INTERIM REPORT
JANUARY – MARCH 2016
Q1
JOHAN DENNELIND,
PRESIDENT & CEO
SUMMARY Q1 2016
SERVICE REVENUE GROWTH
EBITDA* GROWTH
TOTAL FREE CASH FLOW
Reported -0.7%
Organic -0.9%
Reported +10.4%
Organic +10.4%
SEK 2.1 billion
-16.0%
All figures refer to continuing operations *Excluding non-recurring items
2
1
SHAPING OUR COMPANY FOR THE FUTURE
TELIA
COMPANY
DELIVERING
IN CORE
MARKETS
STRENGTHENED
CUSTOMER
PROPOSITIONS
INTENSIFIED
BUSINESS
TRANSFORMATION
EURASIAN
DIVESTMENT
PROCESS
PROGRESSING
STRATEGIC REVIEW
OF NON CORE
ASSETS
3
STRONG EARNINGS DESPITE REVENUE PRESSURE
SERVICE REVENUES*
EBITDA**
Growth y-o-y
Growth y-o-y
Sweden
Sweden
Europe
Continuing operations
Europe
Continuing
operations
10.4%
10.1%
9.9%
-0.1%
-0.8%
-0.9%
Q2 15
Q3 15
Q4 15
Q1 16
• Sweden impacted by continued drop in fixed
telephony and challenging enterprise segment
• Europe supported by solid mobile data growth
• Lower volumes in the carrier business
4
Q2 Q3 Q4 Q1
15 15 15 16
Q2 Q3 Q4 Q1
15 15 15 16
Q2 Q3 Q4 Q1
15 15 15 16
• Strong earnings in Sweden due to improved
equipment margin and lower costs
• Uplift in Europe driven by the majority of markets,
especially Norway
* Local organic ** Local organic excluding non-recurring items
2
MIXED REVENUE PICTURE IN SWEDEN
TELIA FIBER HOUSEHOLDS
SERVICE REVENUES* BY SEGMENT
Growth y-o-y
Telia connected (MDUs + SDUs)
Communication operator
Telia passed, not connected
Incl. fiber installation revenues
Excl. fiber installation revenues
B2C
1.3 million
+3.6%
+1.3%
Q1 14
Q1 15
Q1 16
B2B
-5.8%
Q1 15
Q2 15
Q3 15
Q4 15
Q1 16
• 27,000 new homes passed in the seasonally slow
• Continued growth in consumer segment
first quarter, of which 20,000 were connected
supported by mobile, fiber and TV
• Enterprise remains challenging with keen price
pressure in large and public segments
• 7,000 of the connected new homes relate to SDU
fiber campaigns
* Local organic
5
EXCITING THE CUSTOMERS IN SWEDEN
SURF
SWEDEN ARPU
Growth y-o-y
NEW
FAMILY
DATA ROLLOVER
TV
ROAMING
10.0%
RADIO & MUSIC
STREAMING
1.5%
NEW
Free voice
and SMS
Free surf on
social media
SOCIAL MEDIA
Free roaming in
the Nordic and
Baltics
Telia WiFi
Q2 Q3 Q4 Q1
15 15 15 16
2.0%
Q2 Q3 Q4 Q1
15 15 15 16
Q2 Q3 Q4 Q1
15 15 15 16
• Good TV momentum and stable mobile ARPU
growth
Data roll-over
• Recent price adjustments in TV, mobile and fixed
broadband to support from the second quarter
6
3
IMPROVED BILLED REVENUE GROWTH IN FINLAND
SERVICE REVENUES* & EBITDA**
MOBILE SERVICE REVENUES*
SEK million
Organic growth y-o-y
-0.4%
2,767
Billed revenues
Mobile service revenues
2,740
4.0%
+5.2%
972
0.9%
1,016
Q1 15
Q1 15
Q1 16
Service revenues
Q2 15
Q3 15
Q4 15
Q1 16
Q1 15
Q1 16
EBITDA
• Growth in mobile billed revenues intact
• Service revenues impacted by lower fixed and
supported by B2C
interconnect revenues
• Mobile billed revenue growth and reduced
operating expenses behind EBITDA uplift
= Local organic growth
7
* External service revenues **Excluding non-recurring items
SYNERGY TARGET REACHED IN NORWAY
SERVICE REVENUES*
EBITDA**
SEK million
SEK million, reported
-2.9%
1,693
238
1,724
665
-59
486
Q1 15
Q1 16
Q1 15
reported
• Lower interconnect revenues behind
negative organic service revenue growth
• Successful rebranding to Telia
Increase in
stable FX
FX
impact
Q1 16
reported
• EBITDA excluding FX impact increased by close
to SEK 240 million, the full year run-rate synergy
target of SEK 1 billion reached
• Negative impact on reported EBITDA
from a close to 10 percent weakening of NOK
8
= Local organic growth
* External service revenues **Excluding non-recurring items
4
REVENUE AND EARNINGS UPLIFT IN THE BALTICS
EBITDA**
SERVICE REVENUES*
Organic growth y-o-y
SEK million
+14.2%
+4.7%
5%
-8.1%
+1.1%
277
244
0%
196
+0.7%
+6.9%
181
127
-5%
-10%
Q1 15
Q2 15
Estonia
Q3 15
Q4 15
Lithuania
Q1 15 Q1 16
Estonia
Q1 16
Q1 15 Q1 16
Lithuania
135
Q1 15 Q1 16
Latvia
Latvia
• Strong demand for data in all markets driving
• Billed revenue growth and lower costs behind
growth
improved earnings
• Growth in TV and fixed broadband offsets lower
• Estonia impacted by higher marketing costs
revenues from traditional telephony
9
= Local organic growth
* External service revenues **Excluding non-recurring items
A GOOD START OF THE YEAR
CUSTOMER PROPOSITIONS FURTHER ENHANCED
SLIGHT PRESSURE ON SERVICE REVENUES
SOLID EARNINGS GROWTH IN CORE OPERATIONS
10
5
SAVE THE DATE JUNE 21, 2016
ANALYST AND INVESTOR BRIEFING IN STOCKHOLM - FOCUS ON TELIA SWEDEN
11
INTERIM REPORT
JANUARY – MARCH 2016
Q1
CHRISTIAN LUIGA,
SENIOR VICE PRESIDENT & CFO
6
NET SALES DECLINE DUE TO FIXED AND EQUIPMENT
EQUIPMENT SALES**
NET SALES*
Growth y-o-y
Growth y-o-y
Sweden
-1.1%
Europe
40%
20%
0%
-20%
Q1 15
Mobile
Fixed
Other Equipment Q1 16
service
service
service
revenues revenues revenues
• Mobile growth impacted by lower interconnect
• Traditional telephony decline only partly
compensated by fiber installation revenues, TV
and fixed broadband
-40%
Q1 14
Q1 15
Q1 16
• Equipment sales decline in Sweden due to lack
of major handset releases
• Still equipment sales growth in Europe due to
successful Christmas campaign in Spain and
continued strong growth in Latvia
* Local organic ** Reported currency
13
EBITDA GROWTH SUPPORTED BY LOWER COSTS
EBITDA*
EBITDA*
Growth y-o-y
Growth y-o-y
10.4%
+10.4%
Q1 15
Sweden
Europe
Other
Q1 16
Q1 15
• Sweden supported by improved sales mix
together with lower resource and field
maintenance costs
• Improvements in Europe driven by Norway
Q2 15
Q3 15
Q4 15
Q1 16
• Comparisons to become gradually tougher
throughout the year
• Main challenges remains the B2B segment
primarily in Sweden and Finland
and reduced resource costs in the Nordics
* Local organic, excluding non-recurring items
14
7
LOWER EARNINGS AND ARPU IN DENMARK
SERVICE REVENUES* & EBITDA**
SUBSCRIPTION BASE AND ARPU
SEK million
Subscription in thousands, ARPU growth y-o-y
-2.2%
1,056
Mobile ARPU growth y-o-y
Total mobile subscription base
1,025
1,700
0%
1,600
-5%
-10.7%
154
1,500
137
1,400
Q1 15
Q1 16
Service revenues
-10%
Q1 15
Q1 15
Q1 16
EBITDA**
Q2 15
Q3 15
Q4 15
Q1 16
• Stable subscription base but price pressure
• Fierce competition in the market continues
impacts ARPU
• Limited effects of recent price changes
= Local organic growth
15
* External service revenues **Excluding non-recurring items
CONTINUED CHALLENGES IN EURASIA
EBITDA** Q1
SERVICE REVENUES* Q1
Growth y-o-y
Growth y-o-y
21%
-2%
-6%
-3%
-17%
-19%
-16%
Kazakhstan
Azerbaijan
Uzbekistan
Total
Eurasia
• Still strong competition in Kazakhstan
• Significant negative currency effects
-37%
Kazakhstan
Azerbaijan
Uzbekistan
Total
Eurasia
• Earnings impacted by negative service revenue
development in several markets
in reported figures
* Local organic, external service revenues ** Local organic, excluding non-recurring items
16
8
INVESTMENTS IN FIBER AND NETWORK IMPROVEMENTS
CAPEX EXCLUDING LICENSES*
CAPEX EXCLUDING LICENSES- SWEDEN
SEK billion
Share of total
14.6%
17.6%
Networks
Fiber
IT
+0.5
3.1
2.6
Sweden
Europe
Other operations
Q1 15
• Continued build out of mobile capacity and
Q1 16
coverage throughout the footprint
• In Sweden, fiber investments accounted for
= In relation to reported service revenues
around 35 percent of total CAPEX excluding
licenses
* Continuing operations, reported currency
17
FREE CASH FLOW DEVELOPMENT
TOTAL FREE CASH FLOW*
TOTAL FREE CASH FLOW*
SEK billion
SEK billion
Discontinued operations
-0.6
Continuing operations
0.7
2.9
0.4
2.9
0.1
2.3
0.2
Other
Cash
CAPEX
2.5
Working
capital
Tax
2.3
-0.4
-0.8
Interest
net
Q1 15
EBITDA**
-0.5
0.4
Q1 16
Q1 15
2.1
Q1 16
• EBITDA lower due to FX impact on Eurasia
• Tax refund in Sweden Q1 last year
*Continuing and discontinued operations,** Excluding non-recurring items
18
9
STABLE LEVERAGE RATIO
NET DEBT/EBITDA*
• Net debt/EBITDA flat at 1.53x compared
2.0
to Q4 2015
• Ncell divestment closed in April, positive net cash
1.53
effect estimated to be slightly below SEK 7 billion
• Dividend payment of SEK 6.5 billion paid out in
1.5
April 2016. The same amount to be paid out in
October 2016
1.0
FY 2012 FY 2013 FY 2014 FY 2015 Q1 2016
* Net debt to rolling twelve months EBITDA excl. non-recurring items (Continuing and discontinued operations)
19
STABLE EARNINGS PER SHARE
EARNINGS PER SHARE*
SEK
0.11
0.04
0.11
• Improved earnings in Sweden and Europe
0.05
• Increased contribution from associates
-0.06
0.86
0.87
-0.14
-0.10
in Q1 2015
• Lower contribution from Eurasia
Discontinued
operations
Taxes
Net financials
FX
Non-recurring
items
Associates
Operational
Continuing operations
Q1 15
• Higher tax cost due to positive one-off item
Q1 16
* Continuing and discontinued operations
20
10
OUTLOOK 2016 – UPDATED
EBITDA*
In line or slightly above the level in 2015
(changed from: ambition to maintain the same level as in 2015)
CAPEX**
SEK 14-15 billion (unchanged)
DIVIDEND
>80% of FCF - at least SEK 2 per share (unchanged)
* 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
21
Q&A
11
DEBT MATURITY SCHEDULE
MMO
DEBT MATURING NEXT 12 MONTHS
SEK billion
8
7
6
5
4
3
2
1
0
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
16
nJu
6
-1
ay
M
6
-1
pr
A
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
23
FINANCIAL SUMMARY Q1 2016
Q1 2016
Net sales (SEK million)
Change local organic (%)
Service revenues (SEK million)
Change local organic (%)
EBITDA* (SEK million)
Change local organic (%)
20,394
Q1 2015
CHANGE (%)
20,589
-0.9
17,548
-0.7
5,632
+10.4
-1.1
17,434
-0.9
6,217
+10.4
EBITDA* Margin (%)
30.5
27.4
+3.1pp
Total EPS (SEK)
0.87
0.86
+1.4
Total free cash flow (SEK million)
2,293
2,853
-19.6
* Excluding non-recurring items
24
12
FINANCIAL KEY RATIOS Q1 2016
MAR 31, 2016
DEC 31, 2015
Return on equity*, %
8.2
9.3
Return on capital employed*, %
9.0
8.9
Equity/assets ratio, %
40.5
35.1
Net debt/equity ratio, %
53.5
62.5
Net debt/EBITDA** ratio, multiple
1.53
1.53
Net debt/assets ratio, %
21.7
21.9
* Rolling 12 months ** Rolling 12 months, excluding non-recurring items
25
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.
13