Interim Financial Report January-September November 1, 2013 TDC Group

Transcription

1 Interim Financial Report January-September 203 November, 203 TDC Group

2 Disclaimer This presentation may include statements about TDC s expectations, beliefs, plans, objectives, assumptions or future events or performance that are not historical facts and may be forward-looking. These statements are often, but not always, formulated using words or phrases such as "are likely to result", "are expected to", "will continue", "believe", "is anticipated", "estimated", "intends", "expects", "plans", "seeks", "projection" and "outlook" or similar expressions or negatives thereof. These statements involve known and unknown risks, estimates, assumptions and uncertainties that could cause actual results, performance or achievements or industry results to differ materially from those expressed or implied by such forward-looking statements Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout thisreport. The key factors that may have a direct bearing on TDC s results include: the competitive environment and the industry in which TDC operates; contractual obligations in TDC s financing arrangements; developments in competition within the domestic and international communications industry; information technology and operational risks including TDC s responses to change and new technologies; introduction of and demand for new services and products; developments in the demand, product mix and prices in the mobile and multimedia services market; research regarding the impact of mobile phones on health; changes in applicable legislation, including but not limited to tax and telecommunications legislation and anti-terror measures; decisions by the Danish Business Authority; the possibility of being awarded licences; increases in interest rates; status of important intellectual property rights; exchange-rate fluctuations; global and local economic conditions; investments in and divestments of domestic and foreign companies; and supplier relationships 2

3 Operational Financial Q3 Highlights Revenue down by 4.4% in Q3, which is an improvement on the H 203 development, with continued negative effects from regulation (accounting for approx. 50% of reported revenue decline) Gross profit down by 3.3% in Q3 vs. -4.3% in H 203, positively influenced by our best mobility services performance for a couple of years Opex savings of 5.8% resulted in EBITDA declining by only.4% in Q3; highest EBITDA margin ever (43.3%) EFCF YoY growth of 4.3% 203 revenue guidance revised from DKK bn to DKK bn following a lower than expected revenue from low-margin areas (Nordic and handset sales) Unchanged 203 EBITDA, capex and DPS guidance, as higher than expected opex savings compensated for minor gross profit shortfall Small increases in business and residential mobile ARPUs vs. Q2 203, positively affected by increased roaming Strong intake in mobile subscribers in TDC brand, but residential mobile net adds down by 8k due to continued drain on low ARPU subscribers and one-off migration churn following M/Fullrate integration Continued strong TV net adds in the TDC brand (+5k vs. Q2) fuelled by HomeTrio Mobil intake Loss of organised customers affected the YouSee brand Q3 net adds on TV (-4k) and broadband Best Q3 number of fault-handling hours in more than four years driven by few faults Increased recommend score (66) and customer satisfaction score (76) 3

4 Financial Highlights DKKm Q3 YTD Growth % Growth % Revenue 6,348 6,069 (4.4) 9,568 8,456 (5.7) Gross Profit 4,599 4,448 (3.3) 3,946 3,390 (4.0) % margin Opex (,933) (,820) 5.8 (6,99) (5,788) 6.6 % margin (30.5) (30.0) - (3.7) (3.4) - EBITDA 2,666 2,628 (.4) 7,747 7,602 (.9) % margin Capex (798) (764) 4.3 (2,58) (2,56) 2.5 EFCF,86, ,234 2, Group FTE EoP 9,246 8,937 (3.3) Domestic FTE EoP 8,020 7,692 (4.) 4

5 New mobile network partnership Contract facts 6 years contract signed with Huawei, replacing Ericsson, with an expected total contract value of approximately DKK 4bn Huawei will supply build out services, mobile RAN equipment for 2G, 3G and 4G as well as operating and maintenance services Swap of current Ericsson equipment expected to be finalised over the next ½ years Expected outcome Protect TDC s leading network position More value for money : Substantial improvement of capacity and 3G & 4G coverage 4G coverage obligations met ahead of time New quality regime moves focus from network quality to customer experience 3G (2 Mbps) % of population 3G (42 Mbps) % of population 4G % of population E 205E E 205E E 205E 5

6 Launch of a variety of new products and services to target households and maintain TV & BB position Stronger household offerings and freedom of choice Mobile Family plans Broadband Mix it yourself Significant change in intake split - doubling family subscription share since launch Growth in net adds since launch of new mobile voice portfolio week 28 New pick & choose YouSee broadband portfolio to counter utilities symmetric fiber Freely chose distribution between download & upload speeds online Fullrate TV re-launch No frills, low cost IPTV (Launch Sep. 27) 600 new TV customers per week since launch 42% are entirely new Fullrate customers 75% of customers from competitors 86% on up sale product TV Mix it yourself Launch February 204 First mover to liberate packages and ensure freedom of choice among 00+ channels Freely choose 0 or 34 channels on top of basic package 6

7 Customer satisfaction KPI s Unacceptable customer experiences Index 98 Continued YoY improvement in number of unacceptable customer experiences Fewer cable and volume faults drive continued Q3 YoY reductions in number of fault handling hours (6.6%) Customer satisfaction back to record high score of 76 after a minor decrease in Q2 203 Q3 09 Q3 0 Q3 Q3 3 2 Faults correction time Index Customer satisfaction Index Q3 09 Q3 0 Q3 Q3 3 Q3 09 Q3 0 Q3 Q3 3 Q 2009 = Index 00. A lower index equals a more positive customer experience 2 Compared to TDC Factsheet, Q3 20 is normalised by subtracting hours due to the heavy rainfall in July 20 (Copenhagen cloudburst) 7

8 Mobility Services ARPU (subscriptions) DKK/month Q4 2 5 Q 3 7 Q Q3 3 Significant regulatory impact (-9%) on reported revenue, but significant improvement in YoY decreases in organic revenue and gross profit vs. H 203 and 202 levels RGU net adds (subscriptions) Small increase in business and residential ARPU (+DKK 2-3 vs. Q2 203) affected by increased roaming due to seasonality Improved intake in the TDC brand, but net adds down by 8k due to drain on low ARPU subscribers and migration churn in M/Fullrate -37 Q4 2 Q 3 Q2 3 Q3 3 Residential Business Compared to TDC Factsheet, Q3 data have been adjusted to reflect a movement of 8k Fullrate Erhverv RGUs from Consumer to Business 8

9 Landline Telephony ARPU DKK/month Low traffic revenue during summer months negatively affected Business ARPU (down DKK 9 vs. Q2) Q4 2 Q 3 Q2 3 Q3 3 RGU net adds 000 Residential net adds continues to be negatively affected by successful HomeTrio Mobil Business strategy of selling integrated solutions showed solid progress, as TDC One more than doubled RGUs vs. Q Q4 2 Q 3 Q2 3 Q3 3 Residential Business Compared to TDC Factsheet, Q3 data have been adjusted to reflect a movement of 7k Fullrate Erhverv RGUs from Consumer to Business 9

10 Broadband ARPU DKK/month Q4 2 Q 3 Q2 3 Q3 3 Substantial Business ARPU decline (DKK 2 vs. Q2) due to continued migrations to a new generation of low-arpu products RGU net adds Slowdown in YouSee s RGU growth with a level development vs. Q High intake rates were maintained, but churn was affected by loss of some organised customers Q4 2 Q 3 Q2 3 Q3 3 Residential Business Compared to TDC Factsheet, Q3 data have been adjusted to reflect a movement of 5k Fullrate Erhverv RGUs from Consumer to Business 0

11 TV ARPU DKK/month Q4 2 Q 3 Q2 3 Q3 3 RGU net adds Continued strong RGU net adds in TDC/Fullrate brand (+5k vs. Q2) fuelled by HomeTrio Mobile intake, while YouSee net adds were negatively affected by the loss of organised customers (4k RGUs) TV ARPU decreased by DKK 6 vs. Q2, due to migration to smaller TV packages under the YouSee brand and the fact that Q2 included a one-off boost from a pay-per-view boxing event The number of streaming events doubled vs. Q However, growth rates have slowed due to competition -6 Q4 2 Q 3 Q2 3 Q3 3 TDC/Fullrate brand YouSee brand

12 Nordic Revenue 3, ,8 DKKm 3,304 3, ,236,95 93 YTD Landline Telephony Mobility,075 YTD 2 Internet & network,43 YTD 3 Terminal eq. Revenue growth lower than expected due to increased price pressure across countries resulting in lower ARPUs in landline voice, IP-VPN and mobility services EBITDA DKKm Gross profit margin up from 40.3% in Q3 202 to 42.6% in Q Market shares maintained across products and countries YTD YTD 2 YTD 3 TDC Sweden TDC Norway TDC Finland Other, incl. eliminations 2

13 Group financials Q

14 Revenue Bridge DKKm Q3 YTD 202 6,348 Forex 29 Acq/Div & Sale of assets , Regulatory YTD growth Domestic landline (.5%) Domestic internet & network % % (.7%) Domestic mobility services (3.%) Domestic TV 53 Domestic terminal equipment, etc % (5.6%) Nordic (5.4%) 203 6,069 8,456 Organic growth -2.0% Organic growth -3.4% Regulatory includes mobile termination rates regulation (voice and SMS), international roaming regulation and various fixed line regulation (ULL, leased line, BSA, VULA and fixed line interconnect) 2 Terminal equipment, etc. includes mobile and landline phones and equipment sales in Consumer and Business (incl. NetDesign), including sale of smart phones without subsidies. In addition to terminal equipment, the category also contains eliminations and income from systems integration, installation work, operator service, service fees, and rental of masts 4

15 EBITDA Bridge DKKm Q3 YTD 202 2,666 7,747 Forex 7 Acq/Div & Sale of assets Regulatory YTD growth GP - domestic landline (9.0%) GP - domestic internet & network 33 GP - domestic mobility services 6 -.4% % (.7%) (3.0%) GP - domestic TV % GP - domestic terminal equipment, etc. 9 4 (4.2%) GP - Nordic 6 7.3% Opex % 203 2,628 7,602 Organic growth 0.0% Organic growth 0.% Regulatory includes international roaming regulation and various fixed line regulation (ULL, leased lines, BSA, VULA and fixed line interconnect) 5

16 Domestic YoY organic gross profit Mobility services DKKm -6 Positive development in mobility services driven by improved ARPU trends in both Business and Consumer -3 Landline gross profit back on normal level after strong Q Continued positive impact from TV gross profit Q4 2 Q 3 Q2 3 Q3 3 Landline DKKm TV DKKm Q4 2 Q 3 Q2 3 Q3 3 Q4 2 Q 3 Q2 3 Q3 3 Landline telephony I&N 6

17 Opex & Capex Organic YoY opex savings DKKm 7.6% 3.9% 9.% 5.9% 5.8% Q4 2 Q 3 Q2 3 Q3 3 Wages & personnel related cost External expenses YoY change Capex DKKm 3,700 3,42 3,492 2,58 2,56 Organic opex savings of 5.8% driven by considerable savings in external expenses of 0.3% as a result of optimised marketing spend, reduced consultancy costs and decreased contractors costs due to fewer faults FTEs and temps down 4.7% YoY Q3 203 capex down 4.3% vs. Q YTD capex spend on mobile network approx. 20% lower than expected due to Huawei negotiations Increased spending on remote DSLAMs to ensure higher broadband speed Continued large investment in customer installations, but at a slightly lower level than in YTD 202 YTD E 7

18 Income Statement (extract form) TDC Group DKKm Q3 YTD % % Revenue 6,348 6,069 (4.4) 9,568 8,456 (5.7) Gross profit 4,599 4,448 (3.3) 3,946 3,390 (4.0) Opex (,933) (,820) 5.8 (6,99) (5,788) 6.6 EBITDA 2,666 2,628 (.4) 7,747 7,602 (.9) Depreciation, amortisation and impairment losses (,235) (,269) (2.8) (3,694) (3,707) (0.4) Net financials (309) (25) 30.4 (708) (583) 7.7 Profit before tax,22, ,345 3,32 (.0) Income taxes (43) (267) NM (692) (40) 42. Profit for the period excl. special items, (8.7) 2,653 2,9 9.7 Profit for the period, (47.) 3,20 2,333 (25.2) Incl. profit from joint ventures and associates as well as interest on pension assets 8

19 Equity Free Cash Flow DKKm YTD 202 2,234 Q3 growth EBITDA 45 (38) Change in NWC 257 Net interest paid 2 (05) 27 Substantial YTD NWC improvement in receivables due to both changes in invoicing cycle and smartphone financing (transferred to external partner throughout 202) Income tax paid 2 Capex % 44 9 Cash outflow from capex was DKKm 89m lower than in 202 Special items 9 78 Cash outflow from special items improved due to lower payment for redundancy programmes and vacant tenancies Other 60 (3) YTD 203 2,637 Including adjustment for non-cash items, pension contributions, payments related to provisions, realized currency translation adjustments and finance lease repayments 9

20 Guidance Revised FY 203 guidance on revenue; other guidance parameters remain unchanged Revenue below our expectations mainly due to the low margin areas handset sales and Nordic Revenue 203 Guidance DKK bn Revised 203 Guidance DKK bn Higher than expected opex savings compensate the minor gross profit shortfall; hence EBITDA guidance remain unchanged EBITDA DKK bn Huawei negotiations have delayed the expected step up in our mobile investments on 4G vs. 202 levels; catch up expected in Q4 EFCF growth supporting the guided DPS Capex DPS DKK 3.7bn DKK

21 Regulation Price regulation Rates E 205E Voice MTR (DKK) SMS MTR (DKK) Data roaming (EUR) ~ Revenue loss DKKm Gross profit loss DKKm ~ ~ Regulatory adjustments on voice and SMS MTR continue in 204 and 205 but at a much lower level New statements regarding level retail voice prices within the EU ( Roam like at Home ). Such regulatory changes will impact TDC s revenue related to roaming in the EU, but is not included in the data shown on the left side E 204E E 204E Non-regulated rates 2

22 Q&A 22

23 Appendix

24 New KPIs in TDC Factsheet Share of ARPU from variable traffic % 75 Residential landline Business landline 70 Residential mobile Business mobile Q Q2 Q3 Q4 Q 2 Q2 2 Q4 2 Q 3 Q2 3 Q3 3 Decreasing share of ARPUs from variable traffic; especially mobility services ARPUs are less dependent on volatile traffic Share of RGUs with entry level TV package only has increased since 20 as downward migration in YouSee brand offset positive up sale in TDC brand Full service enabled RGUs increased and approx. 25% of Consumers TV RGUs now have a TV box Continued success in sales of bundled packages including both TV and BB. PSTN-only RGU base diminishes at a steady rate TV KPIs % Access lines KPIs % % 9.% 9.6% 23.5% 2.5% 24.8% 34.6% 27.0% 36.% 3.4% 38.4% 9.0% Q3 Q3 3 Share of RGUs with entry level TV package only Full service enabled RGUs Q3 TDC brand triple play YouSee brand dual play Q3 3 PSTN-only base, in thousands 24

25 Quarterly Revenue and EBITDA trends Reported YoY quarterly Revenue growth % Organic¹ YoY quarterly Revenue growth % (.9) (2.0) (0.7) (.) (2.0) (4.4) (3.8) Q4 2 (6.) Q 3 (6.5) Q2 3 Q3 3 Q4 2 Q 3 (4.4) Q2 3 Q3 3 Reported YoY quarterly EBITDA growth % Organic 2 YoY quarterly EBITDA growth % (0.2) (.6) (.4) (.4) (.) (3.3) (2.8) (3.0) Q4 2 Q 3 Q2 3 Q3 3 Q4 2 Q 3 Q2 3 Q3 3 Adjusted for regulation (mobile termination rates (voice and SMS), international roaming, PSTN resale), acquisitions/divestments, sales of assets, and FOREX 2 Adjusted for regulation (international roaming, PSTN resale), acquisitions/divestments, sales of assets, and FOREX 25

26 Estimated TDC Group Market Shares Landline Telephony % Broadband % 7% 70% 70% 69% 69% 6% 6% 60% 60% 60% Q4 2 Q 3 Q2 3 Q3 3 Q4 2 Q 3 Q2 3 Q3 3 2 Mobility Services % TV % 44% 44% 43% 43% 43% 52% 52% 52% 52% 52% Q4 2 Q 3 Q2 3 Q3 3 Q4 2 Q 3 Q2 3 Q3 3 Market shares for total market include residential and business. Market shares for landline voice, broadband and TV are based on number of lines and mobile voice is based on the number of SIM cards. Source: TDC Market Intelligence 2 Mobile subscriptions (excl. prepaid cards) 26