Telia Company AB · OMXSTO:TELIA
Telia Company AB — TeliaSonera — FY2008 Earnings Presentation
40 slides from Telia Company AB's earnings presentation, February 2009
Slide 1: Year-end Report 2008
Year-end Report 2008 Lars Nyberg President and CEO
Slide 2: Record high fourth-quarter and full-year earnings
Record high fourth-quarter and full-year earnings Q4 2008 in brief • Net sales SEK 28,096 million (24,921) – Increase +12.7% – Organic growth +4.5% (in local currency) – FX effect +6.7% – Acquisitions +1.5% • EBITDA* SEK 8,272 million (7,208) – Increase +14.8% – EBITDA margin* 29.4% (28.9) • EPS SEK
Slide 3: EBITDA margin trend (excl. non-recurring items)
EBITDA margin trend (excl. non-recurring items) % Rolling 4 quarters 40 52 50.8 49.6 49.6 50 38 49.3 48.7 48 36 34 32.2 31.8 31.8 31.8 31.8 32 29.6 30 29.0 29.0 28.9 28.8 28 28.8 28.4 28.2 27.9 26.5 26 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Mobility Services Broadband Services Eurasia Group 3
Slide 4: Outlook compared with outcome
Outlook compared with outcome Guidance Reported 2008 (2007) 7.5% Net sales Stable growth (5.8%) EBITDA-margin 31.8% excl. non-recurring Maintained (32.2%) items Somewhat higher SEK 19,011 million Net income excl. the positive (17,674) one-off items* Around SEK 15,795 million CAPEX SEK 15 billion (13
Slide 5: Focus areas
Focus areas • World class service company − European Performance Satisfaction Index (EPSI) improved in most our Nordic and Baltic businesses • Migration from traditional fixed-voice services − Increased sales of IP based services • New B2B sales approach − Organization established • Growth in Eurasi
Slide 6: Customer satisfaction index (EPSI)
Customer satisfaction index (EPSI) 82 78 74 70 66 62 58 54 BA Mobility BA Broadband Omnitel TeliaSonera group Services * Services 100% owned 2006 2007 2008 * Wholly-owned subsidiaries 6
Slide 7: Addressable cost base to remain unchanged in 2009
Addressable cost base to remain unchanged in 2009 +6%* 35,000 +7%* 30,000 25,000 SEK million 20,000 15,000 10,000 5,000 0 2006 2007 2008 2009 Personnel expenses Marketing expenses Rents Consultant excl. IT IT expenses Other operating expenses * Excluding FX effect and acquisitions 7
Slide 8: Macroeconomic environment
Macroeconomic environment • The global economy was weak in the fourth quarter but we experienced no material effect on our business. • This trend continues in the Nordic countries. Lower terminal sales in the Baltics, but limited effects on usage. • Somewhat slower growth than expected in January in
Slide 9: Group Outlook for 2009
Group Outlook for 2009 • Net sales in local currencies and excluding acquisitions are expected to increase in 2009 compared to 2008. Currency fluctuations may to an increasing extent influence the reported figures in Swedish krona. • TeliaSonera will continue to invest in future growth and in the qu
Slide 10: Year-end Report 2008
Year-end Report 2008 Per-Arne Blomquist Executive Vice President and CFO
Slide 11: Record full-year earnings
Record full-year earnings Full year 2008 in brief • Net sales SEK 103,585 million (96,344) – Increase +7.5% – Organic growth +3.9% (in local currency) – FX effect +2.1% – Acquisitions +1.5% • EBITDA* SEK 32,954 million (31,021) – Increase +6.2% – EBITDA margin* 31.8% (32.2) • EPS SEK 4.23 (3.94) • S
Slide 12: Net sales trend - Group
Net sales trend - Group 32 103.6 28 28.1 25.3 25.8 24 23.9 24.8 24.9 24.4 22.7 100.4 99.4 20 SEK billion 98.0 16 96.3 94.6 12 93.0 91.8 8 4 0 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Net sales Rolling 4 quarters 12
Slide 13: EBITDA margin trend - Group
EBITDA margin trend (excl. non-recurring items) Group 35 33.0 32.0 31.6 31.6 31.7 31.9 31.0 31.2 30 34.9% 25 34.0% SEK billion 20 33.4% 15 32.2% 10 31.8% 31.8% 31.8% 31.8% 5 0 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 EBITDA rolling 4 quarters EBITDA margin rolling 4 quarters 13
Slide 14: EBITDA and margin YTD - Group & per Business area
EBITDA* and margin* YTD - Group & per Business area EBITDA* FY FY Change SEK million 2008 2007 % Mobility Services 14,399 13,084 10.1 Broadband Services 11,922 12,821 -7.0 Eurasia 6,553 5,255 24.7 Other operations 116 -161 The Group 32,954 31,021 6.2 EBITDA* margin, FY FY Change % 2008 2007 % point
Slide 15: Addressable cost base to remain unchanged in 2009
Addressable cost base to remain unchanged in 2009 +6%* 35,000 +7%* 30,000 25,000 SEK million 20,000 15,000 10,000 5,000 0 2006 2007 2008 2009 Personnel expenses Marketing expenses Rents Consultant excl. IT IT expenses Other operating expenses * Excluding FX effect and acquisitions 15
Slide 16: Addressable cost base to remain unchanged in 2009
Addressable cost base to remain unchanged in 2009 40,000 35,000 Addressable cost base 32,171 Employees < 31,200 35,000 33,772 < 33,800 30,000 30,000 25,000 25,000 SEK million 20,000 20,000 15,000 15,000 10,000 10,000 5,000 5,000 0 0 2008 Mobility Broadband Eurasia Other * 2009 2008 Mobility Broadban
Slide 17: Strong financial key ratios
Strong financial key ratios Dec 31, 2008 Dec 31, 2007 Return on equity* 17.2% 18.6% Return on capital employed* 17.3% 19.4% Equity/assets ratio 50.5% 50.3% Net debt/equity ratio 36.5% 31.3% * Rolling 12 months One of the best rated Telecom Operators in Europe 17
Slide 18: Strong free cash flow generation
Strong free cash flow generation Free cash flow increased to SEK 4.9 bn (1.8) mainly due to • Improved EBITDA, SEK 1.1 bn • Lower income taxes, SEK 1.0 bn • Timing of Turkcell Holding's dividend payment, SEK 0.7 bn +SEK 3.1 bn 5,000 4,000 3,000 2,000 1,000 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Slide 19: Debt maturity schedule
Debt maturity schedule (excl. lease and pension liabilities) December 31, 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 01/09 02/09 03/09 04/09 05/09 06/09 07/09 08/09 09/09 10/09 11/09 12/09 Debt Po
Slide 20: Proposed dividend and capital structure
Proposed dividend and capital structure • Proposed ordinary dividend SEK 1.80 per share (1.80) • Proposal for authorization to the AGM to repurchase a maximum of 10 percent of the total number of outstanding shares as an additional instrument to adjust the capital structure. To date, no plans are ma
Slide 21: Year-end Report 2008
Year-end Report 2008 TeliaSonera
Slide 22: Appendix
ac) i wv S (2) Val ue wo kK Appendix l A
Slide 23: Statement of cash flows Q4 and FY 2008
Statement of cash flows Q4 and FY 2008 Oct - Dec Oct - Dec SEK million FY 2008 FY 2007 2008 2007 EBITDA excluding non-recurring items 32,954 31,021 8,272 7,208 Dividends received from associated 1,410 2,684 736 - companies Interest paid (net) -1,784 -886 -381 -304 Income taxes paid -3,892 -5,142 -55
Slide 24: Record high fourth-quarter and full-year earnings
Record high fourth-quarter and full-year earnings Oct - Oct - Change Change SEK million Dec Dec FY 2008 FY 2007 % % 2008 2007 Net sales 28,096 24,921 13 103,585 96,344 8 EBITDA* 8,272 7,208 15 32,954 31,021 6 EBITDA* margin 29.4% 28.9% 31.8% 32.2% Operating income* 7,678 6,358 21 30,041 27,478 9 Non
Slide 25: Net sales Q4 and YTD - Group and per Business area
Net sales Q4 and YTD - Group and per Business area Q4 Q4 Change FY FY Change SEK million 2008 2007 % 2008 2007 % Mobility Services 12,796 11,588 10.4 48,673 45,115 7.9 Broadband Services 11,768 11,209 5.0 44,943 44,478 1.0 Eurasia 4,219 2,911 44.9 13,204 10,338 27.7 Other operations 770 671 14.8 2,5
Slide 26: EBITDA and margin Q4 and YTD - Group & per Business area
EBITDA* and margin* Q4 and YTD - Group & per Business area EBITDA* Q4 Q4 Change FY FY Change SEK million 2008 2007 % 2008 2007 % Mobility Services 3,507 2,824 24.2 14,399 13,084 10.1 Broadband Services 2,627 3,107 -15.4 11,922 12,821 -7.0 Eurasia 2,089 1,327 57.4 6,553 5,255 24.7 Other operations 60
Slide 27: TeliaSonera AB credit ratings (A3/A-)
TeliaSonera AB credit ratings (A3/A-) TeliaSonera AB long-term ratings migration history 2002-to-today 5 4 AA 3 AA- A+ 2 A 1 A- 0 Q1/ 02 Q4/ 02 Q1/ 03 Q4/ 03 Q4/ 04 Q1/ 05 Q4/ 05 Q4/ 06 Q4-07 Q3-08 Q4-08 Moody’s (A3/P-2) Standard & Poor’s (A-/A-2) • January 8, 2003, lowered long- • February 5, 2003,
Slide 28: Liquidity position, TeliaSonera Group
Liquidity position, TeliaSonera Group Cash and cash equivalents, less blocked funds approx. SEK 11 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 Bilate
Slide 29: Credit statistics – TeliaSonera Group
Credit statistics – TeliaSonera Group TeliaSonera estimates SEK billion 2008 (A) 2007 Gross Debt 61.5 43.6 Cash & Liquidity 1) 11.2 6.7 Net Debt 50.3 36.9 Moody’s Adjusted Net Debt 2) 77.3 55.6 Adjusted Retained Cash Flow 3) 19.3 19.1 Adjusted (RCF/Net Debt) 25% 34% S&P Adjusted Net Debt 4) 64.3 49.
Slide 30: TeliaSonera pensions obligations
TeliaSonera pensions obligations • TeliaSonera uses defined benefit pension plans for most employees in Sweden, Finland & Norway • TeliaSonera pension funds are funding vehicles for those pension obligations, the remainder recorded on the balance sheet, covered via credit guarantees • Rating agencie
Slide 31: TeliaSonera pensions obligations (cont'd)
TeliaSonera pensions obligations (cont’d) Main reasons for the increase in the estimated “pension gap” by some SEK 3.7 billion (vs. YE 2007) • Decrease of discount rate for pension obligations: impact SEK 1 billion (Pension liabilities increased) • Negative overall returns on assets: impact SEK 2.6
Slide 32: TeliaSonera pensions obligations (cont'd)
TeliaSonera pensions obligations (cont’d) TeliaSonera Group pension related risks • Reduction of the discount rate for pension obligations by 100 bps from a level of 4.2%, would imply an increase in TeliaSonera Group pension liabilities, all else equal, by some SEK 3.9 billion • The expected impact
Slide 33: TeliaSonera's funding strategy
TeliaSonera’s funding strategy • Liquidity position, as of December 31, 2008 − Cash and cash equivalents, less blocked funds approx. SEK 11 billion − Available unutilized amount of committed bank credit lines approx. SEK 13 billion • Primary means of external borrowing − EMTN (€7 billion) 1) − Swedi
Slide 34: Q4 2008 Net Sales +12.7%
Q4 2008 Net Sales +12.7% SEK million • Increased sales in Business Services, primarily through the acquisition of Avansys • Currency impact was +545 • Growth in local currency was driven by • customer intake in Spain +99 +1 28,096 • growth in subscriber base and usage +1,308 in Sweden • acquisition
Slide 35: Q4 2008 Operating Income Year-on-Year
Q4 2008 Operating Income Year-on-Year SEK million • Net sales +1,308 • Improved overall margins in consolidated operations • Improved results in Cygate • Higher income from associated companies and Holding entities in Russia +293 and Turkey +400 • Net sales +1,208 • Improved margin through cost savi
Slide 36: 2008 Net Sales +7.5%
2008 Net Sales +7.5% • Currency impact was +243 SEK million • Acquisitions in Tajikistan, Uzbekistan, Nepal and Cambodia contributed to growth • Currency impact was +1,065. Growth in • All markets continued to show growth in volumes and local currency was driven by: net sales, organic growth in loca
Slide 37: 2008 Operating Income Year-on-Year
2008 Operating Income Year-on-Year SEK million • Net sales +2,866 • EBITDA-margin maintained at close to 50% in consolidated operations despite increasingly competitive market environment • Higher income from associated companies in Russia +889 and Turkey +1,266 • Net sales +3,558 • Increased margin
Slide 38: FX rates
FX rates Currency Average Average Change v. Change Closing Closing Change v. Change Average Average Change v. Change Currency 2008 2007 2008 2008 2007 Q4 Q42008 2008 2007 vs 2007 2008 vs 2007 vs 2007 Denmark / Krone 1,29 3,9% 1,47 15,5% 1,37 10,2% Estonia / Kroon 0,61 4,0% 0,70 15,4% 0,65 10,1% EMU/
Slide 39: 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 40: Year-end Report 2008
Year-end Report 2008 TeliaSonera