+6.4% 9.4BN UP SLIGHTLY ABOVE LAST YEAR +1.8% ORGANICALLY IN Q3 - - PDF document

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+6.4% 9.4BN UP SLIGHTLY ABOVE LAST YEAR +1.8% ORGANICALLY IN Q3 - - PDF document

Aug 03, 2023 168 likes •302 views

INTERIM REPORT JANUARY SEPTEMBER 2018 JOHAN DENNELIND PRESIDENT & CEO ANOTHER GOOD QUARTER CASH FLOW REMAINS CASH FLOW REMAINS CONTINUED EBITDA GROWTH CONTINUED EBITDA GROWTH EBITDA OUTLOOK EBITDA OUTLOOK STRONG STRONG REVISED

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SLIDE 1

1

JOHAN DENNELIND PRESIDENT & CEO

INTERIM REPORT JANUARY – SEPTEMBER 2018

ANOTHER GOOD QUARTER

CONTINUED EBITDA GROWTH CONTINUED EBITDA GROWTH EBITDA OUTLOOK EBITDA OUTLOOK

SLIGHTLY ABOVE LAST YEAR

CASH FLOW REMAINS STRONG CASH FLOW REMAINS STRONG

9.4BN

YTD Q3 UPDATED OPERATING MODEL UPDATED OPERATING MODEL

+6.4%

+1.8% ORGANICALLY IN Q3 GET/TDC NORWAY DEAL CLOSED GET/TDC NORWAY DEAL CLOSED Norway CUSTOMER FOCUS CUSTOMER FOCUS SPEED AND FLEXIBILITY SPEED AND FLEXIBILITY EFFICIENCY AND SCALABILITY EFFICIENCY AND SCALABILITY NET COST PROGRAM 2018 NET COST PROGRAM 2018

1BN

REALIZED YTD Q3 EFFECTIVE FROM JANUARY 1, 2019

REVISED UP

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SLIDE 2

2

KEY HIGHLIGHTS BY COUNTRY

3% GROWTH IN B2C MOBILE

  • MOST SATISFIED MOBILE CUSTOMERS (SKI*)
  • INCREASED MOBILE B2C MARKET SHARE
  • COST BASE TOO HIGH

EBITDA ABOVE NOK 1 BILLION 6% ORGANIC EBITDA GROWTH 4% ORGANIC EBITDA GROWTH

  • STRONG B2B DUE TO GOOD M&A EXCECUTION
  • LIIGA SUCESSFULLY LAUNCHED
  • EARLY 5G INTEREST
  • TDC NORWAY/GET CLOSED
  • PHONERO SYNERGIES REALIZED
  • STRONG B2C ROADMAP
Norway
  • DOUBLE DIGIT MOBILE GROWTH (LIT)
  • IMPROVING CUSTOMER NPS (DEN)
  • TELIA ONE (EST & LIT)
*SKI = Swedish Quality Index (October 2018)

SERVICE REVENUE DEVELOPMENT

Organic growth, external service revenues Q3 17 Q4 17 Q1 18 Q2 18 Q3 18
  • 1.9%
  • 1.9%
1,8% Q3 17 Q4 17 Q1 18 Q2 18 Q3 18

CONTINUED EBITDA GROWTH

EBITDA DEVELOPMENT

Organic growth, excluding adjustment items
  • Low margin voice revenue decline representing

2/3 of the drop in Q3 and half of the drop in Q2

  • Continued legacy pressure in Sweden
  • Mobile growth in 5 of 7 markets
  • Organic EBITDA growth in 5 of 7 markets
  • Continued cost savings realization
  • Reported growth of 6.4 percent supported by FX
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SLIDE 3

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SIGNIFICANT STEPS TO SUPPORT SWEDEN TURNAROUND

SWEDEN EBITDA DEVELOPMENT

Organic growth, excluding adjustment items
  • Common Product and Services unit to capture

synergies and increased speed

  • Around 500 employees move to common units
  • More customer centric and faster go-to-market

approach locally

  • Other countries to follow
  • Significant structural cost savings from transformation

expected in 2020

  • Short term cost savings in focus to compensate
  • In previous quarters cost savings mitigated

revenue pressure

  • Tougher cost comparisons
  • Slower realization of cost savings in Q3

UPDATED OPERATING MODEL - JAN 1, 2019

CUSTOMER FOCUS CUSTOMER FOCUS SPEED AND FLEXIBILITY SPEED AND FLEXIBILITY EFFICIENCY AND SCALABILITY EFFICIENCY AND SCALABILITY Q3 18 Q3 17 Revenues Cost Q3 one-time effects*
  • 5.6%
* Includes thunderstorm costs and FX effects

DELIVERING ON THE COST PROGRAM

COST SAVINGS REALIZATION – 9M 2018

SEK in billions
  • Strong cost execution YTD
  • Continued focus on ensuring that cost awareness

is part of the organizational culture

1,0 1,1 9M 2018 Full year target

COST SAVINGS BREAKDOWN – 9M 2018

  • Despite Sweden being behind target, other units

compensate

SWE FIN NOR DEN BALT Other
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SLIDE 4

4

0% 1% 2% 3% Q3 17 Q4 17 Q1 18 Q2 18 Q3 18

MOBILE REVENUES CONTINUE TO GROW

MOBILE SERVICE REVENUE GROWTH

Organic growth

SWEDEN

+1.9%

SWEDEN

+1.9%

MOBILE ARPU GROWTH Q3

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

FINLAND

+4.1%

FINLAND

+4.1%

NORWAY

+0.3%

NORWAY

+0.3%

+0.7% +0.7%
  • Mobile revenue growth in 5 of 7 markets
  • Strong B2B development in Finland
  • Lithuania +14 percent on mobile in Q3
  • ARPU continued to grow in majority of markets
  • Core ARPU main driver through price increases and

customer migration

LIT +9.9% EST +0.2% DEN

  • 4.4%

LIIGA IN PLAY AND DELIVERING ON ACQUISITIONS

50% new customers to Telia 43% of sales online 55% on the high ARPU Liiga pass

LIIGA SUCESSFULLY LAUNCHED DELIVERING ON OUR ACQUISITIONS

Cumulative adjusted EBITDA vs. business cases, YTD Q3 Target Outcome NEBULA Target Outcome INMICS Target Outcome PROPENTUS Target Outcome CLOUD SOLUTIONS
  • Four companies acquired 2017/2018, representing

a full ICT portfolio

  • Delivering on the business cases

18%

ABOVE BUSINESS CASES
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SLIDE 5

5

GET/TDC NORWAY DEAL CLOSED – THE NEXT ERA STARTS

SYNERGIES TO REALIZE DEAL CLOSED Q3 PERFORMANCE*

Revenues y-o-y, KPI’s q-o-q

FLAT

REVENUES TV UNCHANGED** BROADBAND +3,000 NOK 0.7 BILLION

(Full run-rate by end of 2021, including SEK 0.1 billion in CAPEX) Norway

SEK 1 BILLION NOK 0.4 BILLION

Norway
  • Deal approved without remedies
  • Closed on October 15
  • Clear integration roadmap
established * Preliminary and unaudited numbers in local currency based on the accounting principles and definitions applied under TDC’s ownership ** Excluding a clean out of 8,000 non-revenue generating RGU’s from shutting down the analogue network RGU= Revenue Generating Unit

RGU’s RGU’s

DIFFERENTIATION / UNIQUE EXPERIENCES

BONNIER BROADCASTING UPDATE

THE KEY RATIONALE THE FINANCIALS

1

DATA ANALYTICS & CUSTOMER KNOWLEDGE

3

WELL POSITIONED IN TRADITIONAL TV AND AVOD

4

IMPROVED POSITION IN MEDIA/AD LANDSCAPE & FLEXIBILITY IN CONTENT USAGE

5

SEK in millions 2020 2021 2022 EBITDA synergies 100 600 Integration costs

  • 200
  • 200

MERGER FILING PROCESS INITIATED & ON-GOING DIALOGUE WITH EU COMMISSION RE-ITERATE EXPECTED CLOSING IN H2 2019 MERGER FILING PROCESS INITIATED & ON-GOING DIALOGUE WITH EU COMMISSION RE-ITERATE EXPECTED CLOSING IN H2 2019

IMPROVED CONVERGENCE TO REDUCE CHURN

6

OFFENSIVE DEFENSIVE

  • Operational free cash flow of SEK 500 million 2020

AD-ENGINE AND COMPETENCE FOR THE FUTURE

2
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SLIDE 6

6

CHRISTIAN LUIGA EXECUTIVE VICE PRESIDENT & CFO

INTERIM REPORT JANUARY – SEPTEMBER 2018

Q3

PRESSURE ON LEGACY AND LOW MARGIN REVENUES

  • Net sales flat - equipment growth of 13 percent

NET SALES DEVELOPMENT

Organic growth
  • Sweden pressured mainly by fixed telephony
  • Telia Carrier down from drop in low-margin volumes
LIT EST LAT Telia Carrier Other Q3 17 NOR SWE FIN DEN Q3 18
  • 1.9%

SERVICE REVENUE DEVELOPMENT

Organic growth, external service revenues Q3 18 Equipment Q3 17 Mobile Fixed Other +0.1%
  • 1.9%
  • 1.9%
Service revenues
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SLIDE 7

7

CONTINUED POSITIVE GROUP EBITDA DEVELOPMENT

  • Continued FX tailwind on reported numbers
Q3 17 SWE FIN NOR DEN LIT EST LAT Other Q3 18 +1.8%

EBITDA DEVELOPMENT- REPORTED

Reported growth, excluding adjustment items

EBITDA DEVELOPMENT - ORGANIC

Organic growth, excluding adjustment items
  • Overall strong cost control in the group
  • Sweden burdened by legacy and higher costs
  • Good operational development in Finland
  • Synergy realization and strong cost control in Norway
M&A Q3 17 Organic FX Q3 18 +6.4%

+74%

MINUTES PER PLAY USER Y-O-Y

+74%

MINUTES PER PLAY USER Y-O-Y

OTT TV MOMENTUM IN SWEDEN

  • Slower mobile growth due to

tougher comparisons

  • Stable but still challenging in B2B
Q3 17 Q4 17 Q1 18 Q2 18 Q3 18

B2B B2C

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

MORE ACTIVE TV USERS

Users and usage
  • Telia Play increasingly attractive

SERVICE REVENUES

Organic growth, external revenues
  • 0.4%
  • 0.4%
+0.5% +0.5%
  • 2.7%
  • 2.7%

MOBILE – B2C

In local currency 262 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Mobile B2C postpaid ARPU Mobile B2C revenue growth +3% +3%
  • Less tailwind from VAS behind

slower growth pace Q3

+38%

ACTIVE PLAY USERS Y-O-Y

+38%

ACTIVE PLAY USERS Y-O-Y

+21,000

TV NET ADDS IN Q3 2018

+21,000

TV NET ADDS IN Q3 2018
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SLIDE 8

8

GOOD MOBILE AND EBITDA DEVELOPMENT IN FINLAND

2 911 3 258 1 089 1 291 Q3 17 Q3 18 Q3 17 Q3 18 Service revenues EBITDA

SERVICE REVENUES* & EBITDA**

SEK million, reported currency & organic growth +6.1% +6.1% +0.8% +0.8%
  • B2C mobile stable – increasing growth in B2B
  • Cost focus and M&A execution drive EBITDA
= Organic growth * External service revenues ** Excluding adjustment items

MOBILE SUBSCRIPTIONS AND ARPU

Total subscription base in 000’, ARPU in local currency
  • Added subscriptions in both B2C and B2B Q3
  • Several new large B2B contracts
  • ARPU growth driven by mix and core ARPU
15 16 17 18 19 20 3 000 3 100 3 200 3 300 3 400 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Subscriptions ARPU +4% +4%

SIGNIFICANT EBITDA GROWTH IN NORWAY

2 187 2 303 925 1 126 Q3 17 Q3 18 Q3 17 Q3 18

SERVICE REVENUES* & EBITDA**

SEK million, reported currency & organic growth +15% +15%
  • 0.9%
  • 0.9%
Service revenues EBITDA
  • Similar revenue trend as previous quarters
  • Headwind from lower special-number revenues

(NOK 30 million impact)

* External service revenues ** Excluding adjustment items = Organic growth

EBITDA** DEVELOPMENT

NOK million, adjusted EBITDA, R12
  • Strong operating leverage from Phonero synergies
  • Highest absolute EBITDA so far
2 000 2 500 3 000 3 500 4 000 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Adjusted EBITDA (R12)
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SLIDE 9

9

317 361 234 282 196 202 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Estonia Lithuania Denmark Q3 17 Q3 18 Estonia Q3 17 Q3 18 Denmark +10.7% +10.7% Q3 17 Q3 18 Lithuania

BALTICS STRONG - DENMARK TOUGH

+4.6% +4.6%
  • 4.9%
  • 4.9%
  • 7.0%
  • 7.0%
+4.4% +4.4% +3.7% +3.7%

SERVICE REVENUE DEVELOPMENT

Organic growth, external service revenues

EBITDA* DEVELOPMENT

SEK million, reported currency & organic growth = Organic growth * Excluding adjustment items
  • Lithuania back to growth
  • Mobile revenue growth of 14 percent
  • Continued mobile and fixed revenue growth in Estonia
  • Tough comparison in Denmark from close down of

prepaid service

  • Revenue growth and cost control in Lithuania and

Estonia

  • Strong execution on cost in Denmark

CASH CAPEX TREND RATHER FLAT

  • Booked CAPEX impacted Q2 2017 by Liiga CAPEX and

Q3 2018 by Telia Helsinki Data Center CAPEX

  • Cash CAPEX excl. licenses flattening out
  • 5G related CAPEX limited before 2020. Then replace

4G related investments

  • Note: 700 MHz auction in Sweden due December 2018

CAPEX EXCLUDING LICENSES

SEK in millions, rolling twelve months (R12) 12 000 13 000 14 000 15 000 16 000 Q1 17 Q2 17* Q3 17 Q4 17 Q1 18 Q2 18 Q3 18* SEK million Booked CAPEX excl. licenses (R12) Cash CAPEX excl. licenses and FX (R12) * Booked CAPEX impacted Q2 2017 by Liiga CAPEX and Q3 2018 by Helsinki data center CAPEX
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SLIDE 10

10

2 4 6 8 10 12 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Operational free cash flow (R12)

EBITDA INCREASINGLY SUPPORTING CASH FLOW

OPERATIONAL FREE CASH FLOW TREND

Continuing operations, SEK billion, R12

OPERATIONAL FREE CASH FLOW - YTD

Continuing operations, SEK billion 10.2 8,9 9,4 YTD 2017 EBITDA NWC CAPEX Interest, tax pensions & other YTD 2018 +1.6
  • 1.1
  • Continued good operational trend
  • Working capital negative in Q3
  • Improvement potential over time unchanged
Of which EBITDA SEK 1.3 billion Of which EBITDA SEK 1.3 billion
  • Operational free cash flow of SEK 9.4 billion YTD
  • Equals a growth of 5.8 percent

LEVERAGE UNCHANGED Q3

NET DEBT DEVELOPMENT – Q3

Continuing and discontinued operations, SEK billion
  • Buy-backs impacted leverage by 0.05x in Q3
  • Get/TDC Norway paid Q4
  • 2nd dividend of SEK 5 billion paid Q4
  • Uzbekistan legal settlement to be paid latest Q1 2019
  • Committed to capital allocation and balance sheet targets
+22.9 31.7 +1.8 +5.0 Q3 18 61.4 Q3 18 Pro forma FX & Other Buy-Back Cash Capex +0.9 +3.3 Operations Get/TDC Norway Q2 18 32.4
  • 6.3
2nd Dividend tranche +1.4 Remaining part of Uzbek settlement 1.14x 1.14x 1.11x 1.11x = Leverage ratio DIVIDEND

SEK 1.15

2ND TRANCHE DIVIDEND

SEK 1.15

2ND TRANCHE BUY-BACKS

SEK 2.7BN

AS PER OCTOBER 12 BUY-BACKS

SEK 2.7BN

AS PER OCTOBER 12
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SLIDE 11

11

2017 (SEK BILLION)

GET/ TDC NORWAY* BONNIER BROADCASTING

RUN-RATE SYNERGIES (PER YEAR)

COMBINED PRO FORMA

1.8 43.4% 0.5 6.8% 1.2

3.5 >28.5% 1.0 53.1% 0.4 82.4% 1.3

2.7 76.5% EBITDA (margin) EBITDA (margin) EBITDA-CAPEX (cash conversion) EBITDA-CAPEX (cash conversion) * SEK/NOK rate of 1.04

A STRONGER TELIA COMPANY

GET/TDC NORWAY

  • Closed and consolidated from October 15
  • Integration costs of NOK 0.4 billion, equally

split between 2019 and 2020

  • Full synergies of NOK 0.7 billion (of which

NOK 0.1 billion in CAPEX) by end of 2021 BONNIER BROADCASTING

  • Expected closing in H2 2019
  • Integration costs of SEK 0.4 billion, equally

split between 2020 and 2021

  • Full synergies of SEK 0.6 billion in 2022,

ramped up gradually

EBITDA OUTLOOK FOR 2018 UPDATED

* Free cash flow from continuing operations, excluding licenses and dividends from associated companies ** Based on current structure, i.e. including M&A made so far (excluding TDC Norway and GET), excluding adjustment items, in local currencies

Above SEK 9.7 billion (unchanged)

Operational FCF together with dividends from associated companies should cover a dividend around the 2017 level

OPERATIONAL FCF*

Slightly above the 2017 level of SEK 25.2 billion (updated)

(Previously: In line or slightly above the 2017 level of SEK 25.2 billion)

EBITDA**

  • NB. Full year outlook excludes the impact from Get/TDC Norway in Q4 2018
  • NB. Full year outlook excludes the impact from Get/TDC Norway in Q4 2018
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SLIDE 12

12

Q&A

EPS IMPROVED

TOTAL EPS DEVELOPMENT

SEK, continuing and discontinued operations * Excluding income from associates and adjustment items 0,53 0,66 0,06 0,45 Q3 17 Operating income* M&A Other Q3 18 M&A Other
  • 0.09
Operations
  • 0.04
  • 0.08
  • 0.17
+0.13 CONTINUING OPERATIONS DISCONTINUED OPERATIONS Due to Turkcell capital loss Q3 2017 Due to Turkcell capital loss Q3 2017 Due to divestments of Azercell and Geocell Due to divestments of Azercell and Geocell
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SLIDE 13

13

ENVIRONMENTAL, SOCIAL AND GOVERNANCE - ESG

DATA CENTER IN WORLD CLASS MORE UPDATES

  • New human rights policy adopted. Expanding our

commitments in

  • Freedom of expression
  • Children’s rights
  • A revised Supplier Code of Conduct was adopted.
  • tougher requirements in responsible sourcing
  • f minerals and human rights due diligence.
  • Being part of the digital pilot eSFI
  • Aims at finding new innovative ways for

language learning

  • Lead to a quicker introduction for immigrants

into society and the labor market.

  • Certified as a trustworthy and safe manager of data
  • Business continuity ISO certified
  • Information security management ISO

certified

  • Runs on 100% renewable energy
  • Energy being reused supplying heating for 20,000

households

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.