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Q2 INTERIM REPORT JANUARY JUNE 2017 JOHAN DENNELIND, PRESIDENT - PowerPoint PPT Presentation

Feb 26, 2024 •324 likes •557 views

Q2 INTERIM REPORT JANUARY JUNE 2017 JOHAN DENNELIND, PRESIDENT & CEO HIGHLIGHTS - Q2 2017 COST INITIATIVES LAUNCHED FEWER FIBER INSTALLATIONS IN SWEDEN CASH FLOW EXECUTION & IMPROVING EBITDA TREND IN FINLAND COST SIDE

  1. Q2 INTERIM REPORT JANUARY – JUNE 2017 JOHAN DENNELIND, PRESIDENT & CEO

  2. HIGHLIGHTS - Q2 2017 COST INITIATIVES LAUNCHED FEWER FIBER INSTALLATIONS IN SWEDEN “CASH FLOW EXECUTION & IMPROVING EBITDA TREND IN FINLAND COST SIDE ASSOCIATES - DIVIDENDS AND DIVESTMENT ADDRESSED” EURASIA UPDATES CASH FLOW FOCUS YIELDING 2

  3. SOFT GROUP DUE TO SWEDEN SERVICE REVENUE DEVELOPMENT EBITDA DEVELOPMENT Organic growth, external service revenues Organic growth, excluding adjustment items Continuing operations Continuing operations -0.6% -3.3% Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 • Service revenue growth in 5 of 7 markets • Double digit growth in Norway • Pressure on fiber installation revenues in Sweden • Finland back to growth (-1.0 p.p. on growth) • Negative development in Sweden • Less focus on low margin revenues in Telia Carrier 3

  4. EXECUTING ON STRATEGY - COMPETITIVE OPERATIONS REAP THE FULL BENEFIT OF STRUCTURAL STRUCTURAL CHANGES ITS* COMPLEMENTED BY INITIATIVES TO REACH AND TRANSFORMATION STRUCTURAL AND SHORT FURTHER POTENTIAL EBITDA SUPPORTED BY ITS* TERM INITIATIVES LAUNCHED IN 2014 LAUNCHED IN H1 2016 2017 2018 2019 Structural initiatives coupled with short-term cost initiatives across the group with emphasis on Sweden 4 * Invest to save program

  5. SWEDEN COST TAKE-OUT H2 2017 SWEDEN OPEX* DEVELOPMENT Reported currency, actuals and estimate for H2 2017 • OPEX to be reduced by ~5 percent in H2 2017 • Main drivers +8% -5% • Resource reductions (~650 resources or 4,305 ~8 percent of total resources) 4,058 3,987 • Service operation optimization • IT & Network • General external spending H1 2016 H1 2017 H2 2016 H2 2017e * Adjusted external OPEX, excluding pension one-off item reported in Q4 2016 5

  6. AT LEAST 3 PERCENT COST REDUCTION IN 2018 • At least 3 percent reduction to targeted cost 38 CUSTOMER base of around SEK 38 billion OPERATIONS • To reduce ~850 resources in H2 2017 – 3 percent of total resources At least • Further resource reductions in 2018 IT & -3% NETWORKS • Increased efficiency through • Further centralization • Process/product simplification SG&A • Resource costs Targeted cost base* (SEK in billions) * Full year cost base excluding equipment related COGS 6

  7. COST REDUCTION SUMMARY REDUCTION AND DRIVERS IMPACT GROUP TARGETED COST BASE EBITDA 2017-2018  2017 outlook reiterated  Around 850 resources to be taken out H2 2017  New structural initiatives to drive further cost  reductions 2018-2019 Structural cost reductions to lower costs by at least 3 percent in 2018 SWEDEN OPEX 2017 OPERATIONAL FREE CASH FLOW  To decline by ~5 percent H2 2017 vs. H2 2016  Improved 2017 outlook  Around 650 resources to be taken out H2 2017  Cost and other initiatives to support operational  free cash flow growth 2018-2019 Equal to ~8% of total resources 7

  8. FIBER ROLL-OUT PACE DROP ERODED SWEDEN EBITDA FIBER REVENUES Reported currency, SEK in millions, B2C • At 1.6 million homes passed, Telia remains the largest player • Positive recurring fiber revenue trend Fiber installation revenues • Fiber installation revenues negatively impacted Q2 by permit 473 Recurring fiber revenues +25% and other intermediary related issues • Total installation revenues 2017 likely to be 15-20 percent 357 lower than in 2016, consequently lower CAPEX 273 • Fiber prices adjusted 193 138 134 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 = Q2 2017 y-o-y growth 8

  9. PERFORMANCE IN NORWAY REMAINS STRONG SERVICE REVENUES* & EBITDA** REWARDS, ACHIEVEMENTS AND M&A SEK million, reported currency & organic growth SYNERGY RUN-RATE TARGET OF NOK 0.4 BILLION BY YEAR-END 2017 REMAINS +3.1% 2,186 1,807 +12.9% BEST MOBILE NETWORK FOR THE SECOND YEAR IN A ROW 879 705 98 % Q2 16 Q2 17 Q2 16 Q2 17 98 PERCENT POPULATION COVERAGE, >2 YEARS Service revenues EBITDA BEFORE THE REGULATORY REQUIREMENT • Organic revenue and EBITDA growth driven mainly by strong wholesale development 900 MHZ SPECTRUM ACQUIRED TO SECURE QUALITY AND SUPPORT 5G IN THE FUTURE 9 = Organic growth * External service revenues ** Excluding adjustment items

  10. NEBULA ACQUIRED AND EBITDA TREND BROKEN NEBULA - FINANCIAL TRACK RECORD SERVICE REVENUES* & EBITDA** In local currency, reported figures SEK million, reported currency & organic growth +1.8% 40 50% 2,913 2,739 40% 30 30% +0.8% EUR in millions 20 1,038 20% 987 10 10% 0 0% Q2 16 Q2 17 Q2 16 Q2 17 2013 2014 2015 2016 Service revenues EBITDA Net sales EBITDA EBITDA margin • Mobile revenues continue to develop positively • Solid financial development and offset pressure on fixed revenues • Synergies expected over time mainly from cross • Cost measures taken are starting to be visible in selling EBITDA and will provide support going forward 10 = Organic growth * External service revenues ** Excluding adjustment items

  11. Q2 INTERIM REPORT JANUARY – JUNE 2017 CHRISTIAN LUIGA, EXECUTIVE VICE PRESIDENT & CFO

  12. LOWER FIBER REVENUES AND HIGHER COSTS IN SWEDEN SERVICE REVENUES* & EBITDA** SERVICE REVENUES* BY SEGMENT Organic growth SEK million, reported currency & organic growth -2.7% B2C B2C incl. fiber installation revenues B2C excl. fiber installation revenues 8,028 7,826 -7.0% 0.0% 3,509 3,268 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 -2.6% B2B -4.1% Q2 16 Q2 17 Q2 16 Q2 17 Service revenues EBITDA • Continued pressure on legacy revenues, lower • Fiber installation revenues down by 46 percent y-o-y fiber installation and wholesale revenues • Flat B2C if excluding the impact from fiber • Negative sales mix and elevated costs burdened • Stabilization in B2B continues EBITDA 12 = Organic growth * External service revenues ** Excluding adjustment items

  13. ESTONIA STABLE BUT DENMARK NEGATIVE SERVICE REVENUES EBITDA* Organic growth, external service revenues SEK million, reported currency & organic growth +13.5% Estonia Lithuania Denmark -0.2% +1.0% 292 281 -7.7% 216 205 +0.4% 159 153 -1.5% Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q2 16 Q2 17 Q2 16 Q2 17 Q2 16 Q2 17 Lithuania Denmark Estonia • Mobile revenue growth of 5.6 percent but pressure • Stable development in Estonia on fixed revenues in Estonia • Lithuania held back by higher marketing and • Strong development in Lithuania due to growth in low resource costs margin transit-service revenues (~12 p.p. impact) • Pressure on EBITDA in Denmark from lower service • Flat mobile development and pressure on fixed revenues revenues in Denmark 13 = Organic growth * Excluding adjustment items

  14. CONTINUED RECOVERY IN EURASIA TRENDS IN KAZAKHSTAN TRENDS IN EURASIA Organic growth Organic growth, excluding Nepal Service revenues* Service revenues* EBITDA** EBITDA** 11% 6% -1% -6% Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 • Commercial and operational initiatives • Continued financial recovery launched 2016 are paying off • Capitalizing on performed price and • Revenue and EBITDA continue to grow portfolio adjustments in the majority of markets • Progress on strategic cost reduction • EBITDA growth of 14 percent if excluding projects provision in Uzbekistan 14 * External service revenues **Excluding adjustment items

  15. CAPEX STARTS TO DECREASE 2017 DESPITE M&A LIIGA CASH IMPACT LOWER CASH CAPEX 2017 LIIGA BOOKED CAPEX Illustrative Illustrative Illustrative Booked CAPEX Cash CAPEX Cash CAPEX 2016 2017e 2016 2017e 2018e 2016 2017e 2018e Non-fiber CAPEX Fiber CAPEX CAPEX (incl. fiber) Liiga CAPEX (incl. fiber) Liiga Phonero & Nebula • H1 2017 CAPEX down by SEK 0.6 • CAPEX of SEK 1.1 billion for • Even including Liiga, cash billion equal to 9 percent Liiga rights booked Q2 2017 CAPEX will decline further 2018, mainly related to a lower fiber • 2017 also includes cash CAPEX in • Impact on cash CAPEX starting roll-out pace Phonero and Nebula H2 2018 15

  16. IMPROVED CASH FLOW Q2 DUE TO TURKCELL DIVIDEND OPERATIONAL FREE CASH FLOW TREND FREE CASH FLOW BRIDGE- Q2 Continuing operations, rolling twelve months (R12) Continuing operations, SEK in billions +0.2 2.5 +0.8 Operational free cash flow, R12 10 1.8 7.8 8 SEK in billions -0.3 6 TURKCELL 4 DIVIDEND 2 0 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q2 16 EBITDA Associate Other Q2 17 dividends Dividends from MegaFon and Turkcell to be SEK 2.8 billion in 2017 given current exchange rates 16

  17. LEVERAGE HEADROOM DESPITE LEGAL SETTLEMENT CURRENT AND ILLUSTRATIVE PRO FORMA LEVERAGE* Leverage, illustrative purpose only LEVERAGE TARGET 2.0X +/- 1.8x 0.5X 1.5x 1.4x 1.4x 1.3x + Uzbek legal + + + settlement Actual Second provision Nebula Associate Q2 2017 dividend acquisition dividends to be tranche received Q3 & Q4 * Actual leverage Q2, expected dividend from associates to be received H2 2017, the 2 nd dividend tranche to be paid and the Uzbek legal settlement provision per June 2017 17

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