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Telia Company

Earnings Release Jul 17, 2013

2982_ir_2013-07-17_7f6780be-3fcf-4a30-899b-3fa95d4e18ce.pdf

Earnings Release

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Positive organic sales growth and higher margin

Second quarter summary

  • Net sales in local currencies, excluding acquisitions and disposals, increased 0.4 percent. In reported currency, net sales decreased 3.9 percent to SEK 25,274 million (26,294).
  • The addressable cost base in local currencies, excluding acquisitions and disposals, decreased 4.1 percent. In reported currency, the addressable cost base decreased 6.6 percent to SEK 7,165 million (7,672).
  • EBITDA, excluding non-recurring items, increased 3.3 percent in local currencies, excluding acquisitions and disposals. In reported currency, EBITDA, excluding non-recurring items, decreased 1.2 percent to SEK 8,928 million (9,034). The EBITDA margin, excluding non-recurring items, increased to 35.3 percent (34.4).
  • Operating income, excluding non-recurring items, decreased 2.8 percent to SEK 7,085 million (7,286). Operating income decreased 10.8 percent to 6,283 million (7,044), including non-recurring items of SEK -802 million (-242).
  • Net income attributable to owners of the parent company decreased 16.9 percent to SEK 4,031 million (4,852).
  • Earnings per share decreased to SEK 0.93 (1.12).
  • Free cash flow was SEK 4,462 million (3,062, excluding dividends from MegaFon net of taxes of SEK 11,726 million).
  • Group outlook for 2013 is unchanged.

First half summary

  • Net sales in local currencies, excluding acquisitions and disposals, decreased 0.3 percent. In reported currency, net sales decreased 4.2 percent to SEK 49,816 million (51,987).
  • Net income attributable to owners of the parent company decreased 9.3 percent to SEK 8,139 million (8,974) and earnings per share to SEK 1.88 (2.07).
  • Free cash flow was SEK 6,876 million (5,255, excluding dividends from MegaFon net of taxes of SEK 11,726 million).

Financial highlights

SEK in millions, except key ratios,
per share data and changes
Apr-Jun
2013
Apr-Jun
2012
Chg
(%)
Jan-Jun
2013
Jan-Jun
2012
Chg
(%)
Net sales 25,274 26,294 -3.9 49,816 51,987 -4.2
Change % local FX ex acquisitions and disposals 0.4 -0.3
Addressable cost base¹) 7,165 7,672 -6.6 14,154 15,104 -6.3
Change % local FX ex acquisitions and disposals -4.1 -2.6
EBITDA¹)
)
excl. non-recurring items²
8,928 9,034 -1.2 17,437 17,886 -2.5
Margin (%) 35.3 34.4 35.0 34.4
Operating income 6,283 7,044 -10.8 12,772 13,812 -7.5
Operating income excl. non-recurring items 7,085 7,286 -2.8 13,713 14,168 -3.2
Net income 4,438 5,132 -13.5 8,937 9,647 -7.4
of which attributable to owners of the parent 4,031 4,852 -16.9 8,139 8,974 -9.3
Earnings per share (SEK) 0.93 1.12 -17.0 1.88 2.07 -9.2
Return on equity (%, rolling 12 months) 20.1 19.1 20.1 19.1
CAPEX-to-sales (%) 14.0 17.0 12.6 14.7
Free cash flow 4,462 14,788 6,876 16,981

1) Please refer to the last page for definitions. 2) Non-recurring items; see table on page 22.

TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm. Tel. +46 8 504 550 00. www.teliasonera.com

Comments by Per-Arne Blomquist, President and CEO

"In the second quarter, organic revenue growth turned positive and margins improved further. TeliaSonera continues to lead the industry change in our markets by shifting away from minute based voice pricing, to new data centric models. In addition, we maintain focus on securing our long term profitability by implementing efficiency measures and investing for the future in 4G and fiber.

In Mobility Services, revenue pressure eased somewhat and margins strengthened, supported by higher billed revenue and reduced costs. It is particularly encouraging that our Danish operations reported an increase in billed revenues, as the market has been challenging for years. However, lower regulated interconnect rates continued to put pressure on revenues in all markets. In Broadband Services, the fiber roll-out regained momentum and in Sweden customer demand currently exceeds our ability to deliver. The cost base decreased, but not enough to fully compensate for the revenue decline. In Eurasia, organic revenue growth remained around 14 percent, supported by increasing data consumption and subscription growth. Margins continued to improve as a result of further cost savings. In Nepal, we reached a new milestone by passing 10 million subscriptions.

In Sweden, Norway and Denmark we launched new mobile offers to consumers, with flat fees for voice and messaging service together with bucket priced data related to usage. In Sweden, our consumer offer continued to attract more than 20 percent of new sales and a similar package is also available for the SME segment. In total, we have gained about 180,000 new subscriptions on the new price plans in Scandinavia and the initial findings are promising.

Network quality and capacity are crucial to meet the exploding demand for data; therefore we will further invest in 4G and mobile coverage, expand within fiber and selectively target acquisitions of existing fiber networks in our home markets. We will significantly expand our 4G network in Sweden, targeting 92 percent geographic coverage in the next two years, utilizing existing 2G/3G infrastructure to ensure a cost efficient roll-out. Coverage is prioritized across the group and our Estonian operation extended its 4G network significantly in the quarter and has currently the best national 4G coverage in Europe.

We continue to implement our cost savings program launched at the end of last year and approximately 1,050 of the targeted 1,800 employees have been given notice year to date. Savings are expected to be further visible in the second half of this year and we remain committed to reducing the cost base by SEK 2 billion net by the end of 2014.

The ownership disputes in our associated company Turkcell continues with two failed AGMs in the quarter. We welcome the decision on July 9, by the Privy Council, stating the terms under which Çukurova can recover the disputed shares in Turkcell Holding from Altimo, an important step in resolving the deadlock. It is crucial that corporate governance is restored in Turkcell and we fully support a resumption of dividend payments.

The above mentioned activities prove that we are executing on our strategy, targeting the best customer experience, high-quality networks and cost-efficient operations. Based on the performance for the first six months, we reiterate our full year 2013 outlook."

Group outlook for 2013 (unchanged)

Net sales in local currencies, excluding acquisitions and disposals, are expected to be flat. Currency fluctuations may have a material impact on reported figures in Swedish krona.

The EBITDA margin, excluding non-recurring items, is expected to increase slightly compared to last year (2012: 34.5 percent).

The CAPEX-to-sales ratio is expected to be approximately 14 percent, excluding license and spectrum fees (2012: 14.6 percent).

Efficiency measures

As announced in the third quarter of 2012, efficiency measures including personnel reductions net of 2,000 employees will lower the cost base by SEK 2 billion net over the coming two years. The savings amounted to SEK 0.2 billion in 2012 and additional SEK 0.4 billion was recorded in the first six months of 2013.

During 2013, 1,800 employees in the Nordics and Baltics will be affected and close to 1,050 people have been given notice year to date.

Total costs for the reductions in 2013 are estimated to SEK 1.7 billion, of which SEK 0.7 billion have been recorded year to date. The efficiency measures will be completed by early 2014 at the latest.

Review of the Group, second quarter 2013

Sales and earnings

Net sales in local currencies, excluding acquisitions and disposals, increased 0.4 percent. In reported currency, net sales decreased 3.9 percent to SEK 25,274 million (26,294). The negative effect of exchange rate fluctuations was 3.4 percent and the negative effect of acquisitions and disposals was 0.9 percent.

In Mobility Services, net sales in local currencies, excluding acquisitions and disposals, decreased 1.8 percent. In reported currency, net sales decreased 4.5 percent to SEK 12,014 million (12,581).

In Broadband Services, net sales in local currencies, excluding acquisitions and disposals, decreased 3.6 percent. In reported currency, net sales decreased 8.1 percent to SEK 8,325 million (9,054).

In Eurasia, net sales in local currencies, excluding acquisitions and disposals, increased 14.3 percent. Net sales in reported currency increased 5.4 percent to SEK 5,197 million (4,930).

The number of subscriptions increased by 9.5 million from the end of the second quarter of 2012 to 183.6 million. In the consolidated operations the number of subscriptions increased by 6.3 million to 71.8 million. In the associated companies, the number of subscriptions increased by 3.2 million to 111.8 million. During the second quarter, the total

Net sales per Business area

Mobility services Broadband services Eurasia Other operations

number of subscriptions increased by 1.4 million in the consolidated operations and remained unchanged in the associated companies.

The addressable cost base in local currencies, excluding acquisitions and disposals, decreased 4.1 percent. In reported currency, the addressable cost base decreased 6.6 percent to SEK 7,165 million (7,672).

EBITDA, excluding non-recurring items, increased 3.3 percent in local currencies, excluding acquisitions and disposals. In reported currency, EBITDA, excluding non-recurring items, decreased 1.2 percent to SEK 8,928 million (9,034). The EBITDA margin, excluding non-recurring items, increased to 35.3 percent (34.4).

Operating income, excluding non-recurring items, decreased 2.8 percent to SEK 7,085 million (7,286). Income from associated companies, excluding non-recurring items, decreased to SEK 1,471 million (1,543).

Non-recurring items affecting operating income totaled SEK -802 million (-242), mainly related to efficiency measures.

Financial items totaled SEK -764 million (-998) of which SEK -721 million (-765) related to net interest expenses.

Income taxes increased to SEK 1,081 million (914). The effective tax rate was 19.6 percent (15.1). The increase is mainly a result of the MegaFon transactions reducing taxes in 2012.

Non-controlling interests in subsidiaries increased to SEK 407 million (280) of which SEK 365 million (217) was related to the Eurasian operations and SEK 33 million (52) to LMT and TEO.

Net income attributable to owners of the parent company decreased 16.9 percent to SEK 4,031 million (4,852) and earnings per share to SEK 0.93 (1.12).

CAPEX decreased to SEK 3,539 million (4,457) and the CAPEX-to-sales ratio decreased to 14.0 percent (17.0). The CAPEX-to-sales ratio, excluding license and spectrum fees, decreased to 13.2 percent (16.2).

Free cash flow was SEK 4,462 million (3,062, excluding dividends from MegaFon net of taxes of SEK 11,726 million).

Net debt increased to SEK 66,151 million at the end of the second quarter (55,275 at the end of the first quarter of 2013). The net debt/EBITDA ratio was 1.85 (1.54 at the end of the first quarter of 2013).

The equity/assets ratio was 41.2 percent (39.1 percent at the end of the first quarter of 2013).

Review of the Group, first half 2013

Sales and earnings

Net sales in local currencies, excluding acquisitions and disposals, decreased 0.3 percent. In reported currency, net sales decreased 4.2 percent to SEK 49,816 million (51,987). The negative effect of exchange rate fluctuations was 3.2 percent and the negative effect of acquisitions and disposals was 0.7 percent.

The addressable cost base in local currencies, excluding acquisitions and disposals, decreased 2.6 percent. In reported currency, the addressable cost base decreased 6.3 percent to SEK 14,154 million (15,104).

EBITDA, excluding non-recurring items, increased 1.4 percent in local currencies, excluding acquisitions and disposals. In reported currency, EBITDA, excluding non-recurring items, decreased 2.5 percent to SEK 17,437 million (17,886). The EBITDA margin, excluding non-recurring items, increased to 35.0 percent (34.4).

Operating income, excluding non-recurring items, decreased 3.2 percent to SEK 13,713 million (14,168). Income from associated companies, excluding non-recurring items, increased to SEK 2,794 million (2,789).

Non-recurring items affecting operating income totaled SEK -941 million (-355), mainly related to efficiency measures.

Financial items totaled SEK -1,603 million (-2,138) of which SEK -1,527 million (-1,662) related to net interest expenses.

Income taxes increased to SEK 2,232 million (2,027). The effective tax rate was 20.0 percent (17.4). The increase is mainly a result of the MegaFon transactions reducing taxes in 2012.

Non-controlling interests in subsidiaries increased to SEK 798 million (673) of which SEK 719 million (546) was related to the Eurasian operations and SEK 61 million (108) to LMT and TEO.

Net income attributable to owners of the parent company decreased 9.3 percent to SEK 8,139 million (8,974) and earnings per share to SEK 1.88 (2.07).

CAPEX decreased to SEK 6,258 million (7,632) and the CAPEX-to-sales ratio decreased to 12.6 percent (14.7). The CAPEX-to-sales ratio, excluding license and spectrum fees, decreased to 11.9 percent (14.2).

Free cash flow was SEK 6,876 million (5,255, excluding dividends from MegaFon net of taxes of SEK 11,726 million.)

Significant events in the second quarter

  • On April 2, 2013, TeliaSonera announced that it continues to develop its Spanish operator Yoigo.
  • On April 3, 2013, six new members of the board were elected and the board members are Marie Ehrling, Chairman, Olli-Pekka Kallasvuo (re-elected), Vice-Chairman, Mats Jansson, Mikko Kosonen, Nina Linander, Martin Lorentzon, Per-Arne Sandström (re-elected) and Kersti Strandqvist. At the statutory meeting, it was decided to establish a Sustainability and Ethics Committee.
  • On April 18, 2013, TeliaSonera announced that the Board of Directors launched a review of the transactions in Eurasia, led by Norton Rose.
  • On April 22, 2013, TeliaSonera announced that it had acquired 90,000 own shares to cover commitments under the "Long Term Incentive Program 2010/2013."
  • On May 30, 2013, TeliaSonera announced that it had secured 800 MHz spectrum enabling faster 4G roll-out in Estonia. By mid-June, the 4G network was ready to use and has a territorial coverage of over 95 percent.
  • On June 14, 2013, TeliaSonera announced that Cecilia Edström will leave her position as Head of Group Communications at TeliaSonera during the summer of 2013.
  • On June 16, 2013, TeliaSonera announced that the Board of Directors had appointed Johan Dennelind to the position of President and CEO of TeliaSonera. Johan Dennelind will take on his new position on September 1, 2013.
  • On June 24, 2013, TeliaSonera issued a statement following a failed shareholders' meeting (AGM) in Turkcell.
  • On June 26, 2013, TeliaSonera announced that it had been awarded the Best LTE/4G Roaming Product and Service, at the 2013 LTE Awards in Amsterdam.
  • During the second quarter, TeliaSonera divested its remaining 2.46 million shares in Telio Holding, a company listed on the Oslo Stock Exchange, for a total consideration of NOK 55 million. The shares were part of the payment when TeliaSonera divested NextGenTel to Telio on January 31, 2013.

Margin improvement in Mobility Services

  • In Sweden, Norway and Denmark, new mobile offers to consumers were launched, with flat fees for unlimited voice and messaging, combined with bucket-pricing for data. In Sweden, our consumer offer continued to attract more than 20 percent of new sales and a similar package is also available for the SME segment.
  • In May, we announced our intention to accelerate the expansion of our 4G network in Sweden, targeting 99 percent population coverage and 92 percent geographic coverage by the end of 2015.
  • Billed revenue growth turned positive in the quarter, but total revenue growth continued to be impacted by reduced regulated interconnect rates on all markets. The EBITDA margin improved, helped by a 9.2 percent reduction in operating expenses in local currencies.

Financial highlights

SEK in millions, except margins,
operational data and changes
Apr-Jun
2013
Apr-Jun
2012
Chg
(%)
Jan-Jun
2013
Jan-Jun
2012
Chg
(%)
Net sales 12,014 12,581 -4.5 23,882 25,081 -4.8
EBITDA excl. non-recurring items 3,783 3,710 2.0 7,231 7,360 -1.8
Margin (%) 31.5 29.5 30.3 29.3
Operating income 2,502 -455 4,864 2,121 129.3
Operating income excl. non-recurring items 2,717 2,604 4.3 5,137 5,180 -0.8
CAPEX 1,004 1,201 -16.4 1,942 2,184 -11.1
Subscriptions, period-end (thousands) 20,724 19,767 4.8 20,724 19,767 4.8
Employees, period-end 6,391 6,803 -6.1 6,391 6,803 -6.1

Second quarter

Net sales in local currencies, excluding acquisitions and disposals, decreased 1.8 percent. In reported currency, net sales decreased 4.5 percent to SEK 12,014 million (12,581). The negative effect of exchange rate fluctuations was 2.7 percent. Lower regulated interconnect rates impacted revenues negatively by SEK 422 million compared to the corresponding period last year.

In Sweden, net sales decreased 1.9 percent to SEK 4,242 million (4,323). Billed revenue growth remained positive and improved slightly on a sequential basis, helped by somewhat easing pressure on voice and messaging combined with continued solid growth in mobile data revenues. Total revenue growth continued to be affected by lower interconnect revenues and lower equipment sales. Our family offer Dela has attracted more than 20 percent of new sales in the consumer post-paid segment.

In Finland, net sales in local currency decreased 6.6 percent to the equivalent of SEK 1,856 million (2,068). Billed revenue growth continued to be negative in the quarter but pressure eased somewhat, helped by a pick-up in mobile data revenue growth. More than 50,000 new subscriptions were added in the post-paid segment.

In Norway, net sales in local currency decreased 10.1 percent to the equivalent of SEK 1,701 million (1,979). There was some pressure on billed revenues, mainly explained by a challenging B2B market. Revenue growth was also impacted by reduced equipment sales and continued effects from reduced interconnect and lower wholesale revenues. New data centric price plans were successfully launched in the quarter.

Business area Mobility Services

provides mobile telecommunication services to the consumer and enterprise mass markets. Services include mobile voice and mobile data for phones, mobile broadband, mobile content, data access via WLAN Hotspots and Wireless Office. The business area comprises operations in Sweden, Finland, Norway, Denmark, Lithuania, Latvia, Estonia and Spain.

In Denmark, net sales in local currency decreased 7.4 percent to the equivalent of SEK 1,047 million (1,187). Billed revenue growth has gradually improved and turned positive in the quarter, helped by strong development of mobile data. Overall revenue growth was impacted by effects from lower interconnect and reduced equipment sales.

In Estonia, Latvia and Lithuania, net sales in local currencies decreased 14.5 percent, 6.7 percent and 8.1 percent, respectively, to the equivalent of SEK 317 million (386), SEK 349 million (391) and SEK 283 million (321), respectively. Billed revenues remained under pressure in all three markets as data growth was not enough to compensate for the decline in voice. Equipment sales affected revenue growth positively in all countries, but this was offset by lower interconnect revenues across the region, with particular impact in Estonia.

In Spain, net sales in local currency increased 20.4 percent to the equivalent of SEK 2,236 million (1,933), driven by solid data growth and higher equipment sales.

The number of subscriptions rose by 1.0 million from the end of the second quarter of 2012 to 20.7 million. Growth was strongest in Spain and Sweden with an increase of 0.6 million and 0.2 million to 3.8 million and 6.6 million subscriptions, respectively. During the quarter the total number of subscriptions increased by 0.1 million.

EBITDA, excluding non-recurring items, increased 4.1 percent in local currencies, excluding acquisitions and disposals. In reported currency, EBITDA, excluding non-recurring items, increased 2.0 percent to SEK 3,783 million (3,710). The EBITDA margin increased to 31.5 percent (29.5).

In Sweden, the EBITDA margin increased to 43.8 percent (42.0), explained by reduced operating expenses related to personnel and IT, combined with the impact of somewhat lower equipment sales. In Finland, the EBITDA margin increased to 41.1 percent (31.1), supported by a one-time correction of subscription fee accruals of SEK 127 million and lower operating expenses.

In Norway, the EBITDA margin decreased to 31.8 percent (33.5), affected by lower billed revenues and decline in wholesale revenues.

In Denmark, the EBITDA margin increased to 14.6 percent (8.3) helped by improved billed revenues and lower operating expenses. We continue to develop our joint network TT-Netværket together with our partner. The dismantling process of old infrastructure will lead to increased costs mid-term in order to realize long-term synergies.

The EBITDA margin in Estonia increased to 32.8 percent (31.6), mainly due to improved gross margin from lower roaming costs. In Latvia and Lithuania, the EBITDA margins decreased to 29.2 percent (38.1) and 26.5 percent (29.3), respectively. Gross margin declined on both markets due to pressure on billed revenues and higher low margin equipment sales.

In Spain, the EBITDA margin increased to 8.2 percent (6.6) helped by lower costs for subsidies and sales commissions.

CAPEX decreased to SEK 1,004 million (1,201) and the CAPEX-to-sales ratio decreased to 8.4 percent (9.5). CAPEX, excluding licenses and spectrum fees, decreased to SEK 997 million (1,137) and the CAPEX-to-sales ratio to 8.3 percent (9.0). Cash flow, measured as EBITDA, excluding non-recurring items, minus CAPEX, increased to SEK 2,779 million (2,509).

Net sales, EBITDA and margin by country

SEK in millions, except margins
and changes
Apr-Jun
2013
Apr-Jun
2012
Chg
(%)
Jan-Jun
2013
Jan-Jun
2012
Chg
(%)
Net sales 12,014 12,581 -4.5 23,882 25,081 -4.8
of which Sweden 4,242 4,323 -1.9 8,325 8,497 -2.0
of which Finland 1,856 2,068 -10.3 3,700 4,215 -12.2
of which Norway 1,701 1,979 -14.0 3,402 3,858 -11.8
of which Denmark 1,047 1,187 -11.8 2,096 2,488 -15.8
of which Lithuania 283 321 -11.8 567 632 -10.3
of which Latvia 349 391 -10.7 731 774 -5.6
of which Estonia 317 386 -17.9 616 745 -17.3
of which Spain 2,236 1,933 15.7 4,470 3,887 15.0
EBITDA excl. non-recurring items 3,783 3,710 2.0 7,231 7,360 -1.8
of which Sweden 1,860 1,814 2.5 3,741 3,705 1.0
of which Finland 763 643 18.7 1,340 1,328 0.9
of which Norway 541 662 -18.3 1,043 1,236 -15.6
of which Denmark 153 99 54.5 284 237 19.8
of which Lithuania 75 94 -20.2 151 182 -17.0
of which Latvia 102 149 -31.5 203 289 -29.8
of which Estonia 104 122 -14.8 194 223 -13.0
of which Spain 184 127 44.9 274 160 71.3
Margin (%), total 31.5 29.5 30.3 29.3
Margin (%), Sweden 43.8 42.0 44.9 43.6
Margin (%), Finland 41.1 31.1 36.2 31.5
Margin (%), Norway 31.8 33.5 30.7 32.0
Margin (%), Denmark 14.6 8.3 13.5 9.5
Margin (%), Lithuania 26.5 29.3 26.6 28.8
Margin (%), Latvia 29.2 38.1 27.8 37.4
Margin (%), Estonia 32.8 31.6 31.5 29.9
Margin (%), Spain 8.2 6.6 6.1 4.1

Net sales in local currencies and excluding acquisitions Apr-Jun Jan-Jun Change (%), total -1.8 -2.2 Change (%), Sweden -1.9 -2.0 Change (%), Finland -6.6 -8.6 Change (%), Norway -10.1 -8.9 Change (%), Denmark -7.4 -11.5 Change (%), Lithuania -8.1 -6.5 Change (%), Latvia -6.7 -1.2

Change (%), Estonia -14.5 -13.9 Change (%), Spain 20.4 19.8

Regained momentum for fiber deployment and reduced costs in Broadband Services

  • The customer base continued to grow for all IP-based services and the fiber roll-out regained momentum. The number of TV customers passed 600,000 in Sweden reaching the number two position on the Swedish TV market.
  • Pressure on revenue growth eased somewhat in the quarter, but sales continued to be affected by a decline in traditional fixed line services combined with challenging market conditions in the B2B segment.
  • There was a positive effect from efficiency measures and operating expenses decreased by 2.3 percent compared to the corresponding period last year.

Financial highlights

SEK in millions, except margins,
operational data and changes
Apr-Jun
2013
Apr-Jun
2012
Chg
(%)
Jan-Jun
2013
Jan-Jun
2012
Chg
(%)
Net sales 8,325 9,054 -8.1 16,568 18,040 -8.2
EBITDA excl. non-recurring items 2,415 2,778 -13.1 4,879 5,590 -12.7
Margin (%) 29.0 30.7 29.4 31.0
Operating income 887 1,372 -35.3 2,129 2,972 -28.4
Operating income excl. non-recurring items 1,163 1,586 -26.7 2,467 3,217 -23.3
CAPEX 1,100 1,412 -22.1 1,896 2,603 -27.2
Subscriptions, period-end (thousands)
Broadband 2,394 2,495 -4.0 2,394 2,495 -4.0
Fixed voice and VoIP 4,065 4,425 -8.1 4,065 4,425 -8.1
TV 1,370 1,248 9.8 1,370 1,248 9.8
Employees, period-end 12,836 13,768 -6.8 12,836 13,768 -6.8

Second quarter

Net sales in local currencies, excluding acquisitions and disposals, decreased 3.6 percent. Net sales in reported currency decreased 8.1 percent to SEK 8,325 million (9,054). The negative effect of exchange rates was 1.6 percent and the negative impact from acquisitions and disposals was 2.9 percent.

In Sweden, net sales decreased 4.4 percent to SEK 4,815 million (5,036). The customer base continued to increase for all IP-based services, but this was not enough to offset the decline in traditional fixed line services. In B2B, price pressure remained intense for large accounts and the public segment, while there is a migration to mobile solutions among smaller customers. The pace of new fiber installations picked-up in the second quarter following a slow start of the year.

In Finland, net sales in local currency decreased 6.3 percent to the equivalent of SEK 1,292 million (1,434), mainly due to intensified competition and price pressure in the B2B segment as well as continued decline in traditional fixed line services.

In Denmark, net sales in local currency decreased 6.4 percent to the equivalent of SEK 250 million (279) due to lower revenues from traditional voice services in the B2B segment.

Business area Broadband

Services provides mass-market services for connecting homes and offices. Services include broadband over copper, fiber and cable, TV, voice over internet, home communications services, IP-VPN/Business internet, leased lines and traditional telephony. The business area operates the group common core network, including the data network of the international carrier business. The business area comprises operations in Sweden, Finland, Denmark, Lithuania, Latvia (49 percent), Estonia and international carrier operations.

In Estonia, net sales in local currency decreased 1.4 percent to the equivalent of SEK 418 million (441). In Lithuania, net sales in local currency decreased 6.5 percent to the equivalent of SEK 441 million (491). Lithuania was impacted by continued decline in traditional fixed telephony revenues and a decrease in voice transit traffic while Estonia was affected by a somewhat slower customer intake for both broadband and IP-TV.

In International Carrier, net sales in local currencies increased 2.3 percent to the equivalent of SEK 1,386 million (1,395). Data revenues increased, but were partly offset by a decline in voice revenues.

The number of subscriptions for broadband access decreased to 2.4 million, a decline of 101,000 from the second quarter of 2012, explained by the divestiture of NextGenTel in Norway with 184,000 subscriptions. During the quarter the number of subscriptions increased by 19,000.

The total number of TV subscriptions rose by 122,000 from the second quarter of 2012 and by 21,000 during the quarter to 1.4 million.

The number of traditional fixed voice subscriptions decreased by 389,000 from the end of the second quarter of 2012 to 2.9 million, and were down 87,000 during the quarter. The intake of VoIP subscriptions was 30,000 in the quarter, bringing the total number of VoIP subscriptions to 0.7 million.

EBITDA, excluding non-recurring items, decreased 10.4 percent in local currencies, excluding acquisitions and disposals. In reported currency, EBITDA, excluding nonrecurring items, decreased 13.1 percent to SEK 2,415 million (2,778). The EBITDA margin decreased to 29.0 percent (30.7).

In Sweden, the EBITDA margin decreased to 35.1 percent (38.3), as reduced operating expenses did not fully compensate for the decline in revenues.

In Finland, the EBITDA margin decreased to 21.8 percent (23.4) as lower operating expenses did not fully compensate for the decline in revenues. In Denmark, the EBITDA margin decreased to 12.0 percent (12.9).

In Lithuania, the EBITDA margin increased marginally to 42.2 percent (41.8) and in Estonia the EBITDA margin remained stable at 27.3 percent (27.2).

In International Carrier, the EBITDA margin increased slightly to 8.1 percent (7.6).

CAPEX decreased to SEK 1,100 million (1,412) and the CAPEX-to-sales ratio decreased to 13.2 percent (15.6). Cash flow, measured as EBITDA, excluding non-recurring items, minus CAPEX, decreased to SEK 1,315 million (1,366).

Net sales, EBITDA and margin by country

SEK in millions, except margins
and changes
Apr-Jun
2013
Apr-Jun
2012
Chg
(%)
Jan-Jun
2013
Jan-Jun
2012
Chg
(%)
Net sales 8,325 9,054 -8.1 16,568 18,040 -8.2
of which Sweden 4,815 5,036 -4.4 9,542 10,058 -5.1
of which Finland 1,292 1,434 -9.9 2,611 2,864 -8.8
of which Norway 273 87 541 -84.1
of which Denmark 250 279 -10.4 492 564 -12.8
of which Lithuania 441 491 -10.2 890 979 -9.1
of which Estonia 418 441 -5.2 818 871 -6.1
of which International Carrier 1,386 1,395 -0.6 2,630 2,741 -4.0
EBITDA excl. non-recurring items 2,415 2,778 -13.1 4,879 5,590 -12.7
of which Sweden 1,691 1,927 -12.2 3,444 3,933 -12.4
of which Finland 282 335 -15.8 595 713 -16.5
of which Norway 49 -4 90
of which Denmark 30 36 -16.7 50 66 -24.2
of which Lithuania 186 205 -9.3 375 396 -5.3
of which Estonia 114 120 -5.0 226 228 -0.9
of which International Carrier 112 106 5.7 193 164 17.7
Margin (%), total 29.0 30.7 29.4 31.0
Margin (%), Sweden 35.1 38.3 36.1 39.1
Margin (%), Finland 21.8 23.4 22.8 24.9
Margin (%), Norway 17.9 -4.7 16.6
Margin (%), Denmark 12.0 12.9 10.2 11.7
Margin (%), Lithuania 42.2 41.8 42.1 40.4
Margin (%), Estonia 27.3 27.2 27.6 26.2
Margin (%), International Carrier 8.1 7.6 7.3 6.0

Net sales in local currencies and

excluding acquisitions Apr-Jun Jan-Jun
Change (%), total -3.6 -4.4
Change (%), Sweden -4.4 -5.2
Change (%), Finland -6.3 -5.1
Change (%), Norway
Change (%), Denmark -6.4 -8.7
Change (%), Lithuania -6.5 -5.3
Change (%), Estonia -1.4 -2.2
Change (%), International Carrier 2.3 -1.4

Continued strong growth in Eurasia

  • Eurasia maintained a growth rate of 14 percent during the quarter, supported by a 57 percent increase in data revenues. Smartphone penetration continued to rise and is currently around 13 percent in the region.
  • Profitability improved due to strict cost control and the EBITDA margin increased to 51.7 percent, despite negative impact from a lost interconnect case in Azerbaijan. Excluding this item, the EBITDA margin would have been 53.7 percent.

Financial highlights

SEK in millions, except margins,
operational data and changes
Apr-Jun
2013
Apr-Jun
2012
Chg
(%)
Jan-Jun
2013
Jan-Jun
2012
Chg
(%)
Net sales 5,197 4,930 5.4 9,881 9,375 5.4
EBITDA excl. non-recurring items 2,688 2,482 8.3 5,169 4,740 9.1
Margin (%) 51.7 50.3 52.3 50.6
Income from associated companies 1,447 4,528 -68.0 2,753 5,759 -52.2
of which Russia 754 3,904 -80.7 1,445 4,790 -69.8
of which Turkey 687 625 9.9 1,304 976 33.6
Operating income 3,149 6,396 -50.8 6,121 9,062 -32.5
Operating income excl. non-recurring items 3,368 3,228 4.3 6,349 5,970 6.3
CAPEX 1,140 1,609 -29.1 1,972 2,400 -17.8
Subscriptions, period-end (thousands)
Subsidiaries 43,219 37,528 15.2 43,219 37,528 15.2
Associated companies 110,800 107,500 3.1 110,800 107,500 3.1
Employees, period-end 5,016 5,026 -0.2 5,016 5,026 -0.2

Consolidated operations

Net sales in local currencies, excluding acquisitions and disposals, increased 14.3 percent. Net sales in reported currency increased 5.4 percent to SEK 5,197 million (4,930). The negative effect from exchange rate fluctuations was 9.3 percent. The positive effect from acquisitions and disposals was 0.4 percent.

In Kazakhstan, net sales in local currency increased 4.3 percent to the equivalent of SEK 2,041 million (2,078) due to continued growth in data revenues. Competition remains fierce with some aggressive tariff offers in the market.

In Azerbaijan, net sales in local currency decreased 0.3 percent to the equivalent of SEK 978 million (1,030), affected by lower interconnect revenues.

In Uzbekistan, net sales in local currency increased 93.8 percent to the equivalent of SEK 783 million (474), helped by solid customer and ARPU trend following the departure of a competitor last year.

In Tajikistan, net sales in local currency increased 5.1 percent to the equivalent of SEK 235 million (234), mainly explained by the increase in the subscription base.

In Georgia, net sales in local currency decreased 8.3 percent to the equivalent of SEK 225 million (259) due to a lost government tender.

Business area

Eurasia comprises mobile operations in Kazakhstan, Azerbaijan, Uzbekistan, Tajikistan, Georgia, Moldova and Nepal. The business area is also responsible for developing TeliaSonera's shareholding in Russian MegaFon (25 percent) and Turkish Turkcell (38 percent). The main strategy is to create shareholder value by increasing mobile penetration and introducing value-added services in each respective country.

In Moldova, net sales in local currency increased 4.2 percent to the equivalent of SEK 130 million (137) with growth in both data and voice revenues.

In Nepal, net sales in local currency increased 25.1 percent to the equivalent of SEK 809 million (718) following continued subscription growth. In Nepal, we reached a new milestone as the number of subscriptions passed 10 million.

The number of subscriptions in the consolidated operations was 43.2 million, an increase by 5.7 million, from the end of the second quarter of 2012. Growth was strongest in Kazakhstan and Nepal with a rise of 2.4 million and 2.2 million to 14.1 million and 10.3 million subscriptions, respectively. During the second quarter, the total number of subscriptions in the consolidated operations increased by 1.3 million. Nepal and Kazakhstan showed the largest rises with an increase of 0.8 million and 0.3 million subscriptions, respectively.

EBITDA, excluding non-recurring items, increased 18.1 percent in local currencies, excluding acquisitions and disposals. In reported currency, EBITDA, excluding nonrecurring items, increased 8.3 percent to SEK 2,688 million (2,482). The EBITDA margin was 51.7 percent (50.3).

In Kazakhstan, the EBITDA margin decreased to 54.6 percent (56.5) due to somewhat higher expenses related to expansion of network and increased marketing costs.

In Azerbaijan, the EBITDA margin decreased to 41.5 percent (48.6), due to costs of SEK 103 million related to a lost interconnect case. Excluding this impact, the EBITDA margin was 52.0 percent. An additional SEK 205 million related to the interconnect case was charged as a non-recurring item.

In Uzbekistan, the EBITDA margin increased to 55.9 percent (32.7) due to higher revenues and cost measures. In Tajikistan, the EBITDA margin increased to 51.5 percent (50.9).

In Georgia, the EBITDA margin increased to 44.9 percent (38.6), helped by higher incoming roaming revenues and cost savings through new commission structures with dealers.

In Moldova, the EBITDA margin increased to 37.7 percent (35.0), mainly due to reduced personnel expenses.

In Nepal, the EBITDA margin decreased to 60.1 percent (61.0), explained by lower gross margin.

CAPEX decreased to SEK 1,140 million (1,609) and the CAPEX-to-sales ratio decreased to 21.9 percent (32.6). CAPEX, excluding licenses and spectrum fees, decreased to SEK 955 million (1,464) and the CAPEX-to-sales ratio to 18.4 percent (29.7). Cash flow, measured as EBITDA, excluding non-recurring items, minus CAPEX, increased to SEK 1,548 million (873).

Net sales, EBITDA and margin by country

SEK in millions, except margins
and changes
Apr-Jun
2013
Apr-Jun
2012
Chg
(%)
Jan-Jun
2013
Jan-Jun
2012
Chg
(%)
Net sales 5,197 4,930 5.4 9,881 9,375 5.4
of which Kazakhstan 2,041 2,078 -1.8 3,901 3,966 -1.6
of which Azerbaijan 978 1,030 -5.0 1,865 1,968 -5.2
of which Uzbekistan 783 474 65.2 1,484 936 58.5
of which Tajikistan 235 234 0.4 446 441 1.1
of which Georgia 225 259 -13.1 440 481 -8.5
of which Moldova 130 137 -5.1 247 256 -3.5
of which Nepal 809 718 12.7 1,507 1,331 13.2
EBITDA excl. non-recurring items 2,688 2,482 8.3 5,169 4,740 9.1
of which Kazakhstan 1,115 1,174 -5.0 2,129 2,244 -5.1
of which Azerbaijan 406 501 -19.0 858 986 -13.0
of which Uzbekistan 438 155 182.6 821 310 164.8
of which Tajikistan 121 119 1.7 225 220 2.3
of which Georgia 101 100 1.0 191 179 6.7
of which Moldova 49 48 2.1 88 87 1.1
of which Nepal 486 438 11.0 918 801 14.6
Margin (%), total 51.7 50.3 52.3 50.6
Margin (%), Kazakhstan 54.6 56.5 54.6 56.6
Margin (%), Azerbaijan 41.5 48.6 46.0 50.1
Margin (%), Uzbekistan 55.9 32.7 55.3 33.1
Margin (%), Tajikistan 51.5 50.9 50.4 49.9
Margin (%), Georgia 44.9 38.6 43.4 37.2
Margin (%), Moldova 37.7 35.0 35.6 34.0
Margin (%), Nepal 60.1 61.0 60.9 60.2
Net sales in local currencies and
excluding acquisitions
Apr-Jun Jan-Jun
Change (%), total 14.3 14.0
Change (%), Kazakhstan 4.3 4.1
Change (%), Azerbaijan -0.3 -0.5
Change (%), Uzbekistan 93.8 84.7
Change (%), Tajikistan 5.1 5.8
Change (%), Georgia -8.3 -3.6
Change (%), Moldova 4.2 5.6
Change (%), Nepal 25.1 27.0

Associated companies – Russia

MegaFon (associated company, in which TeliaSonera holds 25.2 percent and consolidates 27.2 percent, reported with one-quarter lag) in Russia reported a subscription base of 64.8 million, an increase of 1.7 million compared to the corresponding period last year and 0.2 million higher than the previous quarter.

TeliaSonera's income from Russia decreased to SEK 754 million (891, excluding capital gains of SEK 3,013 million). The Russian ruble depreciated 4.8 percent against the Swedish krona which had a negative impact of SEK 38 million. The lower earnings contribution is explained by reduced ownership compared to the same quarter a year ago, impacting results negatively by around SEK 400 million.

Associated companies – Turkey

Turkcell (associated company, in which TeliaSonera holds 38.0 percent, reported with one-quarter lag) in Turkey reported a subscription base of 34.9 million, an increase of 0.4 million compared to the corresponding period last year and a decrease by 0.2 million subscriptions compared to the previous quarter. In Ukraine, the number of subscriptions increased by 1.2 million to 11.1 million compared to the corresponding period last year and remained stable during the quarter.

TeliaSonera's income from Turkey increased to SEK 687 million (625). The Turkish lira depreciated 2.3 percent against the Swedish krona, which had a negative impact of SEK 16 million.

Other operations

Financial highlights

SEK in millions, except changes Apr-Jun
2013
Apr-Jun
2012
Chg
(%)
Jan-Jun
2013
Jan-Jun
2012
Chg
(%)
Net sales 915 974 -6.1 1,775 1,953 -9.1
EBITDA excl. non-recurring items 41 57 -28.1 158 181 -12.7
Income from associated companies 1 -15 1 -33
Operating income -255 -275 -342 -359
Operating income excl. non-recurring items -163 -138 -240 -215
CAPEX 300 235 27.7 449 445 0.9

Net sales in local currencies, excluding acquisitions and disposals, decreased 4.5 percent. In reported currency, net sales decreased 6.1 percent to SEK 915 million (974). Sales growth was negatively impacted by the closure of the Finnish retail chain Veikon Kone during the third quarter of 2012. Veikon Kone's contribution was SEK 127 million in in the second quarter of 2012.

EBITDA, excluding non-recurring items, decreased 28.1 percent to SEK 41 million (57) in reported currency.

Other operations

comprise Other Business Services, TeliaSonera Holding and Corporate functions. Other Business Services is responsible for sales of managed-services solutions to business customers in the Nordic countries.

The Board of Directors and the President and CEO certify that the Interim Report gives a true and fair overview of the Parent Company's and Group's operations, their financial position and results of operations, and describes significant risks and uncertainties facing the Parent Company and other companies in the Group.

Stockholm, July 17, 2013

Marie Ehrling Chairman of the Board

Olli-Pekka Kallasvuo Vice-Chairman of the Board

Agneta Ahlström Board member, employee representative

Magnus Brattström Board member, employee representative

Stefan Carlsson Board member, employee representative

Mats Jansson Board member

Mikko Kosonen Board member

Nina Linander Board member

Per-Arne Sandström Board member

Kersti Strandqvist Board member

Martin Lorentzon Board member

Per-Arne Blomquist President and CEO

This report has not been subject to review by TeliaSonera's auditors.

Condensed Consolidated Statements of Comprehensive Income

SEK in millions,
except per share data, number of shares and changes
Apr-Jun
2013
Apr-Jun
20121)
Chg
(%)
Jan-Jun
2013
Jan-Jun
20121)
Chg
(%)
Net sales 25,274 26,294 -3.9 49,816 51,987 -4.2
Cost of sales -14,108 -14,522 -2.9 -27,952 -28,797 -2.9
Gross profit 11,166 11,772 -5.1 21,864 23,190 -5.7
Selling, admin. and R&D expenses -5,687 -6,223 -8.6 -11,150 -12,200 -8.6
Other operating income and expenses, net -667 -3,051 -78.1 -736 -2,970 -75.2
Income from associated companies and joint ventures 1,471 4,546 -67.6 2,794 5,792 -51.8
Operating income 6,283 7,044 -10.8 12,772 13,812 -7.5
Finance costs and other financial items, net -764 -998 -23.3 -1,603 -2,138 -25.0
Income after financial items 5,519 6,046 -8.7 11,169 11,674 -4.3
Income taxes -1,081 -914 17.2 -2,232 -2,027 10.1
Net income 4,438 5,132 -13.5 8,937 9,647 -7.4
Items that may be reclassified to net income:
Foreign currency translation differences 1,715 518 -530 920
Income from associate companies and joint ventures -55 -99 -74 -286
Cash flow hedges -10 -63 270 1
Available-for-sale financial instruments 2 0 0 1
Income tax relating to items that will be reclassified 642 -80 209 -246
Items that will not be reclassified to net income:
Remeasurements of defined benefit pension plans 994 8 1,795 207
Income tax relating to items that will not be reclassified -219 -2 -395 -54
Associates' remeasurements of defined benefit pension plans 9 9
Other comprehensive income 3,078 282 1,284 543
Total comprehensive income 7,516 5,414 10,221 10,191
Net income attributable to:
Owners of the parent 4,031 4,852 8,139 8,974
Non-controlling interests 407 280 798 673
Total comprehensive income attributable to:
Owners of the parent 7,085 4,851 9,394 9,010
Non-controlling interests 431 563 827 1,181
Earnings per share (SEK), basic and diluted 0.93 1.12 1.88 2.07
Number of shares (thousands)
Outstanding at period-end 4,330,085 4,330,085 4,330,085 4,330,085
Weighted average, basic and diluted 4,330,085 4,330,085 4,330,085 4,330,085
EBITDA 8,125 8,887 16,518 17,627
EBITDA excl. non-recurring items 8,928 9,034 17,437 17,886
Depreciation, amortization and impairment losses -3,314 -6,389 -6,541 -9,606
Operating income excl. non-recurring items 7,085 7,286 13,713 14,168

1) Certain restatements have been made, see reference on page 22.

Condensed Consolidated Statements of Financial Position

SEK in millions Jun 30,
2013
Dec 31,
20121)
Assets
Goodwill and other intangible assets 83,289 83,278
Property, plant and equipment 63,067 62,657
Investments in associates and joint ventures, deferred tax assets
and other non-current assets
38,610 38,858
Long-term interest-bearing receivables 10,353 10,880
Total non-current assets 195,319 195,673
Inventories 1,589 1,623
Trade receivables, current tax assets and other receivables 23,902 22,298
Short-term interest-bearing receivables 4,379 3,647
Cash and cash equivalents 18,128 29,805
Total current assets 47,998 57,373
Total assets 243,317 253,046
Equity and liabilities
Equity attributable to owners of the parent 102,420 105,150
Equity attributable to non-controlling interests 4,039 3,956
Total equity 106,459 109,106
Long-term borrowings 73,987 82,184
Deferred tax liabilities, other long-term provisions 23,421 25,035
Other long-term liabilities 1,208 1,190
Total non-current liabilities 98,616 108,409
Short-term borrowings 12,500 9,403
Trade payables, current tax liabilities, short-term provisions and other current liabilities 25,742 26,128
Total current liabilities 38,242 35,531
Total equity and liabilities 243,317 253,046

1) Certain restatements have been made, see reference on page 22.

Condensed Consolidated Statements of Cash Flows

SEK in millions Apr-Jun
2013
Apr-Jun
20121)
Jan-Jun
2013
Jan-Jun
20121)
Cash flow before change in working capital 7,071 18,873 13,328 25,287
Change in working capital 700 0 -723 -1,156
Cash flow from operating activities 7,771 18,873 12,605 24,131
Cash CAPEX -3,309 -4,085 -5,729 -7,150
Free cash flow 4,462 14,7882) 6,876 16,9812)
Cash flow from other investing activities 384 1,219 -884 872
Total cash flow from investing activities -2,925 -2,866 -6,613 -6,278
Cash flow before financing activities 4,846 16,007 5,992 17,853
Cash flow from financing activities -12,942 -24,826 -17,566 -20,382
Cash flow for the period -8,096 -8,819 -11,574 -2,529
Cash and cash equivalents, opening balance 25,900 18,884 29,805 12,631
Cash flow for the period -8,096 -8,819 -11,574 -2,529
Exchange rate differences 324 45 -103 8
Cash and cash equivalents, closing balance 18,128 10,110 18,128 10,110

1) Certain restatements have been made, see reference on page 22.

2) Including dividends from MegaFon net of taxes of SEK 11,726 million.

Condensed Consolidated Statements of Changes in Equity

Jan-Jun 2013 Jan-Jun 2012
SEK in millions Owners of the
parent
Non
controlling
interests
Total equity Owners of the
parent
Non
controlling
interests
Total equity
Opening balance 105,149 3,956 109,105 115,589 7,353 122,942
Change in accounting policy for defined
1)
benefit pension plans
-2,878 -2,878
Adjustment of opening balance related to
Turkcell (inflation accounting in Belarus)
110 110
Dividends -12,340 -744 -13,084 -12,341 -2,128 -14,469
Business combinations 17 17
Repurchased treasury shares -4 -4
Acquisition of non-controlling interest -10,482 -2,289 -12,771
Other transactions with owners -11 -11
Total comprehensive income 9,394 827 10,221 9,010 1,181 10,191
Share-based payments 9 9 8 8
Effect of equity transactions in associates 212 212
Closing balance 102,420 4,039 106,459 99,016 4,123 103,139

1) See reference on page 22.

Basis of Preparation

General

As in the annual accounts for 2012, TeliaSonera's consolidated financial statements of and for the six-month period ended June 30, 2013, have been prepared in accordance with International Financial Reporting Standards (IFRSs) and, given the nature of Telia-Sonera's transactions, with IFRSs as adopted by the European Union. The parent company TeliaSonera AB's financial statements have been prepared in accordance with the Swedish Annual Reports Act as well as standard RFR 2 Accounting for Legal Entities and other statements issued by the Swedish Financial Reporting Board. This report has been prepared in accordance with IAS 34 Interim Financial Reporting. The accounting policies adopted are consistent with those of the previous financial year, except as described below.

New accounting standards (not yet adopted by the EU)

In May 2013, the International Accounting Standards Board (IASB) issued IFRIC 21 Levies. The interpretation clarifies when to recognize a liability for levies (taxes imposed by government and government bodies whether national local or international other than income taxes, penalties and fines). The interpretation concerns levies that are accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and also those where the timing and amount of the levy is certain. A liability is recognized progressively if the obligating event occurs over a period of time. If an obligation is triggered on reaching a minimum threshold, the liability is recognized when that minimum threshold is reached. The effective date for IFRIC 21 is January 1, 2014, with earlier application permitted and is expected to have minor impact on TeliaSonera.

IASB has also published a minor amendment to IAS 39 Financial instruments: Recognition and measurement: Novation of Derivatives and Continuation of Hedge Accounting. The amendment will allow hedge accounting to continue in a situation where a derivative, which has been designated as a hedging instrument, is novated to effect clearing with a

central counterparty and has been introduced in response to legislative changes across many jurisdictions. The change is applicable for annual periods beginning on or after January 1, 2014, with retrospective application. Currently not applicable to TeliaSonera.

Changes in accounting policies 2013

For information, see corresponding section in TeliaSonera's Interim Report January-March 2013.

Non-recurring Items

SEK in millions Apr-Jun
2013
Apr-Jun
2012
Jan-Jun
2013
Jan-Jun
2012
Within EBITDA -802 -147 -919 -259
Restructuring charges, synergy implementation costs, etc.:
Mobility Services -215 -22 -274 -22
Broadband Services -243 -214 -317 -243
Eurasia -219 -31 -228 -107
Other operations -92 -99 -102 -106
of which TeliaSonera Holding 3 -61 3 -61
Capital gains/losses -33 219 2 219
Within Depreciation, amortization and impairment losses -3,097 -22 -3,098
Impairment losses, accelerated depreciation:
Broadband Services -1 -22 -2
Mobility Services -3,070 -3,070
Other operations -26 -26
Within Income from associated companies and joint ventures 3,002 3,002
Impairment losses
Capital gains/losses 3,002 3,002
Total -802 -242 -941 -355

Deferred Taxes

SEK in millions Jun 30,
2013
Dec 31,
20121)
Deferred tax assets 6,622 7,410
Deferred tax liabilities -10,533 -10,287
Net deferred tax liabilities (-)/assets (+) -3,911 -2,877

1) Certain restatements have been made, see reference above.

Segment and Group Operating Income

SEK in millions Apr-Jun
2013
Apr-Jun
20121)
Jan-Jun
2013
Jan-Jun
20121)
Mobility Services 2,502 -455 4,864 2,121
Broadband Services 887 1,372 2,129 2,972
Eurasia 3,149 6,396 6,121 9,062
Other operations -255 -275 -342 -359
Total segments 6,283 7,038 12,772 13,796
Elimination of inter-segment profits 0 6 0 16
Group 6,283 7,044 12,772 13,812

1) Certain restatements have been made, see reference above.

Investments

SEK in millions Apr-Jun
2013
Apr-Jun
2012
Jan-Jun
2013
Jan-Jun
2012
CAPEX 3,539 4,457 6,258 7,632
Intangible assets 565 662 983 1,077
Property, plant and equipment 2,974 3,795 5,275 6,555
Acquisitions and other investments 20 1,245 1,195 1,395
Asset retirement obligations 3 104 47 198
Goodwill and fair value adjustments 7 1,117 986 1,172
Equity holdings 10 24 162 25
Total 3,559 5,702 7,453 9,027

Financial Instruments – Fair Values

Long-term and Short-term Borrowings1) Jun 30, 2013 Dec 31, 2012
SEK in millions Carrying value
Fair value
Carrying value Fair value
Long-term borrowings
Open-market financing program borrowings in fair value hedge
relationships 17,214 17,214 17,600 17,600
Interest rate swaps at fair value 246 246 340 340
Cross currency interest rate swaps at fair value 1,727 1,727 1,956 1,956
Subtotal 19,187 19,187 19,896 19,896
Open-market financing program borrowings 53,245 62,506 59,915 71,146
Other borrowings at amortized cost 1,496 1,390 2,311 2,311
Subtotal 73,928 83,083 82,122 93,353
Finance lease agreements 59 59 62 62
Total long-term borrowings 73,987 81,142 82,184 93,415
Short term borrowings
Open-market financing program borrowings in fair value hedge
relationships 3,037 3,037 401 401
Interest rate swaps designated as hedging instruments 54 54 29 29
Interest rate swaps held for trading 42 42
Cross currency interest rate swaps held for trading 42 42 343 343
Subtotal 3,133 3,133 815 815
Utilized bank overdraft and short-term credit facilities at amortized
cost 0 0 423 423
Open-market financing program borrowings 6,244 6,376 5,204 5,285
Other borrowings at amortized cost 3,120 3,120 2,958 2,909
Subtotal 12,497 12,629 9,400 9,432
Finance lease agreements 3 3 3 3
Total short-term borrowings 12,500 12,632 9,403 9,435

1) For financial assets, fair values equal carrying values. For information on fair value estimation, see TeliaSonera's Annual Report

2012, Note C3 to the consolidated financial statements.

Financial Assets and Liabilities Jun 30, 2013 Dec 31, 2012
by Fair Value Hierarchy Level1) Carrying of which Carrying of which
SEK in millions value Level 1 Level 2 Level 3 value Level 1 Level 2 Level 3
Financial assets at fair value
Equity instruments available-for-sale 195 195 189 189
Equity instruments held-for-trading 70 70 69 69
Convertible bonds available-for-sale 2 2 4 4
Derivatives designated as hedging
instruments 1,235 1,235 1,790 1,790
Derivatives held-for-trading 187 187 570 569
Total financial assets at fair value by
level 1,689 1,422 267 2,622 2,359 262
Financial liabilities at fair value
Borrowings in fair value hedge
relationships 20,251 20,251 18,001 18,001
Derivatives designated as hedging
instruments 444 444 802 802
Derivatives held-for-trading 1,626 1,626 2,044 2,044
Total financial liabilities at fair value
by level 22,321 22,321 20,847 20,847

1) For information on fair value hierarchy levels and fair value estimation, see TeliaSonera's Annual Report 2012, Note C3 to the consolidated financial statements.

Related Party Transactions

In the six-month period ended June 30, 2013, TeliaSonera purchased services for SEK 44 million, and sold services for SEK 74 million. Related parties in these transactions were mainly MegaFon, Turkcell and Lattelecom.

Net Debt

SEK in millions Jun 30,
2013
Dec 31,
2012
Long-term and short-term borrowings 86,487 91,586
Less derivatives recognized as financial assets and hedging long-term and
short-term borrowings and related credit collateral
-1,965 -2,175
Less short-term investments, cash and bank -18,371 -29,968
Net debt 66,151 59,443

Loan Financing and Credit Rating

The underlying operating cash flow continued to be positive also in the second quarter of 2013.

The rating from Standard & Poor's and Moody´s, respectively, remained unchanged with a credit rating on TeliaSonera AB of A-/A3 for long-term borrowings and A-2/P-2 for shortterm borrowings with a stable outlook.

The corporate credit market in Europe had a robust second quarter with new issuance supply above second quarter last year.

TeliaSonera has not made any major funding during the second quarter. With limited funding needs for the remainder of the year, the opportunistic strategy remains to take advantage of attractive funding opportunities when they appear with a special focus on diversifying the investor base.

Financial Key Ratios

Jun 30,
2013
Dec 31,
20121)
Return on equity (%, rolling 12 months) 20.1 20.5
Return on capital employed (%, rolling 12 months) 15.3 14.9
Equity/assets ratio (%) 41.2 38.2
Net debt/equity ratio (%) 66.0 61.4
Net debt/EBITDA rate excl. non-recurring items (multiple, rolling 12
months) 1.85 1.64
Net debt/assets ratio 27.2 23.5
Owners' equity per share (SEK) 23.7 24.3

1) Certain restatements have been made, see reference on page 22.

Collateral Held

TeliaSonera has sold all its shares in Telecominvest (TCI) to AF Telecom Holding (AFT). The purchase price has not been fully paid by AFT and in order to secure the value of TeliaSonera's receivable, presently SEK 7,788 million, MegaFon shares held by TCI, representing 6.53 percent of the shares in MegaFon, are presently pledged to TeliaSonera. The proper payment of the receivable is guaranteed by certain companies within the AFT Group and the bank accounts where TCI will collect dividends on the pledged shares have also been pledged to TeliaSonera.

Guarantees and Collateral Pledged

As of June 30, 2013, the maximum potential future payments that TeliaSonera could be required to make under issued financial guarantees totaled SEK 345 million, of which SEK 318 million referred to guarantees for pension obligations. Collateral pledged totaled SEK 201 million.

Contractual Obligations and Commitments

As of June 30, 2013, contractual obligations totaled SEK 3,112 million, of which SEK 1,254 million referred to contracted build-out of TeliaSonera's fixed networks in Sweden.

Business Combinations in the Second Quarter

For a minor business combination in the second quarter of 2013, the cost of combination totaled SEK 13 million and the net cash outflow SEK 25 million. Goodwill was SEK 7 million, allocated to business area Broadband Services. Goodwill is explained by strengthened market positions. The total cost of combination and fair values were 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.

Parent Company

Condensed Income Statements
SEK in millions
Apr-Jun
2013
Apr-Jun
2012
Jan-Jun
2013
Jan-Jun
2012
Net sales 3 24 5 31
Operating income -151 -2 -212 38
Income after financial items 11,366 9,166 14,369 10,695
Income before taxes 12,496 9,294 15,305 10,908
Net income 12,739 8,890 14,918 10,069

Income after financial items improved as higher non-taxable dividends from subsidiaries more than compensated for negative foreign currency effects.

Condensed Balance Sheets
SEK in millions
Jun 30,
2013
Dec 31,
2012
Non-current assets 187,953 202,089
Current assets 52,363 63,876
Total assets 240,316 265,965
Shareholders' equity 84,659 81,871
Untaxed reserves 11,794 12,730
Provisions 568 539
Liabilities 143,295 170,825
Total equity and liabilities 240,316 265,965

Total investments in the period were SEK 24 million (21,478), of which SEK 18 million (20,472) referred to shareholder contributions to subsidiaries.

In 2012, the parent company's shares in Telecominvest (TCI) were sold to AF Telecom Holding (AFT). The purchase price has not been fully paid by AFT and in order to secure the value of the parent company's receivable, presently SEK 7,788 million, MegaFon shares held by TCI, representing 6.53 percent of the shares in MegaFon, are presently pledged to the parent company. The proper payment of the receivable is guaranteed by certain companies within the AFT Group and the bank accounts where TCI will collect dividends on the pledged shares have also been pledged to the parent company.

Risks and Uncertainties

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. Additionally, these risks may affect TeliaSonera's share price from time to time.

TeliaSonera has an established risk management framework in place to regularly identify, analyze and assess, 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 and monitoring of business performance.

See Notes C27 and C35 to the consolidated financial statements in TeliaSonera's Annual Report 2012 for a detailed description of some of the factors that may affect TeliaSonera's business, financial position and results of operations.

Risks and uncertainties that could specifically impact the quarterly results of operations during 2013 include, but may not be limited to:

World economy changes. Changes in the global financial markets and the world economy are difficult to predict. TeliaSonera has a strong balance sheet and operates in a relatively non-cyclical or late-cyclical industry. However, a severe or long-term recession in the countries in which TeliaSonera operates would have an impact on its customers and may have a negative impact on its growth and results of operations through reduced telecom spending. The maturity schedule of TeliaSonera's loan portfolio is aimed to be evenly distributed over several years, and refinancing is expected to be made by using uncommitted 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, TeliaSonera's cost of funding might be higher, should there be changes in the global financial markets or the world economy.

Competition and price pressure. 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.

Investments in future growth. TeliaSonera is currently investing in future growth through, for example, sales and marketing expenditures to retain and acquire customers in most markets, build-up of its customer base in start-up operations and investments in infrastructure in all markets to improve capacity and access. While TeliaSonera believes that these investments will improve market position and financial results in the long term, they may not have the targeted positive effects yet in the short term and related expenditures may impact the results of operations both in the long and short term.

Non-recurring items. In accordance with their nature, non-recurring items such as capital gains and losses, restructuring costs, impairment charges, etc., may impact the quarterly results in the short term with amounts or timing that deviate from those currently expected. Depending on external factors or internal developments, TeliaSonera might also experience non-recurring items that are not currently anticipated.

Emerging markets. TeliaSonera has made significant investments in telecom operators in Kazakhstan, Azerbaijan, Uzbekistan, Tajikistan, Georgia, Moldova, Nepal, Russia and Turkey. Historically, the political, economic, legal and regulatory systems in these countries have been less predictable than in countries with more mature institutional structures. The future political situation in each of the emerging market countries may remain unpredictable, and markets in which TeliaSonera operates may become unstable. Other risks associated with operating in emerging market countries include foreign exchange restrictions, which could effectively prevent TeliaSonera from repatriating cash, e.g. by receiving dividends and repayment of loans, or from selling its investments. One example of this is TeliaSonera's business in Uzbekistan in which the group has a net exposure of approximately SEK 7 billion. Another risk is the potential establishment of foreign ownership restrictions or other potential actions against entities with foreign ownership, formally or informally. Weakening of the economies or currencies or other negative developments in these markets might have a significantly negative effect on TeliaSonera's results of operations.

Impairment losses and restructuring charges. 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. TeliaSonera has undertaken a number of restructuring and streamlining initiatives which have resulted in substantial restructuring and streamlining charges. Similar initiatives may be undertaken in the future. In addition to affecting TeliaSonera's results of operations, impairment losses and restructuring charges may adversely affect TeliaSonera's ability to pay dividends.

Shareholder matters in partly-owned subsidiaries. TeliaSonera conducts some of its activities, particularly outside of the Nordic region, through subsidiaries in which TeliaSonera does not have a 100 percent ownership. Under the governing documents for certain of these entities, the holders of non-controlling interests have protective rights in matters such as approval of dividends, changes in the ownership structure and other shareholderrelated matters. One example where TeliaSonera is dependent on a minority owner is Fintur Holdings B.V. (Fintur's minority shareholder is Turkcell) which owns the operations in Kazakhstan, Azerbaijan, Georgia and Moldova. As a result, actions outside TeliaSonera's control and adverse to its interests may affect TeliaSonera's position to act as planned in these partly owned subsidiaries.

Associated companies. A significant portion of TeliaSonera's results derives from Mega-Fon and Turkcell, which TeliaSonera does not control and which operate in growth markets but also in more volatile political, economic and legal environments. TeliaSonera has limited influence over the conduct of these businesses. Under the governing documents for certain of these entities, TeliaSonera's partners have control over or share control of key matters such as the approval of business plans and budgets, and decisions as to the timing and amount of cash distributions. The risk of actions outside TeliaSonera's or its associated companies' control and adverse to TeliaSonera's interests, or disagreement or deadlock, is inherent in associated companies and jointly controlled entities. One example of this is the current deadlock in the board work of Turkcell. TeliaSonera might not be able to assure that the associated companies apply the same corporate responsibility principles, increasing the risk for wrongdoings and reputational and financial losses. Variations in the financial performance of these associated companies have an impact on TeliaSonera's results of operations also in the short term.

Regulation. TeliaSonera operates in a highly regulated industry. The regulations to which TeliaSonera is subject impose significant limits on its flexibility to manage its business. 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.

Sustainability. TeliaSonera is subject to a number of sustainability related risks, including but not limited to, environment, network integrity, data security, corruption and human rights. Especially, the risk is high in emerging markets where historically, the political, economic, legal and regulatory systems have been less predictable than in countries with more mature institutional structures. Failure or perception of failure to adhere to Telia-Sonera's sustainability requirements may damage customer or other stakeholders' perception of TeliaSonera and negatively impact TeliaSonera's business operations and its brand.

Forward-looking Statements

This report contains statements concerning, among other things, TeliaSonera's financial condition and results of operations that are forward-looking in nature. Such statements are not historical facts but, rather, represent TeliaSonera's future expectations. TeliaSonera believes that the expectations reflected in these forward-looking statements are based on reasonable assumptions; however, forward-looking statements involve inherent risks and uncertainties, and a number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statement. Such important factors include, but may not be limited to: TeliaSonera's market position; growth in the telecommunications industry; and the effects of competition and other economic, business, competitive and/or regulatory factors affecting the business of Telia-Sonera, its associated companies and joint ventures, and the telecommunications industry in general. Forward-looking statements speak only as of the date they were made, and, other than as required by applicable law, TeliaSonera undertakes no obligation to update any of them in light of new information or future events.

TeliaSonera in brief

TeliaSonera has its roots in the Nordic telecom market and holds strong positions in the Nordic and Baltic countries, Eurasia and Spain. Our core business is to create better communication opportunities for people and businesses through mobile and broadband communication services.

For more information about TeliaSonera, see www.teliasonera.com.

Definitions

Addressable cost base is defined as personnel costs, marketing costs and all other operating expenses other than purchases of goods and sub-contractor services as well as interconnect, roaming and other network-related costs. Addressable cost base does not include non-recurring items.

Billed revenues are defined as voice, messaging, data and content.

EBITDA: Earnings Before Interest, Tax, Depreciation and Amortization. Equals operating income before depreciation, amortization and impairment losses and before income from associated companies.

Net debt/assets ratio: Net debt expressed as a percentage of total assets.

In this report, comparative figures are provided in parentheses following the operational and financial results and refer to the same item in the second quarter of 2012, unless otherwise stated.

Financial calendar

Interim Report January–September 2013 October 17, 2013 Year-end Report January–December 2013 January 30, 2014 Interim Report January–March 2014 April 23, 2014 Interim Report January–June 2014 July 17, 2014 Interim Report January–September 2014 October 17, 2014 Year-end Report January–December 2014 January 29, 2015

Questions regarding the reports

TeliaSonera AB Investor Relations SE–106 63 Stockholm, Sweden Tel. +46 8 504 550 00 Fax +46 8 611 46 42 www.teliasonera.com

TeliaSonera AB discloses the information provided herein pursuant to the Swedish Securities Markets Act and/or the Swedish Financial Instruments Trading Act. The information was submitted for publication at 07:00 CET on July 17, 2013.

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