Impact of 2008 crisis on mobile operators in Nordic-Baltic region_presentation

THE IMPACT OF THE CURRENT CRISISTHE IMPACT OF THE CURRENT CRISIS ON THE ICT INDUSTRY IN THE NORDIC-BALTIC REGION

AN EXAMPLE OF MOBILE OPERATORS

IN FINLAND AND SWEDEN VS LATVIA AND ESTONIAIN FINLAND AND SWEDEN VS LATVIA AND ESTONIA

AM SMIB 2007 – 2008, Part-TimeBy: Olga EFREMENKO

Director: Serge BESANGER, PhD

CONTENT

Smart RegionGlobal CrisisCrisis in the four countries

Impact of ICT on GDP growthICT in the four countries

Mobile Services – TrendsMobile Services in the four countries

S fMobile Services – Impact of the crisisMobile Services – Recommendations by Analysts

Gl b l Vi i f th f C iGlobal Vision of the four CompaniesMobile Segment – Revenues and ProfitsMobile Segment – Positioning in the four markets

Financial StructureGlobal VisionResponse of the marketsResponse of the markets

Conclusion

SMART REGION - PROSPEROUS FUTUREEconomic success of Baltic countries

EU accessionmarkets liberalizationimportant FDIs inflows from Nordics

350400450500

Current GDP, in bln USD

plow labor cost

Important GDP growth

Example of FDI 100150200250300350

Example of FDIEstonia: 21,5% of GDP in 2005

Cooperation between Baltic and Nordic countries

050

2004 2005 2006 2007

Latvia Estonia Finland Sweden

Source : IMFIndex of Economic Freedom by Fraser Institute

Finland Sweden Estonia Latvia FDIs, 2004-2006

A region with prosperous future in 2007

Finland Sweden Estonia Latvia7,7 7,4 7,9 7,3

15,0%

20,0%

25,0%

A region with prosperous future in 2007The most competitive economies in the worldSophisticated companiesStrong assets baseStrong innovative capacity

0,0%

5,0%

10,0%

2004 2005 2006Latvia Estonia Finland SwedenStrong innovative capacity

High professional skills Source : WTO, 2009

Latvia Estonia Finland Sweden

GLOBAL CRISISTransmission of stress

Global imbalance of payment

IMF: “Global imbalances may have been a factor behind the buildup of macroeconomic and financial excesses that led to the crisis.”

Transmission of the Financial Stresscapital outflows from emerging economydeclines in exports to advanced economiesp

More vulnerable emerging economiesDouble exposure

bank lending exposure to advanced economiesbank lending exposure to advanced economies Twin, current account and fiscal, deficit

Bank lending in Latvia, in % Exposure to crisis, 2002–06

Source : IMF

CRISIS IN THE 4 COUNTRIESCurrent account balance in bln USD20

NORDICS BALTICS

Swedish banks => stopped Overheating economies in 2006

Current account balance, in bln USD

0

2004 2005 2006 2007 2008 2009 2010

Swedish banks => stopped lending operations in Baltics

Recession: in Q4’08 GDP growth in Finland 1 3% Sweden 2 4%

Overheating economies in 2006 Slowdown after foreign banks

stopped lending operations

Decline Increase-40

-20Finland SwedenEstonia LatviaWestern Europe EuroAreaCEE Central Europe

in Finland -1,3%, Sweden - 2,4%.

Trade balance: very serious situation

Finland’s exports - 14%

Decline Increase

loans availabilityreal estate,

construction activities

prices wages

=> weakened

Real GDP , History and Forecast

0

10

20

Finland s exports 14%Sweden’s exports -7,2%, Imports -5,4%

Sweden, Dec. 2008: an economic stimulus package

Recession: May 2008

Estonia: better stamina

consummation competitiveness

-20

-10

02004 2005 2006 2007 2008 2009 2010

Sweden Finland Euro AreaEstonia Latviap g

(employment and infrastructure) Estonia: better staminalower public debt at 3,8% vs 17% Latviahigher government reserves at 10%

Latvia, Dec. 2008: a rescue

Macroeconomic stability

package

Baltics painf l recessions

Source: Baltic Sea Region Report, 2008

- Baltics: painful recessions- Nordics: a stronger position

IMPACT OF ICT ON A GDP GROWTH

Link between ICT development and GDP growth

Production functionProduction function

Mobile telephony in economy growthwhere Qt - real Gross Value Added

KPt – investments in ICT, INF, OtherHLt - employmentB – efficiency

Mobile telephony in economy growth

McKinsey, 2006:

+8% to a nation’s GDP

GDP Growth

+8% to a nation s GDPx2 positive effect => emerging countries

Direct impact from mobile operators

where w - labor share

Indirect impact from mobile phonessoftware manufacturerscontent providerscontent providers end-user increased productivity

ICT investments as a main contributor to the GDP growth

ICT IN THE FOUR COUNTRIESNordic model for the rest of the worldNordic model for the rest of the world

GSM networks, Nokia and Ericssonhigh-skilled researchersinnovationinnovationwealthy economies with good welfare system

Baltic economic growth propelled the ICT developmentg p p pEstonia “the E-land of Skype, mobile payments and electronic ID cards”Latvia is lagged behind => potential for growth

Market environment in 4 countries Usage in 4 countries

Venture capital availability

Financial marketQuality of 

Capacity for innovation

Extent of business I t t

Accessibility of digital t t

g

Financial market sophistication

Availability of latest 

technologies

Intellectual property protection

scientific research institutions

Internet use

Government success in ICT promotion

Presence of ICT in government offices

content

technologies

High‐tech exportsLaws relating to 

ICT

protection

Availability of government online 

services

ICT use and government efficiency

Burden of government regulation

Extent and effect of taxation

Estonia Latvia Finland Sweden

Estonia Latvia Finland Sweden

Source of data: World Economic Forum by INSEAD, 2008

MOBILE SERVICES: FROM FIXED TO MOBILEF fi d t bil iFrom fixed to mobile services

Tele2: “more customers cut the cord and move from fixed to mobile services”.

Voice minutes in Western EuropeVoice minutes in Western Europe

Mobile broadband connections in Europe, 2008 vs 2014

European Customer of Mobile broadband in 2008 vs 2014

Will prevail:Will prevail:ConsumersPrepaid subscriptionsComplementary rather than new/substitutive

Source: Analysis Mason, 2009

MOBILE SERVICES: DATA REVOLUTIONMobile Market Revenue sources in Western Europe

Mobile data (non-voice): services with high value addedInternet (emails, browsing), video, photos, music

TV on mobileSocial networking

Mobile Market Revenue sources in Western Europe

g

ConsummationVoice, SMS: unchangedMobile data: fast growth (2006), principal driver for the future

Revenues in Western Europe

Total Mobile services revenues: x2 in 10 years

Non-voice ARPU from high value-added services

y

Sources of ARPUsubscription feevoice (+possible connection fees)Mobile dataSMS

Non-voice ARPU share2002: 13% of total ARPU2012: 33% of total ARPU (forecast)2012: 33% of total ARPU (forecast)

Next 5 years Analysis Mason:

Source: Analysis Mason, 2007

Next 5 years, Analysis Mason: - less pronounced disparities in ARPU rates- the ARPU will fall-Mobile broadband: 5,7% of telecoms revenues (vs 1,7%)

MOBILE SERVICES: COMPETITIONIntense Technology competition

Growing demand speed increase upgrades

Speeds by technology

2G- GSM 2,5G – GPRS 3G – UMTS 3,5G - HSPDA

9,6 Kb/s 115 Kb/s 2 Mb/s 7,2 Mb/s

Fierce Price competition

The prices are falling down in EU: -26% in 3 years

Main factors of the prices decline: Also affecting the prices:Main factors of the prices decline:growth of the mobile broadbandnew actors (low-cost)

Also affecting the prices:network coveragespeed

MOBILE SERVICES IN THE FOUR COUNTRIES

Mature markets withhigh penetration

Faster growth in Baltics2001: 80% in Finland and Sweden

40% in Estonia, 28% in Latvia

3G subscriptions in 20073G subscriptions in 2007higher than EU average in Sweden and Finlandlow in Estonia (4,3%) => high potential

Lowest and declining pricesFinland, Sweden and Estonia: the lowest prices in EUFinnish prices were the lowest in EU

150 0

200,0

250,0

30,00

35,00

40,00

45,00

Finland

Sweden

Development of Price Type 1, EUR/month 3 price types of mobile calls, Apr.2008, EUR/ month

50,0

100,0

150,0

10 00

15,00

20,00

25,00

, Sweden

Denmark

Norway

0,0Finland Estonia Sweden Denmark Norway Switzerland Spain Italy Av 19 EU

Price Type 1 12,7 15,7 13,6 16,7 16,0 42,4 35,2 31,9 29,2

Price Type 2 19,9 35,3 26,6 33,0 34,4 74,0 78,4 72,7 54,7

Price Type 3 51,9 92,5 62,8 125,7 121,5 128,6 228,0 234,6 145,9

0,00

5,00

10,00

2005 2006 2007 2008

Average of 19 EU countries

MOBILE SERVICES IN NORDICS AND BALTICSNORDICS BALTICS

Heavy investments by Nordic operatorsMobile broadband th t t fi d

Fixed replaced in 5 yearsFixed call minutes: 30% Finland, 75% Sweden

NORDICS BALTICS

as a threat to fixed

Mobile voice price premium below 0% in 2 years

CompetitionHHI:

Mobile-only households - Latvia: 52%- Estonia : 35% in 2008

Intense competition,especiallyvalue-added services

Competition “The mobile communications services market operates under severe competition ”market operates under severe competition.“The profit margins are eroding year by year.”

low-cost to prevent leaving for competitors

Finland the leaderMobile-only: 47% in 20051st to launch 2G; 2,5G; SMS, mobile TV (2005)

highly valuable customers

Estonia the leader

; , ; , ( )2006 – mobile TV in Sweden

- Mature markets with decreasing prices and high competition- ARPU: declined voice compensated by increased non-voice revenues

MOBILE SERVICES: IMPACT OF THE CURRENT CRISIS

Supply side: Mixed messages

Europe, End 2008 - optimistic view: financially strong operators, fast growing traffic (iPhone)

Global vision: less optimistic

End 2008, ITU: ”The global economic downturn may slow the rapid move to 3G and other new technologies.”March 2009: are getting impacted by the crisis

restricted access to capitalrestricted access to capital consumers limited spendingcost reduction plans

Investments: different opinionsInvestments: different opinions

TeliaSonera - Higher speeds require continued driving investments in the industryNokia - Infrastructure investments by -5% in 2009Analysis Mason - More disciplined investments in next-generation networks and technologiesM.Agrawal - Right time for new services and investments as opportunities (mobile)

Demand side: more difficult to predict

NORDICS BALTICSIDC on the crisis:

''M bil b db d k i h N di i d

BuddeComm’s on the crisis:

lower consummation and increased funding costs for''Mobile broadband … market in the Nordics is expected continue the strong development …”.

lower consummation and increased funding costs for CAPEX and/or operating activities

“…voice and broadband will cushion most telecom service providers from decreasing consumer spending”.

MOBILE SERVICES: RECOMMENDATIONS BY ANALYSTS

Focus on delivering value: price as the dominant factor to select a service provider

Focus on core products: nice-to-have services are discretional due to reduced spending

Cost control:serious threat for the companies with heavy debtsto build up cash reserves

Competition: market consolidationCompetition: market consolidation“…struggling players may be acquired at a reduced price.”

“By keeping internal costs under control and focusing on recession-friendly products, operators can protect themselves from the worst implications of the forthcoming recession and discourage unwanted suitors.”

Analysis Mason

MOBILE SERVICES: OUR INVESTIGATIONS

Impact in Nordic and Baltic markets ? If yes similar?Impact in Nordic and Baltic markets ? If yes, similar?

Sales affected?

Profitability margins similar to the previous years?

Have actors already suffered and benefited from the crisis?

Ch i k t iti i f th t ?Changes in market positioning of the actors ?

Investments cuts or raises?

Financial health for 2009?

CEOS ABOUT THE CRISIS AND RESULTSHarri Koponen the President and CEO Lars Nyberg President and CEOHarri Koponen, the President and CEO

“The company has not yet been affected by thecurrent turmoil and customers are still demandingtelecom services in a similar manner as before.”

Lars Nyberg, President and CEO

“We reported record high earnings for the fourthquarter and the full year... The worseningeconomic trends, particularly in the Baltic

i h d i l ff icountries, had no material effect on usage in ourmarkets in 2008”.

Veli-Matti Mattila, President and CEOValdo Kalm, Chairman of the Management Board

“…economic crisis has had less impact on the“… the telecom operator business did not suffersignificant amounts of economic instability duringthe report year.

…ELISA’s revenue decreased by 5% in 2008. Reasonsi l d d l bil i t ti f b th i Fi l d

…economic crisis has had less impact on thetelecommunications sector than on the economy generally. 2008was successful for telecommunications companies on the whole andthe market continued to grow. However, a reduction in demand didappear in the private segment and by the end of the year, also in thebusiness segment… However, the impact of the economic

…included lower mobile interconnection fees both in Finlandand Estonia, as well as declined equipment sales anddecreases in the number of traditional fixed networksubscriptions and the volume of traffic.”

g , precession was added to the natural deceleration of the growth oftraditional communications services, and therefore, new fields ofactivity are increasingly playing an important role in the revenuesof telecommunications companies.”

Size of the companies by total revenues, in EUR

8000

10000

12000

2000

4000

6000

TELIASONERA TELE2 ELISA EESTI

2008 10017 3820 1485 396

2007 8902 3701 1568 400

2006 8414 3641 1518 369

0

GLOBAL VIEW OF THE COMPANIES

Leader in Nordics, Baltics, Eurasia (Sweden)

Strategy: to maintain its leading position focusing on

Alternative operator in Nordics, Baltics, Russia, Central and Western Europe (Sweden)

Strategy: to maintain its leading position …focusing on …migration from traditional fixed telephony to mobile…, deliveringhigh speed mobile data services….

Low cost companies

DNA: a challenger, a fast-mover

Mission: to provide price leading and easy to use communication services

Nordics: cash cow + test bed for new servicesSweden Finland Estonia Latvia

Mobile

FixedFixed

Other(IT solutions)

Largest local holding of telecoms and IT companies (Estonia)Market leader in Finland, operates in Nordics, Baltics, Russia

(Finland)Largest local holding of telecoms and IT companies (Estonia)

EMT - largest mobile operator, the 1st 3G networkElion - leader in the fixed-line market

(Finland)

Finland: market leader in 3G

Estonia:TeliaSonera is the shareholder at 60%

Estonia:Best 2G network

SEGMENTS IN 2008

Sales by Segment

Mobile segment is a significant part of each portfolio

Operating Income by Segment

Operating Income comes also largely from this segmentMobile segment is a significant part of each portfolio

TeliaSonera: Mobile, Fixed: 45% each, Eurasia 10%

Tele2: Mobile 60%, Fixed 15%, Other 20%

ELISA: Mobile 62% Fixed 38%

Operating Income comes also largely from this segment

TeliaSonera: Eurasia 48%, Mobile 33%, Fixed 19%

Tele2: Mobile at 60% covers -40% fm Fixed + Other

ELISA: Mobile at 57% and Fixed at 43%ELISA: Mobile 62%, Fixed 38%

EESTI: Mobile 48%, Fixed 47%

ELISA: Mobile at 57% and Fixed at 43%

EESTI: Mobile at 63% and 34% at Fixed

60%

80%

100%

60%

80%

100%

20%

40%

60%

20%

40%

60%

TELIASONERA TELE2 ELISA EESTI-20%

0%

TELIASONERA TELE2 ELISA EESTI-40%

-20%

0%

Other 964 869 -49 18Fixe 4346 591 615 187Mobile 4707 2366 919 191

TELIASONERA TELE2 ELISA EESTIOther 1327 -194 -4 3Fixe 522 -112 117 40Mobile 921 472 151 74

MOBILE SEGMENT: MARKET SHARES

Market Shares in 2007

Leading TeliaSonera: present in each market TELE2TELENOR

21

TRE 8 ELISA20

DNA 5OTHERS 2,5 OTHERS 5 OTHERS 3 OTHERS 8

Leading TeliaSonera: present in each market

Nordics: through its trademark

Baltics: as a shareholder

TELE225

TELE229

TELE246

21ELISA

50

a t cs as a s a e o deTELIASONERA

43TELIASONERA

40

TELIASONERA48

TELIASONERA46

Share of each market in Global Sales

SWEDEN FINLAND ESTONIA LATVIA

Nordics: the “cash cow region” for Tele2 and TeliaSonera. Elisa’s share in Finland: 50%

Together 3 Baltic countries represent 16% and 18% of total sales for TeliaSonera and Tele2

MOBILE SEGMENT: REVENUES

RevenuesGood global revenues for TeliaSonera and Tele2, but negative for ELISA

and EESTI

Net Sales Changes in Mobile Segment, 2008 vs 2007

20 0%

Region: the performance is lower than the global oneNordics: slight increase, no impact of the crisisBaltics: affected by the strong economic downturn -5,0%

0,0%5,0%

10,0%15,0%20,0%

Baltics: affected by the strong economic downturn

TeliaSonera about Baltics: weaker economic development affected equipment sales , th d li d d t th l i

TeliaSone

raTele2 ELIS

A

TeliaSone

raTele2

TeliaSone

ra

ELISA

TeliaSone

raTele2 Tele2 ELIS

AEES

TI

Global Sweden Finland Latvia Estonia

-20,0%-15,0%-10,0%

the revenue declined due to the lower prices and in case of Estonia, to lower interconnection fees.

Global Sweden Finland Latvia Estonia

Q4'08vsQ4'07 Chg 10,0% 14,9% -7,5% 5,0% 1,9% 1,0% -7,5% -1,0% 15,7% -6,7% -14,8% -8,7%FY08vsFY07 Chg 8,0% 15,4% -6,2% 3,0% 6,4% 1,0% -6,2% -1,0% 12,2% -3,2% -12,0% -5,7%

25%

Zoom on Non-voice revenues* of TeliaSonera

Increasing trend for the 4 markets: Finland: largest revenues

5%10%15%20%25%

Finland: largest revenues Sweden: largest growth Latvia: stableEstonia: lowest revenues

Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1

2008 2007Sweden 19% 17% 16% 17% 13% 13% 11% 11%Finland 21% 17% 18% 18% 17% 16% 15% 15%

0%

*SMS, MMS, mobile-data, content and other non-voice services

Finland 21% 17% 18% 18% 17% 16% 15% 15%Latvia 16% 15% 15% 16% 15% 15% 13% 15%Estonia 12% 11% 10% 11% 10% 8% 8% 8%

MOBILE SEGMENT: PROFITS

EBITDAEBITDA

Global EBITDA changes: “+” TeliaSonera,Tele2,EESTI, “-” ELISATeliaSonera higher sales and improved cost efficiencyElisa effect of interconnection fees changes Telia ELIS Telia Telia ELIS Telia Tele ELIS EES

‐40,0%‐30,0%‐20,0%‐10,0%0,0%10,0%20,0%30,0%40,0%

g

Region: general opposite, declining trend (Q4’08!)Nordics: “+” the highest: +7%Baltics: “-”, the lowest: -12,5%

Sonera

Tele2 ELISA Sone

raTele2 Sone

ra

ELISA Sone

ra

Tele 2 Tele2 ELIS

AEESTI

GLOBAL Sweden Finland Latvia Estonia

CHG Q4'08 vs Q4'07 24,2% 19,4% -1,8% -5,7% 34,4% 4,5% -1,4% 0,6% -33,3%-11,1%15,5%

CHG FY'08 vs FY'07 10,1% 22,2%-11,0% 2,5% 1,8% 6,9% -2,9% -5,5% -12,5%-4,3% 2,8% 1,9%

EBITDA margins

Gl b l i h i i t d i FY’08Global margins have an increasing tendency in FY’08Region:

higher than the global marginssometimes the opposite, declining trend

Customers

Global high increase in subscriptions 6000Global high increase in subscriptionsTele2 +14%, TeliaSonera +10%, ELISA +8%

Nordics: similar trend at +8%+11% Baltics: lighter increases +2%+5% in Estonia, +4% to -1,4% in Latvia

T li S th i th B lti t i i d l l 0100020003000400050006000

TeliaSonera: usage growth in the Baltic countries remained largely unaffected by the weaker economic development.

TeliaSonera Tele2 TeliaS

onera ELISA TeliaSonera Tele2 Tele2 ELISA EESTI

Sweden Finland Latvia Estonia

FY 2008 5334 3358 2676 2541 1056 1106 502 337 779FY 2007 4807 3099 2449 2334 1015 1122 492 322 765

0

MOBILE SEGMENT: REVENUE & PROFITS PER CUSTOMER

ARPU

Lower than global ARPU in the 4 markets (except Tele2). 25,0

30,0

35,0

As predicted by the analysts, the ARPU had-a declining trend with the amplitude of +2% -7%

except Tele2 Latvia-an adjusting tendency to move towards EUR 20 5,0

10,0

15,0

20,0

an adjusting tendency to move towards EUR 20

Other observations:the lowest global ARPU at Tele2Tele2 Latvia: the only ARPU +19% (in EUR)

TeliaSone

ra

Tele 2

ELISA

TeliaSone

raTele2

TeliaSone

ra

ELISA

TeliaSone

ra

Tele 2 Tele2 ELIS

AEES

TI

GLOBAL Sweden Finland Latvia Estonia

FY 2008 26 4 11 0 26 6 20 1 18 6 29 9 15 1 20 1 13 6 16 8 24 5 25 2

0,0

y ( )ELISA Estonia: the strongest decrease at -16%TeliaSonera Finland: the highest ARPU despite lowest prices

FY 2008 26,4 11,0 26,6 20,1 18,6 29,9 15,1 20,1 13,6 16,8 24,5 25,2FY 2007 28,1 11,4 30,7 20,7 18,1 30,8 17,5 20,1 11,4 16,9 29,2 27,2

140

EBITDA per customer

Global trends:ELISA: the biggest loss (-18%) but the highest profit (EUR 92)

20406080

100120140

Tele2: best performance (+12%) but the weakest profit (EUR 32)

The Region performs better than the global averageexcept ELISA Finland

TeliaSoner

aTele2 ELIS

A

TeliaSoner

aTele2

TeliaSoner

a

ELISA

TeliaSoner

a

Tele 2 Tele2 ELIS

AEEST

I

GLOBAL Sweden Finland Latvia Estonia

FY 2008 88 32 92 90 76 111 58 104 56 64 110 116

020

TeliaSonera: the leader with the highest profits in each marketEUR90 in Sweden - EUR116 in Estonia

* Figures are translated into EUR for Tele2, TeliaSonera reporting in SEK, average exchange rates SEK/EUR used are for FY 2008: 9,67, for FY 2007: 9,24

FY 2008 88 32 92 90 76 111 58 104 56 64 110 116FY 2007 83 29 113 93 78 109 65 109 61 65 112 116

POSITIONING IN SWEDEN

MARKET POSITION

Swedes switch from Fixed to Mobile servicesBoth companies gained shares due to higher mobile data

TELIASONERA FY'08TELIASONER

A FY'0714000

16000

Sales, Number of the customers, EBITDA as the size of balls

TeliaSonera: maintained its leading position Customers +11%, Sales +3,3%, EBITDA +2,5%

Tele2 is evolving fasterCustomer base +8 4% Sales +6 4% EBITDA +2% TELE2 8000

10000

12000

thds

SE

K

Customer base +8,4%, Sales +6,4%, EBITDA +2%

PROFITABILITY PER CUSTOMER

FY'08

TELE2 FY'07

4000

6000

8000

Sal

es, i

n t

Declined profitability: subscriptions grew faster than the global revenuesSmaller distance: leading TeliaSonera approached Tele2’s

TeliaSonera - significant losses: ARPU -7%, EBITDA/customer -8% Tele2 slight loss in ARPU and significant loss in profit : ARPU 2%

0

2000

0 1000 2000 3000 4000 5000 6000 7000

Number of the customers

Tele2 - slight loss in ARPU and significant loss in profit : ARPU - 2%, EBITDA/customer -6%.

STRATEGY

Tele2 FY'07

70

80

90

100

stom

er, i

n S

EK

STRATEGY

Continued investments into 4G networks + capacities

TeliaSonera: network development (4G in Stockholm); efficiency plan (-1900 jobs)

TeliaSonera FY'08Tele2

FY'08

TeliaSonera FY'07

30

40

50

60

y E

BIT

DA

per

cus

Tele2: x2 CAPEX to EUR 87 mln

Normal market development, no signs of the crisis0

10

20

180,0 190,0 200,0 210,0 220,0 230,0M

onth

ly

ARPU, in SEK

POSITIONING IN FINLAND

Sales Number of the customers EBITDA as the size of balls

MARKET POSITION

Regulatory interventions offset the sales gained by higher subscriptions and usage of mobile data

Sales, Number of the customers, EBITDA as the size of balls

TELIASONERA FY'07

TELIASONERA FY'08

1000

1200

URob e data

A big move in subscriptions acquisition, almost equal customer bases

TeliaSonera: strengthened Customers +9%, Sales +6%, EBITDA +12%

ELISA FY'07 ELISA

FY'08600

800

Sal

es,

in th

ds E

ELISA: weakenedCustomer base +9%, Sales -6%, EBITDA -3% due to reduced interconnection

fees and equipment sales

PROFITABILITY PER CUSTOMER200

400

Number of the customersPROFITABILITY PER CUSTOMER

Improved for TeliaSonera and highly reduced for ELISA

TeliaSonera : ARPU -3%, EBITDA/customer +2,3%

0

2200 2300 2400 2500 2600 2700 2800

Number of the customers

T li S12

ELISA : ARPU - 14%, EBITDA/customer -11% due to increased subscriptions, lower interconnection fees from other operators.

STRATEGYTeliaSonera FY'07

TeliaSonera FY'08

8

10

ser,

in E

UR

STRATEGY

Continued investments into network by both players

TeliaSonera: continued investments

ra FY'07

ELISA FY'08

ELISA FY'07

2

4

6

hly

EB

ITD

A p

er u

s

ELISA: CAPEX +13% in FY’08, +17% in Q4’08 => 3G network + new services to re-gain the market position in 2009

Normal market development except declined equipment sales for ELISA0

2

0,0 10,0 20,0 30,0 40,0M

onth

ARPU, in EUR

POSITIONING IN ESTONIA

Sales Number of the customers EBITDA as the size of balls

MARKET POSITION

Challenging market conditions due to weakened economic situation (Q4’08!) : consumer behavior, regulations, lower equipment sales, price pressure

Decreased revenues an opposite to the global companies’ trend

Sales, Number of the customers, EBITDA as the size of balls

EESTI FY'07

250

300

RDecreased revenues, an opposite to the global companies trendMaintained positions regarding to each other Slightly gained customers

EESTI: leader, maintained (3G iPhone)Customers +2%, Sales -6% (-9% Q4’08), EBITDA +2%

EESTI FY'08

ELISA FY'07 TELE2 FY'08**

150

200

es,

in th

ds E

UR

Tele2 : price leader, maintainedCustomers +2%, Sales -3% (-11% Q4’08), EBITDA -4%

ELISA: weakenedCustomers +5%, Sales -12%(-15% Q4’08) (interc. fees), EBITDA +3%

ELISA FY'08

TELE2 FY'07

50

100 Sal

e

( ) ( )

PROFITABILITY PER CUSTOMER

Revenues per subscriber decreased except Tele2, profits stood almost unchanged:

00 200 400 600 800 1000

Number of the customers, thds

EESTI FY'08

EESTI FY'07

12p p p g

EESTI: ARPU -7%, unchanged EBITDA/customerTele2: price leader & high-value segments ARPU -1% & EBITDA/customerELISA: ARPU -16%, EBITDA/customer -2%

ELISA

FY 08

Tele2 FY'07 ELISA

FY'07

FY 07

8

10

user

,EU

R

STRATEGY

EESTI: CAPEX -13% (EUR 48 mln), new 3G in big cities, 2G improvementTele2 : CAPEX +79% (EUR 19 mln), focus on business segment ELISA: CAPEX +26% (EUR 15 mln) to re gain the market share focus on prepaid products

Tele2 FY'08

FY'08 FY'07

4

6

thly

EB

ITD

A p

er u

ELISA: CAPEX +26% (EUR 15 mln), to re-gain the market share, focus on prepaid products, business segment and mobile data.

Impacted by the crisis 0

2

0,0 10,0 20,0 30,0 40,0M

ont

ARPU, in EUR

POSITIONING IN LATVIA

Sales Number of the customers EBITDA as the size of ballsMARKET POSITION

Violent crisis, challenging economic conditions (Q4’08!)Fierce price competitionBoth actors approached each other

TELIASONERA FY'07

TELIASONERA FY'08

3000

3500

Sales, Number of the customers, EBITDA as the size of balls

Both actors approached each other

TeliaSonera: leader in sales (iPhone 3G), improvedCustomers +4%, Sales – 1% (FY’08, Q4’08) due to fierce competition, lower

terminal sales, EBITDA -5,5% despite lower costs

TELE2 FY'08

1500

2000

2500

s SEK

Tele2 : leader in number of customers, improvedAggressive strategy by increased marketing activities => high-value ARPU customers

Customers – 1,4%, Sales +12% (FY’08), +16% (Q4’08), EBITDA -12,5%TELE2 FY'07

500

1000

Sales  in

 thd

Number of the customers

PROFITABILITY PER CUSTOMER

Reduced distance

TeliaSonera - higher profitability per customer: + 41% sales +83% profit

0

980 1000 1020 1040 1060 1080 1100 1120 1140

TeliaSonera FY'07

120,00

KTeliaSonera higher profitability per customer: 41% sales 83% profitARPU -5%, EBITDA/customer -9%

Tele2 is the only player to gain ARPU contrary market trendsARPU + 19% in EUR, +14% in SEK, EBITDA/customer -11%

TeliaSoneFY'08

ra FY 07

Tele2 FY'07

80,00

100,00

per u

ser,

In S

EK

STRATEGY

Tele 2: CAPEX +64% (EUR 21 mln) in FY’08, x2 in Q4’ 08 (EUR 6 mln). The recession as an opportunity: price-sensitive customers, business segment, state companies

TeliaSonera: no info

ra FY'08

Tele2 FY'08

20 00

40,00

60,00

Mon

thly

EB

ITD

A

Impacted by the crisis0,00

20,00

0,0 50,0 100,0 150,0 200,0 250,0 300,0

ARPU, in SEK

FINANCIAL STRUCTURE – SHORT TERM

IMF about companies’ financial health worldwide : the crisis deteriorated balance sheetsliquidity

Current Ratio: deteriorated for 3 companiesEESTI: in a very safe positiony pTele2: at the highest risk

Operating Cash Flow Ratio: all companies, except TeliaSonera, improved their operating cycles

EESTI: the strongestTele2: improved but still at riskTele2: improved but still at riskELISA: improved the results

Current ratio + OCFCurrent ratio + OCF

TeliaSonera, Tele2 and EESTI: Investing and Financing activities helped improve the liquidity situationELISA: its positive Operations’ results offset by other activities

FINANCIAL STRUCTURE – LONG TERM

IMF b t i ’ fi i l h lth ld idIMF about companies’ financial health worldwideSubprime crisis 2007: Equity/Assets, Debt/EquitySept. 2008: risks of defaults

Equity RatioTeliaSonera, ELISA -5%: less resources for developmentTele2: +5% freer using more EquityEESTI: good cushion, stable since 2006

Gearing•High gearing => vulnerability: the products cover higher costs of loans, obligation to pay regardless bad sales

ELISA: the riskiest, 20% of its business in EstoniaTele2: low but strengthened since 2006EESTI: the strongest, a perfect cushion

Return on Assets : high ROA = more money earned on less investment.

Tele2: +5% Equity -1% Debt => best evolution of the ROA but still the lowest

ROA -1% but different efforts for the 3 companies:

ELISA: -5% Equity +22% Debt => good performance, must have struggled T li S 5% E it 5% D bt > fitTeliaSonera: -5% Equity -5% Debt => no more profitEESTI: stable Equity +5% Debt => no more profit, best Assets performance

FINANCIAL STRUCTURE – ZOOM TELE2 IN THE REGION

A t ffi i 40 0%Assets efficiency

Low group’s global average EBIT/Assets at 6%25 0%

30,0%

35,0%

40,0%

Region: much better performance (Latvia)

Sweden: stood unchanged10 0%

15,0%

20,0%

25,0%

Baltics: significant deterioration due to the crisis

Latvia: reduced by 2 in 2008 2008 2007 2008 2007 2008 2007 2008 2007

Total global Sweden Estonia Latvia

0,0%

5,0%

10,0%

Mobile segment performs better than Mobile + Fixed

Total global Sweden Estonia LatviaTotal EBIT/Assets 6,0% 2,7% 12,1% 11,9% 16,0% 21,1% 18,0% 34,3%Mobile EBIT/Assets 10% 8% 15% 14% 15% 21% 23% 34%

Mobile segment performs better than Mobile + Fixed

GLOBAL VISION - INVESTMENTS

Analysts: keep investing into the core business in spite of the crisis

CAPEX in 2008TeliaSonera, Tele2: +22%, +14%, ,ELISA, EESTI -11%, -13%

CAPEX/Sales in 200811%-15% of Sales in generalchanged by 1% for all players in 2008changed by 1% for all players in 2008

GLOBAL VISION OF THE FINANCIAL HEALTH

Resemblance of the players by majority of the indicatorsResemblance of the players by majority of the indicatorsChanges

EBITDA margin by 1% for all actorsGearing in 3 cases

Equity/Assets by 5% in 2 cases ROA, ROE in 3 cases, in 1

Position of each companyEESTI: strongest performer- lower costs, improved margins, high profitability but deteriorated gearing + decreased CAPEX

TeliaSonera: good position but too high costs and gearinghigh profitability but deteriorated gearing + decreased CAPEX

Tele2: fastest evolution, the highest but decreased costs, lowest but improved EBITDA margin, the 2nd low gearing

ELISA: the riskiest position due to a very high gearing ratio but ROA, ROE, Costs/Sales are good

Year 2008

91%93%72%

86%60%

80%

100%EQUITY/ ASSETS

GEARINGCOSTS TO SALES97%

71%

86%

40%

60%

80%

100%EQUITY/ ASSETS

GEARINGCOSTS TO SALES

Year 2007

34%

9%

43%

9%-20%

29%12%

15%

-20%

0%

20%

40%

ROACAPEX TO SALES

28%

-4%

48%71%

10%

72%

-25% 30%14%

15%

-40%

-20%

0%

20%

40%

ROACAPEX TO SALES

33%38%

23%

ROEINCOME/ SALES

-4% 10%

35%37%

24%

ROEINCOME/ SALES

EBIDTA Margin

TELIASONERA TELE2 ELISA EESTI

EBIDTA Margin

TELIASONERA TELE2 ELISA EESTI

RESPONSE OF THE MARKETS – SHARES’ PERFORMANCE

Stock markets: -20–60% of value in June-Dec. 2008

R Wood Analysis Mason: “However many of the major operators’ stocks have substantially outperformed theR. Wood, Analysis Mason: However, many of the major operators stocks have substantially outperformed the national indices.”

shares’ performance of the 4: similar to the market indices3 companies: performed better than their local indices3 companies: performed better than their local indices

TELE2 EESTIWorse performance than one of the market

index: Nov.2008Today: 20% of difference with OMXT

RESPONSE OF THE MARKETS – PRICES & EARNINGS/ SHARE

Price changes*, last quarter Earning per Share*, 2006-2011

Annual results => the markets reactionEESTI: +19% ELISA: -11%

Tele2: from -8 SEK to 9 SEKTeliaSonera, ELISA: unchanged EESTI : earnings to weaken in 2009ELISA: 11%

Tele2, TeliaSonera: slight changeEESTI : earnings to weaken in 2009

30,0

0,0

10,0

20,0

15

-30,0

-20,0

-10,0

0

5

10

1 month last quarter 1 yearTeliaSonera, SEK -1,0 1,8 -26,9

-50,0

-40,0

2006 2007 2008 2009 2010 2011TeliaSonera 3,78 3,94 4,23 4,23 4,45 4,65

-10

-5

* in reported currencies

Tele2, SEK 2,5 0,7 -44,8Elisa, EUR -7,3 -10,7 -29,3EESTI, EEK 4,2 18,9 -35,3

Tele2 -8,14 -3,75 5,44 7,4 8,59 9,21Elisa 0,97 1,38 1,12 1,12 1,19 1,24EESTI 9,49 10,91 10,4 9,34 9,86 10,25

CONCLUSION

Strong crisis in Baltic countries, more stable situation in Nordics

Latvia has a potential for ICT development => the economy re-launch

Nordic Mobile markets: no impact of the crisis, normal market development

Baltic Mobile markets: affected by the crisisBaltic Mobile markets: affected by the crisis

The performance of Tele2 and TeliaSonera: unaffected by the crisis in the Baltics

EESTI is the best performer, weakened ELISA’s position

Strong global financial stamina but weakened in 2008.

“Telecom is a good business to be in.”Telecom is a good business to be in.Lars Nyberg, CEO of TeliaSonera

Announcement of Q3 2008 Results

“Operators that focus on how to shape their telecoms businesses to emerge stronger from the recession will be the next decade's great companies.”

Rupert Wood, Analysis Mason