TELIASONERA STOCK EXCHANGE RELEASE 13.02.2007 08:25:00
TeliaSonera January-December 2006
TeliaSonera reports record earnings in 2006
Full year
. Net sales increased 3.9 percent to SEK 91,060 million (87,661).
. EBITDA, excluding non-recurring items, reached SEK 32,266 million (29,411) and
the margin improved to 35.4 percent (33.6).
. Operating income, excluding non-recurring items, increased to SEK 26,751
million (20,107).
. Net income increased to SEK 19,283 million (13,694) and earnings per share rose
48 percent to SEK 3.78 (2.56). Net income was impacted by positive one-off
items amounting to approximately SEK 1.7 billion. Net income was record high,
even excluding these one-off items.
. Free cash flow increased to SEK 16,596 million (15,594).
. Strong subscription growth with 1.5 million new subscriptions in the
majority-owned operations and 14.4 million new subscriptions in the associated
companies.
. Total proposed dividend of SEK 6.30 per share (3.50), including ordinary and
extraordinary dividends, equaling a total of SEK 28,290 million (15,717).
Fourth quarter
. Net sales increased 1.4 percent to SEK 23,187 million (22,876) driven by strong
revenue growth in International Mobile and acquisitions in the home markets. In
local currencies net sales increased 3.9 percent.
. EBITDA, excluding non-recurring items, increased to SEK 7,766 million (7,098)
and the margin improved to 33.5 percent (31.0).
. Operating income, excluding non-recurring items, increased to SEK 6,504 million
(4,890).
. Net income totaled SEK 4,538 million (3,342) and earnings per share rose 48
percent to SEK 0.90 (0.61).
. Free cash flow was SEK 2,865 million (3,191).
Financial Highlights
SEK in millions, Oct-D Oct-D Jan-D Jan-D
except per share ec ec ec ec
data 2006 2005 2006 2005
Net sales 23,18 22,87 91,06 87,66
7 6 0 1
EBITDA1) excl. 7,766 7,098 32,26 29,41
non-recurring 6 1
items2)
Operating income 6,190 4,022 25,48 17,54
9 9
Operating income 6,504 4,890 26,75 20,10
excl. non-recurring 1 7
items
Net income 4,538 3,342 19,28 13,69
3 4
of which 4,029 2,734 16,98 11,69
attributable to 7 7
shareholders of the
parent company
Earnings per share 0.90 0.61 3.78 2.56
(SEK)
1) Please refer to page 25 for definitions.
2) Non-recurring items; see table on page 30.
Comments from Anders Igel, President and CEO
"This is our best ever year financially, clearly showing our ability to perform
in a demanding market. There is more potential in the group to improve longer
term."
Business focus for profitable growth
TeliaSonera introduced as of January 1, 2007, a new organization comprising of
four business areas. The format will capture the strong growth within mobility
and broadband services as well as managed services for enterprises and in
addition the high growth in the eastern markets. The new organization is aimed at
improving business focus and reducing complexity in order to boost profitable
growth and increase speed of implementation. Customers will still meet one
company. Converged and combined services, and content services will be offered.
The new focus is aimed at stimulating growth through clear responsibilities.
Services will be developed closer to customers, competence across borders and
units will be utilized more effectively and migration to new services will be
speeded-up. Efficiency is improved by focusing on cross-border synergies in the
international business areas, through faster and easier decision making, the
separation of process and IT-support between mass market services and high value
enterprise services as well as clearer target setting and benchmarking.
TeliaSonera's focus will be on developing the operations in the home markets,
developing the investment in Spain and creating value related to the eastern
positions.
Outlook 2007
Group net sales are expected to continue to grow, reaching the target of
approximately SEK 100 billion in two years with maintained good profitability.
Net income for 2007 is estimated to be somewhat higher than in 2006, excluding
the positive one-off items of approximately SEK 1.7 billion in 2006.
CAPEX-to-sales ratio is expected to grow due to increased investments in
broadband and mobile capacity.
Review of the Group, Full Year 2006
Net sales increased 3.9 percent to a record high of SEK 91,060 million (87,661).
The net effect of acquisitions and divestitures affected sales positively by 1.7
percent and there was no net effect from exchange rate changes. Organic growth
was 2.2 percent.
In mobile communications, net sales increased in Eurasia (34 percent), Norway (19
percent), the Baltics (9 percent) and Denmark (5 percent). Growth in Norway was
positively affected by acquisitions. In Sweden, volume growth was strong, but net
sales decreased 1 percent due to lower prices. In Finland, total net sales
decreased 6 percent. After excluding the effects from Saunalahti's withdrawal
from TeliaSonera's network, net sales in Finland decreased 1 percent.
In fixed communications, demand for broadband services remained strong in all
TeliaSonera's markets. The acquisitions of NextGenTel in Norway and MicroLink in
Estonia affected sales positively. Still, net sales decreased, mainly due to the
migration to mobile and IP based services, which particularly affected sales in
Sweden.
The number of subscriptions increased almost 20 percent, bringing the total
number of subscriptions in TeliaSonera's majority-owned operations at the end of
the year to 30.2 million and 65.9 million in the associated companies.
EBITDA, excluding non-recurring items, increased to SEK 32,266 million (29,411)
as net sales rose and the margin improved to 35.4 percent (33.6). The margin
improvement was especially due to higher margins in Sweden, Finland and Denmark.
Operating income, excluding non-recurring items, increased 33 percent to SEK
26,751 million (20,107) due to improvements in all profit centers, except in
Spain, where TeliaSonera launched its commercial mobile offerings in December
2006.
In the majority-owned operations, operating income increased 25 percent to SEK
21,076 million (16,858), with the strongest improvement in Finland, followed by
Eurasia, Denmark and Norway. The increase includes SEK 900 million from adjusted
depreciation schedules, mainly in Sweden and Finland.
A SEK 389 million release of a reserve related to historical interconnect fees in
Sweden affected operating income positively in the fourth quarter of 2006. The
release follows a ruling by the Swedish Administrative Court of Appeal on
February 8, 2007, in favor of a reduction of the historical interconnect fees
that Tele2 had demanded from TeliaSonera.
Income from associated companies increased 73 percent to SEK 5,579 million
(3,229). Income from MegaFon increased to SEK 2,780 million (1,176). The
improvement includes SEK 340 million in gains from exchange rates and
divestments, and revaluations of loans in 2005. Turkcell continued its positive
operational trend and, despite a depreciation of the Turkish lira against the
Swedish krona, TeliaSonera's income from Turkcell rose to SEK 2,020 million
(1,761). Additionally, the divestment of the mobile operator MTN Uganda had a
positive effect of SEK 562 million.
Non-recurring items affecting operating income totaled SEK -1,262 million (-
2,558), and were related mainly to restructuring in Sweden and Finland. Non-
recurring items in 2006 were positively impacted by a SEK 500 million reversal of
a provision related to the settlement of a dispute regarding a potential co-
location site in London (West Ferry Road).
Financial items totaled SEK -263 million (-530) and were positively impacted by a
non-recurring capital gain of SEK 183 million (nil) from the sale of shares in
Elisa Corporation.
Income taxes increased to SEK -5,943 million (-3,325). The effective tax rate
increased to 23.6 percent (19.5). The increase is mainly due to the expiration of
the tax holiday in Kazakhstan.
Net income attributable to shareholders of the parent company increased 45
percent, or SEK 5,290 million, to SEK 16,987 million and earnings per share
increased 48 percent to SEK 3.78 (2.56).
CAPEX decreased to SEK 11,101 million (11,583) and the CAPEX-to-sales ratio
decreased to 12.2 percent (13.2). CAPEX decreased in all the Nordic markets,
especially within fixed communications in Sweden and mobile communications in
Finland. In the Baltics and Eurasia CAPEX increased and, due to the commercial
launch of Yoigo in December, investments were made for the build-out of a network
in Spain.
Free cash flow increased to SEK 16,596 million (15,594) mainly due to improved
EBITDA and increased dividends from the associated companies. The improvement was
limited mainly by an increase in working capital, higher cash payments out of
restructuring provisions and higher cash payments for pensions.
Net debt increased to SEK 14,957 million (8,373) primarily due to acquisitions.
The equity/assets ratio decreased to 49.9 percent (58.9).
Acquisitions
TeliaSonera was active during the year and paid a total of SEK 3.3 billion net
cash in acquisitions. The largest transactions were:
. Accessing the Spanish mobile market by acquiring the majority of Xfera
(consolidated as of June 14, 2006) for a net of SEK 617 million. TeliaSonera
increased its ownership to 76.6 from 16.6 percent. TeliaSonera also assumed
additional debt of SEK 3.8 billion through the consolidation of Xfera.
. Expanding into the Norwegian broadband market by acquiring NextGenTel
(consolidated as of June 1, 2006) for a purchase price of SEK 2,338 million.
NextGenTel is a strategic acquisition, strengthening our position in the home
markets. Our intention is to exploit the competence and operations of
NextGenTel when driving growth in other countries.
Significant events after the period
. On January 31, 2007, TeliaSonera signed a share purchase agreement to acquire
100 percent of debitel Danmark A/S in Denmark. The purchase price, on a debt
free basis, may at most reach approximately SEK 1,270 million, of which
TeliaSonera will pay SEK 860 million in cash at closing. The remaining purchase
price is capped at SEK 410 million and is dependent on the development during
the next six months. In addition to the stand alone valuation, the transaction
is based on transferring debitel's traffic from other mobile networks into
Telia Denmark's mobile network. Closing of the transaction is subject to
approval from the Danish Competition Authority.
. On January 26, 2007, TeliaSonera announced that an arbitration tribunal of the
International Chamber of Commerce had issued an award finding that a binding
share purchase agreement was concluded between TeliaSonera and Cukurova in
2005, calling for Cukurova to sell all the remaining shares in Turkcell Holding
to TeliaSonera. The award results from an arbitration proceeding in Geneva that
TeliaSonera commenced in May 2005 against Cukurova after Cukurova withdrew from
the transaction. TeliaSonera hopes to conclude the transaction with Cukurova
but, even if the share purchase agreement is binding, TeliaSonera does not yet
know if Cukurova is willing, or able, to proceed with a transfer of the shares
to TeliaSonera.
. On January 26, 2007, TeliaSonera closed the acquisition of 98.8 percent of
Cygate for a cash consideration of SEK 639 million. The acquisition strengthens
TeliaSonera in the managed services market, primarily in Sweden.
Review of the fourth quarter
Net sales increased 1.4 percent to SEK 23,187 million (22,876). The net effect of
acquisitions and divestitures affected sales positively by 1.7 percent, while
changes in exchange rates had a negative impact of 2.5 percent. Organic growth
was 2.2 percent.
In mobile communications, net sales increased in Eurasia (17 percent), the
Baltics (10 percent), Norway (2 percent), and Finland (1 percent). In Sweden,
volumes continued to grow strongly, but net sales decreased 1 percent due to
lower prices. Sales in Denmark decreased 13 percent due primarily to lower
terminal sales and currency development.
In fixed communications, the demand for broadband services was strong and sales
of broadband increased in all markets. Net sales were positively affected by the
acquisitions of NextGenTel in Norway and MicroLink in Estonia. Despite the
acquisitions and positive development within broadband, fixed communications net
sales decreased, mainly due to lower fixed voice sales in Sweden.
EBITDA, excluding non-recurring items, increased to SEK 7,766 million (7,098) as
a result of higher net sales and the margin improved to 33.5 percent (31.0).
Operating income, excluding non-recurring items, increased 33 percent to SEK
6,504 million (4,890) due to improvements in most of the operations.
In the majority-owned businesses, operating income increased 27 percent to SEK
4,959 million (3,897). The improvement includes SEK 220 million from adjusted
depreciation schedules, mainly in Sweden and Finland. Additionally, a SEK 389
million release of a reserve related to historical interconnect fees in Sweden
affected operating income positively.
Income from associated companies increased 57 percent to SEK 1,555 million (992).
Income from MegaFon increased by SEK 503 million, of which SEK 265 million is due
to gains from exchange rates and divestments, and a negative revaluation of loans
in 2005.
Non-recurring items affecting operating income totaled SEK -314 million (-868)
and were related mainly to restructuring in Sweden, Finland and Denmark. Non-
recurring items in the fourth quarter of 2006 were positively impacted by a SEK
500 million reversal of a provision related to the settlement of a dispute
regarding a potential co-location site in London (West Ferry Road).
Financial items totaled SEK -90 million (-145).
Income taxes increased to SEK -1,562 million (-535) and the effective tax rate
increased to 25.6 percent (13.8). The increase in the tax rate was mainly due to
the expiration of the tax holiday in Kazakhstan and a low tax rate in the
comparative period due to the revaluation of certain deferred tax assets at the
end of 2005. The increase in the effective tax rate was also due to a decrease of
net deferred tax assets in Spain following enacted income-tax rate cuts.
Net income attributable to shareholders of the parent company increased 47
percent to SEK 4,029 million (2,734) and earnings per share increased to SEK 0.90
(0.61).
CAPEX increased to SEK 3,688 million (3,091) and the CAPEX-to-sales ratio rose to
15.9 percent (13.5) primarily due to the timing of investments between the
quarters.
Free cash flow decreased slightly to SEK 2,865 million (3,191) mainly due to
higher CAPEX and higher cash tax payments, despite the higher EBITDA and a larger
decrease in working capital.
Net debt amounted to SEK 14,957 million, a decrease of SEK 3,759 million during
the quarter due to positive cash flow generation.
TeliaSonera Share
The TeliaSonera share is listed on the Stockholm Stock Exchange and the Helsinki
Stock Exchange. The share's settlement price on the Stockholm Stock Exchange
increased more than 30 percent in 2006, from SEK 42.70 to SEK 56.25. The highest
share price was SEK 58.25 (43.40) and the lowest was SEK 37.90 (35.50).
The number of shareholders decreased from 745,172 to 691,106. The Swedish state's
holding is 45.3 percent of the capital and the Finnish state's is 13.7 percent.
Holdings outside Sweden and Finland increased from 12.8 percent to 16.7 percent.
At year-end, Swedish private investors owned 3.2 percent (3.2) and Finnish
private investors 2.2 percent (2.2). Swedish institutional investors owned 15.9
percent (19.7) of the share capital and Finnish institutional investors owned 3.0
percent (3.2).
Ordinary dividend and capital distribution to shareholders
For 2006, the Board of Directors proposes to the Annual General Meeting (AGM) an
ordinary dividend of SEK 1.80 (1.25) per share, totaling SEK 8.1 billion. In
light of the strong results in 2006, the proposed ordinary dividend is in the
upper range of the dividend policy's 30-50 percent interval of net income
attributable to shareholders of the parent company.
In addition to the ordinary annual dividend, the Board of Directors proposes an
annual additional distribution to shareholders. The additional distribution will
be reviewed annually taking into consideration cash flow and its projections as
well as investment plans. Based on the current assessment, the additional
distributions would be on the same level as the current distribution of
approximately SEK 10 billion. Accordingly, for 2006, the Board of Directors has
decided to propose to the AGM an extraordinary dividend of SEK 2.25 per share
(2.25), totaling SEK 10.1 billion.
On top of this, the Board of Directors, in view of the strong development during
the year 2006, proposes to the AGM an additional extraordinary dividend for 2006
of SEK 2.25 per share, totaling SEK 10.1 billion.
The Board of Directors proposes that the final day for trading in shares
entitling shareholders to ordinary and extraordinary dividends be set for April
24, 2007, and that the first day of trading in shares excluding rights to
ordinary and extraordinary dividends be set for April 25, 2007. The recommended
record date at VPC for the right to receive ordinary and extraordinary dividends
will be April 27, 2007. If the AGM votes to approve the Board's proposals,
ordinary and extraordinary dividends are expected to be distributed by VPC on May
3, 2007.
New board members elected in January 2007
TeliaSonera's Nomination Committee informed TeliaSonera in December 2006, that it
had finalized its work regarding nominations for the Board of Directors. As the
proposed changes in the composition of the Board of Directors were substantial,
the shareholders represented in the Nomination Committee requested TeliaSonera's
Board of Directors to call an extraordinary shareholders meeting to elect new
board members.
The Extraordinary General Meeting (EGM) of TeliaSonera AB (publ) was held on
January 17, 2007, and the EGM decided to elect the following persons as new
members to the Board of Directors: Maija-Liisa Friman, Conny Karlsson, Lars G
Nordström and Jon Risfelt.
The General Meeting decided to relieve the following Board members of their
duties: Carl Bennet, Eva Liljeblom, Lennart Låftman, Lars-Erik Nilsson and Sven-
Christer Nilsson.
The General Meeting decided that the number of Board members elected by the
General Meeting be seven without deputy members.
Caroline Sundewall, Timo Peltola and Tom von Weymarn will continue as Board
members. Tom von Weymarn will continue as the Chairman of the Board.
Annual General Meeting 2007
The Annual General Meeting (AGM) will be held on April 24, 2007, at 5 p.m.
Swedish time at Stockholmsmässan in Älvsjö, Stockholm. Notice of the meeting will
be posted on TeliaSonera's website, www.teliasonera.com, and advertised in the
newspapers at the end of March 2007. The record date entitling shareholders to
attend the meeting will be April 18, 2007. Shareholders may file notice of intent
to attend the AGM from March 26, 2007. TeliaSonera must receive notice of
attendance no later than 4 p.m. Swedish time on April 18, 2007.
A Finnish shareholders' information meeting will be arranged on April 25, 2007,
at 4 p.m. Finnish time at Finlandia House, Helsinki. Finnish shareholders will
have the possibility to meet in person representatives from management and the
Board. Shareholders may file notice of intent to attend the Finnish shareholders'
information meeting from March 26, 2007. TeliaSonera must receive notice of
attendance no later than April 16, 2007. More information about how to file a
notice of intent to attend the meeting will be given in connection with similar
information about the AGM.
Full year profitability maintained in Sweden
Full year
. The migration to IP-based services accelerated and usage of mobile services
based on 3G and WLAN increased. By concentrating new offerings to mobile and IP
based services, TeliaSonera maintained its market position despite increased
competition and changing market conditions. The mobile market was characterized
by strong price pressure and a focus on flat rate offerings. Broadband prices
remained fairly stable as competitors focused on offering more bandwidth at the
same prices.
Mobile communications
. Strong volume growth - both in outgoing traffic, which rose 20 percent, and the
use of mobile data services - nearly offset price erosion of slightly more than
20 percent. Net sales decreased 1 percent.
. The number of mobile subscriptions rose by 216,000 to 4,603,000.
. Postpaid churn remained unchanged at 11 percent.
. Volume growth and positive restructuring effects had a positive effect on
EBITDA and almost compensated for lower price levels, increased sales costs and
increased costs for the purchase of capacity from the associated company
Svenska UMTS-nät AB. The release of a reserve related to historical
interconnect fees affected EBITDA positively by SEK 79 million in the fourth
quarter. The EBITDA margin remained unchanged.
. CAPEX-to-sales ratio remained unchanged and during the year TeliaSonera
continued investments in EDGE and the roll-out of the GSM network, thereby
extending its geographic reach to 90 percent. Svenska UMTS-nät has invested SEK
4.1 billion in the 3G infrastructure in Sweden so far and has fulfilled the
license conditions set by the regulator PTS.
Fixed communications
. Despite strong growth within broadband, net sales decreased 6 percent. The
number of broadband subscriptions increased by 29 percent, or 205,000, to
922,000, which compensated for the decline in all other areas except fixed
voice. Fixed voice sales decreased due to the decline in fixed voice traffic, a
lower number of subscriptions and price pressure.
. Positive effects from the ongoing restructuring program and a SEK 310 million
release of a reserve in the fourth quarter more than compensated for the
decrease in fixed voice sales and the EBITDA margin increased.
. Despite increased investments in broadband, CAPEX decreased year on year mainly
due to lower investments in the circuit-switched telephony network and in the
transport network.
SEK in millions, Oct-D Oct-D Jan-D Jan-D
except margins, ec ec ec ec
ARPU and no. of 2006 2005 2006 2005
subscriptions
Net sales 9,359 9,739 37,00 38,71
3 0
EBITDA excl. 3,668 3,635 14,82 15,18
non-recurring items 9 3
Margin (%) 39.2 37.3 40.1 39.2
Operating income 2,188 1,575 9,987 8,302
Operating income 2,816 2,558 11,24 10,80
excl. non-recurring 2 3
items
Mobile
communications
Net sales 3,010 3,027 11,97 12,10
4 4
EBITDA excl. 1,276 1,216 5,033 5,081
non-recurring items
Margin (%) 42.4 40.2 42.0 42.0
CAPEX 316 137 800 787
ARPU (SEK) 203 210 204 213
Number of 4,603 4,387 4,603 4,387
subscriptions, end
of period
(thousands)
Fixed
communications
Net sales 6,349 6,712 25,02 26,60
9 6
EBITDA excl. 2,392 2,419 9,796 10,10
non-recurring items 2
Margin (%) 37.7 36.0 39.1 38.0
CAPEX 1,001 900 2,765 3,260
Number of
subscriptions, end
of period
(thousands):
Retail excl. 5,211 5,758 5,211 5,758
broadband
Broadband 922 717 922 717
Wholesale PSTN 1,002 858 1,002 858
subscriptions
Wholesale copper 520 374 520 374
access, LLUB
Effects from the ongoing restructuring program
. The restructuring program in Sweden is expected to reduce annual gross costs by
SEK 4-5 billion as of 2008 compared to the cost level of 2004. The changes are
expected to result in a reduction of approximately 3,000 employees. The
restructuring costs are estimated at around SEK 5 billion to be reported as non-
recurring items.
. The effect of cost savings in 2006 is approximately SEK 2,280 million (800), of
which about SEK 630 million (400) in the fourth quarter. A large portion was
related to fixed communications. The restructuring measures implemented to date
are estimated to give an annual gross savings effect of approximately SEK 2.8
billion as of 2007.
. Since the introduction of the program in the beginning of 2005, the cumulative
non-recurring expenses for the restructuring totaled SEK 3,765 million (2,509),
of which redundancy provisions were SEK 2,895 million (1,837) and SEK 870
million (672) were impairment charges for the network and costs for surplus
office space. In the fourth quarter, an additional early retirement offer was
given to employees born in 1947 or earlier and non-recurring expenses totaled
SEK 628 million (986).
. Since the introduction of the program in the beginning of 2005, 1,209 employees
have accepted the offer for early retirement and 468 employees have been
transferred to the re-deployment unit. Of these, 1,516 have left the company.
In addition, hired personnel have decreased by approximately 670.
. The responsibility for the ongoing restructuring program in Sweden is divided
between the respective new business areas launched on January 1, 2007.
Fourth quarter
. Packaged solutions dominated the market for offers, and business customers
became an increasingly important target group. Efforts were stepped up to make
3G the dominant solution. Broadband competition intensified locally.
Consolidation in the market continued. Mobile and broadband offerings dominated
the Christmas campaigns. TeliaSonera's successful sales drives resulted in a
strong finish for the year. TeliaSonera maintained its market position.
Mobile communications
. Due to a higher number of subscriptions and increased usage, net sales remained
stable, despite price erosion of almost 25 percent year on year. Price pressure
remained particularly strong in the segment for small and medium-sized
businesses.
. Successful Christmas campaigns generated the highest quarterly subscription
intake in two years. The number of subscriptions rose by 99,000 to 4,603,000,
escalating towards the end of the year.
. Postpaid churn decreased to 11 percent (12).
. The number of traffic minutes per subscription rose 14 percent to 167 minutes,
but ARPU decreased 3 percent to SEK 203 due to lower prices.
. The EBITDA margin was under pressure from higher costs for customer intake and
costs for the purchase of capacity from Svenska UMTS-nät AB, which totaled SEK
120 million (80). However, a release of a reserve related to historical
interconnect fees affected EBITDA positively and the margin rose to 42.4
percent.
Fixed communications
. Net sales continued to decrease as migration accelerated and led to a lower
number of voice subscriptions, decreasing traffic volumes and lower prices. A
SEK 50 million provision related to historical interconnect pricing also
burdened sales.
. Broadband subscription net growth was 60,000 during the quarter, the highest
quarterly increase in the year.
. During the quarter, the number of fixed voice retail subscriptions decreased by
108,000, of which the vast majority migrated to mobile only, or VoIP,
solutions, and only 12,000 transferred to wholesale.
. In addition to lower net sales, the EBITDA margin was negatively impacted by a
lower year-on-year net effect from restructuring compared to the previous
quarters. Increased customer acquisition costs and higher maintenance costs
caused by stormy weather also had a negative impact on EBITDA. However, the
EBITDA margin rose to 37.7 percent, positively affected by a SEK 310 million
release of a reserve related to historical interconnect fees.
Turnaround measures strongly improved
profitability in Finland
Full year
. TeliaSonera's shift in focus to customer loyalty, quality and services led to a
stabilization of the entire Finnish telecommunications market. Improved
profitability at all major operators was the clearest evidence of an ongoing
market recovery. Prices stabilized and in some cases average prices and ARPUs
started to rise. In the mobile market, the amount of ported numbers fell more
than 60 percent, improving churn levels at all mobile operators. In April,
sales of bundled 3G packages started and significantly increased the demand for
3G mobile phones. Within broadband, double-digit market growth continued,
although at a more moderate pace than in 2005. TeliaSonera's turnaround
strategy resulted in rising net sales and strongly improved profitability in
the second half of the year. As anticipated, TeliaSonera's mobile market share
in terms of subscriptions decreased slightly.
Mobile communications
. Total net sales decreased 6 percent. Excluding effects from Saunalahti's
withdrawal from TeliaSonera's network (SEK -470 million), sales decreased 1
percent. Increased sales of new handsets and higher average prices and ARPU
over the year partly offset the effect of inherited price erosion (SEK -200
million).
. The number of subscriptions decreased by 100,000 to 2,407,000, mainly because
of the cancellation of new sales of Tele Finland's low price subscriptions.
Including subscriptions through service providers, the total number of
subscriptions was 2,420,000.
. Postpaid churn declined to 18 percent (26).
. EBITDA and EBITDA margin rose, as turnaround measures helped compensate for
Saunalahti's withdrawal. In 2005, among other things, a settlement on
historical mobile interconnect fees, together with the takeover of the service
provider ACN's customers, burdened earnings by SEK 460 million.
. CAPEX was almost halved due to increased purchasing efficiency and a lower need
for additional network capacity following Saunalahti's withdrawal.
Fixed communications
. Net sales increased 4 percent due to strong growth in equipment sales. Around
half of the growth was due to the consolidation of Data-Info, an ICT solutions
provider for enterprises. Sales of broadband and managed IT services also rose,
while sales of traditional data services and fixed voice decreased.
. The number of broadband subscriptions increased by nearly 20 percent, or
62,000, to 412,000.
. EBITDA rose 23 percent and EBITDA margin improved strongly due to the
successful execution of profitability enhancing measures, which have in
particular reduced subcontracting and personnel expenses.
. CAPEX declined 12 percent as broadband growth continued at a high but more
moderate pace than in 2005. Investment focus was on building IP networks and
extending coverage of fiber access networks. TeliaSonera has the most extensive
fiber access network in Finland.
SEK in millions, Oct-D Oct-D Jan-D Jan-D
except margins, ec ec ec ec
ARPU and no. of 2006 2005 2006 2005
subscriptions
Net sales 4,348 4,233 16,74 17,00
4 2
EBITDA excl. 1,089 775 4,326 3,641
non-recurring items
Margin (%) 25.0 18.3 25.8 21.4
Operating income 359 -8 1,397 337
Operating income 454 -6 1,781 448
excl. non-recurring
items
Mobile
communications
Net sales 2,409 2,379 9,427 9,993
EBITDA excl. 577 343 2,286 1,985
non-recurring items
Margin (%) 24.0 14.4 24.2 19.9
CAPEX 157 202 392 763
ARPU (EUR) 29.5 28.5 28.7 30.1
Number of 2,407 2,507 2,407 2,507
subscriptions, end
of period
(thousands)
Fixed
communications
Net sales 1,939 1,854 7,317 7,009
EBITDA excl. 512 432 2,040 1,656
non-recurring items
Margin (%) 26.4 23.3 27.9 23.6
CAPEX 341 325 1,015 1,157
Number of 1,033 1,073 1,033 1,073
subscriptions, end
of period
(thousands)
Effects from the ongoing cost efficiency program
. In addition to the SEK 1 billion gross cost savings program completed in 2005,
a turnaround program was initiated at the end of 2005 to secure future growth
and restore profitability. The program included cost savings measures targeted
at lowering annual gross cost levels by SEK 2 billion as of 2008 compared to
the cost levels in 2005.
. The turnaround measures implemented to date are expected to yield annual cost
savings of approximately SEK 1 billion (from the total SEK 2 billion) as of
2007. During 2006, the savings effect from the turnaround program was
approximately SEK 700 million (nil), of which about SEK 220 million in the
fourth quarter. In addition, cost savings totaled SEK 1 billion (250 million)
from the previous savings program, of which about SEK 250 million (220) in the
fourth quarter. More than half of the savings affected mobile communications.
. Since the introduction of the turnaround program, SEK 384 million (nil) has
been reported as non-recurring items, of which SEK 96 million as impairment
charges and SEK 138 million as expenses for the competence pool. Thus far, 414
employees have been transferred to the competence pool, of which 73 remained at
the end of the quarter. In the fourth quarter, non-recurring expenses for the
turnaround program totaled SEK 95 million.
. The responsibility for the ongoing turnaround program in Finland is divided
between the respective new business areas launched on January 1, 2007.
Fourth quarter
. Demand was strong for bundled PC and broadband offerings. In contrast to the
competition, TeliaSonera, in line with its strategy to turn around the mobile
market, chose not to offer any free air-time. TeliaSonera improved its service
levels significantly by adding more than 100 people to its customer service.
Mobile communications
. Net sales increased 1 percent due to higher mobile handset sales and new
pricing models. In local currency, sales rose 5 percent.
. The number of subscriptions decreased by 29,000 from the previous quarter.
. Postpaid churn improved slightly to 16 percent (17).
. The number of traffic minutes per subscription rose 1 percent to 285 minutes,
despite higher average prices. ARPU increased 4 percent to EUR 29.5.
. EBITDA and EBITDA margin strongly improved due to turnaround measures,
including decreased customer acquisition costs and new interconnect prices from
July 1, 2006.
Fixed communications
. Net sales increased 5 percent. In local currency, sales increased 8 percent.
Main growth areas were equipment sales, managed IT services and broadband.
Around half of the growth was due to the consolidation of Data-Info. A higher
number of subscriptions and slightly higher ARPU contributed to the growth in
broadband. Sales of fixed voice and data services continued to decline.
. The number of broadband subscriptions increased by 17,000 from the previous
quarter.
. EBITDA rose mainly due to a SEK 68 million gain from sales of old receivables.
Record year in Norway
Full year
. Competition in the Norwegian mobile and broadband market remained intense.
Mobile activities were focused on price segmentation and cost reduction. Within
mobile, TeliaSonera increased its market share in terms of revenue. Broadband
prices remained fairly stable as competitors focused on offering more bandwidth
at the same prices. NextGenTel maintained its position as the second largest
broadband provider in Norway.
SEK in millions, Oct-D Oct-D Jan-D Jan-D
except margins, ec ec ec ec
ARPU and no. of 2006 2005 2006 2005
subscriptions
Net sales 2,366 2,096 9,432 7,481
EBITDA excl. 928 704 3,427 2,614
non-recurring items
Margin (%) 39.2 33.6 36.3 34.9
Operating income 666 486 2,425 1,682
Operating income 666 485 2,425 1,803
excl. non-recurring
items
Mobile
communications
Net sales 2,146 2,096 8,926 7,481
EBITDA excl. 890 704 3,328 2,614
non-recurring items
Margin (%) 41.5 33.6 37.3 34.9
CAPEX 277 261 645 876
ARPU (NOK) * 368 353 368 338
Number of 1,641 1,651 1,641 1,651
subscriptions, end
of period
(thousands)
Fixed
communications
Net sales 220 - 506 -
EBITDA excl. 38 - 99 -
non-recurring items
Margin (%) 17.3 - 19.6 -
CAPEX 37 - 84 -
Number of 172 - 172 -
subscriptions, end
of period
(thousands)
* Refers to NetCom
Mobile communications
. Net sales rose 19 percent to SEK 8,926 million (7,481) due to the acquisition
of Chess (consolidated as of November 7, 2005), and higher sales at NetCom. A
changed customer mix, with a higher proportion of postpaid subscriptions, and
increased traffic contributed to the positive sales development at NetCom.
Lower interconnect fees implemented as of July 1, 2006, impacted sales
negatively.
. NetCom's customer mix improved and the total number of postpaid subscriptions
in Norway increased by 83,000, while the number of prepaid subscriptions
decreased by 93,000. As a result, ARPU increased significantly. Chess' main
focus during the year was to move its customers over to the NetCom network.
. Postpaid churn declined to 15 percent (18).
. EBITDA increased to SEK 3,328 million (2,614) due to higher sales and synergy
gains from the consolidation of Chess. Lower interconnect fees impacted EBITDA
negatively by approximately SEK 55 million.
. CAPEX decreased year on year mainly due to large investments in UMTS and EDGE
in 2005.
Fixed communications
. Net sales were SEK 506 million and the EBITDA margin was 20 percent as a result
of the acquisition of NextGenTel (consolidated as of June 1, 2006).
. At year-end, NextGenTel had 172,000 subscriptions, of which 29,000 were VoIP
subscriptions.
Fourth quarter
. TeliaSonera was less active in the fourth quarter after its sales campaigns had
dominated the Norwegian market in the third quarter. At the end of the quarter,
the regulator NPT issued a draft decision on mobile voice termination prices,
suggesting symmetric prices between Telenor and NetCom by July 1, 2008. NetCom
questions the calculation method and the rationale of the proposed change of
the termination prices. The auction of a fourth 3G license was cancelled due to
lack of willingness to pay for the license.
Mobile communications
. Net sales increased 2 percent to SEK 2,146 million (2,096), mainly due to the
consolidation of Chess, increased traffic volumes and improved customer mix. In
local currency, net sales increased 11 percent. Lower interconnect fees
impacted net sales negatively.
. During the fourth quarter the number of subscriptions increased by 4,000. The
number of postpaid subscriptions increased by 9,000 and the number of prepaid
subscriptions decreased by 5,000.
. Postpaid churn increased to 19 percent (16).
. EBITDA rose to SEK 890 million (704), and EBITDA margin improved to 42 percent
(34), mainly due to higher sales, synergy gains from the consolidation of
Chess, and lower sales and marketing costs. Lower interconnect fees impacted
EBITDA negatively by approximately SEK 30 million.
Fixed communications
. Net sales were SEK 220 million and EBITDA margin was 17 percent as a result of
the acquisition of NextGenTel.
. During the quarter the number of broadband subscriptions increased by 4,000.
The share of VoIP subscriptions increased 2 percentage points to 17 percent.
Strong earnings improvement in Denmark, driven by mobile communications
Full year
. Prices in the Danish mobile market were stable and focus remained on customer
retention and customer loyalty. Mobile marketing activities were focused on
data services and content offerings, such as mobile music shops. On the
broadband market, prices stabilized gradually over the year and the focus was
on delivering more bandwidth at the same prices. TeliaSonera maintained its
position in the market.
SEK in millions, Oct-D Oct-D Jan-D Jan-D
except margins, ec ec ec ec
ARPU and no. of 2006 2005 2006 2005
subscriptions
Net sales 1,712 1,916 7,413 7,178
EBITDA excl. 331 182 1,422 817
non-recurring items
Margin (%) 19.3 9.5 19.2 11.4
Operating income 79 52 423 -174
Operating income 124 -81 500 -277
excl. non-recurring
items
Mobile
communications
Net sales 1,154 1,332 5,199 4,965
EBITDA excl. 242 77 982 391
non-recurring items
Margin (%) 21.0 5.8 18.9 7.9
CAPEX 185 141 353 682
ARPU (DKK) 255 244 252 247
Number of 1,123 1,154 1,123 1,154
subscriptions, end
of period
(thousands)
Fixed
communications
Net sales 558 584 2,214 2,213
EBITDA excl. 89 105 440 426
non-recurring items
Margin (%) 15.9 18.0 19.9 19.2
CAPEX 52 45 177 151
Number of 537 550 537 550
subscriptions, end
of period
(thousands)
Mobile communications
. Net sales increased 5 percent to SEK 5,199 million (4,965) due to higher ARPU
and handset sales. Lower interconnect fees impacted net sales negatively.
. The number of subscriptions decreased by 31,000 to 1,123,000, mostly due to a
decline in the number of prepaid subscriptions as TeliaSonera continued
focusing on high-value customers.
. Postpaid churn remained unchanged at 33 percent.
. EBITDA improved significantly to SEK 982 million (391) due to increased net
sales, synergy gains from the consolidation of Orange and other efficiency
gains. Lower interconnect fees affected EBITDA negatively by approximately SEK
40 million. In 2005, EBITDA was burdened by costs for the re-branding of
Orange.
. CAPEX declined. In 2005, CAPEX had been driven higher by investments to
increase network capacity.
Fixed communications
. Net sales remained unchanged. Increased sales within broadband and cable TV
offset a continued decline in sales of traditional fixed telephony.
. EBITDA and EBITDA margin increased slightly due to efficiency gains, mainly in
the form of reduced administration costs.
. CAPEX increased mainly due to the upgrade of the cable-TV and broadband
networks.
Fourth quarter
. Prices remained stable and Christmas campaigns were focused on data services
and handset sales. TeliaSonera started its sales campaigns of Telia HomeFree, a
new service to support fixed to mobile migration. The market position was
maintained.
Mobile communications
. Net sales decreased 13 percent primarily due to lower terminal sales and
exchange rate effects. Lower interconnect fees further burdened sales. In local
currency, net sales decreased 10 percent.
. During the fourth quarter the total number of subscriptions increased by
29,000. The number of postpaid subscriptions increased by 13,000 and the number
of prepaid subscriptions increased by 16,000.
. Postpaid churn increased to 34 percent (27).
. EBITDA improved substantially due to synergy gains from the consolidation of
Orange and other efficiency gains. Lower interconnect fees affected EBITDA
negatively by approximately SEK 10 million.
Fixed communications
. Net sales decreased to SEK 558 million (584), mainly due to lower fixed voice
sales, but remained stable in local currency. Sales of broadband and cable TV
services increased 12 percent, or in local currency 16 percent.
. During the quarter the number of broadband subscriptions increased by 3,000 to
a total of 162,000.
. EBITDA and the EBITDA margin decreased slightly due to lower fixed voice sales
and slightly reduced margins in Stofa's cable TV business.
Further market adaptation and streamlining
. During the year the Danish operation initiated further efficiency measures in
order to adapt the organization to the market. 65 employees were laid off and
annual cost savings of SEK 80 million are estimated as of 2007. Restructuring
costs of SEK 45 million were booked as a non-recurring item in the fourth
quarter.
Good development in the Baltics
Full year
. Competition remained fierce in the mobile and broadband markets, with new
entrants increasing the pressure on prices. Mobile operators focused on
upgrading their 3G networks with HSDPA. Growth within broadband continued,
creating a growing demand for VoIP services, IP TV and triple play services.
TeliaSonera was very active within all growth areas and maintained its market
positions.
SEK in millions, Oct-D Oct-D Jan-D Jan-D
except margins and ec ec ec ec
no. of 2006 2005 2006 2005
subscriptions
Net sales 2,555 2,453 9,950 9,293
EBITDA excl. 1,018 971 4,403 4,255
non-recurring items
Margin (%) 39.8 39.6 44.3 45.8
Income from 18 45 208 220
associated
companies
Operating income 612 432 2,781 2,303
Operating income 612 432 2,781 2,303
excl. non-recurring
items
Mobile
communications
Net sales 1,814 1,651 6,978 6,380
of which Lithuania 604 605 2,412 2,302
of which Latvia 660 560 2,495 2,252
of which Estonia 550 486 2,071 1,826
EBITDA excl. 693 608 2,953 2,799
non-recurring items
Margin (%), 39.2 31.2 40.3 40.1
Lithuania
Margin (%), Latvia 38.9 43.2 47.5 49.4
Margin (%), Estonia 36.2 36.4 38.4 41.8
CAPEX 279 214 753 667
Number of 3,636 3,301 3,636 3,301
subscriptions, end
of period
(thousands)
Fixed
communications
Net sales 928 959 3,661 3,500
of which Lithuania 498 522 1,978 1,970
of which Estonia 430 437 1,683 1,530
EBITDA excl. 331 367 1,468 1,473
non-recurring items
Margin (%), 41.2 44.8 47.3 48.3
Lithuania
Margin (%), Estonia 29.3 30.4 31.7 34.1
CAPEX 278 173 650 418
Number of
subscriptions, end
of period
(thousands)
in subsidiaries 1,506 1,433 1,506 1,433
in associated 720 692 720 692
companies
Mobile communications
. Net sales increased 9 percent to SEK 6,978 million (6,380) due to a higher
number of subscriptions in all three markets and increased traffic per user in
Latvia and Estonia. In Lithuania traffic per user decreased slightly due to the
high intake of new prepaid subscriptions.
. The number of subscriptions rose in all markets by a total of 335,000 to
3,636,000.
. Average Baltic postpaid churn increased to 14 percent (13).
. EBITDA improved in all Baltic markets driven by higher net sales. The EBITDA
margin was maintained in Lithuania, but increased price pressure, together with
higher costs for sales and marketing, weakened the EBITDA margin in Estonia and
Latvia.
. CAPEX increased in Lithuania and Estonia, mainly due to investments in EDGE and
UMTS/HSDPA. In Latvia, CAPEX decreased, mainly due to reduced investments in 2G
capacity and IT.
Fixed communications
. Total net sales increased 5 percent to SEK 3,661 million (3,500), partly due to
the acquisition of MicroLink in Estonia. Higher broadband net sales contributed
to the rise and more than compensated for lower fixed voice sales.
. In Estonia and Lithuania, the number of broadband subscriptions rose more than
50 percent to 322,000. The number of fixed voice subscriptions decreased 2
percent to 1,166,000.
. The weakened EBITDA margin in Estonia is mainly due to the expansion into the
managed services market. Increased sales of low margin products, including
computers, to support the underlying business also weighed on the margin. In
Lithuania, the slightly lower margin is explained by increased costs for sales
and marketing and costs related to re-branding.
. TeliaSonera's income from the associated company Lattelecom, in Latvia, was SEK
208 million (220).
. CAPEX increased due to the expansion of broadband in all markets and the build-
out of digital terrestrial television in Lithuania.
Fourth quarter
. The market was characterized by high activity, including Christmas campaigns.
Competition and price pressure remained intense. TeliaSonera maintained its
market positions.
Mobile communications
. Net sales increased 10 percent to SEK 1,814 million (1,651) due to a higher
number of subscriptions in all three markets and increased traffic per user. In
local currency, net sales as a weighted average of the three markets rose 14
percent.
. During the quarter the number of subscriptions increased by 78,000 to
3,636,000.
. Average Baltic postpaid churn increased to 15 percent (14).
. EBITDA improved in all three markets due to higher net sales and increased
profitability in Lithuania. The changes in EBITDA margins were mainly driven by
the development of sales and marketing costs.
Fixed communications
. Net sales decreased 3 percent. In Estonia, net sales increased 2 percent in
local currency, driven by strong demand in the business segment. In Lithuania
net sales decreased 1 percent in local currency due to the sale of Comliet.
Excluding the effect from divestments, sales in Lithuania rose 5 percent in
local currency.
. The number of broadband subscriptions continued to grow and during the quarter
increased by 39,000 to 322,000. The number of fixed voice subscriptions
increased by 6,000 to 1,166,000.
. The weakened EBITDA margin was mainly due to increased costs for sales and
marketing, and higher sales of low margin products.
. TeliaSonera's income from associated company Lattelecom decreased to SEK 18
million (45) due to a change in deferred tax items related to fair value
adjustments recorded in the TeliaSonera merger.
. CAPEX increased mainly due to the expansion of broadband and hotspots in all
Baltic markets and the introduction of digital terrestrial television in
Lithuania.
Successful launch in Spain - customer intake
exceeding expectations
. After a record short period of time following the closing of TeliaSonera's
acquisition of Xfera in June 2006, Xfera launched its Spanish operation under
the brand Yoigo on December 1.
SEK in millions, Oct-D Oct-D Jan-D Jan-D
except number of ec ec ec ec
subscriptions 2006 2005 2006 2005
Mobile
communications
Net sales 5 - 5 -
EBITDA excl. -247 - -337 -
non-recurring items
CAPEX 43 - 181 -
Number of 24 - 24 -
subscriptions, end
of period
(thousands)
. The Yoigo offering, based on easy to use services with transparent and
attractive pricing, has been very well received in Spain. At the end of the
year, the number of subscriptions had reached 24,000, out of a total of 34,000
orders received after only one month of operation.
. EBITDA was SEK -247 million. Costs were mainly for the market launch, network
and new customer intake. In December costs for brand awareness campaigns in
connection with the commercial launch totaled SEK 90 million.
. The Xfera operation is based on a flexible and cost efficient organization.
Major functions such as network roll-out and maintenance, customer care, sales
and logistics are outsourced.
Record year in International Mobile with continued strong growth and
profitability
SEK in millions, Oct-D Oct-D Jan-D Jan-D
except margins and ec ec ec ec
number of 2006 2005 2006 2005
subscriptions
Net sales 2,289 1,950 8,508 6,367
of which Kazakhstan 1,251 1,101 4,803 3,509
of which Azerbaijan 688 557 2,453 1,902
of which Georgia 268 219 945 719
of which Moldova 85 75 317 243
EBITDA excl. 1,212 1,072 4,787 3,519
non-recurring items
Margin (%), total 52.9 55.0 56.3 55.3
Margin (%), 55.6 60.4 57.8 55.8
Kazakhstan
Margin (%), 52.3 60.9 61.4 63.2
Azerbaijan
Margin (%), Georgia 51.9 44.7 47.9 46.6
Margin (%), Moldova 44.7 44.0 44.2 52.3
Income from 1,478 845 4,800 2,937
associated
companies
of which Russia 786 283 2,780 1,176
of which Turkey 692 562 2,020 1,761
Operating income 2,416 1,698 8,557 5,692
Operating income 2,416 1,698 8,557 5,692
excl. non-recurring
items
CAPEX 472 563 2,699 2,449
Number of
subscriptions, end
of period
(thousands)
Eurasia 7,352 6,146 7,352 6,146
Russia 29,74 22,83 29,74 22,83
9 6 9 6
Turkey 30,80 26,70 30,80 26,70
0 0 0 0
Ukraine 4,620 1,205 4,620 1,205
Full year
Eurasia
. Net sales increased 34 percent due to strong subscription growth and higher
ARPU.
. The number of subscriptions rose by 20 percent, or 1.2 million, to 7.4 million.
In Kazakhstan, the subscription growth was slowed by the requirement to
register prepaid subscriptions. The registration by the customers was completed
at the end of the third quarter and a total of 725,000 prepaid subscriptions
were deactivated.
. EBITDA rose 34 percent, mainly due to higher net sales and the
EBITDA margin increased.
. CAPEX remained high in order to maintain high network and service quality as
well as coverage leadership in the region. TeliaSonera's first 3G roll-out in
the region is ongoing in Georgia. The commercial launch took place in December.
. All four Fintur companies are dividend payers and during 2006 the companies
paid a total of approximately SEK 1,400 million in dividends, of which
approximately SEK 660 million to minority shareholders. In addition, SEK 350
million in extraordinary dividends were declared in December 2006 and paid in
January 2007, of which approximately SEK 172 million to minority shareholders.
Russia
. The Russian mobile market continued to show strong volume and revenue growth.
The total market grew by 26 million to 152 million subscriptions. Mobile SIM
card penetration rose from 87 to 105 percent. After several years of decline,
prices leveled out during the year and ARPU improved. MegaFon strengthened its
market position in terms of revenue among the three main operators, from 26 to
29 percent. In Moscow, MegaFon improved its market share of subscriptions from
14 to 19 percent. The Calling Party Pays (CPP) regulatory regime was introduced
in July. The 3G license procedure was announced in December.
. MegaFon (associated company, 43.8 percent holding) reported strong sales and
earnings growth and TeliaSonera's income from Russia rose 136 percent to SEK
2,780 million (1,176). SEK 340 million of the improvement is due to gains from
exchange rates and divestments, and a negative revaluation of loans in 2005.
. The number of subscriptions increased by 6.9 million to 29.7 million
subscriptions. Growth was strongest in Moscow, where the number of
subscriptions increased by 56 percent, or 1.8 million, to 5.0 million.
. MegaFon paid no dividend to its shareholders (nil). The cash generated from
operations was invested to expand the business.
Turkey
. The Turkish mobile market continued to expand and the number of subscriptions
grew by 9 million to over 51 million. Mobile SIM card penetration rose from 57
to 69 percent (reported with a one-quarter lag, year on year).
. In Turkey, Turkcell's (associated company, 37.3 percent holding, reported with
a one-quarter lag) subscriptions increased by 4.1 million to 30.8 million. In
Ukraine, the number of subscriptions increased by 3.4 million to 4.6 million.
. Despite a depreciation of the Turkish lira against the Swedish krona,
TeliaSonera's income from Turkcell rose to SEK 2,020 million (1,761) due to a
higher number of subscriptions and increased usage.
. During 2006, TeliaSonera received SEK 1,501 million (175) in dividends from
Turkcell and Turkcell Holding (which owns 51 percent of Turkcell and is jointly
owned by TeliaSonera and Cukurova Holding).
Fourth quarter
Eurasia
. Net sales increased 17 percent. In local currency, net sales rose 25 percent.
The number of subscriptions rose by nearly 0.5 million to 7.4 million.
Subscription growth was particularly strong in Kazakhstan, following the
completion of the registration process of prepaid subscriptions and successful
sales and marketing activities.
. EBITDA increased 9 percent, driven by higher net sales. The EBITDA margin
decreased due to costs for increased sales and marketing activities that had
been postponed from previous quarters in Kazakhstan and Azerbaijan.
. CAPEX decreased, partly due to the postponement of certain investments.
Russia
. MegaFon succeeded well during the fourth quarter and took 30 percent of the
Russian subscription growth. In Moscow, MegaFon took 38 percent of the growth.
. MegaFon showed continued strong sales and earnings growth. TeliaSonera's fourth
quarter income from Russia rose to SEK 786 million (283). The increase includes
SEK 92 million in gains from exchange rates and the PeterStar divestment by
Telecominvest. In 2005, income was negatively affected by SEK 173 million from
revaluations of loans.
. MegaFon's subscriptions increased by 1.6 million in the fourth quarter.
Turkey
. In Turkey, the number of subscriptions rose by 1.0 million during the quarter
(reported with a one-quarter lag). In Ukraine, the number of subscriptions
increased by 0.7 million.
. TeliaSonera's income from Turkcell rose 23 percent to SEK 692 million (562) due
to continued strong growth in usage and the number of subscriptions. A
depreciation of 16 percent of the Turkish lira against the Swedish krona
affected TeliaSonera's income from Turkcell negatively.
Other operations *)
SEK in millions Oct-D Oct-D Jan-D Jan-D
ec ec ec ec
2006 2005 2006 2005
Net sales 1,278 1,216 4,826 4,575
EBITDA excl. -63 -48 7 151
non-recurring items
Income from 17 84 694 84
associated
companies
Operating income 401 -25 1,046 171
Operating income -114 -14 498 73
excl. non-recurring
items
CAPEX 170 96 394 247
*) Include TeliaSonera Holding and TeliaSonera International Carrier
. Net sales increased mainly due to increased voice sales in the carrier
operations.
. Income from associated companies in 2006 was affected by a SEK 562 million gain
from the sale of MTN Uganda that was booked in the third quarter by
TeliaSonera's associated company Overseas Telecom.
. Operating income was positively affected by the reversal of provisions related
to integration and restructuring in the carrier operations. For the full year
the effect was SEK 101 million, of which SEK 61 million in the fourth quarter.
. Non-recurring items in the fourth quarter of 2006 were positively impacted by a
SEK 500 million reversal of a provision related to the settlement of a dispute
regarding a potential co-location site in London (West Ferry Road).
. CAPEX increased due to expansion of the carrier operations into new regions and
markets.
Stockholm, February 13, 2007
Anders Igel
President and CEO
Each year, TeliaSonera's auditors review the interim reports for the first three
quarters. Accordingly, this report has not been subject to review by the
auditors.
Financial Information
More details on the new reporting structure and
restated comparable figures, following the new
organization introduced on January 1, 2007,
will be published well in advance of the
Interim Report January-March 2007.
Interim Report January-March 2007 April 24,
2007
Annual General Meeting, Stockholm April 24,
2007
Shareholders' information meeting, Helsinki
April 25, 2007
Interim Report January-June 2007 July 27, 2007
Interim Report January-September 2007 October
26, 2007
Year-end Report January-December 2007 February
13, 2008
Questions regarding Ordering of individual
content in the hard copies of the
reports: reports:
TeliaSonera AB Tel. +46 372 851 42
Investor Relations Fax +46 372 843 56
SE-106 63 Stockholm, www.teliasonera.com/ir
Sweden
Tel. +46 8 504 550 00
Fax +46 8 611 46 42
www.teliasonera.com/ir
Definitions
EBITDA: Earnings Before Interest, Tax,
Depreciation and Amortization. Equals operating
income before depreciation, amortization and
impairment losses and before income from
associated companies.
ARPU: Average monthly revenue per user.
Churn: The number of postpaid subscribers that
have left the company expressed as a percentage
of the average number of postpaid subscribers.
PSTN: Public Switched Telephone Network.
LLUB: Local Loop Unbundling.
HSDPA: High Speed Downlink Packet Access.
Condensed Consolidated Income Statements
SEK in millions, Oct-D Oct-D Jan-D Jan-D
except per share ec ec ec ec
data and number of 2006 2005 2006 2005
shares
Net sales 23,18 22,87 91,06 87,66
7 6 0 1
Costs of production -13,2 -12,9 -48,6 -47,2
69 33 40 87
Gross income 9,918 9,943 42,42 40,37
0 4
Selling, admin., and -5,63 -6,27 -22,3 -23,7
R&D expenses 4 7 67 06
Other operating 351 -636 -143 -2,34
revenues and 8
expenses, net
Income from 1,555 992 5,579 3,229
associated companies
Operating income 6,190 4,022 25,48 17,54
9 9
Net financial -90 -145 -263 -530
revenues and
expenses
Income after 6,100 3,877 25,22 17,01
financial items 6 9
Income taxes -1,56 -535 -5,94 -3,32
2 3 5
Net income 4,538 3,342 19,28 13,69
3 4
Attributable to:
Shareholders of the 4,029 2,734 16,98 11,69
parent co. 7 7
Minority interests 509 608 2,296 1,997
in subsidiaries
Shareholders' basic 0.90 0.61 3.78 2.56
and diluted earnings
per share (SEK)
Number of shares
(thousands)
Outstanding at 4,490 4,490 4,490 4,490
period-end ,457 ,457 ,457 ,457
Weighted average, 4,490 4,490 4,490 4,573
basic and diluted ,457 ,457 ,457 ,986
Number of treasury
shares
(thousands)
At period-end - 184,7 - 184,7
75 75
Weighted average - 184,7 125,5 101,2
75 46 46
EBITDA 7,455 6,744 31,11 27,50
3 8
EBITDA excl. 7,766 7,098 32,26 29,41
non-recurring items 6 1
Depreciation, -2,82 -3,71 -11,2 -13,1
amortization and 0 4 03 88
impairment losses
Operating income 6,504 4,890 26,75 20,10
excl. non-recurring 1 7
items
Condensed Consolidated Balance Sheets
SEK in millions Dec 31, Dec 31,
2006 2005
Assets
Goodwill and other intangible 74,172 74,367
assets
Property, plant and equipment 48,195 48,201
Investments in associates, 41,826 40,526
deferred tax assets and
other financial assets
Total non-current assets 164,193 163,094
Inventories 997 765
Trade receivables, current tax 20,631 20,489
receivables and
other receivables
Interest-bearing receivables 1,958 2,407
Cash and cash equivalents 11,603 16,834
Total current assets 35,189 40,495
Non-current assets 10 186
held-for-sale
Total assets 199,392 203,775
Equity and liabilities
Shareholders' equity 119,217 127,049
Minority interests 8,500 8,645
Total equity 127,717 135,694
Long-term borrowings 24,311 20,520
Deferred tax liabilities, 14,635 14,948
other long-term provisions
Other long-term liabilities 2,382 2,343
Total non-current liabilities 41,328 37,811
Short-term borrowings 3,418 6,215
Trade payables, current tax 26,929 24,055
payables, short-term
provisions and other current
liabilities
Total current liabilities 30,347 30,270
Total equity and liabilities 199,392 203,775
Condensed Consolidated Cash Flow Statements
SEK in millions Oct-D Oct-D Jan-D Jan-D
ec ec ec ec
2006 2005 2006 2005
Cash flow before 4,575 5,424 28,03 26,15
change in working 4 8
capital
Change in working 1,881 795 -533 832
capital
Cash flow from 6,456 6,219 27,50 26,99
operating activities 1 0
Intangible and -3,59 -3,02 -10,9 -11,3
tangible fixed assets 1 8 05 96
acquired (cash CAPEX)
Free cash flow 2,865 3,191 16,59 15,59
6 4
Cash flow from other 599 -3,06 -2,17 -840
investing activities 8 9
Total cash flow from -2,99 -6,09 -13,0 -12,2
investing activities 2 6 84 36
Cash flow before 3,464 123 14,41 14,75
financing activities 7 4
Cash flow from 524 -421 -19,3 -15,6
financing activities 82 53
Cash flow for the 3,988 -298 -4,96 -899
period 5
Cash and cash 7,834 16,93 16,83 17,24
equivalents, 6 4 5
opening balance
Cash flow for the 3,988 -298 -4,96 -899
period 5
Exchange rate -219 196 -266 488
differences
Cash and cash 11,60 16,83 11,60 16,83
equivalents, 3 4 3 4
closing balance
Condensed Consolidated Statements of Changes in Equity
Jan-Dec 2006 Jan-Dec 2005
Within EBITDA -311 -354 -1,15 -1,90
3 3
Restructuring -628 -577 -1,25 -2,09
charges, synergy 5 5
implementation
costs, etc.:
Sweden
Finland -105 -1 -288 -111
Denmark -45 92 -77 62
International 44 134 77 216
Carrier
Other 416 -9 383 -36
Capital gains: 7 7 7 61
Telia Finans
Within -13 -514 -13 -636
Depreciation,
amortization and
impairment losses
Impairment losses, - -405 - -405
accelerated
depreciation:
Sweden
Norway - 1 - -121
Denmark - 40 - 40
International -13 -150 -13 -150
Carrier
Within Income from 10 - -96 -19
associates
Impairment losses, 10 - -96 -
capital
gains/losses,
provisions and
other:
Finland
Infonet Services - - - -19
Within Financial - - 183 -
net
Capital gains: - - 183 -
Elisa
Total -314 -868 -1,07 -2,55
9 8
Deferred Taxes
SEK in millions Dec 31, Dec 31,
2006 2005
Deferred tax assets 12,054 12,305
Deferred tax liabilities -10,121 -9,578
Net deferred tax assets 1,933 2,727
(+)/liabilities (-)
Related Party Transactions
MegaFon. As of December 31, 2006, TeliaSonera had interest-bearing claims on its
associated company OAO MegaFon of SEK 321 million.
Telefos. As of December 31, 2006, TeliaSonera had interest-bearing claims of SEK
101 million on its associated company Telefos AB. In the three-month period and
the year ended December 31, 2006, TeliaSonera purchased services and products
from Telefos worth SEK 643 million and SEK 1,812 million, respectively, mostly
referring to network construction.
Svenska UMTS-nät. In the year ended December 31, 2006, TeliaSonera purchased
services from its associated company Svenska UMTS-nät AB worth SEK 505 million
and sold services worth SEK 158 million.
Acquisition of Cygate
On November 16, 2006, TeliaSonera announced an agreement to acquire a majority
stake in Cygate Group AB. After obtaining relevant regulatory approval closing
took place on January 26, 2007. TeliaSonera acquired 98.76 percent of the shares
for a cash consideration of SEK 639 million.
Cygate is a leading supplier of secure and managed IP network solutions as well
as system integration in the Nordic market. The acquisition underlines
TeliaSonera's strategic direction to strengthen its position within managed
services.
The transaction is a strategic acquisition providing TeliaSonera with broader
competence within business solution sales, technology and project management.
Cygate provides solutions within networking, security and IP telephony and
services within support, maintenance and IT management. Cygate, which has strong
brand recognition in the market, will operate as a separate business within
TeliaSonera.
Cygate is expected to generate 2006 net sales of approximately SEK 805 million.
Total assets as of September 30, 2006 were SEK 327 million. Work on the purchase
price allocation has started. To some extent the cost of combination will be
allocated to certain identifiable intangible assets (e.g. trade names), but will
mainly be recognized as goodwill. The results of the Cygate operations are
included in the consolidated financial statements as of February 1, 2007.
Investments
SEK in millions Oct-D Oct-D Jan-D Jan-D
ec ec ec ec
2006 2005 2006 2005
CAPEX 3,688 3,091 11,10 11,58
1 3
Intangible assets 357 488 1,152 1,233
Property, plant and 3,331 2,603 9,949 10,35
equipment 0
Acquisitions and 111 2,630 3,951 2,732
other investments
Asset retirement 64 194 67 194
obligations
Goodwill and fair 46 2,408 3,778 2,466
value adjustments
Shares and 1 28 106 72
participations
Total 3,799 5,721 15,05 14,31
2 5
Net Debt
SEK in millions Dec 31, Dec 31,
2006 2005
Long-term and short-term 27,729 26,735
borrowings
Less short-term investments, -12,772 -18,362
cash and bank
Net debt 14,957 8,373
Loan Financing and Credit Rating
Cash-flow generation was positive during 2006, but substantial dividend pay-outs
in May led to some refinancing need. During the year financing activities have
been focused on issuance in Swedish kronor and overall the terms have been
relatively attractive, even though public discussions relating to the ownership
structure in TeliaSonera AB led to a deterioration of the funding conditions
during the latter part of 2006.
In the fourth quarter Moody's changed the Outlook on its TeliaSonera AB A2/P-1
credit rating from Stable to Negative.
During the year, a bond originally issued by the acquired company NextGenTel in
Norway was prepaid in full. Furthermore, the remaining Eurobond maturing in April
2009, originally issued by TeliaSonera Finland Oyj (former Sonera Oyj), changed
its listing from the London Stock Exchange's Gilt-Edged and Fixed Interest Market
to the Professional Securities Market.
Financing needs are expected to increase rather substantially in 2007, primarily
due to extraordinary dividends that are expected to be paid in the spring.
Financial Key Ratios
Dec 31, Dec 31,
2006 2005
Return on equity (%, rolling 17.2 10.3
12 months)
Return on capital employed 19.5 12.6
(%, rolling 12 months)
Equity/assets ratio (%) 49.9 58.9
Net debt/equity ratio (%) 15.0 7.0
Shareholders' equity per 26.55 28.29
share (SEK)
Collateral Pledged and Guarantees
Collateral pledged at December 31, 2006 totaled SEK 1,403 million, mainly
referring to blocked funds in bank accounts for Ipse 2000 S.p.A.'s future license
payments and pledges of shares in Svenska UMTS-nät AB. Guarantees totaled SEK
2,058 million, of which SEK 1,685 million referred to credit guarantees on behalf
of Svenska UMTS-nät. Under certain third-party agreements, the credit guarantees
on behalf of Svenska UMTS-nät are capped at SEK 2,400 million.
Contractual Obligations
Contractual obligations at December 31, 2006 totaled SEK 1,869 million, of which
SEK 1,535 million referred to contracted build-out of TeliaSonera's mobile
network in Spain and fixed networks in Sweden and Lithuania.
Parent Company
Net sales for the year were SEK 19,705 million (21,363), of which SEK 14,424
million (16,046) was billed to subsidiaries. Earnings before appropriations and
taxes decreased to SEK 7,631 million (11,526), mainly due to lower dividends from
subsidiaries. Net income was SEK 3,228 million (1,853).
Total investments for the year amounted to SEK 17,332 million (7,009), including
SEK 2,382 million (2,754) in property, plant and equipment, primarily for the
fixed network. The acquisition price for NextGenTel Holding was SEK 2,335
million. Other investments totaling SEK 12,615 million (4,255) were mainly
attributable to capital infusions in subsidiaries and other equity holdings. Of
the capital infusions, SEK 12,113 million (921) was provided through debt
conversion.
Financial Information/"Underlying" Measures of
Results of Operations
This year-end report includes information on "underlying" measures of
TeliaSonera's results of operations, such as "EBITDA excluding non-recurring
items" and "Operating income excluding non-recurring items." EBITDA equals
operating income before depreciation, amortization and impairment losses,
excluding income from associated companies. Non-recurring items include
impairment losses, capital gains/losses, restructuring/phase-out of operations
and personnel redundancy costs. TeliaSonera's management uses operating income
excluding non-recurring items as the principal measure for monitoring
profitability in internal reporting. Management believes that, besides operating
income, EBITDA excluding non-recurring items and operating income excluding non-
recurring items are also measures commonly reported and widely used by analysts,
investors and other interested parties in the telecommunications industry.
Accordingly, these "underlying" measures are presented to enhance the
understanding of TeliaSonera's historical operating performance.
These "underlying" measures, however, should not be considered as alternatives to
operating income as indicators of our operating performance. Similarly, EBITDA
excluding non-recurring items should not be considered as an alternative to cash
flows from operating activities as a measure of liquidity. EBITDA excluding non-
recurring items and operating income excluding non-recurring items are not
measures of consolidated financial performance under IFRS or U.S. GAAP and may
not be comparable to other similarly titled measures for other companies. These
"underlying" measures are not meant to be predictive of potential future results.
Forward-Looking Statements
This year-end report contains statements concerning, among other things,
TeliaSonera's financial condition and results of operations that are forward-
looking in nature. Such statements are not historical facts but, rather,
represent TeliaSonera's future expectations. TeliaSonera believes that the
expectations reflected in these forward-looking statements are based on
reasonable assumptions; however, forward-looking statements involve inherent
risks and uncertainties, and a number of important factors could cause actual
results or outcomes to differ materially from those expressed in any forward-
looking statement, including TeliaSonera's market position, growth in the
telecommunications industry in Europe, the effects of competition and other
economic, business, competitive and/or regulatory factors affecting the business
of TeliaSonera and the telecommunications industry in general. Forward-looking
statements speak only as of the date they were made, and, other than as required
by applicable law, TeliaSonera undertakes no obligation to update any of them in
light of new information or future events.
-----------------------
Year-end Report January-December 2006. TeliaSonera AB (publ), Corporate Reg.
No. 556103-4249, Registered office: Stockholm
1
TeliaSonera reports record earnings in 2006
| Source: Telia Company AB