Modernisation yielding strong results

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 around 15 percent.

[1] The key figures and summary for the fourth quarter of 2019 are based on current Group structure and accounting standards as of 31 December 2018 (pre IFRS 16), unless otherwise stated. Please refer to Definitions on page 32 for descriptions of alternative performance measures. Some of the comments on the Group’s financial results for the fourth quarter and year 2019 are made excluding DNA. Please refer to page 9 for the Group’s consolidated figures in NOK for DNA.

[2] The outlook for 2020 is based on Group structure as of 31 December 2019 and accounting standards as of 31 December 2019 (post IFRS 16).