10.8BN +1.7% MORE SATISFIED/LOYAL CUSTOMERS IN ALL MARKETS - - PDF document

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10.8BN +1.7% MORE SATISFIED/LOYAL CUSTOMERS IN ALL MARKETS - - PDF document

Jan 05, 2023 347 likes •509 views

YEAR-END REPORT JANUARY DECEMBER 2018 JOHAN DENNELIND PRESIDENT & CEO 1 DELIVERED ON OUR FULL YEAR AMBITIONS ADJUSTED EBITDA* ADJUSTED EBITDA* OPERATIONAL FREE CASH FLOW OPERATIONAL FREE CASH FLOW IMPROVING ON NPS IMPROVING ON NPS

slide-1
SLIDE 1

1

JOHAN DENNELIND PRESIDENT & CEO

YEAR-END REPORT JANUARY – DECEMBER 2018

1

DELIVERED ON OUR FULL YEAR AMBITIONS

OPERATIONAL FREE CASH FLOW OPERATIONAL FREE CASH FLOW COST 2018 COST 2018 DELIVERING ON BUYBACKS AND PROPOSING DIVIDEND OF 2.36 DELIVERING ON BUYBACKS AND PROPOSING DIVIDEND OF 2.36 ADJUSTED EBITDA* ADJUSTED EBITDA*

1.3BN

10.8BN

SEK 2.36 /share

+1.7%

(TARGET: > SEK 9.7 BILLION) (TARGET: SLIGHTLY ABOVE LY) (TARGET: SEK 1.1 BN NET SAVINGS) (SEK 2.30 LAST YEAR) * In local currencies, excluding adjustment items and TDC Norway/Get SAME ABSOLUTE AMOUNT AS FOR 2017 ESG WORK RECOGNIZED ESG WORK RECOGNIZED IMPROVING ON NPS IMPROVING ON NPS MORE SATISFIED/LOYAL CUSTOMERS IN ALL MARKETS 2
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SLIDE 2

2

2018 M&A TAKING US TO WANTED LEADING CONVERGED POSITION IN THE NORDICS

Norway

EURASIA IN ALL MATERIAL ASPECTS EXITED

* Expected to be closed H2 2019

ACQUISITIONS

Signed or closed 2018

DIVESTMENTS

All closed 2018

INTENSE M&A HAS TAKEN TELIA COMPANY TO THE WANTED POSITION *

3

A QUARTER WITH SEVERAL HIGHS BUT LOWER EBITDA

ENDING THE YEAR WITH STRONG CASH FLOW ENDING THE YEAR WITH STRONG CASH FLOW FIRST NEGATIVE ORGANIC EBITDA QUARTER IN 2018 FIRST NEGATIVE ORGANIC EBITDA QUARTER IN 2018
  • 5.5%
  • VS. Q4 2017
CUSTOMER FOCUS YIELDING CUSTOMER FOCUS YIELDING

+76%

  • VS. Q4 2017
TDC NORWAY/GET TRADING ACCORDING TO PLAN TDC NORWAY/GET TRADING ACCORDING TO PLAN Norway

+7 +1

GOOD NPS MOMENTUM IN KEY MARKETS

+4

B2B & ICT B2B & ICT

ICT

4 STRONG B2B PIPELINE IN CORE MARKETS & ICT JOURNEY UNDER WAY
slide-3
SLIDE 3

3

SERVICE REVENUE DEVELOPMENT

Organic growth, external service revenues Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Service revenue growth Service revenue growth excl. Telia Carrier
  • 2.5%
  • 2.5%
  • 1.4%
  • 1.4%
6,590 6,495 6,443 6,977 6,735 3.8% 4.2% 3.9% 1.8%
  • 5.5%
  • 10.0%
  • 8.0%
  • 6.0%
  • 4.0%
  • 2.0%
0.0% 2.0% 4.0% 2,000 3,000 4,000 5,000 6,000 7,000 8,000 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 EBITDA EBITDA growth, yoy

AS PREDICTED A CHALLENGING REVENUE/EBITDA Q

EBITDA DEVELOPMENT

Reported in absolute & organic growth, excl. adj. items
  • Telia Carrier again a material part of the decline
  • Sweden pressured by fixed telephony
  • Mobile revenue growth in 6 of 7 markets
  • First negative EBITDA quarter in 2018
  • Sweden main driver - legacy pressure, credit

losses, marketing and higher sales-related costs

  • Finland neutral and Norway strong
5

DELIVERED ON COST 2018 – BUT NOT THE DESIRED MIX

RESOURCE COST 2018

Change in cost, organic
  • Target SEK 1.1 billion
  • Material part of cost reduction from

less low margin revenues

  • Organic OPEX down by 2 percent

NEW OPERATING MODEL TO SUPPORT NEW OPERATING MODEL TO SUPPORT CONTINUED RESOURCE OPTIMIZATION ACROSS GROUP CONTINUED RESOURCE OPTIMIZATION ACROSS GROUP

  • 3% NET AMBITION ON SWEDISH

OPEX

  • 3% NET AMBITION ON SWEDISH

OPEX

COST REDUCTION 2018

SEK in billions

COST AGENDA 2019

  • 4%
  • 17%
  • 6%
Employees Consultants Total
  • Structural cost reductions are

ahead of us

0.0 0.5 1.0 1.5 Outcome Outcome by type OPEX COGS
  • All countries contribute
  • Majority from Sweden
6
slide-4
SLIDE 4

4

0% 1% 2% Q4 17 Q1 18 Q2 18 Q3 18 Q4 18

STABLE MOBILE REVENUE DEVELOPMENT

MOBILE SERVICE REVENUE GROWTH

Organic growth

SWEDEN

+1.6%

SWEDEN

+1.6%

MOBILE ARPU GROWTH Q4

In local currency, pre & post-paid, y-o-y

FINLAND

+1.2%

FINLAND

+1.2%

NORWAY

+1.3%

NORWAY

+1.3%

+0.9% +0.9%
  • Mobile revenue growth in 6 of 7 markets
  • Low single-digit growth in B2C Sweden
  • Lithuania improved growth sequentially by 2 p.p.

to 16 percent

  • ARPU growth still in majority of markets
  • Continued ARPA/ARPU uplift in scope for 2019

LIT +10% EST

  • 2.7%

DEN +1.3%

7

SWEDEN GROWING EXCLUDING LEGACY PRESSURE

  • 6
  • 4
  • 2
2 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Reported growth Growth ex legacy*
  • Legacy reducing growth by 2-3 p.p.

per quarter

  • *Legacy revenues comprise fixed

telephony and other copper based services excluding DSL

  • Fiber installation revenues down

14 percent full year

  • Slower roll-out as we have

entered the tail

  • 1.8 million homes passed plus

0.9 million through OCN

  • 300
  • 200
  • 100
Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Legacy revenue change
  • Price increases from 2017 no

longer impacting

  • Similar stock reduction as in

previous quarters

REVENUE BREAKDOWN

Service revenues (SR), y-o-y in %

LEGACY HEADWIND BY Q

SR, SEK in millions, y-o-y in absolute

FIBER OTC DEVELOPMENT

SR, SEK in millions, y-o-y in absolute
  • 300
  • 200
  • 100
100 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Fiber installation revenue change 8
slide-5
SLIDE 5

5

STABLE Q4 TRADING FOR GET

Q4 TRADING PERFORMANCE – GET

Revenues, EBITDA & ARPU y-o-y, subscriptions q-o-q

+1%

REVENUES STABLE +2,000 CUSTOMERS

9

+1%

EBITDA

  • Stable revenues and EBITDA development

with slightly improving KPI’s

  • Positive impact on EBITDA from broadband

partly offset by lower TV gross profit

  • A somewhat tough year ending with good

momentum on the customer side

  • Churn managed lower in all segments and

products

  • NPS improved H2 vs. H1 2018

CUSTOMERS ARPU ARPU STABLE +2%

BROADBAND

SUSTAINABILITY BECOMING A CORE PART OF OUR DNA

NORDIC COALITION

IMPORTANT FIRST CROSS INDUSTRY STEP TAKEN

MAKING IMPACT

NEW CLIMATE GOALS

DARING AMBITIONS TO BE IN THE FOREFRONT

YOUNITE

EMPLOYEE ENGAGEMENT FOR SOCIAL IMPACT

EURSIA EXIT

IN A RESPONSIBLE WAY

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SLIDE 6

6

SHAREHOLDER REMUNERATION

11

SHARES BOUGHT UNTIL 31 DECEMBER

99.3M

GROSS VALUE

SEK 4.1BN

AVERAGE PRICE

SEK 41.6

DIVIDEND FOR 2018 FIRST SHARE BUYBACK YEAR ON TRACK

COMMITTED TO 3-YEAR SHARE BUYBACK AMBITION OF SEK 5 BILLION PER YEAR SAME ABSOLUTE AMOUNT AS IN 2017 SEK 2.36 IN TWO SEPARATE TRANCHES SAME ABSOLUTE AMOUNT AS IN 2017 SEK 2.36 IN TWO SEPARATE TRANCHES

IMPROVING CASH FLOW AND STABLE DIVIDEND

12

2.00 2.30 2.36

2016 2017 2018 (PROPOSED) +3%

PROPOSED DIVIDEND EQUALS AN AMOUNT OF SEK 9.9 BILLION – UNCHANGED VS. 2017

115% 115% 115% 80% 80% 80% 84% 84% 84% PAY-OUT RATIO

FREE CASH FLOW AND PAY-OUT RATIOS

SEK billion

5.5 9.7 10.8 2.0 2.7 7.5

2016

12.4

2018 2017

0.9 11.7

Dividend from associated companies Operational free cash flow
slide-7
SLIDE 7

7

LEGACY HEADWIND UNCHANGED LEGACY HEADWIND UNCHANGED GROWTH IN OPERATIONAL FREE CASH FLOW GROWTH IN OPERATIONAL FREE CASH FLOW

LOOKING AHEAD AT 2019

CORE REVENUE GROWTH – FOCUS ON ARPA/ARPU CORE REVENUE GROWTH – FOCUS ON ARPA/ARPU COST FOCUS AND CAPEX DISCIPLINE TO CONTINUE COST FOCUS AND CAPEX DISCIPLINE TO CONTINUE

13

THE 2019 FUNDAMENTALS... THE 2019 FUNDAMENTALS... …LEADS TO …LEADS TO M&A SUPPORTS EARNINGS/ CASH FLOW GROWTH M&A SUPPORTS EARNINGS/ CASH FLOW GROWTH

OUTLOOK FOR 2019 AND RATING

14

Operational free cash flow to be between SEK 12.0-12.5 billion

(SEK 10.8 billion 2018)

OPERATI O NAL FREE CA SH FL OW

Telia Company shall continue to target a solid investment grade long-term credit rating of A- to BBB+

RATING

slide-8
SLIDE 8

8

CHRISTIAN LUIGA EXECUTIVE VICE PRESIDENT & CFO

YEAR-END REPORT JANUARY – DECEMBER 2018

15

PRESSURE ON REVENUES AND EBITDA AS EXPECTED

  • Sweden down mainly due to fixed telephony
  • Telia Carrier continued according to strategy to

take down low-margin revenues – a more neutral development expected 2019

SWE Q4 17 Q4 18 Telia Carrier EST DEN LAT NOR LIT Other FIN
  • 2.5%

SERVICE REVENUE DEVELOPMENT

Organic growth, external service revenues 16 SWE Q4 17 FIN LIT NOR DEN EST LAT Other Q4 18
  • 5.5%

EBITDA DEVELOPMENT

Organic growth, excluding adjustment items
  • Mixed picture on EBITDA development
  • Sweden burdened by fixed telephony erosion and

higher costs

  • Norway benefiting from Phonero synergies
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SLIDE 9

9

GROWTH IN CORE OFFSET BY LEGACY PRESSURE IN SWEDEN

  • Slower mobile growth and higher

telephony drop pace in B2C

  • Flat trend in B2B
  • Most satisfied TV customers again
Q4 17 Q1 18 Q2 18 Q3 18 Q4 18

B2B

B2C excl. fiber installation revenues B2C incl. fiber installation revenues

MOBILE SUBS. – B2C

Postpaid subscriptions in thousands
  • Net addition growth Q4
  • Only negative for three months
  • ver the last two years

SERVICE REVENUES

Organic growth, external revenues
  • 1.0%
  • 1.0%
  • 1.5%
  • 1.5%
  • 3.2%
  • 3.2%

MOBILE – B2C

In local currency 256 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Mobile B2C postpaid ARPU Mobile B2C revenue growth +1.3% +1.3%
  • Slightly lower ARPU due to

lapsing effect from invoice fees

  • Subscription revenues grew by

1.6 percent Q4

17

B2C

2,199 2,300 Jan 17 Dec 18

STABLE QUARTER IN FINLAND

3,087 3,324 1,137 1,191 Q4 17 Q4 18 Q4 17 Q4 18 Service revenues EBITDA

SERVICE REVENUES* & EBITDA**

SEK million, reported currency & organic growth
  • 1.0%
  • 1.0%
  • 0.2%
  • 0.2%
  • Flat mobile revenue development in both B2C and B2B
  • Neutral cost base development
  • OPEX down despite higher marketing spend
= Organic growth * External service revenues ** Excluding adjustment items

MOBILE SUBSCRIPTIONS AND ARPU

Total subscription base in 000’, ARPU in local currency
  • Flat subscription base as growth in B2B from the

acquisition of AinaCom was offset by loss in B2C

  • AinaCom to be EBITDA accretive from 2019
15 16 17 18 19 20 3,000 3,100 3,200 3,300 3,400 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Subscriptions ARPU +1% +1% = ARPU growth y-o-y 18
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SLIDE 10

10

STRONG ORGANIC EBITDA GROWTH IN NORWAY

Q4 17 Q4 18 Q4 17 Q4 18

SERVICE REVENUES* & EBITDA**

SEK million, reported currency & organic growth +7.1% +7.1%
  • 1.1%
  • 1.1%
Service revenues EBITDA
  • Norway organic revenues slightly down due to less

subscriptions

  • Phonero synergies supported EBITDA
* External service revenues ** Excluding adjustment items = Organic growth

NORWAY CASH FLOW DEVELOPMENT R12

  • Adj. EBITDA, CAPEX ex. licenses, local currency, R12
2,121 3,062 859 1,371 TDC Norway & Get =
  • Strong cash flow development on back of M&A
  • Next growth phase started Q4
1,000 1,500 2,000 2,500 3,000 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 NOK million
  • Adj. EBITDA-CAPEX ex. licenses

+60% +60%

19 323 324 215 233 208 237 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Estonia Lithuania Denmark Q4 17 Q4 18 Estonia Q4 17 Q4 18 Denmark +2.7% +2.7% Q4 17 Q4 18 Lithuania

MOBILE GROWTH IN LED

  • 4.7%
  • 4.7%
+8.4% +8.4%
  • 2.4%
  • 2.4%
+3.0% +3.0%
  • 3.3%
  • 3.3%

SERVICE REVENUE DEVELOPMENT

Organic growth, external service revenues

EBITDA* DEVELOPMENT

SEK million, reported currency & organic growth = Organic growth * Excluding adjustment items
  • Lithuania down due to transit revenue decline - mobile

revenues grew 16 percent

  • Continued mobile and fixed revenue growth in Estonia
  • Mobile positive in Denmark but fixed headwind

continued

  • Higher resource and marketing costs in Lithuania
  • Revenue growth and a flat cost base in Estonia
  • Strong execution on cost in Denmark again
20
slide-11
SLIDE 11

11

10 11 12 13 14 15 2016** 2017 2018 2019 Illustrative

CASH CAPEX TRENDING DOWN

  • CAPEX excl. licenses and TDC/Get is estimated to

continue down

  • Continue to invest to retain best network status

CAPEX EXCLUDING LICENSES

SEK in millions, rolling twelve months (R12) 12,000 13,000 14,000 15,000 16,000 Q1 17Q2 17*Q3 17 Q4 17 Q1 18 Q2 18Q3 18*Q4 18 Booked CAPEX excl. licenses (R12) Cash CAPEX excl. licenses in stable FX (R12) * Booked CAPEX impacted Q2 2017 by Liiga and Q3 2018 by Helsinki data center

CASH CAPEX - ILLUSTRATIVE 2019

SEK in billions, excl. licenses & M&A, at stable FX
  • Lower cash CAPEX excl. licenses Q4 despite TDC

Norway/Get

  • Sweden main driver from less fiber and network

capacity investments

** 2016 are based on non-restated figures and adjusted for capitalized wages 21

LEVERAGE INCREASE FROM M&A

NET DEBT DEVELOPMENT – Q4

Continuing and discontinued operations, SEK billion
  • Major M&A agenda concluded
  • Fintur cash of around SEK 3.5 billion to be

distributed 2019 to Turkcell

  • Remaining legal settlement of SEK 1.9 billion to be

paid 2019

  • Swedish 700 MHz of SEK 1.1 billion to be paid 2019
22 31.7 Q3 18
  • 6.0
Operations Q4 18 +19.6 M&A
  • 1.1
FX & Other +6.5 55.4 Cash CAPEX +4.7 Dividend & buy- backs 1.11x 1.11x 1.97x 1.97x = Leverage ratio (including a full year of TDC Norway/Get) Mainly the net of TDC Norway/Get and Kcell/Ucell disposals Mainly the net of TDC Norway/Get and Kcell/Ucell disposals

~2.5%

  • f total shares
bought back since the start
  • f the buy-back
program

~2.5%

  • f total shares
bought back since the start
  • f the buy-back
program
slide-12
SLIDE 12

12

CASH FLOW FOCUS YIELDING RESULTS

  • OP. FCF 2019 – OUTLOOK
SEK billion, illustrative 2019 per bucket EBITDA + NWC + CAPEX* EBITDA + NWC + CAPEX* 13.1 13.1 15.1 15.1 2017 2018 2019 FINANCE + TAX + OTHER FINANCE + TAX + OTHER
  • 3.4
  • 3.4
  • 4.3
  • 4.3
OPERATIONAL FREE CASH FLOW OPERATIONAL FREE CASH FLOW 9.7 9.7 10.8 10.8

+ =

SEK 12-12.5 BN

2017 2018 2019 * CAPEX excluding licenses 2017 2018 2019 23

OPERATIONAL FREE CASH FLOW

Continuing operations, SEK billion, R12 & outlook 2019 12.0BN 12.5BN 2 4 6 8 10 12 14 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 FY 2019
  • utlook
  • Company focus has shifted and increased on cash

flow generation recent years

IFRS16 IN SHORT

WHAT IT RELATES TO

CONTRACT COMMITMENTS CONTRACT EXTENSIONS
  • Financial leases seen as debt
  • EBITDA no longer includes financial lease costs
  • All lease contracts need to be reviewed
  • Extension options should be reasonably certain to be

exercised to be added to debt

  • Based on contract terms
  • >60,000 contracts reviewed
  • Based on judgement

IFRS16 IMPACT ON P&L AND CASH FLOW

EBITDA EBITDA

✔

Before IFRS16 IFRS16 (Old Op. FCF def) Revised OP FCF definition D&A D&A

✔

Financial net Financial net

✔

Op FCF Op FCF

✔ ✔

  • Fin. activities
  • Fin. activities
P&L P&L Cash flow Cash flow
  • Significant impact on EBITDA
  • Neutral on net cash flow
  • Requires new definition of operational free cash flow

to keep the current base intact

✔

Changes in financial lease cost accounting 24

LEASE LIABILITIES (+SEK 15 BILLION)

Adjustment to keep the current base intact Adjustment to keep the current base intact
slide-13
SLIDE 13

13

SAVE THE DATE - ANALYST AND INVESTOR BRIEFING VENUE: STOCKHOLM DATE: 21 MARCH

TOPICS: STRATEGY AND ESG SERVICE REVENUE COST BASE MANAGEMENT CASH FLOW

Q&A

slide-14
SLIDE 14

14

EPS DECLINED Q4

TOTAL EPS DEVELOPMENT

SEK, continuing and discontinued operations 0.18
  • 0.26
  • 0.02
  • 0.15
Q4 17 Other Operations
  • 0.65
Associates 0.35 Finance net 0.03 Discontinued
  • perations
Q4 18
  • 0.44
CONTINUING OPERATIONS Mainly due to MegaFon capital gain LY Mainly due to MegaFon capital gain LY Primarily due to that part of the MegaFon divestment LY also resulted in a capital loss in the financial net Primarily due to that part of the MegaFon divestment LY also resulted in a capital loss in the financial net Rather flat as mainly write downs LY was
  • ffset by a capital loss from the Ucell
disposal in 2018 Rather flat as mainly write downs LY was
  • ffset by a capital loss from the Ucell
disposal in 2018 27

FORWARD-LOOKING STATEMENTS

Statements made in this document relating to future status or circumstances, including future performance and other trend projections are forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There can be no assurance that actual results will not differ materially from those expressed or implied by these forward-looking statements due to many factors, many of which are

  • utside the control of Telia Company.
28