Annual Report • Apr 1, 2012
Annual Report
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| TeliaSonera in brief | 3 |
|---|---|
| The year in brief | 4 |
| Letter from the CEO | 5 |
| Markets and brands | 7 |
| Report of the Directors | 10 |
| Corporate Governance Statement | 24 |
| Board of Directors | 33 |
| Group Management | 35 |
| Consolidated Statements of Comprehensive Income | 37 |
| Consolidated Statements of Financial Position | 38 |
| Consolidated Statements of Cash Flows | 39 |
| Consolidated Statements of Changes in Equity | 40 |
| Notes to Consolidated Financial Statements | 41 |
| Parent Company Income Statements | 92 |
| Parent Company Statements of Comprehensive Income | 93 |
| Parent Company Balance Sheets | 94 |
| Parent Company Cash Flow Statements | 95 |
| Parent Company Statements of Changes in Shareholders' Equity | 96 |
| Notes to Parent Company Financial Statements | 97 |
| Proposed Appropriation of Earnings | 114 |
| Auditors' Report | 115 |
| Ten-Year Summary Financial Data | 117 |
| Ten-Year Summary Operational Data | 118 |
| Definitions | 119 |
| Annual General Meeting 2012 | 121 |
| Contact TeliaSonera | 122 |
TeliaSonera AB (publ), SE-106 63 Stockholm, Sweden
Corporate Reg. No. 556103-4249, Registered office: Stockholm, Telephone: +46 (0)8 504 550 00, www.teliasonera.com
TeliaSonera has its roots in the Nordic telecom market and holds strong positions in the Nordic and Baltic countries, Eurasia and Spain. Our core business is to create better communication opportunities for people and businesses through mobile and broadband communication services.
We help people communicate with family, friends and business contacts in an easy, efficient and environmentally friendly way. We do this by providing high quality telecommunication services in the Nordic and Baltic countries, the emerging markets of Eurasia, including Russia and Turkey, and in Spain. Our ambition is to be a leading operator in all our markets, by providing the best customer experience, high-quality services and cost-efficient operations.
We have majority-owned operations from the Nordics to Nepal, with a total of nearly 63 million subscriptions at year-end as well as more than 107 million subscriptions in our associated companies, mainly in Russia and Turkey. We are also the leading European wholesale provider with a wholly-owned international carrier network.
Mobility Services, Broadband Services and Eurasia are our three business areas. In the Nordic and Baltic regions we provide mobile and fixed services including TV. In Eurasia and Spain we offer mobile services.
We offer high-quality services such as mobile 4G, digital home and fiber services to ensure we can meet future demands.
We had 28,412 employees at year-end.
28,412
In addition to the ordinary dividend we returned SEK 9.9 billion to our shareholders in April through a share repurchase program.
n Net sales n EBITDA margin
| SEK in millions, except key ratios, per share data and margins |
2011 | 2010 | 2009 |
|---|---|---|---|
| Net sales | 104,354 | 106,979 | 109,550 |
| EBITDA, excluding non-recurring | |||
| items | 36,914 | 36,897 | 36,584 |
| margin (%) | 35.4 | 34.5 | 33.4 |
| Operating income | 29,567 | 32,003 | 30,242 |
| Operating income, excluding non | |||
| recurring items | 29,737 | 31,935 | 31,597 |
| Net income | 21,072 | 23,562 | 21,280 |
| of which attributable to owners of the | |||
| parent company | 18,341 | 21,257 | 18,854 |
| Earnings per share (SEK) | 4.20 | 4.73 | 4.20 |
| Return on equity (%, rolling 12 | |||
| months) | 16.8 | 17.8 | 15.2 |
| CAPEX-to-sales (%) | 16.5 | 14.0 | 12.8 |
| Free cash flow | 9,629 | 12,901 | 16,643 |
2011 was an exciting year, both for TeliaSonera and the telecom industry. It started with the Arab spring, where the importance of telecommunication services became very evident. In our markets, the demand for smartphones and tablets exploded and drove the traffic in our networks to new highs.
We believe that telecommunication services have enormous benefits as they cater to a very basic human need – to communicate – by sharing information, exchanging ideas, staying in touch with family and friends, as well as enjoying education, doing business, and taking advantage of medical assistance. Telecommunications also drive economic growth, competitiveness, the transition to knowledge based society and wider socio-economic development. Therefore, TeliaSonera is committed to bridging the digital divide by offering our services and extending our networks in both mature and emerging markets.
Since the birth of the information society a few decades ago we have seen three major technology leaps, all changing the way people communicate and interact. The PC entered the scene in the 80's. During the 90's computers were connected to networks and the internet, and after the millennium shift laptops and 3G technology made telecommunications mobile.
At birth, the information society and communication services were for the select few. Today, they are global and available to the vast majority of people, regardless of time, place and country. At the end of 2011,
there were globally some 5 billion mobile subscriptions and 2 billion people were connected to the internet. This means that in just a few decades, communication services have transformed from being expensive and exclusive into services which are essential, affordable and personal. They have become an integral part of our daily lives, all over the world.
Now we are in the midst of the next big shift, the fourth generation information society. During the past 24 months, we have witnessed an explosive growth in the use of smartphones. The internet has moved into our palms and pockets. Combined with the rise of social media, such as Facebook with close to 1 billion users, these handsets have transformed the way we connect and interact, the way we do business and the way we socialize. We now have family, friends and colleagues in our pocket – just a swipe away. The information society has gone smart, social and truly global.
If we just go back a few years in time, few of us would have imagined that communication services would change countries and economies, overthrow dictatorship and give birth to democracy.
It may sound bold, but we consider ourselves to be at the very core of this development, in the driving seat of the fourth generation information society. Because regardless of your device, operating system, platform or even country, we ensure that your communications function. We make sure that you can connect to anyone at any time and at any location – in short, that you can communicate.
In 2011, the number of subscribers using our and our affiliated companies' networks grew by 13 million to 170 million in total, all the way from the Nordic countries, across our Eurasian footprint to the Himalayas in Nepal.
We invested more than SEK 17 billion in networks and licenses. We have taken the technology leadership in many of our countries by being the first operator in the world to launch 4G services, and with Azercell's 3G launch in Azerbaijan in November we now provide 3G services in all our Eurasian markets. Our ambition is to take the lead in providing our customers with fast access to the internet across our Eurasian footprint, where fixed networks are very limited.
In May 2011, we manifested our heritage and strategy of being a smart, leading international company with a strong local knowledge and connection by uniting all our main brands under a common identity. Eighteen brands now share the same identity, logo and color scheme, but keep their individual names.
The unified brand further strengthens our position on the international scene by manifesting TeliaSonera's unique combination of global reach and local connection. Our strength lies in the combination of these two features. We are one of Europe's leading operators with significant experience of rolling out networks, developing telecommunication services and we have significant financial muscles. At the same time, we operate through strong local brands and are very close to our
We make sure that you can connect to anyone at any time and at any location – in short, that you can communicate.
customers in each market. This clearly differentiates us from our competitors.
Our strategy is based on providing high quality networks, a world-class customer experience and a product portfolio that meets our customers' needs. We also take pride in the early implementation of new technology at a commercially reasonable pace.
The most tangible benefit for our customers in 2011 was our new offer with significantly lower cost and cost control for data roaming. Users are now able to keep the same mobile behavior when traveling abroad as they do in their home country, without facing any bill shocks when they return. We are convinced that the increased usage this will generate over time will compensate for a short-term negative impact on revenues. In fact, we can already see that volumes have more than doubled compared to a year ago.
Financially, 2011 was another strong year for TeliaSonera and we are proud that we were able to generate growth and keep a healthy balance between revenues and costs. Thereby, we were able to improve our EBITDA margin for the third consecutive year.
Looking ahead, we believe our revenues and earnings will continue to grow in 2012 despite macroeconomic and industrial challenges and we are committed to our strategy of delivering a world class customer experience.
Stockholm, March 8, 2012
Lars Nyberg President and CEO
Customers recognize us in each of our markets by our common identity. Our icon represents the international strength of TeliaSonera combined with a strong local connection as represented by our well-known local brand names. In addition to that we also have local fighting brands in most markets with a different marketing strategy. We have majority-owned operations in the Nordics and Baltics as well as in Eurasia and Spain and associated companies in Russia, Turkey and Latvia. We aim to be recognized as a leading player in all our markets.
| Country | Trademark | Ownership | Service | Market position |
Market share1 |
|---|---|---|---|---|---|
| Sweden | |||||
| Telia, Halebop | 100% | Mobile | 1 | 41% | |
| Telia | 100% | Broadband | 1 | 44% | |
| Telia | 100% | Fixed Voice incl. VoIP | 1 | 63% | |
| Telia | 100% | TV | 4 | 11% | |
| Finland | |||||
| Sonera, TeleFinland | 100% | Mobile | 2 | 35% | |
| Sonera | 100% | Broadband | 2 | 30% | |
| Sonera | 100% | Fixed Voice incl. VoIP | 2 | 23% | |
| Sonera | 100% | TV | 3 | 18% | |
| Norway | |||||
| NetCom, Chess | 100% | Mobile | 2 | 26% | |
| NextGenTel | 100% | Broadband | 2 | 11% | |
| NextGenTel | 100% | Fixed Voice (VoIP) | 5 | 1% | |
| NextGenTel | 100% | TV | <10 | <1% | |
| Denmark | |||||
| Telia, Call me | 100% | Mobile | 3 | 17% | |
| Telia, DLG Tele2 | 100% | Broadband | 4 | 4% | |
| Telia, Call me, DLG Tele2 | 100% | Fixed Voice incl. VoIP | 3 | 7% | |
| Telia | 100% | TV | 10 | <1% |
| Country | Trademark | Ownership | Service | Market position |
Market share1 |
|---|---|---|---|---|---|
| Lithuania | |||||
| Omnitel, Ezys | 100% | Mobile | 1 | 39% | |
| TEO | 68.3% | Broadband | 1 | 51% | |
| TEO | 68.3% | Fixed Voice incl. VoIP | 1 | 93% | |
| TEO | 68.3% | TV | 1 | 26% | |
| Latvia | |||||
| LMT, Okarte, Amigo | 60.3% | Mobile | 1 | 43% | |
| Estonia | |||||
| EMT, Diil | 100% | Mobile | 1 | 44% | |
| Elion | 100% | Broadband | 1 | 55% | |
| Elion | 100% | Fixed Voice incl. VoIP | 1 | 80% | |
| Elion | 100% | TV | 2 | 33% | |
| Spain | |||||
| Yoigo | 76.6% | Mobile | 4 | 5% | |
| Kazakhstan³ | |||||
| Kcell, Activ | 51% | Mobile | 1 | 48% | |
| Azerbaijan³ | |||||
| Azercell | 51.3% | Mobile | 1 | 54% | |
| Uzbekistan | |||||
| Ucell | 94% | Mobile | 2 | 31% | |
| Tajikistan | |||||
| Tcell4 | 60%, 59.4% | Mobile | 1 | 36% | |
| Georgia³ | |||||
| Geocell, Lailai | 100% | Mobile | 1 | 42% | |
| Moldova³ | |||||
| Moldcell | 100% | Mobile | 2 | 34% | |
| Nepal5 | |||||
| Ncell | 80% | Mobile | 1 | 49% |
| Country | Trademark | Ownership | Service | Market position |
Market share1 |
|---|---|---|---|---|---|
| Latvia | |||||
| Lattelecom | 49% | Broadband | 1 | 50% | |
| Lattelecom | 49% | Fixed Voice incl. VoIP | 1 | 75% | |
| Lattelecom | 49% | TV | 1 | 26% | |
| Russia | |||||
| MegaFon | 43.8% | Mobile | 2 | 27% | |
| Turkey | |||||
| Turkcell | 38% | Mobile | 1 | 53% |
TeliaSonera reports its financial result by business area segments Mobility Services, Broadband Services, Eurasia and Other operations. The business areas are based on business units that in most cases are country organizations, and for which certain financial information is reported. The area Other operations includes the units Other Business Services, TeliaSonera Holding and Corporate functions, which are all reported collectively. TeliaSonera has corporate functions for Communication, Finance (including M&A and Sourcing), Human Resources, Internal Audit, IT and Legal.
TeliaSonera is an international company with a global strategy, but wherever we operate, we act as a local company.
TeliaSonera's mission is to help people and companies communicate in an easy, efficient and environmentally friendly way, by providing network access and telecommunication services.
Our focus is to deliver a world-class customer experience, while ensuring the quality of our networks and maintaining a cost efficient structure.
TeliaSonera's unified brand further strengthens our position on the international scene by manifesting our unique combination of global reach and local connection.
TeliaSonera aims to be seen as the most attractive brand in our industry in each market, providing the best customer experience. The unified brand gives the experience of TeliaSonera's operators as smart, leading and local, wherever we operate.
For more information about TeliaSonera's vision, mission, strategy and organization, see the Corporate Governance Statement.
TeliaSonera operates in several geographic markets and with a broad range of products and services in the highly competitive and regulated telecommunications industry. As a result, TeliaSonera is subject to a variety of risks and uncertainties. TeliaSonera has defined risk as anything that could have a material adverse effect on the achievement of TeliaSonera's goals. Risks can be threats, uncertainties or lost opportunities relating to TeliaSonera's current or future operations or activities.
TeliaSonera has an established risk management framework in place to regularly identify, analyze, assess, and report business, financial and corporate responsibility risks and uncertainties, and to mitigate such risks when appropriate. Risk management is an integrated part of TeliaSonera's business planning process and monitoring of business performance. Main risks relate to industry and market conditions, operations and strategic activities, associated companies and joint ventures, ownership of TeliaSonera shares, financial management, financial reporting and corporate responsibility.
Risks and uncertainties related to the business, shareholder issues and to corporate responsibility are described in Note C35 and financial risks in Note C27 to the consolidated financial statements. The control environment and risk management related to internal control over financial reporting are described in the Corporate Governance Statement.
During 2011, net sales in local currencies and excluding acquisitions increased 2.6 percent. Growth was driven by the positive development in mobile data and mobile equipment, Yoigo in Spain and Eurasia. In reported currency, net sales decreased 2.5 percent to SEK 104.4 billion. As set out in the graph below, over the year, the growth rate in net sales in local currencies and excluding acquisitions decreased.
net sales in local currencies and excluding acquisitions, Quarterly growth %, Y/Y
EBITDA, excluding non-recurring items, was in line with 2010 at SEK 36.9 billion. EBITDA margin increased for the third consecutive year and was 35.4 percent (34.5). Net income attributable to the owners of the parent company was SEK 18.3 billion (21.3) and earnings per share SEK 4.20 (4.73). The lower earnings per share were primarily a result of negative currency effects on profits from foreign operations and lower income in associated companies. Free cash flow decreased to SEK 9.6 billion (12.9), due to lower dividends from associated companies of SEK 1.2 billion and higher cash CAPEX of SEK 2.9 billion, of which SEK 1.8 billion was investments in licenses.
In February, TeliaSonera issued a 9-year Eurobond of EUR 750 million and in September, a 10.5-year Eurobond of EUR 500 million, both under TeliaSonera's existing EUR 10 billion EMTN (Euro Medium Term Note) program.
In March, TeliaSonera took legal action against Turkcell's Chairman of the Board in order to safeguard good corporate governance in Turkcell and to protect its legal rights as a minority shareholder.
In April, TeliaSonera launched the first commercial 4G services in Lithuania and in June TeliaSonera launched the first commercial 4G services in Latvia. This means that TeliaSonera has launched 4G services in seven countries; Sweden, Norway, Finland, Denmark, Estonia, Latvia and Lithuania, pioneering the Nordic and Baltic markets with superfast mobile services. The roll-out will continue and for example in Sweden the 4G services now cover 200 locations and will expand by one city or village every day during 2012. Before year-end, 4G tablets were launched to the market and during the first quarter of 2012 TeliaSonera will be able to offer 4G handsets.
In May, TeliaSonera launched a new brand identity. TeliaSonera's 18 main brands were united under a common brand identity, while retaining their brand names.
In May, TeliaSonera also lowered Nordic and Baltic roaming prices by approximately 90 percent. The new lower prices and the cost control function automatically apply to all customers during travel in the Nordic and Baltic countries, without customers needing to make any specific action. Users are now able to keep the same mobile behavior when traveling as they do in their home country. TeliaSonera is convinced that increased usage in the longer perspective will compensate for a short-term negative impact on revenues.
In June, Telia, TeliaSonera's subsidiary in Denmark, entered into a network sharing agreement with Telenor to create Denmark's best mobile network. The companies will also establish a common infrastructure company to operate the joint network.
In September, TeliaSonera announced that an arbitration tribunal of the International Chamber of Commerce (ICC) had issued its final award related to a dispute concerning the 2005 Turkcell Holding share purchase agreement between TeliaSonera and Cukurova. The tribunal ordered Cukurova to pay damages to TeliaSonera to an amount of USD 932 million, plus interest. TeliaSonera has taken actions to recover these damages.
In October, TeliaSonera received USD 100 million from Altimo as certain milestones had been met in fulfilling the agreement signed in November 2009. Altimo made an initial payment to TeliaSonera of USD 50 million at signing in 2009.
In November, Azercell launched 3G services in Azerbaijan and TeliaSonera now provides 3G services in all its Eurasian markets.
In December, in line with the strategy to increase ownership in core holdings, TeliaSonera signed an
agreement with Kazakhtelecom, to acquire 49 percent of the shares in Kcell in Kazakhstan. TeliaSonera has also agreed to sell 25 percent of the shares minus one share in Kcell in an Initial Public Offering (IPO), expected to be completed during 2012.
In the fourth quarter, important milestones were met for several operations. TeliaSonera has now more than half a million TV subscribers in Sweden. Yoigo in Spain passed 3 million subscribers and reported positive EBIT and cash flow. Ncell in Nepal became the overall market leader.
In 2011, TeliaSonera acquired several new telecom and frequency licenses.
| SEK in millions, except earnings per share and margins |
2011 | 2010 | Change, % |
|---|---|---|---|
| Net sales | 104,354 | 106,979 | -2 |
| Addressable cost base¹ | -30,751 | -32,090 | -4 |
| EBITDA² excluding non-recurring items³ | 36,914 | 36,897 | 0 |
| Margin (%) | 35.4 | 34.5 | |
| Depreciation, amortization and impairment losses |
-13,023 | -13,479 | -3 |
| Income from associated companies and joint ventures |
5,717 | 7,821 | -27 |
| Non-recurring items³, within EBITDA | -41 | 764 | |
| Operating income | 29,567 | 32,003 | -8 |
| Financial income and expenses, net | -2,793 | -2,067 | 35 |
| Income taxes | -5,702 | -6,374 | -11 |
| Net income | 21,072 | 23,562 | -11 |
| Attributable to: | |||
| Shareholders of the parent company | 18,341 | 21,257 | -14 |
| Non-controlling interests | 2,731 | 2,305 | 18 |
| Earnings per share (SEK) | 4.20 | 4.73 | -11 |
| Operating income excluding non-recurring items3 |
29,737 | 31,935 | -7 |
| Margin (%) | 28.5 | 29.9 |
¹ For details of addressable cost base, see "Expenses" below.
² EBITDA is an abbreviation for Earnings Before Interest, Tax, Depreciation and Amortization. TeliaSonera defines EBITDA as Operating income before Depreciation, amortization and impairment losses, and before Income from associated companies and joint ventures.
³ For details on non-recurring items, see "Non-recurring items" below.
| Reported net sales SEK in millions |
2011 | 2010 | Change, SEK million |
Change, % |
|---|---|---|---|---|
| Mobility Services | 51,032 | 50,659 | 373 | 1 |
| Broadband Services | 36,811 | 39,875 | -3,064 | -8 |
| Eurasia | 17,330 | 16,458 | 872 | 5 |
| Other operations | 3,992 | 5,102 | -1,110 | -22 |
| Eliminations of internal sales | -4,811 | -5,115 | 304 | 6 |
| Group | 104,354 | 106,979 | -2,625 | -2 |
Net sales decreased 2.5 percent to SEK 104,354 million (106,979). Net sales in local currencies and excluding acquisitions increased 2.6 percent. The negative effect of disposals was 0.9 percent and the negative effect of exchange rate fluctuations was 4.2 percent.
| Net sales in local currencies and excluding acquisitions | 2011 |
|---|---|
| Change (%), Mobility Services | 4.2 |
| Change (%), Broadband Services | -5.7 |
| Change (%), Eurasia | 17.0 |
| Change (%), Other operations | -0.8 |
| Change (%), Group | 2.6 |
In Mobility Services, net sales increased 0.7 percent to SEK 51,032 million (50,659). Net sales in local currencies and excluding acquisitions increased 4.2 percent. The negative effect of exchange rate fluctuations was 3.5 percent.
In Broadband Services, net sales decreased 7.7 percent to SEK 36,811 million (39,875). Net sales in local currencies and excluding acquisitions decreased 5.7 percent. The positive effect of acquisitions was 0.1 percent and the negative effect of exchange rate fluctuations was 2.1 percent.
In Eurasia, net sales rose 5.3 percent to SEK 17,330 million (16,458). Net sales in local currencies and excluding acquisitions increased 17.0 percent. The negative effect of exchange rate fluctuations was 11.7 percent.
The number of subscriptions rose by 13.0 million to 170.0 million. The number of subscriptions in the majority-owned operations rose to 62.8 million of which Eurasia rose with 6.3 million to 34.8 million. The number of subscriptions in the associated companies rose to 107.2 million.
Cost of goods sold¹ was SEK 37,504 million (38,494) a decrease of 2.6 percent compared to 2010, with the largest effect from lower interconnect expenses. The change was in line with net sales development, and the gross margin was stable between 2010 and 2011 at 64.1 percent (64.0).
Addressable costs in local currencies and excluding acquisitions rose 0.6 percent compared to last year, with increases in Eurasia and a slight increase in Mobility Services, partly offset by cost reductions in Broadband Services and Corporate functions.
Personnel expenses decreased substantially, -3.9 percent in local currencies and excluding acquisitions, compared to 2010. While personnel expenses
increased in Eurasia, where TeliaSonera is growing, expenses decreased in Mobility Services, Broadband Services and within the corporate functions. The total number of employees decreased by 533 to 28,412 at year-end.
Marketing expenses increased somewhat as a combination of the effects from sales activities and marketing activities, including the global rebranding activity executed during the first half of 2011. Other costs, such as facility costs, IT, travel and consultants, increased slightly.
Depreciation, amortization and impairment losses decreased 3.4 percent to SEK 13,023 million (13,479), where 2010 included write-downs of SEK 678 million related to the operations in Cambodia. Depreciation excluding non-recurring items increased to SEK 12,957 million (12,787) related to the investments in mobile network capacity and coverage in Mobility Services and Eurasia. In local currencies and excluding acquisitions the increase was 7.3 percent.
Other operating income and expenses, net, was positive at SEK 763 million (578).
| Expenses SEK in millions |
2011 | 2010 | SEK million |
Change, % |
|---|---|---|---|---|
| Goods and sub-contracting | ||||
| services purchased | -14,778 -15,399 | 621 | 4 | |
| Interconnect and roaming | ||||
| expenses | -13,387 -15,630 | 2,243 | 14 | |
| Other network expenses | -5,663 | -5,378 | -285 | -5 |
| Change in inventories | -3,676 | -2,087 | -1,589 | -76 |
| Addressable cost base | -30,751 -32,090 | 1,339 | 4 | |
| Personnel expenses | -12,628 -13,685 | 1,057 | 8 | |
| Marketing expenses | -7,548 | -7,704 | 156 | 2 |
| Other expenses | -10,575 -10,701 | 126 | 1 | |
| Total excluding depreciation, amortization and impairment |
||||
| losses | -68,255 -70,584 | 2,329 | 3 | |
| Depreciation, amortization and | ||||
| impairment losses | -13,012 | -12,791 | -221 | -2 |
| Other operating income and | ||||
| expenses | 763 | 578 | 185 | 32 |
| Total expenses | -80,504 -82,797 | 2,293 | 3 |
1 Cost of goods sold consists of goods and sub-contracting services purchased, interconnect and roaming expenses, other network expenses and change in inventories.
Non-recurring items affecting operating income were SEK -170 million (68), including positive effects of SEK 617 million as compensation for meeting certain milestones in fulfilling the agreement with Altimo signed in November 2009 and negative effects of SEK 955 million from restructuring charges in 2011, mainly related to staff redundancy costs.
The following table presents non-recurring items for 2011 and 2010. These items are not included in "EBIT-DA excluding non-recurring items" or in "Operating income excluding non-recurring items," but included in the total results for TeliaSonera and for each of the business areas.
| Non-recurring items SEK in millions |
2011 | 2010 |
|---|---|---|
| Within EBITDA | -41 | 764 |
| Restructuring charges, synergy implementation | ||
| costs, etc.: | ||
| Mobility Services | -221 | -26 |
| Broadband Services | -575 | -142 |
| Eurasia | -19 | -47 |
| Other operations | -177 | -144 |
| of which TeliaSonera Holding | 28 | -37 |
| Capital gains/losses | ||
| Telia Stofa | – | 830 |
| Other entities | 951 | 293 |
| Within Depreciation, amortization | ||
| and impairment losses | -66 | -692 |
| Impairment losses, accelerated depreciation: | ||
| Broadband Services | -66 | -14 |
| Other operations | – | -678 |
| Within Income from associated companies | ||
| and joint ventures | -63 | -4 |
| Capital gains | – | -4 |
| Within Financial net | – | – |
| Total | -170 | 68 |
EBITDA, excluding non-recurring items, remained flat at SEK 36,914 million (36,897). The increase in local currencies and excluding acquisitions was 4.7 percent. The EBITDA increase was driven by the strong top line growth as well as margin improvements in Mobility Services and Eurasia. The EBITDA margin rose to 35.4 percent (34.5).
| EBITDA excluding non-recurring items SEK in millions |
2011 | 2010 | Change, SEK million |
Change, % |
|---|---|---|---|---|
| Mobility Services | 15,746 | 14,928 | 818 | 5 |
| Broadband Services | 12,101 | 13,035 | -934 | -7 |
| Eurasia | 8,850 | 8,348 | 502 | 6 |
| Other operations | 257 | 560 | -303 | -54 |
| Eliminations | -40 | 26 | -66 | |
| Group | 36,914 | 36,897 | 17 | 0 |
Operating income, excluding non-recurring items, decreased to SEK 29,737 million (31,935) mainly due to lower income from associated companies, which decreased by 26.9 percent to SEK 5,717 million (7,821). Income from associates was impacted by currency fluctuations as well as lower underlying results from operations in Turkcell and MegaFon.
| Operating income excluding non-recurring items |
Change, | Change, | ||
|---|---|---|---|---|
| SEK in millions | 2011 | 2010 | SEK million |
% |
| Mobility Services | 11,263 | 10,776 | 487 | 5 |
| Broadband Services | 7,168 | 7,969 | -801 | -10 |
| Eurasia | 11,749 | 13,314 | -1,565 | -12 |
| Other operations | -406 | -154 | -252 | -164 |
| Eliminations | -37 | 30 | -67 | |
| Group | 29,737 | 31,935 | -2,198 | -7 |
Financial net, taxes and non-controlling interests Financial items totaled SEK -2,793 million (-2,067), of which SEK -2,364 million (-1,784) related to net interest expenses.
Income taxes amounted to SEK 5,702 million (6,374). The effective tax rate was unchanged at 21.3 percent (21.3). The tax rate was negatively impacted mainly by lower income from associated companies, while reduced losses in Yoigo in Spain had a positive impact. Recognized deferred tax assets decreased to SEK 8,073 million (9,048) due to utilization but also from a revaluation effect related to the corporate tax rate cut in Finland.
Net income attributable to non-controlling interests in subsidiaries increased to SEK 2,731 million (2,305), of which SEK 2,420 million (2,237) was related to the operations in Eurasia and SEK 262 million (302) to LMT and TEO.
Net income attributable to owners of the parent company decreased 13.7 percent to SEK 18,341 million (21,257) and earnings per share decreased to SEK 4.20 (4.73), primarily due to negative currency effects on profits from foreign operations and lower income in associated companies.
| Change, SEK Change, |
||||
|---|---|---|---|---|
| SEK in millions | 2011 | 2010 | million | % |
| Assets | ||||
| Goodwill and other | ||||
| intangible assets | 91,915 | 90,531 | 1,384 | 2 |
| Property, plant and equipment | 59,580 | 58,353 | 1,227 | 2 |
| Investments in associated companies and joint ventures, deferred tax assets and |
||||
| other financial assets | 65,743 | 62,458 | 3,285 | 5 |
| Total non-current assets | 217,238 | 211,342 | 5,896 | 3 |
| Current assets (except cash | ||||
| and cash equivalents) | 24,043 | 23,865 | 178 | 1 |
| Cash and cash equivalents | 12,600 | 15,344 | -2,744 | -18 |
| Total current assets | 36,643 39,209 | -2,566 | -7 | |
| Total assets | 253,881 250,551 | 3,330 | 1 | |
| Equity and liabilities | ||||
| Shareholders' equity | 116,680 | 125,907 | -9,227 | -7 |
| Non-controlling interests | 7,353 | 6,758 | 595 | 9 |
| Total equity | 124,033 132,665 | -8,632 | -7 | |
| Long-term borrowings | 68,108 | 60,563 | 7,545 | 12 |
| Other long-term liabilities | 25,572 | 24,823 | 749 | 3 |
| Total non-current liabilities | 93,680 85,386 | 8,294 | 10 | |
| Short-term borrowings | 11,734 | 4,873 | 6,861 | 141 |
| Other current liabilities | 24,434 | 27,627 | -3,193 | -12 |
| Total current liabilities | 36,168 32,500 | 3,668 | 11 | |
| Total equity and liabilities | 253,881 250,551 | 3,330 | 1 |
The financial position remained stable year-on-year. Meanwhile goodwill remained unchanged, other intangible assets increased SEK 1.7 billion in 2011 as a result of investments in telecom and frequency licenses in Sweden and Eurasia. The currency effects had limited impact (SEK -0.3 billion). Property, plant and equipment increased through capital expenditures (CAPEX) of SEK 12.1 billion and decreased due to negative exchange rate differences of SEK 0.3 billion (-4.1).
Depreciation and impairment losses were SEK 10.3 billion. The carrying value of associated companies and joint ventures was SEK 47.7 billion (46.5). The value increased due to income from these companies (SEK 5.8 billion), and was partly offset by dividends received, mainly from Svenska UMTS-nät in Sweden, (SEK 0.5 billion) and by negative exchange rate differences (SEK 4.5 billion).
Deferred tax assets decreased from utilization of tax losses as well as an adjustment of deferred tax assets in Finland of SEK 0.3 billion following the enactment of a lower corporate tax rate. In total, the net deferred tax liability of SEK 3.5 billion in 2010 increased to SEK 5.4 billion at year-end 2011.
Net working capital (inventories and non-interestbearing receivables, less non-interest-bearing liabilities) remained negative at SEK -1.0 billion (-3.6).
Shareholders' equity decreased to SEK 116.7 billion (125.9), impacted by net income of SEK 18.3 billion (21.3), negative exchange rate differences of SEK -5.2 billion (-19.4), dividends of SEK 12.3 billion and the share repurchase of SEK 10.0 billion. Equity attributable to non-controlling interests was SEK 7.4 million (6.8).
As of 2013, TeliaSonera's accounting for pension liabilities will change following the implementation of certain IFRS amendments (IAS 19). Among a number of changes impacting TeliaSonera, the most significant is the elimination of the "corridor approach." As a result, historical accumulated actuarial gains and losses will increase recognized pension liabilities and decrease shareholders' equity. Future actuarial gains and losses will not be deferred, but immediately impact shareholders' equity through other comprehensive income.
The equity/assets ratio, adjusted for the proposed dividend, decreased to 44.0 percent (48.0). Net debt increased from SEK 47.3 billion to SEK 65.1 billion. Dividend payments and the share repurchase had a negative impact of SEK 24.8 billion. The net debt/ EBITDA ratio increased to 1.76 (1.28) and the net debt/ equity ratio increased to 58.3 percent (39.3).
Net debt and Net debt / EBITDA* (MULTIPLE)
* Excluding non-recurring items.
See Consolidated Statements of Financial Position, Consolidated Statements of Changes in Equity and related notes to the consolidated financial statements for further details.
TeliaSonera believes that its bank credit facilities and open-market financing programs are sufficient for the present liquidity requirements. At year-end, TeliaSonera's surplus liquidity (short-term investments and cash and bank) totaled SEK 12.7 billion (16.4). In addition, the total available unutilized amount under committed bank credit facilities as well as overdraft and short-term credit facilities at year-end was SEK 16.2 billion (11.9).
TeliaSonera's credit ratings as such remained unchanged. The rating from Moody's Investors Service is A3 for long-term borrowing and Prime-2 for short-term
borrowing, however with a negative outlook. The rating from Standard & Poor's Ratings Services is A for longterm borrowing and A2 for short-term borrowing, with a stable outlook.
TeliaSonera generally seeks to arrange its financing through the parent company TeliaSonera AB. The primary means of external borrowing are described in Notes C21 and C27 to the consolidated financial statements. During 2011, TeliaSonera AB issued some SEK 17.9 billion equivalent in the debt capital markets under its EMTN (Euro Medium Term Note) program. Most of the new funding was denominated in EUR and most of it was issued on a long-term basis. The average time to maturity of TeliaSonera AB's overall debt portfolio was approximately 5.6 years at year-end.
At the end of 2011, TeliaSonera AB had no Commercial Papers outstanding.
| Change, SEK |
Change, | |||
|---|---|---|---|---|
| SEK in millions | 2011 | 2010 | million | % |
| Cash from operating activities | 27,023 | 27,434 | -411 | -1 |
| Cash used in capital expenditure -17,394 | -14,533 | -2,861 | -20 | |
| Free cash flow | 9,629 | 12,901 | -3,272 | -25 |
| Cash used in other investing activities |
88 | -1,943 | 2,031 | |
| Cash flow before financing activities |
9,717 | 10,958 | -1,241 | -11 |
| Cash used in financing activities -12,035 | -17,736 | 5,701 | 32 | |
| Cash and cash equivalents, opening balance |
15,344 22,488 | -7,144 | -32 | |
| Net cash flow for the period | -2,318 | -6,778 | 4,460 | 66 |
| Exchange rate differences | -426 | -366 | -60 | -16 |
| Cash and cash equivalents, closing balance |
12,600 | 15,344 | -2,744 | -18 |
Cash flow from operating activities was SEK 27.0 billion in 2011, approximately at the same level as in 2010. The cash flow was positively affected by lower payments for restructuring provisions and taxes, while lower dividends from associates of SEK 1.2 billion and changes in working capital had a negative impact. Cash flow from change in working capital was SEK -1.8 billion (-1.4) in 2011. Cash used in capital expenditure (cash CAPEX) increased by SEK 2.9 billion or 20 percent. As a result, free cash flow (cash flow from operating activities less capital expenditure) decreased 25 percent in 2011 to a total of SEK 9.6 billion.
Cash used in other investing activities consists of acquisitions, divestments, changes in loans receivable and in short-term investments, and repayments from or additional contributions to pension funds. Cash paid for acquisitions was SEK 0.3 billion (3.2), and cash used for granting loans was SEK 2.5 billion (0.8).
Cash used in financing activities in 2011 includes the share repurchase of SEK 10.0 billion and dividends of SEK 14.8 billion, of which paid to shareholders of the parent company SEK 12.3 billion (10.1) and to noncontrolling interests SEK 2.5 billion (2.9). Net new borrowings were SEK 13.8 billion (-0.8).
See Consolidated Statements of Cash Flows and related notes to the consolidated financial statements for further details.
The growth in net sales in local currencies and excluding acquisitions is expected to be within the range of 1-2 percent. Currency fluctuations may have a material impact on reported figures in Swedish krona.
The EBITDA margin, excluding non-recurring items, in 2012 is expected to remain at the same level compared with 2011.
The CAPEX-to-sales ratio is expected to be approximately 13-14 percent in 2012, excluding license and spectrum fees.
For 2011, the Board of Directors proposes to the Annual General Meeting (AGM) an ordinary dividend of SEK 2.85 (2.75) per share, an increase of 3.6 percent, totaling SEK 12,341 million (12,349), or 68 percent of net income attributable to owners of the parent company.
The Board of Directors proposes that the final day for trading in shares entitling shareholders to dividend be set for April 3, 2012, and that the first day of trading in shares excluding rights to dividend be set for April 4, 2012. The recommended record date at Euroclear Sweden for the right to receive dividend will be April 10, 2012. If the AGM votes to approve the Board's proposals, the dividend is expected to be distributed by Euroclear Sweden on April 13, 2012.
According to its dividend policy, TeliaSonera shall target a solid investment grade long-term credit rating (A– to BBB+) to secure the company's strategically important financial flexibility for investments in future growth, both organically and by acquisitions. The ordinary dividend shall be at least 50 percent of net income attributable to owners of the parent company. In addition, excess capital shall be returned to shareholders after the Board of Directors has taken into consideration to Chapter 18 Section 4 of the Swedish Companies Act, to assess whether the proposed dividend is justified. The Board of Directors assesses that:
The full statement by the Board of Directors on the same will be included in the Annual General Meeting documents. See also Proposed Appropriation of Earnings.
In order to provide TeliaSonera with an additional instrument to adjust the company's capital structure, the Board of Directors proposes that the Annual General Meeting resolve to authorize the Board of Directors to repurchase a maximum of 10 percent of the company's total number of outstanding shares, with the intention of cancelling repurchased shares.
In 2011, TeliaSonera repurchased 160,372,432 of the company's shares. SEK 9,943 million was distributed to the shareholders of TeliaSonera as payment for the repurchased shares. The repurchase was initiated after careful evaluation of expected future cash flows and balance sheet projections. The strong cash flows allowed the Board of Directors to grant the repurchase offer to the shareholders in addition to the proposed ordinary dividend.
Business area Mobility Services provides mobility services to the consumer and enterprise mass markets. Services include mobile voice and data, mobile content, WLAN Hotspots, mobile broadband, mobile/ PC convergence and Wireless Office. The business area comprises mobile operations in Sweden, Finland, Norway, Denmark, Lithuania, Latvia, Estonia and Spain.
The strong demand for mobile internet access in the Nordic countries was driving mobile data revenues and equipment sales and continued to offset a reduction in voice revenues. New offers for mobile data were launched in several markets to better reflect customers' different needs. Less expensive smartphones were available, allowing new consumer segments to be targeted. The exceptional demand for smartphones in combination with the release of several new phone models led to a strong growth in equipment sales especially towards the end of the year.
In May, TeliaSonera considerably reduced the data traffic rate for subscribers roaming in the Nordic and Baltic countries, meeting the need for mobile surfing when staying in these countries. As a result, data traffic rose sharply. In October, the Swedish operation continued to make internet surfing on their mobile phones easier for customers while traveling in Europe. TeliaSonera's customers in Sweden will be the first to experience feeling secure when browsing the mobile web in 25 countries in Europe on a low data roaming price, with complete control over their bill. The new price offering on data roaming was very well received by the customers.
In the first quarter of 2011, TeliaSonera acquired a license in the 800 MHz frequency band in Sweden which will make it possible to continue the roll-out of high quality 4G services in the whole country. By the end of 2011, approximately 200 locations were covered and will expand by one city or village every day during 2012. In the second quarter, LMT in Latvia and Omnitel in Lithuania were the first operators to launch 4G services and TeliaSonera now offers commercial 4G services in all Nordic and Baltic countries.
In Spain, Yoigo acquired a license in the 1,800 MHz frequency band. The license will enable Yoigo to offer 4G services and reduce costs for national roaming. Yoigo reached a milestone and passed 3 million subscriptions in December 2011 and reported positive EBIT and cash flow in the fourth quarter.
In Denmark, TeliaSonera has entered into a network sharing agreement with Telenor to create Denmark's best mobile network. The agreement involves the 2G, 3G and 4G networks.
| SEK in millions, except margins, operational data and changes |
2011 | 2010 | Change, % |
|---|---|---|---|
| Net sales | 51,032 | 50,659 | 1 |
| EBITDA excl. non-recurring items | 15,746 | 14,928 | 5 |
| Margin (%) | 30.9 | 29.5 | |
| Operating income | 11,064 | 10,750 | 3 |
| Operating income excl. | |||
| non-recurring items | 11,263 | 10,776 | 5 |
| CAPEX | 6,600 | 3,879 | 70 |
| Subscriptions, period-end (thousands) | 19,520 | 18,384 | 6 |
| Employees, period-end | 7,771 | 7,488 | 4 |
Additional segment information available at www.teliasonera.com. See also information regarding restated financial information at the end of this report.
Net sales in local currencies and excluding acquisitions increased 4.2 percent. In reported currency, net sales increased by 0.7 percent to SEK 51,032 million (50,659). The negative effect from exchange rate fluctuations was 3.5 percent.
Overall subscription growth, higher usage of mobile broadband and data services as well as equipment sales drove sales higher. Growth was offset by price competition and regulatory interventions, including interconnect and roaming pricing.
The operations in Sweden, Spain, Estonia and Latvia grew during the year. In Sweden, growth came from continued increase in voice and mobile broadband subscriptions as well as increased usage and equipment sales.
Strong net intake of 756,000 subscriptions, an increase in the subscriber base of 33.1 percent, generated growth in Spain. In the Baltics, the growth is explained by higher usage, in Latvia also by a larger customer base, together with equipment sales. Operations in other markets declined in 2011.
EBITDA, excluding non-recurring items, increased 8.2 percent in local currencies and excluding acquisitions. In reported currency, EBITDA, excluding non-recurring items increased to SEK 15,746 million (14,928) and the margin rose to 30.9 percent (29.5).
The growth in EBITDA, excluding non-recurring items was driven by Sweden and Spain. In Sweden, top line growth in combination with limited growth in other OPEX grew EBITDA, excluding non-recurring items. In Spain, Yoigo became EBIT positive in the fourth quarter. The earnings improvement in Spain was achieved through improved gross margin, as a result of more traffic in Yoigo's own network, and balanced growth for personnel and marketing expenses.
Operating income improved to SEK 11,064 million (10,750), mainly because of the development in EBITDA. Amortization and depreciation was higher than previous year, mainly in Sweden, Norway and Spain, due to increased CAPEX in recent years. Operating income was further put under pressure by decreased income from associates, mainly referring to the joint venture Svenska UMTS-nät in Sweden.
Non-recurring items amounting to SEK 200 million (25) and primarily related to restructuring charges affected operating income negatively.
CAPEX increased to SEK 6,600 million (3,879). Excluding investments in licenses, CAPEX increased to SEK 4,327 million (3,490). CAPEX included continued investments in network capacity, coverage and modernization, mainly for 3G (UMTS) networks. 4G (LTE) networks build-out continued in 2011 while investments in 2G (GSM) networks declined further in the year. The CAPEX-to-sales ratio was 12.9 percent (7.7), while excluding licenses 8.5 percent (6.9).
| SEK in millions, | Change, | ||
|---|---|---|---|
| except margins and changes | 2011 | 2010 | % |
| Net sales | 51,032 | 50,659 | 1 |
| of which Sweden | 16,204 | 15,195 | 7 |
| of which Finland | 8,922 | 9,613 | -7 |
| of which Norway | 8,314 | 8,597 | -3 |
| of which Denmark | 5,525 | 6,305 | -12 |
| of which Lithuania | 1,451 | 1,662 | -13 |
| of which Latvia | 1,722 | 1,806 | -5 |
| of which Estonia | 1,608 | 1,650 | -3 |
| of which Spain | 7,451 | 5,979 | 25 |
| EBITDA excl. non-recurring items | 15,746 | 14,928 | 5 |
| Margin (%), total | 30.9 | 29.5 | |
| Margin (%), Sweden | 44.7 | 40.9 | |
| Margin (%), Finland | 31.9 | 31.1 | |
| Margin (%), Norway | 34.8 | 35.4 | |
| Margin (%), Denmark | 13.5 | 18.9 | |
| Margin (%), Lithuania | 27.9 | 33.3 | |
| Margin (%), Latvia | 37.9 | 40.0 | |
| Margin (%), Estonia | 34.4 | 39.6 | |
| Margin (%), Spain | 5.6 | neg |
| Net sales in local currencies and excluding acquisitions | 2011 |
|---|---|
| Change (%), total | 4.2 |
| Change (%), Sweden | 6.6 |
| Change (%), Finland | -1.9 |
| Change (%), Norway | -0.5 |
| Change (%), Denmark | -7.4 |
| Change (%), Lithuania | -7.7 |
| Change (%), Latvia | 0.5 |
| Change (%), Estonia | 3.0 |
| Change (%), Spain | 31.7 |
Business area Broadband Services provides massmarket services for connecting homes and offices. Services include broadband over copper, fiber and cable, IPTV, voice over internet, home communications services, IP-VPN/Business internet, leased lines and traditional telephony. The business area operates the group common core network, including the data network of the international carrier business. The business area comprises operations in Sweden, Finland, Norway, Denmark, Lithuania, Latvia (49 percent), Estonia and international carrier operations.
In Sweden, around 800,000 broadband connections over the copper network will be upgraded with VDSL2. This upgrade will enable speeds up to between 30 and 60 Mbit/s and in a better way support HD-TV, online gaming and on-demand services. The upgrade started in April 2011 and will be finished by 2013.
As TeliaSonera's fixed networks remain a key strategic asset and in order to meet the customers' demand for triple play and capacity-hungry applications, Telia-Sonera will invest more than SEK 8 billion in fiber until 2014, of which SEK 5 billion in Sweden. The roll-out will be selective to ensure a good return on investment. By the end of 2014, TeliaSonera aims to expand the coverage by fiber to 2.3 million connected homes in the Nordic and Baltic countries, of which almost 1 million in Sweden.
The cost efficiency measures implemented early in 2011 had a positive impact and the profitability margin was defended despite lower net sales. The international carrier operations showed a positive trend in profitability by focusing on higher-margin traffic.
| SEK in millions, except margins, | Change, | ||
|---|---|---|---|
| operational data and changes | 2011 | 2010 | % |
| Net sales | 36,811 | 39,875 | -8 |
| EBITDA excl. non-recurring items | 12,101 | 13,035 | -7 |
| Margin (%) | 32.9 | 32.7 | |
| Operating income | 6,582 | 7,813 | -16 |
| Operating income excl. non-recurring | |||
| items | 7,168 | 7,969 | -10 |
| CAPEX | 5,448 | 4,928 | 11 |
| Subscriptions, period-end (thousands) | |||
| Broadband | 2,481 | 2,402 | 3 |
| Fixed voice and VoIP | 4,805 | 5,040 | -5 |
| TV | 1,177 | 935 | 26 |
| Employees, period-end | 13,305 | 13,901 | -4 |
Additional segment information available at www.teliasonera.com. See also information regarding restated financial information at the end of this report.
Net sales in local currencies and excluding acquisitions decreased 5.7 percent. In reported currency, net sales decreased 7.7 percent to SEK 36,811 million (39,875). The positive effect from acquisitions was 0.1 percent and the negative effect from exchange rate fluctuations was 2.1 percent.
The number of broadband subscriptions rose to 2.5 million, an increase of 79,000 during the year, driven by growth in fiber subscriptions, accelerating during the fourth quarter. By the end of 2011, 0.5 million homes and offices were connected by fiber, representing more than 20 percent of all broadband connections. The number of TV subscriptions increased by 242,000 to 1.2 million, whereof 0.5 million in Sweden, while fixed-voice subscriptions decreased by 399,000 to 4.3 million. This was offset by an increase of VoIP subscriptions of 164,000, to 0.5 million.
IP services represented 41 percent of total sales in 2011 (37). Net sales in most markets continued to suffer from the decline in traditional fixed line services which was only partly compensated for by growth in IP-based services.
EBITDA, excluding non-recurring items, decreased 5.4 percent in local currencies and excluding acquisitions. In reported currency, EBITDA, excluding non-recurring items, decreased 7.2 percent to SEK 12,101 million (13,035) and the margin was 32.9 percent (32.7).
The decline in earnings was the result of the decreased sales which were not fully compensated for by cost reductions in several markets. In Sweden, earnings grew 0.8 percent as the result of the implemented cost savings programs and continued efforts to improve efficiency in network maintenance. Also Denmark managed to show increased earnings, mainly due to improved cost efficiency. In Finland, earnings decreased due to the decline in net sales and gross margin, the latter as a result of sales of low-margin products such as equipment together with increased costs for fault handling. Estonia grew net sales in local currency 5.3 percent, while earnings decreased slightly due to lower gross margin.
Operating income decreased to SEK 6,582 million (7,813). In addition to the lower EBITDA, higher non-recurring items of SEK 587 million (156), in terms of restructuring charges, affected operating income negatively. Amortization and depreciation decreased compared to previous year.
CAPEX increased to SEK 5,448 million (4,928), of which mostly in Sweden. A dominant part of CAPEX was spent on deployment of fiber and IP-based infrastructure and services, also representing the increase in CAPEX compared to the previous year. The CAPEX-to-sales ratio was 14.8 percent (12.4).
| SEK in millions, | Change, | ||
|---|---|---|---|
| except margins and changes | 2011 | 2010 | % |
| Net sales | 36,811 | 39,875 | -8 |
| of which Sweden | 17,264 | 18,085 | -5 |
| of which Finland | 5,289 | 5,820 | -9 |
| of which Norway | 1,063 | 1,157 | -8 |
| of which Denmark | 929 | 983 | -5 |
| of which Lithuania | 1,962 | 2,139 | -8 |
| of which Estonia | 1,903 | 1,910 | 0 |
| of which Wholesale | 9,654 | 11,214 | -14 |
| EBITDA excl. non-recurring items | 12,101 | 13,035 | -7 |
| Margin (%), total | 32.9 | 32.7 | |
| Margin (%), Sweden | 39.3 | 38.2 | |
| Margin (%), Finland | 24.2 | 29.5 | |
| Margin (%), Norway | 16.4 | 15.8 | |
| Margin (%), Denmark | 11.0 | 10.0 | |
| Margin (%), Lithuania | 40.3 | 39.8 | |
| Margin (%), Estonia | 28.3 | 30.7 | |
| Margin (%), Wholesale | 25.2 | 24.0 |
| Net sales in local currencies and excluding acquisitions | 2011 |
|---|---|
| Change (%), total | -5.7 |
| Change (%), Sweden | -4.5 |
| Change (%), Finland | -4.5 |
| Change (%), Norway | -5.5 |
| Change (%), Denmark | -0.2 |
| Change (%), Lithuania | -3.1 |
| Change (%), Estonia | 5.3 |
| Change (%), Wholesale | -12.0 |
Business area Eurasia comprises mobile operations in Kazakhstan, Azerbaijan, Uzbekistan, Tajikistan, Georgia, Moldova and Nepal. The business area is also responsible for developing TeliaSonera's shareholding in Russian MegaFon (44 percent) and Turkish Turkcell (38 percent). The main strategy is to create shareholder value by increasing mobile penetration and introducing value-added services in each country.
The number of subscriptions in the consolidated operations was 34.8 million at the end of 2011. During the year, important milestones were reached as Kazakhstan and Uzbekistan passed 10 million and 7 million subscriptions, respectively. Ncell in Nepal became the GSM market leader and increased its subscription base by 2.8 million to a total of 6.8 million subscriptions by the end of the year. Azercell launched 3G services in Azerbaijan in November and TeliaSonera now provides 3G services in all the Eurasian markets and the clear ambition is to become the market leader in mobile data.
In addition to increased mobile penetration, there is an untapped potential in mobile data in Eurasia. In one year, mobile data as a percentage of total revenues has almost doubled and represents around 6 percent of total sales in the region. In Uzbekistan, value-added services constitute 25 percent of Ucell's revenues.
In Russia, MegaFon has passed VimpelCom as the country's second largest mobile operator, both in terms of subscriptions and revenues. Within mobile data, MegaFon was considered being the market leader. Competition in the Russian mobile market has increased due to fights over market shares with lower average price per minute as a result.
| 2011 | 2010 | Change, % |
|---|---|---|
| 17,330 | 16,458 | 5 |
| 8,850 | 8,348 | 6 |
| 51.1 | 50.7 | |
| 4,410 | 5,053 | -13 |
| 1,331 | 2,550 | -48 |
| 12,499 | 13,267 | -6 |
| 11,749 | 13,314 | -12 |
| 4,538 | 5,473 | -17 |
| 34,840 | 28,505 | 22 |
| 106,225 | 100,900 | 5 |
| 4,994 | 4,853 | 3 |
Additional segment information available at www.teliasonera.com. See also information regarding restated financial information at the end of this report.
Net sales in local currencies and excluding acquisitions rose 17.0 percent. Net sales in reported currency increased 5.3 percent to SEK 17,330 million (16,458). The negative effect from exchange rate fluctuations was 11.7 percent.
In Kazakhstan, the largest market in the business area, sales rose by 17.2 percent in local currency. Growth was generated by strong increase in the subscriber base of 1.9 million to 10.9 million and increased usage. A price cap on retail tariffs and the launch by a third operator have put pressure on the average price per minute. Mobile data continued to grow strongly.
In Azerbaijan, net sales decreased by 2.0 percent in local currency due to significant price erosion in the market. The launch of 3G services has been well received and data volumes increased strongly in the fourth quarter. In Uzbekistan, net sales rose 29.8 percent in local currency as a result of strong subscriber intake of 0.9 million to 7.7 million and relatively high usage, both for voice and value added services. However, net sales in Uzbekistan declined in the fourth quarter due to power shortage in the country. The number of subscriptions in Nepal grew by 2.8 million to 6.8 million and net sales rose 92.9 percent in local currency.
Also in Tajikistan and Moldova, net sales grew in 2011 in local currencies, primarily driven by increases in the subscriber base, but in Tajikistan also by increased
usage and higher average revenue per minute. In Georgia, sales decreased 14.6 percent in local currency due to severe price competition in the market. Excise tax on revenues and lower interconnect fees were introduced in the third quarter of 2010 and maximum retail tariffs were introduced in April 2011.
EBITDA, excluding non-recurring items, increased 17.6 percent in local currencies and excluding acquisitions as a result of increased sales and slightly increased margins. In reported currency, EBITDA, excluding nonrecurring items increased 6.0 percent to SEK 8,850 million (8,348).
The growth in EBITDA, in local currencies, was mainly driven by increased net sales in combination with continued margin improvements in Kazakhstan, Nepal and Uzbekistan. The EBITDA margin increased to 51.1 percent (50.7).
Operating income decreased to SEK 12,499 million (13,267). The EBITDA improvement was offset by increased amortization and depreciation, mainly in Kazakhstan, Nepal and Uzbekistan, together with decreased earnings from the associated companies Turkcell and MegaFon.
In 2011, Eurasia had a non-recurring income of SEK 750 million, of which SEK 617 million related to compensation for meeting certain milestones in fulfilling the agreement with Altimo signed in November 2009.
CAPEX decreased to SEK 4,538 million (5,473) and the CAPEX-to-sales ratio decreased to 26.2 percent (33.3). CAPEX, excluding licenses, amounted to SEK 4,129 million (4,941) and the CAPEX-to-sales ratio to 23.8 percent (30.0). CAPEX was driven by investments in additional capacity, and to improve coverage and maintain a high service quality in the network, mainly focused to Kazakhstan, Uzbekistan and Nepal.
| Change, | |||
|---|---|---|---|
| SEK in millions, except changes | 2011 | 2010 | % |
| Net sales | 17,330 | 16,458 | 5 |
| of which Kazakhstan | 7,913 | 7,450 | 6 |
| of which Azerbaijan | 3,449 | 3,817 | -10 |
| of which Uzbekistan | 1,738 | 1,607 | 8 |
| of which Tajikistan | 834 | 823 | 1 |
| of which Georgia | 926 | 1,133 | -18 |
| of which Moldova | 518 | 489 | 6 |
| of which Nepal | 1,960 | 1,149 | 71 |
| Net sales in local currencies and excluding acquisitions | 2011 | ||
| Change (%), total | 17.0 | ||
| Change (%), Kazakhstan | 17.2 | ||
| Change (%), Azerbaijan | -2.0 | ||
| Change (%), Uzbekistan | 29.8 |
| Change (%), Tajikistan | 18.2 |
|---|---|
| Change (%), Georgia | -14.6 |
| Change (%), Moldova | 11.1 |
| Change (%), Nepal | 92.9 |
MegaFon (associated company, in which TeliaSonera holds 43.8 percent) in Russia increased its subscription base by 5.3 million to 62.5 million. MegaFon increased its market share from 26 to 27 percent.
TeliaSonera's income from Russia decreased to SEK 4,410 million (5,053), due to intensified competition in the Russian market, which has caused lower prices and margins, increasing share of lower margin handset sales and fixed broadband. The Russian ruble depreciated 6.8 percent against the Swedish krona which had a negative impact of SEK 322 million.
Turkcell (associated company, in which TeliaSonera holds 38.0 percent, reported with a one-quarter lag) in Turkey increased its subscription base by 0.5 million to 34.4 million. In Ukraine, the number of subscriptions declined by 0.5 million to 9.3 million.
TeliaSonera's income from Turkey decreased to SEK 1,331 million (2,550), mainly due to maximum tariff regulation, lower interconnect rates and increased marketing expenses driven by aggressive competition in Turkey. TeliaSonera's income from Turkey was also negatively affected by devaluation and goodwill impairment in Belarus. The Turkish lira depreciated 13.8 percent against the Swedish krona, which had a negative impact of SEK 213 million.
The 2010 dividend from Turkcell was delayed and not paid in 2011. Turkcell's Annual General Meeting failed to approve any dividends as TeliaSonera and Altimo abstained from voting due to issues relating to the corporate governance of the company. TeliaSonera's part of the proposed dividend is approximately SEK 1.9 billion.
Other operations comprise Other Business Services, TeliaSonera Holding and Corporate functions. Other Business Services is responsible for sales and production of managed-services solutions to business customers.
| Change, | |||
|---|---|---|---|
| SEK in millions, except changes | 2011 | 2010 | % |
| Net sales | 3,992 | 5,102 | -22 |
| EBITDA excl. non-recurring items | 257 | 560 | -54 |
| Income from associated companies | -115 | -23 | |
| Operating income | -541 | 143 | |
| Operating income excl. non-recurring | |||
| items | -406 | -154 | |
| CAPEX | 657 | 654 | 0 |
Additional segment information available at www.teliasonera.com. See also information regarding restated financial information at the end of this report.
Net sales in local currencies and excluding acquisitions and divestments decreased 7.3 percent, mainly as a result of declining sales in the retail chain Veikon Kone. In reported currency, net sales decreased to SEK 3,992 million (5,102). In 2010, the Danish subsidiary Telia Stofa was sold and deconsolidated as of August 1.
EBITDA, excluding non-recurring items decreased to SEK 257 million (560) mainly due to the divestment of Telia Stofa and losses in Veikon Kone.
Income from associated companies decreased to SEK -115 million (-23) largely due to an impairment charge of SEK 63 million.
Operating income decreased to SEK -541 million (143). In 2010, operating income was positively impacted by the capital gain of SEK 830 million from the sale of Telia Stofa and an additional non-cash capital gain of SEK 347 million from the dissolution of a Dutch holding company structure, but offset by the write-down of SEK 678 million related to the operations in Cambodia.
In this report, prior periods have been restated to reflect the discovery of certain classification errors, referring to: (a) certain commission fees to retailers in business area Eurasia; (b) certain equipment sales and commission fees in business area Mobility Services; and (c) certain leasing agreements with customers in reportable segment Other operations.
The main focus of innovation, research and development (R&D) at TeliaSonera is to ensure our pioneering position in the telecom industry as well as support future profitable growth and cost efficiency.
The innovation and R&D activities focus on developing reliable and innovative services, products, systems and concepts that can offer an excellent user experience. The current core communication and
access business is developed in order to catch new business opportunities. Customer focus, cooperation with partners and innovation clusters, open standards, integration of third party solutions, holistic approach and business models are specifically considered in the innovation and R&D work.
A key focus for innovation and R&D during 2011 has been world class network quality in mobile and fiber, mobile data and to strengthen TeliaSonera's technology leadership. TeliaSonera has continued to investigate new communication services, such as GSMA Rich Communication, Next generation Unified Communications and Voice over LTE, to enable richer experiences for the customers. TeliaSonera has also concentrated on the M2M (machine-to-machine) area. M2M and Internet of Things will become an increasingly important business as more and more equipment will be connected. The TV offering was developed with enhanced on-demand services and flexible customer offerings. The business service portfolio is being further developed with emphasis on cloud-based functions. TeliaSonera has also paved the way for increased use of mobile terminals for payment and other services.
As of December 31, 2011, TeliaSonera had approximately 440 patent "families" and approximately 2,560 patents and patent applications, none of which, individually, is material to its business.
In 2011, TeliaSonera incurred R&D expenses of SEK 508 million (801).
TeliaSonera is committed to environmental responsibility. The work is guided by TeliaSonera's Code of ethics and conduct which serves as an overall policy document, also covering the majority-owned companies. TeliaSonera publicly reports annually on its environmental performance in a separate Corporate Responsibility Report.
The environmental impact from TeliaSonera's operations is mainly associated with energy utilization and material usage. The customers demand 24/7 mobile and internet connectivity and even with using cuttingedge technology, the energy consumption required to meet this demand and to run the operations represent the greatest part of TeliaSonera's calculated carbon footprint today. One of the permanent priorities is to continuously try to find more energy-efficient solutions for networks and data centers.
TeliaSonera's operations also generate waste of various kinds, including hazardous waste, electronic equipment, networks devices and cables, and waste from office premises. Technology shifts currently represent a considerable challenge in terms of waste management, particularly in relation to the handling of disused poles, which contain hazardous substances, and to the recycling of valuable copper cables.
TeliaSonera's indirect environmental impacts include various ways in which customers can use TeliaSonera's services to reduce their own carbon dioxide (CO2) emissions. Other indirect environmental impacts
related to TeliaSonera's value chain include activities such as the manufacturing of the equipment and devices used by the customers and TeliaSonera's own network equipment, as well as the end-of-life treatment of these products.
As a minimum, TeliaSonera companies shall comply with local legal requirements wherever they operate. TeliaSonera in Sweden does not conduct any operations subject to environmental permits from authorities according to the Swedish environmental legislation, chapter 9.
The TeliaSonera share is listed at the NASDAQ OMX Stockholm and Helsinki stock exchanges. In 2011, the share price declined 12.3 percent to SEK 46.77. During the same period the OMX Stockholm 30 Index declined 14.5 percent and the STOXX 600 Telecommunications Index declined 6.2 percent.
At year-end 2011, TeliaSonera's market capitalization was SEK 202.5 billion, the sixth largest company at NASDAQ OMX Stockholm. Besides NASDAQ OMX Stockholm and Helsinki, the share was traded at other platforms with the major trading volumes at Boat and Chi-X. In Europe, TeliaSonera was the fifth largest telecom company in terms of market capitalization at the end of the year.
Holdings outside Sweden and Finland increased from 17.6 percent to 18.2 percent and TeliaSonera had 580,076 shareholders at the end of the year.
| Number of shareholders |
Number of shares |
Percent of outstanding shares/votes |
|
|---|---|---|---|
| 1–500 | 495,201 | 88,836,320 | 2.05 |
| 501–1,000 | 34,963 | 27,377,160 | 0.63 |
| 1,001–5,000 | 40,761 | 90,028,583 | 2.08 |
| 5,001–10,000 | 4,884 | 35,702,501 | 0.82 |
| 10,001–15,000 | 1,311 | 16,285,255 | 0.38 |
| 15,001–20,000 | 698 | 12,622,107 | 0.29 |
| 20,001- | 2,258 | 4,059,232,855 | 93.75 |
| Total | 580,076 | 4,330,084,781 | 100.00 |
| Number of out standing shares |
Percent of outstanding shares/votes |
|
|---|---|---|
| Swedish State | 1,614,513,748 | 37.3 |
| Finnish State | 594,123,642 | 13.7 |
| Capital Group Funds | 135,101,977 | 3.1 |
| Swedbank Robur Funds | 122,732,326 | 2.8 |
| Alecta | 103,372,322 | 2.4 |
| AMF Insurance & Funds | 62,544,971 | 1.4 |
| Nordea Funds | 57,521,134 | 1.3 |
| SEB Funds | 50,607,610 | 1.2 |
| Fourth National | ||
| Pension Fund | 47,586,908 | 1.1 |
| AFA Insurance | 42,574,185 | 1.0 |
| Total other shareholders | 1,499,405,958 | 34.7 |
| Total outstanding shares | 4,330,084,781 | 100.0 |
MAJOR shareholder countries by number of shares, as of December 31, 2011
| Share data | 2011 | 2010 |
|---|---|---|
| Paid at year-end, SEK | 46.77 | 53.30 |
| Highest paid during the year, SEK |
55.70 | 56.90 |
| Lowest paid during the year, SEK |
40.60 | 44.00 |
| Number of shares at year-end, millions |
4,330.1 | 4,490.5 |
| Number of shareholders at | ||
| year-end | 580,076 | 601,736 |
| Earnings per share, SEK | 4.20 | 4.73 |
| Dividend per share, SEK | 2.85* | 2.75 |
| Pay-out ratio, % | 68* | 58 |
| Equity per share, SEK | 26.95 | 28.04 |
* Proposed by the Board of Directors.
Sources: Euroclear Sweden and SIS Ägarservice
On July 22, 2011, TeliaSonera announced that its share capital had been decreased by SEK 513,191,782.40, by means of cancellation of the 160,372,432 shares repurchased in the repurchase offer in the spring of 2011.
As of December 31, 2011, TeliaSonera's issued and outstanding share capital totaled SEK 13,856,271,299 distributed among 4,330,084,781 shares. All issued shares have been paid in full and carry equal rights to vote and participate in the assets of the company. At the general meeting of shareholders, each shareholder is entitled to vote for the total number of shares she or he owns or represents. Each share is entitled to one vote. TeliaSonera holds no own shares.
There are no rules in either the Swedish legislation or in TeliaSonera AB's Articles of Association that would limit the possibility to transfer TeliaSonera shares.
As of December 31, 2011, TeliaSonera AB had two shareholders with more than 10 percent of the shares and votes: the Swedish State with 37.3 percent and the Finnish State with 13.7 percent. TeliaSonera is not aware of any agreements between major shareholders of the company regarding the TeliaSonera shares.
As of December 31, 2011, TeliaSonera's pension funds and TeliaSonera Finland Oyj's Personnel Fund held 0.04 percent and 0.01 percent of the company's shares and votes, respectively.
The Board of Directors does not currently have any authorization by the general meeting of shareholders to issue new shares but has the authorization to repurchase a maximum of 10 percent of the company's total number of outstanding shares.
In case of a change of control in TeliaSonera AB, the company could have to repay certain loans at short notice, since some of TeliaSonera's financing agreements contain customary change-of-control clauses. These clauses generally also contain other conditions including, for example, that the change of control has to cause a negative change in TeliaSonera's credit rating in order to be effective.
Proposed remuneration policy for executive management 2012.
The Board of Directors' proposal for the remuneration policy for executive management, to be adopted at the Annual General Meeting on April 3, 2012, is as follows.
TeliaSonera's objective is to offer remuneration levels and other employment conditions required to attract, retain and motivate high caliber executives needed to maintain the success of the business. Remuneration should be built upon a total reward approach allowing for a market relevant – but not market leading – and cost effective executive remuneration based on the following compensation components.
The base salary should reflect the competence required in the position and the responsibility, complexity and the business contribution of the executive. The base salary should also reflect the performance of the executive and consequently be individual and differentiated.
Pension and other retirement benefits should be based on the defined contribution method.
The termination period may be up to six months when given by the executive and up to 12 months when given by the employer (in relation to the CEO six months). In case of termination given by the employer, the executive may be entitled to a severance payment of up to 12 months (in relation to the CEO 24 months).
The severance payment shall not constitute a basis for calculation of vacation pay or pension benefits and shall be reduced should the executive be entitled to pay from a new employment or from conducting his own business during the period under which the severance is payable to the executive.
The executive may be entitled to a company car benefit, health care provisions, travel insurance, etc. in accordance with local labor market practice.
The Board of Directors is allowed to make minor deviations on an individual basis from the principles stated above.
The Annual General Meeting held on April 6, 2011, decided to launch a long-term variable pay program which includes approximately 100 key employees. This program is not available for the members of Group Management. A long-term variable pay program should ensure long-term sustainability of the company, secure a joint interest in increased shareholder value and provide an alignment between key employees and the shareholders by sharing risks and rewards of the TeliaSonera share price.
The program rewards performance measured over a minimum of a three year period is capped to a maximum of 37.5 percent of the annual base salary and is equity based (invested and delivered in TeliaSonera shares with the ambition that the employee should remain shareholders also after vesting). A prerequisite for payout from such a program is the continuous employment at the end of the performance period. The program measures performance over a 3-year period in relation to Earnings Per Share (EPS) – weight 50 percent – and Total Shareholder Return (TSR) compared to a corresponding TSR development of a pre-defined peer-group of companies – weight 50 percent. The program may be annually repeated. In 2010, an equal program was launched for approximately 90 key employees. The prevalence of a long-term variable pay program is subject to the approval of the Annual General Meeting. For more information, see Note C32 to the consolidated financial statements.
The parent company TeliaSonera AB (Corporate Reg. No. 556103-4249), which is domiciled in Stockholm, comprises Group executive management functions including the group's internal banking operations. As of January 1, 2011, the streamlining of the parent company was finalized, as its fixed network and broadband operations were transferred to the subsidiary TeliaSonera Sverige AB.
The parent company's financial statements have been prepared in accordance with the Swedish Annual Accounts Act, other Swedish legislation, and standard RFR 2 "Accounting for Legal Entities" and other statements issued by the Swedish Financial Reporting Board.
Following the transfer of operations, net sales for the year declined to SEK 30 million (SEK 13,236 million in 2010), of which SEK 30 million (10,375) was billed to subsidiaries. Capital losses contributed to an operating loss of SEK 1,616 million (operating income 1,803). Financial net declined strongly, as a result of lower dividends and group contributions from subsidiaries as well as negative effects from foreign exchange derivatives, and income after financial items ended at SEK 11,034 million (34,761). Income before taxes was SEK 10,972 million (29,798) and net income was SEK 9,691 million (25,422).
The balance sheet total decreased to SEK 221,309 million (239,336), also due to lower group contribution receivables from subsidiaries at year-end. Shareholders' equity decreased to SEK 81,848 million (94,573) and retained earnings decreased to SEK 66,137 million (78,349) as net income could not compensate for the ordinary dividend payment of SEK 12,349 million and the share repurchase of SEK 9,983 million in 2011.
Free cash flow declined to SEK 4,330 million (19,470), mainly caused by the lower dividends received, and cash flow before financing activities was SEK -11,206 million (6,467). Net debt was SEK 112,574 million (112,172). Cash and cash equivalents totaled SEK 8,847 million (11,773) at year-end.
The equity/assets ratio (including the equity component of untaxed reserves and adjusted for the proposed dividend) was 35.8 percent (38.4).
Total investments in the year were SEK 4,042 million (11,898), of which SEK 4,014 million referred to shareholder contributions to subsidiaries. In 2010, investments amounting to SEK 10,967 million referred to acquisition of shares in subsidiaries.
Due to the transfer of operations, the number of employees decreased to 249 at December 31, 2011 from 1,255 at year-end 2010.
This Corporate Governance Statement has been adopted by the Board of Directors at its meeting on March 8, 2012 and presents an overview of TeliaSonera's corporate governance model and includes the Board's description of the internal control environment and risk management regarding financial reporting. It is the opinion of the Board of Directors that TeliaSonera has complied with the Swedish Code of Corporate Governance during 2011 without deviations.
The 2011 Corporate Governance Statement has been prepared according to the Swedish Code of Corporate Governance and the Swedish Annual Accounts Act and has been audited by the external auditors.
In 2011, the development work in corporate governance has primarily focused on the areas IT governance, risk management, performance management and improved processes in financial reporting, in particular as regards cash-flow and operating capital.
The main governing bodies of TeliaSonera are:
TeliaSonera is a Swedish, public, limited liability company and is governed by the Swedish Companies Act, the NASDAQ OMX Rule book for issuers, the Swedish Code of Corporate Governance and the company's Articles of Association. The Shareholders' General Meeting is the company's highest decision-making forum where the owners exercise their shareholder power.
The TeliaSonera share is listed on NASDAQ OMX Stockholm and NASDAQ OMX Helsinki. TeliaSonera has only one type of shares. Each TeliaSonera share represents one vote at the General Meeting of Shareholders. At year-end 2011, TeliaSonera had 580,076 shareholders. The ownership structure is further presented in the Report of the Directors.
The Annual General Meeting 2011 was held on April 6, 2011, in Stockholm. Among other issues, the Annual General Meeting 2011 decided upon the following:
At the Annual General Meeting 2011, Pricewaterhouse-Coopers AB was re-elected as auditor.
TeliaSonera's Nomination Committee consists of representatives of the company's four largest shareholders at the time of notice of the Annual General Meeting, and the Chairman of the Board. The Nomination Committee presently consists of Kristina Ekengren, Chairman (the Swedish State), Kari Järvinen (the Finnish State through Solidium Oy), Thomas Eriksson (Swedbank Robur Fonder), Per Frennberg (Alecta) and the Chairman of the Board, Anders Narvinger. The Nomination Committee shall in accordance with its instruction:
The Nomination Committee has received information from the Chairman of the Board and the CEO on TeliaSonera's position and strategic direction. Based on that information, the committee has assessed the competences needed in the Board of Directors as a whole as well as evaluated the competences of the present Board members. Taking into account the competences needed in the future, the competences of present Board members and the present Board members availability for re-election, the committee nominates Board members to the General Meeting.
The Nomination Committee has reported that it complies with the guidelines in the Swedish Code of Corporate Governance and that it intends to report its activities at the Annual General Meeting and on the company's website.
Shareholders are welcome to send nomination proposals to the Nomination Committee. Proposals can be sent by email to forslagtillstyrelseledamot@teliasonera. com.
The Board of Directors is responsible for the organization of the company and the management of the company's affairs. The Board shall regularly assess the company's financial position and shall ensure that the company's organization is structured in such a manner that accounting, management of funds and the company's finances in general are monitored in a satisfactory manner. In that role the Board makes decisions on inter alia:
TeliaSonera's Board of Directors consists of eight members elected by the Annual General Meeting, serving one-year terms, and three employee representatives from the Swedish operations. An additional Finnish employee representative is present at Board meetings, but without voting rights. Anders Narvinger is Chairman of the Board. A more detailed presentation of the members of the Board of Directors can be found at the end of this statement.
In accordance with the guidelines of the Swedish Code of Corporate Governance, all members elected by the Annual General Meeting in 2011 are considered to be independent in relation to the company, to the administration of the company and to major shareholders. The guidelines for the work of the Board of
Directors are set down in standing orders. The standing orders contain rules regarding the number of ordinary board meetings, the agenda items for ordinary board meetings, the tasks of the Chairman of the Board, the division of responsibilities between the Board and the CEO and how work is to be carried out in committees. To improve the efficiency of board work, the Board has appointed a Remuneration Committee and an Audit Committee. The committees prepare recommendations for the Board. The Remuneration Committee handles issues regarding salary and other remuneration to the CEO and Group Management and incentive programs that target a broader group of employees. The Remuneration Committee has the authority to approve remuneration to persons in TeliaSonera's Group Management, except for the CEO. The Audit Committee reviews for example financial statements, accounting, internal controls and auditing. The Audit Committee has the authority to decide on audit scope and audit fees and to approve purchase of non-audit services from the auditors.
The Board of Directors held eight ordinary meetings during 2011 as well as eight extra meetings. In addition to following up on the day-to-day business of the group, the Board of Directors paid special attention to:
During 2011, an external evaluation of the Board of Directors' internal work was performed. The result of this evaluation was reported to the Nomination Committee.
Anders Narvinger is Chairman of the Remuneration Committee and during 2011, the Committee held four meetings. In 2011, the Committee handled, amongst others, the following issues:
Maija-Liisa Friman is Chairman of the Audit Committee and during 2011, the Committee held six meetings. When identifying risks areas related to the financial reporting, the Committee collaborates with the CEO and CFO, external audit, internal audit and internal controls. The input forms the basis when deciding on future focus areas. In 2011, five focus areas were identified by the Committee for monitoring and assessment:
Work in 2011 included, amongst others, the following issues:
The Audit Committee applied a systematic and structured evaluation of its internal work. The result of this evaluation was reported to the Board of Directors.
The CEO is responsible for the company's business development and leads and coordinates the day-today operations in accordance with the decisions of the Board of Directors.
Headed by the CEO, the Group Management consists of ten members: The CEO, CFO, General Counsel, Head of Group Human Resources, Head of Group Communications, CIO, Presidents of the three business areas and the Head of the business sales division Business Services.
Group Management holds meetings monthly. At these meetings, issues of strategic nature and groupwide importance are discussed.
TeliaSonera's group-wide governance framework is designed to ensure that operational results correspond to decisions made, and is structured to encourage all employees to strive, within set boundaries, towards the same goals, with a common clear understanding of direction, shared values, roles, responsibilities and authority to act. This governance framework has been decided by the Board of Directors.
Setting the boundaries for how we act
Follow up of our performance
In order to provide general guidance to the employees, the Board of Directors has issued vision and mission statements. Further, the Board yearly adopts a strategy setting out more specific directions for a three-year period as well as yearly operational and financial targets.
TeliaSonera is a world-class service company recognized as an industry leader.
We are proud of being pioneers of the telecom industry, a position we have gained by being innovative, reliable and customer friendly.
We act responsibly, our activities based on a firm set of values and business principles. Our services form a major part of people's daily lives – for business, education and pleasure. Thereby, we contribute to a world with better opportunities.
TeliaSonera provides network access and telecommunication services that help people and companies communicate in an easy, efficient and environmentally friendly way. We create value by focusing on delivering a world-class customer experience, securing quality in our networks and having an efficient cost structure.
TeliaSonera is an international group with a global strategy, but wherever we operate we act as a local company.
TeliaSonera's strategy is to provide products and services to its different customer segments based on a deep understanding of their present and future needs. To create shareholder value through sustainable and improved profitability and cash flows, TeliaSonera will deliver its services in a cost-effective and sustainable manner.
Operational and financial targets are set for the group as a whole and for each business area, business unit and multi market operation.
The Board of Directors sets the boundaries on how the employees shall act. Key elements in setting the boundaries are shared values, code of ethics and conduct, corporate responsibility activities, group policies, organizational structure and delegation of obligations and authority.
TeliaSonera's shared values – "Add value", "Show respect" and "Make it happen" form the foundation of everyday work.
The key to adding value lies in being customer focused and business minded. Being innovative and acting as pioneers is part of our heritage. We strive to share knowledge by collaborating in teams and across borders, as well as use our resources efficiently. We take ownership, follow up and give feedback to ensure that we foster simple and sustainable solutions that add value to our customers.
We show trust, courage and integrity. Our employees' knowledge and diversity are highly valued, and we are all responsible for creating a good working climate. We treat others the way we want to be treated, in a professional and fair manner. Customer privacy and network integrity are carefully protected, and we always act in the best interest of both our customers and the company.
We make decisions to drive development and change. Planning and fast implementation are crucial. We foster a lively business climate where everyone can contribute and we make use of our employees' competence and commitment. Our customers should experience that it is easy and rewarding to do business with us, and recognize that we deliver on our promises.
In all the countries where we operate, TeliaSonera strives to earn a reputation of trust and reliability. The TeliaSonera Code of ethics and conduct provides guidance for the employees on how to live up to such a reputation in practice. It also highlights the areas needed to be addressed to ensure that the business is conducted in a sustainable way.
Governance of Corporate Responsibility is integrated in the governance framework of TeliaSonera. TeliaSonera addresses corporate responsibility throughout its whole value chain and aims to be accountable to its stakeholders. The term corporate responsibility is used as an umbrella term to describe responsible business operations that include economic, environmental and social responsibility. The main corporate responsibility impacts are related to e.g. assuring environmental and social sustainability in the supply chain, taking care of the well-being of employees, diminishing own and customer's carbon footprint, protecting customer privacy, complying with ethical business practices in the respective markets, protecting children online and supporting research related to exposure to electromagnetic fields.
Corporate responsibility work is guided by the TeliaSonera Code of ethics and conduct, which acts as an overall policy document. The Board of Directors is annually reviewing the performance. The code summarizes the commitments to Corporate Responsibility and gives guidance on how to interact with different stakeholders; customers, business partners, suppliers, competitors, co-workers, shareholders, governments and regulatory bodies, as well as with local communities in which TeliaSonera operates. The Code builds on TeliaSonera's mission, vision and shared values and
translates into conduct in day-to-day operations. The Code is made available in 21 languages to facilitate dissemination and understanding throughout the operations in all markets. TeliaSonera's Code applies in the majority-owned companies. In the associated companies, similar codes have been implemented.
TeliaSonera evaluates and selects its suppliers also against corporate responsibility requirements. TeliaSonera Supplier Code sets the basic social and environmental requirements for suppliers and its rules are mandatory to major suppliers. TeliaSonera Supplier Code defines the conduct expected from suppliers in relation to protecting human and labor rights, promoting occupational health and safety, environmental management and ethical business practices.
TeliaSonera annually reports its corporate responsibility performance in the Corporate Responsibility Report. TeliaSonera applies the Global Reporting Initiative guidelines for reporting on corporate responsibility including the telecommunications sector supplement pilot. The report is intended to respond to internal and external stakeholders' interest for information and request for increased transparency regarding the sustainability work. Internally, TeliaSonera uses the Corporate Responsibility Report to collect, highlight and share information about best practices across the group.
The heads of head office functions shall secure that necessary group policies, instructions and guidelines are issued within their area of responsibility. Group policies are decided by the Board of Directors and the Board has issued group policies within the following areas:
TeliaSonera's largest areas are Mobility Services, Broadband Services and the holdings of TeliaSonera in Russia, Turkey and Eurasia. In order to ensure strong leverage for profitable growth and cross-border synergies, TeliaSonera is organized in three international business areas. The business areas have full profit and loss responsibilities for their assigned businesses. A separate sales unit for all sales to business customers is established in Sweden and Finland.
The business area comprises mobile operations in Sweden, Finland, Norway, Denmark, Lithuania, Latvia, Estonia and Spain.
The business area comprises operations in Sweden, Finland, Norway, Denmark, Lithuania, Latvia, Estonia and international carrier operations.
The business area comprises mobile operations in Kazakhstan, Azerbaijan, Uzbekistan, Tajikistan, Georgia, Moldova and Nepal. The business area is also responsible for developing TeliaSonera's shareholding in Russian MegaFon and Turkish Turkcell.
TeliaSonera has a multi-market operating model within Mobility Services and Broadband Services in whollyowned operations in the Nordic and Baltic countries. The multi market operations, which were initiated in 2011, aim to capture best practice and introduce best way of working in all units, as well as to capture scale advantages. The multi market operations cover many areas, for example product development and network operations.
The head office functions assist the CEO in setting the framework for the activities of the business areas and provide the business areas with certain support.
The CEO has issued a delegation of obligations and authority, which defines the obligations imposed on the heads of business areas, including the head of sales division Business Services, and corporate functions and within which limits they may make decisions.
Performance follow-up is essential in order to be able to take corrective measures and plan for the future. Performance follow-up is performed on organizational units as well as on an individual level.
The CEO sets goals for the operations based on the decisions of the Board of Directors. To ensure performance, managers have annual targets for their particular operations. The planning of the business is documented in annual operating plans and the followup is conducted on a monthly basis, complemented with forecasts and quarterly business review meetings on business unit and business area levels. The business review meetings are held as physical meetings and include financial and business reviews for the reporting period and forecast period. The reviews also include for example risks and operations performance metrics
on network quality and customer service levels. At the business area review meetings, the CEO, CFO, Group Controller and selected members of Group Management attend in addition to the respective business area management.
The Board of Directors receives reports on operational performance on a monthly basis.
In order to outperform competition and reach challenging goals, TeliaSonera is developing a high performance company culture. Setting individual objectives linked to strategic business goals and providing frequent feedback are crucial activities for managers at all levels.
TeliaSonera has established a group-wide performance management model currently valid for the five highest management levels in the organization. The model, which aims to focus on TeliaSonera's business objectives and to cascade them into the different business areas, is designed to:
TeliaSonera's view on performance is that it is not only about what you achieve but how you achieve your objectives, i.e. what kind of competences and behaviors the employee applies in order to reach results.
The competency framework offers support to leaders when providing feedback to individuals on performance and on what competences that they could further develop. In order to establish shared principles and expectations on competences and behaviors Telia-Sonera's shared values are used as a platform for the evaluation of preferred behaviors. In combination with this a group-wide competency framework is established that outlines successful leadership competences for different roles and levels.
TeliaSonera's performance management process is annual. The year starts with setting objectives and ends with a performance evaluation. Consequence management is applied, which means that high performance is rewarded and poor performance addressed. Performance has an impact on compensation as well as career- and development opportunities.
The Board of Directors' Remuneration Committee reviews the individual performance of Group Management members on a yearly basis.
In accordance with the Swedish Companies Act and the Swedish Code of Corporate Governance, the Board of Directors is responsible for the internal control environment. The Board continually reviews the performance
of internal controls and initiates activities for the continuous improvement of internal controls.
Internal control is an integral part of TeliaSonera's corporate governance which involves the Board, senior management and other employees. It is a process which includes methods and processes to:
The objective for TeliaSonera's financial reporting is to be in line with the highest professional standards and to be full, fair, accurate, punctual and understandable.
Internal controls over financial reporting within Telia-Sonera are organized in accordance with the COSO framework for internal control. It consists of interrelated areas, which are risk management, control environment, Group IT Governance, control activities, information and communication and monitoring, as described below.
Risk management is an integral part of the group's business control. Risks that may pose a threat to achieving business objectives are identified, and measures are implemented to mitigate and monitor the identified risks.
The line organization has the primary responsibility for managing business risks. Line managers are responsible for identifying, monitoring, implementing measures and reporting all relevant business risks. The Chief Risk Officer is responsible for coordinating and monitoring the risk management processes in the group and consolidating the quarterly risk reports for Group Management and the Board of Directors. To support the Chief Risk Officer a Risk Management Committee has been established.
The risk assessment and follow-up is divided into three areas; business and financial risks; corporate responsibility, and IT and security. Business units and head office functions manage business continuity within their respective operational area of responsibility based on specified requirements. A process exists to regularly identify business and financial risks that could lead to material misstatements of financial information. The risks are reported by each sub-entity in a bottom-up process, and presented in quarterly business review meetings. Corporate responsibility is integrated into the day-to-day business as well as M&A and strategic purchasing processes. Within IT and security, potential threats to the IT environment are identified and plans are established to prevent problems in the continuity of the business. This area also covers preventive security measures and crisis management.
Risks and uncertainties related to the business, shareholder issues and to corporate responsibility are described in Note C35 and financial risks in Note C27 to the consolidated financial statements.
The most essential parts of the control environment related to financial planning, accounting, financial reporting and controls over financial reporting are included in steering documents and processes governing these areas. Management at each business unit or corporate function is responsible for ensuring that the monthly and quarterly financial reporting follows TeliaSonera's accounting policies and that the reports are delivered on time, sufficient internal controls exist and are performed, required reconciliations are properly done and material business and financial risks are identified and reported.
As part of the control environment at TeliaSonera, management at all levels is responsible for ensuring that group policies (including the Code of ethics and conduct), and requirements are implemented and followed. Group wide controls exist and are reviewed on an annual basis. The purpose of this type of controls is to ensure that the organization complies with Delegation of obligation and authority, financial policies and reporting framework.
As a result of establishing the financial shared services unit, harmonized and standardized financial accounting processes and controls across large whollyowned units have been implemented.
The Group IT strategy which was further developed during 2011, stipulates how IT shall enable business success in TeliaSonera, in particular when addressing business demand for world-class customer experience, business growth, cost efficiency and the One TeliaSonera approach. Since trends and cycles change faster in business than in IT, the supply is managed through six long-term IT imperatives, as follows.
IT Governance stipulates the governing bodies with their roles and responsibilities in TeliaSonera, enabling one common decision and efficient communication.
All business processes across TeliaSonera include controls regarding the initiation, approval, recording and accounting of financial transactions. Major processes, risks and key controls (including IT controls) are described and documented in a common and structured way. Controls are either automated or manual and designed to ensure that necessary actions are taken to either prevent or detect material errors
or misstatements and to safeguard the assets of the company. Controls for the recognition, measurement and disclosure of financial information are included in the financial closing and reporting process, including controls for the IT applications used for accounting and reporting.
In 2011, the implementation of standardized IT general controls was extended to include units in the Baltics and Eurasia. Standardized controls are expected to have a positive impact on quality and integrity.
The major business units within TeliaSonera have dedicated controller functions which take part in the financial planning and analysis of the respective unit's performance. In 2011, their work and expertise have been taken into the internal controls framework by the continued design and implementation of Business Performance Review controls in Mobility Services in Sweden, Finland and Denmark. These controls are based on the analyses of revenues, volumes, costs of goods sold, operating expenses, assets and working capital. The effect of the implementation is a better control environment on business unit level, as well as an improved efficiency in controls testing and auditing. The aim is to continue the implementation of Business Performance Review controls in several business units within Broadband Services during 2012.
A comprehensive objective in this area is to identify the key controls. From an efficiency perspective it is better to perform and monitor high quality and integrity controls which are better adapted to the business operations. As an effect, the total number of key controls might be fewer. As an example, Mobility Services has been able to reduce the number of controls with approximately 15 percent over a five year period, through continuous improvement and strengthening of selected controls. Another example is Financial Services where harmonization and standardization of controls, coordination between processes and continuous improvement has reduced the number of controls even more.
The purpose of internal controls over business operations is to monitor and support the development within TeliaSonera's corporate strategic focus areas. The monitoring of business operations performance is based on defined metric measurements; the Six Sigma framework. The metrics measure, amongst others, performance in networks and customers´ experience with TeliaSonera.
Monthly, the Board of Directors receives a summary of metrics measures by business unit.
Six Sigma is a systematic problem solving methodology that utilizes a broad set of statistical tools to measure, analyze and improve a company's operational performance, practices and systems.
Lean Six Sigma focuses on identifying waste and defects in operations by means of statistical analysis. It also focuses on finding out and removing the root causes of problems. The problem solving framework DMAIC, or Define, Measure, Analyze, Improve and Control is the statistical problem-solving approach of Six Sigma.
| Understand the problem | Remove the root cause and hold the gain |
|||
|---|---|---|---|---|
| Define | Measure | Analyze | Improve | Control |
| Define what business problem to solve |
Measure & Analyze Current performance levels for fact-based decision making on actions to remove root cause |
Implement improvement actions in the line organization across the relevant function |
Establish control mechanisms to hold the achieved gain |
Instructions, guidelines and requirements regarding accounting and reporting as well as performing internal controls are made accessible to all relevant personnel through the use of TeliaSonera's regular internal communication channels. Business operations performance metrics are reported monthly and the results for all entities are shared with all business unit managers and their management teams. The sharing gives a good opportunity for benchmark and learning within the group.
TeliaSonera promotes an open, honest and transparent flow of information, especially regarding the performance of internal controls. Control performers are encouraged to disclose any problems concerning their controls in the monthly reporting, so that any problem can be taken care of before it, possibly, causes errors or misstatements.
The Board of Directors has established a process which enables employees to anonymously report violations in accounting, reporting or internal controls, as well as compliance with the TeliaSonera Code of ethics and conduct, a so called whistle-blower process. TeliaSonera's whistle-blower tool is based on a userfriendly intranet solution. During 2012, the company intends to further educate employees and develop tools used for whistle-blowing.
The Board of Directors actively monitors the environment and effectiveness of internal controls over financial reporting, specifically through the Audit Committee. The Board of Directors receives monthly financial reports from the CEO.
The Board of Directors and its Audit Committee review all external financial statement reports before they are made public.
The Audit Committee receives reports directly from both external and internal auditors and discusses and follows up observations made. Both the external and internal auditors are represented at the committee meetings. At least once a year, the entire Board of Directors meets with the external auditors, in part without the presence of management. The Audit Committee monitors the external financial statement reporting, but also the effectiveness of the internal control environment. This is performed by having regular reviews of the external and internal audit, impairment valuations, financial policies and interpretations of accounting principles of special importance for the group. The work also includes reviewing selected topics that may impact the external financial reporting.
TeliaSonera has implemented a structured monthly process for the monitoring of the performance of internal controls. This process includes all major business units, business areas and corporate functions
1 Identification of risks & need for remediation
2 Design and implementation of controls •Process owners and control owners design controls aimed at mitigating identified risks. • Controls are implemented to become part of regular business activities.
and consists of a self-assessment of the performance of all controls in the group. So called Monitoring of Internal Controls meetings are held at business area level on a regular basis. Such meetings are held at group level when needed, and are chaired by the CFO. At these meetings the performance of internal controls is reviewed and assessed and corrective actions are decided, if necessary.
A risk-based testing of key controls is carried out on behalf of management in order to assess the quality of the internal controls. The risk based testing covers approximately 40 percent of the key controls every year and aims at testing every control at least once over a three-year cycle. The testing is performed by internal resources and the external auditors, where comfort is taken from each other's work, in order to reach an optimal and efficient way of working. The result of the testing is communicated to all relevant business units, where corrective or improvement actions are initiated and performed.
Once a year the Audit Committee, the external auditors and Corporate Internal Control specifically meet to follow up on internal testing, review the efficiency, follow up on actions performed during the last year and review those planned for the coming year.
The group has an internal audit function that reviews the group's operations and makes proposals with a view to improve both internal control environments and efficiency in processes and systems. Through operational reviews, a systematic, disciplined approach to evaluate and improve the effectiveness of governance is achieved. In order to obtain integrity in the metric measurements over business operations, the group internal audit function performs assurance of underlying data.
During the year, an increased part of the work has been towards the Eurasian operations. The work included on-site reviews with focus on revenue assurance, processes and governance. The Head of Group Internal Audit is also responsible, together with two external members, acting within the Equality of Access Board, to oversee developments in relation to equal treatment of internal and external wholesale customers in Sweden. The Head of Group Internal Audit reports to the CEO, who decides in consultation with the Audit Committee on the function's tasks and priorities.
For further information regarding:
Anders Narvinger (Born 1948)
Chairman of the Board. Elected to the Board of Directors in 2010. He is Chairman of the Remuneration Committee of TeliaSonera and a member of the Audit Committee. Anders Narvinger has been CEO of Association of Swedish Engineering Companies and he has previously also served as President and CEO of ABB AB and is Chairman of the Boards in Trelleborg AB, Alfa Laval AB, Coor Service Management AB and Capio AB. He is also a member of the boards of JM AB, Pernod Ricard SA and ÅF AB. Mr. Narvinger holds a Master of Science in Engineering and a Bachelor of Science in Business and Economics. Shares in TeliaSonera: 20,000.
Timo Peltola (Born 1946)
Vice-Chairman of the Board. Elected to the Board of Directors in 2004. He is a member of the Remuneration Committee of TeliaSonera. In addition, Mr. Peltola is the Chairman of the Board of Directors of Neste Oil Oyj, member of the boards of SAS AB and AW-Energy Oy. He is also a member of the Advisory Boards of CVC Capital Partners Svenska AB, Sveafastigheter AB, CapMan Public Market Fund and Citigroup Nordic. Mr. Peltola is also a board member of Securities Market Association and Chairman of the Council of the Finnish Orienteering Federation. Mr. Peltola served as President and CEO of Huhtamäki Oyj between 1989 and 2004. Mr. Peltola holds a Doctor degree in Economics hc. Shares in TeliaSonera: 7,140.
Maija-Liisa Friman (Born 1952)
Elected to the Board of Directors in 2007. She is the Chairman of the Audit Committee of TeliaSonera. She is Chairman of the Board of Ekokem and Vice-Chairman in Metso Oyj. In addition she has board assignments in Neste Oil Oyj, The Finnish Medical Foundation, LKAB and Helsinki Deaconess Institute. She is also a board member and partner of Boardman Oy. Previously Ms. Friman was the CEO of Aspocomp Group Oyj. Ms. Friman holds a Master of Science in Chemical Engineering.
Shares in TeliaSonera: 5,597.
Ingrid Jonasson Blank (Born 1962)
Elected to the Board of Directors in 2010. Ingrid Jonasson Blank has been Executive Vice President of ICA Sverige AB and has held a number of managerial positions in the ICA Group. She is also a member of the boards of Bilia AB, Forma Publishing Group, Fiskars, ZetaDisplay AB, Forex Bank AB, Eatwell Solutions AB, TravelSupport AB and Ambea Group. Ms. Jonasson Blank holds a Master of Business Administration. Shares in TeliaSonera: 1,000.
Conny Karlsson (Born 1955)
Elected to the Board of Directors in 2007. He is a member of the Audit Committee of TeliaSonera. In addition, he is the Chairman of the Board of Swedish Match AB and Rörvik Timber AB and a member of the board of Capman Oyj. He has previously been CEO of Duni AB and has held several managerial positions in Procter & Gamble. Mr. Karlsson holds a Master of Business Administration.
Shares in TeliaSonera: 10,000.
Lars Renström
(Born 1951) Elected to the Board of Directors in 2009. He is a member of the Remuneration Committee of TeliaSonera. Mr. Renström is since 2004 President and CEO of Alfa Laval AB. He has previously served as President and CEO of Seco Tools AB and has held several senior managerial positions within Atlas Copco AB, Ericsson AB and ABB AB. Lars Renström is a board member of ASSA ABLOY AB and Alfa Laval AB. Mr. Renström holds a Master of Science in Engineering and a Bachelor of Science in Business and Economics. Shares in TeliaSonera: 10,000.
Jon Risfelt
(Born 1961) Elected to the Board of Directors in 2007. Mr. Risfelt is a member of the Audit Committee of TeliaSonera. In addition, he is Chairman of the Boards of Cybercom Group AB and Mawell Oy and holds board assignments in Ortivus AB, Bilia AB, Braganza AS, Ticket Affärsresor, Ticket Privatresor AB and Vanna AB. He has earlier served as CEO of Europolitan AB, Nyman & Schultz AB and Gambro Renal. He has held various managerial positions within the American Express Group, Scandinavian Airlines and Ericsson. Mr. Risfelt holds a Master of Science in Chemical Engineering. Shares in TeliaSonera: 8,250.
Per-Arne Sandström (Born 1947)
Elected to the Board of Directors in 2010. He is a member of the Remuneration Committee of TeliaSonera. Per-Arne Sandström has been deputy CEO and Chief Operating Officer of Telefonaktiebolaget L.M. Ericsson and has held a number of managerial positions in the Ericsson Group. He is Chairman of the Board of Infocare A/S and a member of the board of SAAB AB. Per-Arne Sandström studied engineering. Shares in TeliaSonera: 400.
Agneta Ahlström (Born 1960)
Employee representative, appointed by the trade union to the Board of Directors in 2007. She is Chairman of the Swedish Union for whitecollar workers in the private labour market, Telecommunications section (Unionen-Tele). Previously, she was the Chairman of the section of SIF-TELE at TeliaSonera International Carrier. Shares in TeliaSonera: 200.
Magnus Brattström (Born 1953) Employee representative, appointed by the trade union to the Board of
Directors in 2009. In addition, Mr. Brattström is the Chairman of the Union of Service and Communication Employees within TeliaSonera, SEKO TELE, and a member of the European Work Council at TeliaSonera. He is also a board member of the Telia Pension Fund. Shares in TeliaSonera: 20.
Stefan Carlsson (Born 1956)
Employee representative, appointed by the trade union to the Board of Directors in November 2009. He is deputy Chairman of the Swedish Union for white-collar workers in the private labour market, Telecommunications section (Unionen-Tele) and member of the federal board of Unionen. Previously, he was second deputy Chairman of SIF and Unionen. Shares in TeliaSonera: 650.
Including shareholdings by spouse and/or affiliated persons when appropriate.
| Name | Elected year |
Independent Position | Committee | Presence board meetings |
Presence committee meetings |
Total remuneration and benefits (SEK) |
Shares in Telia Sonera |
|
|---|---|---|---|---|---|---|---|---|
| Chairman of the Board and | ||||||||
| Chairman of the Remuneration | Remuneration | 4/4 | ||||||
| Anders Narvinger | 2010 | Yes | Committee | Audit | 16/16 | 6/6 | 1,224,674 | 20,000 |
| Director and Chairman of the | ||||||||
| Maija-Liisa Friman | 2007 | Yes | Audit Committee | Audit | 15/16 | 6/6 | 593,422 | 5,597 |
| Ingrid Jonasson Blank 2010 | Yes | Director | 16/16 | 428,765 | 1,000 | |||
| Conny Karlsson | 2007 | Yes | Director | Audit | 15/16 | 6/6 | 543,430 | 10,000 |
| Timo Peltola | 2004 | Yes | Vice-Chairman of the Board | Remuneration | 15/16 | 4/4 | 474,467 | 7,140 |
| Lars Renström | 2009 | Yes | Director | Remuneration | 16/16 | 4/4 | 474,467 | 10,000 |
| Jon Risfelt | 2007 | Yes | Director | Audit | 16/16 | 6/6 | 543,430 | 8,250 |
| Per-Arne Sandström | 2010 | Yes | Director | Remuneration | 15/16 | 3/4 | 489,137 | 400 |
| Agneta Ahlström | 2007 | – | Employee Representative | 15/16 | 200 | |||
| Magnus Brattström | 2009 | – | Employee Representative | 13/16 | 20 | |||
| Stefan Carlsson | 2009 | – | Employee Representative | 15/16 | 650 |
See also Note C32 to the consolidated financial statements.
Including shareholdings by spouse and/or affiliated persons when appropriate.
At the Annual General Meeting 2008 Pricewaterhouse-Coopers AB was re-elected as auditor until the end of the Annual General Meeting 2011. Bo Hjalmarsson (born 1960) is the auditor in charge. PricewaterhouseCoopers AB is engaged by the company's largest shareholder,
the Swedish State, for both audit and advisory services. Bo Hjalmarsson is also an auditor of Eniro, Lundin Petroleum and Vostok Nafta. He is also the Chairman of the Swedish institutes audit practices committee.
Lars Nyberg (Born 1951)
President and Chief Executive Officer since 2007. Mr. Nyberg is also Chairman of DataCard Corp. and of Autoliv Inc. Between 1995 and 2003 he was Chairman and CEO of NCR Corp, where he continued as Chairman until 2005. Previously, Mr. Nyberg held several managerial positions in Philips, and was a member of Philips Group Management Committee. Mr. Nyberg holds a Bachelor of Science in Business Administration.
Shares in TeliaSonera: 400,000¹.
Per-Arne Blomquist (Born 1962)
Executive Vice President and Chief Financial Officer of TeliaSonera since September 2008. Prior to joining TeliaSonera, Mr. Blomquist was Executive Vice President and CFO of SEB, from 2006, and Head of Group Finance of SEB between 2001 and 2006. Between 1997 and 2000 he held various positions at Telia, e.g. as managing director of Telia Företag. Per-Arne Blomquist started his career at Alfa Laval AB in 1989. Mr Blomquist is a board member of Lernia AB and of Djurgården Hockey AB. Mr. Blomquist holds a Bachelor of Science in Business Administration and Economics. Shares in TeliaSonera: 50,300.
Jan Henrik Ahrnell (Born 1959)
Senior Vice President, General Counsel and Head of Group Legal Affairs since 1999. Mr. Ahrnell has been employed by TeliaSonera since 1989. Prior to his service as General Counsel, Mr. Ahrnell was the head of various legal departments within the TeliaSonera Group and served as corporate counsel in various TeliaSonera companies. Mr. Ahrnell holds a Master of Law. Shares in TeliaSonera: 12,000.
Håkan Dahlström (Born 1962)
President of business area Mobility Services as of February 2010. Mr. Dahlström was previously Head of Broadband Services, since November 2008, and has held a number of managerial positions within TeliaSonera, including President of Mobility Services Sweden and Head of Corporate Networks & Technology. Prior to joining Telia in 1998, Mr. Dahlström was a Navy Officer with extensive experience from the procurement and development of information and communication systems for the Swedish Armed Forces. He holds a Master of Engineering in Computer Technology and a Master of Science in Digital Technology. Shares in TeliaSonera: 10,600.
Cecilia Edström (Born 1966)
Senior Vice President and Head of Group Communications since May 2008. Previously, Ms. Edström was Senior Vice President and Head of Corporate Relations at Scania AB, where she held a number of senior positions since 1995. She started her career in corporate finance at SEB in 1989. She is also a member of the board of BE Group AB. Ms. Edström holds a Bachelor of Science in Finance and Business Administration.
Shares in TeliaSonera: 2,800².
Karin Eliasson (Born 1961)
Senior Vice President and Head of Group Human Resources since 2008. Prior to joining TeliaSonera, Ms. Eliasson was Senior Vice President Human Resources at Svenska Cellulosa Aktiebolaget, SCA. She has been the CEO of Novare Human Capital AB and Vice President Organizational Development at Stora Enso AB. Ms. Eliasson is a board member of Turkcell. She holds a Bachelor of Science in Human Resource.
Shares in TeliaSonera: 2,100.
Malin Frenning
(Born 1967) President of business area Broadband Services since January 2011 and previously deputy since February 2010. Ms. Frenning has more than ten years of experience from senior managerial positions in TeliaSonera with specific focus on the carrier business, international business strategy and product management. Ms. Frenning holds a Master of Science in Mechanical Engineering and is Honorary Doctor of Technology at Luleå University of Technology.
Shares in TeliaSonera: 400.
Sverker Hannervall (Born 1960)
Senior Vice President and Head of sales division Business Services in Sweden and Finland since 2008. Mr. Hannervall is also senior advisor to InnovationsKapital AB. Between 2004 and 2008 he was General Manager of Cisco Systems in Sweden. Previously, Mr. Hannervall was President and CEO of Trio AB and prior to that Executive Vice President of Telelogic AB. Between 1984 and 1997 he held various managerial positions at IBM. Mr. Hannervall holds a Master of Science in Engineering. Shares in TeliaSonera: 0.
Tero Kivisaari (Born 1972)
President of business area Eurasia since 2007. Mr. Kivisaari was previously Chief Financial Officer and Vice President of business area Eurasia. He is a board member of Turkcell, MegaFon, Fintur Holdings B.V. and Nurminen Logistics Plc. Mr. Kivisaari has also been the CFO of SmartTrust AB. Before that he held the position of Vice President of Sonera Corporation's International Operations. Mr. Kivisaari holds Master Degrees in Science and Economics. Shares in TeliaSonera: 0.
Åke Södermark (Born 1954)
Senior Vice President and Chief Information Officer at TeliaSonera since December 2008. Prior to joining TeliaSonera, Mr. Södermark was Senior Vice President at NASDAQ OMX Group and since 2005 Head of Development at OMX Market Technology. Between 1997 and 2005 he held various managerial positions at Atos Origin and at SEB IT between 1984 and 1997. Mr. Södermark started his career at VPC (Swedish Central Security Depository) and his educational background is in computer technology. Shares in TeliaSonera: 6,000.
¹ By way of pension insurance 2 Partly by way of pension insurance
Including shareholdings by spouse and/or affiliated persons when appropriate.
| SEK | Base salary |
Other remuneration |
Other benefits |
Pension expense |
Total remuneration and benefits |
Capital value of pension commitment |
|---|---|---|---|---|---|---|
| Lars Nyberg, CEO | 10,100,004 | 3,233,200 | 110,520 | 8,930,360 | 22,374,084 | – |
| Per-Arne Blomquist, EVP | 5,075,508 | 2,197,191 | 107,830 | 1,930,568 | 9,311,097 | – |
| Other members of Group | ||||||
| Management (8 individuals) | 24,387,588 | 7,116,762 | 741,399 | 9,198,824 | 41,444,573 | 17,469,758 |
See also Note C32 to the consolidated financial statements and Report of the Directors (Remuneration to Executive Management).
| SEK in millions, except per share data | Note | Jan–Dec 2011 | Jan–Dec 2010 |
|---|---|---|---|
| Net sales | C1, C5, C6 | 104,354 | 106,979 |
| Cost of sales | C1, C7 | -56,980 | -57,691 |
| Gross profit | C1 | 47,374 | 49,288 |
| Selling and marketing expenses | C1, C7 | -17,318 | -16,981 |
| Administrative expenses | C7 | -6,461 | -7,902 |
| Research and development expenses | C7 | -508 | -801 |
| Other operating income | C8 | 2,443 | 2,072 |
| Other operating expenses | C8 | -1,680 | -1,494 |
| Income from associated companies and joint ventures | C9 | 5,717 | 7,821 |
| Operating income | C1, C5 | 29,567 | 32,003 |
| Finance costs | C10 | -3,615 | -2,677 |
| Other financial items | C1, C10 | 822 | 610 |
| Income after financial items | 26,774 | 29,936 | |
| Income taxes | C11 | -5,702 | -6,374 |
| Net income | 21,072 | 23,562 | |
| Foreign currency translation differences | C12 | -5,339 | -18,959 |
| Income from associated companies | C12 | 88 | -103 |
| Cash flow hedges | C12 | -118 | 63 |
| Available-for-sale financial instruments | C12 | -1 | -90 |
| Income taxes relating to other comprehensive income | C11, C12 | 5 | -936 |
| Other comprehensive income | -5,365 | -20,025 | |
| Total comprehensive income | 15,707 | 3,537 | |
| Net income attributable to: | |||
| Owners of the parent | 18,341 | 21,257 | |
| Non-controlling interests | C20 | 2,731 | 2,305 |
| Total comprehensive income attributable to: | |||
| Owners of the parent | 13,096 | 1,692 | |
| Non-controlling interests | 2,611 | 1,845 | |
| Earnings per share (SEK), basic and diluted | C20 | 4.20 | 4.73 |
| SEK in millions | Note | Dec 31, 2011 | Dec 31, 2010 |
|---|---|---|---|
| Assets | |||
| Goodwill | C13 | 76,850 | 77,207 |
| Other intangible assets | C13 | 15,065 | 13,324 |
| Property, plant and equipment | C14 | 59,580 | 58,353 |
| Investments in associated companies and joint ventures | C15 | 47,692 | 46,458 |
| Deferred tax assets | C11 | 8,073 | 9,048 |
| Pension obligation assets | C22 | 1,031 | 268 |
| Other non-current assets | C16 | 8,947 | 6,684 |
| Total non-current assets | 217,238 | 211,342 | |
| Inventories | C17 | 1,475 | 1,395 |
| Trade and other receivables | C18 | 20,924 | 19,905 |
| Current tax receivables | 111 | 88 | |
| Interest-bearing receivables | C19 | 1,533 | 2,477 |
| Cash and cash equivalents | C19 | 12,600 | 15,344 |
| Total current assets | 36,643 | 39,209 | |
| Total assets | 253,881 | 250,551 | |
| Equity and liabilities | |||
| Equity attributable to owners of the parent | 116,680 | 125,907 | |
| of which capital | 35,444 | 45,416 | |
| of which reserves and retained earnings | 81,236 | 80,491 | |
| Equity attributable to non-controlling interests | 7,353 | 6,758 | |
| Total equity | 124,033 | 132,665 | |
| Long-term borrowings | C21 | 68,108 | 60,563 |
| Deferred tax liabilities | C11 | 13,437 | 12,526 |
| Provisions for pensions and employment contracts | C22 | 1,030 | 757 |
| Other long-term provisions | C23 | 9,696 | 9,947 |
| Other long-term liabilities | C24 | 1,409 | 1,593 |
| Total non-current liabilities | 93,680 | 85,386 | |
| Short-term borrowings | C21 | 11,734 | 4,873 |
| Short-term provisions | C23 | 725 | 850 |
| Current tax payables | 318 | 1,891 | |
| Trade payables and other current liabilities | C25 | 23,391 | 24,886 |
| Total current liabilities | 36,168 | 32,500 | |
| Total equity and liabilities | 253,881 | 250,551 | |
| Contingent assets | C30 | – | – |
| Guarantees | C30 | 305 | 1,644 |
| Collateral pledged | C30 | 259 | 905 |
| SEK in millions | Note | Jan–Dec 2011 | Jan–Dec 2010 |
|---|---|---|---|
| Net income | 21,072 | 23,562 | |
| Adjustments for: | |||
| Amortization, depreciation and impairment losses | 12,971 | 13,481 | |
| Capital gains/losses on sales/disposals of non-current assets | -230 | -1,148 | |
| Other items related to investing activities | -636 | – | |
| Income from associated companies and joint ventures, net of dividends | |||
| received | -5,221 | -6,100 | |
| Pensions and other provisions | -668 | -1,281 | |
| Financial items | 875 | -85 | |
| Income taxes | 703 | 379 | |
| Miscellaneous non-cash items | -11 | 23 | |
| Cash flow before change in working capital | 28,855 | 28,831 | |
| Increase (–)/Decrease (+) in operating receivables | -833 | -1,228 | |
| Increase (–)/Decrease (+) in inventories | -80 | -25 | |
| Increase (+)/Decrease (–) in operating liabilities | -919 | -144 | |
| Change in working capital | -1,832 | -1,397 | |
| Cash flow from operating activities | C31 | 27,023 | 27,434 |
| Intangible assets and property, plant and equipment acquired | C31 | -17,394 | -14,533 |
| Intangible assets and property, plant and equipment divested | 304 | 87 | |
| Business combinations | C31 | -79 | -2,031 |
| Other equity instruments and operations acquired | C31 | -207 | -1,151 |
| Subsidiaries divested | C31 | 188 | 1,406 |
| Other equity instruments and operations divested | C31 | 670 | 278 |
| Payment on behalf of Ipse 2000 S.p.A. | C23 | – | -182 |
| Loans granted and other similar investments | -2,527 | -764 | |
| Repayment of loans granted and other similar investments | 399 | 402 | |
| Compensation from pension fund | 170 | 850 | |
| Net change in short-term investments | 1,170 | -838 | |
| Cash flow from investing activities | -17,306 | -16,476 | |
| Cash flow before financing activities | 9,717 | 10,958 | |
| Repurchased treasury shares including transaction costs | -9,983 | – | |
| Dividends paid to owners of the parent | -12,349 | -10,104 | |
| Dividends paid to holders of non-controlling interests | -2,490 | -2,859 | |
| Non-controlling interests acquired | C31 | -9 | -1,333 |
| Capital contributions from holders of non-controlling interests | 155 | 150 | |
| Proceeds from long-term borrowings | 17,912 | 7,937 | |
| Repayment of long-term borrowings | -4,406 | -8,091 | |
| Net change in short-term borrowings | 264 | -632 | |
| Settlement of foreign exchange derivative contracts used for economic | |||
| hedges of cash-pool balances | -1,129 | -2,804 | |
| Cash flow from financing activities | -12,035 | -17,736 | |
| Net change in cash and cash equivalents | -2,318 | -6,778 | |
| Cash and cash equivalents, opening balance | 15,344 | 22,488 | |
| Net change in cash and cash equivalents for the year | -2,318 | -6,778 | |
| Exchange rate differences in cash and cash equivalents | -426 | -366 | |
| Cash and cash equivalents, closing balance | C19 | 12,600 | 15,344 |
| Dividends received | C31 | 496 | 1,721 |
| Interest received | C31 | 493 | 260 |
| Interest paid | C31 | -2,587 | -2,301 |
| Income taxes paid | C31 | -4,999 | -5,995 |
| Other con | Foreign currency |
Reval | Total owners |
Non-con | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SEK in millions | Note | Share capital |
tributed capital |
Hedging reserve |
Fair value reserve |
translation reserve |
uation reserve |
Inflation reserve |
Retained earnings |
of the parent |
trolling interests |
Total equity |
| Closing balance, | ||||||||||||
| December 31, 2009 | 14,369 | 31,043 | -172 | 76 | 12,160 | 674 | 4,909 | 72,313 135,372 | 7,127 142,499 | |||
| Dividends | C20 | – | – | – | – | – | – | – -10,104 -10,104 | -2,037 | -12,141 | ||
| Non-controlling inter ests acquired |
C20, C34 |
– | – | – | – | – | – | – | -1,057 | -1,057 | -356 | -1,413 |
| Non-controlling interests divested |
C20 | – | – | – | – | – | – | – | – | – | 179 | 179 |
| Total transactions with owners |
– | – | – | – | – | – | – | -11,161 | -11,161 | -2,214 | -13,375 | |
| Net income | C20 | – | – | – | – | – | – | – | 21,257 | 21,257 | 2,305 | 23,562 |
| Other comprehensive income |
C12, C20 |
– | – | 40 | -95 | -19,510 | – | – | – -19,565 | -460 -20,025 | ||
| Total comprehensive income |
– | – | 40 | -95 | -19,510 | – | – | 21,257 | 1,692 | 1,845 | 3,537 | |
| Share-based pay ments |
– | 4 | – | – | – | – | – | – | 4 | – | 4 | |
| Transfer of amortiza tion and depreciation for the year |
– | – | – | – | – | -126 | – | 126 | – | – | – | |
| Closing balance, December 31, 2010 |
14,369 | 31,047 | -132 | -19 | -7,350 | 548 | 4,909 | 82,535 125,907 | 6,758 132,665 | |||
| Dividends | C20 | – | – | – | – | – | – | – -12,349 -12,349 | -2,018 -14,367 | |||
| Repurchased and canceled treasury shares |
C20 | -513 | -9,470 | – | – | – | – | – | – | -9,983 | – | -9,983 |
| Non-controlling interests acquired |
C20, C34 |
– | – | – | – | – | – | – | -2 | -2 | 2 | 0 |
| Total transactions with owners |
-513 | -9,470 | – | – | – | – | – | -12,351 -22,334 | -2,016 -24,349 | |||
| Net income | C20 | – | – | – | – | – | – | – | 18,341 | 18,341 | 2,731 | 21,072 |
| Other comprehensive income |
C12, C20 |
– | – | -87 | 2 | -5,160 | – | – | – | -5,245 | -120 | -5,365 |
| Total comprehensive income |
– | – | -87 | 2 | -5,160 | – | – | 18,341 | 13,096 | 2,611 | 15,707 | |
| Share-based payments |
– | 11 | – | – | – | – | – | – | 11 | – | 11 | |
| Transfer of amortiza tion and depreciation for the year |
– | – | – | – | – | -125 | – | 125 | – | – | – | |
| Closing balance, December 31, 2011 |
13,856 | 21,588 | -219 | -17 | -12,510 | 423 | 4,909 | 88,650 116,680 | 7,353 124,033 |
| Note | Page | |
|---|---|---|
| C1. | Basis of Preparation | 42 |
| C2. | Key Sources of Estimation Uncertainty | 44 |
| C3. | Significant Accounting Policies | 46 |
| C4. | Changes in Group Composition and Events after the Reporting Period | 54 |
| C5. | Segment Information | 54 |
| C6. | Net Sales | 56 |
| C7. | Expenses by Nature | 56 |
| C8. | Other Operating Income and Expenses | 57 |
| C9. | Income from Associated Companies and Joint Ventures | 57 |
| C10. | Finance Costs and Other Financial Items | 57 |
| C11. | Income Taxes | 58 |
| C12. | Other Comprehensive Income | 60 |
| C13. | Goodwill and Other Intangible Assets | 61 |
| C14. | Property, Plant and Equipment | 63 |
| C15. | Investments in Associated Companies and Joint Ventures | 63 |
| C16. | Other Non-current Assets | 65 |
| C17. | Inventories | 66 |
| C18. | Trade and Other Receivables | 66 |
| C19. | Interest-bearing Receivables, Cash and Cash Equivalents | 67 |
| C20. | Equity and Earnings per Share | 68 |
| C21. | Long-term and Short-term Borrowings | 69 |
| C22. | Provisions for Pensions and Employment Contracts | 70 |
| C23. | Other Provisions | 72 |
| C24. | Other Long-term Liabilities | 74 |
| C25. | Trade Payables and Other Current Liabilities | 74 |
| C26. | Financial Assets and Liabilities by Category and Level | 75 |
| C27. | Financial Risk Management | 76 |
| C28. | Leasing Agreements | 81 |
| C29. | Related Party Transactions | 82 |
| C30. | Contingencies, Other Contractual Obligations and Litigation | 83 |
| C31. | Cash Flow Information | 84 |
| C32. | Human Resources | 85 |
| C33. | Remuneration to Audit Firms | 88 |
| C34. | Business Combinations | 88 |
| C35. | Risks and Uncertainties | 88 |
The annual report and consolidated financial statements have been approved for issue by the Board of Directors on March 8, 2012. The income statement and the balance sheet of the parent company and the statement of comprehensive income and the statement of financial position of the Group are subject to adoption by the Annual General Meeting on April 3, 2012.
TeliaSonera's consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and, given the nature of TeliaSonera's transactions, in accordance with IFRSs as adopted by the European Union (EU).
In addition, concerning purely Swedish circumstances, the Swedish Financial Reporting Board has issued standard RFR 1 "Supplementary Accounting Rules for Groups" and other statements. The standard is applicable to Swedish legal entities whose securities are listed on a Swedish stock exchange or authorized equity market place at the end of the reporting period and specifies supplementary rules and disclosures in addition to IFRS requirements, caused by provisions in the Swedish Annual Accounts Act.
The consolidated financial statements have been prepared mainly under the historical cost convention. Other measurement bases used and applied accounting policies are described below.
In the consolidated financial statements, prior periods have been restated to reflect the discovery of certain classification errors, referring to: (a) certain commission fees to retailers in business area Eurasia; (b) certain equipment sales and commission fees in business area Mobility Services; and (c) certain leasing agreements with customers in reportable segment Other operations. The corrections were as follows.
| Consolidated Statements | ||||||
|---|---|---|---|---|---|---|
| of Comprehensive Income | Jan−Dec 2010 | |||||
| SEK in millions | Reported | Restated | Change | |||
| Net sales | 106,582 | 106,979 | 397 | |||
| Cost of sales | -57,604 | -57,691 | -87 | |||
| Gross profit | 48,978 | 49,288 | 310 | |||
| Selling and marketing | ||||||
| expenses | -16,591 | -16,981 | -390 | |||
| Other items, net | -304 | -304 | − | |||
| Operating income | 32,083 | 32,003 | -80 | |||
| Finance costs | -2,677 | -2,677 | − | |||
| Other financial items | 530 | 610 | 80 | |||
| Income after financial items | 29,936 | 29,936 | − | |||
| Consolidated Statements | ||||||
| of Comprehensive Income | Jan−Dec 2009 | |||||
| SEK in millions | Reported | Restated | Change | |||
| Net sales | 109,161 | 109,550 | 389 | |||
| Cost of sales | -60,965 | -61,039 | -74 | |||
| Gross profit | 48,196 | 48,511 | 315 | |||
| Selling and marketing | ||||||
| expenses | -15,647 | -16,044 | -397 |
Other items, net -2,225 -2,225 − Operating income 30,324 30,242 -82 Finance costs -3,191 -3,191 − Other financial items 481 563 82 Income after financial items 27,614 27,614 −
Unless otherwise specified, all amounts are in millions of Swedish kronor (SEK) or other currency specified and are based on the twelve-month period ended December 31 for items related to comprehensive income and cash flows, and as of December 31 for items related to financial position.
Recently issued new or revised/amended standards and interpretations effective for TeliaSonera on or after January 1, 2012, are as follows:
• Amendments on transfers of financial assets to IFRS 7 "Financial Instruments: Disclosures" (effective for annual periods beginning on or after July 1, 2011; earlier application permitted, comparative information not required at initial application), requiring enhanced disclosures of risk exposures relating to transferred financial assets when an entity has continuing involvement in those assets (contractual obligations to pay or receive cash flows). Examples are guarantees and options (other than at fair value) from agreements such as factoring of receivables, securitization, and sale or lend of financial assets. Disclosures are also required if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period.
between joint operations and joint ventures. A joint operation is a joint arrangement whereby the parties have rights to the assets and obligations for the liabilities. The parties account for their respective interests of assets, liabilities, revenues and expenses. A joint venture on the other hand is a joint arrangement whereby the parties have rights to the net assets and the investment is accounted for using the equity method.
• IFRS 12 "Disclosure of Interests in Other Entities," which requires enhanced disclosures about both consolidated entities and unconsolidated entities in which an entity has involvement. The objective is that financial statement users should be able to evaluate the basis of control, any restrictions on consolidated assets and liabilities, risk exposures arising from involvements with unconsolidated structured entities and non-controlling interest holders' involvement in the activities of consolidated entities.
IFRS 10, IFRS 11, IFRS 12 and the related amendments to IAS 27 and IAS 28 (see below) are effective for annual periods beginning on or after January 1, 2013, with earlier application permitted so long as each of the other four standards are also early applied and if IFRS 9 is not early applied any reference to IFRS 9 should be read as IAS 39. However, entities are permitted to incorporate any of the disclosure requirements in IFRS 12 into their financial statements without technically early applying the provisions of IFRS 12 (and thereby each of the other four standards). TeliaSonera is currently analyzing the effects of applying the new standards. Tentatively, the current classification of subsidiaries and associated companies will not change. Classification of existing joint arrangements as either joint operations or joint ventures requires a deep analysis of each arrangement and the additional disclosure requirements will most likely affect TeliaSonera's reporting with respect to significant jointly controlled entities.
sale. The amendments to IAS 12 refer to assets accounted for under IAS 40 "Investment Property" and revalued assets accounted for under IAS 16 "Property, Plant and Equipment," respectively. IAS 40 is not applicable to TeliaSonera and the revaluation model under IAS 16 is not used. Consequently, the amendments to IAS 12 are not applicable to TeliaSonera.
As of the beginning of March 2012, all standards, revisions/ amendments to standards, and interpretations mentioned above had been adopted by the EU, except for IFRS 9, IFRS 10, IFRS 11, IFRS 12, IFRS 13, the amendments to IAS 1, IAS 12, IAS 19, IAS 27, IAS 28 and IAS 32, and IFRIC 20.
The EU Commission has announced that, if an IFRS (or equivalent) is endorsed after the end of the reporting period but before the date the financial statements are issued, it can be treated as endorsed for the purposes of those financial statements if application prior to the date of endorsement is permitted by both the Regulation endorsing the document and the related IFRS.
The preparation of financial statements requires management and the Board of Directors to make estimates and judgments that affect reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. These estimates are based on historical experience and various other assumptions that management and the Board believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, significantly impacting TeliaSonera's earnings and financial position.
Management believes that the following areas comprise the most difficult, subjective or complex judgments it has to make in the preparation of the financial statements. For information on accounting policies applied, see the respective sections of Note C3 "Significant Accounting Policies."
For a telecom operator, to determine fair values and if or when revenue should be recognized requires management judgment in a number of cases, such as when signing agreements with third-party providers for content services (whether TeliaSonera acts as principal or agent under a certain agreement); in complex bundling of products, services and rights to use assets into one customer offering (whether TeliaSonera should recognize the separate items up-front or defer); the sales of Indefeasible Rights of Use (IRUs); and in assessing the degree of completion in service and construction contracts.
Significant management judgment is required in determining current tax liabilities and assets as well as provisions for deferred tax liabilities and assets, in particular as regards valuation of deferred tax assets. As part of this process, income taxes have to be estimated in each of the jurisdictions in which TeliaSonera operates. The process involves estimating the actual current tax exposure together with assessing temporary differences resulting from the different valuation of certain assets and liabilities in the financial statements and in the tax returns. Management must also assess the probability that the deferred tax assets will be recovered from future taxable income.
Actual results may differ from these estimates due to, among other factors, future changes in business environment, currently unknown changes in income tax legislation, or results from the final review of tax returns by tax authorities or by courts of law. For additional information on deferred tax assets and liabilities and their carrying values as of the end of the reporting period, see Note C11 "Income Taxes."
Determination of the useful lives of asset classes involves taking into account historical trends and making assumptions related to future socio-economic and technological development and expected changes in market behavior. These assumptions are prepared by management and subject to review by the Audit Committee of the Board of Directors.
Currently, the following amortization and depreciation rates are applied.
| Trade names | Individual evaluation, minimum 10 percent |
|---|---|
| Telecom and frequency licenses, numbering rights | Remaining license period, minimum 5 percent |
| Interconnect and roaming agreements | Agreement term, based on the remaining useful life of the related license |
| Customer relationships | Individual evaluation, based on historic and projected churn |
| Capitalized development expenses | 20 percent |
| Other intangible assets | 20–33 percent or individual evaluation |
| Buildings | 2–10 percent |
| Land improvements | 2 percent |
| Capitalized improvements on leased premises | Remaining term of corresponding lease |
| Mobile networks (base stations and other installations) | 14.5–20 percent |
| Fixed networks | |
| – Switching systems and transmission systems | 10–20 percent |
| – Transmission media (cable) | 5–10 percent |
| – Equipment for special networks | 10 percent |
| – Usufruct agreements of limited duration | Agreement term or time corresponding to the underlying asset |
| – Other installations | 2–33 percent |
| Equipment, tools and installations | 10–33 percent |
| Customer premises equipment under service arrangements | 33 percent, or agreement term if longer |
In 2011 and 2010, amortization, depreciation and impairment losses totaled SEK 13,023 million and SEK 13,479 million, respectively. For additional information on intangible and tangible assets subject to amortization and depreciation and their carrying values as of the end of the reporting period see Note C13 "Goodwill and Other Intangible Assets" and Note C14 "Property, Plant and Equipment."
A number of significant assumptions and estimates are involved when measuring value in use based on the expected future discounted cash flows attributable to an asset, for example with respect to factors such as market growth rates, revenue volumes, market prices for telecommunications services, costs to maintain and develop communications networks and working capital requirements. Forecasts of future cash flows are based on the best estimates of future revenues and operating expenses using historical trends, general market conditions, industry trends and forecasts and other available information. These assumptions are prepared by management and subject to review by the Audit Committee of the Board of Directors. The cash flow forecasts are adjusted by an appropriate discount rate derived from TeliaSonera's cost of capital plus a reasonable risk premium at the date of evaluation. For additional information on goodwill and its carrying value as of the end of the reporting period, see Note C13 "Goodwill and Other Intangible Assets."
TeliaSonera's allowance for doubtful receivables reflects estimated losses that result from the inability of customers to make required payments. Management determines the size of the allowance based on the likelihood of recoverability of accounts receivable taking into account actual losses in prior years and current collection trends. Should economic or specific industry trends worsen compared to management estimates, the allowance may have to be increased, negatively impacting earnings. See section "Credit risk management" in Note C27 "Financial Risk Management" for a description of how risks related to trade receivables are mitigated. For additional information on the allowance for doubtful receivables and its carrying value as of the end of the reporting period, see Note C18 "Trade and Other Receivables."
Provisions for pensions and employment contracts
The most significant assumptions that management has to make in connection with the actuarial calculation of pension obligations and pension expenses affect the discount rate, the expected annual rate of compensation increase, the expected employee turnover rate, the expected average remaining working life, the expected annual income base amount increase (only for Swedish entities), the expected annual adjustments to pensions, and the expected annual return on plan assets. These assumptions are prepared by management and subject to review by the Audit Committee of the Board of Directors. A change in any of these key assumptions may have a significant impact on the projected benefit obligations, funding requirements and periodic pension cost. For additional information on assumptions made and on pension obligations and their present values as of the end of the reporting period, see Note C22 "Provisions for Pensions and Employment Contracts."
The discount rate reflects the rates at which the pension obligations could be effectively settled, which means a period somewhere from 15 to 30 years. The rate used to discount pension obligations shall be determined by reference to market yields at the end of the reporting period on high-quality corporate bonds. In countries where there is no deep market in such bonds, the market yields at the end of the reporting period on government bonds shall be used. The currency and term of the corporate bonds or government bonds shall be consistent with the currency and estimated term of the pension obligations. For Sweden, which represents approximately 86 percent of TeliaSonera's pension obligations, historical practice has been to reference long-term nominal government bonds in setting the discount rate, due to the perceived lack of a deep market in high-quality corporate bonds. In 2010, however, a review of the Swedish covered mortgage bond market was carried out, with the objective of determining whether this market satisfied the requirements of IAS 19 in serving as a reference for setting the discount rate. The covered mortgage bond market, which has grown steadily over the last few years, consists of bonds issued mainly by affiliates of Swedish banks and covered by pools of mortgages, and contains a large number of bonds rated AA or higher by the major credit rating agencies. Following this review, management, along with many other employers in
Sweden, concluded that the covered bond market is in fact a deep corporate bond market, as defined in IAS 19, paragraph 78, and as such, is an appropriate reference in determining the discount rate. Management adjusts the reference rate derived from covered bond market yields to reflect any difference between the inflation rate used to estimate expected annual adjustments to pensions (see below) and the implied inflation rate indicated by the financial markets at the end of the reporting period. See section "Pension obligation risk" in Note C27 "Financial Risk Management" for a sensitivity analysis related to a change in the weighted average discount rate used in calculating pension provisions.
The expected annual rate of compensation increase reflects expected future salary increases as a compound of inflation, seniority and promotion. The estimate is based on historical data on salary increases and on the expected future inflation rate (see also below). Historical data is also the basis for estimating the employee turnover rate, which reflects the expected level of employees, by age class, leaving the company through natural attrition.
The estimate for expected average remaining working life is based on current employee age distribution and the expected employee turnover rate. The income base amount, existing only in Sweden, is set annually and inter alia used for determining the ceiling for pensionable income in the public pension system. The estimate for the expected annual income base amount increase is based on the expected future inflation rate and the historical annual rate of compensation increase on the total labor market.
Expected annual adjustments to pensions reflect the inflation rate. In determining this rate, management has chosen to use the annual inflation target rates set by the national and European central banks.
The expected annual return on plan assets reflects the average rate of earnings expected on the investments made (or to be made) to provide for the pension benefit obligations that are secured by the pension funds. Plan assets chiefly consist of fixed income instruments and equity instruments.
The expected nominal net return from the Swedish pension fund portfolio, representing approximately 85 percent of total plan assets, is currently 4.5 percent per annum over a 10-year period, where inflation is assumed to be 2.0 percent per annum. The strategic allocation of plan assets is composed to give the expected average return. More specifically the expected gross nominal return is based on the following assumptions; domestic and global fixed income 3.0 percent, domestic and global equities 7.0 percent and other investments 7.0 percent. The assumptions used in the non-Swedish pension funds are similar.
The determination of redemption amounts for put options related to non-controlling interests involves management judgment and estimates of vital factors such as the likelihood of exercise of the option and the timing thereof, projected cash flows of the underlying operations, the weighted average cost of capital, etc. A change in any of these factors may have a significant impact on future results and cash flows.
TeliaSonera has engaged, and may in the future need to engage, in restructuring activities, which require management to make significant estimates related to expenses for severance and other employee termination costs, lease cancellation,
site dismantling and other exit costs and to realizable values of assets made redundant or obsolete (see section "Valuation of intangible and other non-current assets" above). Should the actual amounts differ from these estimates, future results could be materially impacted.
Determination of the treatment of contingent assets and liabilities in the financial statements is based on management's view of the expected outcome of the applicable contingency. Management consults with legal counsel on matters related to litigation and other experts both within and outside the company with respect to matters in the ordinary course of business.
For additional information on put options related to noncontrolling interests and restructuring provisions, including their carrying values as of the end of the reporting period, and on contingencies and litigation, see Notes C23 "Other Provisions" and C30 "Contingencies, Other Contractual Obligations and Litigation," respectively.
The consolidated financial statements comprise the parent company TeliaSonera AB and all entities over which TeliaSonera has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. Acquisitions are accounted for using the acquisition method which measures goodwill at the acquisition date as: the fair value of the consideration transferred; plus the amount of any non-controlling interest in the acquiree recognized in the transaction; plus if the business combination is achieved in stages, the fair value of the previously held equity interest in the acquiree; less the net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed. When the difference is negative, a bargain purchase gain would be recognized in net income. Costs related to the acquisition are expensed as incurred.
Any contingent consideration payable would be recognized at fair value at the acquisition date. If the contingent consideration would be classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognized in net income. Acquisition of additional shares in a subsidiary after obtaining control as well as a partial disposal of shares in a subsidiary while retaining control are accounted for as equity transactions with owners (see section "Non-controlling interests" below).
Assets (including any goodwill and fair value adjustments) and liabilities for entities acquired or divested during the year are included in the consolidated financial statements from the date on which control is obtained and excluded from the date on which control is lost.
Intra-group sales and other transactions have been eliminated in the consolidated financial statements. Profits and losses resulting from intra-group transactions are eliminated unless a loss indicates impairment.
Prior to 2010, transactions involving non-controlling interests were treated as transactions with non-related parties. Disposals of non-controlling interests resulted in capital gains or losses which were recognized in net income. Purchases
of non-controlling interests resulted in goodwill, being the difference between any consideration paid and the relevant share acquired of the Group's carrying value of net assets of the subsidiary. Prospectively as of 2010, transactions with non-controlling interests are treated as equity transactions, including any transaction-related costs. Gains or losses on disposals as well as any excess or deficit of consideration paid over the carrying amount of non-controlling interests when acquiring additional shares in a subsidiary are recognized in retained earnings. Consideration paid for a call option or other similar contract giving TeliaSonera the right to acquire a fixed non-controlling interest in exchange for a fixed amount of cash or another financial asset is deducted from retained earnings.
Commitments to purchase non-controlling interests made prior to 2010 and put options granted to holders of non-controlling interests (taking into account any subsequent capital contributions from or dividends to such shareholders) prior to 2010 are recognized as contingent consideration (provisions). Where the amount of the liability exceeds the amount of the non-controlling interest, the difference is recorded as goodwill. Subsequent changes in the value of put option liabilities are recognized as an adjustment to goodwill.
Associated companies are entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20 percent and 50 percent of the voting rights. Entities over which the Group has joint control by virtue of a contractual arrangement are joint ventures.
Holdings in associated companies and joint ventures are accounted for using the equity method and are initially recognized at cost, including any transaction costs. The Group's share of net income in associated companies and joint ventures is included in operating income because the operations of these companies are related to telecommunications and it is the Group's strategy to capitalize on industry know-how by means of investing in partly owned operations. The share of net income is based on the entity's most recent accounts, adjusted for any discrepancies in accounting policies, and with estimated adjustments for significant events and transactions up to TeliaSonera's close of books.
The line item Income from associated companies and joint ventures also includes amortization of fair value adjustments and other consolidation adjustments made upon the acquisition of associated companies and joint ventures as well as any subsequent impairment losses on goodwill and other intangible assets, and capital gains and losses on divestitures of stakes in such companies. TeliaSonera's share of any gains or losses resulting from transactions with associated companies and joint ventures are eliminated.
Dividend received reduces the carrying amount of an investment. Negative equity participations in associated companies and joint ventures are recognized only to the extent contractual obligations to contribute additional capital exist and are then recorded as Other provisions.
Cash flows from operating activities are reported using the indirect method and include dividends received from associated companies and other equity instruments, interest paid or received (except for paid interest capitalized as part of the acquisition or construction of non-current assets and therefore included in cash flows from investing activities), provisions and taxes paid or refunded. Changes in non-interest bearing receivables and liabilities are reported in working capital,
except for IRU-related prepayments made or received which are included in cash flows from investing activities.
Payments for equity instruments and operations acquired or divested are classified as cash flows from investing activities, net of cash and cash equivalents acquired or disposed of, respectively. Further, cash flows from investing activities include compensation from or contributions to the Swedish pension fund, payments related to leasing receivables as well as changes in short-term investments with maturities over 3 months.
Cash flows from financing activities include dividends paid to owners of the parent and to holders of non-controlling interests and cash flows from settlement of foreign exchange derivative contracts used for economic hedges of cash-pool balances. Proceeds from and repayment of long-term borrowings include cash flows from derivatives hedging such borrowings.
Cash and cash equivalents include cash at hand, bank deposits and highly-liquid short-term investments (including blocked amounts) with maturities up to and including 3 months.
Cash flows of a foreign entity are translated at the average exchange rate for the reporting period, except for certain transactions like dividends from associates, dividends paid to holders of non-controlling interests, acquisitions or disposals of subsidiaries and associated companies, and other major non-recurring transactions which are translated at the rate prevailing on the transaction day.
The Group's basic operating segments are called business areas (BA), which are founded on management's decision to organize the Group around differences in products and services in combination with geographical markets. Each BA constitutes a reportable segment. Operating segments that are not individually reportable and certain corporate functions are combined into an "other operations" reportable segment. For additional information, see Note C5 "Segment Information." Segments are consolidated based on the same accounting principles as for the Group as a whole, except for intersegment finance leases which are treated as operating leases. When significant operations are transferred between segments, comparative period figures are restated.
Currency translation is based on the fixing rates published daily by Sveriges Riksbank (the Swedish central bank) and, for currencies where a fixing rate is not available, conversion of official exchange rates versus the US dollar (USD).
Separate financial statements of a Group entity are presented in the entity's functional currency, being the currency of the primary economic environment in which the entity operates, normally the local currency. In preparing the financial statements, foreign currency transactions are translated at the exchange rates prevailing at the date of each transaction. At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are translated at the closing rates existing at that date. Exchange rate differences arising from operating receivables or liabilities are recognized in operating income, while differences attributable to financial assets or liabilities are recognized in finance costs. Exchange rate differences on available-for-sale equity instruments and on cash flow hedges are recognized in other comprehensive income.
The consolidated financial statements are presented in Swedish krona (SEK), which is the functional currency of the parent company. For consolidation purposes, income and expenses of foreign operations (subsidiaries, associated companies and joint ventures, and branch offices) are translated at the average exchange rates for the period. However, for items related to dividends, gains or losses on disposal of operations or other major transactions or if exchange rates fluctuated significantly during the period, the exchange rates at the date of the transactions are used. Assets and liabilities, including goodwill and fair value adjustments arising on acquisition of foreign operations, are translated at closing rates at the end of the reporting period except for equity components, which are translated at historical rates. Translation differences are recognized in other comprehensive income and accumulated in equity attributable to owners of the parent or to non-controlling interests, as appropriate.
When a foreign operation is sold, any related cumulative exchange rate difference is recycled to net income as part of the gain or loss on the sale, except for accumulated exchange rate differences related to non-controlling interests which are derecognized but not recycled to net income. However, if TeliaSonera would dispose of a non-controlling interest in a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests.
When the functional currency for a foreign operation is the currency of a hyperinflationary economy, prior to translating the financial statements, the reported non-monetary assets and liabilities, and equity are restated in terms of the measuring unit current at the end of the reporting period. Currently, no subsidiary, associated company or joint venture operates in a hyperinflationary economy.
Net sales principally consist of traffic charges including interconnect and roaming, subscription fees, connection and installation fees, service charges and equipment sales. Sales revenues are recognized at fair value of the consideration received, normally being the sales value, adjusted for rebates and discounts granted and sales-related taxes.
Revenue is recognized in the period in which the service is performed, based on actual traffic or over the contract term, as applicable. Revenue from rendering of services is recognized when it is probable that the economic benefits associated with a transaction will flow to TeliaSonera, and the amount of revenue, and the associated costs incurred, or to be incurred, can be measured reliably. Revenue from voice and data services is recognized when the services are used by the customer. Revenue from interconnect traffic with other telecom operators is recognized at the time of transit across TeliaSonera's network. When invoicing end-customers for third-party content services, amounts collected on behalf of the principal are excluded from revenue.
Subscription fees are recognized as revenue over the subscription period. Sales relating to pre-paid phone cards, primarily mobile, are deferred and recognized as revenue based on the actual usage of the cards. For open access fiber installed at customer's premises, non-refundable customer fees and related installation costs, including planning, trenching, cabling, splicing, mounting, connection, cross connect equipment and media converter, are recognized when the installation is finalized. Connection fees are separately recognized at completion of connection, if the fees do not include any amount for subsequent servicing but only cover the connection costs. Amounts for subsequent servicing are deferred. Revenue from equipment sales is recognized when delivery has occurred and the significant risks and rewards have been transferred to the customer, i.e. normally on delivery and when accepted by the customer.
Under customer loyalty programs, customers are entitled to certain discounts (award credits) relating to services and goods provided by TeliaSonera. Based on relative fair values, proceeds are allocated between services and goods provided and the award credits for future services and goods. For the proportion of award credits expected to be redeemed, revenue is deferred and subsequently recognized when the award credits are redeemed and the obligations to supply the awards are fulfilled. For recognition of customer acquisition costs, see section "Operating expenses" below.
TeliaSonera may bundle services and products into one customer offering. Offerings may involve the delivery or performance of multiple products, services, or rights to use assets (multiple deliverables). In some cases, the arrangements include initial installation, initiation, or activation services and involve consideration in the form of a fixed fee or a fixed fee coupled with a continuing payment stream. Telecom equipment is accounted for separately from service where a market for each deliverable exist and if title to the equipment passes to the end-customer. Costs associated with the equipment are recognized at the time of revenue recognized. The revenue is allocated to equipment and services in proportion to the fair value of the individual items. Services invoiced based on usage are not included in the allocation. Customized equipment that can be used only in connection with services or products provided by TeliaSonera is not accounted for separately and revenue is deferred over the total service arrangement period.
To corporate customers, TeliaSonera offers long-term functional service agreements for total telecom services, which may include switchboard services, fixed telephony, mobile telephony, data communication and other customized services. There are generally no options for the customer to acquire the equipment at the end of the service contract period. Revenue for such functionality agreements is recognized over the service period but part of the periodic fixed fee is deferred to meet the costs at the end of the contract period (maintenance and upgrades).
Service and construction contract revenues are recognized using the percentage of completion method. The stage of completion is estimated using measures based on the nature and terms of the contracts. When it is probable that total contract costs will exceed total contract revenue, the expected loss is immediately expensed.
Within the international carrier operations, sales of Indefeasible Rights of Use (IRU) regarding fiber and duct are recognized as revenue over the period of the agreement (see also section "TeliaSonera as operating lessor" below).
TeliaSonera presents its analysis of expenses using a classification based on function. Cost of sales comprises all costs for services and products sold as well as for installation, maintenance, service, and support. Selling and marketing expenses comprise all costs for selling and marketing services and products and includes expenses for advertising, PR, pricelists, commission fees, credit information, debt collection, etc. Bad debt losses as well as doubtful debt allowances are also included. Recovery of receivables written-off in prior years is included in Other operating income. Research and development expenses (R&D) include expenses for developing new or substantially improving already existing services, products, processes or systems. Maintenance and minor adjustments
to already existing services, products, processes or systems are not included in R&D. Expenses that are related to specific customer orders (customization) are included in Cost of sales. Amortization, depreciation and impairment losses are included in each function to the extent referring to intangible assets or property, plant and equipment used for that function.
Costs for retailer commissions, other customer acquisition costs, advertising, and other marketing costs are expensed as incurred.
All pension benefit costs are recognized as personnel expenses. For equity-settled share-based payments to employees, such as TeliaSonera's Performance Share Programs, cost, being the fair value at the allotment date of the equity instruments allotted, is recognized as personnel expenses allocated over the vesting period and with a corresponding increase in equity. Cost is based on the best available estimate of the number of equity instruments to vest. If necessary, the estimate is revised during the vesting period and finally revised at the end of the vesting period.
Other operating income and other operating expenses include gains and losses, respectively, on disposal of shares or operations in subsidiaries (see section "Associated companies and joint ventures" above) and on disposal or retirement of intangible assets or property, plant and equipment.
Also included in other operating income and expenses are government grants, exchange rate differences on operating transactions, results from court-settled disputes with other operators regarding historical interconnect and roaming fees, restructuring costs and other similar items. Government grants are initially measured at fair value and recognized as income over the periods necessary to match them with the related costs. Exchange rate differences on operating transactions include effects from economic hedges and value changes in derivatives hedging operational transaction exposure (see section "Derivatives and hedge accounting" below).
Interest income and expenses are recognized as incurred, using the effective interest rate method, with the exception of borrowing costs directly attributable to the acquisition, construction or production of an asset, which are capitalized as part of the cost of that asset (see also section "Intangible assets, and property, plant and equipment" below). Increases in provisions due to passage of time are recognized as interest expenses.
Interest income and expenses also include changes in fair value of the interest component of cross currency interest rate swaps as well as changes in fair value of interest rate swaps. The initial difference between nominal value and net present value of borrowings with an interest rate different to market rate ("day 1 gain") is amortized until due date and recognized as Other interest income. The interest component of changes in the fair value of borrowings measured at fair value and of derivatives hedging loans and borrowings (see section "Derivatives and hedge accounting" below) are included in Other interest income (gains) or in Interest expenses (losses). Exchange rate differences on financial transactions comprise changes in fair value of the currency component of cross currency interest rate swaps and of forward contracts hedging currency risks in external borrowings.
Financial components of pension costs, such as interest cost and the expected return on plan assets, are included in Operating expenses (see above).
Dividend income from equity investments is recognized when TeliaSonera's rights to receive payment have been established. Income and expenses relating to guarantee commissions are included in Other interest income and Interest expenses, respectively. Interest expenses include fundingrelated bank fees and fees to rating institutions and market makers.
Incomes taxes comprise current and deferred tax. Current and deferred income taxes are recognized in net income or in other comprehensive income, to the extent relating to items recognized in other comprehensive income. Deferred income taxes are provided in full, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying values in the consolidated financial statements and on unutilized tax deductions or losses. Where a subsidiary has a history of tax losses, TeliaSonera recognizes a deferred tax asset only to the extent that the subsidiary has sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable profit will be available.
On initial recognition of assets and liabilities, deferred taxes are not recognized on temporary differences in transactions that are not business combinations. Deferred tax liabilities for undistributed earnings or temporary differences related to investments in subsidiaries, associated companies and joint ventures are not recognized because such retained earnings can be withdrawn as non-taxable dividends and the companies can be sold without tax consequences. However, some foreign jurisdictions impose withholding tax on dividends. In such cases, a deferred tax liability is recognized, calculated by applying the respective withholding tax rate on undistributed earnings. In certain countries, income tax is not levied on profits, but on dividends paid or declared. In those cases, since current and deferred taxes should be recognized at the rate of undistributed earnings, no deferred tax is recognized and current tax is recognized in the period when dividends are declared.
Current and deferred income tax is determined using tax rates and tax legislation that have been enacted or substantively enacted at the end of the reporting period and in the case of deferred tax that are expected to apply when the related deferred income tax asset or liability is settled. Effects of changes in tax rates are recognized in the period when the change is substantively enacted. Deferred tax assets are recognized to the extent that the ability of utilizing the tax asset is probable. Deferred tax assets and liabilities are offset when a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
Interest on current tax payable or refundable calculated by tax authorities is classified as Interest expenses and Other interest income, respectively.
Goodwill is measured, after initial recognition, at cost, less any accumulated impairment losses. Goodwill is not amortized but tested for impairment at least annually. Impairment losses are not reversed. Based on management analysis, goodwill acquired in a business combination is for impairment testing purposes allocated to the groups of cash-generating units that are expected to benefit from the synergies of the combination. Each group represents the lowest level at which goodwill is
monitored for internal management purposes and it is never larger than an operating segment.
Other intangible assets are measured at cost, including directly attributable borrowing costs, less accumulated amortization and any impairment losses. Direct external and internal development expenses for new or substantially improved products and processes are capitalized, provided that future economic benefits are probable, costs can be measured reliably and the product and process is technically and commercially feasible. Activities in projects at the feasibility study stage as well as maintenance and training activities are expensed as incurred.
Intangible assets acquired in a business combination are identified and recognized separately from goodwill where they satisfy the definition of an intangible asset and their fair values can be measured reliably. The cost of such intangible assets is their fair value at the acquisition date. Subsequent to initial recognition, intangible assets acquired in a business combination are measured on the same basis as intangible assets acquired separately. Fair values of intangible assets acquired in a business combination are determined as follows. Patents and trademarks are valued based on the discounted estimated royalty payments that have been avoided as a result of the patent or trademark being owned. Customer relationships are valued using the multi-period excess earnings method. For other intangible assets, income, market and cost approaches are considered in a comprehensive valuation analysis, by which the nature of the intangible asset, any legal and contractual circumstances and the availability of data will determine which approach(es) ultimately to be utilized to derive each asset's fair value.
Property, plant and equipment are measured at cost, including directly attributable borrowing costs, less accumulated depreciation and any impairment losses. Software used in the production process is considered to be an integral part of the related hardware and is capitalized as plant and machinery. Property and plant under construction is valued at the expense already incurred, including interest during the installation period. To the extent a legal or constructive obligation to a third party exists, the acquisition cost includes estimated costs of dismantling and removing the asset and restoring the site. The cost of replacing a part of an item of property, plant and equipment is recognized in the carrying value of the item if it is probable that the future economic benefits embodied within the item will flow to TeliaSonera and the cost of the item can be measured reliably. All other replacement costs are expensed as incurred. A change in estimated expenditures for dismantling, removal and restoration is added to and/ or deducted from the carrying value of the related asset. To the extent that the change would result in a negative carrying value, this effect is recognized in net income. The change in depreciation charge is recognized prospectively.
Fair values for property, plant and equipment acquired in a business combination are determined as follows. Commercial real estate is normally valued using an income or market approach, while technical buildings, plant and equipment are normally valued using a cost approach, in which the fair value is derived based on depreciated replacement cost for the asset.
Capitalized interest is calculated, based on the Group's estimated average cost of borrowing. However, actual borrowing costs are capitalized if individually identifiable, such as interest paid on construction loans for buildings.
Government grants received as compensation for the cost of an asset are initially measured at fair value, normally being the consideration received. A government grant reduces the
carrying value of the related asset and the depreciation charge recognized over the assets' useful life.
Amortization of intangible assets other than goodwill and depreciation on property, plant and equipment is based on residual values, and taking into account the estimated useful lives of various asset classes or individual assets. Land is not depreciated. For assets acquired during a year, amortization and depreciation is calculated from the date of acquisition. Amortization and depreciation is mainly recognized on a straight-line basis.
Mobile and fixed telecommunication licenses to operate a specific network are regarded as integral to the network and amortization does not commence until the related network is ready for use. Amortization of network-independent licenses to use specific radio frequencies (spectrum) commences when the related frequency block is available for use. License fees based on future services, i.e. relating to the on-going performance of the entity in terms of reported revenue, wages paid, etc., are not capitalized but expensed as incurred.
Goodwill and other intangible assets with indefinite useful lives (currently none existing) and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that the asset may be impaired. Intangible assets with a finite life and tangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Where it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is tested for impairment. If an analysis indicates that the carrying value is higher than its recoverable amount, which is the higher of the fair value less costs to sell and value in use, an impairment loss is recognized for the amount by which the carrying amounts exceeds the recoverable amount.
Value in use is measured based on the expected future discounted cash flows (DCF model) attributable to the asset.
Financial instruments are for measurement purposes grouped into categories. The categorization depends on the purpose and is determined at initial recognition. Category "Financial assets at fair value through profit and loss" comprises derivatives not designated as hedging instruments (held-for-trading) with a positive fair value and investments held-for-trading. Category "Held-to-maturity" comprises non-derivative financial assets with fixed or determinable payments and fixed maturity that TeliaSonera has the positive intention and ability to hold to maturity. This category includes commercial papers, certain government bonds and treasury bills. Category "Loans and receivables" comprises non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. This category includes trade receivables, accrued revenues for services and goods, loan receivables, bank deposits and cash at hand. Category "Available-for-sale financial assets" comprises non-derivative financial assets that are designated to this category or not to any of the other categories. This category currently includes equity instruments and convertible bonds. Assets included in the categories are reported under the statement of financial position items Other non-current assets (Note C16), Trade and Other
receivables (Note C18), Interest-bearing Receivables, Cash and Cash Equivalents (Note C19).
Category "Financial liabilities at fair value through profit and loss" comprises derivatives not designated as hedging instruments (held-for-trading) with a negative fair value. Category "Financial liabilities measured at amortized cost" comprises all other financial liabilities, such as borrowings, trade payables, accrued expenses for services and goods, and certain provisions settled in cash. Liabilities included in the categories are reported under the statement of financial position items Longterm and Short-term Borrowings (Note C21), Other Provisions (Note C23), Other Long-term Liabilities (Note C24) and Trade Payables and Other Current Liabilities (Note C25).
inputs)
The carrying values of classes of financial assets and liabilities measured at fair value were determined based on a three-level fair value hierarchy, as follows.
| Level Fair value determination | Comprises | |
|---|---|---|
| 1 | Quoted (unadjusted) prices in active markets for identical assets or liabilities |
Primarily quoted equity instru ments classified as available for-sale or held-for-trading |
| 2 | Inputs other than quoted prices included in level 1 that are observable for the asset or li ability, either directly (prices) or indirectly (derived from prices) |
Derivatives designated as hedging instruments or held for-trading and borrowings in fair value hedge relationships |
| 3 | Inputs for the asset or liability that are not based on observ able market data (unobservable |
Unquoted equity instruments classified as available-for-sale or held-for-trading |
Financial assets and financial liabilities are initially recognized at fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. However, transaction costs related to assets or liabilities held for trading or liabilities that are hedged items in a fair value hedge are expensed as incurred. A financial asset is considered impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flow of that asset. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively. Evidence of impairment include that debtors, individually or collectively, default in payments or other indications that they experience significant financial difficulty, including the probability of entering bankruptcy or other financial reorganization.
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized when TeliaSonera has transferred its rights to receive cash flows from the asset and has transferred substantially all the risks and rewards of the asset, or has transferred control of the asset.
A financial liability is derecognized when the obligation under the liability is discharged or canceled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference between the carrying amounts is recognized in net income.
The fair values of financial instruments traded in active markets are based on quoted market prices at the end of the reporting period. For financial assets, the current bid price is used. The fair values of financial instruments that are not traded in active markets are determined by using valuation techniques. Management uses a variety of methods and makes assumptions that are based on market conditions existing at the end of the reporting period.
Quoted market prices or dealer quotes for similar instruments are used for long-term debt. Other techniques, such as estimated discounted cash flows (DCF analyses), are used to determine fair value for the remaining financial instruments. DCF analyses are performed using the applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives. Forward exchange contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates matching maturities of the contracts. Interest rate swaps are measured at the present value of future cash flows, estimated and discounted based on the applicable yield curves derived from quoted interest rates.
The carrying value less impairment provision of trade receivables and payables are assumed for disclosure purposes to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available for similar financial instruments.
Financial assets and liabilities maturing more than one year from the end of the reporting period are considered to be noncurrent. Other financial assets and liabilities are recognized as current. Financial assets and liabilities are recognized and derecognized applying settlement date accounting.
Financial assets and liabilities are offset only if there is an enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.
Quoted equity instruments are measured at fair value, being the quoted market prices. Unrealized gains and losses arising from changes in fair value other than impairment losses up to the date of sale are recognized in other comprehensive income and accumulated in the fair value reserve. If the fair value of a quoted equity instrument declines, management makes assumptions about the decline in value to determine whether it is an impairment that should be recognized in profit or loss. Evidence of impairment is a significant or prolonged decline in the fair value below the cost of the instrument. Unquoted equity instruments whose fair value cannot be reliably determined are valued at cost less any impairment. An impairment loss on an unquoted equity instrument is calculated as the difference between the carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Impairment losses on equity investments carried at cost are not subsequently reversed and impairment losses on equity instruments classified as available-for-sale are never reversed through net income.
Government bonds and treasury bills held-to-maturity are initially recognized at fair value and subsequently measured at amortized cost, using the effective interest rate method, less impairment. Receivables arising from own lending, except for short-term receivables where the interest effect is immaterial, are measured at amortized cost, using the effective interest
rate method, less impairment. An impairment loss on government bonds and treasury bills and on receivables from own lending is calculated as the difference between the carrying amount and the present value of the estimated future cash flow discounted at the original effective interest rate.
Short-term investments with maturities over 3 months comprise bank deposits, commercial papers issued by banks, bonds and investments held-for-trading. Cash and cash equivalents include cash at hand and bank deposits as well as highly-liquid short-term investments with maturities up to and including 3 months, such as commercial papers issued by banks. All instruments are initially measured at fair value and subsequently at fair value if categorized as held-for-trading, otherwise at amortized cost.
Financial liabilities (interest-bearing loans and borrowings), except for short-term liabilities where the interest effect is immaterial, are initially recognized at fair value and subsequently measured at amortized cost, using the effective interest rate method. Liabilities that are hedged against changes in fair value are, however, measured at fair value. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognized over the term of the loan or borrowings. Borrowings with an interest rate different to market rate are initially measured at fair value, being the net present value applying the market interest rate. The difference between the nominal value and the net present value is amortized until due date.
Financial guarantee liabilities are contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognized initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issue of the guarantee. Subsequently, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the end of the reporting period and the amount initially recognized.
Trade receivables are initially recognized at fair value, normally being the invoiced amount, and subsequently carried at invoiced amount less impairment (bad debt losses), which equals amortized cost since the terms are generally 30 days and the recognition of interest would be immaterial. An estimate of the amount of doubtful receivables is made when collection of the full amount is no longer probable. An impairment loss on trade receivables is calculated as the difference between the carrying amount and the present value of the estimated future cash flow. Bad debts are written-off when identified and charged to Selling and marketing expenses. Accrued trade payables are recognized at the amounts expected to be billable.
Trade payables are initially recognized at fair value, normally being the invoiced amounts, and subsequently measured at invoiced amounts, which equals amortized cost, using the effective interest rate method, since generally the payments terms are such that the recognition of interest would be immaterial.
TeliaSonera uses derivative instruments, such as interest and cross currency interest rate swaps, forward contracts and options, primarily to control exposure to fluctuations in exchange rates and interest rates. For hedging of net investments in foreign operations, TeliaSonera also uses financial liabilities.
Derivatives and embedded derivatives, when their economic characteristics and risks are not clearly and closely related to other characteristics of the host contract, are recognized at fair value. Derivatives with a positive fair value are recognized as non-current or current receivables and derivatives with a negative fair value as non-current or current liabilities. Currency swaps, forward exchange contracts and options are classified as non-interest-bearing and interest rate swaps and cross currency interest rate swaps as interest-bearing items. For classification in the statement of comprehensive income, see sections "Other operating income and expenses" and "Finance costs and other financial items" above.
Hedging instruments are designated as either fair value hedges, cash flow hedges, or hedges of net investments in foreign operations. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges. Documentation on hedges includes: the relationship between the hedging instrument and the hedged item; risk management objectives and strategy for undertaking various hedge transactions; and whether the hedging instrument used is highly effective in offsetting changes in fair values or cash flows of the hedged item.
For fair value hedges, the effective and ineffective portions of the change in fair value of the derivative, along with the gain or loss on the hedged item attributable to the risk being hedged, are recognized in net income.
For cash flow hedges, the effective portion of the change in fair value of the derivative is recognized in other comprehensive income until the underlying transaction is reflected in net income, at which time any deferred hedging gains or losses are recycled to net income. The ineffective portion of the change in fair value of a derivative used as a cash flow hedge is recognized in net income. However, when the hedged forecast transaction results in the recognition of a non-financial asset or liability, the gains and losses are included in the initial measurement of the cost of the asset or liability.
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized in net income. Gains and losses deferred in the foreign currency translation reserve are recycled to net income on disposal of the foreign operation.
Changes in the fair value of derivative instruments that do not meet the criteria for hedge accounting are recognized in net income.
Hedge accounting is not applied to derivative instruments that economically hedge monetary assets and liabilities denominated in foreign currencies (economic hedges) or that are initiated in order to manage e.g. the overall interest rate duration of the debt portfolio. Changes in the fair value of economic hedges are recognized in net income as exchange rate differences, offsetting the exchange rate differences on monetary assets and liabilities. Changes in the fair value of portfolio management derivatives are recognized in net income as Finance costs.
Inventories are carried at the lower of cost and net realizable value. Costs, including an appropriate portion of fixed and variable overhead expenses, are assigned to inventories held by the method most appropriate to the particular class of inventory, with the majority being valued on a first-in-first-out basis. Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
Obsolescence is assessed with reference to the age and rate of turnover of the items. The entire difference between the opening and closing balance of the obsolescence allowance is charged to cost of sales. The fair value of inventories acquired in a business combination is determined based on the estimated selling price less the estimated cost of sale and a reasonable profit margin.
Non-current assets and disposal groups are classified as held-for-sale if their carrying value will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. An asset-held-forsale is measured at the lower of its previous carrying value and fair value less costs to sell.
Equity attributable to owners of the parent is divided into share capital, other contributed capital, hedging reserve, fair value reserve, foreign currency translation reserve, revaluation reserve, inflation adjustment reserve and retained earnings. Share capital is the legally issued share capital. Other contributed capital comprises contributions made by shareholders in the form of share premiums in connection with new share issues, specific share holder contributions, etc. This item is reduced by reimbursements to shareholders made in accordance with separately decided and communicated capital repayment programs (e.g. through purchasing own shares or extraordinary dividends). The hedging reserve as well as the fair value reserve and the foreign currency translation reserve are reclassified to net income. Cash flow hedges may also adjust the initial cost of a non-financial asset or liability. The revaluation reserve is used in connection with step acquisitions made before 2010 and the inflation adjustment reserve when accounting for operations in hyperinflationary economies. All other equity is retained earnings.
Dividend payments are proposed by the Board of Directors in accordance with the regulations of the Swedish Companies Act and decided by the General Meeting of shareholders. The proposed cash dividend for 2011 will be recorded as a liability immediately following the final decision by the shareholders.
TeliaSonera provides defined benefit pension plans, meaning that the individual is guaranteed a pension equal to a certain percentage of his or her salary, to most of its employees in Sweden, Finland and Norway. The pension plans mainly include retirement pension, disability pension and family pension. Employees in TeliaSonera AB and most of its Swedish subsidiaries are eligible for retirement benefits under the ITP-Tele defined benefit plan. However, all employees born in 1979 and later are covered by a defined contribution pension plan (the ITP1 plan). TeliaSonera's employees in Finland are entitled to statutory pension benefits pursuant to the Finnish Employees' Pension Act, a defined benefit pension arrangement with retirement, disability, unemployment and death benefits (TEL pension). In addition, certain employees have additional pension coverage through a supplemental pension plan.
The pension obligations are secured mostly by pension funds, but also by provisions in the statement of financial position combined with pension credit insurance. In Sweden, the part of the ITP multiemployer pension plan that is secured by paying pension premiums is accounted for as a defined
contribution plan as the plan administrator does not provide any information necessary to account for the plan as a defined benefit plan. In Finland, a part of the pension is funded in advance and the remaining part financed as a pay-as-you-go pension (i.e. contributions are set at a level that is expected to be sufficient to pay the required benefits falling due in the same period).
TeliaSonera's employees in many other countries are usually covered by defined contribution pension plans. Contributions to the latter are normally set at a certain percentage of the employee's salary and are expensed as incurred.
The present value of pension obligations and pension costs are calculated annually, using the projected unit credit method. Actuarial assumptions are determined at the end of the reporting period. The assets of TeliaSonera's pension funds constitute pension plan assets and are valued at fair value.
Changes in the present value of pension obligations due to revised actuarial assumptions as well as differences between expected and actual return on plan assets are treated as actuarial gains or losses. When the net cumulative unrecognized actuarial gain or loss on pension obligations and plan assets goes outside a corridor equal to 10 percent of the higher of either pension obligations or the fair value of plan assets at the beginning of the year, the surplus amount is amortized over the average expected remaining employment period.
Net provisions or assets for post-employment benefits in the statement of financial position represent the present value of obligations at the end of the reporting period less the fair value of plan assets, unrecognized actuarial gains and losses and unrecognized past-service costs.
A provision is recognized when TeliaSonera has a present obligation (legal or constructive) as a result of a past event; it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation. If the likelihood of an outflow of resources is less than probable but more than remote, or a reliable estimate is not determinable, the matter is disclosed as a contingency provided that the obligation or the legal claim is material.
Provisions are measured at management's best estimate, at the end of the reporting period, of the expenditure required to settle the obligation, and are discounted to present value where the effect is material. From time to time, parts of provisions may also be reversed due to better than expected outcome in the related activities in terms of cash outflow.
Where there are a number of similar obligations, e.g. product warranty commitments, the probability that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class may be small but it is probable that some outflow of resources will be needed to settle the class of obligations as a whole.
Other provisions comprise contingent consideration resulting from business combinations or from put options granted to holders of non-controlling interests in existing subsidiaries (for additional information, see section "Consolidated financial statements − Non-controlling interests" above) as well as restructuring provisions which include termination benefits, onerous contracts and other expenses related to cost reduction programs, post-acquisition integration programs, closing-down of operations, etc. Restructuring provisions are mainly recognized as Other operating expenses, since they
are not expenses for post-decision ordinary activities. Termination benefits are recognized when TeliaSonera is committed to terminate the employment of an employee or group of employees before the normal retirement date or as a result of an offer made in order to encourage voluntary redundancy. Such benefits are recognized only after an appropriate public announcement has been made specifying the terms of redundancy and the number of employees affected, or after individual employees have been advised of the specific terms.
Onerous contracts are recognized when the expected benefits to be derived by from a contract are lower than the unavoidable cost of meeting the obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, any impairment loss on the assets associated with that contract is provided for.
Other provisions also include warranty commitments, environmental restoration, litigation, onerous contracts not related to restructuring activities, etc. These provisions are recognized as Cost of sales, Selling and marketing expenses, Administrative expenses or Research and development expenses as applicable.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
As a lessee, TeliaSonera has entered into finance and operating leases and rental contracts. For a finance lease agreement, the leased asset is recognized as a tangible non-current asset and the future obligation to the lessor as a liability, capitalized at the inception of the lease at the lower of the fair value of the leased property or the present value of the minimum lease payments. Initial direct costs are added to the capitalized amount. Minimum lease payments are apportioned between the finance charges and reduction of the lease liability to produce a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to net income. Other agreements are operating leases, with the leasing costs recognized evenly throughout the period of the agreement.
TeliaSonera owns assets that it leases to customers under finance lease agreements. Amounts due from lessees are recorded as receivables at the amount of the net investment in the leases, which equals the net present value. Initial direct costs are included in the initial measurement of the financial lease receivable and reduce the amount of income recognized over the lease term. Income is recognized over the lease term on an annuity basis.
Rental revenues from operating leases are recognized on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying value of the leased asset and are recognized on the same basis as the lease revenues.
Fiber and duct are sold as part of the operations of Telia-Sonera's international carrier business. TeliaSonera has decided to view these as integral equipment to land. Under the agreements, title is not transferred to the lessee. The transactions are therefore recorded as operating lease agreements. The contracted sales price is mainly paid in advance and sales that are not recognized in income are recorded as long-term liabilities or short-term deferred revenues.
TeliaSonera acquired all shares in the Finnish cable TV company Oy Turun Kaapelitelevisio – Åbo Kabeltelevision Ab and indirectly 51 percent of the shares in the Cypriot holding company Airbell Services Ltd., which owns 50 percent of the shares in the Nepalese mobile operator Nepal Satellite Telecom Pvt. Ltd.
On September 1, 2011, TeliaSonera sold its wholly-owned Norwegian subsidiary North Sea Communications AS, which operates a fiber optical cable system between Norway and the UK.
For additional information on acquisitions and divestitures, see section "Business combinations, other acquisitions and divestitures" in Note C31 "Cash Flow Information" and Note C34 "Business Combinations."
See the Report of the Directors, section "Significant Events after Year-End 2011."
The Group's operations are managed and reported by business area (BA) as follows.
Segment consolidation is based on the same accounting principles as for the Group as a whole, except for inter-segment finance leases which are treated as operating leases. Inter-segment transactions are based on commercial terms. Besides Net sales and Operating income, principal segment control and reporting concepts are EBITDA excluding nonrecurring items and Operating segment capital, respectively (see the Definitions section). Segment figures for 2010 have been restated to reflect the discovery of certain classification errors, referring to: (a) certain commission fees to retailers in business area Eurasia; (b) certain equipment sales and commission fees in business area Mobility Services; and (c) certain leasing agreements with customers in reportable segment Other operations. For information on impairment losses in 2010 related to the Cambodian operations within reportable segment Other operations, see Notes C13 "Goodwill and Other Intangible Assets" and C14 "Property, Plant and Equipment."
| January–December 2011 or December 31, 2011 | |||||||
|---|---|---|---|---|---|---|---|
| SEK in millions | Mobility Services |
Broadband Services |
Eurasia | Other | operations Eliminations | Group | |
| Net sales | 51,032 | 36,811 | 17,330 | 3,992 | -4,811 | 104,354 | |
| External net sales | 49,568 | 34,305 | 17,247 | 3,234 | – | 104,354 | |
| EBITDA excluding non-recurring items | 15,746 | 12,101 | 8,850 | 257 | -40 | 36,914 | |
| Non-recurring items | -199 | -520 | 750 | -72 | – | -41 | |
| Amortization, depreciation and impairment losses | -4,495 | -5,084 | -2,836 | -611 | 3 | -13,023 | |
| Income from associated companies and joint ventures | 12 | 85 | 5,735 | -115 | – | 5,717 | |
| Operating income | 11,064 | 6,582 | 12,499 | -541 | -37 | 29,567 | |
| Financial items, net | -2,793 | ||||||
| Income taxes | -5,702 | ||||||
| Net income | 21,072 | ||||||
| Investments in associated companies and joint ventures | 269 | 678 | 46,416 | 329 | – | 47,692 | |
| Other operating segment assets | 87,679 | 50,738 | 32,293 | 5,844 | -1,033 | 175,521 | |
| Unallocated operating assets | 8,497 | ||||||
| Other unallocated assets | 22,171 | ||||||
| Total assets | 253,881 | ||||||
| Operating segment liabilities | 12,475 | 10,502 | 9,175 | 3,561 | -1,086 | 34,627 | |
| Unallocated operating liabilities | 26,690 | ||||||
| Other unallocated liabilities | 80,872 | ||||||
| Adjusted equity | 111,692 | ||||||
| Total equity and liabilities | 253,881 | ||||||
| Investments | 6,667 | 5,764 | 4,808 | 676 | – | 17,915 | |
| of which CAPEX | 6,600 | 5,448 | 4,538 | 657 | – | 17,243 | |
| Number of employees | 7,771 | 13,305 | 4,994 | 2,342 | – | 28,412 | |
| Average number of full-time employees | 7,246 | 12,703 | 4,762 | 2,288 | – | 26,999 |
| January–December 2010 or December 31, 2010 (restated) | |||||||
|---|---|---|---|---|---|---|---|
| Mobility | Broadband | Other | |||||
| SEK in millions | Services | Services | Eurasia | operations Eliminations | Group | ||
| Net sales | 50,659 | 39,875 | 16,458 | 5,102 | -5,115 | 106,979 | |
| External net sales | 49,019 | 37,150 | 16,451 | 4,359 | − | 106,979 | |
| EBITDA excluding non-recurring items | 14,928 | 13,035 | 8,348 | 560 | 26 | 36,897 | |
| Non-recurring items | -26 | -142 | -47 | 979 | − | 764 | |
| Amortization, depreciation and impairment losses | -4,316 | -5,157 | -2,637 | -1,373 | 4 | -13,479 | |
| Income from associated companies and joint ventures | 164 | 77 | 7,603 | -23 | − | 7,821 | |
| Operating income | 10,750 | 7,813 | 13,267 | 143 | 30 | 32,003 | |
| Financial items, net | -2,067 | ||||||
| Income taxes | -6,374 | ||||||
| Net income | 23,562 | ||||||
| Investments in associated companies and joint ventures | 631 | 673 | 44,689 | 465 | − | 46,458 | |
| Other operating segment assets | 84,859 | 50,832 | 31,185 | 6,298 | -1,080 | 172,094 | |
| Unallocated operating assets | 9,379 | ||||||
| Other unallocated assets | 22,620 | ||||||
| Total assets | 250,551 | ||||||
| Operating segment liabilities | 12,456 | 11,420 | 10,118 | 3,476 | -1,263 | 36,207 | |
| Unallocated operating liabilities | 27,835 | ||||||
| Other unallocated liabilities | 66,193 | ||||||
| Adjusted equity | 120,316 | ||||||
| Total equity and liabilities | 250,551 | ||||||
| Investments | 4,312 | 5,208 | 6,261 | 888 | − | 16,669 | |
| of which CAPEX | 3,879 | 4,928 | 5,473 | 654 | − | 14,934 | |
| Number of employees | 7,488 | 13,901 | 4,853 | 2,703 | − | 28,945 | |
| Average number of full-time employees | 7,076 | 12,926 | 4,550 | 3,145 | − | 27,697 |
External net sales were distributed by product area as follows.
| SEK in millions | Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Mobile communications | 59,200 | 59,441 |
| Fixed communications | 33,688 | 37,684 |
| Other services | 11,466 | 9,854 |
| Total | 104,354 | 106,979 |
Fixed communications include internet, data and TV services as well as managed services. Other services include equipment sales and financial services.
Net sales by external customer location and non-current assets, respectively, were distributed among individually material countries as follows.
| Jan–Dec 2011 | Jan–Dec 2010 | Dec 31, 2011 | Dec 31, 2010 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Net sales | Non-current assets | |||||||||
| SEK in millions |
Percent | SEK in millions |
Percent | SEK in millions |
Percent | SEK in millions |
Percent | |||
| Sweden | 36,059 | 34.6 | 36,692 | 34.3 | 26,324 | 17.3 | 25,868 | 17.3 | ||
| Finland | 15,079 | 14.4 | 16,170 | 15.1 | 38,953 | 25.6 | 38,992 | 26.1 | ||
| Norway | 9,378 | 9.0 | 9,864 | 9.2 | 28,706 | 18.9 | 28,760 | 19.2 | ||
| All other countries | 43,838 | 42.0 | 44,253 | 41.4 | 58,221 | 38.2 | 55,905 | 37.4 | ||
| Total | 104,354 | 100.0 | 106,979 | 100.0 | 152,204 | 100.0 | 149,525 | 100.0 |
Net sales by external customer location were distributed among economic regions as follows.
| Jan–Dec 2011 | Jan–Dec 2010 | |||
|---|---|---|---|---|
| SEK in | millions Percent | SEK in millions |
Percent | |
| European Economic Area (EEA) |
85,376 | 81.8 | 88,361 | 82.6 |
| of which European Union (EU) member states |
75,981 | 72.8 | 78,462 | 73.3 |
| Rest of Europe | 2,220 | 2.1 | 2,680 | 2.5 |
| North-American Free Trade Agreement (NAFTA) |
487 | 0.5 | 597 | 0.6 |
| Rest of world | 16,271 | 15.6 | 15,341 | 14.3 |
| Total | 104,354 | 100.0 | 106,979 | 100.0 |
The TeliaSonera Group offers a diversified portfolio of massmarket services and products in highly competitive markets. Hence, the Group's exposure to individual customers is limited.
The distribution of change in net sales in terms of volume effects, price effects, structural effects and exchange rate effects was as follows.
| Percent | Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Change in net sales, total | -2.5 | -2.3 |
| volume growth – |
8.6 | 6.7 |
| price reductions – |
-6.0 | -3.1 |
| structural changes – |
-0.9 | -0.4 |
| exchange rate effects – |
-4.2 | -5.5 |
TeliaSonera experiences volume growth mainly within mobile communications. Besides a robust development in Sweden, volume growth was especially strong in Spain and in the Eurasian operations due to ongoing high customer intake. In 2011 and 2010, however, total volume growth was more than offset
by exchange rate effects and continued overall price pressure on telecom services.
Structural changes in 2011 mainly related to the acquisition of Oy Turun Kaapelitelevisio – Åbo Kabeltelevision Ab in Finland and the divestment of North Sea Communications AS in Norway as well as the 2010 divestitures of Telia Stofa A/S in Denmark and Applifone Company Ltd. in Cambodia, while 2010 was also impacted by the 2009 acquisition of Tele2's broadband and VoIP operations in Norway.
Net sales are broken down by reportable segment, by product area, by individually material countries and by economic region in Note C5 "Segment Information."
Operating expenses are presented on the face of the statement of comprehensive income using a classification based on the functions "Cost of sales," "Selling and marketing expenses," "Administrative expenses" and "Research and development expenses." Total expenses by function were distributed by nature as follows.
| SEK in millions | Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Goods and sub-contracting services purchased | -14,778 | -15,399 |
| Interconnect and roaming expenses | -13,387 | -15,630 |
| Other network expenses | -5,663 | -5,378 |
| Change in inventories | -3,676 | -2,087 |
| Personnel expenses (see also Note C32) | -12,628 | -13,685 |
| Marketing expenses | -7,548 | -7,704 |
| Other expenses | -10,575 | -10,701 |
| Amortization, depreciation and impairment losses | -13,012 | -12,791 |
| Total | -81,267 | -83,375 |
The main components of Other expenses are rent and leasing fees, consultants' services, IT expenses, energy expenses and travel expenses. In conjunction with measuring the outcome of efficiency measures, TeliaSonera uses the concept Addressable cost base, which comprises Personnel expenses, Marketing expenses and Other expenses and totaled SEK 30,751 million in 2011 and SEK 32,090 million in 2010.
Amortization, depreciation and impairment losses by function were as follows.
| SEK in millions | Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Cost of sales | -10,847 | -10,914 |
| Selling and marketing expenses | -1,287 | -1,041 |
| Administrative expenses | -847 | -792 |
| Research and development expenses | -31 | -44 |
| Total | -13,012 | -12,791 |
Amortization, depreciation and impairment losses are broken down by reportable segment in Note C5 "Segment Information." For a discussion on impairment testing, see Note C13 "Goodwill and Other Intangible Assets."
Other operating income and expenses were distributed as follows.
| SEK in millions | Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Other operating income | ||
| Capital gains | 439 | 1,207 |
| Exchange rate gains | 407 | 391 |
| Commissions, license and patent fees, etc. | 295 | 129 |
| Grants | 23 | 26 |
| Recovered accounts receivable | 303 | 73 |
| Court-settled fees with other operators | 300 | 165 |
| Damages received | 676 | 81 |
| Total other operating income | 2,443 | 2,072 |
| Other operating expenses | ||
| Capital losses | -212 | -139 |
| Transaction costs in business combinations | -10 | – |
| Provisions for onerous contracts | -2 | – |
| Exchange rate losses | -429 | -405 |
| Restructuring costs | -930 | -192 |
| Amortization, depreciation and impairment losses | -11 | -688 |
| Court-settled fees with other operators | -50 | – |
| Damages paid | -36 | -70 |
| Total other operating expenses | -1,680 | -1,494 |
| Net effect on income | 763 | 578 |
| of which net exchange rate gains on derivative instruments held-for-trading |
5 | 51 |
In 2011, damages received included SEK 617 million as compensation for meeting certain milestones in fulfilling the agreement with Altimo signed in November 2009. In 2010, capital gains included SEK 830 million referring to the divestiture of Telia Stofa A/S and impairment losses included SEK 678 million related to the Cambodian operations. Restructuring costs mainly comprised staff redundancy costs.
The net effect on income from holdings in associated companies and joint ventures was as follows.
| SEK in millions | Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Share in net income for the year | 5,799 | 7,937 |
| Amortization of fair value adjustments | -93 | -112 |
| Net capital gains/losses | 11 | -4 |
| Net effect on income | 5,717 | 7,821 |
Income is broken down by reportable segment in Note C5 "Segment Information." Large individual stakes (including capital gains/losses and intermediate holding companies, when applicable) impacted earnings as follows.
| SEK in millions | Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Svenska UMTS-nät AB, Sweden (joint venture) | 9 | 163 |
| SIA Lattelecom, Latvia | 82 | 76 |
| OAO MegaFon, Russia | 4,410 | 5,053 |
| Turkcell Iletisim Hizmetleri A.S., Turkey | 1,331 | 2,550 |
| Overseas Telecom AB, Sweden | -120 | -24 |
| Other holdings | 5 | 3 |
| Net effect on income | 5,717 | 7,821 |
Turkcell's financials are included in TeliaSonera's reporting with a one-quarter lag.
Finance costs and other financial items were distributed as follows.
| SEK in millions | Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Finance costs | ||
| Interest expenses | -2,998 | -2,167 |
| Interest expenses on finance leases | -4 | -6 |
| Unwinding of provision discounts | -181 | -181 |
| Capitalized interest | 73 | 57 |
| Net exchange rate gains and losses | -505 | -380 |
| Total finance costs | -3,615 | -2,677 |
| Other financial items | ||
| Interest income | 650 | 420 |
| Interest income on finance leases | 96 | 93 |
| Credit losses on finance leases | -12 | -2 |
| Dividends on equity instruments available-for-sale | − | 0 |
| Capital gains on equity instruments | ||
| available-for-sale | − | 99 |
| Dividends on venture capital investments | 17 | 7 |
| Changes in fair value of venture capital | ||
| investments | -10 | -5 |
| Reversals of provisions for collateral pledged | 79 | − |
| Capital losses on equity instruments at cost | − | -2 |
| Remitted long-term vendor financing | 2 | − |
| Total other financial items | 822 | 610 |
| Net effect on income | -2,793 | -2,067 |
Details on interest expenses, net exchange rate gains and losses and interest income related to hedging activities, loan receivables and borrowings were as follows.
| Jan–Dec 2011 |
Jan–Dec 2010 |
Jan–Dec 2011 |
Jan–Dec 2010 |
Jan–Dec 2011 |
Jan–Dec 2010 |
|
|---|---|---|---|---|---|---|
| SEK in millions | Interest expenses | Net exchange rate gains and losses |
Interest income | |||
| Fair value hedge derivatives | 239 | 369 | 66 | -2,786 | − | − |
| Cash flow hedge derivatives | -72 | -147 | 5 | -106 | − | − |
| Derivatives held-for-trading | -217 | 19 | 74 | -3,336 | − | − |
| Held-to-maturity investments | − | − | – | − | − | 0 |
| Loans and receivables | − | − | 43 | 2,848 | 641 | 418 |
| Borrowings in fair value hedge relationships | -1,206 | -978 | -66 | 2,786 | − | − |
| Borrowings and other financial liabilities at amortized cost | -1,716 | -1,418 | -627 | 214 | − | − |
| Other | -26 | -12 | – | – | 9 | 2 |
| Total | -2,998 | -2,167 | -505 | -380 | 650 | 420 |
Borrowings at amortized cost include items in cash flow hedge relationships as well as unhedged items.
Tax items recognized in comprehensive income and directly in equity were distributed as follows.
| SEK in millions | Jan–Dec 2011 | Jan–Dec 2010 |
|---|---|---|
| Tax items recognized in net income | ||
| Current tax expense relating to current year | -3,404 | -5,867 |
| Underprovided or overprovided current tax expense in prior years | -10 | -61 |
| Deferred tax expense originated or reversed in current year | -2,505 | -569 |
| Recognition of previously unrecognized deferred taxes | 527 | 124 |
| Effect on deferred tax income (+)/expense (–) from changes in tax rates | -310 | -1 |
| Total tax expense recognized in net income | -5,702 | -6,374 |
| Tax items recognized in other comprehensive income | ||
| Current tax relating to current year | -26 | -913 |
| Deferred tax originated or reversed in current year | 31 | -23 |
| Total tax recognized in other comprehensive income | 5 | -936 |
| Tax items recognized directly in equity | ||
| Current tax related to treasury share repurchase transaction costs | 14 | − |
| Total tax recognized directly in equity | 14 | − |
Pre-tax income was SEK 26,774 million in 2011 and SEK 29,936 million in 2010. The difference between the nominal Swedish income tax rate and the effective tax rate comprises the following components.
| Percent | Jan–Dec 2011 | Jan–Dec 2010 |
|---|---|---|
| Swedish income tax rate | 26.3 | 26.3 |
| Effect of higher or lower tax rates in subsidiaries | -1.0 | -1.2 |
| Withholding tax on earnings in subsidiaries, associated companies and joint ventures | 2.5 | 2.6 |
| Underprovided or overprovided current tax expense in prior years | 0.0 | 0.2 |
| Recognition of previously unrecognized deferred taxes | -1.9 | -0.4 |
| Effect on deferred tax expense from changes in tax rates | 1.2 | 0.0 |
| Income from associated companies and joint ventures | -5.6 | -6.9 |
| Current year losses for which no deferred tax asset was recognized | 0.8 | 1.4 |
| Non-deductible expenses | 0.3 | 0.2 |
| Tax-exempt income | -1.3 | -0.9 |
| Effective tax rate in net income | 21.3 | 21.3 |
| Effective tax rate excluding effects from associated companies and joint ventures | 24.8 | 26.0 |
Recently enacted changes in tax legislation affecting TeliaSonera were as follows.
| Country | Enacted | Change in corporate income tax legislation | Effective |
|---|---|---|---|
| Moldova | December 2011 | Tax rate increase from 0 percent to 12 percent | January 1, 2012 |
| Finland | December 2011 | Tax rate cut from 26 percent to 24.5 percent | January 1, 2012 |
| France | September 2011 | To the extent taxable income exceeds EUR 1 million, a maximum of 60 percent of taxable income for the year could be offset against accumulated tax losses in previous years |
January 1, 2011 |
| Spain | August 2011 | If turnover exceeds EUR 60 million, a maximum of 50 percent of taxable income for the year could be offset against accumulated tax losses in previous years. In addition, for tax assessment periods beginning on January 1, 2012 or later, the utilization period for tax losses is extended from 15 years to 18 years. The exten sion is valid on tax losses accumulated in previous years |
January 1, 2011/2012 |
| United Kingdom | March/July 2011 | Tax rate cut from 28 percent to 26 percent with a further reduction to 25 percent in 2012 |
April 1, 2011 |
| Netherlands | December 2010 | Tax rate cut from 25.5 percent to 25 percent | January 1, 2011 |
| Kazakhstan | November 2009 | Previously decided tax rate cuts postponed from 2010 and 2011 to 2013 (from 20 percent to 17.5 percent) and 2014 (to 15.0 percent), respectively |
January 1, 2010 |
Deferred tax assets and liabilities changed as follows.
Temporary differences in deferred tax assets and liabilities were as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Deferred tax assets | ||
| Opening balance | 9,048 | 11,177 |
| Comprehensive income period change | -1,024 | -723 |
| Operations divested | 1 | -68 |
| Reversals of offset tax liabilities/assets, other reclassifications |
76 | -30 |
| Exchange rate differences | -28 | -1,308 |
| Deferred tax assets, closing balance | 8,073 | 9,048 |
| Deferred tax liabilities | ||
| Opening balance | 12,526 | 13,210 |
| Comprehensive income period change | 1,233 | -254 |
| Operations acquired | 17 | − |
| Operations divested | -21 | -95 |
| Reversals of offset tax assets/liabilities, other | ||
| reclassifications | -74 | 58 |
| Exchange rate differences | -244 | -393 |
| Deferred tax liabilities, closing balance | 13,437 | 12,526 |
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Gross deferred tax assets | ||
| Unrealized gain, associated companies | − | 48 |
| Delayed depreciation, impairment losses and | ||
| fair value adjustments, other non-current assets | 6,111 | 6,094 |
| Delayed expenses for provisions | 1,118 | 504 |
| Doubtful current receivables | 121 | 166 |
| Tax loss carry-forwards | 5,305 | 6,465 |
| Subtotal | 12,655 | 13,277 |
| Valuation allowances | ||
| Tax loss carry-forwards | -3,927 | -3,785 |
| Subtotal | -3,927 | -3,785 |
| Offset deferred tax liabilities/assets | -655 | -444 |
| Total deferred tax assets | 8,073 | 9,048 |
| Deferred tax liabilities | ||
| Withholding taxes and impairment losses, | ||
| subsidiaries and associated companies | 3,453 | 3,075 |
| Accelerated depreciation and fair value | ||
| adjustments, other non-current assets | 5,948 | 5,995 |
| Fair value adjustments, provisions | 1,132 | 722 |
| Delayed revenue recognition, current receivables | 38 | 77 |
| Profit equalization reserves | 3,521 | 3,101 |
| Subtotal | 14,092 | 12,970 |
| Offset deferred tax assets/liabilities | -655 | -444 |
| Total deferred tax liabilities | 13,437 | 12,526 |
| Net deferred tax assets (+)/liabilities (–) | -5,364 | -3,478 |
| Net increase (+)/decrease (–) in | ||
| valuation allowance | 142 | -352 |
Unrecognized deferred tax assets, as reflected by the valuation allowance at December 31, 2011, were expected to expire as follows.
| Expected expiry, SEK in millions | 2012 | 2013 | 2014 | 2015 | 2016 | 2017–2029 | Unlimited | Total |
|---|---|---|---|---|---|---|---|---|
| Unrecognized deferred tax assets | 206 | 25 | 14 | 24 | 47 | 2,975 | 636 | 3,927 |
As of December 31, 2011 and 2010, unrecognized deferred tax liabilities for undistributed earnings in subsidiaries, including estimated such income tax that is levied on dividends paid, totaled SEK 679 million and SEK 669 million, respectively.
Deferred tax assets originating from tax loss carry-forwards mainly relate to Spain, Finland and the international carrier operations.
Tax losses in Spain refer to the Spanish 3G mobile network operator Xfera Móviles S.A. (Yoigo), acquired in 2006. Xfera is a start-up operation that has reported tax losses since its incorporation in 2000, due to annual spectrum fees paid to the Spanish government, depreciation and write-downs of earlier investments, other pre-operating costs and additional operating losses incurred thereafter. As of December 31, 2011, Xfera had tax losses and taxable temporary differences totaling SEK 11.6 billion.
Under current 3G market conditions and due to the decreases in equipment prices in the past few years, management is, however, confident that Xfera will be able to generate taxable profits, and has prepared a robust business plan based on a sound business model with detailed and benchmarked data, and has also convinced other parties to invest
alongside TeliaSonera. As a result, management believes that the current tax losses will be utilized before they expire after 18 years from the first profitable year. However, management acknowledges that the threshold for recognizing deferred tax assets in a situation of recurring historical losses is higher than for other assets, and has therefore reduced its projections to a level which it is convinced that Xfera will reach. As of December 31, 2011, based on these projections, management has recognized a deferred tax asset of SEK 600 million after valuation allowance.
Tax losses in Finland refer mainly to capital losses on shares divested in 2003 by a subsidiary within the Finnish tax group. Finnish tax losses expire after 10 years. Tax losses in the international carrier operations refer mainly to impairment losses on plant and machinery recognized in 2002. Most of these tax losses have no expiry dates.
TeliaSonera's accumulated tax loss carry-forwards were SEK 19,111 million in 2011 and SEK 22,735 million in 2010. Tax loss carry-forwards as of December 31, 2011 were expected to expire as follows.
| Expected expiry, SEK in millions | 2012 | 2013 | 2014 | 2015 | 2016 | 2017–2029 | Unlimited | Total |
|---|---|---|---|---|---|---|---|---|
| Tax loss carry-forwards | 1,210 | 1,843 | 148 | 271 | 526 | 12,077 | 3,036 | 19,111 |
Other comprehensive income was distributed as follows.
| SEK in millions | Equity component | Jan–Dec 2011 | Jan–Dec 2010 |
|---|---|---|---|
| Foreign currency translation differences | |||
| Translation of foreign operations | Foreign currency translation reserve | -5,325 | -21,626 |
| Translation of foreign non-controlling interests | Non-controlling interests | -120 | -460 |
| Divestitures transferred to net income | Foreign currency translation reserve | 9 | -345 |
| of which line items other operating income/expenses | 9 | -345 | |
| Hedging of foreign operations | Foreign currency translation reserve | 97 | 3,472 |
| Income tax effect | Foreign currency translation reserve | -26 | -913 |
| Total foreign currency translation differences | -5,365 | -19,872 | |
| of which attributable to owners of the parent | -5,245 | -19,412 | |
| Income from associated companies | |||
| Net changes in fair value of available-for-sale financial instru | Fair value reserve | ||
| ments | 3 | -5 | |
| Translation of foreign operations | Foreign currency translation reserve | 85 | -98 |
| Total income from associated companies | 88 | -103 | |
| Cash flow hedges | |||
| Net changes in fair value | Hedging reserve | -120 | 109 |
| Transferred to finance costs in net income | Hedging reserve | 2 | -46 |
| Income tax effect | Hedging reserve | 31 | -23 |
| Total cash flow hedges | -87 | 40 | |
| Available-for-sale financial instruments | |||
| Net changes in fair value | Fair value reserve | -1 | 15 |
| Divestitures transferred to other financial items in net income | Fair value reserve | – | -105 |
| Total available-for-sale financial instruments | -1 | -90 | |
| Total other comprehensive income | -5,365 | -20,025 | |
| of which total income tax effects (see also Note C11) | 5 | –936 |
The hedging reserve comprises gains and losses on derivatives hedging interest rate and foreign currency exposure, with a negative net effect in equity of SEK 87 million as of December 31, 2011. Future gains or losses will affect net income in 2013- 2014, 2016-2017 and 2019 when the hedged items mature. No hedging reserve transfer necessitated adjustment of the cost of acquisition. See also section "Financial Instruments" in Note C3 "Significant Accounting Policies."
The total carrying value was distributed and changed as follows.
| Dec 31, 2011 |
Dec 31, 2010 |
Dec 31, 2011 |
Dec 31, 2010 |
|
|---|---|---|---|---|
| SEK in millions | Goodwill | Other intangible assets |
||
| Accumulated cost | 77,143 | 77,500 | 35,950 | 32,044 |
| Accumulated amortization | – | − | -19,872 | -17,947 |
| Accumulated impairment | ||||
| losses | -293 | -293 | -1,025 | -1,021 |
| Advances | – | − | 12 | 248 |
| Carrying value | 76,850 | 77,207 | 15,065 | 13,324 |
| of which work in progress | − | − | 1,247 | 950 |
| Carrying value, | ||||
| opening balance | 77,207 | 85,737 | 13,324 | 14,502 |
| Investments | 17 | 2 | 4,586 | 2,573 |
| of which capitalized interest | – | − | 32 | 22 |
| Sales and disposals | – | − | -8 | -18 |
| Operations acquired | 33 | 68 | 63 | 7 |
| Operations divested | – | -40 | -4 | -30 |
| Reclassifications | -10 | − | 373 | 423 |
| Adjustments related to put | ||||
| options | -107 | 482 | – | − |
| Amortization for the year | – | − | -2,714 | -2,581 |
| Impairment losses for the year | – | -174 | -9 | -468 |
| Advances | – | − | -236 | 206 |
| Exchange rate differences | -290 | -8,868 | -310 | -1,290 |
| Carrying value, | ||||
| closing balance | 76,850 | 77,207 | 15,065 | 13,324 |
In 2011 and 2010, investments in telecom and frequency licenses amounted to SEK 2,682 million and SEK 922 million, respectively. In 2010, the value of the Cambodian operations within reportable segment Other operations was reassessed, resulting in write-downs of all goodwill (SEK 174 million) and most of the value of other intangible assets (SEK 411 million). See also Note C14 "Property, Plant and Equipment" and Note C5 "Segment Information."
Apart from goodwill, there are currently no intangible assets with indefinite useful lives. No general changes of useful lives were made in 2011. For amortization rates applied, see section "Useful lives" in Note C2 "Key Sources of Estimation Uncertainty." In the statement of comprehensive income, amortization and impairment losses are included in all expense line items by function as well as in line item Other operating expenses.
The total carrying value of goodwill was distributed by reportable segment as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Business area Mobility Services | 53,640 | 53,829 |
| of which Finland | 20,109 | 20,230 |
| of which Norway | 23,568 | 23,599 |
| of which Denmark | 4,462 | 4,475 |
| Business area Broadband Services | 12,038 | 12,094 |
| of which Finland | 8,077 | 8,104 |
| Business area Eurasia | 10,495 | 10,606 |
| of which Azerbaijan | 4,894 | 4,802 |
| of which Uzbekistan | 1,951 | 1,913 |
| of which Nepal | 2,636 | 2,875 |
| Other operations | 677 | 678 |
| Total goodwill | 76,850 | 77,207 |
The total carrying value of other intangible assets was distributed by asset type as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Trade names | 98 | 153 |
| Telecom and frequency licenses | 7,660 | 5,635 |
| Customer and vendor relationships, interconnect and roaming agreements |
2,253 | 3,137 |
| Capitalized development expenses | 2,044 | 2,031 |
| Patents, etc. | 941 | 502 |
| Leaseholds, etc. | 810 | 668 |
| Work in progress, advances | 1,259 | 1,198 |
| Total other intangible assets | 15,065 | 13,324 |
Capitalized development expenses mainly refer to IT systems, supporting the selling and marketing, and administrative functions.
Goodwill is for impairment testing purposes allocated to cashgenerating units in accordance with TeliaSonera's business organization. In most cases, each geographical market within the respective reportable segment constitutes a cash-generating unit. Carrying values (for impairment testing purposes defined as operating capital and notionally adjusted for noncontrolling interests in goodwill) of all cash-generating units are annually tested for impairment. The recoverable amounts (that is, higher of value in use and fair value less cost to sell) are normally determined on the basis of value in use, applying discounted cash flow calculations. From time to time, Telia-Sonera may also obtain independent appraisals of fair values to determine recoverable amounts.
In the value in use calculations, management used assumptions that it believes are reasonable based on the best information available as of the date of the financial statements. The key assumptions were sales growth, EBITDA margin development, the weighted average cost of capital (WACC), and the terminal growth rate of free cash flow. The calculations were based on forecasts approved by management, which management believes reflect past experience, forecasts in industry reports, and other externally available information. The forecast period was 5 years. However, a forecast period of 10 years was used for cash-generating units where the investment is of a start-up nature and/or put options have been granted to holders of non-controlling interests.
| Years/Percent | Sweden | Finland | Norway | Denmark | Lithuania | Latvia | Estonia | Spain |
|---|---|---|---|---|---|---|---|---|
| Business area Mobility Services | ||||||||
| Forecast period (years) | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 10 |
| WACC rate (%) | 5.2 | 5.6 | 5.5 | 5.3 | 9.9 | 9.6 | 7.6 | 8.4 |
| Terminal growth rate (%) | 2.0 | 2.0 | 2.0 | 2.0 | 2.0 | 2.0 | 2.0 | 2.0 |
| Business area Broadband Services | ||||||||
| Forecast period (years) | 5 | 5 | 5 | 5 | 5 | 5 | 5 | – |
| WACC rate (%) | 5.0 | 5.4 | 6.2 | 6.0 | 9.0 | 8.7 | 6.7 | – |
| Terminal growth rate (%) | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | – |
| Other operations | ||||||||
| Forecast period (years) | 5 | 5 | – | – | – | – | – | – |
| WACC rate (%) | 5.0 | 5.4 | – | – | – | – | – | – |
| Terminal growth rate (%) | 1.0 | 1.0 | – | – | – | – | – | – |
| Years/Percent | Wholesale Kazakhstan | Azerbaijan Uzbekistan | Tajikistan | Georgia | Moldova | Nepal | ||
| Business area Broadband Services | ||||||||
| Forecast period (years) | 5 | – | – | – | – | – | – | – |
| WACC rate (%) | 5.8 | – | – | – | – | – | – | – |
| Terminal growth rate (%) | 1.0 | – | – | – | – | – | – | – |
| Business area Eurasia | ||||||||
| Forecast period (years) | – | 5 | 10 | 10 | 5 | 5 | 5 | 10 |
| WACC rate (%) | – | 13.8 | 15.0 | 18.8 | 21.9 | 17.1 | 16.5 | 16.3 |
| Terminal growth rate (%) | – | 3.5 | 6.0 | 7.2 | 7.0 | 4.0 | 3.5 | 5.0 |
The forecast periods used, and the post-tax WACC rates and the terminal growth rates of free cash flow used to extrapolate cash flows beyond the forecast period varied by reportable segment and geographic area as follows.
In all cases management believes the terminal growth rates to not exceed the average growth rates for markets in which TeliaSonera operates.
In the 2011 impairment tests, the recoverable values based on value in use of the cash-generating units were found not to fall short of their carrying values in any test and therefore the related goodwill was not impaired. For cash-generating units Mobility Services – Lithuania, with a carrying value for impairment testing purposes of SEK 3,433 million (of which goodwill SEK 2,059 million) and Broadband Services – Norway, with a carrying value for impairment testing purposes of SEK 1,975 million (of which goodwill SEK 1,680 million), the estimated recoverable values corresponded to the carrying values. The impairment tests assumed, in addition to the post-tax WACC rates and the terminal growth rates stated above, the following sales growth and EBITDA margin ranges during the next 5 years.
| Mobility Services Lithuania |
Broadband Services Norway |
||||
|---|---|---|---|---|---|
| Percent | From | To | From | To | |
| Sales growth | -7.8 | +5.5 | -5.2 | +3.2 | |
| EBITDA margin | 28.0 | 32.8 | 17.4 | 21.9 |
The following table sets out to what extent each key assumption approximately must change, all else being equal, in order for the recoverable value of Mobility Services – Lithuania to change by -3.7 percent, or by SEK -0.1 billion and the recoverable value of Broadband Services – Norway to change by -6.3 percent, or by SEK -0.1 billion.
| Percentage points | Mobility Services Lithuania |
Broadband Services Norway |
|---|---|---|
| Sales growth in the 5-year period | -0.7 | -1.1 |
| EBITDA margin in the 5-year period and beyond | -0.8 | -0.8 |
| Terminal growth rate of free cash flow | -0.4 | -0.4 |
| Post-tax WACC rate | +0.3 | +0.3 |
The carrying value was distributed and changed as follows.
| Dec 31, 2011 |
Dec 31, 2010 |
Dec 31, 2011 |
Dec 31, 2010 |
Dec 31, 2011 |
Dec 31, 2010 |
Dec 31, 2011 |
Dec 31, 2010 |
Dec 31, 2011 |
Dec 31, 2010 |
|
|---|---|---|---|---|---|---|---|---|---|---|
| Plant and machinery | Equipment, tools | |||||||||
| SEK in millions | Property | Mobile networks | Fixed networks | and installations | Total | |||||
| Accumulated cost | 8,289 | 8,132 | 66,682 | 60,887 | 123,994 | 123,229 | 11,889 | 10,656 | 210,854 | 202,904 |
| Accumulated depreciation | -3,985 | -3,957 | -42,472 | -38,369 | -84,906 | -83,293 | -8,931 | -8,131 -140,294 | -133,750 | |
| Accumulated impairment losses | -410 | -413 | -404 | -372 | -10,444 | -10,805 | -325 | -353 | -11,583 | -11,943 |
| Advances | − | − | 594 | 1,068 | 9 | 74 | − | − | 603 | 1,142 |
| Carrying value | 3,894 | 3,762 | 24,400 | 23,214 | 28,653 | 29,205 | 2,633 | 2,172 | 59,580 | 58,353 |
| of which assets under construction | − | − | 5,370 | 4,381 | 1,689 | 1,541 | − | − | 7,059 | 5,922 |
| Carrying value, opening balance | 3,762 | 4,317 | 23,214 | 23,562 | 29,205 | 31,105 | 2,172 | 2,238 | 58,353 | 61,222 |
| Investments | 116 | 162 | 6,841 | 6,992 | 4,152 | 3,698 | 960 | 935 | 12,069 | 11,787 |
| of which capitalized interest | 3 | 2 | 14 | 8 | 20 | 19 | 4 | 6 | 41 | 35 |
| Sales and disposals | -182 | -39 | -62 | -37 | -73 | -34 | -16 | -57 | -333 | -167 |
| Dismantling and restoration | − | − | 69 | 309 | -505 | 188 | − | − | -436 | 497 |
| Operations acquired | − | − | − | − | − | 3 | 7 | − | 7 | 3 |
| Operations divested | − | -9 | − | -76 | -137 | -434 | − | 0 | -137 | -519 |
| Grants received | − | − | -1 | -1 | -19 | -1 | − | − | -20 | -2 |
| Reclassifications | 511 | 73 | 267 | -327 | -160 | -350 | 547 | 270 | 1,165 | -334 |
| Depreciation for the year | -322 | -340 | -5,218 | -4,968 | -3,681 | -3,772 | -972 | -1,016 | -10,193 | -10,096 |
| Impairment losses for the year | − | − | -39 | -139 | -13 | -13 | -54 | -8 | -106 | -160 |
| Advances | − | − | -474 | 150 | -64 | 74 | − | − | -538 | 224 |
| Exchange rate differences | 9 | -402 | -197 | -2,251 | -52 | -1,259 | -11 | -190 | -251 | -4,102 |
| Carrying value, closing balance | 3,894 | 3,762 | 24,400 | 23,214 | 28,653 | 29,205 | 2,633 | 2,172 | 59,580 | 58,353 |
In 2010, impairment losses of SEK 87 million for Plant and machinery – Mobile networks and SEK 6 million for Equipment, tools and installations were related to the Cambodian operations within reportable segment Other operations (see also Note C13 "Goodwill and Other Intangible Assets" and Note C5 "Segment Information").
No general changes of useful lives were made in 2011. For depreciation rates applied, see section "Useful lives" in Note C2 "Key Sources of Estimation Uncertainty." In the statement of comprehensive income, depreciation and impairment losses are included in all expense line items by function as well as in line item Other operating expenses. For information on contractual obligations regarding future acquisitions of property, plant and equipment, see Note C30 "Contingencies, Other Contractual Obligations and Litigation."
TeliaSonera's real estate holdings include some 3,600 properties, mainly in Sweden and Finland. The substantial majority is used solely for technical facilities, like network installations, computer installations, research centers and service outlets.
The total carrying value of property was distributed by depreciable/non-depreciable assets as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Depreciable property (buildings, etc.) | 3,539 | 3,353 |
| Non-depreciable property (land) | 355 | 409 |
| Total property | 3,894 | 3,762 |
The carrying value was distributed and changed as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Goodwill and similar assets on consolidation | 6,188 | 7,029 |
| Share of equity | 41,504 | 39,429 |
| Carrying value | 47,692 | 46,458 |
| Carrying value, opening balance | 46,458 | 42,518 |
| Shareholder contributions | – | 125 |
| Share of net income for the year | 5,799 | 7,937 |
| Share of other comprehensive income for the year | 88 | -103 |
| Amortization and write-downs of fair value | ||
| adjustments | -93 | -112 |
| Dividends received | -496 | -1,721 |
| Acquisitions and operations acquired | 221 | 998 |
| Divestments and operations divested | -4 | – |
| Reclassifications | 172 | 272 |
| Exchange rate differences | -4,453 | -3,456 |
| Carrying value, closing balance | 47,692 | 46,458 |
The carrying value is broken down by reportable segment in Note C5 "Segment Information" and by company as follows.
| Equity participation in consolidated accounts |
Carrying value in each parent company |
|||||
|---|---|---|---|---|---|---|
| Participation | Number of | 2011 | 2010 | 2011 | 2010 | |
| Company, Corp. Reg. No., registered office | (%) | shares | SEK in millions | |||
| Parent company holdings | ||||||
| Swedish companies | ||||||
| Overseas Telecom AB, 556528-9138, Stockholm | 65 | 1,180,575 | 170 | 294 | 198 | 198 |
| 4T Sverige AB, 556857-8495, Stockholm | 25 | 25,000 | 2 | – | 2 | – |
| SNPAC Swedish Number Portability Administrative Centre AB, 556595-2925, Stockholm |
20 | 400 | 3 | 3 | 1 | 1 |
| Other operating, dormant and divested companies | 0 | 0 | 0 | 0 | ||
| Non-Swedish companies | ||||||
| OAO Telecominvest, St. Petersburg | 26 | 4,262,165 | 4,847 | 4,261 | 700 | 700 |
| Other operating, dormant and divested companies | 0 | 12 | 0 | 0 | ||
| Total parent company | 901 | 899 | ||||
| Subsidiaries' holdings | ||||||
| Swedish companies | ||||||
| Svenska UMTS-nät AB, 556606-7996, Stockholm (joint venture) | 50 | 501,000 | 255 | 621 | 875 | 875 |
| Other operating, dormant and divested companies | 0 | 0 | 0 | 0 | ||
| Non-Swedish companies | ||||||
| AS Sertifitseerimiskeskus, 10747013, Tallinn | 50 | 32 | 7 | 7 | 5 | 5 |
| Nepal Satellite Telecom Pvt. Ltd, 35048/061/62, Kathmandu | 50 | 50,000 | 174 | – | 5 | – |
| SIA Lattelecom, 00030527, Riga | 49 | 71,581,000 | 670 | 663 | 1,344 | 1,349 |
| Turkcell Holding A.S., 430991-378573, Istanbul | 47 | 214,871,670 | 12,653 | 13,931 | 1,747 | 1,758 |
| Turkcell Iletisim Hizmetleri A.S., 304844-252426, Istanbul | 14 | 308,531,984 | 6,786 | 7,447 | 1,833 | 1,845 |
| OAO MegaFon, 7812014560, Moscow | 36 | 2,207,234 | 21,956 | 19,050 | 405 | 407 |
| AUCS Communications Services v.o.f., 34097149, Hoofddorp | 33 | – | 10 | 9 | 0 | 0 |
| OCH A/S, 18936909, Copenhagen | 33 | 1,333 | 7 | 5 | 4 | 4 |
| Voicecom OÜ, 10348566, Tallinn | 26 | – | 1 | 1 | 1 | 1 |
| Glasswool Holdings Ltd., C205765, Nicosia | 25 | 1,350 | 149 | 147 | 216 | 208 |
| Suomen Numerot NUMPAC Oy, 1829232-0, Helsinki | 25 | 3,000 | 1 | 1 | 0 | 0 |
| SCF Huolto Oy, 1892276-7, Loimaa | 20 | 20 | 1 | 1 | 0 | 0 |
| Other operating, dormant and divested companies | 0 | 5 | 0 | 6 | ||
| Total Group | 47,692 | 46,458 |
The share of voting power in Overseas Telecom AB is 42 percent. OAO Telecominvest owns an additional 31 percent of the shares in OAO MegaFon. Turkcell Holding A.S. owns 51 percent of the shares in Turkcell Iletisim Hizmetleri A.S. The shares in Nepal Satellite Telecom Pvt. Ltd. are held through intermediate not wholly-owned holding companies, making the effective ownership 19 percent.
The parent company's and the subsidiaries' holdings of Other Swedish and non-Swedish operating, dormant and divested companies for the comparative year (Group carrying value SEK 17 million, carrying value in the respective parent company SEK 6 million) relate to Telefos AB, which was liquidated, and Kiinteistö Oy Pietarsaaren Isokatu 8 and Johtotieto Oy, which were divested in 2011.
The market value of the Group's direct and indirect holdings in the publicly quoted Turkcell Iletisim Hizmetleri A.S. was SEK 26,824 million and SEK 38,618 million as of December 31, 2011 and 2010, respectively.
Summarized information on the associated companies' and joint ventures' aggregate (100 percent) income statements and statements of financial position was as follows.
| January–December or December 31, |
|||||
|---|---|---|---|---|---|
| SEK in millions | 2011 | 2010 | |||
| Net sales | 95,323 | 98,646 | |||
| Gross profit | 62,361 | 65,435 | |||
| Net income | 19,058 | 23,640 | |||
| Non-current assets | 147,300 | 152,960 | |||
| Current assets | 66,113 | 58,447 | |||
| Provisions and long-term liabilities | 25,838 | 24,131 | |||
| Current liabilities | 26,758 | 25,808 |
For additional information related to associated companies and joint ventures, see Note C29 "Related Party Transactions" and Note C30 "Contingencies, Other Contractual Obligations and Litigation."
The total carrying and fair values of other non-current assets were distributed as follows.
| Dec 31, 2011 | Dec 31, 2010 | ||||
|---|---|---|---|---|---|
| SEK in millions | Carrying value | Fair value | Carrying value | Fair value | |
| Equity instruments available-for-sale | 202 | 202 | 199 | 199 | |
| Equity instruments held-for-trading | 52 | 52 | 50 | 50 | |
| Convertible bonds available-for-sale | 4 | 4 | 4 | 4 | |
| Interest rate and cross currency interest rate swaps at fair value | 1,910 | 1,910 | 1,597 | 1,597 | |
| of which designated as fair value hedges | 1,742 | 1,742 | 1,275 | 1,275 | |
| of which held-for-trading | 168 | 168 | 322 | 322 | |
| Currency swaps and forward exchange contracts held-for-trading | 2 | 2 | 3 | 3 | |
| Subtotal (see Fair value hierarchy levels – Note C26) | 2,170 | 2,170 | 1,853 | 1,853 | |
| Government bonds and treasury bills held-to-maturity | 62 | 62 | 41 | 41 | |
| Loans and receivables at amortized cost | 5,283 | 5,424 | 3,315 | 3,315 | |
| Subtotal (see Categories – Note C26) | 7,515 | 7,656 | 5,209 | 5,209 | |
| Finance lease receivables | 671 | 671 | 782 | 782 | |
| Subtotal (see Credit risk – Note C27)/Total fair value | 8,186 | 8,237 | 5,991 | 5,991 | |
| Equity instruments at cost | 52 | 52 | |||
| Deferred expenses | 709 | 641 | |||
| Total other non-current assets | 8,947 | 6,684 | |||
| of which interest-bearing | 7,007 | 4,531 | |||
| of which non-interest-bearing | 1,940 | 2,153 |
For Loans and receivables, including claims on associated companies, fair value is estimated at the present value of future cash flows discounted by applying market interest rates as of the end of the reporting period. As there had been no significant change in credit quality, Loans and receivables as of the end of the reporting period were not provided for. As of December 31, 2011, contractual cash flows for Government bonds and treasury bills and Loans and receivables represented the following expected maturities.
| Expected maturity, SEK in millions | 2013 | 2014 | 2015 | 2016 | Later years | Total |
|---|---|---|---|---|---|---|
| Government bonds and treasury bills | – | 31 | 10 | 11 | 10 | 62 |
| Loans and receivables | 2,382 | 2,409 | 34 | 25 | 433 | 5,283 |
For more information on financial instruments by category/fair value hierarchy level and exposed to credit risk, see Note C26 "Financial Assets and Liabilities by Category and Level" and section "Credit risk management" in Note C27 "Financial Risk Management," respectively. For information on leases, see Note C28 "Leasing Agreements."
The total carrying value of equity instruments is broken down by company as follows.
| Carrying/fair value in consolidated accounts |
Carrying value in each | parent company | ||||
|---|---|---|---|---|---|---|
| Participation | Number of | 2011 | 2010 | 2011 | 2010 | |
| Company, Corp. Reg. No., registered office | (%) | shares | SEK in millions | |||
| Parent company holdings | ||||||
| Swedish companies | ||||||
| Slottsbacken Fund Two KB, 969660-9875, Stockholm | 18 | – | 2 | 1 | 2 | 1 |
| Lindholmen Science Park AB, 556568-6366, Gothenburg | 9 | 90 | 3 | 3 | 3 | 3 |
| Ullna Golf AB, 556042-8095, Österåker | 1 | 3,500 | 1 | 1 | 1 | 1 |
| Other operating, dormant and divested companies | 0 | 0 | 0 | 0 | ||
| Non-Swedish companies | ||||||
| ONSET VI, L.P., 4604207, Dover, DE | 2 | – | 12 | 10 | 12 | 10 |
| Birdstep Technology ASA, 977037093, Oslo | 2 | 1,722,594 | 2 | 2 | 2 | 2 |
| Vision Extension L.P., LP180, Saint Helier, Jersey | 2 | – | 1 | 1 | 1 | 1 |
| Other operating, dormant and divested companies | 0 | 0 | 0 | 0 | ||
| Total parent company | 21 | 18 | ||||
| Subsidiaries' holdings | ||||||
| Swedish companies | ||||||
| Other operating, dormant and divested companies | 0 | 0 | 0 | |||
| Non-Swedish companies | ||||||
| Eesti Lairiba Arenduse Sihtasutus, 90010094, Tallinn | 13 | – | 1 | 1 | 1 | 1 |
| Telecom Development Company Afghanistan B.V., 34183985, | ||||||
| Amsterdam | 12 | 1,225 | 200 | 197 | 200 | 197 |
| Magma Venture Capital I Annex Fund, L.P., Cayman Islands | 7 | – | 1 | 1 | 1 | 1 |
| Oy Merinova Ab, 0778620-2, Vaasa | 6 | 800 | 1 | 1 | 1 | 1 |
| Vierumäki Golf Village Oy, 1927979-3, Helsinki | 5 | 0 | 13 | 13 | 13 | 13 |
| Diamondhead Ventures, L.P., 3145188, Menlo Park, CA | 4 | – | 7 | 10 | 7 | 10 |
| Helsinki Halli Oy, 1016235-3, Helsinki | 1 | 42 | 4 | 4 | 4 | 4 |
| Intellect Capital Ventures, L.L.C., 3173982, Los Angeles, CA | 0 | – | 28 | 26 | 28 | 26 |
| Digital Media & Communications II L.P., 3037042, Boston, MA | 0 | – | 1 | 1 | 1 | 1 |
| Asunto Oy Helsingin Oskar, 0881553-8, Helsinki | 0 | 280 | 1 | 1 | 1 | 1 |
| Holdings in other real estate and housing companies, Finland | – | – | 23 | 24 | 23 | 24 |
| Holdings in local phone companies, etc., Finland | – | – | 5 | 4 | 5 | 4 |
| Other operating, dormant and divested companies | 0 | 0 | 0 | 0 | ||
| Total Group | 306 | 301 |
After deductions for obsolescence amounting to SEK 4 million in 2011 and SEK 5 million in 2010, the total carrying value was distributed as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Goods for resale | 1,300 | 1,187 |
| Other inventories and expense incurred on construction contracts |
175 | 208 |
| Total | 1,475 | 1,395 |
Other inventories include purchased supplies that are mainly intended for use in constructing TeliaSonera's own installations and for repair and maintenance. Inventories carried at net realizable value totaled SEK 243 million in 2011 and SEK 208 million in 2010.
The total carrying value of trade and other receivables was distributed as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Currency swaps, forward exchange contracts and currency options held-for-trading |
247 | 228 |
| Subtotal (see Fair value hierarchy levels – Note C26) |
247 | 228 |
| Accounts receivable at amortized cost | 13,011 | 11,877 |
| Loans and receivables at amortized cost | 4,215 | 4,437 |
| Subtotal (see Categories – Note C26 and Credit risk – Note C27) |
17,473 | 16,542 |
| Other current receivables | 1,980 | 1,802 |
| Deferred expenses | 1,471 | 1,561 |
| Total trade and other receivables | 20,924 | 19,905 |
For Accounts receivable and Loans and receivables, including claims on associated companies, the carrying values equal fair value as the impact of discounting is insignificant. Loans and receivables mainly comprise accrued call, interconnect and roaming charges. TeliaSonera offers a diversified portfolio of mass-market services and products in a number of highly competitive markets, resulting in a limited credit risk concentration to individual markets and customers.
For Accounts receivable and Loans and receivables, as of the end of the reporting period, concentration of credit risk by geographical area and by customer segment was as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Geographical area | ||
| Nordic countries | 12,805 | 12,620 |
| Baltic countries | 1,373 | 1,136 |
| Eurasia | 1,163 | 949 |
| Other countries | 1,885 | 1,609 |
| Total carrying value | 17,226 | 16,314 |
| Customer segment | ||
| Consumers | 5,514 | 5,806 |
| Business customers | 7,213 | 6,708 |
| Other operators | 3,950 | 3,406 |
| Distributors | 549 | 394 |
| Total carrying value | 17,226 | 16,314 |
The geographic concentration to the Nordic operations reflects a relatively higher share of post-paid customer contracts. In most cases, customers are billed in local currency. Receivables from and payables to other operators for international fixed-line traffic and roaming are normally settled net through clearing-houses. Refer to Note C26 "Financial Assets and Liabilities by Category and Level" and section "Credit risk management" in Note C27 "Financial Risk Management" for more information on financial instruments classified by category/fair value hierarchy level and exposed to credit risk, respectively.
As of the end of the reporting period, allowance for doubtful and ageing of Accounts receivable, respectively, were as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Accounts receivable invoiced | 14,240 | 13,084 |
| Allowance for doubtful accounts receivable | -1,229 | -1,207 |
| Total accounts receivable | 13,011 | 11,877 |
| Accounts receivable not due | 9,117 | 8,413 |
| Accounts receivable past due but not impaired | 3,894 | 3,464 |
| of which less than 30 days | 1,717 | 1,641 |
| of which 30–180 days | 1,407 | 919 |
| of which more than 180 days | 770 | 904 |
| Total accounts receivable | 13,011 | 11,877 |
As of the end of the reporting period, ageing of Loans and receivables were as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Loans and receivables not due | 2,797 | 2,949 |
| Loans and receivables past due but not impaired | 1,418 | 1,488 |
| of which less than 30 days | 1,358 | 1,252 |
| of which 30–180 days | 56 | 59 |
| of which more than 180 days | 4 | 177 |
| Total loans and receivables | 4,215 | 4,437 |
Receivables past due as of the end of the reporting period were not provided for as there had been no significant change in credit quality and the amounts were still considered recoverable. Balances past due more than 180 days mainly referred to other operators. See also section "Credit risk management" in Note C27 "Financial Risk Management" for information on mitigation of risks related to accounts receivable.
Total bad debt expenses were SEK 508 million in 2011 and SEK 560 million in 2010. Recovered accounts receivable in these years were SEK 303 million and SEK 73 million, respectively.
The allowance for doubtful accounts receivable changed as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Opening balance | 1,207 | 1,952 |
| Charges for doubtful receivables in the period | 135 | 127 |
| Operations divested | -9 | -55 |
| Receivables written-off as uncollectible | -59 | -578 |
| Unused allowances reversed | -44 | -84 |
| Exchange rate differences | -1 | -155 |
| Closing balance | 1,229 | 1,207 |
The total carrying value of interest-bearing receivables was distributed as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Interest rate swaps and cross currency interest | ||
| rate swaps at fair value | 174 | 134 |
| of which designated as fair value hedges | – | 13 |
| of which held-for-trading | 174 | 121 |
| Subtotal | ||
| (see Fair value hierarchy levels – Note C26) | 174 | 134 |
| Short-term investments with maturities over | ||
| 3 months | 78 | 1,052 |
| of which bonds and commercial papers | ||
| held-to-maturity | 78 | 152 |
| of which bank deposits at amortized cost | – | 900 |
| Loans and receivables at amortized cost | 964 | 922 |
| Subtotal (see Categories – Note C26) | 1,216 | 2,108 |
| Finance lease receivables | 317 | 369 |
| Total (see Credit risk – Note C27) | 1,533 | 2,477 |
Carrying values for items measured at amortized cost and finance lease receivables are assumed to approximate fair values as the risk of changes in value is insignificant. Refer to Note C26 "Financial Assets and Liabilities by Category and Level" and section "Credit risk management" in Note C27 "Financial Risk Management" for more information on financial instruments classified by category/fair value hierarchy level and exposed to credit risk, respectively. For information on leases, see Note C28 "Leasing Agreements."
Cash and cash equivalents were distributed as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Short-term investments with maturities up to and | ||
| including 3 months | 7,596 | 7,383 |
| of which commercial papers held-to-maturity | 28 | – |
| of which bank deposits at amortized cost | 7,568 | 7,383 |
| Cash and bank | 5,004 | 7,961 |
| Total (see Categories – Note C26 and Credit risk | ||
| – Note C27) | 12,600 | 15,344 |
The carrying values are assumed to approximate fair values as the risk of changes in value is insignificant. Refer to Note C26 "Financial Assets and Liabilities by Category and Level" and section "Credit risk management" in Note C27 "Financial Risk Management" for more information on financial instruments
classified by category and exposed to credit risk, respectively, and to Note C30 "Contingencies, Other Contractual Obligations and Litigation" for information on blocked funds in bank accounts.
According to the articles of association of TeliaSonera AB, the authorized share capital shall amount to no less than SEK 8 billion and no more than SEK 32 billion. All issued shares have been paid in full and carry equal rights to vote and participate in the assets of the company.
Since December 31, 2005, the issued share capital changed as follows.
| Issued share capital (SEK) |
Number of issued shares |
Quotient value (SEK/share) |
|
|---|---|---|---|
| Issued share capital, December 31, 2005 | 14,960,742,621 | 4,675,232,069 | 3.20 |
| Cancellation of shares repurchased in 2005, September 6, 2006 | -591,279,539 | -184,774,856 | 3.20 |
| Issued share capital, December 31, 2006 | 14,369,463,082 | 4,490,457,213 | 3.20 |
| Issued share capital, December 31, 2007, 2008 and 2009 | 14,369,463,082 | 4,490,457,213 | 3.20 |
| Issued share capital, December 31, 2010 | 14,369,463,082 | 4,490,457,213 | 3.20 |
| Cancellation of shares repurchased in 2011, July 19, 2011 | -513,191,783 | -160,372,432 | 3.20 |
| Issued share capital, December 31, 2011 | 13,856,271,299 | 4,330,084,781 | 3.20 |
On February 18, 2011, the Board of Directors resolved, based on the authorization granted by the Annual General Meeting 2010, to repurchase a maximum of 160,373,471 shares, equivalent to a maximum of 3.6 percent of the outstanding shares, through a repurchase offer directed to TeliaSonera's shareholders. The acceptance period of the repurchase offer expired on March 25, 2011 and a total of 160,372,432 shares were repurchased in the offer. The price paid for each repurchased share was SEK 62.00 in cash and pre-tax transaction costs amounted to SEK 54 million. On April 6, the Annual General Meeting 2011 decided to reduce the share capital by cancellation of the repurchased shares. The repurchased shares were canceled on July 19, 2011.
As of December 31, 2011, no TeliaSonera shares were held by the company itself or by its subsidiaries.
The inflation adjustment reserve refers to TeliaSonera's operations in Turkey. As of January 1, 2006, the Turkish economy is from an accounting perspective no longer considered to be hyperinflationary.
Exchange rate differences in non-controlling interests changed as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Opening balance | -605 | -145 |
| Translation of foreign operations | -120 | -460 |
| Closing balance | -725 | -605 |
Non-controlling interests were distributed as follows (including intermediate holding companies, where applicable).
| January–December or December 31, | |||||
|---|---|---|---|---|---|
| Net income | Equity | ||||
| Non-controlling | SEK in millions | ||||
| interest (%) | 2011 | 2010 | 2011 | 2010 | |
| DLG Tele I/S, Denmark | 50.00 | 48 | 39 | 31 | 28 |
| TEO LT, AB, Lithuania | 31.71 | 128 | 142 | 855 | 855 |
| Latvijas Mobilais Telefons SIA, Latvia | 39.73 | 134 | 160 | 594 | 607 |
| Fintur Holdings B.V., the Netherlands | 25.68 | 2,208 | 2,027 | 5,224 | 4,587 |
| Central Asian Telecommunications Development B.V., | |||||
| the Netherlands | 40.00 | 63 | 78 | 261 | 225 |
| TeliaSonera Asia Holding B.V., the Netherlands | 24.55 | 148 | -147 | 370 | 435 |
| Other subsidiaries | – | 2 | 6 | 18 | 21 |
| Total non-controlling interests | 2,731 | 2,305 | 7,353 | 6,758 |
In 2011, the non-controlling interest in TEO was reduced from 31.92 percent. Fintur Holdings has direct and indirect noncontrolling interests in its subsidiaries TOO GSM Kazakhstan (Kcell) in Kazakhstan (49 percent) and Azercell Telekom B.M. in Azerbaijan (48.7 percent), while Geocell LLC in Georgia and Moldcell S.A. in Moldova are wholly-owned subsidiaries.
For information on contracted future changes of ownership in GSM Kazakhstan, see section "Other unrecognized contractual obligations" in Note 30 "Contingencies, Other Contractual Obligations and Litigation." In Tajikistan, Central Asian Telecommunications Development has a 1 percent non-controlling interest in its subsidiary ZAO Indigo Somoncom (Tcell), while
ZAO Indigo Tadzhikistan (Tcell) is a wholly-owned subsidiary. In Nepal, TeliaSonera Asia Holding has an indirect 20 percent non-controlling interest in its subsidiary Ncell Pvt. Ltd.
Based on a put option granted, the non-controlling interest in Azercell is accounting-wise reduced to 6.7 percent. Similarly, based on a put option granted on 6 percent of the share capital, OOO Coscom (Ucell) in Uzbekistan is accounting-wise treated as a wholly-owned subsidiary of TeliaSonera Uzbek Telecom Holding B.V. in the Netherlands (for further information, see section "Put options and contingent consideration" in Note C23 "Other Provisions").
| Jan–Dec 2011 |
Jan–Dec 2010 |
|
|---|---|---|
| Net income attributable to owners of the parent (SEK million) |
18,341 | 21,257 |
| Average number of outstanding shares, basic and diluted (thousands) |
4,366,992 | 4,490,457 |
| Earnings per outstanding share, basic and diluted (SEK) |
4.20 | 4.73 |
| Ordinary cash dividend (for 2011 as pro posed by the Board of Directors) |
||
| – Per share (SEK) | 2.85 | 2.75 |
| – Total (SEK million) | 12,341 | 12,349 |
TeliaSonera's open-market financing (excluding debt derivatives) entails the following programs.
| Dec 31, 2011 | Dec 31, 2010 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Interest rate type | Average | |||||||||
| Limit | Limit | Utilized | Floating | Fixed maturity | Limit | Utilized | ||||
| Program | Characteristics | currency | (in millions) (years) |
(in millions) | ||||||
| TeliaSonera AB | Euro Medium Term Note (EMTN) |
Uncommitted Interna tional, Long-term |
EUR | 10,000 | 8,121 | 1,700 | 6,421 | 5.7 | 9,000 | 6,511 |
| TeliaSonera AB | Euro Commercial Paper (ECP) |
Uncommitted Interna tional, Short-term |
EUR | 1,000 | – | – | – | – | 1,000 | – |
| TeliaSonera AB | Flexible Term Note (FTN) |
Uncommitted Swed ish domestic,Short term and long-term |
SEK | 12,000 | – | – | – | – | 12,000 | – |
Long-term and short-term borrowings were distributed as follows.
| Dec 31, 2011 | Dec 31, 2010 | ||||
|---|---|---|---|---|---|
| SEK in millions | Carrying value | Fair value | Carrying value | Fair value | |
| Long-term borrowings | |||||
| Open-market financing program borrowings in fair value hedge relationships | 17,896 | 17,896 | 9,342 | 9,342 | |
| Interest rate swaps at fair value | 421 | 421 | 276 | 276 | |
| of which designated as hedging instruments | 377 | 377 | 252 | 252 | |
| of which held-for-trading | 44 | 44 | 24 | 24 | |
| Cross currency interest rate swaps at fair value | 1,005 | 1,005 | 1,448 | 1,448 | |
| of which hedging net investments | 41 | 41 | – | – | |
| of which designated as hedging instruments | – | – | 4 | 4 | |
| of which held-for-trading | 964 | 964 | 1,444 | 1,444 | |
| Subtotal (see Fair value hierarchy levels – Note C26) | 19,322 | 19,322 | 11,066 | 11,066 | |
| Open-market financing program borrowings | 46,958 | 53,396 | 46,935 | 49,948 | |
| of which hedging net investments | 33,377 | 38,868 | 26,731 | 28,760 | |
| of which at amortized cost | 13,581 | 14,528 | 20,204 | 21,188 | |
| Other borrowings at amortized cost | 1,755 | 1,756 | 2,478 | 2,478 | |
| Subtotal (see Categories – Note C26) | 68,035 | 74,474 | 60,479 | 63,492 | |
| Finance lease agreements | 73 | 73 | 84 | 84 | |
| Total long-term borrowings | 68,108 | 74,547 | 60,563 | 63,576 | |
| Short-term borrowings | |||||
| Open-market financing program borrowings in fair value hedge relationships | – | – | 464 | 464 | |
| Interest rate swaps designated as hedging instruments | 8 | 8 | 7 | 7 | |
| Cross currency interest rate swaps held-for trading | 655 | 655 | – | – | |
| Subtotal (see Fair value hierarchy levels – Note C26) | 663 | 663 | 471 | 471 | |
| Utilized bank overdraft and short-term credit facilities at amortized cost | 246 | 246 | 71 | 71 | |
| Open-market financing program borrowings | 9,713 | 9,754 | 3,983 | 3,995 | |
| of which hedging net investments | 5,050 | 5,073 | – | – | |
| of which at amortized cost | 4,663 | 4,681 | 3,983 | 3,995 | |
| Other borrowings at amortized cost | 1,106 | 1,107 | 330 | 330 | |
| Subtotal (see Categories – Note C26) | 11,728 | 11,770 | 4,855 | 4,867 | |
| Finance lease agreements | 6 | 6 | 18 | 18 | |
| Total short-term borrowings | 11,734 | 11,776 | 4,873 | 4,885 |
Normally, borrowings by TeliaSonera AB denominated in foreign currencies are swapped into SEK. The exceptions typically include funds borrowed to finance the Group's international ventures or selective hedging of net investments abroad. As of December 31, 2011, long-term borrowings hedging net investments included borrowings also included in fair value hedge relationships. These loans have final maturities in 2014 (SEK 2,751 million) and after 2016 (SEK 4,828 million).
The nominal value of TeliaSonera AB's portfolio of interest rate swaps and cross currency interest rate swaps as of the end of the reporting period was as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Nominal portfolio value | 72,000 | 59,000 |
| of which intended for overall management of the funding portfolio structure and hence not |
||
| included in hedge relationships | 300 | 300 |
Refer to Note C26 "Financial Assets and Liabilities by Category and Level" for more information on financial instruments classified by category/fair value hierarchy level and to Note C27 "Financial Risk Management" for information on maturities and management of liquidity risk, currency risk, interest rate risk and financing risk, respectively.
Total assets (provisions) for pension obligations were as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Present value of funded pension obligations | 21,889 | 20,069 |
| Fair value of plan assets | -19,774 | -19,840 |
| Deficit of funded plans | 2,115 | 229 |
| Present value of unfunded pension obligations | 1,053 | 946 |
| Total pension obligations less plan assets | ||
| (funded status) | 3,168 | 1,175 |
| Unrecognized past service cost | -37 | -41 |
| Unrecognized actuarial gains (+)/losses (−) | -3,132 | -645 |
| Net assets (-)/provisions (+) for pension | ||
| obligations | -1 | 489 |
| of which recognized as provisions | 1,030 | 757 |
| of which recognized as assets | -1,031 | -268 |
For comments, see section "Pension obligation risk" in Note C27 "Financial Risk Management."
Total pension expenses were distributed as follows.
| SEK in millions | Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Current service cost | 424 | 451 |
| Interest cost | 962 | 928 |
| Expected return on plan assets | -971 | -935 |
| Curtailment of pension obligations | -38 | – |
| Amortization of past service cost | -2 | -13 |
| Amortization of actuarial gains (−)/losses (+) | 7 | 120 |
| Pension expenses, defined benefit pension | ||
| plans | 382 | 551 |
| Settlement of pension obligations | – | -3 |
| Termination benefits (excl. premiums and | ||
| pension-related social charges) | 170 | 42 |
| Pension premiums, defined benefit/defined contribution pension plans and pay-as-you-go |
||
| systems | 583 | 640 |
| Pension-related social charges and taxes, other pension expenses |
164 | 197 |
| Less termination benefits (incl. premiums and pension-related social charges) reported as |
||
| restructuring charges | -220 | -73 |
| Total pension expenses | 1,079 | 1,354 |
| of which pension premiums paid to the ITP pension plan |
74 | 120 |
The actuarial calculation of pension obligations and pension expenses is based on the following principal assumptions, each presented as a weighted average for the different pension plans.
| Percentages, except remaining working life | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Discount rate | 4.0 | 4.7 |
| Expected rate of compensation increase | 3.2 | 3.2 |
| Employee turnover rate | 2.9 | 2.9 |
| Average expected remaining working life, years | 13.3 | 14.7 |
| Increase in income base amount | ||
| (only for Swedish entities) | 2.8 | 2.8 |
| Annual adjustments to pensions | 2.0 | 2.0 |
| Expected return on plan assets | 4.6 | 4.9 |
Changes in present value of pension obligations, fair value of plan assets, net assets (net provisions) for pension obligations and actuarial net gains or losses for the defined benefit pension plans were as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Present value of pension obligations | ||
| Opening balance | 21,015 | 23,503 |
| Current service cost | 424 | 451 |
| Interest cost | 962 | 928 |
| Benefits paid | -1,167 | -1,175 |
| Benefits paid, early retirement | -14 | -15 |
| Termination benefits | 170 | 42 |
| Reclassifications | − | 59 |
| Curtailment of pension obligations | -57 | – |
| Settlement of pension obligations | − | -38 |
| Actuarial gains (–)/losses (+) | 1,629 | -2,311 |
| Exchange rate differences | -20 | -429 |
| Closing balance, present value of pension | ||
| obligations | 22,942 | 21,015 |
| Fair value of plan assets | ||
| Opening balance | 19,840 | 19,401 |
| Expected return on plan assets | 971 | 935 |
| Contribution to pension funds | 87 | 83 |
| Payment from pension funds | -221 | -900 |
| Operations acquired/divested | -9 | -20 |
| Actuarial gains (+)/losses (–) | -877 | 761 |
| Exchange rate differences | -17 | -420 |
| Closing balance, plan assets | 19,774 | 19,840 |
| Return on plan assets | ||
| Expected return on plan assets | 971 | 935 |
| Actuarial gains (+)/losses (–) | -877 | 761 |
| Actual return on plan assets | 94 | 1,696 |
| Net assets/provisions for pension obligations | ||
| Opening balance | 489 | 179 |
| Pension expenses, defined benefit pension plans | 382 | 551 |
| Benefits paid | -1,167 | -1,175 |
| Benefits paid, early retirement | -14 | -15 |
| Contribution to pension funds | -87 | -83 |
| Payment from pension funds | 221 | 900 |
| Termination benefits | 170 | 42 |
| Operations acquired/divested, net | − | 3 |
| Reclassifications | − | 59 |
| Exchange rate differences | 5 | 28 |
| Closing balance, net assets (–)/provisions (+) | ||
| for pension obligations | -1 | 489 |
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Unrecognized actuarial gains/losses | ||
| Opening balance, actuarial gains (+)/losses (-) | -645 | -3,890 |
| Actuarial gains (-)/losses (+) to be recognized | 7 | 120 |
| Actuarial gains (-)/losses (+), settlement of pen sion obligations |
7 | − |
| Actuarial gains (-)/losses (+), acquired/divested | ||
| operations | 1 | 15 |
| Actuarial gains (+)/losses (-), pension obligations | -1,629 | 2,311 |
| Actuarial gains (+)/losses (-), plan assets | -877 | 761 |
| Exchange rate differences | 4 | 38 |
| Closing balance, unrecognized actuarial gains (+)/losses (-) |
-3,132 | -645 |
| Operations divested | ||
| Decrease in pension obligations | − | -38 |
| Decrease in plan assets | 9 | 20 |
| Change in unrecognized | ||
| actuarial gains (–)/losses (+) | 1 | 15 |
| Net position, operations divested | 10 | -3 |
As of the end of the reporting period, plan assets were allocated as follows.
| Dec 31, 2011 | Dec 31, 2010 | ||||
|---|---|---|---|---|---|
| Asset category | SEK in millions Percent |
SEK in millions Percent |
|||
| Fixed income instruments, | |||||
| liquidity | 10,021 | 50.7 | 9,933 | 50.1 | |
| Shares and other investments | 9,753 | 49.3 | 9,907 | 49.9 | |
| Total | 19,774 | 100.0 | 19,840 | 100.0 | |
| of which shares in | |||||
| TeliaSonera AB | 84 | 0.4 | 99 | 0.5 |
In the last 5-year period, trends for the defined benefit plans were as follows.
| SEK in millions, except percentages | Dec 31, 2011 | Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 | |||
|---|---|---|---|---|---|
| Plan liabilities | 22,942 | 21,015 | 23,503 | 22,814 | 20,807 |
| Plan assets | -19,774 | -19,840 | -19,401 | -18,068 | -19,265 |
| Deficit (funded status) | 3,168 | 1,175 | 4,102 | 4,746 | 1,542 |
| Plan liabilities | |||||
| Experience adjustments arising on plan liabilities (%) | 0.9 | 2.6 | -1.0 | -0.2 | 0.6 |
| Effects of changes in actuarial assumptions (%) | -8.0 | 8.4 | -1.1 | -4.6 | 6.5 |
| Plan assets | |||||
| Experience adjustments arising on plan assets (%) | -4.4 | 4.0 | 7.8 | -13.6 | -1.4 |
| Actual return on plan assets (%) | 0.5 | 8.9 | 12.5 | -8.5 | 3.1 |
For companies in Sweden, pension liabilities are secured also by pension credit insurance. This means that, should the net provision for pension obligations increase, each company can choose if and when to contribute to the pension fund or otherwise to recognize a provision. To pension funds outside Sweden, TeliaSonera expects to contribute SEK 94 million in 2012.
Changes in other provisions were as follows.
| December 31, 2011 | |||||||
|---|---|---|---|---|---|---|---|
| SEK in millions | Put options and contingent consideration |
Restructuring provisions |
Asset retirement obligations |
Warranty provisions |
Other provisions |
Total | |
| Opening balance | 6,920 | 522 | 2,668 | 263 | 424 | 10,797 | |
| of which financial liabilities at amortized cost | – | – | – | 4 | – | 4 | |
| Provisions for the period | 54 | 958 | 323 | 0 | 37 | 1,372 | |
| Utilized provisions | -8 | -694 | -85 | -10 | -115 | -912 | |
| Reversals of provisions | – | -28 | -772 | -0 | -97 | -897 | |
| Reclassifications | -107 | -220 | − | -37 | 139 | -225 | |
| Timing and interest-rate effects | 44 | 1 | 57 | − | − | 102 | |
| Exchange rate differences | 186 | -1 | -3 | 2 | − | 184 | |
| Closing balance | 7,089 | 538 | 2,188 | 218 | 388 | 10,421 | |
| of which non-current portion | 7,077 | 112 | 2,182 | 214 | 111 | 9,696 | |
| of which current portion of which financial liabilities at amortized cost |
12 | 426 | 6 | 4 | 277 | 725 | |
| (see Categories – Note C26) | – | – | – | 4 | – | 4 |
For financial liabilities, the carrying value equals fair value as provisions are discounted to present value. Refer to Note C26 "Financial Assets and Liabilities by Category and Level" for more information on financial instruments classified by category. As of December 31, 2011, contractual undiscounted cash flows for the financial liabilities represented the following expected maturities. Expected maturity refers to the earliest point in time, based on the agreement terms, at which the counterpart might call for settlement.
| Expected maturity | Jan–Mar | Apr–Jun | Jul– Dec | Later | Total | Carrying |
|---|---|---|---|---|---|---|
| SEK in millions | 2012 | 2012 | 2012 | years | value | |
| Financial liabilities | – | 4 | – | – | 4 | 4 |
The non-current portion of provisions for put options and contingent consideration relates to Xfera Móviles S.A. (Xfera), Azertel Telekomünikasyon Yatirim ve Dis Ticaret A.S. (Azertel) and TeliaSonera Uzbek Telecom Holding B.V. (Uzbek Holding).
For Xfera, which was acquired in 2006, the closing balance comprises in total SEK 1,408 million referring to contingent additional consideration to the selling shareholders based on an up to 20 year earn-out model and to a put option giving existing holders of non-controlling interests the right to sell their shares to TeliaSonera after 5 years, of which at least 2 consecutive years of net profit. The provisions represent the present value of management's best estimate of the amounts required to settle the liabilities. The estimate for the earn-out model has been made based on the Xfera 10-year business plan, using a post-tax discount rate (WACC ) of 8.4 percent and a terminal growth rate of free cash flow of 2.0 percent. The amounts and timing may vary as a result of changes in Xfera's operations and profitability compared to the business plan. The estimate for the put option liability has been made based on assumptions about the timing of the option exercise and about the fair value of Xfera at that date and the provision may
vary as a result of changes in Xfera's estimated fair value and the timing of the option exercise.
For Azertel, the parent company of the mobile operator Azercell Telekom B.M. (Azercell) in Azerbaijan, the closing balance comprises SEK 5,174 million for a put option granted in 2008 in conjunction with the privatization of Azercell, now wholly-owned by Azertel. Should a deadlock regarding material decisions at the general assembly arise, the resolution supported by TeliaSonera will apply. In such circumstances, the put option gives the largest holder of non-controlling interests the right to sell its 42 percent holding in Azertel to TeliaSonera. The exercise price is equal to the fair value at the time of exercise and is to be determined by independent appraisal. The provision represents the present value of management's best estimate of the amount required to settle the liability. The estimate of Azertel's fair value has been made based on the Azercell 10-year business plan with a post-tax discount rate (WACC) of 15.0 percent and a terminal growth rate of free cash flow of 6.0 percent. The provision may vary as a result of changes in Azertel's estimated fair value and the timing of the option exercise.
For Uzbek Holding, the parent company of the mobile operator OOO Coscom in Uzbekistan, the closing balance comprises SEK 495 million for a put option originally granted in 2007 in conjunction with the acquisition of a 3G license, frequencies and number blocks in Uzbekistan in exchange for cash and a 26 percent interest in Uzbek Holding. The put option gave the existing holder of the non-controlling interest the right to sell its 26 percent interest in Uzbek Holding to TeliaSonera. On February 2, 2010, TeliaSonera acquired 20 percent of the shares in Uzbek Holding resulting in a total holding of 94 percent. Following this transaction, the terms of the put option were amended. The put option refers to 6 percent of the shares and is exercisable after February 15, 2013. The exercise price is equal to the higher of either a fixed amount or the fair value at the time of exercise as determined by independent appraisal. The provision represents the present value of management's best estimate of the amount required to settle the liability. The estimate has been made based on
assumptions about the timing of the option exercise and about the fair value of Uzbek Holding at that date, using the Coscom 10-year business plan with a post-tax discount rate (WACC) of 18.8 percent and a terminal growth rate of free cash flow of 7.2 percent. The provision may vary as a result of changes in Uzbek Holding's estimated fair value and the timing of the option exercise.
Fair values for the put option liabilities and the contingent consideration are based on TeliaSonera's long-term business plans for such business units. During the downturn in the world economy, the global equity market values have decreased and, if applied to TeliaSonera's business units through a peer group multiple valuation, would in some cases be below the fair values derived from TeliaSonera's own longterm business plans. Management believes that fair value based on its own business plans gives a better picture of the value for TeliaSonera and of the long-term valuation, compared to the current equity market values.
Changes in restructuring provisions were as follows.
| December 31, 2011 or January–December 2011 | |||||||
|---|---|---|---|---|---|---|---|
| SEK in millions | OPEX savings programs |
Danish operations |
International carrier operations |
Total | |||
| Carrying value, opening balance | 451 | 16 | 55 | 522 | |||
| Provisions for the period | 958 | – | – | 958 | |||
| Utilized provisions (cash outflow) | -672 | -4 | -18 | -694 | |||
| Reversals of provisions | – | − | -28 | -28 | |||
| Reclassification to pension liability | -220 | – | – | -220 | |||
| Timing and interest-rate effects | – | – | 1 | 1 | |||
| Exchange rate differences | -1 | – | – | -1 | |||
| Carrying value, closing balance | 516 | 12 | 10 | 538 | |||
| of which current portion | 422 | 4 | – | 426 | |||
| Cash outflow during the year | -672 | -4 | -18 | -694 | |||
| Cash outflow in prior years | -3,301 | -801 | -2,677 | -6,779 | |||
| Total cash outflow | -3,973 | -805 | -2,695 | -7,473 |
The restructuring provisions represent the present value of management's best estimate of the amounts required to settle the liabilities. The estimates may vary as a result of changes in the actual number of months an employee is staying in redeployment before leaving and in the actual outcome of negotiations with lessors, sub-contractors and other external counterparts as well as the timing of such changes.
In the Swedish and Finnish operations, management in 2005 and in 2008 launched transition programs to keep the profitability by achieving competitive cost levels and focusing of the service offerings. The 2008 program included efficiency measures implemented in 2008 and 2009 aiming, among other things, at a reduction of approximately 2,900 employees in Sweden and Finland. As group-wide initiatives, the programs have been completed, but transition activities continued in 2010 and 2011 on business area level. The remaining provision as of December 31, 2011 is expected to be fully utilized by 2013.
Several restructuring measures have been taken in relation to TeliaSonera's Danish operations: in 2002 in connection with focusing the Danish fixed network operations; in 2004 in connection with the acquisition of Orange Denmark to realize synergy gains from the acquisition; in 2005 in connection
with integrating the mobile operations and the fixed network operations; and in 2006 in connection with further efficiency measures. The remaining provision as of December 31, 2011 mainly relates to the phase-out of long-term lease contracts and is expected to be fully utilized by 2016.
In 2002, TeliaSonera decided to change the strategic focus of Telia International Carrier and significantly restructure its operations. As part of the restructuring program, management decided to close down the Asian operations as well as its domestic voice reseller business in the United Kingdom and Germany, discontinue offering domestic network services in the United States and terminate its co-location business. The sales, administration and customer care resources were also centralized and the workforce was reduced by more than 50 percent, mainly in 2002 and 2003. Further, to realize post-merger synergy gains, management in 2003 decided to integrate the international carrier operations previously run separately by Telia and Sonera. Overlapping operations were phased out and the traffic was moved over from leased capacity to the wholly-owned network. Parts of Sonera's operations in the United Kingdom, the United States, Sweden and Germany were closed down. The remaining provision as of December 31, 2011 mainly relates to the phase-out of long-term lease contracts and is expected to be fully utilized by 2020.
Asset retirement obligations mainly refer to handling hazardous waste such as worn-out telephone poles impregnated with creosote or arsenic and to dismantling and restoration of mobile and fixed network sites. Remaining provisions as of December 31, 2011 are expected to be fully utilized in the period 2019-2060, depending on factors such as any contractual renewal options for site leases and dismantling plans decided by management.
Warranty provisions mainly comprise estimated future expenses for warranties related to products and services sold. Full utilization of these provisions is expected in the period 2012-2013.
Other provisions include provisions for damages and court cases, for payroll taxes on future pension payments and for onerous and other loss-making contracts, and insurance provisions as well as estimated expenses related to fulfilling representations made and warranties given and to potential litigation, etc. in connection with disposals and winding-up of group entities, associated companies and other equity holdings. Full utilization of these provisions is expected in the period 2012-2024. This item included a guarantee commitment on behalf of the minority held Ipse 2000 S.p.A., referring to Ipse's remaining obligations in Italy and for which TeliaSonera also gave cash collateral (see Note C30 "Contingencies, Other Contractual Obligations and Litigation"). The provision was reversed in 2011.
The provisions represent the present value of management's best estimate of the amounts required to settle the liabilities. The estimates may vary mostly as a result of changes in tax and other legislation, in the actual outcome of negotiations with counterparts and in actual customer behavior as well as the timing of such changes.
Other long-term non-interest-bearing liabilities were distributed as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Danish license fee liabilities at amortized cost | 206 | 239 |
| Other liabilities at amortized cost | 4 | 39 |
| Liabilities at amortized cost | ||
| (see Categories – Note C26) | 210 | 278 |
| Prepaid operating lease agreements | 422 | 464 |
| Other liabilities | 777 | 851 |
| Total other long-term liabilities | 1,409 | 1,593 |
For Liabilities at amortized cost, the carrying value approximates fair value as the impact of discounting using market interest rates at the end of the reporting period was insignificant. Refer to Note C26 "Financial Assets and Liabilities by Category and Level" for more information on financial instruments classified by category and to Note C27 "Financial Risk Management" on management of liquidity risk.
As of December 31, 2011, contractual undiscounted cash flows for liabilities at amortized cost represented the following expected maturities.
| Expected maturity SEK in millions |
2013 | 2014 | 2015 | 2016 | Later years |
Total | Carry ing value |
|---|---|---|---|---|---|---|---|
| Liabilities at | |||||||
| amortized cost | 41 | 41 | 41 | 41 | 83 | 247 | 210 |
For information on leases, see Note C28 "Leasing Agreements." Other liabilities mainly comprise customer advances for broadband build-out. Further included was deferred "day 1 gains" which changed as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Opening balance | 465 | 418 |
| Additional gains | 124 | 127 |
| Recognized in net income | -18 | -19 |
| Exchange rate differences | -4 | -61 |
| Closing balance | 567 | 465 |
| of which current portion | 363 | 259 |
Trade payables and other current liabilities were distributed as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Currency swaps, forward exchange contracts and currency options held-for-trading |
577 | 1,048 |
| Subtotal (see Fair value hierarchy levels – Note C26) |
577 | 1,048 |
| Accounts payable at amortized cost | 8,904 | 8,573 |
| Current liabilities at amortized cost | 2,202 | 3,398 |
| Subtotal (see Categories – Note C26) | 11,683 | 13,019 |
| Other current liabilities | 6,943 | 6,874 |
| Deferred income | 4,765 | 4,993 |
| Total trade payables and other current liabilities | 23,391 | 24,886 |
For Accounts payable and Current liabilities, the carrying value equals fair value as the impact of discounting is insignificant. Refer to Note C26 "Financial Assets and Liabilities by Category and Level" for more information on financial instruments classified by category/fair value hierarchy level and to Note C27 "Financial Risk Management" on management of liquidity risk. As of December 31, 2011, contractual cash flows for liabilities at amortized cost represented the following expected maturities.
| Expected maturity | Jan–Mar | Apr–Jun | Jul–Sep | Oct–Dec | Total |
|---|---|---|---|---|---|
| SEK in millions | 2012 | 2012 | 2012 | 2012 | |
| Liabilities at amortized cost |
9,989 | 887 | 178 | 52 | 11,106 |
Corresponding information for currency derivatives held-fortrading are presented in section "Liquidity risk management" to Note C27 "Financial Risk Management."
The main components of Current liabilities are accrued payables to suppliers and accrued interconnect and roaming charges, while Other current liabilities mainly entail valueadded tax, advances from customers and accruals of payroll expenses and social security contributions. Deferred income chiefly relate to subscription and other telecom charges. Included is also the current portion of deferred "day 1 gains" (refer to Note C24 "Other Long-term Liabilities").
Carrying values of classes of financial assets and liabilities were distributed by category as follows. Excluded are financial instruments which are discussed in Note C15 "Investments in Associated Companies and Joint Ventures," Note C22 "Provisions for Pensions and Employment Contracts" and Note C28 "Leasing Agreements," respectively.
| SEK in millions | Note | Dec 31, 2011 | Dec 31, 2010 |
|---|---|---|---|
| Financial assets | |||
| Derivatives designated as hedging instruments | C16, C19 | 1,742 | 1,288 |
| Financial assets at fair value through profit and loss | 643 | 724 | |
| of which derivatives not designated as hedging instruments | C16, C18, C19 | 591 | 674 |
| of which held-for-trading investments | C16 | 52 | 50 |
| Held-to-maturity investments | C16, C19 | 168 | 193 |
| Loans and receivables | C16, C18, C19 | 36,045 | 36,795 |
| Available-for-sale financial assets | C16 | 206 | 203 |
| Total financial assets by category | 38,804 | 39,203 | |
| Financial liabilities | |||
| Derivatives designated as hedging instruments | C21 | 426 | 263 |
| Derivatives not designated as hedging instruments | C21, C25 | 2,240 | 2,516 |
| Borrowings in fair value hedge relationships | C21 | 17,896 | 9,806 |
| Borrowings hedging net investments | C21 | 38,427 | 26,731 |
| Financial liabilities measured at amortized cost | C21, C23, C24, C25 | 32,671 | 39,319 |
| Total financial liabilities by category | 91,660 | 78,635 |
The carrying values of classes of financial assets and liabilities measured at fair value were distributed by fair value hierarchy level as follows.
| December 31, 2011 | December 31, 2010 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Carrying | of which | Carrying | of which | ||||||
| SEK in millions | Note | value | Level 1 | Level 2 | Level 3 | value | Level 1 | Level 2 | Level 3 |
| Financial assets at fair value | |||||||||
| Equity instruments available-for-sale | C16 | 202 | 2 | – | 200 | 199 | 2 | – | 197 |
| Equity instruments held-for-trading | C16 | 52 | – | – | 52 | 50 | – | – | 50 |
| Convertible bonds available-for-sale | C16 | 4 | – | – | 4 | 4 | – | – | 4 |
| Derivatives designated as hedging instruments | C16, C19 | 1,742 | – | 1,742 | – | 1,288 | – | 1,288 | – |
| Derivatives held-for-trading | C16, C18, C19 | 591 | – | 591 | – | 674 | – | 674 | – |
| Total financial assets at fair value by level | 2,591 | 2 | 2,333 | 256 | 2,215 | 2 | 1,962 | 251 | |
| Financial liabilities at fair value | |||||||||
| Borrowings in fair value hedge relationships | C21 | 17,896 | – | 17,896 | – | 9,806 | – | 9,806 | – |
| Derivatives designated as hedging instruments | C21 | 426 | – | 426 | – | 263 | – | 263 | – |
| Derivatives held-for-trading | C21, C25 | 2,240 | – | 2,240 | – | 2,516 | – | 2,516 | – |
| Total financial liabilities at fair value by level | 20,562 | – | 20,562 | – | 12,585 | – | 12,585 | – |
There were no transfers between Level 1 and 2 in 2011 and 2010. Level 3 financial assets changed as follows.
| December 31, 2011 | December 31, 2010 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| SEK in millions | Equity in struments available for-sale |
Equity in struments held-for trading |
Convert ible bonds available for-sale |
Total | Equity in struments available for-sale |
Equity in struments held-for trading |
Convert ible bonds available for-sale |
Total | |
| Level 3, opening balance | 197 | 50 | 4 | 251 | 209 | 57 | 4 | 270 | |
| Changes in fair value | – | -10 | − | -10 | – | -5 | – | -5 | |
| of which recognized in net income of which related to assets held at |
– | -10 | – | -10 | – | -5 | – | -5 | |
| reporting period-end | – | -10 | − | -10 | – | -5 | – | -5 | |
| Purchases/capital contributions | – | 13 | − | 13 | – | 5 | – | 5 | |
| Exchange rate differences | 3 | -1 | − | 2 | -12 | -7 | – | -19 | |
| Level 3, closing balance | 200 | 52 | 4 | 256 | 197 | 50 | 4 | 251 |
Changes in fair value recognized in net income are included in line item Other financial items, see specification in Note C10 "Finance Costs and Other Financial Items."
Principles of financing and financial risk management
TeliaSonera's financing and financial risks are managed under the control and supervision of the Board of Directors of TeliaSonera AB. Financial management is centralized within the Group Treasury unit of TeliaSonera AB, which functions as TeliaSonera's internal bank and is responsible for the management of financing and financial risks.
Group Treasury is responsible for Group-wide financial risk management including netting and pooling of capital requirements and payment flows. Group Treasury also seeks to optimize the cost of financial risk management, which in certain cases may mean that e.g. an intercompany transaction is not replicated with an identical transaction outside the Group or that derivative transactions are initiated in order to adjust e.g. the overall interest rate duration of the debt portfolio, e.g. through overlay-swaps, if deemed appropriate. This means that situations may arise in which certain derivative transactions with parties outside the Group do not fully satisfy the requirements for hedge accounting, and thus any shift in market value will affect the financial net.
Regarding foreign currency transaction exposure, Group Treasury has a clearly defined deviation mandate which is capped at the equivalent of a nominal SEK +/-500 million, expressed as the long/short SEK counter-value amount that may be exposed to currency fluctuations.
SEK is the functional currency of TeliaSonera AB. Its borrowings are therefore normally denominated in, or swapped into, SEK unless linked to international operations or allocated as hedging of net investments abroad.
TeliaSonera's capital structure and dividend policy is decided by the Board of Directors. TeliaSonera shall target a solid investment grade long-term credit rating (A- to BBB+) to secure the company's strategically important financial flexibility for investments in future growth, both organically and by acquisitions.
The ordinary dividend shall be at least 50 percent of net income attributable to owners of the parent company. In addition, excess capital shall be returned to shareholders, after the Board of Directors has taken into consideration the company's cash at hand, cash flow projections and investment plans in a medium term perspective, as well as capital market conditions.
TeliaSonera AB is not subject to any externally imposed capital requirements.
TeliaSonera's exposure to credit risk arises from default of counterparts (including price risks as regards investments in equity instruments), with a maximum exposure equal to the carrying amount of these instruments (detailed in the respective note), as follows.
| SEK in millions | Note | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|---|
| Other non-current assets | C16 | 8,186 | 5,991 |
| Trade and other receivables | C18 | 17,473 | 16,542 |
| Interest-bearing receivables | C19 | 1,533 | 2,477 |
| Cash and cash equivalents | C19 | 12,600 | 15,344 |
| Total | 39,792 | 40,354 |
When entering into financial transactions such as interest rate swaps, cross currency swaps and other transactions in derivatives, TeliaSonera AB accepts only creditworthy counterparts with a solid investment grade rating. TeliaSonera AB requires each counterpart to have an approved rating and an International Swaps and Derivatives Association, Inc. (ISDA) agreement. The permitted exposure to each counterpart when entering into a financial transaction depends on the rating of that counterpart. As of the end of the reporting period, the aggregate exposure to counterparts in derivatives was distributed by counterpart long-term rating with Standard & Poor's as follows. In line with recommendations issued by the Basel Committee on Banking Supervision, exposures are calculated as the net claim on each counterpart with an add-on amount intended to give a margin for a potential future exposure.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Counterpart rating AA− | 238 | 355 |
| Counterpart rating A+ | 584 | 433 |
| Counterpart rating A | 1,195 | 402 |
| Counterpart rating BBB+ | 36 | – |
| Total exposure to counterparts in derivatives | 2,053 | 1,190 |
The credit risk with respect to TeliaSonera's trade receivables is diversified geographically and among a large number of customers, private individuals as well as companies in various industries. Solvency information is required for credit sales to minimize the risk of bad debt losses and is based on groupinternal information on payment behavior, if necessary supplemented by credit and business information from external sources. Bad debt expense in relation to consolidated net sales was approximately 0.5 percent in 2011 and 0.5 percent in 2010.
Surplus cash in TeliaSonera AB may only be invested in bank deposits, commercial papers issued by banks and/or in Swedish, Finnish, Norwegian or Danish government bonds and treasury bills. There are no limits for investments in government papers. For investments with banks, the rating should be at least A-1 (Standard & Poor's) or P-1 (Moody's) and the maturity is limited to 12 months. Furthermore, for maturities longer than 1 month, the exposure per bank is limited to SEK 2,500 million.
Liquidity risk is the risk that TeliaSonera will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. TeliaSonera has internal control processes and contingency plans for managing liquidity risk. A centralized daily cash pooling process enables TeliaSonera to manage liquidity surpluses and deficits according to the actual needs on group and subsidiary level. The short-term and mid-term liquidity management takes into account the maturities of financial assets and financial liabilities and estimates of cash flows from operations. TeliaSonera's policy is to have a strong liquidity position in terms of available cash and/or unutilized committed credit facilities.
As of December 31, 2011 and 2010, the surplus liquidity (short-term investments and cash and bank) amounted to SEK 12,678 million and SEK 16,396 million, respectively. TeliaSonera AB's surplus liquidity is typically deposited in banks or invested in short-term interest-bearing instruments with good credit ratings. As of December 31, 2011, TeliaSonera AB's had no short-term investments in interest-bearing securities with maturities exceeding 3 months, while such investments had a counter value of SEK 900 million as of December 31, 2010. The average yield on bank deposits and short-term investments at the end of the reporting period was 1.2 percent in 2011 and 1.5 percent in 2010.
In addition to available cash, TeliaSonera has committed bank credit facilities and overdraft facilities, intended for short-term financing and back-up purposes, as follows.
| In millions of the respective currency | Dec 31, 2011 |
Dec 31, 2010 |
||||
|---|---|---|---|---|---|---|
| Group entity | Type | Characteristics | Final maturity | Currency | Limit | Limit |
| TeliaSonera AB | Revolving credit facility | Committed, syndicated | December 2017 | EUR | 1,000 | 1,000 |
| TeliaSonera AB | Revolving credit facility | Committed, syndicated | September 2013 EUR | 665 | – | |
| TeliaSonera AB | Revolving credit facility | Committed, bilateral | April 2013 | SEK | 1,400 | 1,400 |
| Bank overdraft and short | ||||||
| TeliaSonera AB and subsidiaries | term credit facilities | Committed, bilateral | – | SEK (various) | 1,658 | 1,520 |
As of December 31, 2011 and 2010, SEK 246 million and SEK 71 million, respectively, of the total facilities was utilized. In total, the available unutilized amount under committed bank credit facilities as well as overdraft and short-term credit facilities was SEK 17,705 million and SEK 11,851 million as of December 31, 2011 and 2010, respectively.
As of December 31, 2011, contractual undiscounted cash flows for the Group's interest-bearing borrowings and noninterest-bearing currency derivatives represented the following expected maturities, including installments and estimated interest payments. Amounts in foreign currency have been converted into SEK using the exchange rate prevailing as of the end of the reporting period. Future interest payments, related to instruments with floating interest rates, have been estimated using forward rates. Where gross settlements are performed (cross currency interest rate swaps, currency swaps and forward exchange contracts), all amounts are reported on a gross basis. The balances due within 12 months equal their carrying values as the impact of discounting is insignificant.
| Expected maturity | Jan–Mar | Apr–Jun | Jul–Sep | Oct–Dec | Later | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| SEK in millions | 2012 | 2012 | 2012 | 2012 | 2013 | 2014 | 2015 | 2016 | years | Total |
| Utilized bank overdraft facilities | 124 | 122 | − | − | − | − | − | − | − | 246 |
| Open-market financing program | ||||||||||
| borrowings | 829 | 5,180 | 4,150 | 1,659 | 8,261 | 10,781 | 10,408 | 4,587 | 45,068 | 90,923 |
| Other borrowings | 188 | 627 | 217 | 162 | 922 | 671 | 294 | 292 | 390 | 3,763 |
| Finance lease agreements | 2 | 2 | 2 | 2 | 13 | 10 | 10 | 9 | 45 | 95 |
| Cross currency interest rate swaps and interest rate swaps |
||||||||||
| Payables | 550 | 5,804 | 494 | 1,026 | 7,127 | 3,782 | 11,656 | 5,032 | 3,341 | 38,812 |
| Receivables | -631 | -5,326 | -296 | -882 | -6,881 | -3,824 | -11,330 | -5,023 | -3,587 | -37,780 |
| Currency swaps and forward exchange contracts |
||||||||||
| Payables | 54,669 | 8,751 | 2,950 | 168 | 29 | 6 | – | – | – | 66,573 |
| Receivables | -54,680 | -8,672 | -2,912 | -170 | -30 | -5 | – | – | – | -66,469 |
| Total, net | 1,051 | 6,488 | 4,605 | 1,965 | 9,441 | 11,421 | 11,038 | 4,897 | 45,257 | 96,163 |
Expected maturities for and additional information on noninterest-bearing provisions and liabilities, guarantees and other contractual obligations are presented in Notes C23 "Other Provisions," C24 "Other Long-term Liabilities," C25 "Trade Payables and Other Current Liabilities" and C30 "Contingencies, Other Contractual Obligations and Litigation," respectively.
Currency risk is the risk that fluctuations in foreign exchange rates will adversely affect the Group's results, financial position and/or cash flows. Currency risk can be divided into transaction exposure and conversion exposure.
Transaction exposure relates to net inflows or outflows of foreign currencies required by operations (exports and imports) and/or financing (interest and amortization). TeliaSonera's general policy is to hedge the majority of known operational transaction exposure up to 12 months into the future. This hedging is primarily initiated via forward exchange contracts and refers to invoiced cash flows. However, financial flows, such as loans and investments, are usually hedged until maturity, even if that is longer than 12 months. Financial flows longer than one year are hedged by normally using cross currency interest rate swaps, while shorter terms are hedged using currency swaps or forward exchange contracts. Currency options may also be used from time to time.
| Expected maturity | Jan–Mar | Apr–Jun | Jul–Sep | Oct– Dec | Later | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| SEK in millions | 2012 | 2012 | 2012 | 2012 | 2013 | 2014 | 2015 | 2016 | years | Total |
| Buy EUR | – | 4,596 | – | 450 | 4,750 | 2,050 | 9,286 | 2,514 | 474 | 24,120 |
| Buy JPY | − | – | − | − | − | – | − | – | 1,328 | 1,328 |
| Buy NOK | – | − | − | − | − | – | − | – | 437 | 437 |
| Buy foreign currencies total | − | 4,596 | − | 450 | 4,750 | 2,050 | 9,286 | 2,514 | 2,239 | 25,885 |
| Buy SEK | − | − | − | − | 388 | 1,236 | 1,251 | 2,575 | 909 | 6,359 |
| Buy total | − | 4,596 | − | 450 | 5,138 | 3,286 | 10,537 | 5,089 | 3,148 | 32,244 |
| Sell NOK | − | -1,018 | − | − | -1,172 | -2,417 | -3,721 | -5,073 | − | -13,401 |
| Sell EUR | − | – | − | − | -389 | – | − | − | -867 | -1,256 |
| Sell foreign currencies total | − | -1,018 | − | − | -1,561 | -2,417 | -3,721 | -5,073 | -867 | -14,657 |
| Sell SEK | − | -4,217 | − | -466 | -3,729 | -939 | -7,519 | − | -2,172 | -19,042 |
| Sell total | − | -5,235 | − | -466 | -5,290 | -3,356 | -11,240 | -5,073 | -3,039 | -33,699 |
| Net position, cross currency | ||||||||||
| interest rate swaps | – | -639 | − | -16 | -152 | -70 | -703 | 16 | 109 | -1,455 |
As of December 31, 2011, TeliaSonera's portfolio of cross currency interest rate swap contracts represented the following currencies and expected maturities. Amounts indicated represent carrying values.
As of December 31, 2011, the TeliaSonera Group's portfolio of currency swap contracts and forward exchange contracts hedging loans, investments, and operational transaction exposures represented the following currencies and expected maturities. Amounts indicated represent settlement values.
| Expected maturity SEK in millions |
Jan–Mar 2012 |
Apr–Jun 2012 |
Jul–Sep 2012 |
Oct–Dec 2012 |
2013 | 2014 | Later years |
Total |
|---|---|---|---|---|---|---|---|---|
| Buy EUR | 21,367 | 7,731 | 2,905 | – | – | – | – | 32,003 |
| Buy DKK | 2,874 | − | – | – | – | – | – | 2,874 |
| Buy USD | 2,162 | − | – | – | – | – | – | 2,162 |
| Buy NOK | 1,421 | − | – | – | – | – | – | 1,421 |
| Buy GBP | 500 | – | – | – | – | – | – | 500 |
| Buy other currencies | 8 | – | – | – | – | – | – | 8 |
| Buy foreign currencies total | 28,332 | 7,731 | 2,905 | − | – | – | – | 38,968 |
| Buy SEK | 26,348 | 941 | 7 | 170 | 29 | 6 | – | 27,501 |
| Buy total | 54,680 | 8,672 | 2,912 | 170 | 29 | 6 | – | 66,469 |
| Sell EUR | -11,759 | -584 | -1 | -1 | -4 | -1 | – | -12,350 |
| Sell NOK | -11,236 | -1 | -2 | -2 | -7 | – | – | -11,248 |
| Sell USD | -8,480 | -179 | – | -2 | – | – | – | -8,661 |
| Sell LTL | -476 | -163 | – | -159 | – | – | – | -798 |
| Sell CZK | -146 | – | – | – | – | – | – | -146 |
| Sell LVL | -93 | – | – | – | – | – | – | -93 |
| Sell DKK | -52 | -5 | -4 | -4 | -18 | -5 | – | -88 |
| Sell other currencies | -94 | – | – | – | – | – | – | -94 |
| Sell foreign currencies total | -32,336 | -932 | -7 | -168 | -29 | -6 | – | -33,478 |
| Sell SEK | -22,333 | -7,819 | -2,943 | – | – | – | – | -33,095 |
| Sell total | -54,669 | -8,751 | -2,950 | -168 | -29 | -6 | – | -66,573 |
| Net position, currency swaps and | ||||||||
| forward exchange contracts | 11 | -79 | -38 | 2 | 0 | 0 | – | -104 |
Conversion exposure relates to net investments in foreign operations. TeliaSonera´s basic principle is not to hedge its conversion exposure. However, the CEO has a mandate to implement hedging up to a specific nominal limit. TeliaSonera's net investments in foreign operations were distributed by currency as follows.
| Dec 31, 2011 | Dec 31, 2010 | |||||
|---|---|---|---|---|---|---|
| Currency | Amount in SEK million |
Percent | Amount in SEK million |
Percent | ||
| EUR | 83,937 | 49.6 | 74,520 | 40.2 | ||
| of which hedged through borrowings of which hedged |
29,992 | 17.7 | 20,905 | 11.3 | ||
| through derivatives | 599 | 0.4 | – | – | ||
| RUB | 24,579 | 14.5 | 21,397 | 11.6 | ||
| TRY | 18,922 | 11.2 | 20,789 | 11.2 | ||
| DKK | 12,085 | 7.2 | 12,060 | 6.5 | ||
| NOK | 7,912 | 4.7 | 29,268 | 15.8 | ||
| LTL | 5,483 | 3.2 | 5,642 | 3.0 | ||
| EEK | – | – | 5,317 | 2.9 | ||
| UZS | 4,283 | 2.5 | 1,652 | 0.9 | ||
| NPR | 3,839 | 2.3 | 3,927 | 2.1 | ||
| USD | -3,269 | -1.9 | -182 | -0.1 | ||
| AZN | 3,114 | 1.8 | 2,531 | 1.4 | ||
| KZT | 2,597 | 1.5 | 2,396 | 1.3 | ||
| LVL | 2,288 | 1.4 | 2,319 | 1.2 | ||
| GEL | 1,409 | 0.8 | 1,293 | 0.7 | ||
| TJS | 735 | 0.4 | 679 | 0.4 | ||
| GBP | 689 | 0.4 | 659 | 0.4 | ||
| Other currencies | 647 | 0.4 | 844 | 0.5 | ||
| Total | 169,250 | 100.0 | 185,111 | 100.0 |
In most cases, TeliaSonera customers are billed in their respective local currency. Receivables from and payables to other operators for international fixed-line traffic and roaming are normally settled net through clearing-houses. Hence, the operational need to net purchase foreign currency is primarily due to a deficit from such settlements and the limited import of equipment and supplies.
The negative impact on net income would be approximately SEK 340 million on a full-year basis, should the Swedish krona weaken by 10 percentage points against all other transaction currencies, assuming an operational transaction exposure equivalent to that in 2011, and provided that no hedging measures were taken and not including any potential impact
due to currency translation of other net income related items. Applying the same assumptions, the positive impact on net income would be approximately SEK 330 million on a full-year basis, should the Euro, the Danish krone, the Lithuanian litas and the Latvian lats weaken by 10 percentage points against the Swedish krona and all other transaction currencies.
The positive impact on Group equity would be approximately SEK 13.9 billion if the Swedish krona weakened by 10 percentage points against all conversion exposure currencies, based on the exposure as of December 31, 2011 and including hedges but excluding any potential equity impact due to TeliaSonera's operational need to net purchase foreign currency or to currency translation of other net income related items. TeliaSonera's conversion exposure is expected to grow due to ongoing expansion of the international business operations.
TeliaSonera's sources of funds are primarily equity attributable to owners of the parent, cash flows from operating activities, and borrowings. The interest-bearing borrowing exposes the Group to interest rate risk. Interest rate risk is the risk that a change in interest rates will negatively affect the Group's net interest expense and/or cash flows.
Average interest rates, including relevant hedges, on TeliaSonera AB's outstanding long-term and short-term borrowings as of the end of the reporting period was as follows.
| Percent | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Long-term borrowings | 4.07 | 3.54 |
| Short-term borrowings | 3.14 | 4.21 |
As of December 31, 2011, approximately 46 percent of total borrowings, including relevant hedges, was subject to interest rate adjustment within one year.
TeliaSonera's financial policy provides guidelines for interest rates and the average maturity of borrowings. The Group aims at balancing the estimated running cost of borrowing and the risk of significant negative impact on earnings, should there be a sudden, major change in interest rates. The Group's policy is that the duration of interest of the debt portfolio should be from 6 months to 5 years.
If the loan portfolio structure deviates from the desired one, various forms of derivative instruments are used to adapt the structure in terms of duration and/or currency, including e.g. interest rate swaps and cross currency interest rate swaps.
As of December 31, 2011, the TeliaSonera Group's portfolio of interest rate swap contracts and cross currency interest rate swap contracts represented the following interest types and expected maturities. Amounts indicated represent carrying values.
| Jan–Mar 2012 |
Apr–Jun 2012 |
Jul–Sep 2012 |
Oct–Dec 2012 |
2013 | 2014 | 2015 | 2016 | Later years |
Total |
|---|---|---|---|---|---|---|---|---|---|
| – | 5,611 | – | – | 1,550 | 6,048 | 12,821 | 5,089 | 5,725 | 36,844 |
| – | 3,595 | 1,005 | 449 | 4,830 | 705 | 6,864 | 1,294 | 4,268 | 23,010 |
| – | 9,206 | 1,005 | 449 | 6,380 | 6,753 | 19,685 | 6,383 | 9,993 | 59,854 |
| – | – | -1,013 | – | -925 | -2,931 | – | -1,408 | -1,699 | -7,976 |
| – | -9,670 | – | -466 | -5,680 | -3,771 | -19,357 | -5,073 | -7,847 | -51,864 |
| – | -9,670 | -1,013 | -466 | -6,605 | -6,702 | -19,357 | -6,481 | -9,546 | -59,840 |
| – | -464 | -8 | -17 | -225 | 51 | 328 | -98 | 447 | 14 |
TeliaSonera AB has designated certain interest rate swaps as cash flow hedges to hedge against changes in the amount of future cash flows related to interest payments on existing liabilities (also including certain long-term borrowings hedging net investments, see Note C21 "Long-term and Short-term Borrowings"). Hedge ineffectiveness related to outstanding cash flow hedges was immaterial and recognized in net income. Net changes in fair value recognized in other comprehensive income are offset in a hedging reserve as a component of equity (see Note C12 "Other Comprehensive Income"). In 2011, no cash flow hedges were discontinued due to the original forecasted transactions not having occurred in the originally specified time period.
As of December 31, 2011, TeliaSonera AB had interest-bearing debt of SEK 76.4 billion with duration of interest of approximately 4.0 years, including derivatives. The volume of loans exposed to changes in interest rates over the next 12-month period was at the same date approximately SEK 35 billion, assuming that existing loans maturing during the year are refinanced and after accounting for derivatives. The exact effect of a change in interest rates on the financial net stemming from this debt portfolio depends on the timing of maturity of the debt as well as reset dates for floating rate debt, and that the volume of loans may vary over time, thereby affecting the estimate. However, assuming that those loans were reset by January 1, 2012 at a one percentage point higher interest rate than the prevailing rate as per December 31, 2011, and remained at that new level during 12 months, the post-tax interest expense would increase by some SEK 260 million. Fair value of the loan portfolio would change by approximately SEK 3,300 million, should the level in market interest rates make a parallel shift of one percentage point, and assuming the same volume of loans and a similar duration on those loans as per year-end 2011.
TeliaSonera's aggregate borrowings usually have a longer maturity than duration of interest (principal is fixed longer than interest rates). This allows the Group to obtain the desired interest rate risk without having to assume a high financing risk. The Group's policy is that the average maturity of borrowings should normally exceed 2 years. In order to reduce financing risk, the Group aims to spread loan maturity dates over a longer period. As of December 31, 2011, TeliaSonera AB borrowings had an average time to maturity of approximately 5.6 years.
TeliaSonera AB enjoys a strong credit rating with the rating agencies Moody's and Standard & Poor's. In late December 2011, Moody's changed the outlook from stable to negative for its credit rating on TeliaSonera AB of A3 for long-term borrowings and P-2 for short-term borrowings. In January 2012, Standard & Poor's confirmed its assigned credit rating on TeliaSonera AB at A- for long-term borrowings and A-2 for short-term borrowings, with a stable outlook. These ratings represent a solid investment grade level and are thus expected to allow TeliaSonera continued good access to the financial markets.
TeliaSonera finances its operations chiefly by borrowing under its uncommitted open-market financing programs directly in Swedish and international money markets and capital markets. TeliaSonera also use some bank financing, which represented approximately 4 percent of the Group's total borrowing as of December 31, 2011. The open-market financing programs typically provide a cost-effective and flexible alternative to bank financing.
As of December 31, 2011, the TeliaSonera Group had pension obligations which net present value amounted to SEK 22,942 million (see Note C22 "Provisions for Pensions and Employment Contracts"). To secure these obligations, the Group has pension funds, with plan assets of SEK 19,774 million based on market values as of December 31, 2011. The pension funds' assets are used as prime funding source for the pension obligations, and consisted of approximately 51 percent fixed income instruments and approximately 49 percent shares and other investments at year-end 2011. The expected average net return on the pension funds' plan assets is 4.6 percent annually. The portion of the pension obligations not covered by plan assets is recognized in the statement of financial position, adjusted for unrecognized actuarial gains and losses, and unrecognized past service cost.
In 2011, accumulated actuarial losses increased from SEK 645 million to SEK 3,132 million, primarily driven by a lower discount rate increasing the present value of pension obligations. In addition, the actual net return on plan assets was 0.5 percent, 4.4 percentage points lower than the expected return.
As of December 31, 2011, the strategic asset allocation decided by the board of the Swedish pension fund, which represents approximately 85 percent of total plan assets, was 45 percent fixed income, 40 percent equities and 15 percent other investments. Other investments include primarily hedge funds and private equity. Out of the fixed income holdings, domestic government bonds represent 10 percentage points, domestic covered mortgage bonds 15 percentage points, and global credit bonds and emerging market bonds 20 percentage points. Out of the equity holdings, domestic equities represent 5 percentage points and global equities 35 percentage points. The actual allocation may fluctuate from the strategic allocation in a range of +35/-15 percentage points for fixed income and in a range of +10/-20 percentage points for equities. All assets in the Swedish pension fund are managed by appointed external managers with specialist mandates.
The approximate impact on the pension obligations is SEK 3.8 billion, should the weighted average discount rate decrease by one percentage point from the 4.0 percent which is currently used. Such an increase in the obligations, were interest rates to fall, should be partly offset by a positive impact from the fixed income assets in the pension funds. Based on the existing asset structure and the duration of the pension funds' fixed income portfolios as of December 31, 2011, and assuming that the value of the other assets in the pension funds were unchanged, a similar reduction in interest rates is estimated to increase the value of the pension funds' assets by some SEK 0.8 billion.
Exogenous risk factors might from time to time lead to actuarial modifications increasing TeliaSonera's pension obligations. However, the impact on the obligations of such modifications cannot be quantified until realized.
The insurance cover is governed by corporate guidelines and includes a common package of different property and liability insurance programs. The business units and other units being responsible for assessing the risks decide the extent of actual cover. Corporate Insurance at TeliaSonera AB manages the common Group insurance programs and uses a captive, TeliaSonera Försäkring AB, as a strategic tool in managing the insurance programs. The risks in the captive are in part reinsured in the international reinsurance market.
The Group's finance leases concerns computers and other IT equipment, production vehicles, company cars to employees, and other vehicles. There is no subleasing.
The carrying value of the leased assets as of the end of the reporting period was as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Cost | 169 | 194 |
| Less accumulated depreciation and impairment losses |
-110 | -121 |
| Net carrying value of finance lease agreements | 59 | 73 |
In 2011 and 2010, depreciation and impairment losses totaled SEK 32 million and SEK 27 million, respectively. Leasing fees paid in these years totaled SEK 22 million and SEK 29 million, respectively.
As of the end of the reporting period, the present value of future minimum leasing fees under non-cancelable finance lease agreements was as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Total future minimum leasing fees | 95 | 121 |
| Less interest charges | -16 | -19 |
| Present value of future minimum leasing fees | 79 | 102 |
As of December 31, 2011, future minimum leasing fees and their present values as per finance lease agreements that could not be canceled in advance and were in excess of one year were as follows.
| Expected maturity SEK in millions |
Jan–Mar 2012 |
Apr–Jun 2012 |
Jul–Sep 2012 |
Oct–Dec 2012 |
2013 | 2014 | 2015 | 2016 | Later years |
Total |
|---|---|---|---|---|---|---|---|---|---|---|
| Future minimum leasing fees | 2 | 2 | 2 | 2 | 13 | 10 | 10 | 9 | 45 | 95 |
| Present value of future minimum lease payments |
2 | 2 | 2 | 2 | 12 | 9 | 9 | 7 | 34 | 79 |
TeliaSonera's operating lease agreements primarily concern office space, technical sites, land, computers and other equipment. Certain contracts include renewal options for various periods of time. Subleasing consists mainly of office premises.
Future minimum leasing fees under operating lease agreements in effect as of December 31, 2011 that could not be canceled in advance and were in excess of one year were as follows.
| Expected maturity SEK in millions |
Jan−Mar 2012 |
Apr−Jun 2012 |
Jul−Sep 2012 |
Oct−Dec 2012 |
2013 | 2014 | 2015 | 2016 | Later years |
Total |
|---|---|---|---|---|---|---|---|---|---|---|
| Future minimum leasing fees | 514 | 499 | 501 | 550 | 1,531 | 1,359 | 1,174 | 1,082 | 1,629 | 8,839 |
| Minimum sublease payments | 2 | 2 | 2 | 3 | 4 | 1 | – | – | – | 14 |
In 2011 and 2010, total rent and leasing fees paid were SEK 2,061 million and SEK 2,243 million, respectively. In these years, revenue for subleased items totaled SEK 10 million and SEK 12 million, respectively.
At the end of 2011, office space and technical site leases covered approximately 735,000 square meters, including approximately 5,700 square meters of office space for Telia-Sonera's principal executive offices, located at Stureplan 8 in Stockholm, Sweden. Apart from certain short-term leases, leasing terms range between 1 year and 50 years with an average term of approximately 7 years. All leases have been entered into on conventional commercial terms. Certain contracts include renewal options for various periods of time.
The leasing portfolio of TeliaSonera's customer financing operations in Sweden, Finland, Norway, Denmark and Estonia comprises financing related to TeliaSonera's product offerings. The term of the contract stock is approximately 12 quarters. The term of new contracts signed in 2011 was 12
quarters. Of all contracts, 59 percent carry a fixed interest rate and 41 percent a floating interest rate. Most contracts include renewal options. In Finland, TeliaSonera also under a finance lease agreement provides electricity meters with SIM cards for automated reading to a power company as part of TeliaSonera's service package. The term of the agreement is 15 years and it carries a fixed interest rate.
As of the end of the reporting period, the present value of future minimum lease payment receivables under noncancelable finance lease agreements was as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Minimum lease payments receivable | 1,133 | 1,322 |
| Unguaranteed residual values accruing to the | ||
| benefit of the lessor | -6 | -4 |
| Gross investment in finance lease contracts | 1,127 | 1,318 |
| Unearned finance income | -140 | -167 |
| Present value of future minimum lease pay ments receivable (net investment in finance |
||
| lease contracts) | 987 | 1,151 |
As of December 31, 2011, the gross investment and present value of receivables relating to future minimum lease payments under non-cancelable finance lease agreements were distributed as follows.
| Expected maturity SEK in millions |
Jan–Mar 2012 |
Apr–Jun 2012 |
Jul–Sep 2012 |
Oct–Dec 2012 |
2013 | 2014 | 2015 | 2016 | Later years |
Total |
|---|---|---|---|---|---|---|---|---|---|---|
| Gross investment | 92 | 91 | 91 | 90 | 246 | 155 | 68 | 51 | 243 | 1,127 |
| Present value of future minimum lease payments receivable |
80 | 79 | 79 | 79 | 220 | 142 | 60 | 44 | 204 | 987 |
As of December 31, 2011 and 2010, the accumulated allowance for uncollectible minimum lease payments receivable totaled SEK 17 million and SEK 6 million, respectively. Credit losses on leasing receivables are reduced by gains from the sale of equipment returned.
The leasing portfolio refers mainly to the international carrier business and includes 19 agreements with other international operators and 77 other contracts. Contract periods range between 10 and 25 years, with an average term of 20 years. In addition, 328 operating lease agreements are related to TeliaSonera's product offerings to end-customers in Sweden and Finland. Contract periods range between 3 and 5 years, with an average term of approximately 3 years.
The carrying value of the leased assets as of the end of the reporting period was as follows:
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Cost | 4,034 | 4,093 |
| Less accumulated depreciation and impairment | ||
| losses | -2,421 | -2,483 |
| Gross carrying value | 1,613 | 1,610 |
| Plus prepaid sales costs | 0 | 0 |
| Less prepaid lease payments | -435 | -520 |
| Net value of operating lease agreements | 1,178 | 1,090 |
Depreciation and impairment losses totaled SEK 267 million in 2011 and SEK 295 million in 2010.
Future minimum lease payment receivables under operating lease agreements in effect as of December 31, 2011 that could not be canceled in advance and were in excess of one year were as follows:
| Expected maturity SEK in millions |
Jan–Mar 2012 |
Apr–Jun 2012 |
Jul–Sep 2012 |
Oct–Dec 2012 |
2013 | 2014 | 2015 | 2016 | Later years |
Total |
|---|---|---|---|---|---|---|---|---|---|---|
| Future minimum lease payment receivables |
68 | 68 | 68 | 68 | 192 | 104 | 30 | 5 | 2 | 605 |
The Swedish State currently owns 37.3 percent and the Finnish State 13.7 percent of the outstanding shares in TeliaSonera AB. The remaining 49.0 percent of the outstanding shares are widely held.
The TeliaSonera Group's services and products are offered to the Swedish and the Finnish State, their agencies, and stateowned companies in competition with other operators and on conventional commercial terms. Certain state-owned companies run businesses that compete with TeliaSonera. Likewise, TeliaSonera buys services from state-owned companies at market prices and on otherwise conventional commercial terms. Neither the Swedish and Finnish State and their agencies, nor state-owned companies represent a significant share of TeliaSonera's net sales or earnings.
The Swedish telecommunications market is governed mainly by the Electronic Communications Act and ordinances, regulations and decisions in accordance with the Act. Notified operators are required to pay a fee to finance measures to prevent serious threats and disruptions to electronic communications during peacetime. The required fee from TeliaSonera was SEK 45 million in 2011 and SEK 46 million in 2010. In addition, TeliaSonera, like other operators, pays annual fees to the Swedish National Post and Telecom Agency (PTS) to fund the Agency's activities under the Electronic Communications Act and the Radio and Telecommunications Terminal Equipment Act. TeliaSonera paid fees of SEK 44 million in 2011 and SEK 44 million in 2010.
The Finnish telecommunications market is governed mainly by the Communications Market Act and the Act on the Protection of Privacy and Data Security in Electronic Communications as well as by regulations, decisions and technical directions in accordance with these acts. In 2011 and 2010, TeliaSonera paid EUR 2.5 million and EUR 2.4 million, respectively, for the use of radio frequencies and EUR 0.8 million and EUR 0.8 million, respectively, for the use of numbers. In 2011 and 2010, TeliaSonera paid EUR 0.2 million and EUR 0.2 million, respectively, for data privacy supervision and EUR 1.0 million and EUR 1.0 million, respectively, as communications market fee, i.e. a general fee paid for the regulatory activities of the Finnish Communications Regulatory Authority (FICORA).
TeliaSonera sells and buys services and products to and from associated companies and joint ventures. These transactions are based on commercial terms. Sales to as well as purchases from these companies mainly related to Svenska UMTS-nät AB in Sweden and comprised 3G capacity and network construction services bought and sold.
Summarized information on transactions and balances with associated companies and joint ventures was as follows.
| January–December or December 31, |
||
|---|---|---|
| SEK in millions | 2011 | 2010 |
| Sales of goods and services | ||
| Svenska UMTS-nät AB (joint venture) | 254 | 257 |
| OAO MegaFon | 62 | 244 |
| Other | 26 | 54 |
| Total sales of goods and services | 342 | 555 |
| Purchases of goods and services | ||
| Svenska UMTS-nät AB (joint venture) | 578 | 727 |
| Other | 49 | 147 |
| Total purchases of goods and services | 627 | 874 |
| Total trade and other receivables | 71 | 42 |
| Loans receivable | ||
| Svenska UMTS-nät AB (joint venture) | 1,680 | 200 |
| Other | 35 | – |
| Total loans receivable | 1,715 | 200 |
| Total trade and other payables | 136 | 154 |
As of December 31, 2011, TeliaSonera's pension funds held 1,800,594 shares in TeliaSonera AB, or 0.04 percent of the voting rights. For information on transactions and balances, see Note C22 "Provisions for Pensions and Employment Contracts."
As of the same date, TeliaSonera Finland Oyj's Personnel Fund held 515,020 shares in TeliaSonera AB, or 0.01 percent of the voting rights. The fund manages a profit-sharing arrangement for TeliaSonera's Finnish subsidiaries and, under its charter, 30 percent of each year's profit-sharing payment received should be invested in TeliaSonera shares. For information on costs related to the profit-sharing arrangement, see Note C32 "Human Resources."
TeliaSonera has made certain commitments on behalf of group companies, associated companies and joint ventures. See Note C30 "Contingencies, Other Contractual Obligations and Litigation" for further details.
As of the end of the reporting period, TeliaSonera had no contingent assets, while financial guarantees reported as contingent liabilities were distributed as follows.
See section "Remuneration to corporate officers" in Note C32 "Human Resources" for further details.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Credit guarantee on behalf of | ||
| Svenska UMTS-nät AB | – | 1,375 |
| Other credit and performance guarantees, etc. | 32 | 16 |
| Subtotal (see Liquidity risk – Note C27) | 32 | 1,391 |
| Guarantees for pension obligations | 273 | 253 |
| Total financial guarantees | 305 | 1,644 |
As of December 31, 2011, credit and performance guarantees represented the following expected maturities.
| Expected maturity | Jan–Sep | Oct–Dec | 2015– | Later | |||
|---|---|---|---|---|---|---|---|
| SEK in millions | 2012 | 2012 | 2013 | 2014 | 2016 | years | Total |
| Credit and performance guarantees | – | 21 | 0 | 2 | – | 9 | 32 |
Some loan covenants agreed limit the scope for divesting or pledging certain assets. Some of TeliaSonera AB's more recent bond issuances include change-of-control provisions which under certain conditions allow the lenders to call back the bond before scheduled maturity. Conditions stipulated include a new owner taking control of TeliaSonera AB, inter alia also resulting in a lowering of TeliaSonera AB's official credit rating to a "non-investment grade" level.
For all financial guarantees issued, stated amounts equal the maximum potential future payments that TeliaSonera could be required to make under the respective guarantee.
As security for certain amounts borrowed by TeliaSonera's 50 percent owned joint venture Svenska UMTS-nät AB under a third-party credit facility, TeliaSonera and Tele2, the other shareholder of Svenska UMTS-nät, had each issued credit guarantees to the lenders and granted pledges of their shares in Svenska UMTS-nät. As of July 28, 2011, the credit facility was canceled and most of the funding of Svenska UMTS-nät is managed by lending from the shareholders, each providing 50 percent of the funding (see Note C29 "Related Party Transactions").
As of the end of the reporting period, collateral pledged was distributed as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| For long-term borrowings: Shares in Svenska | ||
| UMTS-nät AB | – | 621 |
| For pension obligations: Real estate mortgages | 9 | 19 |
| For pension obligations: Current receivables | 35 | 37 |
| For other provisions: Blocked funds in bank | ||
| accounts | 10 | 82 |
| For other provisions: Bonds and short-term | ||
| investments | 106 | 100 |
| For operating leases: Real estate mortgages | 2 | 2 |
| For operating leases: Blocked funds in bank | ||
| accounts | 75 | 1 |
| For deposits from customers: Blocked funds | ||
| in bank accounts | 20 | 43 |
| For commitments under a shareholders' | ||
| agreement: Shares in 4T Sverige AB | 2 | – |
| Total collateral pledged | 259 | 905 |
Under an agreement, all shareholders of 4T Sverige AB have mutually pledged their shares in favor of the other shareholders. In 2010, blocked funds for other provisions included TeliaSonera's part of a cash collateral given for Ipse 2000 S.p.A.'s remaining obligations in Italy. The cash collateral was released in 2011 (see also Note C23 "Other Provisions").
As of December 31, 2011, unrecognized contractual obligations regarding future acquisitions (or equivalent) of non-current assets represented the following expected maturities.
| Expected investment period SEK in millions |
Jan–Mar 2012 |
Apr–Jun 2012 |
Jul–Sep 2012 |
Oct–Dec 2012 |
2013 | 2014 | 2015 | 2016 | Later years |
Total |
|---|---|---|---|---|---|---|---|---|---|---|
| Intangible assets | 15 | 4 | 3 | 6 | 3 | 3 | 4 | 4 | – | 42 |
| Property, plant and equipment | 351 | 221 | 7 | 64 | – | – | – | – | – | 643 |
| Total (see Liquidity risk – Note C27) | 366 | 225 | 10 | 70 | 3 | 3 | 4 | 4 | – | 685 |
Most of the obligations with respect to property, plant and equipment refer to contracted build-out of TeliaSonera's fixed networks in Sweden.
TeliaSonera's Spanish subsidiary Xfera Móviles S.A. (Yoigo) also pays an annual spectrum fee during the term of its 3G license expiring in 2020. The fee is determined on an annual basis by the Spanish government authorities and for 2012 is set to SEK 308 million (EUR 34 million).
As of December 31, 2011, TOO GSM Kazakhstan (Kcell) in Kazakhstan was owned by Fintur Holdings B.V. (51 percent) and Kazakhtelecom (49 percent). Fintur is owned by TeliaSonera (58.55 percent) and Turkcell (41.45 percent), resulting in an effective ownership in Kcell by TeliaSonera of 37.9 percent. On December 22, 2011, TeliaSonera signed an agreement with Kazakhtelecom to acquire its 49 percent of the shares in Kcell, with an expected closing during the first quarter of 2012. TeliaSonera also agreed, subject to certain conditions, to sell 25 percent of the shares minus one share in Kcell in an Initial Public Offering (IPO), expected to be completed during 2012. Depending on the share price development after the IPO, TeliaSonera may have to make an additional payment to Kazakhtelecom. Once both steps of the transaction have been completed, TeliaSonera's effective ownership in Kcell will be 61.9 percent. The acquisition is expected to positively affect earnings per share. The first step of the transaction, which was subject to several conditions, including approval by the regulator, closed on February 1, 2012 and the purchase price of USD 1,519 million was paid on the same day, resulting in a decrease of retained earnings in shareholders' equity and non-controlling interests in equity and an increase in net debt. The Kcell dividend decided for 2011 will be distributed during 2012 according to the shareholder structure before the transaction.
In its normal course of business, TeliaSonera is involved in a number of legal proceedings. These proceedings primarily involve claims arising out of commercial law issues and matters relating to telecommunications regulations and competition law. In particular, TeliaSonera is involved in numerous proceedings related to interconnect fees, which affects future revenues. Except for the proceedings described below, TeliaSonera or its subsidiaries are not involved in any legal, arbitration or regulatory proceedings which management believes could have a material adverse effect on TeliaSonera's business, financial condition or results of operations.
During the second half of 2001, a number of operators filed complaints against TeliaSonera with the Swedish Competition Authority and the Authority initiated an investigation regarding TeliaSonera's pricing of ADSL services. The complaints suggest that the difference between TeliaSonera's wholesale prices and retail prices is too low to effectively enable competition in the retail market. In December 2004, the Competition Authority sued TeliaSonera at the Stockholm District Court claiming that TeliaSonera had abused its dominant position. The Authority demands a fee of SEK 144 million. In December 2011, the Stockholm District Court decided in accordance with the Competition Authority's demands. TeliaSonera's position is that it has not engaged in any prohibited pricing activities and has appealed the District Court's decision. Following the Competition Authority's lawsuit, Tele2 has in April 2005 and Spray Network in June 2006, respectively, claimed substantial damages from TeliaSonera due to the alleged abuse of
dominant market position. TeliaSonera will vigorously contest Tele2's and Spray Network's claims. The actions for damages have been stayed pending the case between TeliaSonera and the Competition Authority.
TeliaSonera is currently involved in court cases with Primav Construcoes e Comercio, former shareholder of the Brazilian mobile operator Tess, relating to such shareholder's disposal of its investment in Tess as well as certain call options and subscription rights in Tess. Whilst TeliaSonera has sold its holding in Tess, it has entered into certain guarantees to compensate the buyer for certain losses in connection with the above-mentioned court cases. TeliaSonera will vigorously contest any claims in connection with the disputes. Even if TeliaSonera believes that losing the disputes is not probable, but given the anticipated duration of the court proceedings, TeliaSonera has recognized a provision for estimated future legal fees.
Cash flow from operating activities under the direct method presentation
| SEK in millions | Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Cash receipts from customers | 103,220 | 105,819 |
| Cash paid to employees and suppliers | -69,600 | -72,070 |
| Cash flow generated from operations | 33,620 | 33,749 |
| Dividends received | 496 | 1,721 |
| Interest received | 493 | 260 |
| Interest paid | -2,587 | -2,301 |
| Income taxes paid | -4,999 | -5,995 |
| Cash flow from operating activities | 27,023 | 27,434 |
In 2011 and 2010, obligations regarding future dismantling and restoration of technical sites entailed non-cash investments of SEK 323 million and SEK 527 million, respectively.
TeliaSonera provides and installs infrastructure in buildings and as compensation is granted an exclusive right to deliver services for 5-10 years through this infrastructure. These activities entailed non-cash exchanges of SEK 296 million in 2011 and SEK 295 million in 2010.
The contract between a new supplier and TeliaSonera includes an extension of the 3G roll-out and a swap with transfer of title to the new supplier of the previous supplier's existing 2G equipment, resulting in a non-cash barter transaction of SEK 40 million.
The TeliaSonera Group is continually restructured by acquiring and divesting equity instruments or operations. The fair value of assets acquired and liabilities assumed in business combinations and the total cash flow from acquisitions were as follows.
| Acquisitions SEK in millions |
Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Investing activities | ||
| Goodwill and other intangible assets | -100 | -75 |
| Property, plant and equipment | -10 | − |
| Financial assets, accounts receivable, | ||
| inventories etc. | -3 | -4 |
| Cash and cash equivalents | -32 | -0 |
| Non-controlling interests | -0 | − |
| Provisions | 27 | − |
| Non-current liabilities | − | 4 |
| Current liabilities | 25 | − |
| Total purchase consideration | -93 | -75 |
| Less cash and cash equivalents acquired | 32 | 0 |
| Contingent consideration paid for prior period | ||
| acquisitions | -18 | -1,956 |
| Net cash outflow from business combinations | -79 | -2,031 |
| Purchase consideration for other acquisitions | -207 | -1,151 |
| Total cash outflow, investing activities | -286 | -3,182 |
| Financing activities | ||
| Acquisitions of non-controlling interests | -9 | -1,333 |
| Total cash outflow, financing activities | -9 | -1,333 |
| Total cash outflow, acquisitions | -295 | -4,515 |
In 2011, cash outflow from other acquisitions included SEK 191 million referring to the indirect acquisition of the stake in the associated company Nepal Satellite Telecom Pvt. Ltd. In 2010, cash outflow included contingent consideration related to OOO Coscom in Uzbekistan and Azercell Telekom B.M. in Azerbaijan, purchase consideration of SEK 815 million paid for additional shares in the associated company Turkcell Iletisim Hizmetleri A.S. in Turkey and the indirect acquisition of noncontrolling interests in Ncell Pvt. Ltd in Nepal.
For additional information, see Note C34 "Business Combinations."
The fair value of assets divested and liabilities transferred in subsidiaries and the total cash flow from divestitures were as follows.
| Divestitures SEK in millions |
Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Investing activities | ||
| Goodwill and other intangible assets | 102 | 841 |
| Property, plant and equipment | 140 | 545 |
| Financial assets, accounts receivable, inventories | ||
| etc. | 23 | 393 |
| Cash and cash equivalents | 0 | 120 |
| Provisions | -21 | -18 |
| Non-current liabilities | -38 | − |
| Current liabilities | -18 | -355 |
| Total sales consideration | 188 | 1,526 |
| Less cash and cash equivalents divested | -0 | -120 |
| Net cash inflow from subsidiaries divested | 188 | 1,406 |
| Sales consideration for other divestitures | 670 | 278 |
| Total cash inflow, investing activities | 858 | 1,684 |
| Total cash inflow, financing activities | − | − |
| Total cash inflow, divestitures | 858 | 1,684 |
In 2011, cash inflow from subsidiaries divested was related to North Sea Communications AS in Norway and, in 2010, mainly to Telia Stofa A/S in Denmark. In 2011, sales consideration for other divestitures included SEK 577 million related to a compensation for meeting certain milestones in fulfilling the agreement with Altimo signed in November 2009. In 2011 and 2010, sales consideration for other divestitures included SEK 87 million and SEK 152 million, respectively, for certain pre-emptive rights sold in connection with the privatization of Azercell Telekom B.M.
Employees, salaries, and social security expenses During 2011, the number of employees decreased by 533 to 28,412 at year-end from 28,945 at year-end 2010. Increases in some of the Eurasian operations due to ongoing high customer intake were offset by efficiency measures executed in the Nordic operations. The net addition from minor business combinations and divestitures in 2011 was 306 employees.
The average number of full-time employees by country was as follows.
| Jan–Dec 2011 | Jan–Dec 2010 | |||
|---|---|---|---|---|
| Country | Total (number) |
of whom men (%) |
Total (number) |
of whom men (%) |
| Sweden | 8,372 | 54.5 | 8,937 | 54.4 |
| Finland | 4,497 | 61.1 | 4,686 | 60.9 |
| Norway | 1,183 | 70.7 | 1,219 | 65.5 |
| Denmark | 1,241 | 64.4 | 1,328 | 66.6 |
| Lithuania | 3,657 | 51.0 | 3,598 | 50.0 |
| Latvia | 913 | 48.4 | 893 | 47.1 |
| Estonia | 2,043 | 56.7 | 1,994 | 56.2 |
| Spain | 102 | 68.6 | 90 | 68.9 |
| Kazakhstan | 1,526 | 41.0 | 1,417 | 40.2 |
| Azerbaijan | 812 | 60.1 | 781 | 58.0 |
| Uzbekistan | 831 | 60.9 | 777 | 60.1 |
| Tajikistan | 327 | 67.0 | 349 | 59.6 |
| Georgia | 333 | 43.2 | 331 | 42.3 |
| Moldova | 353 | 46.5 | 345 | 46.1 |
| Nepal | 528 | 76.3 | 489 | 81.8 |
| Cambodia | – | – | 165 | 64.8 |
| Russian Federation | 50 | 58.0 | 57 | 66.7 |
| United Kingdom | 40 | 70.0 | 50 | 78.3 |
| Other countries | 191 | 71.7 | 191 | 71.2 |
| Total | 26,999 | 56.4 | 27,697 | 55.9 |
In total, operations were conducted in 30 countries in 2011 and 32 countries in 2010.
The share of female and male Senior executives was as follows. Senior executives include ordinary members of boards of directors, presidents and other members of executive management teams at the corporate level, business area level and company level.
| Dec 31, 2011 | Dec 31, 2010 | |||
|---|---|---|---|---|
| Percent | Boards of directors |
Other Senior executives |
Boards of directors |
Other Senior executives |
| Women | 31.1 | 32.7 | 30.7 | 39.2 |
| Men | 68.9 | 67.3 | 69.3 | 60.8 |
| Total | 100.0 | 100.0 | 100.0 | 100.0 |
Total salaries and other remuneration, along with social security expenses and other personnel expenses, were as follows.
| SEK in millions | Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Salaries and other remuneration | 9,974 | 10,405 |
| Social security expenses | ||
| Employer's social security contributions | 1,819 | 1,900 |
| Pension expenses | 1,079 | 1,354 |
| Total social security expenses | 2,898 | 3,254 |
| Capitalized work by employees | -800 | -601 |
| Other personnel expenses | 556 | 627 |
| Total personnel expenses recognized by nature | 12,628 | 13,685 |
Salaries and other remuneration were divided between Senior executives and other employees as follows. Variable pay was expensed in the respective year, but disbursed in the following year.
| Jan–Dec 2011 | Jan–Dec 2010 | ||||
|---|---|---|---|---|---|
| SEK in millions | Senior executives (of which variable pay) |
Other employees |
Senior executives (of which variable pay) |
Other employees |
|
| Salaries and other remuneration | 175 (13) | 9,799 | 172 (15) | 10,233 |
Pension expenses for all Senior executives totaled SEK 33 million in 2011 and SEK 32 million in 2010.
In 2011 and 2010, employee profit-sharing costs in TeliaSonera's Finnish subsidiaries totaled SEK 44 million and SEK 102 million, respectively.
The 2010 and 2011 Annual General Meetings of shareholders in TeliaSonera AB resolved to implement performance share programs (PSP), which shall comprise certain senior executives within the Group (however, the members of Group Management are excluded). Provided that certain performance conditions, consisting of financial targets linked to earnings per share (EPS) and total shareholder return (TSR), are met during a defined performance period, participants in the programs shall be given the opportunity to receive final allotments of TeliaSonera shares without consideration (performance shares). The financial targets include a minimum level which must be achieved in order for any allotments to occur at all, as well as a maximum level in excess of which no additional allotments will occur. Each program shall in total comprise no more than 1,560,000 TeliaSonera shares, corresponding to approximately 0.04 percent of the total number of outstanding shares. The final allotments of performance shares will be based 50 percent on EPS development for each of the three years of the performance period in relation to EPS for the preceding year, and 50 percent on TSR during the full performance period in relation to TSR in group of comparable telecom companies defined by the Board of Directors. Participation in the program requires that the participant has invested in or allocated already held TeliaSonera shares to the program corresponding to a value of 2 percent of the participant's annual base salary. The maximum financial outcome for a participant, and the maximum number of performance shares that may finally be allotted in a program, shall be capped at such number of performance shares which aggregate market value corresponds to 37.5 percent of each participant's base salary. Recalculation of final allotments of performance shares shall take place in the event of an intervening bonus issue, split, rights issue and/or other similar events.
The summarized performance share program activity for the years ended December 31, 2011 and 2010 was as follows.
| Performance share program | 2011/2014 2010/2013 | |
|---|---|---|
| Number of participants | ||
| As of December 31, 2010 | – | 86 |
| New participants | 95 | – |
| Terminated employments | – | -6 |
| Participants as of December 31, 2011 | 95 | 80 |
| Number of allotted shares | ||
| As of December 31, 2010 | – | – |
| Preliminary allotments | – | 114,131 |
| Allotted shares as of December 31, 2011 | – | 114,131 |
The estimated fair values at the date of allotment and the assumptions used when estimating the achievements of the performance conditions were as follows.
| Performance share program | 2011/2014 2010/2013 | |
|---|---|---|
| Fair value at the date of allotment (SEK in millions) |
18 | 18 |
| Assumptions used (percentages) | ||
| Achievement of EPS-based performance condition |
50 | 50 |
| Achievement of TSR-based performance condition was based on |
||
| Estimated volatility, TeliaSonera | 29 | 31 |
| Estimated volatility, peer group companies | 24–41 | 25–40 |
| Average reciprocal correlation between TeliaSonera and the peer group companies |
45 | 45 |
| Risk-free interest rate | 2.7 | 1.8 |
The achievement of the TSR-based performance condition was estimated using a Monte Carlo simulation model.
The estimated fair value of each performance share program and related social security expenses are amortized to expense over the performance period. Total personnel expenses were as follows.
| SEK in millions | Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Salaries and other remuneration | 11 | 4 |
| Social security expenses | 2 | 1 |
| Total personnel expenses, performance share programs |
13 | 5 |
As resolved by the 2011 Annual General Meeting of shareholders (AGM) in TeliaSonera AB, annual remuneration is paid to the members of the Board of Directors in the amount of SEK 1,100,000 to the chairman and SEK 450,000 to each of the other directors, elected by the AGM. In addition, annual remuneration is paid to the members of the Board's Audit Committee in the amount of SEK 150,000 to the chairman and SEK 100,000 to each of the other members. Additional annual remuneration is also paid to the members of the Board's Remuneration Committee in the amount of SEK 55,000 to the chairman and SEK 35,000 to each of the other members. No separate remuneration is paid to directors for other committee work. Directors appointed as employee representatives are not remunerated. There are no pension benefit arrangements for external directors.
The 2011 Annual General Meeting decided to approve the following guidelines for remuneration to the executive management.
TeliaSonera's objective is to offer remuneration levels and other employment conditions required to attract, retain and motivate high caliber executives needed to maintain the success of the business. Remuneration should be built upon a total reward approach allowing for a market relevant – but not market leading – and cost effective executive remuneration based on the following compensation components: (1) base salary; (2) pension; and (3) other benefits. The base salary
should reflect the competence required in the position and the responsibility, complexity and the business contribution of the executive. The base salary should also reflect the performance of the executive and consequently be individual and differentiated. Pension and other retirement benefits should be based on the defined contribution method. The termination period may be up to 6 months when given by the executive and up to 12 months when given by the employer (in relation to the CEO 6 months). In case of termination given by the employer, the executive may be entitled to a severance payment of up to 12 months (in relation to the CEO 24 months). The severance payment shall not constitute a basis for calculation of vacation pay or pension benefits and shall be reduced should the executive be entitled to pay from a new employment or from conducting his own business during the period under which the severance is payable to the executive. The executive may be entitled to a company car benefit, health care provisions,
travel insurance etc. in accordance with local labor market practice. The Board of Directors is allowed to make minor deviations on an individual basis from the principles stated above.
Remuneration to the Chief Executive Officer (CEO), the Executive Vice President (EVP) and other members of Group Management consists of base salary, certain taxable benefits and pension benefits. As per December 31, 2011, TeliaSonera did not operate any share-related incentive program in relation to the CEO, the EVP and other members of Group Management. "Other members of the Group Management" refers to the 8 individuals who are directly reporting to the CEO and which, along with the CEO and the EVP, constituted the TeliaSonera Group Management on December 31, 2011.
Pension benefits and other benefits to the CEO, the EVP and other members of Group Management as described above form part of each individual's total remuneration package.
Remuneration and other benefits during the year, capital value of pension commitments
| Board | Total | Capital value | ||||
|---|---|---|---|---|---|---|
| SEK | remuneration/ Base salary1 |
Other remuneration2 |
Other benefits3 |
Pension expense4 |
remuneration and benefits5 |
of pension commitment |
| Board of Directors | ||||||
| Anders Narvinger, Chairman | 1,224,674 | – | – | – | 1,224,674 | – |
| Timo Peltola, Vice-Chairman | 474,467 | – | – | – | 474,467 | – |
| Maija-Liisa Friman | 593,422 | – | – | – | 593,422 | – |
| Ingrid Jonasson Blank | 428,765 | – | – | – | 428,765 | – |
| Conny Karlsson | 543,430 | – | – | – | 543,430 | – |
| Lars Renström | 474,467 | – | – | – | 474,467 | – |
| Jon Risfelt | 543,430 | – | – | – | 543,430 | – |
| Per-Arne Sandström | 489,137 | – | – | – | 489,137 | – |
| Group Management | ||||||
| Lars Nyberg, CEO | 10,100,004 | 3,233,200 | 110,520 | 8,930,360 | 22,374,084 | – |
| Per-Arne Blomquist, EVP | 5,075,508 | 2,197,191 | 107,830 | 1,930,568 | 9,311,097 | – |
| Other members of Group Management | ||||||
| (8 individuals) | 24,387,588 | 7,116,762 | 741,399 | 9,198,824 | 41,444,573 | 17,469,758 |
| Former CEOs and EVPs | ||||||
| (7 individuals) | − | − | − | − | − | 175,340,112 |
| Total | 44,334,892 | 12,547,153 | 959,749 | 20,059,752 | 77,901,546 | 192,809,870 |
Comments on the table:
TeliaSonera operates both defined benefit executive schemes and defined contribution executive schemes. A defined benefit scheme provides a pension level which is pre-determined as a percentage of the pensionable salary at retirement. A defined contribution scheme provides a contribution to the pension scheme as a percentage of the pensionable salary. The level of pension benefits at retirement will be determined by the contributions paid and the return on investments and the costs associated to the plan. In July 2006, the defined benefit executive scheme was closed for new entrants in the Group and only defined contribution executive schemes are offered.
For the CEO, the pension plan provides a defined contribution arrangement which is two-fold. One part is providing base-salary related contributions of 4.5 percent of the salary up to 7.5 income base amounts and 30 percent of such salary above 7.5 income base amounts. The income base amount is determined annually by the Swedish Government and was SEK 52,100 for 2011. The second part is a fixed annual contribution of SEK 6,000,000. For the EVP, the contributions amount to 4.5 percent of the base salary up to 7.5 income base amounts and 30 percent of such salary above 7.5 income base amounts and an additional contribution of 10 percent
of the base salary. The contributions into the plan are vested immediately. The normal retirement age is 65, although the Company may request the CEO to enter into early retirement not earlier than from age 62 and the CEO may enter into early retirement on his own request not earlier than from age 62. Contributions to the pension scheme will cease at retirement or earlier if leaving the company for any other reason.
Other members of Group Management have individual pension arrangements. All members are covered by defined contribution schemes similar to the ITP plan Section 1 providing contributions in the amount of 4.5 percent of the base salary up to 7.5 income base amounts and 30 percent of the base salary for the part exceeding 7.5 income base amounts. Three members have additional contributions of 20 percent of the base salary, one member has an additional contribution of 15 percent of the base salary and one member has an additional contribution of 14 percent of the base salary. All contributions to the schemes are vested immediately. The retirement age for other members of Group Management is 65.
Termination of the CEO's employment by the Company or by the CEO requires that notice is given by either party in writing 6 months before termination. Should a termination of employment be initiated by the Company more than two years before the CEO has turned the age of 62, the CEO is entitled to a severance pay in the amount of two annual base salaries to be paid in 24 equal monthly installments. If less than 24 months remains until the CEO turns 62, the salary payment during the notice period or the severance payment will cease at age 62. The salary during the notice period and the severance pay will be reduced by any other income. Should the CEO give notice of termination, he is not entitled to any severance pay.
Termination of employment in relation to the EVP and the other members of Group Management require that notice is given in writing 6 months before termination by the employees and 12 months before termination by the Company. Should notice be given by the Company, the member is entitled to a severance pay in the amount of one annual base salary to be paid in 12 equal monthly installments. The salary during the notice period and the severance pay will be reduced by any other income. Should the member give notice of termination on his or her own initiative, he or she is not entitled to any severance pay.
Applying the remuneration policy adopted at the AGM each year, the CEO's total remuneration package is decided by the Board of Directors based on the recommendation of its Remuneration Committee. Total remuneration packages to other members of Group Management are approved by the Remuneration Committee, based on the CEO's recommendation.
The following remuneration was billed by audit firms for audits and other reviews based on applicable legislation and for advice and other assistance resulting from observations in the reviews. Remuneration was also billed for independent advice, using Group auditors or other audit firms, in the fields of Tax/Law and Corporate Finance as well as other consulting services. Audit fees to other audit firms refer to subsidiaries or associated companies and joint ventures not audited by the Group auditors. Auditors are elected by the Annual General Meeting.
PricewaterhouseCoopers AB (PwC) has served as TeliaSonera AB's independent auditor (Group auditor) since April 28, 2004 and was reelected for a 1-year term at the 2011 Annual General Meeting. The audit of the consolidated financial statements has been carried out throughout the year. No separate fee has been billed for the review of interim financial statements.
| SEK in millions | Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Remuneration expensed | ||
| PwC | ||
| Audits | 37 | 44 |
| Audit-related services | 1 | 1 |
| Tax services | 2 | 3 |
| All other services | 1 | 6 |
| Total PwC | 41 | 54 |
| Ernst &Young (E&Y) | ||
| Tax services | 0 | 0 |
| All other services | 9 | 4 |
| Total E&Y | 9 | 4 |
| KPMG | ||
| Tax services | 9 | 11 |
| All other services | 1 | 0 |
| Total KPMG | 10 | 11 |
| Other audit firms | ||
| Audits, audit-related services | 1 | 2 |
| Tax services and all other services | 4 | 1 |
| Total other audit firms | 5 | 3 |
| Total remuneration expensed | 65 | 72 |
| Remuneration recognized in equity | ||
| PwC | ||
| Audit-related services | 0 | − |
| Total PwC | 0 | – |
| Total remuneration recognized in equity | 0 | – |
| Total remuneration | 65 | 72 |
Within the provisions of Swedish legislation, the Audit Committee of the Board of Directors of TeliaSonera AB is responsible, among other matters, for the oversight of TeliaSonera's independent auditors. The Board of Directors has adopted a policy regarding pre-approval of audit-related services and permissible non-audit services provided by audit firms.
For two minor business combinations in 2011, the aggregate cost of combination was SEK 93 million and the net cash outflow SEK 61 million. Goodwill totaled SEK 34 million, of which SEK 2 million allocated to business area Mobility Services and SEK 32 million allocated to business area Broadband Services.
Goodwill is explained by strengthened market positions. The total cost of combination and fair values have been determined provisionally, as they are based on preliminary appraisals and subject to confirmation of certain facts. Thus, the purchase price accounting is subject to adjustment.
TeliaSonera operates in a broad range of geographic product and service markets in the highly competitive and regulated telecommunications industry. As a result, TeliaSonera is subject to a variety of risks and uncertainties. TeliaSonera has defined risk as anything that could have a material adverse effect on the achievement of TeliaSonera's goals. Risks can be threats, uncertainties or lost opportunities relating to TeliaSonera's current or future operations or activities.
TeliaSonera has an established risk management framework in place to regularly identify, analyze, assess, and report business, financial and corporate responsibility related risks and uncertainties, and to mitigate such risks when appropriate. Risk management is an integrated part of TeliaSonera's business planning process and monitoring of business performance. Set forth below is a description of factors that may affect TeliaSonera's business, financial position, results of operations or the share price from time to time. See the Corporate Governance Statement for more information on risk management and the control environment and Note C27 for information on financial risk management.
Changes in the global financial markets and the world economy are difficult to predict. TeliaSonera strives to have a strong balance sheet and operates in a relatively non-cyclical or latecyclical industry. However, a severe or long-term downturn in the economy would have an impact on TeliaSonera's customers and may have a negative impact on its growth and results of operations through reduced telecom spending.
The maturity schedule of TeliaSonera's loan portfolio is aimed to be evenly distributed over several years, and refinancing is expected to be made by using uncommitted openmarket debt financing programs and bank loans, alongside the company's free cash flow. In addition, TeliaSonera has committed lines of credit with banks that are deemed to be sufficient and may be utilized if the open-market refinancing conditions are poor. However, TeliaSonera's cost of funding might be higher should there be changes in the global financial markets or the world economy.
TeliaSonera is subject to substantial and historically increasing competition and price pressure. Competition from a variety of sources, including current market participants, new entrants and new products and services, may adversely affect TeliaSonera's results of operations. Competition has from time to time led to increasing customer churn, decreasing customer bases and to declines in the prices TeliaSonera charges for its products and services and may have similar effects in the future.
TeliaSonera operates in a highly regulated industry. The regulations to which TeliaSonera is subject impose significant limits on its flexibility to manage its business. In a number of countries, TeliaSonera entities have been designated as a party with significant market power in one or several telecom submarkets. As a result, TeliaSonera is required to provide certain services on regulated terms and prices, which may differ from the terms on which it would otherwise have provided those services. Effects from regulatory intervention may be both retroactive and prospective.
Changes in legislation, regulation or government policy affecting TeliaSonera's business activities, as well as decisions by regulatory authorities or courts, including granting, amending or revoking of licenses to TeliaSonera or other parties, could adversely affect TeliaSonera's business and results of operations.
TeliaSonera has made significant investments in telecom operators in Kazakhstan, Azerbaijan, Uzbekistan, Tajikistan, Georgia, Moldova, Nepal, Russia and Turkey. Historically, the political, economic, legal and regulatory systems in these countries have been less predictable than in countries with more mature institutional structures. The future political situation in each of the emerging market countries may remain unpredictable, and markets in which TeliaSonera operates may become unstable.
Other risks associated with operating in emerging market countries include foreign exchange restrictions, which could effectively prevent TeliaSonera from repatriating cash, e.g. by receiving dividends and repayment of loans, or from selling its investments. Another risk is the potential establishment of foreign ownership restrictions or other potential actions against entities with foreign ownership, formally or informally.
Weakening of the economies or currencies or other negative developments in these markets might have a significantly negative effect on TeliaSonera's results of operations.
Factors generally affecting the telecom markets, and changes in the economic, regulatory, business or political environment, as well as TeliaSonera's ongoing review and refinement of its business plans, could adversely affect its financial position and results of operations. TeliaSonera could be required to recognize impairment losses with respect to assets if management's expectation of future cash flows attributable to these assets change, including but not limited to goodwill and fair value adjustments that TeliaSonera has recorded in connection with acquisitions that it has made or may make in the future. Through the merger of Telia and Sonera, the acquisition of NetCom in Norway, and other acquisitions, TeliaSonera has a significant amount of goodwill in its statement of financial position, amounting to approximately SEK 77 billion as of December 31, 2011, which is not amortized but annually tested for impairment.
In the past, TeliaSonera has undertaken a number of restructuring and streamlining initiatives, mainly affecting the Nordic and international carrier operations, which have resulted in substantial restructuring and streamlining charges. Similar initiatives may be undertaken in the future.
TeliaSonera also has significant deferred tax assets resulting from earlier recorded impairment losses and restructuring charges. Significant adverse changes in the economic, regulatory, business or political environment, as well as in TeliaSonera's business plans, could also result in TeliaSonera not being able to use these tax assets in full to reduce its tax obligations in the future, and would consequently lead to an additional tax charge when such tax asset is derecognized.
In addition to affecting TeliaSonera's results of operations, such impairment losses and restructuring charges may adversely affect TeliaSonera's ability to pay dividends. Any significant write-down of intangible or other assets would have the effect of reducing, or possibly eliminating, TeliaSonera's dividend capacity.
TeliaSonera has made substantial investments in networks and telecom and frequency licenses, and also expects to invest substantial amounts over the next several years in the upgrading and expansion of networks. Many times, TeliaSonera also has to pay fees to acquire new licenses or to renew or maintain the existing licenses. In order to attract new customers, TeliaSonera may also engage in start-up operations, such as Xfera Móviles S.A. (Yoigo) in Spain and Ncell Pvt. Ltd. in Nepal, which require substantial investments and expenditure in the build-up phase.
The success of these investments will depend on a variety of factors beyond TeliaSonera's control, including the cost of acquiring, renewing or maintaining licenses, the cost of new technology, availability of new and attractive services, the costs associated with providing these services, the timing of their introduction, the market demand and prices for such services, and competition. A failure to realize the benefits expected from these investments may adversely affect TeliaSonera's results of operations.
TeliaSonera is constantly reviewing its asset portfolio in line with the strategy of increasing ownership in core holdings. Over the years, TeliaSonera has made a number of targeted acquisitions in accordance with its strategy. TeliaSonera may continue to expand and grow its business through business combinations, strategic alliances, etc. The efficient integration of these acquisitions and the realization of related cost and revenue synergies, as well as the positive development of the acquired operations, are significant for the results of operations both in the long and short term. In case TeliaSonera will fail in integrating or managing any acquired company or strategic alliance there is a risk that management's attention will be diverted away from other ongoing business concerns. In addition, any potential acquisition could negatively affect TeliaSonera's financial position and its credit ratings, or, if made using TeliaSonera shares, dilute the existing shareholders.
TeliaSonera conducts some of its activities, particularly outside of the Nordic region, through subsidiaries in which TeliaSonera does not have a 100 percent ownership. Under the governing documents for certain of these entities, the holders of non-controlling interests have protective rights in matters such as approval of dividends, changes in the ownership structure and other shareholder-related matters. As a result, actions outside TeliaSonera's control and adverse to its interests may affect TeliaSonera's position to act as planned in these partly owned subsidiaries.
In addition to cost efficiency in all operations, TeliaSonera's focus areas include high-quality service to its customers and high quality of its networks. TeliaSonera's ambition to create a world-class service company requires a major change of processes, attitude and focus in many parts of the company. The high quality of networks and services is also fundamental to the customer perception and TeliaSonera's success going forward. Failure to reach or maintain such high levels might have an adverse impact on TeliaSonera's business.
TeliaSonera is reliant upon a limited number of suppliers to manufacture and supply network equipment and related software as well as terminals, to allow TeliaSonera to develop its networks and to offer its services on a commercial basis. TeliaSonera cannot be certain that it will be able to obtain network equipment or terminals from alternative suppliers on a timely basis if the existing suppliers are unable to satisfy
TeliaSonera's requirements. In addition, like its competitors, TeliaSonera currently outsources many of its key support services, including network construction and maintenance in most of its operations. The limited number of suppliers of these services, and the terms of TeliaSonera's arrangements with current and future suppliers, may adversely affect TeliaSonera, including by restricting its operational flexibility.
To remain competitive and implement its strategy, and to adapt to changing technologies, TeliaSonera will need to recruit, retain, and where necessary, retrain highly skilled employees with particular expertise. In particular, competition is intense for qualified telecommunications and information technology personnel. To a considerable extent, TeliaSonera's ability to recruit and retain skilled personnel for growth business areas and new technologies will depend on its ability to offer competitive remuneration packages. If TeliaSonera fails to recruit or retrain necessary highly skilled employees, its ability to develop high growth business areas and new business areas or remain competitive in the traditional business areas may be limited.
Operating in emerging markets poses risks for not being able to comply with TeliaSonera's corporate responsibility requirements. To mitigate these risks, TeliaSonera will not enter into countries that are sanctioned for investments by the United Nations or European Union, but may enter into countries with shifting political stability, provided that the business can be conducted in an ethically and financially sound way. During the due diligence process, a risk evaluation is performed to secure that the business to be acquired or market to be entered into will in due time be managed in accordance with TeliaSonera's corporate responsibility standards.
Concerns have been expressed that the electromagnetic signals from mobile handsets and base stations, which serve as the platform for transmitting radio signals, may pose health risks and interfere with the operation of electronic equipment. These concerns may intensify as new technology and products are introduced. Actual or perceived risks of mobile handsets or base stations and related publicity or litigation could reduce the growth rate, customer base or average usage per customer of TeliaSonera's mobile communications services, may result in restrictions on the location and operation of base stations, or could subject TeliaSonera to claims for damages, any of which could have a negative impact on its business, financial position and results of operations.
TeliaSonera is managing significant network and data volumes, posing risks of being complicit in violating human rights due to failure to uphold customer privacy and network integrity and of telecom services being used as a vehicle for exploitation of children. TeliaSonera therefore strives to ensure network integrity and data security and protect customers' personal data. TeliaSonera will only provide personal data to authorities to the extent required by law or with the customer's permission. To ensure privacy, TeliaSonera aims to protect assets such as personnel, customers, information, IT infrastructure, internal and public networks as well as office buildings and technical facilities. TeliaSonera implements measures to prevent and detect the disclosure of sensitive information to unauthorized
parties. TeliaSonera takes measures to detect and promptly respond to security incidents. TeliaSonera maintains a zero acceptance policy towards criminal activities and fraud. While TeliaSonera through appropriate measures avoids failure in its work to secure network integrity and data security, external or internal factors may negatively impact security and cause negative effects on customers' perception on how TeliaSonera handles these matters, possibly leading to an adverse impact on TeliaSonera's business and results of operations. To reduce the distribution of online content depicting sexual abuse of children, TeliaSonera has in its Swedish, Spanish and Nepalese networks introduced the Child Safeguard service, enabling telecom operators and internet service providers to prevent access to websites with child sexual abuse images. The service is based on Internet Watch Foundation's continuous identification and registration of online sexually abusive content.
For any large company with high purchasing volumes, assuring compliance with its corporate responsibility principles in the supply chain is a challenge and represents a reputational risk that needs to be mitigated. TeliaSonera predominantly purchases from a limited number of large strategic global suppliers with well-established corporate responsibility management practices. Risks related to the selection of local suppliers are assessed as part of the procurement process and controlled through management practices and internal control procedures.
Higher or volatile energy prices or energy shortages caused by weather conditions and regulation of or other intervention in the electricity and oil production negatively impact TeliaSonera's results of operations. By focusing on energy efficiency in its networks, from using alternative energy sources to establishing more energy-efficient technical centers accommodating additional traffic without increasing energy consumption, TeliaSonera aims at mitigating the effects of future price fluctuations and shortages.
As a consequence of climate change, extreme weather conditions are expected to become more frequent. Examples may include but are not limited to extreme storms at any time during the year, unusually high snow levels or floods caused by heavy rainfalls. Also internet attacks, technical center break-downs and pandemics are examples of emergency situations that may cause a major negative financial impact on TeliaSonera's business if preventing TeliaSonera from keeping its networks running for the customers.
To limit the effects of emergency situations, TeliaSonera has formed a crisis management organization, including a corporate crisis team and joint business area crisis teams on country level.
TeliaSonera conducts some of its activities, particularly outside of the Nordic region, through associated companies in which TeliaSonera does not have a controlling interest, such as Turkcell Iletisim Hizmetleri A.S. in Turkey, OAO MegaFon in Russia, and Lattelecom SIA in Latvia. As a result, TeliaSonera has limited influence over the conduct of these businesses. Under the governing documents for certain of these entities,
TeliaSonera's partners have control over or share control of key matters such as the approval of business plans and budgets, and decisions as to the timing and amount of cash distributions. The risk of actions outside TeliaSonera's or its associated companies' control and adverse to TeliaSonera's interests, or disagreement or deadlock, is inherent in associated companies and jointly controlled entities.
As part of its strategy, TeliaSonera may increase its shareholdings in some of its associated companies. The implementation of such strategy, however, may be difficult due to a variety of factors, including factors beyond TeliaSonera's control, such as willingness on the part of other existing shareholders to dispose or accept dilution of their shareholdings and, in the event TeliaSonera gains greater control, its ability to successfully manage the relevant businesses.
Further, TeliaSonera might not be able to assure that the associated companies apply the same corporate responsibility principles, increasing the risk for wrongdoings and reputational and financial losses. TeliaSonera strives to use its board presence and active ownership practices to promote the implementation of its corporate responsibility principles.
In Sweden, TeliaSonera has entered into a cooperation arrangement with Tele2 to build and operate a UMTS network through a 50 percent owned joint venture, Svenska UMTS-nät AB, which has rights to a Swedish UMTS license. TeliaSonera has made significant financial investments in this venture. As this is a jointly controlled venture, there is a risk that the partners may disagree on important matters, including the funding of the company. This risk may be magnified because TeliaSonera and Tele2 are significant competitors. A disagreement or deadlock regarding the company or a breach by one of the parties of the material provisions of the cooperation arrangements could have a negative effect on TeliaSonera.
The market price of the TeliaSonera share has been volatile in the past, partly due to volatility in the securities market in general and for telecom companies in particular, and may be volatile in the future. TeliaSonera's share price may be affected by many factors in addition to TeliaSonera's financial results, operations and direct business environment, including but not limited to: expectations of financial analysts and investors compared to the actual financial results; acquisitions or disposals that TeliaSonera makes or is expected or speculated to make; TeliaSonera's potential participation in the industry consolidation or speculation thereof; and speculation of financial analysts and investors regarding TeliaSonera's future dividend policy compared to the current policy.
The Swedish State holds 37.3 percent and the Finnish State holds 13.7 percent of TeliaSonera's outstanding shares. Accordingly, the Swedish State, acting alone, may have and the Swedish State and the Finnish State, if they should choose to act together, will have the power to influence any matters submitted for a vote of shareholders. The interests of the Swedish State and the Finnish State in deciding these matters could be different from the interests of TeliaSonera's other shareholders.
In addition, any sale by the Swedish State or the Finnish State of a significant number of TeliaSonera shares, or the public perception that these sales could occur, may cause the market price of TeliaSonera shares to fluctuate significantly. As far as TeliaSonera is aware, the Swedish State and the Finnish State are currently not under any contractual commitment that would restrict their ability to sell any shares.
| SEK in millions | Note | Jan–Dec 2011 | Jan–Dec 2010 |
|---|---|---|---|
| Net sales | P2 | 30 | 13,236 |
| Costs of production | P3 | -15 | -10,347 |
| Gross income | 15 | 2,889 | |
| Selling and marketing expenses | P3 | -27 | -157 |
| Administrative expenses | P3 | -207 | -856 |
| Research and development expenses | P3 | -0 | -88 |
| Other operating income | P4 | 79 | 81 |
| Other operating expenses | P4 | -1,476 | -66 |
| Operating loss/income | -1,616 | 1,803 | |
| Financial income and expenses | P5 | 12,650 | 32,958 |
| Income after financial items | 11,034 | 34,761 | |
| Appropriations | P6 | -62 | -4,963 |
| Income before taxes | 10,972 | 29,798 | |
| Income taxes | P6 | -1,281 | -4,376 |
| Net income | 9,691 | 25,422 |
| SEK in millions | Note | Jan–Dec 2011 | Jan–Dec 2010 |
|---|---|---|---|
| Net income | 9,691 | 25,422 | |
| Cash flow hedges | -118 | 87 | |
| Available-for-sale financial instruments | -1 | -90 | |
| Income taxes relating to other comprehensive income | 31 | -23 | |
| Total other comprehensive income | P7 | -88 | -26 |
| Total comprehensive income | 9,603 | 25,396 |
| SEK in millions | Note | Dec 31, 2011 | Dec 31, 2010 |
|---|---|---|---|
| Assets | |||
| Goodwill and other intangible assets | P8 | 26 | 435 |
| Property, plant and equipment | P9 | 15 | 3,990 |
| Deferred tax assets | P6 | 280 | 271 |
| Other financial assets | P10 | 177,327 | 169,596 |
| Total non-current assets | 177,648 | 174,292 | |
| Inventories | P11 | – | 2 |
| Trade and other receivables | P12 | 34,571 | 52,369 |
| Current tax receivables | 243 | – | |
| Short-term investments | P13 | 7,255 | 7,940 |
| Cash and bank | P13 | 1,592 | 4,733 |
| Total current assets | 43,661 | 65,044 | |
| Total assets | 221,309 | 239,336 | |
| Shareholders' equity and liabilities | |||
| Restricted equity | |||
| Share capital | 13,856 | 14,369 | |
| Other reserves | 1,855 | 1,855 | |
| Non-restricted equity | |||
| Retained earnings | 56,446 | 52,927 | |
| Net income | 9,691 | 25,422 | |
| Total shareholders' equity | 81,848 | 94,573 | |
| Untaxed reserves | P6 | 13,271 | 13,209 |
| Provisions for pensions and employment contracts | P15 | 490 | 524 |
| Other provisions | P16 | 80 | 96 |
| Total provisions | 570 | 620 | |
| Interest-bearing liabilities | |||
| Long-term borrowings | P17 | 80,072 | 72,379 |
| Short-term borrowings | P17 | 43,434 | 54,197 |
| Non-interest-bearing liabilities | |||
| Long-term liabilities | P18 | 8 | 264 |
| Current tax payables | – | 941 | |
| Short-term provisions, trade payables and other current liabilities | P19 | 2,106 | 3,153 |
| Total liabilities | 125,620 | 130,934 | |
| Total shareholders' equity and liabilities | 221,309 | 239,336 | |
| Contingent assets | P24 | – | – |
| Guarantees | P24 | 4,915 | 4,205 |
| Collateral pledged | P24 | 2 | – |
| SEK in millions | Note | Jan–Dec 2011 | Jan–Dec 2010 |
|---|---|---|---|
| Net income | 9,691 | 25,422 | |
| Adjustments for: | |||
| Amortization, depreciation and impairment losses | 370 | 6,498 | |
| Capital gains/losses on sales/discards of non-current assets | 1,762 | -114 | |
| Pensions and other provisions | -219 | -1,048 | |
| Financial items | 155 | -506 | |
| Group contributions and appropriations | -8,466 | -12,985 | |
| Income taxes | -1,147 | 555 | |
| Cash flow before change in working capital | 2,146 | 17,822 | |
| Increase (–)/Decrease (+) in operating receivables | 2,218 | 2,995 | |
| Increase (–)/Decrease (+) in inventories etc. | 0 | 2 | |
| Increase (+)/Decrease (–) in operating liabilities | -28 | -427 | |
| Change in working capital | 2,190 | 2,570 | |
| Cash flow from operating activities | 4,336 | 20,392 | |
| Intangible and tangible non-current assets acquired | -6 | -922 | |
| Equity instruments acquired | P25 | -4,035 | -10,975 |
| Equity instruments and operations divested | 12,998 | 430 | |
| Non-current assets divested, etc. | – | 2 | |
| Loans granted and other similar investments | -25,714 | -2,209 | |
| Compensation from pension fund | 170 | 850 | |
| Net change in interest-bearing current receivables | 1,045 | -1,101 | |
| Cash flow from investing activities | -15,542 | -13,925 | |
| Cash flow before financing activities | -11,206 | 6,467 | |
| Repurchased treasury shares including transaction costs | -9,983 | – | |
| Dividend to shareholders | -12,349 | -10,104 | |
| Group contributions and dividends received | 17,949 | 1,538 | |
| Proceeds from long-term borrowings | 17,864 | 7,658 | |
| Repayment of long-term borrowings | -4,321 | -7,945 | |
| Change in short-term borrowings | 197 | 1 | |
| Settlement of foreign exchange derivative contracts used for economic | |||
| hedges of cash-pool balances | -1,129 | -2,804 | |
| Cash flow from financing activities | 8,228 | -11,656 | |
| Change in cash and cash equivalents | -2,978 | -5,189 | |
| Cash and cash equivalents, opening balance | 11,773 | 16,962 | |
| Change in cash and cash equivalents | -2,978 | -5,189 | |
| Exchange rate differences in cash and cash equivalents | 52 | 0 | |
| Cash and cash equivalents, closing balance | P13 | 8,847 | 11,773 |
| Dividends received | 7,029 | 18,393 | |
| Interest received | 2,687 | 1,339 | |
| Interest paid | -4,831 | -3,506 | |
| Income taxes paid | -2,428 | -3,822 |
| SEK in millions | Note | Share capital |
Statutory reserve |
Revalu ation reserve |
Fair value reserve |
Retained earnings |
Total share holders' equity |
|---|---|---|---|---|---|---|---|
| Closing balance, December 31, 2009 | 14,369 | 1,855 | 1 | -130 | 63,185 | 79,280 | |
| Dividend | P14 | – | – | – | – | -10,104 | -10,104 |
| Total comprehensive income | – | – | – | -26 | 25,422 | 25,396 | |
| Share-based payments | P26 | – | – | − | – | 1 | 1 |
| Depreciation on tangible assets written-up | P14 | – | – | -1 | – | 1 | – |
| Closing balance, December 31, 2010 | 14,369 | 1,855 | − | -156 | 78,505 | 94,573 | |
| Dividend | P14 | – | – | – | – | -12,349 | -12,349 |
| Repurchased and canceled treasury shares | P14 | -513 | – | − | – | -9,470 | -9,983 |
| Total comprehensive income | – | – | – | -88 | 9,691 | 9,603 | |
| Share-based payments | P26 | – | – | − | – | 4 | 4 |
| Closing balance, December 31, 2011 | 13,856 | 1,855 | − | -244 | 66,381 | 81,848 |
| Note | Page | |
|---|---|---|
| P1. | Basis of Preparation | 98 |
| P2. | Net Sales | 98 |
| P3. | Expenses by Nature | 98 |
| P4. | Other Operating Income and Expenses | 99 |
| P5. | Financial Income and Expenses | 99 |
| P6. | Income Taxes | 100 |
| P7. | Other Comprehensive Income | 101 |
| P8. | Goodwill and Other Intangible Assets | 101 |
| P9. | Property, Plant and Equipment | 102 |
| P10. | Other Financial Assets | 102 |
| P11. | Inventories | 104 |
| P12. | Trade and Other Receivables | 105 |
| P13. | Short-term Investments, Cash and Cash Equivalents | 106 |
| P14. | Shareholders' Equity | 106 |
| P15. | Provisions for Pensions and Employment Contracts | 106 |
| P16. | Other Provisions | 107 |
| P17. | Long-term and Short-term Borrowings | 108 |
| P18. | Long-term Liabilities | 108 |
| P19. | Short-term Provisions, Trade Payables and Other Current Liabilities | 108 |
| P20. | Financial Assets and Liabilities by Category and Level | 109 |
| P21. | Financial Risk Management | 110 |
| P22. | Operating Lease Agreements | 111 |
| P23. | Related Party Transactions | 111 |
| P24. | Contingencies, Other Contractual Obligations and Litigation | 111 |
| P25. | Cash Flow Information | 112 |
| P26. | Human Resources | 112 |
| P27. | Remuneration to Audit Firms | 113 |
The parent company TeliaSonera AB's financial statements have been prepared in accordance with the Swedish Annual Accounts Act, other Swedish legislation, and standard RFR 2 "Accounting for Legal Entities" and other statements issued by the Swedish Financial Reporting Board. The standard is applicable to Swedish legal entities whose equities at the end of the reporting period are listed on a Swedish stock exchange or authorized equity market place. In their consolidated financial statements such companies have to comply with the EU regulation on international accounting standards, while they still have to comply with the Annual Accounts Act in their separate financial statements. RFR 2 states that as a main rule listed parent companies should apply IFRSs and specifies exceptions and additions, caused by legal provisions or by the connection between accounting and taxation in Sweden.
With the few exceptions below, TeliaSonera AB applies the same measurement bases and accounting principles as described in Notes to Consolidated Financial Statements (Note C3).
| Item | Note | Accounting treatment |
|---|---|---|
| Group contributions |
P5 | Under certain conditions, it is possible to transfer profits through group contri butions between Swedish companies in a group. A group contribution is normally a deductible expense for the contributor and a taxable income for the recipient. Group contributions are recognized as financial income and expenses from shares in subsidiaries. |
| Borrowing costs | P5, P8, P9 Borrowing costs directly attributable to the acquisition, construction or produc tion of an asset are not capitalized as part of the cost of that asset. |
|
| Investments in subsidiaries and associated com panies |
P5, P10 | Shares in subsidiaries and associated companies are recognized at cost less any impairment. Dividends received are brought to income while a repayment of contributed capital reduces the car rying value. |
| Provisions for pen sions and employ ment contracts |
P5, P15 | Pension obligations and pension ex penses are recognized in accordance with FAR accounting recommendation No. 4 (RedR 4). |
| Untaxed reserves and appropriations |
P6 | Untaxed reserves and appropriations are reported gross excluding deferred tax liabilities related to the temporary differences. |
| Goodwill | P8 | Goodwill is amortized systematically over a maximum of 5 years. |
| Leasing agreements |
P22 | All leasing agreements are accounted for as operating leases. |
Unless otherwise specified, all amounts are in millions of Swedish kronor (SEK million) or other currency specified and are based on the twelve-month period ended December 31 for income statement and cash flow statement items, and as of December 31 for balance sheet items, respectively.
For information relevant to TeliaSonera AB, see Notes to Consolidated Financial Statements (corresponding section in Note C1).
For information relevant to TeliaSonera AB, see Notes to Consolidated Financial Statements (Note C2).
Sales by customer location were distributed among economic regions as follows.
| SEK in millions | Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| European Economic Area (EEA) | 30 | 13,236 |
| of which European Union (EU) member states | 30 | 13,234 |
| of which Sweden | 30 | 13,221 |
| Total | 30 | 13,236 |
Net sales were broken down by product category as follows.
| SEK in millions | Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Fixed telephony | – | 7,836 |
| Internet | – | 2,619 |
| Network capacity | – | 1,567 |
| Data communications | – | 819 |
| Other | 30 | 395 |
| Total | 30 | 13,236 |
As of January 1, 2011, the parent company operations within fixed network services and broadband application services were transferred to a subsidiary. There was no invoiced advertising tax in the years 2011 and 2010, respectively.
Operating expenses are presented on the face of the income statement using a classification based on the functions "Cost of production," "Selling and marketing expenses," "Administrative expenses" and "Research and development expenses." Total expenses by function were distributed by nature as follows.
| SEK in millions | Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Goods and services purchased | -30 | -2 |
| Interconnect and roaming expenses | – | -856 |
| Other network expenses | -83 | -7,450 |
| Personnel expenses (see also Note P26) | -368 | -1,146 |
| Rent and leasing fees | -42 | -176 |
| Consultants' services | -149 | -128 |
| IT expenses | -78 | -941 |
| Invoiced and other expenses, net | 520 | 591 |
| Amortization, depreciation and impairment losses | -19 | -1,340 |
| Total | -249 | -11,448 |
As of January 1, 2011, the parent company operations within fixed network services and broadband application services were transferred to a subsidiary. Administrative and other parent company expenses which are not classified as shareholder costs are invoiced to the subsidiaries recognized as cost reductions.
Amortization, depreciation and impairment losses were distributed by function as follows.
| SEK in millions | Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Costs of production | -5 | -1,312 |
| Administrative expenses | -14 | -28 |
| Research and development expenses | − | -0 |
| Total | -19 | -1,340 |
Other operating income and expenses were distributed as follows.
| SEK in millions | Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Other operating income | ||
| Capital gains | 5 | 22 |
| Exchange rate gains | 1 | 17 |
| Patents sold, commissions, etc. | 5 | 0 |
| Recovered accounts receivable, released | ||
| accounts payable | − | 0 |
| Damages received | 68 | 42 |
| Total other operating income | 79 | 81 |
| Other operating expenses | ||
| Capital losses | -1,459 | -10 |
| Exchange rate losses | -13 | -25 |
| Restructuring costs | -4 | -31 |
| Total other operating expenses | -1,476 | -66 |
| of which amortization, depreciation and impairment losses |
− | − |
| Net effect on income | -1,397 | 15 |
| of which net exchange rate losses on derivative instruments held-for-trading |
-0 | -3 |
Financial income and expenses were distributed as follows.
| Jan–Dec | Jan–Dec | |
|---|---|---|
| SEK in millions | 2011 | 2010 |
| Income from shares in subsidiaries | ||
| Dividends | 7,029 | 18,393 |
| Group contributions received | 16,085 | 24,032 |
| Capital gains | 1,922 | 24 |
| Impairment losses | -348 | -5,158 |
| Group contributions rendered | -7,557 | -6,084 |
| Capital losses | -2,246 | -1 |
| Total | 14,885 | 31,206 |
| Income from shares in associated companies | ||
| Capital gains | 12 | − |
| Impairment losses | -1 | -1 |
| Total | 11 | -1 |
| Income from other financial investments | ||
| Dividends | 3 | 7 |
| Capital gains/losses, net | 5 | 79 |
| Changes in fair value | -3 | -5 |
| Total | 5 | 81 |
| Other financial income | ||
| Interest from subsidiaries | 1,084 | 360 |
| Other interest income | 204 | 156 |
| Exchange rate gains | 427 | 3,658 |
| Total | 1,715 | 4,174 |
| Other financial expenses | ||
| Interest to subsidiaries | -675 | -467 |
| Other interest expenses | -2,727 | -1,818 |
| Interest component of pension expenses | ||
| (see also Note P15) | -23 | -27 |
| Exchange rate losses | -541 | -190 |
| Total | -3,966 | -2,502 |
| Net effect on income | 12,650 | 32,958 |
Details on other interest expenses, net exchange rate gains and losses and other interest income related to hedging activities, loan receivables and borrowings were as follows.
| Jan–Dec 2011 |
Jan–Dec 2010 |
Jan–Dec 2011 |
Jan–Dec 2010 |
Jan–Dec 2011 |
Jan–Dec 2010 |
|
|---|---|---|---|---|---|---|
| SEK in millions | Other interest expenses | gains and losses | Net exchange rate | Other interest income | ||
| Fair value hedge derivatives | 239 | 368 | 66 | -2,786 | − | – |
| Cash flow hedge derivatives | -72 | -142 | 5 | -106 | − | – |
| Derivatives held-for-trading | -217 | 19 | 112 | -3,339 | − | – |
| Loans and receivables | − | − | 89 | 2,873 | 201 | 156 |
| Borrowings in fair value hedge relationships | -1,206 | -947 | -66 | 2,786 | − | – |
| Borrowings and other financial liabilities at amortized cost | -1,463 | -1,093 | -320 | 4,040 | − | – |
| Other | -8 | -24 | − | − | 3 | – |
| Total | -2,727 | -1,818 | -114 | 3,468 | 204 | 156 |
Borrowings at amortized cost include items in cash flow hedge relationships as well as unhedged items.
Tax items recognized in comprehensive income and directly in equity were distributed as follows.
| SEK in millions | Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Tax items recognized in net income | ||
| Current tax expense relating to current year | -1,259 | -4,357 |
| Underprovided or overprovided | ||
| current tax expense in prior years | 1 | -24 |
| Deferred tax expense originated or | ||
| reversed in current year | -23 | 5 |
| Total tax expense recognized in net income | -1,281 | -4,376 |
| Tax items recognized in other comprehensive income |
||
| Deferred tax originated or | ||
| reversed in current year | 31 | -23 |
| Total tax recognized in | ||
| other comprehensive income | 31 | -23 |
| Tax items recognized directly in equity | ||
| Current tax related to treasury share repurchase | ||
| transaction costs | 14 | − |
| Total tax recognized directly in equity | 14 | − |
Pre-tax income was SEK 10,972 million in 2011 and SEK 29,798 million in 2010. The difference between the nominal Swedish income tax rate and the effective tax rate comprises the following components.
| Percent | Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Swedish income tax rate | 26.3 | 26.3 |
| Underprovided or overprovided current tax | ||
| expense in prior years | 0.0 | 0.1 |
| Non-deductible expenses | 10.7 | 4.7 |
| Tax-exempt income | -25.3 | -16.4 |
| Effective tax rate in net income | 11.7 | 14.7 |
In 2011, as well as in 2010, tax-exempt income consisted primarily of dividends received from subsidiaries.
Deferred tax assets and liabilities changed as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Deferred tax assets | ||
| Carrying value, opening balance | 271 | 289 |
| Comprehensive income period change | 11 | -18 |
| Reversals of offset tax liabilities/assets | -2 | − |
| Carrying value, closing balance | 280 | 271 |
| Deferred tax liabilities | ||
| Carrying value, opening balance | − | − |
| Comprehensive income period change | 2 | − |
| Reversals of offset tax assets/liabilities | -2 | − |
| Carrying value, closing balance | − | − |
Temporary differences in deferred tax assets and liabilities were as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Deferred tax assets | ||
| Fair value adjustments for other financial assets | 78 | 47 |
| Delayed expenses for provisions | 204 | 224 |
| Subtotal | 282 | 271 |
| Offset deferred tax liabilities/assets | -2 | − |
| Total deferred tax assets | 280 | 271 |
| Deferred tax liabilities | ||
| Accelerated depreciation, non-current assets | 2 | − |
| Subtotal | 2 | − |
| Offset deferred tax assets/liabilities | -2 | − |
| Total deferred tax liabilities | − | − |
| Net deferred tax assets | 280 | 271 |
In 2011 and 2010, there were no accumulated non-expiring tax loss carry-forwards or unrecognized deferred tax assets. As of December 31, 2011 and 2010, the unrecognized deferred tax liability in untaxed reserves amounted to SEK 3,490 million and SEK 3,474 million, respectively.
Untaxed reserves in the balance sheet were distributed as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Profit equalization reserves | 13,271 | 11,697 |
| Accumulated excess amortization and depreciation | − | 1,512 |
| Total | 13,271 | 13,209 |
Excess amortization and depreciation changed as follows.
| Dec 31, 2011 | Dec 31, 2010 | |||
|---|---|---|---|---|
| SEK in millions | Intangible assets |
Plant and machinery |
Intangible assets |
Plant and machinery |
| Opening balance | 113 | 1,399 | 142 | 1,879 |
| Reversals | -113 | -1,399 | -29 | -480 |
| Closing balance | − | − | 113 | 1,399 |
As of January 1, 2011, the parent company operations within fixed network services and broadband application services were transferred to a subsidiary.
Appropriations brought to income were as follows.
| SEK in millions | Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Change in profit equalization reserves | -1,574 | -5,472 |
| Change in accumulated excess amortization and | ||
| depreciation | 1,512 | 509 |
| Net effect on income | -62 | -4,963 |
Other comprehensive income was distributed as follows.
| Equity component |
Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Fair value reserve | -120 | -22 |
| Fair value reserve | ||
| 2 | 109 | |
| Fair value reserve | 31 | -23 |
| -87 | 64 | |
| Fair value reserve | -1 | -90 |
| -1 | -90 | |
| -88 | -26 | |
| 31 | -23 | |
No transfer necessitated adjustment of the cost of acquisition.
The total carrying value was distributed and changed as follows.
| Dec 31, 2011 |
Dec 31, 2010 |
Dec 31, 2011 |
Dec 31, 2010 |
|
|---|---|---|---|---|
| Other intangible | ||||
| SEK in millions | Goodwill | assets | ||
| Accumulated cost | − | 114 | 77 | 887 |
| Accumulated amortization | − | -113 | -51 | -329 |
| Accumulated impairment losses | − | − | − | -124 |
| Carrying value | − | 1 | 26 | 434 |
| of which work in progress | − | − | 3 | 167 |
| Carrying value, opening balance | 1 | 2 | 434 | 1,030 |
| Investments and operations | ||||
| acquired | − | − | 3 | 290 |
| Sales and disposals | -1 | − | -399 | -827 |
| Reclassifications | − | − | 1 | 185 |
| Amortization for the year | − | -1 | -13 | -196 |
| Impairment losses for the year | − | − | -0 | -48 |
| Carrying value, closing balance | − | 1 | 26 | 434 |
As of January 1, 2011, the parent company operations within fixed network services and broadband application services were transferred to a subsidiary. No general changes of useful lives were made in 2011. Goodwill was amortized straight-line over 5 years. For other useful lives applied, see Notes to Consolidated Financial Statements (corresponding section in Note C2). In the income statement, amortization and impairment losses are, if applicable, included in all expense line items by function as well as in line item Other operating expenses. Accelerated amortization, to the extent allowed by Swedish tax legislation, is recorded as untaxed reserves and appropriations (see this section in Note P6 "Income Taxes").
The carrying value of other intangible assets was distributed as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Capitalized development expenses | 23 | 266 |
| Licenses, contractual agreements, patents, etc. | − | 1 |
| Work in progress | 3 | 167 |
| Total carrying value | 26 | 434 |
Capitalized development expenses and work in progress mainly refer to administrative IT support systems.
The total carrying value was distributed and changed as follows.
| Dec 31, 2011 |
Dec 31, 2010 |
Dec 31, 2011 |
Dec 31, 2010 |
Dec 31, 2011 |
Dec 31, 2010 |
Dec 31, 2011 |
Dec 31, 2010 |
|
|---|---|---|---|---|---|---|---|---|
| SEK in millions | Property | Plant and machinery | and installations | Equipment, tools | Total | |||
| Accumulated cost | − | 569 | 8 | 41,009 | 22 | 482 | 30 | 42,060 |
| Accumulated depreciation | − | -259 | -3 | -36,957 | -12 | -368 | -15 | -37,584 |
| Accumulated impairment losses | – | – | − | -552 | − | -5 | − | -557 |
| Accumulated write-ups | – | – | − | 6 | − | – | − | 6 |
| Advances | – | – | − | 65 | − | – | − | 65 |
| Carrying value | − | 310 | 5 | 3,571 | 10 | 109 | 15 | 3,990 |
| of which assets under construction | − | − | − | 511 | − | − | − | 511 |
| Carrying value, opening balance | 310 | 311 | 3,571 | 4,331 | 109 | 107 | 3,990 | 4,749 |
| Investments and operations acquired | − | 12 | 2 | 543 | 1 | 13 | 3 | 568 |
| Sales and disposals | -317 | – | -3,559 | -85 | -95 | -26 | -3,971 | -111 |
| Reclassifications | 7 | 20 | -8 | -256 | -0 | 51 | -1 | -185 |
| Depreciation for the year | − | -33 | -1 | -1,027 | -5 | -36 | -6 | -1,096 |
| Advances | − | − | − | 65 | − | − | − | 65 |
| Carrying value, closing balance | − | 310 | 5 | 3,571 | 10 | 109 | 15 | 3,990 |
As of January 1, 2011, the parent company operations within fixed network services and broadband application services were transferred to a subsidiary. No general changes of useful lives were made in 2011. For useful lives applied, see Notes to Consolidated Financial Statements (corresponding section in Note C2). In the income statement, amortization and impairment losses are, if applicable, included in all expense line items by function as well as in line item Other operating expenses. Accelerated depreciation, to the extent allowed by Swedish tax legislation, is recorded as untaxed reserves and appropriations (see this section in Note P6 "Income Taxes").
The total carrying value changed as follows.
| Dec 31, 2011 |
Dec 31, 2010 |
Dec 31, 2011 |
Dec 31, 2010 |
Dec 31, 2011 |
Dec 31, 2010 |
Dec 31, 2011 |
Dec 31, 2010 |
|
|---|---|---|---|---|---|---|---|---|
| SEK in millions | associated companies | Investments in | equity instruments | Investments in other | financial assets | Investments in subsidiaries and other non-current |
Total | |
| Carrying value, opening balance | 899 | 899 | 18 | 148 | 168,679 | 164,043 | 169,596 | 165,090 |
| New share issues and shareholder contribu | ||||||||
| tions | 2 | – | 6 | – | 4,014 | 5 | 4,022 | 5 |
| Additions | – | – | – | – | 15,085 | 11,007 | 15,085 | 11,007 |
| Divestitures | – | – | – | -40 | -11,210 | -282 | -11,210 | -322 |
| Impairment losses | – | – | – | – | 108 | -6,094 | 108 | -6,094 |
| Reclassifications | – | – | – | – | -271 | – | -271 | − |
| Changes in fair value | – | – | -3 | -90 | – | – | -3 | -90 |
| Carrying value, closing balance | 901 | 899 | 21 | 18 | 176,405 | 168,679 | 177,327 | 169,596 |
The total carrying and fair values of other financial assets by class were as follows.
| Dec 31, 2011 | Dec 31, 2010 | ||||
|---|---|---|---|---|---|
| SEK in millions | Carrying value | Fair value | Carrying value | Fair value | |
| Investments in other equity instruments available-for-sale | 2 | 2 | 2 | 2 | |
| Investments in other equity instruments held-for-trading | 15 | 15 | 12 | 12 | |
| Convertible bonds available-for-sale | 4 | 4 | 4 | 4 | |
| Interest rate and cross currency interest rate swaps at fair value | 1,910 | 1,910 | 1,597 | 1,597 | |
| of which designated as fair value hedges | 1,742 | 1,742 | 1,275 | 1,275 | |
| of which held-for-trading | 168 | 168 | 322 | 322 | |
| Currency swaps and forward exchange contracts held-for-trading | 2 | 2 | 3 | 3 | |
| Subtotal (see Fair value hierarchy levels – Note P20) | 1,933 | 1,933 | 1,618 | 1,618 | |
| Loans and receivables at amortized cost | 1,603 | 1,744 | 0 | 0 | |
| Subtotal (see Categories – Note P20 and Credit risk – Note P21)/ | |||||
| Total fair value | 3,536 | 3,677 | 1,618 | 1,618 | |
| Investments in subsidiaries | 159,705 | 166,925 | |||
| Receivables from subsidiaries | 13,181 | 150 | |||
| Investments in associated companies | 901 | 899 | |||
| Investments in other equity instruments at cost | 4 | ||||
| Total other financial assets | 177,327 | 169,596 | |||
| of which interest-bearing | 16,719 | 1,768 | |||
| of which non-interest-bearing | 160,608 | 167,828 |
For Loans and receivables (including claims on associated companies), fair value is estimated at the present value of future cash flows discounted by applying market interest rates at the end of the reporting period. As there had been no significant change in credit quality, Loans and receivables as of the end of the reporting period were not provided for.
For more information on financial instruments by category/ fair value hierarchy level and exposed to credit risk, refer to
Note P20 "Financial Assets and Liabilities by Category and Level" and section "Credit risk management" in Note P21 "Financial Risk Management," respectively. Conventional commercial terms apply for receivables from subsidiaries.
Investments in subsidiaries are specified below, while corresponding information on associated companies and other equity instruments is presented in Notes to Consolidated Financial Statements (Notes C15 and C16).
| Subsidiary, | Participation | Number of | Carrying value (SEK in millions) | ||
|---|---|---|---|---|---|
| Corp. Reg. No., registered office | (%) | shares | Dec 31, 2011 | Dec 31, 2010 | |
| Swedish companies | |||||
| TeliaSonera Skanova Access AB, 556446-3734, Stockholm | 100 | 21,255,000 | 34,003 | 34,003 | |
| Telia Nättjänster Norden AB, 556459-3076, Stockholm | 100 | 68,512 | 7,006 | 5,557 | |
| TeliaSonera Sverige AB, 556430-0142, Stockholm | 100 | 3,000,000 | 2,898 | 2,898 | |
| TeliaSonera Mobile Networks AB, 556025-7932, Nacka | 100 | 550,000 | 2,698 | 2,698 | |
| TeliaSonera Norge Holding AB, 556591-9759, Stockholm | 100 | 1,000 | 2,255 | 0 | |
| Telia International AB, 556352-1284, Stockholm | 100 | 20,000 | 1,722 | 1,722 | |
| Cygate Group AB (publ), 556364-0084, Solna | 100 | 532,724,280 | 681 | 681 | |
| TeliaSonera International Carrier AB, 556583-2226, Stockholm | 100 | 1,000,000 | 453 | 453 | |
| TeliaSonera Finans AB, 556404-6661, Stockholm | 100 | 1,000 | 229 | 229 | |
| TeliaSonera Försäkring AB, 516401-8490, Stockholm | 100 | 1,000,000 | 200 | 200 | |
| TeliaSonera Sverige Net Fastigheter AB, 556368-4801, Stockholm | 100 | 5,000 | 169 | 169 | |
| Sense Communications AB, 556582-8968, Stockholm | 100 | 250,000 | 34 | 34 | |
| Sergel Kredittjänster AB, 556264-8310, Stockholm | 100 | 5,000 | 8 | 8 | |
| Telia International Management AB, 556595-2917, Stockholm | 100 | 1,000 | 5 | 5 | |
| TeliaSonera Asset Finance AB, 556599-4729, Stockholm | 100 | 1,000 | 4 | 4 | |
| TeliaSonera Network Sales AB, 556458-0040, Stockholm | 100 | 10,000 | 3 | 3 | |
| Other operating, dormant and divested companies | 0 | 1,372 |
| Subsidiary, | Participation | Number of | Carrying value (SEK in millions) | |
|---|---|---|---|---|
| Corp. Reg. No., registered office | (%) | shares | Dec 31, 2011 | Dec 31, 2010 |
| Non-Swedish companies | ||||
| TeliaSonera Finland Oyj, 1475607-9, Helsinki | 100 1,417,360,515 | 77,206 | 75,448 | |
| Sergel Oy, 1571416-1, Helsinki | 100 | 267,966,000 | 277 | 277 |
| TeliaSonera International Carrier Finland Oy, 1649304-9, Helsinki | 100 | 100 | 98 | 98 |
| TeliaSonera Danmark A/S, 18530740, Copenhagen | 100 | 14,500 | 6,835 | 6,835 |
| TeliaSonera International Carrier Denmark A/S, 24210413, Copenhagen | 100 | 1,000 | 172 | 172 |
| TEO LT, AB, 121215434, Vilnius | 68.3 | 530,504,838 | 2,884 | 218 |
| UAB Omnitel, 110305282, Vilnius | 100 | 39,688,889 | 2,797 | 2,797 |
| UAB Sergel, 125026242, Vilnius | 100 | 1,500 | 7 | 7 |
| SIA Telia Latvija, 000305757, Riga | 100 | 328,300 | 123 | 123 |
| TeliaSonera International Carrier Latvia SIA, 000325135, Riga | 100 | 205,190 | 13 | 13 |
| Latvijas Mobilais Telefons SIA, 000305093, Riga | 24.5 | 140,679 | 2 | 2 |
| SIA Sergel, 010318318, Riga | 100 | 1,000 | 1 | 1 |
| AS Eesti Telekom, 10234957, Tallinn | 100 | 137,954,528 | 6,702 | 6,702 |
| Xfera Móviles S.A., A82528548, Madrid | 76.6 | 517,025,247 | 2,549 | 2,549 |
| ZAO TeliaSonera International Carrier Russia, 102780919732, Moscow | 100 | 220,807,825 | 200 | 200 |
| TeliaSonera Telekomünikasyon Hizmetleri L.S., 381395, Istanbul | 99 | 79,193 | 10 | 10 |
| TeliaSonera International Carrier Telekomünikasyon L.S., 609188-556770, Istanbul | 100 | 55,919 | 8 | 8 |
| TeliaSonera International Carrier Germany GmbH, HRB50081, Frankfurt am Main | 100 | – | 1,329 | 1,329 |
| TeliaSonera International Carrier France S.A.S., B421204793, Paris | 100 | 2,700,000 | 681 | 681 |
| TeliaSonera International Carrier Austria, FN191783i, Vienna | 100 | – | 118 | 118 |
| TeliaSonera International Carrier Switzerland AG, 2171000547-8, Zurich | 100 | 1,000 | 54 | 54 |
| Telia Telecommunications International B.V., 34135584, Rotterdam | 100 | 45,000 | 4,785 | 4,785 |
| TeliaSonera International Carrier Netherlands B.V., 34128048, Amsterdam | 100 | 910 | 60 | 60 |
| TeliaSonera Assignments B.V., 24300363, Rotterdam | 100 1,810,719,000 | 1 | – | |
| TeliaSonera International Carrier Belgium S.A., 469422293, Brussels | 100 | 50,620 | 20 | 20 |
| TeliaSonera International Carrier Italy S.p.A, 07893960018, Turin | 100 | 530,211 | 17 | 17 |
| TeliaSonera International Carrier Ireland Ltd., 347074, Dublin | 100 | 27 | 6 | 6 |
| TOV TeliaSonera International Carrier Ukraine, 34716440, Kyiv | 100 | – | 6 | 6 |
| TeliaSonera International Carrier Poland Sp. z o.o., KRS00000186, Warsaw | 100 | 52,500 | 58 | 58 |
| TeliaSonera International Carrier Czech Republic a.s., 26207842, Prague | 100 | 20,000 | 126 | 182 |
| TeliaSonera International Carrier Slovakia, s.r.o., 36709913, Bratislava | 100 | – | 7 | 7 |
| TeliaSonera International Carrier Hungaria Távközlési Kft., 01-09-688192, Budapest | 100 | – | 19 | 32 |
| TeliaSonera International Carrier Bulgaria EOOD, 175215740, Sofia | 100 | 40,050 | 19 | 19 |
| TeliaSonera International Carrier Romania S.R.L., 20974985, Bukarest | 100 | 20,001 | 10 | 10 |
| TeliaSonera International Carrier, Inc., 541837195, Herndon, VA | 100 | 100 | 136 | 136 |
| TeliaSonera International Carrier Singapore Pte. Ltd, 200005728N, Singapore | 100 | 1,200,002 | 1 | 1 |
| Other operating, dormant and divested companies | 0 | 13,908 | ||
| Total | 159,705 | 166,925 |
Telia Danmark is a branch of Telia Nättjänster Norden AB. Through its Norwegian branch, TeliaSonera Norge Holding AB owns the vast majority of the TeliaSonera companies in Norway. Another 24.5 percent of the shares in Latvijas Mobilais Telefons SIA are owned by a subsidiary. TeliaSonera has a board majority on Latvijas Mobilais Telefons. The remaining shares in TeliaSonera Telekomünikasyon Hizmetleri L.S. are owned by TeliaSonera Finland Oyj which also indirectly controls Fintur Holdings B.V. and TeliaSonera UTA Holding B.V.
Equity participation corresponds to voting rights participation in all companies except Xfera Móviles S.A., where TeliaSonera controls 80 percent of the votes by virtue of a shareholders agreement.
Other operating and dormant companies do not control Group assets of significant value. Holdings of Other Swedish companies for the comparative year (SEK 1,372 million) refer to Amber Mobile Teleholding AB, Telia International Holdings AB, IKT II Holding AB and Baltic Tele AB, which were liquidated in 2011. Holdings of Other non-Swedish companies for the comparative year (SEK 13,908 million) refer to Amber Teleholding A/S and Holmbladsgade 140 A/S, which were liquidated in 2011, and to Telia NetCom Holding AS, Next-GenTel AS, TeliaSonera Chess Holding AS, Telia Norge AS and TeliaSonera International Carrier Norway AS, which were transferred to a subsidiary in 2011.
In addition to the companies mentioned above, TeliaSonera AB indirectly controls a number of operating and dormant subsidiaries of subsidiaries.
As of January 1, 2011, the parent company operations within fixed network services and broadband application services were transferred to a subsidiary. The transfer included all inventories.
The carrying value of trade and other receivables was distributed as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Interest rate and cross currency interest rate swaps designated as fair value hedges |
− | 13 |
| Currency swaps and forward exchange contracts held-for-trading |
421 | 349 |
| Subtotal (see Fair value hierarchy levels – Note P20) |
421 | 362 |
| Accounts receivable at amortized cost | 5 | 117 |
| Receivables from associated companies and joint | ||
| ventures at amortized cost | 80 | 203 |
| Loans and receivables at amortized cost | 30 | 17 |
| Subtotal (see Categories – Note P20 and Credit risk – Note P21) |
536 | 699 |
| Receivables from subsidiaries | 33,808 | 51,328 |
| of which cash-pool balances and | ||
| short-term deposits | 24,870 | 30,643 |
| of which trade and other receivables | 8,938 | 20,685 |
| Other current receivables | 169 | 174 |
| Deferred expenses | 58 | 168 |
| Total trade and other receivables | 34,571 | 52,369 |
| of which interest-bearing | 24,901 | 31,145 |
| of which non-interest-bearing | 9,670 | 21,224 |
For Accounts receivable and Loans and receivables, the carrying values equal fair value as the impact of discounting is insignificant. For Accounts receivable and Loans and receivables (including receivables from associated companies and joint ventures), at the end of the reporting period, concentration of credit risk by geographical area and by customer segment was as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Geographical area | ||
| Sweden | 115 | 336 |
| Other countries | 0 | 1 |
| Total carrying value | 115 | 337 |
| Customer segment | ||
| Other operators | − | 248 |
| Other customers | 115 | 89 |
| Total carrying value | 115 | 337 |
For more information on financial instruments by category/fair value hierarchy level and exposed to credit risk, refer to Note P20 "Financial Assets and Liabilities by Category and Level" and section "Credit risk management" in Note P21 "Financial Risk Management," respectively. Conventional commercial terms apply for receivables from subsidiaries.
As of the end of the reporting period, allowance for doubtful and ageing of Accounts receivable, respectively, were as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Accounts receivable invoiced | 13 | 142 |
| Allowance for doubtful accounts receivable | -8 | -25 |
| Total accounts receivable | 5 | 117 |
| Accounts receivable not due | 3 | 109 |
| Accounts receivable past due but not impaired | 2 | 8 |
| of which less than 30 days | − | 0 |
| of which 30–180 days | − | 1 |
| of which more than 180 days | 2 | 7 |
| Total accounts receivable | 5 | 117 |
As of the end of the reporting period, ageing of Loans and receivables (including receivables from associated companies and joint ventures) were as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Loans and receivables not due | 110 | 212 |
| Loans and receivables past due but not impaired | − | 8 |
| of which more than 180 days | – | 8 |
| Total loans and receivables | 110 | 220 |
Receivables past due at the end of the reporting period were not provided for as there had not been a significant change in credit quality and the amounts were still considered recoverable. TeliaSonera AB does not hold any significant collateral over these balances. See also Notes to Consolidated Financial Statements (section "Credit risk management" in Note C27) for information on mitigation of risks related to accounts receivable.
There were no bad debt expenses and no recovered accounts receivable in 2011 and in 2010. The allowance for doubtful accounts receivable changed as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Opening balance | 25 | 445 |
| Provisions for receivables impaired | 8 | – |
| Receivables written-off as uncollectible | − | -420 |
| Unused amounts reversed | -25 | -0 |
| Closing balance | 8 | 25 |
Short-term investments, cash and cash equivalents were as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Short-term investments with | ||
| maturities over 3 months | − | 900 |
| of which bank deposits at amortized cost | − | 900 |
| Short-term investments with | ||
| maturities up to and including 3 months | 7,255 | 7,040 |
| of which bank deposits at amortized cost | 7,255 | 7,040 |
| Total short-term investments | 7,255 | 7,940 |
| Cash and bank | 1,592 | 4,733 |
| Total (see Categories – Note P20 and | ||
| Credit risk – Note P21) | 8,847 | 12,673 |
| of which Cash and cash equivalents | 8,847 | 11,773 |
Cash and cash equivalents are defined as the sum of Shortterm investments with maturities up to and including 3 months and the balance sheet item Cash and bank. The carrying values are assumed to approximate fair values as the risk of changes in value is insignificant. As of December 31, 2011, there were no blocked funds in TeliaSonera AB's bank accounts. For more information on financial instruments by category and exposed to credit risk, refer to Note P20 "Financial Assets and Liabilities by Category and Level" and section "Credit risk management" in Note P21 "Financial Risk Management," respectively.
Share capital, treasury shares, earnings per share and dividends See Notes to Consolidated Financial Statements
(corresponding sections in Note C20).
The revaluation reserve changed as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Carrying value, opening balance | – | 1 |
| Depreciation | – | -1 |
| Carrying value, closing balance | – | – |
The vast majority of employees in TeliaSonera AB are covered by a defined benefit pension plan (the ITP-Tele plan) which means that the individual is guaranteed a pension equal to a certain percentage of his or her salary. The pension plan mainly includes retirement pension, disability pension and family pension. All employees born in 1979 or later are covered by a defined contribution pension plan (the ITP1 plan).
Most pension obligations are secured by Telia Pension Fund. Certain commitments, such as certain supplementary individual pension benefits and a right under the employment contracts for certain categories of personnel to retire at age 55, 60, or 63, are provided for by taxed reserves in the balance sheet.
Pension obligations are calculated annually, as of the end of the reporting period, based on actuarial principles.
The parent company's fixed network and broadband opera-
tions and personnel were transferred to a subsidiary as of January 1, 2011. Consequently and after supervision authority approval, the related pension obligations and plan assets were transferred to the subsidiary during 2011.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Opening balance, pension obligations | ||
| covered by plan assets | 9,633 | 9,949 |
| Opening balance, pension obligations | ||
| not covered by plan assets | 524 | 533 |
| Opening balance, total pension obligations | 10,157 | 10,482 |
| Current service cost | 36 | 96 |
| Interest cost, paid-up policy indexation | 111 | 315 |
| Benefits paid | -153 | -744 |
| Divested operations | -8,105 | -2 |
| Other changes in valuation of pension obligations | 35 | -6 |
| Termination benefits | – | 16 |
| Closing balance, pension obligations | ||
| covered by plan assets | 1,591 | 9,633 |
| Closing balance, pension obligations | ||
| not covered by plan assets | 490 | 524 |
| Closing balance, total pension obligations | 2,081 | 10,157 |
| of which PRI Pensionsgaranti pensions | 1,366 | 6,156 |
The fair value of plan assets changed as follows.
| SEK in millions, except percentages | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Opening balance, plan assets | 10,853 | 10,775 |
| Actual return | 30 | 928 |
| Divested operations | -8,661 | – |
| Payment from pension fund | -170 | -850 |
| Closing balance, plan assets | 2,052 | 10,853 |
| Actual return on plan assets (%) | 1.3 | 8.6 |
Provisions for pension obligations were recognized in the balance sheet as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Present value of pension obligations | 2,081 | 10,157 |
| Fair value of plan assets | -2,052 | -10,853 |
| Surplus capital in pension fund | 461 | 1,220 |
| Provisions for pension obligations | 490 | 524 |
Total pension income was distributed as follows.
| SEK in millions | Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Current service cost | 36 | 96 |
| Interest cost, paid-up policy indexation | 111 | 315 |
| Less interest expenses recognized | ||
| as financial expenses | -23 | -27 |
| Actual return on plan assets | -30 | -928 |
| Divested operations, plan assets | 8,661 | – |
| Divested operations, pension obligations | -8,105 | -2 |
| Other changes in valuation of pension obligations | 35 | -6 |
| Termination benefits | – | 16 |
| Pension expenses (+)/income(-), defined | ||
| benefit pension plans | 685 | -536 |
| Pension premiums, defined benefit/defined con | ||
| tribution pension plans and other pension costs | 47 | 89 |
| Changes in estimates | -6 | -16 |
| Less termination benefits (incl. premiums and pension-related social charges) reported as |
||
| restructuring cost | – | -23 |
| Pension expenses (+)/income (-) | 726 | -486 |
| Decrease (–)/Increase (+) of surplus capital in | ||
| pension fund | -760 | 395 |
| Recognized pension income | -34 | -91 |
| of which pension premiums paid | ||
| to the ITP pension plan | 6 | 33 |
The actuarial calculation of pension obligations and pension expenses is based on principles set by PRI Pensionsgaranti and the Swedish Financial Supervisory Authority, respectively.
The principal calculation assumption is the discount rate which, as a weighted average for the different pension plans and, as applicable, net of calculated yield tax, was 3.7 percent
At the end of the reporting period, plan assets were allocated as follows.
| Asset category | Dec 31, 2011 | Dec 31, 2010 | |||
|---|---|---|---|---|---|
| SEK in millions Percent |
SEK in millions | Percent | |||
| Fixed income instruments, liquidity | 1,010 | 49.2 | 5,340 | 49.2 | |
| Shares and other investments | 1,042 | 50.8 | 5,513 | 50.8 | |
| Total | 2,052 | 100.0 | 10,853 | 100.0 | |
| of which shares in TeliaSonera AB | 8 | 0.4 | 53 | 0.5 |
As of December 31, 2011, the fair value of plan assets exceeded the present value of pension obligations. Unless the fair value of plan assets during 2012 should fall short of the
present value of pension obligations, TeliaSonera AB has no intention to make any contribution to the pension fund.
In 2012, pension payments from the defined benefit plans are expected to be SEK 155 million.
Changes in other provisions were as follows.
| December 31, 2011 | ||||||
|---|---|---|---|---|---|---|
| SEK in millions | Payroll taxes on future pen sion payments |
Restructuring provisions |
Warranty provisions |
Damages and court cases |
Insurance provisions |
Total |
| Opening balance | 52 | 48 | 4 | 240 | 41 | 385 |
| of which financial liabilities at amortized cost | – | – | 4 | – | – | 4 |
| Provisions for the period | 5 | 5 | – | – | – | 10 |
| Utilized provisions | -12 | -48 | − | – | -6 | -66 |
| Reversals of provisions | – | – | − | – | – | – |
| Reclassifications | – | – | – | – | – | – |
| Closing balance | 45 | 5 | 4 | 240 | 35 | 329 |
| of which non-current portion | 45 | – | – | – | 35 | 80 |
| of which current portion | – | 5 | 4 | 240 | – | 249 |
| of which financial liabilities at amortized cost | ||||||
| (see Categories – Note P20) | – | – | 4 | – | – | 4 |
For financial liabilities, the carrying value equals fair value as provisions are discounted to present value. Refer to Note P20 "Financial Assets and Liabilities by Category and Level" for more information on financial instruments classified by category. As of December 31, 2011, contractual undiscounted cash flows for the financial liabilities represented the following expected maturities. Expected maturity refers to the earliest point in time, based on the agreement terms, at which the counterpart might call for settlement.
| Expected maturity | Jan–Mar | Apr–Jun | Jul–Dec | Later | Total | Carrying |
|---|---|---|---|---|---|---|
| SEK in millions | 2012 | 2012 | 2012 | years | value | |
| Financial liabilities | – | 4 | – | – | 4 | 4 |
Restructuring provisions mainly refer to staff redundancy costs related to cost saving programs in the Swedish operations, launched by management in 2005 and in 2008. As groupwide initiatives, the programs have been completed, but cost saving activities continued in 2010 and 2011 on business area level. The remaining provision as of December 31, 2011 is expected to be fully utilized in 2012. Warranty provisions include provisions for potential litigation and other provisions related to disposals and winding-up of group entities and associated companies. Full utilization of payroll taxes on future pension
payments, warranty provisions, damages and court cases, and insurance provisions is expected in the period 2012–2024.
The provisions represent the present value of management's best estimate of the amounts required to settle the liabilities. The estimates may vary mostly as a result of changes in actual pension payments, changes in the actual number of months an employee is staying in redeployment before leaving, changes in tax and other legislation and changes in the actual outcome of negotiations with lessors, sub-contractors and other external counterparts as well as the timing of such changes.
in 2011 and 3.0 percent in 2010. Obligations were calculated based on the salary levels prevailing at December 31, 2011 and 2010, respectively.
In 2011, PRI Pensionsgaranti changed its life expectancy assumptions, resulting in a SEK 82 million one-off increase of the parent company's pension obligations.
For information on TeliaSonera AB's open-market financing programs, see Notes to Consolidated Financial Statements (corresponding section in Note C21).
Long-term and short-term borrowings were distributed as follows.
| Dec 31, 2011 | Dec 31, 2010 | ||||
|---|---|---|---|---|---|
| SEK in millions | Carrying value | Fair value | Carrying value | Fair value | |
| Long-term borrowings | |||||
| Open-market financing program borrowings in | |||||
| fair value hedge relationships | 17,896 | 17,896 | 16,253 | 16,253 | |
| Interest rate swaps at fair value | 421 | 421 | 276 | 276 | |
| of which designated as hedging instruments | 377 | 377 | 252 | 252 | |
| of which held-for-trading | 44 | 44 | 24 | 24 | |
| Cross currency interest rate swaps at fair value | 1,005 | 1,005 | 1,448 | 1,448 | |
| of which designated as hedging instruments | – | – | 4 | 4 | |
| of which held-for-trading | 1,005 | 1,005 | 1,444 | 1,444 | |
| Subtotal (see Fair value hierarchy levels – Note P20) | 19,322 | 19,322 | 17,977 | 17,977 | |
| Open-market financing program borrowings at amortized cost | 46,958 | 53,396 | 40,023 | 43,036 | |
| Other borrowings at amortized cost | 375 | 376 | 876 | 881 | |
| Subtotal (see Categories – Note P20)/Total fair value | 66,655 | 73,094 | 58,876 | 61,894 | |
| Borrowings from subsidiaries | 13,417 | 13,503 | |||
| of which other borrowings | 13,417 | 13,503 | |||
| Total long-term borrowings | 80,072 | 72,379 | |||
| Short-term borrowings | |||||
| Open-market financing program borrowings in | |||||
| fair value hedge relationships | – | – | 464 | 464 | |
| Interest rate swaps designated as hedging instruments | 8 | 8 | 7 | 7 | |
| Cross currency interest rate swaps held-for trading | 655 | 655 | – | – | |
| Subtotal (see Fair value hierarchy levels – Note P20) | 663 | 663 | 471 | 471 | |
| Open-market financing program borrowings at amortized cost | 9,703 | 9,744 | 3,983 | 3,995 | |
| Other borrowings at amortized cost | 697 | 698 | – | – | |
| Subtotal (see Categories – Note P20)/Total fair value | 11,063 | 11,105 | 4,454 | 4,466 | |
| Borrowings from subsidiaries | 32,371 | 49,743 | |||
| of which cash pool balances | 30,704 | 48,004 | |||
| of which other borrowings | 1,667 | 1,739 | |||
| Total short-term borrowings | 43,434 | 54,197 |
As of December 31, 2011 and 2010, fully unutilized bank overdraft facilities had a total limit of SEK 1,038 million and SEK 1,089 million, respectively.
For additional information on financial instruments classified by category/fair value hierarchy level, refer to Note P20 "Financial Assets and Liabilities by Category and Level", and for information on maturities and liquidity risks, refer to section "Liquidity risk management" in Note P21 "Financial Risk Management." Refer to Notes to Consolidated Financial Statements (corresponding section in Note C21) for further information on borrowings and the swap portfolio. Conventional commercial terms apply for borrowings from subsidiaries, which comprise cash-pool balances and other borrowings.
The carrying value of long-term liabilities was distributed as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Liabilities to subsidiaries | 6 | – |
| Prepaid contracts for broadband build-out | − | 254 |
| Other liabilities | 2 | 10 |
| Total long-term liabilities | 8 | 264 |
For the years 2011 and 2010, SEK – million and SEK 27 million, respectively, of the total long-term liabilities fell due more than 5 years after the end of the reporting period.
Short-term provisions, trade payables and other current liabilities were distributed as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Currency swaps, forward exchange contracts and currency options held-for-trading |
577 | 1,048 |
| Subtotal (see Fair value hierarchy levels – Note P20) |
577 | 1,048 |
| Accounts payable at amortized cost | 172 | 495 |
| Current liabilities at amortized cost | – | 112 |
| Subtotal (see Categories – Note P20) | 749 | 1,655 |
| Liabilities to subsidiaries | 959 | 833 |
| Other current liabilities | 398 | 568 |
| Deferred income | – | 97 |
| Total short-term provisions, trade payables and other current liabilities |
2,106 | 3,153 |
For Accounts payable and Current liabilities, the carrying value equals fair value as the impact of discounting is insignificant. For additional information on financial instruments classified by category/fair value hierarchy level and on liquidity risks, refer to Note P20 "Financial Assets and Liabilities by Category and Level" and section "Liquidity risk management" in Note P21 "Financial Risk Management." As of December 31, 2011, contractual cash flows for liabilities at amortized cost represented the following expected maturities.
| Expected maturity SEK in millions |
Jan–Mar 2012 |
Apr–Jun 2012 |
Jul–Sep 2012 |
Oct–Dec 2012 |
Total |
|---|---|---|---|---|---|
| Liabilities at | |||||
| amortized cost | – | 39 | 0 | 133 | 172 |
Corresponding information for currency derivatives held-fortrading are presented in section "Liquidity risk management" to Note P21 "Financial Risk Management."
Conventional commercial terms apply for trading with subsidiaries. The main components of Other current liabilities are short-term provisions (see Note P16 "Other Provisions") and accrued payroll expenses and social security contributions.
Carrying values of classes of financial assets and liabilities were distributed by category as follows. Financial assets and liabilities relating to subsidiaries are not included. Excluded are also investments in associated companies as discussed in Note P10 "Other Financial Assets" and pension obligations as discussed in Note P15 "Provisions for Pensions and Employment Contracts."
| SEK in millions | Note | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|---|
| Financial assets | |||
| Derivatives designated as hedging instruments |
P10, P12 | 1,742 | 1,288 |
| Financial assets at fair value through profit and loss |
606 | 686 | |
| Derivatives not designated as | |||
| hedging instruments | P10, P12 | 591 | 674 |
| Held-for-trading investments | P10 | 15 | 12 |
| Loans and receivables | P10, P12, | ||
| P13 | 10,565 | 13,010 | |
| Available-for-sale financial assets | P10 | 6 | 6 |
| Total financial assets by category | 12,919 | 14,990 | |
| Financial liabilities | |||
| Derivatives designated as hedging instruments |
P17 | 385 | 263 |
| Derivatives not designated as hedging instruments |
P17, P19 | 2,281 | 2,516 |
| Borrowings in fair value hedge relationships |
P17 | 17,896 | 16,717 |
| Financial liabilities measured at amortized cost |
P16, P17, P19 |
57,909 | 45,493 |
| Total financial liabilities by category | 78,471 | 64,989 |
The carrying values of classes of financial assets and liabilities were distributed by fair value hierarchy level as follows.
| December 31, 2011 | December 31, 2010 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Fair | of which | Fair | of which | ||||||
| SEK in millions | Note | value | Level 1 | Level 2 | Level 3 | value | Level 1 | Level 2 | Level 3 |
| Financial assets at fair value | |||||||||
| Investments in other equity instruments | |||||||||
| available-for-sale | P10 | 2 | 2 | – | – | 2 | 2 | – | – |
| Investments in other equity instruments | |||||||||
| held-for-trading | P10 | 15 | – | – | 15 | 12 | – | – | 12 |
| Convertible bonds available-for-sale | P10 | 4 | – | – | 4 | 4 | – | – | 4 |
| Derivatives designated as hedging instruments | P10, P12 | 1,742 | – | 1,742 | – | 1,288 | – | 1,288 | – |
| Derivatives held-for-trading | P10, P12 | 591 | – | 591 | – | 674 | – | 674 | – |
| Total financial assets at fair value by level | 2,354 | 2 | 2,333 | 19 | 1,980 | 2 | 1,962 | 16 | |
| Financial liabilities at fair value | |||||||||
| Borrowings in fair value hedge | |||||||||
| relationships | P17 | 17,896 | – | 17,896 | – | 16,717 | – | 16,717 | – |
| Derivatives designated as hedging instruments | P17 | 385 | – | 385 | – | 263 | – | 263 | – |
| Derivatives held-for-trading | P17, P19 | 2,281 | – | 2,281 | – | 2,516 | – | 2,516 | – |
| Total financial liabilities at fair value by level | 20,562 | – | 20,562 | – | 19,496 | – | 19,496 | – |
There were no transfers between Level 1 and 2 in 2011 and 2010.
Level 3 financial assets changed as follows.
| December 31, 2011 | December 31, 2010 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| SEK in millions | Investments in other equity instruments held-for-trading |
Convertible bonds available for-sale |
Total | Investments in other equity instruments held-for-trading |
Convertible bonds available for-sale |
Total | |||
| Level 3, opening balance | 12 | 4 | 16 | 12 | 4 | 16 | |||
| Changes in fair value | -3 | – | -3 | -5 | – | -5 | |||
| of which recognized in net income | -3 | – | -3 | -5 | – | -5 | |||
| of which related to assets held at reporting period-end |
-3 | – | -3 | -5 | – | -5 | |||
| Purchases | 6 | – | 6 | 5 | – | 5 | |||
| Level 3, closing balance | 15 | 4 | 19 | 12 | 4 | 16 |
Changes in fair value recognized in net income are included in line item Financial income and expenses, see specification in Note P5 "Financial Income and Expenses."
For information relevant to TeliaSonera AB, see Notes to Consolidated Financial Statements (Note C27).
TeliaSonera's exposure to credit risk arises from default of counterparts (including price risks as regards investments in equity instruments), with a maximum exposure equal to the carrying amount of these instruments (detailed in the respective note and excluding receivables from subsidiaries), as follows.
| Dec 31, | Dec 31, | ||
|---|---|---|---|
| SEK in millions | Note | 2011 | 2010 |
| Other financial assets | P10 | 3,536 | 1,618 |
| Trade and other receivables | P12 | 536 | 699 |
| Short-term investments, cash and | |||
| cash equivalents | P13 | 8,847 | 12,673 |
| Total | 12,919 | 14,990 |
For information on credit risk management relevant to TeliaSonera AB, see Notes to Consolidated Financial Statements (corresponding section in Note C27).
Liquidity risk is the risk that TeliaSonera AB will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. For information on liquidity risk management relevant to TeliaSonera AB, see Notes to Consolidated Financial Statements (corresponding section in Note C27).
As of December 31, 2011, contractual undiscounted cash flows for interest-bearing borrowings and non-interest-bearing currency derivatives (excluding intra-group derivatives) represented the following expected maturities, including installments and estimated interest payments. The balances due within 12 months equal their carrying values as the impact of discounting is insignificant.
| Expected maturity | Jan–Mar | Apr–Jun | Jul–Sep | Oct–Dec | Later | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| SEK in millions | 2012 | 2012 | 2012 | 2012 | 2013 | 2014 | 2015 | 2016 | years | Total |
| Open-market financing program borrowings | 829 | 5,180 | 4,150 | 1,659 | 8,261 | 10,781 | 10,408 | 4,587 | 45,068 | 90,923 |
| Other borrowings | 206 | 503 | 2 | 2 | 377 | – | – | – | – | 1,090 |
| Cross currency interest rate swaps and interest rate swaps |
||||||||||
| Payables | 550 | 5,804 | 494 | 1,026 | 7,127 | 3,782 | 11,656 | 5,032 | 3,341 | 38,812 |
| Receivables | -631 | -5,326 | -296 | -882 | -6,881 | -3,824 | -11,330 | -5,023 | -3,587 | -37,780 |
| Currency swaps and forward exchange contracts |
||||||||||
| Payables | 54,669 | 8,751 | 2,950 | 168 | 29 | 6 | – | – | – | 66,573 |
| Receivables | -54,680 | -8,672 | -2,912 | -170 | -30 | -5 | – | – | – -66,469 | |
| Total, net | 943 | 6,240 | 4,388 | 1,803 | 8,883 | 10,740 | 10,734 | 4,596 44,822 | 93,149 |
Expected maturities for and additional information on non-interest-bearing liabilities, guarantees and other contractual obligations are presented in Notes P16 "Other Provisions," P19 "Short-term Provisions, Trade Payables and Other Current Liabilities" and P24 "Contingencies, Other Contractual Obligations and Litigation," respectively.
TeliaSonera AB leases primarily office premises. Most of the leases are from outside parties. The leases are on commercial terms with respect to prices and duration. There was no subletting.
Future minimum leasing fees under operating lease agreements in effect as of December 31, 2011 that could not be canceled in advance and were in excess of one year were as follows.
| Expected maturity | Jan–Mar | Apr–Jun | Jul–Sep | Oct–Dec | Later | |||
|---|---|---|---|---|---|---|---|---|
| SEK in millions | 2012 | 2012 | 2012 | 2012 | 2013 | 2014 | years | Total |
| Future minimum leasing fees | 8 | 8 | 8 | 8 | 23 | 1 | – | 56 |
In 2011 and 2010, total rent and leasing fees paid were SEK 42 million and SEK 176 million, respectively.
Conventional commercial terms apply for the supply of goods and services to and from subsidiaries, associated companies and joint ventures.
In 2011 and 2010, sales to subsidiaries totaled SEK 30 million and SEK 10,375 million, respectively, while purchases from subsidiaries totaled SEK 487 million and SEK 6,647 million, respectively. The parent company's fixed network and broadband operations were transferred to a subsidiary as of January 1, 2011.
As of December 31, 2011, Telia Pension Fund held 1,487,099 TeliaSonera shares, or 0.03 percent of the voting rights. TeliaSonera AB's share of the fund's assets is 12 percent. For information on transactions and balances, see Note P15 "Provisions for Pensions and Employment Contracts."
TeliaSonera AB has made certain commitments on behalf of group companies, associated companies and joint ventures. See Note P24 "Contingencies, Other Contractual Obligations and Litigation" for further details.
For descriptions of certain other transactions with related parties, see Notes to Consolidated Financial Statements (Note C29).
As of the end of the reporting period, TeliaSonera AB had no contingent assets, while financial guarantees reported as contingent liabilities were distributed as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| Credit guarantee on behalf of | ||
| Svenska UMTS-nät AB | – | 1,375 |
| Subtotal (see Liquidity risk – Note P21) | – | 1,375 |
| Guarantees on behalf of subsidiaries | 4,877 | 2,695 |
| Guarantees for pension obligations | 38 | 135 |
| Total financial guarantees | 4,915 | 4,205 |
Some loan covenants agreed limit the scope for divesting or pledging certain assets. For information on change-of-control provisions included in some of TeliaSonera AB's more recent bond issuances, see Notes to Consolidated Financial Statements (corresponding section in Note C30).
For all financial guarantees issued, stated amounts equal the maximum potential future payments that TeliaSonera AB could be required to make under the respective guarantee. For information on the guarantee on behalf of Svenska UMTS-nät, see Notes to Consolidated Financial Statements (corresponding section in Note C30).
Guarantees on behalf of subsidiaries include SEK 3,727 million (EUR 417 million) related to Xfera Móviles S.A., of which counter guarantees of EUR 366 million as TeliaSonera's share on behalf of Xfera's performance requirements in relation to its telecom and frequency licenses and a counter guarantee of EUR 44 million as TeliaSonera's share to cover payment to a former Xfera shareholder, should the outcome of a legal dispute concerning Xfera's spectrum fee for 2001 be favorable. Guarantees on behalf of subsidiaries also include SEK 672 million related to Swedish pension obligations.
In addition to financial guarantees indicated above, guarantees for fulfillment of contractual undertakings are granted by TeliaSonera AB on behalf of subsidiaries, as part of the Group's normal course of business. At the end of the reporting period, there was no indication that payment will be required in connection with any such contractual guarantee.
As of the end of the reporting period, collateral pledged was distributed as follows.
| SEK in millions | Dec 31, 2011 |
Dec 31, 2010 |
|---|---|---|
| For commitments under a shareholders' | ||
| agreement: Shares in 4T Sverige AB | 2 | – |
| Total collateral pledged | 2 | – |
Under an agreement, all shareholders of 4T Sverige AB have mutually pledged their shares in favor of the other shareholders.
As of December 31, 2011, unrecognized contractual obligations regarding future acquisitions (or equivalent) of non-current assets represented the following expected maturities.
| Expected maturity SEK in millions |
Jan–Mar 2012 |
Apr–Jun 2012 |
Jul–Sep 2012 |
Oct–Dec 2012 |
Later years |
Total |
|---|---|---|---|---|---|---|
| Other intangible assets | 7 | 2 | 2 | 5 | – | 16 |
| Total (see Liquidity risk – Note P21) | 7 | 2 | 2 | 5 | – | 16 |
Reported obligations refer to licenses for and adaption of business support systems.
For additional information relevant to TeliaSonera AB, see Notes to Consolidated Financial Statements (corresponding section in Note C30).
In 2011, the liquidation of intermediate holding companies for the subsidiaries Telia Nättjänster Norden AB in Sweden and TEO LT, AB in Lithuania, respectively, resulted in non-cash share-barter transactions at fair value amounting to SEK 4,106 million.
The number of employees decreased to 249 at December 31, 2011 (1,255 at year-end 2010), mainly due to the transfer of the parent company's fixed network and broadband operations to a subsidiary as of January 1, 2011.
The average number of full-time employees was as follows.
| Jan–Dec 2011 | Jan–Dec 2010 | |||||
|---|---|---|---|---|---|---|
| Country | Total (number) |
of whom men (%) |
Total (number) |
of whom men (%) |
||
| Sweden | 239 | 50.6 | 1,396 | 69.6 | ||
| Total | 239 | 50.6 | 1,396 | 69.6 |
The share of female and male Corporate Officers was as follows. Corporate Officers include all members of the Board of Directors, the President, the Executive Vice President and the 8 other members (2010: 9 members) of Group Management employed by the parent company.
| Dec 31, 2011 | Dec 31, 2010 | ||||
|---|---|---|---|---|---|
| Percent | Board of Corporate Directors Officers |
Board of Directors |
Other Corporate Officers |
||
| Women | 27.3 | 30.0 | 27.3 | 27.3 | |
| Men | 72.7 | 70.0 | 72.7 | 72.7 | |
| Total | 100.0 | 100.0 | 100.0 | 100.0 |
Total personnel expenses were distributed by nature as follows.
| SEK in millions | Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Salaries and other remuneration | 281 | 913 |
| of which performance share programs | 4 | 1 |
| Social security expenses | ||
| Employer's social security contributions | 86 | 286 |
| of which performance share programs | 1 | 0 |
| Pension expenses | -34 | -91 |
| Total social security expenses | 52 | 195 |
| Other personnel expenses | 35 | 38 |
| Total personnel expenses recognized by nature | 368 | 1,146 |
Salaries and other remuneration were divided between Corporate Officers and other employees as follows.
| Jan–Dec 2011 | Jan–Dec 2010 | |||
|---|---|---|---|---|
| SEK in millions | Corporate Officers (of which variable pay) |
Other employees |
Corporate Officers (of which variable pay) |
Other employees |
| Salaries and other remuneration | 58 (−) | 223 | 58 (−) | 855 |
Corporate Officers include members of the Board of Directors and, as applicable, former Board members (but exclude employee representatives); the President and the Executive Vice President and, as applicable, former holders of these positions; and the 8 other members (2010: 9 members) of Group Management employed by the parent company.
Pension expenses and outstanding pension commitments for Corporate Officers were as follows. There are no pension benefit arrangements for external members of the Board of Directors.
| January–December or December 31, |
|||||
|---|---|---|---|---|---|
| SEK in millions | 2011 | 2010 | |||
| Pension expenses | 20 | 21 | |||
| Outstanding pension commitments | 156 | 176 |
For additional information, see sections "Performance Share Programs" and "Remuneration to corporate officers" in Notes to Consolidated Financial Statements (Note C32).
Remuneration billed by audit firms was as follows. See additional information in Notes to Consolidated Financial Statements (Note C33).
| SEK in millions | Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Remuneration expensed | ||
| PricewaterhouseCoopers AB (PwC) | ||
| Audits | 8 | 12 |
| Audit-related services | 0 | 1 |
| Tax services | 0 | 0 |
| All other services | 1 | 1 |
| Total PwC | 9 | 14 |
| Ernst & Young AB (E&Y) | ||
| Tax services, all other services | 8 | 2 |
| Total E&Y | 8 | 2 |
| KPMG AB (KPMG) | ||
| Tax services, all other services | 1 | 2 |
| Total KPMG | 1 | 2 |
| Other audit firms | ||
| Tax services, all other services | 3 | 0 |
| Total other audit firms | 3 | 0 |
| Total remuneration expensed | 21 | 18 |
| Remuneration recognized in equity | ||
| PwC | ||
| Audit-related services | 0 | – |
| Total PwC | 0 | – |
| Total remuneration recognized in equity | 0 | – |
| Total remuneration | 21 | 18 |
At the disposal of the Annual General Meeting:
The Board proposes that this sum be appropriated as follows:
| SEK | |
|---|---|
| Retained earnings | 56,445,229,060 |
| Net income | 9,691,402,715 |
| Total | 66,136,631,775 |
| SEK | |
|---|---|
| SEK 2.85 per share ordinary dividend to the shareholders | 12,340,741,626 |
| To be carried forward | 53,795,890,149 |
| Total | 66,136,631,775 |
The Board of Directors and the President and CEO certify that the consolidated financial statements have been prepared in accordance with IFRSs as adopted by the EU and give a true and fair view of the Group's financial position and results of operations. The financial statements of the Parent Company have been prepared in accordance with generally accepted accounting principles in Sweden and give a true and fair view of the Parent Company's financial position and results of operations. The Report of the Directors for the Group and the Parent Company provides a fair review of the development of the Group's
and the Parent Company's operations, financial position and results of operations and describes material risks and uncertainties facing the Parent Company and the companies included in the Group.
Stockholm, March 8, 2012
Anders Narvinger Chairman
Timo Peltola Vice-Chairman Agneta Ahlström
Magnus Brattström Stefan Carlsson Maija-Liisa Friman
Ingrid Jonasson Blank Conny Karlsson Lars Renström
Jon Risfelt Per-Arne Sandström
Lars Nyberg President and CEO
Our auditors' report was rendered March 9, 2012 PricewaterhouseCoopers AB
Bo Hjalmarsson Authorized Public Accountant Auditor in charge
Jeanette Skoglund Authorized Public Accountant
To the Annual Meeting of the shareholders of TeliaSonera AB (publ) Corporate Reg. No. 556103-4249
We have audited the annual accounts and consolidated accounts TeliaSonera AB (publ) for the year 2011. The annual accounts and consolidated accounts of the company are included in the printed version of this document on pages 10–114.
The Board of Directors and the Managing Director are responsible for the preparation and fair presentation of these annual accounts and consolidated accounts in accordance with International Financial Reporting Standards, as adopted by the EU, and the Annual Accounts Act, and for such internal control as the Board of Directors and the Managing Director determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on these annual accounts and consolidated accounts based on our audit. We conducted our audit in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the annual accounts and consolidated accounts are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual accounts and consolidated accounts. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the annual accounts and consolidated accounts, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company's preparation and fair presentation of the annual accounts and consolidated accounts in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by the Board of Directors and the Managing Director, as well as evaluating the overall presentation of the annual accounts and consolidated accounts.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the parent company as of December 31, 2011 and of its financial performance and its cash flows for the year then ended in accordance with the Annual Accounts Act, and the consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the group as of December 31, 2011 and of its financial performance and cash flows in accordance with International Financial Reporting Standards, as adopted by the EU, and the Annual Accounts Act. The statutory report of the directors and the corporate governance statement are consistent with the other parts of the annual accounts and consolidated accounts.
We therefore recommend that the annual meeting of shareholders adopt the income statement and balance sheet for the parent company and the group.
In addition to our audit of the annual accounts and consolidated accounts, we have examined the proposed appropriations of the company's profit or loss and the administration of the Board of Directors and the Managing Director of TeliaSonera AB (publ) for the year 2011.
The Board of Directors is responsible for the proposal for appropriations of the company's profit or loss, and the Board of Directors and the Managing Director are responsible for administration under the Companies Act.
Our responsibility is to express an opinion with reasonable assurance on the proposed appropriations of the
company's profit or loss and on the administration based on our audit. We conducted the audit in accordance with generally accepted auditing standards in Sweden.
As a basis for our opinion on the Board of Directors' proposed appropriations of the company's profit or loss, we examined the Board of Directors' reasoned statement and a selection of supporting evidence in order to be able to assess whether the proposal is in accordance with the Companies Act.
As a basis for our opinion concerning discharge from liability, in addition to our audit of the annual accounts and consolidated accounts, we examined significant decisions, actions taken and circumstances of the company in order to determine whether any member of the Board of Directors or the Managing Director is liable to the company. We also examined whether any member of the Board of Directors or the Managing Director has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We recommend to the annual meeting of shareholders that the profit be appropriated in accordance with the proposal in the statutory report of the directors and that the members of the Board of Directors and the Managing Director be discharged from liability for the financial year.
Stockholm, March 9, 2012
PricewaterhouseCoopers AB
Bo Hjalmarsson Authorized Public Accountant Auditor in charge
Jeanette Skoglund Authorized Public Accountant
| TeliaSonera Group Financial Data (IFRS) |
2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 |
|---|---|---|---|---|---|---|---|---|---|---|
| Income (SEK in millions) | ||||||||||
| Net sales | 104,354 | 106,979 | 109,550 | 103,585 | 96,344 | 91,060 | 87,661 | 81,937 | 82,425 | 59,483 |
| Operating income | 29,567 | 32,003 | 30,242 | 28,648 | 26,155 | 25,489 | 17,549 | 18,793 | 14,710 | -10,895 |
| Income after financial items | 26,774 | 29,936 | 27,614 | 26,411 | 25,251 | 25,226 | 17,019 | 17,448 | 13,899 | -11,616 |
| Net income | 21,072 | 23,562 | 21,280 | 21,442 | 20,298 | 19,283 | 13,694 | 14,264 | 10,049 | -7,997 |
| of which attributable to owners of the parent | 18,341 | 21,257 | 18,854 | 19,011 | 17,674 | 16,987 | 11,697 | 12,964 | 9,080 | -8,067 |
| EBITDA excluding non-recurring items | 36,914 | 36,897 | 36,584 | 32,954 | 31,021 | 32,266 | 29,411 | 30,196 | 30,700 | 15,692 |
| EBITDA | 36,873 | 37,661 | 35,159 | 31,658 | 30,333 | 31,113 | 27,508 | 30,841 | 32,035 | 9,421 |
| Amortization, depreciation and impairment losses | 13,023 | 13,479 | 12,932 | 12,106 | 11,875 | 11,203 | 13,188 | 15,596 | 17,707 | 20,844 |
| Financial position (SEK in millions) | ||||||||||
| Goodwill and other intangible assets | 91,915 | 90,531 | 100,239 | 100,968 | 83,909 | 74,172 | 74,367 | 69,534 | 61,820 | 68,106 |
| Property, plant and equipment | 59,580 | 58,353 | 61,222 | 61,946 | 52,602 | 48,195 | 48,201 | 47,212 | 49,161 | 56,172 |
| Financial assets | 65,743 | 62,458 | 60,849 | 62,265 | 48,633 | 41,826 | 40,526 | 35,353 | 42,061 | 48,534 |
| Current assets and non-current assets held-for-sale | 36,643 | 39,209 | 47,360 | 39,107 | 31,558 | 35,199 | 40,681 | 39,873 | 37,018 | 33,844 |
| Total assets | 253,881 | 250,551 | 269,670 | 264,286 | 216,702 | 199,392 | 203,775 | 191,972 | 190,060 | 206,656 |
| Total equity | 124,033 | 132,665 | 142,499 | 141,448 | 127,057 | 127,717 | 135,694 | 128,067 | 115,834 | 113,949 |
| of which attributable to owners of the parent | 116,680 | 125,907 | 135,372 | 130,387 | 117,274 | 119,217 | 127,049 | 121,133 | 112,393 | 108,829 |
| Provisions | 24,163 | 23,230 | 25,625 | 24,594 | 16,748 | 15,471 | 15,564 | 13,402 | 15,297 | 18,406 |
| Interest-bearing liabilities | 79,842 | 65,436 | 71,833 | 65,799 | 43,579 | 27,729 | 26,735 | 24,675 | 30,554 | 44,732 |
| Non-interest-bearing liabilities | 25,843 | 29,220 | 29,713 | 32,445 | 29,318 | 28,475 | 25,782 | 25,828 | 28,375 | 29,569 |
| Total equity and liabilities | 253,881 | 250,551 | 269,670 | 264,286 | 216,702 | 199,392 | 203,775 | 191,972 | 190,060 | 206,656 |
| Capital employed | 192,564 | 186,509 | 204,908 | 199,186 | 153,090 | 127,195 | 146,712 | 147,132 | 142,235 | 157,035 |
| Operating capital | 170,393 | 163,889 | 175,063 | 178,017 | 140,925 | 110,163 | 125,299 | 126,198 | 120,006 | 137,113 |
| Net debt | 65,079 | 47,309 | 46,175 | 48,614 | 34,155 | 14,892 | 7,879 | 6,580 | 17,648 | 38,075 |
| Net interest-bearing liability | 58,701 | 43,573 | 42,668 | 44,652 | 31,830 | 10,736 | 5,320 | 3,741 | 8,847 | 25,034 |
| Cash flows (SEK in millions) | ||||||||||
| Cash flow from operating activities | 27,023 | 27,434 | 30,610 | 25,091 | 26,529 | 27,501 | 26,990 | 24,403 | 26,443 | 12,449 |
| Cash flow from investing activities | -17,306 | -16,476 | -17,627 | -19,634 | -15,705 | -13,084 | -12,236 | -7,991 | -3,443 | -5,553 |
| Cash flow before financing activities | 9,717 | 10,958 | 12,983 | 5,457 | 10,824 | 14,417 | 14,754 | 16,412 | 23,000 | 6,896 |
| Cash flow from financing activities | -12,035 | -17,736 | -2,187 | -2,364 | -14,726 | -19,382 | -15,653 | -11,102 | -16,412 | -10,344 |
| Cash flow for the year | -2,318 | -6,778 | 10,796 | 3,093 | -3,902 | -4,965 | -899 | 5,310 | 6,588 | -3,448 |
| Free cash flow | 9,629 | 12,901 | 16,643 | 9,333 | 13,004 | 16,596 | 15,594 | 14,118 | 17,351 | 3,877 |
| Investments (SEK in millions) | ||||||||||
| CAPEX | 17,243 | 14,934 | 14,007 | 15,795 | 13,531 | 11,101 | 11,583 | 10,331 | 9,267 | 14,345 |
| Acquisitions and other investments | 672 | 1,735 | 2,842 | 9,060 | 7,171 | 3,951 | 2,732 | 9,099 | 2,851 | 40,093 |
| Total investments | 17,915 | 16,669 | 16,849 | 24,855 | 20,702 | 15,052 | 14,315 | 19,430 | 12,118 | 54,438 |
| Business ratios | ||||||||||
| EBITDA margin (%) | 35.4 | 34.5 | 33.4 | 31.8 | 32.2 | 35.4 | 33.6 | 36.9 | 37.2 | 26.4 |
| Operating margin (%) | 28.3 | 29.9 | 27.6 | 27.7 | 27.1 | 28.0 | 20.0 | 22.9 | 17.8 | -18.3 |
| Return on sales (%) | 20.2 | 22.0 | 19.4 | 20.7 | 21.1 | 21.2 | 15.6 | 17.4 | 12.2 | -13.4 |
| Amortization, depreciation and impairment losses | ||||||||||
| as a percentage of net sales | 12.5 | 12.6 | 11.8 | 11.7 | 12.3 | 12.3 | 15.0 | 19.0 | 21.5 | 35.0 |
| CAPEX-to-sales ratio (%) | 16.5 | 14.0 | 12.8 | 15.2 | 14.0 | 12.2 | 13.2 | 12.6 | 11.2 | 24.1 |
| Total asset turnover (multiple) | 0.41 | 0.41 | 0.41 | 0.43 | 0.46 | 0.45 | 0.44 | 0.43 | 0.42 | 0.36 |
| Turnover of capital employed (multiple) | 0.55 | 0.55 | 0.54 | 0.59 | 0.69 | 0.67 | 0.60 | 0.57 | 0.55 | 0.48 |
| Return on assets (%) | 12.3 | 12.7 | 11.8 | 12.7 | 13.1 | 13.2 | 9.4 | 10.5 | 8.7 | -5.7 |
| Return on capital employed (%) | 16.4 | 16.9 | 15.5 | 17.3 | 19.4 | 19.5 | 12.6 | 13.9 | 11.6 | -7.7 |
| Return on equity (%) | 16.8 | 17.8 | 15.2 | 17.2 | 18.6 | 17.2 | 10.3 | 11.6 | 8.5 | -9.7 |
| Equity/assets ratio (%) | 44.0 | 48.0 | 49.1 | 50.5 | 50.3 | 49.9 | 58.9 | 63.8 | 58.5 | 54.2 |
| Net debt/equity ratio (%) | 58.3 | 39.3 | 34.9 | 36.5 | 31.3 | 15.0 | 6.6 | 5.4 | 15.9 | 34.0 |
| Net debt/EBITDA rate (multiple) | 1.76 | 1.28 | 1.26 | 1.48 | 1.10 | 0.46 | 0.27 | 0.22 | 0.57 | 2.43 |
| Interest coverage ratio (multiple) | 7.2 | 10.7 | 8.3 | 7.6 | 14.2 | 18.1 | 11.7 | 7.6 | 5.1 | -4.7 |
| Self-financing rate (multiple) | 1.51 | 1.65 | 1.82 | 1.01 | 1.28 | 1.83 | 1.89 | 1.26 | 2.18 | 0.23 |
| Share data | ||||||||||
| Number of outstanding shares (millions) | ||||||||||
| – at the end of the period | 4,330.1 | 4,490.5 | 4,490.5 | 4,490.5 | 4,490.5 | 4,490.5 | 4,490.5 | 4,675.2 | 4,675.2 | 4,605.8 |
| – average, basic | 4,367.0 | 4,490.5 | 4,490.5 | 4,490.5 | 4,490.5 | 4,490.5 | 4,574.0 | 4,675.2 | 4,667.6 | 3,124.3 |
| – average, diluted | 4,367.0 | 4,490.5 | 4,490.5 | 4,490.5 | 4,490.5 | 4,490.5 | 4,574.0 | 4,675.2 | 4,668.4 | 3,125.3 |
| Basic and diluted earnings/loss per share (SEK) | 4.20 | 4.73 | 4.20 | 4.23 | 3.94 | 3.78 | 2.56 | 2.77 | 1.95 | -2.58 |
| Cash dividend per share (SEK) 1), 2) | 2.85 | 2.75 | 2.25 | 1.80 | 4.00 | 6.30 | 3.50 | 1.20 | 1.00 | 0.40 |
| Total cash dividend (SEK in millions) 1), 2) | 12,341 | 12,349 | 10,104 | 8,083 | 17,962 | 28,290 | 15,717 | 5,610 | 4,675 | 1,870 |
| Pay-out ratio (%) | 67.9 | 58.1 | 53.6 | 42.5 | 101.6 | 166.5 | 136.9 | 43.3 | 51.4 | n/a |
| Equity per share (SEK) | 26.95 | 28.04 | 30.15 | 29.04 | 26.12 | 26.55 | 28.29 | 25.91 | 24.04 | 23.63 |
1) For 2011 as proposed by the Board of Directors.
2) For 2007, 2006 and 2005 including extra dividends of SEK 2.20 per share (totaling SEK 9,879 million), SEK 4.50 per share (totaling SEK 20,207 million) and SEK 2.25 per share (totaling SEK 10,104 million), respectively.
| TeliaSonera Group Operational Data |
2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 |
|---|---|---|---|---|---|---|---|---|---|---|
| Mobility Services Total subscriptions (thousands) of which Sweden |
19,520 | 18,384 | 16,963 | 15,900 | 14,501 | 13,434 | 13,000 | 11,545 | 9,519 | 9,202 |
| Mobile telephony, total subscriptions (thousands) | 6,290 | 5,869 | 5,666 | 5,334 | 4,807 | 4,603 | 4,387 | 4,243 | 3,838 | 3,604 |
| Mobile telephony, outgoing traffic (millions of minutes) | 9,854 | 9,499 | 8,493 | 7,849 | 6,635 | 5,335 | 4,456 | 3,814 | 3,313 | 3,201 |
| Mobile telephony, incoming traffic (millions of minutes) | 4,354 | 4,220 | 3,983 | 3,815 | 3,474 | 3,058 | 2,750 | 2,573 | 2,400 | 2,272 |
| Mobile telephony, MoU (minutes) | 242 | 237 | 218 | 191 | 178 | 157 | 139 | 131 | 128 | 131 |
| Mobile telephony, blended churn (%) | 15 | 17 | 13 | 14 | 15 | 17 | 15 | 11 | 13 | n/a |
| Mobile telephony, ARPU (SEK) | 196 | 196 | 192 | 189 | 194 | 204 | 213 | 227 | 252 | 262 |
| of which Finland Mobile telephony, total subscriptions (thousands) |
3,231 | 3,237 | 2,874 | 2,676 | 2,449 | 2,407 | 2,507 | 2,297 | 2,428 | 2,790 |
| Mobile telephony, outgoing traffic (millions of minutes) | 5,471 | 5,575 | 5,604 | 5,618 | 5,473 | 5,936 | 5,642 | 4,820 | 4,743 | n/a |
| Mobile telephony, incoming traffic (millions of minutes) | 2,840 | 2,896 | 2,831 | 2,911 | 2,656 | 2,554 | 2,405 | 2,147 | 2,090 | n/a |
| Mobile telephony, MoU (minutes) | 255 | 266 | 280 | 276 | 284 | 285 | 277 | 253 | 232 | n/a |
| Mobile telephony, blended churn (%) | 28 | 25 | 22 | 17 | 16 | 19 | 24 | 28 | 17 | n/a |
| Mobile telephony, ARPU (EUR) | 21 | 22 | 24 | 26 | 29 | 29 | 30 | 38 | 38 | n/a |
| of which Norway | ||||||||||
| Mobile telephony, total subscriptions (thousands) Mobile telephony, MoU (minutes) |
1,657 279 |
1,680 276 |
1,658 279 |
1,581 247 |
1,577 236 |
1,641 218 |
1,651 192 |
1,308 175 |
1,195 164 |
1,089 156 |
| Mobile telephony, ARPU (NOK) | 259 | 291 | 309 | 330 | 348 | 352 | 333 | 339 | 342 | 330 |
| of which Denmark | ||||||||||
| Mobile telephony, total subscriptions (thousands) of which Baltic countries |
1,426 | 1,450 | 1,460 | 1,493 | 1,449 | 1,123 | 1,154 | 1,115 | 472 | 421 |
| Mobile telephony, subscriptions, Lithuania (thousands) | 1,990 | 2,000 | 1,991 | 2,012 | 2,012 | 2,074 | 1,889 | 1,338 | 1,052 | 851 |
| Mobile telephony, subscriptions, Latvia (thousands) | 1,092 | 1,068 | 1,042 | 1,056 | 1,015 | 803 | 735 | 649 | 534 | 447 |
| Mobile telephony, subscriptions, Estonia (thousands) | 795 | 797 | 766 | 778 | 765 | 759 | 677 | 595 | – | – |
| of which Spain Mobile telephony, subscriptions (thousands) |
3,039 | 2,283 | 1,506 | 970 | 427 | 24 | – | – | – | – |
| Broadband Services | ||||||||||
| Broadband, total subscriptions (thousands) | 2,481 | 2,402 | 2,348 | 2,284 | 2,164 | 1,828 | 1,278 | 897 | 571 | 411 |
| Fixed telephony, total subscriptions (thousands) of which Sweden |
4,267 | 4,666 | 5,212 | 5,806 | 6,218 | 6,497 | 7,064 | 8,312 | 8,087 | 8,296 |
| Broadband, subscriptions (thousands) | 1,149 | 1,129 | 1,125 | 1,122 | 1,061 | 915 | 711 | 526 | 394 | 317 |
| Fixed telephony, total subscriptions (thousands) of which Finland |
2,948 | 3,214 | 3,604 | 4,000 | 4,295 | 4,586 | 5,036 | 6,115 | 6,283 | 6,415 |
| Broadband, subscriptions (thousands) | 491 | 476 | 458 | 478 | 473 | 412 | 350 | 243 | 150 | 82 |
| Fixed telephony, total subscriptions (thousands) | 239 | 277 | 324 | 420 | 497 | 580 | 647 | 740 | 804 | 722 |
| of which Norway | ||||||||||
| Broadband, subscriptions (thousands) | 188 | 195 | 223 | 176 | 177 | 172 | – | – | – | – |
| of which Denmark | ||||||||||
| Broadband, subscriptions (thousands) | 80 | 67 | 47 | 34 | 31 | 7 | 5 | 1 | 2 | 1 |
| Fixed telephony, prefix and contract customers (thousands) of which Baltic countries |
148 | 153 | 205 | 226 | 251 | 165 | 195 | 212 | 172 | 223 |
| Broadband, subscriptions, Lithuania (thousands) | 372 | 345 | 313 | 298 | 259 | 181 | 105 | 50 | 25 | 11 |
| Fixed telephony, subscriptions, Lithuania (thousands) | 647 | 689 | 722 | 769 | 789 | 785 | 798 | 819 | 828 | 936 |
| Broadband, subscriptions, Estonia (thousands) | 201 | 190 | 182 | 176 | 163 | 141 | 107 | 77 | – | – |
| Fixed telephony, subscriptions, Estonia (thousands) | 285 | 333 | 357 | 391 | 386 | 381 | 388 | 426 | – | – |
| Eurasia | ||||||||||
| Mobile telephony, total subscriptions (thousands) Mobile telephony, subscriptions, Kazakhstan (thousands) |
34,840 10,850 |
28,505 8,921 |
22,363 7,165 |
18,272 7,083 |
12,147 6,017 |
7,352 3,539 |
6,146 3,320 |
3,866 1,795 |
2,385 990 |
1,614 615 |
| Mobile telephony, subscriptions, Azerbaijan (thousands) | 4,166 | 3,994 | 3,847 | 3,471 | 3,029 | 2,333 | 1,741 | 1,291 | 912 | 669 |
| Mobile telephony, subscriptions, Uzbekistan (thousands) | 7,688 | 6,832 | 5,074 | 2,683 | 690 | – | – | – | – | – |
| Mobile telephony, subscriptions, Tajikistan (thousands) | 2,139 | 1,723 | 1,523 | 1,154 | 611 | – | – | – | – | – |
| Mobile telephony, subscriptions, Georgia (thousands) | 2,066 | 2,044 | 1,892 | 1,582 | 1,296 | 1,032 | 715 | 481 | 307 | 198 |
| Mobile telephony, subscriptions, Moldova (thousands) Mobile telephony, subscriptions, Nepal (thousands) |
1,089 6,842 |
907 4,084 |
660 2,202 |
550 1,749 |
504 – |
448 – |
370 – |
299 – |
176 – |
132 – |
| Human Resources | ||||||||||
| Number of employees as of December 31 | 28,412 | 28,945 | 29,734 | 32,171 | 31,292 | 28,528 | 28,175 | 29,082 | 26,694 | 29,173 |
| Average number of full-time employees during the year | 26,999 | 27,697 | 28,815 | 30,037 | 28,561 | 26,969 | 27,403 | 25,381 | 26,188 | 17,277 |
| of whom, in Sweden | 8,372 | 8,937 | 9,170 | 10,152 | 10,002 | 10,427 | 11,061 | 10,948 | 11,321 | 12,593 |
| of whom, in Finland | 4,497 | 4,686 | 4,981 | 5,258 | 5,697 | 5,936 | 6,369 | 6,750 | 6,408 | 1,142 |
| of whom, in other countries | 14,130 | 14,074 | 14,664 | 14,627 | 12,862 | 10,606 | 9,973 | 7,683 | 8,459 | 3,542 |
| of whom, women | 11,784 | 12,212 | 13,111 | 13,251 | 12,571 | 12,164 | 11,934 | 11,427 | 10,936 | 7,546 |
| of whom, men Salaries and remuneration (SEK in millions) |
15,215 9,974 |
15,485 10,405 |
15,704 11,152 |
16,786 11,011 |
15,990 9,632 |
14,805 8,918 |
15,469 9,023 |
13,954 8,674 |
15,252 8,460 |
9,731 6,732 |
| Employer's social security contributions (SEK in millions) | 1,819 | 1,900 | 1,995 | 2,134 | 1,971 | 1,903 | 1,970 | 1,902 | 1,950 | 1,804 |
| Salaries and employer's social security contributions as a | ||||||||||
| percentage of operating costs | 14.5 | 14.8 | 15.3 | 15.8 | 14.8 | 15.2 | 15.5 | 16.4 | 14.9 | 14.9 |
| Net sales per employee (SEK in thousands) | 3,865 | 3,862 | 3,802 | 3,449 | 3,373 | 3,376 | 3,199 | 3,228 | 3,147 | 3,443 |
| Operating income per employee (SEK in thousands) Change in labor productivity (%) |
1,095 11.2 |
1,155 10.8 |
1,050 11.1 |
954 7.8 |
916 7.1 |
945 11.2 |
640 8.3 |
740 10.8 |
562 -4.9 |
-631 53.5 |
| Net income per employee (SEK in thousands) | 780 | 851 | 738 | 714 | 711 | 715 | 500 | 511 | 347 | -467 |
Comprises personnel costs, marketing costs and all other operating expenses other than purchases of goods and sub-contractor services as well as interconnect, roaming and other network-related costs.
An abbreviation of "Earnings Before Interest, Tax, Depreciation and Amortization." Equals operating income before amortization, depreciation and impairment losses, and before income from associated companies.
Non-recurring items include capital gains and losses, costs for phasing out operations, personnel redundancy costs, and non-capitalized expenses in conjunction with the merger with Sonera in 2002. Effective January 1, 2003, only capital gains/losses, impairment losses, restructuring programs or similar that represent more than SEK 100 million on an individual basis, are reported as non-recurring. Previous periods have not been restated.
Reported equity attributable to owners of the parent less the (proposed) dividend. For the parent company also including untaxed reserves net of tax.
Total assets less non-interest-bearing liabilities and non-interest-bearing provisions, and the (proposed) dividend.
Non-interest-bearing assets less non-interest-bearing liabilities, including the (proposed) dividend, and noninterest-bearing provisions.
As Operating capital, but assets and liabilities exclude items related to foreign currency derivatives and accrued interest as well as to deferred and current tax, respectively, and liabilities exclude the (proposed) dividend.
Interest-bearing liabilities less derivatives recognized as financial assets and hedging long-term and shortterm borrowings, and less short-term investments and cash and bank.
Interest-bearing liabilities and provisions less interestbearing assets but including investments in associated companies and joint ventures.
Cash flow from operating activities less cash CAPEX.
An abbreviation of "Capital Expenditure." Investments in intangible and tangible non-current assets but excluding goodwill, fair-value adjustments and asset retirement obligations.
Investments in goodwill and fair-value adjustments, shares and participations, and asset retirement obligations.
EBITDA excluding non-recurring items expressed as a percentage of net sales.
Operating income expressed as a percentage of net sales.
Net income expressed as a percentage of net sales.
Net sales divided by average total assets.
Net sales divided by the average capital employed.
Operating income plus financial revenues expressed as a percentage of average total assets.
Operating income plus financial revenues expressed as a percentage of average capital employed.
Net income attributable to owners of the parent expressed as a percentage of average adjusted equity.
Adjusted equity and equity attributable to non-controlling interests expressed as a percentage of total assets.
Net debt expressed as a percentage of adjusted equity and equity attributable to non-controlling interests.
Net debt divided by EBITDA excluding non-recurring items.
Operating income plus financial revenues divided by financial expenses.
Cash flow from operating activities divided by gross investments.
Earnings per share are based on the weighted average number of shares before and after dilution with potential ordinary shares, while equity per share is based on the number of shares at the end of the period. Earnings equal net income attributable to owners of the parent and equity is equity attributable to owners of the parent.
Dividend per share divided by basic earnings per share.
Minutes of usage per subscription and month.
The number of lost subscriptions (postpaid and prepaid) expressed as a percentage of the average number of subscriptions (postpaid and prepaid).
Average monthly revenue per user.
Year-on-year percentage change in the ratio: net sales at fixed prices to average number of full-time employees.
In conformity with international standards, this report applies the following currency notations:
| SEK | Swedish krona | GEL | Georgian lari | RUB | Russian ruble |
|---|---|---|---|---|---|
| AZN | Azerbaijan manat | JPY | Japanese yen | TJS | Tajikistan somoni |
| CZK | Czech koruna | KZT | Kazakhstan tenge | TRY | Turkish lira |
| DKK | Danish krone | LTL | Lithuanian litas | USD | U.S. dollar |
| EEK | Estonian kroon | LVL | Latvian lats | UZS | Uzbekistan som |
| EUR | European euro | NOK | Norwegian krone | ||
| GBP | Pound sterling | NPR | Nepalese rupee |
TeliaSonera's Annual General Meeting will be held on Tuesday, April 3, 2012 at 14.00 CET at Cirkus, Djurgårdsslätten 43–45, Stockholm. The complete notification was published on TeliaSonera's website, www.teliasonera.com at the end of February. The meeting will be interpreted into English.
Shareholders who wish to attend the Annual General Meeting shall
Notice of attendance can be made
When giving notice of attendance, please state name/ company name, social security number/corporate registration number, address, telephone number (office hours) and number of accompanying persons.
Shareholders, whose shares are registered in the name of a nominee, must request to be temporarily entered into the share register kept by Euroclear Sweden AB as of March 28, 2012, in order to be entitled to participate in the meeting. Such shareholder is requested to inform the nominee to that effect well before that day. As Finnish shareholders within the Finnish book-entry system at Euroclear Finland Oy are nominee registered
at Euroclear Sweden AB, these Finnish shareholders have to contact Euroclear Finland Oy, by email: [email protected] or by phone: +358 (0)20 770 6609, for re-registration well in advance of March 28, 2012 to be able to participate in the meeting.
Shareholders who are represented by proxy shall issue a power of attorney for the representative. Forms for power of attorneys are available at the Company's website www.teliasonera.com. To a power of attorney issued by a legal entity a copy of the certificate of registration (and should such certificate not exist, a corresponding document of authority) of the legal entity shall be attached. The documents must not be older than one year. In order to facilitate the registration at the meeting, powers of attorney in original, certificates of registration and other documents of authority should be sent to the Company at the address above at the latest by Friday March, 30, 2012.
The Annual General Meeting determines, among other matters, the appropriation of the Company's profits and whether to discharge the Board of Directors and President from liability. The Annual General Meeting also appoints the Board of Directors and makes decisions regarding remuneration to the Board. The Board of Directors proposes that a dividend of SEK 2.85 per share be distributed to the shareholders, and that April 10, 2012 be set as the record date for the dividend. If the Annual General Meeting adopts this proposal, it is estimated that disbursement from Euroclear Sweden AB will take place on April 13, 2012.
The CEO's speech at the Annual General Meeting will be posted on the Company's website www.teliasonera.com after the meeting.
Contact TeliaSonera Mailing address: TeliaSonera AB SE–106 63 Stockholm Sweden Visiting address: Stureplan 8, Stockholm Telephone: +46 (0)8 504 550 00 Fax: +46 (0)8 504 550 01
Lars Nyberg Mailing address: TeliaSonera AB SE–106 63 Stockholm Sweden Telephone: +46 (0)8 504 550 00 Fax: +46 (0)8 504 55014
Cecilia Edström Mailing address: TeliaSonera AB SE–106 63 Stockholm Sweden Telephone: +46 (0)8 504 550 00 Fax: +46 (0)8 611 46 42
Andreas Ekström Mailing address: TeliaSonera AB SE–106 63 Stockholm Sweden Telephone: +46 (0)8 504 550 00 Fax: +46 (0)8 611 46 42 Email: [email protected]
Production: TeliaSonera AB Investor Relations in cooperation with Narva Photo of the Board of Directors and Group Management: Victor Brott
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