JANUARY September 2019 Q3 interim REPORT CHRISTIAN LUIGA - PowerPoint PPT Presentation

JANUARY – September 2019 Q3 interim REPORT CHRISTIAN LUIGA president & CEO Douglas lubbe CFO

TRENDS AS EXPECTED OPEX R REDU DUCED D IN IN q q3 V VS IN INCREAS ASED IN D IN h1 h1 SER ERVICE E REV EVEN ENUE D E DEC ECLINE E SOFTEN ENING -1.3% -1.4% -2.6% -4% (+1% h1 2019) Q1 19 Q2 19 Q3 19 YoY growth* Q3 2019 EBIT BITDA DA IN IN POSIT ITIV IVE g growth T h TERRIT ITORY STRONG OPERATIONAL FREE CASH FLOW 1% -4% -2% 11.6 BN Q1 19 Q2 19 Q3 19 (SEK 9.4bn YTD Q3 2018) YTD Q3 2019 YoY growth* 2 * Like for like, Adjusted EBITDA excluding IFRS 16 impact

Share buy-back program TO END SPRING 2020 Rat atio ional al RE RECENT S SHARE REHOL OLDER R RE REMUN UNERA RATION ON SEK in billions • Current pro forma leverage* of 2.7x 16 • Credit rating target A-/BBB+ 12 • Slower overall economic outlook 8 SEK 2.36 SEK 2.30 • Positive EBITDA trend but below internal plans SEK 2 PER PER SHARE PER SHARE 4 SHARE • Sustain flexibility going forward 0 2016 2017 2018 Ordinary dividend Share buy-backs • The 2018 share buy-back decision based on DECISION TAKEN by the Board not to execute strong balance sheet and model being flexible on the remaining SEK 5 billion of the three- year share buy-back program ambition • Carried out as long as credit targets are not breached and strategy allows for it • In total SEK 10 billion, about 6% of shares to be bought back until AGM 2020 * Based on Q3 2019 leverage and including second 2019 dividend tranche and remaining share buy-backs until AGM 2020 3

COST DRIVEN EBITDA RECOVERY Adj Adjusted E d EBIT BITDA DA DE DEVELO LOPME MENT* SER ERVICE E REV EVEN ENUE D E DEV EVEL ELOPMEN ENT* Organic & like for like growth, external service revenues SEK million in reported currency, organic & like for like growth excl. IFRS 16 Reported EBITDA Service revenue growth Organic/like for like EBITDA growth Service revenue growth excl. Telia Carrier +1% -0.9% 0% 8,268 7,468 7,520 6,977 6,735 -1.3% Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 • Unchanged sequential trend • EBITDA turned positive driven mainly by sequential improvements in Sweden and Norway • Loss of low-margin revenues in Telia Carrier still weights on group • Lower costs in central functions also contributed * 2018 based on the previous organic growth definition (stable FX and M&A excluded) 4 2019 based on the new definition “like for like growth” (Stable FX and M&A included in current & corresponding period)

ACCELERATE EXECUTION b2c effic fficie iency b2b Hub to digital experiences in Digitalization partner of Cost leadership through homes and offices choice scale and synergies Strong Grow Drive DRIVE Strong Monetize customer Arpa and loyalty & LOYALTY position digi- position add protect FURTHER in core talization in core services core services growth revenues CPS 5G 5G Fiber OCN FWA ICT Drive loyalty Utilize network superiority New operating model Indu dust stry y le lead ader in digi gital al impac act through gh UN’s ’s Su Sust stai ainab able le Develo De lopment Go Goals als 5

MINOR PART OF BASE MIGRATED – 3% arpu GROWTH New mo w mobile bile portfo folio lio mig migrat atio ion o overvie iew Postpaid aid ar arpu - B2C Postpaid B2C subscriptions in million Postpaid ARPU B2C excluding VAS Telia subscriptions migrated in Q3 2019 3 Telia subscriptions to be migrated -1% 2 subscriptions +3% Not in scope for CURRENT 1 migration 0 Q3 18 Subscription IDD* Top-ups Other Q3 19 fee • IDD* and top-ups temporary burden • Subscriptions in scope migrated Q3 2019 delivered a +3% ARPU impact • Gradual impact over the coming ~20 months 6 * EU international direct dialing regulation, introduced May 2019

Again #1 on quality in sweden Telia had the Most satisfied B2B & b2C customers* #1 also in 2019 on the back of superior product quality, especially relating to Coverage Speed B2c (halebop) B2B (Telia) Reliability * According to SKI (Svenskt Kvalitetsindex, English: Swedish quality index) 7

Improved long-term b2b trend B2B 2B ser ervice e rev even enue GR e GROWTH – all mar all markets Organic growth 2018 & like for like growth 2019 • Gradually improving last two quarters in B2B from increased customer relevance • Main drivers are the large and public segments in Sweden and -0.8% Norway • Sweden B2B NPS trending upwards • Significant improvement in Norway the last two quarters Q2 18 Q3 18 Q4 18 Q1 19 Q2 19* Q3 19 • IoT growth YTD Q3 >20% • Sizable deal with E.ON in Sweden on smart electricity meters secured in Q3 (totaling ~1m SIMs over time) • Good traction in Crowd Insights with two strategic wins in the public transportation space in Q3 8 * Q2 2019 positively impacted by one-off like revenues in Sweden

OPEX STARTED TO COME DOWN OPEX EX d dev evel elopmen ent* External expenses, like for like • Decrease in Q3 mainly driven by lower resource and marketing costs in Sweden & Norway 2% • Sweden reduced by 5% 0% • Norway reduced by 10% • Positive development estimated to continue also in Q4 from -2% • Synergy realization in Norway -4% • New operating model (Finland enrolled from October) -4% • Easier comparisons -6% Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 • Other efficiencies • Full year target of around -2% on OPEX remains 9 * Including an estimated 2% cost inflation

Sta tayin ing g in in the the fron ont t of of digita igitaliz ization tion via via 5 5g Swede den Norway way Finlan Fin land 5G 1,000 EUR 49.90/Month MBIT • The world’s first 5G network • Network upgrade and 5G roll- • 5G devices and price underground launched out over 4 years plans now available • Sweden’s first 5G network • Target to fully cover Norway • Initial roll-out program to for remote steering of cover the 7 largest cities • Strong FWA business case construction equipment 10

Full year cash flow outlook unchanged O P E R A T A T I O I O N A L A L F F R E E • Full year outlook reiterated with outcome likely in the lower C A S H F C A F L O L O W end of the range • EBITDA and CAPEX YTD Q3 combined below internal expectations whereas WC and other items are ahead • Composition and run-rate into 2020 slightly different vs. view at the beginning of the year • Currently there is a higher uncertainty on the operational free cash flow level for 2020 S E S E K 1 1 2 - 1 2 . 5 B B I L L I L L I O N U N C H A U N H A N G E D E D 11

JANUARY – September 2019 Q3 interim REPORT Douglas lubbe CFO

LOWER COSTS COMPENSATED FOR REVENUE DECLINE SER ERVICE E REV EVEN ENUE D E DEV EVEL ELOPMEN ENT EBIT BITDA DE DA DEVELO LOPME MENT Like for like growth, external service revenues Like for like growth, excluding adjustment items and IFRS 16 +1% -1.3% Q3 18 SWE FIN NOR DEN LIT EST LAT Telia Other Q3 19 Q3 18 SWE FIN NOR DEN LIT EST LAT Telia Other Q3 19 Carrier Carrier • Pressure on legacy, mobile and fiber installation • Sweden rather neutral given cost reduction revenues in Sweden • Service revenue loss and lower equipment margin • Copper dismantling and legacy pressure in Finland in Finland • Norway flat driven by one-off revenues • Synergies, one-offs and lower marketing in Norway • Loss of low-margin revenues in Telia Carrier • Solid cost control in central functions 13

B2C improved and B2b normalized vs STRONG q2 Adj Adjusted E d EBIT BITDA DA DE DEVELO LOPME MENT* SER ERVICE E REV EVEN ENUE D E DEV EVEL ELOPMEN ENT Reported currency, external service revenues Organic & like for like growth excl. IFRS 16 B2C excl. fiber OTC B2B B2C 0% B2C -2% -0.9% -4% -1.1% -6% -1.9% B2B -8% -10% -12% Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 • Price adjustments made continued to yield in B2C • Positive trend continued driven primarily by lower OPEX and easy COGS comparisons • B2B came back down after being impacted by one-off like mobile revenues in Q2 * 2018 based on the previous organic growth definition (stable FX and M&A excluded) 14 2019 based on the new definition “like for like growth” (Stable FX and M&A included in current & corresponding period)

Changing revenue mix puts pressure on margin SER ERVICE E REV EVEN ENUES ES* & EB EBITDA** MO MOBILE BILE SUBS BSCRIP IPTIO IONS AN AND D AR ARPU SEK million in reported currency & like for like growth excl. IFRS 16 Total subscription base in 000’, blended ARPU in local currency -1.8% 3,400 20 Subscriptions ARPU +2.4% 3,315 3,258 19 3,300 18 -5% 3,200 17 1,366 1,291 3,100 16 3,000 15 Q3 18 Q3 19 Q3 18 Q3 19 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Service revenues EBITDA • Stable on mobile subscription revenues but loss • Stable subscription base development of interconnect revenues • ARPU uplift driven by both B2C and B2B • Fixed telephony fell from network dismantling • Pressure on the equipment margin 15 = ARPU growth y-o-y = Like for like growth excl. IFRS 16 * External service revenues ** Excluding adjustment items