Transcript TeliaSonera Interim Report Jan

Interim report January-June 2003
Anders Igel
President and CEO
July 31, 2003
Q2 in brief
• Rapid profitability improvement
• Cash flow more than doubled
• Fast integration
• Synergies ahead of plan
• Increased market focus is beginning to yield results
• Turnaround targets reached in Danish fixed business
and in former Telia International Carrier
2
Strong earnings and cash flow development
• Record high EBITDA
margin excl. non-recurring
Q2 2002
Q2 2003
items
8,070
– Group 40%
SEK million
6,241
– Sweden 45%
5,155
3,963
• Maintained investment
efficiency
• Record high free cash
flow
2,534
800
Operating
income
excl. nonrecurring items
CAPEX
Free cash flow1
EBITDA
excl. nonrecurring items
1)
-2,059
-2,909
Cash flow from operating activities less CAPEX
3
Successful turnaround
International Carrier
• Restructuring program yields positive impact
• In April and May end-of-year target of positive
EBITDA-CAPEX was reached
Denmark
• Improved earnings in both the fixed and mobile
operations
• End-of-year target of positive EBITDA for Danish
fixed was reached in Q2
4
Full speed in integration and synergy implementation
• Successful integration is yielding results – Synergy
decision making ahead of schedule
• The EU requirements have been met
– ComHem sold, gain of SEK 1,811 million
– Telia Mobile Finland sold, loss of SEK 108 million
– Fixed and mobile networks legally separated from
the retail business
5
More aggressive in the market
• Start to offer
bundled products
• Telemarketing
stepped up
6
Increased market efforts yield results
• Wide range of new offers and products launched with
visible results by the end of the period
– Reduced losses in Swedish consumer segment and held
position in Finnish consumer segment
– Strengthened position in Finnish and in Swedish Corporate
segments
– Improved position in Norwegian and Danish mobile market
• Combined strength, a winning factor for several large
contracts – Contracts worth SEK 3 billion signed in
Sweden during Q2
– Metso
– IBM/Posten
– StoraEnso
7
Geographical focus
• Strengthening footprint in the markets where
TeliaSonera currently operates
• Selected acquisitions in current
footprint
• Long term strong cash flow
provides us flexibility to
grow in the consolidation
of the European telecom
industry
8
Outlook
We have reached previously stated mid-term
targets earlier than expected
• Net sales for full year 2003 are expected to grow
in line with the first half year
• CAPEX/Sales expected around 12% for 2003
• Operating income excl. non-recurring items for the
second half year of 2003 is expected not to fully
reach the level of the first half year
9
Focus going forward
• Commercial actions – win back
market shares
• Continued synergy realization
• Efficiency improvements
• Strengthen existing geographical
footprint
10
Kim Ignatius
CFO
July 31, 2003
Net sales change
SEK million
+626
Lower fixed
traffic volume
20,290
-450
Consolidation
of Fintur
-167
-160
+197
-16
-50
+95
20,275
Other
Net sales
Q2 2003
-90
Downsizing in Denmark,
International Carrier and
Holding decreases growth
Correction of mobile
revenue accruals
Net sales Sweden
Q2 2002
Finland
Continued strong
growth in Norway
Norway Denmark
Baltic
Eurasia
Int.
Carrier
Holding
12
EBITDA excl. non-recurring items improvement + SEK 1,829 million
SEK million
353
-250
8,070
357
139
1,214
-3
-73
92
Consolidation
of Fintur
6,241
EBITDA Sweden
Q2 2002
Lower OPEX through
restructuring Carrier
• Release of interconnect provision SEK 400 million
• Effects from restructuring 2002 SEK 300 million
• Synergy benefits SEK 100 million
• Lower cost related to SUNAB due to UMTS delay
Finland
Norway Denmark
Baltic
Eurasia
Int.
Carrier
Other
13
EBITDA
Q2 2003
CAPEX reflecting business needs
2003 level around 12% of sales
2,909
SEK million
-498
Tight CAPEX control
+117
-26
Restructuring decreases
CAPEX in Denmark Fixed
and International Carrier
-177
-216
+154
Build out of broadband
and backbone network
to meet market demand
+13
Lower CAPEX in Baltics.
Program in Lithuania to
reduce CAPEX.
CAPEX Sweden
Q2 2002
Finland
Norway Denmark
-214
Baltic
-3
2,059
Consolidation
of Fintur
Eurasia
Int.
Carrier
Holding Elim. and CAPEX
other
Q2 2003
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TeliaSonera January-June key figures
SEK million
Jan-Jun 2003
Jan-Jun 2002
Net sales
40,624
39,932
1.7
n/c
15,632
12,213
Margin (%)
38.5
30.6
Income from associated companies
-670
-30,676
Operating income
5,971
-33,349
Operating income excl. non-recurring items
7,190
2,810
Income after financial items
5,759
-33,585
Net income
3,101
-23,632
CAPEX
3,735
5,562
Growth in net sales (%)
EBITDA excl. non-recurring items
15
Synergies ahead of plan
Impact of decisions taken during 2003
Decisions during Q2
• Eliminate duplicate platforms
such as positioning services,
e-mail, customer support
systems and voice over IP
• Shared use of IT and
systems within CRM
• Eliminate overlapping
testing systems etc.
• Renegotiation of supplier
agreements
Full run rate annual
effect (by 2005)
Effect
in 2003
137
60
36
20
Purchasing
169
169
Network operations
187
84
Corporate functions
145
145
674
478
4
33
26
22
225
265
13
40
268
360
SEK million
OPEX
Product and service development
IT systems and infrastructure
Total
CAPEX
Product and service development
IT systems and infrastructure
Purchasing
Network operations
Total
16
Continued efficiency improvements in Finland and Sweden
Integration and governance models significantly
increase efficiency and eliminate overlaps
• Sweden
– Estimated redundancy of approx. 1,500 employees.
Approx. 700 employees remain affected by redundancy
– A provision of SEK 374 million has been made
• Finland
– Redundancy of 400 employees
– A provision of SEK 15 million has been made
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Non-recurring items Q2 2003
Affecting operating
income
Operating income excl.
non-recurring items
Affecting financial
items
Financial net excl.
non-recurring items -116
Capital gain
ComHem
Capital gains from
financial items
(Netia)
+583
Capital loss Telia
Mobile Finland
-29
Write downs of
financial items
(VCs)
-163
-389
+66
Financial net as
reported
304
3,963
Within income from
assoc. companies
Capital gain Bharti
Mobile
+341
Write downs (Infonet,
-1,208
Metro One, VCs)
Write downs (synergy)
Provision for redundancy
Other
Operating income as
reported
No effect on pro forma
profit & loss statement
2,744
+1,811
-108
SEK million
18
Income taxes
• Effective tax rate (42% in Q2) is mainly increased
by non-deductible Infonet write-down and by nondeductible goodwill amortization
• Deferred tax liability of SEK 12 billion mainly relates
to Sweden
• Deferred tax benefit of SEK 16 billion mainly relates
to European 3G and other write-downs in 2002.
Some SEK 2 billion relates to restructuring of
International Carrier and Denmark and can be used
in Sweden.
• No significant cash payment for taxes in Finland for
6 to 8 years is expected
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Strong cash flow – Strong financial position
Strong cash flow strengthening financial position by reducing net debt
38.1
Net debt
Dec 31, 2002
SEK billion
-9.1
Free cash flow
Jan-Jun 2003
SEK million
+1.9
-2.3
Dividend
Other (incl. gain
from divestitures)
28.6
Net debt
Jun 30, 2003
Jun 30, 2003
Dec 31, 2002
Equity-to-assets ratio
55%
52%
Net debt-to-equity ratio
26%
36%
20
Forward-looking statements
This document contains statements concerning, among other things, TeliaSonera's
financial condition and results of operations that are forward-looking in nature. Such
statements are not historical facts but, rather, represent TeliaSonera's future
expectations. TeliaSonera believes that the expectations reflected in these forwardlooking statements are based on reasonable assumptions; however, forward-looking
statements involve inherent risks and uncertainties, and a number of important
factors could cause actual results or outcomes to differ materially from those
expressed in any forward-looking statement, including TeliaSonera's market position,
growth in the telecommunications industry in Europe, the effects of competition and
other economic, business, competitive and/or regulatory factors affecting the
business of TeliaSonera and the telecommunications industry in general. Forwardlooking statements speak only as of the date they were made, and, other than as
required by applicable law, TeliaSonera undertakes no obligation to update any of
them in light of new information or future events.
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The Nordic and Baltic
telecommunications leader
July 31, 2003