Annual Report • Mar 18, 2009
Annual Report
Open in ViewerOpens in native device viewer
| This is TeliaSonera | 3 |
|---|---|
| The Year in Brief | 4 |
| Letter from the CEO | 5 |
| The TeliaSonera Share | 7 |
| Corporate Strategy | 9 |
| Market and Customers | 10 |
| A Review of Our Operations | 18 |
| Corporate Responsibility | 25 |
| Report of the Directors | 30 |
| Consolidated Income Statements | 42 |
| Consolidated Balance Sheets | 43 |
| Consolidated Cash Flow Statements | 44 |
| Consolidated Statements of Changes in Equity | 45 |
| Notes to Consolidated Financial Statements | 46 |
| Parent Company Income Statements | 89 |
| Parent Company Balance Sheets | 90 |
| Parent Company Cash Flow Statements | 91 |
| Parent Company Statements of Changes in Shareholders' Equity | 92 |
| Notes to Parent Company Financial Statements | 93 |
| Proposed Appropriation of Earnings | 108 |
| Auditors' Report | 109 |
| Ten-year Summary Financial Data | 110 |
| Ten-year Summary Operational Data | 111 |
| Definitions | 113 |
| Corporate Governance Report | 115 |
| Board of Directors including Remuneration | 119 |
| Leadership Team including Remuneration | 121 |
| Glossary | 123 |
| Annual General Meeting 2009 | 124 |
| Contact TeliaSonera | 125 |
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 provides telecommunication services in the Nordic and Baltic countries, the emerging markets of Eurasia, including Russia and Turkey, and in Spain.
We offer services that help people and companies communicate in an easy, efficient and environmentally friendly way.
Our main purpose is to best serve our customers and create value for our shareholders through providing competitive services as well as generating sustainable and improving profits and cash flows.
We develop our operational excellence by focusing on creating a world-class service company, securing quality in our networks and achieving a best-in-class cost structure. That is how we create value.
TeliaSonera is listed on the NASDAQ OMX Stockholm and Helsinki stock exchanges.
Customer satisfaction improved in most of our Nordic and Baltic businesses and employee commitment was the highest to date.
We strengthened our market positions further in Eurasia and expanded to two new high-growth markets, Nepal and Cambodia.
Apple iPhone 3G gave a tremendous boost to our brands and together with mobile broadband drove mobile data usage higher.
4G-licenses in Sweden and Norway and plan to launch 4G commercially as one of the first operators in the world in 2010.
The number of subscriptions grew 17 percent to 135 million in 2008. We are now in 20 markets with 450 million inhabitants.
| SEK in millions except key ratios, per share data and margins | 2008 | 2007 | 2006 |
|---|---|---|---|
| Net sales | 103,585 | 96,344 | 91,060 |
| EBITDA, excluding non-recurring items | 32,954 | 31,021 | 32,266 |
| Margin (%) | 31.8 | 32.2 | 35.4 |
| Operating income | 28,648 | 26,155 | 25,489 |
| Operating income, excluding non-recurring items | 30,041 | 27,478 | 26,751 |
| Net income | 21,442 | 20,298 | 19,283 |
| of which attributable to shareholders of the parent company | 19,011 | 17,674 | 16,987 |
| Earnings per share (SEK) | 4.23 | 3.94 | 3.78 |
| Return on equity (%, rolling 12 months) | 17.2 | 18.6 | 17.2 |
| CAPEX-to-sales (%) | 15.2 | 14.0 | 12.2 |
| Free cash flow | 11,328 | 13,004 | 16,596 |
TeliaSonera continued growing in 2008 and is now present in 20 markets with 450 million inhabitants and subscriptions of 135 million. We reported record-high earnings in 2008.
Net income rose 5.6 percent to SEK 21.4 billion, a new record for TeliaSonera. This was driven by Mobility Services, which achieved growth and higher profitability, despite regulatory intervention and intense competition in the Nordic and Baltic markets, and by strong performance in business area Eurasia.
Eurasia is the growth engine of TeliaSonera. With less developed fixed-line infrastructure and relatively low mobile penetration, the growth potential lies in growing the customer base significantly, increasing mobile usage, and further ahead also in increasing usage of mobile data.
Lars Nyberg, President and CEO, TeliaSonera
In our more mature markets, usage of mobile broadband and data has exploded. Mobile data traffic in our Nordic and Baltic operations jumped close to 500 percent in 2008. More advanced and attractive devices designed for easy surfing contribute strongly to this trend.
The Apple iPhone 3G was introduced in 2008 and gave a tremendous boost to our brands in the Nordic and Baltic region. Data usage among Apple iPhone 3G customers is significantly higher than among users of other handsets.
In Broadband Services, profitability decreased as a continued decline in fixed-voice sales was not totally offset by higher sales of new, IP-based services and by cost-efficiency measures. As a result we did not fully reach our ambition of maintaining the group EBITDAmargin level. This confirms that our earlier plans to increase cost efficiency and the measures we are taking in this part of the organization are necessary.
2008 was a year marked by financial turmoil and macro-economic slowdown. The downturn became much more severe as the year progressed, and the global economy was exceptionally weak in the fourth quarter. TeliaSonera operates in a relatively non-cyclical or late-cyclical industry and we saw no marked effect on our earnings.
Our core business is to offer services that help people and companies communicate in an easy, efficient and environmentally friendly way. Our purpose is to best serve our customers and create value for our shareholders through providing competitive services, as well as generating sustainable and improving profits and cash flows.
We operate in one of the world's most rapidly changing, demanding and competitive industries. When I joined TeliaSonera in 2007, I realized that in order to succeed and act as one company we need to change the company culture and our behavior, particularly in the Swedish and Finnish businesses. All our discussions have to start with the customer and we need to raise our sense of urgency. I am now starting to see a change in our behavior. This is a result of the strengthening of our Leadership Team, the introduction of a more stringent performance and consequence management attitude and rigorous attention to our six focus areas.
This is perhaps the most challenging of our priorities as it is both complex and requires a major change of processes, attitude and focus in many parts of the company. I am pleased to see that customer satisfaction, according to the European Performance Satisfaction Index (EPSI), improved in most of our Nordic and Baltic businesses during 2008. In Eurasia we strengthened our market positions further. One driver of service improvement is employee satisfaction. Therefore, I am encouraged that we saw employee satisfaction and commitment improve in 2008 to the highest level since TeliaSonera started measurements in 2004.
Demand for capacity is virtually unlimited and requires network upgrades. Capital expenditure was SEK 15.8 billion in 2008 and included investments in increased network capacity and coverage and upgrades to support new value-added services.
The strong trend for mobile data and broadband will put further increased demands on the capacity of our networks. We now have 4G licenses in Sweden and Norway and aim to be one of the first operators in the world to launch 4G commercially in 2010. 4G will increase capacity dramatically, enabling significantly faster downloading of large quantities of multimedia.
We have the best mobile networks in Sweden, according to EPSI, and in 2008 we reduced the number of dropped mobile calls.
In Eurasia we also improved service quality in the networks, particularly in Uzbekistan, Tajikistan and Nepal.
TeliaSonera cannot have structurally higher costs than its competitors. Intensified efficiency improvement is crucial for TeliaSonera to be able to adjust its cost base to reflect the shift from traditional to new, value-added services, especially from fixed-voice to mobile and IP-based services. We are carefully going through our operations in order to reduce complexity and the number of products and services.
Our fixed-voice business in Sweden has been declining for several years already as a growing share of customers choose to no longer have a traditional fixed-voice service. Our best asset is our large customer base and our challenge is to keep it. We transform our business through providing IP-based communication and content services at competitive cost and with the best customer service. We have a real opportunity to offer the market triple play and a string of value-added services. Since our launch of IPTV at the beginning of 2007, the number of IPTV subscriptions in Sweden has grown to 324,000 and including all Nordic and Baltic markets to 477,000.
We intend to grow our assets in Eurasia both organically and through acquisitions. We want to expand and look for investment opportunities in the surrounding region. We focus on markets with low mobile penetration, reasonably sized populations and growing economies.
Our acquisitions in Uzbekistan and Tajikistan in 2007 have turned out successful – sales more than doubled in Uzbekistan in the fourth quarter of 2008 and rose more than 80 percent in Tajikistan, where we became market leader. We strengthened our positions in the other Eurasian markets and are now the largest operator also in Georgia, in addition to Kazakhstan and Azerbaijan – where we already had market leadership. During the year we entered two new growth markets, Nepal and Cambodia, by acquiring controlling interests in the mobile operators Spice Nepal and Applifone.
On investing in this region, we have the ambition to control and thereby consolidate. However, sometimes it is not possible to have a majority position. TeliaSonera has minority interests in MegaFon, the third largest operator in Russia, and Turkcell, the leading operator in Turkey. Where we are willing to take a minority position, we will seek to have a degree of liquidity and control, for example through dividends, management control, board seats or public listing.
Another priority is to improve service for business customers and increase sales growth and efficiency, mainly in Finland and Sweden. We are changing our business-to-business sales approach and, as of January 1, 2008, we have combined all our sales resources into one organization that will sell our products and services to the business customers. This dedicated sales organization is measured on growth, market share and sales efficiency.
Entering 2009 we face a number of challenges but also opportunities.
Looking ahead, we need to prepare ourselves for a potentially drawn-out economic downturn that may affect consumer and corporate behavior. Still the influence on our performance is much bigger from regulatory intervention and intense competition.
We expect net sales in local currencies and excluding acquisitions to increase in 2009 compared to 2008. But currency fluctuations may to an increasing extent influence the reported figures. TeliaSonera will continue to invest in future growth and in the quality of networks and services, although with the intention of keeping the addressable costs for 2009 unchanged from 2008. Capital expenditures will be driven by continued investments in broadband and mobile capacity as well as in network expansion in our acquired operations. The CAPEX-to-sales ratio is expected to be somewhat lower in 2009 than in 2008.
TeliaSonera is a strong and financially balanced company with lots of competence and many skilled and motivated people. We have leading positions in the Nordic and Baltic countries and in several emerging markets with high growth potential. We are very well equipped to capture the opportunities that may arise.
Stockholm, March 9, 2009
Lars Nyberg President and CEO
The TeliaSonera share fell 36 percent during 2008, while the NASDAQ OMX Stockholm All Share Index fell 42 percent. The Board of Directors proposes to the Annual General Meeting an ordinary dividend of SEK 1.80 per share (1.80).
During 2008 an average of 22.0 million TeliaSonera shares were traded per trading day, corresponding to a value of SEK 1,042 million per day. TeliaSonera's share price fell 36 percent to SEK 38.90.
Since early 2003, just after the merger of Telia and Sonera, the share price has increased from around SEK 25 but on average underperformed the NASDAQ OMX Stockholm All Share Index. Compared to the Dow Jones STOXX Telecommunications Index, which includes the largest telecom operators in Europe, the TeliaSonera share has performed largely in line with the index.
TeliaSonera's market capitalization was SEK 175 billion at yearend, representing 8 percent of the total market value on the Stockholm stock exchange. In terms of market value, TeliaSonera was the third largest company on the Stockholm stock exchange at year-end and Europe's seventh largest telecommunications operator.
For 2008, the Board of Directors proposes to the Annual General Meeting (AGM) an ordinary dividend of SEK 1.80 (1.80) per share, totaling SEK 8.1 billion, or 43 percent of net income attributable to shareholders of the parent company. The proposal is according to TeliaSonera's capital structure and dividend policy, which is unchanged from 2007.
TeliaSonera targets a solid investment grade long-term credit rating (A- to BBB+ from Standard & Poor's) 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 40 percent of net income attributable to shareholders 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
Dow Jones STOXX Telecommunications Index NASDAQ OMX Stockholm All Share Index
and investment plans in a medium term perspective, as well as capital market conditions.
The Board of Directors proposes that the final day for trading in shares entitling shareholders to dividend be set for April 1, 2009, and that the first day of trading in shares excluding rights to dividend shall be set for April 2, 2009. The recommended record date at Euroclear Sweden (formerly VPC) for the right to receive dividend will be April 6, 2009. If the AGM votes to approve the Board's proposals, dividend is expected to be distributed by Euroclear Sweden on April 9, 2009.
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 resolves to authorize the Board of Directors to repurchase a maximum of 10 percent of the company's total number of outstanding shares. To date, no plans are made to exercise the proposed authorization.
The Board of Directors also proposes that the Annual General Meeting authorizes the Board of Directors to decide upon a sale of part or all of the repurchased shares through the stock exchange.
The Board of Directors further intends to propose to the Annual General Meeting in 2010 that shares repurchased and not resold be cancelled through a reduction of the company's share capital, without repayment to the shareholders.
The number of shareholders decreased during the year from 655,247 to 651,816. Ownership by the Swedish State as a percentage of outstanding shares was 37.3 percent and ownership by the Finnish State was 13.7 percent. Holdings outside of Sweden and Finland decreased from 22.4 percent to 15.6 percent. At year-end, Swedish institutional investors owned 24.2 percent (18.2) of the outstanding shares and Finnish institutional investors owned 3.2 percent (3.0). Swedish private investors owned 3.2 percent (3.0) and Finnish private investors 2.8 percent (2.4) of the outstanding shares.
Trading volume per month (million)
7
| Shareholder | Number of outstanding shares¹ |
Percent of outstanding shares/votes |
|---|---|---|
| Swedish State | 1,674,310,553 | 37.3 |
| Finnish State | 616,128,221 | 13.7 |
| Swedbank Robur funds | 145,833,721 | 3.2 |
| Alecta | 78,050,000 | 1.7 |
| Cevian Capital LP | 71,698,500 | 1.6 |
| AMF Pension | 67,200,000 | 1.5 |
| SEB Funds | 66,469,958 | 1.5 |
| SHB/SPP Funds | 65,549,693 | 1.5 |
| Fourth Swedish National Pension Fund | 62,215,300 | 1.4 |
| Nordea Funds | 61,072,985 | 1.4 |
| Skandia Life Insurance | 53,933,830 | 1.2 |
| AFA Insurance | 46,596,300 | 1.0 |
| Shareholders outside Sweden and Finland |
629,442,585 | 14.1 |
| Total other shareholders | 851,955,567 | 18.9 |
| Total shares outstanding | 4,490,457,213 | 100.0 |
Source: SIS Ägarservice, Euroclear Sweden
¹ Each TeliaSonera share represents one vote at the General Meeting of Shareholders and no shareholder has any special voting rights.
| Ticker symbol | TLSN |
|---|---|
| Highest price 2008 | SEK 62.00 |
| Lowest price 2008 | SEK 30.80 |
| At close 2008 | SEK 38.90 |
| Shares traded 2008, volume | 5,550 million |
| Shares traded 2008, value | SEK 263 billion |
| Market capitalization Dec 31, 2008 | SEK 175 billion |
| NASDAQ OMX Helsinki | |
| Ticker symbol | TLS1V |
| Shares traded 2008, volume | 575 million |
Shares traded 2008, value EUR 2.8 billion
| The Largest Countries by Number of Shares, | |
|---|---|
| as of December 31, 2008 |
| Country | Number of outstanding shares |
Percent of outstanding shares/votes |
|---|---|---|
| Sweden | 2,903,099,124 | 64.6 |
| Finland | 886,217,004 | 19.7 |
| United States | 225,442,273 | 5.0 |
| United Kingdom | 161,926,500 | 3.6 |
| Luxembourg | 86,870,594 | 1.9 |
| Jersey | 52,880,690 | 1.2 |
| Belgium | 33,510,999 | 0.8 |
| France | 20,977,861 | 0.5 |
| Norway | 15,866,318 | 0.4 |
| Ireland | 14,560,932 | 0.3 |
| Total others | 89,104,918 | 2.0 |
| Total shares outstanding | 4,490,457,213 | 100.0 |
Source: Euroclear Sweden
| Changes in Issued Share Capital | |||||
|---|---|---|---|---|---|
| Issued share capital, SEK thousand |
Number of shares |
Quotient value, SEK/share |
|||
| Share capital, Dec 31, 2001 |
9,603,840 | 3,001,200,000 | 3.20 | ||
| – New share issue, Dec 3, 2002 |
5,134,582 | 1,604,556,725 | 3.20 | ||
| Share capital, Dec 31, 2002 |
14,738,422 | 4,605,756,725 | 3.20 | ||
| – New share issue, Feb 10, 2003 |
222,321 | 69,475,344 | 3.20 | ||
| Share capital, Dec 31, 2003 |
14,960,743 | 4,675,232,069 | 3.20 | ||
| Share capital, Dec 31, 2004 |
14,960,743 | 4,675,232,069 | 3.20 | ||
| Share capital, Dec 31, 2005 |
14,960,743 | 4,675,232,069 | 3.20 | ||
| Cancellation of shares repurchased during 2005, Sept 6, 2006 |
-591,280 | -184,774,856 | 3.20 | ||
| Share capital, Dec 31, 2006 |
14,369,463 | 4,490,457,213 | 3.20 | ||
| Share capital, Dec 31, 2007 |
14,369,463 | 4,490,457,213 | 3.20 | ||
| Share capital, Dec 31, 2008 |
14,369,463 | 4,490,457,213 | 3.20 |
TeliaSonera offers reliable, innovative and user-friendly services for transferring and packaging of voice, images, data, information, transactions and entertainment. TeliaSonera is present in the Nordic and Baltic countries, the emerging markets of Eurasia, including Russia and Turkey, and in Spain. TeliaSonera is also the leading European wholesale provider of quality cross-border voice, IP and capacity services, provided through its international carrier network.
Depending on the market position, TeliaSonera either offers a complete service portfolio or a focused range of services. Telia-Sonera aims at creating customer value through its superior customer service, infrastructure and knowledge of customer needs.
TeliaSonera's vision is that simplicity makes everything possible. TeliaSonera's shared values, serving as a guide in its daily operations, are about adding value, showing respect and making it happen.
TeliaSonera's overall strategy is to deliver products and services to our different customer segments based on a deep understanding of present and future customer needs. To create shareholder value through sustainable and improved profitability and cash flows, we will deliver our services in a cost-effective and sustainable manner.
Six focus areas, identified to respond to external trends and
achieve operational efficiency:
TeliaSonera aims to grow in line with the markets and maintain profitability in the Nordic and Baltic region. All Nordic and Baltic markets are exposed to price pressure caused by intense competition and regulatory intervention. In this environment operational efficiency is a top priority. TeliaSonera strives to improve efficiency continuously in order to be able to develop new mobility and IP-based services.
TeliaSonera wants to expand in Eurasia and the surrounding region. We will focus on markets with low mobile penetration, reasonably sized populations and growing economies, and will leverage our management experience in the region. We will seek to consolidate our minority stakes in MegaFon and Turkcell or, if that proves to be impossible, to improve liquidity, for example through management control, public listing and dividends.
In the Spanish market TeliaSonera aims, together with its local partner, to create an efficient low-cost mobile operator with a market position that achieves sustainable strong profits and cash flows and thereby grow the value of the operation.
TeliaSonera's shared values, serving as a guide in the daily operations, are:
Add Value Show Respect Make it Happen
TeliaSonera targets a solid investment grade long-term credit rating (A- to BBB+ from Standard & Poor's) 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 40 percent of net income attributable to shareholders 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 provides high-quality telecommunications services, including packaging and carrying content like sound, images, data, information, transactions and entertainment. We operate in markets with different levels of maturity, in one of the world's most dynamic industries.
We live in an all-communicating society where we want to be able to connect anytime, anywhere, on any device. New technologies gain ground as means of carrying our communication. Demand for capacity is virtually unlimited.
TeliaSonera believes fixed lines will provide the most efficient access for many years to service fixed locations, such as offices or homes in regions where fixed networks already exist. Wireless technologies are being implemented for increased coverage and reach in all our markets and where fixed network presence is not economically feasible.
TeliaSonera offers telecommunication services in the Nordic and Baltic countries, the emerging markets of Eurasia, including Russia and Turkey, and in Spain. Trends are in many ways similar in the emerging markets and more developed markets. But there are differences. With less developed fixed line infrastructure and mobile markets only partially penetrated, the growth potential in emerging markets lies in growing the customer base significantly and increasing mobile usage.
"Regulatory intervention, intense competition and customer migration remain the primary challenges." Lars Nyberg, President and CEO, TeliaSonera
Communication services have grown as a share of gross domestic product and disposable income over time in more developed as well as emerging markets. In emerging markets the correlation between telecom penetration and economic growth is strong.
Telecommunication is a growth industry undergoing significant change. People grow increasingly dependent on having constant access to electronic communication for work, entertainment, social life and care. People want to be able to reach all communications services wherever, whenever and on their own personal device. Businesses strive to become more efficient, profitable and at the same time environmentally friendly. Modern telecommunications are opening new opportunities for companies to improve in all these areas.
Evolving customer behavior and new technology – allowing attractive and easy-to-use services – drive migration from traditional fixed voice services to new mobile and IP-based services in the more developed markets. In emerging markets, with young and large populations, low mobile penetration and growing economies, mobile usage and subscription numbers increase fast.
The need to always be connected drives demand for more bandwidth. Transmission for fixed broadband has grown rapidly over the past five years and demand for higher network speed is increasing dramatically.
In such a context telecom operators are faced with numerous opportunities but also some challenges.
Throughout 2008 intense competition and regulatory intervention continued putting prices under pressure in our markets.
The year was also marked by financial turmoil and macro economic slowdown. The downturn became much more severe as the year progressed, and the global economy was exceptionally weak in the fourth quarter. TeliaSonera operates in a relatively non-cyclical or latecyclical industry and we saw no marked effect on our earnings. Looking ahead though, we need to prepare ourselves for a potentially drawn-out economic downturn that may affect consumer and corporate behavior.
In general terms, basic voice spending is expected to hold fairly stable, even though the migration to mobile services could be pushed. However, it seems likely that customers' appetite for adopting new and innovative services could be held back, particularly if the downturn lasts for several years.
Customers are becoming increasingly dependent on constant access to electronic communication: for work, socializing, entertainment, shopping and information. The market is converging both in terms of services and devices, and customers expect the same services regardless of device. Simplicity is a key driver of customer satisfaction.
These trends apply mainly to our more developed markets. While the trends in many ways are similar in our emerging markets underlying drivers contrast due to demographic, economic and infrastructure differences.
New ways of socializing are gaining ground while voice calls in total generally grow or hold stable. The take up of new non-voice services is growing with SMS, chatting, email and online communities.
The single most important driver of non-voice traffic is the increased use of mobile broadband, which is developing into a strong complement as well as in some cases a substitute to fixed broadband. In a few years from now more families are likely to have mobile broadband connections for each family member as a complement to the household's fixed broadband connection. A key driver behind this development is built-in mobile SIM-cards in laptops.
Telecom services are becoming increasingly device centric, meaning that each screen – TV, computer or handset – allows users full access to all digital applications, content or files. More advanced handsets with new attractive user interfaces, such as the Apple
iPhone 3G and other smart phones, make customers more apt to use advanced services, which in turn drives mobile data traffic.
Take-up of business services such as fleet management and other logistics services can be expected to accelerate. One growth area is mobile applications, such as business-to-business solutions for electronic locks and employee access rights.
In 2008, non-voice services represented around 20 percent of mobile revenues in Western Europe and are expected to grow to 30 percent in 2013 (AnalysysMason, 2008). Key drivers are simplicity, both when it comes to the actual services and to mobile phones, and transmission speeds.
Source: AnalysysMason, 2008, Western European Mobile Market: Trends and forecasts 2008–2013. See Glossary for definitions.
Virtual communities and online social networking sites are powerful and popular means for social interaction. Internet-based services are becoming increasingly important for private businesses and the public sector alike. The power of the consumer is growing.
Social networking sites emerged in the mid 2000s, and since then growth has been dramatic. The sites are used for several purposes, but the largest communities focus on personal contacts and social interaction as a complement to meeting physically or talking on the phone. Photo sharing is an important feature. Other communities are focused on professional networking and enable users to stay in touch, and facilitate recruitment and career planning. Another category encompasses content sharing, such as music or video clips. Yet another interest group is communities, aiming at sharing expertise or exercising influence.
Usage of interactive sites has the potential to strongly increase consumer power, particularly in the so called messenger generation, people aged 35 or younger. The private individual can spread and share views and attitudes fast and widely in a way that only large media houses had the power to do before. At the same time, the internet communities present businesses with the opportunity to use the sites as a marketing channel, not only for advertising but also by creating profiles or virtual spaces where their offerings are presented.
Blogging is another means of interaction on the internet that is rapidly picking up. Today, most blogging takes place over a computer but as mobile screens, internet access and pricing schemes are becoming more user-friendly, blogging over the mobile is expected to increase.
Many of the major online social networks are adding mobile features and creating mobile interfaces enabling customers to upload photos and other content to the site. Thus, online socializing is also an important driver of mobile data usage, according to AnalysysMason's Mobile social networking and case studies, August 2008.
Modern communications fundamentally change the way we consume media. Information and entertainment have long been among the most attractive services over the internet. With the introduction of smart home gateways, new possibilities are opening up as the TV set and the computer come together; both connected to the internet. The internet moves into the living room and develops into a service around which friends and family can jointly participate not only to watch TV or video, but to share photos and music as well as play online games or socialize with others over the internet.
Customers are particularly interested in accessing music via the computer or mobile. Digital distribution of music is steadily gaining ground at the expense of physical distribution, as it allows instant access, at the time and place preferred by the user. Related to this is the Track-ID facility on several mobile phones which allows the customer to identify the artist and the title by simply clicking on the mobile. Similarly, customer value is brought by video-on-demand which allows the customers to "rent" a movie without having to go to the video store, but rather to pick out a movie and access it directly via the connected TV set and view it whenever preferred.
Voice services remain the core business of telecommunications. However, the voice business is in a period of transformation where a growing number of customers choose to have a mobile connection only. Mobile voice price premium has long been an obstacle to mobile migration in some of our markets. Today, such premiums are reduced to levels where mobile is affordable and in some countries mobile voice is already cheaper than fixed voice.
TeliaSonera Annual Report 2008 – Company Description
Telecom Market Matrix Eastern Europe Western European Mobile Market: Trends and forecasts 2008
In Finland, only about 20 percent of all voice call minutes come from the fixed network, while the equivalent share in Sweden is approximately 60 percent. In all our markets, to varying degrees, there is a potential to grow revenue by moving traffic to the mobile networks where customers can place and receive calls on their personal phone, wherever and whenever it suits them.
In parallel, customers migrate from traditional fixed voice to voice over internet protocol, or broadband, so called VoIP. The development towards IP technology is driving a change in price models as well as business models.
The penetration of broadband among European households is steadily increasing with the Nordic countries in the forefront. Broadband constitutes the base on which the customer can find a variety of services, not only telephony and access to the internet, but also media services such as TV and video-on-demand, VoD. At the same time, there is an increasing demand from private consumers and businesses alike for accessing services independent of technology, and converged offerings will continue to increase.
The connected home – often referred to as triple play – with convergence of broadband, TV and telephony, is a step in this direction. Triple-play penetration is fairly low today, but as the services grow more attractive, more people will see the possibilities and advantages of a connected home. As a result, over 15 percent of households in Western Europe are seen having adopted triple play in 2013 (AnalysysMason, 2008).
As technology advances and more services are converged into one single offering, so called smart home solutions, simplicity will be even more important to attract consumer attention.
Multi-play services penetration
Source: AnalysysMason, 2008, Multi-play services in Western Europe: Market sizings and forecasts 2008–2013
As broadband infrastructure is being upgraded to cater to services that offer enhanced user experience, so called rich media services, digital broadband TV, also called IPTV, is gaining ground. Having learnt from the internet world, customers recognize the value of interaction. Demand for interaction is a key driver behind the take up of IPTV. The number of IPTV customers as a share of the total number of pay-TV households in Western Europe is seen rising to around 15 percent in 2013, from 9 percent in 2008 (AnalysysMason, 2008).
The digitalization of the TV networks opens up for a higher degree of interactivity as well as new types of services. From a consumer perspective the freedom of choice will increase, as TV programs and movies can be consumed at any given point in time. VoD services show the way and are expected to have the greatest potential of rendering additional revenues. As TV is becoming IP based, the possibility to consume media over multiple devices will be a fact.
More gadgets and devices - such as TV sets, computers, game consoles and MP3 players - are being equipped with built-in connectivity for easy access to online services. Customers would like as few boxes and cables as possible, and would be prepared to pay for professional help when setting up electronic equipment.
Driven by customer demand and technological achievements, the distinction between the mobile phone and laptop is becoming blurred. Today, the functionality of a mobile phone is not very different from that of a PC and simultaneously, new PC models like netbooks are optimized for internet browsing. Another trend is that private consumers now buy high-end terminals that were previously demanded by business customers only.
Modern telecommunications are opening for new opportunities for companies and public sector organizations to manage and operate more efficiently. Companies are using more integrated functions that require fast, stable and secure connections and on top of that secure, reliable and appropriate applications. Particularly corporate customers want services that combine accesses with network and service integration.
Demand to access the same service irrespective of device is evident in the business segment. Such services include ordinary emails as well as intranets and specific applications like order systems. Working out of the home is becoming more and more common. Secure internet and intranet access means employees can work just as efficiently outside the office walls. Reasons for wanting to work from home include less travel and more flexible hours. Secure and fast access allows business travelers, maintenance workers and others with many hours spent outside of the office to become more efficient.
As businesses seek to improve processes and employee efficiency, they turn to purchasing entire communications solutions rather than seeing access as one service and application as another independent component. Today many business customers buy communications as a complete service offering, for example a remotely hosted platform that manages security, voice, data, video and other applications.
The negative impact on the environment from telecom services is quite modest compared to that of other industries. Rather, the networks and services bring opportunities for businesses and individuals to reduce their environmental footprint.
Care for the environment is a key concern for consumers and businesses today and has developed into an important buying criterion. Many investments will be made with the environment in mind.
A growing trend closely related to the telecom industry is the nonmoving movement, where business travel is replaced by telecom services such as telephone calls, tele conferences, video conferencing and net meetings. In other words, modern communication can result in fewer business trips and at the same time enable more company contact. Costs are extremely low in comparison with business travel, and the individual sees the value in the ability to work from home.
Eurasia is the growth engine of TeliaSonera. In many respects customer demand is the same in our emerging markets as in the Nordic and Baltic countries, and similar technology and services trends apply. There are however some underlying differences in demography, economic development and telecommunications availability.
With less developed fixed line infrastructure and a mobile market only partially penetrated, the growth potential in our emerging markets lies in growing the customer base significantly, increasing mobile usage, and further ahead also in mobile data.
TeliaSonera is present in Eurasia with majority-owned companies in eight markets, and via associated companies MegaFon in Russia and Turkcell in Turkey, including Turkcell's subsidiaries in the Ukraine and Belarus. TeliaSonera also has a financial holding in Afghanistan.
The discussion below concerns Kazakhstan, Azerbaijan, Uzbekistan, Tajikistan, Georgia, Moldova, Nepal and Cambodia, the markets where TeliaSonera has majority-owned operations.
The markets of our majority-owned operators vary in size from Moldova with 4.3 million inhabitants to Nepal with 29.5 million. The combined population is 110.8 million, more than three times the size of the Nordic and Baltic markets with a combined population of 31.8 million.
The demographic differences are large, with ageing populations in the Nordic and Baltic countries and significantly younger populations in our emerging markets. In Eurasia, people younger than 15 make up on average 30 percent of the population, whereas the equivalent shares in the Nordic and Baltic regions are 17 percent and 14 percent, respectively. Looking at people aged 65 and more they represent 17 percent on average of the populations in the Nordic and Baltic region, but as little as 6 percent in Eurasia. The demography in Eurasia opens for a rapid take up of telecommunications services, as it is usually the young that more readily take on new technology-based services.
The emergence of a middle class with increasing real wages, together with rising local consumption, foreign direct investment and the opening up of regulatory frameworks all add to the positive development of our mobile markets in Eurasia. In several of them, exports of natural resources such as oil and gas are the largest underlying drivers of business activity. Correlation between growing telecom penetration and economic growth is strong.
Mobile penetration in the markets where TeliaSonera has majorityowned operations is still fairly low, with the exception of Kazakhstan. The average penetration rate was around 44 percent in 2008, compared with 130 percent in the Baltic countries and 117 percent in the Nordic market.
As the standard of living improves, demand for and take up of services will grow even faster and show in mobile subscriptions, the use of value added services, internet use and the number of broadband connections. So far, internet user penetration remains low in Eurasia, and so does PC penetration.
In the Nordic countries, the number of broadband subscriptions expressed as a percentage of inhabitants was 36 percent in 2008. Penetration in the Baltic countries reached 17 percent, but in Eurasia only about 1 percent. The low broadband penetration in Eurasia opens for future opportunities to expand into the mobile broadband business. Particularly in the Nordic markets and to a certain extent in the Baltic countries, mobile broadband serves as a substitute or a complement to an already existing service, but in Eurasia mobile broadband connectivity represents a new market with high growth potential.
Source: TeliaSonera 2008 estimates, based on ITU World Communication/ICT Indicators Database, 2007. Penetration per population. A voice market with growing demand for data services As GDP per capita is lower in our emerging markets than in western markets, price sensitivity is higher. Not only low-price mobile phones but also easily available prepaid offerings are therefore must haves for operators.
Customers in these markets are not only focusing on basic quality issues such as coverage, but are also interested in SMSbased information services, MMS and ringback tones. The share of such services of total revenues is increasing and in the most penetrated markets – Georgia and Azerbaijan – ranges between 10 and 15 percent. 3G networks and services are made available by some operators in Moldova, Georgia, Tajikistan, Uzbekistan and Cambodia and they are expected to be introduced in other countries as well, to meet a growing demand for broadband data communication.
Customers want coverage and fast internet at home, at work and indoors as well as outdoors. Demand for capacity is virtually unlimited. The technology evolution taking place in the Nordic and Baltic countries is expected also in Eurasia, but when and to what extent remains to be seen.
"Every 18 months the performance doubles." Moore's law, named after Intel co-founder Gordon E. Moore, has been of major importance to describe the history of computer and IT technologies and is becoming relevant also to describe the development in telecommunications.
Transmission for fixed broadband has grown rapidly over the past five years. For example, traffic to TeliaSonera's Swedish IP network reached 100 Gigabits per second in October 2008, hundredfold the speed in 2000. While file sharing makes up a large part of that rise, recent growth in streamed traffic involving web-TV watching place new demands on the networks. Moore's law is becoming true also for describing the evolution of mobile communications. The rapid development of wireless access technologies drives a massive increase in mobile data traffic.
Bandwidth requirements will be determined by the total use of simultaneously connected devices at a certain spot, for example a home or office. Strong traffic growth drives a need for network upgrades and network investments. For many, broadband delivered via the existing copper network or via the mobile network are sufficient. However, for very capacity intense sites, the most future proof technology is fiber, often referred to as FTTx - fiber to the home, building or curb.
Western Europe consumer DSL1 subscriptions per speed
A new global generation of mobile network technology is about to be launched, the so called 4G or Long Term Evolution, LTE, networks. The technology offers high speed mobile broadband and implies a migration to IP-based services also in the mobile networks. This migration opens for new opportunities in service creation, quality and production efficiency.
Source: Ericsson – TeliaSonera joint technology study, October 2008
Moore's law does not only describe increased performance but also improved cost efficiency. An operator needs to support each radio transmitter with a capacity of several hundreds of Megabits per second rather than the few Mbps that has been the norm until recently. To meet this requirement and to capture new business opportunities, while achieving reasonable cost per Megabit, upgrading of the current backbone networks is needed.
Two major technologies support converged fixed-mobile services as well as improved mobile coverage and capacity for certain indoor environments. Unlicensed Mobile Access, UMA, is a standard for extension of mobile services using a WLAN radio link and access point in the customer's premises. UMA requires specific handsets. The second, femtocells, are low-power wireless access points that operate in the 3G spectrum to connect standard mobile handsets to a mobile core network using residential digital subscriber line, DSL.
Telecommunication is developing into an all-IP world. In order to improve performance, efficiency and quality for IP-based services, specifications for a new mobile core network are being finalized in the international standardization body 3GPP during the first quarter, 2009. The new network, named Evolved Packet Core, and the related
standard, will be of major importance as it lowers delays and can efficiently offer fully seamless IP-connectivity management between different access networks.
A technology related to the delivery of IP-based mobile services is IP Multimedia Subsystem, IMS, which is a telecom architecture for building and delivering IP-based services. Now IMS solutions are progressing and being accepted by fixed, mobile as well as cable operators as the future default control platform for IP-based communication services such as VoIP.
Peer-to-Peer is a technology that enables among other things file sharing. P2P is already used in various commercial purposes as for example Skype, a software allowing phone calls via internet, and Joost, a system for distributing recorded TV programs and other forms of video content.
Web services, web 2.0 and related tools play an extremely important role in making service development possible for many people. This puts the end user in the driver seat of open service innovation. Social software enabling online communities and media communication include Rich Site Summary, RSS, for delivering online news, as well as podcasts, videocasts, blogs and sites, or Wikis, the pages of which are edited by the users themselves.
Near Field Communication, NFC, is a standardized short range radio frequency based communications protocol that provides easy and secure connections among various devices without user configuration. NFC will increase simplicity significantly and can be used in for example public transport, retail payments, event arenas and for business workflow.
The possibilities will increase once the next generation of mobile SIM-cards is available. The Universal Integrated Circuit Card, UICC, will increase storage capabilities and improve possibilities for operators to configure and update services. As a result new business models emerge and in turn new opportunities for mobile operators, who can offer business partners a channel to the end users.
Regulation is part of the market environment in which Telia-Sonera operates and we need to adapt to any change. Regulatory intervention remains a primary challenge together with intense competition and customer migration. As a strong player in many markets, TeliaSonera is significantly impacted by alterations in regulation, since these can change business conditions.
TeliaSonera's view is that sector-specific regulations, particularly in the developed Nordic markets, should gradually be withdrawn in order to stimulate investments and innovation, and that the telecom sector should eventually only be regulated by general competition legislation.
However, the telecom market remains a regulated market. In November 2007, the EU Commission published its proposals for a "Revised regulatory framework for electronic communications." Following decisions by the Council of Ministers and the European Parliament a revised framework is expected to be implemented. Proposals include a new market-based strategy for the allocation of frequencies with increased flexibility in the use and trade of frequencies.
The Commission also proposed to provide regulatory authorities with the additional remedy of functional separation. That implies authorities would have the power to require market dominant operators to separate their access network activities, as an exceptional obligation subject to Commission oversight. In Sweden, such legal provisions on functional separation already entered into force on July 1, 2008.
There are developments on EU level and nationally on how to adapt regulations to the emergence of what is often called Next Generation Access Networks. TeliaSonera's standpoint is that the regulatory environment should give the right incentives for operators to be able to invest in the modernization of networks, particularly by introducing fiber in the access networks.
In 2007, EU rules were introduced to regulate prices and conditions for international roaming, for example for mobile phone use abroad. The regulation requires a gradual reduction of both retail and wholesale prices over a three year period, but only for voice calls. In September 2008, the Commission proposed to extend the scope of the Roaming Regulation to cover also SMS services and data roaming. The duration of the regulation for voice calls will be extended for three more years with further gradual price reductions. The proposed amendments have been submitted to the European Parliament and to the Council, which must both agree before the proposal can become law. The same rules will apply to Norway as an EEA country even if the implementation time may differ.
The regulatory environment in Eurasia is different from that of the EU. Obviously, there is no overall regulatory "umbrella" such as the EU regulatory framework and the topical regulatory issues are specific to each country. However, they often relate to spectrum assignment for our mobile operations and regulation of mobile termination rates.
It can be noted that in Russia, the regulatory authority regulates both retail prices and termination rates for fixed-to-mobile calls. Three Russian nationwide 3G licenses were granted at a beauty contest in 2007. The frequencies are not yet fully available but are still used by various governmental organizations for example in Moscow. Mobile Number Portability, MNP, and Mobile Virtual Network Operators, MVNOs, have not been introduced in Russia.
In Turkey, the Telecommunications Law was reformed in 2000 and 2001. The reforms aimed at modernizing and reforming the legal and institutional framework for the provision of telecommunications infrastructure and services in Turkey. The Telecommunications Authority is a financially and administratively independent telecommunications regulator, which has the authority to grant licenses and set fees in the telecommunications sector. In 2008 MNP was introduced and three 3G mobile licenses were granted through auction where each actor, including Turkcell, received a license for different bandwidths.
The telecom industry is undergoing significant changes. As customer behavior is evolving and new technology allows attractive and easy-to-use services, the industry is converging with sectors such as media, entertainment and IT. In such a context, telecom operators are facing numerous opportunities but also several challenges.
A new competition context is evolving, where the telecom value chain covers a larger set of services and a larger number of partners and competitors. In the consumer market, convergence is centered on media, content and devices. The convergence has driven many telecom operators into taking a more active role in the media industry as well as the device industry by focusing not only on mobile phones, but also on computers, TV set-top-boxes and smart home gateways.
The market convergence opens for opportunities for operators to enlarge their market by entering new service segments. However, it also opens for new business models where other than operators are strengthening their roles. Several new actors are lining up to gain a position in the content and services market. Mobile phone manufacturers, and companies like Apple, as well as strong internet brands all strive for positions in the mobile market in particular.
Advertisement-based business models are already well established in the internet space, with market leaders such as Google. As mobile
internet surfing is growing, the same logic is entering the mobile market, and the big internet brands will be among the first to move into the mobile space. Advertising along with m-commerce also opens for new revenue streams for operators. Both these markets will grow, but their share of total revenues is expected to be fairly small for most operators.
However, online advertising on internet is clearly gaining ground as a media channel at the expense of traditional media. As handsets gain in popularity as a media channel, mobile operators are presented with the opportunity to sell space here.
The market context is changing in the consumer and business segments alike. In the business segment, the transformation is related to the convergence between the historically divided telecom and IT services markets. Telecom providers as well as IT providers are expanding their offerings to cover both sides and thereby taking on a larger role in the value chain. Various related industries are working together in an ecosystem with dependence on each other for partnerships, but also in competition with one another.
A driver behind this development is the need by both private and public companies to manage their operations more efficiently. In this process they turn to electronic communication and related applications. At the same time the boundaries between business and private life become blurred. The telecom and IT suppliers are growing closer to each other in order to meet the increased need for efficiency and productivity, and satisfy the demand for higher benefits and fast payback from communications and IT investments.
TeliaSonera is present in 20 markets, including associated companies. Competition is intense and together with regulatory intervention puts prices under pressure in all markets.
Mobile market competition is particularly strong in the Nordic and Baltic markets where new customers, but not necessarily new SIMcards, are few. In these markets, competition is focusing on adding services and increasing service usage. Retail mobile voice prices in the Nordic markets have been declining for some years. Certain consolidation has taken place during recent years however, resulting in fewer players in most markets. The large players, with their own networks, have gained at the expense of smaller providers relying on renting network capacity. But on the other hand, regulation is putting pressure on prices.
Meanwhile, the average revenue per customer remains fairly stable since the price declines are offset by increased voice usage and higher customer spending on value-added services and mobile internet services. An uncertainty in this context is the flat rate pricing of mobile data, which could hamper potential revenue growth, and result in increased costs due to higher data consumption. Operators are starting to introduce other price models that better reflect the level of usage.
Our emerging markets are also characterized by keen competition. In the broadband market, where services generally are priced as a fixed fee per month, the average retail revenue per user is holding steady, and even showing a slight increase. However, data consumption is growing as customers demand higher bandwidths in tandem with increased usage. That increase is rarely offset by corresponding price increases. To compensate for this, broadband providers are offering a number of individually priced, related services such as storage, TV and VoD.
| Owner ship |
No. of Subscriptions |
Market | Market Share |
|||||
|---|---|---|---|---|---|---|---|---|
| Country | Trademark | (percent) | Service | (thousands) | Position | (percent)¹ | Main Competitors | Logotypes |
| Majority-owned companies | ||||||||
| Sweden | Telia, Halebop | 100 | Mobile | 5,334 | 1 | 40 | Tele2, Telenor, "3" | |
| Telia | 100 | Broadband | 1,122 | 1 | 41 | Telenor, Com Hem | ||
| Telia | 100 | Fixed Voice | 4,000 | 1 | 65 | Tele2, Telenor, Com Hem |
||
| Finland | Sonera, TeleFinland | 100 | Mobile | 2,676 | 1 | 39 | Elisa, DNA | |
| Sonera | 100 | Broadband | 478 | 2 | 32 | Elisa, DNA, Welho | ||
| Sonera | 100 | Fixed Voice | 420 | 2 | 27 | Elisa, Finnet | ||
| Norway | NetCom, Chess | 100 | Mobile | 1,581 | 2 | 28 | Telenor, Tele2 | |
| NextGenTel | 100 | Broadband | 176 | 2 | 11 | Telenor, Get, Tele2 | ||
| Denmark | Telia, Call me | 100 | Mobile | 1,493 | 3 | 22 | TDC, Telenor, "3" | |
| Telia, Stofa, DLG Tele² |
100 | Broadband | 184 | 3 | 11 | TDC, Telenor | ||
| Telia, Call me, DLG Tele² |
100 | Fixed Voice | 226 | 2 | 8 | TDC, Tele2 | ||
| Lithuania | Omnitel, Ezys | 100 | Mobile | 2,012 | 1 | 39 | Bité GSM, Tele2 | |
| TEO | 60 | Broadband | 298 | 1 | 49 | LRTC, Balticum TV | ||
| TEO | 60 | Fixed Voice | 769 | 1 | 95 | Telekomuniaciju grupa, Cubio |
||
| Latvia | LMT, Okarte, Amigo | 60.3 | Mobile | 1,056 | 1 | 44 | Tele2, Bité Latvia | |
| Estonia | EMT, Diil | 60.1 | Mobile | 778 | 1 | 47 | Tele2, Elisa | |
| Elion | 60.1 | Broadband | 176 | 1 | 65 | Starman, STV | ||
| Elion | 60.1 | Fixed Voice | 391 | 1 | 85 | Starman, Tele2 | ||
| Spain | Yoigo | 76.6 | Mobile | 970 | 4 | 2 | Telefónica, Vodafone, Orange |
|
| Kazakhstan³ | K'cell | 51 | Mobile | 7,083 | 1 | 47 | VimpelCom | |
| Azerbaijan³ | Azercell | 51.3 | Mobile | 3,471 | 1 | 59 | Bakcell | |
| Uzbekistan | UCell | 74 | Mobile | 2,683 | 2 | 22 | MTS, VimpelCom | |
| Tajikistan | Indigo Tajikistan, Somoncom |
60 59.4 |
Mobile | 1,154 | 1 | 33 | Babilon Mobile | |
| Georgia³ | Geocell | 100 | Mobile | 1,582 | 1 | 49 | Magticom, VimpelCom |
|
| Moldova³ | Moldcell | 100 | Mobile | 550 | 2 | 24 | Orange | |
| Nepal4 | Mero Mobile | 80 | Mobile | 1,749 | 2 | 41 | NTC | |
| Cambodia4 | Star-Cell | 100 | Mobile | 144 | 4 | 4 | Mobitel, TMIC |
| Latvia | Lattelecom | 49 | Broadband | 180 | 1 | 75 | Baltkom TV, Izzi | |
|---|---|---|---|---|---|---|---|---|
| Lattelecom | 49 | Fixed Voice | 597 | 1 | 95 | Telecom Baltija, Teledialogs SIA |
||
| Russia | MegaFon | 43.8 | Mobile | 43,558 | 3 | 23 | MTS, VimpelCom | |
| Turkey | Turkcell | 37.3 | Mobile | 36,300 | 1 | 56 | Vodafone, Avea | |
| Ukraine5 | Life | Mobile | 10,700 | 3 | 20 | Kyivstar, MTS, VimpelCom |
||
| Belarus5 | Life | Mobile | 200 | 3 | 3 | Velcom, MTS |
¹ In Broadband and Fixed Voice TeliaSonera's market share estimate is based on the share of revenues.In Mobile the market share is based on the number of subscriptions except for subsidiaries in Eurasia where it is based on interconnect traffic.
² TeliaSonera owns 50 percent of DLG Tele and controls the company.
³ For Kazakhstan, Azerbaijan, Georgia and Moldova, the ownership percent indicates Fintur Holdings B.V.'s ownership in the four companies. TeliaSonera holds directly and indirectly 74 percent in Fintur Holdings.
4 For Nepal and Cambodia the ownership percent indicates TeliaSonera Asia Holding B.V.'s ownership. TeliaSonera holds 51 percent in TeliaSonera Asia Holding B.V.
5 Turkcell's subsidiaries in Ukraine and Belarus, in which Turkcell holds 55 percent and 80 percent, respectively.
Mobility Services Broadband Services Eurasia
TeliaSonera offers services that help people and companies communicate in an easy, efficient and environmentally friendly way. Demand for being able to connect anywhere, anytime and on any device is growing, be it for entertainment, socializing, business or care.
We operate in markets with varying levels of maturity. In the Nordic and Baltic markets we see massive increases in mobile data usage and IP traffic. We continue migrating our fixed voice customers to mobile and IP-based services, and we invest to
cater to TV and value-added services that drive broadband growth.
In the emerging markets of Eurasia young and growing populations, low mobile penetration and expanding economies offer a tremendous opportunity for growth. In 2008 we entered two new high-growth emerging markets.
Our success is based on providing world-class services and high-quality networks.
TeliaSonera Mobility Services comprises leading brands across the Nordic and Baltic region. Our mobile operators in Sweden, Finland, Lithuania, Latvia and Estonia are the market leaders in their respective countries. We are the second largest mobile operator in Norway and number three in Denmark. Since 2006, we also have operations in Spain.
In 2008, customers in all our Nordic and Baltic markets showed us they value freedom of movement not only for voice but also for sharing data and information – be it for work, care, socializing or entertainment. We saw mobile data usage explode along with the continued success of our laptop-embedded mobile-broadband service. The SIM-card equipped laptop is at the heart of our strategy to offer services that are easy to use and ready to access anywhere. We launched it already in 2007, as the first operator in Europe. While mobile voice certainly remains the dominating revenue generator for us, data traffic is the driver of growth.
In July 2008, TeliaSonera started sales of the Apple iPhone 3G in Sweden, Finland, Norway and Denmark and later in Latvia, Lithuania and Estonia. It has been a tremendous boost to all our brands in the region. For example, in Sweden the Apple iPhone 3G alongside mobile broadband USB modems topped sales at Telia's stores throughout the rest of the year. The iPhone has helped drive data traffic by making surfing easy. Mobile data usage is considerably higher among iPhone users than customers on average.
The emergence of new technology that makes handsets, laptops and other devices perfectly suitable for mobility and data usage is one of the reasons behind the fast take off in mobile data traffic. Attractive pricing and flat-rate offerings for mobile broadband is another. Following campaigns promoting mobile broadband a growing number of people discovered the possibility of surfing, downloading and emailing at increased speeds also while on the move for business or pleasure. Meanwhile a small share of our customer base generates a large part of the traffic. Therefore, we are reviewing the pricing of mobile broadband to find models that better reflect the level of usage.
A third and fundamental factor behind the soaring mobile data usage is the development of the underlying technology allowing increased network capacity and speed. TeliaSonera rolled out turbo 3G in all Nordic and Baltic markets already in 2007. The strong mobile broadband trend will put further increased demands on the capacity of our networks. That is why we are looking forward to the next generation of mobile networks. We now have 4G-licenses in Sweden and Norway and aim to be one of the first operators in the world to launch 4G commercially in 2010. The new frequencies will enable TeliaSonera to build a mobile network providing access speeds of up to 100 Megabit per second, more than 10 times faster than today's networks, and considerably improving our customers' experience of interactive services. TeliaSonera has chosen Ericsson for the supply of the initial 4G city network in Stockholm and Huawei for the network in Oslo. In most of our other Nordic and Baltic markets licenses are expected to be issued in 2009.
Customers show us they value the freedom of mobility also while at home. Like the mobile phone, the laptop is becoming a personal belonging. We also see a trend towards smaller laptops, or netbooks, with functionality optimized for internet browsing. People bring their personal laptops about the house to watch TV while cooking, send emails from the couch or read web magazines in bed. For the customer this is regardless of whether access comes from a fixed network, a public radio network or WLAN, wireless local area network. As the need for speed is virtually unlimited and demand for mobility is growing all-IP-based backhaul networks will be required. Significantly higher speeds will be going out to the base stations in order to ensure outdoor as well as indoor coverage and capacity.
We look into various new technologies and solutions to improve customer experience and to meet future demands for increased reach and capacity within homes and offices as well as outdoors. One such solution on the mobility side may be 3G femto technology which is being tried out in Lithuania and Denmark. 3G femtocells are access points, or small 3G base stations connected to the mobile core network via the fixed broadband internet in the customer's apartment, house or small office.
As part of our growth strategy, we strive to constantly improve relations with our customers. In 2008 we improved customer satisfaction scores in most of our Nordic and Baltic markets, according to the European Performance Satisfaction Index, EPSI. To create closer relations with our customers we also strengthened our distribution network. By acquiring full ownership of retail chain ComHouse in Norway in July 2008, we now have our own distribution channels in all Nordic and Baltic markets. For more information on EPSI see section Corporate Responsibility.
Across our markets, regulatory intervention remains one of our primary challenges. Managing the effects from such intervention including interconnect and roaming fees - is part of our business and the impact varies from country to country.
See section Market and Customers for more information on market shares, brands and market regulation.
Companies show a growing need for mobility. Via our new sales force Business Services, we offer mobility services that help companies save time, increase efficiency and improve their own customer service.
One such tool is Telia Kvittens used by field workers in any sector from public elderly care to private sector service companies. Reneriet, a Stockholm-based cleaning company that serves ferries operating the Baltic Sea, is a customer. Modern ferries mean large investments for the shipping companies that own them and must spend as little time as possible ashore. In less than two hours Reneriet staff cleans 900 cabins at M/S Cinderella, a vessel carrying passengers between Sweden and Finland. To make sure all cabins are cleaned and ready to welcome new passengers Reneriet uses Telia Kvittens. Based on Near Field Communication the system automatically sends a receipt confirming the cleaning has been carried out, and by whom, or reports any damages that need fixing directly to a repairer. The system can automatically redirect incoming passengers to new cabins. Services like Telia Kvittens give Reneriet and its customers an advantage.
"As mobile data usage is exploding we want to offer people and businesses services that are easy to access and easy to use anywhere, anytime. Unmatched in experience and with a good geographic spread, we aim to be the driver of the mobility services evolution in the Nordic and Baltic markets." Kenneth Karlberg, President, Mobility Services
TeliaSonera Broadband Services comprises market leading brands across the Nordic and Baltic countries. We are the market leader in Sweden, Lithuania, Estonia and, via our associated company, in Latvia. In Finland, Norway and Denmark, our operators are number two or three in their markets. Telia-Sonera also has a strong position in the international carrier market.
In 2008, we continued the migration of our fixed voice customers to mobile and IP-based services. More and more people choose to no longer have a traditional fixed line telephony subscription, in favor of mobile phone services and internet telephony, VoIP. More bandwidth and new platforms are required because people and companies make use of the internet for a string of new services and activities beyond web surfing. Such services include TV, games, social networking, surveillance, secure storage, business meetings and customer relations.
In 2008, we saw increased demand from private customers and businesses alike to access our services independent of terminal and connection, and a growing interest in converged offerings. That is why the investment in triple play – voice, broadband and TV as one bundle – and increased bandwidth is so important to our future.
TeliaSonera believes fixed lines will provide the most efficient access for many years to service fixed locations, such as offices or homes in regions where fixed networks already exist. Wireless technologies are being implemented for increased coverage and reach in all our markets and where fixed network presence is not economically feasible.
We offer triple play in most of our Nordic and Baltic markets. We see television at the center of the digital home for all kinds of internet interaction and as a driver of broadband growth ahead.
Our total number of TV subscriptions reached 867,000 in 2008. Our push for IPTV, or digital TV via broadband, brought up the number of subscriptions to 324,000 in Sweden, our single largest market. In 2008 we enhanced our offering for IPTV by adding 17 channels to our already comprehensive selection of channels and on-demand services. New sales have more than compensated for the churn in the market and at the same time, after the initial free-ofcharge trial period, 70 percent of our Swedish IPTV customers continue to be paying customers.
TV opens up for a new range of services that users are willing to pay for, including video-on-demand, or VoD, and time-shift TV, features allowing viewers to choose what day and time to see a program. Like VoD, time-shift TV is a service that adds value and will drive growth. Telia's online video store in Sweden has also become a great success.
In order to meet future demands for increased reach and capacity within homes and offices as well as outdoors, we are looking into various new technologies and solutions to offer customers wireless extension of their wireline connection. Smart Broadband is one such solution, available in Sweden. An intelligent box that connects data, sound and voice equipment, Smart Broadband enables people to easily use their connection for more than surfing and it puts an end to tangled cores. TeliaSonera was the first operator in the world to launch Smart Broadband in 2007.
For our business customers, new communication tools allow the exchange of documents and video presentations. Our services generate benefits like unlimited availability, lower travel costs and reduced carbon dioxide emissions. Usage of virtual meeting services accelerated in 2008 in tandem with tightening economic conditions and increasing awareness of the environmental damage caused by business travel.
TeliaSonera offers a range of tele-conferencing services, including video-conferencing services together with Tandberg and with Cisco, which developed TelePresence, a new generation virtual meeting service that TeliaSonera was first in the Nordics to launch already in 2007. TelePresence features advanced technology and equipment that make meeting participants who are present via a link really appear to be in the same room.
For business customers to adopt meeting solutions and services like unified communication, they need a company that can deliver telecom carrier grade solutions that ensure security. Our secure infrastructure for data communication also gives companies the possibility to provide unmatched customer service through video and other tele-presence services.
TeliaSonera has a strong position in the international carrier market. Serving the communications industry with quality IP and cross-border services, TeliaSonera International Carrier is the leading European carrier with 43,000 kilometers of network and the fastest IP growth rate in Europe. It provides direct internet connectivity via its global IP network to 85 percent of all European broadband service providers. TeliaSonera International Carrier was nominated in the Best Wholesale Carrier and the Green Award categories for the annual world Communications Awards in 2008. A decisive factor for the nominations was consistently high network quality.
Read more about Europe's leading international carrier on www.teliasoneraic.com.
TeliaSonera International Carrier powered the Dreamhack event with internet connectivity again in 2008 via a 40 gigabit link to the world wide web. Dreamhack in Sweden is the world's largest LAN, or local area network, party.
Gaming is part of the new IP-based services of the digital home. TeliaSonera in 2008 launched a new and unique service, Telia Game Subscription, that means users no longer need to buy their computer games, but can easily download them to their computers from Telia's gaming portal and play as much as they want for a fixed monthly fee. The service is not limited to Telia customers – anyone can subscribe.
Successfully managing the migration from traditional fixed services to new mobile and IP-based services, including investments and costs, is crucial for TeliaSonera. This is particularly true in Sweden. This transition needs to be handled in a cost efficient way as TeliaSonera cannot have structurally higher costs than its competitors. Improving operational efficiency remains one of our top priorities.
We continue to modernize our broadband networks in densely populated areas where we see a demand. In such areas in Sweden we increase access to fast fiber for apartment buildings, single dwelling houses and companies and we increase capacity of the transport network. In Finland, the building of a fiber optic network started already in 2007 in the country's 15 biggest cities. Investments by business area Broadband Services in the backbone and transmission networks are required also to meet the growing need for speed that comes from wireless internet. Telecommunications has contributed to the development of new services in various other sectors over the years, for example in retail banking, and in the airline industry. Through our fiber networks we can help our business customers deliver high-bandwidth connectivity services to their end customers. One such example could be a high-resolution video application enabling interaction.
Nordea, the Nordic region's largest bank has chosen TeliaSonera DataNet to secure fast and safe data communication transmission between its branches and ATMs throughout the Nordic markets, except Finland. Fiber access will allow high-speed capacity. With DataNet as the platform, Nordea can build IP-based communication services, such as IP telephony, video and the integration of communication services in its IT systems – so called unified communication.
At the same time, we are replacing fixed-line telephones in sparsely populated rural areas in Finland with wireless solutions. We will ensure services by migrating them securely and in a controlled manner to the mobile network. No fixed-line access will be dismantled before it has been ensured that the services operate flawlessly.
Our best asset is our large customer base and we work hard to improve our customer service. In 2008, we managed to increase customer satisfaction in most Nordic and Baltic markets, according to EPSI. Our Norwegian broadband operator NextGenTel was awarded best customer service company in Norway in 2008 in competition with companies in eight industries. For more information on EPSI see section Corporate Responsibility.
See section Market and Customers for more information on market shares, brands and regulation.
"Our aim is to transform our business through providing IPbased communication and content services at a competitive cost level and with the best customer service. Our best asset is our large customer base and we have an excellent opportunity to strengthen our positions. Our success is based on highquality services and networks."
Håkan Dahlström, President, Broadband Services
TeliaSonera has majority-owned operators with strong or leading brands in eight markets: Kazakhstan, Azerbaijan, Uzbekistan, Tajikistan, Georgia, Moldova and the two new markets, Nepal and Cambodia, that we added in 2008. We are minority owners of MegaFon in Russia and Turkcell in Turkey, including Turkcell's subsidiaries in the Ukraine and Belarus, and have a financial holding in an operator in Afghanistan. Growing in Eurasia is a top priority for TeliaSonera. Eurasia contributes strongly to group earnings and the focus ahead is on sustaining high profitability.
With young and large populations, low mobile penetration and expanding economies, the countries in this part of the world provide a valuable opportunity for growth. Here we operate in one of the world's most dynamic regions where we are committed to continue exploiting growth and creating value for our shareholders. We aim to create leading market positions through organic growth and acquisitions. The growth potential lies in expanding the customer base and increasing mobile voice usage. Looking ahead we also see mobile data taking off with an emerging demand for mobile broadband. Our success is based on providing high-quality services and networks.
In markets with a combined population of more than 380 million, including Russia and Turkey, TeliaSonera's majority- and minorityowned businesses continued their strong performance in 2008. Growth in our consolidated companies was driven by higher subscription numbers, increased traffic, higher usage of voice and non-voice services, and acquisitions.
We have a strong track record of creating value in this region. Already in the early 1990s, and long before the merger between Telia and Sonera in 2002, we were founding partners of some of the operations in Eurasia that are now key contributors to TeliaSonera's solid earnings and shareholder returns. By combining local expertise and our international experience we develop our business to become the leading telecom operator in this part of the world.
Taking a further important step in executing our strategy to expand into new high-growth emerging markets, we entered Nepal and Cambodia in 2008. TeliaSonera acquired controlling interests in Nepal's second largest mobile operator Spice Nepal, operating under the brand Mero Mobile, and in Cambodian start-up Applifone, offering services under the brand Star-Cell.
Nepal and Cambodia have a combined population of 43 million, growing economies and low mobile penetration, 14 percent and 21 percent respectively. Spice Nepal launched its operation in 2005 and has a market share of around 41 percent. Applifone started its business in October 2007 and is the fourth largest mobile operator in Cambodia with a market share of around 4 percent.
Completed in October 2008, the new acquisitions followed our successful investments in Uzbekistan and Tajikistan in 2007. In these two markets we have increased our market shares fast despite strong competition and became the market leader in Tajikistan in 2008.
The emergence of a middle class with increasing real wages, and growing domestic consumption, higher foreign direct investment and the opening up of regulatory frameworks all add to the development of the emerging markets where we are present. In many of them exports of natural resources such as oil and gas are the largest underlying drivers of business activity and economic growth. The share of telecommunications as a percentage of gross domestic products is still low and represents an opportunity. So does the weak fixed-line infrastructure as it leaves room for high mobile services demand.
Intense competition and regulatory intervention are putting margins under pressure and remain our main challenge. Meanwhile the world is in a period of financial turmoil and severe economic downturn and it is very difficult to predict how long it will last. While telecom is a relatively non-cyclical industry customers in this part of the world are very price sensitive. Our balanced-growth approach has enabled us to sustain a high profitability.
Our success is based on providing high-quality services and networks. Strong growth obviously means sizeable investment need. Investment focus in business area Eurasia is on coverage, capacity, 3G licenses and networks and further on developing our transmission and transport networks to cater to a growing demand for mobile data and internet.
The popularity of mobile services has grown dramatically due to larger network coverage, more developed international roaming and value added services along with attractive pricing. 3G services were launched in Georgia in 2007, followed by Moldova in 2008. Geocell and Moldcell now offer 3.5G providing access to services like fast
mobile internet, video calls and, coming up, mobile TV. 3G licenses are obtained in Uzbekistan, Tajikistan, Nepal and Cambodia and are expected in Azerbaijan in 2009.
Demand for internet is expected to grow and will require not only network investments but the right devices as laptop penetration is still low, although there is already a demand for USB modems. Mobile phones will be a way to get to internet and the future of mobile broadband looks promising.
TeliaSonera offers services that can help render economic, social and environmental benefits. People who never had access to telecommunication have increased possibilities to connect to others and access information. Being a good corporate citizen means more, though. Our companies are important contributors to the societies they operate in. TeliaSonera is a significant investor in the region and plays an important role as an infrastructure builder and as an employer and tax payer. Being part of local society is a prerequisite for succeeding in the region, in addition to a deep understanding of, and the ability to manage, local culture and keeping strong internal control.
Good ethics is a requirement for us when conducting business. Good ethics is our means of deciding whether a course of action is right or wrong. We view high ethical standards and continuous followup of business conduct as the path for sustainability. For more information see section Corporate Responsibility.
Political and economic risk could be a challenge but TeliaSonera is well equipped to handle such risk, which is also outweighed by the opportunities in the region. As we expand to new fast-growing and profitable markets we do it in cooperation with strong local partners. We keep strong corporate governance and risk management.
TeliaSonera owns, directly and indirectly, 44 percent of MegaFon, Russia's third largest mobile operator, and 37 percent of Turkcell, the largest operator in Turkey. These assets have brought significant value to our shareholders for several years through strong sales and earnings growth. We will seek to control and thereby consolidate our minority stakes in MegaFon and Turkcell or, if that is impossible, we will seek to have a degree of liquidity and control, for example through dividends, management control, board seats or public listing. For more information visit www.megafon.ru and www.turkcell.com.
See section Market and Customers for more information on market shares, brands and market regulation.
"A top priority for TeliaSonera is to grow in Eurasia. We are creating an operation under our control that is becoming a strong, solid and meaningful asset to TeliaSonera in one of the world's most dynamic regions." Tero Kivisaari, President, Eurasia
As a leading provider of telecommunication services, TeliaSonera is a vital part of the social and economic infrastructure in the markets where we operate. Our communication services drive growth, competitiveness and the transition to a knowledge-based society. Our services help people and companies communicate in a simple, effective and environmentally friendly way.
TeliaSonera is committed to managing business operations in a responsible and ethical manner, with the aim of capturing business opportunities and managing risks.
We have identified the following four areas to be the most material in maintaining the trust of our stakeholders and ensuring the success of our business:
TeliaSonera believes that access to information and communication technology, or ICT – regardless of income, age, gender or geography – is a great enabler of economic and social development as well as improved chances in life for the individual. We contribute to bridging the digital divide in a number of ways; by increasing coverage, providing services that are easy to use and investing in emerging markets. Our services reach people in 20 markets, including associated companies. In 2008, the total number of subscriptions reached 135 million of which 109 million in Eurasia, including majority- and minority-owned operations. Through our presence in emerging markets, we contribute to improve access to ICT in these countries.
The growing concerns about climate change are driving demand for solutions that contribute to sustainability. We help to reduce climate impact by providing new means of communication. Services for telephone, internet or video meetings can substantially cut the need to travel, while other services can contribute to sustainability by optimizing traffic flows, electricity consumption and logistics.
Our success is based on providing world-class services and highquality networks, two of our six focus areas. We continue to invest in upgrading our networks and strengthen our supervision and back-up systems. In 2008, we introduced the widely respected Six Sigma methodology to ensure high quality and continuous improvement in our business processes. We also recognize that without the right leadership and employee focus on our customers, we cannot expect to retain the confidence that we have earned.
TeliaSonera's Code of Ethics, combined with a solid internal control environment, holds top managers personally responsible for following the key policies and procedures. The Eurasian markets represent an excellent opportunity for growth, but there are also challenges and risks related to the region. To further strengthen the control environment we regularly rotate managers.
The starting point for TeliaSonera's approach to corporate responsibility is the commitment to the highest standards of conduct by every employee. Their commitment to preserve our reputation
and enhance the customer experience is found in our vision of Simplicity, our Shared Values and our Code of Ethics.
Our shared values guide our employees in their everyday work and decision-making. They are:
The second pillar of our values, Show Respect, defines TeleSonera's relationship with its stakeholders and is the basis for our approach to Corporate Responsibility.
We show respect by:
At TeliaSonera, we believe that corporate responsibility must be integrated in the day-to-day business if it is to be effective and credible. Our approach is to strive for continuous improvement, step by step.
During 2008 we initiated a review of our CR policies and processes in order to implement an integrated framework for all majority-owned companies and to integrate and align the CR work with TeliaSonera's overall business objectives. This work continues in 2009.
At TeliaSonera, we have a long history of achieving success through honest and fair business practices. Common standards of behavior have been defined in the Code of Ethics that applies to all employees in majority-owned operations as well as contractors, suppliers and service providers. A specific Code of Ethics and Conduct for the Eurasian operations focuses on particular challenges found in these markets.
Major elements of these Codes include:
TeliaSonera requires high corporate responsibility standards by our suppliers. In 2008 we launched group-wide supply chain standards regarding environmental, social and ethical issues, including human rights. The requirements will be used both as a tool for selecting suppliers and as a basis for active engagement with them to promote good corporate responsibility management practices. We expect our suppliers to demonstrate continuous improvement.
With the ambition to improve customer experience we introduced the business management approach Six Sigma during 2008. Six Sigma is a methodology that seeks to identify and remove causes of defects and errors in processes.
We strive to protect our customers from illegal or abusive use of our networks, such as distribution of child pornography. We provide technology and information to help our customers protect themselves from e-bullying and unwanted content. Initiatives include:
To measure and benchmark our performance from the customer perspective, we participate in the European Performance Satisfaction Index (EPSI). According to the EPSI results 2008, customer satisfaction improved in most our Nordic and Baltic businesses in 2008. On the whole, mobile customers were more satisfied than broadband customers. The best results were achieved by Omnitel in Lithuania nearly reaching the "excellent" index score with a result of 79.3.
The EPSI method is a well established method for measuring customer satisfaction and loyalty. Research is public and from a reliable source with statistically verified data. EPSI-rating is based on international research insight from studies in many industries during the past 15 years, with varieties between markets.
Access to communication technology promotes freedom of expression and encourages openness in otherwise closed societies. But technological advances also mean that people's personal data is processed and stored more frequently than ever before. These changes create significant freedom of expression, privacy and data protection challenges.
TeliaSonera complies with the data protection laws that govern our markets and takes all reasonable care to prevent unauthorized access to personal data.
During 2008 The Global Network Initiative – a multi stakeholder forum that TeliaSonera participated in initially – introduced Principles on Protecting and Advancing Freedom of Expression and Privacy in Information and Communications Technologies. The Principles were signed by the US internet companies. TeliaSonera and other telecom operators did not sign the principles, but will continue to work with these issues individually and through industry organizations.
The direct environmental impact of TeliaSonera's operations is limited in relation to the economic value of our services. More importantly, by replacing the need to travel, TeliaSonera's services help our customers reduce their environmental impact, including greenhouse gas emissions.
TeliaSonera has received "Prime" status by oekom reseach, one of the world's leading rating agencies for sustainable investments. TeliaSonera ranks among the world's best companies within the telecom industry thus qualifying for ecologically and socially based investment. Among TeliaSonera's strengths oekom highlighted measures taken to reduce the environmental impact of business travel both among employees and customers by promoting an increased use of tele-meeting services. Measures to minimize the use of electromagnetic ratios of mobile phones and base stations were given the rating "excellent," or A+.
http://www.oekom-research.com/index_en.php
Increased energy efficiency and reduced CO2 emissions In our internal operations we strive to minimize our impact on the environment by continuously improving our resource efficiency. Reducing carbon dioxide emissions is a priority and we are achieving this by a transition to eco-labeled electricity, where possible, to cut the emission of our energy consumption. For example in Sweden and Finland, 100 percent of our energy consumption is eco-labeled.
Sweden, Finland, Norway, Denmark, Lithuania
In order to limit fossil energy consumption, TeliaSonera has piloted the introduction of fuel cell technology to produce backup power for base stations in Sweden. In 2008, the number of pilot fuel cell powered base stations was increased from four to six.
In 2008, the total carbon dioxide emissions from wholly-owned operations, in relation to the number of subscriptions in those operations, fell by 11 percent. The main part of this decline can be attributed to an increased use of renewable energy sources and improved energy efficiency.
Within TeliaSonera we aim to take a lead in using tele meetings as a replacement for physical meetings, thus reducing the need to travel. For example in 2008, by replacing physical traveling with the virtual meeting service TelePresence in Sweden and Finland, TeliaSonera achieved time savings equaling 40 months of full time work of one employee, SEK 5.8 million in traveling costs and some 170 tons in carbon dioxide emissions.
TeliaSonera has strived to be a pioneer in climate reporting. In 2008, this ambition was acknowledged by the Carbon Disclosure Project when it recognized TeliaSonera as the leading Swedish large-cap company for climate reporting. See www.cdproject.net for additional information.
In Sweden, TeliaSonera has had certified management systems since 1992. An integrated management system in accordance with ISO 14001 and ISO 9001 was implemented in 2001. In Finland, our operations have been certified according to ISO 9001 certificate since 2007. These certification programs aim to ensure a systematic approach to handling environmental and quality issues relevant to our operations.
As an in international telecom operator, employing around 32,000 people, TeliaSonera is strongly committed to develop its employees' competence and leadership. Working across borders and driving international solutions is essential to us.
Performance management and competence development TeliaSonera is pushing to be even more commercial and customeroriented and it is essential that our employees possess the right combination of competences. Customer migration from traditional fixed-voice services to new mobility and IP-based services in the more developed of our markets, particularly in Sweden and Finland, adds to this need. We conducted several competence development activities in 2008 with the aim to develop our capabilities to meet our business objectives.
A Performance Management Model is under implementation in TeliaSonera in order to maximize performance and in a structured way encourage all employees to strive towards the same goals. The model will:
The Performance Management Model is being introduced for TeliaSonera's top 300 managers in 2009 and is intended to be launched for all employees in 2010.
To meet our demand for employees who can take responsibility for driving forward change, TeliaSonera conducts Group-wide programs:
On an annual basis TeliaSonera's Leadership Team carries out a management review lead by the CEO. It is an activity that responds to short- as well as long-term business needs of leadership capability and supply.
The purpose of the management review and succession planning is to provide for a solid overview of current leadership capability, and succession planning, secure a future talent pool and follow up on succession planning activities in the respective business areas and functions.
The objective of the management review and succession planning is to ensure a constant focus on the improvement of readiness levels (that is candidates ready to step up and succeed current managers), and of the mix of nationalities and gender.
Today the majority of the management is of Swedish or Finnish nationality. This is natural given the history of the company and the fact that the head office is in Sweden, but with our geographic expansion this is changing.
In the majority-owned operations the share of women has increased to from 42 to 44 percent since the merger of Telia and Sonera late 2002. At the same time the share of female senior executives, other than board members, has increased from 18 to 32 percent. See Note 32 to the consolidated financial statements for more information.
The share of women is highest in Kazakhstan and Azerbaijan (both 54 percent) but significantly lower in Norway and Cambodia (both 32 percent).
One of TeliaSonera's six focus areas is to become a world-class service company. We regard employee satisfaction as a key driver of service improvement.
Employee commitment improved in 2008 and reached the highest level since we started measuring in 2004, according to the TeliaSonera Employee Commitment Score, ECS. TeliaSonera's ambition is to reach a score of 67 in 2010.
We monitor our CR performance through robust internal reporting systems and present our results and progress annually in a digital CR report available on our website www.teliasonera.com. We are gradually expanding our CR reporting to cover not only our whollyowned operations and in 2008 we started including our majorityowned operations.
Our reporting is based on the standards of the Global Reporting Initiative (www.globalreporting.org) as well as the telecommunications sector supplement and we publish a GRI reporting index on our website.
TeliaSonera supports the following international guidelines for corporate responsibility:
Despite turmoil in the global financial markets and the rapid downturn in the world economy, TeliaSonera reported improved sales and earnings in 2008, increasing net sales by 8 percent to SEK 103.6 billion and net income by 6 percent to SEK 21.4 billion. The number of subscriptions increased by 20 percent to 43 million in the majority-owned operations, and by 16 percent to 91 million in TeliaSonera's associated companies.
The EBITDA margin, excluding non-recurring items, was maintained almost at the level of 2007 and was 31.8 percent. EBITDA in absolute terms increased by 6 percent to SEK 33.0 billion.
Operating income, excluding non-recurring items, increased by 9 percent to SEK 30.0 billion due to higher EBITDA and further improved earnings in associated companies. The share of Eurasian operations increased to over 45 percent of TeliaSonera's operating income (40 percent in 2007).
Earnings per share increased by 7 percent to SEK 4.23.
TeliaSonera changed its business organization on January 1, 2008, when Integrated Enterprise Services was discontinued as a separate business area and its operations are since then reported as part of Mobility Services, Broadband Services and Other operations.
In January 2008, TeliaSonera created a separate wholly-owned telecom network infrastructure subsidiary in Sweden, TeliaSonera Skanova Access AB, with the purpose of enhancing efficiency and increasing the market's confidence and trust in TeliaSonera as a supplier of wholesale products.
In June 2008, the Board of Directors rejected a non-binding indicative offer by France Telecom, regarding a potential acquisition of TeliaSonera. The decision was thereafter supported by TeliaSonera's main shareholders.
In October 2008, TeliaSonera continued to expand its presence in the growing mobile markets in Eurasia by acquiring operators in Nepal and Cambodia.
The Board of Directors proposes an ordinary dividend of SEK 1.80 per share, equaling a total of SEK 8.1 billion.
| SEK in millions, | Change, | ||
|---|---|---|---|
| except earnings per share and margins | 2008 | 2007 | % |
| Net sales | 103,585 | 96,344 | +8 |
| Operating expenses (except depreciation, amortization and impairment losses) |
-71,196 | -66,803 | +7 |
| Depreciation, amortization and impairment losses |
-12,057 | -11,704 | +3 |
| Other operating income and expenses | -780 | 621 | |
| Income from associated companies and joint ventures |
9,096 | 7,697 | +18 |
| Operating income | 28,648 | 26,155 | +10 |
| Financial income and expenses, net | -2,237 | -904 | +147 |
| Income after financial items | 26,411 | 25,251 | +5 |
| Income taxes | -4,969 | -4,953 | +0 |
| Net income | 21,442 | 20,298 | +6 |
| Attributable to: | |||
| Shareholders of the parent company | 19,011 | 17,674 | +8 |
| Minority interests in subsidiaries | 2,431 | 2,624 | -7 |
| Earnings per share (SEK) | 4.23 | 3.94 | +7 |
| EBITDA excluding non-recurring items¹, ² | 32,954 | 31,021 | +6 |
| Margin (%) | 31.8 | 32.2 | |
| Operating income excluding non-recurring items² |
30,041 | 27,478 | +9 |
| Margin (%) | 29.0 | 28.5 |
¹ 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. ² For details of non-recurring items, see "Non-recurring items" below.
Net sales increased 7.5 percent to SEK 103,585 million (SEK 96,344 million in 2007). Organic growth in local currencies increased to 3.9 percent (3.6). The positive net effect from acquisitions and divestments was 1.5 percent and from exchange rate changes 2.1 percent. Approximately half of the Group's organic local currency growth came from Mobility Services, especially from Spain, and the other half from Eurasia, partly offset by the organic local currency decline in Broadband Services.
| Organic local |
|||||
|---|---|---|---|---|---|
| SEK in millions | 2008 | 2007 | Change, SEK million |
Change, % |
currency change, % |
| Mobility Services | 48,673 | 45,115 | +3,558 | +8 | +4 |
| Broadband Services | 44,943 | 44,478 | +465 | +1 | -1 |
| Eurasia | 13,204 | 10,338 | +2,866 | +28 | +20 |
| Other operations | 2,538 | 2,049 | +489 | +24 | +12 |
| Eliminations of internal sales |
-5,773 | -5,636 | -137 | ||
| Group | 103,585 | 96,344 | +7,241 | +8 | +4 |
The number of subscriptions rose by 19.9 million to 134.8 million. The number of subscriptions in the majority-owned operations rose to 43.4 million and in the associated companies to 91.4 million.
Overall, expenses increased 7.9 percent in 2008, approximately in line with the increase in net sales.
| Expenses SEK in millions |
2008 | 2007 | Change, SEK million |
Change, % |
|---|---|---|---|---|
| Goods and services purchased |
-16,102 | -17,271 | +1,169 | -7 |
| Interconnect and roaming expenses |
-16,663 | -14,998 | -1,665 | +11 |
| Network capacity expenses | -4,602 | -3,727 | -875 | +23 |
| Change in inventories | -56 | -81 | +25 | -31 |
| Personnel expenses | -15,056 | -13,477 | -1,579 | +12 |
| Marketing expenses | -7,423 | -6,941 | -482 | +7 |
| Other expenses | -11,294 | -10,308 | -986 | +10 |
| Total excluding depreciation, amortization and impairment losses |
-71,196 | -66,803 | -4,393 | +7 |
| Depreciation, amortization and impairment losses |
-12,057 | -11,704 | -353 | +3 |
| Other operating income and expenses |
-780 | 621 | -1,401 | |
| Total expenses | -84,033 | -77,886 | -6,147 | +8 |
Goods and services purchased decreased in 2008 mainly due to lower use of subcontracting in Broadband Services. Interconnect and roaming expenses increased mainly due to increased volumes in International Carrier in Broadband Services and increased volumes in Eurasia. Network capacity expenses increased in all business areas due to higher volumes of traffic.
Personnel expenses increased by 12 percent, due to acquisitions, salary increases and currency effects, which were not fully offset by reductions in the number of personnel especially in Sweden in Finland. The average number of employees increased by 5 percent from 28,561 in 2007 to 30,037 in 2008.
Marketing expenses increased due to increased amount of subsidies and sales commissions for retaining and acquiring customers, especially in Mobility Services in Norway and Spain, and in Eurasia. Other expenses increased mainly due to increased IT expenses.
Depreciation, amortization and impairment losses increased mainly due to growth in Eurasia and currency effects. In 2007, the amount included write-downs of SEK 635 million in Broadband Services related to the fixed access network in Finland and certain product and IT platforms in Sweden.
Other operating income and expenses, net, was negative in 2008 mainly due to provisions of approximately SEK 1,630 million recorded for the ongoing restructuring activities. In 2007, the net amount was positive, when certain provisions related to historical interconnect fees were released in Sweden (impacting other operating income positively by SEK 653 million and interconnect expenses by SEK 118 million). See Note 9 to the consolidated financial statements for further details.
EBITDA, excluding non-recurring items, increased to SEK 32,954 million (SEK 31,021 million in 2007), due to higher sales and cost efficiency in Mobility Services and a continued high growth in Eurasia. The EBITDA margin was 31.8 percent (32.2). The margin improved in Mobility Services, despite the negative effects from regulatory interventions. The margin decreased in Broadband Services due to the continued change in the product mix and a reversal of interconnect provisions in the previous year's results, which effects were not fully offset by savings effects from efficiency measures. The margin in Eurasia was also slightly lower due to investments in growth in the newly entered markets.
| EBITDA excluding non recurring items, SEK in millions |
2008 | 2007 | Change, SEK million |
Change, % |
|---|---|---|---|---|
| Mobility Services | 14,399 | 13,084 | +1,315 | +10 |
| Broadband Services | 11,922 | 12,821 | -899 | -7 |
| Eurasia | 6,553 | 5,255 | +1,298 | +25 |
| Other operations | 116 | -161 | +277 | |
| Eliminations | -36 | 22 | -58 | |
| Group | 32,954 | 31,021 | +1,933 | +6 |
Operating income, excluding non-recurring items, increased to SEK 30,041 million (27,478) due to higher EBITDA excluding nonrecurring items and higher income from associated companies. Due to profitable growth in both Russia and Turkey, income from associated companies increased by 18 percent to SEK 9,096 million, even though in 2007 the amount included a capital gain of SEK 631 million in "Other operations" and positive one-off items of SEK 240 million in Russia.
| Operating income excluding non | Change, SEK |
Change, | ||
|---|---|---|---|---|
| recurring items, SEK in millions | 2008 | 2007 | million | % |
| Mobility Services | 9,926 | 8,751 | +1,175 | +13 |
| Broadband Services | 6,684 | 7,515 | -831 | -11 |
| Eurasia | 13,731 10,883 | +2,848 | +26 | |
| Other operations | -300 | 264 | -564 | |
| Eliminations | 0 | 65 | -65 | |
| Group | 30,041 27,478 | +2,563 | +9 |
Financial items totaled SEK -2,237 million (-904), of which SEK -2,110 million (-1,174) related to net interest expenses. While the higher amount of net debt increased interest expenses significantly, the financial items were positively impacted by a nonrecurring penalty interest income of SEK 290 million, related to a court decision on historical interconnect fees in Sweden.
Income taxes amounted to SEK -4,969 million (-4,953). The effective tax rate was lower at 18.8 percent (19.6). The tax rate was decreased by positive one-off items both in 2008 and 2007. A lowering of the Swedish corporate income tax rate from 28.0 percent to 26.3 percent as of January 1, 2009, resulted in a revaluation of deferred tax assets and liabilities related to the Swedish operations and in a positive one-off item of approximately SEK 400 million in 2008. New deferred tax assets amounting to approximately SEK 650 million were recorded in 2008, relating to Finland, the Netherlands and International Carrier (SEK 850 million of new deferred tax assets in 2007, mainly in Finland).
Minority interests in subsidiaries were SEK 2,431 million (2,624) of which SEK 1,705 million (1,895) related to the Eurasian operations and SEK 692 million (702) to the Baltic operations of Broadband Services and Mobility Services.
Net income attributable to shareholders of the parent company increased to SEK 19,011 million (17,674) and earnings per share to SEK 4.23 (3.94).
Return on capital employed was 17.3 percent (19.4) and return on equity 17.2 percent (18.6).
See the Consolidated Income Statements and related notes to the consolidated financial statements for further details.
The following table presents non-recurring items for 2008 and 2007. These items are not included in "EBITDA excluding non-recurring items" or in "Operating income excluding non-recurring items" analyzed above, but are included in the total results for TeliaSonera and for each of the business areas.
| SEK in millions | 2008 | 2007 |
|---|---|---|
| Within EBITDA | -1,296 | -688 |
| Restructuring charges, synergy implementation costs, | ||
| etc.: Mobility Services |
-397 | -363 |
| Broadband Services | -1,194 | -599 |
| Other operations | 295 | 142 |
| Capital gains: | ||
| Broadband Services | – | 132 |
| Within Depreciation, amortization and impairment losses |
-97 | -635 |
| Impairment losses, accelerated depreciation: | ||
| Mobility Services | -3 | – |
| Broadband Services | -94 | -635 |
| Within Income from associated companies and joint ventures |
– | – |
| Within Financial net | 290 | – |
| Penalty interest income | 290 | – |
| Total | -1,103 | -1,323 |
The ongoing restructuring and streamlining programs have led to significant implementation costs and provisions in 2007 and 2008, mainly related to operations in Sweden and Finland, impacting both business areas Mobility Services and Broadband Services. In 2007, the results for Broadband Services were also impacted by writedowns related to the fixed access network in Finland and certain product and IT platforms in Sweden.
For a detailed discussion of the restructuring and streamlining efforts, see Note 24 to the consolidated financial statements.
Non-recurring items for Other operations have been positively affected by reversals of provisions related to certain old international carrier operations under restructuring. In 2008, a provision of SEK 360 million for an onerous lease and maintenance contract in France was reversed due to a sale of the network. In 2007, SEK 155 million of the restructuring provisions were reversed due to better than expected success in restructuring activities.
Capital gains in the comparative year 2007 included a gain of SEK 132 million from selling part of TeliaSonera's international carrier network in the U.K. Penalty interest income of SEK 290 million in 2008 from Tele2 was related to a court decision on historical interconnect fees in Sweden.
Intensified efficiency improvement is imperative for TeliaSonera to be able to continue shifting the product mix by investing in mobility and IP-based services. Efficiency measures to be implemented primarily in the Swedish and Finnish operations during 2008 and 2009 are in total estimated to give annual gross savings effects of approximately SEK 5 billion compared to the cost base of 2007.
Just above half of these efficiency measures were implemented during 2008 and the remainder will be implemented in 2009. The efficiency measures are expected to result in a reduction of approximately 2,900 employees, of whom about two-thirds in Sweden and one-third in Finland. The related restructuring costs, to be reported as non-recurring items, are estimated to be lower than SEK 3 billion, of which about SEK 1.6 billion were recorded in 2008.
The gross savings effect for 2008 from the ongoing efficiency measures was approximately SEK 2 billion compared to the cost base of 2007.
By the end of 2008, 270 employees have accepted the offer for early retirement and 1,064 employees have agreed to be transferred to the redeployment unit in Sweden or to the competence pool in
Finland. In January 2009, TeliaSonera gave notice of further reductions (see "Significant Events after Year-End 2008" below).
Net sales in local currencies and excluding acquisitions are expected to increase in 2009 compared to 2008. Currency fluctuations may to an increasing extent influence the reported figures in Swedish krona.
TeliaSonera will continue to invest in future growth and in the quality of its networks and services, although the intention is to keep the addressable cost base for 2009 unchanged compared to SEK 33.8 billion in 2008. The ambition for 2009 is to maintain the EBITDA-margin level of 2008, excluding non-recurring items.
Capital expenditures will be driven by continued investments in broadband and mobile capacity as well as in network expansion in the acquired operations. The CAPEX-to-sales ratio is expected to be somewhat lower in 2009 than in 2008.
For 2008, the Board of Directors proposes to the Annual General Meeting (AGM) an ordinary dividend of SEK 1.80 (SEK 1.80 for 2007) per share, totaling SEK 8.1 billion, or 43 percent of net income attributable to shareholders of the parent company.
According to TeliaSonera's dividend policy, the company shall target a solid investment grade long-term credit rating (A- to BBB+ from Standard & Poor's) 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 40 percent of net income attributable to shareholders 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.
For 2008, no extraordinary dividend is proposed by the Board of Directors to the AGM. For 2007, excess capital was returned to shareholders as an extraordinary dividend of SEK 2.20 per share, totaling SEK 9.9 billion.
The Board of Directors has made an assessment according 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."
TeliaSonera changed its business organization on January 1, 2008, when Integrated Enterprise Services was discontinued as a separate business area, and its operations are reported as part of Mobility Services, Broadband Services and Other operations.
Volume growth in the mobile markets continued, with strong demand for mobile devices, including mobile broadband and the Apple iPhone 3G. Intense competition together with regulatory intervention continued to put downward pressure on prices in all markets. The growing need for higher network speeds required by mobile data services continued driving investments in the industry.
| SEK in millions, except margins, | Change, | ||
|---|---|---|---|
| operational data and changes | 2008 | 2007 | % |
| Net sales | 48,673 | 45,115 | +8 |
| EBITDA excl. non-recurring items | 14,399 | 13,084 | +10 |
| Margin (%) | 29.6 | 29.0 | |
| Operating income | 9,526 | 8,386 | +14 |
| Operating income excl. non-recurring items | 9,926 | 8,751 | +13 |
| CAPEX | 4,467 | 4,168 | +7 |
| MoU | 195 | 190 | +3 |
| ARPU, blended (SEK) | 223 | 230 | -3 |
| Churn, blended (%) | 27 | 28 | |
| Subscriptions, period-end (thousands) | 15,900 | 14,501 | +10 |
| Employees, period-end | 8,339 | 8,052 | +4 |
Additional segment information available at www.teliasonera.com/ir
Net sales rose 7.9 percent to SEK 48,673 million (45,115). Organic growth in local currencies was 4.4 percent, of which over two-thirds came from Spain. The positive effect from exchange rate fluctuations was 2.4 percent. Overall subscription growth and higher usage of mobile broadband, data and voice drove sales higher. Regulatory interventions, including interconnect and roaming pricing, were offset by higher sales in most markets.
In local currencies, sales growth came mainly from strong subscription growth in Spain and continued usage and subscription growth in Sweden. The successful migration of Call me (formerly named debitel) customers and an improved product mix in Denmark, and the consolidation of ComHouse in Norway also lifted sales. A weaker economic development affected equipment sales in Latvia and Estonia. However, the revenue decline in these countries is mainly a result of lower prices and, in Estonia, a reduction in interconnect fees.
During the year, interconnect fees that TeliaSonera receives from other mobile operators were lowered by 22 percent in Sweden, and by 14 percent in Norway and Denmark. In Finland, fees were lowered by 23 percent on January 1, 2008, and further by 4 percent on January 1, 2009.
In Norway, the reduction of the interconnect fees and symmetric prices with Telenor as of July 1, 2008, and the effect of losing the national roaming agreement with Network Norway have a total annualized negative effect of approximately SEK 600 million on net sales as of the fourth quarter 2008.
EBITDA, excluding non-recurring items, rose to SEK 14,399 million (13,084) and the margin to 29.6 percent (29.0). The EBITDA increase came mainly from higher sales and improved cost efficiency. Changed interconnect fees in the Nordic and Baltic markets had a negative net effect of approximately SEK 630 million on EBITDA.
In Sweden, EBITDA increased to SEK 4,949 million (4,827). In 2007, EBITDA was positively impacted by reversals of provisions of SEK 325 million related to historical interconnect prices.
In Denmark, EBITDA increased to SEK 1,374 million (841). The margin in Denmark increased mainly as a result of an improved product mix and the successful migration of Call me customers. In 2007, EBITDA included negative one-off items of SEK 160 million related to balance sheet corrections.
In Lithuania and Latvia, downward price pressure was not fully compensated by lower costs. Meanwhile in Estonia, lower costs for interconnect and roaming combined with a decline in sales of lowmargin equipment lifted the margin to 38.1 percent (34.9).
The EBITDA loss in Spain narrowed to SEK -1,269 million (-1,443) despite a SEK 100 million one-off expense in 2008 related to the termination of the old national roaming agreement. The Spanish operation is under review for different options going forward.
CAPEX increased to SEK 4,467 million (4,168) mainly due to a one-off payment of SEK 563 million for the acquisition of a 2.6 GHz license in Sweden. Other CAPEX included continued investments in network coverage and capacity, including upgrading and building capacity for mobile broadband. The CAPEX-to-sales ratio was 9.2 percent (9.2).
| SEK in millions, except margins and changes |
2008 | 2007 | Change, % |
|---|---|---|---|
| Net sales | 48,673 | 45,115 | +8 |
| of which Sweden | 13,334 | 12,905 | +3 |
| of which Finland | 9,917 | 9,786 | +1 |
| of which Norway | 9,433 | 9,001 | +5 |
| of which Denmark | 6,845 | 6,138 | +12 |
| of which Lithuania | 2,722 | 2,484 | +10 |
| of which Latvia | 2,635 | 2,654 | -1 |
| of which Estonia | 2,262 | 2,305 | -2 |
| of which Spain | 2,050 | 589 | +248 |
| EBITDA excl. non-recurring items | 14,399 | 13,084 | +10 |
| Margin (%), total | 29.6 | 29.0 | |
| Margin (%), Sweden | 37.1 | 37.4 | |
| Margin (%), Finland | 31.0 | 29.4 | |
| Margin (%), Norway | 35.3 | 34.1 | |
| Margin (%), Denmark | 20.1 | 13.7 | |
| Margin (%), Lithuania | 34.6 | 36.8 | |
| Margin (%), Latvia | 43.0 | 45.2 | |
| Margin (%), Estonia | 38.1 | 34.9 | |
| Margin (%), Spain | neg | neg |
Overall price erosion was evident in all markets and the migration from traditional fixed voice services persisted. Penetration growth of DSL was affected by the market saturation, competition and the promotion of mobile broadband. Investments were directed to the backbone and transmission networks to support services that require higher bandwidth, such as IPTV and broadband.
| SEK in millions, except margins, | Change, | ||
|---|---|---|---|
| operational data and changes | 2008 | 2007 | % |
| Net sales | 44,943 | 44,478 | +1 |
| EBITDA excl. non-recurring items | 11,922 | 12,821 | -7 |
| Margin (%) | 26.5 | 28.8 | |
| Operating income | 5,396 | 6,413 | -16 |
| Operating income excl. non-recurring items | 6,684 | 7,515 | -11 |
| CAPEX | 5,934 | 5,722 | +4 |
| Broadband ARPU (SEK) | 274 | 270 | +1 |
| Subscriptions, period-end (thousands) | |||
| Broadband | 2,434 | 2,326 | +5 |
| Fixed voice | 5,806 | 6,218 | -7 |
| Associated company, total | 777 | 757 | +3 |
| Employees, period-end | 16,171 | 17,294 | -6 |
Additional segment information available at www.teliasonera.com/ir
Net sales increased 1.0 percent to SEK 44,943 million (44,478). The decline in organic sales was 0.8 percent in local currencies, especially due to continued decline in fixed voice services in Sweden. The positive effect from exchange rate fluctuations was 1.5 percent. Measured in Swedish krona, sales grew in all markets except Sweden. The positive development of international carrier
operations in Wholesale and the acquisition of DLG-Tele in Denmark contributed to the higher sales.
EBITDA, excluding non-recurring items, decreased to SEK 11,922 million (12,821) and the margin to 26.5 percent (28.8). Cost efficiency measures did not offset the effects of the changed revenue mix. In 2007, EBITDA was also positively impacted by oneoff items of SEK 200 million net. The changing revenue mix had a negative impact on margin, when products from international carrier and IP-based services, including TV, replace traditional fixed voice. Compared to traditional fixed voice, these services have lower margins and ARPU.
In 2007, EBITDA was positively impacted by reversals of provisions of SEK 446 million related to historical interconnect prices, and negatively impacted by SEK 130 million of storm related costs, both in Sweden, and also negatively impacted by a provision of SEK 120 million for changed LLUB pricing in Wholesale.
CAPEX was SEK 5,934 million (5,722) with continued investments in broadband platforms and common infrastructure, including core and transmission networks. The CAPEX-to-sales ratio was 13.2 percent (12.9).
| SEK in millions, except margins | Change, | ||
|---|---|---|---|
| and changes | 2008 | 2007 | % |
| Net sales | 44,943 | 44,478 | +1 |
| of which Sweden | 19,536 | 20,343 | -4 |
| of which Finland | 7,736 | 7,598 | +2 |
| of which Norway | 913 | 891 | +2 |
| of which Denmark | 2,352 | 1,998 | 18 |
| of which Lithuania | 2,302 | 2,124 | +8 |
| of which Estonia | 2,163 | 1,926 | +12 |
| of which Wholesale | 11,302 | 10,495 | +8 |
| EBITDA excl. non-recurring items | 11,922 | 12,821 | -7 |
| Margin (%), total | 26.5 | 28.8 | |
| Margin (%), Sweden | 27.6 | 31.1 | |
| Margin (%), Finland | 21.7 | 23.4 | |
| Margin (%), Norway | 20.0 | 22.1 | |
| Margin (%), Denmark | 4.4 | 12.1 | |
| Margin (%), Lithuania | 42.7 | 43.9 | |
| Margin (%), Estonia | 26.7 | 24.4 | |
| Margin (%), Wholesale | 26.7 | 27.5 |
The business area continued to show good volume growth. Regulatory intervention, higher penetration and increasing competition put pressure on prices and margins in the region. In addition, the current economic uncertainty reduces visibility ahead. Fluctuations in exchange rates may also have an adverse effect on revenue and margins.
TeliaSonera maintained market leadership in Kazakhstan and Azerbaijan, strengthened its position and became market leader in Tajikistan and Georgia, and maintained the positions in all other markets.
In October 2008, TeliaSonera continued to expand its presence in the growing mobile markets in Eurasia by acquiring operators in Nepal and Cambodia.
| SEK in millions, except margins, | Change, | ||
|---|---|---|---|
| operational data and changes | 2008 | 2007 | % |
| Net sales | 13,204 | 10,338 | +28 |
| EBITDA excl. non-recurring items | 6,553 | 5,255 | +25 |
| Margin (%) | 49.6 | 50.8 | |
| Income from associated companies | |||
| Russia | 5,070 | 4,181 | +21 |
| Turkey | 3,991 | 2,725 | +46 |
| Operating income | 13,731 | 10,883 | +26 |
| Operating income excl. non-recurring items | 13,731 | 10,883 | +26 |
| CAPEX | 4,595 | 3,114 | +48 |
| Subscriptions, period-end (thousands) | |||
| Subsidiaries | 18,416 | 12,147 | +52 |
| Associated companies | 90,558 | 78,056 | +16 |
| Employees, period-end | 4,780 | 3,862 | +24 |
Additional segment information available at www.teliasonera.com/ir
Net sales rose 27.7 percent to SEK 13,204 million (10,338) with revenue growth in all markets. Organic growth in local currencies was 20.3 percent, of which half from Kazakhstan and one-fourth from Azerbaijan. The acquisitions in Uzbekistan and Tajikistan, consolidated since July 1, 2007, and in Nepal and Cambodia, consolidated since October 1, 2008, affected net sales positively by 5.1 percent. The positive effect from exchange rate fluctuations was 2.3 percent.
EBITDA, excluding non-recurring items, increased 25 percent to SEK 6,553 million (5,255) as a result of higher sales. The margin decreased to 49.6 percent (50.8) due to a decrease in average revenue per minute as well as higher network, sales and marketing expenses. In addition, inflation drove costs higher, particularly for salaries, rents and energy.
CAPEX increased to SEK 4,595 million (3,114) driven by investments in additional capacity, and to improve coverage and maintain a high service quality in the network particularly in Uzbekistan and Tajikistan. The CAPEX-to-sales ratio was 34.8 percent (30.1).
| Change, | |||
|---|---|---|---|
| SEK in millions, except changes | 2008 | 2007 | % |
| Net sales | 13,204 | 10,338 | +28 |
| of which Kazakhstan | 6,673 | 5,582 | +20 |
| of which Azerbaijan | 3,563 | 2,958 | +20 |
| of which Uzbekistan | 496 | 139 | +257 |
| of which Tajikistan | 516 | 184 | +180 |
| of which Georgia | 1,393 | 1,123 | +24 |
| of which Moldova | 420 | 365 | +15 |
| of which Nepal | 158 | – | |
| of which Cambodia | 10 | – |
MegaFon (associated company, in which TeliaSonera holds 43.8 percent) in Russia continued to demonstrate strong performance and increased its subscription base by 7.9 million to 43.6 million. MegaFon increased its market share in terms of subscriptions from 20 to 23 percent. The Russian mobile market continued to show strong volume and revenue growth.
TeliaSonera's income from Russia rose to SEK 5,070 million (4,181), fueled by continued strong sales and earnings growth at MegaFon. The result in 2007 was positively impacted by SEK 240 million in the form of a gain from the sale of Petersburg Transit Telecom by Telecominvest and a partial reversal of writedowns on old equipment in MegaFon. The Russian ruble was, on average, stable against the Swedish krona.
Turkcell (associated company, in which TeliaSonera holds 37.3 percent, reported with a one-quarter lag) in Turkey grew its subscription base by 1.5 million to 36.3 million, as a result of attractive pricing, improved sales channel efficiency, dealer incentives and the continuous positive effect of ongoing campaigns. In Ukraine, the number of subscriptions rose by 3.1 million to 10.7 million.
TeliaSonera's income from Turkey rose to SEK 3,991 million (2,725). The Turkish lira was, on average, stable against the Swedish krona.
In 2008, Turkcell distributed to its shareholders a total cash dividend of TRY 649 million, equal to SEK 2.9 billion, corresponding to 50 percent of the distributable income for the fiscal year 2007. TeliaSonera's share was approximately SEK 1.1 billion (1.0).
In August 2008, Turkcell announced the acquisition of 80 percent of the shares in BeST (rebranded to Life), the third largest mobile operator in Belarus.
| Change, | |||
|---|---|---|---|
| SEK in millions, except changes | 2008 | 2007 | % |
| Net sales | 2,538 | 2,049 | +24 |
| EBITDA excl. non-recurring items | 116 | -161 | |
| Income from associated companies | 6 | 740 | |
| Operating income | -5 | 406 | |
| Operating income excl. non-recurring items | -300 | 264 | |
| CAPEX | 795 | 527 | +51 |
Additional segment information available at www.teliasonera.com/ir
Net sales for Other operations increased mainly due to the consolidation of Avansys to Other Business Services and the good development of TeliaSonera Holding.
In 2007, income from associated companies (and operating income) was positively impacted by a capital gain of SEK 631 million from the sale of Eltel by the associated company Telefos.
| Change, SEK |
Change, | |||
|---|---|---|---|---|
| SEK in millions | 2008 | 2007 | million | % |
| Assets | ||||
| Goodwill and other intangible assets | 100,968 83,909 | +17,059 | +20 | |
| Property, plant and equipment | 61,946 52,602 | +9,344 | +18 | |
| Investments in associated companies and joint ventures, deferred tax assets and other financial assets |
62,265 48,633 | +13,632 | +28 | |
| Total non-current assets | 225,179 185,144 | +40,035 | +22 | |
| Current assets (except cash and cash equivalents) |
27,254 23,750 | +3,504 | +15 | |
| Cash and cash equivalents | 11,826 | 7,802 | +4,024 | +52 |
| Total current assets | 39,080 31,552 | +7,528 | +24 | |
| Non-current assets held-for-sale | 27 | 6 | +21 | +350 |
| Total assets | 264,286 216,702 | +47,584 | +22 | |
| Equity and liabilities | ||||
| Shareholders' equity | 130,387 117,274 | +13,113 | +11 | |
| Minority interests | 11,061 | 9,783 | +1,278 | +13 |
| Total equity | 141,448 127,057 | +14,391 | +11 | |
| Long-term borrowings | 54,178 41,030 | +13,148 | +32 | |
| Other long-term liabilities | 27,159 19,114 | +8,045 | +42 | |
| Total non-current liabilities | 81,337 60,144 | +21,193 | +35 | |
| Short-term borrowings | 11,621 | 2,549 | +9,072 | +356 |
| Other current liabilities | 29,880 26,952 | +2,928 | +11 | |
| Total current liabilities | 41,501 29,501 | +12,000 | +41 | |
| Total equity and liabilities | 264,286 216,702 | +47,584 | +22 |
In general, the balance sheet amounts were increased in 2008 due to weakening of the Swedish krona against most other currencies, when the non-Swedish subsidiaries were translated into krona with higher exchange rates. Almost half of the increase in total assets and total equity and liabilities was due to exchange rate differences.
Goodwill and other intangible assets increased in 2008 mainly due to the acquisition of operations in Nepal and Cambodia (SEK 4.4 billion), granting of a minority put option in Azertel (SEK 3.6 billion), and due to currency effects (SEK 8.3 billion).
Property, plant and equipment increased through capital expenditures (CAPEX) and the acquisitions, and due to positive exchange rate differences of SEK 4.8 billion, partly offset by depreciation.
The carrying value of associated companies and joint ventures increased due to income from these companies (SEK 9.1 billion), and was partly offset by dividends received from associated companies, mainly Turkcell, (SEK 1.4 billion) and by negative exchange rate differences (SEK 1.5 billion).
Both deferred tax assets and liabilities increased due to currency effects. Additionally, deferred tax assets were decreased by the utilization of tax assets, partly offset by recognition of new assets of SEK 650 million. Deferred tax liabilities in Sweden decreased partly due to the change in the Swedish tax rate. Net deferred tax asset decreased to SEK 1.9 billion (2.4).
Other non-current assets increased mainly due to increased positive result from the interest rate and cross currency interest rate swaps used for hedging (SEK 3.8 billion), long-term receivables recorded in connection with the privatization of Azercell (SEK 0.8 billion) and currency effects.
Net working capital (inventories and non-interest-bearing receivables, less non-interest-bearing liabilities) remained negative at SEK -4.1 billion (SEK -4.3 billion in 2007). Increases due to sales growth and acquisitions were offset by decreases due to growth in operating expenses and by timing effects.
Shareholders' equity increased to SEK 130.4 billion, due to net income attributable to shareholders of SEK 19.0 billion and positive exchange rate differences of SEK 12.4 billion, partly offset by
dividends of SEK 18.0 billion paid to shareholders in April 2008.The equity/assets ratio, adjusted for proposed dividends, remained stable at 50.5 percent (50.3). See the Consolidated Statements of Changes in Equity for further details.
Net debt increased from SEK 34.2 billion to SEK 48.6 billion, due to dividend payments, the cash paid for acquisitions and currency effects, only partly offset by free cash flow. The net debt/equity ratio increased to 36.5 percent (31.3).
Other long-term liabilities increased mainly due to increase in deferred tax liabilities (SEK 1.7 billion), a liability recorded for the minority put option in Azertel (SEK 5.0 billion), and exchange rate differences (SEK 1.6 billion).
See the Consolidated Balance Sheets and related notes to the consolidated financial statements for further details.
| Change, | ||||
|---|---|---|---|---|
| SEK in millions | 2008 | 2007 | SEK million |
Change, % |
| Cash from operating activities | 27,086 | 26,529 | +557 | +2 |
| Cash used in capital expenditure | -15,758 | -13,525 | -2,233 | +17 |
| Free cash flow | 11,328 | 13,004 | -1,676 | -13 |
| Cash used in other investing activities |
-3,876 | -2,180 | -1,696 | +78 |
| Cash flow before financing activities |
7,452 | 10,824 | -3,372 | -31 |
| Cash used in financing activities | -4,359 | -14,726 | +10,367 | -70 |
| Cash and cash equivalents, opening balance |
7,802 | 11,603 | -3,801 | -33 |
| Net cash flow for the period | 3,093 | -3,902 | +6,995 | |
| Exchange rate differences | 931 | 101 | +830 | |
| Cash and cash equivalents, closing balance |
11,826 | 7,802 | +4,024 | +52 |
Cash flow from operating activities increased slightly in 2008. The cash flow was positively affected by higher EBITDA and lower cash payments for taxes, and negatively affected by higher financing cost and lower dividends from associated companies. In 2007, cash flow from operating activities included one-off dividends of approximately SEK 1.4 billion from associated companies Telefos and Overseas Telecom.
Cash used in capital expenditure (cash CAPEX) increased significantly in 2008. As a result, free cash flow (cash flow from operating activities less capital expenditure) decreased in 2008 by 13 percent.
The increase in cash CAPEX to SEK 15.8 billion
(SEK 13.5 billion in 2007) and the increase in the CAPEX-to-sales ratio to 15.2 percent (14.0) was driven mainly by the purchase of a Swedish 4G license in Mobility Services, increased investments in network capacity to support increased mobile traffic in the transit networks in Broadband Services, and investments in capacity, coverage and higher quality service in Eurasia, especially in Uzbekistan.
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. Net cash paid for acquisitions was SEK 4.1 billion (4.6), and net cash used for granting loans was SEK 0.2 billion (net cash received from loans receivable of SEK 1.1 billion in 2007). In 2007, net cash used in other investing activities included a repayment of SEK 0.5 billion from TeliaSonera's pension fund in Sweden.
Net cash used in financing activities decreased in 2008, mainly due to lower cash return paid to shareholders than in 2007. Dividends paid to shareholders of the parent company were SEK 18.0 billion (28.3) and to the minority shareholders SEK 1.9 billion (1.4). Net new borrowings were SEK 15.5 billion (15.0). See the Consolidated Cash Flow Statements and related notes to the consolidated financial statements for further details.
During 2008, TeliaSonera has made a number of acquisitions and divestitures.
TeliaSonera believes that its bank credit facilities and open-market financing programs are sufficient for the present liquidity requirements. TeliaSonera's cash and short-term investments totaled SEK 12.9 billion at the end of the year (SEK 8.9 billion at the end of 2007). In addition, the total available unutilized amount under the committed credit facilities was SEK 14.1 billion at year-end (12.6).
TeliaSonera's credit ratings remained unchanged in 2008. The rating from Moody's Investors Service is A3 for long-term borrowing and Prime-2 for short-term borrowing, with a "Stable outlook" reference. The rating from Standard & Poor's Ratings Services is Afor long-term borrowing and A2 for short-term borrowing, also with a "Stable outlook" reference.
TeliaSonera generally seeks to arrange its financing through the parent company TeliaSonera AB. The primary means of external borrowing are described in Note 22 to the consolidated financial statements.
The main focus of research and development (R&D) at TeliaSonera is to support future profitable growth through developing reliable, innovative and user-friendly services based on open standards, integration of third party solutions and cooperation with external innovation clusters. The most important input to the R&D processes is current and forecasted market demand. To reduce risk and ensure easy to use services a proactive engagement of end users in all R&D phases is mandatory.
Examples of important emerging areas are Mobile Wallet (ticketing, payments & ID through the Mobile), Mobile 2.0 content services, Rich Communication Services (RCS), wireless office services, interactive personalized IPTV and Smart Home. Focus is on costefficient, high-quality network and service technologies. Another key priority in 2008 has been the development of the next phase of the mobile broadband market and preparation for the related roll out of 4G/LTE (Long Term Evolution).
As of December 31, 2008, TeliaSonera had approximately 540 patent "families" and approximately 2,100 patents and patent applications, none of which, individually, is material to its business.
In 2008, TeliaSonera incurred R&D expenses of SEK 1,178 million (SEK 1,731 million in 2007).
The environmental impact from TeliaSonera's operations is mainly generated by energy utilization, travel and transport, and material usage. In 2008, TeliaSonera included the environmental aspect as an elemental view in the development of its operations and made technology investments to increase energy efficiency, reduce travel and replace material needs. New technology has reduced the space required by servers, the need for more than one computer and one phone per employee has been reduced and e-billing has replaced paper invoices. In addition the use of new telecommunication services has increased working flexibility.
TeliaSonera in Sweden does not conduct any operations subject to environmental permits from authorities according to the Swedish environmental legislation, chapter 9.
The parent company TeliaSonera AB, which is domiciled in Stockholm, comprises the Group's Swedish activities in development and operation of fixed network services and broadband application services. The parent company also includes Group executive management functions, certain Group common operations and the Group's internal banking operations. As of January 1, 2008, certain operations were transferred to the new, wholly-owned telecom network infrastructure subsidiary, TeliaSonera Skanova Access AB (Skanova Access).
The parent company's financial statements have been prepared in accordance with the Swedish Annual Accounts Act, other Swedish legislation, and standard RFR 2.2 "Accounting for Legal Entities" and other statements issued by the Swedish Financial Reporting Board.
Net sales for the year declined to SEK 16,132 million (SEK 17,809 million in 2007), due to migration to mobile services and lower priced IP-based services, and to operations being transferred to Skanova Access. SEK 12,644 million (12,811) was billed to subsidiaries. Operating income increased strongly due to capital gains on assets transferred to Skanova Access and was SEK 21,697 million (6,304). In 2007, income after financial items was positively impacted by dividend payments from subsidiaries. Net income was SEK 30,306 million (20,001).
The balance sheet total increased to SEK 211,098 million (182,436). Shareholders' equity increased to SEK 75,017 million (63,013) and retained earnings to SEK 58,790 million
(44,848 million) as the strong result more than compensated for the ordinary and extra dividend payments of SEK 17,962 million in 2008.
Free cash flow was a negative SEK 3,370 million (positive 20,668), and cash flow before financing activities was SEK 4,011 million (7,916). Net debt increased to SEK 112,435 million (87,647). Cash and cash equivalents totaled SEK 6,202 million (2,790) at year-end.
The equity/assets ratio (including the equity component of untaxed reserves and adjusted for the proposed dividend) was 34.5 percent (32.6).
Total investments for the year were SEK 40,280 million (13,269), of which SEK 1,276 million (2,705) in property, plant and equipment primarily for the fixed network. Other investments totaled SEK 39,004 million (10,564), of which SEK 34,000 million related to a capital contribution provided in kind in exchange for new shares issued by Skanova Access. In 2007, other investments included the acquisitions of Cygate and debitel Danmark (SEK 2,024 million) and intra-group transfers of shareholdings (SEK 8,015 million).
Mainly due to the transfer of operations to Skanova Access, the number of employees at December 31, 2008, net decreased to 2,160 from 2,565 at year-end 2007.
TeliaSonera's issued and outstanding share capital as of December 31, 2008, totaled SEK 14,369,463,081.60 distributed among 4,490,457,213 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.
There are no rules in either the Swedish legislation or in Telia-Sonera AB's Articles of Association that would limit the possibility to transfer the TeliaSonera shares.
As of December 31, 2008, the company had two shareholders with more than ten 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, 2008, TeliaSonera's pension funds held 0.04 percent of the company's shares and votes. No TeliaSonera shares are held by the company itself or by its subsidiaries.
The Board of Directors does not currently have any authorization by the general meeting of shareholders to issue new shares or to repurchase TeliaSonera 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. The CEO and the Executive Vice President may resign within one month and three months, respectively, from a "change of control" of TeliaSonera AB and be entitled to severance pay as further described in Note 32 to the consolidated financial statements. Other members of the Leadership Team, if they continue their employment after a "change of control," are entitled to a onetime compensation as described in Note 32 to the consolidated financial statements.
The Articles of Association of TeliaSonera AB do not include any rules relating to the appointment or dismissal of members of the Board of Directors, or any rules relating to amendments to the company's Articles of Association, in the general meeting of the shareholders.
On June 5, 2008, TeliaSonera's Board of Directors, supported by its main owners, rejected a non-binding, indicative offer by France Telecom regarding a potential acquisition of TeliaSonera AB. The decision was thereafter supported by TeliaSonera's main shareholders. The indicative offer consisted of a combination of cash and shares in France Telecom, representing a blended spot
value of TeliaSonera at approximately SEK 56 per share. The principle of equal treatment of all shareholders made it impossible for France Telecom to offer small shareholders a cash-only alternative. On June 29, 2008, France Telecom presented a revised indicative offer. The structure, terms and conditions of the revised indicative offer were largely unchanged. As a consequence of a reduced France Telecom share value on June 29, 2008, the blended spot value of the combination of cash and shares in France Telecom was on June 29, 2008, somewhat below SEK 56 per share. The Board of TeliaSonera therefore maintained its view that the proposal substantially undervalued the company. France Telecom withdrew its indicative offer on June 30, 2008.
See also section "The TeliaSonera Share" and Note 21 to the consolidated financial statements.
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 authorizes the Board of Directors to repurchase a maximum of 10 percent of the company's total number of outstanding shares, through purchases on the stock exchange or through an offer directed to all shareholders. To date, no plans are made to exercise the proposed authorization.
The Board of Directors also proposes that the Annual General Meeting authorizes the Board of Directors to decide upon a sale of part or all of the repurchased shares through the stock exchange.
The Board of Directors further intends to propose to the Annual General Meeting in 2010 that shares repurchased and not resold be cancelled through a reduction of the company's share capital, without repayment to the shareholders.
See Note 32 to the consolidated financial statements for remuneration to management, as decided by the Annual General Meeting in March 2008.
The Board of Directors' proposal for the remuneration guidelines, to be adopted at the Annual General Meeting on April 1, 2009, are the same as the remuneration guidelines adopted by the Annual General Meeting on March 31, 2008:
The guiding principle is that remuneration and other terms of employment for the executives shall be competitive in order to assure that TeliaSonera can attract and retain competent executives.
The total remuneration package shall consist of a base salary, variable components of annual variable salary and long term variable compensation, pension and other benefits. The base salary levels shall be set and reviewed on an individual basis and shall be aligned with the salary levels in the market in which the executive in question is employed. The annual variable salary shall be defined in a plan for a set period with set precise targets that promotes Telia-Sonera's business goals. The level of the annual variable salary may vary between executives and cannot exceed 50 percent of the fixed annual salary.
TeliaSonera does not presently have any share based long term variable compensation program.
Pension plans shall follow local market practice and, if possible, the defined contribution system shall be used for newly appointed executives.
The contract with executives shall require a period of at least 6 months from the employee and maximum 12 months (6 months for the CEO) from the company with respect to resignation or termination of employment. Upon termination by the company, the executive shall be entitled to severance pay equal to his or her fixed monthly salary for a period of maximum 12 months (24 months for the CEO). Other benefits shall be competitive in the local market. If an executive resigns his or her position, he or she is not entitled to severance pay.
The Board of Directors may allow minor deviations on an individual basis from this remuneration policy.
On January 15, 2008, Karin Eliasson started as Group Vice President and Head of Group Human Resources, to succeed Rune Nyberg, who retired in January 2008. Ms. Eliasson had previously the same role in SCA, a global consumer goods and paper company.
On May 12, 2008, Cecilia Edström started as Group Vice President and Head of Group Communications, to succeed Ewa Lagerqvist, who left the company in October 2007. Ms. Edström was previously Senior Vice President, Corporate Relations at Scania, a global truck, bus and engine manufacturer.
On August 1, 2008, Sverker Hannervall started as Senior Vice President and Head of the Business Services sales division in Sweden and Finland, to succeed Juho Lipsanen, who left the company on July 31, 2008. Mr. Hannervall was previously General Manager of Cisco Systems in Sweden.
On September 1, 2008, Per-Arne Blomquist started as Executive Vice President and Chief Financial Officer of TeliaSonera, to succeed Kim Ignatius, who left the company after eight years on July 31, 2008, to take up a similar position outside TeliaSonera. Mr. Blomquist was previously Executive Vice President and Chief Financial Officer of SEB, a North-European bank.
On November 1, 2008, Håkan Dahlström started as President of business area Broadband Services, to succeed Anders Bruse, who took up a position as Senior Vice President, Program Office of TeliaSonera. Mr. Dahlström was previously Head of Mobility Services in Sweden.
On December 1, 2008, Åke Södermark started as Chief Information Officer of TeliaSonera. He was previously Senior Vice President at Nasdaq OMX Group. In February 2009, he was also appointed as member of the Leadership Team.
On January 12, 2009, TeliaSonera gave notice to 1,200 employees in Sweden, as part of the efficiency program started in February 2008. Under the same program, TeliaSonera announced on January 14, 2009, a streamlining of 390 jobs in Broadband Services in Finland.
On January 15, 2009, TeliaSonera announced that it had chosen Ericsson to deliver the initial 4G city network in Stockholm, Sweden, and Huawei to deliver the network in Oslo, Norway. The evaluation of suppliers for 4G networks in other Nordic and Baltic countries are in progress.
On January 30, 2009, TeliaSonera's subsidiary Fintur Holdings B.V. increased its holding in Geocell from 97.5 percent to 100 percent by acquiring 2.5 percent of the shares in the Georgian mobile operator from the Government of Georgia.
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. Management 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 and financial risks and uncertainties, and to mitigate such risks when appropriate. Risk management is an integrated part of TeliaSonera's business planning process.
Set forth below is a description of factors that may affect Telia-Sonera's business, results of operations, financial condition or the share price from time to time.
The length of the current turmoil in the global financial markets and the downturn in the world economy are difficult to predict. Telia-Sonera has a strong balance sheet and operates in a relatively noncyclical or late-cyclical industry. However, a severe and 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 evenly distributed over several years, and the refinancing is expected to be made using uncommitted open-market 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, the cost of funding might be higher, should the financial turmoil and the downturn in the economy continue for a long time or become even more severe.
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 led to an increased customer churn and a decrease in customer growth rates as well as to declines in the prices TeliaSonera charges for its products and services and may have similar effects in the future.
In order to meet the increased competition and price pressure, TeliaSonera has carried out and continues to carry out efficiency improvement programs to adjust its cost base accordingly. There is, however, a risk that TeliaSonera will not be successful in implementing its programs due to operational or regulatory reasons or otherwise.
TeliaSonera operates in a highly regulated industry. The regulations to which TeliaSonera is subject impose significant limits on its flexibility to manage its business. For example, in both Sweden and Finland, TeliaSonera has been designated as a party with significant market power in certain markets in which it operates. 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.
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.
TeliaSonera has made significant investments in telecommunications operators in Kazakhstan, Azerbaijan, Uzbekistan, Tajikistan, Georgia, Moldova, Nepal, Cambodia, Russia and Turkey. The political, economic, legal and regulatory systems in these countries historically have been less predictable than in countries with more mature institutional structures. Additionally, the political situation in each of the emerging markets in which TeliaSonera has operations has been unstable in the past and may also become unstable in the future.
Other risks associated with operating in emerging market countries include foreign exchange restrictions, which could effectively prevent TeliaSonera from receiving dividends or selling its investments, if such restrictions were introduced in countries where TeliaSonera has significant operations. Another risk is the potential establishment of foreign ownership restrictions or other potential actions against entities with foreign ownership, formally or informally.
A large part of TeliaSonera's results is derived from emerging markets, and especially from associated companies in Russia and Turkey. In 2008, over 45 percent of operating income and approximately 50 percent of net income was derived from investments in emerging markets. 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.
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 with time and as new 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 significant 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 condition and results of operations.
Factors generally affecting the telecommunications and technology 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 affairs. 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, and other acquisitions, TeliaSonera has a significant amount of goodwill in its balance sheet, amounting to SEK 84 billion as of December 31, 2008, which is not amortized but annually tested for impairment.
In the past, TeliaSonera has undertaken a number of restructuring and streamlining initiatives, including the restructuring and streamlining of the Swedish and Finnish operations and the restructuring of the international carrier and Danish operations, which have resulted in substantial restructuring and streamlining charges. Similar initiatives may be undertaken in the future.
TeliaSonera has also 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 losses and 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, Telia-Sonera's dividend capacity.
TeliaSonera has made substantial investments in telecom networks and licenses and also expects to invest substantial amounts over the next several years in the upgrading and expansion of networks. From time to time, TeliaSonera also has to pay fees to acquire new licenses or to renew or maintain the existing licenses, in order to serve its customers.
From time to time, TeliaSonera may also engage in start-up operations, such as Xfera Móviles S.A. in Spain and Applifone Co. Ltd. in Cambodia, which require substantial investments and expenditure in the build-up phase.
The success of these investments and start-ups 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 and start-ups may adversely affect TeliaSonera's results of operation.
Acquisitions, strategic alliances and business combinations TeliaSonera may participate in the consolidation of the telecommunications industry through acquisitions, strategic alliances or business combinations. A failure in such transactions could harm TeliaSonera's business and results of operations. For example, due to competition in the identification of acquisition opportunities or strategic partners, TeliaSonera may make an acquisition or enter into a strategic alliance on unfavorable terms. There are also the risks that TeliaSonera will not be able to successfully integrate and manage any acquired company or strategic alliance, the acquisition or strategic alliance will fail to achieve the strategic benefits or synergies sought, and 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, including its credit ratings, or, if made using TeliaSonera shares, dilute the existing shareholders.
In addition to cost efficiency in all operations and profitable growth in emerging markets, TeliaSonera's focus areas include high-quality service to its customers, high quality of its networks and services, and simplicity in services and offerings. 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 in 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 certain suppliers, of which there are a limited number, to manufacture and supply network equipment and related software as well as handsets, 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 handsets 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 Telia-Sonera'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 them competitive remuneration packages. If TeliaSonera cannot implement competitive remuneration packages, it may be unable to recruit and retain skilled employees, which may limit its ability to develop high growth business areas and new business areas or remain competitive in the traditional business areas.
Limited influence in associated companies and joint ventures TeliaSonera conducts some of its activities, particularly outside of the Nordic region, through associated companies in which Telia-Sonera does not have a controlling interest, such as Turkcell Iletisim Hizmetleri A.S. in Turkey, OAO MegaFon in Russia, and Lattelecom SIA in Latvia and, 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 timing and amount of cash distributions. The risk of actions outside TeliaSonera's or its associated company's 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, where practical, 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.
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 investments in and financial commitments to 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's business in Sweden.
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 Telia-Sonera's future dividend policy compared to the current dividend 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.
TeliaSonera is exposed to financial risks such as credit risk, liquidity risk, currency risk, interest rate risk, financing risk, and pension obligation risk. Financial risk management is centralized in the Corporate Finance and Treasury unit.
The credit risk with respect to TeliaSonera's trade receivables is diversified geographically and among a large number of customers, both private individuals and companies in various industries. Bad debt expense in relation to consolidated net sales was 0.4 percent in 2008 (0.5 percent in 2007).
TeliaSonera manages the liquidity risk by depositing its surplus liquidity in banks or investing it in short-term interest-bearing instruments, with good credit ratings. In addition to available cash TeliaSonera has committed revolving credit facilities and overdraft facilities. In total the available unutilized amount under committed facilities was approximately SEK 14 billion at year-end.
TeliaSonera's operational currency transaction exposure is not significant. TeliaSonera's conversion exposure, however, is significant and is expected to continue to grow due to the ongoing expansion of business operations outside Sweden. TeliaSonera does not normally hedge its conversion exposure. At year-end, the conversion exposure amounted to SEK 207 billion (SEK 170 billion at year-end 2007). Strengthening of the Swedish krona by 10 percentage points against all currencies in which TeliaSonera has
conversion exposure would have had a negative impact of SEK 20 billion (17) on the TeliaSonera group's equity as of December 31, 2008.
TeliaSonera manages interest rate risk by aiming to balance 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. TeliaSonera's policy is that the duration of interest of the debt portfolio should be from 6 months to 4 years.
By having a significant part of its borrowings with a longer maturity than the duration of interest, TeliaSonera is able to obtain the desired interest rate risk without having to assume a high financing risk. In order to further reduce the financing risk, Telia-Sonera aims to spread loan maturity dates over a longer period. TeliaSonera currently enjoys a strong credit rating with the rating agencies Moody's and Standard & Poor's.
TeliaSonera has a significant amount of pension obligations, with a net present value of SEK 22.8 billion (20.8) at year-end. Telia-Sonera maintains pension funds to secure these obligations, with plan assets totaling SEK 18.1 billion (19.3), based on market values at year-end. A decrease of 1 percentage point in the weighted average discount rate would have increased the pension obligations by SEK 3.9 billion (3.5) as of December 31, 2008. The effect would, however, be partly offset by a positive impact from the fixed income assets in the pension funds. A similar reduction in the interest rates would have increased the value of the fixed-income plan assets by SEK 1.0 billion (1.0).
Financial risk management is described in more detail in Note 28 to the consolidated financial statements.
The follow-up of TeliaSonera's results of business operations and financial condition is based on internal and external financial reporting, which has to be timely, reliable, correct, and complete. Internal control over this reporting is an integral part of TeliaSonera's corporate governance. It includes methods and procedures to safeguard the Group's assets, ensure and control the reliability and correctness of financial reporting in accordance with applicable legislation and guidelines, improve operational efficiency, and control the level of risk in the business operations.
The management of financial reporting risks is described in more detail in the Corporate Governance Report. The corporate governance report, including the description of internal controls, does not form part of the official annual report and has not been audited.
| January-December | ||||
|---|---|---|---|---|
| SEK in millions, except per share data | Note | 2008 | 2007 | |
| Net sales | 6, 7 | 103,585 | 96,344 | |
| Cost of sales | 8 | -57,853 | -54,196 | |
| Gross profit | 45,732 | 42,148 | ||
| Selling and marketing expenses | 8 | -16,670 | -15,819 | |
| Administrative expenses | 8 | -7,552 | -6,760 | |
| Research and development expenses | 8 | -1,178 | -1,732 | |
| Other operating income | 9 | 755 | 1,349 | |
| Other operating expenses | 9 | -1,535 | -728 | |
| Income from associated companies and joint ventures | 6, 12 | 9,096 | 7,697 | |
| Operating income | 6 | 28,648 | 26,155 | |
| Finance costs | 13 | -3,683 | -1,736 | |
| Other financial items | 13 | 1,446 | 832 | |
| Income after financial items | 26,411 | 25,251 | ||
| Income taxes | 14 | -4,969 | -4,953 | |
| Net income | 21,442 | 20,298 | ||
| Attributable to: | ||||
| Shareholders of the parent company | 19,011 | 17,674 | ||
| Minority interests | 2,431 | 2,624 | ||
| Shareholders' earnings per share (SEK), basic and diluted | 21 | 4.23 | 3.94 |
| December 31, | ||||
|---|---|---|---|---|
| SEK in millions | Note | 2008 | 2007 | |
| Assets | ||||
| Goodwill | 15 | 84,431 | 71,172 | |
| Other intangible assets | 15 | 16,537 | 12,737 | |
| Property, plant and equipment | 16 | 61,946 | 52,602 | |
| Investments in associated companies and joint ventures | 6, 12 | 39,543 | 33,065 | |
| Deferred tax assets | 14 | 13,206 | 12,017 | |
| Pension obligation assets | 23 | 330 | 187 | |
| Other non-current assets | 17 | 9,186 | 3,364 | |
| Total non-current assets | 225,179 | 185,144 | ||
| Inventories | 18 | 1,673 | 1,168 | |
| Trade and other receivables | 19 | 23,243 | 20,787 | |
| Current tax receivables | 191 | 94 | ||
| Interest-bearing receivables | 20 | 2,147 | 1,701 | |
| Cash and cash equivalents | 20 | 11,826 | 7,802 | |
| Total current assets | 39,080 | 31,552 | ||
| Non-current assets held-for-sale | 27 | 6 | ||
| Total assets | 264,286 | 216,702 | ||
| Equity and liabilities | ||||
| Shareholders' equity | 130,387 | 117,274 | ||
| Minority interests in equity | 11,061 | 9,783 | ||
| Total equity | 141,448 | 127,057 | ||
| Long-term borrowings | 22 | 54,178 | 41,030 | |
| Deferred tax liabilities | 14 | 11,260 | 9,577 | |
| Provisions for pensions and employment contracts | 23 | 22 | 416 | |
| Other long-term provisions | 24 | 13,312 | 6,755 | |
| Other long-term liabilities | 25 | 2,565 | 2,366 | |
| Total non-current liabilities | 81,337 | 60,144 | ||
| Short-term borrowings | 22 | 11,621 | 2,549 | |
| Short-term provisions | 24 | 849 | 137 | |
| Current tax payables | 1,254 | 2,212 | ||
| Trade payables and other current liabilities | 26 | 27,777 | 24,603 | |
| Total current liabilities | 41,501 | 29,501 | ||
| Total equity and liabilities | 264,286 | 216,702 | ||
| Contingent assets | 30 | – | – | |
| Guarantees | 30 | 2,303 | 2,146 | |
| Collateral pledged | 30 | 1,854 | 1,484 |
| January-December | ||||
|---|---|---|---|---|
| SEK in millions | Note | 2008 | 2007 | |
| Net income | 21,442 | 20,298 | ||
| Adjustments for: | ||||
| Amortization, depreciation and impairment losses | 12,111 | 11,879 | ||
| Capital gains/losses on sales/disposals of non-current assets | -17 | -84 | ||
| Income from associated companies and joint ventures, net of dividends received |
-7,686 | -5,012 | ||
| Pensions and other provisions | -294 | -847 | ||
| Financial items | 1,924 | 1,495 | ||
| Income taxes | 1,077 | -189 | ||
| Miscellaneous non-cash items | -77 | 1 | ||
| Cash flow before change in working capital | 28,480 | 27,541 | ||
| Increase (-)/Decrease (+) in operating receivables | -1,824 | 427 | ||
| Increase (-)/Decrease (+) in inventories | -325 | -86 | ||
| Increase (+)/Decrease (-) in operating liabilities | 755 | -1,353 | ||
| Change in working capital | -1,394 | -1,012 | ||
| Cash flow from operating activities | 31 | 27,086 | 26,529 | |
| Intangible assets and property, plant and equipment acquired | 31 | -15,758 | -13,525 | |
| Intangible assets and property, plant and equipment divested | 40 | 176 | ||
| Shares, participations and operations acquired | 31 | -4,079 | -4,597 | |
| Shares, participations and operations divested | 31 | 32 | 116 | |
| Loans granted and other similar investments | -472 | -740 | ||
| Repayment of loans granted and other similar investments | 309 | 1,863 | ||
| Compensation from pension fund | – | 525 | ||
| Net change in short-term investments | 294 | 477 | ||
| Cash flow from investing activities | -19,634 | -15,705 | ||
| Cash flow before financing activities | 7,452 | 10,824 | ||
| Dividends paid to parent company's shareholders | -17,962 | -28,290 | ||
| Dividends to and investments by minority shareholders, net | -1,902 | -1,415 | ||
| Proceeds from long-term borrowings | 11,776 | 17,075 | ||
| Repayment of long-term borrowings | -1,261 | -2,853 | ||
| Net change in short-term borrowings | 4,990 | 757 | ||
| Cash flow from financing activities | -4,359 | -14,726 | ||
| Net change in cash and cash equivalents | 3,093 | -3,902 | ||
| Cash and cash equivalents, opening balance | 7,802 | 11,603 | ||
| Net change in cash and cash equivalents for the year | 3,093 | -3,902 | ||
| Exchange rate differences in cash and cash equivalents | 931 | 101 | ||
| Cash and cash equivalents, closing balance | 20 | 11,826 | 7,802 | |
| Interest received | 31 | 787 | 571 | |
| Interest paid | 31 | -2,569 | -1,457 | |
| Dividends received | 31 | 1,410 | 2,684 | |
| Income taxes paid | 31 | -3,892 | -5,142 |
| Other | Total share | Minority | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Share | contributed | Recycling | Other | Retained | holders' | interests in | |||
| SEK in millions Closing balance, December 31, 2006 |
Note | capital 14,369 |
capital 51,026 |
reserves -2,887 |
reserves 6,047 |
earnings 50,662 |
equity 119,217 |
equity 8,500 |
Total equity 127,717 |
| Fair value amortization of revalued net assets in step acquisitions |
21 | – | – | – | -166 | 166 | – | – | – |
| Reporting financial instruments at fair value |
21 | – | – | 39 | – | – | 39 | – | 39 |
| Foreign currency translation differences | 21 | – | – | 8,634 | – | – | 8,634 | 160 | 8,794 |
| Net income recognized directly in equity | – | – | 8,673 | -166 | 166 | 8,673 | 160 | 8,833 | |
| Net income | – | – | – | – | 17,674 | 17,674 | 2,624 | 20,298 | |
| Comprehensive income | – | – | 8,673 | -166 | 17,840 | 26,347 | 2,784 | 29,131 | |
| Transactions with minority shareholders in subsidiaries |
21 | – | – | – | – | – | – | -42 | -42 |
| Dividends | 21 | – | -10,104 | – | – | -18,186 | -28,290 | -1,459 | -29,749 |
| Closing balance, December 31, 2007 | 14,369 | 40,922 | 5,786 | 5,881 | 50,316 | 117,274 | 9,783 | 127,057 | |
| Fair value amortization of revalued net assets in step acquisitions |
21 | – | – | – | -153 | 153 | – | – | – |
| Reporting financial instruments at fair value |
21 | – | – | -341 | – | – | -341 | – | -341 |
| Foreign currency translation differences | 21 | – | – | 12,405 | – | – | 12,405 | 1,675 | 14,080 |
| Net income recognized directly in equity | – | – | 12,064 | -153 | 153 | 12,064 | 1,675 | 13,739 | |
| Net income | – | – | – | – | 19,011 | 19,011 | 2,431 | 21,442 | |
| Comprehensive income | – | – | 12,064 | -153 | 19,164 | 31,075 | 4,106 | 35,181 | |
| Transactions with minority shareholders in subsidiaries |
21 | – | – | – | – | – | – | -842 | -842 |
| Dividends | 21 | – | -9,879 | – | – | -8,083 | -17,962 | -1,986 | -19,948 |
| Closing balance, December 31, 2008 | 14,369 | 31,043 | 17,850 | 5,728 | 61,397 | 130,387 | 11,061 | 141,448 |
The annual report and consolidated financial statements have been approved for issue by the Board of Directors on March 9, 2009. The income statements and balance sheets of the parent company and the Group are subject to adoption by the Annual General Meeting on April 1, 2009.
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 1.2 "Supplementary Accounting Rules for Groups" and other statements. As encouraged by the Financial Reporting Board, TeliaSonera has pre-adopted RFR 1.2. The standard is applicable to Swedish legal entities whose securities are listed on a Swedish stock exchange or authorized equity market place on the balance sheet date 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 consolidation and accounting principles are described below.
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 income statement and cash flow statement items, and as of December 31 for balance sheet items, respectively.
New or revised/amended standards and interpretations, effective in 2008 or pre-adopted
transfer from the "Available-for-sale" category to the "Loans and receivables" category of a financial asset that would have met the definition of loans and receivables had it not been designated as available-for-sale. The amendments to IFRS 7 require additional disclosures in connection with any now permitted reclassification. Currently, TeliaSonera is not considering the reclassification of any financial assets.
Recently issued new or revised/amended standards and interpretations impacting TeliaSonera's consolidated financial statements on or after January 1, 2009, are as follows:
tion-by-transaction basis permit recognition of 100 percent of the goodwill of the acquired entity with the in-creased goodwill amount also increasing the non-controlling interest; (d) that in a step acquisition, on the date that control is obtained, the fair values of the acquired entity's assets and liabilities, including goodwill, are measured and any resulting adjustments to previously recognized assets and liabilities are recognized in profit or loss; (e) that acquiring additional shares in a subsidiary after control was obtained as well as a partial disposal of shares in a subsidiary while retaining control is accounted for as an equity transaction with owners; and (f) that a partial disposal of shares in a subsidiary that results in loss of control triggers remeasurement of the residual holding to fair value and any difference between fair value and carrying amount is a gain or loss, recognized in profit or loss. TeliaSonera expects that applying the revised IFRS 3 and the amended IAS 27 will lead to increased volatility in the income statement.
TeliaSonera have in certain cases already been applied and will otherwise have no or very limited impact on Telia-Sonera's results or financial position.
IFRIC 18 "Transfers of Assets from Customers" (effective for transfers received on or after July 1, 2009; earlier application permitted within limits; to be applied prospectively). IFRIC 18 clarifies (a) the circumstances in which the definition of an asset is met; (b) the recognition of the asset and the measurement of its cost on initial recognition; (c) the identification of the separately identifiable services (one or more services in exchange for the transferred asset), (d) the recognition of revenue; and (e) the accounting for transfers of cash from customers. Currently, IFRIC 18 is not expected to have any significant impact on TeliaSonera's results or financial position.
As of the beginning of March 2009, all standards, revisions/amendments to standards, and interpretations mentioned above had been adopted by the EU, except for revised IFRS 1, revised IFRS 3, amendment on improving disclosures to IFRS 7, amendment on business combinations to IAS 27, amendment on eligible hedged items to IAS 39, IFRIC 12, IFRIC 15, IFRIC 16, IFRIC 17 and IFRIC 18.
The EU Commission has announced that, if an IFRS (or equivalent) is endorsed after the balance sheet date 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, all of which are discussed and separately marked in the respective sections of Note 4 "Significant Accounting Policies," comprise the most difficult, subjective or complex judgments it has to make in the preparation of the financial statements: revenue recognition (page 49); income taxes (page 50); valuation of intangible and other noncurrent assets (page 51); collecting trade receivables (page 52); making provisions for pensions (page 54) as well as provisions for restructuring activities, minority put options, contingent liabilities and litigation (page 55).
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. TeliaSonera's consolidated financial statements are based on accounts prepared by all controlled entities as of December 31, and have been prepared using the purchase method. According to this method the cost of a business combination is the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the
acquirer, in exchange for control of the acquiree plus any costs directly attributable to the business combination. Identifiable assets acquired, and liabilities and contingent liabilities assumed are initially measured at fair value. Any excess of the cost of acquisition over the fair value of net assets acquired is recognized as goodwill.
Values for entities acquired or divested during the year are included in the consolidated income statement from the date on which control is transferred to TeliaSonera or excluded from the date on which control ceases.
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.
Transactions with minority interests are treated as transactions with non-related parties. Disposals to minority interests result in capital gains or losses which are recognized in the income statement. Purchases from minority interests result 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. Commitments to purchase minority interests and put options granted to minority shareholders (including any subsequent capital contributions from minority shareholders) are recognized as contingent consideration. Where the amount of the commitment exceeds the amount of the minority interest, the difference is recorded as goodwill. Changes in the fair value of put options granted in connection with business combinations are recognized as an adjustment of goodwill, while changes in fair value of put options granted to minority shareholders in existing subsidiaries are recognized in the income statement.
Items included in the separate financial statements of a Group entity are measured in the entity's functional currency, being the currency of the primary economic environment in which the entity operates, normally the local currency.
The consolidated financial statements are presented in Swedish kronor (SEK), which is the functional currency of the parent company. When income statements and balance sheets of foreign operations (subsidiaries, associated companies and joint ventures, and branch offices) are translated into SEK, the exchange rate prevailing on the balance sheet date (closing rate) is used to translate all items in the balance sheets except for the equity components, which are converted at the historical rate. Income statement items are translated using the average rate for that period. Differences resulting from translation do not affect income but are recognized directly in equity. When a foreign operation is sold, any related cumulative exchange rate difference is recognized in the income statement as part of the gain or loss on the sale.
When the functional currency for a subsidiary, an associated company or a joint venture is the currency of a hyperinflationary economy, the reported non-monetary assets and liabilities, and equity are restated in terms of the measuring unit current at the balance sheet date. The restated financial statements are translated into SEK at the closing rate. The restating effects are recorded as financial income or expense and in income from associated companies and joint ventures, respectively. Currently, no subsidiary, associated company or joint venture operates in a hyperinflationary economy.
Goodwill and fair value adjustments arising from the acquisition of foreign entities are treated as assets and liabilities of the foreign entity.
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, are recorded as associated companies. Entities over which the Group has joint
control by virtue of a contractual arrangement are recorded as joint ventures.
Holdings in associated companies and joint ventures are included in the consolidated income statement and balance sheet according to the equity method and are initially recognized at cost. In the income statement, 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 company's most recent accounts, adjusted for any discrepancies in accounting principles, and with estimated adjustments for significant events and transactions up to TeliaSonera's close of books.
The income statement 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.
Negative equity participations in associated companies and joint ventures are recognized only for entities for which the Group has contractual obligations to contribute additional capital and are then recorded as Other provisions.
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 areas. 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 6 "Segment Information." Segments are consolidated 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. When significant operations are transferred between segments, comparative period figures are reclassified.
Net sales principally consist of traffic charges including interconnect and roaming, subscription fees, connection and installation fees, service charges and sales of customer premises equipment. Sales are recognized at fair value, normally being the sales value, adjusted for rebates and discounts granted and salesrelated 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 the group, 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 at the time when the services are used by the customer. Revenue arising from interconnect voice and data 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. 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 relating to services and goods provided by TeliaSonera. A provision with respect to the total estimated earned amount is recognized as deduction from revenues. 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. If the fair value of delivered items cannot, but the fair value of undelivered items can be reliably determined, the residual method is used. Under the residual method, the amount of consideration allocated to the delivered item(s) equals the total arrangement consideration less the aggregate fair value of the undelivered items. 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 up-grades).
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).
For a telecom operator, management judgment is required in a number of cases to determine if and how revenue should be recognized and to determine fair values, 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; and in assessing the degree of completion in service and construction contracts.
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 debts 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 products, services, processes or systems is 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.
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, 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). 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.
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 funding-related 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 the income statement or in equity, to the extent relating to items recognized directly in equity. 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 be-cause such retained earnings can be withdrawn as nontaxable 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 calculated based on the respective withholding tax rate is recognized. In certain countries, income tax is not levied on profits, but calculated 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 balance sheet date 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.
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 balance sheet date, see Note 14 "Income Taxes."
Intangible assets, and property, plant and equipment Intangible assets, and property, plant and equipment represent approximately 60 percent of TeliaSonera's total assets.
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. Mobile and fixed telecommunication licenses are regarded as integral to the network and the amortization of a license does not commence until the related network is ready for use. 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.
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 as income. The change in depreciation charge is recognized prospectively.
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, initially measured at fair value, reduce the carrying value of related assets and are recognized as income over the assets' useful life by way of a reduced depreciation charge.
Amortization on 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.
Determination of the useful lives of asset classes involves taking into account historical trends and making assumptions related to future socioeconomical 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. For additional information on intangible and tangible assets subject to amortization and depreciation and their carrying values as of the balance sheet date as well as on currently applied useful lives and total amortization and depreciation for the year, see Note 15 "Goodwill and Other Intangible Assets," Note 16 "Property, Plant and Equipment" and Note 11 "Amortization, Depreciation and Impairment Losses", respectively.
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.
A number of significant assumptions and estimates are involved in using DCF models to forecast operating cash flows, 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 balance sheet date, see Note 15 "Goodwill and Other Intangible Assets."
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 nonderivative 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 "Availablefor-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. Assets included in the categories are reported under balance sheet items Other non-current assets (Note 17), Trade and Other receivables (Note 19), Interest-bearing Receivables, Cash and Cash Equivalents (Note 20).
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 and put options granted to minority shareholders in existing subsidiaries. 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 balance sheet items Long-term and Short-term Borrowings (Note 22), Other Provisions (Note 24), Other Long-term Liabilities (Note 25) and Trade Payables and Other Current Liabilities (Note 26).
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.
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 cancelled 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 profit or loss.
The fair values of financial instruments traded in active markets are based on quoted market prices at the balance sheet date. 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 balance sheet date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates at the balance sheet date. The carrying value less impairment provision of trade receivables and payables are assumed 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 balance sheet date are considered to be non-current. Other financial assets and liabilities are recognized as current. Financial assets and liabilities are recognized and derecognized applying settlement date accounting.
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 the fair value reserve as a component of equity. 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. An impairment loss is calculated by reference to the current fair value. 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.
Government bonds and treasury bills are initially recognized at fair value and if held-to-maturity subsequently measured at amortized cost, using the effective interest rate method, less impairment. If not held-to-maturity such instruments are subsequently measured at fair value, being the quoted market prices, with changes recorded directly in equity. 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 balance sheet date 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.
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" in Note 28 "Financial Risk Management" for a description of how credit risks related to trade receivables are mitigated. For additional information on the allowance for doubtful receivables and its carrying value as of the balance sheet date, see Note 19 "Trade and Other Receivables."
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 con-tracts and options, primarily to control exposure to fluctuations in exchange rates and interest rates.
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 income statement, 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 the income statement.
For cash flow hedges, the effective portion of the change in fair value of the derivative is recognized in the hedging reserve as a component of equity until the underlying transaction is reflected in the income statement, at which time any deferred hedging gains or losses are recognized in the income statement. The ineffective portion of the change in fair value of a derivative used as a cash flow hedge is recognized in the income statement. However, when the hedged forecast transaction results in the recognition of a nonfinancial asset or liability, the gains and losses are transferred from equity and 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 the foreign currency translation reserve as a component of equity. The gain or loss relating to the ineffective portion is recognized in the income statement. Gains and losses deferred in the foreign currency translation reserve are recognized in the income statement 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 the income statement.
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 the income statement 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 the income statement 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 costs of sales.
Non-current assets and disposal groups are classified as held-forsale 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-for-sale is measured at the lower of its previous carrying value and fair value less costs to sell.
Shareholders' equity is divided into share capital, other contributed capital, recycling reserves, other reserves 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). Recycling reserves include fair value reserve, hedging reserve and foreign currency translation reserve which are recycled through the income statement, while other reserves comprise revaluation reserve (in connection with step acquisitions) and inflation adjustment reserve. 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 2008 will be recorded as a liability immediately following the final decision by the shareholders.
TeliaSonera provides defined benefit pension plans, which mean 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. As of January 1, 2007, a new defined contribution pension plan (the ITP1 plan) was introduced. This pension plan is applicable to all employees born in 1979 and later. 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 balance sheet 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-asyou-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).
The Group'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 balance sheet date. 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 balance sheet represent the present value of obligations at the balance sheet date less the fair value of plan assets, unrecognized actuarial gains and losses and unrecognized past-service costs.
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, the expected annual adjustments to pensions, and the expected annual return on plan assets. These assumptions are prepared by an internal Pension Committee 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 pension obligations and their present values as of the balance sheet date, see Note 23 "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. Historically, management has chosen to base the estimated discount rate on yields either derived from high-quality corporate bonds or, for countries where there is no deep market for such bonds, derived from domestic government bonds. For Sweden, which represents approximately 87 percent of TeliaSonera's pension obligations, the discount rate was based on nominal government bonds adjusting yields to consistent terms by extrapolating the yield-curve.
At the end of 2008, however, financial market conditions were such that the yields on Swedish government bonds were well below historic levels. Furthermore, the implied long-term rate of inflation, taken as the difference between real and nominal government bonds, was at abnormally low levels and significantly below the national central bank's long-term target of 2 percent which had served as management's basis for the long-term inflation assumption. IAS 19 "Employee Benefits" requires the economic relationship between the discount rate and inflation rate to be considered, and as management has chosen to maintain its 2-percent assumption for long-term inflation, a discount rate assumption of 4.0 percent was chosen in order to preserve a reasonable relationship between the assumptions.
As part of its assessment of a realistic valuation of the pension obligations, management also reviewed to what extent other Swedish market indicators might be useful and concluded that the current Swedish swap curve rates support its choice of estimated discount rate. See section "Pension obligation risk" in Note 28 "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 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 4.6 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 in the Swedish pension fund is based on the following assumptions; domestic fixed income 4.0 percent, domestic and global equity 7.5 percent and other investments 7.5 percent. The assumptions used in the non-Swedish pension funds are similar.
Restructuring provisions include termination benefits, onerous contracts and other expenses related to competitive cost level programs, post-merger integration programs, closing-down of operations, etc. Restructuring provisions are mainly recognized as Other operating expenses, since they are not expenses for postdecision ordinary activities.
Other provisions also include contingent consideration resulting from business combinations or from put options granted to minority shareholders in existing subsidiaries, warranty commitments, environmental restoration, litigation, customer loyalty programs, onerous contracts not related to restructuring activities, etc. Such provisions are recognized as Cost of sales, Selling and marketing expenses, Administrative expenses or Research and development expenses as applicable, except for provisions for loyalty programs that are recognized as a deduction from net sales. Provisions for contingent consideration in business combinations are not charged to income, but increases goodwill.
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 re-sources 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 of the expenditure required to settle the obligation at the balance sheet date, 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.
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.
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.
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 "Intangible assets, and property, plant and equipment" above). Should the actual amounts differ from these estimates, future results could be materially impacted.
The determination of redemption amounts for minority put options involves management judgment and estimates of factors such as the likelihood of exercise of the option and the timing thereof, projected cash flows of the under-lying operations, the weighted average cost of capital, etc. A change in any of these factors may have a significant impact on future results.
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 restructuring provisions and minority put options, including their carrying values as of the balance sheet date, and on contingencies and litigation, see Notes 24 "Other Provisions" and 30 "Contingencies, Other Contractual Obligations and Litigation," respectively.
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 accounts include the leased asset as a tangible non-current asset and the future obligation to the lessor as a liability in the balance sheet, capitalized at the inception of the lease at the fair value of the leased property or, if lower, at 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 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.
Transactions denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the time of each transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the closing rate, any resulting exchange rate differences being charged to income. Accordingly, realized as well as unrealized exchange rate differences are recorded in the income statement. Exchange rate differences arising from operating receivables or liabilities are recorded in operating income, while differences attributable to financial assets or liabilities are recorded in finance costs.
On October 1, 2008, TeliaSonera acquired 51 percent of the shares and votes in TeliaSonera Asia Holding B.V. (Asia Holding), which owns controlling interests in the two mobile operators Spice Nepal Pvt. Ltd. in Nepal (80 percent) and Applifone Co. Ltd. in Cambodia (100 percent).
In 2008 and in order to strengthen its market position, TeliaSonera also acquired all outstanding shares in the retail chain ComHouse AS in Norway (previously an associated company), further the Swedish systems integrator Avansys AB and its subsidiaries (100 percent), the dunning company UAB Creditcollect (now UAB Sergel) in Lithuania (100 percent) and the Estonian IT training company IT Koolituskeskuse OÜ, including its subsidiaries in Estonia, Latvia and Lithuania (83 percent).
For additional information, see Note 34 "Business Combinations, etc."
The Group's operations are managed and reported by business area (BA) as follows.
Moldova, Nepal and Cambodia. The business area is also responsible for developing TeliaSonera's shareholding in the mobile operators MegaFon (44 percent) in Russia and Turkcell (37 percent) in Turkey.
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. Telia-Sonera Holding is responsible for the Group's non-core/nonstrategic operations. Corporate functions comprise the Corporate Head Office and certain shared service functions on Group level, BA level and country level.
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 non-recurring items and Operating segment capital, respectively (see "Definitions"). Comparative period figures for 2007 have been restated to reflect the organizational restructuring effective January 1, 2008 (see "Report of the Directors," section "Review of the Business Areas").
| January–December 2008 or December 31, 2008 | |||||||
|---|---|---|---|---|---|---|---|
| Mobility | Broadband | Other | |||||
| SEK in millions | Services | Services | Eurasia | operations | Eliminations | Group | |
| Net sales | 48,673 | 44,943 | 13,204 | 2,538 | -5,773 | 103,585 | |
| External net sales | 46,259 | 42,015 | 13,196 | 2,115 | – | 103,585 | |
| EBITDA excluding non-recurring items | 14,399 | 11,922 | 6,553 | 116 | -36 | 32,954 | |
| Non-recurring items | -397 | -1,194 | – | 295 | – | -1,296 | |
| Amortization, depreciation and impairment losses | -4,354 | -5,483 | -1,883 | -422 | 36 | -12,106 | |
| Income from associated companies and joint ventures | -122 | 151 | 9,061 | 6 | – | 9,096 | |
| Operating income/loss | 9,526 | 5,396 | 13,731 | -5 | 0 | 28,648 | |
| Financial items, net | -2,237 | ||||||
| Income taxes | -4,969 | ||||||
| Net income | 21,442 | ||||||
| Investments in associated companies and joint ventures | 96 | 974 | 38,100 | 373 | – | 39,543 | |
| Other operating segment assets | 93,159 | 57,996 | 34,088 | 6,309 | -1,375 | 190,177 | |
| Unallocated operating assets | 13,397 | ||||||
| Other unallocated assets | 21,169 | ||||||
| Total assets | 264,286 | ||||||
| Operating segment liabilities | 12,795 | 14,529 | 13,141 | 5,434 | -1,396 | 44,503 | |
| Unallocated operating liabilities | 20,597 | ||||||
| Other unallocated liabilities | 65,821 | ||||||
| Adjusted equity | 133,365 | ||||||
| Total equity and liabilities | 264,286 | ||||||
| Investments | 4,771 | 6,435 | 12,691 | 955 | 3 | 24,855 | |
| of which CAPEX | 4,467 | 5,934 | 4,595 | 795 | 4 | 15,795 | |
| Number of employees | 8,339 | 16,171 | 4,780 | 2,881 | – | 32,171 | |
| Average number of full-time employees | 7,777 | 15,270 | 4,276 | 2,714 | – | 30,037 |
| January–December 2007 or December 31, 2007 (restated) | |||||||
|---|---|---|---|---|---|---|---|
| SEK in millions | Mobility Services |
Broadband Services |
Eurasia | Other operations |
Eliminations | Group | |
| Net sales | 45,115 | 44,478 | 10,338 | 2,049 | -5,636 | 96,344 | |
| External net sales | 42,738 | 41,547 | 10,332 | 1,727 | – | 96,344 | |
| EBITDA excluding non-recurring items | 13,084 | 12,821 | 5,255 | -161 | 22 | 31,021 | |
| Non-recurring items | -364 | -468 | – | 142 | 2 | -688 | |
| Amortization, depreciation and impairment losses | -4,162 | -6,162 | -1,278 | -315 | 42 | -11,875 | |
| Income from associated companies and joint ventures | -172 | 222 | 6,906 | 740 | 1 | 7,697 | |
| Operating income/loss | 8,386 | 6,413 | 10,883 | 406 | 67 | 26,155 | |
| Financial items, net | -904 | ||||||
| Income taxes | -4,953 | ||||||
| Net income | 20,298 | ||||||
| Investments in associated companies and joint ventures | 274 | 885 | 31,572 | 334 | – | 33,065 | |
| Other operating segment assets | 86,076 | 54,332 | 16,008 | 4,734 | -1,789 | 159,361 | |
| Unallocated operating assets | 12,111 | ||||||
| Other unallocated assets | 12,165 | ||||||
| Total assets | 216,702 | ||||||
| Operating segment liabilities | 13,145 | 13,904 | 3,708 | 4,904 | -1,800 | 33,861 | |
| Unallocated operating liabilities | 29,751 | ||||||
| Other unallocated liabilities | 43,995 | ||||||
| Adjusted equity | 109,095 | ||||||
| Total equity and liabilities | 216,702 | ||||||
| Investments | 5,468 | 6,264 | 7,679 | 1,301 | -10 | 20,702 | |
| of which CAPEX | 4,168 | 5,722 | 3,114 | 527 | – | 13,531 | |
| Number of employees | 8,052 | 17,294 | 3,862 | 2,084 | – | 31,292 | |
| Average number of full-time employees | 7,186 | 16,197 | 3,051 | 2,127 | – | 28,561 |
External net sales were distributed by product area as follows.
| January–December | |||
|---|---|---|---|
| SEK in millions | 2008 | 2007 | |
| Mobile communications | 56,213 | 50,418 | |
| Fixed communications | 39,473 | 38,535 | |
| Other services | 7,899 | 7,391 | |
| Total | 103,585 | 96,344 |
Fixed communications include internet, data and TV services. Other services include equipment sales, managed services and financial services.
Net sales by external customer location and non-current assets, respectively, were distributed among individually material countries as follows.
| January–December | December 31 | |||||||
|---|---|---|---|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | |||||
| Net sales | Non-current assets | |||||||
| SEK in millions |
Percent | SEK in millions |
Percent | SEK in millions |
Percent | SEK in millions |
Percent | |
| Sweden | 35,890 | 34.7 | 36,046 | 37.4 | 22,373 | 13.7 | 23,336 | 17.0 |
| Finland | 16,781 | 16.2 | 16,735 | 17.4 | 48,604 | 29.8 | 41,982 | 30.7 |
| Norway | 10,287 | 9.9 | 9,603 | 10.0 | 28,455 | 17.5 | 29,941 | 21.9 |
| All other countries | 40,627 | 39.2 | 33,960 | 35.2 | 63,671 | 39.0 | 41,604 | 30.4 |
| Total | 103,585 | 100.0 | 96,344 | 100.0 | 163,103 | 100.0 | 136,863 | 100.0 |
Net sales by external customer location were distributed among economic regions as follows.
| January–December | ||||
|---|---|---|---|---|
| 2008 | 2007 | |||
| SEK in millions |
Percent | SEK in millions |
Percent | |
| European Economic Area (EEA) |
88,448 | 85.4 | 84,452 | 87.6 |
| of which European Union (EU) member states |
78,108 | 75.4 | 74,817 | 77.7 |
| Rest of Europe | 1,419 | 1.4 | 1,068 | 1.1 |
| North-American Free Trade Agreement (NAFTA) |
688 | 0.6 | 555 | 0.6 |
| Rest of world | 13,030 | 12.6 | 10,269 | 10.7 |
| Total | 103,585 | 100.0 | 96,344 | 100.0 |
The TeliaSonera Group offers a diversified portfolio of mass-market 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, structural effects, exchange rate effects, and price effects was as follows.
| January–December | |||
|---|---|---|---|
| Percent | 2008 | 2007 | |
| Change in net sales, total | 7.5 | 5.8 | |
| – volume growth | 9.8 | 9.7 | |
| – structural changes | 1.5 | 2.7 | |
| – exchange rate effects | 2.1 | -0.5 | |
| – price reductions | -5.8 | -6.1 |
TeliaSonera experiences volume growth mainly within mobile communications and broadband in almost all of its geographical markets. The growth is especially strong in the Eurasian operations due to ongoing high customer intake. The impact from volume growth is, however, partly offset by overall price pressure on telecom services.
Structural changes in 2008 mainly related to the acquisitions of Avansys, ComHouse and the mobile operations in Nepal and Cambodia as well as the acquisitions in 2007 of Cygate, debitel Danmark and the mobile operations in Uzbekistan and Tajikistan, while 2007 was also impacted by the acquisition of NextGenTel in 2006.
Net sales are broken down by reportable segment, by product area, by individually material countries and by economic region in Note 6 "Segment Information."
Operating expenses are presented on the face of the income statement 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.
| January–December | ||||
|---|---|---|---|---|
| SEK in millions | 2008 | 2007 | ||
| Goods purchased | 16,102 | 17,271 | ||
| Interconnect and roaming expenses | 16,663 | 14,998 | ||
| Other network expenses | 4,602 | 3,727 | ||
| Change in inventories | 56 | 81 | ||
| Personnel expenses (see also Note 32) | 15,056 | 13,477 | ||
| Marketing expenses | 7,423 | 6,941 | ||
| Other expenses | 11,294 | 10,308 | ||
| Amortization, depreciation and impairment losses (see also Note 11) |
12,057 | 11,704 | ||
| Total | 83,253 | 78,507 |
The main components of Other expenses are rent and leasing fees, consultants' services, IT expenses, energy expenses and travel expenses.
Other operating income and expenses were distributed as follows.
| January–December | |||
|---|---|---|---|
| SEK in millions | 2008 | 2007 | |
| Other operating income | |||
| Capital gains | 64 | 232 | |
| Exchange rate gains | 267 | 49 | |
| Commissions, license and patent fees, etc. |
265 | 311 | |
| Grants | 37 | 24 | |
| Recovered accounts receivable, released accounts payable |
25 | 680 | |
| Compensation for damages | 97 | 53 | |
| Total other operating income | 755 | 1,349 | |
| Other operating expenses | |||
| Capital losses | -97 | -44 | |
| Provisions for onerous contracts | 0 | 4 | |
| Exchange rate losses | -341 | -114 | |
| Restructuring costs | -986 | -366 | |
| Impairment charges | -49 | -171 | |
| Damages paid | -62 | -37 | |
| Total other operating expenses | -1,535 | -728 | |
| Net effect on income | -780 | 621 | |
| of which net exchange rate losses on derivative instruments held-for-trading |
-13 | -45 |
Released accounts payable in 2007 include SEK 653 million relating to a number of court rulings reducing certain historical interconnect fees in Sweden. Restructuring costs mainly relates to staff redundancy costs. In 2008, this item also includes a SEK 360 million reversal of a provision for onerous lease and maintenance contracts relating to a fiber network in France.
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 state-owned 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 46 million in 2008 and SEK 57 million in 2007. 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 47 million in 2008 and SEK 48 million in 2007.
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 2008 and 2007, TeliaSonera paid EUR 2.0 million and EUR 1.7 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 2008 and 2007, TeliaSonera paid EUR 0.1 million and EUR 0.1 million, respectively, for data privacy supervision and EUR 0.8 million and EUR 0.8 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, up until August 2007, to Telefos AB through its former subsidiaries in the Eltel Group in Sweden and Finland, 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 | 2008 | 2007 | |
| Sales of goods and services | |||
| Svenska UMTS-nät AB (joint venture) | 357 | 212 | |
| Other | 145 | 124 | |
| Total sales of goods and services | 502 | 336 | |
| Purchases of goods and services | |||
| Svenska UMTS-nät AB (joint venture) | 550 | 551 | |
| Telefos AB (including the Eltel Group up until August 9, 2007) |
– | 1,079 | |
| Other | 159 | 184 | |
| Total purchases of goods and services | 709 | 1,814 | |
| Total trade and other receivables | 61 | 63 | |
| Loans receivable | |||
| OAO MegaFon | 362 | 301 | |
| Total loans receivable | 362 | 301 | |
| Total trade and other payables | 206 | 186 |
As of December 31, 2008, TeliaSonera's pension funds held 1,746,948 TeliaSonera shares, or 0.04 percent of the voting rights. For information on transactions and balances, see Note 23 "Provisions for Pensions and Employment Contracts."
TeliaSonera has made certain commitments on behalf of group companies, associated companies and joint ventures and holds collateral in the form of shares in associated companies. See Note 30 "Contingencies, Other Contractual Obligations and Litigation" for further details.
See section "Remuneration to corporate officers" in Note 32 "Human Resources" for further details.
No general changes of useful lives were effected in 2008. For a discussion on impairment testing, see Note 15 "Goodwill and Other Intangible Assets." The following amortization and depreciation rates were applied.
| Trade names Telecom licenses, numbering rights |
Individual evaluation, minimum 10% Remaining license period, minimum 5%. Licenses are regarded as integral to the network and amortization of a license does not commence until the related network is ready for use. |
|---|---|
| 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 |
| Other intangible assets | 20–33% or individual evaluation |
| Buildings | 2–10% |
| Land improvements | 2% |
| Capitalized improvements on leased premises |
Remaining term of corresponding lease |
| Mobile networks (base stations and other installations) |
14.5% |
| Fixed networks | |
| – Switching systems and transmission systems |
10–33% |
| – Transmission media (cable) | 5–10% |
| – Equipment for special networks | 20–33% |
| – Usufruct agreements of limited duration |
Agreement term or time corresponding to the underlying asset |
| – Other installations | 2–33% |
| Equipment, tools and installations | 10–33% |
| Equipment placed with customers under service arrangements |
Agreement term, annuity basis |
Amortization, depreciation and impairment losses on other intangible assets and property, plant and equipment were distributed by function and other operating expenses as follows.
| January–December | |||
|---|---|---|---|
| SEK in millions, except proportions | 2008 | 2007 | |
| Cost of sales | 10,136 | 9,660 | |
| Selling and marketing expenses | 1,133 | 1,400 | |
| Administrative expenses | 737 | 495 | |
| Research and development expenses | 51 | 149 | |
| Total functions | 12,057 | 11,704 | |
| Other operating expenses | 49 | 171 | |
| Total amortization, depreciation and impairment losses |
12,106 | 11,875 | |
| Proportion to net sales (%) | 11.7 | 12.3 |
Amortization, depreciation and impairment losses are broken down by reportable segment in Note 6 "Segment Information."
Amortization, depreciation and impairment losses were
distributed by asset class as follows.
| January–December | ||
|---|---|---|
| SEK in millions | 2008 | 2007 |
| Other intangible assets | 2,545 | 2,837 |
| Buildings and land improvements | 335 | 318 |
| Mobile networks | 4,270 | 3,599 |
| Fixed networks | 4,060 | 4,378 |
| Other plant and equipment | 896 | 743 |
| Total | 12,106 | 11,875 |
Income from associated companies and joint ventures The net effect on income from holdings in associated companies and joint ventures was as follows.
| January–December | |||
|---|---|---|---|
| SEK in millions | 2008 | 2007 | |
| Share in net income for the year | 9,257 | 7,677 | |
| Amortization of fair value adjustments | -146 | -54 | |
| Impairment losses on goodwill, fair value adjustments, etc. |
– | -0 | |
| Net capital gains | -15 | 74 | |
| Net effect on income | 9,096 | 7,697 |
Income is broken down by reportable segment in Note 6 "Segment Information." Large individual stakes (including capital gains/losses and intermediate holding companies, when applicable) impacted earnings as follows.
| January–December | |||
|---|---|---|---|
| SEK in millions | 2008 | 2007 | |
| Svenska UMTS-nät AB, Sweden (joint venture) |
-120 | -156 | |
| SIA Lattelecom, Latvia | 151 | 225 | |
| OAO MegaFon, Russia | 5,070 | 4,181 | |
| Turkcell Iletisim Hizmetleri A.S., Turkey | 3,991 | 2,725 | |
| Telefos AB, Sweden | 1 | 640 | |
| Other holdings | 3 | 82 | |
| Net effect on income | 9,096 | 7,697 |
Turkcell's financials are included in TeliaSonera's reporting with a one-quarter lag. In 2007, Telefos divested its remaining subsidiary Eltel Group Oy.
The total carrying value was distributed and changed as follows.
| December 31, | ||||
|---|---|---|---|---|
| SEK in millions | 2008 | 2007 | ||
| Goodwill and similar assets on consolidation | 7,925 | 8,655 | ||
| Share of equity | 31,618 | 24,410 | ||
| Carrying value | 39,543 | 33,065 | ||
| Carrying value, opening balance | 33,065 | 25,536 | ||
| Share of net income for the year | 9,257 | 7,677 | ||
| Amortization and write-downs of fair value adjustments |
-146 | -54 | ||
| Dividends received | -1,410 | -2,684 | ||
| Acquisitions and operations acquired | 11 | 389 | ||
| Reclassifications | 248 | -314 | ||
| Exchange rate differences | -1,482 | 2,515 | ||
| Carrying value, closing balance | 39,543 | 33,065 |
The carrying value is broken down by reportable segment in Note 6 "Segment Information" and by company in Note 35 "Specification of Shareholdings and Participations." The market value of the Group's holding in the publicly quoted Turkcell was SEK 36,687 million and SEK 57,871 million as of December 31, 2008 and 2007, respectively.
Summarized information on the associated companies' and joint ventures' aggregate (100 percent) balance sheets and income statements was as follows.
Finance costs and other financial items were distributed as follows.
| December 31, or January–December |
||||
|---|---|---|---|---|
| SEK in millions | 2008 | 2007 | ||
| Non-current assets | 135,433 | 125,270 | ||
| Current assets | 56,096 | 39,976 | ||
| Provisions and long-term liabilities | 20,348 | 17,691 | ||
| Current liabilities | 23,691 | 23,508 | ||
| Net sales | 96,302 | 85,195 | ||
| Gross profit | 66,450 | 56,158 | ||
| Net income | 30,992 | 24,638 |
| January–December | ||||
|---|---|---|---|---|
| SEK in millions | 2008 | 2007 | ||
| Finance costs | ||||
| Interest expenses | -3,477 | -1,948 | ||
| Interest expenses on finance leases | -2 | -5 | ||
| Unwinding of provision discounts | -147 | -26 | ||
| Capitalized interest | 58 | 17 | ||
| Net exchange rate gains and losses | -115 | 226 | ||
| Total finance costs | -3,683 | -1,736 | ||
| Other financial items | ||||
| Interest income | 1,429 | 736 | ||
| Interest income on finance leases | 29 | 52 | ||
| Dividends from financial investments | 0 | 0 | ||
| Capital gains on financial investments available-for-sale |
5 | 49 | ||
| Capital losses on equity instruments at cost |
-13 | – | ||
| Impairment losses on venture capital investments |
-4 | -5 | ||
| Total other financial items | 1,446 | 832 | ||
| Net effect on income | -2,237 | -904 |
Interest income in 2008 includes received penalty interest of SEK 290 million related to court rulings on certain historical interconnect fees.
Details on interest expenses, net exchange rate gains and losses and interest income related to hedging activities, loan receivables and borrowings were as follows.
| January–December | ||||||
|---|---|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | |
| SEK in millions | Interest expenses | Net exchange rate gains and losses |
Interest income | |||
| Fair value hedge derivatives | -173 | -57 | 2,047 | 272 | – | – |
| Cash flow hedge derivatives | -245 | -46 | -75 | 145 | – | – |
| Derivatives held-for-trading | -2 | 97 | 3,850 | 192 | – | – |
| Held-to-maturity investments | – | – | – | – | 5 | 15 |
| Loans and receivables | – | – | -2,514 | – | 1,428 | 711 |
| Borrowings in fair value hedge relationships | -656 | -611 | -2,047 | -272 | – | – |
| Borrowings and other financial liabilities at amortized cost |
-2,396 | -1,284 | -1,376 | -111 | – | – |
| Other | -5 | -47 | – | 0 | -4 | 10 |
| Total | -3,477 | -1,948 | -115 | 226 | 1,429 | 736 |
Borrowings at amortized cost include items in cash flow hedge relationships as well as unhedged items.
In 2008 and 2007, pre-tax income was SEK 26,411 million and SEK 25,251 million, respectively. Income tax expense was distributed as follows.
| January–December | ||
|---|---|---|
| SEK in millions | 2008 | 2007 |
| Tax items brought to income | ||
| Current tax expense relating to current year | -3,083 | -5,623 |
| Underprovided or overprovided current tax expense in prior years |
-36 | -158 |
| Deferred tax expense originated or reversed in current year |
-2,926 | 88 |
| Recognition of previously unrecognized deferred taxes |
625 | 845 |
| Effect on deferred tax income (+)/expense (-) from changes in tax rates |
451 | -105 |
| Total tax expense brought to income | -4,969 | -4,953 |
| Tax items recognized directly in shareholders' equity |
||
| Current tax income | 303 | 44 |
| Deferred tax income (+)/expense (-) | 87 | -14 |
| Total tax income recognized directly in shareholders' equity |
390 | 30 |
The difference between the nominal Swedish income tax rate and the effective tax rate comprises the following components.
| January–December | ||||
|---|---|---|---|---|
| Percent | 2008 | 2007 | ||
| Swedish income tax rate | 28.0 | 28.0 | ||
| Effect of higher or lower tax rates in subsidiaries |
-2.4 | -1.7 | ||
| Withholding tax on dividends from subsidiaries, associate companies and joint ventures |
4.8 | 2.2 | ||
| Underprovided or overprovided current tax expense in prior years |
0.1 | 0.6 | ||
| Recognition of previously unrecognized tax losses |
-2.4 | -3.4 | ||
| Effect on deferred tax expense from changes in tax rates |
-1.7 | 0.4 | ||
| Income from associated companies and joint ventures |
-9.7 | -8.5 | ||
| Current year losses for which no deferred tax asset was recognized |
1.9 | 2.2 | ||
| Non-deductible expenses | 0.4 | 0.1 | ||
| Tax-exempt income | -0.2 | -0.3 | ||
| Tax rate as per the income statement | 18.8 | 19.6 | ||
| Tax recognized directly in shareholders' equity | -1.5 | -0.1 | ||
| Effective tax rate | 17.3 | 19.5 |
In December 2008, the Swedish parliament passed changes to the tax legislation, including, among others, a reduction of the Swedish corporate income tax rate from 28 percent to 26.3 percent effective January 1, 2009. This triggered a recalculation of existing deferred tax assets and liabilities in TeliaSonera's Swedish operations, resulting in a net deferred tax income of SEK 395 million in 2008. The corresponding one-off effect of other corporate income tax-rate changes enacted in 2008 (the Czech Republic, Georgia, Italy, Kazakhstan, Lithuania, the Russian Federation and the UK) was a net deferred tax income, totaling SEK 56 million.
Deferred tax assets and liabilities changed as follows.
| December 31, | ||||
|---|---|---|---|---|
| SEK in millions | 2008 | 2007 | ||
| Deferred tax assets | ||||
| Opening balance | 12,017 | 12,054 | ||
| Operations acquired | 22 | 66 | ||
| Income statement period change | -1,013 | -950 | ||
| Recognized in equity | 87 | -14 | ||
| Reclassifications | 379 | 334 | ||
| Exchange rate differences | 1,714 | 527 | ||
| Deferred tax assets, closing balance | 13,206 | 12,017 | ||
| Deferred tax liabilities | ||||
| Opening balance | 9,577 | 10,121 | ||
| Operations acquired | 464 | 774 | ||
| Operations divested | -563 | – | ||
| Income statement period change | 837 | -1,778 | ||
| Reclassifications | 353 | 431 | ||
| Exchange rate differences | 592 | 29 | ||
| Deferred tax liabilities, closing balance | 11,260 | 9,577 |
For changes in deferred tax assets and liabilities related to operations acquired in 2008, see Note 34 "Business Combinations, etc."
Temporary differences in deferred tax assets and liabilities were as follows.
| December 31, | ||||
|---|---|---|---|---|
| SEK in millions | 2008 | 2007 | ||
| Gross deferred tax assets | ||||
| Unrealized gain, associated companies | 48 | 48 | ||
| Delayed depreciation, impairment losses and fair value adjustments, other non-current assets |
6,654 | 5,782 | ||
| Delayed expenses for provisions | 655 | 255 | ||
| Doubtful current receivables | 135 | 191 | ||
| Tax loss carry-forwards | 10,151 | 9,481 | ||
| Subtotal | 17,643 | 15,757 | ||
| Valuation allowances | ||||
| Delayed depreciation, other non-current assets | -40 | -132 | ||
| Tax loss carry-forwards | -3,927 | -2,918 | ||
| Subtotal | -3,967 | -3,050 | ||
| Off-set deferred tax liabilities/assets | -470 | -690 | ||
| Total deferred tax assets | 13,206 | 12,017 | ||
| Deferred tax liabilities | ||||
| Withholding taxes and impairment losses, subsidiaries and associated companies |
2,082 | 1,322 | ||
| Accelerated depreciation and fair value adjustments, other non-current assets |
6,535 | 6,094 | ||
| Fair value adjustments, provisions | 1,521 | 653 | ||
| Delayed revenue recognition, current receivables |
34 | 52 | ||
| Profit equalization reserves | 1,558 | 2,146 | ||
| Subtotal | 11,730 | 10,267 | ||
| Off-set deferred tax assets/liabilities | -470 | -690 | ||
| Total deferred tax liabilities | 11,260 | 9,577 | ||
| Net deferred tax assets | 1,946 | 2,440 | ||
| Net increase (+)/decrease (-) in valuation allowance |
917 | -52 |
Unrecognized deferred tax assets, as reflected by the valuation allowance at December 31, 2008, are expected to expire as follows.
| Expected expiry SEK in millions |
2009 | 2010 | 2011 | 2012 | 2013 | 2014– 2026 |
Un limit ed |
Total |
|---|---|---|---|---|---|---|---|---|
| Unrecognized deferred tax assets |
3 | 6 | 405 | 13 | 61 | 2,549 | 890 | 3,927 |
Unrecognized deferred tax liabilities for undistributed earnings in subsidiaries, including estimated such income tax that is levied on dividends paid, totaled SEK 1,031 million in 2008 and SEK 963 million in 2007.
Deferred tax assets originating from tax loss carry-forwards mainly relate to Finland and Spain.
Tax losses in Finland refer mainly to impairment losses on the European 3G investments recognized by TeliaSonera Finland Oyj (formerly Sonera Oyj) in 2002 and to capital losses on shares divested in 2003 by another subsidiary within the Finnish tax group. Following a positive advance ruling by the Finnish tax authorities related to losses incurred in Telia's former mobile operations in Finland during 2001, 2002 and 2004, an additional deferred tax asset was recognized, amounting to SEK 234 million as of December 31, 2008.
Tax losses in Spain refer to the Spanish 3G mobile network operator Xfera that was acquired in 2006. Xfera is a start-up operation that has reported tax losses since its incorporation in 2000, due to annual spectrum fees invoiced by the Spanish government authorities, depreciation and write-downs of earlier investments, other pre-operating losses and additional operating losses incurred thereafter. As of December 31, 2008, Xfera had tax
The total carrying value was distributed and changed as follows.
losses and taxable temporary differences totaling SEK 10.7 billion. As is the normal case for start-up operations, management projects tax losses also during the next few years.
At the current stage of the 3G market 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 15 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, 2008, based on these projections, management has recognized a deferred tax asset of SEK 772 million after valuation allowance.
TeliaSonera's accumulated tax loss carry-forwards were SEK 36,822 million in 2008 and SEK 35,277 million in 2007. Tax loss carry-forwards as of December 31, 2008 are expected to expire as follows.
| Expected expiry SEK in millions |
2009 | 2010 | 2011 | 2012 | 2013 | 2014– 2026 |
Un limit ed |
Total |
|---|---|---|---|---|---|---|---|---|
| Tax loss carry-forwards |
20 | 26 | 1,929 15,503 3,107 11,851 | 4,386 36,822 |
Most of the Finnish tax loss carry-forwards expire in 2012.
| December 31, | |||||||
|---|---|---|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | ||||
| SEK in millions | Goodwill | Other intangible assets | |||||
| Accumulated cost | 84,847 | 71,515 | 33,553 | 26,350 | |||
| Accumulated amortization | – | – | -16,157 | -12,858 | |||
| Accumulated impairment losses | -416 | -343 | -861 | -756 | |||
| Advances | – | – | 2 | 1 | |||
| Carrying value | 84,431 | 71,172 | 16,537 | 12,737 | |||
| of which work in progress | – | – | 1,380 | 716 | |||
| Carrying value, opening balance | 71,172 | 62,638 | 12,737 | 11,534 | |||
| Investments | 6,882 | 4,653 | 4,195 | 3,332 | |||
| of which capitalized interest | – | – | 29 | 10 | |||
| Sales and disposals | – | – | -22 | -13 | |||
| Operations acquired | – | – | 112 | 248 | |||
| Operations divested | – | -1 | 0 | -1 | |||
| Grants received | – | – | -3 | – | |||
| Reclassifications | -122 | 109 | 255 | -7 | |||
| Amortization for the year | – | – | -2,450 | -2,615 | |||
| Impairment losses/reversed losses for the year | – | -10 | -95 | -212 | |||
| Advances | – | – | 1 | -2 | |||
| Exchange rate differences | 6,499 | 3,783 | 1,807 | 473 | |||
| Carrying value, closing balance | 84,431 | 71,172 | 16,537 | 12,737 |
Apart from goodwill, there are currently no intangible assets with indefinite useful lives. In the income statement, amortization of and impairment losses on other intangible assets is included in all expense line items by function as well as in line item Other operating expenses. For additional information on significant transactions in 2008, see Note 34 "Business Combinations, etc."
The total carrying value of goodwill was distributed by reportable segment as follows.
| December 31, | ||
|---|---|---|
| SEK in millions | 2008 | 2007 |
| Business area Mobility Services | 58,256 | 54,883 |
| of which Finland | 24,584 | 21,297 |
| of which Norway | 22,591 | 23,973 |
| of which Denmark | 5,427 | 4,723 |
| Business area Broadband Services | 13,548 | 12,030 |
| of which Finland | 9,814 | 8,502 |
| Business area Eurasia | 12,028 | 3,777 |
| of which Azerbaijan | 4,845 | 18 |
| of which Uzbekistan and Tajikistan | 2,818 | 3,221 |
| of which Nepal and Cambodia | 3,190 | – |
| Other operations | 599 | 482 |
| Total goodwill | 84,431 | 71,172 |
The total carrying value of other intangible assets was distributed by asset type as follows.
| December 31, | ||||
|---|---|---|---|---|
| SEK in millions | 2008 | 2007 | ||
| Trade names | 365 | 398 | ||
| Licenses | 5,091 | 3,903 | ||
| Customer relationships, interconnect and roaming agreements |
6,231 | 4,694 | ||
| Capitalized development expenses | 2,052 | 1,584 | ||
| Patents, etc. | 1,378 | 1,324 | ||
| Leaseholds, etc. | 38 | 117 | ||
| Work in progress, advances | 1,382 | 717 | ||
| Total other intangible assets | 16,537 | 12,737 |
Capitalized development expenses mainly refer to IT systems, supporting the selling and marketing, and administrative functions.
Goodwill is for impairment testing purposes allocated to cash-generating 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 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, TeliaSonera 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 5-year forecasts approved by management, which management believes reflect past experience, forecasts in industry reports, and other externally available information. Due to the start-up nature of the investments, the forecast period used for cash-generating units Mobility Services – Spain and Eurasia – Uzbekistan was 10 years.
Business area Eurasia's operations in Nepal and Cambodia, each constituting a cash-generating unit, were acquired in October 2008. The investment decision and the purchase price allocation were based on the discounted cash flow of management's projections. There have been no events after the acquisition that would cause management to significantly change the previous cash flow projections. Consequently, the original projections also form the basis for the 2008 impairment test.
The post-tax WACC rates and the terminal growth rates used to extrapolate cash flows beyond the 5-year forecasts (in Spain and Uzbekistan 10-year forecasts) varied by reportable segment and geographic area as follows.
| Baltic | Eurasian | ||||||
|---|---|---|---|---|---|---|---|
| Percent | Sweden | Finland | Norway | Denmark | countries | Spain | countries |
| Business area Mobility Services | |||||||
| WACC rates | 7.0 | 7.3 | 7.4 | 7.9 | 10.5–11.5 | 11.1 | – |
| Terminal growth rates | 1.0 | 2.0 | 2.0 | 2.0 | 2.0 | 2.0 | – |
| Business area Broadband Services | |||||||
| WACC rates | 7.0 | 7.3 | 7.4 | 7.9 | 7.4–8.7 | – | – |
| Terminal growth rates | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | – | – |
| Business area Eurasia | |||||||
| WACC rates | – | – | – | – | – | – | 11.5–18.0 |
| Terminal growth rates | – | – | – | – | – | – | 1.0–2.5 |
| Other operations | |||||||
| WACC rates | 7.4–10.0 | – | – | – | – | – | – |
| Terminal growth rates | 1.0 | – | – | – | – | – | – |
In all cases management believes the terminal growth rates to not exceed the average growth rates for markets in which TeliaSonera operates.
As of December 31, 2008, 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 unit Broadband Services – Norway, with a goodwill carrying value of SEK 1,545 million, the estimated recoverable value corresponded to the carrying value. In the impairment test for Broadband Services – Norway, the sales growth assumption was between 5–9 percent during the next 5 years. The EBITDA margin during the same period was assumed to be between 20–22 percent, and the terminal growth rate of free
cash flow after the 5-year period was assumed to be 1.0 percent. A post-tax WACC rate of 7.4 percent was used in the test.
The following table sets out to what extent each key assumption approximately must change, all else being equal, in order for the recoverable value to change by 10 percent, or by SEK 0.2 billion.
| Sales growth in the 5-year period | +1.5 percentage points |
|---|---|
| EBITDA margin in the 5-year period and beyond |
+1.4 percentage points |
| Terminal growth rate of free cash flow | +0.7 percentage points |
| Post-tax WACC rate | -0.6 percentage points |
The carrying value was distributed and changed as follows.
| December 31, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | |
| Plant and machinery | ||||||||||
| SEK in millions | Property | Mobile networks | Fixed networks | Equipment, tools and installations |
Total | |||||
| Accumulated cost | 9,048 | 7,542 | 58,333 | 47,386 | 127,983 | 119,656 | 8,592 | 7,434 | 203,956 | 182,018 |
| Accumulated depreciation | -3,831 | -3,078 | -33,630 | -28,154 | -84,314 | -77,482 | -6,026 | -5,514 | -127,801 | -114,228 |
| Accumulated impairment losses | -509 | -426 | -405 | -384 | -13,544 | -14,644 | -257 | -246 | -14,715 | -15,700 |
| Advances | – | 24 | 506 | 486 | – | 1 | – | 1 | 506 | 512 |
| Carrying value | 4,708 | 4,062 | 24,804 | 19,334 | 30,125 | 27,531 | 2,309 | 1,675 | 61,946 | 52,602 |
| of which assets under construction | – | – | 3,753 | 3,033 | 1,792 | 2,087 | – | – | 5,545 | 5,120 |
| Carrying value, opening balance | 4,062 | 4,095 | 19,334 | 16,043 | 27,531 | 26,652 | 1,675 | 1,405 | 52,602 | 48,195 |
| Investments | 415 | 155 | 6,805 | 5,895 | 5,012 | 4,914 | 905 | 709 | 13,137 | 11,673 |
| of which capitalized interest | 1 | – | 10 | 2 | 17 | 5 | 1 | – | 29 | 7 |
| Sales and disposals | -18 | -20 | -116 | -49 | -3 | -57 | -18 | -35 | -155 | -161 |
| Dismantling and restoration | – | – | 2 | 29 | 418 | 53 | – | – | 420 | 82 |
| Operations acquired | – | 59 | 125 | 68 | 326 | 355 | 83 | 55 | 534 | 537 |
| Operations divested | – | – | – | – | -2 | -46 | – | -20 | -2 | -66 |
| Grants received | – | – | – | – | -5 | – | – | – | -5 | – |
| Reclassifications | 90 | -33 | -191 | 148 | -235 | -463 | 492 | 251 | 156 | -97 |
| Depreciation for the year | -324 | -318 | -4,178 | -3,580 | -4,035 | -4,164 | -889 | -738 | -9,426 | -8,800 |
| Impairment losses/reversed losses for the year |
-11 | – | -17 | -19 | -100 | -214 | -7 | -5 | -135 | -238 |
| Advances | -24 | -4 | 20 | 385 | -1 | -2 | -1 | -9 | -6 | 370 |
| Exchange rate differences | 518 | 128 | 3,020 | 414 | 1,219 | 503 | 69 | 62 | 4,826 | 1,107 |
| Carrying value, closing balance | 4,708 | 4,062 | 24,804 | 19,334 | 30,125 | 27,531 | 2,309 | 1,675 | 61,946 | 52,602 |
TeliaSonera's real estate holdings include some 4,000 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 Group's Swedish properties have been assessed for tax purposes at the following values.
| SEK in millions | December 31, | ||
|---|---|---|---|
| 2008 | 2007 | ||
| Buildings | 308 | 289 | |
| Land and land improvements | 70 | 56 | |
| Tax-assessed value | 378 | 345 |
At the 2008 property assessment for tax purposes, a number of properties were assessed for the first time, while others had their assessments adjusted. Some tax-assessed properties were sold or disposed of in 2008.
The total carrying and fair values of other non-current assets were distributed as follows.
| December 31, | ||||
|---|---|---|---|---|
| 2008 | 2007 | |||
| SEK in millions | Carrying value | Fair value | Carrying value | Fair value |
| Equity instruments available-for-sale | 325 | 325 | 385 | 385 |
| Equity instruments held-for-trading | 76 | 76 | 51 | 51 |
| Government bonds and treasury bills held-to-maturity | 99 | 99 | 132 | 132 |
| Loans and receivables at amortized cost | 3,171 | 3,171 | 1,144 | 1,144 |
| Interest rate swaps designated as fair value hedges | – | – | 39 | 39 |
| Interest rate swaps designated as cash flow hedges | 691 | 691 | 9 | 9 |
| Cross currency interest rate swaps designated as cash flow hedges | 462 | 462 | 35 | 35 |
| Interest rate swaps and cross currency interest rate swaps held-for trading |
3,173 | 3,173 | 480 | 480 |
| Subtotal (see Categories – Note 27) | 7,997 | 7,997 | 2,275 | 2,275 |
| Finance lease receivables | 938 | 938 | 677 | 677 |
| Subtotal (see Credit risk – Note 28)/Total fair value | 8,935 | 8,935 | 2,952 | 2,952 |
| Equity instruments at cost | 61 | 59 | ||
| Deferred expenses | 190 | 353 | ||
| Total other non-current assets | 9,186 | 3,364 | ||
| of which interest-bearing | 6,866 | 2,475 | ||
| of which non-interest-bearing | 2,320 | 889 |
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 balance sheet date. As of December 31, 2008, contractual cash flows for Government bonds and treasury bills and Loans and receivables represented the following expected maturity dates.
| Expected maturity SEK in millions |
2010 | 2011 | 2012 | 2013 | Later years |
Total |
|---|---|---|---|---|---|---|
| Government bonds and treasury bills |
34 | 23 | – | 32 | 10 | 99 |
| Loans and receivables | 2,090 | 451 | 10 | 153 | 467 | 3,171 |
For more information on financial instruments by category and exposed to credit risk, see Notes 27 "Financial Assets and Liabilities by Category" and 28 "Financial Risk Management," respectively. Equity instruments are specified in Note 35 "Specification of Shareholdings and Participations." For information on leases, see Note 29 "Leasing Agreements."
After deductions for obsolescence amounting to SEK 4 million in 2008 and SEK 10 million in 2007, the total carrying value was distributed as follows.
| December 31, | |||
|---|---|---|---|
| SEK in millions | 2008 | 2007 | |
| Goods for resale | 1,171 | 952 | |
| Other inventories and expense incurred on construction contracts |
502 | 216 | |
| Total | 1,673 | 1,168 |
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 101 million in 2008 and SEK 31 million in 2007.
The total carrying value of trade and other receivables was distributed as follows.
| December 31, | |||
|---|---|---|---|
| SEK in millions | 2008 | 2007 | |
| Accounts receivable | |||
| Invoiced receivables | 14,094 | 13,771 | |
| Allowance for doubtful receivables | -968 | -729 | |
| Total accounts receivable at amortized cost | 13,126 | 13,042 | |
| Currency swaps, forward exchange contracts and currency options held-for-trading |
1,072 | 141 | |
| Loans and receivables at amortized cost | 6,089 | 5,162 | |
| Subtotal (see Categories – Note 27 and Credit risk – Note 28) |
20,287 | 18,345 | |
| Other current receivables | 1,763 | 1,283 | |
| Deferred expenses | 1,193 | 1,159 | |
| Total trade and other receivables | 23,243 | 20,787 |
For Accounts receivable and Loans and receivables, 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 balance sheet date, concentration of credit risk by geographical area and by customer segment was as follows.
| December 31, 2008 |
|---|
| 13,591 |
| 1,484 |
| 1,716 |
| 2,424 |
| 19,215 |
| Customer segment SEK in millions |
December 31, 2008 |
|---|---|
| Residential customers | 6,278 |
| Business customers | 6,325 |
| Other operators | 5,770 |
| Distributors | 842 |
| Total carrying value | 19,215 |
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 Notes 27 "Financial Assets and Liabilities by Category" and 28 "Financial Risk Management" for more information on financial instruments classified by category and exposed to credit risk, respectively.
As of the balance sheet date, ageing of Accounts receivable and Loans and receivables were as follows.
| December 31, | |||
|---|---|---|---|
| SEK in millions | Accounts receivable |
Loans and receivables |
|
| Not due | 8,504 | 4,196 | |
| Receivables past due but not impaired | |||
| Less than 30 days | 2,414 | 1,665 | |
| 30 – 180 days | 1,073 | 85 | |
| More than 180 days | 1,135 | 143 | |
| Total past due but not impaired | 4,622 | 1,893 | |
| Total carrying value | 13,126 | 6,089 |
Receivables past due as of the balance sheet date were not provided for as there had not been a 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 28 "Financial Risk Management" for information on mitigation of credit risks related to accounts receivable.
Total bad debt expenses were SEK 433 million in 2008 and SEK 448 million in 2007. Recovered accounts receivable in these years were SEK 29 million and SEK 27 million, respectively.
| December 31, | |||
|---|---|---|---|
| SEK in millions | 2008 | 2007 | |
| Opening balance | 729 | 791 | |
| Provisions for receivables impaired | 254 | 345 | |
| Receivables written-off as uncollectible | -24 | -336 | |
| Unused amounts reversed | -50 | -77 | |
| Exchange rate differences | 59 | 6 | |
| Closing balance | 968 | 729 |
The total carrying value of interest-bearing receivables was distributed as follows.
| December 31, | ||
|---|---|---|
| SEK in millions | 2008 | 2007 |
| Loans and receivables at amortized cost | 921 | 385 |
| Short-term investments with maturities over 3 months |
1,031 | 1,059 |
| of which investments held-for-trading | 50 | 95 |
| of which bonds and commercial papers held to-maturity |
564 | 358 |
| of which bank deposits at amortized cost | 417 | 606 |
| Subtotal (see Categories – Note 27) | 1,952 | 1,444 |
| Finance lease receivables | 195 | 257 |
| Total (see Credit risk – Note 28) | 2,147 | 1,701 |
The carrying values are assumed to approximate fair values as the risk of changes in value is insignificant. Refer to Notes 27 "Financial Assets and Liabilities by Category" and 28 "Financial Risk Management" for more information on financial instruments classified by category and exposed to credit risk, respectively. For information on leases, see Note 29 "Leasing Agreements."
Cash and cash equivalents were distributed as follows.
| December 31, | |||
|---|---|---|---|
| SEK in millions | 2008 | 2007 | |
| Short-term investments with maturities up to and including 3 months |
5,277 | 2,261 | |
| of which commercial papers held-to-maturity | 244 | 1,189 | |
| of which bank deposits at amortized cost | 5,033 | 1,072 | |
| Cash and bank | 6,549 | 5,541 | |
| Total (see Categories – Note 27 and Credit risk – Note 28) |
11,826 | 7,802 |
The carrying values are assumed to approximate fair values as the risk of changes in value is insignificant. Refer to Notes 27 "Financial Assets and Liabilities by Category" and 28 "Financial Risk Management" for more information on financial instruments classified by category and exposed to credit risk, respectively, and to Note 30 "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 | 14,369,463,082 | 4,490,457,213 | 3.20 |
| Issued share capital, December 31, 2008 | 14,369,463,082 | 4,490,457,213 | 3.20 |
The 2005 Annual General Meeting of shareholders decided on a share repurchase program. After executing the program, the 2006 Annual General Meeting decided to reduce the share capital by cancellation of the repurchased shares. The cancellation was accomplished on September 6, 2006.
No TeliaSonera shares are held by the company's subsidiaries.
| December 31, | ||||
|---|---|---|---|---|
| SEK in millions | 2008 | 2007 | ||
| Recycling reserves | ||||
| Fair value reserve – quoted equity | ||||
| instruments | ||||
| Opening balance | 128 | 124 | ||
| Net changes in fair value | -97 | 4 | ||
| Closing balance | 31 | 128 | ||
| Hedging reserve – cash flow hedges | ||||
| Opening balance | 0 | -35 | ||
| Net changes in fair value | -349 | -13 | ||
| Transferred to finance costs in the income statement |
18 | 62 | ||
| Tax effect | 87 | -14 | ||
| Closing balance | -244 | 0 | ||
| Foreign currency translation reserve | ||||
| Opening balance | 5,658 | -2,976 | ||
| Translation of foreign operations | 13,185 | 8,741 | ||
| Foreign operations divested | – | 7 | ||
| Hedging of foreign operations | -1,083 | -158 | ||
| Tax effect | 303 | 44 | ||
| Closing balance | 18,063 | 5,658 | ||
| Total recycling reserves, closing balance | 17,850 | 5,786 | ||
| Other reserves | ||||
| Revaluation reserve | ||||
| Opening balance | 972 | 1,138 | ||
| Transfer of amortization and depreciation for the year |
-153 | -166 | ||
| Closing balance | 819 | 972 | ||
| Inflation adjustment reserve | ||||
| Opening balance | 4,909 | 4,909 | ||
| Closing balance | 4,909 | 4,909 | ||
| Total other reserves, closing balance | 5,728 | 5,881 | ||
| Total reserves, closing balance | 23,578 | 11,667 |
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 244 million as of December 31, 2008. Future gains or losses will affect the income statement in 2010–2011, 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 4 "Significant Accounting Policies."
The inflation adjustment reserve refers to the Turkish economy, which as of January 1, 2006, from an accounting perspective was no longer considered to be hyperinflationary.
Exchange rate differences in minority interests changed as follows.
| December 31, | |||
|---|---|---|---|
| SEK in millions | 2008 | 2007 | |
| Opening balance | -266 | -426 | |
| Translation of foreign operations | 1,675 | 160 | |
| Closing balance | 1,409 | -266 |
Minority interests in equity were distributed as follows (including intermediate holding companies, where applicable).
| December 31, | ||||
|---|---|---|---|---|
| SEK in millions | 2008 | 2007 | ||
| DLG-debitel I/S, Denmark | 66 | 60 | ||
| TEO LT, AB, Lithuania | 1,319 | 1,178 | ||
| Latvijas Mobilais Telefons SIA, Latvia | 864 | 764 | ||
| AS Eesti Telekom, Estonia | 2,203 | 2,175 | ||
| Fintur Holdings B.V., the Netherlands | 5,615 | 5,356 | ||
| TeliaSonera UTA Holding B.V., the Netherlands |
987 | 233 | ||
| Other subsidiaries | 7 | 17 | ||
| Total minority interests in equity | 11,061 | 9,783 |
| January–December | ||
|---|---|---|
| 2008 | 2007 | |
| Net income attributable to shareholders of the parent company (SEK million) |
19,011 | 17,674 |
| Average number of outstanding shares, basic and diluted (thousands) |
4,490,457 | 4,490,457 |
| Earnings per outstanding share, basic and diluted (SEK) |
4.23 | 3.94 |
| Ordinary cash dividend (for 2008 as proposed by the Board) |
||
| – Per share (SEK) | 1.80 | 1.80 |
| – Total (SEK million) | 8,083 | 8,083 |
| Extraordinary cash dividend | ||
| – Per share (SEK) | – | 2.20 |
| – Total (SEK million) | – | 9,879 |
TeliaSonera's open-market financing (excluding debt derivatives) entails the following programs.
| December 31, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2008 | 2007 | |||||||||
| Interest rate type | ||||||||||
| Limit | Utilized | Floating | Fixed | Average maturity |
Limit | Utilized | ||||
| Program | Characteristics | Limit currency |
(in millions) (years) |
(in millions) | ||||||
| TeliaSonera AB | Euro Medium Term Note (EMTN) |
Uncommitted International Long-term |
EUR | 7,000 | 4,652 | 1,497 | 3,155 | 4.1 | 7,000 | 4,067 |
| TeliaSonera AB | Euro Commercial Paper (ECP) |
Uncommitted International Short-term |
EUR | 1,000 | – | – | – | – | 1,000 | – |
| TeliaSonera AB | Flexible Term Note (FTN) |
Uncommitted Swedish do mestic Short-term and long-term |
SEK | 12,000 | 4,591 | – | 4,591 | 0.3 | 12,000 | 992 |
| TeliaSonera Finland Oyj |
EMTN | Uncommitted International Long-term Dormant |
EUR | 3,000 | 203 | – | 203 | 0.3 | 3,000 | 203 |
The TeliaSonera Finland Oyj EMTN program will not be used for any new financing or refinancing. The intention is that TeliaSonera AB will continue to refinance the outstanding TeliaSonera Finland debt.
Long-term and short-term borrowings were distributed as follows.
| December 31, | ||||||
|---|---|---|---|---|---|---|
| 2008 | 2007 | |||||
| SEK in millions | Carrying value | Fair value | Carrying value | Fair value | ||
| Long-term borrowings | ||||||
| Open-market financing program borrowings | 49,834 | 51,723 | 39,993 | 40,263 | ||
| of which at amortized cost | 24,563 | 25,700 | 20,343 | 20,544 | ||
| of which in fair value hedge relationships | 16,623 | 16,623 | 13,856 | 13,856 | ||
| of which hedging net investments | 8,648 | 9,400 | 5,794 | 5,863 | ||
| Other borrowings at amortized cost | 3,894 | 3,894 | 699 | 699 | ||
| Interest rate swaps at fair value | 375 | 375 | 188 | 188 | ||
| of which designated as hedging instruments | 288 | 288 | 188 | 188 | ||
| of which held-for-trading | 87 | 87 | – | – | ||
| Cross currency interest rate swaps at fair value | 20 | 20 | 77 | 77 | ||
| of which designated as hedging instruments | 20 | 20 | – | – | ||
| of which held-for-trading | – | – | 77 | 77 | ||
| Subtotal (see Categories – Note 27) | 54,123 | 56,012 | 40,957 | 41,227 | ||
| Finance lease agreements | 55 | 55 | 73 | 73 | ||
| Total long-term borrowings | 54,178 | 56,067 | 41,030 | 41,300 | ||
| Short-term borrowings | ||||||
| Utilized bank overdraft facilities at amortized cost | 7 | 7 | 5 | 5 | ||
| Open-market financing program borrowings | 9,550 | 9,590 | 1,444 | 1,440 | ||
| of which at amortized cost | 9,550 | 9,590 | 1,444 | 1,440 | ||
| Other borrowings at amortized cost | 2,030 | 2,030 | 1,045 | 1,045 | ||
| Subtotal (see Categories – Note 27) | 11,587 | 11,627 | 2,494 | 2,490 | ||
| Finance lease agreements | 34 | 34 | 55 | 55 | ||
| Total short-term borrowings | 11,621 | 11,661 | 2,549 | 2,545 |
Bank overdraft facilities had a total limit of SEK 1,204 million in 2008 and SEK 1,163 million in 2007.
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. TeliaSonera AB's portfolio of interest rate swaps and cross currency interest rate
swaps as of December 31, 2008 and 2007 had a nominal value of approximately SEK 38,500 million and SEK 37,600 million, respectively. As of December 31, 2008, the portfolio included interest rate swaps with a nominal value of SEK 900 million related to the overall management of the funding portfolio structure and hence not included in hedge relationships.
Average interest rates, including relevant hedges, on outstanding long-term and short-term borrowings as per the balance sheet date was as follows.
| December 31, | |||
|---|---|---|---|
| Percent | 2008 | 2007 | |
| TeliaSonera AB (SEK) | |||
| Long-term borrowings | 4.91 | 4.89 | |
| Short-term borrowings | 5.30 | 4.58 | |
| TeliaSonera Finland Oyj (EUR) | |||
| Long-term borrowings | 4.18 | 4.63 | |
| Short-term borrowings | 4.63 | 3.86 |
Total assets (provisions) for pension obligations were as follows.
| December 31, | |||
|---|---|---|---|
| SEK in millions | 2008 | 2007 | |
| Present value of pension obligations | 22,814 | 20,807 | |
| Fair value of plan assets | -18,068 | -19,265 | |
| Pension obligations less plan assets | 4,746 | 1,542 | |
| Unrecognized past service cost | -19 | -2 | |
| Unrecognized actuarial gains (+)/losses (-) | -5,035 | -1,311 | |
| Net assets (-)/provisions (+) for pension obligations |
-308 | 229 | |
| of which recognized as provisions | 22 | 416 | |
| of which recognized as assets | -330 | -187 |
For comments, see section "Pension obligation risk" in Note 28 "Financial Risk Management."
Total pension expenses were distributed as follows.
| January–December | ||||
|---|---|---|---|---|
| SEK in millions | 2008 | 2007 | ||
| Current service cost | 441 | 461 | ||
| Interest cost | 925 | 814 | ||
| Expected return on plan assets | -996 | -865 | ||
| Amortization of past service cost | -14 | -13 | ||
| Amortization of actuarial gains (-)/losses (+) | 52 | 83 | ||
| Pension expenses, defined benefit pension plans |
408 | 480 | ||
| Settlement of pension obligations | 3 | – | ||
| Termination benefits (excl. premiums and pension-related social charges) |
408 | 182 | ||
| Pension premiums, defined benefit/defined contribution pension plans and pay-as-you-go systems |
690 | 490 | ||
| Pension-related social charges and taxes, other pension expenses |
206 | 309 | ||
| Less termination benefits (incl. premiums and pension-related social charges) reported as restructuring charges |
-543 | -240 | ||
| Total pension expenses | 1,172 | 1,221 | ||
| of which pension premiums paid to the ITP pension plan |
92 | 105 |
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.
| December 31, | |||
|---|---|---|---|
| Percentages, except remaining working life |
2008 | 2007 | |
| Discount rate | 4.2 | 4.6 | |
| Expected rate of compensation increase | 3.2 | 3.2 | |
| Employee turnover rate | 2.9 | 2.9 | |
| Average expected remaining working life, years | 14.4 | 14.4 | |
| Increase in income base amount (only Swedish Group units) |
2.8 | 2.8 | |
| Annual adjustments to pensions | 2.1 | 2.1 | |
| Expected return on plan assets | 4.7 | 5.1 |
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.
| December 31, | ||
|---|---|---|
| SEK in millions, except percentages | 2008 | 2007 |
| Present value of pension obligations | ||
| Opening balance | 20,807 | 21,495 |
| Current service cost | 441 | 461 |
| Interest cost | 925 | 814 |
| Benefits paid | -1,181 | -1,143 |
| Benefits paid, early retirement | -23 | -48 |
| Termination benefits | 408 | 182 |
| Reclassifications | – | 435 |
| Operations acquired/divested | -22 | -25 |
| Settlement of pension obligations | -3 | – |
| Actuarial gains (-)/losses (+) | 1,104 | -1,489 |
| Exchange rate differences | 358 | 125 |
| Closing balance, present value of pension | 22,814 | 20,807 |
| obligations | ||
| Experience adjustments arising on plan liabilities (%) |
-0.2 | 0.6 |
| Effects of changes in actuarial assumptions (%) | -4.6 | 6.5 |
| Fair value of plan assets | ||
| Opening balance | 19,265 | 18,977 |
| Expected return on plan assets | 996 | 865 |
| Contribution to pension funds | 645 | 573 |
| Payment from pension funds | -536 | -982 |
| Operations acquired/divested | -23 | -24 |
| Actuarial gains (+)/losses (-) | -2,633 | -272 |
| Exchange rate differences | 354 | 128 |
| Closing balance, plan assets | 18,068 | 19,265 |
| Experience adjustments arising on plan assets (%) | -13.6 | -1.4 |
| Return on plan assets | ||
| Expected return on plan assets | 996 | 865 |
| Actuarial gains (+)/losses (-) | -2,633 | -272 |
| Actual return on plan assets | -1,637 | 593 |
| Actual return on plan assets (%) | -8.5 | 3.1 |
| Net assets/provisions for pension obligations | ||
| Opening balance | 229 | -82 |
| Pension expenses, defined benefit pension plans | 408 | 480 |
| Benefits paid | -1,181 | -1,143 |
| Benefits paid, early retirement | -23 | -48 |
| Contribution to pension funds | -645 | -573 |
| Payment from pension funds | 536 | 982 |
| Termination benefits | 408 | 182 |
| Operations acquired/divested, net | -3 | – |
| Reclassifications | – | 435 |
| Exchange rate differences | -37 | -4 |
| Closing balance, net assets (-)/provisions (+) for pension obligations |
-308 | 229 |
| Unrecognized actuarial gains/losses | ||
| Opening balance, actuarial gains (+)/losses (-) | -1,311 | -2,611 |
| Actuarial gains (-)/losses (+) to be recognized | 52 | 83 |
| Actuarial gains (-)/losses (+), acquired/divested operations |
2 | – |
| Actuarial gains (+)/losses (-), pension obligations | -1,104 | 1,489 |
| Actuarial gains (+)/losses (-), plan assets | -2,633 | -272 |
| Exchange rate differences | -41 | 0 |
| Closing balance, unrecognized actuarial gains (+)/losses (-) |
-5,035 | -1,311 |
| Operations divested | ||
| Decrease in pension obligations | -22 | -25 |
| Decrease in plan assets | 23 | 24 |
| Change in unrecognized actuarial gains (-)/losses (+) | 2 | – |
| Net position, operations divested | 3 | -1 |
As of the balance sheet date, plan assets were allocated as follows.
| 2008 | 2007 | ||||
|---|---|---|---|---|---|
| Asset category | SEK in millions |
Per cent |
SEK in millions |
Per cent |
|
| Fixed income instruments, liquidity | 12,598 | 69.7 | 12,269 | 63.7 | |
| Shares and other investments | 5,470 | 30.3 | 6,996 | 36.3 | |
| Total | 18,068 | 100.0 | 19,265 | 100.0 | |
| of which shares in TeliaSonera AB | 68 | 0.4 | 88 | 0.5 |
For companies in Sweden, the total 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 in the balance sheet. To pension funds outside Sweden, TeliaSonera expects to contribute SEK 154 million in 2009.
Changes in other provisions were as follows.
| December 31, 2008 | |||||||
|---|---|---|---|---|---|---|---|
| SEK in millions | Restructuring provisions |
Contingent consideration, etc. |
Warranty provisions |
Asset retirement obligations |
Other provisions |
Total | |
| Opening balance | 1,058 | 3,206 | 1,021 | 779 | 828 | 6,892 | |
| of which financial liabilities at: | |||||||
| – fair value through profit and loss | – | 1,884 | – | – | – | 1,884 | |
| – amortized cost | – | – | 85 | – | – | 85 | |
| Provisions for the period | 1,473 | 4,986 | 82 | 477 | 482 | 7,500 | |
| Utilized provisions | -398 | – | -52 | -53 | -155 | -658 | |
| Reversals of provisions | -478 | – | -28 | – | -92 | -598 | |
| Reclassifications | -543 | – | 71 | – | -63 | -535 | |
| Timing and interest-rate effects | 28 | -107 | 19 | 17 | 11 | -32 | |
| Exchange rate differences | 59 | 1,015 | 341 | 75 | 102 | 1,592 | |
| Closing balance | 1,199 | 9,100 | 1,454 | 1,295 | 1,113 | 14,161 | |
| of which non-current portion | 633 | 9,100 | 1,209 | 1,289 | 1,081 | 13,312 | |
| of which current portion | 566 | – | 245 | 6 | 32 | 849 | |
| of which financial liabilities at (see Categories – Note 27): |
|||||||
| – fair value through profit and loss | – | 7,900 | – | – | – | 7,900 | |
| – amortized cost | – | – | 12 | – | – | 12 |
For Warranty provisions, the carrying value equals fair value as provisions are discounted to present value. Refer to Note 27 "Financial Assets and Liabilities by Category" for more information on financial instruments classified by category. As of December 31, 2008, contractual undiscounted cash flows for the financial liabilities represented the following expected maturities.
Expected maturities in 2010 and 2011 mainly relate to certain minority put options. In this case, expected maturity refers to the earliest point in time, based on the agreement terms, at which TeliaSonera estimates that the minority shareholder might call for option exercise. Timing of the actual exercise, if any, is dependent on counterpart decisions. For additional information, see section "Contingent consideration, etc." below.
| Expected maturity SEK in millions |
2009 | 2010 | 2011 | 2012– 2013 |
Later years |
Total | Carrying value |
|---|---|---|---|---|---|---|---|
| Financial liabilities |
4 | 5,765 | 2,438 | – | 7 | 8,214 | 7,912 |
Changes in restructuring provisions were as follows.
| December 31, 2008 or January–December 2008 | ||||||
|---|---|---|---|---|---|---|
| International carrier operations | Other | |||||
| SEK in millions | Danish operations |
Strategic refocusing |
Post-merger integration |
OPEX savings programs |
restructuring provisions |
Total |
| Carrying value, opening balance | 83 | 589 | 168 | 218 | – | 1,058 |
| Provisions for the period | 8 | 3 | – | 1,461 | 1 | 1,473 |
| Utilized provisions (cash outflow) | -38 | -22 | -21 | -316 | -1 | -398 |
| Reversals of provisions | -4 | -417 | -4 | -53 | – | -478 |
| Reclassification to pension liability | – | – | – | -543 | – | -543 |
| Timing and interest-rate effects | – | 21 | 7 | – | – | 28 |
| Exchange rate differences | 8 | 27 | 18 | 6 | – | 59 |
| Carrying value, closing balance | 57 | 201 | 168 | 773 | 0 | 1,199 |
| of which current portion | – | 19 | 49 | 498 | – | 566 |
| Cash outflow during the year | -38 | -22 | -21 | -316 | -1 | -398 |
| Cash outflow in prior years | -748 | -2,215 | -207 | -1,314 | -70 | -4,554 |
| Total cash outflow | -786 | -2,237 | -228 | -1,630 | -71 | -4,952 |
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.
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, 2008 mainly relates to the phase-out of longterm lease contracts and is expected to be fully used by 2020.
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 Telia International Carrier's 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. Telia International Carrier's sales, administration and customer care resources were also centralized and the original workforce of approximately 800 persons was reduced by more than 50 percent, mainly in 2002 and 2003. In 2008, SEK 360 million related to an onerous lease and maintenance contract for a fiber network in France was reversed due to better than expected success in negotiating the contract termination. The remaining provision as of December 31, 2008 mainly relates to the phase-out of long-term lease contracts and is expected to be fully used by 2019.
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, 2008 mainly relates to the phase-out of long-term lease contracts and is expected to be fully used by 2016.
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 includes efficiency measures implemented in 2008 and 2009 which, among other things, are expected to result in a reduction of approximately 2,900 employees, of whom about two-thirds in Sweden and one-third in Finland. The remaining provision as of December 31, 2008 is expected to be fully used by 2012.
Contingent consideration, etc. relates to Xfera Móviles S.A. (Xfera), TeliaSonera Uzbek Telecom Holding B.V. (Uzbek Holding) and Azertel Telekomünikasyon Yatirim ve Dis Ticaret A.S. (Azertel).
For Xfera, which was acquired in 2006, the closing balance comprises in total SEK 1,200 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 minority shareholders 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 11.1 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 Uzbek Holding, the parent company of the mobile operator OOO Coscom in Uzbekistan, the closing balance comprises SEK 2,139 million for a put option 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 gives the existing minority shareholder the right to sell the 26 percent interest in Uzbek Holding to TeliaSonera after December 31, 2009. The exercise price is dependent on the number of active subscribers in Coscom and on whether the option is exercised in 2010 or after December 31, 2010. In the latter case, 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 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 17.0 percent and a terminal growth rate of free cash flow of 2.0 percent. The provision may vary as a result of changes in Uzbek Holding'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 5,761 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 minority shareholder 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 5-year business plan with a post-tax discount rate (WACC) of 12.6 percent and a terminal growth rate of free cash flow of 1.0 percent. The provision may vary as a result of changes in Azertel's estimated fair value and the timing of the option exercise.
Fair value estimates for the contingent consideration and the minority put option liabilities are based on TeliaSonera's long-term business plans for such business units. In 2008, during the financial market turmoil, the global equity market values have decreased significantly and, if applied to TeliaSonera's business units through a peer group multiple valuation, would in many cases be below the fair values derived from TeliaSonera's own long-term 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 equity market values in the current financial turmoil.
Warranty provisions include SEK 997 million related to a guarantee commitment on behalf of the minority held Ipse 2000 S.p.A. The provision represents TeliaSonera's share of the present value of Ipse's remaining UMTS license fees payable to the Italian government in 2006-2010. In early 2006, the Italian government revoked the license as Ipse had not met the license requirements. Ipse's position was that no further license fees should be payable, but TeliaSonera continued to carry a full provision since the outcome of Ipse's claim against the government was considered uncertain. TeliaSonera also gave cash collateral for the remaining license payments (see Note 30 "Contingencies, Other Contractual Obligations and Litigation"). Following a recent unfavorable court decision
and new legislation in Italy, Ipse has decided to pay installments due for 2006-2008. The payment was made in the beginning of January 2009.
Asset retirement obligations and Other provisions
Asset retirement obligations mainly refer to dismantling and restoration of mobile and fixed network sites and to handling hazardous waste such as worn-out telephone poles impregnated with arsenic. Other provisions comprise provisions for damages and court cases, for loyalty programs, for payroll taxes on future pension payments and for onerous and other loss-making contracts, and insurance provisions. 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.
| December 31, | ||
|---|---|---|
| SEK millions | 2008 | 2007 |
| Long-term trade payables at amortized cost | 175 | 223 |
| Danish 3G license fee liability at amortized cost | 193 | 244 |
| Azercell share purchase consideration at amortized cost |
541 | – |
| Other liabilities at amortized cost | 261 | – |
| Liabilities at amortized cost (see Categories – Note 27) |
1,170 | 467 |
| Prepaid operating lease agreements | 449 | 800 |
| Other liabilities | 946 | 1,099 |
| Total other long-term liabilities | 2,565 | 2,366 |
For liabilities at amortized cost, the carrying value equals fair value as the amounts are discounted to present value using market interest rates. Refer to Note 27 "Financial Assets and Liabilities by Category" for more information on financial instruments classified by category and to Note 28 "Financial Risk Management" on management of liquidity risks. As of December 31, 2008, contractual undiscounted cash flows for liabilities at amortized cost represented the following expected maturities.
| Expected maturity SEK in millions |
2010 2011 2012 2013 2014 | Later years Total |
Carry ing value |
|||||
|---|---|---|---|---|---|---|---|---|
| Liabilities at amortized cost |
414 | 396 | 20 | 16 | 16 | 330 1,192 | 1,170 |
For information on leases, see Note 29 "Leasing Agreements." Other liabilities mainly comprise customer advances for broadband build-out. Further included was deferred "day 1 gains" which changed as follows.
| December 31, | ||
|---|---|---|
| SEK millions | 2008 | 2007 |
| Opening balance | 209 | – |
| Additional gains | 56 | 209 |
| Recognized in the income statement | -13 | – |
| Exchange rate differences | 38 | – |
| Closing balance | 290 | 209 |
| of which current portion | 98 | 16 |
Trade payables and other current liabilities were distributed as follows.
| December 31, | ||||
|---|---|---|---|---|
| SEK millions | 2008 | 2007 | ||
| Accounts payable at amortized cost | 9,401 | 9,600 | ||
| Currency swaps, forward exchange contracts and currency options held-for-trading |
338 | 1 | ||
| Current liabilities at amortized cost | 5,603 | 4,855 | ||
| Subtotal (see Categories – Note 27) | 15,342 | 14,456 | ||
| Other current liabilities | 7,629 | 5,895 | ||
| Deferred income | 4,806 | 4,252 | ||
| Total trade payables and other current liabilities |
27,777 | 24,603 |
For Accounts payable and Current liabilities, the carrying value equals fair value as the impact of discounting is insignificant. The remaining contractual maturity is mainly less than 3 months. Refer to Note 27 "Financial Assets and Liabilities by Category" for more information on financial instruments classified by category and to Note 28 "Financial Risk Management" on management of liquidity risks.
The main components of Current liabilities are accrued payables to suppliers and accrued interconnect and roaming charges, while Other current liabilities mainly entail value-added 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 25 "Other Long-term Liabilities").
The table below sets forth carrying values of classes of financial assets and liabilities distributed by category. Excluded are financial instruments which are discussed in Note 12 "Associated Companies and Joint Ventures," Note 23 "Provisions for Pensions and Employment Contracts" and Note 29 "Leasing Agreements," respectively.
| December 31, | |||
|---|---|---|---|
| SEK in millions | Note | 2008 | 2007 |
| Financial assets | |||
| Derivatives designated as hedging instruments |
17 | 1,153 | 83 |
| Financial assets at fair value through profit and loss |
4,371 | 767 | |
| of which derivatives not designated as hedging instruments |
17, 19 | 4,245 | 621 |
| of which held-for-trading investments |
17, 20 | 126 | 146 |
| Held-to-maturity investments | 17, 20 | 907 | 1,679 |
| Loans and receivables | 17, 19, 20 | 35,306 | 26,952 |
| Available-for-sale financial assets | 17 | 325 | 385 |
| Total financial assets by category | 42,062 | 29,866 | |
| Financial liabilities | |||
| Derivatives designated as hedging instruments |
22 | 308 | 188 |
| Financial liabilities at fair value through profit and loss |
8,325 | 1,962 | |
| of which derivatives not designated as hedging instruments |
22, 26 | 425 | 78 |
| of which liabilities designated upon initial recognition |
24 | 7,900 | 1,884 |
| Borrowings in fair value hedge relationships |
22 | 16,623 | 13,856 |
| Borrowings hedging net investments | 22 | 8,648 | 5,794 |
| Financial liabilities measured at amortized cost |
22, 24, 25, 26 |
56,281 | 38,543 |
| Total financial liabilities by category |
90,185 | 60,343 |
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 Corporate Finance and Treasury (CFT) unit of TeliaSonera AB, which functions as TeliaSonera's internal bank and is responsible for the management of financing and financial risks.
CFT is responsible for Group-wide financial risk management including netting and pooling of capital requirements and payment flows. CFT also seeks to optimize the cost of financial risk management, which in certain cases may mean that e.g. an inter company 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, CFT has a clearly defined deviation mandate which currently is capped at the equivalent of a nominal SEK +/-200 million, expressed as the long/short SEK counter-value amount that may be exposed to currency fluctuations. As of December 31, 2008, the deviation mandate was utilized by less than SEK 50 million.
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 Finland Oyj's borrowings are denominated in EUR.
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 40 percent of net income attributable to shareholders 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 the counterpart, with a maximum exposure equal to the carrying amount of these instruments (detailed in the respective note), as follows.
| December 31, | |||
|---|---|---|---|
| SEK in millions | Note | 2008 | 2007 |
| Other non-current assets | 17 | 8,935 | 2,952 |
| Trade and other receivables | 19 | 20,287 | 18,345 |
| Interest-bearing receivables | 20 | 2,147 | 1,701 |
| Cash and cash equivalents | 20 | 11,826 | 7,802 |
| Total | 43,195 | 30,800 |
TeliaSonera AB accepts only creditworthy counterparts when entering into financial transactions such as interest rate swaps, cross currency swaps and other transactions in derivatives. 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 December 31, 2008 and 2007, the aggregate exposure to counterparts in derivatives was SEK 4,475 million and SEK 532 million, respectively, calculated as a net claim on each counterpart.
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 group-internal 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 0.4 percent in 2008 and 0.5 percent in 2007.
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 10 business days, the exposure per bank is limited to SEK 1,000 million.
Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities. Telia-Sonera's policy is to have a strong liquidity position in terms of available cash and/or unutilized committed credit facilities. As of December 31, 2008, the surplus liquidity (short-term investments and cash and bank) amounted to SEK 12,858 million. TeliaSonera AB's surplus liquidity is typically deposited in banks or invested in short-term interest-bearing instruments with good credit ratings. At year-end, TeliaSonera AB had no such investments in interestbearing securities with maturities exceeding 3 months. The average yield on bank deposits and short-term investments as per the balance sheet date was 3.4 percent in 2008 and 4.3 percent in 2007.
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.
| December 31, | ||||||
|---|---|---|---|---|---|---|
| In millions of the respective currency | 2008 | 2007 | ||||
| Group entity | Type | Characteristics | Final maturity | Currency | Limit | Limit |
| TeliaSonera AB | Revolving credit facility | Committed, syndicated | December 2011 |
EUR | 1,000 | 1,000 |
| TeliaSonera AB | Revolving credit facility | Committed, bilateral | September 2010 |
SEK | 2,000 | 2,000 |
| TeliaSonera AB | Revolving credit facility | Committed, bilateral | April 2013 | SEK | 1,400 | – |
| TeliaSonera AB and subsidiaries | Bank overdraft facilities | Committed, bilateral | – | SEK (various) | 1,204 | 1,163 |
As of December 31, 2008, SEK 1,407 million of the total facilities was utilized (no utilization as of year-end 2007). In total, the available unutilized amount under committed bank credit facilities and overdraft facilities was SEK 14,133 million and SEK 12,636 million as of December 31, 2008 and 2007, respectively.
As of December 31, 2008, contractual undiscounted cash flows for the Group's interest-bearing borrowings and non-interestbearing 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 on the balance sheet day. 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. Corresponding information on non-interest-bearing liabilities are presented in Notes 25 "Other Long-term Liabilities" and 26 "Trade Payables and Other Current Liabilities."
| Expected maturity | |||||||
|---|---|---|---|---|---|---|---|
| SEK in millions | 2009 | 2010 | 2011 | 2012 | 2013 | Later years | Total |
| Utilized bank overdraft facilities | 7 | – | – | – | – | – | 7 |
| Open-market financing program borrowings | 4,592 | 8,949 | 6,129 | 8,433 | 7,646 | 25,990 | 61,739 |
| Other borrowings | 6,263 | 121 | 1,576 | 519 | 377 | – | 8,856 |
| Finance lease agreements | 34 | 24 | 14 | 6 | 4 | 7 | 89 |
| Cross currency interest rate swaps and interest rate swaps |
|||||||
| Payables | 1,508 | 3,625 | 2,442 | 6,156 | 4,470 | 8,794 | 26,995 |
| Receivables | -1,678 | -4,165 | -2,656 | -7,254 | -5,201 | -10,538 | -31,492 |
| Currency swaps and forward exchange contracts |
|||||||
| Payables | 36,528 | – | – | – | – | – | 36,528 |
| Receivables | -36,386 | – | – | – | – | – | -36,386 |
| Total, net | 10,868 | 8,554 | 7,505 | 7,860 | 7,296 | 24,253 | 66,336 |
Currency risk is the risk that fluctuations in foreign exchange rates will adversely affect items in the Group's income statement, balance sheet 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). Conversion exposure relates to equity in foreign subsidiaries, associated companies or joint ventures which is denominated in foreign currencies as well as goodwill and fair value adjustments arising from acquisitions.
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 are also used from time to time. TeliaSonera does not normally hedge its conversion exposure.
As of December 31, 2008, TeliaSonera's portfolio of cross currency interest rate swap contracts represented the following currencies and expected maturities. Amounts indicated represent carrying values.
| Expected maturity SEK in millions |
2009 | 2010 | 2011 | 2012 | 2013 | Later years |
Total |
|---|---|---|---|---|---|---|---|
| Cross currency interest rate swaps, received | |||||||
| Buy EUR | – | 2,848 | – | 6,150 | 4,444 | 8,563 | 22,005 |
| Buy USD | – | – | 1,287 | – | – | 592 | 1,879 |
| Buy JPY | – | 262 | – | – | – | 262 | |
| Total, received | – | 2,848 | 1,549 | 6,150 | 4,444 | 9,155 | 24,146 |
| Cross currency interest rate swaps, paid | |||||||
| Total, paid | – | -2,348 | -1,302 | -5,248 | -3,762 | -7,813 | -20,473 |
| Net position | – | 500 | 247 | 902 | 682 | 1,342 | 3,673 |
As of December 31, 2008, 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 | Later | ||
|---|---|---|---|
| SEK in millions | 2009 | years | Total |
| Sell USD | 1,418 | – | 1,418 |
| Sell EUR | 611 | – | 611 |
| Sell DKK | 210 | – | 210 |
| Sell NOK | 91 | – | 91 |
| Sell GBP | 56 | – | 56 |
| Sell other currencies | 98 | – | 98 |
| Sell total | 2,484 | – | 2,484 |
| Buy USD | -1,485 | – | -1,485 |
| Buy EUR | -563 | – | -563 |
| Buy DKK | -195 | – | -195 |
| Buy NOK | -93 | – | -93 |
| Buy GBP | -59 | – | -59 |
| Buy other currencies | -96 | – | -96 |
| Buy total | -2,491 | – | -2,491 |
| Net position | -7 | – | -7 |
TeliaSonera's conversion exposure was distributed as follows.
| December 31, | |||||||
|---|---|---|---|---|---|---|---|
| 2008 | 2007 | ||||||
| Amount in SEK |
Amount in SEK |
||||||
| Currency | million | Percent | million | Percent | |||
| EUR | 81,321 | 39.4 | 67,281 | 39.5 | |||
| of which hedged through borrowings |
6,149 | 3.0 | 4,045 | 2.4 | |||
| NOK | 32,142 | 15.6 | 32,555 | 19.1 | |||
| TRY | 26,704 | 12.9 | 20,258 | 11.9 | |||
| RUB | 16,946 | 8.2 | 9,456 | 5.6 | |||
| DKK | 15,700 | 7.6 | 12,178 | 7.2 | |||
| LTL | 8,098 | 3.9 | 8,317 | 4.9 | |||
| EEK | 5,438 | 2.6 | 4,963 | 2.9 | |||
| USD | 4,984 | 2.4 | 4,073 | 2.4 | |||
| LVL | 4,132 | 2.0 | 3,759 | 2.2 | |||
| NPR | 2,747 | 1.3 | – | – | |||
| KZT | 2,416 | 1.2 | 1,741 | 1.0 | |||
| UZS | 1,267 | 0.6 | 1,628 | 1.0 | |||
| AZN | 1,205 | 0.6 | 1,194 | 0.7 | |||
| TJS | 1,020 | 0.5 | 839 | 0.5 | |||
| GEL | 898 | 0.4 | 364 | 0.2 | |||
| GBP | 847 | 0.4 | 947 | 0.6 | |||
| Other currencies | 817 | 0.4 | 575 | 0.3 | |||
| Total | 206,682 | 100.0 | 170,128 | 100.0 |
In most cases, TeliaSonera 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. 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 post-tax income would be approximately SEK 130 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 2008, and provided that no hedging measures were taken and not including any potential impact on post-tax income due to currency translation of other income statement items. Applying the same assumptions, the positive impact on post-tax income would be approximately SEK 120 million on a fullyear basis, should the Euro, the Danish krone and the Baltic currencies weaken by 10 percentage points against the Swedish krona and all other transaction currencies.
The positive impact on Group equity would be approximately SEK 20.1 billion if the Swedish krona weakened by 10 percentage points against all conversion exposure currencies, based on the exposure as of December 31, 2008 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 income statement items. TeliaSonera's conversion exposure is expected to continue to grow due to ongoing expansion of the international business operations.
The TeliaSonera Group's sources of funds are primarily shareholders' equity, cash flows from operating activities, and borrowing. 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 cashflows. 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 4 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, 2008, 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.
| Expected maturity | |||||||
|---|---|---|---|---|---|---|---|
| SEK in millions | 2009 | 2010 | 2011 | 2012 | 2013 | Later years | Total |
| Interest received | |||||||
| Fixed interest rate | – | 1,740 | 1,767 | 5,692 | – | 10,325 | 19,524 |
| Floating interest rate | – | 1,780 | 668 | 6,150 | 5,082 | 11,655 | 25,335 |
| Total received | – | 3,520 | 2,435 | 11,842 | 5,082 | 21,980 | 44,859 |
| Interest paid | |||||||
| Fixed interest rate | – | -2,387 | -1,269 | – | -729 | -2,789 | -7,174 |
| Floating interest rate | – | -671 | -904 | -10,839 | -3,762 | -17,916 | -34,092 |
| Total paid | – | -3,058 | -2,173 | -10,839 | -4,491 | -20,705 | -41,266 |
| Net position | – | 462 | 262 | 1,003 | 591 | 1,275 | 3,593 |
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. Hedge ineffectiveness related to outstanding cash flow hedges was immaterial and recognized in earnings during the year. Net changes in fair value recognized in shareholders' equity are separately reported in a hedging reserve (see section "Reserves" of Note 21 "Equity and Earnings per Share"). In 2008, 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, 2008, TeliaSonera AB and TeliaSonera Finland Oyj had interest-bearing debt of SEK 59.3 billion with duration of interest of approximately 2.0 years, including derivatives. The volume of loans exposed to changes in interest rates over the next 12-month period was at the same date SEK 33.9 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, 2009 at a one percentage point higher interest rate than the prevailing rate as per December 31, 2008, and remained at that new level during 12 months, the post-tax interest expense would increase by some SEK 250 million. Fair value of the loan portfolio would change by approximately SEK 1,100 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 2008.
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.
TeliaSonera AB enjoys a strong credit rating with the rating agencies Moody's and Standard & Poor's. In 2008, Standard & Poor's confirmed its assigned credit rating on TeliaSonera AB at Afor long-term borrowings and A-2 for short-term borrowings, with a "Stable" outlook. Moody's credit rating on TeliaSonera AB remained unchanged at A-3 for long-term borrowings and P-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 6 percent of the Group's total borrowing as of
December 31, 2008. The open-market financing programs typically provide a cost-effective and flexible alternative to bank financing.
As of December 31, 2008, the TeliaSonera Group had pension obligations which net present value amounted to SEK 22,814 million (see Note 23 "Provisions for Pensions and Employment Contracts"). To secure these obligations, the Group has pension funds, with plan assets of SEK 18,068 million based on market values as of December 31, 2008. The pension funds' assets are used as prime funding source for the pension obligations, and consisted of approximately 70 percent fixed income instruments and approximately 30 percent shares and other investments at year-end 2008. The expected average net return on the pension funds' plan assets is 4.7 percent annually. The portion of the pension obligations not covered by plan assets is recognized in the balance sheet, adjusted for unrecognized actuarial gains and losses, and unrecognized past service cost.
In 2008, accumulated actuarial losses increased from SEK 1,311 million to SEK 5,035 million. The actual net return on plan assets was a negative 8.5 percent (positive 3.1 percent in 2007), mainly due to falling prices on equity instruments. In addition, lower discount rates increased the present value of pension obligations.
As of December 31, 2008, the strategic asset allocation decided by the board of the Swedish pension fund, which represents approximately 85 percent of total plan assets, was 60 percent fixed income, 32 percent equities and 8 percent other investments. Other investments include primarily hedge funds and private equity. Out of the total strategic assets, 40 percent are domestic index (inflation) linked government bonds and 20 percent refers to other domestic fixed income assets with low credit risk. Out of the equity holdings, domestic equities represent 10 percentage points and global equities 22 percentage points. The actual allocation may fluctuate from the strategic allocation in a range of +/-10 percent between fixed income and 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 3.9 billion, should the weighted average discount rate decrease by one percentage point from the 4.2 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 (including index-linked bonds) as of December 31, 2008, 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 1.0 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 balance sheet date was as follows.
| December 31, | |||
|---|---|---|---|
| SEK millions | 2008 | 2007 | |
| Cost | 623 | 665 | |
| Less accumulated depreciation | -491 | -477 | |
| Net carrying value of finance lease agreements |
132 | 188 |
In 2008 and 2007, depreciation and impairment losses totaled SEK 88 million and SEK 84 million, respectively. Leasing fees paid in these years totaled SEK 63 million and SEK 82 million, respectively.
As of December 31, 2008, future minimum leasing fees and their present values as per finance lease agreements that could not be canceled in advance and were longer than one year in duration were as follows.
| Expected maturity SEK in millions |
2009 | 2010 | 2011 | 2012 | 2013 | Later years |
Total |
|---|---|---|---|---|---|---|---|
| Future minimum leasing fees |
45 | 30 | 17 | 7 | 5 | 10 | 114 |
| Present value of future minimum lease payments |
43 | 28 | 15 | 6 | 4 | 8 | 104 |
As of the balance sheet date, the present value of future minimum leasing fees under non-cancelable finance lease agreements was as follows.
| December 31, | |||
|---|---|---|---|
| SEK millions | 2008 | 2007 | |
| Total future minimum leasing fees | 114 | 141 | |
| Less interest charges | -10 | -13 | |
| Present value of future minimum leasing fees |
104 | 128 |
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, 2008 that could not be canceled in advance and were in excess of one year were as follows.
| Expected maturity SEK in millions |
2009 | 2010 | 2011 | 2012 | 2013 | Later years |
Total |
|---|---|---|---|---|---|---|---|
| Future minimum leasing fees |
1,889 | 1,634 1,221 1,016 | 889 | 1,994 | 8,643 | ||
| Minimum sublease payments |
23 | 18 | 10 | 5 | 2 | 0 | 58 |
In 2008 and 2007, total rent and leasing fees paid were SEK 2,592 million and SEK 2,678 million, respectively. In these years, revenue for subleased items totaled SEK 23 million and SEK 27 million, respectively.
At the end of 2008, office space and technical site leases covered approximately 786,000 square meters, including approximately 5,000 square meters of office space for TeliaSonera's principal executive offices (enlarged by 700 square meters in early 2009), located at Sturegatan 1 in Stockholm, Sweden. Apart from certain short-term leases, leasing terms range mainly between 3 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, Denmark and Estonia comprises financing of products related to TeliaSonera's product offerings. The term of the contract stock is approximately 13 quarters. The term of new contracts signed in 2008 was 12 quarters. Of all contracts, 77 percent carry a fixed interest rate and 23 percent a floating interest rate. Most contracts include renewal options. In Finland, Telia-Sonera 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 carries a fixed interest rate.
As of the balance sheet date, the present value of future minimum lease payment receivables under non-cancelable finance lease agreements was as follows.
| December 31, | |||
|---|---|---|---|
| SEK millions | 2008 | 2007 | |
| Gross investment in finance lease contracts | 1,344 | 1,125 | |
| Less unearned finance revenues | -210 | -188 | |
| Net investment in finance lease contracts | 1,134 | 937 | |
| Less: Unguaranteed residual values of leased properties for the benefit of the lessor |
-1 | -3 | |
| Present value of future minimum lease payment receivables |
1,133 | 934 |
As of December 31, 2008, 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 |
2009 | 2010 | 2011 | 2012 | 2013 | Later years |
Total |
|---|---|---|---|---|---|---|---|
| Gross investment | 322 | 229 | 158 | 75 | 57 | 503 | 1,344 |
| Present value of future minimum lease payment receivables |
307 | 208 | 137 | 61 | 45 | 375 | 1,133 |
As of December 31, 2008 and 2007, the reserve for doubtful receivables regarding minimum lease payments totaled SEK 8 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 to the international carrier business and includes some 20 agreements with other international operators and 88 other contracts. Contract periods range between 10 and 25 years, with an average term of 20 years.
The carrying value of the leased assets as of the balance sheet date was as follows.
| December 31, | |||
|---|---|---|---|
| SEK millions | 2008 | 2007 | |
| Cost | 4,013 | 3,689 | |
| Less accumulated depreciation | -2,596 | -2,211 | |
| Less accumulated impairment losses | -300 | -300 | |
| Gross carrying value | 1,117 | 1,178 | |
| Plus prepaid sales costs | 0 | 2 | |
| Less prepaid lease payments | -449 | -800 | |
| Net value of operating lease agreements | 668 | 380 |
Depreciation and impairment losses totaled SEK 286 million in 2008 and SEK 346 million in 2007.
Future minimum lease payment receivables under operating lease agreements in effect as of December 31, 2008 that could not be canceled in advance and were in excess of one year were as follows.
| Expected maturity SEK in millions |
2009 | 2010 | 2011 | 2012 | 2013 | Later years |
Total |
|---|---|---|---|---|---|---|---|
| Future minimum lease payments |
311 | 132 | 77 | 39 | 19 | 19 | 597 |
As of the balance sheet date, TeliaSonera had no contingent assets, while guarantees reported as contingent liabilities were distributed as follows.
| December 31, | |||
|---|---|---|---|
| SEK millions | 2008 | 2007 | |
| Credit guarantee on behalf of Svenska UMTS nät AB |
2,021 | 1,838 | |
| Credit guarantees on behalf of other associated companies |
– | 13 | |
| Other credit and performance guarantees, etc. | 39 | 61 | |
| Guarantees for pension obligations | 243 | 234 | |
| Total guarantees | 2,303 | 2,146 |
As of December 31, 2008, total guarantees represented the following expected maturities.
| Expected maturity SEK in millions |
2009 | 2010 | 2011 | 2012– 2013 |
Later years |
Total |
|---|---|---|---|---|---|---|
| Guarantees | 39 | 496 | 1,525 | – | 243 | 2,303 |
Some loan covenants agreed limit the scope for divesting or pledging certain assets. Some of TeliaSonera AB's more recent financing arrangements include change-of-control provisions which under certain conditions allow the lenders to call back the arrangement before scheduled maturity. Conditions required 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 "noninvestment grade" level.
For all guarantees, except the credit guarantee on behalf of Svenska UMTS-nät AB, stated amounts equal the maximum potential amount of 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 totaling SEK 4,800 million, TeliaSonera and Tele2, the other shareholder of Svenska UMTS-nät, have each severally but not jointly issued guarantees of a maximum of SEK 2,400 million to the lenders and granted pledges of their shares in Svenska UMTS-nät. The indebtedness under the credit facility may become due on an accelerated basis, under certain circumstances, including if either TeliaSonera or Tele2 ceases to hold, directly or indirectly, 50 percent of the company, unless the lenders provide their advance consent. TeliaSonera is not contractually required to provide any further capital contributions to or guarantees in favor of Svenska UMTS-nät. As of December 31, 2008, Svenska UMTS-nät had, under the credit facility, borrowed SEK 4,041 million, of which TeliaSonera guarantees 50 percent, or SEK 2,021 million.
TeliaSonera has entered into a cross-border finance leaseleaseback agreement for mobile network equipment in Finland, with a zero carrying value as of December 31, 2008. The arrangement was entered into in 1998 by TeliaSonera Finland Oyj (formerly Sonera Oyj) and is valid for 15 years, with an early termination option after 11 years. TeliaSonera has determined that in substance the transactions are not leases as defined in IAS 17, and the amounts are shown net on the balance sheet. Both the lease receivables and the lease obligations were settled at the inception of the agreement and TeliaSonera received a net cash consideration of USD 11 million (EUR 9 million) which was recorded in the balance sheet as an advance payment received and is recognized in financial income over the lease term. In 2008, some amendments to the structure were initiated whereby TeliaSonera provided additional security to certain stakeholders under the lease agreements. TeliaSonera has defeased all obligations under the agreement but retains the ownership of the equipment. However, during the agreement period, TeliaSonera can not dispose of the equipment but may make replacements.
OAO Telecominvest (TCI), 26.1 percent owned by TeliaSonera, owns 31.3 percent of the shares in TeliaSonera's associated company OAO MegaFon. TeliaSonera has signed agreements with TCI and a TCI shareholder in order to secure TeliaSonera's ownership in MegaFon, including an agreement under which TCI has pledged 8.2 percent of the shares in MegaFon to TeliaSonera. TCI has pledged its remaining shares in MegaFon, corresponding to a 23.1 percent ownership in MegaFon, in order to guarantee a loan in favor of AF Telecom Holding which is one of the shareholders of TCI.
As of the balance sheet date, collateral pledged was distributed as follows.
| December 31, | ||
|---|---|---|
| SEK millions | 2008 | 2007 |
| For long-term borrowings: Shares in Svenska UMTS-nät AB |
84 | 204 |
| For pension obligations: Real estate mortgages | 23 | 18 |
| For pension obligations: Current receivables | 46 | 40 |
| For warranty provisions: Blocked funds in bank accounts |
1,158 | 960 |
| For other provisions: Bonds and short-term investments |
140 | 132 |
| For bank overdraft facilities: Chattel mortgages | 18 | 16 |
| For operating leases: Real estate mortgages | 3 | 4 |
| For operating leases: Blocked funds in bank accounts |
1 | 1 |
| For deposits from customers: Blocked funds in bank accounts |
119 | 109 |
| For investments in associated companies: Blocked funds in bank accounts |
37 | – |
| For court proceedings: Blocked funds in bank accounts |
225 | – |
| Total collateral pledged | 1,854 | 1,484 |
As of December 31, 2008, TeliaSonera had recognized all of its commitments on behalf of Ipse 2000 S.p.A. in the balance sheet as warranty provisions. Ipse's UMTS license payments to the Italian government have been secured by bank guarantees. According to an agreement with the bank, Ipse and its shareholders, including TeliaSonera, have given cash collateral for the remaining license payments from 2006 to 2010. TeliaSonera's part of the cash collateral amounts to SEK 1,147 million (EUR 105 million). Of that, EUR 62 million was paid in January 2009 (see Note 24 "Other Provisions" for additional information).
In addition, as of December 31, 2008, shares in Applifone Co. Ltd. and all non-current assets in Applifone were pledged as collateral for borrowings totaling SEK 136 million (USD 18 million) and future customer payments to Spice Nepal Pvt. Ltd. were pledged as collateral for borrowings totaling SEK 144 million (USD 19 million). All loans were repaid in February 2009 and the pledges have been discontinued.
As of December 31, 2008, unrecognized contractual obligations regarding future acquisitions (or equivalent) of non-current assets represented the following expected maturities.
| Expected maturity SEK in millions |
2009 | 2010 | Later years |
Total |
|---|---|---|---|---|
| Intangible assets | 112 | – | – | 112 |
| Property, plant and equipment |
1,695 | 28 | – | 1,723 |
| Other holdings of securities | 8 | – | – | 8 |
| Total | 1,815 | 28 | – | 1,843 |
Most of the obligations with respect to property, plant and equipment refer to contracted build-out of TeliaSonera's mobile networks in Sweden, Finland and Spain as well as fixed network in Sweden.
TeliaSonera's Spanish subsidiary Xfera 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 2009 is set to SEK 297 million (EUR 27 million).
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 regulatory matters. TeliaSonera is also involved in administrative proceedings relating principally 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.
The administrative courts in Sweden have ruled that TeliaSonera shall reimburse Tele2 for all traffic transferred by TeliaSonera to Tele2's mobile network, while TeliaSonera is entitled to be reimbursed by the originating operators who have transferred traffic on TeliaSonera's network. In connection with the proceedings above, Tele2 brought an action in the Swedish civil courts against Telia-Sonera claiming currently SEK 846 million and accrued interest for interconnect fees for the period September 1998–January 2004. TeliaSonera has paid parts of the sum claimed and has recognized provisions for the remaining exposure that management believes to be sufficient.
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 Telia-Sonera at the Stockholm District Court claiming that TeliaSonera has abused its dominant position. The Authority demands a fee of SEK 144 million. TeliaSonera's position is that it has not engaged in any prohibited pricing activities. Following the Competition Authority's lawsuit, Tele2 has on April 1, 2005 and Spray Network on June 29, 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 and Telmig, former shareholders of the Brazilian mobile operator Tess, relating to such shareholders' disposal of their investments 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 abovementioned 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.
| January–December | ||||
|---|---|---|---|---|
| SEK millions | 2008 | 2007 | ||
| Cash receipts from customers | 103,143 | 97,276 | ||
| Cash paid to employees and suppliers | -71,793 | -67,403 | ||
| Cash flow generated from operations | 31,350 | 29,873 | ||
| Dividends received | 1,410 | 2,684 | ||
| Interest received | 787 | 571 | ||
| Interest paid | -2,569 | -1,457 | ||
| Income taxes paid | -3,892 | -5,142 | ||
| Cash flow from operating activities | 27,086 | 26,529 |
In 2008 and 2007, obligations regarding future dismantling and restoration of technical sites entailed non-cash investments of SEK 443 million and SEK 82 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 noncash exchanges of SEK 141 million in 2008 and SEK 47 million in 2007.
The TeliaSonera Group is continually restructured through the acquisition and divestiture of subsidiaries and lines of business as well as associated companies, joint ventures and companies outside the Group. The fair value of assets acquired and liabilities assumed in subsidiaries and the total cash flow from acquisitions were as follows.
| January–December | ||||
|---|---|---|---|---|
| SEK millions | 2008 | 2007 | ||
| Intangible assets | 5,132 | 4,346 | ||
| Property, plant and equipment | 464 | 622 | ||
| Financial assets, accounts receivable, inventories etc. |
268 | 1,183 | ||
| Cash and cash equivalents | 105 | 292 | ||
| Equity adjustments related to transactions prior to the business combination |
8 | – | ||
| Minority interests | -478 | 65 | ||
| Provisions | -408 | -762 | ||
| Non-current liabilities | -294 | -598 | ||
| Current liabilities | -612 | -678 | ||
| Total purchase consideration | 4,185 | 4,470 | ||
| Less repayment of certain borrowings | 40 | 419 | ||
| Less purchase consideration paid prior to the business combination |
-75 | – | ||
| Less cash and cash equivalents in acquired group companies |
-105 | -292 | ||
| Net cash outflow from acquired group companies |
4,045 | 4,597 | ||
| Purchase consideration for other acquisitions | 34 | – | ||
| Total cash outflow from acquisitions | 4,079 | 4,597 |
See Note 34 "Business Combinations, etc." for more information on significant transactions in 2008.
The fair value of assets divested and liabilities transferred in subsidiaries and the total cash flow from divestitures were as follows.
| January–December | |||
|---|---|---|---|
| SEK millions | 2008 | 2007 | |
| Financial assets, accounts receivable, inventories etc. |
6 | – | |
| Assets held-for-sale | 1 | 1 | |
| Liabilities related to assets held-for-sale | -1 | -1 | |
| Total sales consideration | 6 | 0 | |
| Less cash and cash equivalents in divested group companies |
– | – | |
| Net cash inflow from divested group companies |
6 | 0 | |
| Sales consideration for other divestitures | 26 | 116 | |
| Total cash inflow from divestitures | 32 | 116 |
Acquired operations in 2008 added 1,116 employees, of which in Nepal 416, in Norway 412 and in Cambodia 172. In the existing operations, efficiency measures in Sweden and Finland offset recruitments mainly in Eurasia to handle the growth in customer
base, resulting in a net decrease of the number of employees by 237. Hence, the total change during 2008 was an increase by 879 employees to 32,171 at year-end (31,292 at year-end 2007).
| January–December | ||||
|---|---|---|---|---|
| 2008 | 2007 | |||
| Country | Total (number) |
of whom men (%) |
Total (number) |
of whom men (%) |
| Sweden | 10,152 | 52.1 | 10,002 | 54.2 |
| Finland | 5,258 | 59.9 | 5,697 | 59.0 |
| Norway | 1,245 | 67.9 | 945 | 69.7 |
| Denmark | 1,736 | 65.5 | 1,559 | 66.6 |
| Lithuania | 3,694 | 51.6 | 3,672 | 52.1 |
| Latvia | 1,064 | 47.6 | 1,010 | 57.1 |
| Estonia | 2,310 | 58.8 | 2,322 | 56.8 |
| Spain | 79 | 70.9 | 72 | 65.3 |
| Kazakhstan | 1,483 | 40.6 | 1,278 | 45.9 |
| Azerbaijan | 622 | 43.1 | 613 | 46.3 |
| Uzbekistan | 806 | 64.0 | 358 | 64.8 |
| Tajikistan | 605 | 64.8 | 255 | 49.4 |
| Georgia | 275 | 49.1 | 227 | 49.3 |
| Moldova | 313 | 47.0 | 293 | 45.1 |
| Nepal | 92 | 54.0 | – | – |
| Cambodia | 44 | 67.6 | – | – |
| Russian Federation | 56 | 62.5 | 60 | 63.3 |
| United Kingdom | 45 | 64.4 | 51 | 74.5 |
| Other countries | 158 | 73.0 | 147 | 72.8 |
| Total | 30,037 | 55.9 | 28,561 | 56.0 |
In total, operations in 2008 and 2007 were conducted in 32 and 28 countries, respectively.
presidents and other members of executive management teams at the corporate level, business area level and company level.
The share of female and male Senior executives was as follows. Senior executives include ordinary members of boards of directors,
| Percent | December 31, | |||||
|---|---|---|---|---|---|---|
| 2008 | 2007 | |||||
| Boards of directors |
Other Senior executives |
Boards of directors |
Other Senior executives |
|||
| Women | 19.2 | 32.1 | 22.9 | 23.4 | ||
| Men | 80.8 | 67.9 | 77.1 | 76.6 | ||
| 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.
| January–December | |||
|---|---|---|---|
| SEK millions | 2008 | 2007 | |
| Salaries and other remuneration | 11,011 | 9,632 | |
| Social security expenses | |||
| Employer's social security contributions | 2,134 | 1,971 | |
| Pension expenses | 1,172 | 1,221 | |
| Total social security expenses | 3,306 | 3,192 | |
| Capitalized work by employees | -360 | -208 | |
| Other personnel expenses | 1,099 | 861 | |
| Total personnel expenses recognized by nature |
15,056 | 13,477 |
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.
| January–December | ||||
|---|---|---|---|---|
| 2008 2007 |
||||
| SEK in millions | Senior executives (of which variable pay) |
Other employees |
Senior executives (of which variable pay) |
Other employees |
| Salaries and other remuneration | 155 (27) | 10,856 | 179 (30) | 9,453 |
Pension expenses for all Senior executives totaled SEK 25 million in 2008 and SEK 36 million in 2007.
As resolved by the 2008 Annual General Meeting of shareholders in TeliaSonera AB, annual remuneration is paid to the members of the Board of Directors in the amount of SEK 1,000,000 (2007 AGM: SEK 900,000) to the chairman and SEK 425,000 (SEK 400,000) to each of the other directors, elected by the Annual General Meeting. In addition, annual remuneration is paid to the chairman of the Board's Audit Committee in the amount of SEK 150,000 and SEK 100,000 to each of the other members of the Audit Committee. Additional annual remuneration is also paid to the chairman of the Board's Remuneration Committee in the amount of SEK 40,000 and SEK 20,000 to each of the other members of the Remuneration Committee. 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.
Remuneration to the Chief Executive Officer (CEO), the Executive Vice President (EVP) and other members of the Leadership Team consists of base salary, annual variable pay, certain taxable benefits and pension benefits. As of December 31, 2008, TeliaSonera had no share-related incentive program. "Other members of the Leadership Team" refers to the 7 individuals who are directly reporting to the CEO and which, along with the CEO and the EVP, constituted the TeliaSonera Leadership Team on December 31, 2008.
Annual variable pay to the CEO, EVP and to the other members of the Leadership Team is capped at 50 percent of the base salary. Variable pay is based on the financial performance of the Group, financial performance in each officer's area of responsibility and individual performance objectives.
Pension benefits and other benefits to the CEO, the EVP and other members of the Leadership Team as described above form part of each individual's total remuneration package.
| SEK | Board remuneration/ Base salary |
Variable pay |
Other remuneration |
Other benefits |
Pension expense |
Total remuneration and benefits |
Capital value of pension commitment |
|---|---|---|---|---|---|---|---|
| Board of Directors | |||||||
| Tom von Weymarn, chairman | 1,090,000 | – | – | – | – | 1,090,000 | – |
| Maija-Liisa Friman | 493,750 | – | – | – | – | 493,750 | – |
| Conny Karlsson | 458,750 | – | – | – | – | 458,750 | – |
| Lars G Nordström | 438,750 | – | – | – | – | 438,750 | – |
| Timo Peltola | 438,750 | – | – | – | – | 438,750 | – |
| Jon Risfelt | 518,750 | – | – | – | – | 518,750 | – |
| Caroline Sundewall | 568,750 | – | – | – | – | 568,750 | – |
| Leadership Team | |||||||
| Lars Nyberg, CEO | 8,160,000 | 3,100,800 | – | 147,394 | 8,356,200 | 19,764,394 | – |
| Per-Arne Blomquist, EVP | 1,533,340 | 766,667 | – | 166,001 | 582,733 | 3,048,741 | 158,847 |
| Other members of the Leadership Team (7 individuals) |
17,593,685 | 6,436,949 | 646,929 | 2,725,517 | 6,128,149 | 33,531,229 | 32,744,285 |
| Former CEOs, EVPs | |||||||
| Anders Igel | – | – | – | – | 664,683 | 664,683 | 44,243,695 |
| Marianne Nivert | – | – | – | – | – | – | 35,237,011 |
| Jan-Åke Kark | – | – | – | – | – | – | 35,284,107 |
| Stig-Arne Larsson | – | – | – | – | – | – | 25,483,109 |
| Lars Berg | – | – | – | – | – | – | 20,962,033 |
| Tony Hagström | – | – | – | – | – | – | 8,329,443 |
| Kim Ignatius | 2,420,831 | 677,833 | 462,313 | 93,159 | 1,269,035 | 4,923,171 | 10,514,054 |
| Total | 33,715,356 | 10,982,249 | 1,109,242 | 3,132,071 | 17,000,800 | 65,939,718 | 212,956,584 |
Comments on the table:
sated by way of an annual fixed amount, which is included in the total amount of Other benefits. The compensation will be discontinued if and when a potential award from a long term variable pay scheme is introduced.
Pension expense refers to the expense that affected earnings for the year. See further disclosures concerning the terms and conditions of pension benefits below.
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. As from July 2006, the defined benefit executive scheme is 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 a base-salary related contribution 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 48,000 for 2008. The second part is a fixed annual contribution of SEK 6,000,000. For the EVP, the pension agreement is the same as for the CEO apart from the fixed contribution. For the EVP, there is instead a 10 percent additional contribution of the base salary. The contributions into the plan are vesting immediately. The normal retirement age is 65, although the Company may request the CEO to enter into early retirement not earlier than from age 60 and the CEO may enter into early retirement on his own request not earlier than from age 60. Contributions to the pension scheme will cease at retirement or earlier if leaving the company for any other reason.
Other members of the Leadership Team have individual pension arrangements. Four members are covered by defined benefit schemes and three members are covered by defined contribution schemes. Two of the members covered by defined benefit schemes have a retirement age of 62 and 60, respectively. The retirement age for the remaining five members is 65. One member is covered by the Finnish statutory pension arrangement TyEL.
The defined benefit executive scheme for those two members with a retirement age lower than 65 is providing 70 percent of pensionable salary until age 65. For all members covered by the defined benefit executive scheme (not including TyEL), the old age provision from age 65 life-long is according to the ITP plan Section 2 with an additional benefit of 32.5 percent on pensionable salaries above 20 income base amounts for two of the members and 32.5 percent on pensionable salary above 30 income base amounts for one member. The pensionable salary includes base salary and variable pay for those employed prior to July 1, 2002. For those employed after July 1, 2002, only the base salary is pensionable.
The ITP Section 2 provides 10 percent of pensionable salary up to 7.5 income base amounts, 65 percent of such salary between 7.5 and 20 income base amounts and 32.5 percent of such salary between 20 and 30 income base amounts. Salaries above 30 income base amounts are not pensionable. The benefits under the plan are vested.
The defined contribution executive scheme is providing basesalary related contributions of 24.5 percent of the base salary up to 7.5 income base amounts and 50 percent of such salary above 7.5 income base amounts for two of the members. One member has contributions according to the ITP plan Section 1 of 4.5 percent on the salary up to 7.5 income base amounts and 30 percent of such salary above 7.5 income base amounts based on both base salary and variable pay. This member has also an additional contribution corresponding to 15 percent of the base salary. All contributions to the schemes are vesting immediately.
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 before the CEO has turned the age of 60, the CEO is entitled to a severance pay in the amount of two annual base salaries to be paid in 24 equal monthly installments. 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. However, the CEO is entitled to a severance pay in the event of change of control in TeliaSonera, if he gives notice of termination within one month from the change of ownership. In addition, if the CEO gives notice of termination for this reason before September 3, 2009, he is entitled to a one-off contribution of SEK 6,000,000 to his pension plan by the end of the termination period.
Termination of employment in relation to the EVP and the other members of the Leadership 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. However, in the event of change of control in TeliaSonera, the EVP is entitled to a severance pay, should he give notice of termination within 3 months from the change of ownership.
Other members of the Leadership Team are entitled to compensation if a change of control should occur. If a buyer purchases shares in TeliaSonera and reaches not less than a 51 percent ownership and if a member continues his or her employment for more than 30 days from the change of ownership and has not given notice of resignation, compensation equivalent to 12 months base salary will be paid.
Applying the remuneration policy adopted at the Annual General Meeting 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 the Leadership Team are approved by the Remuneration Committee, based on the CEO's recommendation.
The following remuneration was paid to auditors and accounting 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 paid 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 accounting 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 re-elected for a 3-year term at the 2008 Annual General Meeting.
| January–December | |||
|---|---|---|---|
| SEK in millions | 2008 | 2007 | |
| PwC | |||
| Audits | 46 | 37 | |
| Audit-related services | 2 | 6 | |
| Tax services | 0 | 0 | |
| All other services | 1 | 10 | |
| Total PwC | 49 | 53 | |
| Ernst &Young (E&Y) | |||
| Audits, audit-related services | – | 1 | |
| Tax services | 1 | 1 | |
| All other services | 7 | 2 | |
| Total E&Y | 8 | 4 | |
| KPMG | |||
| Audits, audit-related services | – | 2 | |
| Tax services | 5 | 4 | |
| All other services | 2 | 2 | |
| Total KPMG | 7 | 8 | |
| Other accounting firms | |||
| Audits | 2 | 0 | |
| Audit-related services, tax services and all other services |
5 | 5 | |
| Total other accounting firms | 7 | 5 | |
| Total | 71 | 70 |
In addition, fees for accounting firm services capitalized as transaction costs in business combinations and similar transactions totaled SEK 5 million in 2008 (other non-audit services performed by KPMG amounting to SEK 1 million and by Other accounting firms amounting to SEK 4 million) and SEK 3 million in 2007 (other nonaudit services performed by Other accounting firms).
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.
Description of and reasons for the acquisition
TeliaSonera on October 1, 2008, took a further step in executing its strategy to expand into new high-growth emerging markets by acquiring 51 percent of the shares and votes in TeliaSonera Asia Holding B.V. (Asia Holding), which owns controlling interests in:
Nepal and Cambodia have growing economies. Mobile penetration in Nepal, with a population of 28.4 million, is approximately 13 percent, while mobile penetration in Cambodia, with a population of 14.6 million, is approximately 21 percent. Goodwill is explained by expected increases in subscription numbers, a strong market position in Nepal, and synergies from subsequent restructuring of the operations. The results of the Asia Holding operations were included in the consolidated financial statements as of October 1, 2008.
The acquired businesses impacted consolidated net sales and net income, including the effects of fair value adjustments, as follows.
| SEK in millions | Net sales | Net income |
|---|---|---|
| October 1–December 31, 2008 | 168 | 16 |
The following table sets forth the TeliaSonera Group pro forma net sales, net income and earnings per share, including the effects of fair value adjustments, had the acquisition taken place at January 1, 2008.
| SEK in millions, except per share data |
January–December 2008 | |||
|---|---|---|---|---|
| TeliaSonera Group |
Asia Holding |
TeliaSonera Group pro forma |
||
| Net sales | 103,585 | 398 | 103,983 | |
| Net income | 21,442 | -14 | 21,428 | |
| Basic and diluted earnings per share (SEK) |
4.23 | 4.23 |
| SEK in millions | |
|---|---|
| Cost of combination | |
| Cash purchase consideration | 3,328 |
| Transaction-related direct expenses | 54 |
| Total cost of combination | 3,382 |
| Less fair value of net assets acquired (as specified below) | -663 |
| Goodwill (allocated to business area Eurasia) | 2,719 |
The total costs 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.
The cash-flow effects were as follows.
| SEK in millions | |
|---|---|
| Total cost of the combination paid in cash | 3,382 |
| Less acquired cash and cash equivalents | -56 |
| Net cash outflow from the combination | 3,326 |
Carrying values and fair values of assets acquired and liabilities assumed were as follows.
| SEK in millions | Carrying value |
Fair value adjustments |
Fair value |
|---|---|---|---|
| Goodwill | 5,227 | -5,227 | – |
| Licenses | 664 | – | 664 |
| Interconnect agreements | 881 | – | 881 |
| Customer relationships | 158 | – | 158 |
| Mobile networks | 427 | – | 427 |
| Financial non-current assets | 9 | – | 9 |
| Inventories, receivables, other current assets |
108 | – | 108 |
| Cash and cash equivalents | 56 | – | 56 |
| Total assets acquired | 7,530 | -5,227 | 2,303 |
| Minority interests | -18 | -637 | -655 |
| Deferred income tax liabilities | -398 | – | -398 |
| Other long-term liabilities | -189 | – | -189 |
| Short-term liabilities | -398 | – | -398 |
| Total liabilities assumed | -1,003 | -637 | -1,640 |
| Total fair value of net assets acquired |
6,527 | -5,864 | 663 |
There were no purchased in-process research and development assets acquired, nor any contingent liabilities assumed. For information on collateral pledged arising from the acquisition, see section "Collateral pledged" in Note 30 "Contingencies, Other Contractual Obligations and Litigation."
For a number of minor business combinations in 2008, the aggregate cost of combination was SEK 437 million (of which SEK 75 million paid prior to the business combination) and the net cash outflow SEK 353 million. Goodwill totaled SEK 450 million, of which SEK 335 million was allocated to business area Mobility Services, SEK 11 million to business area Broadband Services and SEK 104 million to reportable segment Other operations. The acquired businesses impacted consolidated net sales and net income, including the effects of fair value adjustments, by SEK 348 million and SEK -20 million, respectively.
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.
In the third quarter of 2008, TeliaSonera finalized the purchase price allocation for MCT Corp., the U.S. company with shareholdings in mobile operators in Uzbekistan, Tajikistan and Afghanistan that was acquired in July 2007. A few adjustments were made and the net effect was a decrease in goodwill by SEK 193 million, primarily referring to higher net debt and lower deferred income tax liabilities.
Relating to TeliaSonera's operations in Azerbaijan, TeliaSonera in 2008 granted the largest minority shareholder a put option. 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 shareholder the right to sell its 42 percent holding at fair value to TeliaSonera. TeliaSonera accounted for the present value of the estimated option redemption amount as a provision (see section "Contingent consideration, etc." in Note 24 "Other Provisions" for additional information) and derecognized the minority interest, which increased goodwill by SEK 3,608 million. Any future changes in the estimated redemption amount will be recognized in the income statement, while no minority interest will be recognized.
| Equity participation in consolidated accounts |
Carrying value in each parent company |
||||||
|---|---|---|---|---|---|---|---|
| Company, | Participation | Number of | 2008 | 2007 | 2008 | 2007 | |
| Corp. Reg. No., registered office | (%) | shares | SEK in millions | ||||
| Parent company holdings | |||||||
| Swedish companies | |||||||
| Overseas Telecom AB, 556528-9138, Stockholm | 65 | 1,180,575 | 325 | 321 | 198 | 198 | |
| Lokomo Systems AB, 556580-3326, Stockholm | 44 | 734,241 | 1 | 1 | 0 | 0 | |
| Telefos AB, 556523-6865, Stockholm | 26 | 2,560,439 | 1 | 0 | 0 | 0 | |
| SNPAC Swedish Number Portability Administrative Centre AB, 556595-2925, Stockholm |
20 | 400 | 4 | 4 | 1 | 1 | |
| Other operating, dormant and divested companies | 0 | 0 | 0 | 0 | |||
| Companies outside Sweden | |||||||
| OAO Telecominvest, St. Petersburg | 26 | 4,262,165 | 3,423 | 2,446 | 700 | 700 | |
| Other operating, dormant and divested companies | 0 | 59 | 0 | 75 | |||
| Total parent company | 899 | 974 | |||||
| Subsidiaries' holdings | |||||||
| Swedish companies | |||||||
| Svenska UMTS-nät AB, 556606-7996, Stockholm (joint venture) | 50 | 501,000 | 84 | 204 | 500 | 500 | |
| SmartTrust AB, 556179-5161, Stockholm | 30 | 70,991,460 | 22 | 0 | 18 | 0 | |
| Other operating, dormant and divested companies | 0 | 0 | 0 | 0 | |||
| Companies outside Sweden | |||||||
| AS Sertifitseerimiskeskus, 10747013, Tallinn | 50 | 16 | 6 | 7 | 6 | 18 | |
| SIA Lattelecom, 00030527, Riga | 49 | 71,581,000 | 964 | 876 | 1,650 | 1,428 | |
| Kiinteistö Oy Pietarsaaren Isokatu 8, 0181832-2, Pietarsaari | 48 | 12,851 | 3 | 0 | 7 | 8 | |
| Turkcell Holding A.S., 430991-378573, Istanbul | 47 | 214,871,670 | 7,084 | 6,974 | 2,136 | 1,850 | |
| Turkcell Iletisim Hizmetleri A.S., 304844-252426, Istanbul | 13 | 292,485,209 | 14,101 | 12,720 | 1,371 | 1,188 | |
| OAO MegaFon, 7812014560, Moscow | 36 | 2,207,234 | 13,492 | 9,432 | 470 | 422 | |
| AUCS Communications Services v.o.f., 34097149, Hoofddorp | 33 | – | 21 | 12 | 0 | 0 | |
| Johtotieto Oy, 0875145-8, Helsinki | 33 | 170 | 3 | 1 | 0 | 0 | |
| Operators Clearing House A/S, 18936909, Copenhagen | 33 | 1,333 | 7 | 7 | 5 | 5 | |
| Voicecom OÜ, 10348566, Tallinn | 26 | – | 1 | 1 | 1 | 1 | |
| SCF Huolto Oy, 1892276-7, Loimaa | 20 | 20 | 1 | 0 | 0 | 0 | |
| Other operating, dormant and divested companies | 0 | 0 | 0 | 0 | |||
| Total | 39,543 | 33,065 |
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 parent company's holdings of Other operating, dormant and divested companies for the comparative year (Group carrying value SEK 59 million, parent company carrying value SEK 75 million) relate to ComHouse AS, which became a subsidiary in 2008.
| Carrying/fair value in consolidated accounts |
Carrying value in each parent company |
|||||
|---|---|---|---|---|---|---|
| Company, | Participation | Number of | 2008 | 2007 | 2008 | 2007 |
| Corp. Reg. No., registered office | (%) | shares | SEK in millions | |||
| Parent company holdings | ||||||
| Swedish companies | ||||||
| Slottsbacken Fund Two KB, 969660-9875, Stockholm | 18 | – | 7 | 6 | 7 | 6 |
| Lindholmen Science Park AB, 556568-6366, Gothenburg | 10 | 90 | 2 | 0 | 2 | 0 |
| Ullna Golf AB, 556042-8095, Österåker | 1 | 3,500 | 1 | 1 | 1 | 1 |
| Other operating, dormant and divested companies | 0 | 1 | 0 | 1 | ||
| Companies outside Sweden | ||||||
| Digital Telecommunications Phils., Inc., 000-449-918-000, Quezon City | 9 | 600,000,000 | 96 | 173 | 96 | 173 |
| Birdstep Technology ASA, 977037093, Oslo | 2 | 1,722,594 | 3 | 22 | 3 | 22 |
| 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 | 110 | 204 | ||||
| Subsidiaries' holdings | ||||||
| Swedish companies | ||||||
| Other operating, dormant and divested companies | 0 | 0 | 0 | 0 | 0 | |
| Companies outside Sweden | ||||||
| Telecom Development Company Afghanistan B.V., 34183985, Amsterdam | 12 | 1,225 | 225 | 187 | 225 | 187 |
| Magma Venture Capital I Annex Fund, L.P., Cayman Islands | 7 | – | 1 | – | 1 | – |
| Magma Venture Capital I, L.P., Cayman Islands | 7 | – | 24 | 19 | 24 | 19 |
| Oy Merinova Ab, 0778620-2, Vaasa | 6 | 800 | 0 | 1 | 0 | 1 |
| Vierumäki Golf Village Oy, 1927979-3, Helsinki | 5 | 0 | 15 | 10 | 15 | 10 |
| Diamondhead Ventures, L.P., 3145188, Menlo Park, CA | 4 | – | 6 | 5 | 6 | 5 |
| Santapark Oy, 1095079-8, Rovaniemi | 3 | 10,000 | 2 | 2 | 2 | 2 |
| Helsinki Halli Oy, 1016235-3, Helsinki | 1 | 42 | 5 | 4 | 5 | 4 |
| Intellect Capital Ventures, L.L.C., 3173982, Los Angeles, CA | 0 | – | 33 | 13 | 33 | 13 |
| Digital Media & Communications II L.P., 3037042, Boston, MA | 0 | – | 7 | 6 | 7 | 6 |
| Asunto Oy Helsingin Oskar, 0881553-8, Helsinki | 0 | 280 | 0 | 1 | 0 | 1 |
| Kiinteistö Oy Turun Monitoimihalli, 0816425-3, Turku | 0 | 1 | 1 | 1 | 1 | 1 |
| Holdings in other real estate and housing companies, Finland | – | – | 28 | 23 | 28 | 23 |
| Holdings in other local phone companies, etc., Finland | – | – | 5 | 7 | 5 | 7 |
| Other operating, dormant and divested companies | 0 | 12 | 0 | 12 | ||
| Total | 462 | 495 |
The parent company's and subsidiaries' holdings of Other operating, dormant and divested companies for the comparative year (Group carrying value SEK 13 million, carrying value in the
respective parent company SEK 13 million) relate to OMX AB and iVision AS, which were divested in 2008.
| January-December | |||
|---|---|---|---|
| SEK in millions | Note | 2008 | 2007 |
| Net sales | 2 | 16,132 | 17,809 |
| Costs of production | 3 | -13,354 | -10,725 |
| Gross income | 2,778 | 7,084 | |
| Selling and marketing expenses | 3 | -154 | -213 |
| Administrative expenses | 3 | -753 | -448 |
| Research and development expenses | 3 | -439 | -377 |
| Other operating income | 4 | 20,606 | 578 |
| Other operating expenses | 4 | -341 | -320 |
| Operating income | 21,697 | 6,304 | |
| Financial income and expenses | 7 | -3,417 | 17,541 |
| Income after financial items | 18,280 | 23,845 | |
| Appropriations | 8 | 12,037 | -2,586 |
| Income before taxes | 30,317 | 21,259 | |
| Income taxes | 8 | -11 | -1,258 |
| Net income | 30,306 | 20,001 |
| December 31, | |||
|---|---|---|---|
| SEK in millions | Note | 2008 | 2007 |
| Assets | |||
| Goodwill and other intangible assets | 9 | 1,257 | 1,235 |
| Property, plant and equipment | 10 | 5,090 | 18,654 |
| Deferred tax assets | 8 | 311 | 235 |
| Other financial assets | 11 | 164,194 | 122,345 |
| Total non-current assets | 170,852 | 142,469 | |
| Inventories | 12 | 6 | 1 |
| Trade and other receivables | 13 | 34,038 | 37,176 |
| Short-term investments | 14 | 4,730 | 1,611 |
| Cash and bank | 14 | 1,472 | 1,179 |
| Total current assets | 40,246 | 39,967 | |
| Total assets | 211,098 | 182,436 | |
| Shareholders' equity and liabilities | |||
| Restricted equity | |||
| Share capital | 14,369 | 14,369 | |
| Other reserves | 1,858 | 3,796 | |
| Non-restricted equity | |||
| Retained earnings | 28,484 | 24,847 | |
| Net income | 30,306 | 20,001 | |
| Total shareholders' equity | 75,017 | 63,013 | |
| Untaxed reserves | 8 | 8,024 | 20,061 |
| Provisions for pensions and employment contracts | 16 | 551 | 538 |
| Other provisions | 17 | 157 | 406 |
| Total provisions | 708 | 944 | |
| Interest-bearing liabilities | |||
| Long-term borrowings | 18 | 52,629 | 38,305 |
| Short-term borrowings | 18 | 70,335 | 52,695 |
| Non-interest-bearing liabilities | |||
| Long-term liabilities | 19 | 620 | 814 |
| Current tax payables | – | 752 | |
| Short-term provisions, trade payables and other current liabilities | 20 | 3,765 | 5,852 |
| Total liabilities | 127,349 | 98,418 | |
| Total shareholders' equity and liabilities | 211,098 | 182,436 | |
| Contingent assets | 24 | – | – |
| Guarantees | 24 | 5,489 | 4,669 |
| Collateral pledged | 24 | – | 1 |
| January-December | |||
|---|---|---|---|
| SEK in millions | Note | 2008 | 2007 |
| Net income | 30,306 | 20,001 | |
| Adjustments for: | |||
| Amortization, depreciation and impairment losses | 1,756 | 3,295 | |
| Capital gains/losses on sales/discards of non-current assets | -21,221 | 89 | |
| Pensions and other provisions | -499 | -1,173 | |
| Financial items | 1,357 | 777 | |
| Group contributions and appropriations | -12,037 | 2,585 | |
| Income taxes | -1,029 | -2,182 | |
| Cash flow before change in working capital | -1,367 | 23,392 | |
| Increase (-)/Decrease (+) in operating receivables | 1,715 | 903 | |
| Increase (-)/Decrease (+) in inventories etc. | -5 | 6 | |
| Increase (+)/Decrease (-) in operating liabilities | -2,062 | -559 | |
| Change in working capital | -352 | 350 | |
| Cash flow from operating activities | -1,719 | 23,742 | |
| Intangible and tangible non-current assets acquired | -1,651 | -3,074 | |
| Shares and participations | -3,591 | -10,673 | |
| Non-current assets divested, etc. | – | -228 | |
| Loans granted and other similar investments | 10,354 | -2,912 | |
| Compensation from pension fund | 500 | 950 | |
| Net change in interest-bearing current receivables | 118 | 111 | |
| Cash flow from investing activities | 5,730 | -15,826 | |
| Cash flow before financing activities | 4,011 | 7,916 | |
| Dividend to shareholders | -17,962 | -28,290 | |
| Group contributions and dividends received | 2,148 | -1,091 | |
| Proceeds from long-term borrowings | 11,430 | 16,460 | |
| Repayment of long-term borrowings | -1,231 | -777 | |
| Change in short-term borrowings | 5,016 | 979 | |
| Cash flow from financing activities | -599 | -12,718 | |
| Change in cash and cash equivalents | 3,412 | -4,803 | |
| Cash and cash equivalents, opening balance | 2,790 | 7,593 | |
| Change in cash and cash equivalents | 3,412 | -4,803 | |
| Cash and cash equivalents, closing balance | 14 | 6,202 | 2,790 |
| Interest received | 6,091 | 3,517 | |
| Interest paid | -9,430 | -5,408 | |
| Dividends received | 231 | 16,841 | |
| Income taxes paid | -751 | -2,600 |
| SEK in millions | Note | Share capital |
Statutory reserve |
Revaluation reserve |
Non restricted equity |
Total share holders' equity |
|---|---|---|---|---|---|---|
| Closing balance, December 31, 2006 | 14,369 | 1,855 | 2,443 | 52,595 | 71,262 | |
| Depreciation on tangible assets written-up | 15 | – | – | -502 | 502 | – |
| Reporting financial instruments at fair value | 15 | – | – | – | 40 | 40 |
| Net income recognized directly in equity | – | – | -502 | 542 | 40 | |
| Net income | – | – | – | 20,001 | 20,001 | |
| Comprehensive income | – | – | -502 | 20,543 | 20,041 | |
| Dividend | – | – | – | -28,290 | -28,290 | |
| Closing balance, December 31, 2007 | 14,369 | 1,855 | 1,941 | 44,848 | 63,013 | |
| Depreciation on and sales of tangible assets written-up | 15 | – | – | -1,938 | 1,938 | – |
| Reporting financial instruments at fair value | 15 | – | – | – | -340 | -340 |
| Net income recognized directly in equity | – | – | -1,938 | 1,598 | -340 | |
| Net income | – | – | – | 30,306 | 30,306 | |
| Comprehensive income | – | – | -1,938 | 31,904 | 29,966 | |
| Dividend | – | – | – | -17,962 | -17,962 | |
| Closing balance, December 31, 2008 | 14,369 | 1,855 | 3 | 58,790 | 75,017 |
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 2.2 "Accounting for Legal Entities" and other statements issued by the Swedish Financial Reporting Board. As encouraged by the Financial Reporting Board, TeliaSonera has pre-adopted RFR 2.2. The standard is applicable to Swedish legal entities whose equities on the balance sheet day 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 2.2 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 4).
| Item | Note | Accounting treatment |
|---|---|---|
| Goodwill | 6, 9 | Goodwill is amortized systematically over a maximum of 5 years. |
| Group contributions/Untaxed reserves and appropriations |
7, 8 | Group contributions net received are recognized as dividends from subsidiaries, while if net rendered are recognized directly in shareholders' equity, net of income tax. Untaxed reserves and appropriations are reported gross excluding deferred tax liabilities related to the temporary differences. |
| Borrowing costs | 7, 9, 10 | Borrowing costs directly attributable to the acquisition, construction or production of an asset are not capitalized as part of the cost of that asset. |
| Investments in subsidiaries and associated companies |
7, 11 | Investments in subsidiaries and associated companies are recognized at cost less any impairment. Dividends received are brought to income. |
| Provisions for pensions and employment contracts | 7, 16 | Pension obligations and pension expenses are recognized in accordance with FAR SRS accounting recommendation No. 4 (RedR 4). |
| Leasing agreements | 23 | 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 1).
For information relevant to TeliaSonera AB, see "Notes to Consolidated Financial Statements" (Note 2).
Sales by customer location were distributed among economic regions as follows.
| January–December | |||
|---|---|---|---|
| SEK in millions | 2008 | 2007 | |
| European Economic Area (EEA) | 16,129 | 17,807 | |
| of which European Union (EU) member states |
16,119 | 17,804 | |
| of which Sweden | 16,051 | 17,676 | |
| Rest of Europe | 3 | 2 | |
| Total | 16,132 | 17,809 |
Net sales were broken down by product category as follows.
| SEK in millions | January–December | |
|---|---|---|
| 2008 | 2007 | |
| Fixed telephony | 9,263 | 9,892 |
| Internet | 3,183 | 3,000 |
| Network capacity | 2,204 | 3,348 |
| Data communications | 865 | 957 |
| Other | 617 | 612 |
| Total | 16,132 | 17,809 |
There was no invoiced advertising tax in the years 2008 and 2007, 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.
| January–December | ||
|---|---|---|
| SEK in millions | 2008 | 2007 |
| Goods purchased | 31 | 103 |
| Interconnect and roaming expenses | 1,388 | 1,630 |
| Other network expenses | 7,326 | 3,345 |
| Change in inventories | 10 | 6 |
| Personnel expenses (see also Note 26) | 2,064 | 1,419 |
| Rent and leasing fees | 455 | 493 |
| Consultants' services | 203 | 373 |
| IT expenses | 1,509 | 1,084 |
| Other expenses | 0 | 297 |
| Amortization, depreciation and impairment losses (see also Note 6) |
1,714 | 3,013 |
| Total | 14,700 | 11,763 |
Other operating income and expenses were distributed as follows.
| January–December | ||
|---|---|---|
| SEK in millions | 2008 | 2007 |
| Other operating income | ||
| Capital gains | 20,483 | 2 |
| Exchange rate gains | 116 | 118 |
| Patents sold, commissions, etc. | 0 | 48 |
| Recovered accounts receivable, released accounts payable |
0 | 372 |
| Damages received | 7 | 38 |
| Total other operating income | 20,606 | 578 |
| Other operating expenses | ||
| Capital losses | -5 | -12 |
| Exchange rate losses | -90 | -91 |
| Restructuring costs | -181 | -19 |
| Impairment charges | -32 | -180 |
| Damages paid | -33 | -18 |
| Total other operating expenses | -341 | -320 |
| Net effect on income | 20,265 | 258 |
| of which net exchange rate gains on derivative instruments held-for-trading |
40 | 33 |
Capital gains in 2008 refer to assets transferred to the subsidiary TeliaSonera Skanova Access AB (see also Note 10 "Property, Plant and Equipment"). Released accounts payable in 2007 included SEK 372 million following court rulings reducing certain historical interconnect fees.
Conventional commercial terms apply for the supply of goods and services to and from subsidiaries, associated companies and joint ventures.
In 2008 and 2007, sales to subsidiaries totalled SEK 12,644 million and SEK 12,811 million, respectively, while purchases from subsidiaries totalled SEK 7,383 million and SEK 1,221 million, respectively.
As of December 31, 2008, Telia Pension Fund held 1,393,189 Telia-Sonera shares, or 0.03 percent of the voting rights. TeliaSonera AB's share of the fund's assets is 69 percent. For information on transactions and balances, see Note 16 "Provisions for Pensions and Employment Contracts."
TeliaSonera AB has made certain commitments on behalf of group companies, associated companies and joint ventures. See Note 24 "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 10).
Amortization, depreciation and impairment losses on intangible assets and property, plant and equipment were distributed by function and other operating expenses as follows.
| SEK in millions, except proportions | January–December | |
|---|---|---|
| 2008 | 2007 | |
| Costs of production | 1,645 | 2,956 |
| Administrative expenses | 69 | 57 |
| Total functions | 1,714 | 3,013 |
| Other operating expenses | 32 | 180 |
| Total | 1,746 | 3,193 |
| Proportion to net sales (%) | 10.8 | 17.9 |
Amortization, depreciation and impairment losses were distributed by asset class as follows.
| SEK in millions | January–December | |||
|---|---|---|---|---|
| 2008 | 2007 | |||
| Goodwill | 23 | 23 | ||
| Other intangible assets | 384 | 320 | ||
| Fixed networks | 1,316 | 2,814 | ||
| Other plant and equipment | 23 | 36 | ||
| Total | 1,746 | 3,193 |
Goodwill is amortized straight-line over 5 years. For other useful lives applied, see "Notes to Consolidated Financial Statements" (Note 11). Accelerated depreciation, to the extent allowed by Swedish tax legislation, is recorded as untaxed reserves and appropriations (see this section in Note 8 "Income Taxes").
Financial income and expenses were distributed as follows.
| January–December | ||
|---|---|---|
| SEK in millions | 2008 | 2007 |
| Income from shares in subsidiaries | ||
| Dividends, etc. | 231 | 15,408 |
| Capital gains/losses, net | 22 | 46 |
| Impairment losses | -4 | – |
| Group contributions, net received | 1,031 | 2,991 |
| Total | 1,280 | 18,445 |
| Income from shares in associated companies |
||
| Dividends, etc. | 0 | 1,432 |
| Capital gains/losses, net | 2 | 83 |
| Impairment losses | -12 | -113 |
| Total | -10 | 1,402 |
| Income from other financial investments | ||
| Capital gains/losses, net | 1 | 32 |
| Total | 1 | 32 |
| Other financial income | ||
| Interest from subsidiaries | 1,432 | 976 |
| Other interest income | 649 | 234 |
| Exchange rate gains | 9 | 4 |
| Total | 2,090 | 1,214 |
| Other financial expenses | ||
| Interest to subsidiaries | -2,622 | -1,921 |
| Other interest expenses | -3,073 | -1,567 |
| Interest component of the year's pension provision |
-31 | -24 |
| Exchange rate losses | -1,052 | -40 |
| Total | -6,778 | -3,552 |
| Net effect on income | -3,417 | 17,541 |
Other interest income in 2008 includes received penalty interest of SEK 290 million related to court rulings on certain historical interconnect fees. Dividends from subsidiaries in 2007 included one-off transactions of SEK 14,998 million. Regarding Group contributions, refer to section "Untaxed reserves, appropriations and group contributions" in Note 8 "Income Taxes." See also Note 16 "Provisions for Pensions and Employment Contracts" on the interest component of the year's pension provision.
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.
| January–December | ||||||
|---|---|---|---|---|---|---|
| SEK in millions | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 |
| Other interest expenses |
Net exchange rate gains and losses |
Other interest income |
||||
| Fair value hedge derivatives | -173 | -57 | 2,047 | 272 | – | – |
| Cash flow hedge derivatives | -211 | -17 | -75 | 145 | – | – |
| Derivatives held-for-trading | -2 | 97 | 3,857 | 123 | – | – |
| Held-to-maturity investments | – | – | – | – | – | 5 |
| Loans and receivables | – | – | -2,538 | – | 630 | 210 |
| Borrowings in fair value hedge relationships | -572 | -525 | -2,047 | -272 | – | – |
| Borrowings and other financial liabilities at amortized cost | -2,083 | -1,061 | -2,287 | -304 | – | – |
| Other | -32 | -4 | – | -0 | 19 | 19 |
| Total | -3,073 | -1,567 | -1,043 | -36 | 649 | 234 |
Borrowings at amortized cost include items in cash flow hedge relationships as well as unhedged items.
In 2008 and 2007, pre-tax income was SEK 30,317 million and SEK 21,259 million, respectively. Income tax expense was distributed as follows.
| January–December | ||
|---|---|---|
| SEK in millions | 2008 | 2007 |
| Tax items brought to income | ||
| Current tax expense relating to current year | 0 | -2,539 |
| Underprovided or overprovided current tax expense in prior years |
0 | 2 |
| Deferred tax expense originated or reversed in current year |
-11 | 1,279 |
| Total tax expense brought to income | -11 | -1,258 |
| Tax items recognized directly in shareholders' equity |
||
| Deferred tax income (+)/expense (-) | 87 | -14 |
| Total tax income (+)/expense (-) recognized directly in shareholders' equity |
87 | -14 |
The difference between the nominal Swedish income tax rate and the effective tax rate comprises the following components.
| January–December | ||
|---|---|---|
| Percent | 2008 | 2007 |
| Swedish income tax rate | 28.0 | 28.0 |
| Underprovided or overprovided current tax expense in prior years |
0.0 | 0.0 |
| Effect on deferred tax expense from change in tax rate |
0.0 | – |
| Non-deductible expenses | 0.3 | 0.4 |
| Tax-exempt income | -28.3 | -22.5 |
| Effective tax rate as per the income statement |
0.0 | 5.9 |
| Tax recognized directly in shareholders' equity | -0.3 | 0.1 |
| Effective tax rate | -0.3 | 6.0 |
In 2008, tax-exempt income mainly refers to an asset transfer to the subsidiary TeliaSonera Skanova Access AB (Skanova Access), made at market value in exchange for new shares issued by Skanova Access. From a fiscal point of view, however, the assets were transferred at tax book value and the consideration was treated as taxexempt income in TeliaSonera AB. In 2007, tax-exempt income primarily referred to dividends from subsidiaries and associated companies. In December 2008, the Swedish parliament passed changes to the tax legislation, including, among others, a reduction of the Swedish corporate income tax rate from 28 percent to 26.3 percent effective January 1, 2009. This triggered a recalculation of existing deferred tax assets, resulting in a net deferred tax expense of SEK 15 million in 2008.
Deferred tax assets and liabilities changed as follows.
| December 31, | ||||
|---|---|---|---|---|
| SEK in millions | 2008 | 2007 | ||
| Deferred tax assets | ||||
| Carrying value, opening balance | 235 | 307 | ||
| Income statement period change | -11 | -58 | ||
| Recognized in shareholders' equity | 87 | -14 | ||
| Carrying value, closing balance | 311 | 235 | ||
| Deferred tax liabilities | ||||
| Carrying value, opening balance | – | 1,337 | ||
| Income statement period change | – | -1,337 | ||
| Carrying value, closing balance | – | – |
Temporary differences in deferred tax assets and liabilities were as follows.
| December 31, | |||
|---|---|---|---|
| SEK in millions | 2008 | 2007 | |
| Deferred tax assets | |||
| Fair value adjustments for other financial assets | 87 | 0 | |
| Delayed expenses for provisions | 224 | 235 | |
| Total deferred tax assets | 311 | 235 | |
| Total deferred tax liabilities | – | – | |
| Net deferred tax assets | 311 | 235 |
In 2008 and 2007, there were no accumulated non-expiring tax loss carry-forwards or unrecognized deferred tax assets. The unrecognized deferred tax liability in untaxed reserves amounted to SEK 2,110 million in 2008 and SEK 5,617 million in 2007.
Untaxed reserves in the balance sheet were distributed as follows.
| December 31, | ||
|---|---|---|
| SEK in millions | 2008 | 2007 |
| Profit equalization reserves | 5,625 | 7,281 |
| Accumulated excess amortization and depreciation |
2,399 | 12,780 |
| Total | 8,024 | 20,061 |
Excess amortization and depreciation changed as follows.
| December 31, | ||||
|---|---|---|---|---|
| SEK in millions | 2008 | 2007 | ||
| Intangible assets |
Plant and machinery |
Intangible assets |
Plant and machinery |
|
| Opening balance | 108 | 12,672 | 134 | 13,083 |
| Reversals | 35 | -10,416 | -26 | -411 |
| Closing balance | 143 | 2,256 | 108 | 12,672 |
Appropriations brought to income were as follows.
| January–December | |||
|---|---|---|---|
| SEK in millions | 2008 | 2007 | |
| Change in profit equalization reserves | 1,656 | -3,022 | |
| Change in accumulated excess amortization and depreciation |
10,381 | 437 | |
| Net effect on income | 12,037 | -2,585 |
Under certain conditions, it is possible to transfer profits through group contributions between Swedish companies in a group. Group contributions provided are normally a deductible expense for the contributor and taxable in-come for the recipient. Group contributions were as follows.
| January–December | ||
|---|---|---|
| SEK in millions | 2008 | 2007 |
| Pre-tax group contributions, net received | 1,031 | 2,991 |
| (recognized in income) |
The total carrying value was distributed and changed as follows.
| December 31, | |||||
|---|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | ||
| Other intangible | |||||
| SEK in millions | Goodwill | assets | |||
| Accumulated cost | 114 | 114 | 3,447 | 3,019 | |
| Accumulated amortization | -103 | -80 | -1,665 | -1,359 | |
| Accumulated impairment losses | – | – | -536 | -459 | |
| Carrying value | 11 | 34 | 1,246 | 1,201 | |
| of which work in progress | – | – | 415 | 544 | |
| Carrying value, opening balance | 34 | 54 | 1,201 | 391 | |
| Investments and operations acquired |
– | 3 | 368 | 1,130 | |
| Grants received | – | – | -3 | – | |
| Reclassifications | – | – | 64 | – | |
| Amortization for the year | -23 | -23 | -306 | -185 | |
| Impairment losses for the year | – | – | -78 | -135 | |
| Carrying value, closing balance |
11 | 34 | 1,246 | 1,201 |
The total carrying value was distributed and changed as follows.
Other intangible assets were taken over from subsidiaries at gross carrying value.
The carrying value of other intangible assets was distributed as follows.
| December 31, | ||
|---|---|---|
| SEK in millions | 2008 | 2007 |
| Capitalized development expenses | 825 | 597 |
| Licenses, contractual agreements, patents, etc. | 6 | 60 |
| Work in progress | 415 | 544 |
| Total carrying value | 1,246 | 1,201 |
Capitalized development expenses and work in progress mainly refer to administrative IT support systems.
| December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | |
| SEK in millions | Property | Plant and machinery | Equipment, tools and installations |
Total | ||||
| Accumulated cost | 442 | 406 | 40,750 | 72,541 | 695 | 511 | 41,887 | 73,458 |
| Accumulated depreciation | -197 | -173 | -35,439 | -55,575 | -608 | -446 | -36,244 | -56,194 |
| Accumulated impairment losses | – | – | -551 | -546 | -5 | -5 | -556 | -551 |
| Accumulated write-ups | – | – | 3 | 1,941 | – | – | 3 | 1,941 |
| Carrying value | 245 | 233 | 4,763 | 18,361 | 82 | 60 | 5,090 | 18,654 |
| of which assets under construction | – | – | 851 | 1,260 | – | – | 851 | 1,260 |
| Carrying value, opening balance | 233 | 203 | 18,361 | 18,704 | 60 | 96 | 18,654 | 19,003 |
| Investments and operations acquired | 36 | 58 | 1,190 | 2,599 | 50 | 48 | 1,276 | 2,705 |
| Sales and disposals | – | – | -13,432 | -149 | 0 | -41 | -13,432 | -190 |
| Grants received | – | – | -5 | – | – | – | -5 | – |
| Reclassifications | – | -10 | -59 | 3 | -5 | -7 | -64 | -14 |
| Depreciation for the year | -24 | -18 | -1,292 | -2,796 | -23 | -36 | -1,339 | -2,850 |
| Carrying value, closing balance | 245 | 233 | 4,763 | 18,361 | 82 | 60 | 5,090 | 18,654 |
No real estate properties owned by the parent company were assigned tax-assessed values.
Plant and machinery includes switching systems and peripheral equipment, transmission systems, transmission media and other types of media in the Swedish fixed networks. Assets were taken over from subsidiaries at gross carrying value. In 2008, transfer of assets to the subsidiary TeliaSonera Skanova Access AB net reduced the carrying value by SEK 13,427 million (accumulated cost SEK 32,952 million, accumulated depreciation SEK 21,440 million, accumulated impairment losses SEK 12 million and accumulated write-ups SEK 1,927 million).
Assets were taken over from subsidiaries at gross carrying value.
The carrying value of investments in associated companies changed as follows.
| SEK in millions | December 31, | |
|---|---|---|
| 2008 | 2007 | |
| Carrying value, opening balance | 974 | 1,085 |
| Issues of new shares and shareholder contributions |
6 | 4 |
| Impairment losses | -6 | -108 |
| Divestitures | – | -7 |
| Reclassifications | -75 | – |
| Carrying value, closing balance | 899 | 974 |
The carrying value of other holdings of equity securities changed as follows.
| December 31, | |||
|---|---|---|---|
| SEK in millions | 2008 | 2007 | |
| Carrying value, opening balance | 204 | 172 | |
| Acquisitions | 2 | 27 | |
| Changes in fair value | -97 | 5 | |
| Carrying value, closing balance | 109 | 204 |
The carrying value of other long-term financial assets changed as follows.
| SEK in millions | December 31, | ||
|---|---|---|---|
| 2008 | 2007 | ||
| Carrying value, opening balance | 121,167 | 110,627 | |
| Purchases | 38,707 | 10,059 | |
| Sales and disposals | -330 | -13 | |
| Impairment losses | -83 | -4 | |
| Changes in fair value | 3,725 | 498 | |
| Carrying value, closing balance | 163,186 | 121,167 |
The total carrying and fair values of other financial assets were as follows.
| December 31, | ||||
|---|---|---|---|---|
| 2008 | 2007 | |||
| SEK in millions | Carrying value | Fair value | Carrying value | Fair value |
| Other holdings of equity securities available-for-sale | 102 | 102 | 196 | 196 |
| Other holdings of equity securities held-for-trading | 8 | 8 | 8 | 8 |
| Loans and receivables at amortized cost | 1 | 1 | 5 | 5 |
| Interest rate swaps designated as fair value hedges | 691 | 691 | 39 | 39 |
| Interest rate swaps designated as cash flow hedges | – | – | 9 | 9 |
| Cross currency interest rate swaps designated as cash flow hedges | 462 | 462 | 35 | 35 |
| Interest rate and cross currency interest rate swaps held-for-trading | 3,173 | 3,173 | 480 | 480 |
| Subtotal (see Categories – Note 21 and Credit risk – Note 22)/Total fair value | 4,437 | 4,437 | 772 | 772 |
| Shares in subsidiaries | 158,858 | 120,488 | ||
| Receivables from subsidiaries | – | 111 | ||
| Investments in associated companies | 899 | 974 | ||
| Total other financial assets | 164,194 | 122,345 | ||
| of which interest-bearing | 4,436 | 767 | ||
| of which non-interest-bearing | 159,758 | 121,578 |
The 2008 increase of the carrying value for shares in subsidiaries mainly refers to a capital contribution of SEK 34,000 million that was provided in kind in exchange for new shares issued by the subsidiary TeliaSonera Skanova Access AB. 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 balance sheet date. As of December 31, 2008, contractual cash flows for Loans and receivables represented the following expected maturity dates.
| Expected maturity | 2010– | Later | Total |
|---|---|---|---|
| SEK in millions | 2013 | years | |
| Loans and receivables | – | 1 | 1 |
For more information on financial instruments by category and exposed to credit risk, refer to Note 21 "Financial Assets and Liabilities by Category" and section "Credit risk management" in Note 22 "Financial Risk Management," respectively. Shareholdings and participations in subsidiaries are specified in Note 28 "Specification of Shareholdings and Participations," while information on associated companies and other holdings of equity securities is presented in "Notes to Consolidated Financial Statements" (Note 35). Conventional commercial terms apply for receivables from subsidiaries.
No deductions for inventory obsolescence were needed for the years 2008 and 2007. The carrying value referred to supplies and consumables and was SEK 6 million in 2008 and SEK 1 million in 2007.
The carrying value of trade and other receivables was distributed as follows.
| December 31, | |||
|---|---|---|---|
| SEK in millions | 2008 | 2007 | |
| Accounts receivable | |||
| Invoiced receivables | 889 | 1,809 | |
| Allowance for doubtful receivables | -200 | -209 | |
| Total accounts receivable at amortized cost | 689 | 1,600 | |
| Currency swaps and forward exchange contracts held-for-trading |
1,072 | 141 | |
| Receivables from associated companies at amortized cost |
3 | 4 | |
| Loans and receivables at amortized cost | 81 | 145 | |
| Subtotal (see Categories – Note 21 and Credit risk – Note 22) |
1,845 | 1,890 | |
| Receivables from subsidiaries | 31,827 | 34,688 | |
| of which cash-pool balances | 27,104 | 26,339 | |
| of which trade and other receivables | 4,723 | 8,349 | |
| Other current receivables | 213 | 453 | |
| Deferred expenses | 153 | 145 | |
| Total trade and other receivables | 34,038 | 37,176 | |
| of which interest-bearing | 27,282 | 26,635 | |
| of which non-interest-bearing | 6,756 | 10,541 |
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), as of the balance sheet
date, concentration of credit risk by geographical area and by customer segment was as follows.
| Geographical area SEK in millions |
December 31, 2008 |
|---|---|
| Sweden | 766 |
| Other countries | 7 |
| Total carrying value | 773 |
| Customer segment SEK in millions |
December 31, 2008 |
|---|---|
| Other operators | 576 |
| Other customers | 197 |
| Total carrying value | 773 |
For more information on financial instruments by category and exposed to credit risk, refer to Note 21 "Financial Assets and Liabilities by Category" and section "Credit risk management" in Note 22 "Financial Risk Management," respectively. Conventional commercial terms apply for receivables from subsidiaries.
As of the balance sheet date, ageing of Accounts receivable and Loans and receivables (including receivables from associated companies) were as follows.
| SEK in millions | December 31, 2008 | ||
|---|---|---|---|
| Accounts receivable |
Loans and receivables |
||
| Not due | 297 | 16 | |
| Receivables past due but not impaired | |||
| Less than 30 days | 145 | – | |
| 30 – 180 days | 4 | – | |
| More than 180 days | 243 | 68 | |
| Total past due but not impaired | 392 | 68 | |
| Total carrying value | 689 | 84 |
Receivables past due as of the balance sheet date 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. Balances past due more than 180 days mainly referred to settlements with other operators regarding traffic passed in transit through TeliaSonera's fixed network. See also "Notes to Consolidated Financial Statements" (section "Credit risk management" in Note 28) for information on mitigation of credit risks related to accounts receivable.
Total bad debt expenses were SEK 34 million in 2008 and SEK 23 million in 2007, while there was no recovered accounts receivable in these years. The allowance for doubtful accounts receivable changed as follows.
| SEK in millions | December 31, | ||
|---|---|---|---|
| 2008 | 2007 | ||
| Opening balance | 209 | 181 | |
| Provisions for receivables impaired | 34 | 72 | |
| Unused amounts reversed | -43 | -44 | |
| Closing balance | 200 | 209 |
No short-term investments as of December 31, 2008 or 2007 had maturities over 3 months.
Short-term investments with maturities up to and including 3 months are combined with Cash and bank to produce the item Cash and cash equivalents, as follows.
| December 31, | |||
|---|---|---|---|
| SEK in millions | 2008 | 2007 | |
| Short-term investments with maturities up to and including 3 months |
4,730 | 1,611 | |
| of which commercial papers held-to-maturity | – | 1,189 | |
| of which bank deposits at amortized cost | 4,730 | 422 | |
| Cash and bank | 1,472 | 1,179 | |
| Total (see Categories – Note 21 and Credit risk – Note 22) |
6,202 | 2,790 |
The carrying values are assumed to approximate fair values as the risk of changes in value is insignificant. For more information on financial instruments by category and exposed to credit risk, refer to Note 21 "Financial Assets and Liabilities by Category" and section "Credit risk management" in Note 22 "Financial Risk Management," respectively, and to Note 24 "Contingencies, Other Contractual Obligations and Litigation" for information on blocked funds in bank accounts.
See "Notes to Consolidated Financial Statements" (corresponding sections in Note 21).
The revaluation reserve changed as follows.
| December 31, | ||
|---|---|---|
| SEK in millions | 2008 | 2007 |
| Carrying value, opening balance | 1,941 | 2,443 |
| Sale of assets to the subsidiary TeliaSonera Skanova Access AB |
-1,927 | – |
| Depreciation | -11 | -502 |
| Carrying value, closing balance | 3 | 1,941 |
The fair value reserve changed as follows.
| December 31, | |||||
|---|---|---|---|---|---|
| 2008 | 2007 | ||||
| SEK in millions | Securi ties |
Deriva tives |
Securi ties |
Deriva tives |
|
| Carrying value, opening balance | 129 | 0 | 124 | -35 | |
| Net changes in fair value | -98 | -348 | 5 | -13 | |
| Transferred to interest expenses in the income statement |
– | 18 | – | 62 | |
| Tax effect | – | 87 | – | -14 | |
| Carrying value, closing balance |
31 | -243 | 129 | 0 |
No transfer necessitated adjustment of the cost of acquisition.
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. As of January 1, 2007, a new defined contribution pension plan (the ITP1 plan) was introduced. This pension plan is applicable to all employees born in 1979 or later.
The existing pension obligations that TeliaSonera AB assumed when it was converted into a limited liability company on July 1, 1993 and other pension obligations of the parent company are secured by Telia Pension Fund. Certain commitments, chiefly the contractual right to retire at age 55, 60, or 63 for certain categories of personnel, are provided for by a taxed reserve in the balance sheet.
Pension obligations are calculated annually, on the balance sheet date, based on actuarial principles.
| December 31, | ||
|---|---|---|
| SEK in millions | 2008 | 2007 |
| Opening balance, pension obligations covered by plan assets |
10,281 | 10,404 |
| Opening balance, pension obligations not covered by plan assets |
538 | 555 |
| Opening balance, total pension obligations | 10,819 | 10,959 |
| Current service cost | 122 | 109 |
| Interest cost, paid-up policy indexation | 447 | 448 |
| Benefits paid | -816 | -849 |
| Divested operations | -69 | – |
| Other changes in valuation of pension obligations |
47 | -1 |
| Termination benefits | 52 | 153 |
| Closing balance, pension obligations covered by plan assets |
10,051 | 10,281 |
| Closing balance, pension obligations not covered by plan assets |
551 | 538 |
| Closing balance, total pension obligations | 10,602 | 10,819 |
| of which FPG/PRI pensions | 6,025 | 5,985 |
In 2008, actuarial modifications reflecting an extended average life expectancy were implemented, resulting in an increase of the present value of pension obligations, however more than offset by a lowered standard increment for calculating the ITP pension plan funding reserve.
The fair value of plan assets changed as follows.
| December 31, | ||
|---|---|---|
| SEK in millions, except percentages | 2008 | 2007 |
| Opening balance, plan assets | 11,797 | 12,335 |
| Actual return | -835 | 412 |
| Divested operations | -69 | – |
| Payment from pension fund | -500 | -950 |
| Closing balance, plan assets | 10,393 | 11,797 |
| Actual return on plan assets (%) | -7.1 | 3.3 |
| December 31, | |||||
|---|---|---|---|---|---|
| 2008 | 2007 | ||||
| Asset category | SEK in millions |
Percent | SEK in millions |
Percent | |
| Fixed income instruments, liquidity |
7,158 | 68.9 | 7,622 | 64.6 | |
| Shares and other investments | 3,235 | 31.1 | 4,175 | 35.4 | |
| Total | 10,393 | 100.0 | 11,797 | 100.0 | |
| of which shares in TeliaSonera AB |
37 | 0.4 | 41 | 0.3 |
Provisions for pension obligations were recognized in the balance sheet as follows.
| December 31, | |||
|---|---|---|---|
| SEK in millions | 2008 | 2007 | |
| Present value of pension obligations | 10,602 | 10,819 | |
| Fair value of plan assets | -10,393 | -11,797 | |
| Surplus capital in pension fund | 342 | 1,516 | |
| Provisions for pension obligations | 551 | 538 |
Total pension expense (income) was distributed as follows.
| January–December | ||
|---|---|---|
| SEK in millions | 2008 | 2007 |
| Current service cost | 122 | 109 |
| Interest cost, paid-up policy indexation | 447 | 448 |
| Less interest expenses recognized as financial expenses |
-31 | -24 |
| Actual return on plan assets | 835 | -412 |
| Other changes in valuation of pension obligation | -22 | -1 |
| Termination benefits | 52 | 153 |
| Pension expense, defined benefit pension plans |
1,403 | 273 |
| Pension premiums, defined benefit/defined contribution pension plans and other pension costs |
81 | 62 |
| Changes in estimates | 4 | -19 |
| Pension-related social charges and taxes | 69 | – |
| Less termination benefits (incl. premiums and pension-related social charges) reported as restructuring cost |
-73 | -189 |
| Pension expense | 1,484 | 127 |
| Decrease (-)/Increase (+) of surplus capital in pension fund |
-1,105 | -415 |
| Total pension expense (+)/income (-) | 379 | -288 |
| of which pension premiums paid to the ITP pension plan |
28 | 33 |
The actuarial calculation of pension obligations and pension expenses is based on principles set by FPG/PRI 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 yield tax on pension plan assets, was 3.0 percent in 2008 and 3.2 percent in 2007. Obligations were calculated based on the salary levels existing at December 31, 2008 and 2007, respectively.
See "Notes to Consolidated Financial Statements" (corresponding section in Note 23).
As of December 31, 2008, the fair value of plan assets exceeded the present value of TeliaSonera AB's pension obligations. Unless the fair value of plan assets during 2009 should fall short of the present value of pension obligations, TeliaSonera AB has no intention to make any contribution to the pension fund.
In 2009, TeliaSonera AB expects pension payments from its defined benefit plans to be SEK 780 million.
Changes in other provisions were as follows.
| December 31, 2008 | ||||||
|---|---|---|---|---|---|---|
| SEK in millions | Payroll taxes on future pension payments |
Restructuring provisions |
Warranty provisions |
Damages and court cases |
Insurance provisions |
Total |
| Opening balance | 60 | 47 | 78 | 240 | 55 | 480 |
| of which financial liabilities at amortized cost |
– | – | 78 | – | – | 78 |
| Provisions for the period | 3 | 224 | 3 | – | – | 230 |
| Utilized provisions | – | -53 | -41 | – | -4 | -98 |
| Reversals of provisions | – | -45 | -28 | – | – | -73 |
| Reclassifications | – | -73 | – | – | – | -73 |
| Timing and interest-rate effects | – | -2 | -0 | – | – | -2 |
| Closing balance | 63 | 98 | 12 | 240 | 51 | 464 |
| of which non-current portion | 63 | 35 | 8 | – | 51 | 157 |
| of which current portion | – | 63 | 4 | 240 | – | 307 |
| of which financial liabilities at amortized cost (see Categories – Note 21) |
– | – | 12 | – | – | 12 |
Provisions are discounted to present value, which equals fair value. Refer to Note 21 "Financial Assets and Liabilities by Category" for more information on financial instruments classified by category. As of December 31, 2008, contractual undiscounted cash flows for the financial liabilities represented the following expected maturities.
| Expected maturity SEK in millions |
2009 | 2010 | 2011– 2013 |
Later years |
Total | Carrying value |
|---|---|---|---|---|---|---|
| Financial liabilities | 4 | 4 | – | 7 | 15 | 12 |
Restructuring provisions mainly refer to staff redundancy costs related to cost savings programs in the Swedish operations, launched by management in 2005 and in 2008. The remaining provision as of December 31, 2008 is expected to be fully used by 2012. Warranty provisions also include provisions for potential litigation and other provisions related to disposals and winding-up of group entities and associated companies.
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 counter-parts as well as the timing of such changes.
For information on TeliaSonera AB's open-market financing programs, see "Notes to Consolidated Financial Statements" (corresponding section in Note 22).
Long-term and short-term borrowings were distributed as follows.
| December 31, | ||||
|---|---|---|---|---|
| 2008 | 2007 | |||
| SEK in millions | Carrying value | Fair value | Carrying value | Fair value |
| Long-term borrowings | ||||
| Open-market financing program borrowings | 49,834 | 51,723 | 38,034 | 38,294 |
| of which at amortized cost | 33,211 | 35,100 | 24,178 | 24,438 |
| of which in fair value hedge relationships | 16,623 | 16,623 | 13,856 | 13,856 |
| Other borrowings at amortized cost | 2,400 | 2,400 | 6 | 6 |
| Interest rate swaps at fair value | 375 | 375 | 188 | 188 |
| of which designated as hedging instruments | 288 | 288 | 188 | 188 |
| of which held-for-trading | 87 | 87 | – | – |
| Cross currency interest rate swaps at fair value | 20 | 20 | 77 | 77 |
| of which designated as hedging instruments | 20 | 20 | – | – |
| of which held-for-trading | – | – | 77 | 77 |
| Total long-term borrowings (see Categories – Note 21) | 52,629 | 54,518 | 38,305 | 38,565 |
| Short-term borrowings | ||||
| Open-market financing program borrowings | 7,323 | 7,333 | 1,444 | 1,440 |
| of which at amortized cost | 7,323 | 7,333 | 1,444 | 1,440 |
| Other borrowings at amortized cost | 1,419 | 1,419 | 777 | 775 |
| Subtotal (see Categories – Note 21)/Total fair value | 8,742 | 8,752 | 2,221 | 2,215 |
| Borrowings from subsidiaries | 61,593 | 50,474 | ||
| of which cash-pool balances | 27,105 | 26,339 | ||
| of which other borrowings | 34,488 | 24,135 | ||
| Total short-term borrowings | 70,335 | 52,695 |
For 2008 and 2007, fully unutilized bank overdraft facilities had a total limit of SEK 1,067 million and SEK 1,053 million, respectively.
For additional information on financial instruments classified by category, refer to Note 21 "Financial Assets and Liabilities by Category", and for information on maturities and liquidity risks, refer to section "Liquidity risk management" in Note 22 "Financial Risk Management." Refer to "Notes to Consolidated Financial Statements" (corresponding section in Note 22) for information on the swap portfolio and average interest rates on borrowings. Conventional commercial terms apply for borrowings from subsidiaries.
The carrying value of long-term liabilities was distributed as follows.
| December 31, | |||
|---|---|---|---|
| SEK in millions | 2008 | 2007 | |
| Liabilities to subsidiaries | 38 | 160 | |
| Prepaid contracts for broadband build-out | 573 | 654 | |
| Other liabilities | 9 | – | |
| Total long-term liabilities | 620 | 814 |
For the years 2008 and 2007, SEK 573 million and SEK 233 million, respectively, fell due more than 5 years after the balance sheet date.
Short-term provisions, trade payables and other current liabilities were distributed as follows.
| December 31, | |||
|---|---|---|---|
| SEK in millions | 2008 | 2007 | |
| Accounts payable at amortized cost | 1,223 | 2,069 | |
| Currency swaps, forward exchange contracts and currency options held-for-trading |
338 | 1 | |
| Current liabilities to associated companies at amortized cost |
31 | 38 | |
| Current liabilities at amortized cost | 762 | 934 | |
| Subtotal (see Categories – Note 21) | 2,354 | 3,042 | |
| Liabilities to subsidiaries | 680 | 1,499 | |
| Other current liabilities | 244 | 451 | |
| Deferred income | 487 | 860 | |
| Total short-term provisions, trade payables and other current liabilities |
3,765 | 5,852 |
For Accounts payable and Current liabilities, the carrying value equals fair value as the impact of discounting is insignificant. The remaining contractual maturity is mainly less than 3 months. For additional information on financial instruments classified by category and on liquidity risks, refer to Note 21 "Financial Assets and Liabilities by Category" and section "Liquidity risk management" in Note 22 "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 value-added tax, advances from customers and accruals of payroll expenses and social security contributions. Deferred income chiefly relate to charges for network capacity. Conventional commercial terms apply for trading with subsidiaries.
The table below sets forth carrying values of classes of financial assets and liabilities distributed by category. Financial assets and liabilities relating to subsidiaries are not included. Excluded are also investments in associated companies as discussed in Note 11 "Other Financial Assets" and pension obligations as discussed in Note 16 "Provisions for Pensions and Employment Contracts."
| December 31, | ||||
|---|---|---|---|---|
| SEK in millions | Note | 2008 | 2007 | |
| Financial assets | ||||
| Derivatives designated as hedging instruments |
11 | 1,153 | 83 | |
| Financial assets at fair value through profit and loss |
||||
| Derivatives not designated as hedging instruments |
11, 13 | 4,245 | 621 | |
| Held-for-trading investments | 11 | 8 | 8 | |
| Held-to-maturity investments | 14 | – | 1,189 | |
| Loans and receivables | 11, 13, 14 | 6,976 | 3,355 | |
| Available-for-sale financial assets | 11 | 102 | 196 | |
| Total financial assets by category | 12,484 | 5,452 | ||
| Financial liabilities | ||||
| Derivatives designated as hedging instruments |
18 | 308 | 188 | |
| Financial liabilities at fair value through profit and loss |
||||
| Derivatives not designated as hedging instruments |
18, 20 | 425 | 78 | |
| Borrowings in fair value hedge relationships |
18 | 16,623 | 13,856 | |
| Financial liabilities measured at | 17, 18, 20 | 46,381 | 29,524 | |
| amortized cost | ||||
| Total financial liabilities by category | 63,737 | 43,646 |
For general information on financial risk management relevant to TeliaSonera AB, see "Notes to Consolidated Financial Statements" (Note 28).
TeliaSonera's exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments (detailed in the respective note and excluding receivables from subsidiaries), as follows.
| December 31, | |||
|---|---|---|---|
| SEK in millions | Note | 2008 | 2007 |
| Other financial assets | 11 | 4,437 | 772 |
| Trade and other receivables | 13 | 1,845 | 1,890 |
| Short-term investments, cash and cash equivalents |
14 | 6,202 | 2,790 |
| Total | 12,484 | 5,452 |
For additional information on credit risk management relevant to TeliaSonera AB, see "Notes to Consolidated Financial Statements" (corresponding section in Note 28).
As of December 31, 2008, contractual undiscounted cash flows for interest-bearing borrowings and non-interest-bearing currency derivatives represented the following expected maturities, including estimated interest payments. The balances due within 12 months equal their carrying values as the impact of discounting is insignificant. Corresponding information on non-interest-bearing liabilities are presented in Note 20 "Short-term Provisions, Trade Payables and Other Current Liabilities."
| Expected maturity | |||||||
|---|---|---|---|---|---|---|---|
| SEK in millions | 2009 | 2010 | 2011 | 2012 | 2013 | Later years | Total |
| Open-market financing program borrowings | 4,592 | 8,949 | 6,129 | 8,433 | 7,646 | 25,990 | 61,739 |
| Other borrowings | 6,264 | 121 | 1,576 | 519 | 377 | – | 8,857 |
| Cross currency interest rate swaps and interest rate swaps |
|||||||
| Payables | 1,507 | 3,625 | 2,442 | 6,156 | 4,470 | 8,794 | 26,994 |
| Receivables | -1,678 | -4,165 | -2,656 | -7,254 | -5,201 | -10,538 | -31,492 |
| Currency swaps and forward exchange contracts |
|||||||
| Payables | 36,528 | – | – | – | – | – | 36,528 |
| Receivables | -36,386 | – | – | – | – | – | -36,386 |
| Total, net | 10,827 | 8,530 | 7,491 | 7,854 | 7,292 | 24,246 | 66,240 |
For additional information on liquidity risk management relevant to TeliaSonera AB, see "Notes to Consolidated Financial Statements" (corresponding section in Note 28).
TeliaSonera AB leases primarily premises and land. 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, 2008 that could not be canceled in advance and were in excess of one year were as follows.
| Expected maturity SEK in millions |
2009 | 2010 | 2011 | 2012 | 2013 | Later years |
Total |
|---|---|---|---|---|---|---|---|
| Future minimum leasing fees |
402 | 359 | 164 | 90 | 79 | 57 | 1,151 |
In 2008 and 2007, total rent and leasing fees paid were SEK 455 million and SEK 493 million a, respectively.
As of the balance sheet date, TeliaSonera AB had no contingent assets, while guarantees reported as contingent liabilities and collateral pledged were distributed as follows.
| December 31, | |||
|---|---|---|---|
| SEK in millions | 2008 | 2007 | |
| Guarantees | |||
| Guarantees on behalf of subsidiaries | 3,336 | 2,686 | |
| Credit guarantee on behalf of Svenska UMTS nät AB |
2,021 | 1,838 | |
| Other credit and performance guarantees, etc. | – | 13 | |
| Guarantees for pension obligations | 132 | 132 | |
| Total guarantees | 5,489 | 4,669 | |
| Collateral pledged | – | 1 |
Some loan covenants agreed limit the scope for divesting or pledging certain assets. For information on change-of-control provisions in some of TeliaSonera AB's more recent financing arrangements, see "Notes to Consolidated Financial Statements" (corresponding section in Note 30).
For all guarantees, except the credit guarantee on behalf of TeliaSonera AB's indirectly 50 percent owned joint venture Svenska UMTS-nät AB, stated amounts equal the maximum potential amount of 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 30).
Guarantees on behalf of subsidiaries include SEK 2,030 million (EUR 178 million) related to Xfera Móviles S.A., comprising a counter guarantee of EUR 135 million as TeliaSonera's share on behalf of Xfera's performance requirements in relation to its UMTS license and a counter guarantee of EUR 43 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 favourable. Guarantees on behalf of subsidiaries also include SEK 646 million related to Swedish pension obligations and SEK 314 million related to the Danish 3G license.
In addition to 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 balance sheet date, there was no indication that payment will be required in connection with any such contractual guarantee.
As of December 31, 2008, unrecognized contractual obligations regarding future acquisitions (or equivalent) of non-current assets represented the following expected maturities.
| Expected maturity SEK in millions |
2009 | Later years |
Total |
|---|---|---|---|
| Other intangible assets | 31 | – | 31 |
| Property, plant and equipment | 240 | – | 240 |
| Total | 271 | – | 271 |
Obligations with respect to property, plant and equipment refer to the continued expansion of transmission capacity in the Swedish fixed network.
For additional information relevant to TeliaSonera AB, see "Notes to Consolidated Financial Statements" (corresponding section in Note 30).
In 2008, a capital contribution of SEK 34,000 million was provided in kind in exchange for new shares issued by the subsidiary Telia-Sonera Skanova Access AB (see also Note 10 "Property, Plant and Equipment," section "Plant and machinery" for information on this non-cash asset transfer). In 2008 and 2007, claims on subsidiaries totaling SEK 25 million and SEK 4 million, respectively, were converted to equity in the companies.
The number of employees decreased to 2,160 at December 31, 2008 (2,565 at year-end 2007), mainly due to operations being transferred of to the subsidiary TeliaSonera Skanova Access AB. The average number of full-time employees was as follows.
| January–December | |||||
|---|---|---|---|---|---|
| Country | 2008 | 2007 | |||
| Total (number) |
of whom men (%) |
Total (number) |
of whom men (%) |
||
| Sweden | 2,117 | 68.4 | 2,501 | 69.2 | |
| Total | 2,117 | 68.4 | 2,501 | 69.2 |
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 6 other members (2007: 5 members) of the Leadership Team employed by the parent company.
| December 31, | ||||
|---|---|---|---|---|
| 2008 | 2007 | |||
| Percent | Board of Directors |
Other Corporate Officers |
Board of Directors |
Other Corporate Officers |
| Women | 40.0 | 25.0 | 40.0 | 14.3 |
| Men | 60.0 | 75.0 | 60.0 | 85.7 |
| Total | 100.0 | 100.0 | 100.0 | 100.0 |
Absence due to illness, as a percentage of ordinary work-hours excluding leave time and vacation, was distributed as follows.
| January–December | |||
|---|---|---|---|
| Percent | 2008 | 2007 | |
| Total absence due to illness | 2.1 | 2.6 | |
| Absence due to illness for a period of 60 consecutive days or longer |
1.0 | 1.5 | |
| Total absence due to illness, men | 1.6 | 2.0 | |
| Total absence due to illness, women | 3.2 | 3.8 | |
| Total absence due to illness, employees 29 years of age and younger |
1.9 | 1.1 | |
| Total absence due to illness, employees 30–49 years of age |
2.0 | 2.2 | |
| Total absence due to illness, employees 50 years of age and older |
2.3 | 3.0 |
Total personnel expenses were distributed by nature as follows.
| January–December | |||
|---|---|---|---|
| SEK in millions | 2008 | 2007 | |
| Salaries and other remuneration | 1,215 | 1,218 | |
| Social security expenses | |||
| Employer's social security contributions | 398 | 403 | |
| Pension expenses | 379 | -288 | |
| Total social security expenses | 777 | 115 | |
| Other personnel expenses | 72 | 86 | |
| Total personnel expenses recognized by nature |
2,064 | 1,419 |
Salaries and other remuneration were divided between Corporate Officers and other employees as follows.
| SEK in millions Country |
January–December | |||
|---|---|---|---|---|
| 2007 | ||||
| Corporate Officers (of which variable pay) |
Other employees |
Corporate Officers (of which variable pay) |
Other employees |
|
| Sweden | 41 (9) | 1,174 | 58 (7) | 1,160 |
| Total | 41 (9) | 1,174 | 58 (7) | 1,160 |
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 6 other members (2007: 5 members) of the Leadership Team 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 | 2008 | 2007 |
| Pension expenses | 15 | 18 |
| Outstanding pension commitments | 168 | 184 |
For additional information, see section "Remuneration to corporate officers" in "Notes to Consolidated Financial Statements" (Note 32).
Remuneration paid was as follows. See also additional information in "Notes to Consolidated Financial Statements" (Note 33).
| January–December | ||
|---|---|---|
| SEK in millions | 2008 | 2007 |
| PricewaterhouseCoopers AB (PwC) | ||
| Audits | 9 | 9 |
| Audit-related services | 0 | 1 |
| Tax services, all other services | 0 | 1 |
| Total | 9 | 11 |
| Ernst & Young AB (E&Y) | ||
| Tax services, all other services | 4 | 1 |
| Total | 4 | 1 |
| KPMG Bohlins AB (KPMG) | ||
| Tax services, all other services | 5 | 6 |
| Total | 5 | 6 |
| Other accounting firms | ||
| Tax services, all other services | 3 | 4 |
| Total | 3 | 4 |
| Total | 21 | 22 |
In 2008 and 2007, no audit firm fees were capitalized as transaction costs in business combinations and similar transactions.
| Subsidiary, | Participation | Number | Carrying value (SEK in millions) | ||
|---|---|---|---|---|---|
| Corp. Reg. No., registered office | (%) | of shares | 2008 | 2007 | |
| Swedish companies | |||||
| TeliaSonera Skanova Access AB, 556446-3734, Stockholm | 100 | 21,255,000 | 34,003 | 3 | |
| Telia Nättjänster Norden AB, 556459-3076, Stockholm | 100 | 10,000 | 5,557 | 5,557 | |
| Baltic Tele AB, 556454-0085, Stockholm | 100 | 100,000 | 3,096 | 3,096 | |
| TeliaSonera Sverige AB, 556430-0142, Stockholm | 100 | 3,000,000 | 2,898 | 2,898 | |
| Amber Mobile Teleholding AB, 556554-7774, Stockholm | 100 | 1,000 | 2,806 | 2,806 | |
| TeliaSonera Mobile Networks AB, 556025-7932, Nacka | 100 | 550,000 | 2,698 | 2,683 | |
| Telia International AB, 556352-1284, Stockholm | 100 | 20,000 | 1,722 | 1,722 | |
| Telia Fastigheter Telaris AB, 556343-6434, Stockholm | 100 | 50,000,000 | 731 | 731 | |
| Cygate Group AB (publ), 556364-0084, Solna | 100 | 532,724,280 | 681 | 681 | |
| Telia International Holdings AB, 556572-1486, Stockholm | 100 | 1,000 | 508 | 508 | |
| 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 | |
| IKT II Holding AB, 556635-7306, Stockholm | 100 | 1,822,791 | 120 | 120 | |
| Sonera Sverige AB, 556476-3133, Stockholm | 100 | 52,000 | 75 | 75 | |
| Telia Electronic Commerce AB, 556228-8976, Stockholm | 100 | 27,500 | 45 | 45 | |
| Sense Communications AB, 556582-8968, Stockholm | 100 | 250,000 | 34 | 34 | |
| Sergel Kredittjänster AB, 556264-8310, Stockholm | 100 | 5,000 | 8 | 8 | |
| Telia InfoMedia Interactive AB, 556138-5781, Stockholm | 100 | 250,000 | 8 | 8 | |
| Telia International Management AB, 556595-2917, Stockholm | 100 | 1,000 | 5 | 5 | |
| TeliaSonera Asset Finance AB, 556599-4729, Stockholm | 100 | 1,000 | 3 | 3 | |
| TeliaSonera Network Sales AB, 556458-0040, Stockholm | 100 | 10,000 | 3 | 3 | |
| Telia Norge Holding AB, 556591-9759, Stockholm | 100 | 1,000 | 0 | 0 | |
| Other operating, dormant and divested companies | 0 | 304 |
| Subsidiary, | Participation | Number | Carrying value (SEK in millions) | ||
|---|---|---|---|---|---|
| Corp. Reg. No., registered office | (%) | of shares | 2008 | 2007 | |
| Companies outside Sweden | |||||
| TeliaSonera Finland Oyj, 1475607-9, Helsinki | 100 | 1,417,360,375 | 75,448 | 71,184 | |
| Sergel Oy, 1571416-1, Helsinki | 100 | 267,966,000 | 277 | 277 | |
| TeliaSonera International Carrier Finland Oy, 1649304-9, Helsinki | 100 | 100 | 37 | 37 | |
| Telia NetCom Holding AS, 954393232, Oslo | 100 | 100 | 4,596 | 4,596 | |
| NextGenTel AS, 981649141, Bergen | 100 | 3,750,000,000 | 2,335 | 2,335 | |
| TeliaSonera Chess Holding AS, 980107760, Bergen | 100 | 160,959,656 | 2,315 | 2,315 | |
| ComHouse AS, 988755656, Larvik | 100 | 181,700,000 | 239 | – | |
| Telia Norge AS, 975961176, Oslo | 100 | 2,000 | 189 | 189 | |
| TeliaSonera International Carrier Norway AS, 981946685, Oslo | 100 | 32,666 | 80 | 80 | |
| TeliaSonera Danmark A/S, 18530740, Copenhagen | 100 | 14,500 | 6,835 | 6,835 | |
| Amber Teleholding A/S, 20758694, Copenhagen | 100 | 1,000 | 3,048 | 3,048 | |
| debitel Danmark A/S, 19670996, Albertslund | 100 | 200,000,000 | 1,344 | 1,344 | |
| TeliaSonera International Carrier Denmark A/S, 24210413, Copenhagen | 100 | 1,000 | 172 | 172 | |
| UAB Sergel, 125026242, Vilnius | 100 | 1,500 | 4 | – | |
| SIA Telia Latvija, 000305757, Riga | 100 | 328,300 | 123 | 13 | |
| 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 | – | |
| Xfera Móviles S.A., A82528548, Madrid | 76.6 | 517,025,247 | 2,523 | 2,523 | |
| TeliaSonera Telekomünikasyon Hizmetleri L.S., 381395, Istanbul | 99 | 79,133 | 10 | – | |
| 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 Switzerland AG, 2171000547-8, Zurich | 100 | 1,000 | 54 | 54 | |
| TeliaSonera International Carrier Netherlands B.V., 34128048, Amsterdam | 100 | 910 | 60 | 60 | |
| 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 | |
| ZAO TeliaSonera International Carrier Russia, 102780919732, Moscow | 100 | 220,807,825 | 200 | 200 | |
| TeliaSonera International Carrier Poland Sp. z o.o., KRS00000186, Warsaw | 100 | 52,500 | 63 | 63 | |
| TeliaSonera International Carrier Czech Republic a.s., 26207842, Prague | 100 | 20,000 | 182 | 182 | |
| TeliaSonera International Carrier Slovakia, s.r.o., 36709913, Bratislava | 100 | – | 7 | 0 | |
| TeliaSonera International Carrier Hungaria Távközlési Kft., 01-09-688192, Budapest |
100 | – | 32 | 15 | |
| TeliaSonera International Carrier Bulgaria EOOD, 175215740, Sofia | 100 | 40,050 | 19 | – | |
| TeliaSonera International Carrier Romania S.R.L., 20974985, Bukarest | 100 | 20,001 | 10 | 0 | |
| TeliaSonera International Carrier Telekomünikasyon L.S., 609188-556770, Istanbul |
100 | 55,919 | 8 | 0 | |
| TeliaSonera International Carrier, Inc., 541837195, Herndon, VA | 100 | 100 | 530 | 530 | |
| TeliaSonera International Carrier Singapore Pte. Ltd, 200005728N, Singapore | 100 | 1,200,002 | 1 | 5 | |
| Telia Swedtel (Philippines), Inc., AS095-003695, Manila | 100 | 124,995 | 2 | 2 | |
| Other operating, dormant and divested companies | 0 | 26 | |||
| Total | 158,858 | 120,488 |
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.
Telia Danmark is a branch of Telia Nättjänster Norden AB. Telia Norge Holding AB and Telia NetCom Holding AS jointly own all shares in NetCom AS. Baltic Tele AB holds 60 percent of the shares in AS Eesti Telekom and Amber Teleholding A/S 60 percent of the shares in TEO LT, AB (63 percent of the votes considering the company's treasury shares). Amber Mobile Teleholding AB owns all shares in UAB Omnitel. 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.
In 2008, the previously associated company ComHouse AS became a subsidiary, while the holding in TeliaSonera Telekomünikasyon Hizmetleri L.S. was transferred from a subsidiary. Other operating and dormant companies do not control Group assets of significant value. Holdings of Other Swedish and non-Swedish companies for the comparative year (SEK 304 million and SEK 26 million, respectively), refer to the liquidations of IKT I Holding AB, Infonet Svenska AB, Telia Holding Personal AB and Telefos II B.V. in 2008.
In addition to the companies mentioned above, TeliaSonera AB indirectly controls a number of operating and dormant subsidiaries of subsidiaries.
At the disposal of the Annual General Meeting:
| SEK | |
|---|---|
| Retained earnings | 28,483,266,524 |
| Net income | 30,306,233,346 |
| Total | 58,789,499,870 |
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 Board proposes that this sum be appropriated as follows:
| SEK | |
|---|---|
| SEK 1.80 per share ordinary dividend to the shareholders | 8,082,822,983 |
| To be carried forward to 2009 | 50,706,676,887 |
| Total | 58,789,499,870 |
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 9, 2009
Tom von Weymarn Chairman
Agneta Ahlström Maija-Liisa Friman Elof Isaksson
Conny Karlsson Lars G Nordström Timo Peltola
Jon Risfelt Caroline Sundewall Berith Westman
Lars Nyberg President and CEO
Our auditors' report was rendered March 11, 2009
PricewaterhouseCoopers AB
Göran Tidström Authorized Public Accountant Auditor in charge
Håkan Malmström Authorized Public Accountant
We have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the Board of Directors and the managing director of TeliaSonera AB (publ) for the year 2008. The company's annual accounts and consolidated accounts are included in the printed version on pages 30-108. The Board of Directors and the managing director are responsible for these accounts and the administration of the company as well as for the application of the Annual Accounts Act when preparing the annual accounts and the application of international financial reporting standards IFRSs as adopted by the EU and the Annual Accounts Act when preparing the consolidated accounts. Our responsibility is to express an opinion on the annual accounts, the consolidated accounts and the administration based on our audit.
We conducted our audit in accordance with generally accepted auditing standards in Sweden. Those standards require that we plan and perform the audit to obtain reasonable assurance that the annual accounts and the consolidated accounts are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts. An audit also includes assessing the accounting principles used and their application by the Board of Directors and the managing director and significant estimates made by the Board of Directors and the managing director when preparing the annual accounts and consolidated accounts as well as evaluating the overall presentation of information in the annual accounts and the consolidated accounts. As a basis for our opinion concerning discharge from liability, we examined significant decisions, actions taken and circumstances of the company in order to be able to determine the liability, if any, to the company of any board member or the managing director. We also examined whether any board member 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 our audit provides a reasonable basis for our opinion set out below.
The annual accounts have been prepared in accordance with the Annual Accounts Act and give a true and fair view of the company's financial position and results of operations in accordance with generally accepted accounting principles in Sweden. The consolidated accounts have been prepared in accordance with international financial reporting standards IFRSs as adopted by the EU and the Annual Accounts Act and give a true and fair view of the group's financial position and results of operations. The statutory report of the directors is consistent with the other parts of the annual accounts and the consolidated accounts.
We recommend to the annual meeting of shareholders that the income statements and balance sheets of the parent company and the group be adopted, that the profit of the parent company be dealt with in accordance with the proposal in the 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 11, 2009
PricewaterhouseCoopers AB
Göran Tidström Authorized Public Accountant Auditor in charge
Håkan Malmström Authorized Public Accountant
| TeliaSonera Group | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Financial Data (IFRS) | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | 1999 |
| Income statements (SEK in millions) | ||||||||||
| Net sales | 103,585 | 96,344 | 91,060 | 87,661 | 81,937 | 82,425 | 59,483 | 57,196 | 54,064 | 52,121 |
| Operating income | 28,648 | 26,155 | 25,489 | 17,549 | 18,793 | 14,710 | -10,895 | 5,460 | 12,006 | 5,946 |
| Income after financial items | 26,411 | 25,251 | 25,226 | 17,019 | 17,448 | 13,899 | -11,616 | 4,808 | 11,717 | 5,980 |
| Net income | 21,442 | 20,298 | 19,283 | 13,694 | 14,264 | 10,049 | -7,997 | 1,891 | 10,270 | 4,226 |
| of which attributable to parent company shareholders |
19,011 | 17,674 | 16,987 | 11,697 | 12,964 | 9,080 | -8,067 | 1,869 | 10,278 | 4,222 |
| EBITDA excluding non-recurring items | 32,954 | 31,021 | 32,266 | 29,411 | 30,196 | 30,700 | 15,692 | 12,915 | 13,087 | 14,059 |
| EBITDA | 31,658 | 30,333 | 31,113 | 27,508 | 30,841 | 32,035 | 9,421 | 13,299 | 21,425 | 12,875 |
| Amortization, depreciation and impairment losses | 12,106 | 11,875 | 11,203 | 13,188 | 15,596 | 17,707 | 20,844 | 13,975 | 8,222 | 7,652 |
| Balance sheets (SEK in millions) | ||||||||||
| Goodwill and other intangible assets | 100,968 | 83,909 | 74,172 | 74,367 | 69,534 | 61,820 | 68,106 | 26,816 | 25,198 | 2,146 |
| Property, plant and equipment | 61,946 | 52,602 | 48,195 | 48,201 | 47,212 | 49,161 | 56,172 | 47,314 | 43,807 | 33,318 |
| Financial assets | 62,265 | 48,633 | 41,826 | 40,526 | 35,353 | 42,061 | 48,534 | 20,784 | 22,335 | 18,023 |
| Current assets and non-current assets held-for | 39,107 | 31,558 | 35,199 | 40,681 | 39,873 | 37,018 | 33,844 | 33,277 | 31,375 | 23,117 |
| sale | ||||||||||
| Total assets | 264,286 | 216,702 | 199,392 | 203,775 | 191,972 | 190,060 | 206,656 | 128,191 | 122,715 | 76,604 |
| Total equity | 141,448 | 127,057 | 127,717 | 135,694 | 128,067 | 115,834 | 113,949 | 60,089 | 56,308 | 33,103 |
| of which shareholders' equity | 130,387 | 117,274 | 119,217 | 127,049 | 121,133 | 112,393 | 108,829 | 59,885 | 55,988 | 32,893 |
| Provisions | 24,594 | 16,748 | 15,471 | 15,564 | 13,402 | 15,297 | 18,406 | 13,107 | 11,351 | 10,488 |
| Interest-bearing liabilities | 65,799 | 43,579 | 27,729 | 26,735 | 24,675 | 30,554 | 44,732 | 29,124 | 34,042 | 16,057 |
| Non-interest-bearing liabilities | 32,445 | 29,318 | 28,475 | 25,782 | 25,828 | 28,375 | 29,569 | 25,871 | 21,014 | 16,956 |
| Total equity and liabilities | 264,286 | 216,702 | 199,392 | 203,775 | 191,972 | 190,060 | 206,656 | 128,191 | 122,715 | 76,604 |
| Capital employed | 199,186 | 153,090 | 127,195 | 146,712 | 147,132 | 142,235 | 157,035 | 90,971 | 92,374 | 50,936 |
| Operating capital | 178,017 | 140,925 | 110,163 | 125,299 | 126,198 | 120,006 | 137,113 | 70,150 | 75,042 | 39,160 |
| Net debt | 48,614 | 34,155 | 14,892 | 7,879 | 6,580 | 17,648 | 38,075 | 20,004 | 32,512 | 14,280 |
| Net interest-bearing liability | 44,652 | 31,830 | 10,736 | 5,320 | 3,741 | 8,847 | 25,034 | 10,661 | 20,235 | 7,527 |
| Cash flows (SEK in millions) | ||||||||||
| Cash flow from operating activities | 27,086 | 26,529 | 27,501 | 26,990 | 24,403 | 26,443 | 12,449 | 10,416 | 10,152 | 10,715 |
| Cash flow from investing activities | -19,634 | -15,705 | -13,084 | -12,236 | -7,991 | -3,443 | -5,553 | 3,632 | -37,121 | -10,701 |
| Cash flow before financing activities | 7,452 | 10,824 | 14,417 | 14,754 | 16,412 | 23,000 | 6,896 | 14,048 | -26,969 | 14 |
| Cash flow from financing activities | -4,359 | -14,726 | -19,382 | -15,653 | -11,102 | -16,412 | -10,344 | -6,608 | 26,818 | 1,005 |
| Cash flow for the year | 3,093 | -3,902 | -4,965 | -899 | 5,310 | 6,588 | -3,448 | 7,440 | -151 | 1,019 |
| Free cash flow | 11,328 | 13,004 | 16,596 | 15,594 | 14,118 | 17,351 | 3,877 | -6,506 | -5,845 | 2,828 |
| Investments (SEK in millions) | ||||||||||
| CAPEX | 15,795 | 13,531 | 11,101 | 11,583 | 10,331 | 9,267 | 14,345 | 17,713 | 16,580 | 7,701 |
| Acquisitions and other investments | 9,060 | 7,171 | 3,951 | 2,732 | 9,099 | 2,851 | 40,093 | 3,022 | 31,162 | 4,444 |
| Total investments | 24,855 | 20,702 | 15,052 | 14,315 | 19,430 | 12,118 | 54,438 | 20,735 | 47,742 | 12,145 |
| Business ratios | ||||||||||
| EBITDA margin (%) | 31.8 | 32.2 | 35.4 | 33.6 | 36.9 | 37.2 | 26.4 | 22.6 | 24.2 | 27.0 |
| Operating margin (%) | 27.7 | 27.1 | 28.0 | 20.0 | 22.9 | 17.8 | -18.3 | 9.5 | 22.2 | 11.4 |
| Return on sales (%) | 20.7 | 21.1 | 21.2 | 15.6 | 17.4 | 12.2 | -13.4 | 3.3 | 19.0 | 8.1 |
| Amortization, depreciation and impairment losses as a percentage of net sales |
11.7 | 12.3 | 12.3 | 15.0 | 19.0 | 21.5 | 35.0 | 24.4 | 15.2 | 14.7 |
| CAPEX-to-sales ratio (%) | 15.2 | 14.0 | 12.2 | 13.2 | 12.6 | 11.2 | 24.1 | 31.0 | 30.7 | 14.8 |
| Total asset turnover (multiple) | 0.43 | 0.46 | 0.45 | 0.44 | 0.43 | 0.42 | 0.36 | 0.46 | 0.54 | 0.72 |
| Turnover of capital employed (multiple) | 0.59 | 0.69 | 0.67 | 0.60 | 0.57 | 0.55 | 0.48 | 0.62 | 0.75 | 1.10 |
| Return on assets (%) | 12.7 | 13.1 | 13.2 | 9.4 | 10.5 | 8.7 | -5.7 | 5.7 | 13.6 | 9.4 |
| Return on capital employed (%) | 17.3 | 19.4 | 19.5 | 12.6 | 13.9 | 11.6 | -7.7 | 7.8 | 18.9 | 14.4 |
| Return on equity (%) | 17.2 | 18.6 | 17.2 | 10.3 | 11.6 | 8.5 | -9.7 | 3.3 | 23.9 | 14.2 |
| Equity/assets ratio (%) | 50.5 | 50.3 | 49.9 | 58.9 | 63.8 | 58.5 | 54.2 | 46.4 | 44.7 | 41.3 |
| Net debt/equity ratio (%) | 36.5 | 31.3 | 15.0 | 6.6 | 5.4 | 15.9 | 34.0 | 33.6 | 59.3 | 45.1 |
| Interest coverage ratio (multiple) | 7.6 | 14.2 | 18.1 | 11.7 | 7.6 | 5.1 | -4.7 | 3.0 | 7.3 | 8.5 |
| Self-financing rate (multiple) | 1.09 | 1.28 | 1.83 | 1.89 | 1.26 | 2.18 | 0.23 | 0.50 | 0.21 | 0.88 |
| Share data | ||||||||||
| Number of outstanding shares (millions) | ||||||||||
| – at the end of the period | 4,490.5 | 4,490.5 | 4,490.5 | 4,490.5 | 4,675.2 | 4,675.2 | 4,605.8 | 3,001.2 | 3,001.2 | 8.8 |
| – average, basic¹ | 4,490.5 | 4,490.5 | 4,490.5 | 4,574.0 | 4,675.2 | 4,667.6 | 3,124.3 | 3,001.2 | 2,932.8 | 2,851.2 |
| – average, diluted¹ | 4,490.5 | 4,490.5 | 4,490.5 | 4,574,0 | 4,675.2 | 4,668.4 | 3,125.3 | 3,001.2 | 2,932.8 | 2,851.2 |
| Basic and diluted earnings/loss per share (SEK) | 4.23 | 3.94 | 3.78 | 2.56 | 2.77 | 1.95 | -2.58 | 0.62 | 3.50 | 1.48 |
| Cash dividend per share (SEK)² ³ | 1.80 | 4.00 | 6.30 | 3.50 | 1.20 | 1.00 | 0.40 | 0.20 | 0.50 | 0.52 |
| Total cash dividend (SEK in millions)² ³ | 8,083 | 17,962 | 28,290 | 15,717 | 5,610 | 4,675 | 1,870 | 600 | 1,501 | 1,470 |
| Pay-out ratio (%) | 42.5 | 101.6 | 166.5 | 136.9 | 43.3 | 51.4 | n/a | 32.1 | 14.3 | 34.8 |
| Shareholders' equity per share (SEK) | 29.04 | 26.12 | 26.55 | 28.29 | 25.91 | 24.04 | 23.63 | 19.95 | 18.66 | 11.54 |
¹ Adjusted for a 324-to-1 share split in 2000.
² For 2008 as proposed by the Board of Directors. ³ 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 |
2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | 1999 |
|---|---|---|---|---|---|---|---|---|---|---|
| Mobility Services | ||||||||||
| Total subscriptions (thousands) | 15,900 | 14,501 | 13,434 | 13,000 | 11,545 | 9,519 | 9,202 | 4,936 | 4,519 | 2,841 |
| of which Sweden | ||||||||||
| Mobile telephony, total subscriptions (thousands) | 5,334 | 4,807 | 4,603 | 4,387 | 4,243 | 3,838 | 3,604 | 3,439 | 3,257 | 2,638 |
| Mobile telephony, total GSM/UMTS (thousands) | 5,334 | 4,807 | 4,489 | 4,267 | 4,117 | 3,706 | 3,467 | 3,295 | 3,076 | 2,348 |
| Mobile telephony, total NMT (thousands) | – | – | 114 | 120 | 126 | 132 | 137 | 144 | 181 | 290 |
| Mobile telephony, outgoing traffic (millions of minutes) | 7,849 | 6,635 | 5,335 | 4,456 | 3,814 | 3,313 | 3,201 | 3,016 | 2,591 | 2,089 |
| Mobile telephony, incoming traffic (millions of minutes) | 3,815 | 3,474 | 3,058 | 2,750 | 2,573 | 2,400 | 2,272 | 2,067 | 1,766 | 1,416 |
| Mobile telephony, MoU (minutes) | 191 | 178 | 157 | 139 | 131 | 128 | 131 | 127 | 123 | 121 |
| Mobile telephony, blended churn (%) | 14 | 15 | 17 | 15 | 11 | 13 | n/a | n/a | n/a | n/a |
| Mobile telephony, ARPU (SEK) | 189 | 194 | 204 | 213 | 227 | 252 | 262 | 285 | 308 | 332 |
| of which Finland | ||||||||||
| Mobile telephony, total subscriptions (thousands) | 2,676 | 2,449 | 2,407 | 2,507 | 2,297 | 2,428 | 2,790 | 239 | 149 | 33 |
| Mobile telephony, outgoing traffic (millions of minutes) | 5,618 | 5,473 | 5,936 | 5,642 | 4,820 | 4,743 | n/a | n/a | n/a | n/a |
| Mobile telephony, incoming traffic (millions of minutes) | 2,911 | 2,656 | 2,554 | 2,405 | 2,147 | 2,090 | n/a | n/a | n/a | n/a |
| Mobile telephony, traffic per customer and month (minutes) |
276 | 284 | 285 | 277 | 253 | 232 | n/a | n/a | n/a | n/a |
| Mobile telephony, blended churn (%) | 17 | 16 | 19 | 24 | 28 | 17 | n/a | n/a | n/a | n/a |
| Mobile telephony, ARPU (EUR) | 26 | 29 | 29 | 30 | 38 | 38 | n/a | n/a | n/a | n/a |
| of which Norway | ||||||||||
| Mobile telephony, total subscriptions (thousands) | 1,581 | 1,577 | 1,641 | 1,651 | 1,308 | 1,195 | 1,089 | 970 | 850 | – |
| Mobile telephony, traffic per customer and month | 247 | 236 | 218 | 192 | 175 | 164 | 156 | 133 | 130 | – |
| (minutes) | ||||||||||
| Mobile telephony, ARPU (NOK) of which Denmark |
330 | 348 | 352 | 333 | 339 | 342 | 330 | 310 | 308 | – |
| Mobile telephony, total subscriptions (thousands) | 1,493 | 1,449 | 1,123 | 1,154 | 1,115 | 472 | 421 | 288 | 263 | 170 |
| of which Baltic countries | ||||||||||
| Mobile telephony, subscriptions, Lithuania (thousands) | 2,012 | 2,012 | 2,074 | 1,889 | 1,338 | 1,052 | 851 | – | – | – |
| Mobile telephony, subscriptions, Latvia (thousands) | 1,056 | 1,015 | 803 | 735 | 649 | 534 | 447 | – | – | – |
| Mobile telephony, subscriptions, Estonia (thousands) of which Spain |
778 | 765 | 759 | 677 | 595 | – | – | – | – | – |
| Mobile telephony, subscriptions (thousands) | 970 | 427 | 24 | – | – | – | – | – | – | – |
| Broadband Services | ||||||||||
| Broadband, total subscriptions (thousands) | 2,434 | 2,326 | 1,990 | 1,430 | 1,029 | 678 | 495 | 255 | 59 | 14 |
| Fixed telephony, total subscriptions (thousands) | 5,806 | 6,218 | 6,497 | 7,064 | 8,312 | 8,087 | 8,296 | 6,585 | 6,621 | 6,519 |
| of which Sweden | ||||||||||
| Broadband, subscriptions (thousands) | 1,122 | 1,061 | 915 | 711 | 526 | 394 | 317 | 194 | 27 | 2 |
| Fixed telephony, total subscriptions (thousands) | 4,000 | 4,295 | 4,586 | 5,036 | 6,115 | 6,283 | 6,415 | 6,585 | 6,621 | 6,519 |
| of which Finland | ||||||||||
| Broadband, subscriptions (thousands) | 478 | 473 | 412 | 350 | 243 | 150 | 82 | – | – | – |
| Fixed telephony, total subscriptions (thousands) | 420 | 497 | 580 | 647 | 740 | 804 | 722 | – | – | – |
| of which Norway | ||||||||||
| Broadband, subscriptions (thousands) | 176 | 177 | 172 | – | – | – | – | – | – | – |
| of which Denmark | ||||||||||
| Broadband, subscriptions (thousands) | 184 | 187 | 162 | 151 | 126 | 104 | 81 | 58 | 30 | 11 |
| Cable TV, subscriptions (thousands) | 210 | 210 | 210 | 204 | 201 | 195 | 188 | 179 | 175 | 170 |
| Fixed telephony, prefix and contract customers (thousands) |
226 | 251 | 165 | 195 | 212 | 172 | 223 | n/a | n/a | n/a |
| of which Baltic countries | ||||||||||
| Broadband, subscriptions, Lithuania (thousands) | 298 | 259 | 181 | 105 | 50 | 25 | 11 | – | – | – |
| Fixed telephony, subscriptions, Lithuania (thousands) | 769 | 789 | 785 | 798 | 819 | 828 | 936 | – | – | – |
| Broadband, subscriptions, Estonia (thousands) | 176 | 163 | 141 | 107 | 77 | – | – | – | – | – |
| Fixed telephony, subscriptions, Estonia (thousands) | 391 | 386 | 381 | 388 | 426 | – | – | – | – | – |
| Eurasia | ||||||||||
| Mobile telephony, total subscriptions (thousands) | 18,416 | 12,147 | 7,352 | 6,146 | 3,866 | 2,385 | 1,614 | – | – | – |
| Mobile telephony, subscriptions, Kazakhstan (thousands) |
7,083 | 6,017 | 3,539 | 3,320 | 1,795 | 990 | 615 | – | – | – |
| Mobile telephony, subscriptions, Azerbaijan (thousands) | 3,471 | 3,029 | 2,333 | 1,741 | 1,291 | 912 | 669 | – | – | – |
| Mobile telephony, subscriptions, Uzbekistan (thousands) |
2,683 | 690 | – | – | – | – | – | – | – | – |
| Mobile telephony, subscriptions, Tajikistan (thousands) | 1,154 | 611 | – | – | – | – | – | – | – | – |
| Mobile telephony, subscriptions, Georgia (thousands) | 1,582 | 1,296 | 1,032 | 715 | 481 | 307 | 198 | – | – | – |
| Mobile telephony, subscriptions, Moldova (thousands) | 550 | 504 | 448 | 370 | 299 | 176 | 132 | – | – | – |
| Mobile telephony, subscriptions, Nepal (thousands) | 1,749 | – | – | – | – | – | – | – | – | – |
| Mobile telephony, subscriptions, Cambodia (thousands) | 144 | – | – | – | – | – | – | – | – | – |
| Operational Data | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | 1999 |
|---|---|---|---|---|---|---|---|---|---|---|
| Human Resources | ||||||||||
| Number of employees as of December 31 | 32,171 | 31,292 | 28,528 | 28,175 | 29,082 | 26,694 | 29,173 | 17,149 | 29,868 | 30,643 |
| Average number of full-time employees during the year | 30,037 | 28,561 | 26,969 | 27,403 | 25,381 | 26,188 | 17,277 | 24,979 | 30,307 | 29,546 |
| of whom, in Sweden | 10,152 | 10,002 | 10,427 | 11,061 | 10,948 | 11,321 | 12,593 | 20,922 | 25,383 | 25,414 |
| of whom, in Finland | 5,258 | 5,697 | 5,936 | 6,369 | 6,750 | 6,408 | 1,142 | 775 | 999 | 662 |
| of whom, in other countries | 14,627 | 12,862 | 10,606 | 9,973 | 7,683 | 8,459 | 3,542 | 3,282 | 3,925 | 3,470 |
| of whom, women | 13,251 | 12,571 | 12,164 | 11,934 | 11,427 | 10,936 | 7,546 | 9,196 | 11,521 | 11,268 |
| of whom, men | 16,786 | 15,990 | 14,805 | 15,469 | 13,954 | 15,252 | 9,731 | 15,783 | 18,786 | 18,278 |
| Salaries and remuneration (SEK in millions) | 11,011 | 9,632 | 8,918 | 9,023 | 8,674 | 8,460 | 6,732 | 8,852 | 9,543 | 9,184 |
| Employer's social security contributions (SEK in millions) | 2,134 | 1,971 | 1,903 | 1,970 | 1,902 | 1,950 | 1,804 | 2,614 | 3,055 | 2,895 |
| Salaries and employer's social security contributions as a percentage of operating costs |
16.0 | 14.8 | 15.2 | 15.5 | 16.4 | 14.9 | 14.9 | 19.4 | 25.5 | 26.2 |
| Net sales per employee (SEK in thousands) | 3,449 | 3,373 | 3,376 | 3,199 | 3,228 | 3,147 | 3,443 | 2,290 | 1,784 | 1,764 |
| Operating income per employee (SEK in thousands) | 954 | 916 | 945 | 640 | 740 | 562 | -631 | 219 | 396 | 201 |
| Change in labor productivity (%) | 7.8 | 7.1 | 11.2 | 8.3 | 10.8 | -4.9 | 53.5 | 31.9 | 8.3 | 17.9 |
| Net income per employee (SEK in thousands) | 714 | 711 | 715 | 500 | 511 | 347 | -467 | 75 | 339 | 143 |
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, write-downs, 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 (excluding minority interests) less the (proposed) dividend. For the parent company also including untaxed reserves net of tax.
Total assets less non-interest-bearing liabilities and non-interestbearing provisions, and the (proposed) dividend.
Non-interest-bearing assets less non-interest-bearing liabilities, including the (proposed) dividend, and non-interest-bearing provisions.
As Operating capital, but assets and liabilities exclude deferred and current tax items, respectively, and liabilities exclude the (proposed) dividend.
Interest-bearing liabilities and provisions less interest-bearing assets but including investments in associated companies and joint ventures.
Interest-bearing liabilities less derivatives recognized as financial assets and hedging long-term and short-term borrowings, and less short-term investments and cash and bank.
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 (including minority interests) expressed as a percentage of net sales.
Net sales divided by the average balance sheet total.
Net sales divided by the average capital employed.
Operating income plus financial revenues expressed as a percentage of the average balance sheet total.
Operating income plus financial revenues expressed as a percentage of average capital employed.
Net income (excluding minority interests) expressed as a percentage of average adjusted shareholders' equity.
Adjusted shareholders' equity and minority interests expressed as a percentage of total assets.
Net debt expressed as a percentage of adjusted shareholders' equity and minority interests.
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 shareholders' equity per share is based on the number of shares at the end of the period.
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 | NPR | Nepalese rupee |
|---|---|---|---|---|---|
| AZN | Azerbaijan manat | JPY | Japanese yen | RUB | Russian ruble |
| DKK | Danish krone | KZT | Kazakhstan tenge | TJS | Tajikistan somoni |
| EEK | Estonian kroon | LTL | Lithuanian lita | TRY | Turkish lira |
| EUR | European euro | LVL | Latvian lat | USD | U.S. dollar |
| GBP | Pound sterling | NOK | Norwegian krone | UZS | Uzbekistan som |
TeliaSonera has in the opinion of the Board of Directors followed the Swedish Code of Corporate Governance during 2008.
The corporate governance report, including the description of internal controls, does not form part of the official annual report and has not been audited.
This report starts with an overview of TeliaSonera's corporate governance model and Group-wide governance framework, followed by a description of the company's decision-making forums and processes. A description of the internal control over financial reporting concludes the report.
TeliaSonera's corporate governance model is designed to ensure that operative 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.
The Shareholders' Meeting is the company's highest decisionmaking forum. Among other issues, the Shareholders' Meeting elects the members of the Board of Directors. The Board is responsible for the governance and its duties includes among other issues appointment and dismissal of the CEO, who is responsible for the company's business development.
The Group-wide governance framework comprises common direction and shared values, the management model and delegation of obligations and authority as well as the policies issued by Group functions.
In order to provide a general guidance to all employees in the Group the following governance documents have been issued.
Our corporate strategy sets out the general direction of the Group, and defines our business concept.
TeliaSonera offers reliable, innovative and user-friendly services for transferring and packaging of voice, images, data, information, transactions and entertainment. TeliaSonera is present in the Nordic and Baltic countries, the emerging markets of Eurasia, including Russia and Turkey, and in Spain. TeliaSonera is also the leading European wholesale provider of quality cross-border voice, IP and capacity services, provided through wholly-owned international carrier network.
To create shareholder value through sustainable and improved profitability and cash flows, we will deliver our services in a cost effective and sustainable manner.
See section Corporate Strategy (page 9) for more information.
Our vision, "Simplicity makes everything possible," defines the way we look at our future.
Our shared values, "Add value," "Show respect" and "Make it happen," focus on the behavior we want to promote.
Our code of ethics sets out the ethical standards within which we act. The common direction and shared values are decided by the Board of Directors.
The management model describes
The management model is decided by the Board of Directors.
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.
The delegation is decided by the CEO, within limits set by the Board of Directors.
Describes yearly targets for the Group as a whole and for each business area and is directed to the heads of business areas and corporate functions.
The business targets for the Group are decided by the Board of Directors.
Sets out how decisions by the CEO are made in individual cases.
The heads of Group functions shall secure that necessary corporate policies, instructions and guidelines are issued within their area of responsibility.
The business area-wide governance framework shall be set within the boundaries of the Group wide framework. The business concept, vision, shared values and code of ethics are common for the entire Group.
The corporate head office assists the CEO in setting the framework for the activities of the business areas. The head office also provides the business areas with certain support regarding for example legal and communications issues.
A Performance Management Model is under implementation in TeliaSonera in order to maximize performance and in a structured way encourage all employees to strive towards the same goals. The model will:
TeliaSonera is a Swedish, public, limited liability company and is governed by the Swedish Companies Act and the company's Articles of Association. According to the Companies Act, 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. TeliaSonera had 651,816 shareholders at year-end 2008.
The company announced in the Interim Report January-September 2008 that the Annual General Meeting (AGM) will be held on April 1, 2009, in Stockholm. Information about the shareholders' rights to have an issue addressed at the General Meeting and the deadline for when such a request must have been received by the company to ensure that it is included in the notice of the ordinary AGM can be found on the company's website.
Shareholders had the opportunity to register for the AGM 2008 in several ways, for example via the company's website.
The AGM 2008 was held on March 31, 2008, in Stockholm. A shareholders' information meeting was held in Helsinki the following day, which was attended by the company's management and parts of the Board.
The entire Board of Directors, members of the Leadership Team and the chief auditor attended the AGM 2008. After nomination by the Nomination Committee, attorney Sven Unger was elected chairman of the AGM 2008. Peter Rudman, representing Nordea Fonder, and Thomas Andersson, representing Handelsbanken Fonder, were appointed to approve the minutes. None of them were members of the Board or employees of the company.
The AGM was held in Swedish and simultaneously interpreted into Finnish and English due to the company's international ownership. Material for the meeting was available in Swedish, Finnish and English.
TeliaSonera also provided shareholders who could not attend the AGM the possibility to follow the meeting via the internet and vote by proxies arranged by TeliaSonera. The shareholders attending the AGM were given the opportunity to ask questions, comment and make proposals for decisions.
The minutes from the meeting are available on the company's website in Swedish, Finnish and English.
After the AGM 2008, TeliaSonera's Nomination Committee consists of representatives of the company's four largest shareholders at the time of the notice of the AGM and the Chairman of the Board. The AGM decided that the Nomination Committee should consist of Viktoria Aastrup, (the Swedish State), Markku Tapio (the Finnish State), KG Lindvall (Swedbank Robur Funds), Lennart Ribohn (SEB Funds) and the Chairman of the Board Tom von Weymarn.
The Nomination Committee shall in accordance with its instruction nominate the Chairman and other members of the Board,
The Nomination Committee has reported to the company that the Committee is following the guidelines in the Swedish Code of Corporate Governance and that it intends to report its activities at the AGM and on the company's website. Shareholders are welcome to send nomination proposals to the Nomination Committee. Proposals can be sent by email to "[email protected]".
The Nomination Committee's proposals shall in accordance with the instruction be made public at the latest in connection with the notice of the AGM.
The Board of Directors is responsible for the governance, choice of strategic direction as well as substance of external communication of the Group. In that role the board makes decisions on i.a.:
As of the AGM 2008, TeliaSonera's Board of Directors consists of seven members elected by the AGM, 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. The AGM 2008 re-elected Tom von Weymarn to serve as Chairman of the Board.
All members elected by the AGM in 2008 are considered to be independent in relation to the company and the 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, responsibilities within the Board, including 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 Remuneration Committee handles issues regarding salary and other remuneration to the CEO and Leadership Team and incentive programs that target a broader group of employees.
The Audit Committee reviews the company's external financial reporting, auditing, accounting and internal financial reporting processes, including reviewing of accounting principles that are important for the company. The Audit Committee also reviews the environment of internal control over financial reporting as well as over business operations. In addition, reviews cover the performance and independence of the company's auditors.
The Audit Committee held six meetings in 2008
The Board of Directors' committees prepare decisions for the Board. The Remuneration Committee has the authority to approve
remuneration to persons in TeliaSonera's Leadership Team. The Audit Committee – and in some cases its chairman – has the right to make decisions regarding the purchase of services from the company's auditors within the framework decided by the Board.
TeliaSonera's General Counsel Jan Henrik Ahrnell served as secretary at the Board's and its committees' meetings.
The Board of Directors held nine ordinary meetings during 2008 as well as six extra meetings. In addition to following up on the day-today business of the Group, the Board of Directors paid special attention to:
The Board of Directors applied a systematic and structured evaluation of its internal work, also with the assistance of external consultants – Active Owner Partners AB. The result of this evaluation was reported to the Nomination Committee.
The CEO is responsible for the company's business development and leads and coordinates the day-to-day operations in accordance with the guidelines and instructions of the Board of Directors.
Headed by the CEO, the Leadership Team consists of 10 members: The CEO, CFO, General Counsel, Head of Group Human Resources, Head of Group Communications, Chief Information Officer, Presidents of the three business areas and the Head of the business sales division Business Services.
The Leadership Team holds meetings monthly. At these meetings, issues of strategic nature and Group-wide importance are reviewed. Business reviews with the business area heads are carried out quarterly.
According to the remuneration policy for the Leadership Team established by the AGM, TeliaSonera shall offer a competitive remuneration package. The salary consists of a base salary and a variable salary. The base salary follows the salary structure in each respective country while the objectives of the variable salary are established in a plan for each calendar year and are based on the Group's financial performance, the business unit's financial performance and individual performance objectives. The variable salary for members of the Leadership Team may be a maximum of 50 percent of the base salary.
There are currently no share or share price-related incentive programs at TeliaSonera.
The Board of Directors determines the base salary and other remuneration for the CEO. The Remuneration Committee approves, after proposals from the CEO, base salaries and other remuneration to members of the Leadership Team.
Lars Nyberg had an annual base salary of SEK 8,160,000. The CEO's variable salary may be a maximum of 50 percent of the base salary. In 2008 the outcome of Lars Nyberg's variable salary was SEK 3,100,800.
The Board of Directors is according to the Swedish Companies Act and the Swedish Code of Corporate Governance responsible for internal controls. During 2008 the Board has strived to further develop the company's internal controls over business operations and intends to continue developing these internal controls in 2009.
Internal controls over financial reporting is an integral part of TeliaSonera's corporate governance. It includes methods and procedures to safeguard the Group's assets, ensure and control the reliability and correctness of financial reporting in accordance with applicable legislation and guidelines, improve operational efficiency and control the level of risk in the business operations.
According to company policy adopted by the Board of Directors, the financial reporting of TeliaSonera shall be in line with high professional standards and be full, fair, accurate, punctual and understandable. TeliaSonera's policy for internal controls over financial reporting is based on the international COSO internal control framework.
The Board of Directors strives for a sufficient internal control environment within the Group. This environment should be stable and independent of external control requirements.
On an annual basis the Board of Directors reviews the company's Code of ethics. The purpose of the code is, among other things, to further promote honest and ethical conduct, clear communication, compliance with applicable governmental rules, the prompt internal reporting of violations of the code, and accountability for adherence to the code.
Planning for the operations is based on annual operating plans and the follow-up is conducted in a monthly basis, complemented
with rolling seven-quarter forecasts and quarterly business review meetings. The CEO sets goals for the operations based on the guidelines of the Board of Directors. To ensure performance, managers have annual targets for their particular operations.
Each unit of operations has a controller responsible for ensuring that the monthly and quarterly financial reporting follows policies and that the reports are delivered on time, sufficient internal controls exist and are performed, required reconciliations are properly done and larger business and financial risks are identified and reported.
TeliaSonera has a common system for all large wholly-owned units of operation for standardized control and reporting. TeliaSonera has also established a financial shared services unit that takes care of the standardized financial accounting processes across all large wholly-owned units.
Risk management is an integral part of the Group's business control and monitoring. Risks that may pose a threat to achieving business objectives are identified, and measures to control these risks are introduced.
A process exists to regularly identify risks that could lead to material misstatements of financial information.
The Group's security unit works with preventive security measures and crisis management to protect the Group's assets, IT systems, personnel and to safeguard telecom networks, services and customers from infringements and fraud.
To mitigate risks, TeliaSonera performs control activities, both automated and manual, to ensure that necessary actions are taken to either prevent or detect material misstatements and to safeguard the assets of the company.
Processes are described in a common and structured way, and key controls that are critical in mitigating the financial reporting risks are identified and documented. Sufficient risk-based testing activities were performed during 2008 to assure that these key controls are functioning as intended. Remediation activities were taken to correct or improve controls where such activities were necessary.
The Board of Directors actively monitors the environment of internal control 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 reports before they are made public. The Audit Committee receives direct reports from the external and internal auditors and discusses and follows up their viewpoints. Both the external and internal auditors are represented at the meetings of the committee. At least once a year, the entire Board of Directors meets with the external auditors, in part without the presence of management.
The Board of Directors regularly receives risk reports compiled by management. Also the Audit Committee on a case by case basis reviews units such as for example Corporate Risk Management, Corporate Business Control and Corporate Finance and Treasury. The purpose of these evaluations is to increase the Board's understanding of major issues related to TeliaSonera's risk management and controls.
The Audit Committee addresses, among other issues, internal control environment, impairment valuations, interpretations of accounting principles of special importance for the Group, legal matters that could have a significant impact on the financial statements and evaluation of the auditors' performance.
TeliaSonera also has an internal disclosure committee that reports to the CEO and CFO and that exercises additional control over TeliaSonera's responsibilities regarding external financial reporting. This committee includes responsible persons from corporate control, the legal department and investor relations.
TeliaSonera has implemented a structured monitoring process, systematic testing activities of key controls, and periodic monitoring on the performance of internal controls at both the business area and the Group level. The Group level meetings regarding the monitoring of internal controls are chaired by the CFO and all finance officers responsible for the business areas participate as well as the responsible persons from corporate control, internal audit, legal department, IT units, corporate security and risk management. The Group level meetings are also attended by the external auditors.
The CFO regularly reports to the Audit Committee on the monitoring of internal controls. Both the Audit Committee and the Board of Directors have reviewed and discussed management's assessment of the company's internal controls, and have actively followed up the related improvement measures by management.
Management has identified a need to enlarge the internal control environment to comprise internal controls over business operations. The purpose of internal controls over business operations is to monitor performance metrics related to defined metric measurements and as a result promote well suited and efficient business operations.
Metric measurements focuses on removing mistakes, waste and defects from operations by the means of statistical analysis. It also focuses not only on removing problems but finding out and tackling the root causes of problems.
The Group has an internal audit function that reviews the Group's operations and makes proposals with a view to improve internal controls, streamline processes and increase efficiency. In order to obtain integrity in the metric measurements the internal audit function performs assurance of underlying data. The Head of Corporate Internal Audit reports to the CEO, who decides in consultation with the Audit Committee on the function's tasks and priorities.
The internal audit's tasks and priorities as well as findings are reported to and discussed on a regular basis at the Audit Committee meetings.
At the AGM 2008 PricewaterhouseCoopers AB was re-elected as auditor until the end of the AGM 2011. Göran Tidström (born 1946) is the auditor in charge.
PricewaterhouseCoopers AB is engaged by the company's largest shareholder, the Swedish State, for both audit and advisory services. Current audit assignments include Svenska Spel and Samhall.
Göran Tidström is also an auditor of Meda, Trelleborg and Volvo. He is deputy president of the International Federation of Accountants, IFAC, and Chairman of the Board of the European Financial Reporting Advisory Group, EFRAG.
From left: Timo Peltola, Elof Isaksson, Maija-Liisa Friman, Conny Karlsson, Tom von Weymarn, Caroline Sundewall, Jon Risfelt, Agneta Ahlström, Lars G Nordström and Berith Westman.
Chairman of the Board. Elected to the Board of Directors in 2002. Mr. von Weymarn is the Chairman of the Remuneration Committee of TeliaSonera. He is also a member of the Audit Committee of TeliaSonera since March 31, 2008. In addition, Mr. von Weymarn is the Chairman of the Board of Directors of Lännen Tehtaat Plc and Turku Science Park Oy, a board member of Pohjola Bank Plc, Hydrios Biotechnology Oy, Sibelius Academy, a Senior Advisor and member of the Supervisory Board of IndustriKapital and partner of Boardman Oy. Mr. von Weymarn served as President and CEO of Oy Rettig Ab between 1997 and 2004, and as Executive Vice President of Cultor Plc between 1991 and 1997. He was a Director of Oy Karl Fazer Ab between 1983 and 1991, the last two years as President and CEO. Mr. von Weymarn holds a Master of Science in Chemical Engineering.
Shares in TeliaSonera: 30,316
Elected to the Board of Directors in 2007. Ms. Friman is a member of the Audit Committee of TeliaSonera since March 31, 2008. She is Chairman of Ekokem, a member of the Boards of Directors of Metso Oyj, The Finnish Medical Foundation and LKAB. She is also a member of the Management Council for Keskinäinen Vakuutusyhtiö Ilmarinen. Previously, Ms. Friman was the CEO of Aspocomp Group Oyj. Ms. Friman holds a Master of Science degree in Chemical Engineering.
Shares in TeliaSonera: 5,597¹
Elected to the Board of Directors in 2007. Mr. Karlsson was a member of the Audit Committee of TeliaSonera until March 31, 2008, and since that date a member of the Remuneration Committee of TeliaSonera. In addition, he is the Chairman of the Board of Swedish Match 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
Elected to the Board of Directors in 2007. Mr. Nordström is also a member of the Remuneration Committee of TeliaSonera. In addition, he is President and CEO of the Swedish postal administration Posten AB, a board member of Nordea Bank AB, of which he was President and CEO between 2002 and 2007. He is the chairman of the Finnish-Swedish Chamber of Commerce, the European Financial Management & Marketing Association (EFMA), and the Royal Swedish Opera. He is also a member of the boards of the Swedish American Chamber of Commerce and Viking Line Abp. Mr. Nordström studied law at Uppsala University.
Shares in TeliaSonera: 4,000
Elected to the Board of Directors in 2004. Mr. Peltola is a member of the Remuneration Committee of TeliaSonera. In addition, he is the Chairman of the Boards of Directors of Neste Oil Oyj and AW-Energy Oy, Deputy Chairman of the Board of Directors of Nordea Bank AB and member of the Board of SAS AB. He is also a member of the Advisory Board of CVC Capital Partners and Sveafastigheter Ab. 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: 3,000
Elected to the Board of Directors in 2007. Mr. Risfelt is a member of the Audit Committee of TeliaSonera as from April 24, 2007. In addition, he is Chairman of the Board of Ortivus AB and holds board assignments in Enea Data AB, Bilia AB and ÅF AB. He has previously 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: 4,500
Elected to the Board of Directors in 2001. Ms. Sundewall is the Chairman of the Audit Committee of TeliaSonera. In addition, she is a board member of Electrolux AB, Haldex AB, Lifco AB, Pågengruppen AB, Aktiemarknadsbolagens Förening and Ahlsell AB. Ms. Sundewall has previously served as business editor for Finanstidningen and business commentator and business editor for Sydsvenska Dagbladet. She has also held the position of business controller of Ratos AB. Ms. Sundewall holds a Bachelor of Science in Economics. Shares in TeliaSonera: 4,000¹
Employee representative, appointed by the trade union to the Board of Directors in December 2007. Ms. Ahlström is deputy Chairman of the Swedish Union of Clerical and Technical Employees in Industry, Telecommunications section (Unionen-Tele). Previously, she was the Chairman of the section of SIF-TELE at TeliaSonera International Carrier.
Shares in TeliaSonera: 200
Employee representative, appointed by the trade union to the Board of Directors in 2000. In addition Mr. Isaksson is the Chairman of the Union of Service and Communication Employees within TeliaSonera, SEKO TELE, and Chairman of the European Work Council at TeliaSonera. He is also a board member of the Telia Pension Fund. Shares in TeliaSonera: 1,750¹
Employee representative, appointed by the trade union to the Board of Directors in 1993. In addition, Ms. Westman is the Chairman of the Swedish Union of Clerical and Technical Employees in Industry, the Telecommunications section (Unionen-Tele) and a board member of Telia Pension Fund.
Shares in TeliaSonera: 1,000
Remuneration and attendance see below.
¹ Including shareholdings by spouse and/or affiliated persons.
| Name | Elected year |
Position | Committee | Presence board meetings |
Presence committee meetings |
Total remuneration and benefits (SEK) |
Shares in TeliaSonera |
|---|---|---|---|---|---|---|---|
| Tom von Weymarn¹ | 2002 | Chairman of the Board and Chairman of the Remuneration Committee |
Remuneration Audit |
100% | 100% | 1,090,000 | 30,316 |
| Maija-Liisa Friman¹ | 2007 | Director | Audit | 93% | 100% | 493,750 | 5,5973 |
| Conny Karlsson² | 2007 | Director | Remuneration | 100% | 100% | 458,750 | 10,000 |
| Lars G Nordström | 2007 | Director | Remuneration | 100% | 100% | 438,750 | 4,000 |
| Timo Peltola | 2004 | Director | Remuneration | 100% | 100% | 438,750 | 3,000 |
| Jon Risfelt | 2007 | Director | Audit | 100% | 100% | 518,750 | 4,500 |
| Caroline Sundewall | 2001 | Director and Chairman of the Audit Committee |
Audit | 100% | 100% | 568,750 | 4,0003 |
| Agneta Ahlström | 2007 | Employee Representative | 93% | 200 | |||
| Elof Isaksson | 2000 | Employee Representative | 100% | 1,7503 | |||
| Berith Westman | 1993 | Employee Representative | 80% | 1,000 | |||
¹ Member of the Audit Committee since March 31, 2008.
² Member of the Audit Committee until March 31, 2008. Since that date member of the Remuneration Committee.
³ Including shareholdings by spouse and/or affiliated persons.
President and Chief Executive Officer. Mr. Nyberg was appointed President and CEO on July 27, 2007, and assumed his position on September 3. Mr. Nyberg is also Chairman of DataCard Inc. and a board member 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 degree in Business Administration.
Shares in TeliaSonera: 200,000¹
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 in 1989 and has a Bachelor of Science degree in Business Administration and Economics.
Shares in TeliaSonera: 10,300²
Jan Henrik Ahrnell (Born 1959)
Group Vice President and General Counsel of
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: 8,500
President of business area Broadband Services as of November 2008. Mr. Dahlström was most recently Head of Mobility Services in Sweden, since January 2007, and has held a number of managerial positions within TeliaSonera, including 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: 4,000²
Group 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 has a Bachelor of Science degree in Finance and Business Administration.
Shares in TeliaSonera: 300²
² Including shareholdings by spouse and/or affiliated persons.
Group Vice President and Head of Group Human Resources since January 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 Proffice AB, Pensionsgaranti and PRI Pensionstjänst AB. She holds a Bachelor of Science in Human Resource Development and Labour Relations.
Shares in TeliaSonera: 1,100
Senior Vice President and Head of sales division Business Services in Sweden and Finland since August 2008. Mr. Hannervall is also a board member of Teligent AB and senior advisor to Innovations-Kapital 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. He holds a Master of Science. Shares in TeliaSonera: 0
President of business area Mobility Services since January 2007. Mr. Karlberg has been employed by TeliaSonera since 1987. Mr. Karlberg has previously held several executive positions in TeliaSonera, including Executive Vice President of Telia and head of the Telia Mobile business area. Mr. Karlberg has undergone the Senior Officer program at the Swedish Military Academy.
Shares in TeliaSonera: 1,600²
President of business area Eurasia since May 2007. Mr. Kivisaari was previously Chief Financial Officer and Vice President of business area Eurasia. He is the Chairman and CEO of Fintur Holdings B.V. and a board member of Turkcell and MegaFon. 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 a MBA in Finance.
Shares in TeliaSonera: 0
Chief Information Officer, joined TeliaSonera in December 2008, and became a member of the Leadership Team in February 2009. 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 1985 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
| SEK | Base salary | Variable pay | Other remuneration |
Other benefits | Pension expense |
Total remuneration and benefits |
Capital value of pension commitment |
|---|---|---|---|---|---|---|---|
| Lars Nyberg, CEO | 8,160,000 | 3,100,800 | – | 147,394 | 8,356,200 | 19,764,394 | – |
| Per-Arne Blomquist, EVP¹ | 1,533,340 | 766,667 | – | 166,001 | 582,733 | 3,048,741 | 158,847 |
| Other members of the Leadership Team (7 individuals)2) |
17,593,685 | 6,436,949 | 646,929 | 2,725,517 | 6,128,149 | 33,531,229 | 32,744,285 |
See also Note 32 to the consolidated financial statements and Report of the Directors (Remuneration to Executive Management).
¹ Per-Arne Blomquist assumed his position on September 1, 2008.
² The Leadership Team had 9 members in 2008.
3G Third generation of mobile phone standards and technology.
4G Next generation of mobile phone standards and technology.
ADSL Asymmetric Digital Subscriber Line is a form of DSL, a data communications technology that enables faster data transmission over copper lines than a conventional voice band modem can provide.
ADSL2+ Extends the capability of basic ADSL. The data rates can be as high as 24 Mbit/s.
Blog A website where entries are written in chronological order and commonly displayed in reverse chronological order.
DSL Digital Subscriber Line is a family of technologies that provide digital data transmission over the wires of a local telephone network.
EDGE Enhanced Data rates for GSM Evolution or Enhanced GPRS (EGPRS), is a digital mobile phone technology that allows increased data transmission rates and improved data transmission reliability.
Femtocell Originally known as an Access Point Base Station is a small cellular base station, typically designed for use in residential or small business environments.
GPRS General Packet Radio Service is a mobile data service available to users of GSM and mobile phones.
GPS Global Positioning System.
GSM Global System for Mobile communications is the most common standard for mobile phones in the world.
HDTV High-definition television is a digital television broadcasting system with greater resolution than traditional television systems.
HSDPA High-Speed Downlink Packet Access is a 3G mobile telephony communications protocol in the HSPA family, which allows networks based on UMTS to have higher data transfer speeds and capacity. Also called turbo 3G.
HSPA High-Speed Packet Access is a collection of mobile telephony protocols that extend and improve the performance of existing UMTS protocols.
ICT Information and communications technology.
IMS IP Multimedia Subsystem is an architectural framework for delivering internet protocol multimedia services.
IP Internet Protocol is a data-oriented protocol used for communicating data across a packet-switched internet work. IP provides the service of communicable unique global addressing amongst computers.
IPTV Internet Protocol Television is a system where a digital television service is delivered by using Internet Protocol over a network infrastructure, which may include delivery by a broadband connection. A general definition of IPTV is television content that, instead of being delivered through traditional broadcast and cable formats, is received by the viewer through the technologies used for computer networks.
Java Refers to a number of computer software products and specifications from Sun Microsystems that together provide a system for developing application software and deploying it in a cross-platform environment. Java is used in a wide variety of computing platforms spanning from embedded devices and mobile phones on the low end to enterprise servers and super computers on the high end. Java is fairly common in mobile phones, web servers and enterprise applications, and somewhat less common on desktop computers though users may sometimes come across Java applets when browsing the World Wide Web.
LAN Local Area Network is a computer network covering a small geographic area, like a home, office, or group of buildings e.g. a school.
LTE Long Term Evolution (also called 4G) is the name given to a project within the Third Generation Partnership Project to improve the UMTS mobile phone standard to cope with future requirements. Goals include improving efficiency, lowering costs, improving services, making use of new spectrum opportunities, and better integration with other open standards. The LTE project is not a standard, but it will result in the new evolved release 8 of the UMTS standard, including mostly or wholly extensions and modifications of the UMTS system.
Mbps Megabit per second is a unit of data transfer rate equal to 1,000,000 bits per second.
Mobile 2.0 Refers to a perceived next generation of mobile internet services.
Mobile Broadband Describe various types of wireless high-speed internet access through a portable modem, telephone or other device.
MNP Mobile Number Portability enables mobile telephone users to retain their mobile telephone numbers when changing from one mobile network operator to another.
MVNO Mobile Virtual Network Operator is a company that provides mobile phone service but does not have its own licensed frequency allocation of radio spectrum.
Netbook A type of laptop designed for wireless communication and access to the internet. The term is a combination of the words internet and notebook.
NFC Near Field Communication is a short-range high frequency wireless communication technology which enables the exchange of data between devices over about a 10 centimeter distance.
P2P Peer-to-peer computer network uses diverse connectivity between participants in a network and the cumulative bandwidth of network participants rather than conventional centralized resources where a relatively low number of servers provide the core value to a service or application.
PDA Personal Digital Assistant is a handheld computer, also known as pocket computer or palmtop computer.
PSTN All standard analogue lines, whether or not they are overlaid or augmented by other technologies (such as xDSL). Includes circuit-switched cable telephony lines, but excludes direct access VoIP.
RSS A family of web feed formats used to publish frequently updated works - such as blog entries, news headlines, audio and video – in a standardized format.
SIM Subscriber Identity Module is part of a removable smart card ICC (Integrated Circuit Card), also known as a SIM Card, for mobile cellular telephony devices such as mobile phones and computers.
Smartphone A mobile phone offering advanced capabilities beyond a typical mobile phone, often with PC functionality. There is no industry standard definition of a smart phone.
SOHO Small Office Home Office, a market segment.
Time-shift TV The recording and storage of a TV program to be viewed at a time more convenient to the user.
Triple Play A marketing term for the provisioning of the two broadband services, high-speed internet access and television, and one narrowband service, telephone over a single broadband connection.
UICC Universal Integrated Circuit Card is the smart card used in mobile terminals in GSM and UMTS networks. The UICC ensures the integrity and security of all kinds of personal data, and it typically holds a few hundred kilobytes.
UMA Unlicensed Mobile Access is the commercial name of the 3GPP Generic Access Network or GNA standard. GAN is a telecommunication system that extends mobile voice, data and IP multimedia applications over IP access networks.
UMTS Universal Mobile Telecommunications System is a 3G mobile phone technology.
VDSL2 Very High Speed Digital Subscriber Line 2 is the newest and most advanced standard of DSL broadband wireline communications. Designed to support the wide deployment of triple play services such as voice, video, data, HDTV and interactive gaming.
VoD Video-on-Demand systems allow users to select and watch to video content on demand.
VoIP Voice over Internet Protocol.
WAP Wireless Application Protocol is an open international standard for applications that use wireless communication. Its principal application is to enable access to the internet from a mobile phone or PDA.
Web 2.0 Refers to a perceived second generation of web-based communities and hosted services which aim to facilitate creativity, collaboration, and sharing between users.
WiMAX Worldwide Interoperability for Microwave Access is a telecommunications technology aimed at providing wireless data over long distances in a variety of ways, from point-to-point links to full mobile cellular type access.
WLAN Wireless LAN is a wireless local area network, which is the linking of two or more computers without using wires.
Definitions used in graph Mobile market revenue sources (Chapter Market and Customers, Customer Trends)
Data networking The use of shared applications (such as applications for customer relationship management, enterprise resource planning or mobile workforce management), as well as access to corporate intranets; data networking is exclusive to the business segment.
Infotainment Information-based media content or programming that also includes entertainment content in an effort to enhance popularity with audiences and consumers.
M-advertising Mobile advertisement is a form of advertising via mobile phones or other mobile devices.
M-commerce Mobile ticketing, mobile shopping, mobile banking, mobile trading and mobile advertising; m-commerce does not include revenue derived from digital content delivered over operators' or third-party mobile portals (such as games and ringtones).
Other P2P messaging Person-to-person communications other than SMS and email, mainly MMS (picture messages and video messages) and MIM (mobile instant messaging), but excluding any messages used to deliver third-party content.
Video telephony Real-time audiovisual person-to-person communications.
TeliaSonera's Annual General Meeting (AGM) will be held on Wednesday, April 1, 2009, at 3.00 p.m. at Cirkus, Djurgårdsslätten 43–45, Stockholm. The complete notification was published on TeliaSonera's website, www.teliasonera.com in mid-February. The meeting will be interpreted into Finnish and 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 (formerly VPC AB) as of March 26, 2009, 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 (formerly APK) are nominee registered at Euroclear Sweden AB (formerly VPC AB), these Finnish shareholders have to contact Euroclear Finland Oy (formerly APK), by email: [email protected] or by phone: +358 (0)20 770 6609, for reregistration well in advance of March 26, 2009 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 web site 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 27, 2009.
Shareholder does also have the opportunity to follow the Annual General Meeting on distance via an internet connection. Shareholders wishing to follow the meeting on distance via internet must be listed as shareholders in the printout of the share register issued by Euroclear Sweden AB (formerly VPC AB) already on February 28, 2009, and have notified the company of their intention to follow the meeting on distance no later than 4.00 p.m. Thursday March 26, 2009.
Shareholders following the meeting via internet are considered as guests and can only follow the Annual General Meeting and are not able to vote, make proposals or express opinions. Shareholders who have fulfilled the above criterions will be provided with details of the connections and their personal passwords before the meeting. If a shareholder wishes to participate in the meeting through a representative and to personally follow the meeting via internet, the notice procedure as a whole must be applied.
Please note that following the annual general meeting via an internet connection requires a PC, Operating system: Windows XP, Web browser: Internet Explorer 6 or later, Media Player: Windows Media Player 9 or higher, internet connection for good quality: Broadband with speed of 1 Mbps or faster (not a requirement).
The AGM determines, among other matters, the appropriation of the Company's profits and whether to discharge the Board of Directors and President from liability. The AGM also appoints the Board of Directors and makes decisions regarding remuneration to the Board. The Board of Directors proposes that a dividend of SEK 1.80 per share be distributed to the shareholders, and that April 6, 2009 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 (formerly VPC AB) will take place on April 9, 2009.
The CEO's speech at the Annual General Meeting will be posted on the Company's web site www.teliasonera.com under section Investor Relations after the meeting.
A Finnish shareholders' information meeting will be arranged on March 30, 2009, at 3.00 p.m. Finnish time at the Marina Congress Center, Helsinki. The Finnish shareholders will there have the possibility to meet representatives from the management and the board in person.
Notice of intention to attend the Finnish Shareholders' information meeting can be done starting from March 2 as described below, however no later than March 16:
Information and a link to the notification per email can be found on TeliaSonera's website: www.teliasonera.com under section Investor Relations.
Mailing address: TeliaSonera AB SE-106 63 Stockholm Sweden
Visiting address: Sturegatan 1, Stockholm
Telephone: +46 (0)8 504 550 00 Fax: +46 (0)8 504 550 01 Email: [email protected]
Lars Nyberg Mailing address: TeliaSonera AB SE-106 63 Stockholm Sweden
Telephone: +46 (0)8 504 550 00 Fax: +46 (0)8 504 550 14
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 Hallvarsson & Halvarsson Online speech enabling: VoiceCorp Film production: Producenterna Photo: Peter Moore, Victor Brott, Dick Clevestam and Jeppe Wikström
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.