Interim Report April - June 2001 July 23, 2001 Interim Report - - PowerPoint PPT Presentation

Interim Report 4-6/2001 1

Interim Report April - June 2001

July 23, 2001

Interim Report 4-6/2001 2

Contents

• Financial performance and UMTS projects

Deputy CEO Aimo Eloholma

• Q2 results per business area and financial position

CFO Kim Ignatius

Interim Report 4-6/2001 3

Financial performance in April - June

• Consolidated revenues grew by 11% on the previous year,

amounting to EUR 557 million (500)

• The sale of VoiceStream and Powertel shares was completed:

capital gains and other non-recurring items totaled EUR 588 million (857)

• Profit before extraordinary items and taxes was EUR 560

million (942), and earnings per share were EUR 0.69 (0.90)

• Comparable EBITDA rose by 20% from January - March

Interim Report 4-6/2001 4

Businesses in brief

• Mobile Communications Finland continued to grow and showed good

profitability: comparable revenues were up 10% on the previous year, and EBITDA margin was 52%

• Revenues of Service Businesses grew by 34% , and EBITDA loss

decreased compared with January - March

• Revenues of the fixed network Telecom businesses grew by 7% ;

stable profitability was weakened particularly by the increase in interconnection expenses

Interim Report 4-6/2001 5

Outlook for the second half of 2001

• Growth in revenues expected to continue at the previous year’s level
• Profitability of Mobile Communications Finland for the full year is

estimated to remain at the previous year’s level

• EBITDA loss of Service Businesses is estimated to decrease slightly

from the previous year (EUR 303 million)

• The Group’s comparable EBITDA is estimated to grow in euro terms

compared with 2000 (EUR 501 million)

• Equity income in associated companies is estimated to be about EUR

350 million negative; no impact on Sonera’s operational cash flow

Interim Report 4-6/2001 6

Progress of Group 3G in Germany

• Group 3G has signed a roaming agreement with E-Plus and an

interconnection agreement with Deutsche Telekom; Group 3G will launch its GSM/GPRS service towards the end of 2001

• In June, RegTP approved the shared use of UMTS networks > Group

3G is currently negotiating with other operators and vendors

• Infrastructure sharing will result in significant savings in Group 3G’s

network investments and operating expenses

• In addition to the EUR 3.6 billion already invested by it, Sonera will

not provide further financing to Group 3G

• RegTP’s decision strengthened Sonera’s

and Telefónica’s estimate that no additional equity financing will be needed once the current shareholder loans have been converted into shareholders’ equity

Interim Report 4-6/2001 7

Sonera’s other 3G markets in Europe

• Xfera, Spain
• the aim is to launch GSM/GPRS services by a roaming agreement in the

autumn

• UMTS network under construction; financed with external non-recourse

project financing

• IPSE 2000, Italy (launch in the first half of 2002)
• management selected, and organization being set up
• roaming negotiations ongoing to start 2G services
• Broadband Mobile, Norway
• strategy will be specified - partner Enitel has decided to abandon mobile

business; Sonera may also withdraw from the project

Interim Report 4-6/2001 8

Interim report for April - June

Q2 results per business area and financial position

• Kim Ignatius

Interim Report 4-6/2001 9

Consolidated income statement

EUR million

Revenues EBI TDA Operating profit Q2/2001 % Q2/2000 2000

500 993 919 11 (28) (32)

• Growth in revenues 11%
• EBITDA increased by the sale of the VoiceStream and Powertel shares (gain from

the transaction totaled EUR 596 million)

• Comparable EBITDA rose from Q1 to EUR 122 thanks to the increased profitability
• f Mobile Communications Finland and the decreased outlays on Service Businesses

557 710 626 2,057 2,047 1,748

Interim Report 4-6/2001 10

Equity income in associated companies Net financial expenses Profit before extraordinary items and taxes Earnings per share

• Equity income in associated companies weakened by the net losses reported by

Turkcell and Fintur

• Interest expenses related to the German 3G license had no impact on Sonera’s

results

• Financial expenses partly offset by the dividend income of EUR 12 million
• The tax effect of capital gains lower than the Finnish tax rate

Q2/2001 % Q2/2000 2000

(56) (10) 560 0.69 38 (15) 942 0.90 (247) 33 (41) (23)

Consolidated income statement (cont.)

EUR million

121 (9) 1,860 2.05

Interim Report 4-6/2001 11

Profitability of business areas

Mobile Communications Finland EUR million

• Comparable revenues were up 10% on the previous year; profitability improved

further due to growth in revenues and tight cost control

• Revenues from non-voice services grew by 31% in Q2 to EUR 34 million
• 25 text messages on average were sent from a GSM subscription per month (24)
• Average monthly revenues per customer were EUR 42.0 (42.1)
• Annualized customer churn remained low and was 9.5% (9.5% )

Revenues EBI TDA Operating profit Q2/2001 % Q2/2000 2000

287 135 101 8 19 28 310 161 129 1,134 543 414

Interim Report 4-6/2001 12

Profitability of business areas

Service Businesses EUR million

SmartTrust Zed Other Services Total Q2/2001 % Q2/2000 Q1/2001

5 5 84 94 4 2 64 70 25 150 31 34

Revenues SmartTrust Zed Other Services Total

(18) (34) (19) (71) (13) (16) (28) (57) (38) (113) 32 (25)

EBI TDA

6 2 55 63 (18) (43) (28) (89)

• Half of Zed’s revenues came from outside Finland
• SmartTrust’s order backlog was EUR 18 million at the end of June
• EBI TDA losses of Zed and Other Services decreased on January-March

Interim Report 4-6/2001 13

Profitability of business areas

Sonera Telecom EUR million

• Revenues from fixed network voice and data services were EUR 147 million (135)
• domestic voice revenues decreased, while international voice revenues

increased

• revenues from data services and leased lines rose to EUR 52 million (46):

revenues from leased lines grew due to the cable in Russia, and revenues from both businesses were held back by the reduction in the price level

• Revenues from equipment sales and other operations were EUR 40 million (35)

Revenues EBI TDA Operating profit Q2/2001 % Q2/2000 2000

243 83 52 7 (29) (46) 1,020 300 162 260 59 28

Interim Report 4-6/2001 14

Associated companies

EUR million

Mobile 2G associated companies Mobile 3G associated companies Fixed network associated companies Other associated companies Amortization of goodwill Total Q2/2001 Q2/2000 2000 Equity income in associated companies

• Equity income in associated companies was weakened by the loss of EUR 23 million

booked from Turkcell and the loss of EUR 32 million booked from Fintur (Q1/01)

• Turkcell’s performance in 2001 is weakened by the exchange rate losses resulting

from the devaluation, the decline in the economy in Turkey, and one-time expenses (41) (10) 10

• (15)

(56) 44

• 7

3 (16) 38 147 (2) 38 4 (66) 121

Interim Report 4-6/2001 15

Financial income and expenses

EUR million

• Interest income includes EUR 41 million from the EUR 2.7 billion shareholder

loan to the German associated company Dividend income I nterest income I nterest expenses Capitalized interest expenses Other fin. income and exp. Exchange gains (losses) Total Q2/2001 Change Q2/2000 2000

12 45 (75) 12 (3) (1) (10) 4 5 (23)

• 1

(2) (15) 8 40 (52) 12 (4) 1 5 21 82 (155) 20 23

• (9)

Interim Report 4-6/2001 16

Balance sheet

EUR million

Fixed assets Long-term investments I nventories and current receivables Short-term investments Cash and cash equivalents Total Shareholders’ equity and minority int. Long-term debt Current debt Non-interest bearing liabilities 1,393 5,914 739 1,915 84 10,045 3,973 2,586 2,755 731 1,381 4,779 3,458 68 88 9,774 3,249 1,842 3,955 728 Dec 31, 2000 Change

• Deutsche Telekom shares have been presented under short-term investments. The

carrying value of the shares is about EUR 1.8 billion and the market value about EUR 1.9 billion.

• As distinct from the previous practice, the German shareholder loan receivable of

about EUR 2.7 billion has been presented under long-term investments.

June 30, 2001 12 1,135 (2,719) 1,847 (4) 271 724 744 (1,200) 3

Interim Report 4-6/2001 17

Financial position

• Sale of VoiceStream and Powertel completed according to plan on

May 31

• Of the EUR 3.25 billion bridge loan, EUR 1.1 billion has been repaid by

asset sales, and EUR 1.3 billion by a long-term loan facility; the remaining EUR 0.9 billion will be repaid by October 2001

• Equity-to-assets ratio was 40% and gearing ratio was 128% at the end
• f June, to improve significantly by year end
• Investments in German Group 3G capped at the current EUR 3.6 billion
• The UMTS strategy in Norway will be adjusted, or the project will be

abandoned

• Sonera has committed to ”solid investment grade” level in credit ratings