Interim Financial Report January March May 3, 2013

Transcription

1 Interim Financial Report January March 203 May 3, 203

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 this report. 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 Highlights 203 guidance confirmed Q revenue down 6.%, of which more than 50% was due to regulatory impacts, but also negatively affected by fewer working days compared with 202 Improved organic gross profit trend in both domestic internet & network and mobility services TV continues profitable growth in line with expectations Organic opex savings (9.%) partly compensate for the gross profit decline of 5.4% and result in an EBITDA decrease of 2.8%, of which 74% is caused by regulatory impact EFCF growth of 94.3% driven by a strong NWC improvement Strong growth in our retail broadband RGUs for the seventh consecutive quarter Landline telephony ARPUs down YoY due to fewer working days and regulatory impacts Contained mobile voice ARPU development in Business after five quarters with drops Retail mobile voice subscription RGU decrease of 4k (mainly low ARPU RGUs) vs. Q4 202 Continued intake of mobile RGUs in Nordic High customer satisfaction (76) and employee satisfaction (8) scores Lowest number of fault-handling hours in several years (reduced by 24% vs. Q 202) 3

4 Financial Highlights Q DKKm Growth % Revenue 6,644 6,24 (6.) Gross Profit 4,705 4,45 (5.4) % margin Opex (2,37) (,956) 8.5 % margin (32.2) (3.3) - EBITDA 2,568 2,495 (2.8) % margin Capex % revenue EFCF Group FTE EoP 9,395 9,4 3.0 Domestic FTE EoP 8,45 7,

5 Q 203 saw notable competitor moves with aggressive mobile voice products launched Notable competitor moves were made during Q but with manageable impact on TDC Group so far TDC will maintain strategic direction going forward 3 and Telia launched aggressive unlimited voice products in high end (-50% vs. existing Onfone unlimited voice offer) High data caps at low price make future data monetization difficult Churn impact on TDC Group brands has been manageable so far Fullrate counter offer launched in line with brand portfolio strategy Continue current pricing strategy incl. monetization of data through low data caps Continue execution on brand portfolio strategy w. YouSee and TDC focusing on bundles DKK 5,-/GB DKK 5,-/GB 5

6 Operational efficiency Unacceptable customer experiences Index Key observations Remarkable development in number of unacceptable customer experiences since historically low level in Q Number of fault correction hours decreased by 24% compared with Q 2009 Customer satisfaction at record high score of 76 Q 09 Q 0 Q Fault correction time Hours ( 000) Customer satisfaction score Index Q 09 Q 0 Q Q 09 Q 0 Q Q 2009 = Index 00, A lower index equals a more positive customer experience 6

7 Mobile voice ARPU excl. prepaid and incoming traffic DKK/month Extraordinary impact from regulation (-% on reported revenue), but organic growth shows improving trend Contained ARPU in Business vs. Q4 after 5 quarters with drops, resulting in improved gross profit trend. But further ARPU drops are expected in coming quarters Subscriber RGU (excl. prepaid) net adds Flattish residential YoY ARPU, as negative effects from lower traffic revenue and introductory discounts in Fullrate to former M RGUs were outweighed by the introduction of DKK 9 subscription fee on SIM-only products (3) (5) 0 (2) Focus on premium quality and content as well as bundling benefits to avoid further price reductions. This had negative impact on the RGU net adds (28) (29) (25) Successful launch of Telmore transfer time concept Residential Business 7

8 Landline Telephony ARPU (PSTN/VoIP), incl. incoming traffic DKK/month Low traffic revenue in Q across business lines affected by fewer working days and regulatory price decreases on landline termination prices PSTN/VoIP RGU net adds 000 Furthermore, a one-off item in Business related to finalizing the implementation of the new SKI price scheme resulted in decreased PSTN ARPU (5) (24) (7) (22) (8) (25) (0) (25) (0) Scale has been most successful with both increased ARPU and RGUs in Business VoIP Well-contained retail RGU loss in Q (35k), continuing the positive trend seen in 202 (30) Residential Business 8 Scale is our integrated VoIP and mobile solution

9 Broadband ARPU DKKm/month Continued success in YouSee broadband with GP growth driven by YoY increase in RGUs and ARPU Residential Q net adds of +8k equally split between Consumer and YouSee Broadband RGU net adds Price increase as of January 203 on Consumers unbundled TDC Bredbånd product offsets the negative product ARPU effect following migration from legacy to dual- and triple-play bundles Business ARPU down by DKK 5 in Q following a migration from legacy products towards broadband products with lower ARPU Successful launch of the integrated CaaS solution TDC One ; performing beyond expectations () (3) (3) Residential Business 9

10 TV ARPU DKKm/month Revenue up by DKK 63m or 6.5% in Q 203, positively affected by the subscription fee increases as of January in YouSee and Consumer TDC TV YoY ARPU remained flat as campaigning activities offset the subscription fee increase RGU net adds (TDC TV & YouSee Basic) (6) (6) As reported in Q4 202, YouSee Basic TV net adds was affected by the termination of a large antenna association (-3k) Continued, positive trend in Consumer net adds (+8k vs. Q4) Total 44% increase (YoY) in the number of streaming events, supported by YouBio, which got off to a good start TDC TV YouSee 0

11 Nordic YoY organic EBITDA growth DKKm 9.3% 9.0% 4.9% 32.2% 6.0% 38 Continued positive development from 202 into Q 203, with organic EBITDA growth of 6.0% (reported 8.3%) Revenue decline of 2.7% in Q 203 driven by landline telephony decreases with low GP contribution RGU net adds 000 Started executing on strategic initiatives, incl. the medium enterprise initiative in TDC Sweden 9 Strong intake of mobile RGUs (+9k vs. Q4 202) Won a large mobile and landline contract with 60 Norwegian municipalities; manifesting our position as a strong challenger in the Norwegian business market IP-VPN Mobile

12 Group financials Q 203

13 Revenue Bridge DKKm Q 202 6,644 % growth Forex 36 Acq/Div & Sale of assets Regulatory 204 Domestic landline 39 (4.2%) Domestic internet & network 3 Domestic mobility services 79 Domestic TV 63 Organic growth -3.8% -6.% (0.2%) (5.4%) 6.5% Domestic terminal equipment etc (5.6%) Nordic 74 (6.3%) 3 Other % Q 203 6,24 3 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 smartphones without subsidies. In addition to terminal equipment, the category also contains income from systems integration and installation work 3 Other contains income from operator service, service fees, rental of masts and eliminations

14 EBITDA Bridge DKKm Q 202 2,568 % growth Forex 6 Acq/Div & Sale of assets 2 Regulatory 54 GP - domestic landline 02 (.6%) GP - domestic internet & network 2 (.0%) GP - domestic mobility services % (5.%) GP - domestic TV 2 GP - domestic terminal equipment, etc Organic growth -.% 2.2% (3.3%) GP - Nordic 2 3 GP - Other 34 Opex % (33.7%) 9.% Q 203 2,495 4 Regulatory includes international roaming regulation and various fixed line regulation (ULL, leased lines, 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 smartphones without subsidies. In addition to terminal equipment, the category also contains income from systems integration and installation work 3 Other contains income from operator service, service fees, rental of masts and eliminations

15 Opex Opex bridge DKKm Key observations Q 202 2,37 Substantial organic opex savings of 9.% TDC IT outsourcing from CSC to Tata Consultancy Services resulted in notable IT savings in IT costs Forex Acq/Div & Sale of assets 0 5 A number of space management projects were carried out, e.g. NetDesign, Onfone and Dansk Kabel TV were moved to TDC s main location, Teglholmen Personnel related costs % High level of hirings in Q 203 affected by a conversion of temps to FTEs in our customer services FTE development 000 Marketing & SAC/SRC 4-0.3% Facility & IT 64 9, Other external expenses 59 Organic reduction 9.%, DKK 96m ,4 Q 203,956 FTE, December Hirings and attrition Redundancy programmes Outsourcing Acq/Div FTE, March

16 Income Statement (extract form) TDC Group Q DKKm Growth % Revenue 6,644 6,24 (6.) Gross profit 4,705 4,45 (5.4) OPEX (2,37) (,956) 8.5 EBITDA 2,568 2,495 (2.8) Depreciation, amortisation and impairment losses (,22) (,220) (0.7) Net financials (264) (74) 34. Profit before tax,092,0 0.8 Income taxes (304) (283) 6.9 Profit for the period excl. special items Profit for the period incl. special items

17 Capex Development Capex TDC Group DKKm Key investment areas 3.0% 3.4% 3.8% 4.2% % Q 203 affected by frost, limiting digging activities, such as fibre, coax and copper rollout 3,42 3,492 3,700 Increased YoY network investments above ground, mainly in the mobile network (4G roll out) and IP upgrades in the core network Continued large investments in customer installations but at a slightly lower level than in Q 202 (extraordinary high sales volumes following the analogue switch-off in Q 202) Coverage % of population 202 Q E Mobile 4G coverage 40% 49% 99% 3G coverage (2 Mbps) 70% 7% 75% 3G coverage (42 Mbps) 39% 44% 70% Fixed Households with 00 Mbps 45% 45% 65% Q 202 Q E Households <300 meters from fibre distribution point 63% 64% 70% % : capex-to-revenue 7

18 Equity Free Cash Flow Q EBITDA Change in NWC Net interest paid Substantial NWC improvement in receivables due to changed smartphone financing (transferred to external partner throughout 202) Income tax paid 60 5 Capex % Interest payments increased by DKK 60m due to the refinancing in Q 202 of the EMTN loan that matured in April 202, thus moving interest payments from Q2 in 202 to Q in 203 Special items Other 6 Cash outflow from special items caused by lower payments for redundancy programs and surplus office capacity (from DKK 8m to 2m) Q Including adjustment for non-cash items, pension contributions, payments related to provisions, realized currency translation adjustments and finance lease repayments 8

19 203 guidance confirmed Guidance is based on the following assumptions: Domestic economy with little or no spending growth More severe impact from regulation than in 202 Improved YoY gross profit trend in the mobile business, but continued Business ARPU erosion Gross profit growth in landline telephony and broadband at level with 202 Continued TV gross profit growth fuelled by ARPU increases Growth in Nordic, however at a lower level than in 202 Continued opex savings, though at a lower level than in 202 Reduced licence and restructuring special items cash flow Higher capex following increased build-out of 4G and further capacity expansion in the landline network 9

20 Q&A 20

21 2 Appendix

22 Regulation update projections Increased, negative revenue and gross profit impact in 203 Full year impact from regulation of Data roaming and further cut Different timing in Voice MTR regulation and larger cut Continued SMS MTR cut and different timing EUR ex. VAT per MB DKK ex. VAT per minute DKK ex. VAT per SMS 20 ~2.5 May Jul Jul May May Mar Aug Mar Jul Jan Jan Unregulated Regulated Full GP effect from retail data and also impact from voice and SMS regulation Increased 203 YoY revenue effect with no GP effect Large 203 YoY revenue effect with no GP effect Negative impact 20A 202A 203E Revenue DKK 277m DKK 485m DKK m Gross profit DKK 30m DKK 23m DKK m Including impact from mobile termination rates regulation (voice and SMS), international roaming regulation and various fixed line regulation (ULL, leased lines and PSTN resale) 22

23 Quarterly Revenue and EBITDA trends Reported YoY quarterly Revenue growth % Organic¹ YoY quarterly Revenue growth % 0.5% 0.5% 0.7% (0.2%) (.9%) (2.0%) (0.7%) (.%) (6.%) (3.8%) Reported YoY quarterly EBITDA growth % Organic 2 YoY quarterly EBITDA growth % (0.2%) (0.2%) (.2%) (.6%) (.3%) (.%) (3.3%) (2.8%) (2.8%) (3.0%) 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 23

24 TDC Group Market Shares PSTN/ISDN % VoIP % Landline broadband % 8% 8% 8% 8% 8% 57% 57% 57% 57% 56% 60% 6% 6% 60% 60% Mobile voice % Mobile broadband % Pay-TV % 53% 52% 52% 52% 52% 42% 42% 42% 42% 42% 35% 35% 35% 34% 34% Market shares for total market include residential and business. Market shares for landline voice, landline broadband and pay-tv are based on number of lines and mobile voice is based on the number of SIM cards. Source: TDC Market Intelligence 24

25 Line Loss Overview by Quarter Line Loss 000 YoY landline (voice/broadband/tv) gross profit loss 2 DKKm 8.% 5.0% 5.7% 7.3% 6.9% DKK ARPU/line Retail Wholesale Retail Wholesale % Churn Definition: Line loss refers to the net loss of copper and fiber lines in a given period in the TDC Group, including Wholesale lines. The number of lines is calculated as the sum of RGUs provided with PSTN, ISDN, VoIP, naked-bsa/xdsl and full ULL products and services 2 Excl. landline gross profit in YouSee 25

26 Mobile voice campaigns in Q 203 and onwards Telmore campaigns: - 5hrs/3GB and 6hrs/GB at DKK 99 (Normal price: DKK 49) - 0hrs/5GB and hrs/gb at DKK 49 (Normal price: DKK 99) Telmore offers roll-over - minutes. If the customer does not use all included minutes in the package the minutes will be rolled-over to the package of the next month Oister aggressively cuts FreeVoice price point - Now: FreeVoice/6GB at DKK 79 (Before: DKK 249) Telenor launches 4Gnetwork branded as nu. 4G included in all MV subs. - Campaign: FreeVoice/0GB at DKK 299 (Normal: DKK 400) CBB re-launches MV portfolio: - 5hrs/GB at DKK 39 (Before: 6hrs/2GB at DKK 49) - Free voice/gb at DKK 59 (new) - Free voice/4gb at DKK 99 (Before: DKK 329) Fullrate/M merge: -Campaign: Free on-net the next 6 months Onfone/YouSee merge: - Onfone launches new product portfolio. Less data & more music TDC campaign: New customers signing up for a 2/6/2/FriTale-package are free of charge offered either: - a Free SMS/MMS or - a GB data -add on (worth DKK 50/mth.) Oister campaign: 5hrs/GB at DKK 09 (not a standard package) Telia launches new product portfolio. 4 new packages include unlimited voice. Telia keeps (unlike 3 ) a PAYGand a 3hrs. -package Oister includes less data in their 3hrs -package. Now: 3GB. Before: 6GB. The price point stays at DKK 99 Jan Jan 4 Jan 7 Jan 4 Jan 2 Jan Feb 4 Feb 3 Feb 25 Feb 27 Feb 28 Feb Mar Mar Mar 20 Mar 26 Mar 2 Apr 6 Apr 8 Apr 22 Apr TDC launches higher voice rates Now: 0.75 DKK/min. Before: 0.69 DKK/min. Oister re-launches MV portfolio: - 6hrs/6GB at DKK 39 (Before: 6hrs/2GB at DKK 49) - 2hrs/6GB at DKK 69 (Before: hrs/22gb at DKK 79) - Free voice/6gb at DKK 249 (Before: DKK 299) BiBoB re-launch: Less data included in the packages and price increase on the hr.-package Fullrate campaign - 2hrs/200MB -package at DKK 29 the first 3 months (normal: DKK 79/mth.) CBB includes less data in the 6hrs/data -packages. Now: 2GB. Before: 3GB Oister campaign: hrs/2gb at DKK 9 (not a standard package) CBB adjusts data cap in packages -> less data than the campaign offer running for the last 9 months, but more data than CBB s original standard cap Fullrate campaign: When customers sign up to at 2hrspackage they get 3 months of double voice cap (4hrs) Permanent refers to a discount that is given in all customer lifetime 3 launches new product portfolio. All packages include unlimited voice - ex. Free voice/5gb at DKK 79; Free voice/0gb at DKK 99 Fullrate launches FreeVoice/0GB at DKK 49 Onfone adjusts MV portfolio -Now: 0hrs/500MB at DKK 49; -Before: 6hrs/500MB at DKK Now: 20hrs/GB at DKK 99; -Before: hrs/gb at DKK Now: FreeVoice/3GB at DKK 249; - Before: FreeVoice/3GB at DKK