TDC Business

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Glossary

In 2009, TDC Business’ revenue and EBITDA were DKK 7,926m and DKK 3,666m, respectively, compared with DKK 8,546m and DKK 3,613m in 2008. The EBITDA margin was 46.3% in 2009 compared with 42.3% in 2008.

At year-end 2009, TDC Business had 1,528 full-time employee equivalents compared with 1,620 in 2008 and 1.9m customers at year-end 2009, up 4.2% compared with year-end 2008.

From 2008 to 2009, TDC Business successfully streamlined its business to focus on high-margin products and reduced expenses. As a result, TDC Business successfully increased its EBITDA margin from 42.3% in 2008 to 46.3% in 2009 in spite of the general economic slowdown.

Revenue

TDC Business' revenue decreased by DKK 620m or 7.3% to DKK 7,926m in 2009. Outsourcing of mobile handset sales to large customers, and divestment of business activities, i.e. LG1, Business Phone2, Rejsekort and Digital Signatur in 2008, contributed negatively to revenue growth. Excluding outsourcing and divestments, revenue declined by approximately 4%. The adjusted revenue decrease was driven by lower revenue from traditional landline telephony. This related primarily to a 10% decrease in the customer base due to migration to the mobile networks and VoIP. Revenue on mobility services also decreased by DKK 95m or 4.0%, and was driven by lower ARPU on mobile voice as a result of more flat-rate subscribers, less incoming traffic from landline telephony as well as lower mobile termination charges3 and lower international mobile roaming charges caused by national and EU price regulation, respectively. This was partly offset by increased revenue from mobile broadband and telemetrics. Moreover, revenue from internet and network decreased by DKK 43m or 1.7%. This was due to fewer domestic broadband subscribers, and lower broadband ARPU. Revenue in NetDesign decreased due to lower sales.

In 2008, TDC Business' revenue decreased by DKK 318m or 3.6% to DKK 8,546m. In both years, revenue was affected by outsourcing of mobile terminal sales to large customers and divestment of business activities, i.e. LG, Business Phone and Digital Signatur. Excluding this, revenue declined by approximately 1%. The revenue decrease was also driven by lower revenue from traditional landline telephony, which decreased by DKK 146m or 6.6% and related primarily to a decrease in the customer base and lower MoU due to migration to the mobile networks, and VoIP. This was partly offset by increasing revenue from mobility services, up DKK 38m or 1.6% to DKK 2,346m, driven by a larger mobile voice customer base, partly offset by lower mobile termination fees and lower international roaming prices caused by national and EU price regulation, respectively.

Gross profit

In 2009, gross profit decreased by DKK 58m or 1.1% to DKK 5,283m and transmission costs and cost of goods sold therefore almost offset the negative revenue growth. Transmission costs decreased by DKK 354m or 14.3%, due to lower landline traffic and lower mobile termination costs per minute. Cost of goods sold decreased by DKK 208m or 28.2%, due primarily to the outsourcing and divestment of CPE business activities.

In 2008, gross profit decreased by DKK 283m or 5.0% to DKK 5,341m. Besides the revenue decrease, the gross profit decrease stemmed from higher transmission costs of DKK 101m or 4.3%, due to higher mobile activity, partly offset by lower landline traffic and lower mobile termination costs per minute. This was offset by lower cost of goods sold of DKK 136m or 15.6%, due primarily to outsourcing and divestment of CPE business activities.

Income before depreciation, amortization and special items (EBITDA)

In 2009, EBITDA increased by DKK 53m or 1.5% to DKK 3,666m. Adjusted for disposed business areas, EBITDA increased by approximately 4%. The positive EBITDA development was therefore a result of TDC Business’ successful implementation of cost reductions on other external expenses and wages, salaries and pension costs. Other external expenses fell by DKK 106m or 12.5% to DKK 744m in 2009. In addition to lower costs due to the divestment of minor business areas, this resulted from an ongoing streamlining of the business. Wages, salaries and pension costs dropped by DKK 125m or 12.5% to DKK 875m, driven by a decrease in the number of full-time employee equivalents due to redundancy programs and the sale of minor business areas. Other income and expenses declined by DKK 120m and related solely to the gain from divestments of minor business areas in 2008.

In 2008, EBITDA increased by DKK 118m or 3.4% to DKK 3,613m, reflecting largely lower operating expenses as a result of ongoing streamlining of the business to focus on high-margin products, and a decrease in the number of full-time employee equivalents, which more than offset the lower revenue from traditional landline telephony. Gains from the divestment of minor business areas also contributed to the increase.

Selected financial and operational data Excluding special items
TDC Business    2009  2008  2007   Growth in %  Growth in %
                2009 vs. 2008  2008 vs. 2007
                    
    DKKm               
Revenue    7,926  8,546  8,864  (7.3) (3.6)
   Landline telephony    1,968  2,072  2,218  (5.0) (6.6)
   Mobility services    2,251  2,346  2,308  (4.0) 1.6 
   Internet and network    2,526  2,569  2,604  (1.7) (1.3)
   Terminal equipment, etc.    1,047  1,395  1,542  (24.9) (9.5)
   Other    134  164  192  (18.3) (14.6)
Transmission costs and cost of goods sold    (2,643) (3,205) (3,240) 17.5  1.1 
Gross profit    5,283  5,341  5,624  (1.1) (5.0)
Other external expenses    (744) (850) (1,038) 12.5  18.1 
Wages, salaries and pension costs    (875) (1,000) (1,122) 12.5  10.9 
Operating expenses before depreciation, etc.    (4,262) (5,055) (5,400) 15.7  6.4 
Other income and expenses    122  31  (98.4)  
EBITDA    3,666  3,613  3,495  1.5  3.4 
                    
Key financial ratios                  
EBITDA margin  % 46.3  42.3  39.4     
                    
Customer base (end-of-year) '000               
Landline customers    439  482  504  (8.9) (4.4)
Mobile customers    977  846  710  15.5  19.2 
Mobile data card customers    97  83  73  16.9  13.7 
Internet customers    272  300  313  (9.3) (4.2)
Other networks and data connections    68  67  61  1.5  9.8 
Customer base, total    1,853  1,778  1,661  4.2  7.0 
    DKK /               
ARPU (yearaverage) month               
PSTN/ISDN    364  354  n.a. 2.8   
Mobile voice    274  308  n.a. (11.0)  
Broadband    365  372  n.a. (1.9)  
                    
Number of employees    1,528  1,620  2,212  (5.7) (26.8)
  1. LG refers to import, sales, installation and service of telecommunications installations from LG-Nortel.
  2. Telecommunications solutions for small and medium-sized business customers.
  3. The negative impact on EBITDA from price reductions on mobile termination was relatively low due to the spill-over effect on TDC’s costs.