increased by 2.5% or DKK 51m to DKK 2,058m, driven by one-offs in Consumer from paper communication fees and reassessment of provisions in Q4 2014 (approximately DKK 50m). Both matters had full gross profit effect. However, this was partly offset by lower sales of low-margin mobile handsets without subsi- dies. This development led to a total increase of 30.7% or DKK 285m in other services’ gross profit to DKK 1,214m and a considerably im- proved gross profit margin from 46.3% in 2013 to 59.0% in 2014.
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1 Including eliminations between countries.
Handsets without subsidies
Revenue from mobile handsets without subsi- dies deteriorated in 2014 and decreased by 20.0% or DKK 188m to DKK 753m. The loss of revenue stemmed mainly from lower sales of mobile handsets without subsidies sold by Consumer, especially in the TDC brand. This resulted from reduced sales to a few large third- party vendors and increased competition from retailers.
NetDesign
NetDesign is the largest IT advisor and network integrator in Denmark. NetDesign supplies Danish companies with future-proof IT systems and a wide range of professional communica- tions solutions.
In 2014, NetDesign revenue decreased only slightly by 1.0% or DKK 8m to DKK 823m. This was an improvement compared with the DKK 28m decrease in 2013. Strong competition negatively affected sales of hardware and software, but was partly offset by growth in the high-margin consultant and operations ser- vices.
Digitalisation
As part of TDC Group’s digital transformation and in line with the digitalisation initiatives imposed by the Danish public sector, a paper communication fee of DKK 29 per month was introduced from 1 July 2014. This had a posi- tive effect on revenue and gross profit from other services in 2014. More than half of Con- sumer’s customer base signed up for digital communication with TDC, thus avoiding the fee.
Bet25
In early 2014, TDC Group entered the sports betting and casino markets through ownership of Bet25. This expanded TDC Group’s footprint within the strategically important area of digital content. High awareness was obtained during the FIFA World Cup and through sponsorship of Brøndby IF football club.
Other services1
• Revenue from other services increased by 2.5% vs. 2013
• Lower than expected sales of mobile handsets in 2014
• NetDesign delivered flat revenue and gross profit growth in 2014
• A paper communication fee was introduced to accelerate digitalisation
• Ownership of Bet25 operating within sports betting and the casino market
In 2014, the TDC Group continued to increase efficiency and maintain a clear focus on optimis- ing processes, which resulted in opex savings of 2.2% or DKK 164m. On an organic basis, i.e. adjusted for the negative impact from acquisi- tions and the positive exchange rate impact, opex decreased by 3.4%.
The number of FTEs + temps at year end (8.7k) was level with 2013 as acquisitions of Get and some minor companies added a total of 844 FTEs. This was largely counterbalanced by outsourcing of 704 FTEs to Sitel in the last part of 2014 related to customer support and bill- ing. Adjusted for acquisitions and outsourcing, TDC Group reduced the number of FTEs + temps by 171 or 2.0% during 2014.
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1 Including Other income.
The adjusted decrease in FTEs was facilitated by improved work procedures and higher efficiency across TDC Group. This included benefits from increased flexibility and best practice synergies (e.g. across networks, product management and IT processes), which were made possible by the reorganisation of TDC in the summer of 2013. This was partly offset by a staff increase in call centres during 2014 due to an 8% in- crease in inbound calls during 2014 following the challenging implementation of price and product changes, and more complexity in TDC’s integrated solutions that produced instability in new products. In total, the number of calls answered by call centres increased by 12% from 2013 to 2014.
The development in FTEs affected wages and personnel costs, which dropped by 3.3%4 com- pared with 2013. This was the largest single driver behind the opex decrease. In 2014, TDC Group also benefitted from a new agreement on mobile operations signed in 2013. Also, the discontinuation of carbon tax as well as contin- ued reduction in office space used resulted in reduced operating expenses. In 2014, a signifi- cant part of TDC Group’s headquarters was Re-rented.
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4 Adjusted for the outsourcing of the customer support function
in Q4 2014. FTEs + temps 9,097 8,712 8,681 2012 2013 2014
Operational expenditure1
• Organic opex savings of 3.4% due to increased efficiency across TDC Group
• Opex savings less than previous years as, in spite of significant productivity
increases, staff-up was required in Channels to answer more calls following
implementation of price and product changes
• Unacceptable customer experiences was also negatively affected
• FTE + temps level with 2013, covering some large gross developments
TDC in the market
TDC’s network strategy is to have the best mobile and landline networks in Denmark in terms of speed, coverage and quality. To achieve this, TDC plans to invest DKK 25bn in Denmark from 2011 until 2020 in primarily the