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CEO Letter - Annual Report 2022

Extraordinary challenges call for extraordinary performance

Tele2’s purpose is to enable a society of unlimited possibilities. The outbreak of the coronavirus was followed by unprecedented constraints for most people, and the importance of connectivity and digital communication became greater than ever before, both at work and privately. This was a reminder of Tele2’s important purpose.

When we entered 2022, we did so with optimism and hope for a fresh start. Instead, the world has been thrown into a new tumble of uncertainty and sad news. The heinous attack on Ukraine has affected us all, not least me who previously lived in both Kyiv and Moscow. Alongside the war, rampant electricity prices, inflation and uncertain macro conditions have had a major impact on people’s everyday lives, and we can conclude that 2022 did not become what the world had hoped for.

As for most companies, the global situation and uncertainty posed many challenges for Tele2 too. I am very impressed by the way our employees handled change, adapted to new situations, solved problems and never lost their focus on our customers. I am also proud of the employee initiatives that led to us sending mobile power plants to Ukraine and enabling free calls to and from the country so that people who had fled could stay in touch with friends and family.

Strong financial performance

When summarizing 2022, I am pleased to see that we have been able to adapt to these new realities to deliver yet another strong performance at Tele2. End-user service revenue grew by 3% reaching SEK 20 billion for the year, and underlying EBITDAaL increased by 3.4% to SEK 10 billion. Revenue growth was mainly driven by a strong performance in the Baltics and Sweden B2B, while the positive effects on results from higher revenues and internal efficiency measures were partly offset by the soaring energy prices. Adjusting for the unexpected increase in energy prices, we grew our underlying EBITDAaL by 4.9%, in line with our mid-term financial guidance.

Our operations in the Baltics deserve a special mention for strong performance in a very challenging situation. Despite inflation over 20% and soaring energy prices, we have delivered impressive growth in both top-line and bottom-line, while securing key spectrum and rolling out 5G services.

Tele2 has a history of delivering high and stable shareholder returns. In 2022, we distributed some SEK 13.6 billion back to our owners in the form of an ordinary dividend of SEK 6.75 per share plus an extraordinary dividend of SEK 13 per share, as the proceeds from the divestment of T-Mobile Netherlands were fully distributed to our shareholders. In light of our strong performance in 2022, our Board of Directors proposes an increase in the ordinary dividend to SEK 6.80 per share to be decided at the 2023 Annual General Meeting in May.

Sustainability is a central part of our growth strategy

While our services can have a positive environmental impact, we must also make efforts to minimize our negative impact. We have set a clear ambition to be a leader in sustainability, and in 2022 we further strengthened that position. During the year, we set a target to achieve net zero emissions across our value chain by 2035, and we became the first company in Sweden to have our target approved by the Science Based Targets initiative. Our ambitious sustainability agenda not only increases Tele2’s attractiveness among talent and other stakeholders, but also among existing and potential business partners. Expectations and demands on the telecoms industry are increasing rapidly, and we will contribute to this by constantly raising the bar of what can be expected from a telecoms operator with a leading sustainability agenda.

Accelerated expansion to become Europe’s best 5G network

Energy consumption is a critical part of our sustainability efforts, and it will become even more relevant as the 5G network expands. Tele2’s network partnership, Net4Mobility, is enabling the deployment of a network that is not only the most cost-effective network in Europe, but also the most energy-efficient. The existing 3G network partnerships are being phased out, which will soon make Net4Mobility the only network sharing vehicle on the Swedish mobile market. The relative value this creates for Tele2 and our customers is massive. The 5G rollout was rapid in 2022 and will accelerate further in 2023. By the second half of 2024, we aim to offer Europe’s best 5G network based on speed, coverage, energy and cost efficiency, products and services.

Quality and expertise drive B2B business growth

The importance of our 5G network is growing as our business customers begin to discover the possibilities offered by its speed and stability. It is very exciting to follow our customers’ efficiency and growth journeys as they are enabled by innovation based on our 5G connectivity. What seemed like vague hypotheses a few years ago is now reality. However, Tele2’s attractiveness in the business segment is also growing for other reasons. We have put a lot of effort and resources into becoming an insight-driven partner that focuses on solving real problems and demonstrating opportunities, rather than being just a replaceable provider of off-the-shelf products. This has paid off. The B2B unit has turned a negative trend into growth in a short period of time and I am very excited about the future potentia.

Focus on value creation increases loyalty and willingnessto pay

We have also seen a good performance in our consumer business in 2022. The consolidation and refinement of the brands has served us well, with Comviq targeting a price-sensitive audience and Tele2 a quality-conscious one. As a result, we now have services and offers for all needs and budgets. We also drive and lead developments in the TV market. Our strategy of acting as an aggregator has been well received by both content providers and consumers, with more and more people tired of jumping between streaming services. Simply a win-win-win.

Competition for consumers’ wallets is fierce and market players are trying every method to win and keep customers. Unfortunately, all too often we see examples of short-term solutions where services and products are given away in a way that creates neither loyalty nor profitability. We are convinced that a long-term profitable and growing business must be based on value creation. That is why I am extremely happy when we repeatedly win the SKI (Swedish quality index) award for customer satisfaction, or when Empati Grand Prix recently named us the most empathetic company in the industry. These are small symbols of hard work that is already paying off, but will become even more important and distinctive in the future.

Tele2 is equipped for future growth

What gives me the most confidence for the future is that we were able to deliver such strong results in 2022 while putting a lot of time and resources on internal development. As part of our Business Transformation Program, we embarked on a major project with the aim of getting rid of legacy IT structures and equipping ourselves for a digital customer journey where we bring our brands and our customer data together in one place to optimize service and sales. The project will be completed in 2023 and will put us in a much better position to meet the new needs and demands of our customers.

Finally, I would like to stress how happy I am that our employees are returning to the offices. We continue to offer flexibility, but many are clearly longing for the pulse and energy that comes from face-to-face meetings and problem-solving together. Tele2 has always been, and will continue to be, a place where talent can be challenged and grow – with unlimited possibilities.