Q1
Q2
INTERIM REPORT
JANUARY – JUNE 2016
JOHAN DENNELIND,
PRESIDENT & CEO
SOLID Q2 - STRONG FIRST HALF
Q2 2016
H1 2016
SERVICE REVENUE GROWTH
Reported -1.2%
Organic -0.2%
Reported -0.9%
Organic -0.6%
EBITDA* GROWTH
Reported +4.1%
Organic +5.1%
Reported +7.1%
Organic +7.6%
FREE CASH FLOW
SEK 1.8 billion
SEK 3.9 billion
*Excluding non-recurring items
Continuing operations
2
1
CONTINUED EBITDA GROWTH - REVENUES STABLE
SERVICE REVENUES
EBITDA
Organic growth, external service revenues
Organic growth, excluding non-recurring items
Sweden
Europe
Continuing operations
Sweden
Continuing
operations
Europe
7.4%
5.1%
+0.9%
2.0%
-0.2%
-0.2%
Q2 15
Q3 15
Q4 15
Q1 16
Q2 16
Q2
15
Q2
16
Q2
15
Q2
16
Q2
15
Q2
16
• Region Europe supported by growing mobile
• Lower EBITDA growth in Sweden, mainly due
• Sweden impacted by lower fixed telephony
• EBITDA growth in 6 of 7 markets in region
service revenues in almost all markets
revenues and pressure in B2B large segment
to less favourable y-o-y comparable
Europe supported by mobile service revenue
growth and cost control
3
MIXED REVENUE DEVELOPMENT IN SWEDEN
SERVICE REVENUES BY SEGMENT
Organic growth, external service revenues
TELIA FIBER HOUSEHOLDS
Telia passed, not connected
Communication operator
Telia connected (MDUs + SDUs)
Incl. fiber installation revenues
Excl. fiber installation revenues
1.4 million
B2C
+4.0%
1.2 million
+1.6%
Q2 15
Q2 16
-5.0%
B2B
Q2 15
Q3 15
Q4 15
Q1 16
Q2 16
• B2C segment supported by revenue growth
• 42,000 new connections in Q2 of which
• Still pressure in B2B despite positive
• SDUs passed now exceeds 550,000 of
in broadband, TV and fiber installations
development in SME/SoHo
around 50 percent SDUs
which close to 50 percent are connected
4
2
VALUE LOADING IN SWEDEN
B2C PRODUCT MONETIZATION
TOTAL ARPU DEVELOPMENT
% of total subscription base
Growth y-o-y, B2C and B2B
Mobile
TV
Mobile
Fixed broadband
TV
Large
12 GB or >
Mid
Other
Start &
other
2.5%
1.3%
Q2 15
base
13.3%
Q2 16
base
Q2 15
base
DSL
Q2 16
base
Q2
15
Fiber
60 Mbit
100 Mbit or >
30 Mbit
10 Mbit
10 Mbit
Q2
16
Q2
15
Q2
16
Q2
15
Q2
16
• Positive growth trend in B2C mobile ARPU
offset by pressure in B2B
• Price increases support TV ARPU
• Broadband ARPU increase mainly driven
5
Q2 15
base
Q2 15
base
Q2 16
base
Q2 16
base
by speed migration
HIGHER EARNINGS IN FINLAND
SERVICE REVENUES* & EBITDA**
MOBILE SERVICE REVENUES*
SEK million, reported currency
Organic growth
Mobile billed service revenues
Total mobile service revenues
-0.8%
2,769
2,739
+1.9%
978
0.8%
987
Q2 15
Q2 15
Q2 16
Service revenues
revenues behind revenue decline
• Growth in mobile billed service revenues and
cost control contribute to EBITDA growth
= Organic growth
Q3 15
Q4 15
Q1 16
Q2 16
Q2 15
Q2 16
EBITDA
• Lower interconnect and fixed broadband
6
3.8%
• Price increases and good data monetization
in B2C support mobile billed service
revenues
• Network quality stabilized
* External service revenues **Excluding non-recurring items
3
SOLID PERFORMANCE IN NORWAY
SERVICE REVENUES* & EBITDA**
MOBILE SERVICE REVENUES*
SEK million, reported currency
Organic growth
Mobile billed service revenues
Total mobile service revenues
-0.4%
1,978
1,807
3.8%
+5.0%
731
Q2 15
Q2 16
Service revenues
1.3%
705
Q2 15
Q3 15
Q4 15
Q1 16
Q2 16
Q2 15
Q2 16
EBITDA
• Positive growth in mobile billed service revenues
• Higher mobile billed service revenues
• Improved SARC spend and overall good cost
• Telia awarded best 4G network in Norway’s
was offset by lower interconnect revenues
control behind EBITDA improvement
= Organic growth
7
following successful upsell activities
biggest independent test
* External service revenues **Excluding non-recurring items
EARNINGS GROWTH IN THE BALTICS
SERVICE REVENUES*
EBITDA**
Organic growth
SEK million
+13.9%
+4.6%
+0.5%
+3.6%
281
247
195
134
-3.2%
Q2 15
Q3 15
Estonia
Q4 15
Q1 16
Lithuania
Q2 16
+0.8%
205
Q2 15 Q2 16
Estonia
Q2 15 Q2 16
Lithuania
135
Q2 15 Q2 16
Latvia
Latvia
• Growing demand for mobile data partly
offset by lower roaming revenues
• Service revenue growth and cost control in
Estonia and Lithuania behind improved EBITDA
• Challenging B2B segment in Latvia
* External service revenues
= Organic growth
** Excluding non-recurring items
8
4
NEW GROUP STRUCTURE TAKING SHAPE
EXITING NON-CORE BUSINESSES
• Divested to MÁSMÓVIL
• Divested to Marginalen
• Closing estimated in Q3
• Closing estimated before
year-end 2016
• Divested to Axiata,
transaction closed in Q2
• Q2 impacted by FX and
closing adjustments
FOCUSING ON STRENTHENING
POSITION IN THE NORDICS & BALTICS
• Enhanced ICT capabilities needed to broaden the
enterprise proposition
• Ambition to further strengthen convergent position
• Telia X established for accelerating new initiatives
9
SUMMARY Q2
EBITDA GROWTH IN 7 OF 8 MARKETS
STABLE SERVICE REVENUE DEVELOPMENT
EXECUTING ON STRATEGY– PORTFOLIO OPTIMIZATION
10
5
Q1
Q2
INTERIM REPORT
JANUARY – JUNE 2016
CHRISTIAN LUIGA,
SENIOR VICE PRESIDENT & CFO
11
STABLE SERVICE REVENUES - LOWER EQUIPMENT SALES
SERVICE REVENUES
NET SALES
Organic growth, external service revenues
Organic growth
-0.2%
-1.0%
+0.6%
Q2 15
Mobile
Fixed
Other
Q2 16
excl.
excl.
service
interconnectCarrier revenues
Interconnect
&
Carrier
• Lower interconnect and low-margin voice
revenues in Carrier behind decline in
service revenues
Q2 16
Q2 15
Service Equipment Equipment
revenues Sweden
Europe
Q2 16
• Decline in net sales due to lower equipment
sales in Europe, mainly Finland
• Excluding interconnect, 6 of 8 markets
displayed mobile service revenue growth
12
6
EBITDA GROWTH BUT AT A SLOWER PACE
EBITDA
EBITDA
Organic growth, excluding non-recurring items
Organic growth, excluding non-recurring items
+5.1%
5.1%
Q2 15
Sweden
Europe
Other
Q2 16
• Growth in mobile service revenues and good
cost control support EBITDA
Q2 15
Q3 15
Q4 15
Q1 16
Q2 16
• Lower growth in Q2 primarily due to tougher
comparisons in Sweden
• Europe supported by strong growth in Spain
13
MOBILE GROWTH AND SOLID COST CONTROL IN EUROPE
MOBILE SERVICE REVENUES
EBITDA
Organic growth, external service revenues
Organic growth, excluding non-recurring items
+7.4%
Q2 15
Finland
Norway
Denmark
Lithuania
+2.3%
Estonia
Latvia
Spain
Q2 16
Q2 15 FIN
NOR DEN
LIT
EST
LAT
SPA Q2 16
• Growth supported by price adjustments
• Improved service revenue mix and lower
• Mobil service revenue growth in 6 of 7
• EBITDA growth in 6 of 7 markets
and higher data consumption
operating expenses
markets
14
7
NCELL DECONSOLIDATION & FX IMPACT IN EURASIA
SERVICE REVENUES*
EBITDA**
SEK billion, reported currency, discontinued operations
SEK billion, reported currency, discontinued operations
-39.2%
-54.4%
5.4
3.1
-0.1 p.p.
-16.2 p.p.
3.3
-24.2 p.p.
-19.4 p.p.
-14.9 p.p.
1.4
-18.8 p.p.
Q2 15
Organic
FX
Ncell
deconsolidation
Q2 16
• Organic service revenues remained
unchanged
• Reported revenues significantly impacted
by deconsolidation of Ncell and FX
* External service revenues
Organic
Q2 15
FX
Ncell
deconsolidation
Q2 16
• Reported EBITDA impacted by:
• Organic development
• Negative FX impact, mainly Kazakh Tenge
• Ncell deconsolidated end of April
** Excluding non-recurring items
15
PRESSURE IN KAZAKHSTAN AND AZERBAIJAN
SERVICE REVENUES* Q2
EBITDA** Q2
Organic growth, discontinued operations
Organic growth, discontinued operations
19.7%
0.6%
-0.2%
-21.0%
-9.5%
-15.2%
Kazakhstan
-27.9%
Azerbaijan
Uzbekistan
Total
Eurasia
• Mixed service revenue development
• Negative development in Kazakhstan Q2
but some early signs of market repair
* External service revenues
-34.0%
Kazakhstan
Azerbaijan
Uzbekistan
Total
Eurasia
• EBITDA impacted by revenue pressure in
Kazakhstan and Azerbaijan together with
operational FX impact and higher operational
tax costs in the region
** Excluding non-recurring items
16
8
INVEST-TO-SAVE AND COST DEVELOPMENT ON TRACK
INVEST TO SAVE PHASING
OPEX DEVELOPMENT*
SEK billion, savings run-rate at period/year-end
Organic growth, excl. Norway
2.0
1.1
0.8
0.6
-4%
2015
•
H1 2016
2016
Q2 15
2017
Invest-to-save on track and slightly
improved run-rate since year-end
Q3 15
Q4 15
Q1 16
Q2 16
•
OPEX decline for three consecutive quarters
•
Comparable numbers on cost will be more
challenging during second half of 2016
* Norway excluded for comparison reasons due to theTele2 acquisition
17
SWEDEN FIBER ROLL-OUT DRIVES CAPEX
CAPEX EXCLUDING LICENSES
CAPEX EXCLUDING LICENSES
SEK billion, continuing operations
SEK billion, continuing operations, rolling twelve months
20.2%
20.9%
0.7
0.8
1.4
1.3
1.6
1.7
Q2 15
Q2 16
4.0
3.0
2.0
10
Other operations
Europe
1.0
14.9
15
Sweden
5
0
0.0
Q2 15
Q3 15
Q4 15
Q1 16
Q2 16
= In relation to reported service revenues
• Fiber accounts for around 50 percent
of CAPEX in Sweden
• CAPEX run-rate approaching the high end
of full-year guidance range
• CAPEX in Europe mainly related to 4G
roll-out in Norway and Finland
18
9
EPS IMPACTED BY DISCONTINUED OPERATIONS
EPS - DISCONTINUED OPERATIONS
EPS - TOTAL
SEK
SEK
-0.42
-0.59
0.15
0.75
0.05
0.27
-0.03
0.23
Continuing operations
-0.25
0.33
Other
Discontinued
operations
-0.23
Associates
Operating
income*
Q2 15
-0.13
-0.59
+0.17
Q2 16
Q2 15
EBITDA
excl.
Ncell
Impairments
D&A
and
other
Ncell
decons.
-0.21
-0.32
Ncell
capital
loss
Q2 16
• Higher EPS in continuing operations more than offset by lower EPS in discontinued operations
• Discontinued operations impacted by Ncell deconsolidation, Ncell capital loss (owners of the parent),
impairment charges and lower results
* Excluding income from associates and non-recurring items
19
LOWER FREE CASH FLOW
FREE CASH FLOW
- CONTINUING OPERATIONS
FREE CASH FLOW
- GROUP
SEK billion, continuing operations
SEK billion, rolling twelve months
-3.2
20
17.2
1.0
5.0
0.3
0.2
16
15.5
16.6
16.0
0.1
11.4
12
8.9
8
1.8
-4.7
Q2 15
EBITDA* Tax**
Working Other Dividends Q2 16
capital
from
associates
***
• Cash flow Q2 2015 positively impacted by Turkcell
dividend of SEK 4.7 billion net of tax
4
0
Q2 15
Q3 15
Q4 15
Q1 16
Q2 16
Discontinued operations
Dividends from associates net of taxes
Continuing operations excl. associates
Continuing operations incl. associates
• Working capital improvement in primarily Sweden
* Excluding non-recurring items ** Excluding tax on dividends from associates *** Net of tax
20
10
LEVERAGE REMAINS LOW
NET DEBT/EBITDA*
2.00
• Leverage in the low-end of target
1.75
• First dividend tranche of SEK 6.5 billion
(2.0x +/- 0.5)
1.60
1.60
paid in April 2016
• Second dividend tranche of SEK 6.5 billion
1.50
to be paid in October 2016
1.25
1.00
FY 12
FY 13
FY 14
FY 15
Q2 16
* Net debt to rolling twelve months EBITDA excl. non-recurring items
(Continuing and discontinued operations)
21
OUTLOOK 2016 – UNCHANGED
22
EBITDA*
In line or slightly above the level in 2015
CAPEX**
SEK 14-15 billion
DIVIDEND
> 80% of free cash flow - at least SEK 2 per share
* Excluding non-recurring items, in local currencies, excluding acquisitions and disposals
** Excluding license and spectrum fees, currency fluctuations may impact the reported number in Swedish krona
11
Q&A
MMO
DEBT MATURITY SCHEDULE
DEBT MATURING NEXT 12 MONTHS
SEK billion
8
7
6
5
4
3
2
1
0
17
nJu
7
-1
ay
M
6
-7
pr
A
7
-1
ar
M
17
bFe
17
nJa
6
-1
ec
D
6
-1
ov
N
6
-1
ct
O
6
-1
ep
S
6
-1
ug
A
6
l-1
Ju
DEBT PORTFOLIO MATURITY SCHEDULE – 2016 AND ONWARDS
SEK billion
18
16
14
12
10
8
6
4
2
0
2016
2019
2022
2025
2028
2031
2034
2037
2040
2043
2046
2049
2052
2055
2058
2061
2064
24
12
FINANCIAL SUMMARY Q2 2016
Q2 2016
Net sales (SEK million)
Change local organic (%)
Service revenues (SEK million)
Change local organic (%)
EBITDA* (SEK million)
Change local organic (%)
Q2 2015
21,130
CHANGE (%)
21,558
-2.0
18,289
-1.2
6,136
+4.1
-1.0
18,075
-0.2
6,389
+5.1
EBITDA* Margin (%)
30.2
28.5
+1.7p.p.
Total EPS (SEK)
0.33
0.75
-55.8
Total free cash flow (SEK million)
1,698
6,307
-73.1
* Excluding non-recurring items
25
FINANCIAL KEY RATIOS Q2 2016
JUN 30, 2016
DEC 31, 2015
Return on equity*, %
7.4
9.3
Return on capital employed*, %
9.3
8.9
Equity/assets ratio, %
36.7
35.1
Net debt/equity ratio, %
54.9
62.5
Net debt/EBITDA** ratio, multiple
1.60
1.53
Net debt/assets ratio, %
20.2
21.9
* Rolling 12 months ** Rolling 12 months, excluding non-recurring items
26
13
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 Telia Company.
27
14