CEO WORD Q1 2017

At Tele2, we aim to fearlessly liberate people to live a more connected life. We do this by being the customer champion of connectivity, enabling our customers to connect more of their devices to even more of the content they love, no matter when and no matter where they are. Our customers are increasingly enjoying this freedom and this is driving strong momentum for the Group.

The first quarter has been a strong start to the year, with mobile end-user service revenues up 10 percent, and EBITDA up 28 percent, both on a like-for-like basis. Operating cash flow has more than doubled on a rolling 12 month basis.

Sweden and the Baltics, our newly named “Baltic Sea Challenger” businesses, continue to grow and remain a reliable cash flow engine. EBITDA increased by 11 percent including TDC pro forma and 12 months rolling operating cash flow grew by 16 percent.

In Sweden, mobile end-user service revenue increased by 5 percent like-for-like driven by continued data growth, migration of customers to higher ASPU bundles, and a strengthening of our position in the enterprise segment. The acquisition of TDC has made us stronger, with the first integration synergies materializing during the quarter. The combined large enterprise segment grew revenues by 3 percent on a like-for-like basis. On the consumer side, mobile end-user service revenues grew 5 percent from a continued successful execution of our dual brand strategy. In April, we are reinforcing the “Value Champion” position of our Tele2 brand by launching a new set of commercial propositions and a new campaign.

The Baltics continues to sustain its positive momentum from previous quarters and reported mobile end-user service revenue growth of 12 percent, on the back of data growth, increasing postpaid penetration, larger data buckets, more smartphones and disciplined investments. Our investments in mobile broadband in previous quarters are paying off with end-user service revenue up 52 percent in the quarter, albeit from a low base.

In our “Investment Markets” of Kazakhstan and the Netherlands, operating cash flow on a rolling 12 months basis improved for the third consecutive quarter as we benefit from increased scale and operating leverage, as well as our disciplined investment approach.

In Kazakhstan the benefits of the JV are clearly becoming more visible, with more efficient operations and scale. Mobile end-user service revenue growth of 14 percent like-for-like was driven by an increase in ASPU as well as a positive net customer intake. Additionally, synergy realization from the JV drove EBITDA margin to 19 percent in the quarter.

In the Netherlands, mobile end-user service revenues increased 40 percent, and our cost structure became more efficient with data and voice increasingly on the Tele2 network. 87 percent of the data traffic is now on-net, and around 40 percent of our customers are now active VoLTE users. We did however experience lower customer intake as competitive pressure increased and new regulatory demands came in to play. As we put a transitional quarter behind us, I was delighted to welcome Jon James as CEO of Tele2 Netherlands in March and I look forward to the exciting opportunity we have ahead to leverage our excellent 4G platform with a new set of commercial propositions.

To conclude, I am proud of the strong set of financial results and business momentum that the Tele2 team has delivered at the start of the year, as we pursue our mission to liberate a more connected life for our customers. Looking forward, much of the growth initiatives and infrastructure investments for 2017 lie ahead of us, and revenues and costs will be negatively affected by the new roaming regulation in the second half of the year. Our 2017 full year guidance reflects these factors, as we look to continue delivering long-term value creation for our shareholders, customers and employees.

Allison Kirkby
President and CEO