TDC Annual Report 2018

Annual Report 2018 TDC Group Annual Report 2018 1 Contents Management’s review Business lines performance Financial statements & strategy 29 Shortcut to reading the Annual Report In brief 3 Performance per business line 30 Consolidated financial Highlights 4 Consumer 31 statements 54 Click on the tabs in the right-hand Management statement and Letter from the CEO 6 Business 35 corner to navigate quickly to the Key events in 2018 9 Wholesale 38 independent auditor’s report 55 tables of contents for the report and Five-year overview 11 Other operations 39 Consolidated financial statements 60 accounts, respectively. Who we are 12 Risk management 41 Parent Company financial Click on words in italics for an explana- Our business model 13 Risk assessment 42 statements 117 tion in the Terminology section. TDC Group and society 16 Six key risks 43 Terminology 135 Our business lines and markets 18 Terminology 136 Our people 19 Corporate matters 45 Reported vs. organic growth 137 Investor information 46 Group strategy & Corporate governance 48 performance 21 Management 50 Strategic milestones in 2018 22 Strategy going forward 24 Strategic focus in 2019 25 Group performance 26 2019 guidance 28 High-five TDC takes part in The rollout of Bland Selv: TV and streaming to Wifive page 17 Girls’ day in science page 20 fibre has begun page 23 in one package page 34 TDC Group Annual Report 2018 2 Contents Financial statements In brief Highlights Letter from the CEO Key events in 2018 Five-year overview Did you know that … … in 2018, TDC Group invested DKK 1.8bn, more than 50% of our total investments, in upgrading our network, so that our customers can enjoy more reliable connections anywhere TDC Group Annual Report 2018 In brief 3 Contents Financial statements Highlights Decrease in calls Decrease in organic Capital expenditure to Support operating expenses (investments) and Billing DKKm DKKbn 19% 159 3.5 Decrease 2.7% Capex to revenue 20.2% EBITDA DKKbn Increase in mobility services Share of revenue Organic growth in customers mobility services Consumer: 63% gross profit Business: 24% Wholesale: 10% Other operations: 3% 3% 10% k 24% % 6.7 171 63% 7 Growth in mobile voice Organic growth 0.1% market share 1.1 percentage point TDC Group Annual Report 2018 In brief 4 Contents Financial statements Highlights TDC Group is Digital citizenship Health & safety committed to ensuring Incident rate for accidents Psycho-social Together with Børns Vilkår Digital Denmark’ with absenteeism workplace evaluation TDC has empowered becomes a reality (Based on 10,000 employees) Scale 0-100 (100 is the best score) 151 through countrywide connectivity, but also 78 78 74 5,507 40 35 through digitally parents with tools and knowledge to educating citizens engage their children in conversations 2017 2018 Average rate 2017 2018 Average score about their digital lives for Denmark for major Danish in 2017 companies 2018 Upgrading connections Connecting rural areas Coverage of households in Denmark with As part of its Rural Area Initiative, TDC Group has upgraded the digital infrastructure of 19 rural areas 1000 Mbps1 100 Mbps2 10 Mbps2 providing speeds of between 30-100 Mbps to these previously 96% 97% low speed rural communities 70% YouSee upgraded the cable 66% connections of 37% 1,789 0% households through the state 2015 2018 2015 2018 2015 2018 broadband fund 1 Includes both TDC Group’s own cable and fibre networks and partners’ networks. 2 Measured according to the EU definition (“up to” speeds) TDC Group Annual Report 2018 In brief 5 Contents Financial statements Letter from the CEO In December, I eagerly assumed the role of CEO 2017 driven by mobility services. Business of TDC Group because I saw a company that achieved a strong trajectory during 2018 turn- had just successfully completed a three-year ing an EBITDA decline of 20.1% in Q4 2017 to turn-around. Even more important, I saw a almost year on year stability in Q4 2018. The company that was embracing a bold new strat- improved performance in Business reflects egy to use its unique digital and network growth in mobility services from increase in strengths to capitalise on the major shifts RGU base and stable ARPU as well as lower sweeping over consumer habits and the tele- costs. coms industry, a company determined to set Pivotal year new standards for the telcos industry and drive Mobility services. We have been able to grow the digitalisation of Denmark. mobility services revenue every quarter since Q3 2016, despite negative impacts from EU 2018 financial turn-around regulation in 2017 and 2018. In 2018, we TDC Group successfully completed its three- welcomed 171k new customers, including for TDC Group year effort to restore the company to growth. about 100k public sector customers after TDC Starting with negative organic EBITDA growth of won a key public sector tender agreement (SKI) -9.5% in 2016 to -2.2% in 2017, TDC generated in 2017. The impressive performance is based 2018 was a pivotal year for TDC Group, setting slight growth in 2018. Also, our cash flows im- on our strong network, which for the fourth- proved immensely when adjusted for one-offs year running was tested as Denmark’s best up 2019 as a year of major transformation related to the change of ownership, divestment mobile network. We are dedicated to keeping as we develop a new TDC Group capable of of Get and TDC Norway and other non-recurring the leading market position supported by the items. In 2018 alone, the adjusted cash flows coming upgrade to 5G. capitalising on an unprecedented era of change increased by more than DKK 500m on a like for in the global telecoms industry for the benefit like basis compared with 2017. I am immensely TV Market. In 2017, we continued to see many proud of my TDC colleagues for delivering on customers reducing or leaving their TV pack- of Digital Denmark. the commitments they made, and the resulting ages. The leakage of customers was lower in financial turn-around, which has put us in a 2018 as churn rates have slowed. The improved much better position to move forward with trend was driven by the launch in 2018 of one boldness in 2019. of the most flexible TV offerings in the world; ‘Bland Selv’ in YouSee. In a points-based sys- The improved financial development can be tem, our customers can mix TV channels with seen across our Business and Consumer streaming services like Viaplay, Netflix and HBO business lines. Consumer delivered flat EBITDA within the hour. Further, it is possible to watch growth in 2018 compared with a fall of 2.8% in the content across platforms and on the go. TDC Group Annual Report 2018 In brief 6 Contents Financial statements Our customers appreciate the great flexibility, • Individuals, households and enterprises and we see this as a strong lever for enhancing continue to consume more data, which is cre- TDC Group is committed to customer loyalty. ating expanded demand for data in our networks that can only be fulfilled with the rapid investing in building the infrastruc- In 2018, YouSee has improved its entertain- development of fibre and investments in the ment universe with its own produced content. next generation mobile network, 5G. Both ture and assets that will provide And in January 2019, the new channel Xee was fibre and 5G require significant investment, launched. Xee is produced in collaboration with and increased capital, deployed with a long- us with sustainable, long-term Fox and will include YouSee’s own produced term investment horizon. While the clear content and Fox’ award-winning TV-series. benefits of fibre have been known for a long time, it is now also clear that substantial competitive advantages Digital. We continue to invest in digitalising our competitive advantage will be gained by Allison Kirkby offerings and ways of working. In early 2018 we those companies that manage to embrace Group CEO and President successfully established the new business line 5G early and intelligently. Digital with ~1000 developers devoted to fast- lane development of new customer offerings • Denmark’s economy will depend heavily on and interfaces. We are also enabling the digitali- Digital Denmark’s ability to compete against • Ownership. On 4 May 2018, TDC Group was proudly take responsibility in building the high- sation of Danish businesses in order for them and thrive among the most capable competi- taken over by the three Danish pension funds speed broadband and mobile networks that will to establish a ‘Modern Workplace’ with unified tors worldwide. This will require unparalleled ATP, PKA, PFA and infrastructure funds man- serve as essential pillars for Digital Denmark. communication and collaboration across plat- access to a world-class mobile and landline aged by Macquarie Infrastructure and Real forms and locations. Furthermore, we expanded network, as well as service providers that can Assets. The new owners see TDC’s substantial • Vision. Our vision is to provide all Danish our cloud position in 2018 as we acquired CC drive the continuous digitalisation. potential and are committed to investing deci- households with access to 1Gbps broadband. Factory and a 40% stake of Cloudeon. Going sively for long-term benefit, and we are deter- In November, we finished our gigaspeed forward, TDC will move beyond the cloud, as • Around the world, a seemingly non-stop string mined to provide strong, reliable returns for project, upgrading our own cable network to we look further into security for all customers, of privacy scandals and security breakdowns Denmark’s pensioners. 1 gigabit broadband speeds for more than and pursue new revenue streams that will be has created a strong awareness that greater 30% of Danish households.

Load more