interim report january – september 2020 q3...and tv (~sek 50m) • increased share of mdus and...

Q3

PRESIDENT & CEO

Q3

AlliSON KIRKBYPRESIDENT & CEO

Interim REPORT January – September

2020

GROUP HIGHLIGHTS – Q3 2020

2

Mobile subscriptionrevenues

Service revenues

Adjusted EBITDA

EBITDA-cash capex*

Operational Free Cash Flow YTD Q3

Q3 2020

% Change reported

% Change LFL SEK billion

7.8

18.7

8.2

4.6

9.2

-6.0%

+2.2%

-0.2%

+4.6%

-20.3%

-2.8%

-4.8%

-0.6%

• COVID-19 impacted service revenues negatively by ~SEK 600 million, and EBITDA by ~SEK 300 million

• Excluding COVID-19 impacts, service revenues declined by 2% LFL, and EBITDA grew by 2% LFL

• Less working capital contribution of SEK 2.2 billion included in the decline in OpFCF YTD

* adjusted EBITDA including repayment of lease liabilities less cash CAPEX excluding licenses and spectrum

Comments

DELIVERING ON IMMEDIATE PRIORITIES

3

CONNECTIVITY

CONVERGENCE

CUSTOMER EXPERIENCE

COST CONTROL

CAPITAL ALLOCATION

• Resilient core business, with Fixed BB growing 1% and Mobile stable, ex. roaming

• 5G now available in Sweden, Finland and Norway

• Network modernization and 5G partnerships signed with Ericsson & Nokia

• Telia & Get brands merged in Norway

• Return of premium sports packages gathering momentum and driving Swedish access

• Again awarded for having the most satisfied B2C and B2B customers in Sweden

• OPEX declined 2.9% in the quarter

• Head of transformation appointed

• Plans being developed to simplify and transform

• Telia Carrier divested for SEK 9.45 billion

• BoD proposed an additional SEK 0.65 dividend (subject to EGM approval)

SWEDEN – Q3 2020

4

-3.6%

-1.8%

Q319

Q419

Q120

Q220

Q320

Q319

Q419

Q120

Q220

Q320

SERVICE REVENUES & ADJUSTED EBITDALike for like growth

Service revenues EBITDA

• Service revenue declined SEK 271m, due to legacy products (~SEK 200m) and roaming (~SEK 100m)

• Both Mobile and Broadband ARPU’s developing positively, and TV revenues back to 2019 levels

• EBITDA was positively impacted by OPEX reducing 4% y-o-y

Highlights

Subs.(q-o-q)

ARPU(y-o-y)

+18k -6% -11k +4%

17

Q3 19 Q4 19 Q1 20 Q2 20 Q3 20

ARPU(y-o-y)

+1.8%

Subs.(q-o-q)

ARPU(y-o-y)

SUBSCRIPTIONS & ARPU developmentSubscription growth ex. M2M, q-o-q in 000’, subscription rev. ARPU ex. M2M in local currency

-2% -1%

Excl. Covid19 impact

• Launch of 5G in 20 cities in Q4, and new strategic partnership announced with Ericsson

• Number of converged customers increased by 5k to 293k in the quarter

MOBILE

TV BROADBAND

FINLAND – Q3 2020

5

-4.2%

0.3%

Q319

Q419

Q120

Q220

Q320

Q319

Q419

Q120

Q220

Q320


Subs.(q-o-q)

ARPU(y-o-y)

-4k -12% +2k 0%

1

Q3 19 Q4 19 Q1 20 Q2 20 Q3 20

ARPU(y-o-y)

-0.6%

Subs.(q-o-q)

ARPU(y-o-y)


SUBSCRIPTIONS & ARPU developmentSubscription growth ex. M2M, q-o-q in 000’, subscription rev. ARPU ex. M2M in local currency

• Service revenue declined SEK 139m, due to pressure from legacy products (~SEK 30m), COVID-19 (~SEK 90m) and fiber installations (~SEK 20m)

• Intense competitive activity increased market churn

• EBITDA was relatively stable as higher energy costs were offset by Liiga rescheduling

• 5G now at 25% population coverage. New strategic partnership signed with Nokia

-1%

+5%


MOBILE

TV BROADBAND

Highlights

NORWAY – Q3 2020

6

-5.2%

-0.1%

Q319

Q419

Q120

Q220

Q320

Q319

Q419

Q120

Q220

Q320


SUBSCRIPTIONS & ARPU developmentSubscription growth ex. M2M, q-o-q in 000’, subscription rev. ARPU ex.. M2M in local currency

Subs.(q-o-q)

ARPU(y-o-y)

-4k -3% +1k -8%

-6

Q3 19 Q4 19 Q1 20 Q2 20 Q3 20

ARPU(y-o-y)

-0.8%

Subs.(q-o-q)

ARPU(y-o-y)


-2% +2%


• Service revenue declined SEK 173m, from negative roaming impact of (~SEK 110m) and a combination of fixed telephony, broadband and TV (~SEK 50m)

• Increased share of MDUs and partner networks have had a dilutive impact on broadband ARPU levels

• EBITDA was relatively stable due to special items in Q3 2019 impacting comparisons. OPEX Q3 2020 up by 3 percent due to marketing

• Telia & Get brands merged into one converged Telia brand and updated/new wholesale agreements with ICE and NGT

MOBILE

TV BROADBAND

Highlights

LED – Q3 2020

7

SERVICE REV. & ADJ. EBITDALike for like growth


• Lithuania show flat service revenues but adjusting for COVID and low margin transit revenues, the core grows by 4%. EBITDA atrecord levels (SEK 387m).

• Stable development in Estonia with good fixed development offset by roaming pressure in mobile

• Denmark mitigating competitive market by cost control

SERVICE REV. & adj. EBITDALike for like growth

SERVICE REV. & ADJ. EBITDALike for like growth

Service revenues EBITDA Service revenues EBITDA

-0.1%

7.1%

Q319

Q419

Q120

Q220

Q320

Q319

Q419

Q120

Q220

Q320

0.4%

-0.4%

Q319

Q419

Q120

Q220

Q320

Q319

Q419

Q120

Q220

Q320

-8.7%

-2.3%

Q319

Q419

Q120

Q220

Q320

Q319

Q419

Q120

Q220

Q320

-2% +12%

Excl. Covid19 impactExcl. Covid19 impactExcl. Covid19 impact

+2%

+10%

+4%+2%

Highlights

TV AND MEDIA – Q3 2020

8

647

Q1 20 Q2 20 Q3 20

Tv SUBSCRIPTIONSC More direct OTT subscriptions, in 000’

• Improved service revenue trends in both TV and advertising resulted in revenues falling 13 percent vs. 32 percent in Q2

• Strong SVOD subscriber intake especially in Finland

• EBITDA declined by SEK 20m, as a result of COVID offset by lower COGS and lower OPEX

• Full year EBITDA expected to be above SEK 0.5 billion (previously SEK 0.3-0.5 billion)

Commercial share of viewing (CSOV)

Swedish linear CSOV, ages 15-64

45.6% 46.9%

Q3 19 Q4 19 Q1 20 Q2 20 Q3 20

-13.2%-7.5%

Q1 20 Q2 20 Q3 20 Q1 20 Q2 20 Q3 20



Highlights

Q3Q3

CFO


2020

Per Christian Mørland

Service revenue bridge q3 2020Like for like

SERVICE REVENUES AND EBITDA – Q3 2020

10

EBITDA bridge q3 2020Like for like, excluding adjustment items

UnderlyingQ3 19 TV & Media(COVID-19)

Telco business

(COVID-19)

Q3 20

-0.6%

OtherQ3 19 Mobile Broadband TV COVID-19

Q3 20

-4.8%

+2%

Excluding COVID-19 impact

• COVID-19 impact of SEK 0.6 billion mainly related to roaming and partly also advertising

• Mobile revenues rather flat excluding roaming impact

• Underlying growth almost offset a SEK 0.3 billion impact from COVID-19

OPEX developmentExternal expenses, like for like

OPEX AND CASH CAPEX – Q3 2020

-2.9%

-6%

-4%

-2%

0%

2%

4%

Q3 19 Q4 19 Q1 20 Q2 20 Q3 20

11

• Decline driven mainly by Sweden, TV & Media and group functions

• Reduction driven from lower Resources, Marketing, Travel, Bad debt and IT

• We expect the trend to be broken in Q4 2020

CASH CAPEX developmentReported currency in SEK billion, excluding licenses & spectrum fees, R12,

10

11

12

13

14

15

Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20

• Cash CAPEX decline of 4% in the quarter

• Sweden main driver for reduction

• Finland increase related to mobile network roll out

OPERATIONAL FREE CASH FLOW Q3SEK billion

OPERATIONAL FREE CASH FLOW developmentSEK billion, rolling twelve months

OPERATIONAL FREE CASH FLOW – Q3 2020

02468

101214

Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20

SEK 10.2

billion

Q3 2019

-0.4

0.1

EBITDA less

leasing*

Interest

-0.8

Workingcapital

0.1

Other Q32020

4.7

3.7

-1.0

• Tough comparable in the quarter for both interest and working capital

* Repayment of lease liabilities12

• Less contribution from working capital mainly explains development from peak

net debt and leverage – Q3 2020

• Operations less cash CAPEX lowered net debt by SEK 4.4 billion

• CAPEX down driven mainly by Sweden and partly Norway

3.00.9

CashCAPEX

83.8

Q2 20

-7.4

Operations FX & other

80.3

Q3 20

2.64x

2.55x

= Leverage ratio (multiple, rolling 12 months including a full 12 months of Bonnier Broadcasting)

13

NET DEBT DEVELOPMENTSEK billion and leverage ratio

Leverage DEVELOPMENTNet debt in relation to adjusted EBITDA (including M&A)

Proforma leverage – Q3 2020

14

2.3x

1

2

3

Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Pro-forma

• Increased leverage 2018/2019 driven mainly by

• M&A

• Buy backs

• IFRS 16

• Proforma leverage post divestment proceeds (Turkcell and Telia Carrier) and 2nd dividend payment falls to a comfortable 2.3x

• 2nd dividend of SEK 3.7 billion to be paid in Q4 2020

• Additional dividend of SEK 2.7 billion included, but require EGM approval

• Turkcell proceeds of ~SEK 5 billion expected in Q4 2020

• Telia Carrier proceeds of SEK 9.45 billion expected in H1 2021

Get/TDC Norway

IFRS 16

Bonnier Broadcasting

Q3

PRESIDENT & CEO

Q3

AlliSON KIRKBYPRESIDENT & CEO


2020

OUTLOOK FOR 2020 (updated)

16

Operational free cash flow (uPDATED)

Upper end of SEK 9.5 – 10.5 billion

(previously: SEK 9.5 – 10.5 billion)

CAPITAL ALLOCATION (UPDATED DIVIDEND)

Committed to maintain A- to BBB+

BoD propose EGM an additional dividend of SEK 0.65 per share for 2019

Adjusted EBITDA (Updated)

Adjusted EBITDA for the full year 2020 to be around SEK 30.5 billion

(previously: Adjusted EBITDA generation in constant currency is expected to be similar in the second half of the year compared to the first half)

summary

17

• Q3 better than our expectations • Raised 2020 outlook• Telco business resilient, TV & Media improving• Supporting our communities remains a priority • New Head of Brand appointed, with iconic brand

building experience• Key immediate priorities to improve performance

• Connectivity• Convergence• Customer Experience • Cost base

• Preparing the roadmap and plans that generate sustainable, long term value creation

OUR VALUES OF

DARECARE

SIMPLIFY COULD NOT BE MORE RELEVANT

DISCLAIMER & FORWARD-LOOKING STATEMENTS

This document contains the use of alternative performance measures (APM’s) to provide readers with additional financial information that is regularly reviewed by management, such as adjusted EBITDA, CAPEX and operational free cash flow. These APM’s should not be viewed as a substitute for Telia Company’s IFRS based figures, but as a complement. APM definitions can be found in Telia Company’s interims reports and Annual and Sustainability Report 2019 and may be defined differently by other companies and are therefore not alwayscomparable to similar measures used by other companies. Telia Company’s management considers these APM’s combined with IFRS performance measures and in conjunction with each other, the most appropriate way to measure the performance of Telia Company.

Statements made in this document relating to future status or circumstances, including future performance and other trend projections are forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There can be no assurance that actual results will not differ materially from those expressed or implied by these forward-looking statements due to many factors, many of which are outside the control of Telia Company.

19

interim report january – september 2020 q3...and tv (~sek 50m) • increased share of mdus and...

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