Delivering critical services in demanding times

16/07/2020

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Our operating model has given us flexibility to manage operations, cost and investments, contributing to an EBITDA growth of 1 percent and free cash flow of NOK 4 billion in the quarter. As expected, lockdowns have affected prepaid markets in Asia and global roaming revenues negatively. Combined with a reduction in new sales, this led to a decline in organic subscription and traffic revenues of 4 percent, which was offset by an opex reduction of 12 percent. The financial results this quarter are positively impacted by the strong performance in our operations in Norway and Finland, while Bangladesh and Pakistan, as expected, remain the most challenged prepaid markets.

Our strategy of growth, modernisation and responsible business has provided us with the ability to deliver critical services and manoeuvre in these demanding times. Going forward, we will use this experience to further enhance the execution of our modernisation journey. For 2020, we expect a low single digit percent decline in subscription and traffic revenues, stable organic EBITDA and around 13 percent capex to sales. We will continue to focus on cost management and capex to secure resilience in cash flow.

Sigve Brekke, President and CEO, Telenor Group

KEY FIGURES TELENOR GROUP Second quarter First half year Year

NOK in million 2020 2019 2020 2019 2019

Revenues 30,903 26,917 61,856 53,505 113,666

Organic revenue growth (%) -4.2 0.9 -1.4 0.7 1.2

Subscription and traffic revenues 23,753 20,480 47,620 40,867 85,954

Organic subscription and traffic revenue growth (%) -3.6 -0.4 -0.9 -0.1 0.4

EBITDA before other income and other expenses 14,331 12,029 28,437 24,206 50,735

Organic EBITDA growth (%) 1.0 -3.5 1.8 -3.4 -2.7

EBITDA before other income and other expenses/Revenues (%) 46.4 44.7 46.0 45.2 44.6

Net income attributable to equity holders of Telenor ASA 4,428 2,856 5,125 6,678 7,773

Capex excl. licences and spectrum 3,815 4,087 6,894 8,116 17,415

Total Capex 3,861 4,093 6,985 8,122 18,075

Free cash flow before M&A 3,995 -1,092 6,659 495 3,831

Total Free cash flow 3,579 -1,147 7,353 1,404 -18,998

Mobile subscriptions Change in quarter / Total (mill.) -3.2 2.3 182.4 178.3 186.0

Second quarter 2020 summary1

In the second quarter, subscription and traffic revenues decreased by 4 percent on an organic basis, driven by the loss of prepaid revenues in Asia as well as roaming revenues. Total reported revenues were NOK 30.9 billion. This is an increase of NOK 4.0 billion or 15 percent, driven by currency effects of NOK 2.8 billion as well as the consolidation of DNA.

Currency adjusted opex excluding DNA decreased by NOK 1.1 billion or 12 percent in the second quarter. Reported opex increased by NOK 0.7 billion, as underlying cost reductions partly offset the increases related to the consolidation of DNA and currency development.

EBITDA before other items grew by 1 percent or NOK 0.1 billion on an organic basis in the quarter, as substantial opex reductions were able to mitigate the revenue loss. Reported EBITDA before other items was NOK 14.3 billion and the EBITDA margin was 46 percent.

Capex excluding licences, spectrum and leases was NOK 3.8 billion in the quarter, yielding a capex to sales ratio of 12 percent.

Free cash flow before M&A was NOK 4.0 billion. Total free cash flow was NOK 3.6 billion.

In May, Telenor ASA paid the first tranche of the dividend for 2019 to its shareholders of NOK 6.3 billion, or NOK 4.40 per share. The Annual General Meeting further approved to buy back shares from the Norwegian state related to 2019/2020 share buyback programme, resulting in the recognition of an interest bearing liability of NOK 4.1 billion.

The net debt to EBITDA ratio decreased from 2.3x at the end of the first quarter to 2.2x at the end of the second quarter.

On 29 June 2020, the EFTA Surveillance Authority (ESA) issued a decision against Telenor concerning abuse of dominant position. Based on the decision, Telenor has recognised a provision of NOK 1.2 billion in the second quarter. The decision will be appealed to the EFTA court. See Note 6 Legal disputes for further information.

[1] Please refer to Definitions on page 27 for descriptions of alternative performance measures. Some of the comments on the Group's financial results for the second quarter 2020 are made excluding DNA. Please refer to page 9 for the Group's consolidated figures in NOK for DNA.

Media contact: Tormod Sandst | tormod.sandsto@telenor.com | tel: +47 90 94 32 15

LINK:	https://www.telenor.com/media/press-release/delivering-critical-servic...
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