Telia Company AB · OMXSTO:TELIA
Telia Company AB — TeliaSonera — Q3 2008 Earnings Presentation
30 slides from Telia Company AB's earnings presentation, October 2008
Slide 1: Interim Report January - September, 2008
Interim Report January - September, 2008 Lars Nyberg President and CEO
Slide 2: Growing sales and strong EBITDA
Growing sales and strong EBITDA Q3 2008 in brief • Net sales SEK 25,817 million (24,798) – In local currencies +3.3% • EBITDA* SEK 8,949 million (8,714) – EBITDA-margin* 34.7% (35.1) • EPS SEK 1.06 (1.20) * Excl. non-recurring items 2
Slide 3: Efficiency measures
Efficiency measures • Improve operational efficiency • Stable EBITDA margin despite price pressure and changing product mix • Half way towards personnel reductions of 2,900 • Focus on net savings, per business area and business unit • Gross savings effect for 2008 above SEK 1.5 billion compared to c
Slide 4: Growth opportunities
Growth opportunities Create leading market positions by organic growth and acquisitions • Grow business in fast-growing and profitable markets – Market size, young and growing population – Low mobile penetration and high economic growth – Cultural fit and co-operation with strong local partners – Ma
Slide 5: Strong business amid global financial turmoil
Strong business amid global financial turmoil • TeliaSonera has a strong balance sheet • Attractive and relatively non-cyclical industry with high barriers to entry • Regulatory intervention, intense competition and customer migration remain primary challenges • Unique position in the Nordic and Bal
Slide 6: Interim Report January - September, 2008
Interim Report January - September, 2008 Per-Arne Blomquist Executive Vice President and CFO
Slide 7: Growing sales and strong EBITDA
Growing sales and strong EBITDA SEK million Q3 2008 Q3 2007 Change % Net sales 25,817 24,798 4.1 EBITDA* 8,949 8,714 2.7 EBITDA* margin 34.7% 35.1% Operating income* 8,203 8,354 -1.8 Non-recurring items -299 -114 162.3 Operating income 7,904 8,240 -4.1 Financial items -818 -335 144.2 Net income** 4,
Slide 8: Growing sales and strong EBITDA
Growing sales and strong EBITDA Jan-Sep Jan-Sep SEK million 2008 2007 Change % Net sales 75,489 71,423 5.7 EBITDA* 24,682 23,813 3.6 EBITDA* margin 32.7% 33.3% Operating income* 22,363 21,120 5.9 Non-recurring items -1,071 -1,023 -4.7 Operating income 21,292 20,097 5.9 Financial items -1,462 -615 13
Slide 9: Net sales trend
Net sales trend 27 100.4 99.4 26 98.0 25.8 96.3 25 25.3 24.8 24.9 SEK billion 24 94.6 24.4 23.9 93.0 23 91.8 22.7 22 21 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Net sales Rolling 4 quarters 9
Slide 10: EBITDA trend (excl. non-recurring items)
EBITDA trend (excl. non-recurring items) 10 32.0 31.9 9 31.7 8.9 8.7 31.6 8 31.6 7.9 SEK billion 7.6 7.7 7.5 7 7.2 31.2 6 31.0 5 4 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 EBITDA Rolling 4 quarters 10
Slide 11: Statement of cash flows Q3 2008
Statement of cash flows Q3 2008 SEK million Jul - Sep 2008 Jul - Sep 2007 EBITDA excluding non-recurring items 8,949 8,714 Dividends received from associated companies - 1,547 Interest paid (net) -542 -409 Income taxes paid -1,010 -925 Payment of restructuring provisions -61 -11 Difference between p
Slide 12: Strong financial key ratios
Strong financial key ratios Sep 30, 2008 Dec 31, 2007 Return on equity* 16.8% 18.6% Return on capital employed* 17.3% 19.4% Equity/assets ratio 50.1% 50.3% Net debt/equity ratio 41.4% 31.8% * Rolling 12 months One of the best rated Telecom Operators in Europe 12
Slide 13: Debt maturity schedule (excl. lease and pension liabilities)
Debt maturity schedule (excl. lease and pension liabilities) September 30, 2008 Debt Maturing next 12 months (SEK million) 2,500 TeliaSonera AB 2,000 TeliaSonera Finland Oyj 1,500 (formerly Sonera Corporation) 1,000 500 0 10/08 11/08 12/08 01/09 02/09 03/09 04/09 05/09 06/09 07/09 08/09 09/09 Debt P
Slide 14: Liquidity position, TeliaSonera Group
Liquidity position, TeliaSonera Group Cash and cash equivalents, less blocked funds approx. SEK 7.6 billion* Committed bank lines Maturity Size Amount undrawn Bilateral credit facility Sep 2010 SEK 2 billion SEK 2 billion Syndicated revolving credit facility Dec 2011 EUR 1 billion EUR 1 billion Bila
Slide 15: Outlook for 2008 unchanged
Outlook for 2008 unchanged Net sales • Expected to show stable growth in the financial year 2008 compared to the previous year – Jan-Sep 2008 +5.7% and in local currencies +5.2% EBITDA-margin • TeliaSonera’s ambition for 2008 is to maintain the EBITDA- margin level of 2007, excl. non-recurring items
Slide 16: Interim Report January - September, 2008
Interim Report January - September, 2008
Slide 17: Appendix
Appendix
Slide 18: Key Financials – Income Statement and Cash Flow
Key Financials – Income Statement and Cash Flow SEK million Jul - Sep 2008 Jul - Sep 2007 Net sales 25,817 24,798 Gross income 11,920 11,433 Margin (%) 46.2 46.1 EBITDA excl. non-recurring items 8,949 8,714 Margin (%) 34.7 35.1 Operating income excl. non-recurring items 8,203 8,354 Margin (%) 31.8 3
Slide 19: Q3 2008 Net Sales +4.1%
Q3 2008 Net Sales +4.1% SEK million • Growth in IP based services and international carrier sales almost compensated for the decline in traditional fixed line services +11 25,817 +499 +591 -82 24,798 • Total growth in local currencies 18.5% through continued volume growth • Maintained market leaders
Slide 20: Q3 2008 Operating Income Year-on-Year
Q3 2008 Operating Income Year-on-Year SEK million • Increased depreciation in common • Net sales +591 function IT -30 • Improved margin due to cost • Capital gain in Q3 2007 from efficiency, while changed interconnect Telefos’ sale of Eltel -631 fees negatively impacted earnings +506 -687 8,354 +167
Slide 21: Q3 2008 Net Sales vs Q2 2008 +2.2%
Q3 2008 Net Sales vs Q2 2008 +2.2% SEK million • Continued decline in traditional • Seasonally lower sales to corporate fixed line services mainly in customers in Other Business Services Sweden not fully compensated by growth in IP services and international carrier +552 -68 -131 25,817 +216 -26 25,
Slide 22: Q3 2008 Operating Income vs Q2 2008
Q3 2008 Operating Income vs Q2 2008 SEK million • Net sales +552 • Differences in cost allocation • Maintained margins in of Common functions to BAs consolidated operations partly between quarters offset by lower income from • Improved result in Holding +25 associated company Turkcell +72 -107 8,203
Slide 23: Credit statistics – TeliaSonera Group
Credit statistics – TeliaSonera Group TeliaSonera Estimates SEK billion Q3 2008 (A) 2007 Gross Debt 58.4 43.6 Cash & Liquidity 1) 7.6 6.7 Net Debt 50.8 36.9 Moody’s Adjusted Net Debt 2) 73.1 55.6 Adjusted Retained Cash Flow 3) 16.3 19.1 Adjusted (RCF/Net Debt) 22% 34% S&P Adjusted Net Debt 4) 64.7 4
Slide 24: TeliaSonera pension obligations
TeliaSonera pension obligations • TeliaSonera uses defined benefit pension plans for most employees in Sweden, Finland & Norway. • TeliaSonera uses Government Bond yields when discounting the Swedish pension liabilities, which account for ca 85% of the total pension liabilities. • TeliaSonera pensio
Slide 25: TeliaSonera pension obligations (cont’d)
TeliaSonera pension obligations (cont’d) Main reasons for the increase in the estimated “pension gap” by some SEK 3.6 billion (est. Q3 2008 vs. YE 2007) • Decrease of discount rate for pension obligations – Pension liabilities increased by SEK 2.4 billion • Negative overall returns on assets (total
Slide 26: TeliaSonera pension obligations (cont’d)
TeliaSonera pension obligations (cont’d) TeliaSonera Group pension related risks • Reduction of the discount rate for pension obligations by 100 bps from a level of 3.9%, would imply an increase in TeliaSonera Group pension liabilities, all else equal, by some SEK 3.6 billion • The expected impact o
Slide 27: TeliaSonera AB credit ratings (A3/A-)
TeliaSonera AB credit ratings (A3/A-) TeliaSonera AB long-term ratings migration history 2002-to-today AA 5 AA-4 A+ 3 A 2 A- 1 0 Q1/02 Q4/02 Q1/03 Q4/03 Q4/04 Q1/05 Q4/05 Q4/06 Q4-07 Q3-08 Moody’s (A3/P-2) Standard & Poor’s (A-/A-2) • January 8, 2003, lowered long-term debt • February 5, 2003, lower
Slide 28: TeliaSonera’s funding strategy
TeliaSonera’s funding strategy • Liquidity position, as of September 30, 2008 – Cash and cash equivalents, less blocked funds approx. SEK 7.6 billion – Available unutilized amount of committed bank credit lines approx. SEK 13.1 billion • Primary means of external borrowing – EMTN (€7 billion) 1) – S
Slide 29: Forward-looking statements
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
Slide 30: Interim Report January - September, 2008
Interim Report January - September, 2008