GROUP DEVELOPMENT IN 2016

Financial highlights

Net sales in local currencies, excluding acquisitions and disposals, declined 0.8 percent. In reported currency, net sales declined 2.7 percent to SEK 84,178 million (86,498). Service revenues in local currencies, excluding acquisitions and disposals, declined 0.4 percent.

EBITDA, excluding non-recurring items, increased 2.6 percent in local currencies, excluding acquisitions and disposals. In reported currency, EBITDA, excluding non-recurring items, increased 2.2 percent to SEK 25,836 million (25,281). The EBITDA margin, excluding non-recurring items, increased to 30.7 percent (29.2).

Financial highlights 
SEK in millions, except key ratios, per share data and changes

2016

2015

Change (%)

Net sales

84,178

86,498

-2.7

Change (%) local organic

-0.8

   

of which service revenues (external)1

71,516

72,907

-1.9

change (%) local organic

-0.4

   

EBITDA1 excluding non-recurring items2

25,836

25,281

2.2

Change (%) local organic

2.6

   

Margin (%)

30.7

29.2

 

Operating income excluding non-recurring items2

17,123

17,814

-3.9

Operating income

21,090

14,606

44.4

Income after financial items

19,249

11,689

64.7

Net income, continuing operations

16,433

9,532

72.4

Net income, discontinued operations

-9,937

673

 

Total net income

6,496

10,205

-36.3

of which attributable to owners of the parent company

3,732

8,551

-56.4

Earnings per share, total (SEK)

0.86

1.97

-56.4

Earnings per share, continuing operations (SEK)

3.76

2.16

74.1

Total free cash flow

7,267

16,550

-56.1

of which from continuing operations

7,152

12,520

-42.9

CAPEX excluding license and spectrum fees

15,016

14,289

5.1

1) See Definitions
2) See section “Non-recurring items” for details

 

Operating income, excluding non-recurring items, decreased 3.9 percent to SEK 17,123 million (17,814).

Total net income attributable to owners of the parent company dropped to SEK 3,732 million (8,551) and earnings per share to SEK 0.86 (1.97), mainly due to provision for settlement amount proposed by the US and Dutch authorities.

Significant events in 2016

Operations

For further information on acquired and disposed subsidiaries, see section Acquisitions and Disposals.

On March 18, 2016, Telia Company announced and confirmed that it was in exclusive discussions with Zegona Communications regarding a potential divestment of Yoigo in Spain.

On April 11, 2016, Telia Company announced that it had initiated a strategic review of its Nordic and Baltic credit management services and debt purchase business, Sergel.

On April 13, 2016, the Swedish Companies Registration Office approved the name change of the company from TeliaSonera AB to Telia Company AB.

On June 21, 2016, Sonera, Telia Company’s Finnish operation, announced its interest in acquiring Anvia Telecom, a Finnish wireline operator. On June 29, 2016, Anvia Group announced that it intended to sell its telecoms business to Finnish Elisa.

On June 21, 2016, Telia Company hosted its 2016 Capital Market Day. Presentations included updates on group strategy and the financials together with a special section on the Swedish operations. The full year 2016 outlook was reiterated.

On September 15, 2016, Telia Company announced that it had received a settlement proposal of USD 1.45 billion from the US and Dutch authorities.

On October 21, 2016, Telia Company announced that it will explore together with Turkcell a joint divestment of Fintur Holdings. This will most likely happen in 2017.

Associated companies

On March 29, 2016, Telia Company announced that no decision was made on dividend at Turkcell’s Ordinary General Assembly. No material changes took place in the corporate governance of Turkcell during the year, regarding the continued deadlock between the shareholders Çukurova, LetterOne and Telia Company. Telia Company is actively trying to contribute to the resolution of the deadlock through continued contacts with both Çukurova and LetterOne. The Turkcell Board of Directors consisted of seven independent members, all appointed by the Turkish Capital Markets Board (CMB). For information regarding certain disputes related to shares in Turkcell Holding, see Note C29 to the consolidated financial statements.

Board of Directors and Group Executive Management

On January 12, 2016, Telia Company announced that it had appointed Anders Olsson Chief Operating Officer and Head of Global Services & Operations and member of the Group Executive Management team.

On April 12, 2016, Telia Company announced that the ordinary members of the Board Marie Ehrling, Olli-Pekka Kallasvuo, Mikko Kosonen, Nina Linander and Martin Lorentzon were re-elected. Susanna Campbell, Anna Settman and Olaf Swantee were elected new members to the Board. Marie Ehrling was elected Chair of the Board and Olli-Pekka Kallasvuo was elected Vice-Chair of the Board.

The Annual General Meeting also decided upon a dividend to shareholders of SEK 3.00 per share and that the payment should be distributed in two equal tranches of SEK 1.50 each to be paid in April and October, respectively.

On December 14, 2016, Telia Company announced organizational changes in Group Executive Management as of January 1, 2017. For more information, see www.teliacompany.com.

Funding

On October 3, 2016, Telia Company announced that it had signed a new dual tranche EUR 1,500 million Revolving Credit Facility with a group of thirteen relationship banks.

Treasury shares

As of December 31, 2015, 4,588 Telia Company shares were held by the company itself and the total numbers of issued and outstanding shares were 4,330,084,781 and 4,330,080,193, respectively. On April 29, 2016, Telia Company AB acquired additional 118,398 own shares at an average price of SEK 38.6519 to cover commitments under the “Long term Incentive Program 2013/2016”. During the second quarter of 2016, Telia Company distributed 122,986 shares to the incentive program participants. As of December 31, 2016, no Telia Company shares were held by the company itself or by its subsidiaries. The total numbers of issued and outstanding shares were 4,330,084,781.

Net sales

In continuing operations, net sales decreased 2.7 percent to SEK 84,178 million (86,498). Net sales in local currencies and excluding acquisitions and disposals, decreased 0.8 percent. The positive effect from exchange rate fluctuations was 0.1 percent and the negative effect of acquisitions and disposals was 2.0 percent. Service revenues in local currencies, excluding acquisitions and disposals, decreased 0.4 percent as growth in mobile service revenues in most of our markets and fiber installation revenues in Sweden was not enough to mitigate pressure on traditional fixed telephony revenues and the decline of low margin voice revenues in Telia Carrier. Also contributing to the decline in service revenues was lower interconnect revenues in Finland and Norway, driven by changes in termination rates. Excluding decline in Telia Carrier and lower revenues from interconnect, service revenues in local currencies and excluding acquisitions and disposals, would have increased by 0.3 percent.

Net sales 
SEK in millions

2016

2015

Change (SEK 
million)

Change (%), total

Change (%), of which

Local organic¹

M&A 
effects

FX 
effects²

Region Sweden

37,251

37,336

-85

-0.2

-0.3

0.1

0.0

Region Europe

41,746

43,658

-1,913

-4.4

-0.4

-4.2

0.3

Other operations

7,468

7,753

-285

-3.7

-3.0

0.0

-0.7

Elimination of internal sales

-2,287

-2,249

-38

1.7

n/a

n/a

n/a

Total, continuing operations

84,178

86,498

-2,320

-2.7

-0.8

-2.0

0.1

1) In local currencies and excluding acquisitions and disposals (M&A effects)2) Effects of exchange rate fluctuations

Operating expenses

SEK in millions

2016

2015

Change 
(SEK million)

Change (%)

COGS

-33,578

-35,931

2,353

-6.5

of which goods and sub-contracting services purchased

-17,441

-18,176

735

-4.0

of which interconnect and roaming expenses

-7,971

-9,042

1,071

-11.8

of which other network expenses

-4,695

-4,949

254

-5.1

of which change in inventories

-3,470

-3,763

293

-7.8

Personnel expenses

-12,105

-12,171

66

-0.5

Marketing expenses

-4,319

-4,847

528

-10.9

Other expenses

-8,456

-9,124

668

-7.3

Subtotal

-58,458

-62,073

3,615

-5.8

Amortization, depreciation and impairment losses, total

-11,534

-12,780

1,246

-9.7

Other operating income and expenses, net¹

4,093

-433

4,526

 

Total, continuing operations

-65,899

-75,286

9,388

-12.5

1) Excluding amortization, depreciation and impairment losses

Subscription growth

The total number of subscriptions in continuing operations declined by 3.6 million to 23.5 million, of which mobile subscriptions declined by 3.3 million to 16.7 million. The decrease refers mainly to the disposal of Yoigo in Spain (3.253 million). Fixed telephony subscriptions decreased by 0.3 million, while TV increased by 0.1 million and the number of broadband subscriptions was flat.

SUBSCRIPTIONS (MILLIONS) AND CHANGE YEAR-ON-YEAR (%), CONTINUING OPERATIONS

Operating expenses

Expense items affecting operating income in continuing operations were as follows.

Cost of goods and services sold (COGS) was SEK 33,578 million (35,931) or equal to a 6.5 percent decrease compared to 2015. Around half of the decrease is due to the divestment of Yoigo in Spain and half of the decrease is mainly due to lower handset sales in Finland, as well as lower interconnect costs in Finland and Norway.

Personnel expenses, in local currencies and excluding acquisitions and disposals, decreased 0.9 percent compared to 2015, driven by region Sweden, partly offset by an increase in region Europe. In region Sweden, the lower personnel expenses were primarily due to lower pension costs. In region Europe, Finland was the main driver of increased personnel expenses due to salary inflation and higher costs for variable pay.

Marketing expenses, in local currencies and excluding acquisitions and disposals, decreased 4.9 percent, mainly due to lower marketing spend in Norway. As for the other cost items, figures in reported SEK are impacted by the divestment of Yoigo in Spain.

Amortization, depreciation and impairment losses decreased 9.7 percent to SEK 11,534 million (12,780), mainly explained by impairment losses related to Denmark in 2015, and the divestment of Yoigo in Spain from the fourth quarter of 2016. Amortization and depreciation excluding non-recurring items increased 6.0 percent to SEK 11,534 million (10,880). In local currencies and excluding acquisitions and disposals, the increase was 6.5 percent.

Non-recurring items 
SEK in millions

2016

2015

Within EBITDA

3,977

-1,289

Restructuring charges, synergy implementation costs, etc.:

   

Region Sweden

-362

-495

Region Europe

-189

-615

Other operations

-134

-194

Capital gains/losses

4,662

14

Within Amortization, depreciation and impairment losses

-1,900

Impairment losses, accelerated depreciation:

   

Region Sweden

Region Europe

-1,900

Other operations

Within Income from associated companies and joint ventures

-10

-19

Capital gains/losses

-10

-19

Total, continuing operations

3,967

-3,208

EBITDA excluding non-recurring items 
SEK in millions

2016

2015

Change 
(SEK million)

Change (%)

Region Sweden

14,455

14,267

189

1.3

Region Europe

11,036

10,584

452

4.3

Other operations

345

430

-85

-19.8

Eliminations

0

0

0

 

Total, continuing operations

25,836

25,281

555

2.2

Operating income excluding non-recurring items

SEK in millions

2016

2015

Change 
(SEK million)

Change (%)

Region Sweden

9,569

9,797

-228

-2.3

Region Europe

5,219

4,875

344

7.0

Other operations

2,335

3,141

-806

-25.7

Eliminations

0

0

0

 

Total, continuing operations

17,123

17,814

-691

-3.9

Other operating income and expenses, net excluding amortization, depreciation and impairment losses, was SEK 4,093 million (-433) impacted by a capital gain from the divestment of Yoigo in Spain.

Non-recurring items

Non-recurring items affecting operating income in continuing operations totaled SEK 3,967 million (-3,208) and were mainly related to a capital gain from the divestment of Yoigo in Spain and restructuring charges in connection to cost reduction initiatives.

Earnings

In continuing operations, EBITDA, excluding non-recurring items, increased 2.2 percent to SEK 25,836 million (25,281). In local currencies and excluding acquisitions and disposals, EBITDA, excluding non-recurring items, increased 2.6 percent with positive development in both region Sweden and Europe, respectively. EBITDA excluding non-recurring items, in region Sweden increased primarily due to growth in fixed broadband, tv and fiber installation revenues and lower costs which compensated for lower traditional fixed revenues. The increase in EBITDA excluding non-recurring items, in region Europe was mainly attributable to Finland and Norway, driven by growth in mobile service revenues. Other operations contributed negatively, primarily due to higher pension and variable pay expenses as well as costs related to Division X. The EBTIDA margin, excluding non-recurring items, increased to 30.7 percent (29.2).

In continuing operations, operating income, excluding non-recurring items, decreased 3.9 percent to SEK 17,123 million (17,814), mainly due to lower income from associated companies and higher depreciation and amortization which more than offset the EBITDA increase. The lower income from associated companies was mainly explained by negative foreign exchange rate effects. The operating margin, excluding income from associated companies and non-recurring items affecting operating income, was 17.0 percent (16.7).

Financial net, taxes and net income

Financial net improved to SEK -1,841 million (-2,917), primarily impacted by foreign exchange rate effects, lower interest costs and changes in the interest component of the defined benefit pension plan.

Income taxes increased to SEK -2,816 million (-2,157). The effective tax rate was 14.6 percent (18.5), mainly related to non-taxable capital gain on the sale of Yoigo in Spain.

Net income from continuing operations increased to SEK 16,433 million (9,532) and net income from discontinued operations decreased to SEK -9,937 million (673). Total net income decreased to SEK 6,496 million (10,205) of which SEK 3,732 million is attributable to the owners of the parent company. Earnings per share attributable to owners of the parent company increased to SEK 3.76 (2.16) for continuing operations.

CAPEX

In continuing operations, capital expenditures (CAPEX) increased to SEK 15,625 million (14,595) and the CAPEX-to-service revenues ratio to 21.8 percent (20.0). Main CAPEX components were fiber investments in Sweden (SEK 3.2 billion), continued roll out-of 4G in region Europe as well as IT investments focusing on improved business support. Further, telecom licenses and spectrum permits were acquired in Finland, Norway, Denmark and Lithuania. CAPEX, excluding license and spectrum fees, amounted to SEK 15,016 million (14,289) and the CAPEX-to-service revenues ratio was 21.0 percent (19.6).

CAPEX AND CAPEX-TO-SERVICE REVENUES, CONTINUING OPERATIONS

Discontinued operations

Former segment region Eurasia, is classified as discontinued operations since December 31, 2015. Consequently, information on region Eurasia is presented on an aggregated level. For additional information on discontinued operations, see Note C34 to the consolidated financial statements.

Discontinued operations
SEK in millions, except
margins and changes

2016

2015

Change
(%)

Net sales (external)

13,653

20,742

-34.2

EBITDA excluding non-recurring items

5,880

11,035

-46.7

Margin (%)

43.1

53.2

 

CAPEX

5,813

4,195

38.6

CAPEX excluding license and spectrum fees

2,432

3,784

-35.7

Net sales decreased 34.2 percent in reported currency to SEK 13,653 million (20,742), mainly due to the divestment of Ncell in Nepal and foreign exchange rate fluctuations in most markets.

EBITDA, excluding non-recurring items, decreased to SEK 5,880 million (11,035), and the EBITDA margin, excluding non-recurring items, declined to 43.1 percent (53.2).

Non-recurring items within EBITDA was SEK -11,952 million (-474) impacted by a provision for settlement amount proposed by the US and Dutch authorities (see Note C34 for further information).

Net income was SEK -9,937 million (673), impacted by a provision for settlement amount proposed by the US and Dutch authorities. See Note C34 for further information.

CAPEX increased to SEK 5,813 million (4,195) and CAPEX, excluding license and spectrum fees, decreased to SEK 2,432 million (3,784).

Human resources

During 2016, the number of employees in continuing operations decreased by 312 to 21,030 at year-end, from 21,342 at year-end 2015. The number of employees in discontinued operations decreased by 566 to 4,987 from 5,553 at year-end 2015.

EMPLOYEES, TOTAL (THOUSANDS)

The total average number of full-time employees in 2016 was 24,898 (25,450), of which in continuing operations 19,822 (20,036). In total, operations were conducted in 28 countries (29), of which continuing operations in 21 countries (21). See also Note C31 to the consolidated financial statements.

EMPLOYEES, TOTAL (FTES, %)

For additional information on employees and labor practices, see Occupational health and safety and GRI Index, section “Labor practices and decent work.”