CEO's review: DNA’s profitability improved significantly in 2016

2016 has been a strong year for DNA, in terms of financial development, customer base growth and customer satisfaction. Our net sales increased to EUR 858.9 million. Our profitability improved significantly as our operating result grew 24.8 percent and was EUR 91.2 million, or 10.6 percent of net sales, leading to
earnings per share of EUR 0.51. Net sales were driven by the strong growth in service revenue (net sales less sales of goods and interconnection charges) as well as the positive development of mobile device sales. Our service revenue was boosted in particular by the increased sales of mobile subscriptions and growing use of mobile data as 4G subscriptions become more common. Our net sales were burdened by lower interconnection earnings as well as weaker demand for pay-TV services.

Favourable development of our mobile communication subscription base continued in 2016. It grew by 121,000 subscriptions, reaching 2.7 million in total. Our fixed-network subscription base decreased by 7,000 and totalled 1.1 million at the end of the year. This is due to the drop in the number of fixed-network voice subscriptions. The number of broadband and cable television subscriptions increased by some 6,000 in total during 2016.

DNA shares were listed on the official list of Nasdaq Helsinki towards the end of 2016. Listing is an important milestone in developing DNA to an even stronger telecommunications company in the Finnish market. The final subscription price was EUR 10.10 per share and our IPO was oversubscribed. After the listing, we have more than 11,000 shareholders. Operating result in fourth quarter was affected by listing related costs, however, net sales and comparable operating profit improved clearly.

We made significant investments in our 4G network in 2016, which has been largely completed by the end of
the year. The construction of DNA’s and Sonera’s shared mobile communication network got under way in the spring of 2015 and was also completed by the end of 2016. During these 18 months, more comprehensive, high-speed telecommunications connections have been made available for more than 760,000 residents in sparsely populated areas. We estimate that our capital expenditure will decrease as the focus of our mobile communication network investments shifts from network modernisation and coverage expansion to capacity expansion in the coming years.

In 2016, 4G mobile data traffic volumes in DNA's networks grew some 120 percent. According to a report released by research company Tefficient in December 2016, DNA’s customers have the highest mobile data usage in the world per subscription. DNA carried as much as 9.9 gigabytes of data per subscription each month between January and September 2016.

The Finnish economy is slowly returning to growth which is expected to affect positively customer demand. We expect the service revenue to increase also in 2017. However, net sales are expected to remain at the same level than in 2016 because of lower interconnection earnings. Increasing service revenue and continuous improvement in operational efficiency are expected to increase comparable operating result somewhat in 2017 compared to 2016.

We will continue our measures to improve our customer experience further in 2017. We will also continue to focus on employee satisfaction and the employees' professional development with the aim of creating a team of top experts that has a dedicated and qualified person for every task.

Jukka Leinonen