DNA as an investment

We want to make our customers’ lives more inspiring, productive and entertaining

The cornerstone of DNA’s strategy is customer satisfaction

DNA’s vision and mission are the most satisfied customers in the market. We want to make our customers’ lives more inspiring, productive and entertaining. We provide connections, services and devices in a clear, easy and cost-efficient manner.

CEO's review: DNA’s year started strongly – net sales and operating result grew in the first quarter 

DNA’s year 2017 is off to a strong start as expected. Our net sales increased 5.7% to EUR 213.4 million. Strong growth of service revenue (net sales less sales of devices and interconnection charges) continued, and good development of mobile device sales also had a positive effect on net sales. Service revenue was boosted in particular by the positive development of the mobile subscription base and growing use of mobile data as 4G subscriptions become more common. Our profitability improved and our operating result grew 14.9% and was EUR 28.9 million, or 13.5% of net sales (12.4%).

Mobile communication network subscription volumes were up 100,000 from the reference period. There was a clear improvement in DNA’s revenue per user (ARPU) for mobile communications from the comparison period. Price increases in certain older DNA subscription types increased DNA’s subscription turnover rate (CHURN) in the first quarter. Our fixed-network subscription base (fixed voice, fixed broadband and cable television) increased by 8,000 subscriptions from the reference period, even though our customers kept moving away from using of fixed-voice subscriptions. At the same time, fixed-network broadband and cable television subscriptions increased in total by 20,000.

In 2017, the focus of our network investments has shifted from network coverage expansion to capacity expansion. At the end of 2016, our 4G network reached 99.6 per cent of the population in mainland Finland as the shared network was completed in Eastern and Northern Finland. Due to the improved coverage, DNA has gained new consumer and corporate customers in the area. For example, the University of Lapland selected DNA as its mobile service provider. The agreement between DNA and the University of Lapland covers mobile voice and data connections for hundreds of users. When selecting the service provider, the University of Lapland placed emphasis on coverage.

The DNA Valokuitu Plus (DNA Fibre Optic Plus) network enables broadband speeds of a Gigabit class per second without any changes to the housing company’s internal network. In the first quarter, the Gigabit class speed became available to all 600,000 households in the DNA Valokuitu Plus network across Finland. DNA is among the first operators globally that is capable of providing Gigabit class broadband speeds in the entire network.

In the first quarter, we tested the potential of the new 5G radio technology with Ericsson. A transmission speed of some 25 Gbps and a delay of less than 3 ms were achieved in the radio connection in the 5G test, which is a strong demonstration of the progress of 5G development. There are three important targets for 5G in the future: to enable a large-scale Internet of Things, to support highly reliable delay-critical connections, and to further increase the speed and efficiency of mobile broadband connections.

In the first quarter, we became the first company in Finland to introduce grandparental leave, entitling grandparents to a one week’s paid leave.

Competition is expected to remain intense for the rest of the year and our outlook for 2017 remains unchanged. According to our strategy, we will continue measures to improve our customer experience further, and we will also continue to focus on employee well-being and professional development. 
 

Jukka Leinonen

DNA is one of the leading Finnish telecommunications operators

DNA’s business operations are divided into consumer and corporate business. In 2016, DNA’s net sales amounted to EUR 858.9 million, of which the share of consumer business was 73.5 per cent and the share of corporate business 26.5 per cent.

Of the total net sales of the market, the share of the three largest telecommunications operators in Finland, DNA, Elisa and Sonera, is almost 90 per cent. Growth opportunities for DNA’s business are offered, for example, the high smart phone penetration and the continuously increasing demand for 4G subscriptions, which contributes to higher use of mobile data. In 2016, DNA managed to grow its subscription base more rapidly than its competitors: its mobile subscription base grew by 121,000 subscriptions, while its fixed broadband subscription base grew by 4,000 subscriptions.

DNA has a strong market position in all product categories and increasing market shares

DNA is the third largest player in the Finnish mobile communications market (voice and data services). In the fixed-network broadband market, DNA holds the third position. In the cable television market, DNA is the largest player in Finland. During the past few years, DNA’s market shares have grown. In mobile communications, for example, DNA’s market share has grown from 24 per cent in 2013 to 27 per cent in 2016, and in fixed-network broadband from 21 to 26 per cent.

The cornerstone of DNA’s strategy is customer satisfaction, and At DNA, the customer comes first; we place special emphasis on customer experience. DNA provides connections, services and devices that are of high quality, fairly priced and easy to use. DNA’s service offering is highly competitive as evidenced by its high and growing NPS (Net Promoter Score) scores show.

Trends that will help DNA grow its business in the future include the increasingly networked lifestyle, new mobile devices with their applications, new TV and home entertainment services, the rapid growth of mobile data and high-speed data subscriptions, the increasing business criticality of ICT in companies, and the Industrial Internet of Things.

Large-scale changes continue in telecommunications markets

The number of connected devices continues to grow – and so does the volume of data transmitted in mobile and fixed networks. Popularity of pay-TV and various types of video services is also increasing. Working in companies is increasingly mobile and flexible today. All this sets new kinds of requirements for the quality and availability of operators’ systems and network infrastructure.

Despite undergoing market changes, the competitive environment of the Finnish telecommunications markets is fairly stable. Total net sales of the three biggest telecom service providers – DNA, Elisa and Sonera – is about 90 per cent of the net sales of the markets. Also, no new operators aggressively seeking market shares have emerged. All three leading operators provide both mobile and fixed network services for consumer and corporate customers.

The weak financial situation has affected the telecommunications industry less than many other industries because the demand for data communication services is fairly stable.

Finns are among the leading users of mobile communications in the world

In 2015, net sales of the mobile telecommunications markets in Finland amounted to EUR 1.9 billion(1, and mobile penetration is among the highest in the world. Although mobile penetration was as high as 167 per cent(2 at the end of 2015, subscriber numbers continue to grow.

Finland has the highest mobile penetration in the world

Finland has the highest mobile penetration in the world
Source: IDC

Proportionally, Finland is also the country with the largest number of postpaid subscriptions in Europe. At the end of 2015, as much as 92 per cent of the voice and data service subscribers in the mobile network had a postpaid subscription(3.

Almost all subscriptions supported unlimited data at a fixed monthly fee. Unlimited data combined with high-quality mobile networks has led to a high degree of use of mobile broadband in Finland. In 2015, Finns were the most active mobile data users in the world.

Finns are the most active mobile data users in the world

Finns are the most active mobile data users in the world
Source: tEfficient

Finland has lower fixed broadband penetration than EU countries on average

In 2015, net sales of the fixed telecommunications markets in Finland totalled approximately EUR 1.2 billion(4. Of this, fixed broadband services are estimated to account for approximately 81 per cent.

Approximately 57 per cent of Finnish households have a fixed broadband connection(5. The figure is smaller than in the EU-15 countries on average(6. This is particularly due to high mobile broadband penetration and mobile data subscriptions with unlimited data. In particular, demand for fast, fixed broadband services is expected to grow as popularity of services requiring higher bandwidth, such as streaming video services, increases.

Fixed broadband penetration

Fixed broadband penetration in Finland
Source: Finnish Communications Regulatory Authority, IDC

The pay-TV and video service market is growing

Finnish households mainly use the digital terrestrial TV network and the cable TV network for watching television content but more and more also services provided over the broadband network (e.g. Yle Areena and Netflix). The popularity of cable TV subscriptions has continued to grow steadily, and as many as about 60 per cent of households already receive television content from cable TV network. The number of terrestrial TV households has decreased slightly, but the terrestrial TV network is still the television network most often used in sparsely populated areas and at summer houses in Finland.

The Finnish pay-TV and video service market was estimated to amount to about EUR 235 million in 2015(7. Around 35 per cent of the Finnish households subscribe to pay-TV content(8. Linear broadcasts of cable and terrestrial TV network are the most common way to consume pay-TV content, especially HD sports broadcasts. The growth of the market in the past few years has been particularly attributable to the popularity of streaming and video-on-demand services used over the broadband connection.

Cable television continues to grow in popularity

Cable television continues to grow in popularity
Source: Finnish Communications Regulatory Authority, Statistics Finland

DNA has a strong position in mobile communications, fixed broadband and cable television

DNA has a strong position in all three markets: mobile communications, fixed broadband and cable television. In the cable television market, DNA is the largest player in Finland. In mobile communications and fixed broadband, DNA is a strong number three.

The way of working in companies is changing

Corporate markets comprise telecommunications services and value added services of corporate networks, IT services, IT software and equipment markets. The value of telecommunications markets is estimated to be EUR 1.2 billion, and the value added services markets – essential to DNA – are estimated at EUR 200–300 million (9. IT services and equipment markets form the largest part of the total markets, and their value is estimated to be EUR 6.2 billion(10.

Of telecommunications operators, DNA, Elisa and Sonera provide comprehensive telecommunications and network service solutions. IT service companies, in turn, focus on network value added services, IT services and equipment markets.

Today, working in companies is increasingly mobile, networked and flexible. This is reflected in the telecommunications services that companies require. Mobile data increases in importance, and cloud services gain popularity. The Industrial Internet and the Internet of Things (IoT) will further increase the mobile data volume and provide new growth opportunities for operators.

1) Source: FICORA
2) Source: FICORA, IDC
3) Source: Gartner LINE (Marketvisio)
4) Source: FICORA
5) Source: FICORA
6) Source: FICORA
7) Source: Valor, Finnpanel, TNS Gallup.
8) Source: IHS, DNA’s estimate
9) Source: The company, based on IDC’s and GartnerMarketVision’s data
10) Source: Gartner

Responsible investment

DNA is committed to continuous business development, while considering the needs of its environment and stakeholders. DNA’s responsibility policy creates value for the company’s owners in the long run, and addresses the risks and opportunities related to corporate responsibility. As a Finnish telecommunications group, DNA wants to assume responsibility for reducing emissions and improving energy efficiency.

DNA committed to Society’s Commitment to Sustainable Development

DNA has signed up to Society’s Commitment to Sustainable Development, under which the company undertakes to reduce the climate impacts of its operations. Moreover, DNA enables its customers to reduce their environmental impact by offering them products and services for the sustainable digitalization of business.

Organisation of corporate responsibility at DNA

The primary responsibility for corporate responsibility at DNA lies with the CEO. The Sustainability Manager reports to the Executive Team and the Board of Directors on the success of DNA’s corporate responsibility objectives every six months. The body which ultimately accounts for DNA’s corporate responsibility is the Board of Directors. It is responsible, for example, for approving DNA’s corporate responsibility report annually.

DNA’s responsibility strategy and objectives

DNA’s responsibility strategy comprises three areas: the customer, the society and meaningful work. DNA is also continuously enhancing areas such as responsible procurement, privacy and data security, Code of Conduct compliance and waste recycling.

Strategic areas and the related goals in a nutshell:

Strategic area

Objectives

Examples of measures

Customer
We look after the customer. DNA must understand what the customer needs and provide suitable solutions. The customer understands what can be achieved with our services and is aware of key issues in the digital world.

DNA acts as an enabler in the society, making customers’ lives more inspiring, productive and entertaining while also preventing digital exclusion.
 
  • Responsibility in our customer-facing functions is a key theme in our internal responsibility training and communications
  • DNA’s and Telia’s shared network enables a fast 4G network in sparsely populated areas in Northern and Eastern Finland
  • As the main partner of the “HundrED – 100 Koulua” initiative, DNA supports education innovations in Finnish schools
Society
DNA plays a significant role in society by providing important communication connections and maintaining infrastructure that is critical to the operation of the society.  Our continuously expanding networks consume a lot of energy. We want to be responsible and do our part to combat climate change. 
  • While the expansion of DNA’s networks continues, we aim to reduce our total emissions by 15 per cent by 2020 from the levels reported in 2014
  • We will improve the energy-efficiency of our radio network and reduce emissions from radio network in proportion to annual data transfer volumes by 80 per cent by 2020 from 2014
  • All the electricity that DNA buys directly is produced entirely with renewable energy
  • Modernisation of DNA’s radio network continued as planned, improving energy-efficiency
  • Investments in the energy-efficient LTE technology help reduce emissions
  • Constructing and sharing a network with Telia is more energy-efficient because the technology is shared
Meaningful work
We will increase corporate responsibility know-how and understanding at DNA.

Each DNA employee is familiar with the key responsibility objectives and understands how they personally can help the company achieve them.

 
  • Nearly a thousand DNA employees have participated in DNA’s responsibility training 
  • DNA Group's Code of Conduct obliges all employees.
  • DNA's advanced “Genuine method of working” allows DNA employees to work from home without having to agree on each occasion separately with the supervisor. According to the results, CO2 emissions from work-related travel can be cut by some 40 per cent annually when employees work remotely at home for example.

 

Market outlook

Market outlook according to Interim Report 1-3/2017

The Finnish economy is returning to growth and the value of the telecommunications market has also returned to the growth path. Competition is expected to remain intense in 2017.

In addition to the overall economic situation, net sales and the profitability of the industry are being affected by the increased popularity of IP-based communications solutions driven by the growing number of smart phones and tablets. Moreover, they are affected by the reduction in interconnection prices in the mobile communication network and intense competition in the mobile communication and fixed-line broadband markets in particular.

Strong growth of mobile data use is expected to continue, boosted by the growing number of 4G subscriptions, increased mobile data usage per subscription as well as growing number of connected mobile devices. In the coming years, mobile data use will shift mostly to 4G networks. Steady growth in the demand for unlimited 4G subscriptions continues, and customers are prepared to pay more for faster data connections. In 2017, almost all of the new smart phones sold will support 4G.

In the mobile communication networks, SMS and voice traffic is expected to fall slightly. The decline of the market for fixed-network voice services is expected to continue.

In the consumer market, consumer demand for fast broadband subscriptions and entertainment services in particular is expected to increase. The use of streaming and on-demand video services in particular is expected to keep growing.

Fixed-network broadband customers are expected to continue to switch to housing company subscriptions. The fixed-network broadband subscription base is expected to remain relatively steady in the near future. 

Companies and organisations increasingly need to implement new ICT solutions to improve the productivity of their business. More mobile and versatile ways of working will boost demand for services such as cloud and video conference services. Companies transfer their applications to the cloud to increase their operational efficiency, which will boost the demand for secure high speed connections. The demand for Industrial Internet solutions, and subsequently for M2M subscriptions, is expected to grow.

DNA’s outlook for 2017 remains unchanged

DNA’s net sales are expected to remain at the same level and the comparable operating result is expected to improve somewhat in 2017 compared to 2016. The Group’s financial position and liquidity is expected to remain at a healthy level.