Consumer

Consumer

Operating review

Consumer was affected by increased price competition in mobility services in 2010. However, the acquisition of M1 in January 2010 made it possible to react faster to market developments. In the mobility service segment, the continued focus on customer retention has enabled Consumer to maintain its mobile voice market share and increase its penetration of the smartphone market and its share of the mobile data segment. The competition in the mobile broadband market has also increased further in 2010, which has led Consumer's market share to decrease slightly even though there has been significant growth in RGUs in both the TDC and the Telmore brands.

Consumer also succeeded in reducing landline loss in 2010, due to lower PSTN churn resulting from the launch of new price schemes, active churn control and increased customer satisfaction. Significant cost reductions in call centres were achieved due to optimised processes and transfer of customer enquiries from call centres to online.

KPI development 2009-2010

Consumer had 4,164,000 RGUs at the end of 2010, down 1.0% compared with the end of 2009.

  • Mobile voice RGUs decreased by 0.2% due to a decrease in prepaid-card RGUs, as a consequence of a Christmas campaign that boosted RGUs at the end of 2009. This was partly offset by the acquisition of M1 and an increase in Duét RGUs as a result of an intensified marketing focus on landline customers. Blended ARPU decreased as a result of increased price competition, MTR and international roaming regulation, which was partly offset by an increase in smartphone RGUs that tend to generate higher ARPU.
  • Mobile broadband RGUs increased by 41.9% due to a general increase in the market and TDC's effort in this segment.
  • TV RGUs increased by 31.3% due to the continued success of the HomeTrio product - partly as a result of marketing campaigns.
  • Landline voice RGUs decreased by 8.2% due to the migration from landline to mobile. However, the decrease decelerated compared with previous years due to proactive churn control and the introduction of new price schemes. PSTN ARPU remained level at DKK 185 (compared with DKK 186 per month in 2009) despite the negative impact from lower landline interconnection charges due to regulation.
  • The number of internet RGUs decreased by 1.1% as the decline in non-broadband RGUs was offset primarily by more broadband RGUs in the Fullrate brand. Due to increased competition, xDSL ARPU decreased from DKK 221 per month in 2009 to DKK 203 in 2010.

Financial review

Revenue

2009-2010

Consumer's revenue in 2010 was DKK 9,389m, a decline of DKK 322m, or 3.3%.

  • Landline telephony revenue decreased by DKK 334m, or 12.5%, due mainly to fewer RGUs.
  • Mobility services revenue rose by DKK 31m, or 0.7%, due mainly to more RGUs in mobile broadband and mobile voice (subscription), which was only partly offset by the decrease in blended mobile voice ARPU and also lower mobile broadband ARPU.
  • Internet and network revenue decreased by DKK 102m, or 5.9%, due mainly to the decrease in broadband ARPU.
  • Revenue from terminal equipment (handsets and accessories) decreased by DKK 59m, or 15.5%, mainly as a result of lower sales of data equipment, which was party offset by increased sales of mobile terminals.
  • Operator services revenue decreased by DKK 56m or 24.6%, compared with 2009, due mainly to the revised allocation of certain operator service revenue between business divisions as well as lower activity in directory services.
  • TDC TV revenue increased by DKK 208m or 125.3%, mainly as a result of more RGUs and higher ARPU.

2008-2009

In 2009, Consumer's revenue was DKK 9,711m, a decrease of DKK 190m or 1.9%.

  • Landline telephony revenue declined by DKK 419m, or 13.5% as a result of the 3.8% RGU decrease.
  • Mobility services revenue increased by DKK 211m, or 5.0%, despite the negative impact from the reduction in MTR and international roaming charges. This reflected mainly an increase in the number of mobile voice subscription and mobile broadband RGUs.
  • Internet and network revenue increased by DKK 113m, or 7.0% due to the acquisition of Fullrate and a higher number of RGUs in Telmore, which was only partly offset by fewer xDSL RGUs and lower ARPU generated under the TDC brand resulting primarily from competitive pressures in the broadband market.
  • Terminal equipment revenue decreased by DKK 112m, or 22.7%. This related mainly to lower CPE sales in TDC Shop, reflecting a strategy of limiting the range of CPEs to focus on services.
  • Operator services revenue decreased by DKK 71m, or 23.7%, due to fewer calls to directory services.
  • TDC TV revenue increased by DKK 111m, or 201.8%, reflecting primarily an increase in the number of TVoIP RGUs related to the successful sale of the TDC HomeTrio package and the analogue switch-off in November 2009.

Gross profit

2009-2010

Consumer's gross profit in 2010 declined by DKK 211m, or 3.1%, to DKK 6,510m.

  • This decrease was due mainly to the decline in landline voice, and internet and network (despite the positive impact from Fullrate), which was partly counteracted by growth in TV and mobility services (due to organic growth in Telmore and the acquisition of M1 in January 2010). Consumer's gross profit was also positively affected by allocation of fewer costs from Operations & Wholesale in 2010 than in 2009 due to efficiency improvements.
  • Consumer's gross profit margin remained almost stable in 2010 at 69.3% compared with 69.2% in 2009.

2008-2009

In 2009, Consumer's gross profit was DKK 6,721m, a decrease of DKK 23m, or 0.3%.

  • This decline resulted from a decrease in landline voice and terminal equipment, which was only partly counteracted by the increases in both mobile voice and mobile broadband RGUs and growth in internet and network related to the acquisition of Fullrate.
  • Consumer's gross profit margin increased from 68.1% in 2008 to 69.2% in 2009. The increase in gross profit margin reflected that declining revenue from MTR and international roaming were fully offset by lower transmission costs, and lower sales of low margin terminal equipment in TDC Shop.

EBITDA

2009-2010

EBITDA in 2010 rose by DKK 46m, or 1.2%, to DKK 4,041m, and the EBITDA margin increased from 41.1% in 2009 to 43.0% in 2010.

  • Lower subscriber acquisition costs and lower costs related to information technology, consultancy and billing, as well as lower wages, salaries and pension costs more than offset the gross profit decrease.

2008-2009

In 2009, Consumer's EBITDA increased by DKK 93m, or 2.4%, to DKK 3,995m, and the EBITDA margin rose from 39.4% in 2008 to 41.1% in 2009.

  • Lower wages, salaries and pension costs, and lower FTE-related costs, in spite of the Fullrate acquisition, more than offset the gross profit decrease.

Selected financial and operational data Excluding special items
Consumer 2010 2009 2008 Change in % 2010 vs. 2009 Change in % 2009 vs. 2008
DKKm
Revenue 9,389 9,711 9,901 (3.3) (1.9)
   Landline telephony 2,341 2,675 3,094 (12.5) (13.5)
   Mobility services 4,449 4,418 4,207 0.7 5.0
   Internet and network 1,632 1,734 1,621 (5.9) 7.0
   Terminal equipment, etc. 322 381 493 (15.5) (22.7)
   Operator services 172 228 299 (24.6) (23.7)
   TV 374 166 55 125.3 -
   Other 99 109 132 (9.2) (17.4)
Transmission costs and cost of goods sold (2,879) (2,990) (3,157) 3.7 5.3
Gross profit 6,510 6,721 6,744 (3.1) (0.3)
Other external expenses (1,671) (1,899) (1,943) 12.0 2.3
Wages, salaries and pension costs (802) (837) (901) 4.2 7.1
Other income and expenses 4 10 2 (60.0) -
EBITDA 4,041 3,995 3,902 1.2 2.4
Gross profit margin % 69.3 69.2 68.1 - -
EBITDA margin % 43.0 41.1 39.4 - -
Adjusted revenue¹ DKKm 9,389 9,728 9,989 (3.5) (2.6)
Adjusted EBITDA² DKKm 4,041 4,050 4,084 (0.2) (0.8)
RGU base ('000)
Landline 1,137 1,238 1,287 (8.2) (3.8)
Mobile voice 2,072 2,076 1,938 (0.2) 7.1
   Prepaid cards 229 373 338 (38.6) 10.4
   Subscriptions (incl. Telmore/M1) 1,843 1,703 1,600 8.2 6.4
Mobile broadband 132 93 31 41.9 -
Internet 697 705 624 (1.1) 13.0
TDC TV 126 96 27 31.3 -
RGU base, total 4,164 4,208 3,907 (1.0) 7.7
   Dual-play bundles 304 213 - 42.7 -
   Triple-play bundles 116 86 - 34.9 -
ARPU (year-average) DKK / month
PSTN/ISDN 185 186 188 (0.5) (1.1)
Mobile voice, blended 172 183 189 (6.0) (3.2)
   Prepaid cards 51 66 63 (22.7) 4.8
   Subscriptions (incl. Telmore/M1) 189 204 214 (7.4) (4.7)
IP³ 306 290 259 5.5 12.0
FTEs
Number of FTEs (EoY) 2,037 2,160 2,212 (5.7) (2.4)
Average number of FTEs (YTD) 2,110 2,239 2,426 (5.8) (7.7)
  1. Revenue for 2009-2010 has been adjusted for the acquisitions of M1 and Fullrate; and regulation of landline interconnection, mobile termination and international roaming charges. Fullrate was included in Consumer's reporting from March 2009. Revenue for 2008-2009 was adjusted for the acquisition of Fullrate as well as regulation of mobile termination and international roaming charges.
  2. EBITDA for 2009-2010 was adjusted for the acquisitions of Fullrate and M1, sale of property, plant and equipment and regulation of landline interconnection charges. EBITDA for 2008-2009 was adjusted for the acquisition of Fullrate.
  3. Broadband, VoIP and TV per broadband RGU.

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