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JOHAN DENNELIND PRESIDENT & CEO
interim REPORT JANUARY – March 2019
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CASH FLOW AND EBITDA DEVELOPMENT Q1 2019
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SEK 4.4 bn -4%
* On a like for like basis, excluding IFRS 16 impact
Adjusted EBITDA* growthOperational free cash flow
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REPORTING POST IFRS 16 IMPLEMENTATION
Reported sekReported sekIllustrative graphIllustrative graph
Like for like growthLike for like growthIllustrative graphIllustrative graph
Like For Like growth INcl. Ifrs 16Like For Like growth INcl. Ifrs 16Illustrative graphIllustrative graph
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20192018 2018 2019
• Growth in the existing business including any acquired and excluding any disposed businesses in current and corresponding period
• At stable FX
20192018
• Based on like for like growth but 2018 adjusted as if IFRS16 would have been implemented
• At stable FX
• Reported numbers in SEK including impact from M&A and changes in FX
Numbers incl. IFRS 16M&AFX Numbers incl. IFRS 16M&A
+15.0%+15.0% +5.8%+5.8% -4%-4%
M&A
IFRS16 est. adj.
Numbers incl. IFRS 16
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RECAP OF CMD
Overall: OP FCF TO SUSTAIN AND GROW BEYOND 2019, SEK 12-12.5 BillioN A FLOOR
CMDSUSTAINABILITY: UPpING THE GAME WITH OUR DARING GOALS
CPS: sek 0.6-0.9 Billion COST SAVINGS FROM NEW OPERATING MODEL
FINANCIALS: AMBITION TO REDUCE OPEX ~2% NET ANNUALlY2019-2021
SWEDEN: EBITDA TREND-SHIFT DURING 2020
NORWAY: GET/TDC CASH FLOW SYNERGIES INCREASED TO NOK 800 MILLION
FINLAND: FURTHER DEVELOP b2B and B2C CONVERGENCE
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THANKS FOR THE FEEDBACK
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WHAT YOU LIKEDWHAT YOU LIKED What you would have liked more ofWhat you would have liked more of
Clear message on cash flow
Strategic red thread
Transparency on financials
Structural cost opportunities
BONNIER BROADCASTING
Strategic positioning of new telia norway
FCF GROWTH DESPITE EXPECTED LOWER EBITDA
OPERATIONAL FREE CASH FLOW remained strong
OPERATIONAL FREE CASH FLOW remained strong
Bonnier broadcasting filing process initiated
Bonnier broadcasting filing process initiated
Dividend decided & buy-back mandate renewed at AGM
Dividend decided & buy-back mandate renewed at AGM
ADJUSTED EBITDA* down as expected
ADJUSTED EBITDA* down as expected
SEK 4.4 billion -4%Q1 2019 VS. Q1 2018
* On a like for like basis, excluding IFRS 16 impact ** Like for like
Daring goals to drive sustainability agendaDaring goals to drive sustainability agenda
MOBILE SERVICE REVENUES**MOBILE SERVICE REVENUES**
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SEK 2.36 per Share
Ambition of SEK 10 BN coming
2 years
-2.1%-2.1%Vs. Q1 2018
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Q1 18 Q2 18 Q3 18 Q4 18 Q1 19
Service revenue growth Service revenue growth excl. Telia Carrier
-2.6%-2.6%
-2.4%-2.4% 6,495 6,443 6,977 6,735 7,468
-10.0%-8.0%-6.0%-4.0%-2.0%0.0%2.0%4.0%
Q1 18 Q2 18 Q3 18 Q4 18 Q1 19
Reported EBITDA Organic/like for like EBITDA growth
A CHALLENGING Q1 AS FLAGGED
• Main drivers: Swedish legacy, mobile in Norway/Denmark and Telia Carrier
• A notch better than expected based on a one-off effect in Norway
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SERVICE REVENUE DEVELOPMENT*SERVICE REVENUE DEVELOPMENT*Organic & like for like growth, external service revenuesOrganic & like for like growth, external service revenues
Adjusted EBITDA DEVELOPMENT*Adjusted EBITDA DEVELOPMENT*Reported in absolute, organic & like for like growth excl. IFRS 16 in Q1 19 Reported in absolute, organic & like for like growth excl. IFRS 16 in Q1 19
* Q1 2018-Q4 2018 based on the previous organic growth definition (stable FX and M&A excluded). Q1 2019 based on the new definition “like for like growth” (Stable FX and M&A included in current & corresponding period)
-4%-4%
-2.1%-2.8%
-6%
-4%
-2%
0%
2%
Q1 18 Q2 18 Q3 18 Q4 18 Q1 19
Mobile revenues Fixed revenues excl. Telia Carrier
MOBILE REVENUES TURNED NEGATIVE Q1
• Mobile turned negative Q1 driven by the Nordics
• Fixed remained under pressure by legacy
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MOBILE & fixed SERVICE REVENUE GROWTHMOBILE & fixed SERVICE REVENUE GROWTHOrganic & like for like growthOrganic & like for like growth
MOBILE service revenue GROWTHMOBILE service revenue GROWTHLike for like total mobile service revenuesLike for like total mobile service revenues
LITQ1 18 SWE FIN NOR DEN EST LAT Q1 19
-2.1%
• Contracting customer base in the Nordics
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TELIA SWEDEN - WORLD CLASS MOBILE NETWORK
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#1MOBILE NETWORK IN
SWEDEN
#4IN THE WORLD
Q1 19 Q2 19 Q3 19 Q4 19 Q1 19 Q2 19 Q3 19 Q4 19
BETTER TREND IN H2
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Service revenues - 2019 estimatedService revenues - 2019 estimatedExternal service revenues, like for like growthExternal service revenues, like for like growth
GET OPEX SYNERGIESGET OPEX SYNERGIES
NEW OPERATING MODELNEW OPERATING MODEL
ROBOTICS AND NEAR SHORINGROBOTICS AND NEAR SHORING
G&A AND OTHER EFFICIENCIESG&A AND OTHER EFFICIENCIES
-2%FULL YEAR
-2%FULL YEAR
EASIER COMPARISONs (H2)EASIER COMPARISONs (H2)
OPEX DEVELOPMENT - 2019 estimatedOPEX DEVELOPMENT - 2019 estimatedExternal expenses, like for like growthExternal expenses, like for like growth
OVERALL PRICE INCREASESOVERALL PRICE INCREASES
NORWAY easier comparison NORWAY easier comparison
FINLAND B2BFINLAND B2B
Legacy remains a burdenLegacy remains a burden
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RUN
-rA
TESEK BILLION
TIMEEND OF 2022
IN ADDITION CAPEX SAVINGS OF SEK 0.5 BILLION WITH RUN-RATE END OF 2022
0.6-0.9
New operating model now in play
• EARLIER LAUNCHES OF NEW TECHNOLOGY
• MORE COMPETITIVE PRODUCTS IN ALL MARKETS
EFFICIENCY AND SCALABILITY
EFFICIENCY AND SCALABILITY SPEED AND FLEXIBILITYSPEED AND FLEXIBILITY IMPROVED CUSTOMER
EXPERIENCE IMPROVED CUSTOMER
EXPERIENCE
• DEVELOP ONCE – DELIVER 6X
• ONE JOINED FORCE VS. FRAGMENTED EFFORTS
• NEW WAY OF WORKING – AGILE AND COMMON
• COMMON PRODUCT DEVELOPMENT & PLATFORM
-9%
-6%
-3%
0%
2016 2017 2018
Central cost reductionsCentral cost reductionsCOGS and OPEXCOGS and OPEX
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A STRONGER TELIA COMPANY EMERGING
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2018 (SEK BILLION)
GET/TDC NORWAY
BONNIER BROADCASTING
FULL RUN-RATESYNERGIES
(PER YEAR)
COMBINED PRO FORMA
1.843.4%
1.1**13.8%
1.3 4.2 (prev. 3.5)>32.5%
0.848.1%
1.0***91.3%
1.4 3.3 (prev. 2.7)77.7%
EBITDA(margin)EBITDA(margin)
EBITDA-CAPEX*(cash conversion)
EBITDA-CAPEX*(cash conversion)
SYNERGY BREAKDOWNSYNERGY BREAKDOWN
GET – NOK 800 MILLION CASH FLOW SYNERGIES END of 2021
* Excluding licenses ** Assuming same depreciation in 2018 as in 2017 *** Assuming EBITA equals EBITDA-CAPEX
BONNIER BROADCASTING – CASH FLOW SYNERGIES OF Sek 600 million end of 2022
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OUTLOOK REITERATED & capital MANAGEMENT IN FOCUS
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Operational free cash flow to be between SEK 12.0-12.5 billion (SEK 10.8 billion 2018) – is reiterated
O P E R A T I O N A L F R E E C A S H F L O W
• Executed the first year of buybacks and second year initiated (stretching from April 16, 2019 - February 28, 2020)
• SEK 15 billion in total or SEK 3.45 per share
• Within the target of a credit rating equal to A- to BBB+
• Ordinary dividend of SEK 2.36 of which the first tranche of SEK 1.18 was distributed in April 2019
Capital MANAGEMENT
CHRISTIAN LUIGA EXECUTIVE VICE PRESIDENT & CFO
interim REPORT JANUARY – March 2019
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LOWER REVENUES BEHIND DECLINE IN EBITDA
• Pressure from legacy and mobile revenues in Sweden
• Lower mobile customer base and ARPU pressured Norway
DENQ1 18 FIN NOR ESTLIT LAT Other Q1 19SWE Telia Carrier
-2.6%
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DEN Other Q1 19ESTFINQ1 18 SWE LIT LATNOR Telia Carrier
-4%
• Expected softness from three largest countries
• Sweden and Norway negative due to revenue pressure
• Finland inventory write-down, tough comparison and lower equipment margin
SERVICE REVENUE DEVELOPMENTSERVICE REVENUE DEVELOPMENTLike for like growth, external service revenuesLike for like growth, external service revenues
EBITDA DEVELOPMENTEBITDA DEVELOPMENTLike for like growth, excluding adjustment items and IFRS 16Like for like growth, excluding adjustment items and IFRS 16
COSTS TO GRADUALLY COME DOWN OVER THE YEAR
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OPEX developmentOPEX developmentExternal expenses, like for likeExternal expenses, like for like
1%
-6%
-4%
-2%
0%
2%
Q1 18 Q2 18 Q3 18 Q4 18 Q1 19
• Increase Q1 driven by Finland and Norway, Sweden flat
• Continued solid work on cost in Denmark and lower cost in central functions including CPS
• Cost increase driven mainly by:
• (+) energy
• (+) marketing
• (+) bad debt
• (-) resources
-2%FULL YEAR
-2%FULL YEAR
opex reduction target 2019 remains
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Q1 19 Q2 19 Q3 19 Q4 19
SWEDISH COST LEVEL TO COME DOWN OVER THE YEAR
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OPEX development - 2019 estimatedOPEX development - 2019 estimated
-3%FULL YEAR
-3%FULL YEAR
• Q1 cost base flattish, where resource costs are slightly down, offset by marketing and energy costs
• Initiatives will impact second half more which also have easier comparisons
7,622 7,421
3,421 3,422
Q1 18 Q1 19 Q1 18 Q1 19Service revenues EBITDA
-2.7%-2.7%
• Weaker trend from previous quarters mainly related to mobile service revenues
= Like for like growth excl. IFRS 16 * External service revenues ** Excluding adjustment items
SERVICE REVENUES* & EBITDA**SERVICE REVENUES* & EBITDA**SEK million, reported currency & like for like growth excl. IFRS 16SEK million, reported currency & like for like growth excl. IFRS 16
-6%-6%
Continued Revenue PRESSURE in sweden
• B2C - weaker mobile and continued legacy pressure
• Unchanged situation in B2B
• Positive pricing effects from Q2 and onwards
B2B
Q1 18 Q2 18 Q3 18 Q4 18 Q1 19
Mobile B2C postpaid ARPU
Mobile B2C revenue growth
-1%-1%
• ARPU slightly down
• less top-ups
• Reduced prepaid customer base
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B2C
SERVICE REVENUE DEVELOPMENTSERVICE REVENUE DEVELOPMENTReported currency, external service revenuesReported currency, external service revenues
MOBILE – B2C MOBILE – B2C In local currency, postpaid ARPUIn local currency, postpaid ARPU
0%
Q1 18 Q2 18 Q3 18 Q4 18 Q1 19
B2C excl. fiber OTC B2B B2C
-2.9%-2.9%
-2.6%-2.6%
-3.3%-3.3%
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2,129
3,130
1,0081,516
Q1 18 Q1 19 Q1 18 Q1 19
STABLE IN FIXED BUT PRESSURE ON MOBILE IN NORWAY
-4%-4%
-4.2%-4.2%
• Loss of subscriptions and lower ARPU pressured mobile revenues
• SEK 100 million positive EBITDA impact from sale of earlier impaired customer receivables
• Broadband growth of 5% from customer uplift
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SERVICE REVENUES* & EBITDA**SERVICE REVENUES* & EBITDA**SEK million, reported currency & like for like growth excl. IFRS 16SEK million, reported currency & like for like growth excl. IFRS 16
Broadband/TV service REVenue developmentBroadband/TV service REVenue developmentSEK million, like for like, external service revenuesSEK million, like for like, external service revenues
= Like for like growth excl. IFRS 16 * External service revenues ** Excluding adjustment items
Service revenues EBITDA 0
300
600
900
Q1 18 Q2 18 Q3 18 Q4 18 Q1 19
TV revenues Broadband revenues
tough start - to improve over the year
3,084 3,273
1,151 1,223
Q1 18 Q1 19 Q1 18 Q1 19Service revenues EBITDA
-0.3%-0.3%
• Mobile pressured by interconnect and TV supported fixed revenues
• Inventory write-down and lower equipment margin
• Increased marketing spend
= Like for like growth excl. IFRS 16 * External service revenues ** Excluding adjustment items 20
SERVICE REVENUES* & EBITDA**SERVICE REVENUES* & EBITDA**SEK million, reported currency & like for like growth excl. IFRS 16SEK million, reported currency & like for like growth excl. IFRS 16
-8%-8%
• Loss of MBB subscriptions represented around half of the drop
• Big B2B contracts won not yet visible in the numbers
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16
17
18
19
20
3,000
3,100
3,200
3,300
3,400
Q1 18 Q2 18 Q3 18 Q4 18 Q1 19
Subscriptions ARPU
+0.6%+0.6%
= ARPU growth y-o-y
MOBILE SUBSCRIPTIONS AND ARPUMOBILE SUBSCRIPTIONS AND ARPUTotal subscription base in 000’, ARPU in local currencyTotal subscription base in 000’, ARPU in local currency
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318 345
234272
141219
Q1 18 Q2 18 Q3 18 Q4 18 Q1 19
Estonia Lithuania Denmark
Q1 18 Q1 19Estonia
Q1 18 Q1 19Denmark
+5%+5%
Q1 18 Q1 19Lithuania
Good performance in estonia
-2%-2%
+1%+1%
-5.8%-5.8%
+5.1%+5.1%
-4.8%-4.8%
• Drop in low margin fixed revenues, but solid mobile in Lithuania
• Continued solid performance in Estonia
• Mobile revenue erosion in Denmark behind decline
• Good work on costs in Denmark
• Revenue growth supported EBITDA in Estonia
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SERVICE REVENUE DEVELOPMENTSERVICE REVENUE DEVELOPMENTLike for like growth, external service revenuesLike for like growth, external service revenues
Adjusted EBITDA DEVELOPMENTAdjusted EBITDA DEVELOPMENTSEK million, reported currency & like for like growth excl. IFRS 16SEK million, reported currency & like for like growth excl. IFRS 16
= Like for like growth excl. IFRS 16
Slightly higher capex driven by get
* Booked CAPEX impacted Q2 2017 by Liiga and Q3 2018 by Helsinki data center
• Higher CAPEX in Norway from consolidating Get
• Fiber capex decline not visible until later during the year due to seasonality in roll-out
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CAPEX EXCLUDING LICENSESCAPEX EXCLUDING LICENSESSEK million, rolling twelve months (R12), excluding right-of-use assetsSEK million, rolling twelve months (R12), excluding right-of-use assets
12,000
13,000
14,000
15,000
16,000
Q1 17 Q2 17* Q3 17 Q4 17 Q1 18 Q2 18 Q3 18* Q4 18 Q1 19
Booked CAPEX excl. licenses (R12)
Cash CAPEX excl. licenses in stable FX (R12)
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Higher net debt due to ifrs 16
• Swedish 700 MHz paid – SEK 1.1 billion
• Final part of Uzbek legal settlement paid –SEK 1.9 billion
• SEK 15 billion initial impact from IFRS 16 (0.5x impact on leverage)
• Based on a steady-state assumption, the impact on leverage from IFRS 16 is estimated to come down by 0.2x over the year
• Fintur cash of around SEK 3.7 billion distributed to Turkcell in April 2019
• First dividend tranche of SEK 5 billion paid in April 2019
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+1.055.4
Q4 18
-8.3
Operations FX & Other
70.0
Buy-backsUzbek settlement
+0.5
IFRS 16 Q1 19CashCAPEX
+1.9+4.3
+15.3
1.97x1.97x
2.44x2.44x
= Leverage ratio (including a full year of Get in Norway)
NET DEBT DEVELOPMENTNET DEBT DEVELOPMENTContinuing and discontinued operations, SEK billionContinuing and discontinued operations, SEK billion
Of which SEK 1.1 billion for spectrum in
Sweden
CASH FLOW continued to grow
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0
2
4
6
8
10
12
14
Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19
• Operational free cash flow not affected by IFRS16
• Continued strong working capital development
• Pension refund of SEK 850 million in Sweden to cover pension outflow (vs. SEK 675 million Q1 LY)
OPERATIONAL FREE CASH FLOW developmentOPERATIONAL FREE CASH FLOW developmentSEK billion, rolling twelve monthsSEK billion, rolling twelve months
SEK 11 billionSEK 11 billion
Q1 2019 (SEK billion)
2019E(y-o-Y)
EBITDA 7.5
NWC 1.1
CAPEX ex. licenses -3.2
Other -1.0
Total OP FCF 4.4
Operational free cash flowOperational free cash flow
Outlook: Operational
free cash flow of SEK 12-12.5
billion
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Q&A
Estimated IFRS 16 IMPACT
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ESTIMATED QUARTERLY IFRS 16 IMPACT ON ADJUSTED EBITDA LIKE FOR LIKEESTIMATED QUARTERLY IFRS 16 IMPACT ON ADJUSTED EBITDA LIKE FOR LIKE
• The estimates have not been audited and are based on a high-level assessment
SEK billion
Estimated IFRS 16impact
Continuing operations 0.71Sweden 0.21Finland 0.12Norway 0.10Denmark 0.07Lithuania 0.02Estonia 0.01Other 0.17
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EPS development
-0.16
0.43
-0.14-0.03
Operations Finance net & taxQ1 18 Other
0.10
Associates
0.01
0.65
Discontinued operations
Q1 19
+0.59
CONTINUING OPERATIONS
Q1 2018 impacted by capital losses from the disposals of Azercell and Geocell as well as a write-down in
Uzbekistan
Q1 2018 impacted by capital losses from the disposals of Azercell and Geocell as well as a write-down in
Uzbekistan
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TOTAL EPS DEVELOPMENTTOTAL EPS DEVELOPMENTSEK, continuing and discontinued operations SEK, continuing and discontinued operations
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 alwayscomparable 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.
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