1
JOHAN DENNELIND, PRESIDENT & CEO
YEAR-END REPORT JANUARY – DECEMBER 2016
Q4
DELIVERING ON OUR AMBITIONS
WE REVISED UP AND SAID EBITDA IN LINE OR SLIGHTLY ABOVE 2015
WE DID +2.6%
WE SAID CAPEX IN THE UPPER RANGE OF SEK 14-15 BILLION
WE REPORTED SEK 15 BILLION
AMBITION OF A DIVIDEND OF AT LEAST SEK 2 PER SHAREWE PROPOSE SEK 2
2
2
WEAKER Q4 IN LINE WITH OUR FULL YEAR EXPECTATIONS- CONTINUING OPERATIONS
S E R V I C E R E V E N U E G R O W T H
E B I T D A * G R O W T H
F R E E C A S H F L O W
Reported -5.0%Organic +0.6%
Reported -2.7% Organic -1.9%
SEK 0.0 billion
*Excluding non-recurring items
Reported -1.9%Organic -0.4%
Reported +2.2% Organic +2.6%
SEK 7.2 billion
Q4 2016 FY 2016
3
REFOCUSING TO THE NORDICS & BALTICS
SOLID PERFORMANCE IN KEY MARKETS
STRONG NORWAY GETTING READY FOR MORE
BEST NETWORK IN 5 OF 7 MARKETS
FULL YEAR 2016 AND Q4 IN BRIEF
SERVICE REVENUE GROWTH
NEW OPERATING STRUCTURE
TELIA CARRIER ENDING STRONG
BETTER TREND IN EURASIA
FULL YEAR 2016 Q4 2016
4
ALL TIME HIGH FIBER IN SWEDEN
3
STRONG TV DEVELOPMENT ACROSS THE FOOTPRINT
TV SUBSCRIPTION BASEContinuing operations, in ´000
Sweden
+11.2%Sweden
+11.2%
TV ARPU DEVELOPMENTLocal currency, FY 2016 vs. 2015
Finland
+7.2%Finland
+7.2%Lithuania
+5.2%Lithuania
+5.2%
Estonia
+7.6%Estonia
+7.6%+3.6%+3.6%
• Subscription growth in 4 of 5 markets -improved proposition
• Subscription base growth of 5% in Sweden and 8% in Lithuania
• Solid ARPU development from
− Price adjustments
− Package optimization
− Successful upsell
1,6881,688
5
Q4 15 Q1 16 Q2 16 Q3 16 Q4 16
0.0%
0.5%
1.0%
1.5%
2.0%
Q1 16 Q2 16 Q3 16 Q4 16
GROWING MOBILE BILLED REVENUES
MOBILE BILLED REVENUE GROWTHContinuing operations, organic growth
Sweden
+2.0%Sweden
+2.0%
MOBILE BILLED REVENUE GROWTH Q4Organic growth, Q4 2016 y-o-y
Finland
+5.2%Finland
+5.2%
Norway
+0.9%Norway
+0.9%
6
Continuing operations
+1.7%Continuing operations
+1.7%
+1.7%+1.7%
• Demand for data and upsell main drivers • Growth Q4 in 6 of 7 markets
4
SERVICE REVENUESOrganic growth, external service revenues
Q4 15 Q1 16 Q2 16 Q3 16 Q4 16
Sweden
Europe
Continuing operations
+0.3%+0.3%
+0.6%+0.6%
+1.2%+1.2%
-1.8%
4.3%
-1.9%
Q415
Q416
Q415
Q416
Q416
Q416
REVENUE GROWTH WITH DIFFERENT MIX
EBITDAOrganic growth, excluding non-recurring items
• Growth in fiber and strong development in fixed broadband and TV revenues in Sweden
• Positive mobile service revenue growth in 5 of 6 markets in Europe
• Negative sales mix in Sweden from pressure on high margin fixed legacy revenues
• Growth in Europe driven mainly by solid development in Norway
Continuing
operationsEuropeSweden
7
SWEDEN ENDING THE YEAR WITH REVENUE GROWTH
Q4 15 Q1 16 Q2 16 Q3 16 Q4 16
+1.7%+1.7%
-3.1%-3.1%
+2.4%+2.4%
B2B
B2C
B2C excl. fiber installation revenues
B2C incl. fiber installation revenues
SERVICE REVENUES B2B Organic growth, external service revenues
SERVICE REVENUES BY SEGMENTOrganic growth, external service revenues
• Stable growth in B2C amplified by fiber
• Better performance in B2B driven by less pressure on the large segment
• SME/SoHo remains slightly positive
• Improvement in large enterprises Q4 to some extent due to phasing
+0.5%+0.5%
-4.8%-4.8%
SME/SoHo Large enterprises
Q4 16
Q4 16
8
5
2.5%
6.0%
9.5%
Q4 15 Q1 16 Q2 16 Q3 16 Q4 16
Mobile
Fixed broadband
TV
2.3%5.9%
15.0%
-15.0%
Q416
Q416
Q416
Q416
OVERALL GOOD TRENDS IN SWEDEN
ARPU TREND BY KEY SERVICEGrowth y-o-y
• Rise in mobile ARPU from improvement in B2B
• TV ARPU growth remains strong
• Pressure on mobile due to B2B large
• Broadband benefiting from price increases
• Strong TV growth supported by net adds and ARPU uplift
REVENUE TREND BY KEY SERVICEService revenues, growth y-o-y
Mobile billed revenues
Fixed broadband
TV
Fixed telephony
9
Q4 15 Q1 16 Q2 16 Q3 16 Q4 16
GROWING FIBER REVENUES AND GREAT ACHIEVEMENTS
FIBER BROADBAND REVENUESSEK million, reported currency
44% growth in
villa campaigns
44% growth in
villa campaigns
44% growth in
villa campaigns
SEK 3.2 bnCAPEX
FIBER ACHIEVEMENTS 2016
SEK 1.2 bninstallation
revenues
Market
share
186,000 new households
reached
186,000 new households reached
186,000 new households
reached
10
+30%+30%
• Quarterly y-o-y growth in recurring fiber broadband revenues stable around 30%
Growth y-o-y
Fiber service revenues
6
5.2%
2.7%
Q4 15 Q1 16 Q2 16 Q3 16 Q4 16
Mobile billed service revenues
Total mobile service revenues2,771 2,934
Q4 15 Q4 16
+1.0%+1.0%
STABLE OPERATIONAL DEVELOPMENT IN FINLAND
* External service revenues **Excluding non-recurring items
Service revenues EBITDA
= Organic growth
SERVICE REVENUES* & EBITDA**SEK million, reported currency
MOBILE SERVICE REVENUES*Organic growth
• Fixed service revenue growth in B2B main driver behind positive service revenue development
• EBITDA growth somewhat negative due to higher operational costs
• Mobile billed service revenue growth mainly driven by B2C
• Lower interconnect revenues pressure total mobile service revenues
947 1,000
Q4 15 Q4 16
-0.4%-0.4%
11
2000
2100
2200
2300
2400
Q4 15 Q1 16 Q2 16 Q3 16 Q4 16
SOLID REVENUE AND EARNINGS GROWTH IN NORWAY
681865
Q4 15 Q4 16
+17.8%+17.8%
Service revenues EBITDA
SERVICE REVENUES* & EBITDA**SEK million, reported currency
• Increased wholesale revenues key driver behind service revenue growth
• Revenue uplift and lower SAC behind solid EBITDA development
* External service revenues **Excluding non-recurring items = Organic growth
MOBILE SUBSCRIPTIONS & ARPUSubscriptions in ’000, blended ARPU
• Loss of mainly low ARPU pre and postpaid subscriptions (compensated by wholesale)
• ARPU supported by higher data usage that drives upsell and top-ups
1,8112,036
Q4 15 Q4 16
+4.0%+4.0%
+2.9%+2.9%
Blended mobile ARPU growth, local currency
Mobile subscription base, ‘000
12
7
1,052 1,105
Q4 15 Q4 16
-0.2%-0.2%
HIGH COMPETITION IN DENMARK REMAINS
* External service revenues **Excluding non-recurring items
Service revenues EBITDA
= Organic growth
SERVICE REVENUES* & EBITDA**SEK million, reported currency • Still challenging market conditions in B2C and B2B
• Flat service revenues and a less favorable sales mix eroded EBITDA
• Value loading strategy
215 199
Q4 15 Q4 16
-11.4%-11.4%
Telia TV
13
169207
285 286
138 143
Q4 15 Q1 16 Q2 16 Q3 16 Q4 16
Estonia Lithuania Latvia
Q4 15 Q4 16
LithuaniaQ4 15 Q4 16
Latvia
-4.2%-4.2%
Q4 15 Q4 16
Estonia
MIXED DEVELOPMENT IN THE BALTICS
+16.5%+16.5%
-1.6%-1.6%
+2.2%+2.2%
+1.0%+1.0%
-5.3%-5.3%
SERVICE REVENUESOrganic growth, external service revenues
EBITDA*SEK million, reported currency
• Lower sales in Green IT (-5 p.p. impact) and less demand for travel products in Estonia
• Growth in fixed broadband and TV revenues in Lithuania
• Increased demand for mobile data in Latvia
• Less marketing and good cost control in Estonia
• Latvia flat as revenue growth was offset by higher marketing expenses
= Organic growth * Excluding non-recurring items 14
8
THE RIGHT TREND IN THE EURASIAN OPERATIONS
• Positive EBITDA and service revenue growth trends intact
• Revenues rose in 5 of 6 markets
• Double digit service revenue growth in Uzbekistan, Tajikistan and Moldova
* External service revenues **Excluding non-recurring items
TRENDS IN EURASIAOrganic growth, excluding Nepal
-3% -2%
1%3%
-27%-24%
-9%
-2%
Q1 16 Q2 16 Q3 16 Q4 16
Service revenues*
EBITDA**
TRENDS IN KAZAKHSTANOrganic growth
• Main reason for Eurasian turnaround is less deterioration from Kazakhstan
• Improved market conditions but still a competitive environment in Kazakhstan
• Service revenue erosion pressuring EBITDA
-16% -15%-12% -8%
-37%-34%
-25%
-14%
Q1 16 Q2 16 Q3 16 Q4 16
Service revenues*
EBITDA**
15
SUMMARY FULL YEAR AND Q4 2016
FULL YEAR EB ITDA OUTCOME IN L INE WITH GUIDANCE
GOOD PERFORMANCE IN KEY MARKETS
EURAS IA ON THE R IGHT TRACK
16
9
CHRISTIAN LUIGA,
EXECUTIVE VICE PRESIDENT & CFO
YEAR-END REPORT JANUARY – DECEMBER 2016 Q4
17
ENDING 2016 WITH POSITIVE NET SALES GROWTH
NET SALES DEVELOPMENT Q4Organic growth
0
100
200
300
400
500
Q415
Q116
Q216
Q316
Q416
Revenuesin SEK million
FIBER INSTALLATION TRENDSDU campaigns and installation revenues
• Mobile growth in 6 of 7 markets
• Growth in TV and fixed broadband not enough to compensate for pressure on fixed legacy
• Lower equipment sales mainly due to Finland and Denmark
• Strong SDU campaign roll-out Q4 resulted in 34,000 new households connected
• Lower average installation fee Q4 due to 6,000 SDUs not generating installation revenues
0
10
20
30
40
Q415
Q116
Q216
Q316
Q416
SDUs in thousands
+0.2%
Q4 16Equip-
ment
OtherFiberFixed
excl
fiber
MobileQ4 15
-0.3pp-0.3pp
+0.5pp+0.5pp
SERVICE REVENUES
18
10
NEGATIVE EBITDA GROWTH Q4 BUT POSITIVE FULL YEAR
EBITDA DEVELOPMENT Q4Organic growth, excluding non-recurring items
EBITDA GROWTH TRENDOrganic growth, excluding non-recurring items
-1.9%-1.9%
Q4 16BalticsDENNORFINSWEQ4 15 Other-1.9%
Q4 15 Q1 16 Q2 16 Q3 16 Q4 16
• Pressure on legacy revenues and challenging Q4 2016 comparable figures for Sweden
• Europe EBITDA growth still in positive territory driven by Norway and Estonia
• Foundation laid H1 for reaching 2.6% EBITDA growth for the full year
• Growth profile 2016 largely impacted by comparable figures in 2015
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2015 2016 2017e
SwedenFinlandCentral functionsCAPEX
-0.7
-1.0
INVEST TO SAVE PROGRAM DELIVERED AND ENDED
INVEST TO SAVESEK billion, savings run-rate at period/year-end
0.6
1.2
2.0
• Invest to save program initiated 2014 has ended
• Financial outcome in line with targets
• Transformation will be ongoing to improve customer experience and efficiency
• Cash flow initiatives initiated throughout the group
20
11
PRESSURE ON LEGACY REVENUES IN SWEDEN MITIGATED
Share of
revenues
Share of
revenues
>80%
~60-80%
<25%
Gross
margin
Gross
margin
SERVICE REVENUE GROWTH SWEDENSEK billion, reported currency
• Drop in legacy revenues mainly from fixed telephony and various business solutions
• Since the launch call & errand volumes are down 23% and 53 IT systems have been closed in Sweden
32.3 32.1
2015 2016
EBITDA GROWTH SWEDENSEK billion, reported currency
Revenue
trend
Revenue
trend+1.3%
2016
14.5
New ITS* OtherCoreLegacy2015
14.3
Le
ga
cy
Co
reN
ew
• Legacy: Mainly copper-based services like fixed telephony and various business solutions
• Core: Mainly TV, mobile and broadband
• New: Value added and adjacent services
* Invest to save program (transformation, procurement and general efficiencies)
-0.4%-0.4%
21
6.2 7.1
5.5 5.0
2.6 2.9
0
5
10
15
2015 2016
Other operations
Europe
Sweden
CAPEX TO COME DOWN DESPITE FOCUS ON FIBER
= In relation to external service revenues
19.6%19.6% 21.0%21.0%
CAPEX EXCL. LICENSES* 2015/2016SEK billion, continuing operations
• Sweden CAPEX higher due to fiber roll-out and business transformation
• Europe lower despite high pace 4G roll-out
14.3 15.0
CAPEX EXCL. LICENSES* 2016/2017eDistribution by type, continuing operations
• CAPEX 2017 expected to come down despite:
− Continued high fiber roll-out pace in Sweden
− Need for continued business transition in 2017
0%
25%
50%
75%
100%
2016 2017e
Fiber
Other
Network/IT
* In reported currency
22
12
TOTAL EPS IMPACTED BY NON-RECURRING ITEMS
TOTAL EPSSEK, continuing and discontinued operations
• Impairment charges made to the operation in Denmark Q4 2015 and capital gain from disposal of Yoigo Q4 2016 explain the development in non-recurring items
• Discontinued operations impacted by impairment charges made to the operation in Uzbekistan Q4 2015
• Lower contribution from associates attributable to Turkcell and MegaFon
* Excluding income from associates and non-recurring items
-0.12
1.69
-0.70
+1.08
Discontinuedoperations
Q4 16Other
+0.16
Associates
-0.17
Non-recurringitems
+1.44
Operatingincome*
Q4 15
+1.31+1.31
CONTINUING OPERATIONS
23
LEVERAGE IN LOW-END OF THE TARGET RANGE
NET DEBT AND LEVERAGE TRENDContinuing and discontinued operations
50.8
0
10
20
30
40
50
60
1.00
1.25
1.50
1.75
2.00
Q4 12 Q4 13 Q4 14 Q4 15 Q4 16
Ne
t d
eb
t (S
EK
billio
n)
Lev
era
ge
ra
tio
*
Net debt Leverage ratio*
* Net debt to rolling twelve months EBITDA excl. non-recurring items
1.69x
• Leverage remains at the low-end of target range (2.0x +/- 0.5x)
NET DEBT DEVELOPMENT Q4Continuing and discontinued operations
51.8 50.8
Q4 16OtherYoigo
disposal
Dividend
paid
Cash
Capex
OperationsQ3 16
• Around SEK 6 billion impact from Yoigo disposal
• Second dividend tranche of SEK 6.5 billion paid
• Extra dividend from MegaFon of SEK 0.5 billion received
1.67x1.67x 1.69x1.69x
= Leverage ratio24
13
0
4
8
12
16
20
Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16
Discontinued operations
Dividends from associates net of taxes
Continuing operations excl. Associates
Continuing operations incl. Associates
LOWER DIVIDEND FROM ASSOCIATES 2016
FREE CASH FLOW 2016 SEK billion, continuing operations
• Dividend of SEK 4.7 billion from Turkcell 2015
• Lower taxes mainly in Sweden
• Positive working capital driven by Europe
• Higher cash CAPEX driven by fiber
* Excluding non-recurring items ** Net of tax
12.5
-4.8
EBITDA*
0.6
2015
-0.9
Tax
-0.4
Cash CAPEX
-0.8
Change in WC
0.9
-5.4-5.4
2016
7.2
OtherDividend associates
**
FREE CASH FLOW, R12 MONTHSSEK billion, continuing and discontinued operations
16.016.615.5
7.2
7.3
11.410.3
25
DIVIDEND PROPOSAL FOR 2016
26
SEK 2
14
FREE CASH FLOW – 3 DEFINITIONS
FREE CASH FLOW, from continuing operations as reported today
FREE CASH FLOW EXCLUDING LICENSES, from continuing operations as basis for dividend
OPERATIONAL FREE CASH FLOW, from continuing operations as basis for guidance equals free cash flow excluding licenses and dividends from associates
27
FREE CASH FLOW- OUTLOOK & DIVIDEND DEFINITIONS
DEFINITION FOR OUTLOOK
DEFINITION FOR OUTLOOK
DEFINITION IN
DIVIDEND POLICY
DEFINITION IN
DIVIDEND POLICYFCF DEFINITIONS*
* For illustrative purpose only, based on 2016
5.5
7.57.2
Operational free cash
flow
Dividends
from
associates**
Free cash flow excl.
licenses
LicensesFree cash flow
continuing
operations
SEK BILLION 2016
Free cash flow from continuing operations 7.2
FREE CASH FLOW EXCLUDING LICENSES
Free cash flow from continuing operations
excluding licenses
7.5
OPERATIONAL FREE CASH FLOW
Free cash flow from continuing operations
excluding licenses and dividends from associates**
5.5
28
** Net of taxes
15
CAPITAL MANAGEMENT
At least 80% of free cash flow from continuing operations excluding licenses (previously including licenses)
DIV IDEND POLICYU P D A T E D
29
Net debt/EBITDA of 2x plus/minus 0.5x LEVERAGE
Solid investment grade long-term credit rating (A- to BBB+)CREDIT RAT ING
OUTLOOK 2017
* Continuing operations, in reported currency, associate dividends net of taxes
** Excluding non-recurring items, in local currencies, excluding acquisitions and disposals
Above SEK 7 billion (SEK 5.5 billion in 2016)
Op. FCF & dividends from associates should cover a dividend around the 2016 levelOPERATIONAL FCF*
Around the 2016 levelEB ITDA* *
30
16
Q&A
DEBT MATURITY SCHEDULE
0
1
2
3
4
5
6
7
8
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
0
2
4
6
8
10
12
2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050 2053 2056 2059 2062
DEBT MATURING NEXT 12 MONTHS
DEBT PORTFOLIO MATURITY SCHEDULE – 2017 AND ONWARDS
SEK billion
SEK billion
32
17
FINANCIAL SUMMARY Q4 2016
* External service revenues
** Excluding non-recurring items
Q4 2016 Q4 2015 CHANGE (%)
Net sales (SEK million) 21,130 22,638 -6.7
Change local organic (%) +0.2
Service revenues* (SEK million) 17,594 18,520 -5.0
Change local organic (%) +0.6
EBITDA** (SEK million) 6,380 6,556 -2.7
Change local organic (%) -1.9
EBITDA** Margin (%) 30.2 29.0
Total EPS (SEK) 1.69 -0.70
Total free cash flow (SEK million) -381 2,691
of which continuing operations 32 1,834
33
Dec 31, 2016 DEC 31, 2015
Return on equity*, % 4.5 9.3
Return on capital employed*, % 7.7 8.9
Equity/assets ratio, % 34.0 35.1
Net debt/equity ratio, % 58.9 62.5
Net debt/EBITDA** ratio, multiple 1.69 1.53
Net debt/assets ratio, % 20.0 21.9
* Rolling 12 months ** Rolling 12 months, excluding non-recurring items
FINANCIAL KEY RATIOS Q4 2016
34
18
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.
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