Russia
The Russian operation is Tele2’s most significant growth engine. The company has GSM licenses in 37 regions with approximately 61 million inhabitants.
Mobile
In the quarter the first two new regions (Tula and Orel) of Tele2 Russia reached EBITDA break-even on a monthly basis only 9 months after commercial launch. This strong performance indicates that the roll-out of new regions is progressing ahead of plan.
Tele2 Russia’s strategy is to have a balanced approach to rolling out new regions while improving profitability in the more mature regions. The overall market’s response has been in line with or even better than expected compared to the business plan. The total customer base grew by 1,113,000 (478,000), of which the new regions represented 686,000 (128,000) customers. Over the last 12 months, Tele2 Russia’s customer base has grown by more than 4 million new users, proving that there is a solid demand for the company’s services.
The total customer base amounted to 16,513,000 (12,381,000) at the end of Q2 2010. The turnover of the total customer base improved both sequentially and annually, partly driven by the introduction of a new commission structure to the retail channels, improving the quality of the customer intake. During the quarter, Tele2 Russia broadened the cooperation with several preferred distribution partners to include numerous new cities.
Despite an impact from customer base growth in new regions with lower initial service usage, MoU for the total operations increased by 7 percent compared to Q2 2009, amounting to 232 (217). ARPU amounted to SEK 54 (51) or RUB 217 (207), despite a strong customer intake in new regions. The general pricing environment remained highly competitive throughout the Tele2 Russia footprint.
Supported by customer growth, Tele2 Russia carried on demonstrating good financial performance in the quarter. Revenue grew by 42 percent in Q2 2010 compared to the same period last year. The EBITDA margin development was robust, driven by stable operational trends in the more mature regions and early scale benefits in the new regions. EBITDA in the mature regions amounted to SEK 1,003 (720) million, equivalent to a margin of 45 (40) percent. EBITDA in the new regions amounted to SEK -59 (-76) million. Capex in the quarter amounted to SEK 332 (529) million due to a temporary delay in investments. The investment level is expected to increase in the 2H 2010.
Tele2 Russia will continue to look for possibilities to carefully expand its operations through new licenses as well as by complementary acquisitions which fit with its corporate culture.