TELE2 INTERIM REPORT JANUARY-JUNE 2006

- Mobile revenues in Q2 increased by 29% to SEK 4.6 billion
- Excellent performance in Russian mobile: customer intake, revenues and EBITDA all growing strongly
- Q2 2006 EBITDA amounted to MSEK 1,397 (1,689), including integration costs in Versatel of MSEK 57 and a capital gain of MSEK 52 from the sale of Tele2's Czech operations
- Operating revenue for the first six months of 2006 increased by 14% to MSEK 26,935 (23,622)
- Net profit for the first six months of 2006 amounted to MSEK 476 (1,159)
- Earnings per share, after dilution, for the first six months of 2006 amounted to SEK 1.25 (2.61)
- Acquisition announced of E.ON Bredband in Southern Sweden

 

 

Lars-Johan Jarnheimer, President and CEO of Tele2 AB commented:

 

In Q2 2006, Tele2's period of transition continued. We maintained our focus on growth and the opportunities in mobile and broadband, where our operations are progressing well.

 

In Q2, we achieved revenue growth of 12%, reaching SEK 13.5 billion and an EBITDA of SEK 1.4 billion, which, on an annualised basis, broadly matches the guidance given at the time of our AGM.

 

Our mobile businesses had an excellent quarter, particularly in Sweden and Russia. Swedish mobile had an EBITDA margin of 44%, the third quarter in a row at that level. Russia also contributed a very strong overall mobile performance this quarter with customer numbers up 136% to 4.6 million, revenues up 156% to MSEK 568, and an EBITDA margin of 13%, compared to -18% one year ago. We further consolidated our strong position in Russia in early July with the acquisition of four more mobile operations in North-West Russia. Our MVNO in France had a strong quarter, reporting a total of 300,000 customers at the end June, and the mobile launch in Croatia continues to go well.

 

We have made two significant broadband announcements. In June, we announced our intention to acquire E.ON Bredband in Southern Sweden, giving us a firm foothold from which to accelerate our broadband push in Sweden. In early July, we announced the creation of a broadband company "Plusnet" in Germany, together with QSC. Plusnet's purpose is to provide both parties with LLUB broadband access in Germany. We anticipate launching a LLUB offer in Germany towards the end of this year. Both these deals substantially improve our broadband position in the respective countries. We also had a soft launch of a triple play offer in France during the quarter.

We are experiencing a high demand for our broadband products but have been holding back in taking on new broadband customers during the quarter. This was partly due to a large backlog from Q1 2006, which we thought would disappear more rapidly, as well as the inability of the incumbents to process orders as fast as we would have liked. This caused a slow down in new broadband sales, in order to catch up, as well as an increase in churn. We anticipate this situation improving during the remainder of the year, due to improvements in our forecasting and in the incumbents provisioning process. Consequently, our broadband customer intake will accelerate from its current levels in the coming quarters.

Our fixed line businesses continued to experience a high level of churn. We lost 701,000 of our 16 million fixed line customers during the quarter, with a significant proportion of those coming from France where we are experiencing intense competition from the incumbent, as well as a highly competitive broadband market. However, it must be recognized that the traditional European fixed telephony market is now in structural decline.

We are always trying to improve our disclosure and transparency. This quarter we have taken another positive step by providing the split in our broadband base between direct access and broadband resale customers.

Looking to the remainder of this year, we will continue with the emphasis on mobile and broadband while at the same time seeking to reduce churn, minimize costs and improve efficiencies."

 

 

CONTACTS
Lars-Johan Jarnheimer, Telephone: + 46 (0)8 562 640 00
President and CEO, Tele2 AB
Håkan Zadler, Telephone: + 46 (0)8 562 640 00
CFO, Tele2 AB
Dwayne Taylor, Telephone: + 44 (0)20 7321 5038
Lena Krauss, Telephone: + 46 (0)8 562 000 45
Investor enquiries

Visit us at our homepage: www.tele2.com

 

CONFERENCE CALL DETAILS
A conference call to discuss the results will be held at 16.00 (CET) / 15.00 (UK time) / 10.00 am (New York time), on August 1, 2006. The dial-in number is: +44 (0)20 7365 1828 or US: +1 718 354 1158. Please dial in 10 minutes prior to the start of the conference call to allow time for registration. A recording of the conference call will be available for 10 days after the call on: +44 (0)20 7806 1970 or US: +1 718 354 1112 with access code 4328493#. The conference call will be web-cast on Tele2's website www.tele2.com, along with the presentation material.