2019 Tele2 Annual Report FINANCIAL CALENDAR 2020 MAY 11 Annual general meeting 2020 – Stockholm Financial reports FEB 3 APR 21 Full year report Interim report January – December 2019 January – March 2020 JUL 15 OCT 20 Interim report Interim report January – June 2020 January – September 2020 Contents CEO word 4 Board of directors 6 Leadership team 8 Shareholder information 9 Administrative report 10 Financial overview 10 Three-year summary 11 Tele2 at a glance 12 Proforma Group summary 13 Overview by segment 14 Enterprise risk management 23 Employees 25 Sustainability 28 Governance report 30 Financial statements – Contents 36 Financial statements – Group 37 Consolidated income statement 37 Consolidated comprehensive income 38 Consolidated balance sheet 39 Consolidated cash flow statement 41 Consolidated statements of changes in equity 42 Notes 43 Financial statements – Parent company 80 Parent company’s income statement 80 Parent company’s comprehensive income 80 Parent company’s balance sheet 80 Parent company’s cash flow statement 81 Parent company’s statements of changes in equity 81 Notes 82 Auditor’s report 86 Definitions 89 Non-IFRS measures 89 Financial metrics 92 CEO WORD CEO word With the groundwork done in 2019 we look forward to executing on the next phase of business transformation, turning Tele2 into the smartest telco in the world. 2019 has been a transformative year as we finished the integration of Com We launched a new mobile brand, Com Hem Mobile, and we are happy with Hem and set Tele2 up for its journey to become the smartest telco in the the progress so far. In fact, we saw great momentum across all our mobile world. We completed the transactions in Kazakhstan and the Netherlands, brands, leading to the first full-year positive net intake of mobile subscribers changing the profile of the Tele2 Group to focus on our core Baltic Sea in four years. footprint where we have the scale and market position to drive sustainable While the Swedish B2B market remains challenging, we made efforts growth. With a strong foundation in the Baltics, a clear focus on fixed‑ in 2019 to set us up for a future turnaround. We have separated the Large mobile‑convergence in Sweden and a new business transformation pro‑ Enterprise and SME units for a more efficient and focused setup. As we see gram we can now execute on our goal to return to growth. SME as an area where Tele2 is yet to reach its full potential, we put a lot of effort in developing our capabilities there. We end the year as a stronger In 2019 Tele2 underwent significant changes, laying the foundation for our challenger within SME as we have built up our sales capabilities, revamped new vision to turn Tele2 into the smartest telco in the world and deliver the mobile portfolio and launched FMC offers. growth while operating a more lean and efficient organization. The merger The Baltics continued its great performance and we finally saw a turn- with Com Hem allowed us to launch a completely new strategy in the around in Estonia with end-user service revenue growth for the full year. We Swedish consumer market as we added fixed services to our toolbox. We also took a step to strengthen our network position by entering a network launched the fixed-mobile-convergence (FMC) more-for-more strategy sharing agreement in Latvia and Lithuania, using the knowledge we have and managed to get 219,000 customers on FMC-benefits by the end of the from many years of successful network sharing in Sweden. year, representing about three quarters of the overlapping customer base. We carried out a major rebranding campaign of the Tele2 brand, lifting it into Launching the next phase of business transformation a premium position in the market. Following this campaign, which was the With a more focused geographical footprint and the Com Hem integration most well received marketing campaign in Tele2’s history, we introduced completed we can now run Tele2 in a more efficient way. We changed the new Tele2 family offers and implemented frontbook price adjustment on organizational structure to better reflect the current asset portfolio and Tele2. strategy, shrinking the group structure and setting Tele2 up as a flatter organization. TELE2 ANNUAL REPORT 2019 4 CEO WORD With all this progress we have completed phase one of the Tele2 transforma- reporting our carbon footprint to CDP, committed to setting science-based tion, turning Tele2 into an integrated operator. This enables us to begin the targets, taken the lead role in a new EU research project called AI4Green, and next phase which starts with our new vision to become the smartest telco updated our environmental policy. In our focus area Ethics & Compliance we in the world, creating a society of unlimited possibilities. For us this means have produced an exit report from Kazakhstan, highlighting the transpar- radical simplification and customer focus. It means doing things simpler ency which has been a guiding principle during our presence in this market. within a flat and fast organization, always with a focus on simplification and We have also launched new anti-corruption and fair competition pol- delivering value for our customers. Everyone should have a clear mandate icies, as well as an updated version of our whistleblower policy. Improving and accountability, within a fact-based and performance-driven operation. our gender balance is a key activity for us as a company, emphasized by This mindset allows us to quickly adapt to the world around us, and con- our focus area Diversity & Inclusion. During the year we have committed to tinously modernize our operations. It also means working with distinctly becoming a gender balanced company by 2023 on three levels: executive positioned leading brands, providing our customers with smart combined management team, managers, and all employees. To further this commit- offerings for mobile connectivity, broadband, and next generation TV and ment, we have introduced a principle in our Swedish organization we call play services, covering the entire household and being an outstanding 2+1, meaning that we should strive to recruit two women for each man we partner to businesses and the public sector. hire. We believe that this vision and the new governance model will drive 2019 has been a year where we have continued to receive recognition positive change over the next few years as we launch a new business trans- for the work that we do within sustainability. We have maintained our MSCI formation program which is expected to reduce opex by at least SEK 1 billion AAA-rating which puts us in the top 9 percent globally in the telecommu- over the next three years. While this transformation will result in a significant nication services industry, and we have improved our RobecoSAM score. reduction of opex, that is not the goal in itself. We aim to operate smarter and We were ranked as the 2nd best Swedish company and 35th in the world reduce complexity which in the end means serving the customer in the best in Equileap’s global gender equality report. In the bi-annual “Walking the way possible while operating an efficient and fast organization. Talk” report by Misum at the Stockholm School of Economics we were given the highest “walk” score among all Swedish technology and telecommuni- Increasing focus on sustainability cations companies, praising our sustainability progress. I am proud of the This has been a year where we have seen a continued increase in the progress that we have made in 2019, and pleased that we are recognized for importance of sustainability for society as a whole. For us as a company the hard work that we do. we can clearly see how sustainability is ever higher on the agenda of our customers, investors and employees. This means that sustainability must Looking forward be a foundation for our business. A focus for our efforts during the year has Thanks to the hard work and dedication of the Tele2 employees we have been to complete the integration of the sustainability efforts of Tele2 and achieved a lot in just one year, completing phase one of Tele2’s transfor- Com Hem, following our merger. Our goal with this integration has been to mation and turning the company into an integrated operator. With the take the best parts of both companies’ previous work, and leverage this to groundwork done in 2019 we look forward to executing on the next phase of ensure the best possible impact. business transformation, turning Tele2 into the smartest telco in the world. Our focus areas during the year have been: Environment, Ethics & Compliance, Privacy & Integrity, Child Protection and Diversity & Inclusion. These have remained the same as the previous year, as we still consider these to be the most material issues for us to work with. Among the activities that we have undertaken during the year, there are a few that we would Anders Nilsson like to highlight. As a part of our focus area Environment we have started President and CEO TELE2 ANNUAL REPORT 2019 5 Board OF Directors Board of directors Carla Smits‑Nusteling Andrew Barron Chairman of the Board, elected in 2019 | Board member since 2013 Deputy Chairman of the Board, elected in 2019 | Board member since 2018 Born: 1966 | Nationality: Dutch citizen Born: 1965 | Nationality: British citizen Independence: Independent in relation to the company and management Independence: Independent in relation to the company and management as well as in relation to the company’s major shareholders as well as in relation to the company’s major shareholders Holdings in Tele2: 1,687 B shares Holdings in Tele2: 56,140 B shares Committee work: Member of the Audit Committee Committee work: Chairman of the Remuneration Committee Other current assignments: Member of the Board of Directors of Nokia Other current assignments: Board Member of Ocean Outdoor Limited Oyj, Non-Executive Director at ASML, Member of the management board Previous assignments: Chairman of the Board of Com Hem Holding of the Foundation Unilever NV Trust Office and Lay judge of the Enterprise AB, Arris International plc, COO of Virgin Media inc.