5 On February 5, Norwegian Competitive Authority approved - - PDF document

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Interim Report

January-March, 2015

Interim Report

January-March, 2015 Johan Dennelind

President & CEO

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TeliaSonera receives almost SEK 5 billion dividend from Turkcell after 5 years deadlock On February 5, Norwegian Competitive Authority approved TeliaSonera’s acquisition of Tele2 Norway

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Telia Sweden to connect 5 villas per hour to its fiber network in 2015

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Progress and challenges in the first quarter

• Further growth in mobile service revenues in Sweden
• Continued strong performance in Nepal
• Agreement on Turkcell dividend and completion of the

acquisition of Tele2 Norway

• Group margin impacted by high equipment sales
• Continued macroeconomic challenges in parts of our footprint
• Service revenue pressure in Kazakhstan

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Modest start to the year as expected

• Reported service revenues increased

6.5 percent, boosted by currency effects

• Slightly easing pressure on organic service

revenue growth on a sequential basis

Group service revenues*

21,427 22,810 Q1 14 Q1 15 SEK million

• 1.1% local organic growth

Group EBITDA**

8,345 8,540 Q1 14 Q1 15 SEK million

* External service revenues **Excluding non-recurring items

• 4.3% local organic growth
• Reported EBITDA climbed 2.3 percent,

but declined slightly in organic terms

• Positive organic EBITDA growth in Europe
• ffset by decline in Sweden and Eurasia

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Solid consumer demand in Sweden

• Consumer segment supported by higher

mobile growth despite changing competitive dynamics

• Strong momentum in fiber orders

Sweden – B2C service revenue growth* Sweden – B2B service revenue growth*

* External service revenues

• Continued high competition in large

corporate segment

Q1 14 Q2 14 Q3 14 Q4 14 Q1 15

Fiber installation revenues B2C ex fiber installation revenues

• 4.5%
• 4.2%
• 4.1%
• 2.3%

Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 5

• 3.0%

1.8% 3.1% 1.5% 3.3% 1.9%

Profitability impacted by market investments

• Positive mobile growth offset by decline

in traditional fixed voice

Sweden service revenues*

7,793 7,792 Q1 14 Q1 15 SEK million

• 1.1% local organic growth

Sweden EBITDA**

3,596 3,267 Q1 14 Q1 15 SEK million

* External service revenues **Excluding non-recurring items

• 9.6% local organic growth
• Profitability impacted by high equipment

sales and changed product mix

• Performance expected to improve during

the year

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Stable performance in Europe

• Organic service revenue growth impacted

by lower interconnect by close to 1 p.p. and high competition in several markets

Europe service revenues*

7,851 8,359 Q1 14 Q1 15 SEK million

• 2.3% local organic growth

Europe EBITDA**

2,097 2,272 Q1 14 Q1 15 SEK million

* External service revenues **Excluding non-recurring items

+3.7% local organic growth

• EBITDA growth supported by turnaround

in Spain

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Tele2 Norway acquisition closed in February

Norway service revenues* & EBITDA**

SEK million +3.9% local organic growth Column1 Column2 Column3 Column4 483 486

• Tele2 contributed with net service revenues of

around SEK 300 million and negative EBITDA

• Close to one million subscriptions transferred to

TeliaSonera’s network end of quarter, bringing total base to 2.5 million

• Mobile market share now around 40 percent
• Network synergies to become visible from Q2,

full synergies expected in 2016

* External service revenues **Excluding non-recurring items

8 1,349 1,712 Service revenues EBITDA Q1 14 Q1 15 Q1 14 Q1 15 +5.5% local organic growth

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Back to positive service revenue growth in Eurasia

• Continued demanding macroeconomic

and competitive environment in several markets

Eurasia service revenue growth* Eurasia service revenue growth*

* External service revenue growth in local currencies, excluding acquisitions and disposals

• Positive organic service revenue growth

in 4 out of 7 markets

Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Kazakhstan Tajikistan Azerbaijan Georgia Eurasia Moldova Uzbekistan Nepal +19.9%

• 0.8%

+13.0% +3.1% +1.4% +1.4%

• 6.0%
• 10.1%

9 +4.8% +5.2% +3.1%

• 2.3%

+1.4%

Continued challenges in Kazakhstan

Kazakhstan service revenues*

1,723 1,800 Q1 14 Q1 15 SEK million

• 10.1% local organic growth

Kazakhstan EBITDA**

999 1,057 Q1 14 Q1 15 SEK million

* External service revenues **Excluding non-recurring items

• 8.9% local organic growth
• EBITDA margin remained high but declined to

54.2 percent (57.9) due to increased equipment sales

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• Organic service revenue growth impacted

by continued competitive landscape and reduced interconnect

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Agreement on Turkcell dividend

• Dividend resolution after five years deadlock between main owners
• TeliaSonera’s share of dividend approximately SEK 4.5 billion post tax
• Discussion continues with stakeholders on other corporate governance issues

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Continued governance and sustainability actions

• First combined Annual and Sustainability

Report published

• The second TeliaSonera Transparency

Report published

• Sustainability update for stakeholders in relation

to the Annual General Meeting

• Continued upgrade of responsible business

framework

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The transformation journey has commenced

2014 2015 2016 2013

2018

2017

Deliver on potential Transform & step up Transform & perform Stabilize & shape Big changes

The New TeliaSonera

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Execution has started

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80% fewer products and offerings 50% fewer IT systems >50% of services and sales online 80% use new simplified offerings 80% fewer IT systems >50% of services and sales online Targets by end 2017

• Approximately SEK 100 million invested in the first quarter,

gradual step-up during the year

• Good progress with increasing online share of sales, IT and

product portfolio transformation in early stage

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Outlook 2015 (unchanged)

* Excluding non-recurring items , in local currencies, excluding acquisitions and disposals ** Excluding license and spectrum fees, currency fluctuations may impact the reported number in Swedish krona

• EBITDA* - Around 2014 level
• CAPEX** - Around SEK 17 billion
• Dividend - Target at least SEK 3 per share

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Interim Report

January-March, 2015

Interim Report

January-March, 2015 Christian Luiga

Senior Vice President & CFO

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First quarter 2015

Jan-Mar 2015 Jan-Mar 2014 Change (%)

Net sales (SEK million) 26,041 23,926 8.8 Change local organic (%) 1.5 EBITDA* (SEK million) 8,540 8,345 2.3 Change local organic (%)

• 4.3

EBITDA* Margin (%) 32.8 34.9 EPS (SEK) 0.86 0.91

• 5.9

Free cash flow (SEK million) 2,853 2,556 11.6

* Excluding non-recurring items

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Major currency effects in the first quarter

• Swedish krona weakened against the majority
• f key currencies y-o-y, with the Russian ruble

as main exception

FX change y-o-y versus SEK

• Currencies supported reported net sales

by almost 6 percent in the first quarter

Reported net sales growth

• 28.3%

1.3% 5.9% 7.4% 16.2% 20.8% 27.1% Russia Norway Euro Azerbaijan Turkey Kazakhstan Nepal Q1 14 Organic FX M&A Q1 15 +8.8% +5.6 p.p. +1.7 p.p. +1.5 p.p. 18

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High equipment sales…

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* In local currencies, excluding acquisitions and disposals **Growth year-on-year In reported currency

Group net sales growth* impact Sweden equipment sales growth**

Net sales Q1 14 Billed revenues Interconnect revenues Other mobileservice revenues Fixed service revenues Other service revenues Equipment sales Net sales Q1 15

+0.1

• 0.3

0.0 +2.4

• 0.8

0.0 5.5% 8.2% 12.5% 23.6% Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 38.9% +1.5%

…impacted profitability in the first quarter

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*External service revenues in stable fx-rates, rolling 12 months ** Excluding non-recurring items in stable fx-rates, rolling 12 months *** Excluding non-recurring items in reported currency

Group service revenues* and OPEX** Group EBITDA margin***

• 4%
• 3%
• 2%
• 1%

0% 1% 2% Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Service revenues* OPEX** Q1 14 Q1 15 32.8% 34.9%

• Almost half of margin drop explained by

higher equipment sales

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Several items behind change in EPS

Earnings per share

0.86 0.91

• 0.13
• 0.13
• 0.06

+0.08 +0.09 +0.10 0.00

• Lower associated contribution

from MegaFon and Turkcell

• Reduced tax payments due to

intragroup transfer

• Interest net supported by

FX gains

SEK 21

Higher CAPEX related to investment programs…

CAPEX*

Region Sweden Region Europe Region Eurasia Group Q1 14 Q1 15 SEK million 3,714

• 50 percent of CAPEX in

Sweden related to fiber

• Higher investments mobile

networks in Finland and Norway

• Build out of coverage and

capacity in Eurasia

* Excluding license and spectrum fees

1,010 1,086 1,155 22

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…in line with our superior connectivity strategy

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Fiber households Sweden 4G population coverage

Q1 14 Q2 14 Q3 14 Q4 14 Q1 15

Telia connected (MDUs + SDUs) Communication operator Telia passed, not connected

838,000 1,157,000 1,157,000

0% 20% 40% 60% 80% 100% Q112Q212Q312Q412 Q113Q213Q313Q413 Q114Q214Q314Q414 Q115

Improved cash flow generation

Free cash flow

SEK billion

2.9 2.6

+0.2 0.0 +0.3 +0.5 +0.2 +0.5

• 1.3

0.0 24

• Positive working capital

development, mainly in Nordics and in Spain

* Excluding license and spectrum fees

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Net debt relatively stable in the past 12 months

Net debt development

• Net debt/EBITDA ratio
• f 1.72x end of Q1

SEK billion Q1 14 Free cash flow M&A Dividend payment Minority dividend FX & Other Q1 15 Turkcell dividend Pro forma Q1 15

52.9

• 13.3

+4.2 +13.0

• 4.5

+1.1

60.8

+2.9

56.3

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&

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Financial key ratios

Mar 31, 2015 Dec 31, 2014

Return on equity* 13.9 15.0 Return on capital employed* 11.5 12.2 Equity/assets ratio 41.0 38.0 Net debt/equity ratio 51.9 57.4 Net debt/EBITDA** ratio 1.72 1.68 Net debt/assets ratio 21.3 21.8

* Rolling 12 months ** Rolling 12 months, excluding non-recurring items

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Debt Maturing next 12 months – 2015 and onwards Debt Portfolio Maturity Schedule – 2015 and onwards

Debt maturity schedule

MMO

1 2 3 4 5 6 A p r

• 1

5 M a y

• 1

5 J u n

• 1

5 J u l

• 1

5 A u g

• 1

5 S e p

• 1

5 O c t

• 1

5 N

• v
• 1

5 D e c

• 1

5 J a n

• 1

6 F e b

• 1

6 M a r

• 1

6 2 4 6 8 10 12 14 16 18 2015 2018 2021 2024 2027 2030 2033 2036 2039 2042 2045 2048 2051 2054 2057 2060 2063 SEK billion SEK billion

Debt per Q1 2015

• Gross debt SEK 110.5 billion
• Net debt SEK 60.8 billion
• Net debt/EBITDA 1.72

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TeliaSonera AB long-term ratings migration history 2002-to-today

TeliaSonera AB credit ratings (A3/A-)

1 2 3 4 5

Q1

• 02

Q4- 04 Q4- 07 Q4- 08 Q4- 09 Q4- 1 Q4- 1 1 Q4- 1 2 Q4 1 3 Q4 1 4

AA AA- A+ A A-

Moody’s (A3/P-2)

• January 8, 2003, lowered long-term debt rating to A2
• November 1, 2006, outlook changed to Negative
• October 30, 2007, lowered long- and short-term debt

rating to A3 and P-2 respectively

• May 4, 2012, Outlook changed from Negative to

Stable

• May 7, 2013, rating confirmed, Outlook Stable
• Oct 22, 2014, Outlook changed from Stable to

Negative

• January 8, 2003, lowered long-term debt rating to A2
• November 1, 2006, outlook changed to Negative
• October 30, 2007, lowered long- and short-term debt

rating to A3 and P-2 respectively

• May 4, 2012, Outlook changed from Negative to

Stable

• May 7, 2013, rating confirmed, Outlook Stable
• Oct 22, 2014, Outlook changed from Stable to

Negative

Moody’s (A3/P-2)

• January 8, 2003, lowered long-term debt rating to A2
• November 1, 2006, outlook changed to Negative
• October 30, 2007, lowered long- and short-term debt

rating to A3 and P-2 respectively

• May 4, 2012, Outlook changed from Negative to

Stable

• May 7, 2013, rating confirmed, Outlook Stable
• Oct 22, 2014, Outlook changed from Stable to

Negative

Standard & Poor’s (A-/A-2)

• February 5, 2003, lowered long-term debt rating

to A

• October 28, 2005, lowered long-term debt rating

to A- and short-term debt rating to A-2

• January 28, 2013, rating confirmed

Outlook: Stable

• January 27, 2014, rating confirmed

Outlook: Stable

• January 23, 2015, rating confirmed

Outlook: Stable

• February 5, 2003, lowered long-term debt rating

to A

• October 28, 2005, lowered long-term debt rating

to A- and short-term debt rating to A-2

• January 28, 2013, rating confirmed

Outlook: Stable

• January 27, 2014, rating confirmed

Outlook: Stable

• January 23, 2015, rating confirmed

Outlook: Stable

Standard & Poor’s (A-/A-2)

• February 5, 2003, lowered long-term debt rating

to A

• October 28, 2005, lowered long-term debt rating

to A- and short-term debt rating to A-2

• January 28, 2013, rating confirmed

Outlook: Stable

• January 27, 2014, rating confirmed

Outlook: Stable

• January 23, 2015, rating confirmed

Outlook: Stable 29

Dividend policy

• The company shall target a solid investment grade

long-term credit rating (A- to BBB+)

• TeliaSonera shall target to distribute an annual dividend
• f at least SEK 3 per share for the fiscal year 2015

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Forward-looking statements

Statements made in this document relating to future status or circumstances, including future performance and other trend projections are forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There can be no assurance that actual results will not differ materially from those expressed or implied by these forward-looking statements due to many factors, many of which are

• utside the control of TeliaSonera.

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