interim report - telia company - telia company€¦ · comp non-rec items fx net fin taxes min int...

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Interim ReportJanuary-March, 2013

Per-Arne Blomquist

President and CEO

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Highlights first quarter 2013

2

• Improved margin and cash flow

– Maintained margin within Mobility Services

– Double-digit growth & high profitability in Eurasia

– Continued transition in Broadband Services

• New initiative launched to monetize on mobile data growth

• Focus on efficiency measures

• Continued progress within sustainability

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Positive EBITDA margin development

3

* Excl. non-recurring items

EBITDA margin*, 4 quarters rollingEBITDA margin*, 4 quarters rolling

25%

28%

30%

33%

35%

38%

40%

Q110

Q210

Q310

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

Q113

34.5%34.5%

EBITDA margin*

34.7%

EBITDA margin*

25%

28%

30%

33%

35%

38%

40%

Q110

Q210

Q310

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

Q113

34.7%34.7%34.5%

Billed revenues*, change y/y (%)Billed revenues*, change y/y (%)

Focus on billed revenues in Mobility

4

-6%

-4%

-2%

0%

2%

4%

6%

Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13

Mobility Services, excl. Spain

Q1 2013Volume

y/y**Revenue

y/y**

Voice 0% -13%

Messaging -10% -7%

Mobile data +80% +21%

Billed revenues -2.9%

* Stable FX rates ** Excluding Spain

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Changing our model to monetize on data growth

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Get unlimited voice and text

messagesShare data

within certainbuckets

Connect up to 7 mobile devices

on One bill

Possibility to top-up

data

Data revenues increasing in Eurasia

• Higher data revenue accounts for one third of net sales growth

• Smartphone penetration has doubled in one year, but is still on low levels

• Data pricing is based on our experiences from the Nordics

6

Data revenues and share of net sales

0

100

200

300

400

500

600

700

800

Q1 12 Q2 12 Q3 12 Q4 12 Q1 13

Data revenues

Data revenues to net sales

11.3%11.3%

8.2%8.2%

SEK million

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Transition in Broadband Services

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MMO

1,332

643

• Fast migration from traditional business to IP-based solutions

– Continued pressure on traditional fixed revenues highlights the need to cut costs

– The customer base grew for all IP-based services in the quarter

• Fiber roll-out key for success

– Further extension of our footprint necessary

• Focus on developing our TV offer

– TeliaSonera has now approached 600,000 subscriptions in Sweden

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Narrowing balance between sales and OPEX

* In local currencies and excluding acquisitions and divestments

Net sales and addressable cost base*

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

2007 2008 2009 2010 2011 2012 Q1 13

Net sales Addressable cost base

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Focus on implementing efficiency measures

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• We aim to reduce our cost base by

SEK 2 billion* net during the coming

two years, as announced in late 2012

• Accumulated savings SEK 0.3 billion,

of which SEK 0.1 billion was recorded

in Q1 2013

• In 2013 1,800 employees in the Nordics

and Baltics will be affected**

* Excluding Mobility Spain ** To be completed by early 2014 at the latest

Further progress within sustainability

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• Focus on privacy, freedom of expression and anti-corruption

• Guiding principles on telecommunication, freedom of expression and privacy signed

• Collaboration with the Global Network Initiative

• Extensive sustainability training initiated and new anti-corruption policy adopted

• TeliaSonera signed the United Nation’s Global Compact

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Summary

• Improved margin and cash flow

• Stable margin in Mobility, strong performance in Eurasia, challenges in Broadband

• New initiative launched to monetize on mobile data growth

• Focus on efficiency measures

• Continued progress within sustainability

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Interim ReportJanuary-March, 2013

Christian Luiga

CFO

12

7

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Improved margin and stronger cash flow

• Net sales SEK 24,542 million (25,693)

– Decrease of 0.9% in local currencies

• EBITDA* SEK 8,509 million (8,852)

– Decrease of 0.5% in local currencies

• EBITDA margin* 34.7% (34.5)

• Earnings per share SEK 0.95 (0.95)

• Free cash flow SEK 2,414 million (2,193)

* Excluding non-recurring items

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Net sales and EBITDA*growthy-o-y

Currency headwind in the quarter

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• All of our major currencies have lost 3-8% vs. SEK compared to a year ago

• Negative impact on Net sales SEK 0.8 billion y-o-y

• Negative impact on EBITDA* SEK 0.3 billion y-o-y

-5%

-4%

-3%

-2%

-1%

0%Net sales EBITDA*

Organic M&A FX


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Slightly slower growth on a sequential basis

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*In local currencies and excl. acquisitions and divestments

Net sales split and Net sales growth* y-o-y

Q4 2011 Q4 2012 Q1 2012 Q1 2013

Mobility Broadband Eurasia

+16.3%+16.3%

+1.3%+1.3%

-2.7%-2.7%

+13.6%+13.6%

-2.7%-2.7%

+1.8%-0.9%

-5.9%-5.9%

Mobility Services impacted by lower interconnect

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Net sales, Mobility Services

Q1 2012 Billedrevenues

Inter-connect

Equipment Other FX Q1 2013

11.9

12.5

SEK billion

-0.3-0.5

-0.10.0

+0.3

• Net sales in Mobility Services declined by 2.7% y-o-y in local currencies

• Reduced interconnect revenues affected sales by around 4% y-o-y

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Mobile data supports growth in Eurasia

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* In local currencies and excl. acquisitions and divestments

Net sales growth* - Eurasia

75.3%

29.3%

7.3%

6.6%

4.0%

1.6%

-0.7%

Ucell

Ncell

Moldcell

Tcell

Kcell

Geocell

Azercell

• Overall revenue growth 13.6%

• Data revenue increased 56%, accounting for one third of total net sales growth

• Positive trend in all units, except Azercell due to lower interconnect

Pressure on revenues in Broadband Services

• International Carrier affected by reduced volumes of low margin voice and interconnect

• Fiber roll-out impacted by adverse cold weather

• Weaker traffic volumes in traditional fixed

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*Net sales growth in local currencies and excl. acquisitions and divestments

Broadband Services – net sales growth* y-o-y

-5.9%-5.9%

-0.3%-0.3%

-2.7%-2.7%

-1.0%-1.0%

-2.8%-2.8%

Q1 12 Q2 12 Q3 12 Q4 12 Q1 13

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Slightly higher gross margin

Gross margin*Gross margin*

58

59

60

61

62

63

64

65

66

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

Q113

Gross margin, quarter

Gross margin, 4 quarter rolling

%

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• Lower interconnect

• Reduced low margin equipment sales

• Higher contribution from Eurasia


• Mix shift from classic to IP based revenues and International Carrier

• Net sales -5.9% and addressable cost base +1.9%**

Improved EBITDA margin in the quarter

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• Stable EBITDA* margin

• Net sales -2.7% and addressable cost base -7.1%**

• Positive margin development helped by country mix and cost control

• Net sales +13.6% and addressable cost base +8.2%**

Mobility Services

Q1 12 Q1 13

29.2% 29.1%

EBITDA* margin

Broadband Services

Q1 12 Q1 13

31.3% 29.9%

EBITDA* margin

Eurasia

Q1 12 Q1 13

50.8% 53.0%

EBITDA* margin

* Excl. non-recurring items, **In local currencies and excl. acquisitions and divestments

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Lowering the cost base by SEK 2 billion

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• Savings of SEK 0.2 billion recorded in Q4 2012 and additional SEK 0.1 billion in Q1 2013

• In total, 1,800 employees will be affected

• Close to 1,000 employees noticed y-t-d, of which the majority in April

• Restructuring costs of SEK 1.7 billion expected in 2013

* Excluding Mobility Spain and NextGenTel, stable FX

Addressable cost base target*Addressable cost base target*

2012 2013e 2014e

SEK billion

26.0

25.0

26.8

Stable Earnings per share

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EPS, SEK

Q12012

Operat. Asscomp

Non-rec

items

FX Net fin Taxes Min int Q12013

0.950.95

-0.03

+0.02

0.00

-0.05

+0.07

-0.01

0.00

• EPS positively impacted by associated companies and net financials, but negative FX effect

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CAPEX splitCAPEX split

CAPEX-to-sales ratio of 10.4% in Q1 2013

CAPEX-to-sales ratio*CAPEX-to-sales ratio*

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• CAPEX-to-sales excl. license and spectrum fees was 10.4%

• CAPEX amounted to SEK 2.7 billion (3.2) whereof SEK 0.2 billion (0.0) for licenses and spectrum fees

* Excl. license and spectrum fees

35%

29%

31%

5%

Mobility

Broadband

Eurasia

Other

0%

5%

10%

15%

20%

Q1 12 Q1 13 2011 2012 2013e

14%14%

10.4%10.4%

Free Cash Flow improved in Q1

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Free cash flow Q1 2013

2.42.22.2

SEK billionSEK billion

+0.6+0.6 0.00.0

-0.3-0.3-0.3-0.3

-0.2-0.2

Free cash flow Q1 2013

Q1 2012 EBITDA* Interestpaid

Incometaxespaid

Changein

workingcapital

CashCAPEX

Other Q1 2013

2.42.2

SEK billion

+0.6 0.0

-0.3-0.3

-0.2

• Free cash flow improved to SEK 2.4 billion (2.2), due to lower cash CAPEX and lower income taxes paid+0.4

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Net debt and Net debt / EBITDA*Net debt and Net debt / EBITDA*

Net debt to EBITDA within our target range

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* 4 quarters rolling

0.0

0.5

1.0

1.5

2.0

2.5

0

15

30

45

60

75

Q110

Q210

Q310

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

Q113

SEK billion

• Gross debt of SEK 83.6 billion and Net debt of SEK 55.3 billion

• Net debt to EBITDA of 1.54x (1.89x adjusted for dividend paid in early Q2)

• Target range between 1.5-2.0x

1.54

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Outlook for 2013 – Unchanged

Outlook 3M 2013

Net sales* Flat -0.9%

EBITDA margin**Increase slightly

(34.5% 2012)34.7%

CAPEX-to-sales ratio***

Around 14% 11.0%

* In local currencies and excl. acquisitions and divestments ** Excl. non-recurring items *** Excl. license and spectrum fees

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Q&A

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Net debt Net debt

Net debt development

28

Q4 2012 Cash flowfrom

operatingactivities

CashCAPEX

Otherinvestingactivities

Minoritydividends

Other Q1 2013

55.359.4

SEK billion

0.0

-3.0-4.8

+2.4+1.3

• Gross debt decreased to SEK 83.6 billion (91.6)

• Net debt was SEK 55.3 billion (59.4)

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Debt Maturing next 12 months – March 31, 2013

Debt Portfolio Maturity Schedule – 2013 and onwards

Debt maturity scheduleMMO

0

1

2

3

4

5

6

Apr-13

May-13

Jun-13

Jul-13

Aug-13

Sep-13

Oct-13

Nov-13

Dec-13

Jan-14

Feb-14

Mar-14

0

2

4

6

8

10

12

14

16

18

2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043

SEK billion

SEK billion

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Debt per Q1 2013

• Gross debt SEK 83.6 bn

• Net debt SEK 55.3 bn

• Net debt/EBITDA 1.54x

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Group result Q1 2013

SEK million1Q

2013Q1

2012Change

%

Net sales 24,542 25,693 -4.5

COGS 9,082 9,598 -5.4

Gross margin, % 63.0 62.6

OPEX 6,989 7,348 -4.9

EBITDA* 8,509 8,852 -3.9

Margin, % 34.7 34.5

Depreciation, amortization 3,205 3,216 -0.3

Income from associated companies

1,323 1,246 6.2

EBIT* 6,628 6,882 -3.7


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Group result Q1 2013

SEK millionQ1

2013Q1

2012Change

%

EBIT* 6,628 6,882 -3.7

Non-recurring items -139 -114 -21.9

EBIT 6,489 6,768 -4.1

Financial net -839 -1,140 -26.4

Tax -1,151 -1,113 -3.4

Net income 4,499 4,515 -0.4

Owners of the parent 4,108 4,122 -0.3

Non-controlling interest 391 393 -0.5

EPS, SEK 0.95 0.95 -

CAPEX 2,719 3,175 -14.4

Free cash flow 2,414 2,193 10.1


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Organic revenue growth Q1 2013

Revenue growth (%)Q1 2013

Reportedgrowth

of whichcurrency

of whichacquisitions

and disposals

of which organic

Mobility Services -5.1 -2.4 - -2.7

Broadband Services -8.3 -0.8 -1.6 -5.9

Eurasia 5.4 -8.8 0.6 13.6

The Group -4.5 -3.1 -0.5 -0.9

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Statement of cash flows Q1 2013

SEK million Q1 2013 Q1 2012 Diff

EBITDA excluding non-recurring items 8,509 8,852 -343

Dividends received from ass companies 0 0 -

Interest paid (net) -1,350 -1,090 -260

Income taxes paid -561 -931 370

Payment of restructuring provisions -224 -180 -44

Diff between paid/recorded pensions 58 -9 67

Changes in working cap and other items -1,598 -1,384 -214

Cash flow from operating activities 4,834 5,258 -424

Cash CAPEX -2,420 -3,065 645

Free cash flow 2,414 2,193 221

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Financial key ratios

Mar 31, 2013 Dec 31, 2012

Return on equity* 21.5% 20.5%

Return on capital employed* 15.4% 14.9%

Equity/assets ratio 39.1% 38.2%

Net debt/equity ratio 57.3% 61.4%

Net Debt/EBITDA rate* multiple 1.54x 1.64x

Net Debt/assets ratio 22.4% 23.5%

* Rolling 12 months

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Liquidity position TeliaSonera Group

Committed bank lines Maturity Size Amount undrawn

Syndicated revolving credit facility

Dec 2017 EUR 1 billion EUR 1 billion

Bilateral credit facility Jun 2013 SEK 1.4 billion SEK 1.4 billion

Cash and cash equivalents, less blocked funds approx. SEK 23.4 billion

March 31, 2013

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TeliaSonera AB long-term ratings migration history 2002-to-today

TeliaSonera AB credit ratings (A3/A-)

0

1

2

3

4

5

Q1-02 Q4-04 Q4-07 Q4-08 Q4-09 Q4-10 Q4-11 Q4- 12

AAAA-A+AA-

Moody’s (A3/P-2)

• January 8, 2003, lowered long-termdebt rating to A2

• November 1, 2006, outlook changed to Negative

• October 30, 2007, lowered long- and short-term debt rating to A3 and P-2respectively

• May 4, 2012, Outlook changed from Negative to Stable.





Moody’s (A3/P-2)





Standard & Poor’s (A-/A-2)

• February 5, 2003, lowered long-term debt rating to A

• October 28, 2005, lowered long-term debt rating to A- and short-term debt rating to A-2

• July 2012, debt ratings confirmedOutlook: Stable




Standard & Poor’s (A-/A-2)




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Dividend policy

• The company shall target a solid investment grade

long-term credit rating (A- to BBB+) to secure the

company’s strategically important financial flexibility

for investments in future growth, both organically

and by acquisitions

• The ordinary dividend shall be at least 50% of net

income attributable to owners of the parent company

• Excess capital shall be returned to shareholders,

after the Board of Directors has taken into

consideration the company’s cash at hand,

cash flow projections and investment plans

in a medium term perspective, as well as

capital market conditions

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 outside the control of TeliaSonera.

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