Earnings Release • Feb 11, 2009
Earnings Release
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"We reported record high earnings for the fourth quarter and the full year. Reported growth as well as organic growth in local currencies was higher in 2008 than the year before, but we did not fully reach our ambition of maintaining the EBITDA-margin level.
When I joined TeliaSonera in 2007, I said we need to change our behavior in order to succeed in one of the world's most rapidly changing and demanding industries. In 2008, we strengthened the Leadership Team and introduced a more stringent performance and consequence management. As a result, I am starting to see a change in how we respond to external trends and strive to achieve operational excellence.
We are pleased that customer satisfaction, according to the European Performance Satisfaction Index (EPSI), improved in most of our Nordic and Baltic businesses in 2008. In addition, we further strengthened our market positions in Eurasia and became market leader also in Tajikistan and Georgia.
During the year, we invested in future growth by expanding our presence to Nepal and Cambodia. Mobility Services delivered continued growth with improving margins, despite regulatory intervention and intense competition. The reduced profitability in Broadband Services shows, however, that the efficiency measures we are taking are necessary as we cannot have structurally higher costs than our competitors.
We need to be prepared for a potentially drawn-out economic downturn that may affect consumer and corporate behavior. The worsening economic trends, particularly in the Baltic countries, had no material effect on usage in our markets in 2008. However, we experienced somewhat slower growth than expected in some Eurasian markets in January 2009, although it is too early to draw any conclusion based on one month."
| SEK in millions, except key ratios, per | Oct-Dec | Oct-Dec | Chg | Jan-Dec | Jan-Dec | Chg |
|---|---|---|---|---|---|---|
| share data and changes | 2008 | 2007 | (%) | 2008 | 2007 | (%) |
| Net sales | 28,096 | 24,921 | 13 | 103,585 | 96,344 | 8 |
| EBITDA1) excl. non-recurring items2) | 8,272 | 7,208 | 15 | 32,954 | 31,021 | 6 |
| Margin (%) | 29.4 | 28.9 | 31.8 | 32.2 | ||
| Operating income | 7,356 | 6,058 | 21 | 28,648 | 26,155 | 10 |
| Operating income excl. non-recurring items | 7,678 | 6,358 | 21 | 30,041 | 27,478 | 9 |
| Net income3) | 6,399 | 5,209 | 23 | 21,442 | 20,298 | 6 |
| of which attributable to shareholders of the | ||||||
| parent company3) | 5,644 | 4,467 | 26 | 19,011 | 17,674 | 8 |
| Earnings per share (SEK) | 1.26 | 0.99 | 27 | 4.23 | 3.94 | 7 |
| Return on equity (%, rolling 12 months) | 17.2 | 18.6 | 17.2 | 18.6 | ||
| CAPEX-to-sales (%) | 16.1 | 18.2 | 15.2 | 14.0 | ||
| Free cash flow | 4,918 | 1,839 | 167 | 11,328 | 13,004 | -13 |
| 1) Please refer to page 17 for definitions. |
2) Non-recurring items; see table on page 21.
3) January-December 2008 includes approximately SEK 1,520 million (2,036) positive one-off items.
In this report, comparative figures are provided in parentheses following the operational and financial results and refer to the same item in the full year or in the fourth quarter 2007, unless otherwise stated.
Net sales in local currencies and excluding acquisitions are expected to increase in 2009 compared to 2008. Currency fluctuations may to an increasing extent influence the reported figures in Swedish krona.
TeliaSonera will continue to invest in future growth and in the quality of networks and services, although the intention is to keep the addressable cost base for 2009 unchanged compared to SEK 33.8 billion in 2008. The ambition for 2009 is to maintain the EBITDA margin level of 2008, excluding non-recurring items.
Capital expenditures will be driven by continued investments in broadband and mobile capacity as well as in network expansion in our acquired operations. The CAPEX-to-sales ratio is expected to be somewhat lower in 2009 than in 2008.
Intensified efficiency improvement is imperative for TeliaSonera to be able to continue shifting the product mix by investing in mobility and IP-based services. Efficiency measures to be implemented primarily in the Swedish and Finnish operations during 2008 and 2009 are in total estimated to give annual gross savings effects of approximately SEK 5 billion compared to the cost base of 2007.
Just above half of these efficiency measures were implemented during 2008 and the remainder will be implemented in 2009. The efficiency measures are expected to result in a reduction of approximately 2,900 employees, of whom about two-thirds in Sweden and one-third in Finland. The related restructuring costs, reported as non-recurring items, are estimated to be lower than SEK 3 billion, of which about SEK 1.6 billion were recognized in 2008.
The gross savings effect for 2008 from the ongoing efficiency measures was approximately SEK 2 billion compared to the cost base of 2007.
Thus far, 270 employees have accepted the offer for early retirement and 1,064 employees have agreed to be transferred to the redeployment unit in Sweden or the competence pool in Finland. Under the same efficiency program, TeliaSonera in January 2009, gave notice to 1,200 employees in Sweden and announced a streamlining of 390 jobs in Broadband Services in Finland.
Net sales increased 12.7 percent to SEK 28,096 million (24,921). Organic growth in local currencies was 4.5 percent. All business areas showed higher sales. The positive net effect of acquisitions was 1.5 percent and of exchange rate changes 6.7 percent.
In Mobility Services, net sales rose 10.4 percent to SEK 12,796 million (11,588) with increased sales in all markets except Latvia. Net sales growth was driven by a doubling of the customer base in Spain, higher usage and a growing number of mobile broadband customers in Sweden.
In Broadband Services, net sales increased 5.0 percent to SEK 11,768 million (11,209) due to higher sales in all markets except Sweden and Norway. Growing voice and IP traffic in the international carrier operations in Wholesale and higher sales of IP-based services in the Baltic countries and Denmark contributed to the increase.
In Eurasia, net sales rose 44.9 percent to SEK 4,219 million (2,911), lifted by continued growth, especially in Kazakhstan and Azerbaijan, and the acquisition of operations in Nepal and Cambodia. In Uzbekistan, net sales more than doubled and Tajikistan reported growth of more than 80 percent.
The number of subscriptions rose by 20.0 million from year-end 2007 to 134.8 million at year-end 2008. The number of subscriptions in the majority-owned operations rose by 7.5 million to 43.4 million and in the associated companies by 12.5 million to 91.4 million. During the fourth quarter, the total number of subscriptions increased by more than 6.8 million, with 3.4 million new subscriptions in the majority-owned operations and over 3.4 million in the associated companies.
EBITDA, excluding non-recurring items, increased to SEK 8,272 million (7,208) and the margin to 29.4 percent (28.9). Eurasia showed strong performance with a rise in EBITDA of more than 50 percent from the fourth quarter of 2007. The EBITDA increase in Mobility Services came from higher sales and cost efficiency. In Broadband Services, EBITDA decreased as a result of a continued decline in fixed voice sales in Sweden and Finland and a changed revenue mix that was not offset by savings effects from efficiency measures.
The fourth quarter of 2007 included a positive net effect of approximately SEK 280 million from one-off items distributed between business area Mobility Services (see page 9) and business area Broadband Services (see page 12).
Operating income, excluding non-recurring items, rose to SEK 7,678 million (6,358). Operating income was driven by higher EBITDA and income from associated companies in Russia and Turkey.
Non-recurring items affecting operating income totaled SEK -322 million (-300). Nonrecurring items included charges of approximately SEK -200 million (-230) related to efficiency measures.
Financial items decreased to SEK -775 million (-289), of which SEK -674 million (-307) related to net interest expenses. Financial items were negatively affected by higher net debt.
Income taxes amounted to SEK -182 million (-560) and the effective tax rate was very low at 2.8 percent (9.7). The tax rate was decreased by positive one-off items both in 2008 and 2007. A lowering of the Swedish corporate income tax rate from 28.0 percent to 26.3 percent as of January 1, 2009, resulted in a revaluation of deferred tax assets and liabilities related to the Swedish operations and in a positive one-off item of approximately SEK 400 million in the fourth quarter of 2008. New deferred tax assets amounting to approximately SEK 650 million were recorded in the fourth quarter of 2008, relating to Finland, the Netherlands and International Carrier (SEK 850 million of new deferred tax assets in the fourth quarter of 2007, mainly in Finland). The effect on earnings per share from the positive one-off items in income taxes was SEK 0.23 (0.19).
Minority interests in subsidiaries were SEK 755 million (742), of which SEK 572 million (557) related to operations in Eurasia and SEK 175 million (172) to Eesti Telekom, LMT and TEO.
Net income attributable to shareholders of the parent company increased to SEK 5,644 million (4,467) and earnings per share to SEK 1.26 (0.99).
CAPEX was SEK 4,523 million (4,537) and the CAPEX-to-sales ratio 16.1 percent (18.2).
Free cash flow increased to SEK 4,918 million (1,839). Higher EBITDA, lower income taxes, about SEK 700 million in dividend from the associated company Turkcell Holding and lower working capital all had a positive effect.
Net debt at the end of the fourth quarter amounted to SEK 48,614 million (47,674 at the end of the third quarter 2008).
The equity/assets ratio increased slightly during the fourth quarter to 50.5 percent (50.1 percent at the end of the third quarter 2008).
Net sales increased 7.5 percent to SEK 103,585 million (96,344). Organic growth in local currencies was 3.9 percent. In Mobility Services, net sales rose 7.9 percent to SEK 48,673 million (45,115) with increased sales in most markets. In Broadband Services, net sales increased 1.0 percent to SEK 44,943 million (44,478) with higher sales in all markets except Sweden. In Eurasia, net sales rose 27.7 percent to SEK 13,204 million (10,338). The positive net effect of acquisitions was 1.5 percent and of exchange rate changes 2.1 percent.
EBITDA, excluding non-recurring items, increased to SEK 32,954 million (31,021) and the margin was 31.8 percent (32.2). The EBITDA increase came from higher sales and cost efficiency in Mobility Services and a continued positive performance in Eurasia.
In addition to the one-off items in the fourth quarter of 2007 (reported under the review of the fourth quarter on page 4), EBITDA in 2007 also included a positive net effect of SEK 175 million, mainly related to reversals of provisions in Mobility Services and Broadband Services, and SEK 130 million in storm-related costs in Broadband Services in Sweden.
Operating income, excluding non-recurring items, increased to SEK 30,041 million (27,478) due to higher EBITDA and income from associated companies in Russia and Turkey. In 2007, income from associated companies included a capital gain of SEK 631 million from the sale of Eltel and was positively impacted by SEK 240 million in the form of a gain from the sale of Petersburg Transit Telecom by Telecominvest and a partial reversal of write-downs on old equipment in MegaFon.
Non-recurring items affecting operating income were SEK -1,393 million (-1,323), including charges of about SEK -1,630 million (-900) related to cost efficiency programs. Non-recurring items were positively impacted by the release of a provision of SEK 360 million in TeliaSonera Holding related to a fiber network in France.
In 2007, non-recurring items were positively impacted by the release of provisions of approximately SEK 200 million in TeliaSonera Holding. Meanwhile, a write-down of the access network in Finland and a provision for dismantling the network had a negative impact of approximately SEK 600 million.
Financial items totaled SEK -2,237 million (-904), of which SEK -2,110 million (-1,174) related to net interest expenses. Financial items were negatively affected by higher net debt. Meanwhile, received penalty interest of approximately SEK 290 million related to a court decision on historical interconnect fees in Sweden had a positive effect.
Income taxes amounted to SEK -4,969 million (-4,953). The effective tax rate was low at 18.8 percent (19.6), mainly due to positive one-off items in the fourth quarter (as described on page 4). The effect on earnings per share from positive one-off income tax items was SEK 0.23 (0.19).
Minority interests in subsidiaries were SEK 2,431 million (2,624), of which SEK 1,705 million (1,895) related to operations in Eurasia and SEK 692 million (702) to Eesti Telekom, LMT and TEO.
Net income attributable to shareholders of the parent company increased to SEK 19,011 million (17,674) and earnings per share to SEK 4.23 (3.94).
CAPEX increased to SEK 15,795 million (13,531) and the CAPEX-to-sales ratio to 15.2 percent (14.0) mainly due to the acquisition of a 2.6-GHz license in Sweden and continued investments in network capacity and coverage within Mobility Services and Broadband Services. In Eurasia, CAPEX increased mainly due to investments in Uzbekistan and Tajikistan to improve coverage and maintain high service quality.
Free cash flow decreased to SEK 11,328 million (13,004), mainly due to higher CAPEX and higher financial expenses. Free cash flow was positively impacted by higher EBITDA and approximately SEK 500 million received in the form of a one-off payment related to historical interconnect disputes in Sweden. In 2007, cash flow was positively impacted by one-off dividends from associated companies; about SEK 900 million from Telefos, mainly related to its sale of Eltel, and about SEK 530 million from Overseas Telecom, mainly related to its sale of MTN Uganda.
Net debt at year-end 2008 was SEK 48,614 million (34,155 at year-end 2007).
The equity/assets ratio increased slightly to 50.5 percent from 50.3 percent at year-end 2007.
TeliaSonera on September 26, 2008, announced the acquisition of controlling interests in two mobile operators, Spice Nepal Pvt. Ltd. in Nepal and Applifone Co. Ltd. in Cambodia. TeliaSonera acquired 51 percent of the shares and votes in TeliaSonera Asia Holding B.V. from Visor Group that remains owner of the other 49 percent. TeliaSonera Asia Holding B.V. owns 80 percent of the shares and votes in Spice Nepal and 100 percent of the shares and votes in Applifone. The total cash consideration paid by TeliaSonera was approximately SEK 3.3 billion (USD 484 million), corresponding to 51 percent of the total equity value of TeliaSonera Asia Holding B.V. The transaction was completed on October 1, 2008, and the operations have been consolidated as of the same date. (For more information, see page 23 and www.teliasonera.com/ir.)
The TeliaSonera share is listed on NASDAQ OMX Stockholm and NASDAQ OMX Helsinki. The share's settlement price in Stockholm decreased 35.7 percent in 2008, from SEK 60.50 to SEK 38.90. The highest share price was SEK 62.00 (68.00) and the lowest SEK 30.80 (47.70).
The number of shareholders decreased from 655,247 to 651,816. Ownership by the Swedish state was 37.3 percent and the Finnish state's holding was 13.7 percent. Holdings outside Sweden and Finland decreased to 15.6 percent from 22.4 percent. At yearend, Swedish institutional investors owned 24.2 percent (18.2) of the share capital and Finnish institutional investors owned 3.2 percent (3.0). Swedish private investors owned 3.2 percent (3.0) and Finnish private investors 2.8 percent (2.4).
For 2008, the Board of Directors proposes to the Annual General Meeting (AGM) an ordinary dividend of SEK 1.80 (1.80) per share, totaling SEK 8.1 billion, or 42.5 percent of net income attributable to shareholders of the parent company. For 2007, in addition to the ordinary dividend, excess capital was returned to shareholders in the form of an extraordinary dividend of SEK 2.20 per share, totaling SEK 9.9 billion.
The Board of Directors proposes that the final day for trading in shares entitling shareholders to dividend be set for April 1, 2009, and that the first day of trading in shares excluding rights to dividend be set for April 2, 2009. The recommended record date at VPC for the right to receive dividend will be April 6, 2009. If the AGM votes to approve the Board's proposals, the dividend is expected to be distributed by VPC on April 9, 2009.
TeliaSonera shall target a solid investment grade long-term credit rating (A- to BBB+) to secure the company's strategically important financial flexibility for investments in future growth, both organically and by acquisitions. The ordinary dividend shall be at least 40 percent of net income attributable to shareholders of the parent company. In addition, excess capital shall be returned to shareholders after the Board of Directors has taken into consideration the company's cash at hand, cash flow projections and investment plans in a medium term perspective, as well as capital market conditions.
In order to provide TeliaSonera with an additional instrument to adjust the company's capital structure, the Board of Directors proposes that the Annual General Meeting resolve to authorize the Board of Directors to repurchase a maximum of 10 percent of the company's total number of outstanding shares. To date, no plans are made to exercise the proposed authorization. (For information on TeliaSonera's dividend policy and capital structure, see above.)
The Annual General Meeting (AGM) will be held on April 1, 2009, at 3 p.m. CET at Cirkus, Stockholm. Notice of the meeting will be posted on TeliaSonera's website, www.teliasonera.com, and advertised in the newspapers in mid-February 2009. The record date entitling shareholders to attend the meeting will be March 26, 2009. Shareholders may file notice of intent to attend the AGM from February 19, 2009. TeliaSonera must receive notice of attendance no later than 4 p.m. CET on March 26, 2009.
A Finnish shareholders' information meeting will be arranged on March 30, 2009, at 3 p.m. Finnish time at Marina Congress center, Helsinki. Finnish shareholders will have the possibility to meet representatives from management and the Board. Shareholders may file notice of intent to attend the Finnish shareholders' information meeting from March 2, 2009. TeliaSonera must receive notice of attendance no later than March 16, 2009. More information about how to file notice of intent to attend the meeting will be given in connection with similar information about the AGM.
Business area Mobility Services provides personal mobility services to the consumer and enterprise mass markets. Products and services include mobile voice and data, mobile content, WLAN Hotspots, mobile over broadband, mobile/PC convergence and Wireless Office. The business area comprises mobile operations in Sweden, Finland, Norway, Denmark, Lithuania, Latvia, Estonia and Spain.
• Volume growth in the mobile markets continued with strong demand for mobile devices, including mobile broadband and the Apple iPhone 3G. Intense competition together with regulatory intervention continued to put downward pressure on prices in all markets. The growing need for higher network speeds required by mobile data services continued driving investments in the industry.
| SEK in millions, except margins, | Oct-Dec | Oct-Dec | Chg | Jan-Dec | Jan-Dec | Chg |
|---|---|---|---|---|---|---|
| operational data and changes | 2008 | 2007 | (%) | 2008 | 2007 | (%) |
| Net sales | 12,796 | 11,588 | 10 | 48,673 | 45,115 | 8 |
| EBITDA excl. non-recurring items | 3,507 | 2,824 | 24 | 14,399 | 13,084 | 10 |
| Margin (%) | 27.4 | 24.4 | 29.6 | 29.0 | ||
| Operating income | 2,283 | 1,580 | 44 | 9,526 | 8,386 | 14 |
| Operating income excl. non-recurring items | 2,366 | 1,740 | 36 | 9,926 | 8,751 | 13 |
| CAPEX | 1,145 | 1,476 | -22 | 4,467 | 4,168 | 7 |
| MoU | 196 | 194 | 1 | 195 | 190 | 3 |
| ARPU, blended (SEK) | 224 | 225 | 0 | 223 | 230 | -3 |
| Churn, blended (%) | 27 | 28 | 27 | 28 | ||
| Subscriptions, period-end (thousands) | 15,900 | 14,501 | 10 | 15,900 | 14,501 | 10 |
| Employees, period-end | 8,339 | 8,052 | 4 | 8,339 | 8,052 | 4 |
Additional segment information available at www.teliasonera.com/ir
• Net sales rose 10.4 percent to SEK 12,796 million (11,588). Organic growth in local currencies was 4.6 percent. The positive effect from exchange rate fluctuations was 4.7 percent.
In reported currency, Spain, Finland, Sweden and Denmark made the largest contributions to net sales in absolute terms. In general, subscription growth and higher usage of mobile broadband, data and voice drove volumes higher in our markets, while regulatory interventions, including interconnect and roaming, put downward pressure on revenue.
In local currencies, sales growth came mainly from a doubling of the customer base in Spain, higher usage and a growing number of mobile broadband customers in Sweden, and the consolidation of ComHouse in Norway. Revenue in Spain was also positively affected by the decision to buy terminals directly from vendors and sell them to distribution channels. Lower terminal sales and intensifying price pressure affected sales in Latvia and Estonia. Usage growth in the Baltic countries however remained largely unaffected by the weaker economic development.
• The number of subscriptions rose by 1.4 million from year-end 2007 to 15.9 million. Growth was strongest in Spain with an increase of 543,000 to 970,000, in line with the target for 2008. Sweden followed with 527,000 new subscriptions and Finland with 227,000. In Lithuania, the number of subscriptions was unchanged. During the quarter the number of subscriptions rose by 450,000, with Spain and Sweden showing the largest increases.
• EBITDA, excluding non-recurring items, rose 24.2 percent to SEK 3,507 million (2,824) and the margin to 27.4 percent (24.4). EBITDA rose as a result of higher sales and improved cost efficiency, including lower sales and marketing costs mainly in Sweden, Finland and Denmark. Changed interconnect fees in the Nordic and Baltic markets had a negative net effect of approximately SEK 155 million on EBITDA. In Finland, however, the effect was positive as costs decreased more than revenues.
In Sweden, EBITDA decreased to SEK 1,191 million (1,216). However, the fourth quarter 2007 was positively impacted by reversals of provisions of SEK 185 million related to historical interconnect prices.
In Denmark, EBITDA increased to SEK 382 million (170), corresponding to a margin of 21.3 percent (10.3). The fourth quarter of 2007 included negative one-off items of SEK 135 million related to balance sheet corrections.
In Spain, the EBITDA loss narrowed to SEK -273 million (-463).
• CAPEX decreased to SEK 1,145 million (1,476), mainly as a result of reduced investments in Finland and Denmark due to the timing of investments between the quarters. The CAPEX-to-sales ratio was 8.9 percent (12.7).
• Net sales rose 7.9 percent to SEK 48,673 million (45,115). Organic growth in local currencies was 4.4 percent. The positive effect from exchange rate fluctuations was 2.4 percent.
In reported currency, Spain, Denmark, Sweden and Norway made the largest contributions to net sales in absolute terms. Overall subscription growth and higher usage of mobile broadband, data and voice drove sales higher. Regulatory interventions, including interconnect and roaming, were offset by higher sales in most markets.
In local currencies, sales growth came mainly from strong subscription growth in Spain and continued usage and subscription growth in Sweden. The successful migration of Call me (formerly named debitel) customers and an improved product mix in Denmark, and the consolidation of ComHouse in Norway also lifted sales. A weaker economic development affected equipment sales in Latvia and Estonia. However, the revenue decline in these countries is mainly a result of lower prices and, in Estonia, a reduction in interconnect fees.
• Interconnect fees that TeliaSonera receives from other mobile operators were lowered in Denmark from DKK 0.72 to DKK 0.62 on May 1, 2008, in Sweden from SEK 0.55 to SEK 0.43 on July 1, 2008, and on the same date in Norway from NOK 0.70 to NOK 0.60. In Finland, fees were lowered from EUR 0.066 to EUR 0.051 on January 1, 2008, and further to EUR 0.049 on January 1, 2009.
In Norway, the reduction of the interconnect fees and symmetric prices with Telenor as of July 1, 2008, and the effect of losing the national roaming agreement with Network Norway have, as previously estimated, a total annualized negative effect of approximately SEK 600 million on sales as of the fourth quarter 2008.
• EBITDA, excluding non-recurring items, rose to SEK 14,399 million (13,084) and the margin to 29.6 percent (29.0). The EBITDA increase came mainly from higher sales and improved cost efficiency. Changed interconnect fees in the Nordic and Baltic markets had a negative net effect of approximately SEK 630 million on EBITDA.
In Sweden, EBITDA increased to SEK 4,949 million (4,823). In 2007, EBITDA was positively impacted by reversals of provisions of SEK 325 million related to historical interconnect prices.
In Denmark, EBITDA increased to SEK 1,374 million (841). The margin in Denmark increased mainly as a result of an improved product mix and the successful migration of Call me customers. In 2007, EBITDA included negative one-off items of SEK 160 million related to balance sheet corrections.
In Lithuania and Latvia, downward price pressure was not offset by lower costs. Meanwhile in Estonia, lower costs for interconnect and roaming combined with a decline in sales of low-margin equipment lifted the margin to 38.1 percent (34.9).
The EBITDA loss in Spain narrowed to SEK -1,269 million (-1,443) despite a SEK 100 million one-off expense in the third quarter of 2008 related to the termination of the old national roaming agreement. The Spanish operation is under review for different options going forward, as previously communicated.
• CAPEX increased to SEK 4,467 million (4,168) mainly due to a one-off payment of SEK 563 million for the acquisition of a 2.6 GHz license in Sweden in the second quarter. Other CAPEX included continued investments in network coverage and capacity, including upgrading and building capacity for mobile broadband. The CAPEXto-sales ratio was 9.2 percent (9.2).
| SEK in millions, except margins | Oct-Dec | Oct-Dec | Chg | Jan-Dec | Jan-Dec | Chg |
|---|---|---|---|---|---|---|
| and changes | 2008 | 2007 | (%) | 2008 | 2007 | (%) |
| Net sales | 12,796 | 11,588 | 10 | 48,673 | 45,115 | 8 |
| of which Sweden | 3,407 | 3,257 | 5 | 13,334 | 12,905 | 3 |
| of which Finland | 2,678 | 2,439 | 10 | 9,917 | 9,786 | 1 |
| of which Norway | 2,289 | 2,258 | 1 | 9,433 | 9,001 | 5 |
| of which Denmark | 1,793 | 1,652 | 9 | 6,845 | 6,138 | 12 |
| of which Lithuania | 698 | 656 | 6 | 2,722 | 2,484 | 10 |
| of which Latvia | 663 | 669 | -1 | 2,635 | 2,654 | -1 |
| of which Estonia | 592 | 588 | 1 | 2,262 | 2,305 | -2 |
| of which Spain | 792 | 229 | 246 | 2,050 | 589 | 248 |
| EBITDA excl. non-recurring items | 3,507 | 2,824 | 24 | 14,399 | 13,084 | 10 |
| Margin (%), total | 27.4 | 24.4 | 29.6 | 29.0 | ||
| Margin (%), Sweden | 35.0 | 37.3 | 37.1 | 37.4 | ||
| Margin (%), Finland | 26.8 | 21.9 | 31.0 | 29.4 | ||
| Margin (%), Norway | 33.6 | 31.0 | 35.3 | 34.1 | ||
| Margin (%), Denmark | 21.3 | 10.3 | 20.1 | 13.7 | ||
| Margin (%), Lithuania | 32.8 | 33.5 | 34.6 | 36.8 | ||
| Margin (%), Latvia | 40.9 | 41.1 | 43.0 | 45.2 | ||
| Margin (%), Estonia | 37.0 | 29.3 | 38.1 | 34.9 | ||
| Margin (%), Spain | neg | neg | neg | neg |
Business area Broadband Services provides mass-market services for connecting homes and offices. Products and services include broadband over copper, fiber and cable, IPTV, 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, Norway, Denmark, Lithuania, Latvia (49 percent), Estonia and international carrier operations.
• Overall price erosion was evident in all markets and the migration from traditional fixed voice services persisted. Penetration growth of DSL was affected by market saturation, competition and the promotion of mobile broadband. Investments were directed to the backbone and transmission networks to support services that require higher bandwidth, such as IPTV and broadband.
| SEK in millions, except margins, | Oct-Dec | Oct-Dec | Chg | Jan-Dec | Jan-Dec | Chg |
|---|---|---|---|---|---|---|
| operational data and changes | 2008 | 2007 | (%) | 2008 | 2007 | (%) |
| Net sales | 11,768 | 11,209 | 5 | 44,943 | 44,478 | 1 |
| EBITDA excl. non-recurring items | 2,627 | 3,107 | -15 | 11,922 | 12,821 | -7 |
| Margin (%) | 22.3 | 27.7 | 26.5 | 28.8 | ||
| Operating income | 1,009 | 1,688 | -40 | 5,396 | 6,413 | -16 |
| Operating income excl. non-recurring items | 1,243 | 1,824 | -32 | 6,684 | 7,515 | -11 |
| CAPEX | 2,026 | 1,977 | 2 | 5,934 | 5,722 | 4 |
| Broadband ARPU (SEK) | 285 | 265 | 8 | 274 | 270 | 1 |
| Subscriptions, period-end (thousands) | ||||||
| Broadband | 2,434 | 2,326 | 5 | 2,434 | 2,326 | 5 |
| Fixed voice | 5,806 | 6,218 | -7 | 5,806 | 6,218 | -7 |
| Associated company, total | 777 | 757 | 3 | 777 | 757 | 3 |
| Employees, period-end | 16,171 | 17,294 | -6 | 16,171 | 17,294 | -6 |
Additional segment information available at www.teliasonera.com/ir
The total number of TV subscriptions rose by 98,000 from year-end 2007 to 867,000, of which 477,000 were IPTV subscriptions, up 99,000. In Sweden, the push for IPTV resulted in a rise of 20,000 from year-end 2007 to 324,000. Thus far, around 70 percent of TeliaSonera's IPTV customer base in Sweden is paying customers. The total number of IPTV subscriptions increased by 27,000 during the fourth quarter, of which 4,000 in Sweden.
The number of fixed voice subscriptions decreased by 412,000 from year-end 2007 to 5,806,000, and was down by 115,000 from the end of the third quarter 2008.
• EBITDA, excluding non-recurring items, decreased to SEK 2,627 million (3,107) and the margin was 22.3 percent (27.7). In Sweden, the lower margin reflected a changed revenue mix with a continued fall in sales of traditional services that was not fully offset by efficiency measures, and growth in IP-based services, including TV. Compared to traditional fixed voice, these services have lower margins and ARPU. In Wholesale, higher sales of low-margin international voice traffic affected profitability. In Denmark, the margin decreased to 1.1 percent (9.4) as a result of the continued promotion of IPTV and broadband services.
The fourth quarter of 2007 included a SEK 386 million reversal of a provision related to historical interconnect fees in Sweden. In Wholesale, a provision for changed LLUB pricing had a negative effect of some SEK 120 million.
• CAPEX was SEK 2,026 million (1,977) with continued investments in broadband platforms and common infrastructure, including core and transmission networks. The CAPEX-to-sales ratio was 17.2 percent (17.6).
| SEK in millions, except margins | Oct-Dec | Oct-Dec | Chg | Jan-Dec | Jan-Dec | Chg |
|---|---|---|---|---|---|---|
| and changes | 2008 | 2007 | (%) | 2008 | 2007 | (%) |
| Net sales | 11,768 | 11,209 | 5 | 44,943 | 44,478 | 1 |
| of which Sweden | 4,983 | 5,041 | -1 | 19,536 | 20,343 | -4 |
| of which Finland | 2,114 | 1,947 | 9 | 7,736 | 7,598 | 2 |
| of which Norway | 224 | 231 | -3 | 913 | 891 | |
| of which Denmark | 649 | 551 | 18 | 2,352 | 1,998 | 18 |
| of which Lithuania | 631 | 567 | 11 | 2,302 | 2,124 | 8 |
| of which Estonia | 606 | 492 | 23 | 2,163 | 1,926 | 12 |
| of which Wholesale | 2,990 | 2,629 | 14 | 11,302 | 10,495 | 8 |
| EBITDA excl. non-recurring items | 2,627 | 3,107 | -15 | 11,922 | 12,821 | -7 |
| Margin (%), total | 22.3 | 27.7 | 26.5 | 28.8 | ||
| Margin (%), Sweden | 23.9 | 33.4 | 27.6 | 31.1 | ||
| Margin (%), Finland | 16.8 | 17.0 | 21.7 | 23.4 | ||
| Margin (%), Norway | 18.3 | 22.9 | 20.0 | 22.1 | ||
| Margin (%), Denmark | 1.1 | 9.4 | 4.4 | 12.1 | ||
| Margin (%), Lithuania | 38.8 | 39.5 | 42.7 | 43.9 | ||
| Margin (%), Estonia | 23.6 | 25.2 | 26.7 | 24.4 | ||
| Margin (%), Wholesale | 21.5 | 24.3 | 26.7 | 27.5 |
In addition to the one-off items in the fourth quarter of 2007 (see above), EBITDA in 2007 included a positive effect of SEK 60 million from the reversal of a provision, and SEK 130 million in storm related costs in Sweden, both in the first quarter.
• CAPEX was SEK 5,934 million (5,722) with continued investments in broadband platforms and common infrastructure, including core and transmission networks. The CAPEX-to-sales ratio was 13.2 percent (12.9).
Business area Eurasia comprises mobile operations managed by Fintur in Kazakhstan, Azerbaijan, Uzbekistan, Tajikistan, Georgia, Moldova, Nepal and Cambodia and a shareholding of 12 percent in Afghanistan's largest operator Roshan. The business area is also responsible for developing TeliaSonera's shareholding in Russian MegaFon (44 percent) and Turkish Turkcell (37 percent). The main responsibility is to create shareholder value and to exploit penetration growth in the respective countries.
| SEK in millions, except margins, | Oct-Dec | Oct-Dec | Chg | Jan-Dec | Jan-Dec | Chg |
|---|---|---|---|---|---|---|
| operational data and changes | 2008 | 2007 | (%) | 2008 | 2007 | (%) |
| Net sales | 4,219 | 2,911 | 45 | 13,204 | 10,338 | 28 |
| EBITDA excl. non-recurring items | 2,089 | 1,327 | 57 | 6,553 | 5,255 | 25 |
| Margin (%) | 49.5 | 45.6 | 49.6 | 50.8 | ||
| Income from associated companies | ||||||
| Russia | 1,350 | 1,057 | 28 | 5,070 | 4,181 | 21 |
| Turkey | 1,291 | 891 | 45 | 3,991 | 2,725 | 46 |
| Operating income | 4,111 | 2,926 | 40 | 13,731 | 10,883 | 26 |
| Operating income excl. non-recurring items | 4,111 | 2,926 | 40 | 13,731 | 10,883 | 26 |
| CAPEX | 1,040 | 848 | 23 | 4,595 | 3,114 | 48 |
| Subscriptions, period-end (thousands) | ||||||
| Subsidiaries | 18,416 | 12,147 | 52 | 18,416 | 12,147 | 52 |
| Associated companies | 90,558 | 78,056 | 16 | 90,558 | 78,056 | 16 |
| Employees, period-end | 4,780 | 3,862 | 24 | 4,780 | 3,862 | 24 |
Additional segment information available at www.teliasonera.com/ir
• Net sales rose 44.9 percent to SEK 4,219 million (2,911) with revenue growth in all markets. Organic growth in local currencies was 18.1 percent. In reported currency, the largest contributions in absolute terms came from Kazakhstan and Azerbaijan. In Uzbekistan net sales more than doubled and Tajikistan reported growth of more than 80 percent. Consolidated since October 1, 2008, the operations in Nepal and Cambodia affected net sales positively by 5.8 percent. The positive effect from exchange rate fluctuations was 21.0 percent.
| Oct-Dec | Oct-Dec | Chg | Jan-Dec | Jan-Dec | Chg | |
|---|---|---|---|---|---|---|
| SEK in millions, except changes | 2008 | 2007 | (%) | 2008 | 2007 | (%) |
| Net sales | 4,219 | 2,911 | 45 | 13,204 | 10,338 | 28 |
| of which Kazakhstan | 2,074 | 1,545 | 34 | 6,673 | 5,582 | 20 |
| of which Azerbaijan | 1,086 | 804 | 35 | 3,563 | 2,958 | 20 |
| of which Uzbekistan | 206 | 81 | 154 | 496 | 139 | 257 |
| of which Tajikistan | 179 | 99 | 81 | 516 | 184 | 180 |
| of which Georgia | 388 | 292 | 33 | 1,393 | 1,123 | 24 |
| of which Moldova | 127 | 95 | 34 | 420 | 365 | 15 |
| of which Nepal | 158 | – | 158 | – | ||
| of which Cambodia | 10 | – | 10 | – |
Other operations comprise Other Business Services, TeliaSonera Holding and Corporate functions. Other Business Services is responsible for sales and production of managed-services solutions to business customers.
| Oct-Dec | Oct-Dec | Chg | Jan-Dec | Jan-Dec | Chg | |
|---|---|---|---|---|---|---|
| SEK in millions, except changes | 2008 | 2007 | (%) | 2008 | 2007 | (%) |
| Net sales | 770 | 671 | 15 | 2,538 | 2,049 | 24 |
| EBITDA excl. non-recurring items | 60 | -78 | 116 | -161 | ||
| Income from associated companies | 13 | -1 | 6 | 740 | ||
| Operating income | -47 | -180 | -5 | 406 | ||
| Operating income excl. non-recurring items | -42 | -174 | -300 | 264 | ||
| CAPEX | 308 | 236 | 31 | 795 | 527 | 51 |
Additional segment information available at www.teliasonera.com/ir
• Net sales for Other operations increased mainly due to the consolidation of Avansys to Other Business Services and the good development of TeliaSonera Holding.
Stockholm, February 11, 2009
Lars Nyberg President and CEO
This report has not been subject to review by TeliaSonera's auditors.
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 07.30 CET on February 11, 2009.
Financial Information Annual General Meeting 2009 in Stockholm April 1, 2009 Interim Report January–March 2009 April 24, 2009 Interim Report January–June 2009 July 24, 2009 Interim Report January–September 2009 October 28, 2009
Questions regarding the reports: TeliaSonera AB Investor Relations SE–106 63 Stockholm, Sweden Tel. +46 8 504 550 00 Fax +46 8 611 46 42 www.teliasonera.com/ir
EBITDA: Earnings Before Interest, Tax, Depreciation and Amortization. Equals operating income before depreciation, amortization and impairment losses and before income from associated companies.
ARPU, blended: Average monthly revenue per subscription.
Churn, blended: The number of lost subscriptions (postpaid and prepaid) expressed as a percentage of the average number of subscriptions (postpaid and prepaid).
MoU: Minutes of usage per subscription and month.
DSL: Digital Subscriber Line is a family of technologies that provide digital data transmission over the wires of a local telephone network.
LLUB: Local Loop Unbundling.
| SEK in millions, except per share data, | Oct-Dec | Oct-Dec | Chg | Jan-Dec | Jan-Dec | Chg |
|---|---|---|---|---|---|---|
| number of shares and changes | 2008 | 2007 | (%) | 2008 | 2007 | (%) |
| Net sales | 28,096 | 24,921 | 13 | 103,585 | 96,344 | 8 |
| Cost of sales | -15,747 | -14,608 | 8 | -56,962 | -54,196 | 5 |
| Gross profit | 12,349 | 10,313 | 20 | 46,623 | 42,148 | 11 |
| Selling, admin. and R&D expenses | -7,517 | -6,790 | 11 | -26,291 | -24,311 | 8 |
| Other operating income and expenses, net | -182 | 571 | -780 | 621 | ||
| Income from associated companies and | ||||||
| joint ventures | 2,706 | 1,964 | 38 | 9,096 | 7,697 | 18 |
| Operating income | 7,356 | 6,058 | 21 | 28,648 | 26,155 | 10 |
| Finance costs and other financial items, net | -775 | -289 | 168 | -2,237 | -904 | 147 |
| Income after financial items | 6,581 | 5,769 | 14 | 26,411 | 25,251 | 5 |
| Income taxes | -182 | -560 | -68 | -4,969 | -4,953 | 0 |
| Net income | 6,399 | 5,209 | 23 | 21,442 | 20,298 | 6 |
| Attributable to: | ||||||
| Shareholders of the parent company | 5,644 | 4,467 | 26 | 19,011 | 17,674 | 8 |
| Minority interests in subsidiaries | 755 | 742 | 2 | 2,431 | 2,624 | -7 |
| Shareholders' basic and diluted earnings | ||||||
| per share (SEK) | 1.26 | 0.99 | 27 | 4.23 | 3.94 | 7 |
| Number of shares (thousands) | ||||||
| Outstanding at period-end | 4,490,457 4,490,457 | 4,490,457 4,490,457 | ||||
| Weighted average, basic and diluted | 4,490,457 4,490,457 | 4,490,457 4,490,457 | ||||
| EBITDA | 7,965 | 6,932 | 15 | 31,658 | 30,333 | 4 |
| EBITDA excl. non-recurring items | 8,272 | 7,208 | 15 | 32,954 | 31,021 | 6 |
| Depreciation, amortization and impairment | ||||||
| losses | -3,315 | -2,837 | 17 | -12,106 | -11,875 | 2 |
| Operating income excl. non-recurring items | 7,678 | 6,358 | 21 | 30,041 | 27,478 | 9 |
| Dec 31, | Dec 31, | |
|---|---|---|
| SEK in millions | 2008 | 2007 |
| Assets | ||
| Goodwill and other intangible assets | 100,968 | 83,909 |
| Property, plant and equipment | 61,946 | 52,602 |
| Investments in associates and joint ventures, deferred tax assets | ||
| and other non-current assets | 62,265 | 48,633 |
| Total non-current assets | 225,179 | 185,144 |
| Inventories | 1,673 | 1,168 |
| Trade receivables, current tax assets and other receivables | 23,434 | 20,881 |
| Interest-bearing receivables | 2,147 | 1,701 |
| Cash and cash equivalents | 11,826 | 7,802 |
| Total current assets | 39,080 | 31,552 |
| Non-current assets held-for-sale | 27 | 6 |
| Total assets | 264,286 | 216,702 |
| Equity and liabilities | ||
| Shareholders' equity | 130,387 | 117,274 |
| Minority interests | 11,061 | 9,783 |
| Total equity | 141,448 | 127,057 |
| Long-term borrowings | 54,178 | 41,030 |
| Deferred tax liabilities, other long-term provisions | 24,594 | 16,748 |
| Other long-term liabilities | 2,565 | 2,366 |
| Total non-current liabilities | 81,337 | 60,144 |
| Short-term borrowings | 11,621 | 2,549 |
| Trade payables, current tax liabilities, short-term provisions | ||
| and other current liabilities | 29,880 | 26,952 |
| Total current liabilities | 41,501 | 29,501 |
| Total equity and liabilities | 264,286 | 216,702 |
| Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec | |
|---|---|---|---|---|
| SEK in millions | 2008 | 2007 | 2008 | 2007 |
| Cash flow before change in working capital | 9,300 | 5,706 | 28,480 | 27,541 |
| Change in working capital | 93 | 626 | -1,394 | -1,012 |
| Cash flow from operating activities | 9,393 | 6,332 | 27,086 | 26,529 |
| Intangible and tangible fixed assets acquired | ||||
| (cash CAPEX) | -4,475 | -4,493 | -15,758 | -13,525 |
| Free cash flow | 4,918 | 1,839 | 11,328 | 13,004 |
| Cash flow from other investing activities | -3,926 | -242 | -3,876 | -2,180 |
| Total cash flow from investing activities | -8,401 | -4,735 | -19,634 | -15,705 |
| Cash flow before financing activities | 992 | 1,597 | 7,452 | 10,824 |
| Cash flow from financing activities | 1,336 | 491 | -4,359 | -14,726 |
| Cash flow for the period | 2,328 | 2,088 | 3,093 | -3,902 |
| Cash and cash equivalents, opening balance | 8,799 | 5,641 | 7,802 | 11,603 |
| Cash flow for the period | 2,328 | 2,088 | 3,093 | -3,902 |
| Exchange rate differences | 699 | 73 | 931 | 101 |
| Cash and cash equivalents, closing balance | 11,826 | 7,802 | 11,826 | 7,802 |
| Jan-Dec 2008 | Jan-Dec 2007 | |||||
|---|---|---|---|---|---|---|
| Share | Share | |||||
| holders' | Minority | Total | holders' | Minority | Total | |
| SEK in millions | equity | interests | equity | equity | interests | equity |
| Opening balance | 117,274 | 9,783 | 127,057 | 119,217 | 8,500 | 127,717 |
| Reporting financial instru | ||||||
| ments at fair value | -341 | – | -341 | 39 | – | 39 |
| Hedging of foreign opera | ||||||
| tions, net of tax | -780 | – | -780 | -114 | – | -114 |
| Currency translation differ | ||||||
| ences | 13,185 | 1,675 | 14,860 | 8,748 | 160 | 8,908 |
| Net income recognized | ||||||
| directly in equity | 12,064 | 1,675 | 13,739 | 8,673 | 160 | 8,833 |
| Net income | 19,011 | 2,431 | 21,442 | 17,674 | 2,624 | 20,298 |
| Comprehensive income | 31,075 | 4,106 | 35,181 | 26,347 | 2,784 | 29,131 |
| Transactions with minority | ||||||
| shareholders in subsidiaries | – | -842 | -842 | – | -42 | -42 |
| Dividends | -17,962 | -1,986 | -19,948 | -28,290 | -1,459 | -29,749 |
| Closing balance | 130,387 | 11,061 | 141,448 | 117,274 | 9,783 | 127,057 |
General. As in the annual accounts for 2007, TeliaSonera's consolidated financial statements as of and for the year ended December 31, 2008, 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 Accounts Act as well as standard RFR 2.2 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.
New accounting standards (not yet adopted by the EU). A revised IFRS 1 First-time Adoption of International Financial Reporting Standards (effective for annual periods beginning on or after January 1, 2009; earlier application permitted) was issued on November 27, 2008. The revised version has an improved structure but does not contain any technical changes. IFRS 1 is not applicable to TeliaSonera.
An updated version of the recent reclassification amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures (issued on October 13, 2008) was issued on November 27, 2008, clarifying the effective date requirements as follows: "Any reclassification made on or after 1 November 2008 takes effect from the date of reclassification. However, any reclassification before 1 November 2008 can take effect from 1 July 2008 or a subsequent date. A reclassification cannot be applied retrospectively before 1 July 2008." Currently, TeliaSonera is not considering the reclassification of any financial assets.
IFRIC 17 Distributions of Non-cash Assets to Owners (effective for annual periods beginning on or after July 1, 2009; earlier application permitted; prospective application required) was issued on November 27, 2008. IFRIC 17 applies to pro rata distributions of non-cash assets except for common control transactions and clarifies that: (a) a dividend payable should be recognized when the dividend is appropriately authorized and is no longer at the discretion of the entity; (b) the dividend payable should be measured at the fair value of the net assets to be distributed; and that (c) the difference between the dividend paid and the carrying amount of the net assets distributed should be recognized in profit or loss. IFRIC 17 also requires an entity to provide additional disclosures if the net assets being held for distribution to owners meet the definition of a discontinued operation. Currently, IFRIC 17 is not relevant to TeliaSonera.
IFRIC 18 Transfers of Assets from Customers (effective for transfers received on or after July 1, 2009; earlier application permitted within limits; to be applied prospectively) was issued on January 29, 2009. IFRIC 18 clarifies (a) the circumstances in which the definition of an asset is met; (b) the recognition of the asset and the measurement of its cost on initial recognition; (c) the identification of the separately identifiable services (one or more services in exchange for the transferred asset); (d) the recognition of revenue; and (e) the accounting for transfers of cash from customers. Currently, IFRIC 18 is not expected to have any significant impact on TeliaSonera's results or financial position.
For additional information, see corresponding sections in TeliaSonera's Interim Report January-September 2008, Interim Report January-June 2008 and Annual Report 2007.
| Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec | |
|---|---|---|---|---|
| SEK in millions | 2008 | 2007 | 2008 | 2007 |
| Within EBITDA | -307 | -276 | -1,296 | -688 |
| Restructuring charges, synergy implementa | ||||
| tion costs, etc.: | ||||
| Mobility Services | -83 | -157 | -397 | -363 |
| Broadband Services | -219 | -246 | -1,194 | -599 |
| Other operations | -5 | -5 | 295 | 142 |
| of which TeliaSonera Holding | -3 | 2 | 383 | 161 |
| Capital gains: | ||||
| Broadband Services | – | 132 | – | 132 |
| Within Depreciation, amortization and | ||||
| impairment losses | -15 | -24 | -97 | -635 |
| Impairment losses, accelerated depreciation: | ||||
| Mobility Services | – | – | -3 | – |
| Broadband Services | -15 | -24 | -94 | -635 |
| Within Income from associated companies | ||||
| and joint ventures | – | – | – | – |
| Within Finance costs and other financial | ||||
| items, net | – | – | 290 | – |
| Penalty interest: | ||||
| Tele2 | – | – | 290 | – |
| Total | -322 | -300 | -1,103 | -1,323 |
Deferred Taxes
| Dec 31, | Dec 31, | |
|---|---|---|
| SEK in millions | 2008 | 2007 |
| Deferred tax assets | 13,206 | 12,017 |
| Deferred tax liabilities | -11,260 | -9,577 |
| Net deferred tax assets | 1,946 | 2,440 |
| Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec | |
|---|---|---|---|---|
| SEK in millions | 2008 | 2007 | 2008 | 2007 |
| Mobility Services | 2,283 | 1,580 | 9,526 | 8,386 |
| Broadband Services | 1,009 | 1,688 | 5,396 | 6,413 |
| Eurasia | 4,111 | 2,926 | 13,731 | 10,883 |
| Other operations | -47 | -180 | -5 | 406 |
| Total segments | 7,356 | 6,014 | 28,648 | 26,088 |
| Elimination of inter-segment profits | 0 | 44 | 0 | 67 |
| Group | 7,356 | 6,058 | 28,648 | 26,155 |
MegaFon. As of December 31, 2008, TeliaSonera had interest-bearing claims of SEK 362 million on its associated company OAO MegaFon. OAO Telecominvest (TCI), 26.1 percent owned by TeliaSonera, owns 31.3 percent of the shares in MegaFon. TeliaSonera has signed agreements with TCI and a TCI shareholder in order to secure TeliaSonera's ownership in MegaFon, including an agreement under which TCI has pledged 8.2 percent of the shares in MegaFon to TeliaSonera.
Svenska UMTS-nät. In the three-month period and the year ended December 31, 2008, TeliaSonera purchased services from its 50 percent-owned joint venture Svenska UMTSnät AB worth SEK 165 million and SEK 550 million, respectively, and sold services worth SEK 84 million and SEK 357 million, respectively.
| Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec | |
|---|---|---|---|---|
| SEK in millions | 2008 | 2007 | 2008 | 2007 |
| CAPEX | 4,523 | 4,537 | 15,795 | 13,531 |
| Intangible assets | 792 | 444 | 2,528 | 1,308 |
| Property, plant and equipment | 3,731 | 4,093 | 13,267 | 12,223 |
| Acquisitions and other investments | 4,841 | 2,298 | 9,060 | 7,171 |
| Asset retirement obligations | 443 | 82 | 443 | 82 |
| Goodwill and fair value adjustments | 4,386 | 2,211 | 8,578 | 6,483 |
| Equity holdings | 12 | 5 | 39 | 606 |
| Total | 9,364 | 6,835 | 24,855 | 20,702 |
Net Debt
| Dec 31, | Dec 31, | |
|---|---|---|
| SEK in millions | 2008 | 2007 |
| Long-term and short-term borrowings, net of derivatives1) | 61,472 | 43,016 |
| Less short-term investments, cash and bank | -12,858 | -8,861 |
| Net debt | 48,614 | 34,155 |
1) As of the fourth quarter 2008, the net debt calculation includes derivatives recognized as financial assets and designated to hedge long-term and short-term borrowings. Comparative figures have been restated.
The underlying cash flow generation was positive also in the fourth quarter 2008.
Conditions for funding activities in the fourth quarter improved somewhat compared to the very strained situation during early autumn. In the quarter, TeliaSonera issued both shortterm debt in the form of commercial papers, focusing on maturities over 3 months, and long-term debt in EUR as well as in SEK with maturities around 5 years. Credit spreads rose but due to successively lower underlying interest rates the total borrowing cost remained fairly reasonable.
| Dec 31, | Dec 31, | |
|---|---|---|
| 2008 | 2007 | |
| Return on equity (%, rolling 12 months) | 17.2 | 18.6 |
| Return on capital employed (%, rolling 12 months) | 17.3 | 19.4 |
| Equity/assets ratio (%) | 50.5 | 50.3 |
| Net debt/equity ratio (%) | 36.5 | 31.3 |
| Shareholders' equity per share (SEK) | 29.04 | 26.12 |
For additional information on business combinations during the year, see corresponding sections in TeliaSonera's interim reports for the first, second and third quarter of 2008.
On October 1, 2008, TeliaSonera took a further step in executing its strategy to expand into new high-growth emerging markets by acquiring 51 percent of the shares and votes in TeliaSonera Asia Holding B.V. (Asia Holding), which owns controlling interests in:
Goodwill is explained by potential increases in subscription numbers, a strong market position in Nepal and synergies from subsequent restructuring of the operations.
The results of the Asia Holding operations have been included in the consolidated financial statements as of October 1, 2008.
| Preliminary purchase price allocation | SEK in millions |
|---|---|
| Purchase consideration | 3,328 |
| Transaction related direct expenses | 54 |
| Total cost of the combination | 3,382 |
| Licenses | 664 |
| Interconnect agreements | 881 |
| Customer relationships | 158 |
| Mobile networks | 427 |
| Financial non-current assets | 9 |
| Inventories, receivables and other current assets | 108 |
| Cash and cash equivalents | 56 |
| Minority interests | -655 |
| Deferred income tax liabilities | -398 |
| Other long-term liabilities | -189 |
| Short-term liabilities | -398 |
| Total fair value of net assets acquired | 663 |
| Goodwill (allocated to business area Eurasia) | 2,719 |
| Cash flow effects | SEK in millions |
|---|---|
| Total cost of the combination paid in cash | 3,382 |
| Less acquired cash and cash equivalents | -56 |
| Net cash outflow from the combination | 3,326 |
| Impact on consolidated financials, October 1 – December 31, 2008 | SEK in millions |
|---|---|
| Net sales | 168 |
| Net income | 16 |
| Pro forma effects, as if the combination | TeliaSonera | ||
|---|---|---|---|
| had taken place at January 1, 2008 | TeliaSonera | Asia | Group |
| (SEK in millions, except per share data) | Group | Holding | pro forma |
| Net sales | 103,585 | 398 | 103,983 |
| Net income | 21,442 | -14 | 21,428 |
| Earnings per share (SEK) | 4.23 | 4.23 |
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.
For minor business combinations in the fourth quarter, the cost of combination totaled SEK 15 million and the net cash outflow SEK 15 million. Goodwill was SEK 11 million, allocated to business area Broadband Services. Goodwill is explained by strengthened market positions. 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.
Guarantees at December 31, 2008, totaled SEK 2,303 million, of which SEK 2,021 million referred to credit guarantees on behalf of Svenska UMTS-nät. Under certain third-party agreements, the credit guarantees on behalf of Svenska UMTS-nät are capped at SEK 2,400 million. Collateral pledged totaled SEK 1,854 million, mainly referring to blocked funds in bank accounts for Ipse 2000 S.p.A.'s future license payments and for certain court proceedings.
Contractual obligations at December 31, 2008, totaled SEK 1,843 million, of which SEK 1,512 million referred to contracted build-out of TeliaSonera's mobile networks in Sweden, Finland and Spain as well as fixed network in Sweden.
| Condensed Income Statements | Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec |
|---|---|---|---|---|
| (SEK in millions) | 2008 | 2007 | 2008 | 2007 |
| Net sales | 3,888 | 4,405 | 16,132 | 17,809 |
| Gross profit | 557 | 1,737 | 2,778 | 7,084 |
| Operating income | 4 | 1,851 | 21,697 | 6,303 |
| Income after financial items | -2,159 | 2,777 | 18,280 | 23,845 |
| Income before taxes | -49 | 1,668 | 30,317 | 21,259 |
| Net income | -69 | 1,172 | 30,306 | 20,001 |
Net sales, primarily related to fixed network services in Sweden, declined due to migration to mobile services and lower-priced IP-based services, and to operations being transferred to the subsidiary TeliaSonera Skanova Access AB (Skanova Access). Out of the total net sales in the year, SEK 12,644 million (12,811) was billed to subsidiaries. Operating income increased strongly due to capital gains on assets transferred to Skanova Access at the beginning of the year. In 2007, income after financial items was positively impacted by dividend payments from subsidiaries.
| Condensed Balance Sheets | Dec 31, | Dec 31, |
|---|---|---|
| (SEK in millions) | 2008 | 2007 |
| Non-current assets | 170,852 | 142,469 |
| Current assets | 40,246 | 39,967 |
| Total assets | 211,098 | 182,436 |
| Shareholders' equity | 75,017 | 63,013 |
| Untaxed reserves | 8,024 | 20,061 |
| Provisions | 708 | 944 |
| Liabilities | 127,349 | 98,418 |
| Total equity and liabilities | 211,098 | 182,436 |
Total investments in the year were SEK 40,280 million (13,269), of which SEK 1,276 million (2,705) in property, plant and equipment primarily for the fixed network. Other investments totaled SEK 39,004 million (10,564), of which SEK 34,000 million related to a capital contribution provided in kind in exchange for new shares issued by Skanova Access. In 2007, other investments included the acquisitions of Cygate and debitel Danmark (SEK 2,024 million) and intra-group transfers of shareholdings (SEK 8,015 million).
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. TeliaSonera 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 process in place to regularly identify, analyze and assess, and report business and financial risks and uncertainties, and to mitigate such risks when appropriate. Risk management is an integrated part of Telia-Sonera's business planning process.
See "Report of the Directors – Risks and Risk Management" in TeliaSonera's Annual Report 2007 for a detailed description of some of the factors that may affect TeliaSonera's business, financial condition and results of operations.
Risks and uncertainties that could specifically impact the quarterly results of operations during 2009 include, but may not be limited to:
Efficiency programs. TeliaSonera is in the process of adjusting its cost base to reflect the shift from traditional to new services, especially from fixed-voice services to mobile and IP-based services. In the short term, depending on when the related decisions are made and carried out, these efficiency programs may not yet bring the cost savings that will be visible in the long term. Additionally, related amounts of restructuring costs and their timing may increase the volatility of quarterly results in the short term.
Non-recurring items. In accordance with their nature, non-recurring items such as capital gains and losses, restructuring costs, write-downs, 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.
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.
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