Annual Report • Mar 12, 2019
Annual Report
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annual report / financials / responsibility / corporate governance
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| Elisa in brief 2018 |
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|---|---|
| Elisa's year 2018 |
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| CEO's review | 5 |
| Operating environment and strategy | 8 |
| Consumer customers | 9 |
| Corporate customers10 | |
| Personnel review |
11 |
| Investor information14 |
The year 2018 was yet again a recordbreaking year for Elisa. We emphasised the implementation of our long-term strategy and persistent work to improve quality.
Elisa is a pioneer in telecommunications and digital services. Elisa's main market areas are Finland and Estonia. Elisa is listed on the Nasdaq Helsinki Large Cap with some 186,000 shareholders.
Elisa has more than 6.2 million subscriptions for consumers, companies and public administration organisations, and more than 2.8 million customers. We are the market leader in mobile and fixed network services in Finland, and number two in Estonia.
In addition to domestic markets we also provide digital services for the growing international market, which already contribute more than 15 per cent of our revenue.
Our brands include Elisa, Elisa Saunalahti, Elisa Videra and Elisa Santa Monica, Elisa Smart Factory and Elisa Automate, as well as a growing number of international service brands. In addition to Elisa Videra and Elisa Santa Monica, our important subsidiaries include Elisa Estonia, Enia, Fonum and Elisa Teleteenused (Starman).
Cooperation with Vodafone and Telenor, among others, enables us to offer globally competitive services.
We employ more than 4,800 experts in Finland and Estonia, as well as in 10 other countries around the world. A culture of learning and cooperation combined with innovative customer solutions make Elisa unique.
Our core values in all our business operations are customer orientation, responsibility, renewal, results orientation and cooperation.
Uusimaa region Western Finland Häme region Central Finland Ostrobotnia Eastern Finland Northern Finland
Continuous improvement of quality and operations is strongly reflected in our personnel and customer satisfaction, as well as in other areas of corporate responsibility.
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Earnings per share, EUR 1.95
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11.3.2019 11:47
The year 2018 was yet again a record-breaking year for Elisa. We emphasised the implementation of our longterm strategy and persistent work to improve quality.
Our financial result was excellent, customer satisfaction continued to increase in both of our business segments and Elisa received a five-star EFQM Recognised for Excellence certificate.
The continuous improvement of quality and our operations continued to boost Elisa's competitiveness in the highly competitive market. Our result was strong: our revenue increased by 2.5 percent and the comparable EBITDA by 4.2 per cent. Revenue increased due to, for example, growth in mobile and digital services and declined due to divestments. The result mostly grew due to an improvement in the productivity of Elisa's operational activity and growth in the revenue from digital and mobile services. We updated our medium-term objectives by the end of 2021.
We also grew through acquisitions. We boosted our IT expertise in the Corporate Customers business by acquiring Fenix Solutions, and in the Consumer Customers segment, we acquired Kepit Systems, a company specialising in streaming and video production services. In Finland Elisa Appelsiini merged with Elisa and in Estonia Starman integrated with Elisa.
We are committed to distributing competitive profit to our shareholders. Due to the strong financial position, Elisa's Board of Directors will propose at the annual general meeting in the spring that a dividend of EUR 1.75 per share be paid.
Elisa's unique strategy generates results and growth
Throughout its history, Elisa has served people in Finland as a pioneer in mobile communication. Continuous investments in the data communication infrastructure and new technologies allow us to be among the first operators in the world to offer new services to our customers. Furthermore, our customers value our pricing model, which is based on unlimited data.
We transferred to the 5G era in 2018. Over the course of the year, we built 5G readiness in our network and were able to acquire the frequencies we wanted in the auction in Finland. As a result, we will be able to realise a commercial 5G network starting at the beginning of 2019. Furthermore, we were the first operator in Finland and Estonia to introduce NB-IoT (Narrowband Internet of Things) readiness to the nationwide network. We also completed the first 5G video call in the world between two countries using commercial 5G networks.
We expect the first 5G devices to enter the market in 2019. In addition to high-speed connections, 5G enables whole new services, different types of functionalities through the IoT, virtual reality, augmented reality and low-latency applications for use in transport, health care and the entertainment industry, for example.
We continued to improve the availability of our fast fixed broadband and built optical fibre connections based on customer demand. The demand for fast connections increased, which was also visible in the increase in the number of Elisa's fixed network broadband subscriptions.
Elisa was the first operator in Finland to introduce Wi-Fi calls to its customers, in 2016. In autumn 2018, Elisa enabled Wi-Fi calls for most of its consumer customers. The automatic change allows for faster connections of our customers' calls, better sound quality and a potential solution for problems with indoor coverage.
As Elisa has grown, especially internationally, digital services have become an important product. In 2018, we launched new services and continued with our investments in digital services in Finland, Estonia and internationally.
Elisa's entertainment services already have more than 400,000 customers. We offer our customers high-quality content. We are an important producer, financier and distributor of Finnish cultural content. Five internationally acclaimed series and new Finnish content were launched in Elisa Viihde.
The ebook market grew in Finland by more than 65% from the previous year. Elisa Kirja is Finland's largest reseller of ebooks. We introduced digital newspapers to Elisa Kirja.
For corporate customers, we have added a whole new category to the Finnish market where the combination of IT services and communication services provide major competitive benefits to companies. The significance of understanding our customers' business is increasing due to cloud integration, and Elisa has more certified professionals than almost any other company in Finland.
Our international services are based on our strengths, our core business and carefully considered acquisitions. The cloud-based Elisa Videra videoconferencing services already have customers in almost a hundred countries. Elisa Automate, which offers network automation to other operators, and Elisa Smart Factory for industrial customers received important new international customers over the course of the year.
Elisa's unique operating model and the development of quality were assessed by the European Foundation for Quality Management (EFQM) last summer. The EFQM model determines what excellent companies do and what kinds of practices are needed to maintain and boost excellence. It is used to assess the operations of companies in relation to their own goals.
Elisa demonstrated its performance in the international frame of reference of strategic management, where
Elisa's success is based on the input and wellbeing of our skilled staff with a capacity to evolve.
capabilities and results are assessed from a variety of perspectives. Elisa performed clearly better than the average in all of the categories and was among the best 10 per cent of Finnish companies assessed between 2010 and 2018 in almost all of the categories. After the assessment, Elisa received a highly valued five-star EFQM Recognised for Excellence certificate, which indicates the company's excellent level of operations and result, as well as its ability to systematically and successfully develop its operations.
Our long-term development of customer experience and quality has yielded visible results. For example, utilising artificial intelligence and robotics has resulted in a significant reduction in network disturbances and has given the company a clear lead in FICORA's statistics. Elisa's share of the total network disturbances of all operators combined is notably small, and clearly smaller than Elisa's market share.
AI has also improved customer service: some tasks are being handled by a chatbot, and we have automated SMS orders with the help of software robotics, for example. The continuous improvement of quality and systematic development based on customer feedback are also reflected in the improvement of customer satisfaction in both the Consumer Customers and Corporate Customers segments.
We promote sustainable and safe digitalisation, and we bear our responsibility in our major role in the functionality of the information society in Finland and Estonia. By enabling comprehensive and accessible services, we promote equal opportunities to utilise digital services. Corporate responsibility is one of Elisa's strategic goals, and we annually report our performance in our verified responsibility report. We are committed to the principles of the UN Global Compact and promote the achievement of the UN Sustainable Development Goals in our business.
Helping to curb climate change by reducing our CO2 emissions and by offering our customers services they can use to reduce their own emissions has been part of our strategy since 2009. We set new emissions targets at the start of 2018, and we are the first Finnish telecom operator to join the Science Based Targets initiative, which companies can use to demonstrate that they are committed to the goals of the Paris Agreement.
In addition to our environmental actions, we have succeeded in improving our operations especially in the fields of information security, equality and diversity. Elisians feel that their workplace is equal and non-discriminatory, and Elisa was selected as one of Finland's best workplaces in the Great Place to Work survey for the second time in a row. In the international Gender Equality Global Report & Ranking by Equileap, Elisa was yet again in the vanguard.
For Elisa, participation in social discussion is part of responsibility. We asked our customers which social disadvantages Elisa should address. Almost unanimously, our customers suggested that we tackle online bullying. Hence, we decided to study how serious a phenomenon online bullying and harassment is for our society. We implemented the comprehensive #sananvastuu project in cooperation with Children of the Station in the autumn of 2018. The goal was to promote understanding and plead for everyone to take responsibility for what they say, also online.
I'm very proud of our committed employees, with whom we will continue to focus on the customer experience and improving quality. Every Elisian deserves thanks for our successes in 2018. I also want to thank our customers and owners for their trust. Increasing productivity, internationalising our digital services, offering unlimited data and our strong investment capability will continue to create a solid foundation for the creation of competitive value in the future.
Mr Veli-Matti Mattila CEO
Good development of the services and operations targeted at Elisa's consumer customers ensured good results in 2018. Our customers value easy access to services, faster connections and unique entertainment content.
The service revenue of Elisa's Consumer Customers business increased in the highly competitive market. The number of both mobile and fixed network subscriptions increased. Our customers value faster connections and our explicit pricing model. We expect the demand for even faster subscriptions to continue to increase.
We want to be the first operator to offer new technologies to its customers. We prepared our networks for 5G at several locations and were the first operator to launch 5G-ready subscriptions in the Finnish and Estonian markets. We are prepared to offer full-scale 5G speeds as soon as the frequencies and terminal devices are made available at the beginning of 2019.
We also continued to improve the availability of our fixed network and enabled Wi-Fi calling for most of our consumer customers. We successfully completed the merger of our operations in Estonia, where Starman merged with Elisa, and in Ostrobothnia, where the operations of Anvia and Elisa
merged. We can offer our consumer customers a broad range of high-quality services.
Our entertainment services experienced major growth: now, Elisa's entertainment services have more than 400,000 customers in Finland and Estonia. Elisa Viihde is Finland's most popular entertainment service. We continued to expand its content and features. The service can now be used in all EU member states.
Since 2014, Elisa Viihde has launched 12 original series. Series that premiered in 2018 included Bullets, which won the Buyers' Coup de Coeur Award in Cannes, and our largest international production to date, the crime series Ivalo (Arctic Circle).
Elisa Kirja is Finland's largest electronic literature online store, and it offers the world's largest selection of e-books and audiobooks in Finnish. For example, the e-book and audiobook versions of the year's most popular Finnish book, Tuntematon Kimi Räikkönen (The Unknown Kimi Raikkonen), were exclusively available through Elisa Kirja.
We are the pioneer of e-sports in Finland. We are closely involved in the development of mobile gaming culture, and we have introduced gaming to the general public through Elisa Viihde Sport. At Slush, we arranged the first e-sports tournament realised in a 5G network in collaboration with Hatchi.
We systematically listen to our customers and develop our services based on our interaction with them. Our customers have been especially satisfied with the quality of our customer
service and the easy access to services. A good example of this is Elisa's online store, which has become one of the top ten global online stores used and valued by Finns.
Our Net Promoter Score, which measures customer satisfaction and whether they would recommend our services to others, increased to 29, which is the highest result in our history. Our employees are motivated in and committed to continuous development of quality. We will determinedly continue our work to create an even better customer experience in both Finland and Estonia.
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Executive Vice President, Consumer Customers
Over the course of the year, we continued with the automation of our processes and the development of our customer service with the help of robotics and artificial intelligence, with excellent results.
Every second Finnish company is already Elisa's corporate customer. Revenue from our Corporate Customers business grew in 2018, and our customers were more satisfied with our comprehensive services and our technical competence in IT and communication solutions.
The revenue from Elisa's Corporate Customers business continued to grow on the highly competitive market. The growth was particularly supported by an increase in the number of mobile subscriptions and new, IT-based digital services. Over the course of the year, we transferred to a new, more efficient operating model that allows us to more comprehensively serve our customers. The continuous development of our operations was also reflected in a record-high result of the customer satisfaction survey that we carried out among company decision-makers late in the year. We believe that the capacity of the market will continue to increase and new digital services will be launched.
Elisa's reputation in the market as a provider of high-quality IT and digital services is good. We increased our digital solution competence by purchasing all the shares of Fenix Solutions, a company specialising in Dynamics 365 CRM expert services. Now, we have a good opportunity to expand our digital development and infrastructure services in the growing D365 market.
We gained several new customers during the year: we signed an outsourcing contract for IT services with the city of Espoo, and in the field of unified communication, we signed contracts on communication services with Hansel,
Kuntahankinnat and the Social Insurance Institution of Finland (Kela). Digitalisation of operations is also increasing in the SME sector, where we launched the new Elisa Oma IT service, through which entrepreneurs can receive all their IT services, from hardware to support and maintenance, under one roof.
This year, we were able to fully utilise the competence we obtained through the acquisition of Santa Monica Networks in Finland and Estonia, focusing on safe data network and data centre solutions. As recognition for its persistent work on producing secure, high-quality solutions, Elisa Santa Monica received the internationally recognised ISO/IEC 27001:2013 certificate.
Our customers' cyber security needs are experiencing strong growth, and we have long experience in monitoring data networks. We continued to boost the operations of the Elisa Cyber Security Centre and started to use Rapid Detection Service in monitoring customer networks. These actions allow us to broadly ensure the cyber security of our customer companies.
For the growing needs of our customers, we launched the world's leading 5G network, with special new features for businesses in Finland and Estonia. With the help of our important customer cooperation, we were able to assist
businesses with extra-fast mobile broadband, as well as in the fields of massive IoT and private networks. In 2018, we were also the first operator in Finland to introduce the readiness to use NB-IoT (Narrowband Internet of Things) in all municipalities.
For the needs of our international customers, we continued to strongly develop our digital videoconferencing services through Elisa Videra. We expanded our operations, which now cover some 100 countries. Furthermore, we completed new launches in Elisa Smart Factory and Elisa Automate with several international customers.
In the continuous development of our operations, we used automation and artificial intelligence in, for example, AI-based control of IT service requests. Our employees are very committed to improving quality, and our Net Promoter Score, which measures customer satisfaction and whether they would recommend our services to others, increased to 19 in Finland, which is the highest result in our history. We will continue with our strong development of customer satisfaction in Finland and Estonia.
Executive Vice President, Corporate Customers
Elisa's competitiveness is based on its personnel, who are always motivated to develop the operations. In accordance with our strategy, we continuously improve our operations by encouraging our people to build excellence.
Professionals in dozens of fields and more international expertise are required to change the digital life and world. There are some 4,800 Elisians in Finland and Estonia, and in 10 countries around the world. More than 1,100 Elisians work in other countries, most of them in Estonia, Spain and the United Kingdom. The employees in Finland work at 80 locations. Our working community also includes approximately 1,000 agency contract workers and consultants.
Our unique way of working, Elisa Ideal Work, enables work independent of your physical location and remote working days, for example. In 2018, the average Elisians worked remotely for 72 (75) days. With our campaign Kun elämä kutsuu, työ vastaa ("When life calls, work answers"), we wanted to make visible the long-term work Elisa has done to pioneer a flexible working culture in Finland.
Digitalisation is affecting our business, the content of our work, our way of working, our management, our tools and our working environment. Lifelong learning is a prerequisite for success and one of our key personnel strategy themes this year.
In addition to training and learning by doing, lifelong learning is supported at Elisa with the supervisors' coaching style leadership approach to their work, daily management, development by experimenting and continuous improvement practices, as well as "we learn from our mistakes
and successes" analyses. All employees take part in the development of the operations and processes. A total of 160 (145) Elisa employees guided the development of processes in their own responsibility areas. Some 40 trained Elisa tutors support the continuous improvement practices and train employees. Over the course of the year, they supported almost 350 teams.
One of our focus areas in daily management is continuous improvement of teams, which means that the teams create their own practices for the development of their work.
Almost 900 Elisians have completed a five-day Coaching Leadership course. In 2018, 214 employees completed the course. Furthermore, all new supervisors take part in Elisa Way Leadership training. Our management system includes a personal development plan for each employee, appraisal and development discussions to support long-term development, as well as supplementary training discussions with a supervisor.
Feedback from the personnel has allowed our supervisors to become better listeners. The atmosphere at work is considered respectful, and Elisa employees can be themselves (Elisa's Empowerment Index).
Over the course of the year, more than 1,000 vacancies became available in Elisa. We fill a large part of our open and new positions from within the company. We believe that job rotation is an important part of renewal and learning. Most Elisians have long careers with the company and broad experience from a variety of positions.
Renewal is one of our five values. We consider change an opportunity instead of seeing it as a threat. We also look for such a pioneering attitude and a desire to continuously develop when we are recruiting new employees.
We also continued our close cooperation with educational establishments. We want to offer young people an outlook of the ICT sector as a job of the future and bear our responsibility for the transfer of students to working life. In 2018, Elisa Talent Program allowed 24 students who will soon graduate an opportunity to work as trainees in a variety of junior-level expert positions. Furthermore, all young Elisians for whom Elisa is their first or second job after graduation are invited to join the Elisa Young Professionals network.
At times, we may be faced with situations where current jobs are terminated due to changes made to the company's operations. Elisa Corporation has one of Finland's best relocation programs, where we find a suitable solution for re-employment together.
In February 2018 Elisa was again among the top five employers on the lagre ompanies' listing in the Finnish Great Place to Work study. The study emphasises cooperation, a good atmosphere, team spirit and appreciation of your colleagues. The satisfaction was reflected not only in the result of Elisa, but also in the results of our subsidiaries, such as Enia and Fonum. In October 2018, we received another Great Place to Work certificate based on the Trust Index survey.
We use personnel surveys to monitor how meaningful employees think their work is and how clear their goals are, among other issues. Long term development of personnel satisfaction can be seen also in our own empowerment index, that we have been measuring since 2005. The average value for the empowerment index over the course of the year was 4.1 (4.1) on a scale of one to five. As the result of coaching style leadership and daily management, over 90 per cent of our employees are already working in teams with an empowerment index of more than 3.5.
The personnel survey results are published for all employees and processed at the unit, business unit, department and team levels.
We openly discuss all results – particularly those with room for improvement or large variation between the teams.
Cooperation and community spirit also include open rewarding. Five Elisians or teams receive a special award each quarter. These five employees or teams are selected by their colleagues based on our values: customer orientation, responsibility, renewal, results orientation and cooperation.
In addition to distinctive and flexible ways of giving thanks to employees, Elisa has general remuneration systems for all Elisians. They support Elisa's shared strategic goals and encourage employees to develop themselves. If Elisa exceeds the objectives that have been set, those who contributed to
65.0
14 15 16 17 18 59.965.1 63.9 64.3 Personnel costs per employee* EUR 1,000 Revenue per employee* EUR 1,000 375.4 384.3 380.4 379.0 382.7 14 15 16 17 18 4,089 4,083 4,301 4,715 Number of employees* persons 4,787
14 15 16 17 18
*Calculated on the basis of FTE 31.12.2018
the result will be rewarded. All Elisa employees are included in the scope of a long-term and a short-term remuneration system.
Elisians were yet again given the opportunity to do a day of volunteer work during working hours. A total of 180 Elisians did voluntary work in different parts of Finland, such as at the Walkers cafés run by Children of the Station, at events hosted by the Mannerheim League for Child Welfare, at clothes sorting stations of the Hope Association and assisting with the arrangements for Pride parades. The employees will be given the opportunity to do voluntary work also in 2019.
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Elisa's unique strategy generates profit and growth
The positive development of the macroeconomic environment is decelerating in Finland. Competition in the Finnish telecommunications market remains keen.
Elisa is continuing its productivity improvement development, for example by increasing automation and data analytics in different processes, such as customer interactions, network operations and delivery. Additionally, Elisa's continuous quality improvement measures will increase customer satisfaction and efficiency, and reduce costs.
Elisa's transformation into a provider of exciting, new and relevant services for its customers is continuing. Long-term growth and profitability improvement will derive from the growth in the mobile data market, as well as digital online and ICT services.
Actual profit distribution is 80–100 per cent of the previous fiscal year's net profit. Distribution of additional profit to shareholders is also an option. Elisa's profit distribution includes the dividend payment, repayment of capital and purchase of treasury shares.
Elisa's Annual General Meeting will be held at Messukeskus Helsinki, Expo and Convention Centre, Messuaukio 1, Helsinki, at 2:00 p.m. (EET) on Thursday 3 April 2019.
Each shareholder, who is registered on 22 March 2019, in the shareholders' register of the Company held by Euroclear Finland Ltd, has the right to participate in the Annual General Meeting. A shareholder, whose shares are registered on his/her personal Finnish book-entry account, is registered in the shareholders' register of the Company.
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A shareholder, who is registered in the shareholders' register of the Company and who wants to participate in the Annual General Meeting, shall register for the Meeting by giving a prior notice of participation which shall be received by the Company no later than on 27 March 2019 at 6:00 pm. Such notice can be given:
A holder of nominee-registered shares has the right to participate in the AGM by virtue of such shares based on which they would be entitled to be registered in the shareholders' register of the company maintained by Euroclear Finland Ltd on 22 March 2019. The right to participate in the AGM also requires that the shareholder has, on the basis of such shares, been temporarily registered in the shareholders' register maintained by Euroclear Finland Ltd by 10:00 am on 29 March 2019 at the latest. As regards nominee-registered shares, this constitutes due registration for the AGM.
Pursuant to chapter 5, section 25 of the Finnish Limited Liability Companies Act, a shareholder who is present at the AGM has the right to request information with respect to the matters to be considered at the AGM.
The Board of Directors proposes to the AGM that the profit for the financial period 2018 be added to accrued earnings and that a dividend of EUR 1.75 per share be paid based on the adopted balance sheet of 31 December 2018. The dividend will be paid to all shareholders registered in the shareholders' register maintained by Euroclear Finland Ltd on the dividend payment record date of 5 April 2019. The Board of Directors proposes that the dividend be paid on 16 April 2019.
Record date of AGM participation 22 March 2019 Registration period ends 27 March 2019 at 6:00 pm Annual General Meeting 3 April 2019 Record date of dividend payment 5 April 2019 Date of dividend payment 16 April 2019 Further information is available at www.elisa.com/agm
Elisa's shares are listed on the Nasdaq Helsinki and are registered in the Finnish book-entry register maintained by Euroclear Finland Ltd.
Elisa publishes its financial reports and bulletins in Finnish and English. The Annual Report, Interim Reports, information on the AGM, stock exchange releases and other information for investors, as well as the Disclosure Policy, are available on the Elisa website at www.elisa.com/investors.
17 April 2019 Interim report Q1 2019 12 July 2019 Half year report for Jan–June 2019 17 Oct 2019 Interim report Q3 2019
Shareholders of Elisa are requested to send a written notice of any change of address to the bank where their bookentry account is held. The notice must include the shareholder's name, new address and old address, and book-entry account number.
Mr Vesa Sahivirta IR Director Tel. +358 50 520 5555 [email protected]
Ms Kati Norppa Communications manager, IR Tel. +358 50 308 9773 [email protected]
www.elisa.com/investors [email protected]
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