Slide 1: Interim Report 1 April 2006 – 30 June 2006
Interim Report 1 April 2006 – 30 June 2006 Elisa Corporation Interim report Q2 2006, 25 July 2006 1
Slide 2: Q2 2006 Report
Q2 2006 Report President and CEO Veli-Matti Mattila
Slide 3: Elisa Q2 2006
Elisa Q2 2006 • Q2 2006 and financial highlights • Review of the mobile and fixed network businesses • Execution of the strategy and 3G service bundles • Outlook for 2006 Elisa Corporation Interim report Q2 2006, 25 July 2006 3
Slide 4: Elisa Q2 2006 highlights
Q2 2006 financial highlights Elisa Q2 2006 highlights • Sale of new 3G service bundles progressed well − increasing interest in new services − majority of new subscriptions 3G service bundles • Mobile ARPU improved from previous quarter, churn deceased to 13% • Both mobile and ADSL subscription base
Slide 5: EBITDA excluding one-offs improved clearly
Q2 2006 and financial highlights EBITDA excluding one-offs improved clearly Revenue and EBITDA-%* • Revenue EUR 382m (336) 382 • EBITDA EUR 95m (170) 336 343 348 − excluding one-offs EUR 100m (84) 326 • EBIT EUR 39m (118) − excluding one-offs EUR 44m (32) • Pre-tax profit EUR 35m (113) 30 % − exclud
Slide 6: Financial position stable
Q2 2006 and financial highlights Financial position stable Net debt and cash flow • Cash flow EUR 29m (136*) • Net debt EUR 381m (364) − dividend EUR 117m 381 364 363 • CAPEX EUR 54m (46), 14% of 293 293 revenue (14) 136 145 • Equity ratio 64% (55) 29 13 • Gearing 30% (36) 1 Q2 2005 Q3 2005 Q4 2005
Slide 7: Lower churn, ARPU decrease stopped
Segment review, mobile business Lower churn, ARPU decrease stopped ARPU and value added services • Churn 12.9% (32.3*) − service competition intensifying 33,8 31,2 30,4 31,3 • ARPU EUR 31.3 (33.8*) 28,0 1 483 • Usage growth in non-voice services − revenues increased 12% to 5.3 €/user/month from Q1 •
Slide 8: 3G handset sales increased revenue
Segment review, mobile business 3G handset sales increased revenue Revenue and EBITDA-% • Revenue EUR 239m (180) − growth due to increased Saunalahti traffic and sale of 3G terminals 239 197 192 • EBITDA EUR 57m (74), 24% of 180 183 revenue (41) − excluding one-offs EUR 59m (46), 25% of revenue (26)
Slide 9: ARPU decrease stopped
Segment review, mobile business ARPU decrease stopped ARPU (EUR) and churn (%) Usage (min/sub/month) 50 240 45 220 40 200 35 180 30 160 Three 25 main 140 players in the 20 market 120 Three Saunalahti Several new Elisa acquired main started to players in the Saunalahti players15 grow market 100 in th
Slide 10: Broadband growth continued
Segment review, fixed network business Broadband growth continued Broadband subscriptions • ADSL subscriptions growth 53% 500 000 459 827 472532 y-o-y 450 000 − broadband penetration 56%, PC penetration 72%* 420 465 384 909 400 000 • ADSL growth 12,700 345 898 subscriptions in Q2 350 000 308 183 − m
Slide 11: Revenue at the same level
Segment review, fixed network business Revenue at the same level Revenue and EBITDA-% • Revenue EUR 166m (170) 180 170 173 • EBITDA EUR 39m (43), 24% of 166 166 revenue (25) − excluding one-offs EUR 42m (43), 25% of revenue (25) • EBIT EUR 11m (17), 7% of revenue (10) − excluding one-offs EUR 14m (1
Slide 12: Growth in fixed network subscriptions
Segment review, fixed network business Growth in fixed network subscriptions 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 Traditional analogue ISDN Cable TV Broadband Elisa Corporation Interim report Q2 2006, 25 July 2006 12
Slide 13: 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 Q2 2006, 25 July 2006 13
Slide 14: Productivity improvement
Strategy execution Productivity improvement • Installation outsourcings in fixed network business • Reduction in personnel costs Significant profitability • New broadband pricing improvement • Changes in mobile pricing • 3G service bundles and wider service offering • Capacity and speed Increases in
Slide 15: 3G service bundles in favour
Strategy execution 3G service bundles in favour • Sale of 3G packages exceeded expectations • Currently about 150,000 3G customers in Finland, estimated amount at the year end 250,000 - 300,000 • Usage growth in several new services − e-mail, video calls, video streaming, MMS, information services •
Slide 16: Growth in new services
Strategy execution Growth in new services • Decline in ARPU trend stopped • Lower churn indicates customers increasing demand for better services • 3G customers more active at using new services • About half of 3G service bundle customers also buy data package services • Clear pricing and predictabi
Slide 17: Outlook for 2006
Outlook for 2006 • Market − Competition remains challenging − More focus on services • Financial position − Revenue will clearly grow − EBITDA and EBIT excluding non-recurring items will improve • CAPEX and cash flow − CAPEX 13-15 per cent of revenue − Cash flow clearly positive Elisa Corporation In
Slide 18: Financial performance
Financial performance CFO Jari Kinnunen
Slide 19: Income statement
Income statement EUR million Q2 2006 Q2 2005 2005 Revenue 382 336 1 337 Revenue growth, y-o-y 14% -1% Other income from operations 1 87 114 Operating expenses -289 -253 -1 005 EBITDA 95 170 446 EBITDA-% 25% 51% 33% EBITDA excluding one-offs 100 84 346 EBITDA-% excluding one-offs 26% 25% 26% Deprecia
Slide 20: CAPEX
CAPEX CAPEX, EURm 100 100 % • CAPEX includes 95 % − Broadband infrastructure 90 90 % − Speed increases 85 % − 3G-capacity and coverage increase 80 15 80 % 75 % − HSDPA in Finland and Estonia 70 70 % − Investments in new billing, CRM and network 65 % management systems 60 31 60 % 1 55 % 50 50 % 5 45
Slide 21: Cash flow
Cash flow Cash flow and operative cash flow*, EURm 160 • Positive cash flow EUR 29m in Q2 140 120 • Change in net working capital EUR –6m 100 − Positive effect from seasonality − Sales receivables increased through bundling 80 − Inventories increased through 3G bundling 136 145 60 60 46 38 40 40 18
Slide 22: Net debt
Net debt Net debt, EURm and Net debt/EBITDA • Cash flow EUR 29m in Q2 381 364 363 • Dividend paid in Q2 EUR 117m 293 293 1,02 0,75 0,78 0,66 0,65 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Net Debt, EUR million Net debt/EBITDA Elisa Corporation Interim report Q2 2006, 25 July 2006 22
Slide 23: Summary
Summary • Profitability improvement still main focus − streamlining of processes − cost cutting programs • 3G service bundles − Increases revenue (handset sales) − Increases usage − Lowers churn − Increases receivables and inventory • Stable financial position Elisa Corporation Interim report Q2 200
Slide 24: Interim Report April 2006 – June 2006
Interim Report 1 April 2006 – 30 June 2006 Elisa Corporation Interim report Q2 2006, 25 July 2006 24
Slide 25: Consolidated Cash flow statement
Appendix slide Consolidated Cash flow statement CONSOLIDATED CASH FLOW STATEMENT EUR million Q2 2006 Q1 2006 Q4 2005 Q3 2005 Q2 2005 Q1 2005 Q4 2004 Q3 2004 Q2 2004 Cash flow from operating activities Profit before tax 34 39 33 28 113 39 65 50 41 Adjustments to profit before tax 63 59 57 53 -11 47 3
Slide 26: Financial situation
Appendix slide Financial situation Financial situation (million euros) 30 Jun 2006 31 Mar 2006 31 Dec 2005 30 Sep 2005 30 Jun 2005 Interest-bearing debt Bonds and notes 326 326 446 455 458 Commercial Paper 35 0 0 0 0 Loans from financial institutions 0 0 0 0 1 Financial leases 49 51 56 59 63 Committ