TELE2 Q1 2006 FINANCIAL REPORT

- Operating revenue for the first quarter 2006 increased by 16% to MSEK 13,453 (11,579)
- Russian revenue grew by 167% to MSEK 448 (168) in Q1 2006 and turned EBITDA positive
- Q1 2006 EBITDA amounted to MSEK 1,375 (1,414)
- Net profit for the quarter amounted to MSEK 230 (483)
- Earnings per share for the quarter amounted to SEK 0.59 (1.09)

- The broadband customer base grew by 147,000 to 1.3 million in Q1 2006 and broadband revenue increased by 135% to SEK 1.3 billion in Q1 2006
- Tele2 has agreed to sell its operations in the Czech Republic due to the lack of improvement in the regulatory environment

 

 

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

 

"For Tele2, 2006 is a year of transition. The balance we have maintained between growth, profitability and cash flow has temporarily shifted in favour of growth as we seize the opportunities available to us in broadband and mobile, in order to position the business for the longer term.

In the first quarter of 2006, Tele2 continued to make good progress in key areas, namely the ongoing integration of Versatel and Comunitel, accelerating the push into broadband and maintaining the strong growth momentum in our mobile businesses, particularly in Russia and France.

Revenues for the quarter grew by 16% to SEK 13.5 billion. This revenue growth, which primarily came from the push in broadband and mobile, has resulted in significant increases in marketing and CAPEX over the same period last year. Consequently, this has impacted cash flow and also EBITDA, which at SEK 1.4 billion, is down 3% compared to Q1 2005.

Our broadband push only got underway in the later part of  Q1 and is accelerating. Nevertheless, we added an impressive 147,000 broadband customers in the quarter, demonstrating the value of the Tele2 brand. In addition Tele2 has booked costs for another 40,000 broadband customers in Belgium and the Netherlands, which were not yet activated as customers by the end of Q1 2006. We have also improved our overall system integration process for broadband across our footprint. In France, we are close to resolving our ULL broadband problem and hope for a soft launch in Q2. In Germany, we anticipate announcing a similar broadband arrangement during the quarter, to that which we struck in France last year. In Italy and Belgium, our broadband operations are developing strongly.

Russia again produced substantial growth, as its revenues rose 167% quarter on quarter and it has produced a positive EBITDA for the first time.

Swedish mobile telephony produced good results with an EBITDA margin of 44%, although there are signs that margins may slowly decline during the remainder of the year. The Nordic market area as a whole remains stable, with revenues and EBITDA both rising compared to Q1 2005.

Central Europe market area, with EBITDA growth of 147% compared to Q1 2005, remains a star performer as the synergies from the acquisition of UTA clearly showed themselves and Germany continued to produce strong
results. We have awaited improved regulatory conditions in the Czech Republic. We have seen changes in this area, but unfortunately not for the better. Hence, we have decided to divest our operations there. In Poland, despite the market for local calling having been deregulated, we are encountering some problems as the incumbent is breaching a number of EU Telecoms laws.

 

In Southern Europe we secured a national roaming agreement in Switzerland this quarter, paving the way for us to develop our mobile business there, while our French MVNO is progressing well. I remain confident about the coming year and know that Tele2 is well equipped to meet the challenges
ahead."