Edgar Filing: SONERA CORP

e425

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

PROSPECTUS FILED PURSUANT TO RULE 425 UNDER THE SECURITIES ACT
OF 1933 AND DEEMED FILED PURSUANT TO RULE 14D-2 UNDER THE
SECURITIES EXCHANGE ACT OF 1934

October 29, 2002

TELIA AB

(Name of Filer)

SONERA CORPORATION

(Subject Company)

0-30340

(Exchange Act File No. of Subject Company)


Interim Report January–September 2002

Telia AB (publ), SE-123 86 Farsta, Corp. Reg. No. 556103-4249, Registered office: Stockholm

Q3 in Brief

•		Underlying EBITDA improved 25 % to MSEK 4,281 (3,420). Substantially strengthened margin from 24 % to 30 %

•		Strong free cash flow of MSEK 2,059

•		Restructuring of the Danish fixed network operations affected operating income by MSEK –3,072

•		Costs totaling MSEK 12,089 for restructuring and streamlining efforts, primarily within International Carrier and the Danish fixed network operations, impacted operating income, falling to MSEK –10,815 (2,745)

•		Net sales increased to MSEK 14,496 (14,431). Sales for comparable units increased 5 %

•		The prospectus for the merger with Sonera was published on September 30, 2002

Review of Earnings


		Jul-Sep		Jul-Sep		Jan-Sep		Jan-Sep		Jan-Dec
MSEK		2002		2001		2002		2001		2001

Net sales			14,496		14,431		42,727		42,226		57,196




Change in net sales (%)			0.5		7.0		1.2		6.8		5.8




Underlying EBITDA			4,281		3,420		11,249		9,782		12,915




Underlying EBITDA margin (%)			29.5		23.7		26.3		23.2		22.6




	Depreciation, amortization and write-downs		-11,057		-2,775		-16,768		-7,690		-13,975




	Items not reflecting underlying business operations		-3,997		-239		-4,801		62		384




	Income from associated companies		-42		2,339		333		2,390		6,136




Operating income			-10,815		2,745		-9,987		4,544		5,460




Income after financial items			-10,964		2,491		-10,507		3,902		4,808




Net income			-10,118		1,900		-9,961		2,441		1,869




Basic and diluted loss/earnings per share (SEK)			-3.37		0.63		-3.32		0.81		0.62




Free cash flow			2,059		-1,527		2,674		-5,913		-6,506




Investments			1,956		5,965		6,646		15,578		20,735




	of which CAPEX		1,783		5,630		5,896		12,864		17,713




Number of employees			16,244		22,509		16,244		22,509		17,149

Comments from Anders Igel, President and CEO of Telia

– The efficiency programs carried out during the year are beginning to yield positive results. It is gratifying to note that earnings, excluding restructuring costs and write-downs, showed substantial improvement during the quarter. The significant increase in the underlying EBITDA margin combined with reduced investments resulted in a sharp increase in free cash flow.

– During the third quarter, we have reviewed operations that did not show satisfactory earnings trends, specifically the international carrier operations, which we previously announced, and the fixed network operations in Denmark. We are now taking action to deal with operations that are a drain on Telia’s earnings. These actions have resulted in substantial costs for restructuring and write-downs, which explains the negative operating income.

– On September 30, we published the prospectus for the planned merger between Telia and Sonera and merger preparations are fully underway.

Telia Interim Report January-September 2002

Review of the Group

Underlying EBITDA margin reached 30 percent. Extensive streamlining costs impacted operating income

Net sales for the Telia Group increased 0.5 percent to MSEK 14,496 during the third quarter. Sales were affected by the extensive divestitures in 2001 as part of the Group’s refinement. Sales for comparable units increased 5 percent.

Demand remained good in all growth areas. During the third quarter, Mobile’s sales increased 12 percent; Internet Services’ sales increased 30 percent; and International Carrier’s sales increased 17 percent. Within Networks, sales fell 4 percent for comparable units due to the introduction of local carrier preselection in Sweden.

Net Sales and Margins by Quarter (MSEK)

(NET SALES AND MARGINS BY QUARTER BAR CHART)

Significantly improved underlying EBITDA

The program of ongoing efficiency-enhancing measures is starting to yield results. During the third quarter, underlying EBITDA climbed a full 25 percent to MSEK 4,281 and the margin improved from 24 to 30 percent.

Mobile’s margin increased from 26 to 31 percent; Internet Services improved its earnings 60 percent; and the increase for International Carrier was 58 percent. Weak development in Denmark led to a decreased margin within Networks, dropping from 38 percent to 35 percent. Underlying EBITDA in the Swedish fixed network operations improved and the margin was strengthened from 41 to 42 percent.

Distribution of Net Sales in Q3

(DISTRIBUTION OF NET SALES IN Q3 PIE CHART)

Extensive restructuring and efficiency measures

The International Carrier business area and operations in Denmark have undergone an extensive review.

Looking forward, the International Carrier operations will be concentrated to wholesale sales of capacity, IP and voice to large customers on the profitable segments of Telia’s wholly owned network in Europe and across the Atlantic. The expected result of these measures is for the carrier operations to report positive cash flow on a monthly basis in 2003, adjusted for restructuring costs.

Telia’s Danish mobile and fixed network operations have so far had a negative impact on Telia’s earnings. The cable TV operations, including Internet Cable, have developed well with a positive contribution to EBITDA. Customer growth in the Danish mobile operations was good and the number of customers now totals 449,000. This means that the focus of the cable TV and mobile operations will be sustained.

The Danish fixed network operations and Internet services, including broadband over ADSL show unsatisfactory development, however, and Telia deems that the current focus will not lead to satisfactory profitability. For this reason, the operations are now being switched to focus on potentially profitable areas and the product range and operating costs will be cut by more than half. The objective is to attain positive underlying EBITDA at the end of 2003. The possibility of reaching this objective however, is greatly dependent on the regulatory developments in Denmark, among other factors.

To adapt the operations to the new focus and to streamline other operations in the Group, costs totaling MSEK 12,089 were incurred in the third quarter, of which MSEK 3,160 were for restructuring and MSEK 8,929 entailed write-downs.

Telia Interim Report January-September 2002

Depreciation, amortization, and write-downs in the third quarter totaled MSEK 11,057 (2,775). Write-downs totaled MSEK 8,112 (149) and mainly comprised write-downs of fixed assets in International Carrier and the fixed network operations in Denmark.

Items not reflecting underlying business operations totaled MSEK -3,997 (MSEK -239) and mainly referred to restructuring costs within International Carrier and the fixed network operations in Denmark, as well as capital gains within Holding. The item also included MSEK 159 from certain pension-related costs.

Income from associated companies totaled MSEK -42 (2,339). The comparative quarter was affected by capital gains of MSEK 3,034. Not including capital gains, income from associated companies improved by MSEK 645 in the third quarter 2002.

As a result of extensive write-downs and restructuring costs, operating income decreased to MSEK -10,815 (2,745) in the third quarter.

Financial items improved during the quarter to MSEK -149 (-254).

Income after financial items totaled MSEK -10,964 (2,491).

After minority stakes and a positive tax effect of MSEK 852 arising from a previously unutilized loss carry-forward, the net income reported for the third quarter was MSEK -10,118 (1,900).

Nine-month period

During the nine-month period, net sales advanced 1 percent compared with the same period in the preceding year. Sales for comparable units increased 6 percent.

Underlying EBITDA improved 15 percent to MSEK 11,249 (9,728).

Depreciation, amortization and write-downs totaled MSEK 16,768 (7,690), of which write-downs totaled MSEK 8,208 (149).

Items not reflecting underlying business operations totaled MSEK -4,801 (62) and consist of, in addition to restructuring costs and third quarter write-downs within International Carrier and the Danish fixed network operations, streamlining costs within other operations (MSEK 370), certain pension-related costs (MSEK 354), and a capital gain (MSEK 50).

Income from associated companies totaled MSEK 333 (2,390). Not including capital gains and write-downs, earnings showed an improvement of MSEK 2,151 during the nine-month period.

Operating income decreased to MSEK -9,987 (4,544).

Financial items totaled MSEK -520 (-642), resulting in income after financial items totaling MSEK -10,507 (3,902).

After minority stakes and a positive tax effect of MSEK 544 arising from a previously unutilized loss carry-forward, the net income reported was MSEK -9,961 (2,441).

Strong cash flow, sustained low debt/equity ratio

The substantial increase in underlying EBITDA and low level of investment generated strong free cash flow (cash flows from operating activities less CAPEX) of MSEK 2,059 in the quarter. This strong cash flow enabled the Group to reduce its net interest-bearing liabilities from MSEK 10,336 to MSEK 8,107 and the low debt/equity ratio was maintained despite significant restructuring provisions and write-downs.


	Sep 30,		Dec 31,		Dec 31,
MSEK	2002		2001		2000

Interest coverage ratio (multiple)		-6.4		3.0		7.3




Change in total assets (%)		-13.3		4.5		60.2




Asset turnover ratio (multiple)		0.48		0.46		0.54




Equity/assets ratio (%)		45.0		46.2		44.4




Capital employed		74,076		90,971		92,374




Net interest-bearing liability		8,107		10,661		20,235




Debt/equity ratio (multiple)		0.16		0.18		0.37

Reduced investments

Investments decreased 67 percent to MSEK 1,956 (5,965) in the third quarter due to lower investments in production facilities (CAPEX) in the Swedish fixed network, International Carrier and in the mobile networks.

Investments during the nine-month period totaled MSEK 6,646 (15,578), which represents a 57 percent decrease compared with the same period in the preceding year.

Continued staff cuts

During the nine-month period, the number of Group employees decreased by 905 to 16,244.

Telia Interim Report January-September 2002

Publication of the prospectus for the merger with Sonera

On September 30, 2002, Telia published the prospectus for the merger with Sonera, along with instructions and terms and conditions for the exchange offer through which the merger will be effected. The exchange offer acceptance period commenced on October 7, 2002 and will end on November 8, 2002. The result of the offer is expected to be published on November 14, 2002.

Extraordinary meeting of shareholders

In connection with the planned merger with Sonera, an extraordinary meeting of Telia shareholders will be held on Monday, November 4, 2002 at 5:00 pm at Berwaldhallen in Stockholm, Sweden. Notice of the meeting was advertised in the newspapers on October 4.

Changes in Telia’s Management

Within Telia’s Group Management, Jörgen Latte was appointed as Acting CFO and Head of Corporate Financial Control on September 1, and Eva Lindqvist was appointed as head of the business area International Carrier on September 9. Marie Ehrling will be appointed as head of Telia’s Swedish operations on January 1, 2003. After the planned merger with Sonera, Ehrling will be responsible for the profit center TeliaSonera Sverige.

Review of Business Areas

Mobile – Strong improvement in profitability and continued customer growth

Mobile has developed positively during the quarter with a continued stream of customers, improved earnings and strengthened margins.


						Jan-		Jan-
		Jul-Sep		Jul-Sep		Sep		Sep
MSEK		2002		2001		2002		2001

Net sales			5,743		5,247		16,214		14,692




	of which external		5,367		4,786		15,131		13,143




Underlying EBITDA			1,800		1,375		4,391		3,616




EBITDA margin (%)			31.3		26.2		27.1		24.6




	Depreciation, amortization etc.		-1,036		-980		-2,875		-2,499




	Items not reflecting underlying business operations		-38		-33		-386		-47




	Income from associates		81		105		212		224




Operating income			807		467		1,342		1,294




Investments			633		2,100		2,012		3,307




	of which CAPEX		633		1,835		1,761		3,027

Continued customer growth, increased use of SMS and increased traffic per customer in all Nordic markets contributed to a 12 percent increase in external net sales, to MSEK 5,367 in the third quarter, compared to the corresponding quarter of 2001. The number of customers during the quarter increased by 130,000 to 5,258,000, while the number of customers via service providers fell by 6,000 to 173,000.

Sales rose 15 percent to MSEK 15,131 for the nine-month period.

Volume growth combined with streamlining efforts in all Nordic operations led to a 31 percent improvement in underlying EBITDA, to MSEK 1,800, and the margin was strengthened to 31.3 (26.2) percent during the quarter.

Depreciation increased to MSEK 1,036 (980).

Items not reflecting underlying business operations totaled MSEK -38 (-33) and primarily refer to pension provisions in the Swedish operations.

Income from associated companies, of which the greater part refers to operations in the Baltic states and Russia, fell to MSEK 81 (105). The poorer result is due to the fact that the operations in Russia, after the formation of MegaFon, consist to a large part of start-up operations.

Operating income increased to MSEK 807 (467). Operating income for the nine-month period increased to MSEK 1,342 (1,294).

Investments decreased to MSEK 633 (2,100) and were primarily for capacity expansion in the Norwegian, Danish

Telia Interim Report January-September 2002

and Swedish networks. The high level of investment in the comparative year is attributable to the acquisition of a 3G license in Denmark (MSEK 1,170).

Continued customer growth and improved profitability in Sweden

In Sweden, external net sales in mobile telephony rose 4 percent to MSEK 2,820. At the same time, the price level fell 4 percent due to reduced interconnect fees.

The number of GSM customers during the quarter increased by 57,000 to 3,401,000 and the number of customers via service providers increased by 2,000 to 89,000.

The average traffic volume per customer and month rose to 135 minutes (131).

SMS climbed 24 percent and 134 million messages were sent during the quarter.

Reduced interconnect fees and an increased share of prepaid customers led to a drop in the average revenue per user (ARPU), to SEK 293 (303).

Churn was 13 percent compared with 11 percent during the second quarter 2002.

Increased traffic per customer and cost-cutting measures resulted in a 6 percent improvement in underlying EBITDA, to MSEK 1,518, and the margin increased to 48.4 (46.3) percent.

Telia’s and Tele2’s jointly owned network company, Svenska UMTS-nät AB, signed a loan agreement with a group of banks for SEK 11 billion in loans and credit on current account for the 3G buildout in Sweden. The buildout and financing of the UMTS network in Sweden is proceeding according to plan.

A GPRS service, Telia GPRS LAN-access, was introduced during the quarter. The service targets businesses with employees who need to access information in the company’s internal systems when they are away from the office.

Two new subscription types for businesses were also launched: Work for voice services and Executive for voice and data services.

On October 1, 2002, Telia further reduced its interconnect fee in the GSM network from SEK 0.92 to SEK 0.88 per minute. The price for the HomeRun broadband service was also reduced.

Continued growth and improved earnings in Norway

In Norway, external net sales in mobile telephony rose 25 percent to MSEK 1,484. The number of customers during the quarter increased by 26,000 to 1,022,000, while the number of customers via service providers fell by 8,000 to 84,000.

SMS growth remained strong. During the third quarter, 197 million messages were sent, up 47 percent from the same quarter of the preceding year.

Simple and attractive customer offers and an increased share of postpaid customers contributed to an increase in the traffic volume per customer per month to 169 (147) minutes and ARPU climbed to NOK 377 (341).

Underlying EBITDA climbed 48 percent to MSEK 629 and the margin improved to 41.6 percent (35.4). This improvement in earnings is attributable to customer growth, increased traffic volume and streamlining efforts.

Strong sales growth in Denmark

In Denmark, external sales in mobile telephony rose 62 percent to MSEK 250. The increase was mainly attributable to customer growth. Sales of mobile subscriptions have continued to be successful and the number of customers increased during the quarter by 36,000 to 449,000.

During the third quarter, a total of 58 million SMS messages were sent, a jump of nearly 300 percent. There was also a slight improvement in traffic volume per user and ARPU.

Underlying EBITDA improved to MSEK -119 (-128).

Most of the investments made during the quarter referred to the expansion of the GSM 900 network, which is expected to be completed during the year.

Sales growth and reduced deficit in Finland

In the Finnish market, external sales for mobile telephony jumped 34 percent to MSEK 235 compared with the same quarter of 2001. The number of customers rose by 12,000 to 247,000. Prepaid customers represented the greater part of this growth.

SMS increased 29 percent.

Underlying EBITDA improved to MSEK -34 (-95), partly due to the fact that a greater part of the traffic is now carried in Telia’s own network as a result of the roaming agreement with Suomen 2G.

Telia has committed to selling its mobile operations in Finland as stipulated by the EU in its approval of the merger with Sonera.

Telia Interim Report January-September 2002

Growth in the Baltic states and Russia

The associated companies in Russia and the Baltic states continued to show positive development and the total number of customers surged 635,500 to 3,814,000 during the quarter. The customer growth was primarily attributable to the Russian operations.

Business solutions, telephony

External net sales for telephony in Business Solutions totaled MSEK 408 and underlying EBITDA improved to MSEK -21 (-73).

Reduced losses in other business

For other operations, which mainly include mobile portals, shops and radio contracting, external net sales fell 17 percent to MSEK 170. The decline is chiefly attributable to retail operations. Reduced costs for the portal business resulted in an improvement in underlying EBITDA to MSEK -158 (-184).

Internet Services — Stronger market position in broadband

Within Internet Services, external net sales rose 30 percent to MSEK 1,034 during the third quarter compared with the same quarter of 2001. The increase is attributable to continued demand for broadband access, greater demand for TV services and higher prices. The average price level climbed 7 percent during the quarter.


						Jan-		Jan-
		Jul-Sep		Jul-Sep		Sep		Sep
MSEK		2002		2001		2002		2001

Net sales			1,046		765		3,057		2,337




	of which external		1,034		797		3,027		2,325




Underlying EBITDA			-92		-229		-406		-747




EBITDA margin (%)			-8.8		-29.9		-13.3		-32.0




	Depreciation, amortization etc.		-124		-108		-493		-281




	Items not reflecting underlying business operations		-19		-15		-116		-24




	Income from associates		-33		-9		-51		-36




Operating income			-268		-361		-1,066		-1,088




Investments			67		129		303		672




	of which CAPEX		68		129		274		605

Sales for the nine-month period increased 30 percent.

Telia’s Internet services continued to report weak development. Third quarter sales fell to MSEK 30 (31). This was attributable to weak demand, primarily for content services (portal services) and payment services. The operations also reported weak profitability.

The range of services is being restructured in order to create a service portfolio with solid long-term growth and sustainable profitability. Telia is also concentrating greater efforts on developing accesses and related value-added services such as VOIP and other types of communications-related services, an area where Telia has high expertise and a strong market position with over 1.2 million Internet access customers.

The changed focus means that payment services and certain content services are being phased out in Sweden. The hosting services Telia Instant Web and Telia Webbhotell were closed during the quarter. Certain Internet services will also be phased out in Denmark. Systems and platforms related to Internet services were written down by MSEK 12 in the third quarter.

The sustained strong stream of customers within broadband access, price changes and streamlining efforts improved underlying EBITDA to MSEK -92 (-229) compared with the same quarter of 2001. During the nine-month period underlying EBITDA improved to MSEK -406 (-747).

Depreciation, amortization and write-downs rose to MSEK 124 (108) and include, write-downs on Internet services systems and platforms totaling MSEK 12.

Under items not reflecting underlying business operations, MSEK 12 was reported in restructuring costs, including provisions for redundant personnel.

Income from associated companies totaling MSEK -33 (-9) refer to Marakanda and include a third quarter write-down totaling MSEK 24.

Operating income improved to MSEK -268 (-361). Operating income for the nine-month period totaled MSEK -1,066 (-1,088).

Investments decreased to MSEK 67 (129). This decline was attributable to reduced investment needs in the cable TV business, as property owners are now taking over a large part of the network investments.

Internet accesses

Sales of Internet accesses jumped 45 percent to MSEK 665. During the quarter, the number of ADSL customers increased by 15,000 to 279,000 and the number of customers with Internet Cable increased by 9,000 to 134,000.

Demand for broadband access was strongest in the business segment where primarily smaller companies choose Internet-based solutions over traditional data communications.

Telia Interim Report January-September 2002

During the quarter, Telia strengthened its market position in broadband within the Swedish business segment in which Telia now has 50 percent of the market. At the same time, Telia maintained its 55 percent market share in broadband in the consumer segment.

During the third quarter, demand for dial-up Internet services also grew after having stagnated somewhat earlier in the year. The number of customers grew by 14,000 during the quarter and is currently on a par with the third quarter of 2001. The sales increase is largely attributable to the launch of Telia Internet för Alla, an access service that was well received, particularly among young customers.

Several other new product launches were successful during the quarter. For small and medium-size businesses, Telia has developed an IPX that enables companies to integrate IP telephones, analog telephones, fax machines and modems in a single network solution. A new type of fixed Internet access, ProLane Light, was also developed for small and medium-size companies.

Several major deals were finalized during the quarter. An agreement was signed with SEB for the delivery of a virtual private network. Fixed access solutions (ProLane) were sold to several municipalities.

Cable TV

Increased sales of cable TV connections, higher payments from property owners in the Swedish market and a price increase for cable TV in Denmark resulted in a 14 percent increase in external net sales in the cable TV business, to MSEK 336. During the quarter, the number of cable TV customers increased 21,000 to 1,591,000. The number of digital TV customers remained largely unchanged, which is in line with the market trend.

In Sweden, the total number of cable TV customers was 1,403,000 at the end of the period.

In Denmark, 188,000 customers were connected directly via cable and approximately 440,000 indirectly via parabolic antenna connections.

The cable TV operations in Sweden, Com Hem, will be divested as stipulated by the EU for its approval of the planned merger with Sonera.

International Carrier — New strategic focus will yield positive cash flow 2003

Weaker growth in broadband, delayed 3G buildout and insolvency among several carriers resulted in dramatic and turbulent developments in the carrier market with slowed growth, increased risk and lower asset value in the industry. Considering these developments, Telia has decided to change the strategic direction for International Carrier and to restructure the operations. A restructuring provision of MSEK 2,825 was made in the third quarter.


						Jan-		Jan-
		Jul-Sep		Jul-Sep		Sep		Sep
MSEK		2002		2001		2002		2001

Net sales			1,378		1,283		3,868		3,361




	of which external		1,176		1,003		3,264		2,630




Underlying EBITDA			-255		-614		-873		-1,181




EBITDA margin (%)			-18.5		-47.9		-22.6		-35.1




	Depreciation, amortization etc.		-5,457		-135		-5,868		-305




	Items not reflecting underlying business operations		-3,649		1		-3,650		0




	Income from associates		0		0		0		0




Operating income			-9,361		-748		-10,391		-1,486




Investments			222		1,620		660		3,880




	of which CAPEX		222		1,643		660		3,880

The changed market conditions also led Telia to write down the book value of the fixed assets by MSEK 6,131 in the third quarter.

The measures now being taken are expected to result in a positive cash flow for the carrier operations on a monthly basis during 2003, adjusted for restructuring costs, while Telia retains the possibility to take part of future market growth within IP and broadband.

Concentration on the profitable segments of the network

Looking forward, the operations will be concentrated to wholesale sales of capacity, IP and voice to large customers on the profitable segments of Telia’s wholly owned network in Europe and across the Atlantic.

Telia will also offer secure transport of Internet traffic at competitive prices by continuing to operate its IP network and maintain peering points (connection points to other operators ´ networks) in Europe and the United States.

Phase-out of unprofitable operations

The new focus entails a restructuring of the operations. The restructuring will be completed at the end of 2003 and includes the following steps, among others:

•

Phase-out of operations in Asia

Telia Interim Report January-September 2002

•		Phase-out of sales of domestic voice through resellers in the United Kingdom

•		Phase-out of the co-location business

•		Freezing domestic network services in the United States

•		Centralizing sales, administration and customer services functions to Sweden.

The restructuring will greatly reduce the number of offices and technical facilities as well as lead to reduced operation and maintenance costs and leased lines.

The purpose is to reduce the current staffing of 800 employees by more than half.

The total cost of the restructuring is estimated at approximately SEK 3.5 billion, for which provisions of MSEK 2,825 were made in the third quarter.

Increased sales in all product areas

Third-quarter external net sales rose 17 percent, compared with the corresponding period in the preceding year. Sales were good in all three main product areas.

Capacity and IP sales increased 11 percent and voice sales increased 27 percent. The sales growth is attributable to good order intake, primarily during the second quarter, due to the fact that several competing carriers were forced to exit the market. Order intake tapered off somewhat towards the end of the quarter.

Sales for the nine-month period increased 24 percent compared with the same period in the preceding year.

Improved underlying EBITDA

Increased net sales led to further improvement in underlying EBITDA to MSEK -255, compared with MSEK -614 in the third quarter 2001. Compared with the second quarter 2002, the improvement in earnings was MSEK 32.

Depreciation, amortization and write-downs climbed to MSEK 5,457 (135). The write-down of fixed assets in the third quarter totaled MSEK 6,131, of which MSEK 5,307 burdened the item depreciation, amortization and write-downs and refer to unutilized network sections and technical facilities.

Items not reflecting underlying business operations totaled MSEK -3,649 (1) and include the provision of MSEK 2,825 for close-downs or partial phase-outs of technical facilities, offices and regeneration and amplifier sites as well as redundant personnel, and also includes the MSEK 824 write-down of infrastructure and network capacity acquired from other operators.

The write-down of fixed assets and the restructuring provision led to decreased operating income totaling MSEK -9,361 (-748). Operating income for the nine-month period totaled MSEK -10,391 (-1,486).

Customer-driven investments

Investments decreased during the quarter to MSEK 222 (1,620) and primarily referred to equipment for expanding capacity in the wholly owned network due to increased customer demand.

Networks – Continued improvement in earnings in Sweden. Focus-shift in Denmark

External net sales in Networks fell 8 percent to MSEK 6,615 in the third quarter compared with the third quarter 2001. Sales for comparable units fell 4 percent. This decrease was mainly due to declining revenues in the Swedish retail market.


						Jan-		Jan-
		Jul-Sep		Jul-Sep		Sep		Sep
MSEK		2002		2001		2002		2001

Net sales			8,093		8,229		24,732		24,742




	of which external		6,615		7,183		20,403		21,472




Underlying EBITDA			2,832		3,129		8,440		8,759




EBITDA margin (%)			35.0		38.0		34.1		35.4




	Depreciation, amortization etc.		-4,307		-1,345		-7,128		-3,877




	Items not reflecting underlying business operations		-378		-99		-641		-58




	Income from associates		-32		-624		74		-3,530




Operating income			-1,885		1,061		745		1,294




Investments			649		1,869		2,709		5,155




	of which CAPEX		649		1,830		2,706		4,692

Sales for the nine-month period decreased 5 percent. Price levels remained largely unchanged during the period.

Underlying EBITDA fell to MSEK 2,832 (3,129) during the quarter. The weaker earnings are attributable to losses in the Danish operations. The Danish fixed network operations were reviewed during the quarter in order to value their assets and determine a new focus.

Looking forward, the operations will be concentrated to the transport capacity offer and voice services for both consumers and business customers. This means that the product range and operating costs will be cut by more than half. In conjunction with the review and the new focus, the value of current assets was written down by MSEK 353, the value of fixed assets was written down by MSEK 2,786, and a provision of MSEK 286 was made for restructuring costs. The action program is expected to entail additional restructuring costs of approximately MSEK 185-250 in the fourth quarter 2002. The objective is to attain positive underlying EBITDA at the end of 2003. The possibility of reaching this objective is greatly dependent

Telia Interim Report January-September 2002

on the regulatory developments in Denmark, among other factors.

In Sweden, underlying EBITDA improved to MSEK 3,245 (3,137) despite lower net sales. The improvement in earnings is attributable to reduced costs for sales and product development in the retail business and lower maintenance and installation costs in the wholesale business.

Within Networks, depreciation and write-downs increased to MSEK 4,307 (1,345) in the third quarter. The increase is primarily attributable to the MSEK 2,786 write-down of fixed assets in Denmark.

Items not reflecting underlying business operations totaled MSEK -378 (-99). Costs for ongoing streamlining measures in the Swedish operations, including provisions for redundant personnel, totaled MSEK 21 and costs for restructuring the Danish operations totaled MSEK 286.

Income from associated companies improved to MSEK -32 (-624) as Netia and Eircom/Comsource no longer burden earnings.

Losses in Denmark caused operating income to drop to MSEK -1,885 (1,061) in the third quarter.

Operating income for the nine-month period totaled MSEK 744 (1,294) as losses in Denmark were largely offset by the fact that Eircom/Comsource did not burden income from associated companies.

Investments dropped off to MSEK 649 (1,869) during the third quarter, contributing to significantly improved cash flow.

Retail market

Sales in the retail market declined 8 percent to MSEK 5,543 due to decreased market shares in Swedish fixed telephony. The greatest drop was in local calls due to the carrier preselect reform introduced in February 2002.

Reduced market shares led call revenues for fixed telephony in Sweden to drop 12 percent to MSEK 1,989 during the quarter. Sales dropped in network capacity, data communications and IT services compared with the same quarter 2001. Sales increased, however, for premium services including Caller ID and Telesvar voicemail for consumers and Advance services for business customers.

The number of telephone subscriptions in Sweden dropped by 11,000 to 5,594,000. The number of ISDN channels also fell as more and more customers switch from ISDN to ADSL/LAN.

The Danish retail market also reported somewhat lower sales.

Wholesale market

Sales in the wholesale operations climbed 23 percent comparatively. The increase was mainly attributable to increased sales of interconnect traffic and network capacity in Sweden.

Demand for broadband connections remained strong. Third quarter deliveries of ADSL/LAN connections totaled 28,000, of which 13,000 were to service providers outside Telia. As the period drew to a close, there were 379,000 customers connected to Telia’s broadband network through ADSL/LAN solutions.

In Denmark, sales fell 28 percent due to weaker demand for network capacity from other operators and service providers.

Reported sales for the wholesale operations fell 9 percent to MSEK 1,072 due to the fact that the installation material purchased by the subcontractor Swedia Networks are no longer reported as sales in Skanova.

Holding

Telia Holding is responsible for the Group’s investments outside of Telia’s core businesses. Telia Holding comprises a number of consolidated businesses, including Finans/Credit, Sergel Kredittjänster, Division Satellit, Division Offentlig Telecom, Promotor, Overseas, including Suntel, as well as several associated companies, including Slottsbacken, INGROUP, Drutt Corp, Telefos, AUCS, Infonet Services and COOP Bank.

Extensive divestitures in 2001 along with the closing down of Vimera (customer training) and Time (accounting services) during the second quarter 2002 as well as ongoing phase-outs of operations within Division Satellit resulted in reduced net sales, while underlying EBITDA and the margin improved.


						Jan-		Jan-
		Jul-Sep		Jul-Sep		Sep		Sep
MSEK		2002		2001		2002		2001

Net sales			458		1,649		1,378		8,889




	of which external		243		624		704		2,525




Underlying EBITDA			142		20		345		150




EBITDA margin (%)			31.0		1.2		25.0		1.7




	Depreciation, amortization etc.		-115		-185		-355		-661




	Items not reflecting underlying business operations		137		-902		36		-861




	Income from associates		-53		2,872		123		5,758




Operating income			111		1,805		149		4,386




Investments			239		240		710		2,610




	of which CAPEX		67		186		244		706

For the remaining operations, external net sales fell during the third quarter to MSEK 243 (277) while underlying EBITDA increased to MSEK 142 (130). The drop in sales is

Telia Interim Report January-September 2002

attributable to the consulting company Promotor and Sun-tel, while underlying EBITDA mainly improved within Promotor and Sergel Kredittjänster.

Depreciation fell to MSEK 115 (185) due to divestitures/-phase-outs of operations.

Items not reflecting underlying business operations totaled MSEK 137 (-902) and consisted mainly of a capital gain of MSEK 145 from the sale of Telia’s remaining 9 percent holding in the Orbiant Group to Flextronics. Divestiture decisions made during the third quarter led to additional redundancies, and provisions for restructuring costs of MSEK 12 were made.

Income from associated companies totaled MSEK -53 (2,872). Capital gains affected earnings by MSEK 9 compared with MSEK 3,047 in the comparative quarter.

Operating income totaled MSEK 111 (1,805).

Investments totaled MSEK 239 (240). MSEK 129 referred to loan conversion to shareholder contributions in AUCS, MSEK 55 to Finans/Credit’s leasing operations, MSEK 22 to network investments in Suntel and MSEK 33 to shareholder contributions in COOP Bank.

Outlook 2002

Telia’s efforts aimed at developing and streamlining its core businesses began to yield results in the third quarter. In the coming quarter, we expect the costs of planned marketing activities to have a slowing effect on earnings.

Our focus on reducing investments has been successful, though we are planning to raise our level of investment somewhat in the fourth quarter.

Stockholm, October 25, 2002

Anders Igel
President and CEO

Auditors’ Review Report

We have made a review of this interim report in accordance with recommendations issued by the Swedish Institute of Authorized Public Accountants. A review is substantially limited in scope in comparison to an audit.

Nothing has come to our attention that indicates that this interim report fails to comply with the requirements of the Swedish Securities Exchange Act and International Accounting Standards (IAS).

Stockholm, October 25, 2002


Ernst & Young AB Torsten Lyth Authorized Public Accountant	Gunnar Widhagen Authorized Public Accountant	Filip Cassel Authorized Public Accountant


Financial Information	Questions regarding content:	Reports may be ordered via:




Year-end Report 2002 February 3, 2003	Telia AB, Investor Relations SE-123 86 Farsta, Sweden Tel. +46 (0)8 713 1000 Fax +46 (0)8 713 6947 www.telia.com, Investor Relations	Tel. +46 (0)8 713 7143 Fax +46 (0)8 604 5472 www.telia.com, Investor Relations

Telia Interim Report January-September 2002

Consolidated Income Statements


	Jul-Sep		Jul-Sep		Jan-Sep		Jan-Sep		Oct 2001-		Jan-Dec		Jan-Dec
MSEK	2002		2001		2002		2001		Sep 2002		2001		2000

Net sales		14,496		14,431		42,727		42,226		57,697		57,196		54,064




Costs of production		-8,972		-9,432		-27,316		-27,433		-40,318		-40,435		-33,028

Gross income		5,524		4,999		15,411		14,793		17,379		16,761		21,036




Sales, administrative, and R&D expenses		-4,287		-4,272		-13,291		-12,596		-18,638		-17,943		-16,326




Other operating revenues and expenses, net		-12,010		-321		-12,440		-43		-11,891		506		8,493




Income from associated companies		-42		2,339		333		2,390		4,079		6,136		-1,197

Operating income		-10,815		2,745		-9,987		4,544		-9,071		5,460		12,006




Net financial revenues and expenses		-149		-254		-520		-642		-530		-652		-289

Income after financial items		-10,964		2,491		-10,507		3,902		-9,601		4,808		11,717




Income taxes		852		-573		544		-1,421		-952		-2,917		-1,447




Minority interests		-6		-18		2		-40		20		-22		8

Net income		-10,118		1,900		-9,961		2,441		-10,533		1,869		10,278

Loss/earnings per share, basic (SEK)		-3.37		0.63		-3.32		0.81		-3.51		0.62		3.50




Loss/earnings per share, diluted (SEK)		-3.37		0.63		-3.32		0.81		-3.51		0.62		3.50

Quarterly Data


		2002						2001								2000

MSEK		Q3		Q2		Q1		Q4		Q3		Q2		Q1		Q4		Q3

Net sales			14,496		14,346		13,885		14,970		14,431		14,203		13,592		14,540		13,487




Underlying EBITDA			4,281		3,587		3,381		3,133		3,420		3,014		3,348		3,790		3,180




	Items not reflecting underlying business operations		-3,997		-827		23		322		-239		271		30		6,937		-116




	Income from associates		-42		363		12		3,746		2,339		208		-157		-370		-759




EBITDA			242		3,123		3,416		7,201		5,520		3,493		3,221		10,357		2,305




	Depreciation, amortization and write-downs		-11,057		-3,004		-2,707		-6,285		-2,775		-2,505		-2,410		-2,427		-2,099




Operating income			-10,815		119		709		916		2,745		988		811		7,930		206




Income after financial items			-10,964		-78		535		906		2,491		909		502		7,658		267




Net income			-10,118		30		127		-572		1,900		250		291		7,408		172




Earnings per share, basic (SEK)			-3.37		0.01		0.04		-0.19		0.63		0.08		0.10		2.47		0.06




Earnings per share, diluted (SEK)			-3.37		0.01		0.04		-0.19		0.63		0.08		0.10		2.47		0.06




Operating cash flow			2,108		1,472		-865		9,171		4,745		3,158		-3,026		3,486		-25,923




Investments			1,956		2,637		2,053		5,157		5,965		5,954		3,659		10,311		16,745




	of which CAPEX		1,783		2,091		2,022		4,849		5,630		3,666		3,568		7,185		3,369




	of which acquisitions		173		546		31		308		335		2,288		91		3,126		13,376

Telia Interim Report January-September 2002

Condensed Consolidated Balance Sheets


	Sep 30,		Sep 30,		Dec 31,		Dec 31,
MSEK	2002		2001		2001		2000

Assets




Intangible fixed assets		27,273		28,439		26,816		25,198




Tangible fixed assets		37,041		49,449		47,314		43,807




Financial fixed assets		19,473		18,934		20,784		22,335




Total fixed assets		83,787		96,822		94,914		91,340




Inventories, etc.		348		854		636		773




Receivables		23,325		32,170		23,521		29,072




Short-term investments		1,985		345		7,602		178




Cash and bank		1,919		948		1,518		1,352




Total current assets		27,577		34,317		33,277		31,375

Total assets		111,364		131,139		128,191		122,715




Equity and liabilities




Shareholders’ equity		50,526		61,884		59,885		55,988




Minority interests		290		1,536		204		320




Provisions for pensions and employee contracts		1,514		2,529		2,358		3,525




Deferred tax liability, other provisions		13,557		9,109		10,749		7,826




Total provisions		15,071		11,638		13,107		11,351




Long-term loans		14,113		25,984		25,193		20,876




Short-term loans		8,083		5,825		3,931		13,166




Non-interest-bearing liabilities		23,281		24,272		25,871		21,014




Total liabilities		45,477		56,081		54,995		55,056

Total equity and liabilities		111,364		131,139		128,191		122,715

Condensed Consolidated Cash Flow Statements and Changes in Net Interest-bearing Liability


	Jul-Sep		Jul-Sep		Jan-Sep		Jan-Sep		Oct 2001-		Jan-Dec		Jan-Dec
MSEK	2002		2001		2002		2001		Sep 2002		2001		2000

Cash flow before change in working capital		3,088		2,400		8,357		7,049		11,580		10,272		9,589




Change in working capital		745		716		177		-1,123		1,444		144		563




Cash flow from operating activities		3,833		3,116		8,534		5,926		13,024		10,416		10,152




Cash flow from investing activities		-1,725		1,629		-5,819		-1,049		-1,138		3,632		-37,121




Operating cash flow		2,108		4,745		2,715		4,877		11,886		14,048		-26,969




Cash flow from financing activities		-1,425		-5,021		-7,960		-5,426		-9,142		-6,608		26,818

Cash flow for the period		683		-276		-5,245		-549		2,744		7,440		-151





Cash and cash equivalents, opening balance		3,027		1,207		8,923		1,437		949		1,437		1,575




Cash flow for the period		683		-276		-5,245		-549		2,744		7,440		-151




Exchange rate differences in cash and cash equivalents		-41		18		-9		61		-24		46		13




Cash and cash equivalents, closing balance		3,669		949		3,669		949		3,669		8,923		1,437

Net interest-bearing liability, opening balance		10,336		19,069		10,661		20,235		15,769		20,235		7,527




Change in net borrowings		-1,949		-2,801		-1,710		-3,470		-6,647		-8,407		12,429




Change in pension provisions		-280		-499		-844		-996		-1,015		-1,167		279




Net interest-bearing liability, closing balance		8,107		15,769		8,107		15,769		8,107		10,661		20,235

Telia Interim Report January-September 2002

Condensed Consolidated Statements of Changes in Shareholders’ Equity


	Sep 30,		Sep 30,		Dec 31,		Dec 31,
MSEK	2002		2001		2001		2000

Opening balance		59,885		55,988		55,988		32,893




Change of accounting principles (IAS 39)		–		-342		-342		–




Adjusted opening balance		59,885		55,646		55,646		32,893




Dividend		-600		-1,501		-1,501		-1,470




New share issue		–		–		–		12,750




Underwriting expenses after tax posted directly to equity		16		–		-16		-231




Transactions with outside parties		-16		-128		-155		-82




Share of earnings in companies previously outside the Group		–		–		–		29




Differences arising from translation of foreign operations		1,128		5,787		4,268		2,127




Fair value measurement of securities available for sale		15		-21		143		–




Gains/losses on instruments used to hedge cash flow		51		102		114		–




Differences after tax on forward contracts used for equity hedge		8		-442		-483		-306




Net income for the period		-9,961		2,441		1,869		10,278




Closing balance		50,526		61,884		59,885		55,988

Business Area Breakdown

July-September 2002 or September 30, 2002


				Internet		International				Group-		of which
MSEK		Mobile		Services		Carrier		Networks		wide		Holding		Group

Net sales			5,743		1,046		1,378		8,093		-1,764		458		14,496




External net sales			5,367		1,034		1,176		6,615		304		243		14,496




Underlying EBITDA			1,800		-92		-255		2,832		-4		142		4,281




Depreciation, amortization & write-downs			-1,036		-124		-5,457		-4,307		-133		-115		-11,057




Items not reflecting underlying business operations			-38		-19		-3,649		-378		87		137		-3,997




Income from associated companies			81		-33		0		-32		-58		-53		-42




Operating income			807		-268		-9,361		-1,885		-108		111		-10,815




Operating capital			36,509		905		426		24,927		-4,294		2,134		58,473




	of which Segment assets		42,275		2,179		8,688		33,965		8,654		6,777		95,761




	of which Segment liabilities		-5,766		-1,274		-8,262		-9,038		-12,948		-4,643		-37,288




Equity participations in associates			2,993		0		0		2,526		2,880		2,880		8,399




Investments			633		67		222		649		385		239		1,956




	of which CAPEX		633		68		222		649		211		67		1,783




Number of employees			4,371		1,420		784		7,399		2,270		1,465		16,244




Average number of full-time employees			4,470		1,377		785		7,300		2,288		1,478		16,220

Telia Interim Report January-September 2002

July-September 2001 or September 30, 2001 (restated)


				Internet		International				Group-		of which
MSEK		Mobile		Services		Carrier		Networks		wide		Holding		Group

Net sales			5,247		765		1,283		8,229		-1,093		1,649		14,431




External net sales			4,786		797		1,003		7,183		662		624		14,431




Underlying EBITDA			1,375		-229		-614		3,129		-241		20		3,420




Depreciation, amortization & write-downs			-980		-108		-135		-1,345		-207		-185		-2,775




Items not reflecting underlying business operations			-33		-15		1		-99		-93		-902		-239




Income from associated companies			105		-9		0		-624		2,867		2,872		2,339




Operating income			467		-361		-748		1,061		2,326		1,805		2,745




Operating capital			36,647		1,680		11,506		29,380		-1,187		3,185		78,026




	of which Segment assets		43,676		2,867		17,386		40,324		8,316		8,275		112,569




	of which Segment liabilities		-7,029		-1,187		-5,880		-10,944		-9,503		-5,090		-34,543




Equity participations in associates			2,564		30		0		2,299		3,727		3,727		8,620




Investments			2,100		129		1,620		1,869		247		240		5,965




	of which CAPEX		1,835		129		1,643		1,830		193		186		5,630




Number of employees			5,029		1,272		730		7,897		7,581		6,832		22,509




Average number of full-time employees			4,791		1,199		653		7,585		11,436		10,656		25,664

January-September 2002 or September 30, 2002


				Internet		International				Group-		of which
MSEK		Mobile		Services		Carrier		Networks		wide		Holding		Group

Net sales			16,214		3,057		3,868		24,732		-5,144		1,378		42,727




External net sales			15,131		3,027		3,264		20,403		902		704		42,727




Underlying EBITDA			4,391		-406		-873		8,440		-303		345		11,249




Depreciation, amortization & write-downs			-2,875		-493		-5,868		-7,128		-404		-355		-16,768




Items not reflecting underlying business operations			-386		-116		-3,650		-641		-8		36		-4,801




Income from associated companies			212		-51		0		74		98		123		333




Operating income			1,342		-1,066		-10,391		745		-617		149		-9,987




Operating capital			36,509		905		426		24,927		-4,294		2,134		58,473




	of which Segment assets		42,275		2,179		8,688		33,965		8,654		6,777		95,761




	of which Segment liabilities		-5,766		-1,274		-8,262		-9,038		-12,948		-4,643		-37,288




Equity participations in associates			2,993		0		0		2,526		2,880		2,880		8,399




Investments			2,012		303		660		2,709		962		710		6,646




	of which CAPEX		1,761		274		660		2,706		495		244		5,896




Number of employees			4,371		1,420		784		7,399		2,270		1,465		16,244




Average number of full-time employees			4,470		1,377		785		7,300		2,288		1,478		16,220

Telia Interim Report January-September 2002

January-September 2001 or September 30, 2001 (restated)


				Internet		International				Group-		of which
MSEK		Mobile		Services		Carrier		Networks		wide		Holding		Group

Net sales			14,692		2,337		3,361		24,742		-2,906		8,889		42,226




External net sales			13,143		2,325		2,630		21,472		2,656		2,525		42,226




Underlying EBITDA			3,616		-747		-1,181		8,759		-665		150		9,782




Depreciation, amortization & write-downs			-2,499		-281		-305		-3,877		-728		-661		-7,690




Items not reflecting underlying business operations			-47		-24		0		-58		191		-861		62




Income from associated companies			224		-36		0		-3,530		5,732		5,758		2,390




Operating income			1,294		-1,088		-1,486		1,294		4,530		4,386		4,544




Operating capital			36,647		1,680		11,506		29,380		-1,187		3,185		78,026




	of which Segment assets		43,676		2,867		17,386		40,324		8,316		8,275		112,569




	of which Segment liabilities		-7,029		-1,187		-5,880		-10,944		-9,503		-5,090		-34,543




Equity participations in associates			2,564		30		0		2,299		3,727		3,727		8,620




Investments			3,307		672		3,880		5,155		2,564		2,610		15,578




	of which CAPEX		3,027		605		3,880		4,692		660		706		12,864




Number of employees			5,029		1,272		730		7,897		7,581		6,832		22,509




Average number of full-time employees			4,791		1,199		653		7,585		11,436		10,656		25,664

January-December 2001 or December 31, 2001 (restated)


				Internet		International				Group-		of which
MSEK		Mobile		Services		Carrier		Networks		wide		Holding		Group

Net sales			19,830		3,305		4,632		34,065		-4,636		10,680		57,196




External net sales			17,857		3,288		3,652		29,159		3,240		3,072		57,196




Underlying EBITDA			4,705		-970		-1,569		11,710		-961		265		12,915




Depreciation, amortization & write-downs			-3,385		-606		-3,589		-5,422		-973		-886		-13,975




Items not reflecting underlying business operations			-49		-28		-1		-71		533		-209		384




Income from associated companies			361		-45		0		-2,363		8,183		8,233		6,136




Operating income			1,632		-1,649		-5,159		3,854		6,782		7,403		5,460




Operating capital			36,499		1,401		8,652		30,795		-7,197		287		70,150




	of which Segment assets		42,810		2,810		14,074		39,525		8,151		1,296		107,370




	of which Segment liabilities		-6,311		-1,409		-5,422		-8,730		-15,348		-1,009		-37,220




Equity participations in associates			3,061		22		0		3,488		3,356		3,356		9,927




Investments			4,979		903		5,037		7,129		2,687		2,744		20,735




	of which CAPEX		4,341		836		5,037		6,767		732		788		17,713




Number of employees			4,813		1,369		777		7,910		2,280		1,576		17,149




Average number of full-time employees			4,857		1,257		671		7,693		10,501		9,729		24,979

Telia Interim Report January-September 2002

Geographic Segment Breakdown

January-September 2002 or September 30, 2002


				Other Nordic		Baltic		Rest of		Rest of
MSEK		Sweden		countries		Region		Europe		world		Group

External net sales			33,471		6,941		168		1,461		686		42,727




Depreciation, amortization & write-downs			-6,900		-5,471		-23		-3,843		-531		-16,768




Income from associated companies			-192		1		133		194		197		333




Operating income			2,947		-5,319		117		-6,906		-826		-9,987




Operating capital			18,562		32,769		5,161		-595		2,576		58,473




	of which Segment assets		45,045		38,030		5,287		3,867		3,532		95,761




	of which Segment liabilities		-26,483		-5,261		-126		-4,462		-956		-37,288




Equity participations in associates			772		-1		5,017		461		2,150		8,399




Investments			3,987		1,825		47		739		48		6,646




	of which CAPEX		3,618		1,821		47		368		42		5,896




Number of employees			12,733		2,513		189		355		454		16,244




Average number of full-time employees			12,576		2,619		194		354		477		16,220

January-September 2001 or September 30, 2001


				Other Nordic		Baltic		Rest of		Rest of
MSEK		Sweden		countries		Region		Europe		world		Group

External net sales			34,338		5,858		103		1,202		725		42,226




Depreciation, amortization & write-downs			-5,309		-1,988		-16		-169		-208		-7,690




Income from associated companies			2,919		-19		-2,047		-1,159		2,696		2,390




Operating income			8,514		-1,567		-2,065		-2,289		1,951		4,544




Operating capital			25,976		35,505		5,150		7,757		3,638		78,026




	of which Segment assets		52,179		40,278		5,263		10,139		4,710		112,569




	of which Segment liabilities		-26,203		-4,773		-113		-2,382		-1,072		-34,543




Equity participations in associates			793		-2		5,034		462		2,333		8,620




Investments			7,369		3,972		884		2,765		588		15,578




	of which CAPEX		6,009		3,480		48		2,748		579		12,864




Number of employees			18,720		2,690		180		362		557		22,509




Average number of full-time employees			21,487		2,982		177		423		595		25,664

January-December 2001 or December 31, 2001


			Other Nordic		Baltic		Rest of		Rest of
MSEK	Sweden		countries		Region		Europe		world		Group

External net sales		46,348		8,113		133		1,667		935		57,196




Depreciation, amortization & write-downs		-7,975		-2,788		-23		-2,920		-269		-13,975




Income from associated companies		5,497		-22		-1,923		-246		2,830		6,136




Operating income		12,403		-2,483		-1,967		-4,474		1,981		5,460




Operating capital		24,218		34,289		5,623		5,647		373		70,150




of which Segment assets		48,862		39,549		5,807		8,919		4,233		107,370




of which Segment liabilities		-24,644		-5,260		-184		-3,272		-3,860		-37,220




Equity participations in associates		557		-3		5,508		1,568		2,297		9,927




Investments		10,122		5,136		1,271		3,661		545		20,735




of which CAPEX		8,668		4,752		83		3,611		599		17,713




Number of employees		13,365		2,739		196		352		497		17,149




Average number of full-time employees		20,922		2,880		201		411		565		24,979

Telia Interim Report January-September 2002

Selected Explanatory Notes to the Financial Statements

Items Not Reflecting Underlying Business Operations


	Jul-Sep		Jul-Sep		Jan-Sep		Jan-Sep		Oct 2001-		Jan-Dec		Jan-Dec
MSEK	2002		2001		2002		2001		Sep 2002		2001		2000

Phase-out of operations (excluding depreciation, amortization and write-downs)		-3,939		-510		-4,127		-510		-4,095		-478		–




Personnel redundancy costs		-45		–		-370		–		-370		–		–




Certain pension-related items		-159		156		-354		314		-580		88		854




Initial public offering/integration expenses		–		–		–		–		–		–		-144




Capital gains/losses (excluding associates)		146		115		50		258		566		774		7,628

Total		-3,997		-239		-4,801		62		-4,479		384		8,338

Income from Associated Companies


		Jul-Sep		Jul-Sep		Jan-Sep		Jan-Sep		Oct 2001-		Jan-Dec		Jan-Dec
MSEK		2002		2001		2002		2001		Sep 2002		2001		2000

Core business			11		-533		210		-3,368		1,481		-2,097		301




	Baltic states (Mobile/Networks)		47		45		124		125		194		195		189




	Netia (Networks)		0		-521		0		-2,443		-21		-2,464		-411




	Comsource/Eircom (Networks)		-0		-87		151		-1,053		1,330		126		-933




	Other		-36		30		-65		3		-22		46		1,456




Holding			-53		2,872		123		5,758		2,598		8,233		-1,498




	Unisource/AUCS		-0		4		40		-106		-226		-372		1,445




	Telia Overseas		17		54		273		2,655		412		2,794		-1,719




	Eniro		-2		3,043		-3		3,423		2,626		6,052		185




	Other		-68		-229		-187		-214		-214		-241		-1,409

Total			-42		2,339		333		2,390		4,079		6,136		-1,197

Long-lived Assets


	Intangible assets												Tangible assets

	Goodwill						Other intangibles

	Sep 30,		Dec 31,		Dec 31,		Sep 30,		Dec 31,		Dec 31,		Sep 30,		Dec 31,		Dec 31,
MSEK	2002		2001		2000		2002		2001		2000		2002		2001		2000

Opening balance		24,686		23,935		1,143		2,130		1,263		1,003		47,314		43,807		33,318




Purchases		8		448		22,893		394		1,316		509		5,513		16,409		16,084




Operations acquired		–		–		19		–		–		40		–		1,291		2,431




Sales/discards		-4		–		-31		-18		-1		-23		-208		-875		-579




Operations divested		–		-396		-251		–		-86		-4		-2		-1,258		-387




Reclassifications		-2		-2		-10		269		-68		-76		-480		-620		54




Amortization, depreciation		-1,086		-1,375		-655		-322		-338		-212		-7,122		-8,825		-7,352




Write-downs, reversals of write-downs		-339		-28		-1		-41		-2		–		-7,869		-3,428		-36




CAPEX contribution from CATV customers		–		–		–		–		–		–		-1		6		21




Advances		–		–		–		–		–		–		-3		3		–




Exchange rate differences		1,608		2,104		828		-10		46		26		-101		804		253




Closing balance		24,871		24,686		23,935		2,402		2,130		1,263		37,041		47,314		43,807

Telia Interim Report January-September 2002

Cash Flow from Investing Activities


	Jul-Sep		Jul-Sep		Jan-Sep		Jan-Sep		Oct 2001-		Jan-Dec		Jan-Dec
MSEK	2002		2001		2002		2001		Sep 2002		2001		2000

Shares, participations & operations acquired		-227		-248		-572		-1,762		-1,051		-2,241		-30,841




Shares, participations & operations divested		106		4,331		1,144		9,991		6,784		15,631		9,325




Intangible & tangible fixed assets acquired		-1,774		-4,643		-5,860		-11,839		-10,943		-16,922		-15,997




Other investing activities, net		170		2,189		-531		2,561		4,072		7,164		392

Total		-1,725		1,629		-5,819		-1,049		-1,138		3,632		-37,121

Net Indebtedness


		Sep 30,		Sep 30,		Dec 31,		Dec 31,
MSEK		2002		2001		2001		2000

Long-term and short-term loans			22,196		31,809		29,124		34,042




Less: Interest-bearing financial assets			-7,309		-6,503		-7,510		-4,968




	Interest-bearing receivables		-4,390		-10,773		-4,191		-10,834




	Short-term investments, cash and bank		-3,904		-1,293		-9,120		-1,530

Total net borrowings			6,593		13,240		8,303		16,710




Provision for pensions			1,514		2,529		2,358		3,525

Total net interest-bearing liability			8,107		15,769		10,661		20,235

Gross Investments by Class of Asset


		Jul-Sep		Jul-Sep		Jan-Sep		Jan-Sep		Oct 2001-		Jan-Dec		Jan-Dec
MSEK		2002		2001		2002		2001		Sep 2002		2001		2000

Goodwill			4		82		8		535		-79		448		22,893




Other intangible assets			192		1,265		394		1,379		331		1,316		509




Real estate			4		96		21		193		97		269		552




Machinery and equipment			1,587		4,269		5,481		11,292		10,317		16,128		15,519




	Fixed networks		682		1,801		2,308		3,436		5,894		7,022		4,115




	Mobile networks		449		422		1,246		1,113		2,257		2,124		1,411




	Other machinery and equipment		456		2,046		1,927		6,743		2,166		6,982		9,993




Shares and participations			169		253		742		2,179		1,137		2,574		8,269

Total			1,956		5,965		6,646		15,578		11,803		20,735		47,742




	of which CAPEX		1,783		5,630		5,896		12,864		10,745		17,713		16,580




	of which acquisitions		173		335		750		2,714		1,058		3,022		31,162

Telia Interim Report January-September 2002


Financial Instruments

		September 30, 2002				September 30, 2001				December 31, 2001
MSEK		Book value		Fair value		Book value		Fair value		Book value		Fair value

Equity participations in associates			8,399		7,400		8,620		10,969		9,927		9,682




Other holdings of securities			338		338		342		342		426		426




Other long- and short-term receivables			10,260		10,188		15,628		15,556		10,061		9,973




Short-term investments			235		235		344		344		197		197




Interest rate swaps received			656		656		248		248		673		673




Interest rate swaps paid			-647		-647		-249		-249		-646		-646




FX interest rate swaps received			12,189		12,189		8,527		8,527		12,629		12,629




FX interest rate swaps paid			-11,097		-11,097		-7,218		-7,218		-11,442		-11,442




Other currency derivatives			119		119		441		441		355		355

Total assets			20,452		19,381		26,683		28,960		22,180		21,847




Provisions for pensions			1,514		1,514		2,529		2,529		2,358		2,358




Long-term loans			14,158		14,570		26,792		27,254		25,543		25,890




Short-term loans			8,147		8,206		5,954		5,973		4,030		4,044




Interest rate swaps received			-1,555		-1,555		-1,729		-1,729		-1,970		-1,970




Interest rate swaps paid			1,659		1,659		1,757		1,757		2,062		2,062




FX interest rate swaps received			-1,802		-1,802		-7,847		-7,847		-1,840		-1,840




FX interest rate swaps paid			1,894		1,894		7,274		7,274		1,901		1,901




Other currency derivatives			71		71		671		671		430		430

Total liabilities			24,086		24,557		35,401		35,882		32,514		32,875




	Less book value of:




	- pensions		-1,514				-2,529				-2,358




	- accrued interest		-305				-392				-602




	- other currency derivatives		-71				-671				-430




	Book value of interest-bearing liabilities		22,196				31,809				29,124
FX swaps/forward contracts (portfolio)




Purchases of foreign currency			15,218		15,218		15,217		15,217		19,972		19,972




Sales of foreign currency			9,753		9,753		18,252		18,252		14,030		14,030


Changes in Share Capital

		Number of		Par value,		Share capital,
		shares		SEK/share		KSEK

Share capital, Dec 31, 1999			8,800,000		1,000.00		8,800,000




	Bonus issue, May 20, 2000		–		1,036.80		323,840




	Split 324:1, May 20, 2000		2,842,400,000		3.20		–




	New share issue, June 16, 2000		150,000,000		3.20		480,000




Share capital, Dec 31, 2000			3,001,200,000		3.20		9,603,840




Share capital, Dec 31, 2001			3,001,200,000		3.20		9,603,840




Share capital, Sep 30, 2002			3,001,200,000		3.20		9,603,840


Average Number of Shares

Period		Number

July-September 2002			3,001,200,000




	After dilution		3,001,200,000




July-September 2001			3,001,200,000




	After dilution		3,001,200,000




January-Sep 2002			3,001,200,000




	After dilution		3,001,200,000




January-Sep 2001			3,001,200,000




	After dilution		3,001,200,000




Oct 2001-Sep 2002			3,001,200,000




	After dilution		3,001,200,000




January-Dec 2001			3,001,200,000




	After dilution		3,001,200,000




January-Dec 2000			2,932,757,377

Telia Interim Report January-September 2002

Contingent Assets and Contingent Liabilities

Sep 30,

Dec 31,

MSEK

2002

2001

Contingent assets

–

Collateral pledged

Shares in subsidiaries

Shares in associated companies

143

–

Blocked funds in bank accounts

Total

331

Contingent liabilities

Credit & performance guarantees, etc.

549

622

FPG/PRI

163

Total

712

785


Contractual Obligations

	Sep 30,		Dec 31,
MSEK	2002		2001

Tangible fixed assets		499		499




Indefeasible Rights of Use (IRU)		55		179




Associated & non-consolidated companies		131		274

Total		685		952


Deferred tax
	Sep 30,		Dec 31,
MSEK	2002		2001

Deferred tax liability		7,383		6,940




Deferred tax benefit (incl. valuation reserve)		-3,004		-1,490

Net deferred tax liability		4,379		5,450

Basis for Presentation

General. For the nine-month period ended September 30, 2002 and as in the year ended December 31, 2001, Telia’s consolidated financial statements have been prepared in accordance with International Accounting Standards (IAS). This report has been prepared in accordance with IAS 34 “Interim Financial Reporting.”

Accounting principles. The applied accounting principles, including the adoption of IAS 39 “Financial Instruments: Recognition and Measurement” as of January 1, 2001, are described in Telia’s Annual Report for 2001.

Discrepancies between Swedish GAAP and the accounting principles applied by Telia are discussed in a separate note.

Amounts and dates. Unless otherwise specified, all amounts are in millions of Swedish kronor (MSEK) and are based on the nine-month period ended September 30, 2002 for income statement items and as of September 30, 2002 for balance sheet items, respectively.

Restated accounts. Some adjustments of the Group’s business organization have been implemented during the nine-month period ended September 30, 2002. Hence, the business area figures in this report have been restated.

Recently published accounting standards. During 2001 the interpretations SIC-30 “Reporting Currency – Translation from Measurement Currency to Presentation Currency” and SIC-33 “Consolidation and Equity Method – Potential Voting Rights and Allocation of Ownership Interests” were published, which are to be applied to accounting periods beginning January 1, 2002 or later. The interpretation SIC-32 “Intangible Assets – Web Site Costs” was issued on March 13, 2002 and became effective on March 25, 2002. Application of these interpretations has not entailed any changes to the comparative figures.

During 2000 IAS 41 “Agriculture” was published, which goes into effect on January 1, 2003. IAS 41 does not affect Telia’s operations.

Swedish GAAP

Differences in principles. Telia’s consolidated financial statements are prepared in accordance with International Accounting Standards (IAS). IAS deviates in certain respects from Swedish GAAP, primarily with respect to the reporting of financial instruments and the computation of pension liability and pension expense. The deviations are described in Telia’s Annual Report for 2001.

Translation into Swedish GAAP. Application of Swedish GAAP affects consolidated net income and shareholders’ equity as follows.


	Jul-Sep		Jul-Sep		Jan-Sep		Jan-Sep		Jan-Dec
MSEK	2002		2001		2002		2001		2001

Net income under IAS		-10,118		1,900		-9,961		2,441		1,869




Financial instruments		12		-130		26		-142		-43




Pensions		-1,184		-448		-2,839		-978		-1,088




Deferred tax		329		123		788		275		317




Net income under Swedish GAAP		-10,961		1,445		-11,986		1,596		1,055


	Sep 30,		Sep 30,		Dec 31,
MSEK	2002		2001		2001

Shareholders’ equity under IAS		50,526		61,884		59,885




Financial instruments		56		347		126




Pensions		-2,694		255		145




Deferred tax		739		-207		-76




Shareholders’ equity under Swedish GAAP		48,627		62,279		60,080

Telia Interim Report January-September 2002

Changes in Group Composition

In the beginning of March, 2002, a group of lenders and the largest shareholders, including Telia, came to an agreement for a financial reconstruction of the Polish company Netia Holdings S.A. that primarily entails a conversion of the lenders’ claims to equity in the company. Telia currently owns 48 percent of the share capital in Netia. When all transactions have been completed, Telia’s shareholding will be approximately 3 percent.

On March 19, 2002, a Memorandum of Understanding was signed with the Indian company Bharti Tele-Ventures for the sale of Telia’s holding of 26 percent of the shares in the mobile operator Bharti Mobile Ltd.

On April 18, 2002, Telia sold its 40 percent stake in Comsource UnLtd to the other shareholder, the Dutch telecom operator KPN.

On July 1, 2002, Telia’s remaining 9 percent shareholding in the Orbiant Group was sold to the other shareholder Flextronics.

On March 26, 2002, Telia and the Finnish telecom operator Sonera Oyj announced plans to merge. On September 30, 2002, Telia issued the prospectus setting forth the terms and conditions of the Exchange Offer being made to all Sonera shareholders through which the merger between Sonera and Telia will be effected. The Exchange Offer acceptance period commenced on October 7, 2002 and will end on November 8, 2002. Telia offers 1.51440 Telia shares in exchange for each Sonera share, one new Telia warrant is offered in exchange for each Sonera warrant issued pursuant to Sonera’s 1999 and 2000 stock option programs and 0.30288 Telia ADSs are offered in exchange for each Sonera ADS (each Telia ADS will be equal to five Telia shares). The completion of the Exchange Offer is subject to certain conditions, including the condition that shares representing more than 90 percent of the shares and votes in Sonera (on a fully diluted basis) shall have been validly tendered and not withdrawn. The merger is conditional upon Telia’s current shareholders authorizing the Board of Directors to issue the new shares and warrants necessary to complete the Exchange Offer. Telia has therefore convened an Extraordinary General Meeting on November 4, 2002. Telia has applied for listing of the Telia share and certain warrants on the Helsinki Stock Exchange and to have the Telia ADSs quoted on NASDAQ in the United States.

Related Party Transactions

The Swedish State. The Telia Group’s services and products are offered to the Swedish state, its agencies, and state-owned companies in competition with other operators and on conventional commercial terms. Certain state-owned companies run businesses that compete with Telia.

Likewise, Telia buys services from state-owned companies at market prices and on otherwise conventional commercial terms. Neither the Swedish state, its agencies, or state-owned companies represent a significant share of Telia’s net sales or income.

Like other operators whose business requires a permit from the state, Telia pays an annual fee to the National Post and Telecom Agency for the agency’s activities. As from January 1, 2002, the fee is equal to 1.57 thousandths of net sales in the operator’s business for which a permit is required. There are additional fees for the agency’s licensing activities under the Radio Communications Act and the Radio and Telecommunications Terminal Equipment Act.

Infonet. Telia owns a participating interest in the American company Infonet Services Corp. In the three-month period ended September 30, 2002, Telia sold services and products to Infonet worth MSEK 17 and purchased services and products worth MSEK 58. In the nine-month period ended September 30, 2002, Telia sold services and products to Infonet worth MSEK 29 and purchased services and products worth MSEK 219.

AUCS. Telia owns a participating interest in the Dutch company AUCS Communications Services. As of September 30, 2002, Telia had interest-bearing claims on AUCS of MSEK 154. In the nine-month period ended September 30, 2002, Telia sold services to AUCS worth MSEK 27.

Telefos. Telia owns 49 percent of the shares in Telefos AB. As of September 30, 2002, Telia had interest-bearing claims on the Telefos Group of MSEK 1,423 and had signed a limited supplementary guarantee of MSEK 150 for the credit-insured pension commitments of Telefos companies. In the three-month period ended September 30, 2002, Telia sold services and products worth MSEK 81 to the Telefos Group and bought services and products worth MSEK 568. In the nine-month period ended September 30, 2002, Telia sold services and products worth MSEK 295 and bought services and products worth MSEK 2,556. Some of the services purchased by Telia referred to construction of capital assets.

IN. Telia holds an indirect participating interest in IN-GROUP Sweden AB (IN). In the three-month period ended September 30, 2002, Telia sold services and products worth MSEK 9 and bought services and products worth MSEK 33. In the nine-month period ended September 30, 2002, Telia sold services and products worth MSEK 38 and bought services and products worth MSEK 199.

Other. In addition to those specified, Telia buys and sells services and products to a limited extent from these and other associated companies, in all cases on market terms.

Telia Interim Report January-September 2002

Non-cash Transactions

Vehicles. Telia leases vehicles through financial leasing, primarily from GE Capital. New acquisitions during the three-month period and the nine-month period ended September 30, 2002 entailed a non-cash investment of MSEK 7 and MSEK 31, respectively.

Infrastructure/capacity swaps. Within the international carrier operations, swap contracts for infrastructure and capacity are signed with other carriers. Until both parties have fulfilled all deliveries as agreed, the value provided might differ from the value received. As of September 30, 2002, Telia had, through non-cash swapping, net received infrastructure and network capacity with a book value of MSEK 24.

AUCS. Claims of MSEK 187 on the associated company AUCS Communications Services have been converted to shares in the company.

Dividend

The year 2001 dividend of SEK 0.20 per share, or a total of MSEK 600, was paid out on May 2, 2002.

Financial Risk Management

Foreign exchange risk. The Telia Group has a relatively limited operational need to net purchase foreign currency, primarily due to the settlement deficit in telephony traffic and import of materials.

Telia’s general policy is normally to hedge the majority of known operational transaction exposure up to 12 months into the future. Given an operational net transaction exposure equal to that of 2001, and provided that no hedging measures were taken, there would be a negative impact on Group earnings of approximately MSEK 30 on an annual basis if the Swedish krona weakened one percent against the transaction currencies.

Telia’s conversion exposure has increased due to the relatively fast growth of Telia’s operations outside of Sweden. Telia does not typically hedge its conversion exposure, unless the exposure would be short-term and relate to a large amount of a freely-convertible foreign currency of a country with smoothly-functioning financial markets. As of September 30, 2002, the Group had no hedged conversion exposure.

Interest rate risk. Telia’s financial policy provides guidelines for fixing interest rates on loan debt relative to the average life of the loan. The Group’s policy is that the duration of loan debt should be from six months to four years. The general principle is to optimize interest rate risk from an overall Group perspective.

As of September 30, 2002, the Group had interest-bearing loans of approximately GSEK 22.2 with duration of approximately two years, including derivatives. The volume of loans exposed to changes in interest rates over the next 12-month period was at the same date approximately GSEK 10, assuming that existing loans maturing during that period are refinanced and after accounting for interest rate swaps. The exact effect of a change in interest rates on the financial net 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. Fair value of the loan portfolio would, however, change by approximately MSEK 380, 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 September 30, 2002.

Approximately GSEK 7 was used during the first nine months of 2002 to amortize loans. During the third quarter of 2002, continuing uncertainty in the financial markets has led to considerable volatility in the relative interest rate spreads in the credit market for corporate borrowers, including telecom companies. The volatility is expected to continue in the near future.

Financing and liquidity risk. Telia is considered one of the most creditworthy telecommunications companies in Europe, which gives the Group good opportunities to finance operations using the financial markets.

In April 2002, the credit rating agency Standard & Poor’s downgraded its credit rating for Telia AB to A+ for long-term borrowing and to A-1 for short-term borrowing. Standard & Poor’s also put Telia’s rating on its watch list for possible downgrading in light of the bid on Sonera Oyj. Telia’s rating from the credit rating agency Moody’s is the highest possible, P-1, for short-term borrowing, while Telia’s rating from Moody’s for long-term borrowing is A1. Moody’s has also posted Telia’s rating on its watch list for possible downgrading.

Telia AB has a Revolving Credit Facility, i.e., confirmed loan commitments from a consortium of leading international banks, which constitutes a liquidity tool for the Group. At present, the loan commitment amounts to MUSD 1,000 or the equivalent value in certain other currencies. It was not utilized as of September 30.

Parent Company

The parent company Telia AB, which is domiciled in Stockholm, comprises the Group’s Swedish operations in development and operation of fixed networks and basic production of network services. The parent company also includes Group executive management functions, certain support units and the Group’s internal banking operations.

Telia Interim Report January-September 2002

Net sales for the nine-month period were MSEK 17,300 (16,752), of which MSEK 14,244 (13,899) was invoiced to subsidiaries. Earnings before appropriations and taxes improved to MSEK -250 (-3,046). During the same period in 2001, the parent company’s shares in Netia were written down. Earnings after appropriations and taxes were MSEK 611 (-1,061). Equity was MSEK 33,322 (33,296 at year-end 2001), and retained earnings MSEK 9,824 (9,814).

The balance sheet total decreased to MSEK 79,011 (82,796 at year-end). Cash flow from operating activities was MSEK 7,489 (1,277), while operating cash flow was MSEK 840 (612). Net borrowings declined, to MSEK 26 (3,858 at year-end). Cash and cash equivalents totaled MSEK 2,394 (8,068 at year-end).

The equity/assets ratio (including the equity component of untaxed reserves) improved to 55.8 percent (54.0 percent at year-end 2001).

Total investments for the nine-month period amounted to MSEK 3,368 (7,885), including MSEK 2,423 (3,529) in tangible fixed assets, primarily fixed telephony installations. Other investments totaling MSEK 945 (4,356) were primarily attributable to capital infusions in subsidiaries and associated companies. Of the capital infusions to subsidiaries, MSEK 829 was provided through debt conversion.

The number of employees as of September 30, 2002, was 3,324 (3,150 at year-end 2001).

Telia Interim Report January-September 2002

Geographical Markets, Business Areas¹⁾


		Jul-Sep		Jul-Sep		Jan-Sep		Jan-Sep			Jul-Sep		Jul-Sep		Jan-Sep		Jan-Sep
MSEK		2002		2001		2002		2001		MSEK	2002		2001		2002		2001

Mobile




Mobile telephony, Sweden										Mobile telephony, Finland




Net sales			3,135		3,084		8,836		8,564	Net sales		240		175		702		470




	of which external		2,820		2,715		7,916		7,418	of which external		235		175		694		456




Underlying EBITDA			1,518		1,429		3,995		3,833	Underlying EBITDA		-34		-95		-237		-265




EBITDA margin (%)			48.4		46.3		45.2		44.8	EBITDA margin (%)		-14.2		-54.3		-33.8		-56.4




Investments			154		448		744		952	Investments		32		94		179		217




Mobile telephony, Norway										Business solutions, telephony




Net sales			1,513		1,198		4,045		3,157	Net sales		502		386		1,501		1,343




	of which external		1,484		1,190		3,997		3,135	of which external		408		347		1,402		1,086




Underlying EBITDA			629		424		1,641		1,034	Underlying EBITDA		-21		-73		-73		-92




EBITDA margin (%)			41.6		35.4		40.6		32.8	EBITDA margin (%)		-4.2		-18.9		-4.9		-6.9




Investments			308		214		736		501	Investments		6		8		17		13




Mobile telephony, Denmark




Net sales			298		187		744		554




	of which external		250		155		626		482




Underlying EBITDA			-119		-128		-479		-347




EBITDA margin (%)			-39.9		-68.4		-64.4		-62.6




Investments			185		1,296		333		1,456




		Jul-Sep		Jul-Sep		Jan-Sep		Jan-Sep			Jul-Sep		Jul-Sep		Jan-Sep		Jan-Sep
MSEK			2002		2001		2002		2001	MSEK		2002		2001		2002		2001

Internet Services										Networks




Sweden										Sweden




Net sales			886		644		2,577		1,996	Net sales		7,718		7,747		23,558		23,303




	of which external		875		676		2,548		1,985	of which external		6,370		6,836		19,552		20,398




Underlying EBITDA			-93		-208		-401		-697	Underlying EBITDA		3,245		3,137		8,766		8,753




EBITDA margin (%)			-10.5		-32.3		-15.6		-34.9	EBITDA margin (%)		42.0		40.5		37.2		37.6




Investments			48		84		233		562	Investments		575		1,394		2,296		3,888

For further information: www.telia.com, Investor Relations, Financial Information, External Net Sales per Business Area and Product Segment (specification).

Subscription Trends ¹⁾


					Sep 30,		Jun 30,		Mar 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,
'000					2002		2002		2002		2001		2000		1999		1998		1997		1996

Mobile telephony, Sweden						3,540		3,484		3,459		3,439		3,257		2,638		2,206		1,935		1,745




				Norway		1,022		996		985		970		850		–		–		–		–




				Other Nordic countries		696		648		567		527		412		203		120		–		–




Internet,²⁾ Sweden						1,078		1,044		1,028		992		738		604		440		231		106




			of which broadband			342		322		288		245		51		6		1		–		–




		Denmark				168		164		158		147		108		78		63		11		–




			of which broadband			74		70		65		58		30		11		3		–		–




Cable TV, Sweden						1,403		1,384		1,389		1,378		1,358		1,348		1,330		1,308		1,291




	Denmark					188		186		186		179		175		170		164		145		137




Fixed telephony, PSTN, Sweden						5,594		5,605		5,642		5,663		5,783		5,889		5,965		6,010		6,032




				Denmark		255		256		244		264		232		209		160		86		12




ISDN channels, Sweden						900		905		921		922		838		630		424		244		129

1)		For further information: www.telia.com, Investor Relations, Financial Information, Operational Data




2)		Internet access via the fixed network and the cable television network

Telia Interim Report January-September 2002

Disclosure Obligation in Finland

Telia’s interim reports, year-end reports and annual reports as well as stock exchange releases in connection hereto which possibly will be published prior to the implementation of the combination of Telia and Sonera, will be published in Finland in English only. According to the prospectus published in connection with the exchange offer, it is the intention to publish the financial information in Finland also in Finnish and Swedish. Telia intends, however, to publish the financial information in Finnish and Swedish only after the combination of Telia and Sonera is completed.

The following information is provided pursuant to the Finnish Financial Supervision Authority decision no. 28/269/2002.

This interim report has been prepared in accordance with chapter 2, section 5 of the Finnish Securities Markets Act.

Telia prepares its consolidated financial statements in accordance with International Accounting Standards (IAS). The main differences between Finnish Accounting Standards (Finnish GAAP) and IAS, relevant to Telia, are as follows.

Business combinations
Under Finnish GAAP an acquisition paid through the issue of own shares does not require that the purchase price is determined based on the market value of the issued shares. IAS require that the purchase price is determined based on the market value of the issued shares which often results in the recognition of goodwill and other assets at consolidation and future depreciation and amortization of such amounts. Historically Telia has not issued own shares at acquisitions but the proposed acquisition of Sonera involves the issue of own shares.

Impairment of fixed assets and long-term investments
IAS require that if future cash flows are used for recoverability tests these cash flows should be discounted. Finnish GAAP do not exactly define how recoverability tests should be performed.

Capitalization of interest cost relating to investments in associated companies
Finnish GAAP allow the capitalization of interest costs relating to investments in associated companies if the associated company carries out construction activities that takes time to complete. IAS do not allow capitalization of interest costs relating to investments in associated companies.

Financial instruments
Under Finnish GAAP, derivative financial instruments cannot be recorded at fair value. Under IAS, all derivatives are recorded in the balance sheet at fair value. The changes in the fair value of derivatives are recorded either in earnings or in a separate component of shareholders’ equity, depending on the intended use and designation of the derivative at its inception.

Under Finnish GAAP, investments in marketable securities should be recorded at the lower of cost or market value and the unrealized changes are recorded in the income statement as write-downs or reversals of write-downs. Under IAS, Telia reports all marketable securities classified as “available-for-sale” at fair value, and records the unrealized gains and losses as a separate component of shareholders’ equity, unless there is an impairment, in which case a write-down is recorded in the income statement.

Deferred taxes
Finnish GAAP do not require the recognition of deferred tax assets for certain temporary differences even if it is apparent that the temporary differences reverses in the foreseeable future. IAS require the recognition of a deferred tax asset under such circumstances.

Telia Interim Report January-September 2002

Financial Information/Underlying EBITDA

The financial information given in this interim report is based on Telia’s unaudited consolidated interim financial statements that are prepared in accordance with International Accounting Standards (IAS). This interim report includes information on “underlying EBITDA” and on other similar “underlying” measures of Telia’s results of operations. Underlying EBITDA equals operating income before depreciation, amortization and write-downs, net of items not reflecting the underlying business operations and excluding income from associated companies. Items not reflecting the underlying business operations include capital gains and losses, restructuring/phase-out of operations, personnel redundancy costs, and expenses in conjunction with the initial public offering in 2000. Telia’s management uses underlying EBITDA and operating income as the principal measures for monitoring profitability in internal operations. Management believes that, besides operating income, underlying EBITDA is also a measure commonly reported and widely used by analysts, investors and other interested parties in the telecommunications industry. Accordingly, underlying EBITDA is presented to enhance the understanding of Telia’s historical operating performance.

Underlying EBITDA, however, should not be considered as an alternative to operating income as an indicator of our operating performance. Similarly, underlying EBITDA should not be considered as an alternative to cash flows from operating activities as a measure of liquidity. Underlying EBITDA is not a measure of financial performance under IAS or U.S. GAAP and may not be comparable to other similarly titled measures for other companies. Underlying EBITDA is not meant to be predictive of potential future results.

Forward-Looking Statements

This interim report contains statements concerning, among other things, Telia’s financial condition and results of operations that are forward-looking in nature. Such statements are not historical facts but, rather, represent Telia’s future expectations. Telia 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, including Telia’s market position, growth in the telecommunications industry in Europe, the effects of competition and other economic, business, competitive and/or regulatory factors affecting the business of Telia 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, Telia undertakes no obligation to update any of them in light of new information or future events.

Cautionary Disclaimer/Legend

The combination of Sonera and Telia will be implemented through an exchange offer being made by Telia to all shareholders of Sonera. The contents of this document are neither an offer to purchase nor a solicitation of an offer to sell shares of Telia. Any offer in the United States will only be made through a prospectus which is part of a registration statement on Form F-4 which Telia filed with the U.S. Securities and Exchange Commission (the “SEC”) on October 1, 2002. Sonera shareholders who are U.S. persons or are located in the United States are urged to carefully review the registration statement on Form F-4, the prospectus included therein and other documents relating to the offer that Telia has filed or will file with the SEC because these documents contain important information relating to the offer. You are also urged to read the related solicitation/recommendation statement on Schedule 14D-9 that was filed by Sonera with the SEC on October 1, 2002 regarding the offer. You may obtain a free copy of these documents at the SEC’s web site at www.sec.gov. You may also inspect and copy the registration statement on Form F-4, as well as any documents incorporated by reference therein, and the Schedule 14D-9 at the public reference room maintained by the SEC at 450 Fifth Street, NW, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room. These documents may also be obtained free of charge by contacting Telia AB, Investor Relations, SE-123 86 Farsta, Sweden. Attention: External Communications or Investor Relations (tel: +46 8 7137143, or Sonera Corporation, Teollisuuskatu 15, P.O. Box 106, FIN-00051 SONERA, Finland. Attention: Investor Relations (tel: +358 20401). YOU SHOULD READ THE PROSPECTUS AND THE SCHEDULE 14D-9 CAREFULLY BEFORE MAKING A DECISION CONCERNING THE OFFER.

Forward-Looking Statements
This document contains forward-looking statements regarding Telia’s exchange offer to Sonera’s shareholders and warrantholders. Statements that are not strictly historical statements, including statements about Telia’s and Sonera’s beliefs and expectations, constitute forward-looking statements. By their nature, forward-looking statements are subject to risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. Telia and Sonera are under no obligation to, and expressly disclaim such obligation to, update or alter their forward-looking statements, whether as a result of new information, future events or otherwise.

Restrictions on Ability of Certain Persons to Participate in the Exchange Offer
Due to restrictions under the securities laws of Australia, the Hong Kong Special Administrative Region of the People’s Republic of China, Italy, Japan, New Zealand and South Africa, the exchange offer will not be extended to persons with registered addresses in, and who are residents of, any of Australia, the Hong Kong Special Administrative Region of the People’s Republic of China, Italy, Japan, New Zealand or South Africa.

Cautionary Disclaimer/Legend
The combination of Sonera and Telia will be implemented through an exchange offer being made by Telia to all shareholders of Sonera. The contents of this document are neither an offer to purchase nor a solicitation of an offer to sell shares of Telia. Any offer in the United States will only be made through a prospectus which is part of a registration statement on Form F-4 which Telia filed with the U.S. Securities and Exchange Commission (the “SEC”) on October 1, 2002. Sonera shareholders who are U.S. persons or are located in the United States are urged to carefully review the registration statement on Form F-4, the prospectus included therein and other documents relating to the offer that Telia has filed or will file with the SEC because these documents contain important information relating to the offer. You are also urged to read the related solicitation/recommendation statement on Schedule 14D-9 that was filed by Sonera with the SEC on October 1, 2002 regarding the offer. You may obtain a free copy of these documents at the SEC’s web site at www.sec.gov. You may also inspect and copy the registration statement on Form F-4, as well as any documents incorporated by reference therein, and the Schedule 14D-9 at the public reference room maintained by the SEC at 450 Fifth Street, NW, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room. These documents may also be obtained free of charge by contacting Telia AB, Investor Relations, SE-12386 Farsta, Sweden. Attention: External Communications or Investor Relations (tel: +46 8 7137143, or Sonera, Teollisuuskatu 15, P.O. Box 106, FIN-00051 SONERA, Finland. Attention: Investor Relations (tel: +358 20401). YOU SHOULD READ THE PROSPECTUS AND THE SCHEDULE 14D-9 CAREFULLY BEFORE MAKING A DECISION CONCERNING THE OFFER.