Earnings Release • Feb 2, 2012
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 | 2011 | 2010 | (%) | 2011 | 2010 | (%) |
| Net sales | 27,123 | 26,851 | 1 | 104,354 | 106,979 | -2 |
| Addressable cost base1, 2) | 7,828 | 8,311 | -6 | 30,751 | 32,090 | -4 |
| EBITDA2) excl. non-recurring items3) | 9,191 | 9,002 | 2 | 36,914 | 36,897 | 0 |
| Margin (%) | 33.9 | 33.5 | 35.4 | 34.5 | ||
| Operating income | 7,827 | 8,177 | -4 | 29,567 | 32,003 | -8 |
| Operating income excl. non-recurring items | 7,519 | 7,969 | -6 | 29,737 | 31,935 | -7 |
| Net income | 5,674 | 5,965 | -5 | 21,072 | 23,562 | -11 |
| of which attributable to owners of the parent | 4,972 | 5,309 | -6 | 18,341 | 21,257 | -14 |
| Earnings per share (SEK) | 1.15 | 1.18 | -3 | 4.20 | 4.73 | -11 |
| Return on equity (%, rolling 12 months) | 17.8 | 17.8 | 16.8 | 17.8 | ||
| CAPEX-to-sales (%) | 22.3 | 21.8 | 16.5 | 14.0 | ||
| Free cash flow | 523 | 1,742 | 9,629 | 12,901 | ||
| 1) Additional information available at www.teliasonera.com. 2) Please refer to page 18 for definitions. 3) Non-recurring items; see table on | ||||||
| page 22. | ||||||
| In this report, comparative figures are provided in parentheses following the operational and financial results and refer to the same item in |
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 of 2010, unless otherwise stated.
"The fourth quarter marks the end of another strong year for TeliaSonera. We are proud that we have been able to generate growth and keep a healthy balance between revenues and costs and thereby improved our EBITDA margin, excluding non-recurring items, for the third consecutive year.
When we launched our new brand identity in May, the most tangible benefit for our customers was our new offer with significantly lower cost and improved cost control for data roaming. Users are now able to keep the same mobile behavior when traveling as they do in their home country. We are convinced that increased usage in the longer perspective will compensate for a short-term negative impact on revenues. We can already now see that volumes have more than doubled compared to a year ago.
A cornerstone in our strategy is network quality and capacity. During 2011, we invested more than SEK 17 billion in networks and licenses. We have taken the technology leadership in many of our countries by being the first operator to launch 4G services. The roll-out will continue and for example in Sweden our 4G services now cover 200 locations and will expand by one city or village every day during 2012. After the launch of 4G tablets before Christmas we are now looking forward to be able to offer 4G handsets in the first quarter.
In the fourth quarter, important milestones were met for several of our operations. We have now more than half a million TV customers in Sweden. Yoigo in Spain passed 3 million subscribers and reported positive EBIT and cash flow. Ncell in Nepal became the overall market leader and with Azercell's 3G launch in Azerbaijan in November we now provide 3G services in all our Eurasian markets.
Our free cash flow was affected by lower dividends from associated companies as well as significant investments in spectrum. The former relates to the ownership and governance disputes in Turkcell, where recent legal awards in our favor and the Capital Markets Board's new decree regarding corporate governance principles are important steps in the right direction.
In line with our strategy of increasing ownership in core holdings we signed an agreement to increase our holding in Kcell in Kazakhstan. We will continue to look for new opportunities within or neighboring our existing footprint. Despite significant investments in capacity and ownership increases, our solid financial position paves the way for our Board of Directors to propose an increase in ordinary dividend to SEK 2.85 per share.
Looking ahead, we believe our revenues and earnings in local currencies will continue to grow in 2012 despite macroeconomic and industrial challenges."
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.
Please refer to page 27 for the previous Group outlook for 2011 (published on October 19, 2011)
Net sales in local currencies and excluding acquisitions increased 2.1 percent. In reported currency, net sales increased 1.0 percent to SEK 27,123 million (26,851). The negative effect of disposals was 0.1 percent and the negative effect of exchange rate fluctuations was 1.0 percent.
In Mobility Services, net sales in local currencies and excluding acquisitions increased 3.8 percent. Net sales in reported currency increased 3.5 percent to SEK 13,119 million (12,672).
In Broadband Services, net sales in local currencies and excluding acquisitions decreased 3.9 percent. Net sales in reported currency decreased 4.1 percent to SEK 9,475 million (9,880).
In Eurasia, net sales in local currencies and excluding acquisitions increased 12.7 percent. Net sales in reported currency increased 8.9 percent to SEK 4,708 million (4,323).
The number of subscriptions rose by 13.0 million from the end of the fourth quarter 2010 to 170.0 million, of which 7.6 million to 62.8 million in the consolidated companies and 5.4 million to 107.2 million in the associated companies. During the fourth quarter, the total number of subscriptions increased by 2.4 million in the consolidated companies and increased by 3.3 million in the associated companies.
The addressable cost base in local currencies and excluding acquisitions decreased 4.6 percent. In reported currency, the addressable cost base decreased 5.8 percent to SEK 7,828 million (8,311).
EBITDA, excluding non-recurring items, increased 3.2 percent in local currencies and excluding acquisitions. In reported currency, EBITDA, excluding non-recurring items, increased 2.1 percent to SEK 9,191 million (9,002). The EBITDA margin rose to 33.9 percent (33.5).
Operating income, excluding non-recurring items, decreased 5.6 percent to SEK 7,519 million (7,969). Income from associated companies decreased 22.9 percent to SEK 1,652 million (2,144).
Non-recurring items affecting operating income totaled SEK 308 million (208). Nonrecurring items included charges of approximately SEK 300 million related to efficiency measures. Non-recurring items were also positively affected by SEK 695 million partly as a result of the agreement with Altimo signed in November 2009.
Financial items totaled SEK -835 million (-558) of which SEK -649 million (-445) related to net interest expenses.
Income taxes decreased to SEK 1,318 million (1,654). The effective tax rate was 18.9 percent (21.7). One time effects from changes in deferred tax assets offset by reduced tax rates had a positive impact of 3 percentage points in the quarter.
Non-controlling interests in subsidiaries increased to SEK 702 million (656), of which SEK 621 million (598) was related to the operations in Eurasia and SEK 67 million (64) to LMT and TEO.
Net income attributable to owners of the parent company decreased 6.3 percent to SEK 4,972 million (5,309) and earnings per share to SEK 1.15 (1.18).
CAPEX increased to SEK 6,053 million (5,860) and the CAPEX-to-sales ratio to 22.3 percent (21.8). In the fourth quarter of 2011, CAPEX included SEK 1,321 million for the acquisition of licenses. The CAPEX-to-sales ratio, excluding licenses and spectrum fees, was 17.4 percent (20.3).
Free cash flow decreased 70.0 percent to SEK 523 million (1,742) due to SEK 0.6 billion higher cash CAPEX. In the fourth quarter of 2011, no dividend was received from Turkcell Holding compared with SEK 894 million the same period a year ago.
Net debt was SEK 65,079 million at the end of the fourth quarter (65,980 at the end of the third quarter of 2011). The net debt/EBITDA ratio was 1.76 (1.80 at the end of the third quarter of 2011).
The equity/assets ratio was 44.0 percent (44.5 percent at the end of the third quarter of 2011).
Net sales in local currencies and excluding acquisitions increased 2.6 percent. In reported currency, net sales decreased 2.5 percent to SEK 104,354 million (106,979). The negative effect of disposals was 0.9 percent and the negative effect of exchange rate fluctuations was 4.2 percent.
In Mobility Services, net sales in local currencies and excluding acquisitions increased 4.2 percent. Net sales in reported currency increased 0.7 percent to SEK 51,032 million (50,659).
In Broadband Services, net sales in local currencies and excluding acquisitions decreased 5.7 percent. Net sales in reported currency decreased 7.7 percent to SEK 36,811 million (39,875).
In Eurasia, net sales in local currencies and excluding acquisitions increased 17.0 percent. Net sales in reported currency increased 5.3 percent to SEK 17,330 million (16,458).
The addressable cost base in local currencies and excluding acquisitions increased 0.6 percent. In reported currency, the addressable cost base decreased 4.2 percent to SEK 30,751 million (32,090).
EBITDA, excluding non-recurring items, increased 4.7 percent in local currencies and excluding acquisitions. In reported currency, EBITDA, excluding non-recurring items, was flat at SEK 36,914 million (36,897). The EBITDA margin rose to 35.4 percent (34.5).
Operating income, excluding non-recurring items, decreased 6.9 percent to SEK 29,737 million (31,935). Income from associated companies decreased 26.9 percent to SEK 5,717 million (7,821).
Non-recurring items affecting operating income totaled SEK -170 million (68).
Financial items totaled SEK -2,793 million (-2,067) of which SEK -2,365 million (-1,783) related to net interest expenses.
Income taxes decreased to SEK 5,702 million (6,374). The effective tax rate was unchanged at 21.3 percent (21.3).
Non-controlling interests in subsidiaries increased to SEK 2,731 million (2,305), of which SEK 2,420 million (2,237) was related to the operations in Eurasia and SEK 262 million (302) to LMT and TEO.
Net income attributable to owners of the parent company decreased 13.7 percent to SEK 18,341 million (21,257) and earnings per share to SEK 4.20 (4.73).
CAPEX increased to SEK 17,243 million (14,934) and the CAPEX-to-sales ratio to 16.5 percent (14.0). In 2011, CAPEX, excluding licenses and spectrum fees, amounted to SEK 14,560 million (14,012) and the CAPEX-to-sales ratio to 14.0 percent (13.1).
Free cash flow decreased 25.3 percent to SEK 9,629 million (12,901) mainly due to higher cash CAPEX of SEK 2.9 billion and SEK 1.2 billion lower dividends from associated companies.
The TeliaSonera share is listed on NASDAQ OMX Stockholm and NASDAQ OMX Helsinki. The share's settlement price in Stockholm decreased 12.3 percent in 2011, from SEK 53.30 to SEK 46.77. The highest share price was SEK 55.70 (56.90) and the lowest SEK 40.60 (44.00). The number of shareholders decreased from 601,736 to 580,076. Ownership by the Swedish state was 37.3 percent and the Finnish state's holding was 13.7 percent. Holdings outside Sweden and Finland increased to 18.2 percent from 17.6 percent.
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.
For 2011, the Board of Directors proposes to the Annual General Meeting (AGM) an ordinary dividend of SEK 2.85 (2.75) per share, totaling SEK 12.3 billion, or 68 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 3, 2012, and that the first day of trading in shares excluding rights to dividend be set for April 4, 2012. The recommended record date at Euroclear Sweden for the right to receive dividend will be April 10, 2012. If the AGM votes to approve the Board's proposals, the dividend is expected to be distributed by Euroclear Sweden on April 13, 2012.
The Annual General Meeting (AGM) will be held on April 3, 2012, at 14:00 CET at Cirkus, Stockholm. Notice of the meeting will be posted on www.teliasonera.com, and advertised in the newspapers at the end of February 2012. The record date entitling shareholders to attend the meeting will be March 28, 2012. Shareholders may file notice of intent to attend the AGM from the end of February 2012. TeliaSonera must receive notice of attendance no later than March 28, 2012.
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, | Oct-Dec | Oct-Dec | Chg | Jan-Dec | Jan-Dec | Chg |
|---|---|---|---|---|---|---|
| operational data and changes | 2011 | 2010 | (%) | 2011 | 2010 | (%) |
| Net sales | 13,119 | 12,672 | 4 | 51,032 | 50,659 | 1 |
| EBITDA excl. non-recurring items | 3,890 | 3,644 | 7 | 15,746 | 14,928 | 5 |
| Margin (%) | 29.7 | 28.8 | 30.9 | 29.5 | ||
| Operating income | 2,564 | 2,655 | -3 | 11,064 | 10,750 | 3 |
| Operating income excl. non-recurring items | 2,719 | 2,663 | 2 | 11,263 | 10,776 | 5 |
| CAPEX | 2,419 | 1,293 | 87 | 6,600 | 3,879 | 70 |
| Subscriptions, period-end (thousands) | 19,520 | 18,384 | 6 | 19,520 | 18,384 | 6 |
| Employees, period-end | 7,771 | 7,488 | 4 | 7,771 | 7,488 | 4 |
Additional segment information available at www.teliasonera.com.
• Net sales in local currencies and excluding acquisitions increased 3.8 percent. Net sales in reported currency increased 3.5 percent to SEK 13,119 million (12,672). The negative effect of exchange rate fluctuations was 0.3 percent.
In Sweden, net sales rose by 9.2 percent to SEK 4,246 million (3,890), explained by equipment sales and mobile data usage. Voice and messaging revenues were stable compared to the same period last year. Revenues from equipment sales were higher than previously due to the launch of new smartphone models in the fourth quarter.
In Finland, net sales in local currency declined 3.0 percent to the equivalent of SEK 2,264 million (2,368). Lower average price per minute and reduced interconnection fees explain the decline in net sales. Mobile data revenues grew approximately 20 percent compared to the fourth quarter last year.
In Norway, net sales in local currency fell by 4.0 percent to the equivalent of SEK 2,046 million (2,082), mainly due to lower interconnect fees as well as lower average price per minute. Growth in equipment sales, mobile data and wholesale revenues continued.
In Denmark, net sales in local currency declined 7.2 percent to the equivalent of SEK 1,378 million (1,500). The Danish market continued to be characterized by heavy price competition with customers migrating to fixed price plans with lower average price per minute.
Net sales in local currency in Estonia increased by 6.0 percent to the equivalent of SEK 414 million (396), driven by higher roaming, equipment sales and mobile data usage. In Latvia, net sales in local currency rose 7.8 percent to the equivalent of SEK 481 million (449) due to higher equipment sales and mobile data. Although an improvement from previous quarters, net sales in local currency in Lithuania fell by 2.0 percent to the equivalent of SEK 398 million (413) as a result of lower interconnect rates and price pressure.
Despite the weak macroeconomic development in the country and increased activity from competition, net sales in local currency increased 22.8 percent in Spain to the equivalent of SEK 1,945 million (1,613) as a result of continued high subscription intake.
In Sweden, EBITDA, excluding non-recurring items, increased 22.0 percent to SEK 1,793 million (1,470). The EBITDA margin improved to 42.2 percent (37.8) due to higher revenues, higher gross margin and lower personnel expenses.
In Finland, EBITDA margin improved slightly to 30.1 percent (29.9). The gross margin was negatively impacted by low margin equipment sales but compensated for by lower costs related to transmission. In Norway, the EBITDA margin increased to 33.3 percent (32.9).
In Denmark, the EBITDA margin fell to 8.6 percent (17.2) due to lower revenues as well as lower gross margin. In the fourth quarter, 170 employees or approximately 20 percent of the total workforce were given notice.
The EBITDA margins in Lithuania and Estonia fell to 26.6 percent (34.1) and 29.2 percent (36.9), respectively. Margins in both countries were negatively impacted by a changed revenue mix with a higher proportion of low margin equipment sales. In Latvia, the EBITDA margin increased to 38.3 percent (34.7) due to an improved gross margin.
EBITDA in Spain increased to SEK 206 million (78), corresponding to a margin of 10.6 percent (4.8). The improvement is due to higher revenues and improved gross margin.
• CAPEX increased to SEK 2,419 million (1,293) and the CAPEX-to-sales ratio to 18.4 percent (10.2). CAPEX, excluding licenses and spectrum fees, amounted to SEK 1,490 million (1,285) and the CAPEX-to-sales ratio to 11.4 percent (10.1). Cash flow, measured as EBITDA, excluding non-recurring items, minus CAPEX, fell to SEK 1,471 million (2,351).
• Net sales in local currencies and excluding acquisitions increased 4.2 percent. Net sales in reported currency increased 0.7 percent to SEK 51,032 million (50,659). The negative effect of exchange rate fluctuations was 3.5 percent.
8
| SEK in millions, except margins | Oct-Dec | Oct-Dec | Chg | Jan-Dec | Jan-Dec | Chg |
|---|---|---|---|---|---|---|
| and changes | 2011 | 2010 | (%) | 2011 | 2010 | (%) |
| Net sales | 13,119 | 12,672 | 4 | 51,032 | 50,659 | 1 |
| of which Sweden | 4,246 | 3,890 | 9 | 16,204 | 15,195 | 7 |
| of which Finland | 2,264 | 2,368 | -4 | 8,922 | 9,613 | -7 |
| of which Norway | 2,046 | 2,082 | -2 | 8,314 | 8,597 | -3 |
| of which Denmark | 1,378 | 1,500 | -8 | 5,525 | 6,305 | -12 |
| of which Lithuania | 398 | 413 | -4 | 1,451 | 1,662 | -13 |
| of which Latvia | 481 | 449 | 7 | 1,722 | 1,806 | -5 |
| of which Estonia | 414 | 396 | 5 | 1,608 | 1,650 | -3 |
| of which Spain | 1,945 | 1,613 | 21 | 7,451 | 5,979 | 25 |
| EBITDA excl. non-recurring items | 3,890 | 3,644 | 7 | 15,746 | 14,928 | 5 |
| of which Sweden | 1,793 | 1,470 | 22 | 7,238 | 6,216 | 16 |
| of which Finland | 682 | 709 | -4 | 2,843 | 2,989 | -5 |
| of which Norway | 682 | 686 | -1 | 2,891 | 3,046 | -5 |
| of which Denmark | 118 | 258 | -54 | 744 | 1,189 | -37 |
| of which Lithuania | 106 | 141 | -25 | 405 | 553 | -27 |
| of which Latvia | 184 | 156 | 18 | 653 | 723 | -10 |
| of which Estonia | 121 | 146 | -17 | 553 | 654 | -15 |
| of which Spain | 206 | 78 | 164 | 420 | -441 | |
| Margin (%), total | 29.7 | 28.8 | 30.9 | 29.5 | ||
| Margin (%), Sweden | 42.2 | 37.8 | 44.7 | 40.9 | ||
| Margin (%), Finland | 30.1 | 29.9 | 31.9 | 31.1 | ||
| Margin (%), Norway | 33.3 | 32.9 | 34.8 | 35.4 | ||
| Margin (%), Denmark | 8.6 | 17.2 | 13.5 | 18.9 | ||
| Margin (%), Lithuania | 26.6 | 34.1 | 27.9 | 33.3 | ||
| Margin (%), Latvia | 38.3 | 34.7 | 37.9 | 40.0 | ||
| Margin (%), Estonia | 29.2 | 36.9 | 34.4 | 39.6 | ||
| Margin (%), Spain | 10.6 | 4.8 | 5.6 | neg |
| Net sales in local currencies and | ||
|---|---|---|
| excluding acquisitions | Oct-Dec | Jan-Dec |
| Change (%), total | 3.8 | 4.2 |
| Change (%), Sweden | 9.2 | 6.6 |
| Change (%), Finland | -3.0 | -1.9 |
| Change (%), Norway | -4.0 | -0.5 |
| Change (%), Denmark | -7.2 | -7.4 |
| Change (%), Lithuania | -2.0 | -7.7 |
| Change (%), Latvia | 7.8 | 0.5 |
| Change (%), Estonia | 6.0 | 3.0 |
| Change (%), Spain | 22.8 | 31.7 |
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, | Oct-Dec | Oct-Dec | Chg | Jan-Dec | Jan-Dec | Chg |
|---|---|---|---|---|---|---|
| operational data and changes | 2011 | 2010 | (%) | 2011 | 2010 | (%) |
| Net sales | 9,475 | 9,880 | -4 | 36,811 | 39,875 | -8 |
| EBITDA excl. non-recurring items | 2,982 | 2,991 | 0 | 12,101 | 13,035 | -7 |
| Margin (%) | 31.5 | 30.3 | 32.9 | 32.7 | ||
| Operating income | 1,561 | 1,718 | -9 | 6,582 | 7,813 | -16 |
| Operating income excl. non-recurring items | 1,697 | 1,757 | -3 | 7,168 | 7,969 | -10 |
| CAPEX | 1,659 | 1,800 | -8 | 5,448 | 4,928 | 11 |
| Subscriptions, period-end (thousands) | ||||||
| Broadband | 2,481 | 2,402 | 3 | 2,481 | 2,402 | 3 |
| Fixed voice and VoIP | 4,805 | 5,040 | -5 | 4,805 | 5,040 | -5 |
| TV | 1,177 | 935 | 26 | 1,177 | 935 | 26 |
| Employees, period-end | 13,305 | 13,901 | -4 | 13,305 | 13,901 | -4 |
Additional segment information available at www.teliasonera.com.
• Net sales in local currencies and excluding acquisitions decreased 3.9 percent. Net sales in reported currency decreased 4.1 percent to SEK 9,475 million (9,880). The negative effect of exchange rate fluctuations was 0.4 percent and the positive effect of acquisitions and disposals was 0.2 percent.
In Sweden, net sales fell 2.9 percent to SEK 4,389 million (4,521). Revenues from fixedvoice services fell around 11 percent while the growth within IP based services was around 7 percent, a clear improvement compared to the previous quarter. The positive development within IP based services was partly driven by a 25 percent growth in revenues for TV- and VoIP subscriptions. In addition, broadband is now also showing a positive development and revenues grew 5 percent, driven by market share gains and the ongoing roll-out of fiber.
In Finland, net sales in local currency decreased 4.3 percent to the equivalent of SEK 1,359 million (1,424), mainly due to lower PSTN subscriptions. Traditional fixed-voice services declined by 6 percent while IP-based revenues grew by 2 percent compared with the same period last year.
In Norway, net sales grew 0.8 percent in local currency to the equivalent of SEK 275 million (266). In Denmark, net sales decreased 0.8 percent to the equivalent of SEK 235 million (239) as growth in IP-based services, mainly broadband and TV, could not fully compensate for a decline in revenues from fixed-voice services.
In Estonia, net sales in local currency grew 6.1 percent to the equivalent of SEK 495 million (473), due to higher broadband and TV revenues as well as an increase in transit traffic and equipment sales. In Lithuania, net sales grew 1.5 percent to the equivalent of SEK 515 million (514).
In Wholesale, net sales in local currency fell 10.3 percent to SEK 2,508 million (2,810). Within International Carrier, net sales in local currencies fell 10.6 percent due to a 13 percent decline in low margin voice revenues while IP revenues grew by 17 percent compared with the same period a year ago.
• The number of subscriptions for broadband access rose to 2.5 million, an increase of 79,000 from the fourth quarter of 2010 and by 28,000 during the quarter.
The total number of TV subscriptions rose by 242,000 from the fourth quarter of 2010 and by 40,000 during the quarter to 1.2 million.
The number of fixed-voice subscriptions decreased by 399,000 from the end of the fourth quarter of 2010 to 4.3 million, and was down 123,000 during the quarter. The intake of VoIP subscriptions was 39,000 in the quarter, bringing the total number of VoIP subscriptions to 0.5 million.
• EBITDA, excluding non-recurring items, fell 0.5 percent in local currencies and excluding acquisitions. In reported currency, EBITDA, excluding non-recurring items, decreased 0.3 percent to SEK 2,982 million (2,991). The EBITDA margin increased to 31.5 percent (30.3).
In Sweden, the EBITDA margin, improved to 36.7 percent (33.4), as a result of lower cost of goods sold and lower personnel costs due to efficiency measures. Costs for fault handling increased in the fourth quarter but was off-set by releases of earlier made provisions related to legal disputes.
In Finland, the EBITDA margin declined to 21.2 percent (23.7) due to lower gross margin as a result of higher equipment sales and an increased cost for fault handling. The addressable cost base was reduced by 8.9 percent. The acquired cable-TV operation contributed slightly to the EBITDA.
In Norway, the EBITDA margin improved to 17.1 percent (13.5) due to higher revenues, improved gross margin and a reduction in the addressable cost base. Same explanations are applicable in Denmark where the EBITDA margin increased to 15.3 percent (7.1).
In Lithuania, EBITDA margin improved to 38.1 percent (36.8) while in Estonia the EBITDA margin abated to 24.6 percent (31.1), mainly due to lower gross margin. In Wholesale, the EBITDA margin improved slightly to 27.2 percent (26.8).
• CAPEX decreased to SEK 1,659 million (1,800) and the CAPEX-to-sales ratio fell to 17.5 percent (18.2). Cash flow, measured as EBITDA, excluding non-recurring items, minus CAPEX, grew to SEK 1,323 million (1,191).
| SEK in millions, except margins | Oct-Dec | Oct-Dec | Chg | Jan-Dec | Jan-Dec | Chg |
|---|---|---|---|---|---|---|
| and changes | 2011 | 2010 | (%) | 2011 | 2010 | (%) |
| Net sales | 9,475 | 9,880 | -4 | 36,811 | 39,875 | -8 |
| of which Sweden | 4,389 | 4,521 | -3 | 17,264 | 18,085 | -5 |
| of which Finland | 1,359 | 1,424 | -5 | 5,289 | 5,820 | -9 |
| of which Norway | 275 | 266 | 3 | 1,063 | 1,157 | -8 |
| of which Denmark | 235 | 239 | -2 | 929 | 983 | -5 |
| of which Lithuania | 515 | 514 | 0 | 1,962 | 2,139 | -8 |
| of which Estonia | 495 | 473 | 5 | 1,903 | 1,910 | 0 |
| of which Wholesale | 2,508 | 2,810 | -11 | 9,654 | 11,214 | -14 |
| EBITDA excl. non-recurring items | 2,982 | 2,991 | 0 | 12,101 | 13,035 | -7 |
| of which Sweden | 1,610 | 1,512 | 6 | 6,782 | 6,907 | -2 |
| of which Finland | 288 | 338 | -15 | 1,281 | 1,719 | -25 |
| of which Norway | 47 | 36 | 31 | 174 | 183 | -5 |
| of which Denmark | 36 | 17 | 112 | 102 | 98 | 4 |
| of which Lithuania | 196 | 189 | 4 | 791 | 852 | -7 |
| of which Estonia | 122 | 147 | -17 | 539 | 586 | -8 |
| of which Wholesale | 682 | 753 | -9 | 2,432 | 2,690 | -10 |
| Margin (%), total | 31.5 | 30.3 | 32.9 | 32.7 | ||
| Margin (%), Sweden | 36.7 | 33.4 | 39.3 | 38.2 | ||
| Margin (%), Finland | 21.2 | 23.7 | 24.2 | 29.5 | ||
| Margin (%), Norway | 17.1 | 13.5 | 16.4 | 15.8 | ||
| Margin (%), Denmark | 15.3 | 7.1 | 11.0 | 10.0 | ||
| Margin (%), Lithuania | 38.1 | 36.8 | 40.3 | 39.8 | ||
| Margin (%), Estonia | 24.6 | 31.1 | 28.3 | 30.7 | ||
| Margin (%), Wholesale | 27.2 | 26.8 | 25.2 | 24.0 |
| excluding acquisitions | Oct-Dec | Jan-Dec |
|---|---|---|
| Change (%), total | -3.9 | -5.7 |
| Change (%), Sweden | -2.9 | -4.5 |
| Change (%), Finland | -4.3 | -4.5 |
| Change (%), Norway | 0.8 | -5.5 |
| Change (%), Denmark | -0.8 | -0.2 |
| Change (%), Lithuania | 1.5 | -3.1 |
| Change (%), Estonia | 6.1 | 5.3 |
| Change (%), Wholesale | -10.3 | -12.0 |
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 (44 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, | Oct-Dec | Oct-Dec | Chg | Jan-Dec | Jan-Dec | Chg |
|---|---|---|---|---|---|---|
| operational data and changes | 2011 | 2010 | (%) | 2011 | 2010 | (%) |
| Net sales | 4,708 | 4,323 | 9 | 17,330 | 16,458 | 5 |
| EBITDA excl. non-recurring items | 2,357 | 2,273 | 4 | 8,850 | 8,348 | 6 |
| Margin (%) | 50.1 | 52.6 | 51.1 | 50.7 | ||
| Income from associated companies | 1,687 | 2,033 | -17 | 5,735 | 7,603 | -25 |
| Russia | 1,049 | 1,154 | -9 | 4,410 | 5,053 | -13 |
| Turkey | 640 | 879 | -27 | 1,331 | 2,550 | -48 |
| Operating income | 3,996 | 3,567 | 12 | 12,499 | 13,267 | -6 |
| Operating income excl. non-recurring items | 3,283 | 3,614 | -9 | 11,749 | 13,314 | -12 |
| CAPEX | 1,754 | 2,580 | -32 | 4,538 | 5,473 | -17 |
| Subscriptions, period-end (thousands) | ||||||
| Subsidiaries | 34,840 | 28,505 | 22 | 34,840 | 28,505 | 22 |
| Associated companies | 106,225 | 100,900 | 5 | 106,225 | 100,900 | 5 |
| Employees, period-end | 4,994 | 4,853 | 3 | 4,994 | 4,853 | 3 |
Additional segment information available at www.teliasonera.com.
• Net sales in local currencies and excluding acquisitions increased 12.7 percent. Net sales in reported currency increased 8.9 percent to SEK 4,708 million (4,323). The negative effect from exchange rate fluctuations was 3.8 percent.
In Kazakhstan, net sales in local currency increased 10.8 percent to the equivalent of SEK 2,147 million (1,971). Subscription growth accelerated in the fourth quarter and market share was defended although the price cap on retail tariffs and the launch by a third operator have put pressure on the average price per minute. Mobile data continued to grow strongly.
In Azerbaijan, net sales in local currency fell 1.8 percent to the equivalent of SEK 928 million (935), due to significant price erosion in the market. The launch of 3G services has been well received and data volumes increased strongly in the fourth quarter. The strong growth in minutes of use continued as a result of the launch of new subscriptions and campaigns with lower prices for end-users.
In Uzbekistan, net sales in local currency increased 13.3 percent to the equivalent of SEK 470 million (463). The growth was slower than in previous quarters, mainly as a result of lower network availability due to electricity and weather conditions. Competition remained fierce and Ucell is positioning itself as the leader within mobile data. Value added services today represent 30 percent of Ucell's total revenues.
In Tajikistan, net sales in local currency grew 18.1 percent to the equivalent of SEK 232 million (216), mainly as a result of an increase in on-net usage, incoming international calls and value added services. To increase the long term efficiency and balance the negative effects of regulation introduced in Tajikistan, the operational merger of two separate business entities in Tajikistan has been completed.
In Georgia, net sales in local currency fell 5.5 percent to the equivalent of SEK 242 million (239), an improvement compared to previous quarters since the excise tax on revenues and lower interconnect fees were introduced in the third quarter of 2010. The revenue decline still continued in the quarter due to maximum retail tariffs introduced in April 2011 and severe price competition in the market.
In Moldova, net sales in local currency increased 9.1 percent to the equivalent of SEK 143 million (131). In Nepal, net sales in local currency grew by 68.9 percent to the equivalent of SEK 547 million (370) as a result of a continued strong subscription intake.
EBITDA margin continued to exceed 50 percent in Kazakhstan, Nepal and Tajikistan. Despite fierce competition and negative effects of difficult weather conditions in Uzbekistan, the EBITDA margin remained around 40 percent. EBITDA margin in Azerbaijan declined compared to the same period last year due to lower revenues and an increase in off-net traffic.
• CAPEX decreased to SEK 1,754 million (2,580) and the CAPEX-to-sales ratio decreased to 37.3 percent (59.7). CAPEX, excluding licenses and spectrum fees, amounted to SEK 1,362 million (2,190) and the CAPEX-to-sales ratio to 28.9 percent (50.7). Cash flow, measured as EBITDA, excluding non-recurring items, minus CAPEX, improved to SEK 603 million (-307).
| Oct-Dec | Oct-Dec | Chg | Jan-Dec | Jan-Dec | Chg | |
|---|---|---|---|---|---|---|
| SEK in millions, except changes | 2011 | 2010 | (%) | 2011 | 2010 | (%) |
| Net sales | 4,708 | 4,323 | 9 | 17,330 | 16,458 | 5 |
| of which Kazakhstan | 2,147 | 1,971 | 9 | 7,913 | 7,450 | 6 |
| of which Azerbaijan | 928 | 935 | -1 | 3,449 | 3,817 | -10 |
| of which Uzbekistan | 470 | 463 | 2 | 1,738 | 1,607 | 8 |
| of which Tajikistan | 232 | 216 | 7 | 834 | 823 | 1 |
| of which Georgia | 242 | 239 | 1 | 926 | 1,133 | -18 |
| of which Moldova | 143 | 131 | 9 | 518 | 489 | 6 |
| of which Nepal | 547 | 370 | 48 | 1,960 | 1,149 | 71 |
| Net sales in local currencies and | ||
|---|---|---|
| excluding acquisitions | Oct-Dec | Jan-Dec |
| Change (%), total | 12.7 | 17.0 |
| Change (%), Kazakhstan | 10.8 | 17.2 |
| Change (%), Azerbaijan | -1.8 | -2.0 |
| Change (%), Uzbekistan | 13.3 | 29.8 |
| Change (%), Tajikistan | 18.1 | 18.2 |
| Change (%), Georgia | -5.5 | -14.6 |
| Change (%), Moldova | 9.1 | 11.1 |
| Change (%), Nepal | 68.9 | 92.9 |
• TeliaSonera's income from Russia decreased to SEK 4,410 million (5,053). The Russian ruble depreciated 6.8 percent against the Swedish krona which had a negative impact of SEK 322 million. The EBITDA margin in MegaFon was somewhat lower than comparable period driven by price erosion, increasing share of lower margin handset sales and fixed broadband.
• TeliaSonera's income from Turkey decreased to SEK 1,331 million (2,550). The Turkish lira depreciated 13.8 percent against the Swedish krona, which had a negative impact of SEK 213 million. The EBITDA in Turkcell year-on year decreased due to maximum tariff regulation, lower interconnection rates and increased marketing expenses driven by aggressive competition in Turkey. TeliaSonera's income from Turkey was also negatively affected by devaluation and goodwill impairment in Belarus.
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.
| Oct-Dec | Oct-Dec | Chg | Jan-Dec | Jan-Dec | Chg | |
|---|---|---|---|---|---|---|
| SEK in millions, except changes | 2011 | 2010 | (%) | 2011 | 2010 | (%) |
| Net sales | 1,102 | 1,246 | -12 | 3,992 | 5,102 | -22 |
| EBITDA excl. non-recurring items | 2 | 94 | -98 | 257 | 560 | -54 |
| Income from associated companies | -49 | -5 | -115 | -23 | ||
| Operating income | -254 | 234 | -541 | 143 | ||
| Operating income excl. non-recurring items | -141 | -68 | -107 | -406 | -154 | |
| CAPEX | 222 | 190 | 17 | 657 | 654 | 0 |
Additional segment information available at www.teliasonera.com.
Stockholm, February 2, 2012
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 February 2, 2012.
Financial Information Annual General Meeting 2012 in Stockholm April 3, 2012 Interim Report January–March 2012 April 19, 2012 Interim Report January–June 2012 July 18, 2012 Interim Report January–September 2012 October 17, 2012 Year-end Report January–December 2012 January 31, 2013
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, | Oct-Dec | Oct-Dec | Chg | Jan-Dec | Jan-Dec | Chg |
|---|---|---|---|---|---|---|
| number of shares and changes | 2011 | 20101) | (%) | 2011 | 20101) | (%) |
| Net sales | 27,123 | 26,851 | 1 | 104,354 | 106,979 | -2 |
| Cost of sales | -15,222 | -13,640 | 12 | -57,035 | -57,691 | -1 |
| Gross profit | 11,901 | 13,211 | -10 | 47,319 | 49,288 | -4 |
| Selling, admin. and R&D expenses | -6,299 | -7,647 | -18 | -24,232 | -25,684 | -6 |
| Other operating income and expenses, net | 573 | 469 | 22 | 763 | 578 | 32 |
| Income from associated companies and | ||||||
| joint ventures | 1,652 | 2,144 | -23 | 5,717 | 7,821 | -27 |
| Operating income | 7,827 | 8,177 | -4 | 29,567 | 32,003 | -8 |
| Finance costs and other financial items, net | -835 | -558 | 50 | -2,793 | -2,067 | 35 |
| Income after financial items | 6,992 | 7,619 | -8 | 26,774 | 29,936 | -11 |
| Income taxes | -1,318 | -1,654 | -20 | -5,702 | -6,374 | -11 |
| Net income | 5,674 | 5,965 | -5 | 21,072 | 23,562 | -11 |
| Foreign currency translation differences | -2,757 | -2,722 | -5,339 | -18,959 | ||
| Income from associated companies | 59 | -144 | 88 | -103 | ||
| Cash flow hedges | -11 | 122 | -118 | 63 | ||
| Available-for-sale financial instruments | -1 | 0 | -1 | -90 | ||
| Income taxes relating to other comprehen | ||||||
| sive income | -389 | -180 | 5 | -936 | ||
| Other comprehensive income | -3,099 | -2,924 | -5,365 | -20,025 | ||
| Total comprehensive income | 2,575 | 3,041 | 15,707 | 3,537 | ||
| Net income attributable to: | ||||||
| Owners of the parent | 4,972 | 5,309 | 18,341 | 21,257 | ||
| Non-controlling interests | 702 | 656 | 2,731 | 2,305 | ||
| Total comprehensive income attributable to: | ||||||
| Owners of the parent | 2,033 | 2,396 | 13,096 | 1,692 | ||
| Non-controlling interests | 542 | 645 | 2,611 | 1,845 | ||
| Earnings per share (SEK), basic and diluted | 1.15 | 1.18 | 4.20 | 4.73 | ||
| Number of shares (thousands) | ||||||
| Outstanding at period-end | 4,330,085 4,490,457 | 4,330,085 4,490,457 | ||||
| Weighted average, basic and diluted | 4,330,085 4,490,457 | 4,366,992 4,490,457 | ||||
| Number of treasury shares (thousands) | ||||||
| Outstanding at period-end | – | – | – | – | ||
| Weighted average | – | – | 50,528 | – | ||
| EBITDA | 9,587 | 9,222 | 36,873 | 37,661 | ||
| EBITDA excl. non-recurring items | 9,191 | 9,002 | 36,914 | 36,897 | ||
| Depreciation, amortization and impairment | ||||||
| losses | -3,412 | -3,189 | -13,023 | -13,479 | ||
| Operating income excl. non-recurring items | 7,519 | 7,969 | 29,737 | 31,935 |
1) Certain restatements have been made, see page 21.
| Dec 31, | Dec 31, | |
|---|---|---|
| SEK in millions | 2011 | 2010 |
| Assets | ||
| Goodwill and other intangible assets | 91,915 | 90,531 |
| Property, plant and equipment | 59,580 | 58,353 |
| Investments in associates and joint ventures, deferred tax assets | ||
| and other non-current assets | 65,743 | 62,458 |
| Total non-current assets | 217,238 | 211,342 |
| Inventories | 1,475 | 1,395 |
| Trade receivables, current tax assets and other receivables | 21,035 | 19,993 |
| Interest-bearing receivables | 1,533 | 2,477 |
| Cash and cash equivalents | 12,600 | 15,344 |
| Total current assets | 36,643 | 39,209 |
| Total assets | 253,881 | 250,551 |
| Equity and liabilities | ||
| Equity attributable to owners of the parent | 116,680 | 125,907 |
| Equity attributable to non-controlling interests | 7,353 | 6,758 |
| Total equity | 124,033 | 132,665 |
| Long-term borrowings | 68,108 | 60,563 |
| Deferred tax liabilities, other long-term provisions | 24,163 | 23,230 |
| Other long-term liabilities | 1,409 | 1,593 |
| Total non-current liabilities | 93,680 | 85,386 |
| Short-term borrowings | 11,734 | 4,873 |
| Trade payables, current tax liabilities, short-term provisions | ||
| and other current liabilities | 24,434 | 27,627 |
| Total current liabilities | 36,168 | 32,500 |
| Total equity and liabilities | 253,881 | 250,551 |
| Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec | |
|---|---|---|---|---|
| SEK in millions | 2011 | 2010 | 2011 | 2010 |
| Cash flow before change in working capital | 7,002 | 7,037 | 28,855 | 28,831 |
| Change in working capital | 117 | 716 | -1,832 | -1,397 |
| Cash flow from operating activities | 7,119 | 7,753 | 27,023 | 27,434 |
| Cash CAPEX | -6,596 | -6,011 | -17,394 | -14,533 |
| Free cash flow | 523 | 1,742 | 9,629 | 12,901 |
| Cash flow from other investing activities | 864 | -866 | 88 | -1,943 |
| Total cash flow from investing activities | -5,732 | -6,877 | -17,306 | -16,476 |
| Cash flow before financing activities | 1,387 | 876 | 9,717 | 10,958 |
| Cash flow from financing activities | -3,537 | 1,540 | -12,035 | -17,736 |
| Cash flow for the period | -2,150 | 2,416 | -2,318 | -6,778 |
| Cash and cash equivalents, opening balance | 14,912 | 12,787 | 15,344 | 22,488 |
| Cash flow for the period | -2,150 | 2,416 | -2,318 | -6,778 |
| Exchange rate differences | -162 | 141 | -426 | -366 |
| Cash and cash equivalents, closing balance | 12,600 | 15,344 | 12,600 | 15,344 |
| Jan-Dec 2011 | Jan-Dec 2010 | |||||
|---|---|---|---|---|---|---|
| Non | Non | |||||
| Owners of | controlling | Total | Owners of | controlling | Total | |
| SEK in millions | the parent | interests | equity | the parent | interests | equity |
| Opening balance | 125,907 | 6,758 | 132,665 | 135,372 | 7,127 | 142,499 |
| Dividends | -12,349 | -2,018 | -14,367 | -10,104 | -2,037 | -12,141 |
| Repurchased and canceled | ||||||
| treasury shares | -9,983 | – | -9,983 | – | – | – |
| Other transactions with owners | -2 | 2 | 0 | -1,057 | -177 | -1,234 |
| Total comprehensive income | 13,096 | 2,611 | 15,707 | 1,692 | 1,845 | 3,537 |
| Share-based payments | 11 | – | 11 | 4 | – | 4 |
| Closing balance | 116,680 | 7,353 | 124,033 | 125,907 | 6,758 | 132,665 |
General. As in the annual accounts for 2010, TeliaSonera's consolidated financial statements as of and for the year ended December 31, 2011, 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.
Correction of prior period classification errors. For information, see corresponding section in TeliaSonera's Interim Report January-March 2011.
New accounting standards (not yet adopted by the EU). IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine (effective for annual periods beginning on or after January 1, 2013; earlier application permitted) was published on October 19, 2011. IFRIC 20 is not relevant to TeliaSonera.
On December 16, 2011 the IASB presented amendments to IFRS 9 Financial Instruments, IFRS 7 Financial Instruments: Disclosures and IAS 32 Financial Instruments: Presentation. The mandatory application date for IFRS 9 was deferred to January 1, 2015 and the related disclosure requirements in IFRS 7 were changed to permit or require reconciliation between the measurement categories in accordance with IAS 39 and IFRS 9 and to require disclosure of other transition effects on initial application of IFRS 9.
IAS 32 (effective for annual periods beginning on or after January 1, 2014; to be applied retrospectively), clarified the meaning of 'currently has a legally enforceable right of set-off'´ and that some gross settlement systems may be considered equivalent to net settlement. TeliaSonera is currently analyzing the effects, if any.
For additional information, see corresponding sections in TeliaSonera's Interim Report January-June 2011 and Annual Report 2010.
| Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec | |
|---|---|---|---|---|
| SEK in millions | 2011 | 2010 | 2011 | 2010 |
| Within EBITDA | 396 | 220 | -41 | 764 |
| Restructuring charges, synergy implementation | ||||
| costs, etc.: | ||||
| Mobility Services | -156 | -8 | -221 | -26 |
| Broadband Services | -99 | -27 | -575 | -142 |
| Eurasia | 7 | -47 | -19 | -47 |
| Other operations | -51 | 10 | -177 | -144 |
| of which TeliaSonera Holding | 20 | -34 | 28 | -37 |
| Capital gains/losses: | ||||
| Telia Stofa | − | -1 | − | 830 |
| Other entities | 695 | 293 | 951 | 293 |
| Within Depreciation, amortization and im | ||||
| pairment losses | -25 | -12 | -66 | -692 |
| Impairment losses, accelerated depreciation: | ||||
| Broadband Services | -25 | -12 | -66 | -14 |
| Other operations | − | − | − | -678 |
| Within Income from associated companies | ||||
| and joint ventures | -63 | − | -63 | -4 |
| Impairment losses | -63 | − | -63 | − |
| Capital gains: | ||||
| SmartTrust | − | − | − | -4 |
| Within Finance costs and other financial | ||||
| items, net | − | − | − | − |
| Total | 308 | 208 | -170 | 68 |
| Dec 31, | Dec 31, | |
|---|---|---|
| SEK in millions | 2011 | 2010 |
| Deferred tax assets | 8,073 | 9,048 |
| Deferred tax liabilities | -13,437 | -12,526 |
| Net deferred tax liabilities (-)/assets (+) | -5,364 | -3,478 |
| Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec | |
|---|---|---|---|---|
| SEK in millions | 2011 | 2010 | 2011 | 2010 |
| Mobility Services | 2,564 | 2,655 | 11,064 | 10,750 |
| Broadband Services | 1,561 | 1,718 | 6,582 | 7,813 |
| Eurasia | 3,996 | 3,567 | 12,499 | 13,267 |
| Other operations | -254 | 234 | -541 | 143 |
| Total segments | 7,867 | 8,174 | 29,604 | 31,973 |
| Elimination of inter-segment profits | -40 | 3 | -37 | 30 |
| Group | 7,827 | 8,177 | 29,567 | 32,003 |
Svenska UMTS-nät. As of December 31, 2011, TeliaSonera had interest-bearing claims of SEK 1,680 million on its 50 percent-owned joint venture, Svenska UMTS-nät AB. In the three-month period and the year ended December 31, 2011, TeliaSonera purchased services from Svenska UMTS-nät worth SEK 147 million and SEK 578 million, respectively, and sold services worth SEK 67 million and SEK 254 million, respectively.
| Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec | |
|---|---|---|---|---|
| SEK in millions | 2011 | 2010 | 2011 | 2010 |
| CAPEX | 6,053 | 5,860 | 17,243 | 14,934 |
| Intangible assets | 1,904 | 795 | 4,557 | 2,498 |
| Property, plant and equipment | 4,149 | 5,065 | 12,686 | 12,436 |
| Acquisitions and other investments | 78 | 390 | 672 | 1,735 |
| Asset retirement obligations | 72 | 114 | 323 | 527 |
| Goodwill and fair value adjustments | − | 47 | 112 | 69 |
| Equity holdings | 6 | 229 | 237 | 1,139 |
| Total | 6,131 | 6,250 | 17,915 | 16,669 |
| Dec 31, | Dec 31, | |
|---|---|---|
| SEK in millions | 2011 | 2010 |
| Long-term and short-term borrowings | 79,842 | 65,436 |
| Less derivatives recognized as financial assets and hedging long | ||
| term and short-term borrowings | -2,085 | -1,731 |
| Less short-term investments, cash and bank | -12,678 | -16,396 |
| Net debt | 65,079 | 47,309 |
The underlying operating cash-flow continued to be positive also in the fourth quarter of 2011.
In late December 2011, after the announcement about signing an agreement to increase its ownership in Kcell, Moody´s changed the outlook from stable to negative for its credit rating on TeliaSonera AB of A3 for long-term borrowings and P-2 for short-term borrowings. In January 2012, Standard & Poor's confirmed its credit rating on TeliaSonera AB of A- for long-term borrowings and A-2 for short-term borrowings with a stable outlook.
The European sovereign debt crisis continues with few signs of relief. Illiquidity dominates in all parts of the financial markets so also in credit markets with very low activity. TeliaSonera has not done any major issuance during the quarter, but continues to have a focus on different funding alternatives in order to be prepared and able to take advantage of attractive funding opportunities when they appear.
The economic outlook for 2012 for the Eurozone looks dire and is now facing the risk of moving into recession. Liquidity continues to be key and is expected to be scarce also in 2012. For corporate credit markets current situation with uncertainty will most likely prevail, markets are expected to be volatile and event-driven throughout 2012.
The Swedish krona traded sideways during the quarter and ended in a strengthening mode despite considerable stress and illiquidity in financial markets. The outlook for SEK is uncertain but is increasingly regarded as a safe haven, hence breaking up historical relationship of a weaker SEK during financial market stress.
| Dec 31, | Dec 31, | |
|---|---|---|
| 2011 | 2010 | |
| Return on equity (%, rolling 12 months) | 16.8 | 17.8 |
| Return on capital employed (%, rolling 12 months) | 16.4 | 16.9 |
| Equity/assets ratio (%) | 44.0 | 48.0 |
| Net debt/equity ratio (%) | 58.3 | 39.3 |
| Net debt/EBITDA rate (multiple, rolling 12 months) | 1.76 | 1.28 |
| Owners' equity per share (SEK) | 26.95 | 28.04 |
For information on business combinations during the year, see corresponding sections in TeliaSonera's Interim Report January-June 2011 and Interim Report January-March 2011.
As of December 31, 2011, 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 259 million.
As of December 31, 2011, contractual obligations totaled SEK 685 million, of which SEK 577 million referred to contracted build-out of TeliaSonera's fixed networks in Sweden.
On December 22, 2011, TeliaSonera signed an agreement with Kazakhtelecom to acquire 49 percent of the shares in Kcell in Kazakhstan. TeliaSonera has also agreed to sell 25 percent of the shares minus one share in Kcell in an Initial Public Offering (IPO), expected to be completed during 2012. Depending on the share price development after the IPO, TeliaSonera may have to make an additional payment to Kazakhtelecom. Once both steps of the transaction have been completed, TeliaSonera's effective ownership in Kcell, which currently is 37.9 percent, will be 61.9 percent. The acquisition is expected to positively affect earnings per share. At the date of closing of the first step, retained earnings in shareholders' equity and non-controlling interests in equity will decrease and net debt will increase. The transaction, which was subject to several conditions, including approval by the regulator, closed on February 1, 2012 and USD 1.519 billion was paid on the same day.
| Condensed Income Statements | Oct-Dec | Oct-Dec | Jan-Dec | Jan-Dec |
|---|---|---|---|---|
| (SEK in millions) | 2011 | 2010 | 2011 | 2010 |
| Net sales | 6 | 3,218 | 30 | 13,236 |
| Operating income | -525 | 545 | -1,616 | 1,803 |
| Income after financial items | 2,674 | 11,199 | 11,034 | 34,761 |
| Income before taxes | 2,007 | 10,252 | 10,972 | 29,798 |
| Net income | 1,476 | 9,344 | 9,691 | 25,422 |
As of January 1, 2011, the parent company operations within fixed network services and broadband application services were transferred to a subsidiary, strongly impacting net sales and operating income. Out of the total net sales in the year, SEK 30 million (10,375) was billed to subsidiaries. Income after financial items declined, as a result of lower group contributions and dividends from subsidiaries and negative effects from foreign exchange derivatives.
| Condensed Balance Sheets | Dec 31, | Dec 31, |
|---|---|---|
| (SEK in millions) | 2011 | 2010 |
| Non-current assets | 177,648 | 174,292 |
| Current assets | 43,661 | 65,044 |
| Total assets | 221,309 | 239,336 |
| Shareholders' equity | 81,848 | 94,573 |
| Untaxed reserves | 13,271 | 13,209 |
| Provisions | 570 | 620 |
| Liabilities | 125,620 | 130,934 |
| Total equity and liabilities | 221,309 | 239,336 |
Total investments in the year were SEK 4,042 million (11,898), of which SEK 4,014 million referred to shareholder contributions to subsidiaries. In 2010, investments amounting to SEK 10,967 million referred to acquisition of shares in 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 2010 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 2010.
Risks and uncertainties that could specifically impact the quarterly results of operations during 2012 include, but may not be limited to:
The growth in net sales in local currencies and excluding acquisitions and disposals is expected to be around 3 percent. Currency fluctuations may have a material impact on reported figures in Swedish krona.
We expect the growth in the addressable cost base in 2011 to be below the growth in net sales, in local currencies and excluding acquisitions. The EBITDA margin, excluding nonrecurring items, in 2011 is expected to improve compared with 2010.
Capital expenditures will be driven by investments in broadband and mobile capacity as well as in network expansion in Eurasia. The CAPEX-to-sales ratio is expected to be approximately 13-14 percent in 2011, 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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