SECOND QUARTER SUMMARY
FIRST HALF SUMMARY
Comments by Johan Dennelind,
President and CEO
”TeliaSonera is on a journey of change to become a new generation telecoms company and we will achieve this by enhancing our core operations and explore opportunities in adjacent areas. In order to succeed, we need to drive innovation across the group to improve customer experience and deliver new relevant services. We will engage with partners to differentiate and speed up time to market. In the past quarter we have taken several new initiatives, particularly in the music field, highlighted by our new innovation partnership with Spotify.
In the second quarter, organic service revenues and EBITDA remained slightly under pressure, while reported numbers were supported by the acquisition of Tele2 in Norway and currency effects. Free cash flow improved significantly thanks to the dividend payment from Turkcell. In Sweden, pressure on profitability eased in the quarter. We continue to invest in our networks to offer our customers superior connectivity wherever they are. Our mobile, broadband and TV operations all delivered positive service revenue growth, supported by higher ARPU and positive net customer intake, while fixed telephony continued to decline. Our recent price changes in the B2C segment are expected to support performance going forward, whereas competition in the B2B segment remains fierce. Mobile data consumption continued to increase, supported by a higher share of 4G-enabled handsets and two-thirds of data traffic is now handled by our 4G network. Our fiber roll-out gained further momentum backed by strong consumer demand. We expect to connect more than 50,000 single-family homes in 2015, an increase by around 50 percent compared to last year. At the end of the period we made changes in the leadership team to further boost our commercial agenda.
The integration of Tele2 Norway is progressing at full steam and synergy execution is running ahead of plan, supporting profitability in the quarter. We raise our synergy target from SEK 800 million to around SEK 1 billion, of which approximately SEK 700 million is expected to be achieved this year and the full run rate in 2016. We are also fulfilling our commitment to the Norwegian customers by investing significantly in our mobile network and a new milestone was reached in June when 4G-population coverage surpassed 90 percent. In Eurasia, the quarter was challenging in several aspects. In late April, Nepal was hit by a devastating earthquake impacting the people of the country. Our local team has made a significant effort maintaining service functionality and securing reliable communications after this critical event. TeliaSonera has also via Ncell made major long term commitments to support the rebuild of Nepal. In Kazakhstan, price competition remains fierce and continues to impact service revenue growth and profitability. We work hard to strengthen competitiveness and recently launched new offerings to improve our customer proposition, but the challenging environment is likely to remain near term. Further, Swedish media reported on the privatization of Azercell, which took place seven years ago. TeliaSonera investigated this transaction already in 2013 and we have submitted our findings to Swedish authorities.
Looking ahead, we expect the earnings trend to improve somewhat in the second half of the year and reiterate our full year outlook, but we see increased risks related to performance in Eurasia. Group EBITDA, on a local organic basis and excluding synergies in Norway, is anticipated to remain around last year’s level, while CAPEX is estimated to be approximately SEK 17 billion, excluding license and spectrum fees.”