Tele2 Interim Report January-March 2007

- Operating revenue for Q1 2007 grew by 5 percent to SEK 12,837 (12,243) million

- Continued excellent performance in Russian mobile operations with revenues and EBITDA in Q1 2007 both growing strongly. Russia now has a customer base in excess of 7.1 million

- Strong broadband intake during Q1 2007, adding a total of 254,000 new broadband customers

- Fixed telephony EBITDA margin improved to 14 (11) percent in Q1 2007

 

"We are in a stage of focus. During 2007, we expect to see the majority of our revenue being generated within our own infrastructure based mobile and broadband services, as a result of our shift in focus from resold fixed line telephony to our own infrastructure based services. These services have grown to 41 percent of group sales in Q1 2007 from 32 percent in Q1 2006 and the trend will be accelerated as a result of our current strategic review.

 

Our operational results, with EBITDA growing 22 percent year on year, show that our increased focus on mobile and broadband services continues to pay off and that our investments in infrastructure lead to higher margins for Tele2. To be able to defend higher investments, overall profitability must improve.

 

Our mobile operations in the Baltic region and Russia continue to show healthy operational performance. Strong net customer intake, despite tough competition, is combined with good margin development. This quarter, I am especially pleased with our development in the Nordic market area, which shows that there is still growth potential in the mobile segment. 

 

Our broadband business continued to produce impressive net customer intake numbers, with 254,000 new customers in Q1. Southern Europe represents the majority of our new broadband customers, and I am particularly pleased with the continued strong intake in Italy. Scale is important, and we are getting closer to critical mass in geographies with a sound potential for growth and profitability.

 

Fixed line EBITDA margins improved during the quarter. However, we experienced a higher level of competition from primarily mobile operators leading to a larger net customer outflow and stronger ARPU decline than expected. As we have pointed out earlier, it continues to be important for Tele2 to move into more infrastructure based operations. The recent developments highlight this rationale as we move swiftly towards mobile and broadband services based on our own infrastructure."