Financial Report July September 2015

Financial Report July – September 2015 November 3rd, 2015 TDC Group 1 Disclaimer This Report may include statements about TDC’s expectations, belie...
Author: Edith Singleton
3 downloads 0 Views 1MB Size
Financial Report July – September 2015 November 3rd, 2015 TDC Group

1

Disclaimer This Report 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 financial report. 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 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 made by the Danish Business Authority; the possibility of being awarded licences; increased interest rates; the status of important intellectual property rights; exchange-rate fluctuations; global and local economic conditions; investments in and divestment of domestic and foreign companies; and supplier relationships. As the risk factors referred to in this Report could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made in this Report, undue reliance is not to be placed on any of these forward-looking statements. New factors will emerge in the future that TDC cannot predict. In addition, TDC cannot assess the impact of each factor on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those described in any forward-looking statements. The Market shares included in this report are estimated by TDC Market Intelligence and may change with retrospective effect as increased knowledge of the market is obtained. The total market is defined to 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, excluding Prepaid cards and Data only SIM cards.

2

CEO comments at a glance

 TDC Group reaffirms 2015 guidance on all

parameters  A strong quarter in Norway/Sweden (e.g. 8%

EBITDA growth in Get)…  ... but unsatisfactory EBITDA decrease of 12% in

Denmark  Improved retail mobile voice churn, resulting in net

adds of 13k vs. Q2  Management focus on renewing TDC’s strategic

plan for the coming years

Pernille Erenbjerg, Group CEO

3

Financial Highlights TDC Group

DKKm

Q3 2015

Reported

Organic

2015

Growth, % Reported

5,898

4.5

(3.2)

18,121

Gross Profit % margin

4,336 73.5

3.7 1 (0.6)

(4.8)

13,166 72.7

4.1 1 (1.3)

(1,799)

(7.7)

1.5

(5,742)

(7.8)

2,537 43.0

1.0 1 (1.5)

(7.0)

7,424 41.0

(1,018)

(29.4)

(5.0)

1,333

(9.4)

3.0

0.9

EBITDA % margin

Capex EFCF Adjusted NIBD/EBITDA

2.

Growth, %

Revenue

Opex

1.

Year to date

2

6.1

1.5 1 (1.8)

(3,203)

(22.9)

2,447

(16.4)

Organic

(2.1) (4.6)

0.7 (7.3)

2

(3.1)

1

Percentage points Adjusted for the inclusion of Get 4

Q3 2015 performance per business line

1

2

3

1

Consumer: Negative EBITDA development (-7.7%) from pressure on landline voice and mobility service

2

Business: Substantial EBITDA leakage (-16.3%) across products and segments

3

Norway: Strong EBITDA growth in Get (8.2% YoY); TDC Norway EBITDA affected by a one-off in Q3 2015

1. 2.

Business line absolute figures and growth rates exclude eliminations and therefore do not amount to total Group figures The absolute figures show Get’s contribution to TDC Group’s financial results, while the growth figures show Get’s growth from Q3 2014 to Q3 2015 in local currency 5

Quarterly EBITDA trends Denmark1

Norway

Sweden

Reported YoY EBITDA growth -3.1%

-0.4%

0.9%

DKKm 2.5%

1.0%

59

25

315

308

23

173 (61) (3) (16) (80)

Q3 14

257

0

(159)

(206)

(25) (11)

(28)

Q4 14

Q1 15 2

(255)

Q2 15

DKKm

-5.4%

-7.3%

-7.7%

3 (26) (13) (36)

15

9

25

53 1

(226)

(249)

(22) (141)

Q3 14

2.

Q3 15

-1.4%

(134)

Q4 14

(180)

(23) (195)

Q1 15



YoY increase in reported EBITDA driven by the acquisition of Get; Q3 is the last quarter with full effect from the acquisition



Organic EBITDA decrease in Q3 at the same level throughout 2015 (-7%), as the worsened development in Denmark is cushioned by improvements in Sweden/Get and a positive one-off in TDC Norway

(1)

Organic2 YoY EBITDA growth

1.

(283)

0 (201)

Q2 15

-7.0%

(195)

Q3 15

Eliminations between countries included in Denmark numbers Adjusted for regulation, acquisitions/divestments, sales of assets and forex 6

Continued growth in our cable activities Get (Pre TDC)

Get

YouSee

Share of TDC

TDC Group cable revenue1,2

29%

DKKm

31% +4%

5,425

5,619

1,674

1,761

3,751

3,858

YTD 14

YTD 15

TDC Group cable EBITDA1,2

DKKm



Revenue and EBITDA YTD growth in both Get and YouSee



Our cable activities now represent 35% of TDC Group EBITDA, up by 5 pp YoY on a pro forma basis



Our cable based customer base consist of 1.5m TV subscribers of which 50% are broadband penetrated. 56% of all TDC Groups broadband subscribers are on a cable network, the remainder is on copper/fibre

Cable customers in Q3 2015

‘000

Share of TDC Group B2C customers

35%

30%

2.

56%

1,535

+6%

1.

85%

2,444

2,584

801

873

1,643

1,711

YTD 14

YTD 15

1,107 (10%)

776 439 (40%)

428 (90%)

337 (79%)

TV (Box penetration)

Broadband (BB penetration)

Pro forma reporting including Get before acquisition and with fixed exchange rates for comparative reasons (Q1-Q3 exchange rate of 0.848 DKK/NOK applied) YouSee activities include TV, BB, mobile and digital services, as well as cable installation work in Operations. Costs from Danish cost centres related to YouSee activities are obtained by using activity based modelling

7

Transforming YouSee from a flow TV supplier to a high speed entertainment universe May 2015

High speed broadband to all customers >400K broadband customers upgraded to 50+ mbps

Aug 2015

Live TV through web and app to all customers Increased access to YouSee’s entertainment universe through an app

Dec 2015

300 mbps available to all customers

Q1 2016

Top quality entertainment experience across all screens

8

Mobility services in Denmark Consumer

Business

YoY growth

Market share, %

Organic1 YoY gross profit growth

-6.1%

(74)

-5.8%

-11.1%

DKKm

-13.2%

(68)



Consumer’s mobile voice customer base up by 11k vs. Q2; improved churn rates YoY for the 2nd consecutive quarter due to cross selling to existing TV and broadband customers



Consumer’s mobile voice ARPU down by 4.1% YoY



Business’ mobile voice ARPU down by 15.1% YoY

(86)

(155) Q4 14

Organic gross profit development improved compared with the last quarters driven by development in Consumer subscriber base

-7.5%

(129) Q3 14



Q1 15

Q2 15

Mobile voice ARPU

Q3 15

DKK/month

Mobile voice RGU net adds & market share 42%

42%

41%

41%

‘000 41%

159 144 122

119

139 116

135

133 114

117

13

10 4 (4) (15)

Q3 14

1. 2.

Q4 14

Q1 15

Q2 15

Q3 15

Q3 14

(21)

Q4 14

(2)

11 2

(16)

Q1 15

Q2 15 2

Q3 15

Adjusted for regulation and acquisitions/divestments Business net adds in Q2 2015 influenced by a movement of 3k Justfone RGUs from Wholesale to Business 9

Mobile spectrum licenses and upcoming auctions Upcoming mobile frequency licenses to be auctioned1 2011

2013

Low frequency licenses

2015

2017

2019 2020 2021

800 MHz

900 MHz

700 MHz

2x20Mhz B 2x10Mhz A2

2x30MHz

TBD by EU

High

2600 MHz

1800 MHz

2100 MHz

frequency

2x70MHz

2x65MHz

2x60MHz



In 2012, TDC acquired 2x20MHz of the 800 MHz license, which was a primary catalyst in TDC reaching the position as Denmark’s best mobile network



Next auction will be the 1800 MHz license, as the existing licenses expire in December 2016. The auction is expected to be concluded before summer 2016



A series of licenses will be up for auction in the next few years: 1800 MHz, 900 MHz (2019), possibly 700 MHz (2020) and 2100 MHz (2021)

licenses

Current distribution of frequencies 2600 MHz

2100 MHz

1800 MHz

MHz 900 MHz

Low vs high frequency spectrum

800 MHz High frequency: +

144

40 86

Capacity/speed in cities and in indoor environments Low frequency:

30

+

Long range coverage (countrywide)

+

Capacity/speed in rural areas and cities

20 15

43

40 10 15

22

1. 2.

9 20

21

TDC

T&T

10

10

5

0



A mix of frequency licenses are needed in order to be cost effective and provide needed coverage

Hi3G

Licenses generally lasts for 20 years A license had limitations to Sealand, Bornholm and Jutland 10

Internet & network in Denmark Consumer

Business

Wholesale2

Organic1 YoY gross profit growth

-0.8%

(9)

-1.2%

-1.1%

(14)

(13)

Market share, %

YoY growth

DKKm

-2.8%

-4.7%

(33) (56) Q3 14

Q4 14

Q1 15

Q2 15



Gross profit deterioration in Q3 due to Business, partly affected by loss of some large contracts on network capacity



Customer growth in YouSee offset by loss in TDC brand due to increased price competition following the new wholesale prices (LRAIC), also negatively affecting Wholesale ARPU (-18.2% YoY)

Q3 15

Broadband ARPU

DKK/month

Broadband RGU net adds & market share 59%

281

268

187

262

121

191

105

191

93

57%

56%

1

3 3 (4)

116

58%

262

255

192

189

58%

‘000

0

3 (6)

6 (5)

99

6

(7)

4 0 (5)

(7)

Q3 14 1. 2.

Q4 14

Q1 15

Q2 15

Q3 15

Q3 14

Q4 14

Q1 15

Q2 15

Q3 15

Adjusted for regulation and acquisitions/divestments Including xDSL resale, BSA and VULA 11

TV in Denmark TDC/Fullrate brand

YouSee brand

YoY growth

Organic1 YoY gross profit growth

-3.2%

-4.2%

0.2%

Market share, %

DKKm

1.2%

1.4%

7

8

1

(18) (24) Q3 14

Q4 14

Q1 15

Q2 15

ARPU



Continued TV customer growth in the TDC brand and Fullrate vs. Q2 2015



Continued net loss of YouSee TV customers due to leakage of both individual customers and antenna associations



Small ARPU decline vs. Q2 2015 in TDC brand/Fullrate and YouSee due to changed product mix

Q3 15

DKK/month

RGU net adds & market share 54%

312

307

303 233

231

306 245

55%

54%

‘000 54%

54%

303 243

241

7 (8)

10

9

4

(4) (12)

3 (6)

(27)

Q3 14 1.

Q4 14

Q1 15

Q2 15

Q3 15

Q3 14

Q4 14

Q1 15

Q2 15

Q3 15

Adjusted for acquisitions/divestments

12

Get Broadband

TV

YoY growth

EBITDA1

12.0%

317

Q3 14

NOKm

9.6%

9.9%

309

322

Q4 14

Q1 15

9.0%

365

Q2 15

Residential ARPU

274 246

343

280

279

275 248

248

Get delivered strong YoY gross profit and EBITDA growth of 6.4% and 8.2%, respectively



Customer growth in Get on broadband and TV; broadband penetration up 1 percentage point vs. Q2 2015 to 79%



Get household ARPU rose by 3% YoY driven by higher broadband penetration and higher TV ARPU

Q3 15

NOK/month

248

• 8.2%

Residential RGU net adds

‘000

278 247

8

6 8 4 1 Q3 14

1.

Q4 14

Q1 15

Q2 15

Q3 15

Q3 14

5

6 4 1 Q4 14

Q1 15

Q2 15

2 Q3 15

Including Gets historical data before the acquisition as of November 2014

13

Sweden Operator

Integrator

YoY growth

Revenue

-2.4%

700

SEKm

4.7%

6.9%

10.7%

862

836

830

365

378

384

497

458

446

389

Q4 14

Q1 15

Q2 15

Q3 15

357

343 Q3 14

EBITDA

10.1%



Strong revenue growth for the 4th consecutive quarter; since Q2 this has also resulted in GP and EBITDA growth

771



Growth in mobile subscriptions fuelled by increased sale of combined business solutions including mobile



Migration to the new MVNO contract with TeliaSonera is progressing as planned

382

SEKm

Operator RGUs

‘000

Mobile subscriptions 2.8%

-24.5%

110

-22.0%

96 80

1.2%

1.8%

112 86 87

Q3 14

1.

Q4 14

Q1 15 1

IP-VPN

Q2 15

Q3 15

101

119

137

145

17.5

17.6

18.0

18.1

18.1

Q3 14

Q4 14

Q1 15

Q2 15

Q3 15

Negatively affected by a positive one-off on transmission costs in Q1 2014 (SEK 18m) due to reversed provision related to regulatory pricing decisions 14

Opex & capex YoY growth

Organic1 YoY opex development

5.8%

-2.3%

-0.1%

DKKm

0.9%

1.5%



Organic opex savings in Q3 YoY driven by a reduced spend in Denmark on facility, IT, marketing and fewer faults at customer sites leading to lower costs to contractors and wages in cost centre



YTD investment spending increased relating mainly to the inclusion of Get, but also targeted IT investments in Denmark on digitalisation and preparation of Trefor’s network for delivery of TDC products contributed to the increase

103

18

27

(2) (44) Q3 14

Q4 14

Q1 15

Q2 15

FTE development

Q3 15

‘000

Capex, YoY growth

DKKm

Get +596 -1.8% 44

8,906

260

704

76

11

7

3,203

8,749

762

515 2,607

Q3 2014

1.

Outsourcing

Acqusitions

Efficiency improvements

Q3 2015

YTD 2014

Get

IT

Network

Customer YTD 2015 installations

Adjusted for acquisitions/divestments, sales of assets and forex

15

Equity Free Cash Flow DKKm

YTD 2014

2,928

766

EBITDA (excl. Get)

Capex (excl. Get)

(255)

(33)

39

EBITDA-Capex (Get)

YoY growth Q3 15

358

Net interest paid

Other1

YTD 2015

Adjusted NIBD/EBITDA 1.



Growth in special items mainly related to redundancies



EFCF full-year expected to be at the same level as 2014. A negative EBITDAcapex contribution from the Danish business, offset by positive cash contribution from Get as well as lower tax paid

101

58 -16.4%

Special items

Negative impact from income tax paid as Q3 2014 included a refund from prior years following the final resolution of a dispute with the tax authorities in Denmark

89

Change in NWC

Income tax paid



19

43

260

(220)

125

110

24

26

2,447

3.0

Including adjustment for non-cash items, pension contributions, payments related to provisions and finance lease repayments

16

Guidance 2015 reaffirmed on all parameters

2015 guidance

1. 2.

Organic revenue

Same development as in 2014 (-2.5%)

EBITDA1

At the same level or slightly better than 2014 (DKK 9.8bn)

Capex

~DKK 4.3bn

DPS

DKK 2.50

YTD performance

Status

-2.1%

On track

DKK 7.4bn2

On track

DKK 3.2bn

On track

DKK 1.00

On track

Assuming an exchange rate of ~0.85 DKK/NOK Corresponding to YoY EBITDA growth of +1.5% 17

Q&A

18

A.1 Landline Voice in Denmark Consumer

Market share, %

YoY growth

Business

Organic1 YoY gross profit growth

-11.9%

(86)

Q3 14

-14.0%

-12.2%

(82)

DKKm

-13.1%



Consumer churn rates have stabilised at the same level as before the price increases one year ago



Business ARPU decrease of DKK 26 in Q3 YoY driven mainly by the Public segment due to negative effects from SKI renegotiations in 2014

(84)

(100) Q4 14

-16.6%

(106) Q1 15

Q2 15

ARPU

Q3 15

DKK/month

RGU net adds & market share 67%

346

338

329

332

139

144

142

66%

65%

64%

(29)

(27)

320

(39)

138

67%

‘000

(37)

(40)

142 (11) (9)

Q3 14

1.

Q4 14

Q1 15

Q2 15

Q3 15

Q3 14

(8)

(5) (11) Q4 14

Q1 15

Q2 15

Q3 15

Adjusted for regulation and acquisitions/divestments

19

A.2 Other services Sale of handsets

NetDesign

Other

YoY growth

Revenue

-2.5%

DKKm

25.9%

17.7%

-1.3%

476

204

538 212

137 212

135

189

Q3 14

Q4 14

218

440

434

143

107

217

24.3%

208

108

79

119

Q1 15

Q2 15

Q3 15

Gross Profit

DKKm 55.3%

Revenue from mobile handsets sold with a positive margin decreased YoY in Q3, as a result of lower sales in Consumer to third-party vendors as well as customers awaiting the release of a new iPhone



Diminishing YoY impact on revenue and gross profit development from the paper communication fees, as the fees were introduced in July 2014 and since then more customers transferred to fully electronic communication



TDC’s Security Operations Centre, offering end-to-end cyber security to B2B customers, has obtained the CERT certificate, confirming its capability to provide first-class detection and response

-8.8%

680 279



11.2%

4.3%

-4.6%

288

292

293

Other services consist of… Mobile handsets

368 307

Eliminations Paper communication fees

Q3 14

Q4 14

Q1 15

Q2 15

Q3 15

20

A.3 Operational KPI’s Non-acceptable customer experiences1

71

Q3 14

73

Q4 14

Index YTD

67

Q1 15

Q2 15

65

Q3 15

Hours ('000)

167

Q3 14 1. 2.

Q4 14

('000)

74

Faults correction time

147

Answered calls

139

Q1 15

2,173

2,191

Q3 14

Q4 14

2,334 1,995

Q1 15

Q2 15

TDC Recommend score2

2,189

Q3 15

Index YTD

65

65

63

64

64

Q3 14

Q4 14

Q1 15

Q2 15

Q3 15

140 124

Q2 15

Q3 15

Q1 2009 = Index 100. A lower index equals a more positive customer experience (e.g. an index of 60 equals a reduction in share of non-acceptable customer experiences of 40% since Q1 2009) Recommend score is TDC’s variant of the Net Promoter Score (Would you recommend TDC to family and friends/colleagues and business associates). 100 is maximum score (0-100 scale)

21

A.4 Regulatory update Revenue loss from regulation1

DKKm

656

253



Roaming: ‘Roam-like-at-home’ regulation will be a two step process. Firstly, retail roaming prices will be reduced to current wholesale prices from May 20163. Secondly, retail prices will be equivalent to ‘Roam-like-at-home’ prices from June 2017. Still, there is uncertainty concerning impact on future wholesale prices. TDC expects the commercial pressure on roaming prices to continue in the transition period



LRAIC: Revision of fixed network wholesale prices with effect as of 1 January 2016 will result in only minor price adjustments



Coax: Previously expected requirement to resell a TV package on coax has been withdrawn. Instead, a data-only solution will be introduced in Q1 2016



Fibre: TDC’s obligation to connect wholesale fibre customers, who are located within 30 meters of TDC’s fibre network, may result in investments with a long payback

~250 ~100

2013

2014

2015

Gross profit loss from regulation2

183

2013

1. 2. 3.

2016

DKKm

128

~125

~100

2014

2015

2016

Regulatory includes mobile termination rates regulation (voice and SMS), international roaming regulation and various landline regulations (ULL, leased lines, BSA, VULA and interconnect) There is no gross profit loss caused by mobile termination rates regulation (voice and SMS) Applies to customer with a package product. Customers with a ‘Pay-as-you-go’ product can be charged the domestic retail price plus a wholesale charge, however the combined price must not exceed the current regulated retail roaming price

22