We have completed an evaluation of last year’s report, our first GRI-report, and decided on a number of changes for this year. We will maintain a C-level report, but we will for example extend the scope to include a number of ESG (Environmental Social Governance) indicators, which were identified through a stakeholder dialogue with investors and analysts. The scope will be extended geographically to include Tele2’s Kazakh operations, which was acquired during 2010.

If you are interested in reading our 2011 GRI report, it will be published in the beginning of April.

Read more about CDP’s annual ranking here. 

During Tuesday’s meeting I presented our progress and plans regarding Tele2’s CR work. We looked at goal fulfillment so far and what actions need to be taken to ensure that our goals will be met. Our main topics were the development of our CR strategy and our process for supply chain management, which is one of my primary focus areas this autumn. A subject which I will have reason to get back to later.

Providing efficient means of communication is an essential part of building infrastructure, which in turn is a prerequisite for economic growth and community development. Bridging the digital divide is one of our greatest challenges – and opportunities – in terms of our responsibility work. Therefore, our collaboration with EBRD is valuable in our future efforts in Russia.
We have several projects up and running in Russia. For example, we are controlling the cooling systems in our base stations with the aim to replace older systems with modern fresh air cooling, in order to reduce our CO2 emissions. We are also in the process of implementing our new gender and diversity policy at all our workplaces and our Code of Conduct throughout the supply chain. As a responsible company in the Russian community, we support Playing for change, which is an NGO that supports local social entrepreneurs striving to provide children with a playful childhood.

Russia is Tele2’s biggest market and it is growing. For us it is important that this growth is sustainable, with regards to economic and social factors as well as the environment.

Read more here and here about EBRD’s decision to support OJSC Tele2 Saint-Petersburg.

He also reminded the audience about Tele2’s wanted position:

Customers: We shall provide the Best Deal in each country we operate in!

Employees: We shall be considered “A Great Place to Work at”!

Shareholders: We shall have the best TSR (Total Shareholder’s Return) within our peer group.

Thank you for this year’s event!

Market Area Nordic showed strong cash flow generation in Q2 2011 with EBITDA at SEK 916 million and CAPEX at SEK 123 million.

Our focus areas in Sweden are building on mobile growth and 4G roll-out coupled with household/corporate fiber strategy. In Norway, we will focus integrating Network Norway.

Sweden:

We are seeing recovering EBITDA margins in Sweden, where smartphones are driving growth. We anticipate uplift in smartphone migration and higher fixed fees on data packages. Also, low end smartphones are entering the market, which of course is beneficial for Tele2 (negatively affecting the development of mid range handsets).

We see a strong handset data potential. For the mobile segment, our solid development of net sales is mostly driven by smartphone sales and data services.

For fixed, we will accelerate fiber build-out for the consumer market.

We will continue our 4G roll-out together with Net4Mobility, which will bring savings of almost SEK 300 million. By the end of 2012, we will have a 99% coverage. Right now we have new routers coming out on the market, and we are seeing 4G handsets and tablets arriving on the market during 2H 2011.

New cost efficiency measures will support breaking the mobile EBITDA trend.

Norway:

Tele2 controls now more than 99 percent of the shares in Network Norway. After the acquisition, we will support Norwegian market consolidation, become a clear number three operator and double our revenue market share in Norway.

We will have around 15% of the market, nationwide coverage by 1H 2013, and our long term market share goal is 25.

Tele2’s Market Area Western Europe is leading the group in business to business services and consumer fixed broadband.

Our current focus areas are:

Netherlands: Grow in mobile and SME. Participate in the upcoming license auction.

Austria: Continue growth in B2B.

Germany: Develop mobile product.

Netherlands:

Financial performance is solid, although there is always pressure on topline. Integration costs will be included already in 2011.

Our residential strengths are that we can maximize value in the customer base, we have a solid position in DSL, and we are growing in Triple Play. Put shortly, we put our money where the mouth is.

Our B2B segment is a high margin operation. It provides mission critical services: A majority of the population is using our services, although not being customers.

Our overall objectives in the B2B market are to prioritize topline growth, strengthen our position through the integration of Bbned, and lower costs trough standardization and quality improvement.

Furthermore, we have an opportunity to move from being an MVNO into an MNO, and that opportunity is now. The upcoming auction in Q1 2012 will set the scene till 2030. Reasons for us to pursue this opportunity are several, it allows us to grow long term cash flows and we have strong group experience from the mobile market. Also, the situation is favorable considering the regulatory environment, the current market situation, as well as technology and business models.

Austria:

Tele2 Austria demonstrates stable performance, where B2B is the sales engine. We see double digit growth in key KPIs – 180% increase in B2B sales intake, and an EBITDA margin from 15% to 21% (H1 2011 vs. H1 2010). Going forward, focus is to maximize value in residential and grow top line in B2B.

Germany:

Germany is also a solid profit contributor and shows strong operational performance in sustaining profit levels, although facing overall decline in top line.

The current situation is that we have suffering from not having the fixed line regulated. We want to change this by going mobile, and cut the cord to the incumbent for mobile home telephony. This concept was launched in May 2011 and has already been a success.

Tele2 Russia represents 29% of sales in the group and has today more than 20 million subscribers, making us mobile operator number 4 in Russia both in terms of subscribers and revenue. We are present in 43 regions of Russian Federation and operate on the spectrum of 1800 MHz in those regions.

Current focus in Russia is to continue the strong growth in customer intake, maximizing the 2G opportunity.  We will also ensure that newcomer and challenger regions reach the same operational trends as the old ones. Furthermore, we will evaluate possibilities to expand carefully its operations through new licenses, as well as complementary acquisitions.

We have a great potential in turning our newcomer regions into challengers, and eventually defenders.

We are also comfortable with our current license situation for the coming couple of years and until we have bridged Tele2 into the next digital era.

Old regions:

We are defending and growing our position in the old regions. Subscriber base is growing, ARPU is fluctuating but growing, and annualized churn is stable.

In terms of financials, the profitability profile is solid with growing revenue and EBITDA, including market shares in terms of subscribers and revenue.

New regions:

In our new regions, we are experiencing a customer base growth at an impressive speed and it will continue to grow for the next coming years. Profitability is growing. All in all, when compared to the old regions, the new ones offer great potential. We need to invest in brand awareness, which will drive market share and revenue.

Russian mobile forecast indicates that in the coming few years we’ll have enough resources to grow our business, considering that 2G will remain the main technology until around 2015. Thereafter, 4G will face rapid growth. We are cautiously optimistic about the regulatory development and we hope to be one of the operators running LTE services in Russia.

Several particularly good pieces of news are announced from Market Area Central Europe and Eurasia. Financial guidance is provided for Croatia and Kazakhstan, see below.

The Baltics:

Main focus in the Baltic countries is to uphold stability and focus. Other current topics in the Baltic countries are technical upgrades (radio, core swap), focus on smartphones and data.

• In Estonia, a new management team is in place and the 4G roll-out starts 2012.
• Latvia will have an auction for LTE frequencies in 2012.
• Lithuania will continue to maintain its market leadership position and increase focus on the B2B segment.

Croatia:

Tele2 Croatia has achieved a free cash flow milestone and is from now on cash flow positive (EBITDA-CAPEX-Change in WC) on a quarterly basis.

EBITDA is estimated to HRK 36 million by 3Q 2011, free cash flow to HRK 37 million. The EBITDA margin for Tele2 Croatia’s operation should reach 20 percent by 3Q 2013.

Since 2008, we have doubled our customer market share, and we are the only player growing on the market.

The objective is to continue the revenue market share growth and improvement of gross margins. Improved brand awareness is important to achieve this, which is why a new marketing strategy was launched in Q2 2011. Marketing KPIs have already been improved notably, showing direct effect in revenue market share and EBITDA growth performance.

Kazakhstan:

Tele2’s youngest country market Kazakhstan is growing rapidly, as the mobile market shows strong growth. Low MoU indicates room for growth, compared to neighboring countries. Tele2 has now launched its six first regions in Kazakhstan, and has already more than one million subscribers and an increasing ARPU and MoU. The goal is to have launched all regions by the end of the year.

We have access to all frequency bands, providing us with great flexibility.

MTR reduction will come down from the current levels.

Long term guidance for Tele2 Kazakhstan:

• Tele2 Kazakhstan expects its customer base in Kazakhstan to be able to reach the range of 2.3-2.5 million by end of 2012.
• Tele2 Kazakhstan should reach break-even on EBITDA margin by 2H 2013.
• Tele2 Kazakhstan should reach a long term revenue market share of 30 percent.
• Long term profitability and ROCE are estimated to be in line with Tele2 Group targets.

Tele2 has a diverse infrastructure – ranging from all network standards in Sweden to 2G in Russia – providing us with many opportunities. Fixed networks help us leverage synergies and decrease costs, but we will also need to build LTE for the future.

Our frequency portfolio has great coverage and our countries are well positioned, not the least as net neutrality approaches in different countries.

Remember that mobile data evolution is progressing for ALL standards. GSM is the most mature standard, not the standard for the future, but it will still be there for the coming years. In Sweden, for example, 2G has grown by more than 5x in the last year.

Data consumption grows substantially, mainly driven by 3G. That requires us also to upgrade our networks. The industry is helping us, and all suppliers have roadmaps for continuous evolution of peak data rates ahead (HSPA).

LTE, long term evolution offers improved customer experience, scale and economy. Latency difference between 3G and LTE is 87%. We must of course be where the potential is, and the potential for LTE is nearly unlimited. LTE will allow us to reach much higher efficiencies.

Why do we have so many spectrums? Low spectrum is very important for coverage. 2.6 GHz compared to 800 MHz has a huge difference in coverage area. But you still need higher spectrums in order to be able to off-load traffic from the lower ones.

Tele2’s advantage is that we can chose network at the right point of time. We can make that choice.

Also, as we move forward on the network side, we must momentarily refresh our IT-infrastructure in order to leverage group synergies.

From our perspective, four major trends are impacting our strategy the next few years:

1. There will be an exponential increase in demand for data.
2. We will see an explosion of connected devices and separation of access and services.
3. We will see increased demand for ICT, centrex and cloud solutions for SME.
4. Less underlying growth.

Tele2 will make sure to serve customer demands on increased data to low costs and good quality. We will provide customers with a selective portfolio of smartphones and connected devices, with well thought through financing solutions and pricing.

We will offer the most valuable access products and selectively explore new business models. Core is to deliver affordable, easy to use core communication solutions. We will deliver proven new products, instead of over investing, in order to stay low cost.

We will increase focus on SMEs and notably grow mobile B2B market share from current 8%. Selected add-on services across our markets and explore a “one-stop-shop” concept are two ways forward.

Our commercial strategy is shifting from volume to value, from only being purely price driven to also having a proposition based on value.

Indirect channels are – and will stay – our key sales channels. We will also focus on a mix that gives us the highest customer lifetime value, of which the web and Tele2 branded stores are central. We have around 700 branded Tele2 stores right now, both own and run by 3^rd party.

By decreasing the churn value (as a percentage of revenue) SEK 3 bn will be saves in 4 years, making churn rate reductions a key focus area.

Our value based culture (Tele2 Way) is our most important asset that will safeguard continuous engagement and performance improvements. Being a performance driven group, we constantly measure our activities through a number of KPIs. Compared to industry benchmark, we score notably higher on performance indicators such as employee satisfaction and leadership. We are of course happy with this, but not satisfied. For next year, we will include an “engagement index” as a next step to develop our organization.

Why and how do we drive performance? We have set up three key objectives aimed at employees, customers and shareholders. The basis is, again, our culture (Tele2 Way) and strong leadership.

Every year, each employee is targeted, rated and awarded.

Providing our employees with the right incentives, based on clear evaluation and rating systems, supports us to find “The Right Pay” – thereby driving performance and engagement. Next to base salary, we have both short term and long term incentive programmes that are closely tied to our company performance.

Going forward, we will be focusing on aiming for engagement on all levels of our organizations.

Much has happened since Tele2’s Capital Markets Days in 2007 and 2009. We have delivered on our promises.

As previously reported, net sales for the first six months of 2011 were at SEK 19.6 billion and an EBITDA margin at 26%, which are our strongest results ever. We have also rewarded our shareholders.

ROCE has increased by 12 percentage points since Q3 2007, and we have a strong balance sheet.

Where do we stand now?

• All market areas are performing well.
• We are always looking into new opportunities – that meet our tough financial requirements.
• Highly competitive landscape, as always.
• We have not seen a severe slowdown due to the macroeconomic status.

The conclusion is that we are content with our current financial and operational performance. Forecast net debt / EBITDA for the year end (including the Norway acquisition) is close to 1.25.

Now, we are setting the bar higher with updated targets:

• We will be targeting a long-term mobile EBITDA margin on own infrastructure of at least 35 percent.
• All operations should have the ambition to reach ROCE of at least 24 (earlier 20) percent.

All entities, with own infrastructure, will meet the financial hurdle of 35 percent EBITDA margin over time.

Going forward, we will continue to strive for the best-in-class cost control and increase our quality focus.

Increased value of connectivity is the outcome from a number of trends that will be influencing the communication market in 2020:

• Users expect to always be connected and have access.
• Devices are becoming an extension of ourselves. It will all be connected.
• Services will be digitalized.
• Access/Technologies will enhance performance.
• New types of competition will emerge in the industry.

All these trends have implications for the operator industry:

• Operator takes key a ”access provider” role.
• Develop business models.
• Manage the shift from voice to data.
• Need to increase scale and cost efficiency.

Since our last Capital Markets Day in 2009, we have established ourselves as the operator providing the Best Deal. We have grown our mobile footprint, covering more than 100 million people with controlled licenses.

When welcoming you to Tele2’s Capital Markets Day 2011 I am happy to be able to say that Tele2 stands strong:

• We show excellent operational performance.
• We have strong financial KPIs and best in class shareholder remuneration.

We are also a group that has a healthy mix of high growth markets and mature markets, and we are operating according to their respective characteristics.

We have a strong focus on mobility and are very data centric. Still, we are selective, guided by tough criteria, when it comes to for example entering new markets.

At the same time, a new reality requires us to evolve. De development has been rapid, and the industry transition has gone from fixed to mobile centric (first evolution) and mobile voice to data centric (second evolution). That requires our business model basics to change. Data access is our primary service and should be charged for as one.

I am confident that Tele2 will stand strong in this context. Going forward, our culture is what guides us forward and is a prerequisite for flexibility and future growth. We are performance driven and we are performing towards the Best Deal.

We will also set up a “Business corner” where we’ll demonstrate our products and services, among other things.

I can promise you a great day, see you tomorrow!

1 Jan 2011 – 0.65 NOK
1 July 2011 – 0.50 NOK
1 Jan 2012 – 0.40 NOK
1 July 2012 – 0.25 NOK
1 Jan 2013 – 0.15 NOK

Please find attach an overview of SD’s complete decision
Termination rates overview

* Seasonality: We saw simular trends in Q1 2010 as we did this quarter. One should not underestimate the impact that weather conditions and vacation can have on operational performance
* Price: We have seen some price preassure on open call-by-call, which is expected going into a new year

Overall, we belive the major explanation is seasonality. But one should not forget that fixed telephony is a very mature service.

Ever since I in 2010 became Head of Corporate Responsibility (CR) at Tele2, it’s been full speed ahead. At an early stage, I really reckoned the importance for Tele2 to run its business responsibly. As we continue to grow in emerging markets this becomes ever more important. Sustainable relationships and activities do not only help us to face new risks in new markets, but create also great opportunities for us. One of our core contributions is the fact that by providing the Best Deal in the markets we operate, we at the same time help bridging the digital divide.

Anyhow, my first focus was to perform risk and materiality analyses to identify and confirm our most relevant CR areas to focus on. An approved CR program, stakeholder dialogues, an updated Code of Conduct, one site visit in Russia, and data collection from all our 11 markets later, to mention a few of our activities during the year, 2010 has really been a milestone year for us. Today, we have a stable platform to stand on for further progress.

On a personal note, it’s been a challenging, but exciting year full of activities. It is also rewarding to see the progress in our organization. But still, we have much more to do. Going ahead, I will continue to share thoughts and describe our progress. You are welcome to follow us and join the dialogue!

When finalizing our annual report, we were again reminded of our ability to successfully tackle our role as a challenger in the telecom industry. Ultimately, it is a question of constantly offering the Best Deal when facilitating communication between people – in a rapidly changing marketplace.

To further alleviate for us to communicate with all our stakeholders, we have also launched a new website for our Corporate Responsibility (CR) Report 2010 . For the first time, this report follows Global Reporting Initiative’s (GRI) G3 globally established guidelines.

Our CR Report is the result of intense work throughout 2010, lead by our Head of Corporate Responsibility Åse Bergstedt, to establish a platform with regard to how we deal with responsibility issues in a structured manner throughout the Group. It is also a response of the requests that different stakeholders have put forward to us. Now, we hope that our corporate responsibility related communication with our customers, shareholders and other stakeholders can be improved with the help of our website.

You are most welcome to take a look around our new report websites, we hope that you will enjoy reading them. And please do not hesitate to get back to us with your comments and thoughts on how we can improve our reporting and communication!

New regions Russia 2010

We see that surfing on the Internet via your mobile phone is part of many of our customer´s everyday lives today. The use of mobile data has exploded. We initiated a survey conducted by Sifo, Sweden´s leading market research company, and the result is confirmed by our own figures. The amount of mobile data has more than doubled just during the past six months and the Swedes themselves believe that they will surf even more next year

The survey shows that the most important mobile internet function is the use of social networks. SMS has during a long time been an unchallenged tool to quickly update your friends. But today, updates on Facebook has become an equally common way to tell what you do or where you are. In addition, we do much more with the mobile phone today, from reading the newspaper to tweet and share funny clips on YouTube. Developments in the mobile usage is extremely fast and we notice that more and more of our customers are hitting the surf wave,

For us as an operator we play a big and important part in our customers need to be connected to the internet, updating friends, emailing and munch more on the go.

- The 29th of October, GKRCh took the decision to allocate new 2G frequencies via a tender process
- 45 working days following the announcement (mid December 2010), the tender documentation shall be published
- Bid preparation starts and submission is due in January 2011 (in 10 – 30 work days)
- The final results are to be announced between February – March 2011

Feel free to comment if you have any further Qs on the topic or have new or different information that deviates from above.
/Lars T

Our efforts proved fruitful. There were no offices affected by the fires and only two members of the Tele2 staff were hospitalized due to smog poisoning. They have now recovered. The organization as a whole has not been impacted financially in any way. Lastly/more importantly, we have made sure during the crisis that mobile communication was open to everyone through free roaming between our network and our peers.

For more information read previously published press release June 7, 2010

In our push into the Swedish postpaid market, we scrutinize the development of different mobile platforms and its effect on our handset sales. Even though Symbian has traditionally been dominating the smart phone market, the Android OS has quite recently showed a very strong pick-up, which started as late as in February this year. Now Android-based handsets are making up 15 percent of smart phone sales, driven predominantly by HTC and Sony Ericsson X10. With new “mini” versions being launched, we believe this trend might continue.

Tele2 Group forward looking statement
The following points should be considered when estimating 2010 for the group:
• Tele2 forecasts a corporate tax rate of approximately 22 (earlier 20) percent excluding one-off items. The tax payment will affect cash flow by approximately SEK 800 (earlier 700) million due to better than expected operational performance in Tele2 Russia.
• Tele2 forecasts a CAPEX level in the range of SEK 4,600–4,800 million.

Tele2 Sweden forward looking statement
The following assumptions should be taken into account when estimating the Swedish mobile operations in 2010:
• Tele2 will continue to target the postpaid segment resulting in a full year EBITDA margin in the range of 33-35 percent depending on customer intake.

Tele2 Russia forward looking statement
Tele2 has GSM licenses in 37 regions in Russia covering approximately 61 million inhabitants. The Russian operations have been divided into 17 old regions and 20 new regions. The following assumptions should be taken into account when estimating the operational performance of the total operations in Russia 2010-2011:
• Subscriber base should be able to reach 19-20 (earlier 18-19) million by YE 2011.
• Accumulated ARPU growth should amount to 5 percent in local currency.
• EBITDA margin in the old regions should stabilize at 45 percent (earlier evolve in the range of 40-45 percent). EBITDA contribution in 2010 from new regions should be in the range of SEK -600 to -800 million (earlier SEK -700 to -900 million). The new regions’ EBITDA margin should break even 2 years from commercial launch. Tele2 Russia’s total EBITDA margin should evolve in the range of 27-32 (earlier 25-30) percent.
• Accumulated Capex in Russia should be in the range of SEK 4,500-5,000 million by YE 2011.

Tele2 Croatia forward looking statement
The following assumptions should be taken into account when estimating the Croatian mobile operations in 2010:
• Tele2 Croatia will reach EBITDA break-even by 2H 2010

/Lars Torstensson

To kick the new year off, our first quarter will be released the 21 April at 07:00 CET. We have a tradition of compiling a consensus view from sell side analysts covering our stock, to help the general market to a better understanding of short term expectations on Tele2. But why stop there? I also thought it would  be a good idea to share it with you on a regular basis, following us in our brand new interactive newsroom.  Hopefully it will come handy when you look at our interim result for Januari – March 2010.

/Lars Torstensson

Let me give you the basic building blocks of our strategy, which is quite simple and straight forward.

Our objective is to have a healthy balance between growth regions and more mature markets, and to be established in Europe and Eurasia.

We will secure licenses through strong local connections within the business and political arenas in all our markets.

Our core markets will be characterized by:

• An established Best Deal position
• The capability to reach a Top 2 position
• A mobile operation based on own infrastructure should have the ambition to reach at least 35 percent EBITDA margin
• At least 20 percent ROCE

That is our strategy, which will take us to the next level together with you and our other stake holders.

Lars Torstensson

At this particular part of the new site we would like to share with you, as we always have done, Tele2s latest financials. But at the same time we would like to give a more personal touch to it through this blog. It will mean additional flavour to how our operations are performing on a regular basis as a complement to the hard numbers. Hopefully this will make you revisit us and from time to time give your feed-back on what we as an organization does well and not so good.

However, it is not just one new Tele2 website that we present to you today. It is two. For the first time in Tele2’s history, the Annual Report will not be printed. Instead, we have created a dedicated homepage that will guide you through what we accomplished in 2009. So do not hesitate, after you are done exploring tele2.com, to prolong the experience by entering reports.tele2.com/2009/AR.

Looking forward to interact with you,

Lars Torstensson

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, shareholders and other stakeholders needs to reflect this fact.

This belief was the starting point when we designed our new website. Our ambition was to create a dynamic, open and accessible forum that offers more and better possibilities for you to interact with Tele2.

We hope you will enjoy our website and going forward we welcome your views and suggestions on how we can make improvements.

Best regards

Pernilla Oldmark