CEO Word, Q2 2015

"The second quarter once again proved that the strategy to become a value champion is the right way forward. Our customer net intake was strong and we experienced a break-through by having the lowest churn in many quarters. Consideration for the Tele2 brand showed that the company is scoring amongst the highest compared to industry peers. Mobile end-user service revenue grew 7 percent in the quarter, and with data consumption surging, the platform from which to grow and continue to monetize on data, is definitely in place."

In Sweden, we saw a further increase in demand for mobile data and a strong positive net intake in the quarter. The quarter was characterized of a prepaid to postpaid conversion in the Comviq brand and as expected we saw revenue declines in prepaid and mobile broadband segments due to a lower customer stock compared to the same period last year. Mobile EBITDA contribution grew with 8 percent, mainly driven by the Tele2 brand and lower expansion costs. Tele2.0 has continued to perform well resulting in a positive development of customer satisfaction, leading to both lower churn and higher ASPU.

In Netherlands we expanded the coverage area of the new LTEAdvanced 4G-network, reaching 80 percent outdoor population coverage. The pace of transferring existing Tele2 mobile customers onto our new network increased and our residential mobile customer base continued to expand for the 15th consecutive quarter. The surge in data growth coupled with our dependency on an MVNO relationship will however continue to be a drag on EBITDA until full launch. In an effort to improve our fixed broadband business, Tele2 reached an agreement in July with the incumbent enabling us to offer higher fixed broadband speeds and improved services to our customers.

Despite the intense competition, Kazakhstan continued the positive momentum in customer net intake of 471.000 customers, reaching an all-time high customer base, and resulting in a strong mobile end-user service revenue growth compared to last year. Our tariff plans with bundled voice and data offerings are attracting customers and consideration for Tele2 is constantly growing. We also saw a positive increase in EBITDA compared to last year.

The Baltic region and Croatia showed a strong mobile end-user service revenue growth and solid EBITDA contribution in Q2 2015. The network upgrades to LTE/4G in all the Baltic countries are going according to plan and population coverage in Lithuania has now reached more than 80 percent. Croatia’s network swap, announced last quarter, is progressing ahead of plan and the first phase is now complete, resulting in improved quality for our customers.

The Challenger program, which is expected to reap SEK 1 billion in net savings per year starting from 2018, is on track and we have now kicked off more than 30 initiatives. One of the initiatives initiated is the off-shoring of certain back office administrative tasks in both Finance and Customer operations to Riga and India respectively, allowing us to reduce labor costs, achieve scale synergies and make sustainable process improvements.

Being a Challenger defines our actions; we run to succeed, we continuously overcome obstacles in challenging environments, and we learn quickly. Our commercial strategy, Value champion, is yielding results. With loyal customers, high consideration, and the increasing data consumption, Tele2 is in an ever strong position to continue monetizing on data going forward.

Mats Granryd
President and CEO