Q4 YEAR-END REPORT JANUARY DECEMBER 2017 JOHAN DENNELIND - - PDF document

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Q4 YEAR-END REPORT JANUARY DECEMBER 2017 JOHAN DENNELIND - - PDF document

May 20, 2023 366 likes •539 views

Q4 YEAR-END REPORT JANUARY DECEMBER 2017 JOHAN DENNELIND PRESIDENT & CEO STRONG Q4 PUTS 2017 CASH FLOW WELL ABOVE EXPECTATIONS We said: EBITDA around 2016 We said: EBITDA around 2016 We said: cash flow above SEK We said:

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SLIDE 1

1

Q4

JOHAN DENNELIND PRESIDENT & CEO

YEAR-END REPORT JANUARY – DECEMBER 2017

STRONG Q4 PUTS 2017 CASH FLOW WELL ABOVE EXPECTATIONS

2 We said: “cash flow above SEK 7.5 billion” We said: “cash flow above SEK 7.5 billion” We said: “Sweden OPEX down H2 2017 by 5 percent vs 2016” We said: “Sweden OPEX down H2 2017 by 5 percent vs 2016” We said: ”Cash flow should cover a dividend around SEK 2” We said: ”Cash flow should cover a dividend around SEK 2” We said: “EBITDA around 2016 level” We said: “EBITDA around 2016 level”

6% 9.7bn 9.7bn

WE DID WE DID WE DID WE PROPOSE

2.30

(+15%)

FLAT FLAT +3.8%

Q4

+0.8bn

Q4

(+3.8% Q4) (+0.8bn Q4)

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SLIDE 2

2

SERVICE REVENUE DEVELOPMENT

Organic growth, external service revenues Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Service revenues Service revenues excl. fiber installation revenues
  • 2.3%
  • 2.3%
  • 1.0%
  • 1.0%
3.8% Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 EBITDA EBITDA excl. fiber installation revenues*

GOOD UNDERLYING EBITDA DEVELOPMENT

EBITDA DEVELOPMENT

Organic growth, excluding adjustment items
  • Service revenue growth in 5 of 7 markets
  • Lower fiber installation and Telia Carrier revenues

impacted growth negatively by almost 2 p.p.

  • EBITDA growth in 5 of 7 markets
  • Strong performance in Finland and the Baltics
  • Growth excluding fiber was around 7 percent
3 7% 7% * On average ~70% EBITDA margin on fiber installation revenues in Sweden

COST MANAGEMENT SUPPORTS EBITDA IN SWEDEN

SWEDEN OPEX DEVELOPMENT*

Reported currency, SEK billion & adjusted OPEX 4 8.1 8.1 8.3 8.5 8.3 8.2
  • 10%
  • 5%
0% 5% 10% 6 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 OPEX R12 OPEX y-o-y growth 0%
  • The ambition announced Q2 2017 to take down

OPEX by 5 percent H2 y-o-y* was more than realized

* Adjusted external OPEX, excluding a one-off item in Q4 2016 related to pensions
  • 6%

SWEDEN UNDERLYING EBITDA**

Reported currency, adjusted EBITDA
  • 4%
3% Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 EBITDA growth EBITDA growth excl. fiber installation revenues and pension one-off
  • Positive underlying EBITDA adjusted for fiber

installation revenues and pension one-off Q4 2016

** Adjusted EBITDA excluding fiber installation revenues and for a positive
  • ne-off item in Q4 2016 related to pensions
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SLIDE 3

3

CONVERGENCE IN SWEDEN VIA CUSTOMER EXPERIENCE

5

DEMAND FOR SIMPLIFICATION…

TELIA LIFE

53 million

  • Leading the way on convergence in Sweden through

customer experience

  • Large untapped potential ahead as we refine the

portfolio step by step

  • Simplification & customer experience to drive
MOBILE BROADBAND MOBILE BROADBAND PERSONAL TECHNICIAN PERSONAL TECHNICIAN C MORE STANDARD C MORE STANDARD CHROMECAST CHROMECAST MOBILE 4G ROUTER MOBILE 4G ROUTER LARGE LARGE >20GB

...IN OUR CUSTOMERS’ DIGITAL LIFE

POSITIVE ON REVENUES & STRONG EBITDA GROWTH

MOBILE DEVELOPMENT

Organic growth, ARPU growth in local currency
  • Continued solid mobile service revenue trend
  • ARPU uplift in both B2B and B2C due to price

increases and portfolio management

2,934 3,087 1,000 1,137 Q4 16 Q4 17 Q4 16 Q4 17 Service revenues EBITDA

SERVICE REVENUES* & EBITDA**

SEK million, reported currency & organic growth +10.1% +10.1% +1.5% +1.5%
  • Solid development on mobile
  • Double-digit EBITDA growth on the back of

revenue growth and solid cost control

= Organic growth * External service revenues ** Excluding adjustment items 6 4.5% 6.3% Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Total mobile service revenues Mobile ARPU
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SLIDE 4

4

GEARING UP IN B2B & B2C CONVERGENCE IN FINLAND

DATA CENTER BUILD M&A TO EXPAND PORTFOLIO

  • Largest open data center to support

customers’ digital agenda

  • First customer contracts signed
  • B2B convergence capabilities

strengthened via M&A

  • Around SEK 0.7 billion revenues

annually in the acquired businesses

ICE HOCKEY RIGHTS FOR B2C

  • Exclusive content to build superior

B2C proposition

  • Liiga starts autumn 2018
7

RECENT DIVESTMENTS

NEW FOOTPRINT TAKING SHAPE

8

…AND STRENGTHENING THE NORDIC/BALTIC FOOTPRINT CONTINUING TO BUILD…

FULL STAKE DIVESTED FULL STAKE DIVESTED

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SLIDE 5

5

0% 20% 40% 60% 80% 100% Other LED* Norway Finland Sweden

TARGET TO TAKE DOWN COSTS BY SEK 1.1 BILLION 2018

9

2018 COST TARGET OVERVIEW

Targeted saving by market
  • Net savings of SEK 1.1 billion targeted in 2018 vs. 2017-

initiative launched mid 2017

  • Limited net effect in Finland as gross savings are offset by M&A
  • Other mainly related to group functions
  • Key programme streams
  • Vendor consolidation & near-shoring
  • Transfer of customers online (sales & support)
  • Use of robotics
  • Optimized SAC spend
* Lithuania, Estonia, Denmark

1.1bn

DIVIDEND PROPOSAL FOR 2017

10

+15%

vs 2016

2.30 2.00 3.00 3.00 3.00 2.85 2.85 2016 2017 2015 2014 2013 2012 2011

SEK 2.30

Equal to

9.96bn

in pay-out

Excluding Eurasia cash flow
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SLIDE 6

6

TAILWIND FROM COST PROGRAMS & SYNERGIES (M&A 2017) TAILWIND FROM COST PROGRAMS & SYNERGIES (M&A 2017) MAINTAINED HIGH CASH FLOW 2018 MAINTAINED HIGH CASH FLOW 2018

SO WE ARE LOOKING FORWARD...

LEGACY REVENUE HEADWIND LEGACY REVENUE HEADWIND NWC & CAPEX SUPPORTING CASH FLOW NWC & CAPEX SUPPORTING CASH FLOW FURTHER CASH FLOW GROWTH 2019/20 FROM CORE METRICS FURTHER CASH FLOW GROWTH 2019/20 FROM CORE METRICS

11

1 2 3

THE 2018 FUNDAMENTALS… THE 2018 FUNDAMENTALS… …LEADS TO …LEADS TO

OUTLOOK FOR 2018

* 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

Around SEK 9.7 billion

Operational FCF together with dividends from associated companies should cover a dividend around the 2017 level (a SEK 2.30 dividend/share equals SEK 9.96 billion)

OPERATIONAL FCF*

In line or slightly above the 2017 level of SEK 25.4 billion

EBITDA**

12
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SLIDE 7

7

CHRISTIAN LUIGA EXECUTIVE VICE PRESIDENT & CFO

YEAR-END REPORT JANUARY – DECEMBER 2017 Q4

EBITDA GROWTH DESPITE SERVICE REVENUE DECLINE

  • Lower legacy and fiber installation revenues in Sweden
  • Solid mobile supported revenues in Finland
  • Positive development across the Baltics

SERVICE REVENUE DEVELOPMENT Q4

Organic growth, y-o-y, external service revenues

EBITDA DEVELOPMENT Q4

Organic growth, y-o-y, excluding adjustment items
  • Overall solid execution on costs more than

compensated for revenue pressure

14
  • 2.3%
  • 2.3%

+3.8% +3.8%

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SLIDE 8

8

STABLE UNDERLYING B2C BUT PRESSURE ON FIBER AND B2B

  • Flat B2C development excluding fiber installation

revenues

  • Fiber installation revenues down SEK 224 million
  • Challenging B2B comparison
Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17
  • 0.3%
  • 0.3%
  • 4.1%
  • 4.1%
  • 5.6%
  • 5.6%

B2B B2C

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

B2C MOBILE TRENDS

Organic growth, external revenues
  • B2C mobile continues to develop positively
  • ARPU uplift from positive subscription base mix

development

SERVICE REVENUES BY SEGMENT

Organic growth, external revenues 15 3% 5% Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 B2C mobile service revenue growth B2C mobile ARPU 39%
  • 47%
Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Fiber installation revenues

FIBER ROLL-OUT IN SWEDEN CONTINUES TO BE A DRAG

FIBER INSTALLATION REVENUE TREND

Reported currency, y-o-y growth 16

FIBER CAPEX TREND

Reported currency, SEK million
  • More rural locations and phasing effects in Q4
250 500 750 1,000 1,250 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17
  • Slow fiber roll-out pace also in Q4
  • Permits still an issue and execution has become

more challenging

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SLIDE 9

9

STABLE UNDERLYING PERFORMANCE IN NORWAY

Q4 16 Q4 17 Q4 16 Q4 17

SERVICE REVENUES* & EBITDA**

SEK million, reported currency & organic growth
  • 4.3%
  • 4.3%
+0.1% +0.1% Service revenues EBITDA
  • Flat revenue growth supported by increase in

Wholesale

  • Limited Phonero synergies in the quarter
  • Almost 40,000 B2C subscriptions acquired

ORGANIC EBITDA** DEVELOPMENT

SEK million, organic EBITDA and margin * External service revenues ** Excluding adjustment items = Organic growth
  • Absolute organic EBITDA continues to be fairly

stable

  • Q4 impacted by seasonality and a few special

cost items

0% 10% 20% 30% 40% 50% 250 500 750 1,000 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Special items Q4 2017 Organic EBITDA Organic EBITDA margin 17 2,036 2,149 865 851 Phonero

STRATEGY EXECUTION AND EBITDA GROWTH

  • Telia One launched in

Lithuania & Estonia

  • Increase loyalty
  • Drive cross-sell
  • Improved experience
  • ”My Telia” in Denmark

improved

  • Simplifies subscription

management online

  • Less need for support
  • Improved experience
3.2% 5.7% 5.6% 5.8%
  • 0.3% -2.0%
Lithuania FY 2017 Denmark FY 2017 Estonia FY2017

FINANCIAL DEVELOPMENT 2017

Organic growth, y-o-y
  • Increased efficiency across including continued

synergy realization in Estonia and Lithuania

  • Estonia and Lithuania also supported by strong

revenue development

DELIVERING ON THE STRATEGY IN LED

Service revenues* EBITDA** 18 * External service revenues ** EBITDA excluding adjustment items
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SLIDE 10

10

EURASIA STILL IN GROWTH TERRITORY

  • Revenues continue to grow from positive

development in 4 of 5 markets

  • EBITDA growth in Eurasia despite devaluation

in Uzbekistan

  • Impairment in Eurasia made to reflect updated view
  • n value
* External service revenues **Excluding adjustment items

FINANCIAL TRENDS IN EURASIA

Organic growth 10% 5% Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Service revenues* EBITDA** 19

FINANCIAL TRENDS IN KAZAKHSTAN

Organic growth 0% 11% Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Service revenues* EBITDA**
  • Continued flat revenue development and EBITDA

recovery in Kazakhstan

CAPITAL ALLOCATION REDUCED NET DEBT IN Q4

1.43x 1.43x = Leverage ratio

NET DEBT DEVELOPMENT

Continuing and discontinued operations, SEK billion +1.6 +0.3 +4.3 +4.9 MegaFon proceeds
  • 11.8
2nd dividend 35.4 Remaining part of global settlement Q4 17 33.8 FX & Other 42.6 Q4 17 pro forma Cash CAPEX Operations
  • 6.5
Q3 17 1.14x 1.14x
  • Net debt down by SEK 8.8 billion in the quarter

mainly driven by the divestment of MegaFon

  • The second dividend tranche of SEK 4.3 billion

paid in Q4

  • Turkcell dividend of SEK 0.5 billion received in Q4
  • Around SEK 1.6 billion relates to the Uzbek global

settlement to be paid in due time (amount subject to changes in FX)

20 1.20x 1.20x
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SLIDE 11

11

CAPEX DOWNWARD TREND TO CONTINUE IN 2018

21

CASH CAPEX TREND - ILLUSTRATIVE 2018

Reported currency, SEK billion, excluding licenses 11.6 10.8 3.4 3.1 4 8 12 16 2016 2017 2018 illustrative Non fiber cash CAPEX Fiber cash CAPEX
  • Cash CAPEX expected to decline 2018 driven

mainly by lower fiber in Sweden

  • Finnish ice hockey rights acquired 2017 to be paid
  • ver 6 years starting 2018
15.0 15.0 13.9 13.9 Lower fiber CAPEX to be main driver Lower fiber CAPEX to be main driver 10,000 11,000 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 SEK million CAPEX excluding licenses (R12) CAPEX excl. licenses & fiber (R12)
  • Flat CAPEX development in Q4 but the ambition

to take down CAPEX further in 2018 remains

CAPEX EXCLUDING LICENSES*

Reported currency, SEK million, R12 * Excluding hockey rights in Finland acquired Q2 2017 2 4 6 8 10 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Operational free cash flow (R12)

STRONG CASH FLOW TREND

OPERATIONAL FREE CASH FLOW TREND

Continuing operations, SEK billion

OPERATIONAL FREE CASH FLOW

Continuing operations, SEK billion 9.7 9.7 5.5 2017 Other +0.5 Cash CAPEX +1.0 NWC +1.2 2016 Tax +1.4 22
  • Tax impacted by SEK 0.7 billion refund
  • Lower cash CAPEX and improved Net Working

Capital levels

  • Continued strong cash flow generation from better

performance for the majority of cash flow components

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SLIDE 12

12

AMBITION TO MAINTAIN 2017 CASH FLOW LEVEL IN 2018

23

OPERATIONAL FREE CASH FLOW AMBITION 2018

SEK billion

EBITDA + NWC + CAPEX* EBITDA + NWC + CAPEX* 11.2 11.2 13.0 13.0

2016 * Excluding licenses 2017 2018

FINANCE + TAX + OTHER FINANCE + TAX + OTHER

  • 5.7
  • 5.7
  • 3.3
  • 3.3
2016 2017 2018

OPERATIONAL FREE CASH FLOW* OPERATIONAL FREE CASH FLOW* 5.5 5.5 9.7 9.7

2016 2017 2018

+ =

OUTLOOK FOR 2018

* 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

Around SEK 9.7 billion

Operational FCF together with dividends from associated companies should cover a dividend around the 2017 level (a SEK 2.30 dividend/share equals SEK 9.96 billion)

OPERATIONAL FCF*

In line or slightly above the 2017 level of SEK 25.4 billion

EBITDA**

24
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SLIDE 13

13

Q&A

CAPITAL MANAGEMENT TARGETS

At least 80 percent of free cash flow from continuing operations and excluding licenses At least 80 percent of free cash flow from continuing operations and excluding licenses

DIVIDEND POLICY

U N C H A N G E D 26

Net debt/EBITDA of 2x plus/minus 0.5x Net debt/EBITDA of 2x plus/minus 0.5x Solid investment grade long-term credit rating (A- to BBB+) Solid investment grade long-term credit rating (A- to BBB+)

CREDIT RATING

U N C H A N G E D

LEVERAGE

U N C H A N G E D
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SLIDE 14

14

FREE CASH FLOW DEFINITIONS 2018 (UNCHANGED)

OUTLOOK DEFINITION OUTLOOK DEFINITION DIVIDEND POLICY DEFINITION DIVIDEND POLICY DEFINITION

FREE CASH FLOW 2017

9.7 12.4 0.6 11.8
  • 2.7
Operational free cash flow Free cash flow continuing
  • perations
Free cash flow
  • excl. licenses
Dividends from associates (net of tax) Licenses

SEK BILLION

2016 2017 FREE CASH FLOW FROM CONTINUING OPERATIONS 7.2 11.8 FREE CASH FLOW EXCLUDING LICENSES Free cash flow from continuing operations excluding licenses 7.5 12.4 OPERATIONAL FREE CASH FLOW Free cash flow from continuing operations excluding licenses and dividends from associates (net of tax) 5.5 9.7 27

EPS DOWN FROM M&A AND IMPAIRMENTS IN EURASIA

TOTAL EPS DEVELOPMENT

SEK, continuing and discontinued operations * Excluding income from associates and adjustment items 0.35 0.17 0.12 0.03 1.69
  • 1.52
Q4 17 Eurasia
  • ther
  • 0.03
Impairments Q4 16
  • 0.75
Other
  • 0.02
Tax Finance net
  • 0.13
MegaFon capital gain Adjustment items
  • 1.09
Operating income* CONTINUING OPERATIONS Capital gain from Yoigo divestment in Q4’16 Capital gain from Yoigo divestment in Q4’16 DISCONTINUED OPERATIONS 28 In addition to a capital gain of SEK 2.8 billion the MegaFon disposal also impacted finance net In addition to a capital gain of SEK 2.8 billion the MegaFon disposal also impacted finance net Mainly impairment of the
  • perations in Azerbaijan
Mainly impairment of the
  • perations in Azerbaijan
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SLIDE 15

15

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.
29