Telia Company Ab · OMXSTO:TELIA
Telia Company Ab — TeliaSonera — Investor Day (October 2005)
80 slides from Telia Company Ab's investor day presentation, Oct 26, 2005
Slide 1: Anders Igel, President and CEO
October 26, 2005 1 Anders Igel President and CEO
Slide 2: Kim Ignatius, CFO
October 26, 2005 2 Kim Ignatius Executive Vice President and Chief Financial Officer
Slide 3: Forward-looking statements
3 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 an
Slide 4: Highlights – Third Quarter
4 Highlights – Third Quarter • Net sales +8.5% • Operating income excl. non-recurring items +4.5%, to SEK 6,162 million ‑ Swedish margins maintained in competitive market ‑ Strong sales and earnings growth in Norway, Denmark and the Baltic operations ‑ Very strong sales and earnings growth in Eurasi
Slide 5: Strong third quarter results
5 Strong third quarter results Net sales Operating income Excl. non-recurring items SEK million SEK million +8.5% 22,229 -491 +2,699 -475 20,496 +4.5% -167 -775 +1,206 5,898 6,162 Jul-Sep 2004 Sweden Finland All other Jul-Sep 2005 Jul-Sep 2004 Sweden Finland All other Jul-Sep 2005 operations operati
Slide 6: Nordic and Baltic home markets
6 Nordic and Baltic home markets Performance July-September, 2005 • Strong mobile volume growth and efficiency measures sustained margin in Sweden • Strong mobile customer growth Customer growth Q3, 2005 y-o-y Estonia in Finland Sweden Mobile cust. Mobile cust. +5% +17% • Increasing share of postpai
Slide 7: Continued strong sales and earnings growth in International Mobile
7 Continued strong sales and earnings growth in International Mobile Net sales - Eurasia SEK million 1,817 Eurasia – High growth and margins 1,153 • +2 million customers Q3, 2005 y-o-y, total 5.5 million +58% • EBITDA margin excl. non-recurring items 56.4% • Penetration 26% (16) Q3 2004 Q3 2005 Stro
Slide 8: Key financials – Income Statement and Cash Flow
8 Key financials – Income Statement and Cash Flow SEK million Jul - Sep 2005 Jul − Sep 2004 Net sales 22,229 20,496 EBITDA excl. non-recurring items 8,224 8,212 Margin (%) 37.0 40.1 Operating income excl. non-recurring items 6,162 5,898 Margin (%) 27.7 28.8 Net income 4,367 4,739 Earnings per share1
Slide 9: Operating income
9 Operating income SEK million Very good sales and earnings growth in International Mobile operations Mainly Strong improvement in restructuring Lietuvos Telekomas and costs in Sweden consolidation of Eesti Telekom +28 -167 -520 +258 +666 6,162 5,898 -775 +103 +78 +73 5,642 • Net sales SEK -475 mill
Slide 10: Strong financial position and cash flow generation
10 Strong financial position and cash flow generation Sep 30, Dec 31, SEK billion 2005 2004 10.2 0.2 9.4 Return on 7.1 12.4 equity* 9.5% 11.6% Return on capital 1.0 employed* 10.7% 13.9% 5.6 Equity/asset ratio 64.8% 63.8% 0.1 Net debt/equity ratio 7.4% 5.8% 1.8 Net debt Free Net debt * Rolling 12 mo
Slide 11: Outlook
11 Outlook Sales • Strong mobile volume growth expected to continue but price pressure will limit sales growth in home markets • Sweden, decline in sales of traditional fixed services will partly be compensated by sales of other services • In Eurasia, strong sales growth is expected to continue Marg
Slide 12: Anders Igel, President and CEO
October 26, 2005 12 Anders Igel President and CEO
Slide 13: Profitable growth in a brand new world
13 Profitable growth in a brand new world October 26, 2005
Slide 14: TeliaSonera's migration to Mobile and IP
14 TeliaSonera’s migration to Mobile and IP Fixed Mobile -10%* +23%* TeliaSonera Group TeliaSonera Group o n g rati Mi Mig r atio Internet n +33%* Where of Broadband +60%* TeliaSonera Group *) Change in Net sales Jan-Sep, 2003 - Jan-Sep 2005 October 26, 2005
Slide 15: Half of sales from mobile
15 Half of sales from mobile Sales per product area Sales per product area Jan-Sep, 2003 Jan-Sep, 2005 10% 8% 8% 9% 32% 26% 7% 5% 44% 51% SEK 60,718 million SEK 64,785 million Fixed voice Mobile Communications Internet and Broadband Data Other 1) Excluding non-recurring items and other operations, c
Slide 16: International Mobile increases in importance
16 International Mobile increases in importance Net sales Net sales Market split – Jan-Sep, 2003 Sweden Market split – Jan-Sep, 2005 Finland Norway, Denmark, Baltic Int. Mobile Other operations SEK 60,718 million SEK 64,785 million Operating income Operating income Market split1 – Jan-Sep, 2003 Mark
Slide 17: Strategy for profitable growth
17 Strategy for profitable growth Create growth Home markets Keep profitability Profitable Growth Exploit growth International Mobile Enhance value October 26, 2005
Slide 18: Create growth
18 Create growth • Leading the migration – Focused Service Portfolio • Market share vs. customer value • Genuine service and simplicity in products and offerings • Customer loyalty • Competitive pricing and packaging October 26, 2005
Slide 19: Strong customer growth, year on year
19 Strong customer growth, year on year Nordic and Baltic Eurasia, Russia1 and Turkey1 22.6 million 52.7 million +4% +46% +0.9 million +2 million in Eurasia +14.8 million in MegaFon and Turkcell 1) Associated companies October 26, 2005
Slide 20: New service initiatives
20 New service initiatives Easy-to-use services Increase in mobile data traffic and customer growth • Roll out in Home markets ‑ SurfPort LAN ‑ Mobile TV WLAN ‑ Connect and Connect Pro GSM • Mobile over broadband – tested in DK GPRS EDGE UMTS Always Best Connected October 26, 2005
Slide 21: New service initiatives
21 New service initiatives Attractive Broadband offerings Strong market position • High quality connection and capacity • Firewalls and virus protection as standard (Sweden) • Bundling and Flat rate October 26, 2005
Slide 22: New service initiatives
22 New service initiatives Outsourcing, IP-VPN Bus. and managed services processes Increased demand Business Applications • TeliaSonera DataNet ‑ Nordic IP-VPN Managed Services solution based on MPLS ‑ Global reach through partners • WM-data, Fortum, City of Malmö Infrastructure and other municipa
Slide 23: Competitive Cost Levels
23 Competitive Cost Levels Sweden • 1,325 of about 3,000 employees in transition • Measures implemented by end of Q3 estimated to reduce annual costs by SEK 1.2 billion as of 2006 Finland • Turn-around program under review by new President TeliaSonera Finland Denmark • Telia Mobile and Telia Network
Slide 24: Competitive Cost Levels
24 Competitive Cost Levels • Further exploit scale advantages by building ONE GROUP ‑ Common production ‑ Common technology ‑ Focused Service Portfolio = Common Service Portfolio Further Competitive Completely Merger exploiting cost level different synergies scale cost levels initiatives advantages
Slide 25: International mobile - exploit growth and enhance value
25 International mobile - exploit growth and enhance value • Transparency • Good corporate governance • IPO in Russia • Active board work • Home market/eastern markets cooperation ‑ Explore opportunities in procurement and roaming ‑ Operational involvement and partnership ‑ Sharing of knowledge, ser
Slide 26: Dual opportunities
26 Dual opportunities Home markets International Mobile Strong growth Mature markets markets? Sales 100% mobile Earnings penetration Customers Create growth – Keep profitability Exploit growth – Enhance value Based on strengths in the regions, complementary acquisitions can be considered Octobe
Slide 27: Focused Service Portfolio
October 26, 2005 27 Focused Service Portfolio Terje Christoffersen Group Vice President - Marketing, Products and Services
Slide 28: Why Focused Service Portfolio?
28 Why Focused Service Portfolio? • Market Development ‑ Fixed to mobile and Internet ‑ New market players ‑ Increasing competition • Focus gives us the possibility for growth • Focus reduces complexity and cost Growth Costs October 26, 2005
Slide 29: What is so revolutionary about this?
29 What is so revolutionary about this? • This is not a Technological revolution • This is a Business Focus revolution! ‑ Better satisfaction of customer needs via combinations ‑ Enabling stronger Market Focus and Effectiveness in all processes ‑ Focused and efficient Product Development ‑ Achieving
Slide 30: Focused Service Portfolio
30 Focused Service Portfolio Focus on customer needs and market growth • Mobile voice and data • Mobile over broadband • Wireless office • Mobile enabling services • Broadband (ADSL, Cable, • VOIP Ethernet) • IP-TV • IP-VPN • Retailnet • Contact center solutions • Combination solutions (e.g. • Mobil
Slide 31: Focused Service Portfolio - Strategy
31 Focused Service Portfolio - Strategy GENUINE SERVICE SIMPLICITY Rich Information & Excellent Always Best Communications Entertainment Communications Connected Services Management Experience S E R V I C E S - That work S E R V I C E S - That are useful October 26, 2005
Slide 32: System value - The Modular Office
32 System value - “The Modular Office” “Help” “Guidance” e-mail at host system The wireless office Connection Broadband WLAN Security October 26, 2005
Slide 33: New service initiatives
33 New service initiatives Fixed services • Nordic voice services • Nordic conference services • Call center solutions Mobile services Internet (IP) services LAN • Mobile portal - • Broadband enablers SurfPort • VoIP for PC • Mobile enablers WLAN • Data Net Nordic • Nordic voice services • Connect P
Slide 34: What is so revolutionary about this?
34 What is so revolutionary about this? • This is not a Technological revolution • This is a Business Focus revolution! ‑ Smarter satisfaction of customer needs via combinations ‑ Enabling stronger Market Focus and Effectiveness in all processes ‑ Focused and efficient Product Growth Development ‑ A
Slide 35: Excellent communication experience
35 Excellent communication experience October 26, 2005
Slide 36: Marie Ehrling, President TeliaSonera Sweden
October 26, 2005 36 Marie Ehrling President TeliaSonera Sweden
Slide 37: TeliaSonera Sweden – July-September, 2005
37 TeliaSonera Sweden – July-September, 2005 Margin maintained in a competitive market • Continued Mobile volume growth EBITDA1 has almost offset the effect of lower SEK 4,114 million prices Margin 43% • Efficiency measures contribute to sustained margins Mobile Fixed SEK 1,455 million SEK 2,659 mil
Slide 38: Market transformation and increased competition
38 Market transformation and increased competition Trends - Sweden Effects - Sweden Market • High penetration of fixed and mobile • IP means new competitors • Broadband growth • Consolidation • Bundled and flat-rate offerings • New constellations • Managed Solutions & Outsourcing • Price erosion in
Slide 39: Increasing demand for Broadband
39 Increasing demand for Broadband Broadband Market TeliaSonera Sweden • Escalating broadband competition • ADSL coverage extended to • Triple Play 92% of Swedish households • Market value increasing • Increased focus on high speed access build out – LAN & Fibre • Broadband content: Swedish Broadban
Slide 40: Large potential within Managed Services
40 Large potential within Managed Services Managed Services Market TeliaSonera Sweden • Traditional platforms to common IP • Merging of IT and Telecom • A growing business • IP enables managed solutions • Encompasses Fixed, Mobile & • Customers strive for streamlining Datacom • Expanding into Manage
Slide 41: Positioned to ramp up IP-VPN services
41 Positioned to ramp up IP-VPN services IP-VPN Market TeliaSonera Sweden • IP-VPN solutions replacing leased lines and traditional datacom • Sweden’s largest IP-backbone • Voice and data traffic united into • DataNet IP-VPN • Global reach through partnership • High price pressure • Solid range of v
Slide 42: Strong volume growth in Mobile Data
42 Strong volume growth in Mobile Data Mobile Data Market TeliaSonera Sweden • High mobile penetration • Mobile Internet portal: SurfPort • Accelerating competition • Remote working: Connect Pro combining new content with • Addressing mobile data traffic price-reductions usage-barriers ‑ Mobile musi
Slide 43: Valuable Voice customers
43 Valuable Voice customers Fixed & Mobile Voice Market TeliaSonera Sweden • High penetration • Fixed and Mobile price plans • Price erosion • Fixed to mobile migration enhancing customer loyalty • Decreasing market value • Halebop fastest growing Swedish ‑ Mobile -1% yearly ‑ Fixed -5% yearly mobil
Slide 44: Leading the migration in Sweden
44 Leading the migration in Sweden Unique position to capitalise on being the market leader in all areas Broadband Mobile Internet Triple Play IP-VPN Mobile VPN access Managed Solutions Fixed Voice Mobile Fixed/Mobile convergence October 26, 2005
Slide 45: Extensive business transformation being carried out
45 Extensive business transformation being carried out Scope Restructuring areas 2005-2007 Development Marketing OH • Annual cost reductions / Product Production Sales & & - SEK 4-5 billion Management Distribution Other • Employee reduction ~30% ~30% ~20% ~20% - Approx. 3,000 of savings of savings o
Slide 46: Continuous improvements secured
46 Continuous improvements secured Progress continuously monitored Improvements Initial Action Plan • New organisation established • Annual cost run-rate reduced by SEK 1.2 billion • More than 1,300 employees TSS under transition or accepted Organisation retirement agreements • New Actions • Reporti
Slide 47: Regulatory issues
47 Regulatory issues • Wholesale telephone line subscriptions ‑ Regulated offer launched • Universal Service Obligation ‑ Stay of execution • LLUB including bit-stream and broadband access without telephone line subscription ‑ Launched • Termination prices in fixed and mobile networks ‑ Pending cour
Slide 48: TeliaSonera Sweden is well positioned for the future
48 TeliaSonera Sweden is well positioned for the future • Using its unique strength by being the leading fixed, mobile & broadband player • Ramping up new services • Leading the migration within Mobile Data, Broadband • Succeeding in growth areas and IP Data Services • Securing margins • Organisatio
Slide 49: Juho Lipsanen, President TeliaSonera Finland
October 26, 2005 49 Juho Lipsanen President TeliaSonera Finland
Slide 50: TeliaSonera Finland - July–September, 2005
50 TeliaSonera Finland - July–September, 2005 Strong mobile customer growth in Finland • Good mobile volume growth EBITDA1 • Price erosion, sales and marketing SEK 1,105 million cost and other volume related Margin 27.3% expenses burdened sales and earnings • Cost measures initiated earlier Mobile F
Slide 51: Half of Finnish households - mobile phone only
51 Half of Finnish households - mobile phone only Fixed-line phone, No phone 0.5% only 3.5% • Aggressive fixed to mobile migration • Voice migrating to Fixed-line Mobile mobile networks and 49.4% 46.6% phone, • Fixed networks turning mobile phone only into data networks Source: Statistics Finland, c
Slide 52: Overcapacity main reason for market instability
52 Overcapacity main reason for market instability Indicative Capacity Churn % Churn Capacity Subscribers and Subscriber Index 40 200 3. Low price service 35 providers gained momentum 180 160 2. Mobile number 30 portability introduction 140 25 1. Third mobile 120 network introduced 20 100 80 15 60 1
Slide 53: Market transformation and increased competition
53 Market transformation and increased competition Trends - Finland Effects - Finland Market • High mobile penetration and declining traditional fixed • Overcapacity in mobile • Consolidation (3 network operators) • Price erosion in mobile • Broadband growth and broadband • Bundled offerings introdu
Slide 54: Price erosion and volume growth in mobile (voice)
54 Price erosion and volume growth in mobile (voice) Market - Finland TeliaSonera Finland • Fixed-to-mobile migration to low- cost subscriptions • Customer win-back • Unreasonable free airtime offerings − Tele Finland (mainly campaigns) − Renewed service portfolio • Low price level − Customer loyalt
Slide 55: Strong volume growth in Mobile Data
55 Strong volume growth in Mobile Data Mobile Data Market TeliaSonera Finland • High mobile penetration • Basically all mobile customers • Market opening up for value- mobile data enabled added services after a long period • Non-voice share of mobile of price-centered offerings sales growing • New i
Slide 56: Consolidation started in Finland
56 Consolidation started in Finland Ceased operations, customers transferred to TeliaSonera Finland Discontinued operations in Finland Public tender offer for all Saunalahti shares Restructuring operations October 26, 2005
Slide 57: Strong growth in Broadband
57 Strong growth in Broadband Market - Finland TeliaSonera Finland • Strong competition continuing • Broadband coverage 95% of households* • Despite high growth rates, CAPEX remained • Broadband penetration 37.5%* • 12 and 24 Mbps introduced in • 2008, 90% of Internet connections selected areas Broa
Slide 58: Expansion within Managed Services
58 Expansion within Managed Services Market - Finland TeliaSonera Finland • Steady growth for Managed • Well positioned within Managed Services and Outsourcing Services • Need to integrate mobility and • Strong position in remote working into corporate – LAN/WAN integration networks – Voice/data int
Slide 59: Leading the migration in Finland
59 Leading the migration in Finland Unique position to capitalise on being the market leader in all areas Broadband Fixed mobile Triple play IP-VPN convergence Mobile internet • Managed Solutions Fixed Voice Mobile Fixed-to-mobile migration Voice solutions October 26, 2005
Slide 60: Competitive Cost Level actions implemented
60 Competitive Cost Level actions implemented Scope Actions • Restructuring program • 650 jobs reduced ‑ Estimated annual cost • Focus on purchasing and savings of SEK 1 billion as of sub-contractor management 2006 • Further measures needed to • Focused marketing and sales restore competitiveness an
Slide 61: New legislation/regulation
61 New legislation/regulation • Handset subsidies ‑ Government bill in the Parliament to allow 3G handset subsidy • Consumer rules ‑ New bill to advance consumer rights October 26, 2005
Slide 62: Turn-around program to restore competitiveness
62 Turn-around program to restore competitiveness • Unique strength by being the leading fixed, mobile and broadband provider • Innovative new concepts are introduced in Mobile Data, Triple Play and Managed Services • Leading the migration • Turn-around program under • Succeeding in growth areas rev
Slide 63: Tero Kivisaari, CFO TeliaSonera Eurasia
October 26, 2005 63 Tero Kivisaari CFO TeliaSonera Eurasia
Slide 64: TeliaSonera in Eurasia
64 TeliaSonera in Eurasia July-September, 2005 Strong sales and earnings growth • Net sales ‑ SEK 4,417 million Jan-Sep, 2005 ‑ SEK 1,817 million Q3, 2005 +58% y-o-y • EBITDA excl. non-recurring items ‑ SEK 2,447 million Jan-Sep, 2005 ‑ SEK 1,025 million Q3, 2005, +48% y-o-y ‑ Margin 56.4% Q3, 2005
Slide 65: Developing markets
65 Developing markets Moldova Kazakhstan • Ownership 74% Population 3.4 million Population 15.0 million Customers 0.4 million Customers 2.9 million • Population 31.6 m Market share 47% Market share 69% • Penetration 26% (16) • Network coverage >85% of population #2 #1 • Customers 5.5 million • Prepa
Slide 66: Important contributor to the societies
66 Important contributor to the societies Fixed line penetration % Mobile spending as % of GDP Belarus 31% Azerbaijan 2.7 Georgia 2.6 Ukraine 23% Poland 2.3 Armenia 16.3% Moldova 2.2% Kazakhstan 14.5% Ukraine 1.8% Moldova 14% Italy 1.5% Russia 1.2% Azerbaijan 12.5% Kyrgyz Rep 1.1% Georgia 12.5% Bela
Slide 67: Main issues operating in Eurasia
67 Main issues operating in Eurasia Politics and regulations Economics Business environment October 26, 2005
Slide 68: Internal control environment
68 Internal control environment • Strict policies and authorizations • Projects to enhance internal control ‑ Sarbanes-Oxley project ‑ SAP implemented • Matrix organization • Shareholder oversight October 26, 2005
Slide 69: Trends in Fintur markets
69 Trends in Fintur markets Mobile • Significant increase in value added services • Mobile Internet services important - Fixed Internet not developed • Price pressure due to increasing competition and regulation • Stable ARPU due to economic growth and increasing disposable income October 26, 2005
Slide 70: Trends in Fintur markets
70 Trends in Fintur markets Fixed line • Poor fixed line infrastructure • Mobile - crucial substitute to fixed line both in voice and data • Fixed line still dominated by state entities Internet • Low Internet penetration (<1%) • Limited Internet services mainly due to low quality dial-up accesses •
Slide 71: Good profitability and growth
71 Good profitability and growth SEK billion SEK billion 5 6 5 4 Subscribers Net sales 4 in million 3 57% 56% 54% CAPEX 3 Penetration 26% 2 EBITDA 2 18% margin 1 1 11% 0 0 FY 2003 FY2004 Jan-Sep FY 2003 FY 2004 Jan-Sep 2005 2005 • Net sales CAGR approx. +47% • Still low penetration • Strong EBITDA-m
Slide 72: Azercell in Azerbaijan
72 Azercell in Azerbaijan • Ownership* 51.3% • GDP growth: +20%, 2005, among the highest in the world #1 • Net sales Jan-Sep 2005 SEK 1,334 m Mobile Operator • Penetration 82% market share ‑ Mobile 24% ‑ Fixed 13% • Share of prepaid subs 95% • The competitor has not been a strong challenger • New CD
Slide 73: Kcell in Kazakhstan
73 Kcell in Kazakhstan • Ownership* 51.0% • Net sales Jan-Sep 2005 SEK 2,407 m • Penetration #1 ‑ Mobile 28% Mobile Operator ‑ Fixed 15% 69% market share • Share of prepaid subs 99% • Mobile market booming ‑ >200,000 new subscribers per month during Q3 2005 • Network rollout continues ‑ Maintaining
Slide 74: Geocell in Georgia
74 Geocell in Georgia • Ownership* 83.2% • Net sales Jan-Sep 2005: SEK 501 m #2 • Penetration Mobile Operator ‑ Mobile 28% 48% market share ‑ Fixed 13% • Share of prepaid subs 98% • Customer growth over 200,000 during past 12 months • Successful product offerings • Large customer growth did not dilu
Slide 75: Moldcell in Moldova
75 Moldcell in Moldova • Ownership* 100% • Net sales Jan-Sep 2005: SEK 168 m #2 • Penetration Mobile Operator ‑ Mobile 22% 47% market share ‑ Fixed 14% • Share of prepaid subs. 96% • Technology market leader with extensive value added services • GPRS and EDGE launched - competitor has not been able
Slide 76: Summary - TeliaSonera in Eurasia
76 Summary - TeliaSonera in Eurasia • Eurasian markets are highly attractive ‑ Strong sales growth expected to continue • Eurasia’s contribution to TeliaSonera has grown significantly ‑ TeliaSonera present in Eurasian mobile markets since 1996 • TeliaSonera is one of the largest foreign investors in
Slide 77: Closing remarks
October 26, 2005 77 Closing remarks
Slide 78: Dual opportunities
78 Dual opportunities Home markets International Mobile Strong growth Mature markets markets? Sales 100% mobile Earnings penetration Customers Create growth – Keep profitability Exploit growth – Enhance value Based on strengths in the regions, complementary acquisitions can be considered Octobe
Slide 79: Forward-looking statements
79 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 a
Slide 80: The Nordic and Baltic leader in Telecommunications
October 26, 2005 80 The Nordic and Baltic leader in Telecommunications