Annual and Sustainability Report 2011 - Teracom

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A TV-centric business strategy The Teracom Group is facing intensified competition in the Nordic market, which means that the Group needs to focus and invest in developing its core business – TV and radio. Viewing Patterns for linear TV in minutes per day 210 157,5 105 52,5 0 2006 2007 Growth of the Teracom Group 2008 2009 2010 2011 DK FI SE Source: TNS Gallup (DK), Finnpanel (FI), MMS (SE) Number of subscriptions for Teracom Group in thousands 1200 1000 800 600 400 200 0 2006 2007 2008 2009 2010 2011 Boxer DK PlusTV Boxer SE Source: Teracom Group 1992 Teracom AB is formed from Televerket (Swedish Telecommunications Administration) 1999 Boxer TV-Access AB is formed with Teracom AB as 70 percent owner; the remaining 30 percent stake is purchased in 2008 2008 Boxer TV A/S is formed and receives operator license for the upcoming Danish digital TV network 2009 Teracom AB buys the majority stake in DigiTV Plus Oy (Plus TV) 2010 Teracom AB buys BSD, which is renamed Teracom A/S 2011 Teracom Group AB is formed as a Group company Competition between TV operators has increased, especially since TV has become the major broadband operators’ main service for attracting customers. Competition among broadcasters is also increasing, culminating in increasingly spectacular and interesting program ideas. TV holds its own not only as the largest mass medium, but as the medium with the largest economic resources, and thus the ability to attract talent for even more audience-pleasing program ideas. The main thrust of the Group's strategy is to enhance the competitiveness of the TV offering, create a strong Nordic presence to secure its market position in the long-term, work smart and cost-effectively and increase the skills and leadership within the Group. Effectively integrating network and Pay-TV strengthens the Group's position in the value chain. The competitiveness of the offer will increase by offering customers a wider choice in terms of both packaging and opportunities to watch TV whenever and however they wish. The terrestrial network offers a number of competitive attributes to be developed: • Watch scheduled TV programs whenever you want using smart recording features • Watch TV programs on any TV set in the home since the TV signal can be received anywhere and affordable packages with extra cards for Pay-TV • Watch TV programs on any TV set outside the home using more robust broadcast that reach more areas • Watch TV programs on any device suitable for viewing TV by developing receivers for tablets and similar screens as well as greater choice with more flexible Pay-TV packaging A mature market with rapid development All broadcast platforms for television have been digital for a long time, although cable distribution is essentially still analogue. IPTV via telephone and fiber networks has also been introduced, particularly by the major national telecommunications companies, which with their large financial muscles use television as a loss leader service to sell broadband. TV-like services, especially movies, are also becoming increasingly available online and it is becoming easier to integrate computer and television equipment, two technology platforms that previously lived separate lives in terms of image and connection standards, but that are now approaching each other. In Sweden, the Group worked hard during the year to broaden its service offering after the analogue switch-off. Broadband, IP telephony, more channels and new HDTV channels meant higher revenues per customer and new revenues for the network. The result was a good profit level, but the departure of nearly 100,000 Pay-TV customers from Boxer could not be prevented. Therefore competitiveness needs to be further increased. Having a presence mainly in the Nordic countries is necessary to create the overall size and customer base required to be a priority platform and partner for broadcasters and equipment manufacturers. 6
An integrated TV business The Group's strategy and planning assume that the TV business is a completely integrated business - from the broadcast station via the boxes out to the viewer, a viewer who is preferably a Pay-TV customer. This integrated business will be run in a similar way in market after market and the reason is, of course, that competition is growing and terrestrial networks must therefore be developed. There are three reasons why network and Pay-TV should sit together and expand into more markets: 1. Development of services and technologies requires consensus and careful commercial coordination. 2. The various TV markets share many similarities and the terrestrial networks function in much the same way, so investments and lessons learned from one market become far more valuable if they can be applied in other markets. 3. A large general customer base is essential to achieve sufficient bargaining power against suppliers and broadcasters. The Swedish market is the most mature in the Teracom Group and services developed – HDTV, broadband, IP telephony and set top boxes for Video On Demand – will obviously be launched in other markets. It is important to take advantage of economies of scale in order to strengthen the competitiveness of the terrestrial networks in a financially sound way. The terrestrial networks in which network and Pay-TV are integrated will become more competitive, at least in small countries with several competing means of distribution and where advertising is not enough to finance the many free TV channels. The Teracom Group currently has an integrated business in both Sweden and Denmark, and the Group's aim is to achieve full integration in all markets. Strength in a dedicated broadcast platform The terrestrial networks offer great opportunities for development and there is a considerable need to strengthen the platform on both the network and service sides. In 2010 HDTV was launched in the Swedish network using the new broadcasting standard DVB-T2, which radically optimizes frequency utilization. This technology makes it possible over time to completely switch to HDTV, which is becoming the image standard for all TV sets. The reason of course is that broadcast TV is competing with online video and image quality is one of the great advantages of a dedicated broadcast platform. DVB-T2 can also be used for many more channels, or a mix of HDTV and new channels. TV-like services can be accessed in an increasing number of ways. Movies can be rented via broadband, broadcasters offer on demand services that can be watched both live or stored, while YouTube and similar sites offer an abundance of videos from all over the world, many of them from television. Boxer's new On Demand service is also based on delivery via the customer's own broadband connection. All this underscores how traditional TV networks are challenged by more and more TV-like services over broadband. The traditional TV networks, which broadcast in one direction, offer a number of advantages that may become crucial as online video use increases: • An infinite number of receivers can be reached in the area covered by the broadcasts. Number of users does not affect capacity, unlike broadband, where each new user needs new capacity. This is crucial for live TV, an extremely capacity-intensive service for which people have little tolerance for delays. • The broadcast transmission is paid for by the broadcaster, which is either the program company or the Pay-TV operator. For the user, reception is free (of course customers buy a subscription for Pay-TV services). Households usually pay a fixed fee for broadband. This model does not work as well if capacity requirements radically increase from various media. Just who will pay for broadband services that demand more and more capacity is a major issue in the telecom world. Regardless of where the bill is sent, it has to be paid. This makes broadcast networks appear to be significantly more cost-efficient. • The new image standard will be HDTV, which requires much more capacity than standard TV and will pose major challenges for broadband networks and business models. Pay-TV Services and technologies introduced in the Group Network TV RADIO TELECOM 1995 Digital radio (DAB) 1999 Digital TV with DVB-T/MPEG2 2007 Boxer TV navigator 2008 Digital TV with DVB-T/MPEG4 2009 Broadband IP telephony DAB+ 2010 HDTV with DVB-T2/MPEG4 Regional versions of national TV channels 2011 Video-on-demand The Teracom Group’s strategy is based on the premise that the TV business is a completely cohesive business. 7
Page 1 and 2: Annual and Sustainability Report 20
Page 3 and 4: Read more about the Swedish busines
Page 5 and 6: Denmark has been and continues to b
Page 7: Teracom Group On 1 June, Teracom Gr
Page 11 and 12: digital radio and, in connection wi
Page 13 and 14: Subsidized public transportation en
Page 16 and 17: Sweden Sweden is the Group’s firs
Page 18 and 19: The market The competition primaril
Page 20 and 21: 67 PR5 Customer satisfaction for Bo
Page 22 and 23: Denmark Denmark is the Group's youn
Page 24 and 25: Chris Corneliussen, Boxer Denmark
Page 26 and 27: Finland PlusTV is the largest Pay-T
Page 28 and 29: Kimi »The Iceman« Räikkönen is
Page 30 and 31: Sustainability - corporate responsi
Page 32 and 33: The Teracom Group’s sustainabilit
Page 34 and 35: The Group's breakdown of climate im
Page 36 and 37: Employees For the Teracom Group, hi
Page 38 and 39: Media plurality requires a long-ter
Page 40 and 41: Reporting in accordance with GRI gu
Page 42 and 43: GRI G3 Index Reference Comments 1.
Page 44: Contents 44 Directors’ Report 49
Page 47 and 48: Operating profit for the year amoun
Page 49 and 50: Diversity and equal opportunity Div
Page 51 and 52: Corporate Governance Report The Cor
Page 53 and 54: Teracom AB's 2011 AGM Teracom AB's
Page 55 and 56: Evaluation of the Board of Director
Page 57 and 58: ously striving to achieve long-term
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1 2 3 4 5 6 7 8 9 10 11 12 Board of
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Consolidated Income Statement MSEK
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Consolidated Cash Flow Statement MS
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Parent Company Income Statement MSE
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Parent Company Cash Flow Statement
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Notes Contents Note Description Pag
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the Group conducts an impairment te
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No major changes will be made for f
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Note 4 Segment reporting The Group
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Notice period and severance pay The
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Return on plan assets 2011 2010 For
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Note 13. Tax on profit for the year
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Note 16. Goodwill and other intangi
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Note 17. Other financial assets Gro
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Net investments of foreign operatio
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Financial derivative instruments Th
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Note 26. Shares and participations
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Auditors' report on overall review
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Responsibility of the auditor It is
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Technical definitions Broadcasting
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Annual and Sustainability Report 2011 - Teracom

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