Tele2 — Interim / Quarterly Report 2021

Apr 22, 2021

2021 Tele2 Interim Report First Quarter

Q1 2021 HIGHLIGHTS

• End-user service revenue of SEK 4.7 billion declined by 1% compared to Q1 2020 on an organic basis due to a negative impact from the pandemic.
• Revenue of SEK 6.6 billion was flat compared to Q1 2020 on an organic basis.
• Underlying EBITDAaL of SEK 2.3 billion increased by 6% organically compared to Q1 2020 driven by strong performance in the Baltics, cost savings, temporarily low commercial spend and bad debt provisions recognized in Q1 2020.
• Net profit from total operations of SEK 0.9 billion decreased by SEK 0.3 billion compared to Q1 2020.
• Equity free cash flow from continuing operations of SEK 0.8 (1.3) billion in the quarter decreased mainly due to a spectrum capex payment. Over the last twelve months, SEK 4.3 billion was generated, equivalent to roughly SEK 6.3 per share.
• The Board of Directors proposes an extraordinary dividend of SEK 3.00 per share to be distributed in July, 2021.
• Spectrum licenses in Sweden acquired, enabling nationwide roll-out of 5G network.
• Capital Markets Day to be held on May 25, 2021.

Key financial data

SEK million	Jan-Mar 2021	Jan-Mar 2020	Organic %	Full year 2020
Continuing operations
End-user service revenue	4,730	4,825	-1%	19,184
Revenue	6,550	6,581	0%	26,554
Operating profit	1,202	1,148		7,371
Profit after financial items	1,072	989		6,855
Underlying EBITDAaL	2,314	2,194	6%	9,239
Capex excluding spectrum and leases	702	517		2,717
Operating cash flow	1,613	1,677		6,523
Operating cash flow, rolling 12 months	6,459	6,766		6,523
Equity free cashflow	820	1,285		4,799
Equity free cash flow, rolling 12 months	4,334	5,163		4,799
Total operations
Net profit	865	1,180		7,408
Earnings per share after dilution (SEK)	1.25	1.71		10.71
Equity free cashflow	820	1,282		4,879
Economic net debt to underlying EBITDAaL	2.5x	2.6x		2.6x

Continuing and discontinued operations

Non-IFRS measures

Figures presented in this report refer to Q1 (January-March) 2021 and continuing operations unless otherwise stated. Figures shown in parentheses refer to the comparable periods in 2020. Discontinued operations include the former operations, primarily in Germany, Croatia and Kazakhstan. See Note 10.

This report contains certain non-IFRS measures which are defined and reconciliated to the closest reconcilable line items in the section Non-IFRS measures on page 27. Note that organic growth rates exclude effects from currency movements. For further definitions of industry terms and acronyms, please refer to the Investor section at www.tele2.com.

CEO LETTER – Q1 2021

Our first quarter has been a story of disciplined focus and delivery in the face of pandemic headwinds. We managed to grow underlying EBITDAaL by 6 percent through continued execution on the business transformation program, operational discipline and impressive performance in the Baltics. While we are not back to normal yet, the future is now more predictable, giving us confidence that we can distribute an extraordinary dividend of SEK 3.00 while keeping a strong balance sheet.

Over the last 12 months, Tele2 has dealt with significant uncertainty in our markets caused by the pandemic as well as regulatory unpredictability. Around this time last year we shifted our focus to defending underlying EBITDAaL as a precaution. This was done successfully without interfering with our midterm ambitions and we have been able to continue distributing cash to our shareholders while maintaining a strong balance sheet.

While we are not out of the pandemic yet and still expect some headwinds for a few months, the future is now more predictable. This means that we can turn our focus back towards achieving growth later in the year and make necessary investments to prepare the company for the future. We are also very pleased that we can continue remunerating our shareholders while maintaining a strong balance sheet. In light of this, the Board has decided to propose an extraordinary dividend of SEK 3.00 per share this year and expects to call for an Extraordinary General Meeting to be held in June 2021. Pending shareholder approval, the extraordinary dividend will be distributed in July, 2021.

Our results this quarter reflect another period of successful cost control in the face of pandemic headwinds. We were able to deliver strong growth in underlying EBITDAaL, partly because of bad debt provisions in Q1 2020 giving a somewhat easier comparison, but also due to underlying spending discipline and continued delivery on our transformation program.

As expected, revenue trends were impacted by lower activity as our markets are under COVID-19 restrictions. However, we see clear signs of strength across the business, giving us comfort that we have a resilient business model and that we are on the right strategic trajectory. Across our Baltic markets we see continued impressive performance despite complete lockdowns over extended periods of time. While Sweden B2B still faces structural headwinds, we see initial indications of improvement in both the Small and Large segments as a result of our efforts to rework our offerings.

In Sweden Consumer we see the strength of a value led strategy as tailwinds from last year's more-for-more initiatives support continued growth in mobile postpaid and fixed broadband even in an environment where sales are affected by low market activity. We continued to execute on the morefor-more strategy during the quarter following product improvements such as upgrades to broadband speed and mobile data. We expect to see the effect on ASPU starting in Q2 2021 with the full effect in the second half of the year.

So far, we have driven FMC mainly by connecting separate brands and offering benefits to improve loyalty in the existing customer base. However, for this to really move the needle and drive sustainable growth we need to look beyond the existing customer base and drive organic FMC sales by establishing a leading FMC premium brand that can cater to the whole household.

In the near future we will take the next step in our brand optimization journey and consolidate our premium consumer brands in Sweden into one. Over time, this will help us scale the benefits we see in our current FMC customer

Our first quarter has been a story of disciplined focus and delivery in the face of pandemic headwinds "

base as we solidify our position in the premium end of the market with a clear focus on FMC. Furthermore, we see this as a step back from unnecessary brand proliferation in an already saturated Swedish market.

However, while the brand launch is a major commercial exercise it is just one step in a longer journey which involves migrating to an IT-architecture that enables both more commercial flexibility and significant cost reduction over time. It also allows us to create a whole new level of coordination and focus as we align all internal processes not only to drive sales and reduce complexity but also to improve the customer lifetime value by creating a unified customer experience from end to end.

In the coming quarters we will shift our focus back toward growth and execute on the necessary initiatives that will ensure success in a post pandemic world. We will take the next step in our brand journey to unlock the full potential of FMC in the Swedish consumer market. We will continue executing on our transformation program to support our commercial efforts and deliver on our cost reduction target of at least SEK 1 billion by the end of 2022. We will ramp up the 5G rollout which, along with the Remote PHY upgrade on the fixed network, will ensure that we can continue delivering a great service to our customers and maintain a premium position in the market. We will execute on our strategy to set Sweden B2B on the path to stabilization. With a solid plan in place, it is now time to execute and invest in growth.

Kjell Johnsen President and Group CEO

Financial overview

Analysis of revenue

Continuing operations SEK million	Jan-Mar 2021	Jan-Mar 2020	Organic %	Full year 2020
Mobile	1,413	1,417	0%	5,726
- Postpaid	1,181	1,159	2%	4,721
- Prepaid	231	259	-10%	1,005
Fixed	1,437	1,489	-3%	5,840
- Fixed broadband	678	646	5%	2,653
- Digital TV	695	755	-8%	2,878
- Cable & Fiber	420	442	-5%	1,693
- DTT	275	314	-12%	1,185
- Fixed telephony & DSL	64	87	-27%	309
Landlord & Other	170	175	-3%	694
Sweden Consumer	3,020	3,081	-2%	12,260
Sweden Business	946	1,000	-5%	3,889
Baltics	763	744	8%	3,035
End-user service revenue	4,730	4,825	-1%	19,184
Operator revenue	557	599	-6%	2,341
Equipment revenue	1,263	1,157	11%	5,029
Revenue	6,550	6,581	0%	26,554

End-user service revenue decreased by 1% organically, mainly due to headwinds related to the pandemic including loss of international roaming revenue.

• Sweden Consumer decreased by 2% as continued growth in mobile postpaid and fixed broadband was offset by decline in digital TV and mobile prepaid.
• Sweden Business decreased by 5%, due to continued price pressure in the market, decline in legacy fixed services and loss of roaming revenue.
• Baltics increased by 8% organically despite continued COVID-19 restrictions. This was mainly driven by strong ASPU (Average Spend Per User) growth from continued monetization of growing data consumption and migration of customers from pre- to postpaid subscriptions.

Total revenue was roughly flat organically compared to Q1 2020 as decline in end-user service revenue and operator revenue was offset by growth in equipment revenue. The decline in operator revenue was mainly due to reduced termination rates between operators.

Analysis of income statement

Continuing operations SEK million	Jan-Mar 2021	Jan-Mar 2020	Full year 2020
Revenue	6,550	6,581	26,554
Underlying EBITDAaL	2,314	2,194	9,239
Reversal lease depreciation and interest	316	307	1,245
Underlying EBITDA	2,630	2,501	10,484
Items affecting comparability	-69	-39	1,844
EBITDA	2,561	2,462	12,329
Depreciation/amortization	-1,372	-1,315	-5,269
- of which amortization of surplus from acquisitions	-300	-301	-1,203
- of which lease depreciation	-301	-289	-1,182
- of which other depreciation/amortization	-771	-725	-2,883
Result from shares in associated companies and joint ventures	13	0	311
Operating profit	1,202	1,148	7,371
Net interest and other financial items	-130	-158	-517
Income tax	-205	-195	378
Net profit	867	794	7,233

Underlying EBITDAaL increased by 6% organically, driven by strong performance in the Baltics, cost savings in Sweden and bad debt provisions of approximately SEK 35 million recognized in Q1 2020. The cost savings were primarily related to the business transformation program initiated in 2020.

Items affecting comparability of SEK -69 (-39) million was mainly driven by restructuring cost related to the business transformation program in Sweden. Refer to Note 3 for more details.

Operating profit increased to SEK 1,202 (1,148) million, driven by growth in underlying EBITDA.

Analysis of cash flow statement

SEK million	Jan-Mar 2021	Jan-Mar 2020	Full year 2020
Continuing operations
Underlying EBITDA	2,630	2,501	10,484
Items affecting comparability	-69	-39	1,844
Amortization of lease liabilities	-381	-372	-1,168
Capex paid	-1,086	-599	-2,704
Changes in working capital	-26	92	-337
Net financial items paid	-104	-102	-467
Taxes paid	-161	-209	-916
Other cash items	17	15	-1,937
Equity free cash flow	820	1,285	4,799
Equity free cash flow, rolling 12 months1)	4,334	5,163	4,799
Total operations
Equity free cash flow, continuing operations	820	1,285	4,799
Equity free cash flow, discontinued operations	-0	-3	80
Equity free cash flow	820	1,282	4,879

1) Reconciliation of equity free cash flow rolling 12 months are presented in an excel document (Q1 2021-financials to the market) on Tele2's website www.tele2.com

Capex paid of SEK -1,086 (-599) million includes a SEK 333 million payment for the 100 MHz that Tele2 was awarded in the 3.5 GHz spectrum auction in Sweden in January, 2021.

Taxes paid of SEK -161 (-209) million include repaid preliminary tax in Sweden in the quarter.

Equity free cash flow from continuing operations of SEK 820 (1,285) million in the quarter decreased mainly due to higher capex paid. Over the last twelve months, SEK 4.3 billion was generated, equivalent to roughly SEK 6.3 per share.

Analysis of financial position

Total operations SEK million	Mar 31 2021	Dec 31 2020
Bonds	24,391	21,175
Financial institutions and other liabilities	3,751	3,954
Cash and cash equivalents	-4,686	-970
Other adjustments	-298	-217
Economic net debt	23,158	23,942
Lease liabilities	5,184	5,327
Net debt	28,342	29,269
Underlying EBITDAaL, rolling 12 months1)	9,360	9,239
Economic net debt to Underlying EBITDAaL	2.5x	2.6x
Unutilized overdraft facilities and credit lines	8,710	8,560

1) Includes all operations owned and controlled by Tele2 at the end of each reporting period.

Economic net debt of SEK 23.2 (23.9 at year-end 2020) billion was reduced by SEK 0.8 billion during the quarter, driven by cash generation.

Economic net debt to underlying EBITDAaL (financial leverage) of 2.5x (2.6x year end 2020) was at the lower end of the leverage target range of 2.5-3.0x ahead of dividend payments.

Financial guidance

Financial guidance unchanged

Tele2 AB provides the following guidance for continuing operations in constant currencies.

Full-year 2021

The guidance for 2021 includes an assumption that international roaming will be at a similar level to 2020.

• Group end-user service revenue roughly flat compared to 2020.
• Group underlying EBITDAaL growth of 2-4% compared to 2020.
• Capex excluding spectrum and leasing assets of SEK 2.8–3.3 billion.

Mid-term

• Low single-digit growth of end-user service revenue.
• Mid-single-digit growth of underlying EBITDAaL.
• Annual capex excluding spectrum and leasing assets of SEK 2.8–3.3 billion during the roll-out of 5G and Remote-PHY.

Dividend

For the financial year 2020, the Board of Directors of Tele2 AB has decided to recommend to the Annual General Meeting (AGM) on April 22, 2021 that an ordinary dividend of SEK 6.00 be paid per ordinary A and B share, in two equal tranches on April 29 and October 8, 2021.

In addition, the Board intends to call for an Extraordinary General Meeting in June to propose an extraordinary dividend of SEK 3.00 per ordinary A and B share, to be paid in July, 2021.

Financial policy

• Tele2 will seek to operate within a range for economic net debt to underlying EBITDAaL of between 2.5–3.0x, and to maintain investment grade credit metrics.
• Tele2's policy will aim to maintain target leverage by distributing capital to shareholders through:
• An ordinary dividend of at least 80 percent of equity free cash flow, and,
• Extraordinary dividends and/or share repurchases, based on remaining equity free cash flow, proceeds from asset sales and re-leveraging of underlying EBITDAaL growth.

Group summary

Continuing operations SEK million	Jan-Mar 2021	Jan-Mar 2020	Organic %	Full year 2020
END-USER SERVICE REVENUE
Sweden	3,966	4,080	-3%	16,149
Lithuania	409	394	10%	1,631
Latvia	224	223	6%	901
Estonia	130	127	8%	503
Total	4,730	4,825	-1%	19,184
REVENUE
Sweden	5,335	5,431	-2%	21,601
Lithuania	692	639	14%	2,812
Latvia	353	339	10%	1,424
Estonia	197	200	4%	819
Internal sales, elimination	-26	-27	-4%	-102
Total	6,550	6,581	0%	26,554
UNDERLYING EBITDAaL
Sweden	1,864	1,788	4%	7,468
Lithuania	271	238	20%	1,043
Latvia	134	125	14%	556
Estonia	45	43	9%	173
Total	2,314	2,194	6%	9,239
CAPEX
Sweden	646	464	39%	2,399
Lithuania	23	18	35%	120
Latvia	13	13	3%	104
Estonia	21	22	-3%	93
Capex excluding spectrum and leases	702	517	36%	2,717
Spectrum	333	—		—
Right-of-use assets (leases)	258	326		1,182
Total	1,292	843		3,899
of which:
– Network	346	214		1,301
– IT	229	161		740
– Customer equipment	102	104		516
– Other	25	38		159
Capex excluding spectrum and leases	702	517		2,717

Overview by segment

Sweden

End-user service revenue declined by 3% with decline in both Sweden Consumer and Sweden Business. This was mainly due to decline in legacy fixed services and COVID-19 headwinds such as loss of international roaming revenue.

Continued execution on the business transformation program resulted in annualized run rate savings of SEK 300 million at the end of the quarter, mainly related to efficiency improvements within the Technology and IT organizations. Together with cost savings realized in previous year the total effect on underlying EBITDAaL was approximately SEK 70 million in the quarter.

Underlying EBITDAaL increased by 4% primarily driven by continued execution of the business transformation program, temporarily lower commercial spend and bad debt provisions of approximately SEK 25 million in Q1 2020.

In January 2021, Tele2 together with Telenor bought 100 MHz in the Swedish 3.5 GHz spectrum auction for which Tele2 paid SEK 333 million. Capex excluding spectrum and leases increased by SEK 182 million, mainly due to investments into the 5G network and IT transformation.

Financials SEK million	Jan-Mar 2021	Jan-Mar 2020	Organic %	Full year 2020
End-user service revenue	3,966	4,080	-3%	16,149
Revenue	5,335	5,431	-2%	21,601
Underlying EBITDA	2,136	2,051		8,538
Underlying EBITDAaL	1,864	1,788	4%	7,468
Underlying EBITDAaL margin	35%	33%		35%
Capex
Network	308	179		1,073
IT	221	149		681
Customer equipment	100	102		508
Other	17	34		137
Capex excluding spectrum and leases	646	464		2,399
Spectrum	333	—		—
Right-of-use-assets (leases)	223	290		987
Capex	1,202	754		3,387
Capex excluding spectrum and leases / revenue	12%	9%		11%

Sweden Consumer

Continued progress was made in the FMC strategy with 285,000 customers now on FMC offers. Following upgrades of customer data bundles and broadband speeds, price adjustments were implemented on mobile postpaid and fixed broadband with the effect on ASPU expected from Q2 2021.

Mobile net intake was negative in the quarter as sales were affected by lower activity in physical channels due to COVID-19 restrictions. Mobile end-user service revenue was roughly flat as decline in mobile prepaid was offset by continued growth in mobile postpaid.

Fixed Broadband end-user service revenue growth of 5% was driven by positive net intake and ASPU growth in the quarter on the back of price adjustments made in 2020.

Digital TV end-user service revenue declined by 8% driven by volume decline within DTT and lower revenue from premium sports packages.

	Jan-Mar 2021	Jan-Mar 2020	Mar 31 2021	Mar 31 2020	Organic %	Full year 2020
RGUs (thousands)	Net intake			RGU base
Mobile	-25	-4	2,932	2,959	-1%	2,956
– Postpaid	-6	31	1,925	1,905	1%	1,931
– Prepaid	-18	-34	1,007	1,053	-4%	1,025
Fixed	-23	-23	2,100	2,154	-3%	—
– Fixed broadband	4	10	916	883	4%	2,122
– Digital TV	-14	-15	965	1,007	-4%	911
– Cable & Fiber	-5	-3	657	662	-1%	979
– DTT	-9	-12	308	345	-11%	662
– Fixed telephony & DSL	-13	-18	219	264	-17%	317
Total RGUs	-47	-27	5,031	5,112	-2%	5,079
Addressable fixed footprint	-5	27	3,516	3,342		3,521

	Jan-Mar 2021	Jan-Mar 2020	Organic %	Full year 2020
ASPU (SEK)
Mobile	160	160	0%	161
– Postpaid	204	204	0%	207
– Prepaid	76	81	-6%	79
Fixed	227	229	-1%	226
– Fixed broadband	247	245	1%	248
– Digital TV	238	248	-4%	240
– Cable & Fiber	212	222	-4%	213
– DTT	294	298	-1%	293
– Fixed telephony & DSL	94	107	-12%	100
Revenue (SEK million)
Mobile	1,413	1,417	0%	5,726
– Postpaid	1,181	1,159	2%	4,721
– Prepaid	231	259	-10%	1,005
Fixed	1,437	1,489	-3%	5,840
– Fixed broadband	678	646	5%	2,653
– Digital TV	695	755	-8%	2,878
– Cable & Fiber	420	442	-5%	1,693
– DTT	275	314	-12%	1,185
– Fixed telephony & DSL	64	87	-27%	309
Landlord & Other	170	175	-3%	694
End-user service revenue	3,020	3,081	-2%	12,260
Operator revenue	174	162		676
Equipment revenue	492	467		1,989
Internal sales	0	0		0
Revenue	3,686	3,710	-1%	14,926

Sweden Business

Competition remained intense during the quarter with price pressure across the market as operators continue focus to defend the existing customer base. In Large Enterprise Tele2 launched a new SD-WAN offering and saw positive uptake of cloud-based services and handsets and accessories. In the Small segment, Tele2 launched a new simplified portfolio, ramped up digital sales capabilities and continued the customer migration to the target IT architecture for both fixed and mobile services.

Positive mobile net intake was driven by good initial traction from the new mobile portfolio in the Small segment and new Large Enterprise contracts. New contracts include ATG, Dustin, Höglandsförbundet, PostNord and SJ AB.

End-user service revenue declined by 5% driven by decline in legacy fixed services, mobile price pressure and lower international roaming revenues stemming from the pandemic. The decline in wholesale revenue was primarily related to lack of international roaming revenue.

Sweden Business

	Jan-Mar 2021	Jan-Mar 2020	Mar 31 2021	Mar 31 2020	Organic %	Full year 2020
RGUs (thousands)	Net intake			RGU base
Mobile (excluding IoT)
– Postpaid	18	31	964	950	1%	947

	Jan-Mar 2021	Jan-Mar 2020	Organic %	Full year 2020
ASPU (SEK)
Mobile (excluding IoT)
– Postpaid	135	154	-13%	145
Revenue (SEK million)
Mobile	453	488	-7%	1,866
Fixed	234	249	-6%	980
Solutions	259	262	-1%	1,043
End-user service revenue	946	1,000	-5%	3,889
Operator revenue	25	35		119
Equipment revenue	445	423		1,684
Internal sales	1	—		0
Revenue	1,416	1,458	-3%	5,692

Sweden Wholesale

Financials SEK million	Jan-Mar 2021	Jan-Mar 2020	Organic %	Full year 2020
Operator revenue	231	261		978
Internal sales	1	1		5
Revenue	232	263	-12%	984

Baltics

Lithuania

During the quarter, the pandemic continued to negatively impact the business in Lithuania, primarily through lower international roaming revenue and less activity in the market due to COVID-19 restrictions. Focus remained on directing consumers to online channels and migrating customers from prepaid- to postpaid subscriptions. Retail traffic recuperated slightly during the latter part of the quarter as some restrictions were lifted.

While the net intake of mobile postpaid continued to be positive, total net intake was negative due to the negative development in mobile prepaid. More-for-more campaigns and migration of customers from pre- to postpaid drove an ASPU increase of 10% in local currency.

End-user service revenue increased by 10% in local currency driven by growth in ASPU. Underlying EBITDAaL increased by 20% in local currency driven by higher end-user service revenue, higher equipment sales compared to Q1 2020 and bad debt provisions recognized in Q1 2020.

	Jan-Mar 2021	Jan-Mar 2020	Mar 31 2021	Mar 31 2020	Organic %	Full year 2020
RGUs (thousands)	Net intake			RGU base
Mobile	-2	-17	1,882	1,878	0%	1,884
– Postpaid	16	5	1,200	1,148	5%	1,184
– Prepaid	-18	-22	682	730	-7%	700

	Jan-Mar 2021	Jan-Mar 2020	Organic %	Full year 2020
ASPU (EUR)
Mobile	7.2	6.5	10%	6.9
– Postpaid	9.0	8.5	6%	8.7
– Prepaid	4.0	3.5	15%	3.8
Revenue (SEK million)
Mobile	409	394	9%	1,630
– Postpaid	324	311	10%	1,279
– Prepaid	84	83	7%	351
Fixed	1	—		2
End-user service revenue	409	394	10%	1,631
Operator revenue	59	62		262
Equipment revenue	210	170		869
Internal sales	14	13		50
Revenue	692	639	14%	2,812
Underlying EBITDA	288	255		1,111
Underlying EBITDAaL	271	238	20%	1,043
Underlying EBITDAaL margin	39%	37%		37%
Capex	37	36		177
Capex excluding spectrum and leases	23	18		120
Capex excluding spectrum and leases / revenue	3%	3%		4%

Latvia

During the quarter, the pandemic continued to negatively impact the business in Latvia, primarily through lower international roaming revenue and less activity in the market due to COVID-19 restrictions. Strategic focus remained on digitalizing key processes and logistics, combined with customer base protection and upselling efforts.

Mobile net intake of 11,000 RGUs in the quarter was driven by continued momentum within mobile postpaid while mobile prepaid was stable. Mobile ASPU increased by 3% driven by continued data monetization.

End-user service revenue increased by 6% in local currency, driven by both ASPU growth and positive net intake in mobile postpaid. Underlying EBITDAaL increased by 14% in local currency, driven by higher end-user service revenue, higher equipment sales compared to Q1 2020 and bad debt provisions recognized in Q1 2020.

	Jan-Mar 2021	Jan-Mar 2020	Mar 31 2021	Mar 31 2020	Organic %	Full year 2020
RGUs (thousands)	Net intake			RGU base
Mobile	11	-4	981	950	3%	970
– Postpaid	12	11	714	668	7%	703
– Prepaid	-1	-16	266	282	-6%	267

	Jan-Mar 2021	Jan-Mar 2020	Organic %	Full year 2020
ASPU (EUR)
Mobile	7.5	7.3	3%	7.4
– Postpaid	9.1	9.0	1%	9.1
– Prepaid	3.4	3.5	-3%	3.4
Revenue (SEK million)
Mobile	223	223	5%	900
– Postpaid	196	191	8%	780
– Prepaid	27	32	-11%	121
Fixed	1	0		1
End-user service revenue	224	223	6%	901
Operator revenue	45	45		177
Equipment revenue	75	59		309
Internal sales	9	11		38
Revenue	353	339	10%	1,424
Underlying EBITDA	146	135		599
Underlying EBITDAaL	134	125	14%	556
Underlying EBITDAaL margin	38%	37%		39%
Capex	23	22		176
Capex excluding spectrum and leases	13	13		104
Capex excluding spectrum and leases / revenue	4%	4%		7%

Estonia

The pandemic negatively impacted the business primarily through loss of international roaming revenue and less activity in the market as the country went into another lockdown in the latter part of the quarter. In the quarter, Tele2 Estonia was able to continue the turnaround of business as positive operational trends from previous year persists. The strategic focus remained on pushing FMC offers to customers through own infrastructure and wholesale while focusing on the more-for-more strategi on the existing customer base.

Mobile net intake was roughly flat in the quarter as slight increase in mobile postpaid was offset by a decline in mobile prepaid. Mobile ASPU increased by 2% in local currency driven by upselling and increased sales in higher value products.

Mobile end-user service revenue increased by 3% in local currency, driven by growth in ASPU and volume compared to Q1 2020. Underlying EBITDAaL increased by 9% in local currency driven by higher end-user service revenue.

	Jan-Mar 2021	Jan-Mar 2020	Mar 31 2021	Mar 31 2020	Organic %	Full year 2020
RGUs (thousands)	Net intake			RGU base
Mobile	-1	-9	436	428	2%	437
– Postpaid	1	1	384	375	2%	384
– Prepaid	-2	-10	52	53	-2%	52

	Jan-Mar 2021	Jan-Mar 2020	Organic %	Full year 2020
ASPU (EUR)
Mobile	8.9	8.7	2%	8.7
– Postpaid	9.7	9.6	1%	9.6
– Prepaid	3.1	2.9	6%	2.9
Revenue (SEK million)
Mobile	118	121	3%	478
– Postpaid	114	116	4%	457
– Prepaid	5	5	-6%	21
Fixed	12	6	115%	24
End-user service revenue	130	127	8%	503
Operator revenue	24	34		130
Equipment revenue	41	37		178
Internal sales	2	2		8
Revenue	197	200	4%	819
Underlying EBITDA	60	59		237
Underlying EBITDAaL	45	43	9%	173
Underlying EBITDAaL margin	23%	22%		21%
Capex	31	32		159
Capex excluding spectrum and leases	21	22		93
Capex excluding spectrum and leases / revenue	10%	11%		11%

Associated companies

Associated companies are accounted for in accordance with the equity method. This means that Tele2's share of the company's profit or loss after tax is reported under Operating profit, along with amortization of the Group surplus values.

The Netherlands

Tele2 owns 25% of T-Mobile Netherlands. This section shows 100% of the company, as reported by Deutsche Telecom1).

During Q4 2020 T-Mobile Netherlands (TMNL) continued to attract new customers in the mobile postpaid and fixed network segment. Revenue decreased by 2% due to lower roaming and handset revenue.

EBITDAaL increased by 4% on the back of continued realization of synergies between the merger of TMNL and Tele2 Netherlands.

In October 2020, TMNL announced its intention to acquire the MVNO Simpel. The acquisition was approved by the authorities and closed in December, 2020.

	Oct-Dec 2020	Oct-Dec 2019	Full year 2020	Full year 2019	Organic %
Customers (in thousands)	Net intake			Customer base
Fixed Network
- Fixed Network Access Lines			682	619	10%
- Broadband Customers			668	605	10%
Mobile Communications
- Contract2)	22	83	6,427	5,189	24%
- Prepaid	-17	-1	376	421	-11%
Customers			6,803	5,610	21%

	Oct-Dec 2020	Oct-Dec 2019	Organic %	Full year 2020	Full year 2019	Organic %
ARPU (EUR)
Contract	16	17	-6%	16	17	-6%
Prepaid	3	3	0%	3	3	-12%
Financials (EUR million)3)
Service revenue - Mobile communications	279	273	2%	1,092	1,066	2%
Product view	505	513	-2%	1,946	1,910	2%
- Fixed network	97	90	8%	383	361	6%
- Mobile communications	408	422	-3%	1,563	1,550	1%
Segment view	505	513	-2%	1,946	1,910	2%
- of which Consumer	386	384	1%	1,457	1,418	3%
- of which Business	99	100	-1%	391	392	0%
Total revenue	505	513	-2%	1,946	1,910	2%
EBITDA	157	154	2%	639	591	8%
EBITDAaL	135	130	4%	554	502	10%
EBITDAaL margin	27%	25%		29%	26%
Cash capex (before spectrum)	66	111	-41%	283	294	-4%
Net debt	2,078			2,078
- of which lease obligations	691			691
- of which spectrum liability	202			202

1) As reported by Deutsche Telekom in the financial results for the fourth quarter of 2020 on February 26, 2021 (except net debt, which reflects the TMNL position and includes intragroup debt). Definitions and accounting rules may differ from Tele2 Group reporting.

2) Customer contracts have been adjusted with Simpel Customer Base as of Q4 2020.

3) Financials are adjusted for special factors.

Other items

Risks and uncertainty factors

Tele2's operations are affected by a number of external factors. The current spread of COVID-19 makes the importance of the services we provide greater than ever before. Even if the global pandemic adds uncertainty to our financial performance in the short term, our business model is resilient. The valuation of our segments (which equals our cash generating units) shows hence no need for impairment, and when evaluating the credit market, we conclude that we have the ability to comfortably fund our business.

In the long term, the risk factors considered to be most significant to Tele2's future development are spectrum auctions, regulation, market competitiveness and changing technology, strategy implementation and integration, network and IT infrastructure and quality, data protection and cyber security, external relationships, suppliers and joint ventures, customer churn, recruitment of skilled personnel, geopolitical conditions, environmental costs, corruption and unethical business practices and financial risks such as currency risk, interest risk, liquidity risk, credit risk, risks related to tax matters and impairment of assets. Please refer to Tele2's 2020 Annual and Sustainability Report (Administration report and Note 2) for a detailed description of Tele2's risk exposure and risk management.

Financial calendar

Tele2 will release its financial and operating results for the period ending June 30, 2021 on July 14, 2021, the period ending September 30, 2021 on October 19, 2021 and the period ending December 31, 2021 on February 1, 2022.

Auditors' review report

This interim report has not been subject to specific review by the company's auditors.

Board's assurance

The Board of Directors and CEO declare that the interim report provides a fair overview of the parent company's and Group's operations, their financial position and performance, and describes material risks and uncertainties facing the parent company and other companies in the Group.

Stockholm, April 22, 2021 Tele2 AB

Carla Smits-Nusteling Chairman

Deputy Chairman

Andrew Barron Anders Björkman Cynthia Gordon

Eva Lindqvist Georgi Ganev Lars-Åke Norling

Kjell Johnsen President and CEO

Q1 2021 PRESENTATION

Tele2 will host a presentation, with the possibility to join through a conference call, for the global financial community at 10:00 am CET (09:00 am GMT/04:00 am EST) on Thursday, April 22, 2021. The presentation will be held in English and also made available as a webcast on Tele2's website: www.tele2.com.

This information is information that Tele2 AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact persons set out below, at 07:00 am CET on April 22, 2021.

Dial-in information:

To ensure that you are connected to the conference call, please dial in a few minutes before the start of the conference call to register your attendance.

Dial-in numbers: SE: +46 (0) 8 50 69 21 80 UK: +44 (0) 2071 928000 US: +1 631 510 74 95

Marcus Lindberg

Head of Investor Relations Telephone: +46 (0)73 439 25 40

Tele2 AB

Company registration nr: 556410-8917 Skeppsbron 18 P.O. Box 2094 SE–103 13 Stockholm Sweden Tel + 46 (0) 8 5620 0060 www.tele2.com

Visit our website: www.tele2.com

Contacts Appendices

Condensed consolidated income statement Condensed consolidated comprehensive income Condensed consolidated balance sheet Condensed consolidated cash flow statement Condensed consolidated statement of changes in equity Parent company Notes Non-IFRS measures

Condensed consolidated income statement

SEK million	Note	Jan-Mar 2021	Jan-Mar 2020	Full year 2020
Revenue	2, 3	6,550	6,581	26,554
Cost of services provided and equipment sold	2, 3	-3,842	-3,746	-15,098
Gross profit		2,709	2,834	11,456
Selling expenses	2, 3	-1,052	-1,153	-4,467
Administrative expenses	2, 3	-505	-556	-2,087
Result from shares in associated companies and joint ventures	4	13	0	311
Other operating income	3	66	73	2,350
Other operating expenses	3	-28	-51	-193
Operating profit	3	1,202	1,148	7,371
Interest income		6	5	23
Interest expenses		-126	-150	-491
Other financial items		-10	-14	-49
Profit after financial items		1,072	989	6,855
Income tax	3	-205	-195	378
Net profit, continuing operations		867	794	7,233
Net profit discontinued operations	10	-2	386	175
Net profit, total operations		865	1,180	7,408
Continuing operations
Attributable to:
Equity holders of the parent company		867	794	7,233
Net profit, continuing operations		867	794	7,233
Earnings per share (SEK)	8	1.26	1.15	10.51
Earnings per share, after dilution (SEK)	8	1.25	1.15	10.45
Total operations
Attributable to:
Equity holders of the parent company		865	1,180	7,408
Net profit, total operations		865	1,180	7,408
Earnings per share (SEK)	8	1.26	1.72	10.76
Earnings per share, after dilution (SEK)	8	1.25	1.71	10.71

Condensed consolidated comprehensive income

SEK million	Note	Jan-Mar 2021	Jan-Mar 2020	Full year 2020
NET PROFIT		865	1,180	7,408
Components not to be reclassified to net profit
Pensions, actuarial gains/losses		28	-21	58
Pensions, actuarial gains/losses, tax effect		-6	4	-12
Components not to be reclassified to net profit/loss		23	-17	46
Components that may be reclassified to net profit
Translation differences in foreign operations		112	392	-184
Tax effect on above		—	-5	-4
Reversed cumulative translation differences from divested companies	3, 10	—	352	-1,480
Tax effect on above	3, 10	—	-158	-1,438
Translation differences in associated companies	4	140	435	-278
Translation differences		252	1,015	-3,384
Hedge of net investments in foreign operations		-65	-211	129
Tax effect on above		13	45	-28
Reversed cumulative hedge from divested companies	10	—	-143	-143
Tax effect on above	10	—	41	41
Hedge of net investments		-52	-268	-1
Exchange rate differences		200	748	-3,385
Profit arising on changes in fair value of hedging instruments		25	9	27
Reclassified cumulative profit/loss to income statement		-7	-8	-21
Tax effect on cash flow hedges		-4	-0	-1
Cash flow hedges		14	1	5
Components that may be reclassified to net profit/loss		214	749	-3,380
OTHER COMPREHENSIVE INCOME FOR THE PERIOD, NET OF TAX		237	732	-3,334
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD		1,102	1,912	4,074
Attributable to:
Equity holders of the parent company		1,102	1,912	4,074
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD		1,102	1,912	4,074

Condensed consolidated balance sheet

SEK million Note	Mar 31 2021	Dec 31 2020
ASSETS
Goodwill	29,698	29,651
Other intangible assets	17,283	17,269
Intangible assets	46,981	46,921
Tangible assets	7,523	7,540
Right-of-use assets	5,288	5,349
Shares in associated companies and joint ventures 4	7,170	7,018
Other financial assets 5	707	737
Capitalized contract costs	500	493
Deferred tax assets	193	245
Non-current assets	68,361	68,303
Inventories	888	824
Current receivables	4,819	5,174
Cash and cash equivalents 6	4,686	970
Current assets	10,392	6,968
Assets classified as held for sale 10	142	140
TOTAL ASSETS	78,896	75,411
EQUITY AND LIABILITIES
Attributable to equity holders of the parent company	33,876	32,751
8 Equity	33,876	32,751
Interest-bearing liabilities 5	28,104	27,234
Non-interest-bearing liabilities	4,272	4,311
Non-current liabilities	32,375	31,545
Interest-bearing liabilities 5	6,767	4,881
Non-interest-bearing liabilities	5,325	5,679
Current liabilities	12,092	10,561
Liabilities directly associated with assets classified as held for sale 10	553	554
TOTAL EQUITY AND LIABILITIES	78,896	75,411

Condensed consolidated cash flow statement

Total operations SEK million	Note	Jan-Mar 2021	Jan-Mar 2020	Full year 2020
Operating activities
Net profit		865	1,180	7,408
Adjustments for non-cash items in net profit		1,448	1,061	1,750
Changes in working capital		-26	77	-342
Cash flow from operating activities		2,287	2,317	8,816
Investing activities
Additions to intangible and tangible assets		-1,086	-644	-2,749
Acquisition and sale of shares and participations	9	—	2,131	2,098
Other financial assets, lending		—	-2	-3
Cash flow from investing activities		-1,086	1,486	-654
Financing activities
Proceeds from loans		3,081	79	3,402
Repayments of loans		-586	-1,867	-4,837
Dividends paid	8	—	—	-6,198
Cash flow from financing activities		2,495	-1,788	-7,633
Net change in cash and cash equivalents		3,695	2,015	529
Cash and cash equivalents at beginning of period		970	448	448
Exchange rate differences in cash and cash equivalents		20	8	-7
Cash and cash equivalents at end of the period	6	4,686	2,471	970

Condensed consolidated statements of changes in equity

Total operations SEK million	Note		Mar 31, 2021
					Attributable to equity holders of the parent company
		Share capital	Other paid-in capital	Hedge reserve	Translation reserve	Retained earnings	Total equity
Equity at January 1		863	27,378	-202	-78	4,791	32,751
Net profit		—	—	—	—	865	865
Other comprehensive income for the period, net of tax		—	—	-38	252	23	237
Total comprehensive income for the period		—	—	-38	252	888	1,102
Other changes in equity
Share-based payments	8	—	—	—	—	18	18
Share-based payments, tax effect	8	—	—	—	—	5	5
New shares issues	8	3	—	—	—	—	3
Repurchase of own shares	8	—	—	—	—	-3	-3
Equity at end of the period		866	27,378	-240	173	5,698	33,876

Total operations SEK million	Note	Mar 31, 2020
					Attributable to equity holders of the parent company
		Share capital	Other paid-in capital	Hedge reserve	Translation reserve	Retained earnings	Total equity
Equity at January 1		863	27,378	-207	3,306	3,465	34,805
Net profit		—	—	—	—	1,180	1,180
Other comprehensive income for the period, net of tax		—	—	-267	1,015	-17	732
Total comprehensive income for the period		—	—	-267	1,015	1,163	1,912
Other changes in equity
Share-based payments	8	—	—	—	—	15	15
Share-based payments, tax effect	8	—	—	—	—	4	4
Equity at end of the period		863	27,378	-473	4,321	4,646	36,735

Parent company

Condensed income statement

SEK million	Jan-Mar 2021	Jan-Mar 2020	Full year 2020
Revenue	14	10	34
Administrative expenses	-41	-38	-165
Other operating expenses	-1	-2	6
Operating loss	-28	-29	-124
Dividend from group company	—	—	22,000
Interest revenue and similar income	38	44	146
Interest expense and similar costs	-163	-633	-1,201
Profit/loss after financial items	-153	-618	20,820
Appropriations, group contribution	—	—	1,290
Tax on profit/loss	31	132	-205
Net profit/loss	-122	-486	21,906

Condensed balance sheet

SEK million	Note	Mar 31 2021	Dec 31 2020
ASSETS
Financial assets		72,376	69,110
Non-current assets		72,376	69,110
Current receivables		1,530	1,551
Current assets		1,530	1,551
TOTAL ASSETS		73,906	70,661
EQUITY AND LIABILITIES
Restricted equity	8	5,851	5,848
Unrestricted equity	8	37,301	37,392
Equity		43,153	43,240
Interest-bearing liabilities	5	22,540	21,497
Non-current liabilities		22,540	21,497
Interest-bearing liabilities	5	7,853	5,530
Non-interest-bearing liabilities		360	393
Current liabilities		8,213	5,923
TOTAL EQUITY AND LIABILITIES		73,906	70,661

Notes

NOTE 1 ACCOUNTING PRINCIPLES AND DEFINITIONS

The interim financial information for the Group for the three month period ended March 31, 2021 has been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting as issued by the International Accounting Standards Board (IASB) and the Swedish Annual Accounts Act, and for the parent company in accordance with the Swedish Annual Accounts Act and RFR 2 Reporting for legal entities and other statements issued by the Swedish Financial Reporting Board. In all respects other than those described below, Tele2 has presented the financial statements for the period ended March 31, 2021 in accordance with the accounting policies and principles applied in the 2020 Annual and Sustainability Report. The description of these principles and definitions are found in Note 1 in the Annual and Sustainability Report 2020. Disclosures as required by IAS 34 p. 16 A are presented both in the financial statements and notes as well as in other parts of the interim report.

The amendments to IFRSs applicable from January 1, 2021 have no effects to Tele2's financial reports for the three month period ended March 31, 2021.

From January 1, 2021 Tele2 changed the classification of the segment Sweden to include the parent company Tele2 AB and other minor operations that previously were reported under the segment Other. Previous periods have been restated, please refer to Note 2.

Figures presented in this report refer to January 1 – March 31 (Q1), 2021 and continuing operations unless otherwise stated. Figures shown in parentheses refer to the comparable periods in 2020.

NOTE 2 REVENUE AND SEGMENTS

Revenue per segment

Continuing operations SEK million	Jan-Mar 2021	Jan-Mar 2020	Full year 2020
Sweden	5,335	5,431	21,601
Lithuania	692	639	2,812
Latvia	353	339	1,424
Estonia	197	200	819
Total including internal sales	6,577	6,608	26,656
Internal sales, elimination	-26	-27	-102
TOTAL	6,550	6,581	26,554

Internal sales

Continuing operations SEK million	Jan-Mar 2021	Jan-Mar 2020	Full year 2020
Sweden	2	1	6
Lithuania	14	13	50
Latvia	9	11	38
Estonia	2	2	8
TOTAL	26	27	102

Revenue split per category

Continuing operations SEK million	Jan-Mar 2021	Jan-Mar 2020	Full year 2020
Sweden Consumer
End-user service revenue	3,020	3,081	12,260
Operator revenue	174	162	676
Equipment revenue	492	467	1,989
Internal sales	0	0	0
Total	3,686	3,710	14,926
Sweden Business
End-user service revenue	946	1,000	3,889
Operator revenue	25	35	119
Equipment revenue	445	423	1,684
Internal sales	1	—	0
Total	1,416	1,458	5,692
Sweden Wholesale
Operator revenue	231	261	978
Internal sales	1	1	5
Total	232	263	984
Lithuania
End-user service revenue	409	394	1,631
Operator revenue	59	62	262
Equipment revenue	210	170	869
Internal sales	14	13	50
Total	692	639	2,812
Latvia
End-user service revenue	224	223	901
Operator revenue	45	45	177
Equipment revenue	75	59	309
Internal sales	9	11	38
Total	353	339	1,424
Estonia
End-user service revenue	130	127	503
Operator revenue	24	34	130
Equipment revenue	41	37	178
Internal sales	2	2	8
Total	197	200	819
Internal sales, elimination	-26	-27	-102
CONTINUING OPERATIONS
End-user service revenue	4,730	4,825	19,184
Operator revenue	557	599	2,341
Equipment revenue	1,263	1,157	5,029
TOTAL	6,550	6,581	26,554

Underlying EBITDAaL

Continuing operations SEK million	Jan-Mar 2021	Jan-Mar 2020	Full year 2020
Sweden	1,864	1,788	7,468
Lithuania	271	238	1,043
Latvia	134	125	556
Estonia	45	43	173
TOTAL	2,314	2,194	9,239

NOTE 3 OPERATING PROFIT AND TAX

Reconciling items to reported operating profit/loss

Continuing operations SEK million	Jan-Mar 2021	Jan-Mar 2020	Full year 2020
Underlying EBITDAaL	2,314	2,194	9,239
Reversal lease depreciation and interest	316	307	1,245
Underlying EBITDA	2,630	2,501	10,484
Acquisition costs	-6	-1	-6
Restructuring costs	-61	-38	-261
Disposal of non-current assets	-1	—	2,002
Other items affecting comparability	—	—	109
Items affecting comparability	-69	-39	1,844
EBITDA	2,561	2,462	12,329
Depreciation/amortization	-1,372	-1,315	-5,269
Impairment	—	—	—
Result from shares in associated companies and joint ventures	13	0	311
Operating profit	1,202	1,148	7,371

Acquisition costs

Continuing operations SEK million	Jan-Mar 2021	Jan-Mar 2020	Full year 2020
Com Hem, Sweden	—	-0	3
Other	-6	-1	-9
Acquisition costs 1)	-6	-1	-6

1) Reported as other operating expenses.

Restructuring costs

Continuing operations SEK million	Jan-Mar 2021	Jan-Mar 2020	Full year 2020
Redundancy costs	-29	-6	-120
Other employee and consultancy costs	-22	-17	-69
Exit of contracts and other costs	-10	-16	-73
Restructuring costs	-61	-38	-261
Reported as:
– Cost of services provided	-30	-4	-52
– Selling expenses	-21	-15	-130
– Administrative expenses	-10	-20	-79

Disposal of non-current assets

Continuing operations SEK million	Jan-Mar 2021	Jan-Mar 2020	Full year 2020
Recycled translation differences	—	—	2,033
Other	-1	—	-31
Disposal of non-current assets1)	-1	—	2,002

1) Reported as other operating income and other operating expenses.

In Q4 2020, translation differences of SEK 3,313 million were recycled to the income statement in conjunction with the closure of the operation in Luxembourg, with no impact on total assets or equity. SEK 2,033 million was included in Other operating income and SEK 1,280 million in Income tax. For further details, please refer to Note 6 in the Annual and Sustainability report 2020.

Other items affecting comparability

Continuing operations SEK million	Jan-Mar 2021	Jan-Mar 2020	Full year 2020
Provision for legal dispute, Sweden	—	—	109
Total	—	—	109
Reported as:
– Costs of services provided	—	—	109

In Q3 2020, a provision was released related to a legal dispute in Sweden where we have now reached an agreement.

NOTE 4 SHARES IN ASSOCIATED COMPANIES AND JOINT VENTURES

SEK million	Mar 31 2021	Mar 31 2020	Dec 31 2020
T-Mobile Netherlands
Cost at January 1	7,011	6,976	6,976
Share of profit for the year	12	3	313
Exchange rate differences	140	434	-278
Total T-Mobile Netherlands	7,163	7,413	7,011
Other associated companies and joint ventures	7	7	7
Total shares in associated companies and joint ventures	7,170	7,420	7,018

NOTE 5 FINANCIAL ASSETS AND LIABILITIES

Financing

SEK million	Mar 31 2021	Dec 31 2020
Bonds	24,391	21,175
European Investment Bank (EIB)	1,279	1,254
Nordic Investment Bank (NIB)	1,988	1,987
Other	248	252
Total liabilities to financial institutions	27,906	24,669
Provisions	1,545	1,660
Lease liabilities	5,184	5,327
Other interest-bearing liabilities	235	460
Total interest-bearing liabilities	34,870	32,115

Average maturity and average interest rate (including derivatives) for outstanding debt to financial institutions at March 31, 2021 amounted to 4.4 years and 1.29 percent, respectively.

As of the date of this report, Tele2 has a credit facility with a syndicate of ten banks maturing in 2024.

In March 2021, Tele2 issued a ten year bond of EUR 300 million with an annual coupon of 0.75 percent. The notes have been issued under Tele2's EMTN program and are listed for trading on the Luxembourg Stock Exchange.

Classification and fair values

Tele2's financial assets consist mainly of receivables from end customers, other operators and resellers as well as cash and cash equivalents. Tele2's financial liabilities consist mainly of loans, bonds, lease liabilities and accounts payables. For the category "Liabilities to financial institutions and similar liabilities" the reported value amounted on March 31, 2021 to SEK 27,906 (December 31, 2020: 24,669) million and the fair value to SEK 28,750 (December 31, 2020: 25,537) million.

During 2021, no transfers have been made between the different levels in the fair value hierarchy and no significant changes were made to valuation techniques, inputs used or assumptions.

NOTE 6 RELATED PARTIES

Tele2's share of cash and cash equivalents in joint operations (Svenska UMTS-nät AB and Net4Mobility HB, Sweden and SIA Centuria, Latvia), for which Tele2 has limited disposal rights was included in the Group's cash and cash equivalents and amounted at March 31, 2021 to SEK 54 (December 31, 2020: 36) million. Other transactions with joint operations and other related parties are presented in Note 34 of the 2020 Annual and Sustainability Report.

NOTE 7 CONTINGENT LIABILITIES

In Q4 2020, a provision was made related to the tax deduction on exchange losses on loans to Tele2 Kazakhstan, previously reported as contingent liability. It is presented under discontinued operations for Tele2 Kazakhstan, please refer to Note 10.

NOTE 8 EQUITY, NUMBER OF SHARES AND INCENTIVE PROGRAMS

Number of shares

	Mar 31 2021	Dec 31 2020
Total number of shares	692,821,597	690,341,597
Number of treasury shares	-4,170,765	-1,714,023
Number of outstanding shares	688,650,832	688,627,574
Number of outstanding shares, weighted average	688,628,866	688,392,123
Number of shares after dilution	692,429,603	692,609,831
Number of shares after dilution, weighted average	692,529,140	691,924,160

In Q1 2021, Tele2 issued, and immediately repurchased, 2,480,000 new C shares to be used for future exercises of LTIs, resulting in an increase in share capital of SEK 3 million. As a result of early vesting of the LTI 2019 being exercised in Q1 2021, Tele2 delivered 23,258 B-shares in treasury shares to some of the participants in the program at a weighted share price of SEK 115.95. In addition, 6,177 of class A shares were reclassified into class B shares. Changes in shares during previous year are stated in Note 23 in the 2020 Annual and Sustainability Report.

Outstanding share right programs

	Mar 31 2021	Dec 31 2020
LTI 2020	1,416,233	1,499,975
LTI 2019	1,194,671	1,313,475
LTI 2018	1,167,867	1,168,807
Total outstanding share rights	3,778,771	3,982,257

All outstanding long-term incentive programs (LTI 2018, LTI 2019 and LTI 2020) are based on the same structure, except for that LTI 2020 have an operating cash flow performance measure. Additional information regarding the objective, conditions and requirements related to the LTI programs is stated in Note 31 of the 2020 Annual and Sustainability Report. During the three months in 2021, the total cost including social security costs for the long-term incentive programs (LTI) amounted to SEK 32 (26) million before tax.

LTI 2018

The exercise of the share rights in LTI 2018 was conditional upon the fulfilment of certain retention and performance-based conditions, measured from April 1, 2018 until March 31, 2021. The outcome of these performance conditions was in accordance with below and the outstanding 1,167,867 share rights, to be adjusted for dividend compensation April 2021, are expected to be exchanged for shares in Tele2 during Q2 2021.

Series	Retention and performance based conditions	Minimum hurdle (50%)	Stretch targets (100%)	Performance outcome	Allotment
Series A	Total Shareholder Return Tele2 (TSR)	—	>=0%	40.0%	100%
Series B	Total Shareholder Return Tele2 (TSR) compared to a peer group	>0%	>=20%	34.1%	100%

Dividend

To the Annual General Meeting on April 22, 2021, Tele2's Board of Directors proposes for the financial year 2020 an ordinary dividend of SEK 6.00 per share (SEK 4.1 billion), to be paid in two equal tranches in April and October 2021. In addition, to an Extraordinary General Meeting in June the board intends to propose an extraordinary dividend of SEK 3.00 per share (SEK 2.1 billion), to be paid in July 2021.

NOTE 9 BUSINESS ACQUISITIONS AND DIVESTMENTS

Acquisitions and divestments of shares and participations affecting cash flow were as follows:

SEK million	Jan-Mar 2021	Jan-Mar 2020	Full year 2020
Acquisitions
Other minor acquisitions	—	-5	-6
Total acquisition of shares and participations	—	-5	-6
Divestments
Tele2 Croatia	—	2,031	2,039
Tele2 Germany	—	—	-39
Earn out settlement Tele2 Austria	—	100	99
Other minor divestments	—	5	6
Total sale of shares and participations	—	2,136	2,104
TOTAL CASH FLOW EFFECT	—	2,131	2,098

Information on acquisitions and divestments made in 2020 is provided in the 2020 Annual and Sustainability Report in Note 14 and Note 33, respectively.

NOTE 10 DISCONTINUED OPERATIONS

Tele2 Germany

On December 3, 2020 Tele2 announced the agreement to sell its German business to the Tele2 Germany management for an enterprise value of up to EUR 22.8 million, dependent upon the financial performance of the business until the end of 2024, and on December 11, 2020 the divestment was completed. On March 31, 2021 the estimated fair value of the future cash flows amounted to SEK 142 (December 31, 2020: 140) million. The fair value estimate is sensitive to changes in key assumptions supporting the expected future cash flows for Tele2 Germany. A deviation from the current assumptions regarding the fair value would impact the earn-out asset. Tele2 Germany is reported separately under discontinued operations.

Tele2 Kazakhstan

Tele2 was notified in April 2019 that the Swedish Tax Agency has rejected Tele2's claim for a deduction of an exchange loss related to a conversion of a shareholder loan to the joint venture MTS in Kazakhstan from USD to Kazakh Tenge in connection with the establishment of Tele2's previous joint venture in Kazakhstan. After appealing the decision, the Administrative court has in December 2020 partly ruled in favour of Skatteverket. The remaining additional tax claim amounted at March 31, 2021 to SEK 241 million and a tax surcharge and interest of SEK 115 million (December 31, 2020: SEK 241 and 114 million respectively). Tele2 has appealed the decision to the Administrative Court of appeal. Based on the ruling in the Administrative Court it is Tele2's and its advisors opinion that, it is uncertain whether Tele2 ultimately will succeed in the dispute. Consequently, a provision of SEK 355 million was recognized in Q4 2020 under discontinued operations. At March 31, 2021 the provision amounted to SEK 356 million.

Income statement

All discontinued operations are included below. Tele2 Germany and Tele2 Croatia were divested in 2020. Tele2 Netherlands and Tele2 Kazakhstan were divested in 2019.

Discontinued operations SEK million	Jan-Mar 2021	Jan-Mar 2020	Full year 2020
Revenue	—	435	690
Cost of services provided and
equipment sold	—	-236	-339
Gross profit	—	199	350
Selling expenses	—	-63	-74
Administrative expenses	—	-55	-99
Other operating income	—	1	2
Other operating expenses	—	-1	-1
Operating profit	—	81	179
Interest income	—	0	0
Interest expenses	-1	-2	-19
Profit/loss after financial items	-1	80	160
Income tax from the operation	—	-20	-51
Net profit/loss from the operation	-1	60	110
Profit/loss on disposal of operation including sales costs and cumulative
exchange rate gain	-1	210	286
– of which Germany	3	—	-25
– of which Croatia	-1	213	247
– of which Netherlands, sold 2019	-3	-12	55
– of which Austria, sold 2017	—	9	8
Income tax from capital gain	—	116	-221
– of which Germany	—	—	0
– of which Croatia	—	116	116
– of which Kazakhstan, sold 2019	—	—	-337
NET PROFIT/LOSS	-2	386	175
Attributable to:
Equity holders of the parent company	-2	386	175
NET PROFIT/LOSS	-2	386	175
Earnings per share (SEK)	—	0.57	0.25
Earnings per share, after dilution (SEK)	—	0.56	0.25

Balance sheet

Assets and liabilities associated with assets held for sale as of March 31, 2021 refer to earnouts and provisions for price adjustments and similar for divested operations.

Discontinued operations SEK million	Mar 31 2021	Dec 31 2020
ASSETS
Financial assets	126	123
Non-current assets	126	123
Current receivables	16	16
Current assets	16	16
Assets classified as held for sale	142	140
LIABILITIES
Interest-bearing liabilities	153	149
Non-current liabilities	153	149
Interest-bearing liabilities	59	63
Non-interest-bearing liabilities	341	341
Current liabilities	400	405
Liabilities directly associated with assets classified as held for sale	553	554

Cash flow statement

Discontinued operations SEK million	Jan-Mar 2021	Jan-Mar 2020	Full year 2020
Cash flow from operating activities	-0	60	143
Cash flow from investing activities	—	2,092	2,058
Cash flow from financing activities	—	-31	-31
Net change in cash and cash equivalents	-0	2,122	2,170

Non-IFRS measures

This report contains certain financial measures that are not defined by IFRS but are used by Tele2 to assess the financial performance of the business. These measures are included in the report as they are considered important supplementary measures of operating performance and liquidity. They should not be considered a substitute to Tele2's financial statements prepared in accordance with IFRS. Tele2's definitions of these measures are described below, but other companies may calculate non-IFRS measures differently and these measures are therefore not always comparable to similar measures used by other companies.

EBITDA

Tele2 considers EBITDA to be a relevant measure to present profitability aligned with industry standard.

EBITDA: Operating profit/loss before depreciation/amortization, impairment as well as results from shares in associated companies and joint ventures.

Underlying EBITDA

Tele2 considers underlying EBITDA to be a relevant measure to present in order to illustrate the profitability of the underlying business, and as these are used by management to assess the performance of the business.

Underlying EBITDA: EBITDA excluding items affecting comparability.

Items affecting comparability: Disposals of non-current assets and transactions from strategic decisions, such as capital gains and losses from sales of operations, acquisition costs, integration costs due to acquisition or merger, restructuring programs from reorganizations as well as other items that affect comparability.

Underlying EBITDAaL and underlying EBITDAaL margin

Tele2 considers underlying EBITDAaL and the related margin to be relevant measures of the business performance since underlying EBITDAaL includes the cost of leased assets (depreciation and interest), which is not included in underlying EBITDA according to IFRS 16.

Underlying EBITDAaL: Underlying EBITDA as well as lease depreciation and lease interest costs according to IFRS 16.

Underlying EBITDAaL margin: Underlying EBITDAaL in relation to revenue excluding items affecting comparability.

Continuing operations SEK million	Jan-Mar 2021	Jan-Mar 2020	Full year 2020
Operating profit	1,202	1,148	7,371
Reversal:
Result from shares in associated companies and joint ventures	-13	-0	-311
Depreciation and amortization	1,372	1,315	5,269
EBITDA	2,561	2,462	12,329
Reversal, items affecting comparability:
Acquisition costs	6	1	6
Restructuring costs	61	38	261
Disposal of non-current assets	1	—	-2,002
Other items affecting comparability	—	—	-109
Total items affecting comparability	69	39	-1,844
Underlying EBITDA	2,630	2,501	10,484
Lease depreciation	-301	-289	-1,182
Lease interest costs	-15	-17	-63
Underlying EBITDAaL	2,314	2,194	9,239
Revenue	6,550	6,581	26,554
Revenue excluding items affecting comparability	6,550	6,581	26,554
Underlying EBITDAaL margin	35%	33%	35%

Non-IFRS measures – Capex paid and capex

Tele2 considers capex paid relevant to present as it provides an indication of how much the company invests organically in intangible and tangible assets to maintain and expand its business. Tele2 believes that it is relevant to present capex to provide a view on how much Tele2 invests organically in intangible and tangible assets as well as in right-of-use assets (lease) to maintain and grow its business that is not dependent on the timing of cash payments.

Capex paid: Cash paid for the additions to intangible and tangible assets net of cash proceeds from sales of intangible and tangible assets.

Capex: Additions to intangible assets, tangible assets and right-of-use assets that are capitalized on the balance sheet.

SEK million	Jan-Mar 2021	Jan-Mar 2020	Full year 2020
TOTAL OPERATIONS
Additions to intangible and tangible assets	-1,086	-644	-2,750
Sale of intangible and tangible assets	0	1	1
Capex paid	-1,086	-644	-2,749
This period's unpaid capex and reversal of paid capex from previous period	52	111	16
Reversal received payment of sold intangible and tangible assets	-0	-1	-1
Capex intangible and tangible assets	-1,035	-534	-2,734
Additions to right-of-use assets	-258	-348	-1,204
Capex	-1,292	-882	-3,938
CONTINUING OPERATIONS
Additions to intangible and tangible assets	-1,086	-600	-2,705
Sale of intangible and tangible assets	0	1	1
Capex paid	-1,086	-599	-2,704
This period's unpaid capex and reversal of paid capex from previous period	52	83	-11
Reversal received payment of sold intangible and tangible assets	-0	-1	-1
Capex intangible and tangible assets	-1,035	-517	-2,717
Additions to right-of-use assets	-258	-326	-1,182
Capex	-1,292	-843	-3,899

Non-IFRS measures – Operating cash flow

Tele2 considers operating cash flow a relevant measure to present as it gives an indication of the profitability of the underlying business while also taking into account the investments needed to maintain and grow the business.

Operating cash flow: Underlying EBITDAaL less capex excluding spectrum and leases.

Continuing operations SEK million	Jan-Mar 2021	Jan-Mar 2020	Full year 2020
Underlying EBITDAaL	2,314	2,194	9,239
Capex excluding spectrum and leases	-702	-517	-2,717
Operating cash flow	1,613	1,677	6,523

Non-IFRS measures – Equity free cash flow

Tele2 considers equity free cash flow to be relevant to present as it provides a view of funds generated from operating activities that also includes investments in intangible and tangible assets. Management believes that equity free cash flow is meaningful to investors because it is the measure of the Group's funds available for acquisition related payments, dividends to shareholders, share repurchases and debt repayment.

Equity free cash flow: Cash flow from operating activities less capex paid and amortization of lease liabilities.

SEK million	Jan-Mar 2021	Jan-Mar 2020	Full year 2020
TOTAL OPERATIONS
Cash flow from operating activities	2,287	2,317	8,816
Capex paid	-1,086	-644	-2,749
Amortization of lease liabilities	-381	-391	-1,188
Equity free cash flow	820	1,282	4,879
CONTINUING OPERATIONS
Cash flow from operating activities	2,287	2,257	8,672
Capex paid	-1,086	-599	-2,704
Amortization of lease liabilities	-381	-372	-1,168
Equity free cash flow	820	1,285	4,799

Non-IFRS measures – Net debt and economic net debt

Tele2 believes that net debt is relevant to present as it is useful to illustrate the indebtedness, financial flexibility, and capital structure. Furthermore, economic net debt is considered relevant as it excludes lease liabilities, and thereby consistently can be put in relation to underlying EBITDAaL when measuring financial leverage.

Net debt: Interest-bearing non-current and current liabilities excluding provisions, less cash and cash equivalents, current investments, restricted cash and derivatives.

Economic net debt: Net debt excluding lease liabilities.

Total operations SEK million	Mar 31 2021	Dec 31 2020
Interest-bearing non-current liabilities	28,104	27,234
Interest-bearing current liabilities	6,767	4,881
Reversal provisions	-1,545	-1,660
Cash & cash equivalents, current investments and restricted funds	-4,686	-970
Derivatives	-298	-217
Net debt	28,342	29,269
Reversal:
Lease liabilities	-5,184	-5,327
Economic net debt	23,158	23,942

Organic

Tele2 believes that organic growth rates are relevant to present as they exclude effects from currency movements but include effects from divestments and acquisitions as if these occurred on the first day of each reporting period and are therefore providing an indication of the underlying performance.

Organic growth rates: Calculated at constant currency, meaning that comparative figures have been recalculated using the currency rates for the current period, but including effects from divestments and acquisitions as if these occurred on the first day of each reporting period.

Reconciliation of figures is presented in an excel document (Q1 2021 financials to the market) on Tele2's website www.tele2.com.