Telenor Third Quarter
Group Overview Jon Fredrik Baksaas President and CEO
The following presentations are being made only to, and is only directed at, persons to whom such presentation may lawfully be communicated ( relevant persons ). Any person who is not a relevant person should not act or rely on these presentations or any of its contents. Information in the following presentations relating to the price at which relevant investments have been bought or sold in the past or the yield on such investments cannot be relied upon as a guide to the future performance of such investments. This presentation does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite, subscribe for or otherwise acquire securities in any company within the Telenor Group. The release, publication or distribution of this presentation in certain jurisdictions may be restricted by law, and therefore persons in such jurisdictions into which this presentation is released, published or distributed should inform themselves about, and observe, such restrictions. The presentation contain statements regarding the future in connection with Telenor's growth initiatives, profit figures, outlook, strategies and objectives. All statements regarding the future are subject to inherent risks and uncertainties, and many factors can lead to actual profits and developments deviating substantially from what has been expressed or implied in such statements. These factors include the risk factors relating to Telenor's activities described in Telenor's Annual Report on Form 20-F filed with the Securities and Exchange Commission in the USA under the headings Cautionary Statement Regarding Forward-Looking Statements and Risk Factors (available at www.telenor.com/ir/).
underlying revenue growth
Leveraging from a Successful Strategy Revenues (NOKm)/EBITDA % 23 868 17 641 Revenue growth of 35% Strong EBITDA of NOK 9.1 Bn 36.2 % 38.0 % Continued impressive performance in Kyivstar Improved results in the Nordic mobile operations 05 06 EBITDA CAPEX 9 073 6 378 3 720 4 816 05 06
Added 9 Million Subscriptions in 06 105.2 0.6 0.9 1.4 1.7 2.0 2.3 95.8 06 Other DTAC GrameenPhone Telenor Pakistan Kyivstar Vimpelcom Telenor Serbia 06 Million mobile subscriptions
Maintaining High Margins Ukraine - Kyivstar Stable market share of 44% Revenue growth of 48% in local currency EBITDA margin of 60% Strong cash flow improvement
Maintaining High Margins Ukraine - Kyivstar Revenues (NOKm) / EBITDA% 2 580 2 390 2 329 2 076 3 025 1 643 55 % 55 % 57 % 61 % 62 % 60 % EBITDA CAPEX 1 596 1 432 1 359 1 148 1 106 911 919 890 830 770 1 827 992
No Surprises Serbia - Telenor MTS 62 % Telenor 38 % High margin no sales or marketing activities Full launch in Q4 06 Focus on restructuring Maintaining targets Market Shares
Hungary - Pannon Solid and stable cash flows Montenegro - Promonte Strong revenue and margin improvement
Telenor Pakistan Booming Market 41 34 27 22 17 13 27 % 22 % 14 % 18 % 8 % 11 % Subscriptions Penetration 05 05 Q405 Q106 06 06
Telenor Pakistan Real Penetration is Lower
Telenor Pakistan 5 Million Subscriptions Revenue(NOKm) EBITDA(NOKm) 333 Increased market share to 11% 265 215 140 48 76-77 -87-117 -134-133 -172 Second largest and best quality network ARPU decreased to USD 4.4 due to reduction in interconnection rates
Bangladesh GrameenPhone Strong growth in revenues and EBITDA Thailand - DTAC Limited effects from political situation Malaysia - DiGi Ownership discussions ongoing
Increasing Fixed to Mobile Migration Total Voice Minutes - Norway PSTN/ISDN 5 % 6 % 6 % VoIP 37 % 41 % 41 % 41 % 44 % 48 % Mobile
Mobile Stable Markets and Market Shares Norway -1% Sweden Denmark +6% 2 736 2 709 2 711 1 660 1 676 1 708 1 261 1 310 1 342 56 % 55 % 55 % 17 % 17 % 17 % 27 % 27 % 27 % 05 06 06 Q1 06 06 06 05 06 06 YoY Growth in Subscriptions Telenor Market Share
Mobile Increased MoU from Fixed Migration Norway +7% Sweden Denmark +11% 186 199 160 185 184 183 203 1.69 1.67-1% 1.68 1.55 1.56 1.26 1.18-6% 05 06 Q1 06 06 06 05 06 YoY Growth in MoU Change in Average Price Per Minute (Local Currency)
Mobile ARPU is Increasing Norway +5% Sweden Denmark +4% 314 331 268 286 287 230 239 05 06 Q1 06 06 06 05 06 YoY Growth in ARPU (Local Currency)
Mobile Strong Revenue and Margin Growth Norway +7% Sweden Denmark +4% 3 121 3 351 1 522 1 688 1 787 1 277 1 325 39 % 41 % 13 % 17 % 24 % 23 % 30 % 05 06 Q1 06 06 06 05 06 Underlying Revenue Growth (Local currency) Underlying EBITDA margin
Mobile Signs of Successful Recovery Sweden - Telenor Successful rebranding Highly dedicated employees Strongly reduced churn Cost reductions
Mobile Migration Puts Pressure on Fixed Norway - Fixed Underlying revenue decline of 6.5% Increased underlying margin from 35% in 05 to 36% in 06 Declining broadband growth POTS prices aligned with VoIP prices
Mobile Migration Puts Pressure on Fixed Norway - Fixed NOKm -7.7% + 3.4% -2.2% 4 061-6.5% 3 796 05 POTS Broadband Other 06
Cost Reductions According to Plan Norway - Fixed 78 28 65 51 39 1 732 1 471 05 One-off items Sales and Customer Support Product and IS Operation and delivery Other 06
Solid Performance Broadcast Revenue growth of 13% EBITDA margin improved from 28% in 05 to 31% in 06 First mover on HDTV with exclusive content Started DTT network roll out in Norway Launch new Satellite in H2 2007
Financials Trond Westlie CFO
Earnings Per Share Last Twelve Months (NOK)
Reported P&L (NOKm) 06 05 Revenues 23 868 17 641 68 927 EBITDA 9 073 6 378 23 836 EBIT 5 295 3 472 11 705 Profit before Tax 6 050 3 785 12 591 Net Income 3 781 2 200 7 646 EPS (NOK) 2.25 1.30 4.47
5.4% 2.0% 1.9% 1.7% 1.5% 2.8% 23 868 06 Telenor Pakistan DiGi Revenue Development 8.4% 11.6% NOKm 35.3% 17 641 Other Mobile Norway GrameenPhone Kyivstar Mobile Sweden DTAC 05
EBITDA Development Change in EBITDA (NOKm) EBITDA (NOKm)/EBITDA% 9 073 732 679 511 292 242 204 34 5 630 6 378 6 722 7 856 7 930 6 378 9 073 34 % 36 % 35 % 36 % 35 % 38 % 05 DTAC Kyivstar Mobile Sweden Mobile Norway Fixed GrameenPhone Other 06
Underlying EBITDA of NOK 9.0 Bn Special items Workforce reductions, losses on disposals and terminated contracts Other non recurring items Reversal of provision in Mobile Norway Changes in pension plans 06 Reported EBITDA 9 073 Special items + 224 EBITDA before other items 9 297 Other non recurring items - 300 Underlying EBITDA 8 997
CAPEX Development YTD CAPEX of NOK 12.9 Bn CAPEX (NOKm) and CAPEX/Sales (%) Other int mobile 10 % GrameenPhone 10 % 6 436 DTAC 13 % Kyivstar 20 % 2 923 3 720 3 703 4 422 4 816 Telenor Pakistan 14 % Fixed 14 % Other 9 % Nordic Mobile 10 % 33 % 18 % 21 % 17 % 20 % 20 %
Net Debt to LTM EBITDA of 1.5 NOK Bn 12.3 0.5 0.5 9.1 4.9 38.2 47.3 End 06 CAPEX Paid Acquisitions Taxes Paid Other EBITDA End 06
Events After Positive tax ruling in Supreme Court with NOK 2.8 Bn cash effect in Q4 06 Divested Telenor Satellite Services Proceeds of USD 400 mill Sales gain of appr NOK 1.4 Bn Expect closing in 2007
Outlook Increased Expectations Revenue growth: Around 35% EBITDA margin: Around 36% CAPEX/Sales: Around 20%
Telenor Third Quarter
Telenor Third Quarter Appendix
Mobile Norway Strong Revenue Growth 3 049 3 121 Revenues (NOKm)/ EBITDA% 3 235 3 273 3 105 3 458 Underlying revenue growth of 7% Increased underlying margin from 39% in 05 to 41% in 06 35 % 39 % 37 % 43 % 42 % 44 % ARPU increase of 5% 11% reduction in interconnection rates from July 1 st 1 066 EBITDA CAPEX 1 323 1 365 1 218 1 186 1 513 Symmetric interconnection rates to come 343 220 461 129 143 220
Sonofon Positive Margin Development Revenues (NOKm)/EBITDA% 1 308 1 356 1 334 1 353 1 347 1 428 Increased penetration Revenue growth of 4% in local currency 24 % 23 % 23 % 23 % 23 % 27 % Improved EBITDA margin mainly due to lower SAC EBITDA CAPEX 757 390 308 307 308 305 307 140 137 170 168 109
Mobile Sweden Signs of Successful Recovery Revenues (NOKm)/EBITDA% 1 550 1 430 1 301 24 % Successful rebranding Highly dedicated employees 65 68 48 14 % 17 % Strongly reduced churn Cost reductions Reported EBITDA CAPEX 241 170 135 137 371 112-18 -139-309
Kyivstar Maintaining High Margins Revenues (NOKm)/EBITDA% 3 025 2 076 2 390 2 329 2 580 1 643 Stable market share of 44% Revenue growth of 48% in local currency EBITDA margin of 60% Strong cash flow improvement 61 % 62 % 55 % 55 % 57 % 60 % EBITDA CAPEX 1 827 1 596 1 359 1 432 911 919 1 1481 106 890 830 770 992
Pannon Solid Cash Flows Revenues (NOKm)/EBITDA% Stable revenues in local currency Reduction in interconnection rates expected in Q1 07 Increase in corporate tax from 16% to 20% from September 1 st 1 498 1 583 1 565 1 413 1 427 1 464 41 % 38 % 40 % 40 % 32 % 34 % EBITDA CAPEX 484 650 534 540 567 581 243 150 261 71 235 168
Telenor Serbia Full Focus on Restructuring High margin no sales or marketing activities Full launch in Q4 06 Maintaining targets MTS 62 % Telenor 38 %
DTAC Still a Challenging Market Revenues (NOKm)/EBITDA% 2 032 2 041 1 872 1 893 1 718 1 657 Pro forma revenue growth of 16% in local currency Maintained market share at 31% CAT revenue share increased to 25% from September 16 th 38 % 38 % 38 % 35 % 37 % 36 % NTC approved DTAC s Reference Interconnect Offer Bilateral negotiations in process 655 630 561 418 EBITDA CAPEX 713 719 698 732 605 543 565 219 Revenue figures in according to Thai GAAP for trend purposes
DiGi Solid Growth in Revenues and Margins Revenues (NOKm)/EBITDA% Revenue growth of 23% in local currency 1 161 1 285 1 452 1 546 1 544 1 584 Positive margin development Stable revenue market share at 25% Interim dividend of MYR 289 mill paid Mandatory prepaid registration from December 15 th 43 % 44 % 44 % 45 % 45 % 46 % EBITDA CAPEX 700 700 721 632 560 574 499 371 310 178 226 199
GrameenPhone Strong Margin Development Subscription growth of 1 mill in Maintained market share of 63% 705 47 % Revenues (NOKm)/EBITDA% 1 133 997 955 850 775 69 % 57 % 54 % 57 % 49 % Revenue growth of 57% in local currency Proposed reduction in interconnection rates by appr. 20% from January 1 st 2007 1 153 EBITDA CAPEX 590 441 455 334 357 659 389 488 516 645 435
Telenor Pakistan 5 Million Subscriptions Revenues (NOKm) 333 215 265 Subscription growth of 1.4 mill in Increased market share to 11% ARPU decreased to USD 4.4 due to reduction in interconnection rates Second largest and best quality network 140 76 48 EBITDA CAPEX 754 701 496 299 351-91 -77-87 -134-133 -117-172
Fixed Norway Mobile Migration Puts Pressure on Fixed Revenues (NOKm)/EBITDA% 4 367 4 151 4 186 4 178 3 983 3 796 Underlying revenue decline of 6.5% Increased underlying margin from 35% in 05 to 36% in 06 Declining broadband growth 35 % 33 % 33 % 33 % 36 % 38 % POTS prices aligned with VoIP prices EBITDA CAPEX 1 532 1 354 1 377 1 390 1 417 1 460 917 503 412 479 371 354
Fixed Sweden Strong Competition Revenues (NOKm) / EBITDA % 866 857 654 676 727 Strong competition with reduced broadband prices Broadband net adds of 30k in to 547k VoIP net adds of 13k to 147k New organisation implemented in 06 374 27 % 5 % 15 % 15 % 12 % EBITDA CAPEX 255 230 183 142 155 128 109 100 83 48 31-27
Fixed Denmark Growth in Revenues and Margins Revenues (NOKm) / EBITDA % Stable xdsl market share of 16% 12k net adds broadband subscriptions to 164k in 06 VoIP net adds of 11k subscriptions to 52k in 06 199 174 181 164 142 34 % 30 % 32 % 33 % 31 % 05 Q4 05 Q1 06 06 06 EBITDA CAPEX 48 49 40 57 55 55 59 61 42 52 05 Q4 05 Q1 06 06 06
Broadcast Solid Performance Revenues (NOKm)/ EBITDA% Revenue growth of 13% 1 401 1 392 1 466 1 517 1 564 1 573 EBITDA margin improved from 28% in 05 to 31% in 06 First mover on HDTV with exclusive content Started DTT network roll out in Norway 29 % 28 % 23 % 27 % 28 % 31 % EBITDA CAPEX 485 411 437 394 408 331 96 116 133 92 106 157
Mobile Operations ARPU Development (NOK) Mobile Norway Sonofon Kyivstar Pannon 308 314 317 305 324 331 253 243 246 250 248 257 62 66 64 53 54 57 162 166 162 150 148 150 Q4 Q1 Q4 Q1 Q4 Q1 Q4 Q1 DiGi DTAC GrameenPhone Telenor Pakistan 99 100 102 97 93 90 66 69 59 58 69 65 56 51 45 41 22 25 30 32 30 27 Q4 Q1 Q4 Q1 Q4 Q1 Q4 Q1
Mobile Operations ARPU Development (local currency) Mobile Norway (NOK) Sonofon (DKK) Kyivstar (UAH) Pannon (HUF) 308 314 317 305 324 331 234 230 232 233 235 239 50 51 49 40 44 46 5 116 5 265 5 131 4 804 5 059 5166 Q4 Q1 Q4 Q1 Q4 Q1 Q4 Q1 DiGi (MYR) DTAC (THB) GrameenPhone (BDT) Telenor Pakistan (PKR) 59 58 58 54 54 53 405 405 357 348 690 651 552 516 492 449 203 226 271 284 290 263 Q4 Q1 Q4 Q1 Q4 Q1 Q4 Q1
Mobile Operations MoU/APPM Development MoU APPM (Local currency) Mobile Norway Sonofon Kyivstar Pannon 191 196 199 195 200 209 203 90 103 108 110 118 123 143 145 149 143 159 157 186 184 186 182 183 35,80 36,31 33,89 33,59 31,82 32,90 1,61 1,69 1,72 1,63 1,65 1,67 1,29 1,26 1,19 1,17 1,12 1,18 0,55 0,49 0,45 0,36 0,37 0,37 Q4 Q1 Q4 Q1 Q4 Q1 Q4 Q1 DiGi DTAC GrameenPhone Telenor Pakistan 170 175 169 231 295 327 314 223 223 250 196 213 214 93 131 136 146 123 74 0,35 0,33 0,34 Q4 162 0,33 Q1 163 0,33 162 0,32 1,75 1,37 1,09 1,11 Q4 Q1 3,10 2,92 2,21 Q4 2,63 Q1 2,31 2,10 2,74 2,43 2,07 Q4 2,09 Q1 1,99 2,14
International Mobile Associates International Mobile Associates Total per Company - (100% figures in NOK millions according to local GAAP) Subscriptions ('000) 1) Revenues YTD EBITDA YTD 2) CAPEX YTD Net debt 3) Jun 30 %-change Jun 30 %-change Jun 30 %-change Jun 30 Jun 30 / / / Europe One (Austria) 1 564 1 685 8 % 2 668 2 488-7 % 736 651-12 % 146 142 4 514 Russia VimpelCom 4) 35 102 50 822 45 % 9 026 12 905 43 % 4 490 6 548 46 % 4 441 3 612 12 089 1) Subscription figures based on companies own counting methods 2) EBITDA consists of earnings before interest, tax, depreciation and amortization excluding gains/(losses) from sales of fixed assets and operations 3) Net debt consists of long term and short term interest-bearing debt minus cash. Closing exchange rates used 4) VimpelCom CAPEX excludes acquisitions of new entities. 2004-figures are restated.
Net Interest-bearing Debt in Partly Owned Subsidiaries (NOKm) DiGi 61.0% -1,472-1,366-1,022 DTAC 73.1% 5,662 5,414 Kyivstar 56.5% 214 870 1,987 GrameenPhone 62.0% 624 688 358 EDB Business Partner 51.5% 1,939 1,894 705
Positive FOREX Impact Currency Change from 05 Change from 06 Positive FOREX development in increases revenues by NOK 0.2 bn THB MYR BDT +5.6% -0.9% -8.3% +1.3% -0.3% +1.8% Main contributors are SEK, DKK and THB HUF DKK -7.7% +1.7% -0.7% +2.0% SEK +3.1% +2.6% UAH -3.9% -0.1% PKR -4.6% -0.2% Average FX rates in the quarter