TDC Business

TDC Business

Operating review

In 2010, TDC Business experienced the negative impact of the multimedia tax both on internet and mobility services. This negative effect was increased by the impact of the economic downturn that affected customer investment levels primarily in terminal equipment. This was partly offset by increased use of mobility services driven by mobile broadband and increased smartphone sales. The decrease in traditional landline was partly mitigated by increased sales of VoIP, which have recently been boosted by a significant increase in demand for the Scale product offers. Both landline and mobile recorded a large increase in business-customer demand for flat-rate products. In the mobile voice market this, combined with the increased competition, led to lower ARPUs.

KPI development 2009-2010

TDC Business had 1,860,000 RGUs at the end of 2010, up 0.3% compared with the end of 2009.

  • The number of PSTN/ISDN RGUs decreased by 11.7%, reflecting the migration from traditional landline telephony to mobile telephony and VoIP. This was only partly offset by the 61.9% increase in VoIP RGUs. PSTN/ISDN ARPU rose slightly from DKK 364 per month in 2009 to DKK 368 in 2010.
  • The number of mobile voice RGUs decreased by 0.9%, while the number of mobile broadband RGUs increased by 16.5%, and the number of telemetrics RGUs increased by 12.2%, in all cases reflecting increased demand for such services. Mobile voice ARPU was almost stable despite the impact from MTR and international roaming regulation (DKK 274 per month in 2009 vs. DKK 271 in 2010).
  • The average number of broadband RGUs decreased by 4.8%, which related to an increased churn-rate in the first half of 2010, due to the recent economic downturn and the introduction of the new Danish multimedia tax. Broadband ARPU declined from DKK 365 per month in 2009 to DKK 356 in 2010 due to price competition.

Financial review

Revenue

2009-2010

Revenue in TDC Business declined by DKK 380m, or 4.8%, to DKK 7,546m.

  • Revenue from landline telephony declined by DKK 142m, or 7.2%, reflecting mainly the fewer RGUs.
  • Revenue from mobility services rose by DKK 39m, or 1.7%, driven mainly by the increase in mobile broadband RGUs.
  • Revenue from internet and network decreased by DKK 219m, or 8.7%, reflecting primarily a decline in revenue from broadband due mainly to fewer RGUs. Customer churn from leased lines, which was only partly offset by migration to substituting technologies, also had a negative impact on revenue development.
  • Revenue from the sale of terminal equipment decreased by DKK 57m, or 5.4%, due mainly to lower sales as a result of business customers' reduced investment levels following the recent economic downturn and TDC Business' increased focus on selling services rather than low-margin terminal equipment.

2008-2009

In 2009, TDC Business' revenue was DKK 7,926m, a decline of DKK 620m, or 7.3%.

  • Revenue from landline telephony declined by DKK 104m, or 5.0%, reflecting a 10.3% decrease in the number of PSTN/ISDN RGUs.
  • Revenue from mobility services decreased by DKK 95m, or 4.0%, due primarily to lower ARPU from mobile voice as a result of more flat-rate subscribers and less incoming traffic from landline telephony, as well as lower MTR and international roaming charges. The revenue decrease was partly offset by increased revenue from mobile broadband and telemetrics, as a result of increased demand for such services.
  • Revenue from internet and network decreased by DKK 43m, or 1.7%, due mainly to lower broadband ARPU, primarily as a result of price competition, and, to a lesser extent, a lower average number of broadband RGUs.
  • Revenue from the sale of terminal equipment and systems integration (NetDesign) decreased by DKK 348m, or 24.9%, due mainly to the divestment and outsourcing of CPE sales to business customers and lower sales volume in NetDesign, which reflected primarily the recent economic downturn.

Gross profit

2009-2010

Gross profit was DKK 5,198m, a decrease of DKK 140m, or 2.6%.

  • This was largely a result of the decreased activity in internet and network and landline voice, which was partly compensated for by more activity in mobility services. TDC Business' gross profit was also positively affected by allocation of fewer costs from Operations & Wholesale in 2010 than in 2009 due to efficiency improvements.
  • The gross profit margin increased from 67.3% in 2009 to 68.9% in 2010, reflecting primarily the reduction in MTR and international roaming charges.

2008-2009

TDC Business' gross profit was DKK 5,338m, a decrease of DKK 49m, or 0.9%.

  • This was the result of the divestment and outsourcing of CPE sales and a decrease in landline voice.
  • TDC Business' gross profit margin increased from 63.0% in 2008 to 67.3% in 2009. The increase in gross profit margin reflected primarily the divestment of low margin businesses, as well as the effect of lower MTR and international roaming charges.

EBITDA

2009-2010

TDC Business' EBITDA was DKK 3,644m, a decrease of DKK 77m, or 2.1%. As a consequence of the increased gross profit margin and the significant cost reductions, TDC Business' EBITDA margin increased from 46.9% in 2009 to 48.3% in 2010.

  • EBITDA decreased due to the negative gross profit development, which was only partly offset by a positive impact from the acquisition of DONG Energy's fibre network and cost savings on billing and contractual services as well as wages, salaries and pension costs.

2008-2009

In 2009, TDC Business' EBITDA was DKK 3,721m, an increase of DKK 62m, or 1.7%. The EBITDA margin increased from 42.8% in 2008 to 46.9% in 2009.

  • EBITDA growth was positively affected by lower costs due to the divestment and outsourcing of CPE sales to business customers, the divestments of Digital Signatur, LG Nortel and Rejsekort and the sale of business customer centres, as well as lower wages, salaries and pension costs due to fewer full-time employee equivalents. This was only partly offset by the accounting gains related to the divestment of Business Phone and Digital Signatur that were recorded in 2008, and the negative gross profit development.

Selected financial and operational data Excluding special items
TDC Business 2010 2009 2008 Change in % 2010 vs. 2009 Change in % 2009 vs. 2008
DKKm
Revenue 7,546 7,926 8,546 (4.8) (7.3)
Landline telephony 1,826 1,968 2,072 (7.2) (5.0)
Mobility services 2,290 2,251 2,346 1.7 (4.0)
Internet and network 2,307 2,526 2,569 (8.7) (1.7)
Terminal equipment, etc. 990 1,047 1,395 (5.4) (24.9)
Other¹ 133 134 164 (0.7) (18.3)
Transmission costs and cost of goods sold (2,348) (2,588) (3,159) 9.3 18.1
Gross profit 5,198 5,338 5,387 (2.6) (0.9)
Other external expenses (703) (744) (850) 5.5 12.5
Wages, salaries and pension costs (851) (875) (1,000) 2.7 12.5
Other income and expenses - 2 122 - (98.4)
EBITDA 3,644 3,721 3,659 (2.1) 1.7
Gross profit margin % 68.9 67.3 63.0 - -
EBITDA margin % 48.3 46.9 42.8 - -
Adjusted revenue² DKKm 7,546 7,856 8,108 (3.9) (3.1)
Adjusted EBITDA³ DKKm 3,644 3,737 3,600 (2.5) 3.8
RGU base ('000)
Landline 403 439 482 (8.2) (8.9)
Mobile voice 644 650 652 (0.9) (0.3)
Telemetrics 387 345 226 12.2 52.7
Mobile broadband 113 97 83 16.5 16.9
Internet 259 272 300 (4.8) (9.3)
Other networks and data connections 54 51 52 5.9 (1.9)
RGU base, total 1,860 1,854 1,795 0.3 3.3
ARPU (year-average) DKK / month
PSTN/ISDN 368 364 354 1.1 2.8
Mobile voice 271 274 308 (1.1) (11.0)
Broadband 356 365 372 (2.5) (1.9)
FTEs
Number of FTEs (EoY) 1,476 1,528 1,620 (3.4) (5.7)
Average number of FTEs (YTD) 1,535 1,594 1,978 (3.7) (19.4)
  1. Includes operator services, etc.
  2. Revenue for 2009-2010 has been adjusted for the acquisition of DONG Energy's fibre network and regulation of landline interconnection, mobile termination and international roaming charges. Revenue for 2008-2009 was adjusted for the acquisition of DONG Energy's fibre network, the divestments of Business Phone Digital Signatur, LG, Rejsekort and business customer centres and the divestment and outsourcing of CPE sales to business customers as well as regulation of international roaming and mobile termination charges.
  3. EBITDA in 2009-2010 was adjusted for the acquisition of DONG Energy's fibre network; and regulation of landline interconnection charges. EBITDA in 2008-2009 was adjusted for the divestments of Digital Signatur and Business Phone.

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