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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN ISSUER

Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

April 28, 2004

TELIASONERA AB
(Translation of registrant’s name into English)

Sturegatan 1, S-106 63 Stockholm, Sweden
(Address of principal executive offices)

0-30340

(Commision File Number)

     Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F x        Form 40-F o

     Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes o        No x

 


TABLE OF CONTENTS

SIGNATURES
TeliaSonera January-March 2004 — Pro Forma
First Quarter Review of the Group
First Quarter Review of Profit Centers
Auditors’ Review Report
Condensed Consolidated Income Statements
Condensed Consolidated Balance Sheets
Condensed Consolidated Cash Flow Statements
Segment Information
Quarterly Data
Non-Recurring Items
Number of Customers
TeliaSonera January-March 2004 — Legal
Condensed Consolidated Income Statements
Condensed Consolidated Balance Sheets
Condensed Consolidated Cash Flow Statements
Condensed Consolidated Statements of Changes in Shareholders’ Equity
Long-Lived Assets
Investments
Net Interest-Bearing Liability
Changes in Share Capital
Financial Instruments
Deferred Tax
Contingent Assets and Contingent Liabilities
Contractual Obligations
Exchange Rates
Basis for Presentation
Changes in Group Composition
Related Party Transactions
Loan Financing
Non-Cash Transactions
Stock Option Schemes
Swedish GAAP
Finnish GAAP
Parent Company
Financial Information/“Underlying” Measures of Results of Operations
Forward-Looking Statements


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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

     
Date: April 28, 2004 TELIASONERA AB
 
  By: /s/ Jan Henrik Ahrnell

Vice President and Legal Counsel

 


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Interim Report January-March 2004. TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm


TeliaSonera January-March 2004 — Pro Forma1)

  Net sales, amounting to SEK 19,946 million (20,349), were on the same level as the preceding year adjusted for changes in exchange rates
 
  Net income increased to SEK 2,344 million (1,639) and earnings per share to SEK 0.50 (0.35)
 
  Operating income increased to SEK 4,122 million (3,288)
 
  Free cash flow amounted to SEK 2,194 million (3,897), negatively affected by tax payments for the previous year
 
  Divestment of Telia Finans reduced net debt by SEK 6.0 billion
 
  Continued strong market initiatives yielded results
 
  The number of customers increased to 22.4 million (20.7) in TeliaSonera and to 28.9 million (21.5) in associated companies year-on-year
 
  Cash offer on Eesti Telekom was announced

Key Figures

                                 
    Jan-Mar   Jan-Mar   Jan-Mar   Jan-Dec
    2004   2004   2003   2003
In millions, except percentages and per share data
  SEK
  EUR2)
  SEK
  SEK
Net sales
    19,946       2,154       20,349       81,772  
EBITDA excl. non-recurring items3)
    7,200       777       7,562       30,690  
Margin (%)
    36.1       36.1       37.2       37.5  
Income from associated companies
    354       38       84       382  
Operating income
    4,122       445       3,288       13,140  
Operating income excl. non-recurring items
    3,761       406       3,288       14,831  
Income after financial items
    3,834       414       2,772       12,346  
Net income
    2,344       253       1,639       7,671  
Earnings/loss per share
    0.50       0.05       0.35       1.64  
CAPEX
    1,758       190       1,676       8,960  
Free cash flow
    2,194       237       3,897       17,499  
Legal4)
                               
Net sales
    19,946       2,154       20,674       82,425  
Net income
    2,344       253       1,609       9,080  
Earnings/loss per share
    0.50       0.05       0.35       1.95  


1)   Pro forma presentation excluding Telia’s Finnish mobile operations and Swedish cable TV operations.
 
2)   Convenience translation only, conversion rate SEK 1 = EUR 0.107984
 
3)   Non-recurring items, see table on page 29.
 
4)   Including Telia’s Finnish mobile operations and Swedish cable TV operations through May 31, 2003.


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Interim Report January-March 2004. TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm


Comments from Anders Igel, President and CEO

“TeliaSonera is performing well despite the tough competition in our home markets.

We have had very good response on our market initiatives with increased market shares in important targeted segments, especially within fixed and mobile communications in Sweden.

To secure profitability and maintain or increase market shares, we are accelerating our initiatives to reach competitive cost levels in all operations.

We have responded to several new market demands. For instance, we have launched broadband-based voice over IP. In addition, we have launched mobile data services with seamless handover between current and next generation mobile systems or wireless broadband and automatic connection to the fastest possible system available.”

Outlook

During 2004, the market is expected to show continued good growth in mobile, decline in fixed voice and strong growth in Internet based services. We remain committed to pursuing profitable growth in our current footprint of operations. Based on continued market efforts, our ambition is that, during 2004, organic revenue growth will develop in line with or better than our markets.

The home market especially remains very competitive and we will continue to adapt the cost structure to reflect the market conditions in different segments.

Margins will be positively impacted by continued efficiency improvements and increased volumes and negatively by lower prices. Free cash flow will remain strong, although impacted by higher cash taxes, somewhat increased capital expenditure and higher use of the provisions.

Our ambition is to achieve majority control in all operations by increasing our shareholding in the associated companies, if possible. Our strong financial position together with our recent experience in making a successful cross-border merger, allow us now to look further ahead to take an active role in the consolidation of the European telecom service industry. Our starting point is to build on or increase our strength in the Nordic and Baltic home market, if and when the right opportunity occurs. Any acquisition must be value-enhancing by fulfilling our return requirements and allow us to maintain a solid financial position.


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Interim Report January-March 2004. TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm


First Quarter Review of the Group

Strong customer growth and market share gains balance price reductions

Continued strong market initiatives and customer orientation enabled TeliaSonera to defend its positions and in important segments win market shares on a market characterized by tougher competition and heavy price pressure.

Solid growth continued within mobile communications. Eurasia, Russia, Turkey and Denmark exhibited strong growth, while growth in Sweden, Norway and the Baltic countries was lower. In Finland, a robust increase in sales to service providers offset the loss on the end-customer market.

Sales of Internet and broadband climbed on all markets.

Within fixed voice, the market loss in Sweden was slowed and Telia won market shares in the consumer segment during the quarter. Fixed voice sales were growing again in Denmark after a successful restructuring.

Also in Lithuania, the fixed voice customer loss is gradually being halted, and in Finland, the Auria acquisition strengthened Sonera’s position.

International Carrier sales dropped due to weak demand for IP and capacity on the carrier market and to the closedown of unprofitable businesses.

At the end of the quarter, TeliaSonera had 22.4 million customers (20.7) and an additional 28.9 million customers (21.5) in associated companies, which is a year-on-year increase of 8 and 34 percent, respectively.

Price reductions and exchange rate effects led net sales to decrease 2 percent to SEK 19,946 million compared with the same quarter in the preceding year. Price changes and exchange rate fluctuations affected net sales negatively by 4 and 2 percent, respectively, while divestitures and acquisitions had a positive effect of 1 percent.

Increased operating income

Earnings were improved or maintained across the operations, except in Finland, where a decline was recorded.

During the quarter, competitive cost level initiatives were accelerated in most of our home markets. The aim is to secure high profitability and maintain or increase market shares.

TeliaSonera’s operating income increased to SEK 4,122 million (3,288).


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Interim Report January-March 2004. TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm


Non-recurring items, primarily a capital gain from the sale of Telia Finans and costs for synergy implementation affected operating income by SEK 361 million (—). Excluding non-recurring items, operating income increased to SEK 3,761 million (3,288).

EBITDA excluding non-recurring items decreased to SEK 7,200 million (7,562) and the margin declined slightly to 36 percent (37). Exchange rate fluctuations had a negative impact on EBITDA of 1 percent.

Financial items totaled SEK -288 million (-516) and were affected by non-recurring items totaling SEK -111 million (-198).

Net income increased to SEK 2,344 million (1,639) and earnings per share to SEK 0.50 (0.35).

CAPEX totaled SEK 1,758 million (1,676).

Financial position further strengthened

Free cash flow was SEK 2,194 million (3,897), negatively affected by tax payments for the previous year. Disbursements from restructuring reserves affected free cash flow by SEK -248 million. At the end of the quarter, reserves for future disbursements totaled SEK 2,903 million (3,093 at year-end).

In addition to free cash flow, TeliaSonera’s financial position was positively affected by approximately SEK 6.0 billion by the divestiture of Telia Finans. Compared to year-end, net debt was reduced by SEK 8,434 million, ending at SEK 9,773 million as of March 31.

The equity/assets ratio climbed from 56.7 to 58.6 percent.

Further initiatives keep synergy achievement ahead of schedule

Additional synergy initiatives were taken during the first quarter.

Product and service development: Decision to introduce a shared platform for prepaid card customer verification in the Nordic countries.

IT systems and infrastructure: Decision to introduce a shared support system for purchasing as well as a shared sales support system.

Purchasing: Renegotiation of supplier contracts and licensing agreements.

Network operations: Decision to establish a shared operating center for datacom connections.

The synergies identified and determined to date are expected to yield at year-end 2005 annual cost savings (OPEX) of SEK 1,868 million and annual CAPEX savings of SEK 460 million. Costs for gleaning these synergies are estimated at SEK 1,084 million.


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Interim Report January-March 2004. TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm


The synergies attained to date yield annual OPEX savings of SEK 1,217 million and annual CAPEX savings of SEK 421 million. The cost for implementing these synergies totaled SEK 816 million.

                 
    Decided synergies   Achieved synergies
    (yearly run rate by   (yearly run rate by
SEK in millions
  the end of 2005)
  the end of Q1 2004)
OPEX
               
Product and service development
    561       396  
IT systems and infrastructure
    344       94  
Purchasing
    303       303  
Network operations
    507       279  
Corporate functions
    153       145  
 
   
 
     
 
 
Total
    1,868       1,217  
 
   
 
     
 
 
CAPEX
               
Product and service development
    36       13  
IT systems and infrastructure
    25       16  
Purchasing
    386       386  
Network operations
    13       6  
 
   
 
     
 
 
Total
    460       421  
 
   
 
     
 
 

First-quarter OPEX savings in 2004 totaled SEK 268 million and CAPEX savings totaled SEK 105 million compared with the same quarter of 2003.

Offer on Eesti Telekom

In April, TeliaSonera announced its decision to make a public cash offer for all the issued shares in AS Eesti Telekom. TeliaSonera presently holds 48.91 percent of the shares in Eesti Telekom, which in turn owns 100 percent of the mobile operator EMT and the fixed network operator Elion in Estonia.

First Quarter Review of Profit Centers

Market share gains and sustained strong margins in Sweden

Increased market initiatives and customer orientation are yielding results and Telia gained market shares within mobile services to business customers and within consumer fixed voice. In the first quarter, Telia had a net intake of 110,000 traffic customers within fixed voice.

Lower price levels and lower traffic volumes within fixed voice caused net sales to decrease 4 percent to SEK 10,160 million compared with the same quarter in the preceding year. Adjusted for a changed business relation with Eniro for directory assistance services the decrease was 3 percent, earnings were not affected.

Decreased sales affected EBITDA, but the margin was sustained at 41 percent as streamlining measures and synergy gains offset the loss of revenue and the increased marketing costs.


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Interim Report January-March 2004. TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm


Operating income improved, which was attributable to reduced depreciation due to lower investment levels and extended depreciation schedules for copper cables in the fixed local network and station equipment for ADSL.

                         
    Jan-Mar   Jan-Mar   Jan-Dec
SEK in millions, except percentages
  2004
  2003
  2003
Net sales
    10,160       10,571       42,601  
of which external
    9,994       10,283       41,607  
EBITDA
    4,175       4,339       17,382  
EBITDA excl. non-recurring items
    4,175       4,339       17,723  
Margin (%)
    41.1       41.0       41.6  
Operating income
    3,006       2,744       10,893  
Operating income excl. non-recurring items
    3,006       2,744       11,234  
CAPEX
    725       616       3,105  

During the quarter, competitive cost level initiatives were accelerated with the purpose to secure high profitability and maintain or increase market shares on the competitive Swedish market.

The increased CAPEX was mainly due to capacity expansion and integration of the GSM and UMTS networks as well as digitization of subscriber connections to telephone exchanges in the fixed network. In the quarter, SEK 112 million (66) was invested in mobile communications and SEK 613 million (550) in fixed communications.

Mobile communications

Adjusted for the changed business relation with Eniro, customer growth and increased use, including non-voice services, increased net sales 5 percent to SEK 2,891 million. Reallocation of certain costs from fixed to mobile communications reduced the margin to 40 percent (44) and EBITDA to SEK 1,168 million (1,235).

In the quarter, the number of customers increased by 35,000. The customer base increased by an additional 135,000 customers due to the changed policy for termination of prepaid customers resulting in a total number of customers of 4,008,000. The number of customers through service providers increased by 9,000 to 140,000.

The non-voice share of sales increased to 9 percent (6). The number of SMS messages sent per customer and month climbed to 21 (15) and Telia’s customers sent a total of 2,113,000 MMS during the first quarter.

Despite the strong intake of customers and the larger portion of prepaid customers, the average traffic volume per customer and month remained unchanged (121 minutes). Lower price levels decreased ARPU to SEK 227 (237).

Customer loyalty increased and churn dropped from 11 to 8 percent compared with the fourth quarter of 2003.


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Interim Report January-March 2004. TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm


Fixed communications

Adjusted for the changed business relation with Eniro, net sales decreased 6 percent to SEK 7,269 million. EBITDA decreased to SEK 3,007 million (3,104), but the margin improved to 41 percent (40).

External fixed voice sales decreased 8 percent to SEK 4,961 million. Traffic sales decreased 16 percent to SEK 2,061 million due to lower volumes, campaign offerings and price reductions while sales for subscriptions and value-added services remained at SEK 2,900 million.

External sales of Internet and data services increased 5 percent to SEK 2,054 million. New services and initiatives within broadband spurred growth and broadband sales increased 32 percent to SEK 647 million. Broadband customers increased during the quarter by 24,000 to 423,000.

Telia had a net intake of 110,000 traffic customers. The number of fixed voice subscriptions decreased by 19,000 to 5,474,000 and the number of ISDN channels by 16,000 to 774,000.

Early in the quarter, Telia acquired Fortum’s 37,000 voice and Internet customers.

Customer segments

On March 10, the 3G network was opened for commercial use. All of Telia’s mobile customers have access to the network at no extra cost. The network currently covers approximately 75 percent of the population. If customers go outside the network’s coverage area, calls are automatically transferred over to GSM. Telia’s 3G network is together with the GSM network one of Europe’s most powerful mobile networks. Svenska UMTS-nät AB has invested SEK 1,800 million in 3G infrastructure to date.

To provide customers with an easy way to review costs for mobile datacom services, a simplified price structure for GPRS was introduced and, in conjunction with the 3G launch, prices were reduced by 40-55 percent in order to encourage the use of mobile Internet services. At the same, the price for MMS was cut from SEK 3.80 to SEK 2.90 per message for both consumers and business customers.

The Mobil 25 subscription was introduced for consumers, giving 25 free call minutes and a lower SMS price (0.85 SEK per SMS) for a monthly fee of SEK 50.

A new subscription form was introduced for prepaid card customers, Telia Refill, with lower prices for SMS and lower per-minute call rates.

Telia Fritid was introduced providing an unlimited number of flat rate calls during evenings and weekends for a monthly fee of SEK 30.

During the quarter, Telia launched broadband telephony, which in addition to ordinary phone calls also provides access to chat functions, video calling and text messaging. The geographic coverage for ADSL was expanded and ADSL is now available to 81 percent of households and 89 percent of businesses in Sweden.


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Interim Report January-March 2004. TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm


Several offerings — including Telia Connect and Telia Connect Pro — were launched to simplify the use of mobile data services. A central feature in these offerings is the possibility to be connected to for instance a corporate intranet via multiple access forms such as WLAN, 3G, GPRS or GSM, whichever is the fastest available. The new services seamlessly handle the handover between the different accesses.

In order to simplify for small businesses, Telia launched a complete business package for mobile communications — Mobility2Day — including communications services, computers, software, mobile phones, training, installation and support.

Increased sales on a tough Finnish market

Strong broadband growth, increased sales to mobile service providers and the acquisition of Auria led net sales to increase 5 percent to SEK 4,565 million compared with the same quarter the preceding year.

                         
    Jan-Mar   Jan-Mar   Jan-Dec
SEK in millions, except percentages
  2004
  2003
  2003
Net sales
    4,565       4,368       17,697  
of which external
    4,480       4,264       17,394  
EBITDA
    1,691       1,823       6,668  
EBITDA excl. non-recurring items
    1,691       1,823       6,738  
Margin (%)
    37.0       41.7       38.1  
Operating income
    470       690       1,981  
Operating income excl. non-recurring items
    470       690       2,051  
CAPEX
    436       391       2,348  

Fierce competition led to a decline in Sonera’s end customer base. However, the number of customers through service providers surged, increasing the overall number of customers in Sonera’s mobile network.

Price erosion, higher marketing costs, broadband installation costs and a larger proportion of service providers customers offset gains from efficiency measures and synergies reducing EBITDA and the margin to 37 percent.

Sonera will increase its efforts to regain end-customer market share. To do this with maintained good profitability a program that will secure competitive cost levels within Sonera has been initiated.

Strong ADSL growth increased CAPEX. In the first quarter, SEK 173 million (200) was invested in mobile communications and SEK 263 million (191) in fixed communications.

Mobile communications

Net sales increased 2 percent to SEK 2,809 million due to strong sales growth to service providers and increased usage of mobile services. Price erosion affected net sales by -10 percent.


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Interim Report January-March 2004. TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm


In the first quarter, the number of end customers decreased by 107,000 to 2,321,000 while customers through service providers increased by 257,000 to 434,000.

EBITDA decreased to SEK 1,216 million (1,393) and the margin declined to 43 percent (51).

Following number portability and the increased competition churn climbed significantly from 20 percent in the fourth quarter 2003 to 37 percent in the first quarter.

Share of non-voice sales was 12 percent (12). The number of SMS messages sent per customer and month increased to 34 (27) and Sonera’s customers sent a total of 645,000 MMS during the quarter.

The average traffic volume per customer and month increased to 236 minutes (222). ARPU declined to EUR 38.1 (38.8) due to price erosion.

Finnish mobile network operators achieved mutual agreements on new mobile-to-mobile termination fees. As of March 1, 2004, Sonera receives EUR 0.09 per minute for each call terminated in its network (previously EUR 0.1278 per minute). The new prices will negatively affect sales by a few percentage points and operating income by approximately SEK 45 million on a yearly basis.

Fixed communications

Net sales increased 9 percent to SEK 1,756 million, attributable to the acquisition of Auria (SEK 178 million) and strong broadband growth.

Leased lines sales and wholesale capacity sales in the amount of SEK 52 million were transferred from the fixed voice product area to Internet and data services. On a comparable basis, sales for Internet and data services climbed 14 percent to SEK 747 million and fixed voice sales increased 8 percent to SEK 666 million.

EBITDA improved to SEK 475 million (430) and the margin remained stable at 27 percent.

In the first quarter, the number of broadband customers increased by 24,000 to 174,000 while fixed voice subscriptions decreased by 14,000 to 790,000.

Customer segments

To maintain a strong market position in a highly competitive environment, the prices for the mobile subscriptions Sonera One and ZeroForty were reduced at the end of the quarter.

Sonera continues to build its multi-access strategy. The fixed and mobile offerings of Sonera Plaza and Sonera Colour were combined under the Sonera Plaza brand and the usability of these services was further improved.

To support TeliaSonera’s vision of simplicity, a successful turnkey delivery campaign was carried out for consumer broadband. Two new


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Interim Report January-March 2004. TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm


fixed-line flat rate Internet subscriptions were launched; Sonera Internet Net Line, and Sonera Leisure Line.

Lower prices reduce total market growth in Norway

Competition continued to be intense during the first quarter, and the mobile market in Norway was marked by high subsidies and lower prices. NetCom continued with offerings and new marketing programs as well as initiatives to drive MMS growth. NetCom improved operating efficiency to secure competitive cost levels.

                         
    Jan-Mar   Jan-Mar   Jan-Dec
SEK in millions, except percentages
  2004
  2003
  2003
Net sales
    1,442       1,515       6,081  
of which external
    1,404       1,496       6,011  
EBITDA
    526       646       2,499  
EBITDA excl. non-recurring items
    526       646       2,499  
Margin (%)
    36.5       42.6       41.1  
Operating income
    49       81       423  
Operating income excl. non-recurring items
    49       81       452  
CAPEX
    133       161       861  

Net sales were negatively affected by exchange rate fluctuations. In local currency sales climbed 8 percent due to increased usage of mobile services and strong customer growth year on year. Price reductions affected net sales by -7 percent.

In the quarter, customers through service providers climbed by 22,000 to 112,000 while end customers decreased by 5,000 to 1,190,000. The loss was in the prepaid segment while the number of subscription customers increased by 9,000, reflecting NetCom ´s strategy to focus on high ARPU segments.

The EBITDA margin decreased to 37 percent. Adjusted for one-time payments from Telenor in the first quarter of 2003, EBITDA remained unchanged in local currency, despite price reductions.

CAPEX decreased due to reduced GSM investments.

The average traffic volume per customer and month increased to 170 minutes (156), sustaining ARPU at a high level, NOK 334 (337), despite major price cuts.

The number of SMS messages sent per customer and month increased to 74 (70) and customers using NetCom’s network sent a total of 1,585,000 MMS during the quarter.

As of March 1, the SMS price was reduced from NOK 1.00 to NOK 0.69.

Churn was 19 percent (18).


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Interim Report January-March 2004. TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm


Robust sales and earnings growth in Denmark

Net sales increased 30 percent due to positive growth across all operations. Adjusting for accounting changes on mobile interconnect revenues*), sales increased 22 percent. Earnings exhibited continued positive development.

                         
    Jan-Mar   Jan-Mar   Jan-Dec
SEK in millions, except percentages
  2004
  2003
  2003
Net sales
    933       717       3,278  
of which external
    912       696       3,188  
EBITDA
    65       -27       70  
EBITDA excl. non-recurring items
    65       -27       70  
Margin (%)
    7.0       -3.8       2.1  
Operating income
    -73       -202       -561  
Operating income excl. non-recurring items
    -73       -202       -561  
CAPEX
    47       74       391  


*)   External mobile interconnect revenues were previously reported net, but a transition was made to reporting gross in the fourth quarter of 2003.

Of CAPEX, SEK 18 million (25) referred to mobile communications, and SEK 29 million (49) to fixed communications, including cable TV.

Mobile communications

Strong customer growth and increased traffic volume per customer caused net sales to climb 34 percent to SEK 450 million.

TeliaXpress, with attractive pricing for voice services and free usage of SMS, continues to attract new customers and the number of mobile customers increased by 19,000 to 544,000 in the quarter.

EBITDA increased to SEK 15 million (-4).

The number of sent SMS messages per customer and month surged to 321 (49) and Telia’s customers sent a total of 469,000 MMS during the quarter.

Fixed communications

After a successful restructuring, net sales are climbing again within fixed communications. The primary engines behind this growth are the flat rate subscription for fixed voice, IP-VPN services and competitive wholesale offerings.

Excluding the cable TV operations Telia Stofa, external net sales increased 13 percent to SEK 296 million and EBITDA improved to SEK 4 million (-53).

In Telia Stofa, external net sales increased 26 percent to SEK 183 million and EBITDA improved to SEK 46 million (30).


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Interim Report January-March 2004. TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm


New attractive offerings and transfer speed upgrades for Internet access added 9,000 broadband customers during the quarter, bringing the total to 113,000.

Baltic Countries

                         
    Jan-Mar   Jan-Mar   Jan-Dec
SEK in millions, except percentages
  2004
  2003
  2003
Net sales
    1,403       1,413       5,881  
of which external
    1,392       1,402       5,823  
EBITDA
    665       705       2,796  
EBITDA excl. non-recurring items
    665       705       2,846  
Margin (%)
    47.4       49.9       48.4  
Income from associated companies
    96       110       379  
Operating income
    271       275       994  
Operating income excl. non-recurring items
    271       275       1,164  
CAPEX
    143       132       758  

Strong mobile growth and reduced customer loss within fixed voice in Lithuania

Mobile communications

Omnitel’s external net sales increased 9 percent to SEK 480 million due to customer growth.

EBITDA improved to SEK 226 million (220), but the margin dropped to 44 percent (50) due to increased marketing costs.

Operating income improved to SEK 83 million (79).

The price level dropped 4 percent. Most of the price changes implemented were aimed at business customers, including lower prices between Omnitel customers. In the first quarter, customers increased by 49,000 to 1,101,000.

Fixed communications

Lietuvos Telekomas’ external net sales dropped 10 percent to SEK 461 million due to reduced prices within fixed voice, which represents the greater part of its sales. Lower sales affected EBITDA, which decreased to SEK 227 million (277). The margin fell to 47 percent (53).

Operating income totaled SEK -41 million (-27).

In the first quarter, fixed voice sales decreased 10 percent to SEK 377 million due to price cuts of 17 percent and customer loss. However, traffic volume was 10 percent higher than in the comparable quarter and customer loss has gradually been reduced. The number of fixed voice customers decreased by 3,000 to 825,000 in the quarter.

Several activities are underway to promote Internet usage and a number of attractive offerings have been launched for both dial-up Internet and ADSL access. During the quarter, sales for Internet and data ser-


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vices climbed 8 percent to SEK 83 million. The number of broadband customers (ADSL) increased by 6,000 to 31,000.

Strong mobile growth and good earnings in fixed line operations in Latvia

Mobile communications

Latvijas Mobilais Telefons (LMT) increased net sales 6 percent to SEK 457 million due to customer growth and increased traffic per customer. In local currency, net sales increased 13 percent.

EBITDA improved 12 percent to SEK 252 million and the margin increased to 55 percent (52). In local currency, EBITDA increased 20 percent.

Operating income improved to SEK 174 million (133).

In the quarter, the number of customers increased by 20,000 to 554,000 and customers through service providers increased by 6,000 to 81,000.

Fixed communications

Lattelekom (associated company, 49 percent) reported slightly decreased sales. Fixed voice sales dropped while sales for Internet and data services further increased.

Earnings improved and share of net income increased to SEK 35 million (10). After amortization of goodwill and fair value adjustments, income from Lattelekom increased to SEK 55 million (52).

In the beginning of March, TeliaSonera and the Republic of Latvia agreed to withdraw their respective claims and thereby settle the dispute between them regarding Lattelekom. The dispute had been the subject of ICC arbitration proceedings since 2000.

Stable performance in Estonia

Mobile communications

EMT (associated company, 49 percent holding) reported increased net sales and increased net profit. Share of net income decreased to SEK 59 million (65). After amortization of goodwill and fair value adjustments, income from EMT decreased to SEK 30 million (44).

Fixed communications

Elion (associated company, 49 percent holding) reported increased net sales and increased net profit. Share of net income totaled SEK 26 million (26). After amortization of goodwill and fair value adjustments, income from Elion was SEK 10 million (14).


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Strong margin improvement and strong customer growth in Eurasia

Fintur reported strong net sales and earnings for the quarter compared with same quarter in the preceding year. In local currencies, net sales increased 65 percent.

                         
    Jan-Mar   Jan-Mar   Jan-Dec
SEK in millions, except percentages
  2004
  2003
  2003
Net sales
    794       558       2,742  
of which external
    794       558       2,740  
EBITDA
    444       280       1,490  
EBITDA excl. non-recurring items
    444       280       1,490  
Margin (%)
    55.9       50.2       54.3  
Operating income
    302       133       889  
Operating income excl. non-recurring items
    302       133       889  
CAPEX
    212       225       990  

During the quarter, customer growth was 294,000. ARPU increased in all operations.

Earnings showed strong improvement and the margin increased to 56 percent.

The Fintur companies are still in the phase of network rollout while building out capacity in major cities to meet the customer growth. CAPEX was 27 percent in relation to net sales during the quarter. This was below plan as KCell network investments were postponed from first to second quarter.

In Kazakhstan, KCell increased its customer base during the first quarter by 174,000 to 1,164,000.

In Azerbaijan, Azercell increased its customer base by 77,000 to 989,000, and passed the 1,000,000 mark in April 2004.

In Georgia, Geocell increased its customer base by 21,000 to 328,000.

In Moldova, Moldcell increased its customer base by 22,000 to 198,000.

Over 1.4 million new customers in Russia

MegaFon (associated company, 44 percent holding) reported continued strong growth in both net sales and earnings. The number of customers increased by 1,412,000 to 7,587,000 in the first quarter, and the company further strengthened its market position. In absolute numbers, customer growth was strongest in the southern and northwestern regions.

MegaFon continued its positive earnings trend and share of net income from MegaFon in the first quarter climbed to SEK 166 million (90). After


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amortization of goodwill and fair value adjustments, income from MegaFon increased to SEK 120 million (34).

In March, MegaFon launched operations in the Far East region, which means that the company now has commercial operations up and running in all seven major regions in Russia.

                         
    Jan-Mar   Jan-Mar   Jan-Dec
SEK in millions
  2004
  2003
  2003
Share of net income
    166       90       709  
Amortization of goodwill and fair value adjustments
    -46       -56       -200  
 
   
 
     
 
     
 
 
Income from associated companies
    120       34       509  
 
   
 
     
 
     
 
 

In the first quarter, the total number of mobile customers in Russia climbed by 6 million, bringing mobile penetration up to approximately 29 percent.

Turkcell’s result impacted by provisions

Turkcell (associated company, 37.3 percent holding, reported with a one-quarter lag) reported a negative result of USD 14 million under US GAAP for the fourth quarter. This downturn was attributable to an increase of USD 539 million in provisions for the ongoing disputes with Turkish Treasury, Turkish Telecommunication Authority and Turk Telekom. The increase in provisions was partly offset by recognizing a deferred tax asset of USD 458 million, related to existing tax credit carry-forwards.

                         
    Jan-Mar   Jan-Mar   Jan-Dec
SEK in millions
  2004
  2003
  2003
Share of net income (US GAAP)
    -38       108       600  
IFRS/IAS adjustments
    288       154       706  
Amortization of goodwill and fair value adjustments
    -182       -146       -688  
 
   
 
     
 
     
 
 
Income from associated companies
    68       116       618  
 
   
 
     
 
     
 
 

Share of net income from Turkcell decreased to SEK -38 million (108). After inflation adjustments, amortization of goodwill and fair value adjustments, income from Turkcell was SEK 68 million (116).

In the fourth quarter of 2003, the number of customers climbed by 800,000 to 19 million.

Weak demand for IP and capacity on the international carrier market

In the carrier business, net sales fell 37 percent compared with the same quarter last year, mainly due to the closedown of domestic voice sales through resellers in the United Kingdom and the phase-out of unprofitable business as part of the reconstruction. Compared to the fourth quarter of 2003, net sales decreased 8 percent, mainly reflecting price pressure and lower volumes within IP and capacity.


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Excluding non-recurring items, EBITDA and operating income improved year on year. Compared with the fourth quarter, however, earnings decreased due to lower demand for IP and capacity on the international carrier market.

                         
    Jan-Mar   Jan-Mar   Jan-Dec
SEK in millions, except percentages
  2004
  2003
  2003
Net sales
    935       1,492       4,892  
of which external
    611       1,157       3,589  
EBITDA
    -46       -45       237  
EBITDA excl. non-recurring items
    -9       -45       144  
Margin (%)
    -1.0       -3.0       2.9  
Operating income
    -194       -199       -259  
Operating income excl. non-recurring items
    -126       -199       -298  
CAPEX
    40       27       239  

Non-recurring items had a negative impact of SEK 68 million on operating income due to synergy implementations and negative impact on reserves from fluctuation in exchange rates.

In the first quarter, SEK 108 million of the reserves was utilized for restructuring and synergy implementations. The reserves totaled SEK 2,572 million at the end of the period. Up to SEK 800 million is expected to be disbursed in 2004. The remaining part will be used later during the phase-out of long-term contracts.

CAPEX, which is strictly customer-related or dedicated to reducing operating costs, increased.

TeliaSonera Holding

In TeliaSonera Holding, net sales increased 9 percent compared to the same quarter of the preceding year. Sales for comparable operations decreased.

Earnings growth, primarily in the associated companies Infonet and Telefos led to improved operating income excluding non-recurring items.

Additional businesses were divested in the first quarter.

The sale of Telia Finans was completed, generating a capital gain of SEK 429 million and a cash inflow of approximately SEK 6.0 billion.

The divestiture of Ki Consulting, part of the Telefos Group (49 percent stake), had a positive effect on earnings of SEK 39 million for TeliaSonera and generated a cash inflow of SEK 398 million.

The divestiture of the remaining 7 percent stake in Metro One entailed a capital loss, for which a corresponding write-down was made in the final accounts for 2003, and a cash inflow of SEK 26 million.


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The sale of the 37 percent stake in INGROUP was completed, incurring a capital loss for which a provision was made in the final accounts for 2003.

                         
    Jan-Mar   Jan-Mar   Jan-Dec
SEK in millions, except percentages
  2004
  2003
  2003
Net sales
    415       380       1,628  
of which external
    359       344       1,389  
EBITDA
    391       -7       110  
EBITDA excl. non-recurring items
    -38       -7       110  
Margin (%)
    -9.2       -1.8       6.8  
Income from associated companies
    50       -158       -1,176  
Operating income
    416       -235       -1,447  
Operating income excl. non-recurring items
    -13       -235       -327  
CAPEX
    19       46       211  

The divestiture of the 1 percent holding in the satellite company Eutelsat S.A. yielded a cash inflow of SEK 130 million and a capital gain of SEK 63 million, which affected financial items.

The 29 percent holding in the consulting broker eWork Scandinavia AB was divested, generating a capital gain of SEK 3 million and a cash inflow of SEK 6 million.

In the first quarter, Yahoo exercised its option to sell back its 16 percent stake in Zed to TeliaSonera. The purchase price was EUR 7 million.

After an arbitration decision, Vodafone’s shares in Xfera were acquired for EUR 9 million. At the same time, a capital infusion to Xfera of EUR 3 million was made. Both investments were written down and affected financial items.

The subsidiaries Sergel Kredittjänster AB and TeliaSonera Payphone AB were transferred from Holding to TeliaSonera Sweden during the quarter.

On April 1, the Hong Kong-based mobile company Peoples Telephone Company was listed on the stock exchange. The associated company Overseas Telecom had an 8 percent stake in the company, which was sold in conjunction with the IPO. The capital gain from the sale will have a positive effect of approximately SEK 100 million on TeliaSonera’s operating income in the second quarter.

Stockholm, April 28, 2004

Anders Igel
President and CEO


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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 Financial Reporting Standards (IFRS/IAS).

     
Stockholm, April 28, 2004
   
 
   
 
   
Ernst & Young AB
  KPMG Bohlins AB
 
   
Lars Träff
  Thomas Thiel
Authorized Public Accountant
  Authorized Public Accountant
 
   
 
   
 
   
Financial Information
   
Interim Report January-June 2004
  July 28, 2004
Interim Report January-September 2004
  October 27, 2004
 
   
 
   
 
   
Questions regarding content:
   
TeliaSonera AB
   
Investor Relations
   
SE—106 63 Stockholm, Sweden
   
Tel. +46 8 504 550 00
   
Fax +46 8 611 46 42
   
www.teliasonera.com/ir
   
 
   
 
   
Ordering of individual
  Shareholders with questions
printed reports:
  regarding the distribution
Tel. +46 372 851 42
  of financial reports or for
Fax +46 372 843 56
  change of address:
www.teliasonera.com/ir
  Tel. +46 8 449 88 16
  Fax +46 8 449 88 10
  E-mail: teliasonera@strd.se


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Condensed Consolidated Income Statements

                                 
    Jan-Mar   Jan-Mar   Jan-Mar   Jan-Dec
    2004   2004   2003   2003
In millions, except per share data and no. of shares
  SEK
  EUR
  SEK
  SEK
Net sales
    19,946       2,154       20,349       81,772  
Operating expenses
    -12,355       -1,334       -12,787       -51,450  
 
   
 
     
 
     
 
     
 
 
EBITDA
    7,591       820       7,562       30,322  
Depreciation, amortization and write-downs
    -3,823       -413       -4,358       -17,564  
Income from associated companies
    354       38       84       382  
 
   
 
     
 
     
 
     
 
 
Operating income
    4,122       445       3,288       13,140  
Net financial revenues and expenses
    -288       -31       -516       -794  
 
   
 
     
 
     
 
     
 
 
Income after financial items
    3,834       414       2,772       12,346  
Income taxes
    -1,246       -135       -938       -3,706  
Minority interests
    -244       -26       -195       -969  
 
   
 
     
 
     
 
     
 
 
Net income
    2,344       253       1,639       7,671  
 
   
 
     
 
     
 
     
 
 
Earnings/loss per share
                               
Basic
    0.50       0.05       0.35       1.64  
Diluted
    0.50       0.05       0.35       1.64  
Weighted average no. of shares (thousands)
                               
Basic
    4,675,232       4,675,232       4,675,232       4,675,232  
Diluted
    4,675,232       4,675,232       4,675,953       4,676,040  
 
   
 
     
 
     
 
     
 
 
EBITDA excl. non-recurring items
    7,200       777       7,562       30,690  
Operating income excl. non-recurring items
    3,761       406       3,288       14,831  
 
   
 
     
 
     
 
     
 
 


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Condensed Consolidated Balance Sheets

                         
    March 31,   March 31,   Dec 31,
    2004   2004   2003
In millions
  SEK
  EUR
  SEK
Assets
                       
Intangible fixed assets
    62,018       6,697       61,820  
Tangible fixed assets
    48,967       5,288       49,161  
Financial fixed assets
    38,175       4,122       42,061  
Total fixed assets
    149,160       16,107       153,042  
Inventories, etc.
    529       57       501  
Receivables
    20,348       2,197       24,170  
Short-term investments
    14,819       1,600       8,658  
Cash and bank
    3,715       401       3,689  
Total current assets
    39,411       4,255       37,018  
 
   
 
     
 
     
 
 
Total assets
    188,571       20,362       190,060  
 
   
 
     
 
     
 
 
Shareholders’ equity and liabilities
                       
Shareholders’ equity
    116,344       12,563       112,393  
Minority interests
    3,736       403       3,441  
Provisions for pensions and employee contracts
    612       66       522  
Deferred tax liability, other provisions
    14,675       1,585       14,775  
Total provisions
    15,287       1,651       15,297  
Long-term loans
    15,318       1,654       25,867  
Short-term loans
    12,989       1,403       4,687  
Non-interest bearing liabilities
    24,897       2,688       28,375  
Total liabilities
    53,204       5,745       58,929  
 
   
 
     
 
     
 
 
Total shareholders’ equity and liabilities
    188,571       20,362       190,060  
 
   
 
     
 
     
 
 

Condensed Consolidated Cash Flow Statements

                                 
    Jan-Mar   Jan-Mar   Jan-Mar   Jan-Dec
    2004   2004   2003   2003
In millions
  SEK
  EUR
  SEK
  SEK
Cash flow from operating activities
    3,984       430       5,586       26,554  
Intangible and tangible assets acquired (cash CAPEX)
    -1,790       -193       -1,689       -9,055  
Free cash flow
    2,194       237       3,897       17,499  
Cash flow from other investing activities
    6,466       698       404       3,334  
Total cash flow from investing activities
    4,676       505       -1,285       -5,721  
Cash flow before financing activities
    8,660       935       4,301       20,833  
Cash flow from financing activities
    -2,572       -278       -5,401       -14,162  
 
   
 
     
 
     
 
     
 
 
Cash flow for the period
    6,088       657       -1,100       6,671  
 
   
 
     
 
     
 
     
 
 


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Interim Report January-March 2004. TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm


Segment Information

                         
    Jan-Mar   Jan-Mar   Jan-Dec
SEK in millions
  2004
  2003
  2003
Net sales1)
                       
Sweden
    10,160       10,571       42,601  
Mobile
    2,891       2,786       12,312  
Fixed2)
    7,269       7,785       30,289  
Finland
    4,565       4,368       17,697  
Mobile
    2,809       2,757       10,898  
Fixed2)
    1,756       1,611       6,799  
Norway — mobile
    1,442       1,515       6,081  
Denmark
    933       717       3,278  
Mobile
    450       336       1,552  
Fixed2)
    483       381       1,726  
Baltic countries
    1,403       1,413       5,881  
Lithuania — mobile
    508       439       2,032  
Lithuania — fixed
    488       520       2,136  
Latvia — mobile
    457       431       1,855  
Other
    -50       23       -142  
Eurasia — mobile
    794       558       2,742  
Russia
    0       0       0  
International Carrier
    935       1,492       4,892  
Holding
    415       380       1,628  
Corporate
    1       1       4  
Eliminations
    -702       -666       -3,032  
 
   
 
     
 
     
 
 
The Group
    19,946       20,349       81,772  
 
   
 
     
 
     
 
 


1)   For information about external net sales per product area: www.teliasonera.com/ir
 
2)   Including eliminations between fixed and mobile communications


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    Jan-Mar   Jan-Mar   Jan-Dec
SEK in millions
  2004
  2003
  2003
EBITDA
                       
Sweden
    4,175       4,339       17,382  
Mobile
    1,168       1,235       5,529  
Fixed
    3,007       3,104       11,853  
Finland
    1,691       1,823       6,668  
Mobile
    1,216       1,393       5,136  
Fixed
    475       430       1,532  
Norway — mobile
    526       646       2,499  
Denmark
    65       -27       70  
Mobile
    15       -4       -91  
Fixed
    50       -23       161  
Baltic countries
    665       705       2,796  
Lithuania — mobile
    226       220       900  
Lithuania — fixed
    227       277       1,009  
Latvia — mobile
    252       225       944  
Other
    -40       -17       -57  
Eurasia — mobile
    444       280       1,490  
Russia
    0       -2       0  
Turkey
    0       -1       0  
International Carrier
    -46       -45       237  
Holding
    391       -7       110  
Corporate
    -230       -176       -964  
Eliminations
    -90       27       34  
 
   
 
     
 
     
 
 
The Group
    7,591       7,562       30,322  
 
   
 
     
 
     
 
 
                         
    Jan-Mar   Jan-Mar   Jan-Dec
SEK in millions
  2004
  2003
  2003
EBITDA excl. non-recurring items
                       
Sweden
    4,175       4,339       17,723  
Mobile
    1,168       1,235       5,529  
Fixed
    3,007       3,104       12,194  
Finland
    1,691       1,823       6,738  
Mobile
    1,216       1,393       5,200  
Fixed
    475       430       1,538  
Norway — mobile
    526       646       2,499  
Denmark
    65       -27       70  
Mobile
    15       -4       -91  
Fixed
    50       -23       161  
Baltic countries
    665       705       2,846  
Lithuania — mobile
    226       220       900  
Lithuania — fixed
    227       277       1,059  
Latvia — mobile
    252       225       944  
Other
    -40       -17       -57  
Eurasia — mobile
    444       280       1,490  
Russia
    0       -2       0  
Turkey
    0       -1       0  
International Carrier
    -9       -45       144  
Holding
    -38       -7       110  
Corporate
    -230       -176       -964  
Eliminations
    -89       27       34  
 
   
 
     
 
     
 
 
The Group
    7,200       7,562       30,690  
 
   
 
     
 
     
 
 


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Interim Report January-March 2004. TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm


                         
    Jan-Mar   Jan-Mar   Jan-Dec
SEK in millions
  2004
  2003
  2003
Depreciation, amortization and write-downs
                       
Sweden
    -1,185       -1,594       -6,484  
of which amortization of goodwill and fair value adjustments
    -1       -1       -3  
Finland
    -1,224       -1,133       -4,757  
of which amortization of goodwill and fair value adjustments
    -581       -519       -2,240  
Norway
    -477       -565       -2,076  
of which amortization of goodwill and fair value adjustments
    -294       -335       -1,260  
Denmark
    -138       -176       -619  
of which amortization of goodwill and fair value adjustments
    -8       -6       -14  
Baltic countries
    -491       -541       -2,181  
of which amortization of goodwill and fair value adjustments
    -138       -146       -529  
Eurasia
    -143       -147       -600  
of which amortization of goodwill and fair value adjustments
    -29       -44       -176  
International Carrier
    -148       -154       -496  
of which amortization of goodwill and fair value adjustments
    0       0       -1  
Holding
    -25       -70       -380  
of which amortization of goodwill and fair value adjustments
    -14       2       -3  
Corporate
    -3       -6       -12  
Eliminations
    11       28       41  
 
   
 
     
 
     
 
 
The Group
    -3,823       -4,358       -17,564  
 
   
 
     
 
     
 
 
of which amortization of goodwill and fair value adjustments
    -1,065       -1,049       -4,227  
 
   
 
     
 
     
 
 


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Interim Report January-March 2004. TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm


                         
    Jan-Mar   Jan-Mar   Jan-Dec
SEK in millions
  2004
  2003
  2003
Income from associated companies
                       
Sweden
    16       -1       -6  
Finland
    3       0       70  
Denmark
    1       0       -12  
Baltic countries
    96       110       379  
Latvia — fixed
    55       52       205  
Share of net income
    35       10       117  
Amortization of goodwill and fair value adjustments
    20       42       88  
Estonia — mobile
    30       44       136  
Share of net income
    59       65       215  
Amortization of goodwill and fair value adjustments
    -29       -21       -79  
Estonia — fixed
    10       14       41  
Share of net income
    26       26       84  
Amortization of goodwill and fair value adjustments
    -16       -12       -43  
Eurasia
                 
Russia
    120       34       509  
Share of net income
    166       90       709  
Amortization of goodwill and fair value adjustments
    -46       -56       -200  
Turkey
    68       116       618  
Share of net income (U.S. GAAP)
    -38       108       600  
IFRS/IAS adjustments
    288       154       706  
Amortization of goodwill and fair value adjustments
    -182       -146       -688  
Holding
    50       -158       -1,176  
Share of net income
    94       -138       -271  
Capital gains/losses
    23       -22       251  
Write-downs
    -67       2       -1,435  
Amortization of goodwill and fair value adjustments
    0       0       279  
Corporate
    0       0       0  
Eliminations
    0       -17       0  
 
   
 
     
 
     
 
 
The Group
    354       84       382  
 
   
 
     
 
     
 
 


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Interim Report January-March 2004. TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm


                         
    Jan-Mar   Jan-Mar   Jan-Dec
SEK in millions
  2004
  2003
  2003
Operating income
                       
Sweden
    3,006       2,744       10,893  
Finland
    470       690       1,981  
Norway
    49       81       423  
Denmark
    -73       -202       -561  
Baltic countries
    271       275       994  
Eurasia
    302       133       889  
Russia
    120       32       509  
Turkey
    69       115       618  
International Carrier
    -194       -199       -259  
Holding
    416       -235       -1,447  
Corporate
    -234       -182       -976  
Eliminations
    -80       36       76  
 
   
 
     
 
     
 
 
The Group
    4,122       3,288       13,140  
 
   
 
     
 
     
 
 
                         
    Jan-Mar   Jan-Mar   Jan-Dec
SEK in millions
  2004
  2003
  2003
Operating income excl. non-recurring items
                       
Sweden
    3,006       2,744       11,234  
Finland
    470       690       2,051  
Norway
    49       81       452  
Denmark
    -73       -202       -561  
Baltic countries
    271       275       1,164  
Eurasia
    302       133       889  
Russia
    120       32       509  
Turkey
    69       115       618  
International Carrier
    -126       -199       -298  
Holding
    -13       -235       -327  
Corporate
    -234       -182       -976  
Eliminations
    -80       36       76  
 
   
 
     
 
     
 
 
The Group
    3,761       3,288       14,831  
 
   
 
     
 
     
 
 
                         
    Jan-Mar   Jan-Mar   Jan-Dec
SEK in millions
  2004
  2003
  2003
CAPEX
                       
Sweden
    725       616       3,105  
Finland
    436       391       2,348  
Norway
    133       161       861  
Denmark
    47       74       391  
Baltic countries
    143       132       758  
Eurasia
    212       225       990  
International Carrier
    40       27       239  
Holding
    19       46       211  
Corporate
    3       4       57  
Eliminations
    0       0       0  
 
   
 
     
 
     
 
 
The Group
    1,758       1,676       8,960  
 
   
 
     
 
     
 
 


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Interim Report January-March 2004. TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm


                         
    Jan-Mar   Jan-Mar   Jan-Dec
    2004
  2003
  2003
Number of employees
                       
Sweden
                       
At the end of the period
    10,787       11,361       10,948  
Average for the period
    10,239       10,869       10,476  
Finland
                       
At the end of the period
    6,679       6,200       6,661  
Average for the period
    6,318       5,754       5,984  
Norway
                       
At the end of the period
    718       733       722  
Average for the period
    719       732       718  
Denmark
                       
At the end of the period
    1,028       1,038       1,030  
Average for the period
    1,003       1,040       1,014  
Baltic countries
                       
At the end of the period
    4,470       5,318       4,741  
Average for the period
    4,450       5,380       5,011  
Eurasia
                       
At the end of the period
    1,069       935       1,024  
Average for the period
    1,048       911       962  
Russia
                       
At the end of the period
    1       3       1  
Average for the period
    1       3       1  
Turkey
                       
At the end of the period
    3       3       3  
Average for the period
    3       3       3  
International Carrier
                       
At the end of the period
    535       794       555  
Average for the period
    545       817       658  
Holding
                       
At the end of the period
    605       1,116       711  
Average for the period
    684       1,106       816  
Corporate
                       
At the end of the period
    297       240       298  
Average for the period
    292       207       263  
 
   
 
     
 
     
 
 
The Group
                       
At the end of the period
    26,192       27,741       26,694  
Average for the period
    25,302       26,822       25,906  
 
   
 
     
 
     
 
 


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Interim Report January-March 2004. TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm


Quarterly Data

                                         
    Jan-Mar   Oct-Dec   Jul-Sep   Apr-Jun   Jan-Mar
SEK in millions, except per share data
  2004
  2003
  2003*)
  2003*)
  2003*)
Net sales
    19,946       21,054       20,094       20,275       20,349  
EBITDA
    7,591       7,442       7,571       7,747       7,562  
Depreciation, amortization and write-downs
    -3,823       -4,559       -4,337       -4,310       -4,358  
Income from associated companies
    354       499       419       -620       84  
Operating income
    4,122       3,382       3,653       2,817       3,288  
Income after financial items
    3,834       3,100       3,353       3,121       2,772  
Net income
    2,344       2,696       1,792       1,544       1,639  
Earnings/loss per share
                                       
Basic (SEK)
    0.50       0.58       0.38       0.33       0.35  
Diluted (SEK)
    0.50       0.58       0.38       0.33       0.35  
Investments
    2,051       4,474       1,899       2,121       1,951  
of which CAPEX
    1,758       3,336       1,889       2,059       1,676  
Cash flow from operating activities
    3,984       6,651       6,581       7,736       5,586  
Free cash flow
    2,194       3,309       5,138       5,155       3,897  
 
   
 
     
 
     
 
     
 
     
 
 
EBITDA excl. non-recurring items
    7,200       7,143       7,915       8,070       7,562  
Operating income excl. non-recurring items
    3,761       3,330       4,177       4,036       3,288  
 
   
 
     
 
     
 
     
 
     
 
 


*)   Restated


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Interim Report January-March 2004. TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm


Non-Recurring Items

                         
    Jan-Mar   Jan-Mar   Jan-Dec
SEK in millions
  2004
  2003
  2003
Within EBITDA
    392             -368  
Restructuring charges, synergy implementation costs, etc.:
                       
Sweden
                -341  
Finland
                -70  
Lietuvos Telekomas
                -50  
International Carrier
    -5             -7  
Provisions (FX rate effect):
                       
International Carrier
    -32             100  
Capital gains:
                       
Telia Finans
    429              
Within Depreciation, amortization and write-downs
    -31             -203  
Accelerated depreciation:
                       
International Carrier
    -26              
Write-downs:
                       
Lietuvos Telekomas
                -120  
International Carrier
    -5             -54  
Other
                -29  
Within Income from associated companies
                -1,120  
Capital gains/losses:
                       
Bharti Mobile
                341  
Metro One
                -110  
Write-downs:
                       
Metro One
                -151  
Infonet
                -1,028  
Provisions and other:
                       
INGROUP, etc.
                -172  
Within Financial revenues and expenses
    -111       -198       -22  
Capital gains/losses:
                       
Netia
                594  
Metro One
                -48  
Other financial investments
                -42  
Provisions:
                       
Ipse (3G Italy)
                -153  
Write-downs:
                       
Metro One
                -12  
Xfera (3G Spain)
    -111              
Other financial investments
          -198       -361  
 
   
 
     
 
     
 
 
Total
    250       -198       -1,713  
 
   
 
     
 
     
 
 

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Interim Report January-March 2004. TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm


Number of Customers1, 2)

                                         
    Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,
In thousands
  2004
  2003
  2003
  2003
  2003
Consolidated operations
                                       
Mobile
    12,397       11,957       11,491       11,109       10,772  
Sweden
    4,008       3,838       3,760       3,692       3,681  
Finland
    2,321       2,428       2,441       2,471       2,453  
Norway
    1,190       1,195       1,191       1,181       1,151  
Denmark
    544       525       504       484       438  
Lithuania
    1,101       1,052       965       905       856  
Latvia
    554       534       507       491       468  
Eurasia
    2,679       2,385       2,123       1,885       1,725  
Internet
    1,734       1,686       1,605       1,559       1,534  
Sweden
    1,239       1,222       1,185       1,155       1,130  
   of which broadband
    423       399       380       365       346  
Finland
    310       299       274       265       268  
   of which broadband
    174       150       119       103       94  
Denmark, broadband
    113       104       96       91       87  
Lithuania
    72       61       50       48       49  
   of which broadband
    31       25       18       15       13  
Cable TV, Denmark
    196       195       192       191       189  
Fixed voice
    8,042       8,087       8,027       8,094       8,228  
Sweden
    6,248       6,283       6,330       6,356       6,393  
Finland
    790       804       691       702       712  
Denmark
    179       172       170       177       230  
Lithuania
    825       828       836       859       893  
Associated companies
Mobile     27,689       25,667       23,982       21,895       20,312  
Estonia
    502       492       464       439       431  
Russia
    7,587       6,175       5,318       4,256       3,581  
Turkey
    19,600       19,000       18,200       17,200       16,300  
Internet
    92       76       66       63       57  
Latvia, broadband
    29       19       15       14       12  
Estonia
    63       57       51       49       45  
Fixed voice
    1,089       1,099       1,103       1,121       1,155  
Latvia
    652       654       657       671       694  
Estonia
    437       445       446       450       461  


1)   For further operational data: www.teliasonera.com/ir
 
2)   As of January 1, 2004, TeliaSonera has harmonized the definitions of operational data for all reporting units. Numbers for 2003 have been restated in accordance with the new definitions.

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Interim Report January-March 2004. TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm


TeliaSonera January-March 2004 — Legal1)

Condensed Consolidated Income Statements

                         
    Jan-Mar   Jan-Mar   Jan-Dec
SEK in millions, except per share data and number of shares
  2004
  2003
  2003
Net sales
    19,946       20,674       82,425  
Costs of production
    -10,826       -11,936       -46,688  
 
   
 
     
 
     
 
 
Gross income
    9,120       8,738       35,737  
Selling, admin., and R&D expenses
    -5,781       -5,562       -23,161  
Other operating revenues and expenses, net
    429       12       1,752  
Income from associated companies
    354       84       382  
 
   
 
     
 
     
 
 
Operating income
    4,122       3,272       14,710  
Net financial revenues and expenses
    -288       -530       -811  
 
   
 
     
 
     
 
 
Income after financial items
    3,834       2,742       13,899  
Income taxes
    -1,246       -938       -3,850  
Minority interests
    -244       -195       -969  
 
   
 
     
 
     
 
 
Net income
    2,344       1,609       9,080  
 
   
 
     
 
     
 
 
Earnings/loss per share (SEK)
                       
Basic
    0.50       0.35       1.95  
Diluted
    0.50       0.35       1.95  
 
   
 
     
 
     
 
 
Weighted average number of shares (thousands)
                       
Basic
    4,675,232       4,644,354       4,667,618  
Diluted
    4,675,232       4,645,075       4,668,426  
 
   
 
     
 
     
 
 


1)   Including Telia’s Finnish mobile operations and Swedish cable TV operations through May 31, 2003.

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Interim Report January-March 2004. TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm


Condensed Consolidated Balance Sheets

                 
    March 31,   Dec 31,
SEK in millions
  2004
  2003
Assets
               
Intangible fixed assets
    62,018       61,820  
Tangible fixed assets
    48,967       49,161  
Financial fixed assets
    38,175       42,061  
Total fixed assets
    149,160       153,042  
Inventories, etc.
    529       501  
Receivables
    20,348       24,170  
Short-term investments
    14,819       8,658  
Cash and bank
    3,715       3,689  
Total current assets
    39,411       37,018  
 
   
 
     
 
 
Total assets
    188,571       190,060  
Shareholders’ equity and liabilities
               
Shareholders’ equity
    116,344       112,393  
Minority interests
    3,736       3,441  
Provisions for pensions and employee contracts
    612       522  
Deferred tax liability, other provisions
    14,675       14,775  
Total provisions
    15,287       15,297  
Long-term loans
    15,318       25,867  
Short-term loans
    12,989       4,687  
Non-interest-bearing liabilities
    24,897       28,375  
Total liabilities
    53,204       58,929  
 
   
 
     
 
 
Total equity and liabilities
    188,571       190,060  
 
   
 
     
 
 

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Interim Report January-March 2004. TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm


Condensed Consolidated Cash Flow Statements

                         
    Jan-Mar   Jan-Mar   Jan-Dec
SEK in millions
  2004
  2003
  2003
Cash flow before change in working capital
    4,509       6,547       25,964  
Change in working capital
    -525       -930       479  
Cash flow from operating activities
    3,984       5,617       26,443  
Intangible and tangible fixed assets acquired (cash CAPEX)
    -1,790       -1,726       -9,092  
Free cash flow
    2,194       3,891       17,351  
Cash flow from other investing activities
    6,466       335       5,649  
Total cash flow from investing activities
    4,676       -1,391       -3,443  
Cash flow before financing activities
    8,660       4,226       23,000  
Cash flow from financing activities
    -2,572       -5,328       -16,412  
 
   
 
     
 
     
 
 
Cash flow for the period
    6,088       -1,102       6,588  
 
   
 
     
 
     
 
 
Cash and cash equivalents, opening balance
    12,069       5,465       5,465  
of which short-term investments up to and including three months
    8,380       2,634       2,634  
of which cash and bank
    3,689       2,831       2,831  
Cash flow for the period
    6,088       -1,102       6,588  
Exchange rate differences in cash and cash equivalents
    95       -30       16  
Cash and cash equivalents, closing balance
    18,252       4,333       12,069  
of which short-term investments up to and including three months
    14,537       578       8,380  
of which cash and bank
    3,715       3,755       3,689  
 
   
 
     
 
     
 
 
Net interest-bearing liability, opening balance
    8,847       25,034       25,034  
Change in net borrowings
    -1,849       -2,702       -16,485  
Change in pension provisions
    90       -119       298  
Net interest-bearing liability, closing balance
    7,088       22,213       8,847  
 
   
 
     
 
     
 
 

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Condensed Consolidated Statements of Changes in Shareholders’ Equity

                 
    March 31,   Dec 31,
SEK in millions
  2004
  2003
Opening balance
    112,393       108,829  
Transactions with outside parties
    -5       -13  
Differences arising from translation of foreign operations
    1,486       -8,101  
Inflation adjustments
    131       2,427  
Fair value measurement of securities available for sale
    34        
Gains/losses on instruments used to hedge cash flow
    -39       -10  
Dividend
          -1,870  
New share issue
          2,051  
Net income for the period
    2,344       9,080  
Closing balance
    116,344       112,393  
 
   
 
     
 
 

Long-Lived Assets

                                                 
    Goodwill
  Other intangibles
  Tangibles
    March 31,   Dec 31,   March 31,   Dec 31,   March 31,   Dec 31,
SEK in millions
  2004
  2003
  2004
  2003
  2004
  2003
Opening balance
    52,922       58,584       8,898       9,522       49,161       56,172  
Purchases
    19       1,902       135       1,292       1,719       8,446  
Operations acquired
                      30       223       255  
Dismantling/restoration
                                    106  
Sales/discards
                -3       -131       -40       -356  
Operations divested
                      -5       -123       -1,420  
Reclassifications
    -4       -458       186       432       -187       -455  
Amortization, depreciation
    -830       -3,450       -434       -1,686       -2,539       -11,872  
Write-downs, reversals of write-downs
    -8       -38       -11       -301             -332  
CAPEX contribution from CATV customers
                                  74  
Advances
                0       0       25       49  
Inflation adjustments
                            3       -7  
Exchange rate differences
    941       -3,618       207       -255       725       -1,499  
Closing balance
    53,040       52,922       8,978       8,898       48,967       49,161  
 
   
 
     
 
     
 
     
 
     
 
     
 
 

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Investments

                         
    Jan-Mar   Jan-Mar   Jan-Dec
SEK in millions
  2004
  2003
  2003
CAPEX
    1,758       2,153       9,373  
Intangible fixed assets
    93       516       850  
Tangible fixed assets
    1,665       1,637       8,523  
Acquisitions
    293       1,222       2,745  
Goodwill and other fair value adjustments
    136       1,153       2,413  
Shares and participations
    157       69       332  
 
   
 
     
 
     
 
 
Total
    2,051       3,375       12,118  
 
   
 
     
 
     
 
 

Net Interest-Bearing Liability

                 
    March 31,   Dec 31,
SEK in millions
  2004
  2003
Long-term and short-term loans
    28,307       30,554  
Less: Short-term investments, cash and bank
    -18,534       -12,347  
 
   
 
     
 
 
Net debt
    9,773       18,207  
Less: Interest-bearing financial assets
    -2,473       -6,112  
       Interest-bearing receivables
    -824       -3,770  
 
   
 
     
 
 
Total net borrowings
    6,476       8,325  
Provisions for pensions
    612       522  
 
   
 
     
 
 
Total net interest-bearing liability
    7,088       8,847  
 
   
 
     
 
 

Changes in Share Capital

                         
    Number of
shares

  Par value,
SEK/share

  Share capital,
SEK thousand

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  
New share issue, Dec 3, 2002
    1,604,556,725       3.20       5,134,582  
Share capital, Dec 31, 2002
    4,605,756,725       3.20       14,738,422  
New share issue, Feb 10, 2003
    69,475,344       3.20       222,321  
Share capital, Dec 31, 2003
    4,675,232,069       3.20       14,960,743  
Share capital, March 31, 2004
    4,675,232,069       3.20       14,960,743  

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Financial Instruments

                                 
    March 31,   March 31,   Dec 31,   Dec 31,
    2004   2004   2003   2003
    Book   Fair   Book   Fair
SEK in millions
  value
  value
  value
  value
Equity participations in associated companies
    20,353       30,753       20,401       23,315  
Other holdings of securities
    474       474       558       558  
Other long- and short-term receivables
    2,170       2,170       8,824       8,736  
Short-term investments
    282       282       278       278  
Interest rate swaps received
    4,861       4,861       2,178       2,178  
Interest rate swaps paid
    -4,731       -4,731       -2,084       -2,084  
FX interest rate swaps received
    6,053       6,053       5,989       5,989  
FX interest rate swaps paid
    -5,530       -5,530       -5,583       -5,583  
Other currency derivatives
    54       54       84       84  
 
   
 
     
 
     
 
     
 
 
Total assets
    23,986       34,386       30,645       33,471  
Provisions for pensions
    612       612       522       522  
Long-term loans
    15,403       15,865       25,940       27,023  
Short-term loans
    12,943       13,272       4,686       4,710  
Interest rate swaps received
    -1,310       -1,310       -1,314       -1,314  
Interest rate swaps paid
    1,501       1,501       1,442       1,442  
FX interest rate swaps received
    -1,803       -1,803       -1,795       -1,795  
FX interest rate swaps paid
    1,907       1,907       1,927       1,927  
Other currency derivatives
    26       26       85       85  
 
   
 
     
 
     
 
     
 
 
Total liabilities
    29,279       30,070       31,493       32,600  
Less book value of:
                               
- pensions
    -612               -522          
- accrued interest
    -334               -332          
- other currency derivatives
    -26               -85          
Book value of interest-bearing liabilities
    28,307               30,554          
FX swaps/forward contracts (portfolio)
                               
Purchases of foreign currency
    9,158       9,158       15,030       15,030  
Sales of foreign currency
    3,736       3,736       5,075       5,075  
 
   
 
     
 
     
 
     
 
 

Deferred Tax

                 
    March 31,   Dec 31,
SEK in millions
  2004
  2003
Deferred tax liability
    8,574       8,537  
Deferred tax asset (incl. valuation reserve)
    -14,711       -14,960  
 
   
 
     
 
 
Net deferred tax asset (-)/liability (+)
    -6,137       -6,423  
 
   
 
     
 
 

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Contingent Assets and Contingent Liabilities

                 
    March 31,   Dec 31,
SEK in millions
  2004
  2003
Contingent assets
           
Collateral pledged
               
Real estate mortgages
    20       20  
Chattel mortgages
          262  
Shares in subsidiaries
          570  
Shares in associated companies
    504       642  
Current receivables
    37       36  
Blocked funds in bank accounts
    1,285       1,259  
 
   
 
     
 
 
Total
    1,846       2,789  
Contingent liabilities
               
Credit guarantees, associated companies
    824       726  
Performance guarantees, associated companies and other minority holdings
    1,183       1,159  
Other guarantees, etc.
    858       1,038  
FPG/PRI, other pension guarantees
    176       176  
 
   
 
     
 
 
Total
    3,041       3,099  
 
   
 
     
 
 

TeliaSonera has a dispute with Tele2 and Vodafone concerning interconnect prices in Sweden. TeliaSonera believes that it has recorded sufficient provisions.

Contractual Obligations

                 
    March 31,   Dec 31,
SEK in millions
  2004
  2003
Intangible fixed assets
    5       40  
Tangible fixed assets
    2,129       2,140  
Indefeasible Rights of Use (IRU)
    3        
Associated companies and other minority holdings
    3,457       3,093  
 
   
 
     
 
 
Total
    5,594       5,273  
 
   
 
     
 
 

Exchange Rates

                         
    Jan-Mar   Jan-Mar   Jan-Dec
Average SEK rate against
  2004
  2003
  2003
EUR
    9.182336       9.181832       9.124051  
NOK
    1.064468       1.213247       1.141992  
DKK
    1.232815       1.235705       1.227867  
LVL
    13.775377       14.743591       14.247708  
LTL
    2.659271       2.659541       2.642622  
USD
    7.345478       8.554819       8.082809  
TRL 1,000,000
    0.550930       0.510337       0.539126  

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Basis for Presentation

General. As in the annual accounts for 2003, TeliaSonera’s consolidated financial statements for the three-month period ended March 31, 2004, have been prepared in accordance with International Financial Reporting Standards (IFRS/IAS). The parent company TeliaSonera AB’s financial statements have been prepared in accordance with the Annual Accounts Act and other Swedish regulations. This report has been prepared in accordance with IAS 34 “Interim Financial Reporting.”

Amounts and dates. Unless otherwise specified, all amounts are in millions of Swedish kronor (SEK) or other currency specified and are based on the three-month period ended March 31, 2004 for income statement items and as of March 31, 2004 for balance sheet items, respectively.

New accounting standards. On December 17, 2003, revisions to IAS 32 “Financial Instruments: Disclosure and Presentation” and IAS 39 “Financial Instruments: Recognition and Measurement” were published. A further amendment to IAS 39, incorporating new provisions that permit, in certain cases, fair value hedge accounting for a portfolio hedge of interest rate risk (macro hedging), was published on March 31, 2004. The revised IAS 39 must be applied for annual periods beginning on or after January 1, 2005. Earlier application is permitted only if the revised IAS 32 is also early applied.

On December 18, 2003, IAS 15 “Information Reflecting the Effects of Changing Prices” was withdrawn and revisions were published to IAS 1 “Presentation of Financial Statements,” IAS 2 “Inventories,” IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors,” IAS 10 “Events after the Balance Sheet Date,” IAS 16 “Property, Plant and Equipment,” IAS 17 “Leases,” IAS 21 “The Effects of Changes in Foreign Exchange Rates,” IAS 24 “Related Party Disclosures,” IAS 27 “Consolidated and Separate Financial Statements,” IAS 28 “Investments in Associates,” IAS 31 “Interests in Joint Ventures,” IAS 33 “Earnings per Share,” and IAS 40 “Investment Property.” The effective date for all revised standards is January 1, 2005. Earlier application is encouraged.

The revised standards also supersede SIC 1 “Consistency — Different Cost Formulas for Inventories,” SIC 2 “Consistency — Capitalization of Borrowing Costs,” SIC 3 “Elimination of Unrealised Profits and Losses on Transactions with Associates,” SIC 5 “Classification of Financial Instruments — Contingent Settlement Provisions,” SIC 6 “Costs of Modifying Existing Software,” SIC 11 “Foreign Exchange — Capitalisation of Losses Resulting from Severe Currency Devaluations,” SIC 14 “Property, Plant and Equipment — Compensation for the Impairment or Loss of Items,” SIC 16 “Share Capital — Reacquired Own Equity Instruments (Treasury Shares),” SIC 17 “Equity — Costs of an Equity Transaction,” SIC 18 “Consistency — Alternative Methods,” SIC 19 “Reporting Currency — Measurement and Presentation of Financial Statements under IAS 21 and IAS 29,” SIC 20 “Equity Accounting Method — Recognition of Losses,” SIC 23 “Property, Plant and Equipment — Major Inspection or Overhaul Costs,” SIC 24 “Earnings Per Share — Financial Instruments that May Be Settled in Shares,” SIC 30 “Reporting Currency —


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Translation from Measurement Currency to Presentation Currency,” and SIC 33 “Consolidation and Equity Method — Potential Voting Rights and Allocation of Ownership Interest.”

IFRS 2 “Share-based Payment” (also replacing certain disclosure requirements in IAS 19 “Employee Benefits”) was published on February 19, 2004. IFRS 2 is effective for annual periods beginning on or after January 1, 2005. Earlier application is encouraged. On March 31, 2004, IFRS 3 “Business Combinations” (superseding IAS 22 “Business Combinations”), IFRS 4 “Insurance Contracts” and IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations” (superseding IAS 35 “Discontinuing Operations”) were published. Revisions to IAS 36 “Impairment of Assets” and IAS 38 “Intangible Assets”, in both cases related to IFRS 3, were also published on March 31, 2004.

Generally, IFRS 3 became effective for business combinations agreed to on or after March 31, 2004. Special transitional provisions apply to previously recognized goodwill, negative goodwill, intangible assets, and equity accounted investments. IFRS 4 is effective for annual periods beginning on or after January 1, 2005. Earlier application is encouraged. IFRS 5 must be applied prospectively for annual periods beginning on or after January 1, 2005. Earlier application is permitted if sufficient information is available. The effective date of the revisions to IAS 36 and IAS 38 is April 1, 2004 (or date of adoption of IFRS 3 for intangible assets acquired in a business combination).

TeliaSonera’s future adoption of IFRS 4, IFRS 5 and of the revisions to IAS 2, IAS 8, IAS 10, IAS 16, IAS 17, IAS 21, IAS 24, IAS 28, IAS 31, IAS 32, IAS 33 and IAS 39 will not entail any restatements of comparative figures. When adopting IAS 1 and IAS 27 TeliaSonera will have to recognize the share of equity owned by external shareholders not as a separate line item on the face of the balance sheet but as a separate component within shareholders’ equity. Likewise, the minority share of income will not be recognized as a separate line item on the face of the income statement but as a disclosure on the face of the income statement of the allocation of profit or loss for the period. TeliaSonera does not own assets of the type regulated by IAS 40.

Adoption of IFRS 2 entails, among other things, recognizing share-based payments to employees, suppliers, creditors and others at fair value on the date of grant. TeliaSonera is evaluating what effects, if any, IFRS 2 will have on its consolidated financial statements. Adoption of IFRS 3 and of the revisions to IAS 36 and IAS 38 involves, among other things, that goodwill will no longer be amortized but tested for impairment at least annually and that the minority interest should include minority shareholders’ part of the fair value of assets acquired and liabilities assumed. TeliaSonera is evaluating what effects IFRS 3 will have on its consolidated financial statements.

Change in estimates. Effective January 1, 2004, the depreciation rate for copper cables in the fixed local access network in Sweden has been changed from 8 years to 20 years and for switching equipment for ADSL customers from 3 years to 10 years.


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Restated segment reporting. Some adjustments of TeliaSonera’s business organization were implemented in the first quarter of 2004. Hence, segment information in this report has been restated.

Restated quarterly data. In the fourth quarter of 2003, TeliaSonera finalized the allocation of goodwill to the various businesses acquired directly and indirectly in the merger with Sonera. The final allocation resulted, among others, in a reduction of goodwill related to the Turkcell shares, increasing operating income in 2003 by SEK 291 million. The adjustments were retroactively reflected in all quarters as follows.

                                         
    Jan-Dec   Oct-Dec   Jul-Sep   Apr-Jun   Jan-Mar
SEK in millions
  2003
  2003
  2003
  2003
  2003
Income from associated companies
    291       64       93       73       61  
of which amortization of goodwill and fair value adjustments
    291       64       93       73       61  
Operating income
    291       64       93       73       61  
Income after financial items
    291       64       93       73       61  
Income taxes
    -113       -25       -36       -28       -24  
Net income
    178       39       57       45       37  

Changes in Group Composition

Metro One. On January 14, 2004, TeliaSonera sold its remaining shareholding in Metro One Telecommunications, Inc.

INGROUP. At year-end 2003, the shareholders of INGROUP Holding AB, including TeliaSonera holding a 37 percent share, signed an agreement to sell all of their shares to Manpower. After approval by relevant competition authorities, the divesture was completed on February 20, 2004.

Sonera Zed. On January 13, 2004, Yahoo!, with reference to an existing put option, sold back its 16 percent holding in Sonera Zed Oy to TeliaSonera, whereby Sonera Zed became a wholly owned subsidiary of TeliaSonera.

Telia Finans. On January 15, 2004, TeliaSonera signed an agreement to sell its wholly owned subsidiary, the Swedish leasing company Telia Finans AB, to De Lage Landen International B.V. After approval by the Swedish Financial Supervisory Authority, the sale was completed on March 1, 2004.

Eutelsat. TeliaSonera’s minority holding in the satellite company Eutelsat S.A. was sold in February 2004.

Sturenportti. On February 27, 2004, TeliaSonera purchased all shares in the real estate company Kiinteistö Oy Sturenportti from Sonera Pension Fund.

Eesti Telekom. TeliaSonera presently holds 48.91 percent of the shares in AS Eesti Telekom. On April 14, 2004, TeliaSonera an-


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nounced its decision to make a public cash offer for all the remaining issued shares in Eesti Telekom. The acceptance period for the offer begins on the date when the prospectus is published and will last for 42 days. The offer is conditional upon the offer being accepted to such an extent that TeliaSonera becomes the owner of not less than 85 percent of the total number of shares in Eesti Telekom. The offer is also conditional upon the approval of the Estonian Competition Board.

Related Party Transactions

The Swedish and the Finnish States. The TeliaSonera Group’s services and products are offered to the Swedish and the Finnish states, their agencies, and state-owned companies in competition with other operators and on conventional commercial terms. Certain state-owned companies run businesses that compete with TeliaSonera. Likewise, TeliaSonera buys services from state-owned companies at market prices and on otherwise conventional commercial terms. Neither the Swedish and Finnish states and their agencies, nor state-owned companies represent a significant share of TeliaSonera’s net sales or earnings.

Svenska UMTS-nät. TeliaSonera owns 50 percent of Svenska UMTS-nät AB. In the three-month period ended March 31, 2004, TeliaSonera sold services and products to Svenska UMTS-nät worth SEK 15 million and purchased services and products worth SEK 28 million. As security for certain amounts borrowed by Svenska UMTS-nät under a third-party credit facility, TeliaSonera had, as of March 31, 2004, issued a guarantee of a maximum of SEK 3,500 million to the lenders and granted pledges of its shares in Svenska UMTS-nät.

Lattelekom. TeliaSonera holds a participating interest in the Latvian fixed-line operator Lattelekom SIA. In the three-month period ended March 31, 2004, TeliaSonera sold services and products to Lattelekom worth SEK 28 million and purchased services and products worth SEK 16 million.

MegaFon. TeliaSonera holds a participating interest in the Russian mobile operator OAO MegaFon. As of March 31, 2004, TeliaSonera had interest-bearing and non-interest-bearing claims on MegaFon of SEK 363 million.

Infonet. TeliaSonera owns a participating interest in the American company Infonet Services Corp. In the three-month period ended March 31, 2004, TeliaSonera sold services and products to Infonet worth SEK 10 million and purchased services and products worth SEK 38 million.

Telefos. TeliaSonera owns 49 percent of the shares in Telefos AB. As of March 31, 2004, TeliaSonera had interest-bearing claims on the Telefos Group of SEK 428 million and had signed guarantees of SEK 120 million for commitments made by Telefos companies. In the three-month period ended March 31, 2004, TeliaSonera sold services and products worth SEK 21 million to the Telefos Group and bought services and products worth SEK 549 million. Some of the services purchased by TeliaSonera referred to construction of fixed assets.


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

Loan Financing

In the first quarter of 2004, the positive cash-flow generation continued, in particular due to the divestment of Telia Finans.

Besides scheduled amortization of loans, TeliaSonera AB has, during the first quarter, prepaid loans held by companies within the Auria group, which was acquired in the latter part of 2003. Also in the first quarter, TeliaSonera AB conducted some buy-backs and advance cancellations of outstanding bonds originally issued by TeliaSonera Finland Oyj (former Sonera).

The intention is that TeliaSonera AB will make future refinancing of the outstanding TeliaSonera Finland debt, as well as new financing required for the Finnish operations.

Non-Cash Transactions

Vehicles. TeliaSonera leases vehicles through financial leasing. New acquisitions in the three-month period ended March 31, 2004 entailed non-cash investments of SEK 8 million.

Stock Option Schemes

At General Meetings of shareholders of TeliaSonera AB, a number of stock option schemes have been adopted. Summarized information about warrants outstanding as of March 31, 2004 by exercise price is as follows.

                                 
    Outstanding
  Of which exercisable
            Remaining           Remaining
            contractual life           contractual life
Exercise price (SEK)
  Number of warrants
  (in years)
  Number of warrants
  (in years)
69.00
    12,362,000       1.17       12,362,000       1.17  
71.62
    5,956,650       1.25       5,956,650       1.25  

On March 31, 2004, the closing price for the TeliaSonera share on Stockholmsbörsen was SEK 32.60. Detailed information regarding the stock option schemes is presented in TeliaSonera’s Annual Report for 2003. By Board decisions in February and March 2004, all warrants of series 2002/2008:A-F and 2002/2010:A-F were cancelled, due to non-fulfillment of certain exercise criteria. If fully exercised, the outstanding stock options will entail an increase in share capital of approximately SEK 68 million, equal to a 0.5 percent increase in the number of shares.


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Swedish GAAP

Differences in principles. TeliaSonera’s consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS/IAS). Effective January 1, 2004, IFRS/IAS deviates from Swedish GAAP, relevant to TeliaSonera, only with respect to write-ups of tangible fixed assets.

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

                         
    Jan-Mar   Jan-Mar   Jan-Dec
SEK in millions
  2004
  2003
  2003
Net income under IFRS/IAS
    2,344       1,609       9,080  
Write-up of tangible fixed assets
    -200              
Deferred tax
    56              
Net income under Swedish GAAP
    2,200       1,609       9,080  
                 
SEK in millions
  March 31, 2004
  Dec 31, 2003
Shareholders’ equity under IFRS/IAS
    116,344       112,393  
Write-up of tangible fixed assets
    4,749       4,949  
Deferred tax
    -1,330       -1,386  
Shareholders’ equity under Swedish GAAP
    119,763       115,956  

Finnish GAAP

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. TeliaSonera prepares its consolidated financial statements in accordance with International Financial Reporting Standards (IFRS/IAS). The main differences between Finnish Accounting Standards (Finnish GAAP) and IFRS/IAS, relevant to TeliaSonera, are described in TeliaSonera’s Annual Report for 2003. There were no material changes in the first quarter of 2004.

Parent Company

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

Net sales for the first quarter were SEK 5,250 million (5,584), of which SEK 4,071 million (4,388) was billed to subsidiaries. Earnings before appropriations and taxes ended higher, at SEK 2,029 million (1,385), due to improved operating income. Earnings after appropriations and taxes were SEK 1,508 million (743).

Shareholders’ equity increased to SEK 97,678 million (96,269 at year-end). Retained earnings amounted to SEK 24,861 million (23,209).


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Interim Report January-March 2004. TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm


The balance sheet total increased to SEK 140,423 million (137,112 at year-end). Cash flow from operating activities was SEK 1,802 million (2,241) and cash flow before financing activities improved to SEK 7,976 million (4,661). Net borrowings decreased, to SEK 2,808 million (3,196 at year-end). Cash and cash equivalents totaled SEK 15,089 million (8,809).

The equity/assets ratio (including the equity component of untaxed reserves) was 73.6 percent (74.2 at year-end).

Total investments for the first quarter amounted to SEK 545 million (3,068), including SEK 474 million (463) in tangible fixed assets, primarily fixed-line installations. Other investments totaling SEK 71 million (2,605, of which SEK 2,581 million reflected the purchase price consideration for Sonera) were primarily attributable to capital infusions in subsidiaries and associated companies. Of the capital infusions to subsidiaries, SEK 2 million (–) was provided through debt conversion.

As of March 31, 2004, the number of employees was 2,933 (2,982 at year-end).

Financial Information/“Underlying” Measures of Results of Operations

This interim report includes information on “underlying” measures of TeliaSonera’s results of operations, such as “EBITDA excluding non-recurring items” and “Operating income excluding non-recurring items.” EBITDA equals operating income before depreciation, amortization and write-downs, excluding income from associated companies. Non-recurring items include write-downs, capital gains/losses, restructuring/phase-out of operations and personnel redundancy costs. TeliaSonera’s management uses operating income excluding non-recurring items as the principal measure for monitoring profitability in internal reporting. Management believes that, besides operating income, EBITDA excluding non-recurring items and operating income excluding non-recurring items are also measures commonly reported and widely used by analysts, investors and other interested parties in the telecommunications industry. Accordingly, these “underlying” measures are presented to enhance the understanding of TeliaSonera’s historical operating performance.

These “underlying” measures, however, should not be considered as alternatives to operating income as indicators of our operating performance. Similarly, EBITDA excluding non-recurring items should not be considered as an alternative to cash flows from operating activities as a measure of liquidity. EBITDA excluding non-recurring items and operating income excluding non-recurring items are not measures of consolidated financial performance under IFRS/IAS or U.S. GAAP and may not be comparable to other similarly titled measures for other companies. These “underlying” measures are not meant to be predictive of potential future results.


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Interim Report January-March 2004. TeliaSonera AB (publ), Corporate Reg. No. 556103-4249, Registered office: Stockholm


Forward-Looking Statements

This interim report contains statements concerning, among other things, TeliaSonera’s financial condition and results of operations that are forward-looking in nature. Such statements are not historical facts but, rather, represent TeliaSonera’s future expectations. TeliaSonera believes that the expectations reflected in these forward-looking statements are based on reasonable assumptions; however, forward-looking statements involve inherent risks and uncertainties, and a number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statement, including TeliaSonera’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 TeliaSonera and the telecommunications industry in general. Forward-looking statements speak only as of the date they were made, and, other than as required by applicable law, TeliaSonera undertakes no obligation to update any of them in light of new information or future events.


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