analyst & journalist meeting tele2 2013
TRANSCRIPT
1
INTRODUCTION Lars Torstensson
2
At what price are
you going to sell
4G?
When are
you going to
launch?
But is he going
to tell me
something I
don’t know?
3
WELCOME
Mats Granryd
4
Market presence and offered products
Sweden
Full product suite
Norway
Full product suite
Estonia
Mobile, Fixed
telephony
Latvia
Mobile
Lithuania
Mobile
Netherlands
Full product suite
Austria
Fixed broadband,
Fixed telephony
Croatia
Mobile
Kazakhstan
Mobile
Germany
Mobile, Fixed
broadband & telephony
5
Net sales per market and segment
Share of net sales per market H1 2013
Net sales by market and segment H1 2013
SEK Million
Majority of net sales originates from
Sweden, Norway and the
Netherlands
Remaining markets contribute no
less than 25% of net sales
Mobile is the largest product area in
terms of net sales, representing 70.8%
of total net sales
Sweden Netherlands Norway Austria
Croatia Lithuania Latvia Kazakhstan
Germany Estonia Other
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Mobile Fixed broadband
Fixed telephony Other operations
6
Benefitting from a mobile evolution
Demand growth – European mobile data
usage Tele2 Sweden - Mb/week
3G 4G 2G
Jun-11 Jun-12Jan-12 Jan-13
MB
Jun-13Strong spectrum portfolio
Tele2 is a leading infrastructure-
based challenger with attractive offers
Tele2 is uniquely positioned to
capitalise on mobile data and internet
growth
7
Netherlands Other Netherlands Other
The Netherlands are of high importance
from a Tele2 Group perspective… Netherlands share of Net Sales
H1 2013
Netherlands share of EBITDA H1 2013
18.1% 21.2%
...and the importance will grow over the coming years
8
MARKET OVERVIEW Bob Bunnik
9
NL is a concentrated and competitive market: 4 out of 5 players have a converged strategy
Market: Consolidation
Cable: ‘mobility’ through WiFi, plus MVNO+limited own-roll-out
Full-MVNO on TMNL, transition to MNO
M&A FttH players
‘Quad Play’
‘Convergence Strategy’
Fixed broadband Mobile (3 MNOs & their main brands)
10
Convergence from a customer perspective
Fixed and mobile are converging, providing seamless access on any device and network.
Partnerships are key to enhance the value proposition for both consumer and business.
Services Devices Access
Residential: ‘Packaging’ convergence Business: Real technical convergence
True Convergence is about providing seamless access and convenience (‘one-stop-shop’)
11
Mobile market price levels: NL vs. EU
• The Netherlands mobile market behaves as a protected market with very high price levels.
“774% difference
in Phone call prices
across the EU”
“Up to 100x difference
In Data-only tariff volume
allowances in EU27”
EU Mobile Data price comparison
EU Mobile Voice price comparison
Sources: REWHEEL (2013), EU27 Mobile Data Cost Competitiveness Report and EU Digital Agenda Scorecard 2012 (Aug. 2013)
Average cost per minute (€ cents) in mobile communications,
2011
12
Mobile market: 4G positioned as premium
The Dutch market is moving towards flat-fee Voice & SMS but still with high price levels.
Vodafone KPN
13
Mobile market shares and value
Stable market share development, growth within mobile data
Revenue Market Shares 2005-2012
(x%)
NL Mobile Service Revenue’s 2012-2017
(mEUR)
Sources: Tele2 research and TelecomPaper Q2-2013
3503 3230
2990 2812
2647 2490
2294 2230
2288 2377 2493 2626
0
1000
2000
3000
4000
5000
6000
7000
2012 2013 2014 2015 2016 2017
Voice Non-Voice
0
10
20
30
40
50
60
KPN T-Mobile Vodafone
14
A 4G-centric mobile operator could capture most value at lowest cost.
Mobile handset market development
35% SIM-only May 2013,
up from 26% May 2012
NL:
66%
Very high smartphone penetration
in the Netherlands
SIM-only sales continuous to increase
Source: Comscore Data Gem
15
The addressable market for DSL is declining with clear growth in fiber
A technology shift in fixed broadband
2007 2008 2009 2010 2011 2012 2013 2014 2015
Internet
Internet VoIP
Internet (VoIP) TV
Internet (VoIP/ Mobile)
TV
Internet (Mobile) OTT-TV
xDSL FttH
2016
45% 45% 45% 45% 44% 43%
7% 10% 13% 17% 20% 23%
48% 45% 42% 39% 36% 34%
2012 2013 2014 2015 2016 2017
Cable FttH DSL
Bandwidth demand pushed by TV & Video
Fixed Broadband penetration: a technology shift
Sources: TelecomPaper (Q2-2013), Dutch Broadband
16
Fixed business services shift to mobile & IP
Digital leased lines
IP VPN
Ethernet services
Internet access
IP voice
Traditional fixed voice
2015
100%
2%
19%
13%
20%
21%
25%
2010
100%
5%
19%
6%
21%
8%
41%
Fixed services
Mobile services
2015
5.249 mEUR
45%
55%
2010
5.268 mEUR
54%
46%
Business market value is also shifting to mobile and ‘All-IP’.
FttO regulation more favorable for alternative operators.
Dutch enterprise telecom services Fixed Services Revenue split
Sources: Tele2; Gartner, 2011; IDC, 2011; Cap Gemini Consulting analysis
17
Cloud/Hosted PBX is growing
Fixed and Mobile are integrating
Security is of increased importance
Increasing ICT complexity
Decline in Voice usage
Anywhere, anytime access on any device
Fixed and Mobile convergence
‘Consumerisation’: from ‘investing’
to ‘using’ (Cloud)
Key trends in the business segment
Business market converges into ‘ICT’ business with increased attention for security.
Trends affecting the LE market Trends affecting the SME market
18
Key take-away: Significant growth potential in
mobile
Seamless fixed-mobile operators will be able to capture market value: 4G and fiber will be
pivotal.
Residential growth in Mobile Data &
Fixed Broadband on Fiber
B2B growth in Hosted Voice and
Mobile, Fiber to the office
increasingly important
19
Q&A PART 1
Bob Bunnik
20
THE NEW TELCO Günther Vogelpoel
21
Our Strategic Stronghold
Tele2 is uniquely positioned in the Dutch market with own fiber access and 4G.
Fiber to the
Home
FIBER BACKBONE
Fiber to the
Office Fiber to the X
Fiber to the Site xDSL
LTE Radio Network
Residential Wholesale B2B
Residential, B2B
& Wholesale
22
Tele2 the new Telco – 4G only
2G & 3G & 4G 4G
23
Data is the future
Total Data Revenue NL 2012 – 2017
(x mEUR)
Source: Telecompaper
2000
2100
2200
2300
2400
2500
2600
2700
2013 2014 2015 2016 2017
Provide customers with propositions that makes it easy to use data
24
Transition is the name of the game
Mobile: transition from MVNO to 4G MNO
Broadband: transition from copper (DSL) to Fiber
Our ambition: growth
Converged Player
Mobile residential*
>20%
Broadband residential*
>15%
Business*
>10%
* Market share
25
Strong Sales with MVNO
Growth Tele2 base YoY
-160
-110
-60
-10
40
90
Q112 Q212 Q312 Q412 Q113 Q213
Tele2 KPN Vodaphone T-Mobile
Source: Telecompaper
Customer Net Additions (x1000)
Tele2 is the only company that has shown continuous growth in the last 6 quarters.
0
100
200
300
400
500
600
Jul
Au
g
Sep
Oct
No
v
Dec Jan
Feb
Mar
Ap
r
May Jun
Tho
usa
nd
s
26
Transition to MNO
Smart distribution
Success of
smartmix
proposition
continues
New brand
position
4G ready & 4G
experience
Tele2 has a unique beneficial position to be competitive on mobile and fixed broadband.
27
Passive
NWS
Agreement
with TMNL
MNO progressing well
Off load
data to 4G
network
Secured
new MVNO
deal
Selected
vendors
New brand
platform Grow in
MVNO
Smart
distribution
28
Declining Tele2 base, preparation for transition
to high speed broadband
Broadband development Tele2 base
0%
5%
10%
15%
20%
25%
30%
Q2-12 Q3-12 Q4-13 Q1-13 Q2-13
Ziggo KPN DSL UPC
Others KPN DSL KPN Fiber Tele2
Tele2 Consumer Broadband market share
Incumbent aggressively attacks Cable.
FttH fastest grower
Bring fixed broadband back to growth
-
50
100
150
200
250
300
350
400
450
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Tho
usa
nd
s Total base DSL
Source: Tele2 Research & Telecompaper
29
The addressable market increases to
70 % in 2015
Tele2 FttH last mile via KPN with
regulated prices
High speed broadband coverage growing
Source: Tele2 Research
15%
15%
13%
57%
2013 15%
33%
19%
33%
VDSL Tele2 VDSLKPN FttH Unreachable
15%
50%
25%
10%
The addressable market increases
to 45% in 2014
Wholesale KPN VDSL access
with Tele2 services
Adding VDSL (off-net by KPN) Adding on-net FttH
Addressable market >30MB
30
Why will we be successful?
Synergy 4G
network and FttH
FttH rollout
momentum
Customer demand
higher speeds
Capture value in
converged
services
Leveraging on
existing
customer base
Own fiber
backbone
Tele2 has a unique beneficial position to be competitive on mobile and fixed broadband.
31
MNO ROLLOUT Joachim Horn
32
Spectrum availability
Targeted quality and performance
Expected traffic
Population density, distribution and migration pattern
Topography
Type of buildings
Key criteria for designing coverage
33
SWE NL
Total surface (km2) 450,300 41,540
Non water or forest 28.5% 72.4%
Population 9,5 M 16,7 M
Population per km2
non forest / water**
73.6 555.0
Demography and geography impacts
coverage
50%
100%
Sweden
Netherlands
Po
pu
latio
n c
ove
rage
*
30% Sites
15%
*Approximate
Source: WorldBank.org 2011
**Assuming no inhabitants in forest or water areas
34
Sig
na
l s
tren
gth
Distance [km]
800MHz 2600MHz
Tele2 has a very powerful spectrum position…
Pe
ne
tra
tion
loss
Wall
800 2.6
800 2.6
Coverage Km2
Ou
tdo
or
Ind
oo
r
Signal loss when covering indoor
10 MHz in 800 MHz
Ideal for coverage
20 MHz in 2.6 GHz
Ideal for capacity
Difference indoor/outdoor
… enabling a competitive and cost efficient rollout
35
0%
25%
50%
75%
100%
Time
Network planning done, site sharing deal
signed, suppliers chosen and rollout started
Approx. 3,500 sites for initial rollout
Priority to achieve full coverage
Competitive capacity, speed and quality
First sites being finalized
* Approximate
Population coverage over time*
36
Leveraging synergies with our backbone
and FttH
LTE
POP
Consumer
Small business
Microwave = Tele2 infrastructure
= Rented from Reggefiber
37
Principles of site sharing with T-Mobile NL
RRH*
Antenna
T-Mobile base
station
Tele2
base
station
Backhaul Tele2 core
network
T-Mobile core
network
2G
3G
4G
4G
X
X
X
Passive sharing of infrastructure and antennas
Sharing of backhaul, power and field services is optional
Majority of sites will be shared with T-Mobile, first sites available soon
*RRH = Remote Radio Head
38
RAN
Core
IMS/Voice over
LTE platform
Network procurement done
Mainly price
Similar quality and capabilities of
different vendors
Vendor capabilities
Vendor experience
Existing references
Vendor experience
Vendor flexibility
Equipment Vendor Main decision criteria
39
SE 2003 SE 2008 SE 2013 SE share2013
NL 2013
Sweden reference
Rollout versus license investments
NL
MEUR
161 172
License Network rollout
MEUR
CAPEX for initial rollout* Comparison radio equipment cost
MEUR
Cost per
site
• Competitive equipment prices keep investments low
*Approx. 3,500 sites
40
LTE supports carrier grade VoIP, i.e. Voice
over LTE
First carrier grade voice over IP-solution in
mobile
Future proof “Over-The-Top” competitive
service
Generally available from beginning of 2014
(standardization, chipsets)
Dec. 2012: Tele2 first live VoLTE trial in EU
• Tele2 targets to offer VoLTE early
41
VoLTE brings substantial benefits
Better sound
Less delay
Up to 6x faster establishment times
Spectral efficiency
No national roaming costs
42
Preparing Tele2’s customer base for LTE
US and Asian operators to launch
VoLTE within next 12-18 months
0%
10%
20%
30%
40%
50%
60%
Top tier handsets likely to support
VoLTE from 2014
Potential upgrade of existing LTE
handsets with VoLTE
LTE enabled handsets sold by Tele2 NL
Jul 2012 Jul 2013
• More than 50% of handsets sold in July 2014 are already LTE enabled
43
How we will ensure quality
Full LTE
coverage
with best
in class
ambition
National
Roaming
Agreement
Building our own network based on newest technology without legacy
Ambition to achieve a full LTE coverage as soon as possible
Keep our customers in the Tele2 network throughout the country
Quality design is based on KPI:s which beats best in class in Sweden
Seamless coverage experience for Tele2 customers (2G and 3G)
Similar setups working very well in Tele2 Norway and Croatia
Proven CSFB* technology to deliver voice (2G and 3G) to 4G
customers
Tele2 was the first operator in Europe to launch CSFB (2011)
*CSFB = Circuit Switch Fallback
44
Tele2 will have a very competitive
IT landscape
New IT
architecture
Ahead of the pack – legacy free
Flexible best of breed system, fully agile approach
All current and future business needs, fixed and mobile
Customer benefits
Transparent and clear communication to the customers
Online focus: My Tele2, customer portals and apps
Real-time information for consumption and charging
• Architecture defined, suppliers chosen and development started
45
Key take-aways
In control for best customer experience
Building our own network
Implementing a competitive IT landscape
All legacy free
Planning done, suppliers chosen, implementation started
Initial rollout of 3,500 sites, most of which are shared
Supporting business success with competitive cost position
Working on early launch of VoLTE for true 4G experience
46
Q&A PART 2
Günther Vogelpoel
Joachim Horn
47
B2B OPERATION Fedor Hoevenaars
48
B2B has a clear # 2 position in fixed services
Strong
customer base
Broad service
spectrum
Own
infrastructure
ATM’S TRAINS SCHOOLS &
UNIVERSITIES
HEALTHCARE CASINO’S
One of the largest fiber optic networks
Total length 5,213 km
Access to 55 radio nodes
49
Incumbent is dominant in B2B
58% 16%
5%
4%
16%
Business Market Share: Fixed Voice Connections
58%
13%
4%
4%
8%
6% 7%
Business Market Share: IP-VPN Connections
Tele2 is the only full-service alternative
Sources: OPTA Structural Market Monitor Q1 2013
58%
13%
4%
4%
8%
6%7%
Business Market Share: IP-VPN Connections
KPN Tele2 UPC Ziggo Vodafone Eurofiber Other
50
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Mobile
Fixed
Mobile drives B2B revenue development
Overall strong revenue growth in B2B driven by mobile, where fixed remains important
B2B Mobile growth taking of
in 2015 when network
reached full coverage and
quality
Overall revenue growth
from all segments: SME
and Enterprise
Continued decline in fixed
voice MoU and traditional
voice service being
replaced by Hosted Voice.
Our strength in Data
(VPN/Internet) remains
highly important for the
future
*Not based on actual figures
51
3%
4%
6%
9%
11%
37%
39%
47%
67%
0% 20% 40% 60% 80%
Other
Supported new ways of working
Don't know
4G hasn't benefited my business
Improved customer satisfaction
Increased employee well-being / motivation
Won more business
Cust costs
Increased productivity
Relevance of 4G in B2B
4G is a perfect complement to our Fixed business
‘How can LTE
improve the
processes we
already have?’
‘What’s totally new?’
Source: Arthur D. Little Analysis
52
Corporate
SME
SOHO
Full service provider, serving all segments
Direct: Account
Management
Indirect: Partners
and Telesales
Online and Retail
Sales channel expansion in SME is part of our growth strategy in B2B
53
Transition to integrated services
Convergence is creating momentum
By adding mobile to our portfolio the addressable market is doubled
Cloud/Hosted PBX is growing
Fixed and Mobile are integrating
Anywhere, anytime access on any device
Security is of increased importance
Increasing ICT complexity
We rather partner than invent
ourselves
Tele2
Fixed &
Mobile
Customer
Centricity
Collaboration
Business
Continuity
Cost
Control
4 themes lead our proposition development and
partner selection
54
Large bank
Corporate SME Wholesale
Our B2B strategy proves to be successful C
usto
mers
P
art
ners
55
Tele2
Fixed
Mobile
Convergence
Customer
Centricity
Collaboration
Bu
sin
es
s
Co
nti
nu
ity
Co
st
Co
ntro
l
With 4G capabilities Tele2 is able to address the entire business market
SME
Corporate
Wholesale
SOHO
Take away: converged connectivity is
opening the market
56
Conclusions
>20% >10%
Back to growth
&
benefit from
synergy
Continue growth
&
build 4G
Maintain fixed
&
grow mobile
>15%
57
Q&A PART 3
Fedor Hoevenaars