CEO WORD Q3 2015

"It was a great honour to be appointed CEO of Tele2 on September 1st. Going forward, our strategic focus remains; as the champions of customer value through innovation in data monetization, we will continue to create sustainable and attractive returns for our shareholders.

With that in mind, our third quarter results show solid momentum, with mobile end-user service revenue growing 5 percent. Mobile EBITDA is flat largely reflecting our continued investment in the Netherlands."

Within our established markets of Sweden and the Baltics, mobile trends are again positive, despite a tough comparison last year. Mobile end-user service revenues and EBITDA continue to grow, supported by higher customer intake, increased data usage, and innovative pricing. To ensure an excellent customer experience as well as to encourage more data usage in our networks, we continued to extend 4G coverage, resulting in 90 percent population coverage in the Baltic region. We also made further progress in Sweden towards our ambition to reach 90 percent LTE coverage in 2016 and are currently at 83 percent.

In the Netherlands, a shift in the mobile customer base from low-end subscribers to higher data and higher ASPU customers is driving the positive revenue development in the quarter, but as expected mobile margins are being impacted by both increasing costs to our MVNO host and costs relating to our MNO rollout. The fixed business remains challenging, and the competition within the segment has intensified. Our Virtual Unbundled Local Access (VULA) agreement with the incumbent will stabilize this, in the medium term, as will our ability to offer an improved triple/quad play offer when we launch our 4G network. This has been our priority, and having now reached 90 percent of the Dutch population, earlier than planned, we will accelerate our launch into this year. In achieving our long term ambition in Netherlands, thereby maximizing the value of our network, there will be further investment required this year and next.

In Kazakhstan, despite an intense competitive environment, we are increasing our customer base, improving the quality and coverage of our network enabling greater customer satisfaction, increased incoming traffic and therefore continued top line momentum. This momentum is driving improved operational scale and consequently EBITDA. Data consumption is increasing, up by more than 200 percent compared to the same period last year.

However, data monetization is a challenge, so we continue to monitor the pricing dynamics in the market. Looking forward and as a result of the earlier than planned launch in the Netherlands, our 2015 EBITDA outlook, being at the lower end of our guidance range prior to considering the impact of the Dutch launch, has changed and so our full year EBITDA guidance will be reduced by the 4th quarter investment of SEK 100–200 million. We expect this level of launch investment per quarter to continue in 2016.

Finally, the Challenger program continues to build momentum within the business and is on track to deliver SEK 1bn of annualized cost savings over three years. As a management team our focus on the creation of shareholder value has never been more determined.


Allison Kirkby
President and CEO