Earnings Release • Apr 20, 2016
Earnings Release
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(Former segment region Eurasia is reported as discontinued operations)
| SEK in millions, except key ratios, | Jan-Mar | Jan-Mar | Chg | Jan-Dec |
|---|---|---|---|---|
| per share data and changes | 2016 | 2015 | % | 2015 |
| Net sales | 20,394 | 20,589 | -0.9 | 86,498 |
| Change (%) local organic | -1.1 | |||
| of which service revenues (external) | 17,434 | 17,548 | -0.7 | 72,907 |
| change (%) local organic | -0.9 | |||
| EBITDA1) excl. non-recurring items²) | 6,217 | 5,632 | 10.4 | 25,281 |
| Change (%) local organic | 10.4 | |||
| Margin (%) | 30.5 | 27.4 | 29.2 | |
| Operating income excl. non-rec. items | 4,198 | 3,526 | 19.0 | 17,814 |
| Operating income | 4,084 | 3,224 | 26.7 | 14,606 |
| Income after financial items | 3,520 | 2,433 | 44.7 | 11,689 |
| Net income from continuing operations | 2,905 | 2,412 | 20.4 | 9,532 |
| Net income from discontinued operations3) | 1,006 | 1,698 | -40.8 | 673 |
| Total net income | 3,911 | 4,110 | -4.9 | 10,205 |
| of which attrib. to owners of the parent | 3,766 | 3,714 | 1.4 | 8,551 |
| EPS total (SEK) | 0.87 | 0.86 | 1.4 | 1.97 |
| EPS from continuing operations (SEK) | 0.66 | 0.55 | 21.1 | 2.16 |
| Total Free cash flow | 2,293 | 2,853 | -19.6 | 16,550 |
| of which from continuing operations | 2,071 | 2,464 | -16.0 | 12,520 |
| CAPEX excl. license and spectrum fees | 3,064 | 2,559 | 19.8 | 14,289 |
Additional information available at www.teliacompany.com. 1) Please refer to page 33 for definitions. 2) Non-recurring items; see table on page 20. 3) Discontinued operations, see pages 20-21.
"We continue to shape our company for the future with a clear focus on our core operations in the Nordic and Baltic countries. Four out of seven markets now carry the Telia brand and with new roam-like-home offerings in place we can further leverage our position and boost customer loyalty. To emphasize our common purpose, culture and values, we have also adopted a new name for our group - Telia Company.
In the first quarter, the earnings development was encouraging and our continuing operations reported double digit EBITDA growth compared to the corresponding period last year.
Our Swedish operation was a key contributor to the higher profitability, supported by better sales mix and lower costs. Service revenue growth in the consumer segment stayed positive, backed by solid demand for fiber solutions, good traction within TV and mobile customers migrating to larger data buckets. We continue to offer more to our customers as highlighted by our recent social media proposition. The enterprise area remains highly competitive, putting pressure on service revenues despite bright spots in the SME/SoHo segments.
In Finland, we continue to see positive effects from upsale activities and price adjustments, leading to 4 percent increase in mobile billed revenues, supporting profitability. We experienced network disturbances in the quarter, additional measures have therefore been implemented together with our main vendors to ensure a solid customer experience going forward.
We took a further step on the Norwegian market when we successfully rebranded the Netcom brand to Telia. Positive effects from last year's acquisition of Tele2 Norway continued to support margin and we have now reached our synergy target of SEK 1 billion. Our greater scale and extensive 4G coverage have improved our customer proposition and make us well positioned for the future.
There was further progress in the Baltic region and all three countries delivered positive service revenue growth backed by strong demand for mobile data services. In Lithuania, the integration of Teo and Omnitel continued with further positive effects on profitability.
In mid-April, we completed the divestment of our Nepalese operation Ncell to Axiata. It is comforting that we have been able to hand over the operation to an established player in our industry. The process to exit the
other Eurasian markets continues and we will give further updates as we progress. The operating environment remains demanding in several parts of the region, with intense competition and pressure on currencies due to macroeconomic challenges.
There was no decision on dividend at Turkcell's Ordinary General Assembly in March. We voted in favor of the proposed dividend through our direct ownership, but the main owners were unfortunately not able to agree on this topic. We continue to work hard to solve the governance issues.
We have an ambitious investment agenda in 2016, with initiatives to drive both growth and strengthen long-term competitiveness. This involves an acceleration of the Swedish fiber roll-out as well as further build out of 4G capacity and coverage across our core markets. In addition, we work with our business transformation agenda which will reduce complexity and costs over time.
2016 has started well from an earnings perspective, but we expect growth to slow as we face tougher year-overyear comparisons in the quarters to come. However, we raise our expectations somewhat for the full year and anticipate EBITDA on a comparable basis to be in line or slightly above the level in 2015 for the continuing operations. CAPEX excluding license and spectrum fees for the continuing operations is expected to be SEK 14-15 billion."
Johan Dennelind President and CEO
EBITDA from continuing operations, excluding non-recurring items, in local currencies, excluding acquisitions and disposals, is expected to be in line or slightly above the level in 2015.
Changed from: The ambition is to maintain EBITDA from continuing operations, excluding non-recurring items, in local currencies, excluding acquisitions and disposals, at the same level as in 2015.
2016 is the peak year of the increased investments in fiber, mobile coverage and transformation. CAPEX for continuing operations, excluding license and spectrum fees, is expected to be SEK 14-15 billion. Currency fluctuations may impact the reported number in Swedish krona. (Unchanged)
For the fiscal year 2016, to be paid in 2017, the ambition is to distribute a minimum of SEK 2 per share. (Unchanged)
Net sales in local currencies, excluding acquisitions and disposals, declined 1.1 percent. In reported currency, net sales declined 0.9 percent to SEK 20,394 million (20,589). The effect of exchange rate fluctuations was negative by 1.2 percent and the effect of acquisitions and disposals positive by 1.4 percent. Service revenues in local currencies, excluding acquisitions and disposals, decreased 0.9 percent.
In region Sweden, net sales excluding acquisitions and disposals decreased 2.4 percent. Net sales including acquisitions and disposals decreased 2.4 percent to SEK 8,835 million (9,050).
In region Europe, net sales in local currencies, excluding acquisitions and disposals, increased 0.9 percent. In reported currency, net sales increased 1.2 percent to SEK 10,430 million (10,311).
The number of subscriptions in the subsidiaries decreased by 0.4 million from the end of the first quarter of 2015 to 26.9 million. During the quarter, the total number of subscriptions decreased by 215,000.
EBITDA, excluding non-recurring items, increased 10.4 percent in local currencies, excluding acquisitions and disposals. In reported currency, EBITDA, excluding nonrecurring items, increased 10.4 percent to SEK 6,217 million (5,632). The EBITDA margin, excluding non-recurring items, rose to 30.5 percent (27.4).
Income from associated companies and joint ventures, rose to SEK 746 million (502), mainly explained by higher contribution from Turkcell.
Operating income, excluding non-recurring items, increased 19.0 percent to SEK 4,198 million (3,526).
Non-recurring items affecting operating income totaled SEK -114 million (-302), as a net gain from a real estate divestment was more than offset by restructuring costs.
Financial items totaled SEK -564 million (-791) of which SEK -573 million (-678) related to net interest expenses.
Income taxes increased to SEK -615 million (-21). The effective tax rate was 17.5 percent (0.9). Last year was
influenced by a positive one-off effect related to a revaluation of the withholding tax provision as a consequence of an intra-group transfer.
Total net income decreased to SEK 3,911 million (4,110), whereof SEK 2,905 million (2,412) from continuing operations and SEK 1,006 million (1,698) from discontinued operations. Total earnings per share was SEK 0.87 (0.86). (See pages 20-21 for further information regarding discontinued operations.)
Total net income attributable to non-controlling interests was SEK 145 million (396).
Other comprehensive income decreased to SEK -2,072 million (-29), mainly due to the remeasurement of pension obligations, as a result of lower discount rate, and effect of exchange rate fluctuations.
Free cash flow, continuing and discontinued operations, declined to SEK 2,293 million (2,853), partly due to higher tax payments in Sweden.
Total cash flow decreased to SEK -49 million (5,817). The decline was mainly related to decreased cash flow from financing activities as a result of repayments of borrowings. Cash flow from investing activities for the period improved to SEK -3,158 million (-11,183) as the first quarter of 2015 included the acquisition of Tele2's Norwegian operations.
CAPEX increased to SEK 3,197 million (2,559) and the CAPEX-to-service revenue ratio increased to 18.3 percent (14.6). CAPEX excluding license and spectrum fees increased to SEK 3,064 million (2,559) and the CAPEXto-service revenue ratio, excluding license and spectrum fees to 17.6 percent (14.6).
Net debt, continuing and discontinued operations, was SEK 54,557 million at the end of the first quarter (55,717 at the end of the fourth quarter of 2015). The net debt/EBITDA ratio was 1.53 (1.53 at the end of the fourth quarter of 2015).
The equity/assets ratio, continuing and discontinued operations, was 40.5 percent (35.1 percent at the end of the fourth quarter of 2015).
| SEK in millions, except margins, operational data and changes |
Jan- Mar 2016 |
Jan-Mar 2015 |
Chg (%) | Jan-Dec 2015 |
|---|---|---|---|---|
| Net sales | 8,835 | 9,050 | -2.4 | 37,336 |
| Change (%) local organic | -2.4 | |||
| of which service revenues (external) | 7,745 | 7,806 | -0.8 | 32,268 |
| change (%) local organic | -0.8 | |||
| EBITDA excl. non-recurring items | 3,589 | 3,267 | 9.8 | 14,267 |
| Margin (%) | 40.6 | 36.1 | 38.2 | |
| Income from associated companies | 0 | -1 | -20 | |
| Operating income excl. non-recurring items | 2,426 | 2,173 | 11.7 | 9,797 |
| Operating income | 2,513 | 2,095 | 19.9 | 9,284 |
| CAPEX excl. license and spectrum fees | 1,327 | 1,010 | 31.4 | 6,179 |
| % of service revenues | 17.1 | 12.9 | 19.1 | |
| EBITDA excl. non-recurring items - CAPEX | 2,262 | 2,257 | 0.2 | 8,088 |
| Subscriptions, (thousands) | ||||
| Mobile | 6,071 | 6,142 | -1.2 | 6,119 |
| Fixed telephony | 1,858 | 2,015 | -7.8 | 1,896 |
| Broadband | 1,307 | 1,287 | 1.6 | 1,306 |
| TV | 739 | 701 | 5.4 | 730 |
| Employees | 6,695 | 6,721 | -0.4 | 6,695 |
Net sales, excluding acquisitions and disposals, decreased 2.4 percent. The effect of acquisitions and disposals was 0.0 percent. Service revenues, excluding acquisitions and disposals, decreased 0.8 percent.
Reported mobile service revenues increased by 0.2 percent as growth in the consumer segment was largely offset by a continued negative development within the enterprise segment. Reported fixed service revenues declined by 1.2 percent as growing revenues from the fiber roll-out, TV and fixed broadband could not compensate for the impact from a lower subscription base and volume erosion from traditional fixed telephony.
EBITDA, excluding non-recurring items, acquisitions and disposals, increased 9.9 percent. EBITDA, excluding non-recurring items, but including acquisitions and disposals, increased 9.8 percent to SEK 3,589 million
(3,267). The EBITDA margin increased to 40.6 percent (36.1) from a better equipment sales mix, lower costs and higher fiber installation revenues.
CAPEX increased to SEK 1,327 million (1,010) and CAPEX, excluding licenses and spectrum fees, increased to SEK 1,327 million (1,010).
The number of mobile subscriptions decreased in the quarter by 48,000 attributable to prepaid subscriptions, while the number of fixed broadband and TV subscriptions increased by 1,000 and 9,000, respectively.
As a result of a review of certain types of mobile subscriptions the historical number of subscriptions have been restated for comparability.
| SEK in millions, except margins, operational data and changes |
Jan-Mar 2016 |
Jan-Mar 2015 |
Chg (%) | Jan-Dec 2015 |
|
|---|---|---|---|---|---|
| Net sales | 10,430 | 10,311 | 1.2 | 43,658 | |
| Change (%) local organic | 0.9 | ||||
| of which service revenues (external) | 8,389 | 8,341 | 0.6 | 34,429 | |
| change (%) local organic | -0.1 | ||||
| EBITDA excl. non-recurring items | 2,530 | 2,272 | 11.3 | 10,584 | |
| Margin (%) | 24.3 | 22.0 | 24.2 | ||
| Income from associated companies | 29 | 29 | 0.9 | 119 | |
| Operating income excl. non-recurring items | 1,102 | 909 | 21.2 | 4,875 | |
| Operating income | 1,004 | 781 | 28.6 | 2,375 | |
| CAPEX excl. license and spectrum fees | 1,061 | 1,086 | -2.3 | 5,517 | |
| % of service revenues | 12.7 | 13.0 | 16.0 | ||
| EBITDA excl. non-recurring items - CAPEX | 1,335 | 1,187 | 12.5 | 4,761 | |
| Subscriptions, (thousands) | |||||
| Mobile | 13,792 | 13,929 | -1.0 | 13,914 | |
| Fixed telephony | 923 | 1,038 | -11.1 | 942 | |
| Broadband | 1,276 | 1,261 | 1.2 | 1,283 | |
| TV | 909 | 871 | 4.4 | 900 | |
| Employees | 11,243 | 11,237 | 0.1 | 11,305 |
Net sales in local currencies, excluding acquisitions and disposals, increased 0.9 percent. In reported currency, net sales increased 1.2 percent to SEK 10,430 million (10,311). The effect of exchange rate fluctuations was negative by 2.4 percent and the effect of acquisitions and disposals was positive by 2.7 percent. Service revenues in local currencies, excluding acquisitions and disposals, decreased 0.1 percent.
Mobile service revenues in local currencies, excluding acquisitions and disposals, increased by 0.6 percent as growth in billed revenues more than compensated for lower interconnect revenues in the Nordics. Fixed service revenues declined by 1.5 percent primarily due to
lower demand for traditional fixed telephony and declining fixed broadband revenues in Finland.
EBITDA, excluding non-recurring items, increased 10.1 percent in local currencies, excluding acquisitions and disposals. In reported currency, EBITDA, excluding nonrecurring items, increased 11.3 percent to SEK 2,530 million (2,272). The EBITDA margin increased to 24.3 percent (22.0).
CAPEX increased to SEK 1,195 million (1,086) and CAPEX, excluding licenses and spectrum fees, decreased to SEK 1,061 million (1,086).
| SEK in millions, except margins, operational data and changes |
Jan-Mar 2016 |
Jan-Mar 2015 |
Chg (%) | Jan-Dec 2015 |
|---|---|---|---|---|
| Net sales | 3,162 | 3,273 | -3.4 | 13,279 |
| Change (%) local organic | -2.8 | |||
| of which service revenues (external) | 2,740 | 2,767 | -1.0 | 11,065 |
| change (%) local organic | -0.4 | |||
| EBITDA excl. non-recurring items | 1,016 | 972 | 4.6 | 3,945 |
| Margin (%) | 32.1 | 29.7 | 29.7 | |
| Subscriptions, (thousands) | ||||
| Mobile | 3,287 | 3,286 | 0.0 | 3,306 |
| Fixed telephony | 76 | 96 | -20.8 | 80 |
| Broadband | 519 | 546 | -4.9 | 527 |
| TV | 488 | 493 | -1.0 | 486 |
Service revenues decreased 0.4 percent in local currency, excluding acquisitions and disposals, as growth in mobile billed revenues was offset by lower revenues from interconnect as well as from fixed broadband and traditional fixed telephony.
The EBITDA margin, excluding non-recurring items, increased to 32.1 percent (29.7), explained by growth in mobile billed revenues and lower operating expenses.
The number of subscriptions of fixed broadband decreased by 8,000 while TV increased by 2,000 in the quarter. The number of mobile subscriptions declined by 19,000 in the quarter.
| SEK in millions, except margins, operational data and changes |
Jan-Mar 2016 |
Jan-Mar 2015 |
Chg (%) | Jan-Dec 2015 |
|---|---|---|---|---|
| Net sales | 2,034 | 2,040 | -0.3 | 9,094 |
| Change (%) local organic | -3.1 | |||
| of which service revenues (external) | 1,724 | 1,693 | 1.8 | 7,485 |
| change (%) local organic | -2.9 | |||
| EBITDA excl. non-recurring items | 665 | 486 | 36.8 | 2,761 |
| Margin (%) | 32.7 | 23.8 | 30.4 | |
| Subscriptions, (thousands) | ||||
| Mobile | 2,273 | 2,310 | -1.6 | 2,311 |
Service revenues decreased 2.9 percent in local currency, excluding acquisitions and disposals, mainly explained by lower interconnect revenues, following a change of termination rates in the third quarter of 2015. Mobile billed revenues increased slightly driven by growth in data usage and higher demand for larger data buckets in the consumer segment.
The EBITDA margin, excluding non-recurring items rose to 32.7 percent (23.8), supported by synergies from the acquisition of Tele2 Norway.
The number of mobile subscriptions declined by 38,000 in the quarter.
As a result of a review of certain types of mobile subscriptions the historical number of subscriptions have been restated for comparability.
| SEK in millions, except margins, operational data and changes |
Jan-Mar 2016 |
Jan-Mar 2015 |
Chg (%) | Jan-Dec 2015 |
|---|---|---|---|---|
| Net sales | 1,397 | 1,422 | -1.7 | 5,890 |
| Change (%) local organic | -1.0 | |||
| of which service revenues (external) | 1,025 | 1,056 | -2.9 | 4,247 |
| change (%) local organic | -2.2 | |||
| EBITDA excl. non-recurring items | 137 | 154 | -11.3 | 743 |
| Margin (%) | 9.8 | 10.8 | 12.6 | |
| Subscriptions, (thousands) | ||||
| Mobile | 1,640 | 1,606 | 2.2 | 1,644 |
| Fixed telephony | 110 | 117 | -6.0 | 114 |
| Broadband | 134 | 118 | 13.6 | 135 |
| TV | 29 | 20 | 45.0 | 28 |
Service revenues declined by 2.2 percent in local currency, excluding acquisitions and disposals, driven by pressure on mobile billed revenues from a continued fierce competition in the market. Fixed service revenues were stable as lower revenues from business solutions and traditional fixed telephony were compensated for by growth in TV and fixed broadband.
The EBITDA margin, excluding non-recurring items, fell to 9.8 percent (10.8) as an effect of lower mobile billed revenues.
The number of mobile subscriptions declined by 4,000 in the quarter. The number of fixed broadband subscriptions declined by 1,000 and TV subscriptions increased by 1,000 in the quarter.
| SEK in millions, except margins, operational data and changes |
Jan-Mar 2016 |
Jan-Mar 2015 |
Chg (%) | Jan-Dec 2015 |
|---|---|---|---|---|
| Net sales | 770 | 759 | 1.4 | 3,146 |
| Change (%) local organic | 2.0 | |||
| of which service revenues (external) | 653 | 627 | 4.1 | 2,536 |
| change (%) local organic | 4.7 | |||
| EBITDA excl. non-recurring items | 277 | 244 | 13.5 | 1,051 |
| Margin (%) | 36.0 | 32.2 | 33.4 | |
| Subscriptions, (thousands) | ||||
| Mobile | 1,317 | 1,334 | -1.3 | 1,327 |
| Fixed telephony | 440 | 463 | -5.0 | 447 |
| Broadband | 393 | 373 | 5.4 | 390 |
| TV | 217 | 192 | 13.0 | 212 |
Service revenues increased 4.7 percent in local currency, excluding acquisitions and disposals, as mobile service revenues grew due to a high demand for mobile data. Fixed service revenues also grew somewhat driven by an increased number of fixed broadband and TV subscriptions as well as higher TV ARPU.
The EBITDA margin, excluding non-recurring items, increased to 36.0 percent (32.2), mainly due to higher service revenues.
The number of mobile subscriptions declined by 10,000 in the quarter. The number of fixed broadband subscriptions increased by 3,000 and TV subscriptions increased by 5,000, in the quarter.
| SEK in millions, except margins, operational data and changes |
Jan-Mar 2016 |
Jan-Mar 2015 |
Chg (%) | Jan-Dec 2015 |
|---|---|---|---|---|
| Net sales | 412 | 358 | 15.1 | 1,660 |
| Change (%) local organic | 15.8 | |||
| of which service revenues (external) | 290 | 289 | 0.1 | 1,188 |
| change (%) local organic | 0.7 | |||
| EBITDA excl. non-recurring items | 135 | 127 | 6.3 | 548 |
| Margin (%) | 32.8 | 35.5 | 33.0 | |
| Subscriptions, (thousands) | ||||
| Mobile | 1,114 | 1,096 | 1.7 | 1,119 |
Service revenues increased 0.7 percent in local currency, excluding acquisitions and disposals, driven by higher roaming revenues. Equipment sales continued to show strong growth in the quarter.
The EBITDA margin, excluding non-recurring items, declined to 32.8 percent (35.5), mainly explained by growing equipment sales.
The number of mobile subscriptions decreased by 5,000 in the quarter, but increased by 18,000 compared to the corresponding quarter last year.
| SEK in millions, except margins, operational data and changes |
Jan-Mar 2016 |
Jan-Mar 2015 |
Chg (%) | Jan-Dec 2015 |
|---|---|---|---|---|
| Net sales | 644 | 631 | 2.1 | 2,692 |
| Change (%) local organic | -0.4 | |||
| of which service revenues (external) | 512 | 492 | 3.9 | 2,062 |
| change (%) local organic | 1.1 | |||
| EBITDA excl. non-recurring items | 181 | 196 | -7.8 | 817 |
| Margin (%) | 28.1 | 31.1 | 30.3 | |
| Subscriptions, (thousands) | ||||
| Mobile | 863 | 834 | 3.5 | 863 |
| Fixed telephony | 297 | 313 | -5.1 | 301 |
| Broadband | 230 | 224 | 2.7 | 231 |
| TV | 175 | 166 | 5.4 | 174 |
Service revenues increased 1.1 percent in local currency, excluding acquisitions and disposals, supported by a strong demand for mobile data. Fixed revenues remained flat as lower revenues from traditional fixed telephony were compensated by increased revenues from fixed broadband and TV.
The EBITDA margin, excluding non-recurring items, fell to 28.1 percent (31.1), explained by higher operating expenses.
The number of mobile subscriptions remained unchanged in the quarter. The number of fixed broadband subscriptions decreased by 1,000 and TV subscriptions increased by 1,000, in the quarter.
| SEK in millions, except margins, operational data and changes |
Jan-Mar 2016 |
Jan-Mar 2015 |
Chg (%) | Jan-Dec 2015 |
|---|---|---|---|---|
| Net sales | 2,035 | 1,851 | 9.9 | 7,992 |
| Change (%) local organic | 10.6 | |||
| of which service revenues (external) | 1,446 | 1,415 | 2.2 | 5,847 |
| change (%) local organic | 2.8 | |||
| EBITDA excl. non-recurring items | 119 | 93 | 28.2 | 720 |
| Margin (%) | 5.9 | 5.0 | 9.0 | |
| Subscriptions, (thousands) | ||||
| Mobile | 3,296 | 3,463 | -4.8 | 3,344 |
Mobile service revenues increased by 2.8 percent in local currency, excluding acquisitions and disposals, driven by a strong demand for data and an increased number of high ARPU postpaid customers.
The EBITDA margin, excluding non-recurring items, increased to 5.9 percent (5.0), mainly due to growth in mobile billed revenues and good cost control.
The number of mobile subscriptions declined by 48,000 in the quarter, due to a decrease of 101,000 prepaid subscriptions while the number of postpaid subscriptions grew by 53,000 in the quarter.
| SEK in millions, except margins, operational | Jan-Mar | Jan-Mar | Chg (%) | Jan-Dec |
|---|---|---|---|---|
| data and changes | 2016 | 2015 | 2015 | |
| Net sales | 1,696 | 1,780 | -4.7 | 7,753 |
| Change (%) local organic | -3.8 | |||
| of which Telia Carrier | 1,415 | 1,506 | -6.0 | 6,631 |
| EBITDA excl. non-recurring items | 99 | 92 | 6.7 | 430 |
| of which Telia Carrier | 110 | 92 | 18.6 | 401 |
| Margin (%) | 5.8 | 5.2 | 5.5 | |
| Income from associated companies | 716 | 474 | 51.1 | 3,295 |
| of which Russia | 183 | 150 | 21.8 | 1,413 |
| of which Turkey | 534 | 324 | 64.9 | 1,894 |
| Operating income excl. non-recurring items | 669 | 444 | 50.6 | 3,141 |
| Operating income | 567 | 348 | 62.9 | 2,948 |
| CAPEX | 676 | 463 | 46.1 | 2,593 |
| Employees | 3,341 | 3,239 | 3.1 | 3,342 |
Net sales in local currencies, excluding acquisitions and disposals, declined 3.8 percent. In reported currency, net sales declined 4.7 percent to SEK 1,696 million (1,780). The effect of exchange rate fluctuations was negative by 0.9 percent.
EBITDA, excluding non-recurring items increased to SEK 99 million (92). The EBITDA margin, excluding nonrecurring items, rose to 5.8 percent (5.2).
In Telia Carrier, net sales declined 6.0 percent to SEK 1,415 million (1,506) due to lower traffic volumes and the EBITDA margin, excluding non-recurring items, increased to 7.7 percent (6.1).
Income from associated companies, rose to SEK 716 million (474) explained by higher contribution from Turkcell.
| SEK in millions, except margins, operational data and changes |
Jan-Mar 2016 |
Jan-Mar 2015 |
Chg (%) | Jan-Dec 2015 |
|---|---|---|---|---|
| Net sales (external) | 3,797 | 5,434 | -30.1 | 20,742 |
| EBITDA excl. non-recurring items | 1,775 | 2,908 | -39.0 | 11,035 |
| Margin (%) | 46.7 | 53.5 | 53.2 | |
| CAPEX | 875 | 1,565 | -44.1 | 4,195 |
| CAPEX excluding license and spectrum fees | 258 | 1,155 | -77.7 | 3,784 |
Former segment region Eurasia is classified as discontinued operations as of December 31, 2015. Consequently, highlights for region Eurasia are presented in a condensed format. For more information on discontinued operations, see pages 20-21.
EBITDA, excluding non-recurring items, declined to SEK 1,775 million (2,908). The EBITDA margin, excluding non-recurring items, decreased to 46.7 percent (53.5).
CAPEX declined to SEK 875 million (1,565) and CAPEX, excluding license and spectrum fees, decreased to SEK 258 million (1,155).
Net sales declined by 30.1 percent in reported currency to SEK 3,797 million (5,434), due to mainly negative currency impact.
| SEK in millions, except per share data, number of shares and changes |
Note | Jan-Mar 2016 |
Jan-Mar1) 2015 |
Jan- Dec1) 2015 |
|
|---|---|---|---|---|---|
| Continuing operations | |||||
| Net sales | 1, 5 | 20,394 | 20,589 | 86,498 | |
| Cost of sales | 1 | -12,147 | -12,674 | -52,710 | |
| Gross profit | 8,247 | 7,915 | 33,788 | ||
| Selling, admin. and R&D expenses | -4,864 | -4,990 | -20,243 | ||
| Other operating income and expenses, net | -44 | -202 | -2,333 | ||
| Income from associated companies and joint ventures | 746 | 502 | 3,394 | ||
| Operating income | 5 | 4,084 | 3,224 | 14,606 | |
| Finance costs and other financial items, net | -564 | -791 | -2,917 | ||
| Income after financial items | 3,520 | 2,433 | 11,689 | ||
| Income taxes | -615 | -21 | -2,157 | ||
| Net income from continuing operations | 2,905 | 2,412 | 9,532 | ||
| Discontinued operations | |||||
| Net income from discontinued operations | 4 | 1,006 | 1,698 | 673 | |
| Total net income | 3,911 | 4,110 | 10,205 | ||
| Items that may be reclassified to net income: | |||||
| Foreign currency translation differences from continuing opera | |||||
| tions | -19 | -657 | -6,868 | ||
| Foreign currency translation differences from discontinued oper ations |
-817 | 775 | -5,478 | ||
| Income from associated companies and joint ventures | -234 | 236 | -2 | ||
| Cash flow hedges | 54 | -172 | 614 | ||
| Available-for-sale financial instruments | 84 | 24 | -2 | ||
| Income tax relating to items that will be reclassified | 213 | -256 | -667 | ||
| Items that will not be reclassified to net income: | 0 | ||||
| Remeasurements of defined benefit pension plans | -1,690 | 31 | 4,322 | ||
| Income tax relating to items that will not be reclassified | 367 | -9 | -922 | ||
| Associates' remeasurements of defined benefit pension plans | -18 | 0 | 6 | ||
| Other comprehensive income | -2,060 | -29 | -8,997 | ||
| Total comprehensive income | 1,850 | 4,082 | 1,208 | ||
| Total net income attributable to: | |||||
| Owners of the parent | 3,766 | 3,714 | 8,551 | ||
| Non-controlling interests | 145 | 396 | 1,654 | ||
| Total comprehensive income attributable to: | |||||
| Owners of the parent | 1,807 | 3,608 | 987 | ||
| Non-controlling interests | 43 | 474 | 221 | ||
| Earnings per share (SEK), basic and diluted | 0.87 | 0.86 | 1.97 | ||
| Of which continuing operations, basic and diluted | 0.66 | 0.55 | 2.16 | ||
| Number of shares (thousands) Outstanding at period-end |
4,330,080 | 4,330,085 | 4,330,080 | ||
| Weighted average, basic and diluted | 4,330,080 | 4,330,085 | 4,330,082 | ||
| EBITDA from continuing operations | 6,104 | 5,330 | 23,992 | ||
| EBITDA excl. non-recurring items from continuing operations | 6,217 | 5,632 | 25,281 | ||
| Depreciation, amortization and impairment | |||||
| losses from continuing operations | -2,766 | -2,607 | -12,780 | ||
| Operating income excl. non-recurring items from continuing operations |
4,198 | 3,526 | 17,814 |
1) Certain restatements have been made, see page 19.
| Note | Mar 31, | Dec 31, 2015 |
|---|---|---|
| 6, 14 | 68,912 | 67,933 |
| 6 | 55,824 | 55,093 |
| 29,401 | ||
| 5,054 | ||
| 16,368 | ||
| 173,850 | ||
| 1,871 | ||
| 17,158 | ||
| 10,679 | ||
| 14,647 | ||
| 35,812 | ||
| 80,167 | ||
| 251,369 | 254,017 | |
| 99,695 | 97,884 | |
| 4,353 | 4,318 | |
| 104,049 | 102,202 | |
| 7, 10 | 85,862 | 91,646 |
| 10,411 | 10,627 | |
| 6,721 | 6,199 | |
| 708 | 702 | |
| 103,703 | 109,175 | |
| 7, 10 | 11,445 | 9,337 |
| 21,706 | ||
| 11,598 | ||
| 42,641 | ||
| 254,017 | ||
| 10 10 10 4, 10 4, 10 |
2016 28,537 5,091 15,701 174,065 1,773 16,308 8,820 14,505 35,898 77,303 20,605 11,567 43,617 251,369 |
| SEK in millions | Jan-Mar 2016 |
Jan-Mar 2015 |
Jan-Dec 2015 |
|
|---|---|---|---|---|
| Cash flow before change in working capital | 6,222 | 7,255 | 36,184 | |
| Change in working capital | 255 | -144 | -935 | |
| Cash flow from operating activities | 6,476 | 7,112 | 35,249 | |
| of which from discontinued operations | 1,072 | 1,974 | 8,121 | |
| Cash CAPEX | -4,184 | -4,259 | -18,699 | |
| Free cash flow | 2,293 | 2,853 | 16,550 | |
| of which from discontinued operations | 222 | 389 | 4,030 | |
| Cash flow from other investing activities | 1,026 | -6,925 | -10,285 | |
| Total cash flow from investing activities | -3,158 | -11,183 | -28,985 | |
| of which from discontinued operations | -1,007 | -1,586 | -4,823 | |
| Cash flow before financing activities | 3,319 | -4,071 | 6,264 | |
| Cash flow from financing activities | -3,368 | 9,888 | -9,628 | |
| of which from discontinued operations | -0 | 68 | 422 | |
| Cash flow for the period | -49 | 5,817 | -3,363 | |
| of which from discontinued operations | 65 | 456 | 3,719 | |
| Cash and cash equivalents, opening balance | 25,334 | 28,735 | 28,735 | |
| Cash flow for the period | -49 | 5,817 | -3,363 | |
| Exchange rate differences | -240 | 410 | -38 | |
| Cash and cash equivalents, closing balance | 25,045 | 34,962 | 25,334 | |
| of which from continuing operations | 14,505 | 26,883 | 14,647 | |
| of which from discontinued operations | 10,540 | 8,079 | 10,687 |
| SEK in millions | Owners of the parent |
Non-controlling interests |
Total equity |
|---|---|---|---|
| Opening balance, January 1, 2015 | 111,383 | 4,981 | 116,364 |
| Dividends | – | -9 | -9 |
| Share-based payments | 5 | – | 5 |
| Total transactions with owners | 5 | -9 | -4 |
| Total comprehensive income | 3,608 | 474 | 4,082 |
| Effect of equity transactions in associates | -5 | – | -5 |
| Closing balance, March 31, 2015 | 114,990 | 5,447 | 120,436 |
| Dividends | -12,990 | -826 | -13,816 |
| Share-based payments | 18 | – | 18 |
| Repurchased treasury shares | -14 | – | -14 |
| Acquisition of non-controlling interest | -309 | -47 | -356 |
| Total transactions with owners | -13,295 | -873 | -14,168 |
| Total comprehensive income | -2,621 | -253 | -2,874 |
| Effect of equity transactions in associates | -1,192 | – | -1,192 |
| Closing balance, December 31, 2015 | 97,884 | 4,318 | 102,202 |
| Opening balance, January 1, 2016 | 97,884 | 4,318 | 102,202 |
| Dividends | – | – | – |
| Share-based payments | 5 | – | 5 |
| Acquisition of non-controlling interests | – | -7 | -7 |
| Total transactions with owners | 5 | -7 | -3 |
| Total comprehensive income | 1,807 | 43 | 1,850 |
| Effect of equity transactions in associates | – | – | – |
| Closing balance, March 31, 2016 | 99,695 | 4,353 | 104,049 |
As in the annual accounts for 2015, Telia Company's consolidated financial statements as of and for the threemonth period ended March 31, 2016, have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The parent company's financial statements have been prepared in accordance with the Swedish Annual Reports Act as well as standard RFR 2 Accounting for Legal Entities and other statements issued by the Swedish Financial Reporting Board. For the group this interim report has been prepared in accordance with IAS 34 Interim Financial Reporting and for the Parent Company in accordance with the Swedish Annual Reports Act. The accounting policies adopted and computation methods used are consistent with those followed in the Annual report 2015, except as described below. All amounts in this report are presented in SEK millions, unless otherwise stated. Rounding differences may occur.
Former segment region Eurasia is classified as held for sale and discontinued operations as of December 31, 2015. For information on discontinued operations, see pages 20-21.
Former segment region Eurasia is classified as held for sale and discontinued operations as of December 31, 2015, and is therefore not included in the segment information.
Prior periods have been restated to reflect the discovery of certain classification errors between net sales and cost of sales referring to insurance sales in region Europe. The corrections were as follows below taken into account former segment region Eurasia classified as discontinued operations:
| SEK in | Jan-Mar 2015 | Jan-Mar 2015 | Jan-Mar 2015 | Jan-Mar 2015 |
|---|---|---|---|---|
| millions | Reported | Restatement | Disc. operations | Restated |
| Net sales | 26,041 | -18 | -5,434 | 20,589 |
| Cost of sales | -15,147 | 18 | 2,455 | -12,674 |
| Gross profit | 10,894 | 0 | -2,979 | 7,915 |
| SEK in | Apr-Jun 2015 | Apr-Jun 2015 Re | Apr-Jun 2015 | Apr-Jun 2015 Re |
| millions | Reported | statement | Disc. operations | stated |
| Net sales | 27,115 | -19 | -5,538 | 21,558 |
| Cost of sales | -15,299 | 19 | 2,274 | -13,006 |
| Gross profit | 11,816 | 0 | -3,264 | 8,552 |
| SEK in | Jul-Sep 2015 | Jul-Sep 2015 | Jul-Sep 2015 | Jul-Sep 2015 |
| millions | Reported | Restatement | Disc. operations | Restated |
| Net sales | 27,029 | -18 | -5,300 | 21,712 |
| Cost of sales | -15,293 | 18 | 2,403 | -12,873 |
| Gross profit | 11,737 | 0 | -2,897 | 8,840 |
| SEK in | Oct-Dec 2015 | Oct -Dec 2015 | Oct -Dec 2015 | |
| millions | Reported | Restatement | Restated | |
| Net sales | 22,655 | -17 | 22,638 | |
| Cost of sales | -14,174 | 17 | -14,157 | |
| Gross profit | 8,481 | 0 | 8,481 |
| SEK in millions |
Jan-Dec 2015 Reported |
Jan-Dec 2015 Restatement |
Jan-Dec 2015 Restated |
|---|---|---|---|
| Net sales | 86,569 | -71 | 86,498 |
| Cost of sales | -52,782 | 71 | -52,710 |
| Gross profit | 33,788 | 0 | 33,788 |
Prior periods have been restated for comparability to reflect a refined product classification in region Sweden
where certain revenues now are treated as external service revenues instead of equipment sales.
As a result of a review of certain types of mobile subscriptions in Sweden and Norway the operational data
For more information regarding;
| SEK in millions | Jan-Mar | Jan-Mar | Jan-Dec | |
|---|---|---|---|---|
| 2016 | 2015 | 2015 | ||
| Within EBITDA | -113 | -302 | -1,289 | |
| Restructuring charges, synergy implementation costs, etc.: | ||||
| Region Sweden | -70 | -78 | -495 | |
| Region Europe | -98 | -128 | -615 | |
| Other operations | -102 | -96 | -194 | |
| Capital gains/losses | 156 | -1 | 14 | |
| Within Depreciation, amortization and impairment losses | – | – | -1,900 | |
| Impairment losses, accelerated depreciation: | ||||
| Region Sweden | – | – | – | |
| Region Europe | – | – | -1,900 | |
| Other operations | – | – | – | |
| Within Income from associated companies and joint ventures | -1 | – | -19 | |
| Capital gains/losses | -1 | – | -19 | |
| Total continuing operations | -114 | -302 | -3,208 | |
| Total discontinued operations | -227 | -75 | -5,772 | |
| Total non-recurring items | -341 | -377 | -8,980 |
Impairment losses in region Europe 2015 full year of SEK 1,900 million relates to goodwill write-downs in Denmark as a result of updated earnings projections following the previously announced decision to withdraw
from the proposed joint venture with Telenor in Denmark.
As of December 31, 2015, former segment region Eurasia (including holding companies) is classified as held for sale and discontinued operations and is therefore presented as a single amount in the consolidated statements of comprehensive income. Assets and liabilities in region Eurasia are presented separately in two line items in the consolidated statement of financial position. The consolidated cash flow statement is presented including region Eurasia, but with additional information on cash flows from operating, investing and financing activities and free cash flow for region Eurasia. The amounts for continuing and discontinued operations in the consolidated financial statements are presented after elimination of intra-group transactions. Comparative periods in the consolidated statements of comprehensive income are restated to reflect the classification of region Eurasia as discontinued operations.
In accordance with IFRS 5 the discontinued operations are measured at the lower of carrying value and estimated fair value less costs to sell. Non-current assets included in discontinued operations are not depreciated or amortized. The valuation is based on an assessment of the input from the sales process and the risks in the different countries. The remeasurement of the net assets in
for number of subscriptions has been restated for comparability.
region Eurasia per December 31, 2015, resulted in an impairment charge in the fourth quarter of 2015 of SEK 5.3 billion related to goodwill and other fixed assets in Uzbekistan. Management's best estimate is that the risk adjusted debt free value of Ucell of SEK 3.3 billion per December 31, 2015, remains unchanged per March 31, 2016. Changes in any of the estimated risk adjustments
made for Ucell would have a material impact on the estimated fair value. The most significant impact on fair value will be the buyer's ability to operate in the country and convert local currency. For information on the valuation of Ucell, see the Annual and Sustainability Report 2015. Due to increased carrying values for Ucell an impairment charge of SEK 200 million related to fixed assets is recognized in the first quarter of 2016.
| SEK in millions | Jan-Mar 2016 |
Jan-Mar 2015 |
Jan- Dec 2015 |
|---|---|---|---|
| Net sales | 3,797 | 5,434 | 20,742 |
| Expenses and other operating income, net | -2,041 | -3,539 | -13,775 |
| Operating income | 1,756 | 1,895 | 6,967 |
| Finance income and finance costs, net | -60 | 397 | 1,552 |
| Income after financial items | 1,696 | 2,292 | 8,519 |
| Income taxes | -491 | -594 | -2,546 |
| Impairment loss on remeasurement to fair value less costs to sell 1 | -200 | – | -5,300 |
| Net income from discontinued operations | 1,006 | 1,698 | 673 |
| EBITDA excl. non-recurring items | 1,775 | 2,908 | 11,035 |
1) Non-tax deductible.
| SEK in millions | Mar 31, 2016 | Dec 31, 2015 |
|---|---|---|
| Goodwill and other intangible assets | 11,197 | 10,821 |
| Property, plant and equipment | 10,036 | 10,379 |
| Other non-current assets | 626 | 586 |
| Short-term interest-bearing receivables | 1,453 | 1,382 |
| Other current assets | 2,046 | 1,957 |
| Cash and cash equivalents | 10,540 | 10,687 |
| Assets of region Eurasia classified as held for sale | 35,898 | 35,812 |
| Long-term borrowings | 182 | 238 |
| Long-term provisions | 4,345 | 4,431 |
| Other long-term liabilities | 1,979 | 2,176 |
| Short-term borrowings | 1,248 | 1,230 |
| Other current liabilities | 3,813 | 3,524 |
| Liabilities of region Eurasia associated with assets classified as held for sale | 11,567 | 11,598 |
| Net assets of region Eurasia classified as held for sale2 | 24,331 | 24,214 |
2) Represents 100 percent of external assets and liabilities, i.e. non-controlling interests' share of net assets are included.
| SEK in millions | Jan-Mar 2016 | Jan-Mar 2015 | Jan-Dec 2015 | |
|---|---|---|---|---|
| Net sales | ||||
| Region Sweden | 8,835 | 9,050 | 37,336 | |
| of which external | 8,755 | 8,978 | 37,051 | |
| Region Europe | 10,430 | 10,311 | 43,658 | |
| of which external | 10,339 | 10,208 | 43,238 | |
| Other operations | 1,696 | 1,780 | 7,753 | |
| Total segments | 20,961 | 21,141 | 88,747 | |
| Eliminations | -567 | -552 | -2,249 | |
| Group | 20,394 | 20,589 | 86,498 | |
| EBITDA excl. non-recurring items | ||||
| Region Sweden | 3,589 | 3,267 | 14,267 | |
| Region Europe | 2,530 | 2,272 | 10,584 | |
| Other operations | 99 | 92 | 430 | |
| Total segments | 6,217 | 5,632 | 25,281 | |
| Eliminations | 0 | 0 | 0 | |
| Group | 6,217 | 5,632 | 25,281 | |
| Operating income | ||||
| Region Sweden | 2,513 | 2,095 | 9,284 | |
| Region Europe | 1,004 | 781 | 2,375 | |
| Other operations | 567 | 348 | 2,948 | |
| Total segments | 4,084 | 3,224 | 14,606 | |
| Eliminations | -0 | 0 | 0 | |
| Group | 4,084 | 3,224 | 14,606 | |
| Finance income and finance costs, net | -564 | -791 | -2,917 | |
| Income after financial items | 3,520 | 2,433 | 11,689 |
| SEK in millions | Region Sweden |
Region Europe |
Other operations |
Total segments | Unallo cated |
Discontinued operations |
Total assets/lia bilities, group |
|---|---|---|---|---|---|---|---|
| Segment assets | |||||||
| March 31, 2016 | 42,247 | 96,267 | 33,892 | 172,406 | 43,065 | 35,898 | 251,369 |
| December 31, 2015 | 42,516 | 96,018 | 33,633 | 172,166 | 46,039 | 35,812 | 254,017 |
| Segment liabilities | |||||||
| March 31, 2016 | 10,423 | 10,918 | 5,592 | 26,933 | 108,820 | 11,567 | 147,320 |
| December 31, 2015 | 11,123 | 11,626 | 5,663 | 28,413 | 111,805 | 11,598 | 151,816 |
| Jan-Mar 2016 | Jan-Mar 2015 | Jan-Dec 2015 |
|---|---|---|
| 3,197 | 2,559 | 14,595 |
| 613 | 276 | 2,251 |
| 2,584 | 2,282 | 12,344 |
| 119 | 4,722 | 5,818 |
| 83 | 80 | 275 |
| 26 | 4,642 | 4,497 |
| 11 | – | 1,045 |
| 3,317 | 7,281 | 20,413 |
| 886 | 1,565 | 4,215 |
| 875 | 1,565 | 4,195 |
| 4,203 | 8,845 | 24,628 |
| 4,073 | 4,123 | 18,790 |
| Mar 31, 2016 | Dec 31, 2015 | |||||
|---|---|---|---|---|---|---|
| Long-term and short-term borrowings1) SEK in millions |
Carrying value |
Fair value | Carrying value |
Fair value | ||
| Long-term borrowings | ||||||
| Open-market financing program borrowings in fair value hedge relationships |
26,839 | 30,696 | 37,672 | 41,021 | ||
| Interest rate swaps | 157 | 157 | 627 | 627 | ||
| Cross currency interest-rate swaps | 2,106 | 2,106 | 1,694 | 1,694 | ||
| Subtotal | 29,102 | 32,959 | 39,993 | 43,342 | ||
| Open-market financing program borrowings | 52,451 | 60,210 | 47,908 | 53,577 | ||
| Other borrowings at amortized cost | 4,268 | 4,268 | 3,699 | 3,699 | ||
| Subtotal | 85,821 | 97,437 | 91,600 | 100,618 | ||
| Finance lease agreements | 41 | 41 | 46 | 46 | ||
| Total long-term borrowings | 85,862 | 97,478 | 91,646 | 100,664 | ||
| Short term borrowings | ||||||
| Open-market financing program borrowings in fair value hedge relationships |
7,067 | 7,387 | – | – | ||
| Interest-rate swaps | 38 | 38 | 51 | 51 | ||
| Cross currency interest-rate swaps | 14 | 14 | 21 | 21 | ||
| Subtotal | 7,120 | 7,440 | 72 | 72 | ||
| Utilized bank overdraft and short-term credit facilities at amortized cost |
8 | 8 | 9 | 9 | ||
| Open-market financing program borrowings | 3,127 | 3,135 | 5,627 | 5,648 | ||
| Other borrowings at amortized cost | 1,184 | 1,184 | 3,623 | 3,623 | ||
| Subtotal | 11,440 | 11,767 | 9,330 | 9,351 | ||
| Finance lease agreements | 6 | 6 | 7 | 7 | ||
| Total short-term borrowings | 11,445 | 11,773 | 9,337 | 9,358 |
1) For financial assets, fair values equal carrying values. For information on fair value estimation, see the Annual and Sustainability Report 2015, Note C3 to the consolidated financial statements.
| Mar 31, 2016 | Dec 31, 2015 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Financial assets and liabilities by fair value hierarchy level1) |
of which | of which | |||||||
| SEK in millions | Carrying | Level | Level | Carrying | Level | Level | |||
| value | Level 1 | 2 | 3 | value | Level 1 | 2 | 3 | ||
| Financial assets at fair value | |||||||||
| Equity instruments available-for-sale | 1,069 | – | – | 1,069 | 1,053 | – | – | 1,053 | |
| Equity instruments held-for-trading | 31 | – | – | 31 | 35 | – | – | 35 | |
| Long- and short-term bonds available-for-sale | 13,669 | 13,669 | – | – | 15,739 | 15,739 | – | – | |
| Derivatives designated as hedging instruments | 2,614 | – | 2,614 | – | 2,824 | – | 2,824 | – | |
| Derivatives held-for-trading | 1,742 | – | 1,677 | 65 | 3,137 | – | 3,072 | 65 | |
| Total financial assets at fair value by level | 19,125 | 13,669 | 4,291 | 1,165 | 22,789 | 15,739 | 5,896 | 1,153 | |
| Financial liabilities at fair value | |||||||||
| Derivatives designated as hedging instruments | 2,119 | – | 2,119 | – | 2,165 | – | 2,165 | – | |
| Derivatives held-for-trading | 354 | – | 354 | – | 329 | – | 329 | – | |
| Total financial liabilities at fair value by level | 2,473 | – | 2,473 | – | 2,494 | – | 2,494 | – |
1) For information on fair value hierarchy levels and fair value estimation, see the Annual and Sustainability Report 2015, Note C3 to the consolidated financial statements and the section below.
Investments classified within Level 3 make use of significant unobservable inputs in deriving fair value, as they trade infrequently. As observable prices are not available for these equity instruments, Telia Company has a market approach to derive the fair value.
Telia Company's primary valuation technique used for estimating the fair value of unlisted equity instruments in level 3 is based on the most recent transaction for the specific company if such transaction has been recently done. If there has been significant changes in circumstances between the transaction date and the balance sheet date that, in the assessment of Telia Company, would have a material impact on the fair value, the carrying value is adjusted to reflect the changes.
In addition, the assessment of the fair value of material unlisted equity instruments is verified by applying other valuation models in the form of valuation multiples from listed comparable companies (peers) on relevant financial and operational metrics, such as revenue, gross profit and other relevant KPIs for the specific company. Comparable listed companies are determined based on industry, size, development stage, geographic area and strategy. The multiple is calculated by dividing the enterprise value of the comparable company by the relevant metric. The multiple is then adjusted for discounts/premiums with regards to differences, advantages and disadvantages between Telia Company's investment and the comparable public companies based on company specific facts and circumstances.
Although Telia Company uses its best judgment, and cross-references results of the primary valuation model against other models in estimating the fair value of unlisted equity instruments, there are inherent limitations in any estimation techniques. The fair value estimates presented herein are not necessarily indicative of an amount that Telia Company could realize in a current transaction. Future confirming events will also affect the estimates of fair value. The effect of such events on the estimates of fair value could be material.
Unlisted equity instruments for which the fair value cannot be reliably measured are measured at cost less any impairment.
The table below presents the movement in level 3 instruments for the three-month period ended March 31, 2016.
| Jan-Mar 2016 | ||||||||
|---|---|---|---|---|---|---|---|---|
| SEK in millions | Equity instru ments available for-sale |
Equity instru ments held-for-trading |
Long- and short term bonds availa ble-for-sale |
Derivatives held-for trading |
Total | |||
| Level 3, opening balance | 1,053 | 35 | – | 65 | 1,153 | |||
| Changes in fair value | 5 | -4 | – | – | 1 | |||
| of which recognized in net income | 5 | -4 | – | – | 1 | |||
| of which recognized in other comprehen sive income |
– | – | – | – | – | |||
| Purchases/capital contributions | 10 | 1 | – | – | 11 | |||
| Transfer into/out of level 3 | – | – | – | – | – | |||
| Exchange rate differences | – | 0 | – | 0 | 0 | |||
| Level 3, closing balance | 1,069 | 31 | – | 65 | 1,165 |
| Jan-Dec 2015 | ||||||||
|---|---|---|---|---|---|---|---|---|
| SEK in millions | Equity instru ments available for-sale |
Equity instru ments held-for-trading |
Long- and short term bonds availa ble-for-sale |
Derivatives held-for trading |
Total | |||
| Level 3, opening balance | 275 | 61 | 0 | 55 | 391 | |||
| Changes in fair value | 10 | -26 | 0 | 10 | -6 | |||
| of which recognized in net income | -15 | -26 | 0 | 10 | -31 | |||
| of which recognized in other comprehen sive income |
25 | – | – | – | 25 | |||
| Purchases/capital contributions | 994 | 4 | – | – | 998 | |||
| Transfer into/out of level 3 | – | – | – | – | – | |||
| Exchange rate differences | 16 | -5 | 0 | 0 | 11 | |||
| Reclassified to assets classified as held for sale |
-242 | – | – | -1 | -243 | |||
| Level 3, closing balance | 1,053 | 35 | – | 65 | 1,153 |
The purchases in 2015 were mainly related to the acquisition of a 1.4 percent stake in Spotify for USD 115 million, corresponding to SEK 976 million at the transaction date on June 9, 2015.
On April 28, 2015, Telia Company acquired 270,783 own shares to an average price of SEK 51.7908 to cover commitments under the "Long Term Incentive Program 2012/2015". During the second quarter of 2015, Telia Company distributed 266,195 shares to the incentive program participants. As of March 31, 2016, 4,588 Telia Company AB shares were held by the company itself and the total numbers of registered and outstanding shares were 4,330,084,781 and 4,330,080,193, respectively. The total number of registered and outstanding shares as of December 31, 2015, was 4,330,084,781 and 4,330,080,193, respectively.
In the three-month period ended March 31, 2016, Telia Company purchased goods and services for SEK 18 million (27), and sold goods and services for SEK 12 million (33). Related parties in these transactions were mainly MegaFon, Turkcell and Lattelecom.
Net debt presented below is based on the total Telia Company group including both continuing and discontinued operations.
| SEK in millions | Mar 31, 2016 | Dec 31, 2015 |
|---|---|---|
| Long-term and short-term borrowings | 98,738 | 102,451 |
| Less derivatives recognized as financial assets and hedging long-term and short-term borrow ings and related credit support annex (CSA) |
-4,171 | -5,580 |
| Less long-term bonds available for sale | -9,001 | -8,841 |
| Less short-term investments, cash and bank | -31,009 | -32,313 |
| Net debt, continuing and discontinued operations | 54,557 | 55,717 |
The underlying operating cash flow continued to be positive also in the first quarter of 2016.
The rating from Standard & Poor's remained unchanged with a credit rating on Telia Company AB of A- for longterm borrowings and A-2 for short-term borrowings with a stable outlook. However, at the beginning of February Moody's placed Telia Company's long-term rating, A3, on review for downgrade. Concurrently, Moody's affirmed Telia Company's short-term rating, P-2.
The first quarter started with very light new issuance activity and muted interest from investors to engage in new investments in corporate credits. During March the market sentiment turned around on the back of the ECB announcement to buy corporate credits. The quarter ended with a positive sentiment for credits with large supply and strong demand.
Telia Company has not made any major funding during the first quarter and continues to have limited funding needs for 2016. The strategy for 2016 remains intact, to be opportunistic and take advantage of attractive funding opportunities when they appear with a focus on continue to diversify the investor base.
As of March 31, 2016, the maximum potential future payments that Telia Company (continuing operations) could be required to make under issued financial guarantees totaled SEK 303 million (298 at the end of 2015), of which SEK 287 million (283 at the end of 2015) referred to guarantees for pension obligations. Collateral pledged (continuing and discontinued operations) totaled SEK 273 million (353 at the end of 2015). For information regarding ongoing investigations of Eurasian transactions see Review of Eurasian transactions in section Risk and uncertainties.
As of March 31, 2016, contractual obligations (continuing operations) totaled SEK 3,170 million (2,506 at the end of 2015), of which SEK 2,001 million (1,802 at the end of 2015) referred to contracted build-out of Telia Company's fixed networks in Sweden.
On March 1, 2016, Telia Company acquired all shares in the Swedish company Telecom3 Fibernät i Sverige AB. The cost and net cash outflow of the combination was SEK 26 million, all attributable to goodwill.
The key ratios presented below are based on the total Telia Company group including both continuing and discontinued operations.
| Mar 31, | Dec 31, | |
|---|---|---|
| 2016 | 2015 | |
| Return on equity (%, rolling 12 months) | 8.2 | 9.3 |
| Return on capital employed (%, rolling 12 months) | 9.0 | 8.9 |
| Equity/assets ratio (%) | 40.5 | 35.1 |
| Net debt/equity ratio (%) | 53.5 | 62.5 |
| Net debt/EBITDA rate excl. non-recurring items (multiple, rolling 12 months) | 1.53 | 1.53 |
| Net debt/assets ratio | 21.7 | 21.9 |
| Owners' equity per share (SEK) | 23.02 | 22.60 |
| Condensed income statements SEK in millions |
Jan-Mar 2016 |
Jan-Mar 2015 |
Jan-Dec 2015 |
|
|---|---|---|---|---|
| Net sales | 1 | 0 | 4 | |
| Gross income | 1 | 0 | 4 | |
| Operating expenses | -223 | -263 | -1,265 | |
| Operating income | -222 | -263 | -1,261 | |
| Financial income and expenses | -1,472 | 704 | 7,765 | |
| Income after financial items | -1,694 | 441 | 6,503 | |
| Appropriations | 2,890 | 1,055 | 6,376 | |
| Income before taxes | 1,196 | 1,497 | 12,879 | |
| Income taxes | -239 | -338 | -1,194 | |
| Net income | 957 | 1,159 | 11,685 |
Financial income and expenses for the three-month period decreased mainly due to changes in foreign exchange rates affecting loans designated as hedges of net investments in foreign operations.
| Condensed balance sheets SEK in millions |
Mar 31, 2016 |
Dec 31, 2015 |
|---|---|---|
| Non-current assets | 164,777 | 162,700 |
| Current assets | 48,178 | 60,513 |
| Total assets | 212,955 | 223,213 |
| Equity and liabilities | ||
| Restricted shareholders' equity | 15,712 | 15,712 |
| Non-restricted shareholders' equity | 68,254 | 67,189 |
| Total shareholders' equity | 83,966 | 82,901 |
| Untaxed reserves | 11,686 | 12,666 |
| Provisions | 535 | 504 |
| Long-term liabilities | 81,733 | 88,094 |
| Short-term liabilities | 35,035 | 39,048 |
| Total equity and liabilities | 212,955 | 223,213 |
Financial investments in the three-month period ended March 31, 2016, were SEK 34 million (2,136). The investments in 2015 were mainly related to the acquisition of Tele2's Norwegian mobile operations.
Telia Company operates in a broad range of geographical product and service markets in the highly competitive and regulated telecommunications industry. As a result, Telia Company is subject to a variety of risks and uncertainties. Telia Company has defined risk as anything that could have a material adverse effect on the achievement of Telia Company's goals. Risks can be threats, uncertainties or lost opportunities relating to Telia Company's current or future operations or activities.
Telia Company has an established risk management framework in place to regularly identify, analyze, assess and report business, financial as well as ethics and sustainability risks and uncertainties, and to mitigate such risks when appropriate. Risk management is an integrated part of Telia Company's business planning process and monitoring of business performance.
See section Risk and uncertainties and Note C26 to the consolidated financial statements in the Annual and Sustainability Report 2015 for a detailed description of some of the factors that may affect Telia Company's business, brand perception, financial position, results of operations or the share price from time to time. Risks and uncertainties that could specifically impact the quarterly results of operations during 2016 include, but may not be limited to:
Changes in the global financial markets are difficult to predict. Telia Company strives to have a strong balance sheet and operates in a relatively non-cyclical or late-cyclical industry. However, a severe or long-term financial crisis by itself or by triggering a downturn in the economy of one or more countries in which Telia Company operates would have an impact on the customers and may negatively affect growth and results of operations through reduced telecom spending. The maturity schedule of Telia Company's loan portfolio is aimed to be evenly distributed over several years, and refinancing is expected to be made by using uncommitted open-market debt financing programs and bank loans, alongside the company's free cash flow. In addition, Telia Company has committed lines of credit with banks that are deemed to be sufficient and may be utilized if the openmarket refinancing conditions are poor. However, Telia Company's cost of funding might be higher, should there be unfavorable changes in the global financial markets.
Telia Company has material investments in the Russian Federation related to its associated company PAO MegaFon and the international carrier operations. Following the conflict between the Russian Federation and Ukraine, the European Union and the United States have implemented sanctions directed towards individuals and corporates. The Russian Federation has as a
consequence decided on certain counter actions. The sanctions and counter actions may negatively affect the Russian ruble and the Russian economy, which in turn may impact countries whose economies are closely linked to the Russian economy, such as a number of Telia Company's Eurasian operations. These developments, as well as other international political conflicts or developments affecting countries in which Telia Company is operating, may adversely impact Telia Company's cash flows, financial position and results of operations.
Telia Company is subject to substantial and historically increasing competition and price pressure. Competition from a variety of sources, including current market participants, new entrants and new products and services, may adversely affect Telia Company's results of operations. Transition to new business models in the telecom industry may lead to structural changes and different competitive dynamics. Failure to anticipate and respond to industry dynamics, and to drive a change agenda to meet mature and developing demands in the marketplace, may affect Telia Company's customer relationships, service offerings and position in the value chain, and adversely impact its results of operations.
Telia Company operates in a highly regulated industry. The regulations to which Telia Company is subject impose significant limits on its flexibility to manage its business. Changes in regulation or government policy affecting Telia Company's business activities, as well as decisions by regulatory authorities or courts, including granting, amending or revoking of telecom licenses and frequency permits for Telia Company or other parties, could adversely affect Telia Company's business and results of operations.
Telia Company has made significant investments in telecom operators in Kazakhstan, Azerbaijan, Uzbekistan, Tajikistan, Georgia, Moldova, Nepal, Russia, Turkey and Afghanistan. Historically, the political, economic, legal and regulatory systems in these countries have been less predictable than in countries with more mature institutional structures. The future political situation in each of the emerging market countries may remain or become increasingly unpredictable, and markets in which Telia Company operates may become unstable, even to the extent that Telia Company decides or will be forced to exit a country or a specific operation within a country. Another implication may be unexpected or unpredictable litigation cases under civil or tax legislation. Other risks associated with operating in emerging market countries include foreign exchange restrictions or administrative issues, which could effectively prevent Telia Company from repatriating cash, e.g. by receiving dividends and
repayment of loans, or from selling its investments. Still another risk is the potential establishment of foreign ownership restrictions or other possible actions against entities with foreign ownership, formally or informally. Such negative political or legal developments or weakening of the economies or currencies in these markets might have a significantly negative effect on Telia Company's results of operations and financial position. In September 2015, Telia Company announced its decision to reduce the presence in region Eurasia (Kazakhstan, Azerbaijan, Uzbekistan, Tajikistan, Georgia, Moldova and Nepal) and over time fully leave. Sales processes are ongoing and the divestment of Ncell in Nepal was completed on April 11, 2016. The nature of these markets, including potential government intervention and other factors mentioned above, combined with the fact that the assets are not fully-owned and there are undertakings and obligations in various shareholder agreements, reputational issues regarding the assets and fewer potential buyers than in more mature markets, makes the complexity of these sales processes high with significant uncertainties regarding both expected outcome and timing.
Factors generally affecting the telecom markets as well as changes in the economic, regulatory, business or political environment impact Telia Company financially. Management also constantly reviews and refines the business plans, and may make exit decisions or take other actions in order to effectively execute on Telia Company's strategy. Should such circumstances negatively change management's expectation of future cash flows attributable to certain assets, Telia Company will be required to recognize asset impairment losses, including but not limited to goodwill and fair value adjustments recorded in connection with historical or future acquisitions. Further, Telia Company has undertaken a number of restructuring and streamlining initiatives, which have resulted in substantial restructuring and streamlining charges. Similar initiatives may be undertaken in the future. In addition to affecting Telia Company's financial position and results of operations, impairment losses and restructuring charges may adversely affect Telia Company's ability to pay dividends.
Telia Company is currently investing in business transformation and future growth through, for example, initiatives to increase competitiveness and reduce cost as well as to improve capacity and access by accelerating the fiber roll-out in Sweden, new B2B offerings, as well as upgrading data networks in Eurasia. Telia Company is also constantly investing in sales and marketing efforts to retain and acquire customers in its markets. Telia Company believes that these investments and initiatives will improve market position and financial strength. Should Telia Company fail to reach the targets set for its
business transformation and customer attraction activities, the results of operations will be negatively impacted.
Telia Company conducts some of its activities, particularly outside of the Nordic region, through subsidiaries in which Telia Company does not have a 100 percent ownership. Under the governing documents for certain of these entities, the holders of non-controlling interests have protective rights in matters such as approval of dividends, changes in the ownership structure and other shareholder-related matters. One example where Telia Company is dependent on a minority owner is Fintur Holdings B.V. (Fintur's minority shareholder is Turkcell) which owns the operations in Kazakhstan, Azerbaijan, Georgia and Moldova. As a result, actions outside Telia Company's control and adverse to its interests may affect Telia Company's position to act as planned in these partly owned subsidiaries.
Telia Company is reliant upon a limited number of suppliers to manufacture and supply network equipment and related software as well as terminals, to allow Telia Company to develop its networks and to offer its services on a commercial basis. Telia Company cannot be certain that it will be able to obtain network equipment or terminals from alternative suppliers on a timely basis if the existing suppliers are unable to satisfy Telia Company's requirements. In addition, like its competitors, Telia Company currently outsources many of its key support services, including network construction and maintenance in most of its operations. The limited number of suppliers of these services, and the terms of Telia Company's arrangements with current and future suppliers, may adversely affect Telia Company, including by restricting its operational flexibility. In connection with signing supplier contracts for delivery of terminals, Telia Company may also grant the supplier a guarantee to sell a certain number of each terminal model to its customers. Should the customer demand for a terminal model under such a guarantee turn out to be smaller than anticipated, Telia Company's results of operations may be adversely affected.
In accordance with their nature, non-recurring items such as capital gains and losses, restructuring costs, impairment charges, etc., may impact the quarterly results in the short term with amounts or timing that deviate from those currently expected. Depending on external factors or internal developments, Telia Company might also experience non-recurring items that are not currently anticipated.
Telia Company conducts some of its activities, particularly outside of the Nordic region, through associated
companies, the major ones being MegaFon and Turkcell, which Telia Company does not control and which operate in growth markets but also in more volatile political, economic and legal environments. In turn, these associated companies own stakes in numerous other companies. Telia Company does not have a controlling interest in its associated companies and as a result has limited influence over the conduct of all these businesses. Under the governing documents for certain of these entities, Telia Company's partners have control over or share control of key matters such as the approval of business plans and budgets, and decisions as to the timing and amount of cash distributions. The risk of actions outside Telia Company's or its associated companies' control and adverse to Telia Company's interests, or disagreement or deadlock, is inherent in associated companies and jointly controlled entities. One example of this is the ongoing corporate governance issues on shareholder level in Turkcell. Telia Company might not be able to ensure that the associated companies apply the same responsible business principles, increasing the risk for wrongdoings and reputational and financial losses. Variations in the financial performance of these associated companies have an impact on Telia Company's results of operations also in the short term.
Telia Company is subject to a number of ethics and sustainability related risks, including but not limited to, human rights, customer privacy, corruption, network integrity, data security, labor practices and environment. Especially, the risk is high in emerging markets where historically, the political, economic, legal and regulatory systems have been less predictable than in countries with more mature institutional structures. Failure or perception of failure to adhere to Telia Company's ethics and sustainability requirements may damage customer or other stakeholders' perception of Telia Company and negatively impact Telia Company's business operations and its brand, even to the extent that Telia Company decides to exit one or a number of markets. Further, after making such a decision, the disposal process as such may pose risks to corruption and unethical business behavior.
In late 2012, the then Board of Directors appointed the Swedish law firm Mannheimer Swartling (MSA) to investigate allegations of corruption related to Telia Company's investments in Uzbekistan. MSA's report was made public on February 1, 2013. In April 2013, the Board of Directors assigned the international law firm Norton Rose Fulbright (NRF) to review transactions and agreements made in Eurasia by Telia Company in the past years with the intention to give the Board a clear picture of the transactions and a risk assessment from a business ethics perspective. For advice on implications under Swedish legislation, the Board assigned two Swedish law firms. In consultation with the law firms, Telia Company has promptly taken steps, and will continue to take steps, in its business operations as well as in its
governance structure and with its personnel which reflect concerns arising from the review. The Swedish Prosecution Authority's investigation with respect to Uzbekistan is ongoing and Telia Company continues to cooperate with and provide assistance to the Prosecutor. If continued assessments and investigations would lead to new observations and findings, it cannot be excluded that the consequences of such findings would be that the results of operations and financial position in Telia Company's operations in the Eurasian jurisdictions are adversely impacted. Another risk is presented by the Swedish Prosecution Authority's notification in the beginning of 2013 within the investigation of Telia Company's transactions in Uzbekistan, that the Authority is separately investigating the possibility of seeking a corporate fine against Telia Company, which under the Swedish Criminal Act can be levied up to a maximum amount of SEK 10 million, and forfeiture of any proceeds to Telia Company resulting from the alleged crimes. The Swedish Prosecution Authority may take similar actions with respect to transactions made or agreements entered into by Telia Company relating to operations in its other Eurasian markets. Further, actions taken, or to be taken, by the police, prosecution or regulatory authorities in other jurisdictions against Telia Company's operations or transactions, or against third parties, whether they be Swedish or non-Swedish individuals or legal entities, might directly or indirectly harm Telia Company's business, results of operations, financial position, cash flows or brand reputation. As examples, investigations concerning bribery and money laundering in connection with the transactions in Uzbekistan are conducted by the Dutch prosecutor and police authorities, and by the U.S. Department of Justice and the U.S. Securities and Exchange Commission. As requested by the Dutch authorities, Telia Company has provided a bank guarantee of EUR 10 million as collateral for any financial claims which may be decided against one of its Dutch subsidiaries. Telia Company is cooperating fully with the Dutch and U.S. authorities. The investigations were initiated in March 2014 and are still ongoing. At this point in time, it is not possible to assess how or when the investigations will be resolved. Telia Company has not received any formal or indicative claims or requests for penalties or other monetary sanctions from the authorities, but there is a risk that the investigations will result in some form of sanctions, monetary and/or otherwise. The outcome of the investigations may have a material adverse effect on Telia Company's financials. Telia Company has received requests to make public the reviews made by NRF and other law firms. However, despite risking criticism, it is not possible to publish the reviews with respect to people, companies, business agreements, privacy and thus the risk of Telia Company incurring lawsuits as the law firms' views are not necessarily shared by those implicated. As already stated, Telia Company continuously hand over information to law enforcement agencies, who are better equipped to assess whether any criminal acts have occurred.
Stockholm, April 20, 2016
Johan Dennelind President and CEO
This report has not been subject to review by Telia Company's auditors
This report contains statements concerning, among other things, Telia Company's financial condition and results of operations that are forward-looking in nature. Such statements are not historical facts but, rather, represent Telia Company's future expectations. Telia Company believes that the expectations reflected in these forward-looking 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 forwardlooking statement. Such important factors include, but
may not be limited to: Telia Company's market position; growth in the telecommunications industry; and the effects of competition and other economic, business, competitive and/or regulatory factors affecting the business of Telia Company, its associated companies and joint ventures, and the telecommunications industry in general. Forward-looking statements speak only as of the date they were made, and, other than as required by applicable law, Telia Company undertakes no obligation to update any of them in light of new information or future events.
Telia Company provides communication services helping millions of people to be connected and communicate, do business and be entertained. By doing that we fulfill our purpose to bring the world closer - on the customer´s terms.
For more information about Telia Company, see www.teliacompany.com
Billed revenues: Voice, messaging, data and content.
CAPEX: An abbreviation of "Capital Expenditure." Investments in intangible and tangible non-current assets but excluding goodwill, fair-value adjustments and asset retirement obligations.
EBITDA: Earnings before Interest, Tax, Depreciation and Amortization. Equals operating income before depreciation, amortization and impairment losses and before income from associated companies.
Net debt: Interest-bearing liabilities less derivatives recognized as financial assets (and hedging long-term and short-term borrowings) and related credit support annex (CSA), less short term investments, long-term bonds available for sale and cash/cash equivalents.
Net debt/assets ratio: Net debt expressed as a percentage of total assets.
Non-recurring items comprise capital gains and losses, impairment losses, restructuring programs (costs for phasing out operations and personnel redundancy costs) or other costs with the character of not being part of normal daily operations.
In this report, comparative figures are provided in parentheses following the operational and financial results and refer to the same item in the corresponding period last year, unless otherwise stated.
Interim Report January–June 2016 July 20, 2016
Interim Report January–September 2016 October 21, 2016
Year-end Report 2016 January 27, 2017
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 April 20, 2016.
Telia Company AB (publ) Corporate Reg. No. 556103-4249, Registered office: Stockholm Tel. +46 8 504 550 00. www.teliacompany.com
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