Telia Company AB · OMXSTO:TELIA
Telia Company AB — TeliaSonera — Q2 2004 Earnings Presentation
26 slides from Telia Company AB's earnings presentation, Jul 28, 2004
Slide 1: Interim report January–June 2004
Interim report January–June 2004 Anders Igel President and CEO July 28, 2004
Slide 2: 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 3: TeliaSonera April-June 2004
TeliaSonera April-June 2004 • Net sales increased 2% • Operating income increased to SEK 5,650 million • Market positions maintained at the expense of lower margins • Take lead in transition period – have started initiative to re-engineer our operations • Dividend policy specified and capital struct
Slide 4: Number of customers, million
Customer growth year-on-year, June 30, 2004 • Consolidated +9% 53.2 • Associated +37% (+23%) 43.2 Number of customers, million 32.4 (+18%) 27.5 22.8 (+9%) 21.0 Q2 2003 Q3 2003 Q4 2003 Q1 2004 Q2 2004 Total consolidated Total proportional Total all companies July 28, 2004 4
Slide 5: Growth within mobile and Internet
Growth within mobile and Internet Mobile Sales growth • Strong sales growth in Eurasia Q2 2003 - Q2 2004 and Denmark and in the 29% associated companies in 23% Russia and Turkey • Continued strong volume growth in Sweden, Finland, Norway and the Baltic countries but sales affected 7% by lower price
Slide 6: Market positions in Nordic home markets maintained at the expense of lower margins
Market positions in Nordic home markets maintained at the expense of lower margins • Price competition more Performance intense in Sweden, Finland Apr-Jun 2004 and Norway Sweden Mobile, sales year-on-year -2% Fixed, sales year-on-year -5% • Usage increases but price EBITDA margin 39.6% reductions li
Slide 7: Home market – Baltic countries
Home market – Baltic countries • Good development in both Sales growth Q2 2003-Q2 2004 mobile and fixed in Estonia • Strong mobile growth in Latvia Estonia1 Mobile 12% Fixed 5% • Strong mobile and broadband customer Latvia growth in Lithuania Mobile local currency 11% 13% Fixed1 -6%2 Lithuania Mobil
Slide 8: Strong growth and earnings in international mobile
Strong growth and earnings in international mobile Sales MegaFon1 (USD, million) Russia – Strong operational 400 341 development in MegaFon 300 +75% 195 • +1.5 million customers, total 9 million 200 100 • Share of net income SEK 62 million (218) 0 Apr-Jun 2003 Apr-Jun 2004 1) TeliaSonera estimate •
Slide 9: Strengthening our Nordic and Baltic leadership
Strengthening our Nordic and Baltic leadership • From a weak #4 to a Denmark Mobile subs1 strong #3 position in TDC 2,421,000 Denmark Sonofon 1,212,000 • Possibility to become New Telia Dk2 1,161,000 Telia Dk 556,000 Danish customers’ Orange 605,000 #1 choice #1 • Critical mass in #2 #1 Denmark #1 •
Slide 10: Outlook 2004
Outlook 2004 • Strengthen and improve the operations and position in the current footprint • Maintain or increase market shares • Transition period with strong migration from fixed to internet and mobile expected • Price pressure and migration will limit growth in home markets short term • Longer te
Slide 11: Dividend policy specified and capital structure addressed
Dividend policy specified and capital structure addressed • TeliaSonera will distribute 30%-50% of net income in dividend • Additional SEK 30 billion to shareholders over the period 2005-2007. Investment opportunities can change the figure. • Various means to return the money will be evaluated • Pro
Slide 12: Transition period in the Nordic and Baltic markets
Transition period in the Nordic and Baltic markets • Migration from fixed to mobile and Internet based services is expected to accelerate • TeliaSonera will take the lead in supporting the customer- driven migration Broad Focused range of range of services services Emphasizing opportunities within I
Slide 13: Focused range of services
Focused range of services Legacy Managed Mobile Internet services Mobile voice Content Residential distribution broadband Mobile data Business IP Combinations July 28, 2004 13
Slide 14: Focus going forward
Focus going forward Main challenge 2004 • Continue to improve market position while maintaining our strong profits and cash flow – Commercial actions to maintain or increase market shares – Continued synergy realization – Execution of re-engineering program – Profitable growth organically and by acq
Slide 15: Kim Ignatius, CFO
Kim Ignatius CFO July 28, 2004
Slide 16: Net sales +2% in the quarter
Net sales +2% in the quarter • Acquisitions/divestitures positive effect of 1% • Sales volume increased by 8% and prices decreased by 6% • Acquisition of Auria • Broadband growth SEK million • Increased mobile wholesale -265 20,589 70 74 20,275 -476 293 360 249 11 -2 Strong customer growth and incre
Slide 17: Decreased earnings due to price pressure
Decreased earnings due to price pressure EBITDA excl. non-recurring items SEK million 8,070 • Customer growth • Cost efficiency measures -783 -25 27 -80 26 7,327 117 -14 214 -225 • Price pressure • Price erosion • Customer growth • Release of reserve • Increased • Increased ARPU in comparative marke
Slide 18: Further initiatives keep synergies ahead of schedule
Further initiatives keep synergies ahead of schedule • Decided synergies yearly run rate by the end of 2005 – OPEX 1,978 SEK million – CAPEX 568 SEK million • Achieved synergies yearly run-rate by the end of Q2 2004 – OPEX SEK 1,432 million – CAPEX SEK 539 million Committed to merger target • Total
Slide 19: Increased Operating income excl. non-recurring items
Increased Operating income excl. non-recurring items SEK million • Goodwill amortization discontinued (Q2 2003 SEK 1,073 million) • Assets annually tested for impairment • Lower depreciation in Sweden, almost SEK 400 million • Improving income from associates -77 5,063 -24 287 -111 308 232 124 201 4
Slide 20: Non core assets
Non core assets • 10 additional holdings were divested in the second quarter – Peoples’ Telephone Company in Hong Kong, sold in conjunction with IPO, capital gain SEK 110 million – Mobile Telephone Company (MTC) in Namibia sold to Namibian government. Capital gains SEK 57 million. • Xfera Móviles (1
Slide 21: Net income impacted by tax changes and pension cost
Net income impacted by tax changes and pension cost • Changed tax legislation in Finland – one off tax cost of SEK 920 million • Deferred tax liability in Turkey – tax revenue of SEK 200 million • Revised treatment of certain pension related items – impact on net income SEK 407 million (pre-tax SEK
Slide 22: Acquisition of Orange Denmark
Acquisition of Orange Denmark Substantial synergies Implementation costs and • Total NPV of synergies before CAPEX implementation costs estimated • Implementation costs 2004-05 to around SEK 4,100 million estimated to approximately • Pre-tax cash flow synergies from SEK 540 million 2006: SEK 490 mil
Slide 23: Swedish mobile interconnection rates
Swedish mobile interconnection rates • Court decision granted Vodafone higher historic interconnect fee than established by PTS, the Swedish regulator – TeliaSonera has appealed – Necessary reserves have been recorded • PTS declared changes regarding SMP status, resulting in same future interconnect
Slide 24: Cash flow statement
Cash flow statement • Tax payment – SEK 2,450 million higher than in 2003 SEK billion • Change in working capital – mainly a fluctuation in quarters • CAPEX 10.8% of net sales – driven by mobile and broadband growth 14.5 -2.8 -1.0 6.3 -6.0 -0.5 -4.4 -4.7 0.2 13.9 12.3 Free cash flow SEK 5.8 billion
Slide 25: Financial position further strengthened
Financial position further strengthened SEK Jun 30, Dec 31, billion 2004 2003 18.2 -5.8 Equity-to-assets ratio 62% 57% 0.8 -6.0 4.7 -1.2 Net debt-to-EBITDA ratio 0.4 0.6 10.7 Net debt-to-equity ratio 9% 17% Free cash flow yield 8% 12% Book return on equity 11% 7% Net debt Free Acquisitions Sale of D
Slide 26: The Nordic and Baltic telecommunications leader
The Nordic and Baltic telecommunications leader July 28, 2004