Interim Report Interim Report January-March, 2015 January-March, 2015 Johan Dennelind President & CEO 5 On February 5, Norwegian Competitive Authority approved TeliaSonera’s acquisition of Tele2 Norway TeliaSonera receives almost SEK 5 billion dividend from Turkcell after 5 years deadlock Telia Sweden to connect 5 villas per hour to its fiber network in 2015 2 1
Progress and challenges in the first quarter • Further growth in mobile service revenues in Sweden • Continued strong performance in Nepal • Agreement on Turkcell dividend and completion of the acquisition of Tele2 Norway • Group margin impacted by high equipment sales • Continued macroeconomic challenges in parts of our footprint • Service revenue pressure in Kazakhstan 3 Modest start to the year as expected Group service revenues* Group EBITDA** SEK million SEK million -1.1% local organic growth -4.3% local organic growth 22,810 21,427 8,540 8,345 Q1 14 Q1 15 Q1 14 Q1 15 • Reported service revenues increased • Reported EBITDA climbed 2.3 percent, 6.5 percent, boosted by currency effects but declined slightly in organic terms • Slightly easing pressure on organic service • Positive organic EBITDA growth in Europe revenue growth on a sequential basis offset by decline in Sweden and Eurasia * External service revenues **Excluding non-recurring items 4 2
Solid consumer demand in Sweden Sweden – B2C service revenue growth* Sweden – B2B service revenue growth* Fiber installation revenues B2C ex fiber installation revenues 3.3% 3.1% 1.9% -2.3% 1.8% 1.5% -3.0% -4.1% -4.2% -4.5% Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 • Consumer segment supported by higher • Continued high competition in large mobile growth despite changing competitive corporate segment dynamics • Strong momentum in fiber orders 5 * External service revenues Profitability impacted by market investments Sweden service revenues* Sweden EBITDA** SEK million SEK million -1.1% local organic growth -9.6% local organic growth 7,793 7,792 3,596 3,267 Q1 14 Q1 15 Q1 14 Q1 15 • Positive mobile growth offset by decline • Profitability impacted by high equipment in traditional fixed voice sales and changed product mix • Performance expected to improve during the year * External service revenues **Excluding non-recurring items 6 3
Stable performance in Europe Europe service revenues* Europe EBITDA** SEK million SEK million -2.3% local organic growth 8,359 7,851 +3.7% local organic growth 2,272 2,097 Q1 14 Q1 15 Q1 14 Q1 15 • Organic service revenue growth impacted • EBITDA growth supported by turnaround by lower interconnect by close to 1 p.p. and in Spain high competition in several markets * External service revenues **Excluding non-recurring items 7 Tele2 Norway acquisition closed in February Norway service revenues* & EBITDA** SEK million • Tele2 contributed with net service revenues of around SEK 300 million and negative EBITDA • Close to one million subscriptions transferred to TeliaSonera’s network end of quarter, bringing +3.9% local organic growth total base to 2.5 million 1,712 • Mobile market share now around 40 percent 1,349 • Network synergies to become visible from Q2, +5.5% local organic growth full synergies expected in 2016 483 486 Service revenues EBITDA Column1 Column2 Column3 Column4 Q1 14 Q1 15 Q1 14 Q1 15 * External service revenues **Excluding non-recurring items 8 4
Back to positive service revenue growth in Eurasia Eurasia service revenue growth* Eurasia service revenue growth* Nepal +19.9% +5.2% +4.8% Uzbekistan +13.0% +3.1% Moldova +3.1% +1.4% Eurasia +1.4% Georgia +1.4% Azerbaijan -0.8% Tajikistan -2.3% -6.0% Kazakhstan -10.1% Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 • Continued demanding macroeconomic • Positive organic service revenue growth and competitive environment in several in 4 out of 7 markets markets * External service revenue growth in local currencies, excluding acquisitions and disposals 9 Continued challenges in Kazakhstan Kazakhstan service revenues* Kazakhstan EBITDA** SEK million SEK million -10.1% local organic growth 1,800 1,723 -8.9% local organic growth 1,057 999 Q1 14 Q1 15 Q1 14 Q1 15 • Organic service revenue growth impacted • EBITDA margin remained high but declined to by continued competitive landscape and 54.2 percent (57.9) due to increased reduced interconnect equipment sales * External service revenues **Excluding non-recurring items 10 5
Agreement on Turkcell dividend • Dividend resolution after five years deadlock between main owners • TeliaSonera’s share of dividend approximately SEK 4.5 billion post tax • Discussion continues with stakeholders on other corporate governance issues 11 Continued governance and sustainability actions • First combined Annual and Sustainability Report published • The second TeliaSonera Transparency Report published • Sustainability update for stakeholders in relation to the Annual General Meeting • Continued upgrade of responsible business framework 12 6
The transformation journey has commenced 2018 2017 2016 2015 2014 The New 2013 TeliaSonera Big Stabilize Transform Transform Deliver on changes & shape & perform & step up potential 13 Execution has started • Approximately SEK 100 million invested in the first quarter, gradual step-up during the year • Good progress with increasing online share of sales, IT and product portfolio transformation in early stage Targets by end 2017 80% fewer products and offerings 50% fewer IT systems >50% of services and sales online 80% use new simplified offerings 80% fewer IT systems >50% of services and sales online 14 7
Outlook 2015 (unchanged) • EBITDA* - Around 2014 level • CAPEX** - Around SEK 17 billion • Dividend - Target at least SEK 3 per share * Excluding non-recurring items , in local currencies, excluding acquisitions and disposals ** Excluding license and spectrum fees, currency fluctuations may impact the reported number in Swedish krona 15 Interim Report Interim Report January-March, 2015 January-March, 2015 Christian Luiga Senior Vice President & CFO 8
First quarter 2015 Jan-Mar Jan-Mar Change 2015 (%) 2014 Net sales (SEK million) 26,041 23,926 8.8 Change local organic (%) 1.5 EBITDA* (SEK million) 8,540 8,345 2.3 Change local organic (%) -4.3 EBITDA* Margin (%) 32.8 34.9 EPS (SEK) 0.86 0.91 -5.9 Free cash flow (SEK million) 2,853 2,556 11.6 * Excluding non-recurring items 17 Major currency effects in the first quarter FX change y-o-y versus SEK Reported net sales growth Nepal 27.1% +8.8% Kazakhstan 20.8% +1.7 p.p. +5.6 p.p. Turkey 16.2% +1.5 p.p. Azerbaijan 7.4% Euro 5.9% Norway 1.3% Russia -28.3% Q1 14 Organic FX M&A Q1 15 • Currencies supported reported net sales • Swedish krona weakened against the majority by almost 6 percent in the first quarter of key currencies y-o-y, with the Russian ruble as main exception 18 9
High equipment sales… Group net sales growth* impact Sweden equipment sales growth** +1.5% 38.9% +2.4 +0.1 0.0 0.0 -0.3 23.6% -0.8 12.5% 8.2% 5.5% Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Net sales Billed Interconnect Other Fixed service Other service Equipment Net sales Q1 14 revenues revenues mobileservice revenues revenues sales Q1 15 revenues * In local currencies, excluding acquisitions and disposals **Growth year-on-year In reported currency 19 …impacted profitability in the first quarter Group service revenues* and OPEX** Group EBITDA margin*** Service revenues* OPEX** 2% 34.9% 32.8% 1% 0% -1% -2% -3% -4% Q1 14 Q1 15 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 • Almost half of margin drop explained by higher equipment sales *External service revenues in stable fx-rates, rolling 12 months ** Excluding non-recurring items in stable fx-rates, rolling 12 months *** Excluding non-recurring items in reported currency 20 10
Several items behind change in EPS Earnings per share • Lower associated contribution SEK from MegaFon and Turkcell 0.91 0.86 0.00 +0.10 • Reduced tax payments due to +0.09 +0.08 -0.13 intragroup transfer -0.13 • Interest net supported by -0.06 FX gains 21 Higher CAPEX related to investment programs… CAPEX * SEK million • 50 percent of CAPEX in Q1 14 Q1 15 Sweden related to fiber 3,714 • Higher investments mobile networks in Finland and Norway • Build out of coverage and capacity in Eurasia 1,155 1,086 1,010 Region Sweden Region Europe Region Eurasia Group * Excluding license and spectrum fees 22 11
…in line with our superior connectivity strategy Fiber households Sweden 4G population coverage Telia connected (MDUs + SDUs) Communication operator 100% 1,157,000 1,157,000 Telia passed, not connected 80% 838,000 60% 40% 20% 0% Q112Q212Q312Q412 Q113Q213Q313Q413 Q114Q214Q314Q414 Q115 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 23 Improved cash flow generation Free cash flow • Positive working capital SEK billion +0.5 development, mainly in +0.2 +0.5 Nordics and in Spain 2.9 +0.3 0.0 +0.2 2.6 -1.3 0.0 * Excluding license and spectrum fees 24 12
Net debt relatively stable in the past 12 months Net debt development • Net debt/EBITDA ratio SEK billion of 1.72x end of Q1 60.8 +2.9 56.3 +1.1 +13.0 52.9 -4.5 +4.2 -13.3 Q1 14 Free cash M&A Dividend Minority FX & Other Q1 15 Turkcell Pro forma flow payment dividend dividend Q1 15 25 & 26 13
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