TELIA COMPANY YEAR-END REPORT JANUARY-DECEMBER 2016

DELIVERING ON OUTLOOK

Fourth quarter summary



  • As earlier announced former segment region Eurasia is reported as held for sale and discontinued operations. Sergel is reported as held for sale. The Spanish operation Yoigo is deconsolidated from quarter four. The divestment resulted in a capital gain of approximately SEK 4.5 billion.

  • Net sales in local currencies, excluding acquisitions and disposals, increased 0.2 percent. In reported currency, net sales declined 6.7 percent to SEK 21,130 million (22,638). Service revenues in local currencies, excluding acquisitions and disposals, increased 0.6 percent.

  • EBITDA, excluding non-recurring items, declined 1.9 percent in local currencies, excluding acquisitions and disposals. In reported currency, EBITDA, excluding non-recurring items, declined 2.7 percent to SEK 6,380 million (6,556). The margin, excluding non-recurring items, rose to 30.2 percent (29.0).

  • Operating income, excluding non-recurring items, dropped 24.3 percent to SEK 3,737 million (4,938) mainly due to lower contribution from associated companies.

  • Total net income attributable to the owners of the parent rose to SEK 7,338 million (-3,010) and earnings per share to SEK 1.69 (-0.70) due to Yoigo capital gain and by impairment charges last year in Uzbekistan and Denmark. Total net income rose to SEK 7,325 million (-2,627).


Full year summary



  • Net sales in local currencies, excluding acquisitions and disposals, declined 0.8 percent. In reported currency, net sales declined 2.7 percent to SEK 84,178 million (86,498). Service revenues in local currencies, excluding acquisitions and disposals, declined 0.4 percent.

  • Operating income, excluding non-recurring items, declined 3.9 percent to SEK 17,123 million (17,814).

  • Total net income attributable to the owners of the parent dropped to SEK 3,732 million (8,551) and earnings per share to SEK 0.86 (1.97) mainly due to provision for settlement amount proposed by the US and Dutch authorities. Total net income fell to SEK 6,496 million (10,205).


COMMENTS BY JOHAN DENNELIND,
PRESIDENT & CEO

 
“Dear shareholders, as I am looking back at a challenging and interesting 2016, I am very pleased that we were able to beat our EBITDA guidance set a year ago, ending with a fourth quarter in accordance with our plan. For this I want to thank all employees across the company for the hard work you have put in during the year. I also want to direct a special thank you to our employees in Eurasia for keeping focus and turning trends during exceptionally difficult environments and circumstances.
 
We continue to invest heavily in fixed and mobile across our footprint and during the year were awarded best mobile networks in Sweden, Finland, Norway, Lithuania and Estonia, a clear proof point that we are creating superior network connectivity and we are securing our customers journey from voice to data. In addition the Swedish quality index (SKI) reported that we continue to have the most satisfied TV customers in Sweden which is shown in a continued strong intake. We now have 1.7 million TV customers in the Nordics and Baltics.
 
During 2016 EU adopted new end-user rules regarding roaming regulation. We are however still awaiting final legislation regarding the wholesale prices. Roaming volumes will definitely be affected, but will also lead to a review of our offerings. As of now we expect the new roaming regulation to have a slight negative effect on our EBITDA for 2017.
 
We continue to look for value creative M&A to support our strategy in the Nordics & Baltics. We are awaiting approval from the Norwegian competition authorities for the Phonero acquisition (expected in the first half of 2017), which will strengthen our position in the enterprise segments and we believe this transaction will increase competition and benefit Norway and Norwegian businesses. When it comes to Denmark, as of now we don't see risk and valuation as attractive for a larger acquisition in Denmark and will continue to review our strategic options. Finally, we also closed the Yoigo divestment enabling further focus and improved our net debt position.
 
Division X continued to spearhead the creation of a New Generation Telco - exploring, building and commercializing emerging business areas such as IoT, eHealth and data analytics. December saw their first offerings hit the market - Telia Sense in the connected car space, and Telia Zone which is a connected home play - with more in the pipeline for 2017 and beyond.
 
We have taken great step in our journey to re-shape the company during the year partly through strong internal
engagement, shown in our Purple Voice (our internal engagement survey). In December 2016, we announced a new organizational structure with more country exposure. This will enhance our business and enable us to ramp up execution across our Nordic and Baltic markets even further.
 
When it comes to the disposal of Fintur Holdings, we have seen an increased interest in our assets following the decision to explore a joint divestment of Fintur Holdings together with Turkcell. We see it as highly probable that the Eurasian assets will be disposed during 2017. As we already explained last quarter, the timing of the sale of Ucell asset is the most difficult to predict. We continue to have a constructive dialogue with the US, Dutch and Swedish authorities in their respective investigations and have an active dialogue regarding the proposed settlement of USD 1.45 billion, recorded in our books in quarter three. Our ambition is to close this in a responsible way and in the best interest of our shareholders.
 
Overall, we reached our ambition of a slight increase in organic EBITDA for 2016, which was revised up during the year, and a free cash flow excluding licenses of SEK 7.2 billion. The board proposes an ordinary dividend of SEK 2 per share to be distributed to our shareholders.
 
Our ambition and focus is clear – to be a leading integrated operator in the Nordics & Baltics. We are excited about the opportunities to create a better digital experience for societies, enterprises and consumers in this region and we believe the prospects for value creation are very good. There are still challenges to address in our operations. We see a continuously tough market for our legacy services in fixed which do put pressure on our profitability. So far we have been able to mitigate these negative effects through cost efficiency measures and revenue growth in new services. Looking ahead we aim to mitigate the fall in legacy services, and thereby pressure on profitability, with growth in core and new services. In addition we will ensure that we continue to invest in our networks and to be able to find and maintain growth in our converged offerings in the Nordics and Baltics.
 
We update our dividend policy, stating that at least 80 percent of free cash flow, excluding licenses, from continuing operations to be distributed to our shareholders (previously including licenses). We continue to aim for a net debt/EBITDA ratio of 2 times, +/- 0.5 and target a solid investment grade long-term credit rating (A- to BBB+).
 
In terms of financial guidance for 2017 our organic EBITDA, from continuing operations, excluding non-recurring items, is expected to be around the 2016 level. We aim for our operational free cash flow (free cash flow excluding licenses and dividends from associates), from continuing operations, to be above SEK 7 billion (from SEK 5.5 billion 2016). This operational free cash flow together with dividends from associates, should cover a dividend around the 2016 level. For 2018 and 2019 we aim to further increase the operational cash flow.”

  
QUESTIONS REGARDING THE REPORTS

 
Telia Company AB

www.teliacompany.com
Tel. +46 8 504 550 00
 
Telia Company AB discloses the information provided herein pursuant to the Swedish Securities Markets Act and/or the Swedish Financial Instruments Trading Act. The information was submitted for publication at 07:00 CET on January 27, 2017.