Year-end Report January-December 2001

Year-end Report January-December 2001 Telia ab (publ), 123 86 Farsta, Corp. Reg. No. 556103-4249, Registered office: Stockholm The Year in Brief · Consolidated net sales increased 6% to msek 57,196 (54,064) - Core business +13%, comparable units + 8% · Underlying ebitda was msek 12,915 (13,087) - Core business +10 % · Income after financial items amounted to msek 4,808 (11,717) · Assets in Telia International Carrier written down by msek 3,027 in light of prevailing market conditions · Closing down of non-core operations completed · Sharp focus on development and rationalization of core operations · Review of Group Earnings Oct-Dec Oct-Dec Full year Full year msek 2001 2000 2001 2000 Net sales 14,970 14,540 57,196 54,064 Change in net sales (%) 3.0 -2.3 5.8 3.7 Underlying ebitda 3,133 3,790 12,915 13,087 Underlying ebitda margin (%) 20.9 26.1 22.6 24.2 Operating income 916 7,930 5,460 12,006 Income after financial items 906 7,658 4,808 11,717 Net income -572 7,408 1,869 10,278 Earnings per share (sek) -0.19 2.47 0.62 3.50 Investments 5,157 10,311 20,735 47,742 of which capex 4,849 7,185 17,713 16,580 of which acquisitions 308 3,126 3,022 31,162 Comments from Marianne Nivert, President and CEO - Telia has had solid growth in core operations during the year and improved the margins in Mobile, Networks and Internet Services. The extensive divestitures and turbulence on the international carrier market led to weaker underlying ebitda in 2001 compared with the preceding year. - It is satisfying, however, that International Carrier showed strong growth despite the turbulence and that the negative earnings trend was halted towards the end of the year. Underlying ebitda increased in our core operations as a whole. - Trends were weaker in the fourth quarter than for the full year. This was mainly due to the impact of the generally weaker economy, but also to non-recurring costs related to the strong pressure to change we are experiencing in core operations. - The winding up of non-core operations is now essentially complete and we are concentrating our efforts on developing and rationalizing our core businesses. Group Review Sales and Earnings Full Year Net sales for the Telia Group increased 6 percent to msek 57,196 (54,064) during the year, while underlying ebitda declined 1 percent to msek 12,915 (13,087). Group sales and earnings were affected by the divestiture of non-core operations carried out as part of Telia's refine and focus efforts. External net sales in core business rose 13 percent and underlying ebitda increased 10 percent. The increases for comparable units were 8 and 5 percent, respectively. Net Sales per Business Area 1) Oct-Dec Oct-Dec Full year Full year 2001 Chg 2000 2001 Chg 2000 MSEK % MSEK MSEK % MSEK Mobile 4,350 17.7 3,695 16,407 32.7 12,365 Internet Services 963 36.6 705 3,288 31.5 2,501 International Carrier 1,001 7.4 932 3,549 19.7 2,966 Networks 8,076 4.4 7,735 30,716 2.5 29,963 Retail market 6,685 -3.3 6,915 26,304 -2.5 26,975 Wholesale market 1,391 69.6 820 4,412 47.7 2,988 Equity 543 -61.9 1,427 3,068 -49.3 6,057 Group-wide 37 19.6 46 168 -20.8 212 Total 14,970 3.0 14,540 57,196 5.8 54,064 of which core business 14,427 10.0 13,113 54,128 12.8 48,007 1) For further information: www.telia.com, Investor Relations, Financial Information, External Net Sales per Business Area and Product Segment (specification). Net sales for Telia Mobile climbed 33 percent to msek 16,407, with an increase of 19 percent for comparable units. The Nordic customer base grew by 417,000 during the year to 4,936,000. The margin strengthened from 23 to 27 percent. Demand for Internet access remained strong for Telia Internet Services, particularly broadband, for which sales took off in earnest during the year. Net sales for Telia Internet Services increased 31 percent to msek 3,288 and earnings improved. Telia delivered 263,000 broadband connections during the year, including 40,000 to operators and service providers outside the Group. Despite the turbulence and uncertainty that characterized the carrier market, net sales for Telia International Carrier climbed 20 percent during the year. Substantial investments were made to complete the network and establish an efficient sales organization. The build-up phase has essentially come to an end, as did the negative earnings trend, toward the end of the year. Higher demand for value-added services and wholesale products kept revenues stable within Telia Networks, despite a decline in traffic revenues in the Swedish retail market. The margin increased from 29 to 33 percent. Underlying ebitda for Group-wide improved by msek 398 to msek 1,226. Underlying ebitda and Operating Income Oct-Dec Oct-Dec Full year Full year MSEK 2001 2000 2001 2000 Mobile 1,104 1,136 4,812 3,396 Internet Services -223 -280 -970 -1,201 International Carrier -381 -245 -1,562 -423 Networks 2,936 3,242 11,603 11,404 Equity 108 550 258 1,535 Group-wide -411 -613 -1,226 -1,624 Total underlying ebitda 3,133 3,790 12,915 13,087 of which core business 3,025 3,240 12,657 11,552 Depreciation and write-downs -6,285 -2,427 -13,975 -8,222 Non-recurring items and pensions 322 6,937 384 8,338 Share of earnings in associates 3,746 -370 6,136 -1,197 Operating income 916 7,930 5,460 12,006 Depreciation and write-downs increased to msek 13,975 (8,222). Depreciation rose mainly due to broadband expansion and capacity reinforcement of fixed networks in Sweden, expansion of the carrier network, and the full-year effect of amortization of goodwill from the acquisition of NetCom. In light of prevailing market conditions, the book asset value in Telia International Carrier was written down by msek 3,027. Non-recurring items declined to msek 384 from msek 8,338. Capital gains from divested operations boosted earnings, while provisions for winding up the satellite business reduced earnings by msek -500. Non-recurring items in the preceding year referred mainly to the IPO of Eniro. Earnings from Associated Companies Oct-Dec Oct-Dec Full year Full year MSEK 2001 2000 2001 2000 Baltic states (Mobile/Networks) 70 42 195 190 Netia (Networks) -21 -47 -2,464 -411 Comsource/Eircom (Networks) 1,179 -133 126 -933 Unisource/aucs (Equity) -266 199 -372 1,445 Telia Overseas (Equity) 139 -632 2,794 -1,719 Eniro (Equity) 2,629 185 6,052 185 Other associated companies 16 16 -195 46 Total 3,746 -370 6,136 -1,197 Earnings from associated companies rose to msek 6,136 (-1,197). The improved performance is attributable to capital gains from divested companies and also because some of the divested companies previously reported deficits. The Group as a whole is reporting operating income for 2001 of msek 5,460 (12,006) and net income of msek 1,869 (10,278). About 25 more businesses were divested during the year and the refine and focus efforts are now essentially complete. Construction, installation, and support services have been outsourced, creating opportunities to adjust costs to economic and market fluctuations. The refine and focus program begun in fall 2000 has reduced the total number of employees by 15,000 and strengthened the Group financially. Fourth Quarter Growth tapered off somewhat in the fourth quarter. Sales increased 10 percent in core operations and 7 percent for comparable units. Underlying ebitda was down 7 percent compared with the corresponding quarter in the preceding year. The decline is attributable to the flagging economy and to earnings at the underlying ebitda level encumbered by non-recurring costs of approximately msek 300 related to the change program. Change Program Launched Following the streamlining of the Group, focus is now exclusively on core operations. The development of attractive offers for different customer groups is being intensified and a comprehensive change program is underway to rationalize our core businesses: " All development projects in the Group are being reviewed. Overlapping and less urgent projects are being discontinued. " The new Group structure implemented April 1, 2001 is yielding opportunities for continued rationalization of the sales organization via concentration of customer service by telephone to fewer cities, closure of unprofitable stores, and the introduction of electronic self- service channels for high-volume products and standard services. " Rationalization of the delivery process from order to final report aimed at lowering costs and enhancing delivery reliability. " Reduction of the Telia Networks product portfolio through elimination of less profitable products. Concentration of service development within Telia Internet Services to communications-related services. " Coordination of network development, service development, and production at the Nordic level within Telia Mobile aimed at creating synergies and economies of scale. Revamping of sales efforts in local markets. " Focus on sales and production in the international carrier operations. " Concentration of Telia's operations in Sweden to fewer locations. Co-location in each city to achieve efficient use of premises and technical equipment. To handle issues of workforce redundancy arising from the streamlining of our core businesses, Telia's established Group-wide transition unit will be reinforced. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2002/02/08/20020208BIT00090/bit0001.doc http://www.waymaker.net/bitonline/2002/02/08/20020208BIT00090/bit0001.pdf