Investor brief Jan 29, 2021

Q2Interim report

January – June 2021

GROUP HIGHLIGHTS

2

• Growth in both service revenues and EBITDA

• Mobile subscription service revenues return to growth

• TV & Media recovery accelerated

• OPEX stable despite cost mitigation last year

• Stable CAPEX

• Strong OFCF generation, now SEK 6.1bn YTD

• Telia Carrier transaction closed

• Finland and Norway towers transaction announced

• Leverage at low end of the targeted range

* In reported SEK** Assumes the towers transaction was already closed June 30, 2021 (and compared to March 31, 2021 leverage including Telia Carrier proceeds)

OPEX change

Service revenues

Adjusted EBITDA

Cash CAPEX excl licenses & spectrum*

OFCF*

Q2 2021

Change LFL

vs Q2 2020 SEK billion

-0.2

18.9

7.7

3.4

2.1

0.0%

+3.2%

+1.9%

Proforma leverage** 2.07x

0.0

-6.6%

-0.22x

STRATEGY HIGHLIGHTS I

• Customer satisfaction and NPS broadly stable

• Converged customer base growing with low churn

• Sweden: added 25k converged customers

• Norway: added 7k converged customers

• Finland: added 32k converged customers

• One of only five global operators bundling Netflix

• Enterprise segment highlights

• Mobile growth driven by Sweden, Norway and the Baltics

• Sweden and Norway both sign largest deals ever, with Region Skåne and the Norwegian postal service

• TV & Media viewership continues to grow

• CSOV: Sweden +2.1ppt to 56.8%, Finland +2.7ppt to 43.2%

• C More OTT revenues grew by 75%

3

INSPIRING our Customers CONNECTING EVERYONE

• Network modernization and 5G roll-out continues

• 5G population coverage grew by 1/3rd

• 5G leader in Sweden, Norway, Estonia and Lithuania

• 5G now available in Sweden’s top 22 cities, and 3rd

party test proves Telia is clear 5G leader in Stockholm

• Speed records broken in both Finland and Sweden

• Sole 5G provider in Estonia

• Three independent surveys, incl umlaut, confirmed Telia to be the mobile network leader in Sweden

• Decommissioning legacy

• 47% of 3G traffic migrated to 4G vs. Q2 2020

• SEK 80m cost reduction in Sweden from legacy migration

• Telia Asset Management announced towers transaction with Brookfield and Alecta

STRATEGY HIGHLIGHTS II

• Transformation program progressing to plan

• Headcount reduction on track with 450 exited YTD

• IT transformation

• Supplier consolidation started, reducing first 29 to 4 strategic partners, worth SEK 750m over next 5 years

• Near-shoring initiative progressing well

• SEK 45m cost reduction in the quarter

• Product and process simplification

• Extended partnership with ServiceNow

• Increased use of common products

• >75 legacy systems and >20 product lines decommissioned

• TV & Media digitalization

• Digital ad revenues growing exponentially, +177%

4

Transforming to digital DELIVERING SUSTAINABLY

• Financial target progression

• Service revenues and EBITDA growth

• Roughly 75% of minimum dividend covered by H1 OFCF

• Stability in structural elements of FCF

• Balance sheet strength from Carrier proceeds and announced towers transaction

• Responsibly driving market growth through multiple levers

• Sustainability progress

• Selected as a European Climate Leader by Financial Times

• Launch of new pan-industry Eco Rating of mobile phones

• Awarded highest level (Golden) in Estonian Responsible Business Index

6 451 6 366 6 650 6 441 6 580

Q2 20 Q3 20 Q4 20 Q1 21 Q2 21

Underlying

1 018 920 894 791 756

EO-items Roaming Copper legacy*

SWEDEN FINANCIALS

• Service revenues declined 1.8% (SEK 135m), of which copper related (SEK 171m)

• Underlying service revenues, ex copper and one offs, up 2.0%

• Consumer segment stable, with mobile growing 2.1%, excl 2020 one-offs

• Enterprise segment declined 1.4%, with mobile growing 2.5%

• OPEX reduced by 4.1%

• EBITDA stabilized, despite legacy declines accelerating

5 * Copper legacy = Fixed telephony and xDSL

Service revenuesReported currency, in millions, like for like growth

Service revenues splitReported currency, in millions, like for like growth

Adj EBITDAReported currency, in millions, like for like growth

7 469 7 286 7 544 7 233 7 336

Q2 20 Q3 20 Q4 20 Q1 21 Q2 21

Consumer Enterprise Other

3 316 3 433 3 359 3 235 3 308

Q2 20 Q3 20 Q4 20 Q1 21 Q2 21

Adj EBITDA

-1.8% +2.0% -0.2%

Q2 Highlights

SWEDEN KPIS

• Consumer postpaid base growing

• Enterprise base stable

• ARPU growth in both Consumer and Enterprise

• Solid growth in IPTV subs in both MDUs and SDUs

• ARPU back to pre-pandemic levels

6

• Consumer BB base relatively stable - fiber off-setting copper decline

• ARPU supported by xDSL pricing in June

Mobile postpaid subs and ARPUSubscriptions 000’, ARPU in SEK

Broadband subs and ARPUSubscriptions 000’, ARPU in SEK

TV subs and ARPUSubscriptions 000’, ARPU in SEK

929 946 960 977 994

337 309 282 259 232

309 310 315 314 314

Q2 20 Q3 20 Q4 20 Q1 21 Q2 21

Fiber and FWA Copper

901 919 929 935 949

161 168 171 175 174

Q2 20 Q3 20 Q4 20 Q1 21 Q2 21

Subscriptions ARPU

+7%

4 103 4 120 4 129 4 096 4 103

241 242 241 239244

Q2 20 Q3 20 Q4 20 Q1 21 Q2 21

Postpaid ex M2M ARPU

Q2 Highlights

FINLAND

• Service revenues declined 1.6% (SEK 50m) due to mobile, regulation and ICT/Business solutions

• Consumer segment stable, TV growth offsets mobile decline

• Enterprise segment impacted by lower ICT business solutions, while mobile is stable

Q2 Highlights

• OPEX increased by 3.6% as certain cost items returned

• 5G subscriber base continues to grow, now at more than 100k

• CMore now Finland’s second largest pay streaming service (after Netflix)

7

Mobile postpaid subs and ARPUSubscriptions 000’, ARPU in EUR

2 774 2 763 2 750 2 747 2 779

19.1 18.9 19.3 18.8 18.8

Q2 20 Q3 20 Q4 20 Q1 21 Q2 21



3 233 3 085 3 231 2 991 3 017

Q2 20 Q3 20 Q4 20 Q1 21 Q2 21


-1.6%


-9.1%

1 223 1 2801 154 1 070 1 046

Q2 20 Q3 20 Q4 20 Q1 21 Q2 21

Adj EBITDA

NORWAY

• Service revenues declined 1.5% (SEK 43m) due to ICE contract (SEK 67m)

• EBITDA down 2.9% (44m) mainly due to ICE contract

• OPEX increased by 4.4% as certain cost items returned

Q2 Highlights

• Consumer growth is broad - mobile customer base and ARPU both growing, BB growing high single digits, TV +ve net intake

• Enterprise segment growth driven by mobile

• Enterprise customer wins: Norwegian postal service and renewal with national broadcaster NRK

8

Mobile postpaid subs and ARPUSubscriptions 000’, ARPU in NOK

1 860 1 857 1 846 1 864 1 879

266

277 273267 269

Q2 20 Q3 20 Q4 20 Q1 21 Q2 21




2 760 2 851 2 763 2 756 2 827

Q2 20 Q3 20 Q4 20 Q1 21 Q2 21


1 5101 643 1 523 1 543 1 530

Q2 20 Q3 20 Q4 20 Q1 21 Q2 21

Adj EBITDA

-1.5% -2.9%

LED MARKETS

Q2 Highlights

9

LithuaniaReported currency, in millions, like for like growth

EstoniaReported currency, in millions, like for like growth

DenmarkReported currency, in millions, like for like growth

Service revenues EBITDA Service revenues EBITDA Service revenues EBITDA

+3.7%+5.5% +6.1% +12.0% -1.2% -8.1%

804 780 788 781 811

Q220

Q320

Q420

Q121

Q221

375 380 370 368 370

Q220

Q320

Q420

Q121

Q221

655 649 643 642 665

Q220

Q320

Q420

Q121

Q221

281 302 281 292 299

Q220

Q320

Q420

Q121

Q221

992 966 965 921 937

Q220

Q320

Q420

Q121

Q221

255274 269

216 221

Q220

Q320

Q420

Q121

Q221

• Service revenues and EBITDA developing positively

• Growth of mobile (+5.2%) and fixed (+5.9%)

• Consumer segment growing 11% (driven by mobile), enterprise stable

• Service revenues declined as Fixed continues to burden

• Mobile turned to growth (2.1%)

• EBITDA temporarily impacted by lower equipment margin

• Service revenues and EBITDA developing positively

• Mobile turned to growth (1.9%) while fixed growth accelerated (8.8%)

• Growth in both consumer and enterprise segments

TV & MEDIA


Q2 Highlights

10


1 582 1 633

2 3401 904

2 271

Q2 20 Q3 20 Q4 20 Q1 21 Q2 21

TV Advertising Other

311249 200

120

575

Q2 20 Q3 20 Q4 20 Q1 21 Q2 20

Adj EBITDA

C More subs and ARPUDirect OTT subscriptions 000’, ARPU in SEK

+45.1% +84.7%

439 445 537 528 564

138 179217 210 202

116

144156

146163

Q2 20 Q3 20 Q4 20 Q1 21 Q2 21

SWE FIN DEN ARPU

• Service revenues grew 45.1% from growth in both Advertising (42.9%, SEK 454m) and Pay (57.7%, SEK 277m)

• EBITDA up SEK 264m as higher content costs were more than offset by revenue growth

• OTT subscriber growth from Sport, with strong ARPU trend

• Advertising recovery driven by demand returning, increased inventory and higher pricing

• Usage on digital platform continues to increase (+25%)

• UCL will drive increased content costs in 2nd half of 2021

Q2Interim report


• Growth driven by TV & Media, but also improving trends in mobile

• Consumer service revenues grew by 0.5% excl. TV & Media

• Enterprise service revenues flat excl. TV & Media

• Service revenues growth YTD of +0.4%

SERVICE REVENUES

12

Service revenues bridgeLike for like growth

• Sweden impacted by legacy decline

• Pressure on mobile and fixed revenues in Finland

• Lower wholesale revenues in Norway

• Solid growth in the Baltics – strong recovery for TV & Media

19.1 18.7 19.8 18.7 18.9

Q2 20 Q3 20 Q4 20 Q1 21 Q2 21


Service revenues developmentSEK in billions, in reported currency, like for like growth

+3.2%

2021: Flat to low single digit growth in stable fx excl. Telia Carrier (2020 base SEK 73.0bn)2021-2023: Low single digit growth in stable fx excl. Telia Carrier

OUTLOOK

+3.2%

OPERATIONAL EXPENSES

-4.0%-2.9%

2.9%

-3.0%

0.0%

Q2 20 Q3 20 Q4 20 Q1 21 Q2 21

13

• OPEX increase in Finland and Norway compensated by Sweden

• Impact from transformation and resource reduction increasingly visible ahead

• OPEX lower by 1.6% YTD

• Structural resource costs decline by SEK 100m offset by salary inflation, return of certain cost items and temporary investments in areas such as customer support

• Other cost reduction from lower IT and bad debt, partly offset by higher energy costs

OPEX bridgeLike for like growth

OPEX developmentOperational expenses, y-o-y, like for like growth

To reduce OPEX by SEK 2bn until 2023 and by SEK 4bn until 2025

+0.0%

EBITDA

14

• Sweden stable

• Finland hurt by lower revenues and higher OPEX

• Norway growing excluding wholesale burden

• TV & Media supported by revenue recovery

7.7 8.27.5 7.2 7.7

Q2 20 Q3 20 Q4 20 Q1 21 Q2 21

+1.9%

• EBITDA growth driven by service revenues and improved equipment margin partly offset by higher content costs

• EBITDA growth YTD of +2.0%

Adjusted EBITDA bridgeLike for like growth

Adjusted EBITDA developmentSEK in billions, in reported currency, like for like growth

2021: Flat to low single digit growth in stable fx excl. Telia Carrier (2020 base SEK 29.8bn)2021-2023: Low to mid single digit growth in stable fx excl. Telia Carrier

OUTLOOK

+1.9%

CASH CAPEX

15

• Cash CAPEX R12 to net sales at SEK 13.4bn or 15.1%

• Cash CAPEX to gradually increase going forward

• Main risk relate to COVID-19 delays and supply chain issues

• Increase in mobile network activities related to modernization and 5G but delayed impact on cash CAPEX

• Decline in fiber related investments in Sweden

• Slight increase in prod dev/IT due to transformation related investments

15

12

13

14

Q2 20 Q3 20 Q4 20 Q1 21 Q2 21

13.43.4

3.0

4.2

2.83.4

Q2 20 Q3 20 Q4 20 Q1 21 Q2 21

Mobile NW Fixed NW Prod dev/IT Other

Cash CAPEX by typeReported currency in SEK billion, excluding licenses and spectrum fees

Cash CAPEX developmentReported currency in SEK billion, excluding licenses and spectrum fees, R12

2021: Around SEK 14.5-15.5bn (excl. Telia Carrier and license and spectrum fees)2023: Return to around 15% of net sales by 2023 (excl. Telia Carrier and license and spectrum fees)

OUTLOOK

OPERATIONAL FREE CASH FLOW

02468

101214

Q2 19 Q4 19 Q2 20 Q4 20 Q2 21

Operational free cash flow Ex NWC contr.

12.7

• Strong cashflow R12 driven by working capital contribution

• Cash flow excl working capital R12 still in line with minimum dividend commitment of SEK 8.2bn

• Operational free cash flow YTD of SEK 6.1bn

16

• Phasing effects impacting both tax and interest costs

• Other increased due to business transformation and M&A

• Net working capital impacted by vendor financing

Operational free cash flow bridgeReported currency, SEK billion

Operational free cash flow developmentReported currency, SEK billion, R12

8.2

Minimum dividend level

2021-2023: The operational free cash flow is expected to cover the minimum dividend commitment throughout the periodFrom 2022: Operational free cash flow excl change in NWC is expected to cover the minimum dividend commitment

-6.6%

TOWER TRANSACTION SUMMARY

• Transaction fully in line with plans from the Investor Brief in January

• Crystalizing infrastructure value

• Bringing in operational excellence from experienced partner

17

RATIONAL

TRANSACTION DETAILS

TIME LINE

• Brookfield and Alecta acquired 49% of Telia Company’s tower business in Finland and Norway

• The price for the 49% equals a full enterprise value of EUR 1,524

• The EV corresponds to an EV/EBITDA of 27x 2020

• Total cash proceeds to Telia Company amounts to EUR 722 million

• Net debt to EBITDA for Telia Company including tower proceeds 2.07x

• The transaction involves 4,700 number of towers with total revenues of EUR 88m and EBITDA of EUR 56m in 2020 (post leasing)

• Impact on Telia Company operational free cash flow will be marginal

• The transaction is expected to close in the fourth quarter of 2021 and is subject to regulatory approval

NET DEBT AND LEVERAGE

• Positive impact on net debt and leverage Q2 from Telia Carrier proceeds

• Excluding Telia Carrier proceeds net debt is fairly unchanged as first dividend tranche was paid in Q2

• Proforma leverage Q2 of 2.07x (including the tower proceeds)

= Leverage ratio (multiple, rolling 12 months)

18

Net debt and leverage developmentReported currency, SEK billion and leverage ratio

Net debt/ adjusted EBITDA in the range of 2.0-2.5x

2.52x

2.07x

-8.0

2.32x

2021-2023 2021

CASH CAPEXReturn to around 15% of net sales by 2023 (excl.

Telia Carrier and license and spectrum fees)

Adjusted EBITDA Low to mid single digit growth in stable fx excl. Telia

Carrier

SERVICE REVENUESLow single digit growth in stable fx excl. Telia

Carrier

SERVICE REVENUESFlat to low single digit growth in stable fx excl.

Telia Carrier (2020 base SEK 73.0bn)

CASH CAPEXAround SEK 14.5-15.5bn (excl. Telia Carrier and

license and spectrum fees)

Adjusted EBITDA Flat to low single digit growth in stable fx excl.

Telia Carrier (2020 base SEK 29.8bn)

OUR OUTLOOK (UNCHANGED)

19

Q2Interim report


Q2 2021 IN SUMMARY...

21

• Continuing to deliver in line with expectations and outlook

• Mobile returned to growth in 6 out of 7 countries

• Good momentum in Sweden, Norway and the Baltics

• TV & Media recovery accelerating, and preparing for full potential

• Good progress made on our strategic priorities

• Telia Carrier transaction closed

• First tower transaction announced

• Outlook for 2021 unchanged

• Clear roadmap to create a Better Telia and generate attractive shareholder returns

INSPIRING OURCUSTOMERS

CONNECTING EVERYONE

TRANSFORMING TO DIGITAL

DELIVERING SUSTAINABLY

DISCLAIMER & FORWARD-LOOKING STATEMENTS

This document contains the use of alternative performance measures (APM’s) to provide readers with additional financial information that is regularly reviewed by management, such as adjusted EBITDA, CAPEX and operational free cash flow. These APM’s should not be viewed as a substitute for Telia Company’s IFRS based figures, but as a complement. APM definitions can be found in Telia Company’s interims reports and Annual and Sustainability Report 2020 and may be defined differently by other companies and are therefore not alwayscomparable to similar measures used by other companies. Telia Company’s management considers these APM’s combined with IFRS performance measures and in conjunction with each other, the most appropriate way to measure the performance of Telia Company.

Statements made in this document relating to future status or circumstances, including future performance and other trend projections are forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There can be no assurance that actual results will not differ materially from those expressed or implied by these forward-looking statements due to many factors, many of which are outside the control of Telia Company.

Investor brief Jan 29, 2021

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Transcript of Investor brief Jan 29, 2021