2018 ANNUAL REPORT INDEX INDEX DNA IN 2018 CORPORATE RESPONSIBILITY 57 CORPORATE GOVERNANCE 88 BOARD OF DIRECTORS’ REPORT STATEMENT 4 CEO’s review 22 Corporate responsibility at DNA 114 FINANCIAL STATEMENTS 2018 59 Annual General Meeting 6 DNA’s year 2018 in figures 24 Digital inclusion 116 Consolidated Financial Statements 59 Annual General Meeting 2018 8 Operating environment 26 Great place to work 124 Notes to the consolidated Financial 59 Shareholders’ Nomination Committee Statements 10 Strategy 30 DNA’s climate friendly business 60 Board of Directors 182 Parent company Financial Statements 16 Highlights in 2018 32 Good governance 62 Duties of the Board 191 Notes to parent company Financial 18 For shareholders 36 Taxes and economic impact Statements 63 Members of the Board in 2018 38 Reporting (GRI) 210 Auditor’s Report 65 Board committees 67 CEO and the Executive Team 68 Duties of the Executive Team 69 Members of the Executive Team in 2018 71 Risk management and internal control 75 Auditing 76 Salary and compensation report 2 DNA ANNUAL REPORT 2018 3 DNA ANNUAL REPORT 2018 CEO’S REVIEW GROWTH, PROFITABILITY AND HIGHER CUSTOMER AND PERSONNEL SATISFACTION 2018 was an excellent year for DNA across the board. Our net sales, operating result and operative free cash flow improved significantly year-on-year, reaching record levels for the second consecutive year. Our customers were increasingly satisfied with our operations. DNA was awarded the Great Place to Work® certificate for the second consecutive year and was chosen the best workplace in Finland in the category of large organisations. Our customer base grew in both the mobile and fixed network, and we also increased our market share. DNA’s subscription base in the mobile and fixed network exceeded 4 million, and DNA became the second-largest fixed broadband service provider in Finland. FOCUS ON CUSTOMER SATISFACTION technology, or 5G, for a long time. In the autumn of 2018, we won the 3.5 GHz frequency we pursued in the A key element in our strategy is diff erentiation in the auction and launched a 5G network in Helsinki at the market by creating the best customer experience with turn of the year. We will launch 5G services during 2019 the aim of having the most satisfi ed customers in Fin- once 5G-capable mobile devices become more widely land. In 2018, our customer satisfaction improved fur- available. DNA’s customers already have the highest ther, and the Net Promoter Score (NPS) metrics, which mobile data usage per subscription in the world, and measure the likelihood that a customer would recom- the migration to 5G will enable us to support growth mend the product or service, improved in all areas. In in the years to come. Mobile users will benefi t from 5G Consumer Business, product-specifi c NPS improved through faster data connections, but the technology across all product groups and NPS, which measures also enables faster broadband connections for homes overall customer loyalty, improved by 2 points. In Cor- as well as versatile corporate solutions from port auto- porate Business, overall satisfaction improved notably mation to remote robotics. The new DNA Connectivity and the NPS was up by as many as 3 points. IoT service that we launched in 2018 is a good example SATISFIED PERSONNEL of a smooth transition from 4G to 5G. cause and also recycled old phones in an environmen- and the improved employment situation has a positive tally friendly and responsible way. impact on the demand of operator services. Competi- In February 2019, DNA was chosen the best workplace RELIABILITY AND RESPONSIBILITY ARE IN tion remained intense throughout the year, in mobile in Finland in the category of large organisations. This OUR DNA EXCELLENT RETURN TO SHAREHOLDERS communication in particular, but on the other hand, recognition comes as a result of long-term eff orts to At the heart of DNA is to operate as a reliable and DNA’s share value developed favourably in 2018. DNA’s customers continued to switch to faster 4G subscrip- create a culture of trust through openness and trans- responsible corporate citizen. We updated our respon- excellent free cash fl ow for 2018 and strong balance tions. In 2019, DNA’s net sales are expected to remain parency. This is the foundation for the continuous sibility strategy around four key areas: digital inclusion, sheet again allowed the Board of Directors to make at the same level as in 2018, and EBITDA in 2019 is development of our working environment together as being a great place to work, climate-friendly opera- a generous dividend proposal to the Annual General expected to increase substantially from 2018, in part a team. We have placed special emphasis on compe- tions and good governance. As a concrete example, I Meeting – a dividend and an extra dividend totalling due to the adoption of the IFRS16 accounting stand- tence development to make sure that we remain com- would like to mention the charity campaign towards EUR 1.10 per share. Our balance sheet will remain ard. We expect our profi tability to improve further in petitive, both at the individual level and as a company, the end of 2018 to collect funds for the prevention of strong after the proposed dividend payment, allowing the medium term, and have set a new EBITDA margin now and in the future. digital inequality among the most vulnerable children us to leverage new business opportunities in the future target of at least 34%. 5G CREATES NEW BUSINESS and young people. During the campaign, DNA invited and increase shareholder value in the long term. At the best workplace in Finland, we at DNA continue OPPORTUNITIES the public to bring their old phones to DNA Stores for recycling. In return for each phone, DNA donated 10 POSITIVE FUTURE EXPECTATIONS to work for the benefi t of our customers and sharehold- Reliable, extensive and fast networks are the key to ers. I would like to thank our personnel, customers and euros to SOS Children’s Villages for the purpose of While the rate of growth is levelling, the Finnish providing excellent customer experience. We have been shareholders for our continued success in 2018. purchasing devices and subscriptions. The campaign economy remains on the growth path. Both consumer preparing for the arrival of the fi fth-generation mobile succeeded in raising EUR 72,000 for an important and corporate business confi dence are relative strong Jukka Leinonen 4 DNA ANNUAL REPORT 2018 5 DNA ANNUAL REPORT 2018 DNA IN FIGURES DNA’S YEAR 2018 IN FIGURES DNA was DNA’s 4G network reaches almost Mobile communications ranked first turnover rate in Finland’s 100% decreased and was best workplaces of the population 2019 survey* in mainland Finland 16.2% 4G traffic volumes in Mobile communications DNA’s networks grew Cable TV customers Fixed-network totalled broadband subscription revenue per user 37% base up by increased and was year-on-year in 630,000 the last quarter 23,000 EUR 18.7 92% Fixed-network Mobile communication ~1/3 of mobile data cable TV subscription subscription of Finnish households was transferred base up by base up by are in the service area in the 4G network of DNA’s fibre-optic at the end of 2018 11,000 66,000 based cable network *Great Place to Work Institute’s survey; the survey was conducted in 2018 6 DNA ANNUAL REPORT 2018 7 DNA ANNUAL REPORT 2018 DNA’S OPERATING ENVIRONMENT wireless services, such as mission-critical services which As IoT gains ground, the role of good data security, FINNISH PEOPLE USE THE MOST require low latency and extremely high reliability. The data protection and high operational network reliability technology makes it possible to connect a broad range gain in importance; unprotected devices and solu- MOBILE DATA IN THE WORLD of devices and sensors to the Internet of Things, or IoT. tions reduce users’ confi dence in digital services. DNA improves network security continuously, and considers In the future, 5G will have a range of applications in areas data security critical for its business. The use of video and other entertainment over the Internet is on the such as health care, manufacturing, the vehicle industry as increase, as is the use of social media and other applications. In the well as the distribution of water, electricity and heat. IoT will increase data traffi c volumes even further, and DNA’s M2M (Machine to Machine) subscription base Fixed broadband customers migrating to fourth quarter of 2018, 4G traffic volumes in DNA’s networks were up has grown strongly in recent years. faster subscriptions 37% year-on-year. The new 5G networks and services will accelerate In Finland, the trend of xDSL subscribers migrating to the use of mobile data further and will also extend it into new areas. considerably faster fi xed cable or fi bre-optic broad- Increasingly digital lives, both at home and work, create new business band subscriptions or replacing their xDSL connections with 4G connections continued (DSL, or Digital Sub- MARKET SHARES AT THE ENF OF JUNE opportunities for telecommunications companies. scriber Line is a family of technologies used to transmit 2018 digital data over telephone lines). A growing number of households uses both fi xed and mobile broadband. MOBILE COMMUNICATIONS The fi xed-network broadband subscription base is 1% Number of connected devices grows Customers continued to switch to faster 4G expected to remain at its current level. The growing constantly subscriptions use of cloud and entertainment services maintains 27% and increases the demand for cable- and fi bre-based 34% The strong growth of Internet-connected devices The trend spanning several years continued: sales broadband subscriptions.