FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY

Financial position

The financial position remained stable year-on-year.

Goodwill increased to SEK 57.9 billion mainly explained by positive exchange rate differences, no impairment charges was recorded for continuing operations. Other intangible assets totaled SEK 13.0 billion, positively impacted through CAPEX (investments) of SEK 2.8 billion and exchange rate differences but negatively impacted by amortization of SEK 2.6 billion. 

Property, plant and equipment, totaling SEK 58.1 billion, increased through CAPEX (investments) totaling SEK 12.8 billion and decreased due to depreciations amounting to SEK 8.9 billion. The divestment and deconsolidation of Yoigo in Spain in the fourth quarter of 2016 affected property, plant and equipment by SEK 2.2 billion. The effects from exchange rate differences were positive.

Financial and other non-current assets comprise investments in associated companies and joint ventures, deferred tax assets, pension obligation assets and other assets, mainly long-term interest-bearing receivables.

The carrying value of associated companies and joint ventures was SEK 22.7 billion, of which the carrying values of Russian MegaFon and Turkish Turkcell were SEK 4.7 billion and SEK 17.1 billion, respectively. Share of net income in the associates and joint ventures amounting to SEK 2.8 billion added value, offset by dividends received from the companies, in total SEK 2.1 billion. Currency effects were negative at SEK 1.4 billion, due to negative development of the Turkish lira, partly offset by positive development of the Russian rubel, both versus the Swedish krona.

Deferred tax assets decreased mainly due to the divestment of Yoigo in Spain and deconsolidation of tax loss carry-forwards related to the Spanish operation, whilst deferred tax liabilities (included in Provisions and other liabilities) where stable. All in all, the net deferred tax liability was SEK 6.2 billion at year-end 2016.

Total long-term interest-bearing receivables increased to SEK 18.1 billion (16.4), mainly as a result of using surplus cash to invest in bonds.

Cash and cash equivalents in total were stable versus 2015. Cash flow from operations and the divestments of Ncell in Nepal and Yoigo in Spain had positive impact offset by pay-out of ordinary dividend and changes in the debt portfolio described further below.

Assets classified as held for sale, totaling SEK 29.0 billion, decreased mainly as a result of the divestment and deconsolidation of Ncell in Nepal and impairment charges, see Note C34 for further information. These effects were partially offset by a prolonged license in Uzbekistan.

Total equity decreased 7.2 percent to SEK 94.9 billion (102.2) negatively impacted by dividends of SEK 13.0 billion to the owners of the parent company and SEK 2.4 billion to non-controlling interests whilst net income of SEK 6.5 billion affected equity positive. Other comprehensive income had a positive impact of SEK 1.5 billion with positive currency effects of total SEK 2.2 billion offset by negative remeasurement effects on pensions obligations net amounting to SEK 1.3 billion.

Total gross borrowings decreased to SEK 94.5 billion (100.9) mainly explained by the divestment and deconsolidation of Yoigo in Spain and repayments of the debt portfolio partly related to a credit facility related to the acquisition of Tele2 in Norway in 2015.

Provisions and other liabilities increased mainly due to the provision for the settlement amount proposed by the US and Dutch authorities, see Note C34 for further information.

Liabilities directly associated with assets held for sale, totaling SEK 13.6 billion, increased mainly due to the above described license in Uzbekistan, partly offset by a derecognition of a put option. See Note C34 for further information.

See Consolidated statements of financial position, Consolidated statements of changes in equity and related Notes to the consolidated financial statements for further details.

Financial position 
SEK in millions

2016

2015

Change
(SEK million)

Change (%)

Goodwill and other intangible assets

70,947

67,933

3,014

4.4

Property, plant and equipment

58,107

55,093

3,014

5.5

Financial and other non-current assets

50,420

50,823

-402

-0.8

Total non-current assets

179,475

173,850

5,625

3.2

Other current assets

30,402

29,708

694

2.3

Cash and cash equivalents

14,510

14,647

-137

-0.9

Assets classified as held for sale

29,042

35,812

-6,770

-18.9

Total current assets

73,955

80,167

-6,212

-7.7

Total assets

253,430

254,017

-587

-0.2

Total equity

94,869

102,202

-7,334

-7.2

Borrowings

94,468

100,983

-6,515

-6.5

Provisions and other liabilities

50,466

39,234

11,232

28.6

Liabilities directly associated with assets held for sale

13,627

11,598

2,029

17.5

Total equity and liabilities

253,430

254,017

-587

-0.2

 

Credit facilities

Telia Company believes its available bank credit facilities and updated open-market financing programs are sufficient for the present known liquidity requirements. In the continuing operations, Telia Company’s surplus liquidity (short-term investments, cash and bank, and certain securities with maturities exceeding 12 months but convertible to cash within 2 days) was in total a sum of SEK 29.8 billion at year-end. In addition, the total available unutilized amount under committed bank credit facilities as well as overdraft and short-term credit facilities at year-end was SEK 16.0 billion.

Telia Company AB shall target a solid investment grade long-term credit rating, defined as A- to BBB+. In May 2016 Moody’s decided to downgrade Telia Company’s long- term rating to Baa1 with stable outlook after an extensive period with negative outlook. The short term rating was reconfirmed as P-2.

After the announcement of the proposed settlement from the US and Dutch authorities. in September 2016, Standard & Poor’s Ratings Services decided to put its long term credit rating of Telia Company of A- on CreditWatch negative but confirmed A-2 for short-term borrowings.

Telia Company normally arrange its financing through the parent company Telia Company AB. Most issuance are done under the company’s existing EMTN (Euro Medium Note) program of EUR 12 billion. The primary means of external borrowing are described in Notes C20 and C26 to the consolidated financial statements. In 2016, Telia Company AB issued no new debt in the debt capital markets but announced in May 2016 a tender offer in GBP under which an amount of GBP 153.9 million of the outstanding bond with maturity 2042 was bought back. At year-end, the average time to maturity of Telia Company AB’s overall debt portfolio was approximately 7.8 years.

At the end of 2016, no Commercial Papers were outstanding.

TOTAL NET DEBT AND TOTAL NET DEBT/ TOTAL EBITDA1, 2

1) Excluding non-recurring items
2) Total Telia Company group including both continuing and discontiued operations

Liquidity and Time to maturity1

1) Liquidity includes cash balances, deposits, investment bonds and unutilized credit facilities

DEBT PORTFOLIO MATURITY SCHEDULE – 2017 AND ONWARDS

 

Cash flow, continuing and discontinued operations

Cash flow from operating activities decreased to SEK 26.0 billion (35.2), mainly due to Ncell in Nepal not being consolidated the full year, weakened operational performance in Eurasia and dividend received from Turkcell of SEK 4.7 billion net of taxes in 2015.

Cash flow from investing activities, totaling SEK -7.4 billion (-29.0) consists of investments in intangible assets, property plant and equipment, acquisitions and divestments, changes in loans receivable and in short term investments, and repayments from or additional contributions to pension funds. Cash CAPEX remained flat compared to 2015. Cash received from divestments was SEK 12.1 billion (4.7), which mainly refers to Ncell in Nepal and Yoigo in Spain. Cash paid for business combinations and other equity instruments was SEK 0.1 billion (6.2). Contribution from the Swedish pension fund was SEK 0.5 billion (0). Net cash used for granting loans was SEK -2.9 billion (-10.5) mainly net from investment bonds. Cash inflow from net changes in short-term investments was SEK 1.5 billion (1.6).

Cash outflow from financing activities in 2016, totaling SEK 22.5 billion (9.6), included dividends paid to shareholders of the parent company of SEK 13.0 billion (13.0) and to non-controlling interests of SEK 2.4 billion (0.8). Net outflow from new and repaid borrowings amounted to SEK 8.9 billion (inflow 4.1) mainly from repayment of a credit facility related to the acquisition of Tele2 in Norway in 2015. New for 2016 are repurchase agreements which net was SEK 0.6 billion (0) and net of other derivatives was SEK 1.1 billion (0.5).

See Consolidated statements of cash flows and related Notes to the consolidated financial statements for further details.

 

Cash flow

SEK in millions

2016

2015

Change (SEK million)

Change (%)

Cash flow from operating activities

25,970

35,249

-9,279

-26.3

Cash CAPEX

-18,703

-18,699

-4

0

Free cash flow

7,267

16,550

-9,283

-56.1

Cash flow from other investing activities

11,275

-10,285

21,560

 

Cash flow from investing activities

-7,428

-28,985

21,557

-74.4

Cash flow from financing activities

-22,491

-9,628

-12,863

133.6

Cash and cash equivalents, opening balance

25,334

28,735

-3,401

-11.8

Cash flow for the period

-3,949

-3,363

-586

17.4

of which continuing operations

-3,925

-7,082

3,157

-44.6

Exchange rate differences

1,523

-38

1,561

 

Cash and cash equivalents, closing balance

22,907

25,334

-2,427

-9.6

of which continuing operations

14,605

14,647

-42

-0.3

Outlook for 2017

Free cash flow from continuing operations, excluding licenses and dividends from associated companies, is expected to be above SEK 7 billion. This operational free cash flow together with dividends from associates, should cover a dividend around the 2016 level.

EBITDA from continuing operations, excluding non-recurring items, in local currencies, excluding acquisitions and disposals, is expected to be around the 2016 level.

Dividend policy

Telia Company intends to distribute a minimum of 80 percent of free cash flow from continuing operations, excluding licenses. The dividend should be split and distributed in two equal tranches.

The company targets a leverage corresponding to Net debt/EBITDA of 2x plus/minus 0.5x.

The company shall continue to target a solid investment grade long-term credit rating (A- to BBB+).