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Alternative performance measurements

In addition to financial performance measures prepared in accordance with IFRS, Telia Company presents non-IFRS financial performance measures, for example EBITDA, EBITDA excluding non-recurring items, CAPEX, Cash CAPEX, Free cash flow, Operational free cash flow and Net debt. These alternative measures are considered to be important performance indicators for investors and other users of the Annual report. The alternative performance measures should be considered as a complement to, but not a substitute for, the information prepared in accordance with IFRS. Telia Company’s definitions of these non-IFRS measures are described in this Note and in the Definitions. These terms may be defined differently by other companies and are therefore not always comparable to similar measures used by other companies.

EBITDA and EBITDA excluding non-recurring items

Telia Company considers EBITDA as a relevant measure for investors to be able to understand profit generation before investments in fixed assets. To assist the understanding of Telia Company’s underlying financial performance we believe it is also useful to analyze EBITDA excluding non-recurring items. Non-recurring items within EBITDA are specified in Board of Director’s Report, Non-recurring items.

Continuing operations

SEK in millions

Jan–Dec 2016

Jan–Dec 2015

Operating income

21,090

14,606

Income from associated companies and joint ventures

-2,810

-3,394

Total depreciation/amortization/write-down

11,534

12,780

EBITDA

29,814

23,992

Non-recurring within EBITDA

-3,977

1,289

EBITDA excluding non-recurring items

25,836

25,281

Discontinued operations

SEK in millions

Jan–Dec 2016

Jan–Dec 2015

Operating income

-7,048

6,967

Income from associated companies and joint ventures

-7

-31

Total depreciation/amortization/write-down

-52

3,625

Capital gain on disposal

1,035

-

EBITDA

-6,072

10,560

Non-recurring within EBITDA

11,952

474

EBITDA excluding non-recurring items

5,880

11,035

 

CAPEX

Telia Company considers CAPEX and Cash CAPEX as relevant measures for investors to understand the group’s investments in intangible and tangible non-current assets (excluding goodwill, assets acquired in business combinations and asset retirement obligations).

SEK in millions

Jan–Dec 2016

Jan–Dec 2015

Continuing operations

   

Intangible assets

2,787

2,251

Property, plant and equipment

12,838

12,344

CAPEX

15,625

14,595

Discontinued operations

   

Intangible assets

3,657

994

Property, plant and equipment

2,156

3,201

CAPEX

5,813

4,195

of which unpaid investments1

-2,735

-91

Cash CAPEX, continuing and discontinued operations

18,703

18,699

1) For 2016 mainly attributable to a prolonged unpaid license in Uzbekistan.

Free cash flow

Telia Company considers free cash flow as a relevant measure for investors to be able to understand the group’s cash flow from operating activities and after CAPEX.

SEK in millions

Jan–Dec 2016

Jan–Dec 2015

Cash flow from operating activities

25,970

35,249

Cash CAPEX (paid Intangible and tangible assets)

-18,703

-18,699

Free cash flow, continuing and discontinued operations

7,267

16,550

Operational free cash flow

Telia Company considers Operational free cash flow as a relevant measure for investors to be able to understand the cash flows that Telia Company are in control of. From the reported free cash flow from continuing operations dividends from associated companies are deducted as these are dependent on the approval of board of the associated companies. Licenses and spectrum payments are excluded as they generally refer to a longer period than just one year.

SEK in millions

Jan–Dec 2016

Jan–Dec 2015

Cash flow from operating activities from continuing operations

22,510

27,128

Deduction: Cash CAPEX from continuing operations

-15,358

-14,608

Free cash flow continuing operations

7,152

12,520

Add back: Cash CAPEX for licenses from continuing operations

376

383

Deduction: Dividends from associates from continuing operations

-2,122

-6,896

Add back: Taxes paid on dividends from associates from continuing operations

91

517

Operational free cash flow

5,497

6,524

Net debt

Telia Company considers Net debt to be an important measure for investors and rating agencies to be able to understand the group’s indebtedness. Net debt presented below is based on the total Telia Company group for both continuing and discontinued operations.

SEK in millions

Jan–Dec 2016

Jan–Dec 2015

Long-term borrowings

83,516

91,884

Short-term borrowings

12,919

10,567

Less derivatives recognized as financial assets and hedging long-term and short-term borrowings and related credit support annex (CSA)

-5,455

-5,580

Less long-term bonds available for sale

-10,185

-8,841

Less short-term investments

-7,132

-6,979

Less cash and cash equivalents1

-22,907

-25,334

Net debt, continuing and discontinued operations

50,756

55,717

1) SEK 0.3 billion of the minority owner Visor’s share of the sales price for Ncell and the holding company Reynolds Holding remain within cash and cash equivalents of discontinued operations as of December 31, 2016. For more information, see Note 34.