Earnings Release • Jul 18, 2012
Earnings Release
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Interim Report January-June 2012. TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm
| SEK in millions, except key ratios, | Apr-Jun | Apr-Jun | Chg | Jan-Jun | Jan-Jun | Chg |
|---|---|---|---|---|---|---|
| per share data and changes | 2012 | 2011 | (%) | 2012 | 2011 | (%) |
| Net sales | 26,294 | 26,003 | 1 | 51,987 | 50,838 | 2 |
| Addressable cost base1, 2) | 7,679 | 7,771 | -1 | 15,119 | 15,343 | -1 |
| EBITDA2) excl. non-recurring items3) | 9,006 | 9,186 | -2 | 17,830 | 18,076 | -1 |
| Margin (%) | 34.3 | 35.3 | 34.3 | 35.6 | ||
| Operating income | 6,320 | 6,448 | -2 | 12,847 | 13,721 | -6 |
| Operating income excl. non-recurring items | 6,561 | 6,985 | -6 | 13,202 | 14,243 | -7 |
| Net income | 4,527 | 4,540 | 0 | 8,828 | 9,780 | -10 |
| of which attributable to owners of the parent | 4,247 | 3,860 | 10 | 8,155 | 8,506 | -4 |
| Earnings per share (SEK) | 0.98 | 0.89 | 10 | 1.88 | 1.93 | -3 |
| Return on equity (%, rolling 12 months) | 18.0 | 17.5 | 18.0 | 17.5 | ||
| CAPEX-to-sales (%) | 17.0 | 15.0 | 14.7 | 15.0 | ||
| Free cash flow | 14,788 | 1,440 | 16,981 | 4,087 | ||
| 1) Additional information available at www.teliasonera.com. 2) Please refer to page 18 for definitions. 3) Non-recurring items; page 22. | ||||||
| the second quarter of 2011, unless otherwise stated. | In this report, comparative figures are provided in parentheses following the operational and financial results and refer to the same item in |
"Revenues in local currencies in the second quarter were largely unchanged compared to the same quarter a year ago. While trends within Broadband Services and Eurasia have been broadly stable, Mobility Services experienced a slower growth in service revenues and equipment sales. Mobility Sweden delivered growth for the 22nd consecutive quarter albeit at a lower rate, while growth in Yoigo in Spain slowed down despite further market share gains.
In Broadband Services, we see a continued strong demand for our fiber offerings, as four out of ten households in Sweden being offered our services sign up for them. In the first half of 2012, we have improved our internal processes and hired additional resources and are now ready to expand our fiber offerings to new customers.
It is satisfying to see that our growth engine Eurasia continues to deliver double-digit growth and that all countries are contributing. Given the rapid growth in subscriptions in countries such as Nepal, we have reduced our dependency on one single market. Kcell in Kazakhstan today represents 30 percent of our subscription base in the region, down from 50 percent five years ago.
In April, an important milestone was met as TeliaSonera, AF Telecom and Altimo resolved the governance disputes in MegaFon. As a result, we received a one-time dividend of SEK 12.4 billion in the second quarter. With a total investment of a mere SEK 1.2 billion since the company's inception in 1994, our engagement in MegaFon is a true success story. Unfortunately, the dead-lock situation in Turkcell remains. We regret the postponement of the Annual General Meeting and we have provided our full support to distributing dividends as well as adding more independent members to the Board of Directors.
Customer behavior is rapidly changing in our industry. This requires that operators change their business models from being voice to data centric, where new ways of packaging offers and charging customers based on data usage rather than voice minutes are being introduced. TeliaSonera will be a leader in creating offers based on data that are attractive to customers, while providing the revenues needed for future, mainly data driven, investments. Our initiative to drive down international data roaming prices, which recently expanded to the US and Croatia, and our premium partnership with service providers such as Spotify, now available throughout the Nordics, are good examples of the future direction.
As connectivity becomes an increasingly fundamental part of society and people's everyday lives, questions relating to the use of technology, privacy and freedom of expression become increasingly important. During the quarter TeliaSonera launched a program to further strengthen our focus and actions in this important area. At the same time we are one of the initiators of a dialogue involving eleven industry leaders that are formulating common principles to address these issues.
In light of the industry transition described above, operators including TeliaSonera, need to change their business models, address their structural cost base and review their way of working to secure future profitability. Based on the results for the first six months, we revise our outlook for 2012 and expect revenues in local currencies to be more or less unchanged and the EBITDA margin to be slightly lower compared to last year."
The growth in net sales in local currencies and excluding acquisitions is expected to be within the range of 0-1 percent (January-June 2012: 1.5 percent). Currency fluctuations may have a material impact on reported figures in Swedish krona.
The EBITDA margin, excluding non-recurring items, is expected to be around 35 percent (January-June 2012: 34.3 percent).
The CAPEX-to-sales ratio is expected to be approximately 13-14 percent, excluding license and spectrum fees (January-June 2012: 14.2 percent).
Please refer to page 28 for the previous Group outlook for 2012 (published on February 2, 2012)
Net sales in local currencies and excluding acquisitions were unchanged. In reported currency, net sales increased 1.1 percent to SEK 26,294 million (26,003). The positive effect of exchange rate fluctuations was 1.0 percent.
In Mobility Services, net sales in local currencies and excluding acquisitions decreased 2.1 percent. Net sales in reported currency decreased 2.3 percent to SEK 12,581 million (12,879).
In Broadband Services, net sales in local currencies and excluding acquisitions decreased 1.0 percent. Net sales in reported currency decreased 0.8 percent to SEK 9,086 million (9,155).
In Eurasia, net sales in local currencies and excluding acquisitions increased 12.2 percent. Net sales in reported currency increased 18.9 percent to SEK 4,930 million (4,145).
The number of subscriptions increased by 15.2 million from the end of the second quarter 2011 to 174.6 million, of which 6.4 million to 65.5 million in the consolidated companies and 8.8 million to 109.1 million in the associated companies. During the second quarter, the total number of subscriptions increased by 1.4 million in the consolidated companies and by 0.8 million in the associated companies.
The addressable cost base in local currencies and excluding acquisitions decreased 0.8 percent. In reported currency, the addressable cost base decreased 1.2 percent to SEK 7,679 million (7,771).
EBITDA, excluding non-recurring items, decreased 3.5 percent in local currencies and excluding acquisitions. In reported currency, EBITDA, excluding non-recurring items, decreased 2.0 percent to SEK 9,006 million (9,186). The EBITDA margin decreased to 34.3 percent (35.3).
Operating income, excluding non-recurring items, decreased 6.1 percent to SEK 6,561 million (6,985).
Non-recurring items affecting operating income totaled SEK -242 million (-537), mainly related to the sale of shares in MegaFon which resulted in a net capital gain of SEK 3,013 million and impairment charges in Mobility Services Norway and Lithuania of SEK 3,070 million.
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Financial items totaled SEK -971 million (-584) of which SEK -737 million (-551) related to net interest expenses. The increase in net interest expenses is mainly a result of an increase in gross debt to SEK 85.7 billion (75.3). Other net financial items relate to foreign exchange rate effects, mainly in the Eurasian currencies.
Income taxes decreased to SEK 822 million (1,324). The effective tax rate was 15.4 percent (22.6). The decrease is mainly a result of the MegaFon transaction whereby the company disposed part of its shareholding and consolidated the majority of the remaining ownership to the Netherlands. The disposal of the shares resulted in a tax exempt capital gain. As TeliaSonera's MegaFon shares will be held directly by Sonera Holding BV this will have a positive impact on the withholding taxes. The positive tax effect has been partly offset against the non-tax deductible goodwill impairment charges made in Norway and Lithuania. Excluding the effect from MegaFon and the impairment charges, the effective tax rate would have been 24.2 percent.
Non-controlling interests in subsidiaries decreased to SEK 280 million (680), of which SEK 217 million (607) was related to the operations in Eurasia and SEK 52 million (63) to LMT and TEO.
Net income attributable to owners of the parent company increased 10.0 percent to SEK 4,247 million (3,860) and earnings per share to SEK 0.98 (0.89).
CAPEX increased to SEK 4,457 million (3,897) and the CAPEX-to-sales ratio to 17.0 percent (15.0). CAPEX for licenses and spectrum amounted to SEK 209 million (401), mainly relating to Mobility Services Denmark and Azerbaijan. The CAPEX-to-sales ratio, excluding licenses and spectrum fees, was 16.2 percent (13.4).
Free cash flow increased to SEK 14,788 million (1,440) and was positively impacted by the dividend from MegaFon of SEK 11,726 million net of taxes. Excluding the effect from Mega-Fon, free cash flow increased to SEK 3,062 million, mainly due to changes in working capital and cash CAPEX.
Net debt was SEK 73,758 million at the end of the second quarter (74,112 at the end of the first quarter of 2012). The net debt/EBITDA ratio was 2.00 (2.01 at the end of the first quarter of 2012).
The equity/assets ratio was 41.2 percent (38.6 percent at the end of the first quarter of 2012).
Net sales in local currencies and excluding acquisitions increased 1.5 percent. In reported currency, net sales increased 2.3 percent to SEK 51,987 million (50,838). The positive effect of exchange rate fluctuations was 0.8 percent.
The addressable cost base in local currencies and excluding acquisitions decreased 2.0 percent. In reported currency, the addressable cost base decreased 1.5 percent to SEK 15,119 million (15,343).
EBITDA, excluding non-recurring items, decreased 2.5 percent in local currencies and excluding acquisitions. In reported currency, EBITDA, excluding non-recurring items, decreased 1.4 percent to SEK 17,830 million (18,076). The EBITDA margin, excluding nonrecurring items, decreased to 34.3 percent (35.6).
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Operating income, excluding non-recurring items, decreased 7.3 percent to SEK 13,202 million (14,243).
Non-recurring items affecting operating income totaled SEK -355 million (-522), mainly related to the sale of shares in MegaFon which resulted in a net capital gain of SEK 3,013 million and impairment charges in Mobility Services Norway and Lithuania of SEK 3,070 million.
Financial items totaled SEK -2,082 million (-1,186) of which SEK -1,606 million (-1,082) related to net interest expenses. The increase in net interest expenses is mainly a result of an increase in gross debt. Other financial items was negatively impacted by foreign exchange rate effects in Eurasian currencies and a non-recurring currency effect of SEK 117 million related to the acquisition of Kcell.
Income taxes decreased to SEK 1,937 million (2,755). The effective tax rate decreased to 18.0 percent (22.0). The low income taxes were mainly impacted by the MegaFon transaction offset against the goodwill impairment charges in the second quarter of 2012. Excluding the MegaFon transaction and the impairment charges, the effective tax rate would have been 22.5 percent.
Non-controlling interests in subsidiaries decreased to SEK 673 million (1,274), of which SEK 546 million (1,129) was related to the operations in Eurasia and SEK 108 million (125) to LMT and TEO.
Net income attributable to owners of the parent company decreased 4.1 percent to SEK 8,155 million (8,506) and earnings per share decreased to SEK 1.88 (1.93).
CAPEX was flat at SEK 7,632 million (7,628) and the CAPEX-to-sales ratio decreased to 14.7 percent (15.0). CAPEX for licenses and spectrum amounted to SEK 227 million (1,338), mainly relating to Mobility Services Denmark and Azerbaijan. The CAPEX-to-sales ratio, excluding license and spectrum fees, amounted to 14.2 percent (12.4) in the first half of 2012.
Free cash flow increased to SEK 16,981 million (4,087) due to dividend from MegaFon, changes in working capital and lower income taxes. Excluding the effect from MegaFon, free cash flow increased to SEK 5,255 million, mainly due to changes in working capital and lower paid income taxes.
On April 24, 2012, TeliaSonera announced that MegaFon's shareholders, TeliaSonera, AF Telecom and Altimo had resolved the governance disputes and agreed that the company would pay a dividend of USD 5.15 billion and pursue an Initial Public Offering (IPO). The parties had also agreed that AF Telecom would get majority control in Mega-Fon, Altimo exit and TeliaSonera reduce its ownership whilst keeping a long term strategic ownership of 25 percent plus one share in MegaFon after an IPO. In the second quarter of 2012, TeliaSonera recognized a net capital gain of SEK 3,013 million and received a one-time dividend of SEK 12,366 million. The capital gain includes a negative non-cash exchange rate effect of SEK 572 million.
On April 26, 2012, TeliaSonera, through its 75.45 percent owned subsidiary TeliaSonera Asia Holding B.V., acquired the remaining 49 percent of the shares and votes in Airbell Services Ltd., which owns 75 percent in Nepal Satellite Pvt. Ltd., a regional operator in Nepal.
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 and Wireless Office. The business area comprises mobile operations in Sweden, Finland, Norway, Denmark, Lithuania, Latvia, Estonia and Spain.
| SEK in millions, except margins, | Apr-Jun | Apr-Jun | Chg | Jan-Jun | Jan-Jun | Chg |
|---|---|---|---|---|---|---|
| operational data and changes | 2012 | 2011 | (%) | 2012 | 2011 | (%) |
| Net sales | 12,581 | 12,879 | -2 | 25,081 | 25,028 | 0 |
| EBITDA excl. non-recurring items | 3,702 | 4,069 | -9 | 7,345 | 7,827 | -6 |
| Margin (%) | 29.4 | 31.6 | 29.3 | 31.3 | ||
| Operating income | -462 | 2,864 | 2,107 | 5,484 | -62 | |
| Operating income excl. non-recurring items | 2,597 | 2,904 | -11 | 5,166 | 5,527 | -7 |
| CAPEX | 1,201 | 1,488 | -19 | 2,184 | 3,296 | -34 |
| Subscriptions, period-end (thousands) | 19,767 | 19,013 | 4 | 19,767 | 19,013 | 4 |
| Employees, period-end | 7,416 | 7,511 | -1 | 7,416 | 7,511 | -1 |
Additional segment information available at www.teliasonera.com.
• Net sales in local currencies and excluding acquisitions decreased 2.1 percent. Net sales in reported currency decreased 2.3 percent to SEK 12,581 million (12,879). The negative effect of exchange rate fluctuations was 0.2 percent.
In Sweden, net sales rose 3.9 percent to SEK 4,323 million (4,160). After a period of intensive campaigns during the first quarter, the most aggressive offers were withdrawn from the market in April and the competitive situation became more rational towards the end of the quarter. Growth was mainly driven by mobile data usage, equipment sales and a growing content business.
In Finland, net sales in local currency declined 4.9 percent to the equivalent of SEK 2,068 million (2,211) due to lower interconnect revenues and a reduction of voice revenues, as a result of decreasing average price per minute and a lower subscription base.
In Norway, net sales in local currency fell by 6.1 percent to the equivalent of SEK 1,979 million (2,060), almost entirely explained by lower wholesale revenues. The average revenue per user has been positively impacted by the migration of subscribers to bundled offers and increased 7 percent compared with the previous quarter. Almost 60 percent of the subscriptions within the consumer segment are now on bucket price plans compared with 12 percent the same quarter a year ago.
In Denmark, net sales in local currency declined 14.0 percent to the equivalent of SEK 1,187 million (1,392) of which almost half can be explained by lower interconnect revenues and the remaining by subscribers migrating to bucket price plans with lower average revenue per user. Despite fierce price competition, the positive trend in subscription
intake continued and churn level was at the lowest since 2005 as a result of successful focus on marketing 4G services as well as bundling offers with Spotify.
Net sales in local currencies in Estonia, Latvia and Lithuania decreased 3.5 percent, 6.8 percent and 8.9 percent, respectively, to the equivalent of SEK 386 million (404), SEK 391 million (417) and SEK 321 million (356). The development in the Baltic countries is still characterized by continued growth in mobile data revenues but a reduction in voice revenues as lower average price per minute cannot be fully compensated for by higher usage. The decline is primarily driven within the consumer segment while all countries are showing a positive subscription intake within the corporate segment. Lower interconnect rates also impacted revenues and explain one third of the decline in Estonia and Latvia and as much as half of the decrease in revenues in Lithuania.
In Spain, net sales in local currency increased 3.8 percent to the equivalent of SEK 1,933 million (1,882). Most operators removed handset subsidies during the second quarter which impacted subscription intake and equipment sales. Revenues from handset sales declined 10 percent compared with the second quarter last year. In addition, interconnect fees were reduced by 18 percent to Eurocent 4.07 (4.98) by April 16, 2012. Despite the weak macroeconomic situation in the country, Yoigo continues to gain market share and revenues excluding equipment sales and regulatory impact grew 18 percent in local currency compared with the same quarter a year ago. The new offers launched in June were well received and confirmed Yoigo's price leader position.
In Sweden, EBITDA, excluding non-recurring items, decreased 5.2 percent to SEK 1,810 million (1,909) and the EBITDA margin declined to 41.9 percent (45.9). However, the second quarter of 2011 was positively impacted by a reversal of a provision of approximately SEK 100 million, leaving the comparable margin at 43.5 percent. In addition, churn was negatively impacted by intense competition in the beginning of the quarter which also increased subscription retention costs.
In Finland, the EBITDA margin fell to 30.9 percent (32.2), mainly due to lower voice revenues while gross margin and the addressable cost base remained at the same level as in the second quarter of 2011.
In Norway, the EBITDA margin fell to 33.5 percent (35.7) as a result of lower wholesale revenues. The total cost base has been reduced by 3.6 percent compared to the second quarter a year ago, partly explained by a higher gross margin and more sales in internal channels.
In Denmark, the EBITDA margin fell to 8.3 percent (15.7), due to lower gross margin as a result of lower voice revenues and reduced interconnect margin. Marketing costs also increased as subscription intake reached its highest level in five years.
The EBITDA margin in Estonia fell to 31.6 percent (36.4) as a result of lower gross margin and dilution from low-margin equipment sales. In Latvia and Lithuania, the
EBITDA margins increased to 38.1 percent (35.3) and 29.3 percent (28.1), respectively, due to an improvement in gross margin.
EBITDA in Spain increased to SEK 127 million (103), corresponding to a margin of 6.6 percent (5.5) due to higher revenues and the removal of handset subsidies.
• CAPEX decreased to SEK 1,201 million (1,488) and the CAPEX-to-sales ratio to 9.5 percent (11.6). CAPEX is mainly driven by the roll-out of 1,800 MHz in Spain, a 3G network swap in Norway and 4G investments in Sweden and Finland. CAPEX, excluding licenses and spectrum fees, amounted to SEK 1,137 million (1,104) and the CAPEX-tosales ratio to 9.0 percent (8.6). Cash flow, measured as EBITDA, excluding nonrecurring items, minus CAPEX, decreased to SEK 2,501 million (2,581).
| SEK in millions, except margins | Apr-Jun | Apr-Jun | Chg | Jan-Jun | Jan-Jun | Chg |
|---|---|---|---|---|---|---|
| and changes | 2012 | 2011 | (%) | 2012 | 2011 | (%) |
| Net sales | 12,581 | 12,879 | -2 | 25,081 | 25,028 | 0 |
| of which Sweden | 4,323 | 4,160 | 4 | 8,497 | 8,121 | 5 |
| of which Finland | 2,068 | 2,211 | -6 | 4,215 | 4,389 | -4 |
| of which Norway | 1,979 | 2,060 | -4 | 3,858 | 4,063 | -5 |
| of which Denmark | 1,187 | 1,392 | -15 | 2,488 | 2,784 | -11 |
| of which Lithuania | 321 | 356 | -10 | 632 | 691 | -9 |
| of which Latvia | 391 | 417 | -6 | 773 | 797 | -3 |
| of which Estonia | 386 | 404 | -4 | 745 | 757 | -2 |
| of which Spain | 1,933 | 1,882 | 3 | 3,887 | 3,443 | 13 |
| EBITDA excl. non-recurring items | 3,702 | 4,069 | -9 | 7,345 | 7,827 | -6 |
| of which Sweden | 1,810 | 1,909 | -5 | 3,697 | 3,674 | 1 |
| of which Finland | 640 | 711 | -10 | 1,323 | 1,413 | -6 |
| of which Norway | 662 | 736 | -10 | 1,234 | 1,419 | -13 |
| of which Denmark | 99 | 218 | -55 | 237 | 419 | -43 |
| of which Lithuania | 94 | 100 | -6 | 182 | 193 | -6 |
| of which Latvia | 149 | 147 | 1 | 289 | 295 | -2 |
| of which Estonia | 122 | 147 | -17 | 222 | 275 | -19 |
| of which Spain | 127 | 103 | 23 | 160 | 140 | 14 |
| Margin (%), total | 29.4 | 31.6 | 29.3 | 31.3 | ||
| Margin (%), Sweden | 41.9 | 45.9 | 43.5 | 45.2 | ||
| Margin (%), Finland | 30.9 | 32.2 | 31.4 | 32.2 | ||
| Margin (%), Norway | 33.5 | 35.7 | 32.0 | 34.9 | ||
| Margin (%), Denmark | 8.3 | 15.7 | 9.5 | 15.1 | ||
| Margin (%), Lithuania | 29.3 | 28.1 | 28.8 | 27.9 | ||
| Margin (%), Latvia | 38.1 | 35.3 | 37.4 | 37.0 | ||
| Margin (%), Estonia | 31.6 | 36.4 | 29.8 | 36.3 | ||
| Margin (%), Spain | 6.6 | 5.5 | 4.1 | 4.1 |
| excluding acquisitions | Apr-Jun | Jan-Jun |
|---|---|---|
| Change (%), total | -2.1 | 0.2 |
| Change (%), Sweden | 3.9 | 4.6 |
| Change (%), Finland | -4.9 | -2.7 |
| Change (%), Norway | -6.1 | -7.5 |
| Change (%), Denmark | -14.0 | -10.3 |
| Change (%), Lithuania | -8.9 | -8.0 |
| Change (%), Latvia | -6.8 | -3.6 |
| Change (%), Estonia | -3.5 | -0.9 |
| Change (%), Spain | 3.8 | 13.7 |
Business area Broadband Services provides mass-market services for connecting homes and offices. Services include broadband over copper, fiber and cable, TV, voice over internet, home communications services, IP-VPN/Business internet, leased lines and traditional telephony. The business area operates the group common core network, including the data network of the international carrier business. The business area comprises operations in Sweden, Finland, Norway, Denmark, Lithuania, Latvia (49 percent), Estonia and international carrier operations.
| SEK in millions, except margins, | Apr-Jun | Apr-Jun | Chg | Jan-Jun | Jan-Jun | Chg |
|---|---|---|---|---|---|---|
| operational data and changes | 2012 | 2011 | (%) | 2012 | 2011 | (%) |
| Net sales | 9,086 | 9,155 | -1 | 18,107 | 18,181 | 0 |
| EBITDA excl. non-recurring items | 2,802 | 2,906 | -4 | 5,634 | 6,000 | -6 |
| Margin (%) | 30.8 | 31.7 | 31.1 | 33.0 | ||
| Operating income | 1,359 | 1,280 | 6 | 2,946 | 3,141 | -6 |
| Operating income excl. non-recurring items | 1,574 | 1,675 | -6 | 3,192 | 3,561 | -10 |
| CAPEX | 1,451 | 1,395 | 4 | 2,686 | 2,335 | 15 |
| Subscriptions, period-end (thousands) | ||||||
| Broadband | 2,495 | 2,423 | 3 | 2,495 | 2,423 | 3 |
| Fixed voice and VoIP | 4,425 | 4,956 | -11 | 4,425 | 4,956 | -11 |
| TV | 1,248 | 1,105 | 13 | 1,248 | 1,105 | 13 |
| Employees, period-end | 13,560 | 13,697 | -1 | 13,560 | 13,697 | -1 |
Additional segment information available at www.teliasonera.com.
• Net sales in local currencies and excluding acquisitions decreased 1.0 percent. Net sales in reported currency decreased 0.8 percent to SEK 9,086 million (9,155). The positive effect of acquisitions and disposals was 0.2 percent.
In Sweden, net sales fell 3.6 percent to SEK 5,051 million (5,225). Revenues from TV and broadband fiber grew strongly by 24 percent and 55 percent, respectively, but could as in previous quarters not fully compensate for loss of PSTN subscriptions and lower traffic revenues. Telia gains most of those subscribers migrating from PSTN to VoIP but with lower average revenue per user as a result.
In Finland, net sales in local currency decreased 3.2 percent to the equivalent of SEK 1,447 million (1,506). External sales within the consumer segment grew by more than 9 percent as a result of a 15 percent increase in TV subscriptions compared to last year. Revenues within the business segment fell 4 percent due to lower traffic revenues and a decline in traditional datacom services.
In Norway, net sales grew 2.0 percent in local currency to the equivalent of SEK 273 million (262), due to an increase in average revenue per user as well as increased sales within the business segment. In Denmark, net sales in local currency decreased 3.9 percent to the equivalent of SEK 283 million (297), as a result of a decline in traditional voice revenues that could not be fully compensated for by the growth in broadband and IP services.
In Estonia, net sales in local currency fell 3.0 percent to the equivalent of SEK 441 million (460). In Lithuania, net sales in local currency grew 3.4 percent to the equivalent of SEK 491 million (481), due to an increase in average revenue per user and a growing number of broadband and TV subscriptions.
In International Carrier, net sales in local currencies increased 11.2 percent to the equivalent of SEK 1,395 million (1,233) due to growth in both voice and IP revenues.
• The number of subscriptions for broadband access rose to 2.5 million, an increase of 72,000 from the second quarter of 2011 and by 2,000 during the quarter.
The total number of TV subscriptions rose by 143,000 from the second quarter of 2011 and by 30,000 during the quarter to 1.2 million.
The number of traditional fixed voice subscriptions decreased by 675,000 from the end of the second quarter of 2011 to 3.8 million, and were down 121,000 during the quarter. The intake of VoIP subscriptions was 29,000 in the quarter, bringing the total number of VoIP subscriptions to 0.6 million.
• EBITDA, excluding non-recurring items, fell 4.1 percent in local currencies and excluding acquisitions. In reported currency, EBITDA, excluding non-recurring items, decreased 3.6 percent to SEK 2,802 million (2,906). The EBITDA margin decreased to 30.8 percent (31.7).
In Sweden, the EBITDA margin was unchanged at 38.4 percent (38.7) as lower revenues were compensated for by lower costs primarily for marketing. In Finland, the EBITDA margin fell to 23.4 percent (26.8) due to lower gross margin as a result of higher content costs for TV and cost increases for network capacity.
In Norway, the EBITDA margin rose to 17.9 percent (16.0), mainly as a result of increased sales and a reduction in personnel expenses. In Denmark the EBITDA margin increased to 14.5 percent (7.7) due to a higher gross margin and lower personnel expenses.
In Lithuania, the EBITDA margin was unchanged at 41.8 percent (41.8). In Estonia the EBITDA margin fell to 27.2 percent (31.5) due to lower revenues. In International Carrier, the EBITDA margin rose to 7.5 percent (5.5).
• CAPEX increased to SEK 1,451 million (1,395) and the CAPEX-to-sales ratio rose to 16.0 percent (15.2). Cash flow, measured as EBITDA, excluding non-recurring items, minus CAPEX, fell to SEK 1,351 million (1,511).
| SEK in millions, except margins | Apr-Jun | Apr-Jun | Chg | Jan-Jun | Jan-Jun | Chg |
|---|---|---|---|---|---|---|
| and changes | 2012 | 2011 | (%) | 2012 | 2011 | (%) |
| Net sales | 9,086 | 9,155 | -1 | 18,107 | 18,181 | 0 |
| of which Sweden | 5,051 | 5,225 | -3 | 10,092 | 10,452 | -3 |
| of which Finland | 1,447 | 1,506 | -4 | 2,890 | 3,007 | -4 |
| of which Norway | 273 | 262 | 4 | 541 | 518 | 4 |
| of which Denmark | 283 | 297 | -5 | 571 | 583 | -2 |
| of which Lithuania | 491 | 481 | 2 | 979 | 958 | 2 |
| of which Estonia | 441 | 460 | -4 | 871 | 890 | -2 |
| of which International Carrier | 1,395 | 1,233 | 13 | 2,741 | 2,410 | 14 |
| EBITDA excl. non-recurring items | 2,802 | 2,906 | -4 | 5,634 | 6,000 | -6 |
| of which Sweden | 1,942 | 2,023 | -4 | 3,961 | 4,248 | -7 |
| of which Finland | 339 | 404 | -16 | 721 | 830 | -13 |
| of which Norway | 49 | 42 | 17 | 90 | 81 | 11 |
| of which Denmark | 41 | 23 | 78 | 75 | 34 | 121 |
| of which Lithuania | 205 | 201 | 2 | 396 | 391 | 1 |
| of which Estonia | 120 | 145 | -17 | 228 | 277 | -18 |
| of which International Carrier | 105 | 68 | 54 | 162 | 142 | 14 |
| Margin (%), total | 30.8 | 31.7 | 31.1 | 33.0 | ||
| Margin (%), Sweden | 38.4 | 38.7 | 39.2 | 40.6 | ||
| Margin (%), Finland | 23.4 | 26.8 | 24.9 | 27.6 | ||
| Margin (%), Norway | 17.9 | 16.0 | 16.6 | 15.6 | ||
| Margin (%), Denmark | 14.5 | 7.7 | 13.1 | 5.8 | ||
| Margin (%), Lithuania | 41.8 | 41.8 | 40.4 | 40.8 | ||
| Margin (%), Estonia | 27.2 | 31.5 | 26.2 | 31.1 | ||
| Margin (%), International Carrier | 7.5 | 5.5 | 5.9 | 5.9 |
| excluding acquisitions | Apr-Jun | Jan-Jun |
|---|---|---|
| Change (%), total | -1.0 | -0.7 |
| Change (%), Sweden | -3.6 | -3.6 |
| Change (%), Finland | -3.2 | -3.7 |
| Change (%), Norway | 2.0 | 1.8 |
| Change (%), Denmark | -3.9 | -1.6 |
| Change (%), Lithuania | 3.4 | 3.0 |
| Change (%), Estonia | -3.0 | -1.4 |
| Change (%), International Carrier | 11.2 | 12.4 |
Business area Eurasia comprises mobile operations in Kazakhstan, Azerbaijan, Uzbekistan, Tajikistan, Georgia, Moldova and Nepal. The business area is also responsible for developing TeliaSonera's shareholding in Russian MegaFon (36 percent) and Turkish Turkcell (38 percent). The main strategy is to create shareholder value by increasing mobile penetration and introducing value-added services in each respective country.
| SEK in millions, except margins, | Apr-Jun | Apr-Jun | Chg | Jan-Jun | Jan-Jun | Chg |
|---|---|---|---|---|---|---|
| operational data and changes | 2012 | 2011 | (%) | 2012 | 2011 | (%) |
| Net sales | 4,930 | 4,145 | 19 | 9,375 | 8,008 | 17 |
| EBITDA excl. non-recurring items | 2,482 | 2,149 | 15 | 4,740 | 4,117 | 15 |
| Margin (%) | 50.3 | 51.8 | 50.6 | 51.4 | ||
| Income from associated companies | 3,832 | 1,069 | 4,850 | 2,672 | 82 | |
| Russia | 3,208 | 1,063 | 3,881 | 2,157 | 80 | |
| Turkey | 625 | 8 | 976 | 517 | 89 | |
| Operating income | 5,699 | 2,549 | 124 | 8,152 | 5,447 | 50 |
| Operating income excl. non-recurring items | 2,531 | 2,556 | -1 | 5,060 | 5,393 | -6 |
| CAPEX | 1,609 | 867 | 86 | 2,400 | 1,717 | 40 |
| Subscriptions, period-end (thousands) | ||||||
| Subsidiaries | 37,528 | 31,587 | 19 | 37,528 | 31,587 | 19 |
| Associated companies | 108,100 | 99,322 | 9 | 108,100 | 99,322 | 9 |
| Employees, period-end | 5,026 | 4,963 | 1 | 5,026 | 4,963 | 1 |
Additional segment information available at www.teliasonera.com.
• Net sales in local currencies and excluding acquisitions increased 12.2 percent. Net sales in reported currency increased 18.9 percent to SEK 4,930 million (4,145). The positive effect from exchange rate fluctuations was 6.7 percent.
In Kazakhstan, net sales in local currency increased 1.6 percent to the equivalent of SEK 2,078 million (1,880). Price competition remains fierce and an increase in usage has not fully compensated for the decline in average revenue per user. Interconnect rates were reduced by 8.5 percent in average on March 30, 2012 and the interconnect rates are now symmetrical between Kcell and other operators.
In Azerbaijan, net sales in local currency increased 10.4 percent to the equivalent of SEK 1,030 million (841). Azercell started commercial 4G services and launched a number of data offers in connection with the Eurovision Song Contest that took place in Baku. Several campaigns have also successfully been launched to increase the activity among existing subscribers.
In Uzbekistan, net sales in local currency increased 13.9 percent to the equivalent of SEK 474 million (414). Price competition became more rational and Ucell has raised prices for some of its subscriptions. Ucell also restructured its dealer compensation structure to focus more on customer loyalty. The number of subscriptions decreased slightly due to fewer double SIM cards.
In Tajikistan, net sales in local currency increased 17.0 percent to the equivalent of SEK 234 million (191), as a result of an increase in subscriptions and higher interconnect revenues while the price pressure is high on international traffic.
In Georgia, net sales in local currency increased 3.0 percent to the equivalent of SEK 259 million (223), the first quarter of growth since the second quarter of 2010. The growth comes as a result of higher average revenue per user, partly driven by an increase in prices for incoming international calls. In June, Geocell pioneered the Georgian mobile market by launching a handset campaign with installment plans for the first time.
In Moldova, net sales in local currency increased 0.2 percent to the equivalent of SEK 137 million (127). In Nepal, net sales in local currency increased 62.7 percent to the equivalent of SEK 718 million (472) as a result of continued strong subscription intake and gained market share. Average revenue per user is showing a favorable development as a result of increased usage, effective pricing and growth in mobile data revenues.
The EBITDA margin in Kazakhstan remains well above 50 percent although profitability has been negatively impacted by higher interconnect costs as a result of an increasing volume of off-net calls. The same explanation is valid for Azerbaijan where interconnect costs increased significantly compared to a year ago. Costs for marketing also increased in the second quarter relating to the sponsorship of the Eurovision Song Contest. Despite this, the EBITDA margin was around 50 percent.
In Tajikistan, the EBITDA margin improved due to efficiencies related to the operational merger between two separate legal entities while the introduction of a subscription tax in January 2012 had a negative impact on profitability in Uzbekistan.
In Georgia, the EBITDA margin was kept around 40 percent. In Moldova, the EBITDA margin was positively impacted by a decrease in interconnect rates. The EBITDA margin in Nepal is now the highest within the consolidated operations in Eurasia as increasing revenues has been achieved with good cost control.
• CAPEX increased to SEK 1,609 million (867) and the CAPEX-to-sales ratio increased to 32.6 percent (20.9). CAPEX, excluding licenses and spectrum fees, amounted to SEK 1,470 million (850) and the CAPEX-to-sales ratio to 29.8 percent (20.5). Cash flow, measured as EBITDA, excluding non-recurring items, minus CAPEX, decreased to SEK 873 million (1,282).
| Apr-Jun | Apr-Jun | Chg | Jan-Jun | Jan-Jun | Chg | |
|---|---|---|---|---|---|---|
| SEK in millions, except changes | 2012 | 2011 | (%) | 2012 | 2011 | (%) |
| Net sales | 4,930 | 4,145 | 19 | 9,375 | 8,008 | 17 |
| of which Kazakhstan | 2,078 | 1,880 | 11 | 3,966 | 3,657 | 8 |
| of which Azerbaijan | 1,030 | 841 | 22 | 1,968 | 1,639 | 20 |
| of which Uzbekistan | 474 | 414 | 14 | 936 | 812 | 15 |
| of which Tajikistan | 234 | 191 | 23 | 441 | 368 | 20 |
| of which Georgia | 259 | 223 | 16 | 481 | 435 | 11 |
| of which Moldova | 137 | 127 | 8 | 256 | 234 | 9 |
| of which Nepal | 718 | 472 | 52 | 1,331 | 870 | 53 |
| excluding acquisitions | Apr-Jun | Jan-Jun |
|---|---|---|
| Change (%), total | 12.2 | 12.7 |
| Change (%), Kazakhstan | 1.6 | 2.4 |
| Change (%), Azerbaijan | 10.4 | 10.7 |
| Change (%), Uzbekistan | 13.9 | 17.6 |
| Change (%), Tajikistan | 17.0 | 19.2 |
| Change (%), Georgia | 3.0 | -0.6 |
| Change (%), Moldova | 0.2 | 2.2 |
| Change (%), Nepal | 62.7 | 63.2 |
Other operations comprise Other Business Services, TeliaSonera Holding and Corporate functions. Other Business Services is responsible for sales of managed-services solutions to business customers in the Nordic countries.
| Apr-Jun | Apr-Jun | Chg | Jan-Jun | Jan-Jun | Chg | |
|---|---|---|---|---|---|---|
| SEK in millions, except changes | 2012 | 2011 | (%) | 2012 | 2011 | (%) |
| Net sales | 974 | 1,001 | -3 | 1,953 | 1,922 | 2 |
| EBITDA excl. non-recurring items | 19 | 62 | -69 | 111 | 130 | -15 |
| Income from associated companies | -16 | -57 | 72 | -34 | -64 | 47 |
| Operating income | -277 | -242 | -14 | -359 | -352 | -2 |
| Operating income excl. non-recurring items | -140 | -148 | 5 | -215 | -240 | 10 |
| CAPEX | 196 | 147 | 33 | 362 | 279 | 30 |
Additional segment information available at www.teliasonera.com.
The Board of Directors and the President and CEO certify that the Interim Report gives a true and fair overview of the Parent Company's and Group's operations, their financial position and results of operations, and describes significant risks and uncertainties facing the Parent Company and other companies in the Group.
| Anders Narvinger Chairman |
Timo Peltola Vice-Chairman |
Agneta Ahlström |
|---|---|---|
| Magnus Brattström | Stefan Carlsson | Maija-Liisa Friman |
| Ingrid Jonasson Blank | Olli-Pekka Kallasvuo | Lars Renström |
| Jon Risfelt | Per-Arne Sandström |
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 07:00 CET on July 18, 2012.
Financial Information Interim Report January–September 2012 October 17, 2012 Year-end Report January–December 2012 January 31, 2013 Interim Report January–March 2013 April 19, 2013 Interim Report January–June 2013 July 17, 2013 Interim Report January–September 2013 October 17, 2013 Year-end Report January–December 2013 January 30, 2014
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
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.
| SEK in millions, except per share data, | Apr-Jun | Apr-Jun | Chg | Jan-Jun | Jan-Jun | Chg |
|---|---|---|---|---|---|---|
| number of shares and changes | 2012 | 20111) | (%) | 2012 | 20111) | (%) |
| Net sales | 26,294 | 26,003 | 1 | 51,987 | 50,838 | 2 |
| Cost of sales | -14,531 | -14,356 | 1 | -28,816 | -27,492 | 5 |
| Gross profit | 11,763 | 11,647 | 1 | 23,171 | 23,346 | -1 |
| Selling, admin. and R&D expenses | -6,242 | -5,942 | 5 | -12,238 | -12,249 | 0 |
| Other operating income and expenses, net | -3,050 | -286 | -2,968 | -24 | ||
| Income from associated companies and | ||||||
| joint ventures | 3,849 | 1,029 | 4,882 | 2,648 | ||
| Operating income | 6,320 | 6,448 | -2 | 12,847 | 13,721 | -6 |
| Finance costs and other financial items, net | -971 | -584 | 66 | -2,082 | -1,186 | 76 |
| Income after financial items | 5,349 | 5,864 | -9 | 10,765 | 12,535 | -14 |
| Income taxes | -822 | -1,324 | -38 | -1,937 | -2,755 | -30 |
| Net income | 4,527 | 4,540 | 0 | 8,828 | 9,780 | -10 |
| Foreign currency translation differences | 496 | 1,435 | 724 | -2,387 | ||
| Income from associated companies | -17 | 15 | -214 | -20 | ||
| Cash flow hedges | -63 | -40 | 1 | 21 | ||
| Available-for-sale financial instruments | 0 | 1 | 1 | 1 | ||
| Income taxes relating to other comprehen | ||||||
| sive income | -80 | 224 | -246 | 214 | ||
| Other comprehensive income | 336 | 1,635 | 266 | -2,171 | ||
| Total comprehensive income | 4,863 | 6,175 | -21 | 9,094 | 7,609 | 20 |
| Net income attributable to: | ||||||
| Owners of the parent | 4,247 | 3,860 | 10 | 8,155 | 8,506 | -4 |
| Non-controlling interests | 280 | 680 | -59 | 673 | 1,274 | -47 |
| Total comprehensive income attributable to: | ||||||
| Owners of the parent | 4,300 | 5,397 | -20 | 7,913 | 6,551 | 21 |
| Non-controlling interests | 563 | 778 | -28 | 1,181 | 1,058 | 12 |
| Earnings per share (SEK), basic and diluted | 0.98 | 0.89 | 10 | 1.88 | 1.93 | -3 |
| Number of shares (thousands) | ||||||
| Outstanding at period-end | 4,330,085 4,490,457 | 4,330,085 | 4,330,085 | |||
| Weighted average, basic and diluted | 4,330,085 4,490,457 | 4,330,085 | 4,404,512 | |||
| Number of treasury shares (thousands) | ||||||
| Outstanding at period-end | – | – | – | 160,372 | ||
| Weighted average | – | – | – | 85,945 | ||
| EBITDA | 8,859 | 8,654 | 2 | 17,571 | 17,573 | 0 |
| EBITDA excl. non-recurring items | 9,006 | 9,186 | -2 | 17,830 | 18,076 | -1 |
| Depreciation, amortization and impairment | ||||||
| losses | -6,389 | -3,235 | 97 | -9,606 | -6,500 | 48 |
| Operating income excl. non-recurring items | 6,561 | 6,985 | -6 | 13,202 | 14,243 | -7 |
1) Certain restatements have been made, see page 21.
| Jun 30, | Dec 31, | |
|---|---|---|
| SEK in millions | 2012 | 20111) |
| Assets | ||
| Goodwill and other intangible assets | 89,378 | 92,016 |
| Property, plant and equipment | 62,670 | 61,292 |
| Investments in associates and joint ventures, deferred tax assets | ||
| and other non-current assets | 43,422 | 58,572 |
| Long-term interest-bearing receivables | 12,644 | 5,407 |
| Total non-current assets | 208,114 | 217,287 |
| Inventories | 1,589 | 1,475 |
| Trade receivables, current tax assets and other receivables | 21,153 | 21,151 |
| Short-term interest-bearing receivables | 1,354 | 1,453 |
| Cash and cash equivalents | 10,110 | 12,631 |
| Total current assets | 34,206 | 36,710 |
| Total assets | 242,320 | 253,997 |
| Equity and liabilities | ||
| Equity attributable to owners of the parent | 101,888 | 116,680 |
| Equity attributable to non-controlling interests | 4,123 | 7,353 |
| Total equity | 106,011 | 124,033 |
| Long-term borrowings | 73,310 | 68,108 |
| Deferred tax liabilities, other long-term provisions | 23,623 | 24,163 |
| Other long-term liabilities | 1,178 | 1,409 |
| Total non-current liabilities | 98,111 | 93,680 |
| Short-term borrowings | 12,352 | 11,734 |
| Trade payables, current tax liabilities, short-term provisions | ||
| and other current liabilities | 25,846 | 24,550 |
| Total current liabilities | 38,198 | 36,284 |
| Total equity and liabilities | 242,320 | 253,997 |
1) Certain restatements have been made, see page 21.
| Apr-Jun | Apr-Jun | Jan-Jun | Jan-Jun | |
|---|---|---|---|---|
| SEK in millions | 2012 | 20111) | 2012 | 20111) |
| Cash flow before change in working capital | 18,883 | 7,487 | 25,335 | 13,253 |
| Change in working capital | -10 | -1,218 | -1,204 | -1,799 |
| Cash flow from operating activities | 18,873 | 6,269 | 24,131 | 11,454 |
| Cash CAPEX | -4,085 | -4,829 | -7,150 | -7,367 |
| Free cash flow | 14,7882) | 1,440 | 16,9812) | 4,087 |
| Cash flow from other investing activities | 1,219 | 3 | 872 | 519 |
| Total cash flow from investing activities | -2,866 | -4,826 | -6,278 | -6,848 |
| Cash flow before financing activities | 16,007 | 1,443 | 17,853 | 4,606 |
| Cash flow from financing activities | -24,826 | -21,302 | -20,382 | -14,110 |
| Cash flow for the period | -8,819 | -19,859 | -2,529 | -9,504 |
| Cash and cash equivalents, opening balance | 18,884 | 25,672 | 12,631 | 15,344 |
| Change in accounting principle | 0 | 0 | 0 | 25 |
| Cash flow for the period | -8,819 | -19,859 | -2,529 | -9,504 |
| Exchange rate differences | 45 | -120 | 8 | -172 |
| Cash and cash equivalents, closing balance | 10,110 | 5,693 | 10,110 | 5,693 |
1) Certain restatements have been made, see page 21.
2) Including dividends from MegaFon net of taxes of SEK 11,726 million.
| Jan-Jun 2012 | Jan-Jun 2011 | |||||
|---|---|---|---|---|---|---|
| Non | Non | |||||
| Owners of | controlling | Total | Owners of | controlling | Total | |
| SEK in millions | the parent | interests | equity | the parent | interests | equity |
| Opening balance | 116,680 | 7,353 | 124,033 | 125,907 | 6,758 | 132,665 |
| Adjustment of opening balance | ||||||
| related to Turkcell (inflation | ||||||
| accounting in Belarus) | 110 | – | 110 | – | – | – |
| Dividends | -12,341 | -2,128 | -14,469 | -12,349 | -948 | -13,297 |
| Business combinations | – | 17 | 17 | – | – | – |
| Repurchased treasury shares | – | – | – | -9,981 | – | -9,981 |
| Acquisition of non-controlling | ||||||
| interest | -10,482 | -2,289 | -12,771 | – | – | – |
| Other transactions with owners | 0 | -11 | -11 | 2 | 8 | 10 |
| Total comprehensive income | 7,913 | 1,181 | 9,094 | 6,551 | 1,058 | 7,609 |
| Share-based payments | 8 | – | 8 | 4 | – | 4 |
| Closing balance | 101,888 | 4,123 | 106,011 | 110,134 | 6,876 | 117,010 |
General. As in the annual accounts for 2011, TeliaSonera's consolidated financial statements as of and for the six-month period ended June 30, 2012, 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 Accounting for Legal Entities and other statements issued by the Swedish Financial Reporting Board. This report has been prepared in accordance with IAS 34 Interim Financial Reporting. The accounting policies adopted are consistent with those of the previous financial year, except as described below.
Change of accounting principle and correction of prior period classification errors. For information, see corresponding section in TeliaSonera's Interim Report January-March 2012.
The International Accounting Standards Board (IASB) has on June 28, 2012 issued "Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12)." The amendments change the transition guidance to provide further relief from full retrospective application. The effective date of these amendments, annual periods beginning on or after 1 January 2013, is aligned with the effective dates of IFRS 10, IFRS 11 and IFRS 12.
For additional information, see corresponding section in TeliaSonera's Annual Report 2011.
| Apr-Jun | Apr-Jun | Jan-Jun | Jan-Jun | |
|---|---|---|---|---|
| SEK in millions | 2012 | 2011 | 2012 | 2011 |
| Within EBITDA | -147 | -532 | -259 | -503 |
| Restructuring charges, synergy implementation | ||||
| costs, etc.: | ||||
| Mobility Services | -22 | -61 | -22 | -64 |
| Broadband Services | -214 | -457 | -243 | -468 |
| Eurasia | -31 | -6 | -107 | -10 |
| Other operations | -99 | -94 | -106 | -112 |
| of which TeliaSonera Holding | -61 | 8 | -61 | 8 |
| Capital gains/losses | 219 | 86 | 219 | 151 |
| Within Depreciation, amortization and | ||||
| impairment losses | -3,097 | -5 | -3,098 | -19 |
| Impairment losses, accelerated depreciation: | ||||
| Broadband Services | -1 | -5 | -2 | -19 |
| Mobility Services | -3,070 | − | -3,070 | − |
| Other operations | -26 | − | -26 | − |
| Within Income from associated companies | ||||
| and joint ventures | 3,002 | − | 3,002 | − |
| Capital gains | 3,002 | − | 3,002 | − |
| Total | -242 | -537 | -355 | -522 |
| Jun 30, | Dec 31, | |
|---|---|---|
| SEK in millions | 2012 | 2011 |
| Deferred tax assets | 7,369 | 8,164 |
| Deferred tax liabilities | -11,895 | -13,437 |
| Net deferred tax liabilities (-)/assets (+) | -4,526 | -5,273 |
| Apr-Jun | Apr-Jun | Jan-Jun | Jan-Jun | |
|---|---|---|---|---|
| SEK in millions | 2012 | 20111) | 2012 | 20111) |
| Mobility Services | -462 | 2,864 | 2,107 | 5,484 |
| Broadband Services | 1,359 | 1,280 | 2,946 | 3,141 |
| Eurasia | 5,699 | 2,549 | 8,152 | 5,447 |
| Other operations | -277 | -242 | -359 | -352 |
| Total segments | 6,319 | 6,451 | 12,846 | 13,720 |
| Elimination of inter-segment profits | 1 | -3 | 1 | 1 |
| Group | 6,320 | 6,448 | 12,847 | 13,721 |
1) Certain restatements have been made, see page 21.
| Apr-Jun | Apr-Jun | Jan-Jun | Jan-Jun | |
|---|---|---|---|---|
| SEK in millions | 2012 | 20111) | 2012 | 20111) |
| CAPEX | 4,457 | 3,897 | 7,632 | 7,628 |
| Intangible assets | 662 | 897 | 1,077 | 2,318 |
| Property, plant and equipment | 3,795 | 3,000 | 6,555 | 5,310 |
| Acquisitions and other investments | 1,245 | 481 | 1,395 | 585 |
| Asset retirement obligations | 104 | 147 | 198 | 251 |
| Goodwill and fair value adjustments | 1,117 | 111 | 1,172 | 111 |
| Equity holdings | 24 | 223 | 25 | 223 |
| Total | 5,702 | 4,378 | 9,027 | 8,213 |
1) Certain restatements have been made, see page 21.
Given the relatively high carrying value of business unit Mobility Services Norway, including a substantial goodwill amount created in conjunction with the acquisition of NetCom in 2000, and the current assessment of the achievable long-term return on investment, management has concluded that the current carrying value is not possible to defend, verified by an impairment test performed as of June 30, 2012.
For business unit Mobility Services Lithuania, as disclosed in TeliaSonera's Annual Report 2011, the estimated recoverable value as of December 31, 2011 corresponded to the carrying value. During the first half of 2012, the total value of the Lithuanian mobile market continued to decrease due to competition and price pressure. Consequently, an impairment test was performed as of June 30, 2012.
In both impairment tests, the recoverable values fell short of the carrying values and hence, related goodwill was impaired. Accordingly, under IAS 36, non-cash goodwill impairment charges of SEK 2,752 million (NOK 2,366 million) and SEK 318 million (LTL 125 million), respectively, have been posted to the consolidated financial statements as of June 30, 2012, classified as non-recurring items. The goodwill charges are based on long-term assessments, and not specifically related to the short-term performance of the respective business unit.
In the six-month period ended June 30, 2012, TeliaSonera purchased services for SEK 31 million, and sold services for a value of SEK 52 million. Related parties in these transactions were mainly MegaFon, Turkcell and Lattelecom.
| Jun 30, | Dec 31, | |
|---|---|---|
| SEK in millions | 2012 | 2011 |
| Long-term and short-term borrowings | 85,662 | 79,842 |
| Less derivatives recognized as financial assets and hedging long | ||
| term and short-term borrowings | -1,637 | -2,085 |
| Less short-term investments, cash and bank | -10,267 | -12,709 |
| Net debt | 73,758 | 65,048 |
In April, the ordinary dividend of SEK 12,341 million was paid. The underlying operating cash flow continued to be positive also in the second quarter of 2012. In late April, the dividend and the first proceed from the divestment of the indirectly owned stake in MegaFon was received.
In July 2012, Standard & Poor's confirmed its credit rating on TeliaSonera AB of A- for longterm borrowings and A-2 for short-term borrowings with a stable outlook. After the announcement in relation to MegaFon in late April, Moody´s on May 4 changed the outlook from negative back to stable for its credit rating on TeliaSonera AB of A3 for long-term borrowings and P-2 for short-term borrowings.
The second quarter of 2012 has seen a further deterioration of the EMU crisis with increasing pressure on Greece, Spain and Italy. Although discussions around a Greek exit from EMU have intensified focus has moved to Spain with widening spreads to earlier highs compared to German bonds.
The corporate credit market has been resilient and open throughout the quarter despite limited risk appetite. TeliaSonera has not made any major bond issue during the quarter but will continue to have an opportunistic funding strategy to take advantage of attractive funding opportunities when they appear.
| Jun 30, | Dec 31, | |
|---|---|---|
| 2012 | 2011 | |
| Return on equity (%, rolling 12 months) | 18.0 | 16.8 |
| Return on capital employed (%, rolling 12 months) | 16.1 | 16.4 |
| Equity/assets ratio (%) | 41.2 | 44.0 |
| Net debt/equity ratio (%) | 73.9 | 58.2 |
| Net debt/EBITDA rate (multiple, rolling 12 months) | 2.00 | 1.75 |
| Owners' equity per share (SEK) | 23.53 | 26.95 |
TeliaSonera has sold all its shares in Telecominvest (TCI) to AF Telecom Holding (AFT). The purchase price has not been fully paid by AFT and in order to secure the value of Telia– Sonera´s receivable, presently SEK 8,077 million, MegaFon shares held by TCI, representing 6.53 percent of the shares in MegaFon, are presently pledged to TeliaSonera. The proper payment of the receivable is guaranteed by certain companies within the AFT Group and the bank accounts where TCI will collect dividends on the pledged shares have also been pledged to TeliaSonera.
As of June 30, 2012, the maximum potential future payments that TeliaSonera could be required to make under issued financial guarantees totaled SEK 305 million, of which SEK 273 million referred to guarantees for pension obligations. Collateral pledged totaled SEK 253 million.
As of June 30, 2012, contractual obligations totaled SEK 1,417 million, of which SEK 1,122 million referred to contracted build-out of TeliaSonera's fixed networks in Sweden.
On April 26, 2012, TeliaSonera took a further step in executing its strategy to expand into new high-growth emerging markets by acquiring an additional 49 percent of the shares and votes in Airbell Services Ltd. which owns 75 percent of the shares and votes in Nepal Satellite Telecom Pvt. Ltd. with licenses to operate in certain regions in Nepal. Goodwill is explained by synergies from subsequent restructuring of the operations, potential market opportunities from licenses and customer base.
The results of the Nepal Satellite Telecom operations have been included in the consolidated financial statements as of April 26, 2012.
| Preliminary purchase price allocation | SEK in millions |
|---|---|
| Cash | 295 |
| Contingent consideration | 536 |
| Fair value of existing interest in Nepal Satellite | 359 |
| Total cost of the combination | 1,190 |
| Mobile networks | 82 |
| Inventories, receivables and other current assets | 60 |
| Cash and cash equivalents | 2 |
| Minority interests | 25 |
| Deferred income tax liabilities | -1 |
| Other long-term liabilities | -126 |
| Short-term liabilities | -122 |
| Total fair value of net assets acquired | -80 |
| Goodwill (allocated to business area Eurasia) | 1,270 |
| Cash flow effects | SEK in millions |
|---|---|
| Total cost of the combination paid in cash | 295 |
| Less acquired cash and cash equivalents | -2 |
| Net cash outflow from the combination | 293 |
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.
The re-measurement of the existing interest in Airbell/Nepal Satellite Telecom has resulted in a gain of SEK 185 million. This amount has been included in other operating income in the consolidated statement of comprehensive income.
| Condensed Income Statements | Apr-Jun | Apr-Jun | Jan-Jun | Jan-Jun |
|---|---|---|---|---|
| SEK in millions | 2012 | 2011 | 2012 | 2011 |
| Net sales | 24 | 6 | 31 | 16 |
| Operating income | -2 | 105 | 38 | -1,283 |
| Income after financial items | 9,166 | 5,748 | 10,695 | 6,744 |
| Income before taxes | 9,294 | 5,665 | 10,908 | 7,640 |
| Net income | 8,890 | 5,594 | 10,069 | 7,123 |
Last year, the parent company operations within fixed network services and broadband application services were transferred to a subsidiary effecting operating income for 2011. This year's financial items include a capital gain of SEK 7,481 million for the sale of shares in Telecominvest (TCI) to AF Telecom Holding (AFT). The purchase price has not been fully paid by AFT and in order to secure the value of TeliaSonera's receivable, presently SEK 8,077 million, MegaFon shares held by TCI, representing 6.53 percent of the shares in MegaFon, are presently pledged to TeliaSonera. The proper payment of the receivable is guaranteed by certain companies within the AFT Group and the bank accounts where TCI will collect dividends on the pledged shares have also been pledged to TeliaSonera. During the first half of 2012, the total value of the Lithuanian mobile market continued to decrease due to competition and price pressure. Consequently, the value of the shares in UAB Omnitel has been written down by SEK 674 million.
| Condensed Balance Sheets | Jun 30, | Dec 31, |
|---|---|---|
| SEK in millions | 2012 | 2011 |
| Non-current assets | 206,489 | 177,648 |
| Current assets | 34,252 | 43,661 |
| Total assets | 240,741 | 221,309 |
| Shareholders' equity | 79,579 | 81,848 |
| Untaxed reserves | 13,058 | 13,271 |
| Provisions | 1,263 | 570 |
| Liabilities | 146,841 | 125,620 |
| Total equity and liabilities | 240,741 | 221,309 |
Total investments in the period were SEK 21,478 million (4,020), of which SEK 20,472 million referred to shareholder contributions to subsidiaries.
TeliaSonera operates in a broad range of geographic product and service markets in the highly competitive and regulated telecommunications industry. As a result, TeliaSonera is subject to a variety of risks and uncertainties. Management has defined risk as anything that could have a material adverse effect on the achievement of TeliaSonera's goals. Risks can be threats, uncertainties or lost opportunities relating to TeliaSonera's current or future operations or activities. Additionally, these risks may affect TeliaSonera's share price from time to time.
TeliaSonera has an established risk management framework in place to regularly identify, analyze and assess, 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 Notes C27 and C35 to the consolidated financial statements in TeliaSonera's Annual Report 2011 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 2011.
Risks and uncertainties that could specifically impact the quarterly results of operations during the remainder of 2012 include, but may not be limited to:
The growth in net sales in local currencies and excluding acquisitions is expected to be within the range of 1-2 percent. Currency fluctuations may have a material impact on reported figures in Swedish krona.
The EBITDA margin, excluding non-recurring items, in 2012 is expected to remain at the same level compared with 2011.
The CAPEX-to-sales ratio is expected to be approximately 13-14 percent in 2012, excluding license and spectrum fees.
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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