TDC Group

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Glossary

All figures in these financial statements, including comparative figures, reflect the merger between TDC and NTC with TDC as the surviving company, which was effective from January 1, 2009 for accounting purposes. In accordance with the International Financial Reporting Standards (IFRS), the financial statements of the merged company are based on the values of the original acquirer (NTC). Accordingly, certain assets in these financial statements differ significantly from those in the former financial statements of TDC, as at the time of the acquisition of TDC, NTC allocated the total purchase price for the shares in TDC to the underlying assets and liabilities, in accordance with IFRS.

The merger between TDC and NTC has resulted in a number of accounting adjustments to TDC's financial statements that imply additional depreciation and amortization, due mainly to amortization of customer relationships. TDC's cash flows will not be impacted by the additional depreciation and amortization.

Key financial data
TDC Group    2009  2008  2007   Growth in %  Growth in %
                2009 vs. 2008  2008 vs. 2007
   DKKm               
Revenue 35,939  35,609  36,779  0.9  (3.2)
Transmission costs and cost of goods sold    (10,149) (10,433) (11,206) 2.7  6.9 
Gross profit    25,790  25,176  25,573  2.4  (1.6)
Other external expenses    (7,491) (7,281) (7,268) (2.9) (0.2)
Wages, salaries and pension costs    (5,486) (6,166) (6.808) 11.0  9.4 
Total operating expenses before depreciation, etc.    (23,126) (23,880) (25,282) 3.2  5.5 
Other income and expenses    233  472  266  (50.6) 77.4 
EBITDA    13,046  12.201  11,763  6.9  3.7 
Depreciation, amortization and impairment losses    (6,319) (6,100) (7,446) (3.6) 18.1 
Operating income (EBIT), excluding special items    6,727  6,101  4,317  10.3  41.3 
Special items    (1,187) (3,070) 503  61.3   
Income from joint ventures and associates    76  200  266  (62.0) (24.8)
   of which special items    77  (22) (76)   71.1 
Net financials    (1,882) (1,719) (2.401) (9.5) 28.4 
Income before income taxes    3,734  1,512  2,685  147.0  (43.7)
Income taxes    (987) (588) 326  (67.9)  
   of which special items    291  279  203  4.3  37.4 
Net income from continuing operations    2,747  924  3,011  197.3  (69.3)
Net income from discontinued operations    (364) (367) 621  0,8 (159.1)
   of which special items    (100) 59  1,304    (95.5)
Net income    2,383  557  3,632    (84.7)
                    
Net income from continuing operations excluding special items    3,566  3,737  2,381  (4.60%) 57.0 
                    
Net interest-bearing debt    (33,461) (34,873) (41,450) 4.0  15.9 
                    
Statements of Cash Flow                  
Operating activities    10,619  7,163  9,871  48.2  (27.4)
Investing activities    (6,314) 600  7,886    (92.4)
Financing activities    (10,260) (9,342) (13,199) (9.8) 29.2 
Total Cash Flow    (5,955) (1,579) 4,558    (134.6)
                 
Key financial ratios                  
Earnings Per Share (EPS)  DKK 12.2  3.6  19.7     
EPS from continuing operations, excl. special items  DKK 18.0  18.9  12.0     
Dividend payments per share  DKK 39.3  3.6  3.5     
EBITDA margin  % 36.3  34.3  32.0     
Capital expenditures excl. share acquisitions  DKKm (4,950) (4,710) (4,837) (5.1) 2.6 
Capex excl. share acquisitions-to-revenue ratio  % 13.8  13.2  13.2     
Operating free cash flow  DKKm 8,797  7.132  7,283  23.3  (2.1)
Cash conversion  % 67.4  58.5  61.9     
Net debt/EBITDA  # 2.6  2.9  3.5     
EBITDA/interest  # 8.8  6.9  3.9     

Revenue

In 2009, TDC’s revenue amounted to DKK 35,939m, up by DKK 330m or 0.9% compared with 2008. In Nordic Business, the DKK 839m or 3.1% decline in revenue was more than offset by growth of DKK 1,161m or 13.3% in Sunrise1.

Revenue in Nordic Business was negatively affected by the macroeconomic downturn as well as the divestment of the international voice business, divestment and outsourcing of handset sales and CPE sales to business customers, other minor divestments and the negative exchange-rate developments in TDC Sweden and TDC Norway. This was partly offset by the acquisitions of Fullrate and A+. Excluding these impacts, revenue decreased by approximately 1%, which related mainly to declining domestic revenue from traditional landline telephony in both the business and residential segments as a consequence of the migration toward mobile only and VoIP, and lower CPE sales. The success of Home Duo/Trio offerings helped curb this decline. EU price regulation on international roaming implied a (DKK 140m) decrease in revenue and national price regulation on mobile termination resulted in a (DKK 130m)2 revenue decrease compared with 2008. The reduced revenue was also affected by lower income from the integrator business in TDC Sweden, which was significantly affected by the economic downturn. The decline in revenue in Nordic Business was partly offset by strong customer growth and higher ARPU on TV, mainly in YouSee, as well as increased traffic in the no-frills mobile voice segment and more domestic mobile voice and mobile broadband customers.

During 2009, the quarter-over-quarter revenue decline in Nordic Business improved in each quarter, and revenue development in 4Q 2009 was stable compared with 4Q 2008.

In Sunrise, the acquisition of Tele2 in Switzerland, in particular, and a significant favorable exchange-rate development generated positive growth, whereas the divestment of SBC in 2008 contributed negatively. Adjusted for this, revenue increased by approximately 3%, which related primarily to increased landline wholesale revenue, and an increase in the mobile prepaid and postpaid customer base. This was only partly offset by reduced revenue from mobile termination3, caused by price reductions as a result of national regulation.

Adjusted for acquisitions and divestments4, outsourcing5 and currency effects, TDC’s revenue was unchanged from 2008 to 2009.

Revenue         DKKm
TDC Group 2009  2008  2007   Growth in %  Growth in %
             2009 vs. 2008  2008 vs. 2007
Consumer 9,711  9,901  10,115  (1.9) (2.1)
TDC Business 7,926  8,546  8,864  (7.3) (3.6)
TDC Nordic 3,515  3,854  3,863  (8.8) (0.2)
Operations & Wholesale 2,582  2,748  3,601  (6.0) (23.7)
YouSee 3,597  3,188  2,829  12.8  12.7 
Sunrise 9,866  8,705  8,842  13.3  (1.5)
Other activities1 (1,258) (1,333) (1,335) 5.6  0.1 
TDC Group 35,939  35,609  36,779  0.9  (3.2)
   Nordic Business incl. YouSee 26,079  26,918  27,850  (3.1) (3.3)
           
  1. Includes Headquarters and eliminations.

In 2008, TDC’s revenue amounted to DKK 35,609m, down by DKK 1,170m or 3.2% compared with 2007. This was attributed to a DKK 932m or 3.3% revenue decline in Nordic Business and a DKK 137m or 1.5% decline in Sunrise6.

Further, revenue in the TDC Group was negatively impacted by the divestment of Bité.

Adjusted for acquisitions and divestments7, outsourcing8 and currency effects, TDC’s revenue decreased by approximately 1% from 2007 to 2008.

Gross profit

Gross profit amounted to DKK 25,790m in 2009, up by DKK 614m or 2.4% compared with 2008. The DKK 42m or 0.2% decline in gross profit in Nordic Business was more than offset by a DKK 661m or 12.0% increase in Sunrise9.

The revenue reduction in Nordic Business was largely offset by a DKK 797m or 11.0% reduction in transmission costs and cost of goods sold, reflecting that some of the divestments made in both 2008 and 2009 that led to reduced revenue (with full-year effect in 2009) were in low margin segments such as international voice and CPE. The reduction in transmission costs was also a consequence of savings on mobile termination (DKK 146m) and international roaming (DKK 90m) as the direct impact from regulation. Transmission costs and cost of goods sold also decreased due to lower activity in the traditional domestic landline market and the Nordic integrator business. This was partly offset by increased transmission costs and cost of goods sold following the acquisition of Fullrate and A+, higher program costs related to increased TV activity, and, to a lesser degree, increased costs related to higher activity in mobile voice, mobile broadband and VoIP.

In Sunrise, transmission costs and cost of goods sold increased by DKK 500m or 15.6%, amounting to DKK 3,710m in 2009. This increase related mainly to increased landline wholesale activity and, to a lesser extent, the acquisition of Tele2, increased costs from 2008 to 2009 due to a non-recurring compensation from Swisscom in 2008 regarding excessive termination charges from 2006 to 2008, and the currency effect. This was partly offset by the divestment of SBC, and lower mobile termination and international roaming costs per minute.

Gross profit         DKKm  
TDC Group 2009  2008  2007   Growth in %  Growth in %
             2009 vs. 2008  2008 vs. 2007
Consumer 6,691  6,715  6,839  (0.4) (1.8)
TDC Business 5,283  5,341  5,624  (1.1) (5.0)
TDC Nordic 1,609  1,726  1,667  (6.8) 3.5 
Operations & Wholesale 2,146  2,265  2,591  (5.3) (12.6)
YouSee 2,072  1,844  1,676  12.4  10.0 
Sunrise 6,156  5,495  5,562  12.0  (1.2)
Other activities1 1,833  1,790  1,614  2.4  10.9 
TDC Group 25,790  25,176  25,573  2.4  (1.6)
   Nordic Business incl. YouSee 19,634  19,676  20,063  (0.2) (1.9)
       
1 Includes Headquarters and eliminations.

In 2008, the TDC Group’s gross profit amounted to DKK 25,176m, down by DKK 397m or 1.6% compared with 2007. This was attributed to a DKK 387m or 1.9% decline in Nordic Business’ gross profit and a reduction of DKK 67m or 1.2% in Sunrise10.

Income before depreciation, amortization and special items (EBITDA)

TDC’s EBITDA amounted to DKK 13,046m in 2009, up by DKK 845m or 6.9% on 2008, stemming from DKK 497m or 5.0% growth in Nordic Business, and DKK 363m or 16.9% growth in Sunrise11.

Nordic Business experienced a strong EBITDA development from 2008 to 2009, leading to an EBITDA margin of 40.4%. The EBITDA development was achieved despite a negative EBITDA effect from divestments and outsourcing of business activities and the negative exchange-rate developments in TDC Sweden and TDC Norway, which were only partly offset by the acquisitions of Fullrate and A+. Excluding these impacts, EBITDA increased by approximately 6%, and resulted from cost reductions in other external expenses and wages, salaries and pension costs. Other external expenses decreased by DKK 180m or 3.7% to DKK 4,731m in 2009 and stemmed principally from lower costs for facility management, IT equipment and property, and a general cost reduction across all business lines including Headquarters. Also, marketing costs were lower, as were employee-related costs due to fewer employees. Wages, salaries and pension costs dropped by DKK 587m or 11.3% to DKK 4,598m, driven by a decrease in the number of full-time employee equivalents.

The number of full-time employee equivalents in Nordic Business totaled 11,277 at year-end 2009, a decrease of 495 or 4.2% compared with 11,772 at year-end 2008. The domestic workforce fell from 10,293 full-time employee equivalents at year-end 2008, to 9,986 at year-end 2009, down by 3.0%, driven primarily by redundancy programs12 (804) and to a lesser extent outsourcing (15), which was partly offset by the net effect of the divestment and acquisition of business activities (a negative 353).

In Sunrise, the positive EBITDA growth related primarily to the acquisition of Tele2 in Switzerland, and the favorable exchange-rate development, which was partly offset by increased costs from 2008 to 2009 due to a non-recurring compensation from Swisscom in 2008 regarding excessive termination charges from 2006 to 2008. Excluding these issues, EBITDA increased by approximately 9% and related primarily to growth in the residential mobile market. Outsourcing of the network operations also contributed to the EBITDA growth by reducing wages, salaries and pension costs, though this was partly offset by a corresponding increase in other external expenses. At year-end 2009, Sunrise had 1,550 full-time employee equivalents – an increase of 76 or 5.2% compared with year-end 2008 due primarily to the acquisition of Tele2 (53)13.

Adjusted for acquisitions and divestments, currency effects and the non-recurring compensation from Swisscom in 2008, TDC’s EBITDA increased by approximately 6% from 2008 to 2009.

EBITDA         DKKm
TDC Group 2009  2008  2007   Growth in %  Growth in %
             2009 vs. 2008  2008 vs. 2007
Consumer 3,965  3,873  3,717  2.4  4.2 
TDC Business 3,666  3,613  3,495  1.5  3.4 
TDC Nordic 497  458  425  8.5  7.8 
Operations & Wholesale 1,498  1,574  1,420  (4.8) 10.8 
YouSee 1,141  954  814  19.6  17.2 
Sunrise 2,510  2,147  2,387  16.9  (10.1)
Other activities1 (231) (418) (495) 44.7  15.6 
TDC Group 13,046  12,201  11,763  6.9  3.7 
   Nordic Business incl. YouSee 10,535  10,038  9,356  5.0  7.3 
 
  1. Includes Headquarters and eliminations.

In 2008, TDC’s EBITDA amounted to DKK 12,201m, up by DKK 438m or 3.7% on 2007, and stemmed from DKK 682m or 7.3% growth in Nordic Business, which was partly offset by a DKK 240m or 10.1% reduction in Sunrise14.

Adjusted for acquisitions and divestments, currency effects and the non-recurring compensation from Swisscom in 2008, TDC’s EBITDA increased by approximately 2% from 2007 to 2008.

Depreciation, amortization and impairment losses

Depreciation, amortization and impairment losses rose by DKK 219m or 3.6% to DKK 6,319m in 2009. This increase reflected mainly the CHF exchange-rate development and acquisitions of Fullrate and Tele2 by Sunrise. This was partly offset by the write-down of the Song and Dotcom brands in 2008, and lower depreciation related to landline networks.

In 2008, depreciation, amortization and impairment losses decreased by DKK 1,346m or 18.1% to DKK 6,100m. The reduction reflected mainly lower depreciation of property, plant and equipment and amortization of software due to assets fully depreciated and amortized during 2007 as well as lower amortization of customer relationships according to the diminishing balance method.

Special items

Special items include significant amounts that cannot be attributed to normal operations such as special write-downs for impairment of intangible assets and property, plant and equipment as well as provisions for restructuring and any reversals of such. Special items also include large gains and losses related to divestments of subsidiaries.

Items of a similar nature for non-consolidated enterprises and discontinued operations are recognized under income from joint ventures and associates and net income from discontinued operations, respectively.

Special items from continuing operations are specified in the table together with a reconciliation of net income from continuing operations excluding and including special items.

Special items from continuing operations amounted to expenses of DKK 819m after tax in 2009 compared with expenses of DKK 2,813m in 2008 and income of DKK 630m in 2007.

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

In 2008, special items comprised primarily impairment losses related mainly to goodwill and other intangible assets from TDC Sweden and TDC Finland. Restructuring costs related largely to IT activities including write-down of software as well as redundancy programs including 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.

In 2007, special items amounted to DKK 918m comprising a gain from divestment of properties and Bité. This was partly counterbalanced by restructuring costs of DKK (446)m related largely to redundancy programs in Nordic Business and costs regarding discontinued use of sea cables.

Special items     DKKm
TDC Group 2009  2008  2007 
           
Net income from continuing operations excluding special items 3,566  3,737  2,381 
           
Consolidated enterprises         
Gain/(loss) from divestment of enterprises and property (36) 918 
Income from rulings (40) 29  166 
Impairment losses and adjustments of goodwill (119) (1,879) (135)
Restructuring costs, etc. (992) (1,228) (446)
Special items before income taxes (1,187) (3,070) 503 
Income taxes related to special items 291  279  203 
Special items after income taxes in consolidated enterprises (896) (2,791) 706 
Joint ventures and associates 77  (22) (76)
Special items from continuing operations (819) (2,813) 630 
           
Net income from continuing operations 2,747  924  3,011 

Income from joint ventures and associates

Income from joint ventures and associates decreased by DKK 124m to DKK 76m in 2009. Income from joint ventures and associates excluding special items decreased by DKK 223m to DKK(1)m. The decrease in income reflected the divestment of shares in Polkomtel in 2008.

In 2008, income from joint ventures and associates decreased by DKK 66m to DKK 200m compared with 2007. Income from joint ventures and associates excluding special items decreased by DKK 120m to DKK 222m. The decrease reflected lower income following the divestment of TDC's shares in Polkomtel in 2008. Although the shares were not divested until December 2008, TDC ceased to recognize income from Polkomtel during 2Q 2008, as the net carrying value of the investment in Polkomtel equaled the expected sales proceeds.

Net financials

Net financials totaled an expense of DKK 1,882m in 2009, up by DKK 163m compared with 2008. The development reflected primarily a negative development in currency translation adjustments of DKK 944m due to currency adjustments of debt denominated in NOK and SEK. Further, since early 2009, the investment in Sunrise has no longer been fully hedged, and the hedging of the investment in Sunrise is no longer treated as hedge accounting. This development was partly offset by a positive development of DKK 485m in fair value adjustments of derivative financial instruments. In addition, financial income and expenses improved by net DKK 296m, reflecting lower interest expenses due to long-term debt redemptions and lower interest rates on long-term debt.

In 2008, net financials totaled an expense of DKK 1,719m, down by DKK 682m compared with 2007. Financial income and expenses, net declined by DKK 1,247m, reflecting lower interest expenses due to long-term debt redemptions and lower interest rates on long-term debt. In addition, currency translation adjustments improved by DKK 534m related to currency adjustments of debt denominated in NOK and SEK. This was partly offset by a negative development of DKK 1,099m in fair value adjustments of derivative financial instruments.

Income taxes

Income taxes amounted to an expense of DKK 987m in 2009 compared with an expense of DKK 588m in 2008 and a tax income of DKK 326m in 2007.

Income taxes related to net income, excluding special items totaled an expense of DKK 1,278m in 2009 compared with DKK 867m in 2008 and a tax income of DKK 123m in 2007.

The effective tax rate, excluding special items, was 26.4% in 2009 compared with 18.8% in 2008. The increase related largely to the limitation of tax deductibility on interest expenses according to Danish tax legislation.

The effective tax rate, excluding special items, was 18.8% in 2008 compared with (5.4)% in 2007. In 2008, the effective tax rate was lower than the Danish corporate income tax rate of 25% due to positive adjustments of income taxes in earlier years as well as the tax value of non-capitalized tax losses. In 2007, the limited tax deductibility was more than counterbalanced by a non-recurring positive impact on deferred taxes resulted from the reduction of the corporate tax rate to 25%.

Net income from discontinued operations

In 2009, net income from discontinued operations amounted to a loss of DKK 364m in 2009, largely unchanged from 2008. In 2007, net income from discontinued operations amounted to a profit of DKK 621m.

The loss in 2009 related mainly to Invitel and comprised a loss of DKK 264m from operations and a loss of DKK 100m related to divestment.

The loss in 2008 comprised DKK 426m in Invitel as well as positive adjustments of the gains from the divestment of Talkline in 2007 and TDC Directories in 2005, totaling DKK 59m.

The income in 2007 comprised a net loss of DKK 683m primarily in Invitel, however, this was partly offset by income in Talkline. The net loss was more than offset by gains from the divestments of discontinued operations, related largely to the DKK 1,297m gain from the divestment of Talkline.

Net income

In 2009, net income increased to DKK 2,383m from DKK 557m in 2008. The DKK 1,826m increase reflected primarily lower expenses related to special items and higher EBITDA in 2009. This was counterbalanced by increased income taxes in 2009 due to limitation of tax deductibility on interest expenses, and increased expenses from net financials, related mainly to currency adjustments of debt denominated in NOK and SEK, and lower income from joint ventures and associates related to the divestment of Polkomtel in 4Q 2008.

Net income from continuing operations, excluding special items, amounted to DKK 3,566m in 2009, down by DKK 171m or 4.6% compared with 2008. The decrease reflected higher income tax in 2009, lower income from joint ventures and associates related to the divestment of Polkomtel, and increased expenses from net financials due to negative impact from currency translation adjustments. This was counterbalanced by higher EBITDA.

In 2008, net income, including special items, decreased to DKK 557m from DKK 3,632m in 2007. The decrease reflected mainly the development in special items. Special items had a negative impact in 2008 due primarily to impairment losses related to goodwill from TDC Sweden and TDC Finland as well as restructuring costs. Net income was also negatively affected by a negative development in fair value adjustments. This was only partly offset by lower depreciation, etc. and net financial expenses, and higher EBITDA. Special items had a positive impact in 2007 due largely to gains from the divestment of Bité and One as well as the sale and leaseback of properties. Special items related to discontinued operations also had a positive impact in 2007, which was caused by the gain from the divestment of Talkline.

Net income from continuing operations, excluding special items, amounted to DKK 3,737m in 2008, up DKK 1,356m or 57.0% compared with DKK 2,381m in 2007. The increase reflected mainly lower depreciation, etc. as well as net financial expenses, and higher EBITDA, which was partly offset by a negative development in fair value adjustments.

Comprehensive income

Total comprehensive income amounted to DKK 3,458m in 2009 compared with a loss of DKK 108m in 2008 and an income of DKK 3,919m in 2007.

The DKK 3,566m increase from 2008 to 2009 reflected mainly a positive development related to currency translation adjustments of foreign enterprises before tax, which totaled a gain of DKK 631m in 2009 compared with a loss in 2008 of DKK 2,111m. In addition, net income increased whereas actuarial gains related to defined benefit pension plans decreased.

The DKK 4,027m decrease from 2007 to 2008 related primarily to a decrease in net income. In addition, currency translation losses increased, however these were partly counterbalanced by increased actuarial gains related to defined benefit pension plans.

Balance sheet

Total assets amounted to DKK 86,423m at year-end 2009, compared with DKK 100,005m at year-end 2008, down by DKK 13,582m. The decrease was due chiefly to the divestment of Invitel and lower cash.

In 2008, total assets were down by DKK 6,140m compared with DKK 106,145m at year-end 2007. The decrease was due mainly to lower investments in joint ventures and associates due to the divestment of shares in Polkomtel in 2008.

Equity aggregated DKK 27,078m at year-end 2009, down by DKK 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.

In 2008, equity was down by DKK 530m compared with DKK 32,210m at year-end 2007. Dividend payments of DKK 635m and total comprehensive loss of DKK 108m more than offset a capital contribution of DKK 213m.

Total liabilities declined by DKK 8,980m to DKK 59,345m compared with DKK 68,325m at year-end 2008. The decrease was due primarily to lower long-term loans, partly offset by increased short-term bank loans.

In 2008, total liabilities declined by DKK 5,610m compared with DKK 73,935m at year-end 2007. The decrease was due primarily to lower long-term loans. 

Net interest-bearing debt

Net interest-bearing debt totaled 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 debt totaled DKK 34,873m at year-end 2008, down DKK 6,577m compared with year-end 2007. The decrease in net interest-bearing debt resulted mainly from the divestment of Polkomtel.

Net interest-bearing debt 1     DKKm
TDC Group 2009  2008  2007 
Senior Facilities 26,173  28,415  34,922 
Euro Medium Term Notes (EMTN) 5,325  7,316  9,632 
Other loans 2,900  6,019  5,259 
Loans 34,398  41,750  49,813 
Interest-bearing payables    
Gross interest-bearing debt 34,398  41,750  49,816 
Interest-bearing receivables (174) (159) (69)
Cash (763) (6,718) (8,297)
Net interest-bearing debt 33,461  34,873  41,450 
  1. Net carrying value measured at amortized cost, ensures the difference between the proceeds received and the nominal value is recognized in the Statements of Income over the term of the loan.

The Senior Facilities Agreement (SFA) and the Euro Medium Term Notes (EMTN) are the main debt-financing instrument in TDC, representing 76% and 15%, respectively, of the total loans (in terms of net carrying value).

Senior facilities        Facilities      
       A  B  C  Total
                 
Maturity     Dec. 31, 2011  Jan. 30, 2014  Jan. 30, 2015   
Fixed/floating interest rate     Floating  Floating  Floating   
Interest rate margin    1.250% 1.500% 2.125%   
                 
Outstanding amount1 at January 1, 2009  EURm 803  1,401  1,671  3,874 
Mandatory payment following the divestment of Polkomtel  EURm (306)     (306)
                 
Outstanding amount1 at December 31, 2009  EURm 497  1,401  1,671  3,569 
                 
Outstanding amount1 at December 31, 2009  DKKm 3,696  10,428  12,432  26,556 
                 
Euro Medium Term Notes (EMTN)        Bonds      
      2009  2012 2015   Total
                 
Maturity     Feb. 6, 2009 Apr. 19, 2012  Dec. 16, 2015   
Fixed/floating interest rate     Fixed  Fixed  Fixed   
Coupon    5.625% 6.500% 5.875%   
                 
Outstanding amount1 at January 1, 2009  EURm 251  724    975 
Redemption  EURm (251)     (251)
Buy-back  EURm   (11)   (11)
Exchange offer  EURm   (256) 274  18 
                 
Outstanding amount1 at December 31, 2009  EURm   457  274  731 
                 
Outstanding amount1 at December 31, 2009  DKKm   3,404  2,036  5,440 
  1. Nominal value.

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

Capital expenditures15

Capital expenditures totaled DKK 4,950m in 2009, up by DKK 240m compared with 2008. The increase stemmed mainly from higher investments in Sunrise related to landline, the expansion of ULL coverage and software as well as impacts from the CHF exchange-rate development. Capital expenditures in Nordic Business amounted to DKK 3,891m in 2009, down by DKK 84m compared with 2008, and investments in domestic landline networks increased due to the success in sales of TDC HomeDuo and TDC HomeTrio, which were only partly offset by lower IT investments.

The capex-to-revenue ratio increased to 13.8% in 2009 from 13.2% in 2008. In Nordic Business, the capex-to-revenue ratio increased to 14.9% in 2009 from 14.8% in 2008.

Capital expenditures         DKKm
TDC Group 2009  2008  2007   Growth in %  Growth in %
             2009 vs. 2008  2008 vs. 2007
Nordic Business incl. YouSee 3,891  3,975  3,968  2.1  (0.2)
   Nordic Business excl. YouSee1 3,411  3,623  3,695  5.9  1.9 
      Hereoff TDC Nordic 375  411  398  8.8  (3.3)
   YouSee 480  352  273  (36.4) (28.9)
Sunrise 1,059  735  858  (44.1) 14.3 
Other     11     
TDC Group 4,950  4,710  4,837  (5.1) 2.6 
  1. As domestic infrastructure (excl. YouSee) is based in Operations & Wholesale, domestic capex cannot be allocated to the separate business lines in Nordic Business, excl. YouSee.

In 2008, capital expenditures were DKK 4,710m, down by DKK 127m compared with 2007. Capital expenditures in Nordic Business amounted to DKK 3,975m in 2008, up by DKK 7m compared with 2007. The increase was caused mainly by a capacity expansion and future proving of the access and backbone network, an increase in capitalized

IT investments, and an increase in capital expenditure related to higher activity in YouSee. The increase was almost fully offset by fewer fiber and xDSL customer installations related to fewer installations at a lower unit price. Also, outsourcing of the operation of the GSM and UMTS networks to Ericsson resulted in decreased capex, as the roll-out of 3G and HDSPA expanded compared with 2007.

The capex-to-revenue ratio was 13.2% in both 2007 and 2008. In Nordic Business, the capex-to-revenue ratio increased to 14.8% in 2008 from 14.2% in 2007.

Statements of cash flow

Cash flow from operating activities rose by DKK 3,456m or 48.2% in 2009. The increase was due mainly to lower taxes paid, higher EBITDA, lower net interest paid as well as improvement of working capital of DKK 1,035m which was higher than the DKK 523m improvement in 2008.

Cash conversion increased by 8.9% percentage points to 67.4% in 2009. The higher increase in operating free cash flow than in EBITDA was driven mainly by the additional working capital improvements in 2009.

In 2008, cash flow from operating activities decreased by DKK 2,708m or 27.4% compared with 2007. The decrease was due mainly to currency translation adjustments from hedging activities and higher corporate income tax paid.

In 2008, cash conversion decreased by 3.4 percentage points to 58.5% from 61.9% in 2007. Despite the increase in EBITDA operating free cash flow decreased as a result of a negative development in the other components of operating free cash flow including a lower working capital improvement in 2008 than in 2007.

Cash flow from investing activities totaled an outflow of DKK 6,314m in 2009 compared with an inflow of DKK 600m in 2008. The development reflected primarily higher investments in enterprises, and related to the acquisitions of Fullrate, A+ and DONG Energy's fiber network in 2009 as well as the divestment of TDC's shares in Polkomtel in 2008.

In 2008, cash outflow from investing activities decreased by DKK 7,286m compared with 2007. The development was driven by the lower proceeds from divestment of enterprises in 2008 than in 2007.

Cash outflow from financing activities increased by DKK 918m in 2009. The higher outflow was due largely to higher dividends paid, counterbalanced by lower repayments of loans.

In 2008, cash outflow from financing activities decreased by DKK 3,857m compared with 2007. The lower outflow related mainly to lower repayment of long-term debt.

  1. The split between Nordic Business and Sunrise excludes other activities.
  2. The negative impact on EBITDA from price reductions on mobile termination was relatively low due to the spill-over effect on TDC’s costs.
  3. The negative impact on EBITDA from price reductions on mobile termination was relatively low due to the spill-over effect on Sunrise’s costs.
  4. Acquisitions and divestments from 2008 to 2009 were impacted by the following changes in ownership shares: Acquisitions: Tele2, Fullrate, A+ and DONG Energy's fibernetwork. Divestments Uppsala Stadsnät, Digital Signatur, Business Phone, SBC, the international voice business, LG, the satellite business, hosting & power net business, Rejsekort and Telepunkt activities. In the remainder of the Annual Report, ‘adjusted for acquisitions and divestments from 2008 to 2009’ refers to reported figures for the TDC Group adjusted for these acquisitions and divestments.
  5. Outsourcing from 2008 to 2009 was impacted by: TopNordic.
  6. The split between Nordic Business and Sunrise excludes other activities.
  7. Acquisitions and divestments from 2007 to 2008 were impacted by the following changes in ownership shares: Acquisitions: Tele2, Uni2. Divestments: Bité, Digital Signatur, Business Phone, SBC, the international voice business, LG, Connect Partner, hosting & power net business. In the remainder of the Annual Report, ‘adjusted for acquisitions and divestments from 2007 to 2008’ refers to reported fig-ures for the TDC Group adjusted for these acquisitions and divestments.
  8. Outsourcing from 2007 to 2008 was impacted by: TopNordic.
  9. The split between Nordic Business and Sunrise excludes other activities.
  10. The split between Nordic Business and Sunrise excludes other activities.
  11. The split between Nordic Business and Sunrise excludes other activities.
  12. Including redundancy programs implemented in 2007 and 2008 with effect in 2009. Only retired employees are included, not employees transferred to other positions and terminated positions.
  13. Though the company was acquired in 2008, the employees from Tele2 were not included in Sunrise's full-time employee equivalents until January 2009.
  14. The split between Nordic Business and Sunrise excludes other activities.
  15. Excluding share acquisitions.