Financial Statements for 2000 & Business and Strategy Overview February 12, 2001 Q4 Report February 12, 2001 / 1
Contents • Financial Overview Kim Ignatius • Business and Strategy Overview Kaj-Erik Relander Q4 Report February 12, 2001 / 2
Consolidated Income Statement MEUR % 2000 1999 Q4/2000 Q4/1999 Revenues 1,849 11 560 511 2,057 EBITDA 206 84 180 2,047 668 Operating profit 387 352 9 102 1,748 • Revenue growth of 11% as targeted • EBITDA gains from Turkcell IPO and Aerial/VoiceStream merger • Comparable EBITDA of MEUR 501 lower due to increased inputs by MEUR 240 in New Services; impact highest in Q4 (MEUR 90) • Excluding additional inputs, comparable EBITDA margin 36% Q4 Report February 12, 2001 / 3
Consolidated Income Statement (cont’d) MEUR 2000 1999 Q4/2000 Q4/1999 % Equity income 121 110 10 18 6 Net financial expenses (9) - n/a (3) 5 Profit before extraord. items and taxes 1,860 497 274 24 113 Earnings per share 2.05 0.51 302 0.09 0.11 • Interest expenses related to German 3G license capitalized in Sonera’s accounts • High financial income partly offsets increased interest expenses • Amortization of 3G licenses in Sonera’s accounts begins when operations start • Comparable profit before extraordinary items and taxes MEUR 314 • Comparable Earnings per Share EUR 0.31 Q4 Report February 12, 2001 / 4
Divisional Profitability Mobile Communications MEUR % 2000 1999 Q4/2000 Q4/1999 Revenues 966 15 290 258 1,108 EBITDA 14 147 120 468 535 Operating profit 345 18 111 87 406 • Strengthened GSM market share • 18% increase in GSM subscriptions during 2000 • 36% growth in non-voice revenues during 2000 • Increased ARPU and continuously lower churn • EBITDA impacted by international 3G licence costs (MEUR 2), and capital gains (MEUR 11) in Q4 • Domestic Mobile EBITDA above 47% Q4 Report February 12, 2001 / 5
Divisional Profitability Media Communications and New Services MEUR % Q4/2000 Q4/1999 2000 1999 Total revenues n/a SmartTrust 8 n/a 18 n/a Zed n/a 2 n/a 7 n/a 31 Other New services 64 45 229 175 45 Total 74 45 254 175 EBITDA SmartTrust n/a (21) n/a (65) n/a Zed n/a (44) n/a (102) n/a Other New services (189) (62) (22) (136) (47) Total (545) (127) (22) (303) (47) • SmartTrust: full year pro forma revenues increased 79% from MEUR 14 to MEUR 25 • Zed: access to 80 million customers through announced operator deals, full year pro forma revenues MEUR 9.3 • EBITDA impacted by increased inputs towards year-end, and capital losses MEUR 13 in Q4 Q4 Report February 12, 2001 / 6
Divisional Profitability Fixed Network Voice and Data Services MEUR % 2000 1999 Q4/2000 Q4/1999 Revenues 570 1 147 155 573 EBITDA 26 52 56 200 252 Operating profit 98 39 23 34 136 • Sales on Russian cable capacity increased leased lines revenues by 63% – Voice revenues decreased by 4% • Full year EBITDA includes capital gains of MEUR 26 • Increased efficiency of operations Q4 Report February 12, 2001 / 7
Divisional Profitability Equipment Sales and Other Operations MEUR 2000 1999 Q4/2000 Q4/1999 % Revenues 173 61 62 169 (2) EBITDA 12 26 48 47 2 Operating profit 4 6 7 26 550 • Total revenues impacted by sale of maintenance operations to IsoWorks in 1999 – Equipment sales up 10% – Construction and maintenance up 42% • Full year EBITDA includes capital gains of MEUR 12 Q4 Report February 12, 2001 / 8
Associated Companies MEUR Equity income Book value 2000 1999 2000 2G mobile associates 147 156 889 3G mobile associates (2) - 908 Fixed network associates 38 27 557 Other associated companies 4 5 13 Goodwill amortization (66) (78) n/a Total 121 110 2,367 • Turkcell customers at 10 million – Result impacts from accounting change, interconnection expense and lower ownership • Good profitability in Baltic fixed network joint ventures Q4 Report February 12, 2001 / 9
UMTS Financing • Sonera invested EUR 4 bn in four European UMTS licenses – Germany 42.8% (license term 20 years) – Italy 12.55% (15 years) – Spain 14.25% (20 years) – Norway 50% (12 years) • Investments in 3G to be financed by sale of 2G and other assets – Turkcell IPO in July 2000 – VoiceStream + Powertel to Deutsche Telekom – Other sales Q4 Report February 12, 2001 / 10
UMTS Financing (cont’d) • Capital structure in 3G joint ventures to be 50% debt financed – Non-recourse financing in place for Xfera as targeted – Similar financing negotiations for German JV in final stages • Sonera and Telefónica implementing potential strategic sell-down in Germany • Sonera’s total equity investments through 2005 EUR 5 - 6 bn • Committed to maintain single-A rating Q4 Report February 12, 2001 / 11
UMTS Financing through 2005 Total Joint Ventures n the Major partners include Cash region of Telefónica in Germany and Italy, opex + EUR 30 bn Vivendi and ACS in Spain, interest and Enitel in Norway Debt Non-recourse 32% 50% financing Network capex 32% Equity Sale of Other Assets ~20% Licence 50% fees Sale of US stakes ~65% 36% Turkcell IPO ~15% Financing Financing Sonera´s total share of financing needs structure through 2005 EUR 5-6 billion Q4 Report February 12, 2001 / 12
Outlook for Year 2001 • Revenue growth to accelerate • Media and New Services EBITDA slightly better than 2000 • Group comparable EBITDA to grow from 2000 level • Profits from 2G associates to offset losses from 3G associates • Significant sale of non-strategic 2G assets to strengthen the balance sheet • Financial expenses to grow due to higher net debt level • No significant cash investments planned Q4 Report February 12, 2001 / 13
Sonera’s Business Environment • Economic growth to slow down in many markets • Intensifying competition in Sonera’s business areas • Increased competition and price pressures make Sonera’s growth targets challenging • Revenue growth acceleration possible only through Sonera’s growth strategy • Implementation of Sonera strategy requires market driven participation in consolidation Q4 Report February 12, 2001 / 14
Sonera’s Objectives • Strong 2G and 3G mobile operator in Europe • Growing fixed line operator in the Baltic Sea area • New service businesses in selective global markets Q4 Report February 12, 2001 / 15
Sonera’s Strategy • To grow and develop existing 2G operations • To start 3G operations in Europe • To launch new service businesses in selective European, Asian and US markets • To participate in industry consolidation to ensure scale economics Q4 Report February 12, 2001 / 16
Sonera’s Key Targets • To maintain good profitability through increased cost efficiency • Strong partnerships in marketing and product development • Reallocation of assets from 2G to 3G • To utilize growth opportunities in new service businesses as markets open: - efficient risk management achieved by closely monitoring market performance in each market • Using expertise as service provider and network operator to build scale Q4 Report February 12, 2001 / 17
3G Markets Update • Group 3G in Germany (estimated launch 1Q 2002): - vendor selection and financing negotiations in final stages - management in place, brand under development - aim to launch service in 2001 - market being thoroughly researched enabling customer segmentation • Xfera in Spain (estimated launch in 2H 2001): - network under construction, non-recourse financing in place - organization in full speed, personnel 300 • IPSE in Italy and Broadband in Norway (estimated launches 1Q 2002): - vendor selection and financing negotiations underway • Sonera in Finland: - Nokia and Ericsson providing network, financed by own cash flow - services up and running in major cities in January 2002 Q4 Report February 12, 2001 / 18
Sonera Zed Progress Recent operator deals in Germany, Italy and Finland (Radiolinja) > access to 80 million customers Service launch expected: D1, Germany 16.8 Q2/2001 • • D2, Germany 17.3 Q2/2001 E-Plus, Germany 5.8 Q2/2001 • KPN Mobile, Netherlands 4.4 launched Q3/00 • • Mobile One, Singapore 0.6 Q1/2001 Powertel, USA 0.8 Q1/2001 • Radiolinja, Finland 1.2 Q1/2001 • • Sonera, Finland 2.3 launched Q2/99 Smart Comm, Philippines 2.6 launched Q4/00 • TIM, Italy 20.7 Q2-Q3/2001 • • Turkcell, Turkey 7.2 Q1/2001 Q4 Report February 12, 2001 / 19
Sonera Zed Progress (cont’d) Five data centers up and running in Europe, Asia and US: • enables worldwide delivery of zed services Zed for Business launched in Finland: • first services company calendar and e-mail via SMS/WAP • mobile access to company intranet Revenues: • 2000 pro rata about MEUR 10 up to MEUR 50 in 2001 • primarily from SMS text messages until year end 2002 Q4 Report February 12, 2001 / 20
Sonera SmartTrust Progress • Across Wireless and iD2 operationally and legally merged: SmartTrust in a possession of complete product range to enable secure and manageable e-services on fixed and wireless Internet • Strengthened its position in Europe, and advanced strongly in Asia-Pacific and South Africa • To date 60 operator and 160 corporate customers • Market for secure wireless Internet solutions predicted to grow rapidly • Revenues to double this year from MEUR 25 pro forma in 2000 Q4 Report February 12, 2001 / 21
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