TDC will during its Capital Markets Day in London starting today at 9.30 am CET/8.30 am London time launch the new strategy for the company for the period 2013 – 2015 under the headlines:
We connect you to the future
- Focus on customer value management
- Develop and sell integrated solutions
- Leverage brand portfolio
- Invest in customer service and network/IT
- Continue relentless focus on cost savings
As part of the new strategy, TDC’s remuneration policy has been revised to a dividend payout of around 90% of Equity Free Cash Flow post Special Items etc[1] (EFCF post Special Items) going forward. The revised shareholder remuneration policy and certain financial expectations for 2013 – as outlined below after the account of some of the key elements of the new strategy – will lead to an expected 2013 Dividend per Share of DKK 3.70.
Some key elements of the new strategy – presented by business unit – are:
Consumer
Enhanced focus on delivering seamlessly integrated household solutions, including fixnet and mobile telephony, broadband, television, and other services under the TDC brand.
Accessibility of services across platforms and personalisation of the customer experience are also emphasised.
Consolidation of brand portfolio through merging the subsidiaries Fullrate and M1 under the Fullrate brand into one operation, and optimisation of marketing efforts which will be driven through the newly created Group Marketing function.
YouSee
Similar focus as TDC Consumer on offering seamlessly integrated household solutions. In order to enable this strategy and provide YouSee with a mobile offering, Onfone will be integrated as a part of YouSee, but the Onfone brand will remain.
Further exploit the advantages of coax technology to deliver broadband with very high speeds.
Launch of a new OTT (Over The Top) television offering YouBio.
Business
Launch of integrated business solutions is the key element of the strategy for the Business unit. The aim is to enable business customers to obtain their entire communication solution from TDC, and to easily scale such solutions up or down.
Solutions can, if needed, be cloud based, which will promote both scalability and seamless experiences notwithstanding the location.
As enabler for the sales of integrated business solutions, the go-to-market approach between Business and the subsidiaries Netdesign A/S and TDC Hosting A/S will – going forward – be closely coordinated and potentially fully integrated.
Nordic
Also for the Nordic subsidiaries of TDC – TDC Sweden, TDC Norway and TDC Finland – the strategy includes a move towards seamlessly integrated business solutions, both locally and across the Nordic region.
TDC Sweden plans a gradual move into the segment for small and medium sized businesses, whereas today most customers are large companies.
Finally the strategy for Nordic involves enhancing the hosting business in especially Sweden and Finland.
Operations
During the strategy period TDC will invest additionally approximately DKK 300m compared to previous plans in enhancing the customer experience and customer satisfaction.
Additional investments of approximately DKK 500m are planned for build-out of both the mobile and fixed-line networks with the aim of increasing speed, coverage and quality of the networks, and gradually bringing fibre closer to the homes.
TDC has launched a program to simplify products, platforms and processes with the aim of obtaining synergies, reduce time to market and improve the customer experience over the strategy period. For the same purposes TDC will reorganise the product management activities across the group as a separate division within the Operation business unit.
Financials
TDC’s financial policy going forward is:
- Dividend payout of around 90% of EFCF post Special Items etc.
- Maintain investment grade rating.
- Leverage target at or below 2.2x EBITDA bpi.
- Mergers and Acquisitions will focus on bolt-on, in-market consolidation in Denmark and Nordic Countries and will not compromise adherence to rating targets.
The financial implications of the new strategy are:
- An improved Gross Profit performance is expected over the strategy period.
- The programs mentioned above to simplify products, platforms and processes are together with a continued relentless cost focus expected to yield significant cost savings going forward.
- EBITDA is expected to show a slight decline in 2013 due to investments in the new strategy and regulatory impacts. From 2014-15, EBITDA is expected to stabilise before the impact from strategic initiatives.
- TDC’s annual capex level will increase by DKK 0.2bn to a level of DKK 3.7bn in 2013. The step-up in capex will primarily be applied for TDC’s highspeed broadband strategy and 4G.
- Cash flow to Special Items re restructuring, financial leasing and licenses is expected to drop from a level of approximately DKK 1.0bn in 2012 to DKK 0.7-0.8bn in 2013 due to fewer redundancies and lower license payments.
- EFCF post Special Items etc. is expected to decrease slightly in 2013 and stabilise in 2014-15 before the impact of strategic initiatives.
- The revised shareholder remuneration policy and the financial expectations for 2013 lead to an expected 2013 Dividend Per Share of DKK 3.70. This level is considered sustainable and is supported by the continued cost savings. It will mean that the majority of equity free cash flows will be returned to the shareholders, whilst allowing for investments in the strategy and providing some financial flexibility.
The launch of the new strategy does not change the guidance for 2012 which was last confirmed in connection with the earnings release for Q3 released on November 1, 2012.
-----------
The Capital Markets Day presentations will be webcasted during the event and can be accessed from http://storm.zoomvisionmamato.com/player/tdc/objects/8j6gkb47/
The slides used during the presentations can be accessed on the webpage tdc.com/investor from approximately 2 pm CET/1 pm London time today.
[1] Special Items etc constitute special items, financial leasing and license payments
TDC A/S
Teglholmsgade 3
0900 Copenhagen C
DK-Denmark
tdc.com
