2016 ANNUAL REPORT INDEX DNA IN 2016 86 BOARD OF DIRECTORS’ REPORT 4 CEO’s review 6 Key figures FINANCIAL STATEMENTS 2016 10 Operating environment IFRS-consolidated financial statements 16 Strategy 114 Consolidated income statement 20 Initial Public Offering 115 Consolidated statement of comprehensive income 22 Information for shareholders 116 Consolidated statement of financial 24 Consumer Business position 26 Corporate Business 118 Consolidated statement of cash flows 28 Network infrastructure 120 Consolidated statement of changes in equity CORPORATE RESPONSIBILITY Notes to the consolidated financial 32 Corporate responsibility at DNA statements: 34 Responsibility towards the customer 122 1 The Group in brief 36 DNA in the society 122 2 Accounting principles 38 DNA and climate 132 3 Financial risk management 40 Responsible procurement 136 4 Segment information 41 Stakeholder dialogue 138 5 Net sales 42 Team of top experts 138 6 Other operating income 46 Reporting (GRI) 138 7 Other operating expenses 139 8 Depreciation, amortisation and impairment 62 CORPORATE GOVERNANCE STATEMENT 140 9 Employment benefit expenses and number of personnel 63 Annual General Meeting 140 10 Finance income 65 Board of Directors 140 11 Finance expense 71 Executive Team à CEO and the Executive Team 75 Risk management and internal control 78 Auditing of accounts 78 Salary and compensation report 2 DNA ANNUAL REPORT 2016 INDEX 141 12 Income tax expense Parent company financial statements 142 13 Earnings per share 169 Parent company income satement, FAS 143 14 Property, plant and equipment 171 Parent company balance sheeet, FAS 145 15 Intangible assets and impairment 174 Parent company cash flow statement, testing FAS 176 148 16 Investments in associates Notes to the parent company financial statements: 149 17 Available-for-sale financial assets Parent company accounting principles, 149 18 Trade and other receivables 178 FAS 150 19 Deferred tax assets and liabilities 178 1 Net sales 152 20 Inventories 179 2 Depreciation and amortisation 152 21 Cash and cash equivalents 180 3 Other operating expenses 153 22 Equity 181 4 Finance income and expense 155 23 Share-based payments 181 5 Appropriations 157 24 Employment benefit obligations 182 6 Income tax 161 25 Provisions 186 7 Intangible assets and property, 162 26 Borrowings 187 plant and equipment 163 27 Trade and other payables 188 8 Investments 163 28 Fair value of borrowings 189 9 Receivables from Group companies 164 29 Operating lease agreements 190 10 Accruals 164 30 Guarantees and contingent liabilities 190 11 Equity 165 31 Related party transactions 191 12 Provisions 167 32 Correction to prior periods 191 13 Non-current liabilities 168 33 Events after the balance sheet date 191 14 Liabilities to Group companies 192 15 Accruals 193 16 Deferred tax liability/asset 194 17 Pledged assets and contingent liabilities 196 18 Related party transactions Signatures of the annual report and financial statements Auditor’s Report 3 DNA ANNUAL REPORT 2016 OUR PROFITABILITY IMPROVED SIGNIFICANTLY 2016 was a strong year for DNA, in terms of fi nancial use is increasing also in the fi xed network, driven by development, customer base growth and customer increased viewing of HD content, for example. satisfaction. Our net sales developed well, increasing Our signifi cant network investments continued in by 3.6% to EUR 858.9 million. Our mobile service reve- 2016 to support our customers’ growing use of mobile nue was up by as much as 9%. Mobile service revenue data. At the end of 2016, DNA’s 4G network reached was boosted in particular by the growth of the mobile more than 99.6% of the population in mainland Fin- subscription base by 121,000 subscriptions and the land. Finnish Shared Network Ltd completed the new growing share of 4G subscriptions in our subscription network for mobile communications in Northern and base, which had a positive eff ect on mobile billing and Eastern Finland, making high-speed mobile connec- also boosted mobile device sales to record levels. Oth- tions available for more than 760,000 residents. DNA er growth areas include Industrial Internet solutions, won the 2×10 MHz spectrum it pursued in the 700 fi xed-network broadband services for households as MHz spectrum auction, enabling the build-up of even well as value-added services to the corporate sector, better and faster mobile communication services. DNA such as data security services. launched the ultra-fast DNA Fibre Optic Plus network, Positive development of mobile service revenue and improving speeds signifi cantly in the fi xed network and improved operational effi ciency improved comparable off ering Gigabit speeds to hundreds of thousands of EBITDA, which was up 9%. Comparable operating re- households. sult and operating free cash fl ow in particular devel- IT SYSTEM UPGRADES SUPPORT EVEN oped well. Both grew by more than 40%. BETTER CUSTOMER EXPERIENCE FINNS TOP THE GLOBAL LIST FOR MOBILE We made signifi cant investments in our IT architecture DATA USE to provide even better customer service through more According to a report released by research company tailored service and more comprehensive customer Teffi cient in December 2016, Finns have the high- understanding. We improved our digital channels from est mobile data usage in the world per subscription. our online store to self-service tools to keep delivering DNA tops the list in Finland, carrying as much as 9.9 customer satisfaction excellence. Our main focus was gigabytes of data per subscription each month. Data linking our customer service, chain of DNA Stores and 4 DNA ANNUAL REPORT 2016 CEO’S REVIEW digital channels more closely together. We can now POSITIVE EXPECTATIONS FOR 2017 off er our customers more seamless service through We achieved our strategic objectives well in 2016. Our multiple channels. customer satisfaction remained at a good level, as in- DNA SIGNS UP TO THE SOCIETY’S dicated by the improved Net Promoter Scores and the COMMITMENT TO SUSTAINABLE lowest customer CHURN rate in the market. Accord- DEVELOPMENT ing to the Great Place to Work survey, our personnel As a telecommunications company, DNA plays a satisfaction continued to improve. We achieved faster signifi cant role in society, providing important commu- than market growth in terms of organic net sales and nication connections and maintaining critical infra- relative development of free cash fl ow. Considering the structure. We are committed to continuous business favourable economic development, we have positive development, while considering the needs of our envi- expectations for 2017. We expect our net sales to ronment and stakeholders. In 2016, we signed up to the remain at the same level and the comparable operating Society’s Commitment to Sustainable Development, in result to improve somewhat. which we undertake to reduce our total emissions by I would like to thank our customers, partners and 15% by 2020 from the level reported in 2014. shareholders for our success in 2016. Special thanks are AS A LISTED COMPANY, DNA IS EVEN due to our personnel for their excellence, professional- STRONGER AND MORE TRANSPARENT ism and commitment to developing DNA together. We are in a good position to serve our customers with our DNA shares were listed on the offi cial list of Nasdaq strategic objectives in mind. Helsinki towards the end of 2016. Listing is an impor- tant milestone in developing DNA into an even stronger Jukka Leinonen telecommunications company in the Finnish market. The fi nal subscription price was EUR 10.10 per share and our IPO was oversubscribed by a large margin. Af- ter the listing, we have more than 11,000 shareholders. 5 DNA ANNUAL REPORT 2016 DNA IN FIGURES DNA’S YEAR 2016 IN FIGURES In excess of DNA TV has more than 120 300,000 per cent more mobile data users was transferred in the 4G network than in 2015 Smart phones Cable TV customers accounted for totalled 98 608,000 per cent for all phones sold DNA’s 4G network Over 82% reaches of mobile data was 99.6 transferred in the 4G per cent of Finns network at the end of 2016 Fixed-network Fixed-network broadband subscription cable TV subscription base up by base up by 4,000 2,000 Mobile communications More than subscription 20,396 base up by kilometres of 121,000 fibre-optic cable DNA’s emissions from the generation of purchased energy reduced by 70% from 2015 DNA IN FIGURES NET SALES, EUR MILLION MOBILE COMMUNICATIONS 1,000 SUBCRIPTIONS (VOICE AND MOBILE 859 BROADBAND) 800 3,000,000 2,742,000 600 2,500,000 2,000,000 400 1,500,000 200 1,000,000 0 500,000 2013 2014 2015 2016 0 2013 2014 2015 2016 EBITDA, EUR MILLION AND EBITDA % FIXED-NETWORK SUBSCRIPTIONS OF NET SALES % 1,200,000 1,113,000 250 236 35 1,000,000 30 27.5 DNA’s 200 financial objective 800,000 25 is that EBITDA margin is 150 20 at least 600,000 30%. 15 100 400,000 10 200,000 50 5 0 0 0 2013 2014 2015 2016 2013 2014 2015 2016 Fixed voice EBITDA Cable TV EBITDA % of net sales Fixed broadband COMPARABLE EBITDA AND ARPU AND CHURN ARPU = revenue per user, € COMPARABLE OPERATING RESULT, Churn = mobile communication subscription turnover rate EUR MILLION € % 250 247 20 20 17.1 16.1 200 15 15 150 10 10 102 100 5 5 50 0 0 0 2013 2014 2015 2016 2013 2014 2015 2016 Comparable EBITDA ARPU, € Comparable operating result CHURN, % 8 DNA ANNUAL REPORT 2016 DNA IN FIGURES OPERATIVE CAPEX, EUR MILLION NET DEBT/EBITDA, % AND OPERATIVE CAPEX % OF 2.5 NET SALES % 150 35 2.0 DNA’s 137 financial objective is net debt/ 30 1.5 EBITDA ratio 120 1.36 of less than 2.0%.