CEO comment

Taking it to the next level. Together.

Assessing 2009: Tele2 walks the talk

Being able to offer our customers the Best Deal is at the core of Tele2. This ambition truly captures what our company is all about. It also does a good job of summing up 2009, when everyone in Tele2 worked very hard to deliver the Best Deal to customers in all our markets. This explains why our 2009 results are the strongest in Tele2’s history so far, in spite of the persistent economic downturn. We successfully delivered on the priorities for 2009 that we outlined in last year’s Annual Report: expanding in Russia, developing new mobile services and growing our presence in the corporate segment.

• We expanded our Russian operations ahead of plan, launching 18 new regions, further refining our efficient processes for rolling out new networks and launching new services. We also continued our selective expansion eastwards. Our acquisition of a majority share in the mobile operator NEO in Kazakhstan complements Tele2’s existing footprint and is an attractive opportunity to leverage our successful Russian operating model.

• Tele2 Sweden launched many new innovative services in mobile voice and Internet during 2009, paving the way for the launch of the next generation (4G) mobile network in 2010. The mature Swedish market will continue to serve as a test-bed for new services in the Tele2 Group.

• We also improved our position in the corporate segment during the year. The Dutch operations stand out as a model of best practice in this segment, but we also made significant progress in Sweden.
  Tele2’s businesses in Central Europe performed well, especially in view of the severe economic downturn. Revenue market share improved in all Central European operations. The cash flow was significantly better in 2009 compared to 2008. Our Western European operations also continued to perform very well operationally.

All in all, Tele2’s revenue grew by 2.6 percent to SEK 39.3 billion (38.3) with an EBITDA margin of 23.4 percent from continuing operations. Again, I would like to stress that it is the dedication and hard work of all our people that made these outstanding results possible. Thank you.

Moving forward to the next level together.

While we have achieved a lot, we are not satisfied. We never are. Exciting times are ahead of us even though the economic situation remains difficult and uncertain. The dynamics of the telecommunications industry are changing at a fast pace as customer needs, technological advances and regulatory changes disrupt traditional business models. New challenges and opportunities abound in 2010 and beyond. We need to understand where the world is moving. And we need to be ready to move with, or ahead, of the changing market, at the right time. We need to keep our ears to the ground by listening to, and seeking to understand our customers. Tele2’s business is built on facilitating and promoting communication between people. We are essentially in the business of making communication easy. Tele2’s dialogue with our customers and other stakeholders needs to reflect this fact. This belief was the starting point when we designed our new corporate website, which launches on the same day this Annual Report is published (on the web only). The site offers more and better possibilities for you to interact with Tele2. Our ambition was to create a dynamic, open and accessible forum for our customers, shareholders and other stakeholders.

What is clear is that mobility will, more than ever, be at the core of Tele2’s business. We need to focus on defending voice revenues while at the same time defining new business models, e.g. in areas such as mobile VoIP. It is clear to us that customers’ patience with complicated services is declining fast. An important part of offering the Best Deal is to make sure our services are easy to understand, easy to buy and easy to use.

Tele2 will also focus on handling the burst of demand for bandwidth efficiently. We will build out 4G in Sweden in 2010 – and be ready to leverage what we learn there in other markets. The development of our corporate business remains one of our priorities in 2010, as there is a significant potential for further profitable growth in this segment. We will introduce business-to-business services in more Tele2 countries. At the same time, we will focus on getting more leverage from existing assets and skills in markets where we already have a presence in the corporate segment. In terms of geographical presence, we will continue to explore new opportunities in Russia and the CIS carefully. We aim to maintain a healthy balance between growth regions and more mature markets, and to build a strong market position in Europe and Eurasia.

Let me close by repeating what we asserted in last year’s Annual Report: customer satisfaction and shareholder value go hand in hand. This is why the Best Deal is fundamental to Tele2’s strategy. In order to continue delivering it, we need action-oriented, innovative people who are inspired by tough challenges. At Tele2, we are never satisfied. As we move into 2010 and beyond, I promise you that we will continue to be a fast-moving challenger, always striving to provide the best value for our customers and shareholders. I invite you to read on to find out more about our strategy, what we did in 2009, our results and our plans for the future.

Yours sincerely,

Lars Nilsson
Interim President and CEO