Stokab annual report 2013 «1. Annual Report 2013

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1 Stokab annual report 2013 «1 Annual Report 2013

2 2» Stokab annual report 2013 Who We Are Stokab is owned by the City of Stockholm and lays the foundation for IT use in Stockholm by providing a passive fibre-optic communications network in the region. The company has been tasked with expanding, maintaining and leasing connections to this network. Our operations are intended to promote optimal conditions for IT development and, thereby, the positive development of the region. The network is open for all players on equal terms and Stokab is obliged to lease to all stakeholders who wish to gain access. Because it is unlit or dark fibre that is leased, customers are responsible for providing their own active equipment. Stokab was formed in 1994 to develop a competition-neutral infrastructure able to meet future communications needs, stimulate competition, promote diversity, offer freedom of choice and minimise the need for excavation on city streets. Fibre optics is an optical system used for transmitting light, which, with its superior capacity, serves as the basis for all forms of digital communication down to end-users. A powerful and robust IT infrastructure is necessary in today s society to make access to high-capacity data communication possible for businesses and individuals alike, any time, anywhere. Who We Are 2 Year in Brief 3 CEO s Message 4 The Connected City 6 Stokab s Customers 9 Robust Network and Green IT for More Users 10 Stokab s Employees 12 S:t Erik Kommunikation AB 13 Directors Report 14 The Group s profit and loss statement 16 The Group s balance sheet 17 Group s cash flow statement 19 The parent company s income statement 20 The parent company s balance sheet 21 The parent company s cash flow statement 23 Notes additional information 24 Review report 31 Auditor s Report 32 Directors and Auditors 33 Management 34 More information about Stokab is available in both Swedish and English at stokab.se. Contact information Director of Finance Hans Förnestig hans.fornestig@stokab.se Head of Sales and Marketing Division Christel Sandstedt christel.sandstedt@stokab.se Public Information Officer Anders Broberg anders.broberg@stokab.se Photographers: Peter Phillips and Petter Karlberg

3 Stokab annual report 2013 «3 YEAR IN BRIEF Net sales increased by 3 per cent to SEK 705 million (686). Orders amounted to SEK 274 million (375). The number of new connections supplied totalled 1,785 (2,095). SEK 705 m SEK 274 m 1,785 connections Profit before tax increased to SEK 175 million (174), which is the best earnings in Stokab s history. Investments amounted to SEK 172 million (332). SEK 175 m SEK 172 m Numbers in parentheses are for Stokab s network stretches the equivalent of more than 30 times around the earth. It is 1.25 million fibre kilometres and 5,500 cable kilometres long, has 600 crossover connections and more than 15,000 access points. The network stretches across the entire region and covers basically the whole of Stockholm city. Image at right: By mechanically directing the cooling air in Stokab s nodes using plastic sheeting in the rack aisles and plastic film over unused units in the racks, Roland Hedbom, Head of Technology Sites, has succeeded in reducing energy consumption by the equivalent of six degrees Celsius. In our newest node, located under Östra Real upper-secondary school, the heat generated by our customers broadband equipment is utilised and converted inside the school s heating system. The school upgraded its heating system during the year, reducing the need for external heat by 50 per cent: a climate-smart solution that benefits everyone. The cover photo shows Johanna Lind and Olof Björk hooking up fibre connections in one of the more than 600 crossover connections included in Stokab s network.

4 4» Stokab annual report 2013 CEO s Message Stokab has been active for 2 decades now is the 20th anniversary of the company s establishment. During this time, the company s operations have grown into the world s largest open fibre network. Stokab is also one of the main reasons that Stockholm is currently ranked as one of the world s premier IT cities. Stokab s operations developed positively during Both the demand for fibre and the number of fibre-optic connections supplied remained high. The 2013 results are the best in Stokab s history, which means that we have a stable financial foundation on which to operate. This financial trend allows for the continued development of the company s operations. Financial benefits for society In the 20 years since its inception, Stokab s fibre-optic network has grown to become the world s largest open fibre network. Apart from the fact that the network was built without using tax money, it has also generated financial benefits of SEK 16 billion for society, according to research institute Acreo Swedish ICT. Among other things, these benefits take the form of more jobs, increased property values and lower broadband prices. Acreo also compared the situation in Stockholm with that in Copenhagen, Denmark. This is an interesting exercise given that the politicians in the respective cities drew diametricallyopposed conclusions as to who should own the IT infrastructure and how it should be organised in connection with the deregulation of the telecom market in the early 1990s. The comparison between Stockholm and Copenhagen clearly demonstrates what access to an operator-neutral fibre-optic network has meant for development. In Stockholm, approximately 90 per cent of residences (excl. detached houses) have fibre connections, compared with around 20 per cent in Copenhagen. The prices for both dark fibre and broadband are clearly lower in Stockholm and high upload speeds (symmetric connections) are almost impossible for Copenhagen households to obtain. Stokab s fibre-optic network has generated at least SEK 16 billion in financial benefits for stockholm Another result of Stockholm s well-developed fibre-optic network is that everyone who needs fibre can design their own network structure. In Copenhagen, design options are seriously limited because the incumbent has chosen to expand the fibre network based on its own network structure needs and has therefore also been sparing it its use of fibre. This kind of network drastically impedes flexibility and design opportunities as well as competition. The World s best-connected city Stockholm is ranked number one in Ericsson s Networked Society City Index The reasons for this top-ranking include the city s well-developed fibre network, its extensive use of high-speed broadband both via fibre and mobile 4G and an ICT market that is open to competition. Another reason is Stockholm s widespread use of smart services and advanced units like smartphones. According to consultancy firm Price Waterhouse Coopers, Stockholm is considered to have the highest number of individuals and businesses making use of all the opportunities that ICT provides of any city in the world. The city also has the highest proportion of ICT jobs in Europe 18 per cent of its total workforce according to a report published by the University of Leuven. These kinds of jobs require access to well-developed, high-speed broadband. Fibre Important for Home-buyers Today, access to a fibre-optic connection is the second most important factor for home-buyers looking for a house (after the price of the home) according to a survey of Swedish broadband users conducted by the FTTH Council Europe. The same survey also revealed that households with fibre connections also consider uplink speed important and the majority also view the cost of broadband via fibre as low. In Stockholm, the market currently offers households symmetric gigabit connections for a few hundred kronor a month, which would be highly unlikely unless the fibre was provided by a neutral provider. Fibre a Key to a Fossil Fuel-free City Stockholm aims to become a fossil fuel-free city by One precondition for achieving this goal is access to a well-developed fibre network because it provides a foundation for a host of green IT solutions that aim to either minimise or optimise travel and transports, provide information in real time and opportunities to use cloud services like streamed media.

5 Stokab annual report 2013 «5 Expansion and operational reliability important for the region A growing region needs an expanded and strengthened network, especially with the rapidly growing need by individuals and businesses for connections. At the same time, it is important always to be receptive to our customers needs, so that we help facilitate their business. We must always be prepared to improve our work method and modify our products. Satisfied customers are a prerequisite for the company s successful fulfilment of its commission to promote the positive development of the Stockholm region. Another important matter is maintaining and developing the network s operational reliability. This is an area that Stokab works on continuously. One example that highlights the importance of our work in this area is the tunnel fire that occurred in central Stockholm in the autumn of The fire affected a large number of fibre connections. Despite this serious incident, Stokab successfully restored all fibre connections to working order within the agreed service times. National, operator-independent provider needed For a small country in a globalised world, staying competitive is especially important. In today s knowledge society, access to broadband based on fibre is critical, as is acknowledged in the Swedish national government s innovation strategy. To meet this challenge it is important that the state, as a major owner of IT infrastructure, acts to help create an operator-neutral provider at the national level. The Swedish Association of Local Authorities and Regions (SALAR) has actively promoted this view in public discussions. In connection with the FTTH Council Europe conference held in Stockholm, Stokab and Stockholm IT Region organised a seminar entitled Fibre, the Key to Creating World-class IT Regions. Speakers were invited from different parts of the world to talk about the broadband situation in their regions. In several cases, inspired by Stokab, these regions have organised ownership so as to promote fibre network expansion that fosters competition, diversity and freedom of choice. In Stockholm, we take it for granted that there will be dark fibre that can be leased from a neutral provider no matter where we are. Unfortunately, this is rarely the case in the majority of the world s cities. It is also the reason why we in Stockholm annually receive more than 100 international visitors from around the world. Stockholm City Council, this has led to uncertainty concerning the conditions for investing in basic Swedish IT infrastructure. This view is also shared by both SALAR and the Swedish Local Fibre Alliance. For Stokab s part, the price-regulation has caused a drastic reduction in our investment, in accordance with the City Council s directive. There are now signs that PTS may abolish price-regulation, a decision that would be in keeping with the European Commission s revised recommendations in the area. If price-regulation is abolished, the City of Stockholm s current position on Stokab s investments in fibre, in accordance with the 2014 budget, may be re-examined. Optimistic view of the future The demand for fibre is constantly growing. This trend is clearly illustrated in the size of the cables. The first cable Stokab used contained 24 fibres. Twenty years on, the number of fibres in our largest cables has increased to 1,000. Stokab continues to focus on better meeting our customers needs for delivery reliability and higher levels of service. The company s positive development in recent years has created a good ground for future success. This means that we can optimistically look to developments in Stockholm, March 2014 Jörgen Kleist, CEO Abolish fibre regulation? The Swedish Post and Telecom Authority (PTS) decided in 2011 to price-regulate the Swedish fibre market. According to the

6 6» Stokab annual report 2013 THE CONNECTED CITY Stockholm is one of the world s best-connected cities thanks largely to its well-developed fibre-optic network, four 4G/LTE networks and high level of IT maturity among both businesses and individuals. Given that fact, it is not surprising that the highest proportion of ICT jobs in Europe are in Stockholm, a city that is considered to be one of the most exciting locations for start-up companies. Stockholm is an international role-model in fibre-network expansion. More than 90 per cent of households and almost 100 per cent of businesses have been given the opportunity to connect to Stokab s operator-neutral fibre network. This network has generated at least SEK 16 billion in financial benefits, according to research institute Acreo Swedish ICT. Among other things, these benefits take the form of more jobs, increased property values and lower broadband prices. Access to the operatorneutral fibre network has also been a crucial factor in the rapid expansion of the 4G/LTE mobile networks. The fibre network and access to the 4G/LTE networks were decisive factors in ranking Stockholm as number one in Ericsson s Networked Society City Index According to Price Waterhouse Coopers Cities of Opportunity ranking, Stockholm also has the world s best-connected schools and first-class broadband and is the city with the highest proportion of businesses and individuals using smart IT solutions. Hot start-up location Stockholm has also been ranked as one of the best places in the world for start-up companies, alongside Silicon Valley, New York and London, according to Sparklabs Global Technology Trends and Startup Hubs Companies like Spotify, Wrapp, Rebtel, King and Tictail all companies that quickly conquered the world from their bases in Stockholm have been followed by new companies like Volumental, Fundbyme, Fishbrain, Mostphotos, Mindconnect, Unormaly and Dino Mino. Thanks to new meeting places like SUP46 and Knackeriet, entrepreneurs have better opportunities to meet one another and utilise one another s knowledge and networks as well as to meet both Swedish and international investors. STOCKHOLM WORLD leader THANKS TO FIBRE NETWORK AND access TO 4G Testbed for 5G Kista is a world-leading innovation zone and an international centre for wireless technology, broadband and mobile applications and services. With its more than 1,100 ICT companies, 6,300 university students and 1,100 qualified ICT researchers, the area continues to develop. Among other advances, a testbed for 5G the next generation mobile system is being created here. Compared with the most innovative regions within and outside of Europe, it has been shown that Stockholm is the most knowledge-intensive region outside of the US. Stockholm has the densest concentration of ICT researchers and the highest proportion of IT jobs of any city in Europe 18 per cent of its total workforce. These findings were published in a report authored by researchers at Belgium s University of Leuven entitled High-technology Employment in the European Union. Internet for all Fifty per cent of all two-year-olds and almost 100 per cent of nine-year-olds regularly use the Internet, according to Sweden s Internet Infrastructure Foundation s (.SE) annual survey. At the same time as Internet-use is becoming more widespread among younger age groups, an increasing number of older people are also connecting. For those who have been otherwise excluded from the ordinary housing market, the housing-acquaintance programme Boskola offered by Stiftelsen Hotellhem (Stockholm City Council s social services housing) includes training in Internet use. The senior citizens who live in the city s nursing homes will now receive their own fibre connections which means, at present, gigabit connections. Streaming via the cloud Thanks to customised business models similar to those used by Spotify, streamed TV and movies have taken off through services like Netflix, Viaplay and imagine. A growing number of businesses, organisations and private persons are now producing their own TV programmes, both recorded and live broadcasts. At certain times of the day media streamed via the cloud utilises approximately 50 per cent of the capacity of the operators networks.

7 Stokab annual report 2013 «7 Above: Homeless Stockholmers offer customers the chance to buy the magazine Situation Stockholm using smartphones and the card reader system izettle. At left: Berthel Nordström, 93 years of age, received the award Årets modernaste pensionär 2013 (Most Modern Senior Citizen of the Year, 2013) from the Internet Infrastructure Foundation (.SE) on the grounds that, using his incredible digital acuity, he investigates every new innovation he can find and because he is an important role model for others who are not yet acquainted with the Internet. Below: Stockholm is one of the best connected cities in the world when it comes to 4G. Four operators compete to offer customers connection speeds of up to 80 Mbps. In Kista, a testbed for 5G the next generation mobile system is currently being created. At certain times of the day, the consumption of streamed media uses around 50 per cent of the capacity of operators networks. Streaming media is a significantly more climate-smart solution than buying a physical product.

8 8» Stokab annual report 2013 STOCKHOLM HAS A LONG TRADITION OF ENTREPRENEURSHIP AND COMPETITION WITHIN TELECOM Fishbrain is one of the start-up companies using the SUP46 meeting place. The meeting place is intended to give entrepreneurs better opportunities to meet investors and others with the same mind-set. Companies also use fibre to create new opportunities. Thanks to access to dark fibre, Swedish Television (SVT) has been able to build a studio inside the Swedish parliament that it controls from its main control room in the Gärdet neighbourhood. The result has been a marked reduction in lead times and in the costs associated with production. Streaming media is also much more environmentally-friendly than buying a physical product or transporting people and equipment between different places. What s more, the use of cloud services also means that processing power and energy used are optimised. A tradition of entrepreneurship and competition Stockholm has a long tradition of entrepreneurship and competition within telecommunications. In the late 1800s entrepreneur Henrik Cedergren, together with Lars Magnus Ericsson, used an innovative business model to lay the foundation for what became known as the Swedish telecom miracle. By the turn of the century Stockholm had by far the greatest number of telephones of any city in the world. Cedergren s telephone company, Stockholms allmänna telefon AB (SAT), successfully competed against the state-owned telegraph service Telegrafverket, leading to the wide-spread use of telephony at low prices in Stockholm. The competition from SAT so worried the Swedish government that the national parliament approved its purchase in Once competition was removed, telephony prices in Stockholm sky-rocketed. Despite strong opposition from the state-owned Televerket (formerly Telegrafverket), in the early 1980s entrepreneur Jan Stenbeck obtained permission to offer mobile telephony in competition with Televerket. Through innovative business models, mobile phone use shot up and prices were driven down. In 1991, Stenbeck s company was the first in Sweden to offer commercial Internet connections. At the time Televerket was not interested in the Internet, viewing it as an uncertain technology with no future. When the Swedish government decided to keep Telia (the incumbent) intact after the national telecom market was deregulated in 1993, despite earlier political convictions about the importance of separating infrastructure from services, the City of Stockholm founded Stokab. It did so because Stockholm s politicians believed that a neutral provider was needed to provide basic IT infrastructure to all on equal terms in order to generate competition, diversity and a range of choice within telecommunications and data. Major international interest The City of Stockholm s principal stance on IT infrastructure, the competition that has been created through the open fibre network and the fact that Stockholm households can acquire gigabit connections for a few hundred kronor a month has attracted major international interest. The fibre-optic network, open to all on equal terms and available to over 90 per cent of households and almost 100 per cent of businesses, has helped to make Stockholm a world-class city.

9 Stokab annual report 2013 «9 STOKAB S CUSTOMERS Stokab s more than 800 customers include companies from many different industries with different needs when it comes to network structure and IT solutions. Through Stokab s network, customer s are given the exclusive right of use to the fibre connections and the network structure they need to be able to generate business simply and cost-effectively. Because Stokab is an operator-neutral provider with a well-developed network, customers can design their own network structures without needing to build their business on a competitor s network. Operators More than 100 operators and service providers supply services in the form of Internet, TV and telephony via Stokab s network. Regardless of what kind of business model its customers use, Stokab s range of product solutions lets them reach end-customers simply and cost-effectively. Businesses and organisations Businesses and organisations that require large data capacity and that strive to achieve efficient and secure data communication lease their own fibre connections from Stokab. This also makes it easier to influence transfer rates and communications technology and to procure services in a competitive market. The public sector The need to develop public sector services using new technology continues to grow. The financial benefits for society are significant. By connecting data communications, telephony, TV and even control and measurement equipment, processes within the public sector are simplified and streamlined. This makes better communication with residents possible. The ability to lease fibre connections from Stokab guarantees a secure and powerful IT infrastructure for all public agencies. Residences in Stockholm The continuing increase in needs by households for constant, high-capacity connection to the Internet continues to drive the demand for increased bandwidth, which, in turn, expands the need for a powerful, future-oriented IT infrastructure. With this in mind, Stokab has expanded its network to service the vast majority of multi-family residences in Stockholm City. Through connection to Stokab s fibre network, the growing need of households for fast broadband, for TV and for telephony supplied by various service providers is catered for. At the same time, competition, diversity and freedom of choice are increased, especially if property owners install an internal fibre network, which is also important in providing social services, like home help and nursing, to individuals. A fibre-optic connection also makes it possible for property owners to streamline the operation and care of the property itself, by having such features as temperature control, electricity and water meters, camera surveillance and lock systems online. Excedo Networks AB specialises in assuming complete responsibility for restaurants and cafés need for services that require broadband. Using fibre connections, payments can be made securely and quickly while also providing business owners with additional services, such as WiFi, intranet, advertising, surveillance, streamed media and images. Image from Gateau, one of Excedo s many customers.

10 10» Stokab annual report 2013 ROBUST NETWORK AND GREEN IT FOR MORE USERS The establishment of a node structure and the connection of multi-family residences make possible more secure and environmentally-friendly operation of the network at the same time as households, property owners and many small businesses and small municipal agencies now have better opportunities to use green IT solutions. In recent years practically all multi-family residences in Stockholm city have been connected to Stokab s network and a node system has been expanded. This makes it possible for our customers to more easily design and manage their networks in a secure, efficient and environmentally-friendly way. The expansion has also created better redundancy and the opportunity to reroute. The importance of good opportunities for rerouting was highlighted by the autumn 2013 tunnel fire that broke out in central Stockholm. The fire affected a large number of fibre connections. Despite this serious incident, Stokab successfully restored all fibre connections to working order within the agreed service times (SLA). Because Stokab is an operator-neutral provider, from the outset the network was built to support competition and to provide good opportunities for our customers to design their own network structures. With a solid documentation system and a well-structured operational organisation, a robust network with operational reliability has been created, a factor that is critical to our customers businesses. Work to ensure reliability has always been an integrated part of the company s operations and is performed in such areas as network security, preparedness and emergency preparedness, IT support and follow-up. Measures to improve security are continually implemented at our facilities. This year, a large number of node sites have been equipped with camera surveillance. In combination with automation of the physical handling of keys, this increases security, streamlines work and contributes to reduced travel. Green opportunities The well-developed network lays the foundation for using what are known as green IT solutions. For property owners, connecting to Stokab s fibre network increases their opportunities to control and monitor the management of their properties in real time, which both reduces energy consumption and minimises transports. For households and businesses, connecting to the network means better opportunities for smooth telecommuting, the planning and optimisation of travel and, not least of all, the use of cloud services. Cloud services also allow processing power and energy use to be optimised. Stockholm-based Spotify is one of the companies that has paved the way for this environmentally-friendly method of distribution. Its customers appreciation for Spotify s services has meant that rights holders now receive a larger share of the revenue generated from sales of their music from streamed services than from traditional sales.

11 Stokab annual report 2013 «11 A growing number of businesses, organisations and private persons are now producing their own TV shows, both recorded and live broadcasts. For example, Swedish YouTube sensation PewdiePie (Felix Kjellberg) has 25 million viewers following his channel. The live broadcast of self-produced TV shows, in particular, is now simpler thanks to fibre-based broadband because fibre supports high uplink speeds. Energy-efficient initiatives The path of cooling air inside the rack rooms in Stokab s nodes is now also regulated mechanically. This is done by hanging plastic sheeting in the rack aisles and covering unused units in the rack with plastic film. This measure has led to a reduction in energy consumption equivalent to six degrees Celsius. As Stokab s newest switching point has been expanded, Östra Real upper-secondary school has upgraded its system that utilises the heat generated by our customers equipment inside the switching point. By doing so, the school has cut its need for external heat supply in half, at the same time as Stokab has minimised its need for external cooling: a climate-smart solution that benefits everyone. Stokab only buys green electricity, uses a 100-per-cent green vehicle car fleet (with the exception of special vehicles) and also provides bicycles and public transport cards for employees work-related travel. During the year, energy efficiency measures have also been implemented at our node sites and hubs, which has reduced energy consumption by around ten per cent. Stokab works primarily with contractors and consultants. To ensure that environmental measures are not just an internal consideration, tenderers are required to implement systematic environmental efforts as part of procurement procedures. This includes requiring tenderers to have an environmental management system in place and to ensure that any subcontractors also comply with Stokab s environmental requirements. Stokab a green idea Fibre is an environmentally-friendly product in its own right. One of the ideas behind Stokab was to reduce environmental impact. This has been achieved by digging up city streets only once and laying enough fibre to give everyone the fibre connections they need without having to excavate for every company. Stokab s environmental efforts Stokab s environmental efforts aim to reduce the environmental impact of our activities. One overarching goal is to use green vehicles for transports wherever possible. Materials are to be disposed of in a way that limits emissions of greenhouse gases and their impact on the environment, and waste is to be sorted for recycling. Security, documentation and a robust network have always been central for Stokab. The establishment of the node structure in connection with the expansion to service multi-family residences has made possible the more secure and environmentally-friendly management of the network.

12 12» Stokab annual report 2013 Stokab s Employees Stokab is a knowledge-intensive company with skilled and dedicated employees and managers that are crucial to its operations. Active customer-focus We develop our organisation with the aim of achieving our business and operational goals. For us, this entails the belief that we can always be better at what we do and that the customer s interests should always come first. For this reason, our employees know-how and dedication are important. As part of our work to always improve, we conduct continual training initiatives so that our employees can contribute to and be involved in achieving our business and operational goals. Work environment and health Each Stokab employee contributes to our operations and has his or her own unique talents. Based on this understanding, we strive to cultivate a work environment that promotes health and well-being at both the individual and group levels. In doing so, we are convinced that we are creating the right conditions for a sense of security, participation and joy among our employees. Absences due to illness in 2013 amounted to 1.7 per cent of ordinary working hours for the Group. This shows that our strategic work has had a positive impact on health and has contributed to the company s earnings. At the close of 2013 Stokab had 93 employees, of which 33 were women and 60 men. Stokab s management group consists of an equal number of men and women. Absences due to illness amounted to 1.7 per cent of ordinary working hours, showing that our health-promotion efforts yield good results