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News Tele2 Group Apr 24 2002, 12:00 PM CET

Results for the first quarter 2002

[2002-04-24 6:00]
New York and Stockholm - Wednesday, April 24, 2002 - Tele2 AB ("Tele2", "the Group") (Nasdaq Stock Market: TLTOA and TLTOB and Stockhomsbörsen: TEL2A and TEL2B), the leading alternative pan-European telecommunications company, today announced its consolidated results for the first quarter ended March 31, 2002.
  • MSEK 949 EBITDA in Q1 (Q1 2001 MSEK -2)
  • Positive EBT of MSEK 11 (MSEK -871)
  • Central Europe reports MSEK 12 EBITDA in fixed telephony
  • Southern Europe revenue increased by 55%
  • 32% increase in Operating Revenue compared to the same period in 2001
  • Mobile operations for Tele2 in Sweden reported EBITDA margin of more than 50% in Q1 and revenues up 25%
  • Improved positive cash flow for the quarter
  • 15.6 million customers an increase of 25%
Lars-Johan Jarnheimer, President and CEO of Tele2 AB stated:
"It is pleasing that Tele2 delivered a positive result before tax of MSEK 11 in the first quarter which reflected the continued strong progress in our fixed line operations in Continental Europe. Our marketing activities in the first quarter were less aggressive than in the third and fourth quarters of 2001 and this helped us achieve this milestone. We understand that investors wished to see Tele2 reach profitability. The outlook for our mobile business is excellent and in Sweden mobile margins of over 50% are best of class. Our focus continues to be on low cost customer acquisition, churn management and operational cost control."
(The figures shown in parenthesis correspond to the comparable periods in 2001 and all negative amounts are distinguished with a minus sign).
Financial highlights for the first quarter, 2002

(ii) EBIT
(iii) EBT
(iv) The taxes for the period are wholly related to deferred taxes and have no cash impact

Operating highlights, for the first quarter, 2002
  • Tele2's marketing activities in the first quarter were less aggressive than in the third and fourth quarters of 2001, therefore the customer intake was reduced to some 350,000 customers in continental Europe during the quarter.
  • Local calling is being progressively introduced across Europe and among Tele2's larger markets local calling has been introduced in Sweden and France in quarter one. Tele2 already has local calling in Italy and it was announced during the quarter that local calling in Germany will commence on 1 December, 2002.
  • Cost savings made in Norway and Denmark by staff reductions in both operations following on from similar cost reductions in Sweden in the third quarter of 2001.
  • Tele2 Norway has started the roll out of 3G infrastructure in Norway.
  • Tele2 launched a marketing campaign in the UK to sell fixed line services in partnership with the Post Office
Post Quarter Events
  • Tele2 was awarded two GSM licenses in St.Petersburg as part of agreement for the purchase of FORA Telecom from Millicom International Cellular.
  • Tele2 increased its ownership in Finnish 3 G Suomen Kolmegee Oy from 20% to 27.44%. The voting power remains at 15%. The company has one of the four 3G licenses in Finland.
  • On April 19 the Ministry of Transport and Communications in Norway approved a revised plan for UMTS roll-out for Tele2 in Norway. It has been agreed that the previously suggested fines will not be payable.

Operating revenue, MSEK 3,516 (2,916), +21%
EBITDA, MSEK 1,098 (780), +41%
The Nordic market encompasses Tele2 operations in Sweden, Norway, Denmark and Finland, and Datamatrix. Optimal Telecom is included with effect from 1 January 2002 (note 4).
Tele2 has agreed terms with Telia in Sweden, Telenor in Norway and TDC in Denmark to resell ADSL services and Tele2 expects that the launch of these services will take place this summer.
Tele2 in Sweden is the main component of the Nordic region. In the first quarter Tele2 in Sweden was able to maintain high margins for both the fixed and mobile operations, with 55% EBITDA margin in mobile and 21% EBITDA margin in fixed line. The mobile operations in Sweden reported 2,671,000 customers, an annualized increase of 23%. Monthly average revenue per mobile customers (ARPU), including both postpaid and prepaid customers, was SEK 201 a 1% rise over the year and monthly mobile minutes of usage (MOU) were 100, a rise of 3% year on year. Prepaid mobile customers accounted for 67% of the total mobile subscriber base. Fixed telephony and internet had customer 1.9 million customers at the end of the quarter, with EBITDA margin reaching 21% for the first quarter compared to 19% in quarter one 2001.
Denmark, Finland and Norway
Denmark, Finland and Norway reported a 1.7 million, predominantly fixed telephony, customers. There was growth in all areas of the business in these countries and encouragingly, competitive pressures continue to reduce.
Following the successful launch of a cost saving initiative in Sweden in September last year this programme has been replicated in Norway and Denmark. This led to staff reductions of approximately 10% in Denmark and 20% in Norway.
In Norway Tele2 has been successful in cross selling mobile services to its fixed line customers which have kept customer acquisition costs low. In Denmark margins have improved as costs have been reduced and prices have stabilised and Tele2 is now the only remaining fixed telephony and internet provider competing with the incumbent TDC.
In early April 2002 Tele2 increased its stake in Finnish 3 G Suomen Kolmegee Oy. The company which has one of the four 3G licenses in Finland and is co-owned by Finnet Group, from 20% to 27.44%. The voting power remains the same at 15%

Eastern Europe and Russia
Operating revenue, MSEK 503 (210), +140%
EBITDA, MSEK 126 (59), +114%
The Eastern Europe and Russia market encompasses Tele2 operations in the Baltics (Lithuania, Latvia and Estonia), in Poland, the Czech Republic and Russia, and X-source.
The revenues within Eastern Europe and Russia are predominantly from the mobile businesses.
In December 2001 Tele2 purchased FORA, Millicom International's Russian cellular assets, and in April 2002 Tele2 received confirmation that it has been awarded the GSM licenses in St Petersburg. This completes the outstanding licenses for Tele2 and it now has twelve operations and in all a total population under license of 48 million.

Central Europe
Operating revenue, MSEK 1,423 ( 1,189), +20%
EBITDA, MSEK -27 (-277), of which a positive EBITDA of MSEK 12 (-278) for fixed telephony
The Central European market encompasses Tele2 operations in Germany, the Netherlands, Switzerland and Austria, and a license in Ireland.
EBITDA for the market area continued the improving trend and in Q1 the fixed line operations reached EBITDA breakeven for the first time, in line with Tele2's target of reaching breakeven within the three years from operational launch. ARPU for the fixed line business in Central Europe reached SEK 148 in the first quarter up 2% year or year.
Tele2 is the largest alternative telephony operator in The Netherlands. In August, Tele2 launched the first Mobile Virtual Network Operator (MVNO) in The Netherlands and this operation is performing well, acquiring customers at a low cost, illustrating the benefits of crossing selling mobile services to the Tele2's substantial fixed line customer base.
In Germany Tele2 continues to benefit from market consolidation as a number of competitors have either been integrated into larger organisations or disappeared from the market and Tele2 is now the number four operator in Germany. The German regulator has made a final decision with regard to local traffic and this local traffic will now be available to Tele2 from 1 December this year.
Tele2 is now the second largest alternative operator in Switzerland, and it is the largest alternative fixed telephony operator in Austria. Consumption per customer in both countries continues to rise reflecting the high levels of preselection. In Switzerland Tele2 has been able to take local traffic since April 1, 2002.

Southern Europe
Operating revenue, MSEK 1,868 (1,204 ), +55%
EBITDA, MSEK -181 (-397 )
The Southern Europe market includes Tele2 operations in France, Italy and Spain and a license in Portugal.
The region has continued to show strong growth in operating revenue which was up 19% from last quarter despite a lower marketing spend. With more than 4.5 million active customers in Southern Europe generating more than 1 billion minutes per month. Also there has been a dramatic improvement in EBITDA in the first quarter with MSEK -181 as compared to MSEK -329 in quarter four. Tele2 achieved a strong ARPU for Southern Europe of SEK 141 this was an 11% increase on the fourth quarter.
Tele2 France, is the largest alternative fixed operator in France. In a survey by GFK Tele2 France was identified as "the French's favourite operator" and as "the operator offering better prices". Local calling was launched in the quarter and has progressively opened up across all regions which has meant that revenues per customer are now seeing extra growth at no extra cost to Tele2. Also from 1 January 2002 interconnect tariffs were reduced.
Tele2 Italy is still the fastest growing business and there has been a substantial improvement in profitability in quarter one and it is now consolidating its position as Italy's second leading alternative fixed telephony operator. In an independent survey by GFK respondents identified Tele2 Italy as "the operator offering the most favourable prices" and this has led to the company being recognized as the preferred operator among households which have not yet switched to an alternative operator.
In Spain Tele2 is now the number four operator which underlines the success of the IP network, which is delivering a high-quality service to our clients. The full prepaid offer generates high operational savings and allows Tele2 to offer the best prices on the market. According to the GFK survey in January Tele2 has now reached 66% awareness in Spain and is perceived as "the operator offering the most attractive prices" and the operator "offering the simplest and clearest offers".

Operating revenue, MSEK 196 (167), +17%
EBITDA, MSEK 23 (10)
The Luxembourg market includes Tele2 operations in Liechtenstein and Luxembourg, a license in Belgium, 3C and Transac.
Tango is the largest mobile provider in Luxembourg. The launch of TANGO TV in conjunction with Tango Sunshine radio is successfully reaching its target younger audience and is the first step to interactivity between media and mobile which will drive SMS traffic in particular. These activities strengthen the brand and the launch of the new WAP portal which can be totally personalized and the SMS push platform, Tango Tatoo are two further developments since the first quarter. During quarter one Tele2 also launched pre-paid in Luxembourg.

Branded Products and Services
Operating revenue, MSEK 220 (402),
EBITDA, MSEK -90 (-177)
Branded Products includes Tele2 UK, the operations recently launched in conjunction with the Post Office in the UK, C3, and IntelliNet. Optimal Telecom has been moved to market area Nordic with effect from 1 January 2002, to increase visibility and improve the analysis of the financial development in both market areas.
Parent Company
At the Parent company level, Tele2 reported at March 31, 2002 operating revenue of MSEK 4 (2), EBIT of MSEK -17 (-12) and liquidity MSEK 3 compared to MSEK 8 at December 31, 2001.

The Annual General Meeting (AGM)
The AGM will be held at 1:30 pm local time on Thursday, May 16, 2002 at Gamla Stans Bryggeri, Tullhus 2 at Skeppsbrokajen in Stockholm.
Second Quarter of 2002 Results

The release of Tele2's financial and operating results for the period ended June 30, 2002 is August 5, 2002.
Stockholm, April 24, 2002
Lars-Johan Jarnheimer
President and CEO, Tele2 AB

The financial and operating results for the period ended March 31, 2002 have not been subject to specific review by the Company's auditor.
Tele2 AB, formed in 1993, is the leading alternative pan-European telecommunications company offering fixed and mobile telephony, data network and Internet services under the brands Tele2, Tango and Comviq to 15.6 million people in 21 countries. Tele2 operates Datametrix, which specializes in systems integration, 3C Communications, operating public pay telephones and public Internet services; Transac, providing billing and transaction processing service; C³, offering co-branded pre-paid calling cards and IntelliNet and Optimal Telecom, the price-guaranteed residential router device. The Group offers cable television services under the Kabelvision brand name and together with MTG, owns the Internet portal 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
Andrew Best Telephone: + 44 20 7321 5022
Investor enquiries
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A conference call to discuss the results will be held at 15.00 (Swedish time) / 09.00 (New York time), on 24 April, 2002. The dial in number is: +44 (0)20 8240 8240 and participants should quote, Tele2 AB. A live audio stream of the conference call can also be accessed at Please dial in / log on 10 minutes prior to the start of the conference call to allow time for registration. An instantaneous recording of the conference call will be available for 48 hours after the call on +44 (0) 20 8288 4459 access code 652512.
Consolidated Income Statement
Consolidated Balance Sheet
Consolidated Cash flow Statement
Change of Consolidated Shareholders' Equity
Market Areas split by Business Areas
Tele2 in Sweden
Five Year Summary
Notes to the Accounts