Telia Company AB · OMXSTO:TELIA
Telia Company AB — TeliaSonera — Investor Day (2014)
48 slides from Telia Company AB's investor day presentation, Dec 29, 2014
Slide 1: Agenda
Agenda 9.30 TeliaSonera Group, Johan Dennelind, President and CEO 10.00 Region Sweden, Malin Frenning 10.30 Break 11.00 Region Europe, Robert Andersson 11.30 Region Eurasia, Erik Hallberg 12.00 Commercial Excellence, Hélène Barnekow 12.15 Lunch 13.00 Review of the financials, Christian Luiga 13.30 Q
Slide 2: TeliaSonera Group
TeliaSonera Group Johan Dennelind A new generation telco is taking shape 2018 2017 2016 2015 2014 The New 2013 TeliaSonera Big Stabilize Transform Transform Deliver on changes & shape & perform & step up potential 4 2
Slide 3: Steady performance during a period of change
Steady performance during a period of change External service revenue & EBITDA growth 10% 5% 0% -5% -10% Q113 Q213 Q313 Q413 Q114 Q214 External service revenue* EBITDA** * Stable FX rates, **Excluding non-recurring items 5 Solid track record of growing shareholder returns Free cash flow, SEK billion
Slide 4: Our journey has already started
Our journey has already started… De-coupled from the network (OTT) Traditional MVNOs System integrators Financial institutions Platform Arbitrage players players Network Applications based & integrated services services TeliaSonera today Telco space New Generation Telco Network centric 7 Growing dem
Slide 5: Negative market share trend requires an updated strategic agenda
…and a negative market share trend… Examples B2C market share B2B market share of markets ∆ 2010-2013 ∆ 2010-2013 Sweden -2 pp -4 pp Finland -1 pp 0 pp Norway -1 pp -4 pp 9 …requires an updated strategic agenda S T R AT E G Y S T R AT E G I C PRIORITIES Develop the core Value through superior Custom
Slide 6: Differentiate through superior connectivity
Differentiate through superior connectivity THE FUTURE MODEL CUSTOMER IS PAYING FOR ACCESS EXTRA SPEED SERVICES • Secure the transition from voice to data through future proof network access to our DATA EXTRA VOLUMES QUALITY end customers − Fiber push where viable − 4G coverage and capacity in core
Slide 7: Utilize the untapped potential in Eurasia
Utilize the untapped potential in Eurasia B2B share of service revenues • Foundation for continued growth ~6% − Strong market positions ~45% − Solid financial performance − Strengthened governance Eurasia Nordics • Untapped data potential in B2C Data share of service revenues • Expansion of B2B busi
Slide 8: Grow in areas that complement and strengthen the core
Grow in areas that complement and strengthen the core Customer behavior • 1.5 million TV subscriptions eHealth m2m m2m • 0.5 million music service subscriptions TeliaSonera Music Financial Services • Expect to quadruple M2M revenues in next three years TV Security 15 Responsible Business From words…
Slide 9: Responsible Business 2013 and 2014
Responsible Business 2013 Focus Area Anti- Freedom of Occupational Customer Status vs. annual plan Corruption Expression Health & Safety Privacy 1. Risk Assessment 2. Organization 3. Policies, Instructions & Guidelines 4. Education and Communication 5. Due Care- Third party management 6. Reporting,
Slide 10: Continue to optimize portfolio through M&A
Continue to optimize portfolio through M&A • Strong market positions within current portfolio − #1 or #2 operator in 13 of 15 markets • Seeking opportunities in existing footprint and regions • Scrutinizing our operations and market positions to secure adequate returns − Acquisition of Tele2 Norway
Slide 11: Dividend floor of SEK 3 per share
Transformation weighs on cash flow – but we floor our dividend at SEK 3 per share for 2014 and 2015 Net debt/EBITDA 2.5 • Invest to save and invest to grow activities will 2.0 impact our cash flow in the next two years 1.5 40- 50% 1.0 Current rating: Moody’s (A3/P-2) 0.5 Standard & Poor’s (A-/A-2) 0
Slide 12: Region Sweden
Region Sweden Malin Frenning Summary and key priorities • Bring customers a seamless communication and internet experience • Provide superior high speed internet through multi-access expansion (fiber and 4G) • Transform to drive revenues and reach sustainable reduction in cost base Share of group ne
Slide 13: Strong market positions and stable financials
Strong market positions and stable financials Market share and market position External service revenue & EBITDA* growth 61% External service revenue growth EBITDA* growth 2% 1 0% 39% 39% 34% -2% 1 1 1 -4% 14% -6% 3 -8% Fixed Mobile Fixed Mobile TV Q113 Q213 Q313 Q413 Q114 Q214 telephony telephony b
Slide 14: Data consumption is increasing
…and data consumption is increasing • Data volumes has increased • The share of consumers • The number of data top-up three fold over the past 2 years reaching the limit in their packages sold in relation to data bucket is increasing, consumers reaching the limit • Smartphone penetration is supporte
Slide 15: Demand for higher speeds and multi-access networks
…and demand for higher speeds continue to increase Broadband speed demand* Peak hour traffic to and from TS Sweden network Broadband speed demand* 100 4 4 FTTx To TS Sweden 9 required 90 From TS Sweden 80 39 >100 Mbit/s 70 51 percent average growth 51-100 Mbit/s 60 last 12 months for internet 31-50
Slide 16: Telia wants to grow in all layers of the fiber market
…and Telia wants to grow in all layers of the fiber market Telia ● CAPEX low fiber broadband Service Provider market share Applications / Customer service ● Margin low ● ARPU high 26%* Telia ● CAPEX low-mid market share Communication Operator ● Margin low-mid 34% Active infrastructure provider ● ARP
Slide 17: Improved SDU fiber business case and growth targets
Our business case for SDU fiber has improved… ■ CMD 2011 ■ CMD 2014 600 20,000 100% 10 500 80% 8 15,000 400 60% 6 300 10,000 40% 4 200 5,000 100 20% 2 0 0 0% 0 ARPU (SEK/month) One-time fee* (SEK) Initial penetration rate Payback time (years) 33 * Including VAT …and that is why we target to capture
Slide 18: Untapped convergence potential and transformation
Untapped convergence potential… • Customers want complete solutions for the household and internet everywhere Share of Telia fixed • Telia is well positioned with all necessary 42% broadband households pieces in place with Telia mobile services* • Simplicity and service will lead to loyalty and prem
Slide 19: Region Europe
Summary and key priorities • Bring customers a seamless communication and internet experience • Provide superior high speed internet through multi-access expansion (fiber and 4G) • Transform to drive revenues and reach sustainable reduction in cost base 2018 The New TeliaSonera 37 Region Europe Robe
Slide 20: Seven markets with different fundamentals
Summary and key priorities • Drive data monetization across footprint • Transform for agility and reduced costs • Optimize portfolio Share of group net sales* Share of group EBITDA* 27% 40% 39 * Q2 2014, 12 months rolling, ex non-recurring items Seven markets with different fundamentals… • Mobile ma
Slide 21: Local adaptation of strategy and clear priorities
…requires local adaptation of strategy • Further strengthen position Integrated operators in both fixed and mobile – focus on convergence Finland Estonia Denmark Mobile centric operators • Focus on data growth and structural opportunities Norway Spain • Strong position in mobile and fixed – aim for
Slide 22: Operational turnaround in Finland
Operational turnaround in Finland… Post-paid mobile subscriptions External service revenue growth* • Positive subscription trend 3,200 0% since launch of new price 3,100 plans 3,000 -5% 2,900 • Profitability supported by 2,800 -10% efficiency gains Q112 Q214 Q113 Q214 • Decreasing churn Blended chur
Slide 23: Simplify by renewing across three dimensions
Simplify by renewing across three dimensions Product & Channel Renewal Process & System Renewal Network Renewal Products Channels Processes IT Systems Network & Assets Complex Multiple legacy platforms From Offline business Complex legacy Complex offering manual supported by online IT systems Comple
Slide 24: Data-centric models in Norway
Fast transition to data-centric models in Norway... Consumer subscription share External service revenue growth* • 8 out of 10 customers 100% Data-centric Voice-centric 0% are now on data-centric 75% subscriptions 50% -5% • Subscription base stable 25% during transition 0% Apr/13 Jun/14 -10% Q113 Q2
Slide 25: Position strengthened by Tele2 deal
…and position will be further strengthened by Tele2 deal • Market share will increase from 23 percent to about 40 percent – in total 2.7 million subscriptions • Synergies of at least SEK 800 million expected • Enables higher quality and wider coverage of mobile internet services • Acceleration of 4G
Slide 26: Region Eurasia
Region Eurasia Erik Hallberg Summary and key priorities • Focus on taking Eurasia to the next level • Utilize the untapped data potential in B2C • Ignite the B2B opportunity • Secure right leadership and culture to drive responsible business and value creation Share of group net sales* Share of grou
Slide 27: Strong market positions with growing revenues and EBITDA
Strong market positions with growing revenues and EBITDA • Number one or number two position in all markets • Solid growth in both service revenues and EBITDA Market share and market position External service revenue & EBITDA* growth 57% External service revenue growth 50% EBITDA* growth 46% 1 20% 4
Slide 28: Voice penetration maturing, data growth taking off
Voice penetration gradually maturing within our footprint… SIM card penetration 175% 150% 125% 5 of 7 markets approached 100 percent 100% SIM penetration or more 75% 50% 25% 0% Kazakhstan Georgia Tajikistan Moldova Azerbaijan Nepal Uzbekistan Nordics 55 …but data growth is taking off Data share of r
Slide 29: Affordable smartphones key for data usage
Affordable smartphones key for increased data usage… Smartphone penetration • Average smartphone penetration still below 20 percent in the region 80% 70% • Smartphone sales driven by 60% affordable devices priced at 50% around $ 50 40% 30% 20% 10% 0% 57 …as these significantly uplift ARPU... Kcell A
Slide 30: Affordable internet pricing and strong growth in Nepal
…together with price models that promote affordable internet • Affordable internet − Enabling handset upgrades − Low entry point pricing • Keep on winning the competition − Quality +19% 59 Strong growth in Nepal… Market share • Subscriptions have seven folded since 2008, driven by increased penetrat
Slide 31: Data contributing to ARPU and untapped B2B potential
…with data starting to contribute to ARPU Nepal SIM card penetration • In Nepal SIM card penetration is around 100% 70 percent and expected to reach over 90 percent in 2017 80% 60% • Growing ARPU supported by increased 40% voice penetration and data contribution 20% 0% • Advert-funded data packs to
Slide 32: Network investments and long term sustainable business
Further network investments required to support growth initiatives Expansion of 3G & 4G Fiber • To support mobile data expansion • Secure capacity and backbone • Also maintaining high quality voice at the right cost coverage for users, securing • Expand product offering for B2B competitive position
Slide 33: Group Commercial
Summary and key priorities • Strong market positions and solid operational performance • Focus on taking Eurasia to the next level • Utilize the untapped data potential in B2C and ignite the B2B opportunity 2018 The New TeliaSonera • Secure right leadership and culture to drive responsible business
Slide 34: Strategic priorities and commercial agenda
Our strategic priorities are clear S T R AT E G Y S T R AT E G I C PRIORITIES Develop the core Value through superior Customer loyalty Competitive operations business in Nordics & Baltics network connectivity through convergence Enhance the core Take Eurasia to the next level Investments in Explore
Slide 35: Explore opportunities close to the core: TV
Explore opportunities Explore opportunities close to the core: close to the core Strategic rationale Examples of focus areas: Strengthen the core business Pay TV Focus on creating customer value and loyalty M2M Develop new profit pools Portfolio approach with selective and focused investments with G
Slide 36: Internet of Things and M2M
Explore opportunities Internet of Things and M2M: close to the core Quickly growing market with the Nordics paving the way... …expected to reach 2.6 mobile connected units Internet of things: fast growing space… per person in 2017* 30% year-on-year revenue growth, twice as fast as the global market
Slide 37: M2M strategy and projections
Explore opportunities Strategy and projections: outgrow the market close to the core S T R AT E G I C PRIORITIES M2M revenues • Focus on horizontal offerings close to our core SEK 1+ billion ~4x • Go deeper in select verticals – E.g. automotive, consumer gadgets, health, buildings SEK 300 million •
Slide 38: Financials
Financials Christian Luiga Financial ambition: topics to be covered today Leverage Cost CAPEX Cash Flow Dividend 76 38
Slide 39: Improving service revenue trend with stable EBITDA
Improving service revenue trend… Local organic net sales growth*, % Service revenue growth*, % -0.2 -1.5% 2011 2012 2013 2014 H1 Q413 Q114 Q214 * Stable FX rates 77 …with relatively stable EBITDA EBITDA* development, SEK billion Local organic growth 40 -2.4% +1.7% +0.1% 35 30 25 20 15 10 5 0 2011 20
Slide 40: Stable CAPEX and solid capital structure
MMO Stable CAPEX to service revenue over time Free cash flow, SEK billion CAPEX*/Service revenues, % 25 20 16.2 16.0 16.3 15.3 15 10 5 0 2011 2012 2013 2014 H1** 2011 2012 2013 2014 H1** Dividend from MegaFon CAPEX*/ Free Cash Flow, ex dividend from MegaFon Net sales 14.0 14.6 14.3 14.6 79 *Excludin
Slide 41: Transparent funding strategy and predictable M&A
Transparent funding strategy Debt portfolio maturity schedule, SEK billion • Prudent liquidity position − Cash and cash equivalents 10 − Unutilized committed bank credit lines ~EUR 2 billion 8 • Preferred source of funding – debt 6 capital markets − Bank funding as back-up / 4 interim needs 2 • Incr
Slide 42: Efficiency program ending; investing to save and grow
Efficiency program from 2012 ending Addressable cost base impact*, SEK billion 2012 2013 H1 2014 • Program launched end Q3 2012 with target to reduce addressable cost by SEK 2.0 billion end 2014 -0.2 • Original plan will not be fully met in order to secure delivery in customer critical -1.0 areas an
Slide 43: Invest to save and invest to grow
Invest to save: Investing SEK 2 billion to save SEK 2 billion Net investments & savings 2015-2016, SEK billion • Transformation is required to future proof the business 2.0 − Step change in cost take-out − Additional upside in revenue (e.g. time to market, customer experience) • Continuous cost cont
Slide 44: Working capital and dividend opportunity
Continued focus on working capital improvements Cash impact from changes in working capital, SEK million • Improve days payable outstanding with vendor financing and payment 1,000 conditions 500 0 -500 • Further amendment of customer -1,000 price plans and payments -1,500 -2,000 2009 2010 2011 2012
Slide 45: Financial ambitions
A new generation telco is taking shape 2018 2017 2016 2015 2014 The New 2013 TeliaSonera Big Stabilize Transform Transform Deliver on changes & shape & perform & step up potential 89 Financial ambitions • Aim for A- to BBB+ rating Leverage • Flexibility to pursue business development and M&A • Base
Slide 46: Closing remarks
Closing remarks A new generation telco is taking shape 2018 2017 2016 2015 2014 The New 2013 TeliaSonera Big Stabilize Transform Transform Deliver on changes & shape & perform & step up potential 92 46
Slide 47: Updated strategic agenda and summary
…requires an updated strategic agenda S T R AT E G Y S T R AT E G I C PRIORITIES Develop the core Value through superior Customer loyalty Competitive operations business in Nordics & Baltics network connectivity through convergence Enhance the core Take Eurasia to the next level Investments in Explo
Slide 48: Forward-looking statements
Forward-looking statements Statements made in this document relating to future status or circumstances, including future performance and other trend projections are forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and