CEO comment

Tele2 is a value driven company: Our strong culture differentiates us in the market. Ever since the company was founded, our success has been built on being a fast-moving challenger. I believe that this mindset will continue to be vitally important to our future achievements.

In 2010, we were successful by all our target measures. Group revenue increased by 2 percent to SEK 40.2 billion, while EBITDA margin expanded to 26 (24) percent. Adjusted for currency movement revenue increased by 6 percent. Tele2 Russia exceeded 18 million customers and our new regions started to reach profitability; Tele2’s value conscious customers began to benefit from the availability of more affordable smart phone handsets; we improved our handset portfolio in Sweden for the new mass market; we acquired BBned, strengthening our position and commitment as a serious long-term player to the Netherlands; lastly, Tele2 Croatia attained EBITDA break-even. Another significant milestone passed during 2010 was the 30 million subscribers, increasing our customer base 16 percent. These are exceptional results, made possible by our colleagues dedication to offering our customers the Best Deal. I would like to extend my sincerest thanks and appreciation.

It bears repeating that we are never satisfied at Tele2. Let’s look ahead.

Tele2’s strategy and targeted position re-emphasised

While our underlying strategy is unchanged, we have further clarified and re-emphasised our targeted position in terms of customers, employees and shareholders. Tele2 will provide the Best Deal for customers in all countries where it has a presence by 2013. In our industry, customer needs and expectations are in constant flux. Tele2’s ability to keep on top of market dynamics and take quick action ultimately derives from the expertise and ingenuity of our people. In order to keep attracting and developing the best people in the business, Tele2 will be considered a great place to work in all its markets by 2013.

While it is true that we cannot directly influence all parts of the measure total shareholders’ return, particularly in the short term, Tele2’s goal is to deliver a long-term total shareholders’ return that is superior to its peer group.

Increased focus on execution

Success in these key aspects of our business – customers, employees, and shareholders – depends on our capacity to continuously improve our operations in all areas. We focused hard on execution during 2010, and we will redouble our efforts going forward, not least in the area of cost efficiency. Price leadership, a central pillar of offering the Best Deal, requires us to be cost leaders. We continually measure our progress by benchmarking ourselves against our industry peers.

Delivering the right quality is the other important element in providing the Best Deal. Customers’ perception of quality is a moving target, requiring us to make sure that we move in step with the market. It is clear that the significance of network quality as a differentiator is decreasing. At the same time, other factors are becoming increasingly important, e.g. customer care and ease of use. We need to remain agile and flexible in order to meet ever-evolving customer demands and expectations. Constant access to updated, actionable information is a must. We increased our investments in customer information systems during the year in order to generate better, timelier intelligence on usage patterns. We also launched a major customer survey across all our markets in 2010.

Tele2’s operations are not primarily geared towards achieving and maintaining technology leadership. Our overarching aim is rather to offer intuitive products and services that are easy to understand, easy to buy and easy to use. In this area, it is imperative that we keep executing better, faster and more cost-effectively than our competitors. A key initiative during 2010 was the roll-out of a new concept for Tele2’s stores, primarily in Sweden. The concept is built on the idea of transparent, easy-to-understand product packaging that underscores customer requirements rather than technical specifications. A better match between product characteristics and customer needs and expectations translates into a more beneficial relationship, both for Tele2 and our customers. Given the considerable success of the new store format in Sweden, we will accelerate the roll-out in other markets during 2011.

The corporate segment also remains an important focus area for 2011. We have successfully expanded our business-to-business operations, not least in the Netherlands where we acquired BBned in 2010.

Another key growth initiative for 2011 is the expansion of our operations in Kazakhstan, where we are well-positioned to further leverage our operating and investing experience in Russia. We have started rolling out an improved network and plan to re-launch our services under the Tele2 brand during the first half of 2011.

Taking our Responsibility

Maintaining the trust of our stakeholders is one of our most important assets. While sustaining economic growth, we have therefore increased our efforts to control the social and environmental impact from our operations. In that respect, we have adopted a new Code of Conduct during the year. The Code is based on the United Nations Global Compact principles and will serve as the overarching governance document for our Corporate Responsibility work.

We have also conducted a series of stakeholder dialogues during the year to learn more about how our stakeholders perceive our corporate responsibility work and where they think our priorities should lie. Improved communication was one of the matters all stakeholder groups brought forward. This is why we today publish our first Corporate Responsibility Report in accordance with GRI guidelines

Please read on to find out more about our achievements in 2010 and our priorities going forward.