TeliaSonera Reports Q1
First quarter summary
Comments by Johan Dennelind,
President and CEO
“Our markets continue to be characterized by a changing customer behavior and an evolving convergence trend. We stay focused on upgrading our customers’ internet experience through further investments in 4G and fiber. In Sweden, our 4G coverage has approached 90 percent of population and we remain committed to reach 99 percent by the end of this year.
In the first quarter, underlying EBITDA margin improved compared to last year and reached 34.8 percent, while organic revenues declined by 1.8 percent due to reduced low margin equipment sales and continued effects from lower regulated mobile termination rates. Free cash flow increased by 5.9 percent to SEK 2.6 billion, supported by positive working capital development.
We continue to perform well in the consumer segment, where average billed revenue growth in Nordic Mobility Services increased to more than 3 percent, supported by all countries, as solid demand for data services compensated for slower growth in voice and messaging. We see further positive effects from our data-centric price models, which are now introduced in all Nordic markets. In Swedish Broadband Services, sales remained flat in the consumer area, as higher revenues for TV and broadband together with price adjustments compensated for lower volumes in traditional fixed services. The enterprise area remains challenging and we work hard to strengthen our position further by new products and services.
We reached a new milestone in Spain by passing four million subscriptions in the quarter. Billed revenues remained flat compared to last year, while total sales growth was impacted by lower handset sales and reduced interconnect revenues. Higher costs for subscriber acquisitions pressured profitability, but we foresee a more balanced development going forward.
On April 1, we implemented a new country based operating model with strengthened commercial and technology functions on group level. This will be instrumental for our future strategic agenda and will also enable further efficiency benefits. Our journey ahead will be based on three pillars; strengthen and develop our core business in the Nordic and Baltic region, take Eurasia to the next level by monetizing on the data opportunity and examine possible income opportunities in closely related adjacent industries. Geographically, focus remains on the markets where we are already present, with strict criteria for return on capital. We have a prudent but pragmatic approach to M&A and will mainly aim for potential consolidation opportunities in existing markets.
The Board’s review of last years’ transactions in Eurasia was finalized in the quarter. As previously communicated, several of these transactions have been inconsistent with sound business practice and our ethical requirements. We continue to fully cooperate with both Swedish and foreign authorities’ requests in this matter. We have taken, and will continue to take, a number of measures to transform our internal control systems to make sure we have adequate processes to identify and manage risk going forward.
In the regulatory area, we are concerned about the recent vote in the European parliament, particularly related to the area of net neutrality, as this may limit the possibilities for us to meet demand from our customers. We stress the importance of operators being able to run efficient networks and offer differentiated services to encourage innovation and investments.
We reiterate our full-year outlook regarding organic revenues and EBITDA margin at approximately last year’s level with a CAPEX-to-sales of 15 percent, although we see slightly increased risk to reduced revenues related to low margin equipment sales.”