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1
Q1JOHAN DENNELIND,
PRESIDENT & CEO
INTERIM REPORT
JANUARY – MARCH 2017
PHONERO TRANSACTION CLOSED PHONERO TRANSACTION CLOSED
TELIA BRAND IN ALL MARKETS TELIA BRAND IN ALL MARKETS
MOBILE REVENUES DRIVING GROWTH MOBILE REVENUES DRIVING GROWTH
EBITDA IN LINE WITH OUR EXPECTATIONSEBITDA IN LINE WITH OUR EXPECTATIONS
STRONG CASH FLOW GENERATION STRONG CASH FLOW GENERATION
BALANCE SHEET STRENGTHENED WITH BOND ISSUEBALANCE SHEET STRENGTHENED WITH BOND ISSUE
Q1 2017 HIGHLIGHTS- NORDICS & BALTICS
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“HAPPY WITH REVENUE GROWTH, BUT NOT
WITH COSTS”
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REVENUE GROWTH IN MAJORITY OF MARKETSREVENUE GROWTH IN MAJORITY OF MARKETS
STRONG EBITDA DEVELOPMENT FOR THE REGIONSTRONG EBITDA DEVELOPMENT FOR THE REGION
EXIT FROM TAJIKISTAN COMPLETEDEXIT FROM TAJIKISTAN COMPLETED
UZBEK LEGAL SETTLEMENT PROVISION CHANGED TO
USD 1.0 BILLION (USD 1.45 BILLION)
UZBEK LEGAL SETTLEMENT PROVISION CHANGED TO
USD 1.0 BILLION (USD 1.45 BILLION)
Q1 2017 HIGHLIGHTS- EURASIA UPDATE
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“PROGRESS MADE ON
EURASIA EXIT AND UZBEK LEGAL
SETTLEMENT”
SERVICE REVENUE DEVELOPMENTOrganic growth, external service revenues
Q1 16 Q2 16 Q3 16 Q4 16 Q1 17
Continuing operations
+1.4%+1.4%
-0.9%
Q1 16 Q2 16 Q3 16 Q4 16 Q1 17
HEALTHY REVENUES BUT COSTS TEMPORARILY HIGHER
EBITDA DEVELOPMENTOrganic growth, excluding non-recurring items
• Service revenue growth in 6 of 7 markets
• Revenue growth still hampered by fixed telephony and B2B
• Strong EBITDA growth in Norway partly compensating for Sweden and Finland
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Continuing operations
3
0%
1%
2%
3%
4%
Q1 16 Q2 16 Q3 16 Q4 16 Q1 17
STRONG MOBILE DEVELOPMENT ACROSS MARKETS
MOBILE BILLED SERVICE REVENUESContinuing operations, organic growth y-o-y
Sweden
+1.3%Sweden
+1.3%
MOBILE SERVICE REVENUES Organic growth, Q1 2017 y-o-y
Finland
+5.7%Finland
+5.7%
Norway
+5.3%Norway
+5.3%
Denmark
+4.3%Denmark
+4.3%
+2.6%+2.6%
• Growth in mobile billed service revenues was amplified by strong development in wholesale
• Mobile service revenues grew 2.1 percent in the Baltics
• Finland and Norway stand out but all markets contributed to the mobile billed revenue growth
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STRATEGY REMAINS & PRIORITIES FOR 2017 ARE CLEAR
OPERATIONAL
FREE CASH FLOW
(>SEK 7 BILLION)
EBITDA
(IN LINE WITH
2016 LEVEL)
CAPITAL
ALLOCATION
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STRATEGY PRIORITIES FOR 2017
Enhance
the core
Explore opportunities close
to the core
Value through superior
network connectivity
Customer loyalty
through convergence
Competitive
operations
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MAKING PROGRESS TOWARDS CONVERGENCE VISION
Best digital customer
service
ON THE
CUSTOMER’S
TERMS
LIKE THE...
ON THE
CUSTOMER’S
TERMS
LIKE THE...
SEAMLESS
ACROSS ALL
TOUCH-POINTS
LIKE VIA THE...
SEAMLESS
ACROSS ALL
TOUCH-POINTS
LIKE VIA THE...
DEVICE AND
ACCESS
INDEPENDENT
SUPPORTED BY…
DEVICE AND
ACCESS
INDEPENDENT
SUPPORTED BY… Superior fixed
infrastructure
TELIA CONVERGENCE VISION -B2C
TELIA CONVERGENCE VISION -B2C
Adjacent services like
Telia Sense & Telia Zone
Best mobilenetworks
Value-loaded mobile
portfolio
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• Focus on customers with demand for
seamless, platform independent and
high quality offerings
• Active migration work and trickle down
effect over time
NOW TELIA ACROSS MARKETS
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AFTER REBRANDING IN
LITHUANIA & FINLAND...
...ALL SUBSIDIARIES ARE NOW TELIA
Q1
2016
Q1
2016
Q1
2017
Q1
2017
5
YOUNITE: OUR WAY OF MAKING MORE IMPACT
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UNITED NATIONS
SUSTAINABLE DEVELOPMENT
GOALS
OUR ACTIVE CONTRIBUTION
THE ”ALL IN” STRATEGY YOUNITE
• Connecting the unconnected
• Education for all
• A healthy and safe society
• Digital entrepreneurship and innovation
EMPLOYEE
ENGAGEMENT
STRONG NORWAY TO BECOME EVEN STRONGER
• Approved by the Norwegian authorities and closed
in April
• Purchase price of NOK 2.3 billion
• EV/EBITDA multiple of 3.7x
• Doubling Telia’s enterprise mobile market share
from 13 percent to 27 percent
• Brings a strong product portfolio
• Synergy target of NOK 400 million
• The nature of the synergies in line with previous
M&A made in Norway (NOK 1 billion)
+
10
6
Q1 SUMMARY
EXECUTING ON STRATEGY & PR IORIT IES CLEAR FOR 2017
MORE TO BE DONE ON COSTS
COMFORTABLE ON GUIDANCE
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12
Q1CHRISTIAN LUIGA,
EXECUTIVE VICE PRESIDENT & CFO
INTERIM REPORT
JANUARY – MARCH 2017
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7,745 7,733
3,589 3,360
Q1 16 Q1 17 Q1 16 Q1 17
HIGHER COSTS IMPACTED SWEDEN EBITDA
• Pressure on legacy revenues and an increased cost level burdened EBITDA
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Q1 16 Q2 16 Q3 16 Q4 16 Q1 17
+1.1%+1.1%
-2.9%-2.9%
+1.0%+1.0%
B2B
B2CB2C excl. fiber installation revenues
B2C incl. fiber installation revenues
SERVICE REVENUES BY SEGMENTOrganic growth, external service revenues
• Continued stable B2C segment
• Fiber installation revenues fairly flat y-o-y
• SME/SoHo still positive and B2B large is stabilizing
SERVICE REVENUES* & EBITDA**SEK million, reported currency & organic growth
* External service revenues **Excluding non-recurring items = Organic growth
-6.4%-6.4%
-0.3%-0.3%
ELEVATED COST LEVEL IN SWEDEN
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OPEX DEVELOPMENT SWEDEN Reported currency
+6.2%
Q1 17Other
costs
Customer
experience
Gross
savings*Q1 16 IT
• OPEX development not satisfactory
• Year on year OPEX impacted by:
• More transformation and compliance IT projects in pre-study phases (impacting OPEX and not CAPEX)
• Increased spend on customer experience
• OPEX comparables to come down in the coming quarters
* COGS savings not included in the above chart
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249244
248
259256 257
Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17
EXCEPTIONAL PERFORMANCE IN NORWAY
1,7241,964
665868
Q1 16 Q1 17 Q1 16 Q1 17
SERVICE REVENUES* & EBITDA**SEK million, reported currency & organic growth
+20.7%+20.7%
+5.4%+5.4%
Service revenues EBITDA
• Revenue growth mainly from rise in mobile ARPU and positive wholesale development
• Higher revenues coupled with good cost control resulted in significant leverage on EBITDA
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MOBILE BLENDED ARPULocal currency
• ARPU growth y-o-y from subscription mix and upsell
• Somewhat positive ARPU development Q1 compared to the previous quarter
* External service revenues **Excluding non-recurring items = Organic growth
1,025 1,063
137 140
Q1 16 Q1 17 Q1 16 Q1 17
2,740 2,837
1,016 974
Q1 16 Q1 17 Q1 16 Q1 17
UNDERLYING FLAT EBITDA IN FINLAND & DENMARK
* External service revenues **Excluding non-recurring items
Service revenues EBITDA
= Organic growth
SERVICE REVENUES* & EBITDA**SEK million, reported currency & organic growth
SERVICE REVENUES* & EBITDA**SEK million, reported currency & organic growth
-5.9%-5.9%
+1.5%+1.5%
+0.4%+0.4%
+1.3%+1.3%
Service revenues EBITDA
• Strong mobile revenue growth trend intact
• Elevated cost level due to one-offs including rebranding impacting by ~6 percent
• Pressure on fixed telephony offset by mobile growth
• EBITDA supported by lower resource and marketing expenses
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9
181206
277 283
135 143
Q1 16 Q2 16 Q3 16 Q4 16 Q1 17
Estonia Lithuania Latvia
Q1 16 Q1 17
LithuaniaQ1 16 Q1 17
Latvia
+0.3%+0.3%
Q1 16 Q1 17
Estonia
POSITIVE READ ACROSS THE BALTICS
+11.5%+11.5%
+3.6%+3.6%
+4.9%+4.9%
+0.7%+0.7%
+2.2%+2.2%
SERVICE REVENUESOrganic growth, external service revenues
EBITDA*SEK million, reported currency & organic growth
= Organic growth * Excluding non-recurring items
• Mobile and fixed revenues grew in all markets
• Growth in fixed broadband and TV mitigated pressure from fixed telephony
• Strong development in Estonia from revenue growth together with good cost control
• Lithuania somewhat held back by rebranding costs
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INCREASED TOTAL EPS
TOTAL EPS DEVELOPMENTSEK, continuing and discontinued operations
* Excluding income from associates and non-recurring items
1.61
0.87
Q1 16 Operatingincome*
-0.05
Discontinuedoperations
+0.74
Q1 17Other
+0.82
Non-recurringitems
Associates
-0.04-0.01
+0.02
CONTINUING OPERATIONS
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10
IMPROVED CASH FLOW & LOWER NET DEBT
47.950.8
Q1 17OtherCash
CAPEX
Opera-
tionsQ4 16
1.69x1.69x
1.58x1.58x
= Leverage ratio19
FREE CASH FLOW R12 Continuing and discontinued operations, SEK in billions
NET DEBT DEVELOPMENT*Continuing and discontinued operations, SEK in billions
0
4
8
12
16
20
Q1 16 Q2 16 Q3 16 Q4 16 Q1 17
Discontinued operations
Dividends from associates net of taxes
Continuing operations excl. associates
Continuing operations incl. associates
* Not including hybrid bond issuance and 1st dividend payment (recorded in April)
8.9
BALANCE SHEET FLEXIBILITY FROM HYBRID BOND ISSUE
ATTRACTIVE
TIMING & PRICE
ADDING
INEXPENSIVE
EQUITY TO THE
BALANCE SHEET
ATTRACTIVE
TIMING & PRICE
ADDING
INEXPENSIVE
EQUITY TO THE
BALANCE SHEET
STRONG
COMMITMENT TO
CREDIT RATING &
OUR LEVERAGE
TARGET
STRONG
COMMITMENT TO
CREDIT RATING &
OUR LEVERAGE
TARGET
INCREASED
BALANCE SHEET
FLEXIBILITY TO
PURSUE THE
NORDIC/BALTIC
STRATEGY
INCREASED
BALANCE SHEET
FLEXIBILITY TO
PURSUE THE
NORDIC/BALTIC
STRATEGY
STRENGTHENS
THE AMBITION OF
PROVIDING HIGH
REMUNERATION
TO OUR
SHAREHOLDERS
STRENGTHENS
THE AMBITION OF
PROVIDING HIGH
REMUNERATION
TO OUR
SHAREHOLDERS
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Rating A- confirmed and removed
from S&P’s CreditWatch negative
after issuing the hybrid bond but a
negative outlook was added
Rating A- confirmed and removed
from S&P’s CreditWatch negative
after issuing the hybrid bond but a
negative outlook was added
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0.0
0.5
1.0
1.5
2.0
2.5
Levera
ge r
atio
LEVERAGE HEADROOM DESPITE LEGAL SETTLEMENT
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CURRENT AND ILLUSTRATIVE PRO FORMA LEVERAGE*Leverage, illustrative purpose only
LEVERAGE
TARGET
2.0X
+/-
0.5X
* Actual leverage Q1, hybrid bond issuance of SEK 15 billion, SEK 4.3 billion dividend payment and the Uzbek legal settlement provision per March 2017
1.6x
Actual
Q1 2017
Actual
Q1 2017
Uzbek legal
settlement
provision
Uzbek legal
settlement
provision
1.3x
1.5x
1.8x
Hybrid
bond
Hybrid
bond
Dividend
(1st tranche)
Dividend
(1st tranche)
+ + +
OUTLOOK FOR 2017 UNCHANGED
* Free cash flow from continuing operations, excluding licenses and dividends from associated companies
** 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* *
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12
Q&A
PROGRESS IN OUR DISCUSSIONS WITH AUTHORITIESPROGRESS IN OUR DISCUSSIONS WITH AUTHORITIES
RECENT DEVELOPMENTS HAVE LED TO REVISED
ESTIMATE OF MOST LIKELY OUTCOME
RECENT DEVELOPMENTS HAVE LED TO REVISED
ESTIMATE OF MOST LIKELY OUTCOME
CHANGING PROVISION TO USD 1.0 BILLION
(PREVIOUSLY USD 1.45 BILLION)
CHANGING PROVISION TO USD 1.0 BILLION
(PREVIOUSLY USD 1.45 BILLION)
NO FINAL RESOLUTION HAS BEEN REACHED AND NO
ASSURANCES THAT FINAL AMOUNT MAY NOT DIFFER
NO FINAL RESOLUTION HAS BEEN REACHED AND NO
ASSURANCES THAT FINAL AMOUNT MAY NOT DIFFER
UZBEK LEGAL SETTLEMENT UPDATE
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“PROVISION CHANGED FROM USD 1.45 BILLION TO USD 1.0 BILLION”
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DEBT MATURITY SCHEDULEMMO
0
1
2
3
4
5
6
7
8
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Mar-18
0
2
4
6
8
10
12
2018 2021 2024 2027 2030 2033 2036 2039 2042 2045 2048 2051 2054 2057 2060 2063
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DEBT MATURING NEXT 12 MONTHS
DEBT PORTFOLIO MATURITY SCHEDULE – 2018 AND ONWARDS
SEK billion
SEK billion
FINANCIAL SUMMARY Q1 2017
* External service revenues
** Excluding non-recurring items
Q1 2017 Q1 2016 CHANGE (%)
Net sales (SEK million) 19,252 20,394 -5.6
Change local organic (%) +3.0
Service revenues* (SEK million) 16,506 17,434 -5.3
Change local organic (%) +1.4
EBITDA** (SEK million) 6,149 6,217 -1.1
Change local organic (%) -0.9
EBITDA** Margin (%) 31.9 30.5
Total EPS (SEK) 1.61 0.87
Total free cash flow (SEK million) 4,087 2,293
of which continuing operations 3,861 2,071
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14
MAR 31, 2017 DEC 31, 2016
Return on equity*, % 8.0 4.5
Return on capital employed*, % 9.6 7.7
Equity/assets ratio, % 37.2 34.0
Net debt/equity ratio, % 53.8 58.9
Net debt/EBITDA** ratio, multiple 1.58 1.69
Net debt/assets ratio, % 20.0 20.0
* Rolling 12 months ** Rolling 12 months and excluding non-recurring items
FINANCIAL KEY RATIOS Q1 2017
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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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