IN 2003 TELE2 ADDED A RECORD INTAKE OF 5.5 MILLION NET CUSTOMERS WHILE
OPERATING CASH FLOW INCREASED 37% TO SEK 6.0 BILLION
New York and Stockholm - Monday, February 9, 2004 - Tele2 AB ("Tele2",
"the Group") (Nasdaq Stock Market: TLTOA and TLTOB and Stockholmsbörsen:
TEL2A and TEL2B), the leading alternative pan-European
telecommunications company, today announced its consolidated results for
the fourth quarter and year ended December 31, 2003.
· Operating revenue for the full year 2003 increased by 20% to MSEK
37,190* (MSEK 31,045**)
· Profit after tax for the full year 2003 increased to MSEK 2,396
· Earnings per share after tax and after dilution for full year 2003
increased to SEK 16.20 (SEK 1.51)
· Record intake of 1.9 million net customers added during Q4
· Cash flow up 85% to MSEK 3,418 for 2003 after investing activities
* Excl. MSEK -279 regarding adjustments for prepaid card accounting
** Excl. MSEK 237 Telia court settlement (Note 1)
The figures shown in parenthesis correspond to the comparable periods in
2002 and all negative amounts are distinguished with a minus sign.
Lars-Johan Jarnheimer, President and CEO of Tele2 AB commented:
"Tele2 showed throughout 2003 that it remains a growth company,
profitable and highly cash generative. This focus of being long on
customers and short on infrastructure continued to bear fruit. We added
another 1.9 million customers in the fourth quarter, lifting our
customer base to 22.3 million at the end of 2003. Revenue for the year
increased by 20% to SEK 37.2 billion whilst at the same time we achieved
cash flow of SEK 3.4 billion, up 85%, after investing activities. It
remains our objective to maintain this balance between customer growth,
profitability and cash flow generation.
During the quarter we added over one million customers in the fixed line
and Internet business in Continental Europe, a fourfold increase on the
same period in 2002, demonstrating the momentum we have achieved in
marketing our low cost products and services to our customers. In
Germany the impact of local carrier pre-select has resulted in lower
churn and improved margins. In France our ADSL offering has proved
highly attractive to customers and we also continue to promote dial-up
Internet services in Europe, contrary to a lot of our competitors. The
UK business is progressing well and the Eastern Europe and Russia region
had its highest ever intake. In the Baltics our mobile operations
continue to grow, whilst the fixed line businesses in Eastern Europe
show great potential. Our overall successful growth commitments have, of
course, had an effect on margins.
In Sweden, the mobile EBITDA margin finally fell below 50% in the fourth
quarter. This did not surprise us, as we have been telling the market
for over two years that we expected competition in Swedish mobile to
increase. In fact, the only surprise to us was that it hadn't happened
sooner. In the Nordic fixed business there is currently some pricing
pressure while waiting for the impact of being able to resell the fixed
line fee to benefit us, in the same way it has in Denmark.
The Board will, as earlier communicated, propose a dividend for the
fiscal year 2003. Details will be disclosed Tuesday, 10 February 2004.
Our focus, which has proven to be highly successful, continues to be on
low customer acquisition cost, churn management and operational cost
FINANCIAL AND OPERATING HIGHLIGHTS
Financial highlights for the year ended December 31, 2003
MSEK 2003 2002 2003 2002
Full year Full year Q4 Q4
Operating Revenue 37,190* 31,045** 10,030* 8,491
EBITDA (i) 5,989* 4,890** 1,431* 1,549
Operating cash flow 5,974 4,365 1,394 1,254
Cash flow after investments 3,418 1,849 836 723
* Excl. MSEK -279 for full year 2003 and -374 for Q4 2003 regarding
adjustments for prepaid card accounting (Note 1)
** Excl. MSEK 237 Telia court settlement (Note 1)
(i) Operating Profit (loss) before interest, tax, depreciation
Operating highlights for the fourth quarter ended December 31, 2003
· Tele2 had its largest-ever net intake with 1,932,000 customers
added during the quarter. The operations in Eastern Europe & Russia
showed strong growth with customer net intake of 724,000. Southern
Europe continued its strong growth with customer net intake of 736,000
in the quarter.
· In December, Tele2 announced that Svenska UMTS-Nät AB, a 50-50
joint venture between Tele2 and TeliaSonera, intended to acquire the
fourth Swedish 3G license from Orange. The final closing of the deal is
contingent on the approval of the transaction by the authorities and the
approval of the Boards of all involved companies.
· In November, Tele2 launched a document submitted to the EU, "Tele2
- the Monopoly Challenger', in which the company presented its views on
fixed telephony subscription, carrier pre-selection, MVNO and ADSL and
suggested how the prevailing domination by the former incumbents can be
· During October Tele2 began full scale fixed line operations in the
· In December the Swiss Federal Communications Commission announced
that it had awarded Tele2 a GSM license in Switzerland.
· In Norway during Q4, Tele2 launched its Mobile Virtual Network
Operation (MVNO) and also began offering resale of the fixed rental fee.
· The results for the fourth quarter were impacted by a number of non-
recurring items, the net total of which is MSEK 874 (Note 1-4).
· From January 1, 2004 Tele2, as previously announced, has adopted a
new reporting structure.
OPERATIONAL REVIEW BY MARKET AREA
Operating revenue Q4 2003, MSEK 3,361* (3,468), -3%
EBITDA Q4 2003, MSEK 1,034* (1,261), -18%
EBIT Q4 2003, MSEK 709* (617), +15%
The Nordic market area encompasses mainly Tele2 operations in Sweden
(including Optimal Telecom), Norway, Denmark and Finland and Datametrix
The mobile operations in Sweden reported 3.3 million customers at the
end of 2003, an annualized increase of 10%. Monthly average revenue per
mobile user (ARPU), including both postpaid and prepaid customers, was
SEK 164* (187) in the fourth quarter and mobile minutes of usage (MoU)
was 84 (89**). Prepaid mobile customers accounted for 76% of the total
mobile customer base.
Tele2, has for some two years expressed the opinion that its mobile
margins in Sweden will come under pressure and fall below 50%.
Therefore, it is not surprising that this has now occurred. In Q4 the
mobile business in Sweden faced increased price competition, higher
subsidies and it also further lowered it's interconnect charges.
In the Swedish fixed line and Internet business there was some pricing
pressure during Q4. Tele2 is awaiting the introduction of the resale of
the fixed line subscription fee, which should benefit this business in
the same way as it has in Denmark.
In Sweden, Svenska UMTS-Nät, a 3G license owner in which Tele2 holds a
50% stake, announced its intention to acquire the fourth Swedish 3G
license from Orange, adding capacity at a low cost, hence enabling Tele2
to enhance its position as the price leader in mobile communications.
* Excl. MSEK -374 regarding adjustments for prepaid card accounting
** The system used to measure minutes of use has been further improved
as from Q1 2003. Previously part of the traffic between two Comviq/Tele2
Mobile subscriptions was accounted for as both incoming and outgoing
traffic. This is now measured in one direction only. The comparable
figure for 2002 has been adjusted to take account of this change.
Denmark, Norway and Finland
The operations in Denmark, Norway and Finland are predominantly fixed
telephony and Internet. Tele2 is the leading alternative operator in
Denmark and Norway.
In Norway, Tele2 successfully launched the resale of fixed telephony
subscription fee during the quarter. While this will strengthen this
business in Norway there are costs associated with launching this
service. In addition a Mobile Virtual Network Operation (MVNO) was also
launched in Norway during the quarter. The positive trend in Denmark
continues and Tele2 plans to launch mobile operations in Finland during
the first quarter 2004 under its existing MVNO agreement.
Eastern Europe & Russia
Operating revenue Q4 2003, MSEK 850 (626), +36%
EBITDA Q4 2003, MSEK 94 (104), -10%
EBIT Q4 2003, MSEK -18 (-9)
The Eastern Europe & Russia market area encompasses Tele2 operations in
the Baltics (Lithuania, Latvia and Estonia), Poland, the Czech Republic
and Russia, and X-Source operations.
Tele2 Lithuania has signed a fixed network interconnect agreement with
the local incumbent and plans to launch services in February 2004.
Tele2 launched mobile Internet and MMS (Multi-Media Messaging) services
in Estonia in November. Carrier pre-select (CPS) for fixed telephony was
launched in Estonia in December.
In the Czech Republic dial-up Internet services were launched during the
In Russia, the business is developing very well. Tele2's GSM networks
now reach 10 million people in seven regions, with a small scale GSM
launch having taken place in Smolensk during Q4.
Operating revenue Q4 2003, MSEK 2,121 (1,546), +37%
EBITDA Q4 2003, MSEK 172 (20), of which MSEK 174 (65), +168%, for fixed
telephony & Internet.
EBIT Q4 2003, MSEK 120 (-19), of which MSEK 129 (30), +330%, for fixed
telephony & Internet.
The Central European market area encompasses Tele2 operations in
Germany, the Netherlands, Switzerland and Austria.
Tele2´s operations in Central Europe grew strongly during the quarter
while generating an 8% EBITDA margin. ARPU for fixed telephony and
Internet for the Central Europe market area was SEK 158 (164) for the
fourth quarter. Since the introduction of local pre-select in Germany
the fixed telephony business has picked up, both with regard to churn
and margin development.
In the Netherlands, market share and margin development continued to
improve and the MVNO operations are developing satisfactorily.
In December, the Swiss Federal Communications Commission announced that
it had awarded Tele2 a GSM license in Switzerland.
Operating revenue Q4 2003, MSEK 2,839 (2,358), +20%
EBITDA Q4 2003, MSEK 248 (156), +59%
EBIT Q4 2003, MSEK 224 (123), +82%
The Southern Europe market area includes Tele2 operations in France,
Italy, Spain and Portugal.
Southern Europe again showed strong customer growth with a record net
addition of 736,000 customers in the quarter. ADSL customers accounted
for a substantial portion of the customer intake in Q4. ARPU for
Southern Europe for fixed telephony and Internet was SEK 148 (162).
ADSL services in France continued to grow satisfactorily in Q4. Tele2
France confirmed its position as the leading alternative operator and
managed to maintain its steady growth despite increased activity from
Operating revenue 2003, MSEK 273 (216), +26%
EBITDA 2003, MSEK -11 (31)
EBIT 2003, MSEK -114 (7)
The Luxembourg market area includes mainly Tele2 operations in
Luxembourg (including Tango), Liechtenstein and Belgium, 3C operations
The successful launch of fixed line services in Brussels during the
first quarter and throughout the rest of Belgium in the third quarter
has continued to drive stable growth. This investment in customers has
impacted the EBITDA margin. Luxembourg, including Tango, maintained the
healthy growth seen in previous quarters.
Branded Products & Services
Operating revenue 2003, MSEK 586 (277), +112%
EBITDA 2003, MSEK -106 (-23)
EBIT 2003, MSEK -121 (-26)
Branded Products & Services include Tele2 operation in the UK, Alpha
Telecom in the UK, C3 operations, Everyday operations and IntelliNet
During the quarter, Tele2 increased its commitments by successfully
launching a full-scale entry into the UK market, offering residential
fixed line services. Our experience from entering markets of similar
size as the UK shows that a successful launch requires initial marketing
investments of roughly MSEK 500, during the first year of launch.
SEC Tax issue
In December 2003, Tele2 announced that the tax authorities' review of
Tele2's financial accounts for 2001 had been finalized and that they
wanted to change Tele2's taxation. In 2000, Tele2 acquired the remaining
majority in the listed company SEC SA. In conjunction with restructuring
the business, an external valuation was made resulting in a depreciation
of the value and it was at this value at which the operations were
transferred. It was for this realized loss that Tele2 claimed the tax
allowance (Note 4).
We are convinced that we have fulfilled all demands for proof in this
issue and that the requested deduction will be approved. We will either
ask for review of the decision or appeal to the County Administrative
Court. Since our request for deferment of the tax charge has been
approved, there is no cash flow or P&L impact.
New Market Area Structure
In September 2003, Tele2 announced a new market area structure. However,
for accounting purposes the original market areas will remain unchanged
until 31 December 2003.
In Q3 2003, Tele2 increased its share in five of its Russian mobile
As a part of it's mobile strategy in Russia, in September Tele2 acquired
62.5 % of Radio Components Sweden AB. One of Radio Components products
is an antenna solution for GSM 1800 which reduces the need for sites by
a factor of three to four times for coverage build out. With the
investment Tele2 has secured a cost efficient build out in Russia and in
other areas where mobile rollouts may occur.
In May 2003, Tele2 acquired the remaining shares (72.6%) in Suomen 3G
Oy, a company with a UMTS network in 9 Finnish cities.
Alpha Group was acquired on February 17, 2003. The net cash outlay,
including expected additional earn out payments, was MSEK 704. Alpha is
the UK's leading operator in prepaid fixed network telephony for
individuals and a market leader in cash cards for fixed telephony. The
acquisition will directly contribute to Tele2's earnings per share in
2003, even without the expected synergy effects. The acquisition of
Alpha Telecom is a unique opportunity for Tele2 to attain critical mass
in the UK and is in line with Tele2's strategy of steadily establishing
a presence in the UK market. Alpha Telecom customers are not included in
the total number of customers for the Tele2 Group.
Other long-term holdings
The Balance Sheet for Svenska UMTS-Nät AB in Sweden, in which Tele2 has
a 50% interest, is stated in Note 7.
At the Parent company level, Tele2 reported at December 31, 2003
operating revenue of MSEK 17 (16),EBIT of MSEK -27 (-73) and liquidity
of MSEK 1 compared to MSEK 10 at December 31, 2002.
A convertible has during Q4 2003 been converted to 100,000 B-shares with
an effect on equity of MSEK 15. The Parent company has received a Group
contribution of MSEK 1,730 (3,035).
The Board will propose a dividend for the fiscal year 2003 on Tuesday,
10 February 2004.
Tele2's Annual Report for 2003 is scheduled for release in late March -
early April 2004.
Tele2 will release the financial and operating result for the period
ended March 31, 2004, on April 21, 2004.
The Annual General Meeting (AGM) is to be held at 1:30 pm local time on
Wednesday, May 12, 2004 at Brasserie by the Sea, on Skeppsbrokajen in
The nomination group for the AGM 2004 is being chaired by Cristina
Stenbeck. Shareholders who would like to suggest representatives for the
Tele2 Board of Directors can contact: firstname.lastname@example.org.
Stockholm, February 9, 2004
Board of Tele2 AB
The financial and operating results for the period ended December 31,
2003 have not been subject to specific review by the Company's auditor.
Tele2 AB, formed in 1993, is the leading profitable alternative pan-
European telecommunications company offering fixed and mobile telephony,
data network and Internet services under the brands Tele2, Tango and
Comviq to 22.3 million people in 23 countries. Tele2 operates
Datametrix, which specializes in systems integration, 3C Communications,
providing integrated credit card processing, web payment solutions and
public payphones; Transac, providing billing and transaction processing
service; C³, offering co-branded pre-paid calling cards and Optimal
Telecom, the price-guaranteed residential router device. The Group
offers cable television services and, together with MTG, owns the
Internet portal Everyday.com. The Company is listed on the
Stockholmsbörsen, under TEL2A and TEL2B, and on the Nasdaq Stock Market
under TLTOA and TLTOB.
Lars-Johan Jarnheimer Telephone:+ 46 8 562 640 00
President and CEO, Tele2 AB
Håkan Zadler Telephone:+ 46 8 562 640 00
CFO, Tele2 AB
Dwayne Taylor / Lena Glader Telephone:+ 44 20 7321 5038 / 5025
Tele2 AB - company registration number: 556410-8917
P.O. Box 2094
SE-103 13 Stockholm
Tel+ 46 8 562 000 60
Visit us at our homepage: http://www.Tele2.com
CONFERENCE CALL DETAILS
A conference call to discuss the results will be held at 16.00 (CET) /
10.00 (New York time), on 9 February, 2004. The dial in number is: +44
(0) 1452 542 300 or US: 1 866 2201 452. Please dial in 10 minutes prior
to the start of the conference call to allow time for registration. A
recording of the conference call will be available for 7 days after the
call on +44 (0) 1452 55 0000 access code 985274#. The conference call
will be web-cast on Tele2's website www.Tele2.com.
Consolidated Income Statement
Consolidated Balance Sheet
Consolidated Cash flow Statement
Change of Consolidated Shareholders' Equity
Number of Customers
Market Areas split by Business Areas
Tele2 Operations in Sweden
Five Year Summary
Notes to the Accounts
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