JANUARY - december 2019 Q4 - CHRISTIAN LUIGA Douglas lubbe president & CEO - Telia Company
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Q4 Year-end REPORT JANUARY – december 2019 CHRISTIAN LUIGA president & CEO Douglas lubbe CFO
CASH FLOW AND EBITDA GROWTH FROM LOWER COST
✔ ✔
OPERATIONAL FREE CASH FLOW EBITDA DEVELOPMENT
We said We did We said We did
4%
12-12.5BN 12.6BN* Q1 Q2 Q3 Q4
* SEK12.2bn adjusted for Q4 pension refund Q1 19 Q2 19 Q3 19 Q4 19
✔ ✔
GROUP OPEX REDUCTION SWEDEN OPEX REDUCTION
We said We did We said We did
~2% ~2% ~3% ~4%*
* 3% adjusted for pension refund Q4
2
IMPROVED SERVICE REVENUE AND EBITDA TRENDS
SERVICE REVENUE DEVELOPMENT* Adjusted EBITDA DEVELOPMENT*
Organic & like for like growth, external service revenues SEK million in reported currency, organic & like for like growth excl. IFRS 16
Service revenue growth Reported EBITDA
Organic/like for like EBITDA growth
Growth excl. Telia Carrier
Growth excl. Telia Carrier & Sweden fiber OTC Q4 2019 +4%
-0.6% 0%
7,413 7,465 8,226 7,914
-1.5% 6,680
-1.7%
Q4 18 Q1 19 Q2 19 Q3 19 Q4 19
Q4 18 Q1 19 Q2 19 Q3 19 Q4 19
• Improved revenue trend excluding fiber OTC • Mainly driven by OPEX and COGS reductions
• Telia Carrier still weights slightly on group • Easy comparison and SEK 100 million pension
refund in Sweden – despite this EBITDA is still
growing Y/Y and Q/Q
* 2018 based on organic growth (stable FX and M&A excluded)
3
2019 based on like for like growth (Stable FX and M&A included in current & corresponding period)
Not including the segment TV and Media established in Q4 2019
NEW AND UNIQUE PLAYER IN THE NORDIC MEDIA SPACE
Synergies of SEK 0.6 billion
by end 2022
Operational free cash flow
of SEK 0.5 billion 2020
4
PROVIDING HIGH QUALITY CONTENT FOR EVERYBODY
Committed to reach and availability Ott rights treated in line with commitments
Continued focus
on market leading
reach
Content
availability for all
guaranteed
• Despite being offered to distribute at a zero cost in • In accordance with our commitments to the EC
December, Com Hem stopped giving its customers we will negotiate OTT distribution rights with at
right to view TV4 and C More on their TV screens least one other player in each market
• We continued to provide TV4 and C More content
through other platforms for all users in Sweden
5
2019 WAS A RECORD YEAR FOR TV & MEDIA
Net sales & EBITDA (2020 illustrative) KEY OPERATIONAL HIGHLIGHTS 2019
SEK billion in reported currency, external net sales & adjusted EBITDA
Continued Successful content
strategy
8.2 8.7 • Leading CSOV* position maintained
• Strong sales execution in ad space
• PUT* down 8% FY 2019 and 10% Dec 2019**
Significant growth in subscriptions
1.2 1.5
• More than 30% OTT subscriber growth due to
domestic drama content and added sport rights
2018 2019 2020e 2018 2019 2020e • Gradual NPS improvement
Net sales EBITDA
Market improved albeit still
• EBITDA growth from strong service revenues, despite challenging
the conflict at year-end • Growing in a continuously challenging market
• Decline in PUT* and implications of the Com Hem • Leading CSOV market position maintained
dispute will imply some pressure on 2020
6 * In the target group A15-64 year olds
* PUT=People Using TV, CSOV=Commercial Share Of Viewing
Sweden B2C mobile back to growth
Postpaid arpu - B2C Mobile Subscription revenues - b2c
Postpaid ARPU B2C excluding VAS Like for like growth
3%
2.0%
+2% 2%
1%
0%
-1%
+4%
-2%
-3%
Q4 18 Q1 19 Q2 19 Q3 19 Q4 19
Q4 18 Subscription IDD* Top-ups Other Q4 19
fees
• ARPU growth due to rise in subscription fees • Mobile subscription revenues back into positive
due to increase in postpaid subscriptions and
• Top-ups headwind faded, pressure from IDD*
ARPU growth
remained
• Stable churn despite price adjustments
7 * EU international direct dialing regulation, introduced May 2019
Improved B2b 2019 vs 2018
B2B service revenue GROWTH – group/Sweden ICT AND IOT INCREASINGLY COMPENSATING LEGACY
Organic growth 2018 & like for like growth 2019
FY18 -2.3% FY19 -1.2%
Ict/IOT
revenues up 20%
-1.3% 2019 vs. 2018
Finland b2b +1%
-2.1% q4 due to ict
growth
Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19* Q3 19 Q4 19
8 * Q2 2019 positively impacted by one-off like revenues in Sweden
FULL YEAR 2019 OPEX TARGET REALIZED
OPEX development 2020 key efficiency drivers
External expenses, like for like, including an estimated 2% cost inflation
2%
• Efficiency gains in New operating model –
0% pooling effects and synergies
1,700 3,300
-2% -2%
FROM
MOVED TO RESOURSES
IN CPS
COUNTRIES
now
-4%
-5%
-6% • Further synergy realization from Get as well as
Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Full year TV & Media
2019 NOK 220 NOK 350
million MILLION
• OPEX Q4 down 5 percent largely driven by Sweden run-rAte END 2022
• Sweden, CPS and Denmark main contributors full year
• New ways of working, such as Shared service
• Full year target of around -2% on group OPEX realized center in Lithuania
• Continued cost take-out expected 2020 300 500
RESOURCES RESOURCES
END 2018 END 2019
9
* CPS = Common Products and Services
PROPOSING A 3.8 PERCENT DIVIDEND INCREASE
Dividend base and pay-out ratios
PROPOSED DIVIDEND EQUALS AN SEK billion and pay-out ratios
AMOUNT OF SEK 10.0 BILLION VS. SEK SEK 12.9 billion reported 2019
SEK 12.5 billion adjusted for pension refund*
9.8 billion 2018
115% 80% 84% 80%
+3.8% 12.4 12.5
11.7 0.4
2.30 2.36 2.45
2.00 7.5
12.2*
2016 2017 2018 2019 2016 2017 2018 2019
(proposed)
Dividend from associated companies
Operational free cash flow (2019 adjusted for pension*)
* Adjusted for SEK 0.4 billion pension refund in Q4 2019
10CMD 2019 MESSAGE UPDATE
WISE
BEST IN CLASS
CMD 2019 FIGHT FOR PUSH FOR EXECUTION OF INVESTMENtS
CASH
message GROWTH EFFICIENCY M&A USING OUR
MANAGEMENT
SCALE
• Convergence • Structural reductions • Get/TDC NOK 800 • CAPEX coming • SEK 2.4 billion
million down further remaining in working
• Smart pricing • Cost smartness capital efficiencies
• Bonnier Broadcasting
• Telia global • Net OPEX reduction SEK 600 million
of 2 percent 2019-21
Increased CAPEX Well in reach of
Convergence 2019 ambition Norway cost
Current capabilities realized & 2020- synergies realized
ambitions from the SEK 6bn
customer driven ambition – will be
status enhanced - ready 2021 ambitions – revenue synergies
demand, mobile in above SEK 6bn end
for next step unchanged up next
FInland & Get in 2020
NOrway
11STAKING OUT OUR ROAD TO ZERO
By 2022 we will
• 100 percent renewable electricity use
• 5 percent lower energy consumption per subscription equivalent (baseline 2018)
• Climate neutral within our own operations (energy and business travel)
• Engage with all suppliers to have a plan in place by 2022 to reach Zero CO2 by 2030,
including their suppliers
• Significantly increase reuse of network and B2C/B2B equipment
• Comprehensive green offerings in all markets
• Include sustainability in incentives and performance evaluation
DARING GOALS
2030
12OUTLOOK FOR 2020
OPERATIONAL FCF* SEK 10.5-11.5 BILLION
ADJUSTED EBITDA* TO GROW BETWEEN 2-5% COMPARED TO 2019
13
* Based on the Group structure at year-end 2019 (i.e. including the segment TV and Media established in December 2019). Adjusted EBITDA in stable FXQ4 Year-end REPORT JANUARY – december 2019 Douglas lubbe CFO
EBITDA GROWTH DESPITE REVENUE PRESSURE
SERVICE REVENUE DEVELOPMENT EBITDA DEVELOPMENT
Like for like growth, external service revenues Like for like growth, excluding adjustment items and IFRS 16
-1.7% +4%
Q4 18 SWE FIN NOR DEN LIT EST LAT Telia Other Q4 Q4 18 SWE FIN NOR DEN LIT EST LAT Telia Other Q4
Carrier 2019 Carrier 2019
• Sweden down due to PSTN and fiber OTC • Strong Sweden due to lower OPEX
• Pressure on PSTN in Finland and interconnect • Norway impacted by one-off items
• Norway decline related to B2C mobile • Revenue mix and lack of efficiencies in Finland
15Growth in b2c excluding fiber otc
SERVICE REVENUE DEVELOPMENT Adjusted EBITDA DEVELOPMENT*
Reported currency, external service revenues Organic & like for like growth excl. IFRS 16
B2C excl. fiber OTC B2B B2C Pension refund and easy
9%
+1.3% comparison
6%
B2C
-2.1% 3%
B2B -2.5%
Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19
• Significant impact on B2C from lower fiber OTC • Significant growth Q4 driven by lower costs
• Excl. fiber OTC B2C grew due to strong mobile • Efficiencies realized
and fixed broadband
• Pension refund contributed by SEK 100 million
• B2B down from deterioration in mobile revenues
• Easy comparison figure
* 2018 based on organic growth definition (stable FX and M&A excluded)
16
2019 based on like for like growth (Stable FX and M&A included in current & corresponding period)REVENUE MIX PRESSURING EBITDA DEVELOPMENT
SERVICE REVENUES & ADJUSTED EBITDA MOBILE SUBSCRIPTIONS AND postpaid ARPU
SEK million in reported currency & like for like growth excl. IFRS 16 Total subscription base in 000’, postpaid ARPU in local currency
-1.4% 3,400 22
Subscriptions Postpaid ARPU
3,324 3,412 3,300 21
3,200 +3.4%
20
-3% 3,100
19
1,136 1,254 3,000
2,900 18
2,800 17
Q4 18 Q4 19 Q4 18 Q4 19 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19
Service revenues EBITDA
• PSTN and interconnect burden service revenues • Continued strong ARPU development
• Fixed legacy in B2B compensated by ICT • Smart pricing and low margin VAS
• Revenues mix and limited cost reduction in • Ex. VAS ARPU grew by 1.8 percent
PSTN explain EBITDA decline
• Subscription erosion within both B2B and B2C
17 = Like for like growth excl. IFRS 16 = ARPU growth y-o-yREVENUE PRESSURE NOT OFFSET BY LOWER COSTS
SERVICE REVENUES & ADJUSTED EBITDA service REVenues - BB/TV & full B2B segment
SEK million in reported currency & like for like growth excl. IFRS 16 SEK million, like for like, external service revenues
TV Broadband B2B
-1.8%
+1.0%
3,063 3,120 900 800
-2.3%
-1%
600
1,505
600 -5%
1,371 Y-o-y
400
300
+10% 200
Y-o-y
Q4 18 Q4 19 Q4 18 Q4 19 0 0
Service revenues EBITDA
Q4 18 Q4 19 Q4 18 Q4 19
• Mobile decline due to subscriber loss in B2C • Stable low single-digit growth in Get
• Underlying EBITDA development around 2 • Pressure on traditional fixed B2B telco services
percent
• B2B mobile still growing
• Synergy execution as planned
18 = Like for like growth excl. IFRS 16Strong baltics whilst denmark contracted
SERVICE REVENUE DEVELOPMENT Adjusted EBITDA DEVELOPMENT
Like for like growth, external service revenues SEK million in reported currency & like for like growth excl. IFRS 16
Estonia Lithuania Denmark +8.9% +6%
+9% -8%
+6.0% 379
324
280 295
233 237
-6.4%
Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q4 18 Q4 19 Q4 18 Q4 19 Q4 18 Q4 19
Lithuania Estonia Denmark
• Significant growth in Lithuania largely driven by • Both revenue growth and cost control supported
transit revenues EBITDA in Lithuania
• Another great quarter for Estonia in all key areas • Revenue driven EBITDA growth in Estonia
• Denmark continued to struggle on mobile • Despite working on costs, Denmark unable to offset
revenue decline
19 = Like for like growth excl. IFRS 16operational free Cash FLOW grew 16 percent 2019
OPERATIONAL FREE CASH FLOW development OPERATIONAL FREE CASH FLOW 2019
SEK billion, rolling twelve months SEK billion, rolling twelve months
SEK +16%
12.6 billion
14 1.8 0.4 12.6
10.8 -0.1
12 -0.4
10
8
6
4
2
0
2018 EBITDA WC CAPEX Other 2019
Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19
less ex.
leasing* licenses
• As expected operational free cash flow came • EBITDA growth mainly due to FX and Norway M&A
down Q4 as WC swung back
• Neutral NWC impact due to Q4 swing back and
higher cash CAPEX
• Other items rose driven mainly by higher pension
20 * Repayment of lease liabilities refundnet debt up due to dividend and M&A
NET DEBT DEVELOPMENT
Continuing and discontinued operations, SEK billion, and leverage ratio
• Net debt increased driven mainly by the Bonnier
2.71x Broadcasting acquisition and payment of the
9.2 second dividend tranche
88.1
-1.2
• Share buy-backs of around SEK 0.9 billion left
2.50x 4.9
to do until the AGM 2020
75.4 1.5 • Bonnier Broadcasting earn-out of around SEK
3.9
0.8 billion
• The remaining 50% equals to SEK 0.2 billion in
-5.6 dividend from Turkcell to be received H1 2020
• Pro forma leverage of 2.76x
Q3 19 Operations Cash Buy- Dividend Bonnier Other Q4 19
CAPEX backs Broadcasting
21 = Leverage ratio (multiple, rolling 12 months including a full 12
months of Get/TDC Norway and Bonnier Broadcasting)Operational free Cash flow outlook 2020
OPERATIONAL FREE
• EBITDA, cash CAPEX and NWC expected to be rather neutral
CASH FLOW
• Other items to reduce operational free cash flow driven by
2020
• Paid taxes and interest to increase by c. SEK 1 billion
• Less support from the pension refund
SEK 10.5-11.5
BILLION
22Q&A
DISCLAIMER & FORWARD-LOOKING STATEMENTS This document contains the use of alternative performance measures (APM’s) to provide readers with additional financial information that is regularly reviewed by management, such as adjusted EBITDA, CAPEX and operational free cash flow. These APM’s should not be viewed as a substitute for Telia Company’s IFRS based figures, but as a complement. APM definitions can be found in Telia Company’s interims reports and Annual and Sustainability Report 2018 and may be defined differently by other companies and are therefore not always comparable to similar measures used by other companies. Telia Company’s management considers these APM’s combined with IFRS performance measures and in conjunction with each other, the most appropriate way to measure the performance of Telia Company. 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 depend on circumstances that will occur in the future. There can be no assurance that actual results will not differ materially from those expressed or implied by these forward-looking statements due to many factors, many of which are outside the control of Telia Company. 24
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