interim REPORT JANUARY – March 2019 JOHAN DENNELIND PRESIDENT & CEO 1 CASH FLOW AND EBITDA DEVELOPMENT Q1 2019 SEK 4.4 bn -4% Operational free cash flow Adjusted EBITDA* growth 2 * On a like for like basis, excluding IFRS 16 impact 1 REPORTING POST IFRS 16 IMPLEMENTATION Reported sek Like for like growth Like For Like growth INcl. Ifrs 16 Illustrative graph Illustrative graph Illustrative graph +15.0% +5.8% -4% 2018 2019 2018 2019 2018 2019 FX M&A Numbers incl. IFRS 16 M&A Numbers incl. IFRS 16 M&A Numbers incl. IFRS 16 IFRS16 est. adj. • Reported numbers in SEK including • Growth in the existing business • Based on like for like growth but 2018 impact from M&A and changes in FX including any acquired and excluding adjusted as if IFRS16 would have any disposed businesses in current been implemented and corresponding period • At stable FX • At stable FX 3 RECAP OF CMD Overall: OP FCF TO SUSTAIN AND GROW BEYOND 2019, SEK 12-12.5 BillioN A FLOOR SUSTAINABILITY: UPpING THE GAME WITH OUR DARING GOALS CPS: sek 0.6-0.9 Billion COST SAVINGS FROM NEW OPERATING MODEL CMD FINANCIALS: AMBITION TO REDUCE OPEX ~2% NET ANNUALlY 2019-2021 SWEDEN: EBITDA TREND-SHIFT DURING 2020 NORWAY: GET/TDC CASH FLOW SYNERGIES INCREASED TO NOK 800 MILLION FINLAND: FURTHER DEVELOP b2B and B2C CONVERGENCE 4 2 THANKS FOR THE FEEDBACK WHAT YOU LIKED What you would have liked more of Clear message on cash flow Structural cost opportunities Strategic red thread BONNIER BROADCASTING Strategic positioning of new Transparency on financials telia norway 5 FCF GROWTH DESPITE EXPECTED LOWER EBITDA OPERATIONAL FREE CASH FLOW ADJUSTED EBITDA* down as MOBILE SERVICE REVENUES** remained strong expected SEK 4.4 billion -4% -2.1% Q1 2019 VS. Q1 2018 Vs. Q1 2018 Bonnier broadcasting filing Dividend decided & buy-back Daring goals to drive process initiated mandate renewed at AGM sustainability agenda SEK 2.36 per Share Ambition of SEK 10 BN coming 2 years 6 * On a like for like basis, excluding IFRS 16 impact ** Like for like 3 A CHALLENGING Q1 AS FLAGGED SERVICE REVENUE DEVELOPMENT* Adjusted EBITDA DEVELOPMENT* Organic & like for like growth, external service revenues Reported in absolute, organic & like for like growth excl. IFRS 16 in Q1 19 Service revenue growth Reported EBITDA Service revenue growth excl. Telia Carrier Organic/like for like EBITDA growth 4.0% 2.0% 0.0% -2.0% 6,977 6,735 7,468 -2.4% 6,495 6,443 -4.0% -4% -6.0% -2.6% -8.0% -10.0% Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 • Main drivers: Swedish legacy, mobile in • A notch better than expected based on a one-off Norway/Denmark and Telia Carrier effect in Norway * Q1 2018-Q4 2018 based on the previous organic growth definition (stable FX and M&A excluded). 7 Q1 2019 based on the new definition “like for like growth” (Stable FX and M&A included in current & corresponding period) MOBILE REVENUES TURNED NEGATIVE Q1 MOBILE & fixed SERVICE REVENUE GROWTH MOBILE service revenue GROWTH Organic & like for like growth Like for like total mobile service revenues Mobile revenues Fixed revenues excl. Telia Carrier -2.1% 2% 0% -2% -2.1% -2.8% -4% -6% Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q1 18 SWE FIN NOR DENLIT EST LAT Q1 19 • Mobile turned negative Q1 driven by the Nordics • Contracting customer base in the Nordics • Fixed remained under pressure by legacy 8 4 TELIA SWEDEN - WORLD CLASS MOBILE NETWORK #1 MOBILE NETWORK IN SWEDEN #4 IN THE WORLD 9 BETTER TREND IN H2 Service revenues - 2019 estimated OPEX DEVELOPMENT - 2019 estimated External service revenues, like for like growth External expenses, like for like growth -2% FULL YEAR Q1 19 Q2 19 Q3 19 Q4 19 Q1 19 Q2 19 Q3 19 Q4 19 OVERALL PRICE INCREASES FINLAND B2B GET OPEX SYNERGIES ROBOTICS AND NEAR SHORING NORWAY easier comparison Legacy remains a burden NEW OPERATING MODEL G&A AND OTHER EFFICIENCIES EASIER COMPARISONs (H2) 10 5 New operating model now in play EFFICIENCY AND IMPROVED CUSTOMER SPEED AND FLEXIBILITY SCALABILITY EXPERIENCE • NEW WAY OF WORKING – AGILE • DEVELOP ONCE – DELIVER 6X • EARLIER LAUNCHES OF NEW AND COMMON • ONE JOINED FORCE VS. FRAGMENTED TECHNOLOGY • COMMON PRODUCT DEVELOPMENT EFFORTS • MORE COMPETITIVE PRODUCTS IN & PLATFORM ALL MARKETS Central cost reductions COGS and OPEX SEK BILLION 0.6-0.9 0% -3% IN ADDITION CAPEX SAVINGS OF SEK 0.5 -6% BILLION WITH RUN- RATE END OF 2022 -9% 2016 2017 2018 RUN-rATE TIME 11 END OF 2022 A STRONGER TELIA COMPANY EMERGING FULL RUN-RATE GET/ BONNIER SYNERGIES COMBINED 2018 (SEK BILLION) TDC NORWAY BROADCASTING (PER YEAR) PRO FORMA EBITDA 1.8 1.1** 4.2 (prev. 3.5) 1.3 (margin) 43.4% 13.8% >32.5% 0.8 1.0*** 3.3 (prev. 2.7) EBITDA-CAPEX* 1.4 (cash conversion) 48.1% 91.3% 77.7% SYNERGY BREAKDOWN GET – NOK 800 MILLION CASH BONNIER BROADCASTING – CASH FLOW SYNERGIES END of FLOW SYNERGIES OF Sek 600 2021 million end of 2022 12 * Excluding licenses ** Assuming same depreciation in 2018 as in 2017 *** Assuming EBITA equals EBITDA-CAPEX 6 OUTLOOK REITERATED & capital MANAGEMENT IN FOCUS OPERATIONAL FREE Operational free cash flow to be between SEK 12.0-12.5 billion C A S H F L O W (SEK 10.8 billion 2018) – is reiterated Capital MANAGEMENT • Executed the first year of buybacks and second year initiated (stretching from April 16, 2019 - February 28, 2020) • SEK 15 billion in total or SEK 3.45 per share • Within the target of a credit rating equal to A- to BBB+ • Ordinary dividend of SEK 2.36 of which the first tranche of SEK 1.18 was distributed in April 2019 13 interim REPORT JANUARY – March 2019 CHRISTIAN LUIGA EXECUTIVE VICE PRESIDENT & CFO 14 7 LOWER REVENUES BEHIND DECLINE IN EBITDA SERVICE REVENUE DEVELOPMENT EBITDA DEVELOPMENT Like for like growth, external service revenues Like for like growth, excluding adjustment items and IFRS 16 -2.6% -4% Q1 18 SWEFINNORDEN LIT EST LAT Telia Other Q1 19 Q1 18 SWEFIN NORDEN LITEST LAT Telia Other Q1 19 Carrier Carrier • Pressure from legacy and mobile revenues in • Expected softness from three largest countries Sweden • Sweden and Norway negative due to revenue pressure • Lower mobile customer base and ARPU • Finland inventory write-down, tough comparison and pressured Norway lower equipment margin 15 COSTS TO GRADUALLY COME DOWN OVER THE YEAR OPEX development External expenses, like for like • Increase Q1 driven by Finland and Norway, Sweden flat • Continued solid work on cost in Denmark and lower cost 2% 1% in central functions including CPS • Cost increase driven mainly by: 0% • (+) energy -2% • (+) marketing • (+) bad debt -4% • (-) resources -6% Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 -2% FULL YEAR opex reduction target 2019 remains 16 8 SWEDISH COST LEVEL TO COME DOWN OVER THE YEAR SERVICE REVENUES* & EBITDA** OPEX development - 2019 estimated SEK million, reported currency & like for like growth excl. IFRS 16 -2.7% 7,622 7,421 -6% 3,421 3,422 -3% FULL YEAR Q1 18 Q1 19 Q1 18 Q1 19 Service revenues EBITDA Q1 19 Q2 19 Q3 19 Q4 19 • Weaker trend from previous quarters mainly • Q1 cost base flattish, where resource costs are related to mobile service revenues slightly down, offset by marketing and energy costs • Initiatives will impact second half more which also have easier comparisons 17 = Like for like growth excl. IFRS 16 * External service revenues ** Excluding adjustment items Continued Revenue PRESSURE in sweden SERVICE REVENUE DEVELOPMENT MOBILE – B2C Reported currency, external service revenues In local currency, postpaid ARPU B2C excl. fiber OTC B2B B2C Mobile B2C postpaid ARPU Mobile B2C revenue growth B2C -2.6% B2B -2.9% -3.3% 0% -1% Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 • B2C - weaker mobile and continued legacy pressure • ARPU slightly down • Unchanged situation in B2B • less top-ups • Positive pricing effects from Q2 and onwards • Reduced prepaid customer base 18 9 STABLE IN FIXED BUT PRESSURE ON MOBILE IN NORWAY SERVICE REVENUES* & EBITDA** Broadband/TV service REVenue development SEK million, reported currency & like for like growth excl. IFRS 16 SEK million, like for like, external service revenues TV revenues Broadband revenues -4.2% 900 3,130 -4% 2,129 600 1,516 1,008 300 Q1 18 Q1 19 Q1 18 Q1 19 Service revenues EBITDA 0 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 • Loss of subscriptions and lower ARPU pressured • Broadband growth of 5% from customer uplift mobile revenues • SEK 100 million positive EBITDA impact from sale of earlier impaired customer receivables 19 = Like for like growth excl. IFRS 16 * External service revenues ** Excluding adjustment items tough start - to improve over the year SERVICE REVENUES* & EBITDA** MOBILE SUBSCRIPTIONS AND ARPU SEK million, reported currency & like for like growth excl. IFRS 16 Total subscription base in 000’, ARPU in local currency 3,400 20 -0.3% Subscriptions ARPU 19 3,084 3,273 3,300 +0.6% 18 -8% 3,200 17 1,151 1,223 3,100 16 3,000 15 Q1 18 Q1 19 Q1 18 Q1 19 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Service revenues EBITDA • Mobile pressured by interconnect and TV supported • Loss of MBB subscriptions represented around half fixed revenues of the drop • Inventory write-down and lower equipment margin • Big B2B contracts won not yet visible in the numbers • Increased marketing spend 20 = Like for like growth excl.