According to preliminary annual accounts for 1997 from Norways major telecommunications and IT company, Telenor, the Telenor Group recorded a 15.1 per cent increase in operating income, to NOK 25,518 million. Profits before taxes amounted to NOK 1,915 million, a decrease of approximately NOK 440 million from 1996. This was mainly due to expenses related to investments and start-up of activities outside of Norway. For domestic activities, the estimated profit before taxes rose by approximately NOK 410 million to NOK 2,300 in 1997. At the same time, the assessed value of the Group is increasingly positive, not least because of good developments in the company's operations abroad.
“We are well satisfied with the results generated from domestic activities, even though our business customer unit, Telenor Bedrift, shows negative results. The resulta from activities outside of Norway are affected by major investments made, but their value is developing in a positive manner. All in all, 1997 has been a satisfactory year for the Telenor Group”, says Tormod Hermansen, the Group’s President and Chief Executive Officer.
In spite of price reductions in 1997 amounting to roughly NOK 1,100 million for network based services, such as telephony/ISDN, mobile and satellite communication, operating income rose by about NOK 3,350 million. This is a result of higher volumes of network based services (NOK 3,010 million), spinning off activities (NOK 140 million), acquisitions (NOK 700 million), and otherwise organic growth (NOK 600 million).
Preliminary profits before taxes for 1997 of NOK 1,915 million for the Group as a whole, represents a 10.9 per cent return on capital employed, a 12.7 per cent return on equity, and a profit margin of 7.5 per cent. At the end of 1997, total assets amounted to approximately NOK 33,700 million. Total interest-bearing debt amounted to approximately NOK 9,215 million. The equity ratio stood at 44.6 per cent, compared to 49.6 per cent at the end of 1996.
The Group invested an aggregate of approximately NOK 8,850 million, a rise of some NOK 3,300 million compared to 1996. Of this amount, NOK 4,630 million was invested in activities in Norway and NOK 4,220 million was invested in activities outside Norway. The corresponding figures in 1996 were NOK 4,300 million in Norway and NOK 1,250 million outside Norway. NOK 2,400 million was invested in the development of the fixed telecommunications network in Norway, which is now 100 per cent digitalised. The largest investments outside Norway were in mobile-related activities with about NOK 1,800 million and satellite-related activities with about NOK 1,000 million.
Telenor’s human resources, when measured in terms of man-years, rose by about 1,500 in 1997 to reach 19,650. Of this growth, about 600 man-years were in Norway and about 900 man-years abroad.
Domestic activities generated an estimated profit before taxes of NOK 2,300 million. The return on capital employed was 16 per cent and the profit margin 10 per cent. In 1996, the estimated profit was NOK 1,890 million, the return on capital employed 15 per cent, and the profit margin 9 per cent.
In 1997, particularly the fixed network telephony/ISDN and mobile telephony showed positive trends in the Norwegian market. The volume of fixed network-generated traffic rose by 13.8 per cent in the corporate market and by 11.5 per cent in the private market. Traffic to the mobile networks grew by about 40 per cent. In the mobile markets, the number of subscribers rose by some 281,000 net, an approximate increase of 338,000 in the GSM market, and an approximate decrease of 57,000 in the analogue NMT market. Telenor Mobil returned a profit before taxes of NOK 685 million and Telenor Privat a profit before taxes of NOK 361 million.
Operating income from activities outside Norway rose by approximately NOK 1,500 million to approximately NOK 4,560 million in 1997. The result before taxes was a loss of approximately NOK 385 million in 1997, compared to a profit of approximately NOK 465 million in 1996. This is mainly due to the fact that many of the activities in which the Group is involved abroad, are new establishments that have a negative impact on the financial results the first years.
Telenor’s IT operation returned weaker results than anticipated in 1997. Together with assignated funds for restructuring purposes and a recorded deficit from the its English subsidiary Norsk Data Ltd., Telenor Bedrift recorded a loss before taxes of NOK 188 million. On the other hand, through its efforts in the field of software and advanced operating services for the corporate market, Telenor has positioned itself well for the future.
Telenor Nextel returned a loss before taxes of NOK 280 million, but Internet traffic makes a major contribution to the Group’s growth in traffic as a whole. By concentrating on the Internet, Telenor has positioned itself in the perhaps most interesting market for the future.
After a regrouping, Telenors Installation Division has shown a marked increase in effectivity and resulting profits. This in its first year of business.
Telenors Networking activities have demonstrated a profitable operation and contributed greatly to Telenors total profitability for 1997.
In 1997, the value of the international activities developed in a very positive manner. A recent evaluation carried out by HKSB Investment Banking estimates that the value of Telenor International AS’s equity is between NOK 9,000 and NOK 15,000 million, while the book capital at 31 December 1997 was approximately NOK 3,000 million.
NOK million Income
Profit before taxes
Telenor Bedrift 9.960 – 188
Telenor International 3.587 – 289
Telenor Plus 2.816 244
Telenor Mobil 5.137 685
Telenor Privat 7.184 361
Telenor Nextel 309 – 280
Telenor Nett 9.196 1.654
Telenor Installasjon 1.868 67
Other areas 2.322 – 287
Eliminations – 16.861 – 52
Total 25.518 1.915
InvestmentsNOK million 1997* 1996
Telenor Group 8.850 5.528 4.555
- of which in Norway
- of which outside Norway
4.220 1.250 700
By business area 1997* 1996
Telenor Bedrift 450 785 357
Telenor International 3.920 1.224 708
Telenor Plus 460 511 255
Telenor Mobil 920 1.091 960
Telenor Nett 2.400 1.710 1.119
Other areas 700 207 1.156
Total 8.850 5.528 4.555