E ploiting gro th opport nities inExploiting growth opportunities in Sweden and Russia

Mats GranrydCEOCEO

February 23, 2011

Agendag

Tele2 in brief

Q4 2010 summary

E l iti th t iti i R iExploiting growth opportunities in Russia

Exploiting growth opportunities in SwedenExploiting growth opportunities in Sweden

2010-10-2011

Tele2 – An Eastern European growth machine

• SEK 40 billion in revenue• Of which 70 percent mobile• Of which 70 percent mobile

• 31 million customers in 11 countries

• Tele2 always provides• Tele2 always provides the Best Deal• Through price leadership

and• Quality in all customer

touch points

2

Q4 2010 summary

3

Highlights Q4 2010Group:

g g

– Net customer intake for the group 803,000 in Q4 2010

– Net sales grew by 2 percent. Currency-adjusted 8 percent8 percent

EBITDA grew by 10 percent Currency adjusted– EBITDA grew by 10 percent. Currency-adjusted 18 percent

2010-10-2044

Highlights Tele2 Russiag g

• 755,000 (1,149,000) new755,000 (1,149,000) new customers in Q4 2010

• Revenue grew by 24 percent i Q4 2010in Q4 2010

2010-10-2055

Highlights Tele2 Sweden g g• Increased mobile revenue growth of 12 percent

• Adding 20,000 (20,000) mobile customers, of which 65,000 (51,000) postpaid

• Mobile EBITDA margin 30 (33) percent due to a larger intake of smart• Mobile EBITDA margin 30 (33) percent, due to a larger intake of smart phone customers and increased costs to JVs

• 4G launch in five major cities

2010-10-2066

Tele2 Netherlands: Revenues, segments & gfocus areas

Share of total revenue 2010

Corporate Fixed & BB (22%) SME Fixed & BB (7%) Wholesale (10%)Tele2 NL network

LeeuwardenGroningen

Assen

IRU

Own Build

AlkmaarL d

• Tele2 Business is the largest competitor to KPN. That position will be developed & strenghtened by acquisition of BBned

&

• Big potential in addressing SME segment by building indirectchannel.

• Improved offering and

• Shift from voice to more data.

• Focus on Ethernet portfolio

UtrechtThe Hague

Arnhem

LelystadZwolle

Amsterdam DeventerEnschede

Nijmegen

Haarlem

Amersfoort

Rotterdam

London • Focus on Fixed Data & Telephony, strong position in the corporate & governmental segment.

market position via BBned(‘BBeyond’) with a strong indirect channel

Residential Fixed & BB (46%) Mobile (15%)Middelburg

Den Bosch

MaastrichtHeerlen

VenloEindhoven

Breda

BrusselsAntwerp

Frankfurt

Paris

Residential Fixed & BB (46%)

Focus on Broadband 3P bundles

Develop Best Deal position

Mobile (15%)

Currently MVNO based

Maastricht

2010-10-2077

Highlights Tele2 Kazakhstang g

• During the quarter Tele2 added 114 000• During the quarter, Tele2 added 114,000 new customers in Kazakhstan, a sequential improvement of the total customer stock by 52 percent

• Focus on widening the distribution t k th h t th tnetwork throughout the country

Interconnect lowered as of 2011 with• Interconnect lowered as of 2011 with good support from NRA

2010-10-2088

Group financial profile

2010-10-2099

Net debt and dividend targets

• Shareholder remuneration

g

– “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 thethe 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 p g g qrequirements.”

• Balance sheet“Tele2 has a target net debt to EBITDA ratio of between 1 25 and 1 75– 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 strategicoperates and reflect the status of its operations, future strategic opportunities and contingent liabilities.”

2010-10-201010

Tele2’s general group targetsg g g

B t D l iti• Best Deal position

• Targeting a long-termg g gmobile EBITDA margin on owninfrastructure of at least 35 percent

• All operations should have the ambition of reaching ROCE of at least 20 percent

• The capability to reach a top 2 position, in terms of customer market share, in an individual country or , yregion

2010-10-201111

Exploiting growth opportunities in Russia

12

Macro outlook

13,3 14,018500GDP per capita (PPP), $

Consumer & Labor Market Indices 2008 – 2012

12,0

14,0

17500

18000CPI, %

Real Disposable Income Growth, %

Unemployment  rate, %Budget deficit, % of GDP 2009 2010 2011F

8,8 8,8

7,77,08,4

8,0

10,0

16000

16500

17000 Russia 6.1 4.1 2.0

EMEA (incl. Russia) 5.8 5.0 3.7

Eurozone 6 3 6 0 4 7USD

Percen

2 73,4 F

6,46,8

7,3 7,1

4,0

6,0

14500

15000

15500Eurozone 6.3 6.0 4.7

US 10.2 8.6 6.3

Japan 5.6 6.5 7.5

nt

2,72,3 2,4 2,6

0 0

2,013500

14000 Global 6.0 5.3 4.3

0,013000

2008 2009 2010 2011F* 2012F*

Further outlook is for stable macro-environment and positive economic growth

13Sources: Actual data & 2010 estimate – Official statistics; forecast – Deutsche Bank EM Outlook 2011, World Bank Outlook

p g

Tele2 Russia: Mobile market overviewbe

rs (m

illion

)

Pene

tratio

n

Prep

aid

shar

e

Mob

ile s

ubsc

ri P

100%

NET ADDITIONSShare of adds (%) MTS Vimpelcom MegaFon Tele2

QUARTERLY CHURN  PERCENT Tele2

40%

60%

80%

100%

10%

13%

Net

add

ition

s

Qua

rterly

chu

rn

‐20%

0%

20%

40%

4%

7%Q

14

3Q09 4Q09 1Q10 2Q10 3Q10 4Q10

Source: AC&M – 3Q10 Report, Mayson Analysis – Voice Quarterly Metrics, Nov 8th 2010

Tele2 Russia: Mobile market overviewMOBILE MARKET SHARESPERCENT OF ACTIVE SUBSCRIBERS

MOBILE MARKET SHARESPERCENT OF RETAIL REVENUES

30%

35%

40%

PERCENT OF ACTIVE SUBSCRIBERS

25,0%

30,0%

35,0%

mar

ket s

hare

s

mar

ket s

hare

s

15%

20%

25% Mobile TeleSystems

VimpelCom

MegaFon

T l 2 10 0%

15,0%

20,0%

,

Mobile TeleSystems

VimpelCom

MegaFon

T l 2

Mob

ile m

Mob

ile m

0%

5%

10%

2006 2007 2008 2009 1Q10 2Q10 3Q10

Tele 2

0,0%

5,0%

10,0%

2006 2007 2008 2009 1Q10 2Q10 3Q10

Tele 2

2006 2007 2008 2009 1Q10 2Q10 3Q10 2006 2007 2008 2009 1Q10 2Q10 3Q10

Average TELE2 share (old regions) – 38.5%Average TELE2 share (new regions) – 14%Average TELE2 share (total 37) – 28%

2010-10-201515Source: AC&M Consulting – 3Q10 Report, Mayson Analysis – Voice Quarterly Metrics, Nov 8th 2010

Mobile ARPU developmentp

Even if prices are pressured in Russia, Tele2 will see stable or growing ARPU

16Source: World Economic Outlook, Oct. 2010; Analysis Mason, Country Report Data: Russia, Oct 2010; ACM Consulting

Tele2 Russia: Mobile data market

14%

BIG4 DATA REVENUE BREAKDOWN*TELE2 REGIONS, PERCENT, 3Q10

29%

22%

МТС

МегаФон

ВымпелКом

35%

Tele2

3%

BIG4 DATA TRAFFIC BREAKDOWN*TELE2 REGIONS,  PERCENT, 3Q10DATA REVENUE

MTS Vimpelcom MegaFon Tele2

21%18%

3%МТС

МегаФон

ВымпелКом

Tele2

87

9

7

58%Data Rev, % of total Revenues

2010-10-201717 * Tele2 regions internal, BIG 3 – J’son & Partners, 2011, otherwise AC&M, 2010

Data Rev, % of total Revenues

The business opportunity

5,520 7

22,5

pp yConnections (millions) and ARPU (RUB) Service Revenues (BUSD)

5,6% 4,7%CAGR 2010-CAGR 2010-2015

0,61,40,4

0,84,42,23,7

20,719,4

1,5

4,617,1 25,1%

11,4%

-1,3%

14,8%

18,1%

20152015

3,4 3,3

2010 2015

18,515,715,6

17,92,8% -3,3% -0,3%

Voice Broadband Non‐Voice

2010 2015

ARPU Voice ARPU Non‐Voice

2010 2015

Handsets MBB

Current Tele2 B2B Russia Target Market (Service revenues)

19%1%

The total Russian B2B market is app. USD 4.4 billion with expected 2010-2015 CAGR19%1% expected 2010 2015 CAGR at 5 percent

18 Source: Analysys Mason

Total Market T2 Target MarketT2 Target Market T2 Revenues

Tele2 regional expansion opportunitiesg p ppCOVERAGE MAPPopulation (Million)

Total Market 142

CHUKOTSKI

Петрозаводск

Мурманск

П

КалининградС.-Петербург

Tele2 61

New licenses 12,5

Combined 73,5

KAMCHATSKAYA

KORYAKSKI

MAGADANSKAYAДудинка

YAMALO-NENETSKI

Архангельск

Сыктывкар

Нарьян-МарПсков

Кострома

Тверь Вологда

В.Новгород

Смоленск

Брянск

Курск

МОСКВАЯрославль

Н.НовгородРязань

ИвановоВладимирОрел Тула

Калуга

KOMI-PERMIATSKI

KAMCHATSKAYAYAKUTIA

HABAROVSKI

Тура

Тюмень

HANTY-MANSIYSKI

Екатеринбург

Оренбург

ЧелябинскСамара

Пермь

Уфа

Ставрополь

Волгоград

Краснодар

МайкопЭлиста

СаратовР.-на-Дону

Ижевск

Киров

Воронеж

Белгород

Казань

р д

Йошкар-ОлаТамбовСаранск

Липецк

EVREISKAYA

AMURSKYA

SAKHALINSKAYA

ЧитаУлан-Удэ

Красноярск

Барнаул

Томск

НовосибирскКемерово

ОмскKURGANSKAYAОренбург

Махачкала

Астрахань

ULIANOVSKAYA

PENZENSKAYA

UST-ORDYNSKI

ИркутскPRIMORIEГорно-Алтайск

Кызыл

Opportunity for Tele2 to expand 2G coverage

19

Opportunity for Tele2 to expand 2G coverage

4G license background

• Tele2 has submitted an application letter to join the 4G consortium set up toinvestigate the feasibility of 3G and 4G in a number of radio frequency bandsinvestigate the feasibility of 3G and 4G in a number of radio frequency bands

• The Government has approved the “perspective radio frequency plan” for 800, 900,2300 d 2600 MH b d t b d f th 3G/4G bil b db d b 2014 20152300 and 2600 MHz bands to be used for the 3G/4G mobile broadband by 2014-2015

• As per officials’ public statements technology neutrality shall be adopted by 2015• As per officials public statements technology neutrality shall be adopted by 2015

LTE 1800 is viewed as a viable 4G opportunity by a number of market players

20

Summary• After the financial crisis Russia is

back on track with GDP growthback on track with GDP growth projected at 4.2% in 2011

• The 17 regions launched in 2009 had a great start, and there is still a lot of market to capturea lot of market to capture

• Upcoming new licenses may give further geographical expansionfurther geographical expansion

Tele2 Russia’s inherent organic growth is complemented by an array of new opportunities

21

Tele2 Russia s inherent organic growth is complemented by an array of new opportunities

Exploiting growth opportunities in Sweden

22

A continued shift from fixed to mobile and voice to data

60

30

40

50 M2M

IP-TV

Mobile Messaging (SMS/MMS)

Mobile DataBill

ion

SE

K

0

10

20 Fixed Business Data

Fixed Broadband

Mobile Voice

Fixed Voice

B

02001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

23Sources: PTS, Analysys Mason, Ovum

Smartphones change the customers’ behaviorSmartphones change the customers behavior

The Swedish mobile market Tele2 customers’ demand for data solutions is increasing rapidlyThe Swedish mobile market increasing rapidly

Sales of data packages increased 400% in 2010

100%

Smartphones vs. regular phonesShare of total market

60%

70%

80%

90%

20%

30%

40%

50%

More than 60 percent of Tele2’s prepaid

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

0%

10%

2009 2010 2011 2012 2013 2014Smartphone Active mobile handset subscribers

p p pcustomers converting to postpaid change to a smartphone

24

Sources: Analysys Mason Sources: Internal data

Smart phones drive revenue growthSmart phones drive revenue growth

1 iPhone4

• Increased usage and ASPU– A customer used to a regular phone quickly

increases usage of voice, text and data – ASPU increases with almost 20%

Top 10 phone sales (Oct-Dec)

2 iPhone 3GS

3 Sony Ericsson X8

4 HTC Desire

5 HTC Desire HD

6 Samsung E1080

7 Samsung Galaxy S

Smartphone user, who previously used a regular phone

Minutes* SMS MMS Data ASPU**8 HTC Wildfire

9 Nokia 1208

10 Sony Ericsson X10 Mini Pro

Up-lift 13% 21% 26% 975% 19%

* Out-going minutes** ARPU excluding operator revenue and installments

25

10 Sony Ericsson X10 Mini Pro

Communication As a Service (CAS) increases revenue

200

250

IP Centrex extensions

$20

$25

$30

Service revenues for SME ('000s)

50

100

150

$5

$10

$15

$20

• Tele2 has strengthened its product portfolio within the CAS segment

02008 2009 2010 2011 2012 2013 2014

$02008 2009 2010 2011 2012 2013 2014

– Acquired Spring Mobil in 2010– Integrated the departments working with CAS to gain an increased focus on customers

26

4G is a substitution for fixed broadband4G is a substitution for fixed broadbandRevenue from data 2004-20094G benefits for Tele2

19%21%23%25%

26000270002800029000

e/R

even

ue

ue (M

SEK

)

Revenue from data 2004 2009

• Increased customer intakeSubstitute for Fixed Broadband

4G benefits for Tele2

9%11%13%15%17%

2200023000240002500026000

Dat

a-R

even

ue

Mob

ile re

venu– Substitute for Fixed Broadband

• Improved quality perception9%22000

2004 2005 2006 2007 2008 2009• Higher ARPU

• Lower production costs

2004 2005 2006 2007 2008 2009

27 Source: Analysis mason, 2010

SummarySummary

A i d hif f fi d• A continued shift from fixed to mobile and voice to data

• Smartphones change the customers’ behavior and drive revenue growthrevenue growth

• Good potential for further market pshare gain in the SME segment

4G id b tit t f fi d• 4G can provide a substitute for fixed broadband

28

Tele2’s group guidelinesTele2 s group guidelines

B t D l iti• Best Deal position

• Targeting a long-termg g gmobile EBITDA margin on owninfrastructure of at least 35 percent

• All operations should have the ambition of reaching ROCE of at least 20 percent

• The capability to reach a top 2 position, in terms of customer market share, in an individual country or , yregion

29

30

APPENDIX

31

Tele2 has the lowest costs according to AT&K l b l b h kAT&Kearney global benchmark

107,

405

93,5

4493

,311

92,5

9081

,819

78,6

6176

,117

71,8

3771

,082

70,5

048

196

770

895

875

822

229

942

0

01 6

Total cost per site

7

71 71,

70,

68,1

67,7

65,9

565

,75

65,2

264

,29

63,4

2061

,801

59,5

8657

,280

56,1

9555

,718

55,7

0355

,622

55,3

3755

,104

53,9

6053

,020

52,8

7650

,457

49,9

0645

,861

44,8

5144

,076

43,8

9443

,461

42,6

8941

,967

41,0

6440

,915

40,1

2239

,992

38,6

4836

,049

35,8

3935

,249

34,3

4434

,307

32,8

9232

,678

31,8

5031

,762

30,7

4920

,657

19,9

8917

,780

13,9

41

A B C D E F ] G H I J K L M N O P ] Q R S T U V W X Y Z

AA AB AC AD E ]

AF G ]

AH AI ] AJ AK AL AM N ]

O ]

AP AQ AR AS T ]

AU AV AW X ]

AY Z ]

BA 7A BC BD A ]A C

[ F G M O

[ P Q V W X Y

AA A AC A

[ AE A

[ AG A

[ AI A A A AM

[ AN

[ AO A AQ A A

[ AT A AV AW

[ AX AY

[ AZ BA

Tele2 SE

07 BC B

[ Tele2

SE 08

A

Personnel Ex ternal serv ices Leased lines / frequencies License & v endor maintenanceRental equipment Site and building rental Pow er OtherDepreciation Reference Cluster reference

137.9

129.3

21211

6.210

8.710

6.610

5.710

5.410

3.299

.898

.392

.188

.280

.578

.772

.572

.171

.270

.568

.267

.166

.966

.463

.061

.961

.660

.460

.459

.759

.559

.257

.255

.052

.751

.951

.6 9.7 8 3 9 8 6 3 4

Total cost per Gb (traffic)

5 5 52 51 51 49.

48.3

46.9

46.8

45.6

44.3

43.4

42.9

42.4

42.3

41.9

41.4

41.2

37.2

34.7

32.1

31.4

30.1

27.2

23.1

A B C D E F G ] I ] K ] M N O P Q A S ] U V W ] ] ] A B C D ] F G H I J K L ] N O P Q ] S T U V W X Y Z A B ]A B C D E F G[ H

[ J K

[ L M N O P Q

Tele

2 SE

07A S

[ T U V W

[ X ]

[ Y

[ Z

AA AB AC AD[ A

E A F AG AH A AJ AK AL[ A

M

A N AO AP AQ[ A

R AS AT AU AV AW AX AY AZ BA BB[ T

ele2

SE

08A

Personnel Ex ternal serv ices Leased lines / frequencies License & v endor maintenanceRental equipment Site and building rental Pow er OtherDeprec iation Reference C lus ter reference

32

[ ] = Cluster; = Operator excluded from reference value calculation

p

Our customers shall communicate in the world’s t ffi i t t k ith d litmost efficient network, with good quality

GCB - Independent benchmark to other operators

Lowest value Tele2 Average Highest valueCongestion rate

Lowest value 0,01%

Tele2 0,2%

Average0,53%

Highest value 1,8%

Call drop rate

Lowest value 0,23%

Tele2 0,7%

Average0,73%

Highest value 1,54%

Average callLowest value

2630Tele2 4500

Average4873

Highest value 7940Average call

set-up time (msec)2630 4500 4873 7940

33

An overview of network sharing arrangements

TeliaTelenor Tele2

2G Net4Mobility

3G 3GIS SUNAB

4G Net4Mobility4G

34

Strategy for network companies proven with the S b j i t t

T l 2 bil b db d ”b t i t t”

Sunab joint venture

• Tele2 mobile broadband ”best in test”

• >50% savings, OPEX and CAPEX compared kto own network

• Benchmark on quality and costsCost efficiency always in focus

• ”Key for success” to have a detailed agreement and a common plan

always in focus

g p

”Test av bästa mobila bredbandet”

35

Strategy for cost efficiency resulted in joint t ith T lventure with Telenor

• N4M enables unique position for 4G speeds and coverage in Sweden

N4M

• 40-50% OPEX and CAPEX savings,

Cost efficiency always in focus

compared to own network

• Benchmark on quality and costs

• ”Key for success” to have a detailed agreement and a common plan

36

4G roll-out

NETWORK AND TERMINALS PLAN ON TRACK COMMERCIALLY LAUNCHED 15-11-2010

• 4G Core network installed and operational

• Roll-out started from new combined 2G and 4G t k i St kh l G th b M l ö L dnetwork in Stockholm, Gothenburg, Malmö, Lund

and Karlskrona

• >350 sites swapped to date

• 30 – 50 sites will be swapped each week

• Quality and speed improvements in the 2G networknetwork

• Emphasis on 2G quality and coverage

37

4G speeds

38

39