TDC Group

RGU development

TDC had 8.9m RGUs in 2010, down 0.8% compared with 2009.

The number of domestic RGUs decreased from 8,767,000 in 2009 to 8,647,000 in 2010, corresponding to a decrease of 1.4% [1], which reflected mainly:

  • 7.7% fewer landline voice RGUs due to the migration from landline to mobile. However, this was a deceleration compared with previous years [2] due to pro-active churn control on PSTN/ISDN and a 21.9% increase in the number of VoIP RGUs, which was due mainly to the popularity of multi-play bundles.
  • 4.4% fewer mobile voice RGUs due to fewer low ARPU prepaid-card RGUs, which rose at the end of 2009 following a Christmas campaign. The decrease was partly counteracted by more telemetrics, and mobile broadband RGUs, which increased by 12.2% and 28.5%, respectively. TDC's acquisitions of M1 and Unotel did not affect TDC's total number of RGUs, as these RGUs were included in wholesale's RGUs in 2009.
  • 0.3% more internet RGUs as the increase in broadband RGUs in the Fullrate brand was almost offset by a decline in non-broadband RGUs. The number of business broadband RGUs decreased due to the economic downturn and the introduction of the multimedia tax in January 2010.
  • 4.9% more TV RGUs due to the success of HomeTrio [3] and continued growth in YouSee, in part related to the demand for add-on services.
  • The number of RGUs in TDC Nordic increased by 28.7% from 181,000 in 2009 to 233,000 in 2010. The development in TDC Nordic was affected mainly by growth in both its landline and mobile RGUs.

RGU base ('000 end-of-period) 31 Dec. 2010 31 Dec. 2009 31 Dec. 2008 Change in % 2010 vs. 2009 Change in % 2009 vs. 2008
Domestic, retail and wholesale:
Landline voice 1,836 1,990 2,113 (7.7) (5.8)
   PSTN/ISDN 1,407 1,638 2,002 (14.1) (18.2)
      Retail 1,196 1,397 1,705 (14.4) (18.1)
      Wholesale 211 241 297 (12.4) (18.9)
   VoIP 429 352 111 21.9 -
Mobile voice 2,903 3,038 2,792 (4.4) 8.8
   Retail voice 2,716 2,726 2,590 (0.4) 5.3
      Prepaid cards 229 373 338 (38.6) 10.4
      Subscriptions (incl. Telmore/M1) 2,487 2,353 2,252 5.7 4.5
   Wholesale voice 187 312 202 (40.1) 54.5
Telemetrics 387 345 226 12.2 52.7
Mobile broadband 257 200 116 28.5 72.4
Landline internet 1,513 1,508 1,371 0.3 10.0
   Broadband, retail 1,295 1,296 1,151 (0.1) 12.6
   Broadband, wholesale 154 139 124 10.8 12.1
   Non-broadband 64 73 96 (12.3) (24.0)
Other networks and data connections 287 291 365 (1.4) (20.3)
   Retail 54 51 52 5.9 (1.9)
   Wholesale 233 240 313 (2.9) (23.3)
Total TV 1,464 1,395 1,245 4.9 12.0
   YouSee Clear 1,176 1,153 1,113 2.0 3.6
   YouSee Plus 160 146 105 9.6 39.0
   TDC TV 128 96 27 33.3 -
Domestic RGUs, total 8,647 8,767 8,228 (1.4) 6.6
   Dual-play bundles 304 213 - 42.7 -
   Triple-play bundles 116 86 - 34.9 -
TDC Nordic
Landline 80 55 47 45.5 17.0
Mobile 67 44 24 52.3 83.3
Landline internet 86 82 94 4.9 (12.8)
TDC Nordic RGUs, total 233 181 165 28.7 9.7
TDC Group RGUs, total 8,880 8,948 8,393 (0.8) 6.6

Financial review

Revenue

2009-2010

The TDC Group's revenue rose by 0.3% to DKK 26,167m compared with 2009.

Revenue was positively affected by forex and the net impact from acquisitions and divestments, which were partly offset by negative impact from the regulation of MTR, landline interconnection charges, and international roaming charges.

  • Decreasing landline revenue related to the decline in the number of PSTN/ISDN RGUs and shift towards VoIP (which generates lower ARPU).
  • Increasing mobility service revenue was driven by mobile voice traffic and more mobile broadband customers.
  • Decreasing domestic internet and network revenue was driven by increased market competition, the recent economic downturn and the introduction of the Danish multimedia tax in January 2010.
  • Decreasing terminal equipment revenue reflected fewer customers visiting TDC Shop, and lower sales in NetDesign due to reduced investment levels among business customers.
  • Increasing TV revenue was driven by increased revenue from YouSee Clear and YouSee Plus, following the increased demand for add-on services. Revenue also increased following the success of the TDC TV product, due to the popularity of HomeTrio.
  • Increasing revenue in TDC Nordic was due mainly to increased sales of mobility services to existing landline and data customers, and higher revenue from the integrator business, which partly recovered from the recent economic downturn.
  • Decreasing revenue related to Other activities resulted primarily from increased intra-group sales.
Revenue-devel-UK.png

2008-2009

In 2009, TDC's revenue was DKK 26,079m, a decrease of DKK 838m, or 3.1%, compared with 2008.

Revenue was negatively affected by forex and the negative impact from regulation of MTR and international roaming charges, which was partly counteracted by the net impact from acquisitions and divestments.

  • Decreasing landline revenue related to fewer traditional domestic telephony RGUs and was somewhat mitigated by the success of the HomeTrio and HomeDuo packages.
  • Increasing mobility revenue related primarily to more mobile voice subscription customers (with relatively high ARPU compared with prepaid cards), and the growing number of mobile broadband customers.
  • Decreasing terminal equipment revenue related primarily to the divestment and outsourcing of CPE sales to business customers.
  • Increasing TV revenue, primarily as a result of customers' increased demand for content and add-on services and the success of the HomeTrio product, was reflected in more RGUs and higher ARPU.
  • Lower revenue from TDC Nordic, due to a decrease in Swedish integrator business.
Revenue DKKm
TDC Group 2010 2009 2008 Change in % 2010 vs. 2009 Change in % 2009 vs. 2008
Consumer 9,389 9,711 9,901 (3.3) (1.9)
TDC Business 7,546 7,926 8,546 (4.8) (7.3)
TDC Nordic 4,087 3,515 3,854 16.3 (8.8)
Operations & Wholesale 2,550 2,582 2,748 (1.2) (6.0)
YouSee 4,012 3,597 3,188 11.5 12.8
Other activities (1,417) (1,252) (1,320) (13.2) 5.2
TDC Group 26,167 26,079 26,917 0.3 (3.1)
Adjusted revenue¹ 26,167 26,316 26,400 (0.6) (0.3)
  1. Revenue for 2009-2010 has been adjusted for the acquisitions of Fullrate, A+, AinaCom's fibre network, DONG Energy's fibre network, M1 and Nordit, the divestment of the satellite business, currency effects, and regulation of landline interconnection, international roaming and mobile termination charges. Revenue for 2008-2009 was adjusted for the acquisitions of Fullrate, A+ and DONG Energy's fibre network; the divestments of Business Phone, Digital Signatur, Connect Partner, International Carrier Services, LG, Rejsekort, the satellite business and business customer centres as well as the divestment and outsourcing of CPE sales to business customers; currency effects; and regulation of international roaming and mobile termination charges.

Gross profit

2009-2010

TDC's gross profit was DKK 19,420m, a decrease of DKK 215m, or 1.1%, compared with 2009.

  • This decrease, which was due mainly to the decline in domestic landline voice and internet and network, terminal equipment and regulation of international roaming and landline interconnection, was only partly counteracted by the acquisition of Fullrate, A+, M1, AinaCom's fibre network and DONG Energy's fibre network, increased gross profit from domestic TV and mobility services as well as growth in TDC Nordic.
  • TDC's gross profit margin decreased from 75.3% in 2009 to 74.2% in 2010 This was mainly a result of product mix shift with growth in relatively lower margin areas such as the TV business and TDC Nordic as well as the activity decrease in high margin areas such as landline voice, broadband and operator services.
2008-2009

In 2009, TDC's gross profit declined by DKK 43m, or 0.2% to DKK 19,635m.

  • This related mainly to lower project sales in the Swedish integrator business, lower activity in Operations & Wholesale, the divestment of Digital Signatur and Business Phone, the divestment and outsourcing of CPE and regulation of international roaming, which was only partly counteracted by increased gross profit from TV and the acquisitions of Fullrate and A+.
  • TDC's gross profit margin increased from 73.1% in 2008 to 75.3% in 2009. The increased gross profit margin reflects primarily the lower MTR which have negative revenue impact but no negative gross profit impact, the divestment and outsourcing of CPE sales to business customers, the sale of other low-margin businesses by TDC Business and lower activity in the low-margin Swedish integrator business.

Gross profit DKKm
TDC Group 2010 2009 2008 Change in % 2010 vs. 2009 Change in % 2009 vs. 2008
Consumer 6,510 6,721 6,744 (3.1) (0.3)
TDC Business 5,198 5,338 5,387 (2.6) (0.9)
TDC Nordic 1,694 1,609 1,726 5.3 (6.8)
Operations & Wholesale 1,985 2,061 2,191 (3.7) (5.9)
YouSee 2,357 2,072 1,844 13.8 12.4
Other activities 1,676 1,834 1,786 (8.6) 2.7
TDC Group 19,420 19,635 19,678 (1.1) (0.2)

EBITDA

2009-2010

The TDC Group's EBITDA rose by DKK 236m, or 2.2%, to DKK 10,772m. The EBITDA margin increased from 40.4% in 2009 to 41.2% in 2010.

  • EBITDA was positively affected by lower wages, salaries and pension costs and lower employee-related costs due to fewer full-time employees (the number of average FTEs decreased by 5.7% from 2009 to 2010) despite the acquisition of some minor enterprises. EBITDA was also positively affected by the higher pension income related to the domestic defined benefit plans (DKK 150m) and currency movements. Savings related to lower subscriber acquisition costs, lower information technology costs and lower costs related to bad debt also had a positive influence on EBITDA.
  • Besides the gross profit reduction, EBITDA was negatively affected by the accounting gains from the divestment of the satellite business and the field force operation in TDC Sweden, both in 2009.
2008-2009

TDC's EBITDA rose by DKK 482m to DKK 10,536m in 2009. The EBITDA margin increased from 37.4% in 2008 to 40.4% in 2009.

  • EBITDA was positively affected by lower wages, salaries and pension costs and lower employee-related costs due to fewer full-time employees (from 2008 to 2009, the number of average FTEs decreased by 11.5%) and lower information technology costs and facility management costs.
  • Besides the gross profit reduction, EBITDA was negatively affected by foreign exchange-rate developments in TDC Sweden and TDC Norway.

EBITDA DKKm
TDC Group 2010 2009 2008 Change in % 2010 vs. 2009 Change in % 2009 vs. 2008
Consumer 4,041 3,995 3,902 1.2 2.4
TDC Business 3,644 3,721 3,659 (2.1) 1.7
TDC Nordic 564 497 458 13.5 8.5
Operations & Wholesale 1,114 1,413 1,500 (21.2) (5.8)
YouSee 1,353 1,141 954 18.6 19.6
Other activities 56 (231) (419) 124.2 44.9
TDC Group 10,772 10,536 10,054 2.2 4.8
Adjusted EBITDA¹ 10,767 10,458 9,778 3.0 7.0
  1. EBITDA for 2009-2010 has been adjusted for the acquisitions of Fullrate, A+, AinaCom's fibre network, DONG Energy's fibre network, M1 and Nordit as well as the divestment of the satellite business and the gain related to the divestment of the field force operation in TDC Sweden, sale of assets (sale of property, plant and equipment and intangible assets); currency effects and regulation of landline interconnection and international roaming charges. EBITDA for 2008-2009 was adjusted for the acquisitions of Fullrate, A+ and DONG Energy's fibre network; the divestments of Uppsala Stadsnät, Business Phone, Digital Signatur, International Carrier Services, Connect Partner, LG, the satellite business customer centres and TDC Produktion as well as the gain related to the divestment of the field force operations in TDC Sweden, the sale of property, plants and equipment, currency effects and regulation of international roaming charges.

Depreciation, amortisation and impairment losses

2009-2010

In 2010, depreciation, amortisation and impairment losses rose by DKK 697m, or 15.0% to DKK 5,356m. This increase was due mainly to higher amortisation of the value of customer relationships, reflecting the implementation of a revised customer segmentation method for calculating the amortisation. On an isolated basis, the adjusted customer segmentation method resulted in an increase in amortisation of approximately DKK 500m compared with 2009. In addition, the increased depreciation, amortisation and impairment losses were due mainly to the acquisitions of Fullrate, A+, DONG Energy's fibre network, M1 and Unotel. On an isolated basis, these acquisitions resulted in an increase in depreciation, amortisation and impairment losses of approximately DKK 100m compared with 2009.

2008-2009

In 2009, depreciation, amortisation and impairment losses rose by DKK 112m, or 2.5%, to DKK 4,659m compared with 2008. This increase reflected mainly the acquisition of Fullrate and was partly offset by lower depreciation due to certain assets relating to the landline network being fully depreciated during 2008 and the write-down of the Song and Dotcom brands in 2008. These brands were replaced by the TDC brand.

Special items

The table below shows the TDC Group's Special items for the periods indicated. Special items from continuing operations are shown together with a reconciliation of profits from continuing operations excluding and including Special items.

Special items include significant amounts that cannot be attributed to normal operations such as provisions for restructuring costs and special write-downs for impairment of intangible assets and property, plant and equipment, as well as any reversals of such impairment write-downs. Special items also include gains and losses related to asset divestments of enterprises and properties, and adjustments to such gains and losses and divestment of enterprises, as well as transaction costs relating to the acquisition of enterprises.

Special items from continuing operations amounted to expenses after tax of DKK 1,084m in 2010, compared with an expense after tax of DKK 766m in 2009 and DKK 2,950m in 2008.

2010

In 2010, Special items comprised primarily restructuring costs and loss from rulings related to a Swedish court ruling in an interconnect fee dispute with TeliaSonera. Restructuring costs resulted largely from redundancy programmes, including costs related to surplus office capacity following a reduction of full-time employees, as well as costs related to a one-time grant to all employees of TDC shares (DKK 145m) and accelerated amortisation of borrowing costs (DKK 106m) due to the expected refinancing of TDC's Senior Loans in early 2011.

2009

In 2009, Special items comprised primarily restructuring costs, which were due largely to redundancy programmes and the resulting costs related to surplus office capacity. Impairment losses were attributable to the write-down of software. Special items in joint ventures and associates related to an adjustment to the loss from the divestment of shares in Polkomtel in 2008.

2008

In 2008, Special items comprised primarily impairment losses relating to goodwill and other intangible assets in TDC Sweden and TDC Finland. These impairments resulted primarily from reduced cash flow expectations for these businesses. Restructuring costs related largely to the restructuring of TDC's information technology activities, including a write-down of software, as well as redundancy programmes and the resulting costs related to surplus office capacity. Special items in joint ventures and associates related mainly to a loss from the divestment of shares in Polkomtel.

Special items DKKm
TDC Group 2010 2009 2008
Profit for the year from continuing operations excl. special items 2,888 2,727 2,959
Consolidated enterprises:
Gain/(loss) from divestments of enterprises and property, net (38) (18) (2)
Impairment losses (50) (119) (1,972)
Income/(loss) from rulings (85) 0 0
Restructuring costs, etc. (1,172) (982) (1,238)
Costs related to acquisition of enterprises (2) 0 0
Special items before income taxes (1,347) (1,119) (3,212)
Income taxes related to special items 253 276 284
Special items after income taxes in consolidated enterprises (1,094) (843) (2,928)
Joint ventures and associates 10 77 (22)
Special items from continuing operations (1,084) (766) (2,950)
Profit for the year from continuing operations 1,804 1,961 9

Profit from joint ventures and associates

2009-2010

In 2010, Profit from joint ventures and associates was DKK 13m compared with DKK 76m in 2009. The profit in both 2010 and 2009 comprised primarily special items due to adjustment of gains from the divestment Polkomtel and One, respectively.

2008-2009

Profit from joint ventures and associates was DKK 76m, a decrease of DKK 124m compared with 2008. In 2009, loss from joint ventures and associates, excluding Special items, was DKK 1m in 2009, a decrease of DKK 223m compared with 2008. The decrease reflected lower profit following the divestment of TDC's shares in Polkomtel.

Net financials

2009-2010

Net financials represented an expense of DKK 1,496m, a decrease of DKK 568m compared with 2009, driven by:

  • A positive development of DKK 368m in fair value adjustments of derivative financial instruments related to hedging of EUR denominated Senior Facilities.
  • A positive development of DKK 237m in currency translation adjustments, reflecting gains on intra-group debt denominated in SEK, partly offset by losses on long-term EUR debt (Senior Facilities and EMTNs) and hedging arrangements.
  • An increase in net financial expenses of DKK 37m, reflecting lower interest income from lower cash positions, which were partly offset by lower interest expenses on the Senior Facilities, due mainly to lower interest rates.
2008-2009

In 2009, TDC's net financials rose by DKK 16m compared with 2008 to an expense of DKK 2,064m. This increased expense was due mainly to:

  • A negative development of DKK 1,027m in foreign currency adjustments due to currency movements of intra-group loans denominated in NOK and SEK.
  • A positive development of DKK 433m in fair value adjustments of variable interest-rate hedging arrangements entered into in connection with the Senior Facilities Agreement.
  • A DKK 578m decrease in net financial expenses reflecting lower interest expenses due to redemptions of long-term debt and lower applicable interest rates on long-term debt.

Income taxes

Income taxes related to profit for the year, excluding Special items, represented an expense of DKK 1,035m in 2010, compared with DKK 1,085m in 2009 and DKK 722m in 2008.

The effective tax rate, excluding Special items, was 26.4% in 2010 compared with 28.5% in 2009 and 19.6% in 2008. The development in both years was due largely to the impact from the limitation of tax deductibility of interest expenses under Danish tax legislation.

Total income taxes amounted to an expense of DKK 782m in 2010, compared with DKK 809m in 2009 and DKK 438m in 2008.

Profit for the year from discontinued operations

The following table shows the profit from discontinued operations, which comprises profit from operations as well as Special items.

Profit for the year from discontinued operations was DKK 1,203m in 2010, compared with DKK 422m in 2009 and DKK 548m in 2008.

2010

In 2010, profit for the year from discontinued operations related largely to operations in Sunrise (including hedging activities) and a gain resulting from the divestment of Sunrise in October 2010.

2009

Profit for 2009 reflected mainly the results from operations in Sunrise (including hedging activities) and Invitel, partly offset by a loss resulting from the divestment of Invitel in November 2009.

2008

Profit for 2008 comprised primarily the results of operations in Sunrise (including hedging activities) and Invitel, as well as Special items in Sunrise relating largely to the divestment of Sunrise Business Communications in July 2008.

Profit from discontinued operations DKKm
TDC Group 2010 2009 2008
Profit/(loss) from operations:
Sunrise 413 839 778
Invitel 0 (264) (426)
Talkline 0 0 0
Profit/(loss) from operations 413 575 352
Special items:
Sunrise 762 (53) 137
Invitel 0 (119) 0
Talkline 0 0 0
Adjustments regarding earlier divestments in previous years 28 19 59
Total Special items related to discontinued operations 790 (153) 196
Profit from discontinued operations 1,203 422 548

Profit for the year

2009-2010

Profit for the year from continuing operations, excluding Special items, amounted to DKK 2,888m in 2010, up by DKK 161m, or 5.9%, compared with 2009. The increase was due largely to improved EBITDA and the positive development in currency adjustments and fair value adjustments, which was only partly offset by increased depreciation and amortisation.

In 2010, Profit for the year, including Special items, increased by DKK 624m to DKK 3,007m from DKK 2,383m in 2009. This increase related mainly to improved EBITDA and the positive development in currency adjustments and fair value adjustments, which were partly offset by increased amortisation of the value of customer relationships from acquisitions (due mainly to adjusted customer segmentation for calculating amortisation), and Special items relating to higher restructuring costs.

2008-2009

Profit from continuing operations, excluding Special items, amounted to DKK 2,727m in 2009, down by DKK 232m, or 7.8%, compared with 2008. The decrease reflected higher income taxes in 2009, lower profit from joint ventures and associates relating to the divestment of Polkomtel in December 2008, and increased expenses from net financials due to the negative impacts of foreign currency movements. This was partly offset by increased EBITDA.

In 2009, Profit for the year, including Special items, increased by DKK 1,826m, from DKK 557m in 2008, reflecting primarily lower expenses related to Special items.

Comprehensive income

Total comprehensive income amounted to DKK 2,636m compared with DKK 3,458m in 2009, and a loss of DKK 108m in 2008.

2009-2010

The decrease of DKK 822m from 2009 to 2010 reflected mainly a negative development in actuarial gains and losses, which totalled a loss of DKK 515m in 2010 compared with a gain of DKK 588m in 2009, in particular as a result of a decreasing discount rate [4]. In addition, currency translation adjustments of foreign enterprises developed negatively, although this was partly offset by higher Profit for the year.

2008-2009

The DKK 3,566m increase from 2008 to 2009 reflected mainly a positive development related to currency translation adjustments of foreign enterprises (before tax). Such adjustments resulted in a gain of DKK 631m in 2009 and a loss of DKK 2,111m in 2008. In addition, profit for the year increased whereas actuarial gains from defined benefit pension plans decreased.

Equity

2009-2010

Equity aggregated DKK 20,855m at year-end 2010, down by DKK 6,223m compared with DKK 27,078m at year-end 2009. The decrease reflected largely the acquisition of treasury shares, DKK 9,000m, which more than offset Total comprehensive income of DKK 2,636m.

2008-2009

In 2009, equity was down by 4,602m compared with DKK 31,680m at year-end 2008. Dividend payments of DKK 8,060m more than offset total comprehensive income of DKK 3,458m.

Net interest-bearing debt

The Senior Facilities Agreement (SFA) and the Euro Medium Term Notes (EMTN) are TDC's main debt-financing instruments representing 75% and 23%, respectively, of the total loans (in terms of net carrying value).

TDC may occasionally continue to make buy-backs and prepay its debt, including the Senior Facilities and EMTNs.

TDC expects to refinance the Senior Facilities Agreement in early 2011 provided terms and conditions are deemed fa-vourable.

2009-2010

Net interest-bearing debt totalled DKK 22,607m at year-end 2010, down DKK 10,854m compared with year-end 2009. The decline is attributable mainly to the proceeds from the divestment of Sunrise and the positive net cash flow from operating and investing activities, which were partly offset by the DKK 9.0bn share buy-back in December 2010.

2008-2009

Net interest-bearing debt totalled DKK 33,461m at year-end 2009, down DKK 1,412m compared with year-end 2008. The divestment of Invitel had a positive impact of approximately DKK 5bn. However, the payment of dividends more than offset the positive net cash flow from operating and investing activities in 2009.

Net interest-bearing debt¹ DKKm
TDC Group 2010 2009 2008
Senior loans 17,737 26,173 28,415
Euro Medium Term Notes (EMTN) 5,342 5,325 7,316
Other loans 565 2,900 6,019
Loans 23,644 34,398 41,750
Interest-bearing payables 2 - -
Gross interest-bearing debt 23,646 34,398 41,750
Interest-bearing receivables (208) (174) (159)
Cash and cash equivalents (831) (763) (6,718)
Net interest-bearing debt 22,607 33,461 34,873
  1. 1 Net carrying value measured at amortised cost, ensures the difference between the proceeds received and the nominal value is recognised in the Statements of Income over the term of the loan.

Senior Facilities Facilities
A B C Total
Maturity 31 Dec 2011 30 Jan 2014 30 Jan 2015
Fixed/Floating rate Floating Floating Floating
Margin 1.250% 1.500% 2.125%
Outstanding amount¹ 1 January 2010 EURm 497 1,401 1,670 3,568
Mandatory prepayment 30 June 2010 EURm (75) (75)
Mandatory prepayment 12 November 2010 EURm (211) (46) (49) (306)
Voluntary prepayment 12 November 2010 EURm (211) (581) (792)
Outstanding amount¹ 31 December 2010 EURm - 1,355 1,040 2,395
Outstanding amount¹ 31 December 2010 DKKm - 10,099 7,753 17,852
Euro Medium Term Notes (EMTN) Bonds
2012 2015 Total
Maturity 19 Apr 2012 16 Dec 2015
Fixed/Floating rate Fixed Fixed
Coupon 6.500% 5.875%
Outstanding amount¹ 1 January 2010 EURm 457 274 731
Outstanding amount¹ 31 December 2010 EURm 457 274 731
Outstanding amount¹ 31 December 2010 DKKm 3,410 2,039 5,449
  1. Nominal value.

Capital expenditure

2009-2010

In 2010, capital expenditure fell by DKK 357m compared with 2009 to DKK 3,534m. This decrease resulted primarily from lower investments in information technology and network infrastructure, the latter due mostly to postponement of work as a result of adverse weather conditions at the beginning of 2010. In 2010, network investments (excluding cable) represented 65.4% of total capital expenditure.

The capital expenditure-to-revenue ratio decreased to 13.5% in 2010, from 14.9% in 2009.

2008-2009

In 2009, compared with 2008, capital expenditure decreased by DKK 84m to DKK 3,891m. Investments in Danish landline networks increased due to the popularity of TDC HomeDuo and TDC HomeTrio, which were only partly offset by lower information technology investments. Network investments (excluding cable) represented 66.9% of total capital expenditure in 2009.

The capital expenditure-to-revenue ratio increased to 14.9% in 2009 from 14.8% in 2008.

Capital expenditure DKKm
TDC Group 2010 2009 2008 Change in % 2010 vs. 2009 Change in % 2009 vs. 2008
TDC Group excl. TDC Nordic and YouSee 1 2,667 3,036 3,212 12.2 5.5
TDC Nordic 401 375 411 (6.9) 8.8
YouSee 466 480 352 2.9 (36.4)
Capital expenditure 3,534 3,891 3,975 9.2 2.1
  1. As domestic infrastructure (excl. YouSee) is based in Operations & Wholesale, domestic capex cannot be allocated to the separate domestic business divisions apart from YouSee.

Statements of Cash Flows

2009-2010
  • In continuing operations, Cash flow from operating activities decreased by 2.7%, to DKK 7,238m in 2010, which reflected primarily higher income tax payments in 2010 compared with 2009. Danish corporate tax is paid on account on a current year basis in two on account instalments on 20 March and 20 November during the tax year, with a final settlement due on 20 November following the end of the tax year. Accordingly, a substantial part of the taxes have been paid in Q4 in the year following the tax year. In 2010, the payment for the previous year was higher than in 2009. In addition the on account payment for the current year in 2010 was higher than in 2009.The higher tax payments were partly counterbalanced by a positive change in net working capital, due mainly to optimisation of billing cycles, which included billing mobile subscription in advance and other billing cycle optimisations, and improved creditor payment terms. Increased EBITDA and lower net interest payments also contributed positively to the cash flow development.
  • Cash outflow from investing activities in continuing operations decreased by DKK 922m or 19.2% from 2009 to 2010. The improvement reflected primarily the acquisitions of DONG Energy's fibre network, Fullrate and A+ in 2009 and lower investments in property, plant and equipment.
  • Cash outflow from financing activities in continuing operations amounted to DKK 20,091m, reflecting a higher outflow of DKK 9,830m or 95.8%. The higher outflow was due largely to the buy-back of shares in 2010 and higher net repayments of the principal of long-term loans and short-term bank loans. This was only partly counterbalanced by dividend payments made in 2009.
  • Operating free cash flow increased by 15.0% and cash conversion improved by 7.6 percentage points to 69.0% in 2010, both due mainly to the lower investments in property, plant and equipment and the positive development in net working capital.
  • Equity Free Cash Flow increased by 2.0%, to DKK 4,515m driven by the positive development in change in net working capital as well as the lower investments in property, plant and equipment and net interest payments. The increase was partly offset by higher income tax payments.
  • Total cash flow from discontinued operations increased by DKK 15,133m, to DKK 16,810m and related mainly to Sunrise.
2008-2009
  • In 2009, cash flow from operating activities in continuing operations increased by DKK 1,697m, or 29.5%, compared with 2008. The increase was due mainly to lower taxes paid, higher EBITDA, lower pension contributions and lower net interest paid. This was partly offset by higher cost related to special items concerning mainly redundancy and vacant office space. Also, cash flow was further negatively affected by the DKK 147m improvement in working capital in 2009, which was lower than the DKK 847m improvement in 2008.
  • In 2009, cash flow from investing activities in continuing operations constituted an outflow of DKK 4,811m, compared with an inflow of DKK 2,096m in 2008. The decrease reflected primarily the divestment of TDC's shares in Polkomtel in 2008 and, to a lesser extent, the acquisitions of Fullrate, A+ and DONG Energy's fibre network in 2009.
  • In 2009, cash outflow from financing activities in continuing operations increased by DKK 755m compared with 2008, to DKK 10,261m. The higher outflow was due primarily to higher dividends paid, partly offset by lower loan repayments.
  • The lower increase in operating free cash flow than in EBITDA was driven mainly by the lower working capital increases in 2009. TDC's cash conversion decreased from 62.9% in 2008 to 61.4% in 2009.
  • Equity Free Cash Flow increased by 82.6%, to DKK 4,426m driven mainly by higher EBITDA, lower pension contributions and lower income tax and net interest payments. The increase was partly offset by the more limited improvement in net working capital in 2009 than in 2008.
  • Total cash flow from discontinued operations increased by DKK 1,589, to DKK 1,677m and related mainly to Sunrise and Invitel.

Cash flow key figures DKKm
TDC Group 2010 2009 2008 Change in % 2010 vs. 2009 Change in % 2009 vs. 2008
Cash flow from operating activities 7,238 7,440 5,743 (2.7) 29.5
Cash flow from investing activities (3,889) (4,811) 2,096 19.2 -
Cash flow from financing activities (20,091) (10,261) (9,506) (95.8) (7.9)
Total cash flow from continuing operations (16,742) (7,632) (1,667) (119.4) -
Total cash flow from discontinued operations 16,810 1,677 88 - -
Operating free cash flow 7,437 6,469 6,324 15.0 2.3
Equity free cash flow 4,515 4,426 2,424 2.0 82.6
Cash conversion (%) 69.0 61.4 62.9 7.6 (1.5)

  1. When adjusted for the large decrease in low-ARPU prepaid cards, domestic RGUs increased by 0.3%
  2. The lower RGU decrease from 2008 to 2009 was a consequence of the acquisition of Fullrate in 2009.
  3. Dual-play- and triple-play bundles increased by 42.7% and 34.9%, respectively, due to the success of TDCDuo and TDCTrio.
  4. The discount rate, which is applied to TDC's domestic defined benefits plans, decreased from 5.00% at 31 December 2009, to 4.95% at 31 December 2010.
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