Q2 INTERIM REPORT JANUARY JUNE 2017 JOHAN DENNELIND, PRESIDENT - - PowerPoint PPT Presentation

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Q2 INTERIM REPORT JANUARY JUNE 2017 JOHAN DENNELIND, PRESIDENT - - PowerPoint PPT Presentation

Feb 26, 2024 324 likes •563 views

Q2 INTERIM REPORT JANUARY JUNE 2017 JOHAN DENNELIND, PRESIDENT & CEO HIGHLIGHTS - Q2 2017 COST INITIATIVES LAUNCHED FEWER FIBER INSTALLATIONS IN SWEDEN CASH FLOW EXECUTION & IMPROVING EBITDA TREND IN FINLAND COST SIDE

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SLIDE 1

Q2

JOHAN DENNELIND, PRESIDENT & CEO

INTERIM REPORT JANUARY – JUNE 2017

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SLIDE 2

EURASIA UPDATES COST INITIATIVES LAUNCHED FEWER FIBER INSTALLATIONS IN SWEDEN IMPROVING EBITDA TREND IN FINLAND ASSOCIATES - DIVIDENDS AND DIVESTMENT CASH FLOW FOCUS YIELDING

HIGHLIGHTS - Q2 2017

2

“CASH FLOW EXECUTION & COST SIDE ADDRESSED”

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SLIDE 3

SERVICE REVENUE DEVELOPMENT

Organic growth, external service revenues Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Continuing operations
  • 0.6%
  • 3.3%
Q2 16 Q3 16 Q4 16 Q1 17 Q2 17

SOFT GROUP DUE TO SWEDEN

EBITDA DEVELOPMENT

Organic growth, excluding adjustment items
  • Service revenue growth in 5 of 7 markets
  • Pressure on fiber installation revenues in Sweden

(-1.0 p.p. on growth)

  • Less focus on low margin revenues in Telia Carrier
  • Double digit growth in Norway
  • Finland back to growth
  • Negative development in Sweden
3 Continuing operations
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SLIDE 4 2016 2017 2018 2019

EXECUTING ON STRATEGY - COMPETITIVE OPERATIONS

Structural initiatives coupled with short-term cost initiatives across the group with emphasis on Sweden

4 ITS* COMPLEMENTED BY STRUCTURAL AND SHORT TERM INITIATIVES LAUNCHED IN H1 STRUCTURAL INITIATIVES TO REACH FURTHER POTENTIAL EBITDA SUPPORTED BY ITS* LAUNCHED IN 2014 REAP THE FULL BENEFIT OF STRUCTURAL CHANGES AND TRANSFORMATION * Invest to save program
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SLIDE 5

SWEDEN COST TAKE-OUT H2 2017

5

SWEDEN OPEX* DEVELOPMENT

Reported currency, actuals and estimate for H2 2017 * Adjusted external OPEX, excluding pension one-off item reported in Q4 2016 3,987 4,305 4,058 H1 2016 H1 2017 H2 2016 H2 2017e +8%
  • 5%
  • OPEX to be reduced by ~5 percent in H2 2017
  • Main drivers
  • Resource reductions (~650 resources or

~8 percent of total resources)

  • Service operation optimization
  • IT & Network
  • General external spending
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SLIDE 6

AT LEAST 3 PERCENT COST REDUCTION IN 2018

  • At least 3 percent reduction to targeted cost

base of around SEK 38 billion

  • To reduce ~850 resources in H2 2017 – 3

percent of total resources

  • Further resource reductions in 2018
  • Increased efficiency through
  • Further centralization
  • Process/product simplification
  • Resource costs
6

CUSTOMER OPERATIONS IT & NETWORKS SG&A

38

Targeted cost base* (SEK in billions)

At least

  • 3%
* Full year cost base excluding equipment related COGS
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SLIDE 7

COST REDUCTION SUMMARY

GROUP TARGETED COST BASE 2017-2018

  • Around 850 resources to be taken out H2 2017
  • Structural cost reductions to lower costs by at

least 3 percent in 2018

EBITDA

  • 2017 outlook reiterated
  • New structural initiatives to drive further cost

reductions 2018-2019

OPERATIONAL FREE CASH FLOW

  • Improved 2017 outlook
  • Cost and other initiatives to support operational

free cash flow growth 2018-2019

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REDUCTION AND DRIVERS IMPACT SWEDEN OPEX 2017

  • To decline by ~5 percent H2 2017 vs. H2 2016
  • Around 650 resources to be taken out H2 2017
  • Equal to ~8% of total resources
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SLIDE 8

FIBER ROLL-OUT PACE DROP ERODED SWEDEN EBITDA

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FIBER REVENUES

Reported currency, SEK in millions, B2C
  • At 1.6 million homes passed, Telia remains the largest player
  • Positive recurring fiber revenue trend
  • Fiber installation revenues negatively impacted Q2 by permit

and other intermediary related issues

  • Total installation revenues 2017 likely to be 15-20 percent

lower than in 2016, consequently lower CAPEX

  • Fiber prices adjusted
138 357 273 473 134 193 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Fiber installation revenues Recurring fiber revenues +25% = Q2 2017 y-o-y growth
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SLIDE 9

PERFORMANCE IN NORWAY REMAINS STRONG

1,807 2,186 705 879 Q2 16 Q2 17 Q2 16 Q2 17

SERVICE REVENUES* & EBITDA**

SEK million, reported currency & organic growth +12.9% +3.1% Service revenues EBITDA
  • Organic revenue and EBITDA growth driven mainly

by strong wholesale development

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REWARDS, ACHIEVEMENTS AND M&A

* External service revenues ** Excluding adjustment items = Organic growth

98%

SYNERGY RUN-RATE TARGET OF NOK 0.4 BILLION BY YEAR-END 2017 REMAINS BEST MOBILE NETWORK FOR THE SECOND YEAR IN A ROW 98 PERCENT POPULATION COVERAGE, >2 YEARS BEFORE THE REGULATORY REQUIREMENT 900 MHZ SPECTRUM ACQUIRED TO SECURE QUALITY AND SUPPORT 5G IN THE FUTURE
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SLIDE 10

NEBULA ACQUIRED AND EBITDA TREND BROKEN

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NEBULA - FINANCIAL TRACK RECORD

In local currency, reported figures 0% 10% 20% 30% 40% 50% 10 20 30 40 2013 2014 2015 2016 EUR in millions Net sales EBITDA EBITDA margin
  • Solid financial development
  • Synergies expected over time mainly from cross

selling

2,739 2,913 987 1,038 Q2 16 Q2 17 Q2 16 Q2 17 Service revenues EBITDA

SERVICE REVENUES* & EBITDA**

SEK million, reported currency & organic growth +0.8% +1.8%
  • Mobile revenues continue to develop positively

and offset pressure on fixed revenues

  • Cost measures taken are starting to be visible in

EBITDA and will provide support going forward

= Organic growth * External service revenues ** Excluding adjustment items
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SLIDE 11

Q2

CHRISTIAN LUIGA, EXECUTIVE VICE PRESIDENT & CFO

INTERIM REPORT JANUARY – JUNE 2017

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SLIDE 12 8,028 7,826 3,509 3,268 Q2 16 Q2 17 Q2 16 Q2 17

LOWER FIBER REVENUES AND HIGHER COSTS IN SWEDEN

  • Continued pressure on legacy revenues, lower

fiber installation and wholesale revenues

  • Negative sales mix and elevated costs burdened

EBITDA

12 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 0.0%
  • 2.6%
  • 4.1%

B2B B2C

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

SERVICE REVENUES* BY SEGMENT

Organic growth
  • Fiber installation revenues down by 46 percent y-o-y
  • Flat B2C if excluding the impact from fiber
  • Stabilization in B2B continues

SERVICE REVENUES* & EBITDA**

SEK million, reported currency & organic growth * External service revenues ** Excluding adjustment items = Organic growth
  • 7.0%
  • 2.7%
Service revenues EBITDA
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SLIDE 13 205 216 281 292 159 153 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Estonia Lithuania Denmark Q2 16 Q2 17 Lithuania Q2 16 Q2 17 Denmark
  • 0.2%
Q2 16 Q2 17 Estonia

ESTONIA STABLE BUT DENMARK NEGATIVE

+1.0%
  • 7.7%
  • 1.5%
+13.5% +0.4%

SERVICE REVENUES

Organic growth, external service revenues

EBITDA*

SEK million, reported currency & organic growth = Organic growth * Excluding adjustment items
  • Mobile revenue growth of 5.6 percent but pressure
  • n fixed revenues in Estonia
  • Strong development in Lithuania due to growth in low

margin transit-service revenues (~12 p.p. impact)

  • Flat mobile development and pressure on fixed

revenues in Denmark

  • Stable development in Estonia
  • Lithuania held back by higher marketing and

resource costs

  • Pressure on EBITDA in Denmark from lower service

revenues

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SLIDE 14

CONTINUED RECOVERY IN EURASIA

  • Commercial and operational initiatives

launched 2016 are paying off

  • Revenue and EBITDA continue to grow

in the majority of markets

  • EBITDA growth of 14 percent if excluding

provision in Uzbekistan

* External service revenues **Excluding adjustment items

TRENDS IN EURASIA

Organic growth, excluding Nepal

TRENDS IN KAZAKHSTAN

Organic growth
  • Continued financial recovery
  • Capitalizing on performed price and

portfolio adjustments

  • Progress on strategic cost reduction

projects

  • 1%
  • 6%
Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Service revenues* EBITDA** 14 11% 6% Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Service revenues* EBITDA**
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SLIDE 15

CAPEX STARTS TO DECREASE 2017 DESPITE M&A

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LOWER CASH CAPEX 2017

Illustrative
  • CAPEX of SEK 1.1 billion for

Liiga rights booked Q2 2017

  • Impact on cash CAPEX starting

H2 2018

  • H1 2017 CAPEX down by SEK 0.6

billion equal to 9 percent

  • 2017 also includes cash CAPEX in

Phonero and Nebula

LIIGA CASH IMPACT

Illustrative 2017e 2016 Non-fiber CAPEX Fiber CAPEX Phonero & Nebula 2016 2017e 2018e CAPEX (incl. fiber) Liiga Cash CAPEX Booked CAPEX

LIIGA BOOKED CAPEX

Illustrative Cash CAPEX 2016 2017e 2018e CAPEX (incl. fiber) Liiga
  • Even including Liiga, cash

CAPEX will decline further 2018, mainly related to a lower fiber roll-out pace

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SLIDE 16

IMPROVED CASH FLOW Q2 DUE TO TURKCELL DIVIDEND

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OPERATIONAL FREE CASH FLOW TREND

Continuing operations, rolling twelve months (R12)

FREE CASH FLOW BRIDGE- Q2

Continuing operations, SEK in billions 2 4 6 8 10 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 SEK in billions Operational free cash flow, R12 7.8 2.5 1.8 Q2 16 Associate dividends +0.8 EBITDA
  • 0.3
Q2 17 Other +0.2 TURKCELL DIVIDEND

Dividends from MegaFon and Turkcell to be SEK 2.8 billion in 2017 given current exchange rates

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SLIDE 17

LEVERAGE HEADROOM DESPITE LEGAL SETTLEMENT

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CURRENT AND ILLUSTRATIVE PRO FORMA LEVERAGE*

Leverage, illustrative purpose only LEVERAGE TARGET 2.0X +/- 0.5X * Actual leverage Q2, expected dividend from associates to be received H2 2017, the 2nd dividend tranche to be paid and the Uzbek legal settlement provision per June 2017 1.4x Actual Q2 2017 Uzbek legal settlement provision 1.8x Associate dividends to be received Q3 & Q4

+ +

1.5x 1.3x Second dividend tranche

+

Nebula acquisition 1.4x

+

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SLIDE 18

NEGATIVE TOTAL EPS

TOTAL EPS DEVELOPMENT

SEK, continuing and discontinued operations * Excluding income from associates and adjustment items
  • 0.09
  • 0.04
0.33 Operating income*
  • 0.10
Q2 16 Capital losses/gains
  • 0.14
Income from associates
  • 0.08
Adjustment items
  • 0.10
Discontinued
  • perations
Financial net & tax +0.04
  • 0.42
Q2 17 CONTINUING OPERATIONS 18 Mainly IT & network write-down Capital loss from the sale
  • f shares in Turkcell and
capital gain from Sergel divestment
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SLIDE 19

OUTLOOK FOR 2017 IMPROVED

* Free cash flow from continuing operations, excluding licenses and dividends from associated companies ** Excluding adjustment items, in local currencies, excluding acquisitions and disposals *** Post tax and given current exchange rates

Above SEK 7.5 billion (previously above SEK 7 billion)

Operational FCF together with dividends from associates of around SEK 2.8 billion*** to be above SEK 10 billion and should cover a dividend around the 2016 level

OPERATIONAL FCF*

Around the 2016 level (unchanged)

EBITDA**

19
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SLIDE 20

Q&A

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SLIDE 21

LOWER NET DEBT REDUCED LEVERAGE TO 1.36x

1.58x = Leverage ratio 21

NET DEBT DEVELOPMENT*

Continuing and discontinued operations, SEK in billions +3.0 +4.3 FX & Other Hybrid capital
  • 7.6
Dividend paid M&A
  • 4.0
Operational cash flow
  • 2.8
Q1 17 47.9 40.8 Q2 17 1.36x
  • Lower net debt mainly due to lower cash CAPEX,

hybrid capital issuance and M&A activities

  • Sale of shares in Turkcell (SEK 4.4 billion)
  • Disposal of Sergel (SEK 1.9 billion)
  • Phonero acquisition (SEK 2.3 billion)
  • Net debt impacted by stronger EUR and NOK
* Not including the Nebula acquisition closed July 3
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SLIDE 22

ASSOCIATE DIVIDENDS

22
  • SEK 2.1 billion* dividend in 2017 for

Telia Company at current exchange rates

  • TRY 3.0 billion in total dividend
  • To be paid in 3 tranches 2017
  • Ownership reduced in Q2 from 38  31 percent

which generated SEK 4.4 billion in proceeds

  • SEK 0.7 billion* dividend in 2017 for

Telia Company at current exchange rates

  • RUB 20 billion in total dividend
  • To be paid in Q3 2017
* Post tax
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SLIDE 23

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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