Interim Report April - June 2001 July 23, 2001 Interim Report - PowerPoint PPT Presentation

Interim Report April - June 2001 July 23, 2001 Interim Report 4-6/2001 1

Contents Financial performance and UMTS projects • Deputy CEO Aimo Eloholma Q2 results per business area and financial position • CFO Kim Ignatius Interim Report 4-6/2001 2

Financial performance in April - June Consolidated revenues grew by 11% on the previous year, • amounting to EUR 557 million (500) The sale of VoiceStream and Powertel shares was completed: • capital gains and other non-recurring items totaled EUR 588 million (857) Profit before extraordinary items and taxes was EUR 560 • million (942), and earnings per share were EUR 0.69 (0.90) Comparable EBITDA rose by 20% from January - March • Interim Report 4-6/2001 3

Businesses in brief Mobile Communications Finland continued to grow and showed good • profitability: comparable revenues were up 10% on the previous year, and EBITDA margin was 52% Revenues of Service Businesses grew by 34% , and EBITDA loss • decreased compared with January - March Revenues of the fixed network Telecom businesses grew by 7% ; • stable profitability was weakened particularly by the increase in interconnection expenses Interim Report 4-6/2001 4

Outlook for the second half of 2001 Growth in revenues expected to continue at the previous year’s level • Profitability of Mobile Communications Finland for the full year is • estimated to remain at the previous year’s level EBITDA loss of Service Businesses is estimated to decrease slightly • from the previous year (EUR 303 million) The Group’s comparable EBITDA is estimated to grow in euro terms • compared with 2000 (EUR 501 million) Equity income in associated companies is estimated to be about EUR • 350 million negative; no impact on Sonera’s operational cash flow Interim Report 4-6/2001 5

Progress of Group 3G in Germany Group 3G has signed a roaming agreement with E-Plus and an • interconnection agreement with Deutsche Telekom; Group 3G will launch its GSM/GPRS service towards the end of 2001 In June, RegTP approved the shared use of UMTS networks > Group • 3G is currently negotiating with other operators and vendors Infrastructure sharing will result in significant savings in Group 3G’s • network investments and operating expenses In addition to the EUR 3.6 billion already invested by it, Sonera will • not provide further financing to Group 3G RegTP’s decision strengthened Sonera’s and Telefónica’s estimate • that no additional equity financing will be needed once the current shareholder loans have been converted into shareholders’ equity Interim Report 4-6/2001 6

Sonera’s other 3G markets in Europe Xfera, Spain • - the aim is to launch GSM/GPRS services by a roaming agreement in the autumn - UMTS network under construction; financed with external non-recourse project financing IPSE 2000, Italy (launch in the first half of 2002) • - management selected, and organization being set up - roaming negotiations ongoing to start 2G services Broadband Mobile, Norway • - strategy will be specified - partner Enitel has decided to abandon mobile business; Sonera may also withdraw from the project Interim Report 4-6/2001 7

Interim report for April - June Q2 results per business area and financial position Kim Ignatius • Interim Report 4-6/2001 8

Consolidated income statement EUR million % Q2/2001 Q2/2000 2000 11 Revenues 500 2,057 557 993 (28) 2,047 710 EBI TDA (32) 919 1,748 626 Operating profit Growth in revenues 11% • EBITDA increased by the sale of the VoiceStream and Powertel shares (gain from • the transaction totaled EUR 596 million) Comparable EBITDA rose from Q1 to EUR 122 thanks to the increased profitability • of Mobile Communications Finland and the decreased outlays on Service Businesses Interim Report 4-6/2001 9

Consolidated income statement (cont.) EUR million 2000 Q2/2001 Q2/2000 % Equity income in associated 38 (56) (247) 121 companies (15) (10) 33 (9) Net financial expenses Profit before extraordinary 942 560 (41) 1,860 items and taxes Earnings per share 0.90 0.69 (23) 2.05 Equity income in associated companies weakened by the net losses reported by • Turkcell and Fintur Interest expenses related to the German 3G license had no impact on Sonera’s • results Financial expenses partly offset by the dividend income of EUR 12 million • The tax effect of capital gains lower than the Finnish tax rate • Interim Report 4-6/2001 10

Profitability of business areas Mobile Communications Finland EUR million % Q2/2001 Q2/2000 2000 287 1,134 Revenues 310 8 135 543 EBI TDA 161 19 129 101 414 Operating profit 28 Comparable revenues were up 10% on the previous year; profitability improved • further due to growth in revenues and tight cost control Revenues from non-voice services grew by 31% in Q2 to EUR 34 million • 25 text messages on average were sent from a GSM subscription per month (24) • Average monthly revenues per customer were EUR 42.0 (42.1) • Annualized customer churn remained low and was 9.5% (9.5% ) • Interim Report 4-6/2001 11

Profitability of business areas Service Businesses EUR million Q2/2001 Q2/2000 % Q1/2001 Revenues SmartTrust 5 4 25 6 5 2 150 2 Zed 84 64 31 55 Other Services 94 70 34 63 Total EBI TDA SmartTrust (18) (13) (38) (18) (34) (16) (113) Zed (43) (19) (28) 32 (28) Other Services (71) (57) (25) (89) Total Half of Zed’s revenues came from outside Finland • SmartTrust’s order backlog was EUR 18 million at the end of June • EBI TDA losses of Zed and Other Services decreased on January-March • Interim Report 4-6/2001 12

Profitability of business areas Sonera Telecom EUR million % Q2/2001 Q2/2000 2000 7 1,020 Revenues 243 260 83 (29) 300 59 EBI TDA (46) 162 52 28 Operating profit Revenues from fixed network voice and data services were EUR 147 million (135) • - domestic voice revenues decreased, while international voice revenues increased - revenues from data services and leased lines rose to EUR 52 million (46): revenues from leased lines grew due to the cable in Russia, and revenues from both businesses were held back by the reduction in the price level Revenues from equipment sales and other operations were EUR 40 million (35) • Interim Report 4-6/2001 13

Associated companies EUR million Equity income in associated companies Q2/2001 Q2/2000 2000 147 Mobile 2G associated companies (41) 44 (2) Mobile 3G associated companies (10) - 38 Fixed network associated companies 10 7 4 Other associated companies - 3 (66) Amortization of goodwill (15) (16) 121 Total (56) 38 Equity income in associated companies was weakened by the loss of EUR 23 million • booked from Turkcell and the loss of EUR 32 million booked from Fintur (Q1/01) Turkcell’s performance in 2001 is weakened by the exchange rate losses resulting • from the devaluation, the decline in the economy in Turkey, and one-time expenses Interim Report 4-6/2001 14

Financial income and expenses EUR million Change Q2/2001 Q2/2000 2000 Dividend income 21 12 4 8 I nterest income 82 45 5 40 I nterest expenses (155) (75) (23) (52) Capitalized interest expenses 12 - 12 20 23 Other fin. income and exp. (3) 1 (4) Exchange gains (losses) - (1) (2) 1 (9) Total (10) (15) 5 Interest income includes EUR 41 million from the EUR 2.7 billion shareholder • loan to the German associated company Interim Report 4-6/2001 15

Balance sheet June 30, Dec 31, EUR million Change 2001 2000 Fixed assets 1,393 1,381 12 Long-term investments 5,914 4,779 1,135 I nventories and current receivables 739 3,458 (2,719) Short-term investments 1,915 68 1,847 Cash and cash equivalents 84 88 (4) Total 10,045 9,774 271 Shareholders’ equity and minority int. 3,973 3,249 724 Long-term debt 2,586 1,842 744 Current debt 2,755 3,955 (1,200) Non-interest bearing liabilities 731 728 3 Deutsche Telekom shares have been presented under short-term investments. The • carrying value of the shares is about EUR 1.8 billion and the market value about EUR 1.9 billion. As distinct from the previous practice, the German shareholder loan receivable of • about EUR 2.7 billion has been presented under long-term investments. Interim Report 4-6/2001 16

Financial position Sale of VoiceStream and Powertel completed according to plan on • May 31 Of the EUR 3.25 billion bridge loan, EUR 1.1 billion has been repaid by • asset sales, and EUR 1.3 billion by a long-term loan facility; the remaining EUR 0.9 billion will be repaid by October 2001 Equity-to-assets ratio was 40% and gearing ratio was 128% at the end • of June, to improve significantly by year end Investments in German Group 3G capped at the current EUR 3.6 billion • The UMTS strategy in Norway will be adjusted, or the project will be • abandoned Sonera has committed to ”solid investment grade” level in credit ratings • Interim Report 4-6/2001 17