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Annual Report 2017

Highlights

2017 at a glance

EBITDA DKKbn:

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EBITDA growth in 2017:
-2.9%

Revenue DKKbn:

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Revenue growth in 2017:
-3.6%

Capital expenditures
We invested DKKbn

capex
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Capex growth in 2017:
3.1%

EFCF DKKbn

efcf
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EFCF growth in 2017:
17.4%

Improvement in operating expenses 1:

5.5%

1. Organic opex adjusted for foreign exchange and acquisitions/divestments

Growth in Consumer mobility services revenue

mobilty-service

Outbound data roaming traffic increaced by

~500 %

Improvement in negative customer experiences at YouSee’s online touchpoints:

11.4%points

“We are providing our customers with the best offerings and are on trajectory to have best-in-class customer experience"

Pernille Erenbjerg
Group CEO and President

“We are well positioned and well equipped to deliver on our ambitious financial transformation”

Pierre Danon
Chairman of the Board

Key events

  • Q1

    • hosting

      Divestment of TDC Hosting …

      … completed on 31 March in continuation of our overall strategy and determination to focus on our core business

    • tv

      Next chapter of Get TV …

      … with the introduction of a completely new point-based channel selection menu, allowing customers to tailor their own TV packages, including integrating SVoD services with Get’s TV offering

    • customer

      Telmore and Get both won awards for the best customer service ...

      ... Telmore across industries in Denmark and Get among TV providers in Norway

  • Q2

    • Roam Like at Home

      Roam Like at Home …

      … implemented on 15 June, and we are pleased that our customers have welcomed the option of using EU roaming at no extra charge on the best networks in the EU

    • customer

      Best mobile network in Denmark for the third year

      For the third year in a row, the Danish Technological Institute concluded that TDC Group has the best mobile network in Denmark

    • Customer support

      All customer support functions insourced to TDC Business Denmark …

      … together with a new structured skills training programme driving significant ‘first time right’ improvements

  • Q3

    • customer

      Benefit programme 'YouSee More' launched …

      … providing customers with a minimum of two or more products with additional benefits

    • award

      Next chapter of YouSee TV …

      … introduced with exclusive content and selected streaming services integrated in our TV offering, while announcing a completely new point-based channel selection menu to enable flexible and customised TV packages

    • customer support

      Full customer value chain now in house

      Announcement of the insourcing of YouSee support and billing call centre with increase of ~800 FTEs. The full customer service value chain is now anchored in TDC Group to make it simpler and better to be a customer

  • Q4

    • customer

      TDC Business Denmark won ‘Microsoft Modern Workplace’ award…

      … for providing the best agile and flexible solutions that enable workplaces to function more efficiently

    • award

      Agreement with utility company Eniig …

      … securing access to ~270k households on their fibre infrastructure from 2018, which is ~10% of Danish households

    • award

      Beta test of hybrid broadband …

      … for 250 YouSee customers, boosting speeds by combining DSL with our best-in-class 4G network

    • Customer support

      TDC Business awarded the largest B2B contract …

      … in the Danish market covering most of local authorities and the central government in Denmark, who are welcomed on Denmark’s best mobile network from 2018. The new contract has better terms and higher prices on mobile voice than the current contract

Guidance 2017 and 2018

  • 2017 guidance
  • 2017 guidance follow-up
  • 2018 guidance
  • EBITDA

    DKKbn>8.2
    After sale of TDC hosting

  • EFCF

    Stable or
    moderate
    growth
  • Dividend per share

    DKK1.05
  • EBITDA

    2017 actuals
    DKKbn8.24
    Better than expected

    Stronger than expected

    Stronger than expected

    • Operating expense savings across TDC Group driven by simplification initiatives as well as fewer calls to customer support
    • Strong cash flow growth due to higher impact from net working capital, slightly lower tax 
including repayment from 2016 but partly offset by slightly higher cash flow capex than originally anticipated
  • EFCF

    2017 actuals
    DKKbn2.4
    + 17.4%
    As expected

    As expected

    As expected

    • Reduced loss in Consumer landline voice gross profit following continued lower landline voice churn
    • Negative impact from final implementation 
of the Roam Like at Home regulation 
    • Almost stable Consumer broadband gross profit
    • Small growth in gross profit from Consumer mobility services due to higher mobile voice ARPU and growth in mobile broadband; Plenti acquired in 2017 with negative EBITDA 
impact in Q4
    • Continued growth in Norway but at a lower level than in previous years due to the negative impact on Get TV from increased content costs and contained loss of customers deselecting flow TV. Growth in Get broadband penetration continued
    • Intense price competition negatively 
impacted Business’ earnings, however, 
underlying gross profit improved driven by 
a better trend in the small and medium-sized business segment. Negative impact from the sale of Hosting
    • Minor Wholesale gross profit development with growth in primarily broadband, offset by reductions in other parts of the Group
  • Dividend per share

    2017 actuals
    DKK1.05
    to be paid out in Q1 2018
    Weaker than expected

    Weaker than expected

    Weaker than expected

    • TV development weaker than expected with more customers deselecting flow TV than anticipated
    • Adverse development in NOK/DKK exchange rate during 2017 negatively impacted EBITDA
  • EBITDA (organic development)

    ≥0%
    (corresponding to reported DKK ~8.2bn assuming NOK/DKK exchange rate of 0.77)
  • EFCF

    DKKbn≥2.4
  • Dividend per share

    DKK1.15
    to be paid out in Q1 2019

TDC Group brings people closer together. We connect families and friends, and we help businesses, municipalities and the government to create value, thereby impacting on many areas of society.

Who we are

People have always had a need to communicate and for more than 130 years, TDC Group has ensured that people were connected. TDC Group aims to be the preferred provider of simple and digital communication solutions to enterprises and individuals as well as entertainment services in the home and on the move

Our Business model

TDC Business model

Our business model

Explore our business model and see how we develop our networks and offerings to create value for our stakeholders

1

Our resources and assets

Our resources and assets consist of skilled employees, tangible and intangible assets, partnerships and suppliers and financials capital

Skilled employees
Our diverse and skilled workforce comprises everything from technicians to customer service and academics.

Networks and brand stores
Mobile and landline networks in Denmark and landline network in Norway. Furthermore, both B2C and B2B brand stores

Partnership & suppliers
Consists of content and IT service providers, network development and maintenance. Furthermore, international connectivity

Financial capital

2

Our value adding activities

Our resources and assets enables us to develop and upgrade our infrastructure, and digital offerings as well as provide service and support to our customers

Better connectivity
World-class infrastructure in our core markets is fundamental to deliver stable, high-quality and reliable services and solutions. We invest in upgrade and build-out of existing and new infrastructure while implementing new technologies and partnerships. This includes upgrading of our mobile and landline networks in Denmark and landline network in Norway

Better offerings
To meet our customers' different and changing need for communication and entertainment solutions, we continuously renew, develop and innovate our digital offerings, including aggregating communication solutions and entertainment, to stay relevant for our customers, today and tomorrow

Better customer experience
Development of service and support for customers, including flexible digital self-service solutions and by ensuring that our customers receive their services on their preferred platform driven by best customer insights and digitization

3

Our offerings

Our value adding activities makes it possible for us to deliver high-quality integrated product and services to our private, business and wholesale customers…

  • Internet & network Internet & network
  • Entertainment and TV Entertainment and TV
  • Landline and mobile voice Landline and mobile voice
  • Cloud offerings Cloud offerings
  • Loyalty programm Benefit programme
  • Security Security
  • Wholesale offerings Wholesale offerings
  • Unified communications Unified communications
4

Our value creation

Our resources and assets, value adding activities and offerings create value for our stakeholders, including customers, employees and capital owners

Best-in-class customer satisfaction
Easy access to digital integrated solutions and best entertainment in one place with the best connectivity everywhere and anytime. Including easy and user-friendly customer support

Best-in-class employee satisfaction
Motivated by attractive development opportunities, great teams and pride in working for TDC Group

Best in-class shareholder returns for capital owners

In 2017 our shareholder return was DKK 802m

Performance

  • Revenue

    0 DKKm

  • Gross profit

    0 DKKm

  • EBITDA

    0 DKKm

  • EFCF

    0 DKKm

Strategy

Always simpler and better

  • Better connectivity

    World-class infrastructure in our core markets is fundamental to deliver stable, high-quality and reliable services and solutions. We invest in upgrade and build-out of existing and new infrastructure while implementing new technologies and partnerships.

    Strategic milestones in 2017

    • Simpler and better delivery of optimal broadband infrastructure, including commercialisation of gigaspeed broadband for B2C and B2B customers in Denmark, and new partnerships with utility companies
    • Again best-in-class mobile network in Denmark
    • Increased stability and wireless user experience in Get and TDC Norway implemented through 'Broadband programme'
  • Better offerings

    Increased our TV box penetration in Denmark to 33% of which almost all are IP enabled, on top we have +40k customers solely using our TV app and web solutions

    Strategic milestones in 2017

    • Increased our TV box penetration in Denmark to 33% of which 30% are IP enabled, on-top we have ~80k customers solely using our TV app and web solutions
    • Introduced new flexible TV ‘pick & choose’ package in Get Norway integrating SVoD services in our offering, the packages are used by >60% of Get customers and similar offering will be introduced by YouSee in Q1 2018
    • Launched a converged offering ‘YouSee More’ and are currently on-boarding ~1,000 per day and expecting to reach >300k in 2018
    • Grew our cloud-based collaboration solution Skype for Business by more than 70% to ~24,000 users which is expected to double in 2018
  • Better customer experience

    Our ambition is to deliver best-in-class customer experience by ensuring that our customers receive their services on their preferred platform driven by customer insights and digitalisation.

    Strategic milestones in 2017

    • Online push of customer interactions through digitalised and simplified journeys
    • Differentiated self-service and app experiences with increased flexibility and transparency for our B2C and B2B customers
    • Increased availability and quality in all customer service touchpoints
    • All customer support functions insourced in TDC Business and YouSee
  • Simplified digital operating model

    To deliver on our three customer promises, better connectivity, better offerings and better customer experience, stated above, we need a streamlined business and simplified digital operating model. This drives meaningful operational efficiency from our simplification processes and new ways of working across TDC Group.

    Strategic milestones in 2017

    • Achieved IT and platform simplification following the brand merger of TDC and YouSee and IT migrations
    • Introduced digital transformation programme ‘Digital First’ to enhance customer experience and cost reductions
    • Achieved call reductions to Support and Billing from higher quality processes and enhanced digital customer interactions