ic
Competition and market trends
Continued migration from traditional landline telephony
towards IP-based solutions and mobile-only.
Increasing focus on high-speed fibre-based solutions
among both operators and customers, reflecting increasing demand for integrated and value-added services.
Increasing demand for flat-rate offers, including
international voice and data.
Increase in the market for CaaS - a development that is
expected to accelerate in the coming years.
Nordic in the market
Nordic offers landline telephony as well as internet & network (including IP-VPN services) on its own pan-Nordic landline network in Finland, Norway and Sweden. Nordic offers competitive pan-Nordic telecommunications solutions for business customers and public-sector customers, including a common pan-Nordic video- conferencing solution. The utilisation of cross-selling opportunities triggered several strong wins in 2012. Leveraging on its pan-Nordic network, Nordic also sells a wide range of wholesale solutions. Services are also offered to global customers through partnerships.
Nordic offers mobile telephony through MVNO agreements in Sweden and Norway and a service provider agreement in Finland. A recent renegotiation of the MVNO contract in Sweden increases both the quality and competitiveness of the mobile offerings, and TDC Sweden has already seen the first significant wins following this initiative.
As the sole Nordic operator, TDC Sweden offers integrator
services, including the Direct business1, giving Nordic a
significant advantage in the growing CaaS market. Leveraging on the successful experience in Sweden, the TDC Scale concept was also launched in Norway in 2012, causing increased activity levels.
TDC Hosting offers hosting and information technology solutions in Sweden, Finland and Denmark, with a primary ______________________________________________________________________
1 Direct business comprises sale of handsets, conference telephones, headsets,
tablets, etc. sold online and by Nordic’s sales force.
focus on providing managed hosting, co-location and shared hosting for small and medium-sized enterprises. Hosting in Denmark won several large contracts in 2012, and continued investing in hosting infrastructure.
Completed expansion of data centre capacity in both Malmö and Helsinki will support the ambition of continued strong growth outside Denmark.
In 2012, for the third consecutive year, TDC Finland was awarded the title of ‘best corporate network provider in Finland’ by the independent EPSI rating study, while TDC Norway was awarded first place on data. TDC Norway also achieved an all-time high annual customer satisfaction score for all product areas.
In December 2012 a decision from Samferdselsdeparte- mentet in Norway was upheld, resulting in a MVNO price reduction of 19.8% for TDC Norway.
Nordic’s financial performance in 2012
For Nordic, 2012 proved to be a very strong year across all business units, with organic growth of 12.2% in EBITDA (reported 14.2%).
Revenue
Reported revenue in Nordic increased by DKK 328m or 7.3% in 2012 due to solid growth across all product groups except landline telephony. Revenue was positively affected by a favourable exchange-rate development in SEK and NOK, while a correction of the booking of certain types of service number revenue has negatively affected revenue growth in TDC Finland by DKK 57m.
Landline telephony
Nordic successfully maintained a stable level of
connections, though the decline in minutes of use following the migration away from landline, combined with the general price erosion, resulted in a 13.7% decline in
revenue, but a limited gross profit effect2.
Mobility services
The strong intake of mobile subscriptions was maintained, particularly in TDC Sweden and TDC Finland, while TDC Norway achieved increasing revenue driven by mobile data. ______________________________________________________________________
2 Gross profit from landline decreased by only 1.1%.
Nord
ic
In Finland, winning the City of Vantaa (fourth most populated city in Finland) account was the main driver for the increase, while the increase in Sweden resulted from several wins in the public sector. In Sweden, the strong uptake resulted from improved network stability. Overall, revenue from mobility services grew by 11.9%.
Internet & network
The IP-VPN business continued its solid performance in all three countries, with an 8.7% increase in the number of connections. In Norway and Sweden, where uptake in the number of IP-VPN connections was particularly strong, implementation of Statens Vegvesen in Norway and Posten in Sweden were the two largest contributors. However, the increase in IP-VPN subsided at the end of the year. Though the number of internet connections was under pressure, particularly in TDC Sweden, the majority of the lost installations had a relatively low ARPU and margin. Revenue in TDC Hosting exceeded market growth in all three countries, and TDC Hosting gained market share. Sales were strong with major wins especially in Denmark where TDC Hosting strengthened its presence at the high end of the market.
Terminal equipment
The Direct business in TDC Sweden experienced double- digit growth, and based on this success, the concept was launched in Norway in 2H 2012. In total, revenue from terminal equipment, etc. increased by 15.6%, and new product areas such as Video, Datacentre and LAN solutions contributed to this growth.
Key financial data, Nordic
Nordic 2012 2011 Change in % DKKm Revenue 4,815 4,487 7.3 Landline telephony 869 1,007 (13.7) Mobility services 310 277 11.9 Internet and network 1,762 1,647 7.0 Terminal equipment, etc. 1,461 1,264 15.6 Other¹ 413 292 41.4
Gross profit 2,024 1,865 8.5
Gross profit margin % 42.0 41.6 - Organic revenue² DKKm 4,815 4,614 4.4 Organic gross profit² DKKm 2,024 1,911 5.9
¹ Including operator services, etc.
² Reported revenue and gross profit excluding the impact from currency effects, impact from regulatory price adjustments as well as the impact from acquisitions and divestments.
Gross profit
Gross profit rose by 8.5% compared with 2011, and growth was achieved across all business units.
The gross profit margin increased as a result of improved operational efficiency and optimisation of the network set- up. However, this was challenged by a shift in product mix, as an increasing share of revenue came from low-margin products such as Direct and mobility services, combined with new product areas such as datacentre and video which also have low margins.
Revenue per business unit DKKm
2,422 2,686 1,034 1,056 754 716 415 504 2011 2012 2011 2012 2011 2012 2011 2012
TDC Sweden TDC Norway TDC Finland
10.9%
TDC Hosting
2.1%
-5.0%
21.4%