CEO WORD Q1 2016


In the first quarter we achieved a key milestone - we now offer 4G throughout our footprint. As a result, we have strengthened the foundations of our business to ensure continued success in data growth and data monetization. As Champions of Customer Value, our customers can enjoy access to high quality, high speed mobile connectivity at a great price. I am confident that our focused approach to technology and to data monetization will create continued and sustainable value for both our customers and shareholders.   

This quarter, mobile end-user service revenue, on a like for like basis, increased by 4 percent year on year. Group EBITDA declined, mainly as a result of our mobile launch in the Netherlands but also due to a lower EBITDA in Sweden.

The trends we saw in the 4th quarter last year, continued into the first half of this quarter. The Swedish market has been fiercely competitive, particularly in the B2B SME segment. However, in the consumer segment we have seen continued progress, with positive net intake and positive mobile end-user service revenue growth and we continue to win new customers in B2B large enterprises. To regain momentum and stimulate further growth we have increased our sales and marketing efforts, which had a negative effect on EBITDA, relative to a low investment period in the first quarter of last year. Sweden has continued to leverage its dual brand strategy, with Comviq as the price fighter and Tele2 as the Value Champion. Our customer focused strategy continues to be successful and has resulted in an increased Customer satisfaction score reaching world class benchmark of 85 percent.

The Baltic region continues to deliver a strong performance, monetizing data from increasing 4G coverage, which is now above 90 percent in all markets. With our data centric pricing and increasing demand for data, mobile end-user service revenue continues to grow mid-single digit in the Baltic region with a strong 32 percent EBITDA margin. Smartphone penetration continues to increase at a rapid pace and I am therefore pleased that we now have an agreement with Apple in place, enabling us to offer the iPhone to Baltic consumers.

In the Netherlands, as planned, we achieved important milestones during the quarter by launching the iPhone, introducing a new SIM-only proposition and the launch of VoLTE (Voice over LTE). This has triggered an increased interest in Tele2’s 4G services and resulted in a ramp-up of our mobile customer net intake, particularly in the month of March, when all elements became available to the Dutch consumer. With the addition of the iPhone, Tele2 now offers the full range of popular VoLTE-enabled handsets and at the end of the quarter the first customers successfully started to use VoLTE. Our continued focus to attract 4G hungry customers has resulted in us significantly increasing the share of 4G customers in our base. The transfer of our customers to our brand new network is accelerating, and I am therefore very pleased that the research company P3’s results on network quality already puts Tele2’s network (whilst it is still being rolled out) on par with the other three MNO’s in the market, and one of the best quality networks in the World.

As we announced in the beginning of March, we have now concluded the closing of our Joint Venture in Kazakhstan and immediately launched 4G to Tele2 customers in the geography. The integration is well underway, and business momentum is keeping pace with a solid growth in net intake for the quarter. On a like for like basis mobile end-user service revenue has grown by 31 percent. EBITDA is impacted by both business expansion and the significant devaluation of the Kazakh Tenge. Looking forward, we are excited by the prospect of the next stage of this journey – realizing synergies from consolidation and becoming a stronger and more sustainable player in the Kazakhstan market. An example of this is that during the quarter, we informed our customers of our intention to withdraw the highly unprofitable (and service eroding) unlimited Altel offers, and are now executing on this.

We are now entering the second year of the Challenger program with 60 initiatives up and running. The progress continues in centralizing our Shared Operations organization and I am especially encouraged by our initiatives to move our Network & IT functions to the Cloud. This sets us up for 5G and also enables a more cost efficient network in the future.

Looking forward, we will continue to make progress with 4G penetration in all our markets, to enable surging data consumption. Our Value Champion strategy, combined with benefits from the Challenger program is enabling a platform for further growth in Sweden, Baltics, Netherlands, and in a consolidated Kazakh market. We are well equipped to continue monetizing data throughout the Group which in turn will lead to sustainable value creation for our customers, employees and our shareholders.

 

Allison Kirkby
President and CEO