CEO WORD Q2 2017

It has been a productive quarter for Tele2 and a good quarter for our customers. We have launched new commercial propositions throughout our footprint to enable more freedom in data usage, forming the next step in our mission to liberate people to live a more connected life. It has also been a quarter of strong growth, with mobile end-user service revenues increasing by 12 percent on a like-for-like basis, an acceleration from the 10 percent we saw in Q1 and proof that we are successfully delivering on our promise to be the customer champion of connectivity.

Sweden and Baltics – together our Baltic Sea Challenger – delivered the solid cash flow that we expect from these businesses, with EBITDA growing by 14 percent including TDC pro forma, and operating cash flow increasing on a rolling 12 month basis by 20 percent to SEK 4.3 billion.

In Sweden, we have had a good response from customers to our new “Power 2” campaign and our new commercial offerings that were launched in April, with consumer mobile end-user service revenues rising by 8 percent in the quarter despite continued strong competition in the discount segment. Our B2B business has reported a slight like-for-like revenue decline this quarter as it has faced a price competitive Large Enterprise environment during our integration with TDC, while successfully returning to growth in the SME segment. Meanwhile, synergies from the TDC integration are ahead of plan, with all MVNO customers now migrated to our own network.

In the Baltics, mobile end-user service revenue growth accelerated to 13 percent in local currency in the quarter. We continue to drive 4G smartphone penetration, larger data buckets, and mobile broadband which enables fast internet connections to people living in areas with poor fixed-line coverage.

Our Investment Markets delivered even stronger growth: mobile end-user service revenue accelerated to 21 percent in Kazakhstan and 45 percent in the Netherlands, both in local currency. While we continue to invest, the negative operating cash flow in these markets has been reduced to SEK 1 billion on a rolling 12 months basis, versus an outflow of SEK 2.3 billion one year ago.

The quality of our 4G only network in the Netherlands, a market with some of the best networks in the world, is now on par with the competition only 1.5 years after its commercial launch. We have passed the milestone of having 50 percent of voice traffic on our own network, and 90 percent of the data. It is from this position of strength that we launched our new commercial propositions on May 17, offering flexibility and data freedom at prices that are market leading across the range, and in particular on larger SIM only data buckets, which the market is now moving towards. We are already seeing accelerating subscriber growth, having quickly doubled our market share of new SIM only subscribers, and an uptake of close to 70,000 Unlimited subscribers in just 6 weeks.

In Kazakhstan, the network integration accelerated in the quarter and we have now integrated around 1,400 of the 1,700 sites that we intend to integrate. We also relaunched the Altel brand to establish it as the premium brand in the Kazakh market, and continue to promote higher ASPU bundled propositions to improve data monetization on both Tele2 and Altel brands. The business momentum continues, with a further increase in EBITDA margin to 22 percent.

Looking forward, we are raising our full-year EBITDA guidance to SEK 6.2–6.5 billion (SEK 5.9–6.2 billion), despite tough competition, an expected continuation of recent trends in our Swedish Large Enterprise segment, and the negative effects from Roam Like at Home in H2. This reflects strong progress in Kazakhstan, improved economics in the Netherlands, and good progress in both TDC and Altel integrations and Challenger Program across our footprint. Our investments will gather pace in H2, not least in Sweden and Kazakhstan, and we now expect CAPEX of SEK 3.6–3.9 billion for the full year (SEK 3.8–4.1 billion).

To conclude, I am delighted with the strong set of financial results and business momentum that the Tele2 team has delivered in the first half of the year, as we pursue our mission to liberate people to live a more connected life. This mission, and the strategic choices that support it, will continue to deliver sustainable and long-term value creation for our shareholders, customers and employees.


Allison Kirkby
President and CEO