TeliaSonera January-December 2010

Solid growth blazed the trail to record earnings

Fourth quarter

• Net sales in local currencies and excluding acquisitions increased 4.2 percent. In reported currency, net sales decreased 2.8 percent to SEK 26,774 million (27,549).
• The addressable cost base in local currencies and excluding acquisitions increased 5.2 percent. In reported currency, the addressable cost base decreased 1.8 percent to SEK 8,215 million (8,365).
• EBITDA, excluding non-recurring items, increased 5.2 percent in local currencies and excluding acquisitions. In reported currency, EBITDA was unchanged at SEK 9,024 million (9,039) and the margin increased to 33.7 percent (32.8).
• Operating income, excluding non-recurring items, increased 5.5 percent to SEK 7,991 million (7,573).
• Net income attributable to owners of the parent company increased 8.3 percent to SEK 5,309 million (4,902) and earnings per share to SEK 1.18 (1.09).
• Free cash flow decreased 57.7 percent to SEK 1,742 million (4,118) due to higher cash CAPEX of SEK 1.4 billion and higher paid taxes of SEK 1.3 billion.
• During the quarter the number of subscriptions grew by 2.6 million in the consolidated operations while subscriptions in the associated companies decreased by 2.2 million. The total number of subscriptions was 156.5 million.

Full year

• Net sales in local currencies and excluding acquisitions increased 3.5 percent. In reported currency, a decrease by 2.4 percent to SEK 106,582 million (109,161).
• Net income attributable to owners of the parent company increased 12.7 percent to SEK 21,257 million (18,854) and earnings per share to SEK 4.73 (4.20).
• Free cash flow decreased to SEK 12,901 million (16,643), mainly due to higher paid taxes of SEK 2.9 billion.
• The Board of Directors proposes an ordinary dividend of SEK 2.75 per share (2.25), totaling SEK 12,349 million (10,104), or 58 percent (54) of net income attributable to owners of the parent company. The Board has also declared its intention to repurchase shares for a total amount of approximately SEK 10 billion.

Comments by Lars Nyberg, President and CEO

“The fourth quarter marks the end of a successful year for TeliaSonera. The organic revenue growth improved throughout the year and earnings per share increased 13 percent in 2010.

TeliaSonera’s three focus areas are to secure high quality in our networks, be cost efficient and to build a world class service company, by providing a superior customer experience. In 2010, we continued to roll out high quality fixed and mobile networks, with improved capacity and coverage. We also made progress in working in a more integrated way throughout the company. Within Mobility and Broadband Services, a common operating model was put in place in every country to serve our customers’ needs in a better way and to extract cost and scale advantages. In Eurasia, all operations except UCell in Uzbekistan were rebranded which further emphasizes their integration into the TeliaSonera group.

During the year, TeliaSonera strengthened its technology leadership as we were the first operator to launch commercial 4G services also in Finland, Denmark and Estonia. 4G services were launched as early as in December 2009 in Sweden and Norway and the roll-out continued throughout 2010. In October, Ncell in Nepal launched mobile data services in the world’s highest location, when they introduced 3G services in the Mount Everest area. As we also see a major potential for mobile data in the Eurasian countries in the coming years, we are very pleased to have secured a 3G license in Kazakhstan in December. In Uzbekistan we invested heavily to increase mobile voice and data capacity by expanding our 3G network.

Our Spanish mobile operator, Yoigo, reached the EBITDA breakeven target in the fourth quarter, only four years after the launch in 2006. Yoigo is well positioned as the challenger in Spain and has reached a market share of four percent. To maximize shareholder value, we will now continue to develop the business and the next milestone is to become cash flow positive by the end of 2011.

The demand for smart phones is growing at an exceptional rate. In 2010, seven out of ten new mobile phones sold in our Swedish stores were smart phones. Adding a continued strong demand for mobile broadband and the launch of tablet devices, we are expecting an eight folded growth in data traffic in our network in three years time. In Broadband Services, the demand for on-demand services, such as films, is gaining momentum and we rented out more than 2 million films through our video on demand TV service in Sweden last year.

We are constantly reviewing our asset portfolio and during the year we increased our ownership in UCell in Uzbekistan and Ncell in Nepal, in line with our strategy of increasing ownership in core holdings. We also divested our non-core asset Telia Stofa in Denmark. We will continue to look for new opportunities within or neighboring our existing footprint. In spite of this, our financial position remains strong and the Board of Directors proposes a 22 percent increase in ordinary dividend. In addition, the Board has decided to execute the authorization from the Annual General Meeting and TeliaSonera will repurchase outstanding shares for a total value of approximately SEK 10 billion.

One of our focus areas is to run cost efficient operations. We had tailwind from previous cost savings during the first half of 2010. During the second half, the organization has identified further savings to be implemented during 2011. We also foresee that the common operating model and cross border organization within Mobility and Broadband Services will result in synergies. All in all, we aim to reduce the workforce by some 800 employees whereof 640 in Sweden and 165 in Finland. At the same time, we have a need to recruit new competence and aim to hire 200 new employees in 2011.

Looking ahead, we believe revenue growth in local currencies will be somewhat higher than in 2010. This will mainly be driven by mobile data in the Nordic region, increased market share in Spain and higher mobile penetration in Eurasia.”

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

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