Telia Company Interim report January-March 2018

STRONG EBITDA AND CASH FLOW GROWTH

First quarter summary

• Net sales in local currencies, excluding acquisitions and disposals, increased 0.2 percent. In reported currency, net sales rose 3.2 percent to SEK 19,852 million (19,227). Service revenues in local currencies, excluding acquisitions and disposals, decreased 0.9 percent.
• Adjusted EBITDA rose 4.2 percent in local currencies, excluding acquisitions and disposals. In reported currency, adjusted EBITDA rose 7.4 percent to SEK 6,495 million (6,049) due to organic growth, positive net impact from acquisitions and disposals and foreign exchange rate impact. The adjusted EBITDA margin improved to 32.7 percent (31.5).
• Adjusted operating income fell 3.2 percent to SEK 3,588 million (3,706).
• Total net income fell to SEK -600 million (7,054) mainly due to the disposals of Azercell and Geocell (resulting in capital losses and lower net income contribution), and an impairment charge related to Ucell. The devaluation in Uzbekistan in the third quarter of 2017 had also a negative impact in the first quarter of 2018, while the first quarter of 2017 included a positive effect from the adjustment of the provision regarding the Uzbekistan investigations. These also affected Total net income attributable to the owners of the parent that fell to SEK -710 million (6,894).
• Free cash flow in continuing and discontinued operations rose to SEK 4,383 million (4,087). Operational free cash flow in continuing operations increased to SEK 4,256 million (3,937).
• The Board of Directors has decided to initiate a share buyback program. The ambition is to buy back shares for an annual amount of SEK 5 billion over the coming three year period. The reason is to return excess cash to shareholders and is a continued effort to optimize the capital structure of the company.
• Outlook for 2018 is revised.

Comments by Johan Dennelind, President & CEO
 
“Dear shareholders and Telia followers, I am pleased to report that the start of 2018 has been encouraging with strong operational free cash flow generation of SEK 4.3 billion and a 7 percent reported EBITDA growth versus last year. Together with the recent Turkcell dividend decision and Spotify divestment, this is strengthening our balance sheet even further.
 
The Board of Directors has decided to utilize its repurchase mandate given at the recent annual general meeting with the aim to buy back shares equivalent to SEK 5 billion per annum over the coming three year period i.e. in total SEK 15 billion. The rationale is to return excess cash to shareholders and to optimize the capital structure of the company. Combining this with the ordinary dividend policy we believe that we will be offering an attractive total return to our shareholders. In addition, we will still have room to execute disciplined value creative M&A within our Nordic and Baltic strategy.
 
The financial performance in the first quarter of 2018 is strong with further cash flow growth, driven by EBITDA, working capital and cash CAPEX reductions. The service revenue development in Sweden improved, mainly from the mobile consumer segment and a slower deterioration in the enterprise segment. In Finland, service revenues saw a continuous positive contribution from mobile, especially the enterprise segment that has turned the corner. During the summer, our Helsinki data center will open adding further services to our customers and we will start to see the effects of the recently acquired ice hockey rights early autumn. In Norway, the Phonero customers have been successfully migrated and we are leveraging on the synergies, in the quarter approximately SEK 100 million, resulting in a double-digit EBITDA growth. The development in the Baltics continues to be encouraging and a reshaped mobile portfolio in Denmark shows early positive signs. On the 2018 ambition to reduce costs we have completed savings of around SEK 0.2 billion during the first quarter, equivalent to around 20 percent of the total program ambition. This is well in line with our plans and the target of SEK 1.1 billion in net cost reduction for 2018 stands firm.
 
The reshaping of Telia Company continues with further, responsible I want to add, disposals of our Eurasian assets Azercell and Geocell. We have also divested our holding in Spotify, which generated a return of 2.4 times the original investment. We have together with our co-owners in Turkcell Holding agreed on a Turkcell dividend that will bring around SEK 0.9 billion to Telia Company during 2018. In addition, we now also have a seat at the Turkcell board, which is a step forward in restoring ordinary corporate governance.
 
In our annual and sustainability report, we have published our responsible business goals, the progress of the work we do to address the UN Sustainability Development Goals and describe Younite, our employee engagement program.
 
Looking at the remainder of 2018 we have a lot to look forward to and deliver upon. We continue to execute the transformation in Sweden and other markets, which is still holding back our full potential of our customer experience and efficiency agenda. We are tracking our plans and not faltering from our dedication to complete the transformation journey. This journey will be completed to deliver a future proof digital leader – a New Generation Telco. We are also reiterating our EBITDA guidance whilst we slightly change our cash flow guidance, where we now see that we will be above last year’s level (previously “around”).”
 
Johan Dennelind, President and CEO
 
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 April 20, 2018.
 
For more information, please contact our press office +46 771 77 58 30, visit our Newsroom or follow us on Twitter @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.
 
 
We’re Telia Company, the New Generation Telco. Our approximately 20,000 talented colleagues serve millions of customers every day in one of the world’s most connected regions. With a strong connectivity base, we’re the hub in the digital ecosystem, empowering people, companies and societies to stay in touch with everything that matters 24/7/365 - on their terms. Headquartered in Stockholm, the heart of innovation and technology, we’re set to change the industry and bring the world even closer for our customers. Read more at www.teliacompany.com.

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