Tele2 Third quarter 2012

THIRD QUARTER 2012

Tele2 AB
October 18, 2012

Agenda

• About Q3 2012

• Financial review

• Concluding remarks

2

Tele2 Group Q3 Highlights

• Net mobile customer intake of 1.5 million leading to a total customer
base of 37.7 million

• Net sales growth for the Group amounted to 9% excluding exchange
rate differences, corresponding to SEK 10,906 million

• EBITDA amounted to SEK 3,002 million, equivalent to a margin of 28%

• CAPEX amounted to SEK 1,229 million

3

Market Area Russia: Overview

Population
Appr. 143 million
Tele2 Russia
 43 regions of Russian Federation
 22.3 million subscribers
 Mobile operator #4 in Russia in terms
of subscribers and revenue
Represents 30% of total net sales in Q3 2012

Focus
 Continue to grow customer base and maximize the 2G opportunity
 Evaluate possibilities to expand carefully through new licenses as well as by
complementary acquisitions
 Make progress on technology neutrality

4

Q3 Highlights Russia

• Strong customer net intake of 710,000
• Increased EBITDA margin, amounting to 38%
• ARPU continues to grow, showing a growth of
4% YoY

CUSTOMER BASE and NET SALES and EBITDA and
CUSTOMER INTAKE YoY NET SALES GROWTH EBITDA MARGIN
Thousands of customers SEK Million SEK Million
24,000 800 4,000 20% 1,600 42%

22,000 600 3,000 40%
15% 1,200
38%
20,000 400 2,000 10% 800
36%
18,000 200 1,000 5% 400
34%

16,000 0 0 0% 0 32%
Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12

Customer base (left) Net sales (left) EBITDA (left)
5 Customer net YoY net sales EBITDA
intake (right) growth (right) margin (right)

The Russian mobile market overview
TELE2 SUBSCRIBERS AS PART OF TOTAL RUSSIAN NET ADDITIONS
MOBILE MARKET
Tele2 MegaFon
Million subscribers Thousands of subscribers
Tele2 Vimpelcom MTS
8 000
250 8.8% 9.5%
6.5% 7.7% 6 000
200
4 000
150
2 000
100 0
50 -2 000

0 -4 000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
09 09 10 10 10 10 11 11 11 11 12 12 12
09 09 09 09 10 10 10 10 11 11 11 11 12 12
ARPU DEVELOPMENT Tele2 MegaFon ANNUALIZED CHURN RATE Tele2 MegaFon
Vimpelcom MTS Vimpelcom MTS
RUB
400 80%
4% growth
300 60%
234
200 40%

100
20%

0
0%
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Q3-11 Q4-11 Q1-12 Q2-12 Q3-12
09 09 10 10 10 10 11 11 11 11 12 12 12

6 Source: Company data, AC&M Consulting

Q3 Revenue Source Development
VOICE & OTHER and DATA REVENUE SPLIT DEVELOPMENT
SEK millions

4,000

8% 8%
3,000 9%
8% 8%

2,000

92% 92%
92% 92% 91%
1,000

0
Q3 11 Q4 11 Q1 12 Q2 12 Q3 12

Voice & other Data access

Voice and data demonstrate 8% and 12% YoY growth
respectively

7

Regulatory update: significant developments

Technology neutrality
On October 2, GKRCh* requested the Telecom Ministry to analyze the studies
about using 900 MHz band for UMTS and 1800 MHz for LTE by December 1.
Tele2 will further contribute to the discussion on LTE1800. The next GKRCh
meeting is tentatively scheduled for December 7, 2012

New regional licenses
On October 2, the GKRCh meeting agenda included the discussion of 9
GSM1800 license distributions. According to the statements of Ministry
officials, the current plan is to distribute them via auctions although the
auctions timing and the conditions have not yet been announced. Tele2’s
participation in the auctions will depend on their terms and conditions.

* GKRCh – State Commission on Radio Frequencies
8

Tele2 Russia forward looking statement

The following assumptions should
be taken into account when
estimating the operational
performance of the total operations
in Russia in 2012:

• Tele2 expects the subscriber base to
reach approximately 22.5 (earlier 22)
million.

• Tele2 expects ARPU to grow by 3-5
percent in local currency.

• Tele2 expects an EBITDA margin of
between 37-39 percent.

• Tele2 expects capex of between SEK
1,300 - 1,500 million.

9

Market Area Nordic: Overview

Population
14.4 million

Tele2 Sweden and Tele2 Norway
Home market and test bed for new services
Sweden 29%; Norway 11%

Focus
 Sweden: Build on mobile growth and 4G roll-out coupled with household / corporate
fiber strategy
 Norway: Roll out own network and focus on bucket-price subscriptions

10

Q3 Highlights Tele2 Sweden

• Net sales amounted to SEK 3,189 million and
EBITDA amounted to SEK 966 million
• Mobile service revenue growth of 4% YoY
excluding interconnect, and 2% including
interconnect
• Mobile EBITDA margin of 33%, affected by the
introduction of iPhone 5

4,900 80 4,000 2% 1,000 40%

4,800 40 3,000 750 30%
0%

4,700 0 2,000 500 20%

-2%
4,600 -40 1,000 250 10%

4,500 -80 0 -4% 0 0%

Customer base (left) Mobile Fixed broadband Fixed telephony Other

Bucket price plans

Launch of new Comviq price Continued demand for fixed
plan fee price plans

12

2G and 4G network roll-out

4G 80% population coverage

Shared network activated on Gotland and
2G on the West Coast of Sweden

13

Smartphone market development

SMARTPHONE INSTALLED BASE*
100%
Sales of top ten mobile phones 90%

Tele2 Sweden (Q32012) 80%
70%
60%
1. iPhone 4S 50%

2. Samsung Galaxy SIII 40%
30%
3. iPhone 5 20%
4. iPhone 4 10%

5. Samsung Galaxy Ace 0%
1111 1112 1201 1202 1203 1204 1205 1206 1207 1208 1209
6. Samsung Galaxy SII
Regular handset Smartphone
7. HTC Desire C
8. Samsung Galaxy Gio
9. Sony Xperia Acro S
10. Samsung E1080

* Postpaid residential, quantity of handsets
14

Tele2 Sweden forward looking statement

performance of the Swedish mobile
operations in 2012:

• Tele2 expects mobile service revenue to
grow by approximately 3-4 percent.

between 30-32 percent, assuming that
the market environment will remain
stable.

15

Q3 Highlights Tele2 Norway
• Strong focus on network roll-out
• Satisfactory net intake of 14,000 mobile customers
• Tele2 Norway reported total external revenue of SEK 1,184
million, of which SEK 1,117 million was mobile revenue
• Mobile EBITDA contribution was SEK 101 million

1,600 30 1,600 80% 150 10%

100
1,200 15 1,200 5%
50%
50
800 0 800 0%
0
20%
400 -15 400 -5%
-50

0 -30 0 -10% -100 -10%


Tele2 Norway forward looking statement

performance of the total operations
in Norway in 2012:

• Tele2 expects a total revenue of
between SEK 4,800-5,000 million.

between 4-6 (earlier 2-3) percent.

• Tele2 expects capex of between SEK
450-550 (earlier 850-950) million.

17

Market Area Western Europe:
Overview

Population
108 million

Leading the group in business to business services
and consumer fixed broadband
Netherlands 11%; Germany 2%; Austria 3%

Focus
 Netherlands Growth in mobile and B2B
 Austria B2B & continuous integration of Silver Server
 Germany Grow Fixed Via Mobile product

18

Q3 Highlights Tele2 Netherlands

• Financial performance continues to be stable
• Mobile intake above plan – net intake of 51,000
customers in Q3 and 96,000 YTD, with a significant
part in the high value mobile postpaid segment
• Several successful large corporate contracts signed
push intake in B2B

1,200 40 1,600 10% 800 40%

5% 600 30%
900 20 1,200
0% 400 20%
600 0 800
-5% 200 10%
300 -20 400
-10% 0 0%

0 -40 0 -15% -200 -10%


Q3 Highlights Tele2 Germany
and Tele2 Austria
• Austria and Germany continue to show stable
profitability
• Tele2 Germany: Fixed via Mobile partly
compensates the decline in fixed
• Tele2 Austria: B2B data intake remains steady
throughout the quarter, delivering stable financial
performance
• Successful integration of Silver Server almost
finalized
TELE2 GERMANY TELE2 AUSTRIA
EBITDA and EBITDA MARGIN EBITDA and EBITDA MARGIN
SEK Million SEK Million
120 40% 120 40%

90 30% 90 30%

60 20% 60 20%

30 10% 30 10%

0 0% 0 0%
Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12

EBITDA (left) EBITDA (left)
20 EBITDA EBITDA
margin (right) margin (right)

Market Area Central Europe and
Eurasia: Overview

Population
28 million
Represents 13% of total net sales in Q3
2012
Estonia 2%; Latvia 2%; Lithuania 3%;
Croatia 3%; Kazakhstan 3%

Focus
 Continued rapid market share growth in Kazakhstan
 Efficiency improvements in Baltics
 Improvements in market share growth in Croatia

21

Q3 Highlights Tele2 Estonia

• Stable financial performance and profitability in a
competitive market
• Tele2 Estonia maintains a positive net intake of mobile
customers
• Modernization of network and 4G roll-out currently ongoing

MOBILE CUSTOMER BASE NET SALES and EBITDA and
and CUSTOMER INTAKE YoY NET SALES GROWTH EBITDA MARGIN
600 30 300 12% 80 40%

450 20 225 9% 60 30%

300 10 150 6% 40 20%

150 0 75 3% 20 10%

0 -10 0 0% 0 0%

Mobile customer base (left) Net sales (left) EBITDA (left)

Q3 Highlights Tele2 Latvia

• Tele2 Latvia maintains high efficiency in a competitive market
• EBITDA margin amounted to 34%
• Net customer intake of 21,000
• Rolling out 4G when commercially attractive

1,200 40 400 -5% 120 40%

900 20 300 -10% 90 38%

600 0 200 -15% 60 36%

300 -20 100 -20% 30 34%

0 -40 0 -25% 0 32%


Q3 Highlights Tele2 Lithuania

• Significant intake of 38,000 mobile customers
• EBITDA margin amounted to 35%
• Continuing strong performance

MOBILE CUSTOMER BASE NET SALES and EBITDA and
and CUSTOMER INTAKE YoY NET SALES GROWTH EBITDA MARGIN
2,000 55 400 5% 160 50%

1,500 40 300 0% 120 40%

1,000 25 200 -5% 80 30%

500 10 100 -10% 40 20%

0 -5 0 -15% 0 10%

Mobile customer base (left) Net sales (left) EBITDA (left)

Tele2 Lithuania – a success story
MARKET SHARE DEVELOPMENT MARKET SHARE DEVELOPMENT
(revenue; 100% of the market) (EBITDA; 100% of the market)
60% 60%
50% 50%
40% 40%
30% 30%
20% 20%
10% 10%
0% 0%

Tele2 Company A Company B Tele2 Company A Company B

Tele2 Lithuania continues to outperform its competitors in terms of Revenue
market share growth and EBITDA market share. Tele2 has the highest
service revenue among all competitors

25

Q3 Highlights Tele2 Croatia

• Positive net intake of 33,000 customers
• Focus on maintaining a positive cash flow
• An impairment of goodwill and other fixed assets amounting to
SEK 250 million was done in the quarter

EBITDA-CAPEX
Thousands of customers SEK Million SEK Million SEK Million
1,000 90 500 5% 60 12% 50

750 30 375 0% 45 9% 25

500 -30 250 -5% 30 6% 0

250 -90 125 -10% 15 3% -25

0 -150 0 -15% 0 0% -50
Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3
11 11 12 12 12 11 11 12 12 12 11 11 12 12 12 11 11 12 12 12

EBITDA
26
CAPEX
Customer net YoY net sales EBITDA
intake (right) growth (right) margin (right) EBITDA-CAPEX

Tele2 Croatia forward looking
statement

The following assumption should
performance of the Croatian mobile
operations in 2012:

• Tele2 expects Croatia to reach an
EBITDA margin of between 4-6 percent.

27

Q3 Highlights Tele2 Kazakhstan

• Continuing strong net intake of 589,000 customers
• Total number of customers amounted to 3.1 million
• Continuing rapid roll-out of new base stations for increased
coverage

3,750 1,000 300 600% 160 0%

3,000 800
225 450% 80 -25%
2,250 600
150 300% 0 -50%
1,500 400
75 150% -80 -75%
750 200

0 0 0 0% -160 -100%


The Kazakhstan mobile market overview

MOBILE SUBSCRIBERS – MARKET SHARE NET ADDITIONS
Thousands of subscribers
3.5% 10.5%
100% 2,000

1,500
75%

1,000
50%
500
25%
0

0% -500
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
10 10 11 11 11 11 12 12 10 10 11 11 11 11 12 12 12

Tele2 Kcell/Activ Tele2 Kcell/Activ
Dalacom/Pathword Beeline Dalacom/Pathword Beeline

Tele2 Kazakhstan has reached more than 3 million customers within 18
months of operations

29

Tele2 Kazakhstan forward-looking statement

The following assumptions should be
taken into account when estimating the
operational performance of the total
operations in Kazakhstan in 2012:

• Tele2 expects the subscriber base to reach
approximately 3.4 (earlier 3.0) million.

• Tele2 expects an EBITDA contribution of
between SEK -350 to -400 million

• Tele2 expects capex of between
SEK 450-500 (earlier 550-600) million.

• Tele2 expects to reach EBITDA break-even
by 2H 2013.

• Tele2 expects to reach a long-term mobile
customer market share of 30 percent.

30

Agenda

• About Q3 2012



31

Group results Q3
SEK million Q3 2012 Q3 2011 ∆%
Net sales 10,906 10,429 4.6%

EBITDA 3,002 2,986 0.5%
EBITDA margin (%) 27.5% 28.6% -1.1%

Depreciation & associated companies -1,147 -989 16.0%
• During the quarter one-off
Depreciation of net sales (%) -10.5% -9.5% -1.0%
items of SEK -538 million
One-off items -538 -20 affected the EBIT result
EBIT 1,317 1,977 -33.4%
Normalized EBIT 1,855 1,997 -7.1% • One-off tax items
Normalized EBIT margin (%) 17.0% 19.1% -2.1% amounted to SEK +262
million
Financial items -219 -287
Taxes -118 -431
Net profit from continuing operations 980 1,259 -22.2%

Discountinued operations - 1

Net profit 980 1,260 -22.2%

32

Group results YTD
SEK million YTD 2012 YTD 2011 FY 2011 ∆%
Net sales 32,451 30,149 41,001 7.6%

EBITDA 8,288 8,339 11,212 -0.6%
EBITDA margin (%) 25.5% 27.7% 27.3% -2.1%

Depreciation & associated companies -3,604 -2,974 -4,158 21.2%
Depreciation of net sales (%) -11.1% -9.9% -10.1% -1.2%

One-off items -555 22 -4
EBIT 4,129 5,387 7,050 -23.4%
Normalized EBIT 4,684 5,365 7,054 -12.7%
Normalized EBIT margin (%) 14.4% 17.8% 17.2% -3.4%

Financial items -718 -591 -674
Taxes -712 -1,203 -1,472
Net profit from continuing operations 2,699 3,593 4,904 -24.9%

Discountinued operations - -7 -7

Net profit 2,699 3,586 4,897 -24.7%

33

Currency movements YTD
1%

0%

-1%

-2%

-3%

-4%

-5%

-6%
EUR RUB NOK
Average YTD Sept 2012 vs. YTD Sept 2011 Fixing rate Sept 2012 vs. Dec 2011

EUR/EUR pegged and RUB currencies represent 57 % of
external sales and 73 % of EBITDA

34

Depreciation

Depreciation and
Depreciation as a percentage of net sales
SEK million
Change year-on-year for Q3
1,400 12.5%
• Acquisition of Network
12.0%
1,200 Norway: SEK 80 million
11.5%
1,000
11.0% • Upgrade/replacement of
800 10.5% networks in the Baltics:
600 10.0% SEK 65 million
400
9.5%
• Reduction in Sweden:
9.0%
200
SEK -55 million
8.5%
0 8.0% • Growth Russia and
Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Kazakhstan: SEK 61 million
Depreciation Depreciation of net sales (%)

35

Financial items
Financial items in income statement Q3 2012 Q3 2011 YTD 2012 YTD 2011 FY 2011

Interest income/costs -259 -180 -710 -308 -483
Exchange rate differences, external -12 -11 -19 -53 -24
Exchange rate differences, intragroup 88 -53 135 -92 13
Other financial items -36 -43 -124 -138 -180

Total -219 -287 -718 -591 -674

Financial items in cash flow statement Q3 2012 Q3 2011 YTD 2012 YTD 2011 FY 2011

Interest paid -154 -76 -388 -150 -366

36

Taxes
Taxes in income statement Q3 2012 Q3 2011 YTD 2012 YTD 2011 FY 2011

Normal -380 -431 -974 -1,203 -1,580
One-off 262 - 262 - 108

Total -118 -431 -712 -1,203 -1,472

Taxes in cash flow statement Q3 2012 Q3 2011 YTD 2012 YTD 2011 FY 2011

Normal -178 -235 -492 -785 -948
One-off - - - - -

Total -178 -235 -492 -785 -948

• One time valuation of deferred tax assets in Austria SEK +262 million
• Deferred tax assets at year to date amounted to SEK 2.5 billion (Dec 2011: SEK 3 billion)

37

Cash flow
SEK million Q3 2012 Q3 2011 YTD 2012 YTD 2011 FY 2011

OPERATING ACTIVITIES
Cash flow from operations, excl. taxes and interest 2,866 2,978 8,165 8,402 11,261
Interest paid -154 -76 -388 -150 -366
Taxes paid -178 -235 -492 -785 -948
Change in working capital 244 59 -421 -205 -257
Cash flow from operating activities 2,778 2,726 6,864 7,262 9,690

INVESTING ACTIVITIES
CAPEX -1,076 -1,142 -3,323 -3,819 -5,572
Cash flow after CAPEX 1,702 1,584 3,541 3,443 4,118

Shares and other financial assets 3 51 -200 -3 -1,563

Cash flow after investing activities 1,705 1,635 3,341 3,440 2,555

38

Pro forma financial debt profile
Sources of funding
SEK billion
20.0
16.9
17.5
15.2
15.0
12.8
12.1
12.5

10.0

7.5

5.0

2.5

0.0

-2.5
Q4 '11 Q1 '12 Q2 '12 Q3 '12
Revolving Credit Facility Russian bond Commercial paper
Swedish bond Norwegian bond Other financing
Put option Kazakhstan Cash Pro forma net debt

39

Debt position and ratio
Pro forma net debt / EBITDA 12 m rolling
SEK billion / Ratio
20.0 2.00

17.5 1.75
2.9 2.9

15.0 1.50
2.9
2.9
12.5 1.25

10.0 1.00

16.9
7.5 15.2 0.75
12.8
12.1
5.0 0.50

2.5 0.25

0.0 0.00
Q4 '11 Q1 '12 Q2 '12 Q3 '12
Pro forma net debt Ordinary dividend (paid May 2012)
Extraordinary dividend (paid May 2012) Leverage net

40

Group financials ►
►
Mobile
Fixed telephony
►
►
Fixed broadband
Other operations

Group EBITDA and
Group EBITDA margin Group Net Sales
SEK million Group EBITDA margin SEK million
3,500 30% 12,000
3,000 10,000
28%
2,500
8,000
2,000 26%
6,000
1,500 24%
4,000
1,000
22%
500 2,000

0 20% 0
Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12

Group CAPEX (BS) and CAPEX/Sales ROCE (Normalized)
SEK million CAPEX/Sales Percent
2,000 30% 25%
22% 21%
19%
20%
1,500 23% 16%
16%
15%
1,000 15%
10%

500 8%
5%

0 0% 0%
Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12

41

Agenda

• About Q3 2012



42

Concluding remarks

Continue to grow as an operator

Manage the shift from voice to data

Continue to migrate from prepaid to
postpaid

Exploit new services and opportunities by
offering our customers what they need for
less

43

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