Financial position, capital resources and liquidity

Financial position

Goodwill and other intangible assets increased to SEK 76.7 billion. Goodwill increased mainly due to the acquisitions of Nebula and Phonero. Other intangible assets totaled SEK 15.7 billion, positively impacted by investments of SEK 4.1 billion but negatively impacted by amortization of SEK 2.8 billion.

Property, plant and equipment, totaled SEK 60.0 billion, increased through investments amounting to SEK 11.5 billion. The increase due to investments was offset by depreciations amounting to SEK 9.1 billion and impairment losses amounting to SEK 0.7 billion.

The carrying value of associated companies and joint ventures decreased to SEK 9.4 billion, mainly affected by reduced ownership in Turkcell and the disposal of MegaFon. Share of net income in the associated companies and joint ventures added value of SEK 1.7 billion, offset by dividends received from the companies of SEK 3.2 billion. Currency effects were negative by SEK 2.3 billion mainly due to negative development of the Turkish lira versus the Swedish krona.

Financial and other non-current assets comprise deferred tax assets, pension obligation assets and other non-current assets, mainly long-term interest-bearing receivables. Financial and other non-current assets increased mainly due to revaluation of Telia Company’s 1.4 percent holding in Spotify. Financial and other non-current assets increased mainly due to revaluation of Telia Company’s holding in Spotify and increased pension obligation assets, partly offset by decreased deferred tax assets.

Other current assets comprise interest bearing receivables, trade and other receivables, inventories and current tax receivables. Other current assets increased mainly due to increased interest bearing receivables as a result of using surplus liquidity from the divestments of shares in Turkcell, MegaFon and Sergel.

Cash and cash equivalents increased to SEK 15.6 billion. Cash flow from operations had a positive impact, as well as the reduced ownership in Turkcell and disposals of MegaFon and Sergel. These effects were partly offset by dividend paid and the acquisitions of Nebula and Phonero, as well as the payments of fines and disgorgements related to the Uzbekistan investigations.

Assets classified as held for sale, totaled SEK 18.4 billion, decreased mainly due to the disposal of Sergel, impairment charges related to Eurasia and exchange rate differences due to devaluation in Uzbekistan. See Note C34 for further information.

Total equity increased 10.9 percent to SEK 105.2 billion. Total equity was reduced by dividends to the owners, whilst net income had a positive effect. Other comprehensive income had a positive impact, mainly due to reclassified exchange effects from the disposals of MegaFon and holdings in Turkcell.

Long-term borrowings amounted to SEK 87.8 billion, and increased mainly due to the issue of hybrid capital. Buy-backs of outstanding Telia Company bonds had an adverse effect giving a net increase in long-term borrowings.

Other non-current liabilities comprise deferred tax liabilities, provisions for pensions, other long-term provisions and other long-term liabilities. Deferred tax liabilities decreased mainly due to revaluation of withholding tax provision as a consequence of the disposal of shares in Turkcell and in MegaFon. Other long-term provisions include the outstanding provision regarding the Uzbekistan investigations amounting to SEK 1,650 million after discount effect, see Note C34 for further information.

Short-term borrowings decreased to SEK 3.7 billion by maturing short-term debt.

Short-term provisions decreased to SEK 0.5 billion mainly due to the payment of parts of the provision for the settlement amount agreed with the authorities related to the Uzbekistan investigations, as well as the transfer to other long-term provisions of the outstanding amount.

Liabilities directly associated with assets held for sale decreased mainly due to exchange rate differences and a decrease in deferred tax liabilities. 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

Dec 31,

2017

Dec 31,

2016

Change 
(SEK in millions)

Change

(%)

Goodwill and other intangible assets

76,652

70,947

5,705

8.0

Property, plant and equipment

60,024

58,107

1,917

3.3

Investments in associated complanies and joint ventures

9,449

22,698

-13,249

-58.4

Financial and other non-current assets

28,379

27,722

657

2.4

Total non-current assets

174,503

179,475

-4,972

-2.8

Other current assets

35,318

30,402

4,916

16.2

Cash and cash equivalents

15,616

14,510

1,106

7.6

Assets held for sale

18,408

29,042

-10,634

-36.6

Total current assets

69,341

73,955

-4,614

-6.2

Total assets

243,845

253,430

-9,585

-3.8

Total equity

105,230

94,869

10,361

10.9

Long-term borrowings

87,813

83,161

4,652

5.6

Other non-current liabilities

18,927

18,573

354

1.9

Total non-current liabilities

106,740

101,734

5,006

4.9

Short-term borrowings

3,674

11,307

-7,633

-67.5

Short-term provisions

470

13,673

-13,203

-96.6

Other current liabilities

19,179

18,219

960

5.3

Liabilities directly associated with assets held for sale

8,552

13,627

-5,075

-37.2

Total current liabilities

31,875

56,826

-24,951

-43.9

Total equity and liabilities

243,845

253,430

-9,585

-3.8

CAPEX

In continuing operations, capital expenditures (CAPEX) increased to SEK 15,672 million (15,625). Main CAPEX components were network related investments, fiber investments in Sweden, investments in ice hockey rights in Finland (the agreement stretches over six years and the cash flow effect will start in the second half of 2018), as well as IT investments focusing on improved efficiency. Further, telecom licenses and spectrum permits were acquired in Norway and Estonia. CAPEX, excluding license and spectrum fees, amounted to SEK 15,215 million (15,016).

CAPEX

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 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 SEK 41.2 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 16.1 billion.

Telia Company AB shall target a solid investment grade long-term credit rating, defined as A- to BBB+. After the issuance of hybrid bonds Standard&Poors removed the CreditWatch negative and confirmed its long-term A-rating with negative outlook and the short-term rating A-2. The rating from Moody’s remained unchanged in 2017, the long-term rating at Baa1 and the short-term rating at Prime-2, both with stable outlook.

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 Term 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 2017, Telia Company AB issued hybrid bonds at an amount of SEK 15 billion and funding in NOK equal to SEK 600 million. In connection to the issuance of hybrid bonds a tender for buy-back of senior bonds was announced under which an amount of EUR 545 million of bonds maturing in 2019, 2020 and 2021, respectively, were bought back. In May, SEK 1,029 million of a bond maturing in 2019 were bought back and in November a new tender for buy-back was announced under which an amount of EUR 345 million of outstanding bonds maturing in 2019, 2020, 2021 and 2022, respectively, were bought back. At year-end, the average time to maturity of Telia Company AB’s overall debt portfolio was approximately 7.9 years.

As at the end of 2017, no Commercial Papers were outstanding.

Total NET DEBT AND Total NET DEBT/ Total EBITDA1, 2 

1) Excluding adjustment items.

2) Total Telia Company group including both continuing and discontinued operations.

Liquidity and Time to maturity1 

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

DEBT PORTFOLIO MATURITY SCHEDULE – 2018 AND ONWARDS 

Cash flow, continuing and discontinued operations

Cash flow from operating activities decreased to SEK 23.6 billion (26.0), affected by a negative change in working capital driven mainly by the payment of the settlement regarding the Uzbekistan investigation and partly offset by decreased cash CAPEX in both continuing and discontinued operations. 2016 was affected by the disposal and deconsolidation of Ncell in Nepal and Yoigo in Spain.

Operational free cash flow, continuing operations, increased to SEK 9,7 billion (5,5) mainly due to lower paid taxes, lower cash CAPEX and improved working capital.

Cash flow from investing activities, totaling SEK -10.1 billion (-7.4) consists of investments in intangible assets, property plant and equipment, acquisitions and disposals, changes in loans receivable and in short-term investments. Cash CAPEX decreased to SEK -16.4 billion (-18.7). Cash received from disposals was SEK 23.1 billion (12.1), which mainly refers to reduced ownership in Turkcell and the disposals of MegaFon and Sergel. 2016 was affected by the disposals of Ncell in Nepal and Yoigo in Spain. Cash paid for business combinations and other equity instruments was SEK -4.4 billion (-0.1) and refers mainly to the acquisitions of Phonero and Nebula. Net cash used for granting loans was SEK -2.4 billion (-3.0). Cash outflow from net changes in short-term investments was SEK -10.2 billion (inflow 1.6), mainly due to investments of surplus liquidity from the disposals.

Cash outflow from financing activities in 2017, totaling SEK -13.9 billion (-22.5), includes dividends paid to shareholders of the parent company of SEK -8.7 billion (-13.0) and to non-controlling interests of SEK -0.9 billion (-2.4). Net outflow from new and repaid borrowings amounted to SEK -2.6 billion (-8.9) mainly due to issue of Hybrid capital offset by debt maturity and buy-back of outstanding bonds. Net of repurchase agreements amounted to SEK 0.1 billion (0.6) and net of other derivatives was SEK -1.9 billion (1.1).

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

Cash flow

SEK in millions

Jan-Dec

2017

Jan-Dec

2016

Change 
(SEK million)

Change 
(%), total

Cash flow from operating activities

23,569

25,970

-2,401

-9.2

Cash CAPEX

-16,405

-18,703

2,298

-12.3

Free cash flow

7,164

7,267

-103

-1.4

of which operational free cash flow, continuing operations

9,687

5,497

4,190

76.2

Cash flow from other investing activities

6,290

11,275

-4,985

-44.2

Cash flow from investing activities

-10,115

-7,428

-2,687

36.2

Cash flow from financing activities

-13,905

-22,491

8,586

-38.2

Cash and cash equivalents, opening balance

22,907

25,334

-2,427

-9.6

Cash flow for the period

-451

-3,949

3,498

-88.6

of which continuing operations

-6,935

-24

-6,911

 

Exchange rate differences

-1,472

1,523

-2,994

 

Cash and cash equivalents, closing balance

20,984

22,907

-1,923

-8.4

of which continuing operations

15,616

14,605

1,012

6.9