Earnings Release • Feb 11, 2010
Earnings Release
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| SEK in millions, except key ratios, | Oct-Dec | Oct-Dec | Chg | Jan-Dec | Jan-Dec | Chg |
|---|---|---|---|---|---|---|
| per share data and changes | 2009 | 2008 | (%) | 2009 | 2008 | (%) |
| Net sales | 27,410 | 28,096 | -2 | 109,161 | 103,585 | 5 |
| Addressable cost base1, 2) | 8,443 | 9,674 | -13 | 33,568 | 33,859 | -1 |
| EBITDA2) excl. non-recurring items3) | 9,039 | 8,272 | 9 | 36,666 | 32,954 | 11 |
| Margin (%) | 33.0 | 29.4 | 33.6 | 31.8 | ||
| Operating income | 7,505 | 7,356 | 2 | 30,324 | 28,648 | 6 |
| Operating income excl. non-recurring items | 7,573 | 7,678 | -1 | 31,679 | 30,041 | 5 |
| Net income | 5,499 | 6,399 | -14 | 21,280 | 21,442 | -1 |
| of which attributable to owners of the parent | 4,902 | 5,644 | -13 | 18,854 | 19,011 | -1 |
| Earnings per share (SEK) | 1.09 | 1.26 | -13 | 4.20 | 4.23 | -1 |
| Return on equity (%, rolling 12 months) | 15.2 | 17.2 | 15.2 | 17.2 | ||
| CAPEX-to-sales (%) | 17.2 | 16.1 | 12.8 | 15.2 | ||
| Free cash flow | 4,660 | 4,918 | -5 | 17,024 | 11,328 | 50 |
1) Additional information available at www.teliasonera.com/ir.
2) Please refer to page 18 for definitions.
3) Non-recurring items; see table on page 23.
In this report, comparative figures are provided in parentheses following the operational and financial results and refer to the same item in the fourth quarter or the full year 2008, unless otherwise stated.
"I am proud of our achievements during 2009. We have been able to keep revenues in local currencies intact, reported the highest EBITDA ever and improved cash flow by as much as 50 percent compared to last year, due to a healthy mix of mature and emerging markets.
One of the things I and the rest of the management team are particularly proud of is that we have managed to break the trend of continuous cost increases. This is a result of major cost reductions in the Nordic and Baltic countries and tight cost control in Eurasia. In this context, I am encouraged that employee satisfaction and commitment improved. For the second year in a row, we have made significant progress and reached the highest level since TeliaSonera started measurements in 2004.
For a number of years, we have had the ambition to increase our ownership in both Turkcell and MegaFon. However, this has proven to be very difficult and we have explored different routes to increase our control over as well as the liquidity of these assets. In November, we took an important step towards resolving the long lasting ownership deadlock, by aligning our ownership interests with Altimo. However, we also made it clear at the time of the announcement that the real value of this agreement will lie in the execution of it.
As a result of our efficiency improvements and careful capital spending, free cash flow increased significantly and strengthened our financial position further. We are therefore in the fortunate position that we can increase capital expenditures for 2010 to secure our future growth. In addition, the Board of Directors will propose a 25 percent increase in ordinary dividend to our shareholders at the Annual General Meeting. The dividend policy has also been revised and the payout ratio has increased to be at least 50 percent of net income.
It is important that TeliaSonera is regarded as a pioneer by being in the forefront of adopting new technology and introducing new services. We were therefore excited that we were able to open up the world's first commercial 4G networks in the city centers of Stockholm and Oslo in December and the initial response from our customers has been positive. As we also strongly believe that the fixed network will remain competitive for a foreseeable future, we will selectively increase our fiber and IP investments within Broadband Services this year.
Looking ahead, TeliaSonera is a financially strong company with leading positions in most markets and with motivated and competent employees. We are confident that we will be able to defend our profitability in 2010."
Net sales in local currencies and excluding acquisitions are expected to be somewhat higher in 2010 compared to 2009. Currency fluctuations may have a material impact on reported figures in Swedish krona.
TeliaSonera will continue to invest in future growth as well as in the quality of networks and services. We expect the addressable cost base in 2010 to be in line with the SEK 33.6 billion of 2009, in local currencies and excluding acquisitions. The EBITDA margin in 2010 is expected to be somewhat higher compared to 2009, excluding non-recurring items.
Capital expenditures will be driven by continued investments in broadband and mobile capacity as well as in network expansion in Eurasia. The CAPEX-to-sales ratio is expected to be somewhat below 15 percent in 2010.
The intention was to keep the addressable cost base for 2009 below the SEK 33.8 billion of 2008, in local currencies and excluding acquisitions, and that the number of employees would be somewhat below 30,000 by year-end 2009 (32,171). In 2009, the addressable cost base in local currencies and excluding acquisitions decreased 6.8 percent compared to last year. The number of employees was 29,734 at the end of 2009.
Restructuring costs for 2008 and 2009, reported as non-recurring items, were SEK 3.4 billion. Restructuring costs in 2009 amounted to SEK 1.8 billion. The efficiency measures affecting 2,900 employees in Sweden and Finland, as announced in February 2008, have now been completed.
Net sales decreased 2.4 percent to SEK 27,410 million (28,096). Net sales in local currencies and excluding acquisitions decreased 0.5 percent. The positive effect of acquisitions was 0.3 percent and the negative effect of exchange rate fluctuations was 2.2 percent.
In Mobility Services, net sales decreased 0.6 percent to SEK 12,714 million (12,796). Net sales in local currencies and excluding acquisitions decreased 2.4 percent. The positive effect of exchange rate fluctuations was 1.8 percent.
In Broadband Services, net sales decreased 2.3 percent to SEK 10,858 million (11,109). Net sales in local currencies and excluding acquisitions decreased 3.2 percent. The positive effect of acquisitions was 0.8 percent and exchange rate fluctuations 0.1 percent.
In Eurasia, net sales were significantly impacted by currency movements and decreased 14.1 percent to SEK 3,625 million (4,219). Net sales in local currencies and excluding acquisitions increased 7.3 percent. The negative effect of exchange rate fluctuations was 21.4 percent.
The number of subscriptions rose by 12.7 million from the end of the fourth quarter of 2008 to 147.6 million, of which approximately 4.9 million to 48.5 million in the majorityowned operations and 7.8 million to 99.1 million in the associated companies. During the fourth quarter, the total number of subscriptions increased by more than 3.8 million, with 1.8 million new subscriptions in the majority-owned operations and over 2.0 million in the associated companies.
EBITDA, excluding non-recurring items, rose 9.3 percent to SEK 9,039 million (8,272). The increase in local currencies and excluding acquisitions was 13.8 percent. Efficiency measures, mainly in Sweden and Finland contributed to the increase. The margin rose to 33.0 percent (29.4).
Operating income, excluding non-recurring items, was SEK 7,573 million (7,678). The higher EBITDA was offset by lower income from associated companies. Income from associated companies declined 33.4 percent to SEK 1,803 million (2,706), mainly driven by currency fluctuations and lower contribution from Turkcell.
Non-recurring items affecting operating income totaled SEK -68 million (-322). Nonrecurring items included charges of approximately SEK -370 million (-200) related to efficiency measures. Non-recurring items were positively affected by SEK 282 million as a result of the agreement with Altimo to combine the two companies' ownership interests in Turkcell and MegaFon into a new company.
Financial items totaled SEK -522 million (-775), of which SEK -406 million (-674) related to net interest expenses. Financial items were positively affected by lower interest rates and lower net debt.
Income taxes increased to SEK -1,484 million (-182). The effective tax rate increased to 21.3 percent (2.8). The tax rate in the fourth quarter of 2008 was affected by positive one-off items of approximately SEK 1,050 million, mainly related to revaluation of deferred tax assets in the Swedish operation and new deferred tax assets in Finland, the Netherlands and International Carrier.
Minority interests in subsidiaries decreased to SEK 597 million (755), of which SEK 532 million (572) related to operations in Eurasia and SEK 52 million (175) to Eesti Telekom, LMT and TEO.
Net income attributable to owners of the parent company declined to SEK 4,902 million (5,644) and earnings per share to SEK 1.09 (1.26) due to lower income from associated companies and higher income taxes.
CAPEX increased to SEK 4,721 million (4,532) and the CAPEX-to-sales ratio to 17.2 percent (16.1).
Free cash flow was SEK 4,660 million (4,918). The higher EBITDA excluding non-recurring items was offset by higher restructuring provisions and that dividend from the associated company Turkcell Holding was paid in the fourth quarter of 2008 instead of in the third quarter as in 2009.
Net debt was SEK 46,175 million at the end of the fourth quarter (46,545 at the end of the third quarter).
The equity/assets ratio was 49.1 percent at the end of the fourth quarter (51.0 percent at the end of the third quarter).
Net sales increased 5.4 percent to SEK 109,161 million (103,585). Net sales in local currencies and excluding acquisitions decreased 0.3 percent. The positive effect of acquisitions was 1.1 percent and exchange rate fluctuations 4.6 percent.
In Mobility Services, net sales rose 4.9 percent to SEK 51,077 million (48,673). Net sales in local currencies and excluding acquisitions decreased 1.6 percent. The positive effect of acquisitions was 0.3 percent and exchange rate fluctuations 6.2 percent.
In Broadband Services, net sales increased 1.7 percent to SEK 43,342 million (42,625). Net sales in local currencies and excluding acquisitions decreased 3.1 percent. The positive effect of acquisitions was 0.4 percent and exchange rate fluctuations 4.4 percent.
In Eurasia, net sales rose 12.6 percent to SEK 14,866 million (13,204). Net sales in local currencies and excluding acquisitions increased 5.0 percent. The positive effect of acquisitions was 5.4 percent and exchange rate fluctuations 2.2 percent.
EBITDA, excluding non-recurring items, increased 11.3 percent to SEK 36,666 million (32,954). The increase in local currencies and excluding acquisitions was 6.0 percent. The EBITDA increase was driven by efficiency measures, mainly in Sweden and Finland, and improvement in profitability in Eurasia. The margin rose to 33.6 percent (31.8).
Operating income, excluding non-recurring items, rose to SEK 31,679 million (30,041) mainly due to higher EBITDA. Income from associated companies decreased 11.9 percent to SEK 8,015 million (9,096), mainly driven by currency fluctuations and lower contribution from Turkcell due to one-off items.
Non-recurring items affecting operating income were SEK -1,355 million (-1,393), including charges of about SEK -1,800 million (-1,630) related to efficiency measures. Non-recurring items were positively affected by SEK 282 million as a result of the agreement with Altimo to combine the two companies' ownership interests in Turkcell and MegaFon into a new company as well as a capital gain of SEK 141 million from the sale of SmartTrust within Telia-Sonera Holding.
Financial items totaled SEK -2,710 million (-2,237), of which SEK -2,346 million (-2,110) related to net interest expenses. The comparable period last year included a positive onetime interest payment of SEK 290 million related to a court decision on historical interconnect fees in Sweden.
Income taxes increased to SEK -6,334 million (-4,969). The effective tax rate increased to 22.9 percent (18.8). The tax rate in 2008 was affected by positive one-off items of approximately SEK 1,050 million in the fourth quarter as described on page 4.
Minority interests in subsidiaries were SEK 2,426 million (2,431), of which SEK 1,905 million (1,705) related to operations in Eurasia and SEK 471 million (692) to Eesti Telekom, LMT and TEO.
Net income attributable to owners of the parent company decreased to SEK 18,854 million (19,011) and earnings per share to SEK 4.20 (4.23) due to lower income from associated companies and higher income taxes.
CAPEX decreased to SEK 14,007 million (15,795) and the CAPEX-to-sales ratio fell to 12.8 percent (15.2). In 2008, CAPEX included a one-off payment of SEK 563 million for the acquisition of a 2.6 GHz license in Sweden in the second quarter.
Free cash flow improved to SEK 17,024 million (11,328), mainly due to higher EBITDA and dividends of SEK 2,153 million (1,410) from associated companies.
Net debt at year-end 2009 was SEK 46,175 million (48,614).
The equity/assets ratio decreased to 49.1 percent from 50.5 percent at year-end 2008.
• On June 3, 2009, TeliaSonera sold its 24 percent shareholding in SmartTrust and recognized a capital gain of total SEK 141 million.
• On February 2, 2010, TeliaSonera announced that it had increased its ownership in UCell (OOO Coscom) from 74 percent to 94 percent by acquiring 20 percent of the shares in the jointly owned TeliaSonera Uzbek Telecom Holding B.V. from Takilant Limited. TeliaSonera will pay approximately SEK 1,550 million (USD 220 million) for the shares. TeliaSonera Uzbek Telecom Holding B.V. is a Dutch holding company owning 100 percent of OOO Coscom in Uzbekistan.
The TeliaSonera share is listed on NASDAQ OMX Stockholm and NASDAQ OMX Helsinki. The share's settlement price in Stockholm increased 33.3 percent in 2009, from SEK 38.90 to SEK 51.85. The highest share price was SEK 53.35 (62.00) and the lowest SEK 34.40 (30.80). The number of shareholders decreased from 651,816 to 635,799. 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 13.8 percent from 15.6 percent.
For 2009, the Board of Directors proposes to the Annual General Meeting (AGM) an ordinary dividend of SEK 2.25 (1.80) per share, totaling SEK 10.1 billion, or 54 percent of net income attributable to owners of the parent company.
The Board of Directors proposes that the final day for trading in shares entitling shareholders to dividend be set for April 7, 2010, and that the first day of trading in shares excluding rights to dividend be set for April 8, 2010. The recommended record date at Euroclear Sweden for the right to receive dividend will be April 12, 2010. If the AGM votes to approve the Board's proposals, the dividend is expected to be distributed by Euroclear Sweden on April 15, 2010.
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 50 percent of net income attributable to owners 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.
Please refer to page 28 for the previous Dividend policy (published on October 26, 2007)
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, with the intention of cancelling repurchased shares.
The Annual General Meeting (AGM) will be held on April 7, 2010, at 14:00 CET at Cirkus, Stockholm. Notice of the meeting will be posted on TeliaSonera's website, www.teliasonera.com, and advertised in the newspapers at the beginning of March 2010. The record date entitling shareholders to attend the meeting will be March 30, 2010. Shareholders may file notice of intent to attend the AGM from March 8, 2010. TeliaSonera must receive notice of attendance no later than 16:00 CET on March 30, 2010.
Business area Mobility Services provides mobility services to the consumer and enterprise mass markets. Services include mobile voice and data, mobile content, WLAN Hotspots, mobile broadband, mobile/PC convergence and Wireless Office. The business area comprises mobile operations in Sweden, Finland, Norway, Denmark, Lithuania, Latvia, Estonia and Spain.
| SEK in millions, except margins, | Oct-Dec | Oct-Dec | Chg | Jan-Dec | Jan-Dec | Chg |
|---|---|---|---|---|---|---|
| operational data and changes | 2009 | 2008 | (%) | 2009 | 2008 | (%) |
| Net sales | 12,714 | 12,796 | -1 | 51,077 | 48,673 | 5 |
| EBITDA excl. non-recurring items | 3,858 | 3,507 | 10 | 14,961 | 14,399 | 4 |
| Margin (%) | 30.3 | 27.4 | 29.3 | 29.6 | ||
| Operating income | 2,624 | 2,283 | 15 | 10,084 | 9,526 | 6 |
| Operating income excl. non-recurring items | 2,746 | 2,366 | 16 | 10,536 | 9,926 | 6 |
| CAPEX | 1,365 | 1,145 | 19 | 3,867 | 4,467 | -13 |
| MoU | 193 | 196 | -2 | 191 | 195 | -2 |
| ARPU, blended (SEK) | 207 | 224 | -8 | 216 | 223 | -3 |
| Churn, blended (%) | 25 | 27 | -7 | 27 | 27 | 0 |
| Subscriptions, period-end (thousands) | 16,963 | 15,900 | 7 | 16,963 | 15,900 | 7 |
| Employees, period-end | 7,506 | 8,339 | -10 | 7,506 | 8,339 | -10 |
Additional segment information available at www.teliasonera.com/ir
• Net sales decreased 0.6 percent to SEK 12,714 million (12,796). Net sales in local currencies and excluding acquisitions decreased 2.4 percent. The positive effect of exchange rate fluctuations was 1.8 percent.
In local currencies, net sales grew in Sweden and Spain. Net sales in Sweden rose 6.4 percent to SEK 3,624 million (3,407) as a result of strong growth in mobile data, increased traffic revenues in the consumer segment and higher equipment sales. In Spain, net sales in local currency rose 33.4 percent to the equivalent of SEK 1,075 million (792). Net sales in Spain were negatively impacted by approximately SEK 120 million due to a reclassification of subsidies for equipment sales in own channels. This one-time revenue correction in the fourth quarter, related to the full year 2009, had no impact on EBITDA.
In Norway, net sales in local currency decreased 10.2 percent, partly as a result of a reduction in interconnect fees, roaming and equipment sales. In Finland, net sales in local currency decreased 1.4 percent compared to the corresponding quarter last year. This was an improvement compared with the third quarter of 2009 as a result of higher equipment sales and increased revenues from mobile data in the consumer segment. In Denmark, net sales in local currency fell 4.1 percent due to a decline in postpaid traffic, roaming and lower interconnect fees.
The situation in the Baltic countries remained challenging and the economic recession continued to cause substantial decline in traffic revenues and equipment sales. In Lithuania, Latvia and Estonia net sales in local currencies decreased by 29.6 percent, 23.0 percent and 16.8 percent respectively.
In Sweden, EBITDA excluding non-recurring items increased 13.9 percent to SEK 1,356 million (1,191). The EBITDA margin improved to 37.4 percent (35.0) due to increased sales in own channels. Despite a continued strong subscriber intake, the EBITDA loss in Spain narrowed further to SEK -119 million (-273) as a result of higher net sales and increased share of traffic in the own network.
The decrease in net sales in local currencies in Finland, Norway and Denmark were offset by personnel reductions and lower subscriber acquisition costs and the EBITDA margins improved to 33.4 percent (26.8), 34.7 percent (33.6) and 22.8 percent (21.3) respectively.
In Lithuania, operating costs were successfully reduced and the EBITDA margin improved considerably to 39.5 percent (32.8). In Latvia and Estonia, cost savings did not fully compensate for the decline in sales and EBITDA margins fell to 37.8 percent (40.9) and 35.7 percent (37.0) respectively.
• CAPEX increased to SEK 1,365 million (1,145) and the CAPEX-to-sales ratio to 10.7 percent (8.9) due to 4G roll out in Sweden and Norway. Cash flow, measured as EBITDA, excluding non-recurring items, minus CAPEX, increased to SEK 2,493 million (2,362).
| SEK in millions, except margins | Oct-Dec | Oct-Dec | Chg | Jan-Dec | Jan-Dec | Chg |
|---|---|---|---|---|---|---|
| and changes | 2009 | 2008 | (%) | 2009 | 2008 | (%) |
| Net sales | 12,714 | 12,796 | -1 | 51,077 | 48,673 | 5 |
| of which Sweden | 3,624 | 3,407 | 6 | 14,114 | 13,334 | 6 |
| of which Finland | 2,677 | 2,678 | 0 | 10,540 | 9,917 | 6 |
| of which Norway | 2,220 | 2,289 | -3 | 8,977 | 9,433 | -5 |
| of which Denmark | 1,732 | 1,793 | -3 | 7,278 | 6,845 | 6 |
| of which Lithuania | 489 | 698 | -30 | 2,220 | 2,722 | -18 |
| of which Latvia | 510 | 663 | -23 | 2,286 | 2,635 | -13 |
| of which Estonia | 496 | 592 | -16 | 2,080 | 2,262 | -8 |
| of which Spain | 1,075 | 792 | 36 | 4,086 | 2,050 | 99 |
| EBITDA excl. non-recurring items | 3,858 | 3,507 | 10 | 14,961 | 14,399 | 4 |
| of which Sweden | 1,356 | 1,191 | 14 | 5,483 | 4,949 | 11 |
| of which Finland | 893 | 719 | 24 | 3,423 | 3,079 | 11 |
| of which Norway | 770 | 769 | 0 | 3,156 | 3,328 | -5 |
| of which Denmark | 395 | 382 | 3 | 1,430 | 1,374 | 4 |
| of which Lithuania | 193 | 229 | -16 | 768 | 942 | -18 |
| of which Latvia | 193 | 271 | -29 | 935 | 1,134 | -18 |
| of which Estonia | 177 | 219 | -19 | 760 | 861 | -12 |
| of which Spain | -119 | -273 | -56 | -995 | -1,269 | -22 |
| Margin (%), total | 30.3 | 27.4 | 29.3 | 29.6 | ||
| Margin (%), Sweden | 37.4 | 35.0 | 38.8 | 37.1 | ||
| Margin (%), Finland | 33.4 | 26.8 | 32.5 | 31.0 | ||
| Margin (%), Norway | 34.7 | 33.6 | 35.2 | 35.3 | ||
| Margin (%), Denmark | 22.8 | 21.3 | 19.6 | 20.1 | ||
| Margin (%), Lithuania | 39.5 | 32.8 | 34.6 | 34.6 | ||
| Margin (%), Latvia | 37.8 | 40.9 | 40.9 | 43.0 | ||
| Margin (%), Estonia | 35.7 | 37.0 | 36.5 | 38.1 | ||
| Margin (%), Spain | neg | neg | neg | neg |
Business area Broadband Services provides mass-market services for connecting homes and offices. 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.
| SEK in millions, except margins, | Oct-Dec | Oct-Dec | Chg | Jan-Dec | Jan-Dec | Chg |
|---|---|---|---|---|---|---|
| operational data and changes | 2009 | 2008 | (%) | 2009 | 2008 | (%) |
| Net sales | 10,858 | 11,109 | -2 | 43,342 | 42,625 | 2 |
| EBITDA excl. non-recurring items | 3,270 | 2,552 | 28 | 13,922 | 11,705 | 19 |
| Margin (%) | 30.1 | 23.0 | 32.1 | 27.5 | ||
| Operating income | 1,774 | 969 | 83 | 7,420 | 5,285 | 40 |
| Operating income excl. non-recurring items | 1,941 | 1,198 | 62 | 8,649 | 6,568 | 32 |
| CAPEX | 1,667 | 1,984 | -16 | 4,942 | 5,810 | -15 |
| Broadband ARPU (SEK) | 314 | 287 | 9 | 312 | 270 | 16 |
| Subscriptions, period-end (thousands) | ||||||
| Broadband | 2,348 | 2,284 | 3 | 2,348 | 2,284 | 3 |
| Fixed voice | 5,212 | 5,806 | -10 | 5,212 | 5,806 | -10 |
| Associated company, total | 754 | 777 | -3 | 754 | 777 | -3 |
| Employees, period-end | 13,645 | 15,410 | -11 | 13,645 | 15,410 | -11 |
Additional segment information available at www.teliasonera.com/ir
• Net sales decreased 2.3 percent to SEK 10,858 million (11,109). Net sales in local currencies and excluding acquisitions decreased 3.2 percent. The positive effect from acquisitions was 0.8 percent and exchange rate fluctuations 0.1 percent. Sales of IPbased services increased 10.6 percent in reported currency and its share of Broadband Services external net sales increased to 35 percent (31).
In Sweden, the trend in external sales for fixed voice and IP based services was largely unchanged compared with previous quarters. However, net sales fell 5.6 percent to SEK 4,648 million (4,922), partly due to lower internal sales. The growth in IPTV continued and revenues doubled compared to last year. The price increases in fixed telephony in Sweden that were announced in March 2009 had a positive impact in the fourth quarter.
In Finland, net sales in local currency and excluding acquisitions decreased by 5.6 percent, mainly due to a decline in traditional fixed-voice services. Net sales were also negatively impacted by lower internal sales than in previous quarters.
The acquisition of the broadband and VoIP business of Tele2 Norge impacted reported net sales positively by approximately SEK 85 million in the fourth quarter of 2009. In Denmark, net sales in local currency increased 4.6 percent compared to the corresponding quarter last year. This was an improvement compared with the third quarter of 2009 as growth in IP based services offset the decline in traditional fixed line services.
The trends in the Baltic countries worsened in the fourth quarter as a result of the economic recession and net sales in local currencies in Lithuania and Estonia fell 6.7 percent and 15.3 percent, respectively. Net sales in Wholesale remained largely at the same level as in the corresponding quarter last year at SEK 3,203 million (3,170).
• The number of subscriptions for broadband access rose to 2,348,000, an increase of 64,000 from the end of 2008, but a decrease of 3,000 in the quarter.
The total number of TV subscriptions rose by 141,000 from the end of 2008 to 798,000, of which 620,000 were IPTV subscriptions. About 26 percent of TeliaSonera's broadband customers also subscribe to the IPTV services. The total number of IPTV subscriptions increased by 59,000 during the quarter, of which 29,000 in Sweden.
The number of fixed-voice subscriptions decreased by 594,000 from the end of 2008 to 5,212,000, and was down 136,000 from the third quarter of 2009. The intake of VoIP subscriptions was 26,000 in the quarter, bringing the total number of VoIP subscriptions to 228,000.
• EBITDA, excluding non-recurring items, rose 28.1 percent to SEK 3,270 million (2,552). Addressable cost base in local currencies and excluding acquisitions fell 20.2 percent compared to last year, with the Swedish and Finnish operations showing the largest decline, 23.1 percent in total. The EBITDA margin improved to 30.1 percent (23.0).
In Sweden, the EBITDA margin improved to 34.1 percent (23.6) due to sustainable lower addressable cost base level as a result of efficiency measures, improved gross margin including lower interconnect costs.
In Finland, the EBITDA margin rose to 31.3 percent (20.9) mainly due to improved cost efficiency and lower cost of goods sold. In Estonia, lower interconnect and subcontracting costs improved the EBITDA margin to 26.4 percent (23.6). In Denmark, lower subscriber acquisition and lower network costs lifted the EBITDA margin to 10.5 percent (neg).
In Norway, decisions to extract further synergies from the acquired operation of Tele2 Norge impacted profitability negatively in the fourth quarter. The EBITDA margin decreased to 13.0 percent (18.3) although the underlying margin remained unchanged at approximately 20 percent. In Lithuania, the decrease in operating costs could not offset the decrease in net sales and the EBITDA margin fell to 33.4 percent (38.8).
• CAPEX decreased to SEK 1,667 million (1,984) and the CAPEX-to-sales ratio to 15.4 percent (17.9). Cash flow, measured as EBITDA, excluding non-recurring items, minus CAPEX, increased to SEK 1,603 million (568).
| SEK in millions, except margins | Oct-Dec | Oct-Dec | Chg | Jan-Dec | Jan-Dec | Chg |
|---|---|---|---|---|---|---|
| and changes | 2009 | 2008 | (%) | 2009 | 2008 | (%) |
| Net sales | 10,858 | 11,109 | -2 | 43,342 | 42,625 | 2 |
| of which Sweden | 4,648 | 4,922 | -6 | 18,692 | 19,283 | -3 |
| of which Finland | 1,642 | 1,728 | -5 | 6,772 | 6,321 | 7 |
| of which Norway | 324 | 224 | 45 | 1,114 | 913 | 22 |
| of which Denmark | 275 | 259 | 6 | 1,086 | 994 | 9 |
| of which Lithuania | 592 | 631 | -6 | 2,508 | 2,302 | 9 |
| of which Estonia | 518 | 606 | -15 | 2,128 | 2,163 | -2 |
| of which Wholesale | 3,203 | 3,170 | 1 | 12,415 | 12,010 | 3 |
| EBITDA excl. non-recurring items | 3,270 | 2,552 | 28 | 13,922 | 11,705 | 19 |
| of which Sweden | 1,585 | 1,164 | 36 | 6,607 | 5,264 | 26 |
| of which Finland | 514 | 362 | 42 | 2,217 | 1,461 | 52 |
| of which Norway | 42 | 41 | 2 | 199 | 183 | 9 |
| of which Denmark | 29 | -29 | 87 | -112 | ||
| of which Lithuania | 198 | 245 | -19 | 1,065 | 983 | 8 |
| of which Estonia | 137 | 143 | -4 | 624 | 578 | 8 |
| of which Wholesale | 765 | 630 | 21 | 3,122 | 3,350 | -7 |
| Margin (%), total | 30.1 | 23.0 | 32.1 | 27.5 | ||
| Margin (%), Sweden | 34.1 | 23.6 | 35.3 | 27.3 | ||
| Margin (%), Finland | 31.3 | 20.9 | 32.7 | 23.1 | ||
| Margin (%), Norway | 13.0 | 18.3 | 17.9 | 20.0 | ||
| Margin (%), Denmark | 10.5 | neg | 8.0 | neg | ||
| Margin (%), Lithuania | 33.4 | 38.8 | 42.5 | 42.7 | ||
| Margin (%), Estonia | 26.4 | 23.6 | 29.3 | 26.7 | ||
| Margin (%), Wholesale | 23.9 | 19.9 | 25.1 | 27.9 |
Business area Eurasia comprises mobile operations 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 strategy is to create shareholder value by increasing mobile penetration and introducing value-added services in each respective country.
| SEK in millions, except margins, | Oct-Dec | Oct-Dec | Chg | Jan-Dec | Jan-Dec | Chg |
|---|---|---|---|---|---|---|
| operational data and changes | 2009 | 2008 | (%) | 2009 | 2008 | (%) |
| Net sales | 3,625 | 4,219 | -14 | 14,866 | 13,204 | 13 |
| EBITDA excl. non-recurring items | 1,810 | 2,089 | -13 | 7,469 | 6,553 | 14 |
| Margin (%) | 49.9 | 49.5 | 50.2 | 49.6 | ||
| Income from associated companies | ||||||
| Russia | 1,019 | 1,350 | -25 | 4,691 | 5,070 | -7 |
| Turkey | 773 | 1,291 | -40 | 3,056 | 3,991 | -23 |
| Operating income | 3,338 | 4,111 | -19 | 13,109 | 13,731 | -5 |
| Operating income excl. non-recurring items | 3,056 | 4,111 | -26 | 12,827 | 13,731 | -7 |
| CAPEX | 1,484 | 1,040 | 43 | 4,416 | 4,595 | -4 |
| Subscriptions, period-end (thousands) | ||||||
| Subsidiaries | 22,558 | 18,416 | 22 | 22,558 | 18,416 | 22 |
| Associated companies | 98,342 | 90,558 | 9 | 98,342 | 90,558 | 9 |
| Employees, period-end | 4,888 | 4,780 | 2 | 4,888 | 4,780 | 2 |
Additional segment information available at www.teliasonera.com/ir
• Net sales decreased 14.1 percent to SEK 3,625 million (4,219). Organic growth in local currencies was 7.3 percent. The negative effect from exchange rate fluctuations was 21.4 percent.
Net sales in local currency in Kazakhstan increased by 6.7 percent, an improvement compared to the previous quarter. This was mainly due to a strong subscriber intake as a result on the launch of new tariff plans offering equal prices to all networks. In Azerbaijan, net sales in local currency decreased 9.6 percent to the equivalent of SEK 887 million (1,086), of which approximately half can be explained by the introduction of asymmetrical interconnect pricing between operators in the third quarter.
Net sales in local currencies in Uzbekistan and Tajikistan increased by 81.2 percent and 43.1 percent to the equivalents of SEK 311 million (206) and SEK 190 million (179), respectively, as a result of strong subscriber intake.
| Oct-Dec | Oct-Dec | Chg | Jan-Dec | Jan-Dec | Chg | |
|---|---|---|---|---|---|---|
| SEK in millions, except changes | 2009 | 2008 | (%) | 2009 | 2008 | (%) |
| Net sales | 3,625 | 4,219 | -14 | 14,866 | 13,204 | 13 |
| of which Kazakhstan | 1,623 | 2,074 | -22 | 6,593 | 6,673 | -1 |
| of which Azerbaijan | 887 | 1,086 | -18 | 3,829 | 3,563 | 7 |
| of which Uzbekistan | 311 | 206 | 51 | 1,200 | 496 | 142 |
| of which Tajikistan | 190 | 179 | 6 | 735 | 516 | 42 |
| of which Georgia | 313 | 388 | -19 | 1,331 | 1,393 | -4 |
| of which Moldova | 117 | 127 | -8 | 486 | 420 | 16 |
| of which Nepal | 182 | 158 | 15 | 687 | 158 | |
| of which Cambodia | 7 | 10 | -30 | 31 | 10 |
• TeliaSonera's income from Russia decreased to SEK 4,691 million (5,070). The Russian ruble depreciated 9.0 percent against the Swedish krona which had a negative effect of SEK 463 million.
Other operations
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 | 2009 | 2008 | (%) | 2009 | 2008 | (%) |
| Net sales | 1,559 | 1,447 | 8 | 5,561 | 4,906 | 13 |
| EBITDA excl. non-recurring items | 103 | 135 | -24 | 314 | 333 | -6 |
| Income from associated companies | 4 | 13 | -69 | 191 | 6 | |
| Operating income | -233 | -7 | -307 | 106 | ||
| Operating income excl. non-recurring items | -173 | 3 | -351 | -184 | 91 | |
| CAPEX | 206 | 350 | -41 | 781 | 919 | -15 |
Additional segment information available at www.teliasonera.com/ir
• Net sales increased 7.7 percent to SEK 1,559 million (1,447). In local currencies and excluding acquisitions, net sales increased 5.8 percent.
Net sales in the cable TV company Telia Stofa was SEK 371 million (373). In local currency, net sales decreased 2.0 percent. The number of subscriptions for broadband access decreased by 3,000 from the end of 2008 to 147,000, while the number of subscriptions for cable TV increased by 8,000 to 218,000.
Stockholm, February 11, 2010
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, 2010.
Financial Information Annual General Meeting 2010 in Stockholm April 7, 2010 Interim Report January–March 2010 April 20, 2010 Interim Report January–June 2010 July 20, 2010 Interim Report January–September 2010 October 25, 2010
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
Addressable cost base: Comprises personnel costs, marketing costs and all other operating expenses other than purchases of goods and sub-contractor services, and interconnect, roaming and other network-related costs.
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.
| SEK in millions, except per share data, | Oct-Dec | Oct-Dec | Chg | Jan-Dec | Jan-Dec | Chg |
|---|---|---|---|---|---|---|
| number of shares and changes | 2009 | 2008 | (%) | 2009 | 2008 | (%) |
| Net sales | 27,410 | 28,096 | -2 | 109,161 | 103,585 | 5 |
| Cost of sales | -15,130 | -15,970 | -5 | -60,965 | -57,853 | 5 |
| Gross profit | 12,280 | 12,126 | 1 | 48,196 | 45,732 | 5 |
| Selling, admin. and R&D expenses | -6,484 | -7,294 | -11 | -24,718 | -25,400 | -3 |
| Other operating income and expenses, net | -94 | -182 | -48 | -1,169 | -780 | 50 |
| Income from associated companies and | ||||||
| joint ventures | 1,803 | 2,706 | -33 | 8,015 | 9,096 | -12 |
| Operating income | 7,505 | 7,356 | 2 | 30,324 | 28,648 | 6 |
| Finance costs and other financial items, net | -522 | -775 | -33 | -2,710 | -2,237 | 21 |
| Income after financial items | 6,983 | 6,581 | 6 | 27,614 | 26,411 | 5 |
| Income taxes | -1,484 | -182 | -6,334 | -4,969 | 27 | |
| Net income | 5,499 | 6,399 | -14 | 21,280 | 21,442 | -1 |
| Foreign currency translation differences | 3,327 | 10,850 | -69 | -7,355 | 13,814 | |
| Income from associated companies | -11 | -80 | -86 | 188 | -37 | |
| Cash flow hedges | 31 | -324 | 89 | -331 | ||
| Available-for-sale financial instruments | 1 | -37 | 34 | -97 | ||
| Income taxes relating to other comprehen | ||||||
| sive income | 52 | 325 | -84 | -296 | 390 | |
| Other comprehensive income | 3,400 | 10,734 | -68 | -7,340 | 13,739 | |
| Total comprehensive income | 8,899 | 17,133 | -48 | 13,940 | 35,181 | -60 |
| Net income attributable to: | ||||||
| Owners of the parent | 4,902 | 5,644 | -13 | 18,854 | 19,011 | -1 |
| Minority interests | 597 | 755 | -21 | 2,426 | 2,431 | 0 |
| Total comprehensive income attributable to: | ||||||
| Owners of the parent | 7,866 | 15,051 | -48 | 13,068 | 31,075 | -58 |
| Minority interests | 1,033 | 2,082 | -50 | 872 | 4,106 | -79 |
| Earnings per share (SEK), basic and diluted | 1.09 | 1.26 | -13 | 4.20 | 4.23 | -1 |
| 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 | 8,986 | 7,965 | 13 | 35,241 | 31,658 | 11 |
| EBITDA excl. non-recurring items | 9,039 | 8,272 | 9 | 36,666 | 32,954 | 11 |
| Depreciation, amortization and impairment | ||||||
| losses | -3,284 | -3,315 | -1 | -12,932 | -12,106 | 7 |
| Operating income excl. non-recurring items | 7,573 | 7,678 | -1 | 31,679 | 30,041 | 5 |
| Dec 31, | Dec 31, | |
|---|---|---|
| SEK in millions | 2009 | 2008 |
| Assets | ||
| Goodwill and other intangible assets | 100,239 | 100,968 |
| Property, plant and equipment | 61,222 | 61,946 |
| Investments in associates and joint ventures, deferred tax assets | ||
| and other non-current assets | 60,849 | 62,265 |
| Total non-current assets | 222,310 | 225,179 |
| Inventories | 1,551 | 1,673 |
| Trade receivables, current tax assets and other receivables | 21,595 | 23,434 |
| Interest-bearing receivables | 1,726 | 2,147 |
| Cash and cash equivalents | 22,488 | 11,826 |
| Total current assets | 47,360 | 39,080 |
| Non-current assets held-for-sale | 0 | 27 |
| Total assets | 269,670 | 264,286 |
| Equity and liabilities | ||
| Equity attributable to owners of the parent | 135,372 | 130,387 |
| Minority interests | 7,127 | 11,061 |
| Total equity | 142,499 | 141,448 |
| Long-term borrowings | 63,664 | 54,178 |
| Deferred tax liabilities, other long-term provisions | 25,625 | 24,594 |
| Other long-term liabilities | 1,589 | 2,565 |
| Total non-current liabilities | 90,878 | 81,337 |
| Short-term borrowings | 8,169 | 11,621 |
| Trade payables, current tax liabilities, short-term provisions | ||
| and other current liabilities | 28,124 | 29,880 |
| Total current liabilities | 36,293 | 41,501 |
| Total equity and liabilities | 269,670 | 264,286 |
| Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec | |
|---|---|---|---|---|
| SEK in millions | 2009 | 2008 | 2009 | 2008 |
| Cash flow before change in working capital | 8,325 | 9,300 | 31,965 | 28,480 |
| Change in working capital | 977 | 93 | -974 | -1,394 |
| Cash flow from operating activities | 9,302 | 9,393 | 30,991 | 27,086 |
| Cash CAPEX | -4,642 | -4,475 | -13,967 | -15,758 |
| Free cash flow | 4,660 | 4,918 | 17,024 | 11,328 |
| Cash flow from other investing activities | -2,725 | -3,926 | -3,660 | -3,876 |
| Total cash flow from investing activities | 7,367 | -8,401 | -17,627 | -19,634 |
| Cash flow before financing activities | 1,935 | 992 | 13,364 | 7,452 |
| Cash flow from financing activities | 2,999 | 1,336 | -2,568 | -4,359 |
| Cash flow for the period | 4,934 | 2,328 | 10,796 | 3,093 |
| Cash and cash equivalents, opening balance | 17,063 | 8,799 | 11,826 | 7,802 |
| Cash flow for the period | 4,934 | 2,328 | 10,796 | 3,093 |
| Exchange rate differences | 491 | 699 | -134 | 931 |
| Cash and cash equivalents, closing balance | 22,488 | 11,826 | 22,488 | 11,826 |
| Jan-Dec 2009 | Jan-Dec 2008 | |||||
|---|---|---|---|---|---|---|
| Owners of | Minority | Total | Owners of | Minority | Total | |
| SEK in millions | the parent | interests | equity | the parent | interests | equity |
| Opening balance | 130,387 | 11,061 | 141,448 | 117,274 | 9,783 | 127,057 |
| Dividends | -8,083 | -2,817 | -10,900 | -17,962 | -1,986 | -19,948 |
| Transactions with minority | ||||||
| interests | – | -1,989 | -1,989 | – | -842 | -842 |
| Total comprehensive income | 13,068 | 872 | 13,940 | 31,075 | 4,106 | 35,181 |
| Closing balance | 135,372 | 7,127 | 142,499 | 130,387 | 11,061 | 141,448 |
General. As in the annual accounts for 2008, TeliaSonera's consolidated financial statements as of and for the year ended December 31, 2009, 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 2.3 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.
Change in accounting policy. IFRSs are unclear on the accounting for certain transactions with minority interests. With respect to changes in the value of liabilities arising from put options granted to minority interests, TeliaSonera would previously have recognized such changes as an adjustment to goodwill if the option was granted in connection with a business combination and in net income if it was not (the IAS 39 approach). As of the fourth quarter of 2009, changes in the value of the liabilities have been recognized as adjustments to goodwill. This means that the liability is now considered contingent consideration applying business combination accounting (IFRS 3) by analogy. This is consistent with TeliaSonera's policy for other minority interest acquisitions. Additionally, the option strike prices are fair value at the exercise date, implying no gains or losses neither upon exercise nor during the term. For these reasons, TeliaSonera believes that it is more relevant to recognize value changes towards goodwill. As no value changes to the put option liabilities have previously been recognized, this change will have no retrospective impact.
New accounting standards (not yet adopted by the EU). On November 4, 2009, a revised IAS 24 Related Party Disclosures (effective for annual periods beginning on or after January 1, 2011; earlier application permitted) was issued, simplifying the disclosure requirements for government-related entities and changing the definition of a related party. The revision also changes the disclosure requirements in the separate financial statements of subsidiaries or associates. Previously, only directly or indirectly held investments in associates were included in the disclosure requirements, now any associated company of the whole Group is regarded as a related party also in separate financial statements. Further, "commitments" is added to the list of examples of related party transactions that are to be disclosed. Telia-Sonera's interpretation of the current disclosure requirements relating to transactions with other entities controlled, or significantly influenced by the governments of Sweden and Finland are in line with the revised disclosure requirements. TeliaSonera is currently analyzing the effects, if any, of adopting the other revisions to IAS 24.
On November 12, 2009, IFRS 9 Financial Instruments (effective for annual periods beginning on or after January 1, 2013; earlier application permitted; to be applied retrospectively but if adopted before January 1, 2012, restatement of prior periods is not required) was issued. Classification under IFRS 9 is driven by the entity's business model for managing financial assets and the contractual characteristics of the financial assets. IFRS 9 replaces the current multiple-category classification with the two categories: "amortized cost" and "fair value." The main principle is that a financial asset shall be measured at amortized cost if both of the following conditions are met: (a) the objective is to hold the financial asset in order to collect the contractual cash flows, and (b) the contractual terms give rise on specified dates to cash flows that solely represent payments of principal and interest. All other financial assets within scope are measured at fair value. Reclassifications between the categories are only allowed when the entity's business model for managing financial assets is changed. IFRS 9 requires all equity instruments within scope to be measured at fair value and removes the cost exemption for unquoted equities. Still, IFRS 9 states that in limited cases cost may be an appropriate estimate of fair value and includes a table of indicators that cost might not be representative of fair value. IFRS 9 also amends many other standards, including the disclosure requirements of IFRS 7. The issued parts of IFRS 9 mark the first phase of replacing IAS 39 Financial Instruments: Recognition and Measurement. Work on finalizing IFRS 9 is ongoing and includes addressing the impairment methodology for financial assets, hedge accounting as well as classification and measurement of financial liabilities. TeliaSonera is currently analyzing the effects, if any, of adopting the issued parts of IFRS 9. Tentatively, the change into two categories would in most cases have no major effect on the measurement of a specific financial asset since the measurement bases already today are amortized cost or fair value, even though IAS 39 specifies more than two categories.
On November 26, 2009, an amendment on prepayments of a minimum funding requirement to IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (effective January 1, 2011; earlier application permitted, to be applied retrospectively) was issued. The amendment is currently not relevant to TeliaSonera.
On November 26, 2009, IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (effective for annual periods beginning on or after July 1, 2010; earlier application permitted, to be applied retrospectively) was issued, clarifying the accounting treatment when an entity renegotiates the terms of a financial liability with its creditor and the creditor agrees to accept the entity's shares or other equity instruments to settle the liability fully or partially. IFRIC 19 is currently not relevant to TeliaSonera.
On January 28, 2010, an amendment on limited exemption from comparative IFRS 7 disclosures to IFRS 1 First-time Adoption of International Financial Reporting Standards (effective July 1, 2010; earlier application permitted) was issued. IFRS 1 is not applicable to TeliaSonera.
For additional information, see corresponding sections in TeliaSonera's Interim Report January-September 2009, Interim Report January-June 2009, Interim Report January-March 2009 and Annual Report 2008.
Non-recurring Items
| Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec | |
|---|---|---|---|---|
| SEK in millions | 2009 | 2008 | 2009 | 2008 |
| Within EBITDA | -53 | -307 | -1,425 | -1,296 |
| Restructuring charges, synergy implementation | ||||
| costs, etc.: | ||||
| Mobility Services | -122 | -83 | -452 | -397 |
| Broadband Services | -143 | -213 | -1,158 | -1,189 |
| Eurasia | 282 | – | 282 | – |
| Other operations | -70 | -11 | -97 | 290 |
| of which TeliaSonera Holding | -35 | -8 | -33 | 379 |
| Within Depreciation, amortization and | ||||
| impairment losses | -24 | -15 | -71 | -97 |
| Impairment losses, accelerated depreciation: | ||||
| Mobility Services | – | – | – | -3 |
| Broadband Services | -24 | -15 | -71 | -94 |
| Within Income from associated companies | ||||
| and joint ventures | 9 | – | 141 | – |
| Capital gains: | ||||
| SmartTrust | 9 | – | 141 | – |
| Within Finance costs and other financial | ||||
| items, net | – | – | – | 290 |
| Penalty interest: | ||||
| Tele2 | – | – | – | 290 |
| Total | -68 | -322 | -1,355 | -1,103 |
| Dec 31, | Dec 31, | |
|---|---|---|
| SEK in millions | 2009 | 2008 |
| Deferred tax assets | 11,177 | 13,206 |
| Deferred tax liabilities | -13,210 | -11,260 |
| Net deferred tax liabilities (-)/assets (+) | -2,033 | 1,946 |
| Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec | |
|---|---|---|---|---|
| SEK in millions | 2009 | 2008 | 2009 | 2008 |
| Mobility Services | 2,624 | 2,283 | 10,084 | 9,526 |
| Broadband Services | 1,774 | 969 | 7,420 | 5,285 |
| Eurasia | 3,338 | 4,111 | 13,109 | 13,731 |
| Other operations | -233 | -7 | -307 | 106 |
| Total segments | 7,503 | 7,356 | 30,306 | 28,648 |
| Elimination of inter-segment profits | 2 | 0 | 18 | 0 |
| Group | 7,505 | 7,356 | 30,324 | 28,648 |
MegaFon. OAO Telecominvest (TCI), 26.1 percent owned by TeliaSonera, owns 31.3 percent of the shares in TeliaSonera's associated company OAO 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, 2009, TeliaSonera purchased services from its 50 percent-owned joint venture, Svenska UMTSnät AB, worth SEK 201 million and SEK 725 million, respectively, and sold services worth SEK 61 million and SEK 320 million, respectively.
| Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec | |
|---|---|---|---|---|
| SEK in millions | 2009 | 2008 | 2009 | 2008 |
| CAPEX | 4,721 | 4,523 | 14,007 | 15,795 |
| Intangible assets | 597 | 792 | 1,856 | 2,528 |
| Property, plant and equipment | 4,124 | 3,731 | 12,151 | 13,267 |
| Acquisitions and other investments | 2,648 | 4,841 | 2,842 | 9,060 |
| Asset retirement obligations | 1,043 | 443 | 1,055 | 443 |
| Goodwill and fair value adjustments | 1,605 | 4,386 | 1,776 | 8,578 |
| Equity holdings | – | 12 | 11 | 39 |
| Total | 7,369 | 9,364 | 16,849 | 24,855 |
| Dec 31, | Dec 31, | |
|---|---|---|
| SEK in millions | 2009 | 2008 |
| Long-term and short-term borrowings | 71,833 | 65,799 |
| Less derivatives recognized as financial assets and hedging long | ||
| term and short-term borrowings | -2,861 | -4,327 |
| Less short-term investments, cash and bank | -22,797 | -12,858 |
| Net debt | 46,175 | 48,614 |
The underlying cash flow generation, excluding liquidity effects from acquisitions, was positive also in the fourth quarter of 2009.
Conditions for funding activities improved substantially during the latter part of 2009 after a very turbulent and difficult early part of the year. In November, TeliaSonera issued a second public bench-mark Eurobond, with final maturity in 2021. The nominal amount issued was EUR 600 million with a fixed rate coupon of 4.75 percent per annum. During the year, Telia-Sonera focused on medium and long-term debt issuance and no short-dated debt issuance was made in 2009.
Facing 2010, TeliaSonera's liquidity position is very strong.
The improvement in overall financial market sentiment, with credit spreads tightening from the high levels in the very early part of the year, and some signs of a recovery in the general economy, continued during the fourth quarter. However, it is not certain that the current positive trend will continue during 2010, since real economy effects and credit losses tend to lag and furthermore the current monetary policy in most countries is extremely loose, which needs to be reversed in a not too distant future. The Swedish krona remains weak in a historical perspective.
| Dec 31, | Dec 31, | |
|---|---|---|
| 2009 | 2008 | |
| Return on equity (%, rolling 12 months) | 15.2 | 17.2 |
| Return on capital employed (%, rolling 12 months) | 15.5 | 17.3 |
| Equity/assets ratio (%) | 49.1 | 50.5 |
| Net debt/equity ratio (%) | 34.9 | 36.5 |
| Owners' equity per share (SEK) | 30.15 | 29.04 |
For additional information on business combinations during the year, see corresponding sections in TeliaSonera's Interim Report January-September 2009 and Interim Report January-June 2009.
For minor business combinations in the fourth quarter, the cost of combination totaled SEK 30 million and the net cash outflow SEK 27 million. Goodwill was SEK 22 million, of which SEK 16 million allocated to business area Mobility Services and SEK 6 million to business area Broadband Services. Goodwill is explained by strengthened market positions. The total cost of combination and fair values were determined provisionally, as they are based on preliminary appraisals and subject to confirmation of certain facts. Thus, the purchase price accounting is subject to adjustment.
In the fourth quarter of 2009, TeliaSonera finalized the purchase price allocation for Telia-Sonera Asia Holding B.V., the Dutch company with shareholdings in mobile operators in Nepal and Cambodia that was acquired in October 2008. A few adjustments were made, resulting in a decrease of the value of the mobile license and the related deferred tax liability, and higher net debt. Goodwill increased net by SEK 160 million.
At December 31, 2009, the maximum potential future payments that TeliaSonera could be required to make under issued financial guarantees totaled SEK 2,306 million, of which SEK 2,025 million referred to credit guarantees on behalf of Svenska UMTS-nät AB. Collateral pledged totaled SEK 822 million, mainly referring to blocked funds in bank accounts related to shares in Svenska UMTS-nät, Ipse 2000 S.p.A.'s future license payments and insurance provisions.
Contractual obligations at December 31, 2009, totaled SEK 744 million, of which SEK 624 million referred to contracted build-out of TeliaSonera's mobile and fixed networks in Sweden.
| Condensed Income Statements | Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec |
|---|---|---|---|---|
| (SEK in millions) | 2009 | 2008 | 2009 | 2008 |
| Net sales | 3,872 | 3,888 | 15,135 | 16,132 |
| Operating income | 1,579 | 4 | 1,439 | 21,697 |
| Income after financial items | 2,320 | -2,159 | 12,964 | 18,280 |
| Income before taxes | 1,791 | -49 | 12,743 | 30,317 |
| Net income | 1,316 | -69 | 12,264 | 30,306 |
Net sales, primarily related to fixed network services and broadband application services in Sweden, declined due to migration to mobile services and lower-priced IP-based services. Out of the total net sales in the year, SEK 12,058 million (12,644) was billed to subsidiaries. Financial net improved strongly as a result of dividend payments from subsidiaries. In 2008, operating income was heavily impacted by capital gains on assets transferred to the subsidiary TeliaSonera Skanova Access AB (Skanova Access) and income before taxes by a related reversal of excess depreciation.
| Condensed Balance Sheets | Dec 31, | Dec 31, |
|---|---|---|
| (SEK in millions) | 2009 | 2008 |
| Non-current assets | 171,160 | 170,852 |
| Current assets | 51,677 | 40,246 |
| Total assets | 222,837 | 211,098 |
| Shareholders' equity | 79,280 | 75,017 |
| Untaxed reserves | 8,245 | 8,024 |
| Provisions | 698 | 708 |
| Liabilities | 134,614 | 127,349 |
| Total equity and liabilities | 222,837 | 211,098 |
Total investments in the year were SEK 4,879 million (40,280), of which SEK 914 million (1,276) in property, plant and equipment primarily for the fixed network. Other investments totaled SEK 3,965 million (39,004), of which SEK 3,535 million related to AS Eesti Telekom and TEO LT, AB. In 2008, other investments included a capital contribution of SEK 34,000 million provided in kind in exchange for new shares issued by Skanova Access.
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, and 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 "Report of the Directors – Risks and risk management" in TeliaSonera's Annual Report 2008 for a detailed description of some of the factors that may affect TeliaSonera's business, financial position and results of operations. TeliaSonera believes that the risk environment has not materially changed from the one described in the Annual Report 2008.
Risks and uncertainties that could specifically impact the quarterly results of operations during 2010 include, but may not be limited to:
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.
Associated companies. A significant portion of TeliaSonera's results derives from MegaFon and Turkcell, which TeliaSonera does not control and which operate in growth markets but also in more volatile political, economic and legal environments. Variations in the financial performance of these associated companies have an impact on Telia-Sonera's results of operations also in the short term.
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.
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 TeliaSonera, its associated companies and joint ventures, and the telecommunications industry in general. Forwardlooking 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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