Annual and Sustainability Report 2011
Teracom Group
• The Teracom Group offers a wide range of communication solutions for radio and TV.
The main product areas are Pay-TV, radio and TV broadcasting, transmision capacity
services, co-location and service.
• T he Teracom Group consists of Teracom Sweden, Boxer Sweden, Teracom Denmark,
Boxer Denmark and PlusTV in Finland.
• T he Group has a total of more than 1 million Pay-TV-customers.
vision
We deliver the best viewing and listening experience, characterized by personality,
portability, simplicity and reliability.
mission
The Teracom Group offers TV and radio via terrestrial networks along with supporting
Telecom services.
group objectives
Revenue:
EBIT margin:
Customer:
Employee:
Environmental: ≥ 5% yearly growth
≥ 2 percentage points annual improvement
Most satisfied customers of our industry
Highly motivated and dedicated employees
Yearly decrease in environmental impact
key ratios
Income
2011
2010
2009
2008
2007
4 059
3 852
3 408
2 991
3 312
Operating profit/loss
376
293
496
635
625
Operating margin, %
9
8
15
21
19
168
201
269
460
470
10
12
16
26
26
Net income
Return on equity, %
32
31
40
44
48
Dividends to owners
Equity ratio, %
110*
110
110
150
400
Average number of employees
707
707
638
669
674
* The Board of Directors' proposed dividend
This is a translation of the original Swedish annual report. in the event of differences between the english translation and the Swedish original,
the Swedish annual report shall prevail.
Read more about the
Swedish business on page 14
Read more about the
Danish business on page 20
Read more about the
Finnish business on page 24
The Teracom Group owns and operates digital
terrestrial networks with Pay-TV services in
three markets. Our core business also includes
broadcasting of national and local radio.
By having a presence along the entire value
chain, from broadcast stations to TV viewers and
their Pay-TV subscriptions, we can strengthen
both our own business and the business of
the broadcasters. We create opportunities
for broadcasters to reach their audience, for
viewers and listeners to easily have access to
their content, while creating public benefit by
deploying a multitude of different channels
from many independent broadcasters.
An integrated TV business 2-3 Important events 2011 4–5 A TV-centric business strategy 6–11 Sweden 14-19 Denmark
20-23 Finland 24-27 The Teracom Group’s sustainability efforts 30 Environmental impact 31-33 Employees 34-35
Media plurality requires a long-term perspective 36-37 GRI G3 Index 40-41 Financials 42-93 Definitions 96
Production: Teracom Group and Åkesson & Curry AB in cooperation with Waldton Design. Printing: Göteborgstryckeriet. Photos: Pernille Tofte, pages 2, 15, 21, 25.
Dawid, pages 56-57 (excl. Steffen Weber photo of Gitte Falkenberg). Mats Lundqvist, page 9, 11, 13, 34, 35, 37. Kurt Jørgensen, page 10. Stefan Berg, page 14, 28,
29, 42, 94-95. Perikles Ladopoulos , page 17. Jens Ove Kristensen, page 22. Fabrice Dell´Anese/Corbis Outline/Scanpix, page 26. Bertil Strandell, page 31. Bo Pettersson, page 35. TV screen images: Jens Ohlsson/Scanpix, page 15. Murray Cooper/GettyImages/All Over Press, page 21. Reinhard Dirscherl/Getty­Images page 25.
1
An integrated TV business
There are three things that I believe deserve special attention: In
Denmark customers are beginning to pour in, we are continuing
to work hard to increase the number of Pay-TV customers in
Finland and we are integrating our TV business in Sweden and
Denmark, the countries where we have both network and PayTV companies. Today we have a total of more than one million
customers, a solid foundation for continued development.
W
ith a fully integrated corporate strategy, we are increasing our competitiveness. We need to launch our products faster on all markets, at the
same time as we continue to streamline the Group and take advantage of
all conceivable synergies. We have formed a completely new product development
organization, which will be a Group function and service all of the companies. We
have decided to further integrate our sustainability efforts in our business and set
higher environmental standards for all of our companies.
2
Denmark has been and continues to be the Group's major
growth business where we have invested heavily to build a
stable customer base of Pay-TV customers. Growth began to take
off during the summer of 2010 and in the second half of 2011
customers were pouring in. We are experiencing the same phenomenon as when we started Boxer in Sweden – slow growth at
first, then an explosion. Through attractive pricing and packaging
combined with clever marketing, we managed after a few years
to become the largest digital Pay-TV operator in Sweden. I am
convinced that we will achieve the same result in Denmark.
Through the acquisition of BSD, which we renamed
Teracom A/S in January, we now have both network and
Pay-TV operations in Denmark and can begin to develop the
business in a significantly simpler way than if we only owned
the one company. As a concrete example, we were able to
quickly draw up a larger-scale plan for the spring 2012 introduction of HDTV with the new DVB-T2 broadcasting technology. Part of the network will switch completely to DVB-T2, at
the same time as we increase the efficiency of the rest of the
network by investing in new equipment.
We successfully introduced HDTV in Sweden following
exactly the same strategy. By upgrading our terrestrial network
to modern technology over time, we can offer more and better
services. The long-term plan, is to completely transfer to the
new DVB-T2 technology, and to switch off DVB-T, but this must
be done in a commercially viable way, and must benefit both
broadcasters and viewers. Such a transition requires far-reaching commercial consensus between the network and Pay-TV
operators, as well as a synchronization of the companies'
long-term and short-term plans.
A seamless value chain
An integrated business, like we have in Sweden and Denmark,
provides a seamless value chain in our business. Between
encoders in the broadcast station and the service organization,
through quality assurance of boxes, packaging of TV channels,
marketing and the store where Pay-TV subscriptions are sold to
individual viewers. We are a Group that work as if we were a
single company. Through integration, we take full responsibility
for our infrastructure and our services, that the broadcasters’
content reaches out, for the experience of viewers and for the
public benefit provided by the terrestrial networks. The terrestrial networks are crucial for ensuring that, in the long-term, a
platform is available where countries can guarantee a variety of
TV channels for most tastes and from many independent broadcasters. Our integration aims to increase the competitiveness of
the terrestrial networks so they can continue to contribute to a
comprehensive freedom of speech and communication. This is
the most central part of our sustainability work; a direct relationship can be found between the business challenges we face
and our contribution to society.
The terrestrial networks have room for many high-­
quality channels
Broadcast is a superior method for transmission to an infinite number of receivers. The terrestrial networks specialize
in broadcast and we will develop our business based on
broadcast. The great advantage of the transition to DVB-T2 is
that we can eventually change over all channels to HDTV, the
video standard that is designed for TV screens larger than 40
inches. Another major advantage of our terrestrial networks
is the ability to regionalize channels, to broadcast regionally
adapted versions of a channel from different masts. Sveriges
Television has been using this technology for regional news
for a long time. The commercial channels use their regional
versions to send advertising to a specific area that is of high
commercial interest. In 2011 we signed agreements for 2012
that allow us to broadcast 168 versions of eight channels in
both high definition and standard formats. We would like to
continue with this development and we believe that, within
a few years, 500 HDTV channels will be broadcast in different
versions, all over the country, but broken down by region.
The flexibility of the terrestrial network is its great
strength; we will develop that strength because it will make
a major difference when HDTV is all that is marketable, when
all broadcasters will demand regional breakdown and when
the broadband networks are bottlenecked by the growing
video streams over the open Internet.
Supplementary services
We have supplemented the linear selection of On Demand services
with Boxer Sweden's launch of Boxer On Demand last fall.
Our new product department is now working with the next
generation of recording boxes, which offer new opportunities
for customers to watch what they want, when they want. The
Boxer box of the future takes maximum advantage of the terrestrial network’s ability to transmit all channels simultaneously,
and has a connection to the Internet for On Demand and Play
services. It has a large hard drive, many receivers that simultaneously record several channels and endless opportunities
for customers to sort the content by personal preference. This
is how we see our future – our terrestrial network delivers the
primary service, linear broadcast TV, while the additional services
are delivered via the Internet. Broadcast is what we know, linear
TV is what our customers want, that is our role and our future.
Broadcast TV also plays another important role in addition
to being a good commercial business. Broadcast television
in every country, all over the world, is the most important
common arena for public debate. »We have all seen the disturbing pictures on TV,« said President Barack Obama, for example,
when commenting on NATO’s upcoming intervention in Libya in
the spring of 2011. That's what television is – a mass medium
with well-known broadcasters that have earned the trust of the
audience. That’s where the important things happen. The broadcasters’ brands and the trust they signal is a key component of
our business. With our talented employees and our investments,
I know that our TV business is long-term and highly competitive.
CRISTER Fritzson
President and CEO of the Teracom Group
3
Important events 2011
TV
Expansion of HDTV in the Swedish terrestrial network continued during the
year. At year-end 2011/2012, 93 percent
of households had access to eight HD
channels, including Kanal 5 HD, TV3 HD
and TV4 HD, which all began broadcasting during the first quarter.
In early April, 3D TV was tested for
the first time in a Nordic terrestrial
network when Canal+ broadcast the
AIK-Djurgården soccer derby.
During the year a number of new
agreements were signed with several
major broadcasters about broadcasting
commercials and programs in different
geographic regions via the Swedish
terrestrial network. The services were
launched in February 2012.
In February, PlusTV launched a new
flexible packaging structure with
attractive price points. During the fall
additional cards were introduced as
part of the offering.
In March, Danish Boxer developed its
offering with up to four additional
cards as part of the basic subscription. The previously free TV channel
TV 2, which became a Pay-TV channel
in January 2012, was integrated into
different packages in December.
4
Radio
A decision was taken to begin HDTV
broadcast in Denmark in April 2012.
In November, Boxer in Denmark
reached 100,000 customers. In early
January, Boxer passed 200,000 customers and in February 2012 it reached a
record-high 300,000 customers.
On September 19, Boxer Sweden
launched a campaign for the Mix
package for SEK 129 a month, with no
regular fees.
In April, Boxer in Sweden lowered the
price of 8 Mbit/s broadband to SEK 199
per month, one of the lowest prices in
the market and about SEK 100 lower
than the offers Boxer's customers could
receive from the major telecommunications operators.
Boxer On Demand was launched
in Sweden, which provides Boxer
customers with access via a hybrid
box to Filmbutik with SF Anytime, Play
channels, and gaming and entertainment apps like Facebook, the Swedish
Meteorological and Hydrological
Institute and Twitter.
The Swedish Broadcasting Authority
announced in its »Strategy for licensing of commercial digital radio« that
it would allocate licenses for DAB+
for commercial radio during the year,
though the licensing process has been
delayed. According to the TV Broadcasting Authority, a call for applications will
take place in spring 2012 and the application period will be extended after
September 1, when the Public Service
Committee will submit a report.
On April 1 MTG Radio launched a new
radio channel in the FM network, Radio
1, the first commercial talk radio channel launched in Sweden.
In the digital pilot network for radio,
which Teracom Sweden operates, a
number of channels started broadcasting during the year, four from SBS,
one from Sveriges Radio and one from
MTG Radio.
Teracom Group
On 1 June, Teracom Group AB became
the Parent Company for the Group.
At the end of January the name of the
acquired company Broadcast Service
Danmark was changed to Teracom A/S.
Andrea Gisle Joosen began working on
8 August as the new President of Boxer
Sweden.
Steffen Weber, CFO, was appointed as
acting CEO for Teracom Denmark when
Finn Søndergaard stepped down on 8
November.
Sustainability
A decision was taken to integrate the
Group's sustainability issues into the
overall strategies moving forward.
The Group strengthened its environmental efforts by appointing new
environmental coordinators in all
companies. The work aims to help the
companies to carry out environmental activities to reduce their carbon
footprint and thus achieve the environmental target, which applies to all
companies within the Group in 2012.
Short wave and medium wave broadcast from the stations in southern
Sweden were discontinued during the
year. Some equipment was sold, while
other materials were handled under
our scrap and waste management
system. Teracom Sweden’s electricity
consumption decreased as a result of
the discontinued broadcast by about
3 percent.
A new mentoring program for junior
managers in the Teracom Group was
initiated during the year aiming at
further developing leadership and our
employees' skills.
In March, the Group launched Guiding
Stars, which managers and a dedicated
team of employees implemented during
the year. The employee survey showed
that 93 percent of the employees were
aware of the Guiding Stars program
and that a full 67 percent could identify
with them.
An internal review revealed that Boxer
Sweden and Boxer Denmark did not
meet expectations with regard to
packaging and electronic products.
Agreements for practical management
have been reached with the necessary
suppliers and new internal procedures
have been adopted.
Teracom Denmark, which was acquired
in 2010, is fully integrated in the
Sustainabilit­y Report. Teracom Group
AB has been reported in the statement
as a separate company since June 1;
before that, it was reported as an integrated part of Teracom, Sweden.
5
A TV-centric business strategy
The Teracom Group is facing intensified competition in the
Nordic market, which means that the Group needs to focus and
invest in developing its core business – TV and radio.
Viewing Patterns for linear TV in minutes
per day
210
157,5
105
52,5
0
2006
2007
2008
2009
DK
2010
FI
2011
SE
Source: TNS Gallup (DK), Finnpanel
(FI), MMS (SE)
Number of subscriptions for Teracom
Group
1200 in thousands
1000
800
600
400
200
0
2006
2007
Boxer DK
2008
2009
PlusTV
2010
2011
Boxer SE
Source: Teracom Group
Growth of
the Teracom Group
1992Teracom AB is formed from Televerket
(Swedish Telecommunications Administration)
1999 Boxer TV-Access AB is formed with
Teracom AB as 70 percent owner;
the remaining 30 percent stake is
purchased in 2008
2008 Boxer TV A/S is formed and receives
operator license for the upcoming
Danish digital TV network
2009 Teracom AB buys the majority stake in
DigiTV Plus Oy (Plus TV)
2010Teracom AB buys BSD, which is
renamed Teracom A/S
2011 Teracom Group AB is formed as a
Group company
6
Competition between TV operators has increased, especially since TV has become
the major broadband operators’ main service for attracting customers. Competition
among broadcasters is also increasing, culminating in increasingly spectacular and
interesting program ideas. TV holds its own not only as the largest mass medium,
but as the medium with the largest economic resources, and thus the ability to
attract talent for even more audience-pleasing program ideas.
The main thrust of the Group's strategy is to enhance the competitiveness of
the TV offering, create a strong Nordic presence to secure its market position in
the long-term, work smart and cost-effectively and increase the skills and leadership within the Group. Effectively integrating network and Pay-TV strengthens the
Group's position in the value chain.
The competitiveness of the offer will increase by offering customers a wider choice
in terms of both packaging and opportunities to watch TV whenever and however they
wish. The terrestrial network offers a number of competitive attributes to be developed:
• Watch scheduled TV programs whenever you want using smart recording
features
• Watch TV programs on any TV set in the home since the TV signal can be received
anywhere and affordable packages with extra cards for Pay-TV
• Watch TV programs on any TV set outside the home using more robust broadcast that reach more areas
• Watch TV programs on any device suitable for viewing TV by developing
receivers for tablets and similar screens as well as greater choice with more
flexible Pay-TV packaging
A mature market with rapid development
All broadcast platforms for television have been digital for a long time, although
cable distribution is essentially still analogue. IPTV via telephone and fiber networks
has also been introduced, particularly by the major national telecommunications
companies, which with their large financial muscles use television as a loss leader
service to sell broadband. TV-like services, especially movies, are also becoming
increasingly available online and it is becoming easier to integrate computer and
television equipment, two technology platforms that previously lived separate
lives in terms of image and connection standards, but that are now approaching
each other.
In Sweden, the Group worked hard during the year to broaden its service
offering after the analogue switch-off. Broadband, IP telephony, more channels
and new HDTV channels meant higher revenues per customer and new revenues
for the network. The result was a good profit level, but the departure of nearly
100,000 Pay-TV customers from Boxer could not be prevented. Therefore competitiveness needs to be further increased.
Having a presence mainly in the Nordic countries is necessary to create the
overall size and customer base required to be a priority platform and partner for
broadcasters and equipment manufacturers.
An integrated TV business
The Group's strategy and planning assume that the TV business is a completely integrated business - from the broadcast
station via the boxes out to the viewer, a viewer who is preferably a Pay-TV customer. This integrated business will be run
in a similar way in market after market and the reason is, of
course, that competition is growing and terrestrial networks
must therefore be developed. There are three reasons why
network and Pay-TV should sit together and expand into
more markets:
1.
Development of services and technologies requires
consensus and careful commercial coordination.
2.The various TV markets share many similarities and the
terrestrial networks function in much the same way,
so investments and lessons learned from one market
become far more valuable if they can be applied in other
markets.
3.A large general customer base is essential to achieve
sufficient bargaining power against suppliers and broadcasters.
The Swedish market is the most mature in the Teracom
Group and services developed – HDTV, broadband, IP telephony and set top boxes for Video On Demand – will obviously be launched in other markets. It is important to take
advantage of economies of scale in order to strengthen the
competitiveness of the terrestrial networks in a financially
sound way.
The terrestrial networks in which network and Pay-TV are
integrated will become more competitive, at least in small
countries with several competing means of distribution and
where advertising is not enough to finance the many free
TV channels. The Teracom Group currently has an integrated
business in both Sweden and Denmark, and the Group's aim
is to achieve full integration in all markets.
Strength in a dedicated broadcast platform
The terrestrial networks offer great opportunities for development and there is a considerable need to strengthen the
platform on both the network and service sides. In 2010
HDTV was launched in the Swedish network using the new
broadcasting standard DVB-T2, which radically optimizes
frequency utilization. This technology makes it possible over
time to completely switch to HDTV, which is becoming the
image standard for all TV sets. The reason of course is that
broadcast TV is competing with online video and image
quality is one of the great advantages of a dedicated broadcast platform. DVB-T2 can also be used for many more channels, or a mix of HDTV and new channels.
TV-like services can be accessed in an increasing number
of ways. Movies can be rented via broadband, broadcasters
offer on demand services that can be watched both live or
stored, while YouTube and similar sites offer an abundance of
videos from all over the world, many of them from television.
Boxer's new On Demand service is also based on delivery via
the customer's own broadband connection. All this underscores how traditional TV networks are challenged by more
and more TV-like services over broadband. The traditional TV
networks, which broadcast in one direction, offer a number
of advantages that may become crucial as online video use
increases:
• An infinite number of receivers can be reached in the
area covered by the broadcasts. Number of users does
not affect capacity, unlike broadband, where each new
user needs new capacity. This is crucial for live TV, an
extremely capacity-intensive service for which people
have little tolerance for delays.
• The broadcast transmission is paid for by the broadcaster,
which is either the program company or the Pay-TV operator. For the user, reception is free (of course customers
buy a subscription for Pay-TV services). Households
usually pay a fixed fee for broadband. This model does
not work as well if capacity requirements radically
increase from various media. Just who will pay for broadband services that demand more and more capacity is a
major issue in the telecom world. Regardless of where
the bill is sent, it has to be paid. This makes broadcast
networks appear to be significantly more cost-efficient.
• The new image standard will be HDTV, which requires
much more capacity than standard TV and will pose
major challenges for broadband networks and business
models.
Pay-TV
Services and technologies
introduced in the Group
Network
1995 Digital radio (DAB)
1999 Digital TV with DVB-T/MPEG2
2007 Boxer TV navigator
2008 Digital TV with DVB-T/MPEG4
2009Broadband
IP telephony
DAB+
2010 HDTV with DVB-T2/MPEG4
Regional versions of national TV
channels
2011Video-on-demand
TV
RADIO
TELECOM
The Teracom Group’s strategy is based on the premise that the TV business is a completely cohesive business.
7
How the Teracom Group meets
the competition in the TV
market
Price
• Strengthen the perception of »price leader«
• Maintain high standards of quality and
customer service
Simplicity
• Products are user-friendly in all respects
• Easy to understand, find, choose and buy
• Easy to install
Contents
• Large and medium-sized channels with
highest audience share (SD and HDTV)
• Add Video On Demand
• An attractive selection of premium channels (sports) and niche channels
TIME SHIFT
Thus, broadband will not be the obvious future platform for TV broadcast, and the
Group's digital terrestrial networks will continue to be one of the most important
TV platforms. However, intensive business development and major investments are
crucial and therefore the Group will completely focus on digital TV alongside with
radio broadcast. Other business should be viewed as a complement that is offered
to the extent it supports or is supported by the TV business. Such business will not
represent new legs to stand on, but rather will offered because the infrastructure
or other prerequisites already exist for the TV business and can easily be used for
a new application.
Radio
The origin of the Group is in radio. Regular radio broadcasts to a wide audience
began in 1921 in Sweden and 1922 in Denmark. Since the 1960s, the Group broadcasts on the FM band, which allows quite a few channels with good reception essentially everywhere and excellent sound quality. FM receivers are everywhere – in music
systems, mobile phones, cars, safety helmets and anywhere that people want sound.
Digital radio has been available in both Sweden and Denmark for several years.
However, the FM band is full. It is virtually impossible to make room for more
channels, especially for additional channels that broadcast nationwide, which is still
of greatest interest to broadcasters. So digital radio is essential if the medium of
radio is to be developed with new actors and new program formats.
In Sweden, the Swedish Broadcasting Authority was commissioned by the government to announce licensing of commercial digital radio. Meanwhile, a public
service inquiry was commissioned to investigate Sveriges Radio’s future DAB operations until the fall of 2012. To coordinate these two processes, the Broadcasting
Authority has decided to wait with commercial licensing until spring 2012. It is a
good decision because experience from other countries shows that it is crucial for
all broadcasters to jointly address the radio issue.
The Group's strategy is to develop its own platforms and includes not only the
introduction of new technologies, but switching to the new technology and subsequently abandoning the old technology. The Group is working hard to encourage
broadcasters and government agencies to invest in a nationwide expansion of
MULTI SCREEN
MULTI ROOM
You watch your programs on
the receiver of your choice –
on a tablet or other portable
screen.
You can conveniently and
affordably watch all of your
channels from a TV in any
room.
You watch your programs
when you want because the
box records and sorts the
programs for you.
PLACE SHIFT
FLEXIBILTY
Simpler packaging where you
can put together packages of
your favorite channels.
8
You watch your programs
wherever you want – on the
TV in the summer cottage, or
somewhere else.
digital radio and, in connection with this expansion, to decide when and how to
switch off FM broadcasts. The strategy distinguishes between launching new technology and shifting to new technology. A launch means that radio listeners or TV
viewers get more services if they get new receivers, but if they only want the old
services, they can keep their old receivers. A transition means that the old technology is switched off, so new receivers are required to listen to, or watch, both old
and new services. A transition is both commercially and politically risky and must
be planned and closely coordinated.
Transition to digital radio
A transition to digital radio in itself is not unusual. Over a period of a few years
in the 1960s the radio broadcasters switched from the AM band to the FM band
currently in use. In TV, analogue transmissions were switched off after a period of
parallel transmission with digital TV. The key to a successful transition is that the
services provided by the new technology must offer users more than they get with
the old technology. It is therefore important that program companies not only
parallel broadcast their traditional services, but actually invest in new services to
attract both old and new listeners so that a transition will be commercially viable
for them. If broadcasters invest in new technology, a transition is also inevitable
because long parallel transmission is not economically justifiable.
The technology that the Group has been working with for a long time is DAB+,
a development of DAB that allows very efficient frequency utilization and thus
many more radio channels and other services across the country. Denmark has
an extensive DAB network and the Group is carefully studying the possibilities of
launching DAB+ so that it eventually replaces FM.
With current regulation in Sweden and Denmark it is not at all obvious who
would get the contract to build and operate the DAB networks. A nationwide infrastructure for radio and television, extensive experience and a focus on broadcast
services all represent a great advantage for the Group. Analyses show that
analogue radio, like TV, cannot compete in the long run with all the other ways to
enjoy audio and video services and therefore must be digitized. DAB+ will accommodate many more program services with national coverage and a host of new
services. When DAB+ penetrates the market, just like FM, there will be hundreds of
millions of receivers in our Nordic markets.
Co-location and service
In Sweden and Denmark the Group has nationwide infrastructures of stations and
masts measuring from a few meters up to 330 meters. They include 78 tall masts,
54 in Sweden and 24 in Denmark. Besides the tall masts, there are hundreds of
smaller masts to reach areas not covered by the tall masts. The masts are attractive to all companies that need to transmit radio waves over long distances or that
otherwise want to place their equipment high up.
The strategy focuses on broadcast services, for which the major new investments are made. However, once the investments are made, it can be highly costeffective, both commercially and economically, to place as much equipment as
possible in the infrastructure. The Group's tall masts comprise a unique national
infrastructure built to reach as many people as efficiently as possible. Therefore
co-location and service are important complements to the Group’s core business,
which is radio and TV broadcasting.
Connection services
Teracom offers two products in the Connections business area: Wavelength and
Capacity. Both services involve offering customers the opportunity to transfer data
from one location to another via the Group's network. The Group currently has one
of Europe’s most modern wavelength networks and offers customers the opportunity to use 1, 2.5 or 10 Gbit/s in them. Since the Group has both fibre and radio links,
it can offer customers redundant paths and high availability. The fibre network, with
Average radio listening 2011
136
121
per person and day
minutes in Sweden
minutes in Denmark
Teracom Group on World DMB
Board of Directors
Per G. Borgå, product manager Radio
Teracom Group, was elected to the Board
of Directors of WorldDMB in 2011. This
responsibility is accompanied by the opportunity to influence digital radio strategies
internationally and gain greater insight into
newly established markets such as Germany
and Australia.
»It feels like the digital radio trend is
moving in the right direction, but of course
it could go faster. Being elected to the Board
is an honor and I hope to convert the experience into practice in our own market, now
that commercial radio will have the opportunity to start digital broadcasting,« says Per.
World DMB’s Steering Board (SB) consists
of 16 participants and carries the strategic
responsibility for the organization, which
includes purely operational issues and
financial management of World DMB.
9
Digital TV
Digital radio
FM radio,
Private local
radio
Co-locations:
GSM, 3G/4G
Co-locations:
Link
The Teracom Group’s nationwide infrastructure
is well suited for co-location of communication
equipment.
thousands of kilometers of cable extending from Kiruna in the north and Bornholm
in the south, is being continuously expanded to meet the needs of our customers.
The strategy includes utilizing our existing backbone for radio and TV and combining
it with other types of services.
Terrestrial networks have several stakeholders
Besides the Teracom Group, there are two very important parties that exercise
control over the terrestrial networks, with whom it is important to have close relationships. Governments and regulatory authorities regulate and control licensing
since the terrestrial networks play an important role in media policy. The Teracom
Group's influence is directly proportional to the ability to support the agreed
national media policy.
Licensing of broadcasting in the terrestrial networks follows a political
ambition to achieve a variety of program services for all tastes and many independent broadcasters. This ambition is ultimately about protecting the airwaves as
well-functioning platforms that are independent of special interests, an arena for
public discourse and thus for political democracy. For the Group to have a sustainable business in terrestrial networks, it is important to ensure that licensing works
in practice. And that means it must be commercially viable – for the Group and
especially for the broadcasters. Essentially, terrestrial networks should rest equally
on political and commercial considerations and must always be of benefit to both.
The terrestrial networks exist for the broadcasters and their program content
is the purpose of allocating spectrum for broadcasting. The role of the Teracom
Group is to enable broadcasters to reach many viewers on acceptable financial
terms. At the same time, it is important to establish that while the Group certainly
includes most of the value chain in TV, so far it has refrained from becoming
engaged in terms of ownership of program content. The reason, of course, is that
the Group’s role as a facilitator is based on equal treatment of all broadcasters.
This table summarizes the prioritized areas for the Teracom Group’s sustainability efforts.
Area
Incentive
Governance
Employees
Good working conditions and skills development
motivates employees to perform.
Work environment, gender, education, career,
employee reviews, salary statistics.
Suppliers
Ensure that the Group's suppliers meet required
sustainability standards.
Dialogue with existing and potential suppliers using the
Group's basis for supplier evaluation.
Development and technical maintenance of the
terrestrial network are essential for this type of
distribution to be perceived as long-term.
Investment plans, licensing, spectrum allocation, crisis
management, joint drills with customers.
Greenhouse gas emissions
The Group will strengthen its competitiveness by
minimizing its environmental impact.
Environmental policy, preventive environmental work
and refocusing parts of the Group where the opportunity to have an influence is large.
Legal requirements
As a state owned company with important social
functions, fulfillment of legal requirements is
particularly important.
Occupational health and safety instructions, safety
committee work, incident management, environmental
regulations.
Society
Media plurality
Environment
Finance
Financial value generated
10
Financial earning capacity, in relation to the Group's
costs, must support long-term development.
Through interim reports and an annual report that
includes a sustainability report.
Subsidized public transportation encourages
people to leave their cars at home
Since 2008, Boxer Sweden and Denmark have offered an environmental bonus. The purpose of the environmental bonus has been
to encourage people to commute to work using public transportation. More than half of all employees take advantage of this highly
appreciated benefit. In connection with the move to the new, shared
head office, the opportunity for subsidized public transport will now
be extended to all employees in Stockholm.
Corporate social responsibility
The Earth's natural resources are finite and it is important for companies to work
so that the business is sustainable. Today's generations and companies must be
able to exist and evolve while ensuring that future generations will have the same
conditions.
Being on the leading edge of this field offers great advantages since international institutions, particularly the EU, increasingly recognize the importance of
laws and regulations supporting sustainable development. Companies that have
already adapted to become a more considerate business will have a head start
when the time comes for regulations to be imposed. As a state-owned company,
the Teracom Group already meets requirements from the owner to work with and
report on sustainability efforts. More and more companies are also requiring their
suppliers, just as Teracom Group does, to work and report on sustainability in order
to be a sustainable partner.
Our challenge is to develop our sustainability efforts, where environmental work is an important part, as a natural part of our commercial work. Greater
emphasis will be placed on this work over the next few years.
Environmental strategy
To be responsible and competitive, the Teracom Group needs to work even more
proactively to reduce its negative environmental impact. The result will be better
control of the risks in the area, better procedures for environmental incidents and
greater credibility with customers, shareholders, suppliers, employees and other
stakeholders. The Group also has the opportunity to continually become more
effective and resource-efficient and thus also to reduce both costs and environmental impact.
The Teracom Group wants to be at the forefront of environmental efforts.
Therefore, the Group formulated an environmental policy and set one of its
overarching business objectives to reduce its carbon footprint by three percent
annually. The Teracom Group chose this target because it plans to reduce its
carbon footprint at the same rate as the climate goals that the Government set for
Sweden, by 40 percent from 1990 to 2020. Each company will identify its biggest
impact areas annually and formulate activities in its business plans to reduce its
carbon footprint. Teracom Sweden worked on this target in 2011, but in the future
the carbon footprint reduction target will apply to all of the companies. To accomplish this, the Group’s main principle is to streamline and control its activities.
Gradually switching over to renewable energy sources and more modern technology will also help the Teracom Group achieve its environmental goal. As a last
resort, compensation for emissions would be considered. The biggest impact areas
for the Group are electricity and fuel consumption, followed by travel in the form
of business trips and commuting.
The biggest environmental impact areas
for the Group are elec­tricity
and fuel consumption.
Maria Åstrand, Environmental
Manager Teracom Group.
11
Teracom Group
operations
12
13
Sweden
Sweden is the Group’s first and most mature market. The
Swedish digital terrestrial network and Boxer were launched in
1999 and the last analogue broadcast ended in the fall of 2007.
Despite increased competition, Boxer is still Sweden's biggest
digital TV operator.
Sales and operating margin
Teracom Sweden
MSEK
%
1500
40
1200
32
900
24
600
16
300
8
0
2009
2009
2010
2010
0
2011
2011
■ Sales MSEK ■ Operating margin %
2011 • HDTV broadcasts reached 93 percent of households at year-end.
• Boxer launched on demand services as a complement to the linear TV
experience.
larger program companies decided to broadcast regional
content via the terrestrial network.
• On April 1 MTG Radio launched Sweden's first commercial talk radio
channel, Radio 1.
• Several
Sales and operating margin
Boxer Sweden
MSEK
%
2100
40
1575
30
1050
20
525
10
0
2009
2009
2010
2010
2011
2011
During the year Group-wide Guiding Stars and leadership principles were launched. An internal mentoring program aimed at junior
managers was initiated.
Number of employees at Boxer Sweden: 53
Number of employees at Teracom Sweden: 445
0
■ Sales MSEK ■ Operating margin %
Boxer Sweden, Teracom Sweden and Group functions started moving into
a new office together; the building is environmentally certified and environmental initiatives will continue together with the new property owner.
616 542
Pay-TV subscribers for Boxer Sweden on
December 31, 2011.
14
Operating profit for Teracom Sweden was only marginally lower in 2011
than in 2010. Higher income from services such as regionalization and
telecom compensated for the somewhat lower income from regulated
products. An accrual effect of changed invoiced sales for Boxer Sweden
resulted in lower income during the first half of the year and reduced
the operating margin. A lower customer base and higher costs for
transmission and marketing also had an impact. Campaign with a lower
price point for Boxer Mix had a positive impact on new sales.
Popular entertainment and sporting
events generate high viewing figures.
15
The market
The competition primarily consists of satellite operators Canal Digital and Viasat, where
Viasat in particular has aggressively purchased exclusive sports rights, cable operator
Comhem and IPTV operator Telia. Telia has achieved strong growth in recent years
through IPTV as part of a Triple Play offering. The Group is strengthening its competitiveness and responding to the growing competition by launching new services.
HDTV
During the year, HDTV broadcasts in MUX six and MUX seven, a total of eight
channels, continued to be expanded and reached over 93 percent of households
at year-end. The broadcasts were launched in November 2010 using broadcasting
standard DVB-T2 and MPEG4 compression technology.
The general trend is to introduce more HD channels since, as TV screens are
growing in size, HD is becoming the new image standard. The five largest Swedish
channels broadcast their HD channels alongside their regular channels. Broadcasting HD and regular channels simultaneously over a transition period allows the
number of viewers with HD receivers to increase as households upgrade their TV
equipment. The long term aim is to replace standard channels with HD channels.
However, this transition should be done in conjunction with the broadcasters filling
their HD channels with almost exclusively »native HD«, which is not the case today.
The HD launch is successful; Boxer has sold many HD subscriptions and the
subscription price was reduced during the year from SEK 59 to SEK 19 per month.
At the same time, reactions in the local press in places where HD is being expanded
indicate a demand for SVT in HD resolution.
Newspaper clippings from the HD rollout.
HDTV broadcasts reached 93 percent of
households at year-end.
MIX
FRIA KANALER – GÅR ATT SE UTAN ABONNEMANG
Program package offering. The Boxer Mix
package costs SEK 179 per month and is
Sweden's most popular Pay-TV package
16
Regionalization demonstrates the strength of the terrestrial network
SVT1, SVT2 and TV4 have been broadcasting various regional editions of their
channels for a long time. For these two broadcasters, regional editions provide an
opportunity to broadcast regional news, but TV4 takes advantage of this opportunity to broadcast regional advertising. Consequently, TV4 can sell advertising to
a target group that previously could only turn to the local press. This local advertising market is highly profitable, as demonstrated in the financial performance of
large local press groups.
During the year the Group signed agreements establishing regionalization of
SVT’s HD channels, TV4 HD, Sjuan, TV3 and Kanal 5. These channels will also be
able to compete in the regional advertising market, which means that the terrestrial network has generated great value for the broadcasters. Roughly speaking,
the terrestrial network broadcasts about 160 different channel editions from these
four broadcasters. Since regionalization entails good business for all parties, the
aim is to sell the service to most broadcasters.
The flexibility and competitiveness of the terrestrial network can be illustrated
by a sample calculation that assumes that far more channels will buy regionalization to take advantage of the regional and local advertising market. If half the
channels in the terrestrial network, about twenty-five, were to purchase regionalization into 20 regions each, the terrestrial network would broadcast 500 regional
channels. The scalability and flexibility of the terrestrial network makes this manageable, despite the enormous aggregate bandwidth required by 500 channels.
With satellite TV, for example, transponder capacity would need to be arranged
for all channels from one point. This advantage of the terrestrial network would
increase sharply over time as channels in the terrestrial network switch to HD
format; 500 HD channels would then require a huge aggregate bandwidth, which
can be handled through the decentralized structure of the terrestrial network.
Boxer On Demand
With the launch of Boxer On Demand in November, the Group has now also started
to take advantage of the Internet as a distribution channel for some content. The
launch was carried out with a Boxer-branded, custom-designed HDTV and On
New office »Lyckan« – kind to the environment
The new office in Lindhagen was built and adapted for an office lifestyle that supports
good environmental work. The »Green Lease« means that the Group and the landlord will
continue to work together to reduce the office’s environmental footprint – also in the
future.
Three specific examples of energy efficiency features in the building are smart temperature control, using cold air outside the building to cool equipment and automatic presence
and daylight sensors. The entire building is certified under the »Miljöbyggnad« (Environmental Building) rating system, which is based on Swedish construction and government
regulations, and the building will most likely be certified under »LEED« (U.S. certification for
buildings) on the second highest level.
»Every workday we support environmental targets and I hope it makes us very proud of
our new workplace,« says Maria Åstrand, Environmental Manager, Teracom Group.
Demand box. The service provides access to a movie store from SF Anytime, on
demand services from several major broadcasters and a range of other services.
Access to SF Anytime is part of the regular Boxer subscription, but a charge for
each movie the customer rents is added to the regular bill.
Most notable about this launch is that Boxer is the only Pay-TV operator
offering on demand services from SVT. SVTr, or SVTrepris, is an on demand service
offering almost half of the material available through SVT Play online.
The HD/On Demand box is a »hybrid« box; it receives signals from the Group’s
own terrestrial network and from the open Internet via the customer's own
broadband connection. Movies and Play material are streamed from the Internet and
the time delays that may occur with an ordinary broadband connection are resolved
by the box buffering the material by temporarily storing it on the hard drive. This
technique allows viewers to freely watch streaming programs via broadband.
Through the new HD/On Demand box, the Group has established a hybrid
platform for future services, both via the terrestrial network and via broadband.
This platform can then apply the lessons learned in Sweden for use in the Group's
other markets.
Digital radio, the way forward
The Group has broadcast digital radio using the DAB standard since 1995, and
since 2009 broadcasts have also been provided using the advanced standard,
DAB+. Although these broadcasts are pilot broadcasts provided in parts of Sweden
and despite their limitations, several broadcasters are participating in the broadcasts and DAB+ receivers are present in a growing number of receivers on the
market, so from the perspective of many listeners, digital radio is already available.
However, the pilot broadcasts do not benefit from the major competitive benefit
of digital radio, which is to provide many broadcasters with the opportunity to
broadcast across the entire country. Now that the digital broadcasts have started
to reach a broader audience, the strategy is to specifically discuss switching off
analogue FM broadcasts. In Norway, for example, the government has decided to
discontinue FM broadcasts in 2017 and it would not be unreasonable for Sweden
to follow suit some time thereafter.
Digital radio depends on political decisions and the Swedish Broadcasting
Authority has decided to issue broadcasting licenses in two multiplexes, representing around thirty national channels. Since the continued commitment of Sveriges
Radio to digital radio is being examined in a public service inquiry that will be
completed in the fall of 2012, the Swedish Broadcasting Authority decided to
delay licensing for 2012 so that the commercial license holders and Sveriges Radio
can coordinate their efforts. Teracom Sweden is planning on expansion once the
broadcasters have consulted one another.
500
Room for more than 500 channels in the
terrestrial network thanks to efficient
new technology.
On April 1 MTG Radio launched Sweden's
first commercial talk radio channel, Radio 1.
17
PR5
Customer satisfaction for Boxer
Sweden:
Customer
satisfaction for
Teracom Sweden:
67
63
This business deal is
ideal for us; we can
take advantage of our
existing backbone network
for radio and television,
and combine it with other
types of services
Teracom Sweden’s CEO Stephan Guiance
on the ten-year agreement with Statkraft
Boxer, Sweden's largest Pay-TV operator.
18
Co-location and service
Teracom has a nationwide infrastructure of stations and masts which range from
just a few meters to as much as 330 meters in height. Most facilities are associated
with a mast and 54 of these are tall masts.
Teracom’s facilities are attractive to all enterprises that need to establish local
or nationwide communication networks. The unique high-altitude masts enable
companies to cover a large area and reach many end customers.
Teracom offers 24/7 monitoring and field service for customers’ equipment
through Teracom’s NOC (Network Operation Center) and service personnel. Service
personnel are available throughout the country, ready to be dispatched to resolve
problems, regardless of whether the equipment is in Teracom's own facility or the
customer's facility.
The largest co-location and service customers are Nokia Siemens Networks,
TeliaSonera, Net 1, SES ASTRA, 3GIS and Telenor. Other customer segments include
broadband providers, utility companies, transport companies and other types of
firms or authorities that establish their communications equipment by leasing
space in Teracom’s facilities.
In 2011, the mobile operators initiated installation of 4G networks in many
Teracom facilities.
Connection services
Teracom offers two products in the Connections area: Wavelength and Capacity.
Both services involve offering customers the opportunity to transfer data from
one location to another via Teracom's network. Since Teracom has both fibre and
radio links, it can offer customers redundant paths and high availability.
Teracom's fibre network with about 6,000 kilometers of cable in a ring
structure extends from Kiruna in the north to Malmö in the south and is constantly expanded to meet customer needs. Teracom currently has one of Europe’s
most modern wavelength networks and security is integral to the product through
extensive experience from radio and television networks.
At the end of the year, Teracom signed an agreement with Statkraft, which
covers connection services and support services for delivery of masts. Statkraft
owns and operates about 60 hydropower plants in Sweden and the task is to
connect the facilities with Statkraft’s operational control centers all over the
country. The plants and the operational control centers are connected together in
Teracom’s existing national nationwide fibre and microwave backbone network. The
network will be owned, operated and monitored around the clock by Teracom.
Small differences between players, work faster and smarter
Boxer has lost its two-year run as the operator with the most satisfied customers,
though the differences between operators are shrinking compared with the
previous year. This year's customer satisfaction index is 67 (67), somewhat better
than the average for the industry (66). The customers want more choice and better
customer care. Perceived value for money has greater weight as a result of the
increased competition.
After an earlier six-point upswing, the results for Teracom dropped to 63 (66).
Customers see Teracom as competent, delivering high quality and credible. At the
same time, they want shorter lead times, clearer communication and faster product
development. Process efficiency will allow the company to work both smarter and
faster in relation to customers.
Environmental work in Sweden
Teracom Sweden has been working on environmental issues for a long time, while
Boxer Sweden has recently started this work. A major joint effort preceded the
renovation and move to the new office where the Swedish companies have been
working together since January 2012.
Teracom Sweden is actively working with many environmental issues such as
waste management, high-frequency electromagnetic fields (which form around
the antennas when broadcasting radio and TV) and the impact of the vehicle fleet.
In 2011, Teracom Sweden reduced electricity consumption as a result of the closure
of a broadcast station in Hörby and continuous energy efficiency improvements
when replacing equipment. However, expansion of the DTTV network and the new
transport network in 2011 increased electricity consumption. A larger proportion of
purchased electricity is also produced by fossil fuel than in 2010.
Fuel consumption in Teracom Sweden rose since service previously provided
by contractors is now provided by our own staff. This has also led to an increase
in the service organization staff by about 10 percent. The environmental goal is
set taking into account that the business should be able to grow or decrease in
scope and that the organization would be adjusted accordingly. The management
of Teracom Sweden decided to make a financial compensation contribution for
its carbon footprint for 2011 to achieve the climate target of -3 percent. In 2012,
environmental work will focus on implementing energy efficiency measures with
monthly internal reports on the results, and finding good measurement parameters
to clearly describe progress.
For many years, Boxer Sweden has offered its employees a monthly environmental bonus for leaving the car at home and riding a bicycle or using public
transportation to work instead. In December 2011, use was 61 percent, an increase
from 46 percent in 2010; the total also includes those who have company cars and
Boxer Denmark employees. With the move to the new headquarters, the possibility of subsidized public transportation has been extended to apply to all Group
employees in Stockholm.
One important environmental aspect for Boxer Sweden is the impact of the
boxes on the environment, which will be identified in 2012 to develop a box
strategy with environmental activities focused where they will make the greatest
difference.
Environmental activities
decide­d for the Swedish
companie­s:
• Streamlining of energy consumption,
e.g., at Teracom Sweden’s larger FM/TV
stations.
• Streamlining of fuel consumption, e.g., by
continuously improving planning of work
in the field for Teracom Sweden’s service
organization.
• Analysis of the environmental impact of
Boxer Sweden’s boxes.
Boxer Sweden's breakdown of
climate impact
Fuel 41%
Business trips 38%
Commuting 8%
Freight transports
6%
Premises 4%
Fuel production and
shipment 3%
Electricity and
district heating 0%
Teracom Sweden's breakdown of
climate impact
Fuel 45%
Electricity and
district heating 31%
Commuting 8%
Business trips 7%
Freight transports 5%
Fuel production and
shipment 3%
Premises 1%
Teracom Sweden's change in
climate impact
1600
A: Bränsle 16%
B: El och fjärrvärme -3%
C: Pendling -6%
D: Tjänsteresor -3%
E: Godstransporter -12%
F: Bränsleproduktion
och transport 14%
1280
960
640
320
0
A
B
■ 2010
C
D
E
F
■ 2011
A: Fuel 16%
E: Freight transports
B: E lectricity and
-12%
district heating -2% F: Fuel production and
C: Commuting -23%
shipment 9%
D: Business trips -21%
The picture shows the areas in the operations that are monitored and converted into
climate impact. The appearance of the graph
for 2011 is primarily due to more projects
and an expanded service organization, which
resulted in higher fuel consumption. Teracom
Sweden has decided to make a financial
compensation contribution for its carbon
footprint in order to achieve its climate
target.
19
Denmark
Denmark is the Group's youngest market with both network
and Pay-TV operations. Boxer Denmark became operational in
November 2009 following the closing of the Danish analog terrestrial network. On January 6, 2012, Boxer Denmark reached
200,000 customers and the 300,000 mark was reached already
in February.
Sales Boxer Denmark.
2011 MSEK
300
200
• Boxer Denmark exceeded 300,000 customers on February 5, 2012.
• During the year TV 2 decided to become a Pay-TV channel and made
100
0
2009
2010
2011
■ Sales MSEK
the switch in January 2012.
• Decision was taken to launch HDTV in Denmark in 2012.
The margin for Boxer Denmark is
negative due to startup costs.
SEK 345
million
During the year Group-wide Guiding Stars and leadership principles were launched. An internal mentoring program aimed at junior
managers was initiated.
Number of employees at Boxer Denmark: 33
Number of employees at Teracom Denmark: 65
Sales for Teracom Denmark 2011.
19 %
The carbon footprint was analyzed to identify the most important
aspects on which to focus moving forward.
Operating margin for Teracom
Denmark 2011.
300 000
Pay-TV subscribers for Boxer Denmark
February 5, 2012.
20
Teracom Denmark has long-term contracts that provide stable revenue;
new business in the telecom sector has developed with both new and
existing customers. Boxer Denmark has a strong position in the Danish
Pay-TV market as a »Preferred Brand«; the number of subscribers
increased dramatically over the past year. Revenue increased by almost
80 percent over the previous year but, as expected, the result is still
negative since the business is in an expansion phase.
A multitude of channels enables
niche TV viewing.
21
Chris Corneliussen, Boxer
Denmark’s 100,000th customer, together with Carsten
Howard from Boxer Denmark.
Boxer Denmark
Boxer Denmark reached 100,000 customers during the first week of November 2011
and Chris Corneliussen from Slagelse on
West Sealand was the lucky customer. Chris
received a 50-inch Panasonic television and a
one-year subscription for Boxer Mix.
»It was with great pleasure that we
celebrated our 100,000th Boxer customer. We
reached this important benchmark exactly
two years after the digital transition. It took
about 700 days to reach the first 100,000
customers, less than 70 days to pass 200,000
and only 30 days later we passed 300,000,«
says Boxer Denmark’s CEO Steen Ulf Jensen.
VALUE FOR
PEANUTS
BEGRÆNSET ANTAL
TIL INTROPRIS
199
*
kr.
for 12 mdr.
SPAR
228 kr
.
TV 2
ekskl.
modtagerudstyr
Scan og se mere
Betalingskanal fra 11.01.12
Disse kanaler
kan du
altid se med
Disse
kanaler
kanBoxer-udstyr
du altid se
med Boxer-udstyr
Fra nytår bliver TV 2 betalingskanal.
Hvis du ser TV 2 med antenne, skal du have Boxer.
Her er TV 2 med
alle pakker
dukortafgift
kan endda
få den Gælder kun ved
*Samletimindstepris
237 kr. (199og
kr. i årlig
+ 2x19 kr. i abonnement).
tilmelding til PBS. Abonnementet løber tidligst fra d. 11.01.12 – du kan som altid se TV 2 med
som selvstændig
kanal.
Boxer-udstyr frem til denne dato.
* Intropris i begrænset antal dog senest inden 01.04.12. Samlet mindstepris ved
tilmelding til Betalingsservice: 199 kr. i årlig kortafgift. Abonnementet løber tidligst
fra d. 11.01.12 – du kan som altid se TV 2 med Boxer-udstyr frem til denne dato.
Normalpris pr. 01.04.12: årlig kortafgift 199 kr. + 19 kr./md.
www.boxertv.dk
22
Packaging and pricing
Boxer has worked hard with packaging and pricing. In March, up to four extra cards
were offered as part of the basic subscription – two extra cards in the basic package
and two children’s cards. This means that households can easily purchase Boxer-TV for
every TV in the family and thus take advantage of the simplicity with which the signals
from the terrestrial network can reach an unlimited number of devices. In May, the
Consumer Council's publication TÆNK named Boxer »most cost-effective TV operator«.
Most important of all is that, following a political decision in March 2011, TV 2
became a Pay-TV channel in conjunction with the technology shift from MPEG2
to MPEG4. TV 2’s transition to Pay-TV has fuelled interest in Boxer’s services and
although many customers are probably signing up for a subscription in order to
*
watch
TV 2, the percentage of TV 2-only subscriptions has been small. Boxer has in
fact greatly increased sales of its regular subscription services in connection with
the channel’s transition. The transfer of TV 2 from MPEG2 to MPEG4 was accomplished through close cooperation between sister companies Boxer Denmark and
Teracom Denmark since the project also involves relocation of TV 2 and its regional
channels from MUX 2 to Boxer’s MUX 3.
19
kr./md.
In early January, popular TV 2 became a PayTV channel in Boxer Denmark’s offering.
OPLYSNING TIL
SEERNE OM BOXER
Pay-TV in Denmark
Boxer has a government permit with exclusive rights to operate Pay-TV in four
multiplexes until 2020. The purpose of issuing a permit for a Pay-TV operator, an
arrangement that does not exist in Sweden or Finland, is to increase competition
in the Danish television market, a situation to which Boxer has greatly contributed.
The Danish Pay-TV market, like the Swedish market before Boxer became established, is dominated by relatively large and therefore expensive TV packages. The
Group's strategy has been to break in at package and price levels that are attractive
to people who want the right amount of television, not too much and not too little.
This strategy applies to customers with other operators who feel they do not benefit
from everything they buy, as well as customers who until now have been content with
the terrestrial network’s free television offering, DR and TV 2’s channels. The sense of
freedom of choice created by Boxer’s flexible packaging has been extremely important.
As is typical with subscription services, significant investments were required,
which have resulted in initially negative results. However, once the customer base
surpasses a certain level, the profits will be substantial.
+ årlig kortafgift på 199 kr.
Samlet pris
1. år: 237 kr.*
Two years after its launch in November 2011, Boxer passed 100,000 customers
and, only 70 days later in January 2012 Boxer passed 200,000 customers. The high
growth rate from the end of the year continued into 2012 and on February 5 Boxer
reached a record level of 300,000 customers. Boxer began 2011 with four percent
of the Pay-TV market and ended the year with eight percent.
HDTV with DVB-T2
In late 2010, the Group purchased the Danish terrestrial network operator, Broadcast
Service Denmark, from the public service companies DR and TV 2. The company changed
its name in January 2011 to Teracom A/S and is now an integrated part of the Group's
business. It has already resulted in an aggressive plan to introduce HDTV to DVB-T2 in
Boxer’s Denmark selection in spring 2012. Through this strategy the Danish terrestrial
network has also initiated a gradual upgrade to better picture and sound quality and
more efficient broadcasting technology that will allow room for more services.
The 800 band
Denmark is planning to hold an auction for the 800 band in early 2012. The
Group has therefore been working on moving channels and vacating the 800
band. Sweden introduced a clear rule in which a disturbance, according to a
given definition, must be immediately remedied at no cost to viewers. The Danish
Telecommunication Authority is working on similar rules, but the decisive factor is
still how they will be implemented in practice.
Digital radio
Denmark started broadcasting DAB at the same time as Sweden, in 1995, but has
made ​more progress in deployment. Two multiplexes that are mainly used by DR
provide 90 to 95 percent of the country’s area with good indoor reception. An estimated 35 percent of the population listens to DAB radio regularly.
The planning now under way involves sharing the two multiplexes between DR
and future commercial channels. No decision has been taken to switch off the analog
FM network, although DR has stated that it would like to see such a decision within
the next few years. Teracom is actively promoting further expansion and, together
with its Swedish sister company, investigating the feasibility of introducing DAB+.
Radio is part of the Group's core business and the Group is at the forefront of the
transition to digital radio which, in one way or another, is underway in most countries.
Large inflow of customers poses challenges for Boxer Denmark
Boxer’s customer satisfaction dropped to 65 (67), still somewhat over the industry
average. Customer growth surged at Boxer during the year and a small portion of
customers had to contact customer service, at the same time as the total number
of calls increased. The score is still better than the average in the market and Boxer
is perceived as the most cost-effective operator.
Teracom achieved a customer satisfaction score of 56 in its first survey as part
of the Teracom Group. Customers perceive Teracom as a company that delivers
high-quality products and offers a selection of services with market-oriented
service levels. Areas for improvement that Teracom Denmark will focus on are
image in the market and customer loyalty.
Environmental work
Focused environmental work is in the startup phase in Denmark. The carbon footprint was analyzed to identify the most important aspects to focus on moving
forward. Emissions from largely coal-based electricity in Teracom Denmark drastically increase the Group's total emissions. A large and important challenge
for Teracom Denmark is therefore to reduce energy consumption by working to
achieve more efficient electricity use.
PR5
Customer satisfaction for Boxer
Denmark:
Customer
satisfaction
for Teracom
Denmark:
65
56
Environmental coordinators
The environmental coordinators are responsible for proposing, supporting and following
up on agreed environmental activities in
order for the companies to achieve the
overall environmental goal. Since impact of
the companies on the environment varies,
the focus varies, too; for example, Teracom
Denmark focuses on energy efficiency
for broadcasting equipment, while Boxer
Denmark has chosen to review its electricity
subscription and travel arrangements. The
environmental coordinators themselves
represent extensive expertise in the business.
Environmental activities decided for the Danish companies
• Review the possibilities for changing electricity subscriptions and improving travel
procedures for Boxer Denmark.
• Review broadcast equipment, etc., for
Teracom Denmark to make it more energy
efficient.
Boxer Denmark’s breakdown of
climate impact
Business trips 44%
Fuel 32%
Premises 13%
Freight transports
6%
Commuting 3%
Fuel production and
shipment 2%
Electricity and
district heating 0%
Teracom Denmark’s breakdown of
climate impact
Electricity and
district heating 95%
Premises 2%
Business trips 1%
Commuting 1%
Fuel 1%
Freight transports 0%
Fuel production and
shipment 0%
23
Finland
PlusTV is the largest Pay-TV operator for individual subscribers on the Finnish market and the terrestrial network is the
dominant TV platform.
Sales PlusTV
2011 MSEK
600
400
• Intensive efforts together with several broadcasters have been made
200
0
to increase the attractiveness of Pay-TV.
2009
2010
2011
■ Sales MSEK
• PlusTV’s churn has decreased during the year as a result of methodical
work.
February a new flexible packaging structure with attractive price
points was launched. During the fall, additional cards were introduced
as part of the offering.
• In
Operating margin PlusTV
%
0
-5
-10
-15
-20
2009
2010
2011
■ Operating margin %
237 800
Pay-TV subscribers for PlusTV on
December 31, 2011.
During the year, Group-wide Guiding Stars and leadership principles were launched. An internal mentoring program aimed at junior
managers was initiated.
Number of employees at PlusTV: 30
Environmental work in Finland is in the startup phase. To promote
internal involvement, the company formed a separate environmental
group.
The Finnish Pay-TV market has exhibited weak growth during a twoyear period due to the wide selection of free TV. Demand is also driven
by the seasons for sporting events, which had a positive impact on sales
toward the end of the year in connection with the ice hockey and skiing
seasons.
As a result of good sales and decreasing churn, the customer base grew
by almost 13,000 customers in the fourth quarter.
24
Social media evolve exponentially. Every day, broadcast TV
delivers new and interesting topics.
25
Kimi »The Iceman« Räikkönen
is back in Formula 1 and is
broadcast exclusively on MTV3
MAX and PlusTV
TV viewing in Finland is strongly related to
sports and sporting events, especially sports
that involve wheels. This type of content and,
of course, the rights to it, are crucial for the
number of subscribers and viewers. PlusTV
has exclusive rights in the terrestrial network
for the channel that will broadcast Formula 1
with the very popular Formula 1 driver: Kimi
»The Iceman« Räikkönen, who signed a two
year contract with Renault.
26
Finnish market
The Group acquired a majority shareholding in PlusTV in 2009 when the company
was three years old and had worked up a sizable customer base. However, the
customer base has declined since then because the aim was to have a stable stock
of long-term loyal customers, rather than to have many customers at any cost.
Churn is significantly lower today than it was three years ago and it is also on
the decline. The Finnish market differs from the other Nordic markets because the
major broadcasters have traditionally focused on advertising-supported Free to
Air television and to a lesser degree on developed channels for Pay-TV. The large
number of free TV channels poses challenges because viewers are not accustomed
to subscribing for Pay-TV to be able to see their regular TV channels. People are
willing to pay for exclusive sports rights, but that is an expensive way to get
customers.
Packaging
The Group is working intensively with the broadcasters to find opportunities
to transfer interesting content to Pay-TV in a way that commercially benefits
both parties. For the broadcasters, Pay-TV provides a relatively secure source of
financing, unlike advertising, which is highly cyclical. At the beginning of the year,
the Verraton package was launched with five new Pay-TV channels, including a
sports channel that left the free TV domain. Intensive collaboration with Canal+
during the spring culminated in the launch of the fantasy series Game of Thrones.
As a result, Canal+ sales increased by 150 percent in April and 75 percent in May.
Because Pay-TV is closely associated with sports, subscribers come and go on a
fairly regular basis, depending on the season. MTV3, the large Bonnier-owned
program company, purchased the rights to the major ski races next year and the
plan is to broadcast most of them as Pay-TV, with a positive impact on sales in the
autumn.
The aim is to work with broadcasters to create Pay-TV packages that are interesting for permanent subscriptions, just like those on the other Nordic markets
where Pay-TV penetration is almost 80 percent of households, compared with
around 35 percent in Finland.
The Finnish terrestrial network currently has three network and three Pay-TV
operators. However, new players find it difficult to break into the market because
of the low growth rate and PlusTV is holding on as the major operator with the
most interesting offering and the strongest brand. The new Pay-TV operators
have focused on HDTV, but this appears to be a bit premature since interest in the
market has been limited.
HDTV
In the long run, however, HDTV is interesting since large screens need a better
image standard, so preparations are underway to launch HDTV. Preparations are
also in progress to launch Boxer’s On Demand service and to bring Boxer and
PlusTV closer together in every way. The impact of PlusTV’s offering could increase
considerably by quickly launching Group-wide services.
Future
The Group’s focus is on combining the roles of network and Pay-TV operators
to influence the development, thereby increasing the competitiveness of terrestrial networks, and if this is not feasible, effecting closer cooperation. In Finland,
the strategy is to invest in an appropriate number of Pay-TV channels with the
right content. Appropriate packaging and pricing have been the priority, as well
as increasing the Group’s presence in the retail sector. Here PlusTV has a major
competitive advantage because the company and the brand are well known,
representing good services and reliable delivery in the eyes of the customer. Thus,
in the Finnish market, competition is within the terrestrial network to a greater
extent, whereas in other countries competition is between the terrestrial network
and other TV platforms. The strategy must therefore be slightly different than in
other markets, and the aim is to promote development of the Finnish terrestrial
network and to become more competitive over time. The most immediate task is
to continue strengthening the position of Pay-TV in the Finnish market, so that
both operators and broadcasters can have the financial resources to develop the
services that viewers and customers will demand in the future.
Customers appreciated the repackaging, but they want more
Overall satisfaction among PlusTV customers remained at about the same level in
2011, 62 (63), which is somewhat below average for the industry (65). The major
categories of product quality, service quality and affordability have all improved.
The fact that overall satisfaction does not reflect satisfaction with price and
product is probably due to higher expectations, fueled by new players on the
market.
PR5
Customer satisfaction
for PlusTV:
62
Green power in Finland
Seven employees who are also environmental
role models have gathered in Finland to
discuss how PlusTV employees can easily
and conveniently increase the environmental
commitment of the company. Elina Leino,
environmental coordinator and Head of PR
and Communications at PlusTV, is behind the
initiative. The group calls itself Green Power
and plans for 2012 include holding garage
sales, increasing waste sorting and collecting
clothes for charity. »It's a fun initiative that
may provide motivation and visibility for the
agreed major environmental activities to be
carried out in 2012,« says Maria Åstrand,
Environmental Manager at Teracom Group.
Environmental activities
decided for PlusTV
• Review travel procedures and reduce
emissions from travel for PlusTV.
• Increase internal environmental commitment at PlusTV.
PlusTV’s breakdown of climate impact
Business trips 78%
Commuting 11%
Fuel 10%
Premises 1%
Fuel production and
shipment 1%
Electricity and
district heating 0%
Freight transports 0%
Environmental work at PlusTV
Environmental work in Finland is also in the startup phase. To promote internal
involvement, the company formed a separate environmental group, »Green Power«.
The hope is that this initiative will increase the penetration of larger environmental
activities, such as reducing travel.
27
Sustainability
- corporate
responsibility
The Teracom Group has developed greatly in recent years and
sustainability has become more important both internally and
externally.
The Group's sustainability efforts have been categorized based
on the three concepts of society, environment and finance.
• Read more about how our sustainability work is guided in the Directors’ Report.
28
Many of the Group's masts and facilities are located in remote places.
The easiest way for Teracom's service technicians to reach Ryfjället,
1,413 meters above sea level, is by helicopter or snowmobile.
29
The Teracom Group’s sustainability
efforts
How the Group communicates
with its different stakeholders
Owner
Ongoing dialogue,
reporting
Customers
Ongoing dialogue, customer
surveys, seminars
Employees
Employee reviews,
surveys
Suppliers
Purchasing policy, regular
evaluations
Partners
Ongoing dialogue
Media
Contact should be based on
facts, accessibility, relevance
and honesty
Government
Authorities/
Departments
Ongoing dialogue, feedback
on proposals
General Public
Customer service, online
The Teracom Group’s
prioritized areas
Society
• Employees
• Suppliers
• Media plurality
Environment
• Greenhouse gas emissions
• Legal requirements
Finance
• Financial value generated
30
Materiality analysis
When the Teracom Group's sustainability efforts were initiated in 2008, the work
group at that time conducted a relevance analysis. This analysis identified stakeholders, the Group's level of influence and control over stakeholders and the
importance of stakeholder relationships in terms of sustainability. The result was
a compilation of important target groups, which are listed in the adjacent table.
At the same time, a relevance analysis was conducted of sustainability issues
that provided the basis for the selection of indicators, as well as the selection of
reporting areas for governance. Since then, prioritized issues associated with the
Group's sustainability efforts have been analyzed and developed in accordance
with decisions by the governance group. These decisions, along with action plans,
provide the guidance for continued sustainability efforts.
Follow-up of the action plan
2011
• The most important sustainability aspect is the Group's carbon footprint. The
Teracom Group therefore set a new objective to reduce its CO2 emissions, for
application beginning in 2011.
Sustainability
assessments of the Group's suppliers are an important compo•
nent of taking greater responsibility for the Group's sustainability impact.
These efforts also expanded in 2011 by entering into a dialogue with small
suppliers and suppliers to all of the Group’s companies.
• A survey is being conducted to identify the consumables used by Teracom
Sweden and how these items are purchased. This will allow for stricter
requirement­s on such repeat purchases.
• The travel patterns within the Group will also be reviewed with the aim of
achieving conformance on how travel and meetings are conducted.
• In 2010 and 2011, the Teracom Group focused on corporate governance and
forming an affiliated company.
• Sustainability dialogues with key customers will be implemented over the next year.
• Teracom Denmark is now an integrated part of the Sustainability Report.
Action plan
2012
• Review the travel process for the entire Group with the goal of creating a
Group-wide travel and meeting policy.
• Develop the sustainability assessment of the Group's suppliers.
• Hold stakeholder dialogues with the most important customers.
• Begin implementation of the environmental goal for all companies within the
Group.
2013-2014
• Enter into a dialogue with other stakeholders: ones that have shown a direct
interest and ones that have been identified by the Group (such as customers
and suppliers).
2015
• Complete sustainability assessments for suppliers that account for 80 percent
of the Group's purchasing costs.
Environmental impact
The Group’s companies have offices, products, facilities and networks that all affect the environment in one way or another.
Since 2008, efforts have been underway to document the ways
in which the Group most significantly affects the environment.
Today there is a good picture of the environmental impact of the
organization and the areas of improvement that require work.
Environmental goal
The Teracom Group's environmental goal is to decrease the Group's climate impact
each year. In 2011 the goal for Teracom Sweden was to reduce greenhouse gas
emissions by an average of 3 percent per year and, moving forward, this goal
applies to the entire Group.
To achieve these reductions, the main strategy is to make the operations more
efficient. Gradually switching over to renewable energy sources and more modern
technology will help the Teracom Group achieve its environmental goal. As a last
resort, compensation for emissions will be considered.
In 2011, the Group carried out a series of activities aimed at identifying its
environmental impact, gaining better control over it, setting up action plans and
developing dialogues with stakeholders.
Examples of activities carried out in 2011
• To achieve better control of Teracom Sweden's waste management, the
company continued to work with the central agreement for all offices and
stations in Sweden. Implementation is now complete and will be further evaluated in 2012.
• Since 2009, the Group has carried out supplier assessments which are now a
natural part of the purchasing process. Suppliers are asked about issues such
as environmental work, human rights and quality.
• The Group has conducted a survey of its environmental impact from Teracom
Denmark’s activities.
• Boxer has continued to encourage its employees to leave their cars at home
by offering an environmental bonus for using public transport and in 2012 all
Group employees in Stockholm have the opportunity to receive subsidies for
public transportation.
In order for the Teracom Group to achieve its environmental goal in 2012, the
companies decided to carry out environmental activities (see examples in the
section for each country). In addition, the Group will also engage in Group-wide
activities in the following areas:
• Revision of the environmental policy and clarifications to the management
system and environmental processes
• Follow-up of goals and activities
• Environmental communication – internally and externally
• Car policy and tougher environmental requirements when purchasing vehicles
• Read more in the Directors’
Report/Corporate Governance
Report regarding environmental
management for environmental
incidents within the Group.
The Teracom Group has an
impact on the environment
primarily in three areas:
• Electricity consumption
• Fuel consumption
• Emissions associated with the goods and
services it purchases, such as business
travel and shipments.
A new car policy will be developed in 2012.
-3%
The Teracom Group will reduce
greenhouse gas emissions by an
average of 3 percent annually.
31
• Improvement of travel patterns, including better opportunities for video
The Group's breakdown of
climate impact
conferences
• More stringent environmental and energy requirements when making
purchases
Electricity and
district heating 78%
Fuel 11%
Business trips 4%
Commuting 3%
Premises 2%
Freight transports 1%
Fuel production and
shipment 1%
Energy consumption and environmental impact
The Teracom Group's largest impact on the environment is from fuel and energy
consumption, which also directly impacts the Group’s operating costs.
In order to decrease the Group's fuel and energy consumption, a number of
initiatives have been implemented to streamline its energy use. Data on direct
and indirect energy consumption has also been compiled and converted into CO2
equivalents. In 2011, data on Teracom Denmark’s consumption was also identified and converted into CO2 equivalents in order to quantify the Group’s carbon
footprint. This work has been used to set goals and form action plans that will
reduce the environmental impact.
EN3
The Group's fuel consumption
The Group's direct energy consumption is the fuel consumed by the various
combustion engines owned or leased by its companies. In 2011, fuel consumption increased due to an increase in the service business. For example, the Group's
direct energy consumption comes from its use of:
• Company cars (business use and/or private use), snowmobiles, four-wheelers,
all-terrain vehicles, etc., that are fueled by diesel, gasoline or ethanol.
• Mast elevators and mobile power stations that are fuelled by gasoline.
• Backup power stations fuelled by diesel.
EN4
Electricity consumption of network companies
Operating a nationwide terrestrial network for TV broadcast consumes a great deal
of electricity. The Teracom Group has offices and stations that use energy, specifically electricity, heat and cooling. In 2011 energy consumption for the Group was
about 139 GWh. The GRI index presents the Group’s total consumption of electricity and heat purchased directly from producers as well as the energy consumption of premises using indicator EN4 (energy consumption for premises was
reported in 2010 in indicator EN17).
The Group's indirect energy consumption comes from its use of electricity,
district cooling and district heating. The network companies’ services (broadcasting) and operation of stations in Sweden and Denmark account for 98 percent of
energy consumption.
The production mix for electricity in the Danish operation consists of 27
percent renewable energy sources (biomass/biogas and wind/water and solar
energy) and 73 percent non-renewable energy sources (mainly coal) and explains
the large increase (four times greater than 2010) in the Group's emissions.
About 99 percent of Teracom Sweden’s energy consumption is electricity
purchased from an electricity supplier where the primary energy sources consist of
53 percent renewable energy and 47 percent non-renewable energy sources. The
renewable sources are primarily water power and, to a smaller extent, wind power.
The non-renewable sources consist almost exclusively of nuclear power. Electricity subscriptions in the two countries have a variable production mix from year to
year, which means that emissions for the Teracom Group change in the same way.
An electricity loss of about 3 to 9 percent occurs during transmission from power
plant to Teracom Sweden's facilities.
facts
Greenhouse effect
Heating of the surface of the earth caused by
the earth’s atmosphere. The effect is due to
part of the thermal radiation from the earth's
surface being re-radiated back to the earth
after being absorbed by the atmosphere.
CO2 equivalents
A common unit of measure that makes it
possible to compare the climate impact of
various greenhouse gases, their converted
greenhouse effect expressed in the equivalent
amount of carbon emissions.
CO2 emission
Emissions of carbon dioxide or converted
equivalents.
32
The Group's greenhouse gas emissions
To reflect the Group's total carbon footprint and identify which parts can be
improved, the Group compiled its total direct and indirect greenhouse gas emissions and converted its energy use to CO2 equivalents. In 2011, the Group further
documented its impact by including transports (freight shipments, business travel
and commuting), fuel production and energy usage at the Group's leased facilities.
This work will continue to evolve in 2012.
EN16
EN17
Product responsibility
In the fall of 2011, the Teracom Group realized that it had not properly addressed
its product responsibility for certain consumer electronic equipment
that was imported and sold in the Nordic market in 2011due to
changed sales processes in the Boxer companies. New internal
procedures were adopted and cooperation has been initiated
with organizations in different countries, which help
the company meeting the obligations of its product
responsibility. These organizations are: Repa and
El-kretsen in Sweden, and Elretur in Denmark.
In Finland, no electronic products have been
sold yet, though a similar collaboration will be
launched before sales begin
in the spring of 2012.
SUNDSVALL
STOCKHOLM
HELSINGFORS
KÖPENHAMN
The picture shows the environmental impact of the Teracom Group through
activities that the Group carries out within the business. Examples are electricity and fuel
consumption, as well as transports, business trips and the use of offices. The red and white
markings on the map symbolize where the Group has its larger FM/TV masts.
33
Employees
For the Teracom Group, highly motivated and committed employees is a strategic issue and a necessity for the Group to
achieve its goals; the aim is to create a truly attractive workplace. The year was characterized by intensive work with the
Group-wide Guiding Stars and leadership principles.
Group-wide
mentoring program
Catarina Myhrman, section manager for Network Systems at the Networks department
within Teracom Sweden, is one of this year's
novices in the Group’s newly started mentoring program. Her mentor is none other than
the Group's CEO, Crister Fritzson
»Of course I’m looking forward to having
Crister as my mentor. He is a clear and
inspiring leader, and it is truly a privilege to
have the opportunity to discuss leadership
and other important matters with him,« says
Catarina Myhrman.
Leadership
The Group’s core values ​​and Guiding Stars are important in its effort to act as a
unified business and encourage employees to work toward the same goals. The
Group's managers play an important role in this process. Five leadership principles
will help to guide them in their daily work. Leadership must be business-driven,
action-oriented, communicative, involving and goal-oriented. Creating a common
culture and obtaining an understanding of the entire business process goes hand
in hand with developing the Group's leadership principles. How well our managers
live up to the leadership principles is assessed in the annual employee survey.
A mentoring initiative was implemented during the year. A structure for a
Group-wide internal mentoring program was designed. The program began in
January 2012 and will continue for one year. The target group is junior managers
who want to develop their leadership skills, and mentors are members of corporate
and Group management. In addition, since 2008 the Group has participated in
Womentor, a mentor program for women early in their managerial career in the IT
and telecom industry.
Group-wide Guiding Stars in the Teracom Group
During the year, the Group presented new common Guiding Stars. Formulating
these new Guiding Stars was a thorough initiative that used the previous values​​
and guiding principles of the five companies as a point of departure. After just
six months, 65 percent of employees felt they could identify with the words that
describe their daily work and how the Group wants customers to perceive us.
We simplify, We build trust, We make a difference
Leadership principles within the Teracom Group
Business-driven
By understanding a changing world and choosing
a proactive approach, we can act in time and take
calculated risks. Our ability to weigh customer
benefits against our own profitability requirements
will help us secure business in the long term.
Action-oriented
By making decisions based on experience, judgment and available facts, we will reach our goals
even without a requirement for consensus. We
act decisively and energetically to ensure effective delivery.
34
Communicative
By being transparent, honest and clear, we build
security and bring out the best in our employees.
Our communicative mission is to create an open
dialogue for mutual understanding of our reality.
Involving
By recognizing the talents and diversity of our
employees, we create participation and a strong
sense of cohesiveness within the Group. Our
enthusiasm for being leaders and role models is
obvious and provides energy for everyone.
Target-driven
By clearly linking individual goals to Group goals
and long-term strategy, we create motivation and
accountability. We ensure our goals by always
prioritizing, following up on results, acting on
deviations and celebrating successes.
To further gain support for the Guiding Stars within the organization, a Guiding
Star Team monitors and promotes their development and use. Of course it is
everyone's job, especially the managers, to contribute to a development in which
the Guiding Stars are used as an aid in day-to-day activities, but the Guiding Star
Team is an assurance that all of the activities carried out are also rooted in the
cultures and countries in which the Group is active.
Employee survey
The Group carried out a joint and Group-wide employee survey for the first time in
2011. The Teracom Group intends to conduct such surveys regularly to evaluate the
effectiveness of employee motivation and identify areas that could be improved.
The response rate was an impressive 95 percent and the results are summarized
through two indexes: Team Efficiency Index (TEI) and Leadership index (LSI). The
2011 survey shows a TEI for the Group of 83, with an external benchmark index
of 85.
The goal for next year's survey is to achieve 90 for the entire Group. Boxer
Denmark has the highest TEI (89). About 40 percent of the Group’s employees feel
there are no obstacles at all to efficiency or productivity.
The Leadership Index for the Teracom Group (an aggregate average of all
managers) was 70, which is slightly lower than the benchmark (71). Group
Functions, Boxer Sweden, Teracom Sweden and Teracom Denmark are slightly
below the benchmark, while PlusTV is slightly above. Boxer Denmark scored above
the index. The survey shows that managers do a relatively good job of complying
with the leadership principles.
Regarding commitment, which is essentially based on two parameters, energy
level and clarity of objectives, the energy level is higher than clarity of objectives
within the Group. In all, 65 percent believe they understand how the work group’s
objectives support the corporate goals and 58 percent feel that the work group’s
goals are converted into individual goals.
All work groups have analyzed the results, in part to understand how strengths
can be retained or enhanced, and in part to identify reasons for weaknesses. All
work groups establish an action plan with relevant and practical activities aimed at
improving the working climate and thus profitability.
Leadership and efficiency
One of the managers in the Teracom Group
who received both a high LSI and TEI in 2011
is Magnus Oldenburg, CIO Teracom Sweden.
»The most important aspect about my
approach to leadership is to have an open
dialogue with my staff so they feel part of
the Group’s development.«
Employee performance and
development review
LA12
• 94 percent of employees had performance
reviews during the past 12 months.
• 86 percent received established goals and
a development plan.
• 81 percent received feedback on their performance in relation to established goals.
facts
TEI: Team Efficiency Index – measure of the
work conditions in the Group with a focus on
profitability.
LSI: Leadership Index – measures leadership
based on parameters such as the leadership
principles.
Kayaking
In addition to the possibility to receive individual wellness subsidies,
various group activities are arranged. A greatly appreciated activity
in Stockholm is Kayaking, where employees have swiftly claimed the
approximately dozen openings. Thomas Rabbing at Teracom Sweden’s facilities group is the driving force behind the activity. »For many years we
have kayaked on Lake Mälaren one evening right before Midsummer. The
weather gods have usually been with us, but obviously we’ve experienced
strong winds, rain and thunderstorms. The accompanying leaders have
taken good care of us. Some participants have taken a dip, both when
going ashore and out on the open water. We'll see where we go in the
summer of 2012, it isn’t written in stone.«
35
Media plurality requires a
long-term perspective
HR2
The Teracom Group’s customers expect well-functioning services, provided in equally well-functioning and reliable terrestrial
networks. Regardless whether the customer is a broadcaster,
program company or end user, they should be able to demand a
long-term perspective in terms of both program selection and
technical infrastructure.
Supplier assessments
The Teracom Group has an established and
effective procedure for the assessment of
suppliers.
In 2011, Teracom Sweden evaluated
95 of its suppliers (which corresponds with
80 percent of Teracom Sweden's purchasing
volume). Of the 95 suppliers, 81 responded
and 69 were approved.
Development of the terrestrial network – a sustainability issue
As part of its customers' expectations and demands on the Group's business,
Teracom Group needs to integrate sustainability aspects into its business processes;
only then will the necessary controls be created to ensure that investments are made
in the right areas, with high demands for quality and the lowest possible impact on
the environment. The trust of the various stakeholders is the guarantee for a longterm distribution strategy based on a well-functioning terrestrial network, which
in turn ensures secure transfer of social information as well as independant media.
Investments and reinvestments
A business based on a nationwide infrastructure must continuously invest in
new technology that enables new products and services. This technology is an
important requirement for long-term competitiveness. Investments in facilities,
transmitting networks and technology systems are a major part of the Group’s
assets, and part of this responsibility is therefore to nurture this infrastructure by
implementing a long-term reinvestment plan. Consumer boxes and other receiving
equipment also comprise an important component of the total investment that
various stakeholders make in the terrestrial networks. Because many players share
utilization of the infrastructure, the Teracom Group can achieve safe and costeffective distribution for an infinite number of receivers.
Licensing
By design, terrestrial networks are open to a variety of content producers and
spectrum is assigned through national licensing rather than strictly commercial
principles, which guarantees freedom of expression. The Teracom Group has a
responsibility to monitor development in this area to best adapt new investments
and reinvestments to the conditions that licensing creates. For the past few years,
the Teracom Group has also actively participated in BNE, a European organization
that aims to provide the terrestrial networks with the right competitive conditions
in relation to other means of distribution.
36
Customers
The Teracom Group has extremely satisfied customers and to retain this position the
Group’s customers must be able to count on availability and reliability throughout
the chain, from customer service to broadcasting. For many years, customers have
been actively involved in prevention and monitoring; for example, joint exercises
are carried out with major customers, as are reviews of operations at regular intervals. Monitoring services are important components of customer agreements, as is
regular reporting of availability and network capacity. Investments in robustness
and contingency procedures are essential for customers’ confidence in the Group
as a provider, whether with regard to Public Service or Pay-TV.
Suppliers
Long-term and sustainable financial development of the Group's operations
requires suppliers to provide solutions that stand the test of time, both technically and financially. The purpose of the Group’s supplier assessments is to ensure
that deliveries meet the highest standards of quality, environment, ethics and social
responsibility. The Teracom Group expects suppliers to constantly improving the
efficiency of products and services, both financially and from an energy perspective.
The Kaknäs tower is a natural hub for
Sweden's terrestrial radio and television
broadcasts. The Group has a responsibilit­y,
both for its cultural value and to follow
technological development, to care for
the infrastructure through a long-term
reinvestmen­t plan.
37
Reporting in accordance with GRI
guidelines
Below is an explanation of how the Sustainability Report, which is an integrated
part of the Annual Report, was formulated and a description of its essential limitations. Work on and reporting of sustainability issues are closely integrated; therefore material information regarding the focus of sustainability initiatives is also
described here.
Correlation between key sustainability issues, stakeholders and indicators
The Teracom Group has a long history as a safe, reliable and responsible partner
and supplier of media services that benefit public welfare. During 2011, efforts
have been made to work in a more structured way on sustainability issues that are
important to the business and to the stakeholders who are affected by them. The
Sustainability Report describes how efforts have progressed, along with presenting
the goals that have been formulated within the Group.
The Teracom Group applies the Global Reporting Initiatives (GRI G3) guidelines
for its sustainability reporting. The report is for the 2011 financial year and is at
the C+ level. The plus sign (+) indicates that the report was submitted for external
review. The Assurance Report from the authorized auditing firm, PwC, is presented
on page 91. Teracom's 2010 Sustainability Report was published at the same time
as its Annual Report, in March 2011. The Sustainability Report will continue to be
published once a year, integrated with the Group's Annual Report.
Criteria for application levels
Each of the criteria specified in the column for each level must be met to be classified as level C, C+, B, B+, A or A+.
Report on at least ten
performance indicators,
and at least one from
each: social, economic and
environmental impact
Report on all points
for level C and:
1.2
3.9 - 3.13
4.5 - 4.13, 4.16 - 4.17
Disclosures on management approach
for each indicator category
Report on a minimum of 20 Performance
Indicators, including at least one from
each of: economic impact, environmental
impact, human rights, labor relations and
working conditions, role of the organization in society, product responsibility
*Sector supplement in final version
38
B+
A
A+
Same requirements as for
level B
Disclosures on management approach for each
indicator category
Report on each core G3 indicator and
sector supplement* indicator with due
regard to the materiality principle by
either: a) reporting on the indicator,
or b) explaining the reason for its
omission.
Report certified by external party
G3 Performance
Indicators
& sector
performance indicators
INFORMATION
G3 Disclosures
on management
approach
B
Report certified by external party
Report on:
1.1
2.1 - 2.10
3.1 - 3.8, 3.10 - 3.12
4.1 - 4.4 , 4.14 - 4.15
C+
Report certified by external party
C
Not required
INFORMATION
Standard disclosures
G3 Disclosures
on profile
INFORMATION
Presentation application level
An index of the profile information and performance indicators reported by
Teracom in accordance with GRI G3 and their page references are provided on
pages 40-41. A new indicator in this year’s report is LA1; the indicators LA10 and
HR3 have been deleted. A description of how information was gathered is provided
under each area and performance indicator.
EN16
This symbol is used to designate reporting about a GRI performance
indicator. It also shows which particular indicator is being referred to.
More information about GRI, guidelines and indicators is available at
www.global­reporting.org.
Limitations of the report
This Sustainability Report pertains to all companies in the Teracom Group. In 2011
the Group continued to develop through the formation of a new Parent Company.
The Danish network operator, Teracom Denmark A/S, which was purchased in the
autumn of 2010, is now included in the 2011 Sustainability Report.
As part of the effort to focus on core business activities, the Group has decided
to outsource the following services; therefore these activities are not included in
the Sustainability Report:
• Customer service for Pay-TV customers and private households
• Salary administration
• Office operations and cleaning
• Administration of company cars
• Logistics and warehouse management for Pay-TV operations
We want to know what you
think is important!
We look forward to your questions and feedback about our sustainability work. Contact
us by e-mail, hallbarhet@teracomgroup.se,
or call Teracom Group Executive Vice President Gunilla Berg at +46 8 555 421 00.
Read more about the Teracom Group’
sustainability efforts at http://www.teracomgroup.se/Hallbarhetsarbete/
39
GRI G3 Index
Reference
Comments
Pages 2-3, 4-5
and 6-11.
Fully reported.
1.
STRATEGY AND ANALYSIS
1.1
CEO on the importance of sustainability to the business and its strategies
2.
organization section
2.1
Name of the organization
Pages 44-45.
Fully reported.
2.2
Primary products, services and brands
Pages 44-45.
Fully reported.
2.3
Organizational structure.
Pages 44-45.
Fully reported.
2.4
Head office's location.
Page 49.
Fully reported.
2.5
Countries where the organization has operations.
Pages 44-45.
Fully reported.
2.6
Ownership
Pages 44-45.
Fully reported.
2.7
Markets in which the organization operates, including geographic distribution,
sectors where it competes and type of customers.
Pages 44-45.
Fully reported.
2.8
Size of the organization.
Pages 44-45.
Fully reported.
2.9
Significant changes during the reporting period regarding size, structure or ownership.
Pages 44-45.
Fully reported.
2.10
Awards received by the organization during the reporting period.
No honors or awards
were received during the Fully reported.
period.
3.
report profile
3.1
Reporting period
Pages 44-45.
Fully reported.
3.2
Date of most recent report.
Pages 38-39.
Fully reported.
3.3
Reporting cycle.
Page 38.
Fully reported.
3.4
Person to contact for questions regarding the report and its content.
Page 39.
Fully reported.
3.5
Process for creating the content of the report.
Pages 30, 38-39.
Fully reported.
3.6
Scope of the report.
Pages 30, 38-39.
Fully reported.
3.7
Special limitations in the report.
Page 39.
Fully reported.
3.8
Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations
and other entities that can significantly affect comparability from
period to period and/or between organizations.
Page 39.
Fully reported.
3.9
Basis and assumptions behind calculations.
Under each
indicator
Partially reported.
3.10
Explanation and reasons for changes that have been made to prior information that was provided.
Page 32. (Only changes
in reporting of EN4,
Fully reported.
which now also
includes energy use in
premises)
3.11
Significant changes that have been made to scope, boundary or measurement methods
since the last reporting period.
Page 39.
Fully reported.
3.12
GRI index
Pages 40-41.
Fully reported.
3.13
Policy and current practice with regard to seeking external assurance for the report.
Pages 38 and 91.
Fully reported.
4.
GOVERNANCE
4.1
Governance structure of the organization.
Page 50.
Fully reported.
4.2
Chairman of the Board's role(s) in the organization.
Page 51.
Fully reported.
4.3
Number of independent, non-executive directors
Page 57.
Fully reported.
4.4
Mechanisms for shareholders and employees to provide recommendations or guidance to the Board or
senior management team.
Page 30.
Fully reported.
4.8
Internally developed business concepts or statements on fundamental values, codes of conduct, and prinPages 54-55.
ciples relevant to financial, environmental, and social performance and the status of their implementation.
Fully reported.
4.9
The Board's routines for evaluating the organization's sustainability efforts.
Pages 54-55.
Fully reported.
4.14
The organization's stakeholders.
Page 30.
Fully reported.
4.15
Method used for identifying stakeholders.
Page 30.
Fully reported.
4.16
Types of dialogue with stakeholders.
Page 30.
Fully reported.
40
5.
PERFORMANCE INDICATORS
EC1
Direct economic value generated and distributed, including revenues, operating costs,
employee compensation, donations and other community investments, retained earnings, and
payments to capital providers and governments/authorities.
EC1
EN3
EN4
EN4
EN16
EN16
EN17
EN17
PR5
PR5
Comments
Reported below
Fully reported.
Reported below and
on page 32.
Fully reported.
Presented below and
on page 32.
Reported.
No efficiency losses
when converting
primary fuel to
electricity
Reported below and
on page 32.
Fully reported.
Reported below and
on page 32.
Fully reported.
Reported below and on
pages 18, 23 and 27.
Fully reported.
In 2011, the Group's profitability and financial position were strong and the equity ratio was 32 percent.
The Group's economic value generation, by stakeholder
* Income from customers * Costs for purchased goods and services * Salaries and remunerations, employees * Payments to capital providers to the owner and to the minority * Taxes * Total distributed value * Funds retained in the business EN3
Reference
SEK 4,059 (3,852) million
SEK -2,671 (-2,648) million
SEK -556 (-543) million
SEK -428 (-22) million,
SEK -110 (-110) million
SEK 0 (0) million
SEK -149 (-165) million
SEK -3,914 (- 3,488) million
SEK 145 (364) million
Direct energy consumption by main energy source and supplier.
The Group has consumed 25,338 (21,253) GJ through fuel use, of which 149 (581) GJ is energy from
renewable energy sources. The increase can be attributed to the expansion of the Group with the
network company in Denmark and an increase in the service business in Sweden.
Indirect energy consumption by main energy source and supplier.
Indirect energy consumption for the Group was 500 (400) TJ. For the distribution between renewable and
nonrenewable energy sources, please see page 32
Total direct and indirect greenhouse gas emissions, in weight (CO2 equivalents).
Direct and indirect energy consumption converted to carbon dioxide equivalents was
15,340 (2,497) tons of CO2 equivalents. The large increase is primarily due to the addition of Teracom
Denmark’s climate impact, and because their indirect energy is mainly produced by coal power.
Other relevant indirect greenhouse gas emissions, in weight CO2 equivalents.
Other emissions for the Group overall amounts to 1,536 (967) tons CO2 equivalents. Just as in 2010, this
figure includes business travel, business travel, freight shipments and fuel production. The increase is due
to the addition of emissions from Teracom Denmark.
Procedures for achieving customer satisfaction, including results of customer satisfaction surveys.
In order to have a sustainable organization in the long term, it is necessary for the Group to have loyal,
satisfied customers who speak well of its products and services. Therefore, the Teracom Group's goal is to have
the industry's (i.e. among end consumers and customers of network companies) most satisfied customers. It is
important to have regular customer surveys in order to measure the level of customer satisfaction.
Methodology:
• T eracom Sweden, conduct an annual web-based survey, interviews with selected customers. In 2011,
carried out January - February: 60 web surveys with 58 percent response rate and 26 in-depth interviews
•B
oxer Sweden and Teracom Denmark: www.kvalitetsindex.se
•B
oxer Denmark: www.wilke.dk
• P lusTV: www.epsi-finland.org
HR2
Percentage of important suppliers and contractors that have been assessed on their respect for
human rights and measure that have been taken.
Pages 36-37.
Fully reported.
LA1
Total workforce by employment type, employment terms and region.
Page 46.
Fully reported.
LA7
Reporting on the level of injuries, work-related illnesses, sick days, absences and the total number of
work-related deaths (listed for each region).
Pages 47-48.
Reported. Frequency,
stated in million
work hours.
LA12
Percentage of employees that receive regular assessment of their performance and career development.
Page 35.
Fully reported.
LA14
Basic salary and wage relationship between men and women, listed by employment category.
Page 47.
Fully reported.
SO4
SO4
Measures taken due to incidents of corruption.
No corruption cases
were reported during the Fully reported.
reporting period
41
Contents
44 49 56 57 58 59
59 60 61 62 63 63 42
Directors’ Report
Corporate Governance Report
Group Management
Board of Directors
Financial Overview of the Group
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Consolidated Statement of Changes in Equity
Parent Company Income Statement
Parent Company Statement of Comprehensive Income
64 Parent Company Balance Sheet
65 Parent Company Cash Flow Statement
66 Parent Company Statement of Changes in Equity
67Notes
91 Audit Report for the Sustainability Report
92 Audit Report
96Definitions
43
Directors’ Report
The Board of Directors and President/CEO of Teracom Group
AB, CIN: 556842-4856, hereby submit the annual report for
the Group and Parent Company for the 2011 financial year.
Financial statements
The following sections of the annual report are financial
statements: the Directors’ Report, financial overview of the
Group, consolidated comprehensive income, consolidated
cash flows, consolidated financial position, changes in Group
equity, Parent Company profit/loss, Parent Company financial
positions, changes in Parent Company equity and notes. The
Corporate Governance Report is also a part of the Directors’
Report. All of these parts have been audited by the auditors.
The other parts of the annual report were reviewed on a
general level by the auditors.
Ownership and legal structure
The Parent Company of the Group was previously Teracom
AB, which consisted of Teracom Sweden’s operations and
Group-wide functions. Swedish Parliament granted the
Government the authority, at the Government's request, to
change the Group structure. As a result of this decision, a
new Parent Company, Teracom Group AB, was created on 1
June 2011. The new Parent Company is a holding company,
which has taken over the activities of the Group-wide functions from Teracom AB. With this structure in place, the legal
structure now corresponds to the governance-related business structure.
The shares in Teracom AB have been transferred via a
shareholder contribution to Teracom Group AB. Afterwards,
Teracom AB's subsidiaries were transferred to the new
Parent Company in exchange for promissory notes. Carrying
amounts were used when making the transactions. The new
Group structure does not involve any change in the business
focus as set out by Parliament.
The Parent Company for the Group, Teracom Group AB,
is a limited liability company that is wholly owned by the
Swedish state and has its registered office in Stockholm,
Sweden. During 2011, operations were conducted in Teracom
Group AB, the subsidiaries Teracom AB, Boxer TV-Access AB,
Teracom A/S, Boxer TV A/S and Digi TV Plus Oy.
Operations and segments
The Teracom Group monitors operations within five segments.
Two segments, Teracom Sweden and Teracom Denmark,
conduct network operations within terrestrial TV, radio and
connections. Three segments, Boxer Sweden, Boxer Denmark
and PlusTV, conduct pay TV operations within terrestrial TV.
The geographic markets cover Sweden, Denmark and Finland.
The segments reflect how the Group management team
makes decisions regarding the allocation of resources and
assesses performance based on operating profits.
44
Boxer Sweden packages, markets and sells digital pay
TV subscriptions in the digital terrestrial network. Its competitors are suppliers of cable TV, satellite operators and
providers of TV via broadband. Boxer Sweden's customers
are Swedish households. All competitors are developing
new services, such as HDTV, On Demand services and even
some 3DTV broadcasts. Play and 4G services are also exhibiting strong growth. Teracom Sweden owns and operates a
broadcasting network for radio and TV that reaches nearly
99.8 percent of all Swedish households. Teracom's nationwide network makes it possible to offer a number of integrated communication solutions. In Sweden, the market for
TV and radio is regulated for public service broadcasting. In
order to prepare for a decision by the Swedish Parliament
on the digital transition of radio, Teracom is conducting test
broadcasts in cooperation with the major radio companies.
Teracom Sweden's major customers are Boxer Sweden,
Sveriges Television, Sveriges Radio and TV4.
Boxer Denmark runs pay TV activities in the Danish
digital terrestrial network. The business model is the same
as for Boxer Sweden – to package, market, sell and administer program channels broadcast in the terrestrial network.
The customers are Danish households. There is also intense
competition in Denmark's pay TV market. Most competitors are offering triple play and HDTV. Teracom Denmark
owns and operates the broadcasting network for radio and
TV that reaches nearly 99 percent of all Danish households.
Customers include Boxer Denmark, Danmarks Radio and
Denmark's largest channel, TV2. Intense preparations have
been underway for the conversion of TV2 from free TV to pay
TV in January 2012.
Plus TV is the leading pay TV operator in Finland. Like
Boxer, Plus TV packages, markets, sells and administers PlusTV
program channels that are licensed to broadcast pay TV in
the terrestrial network. The customers are Finnish households. In Finland, terrestrial TV is strong. The majority of TV
reception is free TV and there is a wide variety of channels.
The demand for pay TV is partially seasonal and driven by
various sporting events. During the period, the competition
for pay TV customers increased when the terrestrial network
operator, Digita, which is owned by TDF, started up pay TV
operations under the name, TV Viihde.
Earnings trend
Group income for full-year 2011 amounted to SEK 4,059
(3,852) million, an improvement of 5 percent. Boxer Denmark
increased its income by 68 percent compared to last year
due to a sharp increase in the number of subscribers. For
Boxer Sweden, there was a negative impact on accumulated
income of slightly more than SEK 50 million due to a transition from semi-annual billing to monthly billing of card fees.
Revenue recognition was also modified in conjunction with
this transition, which is only an effect in the distribution of
revenue over a period of time.
Operating profit for the year amounted to SEK 376 (293)
million, an increase of 28 percent compared to 2010. There
was a negative impact on profit from costs affecting comparability totaling SEK 36 (47) million. This amount consisted of
restructuring costs of SEK 17 million as well as impairment
losses on property, plant and equipment of SEK 19 million,
which were an adjustment resulting from technological
development. Comparative costs from last year consisted of
restructuring costs of SEK 23 million and impairment losses
on property, plant and equipment and inventories of SEK 24
million. Boxer Sweden's profit was affected negatively by the
above-mentioned SEK 50 million. Translation of the subsidiaries' losses in Finland and Denmark resulted in a positive
impact on profits of slightly more than SEK 19 million
compared to last year.
Profit after financial items was SEK 325 (281) million.
Net financial expense for the year was SEK -51 (-12) million.
Interest expenses increased by approximately SEK 35 million
compared to full year 2010 due to higher loan levels during
the year as a result of the acquisition of Teracom Denmark
(BSD). This year the Group began to apply hedge accounting
to unrealized gains related to electricity derivatives, which
were reported directly in comprehensive income. Unrealized gains (losses) related to electricity derivatives positively
impacted last year's net financial income/expense by SEK 14
million since hedge accounting was not applied.
Net profit for the period was SEK 168 (201) million.
Based on the company management team's current assessment of future profits, a deferred tax asset of SEK 9 million
was reported for the year's deficit in Finland. A deferred tax
asset of SEK 25 million was reported for the year's deficit in
the Swedish Parent Company, Teracom Group AB. Last year a
deferred tax asset of SEK 105 million was capitalized based
on a valuation of the deficits in the Danish operations.
Parent Company earnings
Parent Company income for 2011 amounted to SEK 33 (-)
million. Operating profit for the year was SEK -37 (-) million.
The Parent Company received dividends from subsidiaries
totaling SEK 297 (-) million and profit after financial items
was SEK 201 (-) million. Net profit for the period was SEK
226 (-) million. Based on the management's assessment, a
deferred tax asset of SEK 25 (-) million was capitalized during
the year.
Financial position
Group interest-bearing liabilities amounted at year-end to
SEK 2,016 (2,381) million. During 2011, the amortization of
credit facilities amounted to SEK 375 million. The net debt/
equity ratio was 0.98 (1.12). Total assets decreased by SEK
145 million to SEK 5,553 (5,698) million. The Group's equity
ratio was 32 (31) percent, which represents an increase of
one percentage point compared to the same time last year.
Significant events January – December 2011
• Teracom Sweden offered program companies the option
of purchasing broadcasting of commercials or programs in
up to 30 different regions. During the period, new agreements were signed with several major program companies.
• On June 1 Teracom Group AB was formed as the Parent
Company for the Group, which created a transparent legal
structure corresponding to the business structure.
• Andrea Gisle Joosen began working on August 8 as the
new President of Boxer TV Access AB (Boxer Sweden). Most
recently, she held the position of President of Panasonic
Nordic.
• Steffen Weber was named in November Acting President
of Teracom A/S (Teracom Denmark). He is replacing Finn
Søndergaard, who is moving to the Group Strategy &
Business Development Department as a step toward retirement.
Significant events after the end of the period
• Sales of Boxer On Demand, which was launched on
Novembe­r 7, 2011, were temporarily halted on January 2.
• On January 11, Danish TV 2 went from MPEG2 to MPEG4
and in conjunction with this joined Boxer's pay TV
channe­l selection, which has greatly contributed to Boxer
Denmark'­s strong growth.
• Boxer Denmark reached 300,000 pay TV customers on
Februar­y 5, 2012.
• When the Parent Company acquired Digi TV Plus Oy in
2009, it issued two put options for the remaining 49 percent of shares in the Finnish subsidiary. The put options
were reported as a liability. At the beginning of 2012, the
owner of one of the put options utilized the right to sell
shares worth the equivalent of approximately 18 percent
to the Parent Company. The purchase was completed at a
price corresponding to the amount reported as a liability
at the end of the financial year. One put option, and therefore a liability, for approximately 31 percent of the shares
in Digi TV Plus Oy remain.
Risks and risk management
Executive management has primary responsibility for
managing the Group's risk. In general, there are three types
of risks. Business risks are normally managed by the operational units in the Group, financial risks by the Group's central
finance department and regulatory risks by the central function, Regulatory and Public Affairs. Group management
manages the risks in a structured, proactive manner with the
aid of a clearly documented control model, decision-making
processes and Group policies.
Business and operational risks
The most important business risk is the tough competition
on all markets, which means that the terrestrial network
could have a lower market share if more and more customers
switch to other digital TV platforms such as satellite, cable
TV and TV via broadband. The pay TV companies are therefore focusing on providing an attractive offer to the large
45
customer base the Group has in the Nordic countries. In
addition, prices in negotiations with the program companies
must be competitive.
The Group's network activities place high demands on
reliability of service - not just under normal conditions, but
also under different types of pressures and extraordinary
circumstances. Risk analyses are performed in the line organization in order to maintain the proper level of security
and stable operations. Work related to information safety is
based on the international information safety standard, ISO/
IEC 27001, and training exercises are conducted regularly in
cooperation with customers and authorities in order to create
and maintain the required skills for managing different types
of incidents and crises.
Regulatory risks
The Group's business is affected by government decisions
and legislation, primarily on media and electronic communications. Examples of important issues are: frequency use,
the design of licenses and permits for the Group's customers
in the terrestrial network, rights, and the regulation of prices
and access through SMP (Single Market Providers) decisions
pertaining to networks and other infrastructures. The Group
is actively working with regulatory issues via its contacts
with government authorities and politicians in Sweden,
Finland and Denmark. The Group also actively participates in
several European forums in order to monitor and influence
these issues.
Financial risks
Teracom Group AB is exposed to various types of financial
risks, the most significant of which are financing risk, interest
rate risk, currency risk and credit risk. These risks are dealt
with in accordance with the finance policy established by
the Board of Directors, which is characterized by the desire
to maintain a low level of risk. The overriding principle is
to minimize all factors that could have a negative impact
on earnings and cash flow due to short-term fluctuations
in financial markets. Within the given limits, the company
strives to achieve optimal net financial income. More information about financial instruments and financial risk
management is available in note 21 on pages 84-87.
Environmental impact of operations
The Group's environmental policy is based on the Group's
desire to take responsibility for its environmental impact by
working on prioritized environmental issues. A clear environmental awareness strengthens competitiveness in interactions with customers, cooperation partners and in the
Group's role as an employer.
The Group's largest impact on the environment is from
fuel and energy consumption, a measure of which is its
greenhouse gas emissions. The Group's overall climate
impact has been documented and the Group has established
the goal of decreasing its negative impact on the environment each year. All of the operations should prepare plans
and activities for how to reduce their environmental income.
In 2011, Teracom Sweden received an environmental
sanction from Nacka Municipality due to a delayed refrigerant report. The routines for submitting the report are now
revised with the responsible supplier.
Employees
The right development of skills contributes to ensuring the
company's competitiveness and the development of individuals. It is therefore the responsibility of every Group company
and every manager to together with the employees regularly
evaluate completed skills development activities and plan for
future needs. The Group also works to pursue goal-oriented
efforts at all levels of its companies. This involves continual
follow-up and feedback on performance compared to the
established goals and goals pertaining to skill development.
Follow-up is conducted via regular employee reviews.
The following table shows the entire staff broken
down by the offered type and form of employment for the
companies included in the Group.
LA1
Unit
Teracom Group Total
Teracom AB
Boxer TV-Access AB
Teracom Group AB
Teracom A/S
Boxer TV A/S
Digi TV Plus OY
Total personnel
Permanent full-time
Permanent part-time
Temporary
employment
740
475
62
73
66
33
31
698
445
53
72
65
33
30
1
0
0
0
1
0
0
41
30
9
1
0
0
1
Hired consultants,
recalculated to fulltime equivalents*
6,9
3,7
0,6
1,1
1,5
0
0
* A hired resource is calculated to correspond to 1,800 working hours per year for a full-time position and refers to the entire accounting period.
46
Diversity and equal opportunity
Diversity is a success factor because it enables the Group
to get the most out of each person's specific expertise and
development potential. Differences in background and experiences provide an opportunity for both the company and
its employees to develop, which contributes to a dynamic,
creative and pleasant work conditions. Long-term as well,
the Group must be able to attract applicants, regardless of
gender, age, ethnic background, beliefs, functional disabilities, appearance, sexual preferences or any other factor. At
the end of 2009, the Group adopted a diversity and equality
policy.
Important areas in the diversity and equal opportunity
policy include recruitment, work conditions, harassment and
discrimination, parenting, how salaries are determined and
a follow-up on equal opportunity. In preparation for salary
reviews, the Group regularly documents the salary differences between women and med with equivalent positions.
Gender comparisons of basic salaries at different levels
in all of the Group's companies are presented below. The
results are based on the number of permanent employees. In
other words, results do not include any employees who have
been released from duty as part of an employment termination agreement. Each company's President is included in the
numbers for Teracom Group AB/Group management.
LA14
Company/category
Teracom Group AB/Group management
Teracom Group AB/managers
Teracom Group AB/other employees
Teracom AB/managers
Teracom AB/other employees
Boxer TV-Access AB/managers
Boxer TV-Access AB/other employees
Teracom A/S/managers
Teracom A/S/other employees
Boxer TV A/S/managers
Boxer TV A/S/other employees
Digi TV Plus OY/managers
Digi TV Plus OY/other employees
Number of men
8
3
21
28
354
8
23
6
48
7
14
3
10
Number of women
4
5
38
8
55
5
22
2
9
2
10
3
15
Relative salary level
between women and men
in percent *
107
79
73
90
104
121
115
73
102
69
102
81
83
* A figure below 100 percent means that men have a higher average salary than women
Work environment, safety and sick leave
The following are examples of how the Group fulfills its work
environment responsibilities:
• Training courses in work environment for managers, rescuing injured individuals from masts, mast elevator and
skylift operation, working at heights and driving cars safely using eco-driving.
• Regular health evaluations for employees.
• Requiring health evaluations for employees working in
masts, which complies with the regulations issued by the
Swedish Work Environment Authority.
The Group's fitness program offers a personal fitness
subsidy and various activities provided by the local fitness
groups. In Denmark, the taxation rules do not allow a
personal fitness subsidy. Therefore, only group fitness activities are offered to employees in that country.
In 2011, there were two work environment incidents at
Teracom AB that were reported to the Swedish Work Environment Authority. While dismantling old broadcast masts at
Hörby AM station, an employee passed away while up in the
mast. A medical investigation indicated that the death was
the result of an acute illness and the matter is no longer clas-
sified as an accident. The investigation provided new information about the method for how injured individuals are
rescued from masts and as a result the rescue equipment has
been modified.
One employee was involved in a car accident that could
have caused considerable harm. The employee needed to take
an extended period of sick leave, but the injuries will most
likely not cause any long-term effects.
LA7
Company/category
Group total
Teracom Group AB
Teracom AB
Boxer TV-Access AB
Teracom A/S
Boxer TV A/S
Digi TV Plus OY
Total sick leave, percent
2,0
2,4
2,0
1,1
2,7
1,3
1,4
47
Accident frequency Teracom AB and Teracom Group AB 2011
Year
2011
2010
Nearaccidents
25
10
Travel
accidents
0
4
Accidents not
resulting in
absence
3
4
Accidents
resulting in
absence
>1 day
2
1
Reported
work-related
illness
0
0
Lost work
days due to
accident/
million work
hours
87*
82*
Accidents
resulting in
absence >
1 day/million
work hours
1,8
0,9
Million work
hours
1,135
1,094
* One serious accident in 2010 and one in 2011 resulted in 90 lost work days. Other companies in the Group have no work-related incidents to report.
Remuneration levels for senior management
Teracom AB's Board of Directors is responsible for appointing
the company's President and CEO along with establishing
the terms of employment. The Board applies the guidelines
established by the Government, Guidelines for the employment terms of senior executive in companies that are stateowned. Details about remuneration to the Board of Directors,
President/CEO and other senior executives are available in
note 6 on pages 74-75.
Future prospects
The pay TV operations are relatively less sensitive to business
cycle fluctuations than the other areas, but the importance
of value-for-money increases during period of financial
uncertainty. The competition on all of the pay TV markets
in which the Group is active will continue to be intense.
The network operations are by nature more stable and have
external contracts primarily within public service and services
to major players on the telecom market.
Owner requirements and dividends
The owner has established a requirement for the Group's
equity ratio and a long-term goal for return on equity. The
equity ratio should be at least 30 percent and the goal for
return on equity is 17 percent. At the end of 2011, the equity
ratio was 32 (31) percent and return on equity for the year
was 10 (12) percent. The Group's goal is to distribute as
dividends 40-60 percent of net profit for the year provided
that the goal of an equity ratio equal to 30 percent has been
achieved.
Proposed appropriation of profits
Non-restricted equity in the Parent
Company
Profit brought forward
Profit (loss) for the year
Total non-restricted equity
1,633,000,000 SEK
226,129,759 SEK
1,859,129,759 SEK
The Board of Directors suggests the following appropriation of profits:
Dividends
110,000,000 SEK
Carried forward
1,749,129,759 SEK
Total
1,859,129,759 SEK
48
The Board of Directors' statement on value transfer
according to Chapter 18 Section 4 of the Swedish
Companies Act
The Board suggested to the 2012 AGM that it decide on
total dividends of SEK 110 million for the 2011 financial year.
The distribution totals 65 percent of the Group's net profit.
In light of the proposal, the Board of Directors may hereby
make the following statement in accordance with Chapter
18, section 4 of the Companies Act.
The Board of Directors finds that the company's restricted
equity will still be fully covered following the proposed
dividends. The Group is reporting equity of SEK 1,773 million,
of which SEK 217 million consists of earned profits after the
transactions with shareholders for the year as a result of the
formation of a new Group structure. The equity ratio for the
Group was 32 (31) percent and for the Parent Company 31 (-)
percent. It is the opinion of the Board of Directors that the
company's and the Group's equity will be sufficient following
the proposed proposition given the nature, scope and risks of
the operations. The Board has taken into consideration the
company's and the Group's historical and budgeted development and the state of the economy.
Even after the proposed distribution of profits, the
company's and the Group's equity ratio is judged to be satisfactory. The dividends payment will not affect the company's
or the Group's ability to fulfill its payment obligations. It is
the opinion of the Board that the company and the Group
are well prepared to handle both changes to liquidity and
unexpected events.
Having considered this and all of the information
presented in the annual report, it is the Board's opinion that
its proposed dividend is justifiable. This applies not only to
the Parent Company but also the Group as regards the equity
requirements that are based upon the type, size and associated risks of the business as well as consolidation and investment needs, liquidity and overall financial position, as stated
in the Swedish Companies Act, ABL chapter 17, paragraph 3
(Prudence Rule).
Corporate Governance Report
The Corporate Governance Report has been examined by
the Group's auditors and is part of the Directors' Report.
The report describes how the company is governed, how the
work of the Board of Directors is designed, how the company
conducts its business and how the operations are followed up
in relation to established goals. The report includes a description of the internal control with regard to financial reporting.
Teracom Group AB's owner and goals
The Swedish Government is the sole owner of Teracom Group
AB, a Swedish limited liability company with its registered
office in Stockholm.
The catchwords for the Government's administration of
wholly owned companies are openness, active ownership,
order and clarity. The Government Ownership Policy states
that state-owned companies must take responsibility for
issues relating to ethics, the environment, human rights,
equality and diversity. The owner thus requires a well
thought-out strategy for these issues.
The business objective of Teracom Group AB is to indirectly offer network solutions for the distribution of radio
and TV and any other activities relating thereto. Based on this
objective and within the framework of the regulatory requirements, the company must always act in a businesslike manner.
The ownership directive lays down the Group's financial
goals and dividends policy as:
• Return on equity should be calculated as the profit after
net financial items (taxed at the standard rate) divided by
average adjusted equity. The goal is to obtain a long-term
return on equity of 17 percent.
• Equity ratio of 30 percent.
• Between 40 and 60 percent of net profits should be distributed as dividends, provided that the goal for equity
ratio has been achieved.
Framework and governance structure within Teracom Group
Management of Teracom Group AB is based on the Companies
Act (ABL, in Swedish) and the Government Ownership Policy.
The Government's Ownership Policy in turn contains references to the Swedish Code of Corporate Governance, hereafter referred to as "the Code".
At the Annual General Meeting, the owner decides on the
company's Articles of Association, appoints the company's
Board of Directors and provides directives regarding the
Group's financial goals and dividends policy.
The Board of Directors is responsible for ensuring that
the Group's companies are well organized and carries the
ultimate responsibility for the management of the companies'
operations. The work of the Board of Directors is governed by
a Rules of Procedure, which is adopted by the Board at least
once a year. The Rules of Procedure also regulates the relationship between the Board of Directors and the President/
CEO, as well as the President/CEO's authorities. Read more
about the Annual General Meeting and the work of the Board
of Directors on pages 50-52.
The Board of Directors also decides on important internal
governance documents for the Group, for example the
strategic plan and some Group policies.
At the end of 2011, the Group consisted of the Parent
Company, Teracom Group AB, and the operating subsidiaries,
Teracom AB and Boxer TV-Access AB in Sweden, Teracom A/S
and Boxer TV A/S in Denmark and Digi TV Plus Oy in Finland.
The diagram on page 50 provides an overview of the Group's
governance structure.
Deviations from the Code
According to the Government Ownership Policy, the Code
shall be applied in all state-owned companies. The purpose of
the Code is to contribute to improved governance of Swedish
limited liability companies and address the decision-making
systems through which the owners directly or indirectly
control the company.
The rules pertain to an individual company's organization
and working methods, along with the interaction between
the two. The Code should be applied in accordance with the
"comply or explain" principle. For certain issues, in accordance with the Code's "comply or explain" principle, the Government has found cause to justify deviations from the Code.
A summary of the Government's reasons for its deviations
from the Code is presented below.
Teracom Group AB deviates from the Code on the
following items:
Rule 2 on the selection of and remuneration to the Board
and auditors
The provisions of the Code are primarily intended for public
companies with widespread ownership. Teracom Group
deviates from these rules because the nomination process
follows the Government Ownership Policy. According to the
Government Ownership Policy, the owners, via the Ministry
of Finance, nominate the members of the Board of Directors
and the auditors. For the 100 percent state-owned companies, there are uniform and common principles for a structured nomination process, which is run and coordinated by
the Ministry.
Rule 4.4 on the independence of the Board of Directors
According to rule 4.4, the majority of Board members must
be independent in relation to the owners. Teracom Group
deviates from this rule because, for companies that are 100
percent state-owned, there is no reason to report on independence. The Government Ownership Policy stipulates
that nominations of Board members are to be made public,
in accordance with the guidelines of the Code. However,
an exception is made for reporting members' independence
in relation to major owners. The Code rule stipulates that
companies must have at least two Board members who are
independent of major owners. It also stipulates that the
independence of all Board members to major owners must
be reported. The purpose of this rule is to protect minority
owners' interest in companies where there is widespread
ownership.
49
The Government
The Government Ownership
Policy
Governance structure
Nomination process
The Government Ownership
Policy
Annual General Meeting
Articles of Association
External audit
Audit plan
Teracom Group AB
Board of Directors
Rules of Procedure
Audit committee
Remuneration committee
Internal audit
Internal audit plan
President/CEO
Directive for the President/CEO
Teracom AB
Teracom A/S
Rule 6.1 on the Chairman of the Board
The Code addresses the special role of the Chairman of the
Board. The Chairman of the Board in the Teracom Group AB is
appointed by the Annual General Meeting. If the Chairman steps
down during the term of office, the owner must immediately
appoint a new Chairman at an extraordinary general meeting of
shareholders. This is a deviation from the Code, which instead
stipulates that the Board may appoint its new Chairman.
Rules 6.3 and 8.2 on evaluation of the Board of Directors and
the President/CEO
The work performed by the Board of Directors must be evaluated
each year. The Code stipulates that the Chairman of the Board is
responsible for ensuring that the Board's work is evaluated and
that the nomination committee is informed of the results of the
evaluation. For companies that are wholly owned by the state,
the Swedish Government Offices, rather than the nomination
committee, must be informed of the evaluation results.
Teracom Group's Annual General Meeting
The Annual General Meeting (AGM) is Teracom Group AB's
highest decision-making body. It is the forum through which
the Government, in its role as shareholder, formally exercises its control. The AGM appoints the Board of Directors
and auditors. It also makes decisions concerning such things
as changes to the articles of association and adopting the
balance sheet and income statement.
Teracom Group AB's AGM is held in Stockholm, where the
company's registered office is currently located. Notice of the
AGM and any extraordinary general meetings of shareholders, where issues pertaining to a change to the articles of
association will be discussed, must be given no earlier than
six weeks and no later than four weeks prior to the meeting.
Notice of any other extraordinary general meetings of shareholders must be given no earlier than six weeks and no later
than two weeks prior to the meeting. In addition to the rules
contained in the Swedish Companies Act and the Code, the
following principles apply to the shareholder meetings of
state-owned companies. Notice of the time and location
of the AGM must be sent to the Swedish Parliament (Riksdagens Centralkansli) simultaneous to issuing such notice to
50
Boxer TV-Access AB
Boxer TV A/S
Digi TV Plus OY
shareholders. Members of Parliament who wish to attend the
AGM must notify the Board in advance. Such notice should
be submitted at least one week prior to the AGM.
The public should be invited to attend the AGMs of stateowned companies. For state-owned companies, arrangements
should be made in conjunction with the AGM for allowing
the public to present questions to the Board of Directors and
management team. State-owned companies must hold their
AGM before April 30 and any distribution of dividends must
take place no later than two weeks after the AGM.
Extraordinary General Meeting of Shareholders, Number 1, 2011
Teracom Group AB held an extra general meeting of shareholders on March 22, 2011 as a step in the process of forming
a new Parent Company in the Group. At the meeting, the
following Board members were elected: Åsa Sundberg, Tobias
Henmark, Ingrid Engström, Lars Grönberg, Kristina AxbergBohman, Urban Lindskog, Maria Curman and Nils Petter Tetlie.
Åsa Sundberg was elected Chairman of the Board.
The above list of members were at the same time elected
to the Board of Directors of Teracom AB.
PriceWaterhouseCoopers AB was appointed auditor for
the period of time until the next AGM.
Extraordinary General Meeting of Shareholders, Number 2, 2011
Teracom Group AB also held an extra general meeting of
shareholders on June 1, 2011. The meeting elected Johan
Hallberg as a new Board member to replace Tobias Henmark
and announced employee representatives John-Olof
Blomkvist, ST, with Stig-Arne Celin as deputy, and Magnus
Ahxner, Akademikerna, with Niklas Hanson as deputy.
The AGM-appointed Board members and employee representatives are presented on pages 56-57. On the same day,
Teracom Group AB formally became the Parent Company
in the Group as the Government transferring the shares in
Teracom AB to Teracom Group AB.
2012 AGM
The 2012 AGM will be held in Stockholm on April 18.
Teracom AB's 2011 AGM
Teracom AB's AGM was held on April 14, 2011. At the AGM,
the auditor from PriceWaterhouseCoopers AB delivered the
auditor's report to the owner, which then discharged the
Board of Directors from liability. The AGM adopted the annual
report for the 2010 financial year and decided, in accordance
with the Board's proposal, to distribute SEK 110 million as
dividends to the owner. The AGM approved the proposal that
was presented on remuneration and other employment terms
and conditions for senior executives. The minutes from the
general meetings of shareholders, with information about all
decisions, are available at www.teracom.se.
Composition of the Board of Directors
According to the Government Ownership Policy, each nomination of a Board member shall be based on the competence need
of the company’s Board of Directors. The Government's goal
is that the Board shall have a high level of expertise, which is
well adapted to the company's business, situation and future
challenges. Board members are expected to have a high level
of integrity and exercise good judgment, as demanded of
state representatives. Each Board member must be capable of
making an independent assessment of the company's operations. The composition of the Board should also be such that
there is balance between the number of men and women (at
least 40 percent representation for each gender). The percentage
of members elected by the AGM who are male is 50 (43) percent
for Teracom Group AB's Board of Directors. The average age
of Board members is 50 (53) years. The owner's assessment is
that, on the whole, the Board of Directors meets or exceeds the
requirements stated in the Government Ownership Policy.
Responsibility of the Board of Directors
The Board has the ultimate responsibility for the organization
and management of the Group's affairs. The Board is responsible for ensuring that ccompany’s reporting to its owner and
the public provides a true and complete picture of the Group's
development, financial position and risks. Furthermore, the
Board is responsible for making sure that financial statements
are prepared in accordance with applicable laws and generally
accepted accounting principles. It must also ensure that the
Group complies with the recommendations set out in the OMX
Nordic Exchange Stockholm listing agreement. The Board must
reconcile with the owner on issues of significant importance,
such as the capital structure and long-term financing issues,
changes in strategy and acquisitions, mergers or divestitures.
Name
Åsa Sundberg
Kristina Axberg Bohman
Maria Curman
Ingrid Engström
Lars Grönberg
Johan Hallberg
Urban Lindskog
Nils Petter Tetlie
Tobias Henmark
John-Olof Blomkvist
Magnus Ahxner
Claes-Göran Persson
Stig-Arne Celin
Function in the Group Board of Directors
Chairman of the Board
Board Member
Board Member
Board Member
Board Member
Board Member
Board Member
Board Member
Board Member
Board Member
Board Member
Board Member
Board Member
The Board's Rules of Procedure, which the Board adopts
annually, contains, in addition to rules for the work of the
Board and the division of responsibility between the Board
of Directors and the President/CEO, instructions regarding
financial reporting that complement the provisions set out in
the Companies Act and the Code.
The Chairman of the Board has special responsibility for
leading the work done by the Board and making sure that
it carries out all of its assigned duties. Among other things,
the Chairman is responsible for making sure that every new
Board member receives appropriate introductory training
and that the Board regularly updates and deepens its
knowledge of the Group. The Chairman is also responsible for
the company's contacts with the owner and for relaying the
owner's views on ownership issues to the rest of the Board.
The duties of the Board of Directors
There were 10 Board meetings held in 2011 in the Group's
Parent Company, up until June 1 Teracom AB and thereafter
Teracom Group AB. Essentially, the work done by the Board
followed the adopted plan, which consisted of standing information and decision items as well as special issues that must
be approved by the Board each year. Each meeting followed
an approved agenda and the underlying documentation was
distributed to the Board prior to the meeting or made available on the Board's website. The company's auditors who
were elected at the AGM participated in a Board meeting
that was not attended by the company's management team.
At the meeting of the Board of Directors on March 16, 2011,
Teracom AB's auditor presented the findings from the audit
of the 2010 financial statements. The President/CEO and
Executive Vice President/CFO attended each Board meeting.
Representatives from the Group's senior management team
were invited to present certain issues. Standing items that
were covered at Board meetings included the President/CEO's
report and monthly financial reporting. Additionally, the
Board addressed several other issues at the meetings held in
2011. Particular attention was given to the following items:
• Strategic plan
• Budget
• Development in Boxer TV A/S and Digi TV Plus Oy
• The Group's organizational structure
• Reports from the audit committee on such items as internal control and audits
• Corporate governance issues and Group-wide policies
• Annual and interim financial statements
Number of Board meetings
10/10
10/10
8/10
10/10
10/10
6/6
9/10
5/8
4/4
7/10
9/9
1/2
2/2
Audit committee
Remuneration
committee
2/2
7/7
2/2
2/2
7/7
2/2
6/7
51
Remuneration
The Chairman of the Board and all Board members are paid for
their efforts and the responsibility that their assignment entails
in accordance with the decisions taken at the AGM. Members
also receive payment for their work in committees. The Board
of Directors decides on remuneration to the President/CEO and
Executive Vice President/CFO based on preparatory work by the
remuneration committee. When deciding on the remuneration and other employment terms and conditions for senior
executives, decisions are based on the guidelines set out the
remuneration policy, which are established by the owner at the
AGM. For more information on remuneration, please see note 6
on pages 74-75 of the annual report.
Audit committee
Each year, the Board appoints an audit committee to obtain
more in-depth knowledge on, and to be able to work more efficiently on, matters relating to risk assessment, internal control,
external reporting and auditing. The audit committee is a preparatory body, whose proposals are passed on to the Board, i.e. the
committee is not authorized to make decisions. The committee's
work is regulated by the Board's Rules of Procedure.
The committee's tasks also include monitoring auditor
impartiality and independence by supervising the independent audit tasks that auditors may be given by the company's
management team. The audit committee also assists the
Board of Directors in assuring the quality of financial
reporting. Following the Board meeting in March 2011, the
audit committee consisted of three members: Chairman
Kristina Axberg Bohman, Lars Grönberg and Urban Lindskog.
The Executive Vice President/CFO, group reporting
manager and auditors attended each meeting. However, the
auditors were not present at the meeting to evaluate their
work. Company officers from the Group were invited to
present certain issues. The audit committee always submitted
information about its meetings at the next scheduled Board
meeting. The minutes from each meeting of the audit
committee were sent to each of the Board members or made
available on the Board's website.
During the 2011 financial year, the committee held
seven meetings and particular attention was devoted to the
following items:
• 2011 interim reports and the 2010 annual report
• Risk assessments
• Critical accounting issues
• Evaluation of the internal controls
• Evaluation of the work done by auditors
• Governing policies for Board decisions
• Internal audit
• Planning of the audit
Remuneration committee
The remuneration committee is a preparatory body that
submits its recommendations to the Board of Directors and
thus is not authorized to make decisions. The remuneration committee is responsible for reviewing and providing
recommendations to the Board on remuneration principles
and pension terms for the company's senior executives in
52
accordance with the Group's policies. It is also responsible for
reviewing and providing recommendations on the President/
CEO's terms of employment, remuneration and other benefits
prior to a decision on such matters by the Board of Directors.
The remuneration committee held two meetings during the
2011 financial year. The committee consists of four members
appointed by the Board, specifically Åsa Sundberg (Chairman),
Maria Curman, Ingrid Engström and Johan Hallberg.
Responsibilities of the President/CEO and cooperation with
the Board
The Board of Directors appoints the Group's President/CEO,
a position which has been held by Crister Fritzson since
2008. Gunilla Berg was elected Executive Vice President/
CFO at the Board meeting in November 2010. According
to the Companies Act and the Board of Directors' Rules of
Procedure, the President/CEO is responsible for the ongoing
administration of the Group's business activities. The Board's
directive for the President/CEO provides detailed information
on the President/CEO's authority and obligations.
Cooperation and exchange of information between the
President/CEO and the Chairman of the Board occurs at
regularly scheduled meetings. Among other things, these
meetings are used to plan upcoming Board meetings. The
President/CEO provides the Board with monthly reports that
help facilitate the Board's ability to continuously monitor the
Group's financial position.
Management structure and organization
Teracom Group's management team meets every other week
in order to discuss issues relevant to the Group as a whole,
such as allocation of resources, financial developments,
budgets/forecasts, ongoing decisions pertaining to business
operations, governance, risk management, sustainability
issues and issues before the Board.
During 2011, the Group management team consisted
of Crister Fritzson, President and CEO of Teracom Group
AB, Gunilla Berg, Executive Vice President and CFO of
Teracom Group AB, the Presidents of the active subsidiaries
in Sweden, Denmark and Finland and heads of the Group
functions Finance, Communication, Human Resources and
Strategy and Business Development. The Group management
team formulates and develops the Group's mission, goals and
strategies through discussions with the Board and it is also
responsible for the on-going administration of the Group.
Changes to the functions included in the Group management
team for 2012 are that, as of January, the head of Finance
will no longer participate and, as of March 12, the head of
the new function, Product, will join.
The President/CEO is Chairman of the Group management team and decides on the control mechanisms for the
subsidiaries and Group functions. The subsidiaries handle the
operational activities and are clearly accountable for their
performance. The Group functions, which are placed in the
Parent Company, have a functional responsibility within their
areas of expertise and are charged with the task of actively
supporting the Group management team and subsidiaries in
their efforts to achieve the Group's goals.
Evaluation of the Board of Directors and President/CEO
The Board's Rules of Procedure stipulates that there should
be a written evaluation of the work done by the Board and
the President/CEO during the past year covering topics such
as how well the Board has collectively executed its tasks and
the performance of individual Board members. The evaluation is then submitted to the unit within the Ministry of
Finance that is responsible for the nomination process.
The Board executed an evaluation of its work and the
work done by the President/CEO during 2011. A meeting to
evaluate the President/CEO was held without any members
of the senior management team present.
Internal control within the Teracom Group
Effective risk management and internal controls within the
Group provide the foundation for long-term growth in value.
The Teracom Group has established a set of rules, methods,
routines and policy documents aimed at mitigating risks
and increasing commercial advantages. Examples of such
governing policies are the financial policy and the authorization rules. Risk management within the Group is based on
established goals, both at a general level and at a secondary
level. More information about risk factors and how they are
managed by the Group is available on pages 45-46.
Internal audit
The Group discontinued its internal audit function during
the year. The primary reason for this was to increase the efficiency of internal audit activities.
The Group has implemented an annual self-evaluation
that specifically states the internal control requirements the
Group places on critical processes.
The evaluation is conducted in both the subsidiaries and
certain Group functions, depending on where the entire or
parts of the process are carried out. The units should state if
the control or measures are carried out and present in some
cases proof of this. The auditors then review the answers
with the units in question and conduct sample control tests.
If the unit states that insufficient controls and measures
have been taken, an action plan is prepared that outlines
a schedule for the measures and appoints a responsible
manager. These action plans are submitted to the auditors
and the Group Finance Department at Teracom Group.
To further ensure adequate internal control, the auditors
annually conduct an in-depth review of several of the critical
processes within the Group.
It is the Board of Director's overall assessment that the
proposed process ensures that the Group practices adequate
internal control. The Board intends to evaluate the need for
an internal audit function on an annual basis and explain its
decision in the Corporate Governance Report.
Auditors
The auditors elected at the AGM are responsible for examining the annual report, the accounts, the work done by the
Board of Directors and the President/CEO's administration. The
owner is responsible for appointing the company's auditors.
An administrator from the Swedish Government Offices monitors each step of the procurement process to determine the
auditors, from procurement criteria to selection and evaluation. The final decision is made by the owner at the AGM.
In accordance with the Companies Act, auditors are
appointed to serve for a period of one year. Ongoing evaluations are conducted to correct any deficiencies that may arise
and to clarify owner requirements. The audit firm PriceWaterhouseCoopers AB was appointed at an extraordinary general
meeting of shareholders in March 2011. Sten Håkansson,
who is the auditor-in-charge, also has audit assignments
with companies such as COOR, Eniro and the Swedish Trade
Council in addition to the Teracom Group audit assignment.
The Board's description of internal control for financial
reporting
As per the Swedish Companies Act and the Code, the Board of
Directors is responsible for the internal control. This report on
internal control was prepared in accordance with section 7.4
of the Code. As such, it is limited to a description of the internal
control and risk management related to the financial statements. The Teracom Group uses Internal Control – Integrated
Framework, which was launched in 1992 by The Committee
of Sponsoring Organizations of the Treadway Commission
(COSO). This is a recognized and established framework for
internal control. The Group applies the framework described
in the guidance to the Code. This framework advocates that
internal control should be comprised of the following:
• Control Environment
• Risk Assessment
• Control Activities
• Information and Communication
• Monitoring
Control environment
The control environment provides the basis for the internal
control. It is comprised of the culture and values that exist
within the Group. To a great extent, these are reflected in policies, guidelines and instructions. The control environment is
also comprised of the allocation of responsibilities, authorities
and decision paths that have been defined for the company.
Risk assessment
Risk assessments are made on a regular basis and are based
upon the financial and non-financial goals that have been
established for the Teracom Group. The Group goals are broken
down into operational goals for each subsidiary and Group
function. These goals are communicated to the organization.
In order to achieve these goals, the Group has a process that
is based upon materiality criteria. The process also involves
identifying any external or internal risks that could present
obstacles to the company's ability to achieve its goals. In
conjunction with the planning of the internal audit, a number
of different critical areas for financial reporting are identified
and selected for special examination. During 2011, two areas
53
were examined: revenue processes and salary processes. One
aspect of the critical processes related to the financial statements is to conduct risk assessment in order to make sure that
controls are in place that provide reasonable assurance on the
accuracy of the company's financial reporting.
Control activities
Control activities exist within each area where management
has assessed that there is the greatest risk of a significant
impact on the financial statements. Among other things,
these activities include reporting on deviations, attestation
controls, follow-up on budgets, review of authorizations and
authorities, and follow-up on investments. They also include
several key controls related to the reporting process, which
are performed by the person in the organization who has
been allocated responsibility for that task. The effectiveness
and design of controls are periodically reviewed and tested.
The Group management team also relies on the information
in employee surveys regarding opportunities for improvement that exist throughout the organization.
Information and communication
The purpose of the Group's information activities is to regularly provide employees, as well as external stakeholders,
with true and fair information about the Group. The external
information should be factual, accessible, honest and
relevant. According to the Government Ownership Policy,
external reporting for state-owned companies should be
just as transparent as it is for companies listed on the stock
exchange. Therefore, external reporting should, where applicable, follow the recommendations set out in Nasdaq OMX
Stockholm's regulations. Annual reports and interim reports
are published at www.teracomgroup.se. Internal information
is primarily communicated via the company's Intranet and
managers. Policies, guidelines and instructions are available
to all employees via the company's intranet and commonly
accessible disks. The Group's information and communication channels for financial reporting purposes are deemed
to be appropriate and well-known. As such, reporting and
feedback from the business to the Board of Directors and
management team is thus possible. Financial information is
collected in conjunction with the month-end closing. Those
persons in charge of subsidiaries and Group functions are
responsible for commenting on such information as well
as any follow-up. This is compiled in a monthly report that
describes the Group's development. These reports are distributed to the Board of Directors, the Group management team
and the management teams of each subsidiary.
Follow-up
In this phase of control activities, it is possible to assure
the quality of financial reporting and identify any potential
deficiencies. The company's controller function is responsible for monitoring the business and reporting to the Group
management team. The Group management team and Board
of Directors are assisted by the audit committee and the
company's auditors, which regularly examine and test how
54
risk management, controls and the management systems are
functioning within the organization. They also help to ensure
that the internal controls that are in place are working as
intended to achieve the stated goals.
Governance for increased profitability and a sustainable
society
Focus on responsibility and business orientation
The catchwords for the government's administration of
wholly owned companies are openness, active ownership and
orderliness.
The owner expects its fully owned and administered
companies to serve as role models in sustainability issues.
Since 2008, the Group has improved by working on sustainability issues in a more structured way. This has been a
learning process, where the Group has collected the experiences of its companies and is always striving to improve
and renew itself. The Teracom Group reports its sustainability
work in accordance with the GRI guidelines at the C+ level.
Policies and guidelines
In order to define the Group's fundamental values, a decision
was made in 2010 to update and develop new Group-wide
policies, which were adopted by the Board in December 2011:
• Ethics policy
• Information and Public Affairs policy
• Investment policy
• Finance policy
• Security policy
• Remuneration policy
In addition, there are also the following Group policies:
• Diversity policy
• Environmental policy
• Information security policy
The policies provide the foundation for sustainability
work and were developed in stages. The ability to understand
and live up to these policies on a daily basis is what provides
real value when conducting business and to the Group's
stakeholders. For this reason, it is important to find ways
of implementing the policies that reach all employees. To a
limited extent, companies belonging to the Group supplement these with company-specific policies, such as quality,
work environment and network security policies.
Ethics policy
The Ethics policy takes precedence over other policies and
governance documents in the Group. It aims to provide
support and guidance to managers and employees. The
policy is based on the OECD Guidelines for Multinational
Companies and the ten principles in the UN Global Compact,
such as human rights, the environment, diversity, labor law
and anti-corruption.
The purpose of the policy is to ensure that all of the
Group's companies and employees behave in a manner that
strengthens the organization's profitability while simultane-
ously striving to achieve long-term social, environmental and
financial sustainability. It is possible for every employee to
report incidents that deviate from the Ethics Policy, or the
underlying governance documents and instructions, without
it resulting in any form of discrimination of punishment.
Environmental management
Within the Group there is a Group-wide organization for environmental work. The basis for this work is the environmental
policy, and the managers of the Group's various business
activities should ensure that the policy is put into practice in
their respective areas. The policy establishes overall principles
for how the Group should work to achieve a more sustainable
society, from an environmental perspective. Each company
is responsible for integrating the environmental work into a
natural part of its daily operations, thus reducing the Group's
total environmental impact. According to the environmental
policy, the impact on the environment will be minimized by:
• at the Group level, working long term and preventively for
a sustainable development of society, in which the environment is an important aspect
• at each company, identifying the areas that have an impact on the environment; then, prioritizing and working
with the issues that cause the overall environmental impact to decrease
• methodically establishing goals and action plans and following up and evaluating the results of environmental
work in order to raise efficiency, quality and achieve continual improvements
• always complying with legal requirements by creating and
following internal instructions related to the environment
• treating environmental issues with a great deal of openness, developing the Sustainability Report and communicating actively with the surrounding world in order to
improve cooperation
• ensuring that all employees are aware of their own responsibility to strive to decrease environmental impact
and that they are familiar with, and have access to, the
environmental policy
In order to systematically approach the efforts to
minimize its environmental impact, the Group decided set up
an environmental goal of decreasing its emissions 3 percent
a year until 2020. Based on this environmental goal and the
Teracom Group's documentation, activities designed to have
a beneficial impact on the environment will be implemented
at the companies during 2012. (Read more about the decided
activities in the Environmental section on pages 31-33 and
the country sections in the first section of the Annual Report.)
The Managing Director of each Group company has the
ultimate legal responsibility for the environmental work at
that company. The Teracom Group AB's environmental unit
monitors laws and requirements and provides support for
the managers responsible for implementing corresponding
routines in the organization. Each company has appointed an
environmental coordinator who will work with environmental issues on a part-time basis and form a link between the
Environmental Manager and the companies. These coordinators also form an environmental group that meets twice a
year to find ways for the companies to work together. The
result of this work and decisions from the group are to be
reported to the management team of each company as well
as the Group management team. The environmental policy
states that all of the Group's employees are responsible for
making an effort to decrease the environmental impact.
Furthermore, whenever environmental incidents occur
within the Teracom Group, the environmental unit is responsible for investigating the incident, suggesting improvements and reporting the results to the management team.
This facilitates more systematic monitoring and simplifies
continual follow-up.
In accordance with the Environmental Code, the areas of
operations that require a permit or must be reported include
the handling of cooling agents at broadcast stations, the
transportation of dangerous waste products and permits for
storing oil at broadcast stations. All of these activities are
performed by Teracom AB.
Work environment and safety
Teracom Group takes considerable responsibility for the
safety of its employees, as well as for their work environment
in general. The Swedish operations have had a structured
work environment policy for a long time. Risky work assignments require training and the proper protective equipment.
The Protection Committees at Teracom AB, which consist
of managers and safety representatives, have constant access
to relevant knowledge and requirements via the Group
function Facility management and environment, which is
knowledgeable in matters pertaining to the work environment and environmental safety. Each company's management team is responsible for company-wide efforts pertaining to the work environment and environmental safety
issues. Teracom AB's Protection Committee is responsible for
reporting any environmental and work environment incidents
to the company management team. Teracom AB's Protection
Committee also serves as an advisory body. The Protection
Committee's recommendations should serve as guidelines for
decisions on measures to be taken at the authorized level of
the companies. Starting in 2012, work environment issues for
the Swedish portion of the Group will be handled by a joint
Work Environment Committee.
Crisis organization
It is very important that Teracom AB has reliable operations and can provide a high level of service. In the event of
crises and serious disruptions, Teracom AB activates a wellestablished organization to effectively limit damages and
restore operations. The requirements within digital TV and
FM radio are particularly high. In addition to its assignment
to safeguard public service broadcasts from democratic and
educational perspectives, Teracom AB offers services that are
important to society. One example is the service Important
Public Announcements (IPA), which must always be available
in the event the general public must be warned about serious
events. Radio newspapers, a service that provides people with
different types of functional disabilities access to daily newspapers and for which Teracom provides the technical platform, are also important.
55
1
2
3
4
5
6
7
8
9
10
11
Group management
1. Crister Fritzson (Born 1961)
President and CEO, employed since 2001. Previously
President of Boxer TV-Access AB, Vice President
with global responsibility for Marketing and Sales at
Allgon Systems, Channel Manager at Motorola and
Head of Nordic/Baltic Region at Motorola. Board
assignments at Boxer TV-Access AB, Digi TV Plus
Oy and Boxer TV A/S. Diploma in Market Economy
and MBA from Nordic School of Marketing and
Executive Management Program at INSEAD.
2. Gunilla Berg (Born 1960)
Executive Vice President and CFO, employed since
2010. Previously Executive Vice President and CFO for
the SAS Group, Executive Vice President and CFO for
the Swedish Cooperative Union (KF) and various management positions at AGA and Svenska Shell. Board
assignments at Alfa Laval AB and Lundbergföretagen
AB. MSc from the Stockholm School of Economics.
3. Steffen Weber (Born 1967)
Acting Managing Director of Teracom A/S,
employed since 2009. Previously CFO at Teracom
Denmark, CFO at Privathospital Hamlet, CFO at
TDC Norway and Controller at Nykredit A/S. MSc in
Business Administration and Managerial Accounting from Copenhagen Business School.
4. Pierre Helsén (Born 1951)
Director of Strategy & Research, employed since
July 2007. Previously Head Secretary at the Digital
TV Commission, Investment Manager at Skandia
Mediainvest, CFO at SVT and CFO at TV4. Board
56
assignments at Sundbybergs Stadsnätsbolag &
Pampas Produktion. Studied business management
at Uppsala University.
5. Niklas Engström (Born 1973)
Director of Product, employed since 2012. Previously manager at New Business & Product Management Bredbandsbolaget, manager at Media &
Entertainment XlentStrategy and consultant at
Andersen Consulting. MSc in Industrial Economics
& Management from the KTH Royal Institute of
Technology in Stockholm.
6. Stephan Guiance (Born 1960)
Managing Director of Teracom AB, employed since
2008. Previously President of FastTV.net AB and
employed at Sweden On Line, as President for the
years 1995–2002. Studied business management at
Stockholm University.
7. Andrea Gisle Joosen (Born 1964)
Managing Director of Boxer TV-Access AB,
employed since 2011. Previously Managing
Director Panasonic Nordic AB, Managing Director
Nordic for Chantelle AB, Managing Director Nordic
for Twentieth Century Fox Home Entertainment
AB, Marketing Director Nordic at Johnson &
Johnson Consumer Products AB. Board assignment
at Board Hakon Invest AB. MSc in Business and
Economics from Copenhagen Business School.
8. Jyri Ratia (Born 1972)
Managing Director of Digi TV Plus Oy, employed
since 2010. Previously Senior Vice President,
Business Development Sanoma Entertainment Oy,
Vice President Television Welho cable operator
business Sanoma Television Oy, Head of Marketing
and Sales, Marketing Manager Brand Manager
Sanoma Television Oy. MSc (Econ) Helsinki School
of Economics.
9. Steen Ulf Jensen (Born 1966)
Managing Director of Boxer TV A/S, employed since
2008, associated with Boxer since 2006. Previously
Founder and Partner at Jensengroup Consulting playing a key role in Boxer's application as
operator in Denmark, CEO of Viasat Distribution,
Chief Operating Officer Viasat Broadcasting, CEO
of Viasat Denmark. Board assignment at AH Metal
Solution. MBA from Copenhagen Business School.
10. Marianne Winblad von Walter (Born 1969)
Human Resources Director, employed since 2010.
Previously HR Director NASDAQ OMX, HR Manager
Gillette Group Nordic, HR Specialist and Acting
Head of HR at MTG AB. BSc from Uppsala University.
11. Johan Bobert (Born 1960)
Communications Director, affiliated with Teracom
and Boxer since 2002, employed since 2011. Previously Partner and Executive Vice President at Hill
& Knowlton Sweden AB and Senior Consultant at
Jerry Bergström AB. Studied political science and
history at Stockholm University. Studied marketing
communications at RMI Berghs.
1
2
3
4
5
6
7
8
9
10
11
12
Board of Directors
1. Åsa Sundberg (Born 1959)
Chairman of the Board since 2008, Managing Director
Net 1 Sverige. Active in, and partner of the risk capital
company, Provider Venture Partner. Previously CEO
of Telia Engineering and Telia Prosoft as well as head
of Telia's International Network and Carrier business.
Other current and previous board assignments at
Aspiro AB, The Cloud Networks Ltd, Fox Technologies
Inc, APTV AB and Mobilaris AB. MSc from the KTH
Royal Institute of Technology in Stockholm.
2. Lars Grönberg (Born 1949)
Member since 2005. Previously President and CEO of
Intrum Justitia and director responsible for foreign
operations at TeleDenmark. Other board assignments
at Matkompaniet AB, Bindomatic AB, Connecta AB,
Br. Perssons Byggnads AB, Business Security AB,
Qamcom AB, Quadracom AB and Skandia Elevator AB.
MSc and PhD from Stockholm School of Economics.
3. Kristina Axberg Bohman (Born 1959)
Member since 2007, President of Bohman Consulting & Advisory AB. Previously CFO at Manpower,
CFO at LG P Telecom, Financial Controller at Telia
AB and Financial Controller at Akzo Nobel. MSc
from Linköping University.
4. Urban Lindskog (Born 1965)
Member since 2007, President of Oryx Simulations AB. Previously CEO of Scharp & Lindskog AB
and Lindskog & Partners AB, CEO of Catella IT AB.
Other board assignments at Algoryx Simulation
AB, Carmenta Sverige AB and Sonetel AB. MSc in
system engineering from the KTH Royal Institute of
Technology in Stockholm and MBA from INSEAD in
Fontaine­bleau, France.
5. Maria Curman (Born 1950)
Member since 2007, President of Bonnier Books.
Previously MD for SVT and President and Director
of Bonnier Utbildning AB. Other Board assignments at Axfood, Bonnier Media Germany,
Cappelen Damm Norway and Bonnierförlagen AB.
MSc from the Stockholm School of Economics.
6. Nils-Petter Tetlie (Born 1965)
Member since 2011, President of Fujifilm Sverige AB
Previously Executive Vice President at Bredbandsbolaget, Network Director at Telia AS. Other (previous)
board assignment at Aspiro AB. MSc from Heriot
Watt University/Edinburgh.
7. Ingrid Engström (Born 1958)
Member since 2003, Senior Executive Advisor SE
B. Previously Senior Vice President Operations,
Purchase and HR at Eniro AB, President of Know
It AB and President of ComHem AB. Other board
assignment at Bisnode. MA in Applied Psychology
from Uppsala University.
8. Johan Hallberg (Born 1974)
Member since 2011. Administrator, Swedish Government Offices. Previously Lenner & Partners, Director
– Team Head for Stockholm Corporate Finance and
Associate at HSBC Investment Bank in London. Other
board assignments at Metria AB and Oak Capital
Group AB. MSc from Stockholm School of Economics.
9. Stig-Arne Celin (Born 1953)
Deputy Board Member since 2002, union representative for ST at Teracom Group. Service engineer at
Gävle FM/TV station, Teracom Sweden.
10. Magnus Ahxner (Born 1973)
Member since 2011, union representative for
Akademikerna at Teracom Group. Business development at the Teracom Group. Deputy member of
Teracom AB's Board of Directors in 2010.
11. Niklas Hanson (Born 1977)
Deputy Board Member since 2011, union representative for Akademikerna at Teracom Group. Project
manager at the Teracom Group.
12. John-Olof Blomkvist (Born 1949)
Member since 1995, union representative for ST
at Teracom Group. Maintenance planner at the
Teracom Group.
Auditors
PriceWaterhouseCoopers AB, auditor-in-charge
Sten Håkansson – authorized public accountant
and sustainability verification officer Fredrik
Ljungdahl – expert member of FAR.
57
Financial overview of the Group
MSEK
2011
2010
2009
2008
2008*
2007
2006
2005
Net profit/loss
Operating income
Depreciation/amortization and impairment
Operating profit/loss
Profit (loss) before taxes
Profit (loss) for the year
4 059
-423
376
325
168
3 852
-349
293
281
201
3 408
-281
496
483
269
2 991
-277
635
622
460
3 188
-374
581
568
421
3 312
-429
625
669
470
3 004
-408
495
490
354
2 700
-411
360
359
277
-
-
-
91
91
80
56
33
5 553
1 773
5 698
1 743
4 190
1 685
3 765
1 666
3 765
1 666
3 803
1 810
3 919
1 776
3 644
1 602
0
0
0
0
0
80
86
60
2 016
1 764
2 381
1 574
1 016
1 489
306
1 793
306
1 793
7
1 906
11
2 046
15
1 967
645
-344
-458
-157
789
-1 528
1 040
301
286
-519
293
60
618
-1 200
-180
-762
581
-1 242
-180
-841
995
-238
-436
321
738
-263
-219
256
827
-447
-208
172
9
10
10
32
0,98
799
2 177
707
8
12
10
31
1,12
642
15
16
22
40
0,54
777
21
26
34
44
0,14
912
18
24
32
52
0,14
955
19
26
34
48
0
1 054
16
21
27
45
0
903
13
19
18
44
0
771
3 041
1 171
254
243
-161
-168
-417
707
638
669
669
674
687
697
of which holdings without a controlling interest
Financial position*
Total assets
Equity
of which holdings without a controlling interest
Interest-bearing liabilities
Non-interest bearing liabilities
Cash flow
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Cash flow for the year
Key ratios
Operating margin, %
Return on equity, %
Return on capital employed, %
Equity ratio, %
Debt/equity ratio
EBITDA
Net liability over EBITDA
Average number of employees
* Including operations that were discontinued in 2009
58
Consolidated Income Statement
MSEK
Operating income
Note
2,3,4
2011
2010
4 046
13
4 059
3 848
4
3 852
25
9
-214
-614
-404
-19
-385
-1 038
-1 034
376
-235
-571
-331
-18
-472
-972
-969
293
12
12
27
-78
325
37
-49
281
13
-157
168
-80
201
Net sales
Other income
Work performed by the company for its own use and capitalized
5
Operating expenses
Material costs
Personnel expenses
Depreciation/amortization
Impairment
Transmission
Program company costs
Other expenses
Operating profit/loss
Financial income
Financial expenses
6,7
4,8
4,9
10,11
4
Profit (loss) before taxes
Tax on profit for the year
Profit (loss) for the year
Consolidated Statement of Comprehensive Income
MSEK
Profit (loss) for the year
2011
168
2010
201
Other comprehensive income:
Cash flow hedges
Hedges of net investments
Translation differences
Income tax related to "Other comprehensive income" items
Total Other comprehensive income for the year, net after tax
Total comprehensive income for the year
-37
-6
3
12
-28
140
0
0
-33
0
-33
168
Comprehensive income for the period related to:
Parent Company shareholders
Holdings without a controlling interest
Total comprehensive income for the year
140
0
140
168
0
168
59
Consolidated Balance Sheet
MSEK
Note
2011-12-31
2010-12-31
15
15
15
15
16
16
17
21
755
1 969
31
238
1 181
257
95
2
4 528
771
2 071
33
164
1 214
351
114
0
4 718
19
20
67
321
18
44
0
329
26
220
1 025
5 553
25
295
0
24
17
242
0
377
980
5 698
0
1 633
-77
217
1 773
250
653
-49
889
1 743
3, 21
21
24
18
7,25
1 783
16
79
330
1
2 209
2 134
0
70
362
1
2 567
3, 21
75
442
285
76
329
217
ASSETS
Fixed assets
Land and buildings
Plant and machinery
Equipment, tools, fixtures and fittings
Construction-in-progress
Goodwill
Other intangible assets
Other financial assets
Derivative instruments
Total fixed assets
Current assets
Inventories
Accounts receivable
Income tax recoverable
Other receivables
Derivative instruments
Prepaid expenses and accrued income
Other financial receivables
Cash equivalents
21
22
21
Total current assets
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity
23
Share capital
Other contributed capital
Translation reserve
Earned profits including net profit/loss for the year
Total equity
Long-term liabilities
Liabilities to credit institutions
Derivative instruments
Deferred income
Deferred tax liabilities
Provisions for pensions and similar obligations
Total long-term liabilities
Current liabilities
Liabilities to credit institutions
Accounts payable
Other current liabilities
Derivative instruments
Accrued expenses and deferred income
Provisions
21
10
0
24
25
755
4
1 571
3 780
5 553
764
2
1 388
3 955
5 698
28
29
0
0
0
0
Total current liabilities
Total liabilities
TOTAL EQUITY AND LIABILITIES
Pledged assets
Contingent liabilities
60
Consolidated Cash Flow Statement
MSEK
Note
2011
2010
376
423
105
9
-62
-149
702
293
349
44
1
-17
-165
505
Cash flow from changes in working capital
-42
-26
-108
112
7
-57
37
134
27
17
69
284
Cash flow from operating activities
645
789
-287
-45
0
-12
-344
-242
-42
-1 241
-3
-1 528
27
-375
-110
-458
1 809
-659
-110
1 040
-157
377
0
220
301
78
-2
377
Operating activities
Operating profit/loss
Depreciation/amortization and impairment
Other items not affecting liquidity
Interest received
Interest paid
Income tax paid
Cash flow from operating activities before changes in working capital
Cash flow from changes in working capital
Change in inventories
Change in accounts receivable
Change in other operating assets
Change in accounts payable
Change in other operating liabilities
Investing activities
Investments in property, plant and equipment
Investments in intangible assets
Acquisition of subsidiaries
Other
Cash flow from investing activities
27
Financing activities
New loans
Amortization of loans
Dividends
Cash flow from financing activities
Cash flow for the year
Cash equivalents at the beginning of the year
Exchange rate differences on cash equivalents
Cash equivalents at the end of the year
61
Consolidated Statement of Changes in Equity
Attributable to the Parent Company's shareholders
MSEK
Opening balances, 1 January 2010
Share capital
Other
contributed
capital
Reserves
250
653
-16
Comprehensive income
Profit (loss) for the year
Profit
brought
forward
798
1 685
201
201
Total
equity
Other comprehensive income
Exchange rate differences
Total Other comprehensive income
Total comprehensive income
0
0
0
0
-33
-33
-33
0
201
-33
-33
168
Transactions with shareholders
Dividend pertaining to 2009
Total transactions with shareholders
0
0
0
-110
-110
-110
-110
250
653
-49
889
1 743
168
168
0
168
-37
-6
3
12
-28
140
Opening balances, 1 January 2011
Comprehensive income
Profit (loss) for the year
Other comprehensive income
Cash flow hedges
Hedging of net investment
Exchange rate differences
Income tax related to Other comprehensive income
Total Other comprehensive income
Total comprehensive income
0
0
0
0
-37
-6
3
12
-28
-28
Transactions with shareholders
Dividend pertaining to 2010
New Group structure 1 June 2011
Total transactions with shareholders
-250
-250
980
980
0
-110
-730
-840
-110
0
-110
Closing balance, 31 December 2011
0*)
1 633
-77
217
1 773
*) Share capital amounts to SEK 50,000
62
Parent Company Income Statement
MSEK
Operating income
Net sales
Operating expenses
Other external expenses
Personnel costs
Operating profit/loss
Profit from financial investments
Interest income and similar items
Income from Group companies
Interest expenses and similar items
Profit/loss after financial items
Deferred tax
Profit (loss) for the year
Note
2,14
2011-06-01
2011-12-31
33
33
10,11
6,7
-13
-57
-37
12
12
12
24
297
-83
201
13
25
226
Parent Company Statement of Comprehensive Income
MSEK
Net profit/loss for the period
Profit (loss) for the year
Other comprehensive income:
Other comprehensive income for the year, net after tax
Total comprehensive income for the year
Note
2011-06-01
2011-12-31
226
226
0
226
63
Parent Company Balance Sheet
MSEK
Note
2011-12-31
26
14
18
5 292
134
25
5 451
5 451
14
22
377
2
379
21
212
591
6 042
ASSETS
Fixed assets
Financial assets
Participations in Group companies
Receivables from Group companies
Deferred tax assets
Total financial assets
Total fixed assets
Current assets
Receivables from Group companies
Prepaid expenses and accrued income
Total current receivables
Cash and bank balances
Total current assets
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity
Restricted equity
23
Share capital
0
0
Total restricted equity
Non-restricted equity
Profit brought forward
Profit (loss) for the year
Total non-restricted equity
1 633
226
1 859
1 859
Total equity
LIABILITIES
Long-term liabilities
Liabilities to credit institutions
Liabilities to Group companies
21
14
1 783
1 510
3 293
21
75
2
789
3
3
14
4
890
6 042
Total long-term liabilities
Current liabilities
Liabilities to credit institutions
Accounts payable
Liabilities to Group companies
Income tax liability
Other current liabilities
Accrued expenses and deferred income
Provisions
Total current liabilities
14
24
25
TOTAL EQUITY AND LIABILITIES
MEMORANDUM ITEMS
Pledged assets
Contingent liabilities
64
28
29
0
0
Parent Company Cash Flow Statement
MSEK
Note
2011
Operating activities
Profit/loss before financial items
Other items not affecting liquidity
Interest received
Dividends received
Interest paid
-37
-2
2
297
-59
201
Cash flow from operating activities before changes in working capital
Cash flow from changes in working capital
Change in Group receivables
Change in Other current assets
Change in Other operating liabilities and provisions
Cash flow from changes in working capital
-373
-6
815
436
Cash flow from operating activities
637
Investing activities
Acquisition of subsidiaries
Investments in other financial assets
Cash flow from investing activities
26
-5 292
-134
-5 426
Financing activities
New issue
New long-term loans
Amortization of long-term loans
Cash flow from financing activities
Cash flow for the year
Cash equivalents at the beginning of the year
Cash equivalents at the end of the year
1 633
3 878
-510
5 001
212
0
212
65
Parent Company Statement of Changes in Equity
MSEK
New Group structure 1 June 2011
Share capital
Other
contributed
capital
0*)
1 633
Statutory
reserve
0
Comprehensive income
Profit (loss) for the year
Profit
brought
forward
0
1 633
226
226
Total
Other comprehensive income
Total Other comprehensive income
Total comprehensive income
0
0
0
0
0
0
0
0
0
0
0
226
0
0
226
Transactions with shareholders
Total transactions with shareholders
0
0
0
0
0
0
0
0
0
0
Closing balance, 31 December 2011
0
1 633
0
226
1 859
*) Share capital amounts to SEK 50,000
66
Notes
Contents
Note
Description
1
2
3
4
Accounting and valuation principles
Operating income
Leases
Segment reporting
Work performed by the company for its own use and
capitalized
Employees and remuneration
Pensions
Depreciation/amortization
Impairment
Other expenses
Remuneration to auditors
Financial income and financial expenses
Tax on profit for the year
Information concerning closely related parties
Property, plant and equipment
5
6
7
8
9
10
11
12
13
14
15
Page
67
72
72
73
73
74
76
78
78
78
78
78
79
79
80
Note
Description
16
17
18
19
20
Goodwill and other intangible assets
Other financial assets
Deferred tax
Inventories
Accounts receivable
81
83
83
84
84
21
Financial instruments and financial risk management
84
22
23
24
25
26
27
28
29
Prepaid expenses and accrued income
Equity
Accrued expenses and deferred income
Provisions
Shares and participations in Group companies
Acquired businesses
Pledged assets
Contingent liabilities/guarantees
87
88
88
88
89
89
89
89
Page
Note 1. Accounting and valuation principles
Basis for the preparation of the financial statements
The consolidated financial statements have been prepared in accordance with
IAS 27 and through application of International Financial Reporting Standards (IFRS) as adopted by the EU. The application of these standards has been
supplemented by the interpretations issued by the International Financial
Reporting Interpretations Committee (IFRIC).
The consolidated financial statements were prepared in accordance with
the cost method with the exception of financial assets and liabilities (including derivative instruments) valued at fair value via the income statement.
Some disclosures are prepared in accordance with Swedish Financial Reporting Board Recommendation RFR 1, the Annual Accounts Act and the requirements set forth by the Government Ownership Policy. The Parent Company's
financial statements are prepared in accordance with the same accounting
principles as the consolidated financial statements, with the exception of that
described in the section Parent Company Accounting Principles.
The consolidated financial statements and annual report for the financial
year ending on 31 December 2011 were approved for issue by the Board of
Directors and Group CEO/President on 16 March 2012 and will be brought
forth for adoption at the Annual General Meeting on 18 April 2012.
Consolidated financial statements
The consolidated financial statements are prepared in accordance with the
purchase accounting method. This method implies that the identified assets,
liabilities and contingent liabilities of the operations acquired are reported
at fair value at the time of the acquisition, in accordance with a prepared
acquisition analysis. The acquisition cost for an acquisition includes the fair
value of assets submitted as consideration and liabilities incurred or assumed
on the day of transfer. This amount includes the fair value of assets or liabilities resulting from agreements for additional consideration. Expenses directly
attributable to the acquisition are recognized as they are incurred. Goodwill
arises and is reported as an asset whenever the consideration exceeds fair
value as determined by the acquisition analysis.
The Group's consolidated financial statements include the financial statements of the Parent Company and its directly or indirectly owned subsidiaries after the elimination of intra-Group transactions, unrealized gains from
inventories and amortization of acquired surplus values.
Definition of Group companies
The consolidated financial statements include Teracom Group AB and all
subsidiaries. Subsidiaries are companies in which Teracom Group AB either
directly or indirectly holds more than 50 percent of the voting rights or in
some other way exercises a controlling influence.
With regard to companies acquired or divested during the year, the following
applies:
- Companies acquired during the year were included in the consolidated
income statement as of the date control of the company was obtained.
- Companies divested during the year are included in the consolidated income
statement up until the date Teracom's control was terminated.
Transactions with closely related parties
All transactions with closely related parties are based on market prices.
Foreign currency translation
The consolidated financial statements are prepared in SEK, which is the Parent
Company's functional and reporting currency.
Transactions in foreign currencies are converted to the relevant currency
using the exchange rate applicable on the transaction date. Financial assets
and liabilities expressed in foreign currencies are reported in the balance sheet
after valuation at the exchange rate prevailing on the balance sheet date.
Exchange rate differences arising during the period due to operating receivables and operating liabilities are reported as part of operating profit (loss),
whereas exchange rate differences attributable to financial assets and liabilities are reported as part of the profit (loss) from financial investments. The
portion of the exchange rate differences that comprises an effective hedge of
net investments is reported under Other comprehensive income.
The balance sheets of foreign subsidiaries were translated to SEK using the
exchange rate prevailing on the balance sheet date. Goodwill and adjustments
to fair value arising from acquisitions of foreign companies are treated as
assets and liabilities in the foreign subsidiary and translated at the exchange
rate prevailing on the balance sheet date. The income statements were translated using the average exchange rate for the year. The translation difference
arising from the translation is reported directly under Other comprehensive
income.
67
The Group uses forward contracts and loans in foreign currency to hedge
certain foreign net investments. Exchange rate differences arising as result of
these contracts and loans are transferred to consolidated other comprehensive income to the extent they correspond to translation differences.
Following the divestment of a foreign subsidiary, the accumulated
exchange rate differences, which were previously transferred to Other comprehensive income, are reported in the profit/loss for the period as a part of
the profit or loss attributable to the sale.
Segment reporting
For the Teracom Group, the Group management team has been identified
as the senior-most decision making body. The Group management team
has established operating segments based on the information used to make
strategic decisions. The operating segments are responsible for the operating
profit and the working capital that they manage. Financial expenses, financial
income and income tax are dealt with at the Group level. The "Other" item
comprises Group functions, including Group management. These functionbased departments have income of insignificant amounts, which is why they
are not considered to be separate operating segments (in accordance with
IFRS 8).
The segments are reported in accordance with the same accounting principles that are applied by the Group. Sales between segments occur at market
terms and prices that are fair estimates of current market prices.
Recognition of revenue
Revenue is recognized when it is probable that the financial benefits will flow
to the Group and the amount of revenue can be measured reliably. Revenue
from fixed-price contracts for all segments is reported in the Parent Company in accordance with the percentage of completion method. Profit is thus
recorded at the same rate as the work is completed, provided that the costs
incurred or to be incurred in respect of the transaction can be measured reliably. Any expected loss on such contracts is recognized as an expense as soon
as such loss is probable. For subscription contracts that provide the customer
access to TV programs, revenue is recognized on a linear basis over the course
of the contract term. This also applies to direct costs associated with such
contracts, which are also recognized on a linear basis over the course of the
contract term. Costs and income for program cards (which are needed to see
the coded channels via a box and antenna) are not distributed over the course
of the contract term since these cards cannot be returned. Both the income
and costs for program cards are reported at the time card fee is invoiced to
the customer.
Net sales
Net sales pertains to revenue from services that have been sold and subscriptions that are part of the Group's ordinary operations, less any discounts and
value-added tax.
Other income/other operating income
Other income is income obtained from activities that are not part of the
Group's ordinary operations.
Borrowing costs
Borrowing costs, i.e. interest rates and other costs incurred in connection with
the borrowing of funds, are recognized in the income statement for the period
to which they refer. There are no loan expenses that are directly attributable
to the purchase, performance or production of a qualified asset and thereby
should be capitalized in the asset's cost of acquisition.
Taxes
Reported tax is made up of current tax and deferred tax. Current tax refers to
the profit or loss for the period and is valued at the tax rate prevailing on the
balance sheet date. Deferred tax is comprised of amounts to be paid in the
future or a reduction of future tax. Deferred tax is calculated in accordance
with the tax rates decided or announced on the balance sheet date.
Deferred tax is based on all identifiable temporary differences that exist on
the balance sheet date. Temporary differences are defined as the difference
between the carrying amount of an asset or liability and its tax base. Deferred
tax assets on deficit deductions and temporary differences are reported as
assets to the extent it is probable they will be utilized in the future. Deferred
tax assets and deferred tax liabilities are reported net when they are attributable to a single tax authority and when a company or a group of companies, for example via a Group contribution, is legally entitled to net tax assets
against tax liabilities.
The carrying amount of deferred tax assets is reviewed at the end of each
68
reporting period and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow the benefit of part or all
of that deferred tax asset to be utilized. Any such reduction is subsequently
reversed to the extent that it becomes probable that sufficient taxable profit
will be available.
Property, plant and equipment
Items of property, plant, and equipment are recognized as assets when it is
probable that the future economic benefits associated with the asset will flow
to the Group, and the cost of the asset can be measured reliably. Property,
plant and equipment are reported at historic cost with deductions for linear, accumulated depreciation and any impairment. Depreciation is calculated
from the point when an asset is acquired or a new plant is put into operation. Estimated useful lives are applied to both groups of assets and individual
assets. Land is not depreciated since its useful life is judged to be unlimited. In
all other cases, depreciation is calculated on a linear basis and is based on the
following expected useful lives:
Assets
Land and buildings
Buildings
Land improvements
Plant and machinery
Permanent equipment in buildings
Distribution equipment
Radio equipment
Power generating equipment
Antenna sites
Mast installations
Equipment, tools, fixtures and fittings
Vehicles
Other equipment
Useful life, years
20-40 years
10-20 years
10-15 years
3-10 years
7-15 years
10-15 years
10-20 years
20-30 years
3-6 years
3-5 years
Construction-in-progress
Construction in progress refers primarily to facilities that are being built.
Construction-in-progress is valued in the same way as acquired assets, i.e. in
accordance with the cost method at the cost of acquisition including directly
attributable expenses – that is, valuation in accordance with the actual costs
incurred.
Intangible assets
Goodwill
Goodwill is reported as an intangible asset with an uncertain useful life at
cost with deductions for accumulated impairment.
Brands
Acquired brands refers to Teracom's entitlement to use the Plus TV brand,
which was acquired in June 2009, in Finland. The brand is reported as an
intangible asset that is considered to have an uncertain useful life and is not
amortized.
Customer agreements
The acquisition of Teracom A/S in September 2010 included customer agreements, which were reported as an intangible asset. Acquired customer agreements are amortized on a linear basis over their useful life, which is 3 years.
Customer relations
Both the acquisition of Digi-TV Plus Oy in June 2009 and the acquisition of
Teracom A/S in September 2010 included customer relationships that were
reported as intangible assets. These acquired customer relationships are
amortized on a linear basis over their useful lives, which are judged to be 8
and 9 years, respectively.
Patents, licenses and similar rights
Intangible assets are recognized when it is probable that the future economic
benefits that are attributable to the asset will flow to the Group and the cost
of the asset can be measured reliably. Acquired patents, licenses and similar
rights are reported at cost with deductions for accumulated amortization and
any impairment. Patents, licenses and similar rights are amortized on a linear basis over the useful life, which is 3 years. The network activities include
capacity rights that are amortized over a useful life of 10 years.
Test of impairment on fixed assets
The Group assesses at each balance sheet date if there is any indication that
the value of a non-current asset has depreciated. If such an indication arises,
the Group conducts an impairment test, i.e. an assessment of the asset's
recoverable amount. Recoverable amount refers to the higher of an asset's
fair value, less sales expenses, and its value-in-use. Value-in-use is calculated as the present value of expected future cash flows that the asset is
expected to generate. The asset is written down by the amount to which the
asset's carrying amount exceeds the recoverable amount. When determining write-down requirements, the assets are grouped into cash-generating
units. A cash-generating unit is the smallest group of assets generating cash
flows that are in all material aspects independent of cash flows from other
assets or groups of assets. In addition, the Group conducts an annual review
of intangible assets with uncertain useful lives and intangible assets that are
not yet available for use. An assessment of whether there are any indications
of impairment is carried out at least once per year.
Leases
A lease is classified as a financial lease if it transfers substantially all of the
risks and rewards incident to ownership from the lessor to the lessee. All other
leases are classified as operating leases.
Teracom as lessor
Leases where the lessor retains substantially all of the risks and rewards incident to ownership are classified as operating leases. The Group's income from
operating leases primarily comes from rental agreements related to co-locations in the Group's masts. Any leasing income that arises is allocated to the
proper period and revenue is recognized linearly over the lease term. However,
any costs that arise, including depreciation, are expensed as occurred. Depreciation is in accordance with the rules for each type of asset, respectively.
Teracom as lessee
Leasing agreements pertaining to fixed assets, where the Group retains substantially all of the risks and rewards incident to ownership, are classified as
financial leases. At the inception of the lease, financial leases are reported in
the balance sheet at the leased asset's fair value or the present value of the
minimum lease payments (whichever is lower). Fixed assets obtained through
financial lease agreements are primarily vehicles, which are depreciated over
the asset's useful life or the term of the lease (whichever is shorter). Financial
lease payments are appropriated between financial expenses, interest and the
reduction (amortization) of the outstanding financial liability, so as to produce a constant periodic rate of interest on the remaining balance of the liability. The corresponding payment obligations, less the deduction of financial
expenses, are included in the balance sheet items: Liabilities to credit institutions (long-term and short-term financial liabilities, respectively). Financial
expenses are recognized in the income statement.
For operating leases, the lease payments are recognized as an expense in
the income statement over the lease term on a straight-line basis.
Financial instruments
Financial instruments are any type of contract that gives rise to a financial
asset, financial liability or one's own capital instrument in another company.
For the Group, financial instruments are comprised of the following: cash
equivalents, interest-bearing receivables, accounts receivable, accounts payable, borrowings and derivatives.
Classification of financial assets
Management determines the initial classification of the financial asset. The
purpose of the acquisition of the financial asset determines its classification.
a) Financial assets valued at fair value via the income statement
A financial asset is transferred to this category if it was acquired primarily to
be sold in the short term. Derivatives are classified as held for trading, provided that they are not identified as hedges, which are valued at fair value via
the income statement. Derivatives are only used for the purpose of managing
the Group’s electricity, currency and interest rate risks.
b) Loan receivables and accounts receivable
Loan receivables and accounts receivable are financial assets with fixed or
determinable payments. The receivables are reported as current assets, with
the exception of receivables maturing more than 12 months after the balance sheet date, which are classified as non-current assets. The Group's cash
equivalents, accounts receivable and loan receivables are included in this
category. Cash equivalents consist of cash, bank balances and other current
investments with high liquidity and a maturity of no more than three months
that can be easily converted to a known cash amount and are only exposed to
negligible risk of fluctuation in value.
c) Investments held until maturity
Investments held to maturity are non-derivative financial assets with fixed or
determinable payments and fixed maturity that the company management
has the positive intention and ability to hold to maturity.
Recognition and measurement of financial assets
Acquisitions and sales of financial assets are reported on the transaction date,
i.e. the date the Group undertakes a binding commitment to buy or sell the
asset. Financial assets are reported in the balance sheet when the Group has
transferred the material risks and rewards associated with the transaction and
the counterpart has an obligation to pay. A financial asset is removed from
the balance sheet when the right to receive cash flows from the asset has
expired or was transferred and all risks and rewards associated with ownership were transferred from the Group.
a) Financial assets valued at fair value via the income statement are valued at
fair value on a continual basis.
b) Loan receivables and accounts receivable are reported initially at fair value
and thereafter at amortized cost less any deductions for impairment provisions. Impairment provisions are made when it is apparent that the company will not be able to collect the total outstanding amount in accordance
with the original terms. Group companies with pay TV operations, which
have end consumers as part of their customer base, make provisions in
accordance with a pre-determined ladder that has been adapted to the
conditions of each geographic market. Group companies with network
activities, which do business with other companies, make provisions based
on an individual assessment of each customer and receivable. The change
in the provision is reported in the income statement as a cost of sales.
c) Investments held to maturity are reported initially at fair value plus transaction costs. They are then reported at amortized cost, which is equal to
the present value of the remaining cash flows using the effective interest
method.
Derivative instruments and hedging
The Group's finance policy only allows derivatives to decrease an underlying
exposure. Using a derivative for trading or any purpose other than hedging is
not allowed. Given this restriction, the Group only holds the following types
of derivatives at the end of the year:
- Currency derivatives held to hedge future payments and accounts payable
in foreign currency. These derivatives do not qualify for hedge accounting.
- A portfolio with electricity derivatives to hedge Swedish electricity price risk
which constitute a cash flow hedge.
- A loan in SEK with a variable interest rate that was converted to a DKK
loan with a variable interest rate using a currency interest rate swap, which
should hedge the currency risk in the net investment in the Danish subsidiary, Teracom A/S.
- A fixed interest rate swap that hedges the interest rate risk in parts of the
above-mentioned loans with variable interest rates.
Derivative instruments are reported in the balance sheet at the contract
date and at fair value, both initially and following subsequent revaluations.
The method for reporting gain or loss depends on whether the derivative
instrument was designated as a hedging instrument and the nature of the
hedged item.
When the hedge is entered into, the Group documents the relationship
between the hedging instrument and the hedged items as well as the company's objective for its risk management and the risk management strategy
for the hedge. The Group also documents, even when the hedge is entered
into on an ongoing basis, its assessment of whether the derivatives used for
the hedging transactions are expected to be very effective at neutralizing
changes in fair value or cash flows attributable to the hedged risk. Changes
in the hedge reserve are reported under Other comprehensive income in the
consolidated income statement.
Cash flow hedging
The effective portion of the changes in fair value of a derivative instrument
designated as a cash flow hedge is reported under Other comprehensive
income. The gain or loss attributable to the ineffective portion is reported
directly under net financial income in the income statement. For the Group
this refers to the hedging of electricity price risk and hedging of interest rate
risk via interest rate swaps.
69
Hedges of net investments
Hedges of net investments in foreign operations are reported similarly to cash
flow hedges. The gain or loss attributable to the effective portion of the hedge
is reported under Other comprehensive income. Gain or loss attributable to
the ineffective portion of the hedge is reported under net financial income in
the income statement. Accumulated gain or loss under Other comprehensive
income is reported in the profit/loss for the period when the foreign operations, or a part of the operations, is divested. For the Group, this refers to
loans combined with a currency interest rate swap.
Derivatives not subject to hedge accounting
Some derivative instruments do not qualify for hedge accounting. For the
Group, this refers to currency derivatives which hedge future payments and
accounts payable in foreign currency.
Inventories
Inventories are valued at the lower of cost and net realizable value. Cost
includes all costs incurred in delivering the inventories to their present location and condition. Net realizable value is the estimated selling price in the
ordinary course of business, less the estimated cost of completion and the
estimated costs necessary to make the sale. The first-in, first-out method
(FIFO) is applied when determining cost. Any losses associated with inventories or adjustments due to write-downs to the net realizable value are recognized in the income statement in the period in which they occur.
Provisions
Provisions for environmental rehabilitation, restructuring costs and legal
requirements are reported when the Group has an obligation as a result of an
occurred event and when it is probable that settlement will require an outflow
of resources and when the amount can be estimated reliably. The amount
reported as a provision is the amount that according to the best assessment
is the amount that will need to be paid to settle the obligation at the balance
sheet date. Where the time value of money is of significance, the amount has
been reported at the present value of estimated expenses. Any increase in the
provision that is based on the passage of time is reported as interest expense.
Restructuring costs are reported when the Group has both decided on a
detailed restructuring plan and the main features have been announced to
affected parties.
Post-employment remuneration
Post-employment remuneration is reported in accordance with IAS 19 and
classified as either a defined benefit or defined contribution plan.
Defined benefit plans
A majority of the Group's employees are included in defined benefit pension
plans, which means that employees are guaranteed a pension corresponding
to a certain percentage of their final salary. Defined benefit pension plans
entail that the Group has an obligation to pay contractual benefits to both
current and former employees. In addition, defined benefit pension plans
entail that the Group carries both actuarial risk and investment risk. Actuarial
risk refers to the risk that the benefits will cost more than anticipated. Defined
benefit pension plans are primarily funded by regular premium payments to
life insurance companies.
Employees of Boxer TV-Access AB are entitled to pension benefits in accordance with the ITP pension plan, which is a plan that covers many employers and is secured through insurance with Alecta. The ITP pension plan is a
defined benefit plan. However, since the plan assets and obligations may
not be allocated to each employer, it is thus reported as a defined contribution plan in accordance with item 30 in IAS 19. The design of the plan does
not entitle Alecta to allocate to each employer their share of the assets and
obligations or the information to which the disclosures apply. Therefore, it is
reported as a defined contribution plan, which means that paid premiums are
reported as costs as the benefits are earned.
The Projected Unit Credit Method (PUCM) is used to determine the present
value of the Group's pension commitments and expenses. This calculation is
conducted annually by independent actuaries based on actuarial assumptions
determined in conjunction with the balance sheet date.
Changes in the present value of the commitments that are related to
changed actuarial assumptions are treated as actuarial gains or losses and
distributed across the employee's average remaining period of employment
in accordance with the corridor approach. Differences between expected and
actual returns on the plan's assets are treated as actuarial gains or losses.
Actuarial gains and losses are reported as income or costs if the accumulated actuarial gain or loss exceeds 10 percent of the higher of the value of
the commitment or the fair value of the plan assets. Any amount in excess of
70
that is distributed over the remaining expected period of employment for the
employee covered by the particular plan.
The liability reported in the balance sheet for defined benefit pension plans
is the present value of the commitment on the balance sheet date less the
fair value of the managed asset, any expenses relating to prior employment
that have not yet been reported, any actuarial losses not yet reported, and
increased by any actuarial gains that have not yet been reported. Funded
plans with net assets, i.e. plans with assets exceeding the commitment, are
reported as a financial asset.
Special employer's contribution is calculated as the difference between
the pension expense determined in accordance with IAS 19 and the pension
expense determined in accordance with the rules applied in legal entities. Payroll tax is reported as a cost in the income statement.
Defined contribution pension plans
With regard to defined contribution plans, the company pays a defined fee to
an independent insurance company and has no legal obligation to pay additional fees if this unit does not have sufficient assets to pay all benefits. This
means that the employee bears the actuarial risk and investment risk. As such,
no actuarial assumptions are required and neither are there any actuarial
gains or losses. The fees are expensed when they fall due for payment.
Loans
Loans are reported initially at the fair value of the inflow of funds less deductions for transactions costs. After the date of acquisition, the loan is valued at
amortized cost using the effective interest rate method.
Accounts payable
Accounts payable are reported initially at fair value. After the date of acquisition, accounts payable are valued at amortized cost using the effective interest rate method.
New or changed accounting standards as of 1 January 2011
None of the IFRS or IFRIC interpretations that are obligatory for initial application for financial years starting 1 January 2011 or later are expected to have
a significant impact on the Group.
IAS 24 Related Party Disclosures (revised): The revised standard clarifies and
simplifies the definition of a related party. It also removes the requirement
on state affiliates to provide detailed disclosures on all transactions with
the government or other state affiliates. The Group discloses transactions
between Group companies but no longer discloses transactions with other
state affiliates.
IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements
and their Interaction (amended): The amendment to IFRIC 14 corrects a previous, unintentional consequence of the interpretation. According to the previous version of IFRIC 14, companies were not allowed in some cases to report
certain voluntary advance payments of a minimum funding requirement as
an asset. The amendment does not affect the Teracom Group.
New or revised accounting standards after 2011 that are judged to
have an impact on the Teracom Group when they enter into force
The following standards or amendments were issued by IASB but are not
applicable to the financial year starting 1 January 2011 and will not be applied
in advance.
IAS 19 Employee Benefits (revised): This standard removes the corridor
approach and all actuarial gains or losses should be immediately reported
under Other comprehensive income as incurred. Costs for employment from
prior years will be reported on an ongoing basis. Interest expenses and expected return on plan assets will be replaced by net interest, which is calculated
using the discount rate based on the net surplus and net deficit in the defined
benefit pension plan. Teracom intends to apply the amended standard for the
financial year starting 1 January 2013 and evaluate the effect during 2012. IAS
19 enters into force on 1 January 2013 but has not yet been adopted by the EU.
IFRS 9 Financial Instruments addresses the classification, valuation and
accounting of financial liabilities and assets. IFRS 9 was issued in November
2009 for financial assets and October 2010 for financial liabilities and replaces
the parts of IAS 39 that are related to the classification and measurement of
financial instruments. IFRS 9 states that financial assets should be classified
as one of two categories: fair value or amortized cost. The classification is
made at the time the financial asset is initially recognized based on the company's business model and the characteristics of the contractual cash flows.
No major changes will be made for financial liabilities compared to IAS 39.
The most significant change relates to liabilities identified at fair value. The
portion of the change in fair value that is attributable to the credit risk of the
liability should be reported in Other comprehensive income instead of profit
or loss as long as this does not create a recognition inconsistency (accounting
mismatch). The Group intends to apply the new standard no later than the
financial year starting 1 January 2013 and has not yet evaluated the effects.
The standard has not yet been adopted by the EU.
IFRS 10 Consolidated Financial Statements: This standard defines the term
"deciding influence" and builds on existing principles by identifying controls
as the determining factor in whether a company should be included in the
consolidated financial statements. The standard provides additional guidance to assist in the determination of control where this is difficult to assess.
Given the current ownership structure of the Group, the new standard will
not affect the Group's reporting. IFRS 10 enters into force on 1 January 2013
but has not yet been adopted by the EU.
IFRS 12 Disclosures of Interests in Other Entities: The standard covers disclosure requirements for subsidiaries, joint arrangements, associated companies
and unconsolidated structured entities. The Group intends to apply IFRS 12
to the financial year starting 1 January 2013 and has not yet evaluated the
full effect on the financial statements. IFRS 12 enters into force on 1 January
2013 but has not yet been adopted by the EU.
IFRS 13 Fair Value Measurement: The purpose of the standard is to make the
fair value measurements more consistent and less complicated by providing
an exact definition and a single source within IFRS for fair value measurements and related disclosures. The requirements do not expand the area of
application for when fair value should be applied, but rather provide guidance
with regard to how it should be applied when other IFRS already require or
allow fair value measurements. The Group has not yet evaluated the full effect
of IFRS 13 on the financial statements. The Group intends to apply the new
standard to the financial year starting 1 January 2013. The standard has not
yet been adopted by the EU.
Use of estimated values
In the preparation of the annual report in accordance with IFRS, Group management has used assumptions and estimates in the reporting of assets and
liabilities. Discussed below are those areas where there is the greatest risk for
changes in value during the following year due to a potential need to revise
prior assumptions or estimates.
Transactions with minority owners
The Teracom Group owns a majority of the shares in the Finnish pay TV operator, Digi TV Plus Oy. In conjunction with the acquisition in 2009, Teracom also
issued a put option over the remaining minority shares and Teracom also has
a call option to acquire the same shares. The commitment related to the put
option is included in the total acquisition cost. The liability was reported at
fair value based on Teracom's best assessment of what it will have to pay for
the outstanding equity stake. The future payment of the outstanding equity
stake is based on the company's future results and it may be adjusted if the
assumptions underlying Teracom's assessment change. The option's interest
rate effect and currency effect are reported in the income statement on an
ongoing basis.
Impairment of assets
Non-current asset such as goodwill are reviewed each year to determined
the impairment requirement or when events and changes occur that indicate
the carrying amount of an asset cannot be recovered. Company management regularly conducts a revaluation of the useful life of all tangible and
intangible assets. It is the opinion of the company's management team that
reasonable changes to the factors forming the basis for the estimation of the
assets' recoverable amounts would not result in the carrying amount exceeding the recoverable amount.
Accounts receivable
Receivables are reported net after reserves for doubtful debts. The amount
is based on circumstances known at the balance sheet date. Changed conditions, for example that payments in default increase in scope or the financial
position of a significant customer changes, can result in significant deviations
from the valuation.
Post-employment remuneration
The Teracom Group has both defined benefit pension plans and defined contribution pension plans. The defined benefit plans entail actuarial risk and
investment risk for the Group. Actuarial calculations of pension commitments
and pension expenses are based on a number of assumptions, such as the
discount rate, anticipated salary increases, anticipated remaining periods of
employment and anticipated return on plan assets. A change in any of these
fundamental assumptions could have a significant impact on calculated pension commitments, financing requirements and pension expenses.
Restructuring costs
Restructuring costs include required impairment of assets and other items
that do not affect the cash flow, such as estimated costs for notices of termination and other direct costs related to the phasing out of operations. The
cost calculation is based on detailed action plans that are expected to improve
the Group's cost structure.
Accounting principles for the Parent Company
The Group’s and the Parent Company's financial statements and terminology
differ since the Group applies IAS 1 and the Parent Company applies RFR 2
September 2011 and the Annual Accounts Act (1995:1554). The Parent Company is limited in its ability to fully apply IFRS. These limitations are associated
with the Parent Company's application of RFR 2, the Annual Accounts Act and
the Parent Company's tax regulations.
Participations in subsidiaries
Participations in subsidiaries are reported in accordance with the cost method. The value of the participations is tested when there are indications that
the value has depreciated.
Anticipated dividends
Dividends from Group companies are reported in the income statement after
a decision regarding dividends is made at each subsidiary's Annual General
Meeting. Anticipated dividends are reported when the Parent Company unilaterally has the right to decide on the size of the dividends and the Parent Company has decided on the size of the dividends before it published its
annual report or quarterly reports.
Shareholder contributions and Group contributions
Group contributions paid from the Parent Company to subsidiaries are reported in the Parent Company in the same manner as shareholder contributions.
Shareholder contributions are reported directly against the recipient's equity
with a corresponding increase in "Participations in Group companies" by the
contributor. Alternatively, the Group contribution may be reported as a cost in
the income statement. Group contributions received from subsidiaries should
always be reported in the Parent Company as financial income in the same
manner as a dividend.
Leases
All lease agreements are reported in the Parent Company according to the
rules that apply for operating leases.
Valuation of financial instruments
Unlike the Group, the Parent Company does not adjust financial instruments
to fair value.
Deferred taxes
The Teracom Group's deferred tax assets are primarily attributable to loss
deductions and temporary differences and these are reported if the tax assets
are expected to be recoverable via future taxable income. Changes to the
assumptions regarding future taxable income, or changes to tax rates, can
lead to significant changes in the valuation of deferred taxes.
71
Note 2. Operating income
Note 3. Leasing
Net sales by revenue category
Parent
Company
Group
Revenue category
Service assignments
Total
2011
4 046
4 046
2010
3 848
3 848
2011-06-01
2011-12-31
33
33
Leases where the lessor retains substantially all of the risks and rewards incident to ownership are classified as operating leases.
The Teracom Group as lessor in operating lease agreements
The Group's income from operating leases is reported as part of net sales in the
income statement. This income primarily comes from co-locations. The Teracom Group has a nationwide network in Sweden and Denmark of strategically
located masts and stations with high performance and radio coverage.
Net sales for the Group includes income from operating leases in the amount of
SEK 281 (187) million.
2011
2010
Parent
Company
2011-06-01
2011-12-31
2
4
0
2
9
13
0
0
4
0
0
0
Group
Other income/other
operating income
Exchange gains on receivables or
payables from operating activities
Gains on disposal of equipment
Other
Total
Exchange gains on receivables or payables from operating activities
These are primarily exchange gains on accounts payable.
Other
Primarily attributable to market contributions from program companies.
Maturity date
Within one year
More than one year, but less than five years
More than five years
Total
Group
Minimum lease
payments
2011
2010
205
194
262
379
2
3
469
576
The Teracom Group as lessee in operating lease agreements
The Group has operating lease agreements primarily relating to commercial
rental contracts for premises for offices and technical equipment, co-location
contracts and communication contracts. For the remaining term, these contracts are non-cancelable.
The majority of leasing contracts have terms such that indexing of the
minimum lease payments according to established indexation is possible. The
future minimum lease payments that are required according to non-cancelable operating lease agreements are as follows:
Maturity date
Within one year
More than one year, but less than five years
More than five years
Total
Group
Minimum lease
payments
2011
2010
44
52
59
64
24
26
127
142
For the 2011 financial year, total operating lease expenses were SEK 112 (105)
million.
The Teracom Group as lessee in financial lease agreements
The Group leases certain items of property, plant and equipment, such as service vehicles, company cars and other vehicles.
Leasing agreements pertaining to fixed assets, where the Group retains
substantially all of the risks and rewards incident to ownership, are classified
as financial leases. At the inception of the lease, financial leases are reported
in the balance sheet at the leased asset's fair value or the present value of the
minimum lease payments (whichever is lower).
Adjustments to financial lease agreements for depreciation and disposals
amounted to SEK 0 (1) million.
72
Note 4 Segment reporting
The Group management team has established operating segments based on
the information used to make strategic decisions. The operating segments are
responsible for the operating profit and the working capital that they manage. The Parent Company with Group functions is reported on the line "Other".
These function-based departments have income of insignificant amounts,
which is why they are not considered to be separate operating segments (in
accordance with IFRS 8). For sales between segments, market terms and market
prices are used.
Operating income
Group operating segments,
SEK million
Teracom Sweden
Boxer Sweden
Teracom Denmark
Boxer Denmark
Plus TV
Other
Group adjustments
Total
2011
2010*)
1 478
2 011
345
266
556
60
-657
4 059
1 473
2 041
92
158
582
7
-501
3 852
*) Comparable figures for the full-year 2010 were adjusted in accordance with
new principles for operational follow-up.
Operating profit/loss
Group operating segments,
SEK million
Teracom Sweden
Boxer Sweden
Teracom Denmark
Boxer Denmark
Plus TV
Other
One-off effects
Group adjustments
Total
2011
2010*)
469
278
66
-260
-72
-54
-36
-15
376
472
331
21
-297
-81
-83
-47
-23
293
*) Comparable figures for the full-year 2010 were adjusted in accordance with
new principles for operational follow-up.
Assets / Liabilities
Group operating segments, SEK million
Teracom Sweden
Boxer Sweden
Teracom Denmark
Boxer Denmark
Plus TV
Other
Group adjustments
Total
Assets
2011
2010
3 422
1 030
1 453
346
159
6 045
-6 902
5 553
5 447
631
1 842
123
104
-2 449
5 698
Liabilities
2011
2010
1 851
874
149
602
293
4 183
-4 502
3 450
2 662
491
340
227
166
-294
3 592
Investments
Group operating segments,
SEK million
Teracom Sweden
Boxer Sweden
Teracom Denmark
Boxer Denmark
Plus TV
Total
Depreciation/amortization
Group operating segments,
SEK million
Teracom Sweden
Boxer Sweden
Teracom Denmark
Boxer Denmark
Plus TV
Other
Total
Impairment
Group operating segments,
SEK million
Teracom Sweden
Boxer Sweden
Teracom Denmark
Boxer Denmark
Plus TV
Other
Total
2011
2010
-288
-24
-18
0
-2
-332
-245
-29
-2
0
-8
-284
2011
2010
-255
-33
-90
-1
-8
-17
-404
-257
-28
-21
-1
-10
-14
-331
2011
2010
-7
0
0
0
-12
0
-19
-10
-3
0
0
0
-5
-18
Geographic information
Income from external customers, SEK million
Sweden
Finland
Denmark
Other countries
Total
2011
2010
2 936
588
481
54
4 059
2 980
616
221
35
3 852
The Group's property, plant and equipment and intangible assets, not including Group surplus values, are distributed to each respective country in the
table below.
Fixed assets, SEK million
Sweden
Finland
Denmark
Total
2011
2010
1 731
19
1 357
3 107
1 714
36
1 480
3 230
Note 5. Work performed by the company
for its own use and capitalized
Work performed by the company for its own use and capitalized consists
of labor costs that are directly related to investments in property, plant and
equipment.
73
Note 6. Employees and remuneration
Group
Salaries, other remuneration
and social security expenses,
SEK thousand
Board members, President/CEO,
Executive Vice President/CFO and
senior executives
Other employees
Total salaries and remuneration
Social security expenses
Pension expenses, defined benefit
plans
Pension expenses, defined contri­
bution pensionplans
Other personnel expenses
Total personnel expenses
management team, Board members or persons with the title of president,
managing director or executive vice president within the Group.
Remuneration to senior executives
Parent Company
2011
2010
2011
2010
19 119
14 502
10 705
-
388 427
407 546
349 698
364 200
17 836
28 541
-
113 220
112 852
11 696
-
21 137
25 915
1 990
-
52 785
49 523
13 043
-
19 519
614 207
18 155
570 645
1 906
57 176
-
Of the Group's pension expenses, SEK 3,745 (1,468) thousand was for the
Boards of Directors or persons with the title of president, managing director
or executive vice president within the Group. Outstanding pension obligations
to these individuals are SEK 0 (0) thousand.
Of the Parent Company's pension expenses, SEK 1,666 (0) thousand was
for the Boards of Directors or persons with the title of president, managing
director or executive vice president within the Group.
No bonuses or comparable remuneration have been paid to the Group
Principles
Teracom Group AB's Board of Directors is responsible for appointing the
President/CEO and establishing the terms of employment. The Board of Directors complies with Government guidelines regarding remuneration to senior
executives.
Senior executives include persons that belong to, or have belonged to, the
Group management team. The Group management team consists of 36 (30)
percent women.
The company's President/CEO and Executive Vice President each receive
a market-competitive salary, premium-based pension benefits in addition to
what is stipulated in the Swedish National Insurance Act, health insurance, a
company car, individually negotiated terms for termination of employment
and severance pay. Senior executives refers to the 11 (9) persons in the Group
who, at some point during 2011 belonged to the Group management team,
excluding the President/CEO and Executive Vice President. All pension plans
for senior executives are vesting. Senior executives in the subsidiaries are the
Presidents of each company.
President/CEO Crister Fritzson and Executive Vice President Gunilla Berg
have also been assured of pension benefits corresponding to monthly pension
premium payments amounting to 30 percent of their base salary. The retirement age for the President/CEO and Executive Vice President is 65.
Remuneration and benefits paid in 2011 to senior executives, SEK thousand
Position
Group CEO and President of Teracom Group AB
Name
Crister Fritzson
Executive Vice President of Teracom Group AB
Gunilla Berg
Senior executives
Total
11 persons
Basic salary
2 844
Other
remuneration
and benefits
291
Total
3 135
2 400
144
2 544
770
11 668
16 912
855
1 290
12 523
18 202
3 581
5 247
Basic salary
2 760
Other
remuneration
and benefits
313
Total
3 073
400
5
405
0
9 365
12 525
779
1 097
10 144
13 622
3 210
4 106
Pension
expense Notice period Severance pay
896
6 months
18 months
6 months
12 months
Remuneration and benefits paid in 2010 to senior executives, SEK thousand
Position
Group CEO and President of Teracom AB
Executive Vice President of Teracom AB
Senior executives
Total
Name
Crister Fritzson
Gunilla Berg
Started on 2010-11-01
9 persons
Comments about the table
- Remuneration to the President/CEO, Executive Vice President and other
senior executives consists of a base salary, other benefits and a pension.
- All amounts are excluding social security contributions and payroll tax.
- Base salary refers to the fixed monthly salary.
- Other remuneration and benefits refers to vacation pay, deductions/benefits
for absence due to illness, parental leave deductions/benefits, subsidized
lunch coupons, company cars, increased salary in lieu of a company car,
74
Pension
expense Notice period Severance pay
896
6 months
18 months
6 months
12 months
fuel and parking benefits (only for senior executives that have opted out of
having a company car).
- Pension expenses also include health insurance for the President/CEO and
other senior executives.
- The stated notice period is for termination initiated by the company.
- The Group's auditors have conducted a special review of remuneration to
senior executives.
Notice period and severance pay
The remuneration to the President/CEO for the 2011 financial year was established by the Board of Directors. Remuneration to other senior executives was
decided by the President/CEO in consultation with the Chairman of the Board.
Between the Company and the President/CEO, Crister Fritzson, a notice period
of six months applies, regardless of whether termination is initiated by the
Company or by the President.
If employment termination is initiated by the Company, the President/CEO
receives severance pay in accordance with the above table. A clarification has
been made that severance pay is only calculated using the fixed portion of the
monthly salary. Severance pay is offset against other income.
If employment termination is initiated by the President, there is accordingly no severance pay. The same terms apply to the Executive Vice President.
Remuneration to Board of Directors in 2011, SEK thousands
Position
Name
Chairman of the Board
Board member
Board member
Board member
Board member
Board member
Board member
Board member
Board member
Employee representative
Employee representative
Employee representative
Employee representative, deputy
Employee representative, deputy
Total
Åsa Sundberg
Kristina Axberg Bohman
Maria Curman
Ingrid Engström
Lars Grönberg
Johan Hallberg
Tobias Henmark
Urban Lindskog
Nils Petter Tetlie
Magnus Ahxner
John-Olof Blomkvist
Claes-Göran Persson
Stig-Arne Celin
Niklas Hanson
Remuneration to Board of Directors in 2010, SEK thousands
Position
Name
Chairman of the Board
Board member
Board member
Board member
Board member
Board member
Board member
Employee representative
Employee representative
Employee representative, deputy
Employee representative, deputy
Employee representative, deputy
Total
Åsa Sundberg
Kristina Axberg Bohman
Maria Curman
Ingrid Engström
Lars Grönberg
Tobias Henmark
Urban Lindskog
John-Olof Blomkvist
Claes-Göran Persson
Magnus Ahxner
Stig-Arne Celin
Stefan Thylander
Board remuneration
The Chairman of the Board and the Board members receive an annual fee that
is decided at the Annual General Meeting. For the Chairman, the annual fee
was SEK 190 (190) thousand and for Board members, the annual fee was SEK
95 (95) thousand. A fee is paid for participation in the audit committee in the
amount of SEK 60 (60) thousand to the Chairman and SEK 30 (30) thousand
to each committee member. A fee is paid for participation in the remuneration
committee in the amount of SEK 30 (30) thousand to the Chairman and SEK
15 (15) thousand to each committee member. This fee is not based on the calendar year, rather, the period May through April. In addition, Board members
are compensated for expenses arising in conjunction with company business.
Remuneration paid to Åsa Sundberg, Chairman of the Board, was SEK 220
(210) thousand. Apart from the fee that the Annual General Meeting established for Board members and the fee that the Board of Directors established
for employee representatives on the Board, no remuneration was paid in 2011.
The Board of Directors consists of 50 (57) percent women.
Comment
Board fee
Other remuneration
190
95
95
95
95
0
8
95
63
0
0
0
0
0
736
30
60
15
15
30
0
1
30
0
0
0
0
0
0
181
Board fee
Other remuneration
190
95
95
95
95
32
95
12
5
0
0
0
714
20
60
10
10
20
13
33
0
0
0
0
0
166
Started on 01.06.11
Left on 01.06.11
Started on 22.03.11
Left on 01.06.11
Started on 01.06.11
Comment
Started on 31.03.10
Left on 31.03.10
Average number of employees broken down by geographic location and gender
Average number of employees
Total
2011
Men %
Women %
Total
2010
Men %
Women %
Sweden
Denmark
Finland
Total in the Group
577
99
31
707
77%
77%
39%
75%
23%
23%
61%
25%
580
98
29
707
76%
79%
52%
76%
24%
21%
48%
24%
75
Note 7. Pensions
A majority of the Group's employees are primarily covered by defined benefit
pension plans, which means that they are guaranteed a pension that corresponds to a certain percentage of their salary. The pension plans include
a retirement pension, a disability pension and a survivor pension. Employees
of Boxer TV-Access AB are entitled to pension benefits in accordance with
the ITP pension plan, which is secured through insurance with Alecta. Other
employees within the Group in Sweden are covered by the ITP-Tele pension
plan. Pension obligations are calculated annually as per the reporting date,
based on actuarial assumptions. Pension obligations are secured through provisions in the balance sheet and through insurance premiums.
In Finland, employees are entitled to statutory pensions benefits in accordance with Finnish legislation on pensions for employees, a defined benefit
pension plan (TEL pension). Pension benefits are secured through insurances
and they are not covered by IAS 19. Employees in Denmark are covered by
a defined contribution pension plan. Pension benefits are secured through
insurances.
In addition to the ITP plan, there is a pension liability that Teracom AB
assumed from the former Swedish PTT when it was incorporated in 1992.
The liability consists of a non-vesting portion and a vesting portion. The nonvesting portion was terminated on 2011-12-31 since all employees with this
type of agreement retired in 2011. The remaining vesting portion refers to
retirement pensions. Employees hired after incorporation have an insuranceonly solution as of 65 years of age. Retirement pensions to employees who
have been invited to take early retirement are secured through provisions in
the balance sheet or insurances and are paid as a retirement pension until the
person reaches 65 years of age.
Actuarial gains and losses are taken up as income over the employee’s
remaining period of employment to the extent that the total gain or loss per
plan falls outside the 10 percent corridor corresponding to the higher of the
pension obligation or the fair value of the plan assets for each plan, respectively. The cost related to service during the current year refers to the capital
value of earned pension benefits during the year as calculated by the Projected Unit Credit Method.
Total pension expenses are distributed as follows:
Group
Pension expense for the period
Cost related to service during the current year
Interest expense
Expected return on plan assets
Change in asset reduction (IAS 19.58b)
Actuarial profit/loss (+/-) to report for the year
Cost regarding service from prior periods
Total cost for defined benefit plans
Pension expense to report in the income statement
Other effects to report in the income statement
Reductions, profit/loss (-/+)
Total
2011
2010
Forecast 2012
7
20
-13
-25
28
1
18
18
11
18
-12
27
-22
0
22
22
9
19
-13
0
4
0
19
19
-1
-1
-9
-9
0
0
Detailed description of pension obligations and pension expense
Pension obligations, plan assets and receivables/provisions for pension obligations as well as actuarial gains/loss for defined benefit pension plans have
developed as follows:
Group
Pension liability
2011
2010
Forecast 2012
Present value of wholly or partially funded obligations (+)
Fair value of plan assets
Net value of wholly or partially funded obligations (+/-)
Present value of unfunded obligations (+)
Present value of net obligation (+/-)
Unaccounted actuarial gain/loss (+/-)
Effect of the limitation rule for net assets
Pension liability/asset to report in the balance sheet
485
-439
46
4
50
-111
2
-59
389
-424
-35
8
-27
-51
27
-51
498
-452
46
1
47
-106
1
-58
Present value of defined benefit plans
Present value of the obligation on 1 January
Cost related to service during the current period
Interest expense
Paid remuneration
Cost regarding service from prior periods
Reductions and adjustments
Actuarial profit/loss on the obligation (+/-)
Present value of the obligation on 31 December
76
2011
2010
Forecast 2012
397
7
20
-19
1
-1
84
489
494
11
18
-21
0
-10
-95
397
489
9
19
-18
0
0
0
499
Return on plan assets
2011
2010
Forecast 2012
13
-4
9
12
8
20
13
0
13
2011
2010
Forecast 2012
424
13
20
-14
-4
439
401
12
16
-13
8
424
439
13
16
-16
0
452
2011
2010
Forecast 2012
-51
18
-19
-20
14
-1
-59
-40
22
-21
-16
13
-9
-51
-59
19
-18
-16
16
0
-58
2011
2010
Forecast 2012
Accumulated unaccounted actuarial profits /losses (+/-) on 1 January
Reported actuarial profits/losses (+/-) during the year
Profit/loss (+/-) on obligation
Profit/loss (+/-) on plan assets
Profit/loss (+/-) on reductions and adjustments
Accumulated unaccounted actuarial profits /losses (+/-) on 31 December
-51
28
-84
-4
0
-111
-133
-22
95
8
1
-51
-111
5
0
0
0
-106
Number entitled to pension on 1 January
2011
2010
Forecast 2012
504
743
256
1 503
512
729
228
1 469
519
786
286
1 591
Expected return on plan assets
Actuarial profit/loss on the plan assets (+/-)
Actual return on plan assets
Plan assets
Fair value of plan assets on 1 January
Expected return on plan assets
Fees/premiums (+)
Paid remuneration (-)
Actuarial profit/loss (+/-) on plan assets
Fair value of plan assets on 31 December
Reconciliation of change in pension liability
Net liability/asset on 1 January
Pension expense for the period
Paid remuneration (-)
Fees, premiums (-)
Reimbursement (+)
Reductions and adjustments
Net liability/asset on 31 December
Employees
Vested benefits
Retired persons
Total
Five-year overview
2011
2010
2009
2008
2007
Present value of the obligation (+)
Fair value of plan assets (-)
Present value of net obligation (+/-)
489
-439
50
397
-424
-27
494
-401
93
454
-371
83
478
-358
120
-4
-4
7
8
-22
-11
7
-14
-7
3
2011
439
2010
424
2009
401
2008
371
2007
358
Profit/loss (+/-) on the obligation, actual effects
Profit/loss (+/-) on plan assets, actual effects
Plan assets
Insurance contract
The annual fees for pension insurance with Alecta (reported as a defined
contribution plan) were SEK 2 (3) million. Alecta's surplus may be distributed
amongst the policy holder(s) and/or the insured. As of 31 December 2011,
Alecta's surplus in the form of the collective funding ratio amounted to 113
(146) percent. The collective funding ratio was calculated in accordance with
IAS19.
Actuarial assumptions
The actuarial calculation of the Group’s pension obligations and pension costs
is based on the following key assumptions stated as weighted averages for
the various pension plans. A change in any of these fundamental assumptions
can have a significant impact on calculated pension obligations, financing
requirements and pension costs.
2011
2010
Forecast
2012
Discount rate (%)
Annual salary increase (%)
Increase in the income base amount (%)
3,90
3,00
3,00
5,00
3,00
3,00
3,90
3,00
3,00
Inflation/annual increase in pension benefits (%)
2,00
2,00
2,00
Termination rate (%)
Expected remaining term of service (years)
Expected return on plan assets (%)
3,00
17,8
3,00
3,00
18,8
3,00
3,00
17,2
3,00
Actuarial assumptions
Discount rate
The interest rate used to discount both funded and unfunded obligations for
post-employment remuneration. When establishing the discount rate, consid-
eration is given to the market yield on mortgage bonds with the same maturities as the obligation as of the balance sheet date.
Annual salary increase
The assessment of the annual salary increase reflects anticipated future salary
increases as a combined effect of inflation, period of service, promotion and
other relevant factors such as supply and demand in the labor market.
Increase in the income base amount
The income base amount, set annually, is used to determine the pensionable
income ceiling in the national pension system. The assessment is based on the
anticipated rate of inflation and historical salary trend of the entire labor market.
Inflation/annual increase in pension benefits
The assumption is based upon the expected rate of inflation in the market.
Termination rate
Historical information has been used in order to make an assessment of the
termination rate. Teracom has used this information to estimate the future
termination rate.
Expected remaining term of service
The average expected remaining term of service. This calculation is based
upon the age distribution for employees and the expected future rate of
employee turnover.
Expected return on plan assets
The assessment is based on the average expected return on existing and
future plan assets.
77
Note 7 (cont'd)
Note 10. Other costs
Mortality rate
Assumptions regarding the mortality rate are in accordance with the Swedish
Financial Supervisory Authority's regulation, DUS06 (DUS06).
The Group's other expenses amounted to SEK -1,034 (-969) million. The comparison figures are adapted to the higher degree of detail in the income statement. The largest expense item is costs for customer service. In the Parent
Company, other external expenses for the year were SEK -13 (-) million.
Parent Company
The Parent Company Teracom Group AB does not carry a pension liability in
its balance sheet. The only pension liability in the Group is reported by the
subsidiary Teracom AB, which was the Parent Company of the Group until
June 2011.
Group
Exchange losses on receivables/payables
from operating activities
Parent Company
2011
2010
2011-06-01
2011-12-31
-4
-4
-11
-11
0
0
Exchange losses on accounts payable
Total
Group net exchange rate differences from operating activities amounted to
SEK -1 (-7) million.
Parent Company net exchange rate differences from operating activities
amounted to SEK 0 (-) million.
Note 8. Depreciation/amortization
Tangible and intangible fixed assets are depreciated/amortized systematically
over the estimated useful life of the asset. Useful life refers to the period
during which the asset is expected to be used for its intended purpose in the
Group. Land is not depreciated, since its useful life is unlimited. Goodwill and
trademarks are not amortized because it is not possible to estimate useful life.
An assessment of the residual value and useful life is performed on each
balance sheet date, and an adjustment is made if necessary. During 2011, no
changes have been made to the lengths of useful lives.
Depreciation/amortization according to type of asset
Note 11. Remuneration to auditors
Group
Remuneration to auditors
Group
Assets
2011
2010
Depreciation on buildings and land
Depreciation on plant and machinery
Depreciation on equipment, tools, fixtures and fittings
Amortization on licenses and similar rights
Amortization of customer agreements
Amortization of customer relationships
Total
-40
-277
-20
-50
-6
-11
-404
-19
-235
-18
-47
-2
-10
-331
PwC
- Audit engagement
- Audit activities in addition to
the audit assignment
- Tax consultation
- Other services
Total
Parent Company
2011
2010
2011-06-01
2011-12-31
-3
-2
-1
0
0
0
0
0
-3
0
0
-2
0
0
-1
Note 12. Financial income and
financial expenses
Note 9. Impairment
Group
Assets
Amortization on patents, licenses and similar rights
Impairment loss on plant and machinery
Total
Group
2011
2010
-12
-7
-19
-18
0
-18
Impairment losses for the year on intangible assets amounted to
SEK -12 million and were attributable to the Plus TV segment.
Impairment losses for the year on property, plant and equipment amounte­d
to SEK -7 million and were attributable to the Teracom Sweden segment.
Impairment losses in the corresponding period last year, SEK -18 million,
were related to intangible assets, SEK -10 million within the Teracom Sweden
segment, SEK -3 million within the Boxer Sweden segment and SEK -5 million
for Group surplus value.
78
Financial income
Interest income
Other financial income
Total financial income
Financial expenses
Interest expenses
Other financial expenses
Total financial expenses
2011
2010
9
18
27
5
32
37
-58
-20
-78
-23
-26
-49
The net exchange rate differences from financing activities were SEK 0 (22)
million for the Group and are reported in other financial expenses. The net
amount for the Parent Company was SEK -2 (-) million.
Parent Company
2011-06-01
2011-12-31
Financial income
Net profit/loss on participations in Group companies
- Dividend
- Capital gains (losses)
Exchange rate differences
Interest income
Total financial income
297
0
22
2
321
Financial expenses
Interest expenses
Other financial expenses
Total financial expenses
-11
-72
-83
Note 13. Tax on profit for the year
Current tax
- Sweden
Total current tax
Change in deferred tax - temporary differences
Total tax
Group
2011
2010
Parent Company
2011
-169
-169
-158
-158
0
0
0
0
12
78
25
0
-157
-80
25
0
2010
Tax was calculated using the applicable tax rates, based on the taxable net profit for the financial year.
Group
2011
Tax, % Net profit/loss
Profit (loss) before taxes
Tax, %
2010
Net profit/loss
325
Tax according to tax rate in Sweden (26.3 %)
Difference between the tax rate in Sweden and abroad
Tax effect of non-deductible expenses
Other non-deductible expenses
Tax effect of non-taxable income
Other non-taxable income
Tax effect of non-utilized deficit deduction
Tax effect of deficit deduction
Tax on fictitious income related to opening balance of tax allocation fund
Adjustment of tax prior year's taxation
Tax expense and effective tax rate for the financial year
281
-26,3
-1
-85
-3
-26,3
-1
-74
-4
-1
-3
-3
-8
0
-21
0
-1
2
48,3%
0
-67
0
-4
5
-157
2
-8
9
-1
0
-28,4%
5
-21
26
-4
0
-80
Parent Company
2011
2010
Tax, % Net profit/loss
Tax, %
Net profit/loss
Profit/loss before appropriations
Profit (loss) before taxes
201
201
Tax according to tax rate in Sweden (26.3 %)
Tax effect of non-taxable income
Other non-taxable income
Tax expense and effective tax rate for the financial year
-
-26,3
-53
-
-
39
12,7%
78
25
-
-
Note 14. Disclosures concerning closely related parties
The Swedish State owns 100 percent of the shares in Teracom Group AB. The
parent company has relationships with closely related parties that entail a
controlling influence in its Group companies, see note 26. The parent company in 2010 was Teracom AB; in 2011 the new formed Teracom Group AB
was the parent company. The Teracom Group’s services are offered to closely
related companies at normal commercial terms. The following transactions
were conducted with closely related companies:
Parent Company Teracom Group AB's sales and purchases of goods and
services with subsidiaries
2011
Subsidiaries
Teracom AB
Boxer TV-Access AB
Teracom A/S
Boxer TV A/S
Digi TV Plus Oy
Total
Parent Company Teracom Group AB's outstanding receivables and
liabilities to subsidiaries
2011
Subsidiaries
Teracom AB
Boxer TV-Access AB
Teracom A/S
Boxer TV A/S
Digi TV Plus Oy
Teracom Mast AB
Teracom Mobile TV AB
Total
Receivables Liabilities
0
1
1
373
136
0
0
511
1 493
695
65
0
45
1
0
2 299
Sales Purchasing
18
8
1
3
3
33
3
0
0
0
0
3
Senior executives
Remuneration to the Board of Directors, Group CEO/President and senior
executives is described in note 6.
79
Note 15. Property, plant and equipment
Group
Land and buildings
2011
2010
Opening cost, 1 January
- Acquisitions
- Adjustment of acquisition balance/reclassification from intangible assets
- Investments
- Reclassifications
- Exchange rate differences
Closing accumulated cost, 31 December
1 163
0
20
11
0
-2
1 192
573
586
11
3
-10
1 163
- Opening depreciation, 1 January
- Adjustment of acquisition balance/reclassification from intangible assets
- Depreciation for the year
- Exchange rate differences
Closing accumulated depreciation, 31 December
-392
-6
-40
1
-437
-373
-19
0
-392
755
771
Closing carrying amount, net, 31 December
Group
Plant and machinery
2011
2010
Opening cost, 1 January
- Acquisitions
- Adjustment of acquisition balance
- Investments
- Sales/disposals
- Reclassification from work in progress
- Exchange rate differences
Closing accumulated cost, 31 December
5 216
0
-2
16
-390
173
-2
5 011
4 281
837
18
-40
135
-15
5 216
-3 145
388
-277
-1
-3 035
-2 949
39
-235
0
-3 145
0
0
-7
-7
-2
2
0
0
- Opening depreciation
- Sales/disposals
- Depreciation for the year
- Exchange rate differences
Closing accumulated depreciation, 31 December
- Opening impairment losses, 1 January
- Reclassifications
- Impairment losses for the year
Closing accumulated impairment losses, 31 December
Closing carrying amount, net, 31 December
1 969
2 071
Group
Equipment, tools, fixtures and fittings
2011
2010
373
0
2
13
-23
0
365
358
3
21
-9
0
373
-338
1
23
-20
0
-334
-328
8
-18
0
-338
- Opening impairment losses, 1 January
- Reclassifications
- Impairment losses for the year
Closing accumulated impairment losses, 31 December
-2
2
0
0
0
-2
0
-2
Closing carrying amount, net, 31 December
31
33
Opening cost, 1 January
- Acquisitions
- Adjustment of acquisition balance
- Investments
- Sales/disposals
- Exchange rate differences
Closing accumulated cost, 31 December
- Opening depreciation, 1 January
- Adjustment of acquisition balance
- Sales/disposals
- Depreciation for the year
- Exchange rate differences
Closing accumulated depreciation, 31 December
Group
Construction-in-progress
2011
2010
Opening cost, 1 January
- Investments
- Sales
- Reclassifications
Closing carrying amount, net, 31 December
164
247
0
-173
238
115
192
-2
-141
164
Investment projects and the inventory of spare parts related to investment projects are for construction-in-progress.
80
Note 16. Goodwill and other intangible assets
Goodwill and intangible assets with uncertain useful life
Goodwill as of 31 December 2011 had a carrying amount of SEK 1,181 million.
In addition, the right to use the brand Plus TV in Finland, which was acquired
in June 2009, was assigned an uncertain useful life. This right has a carrying
amount of SEK 73 million. Goodwill is allocated to the Group's cash-generating units that have been identified by operating segment in accordance with
the table below.
2011
Group operating segments,
SEK million
Teracom Sweden
Boxer Sweden
Teracom Denmark
Boxer Denmark
Plus TV
Total
Goodwill
Brand
Intangible
assets with
uncertain
useful life
0
818
110
0
253
1 181
73
73
0
818
110
0
326
1 254
The Teracom Group's goodwill and intangible assets that have an uncertain
useful life are not amortized. Rather, they are tested annually for impairment.
When testing for impairment, the recoverable amount for each cash generating unit (CGU) is calculated. The recoverable amount is either the fair value or
the value-in-use of the CGU (whichever is higher).
The recoverable amount of a CGU has been established based on calculations of the value-in-use. These calculations are derived from an estimation
of future cash flows, based on the most recent financial business plans that
have been approved by the Group management team. The Teracom Group has
selected a discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. The discount rate does not
reflect risks for which future cash flows have been adjusted.
Boxer Sweden
Impairment testing of Boxer Sweden is based on a calculation of the valuein-use. The calculated value is based on cash flow forecasts through 2017,
which are based on reasonable and verifiable assumptions representing the
Group's best estimates of the financial conditions that are expected to prevail
during the period. The present value of the forecasted cash flows has been
calculated using a discount rate of approximately 8.5 percent. The expected
future scenario is based on prior experience and external sources. The Group
management team has determined that there have not been any changes to
important assumptions such that the calculated value-in-use is now less than
the carrying amount.
Plus TV
Impairment testing of Plus TV is based on a calculation of the value-in-use.
The calculated value is based on cash flow forecasts through 2017, which
are based on reasonable and verifiable assumptions representing the Group's
best estimates of the financial conditions that are expected to prevail during
the period. The calculations apply to periods that are more than five years in
the future because the company is still in the start-up phase and it will be
quite some time before long-term stable profitability is achieved. The present value of the forecasted cash flows has been calculated using a discount
rate of approximately 8.7 percent. Improved margins and growth in sales are
important variables to consider when calculating Plus TV's value-in-use. The
expected future scenario is based on prior experience and external sources.
The Group management team has determined that there have not been any
changes to important assumptions such that the calculated value-in-use is
now less than the carrying amount.
Boxer Denmark
Impairment testing of Boxer Denmark is based on a calculation of the valuein-use. The calculated value is based on cash flow forecasts through 2019,
which are based on reasonable and verifiable assumptions representing the
Group's best estimates of the financial conditions that are expected to prevail
during the period. The calculations apply to periods that are more than five
years in the future because the company is still in the start-up phase and it
will be quite some time before long-term stable profitability is achieved. The
present value of the forecasted cash flows has been calculated using a discount rate of approximately 8.6 percent. Important variables to consider when
calculating Boxer Denmark's value-in-use are improved margins and growth
in sales. The expected future scenario is based on prior experience and external sources. The Group management team has determined that there have not
been any changes to important assumptions such that the calculated valuein-use is now less than the carrying amount.
Teracom Denmark
Impairment testing of Teracom Denmark is based on a calculation of the value-in-use. The calculated value is based on cash flow forecasts through 2019,
which are based on reasonable and verifiable assumptions representing the
Group's best estimates of the financial conditions that are expected to prevail
during the period. The present value of the forecasted cash flows has been
calculated using a discount rate of approximately 8.3 percent. The expected
future scenario is based on prior experience and external sources. The Group
management team has determined that there have not been any changes to
important assumptions such that the calculated value-in-use is now less than
the carrying amount.
Note 16 continues on the next page
81
Note 16 (cont'd)
Group
2011
Intangible assets
Accumulated cost
- Opening balance, 1 January
- Adjustment of acquisition balance, reclassification to property,
plant and equipment
- Adjustment of acquisition balance, netting against customer advances
Patents,
licenses and
similar
rights
Goodwill
Brand
Customer
agreements
Customer
relations
Total
364
1 233
73
20
85
1 775
-14
-
-
-
-
-14
-67
-
-
-
-
-67
45
-29
0
30
329
0
-19
-3
-30
1 181
0
0
0
73
0
0
-1
19
0
0
0
85
45
-48
-4
0
1 687
-155
21
0
-50
-184
0
0
0
0
0
0
0
0
-2
0
0
-6
-8
-16
0
0
-11
-27
-173
21
0
-67
-219
Accumulated impairment losses
- Opening balance, 1 January
- Sales/disposals
- Reclassifications
- Impairment losses for the year
Closing accumulated impairment losses, 31 December
-18
0
0
-12
-30
-19
19
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
-37
19
0
-12
-30
Carrying amount
1 January
31 December
191
115
1 214
1 181
73
73
18
11
69
58
1 565
1 438
- Investments
- Sales/disposals
- Exchange rate differences
- Reclassification
Closing accumulated cost, 31 December
Accumulated amortization
- Opening balance, 1 January
- Sales/disposals
- Exchange rate differences
- Depreciation for the year
Closing accumulated amortization, 31 December
Group
2010
Patents,
licenses and
similar
rights
Goodwill
Brand
Customer
agreements
Customer
relations
Total
209
42
120
-7
364
1 158
0
112
-37
1 233
84
0
0
-11
73
0
0
20
0
20
84
0
12
-11
85
1 535
42
264
-66
1 775
-108
-47
-155
0
0
0
0
-2
-2
-6
-10
-16
-114
-59
-173
Accumulated impairment losses
- Opening balance, 1 January
- Reclassifications
- Sales/disposals
- Exchange rate differences
- Impairment losses for the year
Closing accumulated impairment losses, 31 December
0
0
0
0
-18
-18
-16
-3
0
0
0
-19
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
-16
-3
0
0
-18
-37
Carrying amount
1 January
31 December
101
191
1 142
1 214
84
73
0
18
78
69
1 405
1 565
Intangible assets
Accumulated cost
- Opening balance, 1 January
- Investments
- Acquisitions
- Exchange rate differences
Closing accumulated cost, 31 December
Accumulated amortization
- Opening balance, 1 January
- Depreciation for the year
Closing accumulated depreciation, 31 December
82
Note 17. Other financial assets
Group
Other financial assets
Net asset, pensions
Long-term loan receivable
Endowment insurance
Other
Total
2011
2010
59
30
1
5
95
51
56
1
6
114
A detailed description of the item "Net asset, pensions" is provided in note 7.
Note 18. Deferred tax
Deferred tax assets
Deferred tax liabilities
Deferred tax asset/tax liability, net
Group
2011
2010
172
-502
-330
120
-482
-362
Parent Company
2011
25
25
2010
-
The tables below present deferred tax assets and liabilities for the Group and the Parent Company according to category and how the assets and liabilities
changed during the year.
Group
Deferred tax assets/liabilities
Untaxed
reserves
Intangible
assets
Pension
liability
Deficit
deduction
-449
-38
-18
134
-27
-476
-4
5
-37
-2
-20
-1
18
37
188
Opening balance, 1 January
Cash flow hedges
Exchange rate differences
Reclassifications
Taken up as income during the year
Closing balance, 31 December 2011
Other
Total
9
5
0
2
-1
15
-362
5
-1
16
12
-330
Deficit deductions
Total
0
25
25
0
25
25
Parent Company
Deferred tax assets/liabilities
Opening balance, 1 January
Taken up as income during the year
Closing balance, 31 December 2011
On the balance sheet date, the Group has unutilized deficit deductions for
the Swedish operations totaling SEK 97 (0) million. The deficit deduction was
reported as a deferred tax asset totaling SEK 25 (0) million.
The total deficit pertaining to the Danish operations was SEK 755 (572)
million on the balance sheet date, which corresponds to a deferred tax asset
of SEK 189 (143) million using the Danish tax rate. Having taken into consideration uncertainties about future profits and other factors, a deferred tax
asset of SEK 104 (105) million was reported by the Boxer Denmark segment.
Unutilized deficit deductions for the Danish operations amount to SEK 338
(151) million.
For the Finnish operations, the total deficit as of the balance sheet date
was SEK 655 (571) million, which corresponds to a deferred tax asset of SEK
170 (148) million using the Finnish tax rate. For the Plus TV segment, SEK 58
(38) million was reported as a deferred tax asset having taken into consideration uncertainties about future profits and other factors. Unutilized deficit
deductions for the Finnish operations amount to SEK 431 (424) million. The
unutilized deficit deductions have an unlimited life, except for the deductions
in Finland, which have a 10-year life.
83
Note 19. Inventories
Group
Type of goods
2011
2010
Finished goods
Total
67
67
25
25
Inventories are valued at cost. The cost for inventories that is expensed is
included in the item Material costs and amounted to SEK 144 (141) million for
the Group. The obsolescence reserve is included in the value of the inventories.
The total write-down amount for the year was SEK 0 (0) million.
Note 20. Accounts receivable
Accounts receivable
Provisions for bad debts
Accounts receivable, net
Provisions in relation to accounts receivable
2011
2010
353
-32
321
9%
306
-11
295
4%
As of 31 December 2011 the Group's provision for doubtful debts was SEK
32 (11) million. Group companies with pay TV operations, which have end
consumers as part of their customer base, make provisions in accordance with
a pre-determined ladder that has been adapted to the conditions of each geographic market. Group companies with network activities, whose customers
are companies, make provisions based on an individual assessment of each
customer and receivable. Provisions and the utilization of reserves for doubtful receivables were transferred to the income statement and are included in
cost of sales.
Provisions for doubtful receivables
Provisions 1 January
New provisions
Release of reserves
Bad debt losses
Exchange rate differences and other changes
Provisions 31 December
2011
2010
-11
-16
4
-9
0
-32
-24
0
11
2
0
-11
The carrying amount of accounts receivable is the same as the fair value since
the discounting effect is insignificant. The fair value of accounts receivable
constitutes maximum exposure to the calculated risk for bad debt losses.
The credit terms for various types of contracts and customer categories are
defined in each subsidiary's credit instructions. A credit statement is obtained
for sales on credit to both companies and consumers in order to minimize the
risk of bad debt losses.
Time analysis of accounts receivable fallen due
Accounts receivable that have not fallen due
Accounts receivable overdue < 30 days
Accounts receivable overdue 30 - 60 days
Accounts receivable overdue 61 - 90 days
Accounts receivable overdue 91 - 120 days
Accounts receivable overdue > 121 days
Accounts receivable, total
2011
2010
215
87
10
4
2
3
321
188
94
6
2
2
3
295
Note 21. Financial instruments and financial risk management
Teracom’s operations expose the Group to various types of financial risk. The
Group’s overall financial operations and management of financial risk are
centralized to the Teracom Group's Finance department. These activities are
based upon the finance policy established by the Board of Directors, which is
characterized by the desire to maintain a low level of risk. The Group's financial strategy and goals are designed to achieve maximum return on equity
based upon reliable, cost-effective financial management practices that help
ensure adequate control and high quality risk management within the Group.
The overriding principle is to minimize all factors that could have a negative
impact on earnings and cash flow due to short-term fluctuations in financial
markets. This applies to both the Parent Company and the Group, in its entirety.
The Group may use derivative instruments in order to hedge certain exposures to risk, however, only for the following purposes:
- To convert future payments for electricity consumption to a fixed electricity price.
- To convert future expected commercial payments in foreign currencies (primarily EUR) to Swedish krona (SEK).
- To convert the fixed interest term for borrowing.
- To hedge net investment in foreign operations.
The market risks include currency risk, interest rate risk and electricity price
risk, which are also described in this note. Other financial risks are broken
down into credit risk, liquidity risk and financing risk.
Currency risk
This is the risk that changes in exchange rates will negatively impact the
Group's profitability or financial position. This type of risk is divided into two
categories (below): transactional and translational.
84
Transactional exposure
Transaction exposure encompasses all future contractual and forecasted
income and expenses in foreign currencies, which thus involve a risk that the
Group's profitability will be negatively impacted by changes in exchange rates.
The Teracom Group has limited transactional exposure. This is because the
value-added from international business activities is primarily created locally
by having expenses in the same currency as the sales revenues.
Currency derivatives are used to decrease transaction exposure in EUR and
the hedged flow on the balance sheet date was EUR 6 million.
Sensitivity analysis of currency risk
The Teracom Group's currency transactions are primarily in SEK, EUR and DKK.
During 2011, the net outflow of EUR amounted to the equivalent of SEK -148
(-146) million. In 2011, the average exchange rate for EUR was SEK 9.0335. A
fluctuation in the exchange rate of +/- 10 percent would impact profits by
SEK +/- 15 million. The Group's net flow in DKK during 2011 was close to zero
through internal currency netting within the Group.
Translational exposure
Because the company has international business activities, there is also a
certain degree of translation exposure. This is rooted in the value of foreign
investments as well as the profits generated on an ongoing basis. Such profits
are translated using the average rate for the year as the opening value and
comparing it to the year's ending rate, which is provided by the Swedish Central Bank. The difference is reported against equity. Accordingly, the only time
that an actual cash flow is involved is in connection with disposals, investments and dividends from subsidiaries.
Net investments of foreign operations can be hedged if the Group's Board
of Directors approves such a decision. Hedge accounting is applied for the
hedging of net investment via loans or derivative instruments.
Translation exposure on net assets in foreign subsidiaries amounted to
SEK 6 (33) million.
Interest rate risk
Interest rate risk is defined as the risk that changes in market interest rates
will have a negative impact on the Group's profit and cash flow. The interest
rate risk associated with the Teracom Group's financing activities should be
limited in accordance with its financial goals and having considered all of the
Group's other risks and margin for such risks. The Group has both interestbearing liabilities and cash equivalents. In terms of risks, these two items balance each other to a certain extent. Given the desire to limit risks, the goal
is to minimize interest expenses. Interest-bearing assets should primarily be
used to reduce existing borrowings and as such, fixed interest terms should
not extend beyond the closest date for amortizing the Group's loans. Derivatives in the form of interest swaps and futures may be used to influence the
fixed interest term without changing the underlying conditions of the loans.
Sensitivity analysis of interest rate risk
As of 31 December 2011, the Group had bank loans of SEK 1,858 (2,209) million.
Part of the funding is at a fixed rate via interest rate derivatives, see more information under the section on financial instruments. The fixed interest term on the
liability at year-end 2011 was 14.6 months. The base lending rate on the liability at
year-end 2011 was 1.53 percent. A change in interest rate of 1 percentage point
affects the Group's interest expenses by SEK +/- 18.6 million on total borrowing.
Electricity price risk
Teracom AB has broadcasting activities that consume significant amounts of
electricity. To limit the exposure to changes in electricity prices, the majority of purchased electricity is hedged. Hedging is conducted using financial
electricity contracts based upon electricity trading instructions that have been
established by the Board of Directors of Teracom AB. This type of derivative
only exists in Teracom AB and maturity dates occur during the period 20122014. Teracom AB hedges electricity prices for 70–100 percent of estimated
total consumption over the coming 12 months. Thereafter, within the interval 13-36 months, prices are hedged for a certain portion of the estimated
consumption volume according to a ladder model. Within the interval 13-24
months, prices are hedged 40-80 percent and within the interval 25-36
months, prices are hedged 10-50 percent.
A change in unrealized gains (losses) related to electricity derivatives, SEK
-27 million, was transferred to equity since the management team decided
that the derivative constitutes cash flow hedging. As of 31 December 2011
there was an unrealized loss attributable to electricity derivatives totaling
SEK -9 million. At the end of 2010, there was an unrealized gain in electricity
derivatives of SEK 17 million.
Sensitivity analysis of electricity price risk
For 2011, Teracom's total electricity consumption was 110,156 MWh. In 2011,
Teracom AB had hedged 96,247 MWh. The average spot price for 2011 was 430.81
SEK/MWh with a variation of approximately +/- 190 SEK/MWh. If the total electricity consumption had not been hedged at all, a fluctuation in electricity prices
of +/- 20 percent could have an effect on profits of SEK +/- 9.5 million.
Credit risk
Note 20 describes the accounts receivable and commercial credit risks associated with them. This note describes the Group's financial credit risk, which can
be broken down into two parts:
- Issuer risk is the risk that the Group fails to get back the amount that was
invested (including interest) due to default, i.e. the counterparty runs into
financial difficulties or goes into bankruptcy.
- Counterparty risk is the risk that the counterparty defaults and is unable
to fulfill its obligations as per the financial contract, such as a forward
exchange agreement. As a result, the Group could then encounter losses by
having to enter into a new contract at going market rates.
Counterparty risk and issuer risk are managed by only allowing financial contracts and investments to be made with established Nordic banks that as a
minimum have a credit rating of A according to S&P.
Liquidity risk
The Group is exposed to the risk of not having sufficient liquid funds at a
certain point in time and thus not being able to fulfill its payment obligations.
Liquidity risk is dealt with by making sure that the Group has sufficient liquid funds and short-term investments in a liquid market, accessible financing
through contracted credit facilities and the ability to close market positions.
The liquidity reserve consists of the Group's liquid funds (credit balances and negotiable investments), unutilized available overdraft facilities and
unutilized credit facilities The liquidity reserve should total at least 10 percent
of the Group's sales, of which at least SEK 100 million at all times must be
immediately available
Surplus of cash equivalents, which is in addition to the need for a liquidity
reserve in accordance with that set out above and which cannot be used to
amortize outstanding loans, should be invested within established guidelines
to create added returns.
At the end of 2011, the liquidity reserve was SEK 1,193 (1,577) million.
Group
Cash equivalents, MSEK
2011
2010
Cash and bank balances
Total
220
220
377
377
Financing risk
The Teracom Group's goal for its capital structure is to make sure that the
Group is able to continue its business activities so that it generates a return
for its shareholders.
The Teracom Group's financial strategy and long-term goal is to generate
a return on equity that is at least 17 percent, along with a long-term equity
ratio ranging between 30-40 percent.
During 2011, the Group's strategy was to maintain a maximum net debt/
equity ratio of 175 (175) percent, which means that the amount of capital
loaned out by the Group may not exceed an amount that is 1.75 times the
carrying amount of the Group's equity. The long-term target for the net debt/
equity ratio is 100 percent. As of 31 December 2011 and 2010, the net debt/
equity ratio was as follows:
MSEK
2011
2010
Interest-bearing liabilities
Less: Cash equivalents
Other interest-bearing assets
Net liability
Equity
Net debt/equity ratio
2 016
-220
-56
1 740
1 773
0,98
2 381
-377
-52
1 952
1 743
1,12
Upplysningscentralen (UC) – Sweden's largest and leading business and credit
information agency has given Teracom AB a risk class rating of 5.
Maturity dates for liability items (excluding interest)
The table below is an analysis of the Group's financial liabilities, which have
been categorized according to the time remaining until the contractual maturity date as of the balance sheet date. The amounts shown in the table represent contractual undiscounted cash flows.
Maturity dates for liability items 2011-12-31
MSEK
Bank loan
Other loans
Derivative instruments
Call option, Digi TV Plus Oy
Financial leasing
Total
Group
Within one
year
1-2 years
2-3 years
3-4 years
4-5 years
More than
five years
Total
75
13
16
128
0
232
302
0
0
0
0
302
75
0
0
0
0
75
1 206
0
10
0
0
1 216
200
0
0
0
0
200
0
0
0
0
0
0
1 858
13
26
128
0
2 025
85
Note 21 (cont'd)
The Group maintains financing flexibility by entering into credit agreements
to make sure that it has both immediate and long-term access to credit facilities. The Group can also take action to influence the maturity dates on its loan
stock and by making sure to take loans with at least two creditors.
Financial loan conditions
The Group has not entered into any new agreement for credit facilities in
2011. Existing credit agreements include financial loan conditions, i.e. covenants, relating to net debts/EBITDA, the interest coverage ratio and the equity
ratio that must be satisfied each quarter. Should the agreed-upon covenants
not be satisfied, this would then entitle the lender to cancel the credit agreement. All of the financial ratios fulfilled the contracted limits during the year.
During the year, the Group's net liabilities increased/decreased by SEK -212
(1,042) million. On the balance sheet date, the Group reported a net liability of
SEK 1,740 (1,952) million.
Contract terms, pledged assets and financial obligations
The scope of Group's pledged assets and contingent liabilities is limited. Disclaimers are typically in place whenever the Group enters into agreements to
obtain credit. The disclaimer states that Group companies do not grant the
lender any type security in the form of chattel mortgages or similar items.
Rather, they only commit to not providing any collateral to another party.
Calculation of fair value
The table below shows financial instruments measured at fair value, based
on how classification in the fair value hierarchy has been done. The different
levels are defined as follows:
- In Level 1, fair value is based on financial instruments at listed prices (unadjusted) on active market for identical assets or liabilities. A market is considered to be active if quoted prices from a stock exchange, broker, trade
association, pricing service or surveillance authority are easily and regularly available. The prices must also represent actual and regularly occurring arm's length market transactions. The quoted market price used for the
Group's financial assets is the current bid price.
- The fair value of financial instruments that are not held in an active market
is established by using valuation techniques. To the extent possible, market
information is used whenever it is available and company-specific information is used as little as possible. If all significant input data required for fair
value measurement of an instrument is observable, the instrument will then
be categorized in Level 2.
- In instances where one or more significant input data items are not based
on observable market information, the instrument will then be classified as
Level 3.
The following table shows the Group's financial assets and liabilities measured at
fair value as of 31 December 2011.
2011
Fair value hierarchy
MSEK
Financial assets valued at fair value via the income statement
- Derivative instruments
Financial assets, total
Financial liabilities
Derivative instruments where hedge accounting is applied
Financial liabilities valued at fair value via the income statement
Financial liabilities, total
Level 1
Level 2
Level 3
Total
2
2
-
-
2
2
26
26
128
128
-
26
128
154
The following table shows the Group's financial assets and liabilities measured at
fair value as of 31 December 2010.
Fair value hierarchy
MSEK
Financial assets
Financial assets valued at fair value via the income statement
- Electricity derivatives included in the item, Derivative instruments
Financial assets, total
Financial liabilities
Financial liabilities valued at fair value via the income statement
- Put option included in the item, Other current liabilities
Financial liabilities, total
86
2010
Level 1
Level 2
Level 3
Total
17
17
-
-
17
17
-
125
125
-
125
125
Financial derivative instruments
The following table shows the fair value of the Group's financial derivative
instruments for managing financial risks.
Derivative instruments at fair value
Interest rate swap
Cash flow hedges
Hedges of fair value
Held for trading
Currency interest rate swap
Cash flow hedges
Hedges of fair value
Held for trading
Electricity derivatives
Cash flow hedges
Hedges of fair value
Held for trading
Total
31 December 2011
31 December 2010
Assets
Liabilities
Assets
Liabilities
-
10
-
-
-
-
6
-
-
-
0
10
26
17
17
0
Note 22. Prepaid expenses and accrued income
Parent Company
Group
Prepaid expenses and accrued income
Accrued income
Prepaid project expenses
Prepaid boxes in customer agreements
Other items
Total
2011
2010
2011
2010
82
142
83
22
329
51
98
71
22
242
2
0
0
0
2
-
Prepaid project expenses
Prepaid project expenses refer to costs for fixed-price contracts. These expenses are reported in accordance with the percentage of total service that has
been delivered. These expenses consist of program company expenses in order
to provide customers with access to TV programs, as well as direct expenses
related to taking orders.
Prepaid boxes in customer agreements
Prepaid boxes in customer agreements are expenses for boxes that are included in agreements with customers. These expenses are reported in accordance
with the percentage of total service that has been delivered.
87
Note 23. Equity
Note 25. Provisions
Share capital
According to the articles of association for Teracom Group AB (the
Parent Company), the share capital should amount to no less than
SEK 50,000 and no more than SEK 200,000. As of 31 Decembe­r
2011, the share capital was SEK 50,000. The quotient value is
SEK 1,000. All 50,000 shares are fully paid and carry full entitlement to an
equal voting right and share in the company’s assets.
Long-term provision
Provisions
Opening balance, 1 January
Provisions made
Provisions utilized
Closing balance, 31 December
Group
Pension provisions
2011
2010
1
0
0
1
2
1
-2
1
No shares are held by the Company itself or its subsidiaries.
Other contributed capital
Other contributed capital refers to capital contributed by the owner.
Short-term provision
Reserves
Reserves include all exchange rate differences arising during the translation
of financial statements from foreign operations, changes in the translation of
goodwill, other surpluses in local currency and derivative instruments subject
to hedge accounting. Reserves also include tax related to the above items.
Opening balance, 1 January
Provisions made
Provisions utilized
Closing balance, 31 December
Provisions
Profit brought forward
Profit brought forward, which includes the profit/loss for the period, also
includes earned profits for the Parent Company and its share of profits/losses
of subsidiaries. Profit brought forward includes amounts to be distributed as
dividends.
Proposed dividends
As of 31 December 2011, the Parent Company had non-restricted equity of
SEK 1,859 million. A decision about dividends will be made at the AGM on
18 April 2012. The Board of Directors' proposed dividend is SEK 110 million.
Note 24. Accrued expenses and
deferred income
Deferred income primarily pertains to deferred income for pay TV subscriptions and deferred income for capacity and co-location.
The long-term portion of deferred income amounts to SEK 79 (70) million
for the Group and SEK 0 (-) million for the Parent Company.
The components of the current portion of deferred income are shown in the
table, below.
Accrued expenses and
deferred income
Accrued personnel expenses
Deferred income
Accrued expenses for program
companies
Other items
Total
88
Group
Parent Company
2011
2010
2011
2010
67
517
66
463
9
0
-
73
61
-
-
98
755
174
764
5
14
-
Short-term provision
Provisions
Opening balance, 1 January
Provisions made
Provisions utilized
Closing balance, 31 December
Group
Restructuring
2011
2010
2
6
-4
4
1
5
-4
2
Parent Company
Restructuring
2011
2010
0
4
0
4
-
Provisions made and utilized consist of estimated personnel expenses resulting from the Group's decision to execute a reorganization of the company.
These expenses primarily consist of retirement pensions.
Note 26. Shares and participations in Group companies
Participations in Group companies
Company name
Teracom AB
Boxer TV-Access AB
Oy Boxer TV AB
Boxer TV A/S
Teracom A/S
Digi TV Plus Oy
Teracom Mobile TV AB
Teracom Mast AB
CIN
Registered office
556441-5098
556548-1131
1589479-9
29939470
25598008
1988050-3
556392-5303
556711-9168
Stockholm
Stockholm
Helsinki
Copenhagen
Taastrup
Helsinki
Stockholm
Stockholm
Book value
Company name
Teracom AB (Parent Company previous year)
Boxer TV-Access AB
Oy Boxer TV AB
Boxer TV A/S
Teracom A/S
Digi TV Plus Oy
Teracom Mobile TV AB
Teracom Mast AB
Number shares
Equity
250 000
3 332
392
5 000
3 800
2 921 500
10 000
10 000
1 572
156
304
156
-256
1 288
-134
1
1
-258
43
-75
0
0
Note 27. Acquired businesses
On 30 September 2010, Teracom AB acquired 100 percent of the shares in
the Danish terrestrial network operator, BSD, which consists of the following
three companies: Broadcast Service Denmark A/S, Broadcast Stations Company 1 A/S and Broadcast Stations Company 2 A/S. The consideration, SEK
1,394 million, was paid in cash. Acquisition costs amounted to SEK 16 million
and have been included in the Group's income statement for 2010 as other
expenses. The acquired companies, which were merged in May 2011, comprise
a cash-generating unit called Teracom A/S. According to the final acquisition
analysis, the assets and liabilities included in the acquisition of Teracom A/S
are as follows:
MSEK
Property, plant and equipment
Customer agreements
Customer relations
Intangible assets
Current receivables - interest-bearing
Current receivables - non interest-bearing
Cash and bank balances
Provisions (deferred tax liabilities)
Long-term liabilities - interest-bearing
Long-term liabilities - non interest-bearing
Current liabilities - interest-bearing
Current liabilities - non interest-bearing
Acquired identifiable net assets
Goodwill
Purchase sum for shares in subsidiary
Purchase sum entered as a liability
Consideration paid on 31 December 2010
Cash equivalents in acquired subsidiaries
Change in Group cash equivalents as of
31 December 2010
Capital/share
Profit (loss) for the year of votes, %
Value according to
acquisition analysis
1 440
20
12
39
47
4
147
-8
-241
-98
-43
-37
1 282
112
1 394
100
100
100
100
100
53
100
100
2011
1 633
1 410
0
444
1 410
394
0
1
5 292
2010
1 410
0
1 410
413
0
1
3 234
possible to calculate the total amount of income that the Group would have
had if Teracom A/S had been consolidated on 1 January 2010 since Teracom
A/S consisted of several companies during 2010 and the legal structure was
changed just prior to the acquisition.
Note 28. Pledged assets
The Group's and the Parent Company's pledged assets at the end of the year
amounted to SEK 0 (0) million and 0 (0), respectively.
Note 29. Contingent liabilities/Guarantees
At the end of 2011 there was only one contingent liability/guarantee in the
Parent Company. It was also the only contingent liability in the Group. The
contingent liability referred to a Parent Company guarantee for the subsidiary
Boxer TV A/S. The Parent Company guarantees its subsidiary's financial commitments in a Letter of Financial Support.
-6
-1 388
147
-1 241
The income from Teracom A/S included in the consolidated income statement
for the period 1 October-31 December 2010 amounted to SEK 60 million.
Teracom A/S also contributed a profit before tax of SEK 18 million. It is not
89
The undersigned hereby declare that the consolidated financial statements and annual report have been prepared in
accordance with international financial reporting standards
(IFRS), as adopted by the EU, as well as generally accepted
accounting principles. These give a true and fair view of the
Group's and the Parent Company's financial position and
earnings. In addition, the Group's Directors' Report and the
Parent Company's Director's Report provide a fair overview
of how the Group and the Parent Company's businesses have
developed, along with financial position and earnings. The
significant risks and uncertainty factors facing the companies that belong to the Group have also been described.
Sundbyberg, March 16, 2012
Åsa Sundberg
Chairman of the Board
Lars Grönberg
Kristina Axberg Bohman
Urban Lindskog
Maria Curman
Nils-Petter Tetlie
Ingrid Engström
Johan Hallberg
Magnus Ahxner
John-Olof Blomkvist
Crister Fritzson
President/CEO
Sten Håkansson
Authorized Public Accountant
90
Auditors' report on overall review of
the Sustainability Report
To the readers of Teracom's Sustainability Report
The management of Teracom Group AB commissioned us to
conduct a general review of the sustainability information
referred to in the GRI index in Teracom Group AB's combined
2011 Annual and Sustainability Report. The Board and senior
management team are responsible for the operating activities related to the environment, the work environment, social
responsibility and sustainable development, as well as the
preparation and presentation of the Sustainability Report in
accordance with applicable criteria. Our responsibility is to
express an opinion on the Sustainability Report that is based
upon our overall review.
The purpose and scope of a review
We carried out our overall review in accordance with RevR 6
Assurance of sustainability reports, which is published by FAR.
A review consists of making inquiries, primarily of persons
responsible for preparation of the Sustainability Report, and
applying analytical and other review procedures. A review
has a different purpose and is substantially more limited in
scope than an audit conducted in accordance with IAASB's
standards for audit and quality control, and other generally
accepted auditing standards. The procedures performed in a
review do not enable us to obtain a level of assurance that
would make us aware of all significant matters that might
be identified in an audit. Therefore, the conclusion expressed
based on a review does not give the same level of assurance
as a conclusion based on an audit.
The criteria that we used to base our review on are the
parts of the Sustainability Reporting Guidelines, G3, issued
by Global Reporting Initiative (GRI), which are relevant for
the Sustainability Report along with the accounting and calculation principles specifically designed and specified by the
company. We believe that these criteria are appropriate to
use for preparation of the Sustainability Report.
Based on an assessment of materiality and risk, our
overall review covered the following items:
a.
updating our own knowledge and understanding of
Teracom's organization and operations,
b.assessing the results of the company's dialogue with
stakeholders,
c.conducting interviews with managers at the Group level
and at selected units, with the aim of assessing whether
the qualitative and quantitative information contained in
the Sustainability Report is complete, accurate and sufficient,
d.examining internal and external documentation in order
to assess whether the reported information is complete,
accurate and sufficient,
e.evaluating the design of the systems and processes that
have been used to collect, manage and validate sustainability information,
f.conducting an analytical review of the reported information,
g.assessing the company's stated application level in terms
of GRI guidelines,
h.
assessing the overall impression made by the
Sustainability Report, along with its format and with
that, assessing whether the information reciprocally is in
agreement with the applied criteria.
Conclusion
Based on our overall review, no circumstances were
brought to light that would give us reason to believe that
the Sustainability Report was not, in all material respects,
prepared in accordance with the criteria stated above.
Stockholm, March 16, 2012
PricewaterhouseCoopers AB
Sten HåkanssonFredrik Ljungdahl
Authorized Public Accountant
Specialist member of FAR
91
Auditor's report
To the AGM in Teracom Group AB, CIN 556842-4856
Report on the annual report and consolidated financial
statements
We have audited the annual report and consolidated financial statements of Teracom Group AB for 2011. The company's annual report and consolidated financial statements are
included in the printed version of this document on pages
44–89.
The responsibility of the Board of Directors and the
President/CEO for the annual report and consolidated
financial statements
The Board of Directors and the President/CEO are responsible for preparing an annual report that presents a true and
fair view in accordance with the Annual Accounts Act and
consolidated financial statements that present a true and fair
view in accordance with the IFRS international accounting
standards, as adopted by the EU, and the Annual Accounts
Act, and for the internal control that the Board of Directors
and the President/CEO deem to be necessary to prepare an
annual report and consolidated financial statements that are
free of material misstatement, whether such are the result of
falsifications or errors.
Responsibility of the auditor
Our responsibility is to express our opinion on the annual
report and the consolidated financial statements based on
our audit. We conducted the audit in accordance with the
International Standards on Auditing and generally accepted
auditing standards in Sweden. These standards require that
we apply professional moral requirements and plan and
carry out the audit in such a manner as to assure reasonable
certainty that the annual report and consolidated financial
statements are free of material misstatement.
An audit entails obtaining through different measures
audit evidence regarding amounts and other information
in the annual report and consolidated financial statements.
The auditor decides the measures that will be conducted,
in part by assessing the risks for material misstatement in
the annual report and consolidated financial statements,
regardless whether these misstatements are due to falsifications or error. When conducting this risk assessment, the
auditor takes into account the areas of internal control that
are relevant for how the company prepares its annual report
and consolidated financial statements in order to present a
true and fair view, with the intention of designing auditing
measures that are appropriate given the circumstances, but
not with the intention of making a statement regarding the
92
efficiency of the company's internal control. An audit also
entails evaluating the appropriateness of the accounting
principles applied and the plausibility of the estimations
made by the board of directors and the managing director
in the report, as well as evaluating the overall presentation
of the annual report and consolidated financial statements.
We believe the audit evidence we obtained to provide a
sufficient and appropriate base for our statement.
Opinion
It is our opinion that the annual report has been prepared in
accordance with the Annual Accounts Act and in all material
aspects provides a true and fair view of the Parent Company's
financial position as of 31 December 2011 and the financial
results and cash flows for the year in accordance with the
Annual Accounts Act, and that the consolidated financial
statements were prepared in accordance with the Annual
Accounts Act and provide in all material aspects a true and
fair view of the Group's financial position as of 31 December
2011 and its results and cash flows in accordance with the
international accounting standards, as adopted by EU, and
the Annual Accounts Act. A Corporate Governance Report
has been prepared. The Directors’ Report and the Corporate
Governance Report are consistent with the other parts of the
annual report and the consolidated financial statements.
We therefore recommend to the Annual General Meeting
that the income statement and balance sheet for the Parent
Company and the Group be adopted.
Reports on other requirements in accordance with laws
and other regulations
In addition to our audit of the annual report and consolidated financial statements, we also audited the proposed
appropriations regarding the company's profit or loss and
the Board of Director's and the President/CEO's administration of the Teracom Group AB for 2011.
The responsibility of the Board of Director and the President/
CEO
It is the responsibility of the Board of Directors to propose
the appropriations regarding the company's profit or loss,
and it is the responsibility of the Board of Directors and the
President/CEO for administration in accordance with the
Companies Act.
Responsibility of the auditor
It is our responsibility to express our opinion with reasonable certainty on the proposed appropriations regarding the
company's profit or loss and the administration based on our
audit. We conducted the audit in accordance with generally
accepted auditing standards in Sweden.
As the basis for our statement regarding the Board of
Director's proposed appropriations regarding the company's
profit or loss we audited the Board of Director's reasoned
opinion and a sample of the data underlying this opinion
in order to assess if the proposal is in compliance with the
Companies Act.
As the basis of our statement regarding discharge from
liability, in addition to our audit of the annual report and
consolidated financial statements, we examined significant
decisions, actions taken and circumstances of the Company
in order to be able to determine the possible liability to the
Company of any Board member or the President/CEO. We also
examined whether any Board member or the CEO has, in any
other way, acted in contravention of the Swedish Companies
Act, the Annual Accounts Act or the articles of association.
We believe the audit evidence we obtained to provide a
sufficient and appropriate base for our statement.
Opinion
We recommend that the Annual General Meeting distribute
the profit in accordance with the proposal in the Directors’
Report and discharge the members of the Board of Directors
and the President/CEO from liability for the financial year.
Stockholm, March 16, 2012
PricewaterhouseCoopers AB
Sten Håkansson
Authorized Public Accountant
93
94
Teracom Group's service technicians
are used to working at heights that
are often over 300 m.
95
Technical definitions
Broadcasting
Transmission of radio and TV.
Co-location
Allows companies and organizations to rent a place in the network operator’s
masts and stations. Typically, the equipment belongs to the customer.
DAB
Digital Audio Broadcasting, digital radio.
DAB+
The future digital radio standard for the terrestrial radio network.
DVB-T
Digital Video Broadcasting Terrester. The European standard
for terrestrial digital TV.
DVB-T2
The future digital TV standard for the terrestrial TV network.
Environmental Code
This refers to the portion of Swedish legislation that protects human health
and the environment. The work environment is regulated in other legislation.
Free TV (FTA)
Channels that do not require any special subscription.
Global Compact
Global Compact is a UN initiative to unite companies with UN bodies, trade
unions and the civil sector. The initiative supports ten principles concerning
human rights, labor legislation, the environment and efforts to counteract
corruption. Its vision is for a more sustainable economy that does not marginalize different groups in society or have a negative impact on the environment.
HDTV (High Definition TV).
High definition TV that has a sharper picture than standard TV.
IPA (Important Public Announcements)
These are important messages to society. It is the society’s information channel used to reach those who are affected by very serious accidents/disasters
and similar events.
IPTV
Broadband TV that is distributed via fiber or ADSL, for example.
MPEG2/MPEG4
Moving Pictures Expert Group. Compression for digital TV broadcasts. With
MPEG-2 coding technology, there is room for 5 to 7 standard TV channels in
each multiplex. With the new MPEG-4 technology, there is room for 10 to 12
standard TV channels, or 2 to 4 HDTV channels.
MUX (multiplex)
Frequency space for digitally compressed signals. A MUX utilizes a frequency
channel for transmission.
Pay TV
Channels requiring a paid subscription.
Radio newspapers
Recordings of newspaper articles for the visually impaired and dyslectics. Distributed via the FM network.
RDS
Radio Data System, technology for broadcasting texts and program-related
messages in FM radio.
Triple play
An offering that includes telephony, Internet and TV that is distributed via the
same network using shared technology.
TV Operator
The Teracom Group's common position as both a pay TV operator and a network operator.
VoD (On demand)
Video-on-demand, films or TV programs distributed to viewers at the exact
moment they themselves desire to view the content.
3G
Third generation mobile telephony. It offers more rapid transmission speeds
between mobile telephones, with the possibility of sending moving pictures,
among other things.
4G
Fourth generation mobile telephony.
Financial definitions
Average number of employees
The number of employees at the beginning of the year, plus the number of
employees at year end, divided by two.
Net liability
Interest-bearing liabilities less interest-bearing assets and cash equivalents
Capital employed
Total assets less non interest-bearing liabilities including deferred tax
liabilitie­s.
Operating income
Income that has been earned or is from work completed during the period.
Pertains to all income except work performed by the company for its own use
and capitalized, which is included as part of operating expenses.
EBIT
Operating profit according to the income statement.
Operating margin
Operating profit expressed as a percentage of operating income.
EBITDA
Operating profit excluding depreciation/amortization of property, plant and
equipment and intangible assets.
Return on capital employed
Profit after net financial income/expense plus financial expenses expressed as
a percentage of average capital employed.
Equity ratio
Equity expressed as a percentage of total assets.
Return on equity,
Profit for the year expressed as a percentage of adjusted equity.
Net debt/EBITDA
Net debt divided by EBITDA
96
Our services are easy to use, solutions easy to
understand and our processes easy to work with.
We deliver what we promise as we care for
customers and colleagues.
We take pride in making a difference for our
customers and users as well as for our company.
We simplify by working in a smart, fast and
effective way to attract and retain customers
and build our competitive strength.
To secure long term loyalty and commitment,
we build trust through mutual respect and
individual ownership.
We stand out in the market with solutions
that create significant value and attract
customers.
CONTACT INFORMATION:
Teracom Group AB
Box 30150
SE-104 25 Stockholm
Teracom A/S
Banestrøget 19-21
DK2630 Taastrup
Boxer A/S
Postbox 118
DK 1004 København k
Street address:
Lindhagensgatan 122
SE-112 51 Stockholm
Street address:
Banestrøget 19-21
Taastrup
Street address:
Langebrogade 6E, 1. Sal
Köpenhamn K
Tel: +46 8 555 421 00
Tel: +45 7011 8011
Tel: +45 7025 1588
Fax: +46 8 555 420 01
Fax: +45 4371 1143
info@boxertv.dk
www.teracomgroup.se
info@teracom.dk
Customer service tel: +45 7033 2033
www.teracom.dkkundeservice@boxertv.dk
www.boxertv.dk
CIN: 556842-4856
Teracom Sweden
Box 30150
SE-104 25 Stockholm
Boxer TV-Access AB
Box 30150
SE-104 25 Stockholm
Digi TV Plus Oy
Pasilankatu 2
FI-00240 Helsinki, Finland
Street address:
Lindhagensgatan 122
SE-112 51 Stockholm
Street address:
Lindhagensgatan 122
SE-112 51 Stockholm
Street address:
Pasilankatu 2 (Huolintatalo)
Helsinki
Tel: +46 8 555 420 00
Fax: +46 8 555 420 01
Customer service tel: 077191 00 85
www.teracom.se
Tel: +46 8 587 899 00
Tel: +358 10 387 3001
Fax: +46 8 587 899 99
Fax +358 10 387 3088
customer service tel: 077121 10 00
Customer service tel: +358 10 309 8008
kundservice@boxer.seasiakaspalvelu@plustv.fi
www.boxer.sewww.plustv.fi