Telia Company Interim report January-March 2019

STABLE CASH FLOW

First quarter summary

• The new lease accounting principles, IFRS 16, have had significant effects on the financial statements for 2019. Comparative information for 2018 has not been restated. See below and Note 1.
• Net sales like for like regarding exchange rates, acquisitions and disposals, decreased 3.0 percent. In reported currency, net sales rose 5.0 percent to SEK 20,847 million (19,852). Service revenues like for like regarding exchange rates, acquisitions and disposals, decreased 2.6 percent.
• Adjusted EBITDA rose 15.0 percent in reported currency to SEK 7,468 million (6,495). Like for like regarding exchange rates, acquisitions and disposals, adjusted EBITDA rose 5.8 percent. Excluding the positive impact from IFRS 16, adjusted EBITDA, like for like regarding exchange rates, acquisitions and disposals, fell 4 percent. The adjusted EBITDA margin increased to 35.8 percent (32.7). The target of reducing operational expenses on group-level in 2019 by 2 percent is reiterated. In the first quarter these costs increased 1 percent.
• Adjusted operating income fell 2.8 percent to SEK 3,486 million (3,588).
• Total net income rose to SEK 1,799 million (-600). Total net income attributable to owners of the parent rose to SEK 1,793 million (-710).
• Free cash flow from continuing and discontinued operations fell to SEK 2,057 million (4,383). Operational free cash flow from continuing operations rose to SEK 4,409 million (4,256). Total cash flow amounted to SEK 1,936 million (9,012).
• Outlook 2019 is reiterated.
    

Comments by Johan Dennelind, President & CEO
 
“Dear shareholders and Telia followers, as we said already in connection to the fourth quarter report 2018 and at our Capital Markets Day in March, we expected a soft start to 2019. This is also shown in the first quarter performance, but we see no reason to change our view that a slower earnings trend in the first half of 2019 will be followed by a stronger second half. The improving trends through the year is expected to be supported by effects from price increases implemented as of April 1, 2019, impact from already signed contract wins, cost reduction measures and gradual increased execution of synergies both in Norway from the Get acquisition and from the new operating model.
  
Our prime focus continues to be to increase the operational free cash flow and I am pleased to see a SEK 0.2 billion growth from the first quarter of 2018. This is driven by EBITDA and working capital. Service reve-nues on group level, like for like, declined 3 percent, with mobile service revenues declining 2 percent. Like for like, adjusted EBITDA declined 4 percent (excluding IFRS 16 impact), which is slightly better than we saw, based on January and February trading. The operational expenses grew 1 percent, but we reiterate that these costs will be reduced by 2 percent on a net basis for 2019.
 
The Swedish operation saw, as expected, a continuous decline in the legacy business. Previous quarters the legacy decline has been mitigated by growth in core services. This mitigation was lower this quarter, especially due to weaker mobile service revenues. The target to reduce the Swedish operational expenses by 3 percent in 2019 is reiterated. The cost level was flat in the first quarter. All in all, EBITDA declined 6 percent like for like (excluding IFRS 16 impact).
  
In Norway we have seen a declining mobile customer base for some time now, which is the main reason for the mobile service revenue decline. Get is now fully integrated, the TDC brand is closed and customers were moved to Telia. In connection to the Capital Markets Day in Stockholm on March 26, 2019, we an-nounced an increase in the full run-rate of cash flow synergies from NOK 700 million to NOK 800 million. As planned, the synergy realization was limited in the first quarter of 2019 but will accelerate coming quarters.
  
The Finnish mobile service revenue growth is lower than previous quarters, to a large extent driven by inter-connect rate cuts. We have seen a strong order intake in the end of 2018 and beginning of 2019 which will have a positive effect on service revenue growth later in 2019.
  
Speaking of contract wins we have during the quarter taken yet another narrowband IoT deal, this time including 900,000 units with an electricity distribution customer. This is a proof point that we are highly competitive in the IoT market which we see as an important revenue driver in years to come.
 
In the quarter Sweden was enrolled into the new operating model which will increase focus on commercial execution, improved scale benefits with intended cost reductions. It is encouraging that we already in the first quarter have been able to reduce the external costs within Common Product and Services, which leads the efficiency streams across our markets stemming from the new operating model. In addition, Norway and Finland will be included in the new operating model later in 2019, which will further add efficiency gains.
  
We believe that it will be a prerequisite from both customers, employees and a stakeholder perspective that we have an ambitious environmental agenda. As such by year 2030, Telia Company targets to have zero waste, zero emissions throughout our value chain and a full employee engagement. It is a big bet and a bold move, but not only do we see that we can make an impact on the climate, we also see business opportunities.
  
You can find more details on this as well as our overall integrated sustainability efforts in our annual and sustainability report.
  
The Annual general meeting held on April 10, 2019, approved the proposal from the board of a SEK 2.36 dividend per share (of which the first part was distributed in April) and gave a mandate for additional share buybacks. We have initiated the 2019 program aiming to buy back shares for SEK 5 billion until February 28, 2020. This implicitly leaves the total shareholder remuneration to SEK 3.55 per share.
  
The outlook of an operational free cash flow of SEK 12.0 to 12.5 billion in 2019 is reiterated. Albeit a slow start on service revenues and EBITDA we are convinced that the measures and steps we have taken to turn the trends will materialize in order to continue to create shareholder value.”
  
Johan Dennelind, President & 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 25, 2019.
  
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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