Slide 1: Interim Report 1 July 2006 – 30 September 2006
Interim Report 1 July 2006 – 30 September 2006 Elisa Corporation Interim report Q3 2006, 20 October 2006 1
Slide 2: Q3 2006 Report
Q3 2006 Report President and CEO Veli-Matti Mattila
Slide 3: Elisa Q3 2006
Elisa Q3 2006 • Q3 2006 and financial highlights • Review of the mobile and fixed network businesses • Execution of the strategy • Outlook for 2006 Elisa Corporation Interim report Q3 2006, 20 October 2006 3
Slide 4: Elisa Q3 2006 highlights
Q3 2006 financial highlights Elisa Q3 2006 highlights • Sale of 3G service bundles progressed well • Churn decreased further to 11.7%, mobile ARPU decreased slightly from the previous quarter − Lower Saunalahti interconnection fee • Both mobile and ADSL subscription bases increased − Broadband marke
Slide 5: EBITDA improved clearly
Q3 2006 and financial highlights EBITDA improved clearly Revenue and EBITDA-% • Revenue EUR 387m (326) 382 387 • EBITDA EUR 123m (85) 343 348 326 • EBIT EUR 73m (33) • Pre-tax profit EUR 69m (28) 30 % 32 % • EPS EUR 0.32 (0.15) 26 % 26 % 26 % Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Revenue, EURm EBI
Slide 6: Financial position stable
Q3 2006 and financial highlights Financial position stable Net debt and cash flow • Cash flow EUR 36m (1) 381 363 • Net debt EUR 336m (363) 336 293 293 • CAPEX EUR 40m (45), 10% of revenue (14) 145 • Equity ratio 65% (55) 36 • Gearing 25% (35) 1 13 29 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Net debt
Slide 7: Share buy-back
Share buy-back • Up to 4 million shares • Starts at the earliest on 27th October 2006 • Approximately EUR 70m • Acquisitions in public trading • Shares to be cancelled or to be used as consideration in potential corporate acquisitions Elisa Corporation Interim report Q3 2006, 20 October 2006 7
Slide 8: Lower churn, ARPU at the same level
Segment review, mobile business Lower churn, ARPU at the same level ARPU and value added services • Churn 11.7 % (27.2*) − Shift from price competition to service competition 31,2 30,4 31,3 30,5 28,0 • ARPU EUR 30.5 (31.2*) − Lower Saunalahti interconnection tariff 1 483 • 3G service bundles increas
Slide 9: 3G handset sales increased revenue
Segment review, mobile business 3G handset sales increased revenue Revenue and EBITDA-% • Revenue EUR 246m (183) − Growth due to increased Saunalahti traffic and 239 246 sale of 3G terminals • EBITDA EUR 72m (46), 29% of 197 192 183 revenue (25) − Cost cutting, volume growth, increase in 3G service
Slide 10: Lower interconnection fee affected ARPU
Segment review, mobile business Lower interconnection fee affected ARPU ARPU (EUR) and annualised churn (%) Usage (min/sub/month) 50 240 45 220 40 200 35 180 30 160 25 140 20 120 15 100 Saunalahti Several new started to players in the Elisa acquired 10 grow market Saunalahti 80 5 Number- ACN entered
Slide 11: Broadband growth has slowed down
Segment review, fixed network business Broadband growth has slowed down Broadband subscriptions • Broadband subscriptions growth 520 000 479586 472532 39% y-o-y 459 827 420 465 420 000 • Broadband growth 7,000 345 898 subscriptions in Q3 320 000 − Elisa as a market leader in slower growth subscripti
Slide 12: Clear improvement in profitability
Segment review, fixed network business Clear improvement in profitability Revenue and EBITDA-% • Revenue EUR 156m (166) − Lower volumes in traditional subscriptions − Seasonality 180 173 166 166 156 • EBITDA EUR 52m (40), 33% of revenue (24) − Cost cutting, lower sales costs • EBIT EUR 26m (12), 17%
Slide 13: Growth in subscriptions has stopped
Segment review, fixed network business Growth in subscriptions has stopped Thousands 1 600 1 400 1 200 1 000 800 600 400 200 0 Q1/04 Q2/04 Q3/04 Q4/04 Q1/05 Q2/05 Q3/05 Q4/05 Q1/06 Q2/06 Q3/06 Traditional analogue ISDN Cable TV Broadband Elisa Corporation Interim report Q3 2006, 20 October 2006 13
Slide 14: Strategy execution
Strategy execution 2005 - 2003 - New markets and new services Strengthening market position Integration in core markets of One Elisa Elisa Corporation Interim report Q3 2006, 20 October 2006 14
Slide 15: Productivity improvement
Strategy execution Productivity improvement • Installation and maintenance outsourcings • Financial administration outsourcings Significant profitability • Reduction in personnel costs improvement • Changes in broadband pricing • 3G service bundles and wider service offering • Terminal management se
Slide 16: Most comprehensive mobile TV – Elisa TV
Strategy execution, new services Most comprehensive mobile TV – Elisa TV 8 TV channels in mobile terminal Elisa Corporation Interim report Q3 2006, 20 October 2006 16
Slide 17: Device management solution
Strategy execution, new services Device management solution Full service for mobile handset delivery and management Also possibility for remote services Elisa Corporation Interim report Q3 2006, 20 October 2006 17
Slide 18: 3G service bundles success story
Strategy execution 3G service bundles success story • Sale of 3G packages has progressed well − Significant amount of new subscriptions is 3G service bundles • ARPU much higher than in traditional subscriptions − Share of data is significant • Currently about 220,000 3G customers in Finland, estimat
Slide 19: Outlook for 2006
Outlook for 2006 • Challenging market − Competition remains challenging − More focus on services • Clear improvement in result − Revenue will clearly grow − EBITDA and EBIT excluding non-recurring items will improve clearly − Q4 EBITDA and EBIT slightly lower level than in Q3 − increased market acti
Slide 20: Financial performance
Financial performance CFO Jari Kinnunen
Slide 21: Income statement
Income statement EUR million Q3 2006 Q3 2005 Change 2005 Revenue 387 326 19% 1 337 Other income from operations 3 3 114 Operating expenses -267 -244 -1 005 EBITDA 123 85 45% 446 EBITDA-% 32% 26% 33% EBITDA excluding one-offs 123 85 45% 346 EBITDA-% excluding one-offs 32% 26% 26% Depreciations -50 -5
Slide 22: Revenue growth
Revenue growth 450 62 9 400 350 -10 300 250 Decrease in Saunalahti 200 analogue lines acquisition 387 150 326 Increase in Increased usage broadband 100 3G bundling 50 0 3Q 2005 Fixed line Mobile Other and group 3Q 2006 elimination Elisa Corporation Interim report Q3 2006, 20 October 2006 22
Slide 23: Operative expenses
Operative expenses 120 % Q1 Q2 Q3 100 % 2006 2006 2006 19 % 17 % 17 % 80 % 21 % 16 % Revenue 348 382 387 22 % Other income 3 1 60 3% 40 % Materials and services -149 -179 -178 62 % 67 % 59 % Employee benefit expenses -57 -60 -43 20 % Other operating expenses -47 -49 -45 Total -253 -289 -2670 % EBITD
Slide 24: CAPEX
CAPEX CAPEX, EURm 100 • CAPEX includes − New broadband infrastructure 90 21 % 20 % − 3G-capacity and coverage increase − HSDPA in Finland and Estonia 80 15 70 15 % • Investments in fixed assets 60 14 % 14 % − Mobile EUR 14m 1 13 % − Fixed network EUR 27m 50 12 % 5 10 % 0 7 40 • Lounet shares EUR 7m
Slide 25: Cash flow
Cash flow Cash flow and operative cash flow*, EURm 160 • Positive cash flow EUR 36m in Q3 140 120 • Increase in net working capital EUR 22m 100 − Sales receivables increased through seasonality 83 and 3G- bundling 80 145 − Inventories decreased EUR 3m 60 60 46 40 40 18 20 36 31 13 0 1 Q3 2005 Q4 200
Slide 26: Net debt
Net debt Net debt, EURm and Net debt/EBITDA • Cash flow EUR 36m in Q3 381 363 336 293 293 1,02 0,78 0,80 0,66 0,65 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Net Debt, EUR million Net debt/EBITDA Elisa Corporation Interim report Q3 2006, 20 October 2006 26
Slide 27: Summary
Summary • Profitability improvement still main focus − Streamlining of processes − Sourcing and procurement − IT systems − Outsourcing • Strong financial position Elisa Corporation Interim report Q3 2006, 20 October 2006 27
Slide 28: Interim Report July 2006 – September 2006
Interim Report 1 July 2006 – 30 September 2006 Elisa Corporation Interim report Q3 2006, 20 October 2006 28
Slide 29: Consolidated Cash flow statement
Appendix slide Consolidated Cash flow statement CONSOLIDATED CASH FLOW STATEMENT EUR million Q3 2006 Q2 2006 Q1 2006 Q4 2005 Q3 2005 Q2 2005 Q1 2005 Q4 2004 Q3 2004 Cash flow from operating activities Profit before tax 69 34 39 33 28 113 39 65 50 Adjustments to profit before tax 50 63 59 57 53 -11 4
Slide 30: Financial situation
Appendix slide Financial situation Financial situation (million euros) 30 Sep 2006 30 Jun 2006 31 Mar 2006 31 Dec 2005 30 Sep 2005 Interest-bearing debt Bonds and notes 327 326 326 446 455 Commercial Paper 0 35 0 0 0 Loans from financial institutions 0 0 0 0 0 Financial leases 48 49 51 56 59 Committ