Annual Report 2007 - Financial StatementsFinancial Results
Financial resultsClick to view table| SEK in millions, except earnings per share and margins | 2007 | 2006 |
|---|---|---|
| Net sales | 96,344 | 91,060 |
| Operating expenses (except depreciation, amortization and impairment losses) | -66,011 | -59,947 |
| Depreciation, amortization and impairment losses | -11,875 | -11,203 |
| Income from associated companies and joint ventures | 7,697 | 5,579 |
| Operating income | 26,155 | 25,489 |
| Financial revenues and expenses, net | -904 | -263 |
| Income after financial items | 25,251 | 25,226 |
| Income taxes | -4,953 | -5,943 |
| Net income | 20,298 | 19,283 |
| Attributable to: | ||
| Shareholders of the parent company | 17,674 | 16,987 |
| Minority interests in subsidiaries | 2,624 | 2,296 |
| Earnings per share (SEK) | 3.94 | 3.78 |
| EBITDA excluding non-recurring items1) 2) | 31,021 | 32,266 |
| Margin (%) | 32.2 | 35.4 |
| Operating income excluding non-recurring items2 | 27,478 | 26,751 |
| Margin (%) | 28.5 | 29.4 |
1) EBITDA is an abbreviation for Earnings Before Interest, Tax, Depreciation and Amortization. TeliaSonera defines EBITDA as Operating income before Depreciation, amortization and impairment losses, and before Income from associated companies and joint ventures.
2) For details of non-recurring items, see "Non-recurring items" below.
Net sales
Net sales increased 5.8 percent to SEK 96,344 million (SEK 91,060 million in 2006). The net effect of acquisitions and divestments was positive 2.7 percent and the net effect from exchange rate changes was negative 0.5 percent. Organic growth was 3.6 percent. All business areas showed higher sales.
Net salesClick to view table| SEK in millions | 2007 | 2006 | Change, % |
|---|---|---|---|
| Mobility Services | 44,519 | 41,949 | 6.1 |
| Broadband Services | 41,273 | 40,880 | 1.0 |
| Integrated Enterprise Services | 13,729 | 12,940 | 6.1 |
| Eurasia | 10,338 | 8,508 | 21.5 |
| Other operations | 647 | 527 | 22.8 |
| Eliminations of internal sales | -14,162 | -13,744 | |
| Group | 96,344 | 91,060 | 5.8 |
In Mobility Services, net sales rose 6.1 percent with increased sales in all markets. In particular, the acquisition of debitel in Denmark in April, good underlying development in Sweden and Estonia and the Yoigo start-up in Spain drove sales higher.
In Broadband Services, net sales increased 1.0 percent due to higher sales in all markets except Sweden. Particularly the good underlying development in Wholesale and in Estonia, and the acquisition of NextGenTel in Norway in June 2006 contributed to higher sales.
In Integrated Enterprise Services, net sales increased 6.1 percent. The improvement was attributable to the acquisitions of Cygate, Didata and Crescom in 2007.
In Eurasia, net sales rose 21.5 percent, lifted by continued strong growth, especially in Kazakhstan and Azerbaijan, and the acquisition of operations in Uzbekistan and Tajikistan.
The number of subscriptions rose by 18.7 million to 114.9 million. The number of subscriptions in the majority-owned operations rose to 36.1 million and in the associated companies to 78.8 million.
Profitability
EBITDA, excluding non-recurring items, decreased to SEK 31,021 million (SEK 32,266 million in 2006) and the margin was 32.2 percent (35.4), despite higher net sales in all business areas and higher EBITDA in Eurasia. The profitability was impacted by the change in the product mix and related investments in growth, especially in mobility and IP-based services. In Spain, costs for building the Yoigo brand resulted in an EBITDA of SEK -1,443 million (-337). In addition, acquisitions during the year as well as price erosion and regulatory intervention had a negative effect on the margin level.
EBITDA excluding non-recurring itemsClick to view table| SEK in millions | 2007 | 2006 | Change, SEK million | Change, % |
|---|---|---|---|---|
| Mobility Services | 13,332 | 13,845 | -513 | -3.7 |
| Broadband Services | 12,926 | 13,629 | -703 | -5.2 |
| Integrated Enterprise Services | -162 | 360 | -522 | n/a |
| Eurasia | 5,255 | 4,757 | 498 | 10.5 |
| Other operations | -348 | -318 | -30 | -9.4 |
| Eliminations | 18 | -7 | 25 | |
| Group | 31,021 | 32,266 | -1,245 | -3.9 |
Operating income, excluding non-recurring items, increased to SEK 27,478 million (26,751) due to higher income from associated companies in Russia and Turkey.
Operating income excluding non-recurring itemsClick to view table| SEK in millions | 2007 | 2006 | Change, SEK million | Change, % |
|---|---|---|---|---|
| Mobility Services | 8,998 | 9,610 | -612 | -6.4 |
| Broadband Services | 7,906 | 8,295 | -389 | -4.7 |
| Integrated Enterprise Services | -590 | 44 | -634 | n/a |
| Eurasia | 10,883 | 8,527 | 2,356 | 27.6 |
| Other operations | 219 | 243 | -24 | -9.9 |
| Eliminations | 62 | 32 | 30 | |
| Group | 27,478 | 26,751 | 727 | 2.7 |
Financial items totaled SEK -904 million (-263), of which SEK -1,174 million (-472) related to net interest expenses. The comparative year was positively impacted by a capital gain of SEK 183 million from a sale of shares.
Income taxes amounted to SEK -4,953 million (-5,943). The effective tax rate decreased to 19.6 percent (23.6). The decrease was mainly related to recognition of deferred tax assets of approximately SEK 850 million, mainly in Finland, after a positive ruling concerning certain old tax losses, and to higher income from associated companies in Russia and Turkey.
Minority interests in subsidiaries were SEK 2,624 million (2,296) of which SEK 1,895 million (1,654) related to the Eurasian operations and SEK 702 million (650) to the Baltic operations of Broadband Services and Mobility Services.
Net income attributable to shareholders of the parent company increased to SEK 17,674 million (16,987) and earnings per share to SEK 3.94 (3.78).
Return on capital employed was 19.4 percent (19.5) and return on equity increased slightly to 18.6 percent (17.2).
See the Consolidated Income Statements and related notes to the consolidated financial statements for further details.
Non-recurring items
The following table presents non-recurring items for 2007 and 2006. These items are not included in "EBITDA excluding non-recurring items" or in "Operating income excluding non-recurring items" as analyzed above, but are included in the total results for TeliaSonera and for each of the business areas.
Non-recurring itemsClick to view table| SEK in millions | 2007 | 2006 |
|---|---|---|
| Within EBITDA | -688 | -1,153 |
| Restructuring charges, synergy implementation costs, etc.: | ||
| Mobility Services | -363 | -418 |
| Broadband Services | -464 | -847 |
| Integrated Enterprise Services | -135 | -278 |
| Other operations | 142 | 383 |
| Capital gains: | ||
| Broadband Services | 132 | - |
| Telia Finans | - | 7 |
| Within Depreciation, amortization and impairment losses | -635 | -13 |
| Impairment losses, accelerated depreciation: | ||
| Broadband Services | -635 | -13 |
| Within Income from associated companies and joint ventures | - | -96 |
| Impairment losses, capital gains/losses, provisions and other: | ||
| Mobility Services | - | -96 |
| Within Financial net | - | 183 |
| Capital gains: | ||
| Sale of Elisa shares | - | 183 |
| Total | -1,323 | -1,079 |
The ongoing restructuring and streamlining programs have led to significant implementation costs and provisions in 2006 and 2007, mainly related to operations in Sweden and Finland, impacting each of the business areas Mobility Services, Broadband Services and Integrated Enterprise Services. The results for Broadband Services are also impacted by write-downs related to the fixed access network in Finland and certain product and IT platforms in Sweden.
For a detailed discussion of the restructuring and streamlining efforts, see Note 24 to the consolidated financial statements.
Non-recurring items for TeliaSonera's other operations have been positively affected by reversals of provisions. In 2007, SEK 155 million of the restructuring provision related to the international carrier operations were reversed due to better than expected success in restructuring activities. In 2006, a similar reversal of SEK 101 million was recorded. Additionally in 2006, SEK 500 million was reversed after a settlement of a dispute regarding a real estate in the U.K.
Capital gains include a gain of SEK 132 million from selling part of TeliaSonera International Carrier's network in the U.K. in 2007, and a gain of SEK 183 million from selling the Elisa shares in 2006.