Fourth quarter summary

• Net sales like for like regarding exchange rates, acquisitions and disposals, declined 2.3 percent. Net sales in reported currency rose 2.8 percent to SEK 22,838 million (22,209). Service revenues like for like regarding exchange rates, acquisitions and disposals declined 1.7 percent.

• Adjusted EBITDA excluding the positive impact from IFRS 16, like for like regarding exchange rates, acquisitions and disposals, grew by 4 percent. Like for like regarding exchange rates, acquisitions and disposals, adjusted EBITDA rose 14.7 percent. Adjusted EBITDA rose 18.5 percent in reported currency to SEK 7,914 million (6,680). The adjusted EBITDA margin rose to 34.7 percent (30.1).

• Adjusted operating income fell 0.4 percent to SEK 2,980 million (2,993).

• Total net income amounted to SEK 1,370 million (-1,572). Total net income attributable to owners of the parent amounted to SEK 1,312 million (-1,087).

• Free cash flow from continuing and discontinued operations rose to SEK 1,681 million (1,442). Operational free cash flow from continuing operations fell to SEK 977 million (1,417) as higher EBITDA and lower CAPEX were offset by negative working capital. Cash flow from operating activities, from continuing and discontinued operations, decreased to SEK 5,566 million (6,122) mainly impacted by working capital.

•  the 2019 level (SEK 12.6 billion). Adjusted EBITDA based on group structure at year-end 2019 and at stable currencies, is expected to grow 2-5 percent compared to 2019.

Full year summary

• Net sales like for like regarding exchange rates, acquisitions and disposals, fell 3.5 percent. Net sales rose 2.9 percent in reported currency to SEK 85,965 million (83,559).

• Adjusted operating income declined 4.9 percent to SEK 13,452 million (14,146).

• Total net income increased 132.4 percent to SEK 7,261 million (3,124). Total net income attributable to the owners of the parent increased to SEK 7,093 million (3,213).

Comments by Christian Luiga, acting President & CEO

“We have delivered on the financial targets we had set up for ourselves in 2019 as we have taken important steps in executing on our strategy. Operational free cash flow reached SEK 12.6 billion, up 16 percent from 2018, and within the SEK 12-12.5 billion target range if we exclude a positive pension refund of SEK 0.4 billion in the fourth quarter. Adjusted EBITDA grew by 17 percent in reported currency in the fourth quarter and followed the outlined pattern with a gradual improvement throughout the year. Excluding the IFRS16 impact the like-for-like growth was 4 percent. This was mainly driven by increased efficiency in cost of goods sold and further reductions in operational expenses where Sweden stand out by reaching a 6 percent reduction for the fourth quarter and the target of 3 percent for the full year. We are pleased and take pride in that, meanwhile we continue our efforts for a stronger service revenue development. Based on the operational free cash flow the board proposes a dividend of SEK 2.45 per share for 2019, equal to a 3.8 percent increase versus 2018.

In the fourth quarter we closed our acquisition of Bonnier Broadcasting with TV4, C More and MTV and established our new unit, TV and Media. Our ability to handle the new dynamics in the TV market was immediately tested by the competition and we proved that we were able to rise to the challenge. I want to take the opportunity to make it very clear that we will not limit TV4 or MTV to any Swedish or Finnish households and we will secure that we follow the commitments we have given to the European Commission.

One important focus area for me has been our commercial agenda, we are not fully at our potential, but we are gradually improving. As a market leader we have taken a big responsibility to continue price calibration to address our service revenue challenge. Recently this has predominately been seen in the Swedish consumer mobile and broadband service revenues both of which turned to growth in the fourth quarter. Another example is Estonia, that for the year has grown service revenues in all key areas through strong bundled offerings under the Telia1 umbrella which created a strong upsell execution.

Convergence will continue to be a key part in our commercial activities going forward. It is all about increasing our customers experience, customer loyalty and reducing churn, both in B2C and B2B. We have improved and see several examples of great results in this area, like our mobile family offer in Sweden that has been proven to be rewarding to both our customers and us. An increased focus on data analytics is and will be an important support to create even stronger and more relevant converged offers to our existing customers. I have ensured that this competence is part of all our management teams in all countries. We have continued to invest in new support systems and the migration of customers to these systems has led to a temporary dip in customer support. We have mitigated the risk from the migration that will be finalized in 2020 with all customers moved to the new platform.

In the enterprise segment we clearly benefit from combining our core products with new types of services within ICT and IoT. Revenues from our IoT business have grown by some 20 percent in 2019 to around SEK 1 billion. The demand for products and services are not only helping our customers to become more digitalized but also more sustainable. One recent deal is with Rikshem in Sweden where we are turning 30,000 homes smarter. ICT and digitalization are also key elements in how we, our suppliers and our customers can contribute to a better environment and are aligned with the Daring Goals that we communicated in March 2019. We have further concretized our road to zero waste and zero CO2 emissions as we aim to be climate neutral within our own operations by 2022. In line with those targets we will keep on developing our offerings and for instance increase the reuse of network equipment and handsets. More on this work will be found in our upcoming Annual and Sustainability Report.

We have continued to invest in our infrastructure in the region, very much driven by customer demands and our acquisition of Get in Norway. We have been acknowledged in several independent studies which creates an important platform for enhancing customer experience and supports our commercial agenda. It was also the year when we went live with 5G, with full scale commercial offerings launched in Finland, investment decisions in Norway and several successful pilots across our footprint. With the integration of Get in Norway we have also made our first converged offerings. Moving into 2020, we are clearly aware of the challenges that the telecom industry is facing. The legacy decline will continue as well as a tough competition in core and new services. We are ready to face these challenges. Meanwhile we continue to improve our customer relevance we will go through technology shifts that will secure best network and bring down cost. Our new operating model that supports scale synergies across our footprint will continue to bring savings together with synergies from recent acquisitions. Our cost ambition remains to reduce operational expenses by around 2 percent coming years. Telia Company is in a delivery mode.

For 2020 we expect the adjusted EBITDA to increase between 2-5 percent. As we highlighted in the third quarter report, we do not see CAPEX to be reduced further. The continued operational improvement is expected to be compensated by an increased customer driven demand, an increased ambition in the mobile network in Finland and the Get footprint in Norway. All this taken into account we expect the operational free cash flow to be in the range of SEK 10.5-11.5 billion.