Annual Report • Mar 11, 2020
Annual Report
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Improvements in quality and the customer experience, as well as investments in new technologies, boosted our competitiveness. We were the first to offer a 5G network, subscriptions, devices and services, to our customers.
| Elisa in brief | 3 |
|---|---|
| Elisa's year 2019 | 5 |
| CEO's review | 6 |
| Environment and strategy | 10 |
| Business overview | 11 |
| Personnel review | 13 |
| Investor information | 17 |
CEO'S REVIEW ENVIRONMENT AND STRATEGY BUSINESS REVIEW PERSONNEL REVIEW
INVESTOR INFORMATION
We live in an era of knowledge and feelings. The digital and physical worlds are entwined in almost every aspect of our lives. In this world of countless opportunities, we at Elisa are also building a shared future.
Sustainable development is a precondition for people everywhere on the globe to live securely, for their wellbeing, and for their ability to fulfil their dreams.
Digitalisation is an important tool in solving many of the challenges in sustainable development – as well as in achieving an individual's dreams and aspirations.
More than a hundred years ago we started to change the world permanently. First, we helped the factory owner to talk to the factory building from his office.
Now we're enabling the everyday communication, work, daily routines and entertaining of millions of people, securely and with care. With digitalisation, we're providing solutions for things that are important to people and for sustainable development.
CEO'S REVIEW ENVIRONMENT AND STRATEGY BUSINESS REVIEW PERSONNEL REVIEW
INVESTOR INFORMATION
Elisa is a Finnish pioneer in data communications and digital services. Our customers include 2.8 million consumers, companies and public administration organisations, and our comprehensive network consists of more than 6.3 million subscriptions.
Our core markets are Finland and Estonia, and we also provide digital services for the international market. We are the market leader in mobile and fixed network services in Finland, and number two in Estonia.
For almost all of our 140 years in operation, we have been a trailblazer in the deployment of new technologies. We were the first operator to introduce unlimited mobile internet access to our customers, and now we are the leading operator in 5G services. Cooperation with leading global partners, such as Vodafone, enables us to provide internationally competitive services.
We are also building innovations for the future in cooperation with startups and our research partners. Elisa is listed on the Nasdaq
Our core values in all our operations are Customer orientation, Responsibility, Renewal, Results orientation and Collaboration.
Helsinki Large Cap with some 178,000 shareholders. More than half of the shareholders are Finnish institutions and households. We operate in 14 countries, employing almost 5,000 professionals. Elisa has received awards for its persistent work to maintain high quality. Our operations are guided by the principles of continuous improvement, learning and collaboration.
Uusimaa region Western Finland Häme region Central Finland Ostrobotnia Eastern Finland Northern Finland
Consumer
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Good results were achieved through continuous improvement of the customer experience. We received the Finnish Excellence Award and were one of Europe's best employers in the Great Place to Work study.
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In 2019, Elisa achieved the best profitability of its entire history. Improvements in quality and the customer experience, as well as investments in new technologies, boosted our competitiveness. We were the first operator to offer a 5G network, as well as 5G subscriptions, devices and services, to our customers.
Elisa's financial result was yet again good: revenue increased by 0.7 per cent from the previous year and comparable EBITDA by 4.4 per cent. Most of the revenue growth was due to mobile services and a corporate acquisition.
The shift among customers to increasingly fast mobile broadband subscriptions continued. Consumers, corporate customers and organisations appreciate fast connections that make everyday life smoother. The mobile subscription base increased by 1.6 per cent (4,736,500 subscriptions) and the fixed network broadband subscription base by 1 per cent (689,500 subscriptions).
In line with our strategy, we continued to invest in continuous improvement of the customer experience and quality. Elisa's consistent work to improve quality was recognised with the Finnish Excellence Award from Excellence Finland. The award is national recognition for excellence and a capacity for continuous improvement in aspects valued by customers.
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We are committed to competitive distribution of profits to our owners. Due to the strong result in 2019, Elisa's Board of Directors will propose to the annual general meeting in the spring an increase of the dividend to EUR 1.85 per share.
Finland is one of the forerunners in the introduction of the 5G technology. Finnish people are world champions in the use of mobile data.
The 5G readiness built into our network enabled us to be one of the first companies in the world to launch a commercial 5G network, at the very beginning of the year. Over the course of the year, we launched 5G networks in Helsinki, Espoo, Tampere, Vantaa, Oulu, Turku, Jyväskylä, Lahti, Kuopio, Kouvola, Seinäjoki, Vaasa and Pori. At the end of the year, the 5G network in the Helsinki metropolitan region was the most extensive in Europe.
We were the first operator to launch the sales of 5G devices and subscriptions in the spring. We sell 5G phones and routers from several manufacturers and 5G subscriptions of different speeds. Demand for them has been excellent, and the services already have thousands of users.
The Port of Helsinki was the first port to adopt a 5G network for ship passengers in Helsinki's West Harbour. The city of Turku has also been a trailblazer in Finland by, for instance, experimenting with virtual walks for older people. Together with the city of Turku, we arranged a hackathon to find ideas relying on 5G technology to prevent social problems, such as marginalisation.
For several years now, we have invested in cooperation with startups, forming a total of 130 partnerships. We received applications from twelve countries for this year's Elisa 5G Co-Creation Challenge. We developed new 5G services with nine selected startups. The winner was a residential Wi-Fi network optimised for gaming, developed by Domos.
In cooperation with the technology company Varjo, we raised virtual reality to a whole new level: at Slush, we presented the first virtual reality broadcast with the resolution of the human eye, using a 5G connection.
Accelerated by digital services that utilise the capabilities of our core business functions, Elisa's international growth continued. Digital services already contribute more than 15 per cent of our revenue.
We boosted our Elisa Automate business by purchasing Polystar OSIX, a company that offers network monitoring and analytics software solutions to international telecom operators. The acquisition is in line with Elisa's strategy of growing its digital service portfolio internationally.
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Elisa Videra, which offers global videoconferencing solutions, expanded to Asia, and the industrial IoT solution provider Elisa Smart Factory is already in use in eight countries. In our Finnish digital service portfolio, strong demand for entertainment services and cloud-based IT solutions persisted.
Our duty is to build a digital foundation for society through sustainable business operations, and to provide digital solutions that are important for people and sustainable development.
We are committed to the principles of the UN Global Compact, and we promote the achievement of the UN Sustainable Development Goals in our business. For us, it is important to ensure that everybody can use digital services and stay safe in the digital environment. More than 2,000
We are one of the most important producers, financiers and distributors of Finnish TV series. So far, Elisa Viihde has launched 16 unique, original Finnish TV series, which have received several international awards and have been sold to dozens of countries. In 2019, we launched four new TV series and three new seasons for existing series. Our calculated cultural footprint was approximately EUR 40 million in 2019.
Responsibility is at the heart of our business, which is also reflected in our updated mission: a sustainable future through digitalisation.
We are the only large operator in Finland, and a critical part of the functioning of society in Finland and Estonia. We must earn the trust of our customers and stakeholders every day by offering them excellent solutions and doing business responsibly.
children have already studied the wonders of the digital world and learned the basics of programming at our digital schools, which were held at 12 locations. This year, we expanded our digital training to cover senior citizens and entrepreneurs.
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Curbing the impact of climate change has been part of our strategy for ten years now. We are committed to the climate targets of the Paris Agreement and to becoming carbonneutral by the end of 2020.
The growing volume of data means that more energy will be consumed, which is why we are continuously working to make our use of electricity more efficient and to use more energy-efficient operating methods. All the electricity we use in both Finland and Estonia comes from renewable sources. Furthermore, we sponsored the 2019 World Summit of Students for Climate held in Finland, where young people between the ages of 14 and 17 voiced their concerns regarding climate change and offered practical solutions to help combat climate change.
We are actively working to promote responsibility in the ICT industry's supply chains, for which purpose we have joined the Joint Audit Cooperation (JAC), which carries out responsibility audits for industry manufacturers and suppliers. This collaboration allows us to boost the effectiveness of our actions, which allows us to better address any shortcomings in our production chains.
We are engaged in persistent work towards the wellbeing of young people, in particular. In 2019, we arranged – together with Mental Health Finland – a campaign called #aidostiminä ("truly me"), which was a continuation to the #sananvastuu ("take responsibility for what you say") campaign of the previous year. The goal is to start a discussion on the fact that everybody is good enough as they are, also in the digital world. The traditional ShedHelsinki musical, created by young people, continued along the same themes.
Equality and diversity are some of Elisa's strengths. Elisa was, yet again, deemed one of the world's most gender-equal listed companies in a global study by Equileap. In addition, Elisa was included in the Bloomberg Gender-Equality Index (GEI) and selected as one of Finland's best workplaces for the third time in the Great Place to Work survey. We were also listed among the best places to work in Europe for the first time. Our employees particularly appreciate our development and learning opportunities, as well as our exceptionally flexible working practices according to our Elisa Ideal Work operating method.
We at Elisa are a diverse, committed and continuously learning team. We offer our customers versatile services and do daily persistent work to improve the customer experience and quality. I would like to thank all of our employees for this year's excellent result, as well as our international network of partners for helping us to continuously improve our services. I would also like to thank our customers and owners for their trust in Elisa.
Continuous improvement of the customer experience and quality is a key part of our corporate culture. Increasing productivity, expanding our digital services internationally and generating value with data, as well as our strong investment capability, will continue to lay a solid foundation for creating value competitively in the future as well.
Chief Executive Officer
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INVESTOR INFORMATION
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The financial and operational results of Elisa's business segments, Consumer Customers and Corporate Customers, were strong, and we provided new services to our customers. There was increased demand for digital services designed for the international market.
Continuous development of the customer experience is at the heart of our consumer customer service in all of our sales and service channels.
Over the course of the year, we introduced plenty of new, relevant services and content to our customers. We were the first operator in Finland to launch extremely fast 5G subscriptions and devices.
Improvements in quality and the customer experience, as well as investments in new technologies, boosted our competitiveness
Our customers were among the first to utilise the opportunities offered by the quickly expanding 5G network. We were the first operator to introduce a service that allows customers to use 5G as their home's primary internet connection (5G Kotinetti). We also continued to improve the availability of our fixed network.
The selection of original series in the Elisa Viihde entertainment service was expanded, and the service became even more popular. Over the course of the year, we launched the original series All the Sins, Maanantai, Shadow Lines, Duke of the Suburbs and Man in Room 301. Elisa Viihde original series have been successful internationally and have been nominated for a combined 13 Venla awards (the "Finnish Oscars"). Elisa's original series Arctic Circle has been sold to more than 30 countries, for example. We expanded the Elisa Viihde service with a smart TV app and introduced a new service: Elisa Viihde Premium.
The popularity of eSports grew exponentially, and we arranged the world's first 5G mobile eSports tournament. The Arctic Invitational (Counter Strike: Global Offensive) in September was the largest eSports event ever held in Finland. The day's streaming reached more than half a million people globally.
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According to studies (an online store survey arranged by the Finnish Commerce Federation in 2019 and a large online store survey arranged by Posti in 2019).
Elisa's online store is one of the most popular and well-liked Finnish online stores. Sales have been increasing quickly. Customers continue to take care of more and more of their business online through digital service channels.
We continued to automate and develop our processes with the help of robotics and machine learning. More efficient automation speeds up our customer service, reduces human error and frees up more time for us to generate added value for our customers.
We are especially pleased with the fact that the positive development of customer satisfaction continued. As recognition for our persistent work, CXPA Finland, the Finnish branch of the Customer Experience Professionals Association, selected Elisa as the company that puts the most effort into its customer experience management in Finland.
In the corporate customer segment, Elisa is a trailblazer in digitalisation. We continued pioneering in the ICT market by offering expertise, solutions and services. We boosted our position in this fiercely competitive market, and the development of customer satisfaction was positive.
Our Finnish customers were among the first in the world to benefit from 5G. According to a study commissioned by Elisa, Finnish companies see 5G as a competitive advantage. Companies are especially attracted by the smooth operation of cloud services, remote monitoring and control of devices and processes, as well as the efficiency boost in operations provided by digitalisation. Our mobile service revenue continued to grow despite fierce competition. We added eSIM support to all of Elisa's corporate subscriptions.
We are one of Finland's best-known IT service providers, and we won several important new customers during the year. We offer comprehensive IT services and solutions to companies of different sizes. Our solutions range from telephone services to the outsourcing of IT operations, application development, as well as development and support of the customer experience through digital solutions.
We boosted the Elisa Cyber Security Centre solution we offer to our customers through collaboration with F-Secure and Microsoft. Our cyber security consulting services have also been well received by our customers.
In September, Elisa ICT Day brought together 400 customers and partners to hear about the most recent trends in the industry, as well as to witness the launch of our SD-WAN company network service. We carried out a pilot project with Ericsson on a private network solution for companies that guarantees its users confirmed capacity, high availability and secure data communications.
We expanded the corporate services provided at Elisa stores, and now all Elisa stores serve both consumer and corporate customers at the same counter. Furthermore, we continued to develop automation and quality with the help of robotics in processing orders, managing customer information and invoicing. Our motto is "We all pull together", and we want to be the best possible partner for companies in Finland, Estonia and globally.
The private network will provide business benefits, especially in the fields of industry, logistics, health care and commerce. Elisa's international digital services are based on the capabilities of our vital business functions. The Elisa Automate business received a major boost from the acquisition of Polystar OSIX. By combining Polystar's analytics expertise and Elisa's automation capabilities, we can offer unique automation and analytics solutions for telecommunications companies globally.
More than 100,000 customers already use Elisa Videra video service systems, and the operations expanded into Asia in 2019. The customer base of Elisa Smart Factory increased: the services are now being offered to five different branches of industry.
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Improved efficiency and quality are at the core of Elisa's strategy. We reach our goals by encouraging our employees to build excellence. We want to be an attractive employer that offers its employees the opportunity to continuously develop themselves.
Elisa employs almost 5,000 professionals in a variety of positions, such as application developers, salespersons, designers, analysts, network infrastructure designers and builders, as well as business and customer service experts. There are Elisians in 14 countries around the world. Our work community also includes approximately 1,000 agency contract workers and consultants.
For several years now, we have been determinedly working to develop a good workplace and work culture. We allow people to take responsibility, and encourage
them to experiment and learn. All Elisians want to become even better in all the fields our customers value the most. Happy people do better work, which is why we have created Finland's leading culture of flexible working. The starting point of Elisa Ideal Work, our way of working, is that the work requirements in different positions are different, but regardless of your position, you can adapt your work to your changing life situation.
Personal development and learning together are essential aspects of our work. Our supervisory work focuses on leadership by coaching, which is also part of the training of each supervisor. We support learning through experimentation and methods of continuous improvement.
We continued to boost the use of the kata continuous improvement method, the involvement of employees in the strategy work and the development of teams through daily management. Teams create their own work development practices and share information within the organisation through "We learn from our mistakes and successes"
Elisa's highly advanced, flexible way of working and remote working policy have enabled us to stay for longer periods in our new home in Spain."
TIMO GRÖNROOS / service manager
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analyses, for example. Our management system also includes a personal development plan for every employee.
To emphasise the importance of learning, we switched from traditional target and development discussions to Elisa's learning and objectives discussions. Conducted every six months, the discussions are used to set both learning and working goals, to assess the past six months, to plan for the future and to provide feedback. These systematic discussions are complemented by regular supplementary training discussions with supervisors. Learning also includes participation in socially important projects outside the workplace.
All Elisians had, yet again, the opportunity to use one working day or their Competitiveness Pact hours to do voluntary work. For more information, please see the corporate responsibility report.
We have been measuring the job satisfaction of our employees since 2005. The results of the persistent monitoring and development actions performed on the basis of the survey results are reflected in our resource index: we have reached our target score of more than four (on a scale of one to five) for several years in a row.
In 2019, our resource index continued to climb, reaching 4.06 (4.02 in 2018). Especially valuable aspects for Elisians include the fact that they can be themselves at work (4.62), that we respect each other (4.58) and that there is trust between
supervisors and employees (4.59). This is what creates the foundation for everything we achieve together. As an important indicator of the development of job satisfaction, we saw over the course of the year how most of our employees worked in teams where they are comfortable and enjoy their work.
According to the results, more than 90% of our employees are currently working in teams with a resource index score of more than 3.5. The resource index offers us tools to increase the significance of work and make goals clearer, for example. Open dialogue throughout the organisation about the results and development areas is an essential part of the process. We introduced a new work monitoring tool, Employer Branding metrics from Universum Finland, to further boost Elisa's recognition and attractiveness as an employer.
The community spirit approach also includes an open compensation culture. All Elisians are part of short-term and long-term reward systems that support our shared strategic goals and development. As in previous years, the employees themselves selected twenty people or teams to receive the Elisian Award for exemplary work in line with our values.
We were one of the best European companies in the Great Place to Work survey, and among the one hundred most gender-equal listed companies in the world according to a study by Equileap. These results show that collaboration, which is also one of our values, strongly guides our daily work and can be seen in everything we do. People value their colleagues and believe that there is equality in the work community.
At Elisa, I have been able to engage in my passion for singing alongside my work. The employer understands my way of life, and is flexible in terms of shifts, for example."
HEIDI MAKKONEN / customer service representative, sales
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More than 850 job openings became available in Elisa during the year. Our international presence expanded due to the acquisition of Polystar. Now, there are Elisians in 14 countries.
We hired over 440 new colleagues. We encourage our employees to try out new positions in different units to offer them a long and interesting career within the company. Elisa Corporation also uses one of Finland's best relocation programs in cases where positions need to be rearranged.
We never ask about a person's age or gender during the recruitment process. We want to be involved in the creation of a good applicant experience, which is why we also request feedback from applicants to develop the experience.
Meaningful
Freedom and responsibility
work
2.
3.
A chance to learn...
Good supervisors 7.
...and be part of a major change 5.
6. Multiple career
The best colleagues 8.
operating methods 10.
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By collaborating with educational establishments, we can encourage young people to enter the ICT industry. A total of 156 Elisians who are starting their careers are included in the Elisa Young Professionals network. We are also part of the Finland Young Professionals network.
For more information about our responsible HR management principles, please see the corporate responsibility section of our annual report.
process development
180 participants in training on leadership by coaching
82 Elisa KATA coaches to assist teams
120 summer jobs Over
Elisa personnel (31 December 2019, FTE)
| Northern Finland | 148 |
|---|---|
| Eastern Finland | 404 |
| Central Finland | 98 |
| Western Finland | 132 |
| Ostrobotnia | 340 |
| Häme | 536 |
| Southern Finland | 2,107 |
| Estonia | 888 |
| Other countries | 264 |
2015 2016 2017 2018 2019 65.1 66.0 63.9 64.3 Personnel costs per employee* EUR 1,000 65.0
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* European telecom operators
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Above industry average
Above 37%
Maximum 12%
1,5 — 2x > 35 %
The positive development of the macroeconomic environment is decelerating in Finland. Competition in the Finnish telecommunications market remains keen.
Full-year revenue is estimated to be at the same level or slightly higher than in 2019. Mobile data and digital services are expected to increase revenue. Full-year comparable EBITDA is anticipated to be at the same level or slightly higher than in 2019. Capital expenditure is expected to be a maximum of 12 per cent of revenue.
Elisa is continuing its productivity improvement development, for example by increasing automation and data analytics in different processes, such as customer interactions, network operations and delivery. Additionally, Elisa's continuous quality improvement measures will increase customer satisfaction and efficiency, and reduce costs.
Elisa's transformation into a provider of exciting, new and relevant services for its customers is continuing. Longterm growth and profitability improvement will derive
from growth in the mobile data market, as well as digital online and ICT services.
Elisa's profit distribution is 80–100 per cent of the previous fiscal year's net profit. In addition, any excess capital can be distributed to shareholders. When making the distribution proposal or decision, the Board of Directors will take into consideration the company's financial position, future financial needs and financial targets. Profit distribution includes dividend payment, capital repayment and purchase of treasury shares.
Elisa's Annual General Meeting will be held at Messukeskus Helsinki, Expo and Convention Centre, at 2:00 pm (EET) on 2 April 2019.
Each shareholder, who is registered on 23 March 2020, in the shareholders' register of the Company held by Euroclear Finland Ltd, has the right to participate in the Annual General Meeting. Information about registering is available on the AGM invitation and on the company website at www.elisa.com/agm
Revenue growth
EBITDA margin
Net Debt/EBITDA Equity ratio
CAPEX/Sales
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The Board of Directors proposes to the AGM that theprofit for the financial period 2019 be added to accrued earnings and that a dividend of EUR 1.85 per share be paid based on the adopted balance sheet of 31 December 2019.
| 23 March 2020 | Record date of AGM participation |
|---|---|
| 26 March 2020 at 6:00 pm |
Registration period ends |
| 2 April 2020 | Annual General Meeting |
| 6 April 2020 | Record date of dividend payment |
| 15 April 2020 | Date of dividend payment |
Elisa's shares are listed on the Nasdaq Helsinki and are registered in the Finnish book-entry register maintained by Euroclear Finland Ltd.
Elisa publishes its financial reports and bulletins in Finnish and English. The Annual Report, Interim Reports, information on the AGM, stock exchange releases and other information for investors, as well as the Disclosure Policy, are available on the Elisa website at www.elisa.com/investors.
| 22 April 2020 | Interim report Q1 2020 |
|---|---|
| 15 July 2020 | Half year report for Jan–June 2020 |
| 16 Oct 2020 | Interim report Q3 2020 |
IR Director Tel. +358 50 520 5555 [email protected]
Communications manager, IR Tel. +358 50 308 9773 [email protected]
www.elisa.com/investors [email protected]
1) Rebased on Elisa's share price
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