C27. Leasing agreements

Telia Company as lessee, continuing operations

Finance leases

The group’s finance leases concern computers and other IT equipment, production vehicles, company cars to employees, and other vehicles. There is no subleasing.

The carrying value of the leased assets as of the end of the reporting period was as follows.

SEK in millions

Dec 31, 2016

Dec 31, 2015

Cost

329

92

Less accumulated depreciation and impairment losses

-85

-79

Net carrying value of finance lease agreements

244

13

In 2016 and 2015, depreciation and impairment losses totaled SEK 2 million and SEK 4 million, respectively. Leasing fees paid in these years totaled SEK 10 million and SEK 9 million, respectively.

As of the end of the reporting period, the present value of future minimum leasing fees under non-cancelable finance lease agreements were as follows.

SEK in millions

Dec 31, 2016

Dec 31, 2015

Total future minimum leasing fees

259

68

Less interest charges

-32

-19

Present value of future minimum leasing fees

228

49

As of December 31, 2016, future minimum leasing fees and their present values as per finance lease agreements that could not be canceled in advance and were in excess of one year were as follows.

Expected maturity
SEK in millions

Jan–Mar 2017

Apr–Jun 2017

Jul–Sep 2017

Oct–Dec 2017

2018

2019

2020

2021

Later years

Total

Future minimum leasing fees

4

4

4

4

17

15

15

15

180

259

Present value of future minimum
leasing fees

4

4

4

4

14

13

14

14

159

228

Operating leases

Telia Company’s operating lease agreements primarily concern office space, technical sites, land, computers and other equipment. Certain contracts include renewal options for various periods of time. Subleasing consists mainly of office premises.

Future minimum leasing fees under operating lease agreements in effect as of December 31, 2016, that could not be canceled in advance and were in excess of one year were as follows.

Expected maturity
SEK in millions

Jan–Mar 2017

Apr–Jun 2017

Jul–Sep 2017

Oct–Dec 2017

2018

2019

2020

2021

Later years

Total

Future minimum leasing fees

386

410

410

411

1,110

529

459

402

1,522

5,640

Minimum sublease payments

6

6

6

6

3

1

28

In 2016 and 2015, total rent and leasing fees paid were SEK 1,771 million and SEK 1,818 million, respectively.

The decrease compared to reported expected maturity in the annual report 2015 is mainly related to Yoigo in Spain which was divested in the fourth quarter of 2016.

In these years, revenues for subleased items totaled SEK 24 million and SEK 15 million, respectively.

Apart from certain short-term leases, leasing terms range between 3 months and 31 years with an average term of approximately 5 years. All leases have been entered into on conventional commercial terms. Certain contracts include renewal options for various periods of time.

Telia Company as lessor, continuing operations

Finance leases

The leasing portfolio of Telia Company’s customer financing operations in Sweden, Finland, Denmark and Norway, comprise financing related to Telia Company’s product offerings. The term of the contract stock is approximately 14 quarters. The term of new contracts signed in 2016 was 14 quarters. Of all contracts, 67 percent carry a fixed interest rate and 33 percent a floating interest rate. Most contracts include renewal options. In Finland, Telia Company provides, under a finance lease agreement, electricity meters with SIM cards for automated reading to a power company as part of Telia Company’s service package.

The term of the agreement was 15 years and it carries a fixed interest rate and agreement will end at year 2023.

As of the end of the reporting period, the present value of future minimum lease payment receivables under non-cancelable finance lease agreements were as follows.

SEK in millions

Dec 31, 2016

Dec 31, 2015

Minimum lease payments receivables

1,007

947

Unguaranteed residual values accruing to the benefit of the lessor

Gross investment in finance lease contracts

1,007

947

Unearned finance income

-130

-77

Present value of future minimum lease payments receivables (net investment in finance lease contracts)

877

870

As of December 31, 2016, the gross investment and present value of receivables relating to future minimum lease payments under non-cancelable finance lease agreements were distributed as follows.

Expected maturity
SEK in millions

Jan–Mar 2017

Apr–Jun 2017

Jul–Sep 2017

Oct–Dec 2017

2018

2019

2020

2021

Later years

Total

Gross investment

116

116

117

116

221

145

98

53

24

1,007

Present value of future minimum lease payments receivables

40

42

42

41

251

187

146

105

23

877

As of December 31, 2016 and 2015, the accumulated allowance for uncollectible minimum lease payments receivables totaled SEK 0 million and SEK 0 million, respectively. Credit losses on leasing receivables are reduced by gains from the sale of equipment returned.

Operating leases

The leasing portfolio refers mainly to the international carrier business and includes agreements with other international operators and other contracts. The contract periods with operators range between 10 and 25 years with the average term being 20 years. For other contracts, the contract periods range between 3 and 10 years with the average term of approximately 5 years. Apart from this, Telia Company has operating lease agreements related product offerings to end-customers in Sweden and Finland. Contract periods range between 3 and 5 years, with an average term of approximately 3 years.

The carrying value of the leased assets as of the end of the reporting period was as follows:

SEK in millions

Dec 31, 2016

Dec 31, 2015

Cost

3,304

3,249

Less accumulated depreciation and impairment losses

-1,880

-1,886

Gross carrying value

1,424

1,363

Less prepaid lease payments

-466

-319

Net value of operating lease agreements

958

1,044

Depreciation and impairment losses totaled SEK 636 million in 2016 and SEK 651 million in 2015.

Future minimum lease payment receivables under operating lease agreements in effect as of December 31, 2016, that could not be canceled in advance and were in excess of one year were as follows:

Expected maturity
SEK in millions

Jan–Mar 2017

Apr–Jun 2017

Jul–Sep 2017

Oct–Dec 2017

2018

2019

2020

2021

Later years

Total

Future minimum lease payments receivables

155

155

155

155

265

138

53

23

68

1,168