Q1 INTERIM REPORT JANUARY MARCH 2018 JOHAN DENNELIND PRESIDENT - - PDF document

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Q1 INTERIM REPORT JANUARY MARCH 2018 JOHAN DENNELIND PRESIDENT - - PDF document

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Q1 INTERIM REPORT JANUARY MARCH 2018 JOHAN DENNELIND PRESIDENT & CEO GOOD START OF 2018 MOBILE GROWTH ACROSS MOBILE GROWTH ACROSS STRONG OPERATIONAL FREE STRONG OPERATIONAL FREE REPORTED EBITDA GROWTH REPORTED EBITDA GROWTH

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SLIDE 1

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JOHAN DENNELIND PRESIDENT & CEO

INTERIM REPORT JANUARY – MARCH 2018

Q1

GOOD START OF 2018

2 MOBILE GROWTH ACROSS FOOTPRINT MOBILE GROWTH ACROSS FOOTPRINT TURKCELL DIVIDEND & DIVESTMENTS TURKCELL DIVIDEND & DIVESTMENTS THREE YEAR BUY BACK PROGRAM THREE YEAR BUY BACK PROGRAM STRONG OPERATIONAL FREE CASH FLOW STRONG OPERATIONAL FREE CASH FLOW

6 OF 7

MARKETS

6 OF 7

MARKETS

5BN/YEAR 5BN/YEAR

0.9BN 0.9BN

4.3BN 4.3BN

REPORTED EBITDA GROWTH REPORTED EBITDA GROWTH

+7.4% +7.4%

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SLIDE 2

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LAUNCH OF A THREE YEAR BUYBACK PROGRAM

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SEK 15BN 9% 0.5x SEK 3.45

AMBITION OF OUTSTANDING SHARES PER SHARE IMPACT ON LEVERAGE

IMPROVED SERVICE REVENUE TREND

Organic growth, external service revenues Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Service revenues Service revenues excl. fiber installation revenues
  • 0.9%
  • 0.9%
  • 0.5%
  • 0.5%
4.2% 7.4% Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q1 18 reported

STABLE REVENUES WITH GROWING EBITDA

STRONG EBITDA DEVELOPMENT

Organic growth, reported Q1’18, excluding adjustment items
  • Mobile revenue growth in 6 of 7 markets
  • Legacy and fiber headwind in Sweden
  • EBITDA growth in 6 of 7 markets
  • Support from lower costs
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SLIDE 3

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0% 1% 2% 3% 4% Q1 17 Q2 17 Q3 17 Q4 17 Q1 18

MOBILE REVENUES CONTINUED TO GROW

MOBILE SERVICE REVENUE GROWTH

Organic growth

SWEDEN

+4%

SWEDEN

+4%

MOBILE ARPU GROWTH Q1

In local currency, y-o-y

FINLAND

+5%

FINLAND

+5%

NORWAY

FLAT

NORWAY

FLAT

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THE BALTICS

+4%

THE BALTICS

+4%

+1.5% +1.5%
  • Mobile revenue growth in 6 of 7 markets
  • Growth in ARPU key part of strategy - not SIM cards
  • Norway impacted by lower special number revenues

ARPU GROWTH IN FOCUS ON SWEDISH MOBILE

MOBILE SUBSCRIPTION GROWTH – B2C

Postpaid mobile base, excl. mobile broadband, in 000’

POST-PAID ARPU GROWTH – B2C

In local currency 6
  • Stable growth of postpaid subscriptions
  • Focus on value and revenue market share
1,500 1,750 2,000 2,250 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Mobile B2C postpaid ARPU Mobile B2C revenue growth
  • ARPU increasingly driven by subscription and usage
  • VAS more “normal” growth vs. Q3/Q4 2017
+5% +5%
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SLIDE 4

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CONVERGENCE IN OUR VALUE PROPOSITIONS

LIIGA PACKAGING TAKING SHAPE STRONG B2B PIPELINE AHEAD

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  • B2B convergence via a broader portfolio
  • Increased B2B interest from stronger proposition
  • Data center to open in June

TEAM PASS LIIGA PASS GAME PASS

EUR 24.90/MONTH EUR 19.90/MONTH TO BE LAUNCHED
  • Pre-sales exceeds expectations
  • Both existing and new customers
  • Much more to come

LEVERAGING ON STRONG B2B POSITION IN NORWAY

MOBILE B2C – CORE ARPU GROWTH

In local currency, B2C

PHONERO READY FOR NEXT PHASE

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  • Focus on value to drive ARPU
  • Improved product mix - focus on segment Young
  • Monthly fees mitigated for special numbers
  • Churn in line with expectations

Q2

2017

Q2

2017

Consolidated from Customer migration started Customers migrated

Q3

2017

Q3

2017

Q1

2018

Q1

2018

NOK 400m

SYNERGY RUN RATE

NOK 400m

SYNERGY RUN RATE

100 200 300 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Monthly fee Special numbers Other Roaming

+6%

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SLIDE 5

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OUR SEK 1.1 BILLION COST PROGRAM 2018 ON TRACK

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COST SAVINGS REALIZATION – Q1

SEK in billions, cost base* in scope +0.2 Disposals Q1 17
  • 0.3
Savings excl. FX
  • 0.1
Acquisitions Q1 18
  • 0.2

SEK 1.1BN SEK 1.1BN

* Equipment related costs are not included in the SEK 1.1 billion cost savings target for 2018

COST REDUCTION AMBITION 2018

INTEGRATED APPROACH TO SUSTAINABILITY

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CLEAR FRAMEWORK & TARGETS EXAMPLES OF RESPONSIBLE BUSINESS

ETHICS AND COMPLIANCE ETHICS AND COMPLIANCE TELIA - STATEMENT OF MATERIALITY TELIA - STATEMENT OF MATERIALITY EMPLOYEE ENGAGEMENT & YOUNITE EMPLOYEE ENGAGEMENT & YOUNITE RESPONSIBLE BUSINESS RESPONSIBLE BUSINESS SHARED VALUE CREATION SHARED VALUE CREATION CHILDRENS RIGHTS

  • Facilitate cooperation with others to spread learnings
  • Sharing experience how to protect children from abuse

SHARED VALUE CREATION

  • Smart transportation
  • Connected water taps

ENVIRONMENTAL RESPONSIBILITY

  • 148,000 tons CO2e abated, equivalent of 30,000 cars
  • 87 percent of electricity from renewable sources 2017

STRONG ESG PERFORMANCE

  • MSCI ESG “AAA”
  • EcoVadis “Gold Supplier”
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SLIDE 6

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OUTLOOK FOR 2018 (REVISED UP)

* 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 adjustment items, in local currencies

Above SEK 9.7 billion (previously: Around SEK 9.7 billion)

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

OPERATIONAL FCF*

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

EBITDA**

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CHRISTIAN LUIGA EXECUTIVE VICE PRESIDENT & CFO

INTERIM REPORT JANUARY – MARCH 2018

Q1

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SLIDE 7

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EBITDA GROWTH BOTH FROM ORGANIC AND M&A

EBITDA DEVELOPMENT – ORGANIC

Organic growth, y-o-y, excluding adjustment items
  • Revenue growth coupled with EBITDA leverage in

majority of markets

13 DEN Q1 17 SWE FIN NOR LIT EST LAT Other Q1 18 +4.2%
  • EBITDA growth of 7.4 percent driven by
  • Solid organic growth
  • M&A in Finland and Norway
  • FX tailwind from stronger EUR

EBITDA DEVELOPMENT – REPORTED

Reported growth, excluding adjustment items Q1 17 Organic M&A FX Q1 18 +7.4%

LOWER COGS & RESOURCE COST KEY FOR COST SAVINGS

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COST 2018 SAVINGS BY TYPE

Cost savings components as % of total savings

5%

Resources COGS Marketing IT Other
  • Improved sourcing and efficiency measures to drive

down COGS

  • Process improvements to drive down resource costs

COST 2018 SAVINGS OVERVIEW

Illustrative only Acqui- sitions Savings
  • excl. FX
Dispo- sals 2017 Equipment COGS Cost base in scope Target cost base** * 2017 M&A refers to the disposal of Sergel and acquisitions of Phonero and Nebula
  • Equipment COGS and FX excluded
  • All other costs incl. salary and other inflation included
** Adjusted for changes in FX

SEK 1.1 BILLION

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SLIDE 8

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EBITDA GROWTH IN SWEDEN DRIVEN BY LOWER COSTS

  • Continued growth in SME/SoHo
  • Recovery in Large enterprises
Q1 17 Q2 17 Q3 17 Q4 17 Q1 18

B2B B2C

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

EBITDA*

Organic growth
  • Cost savings more than

mitigate the lower revenues

SERVICE REVENUES

Organic growth, external revenues 15 3.0% Q1 17 Q2 17 Q3 17 Q4 17 Q1 18

FIBER REVENUES

SEK million, reported currency * Excluding adjustment items
  • 0.1%
  • 0.1%
+1.4% +1.4%
  • 2.4%
  • 2.4%
  • 42%
Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 100 200 300 Fiber installation revenues Fiber installation revenue growth
  • Permit issues remains
  • We remain committed despite

uncertainty

CONTINUED STRONG EBITDA GROWTH IN FINLAND

MOBILE DEVELOPMENT

Organic growth, ARPU growth in local currency
  • Mobile ARPU still growing by around 5 percent
  • Mobile growth impacted by loss of subscriptions
2,837 3,084 964 1,151 Q1 17 Q1 18 Q1 17 Q1 18 Service revenues EBITDA

SERVICE REVENUES* & EBITDA**

SEK million, reported currency & organic growth +8.7% +8.7%
  • 0.7%
  • 0.7%
  • Reported numbers boosted by M&A and FX
  • EBITDA uplift from less resource costs and marketing
= Organic growth * External service revenues ** Excluding adjustment items 16 2.4% 4.8% Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Total mobile service revenues Mobile ARPU
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SLIDE 9

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REVENUE AND EBITDA GROWTH IN NORWAY

1,943 2,129 862 1,008 Q1 17 Q1 18 Q1 17 Q1 18

SERVICE REVENUES* & EBITDA**

SEK million, reported currency & organic growth +5.0% +5.0% +1.1% +1.1% Service revenues EBITDA
  • Wholesale continued to be the main revenue driver
  • Special number revenues down by SEK ~30 millions

EBITDA** DEVELOPMENT

SEK million, reported EBITDA growth * External service revenues ** Excluding adjustment items = Organic growth
  • Revenues and cost control behind organic growth
  • Phonero synergies drove double digit reported growth
  • Slight y-o-y headwind from FX
17 Q1 17 Organic M&A FX Q1 18 +16.8% 206 234 277 318 145 141 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Estonia Lithuania Denmark Q1 17 Q1 18 Lithuania Q1 17 Q1 18 Denmark +9.5% +9.5% Q1 17 Q1 18 Estonia

SOLID BALTICS – CHALLENGING MARKET IN DENMARK

+8.8% +8.8%
  • 6.9%
  • 6.9%
  • 4.2%
  • 4.2%
+4.7% +4.7% +2.5% +2.5%

SERVICE REVENUE DEVELOPMENT

Organic growth, external service revenues

EBITDA* DEVELOPMENT

SEK million, reported currency & organic growth = Organic growth * Excluding adjustment items
  • Mobile growth of 12 percent in Lithuania
  • Solid fixed development in Estonia
  • Denmark still challenging- unlimited offering launched
  • EBITDA leverage in the Baltics from revenue growth

and lower costs

  • Good efforts on cost in Denmark left absolute

EBITDA more or less flat

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SLIDE 10

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CASH CAPEX CONTINUES TO TREND DOWN

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  • Cash CAPEX continues to trend down
  • Both lower fiber and non-fiber related CAPEX
  • Difference booked vs. cash CAPEX due to ice hockey rights
  • In line with our expectations 2018 will show lower cash CAPEX

CAPEX EXCLUDING LICENSES

Reported currency, SEK million, R12 12,000 13,000 14,000 15,000 16,000 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 SEK million Booked CAPEX excl. licenses (R12) Cash CAPEX excl. licenses (R12)

LOWER NET DEBT AND LEVERAGE

1.15x 1.15x = Leverage ratio

NET DEBT DEVELOPMENT - Q1

Continuing and discontinued operations, SEK billion +3.2 +1.2 Cash CAPEX M&A Q4 17
  • 7.5
Operations
  • 2.2
FX & Other Q1 18 33.8 28.5 1.01x 1.01x 20 1.27x 1.27x * Not including 2nd dividend tranche of SEK 5 billion +5.0 +1.6 +1.4 M&A proceeds to be distributed Turkcell dividend
  • 0.9
Q1 18 1st dividend tranche Remaining part of global settlement Q1 18 pro forma* 28.5 35.6

NET DEBT DEVELOPMENT – PRO FORMA*

Continuing and discontinued operations, SEK billion 1.01x 1.01x
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SLIDE 11

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NWC AN IMPORTANT PART OF THE CASH FLOW AGENDA

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  • NWC important part of cash flow agenda in

coming years

  • Additional potential from i) vendor financing ii)

credit account iii) part payment for resellers

NET WORKING CAPITAL TRENDS

NWC in relation to R12 sales*

DPO DEVELOPMENT

Average DPO** for Sweden, Finland & Norway
  • Improved payment terms and vendor financing
  • Several key suppliers and resellers in Sweden,

Finland and Norway already on-board

  • 15%
  • 10%
  • 5%
0% 5% 10% Q1 16 Q3 16 Q1 17 Q3 17 Telia Company Peer group average * Peer group consists of Telenor, Tele2, TDC, KPN, Deutsche Telekom, Proximus ** DPO=Days payable outstanding 2015 2016 2017 +6 +6 2 4 6 8 10 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Operational free cash flow (R12)

STRONG CASH FLOW TREND CONTINUES

OPERATIONAL FREE CASH FLOW TREND

Continuing operations, SEK billion

OPERATIONAL FREE CASH FLOW

Continuing operations, SEK billion 10.0 3.9 4.3
  • 0.4
Q1 18 Q1 17 Other EBITDA NWC CAPEX Interest Tax Pensions +0.7 +0.0 22
  • Driven by operational performance
  • Fairly neutral on tax but negative on interests as

Q1 2017 was impacted by the settlement of interest rate swaps

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SLIDE 12

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>9.7 9.7 >1.0

Cash flow SEK 2.3 dividend* Dividend from associated companies
  • Op. Free CF guidance

CASH FLOW AND LEVERAGE SUPPORTS BUYBACKS

23

1.3x 1.3x

CASH FLOW GUIDANCE

In SEK billions

PRO FORMA LEVERAGE Q1 SHARE BUYBACKS

In SEK billions, % of outstanding shares 5 10 15 0% 2% 4% 6% 8% 10% 4 8 12 16 2018 2019 2020 * Dividend amount in SEK billion from a SEK 2.3 per share dividend including impact from 2018 buybacks

Q&A

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SLIDE 13

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EXITED THE SPOTIFY INVESTMENT

EXIT FROM EURASIA CONTINUES AND SPOTIFY DIVESTED

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CONTINUING TO DIVEST IN EURASIA

  • Azercell divested
  • Leverage increase* of 0.1x
  • Geocell divested
  • Neutral on leverage*
  • Investment made June 2015
  • Proceeds of SEK 2.3 billion
  • Return on investment of 2.4x (excl. FX)
  • Successful collaboration ended
* After proceeds from the disposals have been distributed from Fintur to Turkcell

NEGATIVE EURASIA EBITDA DUE TO UZBEKISTAN

  • Revenue growth Q1 due to Uzbekistan
  • Positive EBITDA development in all countries

except for Uzbekistan that was impacted by new subscriber taxes

* External service revenues **Excluding adjustment items

FINANCIAL TRENDS IN EURASIA

Organic growth 2%
  • 6%
Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Service revenues* EBITDA** 26

FINANCIAL TRENDS IN KAZAKHSTAN

Organic growth
  • 2%
1% Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Service revenues* EBITDA**
  • Flat EBITDA development as decreased costs

compensated for somewhat lower revenues

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SLIDE 14

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EPS DOWN DUE TO EURASIA

TOTAL EPS DEVELOPMENT

SEK, continuing and discontinued operations * Excluding income from associates and adjustment items 1.59
  • 0.16
0.08 M&A Q1 18
  • 0.09
Operating income* Associated companies Provision reversal 0.00 Other Operations Other Q1 17
  • 0.12
  • 0.95
0.09
  • 0.76
  • 1.75
CONTINUING OPERATIONS DISCONTINUED OPERATIONS 27 Q1 2017 positively impacted by a reversal of provision for the Uzbek legal investigation Q1 2017 positively impacted by a reversal of provision for the Uzbek legal investigation Mainly due to the Azercell disposal Mainly due to the Azercell disposal

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.
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