Telia Company Ab · OMXSTO:TELIA
Telia Company Ab — TeliaSonera — Investor Day (June 2011)
50 slides from Telia Company Ab's investor day presentation, Jun 14, 2011
Slide 1: Investor Day 2011
Investor Day 2011 Moderna Museet, Stockholm June 14 Contents 1 Program 2 TeliaSonera Group - Lars Nyberg, President and CEO 3 Business area Broadband Services - Malin Frenning, President 4 Business area Mobility Services - Håkan Dahlström, President 5 Business area Eurasia - Tero Kivisaari, Presiden
Slide 2: Program
Program 09:30 TeliaSonera Group Lars Nyberg, President and CEO 10:00 Business area Broadband Services Malin Frenning, President BA Broadband Services 10:45 Coffee break 11:15 Business area Mobility Services Håkan Dahlström, President BA Mobility Services 12:00 Lunch 13:00 Business area Eurasia Tero
Slide 3: Achievements since last Investor Day
TeliaSonera Lars Nyberg President and CEO Achievements since last Investor Day Increased World’s first ownership Efficiency operator in core holdings measures to launch 4G Rebranding Increased Yoigo under common dividends brand identity and breakeven buyback 6 3
Slide 4: Changing competitive dynamics; Mobile data volumes continue to explode
Changing competitive dynamics Investor Day 2009 Content distribution Applications Web Browser & search engine Access Telcos Hardware 7 Mobile data volumes continue to explode Mobile data growth CAPEX-to-sales Megabytes (‘000,000) Mobility Services* 12,000 12% 10,000 10% 8,000 8% 6,000 6% 4,000 4% 2,
Slide 5: Pricing models have to be developed
Pricing models have to be developed 5x 5x Voice Data Voice Data Revenues Network investments 9 Mitigation of market developments • Manage the decline in voice revenues – Charge for Mobile VoIP services – Ensure that MTR’s are maintained at an acceptable level • Increase data revenues – Access fees –
Slide 6: Fixed networks remain competitive
Fixed networks remain competitive Global Mobile traffic Global Fixed traffic (ExaByte/month) (ExaByte/month) 2.5 100 Residential 80 Unicast TV 2.0 Handheld data traffic 1.5 60 Residential Laptop Internet data traffic 40 Business 1.0 Internet Voice Voice 0.5 traffic 20 traffic 0.0 0 -07 -08 -09 -10 -
Slide 7: Mobile data potential in Eurasia
Requires • Significant investments in fiber – More than SEK 8 billion until 2014, of which SEK 5 billion in Sweden • Change in business model – Speed based access fees – Tiered pricing based on volume and quality Business area Broadband Services 13 Mobile data potential in Eurasia 3% 3% 3% 4% 6% 6%
Slide 8: Much has been achieved
15 Much has been achieved One Company approach and performance based culture have been implemented over the past three years • Clear strategy with three focus areas – World class service company – Quality in networks – Cost efficiency • Group wide performance management system • Code of Ethics and C
Slide 9: International and Local strength
International and Local strength 17 The demand for our services is larger than ever 18 9
Slide 10: Access - an attractive business
Challenges 1 Changing competitive environment - New players, different business logic 2 Requires new pricing models - For both mobile and fixed communication 3 Investments directed to fiber and capacity 19 Access - an attractive business 10
Slide 11: Q&A Broadband Services
Q&A Broadband Services Malin Frenning President Business Area Broadband Services 11
Slide 12: Challenges
Challenges • Declining PSTN business • Data volumes rapidly increasing, generated by demand for triple play and capacity hungry applications • Develop new business models to meet customer demand and safeguard profitability • Extensive fiber roll-out required 23 Different strategy in different market
Slide 13: Controlled decline in consumer PSTN
Controlled decline in consumer PSTN Consumer PSTN development* Initiatives to increase revenues* SEK million 5,000 (000) 3,000 CAGR 4,500 2,500 -11% 2,000 4,000 1,500 3,500 1,000 500 3,000 2010 Revenue Increased Invoice 2011e 0 2006 2007 2008 2009 2010 2011 drop traffic fees charges * Example from C
Slide 14: A business model based on volume and quality
Need for high speed fixed access Advanced TV services Over the top services Cloud applications Consumer • On-demand, HD, 3D TV • E-commerce, Gaming • Storage and backup Unified Communication Digital signage Cloud applications Business • Moving images and • Enterprise applications • Video Conferencin
Slide 15: Selective build-out strategy key to success
Selective build-out strategy key to success Mix of infrastructure LTE Upgrade to VDSL Central 1 km Office Fiber the long-term solution 29 Ambitious plans for fiber roll-out Number of connected homes (‘000) Build Partner Build Build 2010 2014 0 200 400 600 800 1,000 Partner Build Year 2014 2.3 millio
Slide 16: High number of active customers
High number of active customers Active customers in accessible market* 0% 5% 10% 15% 20% 25% 30% 35% 40% AT&T KPN Reggefiber Verizon * Connected homes 31 A fiber network open to others Other Service TeliaSonera’s Service Provider Providers Communication Operator Maximizes utilization of fiber Skanov
Slide 17: Strict criteria for SDU roll-out
Strict criteria for SDU roll-out Penetration Built 2009 Criteria for SDU roll-out Hällefors 44% • Good technical base to build on – Fiber and duct availability Nora 41% – Synergies with other platforms Askersund 34% • Good co-operation with the municipality – Allows efficient building methods Pre-bu
Slide 18: Fiber leads to higher market share and usage
Fiber leads to higher market share and usage Broadband penetration in MDU’s Number of products in SDU’s 35% 3.0 30% 2.5 25% 2.0 20% 1.5 15% 1.0 10% 5% 0.5 0% 0.0 Copper (DSL) Fiber Copper (DSL) Fiber Example from Sweden 35 Still some regulatory uncertainties Negatives Positives • Unclear if fiber to
Slide 19: Fiber roll-out large portion of planned CAPEX
Fiber roll-out large portion of planned CAPEX Broadband Services Broadband Services Sweden SEK million SEK million 6,000 6,000 5,000 5,000 4,000 4,000 3,000 3,000 2,000 2,000 Other Other 1,000 IP 1,000 IP Fiber Fiber 0 0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Fiber investments of SEK 8.3
Slide 20: Production costs cut by SEK 2.3 billion
Production costs cut by SEK 2.3 billion SEK million 8,000 7,000 -31% 6,000 5,000 Rents, energy & other -42% 4,000 IT expenses -27% 3,000 Personnel expenses -27% 2,000 Subcontracted work -54% 1,000 Network Capacity +76% 0 2007 2008 2009 2010 2011e Sweden and Finland 39 Broadband Services’ priorities
Slide 21: Q&A Mobility Services
Q&A Mobility Services Håkan Dahlström President Business Area Mobility Services 21
Slide 22: Net sales
Business trend and drivers Business drivers 1. Mobile behavior 2. Smartphones +14% 3. Mobile data 4. Fixed Mobile Substitution 5. Applications Net sales 1. Interconnect 2. Roaming -8% 3. Price pressure +6%* * Growth in Net sales for Mobility Services during 2010 43 Continued strong growth in Smartph
Slide 23: More devices get connected
More devices get connected 3,100,000 -15% Number of connected 1,200,000 devices* 750,000 +∞ +150% 35,000 +40% 1,300 MB -10% Average traffic per 480 MB user +80% 300 MB +∞ 7 MB +70% Non-Smartphones Smartphones Tablets Laptops Active devices measured, Sweden April 2011 compared to last year * M2M not
Slide 24: Data a larger part of revenues
Data a larger part of revenues 100% 6 8 11 11 13 15 90% 8 17 8 22 11 14 10 Data 80% 12 11 8 SMS 70% Voice 60% 50% 40% 86 84 78 75 77 73 72 70 30% 20% 10% 0% Spain Estonia Latvia Denmark Lihuania Norway Finland Sweden All types of revenues not included 47 Rebalancing of pricing model needed Financial
Slide 25: Continued development of price models for data
Continued development of price models for data Drive adoption Focus eliminate uncertainty in invoice Right capacity at the right price One offering for all Portfolio of offerings On peak SEK 15/MB Buckets based on Off-peak SEK 89 flat rate Speed and Volume SEK 369, 20GB, 22Mbp/s Evolution of price m
Slide 26: CAPEX under control despite data growth
CAPEX under control despite data growth 1 Technology - 4G eight times more efficient than 3G 2 Spectrum - 2.6 GHz used for capacity, 800 MHz used for coverage 3 Existing mobile and fixed infrastructure - 70% of existing sites in Sweden re-used for 4G 51 Strengthened Multi Market Operation • Country
Slide 27: Potential savings in production cost
Potential savings in production cost SEK 25.3 billion Ongoing activities, examples Other* • Simplicity in support systems and processes • One network operations center SEK 9 billion • Mobile messaging • Network sharing * Other includes depreciation, interconnect, roaming, handsets etc. 53 Simplicity
Slide 28: From six to one Network Operations Center
From six to one Network Operations Center NOC 55 Reducing complexity in value added services Example from messaging 9 Vendors 1 Vendor 2011 2015 16 Systems <6 Systems 78 Cabinets <16 Cabinets Consolidate & migrate Central messaging Re-negotiate contracts existing systems node in operation SEK millio
Slide 29: Stable EBITDA margin and CAPEX
Network sharing agreement in Denmark • Network sharing agreement with Telenor in Denmark • Radio access network • 2G, 3G and 4G • Joint venture to operate the infrastructure • CAPEX within joint venture 57 Stable EBITDA margin and CAPEX EBITDA margin* CAPEX-to-sales* 8.3% 7.8% 7.7% 7.7% 30.1% 7.3% 2
Slide 30: Mobility Services' priorities
Mobility Services’ priorities 1 Top line growth above market - Leverage on mobile behavior – smartphones, price models 2 Excellent customer experience - Set and meet customer expectations 3 Cost leadership - Multi Market Operations, reduce complexity, network sharing 59 Q&A 30
Slide 31: Eurasia: Our footprint
Eurasia Tero Kivisaari President Business Area Eurasia MMO Our footprint in Eurasia 62 31
Slide 32: History of delivering profitable growth
History of delivering profitable growth Subscriptions, millions Net sales, SEK billion EBITDA, SEK billion CAGR* 28.5 +18% 16.5 CAGR +40% CAGR* +15% 8.3 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 • More than 31 million • 22% growth in net • Keeping EBITDA subscription
Slide 33: Mobile penetration and data opportunity
Mobile penetration and data opportunity Mobile penetration, % Azerbaijan 105 Kazakhstan 98 Moldova 89 Tajikistan 86 Uzbekistan 78 Georgia 76 Nepal 30 VAS as % of revenues 25% 22% 23% 14% Sources: IHS Global Insight, AC&M Consulting. Data from Russia Q4 2010 65 MMO Significant growth opportunities Ov
Slide 34: Still untapped potential in voice revenues
MMO Still untapped potential in voice revenues 100% 120% Voice revenues driven by: 80% 100% • Penetration growth (e.g. Nepal) • Economy (e.g. Kazakhstan) 60% 80% 40% 60% 20% 40% 0% 20% -20% 0% Voice revenue growth, % Mobile penetration, % Q1 2011 y-o-y. Source: IHS Global Insight 67 MMO Revenues hav
Slide 35: From start-up to GSM market leader in Nepal
From start-up to GSM market leader in Nepal Significant network expansion • Increasing population coverage to 80% (44) since 2008 • 5 times increase in number of base stations to 1,500 (300) Brand image • From youth brand Mero Mobile to Ncell • Focus on distribution - more than 4,000 Point of Sales
Slide 36: Strong revenue growth in Kcell
MMO Strong revenue growth in Kcell Net sales growth* 30% • Increasing revenue market share 25% • 28% revenue growth in Q1 2011 y-o-y 20% 15% • EBITDA margin kept above 50% 10% 5% 0% Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Subscription market share 2% Tele2, 2% Altel, 6% Beeline, Kcell, 50% 42% * In loca
Slide 37: Kcell's offer competitive but not price leader
MMO Kcell’s offer competitive but not price leader APPM, Kazakh Tenge 9.7 8.9 8.5 • APPM will decrease due to new price offerings and introduction of per second billing • Gradual reduction in interconnect fees expected • Focus on quality rather than price KZT 10 = USD 0.07 APPM - Average Price Per M
Slide 38: Kcell well positioned in non-voice
MMO Kcell well positioned in non-voice Growth in mobile data Products (KZT ‘000) • Promotion of USB modems 4,000 10.0% • >1.5 million 3G handsets in use 3,000 7.5% • Flexible pricing 2,000 5.0% Usage 1,000 2.5% • 3.8 million subscribers use Kcell data services every month 0 0.0% Q1 10 Q2 10 Q3 10 Q4
Slide 39: Eurasia's priorities
MMO Investments allocated to growth areas CAPEX split, 2010 70% Kcell 60% Azercell Ucell Tcell 50% Geocell Moldcell Growth in net sales 2010 Ncell 40% 30% CAPEX split, 2010 20% Radio, 2G Radio, 3G 10% Transmission Core Network 0% Service Network Licenses Other -10% 0% 20% 40% 60% 80% 100% 120% CAPEX
Slide 40: Q&A Review of financials
Q&A Review of financials Per-Arne Blomquist Executive Vice President & CFO 40
Slide 41: Review of the past five years
Review of the past five years Net sales growth OPEX growth EBITDA margin** SEK billion SEK billion CAGR CAGR 107.0 34.5% +1.7%* +2.7%* 32.1 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 * Growth in local currencies and excluding acquisitions ** Excluding non-recurring it
Slide 42: Developments in the Nordics and Baltics
MMO Developments in the Nordics and Baltics Net sales* OPEX* EBITDA** -3.4% -0.5% -0.5% -2.3% +4.3% +0.1% +1.2% -11.1% -0.7% 33.5% 36.2% 36.4% 36.1% 2008 2009 2010 Q1 2008 2009 2010 Q1 2008 2009 2010 Q1 11*** 11*** 11*** • Mostly impacted by • Somewhat higher • EBITDA margin negative growth in incre
Slide 43: Continued improvement in gross margin
MMO Continued improvement in gross margin +3.3 p.p. 49.2% 47.3% 47.2% 43.9% 43.8% Main areas of improvement • Cross functional cost reduction through multimarket operations • Platform rationalization in Broadband • Economies of scale in Eurasia Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 85 Managing cos
Slide 44: CAPEX-to-sales at 8-12% in mature markets
MMO CAPEX-to-sales at 8-12% in mature markets Mobility Services Broadband Services Eurasia Eurasia 31% 27% SEK billion 2010 12% 11% Network related 9.8 8% 7% Other 4.2 Licenses 0.9 Total 14.9 Of which IT 40% 2009 2010 2009 2010 2009 2010 • High quality in our networks • Technology leadership • CAPEX
Slide 45: Predictable M&A strategy
MMO Predictable M&A strategy Criteria when considering M&A Priorities Decision Strategic and • Increase ownership geographical fit in core holdings Market multiples • Complementary TeliaSonera’s acquisitions in existing financial position Return on footprint investment • Selectively looking at new S
Slide 46: Excess capital will be returned to shareholders
MMO Excess capital will be returned to shareholders SEK 7.00 1.75 6.00 1.50 Dividend policy 5.00 1.25 • Rating A- to BBB+ 4.00 1.00 • Ordinary dividend at least 50% of net income* 3.00 0.75 • Excess capital shall be returned to shareholders 2.00 0.50 1.00 0.25 0.00 0.00 2003 2004 2005 2006 2007 2008
Slide 47: Active on the debt market
Active on the debt market • May 2010 - EUR 250 million tap of 2021 benchmark • September 2010 - EUR 500 million new 15 year benchmark • February 2011 - EUR 750 million new 9 year benchmark • March 2011 - SEK 4,000 million 18 month FRN Average interest rate, % 6 5 4 3 2 1 0 May-07 Jan-08 Sep-08 May-0
Slide 48: Financial priorities
Outlook 2011 - reiterated • Growth in net sales* expected to be around 3% • Growth in addressable cost base below the growth in net sales • EBITDA margin** to improve compared with 2010 (34.7%) • CAPEX-to-sales*** ratio between 13-14% * In local currencies and excluding acquisitions ** Excluding non
Slide 49: Q&A Closing remarks
Q&A Closing remarks Lars Nyberg President and CEO 49
Slide 50: 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