The Nordic and Baltic
telecommunications leader
Year-End Report 2002
Stockholm, February 19, 2003
Anders Igel
President and CEO
Year-End Report January-December 2002
Merger of Telia and Sonera completed in December 2002
Pro forma highlights 2002
• Comparable net sales >+5%
• Underlying EBITDA SEK 25,457 million (21,768), margin
31.4% (26.9%)
• Strong free cash flow of SEK 9,534 million (-7,008)
• Costs totaling SEK 53,278 million for restructuring and
streamlining efforts, primarily within international 3G
operations, International Carrier and the Danish fixed
network operations, impacted operating income which fell to
SEK -45,958 million (9,586)
• Underlying operating income increased to SEK 7,320 million
(-1,514)
Improved underlying performance
Pro forma underlying EBITDA (SEK million)
• Strong improvement in
underlying operations
• Underlying EBITDA
margin increasing from
26.9% to 31.4%
25,000
20,000
15,000
10,000
5,000
0
2001
Sonera
Telia
2002
TeliaSonera
Key performance drivers
• Strong mobile development in home markets
– Streamlining in Sweden gives 50% EBITDA margin in Q4
– Tight cost control in Finland gives 50% EBITDA margin for 2002
– Business initiatives in Norway make EBITDA climb by 42% in Q4
– Strong customer growth in Denmark gives significant improvement
of EBITDA
• Swedish fixed line operation shows strong EBITDA growth with margin
of 37.4%. Efficiency measures implemented.
• Significant growth in eastern markets in 2002
– Russian MegaFon triples its customer base to 3 million subscribers
– Fintur companies expand in respective country in Eurasia
– Turkcell’s subscriber base grows by 3.5 million to 15.7 million
customers
Reduced investments / Improved cash flow
Pro forma (SEK billion)
25
• Improved cash flow from
20.7
20
15
14.2
9.5
10
– Improved margins
– Reduced investments
5
0
-5
-7.0
-10
-11.2
-15
-20
-25
-21.2
2001
Cash flow from operating activities
2002
CAPEX
Free cash flow*) *) Excluding effects of other investments and divestments
Taking action with problem areas
Operating income affected by cost for restructuring and
streamlining of SEK 53,278 million
AREA
ACTION
TARGET
International Carrier
New strategic focus
Cash flow positive on a
monthly basis during 2003
Danish fixed
network operations
Refocus and streamlining
program
Positive underlying
EBITDA at the end of 2003
UMTS projects
Impairment and
discontinued equity
accounting
No risk exposure
Summary 2002 TeliaSonera
• Very strong development with improved margins within
our home market businesses
• The exceptions are:
– Danish fixed network operations
– International Carrier
– Group 3G
• We have dealt with these problems during the year
and initiated thorough restructuring programs
What’s next – It’s about customers and profits
• Actions to gain market shares in selected
home market segments
• Quick decisions in synergy implementation
• Ensure competitive cost levels in all
TeliaSonera operations
Outlook
In the current business and regulatory environment
Key figures
Group level mid-term targets
Revenue
Few percentage points growth annually
Underlying EBITDA
Increasing margin, approaching 34%
CAPEX / Sales
Few percentage points higher than 2002
In the longer term TeliaSonera expects a significant
increase in profits and free cash flow
Dividend
• Based on current circumstances the Board of
Directors will be proposing a dividend of SEK 0.40
per share to the AGM, resulting in a total distribution
of SEK 1,870 million.
Dividend policy
• The outlook for operating cash flow generation,
capital expenditure requirements, earnings growth
and the amount of funds available for distribution
shall be taken into consideration when proposing
the level of dividend. The intention is to increase the
dividend annually.
Harri Koponen
Deputy CEO
Market development
Characteristics
• Advanced IT and telecom market
• Competitive environment
• Increased regulatory impact
Positions
• Strong market leader in fixed, mobile and
Internet segments in home markets
• Strong growth potential in Russia and Eurasia
Market actions
• MMS launched in all Nordic countries
• 3G build out according to market demand and
license requirements
• Actions to win back lost market share
– Focus on customer and Pan-Nordic services
• Pursuing broadband growth opportunity
Mobile operations – Sweden
ARPU
ARPU
(SEK)
500
432
394
439
431
280
303
289
108
125
415
397
441
461
283
293
456
Post paid
400
Total
300
200
303
273
262
281
Pre paid
100
106
0
101
Q4 00
109
99
100
109
Q4 01
99
Q4 02
Churn 13%
MoU
MoU
(minutes)
250
200
170
180
179
181
119
130
131
129
53
62
68
63
165
207
195
139
135
61
68
176
196
150
100
Post paid
Total
124
50
54
0
Q4 00
Q4 01
121
55
127
Pre paid
57
Q4 02
Mobile operations – Finland
ARPU
ARPU
(EUR)
60
40
39
40
42
Total (Post paid)
41
40
39
41
40
39
20
0
Q4 00
Q4 01
Q4 02
Churn 16%
MoU
MoU
(minutes)
200
150
100
141
139
150
149
147
143
155
153
153
50
0
Q4 00
Q4 01
Q4 02
Total (Post paid)
Mobile operations – Norway
ARPU
ARPU
(NOK)
700
600
500
496
487
534
400
300
200
100
0
567
616
524
536
562
579
Total
308
292
317
341
119
107
115
128
Q4 00
317
326
346
125
121
130
377
358
Pre paid
132
Q4 01
134
Q4 02
Churn 31%
MoU
MoU
(minutes)
Post paid
300
209
210
231
238
223
230
141
147
141
144
60
59
250
262
255
162
169
163
65
65
64
Post paid
200
100
136
62
0
Q4 00
131
56
57
Q4 01
59
Q4 02
Total
Pre paid
Integration
• Synergies work has started
– Common MMS platform
– Telia Homerun and Sonera W-gate roaming
– Pan-Nordic IP-VPN service
• Several large contracts landed because of enhanced
Pan-Nordic capability
– Axfood
– Fläkt woods group
– TietoEnator
– KONE
– Partek
– Schlumberger SEMA
• Competence center
The work continues
• New Group structure and new control models
implemented
• Customer orientation
– Attractive service packaging
– Cross selling
– Tailored offerings for different customer segments
• Fulfillment of EU requirements
• Stand-alone improvements – major rationalization
program will continue
• Execution of synergy plan
Kim Ignatius
CFO
TeliaSonera legal
• Net sales increased 4% to SEK 59,483 million (57,196)
• Underlying EBITDA increased to SEK 15,692 million
(12,915) and the margin increased to 26% from 23%
• Comparison affected by the consolidation of Sonera and
new Baltic subsidiaries in December
SEK million
Net sales
Underlying EBITDA
Operating income
Underlying operating income
Oct-Dec 02 Oct-Dec 01 Change% FY 2002 FY 2001 Change %
16,756
14,970
+12
59,483
57,196
+4
4,443
3,133
+42
15,692
12,915
+22
-908
916
-199
-10,895
5,460
-299
3,587
1,011
+255
TeliaSonera legal
• No significant gains from associated companies in
2002 (significant sales of shares in 2001)
• A net loss per share due to significant write-downs
and provisions
SEK million
Associated companies
Financial items
Income after financial items
Earnings/loss per share (SEK)
Oct-Dec 02
Oct-Dec 01
FY 2002
FY 2001
195
3,746
528
6,136
-201
-10
-721
-652
-1,109
906
-11,616
4,808
0.54
-0.19
-2.58
0.62
Goodwill summary
SEK billion
EUR billion
Purchase price of Sonera
securities (up to Dec 31, 2002)
56.5
6.2
Sonera’s book equity
16.4
1.8
Difference
40.1
4.4
Allocated to:
Amortized over
• Goodwill
28.5
3.1
20 years
• Associated companies, other
minority holdings
10.1
1.1
10 years
5.1
0.6
5-20 years
• Deferred tax liability
-3.6
-0.4
Total
40.1
4.4
• Other assets and liabilities
Preliminary purchase price and allocation as of December 31, 2002.
Balance sheet
• Strong financial position
• Balance sheet impacted by share issue of SEK
56 billion, and increase of SEK 19 billion in net
debt through the merger
Dec 31 2002
Dec 31 2001
53.0
46.2
Net debt (SEK million)
38,075
20,004
Net debt-to-equity (%)
35.0
33.4
Equity-to-assets ratio (%)
Pro forma income statement 2002 and 2001
EU conditions1)
and pro forma
adjustments
TeliaSonera
pro forma
2002
TeliaSonera
pro forma
2001
%
SEK billion
Telia Sonera Baltic
Net sales
57.1
20.5
6.2
-2.8
81.0
80.9
0
Underlying EBITDA
14.9
7.3
3.0
0.2
25.5
21.8
17
Underlying EBITDA margin, %
Depreciation, amortization and
write-off
Items not reflecting underlying
business operations
26.1
35.7
48.4
31.4
26.9
-20.2
-5.2
-1.6
-1.2
-28.2
-22.1
28
-6.0
-4.2
-
-
-10.2
7.8
-231
-11.3
-2.0
1.4
-1.0
-12.9
7.5
-272
0.4
-33.0
-
-0.5
-33.1
2.1
Operating income
-10.9
-35.0
1.4
-1.5
-46.0
9.6
Income after financial items
-11.4
-35.4
1.3
-1.3
-46.8
5.3
-8.6
-23.7
1.1
-1.7
-32.9
2.1
-7.02
0.57
Operating income before
associated companies
Income from associated
companies
Net income
Earnings per share (EUR)
Cash flow from operating
activities
Capital expenditure
Free cash flow2)
12.3
-8.3
6.0
-2.5
2.2
-1.3
-0.1
0.6
20.7
-11.2
14.2
-21.2
44
-54
4.0
3.5
0.9
0.5
9.5
-7.0
227
1) Effects of excluding Telia's operations in Finland and ComHem AB 2) Excluding effects of other investments and divestments
Pro forma underlying income statement 2002 and 2001
EU conditions1)
and pro forma
adjustments
TeliaSonera
pro forma
2002
TeliaSonera
pro forma
2001
%
SEK billion
Telia Sonera Baltic
Net sales
57.1
20.5
6.2
-2.8
81.0
80.9
0
EBITDA
14.9
7.3
3.0
0.2
25.5
21.8
17
EBITDA margin, %
26.1
35.7
48.4
31.4
26.9
Depreciation and amortization
-11.4
-3.3
-1.6
-1.2
-17.5
-18.1
-3
3.6
4.0
1.4
-1.0
8.0
3.7
116
0
-0.2
-
-0.5
-0.7
-5.2
-87
3.6
3.8
1.4
-1.5
7.3
-1.5
587
Operating income before
associated companies
Income from associated
companies
Operating income
1) Effects of excluding Telia's operations in Finland and ComHem AB
Telia breakdown external sales
• Strong mobile growth due to over 500,000 additional customers and
increased volumes
• Fixed telephony drop due to introduction of local carrier pre-selection and
overall market development
• Strong demand for broadband access. Increase in Internet accesses close
to 200,000.
• Increased International Carrier revenues despite refocusing of operations
SEK million
Telia stand-alone
Oct-Dec 02 Oct-Dec 01 Change %
FY 2002 FY 2001 Change %
14,411
14,970
-4
57,138
57,196
0
Telia Mobile
5,032
4,714
+7
20,163
17,857
+13
Telia Internet Services
1,147
963
+19
4,174
3,288
+27
Telia International Carrier
1,105
1,022
+8
4,369
3,652
+20
Telia Networks
6,860
7,687
-11
27,263
29,159
-7
267
584
-
1,169
3,240
-
Other
Telia breakdown underlying EBITDA
• Volume growth and streamlining efforts improving profitability in Mobile,
positive trend continues in Q4 2002
• Record-high margins for Telia Networks Sweden – Refocus program in
Denmark continues
• Price increases and efficiency measures reducing EBITDA losses from
Internet Services
• New strategic focus and realignment of operations improving
International Carrier profitability
SEK million
Oct-Dec 02
Oct-Dec 01 Change %
FY 2002
FY 2001 Change %
Telia stand-alone
3,666
3,133
+17
14,909
12,915
+15
Telia Mobile
1,732
1,089
+59
6,123
4,705
+30
-80
-223
+64
-486
-970
+50
-414
-388
-7
-1,287
-1,569
+18
2,650
2,951
-10
11,090
11,710
-5
-221
-296
-
-531
-961
-
Telia Internet Services
Telia International Carrier
Telia Networks
Other
Sonera breakdown net sales
• Mobile sales growth from increased usage and revised revenue sharing,
negatively impacted by new interconnection and lower prices
• Comparable growth in Fintur 38%. Consolidated as of September 2002.
• Sale of Info Communications and restructured operations reducing sales
from Service Businesses
• Telecom: Primatel and Gateway sold. Data services increasing revenues.
Finnish GAAP (SEK million)
Sonera stand-alone
Mobile Communications
Finland
Oct-Dec 02
Oct-Dec 01 Change %
FY 2002 FY 2001 Change %
5,552
5,146
+8
20,530 20,241
+1
2,794
2,832
-1
11,332
11,226
+1
Int. Mobile Communications
632
9
-
861
37
Service Businesses
650
814
-20
2,602
2,971
-12
2,299
2,443
-6
9,079
9,477
-4
Sonera Telecom
-
Sonera breakdown underlying EBITDA
• Strong Mobile profitability based on cost control and process development
• Fintur full year EBITDA at the level of 51%
• Focused strategy leading to narrowed losses in Services, beating the target
• Revised revenue sharing and sale of businesses reducing Telecom EBITDA
Finnish GAAP (SEK million)
Sonera stand-alone
Mobile Communications
Finland
Oct-Dec 02
Oct-Dec 01 Change %
FY 2002 FY 2001 Change %
1,960
1,435
+37
7,320
5,201
+41
1,328
1,305
+2
5,662
5,590
+1
Int. Mobile Communications
339
-37
-
394
-130
-
Service Businesses
-92
-379
-76
-376
-2,258
-83
Sonera Telecom
357
528
-32
1,612
2,129
-24
Baltics summary
Pro forma, SEK million
Jan-Dec 02
Jan-Dec 01
Revenues
6,212
5,744
+8
Underlying EBITDA
3,006
2,859
+5
Operating profit
1,396
1,411
-1
Capex
1,300
1,962
-34
430
450
-4
Income from associates before
goodwill amortization
Change %
Revenues,
SEK million
Growth %
EBITDA margin
Ownership
Operator
Country
Latvijas Mobilais Telefons
Latvia
1,815
+4
51%
60.3%
Lietuvos Telekomas
Lithuania
2,557
-7
53%
60%
Omnitel
Lithuania
1,840
+45
40%
55%
Eesti Telefon
Estonia
1,539
-9
36%
49%
EMT
Estonia
1,438
+11
49%
49%
Lattelekom
Latvia
2,289
-3
45%
49%
Associated companies:
Significant associated companies
• Significant growth in MegaFon customer base in 2002
• Turkcell back to profitable results during the year,
continued growth
Customers, million
Growth %
Equity income 2002,
pro forma1), SEK million
Baltic associates
1.6
-1
430
MegaFon (43.8%)
3.0
+227
172
15.7
+29
620
Turkcell (37.1%)
1) Before goodwill amortization.
Free cash flow – Strong improvement
Pro forma free cash flow 20011)
(SEK billion)
Pro forma free cash flow 20021)
(SEK billion)
1.1
9.5
0.9
3.5
4.0
Telia
Sonera
Baltic Adjustments 2) Total
assets
Telia
-6.5
Sonera
Baltic Adjustments 2) Total
assets
-7.0
-1.5
0.1
0.9
1) Cash flow from operating activities less capital expenditures. 2) EU conditions and pro forma adjustments.
Forward-looking statements
This document contains statements concerning, among other things, TeliaSonera's
financial condition and results of operations that are forward-looking in nature. Such
statements are not historical facts but, rather, represent TeliaSonera's future
expectations. TeliaSonera believes that the expectations reflected in these forwardlooking statements are based on reasonable assumptions; however, forward-looking
statements involve inherent risks and uncertainties, and a number of important
factors could cause actual results or outcomes to differ materially from those
expressed in any forward-looking statement, including TeliaSonera's market position,
growth in the telecommunications industry in Europe, the effects of competition and
other economic, business, competitive and/or regulatory factors affecting the
business of TeliaSonera and the telecommunications industry in general. Forwardlooking statements speak only as of the date they were made, and, other than as
required by applicable law, TeliaSonera undertakes no obligation to update any of
them in light of new information or future events.
The Nordic and Baltic
telecommunications leader