EBITDA stable despite covid-19

• Net sales rose 2.0 percent to SEK 21,530 million (21,101) and like for like[4], net sales fell 3.7 percent.
• Service revenues grew 2.2 percent to SEK 18,733 million (18,338) and like for like[4], service revenues declined 4.8 percent.
• Adjusted EBITDA fell 0.2 percent to SEK 8,211 million (8,226) and the adjusted EBITDA margin fell to 38.1 percent (39.0). Like for like[4], adjusted EBITDA fell 0.6 percent.
• Operational free cash flow fell to SEK 3,732 million (4,743) and cash flow from operating activities fell to SEK 7,392 million (8,471).
• COVID-19 had an estimated SEK 600 million impact on service revenues, driven by mainly lower roaming and advertising revenues. The estimated impact on adjusted EBITDA amounted to SEK 300 million.
• The sequentially lower COVID-19 impact is expected to result in an adjusted EBITDA of around SEK 30.5 billion for the full year 2020. Consequently, we expect the operational free cash flow for the full year to be in the upper end of the previously communicated SEK 9.5-10.5 billion range.
• After the end of the third quarter an agreement was signed to divest the Telia Carrier business for a value of SEK 9,450 million on a cash and debt free basis.
• The Board of Directors has decided to propose an additional dividend of SEK 0.65 per share, subject to the approval by an Extraordinary General Meeting.    

• Net sales rose 4.1 percent to SEK 65,726 million (63,127) and like for like[4], net sales fell 3.9 percent.
• Adjusted operating income fell 14.5 percent to SEK 8,950 million (10,471).
• Total net income fell to SEK 1,689 million (5,891), mainly due to an impairment of SEK -2,928 million regarding the ownership in Turkcell Holding.

Comments by Allison Kirkby, President & CEO

"It has been a busy quarter for Telia Company, as we embark on a journey to restore Telia to a thought leader that outperforms the industry by delivering superior customer experiences and superior business results. I am very proud that we are successfully striking the balance between supporting our customers and society in a time of great uncertainty and delivering on our short-term financial commitments, while preparing the strategic roadmap that will deliver sustainable, long term value for shareholders.

Our third quarter results were encouraging. Whilst service revenues declined by 4.8 percent year on year to SEK 18.7 billion as a result of lower roaming and lower advertising revenues, we succeeded again in mitigating a large portion of the bottom line impact through our cost actions, delivering an EBITDA of SEK 8.2 billion, a level similar to the same quarter last year. Cash CAPEX in the quarter amounted to SEK 3.0 billion and operational free cash flow to SEK 3.7 billion. We have now generated SEK 9.2 billion in operational free cash flow so far this year, and even though the fourth quarter typically is weaker from an operational cash flow perspective, we expect to end the year at the upper end of our guidance range.

Since our last interim report, we have made good progress on the strategic priorities identified upon my arrival at Telia just over five months ago.

One of these priorities is to build on our core strengths, in particular our network leadership. Today I am delighted to be able to announce that Telia Company is entering into two strategic partnerships, with Ericsson and Nokia respectively, which brings together three of the region's wireless pioneers to provide superior network experiences based on 5G and 4G technology to Telia's 10 million mobile customers in Sweden, Finland and Estonia. Our networks have never been more important to life and livelihoods and they are the foundation of a thriving digital economy, with innovation, sustainability and security at their core. Assuming we are successful in the upcoming Swedish spectrum auction we now have the foundations in place to build the most trusted and reliable 5G networks for the societies of the Nordics and the Baltics to benefit from. This kicks off a multiyear investment in our networks, ramping up fully in 2021.

On the convergence side the launch of the new Telia "daring challenger" converged brand proposition in Norway, in mid-September, was a major milestone from which we will be able to generate revenue synergies going forward. Furthermore, the withdrawal of the Get brand will allow us to execute further on our cost synergy ambition.

Another one of our priorities is to seek further cost efficiencies and improve capital allocation. We have appointed a Head of Transformation, with a proven track record to help us mobilize and deliver on a major program of process simplification and structural transformation.

With regards to capital allocation, we announced the divestment of Telia Carrier to Polhem Infra for an enterprise value of SEK 9.45 billion, crystallizing significant value for our shareholders from the customer relationships and digital infrastructure which the Carrier business unit has built up over many years. As a result of this transaction, and the divestment of our holding in Turkcell Holding (the receipt of the proceeds of which is expected imminently), the board have proposed to reinstate our 2019 dividend of SEK 2.45 per share, and we can now focus our strategy and execution entirely on the Nordic and Baltic region.

Finally, to help us achieve our aim of rebuilding the Telia brand to one that is loved and admired by the markets we serve, I am today announcing the appointment of a new Head of Brand reporting to me. I am delighted that Per Carleö will join us on January 1, 2021. Per has an extensive career in brand building and marketing, most recently as Marketing Director of Volvo Car Sweden, another iconic Swedish brand.

Turning to the business units, during the quarter, our market leading Swedish and Baltic operations were again solid. In Sweden we are seeing the mobile subscriber revenue trends improving despite lapsing price effects. In order to capture monetizing opportunities ahead, content differentiation will be an important driver for a "more-for-more" approach as well as 5G. On the latter we will cover 20 cities with 5G during the fourth quarter and as mentioned above we have announced Ericsson as our strategic partner to roll out the highest quality 5G network experience to the whole of Sweden, again assuming that we secure the relevant spectrum. In the Baltics we are making progress on our convergence strategy with positive impacts on both ARPU levels and churn. In Lithuania we deliberately reduced our low margin transit revenues, but strong performance in other areas led EBITDA to its highest level since the merger in 2017 (growing 7.1 percent in the third quarter). Estonia reported stable service revenue and EBITDA levels.

In Finland the return of sports improved the trend in TV, and we expect this to continue as the ice hockey season resumes in the fourth quarter. The mobile operations continued to suffer from lower levels of roaming and a highly competitive market. To strengthen and modernize the mobile network and further implement 5G, we have, as mentioned above, signed a new agreement with Nokia as our strategic partner.

Elsewhere, our Norwegian business showed similar trends as in previous quarters. EBITDA was flat as a result of a tough comparison with strong prior-year performance but was helped by prompt action on costs. In Denmark, despite seeing continuous strong mobile subscriber intake, the market has remained competitive and EBITDA was reduced by 2.3 percent.

In TV & Media trends are gradually improving. We continue to see improved demand for our free-to-air content in both Sweden and Finland. As a consequence, advertising revenues went from a 31 percent decline in the second quarter to a 12 percent decline in the third quarter. Encouragingly, we added 54,000 TV subscribers after two quarters of subscriber losses, driven by both Sweden and especially Finland as key sport coverage resumed. Around SEK 100 million of content costs were phased into the fourth quarter, leaving EBITDA better than expected at SEK 249 million, still a year-on-year decline of 7.5 percent.

One of the themes that the coronavirus pandemic has amplified is the digital divide, including lagging understanding of new technology use amongst the elderly and educational inequalities perpetuated by lack of connectivity or equipment. In order to make sure no one is left behind we have implemented the "Mer digital" ("More digital") program. It supports and guides municipalities to help residents to get access to and understand how to use digital services. We have developed a similar program to support SMEs in their digitalization journeys ("Bli digital" or "Become digital"). The initiatives are the result of fruitful partnerships with Google, Microsoft and Fortnox. Since the launch in September, around 35 municipalities and some 150 SMEs in Sweden and Norway have engaged with the program highlighting strong demand.

In summary, throughout the pandemic we have remained focused on the immediate priorities of keeping our customers connected, informed and entertained and ensuring that our operations deliver on our near-term financial commitments, whilst preparing a long-term strategy that will deliver sustainable attractive financial results."

Allison Kirkby
President & CEO

In Comments by the President & CEO, all growth rates disclosed are based on the like for like definition and EBITDA refers to adjusted EBITDA, unless otherwise stated. See definitions for more information.

This information is information that Telia Company AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 07.00 CET on October 21, 2020.

For more information, please contact our press office +46 771 77 58 30, visit our Newsroom (http://www.teliacompany.com/sv/nyhetsrum/) or follow us on Twitter @Teliacompany (https://twitter.com/Teliacompany).

Forward-Looking Statements
Statements made in the press release 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 depend on circumstances that will occur in the future. There can be no assurance that actual results will not differ materially from those expressed or implied by these forward-looking statements due to many factors, many of which are outside the control of Telia Company.  
 

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