Europe – development in 2016

Solid development in region Europe

SHARE OF GROUP TOTAL, CONTINUING OPERATIONS (%)




SEK in millions,
except margins, operational data and changes

2016

2015

Change (%)

Net sales

41,746

43,658

-4.4

Change (%) local organic

-0.4

   

of which service revenues (external)

33,497

34,429

-2.7

change (%) local organic

0.7

   

EBITDA
excl. non-recurring items

11,036

10,584

4.3

Margin (%)

26.4

24.2

 

Income from associated companies and joint ventures

115

119

-3.5

Operating income
excl. non-recurring items

5,219

4,875

7.0

Operating income

9,529

2,375

 

CAPEX excl. license and spectrum fees

4,993

5,517

-9.5

% of service revenues

14.9

16.0

 

EBITDA excl. non-recurring items less CAPEX

5,434

4,761

14.1

Subscriptions,
period-end (thousands)

     

Mobile

10,488

13,914

-24.6

Fixed telephony

890

942

-5.5

Broadband

1,260

1,283

-1.8

TV

923

900

2.6

Employees, period-end

11,093

11,323

-2.0

Additional (unaudited) segment information available at www.teliacom­pany.com; see also the preamble to this Report for information on restated financial information.

The focus on monetization on the growing data traffic continued in our markets during 2016 and “Roam like home” offerings were successfully launched in all markets within region Europe. The number of mobile subscriptions declined during the year mainly impacted by the divestment of Yoigo in Spain but also due to decline of customers’ demand for multiple subscriptions. The share of post-paid subscriptions increased from 82 percent to 88 percent of the total. Among the fixed services, traditional fixed telephony continued to decline and the move from copper- to fiber-based services continued. In the consumer segment, ARPU improved in most markets while price pressure continued within the enterprise segment, most apparent in Norway and Denmark.

Net sales in local currencies, and excluding acquisitions and disposals decreased 0.4 percent, mainly due to decreased equipment sales while service revenues increased. Net sales in reported currency decreased 4.4 percent to SEK 41,746 million (43,658). The effect from exchange rate fluctuations was positive by 0.2 percent and the negative effect of acquisitions and disposals was 4.2 percent. Service revenues, in local currency and excluding acquisitions and disposals, increased 0.7 percent, as mobile service revenue growth compensated for the decline in fixed service revenues.

EBITDA, excluding non-recurring items, increased to SEK 11,036 million (10,584) in reported currency, and the margin increased to 26.4 percent (24.2), mainly due to network efficiencies and lower marketing costs in Norway combined with cost control in most countries. In local currencies and excluding acquisitions and disposals, EBITDA, excluding non-recurring items increased 5.5 percent.

Operating income, excluding non-recurring items, increased 7.0 percent in reported currency. Non-recurring items in 2016 were mainly related to a capital gain from the divestment of Yoigo in Spain and personnel restructuring across the markets. Operating income increased to SEK 9,529 million (2,375) in reported currency, primarily as 2016 was positively impacted by the capital gain from the divestment of Yoigo in Spain and 2015 being negatively impacted by goodwill impairment charges related to the operation in Denmark.

CAPEX excluding license and spectrum fees decreased 9.5 percent mainly driven by lower mobile network investments in Norway and Finland.

Finland – Growth in mobile billed revenues

SEK in millions,
except margins, operational data and changes

2016

2015

Change (%)

Net sales

13,042

13,279

-1.8

Change (%) local organic

-3.0

   

of which service revenues (external)

11,197

11,065

1.2

change (%) local organic

-0.1

   

EBITDA
excl. non-recurring items

4,059

3,945

2.9

Margin (%)

31.1

29.7

 

Subscriptions,
period-end (thousands)

     

Mobile

3,253

3,306

-1.6

Fixed telephony

65

80

-18.8

Broadband

497

527

-5.7

TV

489

486

0.6

Net sales in reported currency decreased 1.8 percent to SEK 13,042 million (13,279). In local currency excluding acquisitions and disposals the decrease was 3.0 percent, mainly due to decline in equipment sales. Service revenues declined 0.1 percent in local currency, excluding acquisitions and disposals, as growth in mobile billed revenues was offset by decline in interconnect revenues and fixed service revenues. Growth in mobile billed revenues stems primarily from higher ARPU in the consumer segment which more than offset the interconnect revenue decline. TV revenues grew as a result of higher ARPU while fixed broadband revenues declined as competition from mobile services impacted both broadband ARPU and the number of broadband subscriptions.

The EBITDA margin, excluding non-recurring items, increased to 31.1 percent (29.7), positively impacted by lower share of equipment sales. In local currency, excluding acquisitions and disposals, EBITDA excluding non-recurring items increased 1.7 percent.

During the year, the number of TV subscriptions grew by 3,000. Mobile, fixed telephony and broadband subscriptions decreased by 53,000, 15,000 and 30,000, respectively, the latter due to customers abandoning fixed broadband in favour of mobile services.

Norway – Improved profitability

SEK in millions,
except margins, operational data and changes

2016

2015

Change (%)

Net sales

9,057

9,094

-0.4

Change (%) local organic

-0.5

   

of which service revenues (external)

7,516

7,485

0.4

change (%) local organic

-0.2

   

EBITDA
excl. non-recurring items

3,125

2,761

13.2

Margin (%)

34.5

30.4

 

Subscriptions,
period-end (thousands)

     

Mobile

2,211

2,311

-4.3

Net sales in reported currency decreased 0.4 percent to SEK 9,057 million (9,094). Service revenues decreased 0.2 percent in local currency, excluding acquisitions and disposals, mainly due to decline in interconnect and fixed service revenues. The latter due to the divestment of the fixed telephony subscription base in the fourth quarter of 2015. Mobile service revenue increased slightly as wholesale revenues compensated for the interconnect decline. Mobile ARPU declined, driven by the lower interconnect rate, despite improved consumer ARPU.

The EBITDA margin, excluding non-recurring items, increased to 34.5 percent (30.4), explained by network efficiencies and lower cost for customer acquisitions and marketing spend.

The number of mobile subscriptions decreased by 100,000 during the year.

Denmark – Still fierce competition

SEK in millions,
except margins, operational data and changes

2016

2015

Change (%)

Net sales

5,880

5,890

-0.2

Change (%) local organic

-1.6

   

of which service revenues (external)

4,270

4,247

0.5

change (%) local organic

-0.9

   

EBITDA
excl. non-recurring items

692

743

-6.8

Margin (%)

11.8

12.6

 

Subscriptions,
period-end (thousands)

     

Mobile

1,606

1,644

-2.3

Fixed telephony

101

114

-11.4

Broadband

128

135

-5.2

TV

28

28

0.0

Net sales in reported currency decreased 0.2 percent to SEK 5,880 million (5,890). Service revenues decreased 0.9 percent in local currency, excluding acquisitions and disposals. Mobile service revenues increased 2.5 percent despite a decline in the subscription base, due to growth in wholesale and interconnect revenues. Fixed broadband and TV revenues showed growth but fixed service revenues as a whole decreased driven by decline in traditional fixed telephony and business solutions.

The EBITDA margin, excluding non-recurring items, declined to 11.8 percent (12.6), negatively impacted by continued price pressure in the enterprise segment.

The number of mobile subscriptions decreased by 38,000 during the year. Fixed telephony subscriptions decreased by 13,000 and broadband subscriptions by 7,000, while TV subscriptions remained flat.

Lithuania – Revenue and earnings growth

SEK in millions,
except margins, operational data and changes

2016

2015

Change (%)

Net sales

3,268

3,146

3.9

Change (%) local organic

2.6

   

of which service revenues (external)

2,662

2,536

5.0

change (%) local organic

3.7

   

EBITDA
excl. non-recurring items

1,139

1,051

8.4

Margin (%)

34.9

33.4

 

Subscriptions,
period-end (thousands)

     

Mobile

1,318

1,327

-0.7

Fixed telephony

417

447

-6.7

Broadband

402

390

3.1

TV

229

212

8.0

Net sales in reported currency increased 3.9 percent to SEK 3,268 million (3,146). Service revenues increased 3.7 percent in local currency, excluding acquisitions and disposals driven by both mobile and fixed service revenues as the decline in fixed telephony was more than compensated for by growth in other fixed services. Mobile ARPU increased 8.1 percent mainly due to a higher share of post-paid subscriptions.

The EBITDA margin, excluding non-recurring items, increased to 34.9 percent (33.4), driven by the increase in service revenues coupled with cost control and integration synergies.

The number of mobile subscriptions decreased by 9,000 during the year, pre-paid subscriptions declined while post-paid increased in line with the overall trend in the market. Fixed telephony subscriptions declined by 30,000, while broadband subscriptions grew by 12,000 and TV subscriptions by 17,000.

Latvia – Good net sales growth

SEK in millions,
except margins, operational data and changes

2016

2015

Change (%)

Net sales

1,788

1,660

7.8

Change (%) local organic

6.4

   

of which service revenues (external)

1,202

1,188

1.1

change (%) local organic

-0.1

   

EBITDA
excl. non-recurring items

580

548

5.8

Margin (%)

32.4

33.0

 

Subscriptions,
period-end (thousands)

     

Mobile

1,200

1,119

7.3

Net sales in reported currency increased 7.8 percent to SEK 1,788 million (1,660), driven by growth in equipment sales. Service revenues declined by 0.1 percent in local currency, excluding acquisitions and disposals. Mobile billed revenues increased and almost compensated for lower other mobile service revenues. Mobile ARPU increased 4.0 percent due to a shift from pre-paid to post-paid subscriptions with higher ARPU.

The EBITDA margin, excluding non-recurring items, decreased to 32.4 percent (33.0), due to a higher share of equipment sales.

The number of mobile subscriptions increased by 81,000, as a decline of 23,000 in pre-paid was more than offset by an increase of 105,000 post-paid subscriptions driven by subscriptions used for machine-to-machine services.

Estonia – Growing subscription base

SEK in millions,
except margins, operational data and changes

2016

2015

Change (%)

Net sales

2,733

2,692

1.5

Change (%) local organic

-1.3

   

of which service revenues (external)

2,080

2,062

0.8

change (%) local organic

-2.1

   

EBITDA
excl. non-recurring items

811

817

-0.8

Margin (%)

29.7

30.3

 

Subscriptions,
period-end (thousands)

     

Mobile

901

863

4.4

Fixed telephony

307

301

2.0

Broadband

233

231

0.9

TV

177

174

1.7

Net sales in reported currency increased 1.5 percent to SEK 2,733 million (2,692). Service revenues declined 2.1 percent in local currency, excluding acquisitions and disposals, as growth in mobile service revenues was offset by lower sales of travel products and as quarter four last year included high revenues from the Estonian subsidiary Green IT.

The EBITDA margin, excluding non-recurring items, decreased to 29.7 percent (30.3) percent, mainly due to lower wholesale revenues.

The number of mobile subscriptions increased net by 38,000, with 53,000 increase of post-paid subscriptions of which 50,000 related to subscriptions used for machine-to-machine services. The number of TV subscriptions increased by 3,000 during the year.

Spain – Divested as of quarter four 2016

SEK in millions,
except margins, operational data and changes

2016

2015

Change (%)

Net sales

6,073

7,992

-24.0

Change (%) local organic

3.6

   

of which service revenues (external)

4,572

5,847

-21.8

change (%) local organic

5.3

   

EBITDA
excl. non-recurring items

630

720

-12.5

Margin (%)

10.4

9.0

 

Subscriptions,
period-end (thousands)

     

Mobile

3,344

 

Net sales in reported currency decreased 24.0 percent to SEK 6,073 million (7,992), as the Spanish operation was divested and hence deconsolidated from quarter four 2016. During the period January to September 2016, service revenues increased 5.3 percent in local currency, excluding acquisitions and disposals.

The EBITDA margin, excluding non-recurring items, increased to 10.4 percent (9.0). During the period January to September 2016, EBITDA in local currency, and excluding acquisitions and disposals increased by 28.3 percent.