Tele2’s financial performance is driven by its relentless focus on developing mobile services on its own infrastructure, complemented in certain countries by fixed broadband services and business-to-business offerings. Mobile sales, which grew compared to the same period last year, and a greater focus on mobile services on own infrastructure have further improved Tele2’s EBITDA margin. The company will concentrate on maximizing the return from fixed-line operations as their customer base continues to decline.
Net customer intake amounted to 399,000 (811,000) in Q1 2011. The customer intake in mobile services amounted to 522,000 (972,000), of which 14,000 (33,000) were mobile broadband users. This was mainly driven by a robust performance in Tele2 Russia. During the period, Tele2 Russia’s customer base grew by 547,000 (949,000) customers. Fixed broadband customer base lost -4,000 (9,000) customers in Q1 2011, primarily attributable to Tele2’s operations in the Netherlands and in Germany. As expected, the number of fixed telephony customers fell in Q1 2011. On March 31, 2011 the total customer base amounted to 31,238,000 (27,655,000) thanks to a prolonged success in mobile services.
Tele2’s objective is to maintain a healthy balance between growth regions and more mature markets and to be established in Europe and Eurasia. The company will secure licenses through strong local connections within the business and political communities in all its markets. Tele2’s core markets are characterized by:
- An established Best Deal position.
- The capability to reach a top 2 position, in terms of customer market share, in an individual country or region.
- A mobile operation based on own infrastructure should return at least 35 percent EBITDA margin.
- All operations in the group should return at least 20 percent return on capital employed (ROCE).
Tele2 group forward looking statement
The following assumptions should be taken into account when estimating 2011 results for the group:
- Tele2 forecasts a corporate tax rate in the range of 26-27 percent excluding one-off items. The tax payment will affect cash flow by approximately SEK 1,000 million.
- Tele2 forecasts a capex level that will not exceed SEK 5,500 million, excluding license payments.
Tele2 Sweden forward looking statement
The following assumptions should be taken into account when estimating results for the Swedish mobile operations in 2011:
- Tele2 expects mobile revenue to grow with high single digits.
- Tele2 expects a similar EBITDA contribution in 2011 as in 2010 due to instalments and start up costs related to joint venture Net4Mobility.
Tele2 Norway forward looking statement
The following assumptions should be taken into account when estimating results for the Norwegian mobile operations in 2011:
- Tele2 expects an EBITDA contribution of SEK -100 million due to lower interconnect tariffs and start up costs related to joint venture Mobile Norway.
Tele2 Russia forward looking statement
Tele2 has GSM licenses in 37 regions in Russia covering approximately 61 million inhabitants. The following assumptions should be taken into account when estimating the operational performance of the total operations in Russia in 2011:
- Subscriber base should reach 20-21 million by YE 2011.
- ARPU should remain stable in local currency.
- Tele2 Russia’s total EBITDA margin should evolve in the range of 36-39 percent.
- Capex in Russia should be approximately SEK 2,000 million by YE 2011.
Tele2 in Kazakhstan forward looking statement
The following assumptions should be taken into account when estimating the operational performance of the total operations in Kazakhstan in 2011:
- Tele2 expects an EBITDA contribution in 2011 of approximately SEK -500 million.
- Capex in Kazakhstan should be in the range of SEK 1,200-1,400 million by YE 2011.
- Tele2’s operations in Kazakhstan should be able to reach break-even within two years from the commercial launch, which is planned to take place in 1H 2011.
Tele2 Croatia forward looking statementThe following assumptions should be taken into account when estimating the Croatian mobile operations in 2011:
- Tele2 Croatia will reach free cash-flow break-even by 2H 2011.
Tele2 will seek to pay a progressive ordinary dividend of 50 percent or more of net income excluding one-off items. Extraordinary dividends and the authority to purchase Tele2’s own shares will be sought when the anticipated total return to shareholders is deemed to be greater than the achievable returns from the deployment of the capital within the group’s operating segments or the acquisition of assets within Tele2’s economic requirements.
In respect of the financial year 2010, the Board of Tele2 AB has decided to recommend to the Annual General Meeting (AGM) in May 2011 a total dividend payment of SEK 27.00 (5.85) per ordinary A or B share, to be comprised of an ordinary dividend of SEK 6.00 (3.85) and an extraordinary dividend of SEK 21.00 (2.00)
Tele2 has a target net debt to EBITDA ratio of between 1.25 and 1.75 times over the medium term. The company’s longer term financial leverage should be in line with the industry and the markets in which it operates and reflect the status of its operations, future strategic opportunities and contingent liabilities.
|SEK million||Q1 2011||Q1 2010||FY 2010|
|Net customer intake (thousands)||522||972||4,443|
|Net customer intake (thousands)||-4||9||32|
|Net customer intake (thousands)||-119||-170||-543|
|Net customer intake (thousands)||399||811||3,932|
|Cash flow from operating activities||2,054||2,291||9,610|
|Cash flow after CAPEX||1,121||1,683||6,007|
1 Less one-off items (see sections Net sales and EBIT)
2 Including one-off items (see Note 1)
3 Total EBIT includes result from sale of operations, impairment and other one-off items stated under the segment reporting section of EBIT (page 20)
Significant events in the quarter
- The Administrative Court of Appeal approved Tele2’s claim for a deduction of a capital loss of SEK13.3 billion
- Tele2 entered into a 2-year revolving credit facility agreement of SEK 2.5 billion with a syndicate of five banks
- Tele2 Sweden was awarded a mobile license of 2x10 MHz in the 800 MHz frequency band through the network company Net4Mobility
- Günther Vogelpoel was appointed as new Market Area Director Western Europe and CEO of Tele2 Netherlands, succeeding Henrik Ringmar
- Niclas Palmstierna, Market Area Director Nordic and CEO Tele2 Sweden, left the company 1 May, 2011.
Significant subsequent events
- Joachim Horn appointed Chief Technology and Information Officer at Tele2 AB