Telia Company Interim report January-September 2017
FOCUS ON CASH FLOW AND COSTS
Third quarter summary
- Net sales in local currencies, excluding acquisitions and disposals, decreased 0.5 percent. In reported currency, net sales decreased 8.8 percent to SEK 19,628 million (21,524). Service revenues in local currencies, excluding acquisitions and disposals, decreased 0.9 percent.
- Adjusted EBITDA decreased 0.4 percent in local currencies, excluding acquisitions and disposals. In reported currency, adjusted EBITDA, decreased 3.6 percent to SEK 6,604 million (6,850). The adjusted EBITDA margin rose to 33.6 percent (31.8).
- In September, Telia Company reached a global settlement with the authorities regarding the Uzbekistan investigations. As part of the settlement, Telia Company agreed to pay fines and disgorgements in an aggregate amount of USD 965 million (SEK 7,717 million at that point in time), whereof USD 757 million (SEK 6,129 million) were paid during the third quarter. A provision for the settlement was already recognized in 2016.
- Adjusted operating income fell 19.6 percent to SEK 3,812 million (4,742) negatively impacted by the sale of Turkcell shares.
- Total net income attributable to the owners of the parent improved to SEK 2,268 million (-8,810) and earnings per share to SEK 0.52 (-2.03). Total net income improved to SEK 2,543 million (-8,641).
- Free cash flow, in continuing and discontinued operations, fell to SEK -1,281 million (3,657). Operational free cash flow rose to SEK 2,808 million (2,089).
- The outlook for 2017 is reiterated.
Nine month summary
- Net sales in local currencies, excluding acquisitions and disposals, increased 0.6 percent. In reported currency, net sales decreased 6.9 percent to SEK 58,681 million (63,049). Service revenues were flat in local currencies, excluding acquisitions and disposals.
- Adjusted operating income fell 15.4 percent to SEK 11,319 million (13,386) negatively impacted by the sales of Turkcell shares.
- Total net income attributable to owners of the parent improved to SEK 8,855 million (-3,605) and earnings per share to SEK 2.04 (-0.83). Total net income rose to SEK 9,377 million (-829).
Comments by Johan Dennelind, President & CEO
“Dear shareholders and Telia followers, the third quarter of 2017 marked yet another quarter where we step by step are approaching a pure Nordic/Baltic footprint. From a financial aspect I am pleased that we can now show that the trends we have been talking about all year are materializing. Both the activities to reduce our cost base and the efforts we have made to improve cash flow are yielding positive results.
The settlement with the US and Dutch authorities marked the closing of a sad chapter in the history of our company. This was a global settlement and, encouragingly, there are no further investigations ongoing regarding Telia’s operations in any of our markets from the authorities. In addition the authorities did not see the need for a compliance monitor, a proof point that the hard work we have put into improving our ethics and compliance processes have shown visible results.
In line with our focus on the Nordic and Baltic regions we have continued to divest shares in Turkcell and MegaFon, adding SEK 7.3 billion to our cash position (of which SEK 4.1 billion was recognized in the third quarter and the rest to be recognized in the fourth quarter). Through our remaining 24 percent indirect stake in Turkcell we will continue to work hard to solve the ownership deadlock and to reinstate proper corporate governance. In MegaFon we remain the second largest owner and we will continue to co-operate with USM Holdings and others to create shareholder value. This leaves us with a strong balance sheet, even after the upcoming dividend payment of SEK 1 per share in the fourth quarter.
Telia Company has a heritage of being in the forefront of technology and innovation. This tradition continues as we will bring 5G to life in 2018 for our customers in Stockholm, Helsinki and Tallinn. That said we are worried about that the lack of recognition from European policy makers to set a framework that supports others to invest in future technology for the benefit of the next generation.
I am proud to see that we come out on top in two important surveys related to Sweden. Firstly in the annual survey conducted by Swedish Quality Index, both on B2C (through Halebop) and B2B (through Telia). Secondly, we have again, just as in 2016, been rated to have the best mobile network in Sweden by P3, scoring even higher than last year. I know the Swedish organization is working hard on customer satisfaction and to deliver superior network quality. This is a clear proof point that we do the right things the right way.
The result of what we have been doing on our cost side is most visible in Sweden, where the operational expenses are reduced in the third quarter by 6 percent. We are comfortable of reaching the ambition of 5 percent operational expense cut in the second half of 2017. In 2017 we have been prepared to connect just as many households to our future proof fiber technology as in 2016. However, longer handling processes at various permit issuing authorities have prevented us to do so. This is a big hurdle for a faster digitalization of Sweden. Lower fiber installation fees burden our EBITDA, but at the same time cash flow is improving due to lower fiber related CAPEX.
For all of the remaining countries we are seeing positive service revenue growth, mainly driven by mobile. However, we are not getting that positive development to feed through to EBITDA growth in all countries, leaving us to push harder on the cost side. Our ambition to reduce our cost base (amounting to an expected SEK 38 billion in 2017) by 3 percent, on a net basis in 2018 over 2017, is on track.
For Fintur Holdings we see continuous progress and high activity and it is still our ambition to divest these assets before year-end, even if I will not set that as a firm deadline.
We reiterate our outlook for the full year 2017, both on EBITDA and operational free cash flow.”
Johan Dennelind, President and CEO
This information is information that Telia Company AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 07:00 CET on October 19, 2017.
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Statements made in the press release 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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