Agenda CEO s review Veli-Matti Mattila, CEO Financial review Jari Kinnunen, CFO 2
CEO s review Q3 2010 highlights Segment review Consumer Customers Corporate Customers Execution of the strategy Progress of new services Outlook for 2010 3
Q3 2010 highlights YoY revenue growth continued Good profitability and cash flow Mobile subscription and usage growth continues Voddler to strengthen IPTV Elisa Viihde offering Focus on the smartphone market Decision on extraordinary dividend of 0.50 per share, total amount 77.9m One of the best dividend yields in the sector 4
Q3 2010 financial highlights Solid revenue development Revenue 363m (360) Growth in mobile services Decrease in fixed business 34 % 35 % 33 % 33 % 36 % 33 % 33 % 33 % 35 % Growth in online and ICT service business EBITDA 127m (131), margin 35% CAPEX 42m (40), 11% of revenue According to target ( 12 %) Net debt 725m (719 in 2009) 374 372 351 355 360 365 353 364 363 Cash flow 29m Net debt / EBITDA 1.5 (1.5) Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Revenue, EURm EBITDA-% 5
Q3 2010 operational highlights Mobile subscription growth continued Mobile net adds 102,500 in Q3/10 Growth in both customer segments Growth in mobile broadband, postpaid and prepaid 2 830 2 880 3 026 3 153 3 218 3 329 3 432 3 550 3 652 Estonia +24,000 subscriptions QoQ growth in fixed broadband subscriptions resumed Growth 2,200 in Q3/10 520 502 495 482 476 467 462 462 464 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Mobile subs ('000) Fixed broadband subs ('000) 6
Q3 2010 operational highlights Increased competition in mobile broadband Growth in mobile usage Outgoing minutes growth 8% YoY SMS growth 14% YoY Mobile churn 18.1% (14.5) Competition mainly in mobile broadband, but strong subscription growth regardless 14,1 % 12,0 % 15,9 % 14,0 % 14,7 % 15,4 % 14,5 % 14,7 % 1 719 1 645 1 652 1 589 1 586 18,1 % 1 707 1 498 1 527 1 525 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Usage (outgoing minutes, million) Churn 7
Business Segments 8
Q3 2010 Consumer Customers Revenue growing Revenue 225m (220) 37 % Growth in mobile customer billing and online services 32 % 33 % 32 % 33 % 33 % 34 % 31 % 34 % Decrease in fixed business EBITDA 77m (81), margin 34% Increase in sales costs New service launches Focus on customer service Stable mobile SAC per subscription CAPEX 26m (21) 225 217 202 209 220 217 214 217 225 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Revenue, EURm EBITDA-% 9
Q3 2010 Corporate Customers Corporate Customer business at solid level Revenue 139m (139) Increase in mobile revenue 39 % 37 % 34 % 33 % 36 % 34 % 34 % 36 % Growth in ICT services 31 % Decrease in fixed business EBITDA 50m (50), margin 36% 155 CAPEX 16m (19) 149 150 146 139 148 139 147 139 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Revenue, EURm EBITDA-% 10
Strategy execution New services and new markets Strengthening market position in core markets Integration of One Elisa 11
Strategy execution Growth in 3G data users continued Number of active mobile data users in Elisa s network, thousands Active 3G users Active GPRS users 1221 1255 19 398 72 490 112 526 627 153 173 595 198 668 249 703 282 740 326 701 374 790 789 425 496 914 523 843 569 937 636 993 1044 1051 807 709 672 905 Q1/06 Q2/06 Q3/06 Q4/06 Q1/07 Q2/07 Q3/07 Q4/07 Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 12
Voddler to strengthen IPTV Elisa Viihde offering Voddler s services provided first to Elisa customers in Finland More than 2,500 movies, television series and documents Ad-based video service, 80% of the offering is free of charge Elisa provides Voddler s media services in Finland 13
Focus on the smartphone market Smartphone market is picking up Creates new demand for mobile data services Many benefits to customers Wide variety of applications and easy to use for consumers Productivity improvements and process rationalisation for corporate Android iphone Symbian 14
Omaguru : Seamless technical support for customers Comprehensive support regarding the use of digital devices, systems and applications Targeted to households and SOHO customers Specialised help desk Personalised customer service Specialists available online 15
Outlook for 2010 Positive trends of the general economy have continued Competition remains challenging Revenue at the same level as in 2009 EBITDA excluding one-offs at the same level as in 2009 CAPEX 10 12 per cent of revenue 16
Agenda CEO s review Veli-Matti Mattila, CEO Financial review Jari Kinnunen, CFO 17
Growth in revenue continued EUR million Q3/10 Q3/09 Δ 1-9/10 1-9/09 Δ 2009 Revenue 363 360 3 1081 1066 15 1430 Other operating income 1 0 3 2 4 Operating expenses -237-229 -722-705 -951 EBITDA 127 131-4 362 363-1 484 EBITDA-% 35% 37% 33% 34% 34% Depreciation and amortisation -54-54 -162-160 -216 EBIT 73 77-4 199 203-4 267 EBIT-% 20% 22% 18% 19% 19% Profit before tax 68 70-2 131 179-48 235 Profit before tax excl. one-off item 68 70-2 175 179-4 Income taxes -17-17 0-32 -43 11-58 Net profit 51 53-2 99 136-37 177 Net profit excl. one-off item 51 53-2 132 136-4 EPS, EUR/share 0.32 0.34-0.02 0.63 0.87-0.24 1.13 EPS, EUR/share excl. one-off item 0.32 0.34-0.02 0.84 0.87-0.03 18
YoY Revenue growth 363 3 360-2 2 + Mobile + Online Services + ICT services + Estonia +/- Cable TV - PSTN - Broadband Q3/09 Interconnection and roaming Equipment sales Services Q3/10 19
Sales costs affected OPEX OPEX decreases Network operating expenses Interconnections and roaming Credit losses reduced OPEX increases Sales costs Stable SAC per subscription New service development Customer service Employee expenses Collective labor agreements, 2.6% increase in September 2009 Videra acquisition in Q2/2010 EURm Materials and services Employee benefit expenses Other operating expenses Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 143 144 140 148 148 43 51 55 52 46 43 50 43 46 42 Total expenses 229 246 238 247 237 Depreciation 54 57 54 54 54 20
CAPEX/Sales in line with guidance Q3 CAPEX EUR 42m (40) CAPEX/Sales 11% (11%) Q1-Q3 CAPEX EUR 142m (117) CAPEX/Sales 12% (10%) Q3 CAPEX by segments Consumer EUR 26m (21) Corporate EUR 16m (19) Major CAPEX areas 3G network Fixed access and backbone networks IT systems Customer equipment 17 % 17 % 13 % 11 % 2 11 % 11 % 11 % 10 % 10 % 11 28 28 4 5 1 20 19 16 19 15 16 17 36 33 27 23 18 19 22 24 26 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Consumer Corporate Shares Capex/Sales 20 % 15 % 10 % 5 % 0 % -5 % -10 % -15 % -20 % 21
Cash flow EUR million Q3/10 Q3/09 Δ 1-9/10 1-9/09 Δ 2009 EBITDA 127 131-4 362 363-1 484 Change in receivables -17-25 4 26 36 Change in inventories -4-2 -3-3 -9 Change in payables -6 4-12 -12 10 Change in NWC -27-23 -4-11 11-22 37 Financials (net) -11-12 1-27 -29 2-30 Taxes for the year -16-11 -41-44 -55 Taxes for the previous year 0 0-6 -2-2 Taxes -16-11 -5-47 -46-1 -57 CAPEX -42-40 -2-126 -110-16 -170 Investments in shares -4 0-9 -10-10 Sale of assets and adjustments 1-1 2-1 -2 Cash flow after investments 29 43-14 144 178-34 252 22
Liquidity position is good Bond and Bank loan maturities Cash and undrawn committed facilities EUR 317m (324m) Revolving Credit Facilities EUR 170m maturing Jun 2012 EUR 130m maturing Nov 2014 Fully undrawn Q3/10 Commercial Paper Program EUR 68m in use, back up with RCF Credit ratings constant since 2003 S&P BBB/Stable outlook Moody s Baa2/Stable outlook 10 300 226 75 10 10 10 10 2011 2012 2013 2014 2015 2016 2017 2018 Bonds Loans 23
Estonian growth continued Slight increase in revenue Growth in corporate segment Consumer segment flat 401,800 mobile subscriptions 37 % 39 % 36 % 36 % 35 % 32 % 31 % 28 % 34 % + 47,500 YoY + 24,000 QoQ EUR million Q3/10 Q3/09 2009 25 23 21 21 21 21 20 21 22 Revenue 22 21 84 EBITDA 7 7 29 EBITDA-% 34 35 34 EBIT 5 5 18 EBIT-% 21 22 21 CAPEX 2 1 7 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Revenue EBITDA-% 24
Capital structure in line with targets Capital structure Net debt / EBITDA 1.5 Gearing 84%, Equity ratio 45% 1,7 1,7 1,8 1,6 1,5 1,5 1,7 1,5 1,5 Target setting Net debt / EBITDA 1.5 2x Equity ratio >35% 891 812 854 773 729 719 817 752 725 41 % 43 % 41 % 45 % 48 % 46 % 40 % 42 % 45 % Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Net Debt, EURm Equity ratio % Net Debt/EBITDA 25
Extraordinary dividend of EUR 0.50 EUR 0.50 per share Total amount EUR 77.9m Ex-date 25 October 2010 Payment 3 November 2010 Based on the AGM EUR 100m authorisation After the payment Dividend yield 9% * Pro Forma Q3/10 net debt/ebitda 1.7 302 % 86 149 % 43 126 % 110 % 77 % 402 88 % 79 285 39 % 221 123 116 156 0 % 0 % 0 % 9 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e Dividend / capital repayment Buy-back Pay-out ratio % 26 * Total profit distribution /share price as 30.12.2009 ( 15.96)
APPENDIX SLIDE Consolidated cash flow statement EUR million Q3 2010 Q2 2010 Q1 2010 Q4 2009 Q3 2009 Q2 2009 Q1 2009 Q4 2008 Q3 2008 Cash flow from operating activities Profit before tax 68 53 10 56 70 56 53 70 67 Adjustments to profit before tax 60 67 106 64 60 60 61 57 59 Change in working capital -27 20-4 26-23 30 4 33-2 Cash flow from operating activities 101 140 112 146 107 146 119 159 124 Received dividends and interests and interest paid -11 0-15 -1-12 -2-15 -4-15 Taxes paid -16-19 -13-11 -11-18 -17-11 -15 Net cash flow from operating activities 74 121 84 134 84 127 87 145 93 Cash flow in investments Capital expenditure -42-46 -38-61 -40-36 -34-60 -42 Investments in shares and other investments -4-5 -1 0-2 -7-1 -1 Proceeds from asset disposal 0 1 0 0 1 0 0 0 Net cash used in investment -45-51 -39-61 -41-37 -41-61 -42 Cash flow after investments 29 70 45 74 43 89 46 84 51 Cash flow in financing Share Buy Backs and sales (net) 0-43 Change in interest-bearing receivables Change in long-term debt -30 25-36 0 Change in short-term debt -42-33 69 13-62 -47 40-70 -1 Repayment of financing leases -1-1 -1-1 -1-1 -1-1 -1 Dividends paid -1-143 -63 0-8 -86-1 0 Cash flow in financing -43-65 -50-51 -64-92 -47-72 -45 Change in cash and cash equivalents -15 5-5 23-20 -2-2 12 6 28
APPENDIX SLIDE Financial situation EUR Million 30 Sep 2010 30 Jun 2010 31 Mar 2010 31 Dec 2009 30 Sep 2009 30 Jun 2009 31 Mar 2009 31 Dec 2008 30 Sep 2008 Interest-bearing debt Bonds and notes 598 598 597 572 572 570 606 606 604 Commercial Papers 68 110 118 74 62 119 101 56 81 Loans from financial institutions 52 52 80 80 80 80 80 80 80 Financial leases 23 24 23 23 24 27 27 27 26 Committed credit lines 1) 0 0 25 0 0 5 70 75 120 Others 2) 0 0 0 0 0 1 1 1 1 Interest-bearing debt, total 742 784 843 750 738 802 885 845 912 Cash and cash equivalents 17 32 26 31 9 29 31 33 21 Interest-bearing receivables 17 32 26 31 9 29 31 33 21 Net debt 3) 725 752 817 719 729 773 854 812 891 1) The committed credit lines are EUR 170 million and EUR 130 million revolving credit facilities with five banks, which Elisa Corporation may use flexibly on agreed pricing. The loan arrangements are valid until 17 June 2012 and 23 November 2014. 2) Redemption liability for minorities 3) Net debt is interest-bearing debt less cash and interest-bearing receivables. 29