Fiber slow down impacted profitability

In Sweden, the journey towards more connectivity and converged offerings continued, with the launch of Telia Life. The consumer segment continued the successful path with growing mobile revenues, despite somewhat negative impact from the implementation of new EU roaming regulations. On the other hand, the fiber installation revenues decreased significantly by 41.4 percent to SEK 727 million (1,240). The main reason for the decrease was a slower roll-out pace due to issues in getting needed digging permits as well as more intermidiaries involved in roll-out.

The B2B segment remained challenging due to price pressure within the large enterprise part of the segment. The offerings to SME and SoHo (Small office Home office) customers were further strengthened, which is visible in the positive development for that part of the enterprise segment. In total, revenues in the enterprise segment decreased by 2.9 percent compared to last year.

Net sales excluding acquisitions and disposals decreased 1.3 percent. Net sales in reported currency including acquisitions and disposals decreased 1.1 percent to SEK 36,825 million (37,251). The impact from acquisitions and disposals was positive by 0.2 percent. Service revenues, excluding acquisitions and disposals, decreased 2.7 percent. Mobile service revenues increased 0.6 percent, where the consumer segment grew by 2.7 percent and more than compensated for the decreasing revenues from enterprise segment. Mobile ARPU increased slightly. Fixed service revenues declined 5.9 percent due to the drop in revenues from traditional fixed telephony. TV and broadband ARPU as well as TV subscriptions grew.

On the customer satisfaction side Telia continued to be rewarded for quality. Swedish quality index (SKI) reported that Telia has the most satisified customers within B2B, B2C (Halebop), as well as TV.

An ambition to take down operating expenses (OPEX) was announced in the second quarter. The aim was to take down operating expenses by 5 percent for the second half of 2017 compared to the previous year. The outcome was a decrease of 6 percent, where lower resource and marketing costs were the main drivers.

Adjusted EBITDA, decreased 4.9 percent to SEK 13,749 million (14,455) and adjusted EBITDA, excluding acquisitions and disposals, decreased 5.0 percent. Continued pressure on legacy revenues, coupled with lower fiber installation revenues as well as an increased cost base for the full year were the main drivers behind the EBITDA decline. The adjusted EBITDA margin decreased to 37.3 percent (38.8).

Adjusted operating income decreased 9.1 percent to SEK 8,698 million (9,569). Adjustment items impacted operating income and were SEK 500 million (209) mainly related to restructuring charges and IT related write-downs.

CAPEX decreased to SEK 6,392 million (7,119), impacted by lower CAPEX related to the fiber roll-out. No licenses were acquired during the year. The investments were primarily related to fiber, 4G and overall efficiency improvements. Telia was awarded best mobile network which shows that superior network connectivity is created and that the customer journey from voice to data continued to be supported.

SEK in millions,
except margins, operational data and changes

Jan–Dec
2017

Jan–Dec
2016

Chg

(%)

Net sales

36,825

37,251

-1.1

Change (%) local organic

-1.3

   

of which service revenues (external)

31,317

32,128

-2.5

change (%) local organic

-2.7

   

Adjusted EBITDA

13,749

14,455

-4.9

Margin (%)

37.3

38.8

 

change (%) local organic

-5.0

   

Adjusted operating income

8,698

9,569

-9.1

CAPEX excluding license and spectrum fees

6,392

7,119

-10.2

Subscriptions, (thousands)

     

Mobile

6,118

6,071

0.8

of which machine to machine (postpaid)

944

835

13.1

Fixed telephony

1,381

1,675

-17.6

Broadband

1,286

1,299

-1.0

TV

787

765

2.9

Employees

6,619

6,720

-1.5