TELE2 AB ANNOUNCES CONTINUING REVENUE GROWTH AND THE DOUBLING OF EBITDA SINCE THE SECOND QUARTER

 

New York and Stockholm - October 24, 2001 - Tele2 AB ("Tele2", "the Group") (Nasdaq Stock Market: TLTOA and TLTOB and Stockhomsbörsen: TEL2A and TEL2B), the leading alternative pan-European telecommunications company, today announced its consolidated results for the third quarter 2001.

 

 

 

 

FINANCIAL AND OPERATING HIGHLIGHTS

 

 

Financial highlights

 

 

 

 

 

Operating revenue increased by 60% to MSEK 18,163. There has been steady revenue growth in mobile telephony and fixed telephony operations. Increased marketing activity in the early Autumn following a slower period during the summer is now driving customer numbers and this will be feeding through to operating revenue over the Autumn period.

Operating revenue for Tele2 Sweden was MSEK 6,649, an annualized increase of 15% with an encouraging 21% increase in mobile telephony.

 

EBITDA (Operating profit (loss) before depreciation and amortization) was MSEK 1,069 (6). EBITDA doubled from MSEK 351 in the second quarter of 2001 compared to MSEK 716 in the third quarter of 2001. EBITDA margins improved to 11% in the third quarter versus 6% in the second quarter of 2001.

EBITDA for Tele2 Sweden was MSEK 2,729 (1,926), an annualized increase of 42%. EBITDA margins were 41% versus 33% in the prior year, showing continuing improvements on a quarterly basis for the past 6 quarters.

 

EBIT (Operating profit (loss) after depreciation and amortization) was MSEK -1,128 (-1,823). EBIT improved from MSEK -375 in the second quarter of 2001 to MSEK -46 in the third quarter of 2001.

EBIT for Tele2 Sweden was MSEK 2,153 (1,402), an increase of 54%.

 

EBT (Profit (loss) after financial items) was MSEK -1,597 (-1,965). Net interest expense and other financial items totaled MSEK -419 (-112). The average interest rate applied to debt outstanding was 6.1%.

 

Profit (loss) after tax was MSEK -2,184 (-2,377).

 

Earnings (loss) per share (diluted) was SEK -15.05 (-22.89), after dilution.

 

Tele2's total assets at September 30, 2001 increased by 9% to MSEK 46,259 compared to the MSEK 42,345 reported at December 31, 2000.

 

OPERATIONAL REVIEW BY MARKET AREA

 

Nordic

 

Operating revenue, MSEK 9,065 (7,617), +19%

 

EBITDA, MSEK 2,692 (2,190), +23%

The Nordic market encompasses operations in Sweden, Norway, Denmark and Finland.

The Nordic market reported revenue growth across all of its core market areas.

 

Tele2 Sweden is the main component, representing operating revenues of MSEK 6,649, an increase of 15% over the nine months ended September 30, 2001. EBITDA increased by 42% to MSEK 2,729 over the same period. The growth in the number of mobile prepaid and contract subscribers continued during the third quarter, due primarily to Tele2's market position as the price-leading operator. Comviq reported 2.4 subscribers, an annualized increase of 24%. Monthly average revenue per subscriber (ARPU), including both postpaid and prepaid customers, remained stable at SEK 214 compared to SEK 222 over the same period last year and SEK 204 in the second quarter of 2001, despite the higher customer intake during the period. Minutes of usage (MOU) increased by more than 10% from 102 to 113 over the same period and remained stable compared to 114 in the second quarter 2001.

Prepaid mobile customers accounted for 61% of the total mobile subscriber base and 90% of net new mobile subscriber additions for Tele2 Sweden in the period.

 

Fixed telephony customer intake in Sweden was strong, increasing 30% on an annualised basis to 1.3 million, whilst EBITDA margin reached 22% in the third quarter of 2001 compared to 12% over the same period last year.

 

In September, Tele2 Sweden launched a cost saving initiative by simplifying Tele2's offering to customers and reducing its domestic workforce by some 7%. In 2002, these actions will save approximately 80 million SEK on an annual basis.

 

In October, Tele2 launched GPRS in Sweden and the offering was well received as access was at a substantial discount to competitors.

Denmark and Norway are predominantly fixed telephony operations and reported a total of 1.6 million subscribers. There was growth in all areas of the business in the two countries. In September Tele2 Norge acquired Enitel's private and corporate fixed telephony and dial-up Internet subscribers at a low cost per subscriber.

 

 

Operating revenue, MSEK 781 (123), +535%

EBITDA, MSEK 196 (-6)

The Baltic and Eastern Europe market encompasses operations in the Baltics, Poland and the Czech Republic.

Baltic and Eastern Europe operating revenues increased to MSEK 781 (123) and EBITDA increased to MSEK 196 (-6).

 

Operating revenue, MSEK 4,039 (2,090), +93%

EBITDA, MSEK -554 (-1,140)

The Central European market encompasses Tele2 operations in Germany, the Netherlands, Switzerland, Austria and the United Kingdom.

Pro forma operating revenues increased to MSEK 4,039 (+93%) for Central Europe. EBITDA for the area improved significantly over the last four quarters. This reflects the maturity of certain of the operations and their progress towards EBITDA breakeven within the three years from operational launch. Strong Q3 ARPU's for Central Europe of SEK 150 (104) on a monthly basis were achieved.

On 24 August Tele2 launched the first Mobile Virtual Network Operator (MVNO) in The Netherlands. Tele2 signed an agreement with Telfort, a GSM operator owned by British Telecom. The agreement allows Tele2 to offer mobile services to its fixed line customers.

 

Operating revenue, MSEK 4,025 (1,692), +138%

EBITDA, MSEK -1,002 (-945)

The Southern Europe market includes Tele2 operations in France, Italy and Spain and a license in Portugal.

Pro forma operating revenues increased to MSEK 4,025 (+138%) for Southern Europe. The region had a strong first nine months in terms of EBITDA margin growth reflecting particularly the improving profitability of Tele2's operations in France. Tele2 entered the French market in March 1999, and has grown to become the largest private operator in the residential sector with a subscriber base of approximately 2.4 million. Strong Q3 ARPU's for Southern Europe of SEK 125 (95) on a monthly basis were achieved.

Tele2 is now one of Italy's second leading private fixed line operators.

 

In the second quarter, Tele2 launched fixed telephony services in Spain and by September 30, 2001 had 169,000 subscribers. Tele2 aims to be the second leading alternative operator by year-end 2001. The network in Spain is IP based using CISCO switches. The company's offering is entirely pre-paid in Spain.

 

Operating revenue, MSEK 557 (412), +35%

EBITDA, MSEK 42 (-19)

The Luxembourg market includes Tele2 operations in Liechtenstein, Luxembourg and Belgium and 3C companies in all countries of operation.

Luxembourg operating revenues increased by 35% to MSEK 557 on a pro forma basis. EBITDA increased to MSEK 42 (-19). Market performance was strong this quarter with a significant improvement of EBITDA margin to 16% and a 6% growth in sales quarter on quarter.

Tele2 offers mobile telephony services in Liechtenstein under the Tango brand and launched fixed telephony services under the Tele2 brand in the second half of 2000. In March, Tele2 was awarded a UMTS license in Liechtenstein.

In Luxembourg, Tango has a 43 % market share. In March, Tango launched GPRS in Luxembourg.

 

Operating revenue, MSEK 1,069 (591), +81%

EBITDA, MSEK -305 (-74)

Branded Products and Services includes Optimal Telecom, C3, Everyday.com and IntelliNet in all countries of operation.

Pro forma operating revenues increased to MSEK 1,069 (+81%) for Branded products and services. The main revenue generators within this area are Optimal Telecom and C3. The market area recorded a third successive quarter of EBITDA improvement.

 

Tele2 finalised a €1.2 billion refinancing through ABN Amro, CIBC World Markets plc, ING Bank, Nordea, The Royal Bank of Scotland and West LB. This 5 year, amortizing senior debt facility has replaced the two previous debt facilities, which existed within Tele2 Sweden and the former SEC. This facility ensures that all Tele2 group operations are fully funded with regard to the group's business plan. The applicable margin, which is based on the Debt to EBITDA ratio, starts at 2.25% and will be progressively reduced as EBITDA improves.

 

Cash flows from operations increased to 585 as compared to cash flow of 202 in the previous quarter.

During the summer months, Tele2 upgraded its billing systems. This upgrade resulted in delays in sending out invoices in few countries and therefore working capital increased over the period. We expect that the level of working capital will normalize in the next quarter.

Investments and Divestments

Transcom Worldwide SA

In January, Tele2 divested its 37.45% holding (acquired through the merger with SEC) in the call center company Transcom Worldwide SA ("Transcom") to Industriförvaltnings AB Kinnevik ("Kinnevik"). At its AGM, the Board of Kinnevik proposed a dividend of Transcom shares to its shareholders and also a public listing of Transcom. On 6 September the shares in Transcom were listed on NASDAQ and Stockholmborsen's O-list. The proceeds due to Tele2 on the sale of its interest in Transcom will be determined by the market price of Transcom's publicly listed equity 60 trading days after the market quotation day. It is therefore anticipated that a capital gain on disposal will be recorded in the income statement in the fourth quarter of 2001.

Parent Company

 

At the Parent company level, Tele2 reported operating revenue of MSEK 9 (6) and operating profit of MSEK -32 (196). Liquidity at September 30, 2001 and December 31, 2000 was MSEK 2 and MSEK 7 respectively.

 

COMPANY DISCLOSURE

 

The proposed date for the release of Tele2's financial and operating results for the period ended December 31, 2001 is February 2002 at a date yet to be disclosed.

 

REPORT REVIEW

The financial and operating results for the period ended September 30, 2001 have not been subject to specific review by the Company's auditor.