Telia Company Interim report January-September 2018

BETTER EARNINGS MOMENTUM
     
Third quarter summary

• Net sales in local currencies, excluding acquisitions and disposals rose 0.1 percent. In reported currency, net sales rose 5.5 percent to SEK 20,685 million (19,614). Service revenues in local currencies, excluding acquisitions and disposals, declined 1.9 percent.
• Adjusted EBITDA rose 1.8 percent in local currencies, excluding acquisitions and disposals. In reported currency, adjusted EBITDA rose 6.4 percent to SEK 6,977 million (6,556). The adjusted EBITDA margin rose to 33.7 percent (33.4).
• Adjusted operating income rose 5.3 percent to SEK 3,964 million (3,763).
• Total net income amounted to SEK 3,026 million (2,585). Total net income attributable to the owners of the parent was SEK 2,825 million (2,310).
• Free cash flow from continuing and discontinued operations was SEK 2,963 million (-1,281). Comparable figures were impacted by the payment related to the settlement regarding the Uzbekistan investigations. Operational free cash flow from continuing operations was SEK 2,569 million (2,808).
• The acquisition of Get and TDC Norway was completed on October 15.
• Outlook for adjusted EBITDA 2018 is revised up.

Nine months summary

• Net sales in local currencies, excluding acquisitions and disposals increased 0.5 percent. In reported currency, net sales increased 4.6 percent to SEK 61,351 million (58,627).
• Adjusted operating income rose 0.5 percent to SEK 11,153 million (11,102).
• Total net income amounted to SEK 4,670 million (9,438). Total net income attributable to the owners of the parent declined to SEK 4,275 million (8,913).
• Operational free cash flow from continuing operations was SEK 9,399 million (8,883).

Comments by Johan Dennelind, President & CEO
    
“Dear shareholders and Telia followers, the third quarter of 2018 gives us further comfort as our focus and dedication to deliver on our cost agenda and operational free cash flow ambition for the year is paying off. We are clearly on track to deliver the net cost reduction of SEK 1.1 billion that we have set out as a priority for the year. Our operational free cash flow continues to be strong, having generated SEK 10.2 billion over the last 12 months. Our adjusted EBITDA is growing in six out of seven countries, with Finland, Norway as well as our central units being the main drivers. The performance is a combination of strong execution of the cost ambition as well as delivering synergies and stronger propositions to customers from the acquisitions we have done in recent years.
     
In early October we obtained the approval on our acquisition of TDC Norway and Get. The transaction closed October 15, and I would like to take the opportunity to give a warm welcome to all the customers and staff to the Telia Company family. Together we create a strong convergent operator with a lot of attractive new products and services for both our consumer and enterprise customers. Regarding the Bonnier Broadcasting transaction, we are in dialogue with the EU Commission and aim to complete the merger filings around the end of the first quarter next year. The closing is therefore still expected for the second half of 2019.
    
Sweden had, as expected, a slower EBITDA quarter compared to previous quarters, partly explained by expected tougher comparisons, but also due to costs related to thunderstorms and negative currency effects. Even though we have reduced costs year-to-date in Sweden under the cost program, we are still not happy with the pace of the turn-around. We know there is clear large potential for improvements over the years to come. The new CEO in Sweden Anders Olsson has taken substantial steps in building a stronger commercial roadmap and improving the efficiency. Part of this will be executed already from January 1, as we go live with our updated operating model. Initially the new model will be implemented between our new unit Common Products and Services (under the Group COO Magnus Zetterberg) and Sweden. The new model includes Sweden's IT and product platforms and around 500 employees being moved into Common Products and Services. The other countries will follow at a later stage, adding further structural efficiencies. Since the transformation is delayed and the real significant benefits are to come in 2020 rather than as expected in 2019, part of the turn-around in Sweden is to tighten the execution of the transformation and also to improve cost efficiency in other areas.
    
In Finland we reported a mobile B2B growth of 7 percent adding some large wins in the quarter. Our position in this segment has been strengthened during recent years through acquisitions and it is very satisfying that we continue to deliver value from the acquisitions that we have made. Equally satisfying is that the Telia Helsinki Data Center has come out flying from the starting blocks having signed an important agreement with Nokia almost immediately after launch. The Finnish ice hockey league started its season in September. We have had a good start and see the asset as a key differentiator in the market. We see a clear opportunity to further capitalize on these rights.
    
Our team in Norway has shown excellent execution of the Phonero acquisition and at the same time shown cost control in a flattish market, which resulted in strong EBITDA growth. Our Baltic operations continue with their strong performance.
    
During the quarter we have launched a pre-commercial 5G network in the city center of Helsinki. Full scale commercial operations will be available in 2019 when we can utilize the spectrum acquired in the recent 3.5 GHz auction. This is in line with our 5G strategy to be early out in understanding what 5G will bring in terms of potential for our customers. We reiterate that 5G related investments will be limited before 2020 and thereafter gradually replace current 4G related investments.
    
Sustainability is key for our strategy and value creation. We strive to be a transparent, trusted partner for all our stakeholders. To further increase our transparency, we are now publishing the sustainability highlights alongside the quarterly financial reports. Log on to our website and read about Telia Company’s new human rights policy, our work with children’s rights and how we, so far, have engaged half of our employees to volunteer on various projects where digitalization is used to improve lives in our society.
    
Today our shares will open trading excluding the second part of the 2017 dividend of SEK 1.15, to be distributed in a few days. As of last week, we have bought back shares for SEK 2.7 billion under our current buy-back program. We remain committed to our capital allocation ambitions and balance sheet targets.
    
No doubt comparisons will continue to be tough in the fourth quarter, especially in Sweden. Still, given the performance so far, with adjusted EBITDA having grown by 4 percent excluding currency effects, we up our full year EBITDA guidance from “in line or slightly above the 2017 level” to “slightly above the 2017 level”. The outlook for operational free cash flow being above SEK 9.7 billion is left unchanged. Finally, I want to thank my team for a solid delivery in the quarter.”
    
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 October 19, 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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