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CEO Letter - Q1 2024

Last year’s growth momentum continued in Q1

I am pleased to say that we are off to a good start in 2024. Having built momentum in our Swedish business in 2023, we now see continued growth while maintaining high pace in our 5G roll-out and digital transformation efforts. Performance in the Baltics is also good, primarily led by a strong performance in Lithuania. The Tele2 model of unique capital efficiency continues to provide strong cash flows and low leverage even while executing significant upgrades of our technical capabilities.

Kinnevik sells to Freya, jointly controlled by iliad and NJJ

During Q1, we learned that iliad/NJJ and Kinnevik have agreed a transaction whereby iliad/NJJ plans to buy the Kinnevik position in Tele2, subject to regulatory approval. Kinnevik was the founding shareholder of Tele2 and has made major contributions to the company over many years. Iliad’s successful growth strategy has been recognized over many years as a leader within European telecoms. This transaction, if finalized, will bring clarity around the long-term ownership structure of Tele2.

Challenging the industry’s volume focus

Over the last quarters, the Tele2 brand has been reinvigorated and shown strong performance in the market. Customer loyalty is improving because of these efforts and contributes to good growth momentum. The transition from volume to value is not linear and we are working hard to create better customer journeys in our own channels to reduce dependency on third-party retail solutions. Given the inherent volume focus our industry still suffers from, this journey will take time and happen in stages, but the direction is both credible and necessary.

Our reliable and loved Comviq brand keeps exciting our customers even though there has been massive entry level fighting in the no-frills end of the market. Comviq’s more balanced approach has served us well and we will be devoting a significant amount of attention to the further development of our offerings and interfaces for Comviq going forward.

Sustainable investments in superior customer experience

Our 5G swap and roll-out continues at speed. We are confident that our year-end targets will be reached within the stated Capex envelope. As we speak, around 2/3 of the Swedish population is covered by our brand-new high frequency 5G network. Most of that coverage is available in the 3.5 GHz spectrum and a small proportion through 2.1 GHz, ensuring a true 5G speed experience for our customers.

We are ending the quarter at a leverage of 2.34 x underlying EBITDAaL, which is below our indicated band of 2.5 to 3.0x and shows the capital efficiency of our model. After paying dividend to our shareholders in May, we still expect to be around the 2.5x mark. We see that as prudent at this moment as it gives us flexibility.

Recognized for our commitment to planet and people

Since the beginning of the year, Tele2 has received positive recognition for our sustainability efforts. Our Climate A-rating with CDP was reaffirmed. We are also number two in Sweden and among the top 100 worldwide in Equileap’s gender equality ranking. As ever, we are very aware that today’s performance is not good enough to remain a leader in sustainability in the future, as the world and businesses around us keep improving. We welcome this challenge and will continue having sustainability as a key proof-point to our strategy.

Macro contributes to optimism

Moving into Q2, we are cautiously optimistic that consumer sentiment in our operations will gradually improve as we see reduced inflation and lower interest rates in our markets. These improvements should be supportive for the economy overall and our business over the next quarters.

Kjell Johnsen
President and Group CEO