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Modernisation yielding strong results

30/01/2020

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In Norway, growth in mobile revenues continued with further ARPU improvement, and we were able to offset copper revenue decline with growth in fibre and fixed wireless access. One of our top priorities this year has been to return to growth in Thailand and Myanmar, and it is therefore reassuring to end the year with good performance in both markets. The positive developments in these markets were partly offset by price pressure in Sweden and a still challenging situation in Pakistan. In Bangladesh, we were able to serve our customers with innovative and high quality services despite 2019 being a year with an increasingly demanding business environment.

During the year our customer base increased by 12 million, resulting in a total base of 186 million. Throughout 2019, we have continued our strategic journey set out at the Capital Markets Day in 2017 with clear ambitions. Delivering on these ambitions over several years has given us the flexibility to further develop our portfolio, resulting in the acquisition of DNA in Finland in 2019. In accordance with our dividend policy, we will propose an ordinary dividend of NOK 8.70 per share for 2019.

Entering 2020, we will continue to focus on growth, efficiency and simplification, expecting organic subscription and traffic revenue growth of zero to two percent and organic EBITDA growth of two to four percent, supported by continued modernisation efforts. The capex to sales ratio, excluding licences and spectrum, is expected to be around 15 percent, says Sigve Brekke, President and CEO of Telenor Group.

Fourth quarter Fourth quarter Year Year Year

Post IFRS 16

KEY FIGURES TELENOR GROUP

(NOK in millions) 2019 2018 2019 2018 2019

Revenues 31 808 27 070 113 935 105 923 113 666

Organic revenue growth (%) 2.9 (0.4) 1.2 (0.6)

Subscription and traffic revenues 23 363 20 043 85 954 80 386 85 954

Organic subscription and traffic revenue growth (%) 1.8 (1.2) 0.4 (0.4)

EBITDA before other income and other expenses 11 882 10 124 45 358 44 220 50 735

Organic EBITDA growth (%) 4.6 (2.4) (2.6) 3.7

EBITDA before other income and other expenses/Revenues (%) 37.4 37.4 39.8 41.7 44.6

Net income attributable to equity holders of Telenor ASA 1 948 1 212 8 489 14 731 7 773

Capex excl. licences and spectrum 5 574 6 055 17 415 16 713

Total Capex 6 194 18 605 18 075 31 182

Free cash flow before M&A 555 579 4 015 11 691

Total free cash flow (8 734) (141) (18 814) 31 989

Mobile subscriptions Change in quarter/Total (mill.) 2.6 0.8 186 174

Fourth quarter and full year 2019 summary[1]

In the fourth quarter, subscription and traffic revenues increased by 2 percent on an organic basis. Organic subscription and traffic revenue growth for the full year 2019 was slightly positive and marginally higher than last year. Including the Finnish operation DNA, which was acquired in 2019, total reported revenues increased by 18 percent to NOK 31.8 billion.

Currency adjusted gross profit excluding DNA declined by NOK 0.1 billion in the quarter. In 2019, currency adjusted gross profit excluding DNA decreased by NOK 1.5 billion, mainly as a result of positive non-recurring items in Pakistan last year, full year effect of TOT rental fees in Thailand this year as well as the product mix change in Scandinavia. Reported gross profit increased by NOK 0.9 billion.

Currency adjusted opex excluding DNA decreased by NOK 0.6 billion or 6 percent in the fourth quarter. Reported opex increased by NOK 1.0 billion. For the full year, currency adjusted opex excluding DNA was reduced by NOK 0.3 billion, or 1 percent.

EBITDA grew by 5 percent or NOK 0.5 billion on an organic basis in the quarter, as a result of revenue growth and opex reductions. Reported EBITDA before other items was NOK 11.9 billion. For the full year, EBITDA fell by 3 percent on an organic basis, as cost reductions were offset by the decline in gross profit. The EBITDA margin for 2019 came in at 40 percent.

Capex excluding licences and spectrum, not taking into account DNA, was NOK 4.9 billion in the quarter and NOK 16.6 billion for the full year.

Free cash flow before M&A was NOK 0.6 billion in the fourth quarter and NOK 4.0 billion for the full year. Total free cash flow in 2019 was negative NOK 18.8 billion, including payments of NOK 26.6 billion for the acquisition of 98 percent of the shares in DNA.

In India, after the Supreme Court upheld the regulators view on the determination of how to calculate licence fees and spectrum usage charges, applicable to all operators, an additional provision of NOK 1.7 billion has been recognised in the fourth quarter 2019. See note 6 for further details. In Telenor Microfinance Bank in Pakistan, a provision of NOK 0.5 billion has been recognised in the fourth quarter 2019, to cover a potential loss related to lending irregularities. The matter is still being evaluated. In Bangladesh, uncertainty remains with regard to the BTRC Audit and the total amount of potential claims resulting from the dispute. See note 6 for further details.

Shareholder remuneration Based on the performance during the year, the Board of Directors proposes an ordinary dividend of NOK 8.70 per share for 2019, to be declared by the Annual General Meeting (AGM) on 11 May 2020. The proposed dividend shall be split into two tranches of NOK 4.40 and NOK 4.30 per share, to be paid in May and October 2020 respectively, and represents a 4 percent increase per share compared to 2018.

Outlook for 2020 [2] For 2020, we expect organic subscription and traffic revenue growth of zero to two percent and organic EBITDA growth of two to four percent. The capex to sales ratio, excluding licences and spectrum, is expected to be ar
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