Financial Statements for 2000 & Business and Strategy Overview - - PowerPoint PPT Presentation

Q4 Report February 12, 2001 / 1

Financial Statements for 2000 & Business and Strategy Overview

February 12, 2001

Q4 Report February 12, 2001 / 2

Contents

• Financial Overview

Kim Ignatius

• Business and Strategy Overview

Kaj-Erik Relander

Q4 Report February 12, 2001 / 3

Consolidated Income Statement

MEUR

Revenues EBITDA Operating profit 2000 % 1999 Q4/2000 1,849 668 387 11 206 352 560 84 9 511 180 102

• 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%

Q4/1999 2,057 2,047 1,748

Q4 Report February 12, 2001 / 4

Equity income Net financial expenses Profit before extraord. items and taxes Earnings per share

• 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

2000 % 1999 Q4/2000 Q4/1999 121 (9) 1,860 2.05 110

• 497

0.51 10 n/a 274 302 18 (3) 24 0.09 6 5 113 0.11

Consolidated Income Statement (cont’d)

MEUR

Q4 Report February 12, 2001 / 5

Divisional Profitability

Mobile Communications MEUR

• 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%

Revenues EBITDA Operating profit 2000 % 1999 Q4/2000 966 468 345 15 14 18 290 147 111 258 120 87 Q4/1999 1,108 535 406

Q4 Report February 12, 2001 / 6

Divisional Profitability

Media Communications and New Services MEUR

• 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

SmartTrust Zed Other New services Total 2000 % 1999 Q4/2000 Q4/1999 18 7 229 254 n/a n/a 175 175 n/a n/a 31 45 8 2 64 74 n/a n/a 45 45 Total revenues SmartTrust Zed Other New services Total (65) (102) (136) (303) n/a n/a (47) (47) n/a n/a (189) (545) (21) (44) (62) (127) n/a n/a (22) (22) EBITDA

Q4 Report February 12, 2001 / 7

Divisional Profitability

Fixed Network Voice and Data Services MEUR

• 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

Revenues EBITDA Operating profit 2000 % 1999 Q4/2000 570 200 98 1 26 39 147 52 23 155 56 34 Q4/1999 573 252 136

Q4 Report February 12, 2001 / 8

Divisional Profitability

Equipment Sales and Other Operations MEUR

• 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

Revenues EBITDA Operating profit 2000 % 1999 Q4/2000 173 47 4 (2) 2 550 61 12 6 62 26 7 Q4/1999 169 48 26

Q4 Report February 12, 2001 / 9

Associated Companies

MEUR

2G mobile associates 3G mobile associates Fixed network associates Other associated companies Goodwill amortization Total 147 (2) 38 4 (66) 121 156

• 27

5 (78) 110 889 908 557 13 n/a 2,367 2000 1999 2000 Equity income Book value

• Turkcell customers at 10 million

– Result impacts from accounting change, interconnection expense and lower

• wnership
• Good profitability in Baltic fixed network joint ventures

Q4 Report February 12, 2001 / 10

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 / 11

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 / 12

UMTS Financing through 2005

Major partners include Telefónica in Germany and Italy, Vivendi and ACS in Spain, and Enitel in Norway Sonera´s total share of financing through 2005 EUR 5-6 billion Total Joint Ventures Licence fees 36% Network capex 32% Cash

• pex +

interest 32% Financing needs Financing structure n the region of EUR 30 bn Equity 50% Debt 50% Non-recourse financing Turkcell IPO ~15% Sale of US stakes ~65% Sale of Other Assets ~20%

Q4 Report February 12, 2001 / 13

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 / 14

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 / 15

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 / 16

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 / 17

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 / 18

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 / 19

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 / 20

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 / 21

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 / 22

Other New Service Update

Sonera Plaza, number one ISP and Internet portal in Finland:

• nearly 1.5 million different monthly visitors
• 239 000 subscribers at the end of last year
• developing new center with personal financial services, info,

e-commerce, entertainment etc. Sonera Info Communications, global growth of directory services:

• perations in Finland, Sweden, France, Netherlands, Philippines

and Singapore

• start-ups in Italy, Spain and UK
• strategic partners in UK, US, Israel and Finland

Sonera Juxto, focus on wireless ASP:

• following the acquisition of Swedish Frontec

corporate services launched also in Sweden

Q4 Report February 12, 2001 / 23

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