interim report january – september 2014...1 interim report january – september 2014 johan...

1

Interim ReportJanuary – September 2014

Johan DennelindPresident & CEO

Capital Markets Day – summary

20142015

2016

2013

2018

2017

Deliver onpotential

Transform & step up

Transform& perform

Stabilize& shape

Bigchanges

The New

TeliaSonera

2

2

Shaping a new generation telco

• SEK 4–5 billion investment in additional growth initiatives in 2015–2016

• Primarily acceleration of Swedish fiber roll-out, new B2B offerings and data networks in Eurasia

3

• SEK 2 billion investment in business transformation in the next two years

• Net savings with a yearly run rate of SEK 2 billion during 2017

• Target to distribute an annual dividend of at least SEK 3 per share for the fiscal years 2014 and 2015

Steady development in the third quarter

• Organic service revenues nearly unchanged - flat EBITDA* margin

• Continued growth in Swedish B2C business - challenges in B2B

• Improved earnings trend in Europe - encouraging development in Finland

• Solid profitability in Eurasia

• Further effects of our upgrade of governance and control

4

* Excluding non-recurring items

3

Stable group margin

* Excluding non-recurring items **Excluding license and spectrum fees

• Organic sales growth impacted by reduced equipment sales in Spain

• EBITDA * declined by 0.9 percent in local currencies – margin unchanged

Net sales & EBITDA margin*

25,416 25,464

Q3 13 Q3 14

37.1%37.1%

SEK million

-2.0% local organic

CAPEX** & CAPEX-to-sales**

3,641 3,782

0.000

1.000

2.000

3.000

4.000

Q3 13 Q3 14

14.9%14.3%

• Continued focus on investments to support data growth in mobile and fixed

SEK million

5

Group service revenues almost unchanged

Local organic service revenue growth

• Positive growth in Eurasia and B2C offset by pressure in B2B

-10%

-5%

0%

5%

10%

Q1 14 Q2 14 Q3 14

B2C (Sweden & Europe) B2B (Sweden & Europe) Eurasia

• Group organic service revenues declined by 0.6 percent in Q3

• Slight slowdown in Eurasia and easing pressure in Europe

Local organic service revenue growth

-10%

-5%

0%

5%

10%

Q1 14 Q2 14 Q3 14

Sweden Europe Eurasia Group

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4

Stable sales in Sweden


• Local organic service revenue declined by 1.2 percent, as positive growth in B2C was offset by decline in B2B

• Margin drop due to weather related costs, higher equipment sales and change in product mix


8,883 8,985

Q3 13 Q3 14

40.5%43.2%

SEK million0.2% local organic


1,150 1,184

0.000

1.000

Q3 13 Q3 14

13.2%12.9%

• Continued expansion of fiber network

• 4G coverage now exceeds 96 percent of population

SEK million

7

Increased profitability in Europe


• Organic sales growth impacted by low equipment sales in Spain – easing pressure on service revenue growth

• Margin supported by improvements in Finland and Spain


10,275 9,982

Q3 13 Q3 14

27.2%24.9%

SEK million

-8.1% local organic


1,0961,152

0.000

1.000

Q3 13 Q3 14

11.5%10.7%

• Further roll-out of 4G services across our markets

• Accelerated CAPEX in Norway

SEK million

8

5

Continued positive trend in Finland

* Excluding non-recurring items **In local currency


3,0593,222

Q3 13 Q3 14

33.0%32.0%

SEK million-0.7% local organic

• Positive service revenue growth despite reduced mobile interconnect rates

• Continued growth in B2C and easing pressure in B2B

9

External service revenue growth**

-10%

-8%

-6%

-4%

-2%

0%

2%

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14

• Profitability supported by easing top-line pressure and cost savings

Margin remains high in Eurasia


• Slight slowdown in organic revenue growth

• Positive subscriber additions in all countries

• Focus on strengthening governance and control


5,291 5,467

Q3 13 Q3 14

52.9%53.9%

SEK million

+5.4% local organic


1,087

975

0.000

200.000

400.000

600.000

800.000

1,000.000

Q3 13 Q3 14

17.8%20.5%

SEK million

10

• Continued investments to support mobile data growth

6

Slower growth, improved margin in Kazakhstan



2,0981,897

0.000

Q3 13 Q3 14

55.6%54.6%

SEK million

+0.5% local organic

• Service revenue growth impacted by regional price adjustments – continued high profitability

• Focus on strengthening corporate governance

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Data as share of service revenues

0%

5%

10%

15%

20%

25%

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14

• Data revenue growth 26 percent in Q3

• The share of data has increased to around 19 percent of service revenues

Corporate governance and sustainability actions

• Country, Institutional and Operational risk assessments performed

• Virtually all staff in Eurasia have done anti-corruption face to face training

• Implementation of Speak-Up Line, available 24/7

• First transparency report published in August

• Signed UN Global Compact call to action on anti-corruption

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7

Interim ReportJanuary-September, 2014

Christian LuigaSenior Vice President and CFO

Stable EBITDA in first nine-months 2014

Jan-Sep 2014

Jan-Sep

2013

Change(%)

Net sales (SEK million) 74,454 75,311 -1.1

Change local organic (%) -1.7

EBITDA* (SEK million) 26,620 26,856 -0.9

Change local organic (%) -0.2

EBITDA* Margin (%) 35.8 35.7

EPS (SEK) 2.67 2.95 -9.5

Free cash flow (SEK million) 11,412 14,184 -19.5

14


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Sales growth impacted by Spain

Impact on organic sales growth* - Q3 2014

24

25

26

+0.5%

-0.6%

+1.1%

-0.4%-2.0%

+0.3%

15

SEK billion

* In local currencies and excl. acquisitions and disposals ** Excluding Spain

-2.9%

Mixed EBITDA development in the regions

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EBITDA*, Region Sweden

Q3 13 Q3 14

3,8403,637

EBITDA*, Region Europe

-6.0% local organic

EBITDA*, Region Eurasia

+1.1% local organic +4.5% local organic

Q3 13 Q3 14

SEK million

Q3 13 Q3 14

SEK million

2,555 2,7162,854 2,890


SEK million

• EBITDA* decline mainly explained by weather related costs and higher equipment sales

• Profitability supported by improvements in Finland and Spain

• Solid growth in Nepal and Uzbekistan

• Stabilized development in Azerbaijan

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EBITDA**

Higher profitability in Spain despite sales decline

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Spain - net sales split*

0

500

1,000

1,500

2,000

2,500

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14

Billed Interconnect Equipment Other

SEK millionSEK million

* Stable FX ** Excluding non-recurring items and gains from tower sales

-100

-50

0

50

100

150

200

250

300

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14

• Equipment revenues down by two-thirds

• Service revenues declined by 4.9 percent

• Continued EBITDA** improvement

• Slight increase in subscription base

Investing in improved internet experience

CAPEX* & CAPEX-to-sales*

0

200

400

600

800

1,000

1,20010.7%

11.5%20.5%

17.8%

13.2%

EurasiaEuropeSweden

Q3 13 Q3 14 Q3 13 Q3 14Q3 13 Q3 14

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* Excluding license and spectrum fees

• Approximately 70 percent of CAPEX in Sweden related to fiber and 4G

• Approximately 50 percent of CAPEX in Europe invested in fiber and 4G

• Continued build out of coverage and capacity in Eurasia

12.9%

SEK million

10

Free cash flow impacted by higher cash CAPEX

19

Free Cash Flow

6.47.37.3

SEK billionSEK billion

+0.1+0.1

-0.3-0.3

0.00.0

-0.0-0.0-0.6-0.6

Free Cash Flow

6.47.3

SEK billion

+0.1

-0.3

0.0

-0.0-0.6

-0.2 -0.1

+0.1


Reduced net debt

20

Net debt Net debt

Q2 2014 Cash flowfrom

operatingactivities

Cash CAPEX Otherinvestingactivities

Minoritydividend

FX & other Q3 2014

59.367.1

SEK billion

-2.1-10.7

+0.4+4.3 +0.4

• Net debt declined by nearly SEK 8 billion in the third quarter

• Positive impact from MegaFondividend of SEK 1.9 billion net of taxes and AF Telecom payment of SEK 2.1 billion

• Net debt/EBITDA reduced to 1.68x (1.90x in the second quarter)

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EPS impacted by non-recurring items

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Earnings per share, SEK

Q3 2013 Operat. Assoc.comp

Non-recitems

FX Net fin Taxes Min int Q3 2014

0.941.07

-0.04-0.03

-0.08 -0.03

+0.02 0.00 +0.03

• Non recurring items include SEK -247 million related to settlement of property leasesin Sweden and SEK -615 million write down in Eurasia

2014 full-year outlook reiterated

* In local currencies, excluding acquisitions and disposals** Excluding non-recurring items *** Excluding license and spectrum fees

Outlook 2014 9M 2014

Net sales* Slightly below 2013 level -1.7%

EBITDA margin**Around 2013 level(35%)

35.8%

CAPEX-to-sales ratio*** Around 15% 13.2%

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12

Q&A

Dividend policy

• The company shall target a solid investment grade long-term credit rating (A- to BBB+)

• TeliaSonera shall target to distribute an annual dividend of at least SEK 3 per share for the fiscal years 2014 and 2015

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13

Organic revenue growth Q3 2014

Revenue growth (%)Q3 2014

Reportedgrowth

of whichcurrency

of whichacquisitions and

disposals

of which organic

Region Sweden +1.1 - +0.9 +0.2

Region Europe -2.8 +5.0 +0.3 -8.1

Region Eurasia +3.3 -2.1 - +5.4

The Group +0.2 +1.8 +0.4 -2.0

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Statement of cash flows Q3 2014

SEK million Q3 2014 Q3 2013 Diff

EBITDA excluding non-recurring items 9,439 9,419 +20

Dividends received from associates 2,003 2,043 -40

Interest paid (net) -283 -109 -174

Income taxes paid -896 -836 -60

Payment of restructuring provisions -105 -220 +115

Diff between paid/recorded pensions -70 24 -94

Changes in working cap and other items 620 741 -121

Cash flow from operating activities 10,709 11,062 -353

Cash CAPEX -4,321 -3,754 -567

Free cash flow 6,387 7,308 -921

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14

Financial key ratios

Sep 30, 2014 Dec 31, 2013

Return on equity* 14.6 15.9

Return on capital employed* 14.4 13.9

Equity/assets ratio 40.1 39.5

Net debt/equity ratio 57.6 55.8

Net debt/EBITDA* ratio 1.68 1.57

Net debt/assets ratio 23.1 22.1

* Rolling 12 months

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Debt Maturing next 12 months – 2014 and onwards

Debt Portfolio Maturity Schedule – 2014 and onwards

Debt maturity scheduleMMO

0

1

2

3

4

5

6

Oct 14

Nov 14

Dec 14

Jan 15

Feb 15

Mar 15

Apr 15

May 15

Jun 15

Jul 15

Aug 15

Sep 15

0

2

4

6

8

10

12

14

16

18

2014 2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050 2053 2056 2059 2062

SEK billion

SEK billion

Debt per Q3 2014

• Gross debt SEK 94.0 bn

• Net debt SEK 59.3 bn

• Net debt/EBITDA 1.68

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15

Liquidity position TeliaSonera Group

Committed bank lines Maturity Size Amount undrawn

Syndicated revolving credit facility

Dec 2017 EUR 1 billion EUR 1 billion

Revolving credit facility June 2017 EUR 1 billion EUR 1 billion

Cash and cash equivalents, less blocked funds approx. SEK 24.0 billion

September 30, 2014

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TeliaSonera AB long-term ratings migration history 2002-to-today

TeliaSonera AB credit ratings (A3/A-)

0

1

2

3

4

5

Q1- 02 Q4- 04 Q4- 07 Q4- 08 Q4- 09 Q4- 10 Q4- 11 Q4- 12 Q4 13

AAAA-A+AA-

Moody’s (A3/P-2)

• January 8, 2003, lowered long-termdebt rating to A2

• November 1, 2006, outlook changed to Negative

• October 30, 2007, lowered long- and short-term debt rating to A3 and P-2 respectively

• May 4, 2012, Outlook changed from Negative to Stable

• May 7, 2013, rating confirmed, Outlook Stable






Moody’s (A3/P-2)






Standard & Poor’s (A-/A-2)

• February 5, 2003, lowered long-term debt rating to A

• October 28, 2005, lowered long-term debt rating to A- and short-term debt rating to A-2

• January 28, 2013, ratings confirmedOutlook: Stable

• January 27, 2014, ratings confirmedOutlook Stable





Standard & Poor’s (A-/A-2)





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16

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 TeliaSonera.

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interim report january – september 2014...1 interim report january – september 2014 johan...

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