Earnings Release • Apr 19, 2013
Earnings Release
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| SEK in millions, except key ratios, per share data and changes |
Jan-Mar 2013 |
Jan-Mar 2012 |
Chg (%) |
Jan-Dec 2012 |
|---|---|---|---|---|
| Net sales | 24,542 | 25,693 | -4.5 | 104,898 |
| Addressable cost base¹, ) ² |
6,989 | 7,432 | -6.0 | 29,644 |
| ) ) EBITDA² excl. non-recurring items³ |
8,509 | 8,852 | -3.9 | 36,171 |
| Margin (%) | 34.7 | 34.5 | 34.5 | |
| Operating income | 6,489 | 6,768 | -4.1 | 28,400 |
| Operating income excl. non-recurring items | 6,628 | 6,882 | -3.7 | 28,682 |
| Net income | 4,499 | 4,515 | -0.4 | 21,168 |
| of which attributable to owners of the parent | 4,108 | 4,122 | -0.3 | 19,886 |
| Earnings per share (SEK) | 0.95 | 0.95 | 4.59 | |
| Return on equity (%, rolling 12 months) | 21.5 | 18.4 | 16.8 | 20.5 |
| CAPEX-to-sales (%) | 11.1 | 12.4 | 15.0 | |
| Free cash flow | 2,414 | 2,193 | 10.1 | 23,740 |
1) Additional information available at www.teliasonera.com.
2) Please refer to the last page for definitions.
3) Non-recurring items; see table on page 21.
In this report, comparative figures are provided in parentheses following the operational and financial results and refer to the same item in the first quarter of 2012, unless otherwise stated.
"Our industry continues to go through a period of change where traditional business models are being challenged by new customer behavior. The competitive situation remains demanding on many markets and puts pressure on overall revenue streams. In this environment, we deliver a quarter with both improved margins and stronger cash flow.
In the first quarter, revenues in local currencies declined by 0.9 percent compared to the same period last year. Our business in Eurasia continued to perform well and delivered once again double digit growth with continued pick-up in data revenues. Mobility Services were impacted by major reductions in regulated interconnect rates, while Broadband Services experienced higher pressure on traditional voice revenues and were also impacted by slower roll-out of fiber due to cold weather conditions.
In March, we took an important step on the Swedish market. As one of the first operators in Europe we offer consumers the opportunity to connect multiple mobile devices to one subscription, including unlimited calls and text messages, with the possibility to share data volumes within certain buckets. In our view, this is an innovative and attractive proposal for the customer at the same time as we move towards a more sustainable business model in a world where the consumption of data is increasing heavily.
In order to maintain our ability to invest in future growth, it is essential to manage our cost base in a prudent way. We have continued to put significant emphasis on implementing the efficiency measures initiated at the end of last year. There were effects within Mobility Services already in the quarter, while within Broadband Services they will come in the latter part of the year. We remain determined to bring total costs down by SEK 2 billion net over a two year period.
During the quarter, we finalized the strategic review of our Spanish operator Yoigo. In early April, we announced that the sales process was terminated and that our intention is to continue developing the business. In the first quarter, Mobility Spain reported 19 percent revenue growth and a positive margin trend, highlighting its future potential.
In early February, the Swedish law firm Mannheimer Swartling released its report on TeliaSonera's investments in Uzbekistan. The firm did not find any substance to the allegations that we committed bribery or participated in money laundering. However, it directed serious criticism at TeliaSonera for shortcomings in the investment process. Over the past few years, we have put significant effort into improving our processes and will continue to strengthen our way of working even further.
Sustainability is of high priority, with special focus on privacy, freedom of expression and anti-corruption. In March, TeliaSonera and the other members of the Telecommunication Industry Dialogue signed guiding principles on telecommunication and freedom of expression and privacy. The principles provide guidance on how we should act to respect these basic human rights. We also entered into a two-year collaboration with the Global Network Initiative (GNI) to develop and expand this initiative further."
Net sales in local currencies and excluding acquisitions are expected to be flat. Currency fluctuations may have a material impact on reported figures in Swedish krona.
The EBITDA margin, excluding non-recurring items, is expected to increase slightly compared to last year (2012: 34.5 percent).
The CAPEX-to-sales ratio is expected to be approximately 14 percent, excluding license and spectrum fees (2012: 14.6 percent).
As announced in the third quarter of 2012, efficiency measures including personnel reductions net of 2,000 employees, will lower the cost base by SEK 2 billion net over the coming two years, of which approximately SEK 0.2 billion was recorded in the fourth quarter of 2012. An additional reduction of SEK 0.1 billion was achieved in the first quarter of 2013.
During 2013, 1,800 employees in the Nordics and Baltics will be affected. Close to 1,000 have been given notice year-to-date, of which the majority in early April and costs for this will be recorded in the second quarter.
Total costs for the reductions in 2013 are estimated to SEK 1.7 billion, of which SEK 0.1 billion was recorded in the first quarter. The efficiency measures will be completed by early 2014 at the latest.
Net sales in local currencies and excluding acquisitions decreased 0.9 percent. In reported currency, net sales decreased 4.5 percent to SEK 24,542 million (25,693). The negative effect of exchange rate fluctuations was 3.1 percent and the negative effect of acquisitions and disposals was 0.5 percent.
In Mobility Services, net sales in local currencies and excluding acquisitions decreased 2.7 percent. In reported currency, net sales decreased 5.1 percent to SEK 11,868 million (12,500).
In Broadband Services, net sales in local currencies and excluding acquisitions decreased 5.9 percent. In reported currency, net sales decreased 8.3 percent to SEK 8,243 million (8,986).
In Eurasia, net sales in local currencies and excluding acquisitions increased 13.6 percent. Net sales in reported currency increased 5.4 percent to SEK 4,684 million (4,445).
Mobility services Broadband services Eurasia
Other operations
The number of subscriptions rose by 10.1 million from the end of the first quarter of 2012 to 182.1 million. In the consolidated operations the number of subscriptions increased by 6.3 million to 70.3 million. In the associated companies, the number of subscriptions increased by 3.8 million to 111.8 million. During the first quarter, the total number of subscriptions decreased by 0.8 million in the consolidated operations and remained unchanged in the associated companies.
The addressable cost base in local currencies and excluding acquisitions decreased 1.0 percent. In reported currency, the addressable cost base decreased 6.0 percent to SEK 6,989 million (7,432).
EBITDA, excluding non-recurring items, decreased 0.5 percent in local currencies and excluding acquisitions. In reported currency, EBITDA, excluding non-recurring items, decreased 3.9 percent to SEK 8,509 million (8,852). The EBITDA margin, excluding nonrecurring items, increased to 34.7 percent (34.5).
Operating income, excluding non-recurring items, decreased 3.7 percent to SEK 6,628 million (6,882). Income from associated companies, excluding non-recurring items, increased to SEK 1,323 million (1,246).
Non-recurring items affecting operating income totaled SEK -139 million (-113), mainly related to efficiency measures in Finland.
Financial items totaled SEK -839 million (-1,140) of which SEK -806 million (-897) related to net interest expenses. Last year financial items were negatively impacted by nonrecurring currency effects of SEK 117 million related to the acquisition of Kcell.
Income taxes increased to SEK 1,151 million (1,113). The effective tax rate was 20.4 percent (19.8).
Non-controlling interests in subsidiaries decreased to SEK 391 million (393) of which SEK 354 million (329) was related to the Eurasian operations and SEK 28 million (56) to LMT and TEO.
Net income attributable to owners of the parent company decreased 0.3 percent to SEK 4,108 million (4,122) and earnings per share was unchanged at SEK 0.95 (0.95).
CAPEX decreased to SEK 2,719 million (3,175) and the CAPEX-to-sales ratio decreased to 11.1 percent (12.4). The CAPEX-to-sales ratio, excluding license and spectrum fees, amounted to 10.4 percent (12.3).
Free cash flow increased to SEK 2,414 million (2,193), mainly due to lower cash CAPEX.
Net debt decreased to SEK 55,275 million at the end of the first quarter (59,543 at the end of the fourth quarter of 2012). The net debt/EBITDA ratio was 1.54 (1.64 at the end of the fourth quarter of 2012).
The equity/assets ratio was 39.1 percent (38.2 percent at the end of the fourth quarter of 2012).
| SEK in millions, except margins, operational data and changes |
Jan-Mar 2013 |
Jan-Mar 2012 |
Chg (%) |
Jan-Dec 2012 |
|---|---|---|---|---|
| Net sales | 11,868 | 12,500 | -5.1 | 50,637 |
| EBITDA excl. non-recurring items | 3,448 | 3,650 | -5.5 | 14,718 |
| Margin (%) | 29.1 | 29.2 | 29.1 | |
| Operating income | 2,362 | 2,576 | -8.3 | 4,229 |
| Operating income excl. non-recurring items | 2,420 | 2,576 | -6.1 | 10,429 |
| CAPEX | 938 | 983 | -4.6 | 4,496 |
| Subscriptions, period-end (thousands) | 20,585 | 19,603 | 5.0 | 20,537 |
| Employees, period-end | 6,915 | 7,199 | -3.9 | 7,118 |
Additional segment information available at www.teliasonera.com.
Net sales in local currencies and excluding acquisitions decreased 2.7 percent. In reported currency, net sales decreased 5.1 percent to SEK 11,868 million (12,500). The negative effect of exchange rate fluctuations was 2.4 percent. Higher pressure on voice and messaging revenues, significant reductions in regulated interconnect prices on several markets, combined with lower equipment sales affected overall performance. Lower interconnect revenues impacted sales by close to SEK 500 million compared to the same quarter last year.
In Sweden, net sales decreased 2.2 percent to SEK 4,083 million (4,174). Billed revenues continued to grow, but at a slower rate compared to previous quarter, mainly due to increased pressure on voice and messaging services in the corporate segment. Total revenue was also impacted by reduced equipment sales as there were no major new product launches in the quarter.
In Finland, net sales in local currency decreased 10.5 percent to the equivalent of SEK 1,844 million (2,147). Billed revenues declined as growth in data was not enough to offset increased pressure on voice and messaging. Lower interconnect revenues explained more than one third of the overall sales decline.
In Norway, net sales in local currency declined 7.7 percent to the equivalent of SEK 1,701 million (1,879). Billed revenues remained flat compared to last year, but sales were negatively affected by reduced interconnect and lower wholesale volumes.
provides mobile telecommunication services to the consumer and enterprise mass markets. Services include mobile voice and mobile data for phones, mobile broadband, mobile content, data access via WLAN Hotspots and Wireless Office. The business area comprises operations in Sweden, Finland, Norway, Denmark, Lithuania, Latvia, Estonia and Spain.
In Denmark, net sales in local currency declined 15.3 percent to the equivalent of SEK 1,049 million (1,301). Two thirds of the decline is explained by lower interconnect revenues, while pressure on billed revenues eased somewhat in the quarter.
In Estonia and Lithuania, net sales in local currencies decreased 13.2 percent and 4.8 percent, respectively, to the equivalent of SEK 299 million (359) and SEK 284 million (311) respectively. The decline in Estonia was mainly related to reduced interconnect revenues, while there was continued pressure on billed revenues in Lithuania from lower voice and messaging revenues.
In Latvia, net sales in local currency increased 4.5 percent to the equivalent of SEK 382 million (382), helped by higher equipment sales.
In Spain, net sales in local currency increased 19.2 percent to the equivalent of SEK 2,234 million (1,954), explained by solid data growth and higher equipment sales.
The number of subscriptions rose by 1.0 million from the end of the first quarter of 2012 to 20.6 million. Growth was strongest in Spain and Sweden with an increase of 0.6 million and 0.2 million to 3.7 million and 6.6 million subscriptions, respectively. During the quarter the total number of subscriptions remained unchanged.
EBITDA, excluding non-recurring items, decreased 4.0 percent in local currencies and excluding acquisitions. In reported currency, EBITDA, excluding non-recurring items, decreased 5.5 percent to SEK 3,448 million (3,650). The EBITDA margin decreased marginally to 29.1 percent (29.2).
In Sweden, the EBITDA margin improved to 46.1 percent (45.3), explained by higher gross margin from reduced low margin equipment sales, but also a reduction in addressable costs related to personnel and IT. In Finland, the EBITDA margin declined to 31.3 percent (31.9) as the achieved cost reduction did not compensate for the decline in net sales.
In Norway, the EBITDA margin declined to 29.5 percent (30.5), mainly as an effect of reduced gross margin due to lower wholesale traffic and reduced equipment margin. In Denmark, the EBITDA margin improved to 12.5 percent (10.6), helped by improved gross margin and lower spend related to marketing and sales commissions.
The EBITDA margin in Estonia improved to 30.1 percent (28.1). The improvement is explained by higher gross margin due to better margins for interconnect and roaming together with increased margin for certain wholesale products. In Latvia and Lithuania, the EBITDA margins decreased to 26.4 percent (36.6) and 26.8 percent (28.3), respectively. The decline in Latvia is explained by weaker gross margin partly due to negative balance in interconnect traffic. In Lithuania the gross margin was negatively affected by changed product mix.
In Spain, the EBITDA margin increased to 4.0 percent (1.7) helped by lower costs for subsidies and sales commissions.
CAPEX decreased to SEK 938 million (983) and the CAPEX-to-sales ratio was stable at 7.9 percent (7.9). CAPEX, excluding licenses and spectrum fees, amounted to SEK 938 million (975) and the CAPEX-to-sales ratio to 7.9 percent (7.8). Cash flow, measured as EBITDA, excluding non-recurring items, minus CAPEX, decreased to SEK 2,510 million (2,667).
| SEK in millions, except margins and changes |
Jan-Mar 2013 |
Jan-Mar 2012 |
Chg (%) |
Jan-Dec 2012 |
|---|---|---|---|---|
| Net sales | 11,868 | 12,500 | -5.1 | 50,637 |
| of which Sweden | 4,083 | 4,174 | -2.2 | 17,297 |
| of which Finland | 1,844 | 2,147 | -14.1 | 8,173 |
| of which Norway | 1,701 | 1,879 | -9.5 | 7,582 |
| of which Denmark | 1,049 | 1,301 | -19.4 | 4,835 |
| of which Lithuania | 284 | 311 | -8.7 | 1,277 |
| of which Latvia | 382 | 382 | – | 1,608 |
| of which Estonia | 299 | 359 | -16.7 | 1,515 |
| of which Spain | 2,234 | 1,954 | 14.3 | 8,382 |
| EBITDA excl. non-recurring items | 3,448 | 3,650 | -5.5 | 14,718 |
| of which Sweden | 1,881 | 1,891 | -0.5 | 7,382 |
| of which Finland | 577 | 685 | -15.8 | 2,446 |
| of which Norway | 502 | 574 | -12.5 | 2,414 |
| of which Denmark | 131 | 138 | -5.1 | 549 |
| of which Lithuania | 76 | 88 | -13.6 | 339 |
| of which Latvia | 101 | 140 | -27.9 | 543 |
| of which Estonia | 90 | 101 | -10.9 | 417 |
| of which Spain | 90 | 33 | 172.7 | 627 |
| Margin (%), total | 29.1 | 29.2 | 29.1 | |
| Margin (%), Sweden | 46.1 | 45.3 | 42.7 | |
| Margin (%), Finland | 31.3 | 31.9 | 29.9 | |
| Margin (%), Norway | 29.5 | 30.5 | 31.8 | |
| Margin (%), Denmark | 12.5 | 10.6 | 11.4 | |
| Margin (%), Lithuania | 26.8 | 28.3 | 26.5 | |
| Margin (%), Latvia | 26.4 | 36.6 | 33.8 | |
| Margin (%), Estonia | 30.1 | 28.1 | 27.5 | |
| Margin (%), Spain | 4.0 | 1.7 | 7.5 |
| Net sales in local currencies and | |
|---|---|
| excluding acquisitions | Jan-Mar |
| Change (%), total | -2.7 |
| Change (%), Sweden | -2.2 |
| Change (%), Finland | -10.5 |
| Change (%), Norway | -7.7 |
| Change (%), Denmark | -15.3 |
| Change (%), Lithuania | -4.8 |
| Change (%), Latvia | 4.5 |
| Change (%), Estonia | -13.2 |
| Change (%), Spain | 19.2 |
| SEK in millions, except margins, operational data and changes |
Jan-Mar 2013 |
Jan-Mar 2012 |
Chg (%) |
Jan-Dec 2012 |
|---|---|---|---|---|
| Net sales | 8,243 | 8,986 | -8.3 | 35,723 |
| EBITDA excl. non-recurring items | 2,464 | 2,812 -12.4 | 11,004 | |
| Margin (%) | 29.9 | 31.3 | 30.8 | |
| Operating income | 1,242 | 1,600 -22.4 | 4,054 | |
| Operating income excl. non-recurring items | 1,304 | 1,631 -20.0 | 6,242 | |
| CAPEX | 796 | 1,191 -33.2 | 5,445 | |
| Subscriptions, period-end (thousands) | ||||
| Broadband | 2,375 | 2,493 | -4.7 | 2,532 |
| Fixed voice and VoIP | 4,142 | 4,517 | -8.3 | 4,269 |
| TV | 1,349 | 1,218 | 10.8 | 1,332 |
| Employees, period-end | 12,646 | 13,083 | -3.3 | 13,173 |
Additional segment information available at www.teliasonera.com.
Net sales in local currencies and excluding acquisitions decreased 5.9 percent. Net sales in reported currency decreased 8.3 percent to SEK 8,243 million (8,986). The negative effect of exchange rates was 0.8 percent and the negative impact from acquisitions and disposals was 1.6 percent.
In Sweden, net sales decreased 6.1 percent to SEK 4,727 million (5,022). The customer base increased in all IP-based services, but this could not compensate for a weaker trend in traditional voice revenues. Fiber deployment was on a lower level compared to the same period last year due to cold weather conditions.
In Finland, net sales in local currency decreased 3.9 percent to the equivalent of SEK 1,319 million (1,430). The decline in sales narrowed compared to previous quarter, partly helped by higher broadband ARPU.
In Denmark, net sales in local currency decreased 11.0 percent to the equivalent of SEK 242 million (285) due to lower revenues from traditional voice services.
Services provides mass-market services for connecting homes and offices. Services include broadband over copper, fiber and cable, TV, voice over internet, home communications services, IP-VPN/Business internet, leased lines and traditional telephony. The business area operates the group common core network, including the data network of the international carrier business. The business area comprises operations in Sweden, Finland, Denmark, Lithuania, Latvia (49 percent), Estonia and international carrier operations.
In Estonia, net sales in local currency decreased 3.1 percent to the equivalent of SEK 400 million (430). In Lithuania, net sales in local currency decreased 4.1 percent to the equivalent of SEK 449 million (488). Revenue trends remained fairly stable in both countries compared to previous quarter, with growth in IP-based services but continued pressure on traditional voice revenues.
In International Carrier, net sales in local currencies decreased 10.2 percent to the equivalent of SEK 1,244 million (1,346) as a result of lower voice traffic volumes and impact from reduced interconnect revenues.
The number of subscriptions for broadband access fell to 2.4 million, a decrease of 118,000 from the first quarter of 2012 and by 157,000 during the quarter explained by the divestiture of NextGenTel in Norway with 184,000 subscriptions. Adjusted for NextGen-Tel, the number of subscriptions increased by 27,000 during the quarter.
The total number of TV subscriptions rose by 131,000 from the first quarter of 2012 and by 17,000 during the quarter to 1.3 million. Adjusted for NextGenTel, the number of subscriptions increased by 29,000 during the quarter.
The number of traditional fixed voice subscriptions decreased by 406,000 from the end of the first quarter of 2012 to 2.9 million, and were down 97,000 during the quarter. The intake of VoIP subscriptions was 5,000 in the quarter, bringing the total number of VoIP subscriptions to 0.7 million. Adjusted for NextGenTel, the number of subscriptions increased by 33,000 during the quarter.
EBITDA, excluding non-recurring items, declined 11.1 percent in local currencies and excluding acquisitions. In reported currency, EBITDA, excluding non-recurring items, decreased 12.4 percent to SEK 2,464 million (2,812). The EBITDA margin decreased to 29.9 percent (31.3).
In Sweden, the EBITDA margin decreased to 37.1 percent (39.9) due to lower gross margin and higher personnel expenses in order to improve customer service.
In Finland, the EBITDA margin decreased to 23.7 percent (26.4), since a higher gross margin could not fully compensate for increased operating costs.
In Denmark, the EBITDA margin decreased to 8.3 percent (10.5), due to lower voice revenues.
In Lithuania, the EBITDA margin increased to 42.1 percent (39.1) due to a better gross margin development. In Estonia the EBITDA margin increased to 28.0 percent (25.1), explained by positive impact from efficiency measures.
In International Carrier, the EBITDA margin increased to 6.5 percent (4.3) helped by an improved gross margin due to lower intake of low margin voice traffic.
CAPEX decreased to SEK 796 million (1,191) and the CAPEX-to-sales ratio decreased to 9.7 percent (13.3). Cash flow, measured as EBITDA, excluding non-recurring items, minus CAPEX, increased to SEK 1,668 million (1,621).
| SEK in millions, except margins and changes |
Jan-Mar 2013 |
Jan-Mar 2012 |
Chg (%) |
Jan-Dec 2012 |
|---|---|---|---|---|
| Net sales | 8,243 | 8,986 | -8.3 | 35,723 |
| of which Sweden | 4,727 | 5,022 | -5.9 | 20,043 |
| of which Finland | 1,319 | 1,430 | -7.8 | 5,584 |
| of which Norway | 87 | 268 | -67.5 | 1,083 |
| of which Denmark | 242 | 285 | -15.1 | 1,092 |
| of which Lithuania | 449 | 488 | -8.0 | 1,915 |
| of which Estonia | 400 | 430 | -7.0 | 1,761 |
| of which International Carrier | 1,244 | 1,346 | -7.6 | 5,388 |
| EBITDA excl. non-recurring items | 2,464 | 2,812 | -12.4 | 11,004 |
| of which Sweden | 1,753 | 2,006 | -12.6 | 7,747 |
| of which Finland | 313 | 378 | -17.2 | 1,351 |
| of which Norway | -4 | 41 | – | 184 |
| of which Denmark | 20 | 30 | -33.3 | 125 |
| of which Lithuania | 189 | 191 | -1.0 | 774 |
| of which Estonia | 112 | 108 | 3.7 | 463 |
| of which International Carrier | 81 | 58 | 39.7 | 361 |
| Margin (%), total | 29.9 | 31.3 | 30.8 | |
| Margin (%), Sweden | 37.1 | 39.9 | 38.7 | |
| Margin (%), Finland | 23.7 | 26.4 | 24.2 | |
| Margin (%), Norway | -4.6 | 15.3 | 17.0 | |
| Margin (%), Denmark | 8.3 | 10.5 | 11.4 | |
| Margin (%), Lithuania | 42.1 | 39.1 | 40.4 | |
| Margin (%), Estonia | 28.0 | 25.1 | 26.3 | |
| Margin (%), International Carrier | 6.5 | 4.3 | 6.7 | |
| SEK in millions, except margins, operational data and changes |
Jan-Mar 2013 |
Jan-Mar 2012 |
Chg (%) |
Jan-Dec 2012 |
|---|---|---|---|---|
| Net sales | 4,684 | 4,445 | 5.4 | 19,731 |
| EBITDA excl. non-recurring items | 2,481 | 2,258 | 9.9 | 9,976 |
| Margin (%) | 53.0 | 50.8 | 50.6 | |
| Income from associated companies | 1,306 | 1,231 | 6.1 | 13,815 |
| of which Russia | 691 | 886 -22.0 | 11,542 | |
| of which Turkey | 617 | 351 | 75.8 | 2,280 |
| Operating income | 2,972 | 2,666 | 11.5 | 20,629 |
| Operating income excl. non-recurring items | 2,981 | 2,742 | 8.7 | 12,340 |
| CAPEX | 832 | 791 | 5.2 | 4,739 |
| Subscriptions, period-end (thousands) | ||||
| Subsidiaries | 41,919 | 36,231 | 15.7 | 42,535 |
| Associated companies | 110,800 | 107,000 | 3.6 | 110,700 |
| Employees, period-end | 5,099 | 5,033 | 1.3 | 4,980 |
Business area
Eurasia comprises mobile operations in Kazakhstan, Azerbaijan, Uzbekistan, Tajikistan, Georgia, Moldova and Nepal. The business area is also responsible for developing TeliaSonera's shareholding in Russian MegaFon (25 percent) and Turkish Turkcell (38 percent). The main strategy is to create shareholder value by increasing mobile penetration and introducing value-added services in each respective country.
Additional segment information available at www.teliasonera.com.
Net sales in local currencies and excluding acquisitions increased 13.6 percent. Net sales in reported currency increased 5.4 percent to SEK 4,684 million (4,445). The negative effect from exchange rate fluctuations was 8.8 percent. The positive effect from acquisitions was 0.6 percent.
In Kazakhstan, net sales in local currency increased 4.0 percent to the equivalent of SEK 1,860 million (1,888), mainly driven by growth of data. The market remains highly competitive but price erosion slowed down in the quarter.
In Azerbaijan, net sales in local currency decreased 0.7 percent to the equivalent of SEK 887 million (938). The weaker revenue trend is largely explained by reduced interconnect rates.
In Uzbekistan, net sales in local currency increased 75.3 percent to the equivalent of SEK 701 million (462). The absence of a third player in the market has impacted ARPU positively. Ucell churned out 1.5 million inactive subscriptions during the first quarter.
In Tajikistan, net sales in local currency increased 6.6 percent to the equivalent of SEK 211 million (207), explained by growth in data revenues. The higher subscription base more than compensated for the ARPU erosion.
In Georgia, net sales in local currency increased by 1.6 percent to the equivalent of SEK 215 million (222), supported by higher prices for incoming international roaming traffic. The subscription base declined in the quarter, to a large extent explained by the loss of a large Government tender.
In Moldova, net sales in local currency increased 7.3 percent to the equivalent of SEK 117 million (119). The improved growth rate is largely explained by a positive development in voice revenues, helped by more favorable pricing environment.
In Nepal, net sales in local currency increased 29.3 percent to the equivalent of SEK 698 million (613). The growing subscription base continues to be the main driver to revenue growth.
The number of subscriptions in the consolidated operations was 41.9 million, an increase by 5.7 million, from the end of the first quarter of 2012. Growth was strongest in Kazakhstan and Nepal with a rise of 2.6 million and 2.1 million to 13.8 million and 9.6 million subscriptions, respectively. During the first quarter, the total number of subscriptions in the consolidated operations decreased by 0.6 million, mainly because Ucell in Uzbekistan churned out 1.5 million inactive subscriptions. Nepal, Kazakhstan and Tajikistan showed the largest rises with an increase of 0.5 million, 0.3 million and 0.3 million subscriptions, respectively.
EBITDA, excluding non-recurring items, increased 19.1 percent in local currencies and excluding acquisitions. In reported currency, EBITDA, excluding non-recurring items, increased 9.9 percent to SEK 2,481 million (2,258). The EBITDA margin was 53.0 percent (50.8).
In Kazakhstan, the EBITDA margin decreased to 54.5 percent (56.7), partly due to higher utility costs related to a significant increase in energy prices and larger size of the network.
In Azerbaijan, the EBITDA margin decreased to 51.0 percent (51.7), as profitability was negatively affected by the slowing revenue trend.
In Uzbekistan, the EBITDA margin increased to 54.6 percent (33.5), as an effect of higher revenue and cost optimization measures. In Tajikistan, the EBITDA margin increased slightly to 49.3 percent (48.8).
In Georgia, the EBITDA margin increased to 41.9 percent (35.6), helped by positive gross margin trend due to increasing incoming and roaming revenue and cost optimization. In Moldova, the EBITDA margin increased slightly to 33.3 percent (32.8).
In Nepal, the EBITDA margin increased to 61.9 percent (59.2), driven by traffic growth with strict cost control.
CAPEX increased to SEK 832 million (791) and the CAPEX-to-sales ratio was stable at 17.8 percent (17.8). CAPEX, excluding licenses and spectrum fees, amounted to SEK 673 million (782) and the CAPEX-to-sales ratio to 14.4 percent (17.6). Cash flow, measured as EBITDA, excluding non-recurring items, minus CAPEX, increased to SEK 1,649 million (1,467).
| SEK in millions, except margins and changes |
Jan-Mar 2013 |
Jan-Mar 2012 |
Chg (%) |
Jan-Dec 2012 |
|---|---|---|---|---|
| Net sales | 4,684 | 4,445 | 5.4 | 19,731 |
| of which Kazakhstan | 1,860 | 1,888 | -1.5 | 8,256 |
| of which Azerbaijan | 887 | 938 | -5.4 | 3,934 |
| of which Uzbekistan | 701 | 462 | 51.7 | 2,369 |
| of which Tajikistan | 211 | 207 | 1.9 | 927 |
| of which Georgia | 215 | 222 | -3.2 | 1,011 |
| of which Moldova | 117 | 119 | -1.7 | 536 |
| of which Nepal | 698 | 613 | 13.9 | 2,716 |
| EBITDA excl. non-recurring items | 2,481 | 2,258 | 9.9 | 9,976 |
| of which Kazakhstan | 1,014 | 1,070 | -5.2 | 4,602 |
| of which Azerbaijan | 452 | 485 | -6.8 | 1,964 |
| of which Uzbekistan | 383 | 155 | 147.1 | 904 |
| of which Tajikistan | 104 | 101 | 3.0 | 470 |
| of which Georgia | 90 | 79 | 13.9 | 397 |
| of which Moldova | 39 | 39 | – | 193 |
| of which Nepal | 432 | 363 | 19.0 | 1,614 |
| Margin (%), total | 53.0 | 50.8 | 50.6 | |
| Margin (%), Kazakhstan | 54.5 | 56.7 | 55.7 | |
| Margin (%), Azerbaijan | 51.0 | 51.7 | 49.9 | |
| Margin (%), Uzbekistan | 54.6 | 33.5 | 38.2 | |
| Margin (%), Tajikistan | 49.3 | 48.8 | 50.7 | |
| Margin (%), Georgia | 41.9 | 35.6 | 39.3 | |
| Margin (%), Moldova | 33.3 | 32.8 | 36.0 | |
| Margin (%), Nepal | 61.9 | 59.2 | 59.4 | |
| Net sales in local currencies and excluding acquisitions |
Jan-Mar |
|---|---|
| Change (%), total | 13.6 |
| Change (%), Kazakhstan | 4.0 |
| Change (%), Azerbaijan | -0.7 |
| Change (%), Uzbekistan | 75.3 |
| Change (%), Tajikistan | 6.6 |
| Change (%), Georgia | 1.6 |
| Change (%), Moldova | 7.3 |
| Change (%), Nepal | 29.3 |
MegaFon (associated company, in which TeliaSonera holds 25.2 percent and consolidates 27.6 percent, reported with one-quarter lag) in Russia reported a subscription base of 64.6 million, an increase of 1.9 million compared to the corresponding period last year and 0.2 million lower than the previous quarter.
TeliaSonera's income from Russia decreased to SEK 691 million (886). The Russian ruble depreciated 1.4 percent against the Swedish krona which had a negative impact of SEK 10 million. The lower earnings contribution is explained by reduced ownership compared to the same quarter a year ago, impacting results negatively by around SEK 400 million.
Turkcell (associated company, in which TeliaSonera holds 38.0 percent, reported with one-quarter lag) in Turkey reported a subscription base of 35.1 million, an increase of 0.6 million compared to the corresponding period last year and a decrease by 0.1 million subscriptions compared to the previous quarter. In Ukraine, the number of subscriptions increased by 1.4 million to 11.1 million compared to the corresponding period last year and increased by 0.4 million during the quarter.
TeliaSonera's income from Turkey increased to SEK 617 million (351). The Turkish lira was stable against the Swedish krona, which had no impact in SEK.
| SEK in millions, except changes | Jan-Mar 2013 |
Jan-Mar 2012 |
Chg (%) |
Jan-Dec 2012 |
|---|---|---|---|---|
| Net sales | 860 | 979 -12.2 | 3,799 | |
| EBITDA excl. non-recurring items | 117 | 124 | -5.6 | 483 |
| Income from associated companies | 0 | -18 | – | -50 |
| Operating income | -87 | -84 | -3.6 | -503 |
| Operating income excl. non-recurring items | -77 | -77 | – | -319 |
| CAPEX | 149 | 210 -29.0 | 1,014 |
Additional segment information available at www.teliasonera.com.
Net sales in local currencies and excluding acquisitions decreased 10.7 percent. In reported currency, net sales decreased 12.2 percent to SEK 860 million (979).
EBITDA, excluding non-recurring items, decreased 5.6 percent to SEK 117 million (124) in reported currency.
comprise Other Business Services, TeliaSonera Holding and Corporate functions. Other Business Services is responsible for sales of managed-services solutions to business customers in the Nordic countries.
Stockholm, April 19, 2013
Per-Arne Blomquist President and CEO
This report has not been subject to review by TeliaSonera's auditors.
| SEK in millions, except per share data, number of shares and changes |
Jan-Mar 2013 |
Jan-Mar 20121) |
Chg (%) |
Jan-Dec 20121) |
|---|---|---|---|---|
| Net sales | 24,542 | 25,693 | -4.5 | 104,898 |
| Cost of sales | -13,844 | -14,275 | -3.0 | -58,350 |
| Gross profit | 10,698 | 11,418 | -6.3 | 46,548 |
| Selling, admin. and R&D expenses | -5,463 | -5,978 | -8.6 | -24,037 |
| Other operating income and expenses, net | -69 | 82 | – | -7,979 |
| Income from associated companies and joint ventures | 1,323 | 1,246 | 6.2 | 13,868 |
| Operating income | 6,489 | 6,768 | -4.1 | 28,400 |
| Finance costs and other financial items, net | -839 | -1,140 | -26.4 | -3,918 |
| Income after financial items | 5,650 | 5,628 | 0.4 | 24,482 |
| Income taxes | -1,151 | -1,113 | 3.4 | -3,314 |
| Net income | 4,499 | 4,515 | -0.4 | 21,168 |
| Items that may be reclassified to net income: | ||||
| Foreign currency translation differences | -2,245 | 402 | -2,432 | |
| Income from associate companies and joint ventures | -19 | -187 | -260 | |
| Cash flow hedges | 280 | 64 | 28 | |
| Available-for-sale financial instruments | -2 | 1 | 24 | |
| Income tax relating to items that will be reclassified | -433 | -166 | -439 | |
| Items that will not be reclassified to net income: | ||||
| Remeasurements of defined benefit pension plans | 801 | 199 | -1,635 | |
| Income tax relating to items that will not be reclassified | -176 | -52 | 361 | |
| Other comprehensive income | -1,794 | 261 | -4,353 | |
| Total comprehensive income | 2,705 | 4,776 | 16,815 | |
| Net income attributable to: | ||||
| Owners of the parent | 4,108 | 4,122 | 19,886 | |
| Non-controlling interests | 391 | 393 | 1,282 | |
| Total comprehensive income attributable to: | ||||
| Owners of the parent | 2,309 | 4,159 | 15,797 | |
| Non-controlling interests | 396 | 617 | 1,018 | |
| Earnings per share (SEK), basic and diluted | 0.95 | 0.95 | 4.59 | |
| Number of shares (thousands) | ||||
| Outstanding at period-end | 4,330,085 | 4,330,085 | 4,330,085 | |
| Weighted average, basic and diluted | 4,330,085 | 4,330,085 | 4,330,085 | |
| EBITDA | 8,393 | 8,740 | -4.0 | 35,074 |
| EBITDA excl. non-recurring items | 8,509 | 8,852 | -3.9 | 36,171 |
| Depreciation, amortization and impairment losses | -3,227 | -3,217 | 0.3 | -20,542 |
| Operating income excl. non-recurring items | 6,628 | 6,882 | -3.7 | 28,682 |
1) Certain restatements have been made, see page 19.
| SEK in millions | Mar 31, 2013 |
Dec 31, 20121) |
|---|---|---|
| Assets | ||
| Goodwill and other intangible assets | 81,472 | 83,278 |
| Property, plant and equipment | 61,616 | 62,657 |
| Investments in associates and joint ventures, deferred tax assets and other non-current assets |
40,085 | 38,858 |
| Long-term interest-bearing receivables | 10,484 | 10,880 |
| Total non-current assets | 193,657 | 195,673 |
| Inventories | 1,652 | 1,623 |
| Trade receivables, current tax assets and other receivables | 20,762 | 22,298 |
| Short-term interest-bearing receivables | 4,303 | 3,647 |
| Cash and cash equivalents | 25,900 | 29,805 |
| Total current assets | 52,617 | 57,373 |
| Total assets | 246,274 | 253,046 |
| Equity and liabilities | ||
| Equity attributable to owners of the parent | 107,473 | 105,150 |
| Equity attributable to non-controlling interests | 4,343 | 3,956 |
| Total equity | 111,816 | 109,106 |
| Long-term borrowings | 71,507 | 82,184 |
| Deferred tax liabilities, other long-term provisions | 24,173 | 25,035 |
| Other long-term liabilities | 1,262 | 1,190 |
| Total non-current liabilities | 96,942 | 108,409 |
| Short-term borrowings | 12,108 | 9,403 |
| Trade payables, current tax liabilities, short-term provisions and other current liabilities | 25,408 | 26,128 |
| Total current liabilities | 37,516 | 35,531 |
| Total equity and liabilities | 246,274 | 253,046 |
1) Certain restatements have been made, see page 19.
| SEK in millions | Jan-Mar 2013 |
Jan-Mar 20121) |
Jan-Dec 20121,2) |
|---|---|---|---|
| Cash flow before change in working capital | 6,257 | 6,414 | 39,952 |
| Change in working capital | -1,423 | -1,156 | -1,073 |
| Cash flow from operating activities | 4,834 | 5,258 | 38,879 |
| Cash CAPEX | -2,420 | -3,065 | -15,139 |
| Free cash flow | 2,414 | 2,193 | 23,740 |
| Cash flow from other investing activities | -1,268 | -347 | 8,780 |
| Total cash flow from investing activities | -3,688 | -3,412 | -6,359 |
| Cash flow before financing activities | 1,146 | 1,846 | 32,520 |
| Cash flow from financing activities | -4,624 | 4,444 | -15,231 |
| Cash flow for the period | -3,478 | 6,290 | 17,289 |
| Cash and cash equivalents, opening balance | 29,805 | 12,631 | 12,631 |
| Cash flow for the period | -3,478 | 6,290 | 17,289 |
| Exchange rate differences | -427 | -37 | -115 |
| Cash and cash equivalents, closing balance | 25,900 | 18,884 | 29,805 |
1) Certain restatements have been made, see page 19.
2) Including dividends from MegaFon net of taxes of SEK 11,726 million.
| Jan-Mar 2013 Jan-Mar 2012 |
||||||
|---|---|---|---|---|---|---|
| SEK in millions | Owners of the parent |
Non controlling interests |
Total equity | Owners of the parent |
Non controlling interests |
Total equity |
| Opening balance | 105,150 | 3,956 | 109,106 | 115,589 | 7,353 | 122,942 |
| Change in accounting principle pensions | – | – | – | -2,878 | – | -2,878 |
| Adjustment of opening balance related to Turkcell (inflation accounting in Belarus) |
– | – | – | 110 | – | 110 |
| Dividends | – | -9 | -9 | – | -1,775 | -1,775 |
| Business combinations | – | – | – | – | 17 | 17 |
| Acquisition of non-controlling interest | – | – | – | -8,997 | -1,534 | -10,531 |
| Total comprehensive income | 2,309 | 396 | 2,705 | 4,159 | 617 | 4,776 |
| Share-based payments | 5 | – | 5 | 2 | – | 2 |
| Effect of equity transactions in associates | 9 | – | 9 | – | – | – |
| Closing balance | 107,473 | 4,343 | 111,816 | 107,985 | 4,678 | 112,663 |
As in the annual accounts for 2012, TeliaSonera's consolidated financial statements of and for the three-month period ended March 31, 2013, have been prepared in accordance with International Financial Reporting Standards (IFRSs) and, given the nature of TeliaSonera's transactions, with IFRSs as adopted by the European Union. The parent company TeliaSonera AB'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. This report has been prepared in accordance with IAS 34 Interim Financial Reporting. The accounting policies adopted are consistent with those of the previous financial year, except as described below.
As of January 1, 2013, TeliaSonera applies the amended standards IAS 19 Employee Benefits, IAS 28 Investments in Associates and Joint Ventures, IFRS 7 Financial Instruments: Disclosures and the new standards IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities and IFRS 13 Fair Value Measurement and any consequential amendments in other standard. For additional information, see corresponding section in TeliaSonera's Annual Report 2012.
IFRS 13 defines fair value and sets out the framework for measuring fair value. The introduction of IFRS 13 had no major impact on the Group's carrying values or valuation techniques but might in the future increase the volatility in comprehensive income. The new standard also requires additional disclosures for financial instruments measured at fair value split by fair value hierarchy level.
The most significant amendment in IAS 19 is the elimination of the "corridor approach" for defined benefit pension plans. As a result, historical accumulated actuarial gains and losses will increase recognized pension liabilities and decrease shareholders' equity. Future re-measurements (including actuarial gains and losses) will not be deferred, but immediately impact shareholders' equity through other comprehensive income (OCI). Further, the expected return on plan assets affecting net income should not be assessed
separately, but equal the rate used to discount pension obligations. As of 2013, Telia-Sonera also has chosen to classify these interest components as financial items in the statement of comprehensive income net income. The impact of applying the revised IAS 19 in 2012 was as follows:
| Condensed Consolidated Statements of Comprehensive Income SEK in millions |
Jan-Mar 2012 |
Apr-Jun 2012 |
Jul-Sep 2012 |
Oct-Dec 2012 |
Jan-Dec 2012 |
|---|---|---|---|---|---|
| Cost of sales | 10 | 10 | 9 | 9 | 38 |
| Gross profit | 10 | 10 | 9 | 9 | 38 |
| Selling, admin and R&D expenses | 18 | 18 | 19 | 19 | 74 |
| Operating income | 28 | 28 | 28 | 28 | 112 |
| Finance costs and other financial items, net | -28 | -28 | -28 | -28 | -112 |
| Income after financial items | 0 | 0 | 0 | 0 | 0 |
| Income taxes | 0 | 0 | 0 | 0 | 0 |
| Net income | 0 | 0 | 0 | 0 | 0 |
| Re-measurements of defined benefit pension plans | 199 | 8 | -1,915 | 73 | -1,635 |
| Income tax relating to items that will not be reclassified | -52 | -2 | 504 | -89 | 361 |
| Other comprehensive income | 147 | 6 | -1,411 | -16 | -1,274 |
| Total comprehensive income | 147 | 6 | -1,411 | -16 | -1,274 |
| Condensed Consolidated Statements of Financial Position | Mar 31, | Jun 30, | Sep 30, | Dec 31, |
|---|---|---|---|---|
| SEK in millions | 2012 | 2012 | 2012 | 2012 |
| Assets | ||||
| Receivables for pension obligations | -1,193 | -1,271 | -1,431 | -1,571 |
| Other long non-interest bearing receivables | -277 | -287 | -317 | -403 |
| Deferred tax assets | 504 | 487 | 991 | 688 |
| Total assets | -966 | -1,071 | -757 | -1,286 |
| Equity and liabilities | ||||
| Equity attributable to owners of the parent | -2,731 | -2,725 | -4,136 | -4,281 |
| Total equity | -2,731 | -2,725 | -4,136 | -4,281 |
| Provisions for pensions | 2,136 | 2,040 | 3,765 | 3,494 |
| Deferred tax liabilities | -371 | -386 | -386 | -471 |
| Other current liabilities | – | – | – | -28 |
| Total equity and liabilities | -966 | -1,071 | -757 | -1,286 |
| Condensed Consolidated Statements of Cash Flows | Jan-Mar | Apr-Jun | Jul-Sep | Oct-Dec | Jan-Dec |
|---|---|---|---|---|---|
| SEK in millions | 2012 | 2012 | 2012 | 2012 | 2012 |
| Cash flow before change in working capital | -38 | -10 | -30 | -58 | -136 |
| Change in working capital | 38 | 10 | 30 | 58 | 136 |
| Cash flow from operating activities | 0 | 0 | 0 | 0 | 0 |
| SEK in millions | Jan-Mar 2013 |
Jan-Mar 2012 |
Jan-Dec 2012 |
|---|---|---|---|
| Within EBITDA | -117 | -112 | -1,097 |
| Restructuring charges, synergy implementation costs, etc.: | |||
| Mobility Services | -58 | – | -228 |
| Broadband Services | -74 | -29 | -633 |
| Eurasia | -9 | -76 | -287 |
| Other operations | -10 | -7 | -147 |
| of which TeliaSonera Holding | – | – | -48 |
| Capital gains/losses | 35 | – | 198 |
| Within Depreciation, amortization and impairment losses | -22 | -1 | -7,565 |
| Impairment losses, accelerated depreciation: | |||
| Broadband Services | -22 | -1 | -1,555 |
| Mobility Services | – | – | -5,984 |
| Other operations | – | – | -26 |
| Within Income from associated companies and joint ventures | – | – | 8,380 |
| Impairment losses | – | – | – |
| Capital gains/losses | – | – | 8,3801) |
| Within Finance costs and other financial items, net | – | – | – |
| Total | -139 | -113 | -282 |
1) The capital gain includes a negative non-cash exchange rate effect of SEK 1,441 million.
| SEK in millions | Mar 31, 2013 |
Dec 31, 20121) |
|---|---|---|
| Deferred tax assets | 6,622 | 7,410 |
| Deferred tax liabilities | 10,429 | 10,287 |
| Net deferred tax liabilities (-)/assets (+) | -3,807 | -2,877 |
1) Certain restatements have been made, see page 19.
| SEK in millions | Jan-Mar 2013 |
Jan-Mar 20121) |
Jan-Dec 20121) |
|---|---|---|---|
| Mobility Services | 2,362 | 2,576 | 4,229 |
| Broadband Services | 1,242 | 1,600 | 4,054 |
| Eurasia | 2,972 | 2,666 | 20,629 |
| Other operations | -87 | -84 | -503 |
| Total segments | 6,489 | 6,758 | 28,409 |
| Elimination of inter-segment profits | 0 | 10 | -9 |
| Group | 6,489 | 6,768 | 28,400 |
1) Certain restatements have been made, see page 19.
| SEK in millions | Jan-Mar 2013 |
Jan-Mar 2012 |
Jan-Dec 2012 |
|---|---|---|---|
| CAPEX | 2,719 | 3,175 | 15,685 |
| Intangible assets | 1,119 | 415 | 2,174 |
| Property, plant and equipment | 1,600 | 2,760 | 13,511 |
| Acquisitions and other investments | 1,157 | 150 | 1,905 |
| Asset retirement obligations | 44 | 94 | 651 |
| Goodwill and fair value adjustments | 962 | 55 | 1,206 |
| Equity holdings | 151 | 1 | 48 |
| Total | 3,876 | 3,325 | 17,590 |
| Long-term and Short-term Borrowings1) | Mar 31, 2013 | Dec 31, 2012 | |||
|---|---|---|---|---|---|
| SEK in millions | Carrying value | Fair value | Carrying value | Fair value | |
| Long-term borrowings | |||||
| Open-market financing program borrowings in fair value hedge | |||||
| relationships | 14,261 | 14,261 | 17,600 | 17,600 | |
| Interest rate swaps at fair value | 287 | 287 | 340 | 340 | |
| Cross currency interest rate swaps at fair value | 2,187 | 2,187 | 1,956 | 1,956 | |
| Subtotal | 16,735 | 16,735 | 19,896 | 19,896 | |
| Open-market financing program borrowings | 53,116 | 58,955 | 59,915 | 71,146 | |
| Other borrowings at amortized cost | 1,603 | 1,603 | 2,311 | 2,311 | |
| Subtotal | 71,454 | 77,293 | 82,122 | 93,353 | |
| Finance lease agreements | 53 | 53 | 62 | 62 | |
| Total long-term borrowings | 71,507 | 77,346 | 82,184 | 93,415 | |
| Short term borrowings | |||||
| Open-market financing program borrowings in fair value hedge | |||||
| relationships | 2,873 | 2,873 | 401 | 401 | |
| Interest rate swaps designated as hedging instruments | 53 | 53 | 29 | 29 | |
| Interest rate swaps held for trading | 0 | 0 | 42 | 42 | |
| Cross currency interest rate swaps held for trading | 59 | 59 | 343 | 343 | |
| Subtotal | 2,985 | 2,985 | 815 | 815 | |
| Utilized bank overdraft and short-term credit facilities at amortized | |||||
| cost | – | – | – | 423 | |
| Open-market financing program borrowings | 6,527 | 6,798 | 5,204 | 5,285 | |
| Other borrowings at amortized cost | 2,593 | 2,593 | 2,958 | 2,909 | |
| Subtotal | 12,105 | 12,376 | 9,400 | 9,432 | |
| Finance lease agreements | 3 | 3 | 3 | 3 | |
| Total short-term borrowings | 12,108 | 12,379 | 9,403 | 9,435 |
1) For financial assets, fair values equal carrying values. For information on fair value estimation, see TeliaSonera's Annual Report
2012, Note C3 to the consolidated financial statements.
| Financial Assets and Liabilities | March 31, 2013 | December 31, 2012 | ||||||
|---|---|---|---|---|---|---|---|---|
| by Fair Value Hierarchy Level1) | Carrying | of which | Carrying | of which | ||||
| SEK in millions | value | Level 1 | Level 2 | Level 3 | value | Level 1 | Level 2 | Level 3 |
| Financial assets at fair value | ||||||||
| Equity instruments available-for-sale | 256 | 67 | – | 189 | 189 | – | – | 189 |
| Equity instruments held-for-trading | 66 | – | – | 66 | 69 | – | – | 69 |
| Convertible bonds available-for-sale | 2 | – | – | 2 | 4 | – | – | 4 |
| Derivatives designated as hedging | ||||||||
| instruments | 1,421 | – | 1,421 | – | 1,790 | – | 1,790 | – |
| Derivatives held-for-trading | 293 | – | 293 | – | 570 | – | 569 | – |
| Total financial assets at fair value by | ||||||||
| level | 2,038 | 67 | 1,714 | 257 | 2,622 | – | 2,359 | 262 |
| Financial liabilities at fair value | ||||||||
| Borrowings in fair value hedge | ||||||||
| relationships | 17,134 | – | 17,134 | – | 18,001 | – | 18,001 | – |
| Derivatives designated as hedging | ||||||||
| instruments | 577 | – | 577 | – | 802 | – | 802 | – |
| Derivatives held-for-trading | 1,983 | – | 1,983 | – | 2,044 | – | 2,044 | – |
| Total financial liabilities at fair value | ||||||||
| by level | 19,694 | – | 19,694 | – | 20,847 | – | 20,847 | – |
1) For information on fair value hierarchy levels and fair value estimation, see TeliaSonera's Annual Report 2012, Note C3 to the consolidated financial statements.
Related Party Transactions
In the quarter ended March 31, 2013, TeliaSonera purchased services for SEK 16 million, and sold services for SEK 37 million. Related parties in these transactions were mainly MegaFon, Turkcell and Lattelecom.
| SEK in millions | Mar 31, 2013 |
Dec 31, 2012 |
|---|---|---|
| Long-term and short-term borrowings | 83,615 | 91,586 |
| Less derivatives recognized as financial assets and hedging long-term and short-term borrowings and related credit collateral |
-2,166 | -2,175 |
| Less short-term investments, cash and bank | -26,174 | -29,968 |
| Net debt | 55,275 | 59,443 |
The underlying operating cash flow continued to be positive also in the first quarter of 2013.
The rating from Standard & Poor's and Moody´s, respectively, remained unchanged with a credit rating on TeliaSonera AB of A-/A3 for long-term borrowings and A-2/P-2 for shortterm borrowings with a stable outlook.
Credit markets have continued to offer favorable new issue conditions in the first quarter with new issuance volumes in the primary market in Europe in line with last year.
TeliaSonera has not made any major funding during the first quarter but will continue to have an opportunistic funding strategy and take advantage of attractive funding opportunities when they appear with a special focus on diversifying the investor base.
| Mar 31, 2013 |
Dec 31, 20121) |
|
|---|---|---|
| Return on equity (%, rolling 12 months) | 21.5 | 20.5 |
| Return on capital employed (%, rolling 12 months) | 15.4 | 14.9 |
| Equity/assets ratio (%) | 39.1 | 38.2 |
| Net debt/equity ratio (%) | 57.3 | 61.4 |
| Net debt/EBITDA rate (multiple, rolling 12 months) | 1.54 | 1.64 |
| Net debt/assets ratio | 22.4 | 23.5 |
| Owners' equity per share (SEK) | 24.8 | 24.3 |
1) Certain restatements have been made, see page 19.
TeliaSonera has sold all its shares in Telecominvest (TCI) to AF Telecom Holding (AFT). The purchase price has not been fully paid by AFT and in order to secure the value of TeliaSonera's receivable, presently SEK 7,560 million, MegaFon shares held by TCI, representing 6.53 percent of the shares in MegaFon, are presently pledged to TeliaSonera. The proper payment of the receivable is guaranteed by certain companies within the AFT Group and the bank accounts where TCI will collect dividends on the pledged shares have also been pledged to TeliaSonera.
As of March 31, 2013, the maximum potential future payments that TeliaSonera could be required to make under issued financial guarantees totaled SEK 343 million, of which SEK 318 million referred to guarantees for pension obligations. Collateral pledged totaled SEK 376 million.
As of March 31, 2013, contractual obligations totaled SEK 2,564 million, of which SEK 923 million referred to contracted build-out of TeliaSonera's fixed networks in Sweden.
On January 11, 2013, TeliaSonera reaffirmed its strategic commitment to developing mobile technologies and services in Kazakhstan by acquiring 100 percent of TOO KazNet Media, operating a WiMax network in Kazakhstan. Goodwill is explained by the future expected cash flows from the acquired business, the strengthened market position and opportunities for TeliaSonera in Kazakhstan. The result of the KazNet Media operations is included in the consolidated financial statements as of January 2013.
| SEK in millions | KazNet Media |
|---|---|
| Cost of combination | |
| Cash consideration | 714 |
| Contingent consideration | 6 |
| Total cost of the combination | 720 |
| Fair value of net assets acquired | |
| Intangible assets (mainly frequencies) | 704 |
| Property, plant and equipment | 237 |
| Inventories, receivables and other current assets | 68 |
| Cash and cash equivalents | 40 |
| Total assets acquired | 1,049 |
| Deferred income tax liabilities | -145 |
| Short-term liabilities | -445 |
| Total liabilities assumed | -590 |
| Total fair value of net assets acquired | 459 |
| Goodwill (allocated to business area Eurasia) | 261 |
| SEK in millions | KazNet Media |
|---|---|
| The total cost of the combination paid in cash | 714 |
| Less acquired cash and cash equivalents | -40 |
| Net cash outflow from the combination | 674 |
The total cost of combination and fair values have been determined provisionally, as they are based on preliminary appraisals and subject to confirmation of certain facts. Thus, the purchase price accounting is subject to refinement.
TeliaSonera's share of net income from TOO Rodnik Ink, holding 79.9 percent in the publicly quoted subsidiary AO KazTransCom, is included in TeliaSonera's reporting with a one-quarter lag in line item "Income from associated companies and joint ventures."
| Condensed Income Statements SEK in millions |
Jan-Mar 2013 |
Jan-Mar 2012 |
Jan-Dec 2012 |
|---|---|---|---|
| Net sales | 1 | 7 | 61 |
| Operating income | -61 | 40 | -435 |
| Income after financial items | 3,003 | 1,529 | 13,413 |
| Income before taxes | 2,809 | 1,614 | 13,954 |
| Net income | 2,179 | 1,179 | 12,327 |
Last year financial items include a capital gain of SEK 7,481 million for the sale of shares in Telecominvest (TCI) to AF Telecom Holding (AFT). The purchase price has not been fully paid by AFT and in order to secure the value of TeliaSonera's receivable, presently SEK 7,560 million, MegaFon shares held by TCI, representing 6.53 percent of the shares in MegaFon, are presently pledged to TeliaSonera. The proper payment of the receivable is guaranteed by certain companies within the AFT Group and the bank accounts where TCI will collect dividends on the pledged shares have also been pledged to TeliaSonera.
| Condensed Balance Sheets SEK in millions |
Mar 31, 2013 |
Dec 31, 2012 |
|---|---|---|
| Non-current assets | 196,825 | 202,089 |
| Current assets | 51,875 | 63,876 |
| Total assets | 248,700 | 265,965 |
| Shareholders' equity | 84,268 | 81,871 |
| Untaxed reserves | 12,924 | 12,730 |
| Provisions | 584 | 539 |
| Liabilities | 150,924 | 170,825 |
| Total equity and liabilities | 248,700 | 265,965 |
Total investments in the quarter were SEK 7 million (10,327), of which SEK 0 (10,221) million referred to shareholder contributions to subsidiaries.
TeliaSonera operates in a broad range of geographic product and service markets in the highly competitive and regulated telecommunications industry. As a result, TeliaSonera is subject to a variety of risks and uncertainties. Management has defined risk as anything that could have a material adverse effect on the achievement of TeliaSonera's goals. Risks can be threats, uncertainties or lost opportunities relating to TeliaSonera's current or future operations or activities. Additionally, these risks may affect TeliaSonera's share price from time to time.
TeliaSonera has an established risk management framework in place to regularly identify, analyze and assess, report business and financial risks and uncertainties, and to mitigate such risks when appropriate. Risk management is an integrated part of TeliaSonera's business planning process and monitoring of business performance.
See Notes C27 and C35 to the consolidated financial statements in TeliaSonera's Annual Report 2012 for a detailed description of some of the factors that may affect TeliaSonera's business, financial position and results of operations.
Risks and uncertainties that could specifically impact the quarterly results of operations during 2013 include, but may not be limited to:
World economy changes. Changes in the global financial markets and the world economy are difficult to predict. TeliaSonera has a strong balance sheet and operates in a relatively non-cyclical or late-cyclical industry. However, a severe or long-term recession in the countries in which TeliaSonera operates would have an impact on its customers and may have a negative impact on its growth and results of operations through reduced telecom spending. The maturity schedule of TeliaSonera'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, TeliaSonera has committed lines of credit with banks that are deemed to be sufficient and may be utilized if the open-market refinancing conditions are poor. However, TeliaSonera's cost of funding might be higher, should there be changes in the global financial markets or the world economy.
Competition and price pressure. TeliaSonera 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 TeliaSonera's results of operations.
Investments in future growth. TeliaSonera is currently investing in future growth through, for example, sales and marketing expenditures to retain and acquire customers in most markets, build-up of its customer base in start-up operations and investments in infrastructure in all markets to improve capacity and access. While TeliaSonera believes that these investments will improve market position and financial results in the long term, they may not have the targeted positive effects yet in the short term and related expenditures may impact the results of operations both in the long and short term.
Non-recurring items. 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, TeliaSonera might also experience non-recurring items that are not currently anticipated.
Emerging markets. TeliaSonera has made significant investments in telecom operators in Kazakhstan, Azerbaijan, Uzbekistan, Tajikistan, Georgia, Moldova, Nepal, Russia and Turkey. 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 unpredictable, and markets in which TeliaSonera operates may become unstable. Other risks associated with operating in emerging market countries include foreign exchange restrictions, which could effectively prevent TeliaSonera from repatriating cash, e.g. by receiving dividends and repayment of loans, or from selling its investments. One example of this is TeliaSonera's business in Uzbekistan in which the group has a net exposure of approximately SEK 6 billion. Another risk is the potential establishment of foreign ownership restrictions or other potential actions against entities with foreign ownership, formally or informally. Weakening of the economies or currencies or other negative developments in these markets might have a significantly negative effect on TeliaSonera's results of operations.
Impairment losses and restructuring charges. TeliaSonera could be required to recognize impairment losses with respect to assets if management's expectation of future cash flows attributable to these assets change, including but not limited to goodwill and fair value adjustments that TeliaSonera has recorded in connection with acquisitions that it has made or may make in the future. TeliaSonera 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 TeliaSonera's results of operations, impairment losses and restructuring charges may adversely affect TeliaSonera's ability to pay dividends.
Shareholder matters in partly-owned subsidiaries. TeliaSonera conducts some of its activities, particularly outside of the Nordic region, through subsidiaries in which TeliaSonera 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 shareholderrelated matters. One example where TeliaSonera 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 TeliaSonera's control and adverse to its interests may affect TeliaSonera's position to act as planned in these partly owned subsidiaries.
Associated companies. A significant portion of TeliaSonera's results derives from Mega-Fon and Turkcell, which TeliaSonera does not control and which operate in growth markets but also in more volatile political, economic and legal environments. TeliaSonera has limited influence over the conduct of these businesses. Under the governing documents for certain of these entities, TeliaSonera'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 TeliaSonera's or its associated companies' control and adverse to TeliaSonera's interests, or disagreement or deadlock, is inherent in associated companies and jointly controlled entities. One example of this is the current deadlock in the board work of Turkcell. TeliaSonera might not be able to assure that the associated companies apply the same corporate responsibility principles, increasing the risk for wrongdoings and reputational and financial losses. Variations in the financial performance of these associated companies have an impact on TeliaSonera's results of operations also in the short term.
Regulation. TeliaSonera operates in a highly regulated industry. The regulations to which TeliaSonera is subject impose significant limits on its flexibility to manage its business. Changes in legislation, regulation or government policy affecting TeliaSonera's business activities, as well as decisions by regulatory authorities or courts, including granting, amending or revoking of licenses to TeliaSonera or other parties, could adversely affect TeliaSonera's business and results.
Sustainability. TeliaSonera is subject to a number of sustainability related risks, including but not limited to, environment, network integrity, data security, corruption and human rights. 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-Sonera's sustainability requirements may damage customer or other stakeholders' perception of TeliaSonera and negatively impact TeliaSonera's business operations and its brand.
This report contains statements concerning, among other things, TeliaSonera's financial condition and results of operations that are forward-looking in nature. Such statements are not historical facts but, rather, represent TeliaSonera's future expectations. TeliaSonera believes that the expectations reflected in these 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 forward-looking statement. Such important factors include, but may not be limited to: TeliaSonera'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-Sonera, 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, TeliaSonera undertakes no obligation to update any of them in light of new information or future events.
TeliaSonera has its roots in the Nordic telecom market and holds strong positions in the Nordic and Baltic countries, Eurasia and Spain. Our core business is to create better communication opportunities for people and businesses through mobile and broadband communication services.
For more information about TeliaSonera, see www.teliasonera.com.
Addressable cost base is defined as personnel costs, marketing costs and all other operating expenses other than purchases of goods and sub-contractor services as well as interconnect, roaming and other network-related costs. Addressable cost base does not include non-recurring items.
Billed revenues are defined as voice, messaging, data and content.
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/assets ratio: Net debt expressed as a percentage of total assets.
For additional information, see corresponding section in TeliaSonera's Annual Report 2012.
Interim Report January–June 2013 July 17, 2013 Interim Report January–September 2013 October 17, 2013 Year-end Report January–December 2013 January 30, 2014
TeliaSonera AB Investor Relations SE–106 63 Stockholm, Sweden Tel. +46 8 504 550 00 Fax +46 8 611 46 42 www.teliasonera.com
TeliaSonera 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 19, 2013.
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