CEO Word Q2 2018

As we move into the second half of this transformative year, our business continues to deliver strong results with 5 percent growth in mobile end-user service revenue and 12 percent growth in adjusted EBITDA on a like-for-like basis. This is our 12th consecutive quarter of delivering results ahead of expectations, and provides us with confidence to raise our full year adjusted EBITDA guidance.

Intensive preparations for our two transformative deals in Sweden and the Netherlands have continued throughout the quarter, with a number of key milestones achieved. In Sweden, we are now confident that the opex and capex synergies from the Com Hem merger will be higher than the previously communicated annual target of SEK 450 million. We have also submitted the merger document to the U.S. Securities and Exchange Commission after an extensive re-audit of our financial statements for the years 2015, 2016 and 2017. Meanwhile, the Dutch combination with T-Mobile completed Phase I of its regulatory process and entered, as expected, into Phase II. Both deals are still expected to close in the fourth quarter.

I am particularly pleased that our Swedish business remains resilient, winning both new postpaid smartphone consumers and new enterprise customers, and defended its mobile revenue despite the headwinds from Roam Like at Home and price competition. Our mobile consumer business successfully produced another quarter of positive net additions of postpaid, small-screen customers, in a market which has seen some increased activity in the price-oriented segment during the first half of this year. Such periods of increased activity have occurred before and, as we have done before, we leveraged our strong dual brand position and customer value propositions to successfully navigate the competitive environment. Swedish consumers continue to embrace the opportunity to consume more, with mobile data growing by 50 percent per postpaid customer. Customer satisfaction is our overarching mission to grow sustainable value in our business, and we proudly note that in April, Comviq and Tele2 claimed the two top spots in a ServiceScore survey of operators’ ability to meet the service expectations of Swedish telecom consumers.

The Swedish business segment sequentially improved in the second quarter, and won several new enterprise customers, examples of which are the City of Gothenburg, Uppsala Municipality, Epiroc, Getinge and the Swedish Sports Federation. We expect some price pressure within B2B to continue in the short term, but customer wins seen over the past quarters should help to improve the revenue trend during the second half.

In the Baltics, our Lithuanian and Latvian businesses continue to deliver strong growth rates in mobile end-user service revenue of 12 and 10 percent respectively, in local currency. Estonia made a first step towards a financial turnaround, but even more important was our Customer First initiative, whereby we closed our Estonian telemarketing channel and re-directed resources to better serve existing, loyal customers. This initiative received extremely positive media coverage, and has now resulted in a new industry Code of Conduct to stop unsolicited telemarketing.

In summary, Sweden and the Baltics, together our Baltic Sea Challenger businesses, achieved a 5 percent rise in operating cash flow on a rolling 12-month basis, and cash conversion remained strong and stable at 80 percent, contributing to a 20 percent rise in 12-months rolling operating cash flow from continuing operations.

Both Kazakhstan and Croatia, our remaining investment markets, continue to deliver excellent results. Kazakhstan grew mobile enduser service revenue by 20 percent in local currency, driving further economies of scale, with the adjusted EBITDA margin expanding to 34 percent. Croatia continues to monetize on its improved product portfolio and strengthened brand perception since the beginning of 2017, contributing to mobile end-user service revenue growth of 13 percent in local currency and a new seasonal high in adjusted EBITDA.

To conclude, I am so proud of the whole Tele2 team, who have yet again delivered another quarter of improved customer satisfaction alongside strong financial results, as we pursue our mission to liberate people to live a more connected life. This purpose, and the strategic choices we have made over recent years, are the right ones. In particular, the merits of the merger with Com Hem are increasingly clear, as is the logic of the combination with T-Mobile in the Netherlands. Both contribute to an existing strong roadmap for the creation of increased value for our customers in the coming years, and consequently for our shareholders and our employees.



Allison Kirkby
President and CEO