Group development in 2015

Financial highlights

  • Region Eurasia is reported as held for sale and discontinued operations.
  • Net sales in local currencies, excluding acquisitions and disposals, increased 2.4 percent. In reported currency, increased 6.7 percent to SEK 86,569 million (81,131). Service revenues in local currencies, excluding acquisitions and disposals, declined 0.4 percent.
  • EBITDA, excluding non-recurring items, increased 0.1 percent in local currencies, excluding acquisitions and disposals. In reported currency, EBITDA, excluding non-recurring items, increased 3.8 percent to SEK 25,281 million (24,364). The EBITDA margin, excluding non-recurring items, declined to 29.2 percent (30.0).
  • Operating income, excluding non-recurring items, decreased 5.4 percent to SEK 17,814 million (18,837).
  • Total net income attributable to owners of the parent company decreased to SEK 8,551 million (14,502) and earnings per share to SEK 1.97 (3.35), mainly impacted by non-cash write-downs of SEK 7,200 million.

 

Financial highlights

SEK in millions, except key ratios, per share data and changes

2015

2014

Change (%)

Net sales

86,569

81,131

6.7

Change (%) local organic

2.4

   

of which service revenues (external)1

72,905

69,980

4.2

change (%) local organic

-0.4

   

EBITDA1 excluding non-recurring items2

25,281

24,364

3.8

Change (%) local organic

0.1

   

Margin (%)

29.2

30.0

 

Operating income excluding non-recurring items2

17,814

18,837

-5.4

Operating income

14,606

17,743

-17.7

Income after financial items

11,689

15,209

-23.1

Net income, continuing operations

9,532

12,219

-22.0

Net income, discontinued operations

673

3,379

-80.1

Total net income

10,205

15,599

-34.6

of which attributable to owners of the parent company

8,551

14,502

-41.0

Earnings per share, total (SEK)

1.97

3.35

-41.0

Earnings per share, continuing operations (SEK)

2.16

2.78

-22.3

Total free cash flow

16,550

13,046

26.9

of which from continuing operations

12,520

8,141

53.8

CAPEX excluding license and frequency fees

14,289

11,955

19.5

¹ See Definitions

² See section “Non-recurring items” for details

 

Significant events in 2015

Operations

On February 12, following the Norwegian Competition Authority approval, TeliaSonera acquired Tele2’s Norwegian operations. In conjunction, TeliaSonera reiterated its ambition to provide 98 percent population coverage for 4G in Norway already in 2016 – two years ahead of the regulatory requirements.

TeliaSonera’s strategic priorities include exploring opportunities close to the core. On March 3, TeliaSonera announced the issue of the 2015 edition of the Connected Things report, prepared by TeliaSonera and Arthur D. Little. The report states that the Nordic region is in pole position to capture IoT (internet of things) opportunities, driving business innovation and improving quality of life across the region and expects there will be close to four connected devices per person in the Nordics by 2018, totaling 102 million connected things. Advancements in connected cars, smart homes and digital healthcare are expected to help drive market growth for IoT solutions by 23 percent annually until 2018, reaching an approximate market value of EUR 9.1 billion.

On April 8, TeliaSonera announced that the European Commission had announced that it should open an in-depth investigation into the proposed merger of TeliaSonera’s and Telenor’s Danish operations. On June 23, TeliaSonera announced that the Commission had taken the next step in the investigation into the proposed merger by addressing a “statement of objections” to the two companies. On September 11, TeliaSonera and Telenor announced the withdrawal of the proposed merger. The companies had not been able to agree with the Commission on acceptable conditions to go ahead with their plan to create a robust mobile operator in Denmark. On January 14, 2016, TeliaSonera announced that the 2015 results would be impacted by a non-cash goodwill impairment charge of SEK 1.9 billion related to the operations in Denmark.

On June 10, TeliaSonera announced that TeliaSonera and Spotify had decided to further boost co-operation following more than five years of successful partnership and TeliaSonera made an equity investment in Spotify of USD 115 million (SEK 976 million).

On September 17, TeliaSonera announced that it is not a long-term owner in region Eurasia. TeliaSonera will increase focus on its regions Europe and Sweden within the strategy of creating the new TeliaSonera. A process was initiated in order to reduce the presence in region Eurasia and over time fully leave. On December 21, TeliaSonera announced that it had agreed to sell its 60.4 percent ownership in the Nepalese operator Ncell to Axiata, one of Asia’s largest telecommunication groups. Closing is expected during the first half of 2016. On January 14, 2016, TeliaSonera announced that region Eurasia would be reported as held for sale and discontinued operations as of December 31, 2015. It was also stated that the 2015 results would be impacted by a non-cash impairment charge of SEK 5.3 billion related to the operations in Uzbekistan.

On October 6, TeliaSonera announced that it had executed on its new strategic focus by combining its two Lithuanian subsidiaries. The fixed line operator TEO and the mobile operator Omnitel had decided to join forces, which strengthens TeliaSonera’s core business in the Nordics and Baltics. On January 4, 2016, TEO announced that it had acquired all shares in Omnitel.

TeliaSonera’s strategic priorities include to develop the core business in the Nordics and Baltics, among others involving superior connectivity. During the year, the fiber rollout continued in high pace. Region Sweden connected 150,000 Swedish households, which means a new connection every three to four minutes, every day, around the clock. In November, TeliaSonera launched 4G roaming in Latvia, which completed the rollout of 4G roaming in regions Sweden and Europe. 4G roaming is also available for customers travelling to most other parts of Europe, United States, Canada, China, Thailand and Japan. The traffic in the 4G network now carries more than 50 percent of the overall data roaming volumes abroad compared to 15 percent one year ago.

In addition to transactions mentioned above, TeliaSonera during 2015 made a number of targeted smaller acquisitions. See section “Acquisitions and divestitures” for further information on all transactions.

Associated companies

On March 25, TeliaSonera announced that TeliaSonera and the other shareholders in Turkcell Holding had agreed to propose to the General Assembly Meeting of Turkcell that the company distribute dividends totaling TRY 3,925 million for the fiscal years 2010-2014. The General Assembly Meeting of Turkcell was held on March 26, and the proposal was approved. TeliaSonera’s share was SEK 4,722 million.

Apart from the General Assembly Meeting, no material changes took place in the corporate governance of Turkcell during the year, as a consequence of the continued deadlock between the shareholders Çukurova, LetterOne and TeliaSonera. The Turkcell Board of Directors consisted of seven independent members, all appointed by the Turkish Capital Markets Board (CMB). For information regarding certain disputes related to shares in Turkcell Holding, see Note C29 to the consolidated financial statements.

Board of Directors and Group Executive Management

On April 8, TeliaSonera announced that the ordinary members of the Board Marie Ehrling, Olli-Pekka Kallasvuo, Mats Jansson, Mikko Kosonen, Nina Linander, Martin Lorentzon, Per-Arne Sandström and Kersti Strandqvist were re-elected at the Annual General Meeting. Marie Ehrling was elected Chair of the Board and Olli-Pekka Kallasvuo was elected Vice-Chair of the Board.

During 2015, changes in TeliaSonera’s Group Executive Management were as follows.

On June 25, it was announced that as of July 1, Hélène Barnekow would assume the position of Executive Vice President and Head of region Sweden, while Malin Frenning would assume a new role in Group Executive Management as Senior Vice President and Head of Technology and transformation. Sverker Hannervall left the company but remained as advisor during the notice period.

On September 28, it was announced that the group functions Group Commercial and Group Technology would be combined into a new unit. Malin Frenning left TeliaSonera and Emil Nilsson was appointed Head of region Eurasia.

On October 8, it was announced that Sören Abildgaard had been appointed acting Head of the combined Group Commercial-Group Technology unit and became a member of Group Executive Management. At the same date, TeliaSonera informed that Erik Hallberg had assumed a position as head of the new unit Global Businesses and left Group Executive Management.

Funding

In February, TeliaSonera in line with its funding strategy of diversification and increasing the duration of the debt portfolio, issued a bond of EUR 500 million in a 20 year deal maturing in February 2035, under its existing EUR 12 billion EMTN (Euro Medium Term Note) program. The Re-offer yield was set at 1.70 percent p.a. equivalent to Mid-swaps + 63 basis points.

During the year, some additional bonds denominated in JPY, SEK and NOK were issued under the EMTN program (see also section “Credit facilities”).

Treasury shares

In April, TeliaSonera announced that the Board of Directors had decided to exercise the share buyback mandate given by the Annual General Meeting and that TeliaSonera had acquired 270,783 shares at an average price of SEK 51.7908 to cover commitments under its long term incentive program 2012/2015. For more information on TeliaSonera’s incentive programs, see section “Long-term incentive program 2015/2018” and Note C31 to the consolidated financial statements.

Net sales

In the continuing operations, net sales increased 6.7 percent to SEK 86,569 million (81,131). Net sales in local currencies and excluding acquisitions and disposals increased 2.4 percent. The positive effect from exchange rate fluctuations was 1.1 percent and the positive effect of acquisitions and disposals was 3.2 percent. Service revenues in local currencies, excluding acquisitions and disposals, decreased 0.4 percent as growth in region Sweden mobile service revenues and fiber one-time charges was not enough to mitigate lower fixed service revenues, driven by fixed-line disconnects, and lower interconnect revenues across region Europe driven by changes in termination rates. Also contributing to the decline in service revenues were lower wholesale and roaming revenues in Estonia, and a lower prepaid customer base with lower ARPU in Spain, not fully compensated for by an increase in the postpaid customer base and ARPU.

 

Net sales 
SEK in millions

2015

2014

Change
(SEK 
million)

Change
(%), total

Change (%), of which

local 
organic¹

M&A 
effects

FX 
effects²

Region Sweden

37,336

36,456

880

2.4

2.0

0.4

0.0

Region Europe

43,730

39,667

4,063

10.2

2.7

6.1

1.4

Other operations

7,753

7,043

710

10.1

4.5

0.0

5.6

Elimination of internal sales

-2,249

-2,035

-214

10.5

n/a

n/a

n/a

Total, continuing operations

86,569

81,131

5,438

6.7

2.4

3.2

1.1

¹ In local currencies and excluding acquisitions and disposals (M&A effects)

² Effects of exchange rate fluctuations

 

Operating expenses 
SEK in millions

2015

2014

Change 
(SEK million)

Change (%)

COGS

-36,002

-32,809

-3,193

9.7

of which goods and sub-contracting services purchased

-18,176

-16,606

-1,570

9.5

of which interconnect and roaming expenses

-9,113

-8,419

-695

8.3

of which other network expenses

-4,949

-4,784

-166

3.5

of which change in inventories

-3,763

-3,000

-763

25.4

Personnel expenses

-12,171

-11,248

-923

8.2

Marketing expenses

-4,847

-4,363

-485

11.1

Other expenses

-9,124

-8,632

-492

5.7

Subtotal

-62,145

-57,051

-5,093

8.9

Amortization, depreciation and impairment losses, total

-12,780

-10,276

-2,504

24.4

Other operating income and expenses, net¹

-433

-628

194

-31.0

Total, continuing operations

-75,358

-67,955

-7,403

10.9

¹ Excluding amortization, depreciation and impairment losses

Subscription growth

The total number of subscriptions in the continuing operations increased by 0.6 million to 27 million, of which region Europe increased by 0.8 million to 17 million. Telephony subscriptions decreased by 0.2 million, while TV increased by 0.1 million and broadband subscriptions were flat.

SUBSCRIPTIONS (MILLIONS) AND CHANGE YEAR-ON-YEAR (%), CONTINUING OPERATIONS

Number_Subscriptions.ai

Operating expenses

Net expense items affecting operating income in the continuing operations were as follows.

Cost of goods and services sold (COGS) was SEK 36,002 million (32,809) or equal to a 9.7 percent increase compared to 2014, impacted by the acquisition of Tele2 in Norway and also due to higher handset sales in Sweden, Finland and Spain and increased roaming expenses in region Europe.

Personnel expenses, in local currencies and excluding acquisitions and disposals, increased 4.9 percent compared to 2014, driven by most countries. In region Sweden, the higher personnel expenses was primarily due to salary inflation and increased social security costs for youths. In region Europe, Finland was the main driver of increased personnel expenses with salary inflation, increased headcount and pension costs as main drivers, partly offset by higher capitalized wages.

Marketing expenses, in local currencies and excluding acquisitions and disposals, increased 1.3 percent, mainly due to increased marketing activities in Sweden, partly offset by lower equipment subsidies and sales commissions in Spain. As for the other cost items, figures in reported SEK are impacted by the acquisition of Tele2 in Norway.

Amortization, depreciation and impairment losses increased 24.4 percent to SEK 12,780 million (10,276), mainly explained by impairment losses related to Denmark. Amortization and depreciation excluding non-recurring items increased 7.8 percent to SEK 10,880 million (10,094). In local currencies and excluding acquisitions and disposals, there was a 1.8 percent increase.

Other operating income and expenses, net excluding amortization, depreciation and impairment losses, was SEK -433 million (-628).

Non-recurring items

Non-recurring items affecting operating income in the continuing operations totaled SEK -3,208 million (-1,093) and were mainly related to a non-cash goodwill impairment charge in Denmark, costs in relation to the acquisition and integration of Tele2 in Norway and restructuring charges in connection with cost-reduction initiatives.

Earnings

In the continuing operations, EBITDA, excluding non-recurring items, increased 3.8 percent to SEK 25,281 million (24,364). In local currencies and excluding acquisitions and disposals, EBITDA, excluding non-recurring items, increased 0.1 percent. EBITDA in regions Sweden and Europe decreased slightly, mainly due to continued drop in fixed telephony revenues as well as increased marketing efforts and higher personnel expenses not fully compensated for by increases in mobile billed revenues and fiber one-time charges. Other operations contributed positively, primarily due to good cost control. The EBTIDA margin, excluding non-recurring items, fell to 29.2 percent (30.0).

In the continuing operations, operating income, excluding non-recurring items, decreased 5.4 percent to SEK 17,814 million (18,837), mainly due to lower income from associated companies and higher depreciation and amortization which more than offset the EBITDA increase. The lower income from associated companies was mainly explained by negative foreign exchange rate effects. The operating margin, excluding income from associated companies and non-recurring items affecting operating income, was 16.7 percent (17.6).

Non-recurring items 
SEK in millions

2015

2014

Within EBITDA

-1,289

-912

Restructuring charges, synergy implementation costs, etc.:

   

Region Sweden

-495

-354

Region Europe

-615

-204

Other operations

-194

-246

Capital gains/losses

14

-107

Within Amortization, depreciation and impairment losses

-1,900

-182

Impairment losses, accelerated depreciation:

   

Region Sweden

-29

Region Europe

-1,900

-152

Other operations

-1

Within Income from associated companies and joint ventures

-19

Capital gains/losses

-19

Total, continuing operations

-3,208

-1,093

 

EBITDA excluding non-recurring items 
SEK in millions

2015

2014

Change
(SEK million)

Change 
(%)

Region Sweden

14,267

14,311

-44

-0.3

Region Europe

10,584

9,772

812

8.3

Other operations

430

282

148

52.5

Eliminations

0

0

0

 

Total, continuing operations

25,281

24,364

917

3.8

 

Operating income excluding non-recurring items 
SEK in millions

2015

2014

Change
(SEK million)

Change
(%)

Region Sweden

9,797

10,130

-332

-3.3

Region Europe

4,875

4,759

116

2.4

Other operations

3,141

3,948

-807

-20.4

Eliminations

0

0

0

 

Total, continuing operations

17,814

18,837

-1,023

-5.4

 

Financial net, taxes and non-controlling interests

In the continuing operations, these items were as follows.

Financial net decreased to SEK -2,917 million (-2,535), primarily impacted by foreign exchange rate effects and decreased interest revenues.

Income taxes decreased to SEK -2,157 million (-2,989).The effective tax rate was 18.5 percent (19.7), affected by an intra-group restructuring resulting in a revaluation and one-off effect of the withholding tax provision and a decrease of the deferred tax liability.

Net income attributable to non-controlling interests in subsidiaries was flat versus last year at SEK 170 million (170), fully related to region Europe.

Net income attributable to owners of the parent company decreased 22.3 percent to SEK 9,362 million (12,050) and earnings per share to SEK 2.16 (2.78).

CAPEX

In the continuing operations, capital expenditures (CAPEX) increased to SEK 14,595 million (11,955) and the CAPEX-to-service revenues ratio to 20.0 percent (17.1). Main CAPEX components were investments in fiber roll-out in Sweden, accelerated roll out of 4G in Norway to meet regulatory requirements after the Tele2 acquisition and investments in 4G coverage in Finland. Further, telecom licenses and frequency permits were acquired in Norway. CAPEX, excluding license and frequency fees, amounted to SEK 14,289 million (11,955) and the CAPEX-to-service revenues ratio was 19.6 percent (17.1).

CAPEX and CAPEX-TO-Service revenues, continuing operations

Capex_capex-sales.ai

Discontinued operations

Region Eurasia, formerly reported as a segment, is classified as discontinued operations as of December 31, 2015. Consequently, information on region Eurasia is presented on an aggregated level. For additional information on discontinued operations, see Note C34 to the consolidated financial statements.

Discontinued operations
SEK in millions, except margins 
and changes

2015

2014

Change (%)

Net sales (external)

20,742

19,759

5.0

EBITDA excluding non-recurring items

11,035

10,859

1.6

   Margin (%)

53.2

55.0

 

CAPEX

4,195

4,724

-11.2

CAPEX excluding license and frequency fees

3,784

3,370

12.3

 

Net sales increased 5.0 percent in reported currency to SEK 20,742 million (19,759), in most markets due to foreign exchange rate fluctuations.

EBITDA, excluding non-recurring items, increased to SEK 11,035 million (10,859). The EBITDA margin, excluding non-recurring items, declined to 53.2 percent (55.0).

Non-recurring items affecting operating income was SEK -5,772 million (-2,883) primarily related to the SEK 5,300 million non-cash impairment charge of goodwill and other fixed assets in the Uzbekistan operations.

Net income was SEK 673 million (3,379), impacted by the non-cash impairment charge related to Uzbekistan.

CAPEX decreased to SEK 4,195 million (4,724) and CAPEX, excluding license and frequency fees, increased to SEK 3,784 million (3,370).

Human resources

In 2015, the total number of employees increased from 26,166 to 26,895 at year-end. The number of employees in the continuing operations increased by 2.1 percent to 21,342 (20,893). Business combinations in 2015 added 495 employees, the major part of which from the acquisition of Tele2 in Norway.

Employees, total (thousands)

Human-resources.ai

The total average number of full-time employees in 2015 was 25,450 (24,973), of which in continuing operations 20,036 (19,944). In total, operations were conducted in 29 countries (29), of which continuing operations in 21 countries (21). See also Note C31 to the consolidated financial statements.

EMPLOYEES, total (FTEs, %)

BY GENDER

employees_by-gender.ai

BY COUNTRY

employees_by-gender.ai

For additional information on employees and labor practices, see "Occupational health and safety" and GRI Index, section “Labor practices and decent work.

© TeliaSonera 2015
In the event of any differences between this online version of the Annual and sustainability report and the printed version, the printed version shall prevail.