Telia Company AB · OMXSTO:TELIA
Telia Company AB — TeliaSonera — FY2004 Earnings Presentation
36 slides from Telia Company AB's earnings presentation, Feb 11, 2005
Slide 1: Year-end Report, January–December 2004
Year-end Report, January–December 2004 Anders Igel President and CEO February 11, 2005 Year-end Report, January–December 2004
Slide 2: Record high result in 2004
Record high result in 2004 • Strategy has proven to be successful – Complementary acquisitions – Market positions maintained • Ready to take the lead in the migration – Necessary mechanisms in place – Clear view of future offerings (Focused service portfolio) – Foundation for change in place in Swed
Slide 3: Record high result in 2004
Record high result in 2004 SEK million Net Sales and EBITDA Operating Income EBITDA margin Excl. non-recurring items 80,979 81,772 81,937 100% 80,000 18,793 90% 13,140 70,000 80% 60,000 70% -45,958 50,000 60% 50% 40,000 40% 30,690 30,196 30,000 25,457 37.5% 36.9% 30% 20,000 31.4% 20% 10,000 10% 0 0%
Slide 4: Operating income excl. non-recurring items and GWA
Operating income excl. non-recurring items and GWA SEK million 20,859 18,810 9,911 Jan–Dec 2002 Jan–Dec 2003 Jan–Dec 2004 February 11, 2005 Year-end Report, January–December 2004 4
Slide 5: Operating income excl. non-recurring items and GWA
Operating income excl. non-recurring items and GWA Full Year 2003 compared to Full Year 2004 977 -26 20,859 746 -56 -185 3 815 -216 -436 277 150 18,810 Operating Sweden Finland Norway Denmark Baltic Eurasia Russia Turkey Int. Holding Other Operating income countries Carrier income Jan-Dec Jan-Dec 20
Slide 6: Increased international shareholding
Increased international shareholding Shareholder categories 2003 2004 Swedish State 45.3% 45.3% Finnish State 19.1% 13.7% Institutions and companies, Sweden 19.8% 19.0% Institutions and companies Finland 3.9% 4.0% Individual Investors, Sweden 3.6% 3.5% Individual investors, Finland 2.4% 2.4% Shareho
Slide 7: Strong customer growth
Strong customer growth Nordic and Baltic Eurasia, Russia and Turkey 22,750,000 39,814,000 +8% +49% +1.5 million +13 million February 11, 2005 Year-end Report, January–December 2004 7
Slide 8: Market positions in Nordic home markets maintained
Market positions in Nordic home markets maintained • Usage increases but price Performance reductions limit growth Jan–Dec 2004 (year-on-year) • Smart packaging and new price Sweden Mobile, sales +-0% plans maintained market lead Fixed, sales -3.5% in Sweden EBITDA margin 41.4% • Aggressive competit
Slide 9: Complete mobile footprint in Baltic markets
Complete mobile footprint in Baltic markets • Strong mobile customer Sales growth growth despite increased Jan–Dec 2004 (year-on-year) competition in Lithuania • Strong mobile growth in Estonia1, 2 Mobile 10% Latvia Fixed 4% • Eesti Telekom consolidated Latvia Mobile 10% local currency 15% Fixed1 -5
Slide 10: Strong growth and earnings in international mobile
Strong growth and earnings in international mobile Sales MegaFon1 (USD, million) Russia – Strong customer growth in MegaFon 500 418 • Customers doubled in one year to 13.6 million 400 +74% 300 240 • Strongest growth in the southern and north-western 200 regions 100 0 • Market share +1% to 18.4% duri
Slide 11: TeliaSonera – Dual opportunities
TeliaSonera – Dual opportunities Nordic and Baltic Eurasia, Russia and Turkey • Create growth • Exploit growth • Keep profitability • Enhance value Financial strength and position to take advantage of opportunities February 11, 2005 Year-end Report, January–December 2004 11
Slide 12: Building for the future
Building for the future February 11, 2005 Year-end Report, January–December 2004
Slide 13: Building for the future
Building for the future Platform for Create growth future growth • Focused service portfolio specified – Gives possibility for growth – Reduces complexity and cost • Selected acquisitions Keep Competitive profitability Cost Level • Programs announced in Finland and Sweden • Further exploiting scale
Slide 14: Focused Service Portfolio examples
Focused Service Portfolio examples • TeliaSonera Connect services • Voice over IP • Triple Play • Broadband build-out • GSM networks build-out with EDGE functionality • Bucket pricing and bundling • IP-VPN solutions February 11, 2005 Year-end Report, January–December 2004 14
Slide 15: Strengthened the Nordic and Baltic footprint
Strengthened the Nordic and Baltic footprint Acquisition of Consolidation of Orange Denmark Eesti Telekom Full ownership in Omnitel February 11, 2005 Year-end Report, January–December 2004 15
Slide 16: Annual costs down SEK 5–6 billion within three years
Annual costs down SEK 5–6 billion within three years • Staff functions • Production • Sales • Networks • Marketing • Product management & Development Sweden Finland • Readjustment program • Employee support – Max three years programs – Competence – Internal or external development and redeployment e
Slide 17: Exploiting the scale advantages
Exploiting the scale advantages Further Competitive Completely exploiting Merger synergies cost level different scale initiatives cost levels advantages • Merger synergy • Annual costs • More common target met down SEK 5–6 and concentrated • SEK 2.7 billion billion within resources in three years No
Slide 18: Outlook
Outlook February 11, 2005 Year-end Report, January–December 2004
Slide 19: Outlook
Outlook Enhance value by strengthening operations and positions in current footprint Area Expectations • Strong migration from Fixed to Mobile and Internet Market • Three year transition period Prices • Price pressure continues. Particularly in Sweden and Finland. Restructuring • Negative effect on
Slide 20: Kim Ignatius
Kim Ignatius Executive Vice President and Chief Financial Officer February 11, 2005 Year-end Report, January–December 2004
Slide 21: Significantly improved Net income 2004 compared to 2003
Significantly improved Net income 2004 compared to 2003 • Operational improvements and discontinued GWA improves income after financial items • Revaluation of deferred tax assets lowers reported tax SEK million Jan–Dec 2004 Jan–Dec 2003 Income after financial items 17,448 12,346 Income taxes -3,184
Slide 22: Net sales +0.9% in the quarter
Net sales +0.9% in the quarter SEK million • Traffic volume: +8% • Prices: -7% • Orange consolidated • Positive development in all units Strong customer 343 -30 -219 growth -5 21,252 21,054 -513 551 13 -95 153 • Continued mobile price Customer Divested businesses erosion growth • Increasing mobile w
Slide 23: Operating income excl. non-recurring items and GWA +21.5%
Operating income excl. non-recurring items and GWA +21.5% SEK million Lower margins – Higher deprecations in IAS adj. effect price erosion mobile – consolidation SEK -84 million of Orange 5,076 98 767 -238 -20 -92 140 183 16 113 -35 -34 4,178 • Higher customer Customer growth Impact from associated
Slide 24: TeliaSonera Group
TeliaSonera Group Sales, EBITDA1 and EBITDA margin CAPEX and CAPEX/Sales SEK million SEK million 25,000 50% 25,000 50% 21,054 21,252 20,000 40% 20,000 40% 35.1% 33.9% 15,000 30% 15,000 30% 10,000 20% 10,000 20% 15.8% 15.9% 7,143 7,457 5,000 10% 5,000 3,374 10% 3,336 0 0% 0 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Slide 25: International Carrier 2004
International Carrier 2004 • Non-cash write-down in Q4 – SEK 3.3 billion, remaining book value of net fixed assets: zero – Remaining gross value of fixed assets SEK 1.2 billion corresponds to equal amount of unrecognized revenues from Indefeasible Rights of Use (IRUs) • Positive EBITDA, market posit
Slide 26: Telia Denmark – Acquisition of Orange Denmark
Telia Denmark – Acquisition of Orange Denmark • Net sales SEK 4.5 billion (+37%) – Sales increased across the operations • Operating loss increased to SEK 0.9 billion, – One-off synergy implementation related costs of SEK 639 million – Orange Q4 EBITDA SEK -35 million related to increased marketing
Slide 27: Eesti Telekom consolidated
Eesti Telekom consolidated • Increased ownership to over 50%, during December – Consolidated as of December 28, 2004 • Non-cash write-down of old goodwill of SEK 104 million AS Eesti Telekom financial highlights: EUR million Jan–Dec 2004 Change % Total revenues 328.7 7.0% EBITDA 135.6 0.2% EBIT 83.5
Slide 28: TeliaSonera Holding 2004
TeliaSonera Holding 2004 • Operating income SEK 1.9 billion – Substantially improved by divestments and improvements in the remaining operations – Some 20 holdings were sold in whole or part – Non-recurring items increased operating income by SEK 1.5 billion – Recognition of SEK 1.0 billion deferred
Slide 29: Accounting for 3G joint venture in Sweden
Accounting for 3G joint venture in Sweden • 50% joint venture with Tele2 • Investments so far SEK 3 billion – Equity SEK 1 billion – Third-party loan SEK 2 billion • Costs in SUNAB consist mainly of depreciation and interest costs, but also operational costs – Depreciation has commenced, full impact
Slide 30: Taxation
Taxation • Reported tax rate of 18% – lower than in 2003 (30%) – Discontinuation of goodwill amortization – New valuation of deferred tax assets – Higher result from associated companies • Deferred tax assets of SEK 12.1 billion – Tax losses/temporary differences in Finland (approx SEK 9.7 billion),
Slide 31: Sweden – Current regulatory issues
Sweden – Current regulatory issues • Wholesale Line Rental pricing framework pending PTS decision – TeliaSonera Sweden started to offer WLR already in December 2004 at a 12% discount, minor impact 2005 • PTS presented a decrease to fixed termination fees – TeliaSonera appealed • Mobile termination r
Slide 32: Finland – Current regulatory issues
Finland – Current regulatory issues • Calculation grounds of mobile interconnection pricing affirmed September 2004 – TeliaSonera Finland lowered interconnection prices from EUR 0.09 to EUR 0.084 per minute December 2004 – FICORA ruling on final prices for operators expected later in 2005 • Fixed to
Slide 33: Cash flow statement
Cash flow statement Free cash flow decreased to SEK 14.1 billion (17.5) mainly due to: SEK • Increased CAPEX,12.6% of Net sales – driven by broadband, IP- billion based services and mobile growth • Higher Tax payments, SEK 1.8 billion higher than last year 30.2 -3.1 -0.3 -2.4 -10.3 6.9 -5.5 -6.6 -4.
Slide 34: Financial position further strengthened
Financial position further strengthened Dec 31, Dec 31, SEK 2004 2003 billion 18.2 14.1 Equity-to-assets ratio 60% 57% Net debt-to-EBITDA ratio 0.2 0.6 6.2 6.9 4.7 1.0 Net debt-to-equity ratio 6% 17% 7.1 Free cash flow yield 9% 12% Book return on equity 12% 7% Net debt Free Acquisitions Sale of Divi
Slide 35: 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 36: The Nordic and Baltic telecommunications leader
The Nordic and Baltic telecommunications leader February 11, 2005 Year-end Report, January–December 2004