Telenor Group – Second Quarter 2014 Jon Fredrik Baksaas, CEO
Disclaimer The following presentation is being made only to, and is only directed at, persons to whom such presentation may lawfully be communicated (’relevant persons’). Any person who is not a relevant person should not act or rely on this presentation or any of its contents. Information in the following presentation relating to the price at which relevant investments have been bought or sold in the past or the yield on such investments cannot be relied upon as a guide to the future performance of such investments. This presentation does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite, subscribe for or otherwise acquire securities in any company within the Telenor Group. The release, publication or distribution of this presentation in certain jurisdictions may be restricted by law, and therefore persons in such jurisdictions into which this presentation is released, published or distributed should inform themselves about, and observe, such restrictions. This presentation contains statements regarding the future in connection with the Telenor Group’s growth initiatives, profit figures, outlook, strategies and objectives. In particular, the slide “Outlook for 2014” contains forward- looking statements regarding the Telenor Group’s expectations. All statements regarding the future are subject to inherent risks and uncertainties, and many factors can lead to actual profits and developments deviating substantially from what has been expressed or implied in such statements. 2
Q2 2014 Data growth and margin expansion • 4 million new mobile subscribers • 4% underlying mobile service revenue growth • Increased data consumption driving growth • 36% EBITDA margin and 6% organic growth in EBITDA EBITDA before other items 3
Q2 2014 Increasing data usage driving revenue growth in Norway Mobile ARPU (NOK per month) and median data usage (MB per user) • 5% underlying growth in mobile subscription and 304 294 traffic revenues 284 287 282 280 • 6% growth in fixed Internet and TV revenues • 232 Mobile tariff adjustments implemented in May to 180 156 147 align with increasing data consumption 123 95 • Continued investments in high-speed networks, Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 with 4G population coverage approaching 80% • Revenues (NOK m) and OCF margin (%) Modernisation of fixed value chain and efficiency initiatives 6 504 6 479 6 274 6 276 6 165 6 153 28% 28% 28% 26% 24% 21% Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Median usage of active data users with >50 KB per month 4 Operating cash flow (OCF) = EBITDA margin before other items, minus capex excl licence fees
Q2 2014 Solid quarter in Sweden, while Denmark remains challenging Sweden - Revenues (NOK m) and EBITDA margin Denmark - Revenues (NOK m) and EBITDA margin 2 996 2 884 2 838 2 766 2 672 2 539 -1% 1 298 1 246 1 231 1 207 1 192 1 166 -12% 34% 31% 30% 29% 28% 28% 24% 21% 18% 18% 16% 11% Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 • 6% mobile service revenue growth excl. IC • Continued ARPU pressure and handset-related discount • 15% EBITDA margin excl cost related to • 2.5pp underlying growth in EBITDA margin transformation programme Organic revenue growth Organic growth assuming fixed currency, adjusted for acquisitions and disposals. 5 EBITDA and EBITDA margin before other items. Capex excl licence fees
Q2 2014 Top-line pressure in Thailand, steady performance in Malaysia dtac - Revenues (NOK m) and EBITDA margin DiGi - Revenues (NOK m) and EBITDA margin 4 792 4 732 3 272 4 519 3 230 3 173 3 136 3 142 3 005 4 187 4 069 4 029 +6% - 11% 46% 45% 45% 37% 45% 45% 36% 43% 33% 31% 32% 30% Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 • • 4% growth in subscription & traffic revenues Reduced MTR, intense competition and weak macro impacting revenues • Growth driven by increasing data usage • and modernised data network Progress on regulatory cost savings Organic revenue growth Organic growth assuming fixed currency, adjusted for acquisitions and disposals. 6 EBITDA and EBITDA margin before other items. Capex excl licence fees
Q2 2014 Healthy growth and margin uplift in Bangladesh and Pakistan Bangladesh - Revenues (NOK m) and EBITDA margin Pakistan - Revenues (NOK m) and EBITDA margin 2 025 1 555 1 961 1 939 1 895 1 433 1 788 1 395 1 346 1 340 1 672 1 286 +10% +6% 54% 54% 53% 51% 51% 48% 42% 40% 39% 39% 38% 35% Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 • • Solid growth and good momentum on 3G spectrum (2.1 GHz) acquired in April, operational excellence commercial service launch in June Organic revenue growth Organic growth assuming fixed currency, adjusted for acquisitions and disposals. 7 EBITDA and EBITDA margin before other items. Capex excl licence fees
Q2 2014 Strengthening the challenger position in India Revenues (NOK m) Other circles 6 circles • Strong subscriber and revenue growth 1021 919 836 • 2.0 million new subscribers 728 729 708 • +46% 11% organic ARPU growth • 46% organic revenue growth • Redeployment of 5,000 sites ongoing Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 • 1,325 new sites on air in 1H • Expected completion in Q3 Operating cash flow (NOK m)* • 32% growth in active Internet users YTD Other circles 6 circles -137 -194 -192 -.200 -236 -221 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Organic revenue growth *) Excl bonus pay-out in Q4 2013 8
Priorities going forward • Implementation of efficiency programmes • Continued development of performance management • Profitable growth from mobile data through Internet for All strategy 9
Telenor Group – Second Quarter 2014 Richard Olav Aa, CFO
Q2 2014 Organic revenue growth of 1.6% Revenues (NOK m) and revenue growth Organic revenue growth decomposition (pp) 27 611 26 803 26 515 25 953 25 747 -0.5 24 716 0.7 0.0 -1.5 2.9 1.6 1.6 % 1.5 % 1.6 % 1.0 % 0.7 % 0.3 % Mobile Devices Other Fixed Interconnect Group service revenues voice Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 revenues Organic revenue growth in fixed currency, adj. for acquisitions and disposals. 11
Q2 2014 Underlying mobile service revenue growth of 4% Organic mobile subs. & traffic revenue growth 16% 14% 12% 10% 8% 6% 4% 2% 0% Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q1 14 Q214 -2% -4% Norway Europe Asia Group Organic revenue growth in fixed currency, adj. for acquisitions and disposals. 12 Organic growth in Sweden adjusted for handset-related discount
Q2 2014 36% EBITDA margin and 6% organic growth in EBITDA EBITDA (NOK m) and EBITDA margin EBITDA breakdown (NOK m) 9 619 9 616 9 298 8 993 8 857 177 9 616 236 8 423 168 178 8 857 37% 36% 35% 34% 34% 33% Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q2 13 GP Norway Other Q2 14 Globul & Myanmar EBITDA and EBITDA margin before other items 13
Q2 2014 Operating cash flow of NOK 5.6 billion OCF (NOK m) and OCF margin OCF development (NOK m) 5 889 581 5 632 5 604 5 555 5 632 5 374 5 374 -1 -209 -115 4 416 22% 23% 21% 21% 21% 16% Q2 13 Gross profit Opex Capex Globul & Q2 14 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 excl Globul Myanmar Operating cash flow from continuing operations, excluding licence fees. 14 Operating cash flow defined as EBITDA before other items less capex
Q2 2014 Net income of NOK 2.3 billion NOKm Q2 14 Q2 13 Revenues 26 803 25 747 EBITDA before other items 9 616 8 857 • Norway (-39m), Other units (-113m) Other items -196 -94 EBITDA 9 421 8 763 Depreciation and amortisation -3 736 -3 391 • VimpelCom (-321m) • CMore (-78m) EBIT 5 685 5 372 • Online classifieds (-220m) Associated companies -562 230 Net financials -279 -321 Profit before taxes 4 844 5 281 Taxes -1 649 -1 458 Non-controlling interests -876 -574 Net income to Telenor 2 319 3 249 Earnings per share (NOK) 1.54 2.13 15
Q2 2014 Net debt/EBITDA of 1.1x Net debt (NOK bn) and net debt/EBITDA * Change in net debt (NOK bn) Net debt 31 Mar 2014 37.2 44.4 EBITDA (9.4) 39.4 Income taxes paid 1.2 37.8 37.2 Net interest paid 0.4 31.7 Capex paid 4.2 28.9 Net proceeds from divestments (1.2) Dividends paid to Telenor shareholders 10.1 Dividends paid to minorities 0.9 1.1 1.1 1.1 Revenue share in dtac (0.5) 1.0 1.0 0.9 Currency effects 0.9 Other changes in working capital 0.6 Net change 7.2 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Net debt 30 Jun 2014 44.4 *) 12 months rolling EBITDA. Excl licence commitments 16
Q2 2014 Outlook for 2014 2014 2014 YTD FY 2013 Organic revenue growth Low single digit 1.6% 0.9% Above 2013 level EBITDA margin 35.8% 34.5% (prev. “In line with 2013”) 14-15% Capex / sales 13.4% 14.1% (prev. “Around 16%”) Group structure as of 30 June 2014, excl Myanmar Organic revenue growth in fixed currency, adj. for acquisitions and disposals. EBITDA before other items. Capex excl. licence fees. Exchange rates as of 30 June 2014 17
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