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TeliaSonera AB (0H6X)

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Tuesday 13 February, 2007

TeliaSonera AB

TeliaSonera January-December 2006

TeliaSonera January-December 2006





TeliaSonera reports record earnings in 2006



Full year

·  Net sales increased 3.9 percent to SEK 91,060 million (87,661).
·  EBITDA, excluding non-recurring items, reached SEK 32,266 million
(29,411) and the margin improved to 35.4 percent (33.6).
·  Operating income, excluding non-recurring items, increased to SEK
26,751 million (20,107).
·  Net income increased to SEK 19,283 million (13,694) and earnings per
share rose 48 percent to SEK 3.78 (2.56). Net income was impacted by
positive one-off items amounting to approximately SEK 1.7 billion. Net
income was record high, even excluding these one-off items.
·  Free cash flow increased to SEK 16,596 million (15,594).
·  Strong subscription growth with 1.5 million new subscriptions in the
majority-owned operations and 14.4 million new subscriptions in the
associated companies.
·  Total proposed dividend of SEK 6.30 per share (3.50), including
ordinary and extraordinary dividends, equaling a total of SEK 28,290
million (15,717).


Fourth quarter

·  Net sales increased 1.4 percent to SEK 23,187 million (22,876) driven
by strong revenue growth in International Mobile and acquisitions in the
home markets. In local currencies net sales increased 3.9 percent.
·  EBITDA, excluding non-recurring items, increased to SEK 7,766 million
(7,098) and the margin improved to 33.5 percent (31.0).
·  Operating income, excluding non-recurring items, increased to SEK
6,504 million (4,890).
·  Net income totaled SEK 4,538 million (3,342) and earnings per share
rose 48 percent to SEK 0.90 (0.61).
·  Free cash flow was SEK 2,865 million (3,191).


Financial Highlights



SEK in                                            Jan-Dec        Jan-Dec
millions,                                            2006           2005
except per          Oct-Dec        Oct-Dec
share data             2006           2005
Net sales            23,187         22,876         91,060         87,661
EBITDA1)
excl. non-
recurring
items2)               7,766          7,098         32,266         29,411
Operating
income                6,190          4,022         25,489         17,549
Operating
income excl.
non-recurring
items                 6,504          4,890         26,751         20,107
Net income            4,538          3,342         19,283         13,694
of which
attributable
to
shareholders
of the parent
company               4,029          2,734         16,987         11,697
Earnings per
share (SEK)            0.90           0.61           3.78           2.56

1) Please refer to page 25 for definitions.
2) Non-recurring items; see table on page 30.




Comments from Anders Igel, President and CEO


"This is our best ever year financially, clearly showing our ability to
perform in a demanding market. There is more potential in the group to
improve longer term."



Business focus for profitable growth


TeliaSonera introduced as of January 1, 2007, a new organization
comprising of four business areas. The format will capture the strong
growth within mobility and broadband services as well as managed
services for enterprises and in addition the high growth in the eastern
markets. The new organization is aimed at improving business focus and
reducing complexity in order to boost profitable growth and increase
speed of implementation. Customers will still meet one company.
Converged and combined services, and content services will be offered.

The new focus is aimed at stimulating growth through clear
responsibilities. Services will be developed closer to customers,
competence across borders and units will be utilized more effectively
and migration to new services will be speeded-up. Efficiency is improved
by focusing on cross-border synergies in the international business
areas, through faster and easier decision making, the separation of
process and IT-support between mass market services and high value
enterprise services as well as clearer target setting and benchmarking.

TeliaSonera's focus will be on developing the operations in the home
markets, developing the investment in Spain and creating value related
to the eastern positions.



Outlook 2007


Group net sales are expected to continue to grow, reaching the target of
approximately SEK 100 billion in two years with maintained good
profitability.

Net income for 2007 is estimated to be somewhat higher than in 2006,
excluding the positive one-off items of approximately SEK 1.7 billion in
2006.

CAPEX-to-sales ratio is expected to grow due to increased investments in
broadband and mobile capacity.



Review of the Group, Full Year 2006


Net sales increased 3.9 percent to a record high of SEK 91,060 million
(87,661). The net effect of acquisitions and divestitures affected sales
positively by 1.7 percent and there was no net effect from exchange rate
changes. Organic growth was 2.2 percent.

In mobile communications, net sales increased in Eurasia (34 percent),
Norway (19 percent), the Baltics (9 percent) and Denmark (5 percent).
Growth in Norway was positively affected by acquisitions. In Sweden,
volume growth was strong, but net sales decreased 1 percent due to lower
prices. In Finland, total net sales decreased 6 percent. After excluding
the effects from Saunalahti's withdrawal from TeliaSonera's network, net
sales in Finland decreased 1 percent.

In fixed communications, demand for broadband services remained strong
in all TeliaSonera's markets. The acquisitions of NextGenTel in Norway
and MicroLink in Estonia affected sales positively. Still, net sales
decreased, mainly due to the migration to mobile and IP based services,
which particularly affected sales in Sweden.

The number of subscriptions increased almost 20 percent, bringing the
total number of subscriptions in TeliaSonera's majority-owned operations
at the end of the year to 30.2 million and 65.9 million in the
associated companies.

EBITDA, excluding non-recurring items, increased to SEK 32,266 million
(29,411) as net sales rose and the margin improved to 35.4 percent
(33.6). The margin improvement was especially due to higher margins in
Sweden, Finland and Denmark.

Operating income, excluding non-recurring items, increased 33 percent to
SEK 26,751 million (20,107) due to improvements in all profit centers,
except in Spain, where TeliaSonera launched its commercial mobile
offerings in December 2006.

In the majority-owned operations, operating income increased 25 percent
to SEK 21,076 million (16,858), with the strongest improvement in
Finland, followed by Eurasia, Denmark and Norway. The increase includes
SEK 900 million from adjusted depreciation schedules, mainly in Sweden
and Finland.

A SEK 389 million release of a reserve related to historical
interconnect fees in Sweden affected operating income positively in the
fourth quarter of 2006. The release follows a ruling by the Swedish
Administrative Court of Appeal on February 8, 2007, in favor of a
reduction of the historical interconnect fees that Tele2 had demanded
from TeliaSonera.

Income from associated companies increased 73 percent to SEK 5,579
million (3,229). Income from MegaFon increased to SEK 2,780 million
(1,176). The improvement includes SEK 340 million in gains from exchange
rates and divestments, and revaluations of loans in 2005. Turkcell
continued its positive operational trend and, despite a depreciation of
the Turkish lira against the Swedish krona, TeliaSonera's income from
Turkcell rose to SEK 2,020 million (1,761). Additionally, the divestment
of the mobile operator MTN Uganda had a positive effect of SEK 562
million.

Non-recurring items affecting operating income totaled SEK -1,262
million (-2,558), and were related mainly to restructuring in Sweden and
Finland. Non-recurring items in 2006 were positively impacted by a SEK
500 million reversal of a provision related to the settlement of a
dispute regarding a potential co-location site in London (West Ferry
Road).

Financial items totaled SEK -263 million (-530) and were positively
impacted by a non-recurring capital gain of SEK 183 million (nil) from
the sale of shares in Elisa Corporation.

Income taxes increased to SEK -5,943 million (-3,325). The effective tax
rate increased to 23.6 percent (19.5). The increase is mainly due to the
expiration of the tax holiday in Kazakhstan.

Net income attributable to shareholders of the parent company increased
45 percent, or SEK 5,290 million, to SEK 16,987 million and earnings per
share increased 48 percent to SEK 3.78 (2.56).

CAPEX decreased to SEK 11,101 million (11,583) and the CAPEX-to-sales
ratio decreased to 12.2 percent (13.2). CAPEX decreased in all the
Nordic markets, especially within fixed communications in Sweden and
mobile communications in Finland. In the Baltics and Eurasia CAPEX
increased and, due to the commercial launch of Yoigo in December,
investments were made for the build-out of a network in Spain.

Free cash flow increased to SEK 16,596 million (15,594) mainly due to
improved EBITDA and increased dividends from the associated companies.
The improvement was limited mainly by an increase in working capital,
higher cash payments out of restructuring provisions and higher cash
payments for pensions.

Net debt increased to SEK 14,957 million (8,373) primarily due to
acquisitions.

The equity/assets ratio decreased to 49.9 percent (58.9).


Acquisitions

TeliaSonera was active during the year and paid a total of SEK 3.3
billion net cash in acquisitions. The largest transactions were:

·  Accessing the Spanish mobile market by acquiring the majority of
Xfera (consolidated as of June 14, 2006) for a net of SEK 617 million.
TeliaSonera increased its ownership to 76.6 from 16.6 percent.
Telia­Sonera also assumed additional debt of SEK 3.8 billion through the
consolidation of Xfera.

·  Expanding into the Norwegian broadband market by acquiring NextGenTel
(consolidated as of June 1, 2006) for a purchase price of SEK 2,338
million. NextGenTel is a strategic acquisition, strengthening our
position in the home markets. Our intention is to exploit the competence
and operations of NextGenTel when driving growth in other countries.


Significant events after the period

·  On January 31, 2007, TeliaSonera signed a share purchase agreement to
acquire 100 percent of debitel Danmark A/S in Denmark. The purchase
price, on a debt free basis, may at most reach approximately SEK 1,270
million, of which TeliaSonera will pay SEK 860 million in cash at
closing. The remaining purchase price is capped at SEK 410 million and
is dependent on the development during the next six months. In addition
to the stand alone valuation, the transaction is based on transferring
debitel's traffic from other mobile networks into Telia Denmark's mobile
network. Closing of the transaction is subject to approval from the
Danish Competition Authority.

·  On January 26, 2007, TeliaSonera announced that an arbitration
tribunal of the International Chamber of Commerce had issued an award
finding that a binding share purchase agreement was concluded between
TeliaSonera and Cukurova in 2005, calling for Cukurova to sell all the
remaining shares in Turkcell Holding to TeliaSonera. The award results
from an arbitration proceeding in Geneva that TeliaSonera commenced in
May 2005 against Cukurova after Cukurova withdrew from the transaction.
TeliaSonera hopes to conclude the transaction with Cukurova but, even if
the share purchase agreement is binding, TeliaSonera does not yet know
if Cukurova is willing, or able, to proceed with a transfer of the
shares to TeliaSonera.

·  On January 26, 2007, TeliaSonera closed the acquisition of 98.8
percent of Cygate for a cash consideration of SEK 639 million. The
acquisition strengthens TeliaSonera in the managed services market,
primarily in Sweden.


Review of the fourth quarter

Net sales increased 1.4 percent to SEK 23,187 million (22,876). The net
effect of acquisitions and divestitures affected sales positively by 1.7
percent, while changes in exchange rates had a negative impact of 2.5
percent. Organic growth was 2.2 percent.

In mobile communications, net sales increased in Eurasia (17 percent),
the Baltics (10 percent), Norway (2 percent), and Finland (1 percent).
In Sweden, volumes continued to grow strongly, but net sales decreased 1
percent due to lower prices. Sales in Denmark decreased 13 percent due
primarily to lower terminal sales and currency development.

In fixed communications, the demand for broadband services was strong
and sales of broadband increased in all markets. Net sales were
positively affected by the acquisitions of NextGenTel in Norway and
MicroLink in Estonia. Despite the acquisitions and positive development
within broadband, fixed communications net sales decreased, mainly due
to lower fixed voice sales in Sweden.

EBITDA, excluding non-recurring items, increased to SEK 7,766 million
(7,098) as a result of higher net sales and the margin improved to 33.5
percent (31.0).

Operating income, excluding non-recurring items, increased 33 percent to
SEK 6,504 million (4,890) due to improvements in most of the operations.

In the majority-owned businesses, operating income increased 27 percent
to SEK 4,959 million (3,897). The improvement includes SEK 220 million
from adjusted depreciation schedules, mainly in Sweden and Finland.
Additionally, a SEK 389 million release of a reserve related to
historical interconnect fees in Sweden affected operating income
positively.

Income from associated companies increased 57 percent to SEK 1,555
million (992). Income from MegaFon increased by SEK 503 million, of
which SEK 265 million is due to gains from exchange rates and
divestments, and a negative revaluation of loans in 2005.

Non-recurring items affecting operating income totaled SEK -314 million
(-868) and were related mainly to restructuring in Sweden, Finland and
Denmark. Non-recurring items in the fourth quarter of 2006 were
positively impacted by a SEK 500 million reversal of a provision related
to the settlement of a dispute regarding a potential co-location site in
London (West Ferry Road).

Financial items totaled SEK -90 million (-145).

Income taxes increased to SEK -1,562 million (-535) and the effective
tax rate increased to 25.6 percent (13.8). The increase in the tax rate
was mainly due to the expiration of the tax holiday in Kazakhstan and a
low tax rate in the comparative period due to the revaluation of certain
deferred tax assets at the end of 2005. The increase in the effective
tax rate was also due to a decrease of net deferred tax assets in Spain
following enacted income-tax rate cuts.

Net income attributable to shareholders of the parent company increased
47 percent to SEK 4,029 million (2,734) and earnings per share increased
to SEK 0.90 (0.61).

CAPEX increased to SEK 3,688 million (3,091) and the CAPEX-to-sales
ratio rose to 15.9 percent (13.5) primarily due to the timing of
investments between the quarters.

Free cash flow decreased slightly to SEK 2,865 million (3,191) mainly
due to higher CAPEX and higher cash tax payments, despite the higher
EBITDA and a larger decrease in working capital.

Net debt amounted to SEK 14,957 million, a decrease of SEK 3,759 million
during the quarter due to positive cash flow generation.


TeliaSonera Share

The TeliaSonera share is listed on the Stockholm Stock Exchange and the
Helsinki Stock Exchange. The share's settlement price on the Stockholm
Stock Exchange increased more than 30 percent in 2006, from SEK 42.70 to
SEK 56.25. The highest share price was SEK 58.25 (43.40) and the lowest
was SEK 37.90 (35.50).

The number of shareholders decreased from 745,172 to 691,106. The
Swedish state's holding is 45.3 percent of the capital and the Finnish
state's is 13.7 percent. Holdings outside Sweden and Finland increased
from 12.8 percent to 16.7 percent. At year-end, Swedish private
investors owned 3.2 percent (3.2) and Finnish private investors 2.2
percent (2.2). Swedish institutional investors owned 15.9 percent (19.7)
of the share capital and Finnish institutional investors owned 3.0
percent (3.2).


Ordinary dividend and capital distribution to shareholders

For 2006, the Board of Directors proposes to the Annual General Meeting
(AGM) an ordinary dividend of SEK 1.80 (1.25) per share, totaling SEK
8.1 billion. In light of the strong results in 2006, the proposed
ordinary dividend is in the upper range of the dividend policy's 30-50
percent interval of net income attributable to shareholders of the
parent company.

In addition to the ordinary annual dividend, the Board of Directors
proposes an annual additional distribution to shareholders. The
additional distribution will be reviewed annually taking into
consideration cash flow and its projections as well as investment plans.
Based on the current assessment, the additional distributions would be
on the same level as the current distribution of approximately SEK 10
billion. Accordingly, for 2006, the Board of Directors has decided to
propose to the AGM an extraordinary dividend of SEK 2.25 per share
(2.25), totaling SEK 10.1 billion.

On top of this, the Board of Directors, in view of the strong
development during the year 2006, proposes to the AGM an additional
extraordinary dividend for 2006 of SEK 2.25 per share, totaling SEK 10.1
billion.

The Board of Directors proposes that the final day for trading in shares
entitling shareholders to ordinary and extraordinary dividends be set
for April 24, 2007, and that the first day of trading in shares
excluding rights to ordinary and extraordinary dividends be set for
April 25, 2007. The recommended record date at VPC for the right to
receive ordinary and extraordinary dividends will be April 27, 2007. If
the AGM votes to approve the Board's proposals, ordinary and
extraordinary dividends are expected to be distributed by VPC on May 3,
2007.


New board members elected in January 2007


TeliaSonera's Nomination Committee informed TeliaSonera in December
2006, that it had finalized its work regarding nominations for the Board
of Directors. As the proposed changes in the composition of the Board of
Directors were substantial, the shareholders represented in the
Nomination Committee requested TeliaSonera's Board of Directors to call
an extraordinary shareholders meeting to elect new board members.

The Extraordinary General Meeting (EGM) of TeliaSonera AB (publ) was
held on January 17, 2007, and the EGM decided to elect the following
persons as new members to the Board of Directors: Maija-Liisa Friman,
Conny Karlsson, Lars G Nordström and Jon Risfelt.

The General Meeting decided to relieve the following Board members of
their duties: Carl Bennet, Eva Liljeblom, Lennart Låftman, Lars-Erik
Nilsson and Sven-Christer Nilsson.

The General Meeting decided that the number of Board members elected by
the General Meeting be seven without deputy members.

Caroline Sundewall, Timo Peltola and Tom von Weymarn will continue as
Board members. Tom von Weymarn will continue as the Chairman of the
Board.


Annual General Meeting 2007


The Annual General Meeting (AGM) will be held on April 24, 2007, at 5
p.m. Swedish time at Stockholmsmässan in Älvsjö, Stockholm. Notice of
the meeting will be posted on TeliaSonera's website,
www.teliasonera.com, and advertised in the newspapers at the end of
March 2007. The record date entitling shareholders to attend the meeting
will be April 18, 2007. Shareholders may file notice of intent to attend
the AGM from March 26, 2007. TeliaSonera must receive notice of
attendance no later than 4 p.m. Swedish time on April 18, 2007.

A Finnish shareholders' information meeting will be arranged on April
25, 2007, at 4 p.m. Finnish time at Finlandia House, Helsinki. Finnish
shareholders will have the possibility to meet in person representatives
from management and the Board. Shareholders may file notice of intent to
attend the Finnish shareholders' information meeting from March 26,
2007. TeliaSonera must receive notice of attendance no later than April
16, 2007. More information about how to file a notice of intent to
attend the meeting will be given in connection with similar information
about the AGM.



Full year profitability maintained in Sweden



Full year

·  The migration to IP-based services accelerated and usage of mobile
services based on 3G and WLAN increased. By concentrating new offerings
to mobile and IP based services, TeliaSonera maintained its market
position despite increased competition and changing market conditions.
The mobile market was characterized by strong price pressure and a focus
on flat rate offerings. Broadband prices remained fairly stable as
competitors focused on offering more bandwidth at the same prices.


Mobile communications

·  Strong volume growth - both in outgoing traffic, which rose 20
percent, and the use of mobile data services - nearly offset price
erosion of slightly more than 20 percent. Net sales decreased 1 percent.

·  The number of mobile subscriptions rose by 216,000 to 4,603,000.

·  Postpaid churn remained unchanged at 11 percent.

·  Volume growth and positive restructuring effects had a positive
effect on EBITDA and almost compensated for lower price levels,
increased sales costs and increased costs for the purchase of capacity
from the associated company Svenska UMTS-nät AB. The release of a
reserve related to historical interconnect fees affected EBITDA
positively by SEK 79 million in the fourth quarter. The EBITDA margin
remained unchanged.

·  CAPEX-to-sales ratio remained unchanged and during the year
Telia­Sonera continued investments in EDGE and the roll-out of the GSM
network, thereby extending its geographic reach to 90 percent. Svenska
UMTS-nät has invested SEK 4.1 billion in the 3G infrastructure in Sweden
so far and has fulfilled the license conditions set by the regulator
PTS.


Fixed communications

·  Despite strong growth within broadband, net sales decreased 6
percent. The number of broadband subscriptions increased by 29 percent,
or 205,000, to 922,000, which compensated for the decline in all other
areas except fixed voice. Fixed voice sales decreased due to the decline
in fixed voice traffic, a lower number of subscriptions and price
pressure.

·  Positive effects from the ongoing restructuring program and a SEK 310
million release of a reserve in the fourth quarter more than compensated
for the decrease in fixed voice sales and the EBITDA margin increased.

·  Despite increased investments in broadband, CAPEX decreased year on
year mainly due to lower investments in the circuit-switched telephony
network and in the transport network.


SEK in                                            Jan-Dec        Jan-Dec
millions,                                            2006           2005
except
margins, ARPU
and no. of           Oct-Dec       Oct-Dec
subscriptions           2006          2005
Net sales              9,359         9,739         37,003         38,710
EBITDA excl.
non-recurring
items                  3,668         3,635         14,829         15,183
Margin (%)              39.2          37.3           40.1           39.2
Operating
income                 2,188         1,575          9,987          8,302
Operating
income excl.
non-recurring
items                  2,816         2,558         11,242         10,803
Mobile
communications
Net sales              3,010         3,027         11,974         12,104
EBITDA excl.
non-recurring
items                  1,276         1,216          5,033          5,081
Margin (%)              42.4          40.2           42.0           42.0
CAPEX                    316           137            800            787
ARPU (SEK)               203           210            204            213
Number of
subscriptions,
end of period
(thousands)            4,603         4,387          4,603          4,387
Fixed
communications
Net sales              6,349         6,712         25,029         26,606
EBITDA excl.
non-recurring
items                  2,392         2,419          9,796         10,102
Margin (%)              37.7          36.0           39.1           38.0
CAPEX                  1,001           900          2,765          3,260
Number of
subscriptions,
end of period
(thousands):
Retail excl.
broadband              5,211         5,758          5,211          5,758
Broadband                922           717            922            717
Wholesale PSTN
subscriptions          1,002           858          1,002            858
Wholesale
copper access,
LLUB                     520           374            520            374



Effects from the ongoing restructuring program

·  The restructuring program in Sweden is expected to reduce annual
gross costs by SEK 4-5 billion as of 2008 compared to the cost level of
2004. The changes are expected to result in a reduction of approximately
3,000 employees. The restructuring costs are estimated at around SEK 5
billion to be reported as non-recurring items.

·  The effect of cost savings in 2006 is approximately SEK 2,280 million
(800), of which about SEK 630 million (400) in the fourth quarter. A
large portion was related to fixed communications. The restructuring
measures implemented to date are estimated to give an annual gross
savings effect of approximately SEK 2.8 billion as of 2007.

·  Since the introduction of the program in the beginning of 2005, the
cumulative non-recurring expenses for the restructuring totaled SEK
3,765 million (2,509), of which redundancy provisions were SEK 2,895
million (1,837) and SEK 870 million (672) were impairment charges for
the network and costs for surplus office space. In the fourth quarter,
an additional early retirement offer was given to employees born in 1947
or earlier and non-recurring expenses totaled SEK 628 million (986).

·  Since the introduction of the program in the beginning of 2005, 1,209
employees have accepted the offer for early retirement and 468 employees
have been transferred to the re-deployment unit. Of these, 1,516 have
left the company. In addition, hired personnel have decreased by
approximately 670.

·  The responsibility for the ongoing restructuring program in Sweden is
divided between the respective new business areas launched on January 1,
2007.


Fourth quarter

·  Packaged solutions dominated the market for offers, and business
customers became an increasingly important target group. Efforts were
stepped up to make 3G the dominant solution. Broadband competition
intensified locally. Consolidation in the market continued. Mobile and
broadband offerings dominated the Christmas campaigns. TeliaSonera's
successful sales drives resulted in a strong finish for the year.
TeliaSonera maintained its market position.


Mobile communications

·  Due to a higher number of subscriptions and increased usage, net
sales remained stable, despite price erosion of almost 25 percent year
on year. Price pressure remained particularly strong in the segment for
small and medium-sized businesses.

·  Successful Christmas campaigns generated the highest quarterly
subscription intake in two years. The number of subscriptions rose by
99,000 to 4,603,000, escalating towards the end of the year.

·  Postpaid churn decreased to 11 percent (12).

·  The number of traffic minutes per subscription rose 14 percent to 167
minutes, but ARPU decreased 3 percent to SEK 203 due to lower prices.

·  The EBITDA margin was under pressure from higher costs for customer
intake and costs for the purchase of capacity from Svenska UMTS-nät AB,
which totaled SEK 120 million (80). However, a release of a reserve
related to historical interconnect fees affected EBITDA positively and
the margin rose to 42.4 percent.


Fixed communications

·  Net sales continued to decrease as migration accelerated and led to a
lower number of voice subscriptions, decreasing traffic volumes and
lower prices. A SEK 50 million provision related to historical
interconnect pricing also burdened sales.

·  Broadband subscription net growth was 60,000 during the quarter, the
highest quarterly increase in the year.

·  During the quarter, the number of fixed voice retail subscriptions
decreased by 108,000, of which the vast majority migrated to mobile
only, or VoIP, solutions, and only 12,000 transferred to wholesale.

·  In addition to lower net sales, the EBITDA margin was negatively
impacted by a lower year-on-year net effect from restructuring compared
to the previous quarters. Increased customer acquisition costs and
higher maintenance costs caused by stormy weather also had a negative
impact on EBITDA. However, the EBITDA margin rose to 37.7 percent,
positively affected by a SEK 310 million release of a reserve related to
historical interconnect fees.



Turnaround measures strongly improved
profitability in Finland



Full year

·  TeliaSonera's shift in focus to customer loyalty, quality and
services led to a stabilization of the entire Finnish telecommunications
market. Improved profitability at all major operators was the clearest
evidence of an ongoing market recovery. Prices stabilized and in some
cases average prices and ARPUs started to rise. In the mobile market,
the amount of ported numbers fell more than 60 percent, improving churn
levels at all mobile operators. In April, sales of bundled 3G packages
started and significantly increased the demand for 3G mobile phones.
Within broadband, double-digit market growth continued, although at a
more moderate pace than in 2005. TeliaSonera's turnaround strategy
resulted in rising net sales and strongly improved profitability in the
second half of the year. As anticipated, TeliaSonera's mobile market
share in terms of subscriptions decreased slightly.


Mobile communications

·  Total net sales decreased 6 percent. Excluding effects from
Saunalahti's withdrawal from TeliaSonera's network (SEK -470 million),
sales decreased 1 percent. Increased sales of new handsets and higher
average prices and ARPU over the year partly offset the effect of
inherited price erosion (SEK -200 million).

·  The number of subscriptions decreased by 100,000 to 2,407,000, mainly
because of the cancellation of new sales of Tele Finland's low price
subscriptions. Including subscriptions through service providers, the
total number of subscriptions was 2,420,000.

·  Postpaid churn declined to 18 percent (26).

·  EBITDA and EBITDA margin rose, as turnaround measures helped
compensate for Saunalahti's withdrawal. In 2005, among other things, a
settlement on historical mobile interconnect fees, together with the
takeover of the service provider ACN's customers, burdened earnings by
SEK 460 million.

·  CAPEX was almost halved due to increased purchasing efficiency and a
lower need for additional network capacity following Saunalahti's
withdrawal.


Fixed communications

·  Net sales increased 4 percent due to strong growth in equipment
sales. Around half of the growth was due to the consolidation of Data-
Info, an ICT solutions provider for enterprises. Sales of broadband and
managed IT services also rose, while sales of traditional data services
and fixed voice decreased.

·  The number of broadband subscriptions increased by nearly 20 percent,
or 62,000, to 412,000.

·  EBITDA rose 23 percent and EBITDA margin improved strongly due to the
successful execution of profitability enhancing measures, which have in
particular reduced subcontracting and personnel expenses.

·  CAPEX declined 12 percent as broadband growth continued at a high but
more moderate pace than in 2005. Investment focus was on building IP
networks and extending coverage of fiber access networks. TeliaSonera
has the most extensive fiber access network in Finland.


SEK in                                            Jan-Dec        Jan-Dec
millions,                                            2006           2005
except
margins, ARPU
and no. of           Oct-Dec       Oct-Dec
subscriptions           2006          2005
Net sales              4,348         4,233         16,744         17,002
EBITDA excl.
non-recurring
items                  1,089           775          4,326          3,641
Margin (%)              25.0          18.3           25.8           21.4
Operating
income                   359            -8          1,397            337
Operating
income excl.
non-recurring
items                    454            -6          1,781            448
Mobile
communications
Net sales              2,409         2,379          9,427          9,993
EBITDA excl.
non-recurring
items                    577           343          2,286          1,985
Margin (%)              24.0          14.4           24.2           19.9
CAPEX                    157           202            392            763
ARPU (EUR)              29.5          28.5           28.7           30.1
Number of
subscriptions,
end of period
(thousands)            2,407         2,507          2,407          2,507
Fixed
communications
Net sales              1,939         1,854          7,317          7,009
EBITDA excl.
non-recurring
items                    512           432          2,040          1,656
Margin (%)              26.4          23.3           27.9           23.6
CAPEX                    341           325          1,015          1,157
Number of
subscriptions,
end of period
(thousands)            1,033         1,073          1,033          1,073



Effects from the ongoing cost efficiency program

·  In addition to the SEK 1 billion gross cost savings program completed
in 2005, a turnaround program was initiated at the end of 2005 to secure
future growth and restore profitability. The program included cost
savings measures targeted at lowering annual gross cost levels by SEK 2
billion as of 2008 compared to the cost levels in 2005.

·  The turnaround measures implemented to date are expected to yield
annual cost savings of approximately SEK 1 billion (from the total SEK 2
billion) as of 2007. During 2006, the savings effect from the turnaround
program was approximately SEK 700 million (nil), of which about SEK 220
million in the fourth quarter. In addition, cost savings totaled SEK 1
billion (250 million) from the previous savings program, of which about
SEK 250 million (220) in the fourth quarter. More than half of the
savings affected mobile communications.

·  Since the introduction of the turnaround program, SEK 384 million
(nil) has been reported as non-recurring items, of which SEK 96 million
as impairment charges and SEK 138 million as expenses for the competence
pool. Thus far, 414 employees have been transferred to the competence
pool, of which 73 remained at the end of the quarter. In the fourth
quarter, non-recurring expenses for the turnaround program totaled SEK
95 million.

·  The responsibility for the ongoing turnaround program in Finland is
divided between the respective new business areas launched on January 1,
2007.


Fourth quarter

·  Demand was strong for bundled PC and broadband offerings. In
con­trast to the competition, TeliaSonera, in line with its strategy to
turn around the mobile market, chose not to offer any free air-time.
Telia­Sonera improved its service levels significantly by adding more
than 100 people to its customer service.


Mobile communications

·  Net sales increased 1 percent due to higher mobile handset sales and
new pricing models. In local currency, sales rose 5 percent.

·  The number of subscriptions decreased by 29,000 from the previous
quarter.

·  Postpaid churn improved slightly to 16 percent (17).

·  The number of traffic minutes per subscription rose 1 percent to 285
minutes, despite higher average prices. ARPU increased 4 percent to EUR
29.5.

·  EBITDA and EBITDA margin strongly improved due to turnaround
measures, including decreased customer acquisition costs and new
interconnect prices from July 1, 2006.


Fixed communications

·  Net sales increased 5 percent. In local currency, sales increased 8
percent. Main growth areas were equipment sales, managed IT services and
broadband. Around half of the growth was due to the consolidation of
Data-Info. A higher number of subscriptions and slightly higher ARPU
contributed to the growth in broadband. Sales of fixed voice and data
services continued to decline.

·  The number of broadband subscriptions increased by 17,000 from the
previous quarter.

·  EBITDA rose mainly due to a SEK 68 million gain from sales of old
receivables.



Record year in Norway



Full year

·  Competition in the Norwegian mobile and broadband market remained
intense. Mobile activities were focused on price segmentation and cost
reduction. Within mobile, TeliaSonera increased its market share in
terms of revenue. Broadband prices remained fairly stable as competitors
focused on offering more bandwidth at the same prices. NextGenTel
maintained its position as the second largest broadband provider in
Norway.


SEK in                                            Jan-Dec        Jan-Dec
millions,                                            2006           2005
except
margins, ARPU
and no. of           Oct-Dec       Oct-Dec
subscriptions           2006          2005
Net sales              2,366         2,096          9,432          7,481
EBITDA excl.
non-recurring
items                    928           704          3,427          2,614
Margin (%)              39.2          33.6           36.3           34.9
Operating
income                   666           486          2,425          1,682
Operating
income excl.
non-recurring
items                    666           485          2,425          1,803
Mobile
communications
Net sales              2,146         2,096          8,926          7,481
EBITDA excl.
non-recurring
items                    890           704          3,328          2,614
Margin (%)              41.5          33.6           37.3           34.9
CAPEX                    277           261            645            876
ARPU (NOK) *             368           353            368            338
Number of
subscriptions,
end of period
(thousands)            1,641         1,651          1,641          1,651
Fixed
communications
Net sales                220             -            506              -
EBITDA excl.
non-recurring
items                     38             -             99              -
Margin (%)              17.3             -           19.6              -
CAPEX                     37             -             84              -
Number of
subscriptions,
end of period
(thousands)              172             -            172              -

* Refers to NetCom


Mobile communications

·  Net sales rose 19 percent to SEK 8,926 million (7,481) due to the
acquisition of Chess (consolidated as of November 7, 2005), and higher
sales at NetCom. A changed customer mix, with a higher proportion of
postpaid subscriptions, and increased traffic contributed to the
positive sales development at NetCom. Lower interconnect fees
implemented as of July 1, 2006, impacted sales negatively.

·  NetCom's customer mix improved and the total number of postpaid
subscriptions in Norway increased by 83,000, while the number of prepaid
subscriptions decreased by 93,000. As a result, ARPU increased
significantly. Chess' main focus during the year was to move its
customers over to the NetCom network.


·  Postpaid churn declined to 15 percent (18).

·  EBITDA increased to SEK 3,328 million (2,614) due to higher sales and
synergy gains from the consolidation of Chess. Lower interconnect fees
impacted EBITDA negatively by approximately SEK 55 million.

·  CAPEX decreased year on year mainly due to large investments in UMTS
and EDGE in 2005.


Fixed communications

·  Net sales were SEK 506 million and the EBITDA margin was 20 percent
as a result of the acquisition of NextGenTel (consolidated as of June 1,
2006).

·  At year-end, NextGenTel had 172,000 subscriptions, of which 29,000
were VoIP subscriptions.


Fourth quarter

·  TeliaSonera was less active in the fourth quarter after its sales
campaigns had dominated the Norwegian market in the third quarter. At
the end of the quarter, the regulator NPT issued a draft decision on
mobile voice termination prices, suggesting symmetric prices between
Telenor and NetCom by July 1, 2008. NetCom questions the calculation
method and the rationale of the proposed change of the termination
prices. The auction of a fourth 3G license was cancelled due to lack of
willingness to pay for the license.


Mobile communications

·  Net sales increased 2 percent to SEK 2,146 million (2,096), mainly
due to the consolidation of Chess, increased traffic volumes and
improved customer mix. In local currency, net sales increased 11
percent. Lower interconnect fees impacted net sales negatively.

·  During the fourth quarter the number of subscriptions increased by
4,000. The number of postpaid subscriptions increased by 9,000 and the
number of prepaid subscriptions decreased by 5,000.

·  Postpaid churn increased to 19 percent (16).

·  EBITDA rose to SEK 890 million (704), and EBITDA margin improved to
42 percent (34), mainly due to higher sales, synergy gains from the
consolidation of Chess, and lower sales and marketing costs. Lower
interconnect fees impacted EBITDA negatively by approximately SEK 30
million.


Fixed communications

·  Net sales were SEK 220 million and EBITDA margin was 17 percent as a
result of the acquisition of NextGenTel.

·  During the quarter the number of broadband subscriptions increased by
4,000. The share of VoIP subscriptions increased 2 percentage points to
17 percent.




Strong earnings improvement in Denmark, driven by mobile communications



Full year

·  Prices in the Danish mobile market were stable and focus remained on
customer retention and customer loyalty. Mobile marketing activities
were focused on data services and content offerings, such as mobile
music shops. On the broadband market, prices stabilized gradually over
the year and the focus was on delivering more bandwidth at the same
prices. TeliaSonera maintained its position in the market.


SEK in                                            Jan-Dec        Jan-Dec
millions,                                            2006           2005
except
margins, ARPU
and no. of           Oct-Dec       Oct-Dec
subscriptions           2006          2005
Net sales              1,712         1,916          7,413          7,178
EBITDA excl.
non-recurring
items                    331           182          1,422            817
Margin (%)              19.3           9.5           19.2           11.4
Operating
income                    79            52            423           -174
Operating
income excl.
non-recurring
items                    124           -81            500           -277
Mobile
communications
Net sales              1,154         1,332          5,199          4,965
EBITDA excl.
non-recurring
items                    242            77            982            391
Margin (%)              21.0           5.8           18.9            7.9
CAPEX                    185           141            353            682
ARPU (DKK)               255           244            252            247
Number of
subscriptions,
end of period
(thousands)            1,123         1,154          1,123          1,154
Fixed
communications
Net sales                558           584          2,214          2,213
EBITDA excl.
non-recurring
items                     89           105            440            426
Margin (%)              15.9          18.0           19.9           19.2
CAPEX                     52            45            177            151
Number of
subscriptions,
end of period
(thousands)              537           550            537            550



Mobile communications

·  Net sales increased 5 percent to SEK 5,199 million (4,965) due to
higher ARPU and handset sales. Lower interconnect fees impacted net
sales negatively.

·  The number of subscriptions decreased by 31,000 to 1,123,000, mostly
due to a decline in the number of prepaid subscriptions as Te­liaSonera
continued focusing on high-value customers.

·  Postpaid churn remained unchanged at 33 percent.

·  EBITDA improved significantly to SEK 982 million (391) due to
increased net sales, synergy gains from the consolidation of Orange and
other efficiency gains. Lower interconnect fees affected EBITDA
negatively by approximately SEK 40 million. In 2005, EBITDA was burdened
by costs for the re-branding of Orange.

·  CAPEX declined. In 2005, CAPEX had been driven higher by investments
to increase network capacity.


Fixed communications

·  Net sales remained unchanged. Increased sales within broadband and
cable TV offset a continued decline in sales of traditional fixed
telephony.

·  EBITDA and EBITDA margin increased slightly due to efficiency gains,
mainly in the form of reduced administration costs.

·  CAPEX increased mainly due to the upgrade of the cable-TV and
broadband networks.


Fourth quarter

·  Prices remained stable and Christmas campaigns were focused on data
services and handset sales. TeliaSonera started its sales campaigns of
Telia HomeFree, a new service to support fixed to mobile migration. The
market position was maintained.


Mobile communications

·  Net sales decreased 13 percent primarily due to lower terminal sales
and exchange rate effects. Lower interconnect fees further burdened
sales. In local currency, net sales decreased 10 percent.

·  During the fourth quarter the total number of subscriptions increased
by 29,000. The number of postpaid subscriptions increased by 13,000 and
the number of prepaid subscriptions increased by 16,000.

·  Postpaid churn increased to 34 percent (27).

·  EBITDA improved substantially due to synergy gains from the
consolidation of Orange and other efficiency gains. Lower interconnect
fees affected EBITDA negatively by approximately SEK 10 million.


Fixed communications

·  Net sales decreased to SEK 558 million (584), mainly due to lower
fixed voice sales, but remained stable in local currency. Sales of
broadband and cable TV services increased 12 percent, or in local
currency 16 percent.

·  During the quarter the number of broadband subscriptions increased by
3,000 to a total of 162,000.

·  EBITDA and the EBITDA margin decreased slightly due to lower fixed
voice sales and slightly reduced margins in Stofa's cable TV business.


Further market adaptation and streamlining

·  During the year the Danish operation initiated further efficiency
measures in order to adapt the organization to the market. 65 employees
were laid off and annual cost savings of SEK 80 million are estimated as
of 2007. Restructuring costs of SEK 45 million were booked as a non-
recurring item in the fourth quarter.




Good development in the Baltics



Full year

·  Competition remained fierce in the mobile and broadband markets, with
new entrants increasing the pressure on prices. Mobile operators focused
on upgrading their 3G networks with HSDPA. Growth within broadband
continued, creating a growing demand for VoIP services, IP TV and triple
play services. TeliaSonera was very active within all growth areas and
maintained its market positions.


 SEK in                                           Jan-Dec        Jan-Dec
millions,                                            2006           2005
except margins
and no. of           Oct-Dec       Oct-Dec
subscriptions           2006          2005
Net sales              2,555         2,453          9,950          9,293
EBITDA excl.
non-recurring
items                  1,018           971          4,403          4,255
Margin (%)              39.8          39.6           44.3           45.8
Income from
associated
companies                 18            45            208            220
Operating
income                   612           432          2,781          2,303
Operating
income excl.
non-recurring
items                    612           432          2,781          2,303
Mobile
communications
Net sales              1,814         1,651          6,978          6,380
of which
Lithuania                604           605          2,412          2,302
of which
Latvia                   660           560          2,495          2,252
of which
Estonia                  550           486          2,071          1,826
EBITDA excl.
non-recurring
items                    693           608          2,953          2,799
Margin (%),
Lithuania               39.2          31.2           40.3           40.1
Margin (%),
Latvia                  38.9          43.2           47.5           49.4
Margin (%),
Estonia                 36.2          36.4           38.4           41.8
CAPEX                    279           214            753            667
Number of
subscriptions,
end of period
(thousands)            3,636         3,301          3,636          3,301
Fixed
communications
Net sales                928           959          3,661          3,500
of which
Lithuania                498           522          1,978          1,970
of which
Estonia                  430           437          1,683          1,530
EBITDA excl.
non-recurring
items                    331           367          1,468          1,473
Margin (%),
Lithuania               41.2          44.8           47.3           48.3
Margin (%),
Estonia                 29.3          30.4           31.7           34.1
CAPEX                    278           173            650            418
Number of
subscriptions,
end of period
(thousands)
in
subsidiaries           1,506         1,433          1,506          1,433
in associated
companies                720           692            720            692



Mobile communications

·  Net sales increased 9 percent to SEK 6,978 million (6,380) due to a
higher number of subscriptions in all three markets and increased
traffic per user in Latvia and Estonia. In Lithuania traffic per user
decreased slightly due to the high intake of new prepaid subscriptions.

·  The number of subscriptions rose in all markets by a total of 335,000
to 3,636,000.

·  Average Baltic postpaid churn increased to 14 percent (13).

·  EBITDA improved in all Baltic markets driven by higher net sales. The
EBITDA margin was maintained in Lithuania, but increased price pressure,
together with higher costs for sales and marketing, weakened the EBITDA
margin in Estonia and Latvia.

·  CAPEX increased in Lithuania and Estonia, mainly due to investments
in EDGE and UMTS/HSDPA. In Latvia, CAPEX decreased, mainly due to
reduced investments in 2G capacity and IT.


Fixed communications

·  Total net sales increased 5 percent to SEK 3,661 million (3,500),
partly due to the acquisition of MicroLink in Estonia. Higher broadband
net sales contributed to the rise and more than compensated for lower
fixed voice sales.

·  In Estonia and Lithuania, the number of broadband subscriptions rose
more than 50 percent to 322,000. The number of fixed voice subscriptions
decreased 2 percent to 1,166,000.

·  The weakened EBITDA margin in Estonia is mainly due to the expansion
into the managed services market. Increased sales of low margin
products, including computers, to support the underlying business also
weighed on the margin. In Lithuania, the slightly lower margin is
explained by increased costs for sales and marketing and costs related
to re-branding.

·  TeliaSonera's income from the associated company Lattelecom, in
Latvia, was SEK 208 million (220).

·  CAPEX increased due to the expansion of broadband in all markets and
the build-out of digital terrestrial television in Lithuania.


Fourth quarter

·  The market was characterized by high activity, including Christmas
campaigns. Competition and price pressure remained intense. Telia­Sonera
maintained its market positions.


Mobile communications

·  Net sales increased 10 percent to SEK 1,814 million (1,651) due to a
higher number of subscriptions in all three markets and increased
traffic per user. In local currency, net sales as a weighted average of
the three markets rose 14 percent.

·  During the quarter the number of subscriptions increased by 78,000 to
3,636,000.

·  Average Baltic postpaid churn increased to 15 percent (14).

·  EBITDA improved in all three markets due to higher net sales and
increased profitability in Lithuania. The changes in EBITDA margins were
mainly driven by the development of sales and marketing costs.



Fixed communications

·  Net sales decreased 3 percent. In Estonia, net sales increased 2
percent in local currency, driven by strong demand in the business
segment. In Lithuania net sales decreased 1 percent in local currency
due to the sale of Comliet. Excluding the effect from divestments, sales
in Lithuania rose 5 percent in local currency.

·  The number of broadband subscriptions continued to grow and during
the quarter increased by 39,000 to 322,000. The number of fixed voice
subscriptions increased by 6,000 to 1,166,000.

·  The weakened EBITDA margin was mainly due to increased costs for
sales and marketing, and higher sales of low margin products.

·  TeliaSonera's income from associated company Lattelecom decreased to
SEK 18 million (45) due to a change in deferred tax items related to
fair value adjustments recorded in the TeliaSonera merger.

·  CAPEX increased mainly due to the expansion of broadband and hotspots
in all Baltic markets and the introduction of digital terrestrial
television in Lithuania.



Successful launch in Spain - customer intake
exceeding expectations


·  After a record short period of time following the closing of
TeliaSonera's acquisition of Xfera in June 2006, Xfera launched its
Spanish operation under the brand Yoigo on December 1.


SEK in                                            Jan-Dec        Jan-Dec
millions,                                            2006           2005
except number
of                   Oct-Dec       Oct-Dec
subscriptions           2006          2005
Mobile
communications
Net sales                  5             -              5              -
EBITDA excl.
non-recurring
items                   -247             -           -337              -
CAPEX                     43             -            181              -
Number of
subscriptions,
end of period
(thousands)               24             -             24              -


·  The Yoigo offering, based on easy to use services with transparent
and attractive pricing, has been very well received in Spain. At the end
of the year, the number of subscriptions had reached 24,000, out of a
total of 34,000 orders received after only one month of operation.

·  EBITDA was SEK -247 million. Costs were mainly for the market launch,
network and new customer intake. In December costs for brand awareness
campaigns in connection with the commercial launch totaled SEK 90
million.

·  The Xfera operation is based on a flexible and cost efficient
organization. Major functions such as network roll-out and maintenance,
customer care, sales and logistics are outsourced.




Record year in International Mobile with continued strong growth and
profitability



SEK in                                            Jan-Dec        Jan-Dec
millions,                                            2006           2005
except margins
and number of        Oct-Dec       Oct-Dec
subscriptions           2006          2005
Net sales              2,289         1,950          8,508          6,367
of which
Kazakhstan             1,251         1,101          4,803          3,509
of which
Azerbaijan               688           557          2,453          1,902
of which
Georgia                  268           219            945            719
of which
Moldova                   85            75            317            243
EBITDA excl.
non-recurring
items                  1,212         1,072          4,787          3,519
Margin (%),
total                   52.9          55.0           56.3           55.3
Margin (%),
Kazakhstan              55.6          60.4           57.8           55.8
Margin (%),
Azerbaijan              52.3          60.9           61.4           63.2
Margin (%),
Georgia                 51.9          44.7           47.9           46.6
Margin (%),
Moldova                 44.7          44.0           44.2           52.3
Income from
associated
companies              1,478           845          4,800          2,937
of which
Russia                   786           283          2,780          1,176
of which
Turkey                   692           562          2,020          1,761
Operating
income                 2,416         1,698          8,557          5,692
Operating
income excl.
non-recurring
items                  2,416         1,698          8,557          5,692
CAPEX                    472           563          2,699          2,449
Number of
subscriptions,
end of period
(thousands)
Eurasia                7,352         6,146          7,352          6,146
Russia                29,749        22,836         29,749         22,836
Turkey                30,800        26,700         30,800         26,700
Ukraine                4,620         1,205          4,620          1,205



Full year



Eurasia

·  Net sales increased 34 percent due to strong subscription growth and
higher ARPU.

·  The number of subscriptions rose by 20 percent, or 1.2 million, to
7.4 million. In Kazakhstan, the subscription growth was slowed by the
requirement to register prepaid subscriptions. The registration by the
customers was completed at the end of the third quarter and a total of
725,000 prepaid subscriptions were deactivated.

·  EBITDA rose 34 percent, mainly due to higher net sales and the
EBITDA margin increased.

·  CAPEX remained high in order to maintain high network and service
quality as well as coverage leadership in the region. TeliaSonera's
first 3G roll-out in the region is ongoing in Georgia. The commercial
launch took place in December.

·  All four Fintur companies are dividend payers and during 2006 the
companies paid a total of approximately SEK 1,400 million in dividends,
of which approximately SEK 660 million to minority shareholders. In
addition, SEK 350 million in extraordinary dividends were declared in
December 2006 and paid in January 2007, of which approximately SEK 172
million to minority shareholders.


Russia

·  The Russian mobile market continued to show strong volume and revenue
growth. The total market grew by 26 million to 152 million
subscriptions. Mobile SIM card penetration rose from 87 to 105 percent.
After several years of decline, prices leveled out during the year and
ARPU improved. MegaFon strengthened its market position in terms of
revenue among the three main operators, from 26 to 29 percent. In
Moscow, MegaFon improved its market share of subscriptions from 14 to 19
percent. The Calling Party Pays (CPP) regulatory regime was introduced
in July. The 3G license procedure was announced in December.

·  MegaFon (associated company, 43.8 percent holding) reported strong
sales and earnings growth and TeliaSonera's income from Russia rose 136
percent to SEK 2,780 million (1,176). SEK 340 million of the improvement
is due to gains from exchange rates and divestments, and a negative
revaluation of loans in 2005.

·  The number of subscriptions increased by 6.9 million to 29.7 million
subscriptions. Growth was strongest in Moscow, where the number of
subscriptions increased by 56 percent, or 1.8 million, to 5.0 million.

·  MegaFon paid no dividend to its shareholders (nil). The cash
generated from operations was invested to expand the business.


Turkey

·  The Turkish mobile market continued to expand and the number of
subscriptions grew by 9 million to over 51 million. Mobile SIM card
penetration rose from 57 to 69 percent (reported with a one-quarter lag,
year on year).

·  In Turkey, Turkcell's (associated company, 37.3 percent holding,
reported with a one-quarter lag) subscriptions increased by 4.1 million
to 30.8 million. In Ukraine, the number of subscriptions increased by
3.4 million to 4.6 million.

·  Despite a depreciation of the Turkish lira against the Swedish krona,
TeliaSonera's income from Turkcell rose to SEK 2,020 million (1,761) due
to a higher number of subscriptions and increased usage.

·  During 2006, TeliaSonera received SEK 1,501 million (175) in
dividends from Turkcell and Turkcell Holding (which owns 51 percent of
Turkcell and is jointly owned by TeliaSonera and Cukurova Holding).


Fourth quarter



Eurasia

·  Net sales increased 17 percent. In local currency, net sales rose 25
percent. The number of subscriptions rose by nearly 0.5 million to 7.4
million. Subscription growth was particularly strong in Kazakhstan,
following the completion of the registration process of prepaid
subscriptions and successful sales and marketing activities.

·  EBITDA increased 9 percent, driven by higher net sales. The EBITDA
margin decreased due to costs for increased sales and marketing
activities that had been postponed from previous quarters in Kazakhstan
and Azerbaijan.

·  CAPEX decreased, partly due to the postponement of certain
investments.


Russia

·  MegaFon succeeded well during the fourth quarter and took 30 percent
of the Russian subscription growth. In Moscow, MegaFon took 38 percent
of the growth.

·  MegaFon showed continued strong sales and earnings growth.
Telia­Sonera's fourth quarter income from Russia rose to SEK 786 million
(283). The increase includes SEK 92 million in gains from exchange rates
and the PeterStar divestment by Telecominvest. In 2005, income was
negatively affected by SEK 173 million from revaluations of loans.

·  MegaFon's subscriptions increased by 1.6 million in the fourth
quarter.


Turkey

·  In Turkey, the number of subscriptions rose by 1.0 million during the
quarter (reported with a one-quarter lag). In Ukraine, the number of
subscriptions increased by 0.7 million.

·  TeliaSonera's income from Turkcell rose 23 percent to SEK 692 million
(562) due to continued strong growth in usage and the number of
subscriptions. A depreciation of 16 percent of the Turkish lira against
the Swedish krona affected TeliaSonera's income from Turkcell
negatively.



Other operations *)



SEK in              Oct-Dec        Oct-Dec        Jan-Dec        Jan-Dec
millions               2006           2005           2006           2005
Net sales             1,278          1,216          4,826          4,575
EBITDA excl.
non-recurring
items                   -63            -48              7            151
Income from
associated
companies                17             84            694             84
Operating
income                  401            -25          1,046            171
Operating
income excl.
non-recurring
items                  -114            -14            498             73
CAPEX                   170             96            394            247

*) Include TeliaSonera Holding and TeliaSonera International Carrier

·  Net sales increased mainly due to increased voice sales in the
carrier operations.

·  Income from associated companies in 2006 was affected by a SEK 562
million gain from the sale of MTN Uganda that was booked in the third
quarter by TeliaSonera's associated company Overseas Telecom.

·  Operating income was positively affected by the reversal of
provisions related to integration and restructuring in the carrier
operations. For the full year the effect was SEK 101 million, of which
SEK 61 million in the fourth quarter.

·  Non-recurring items in the fourth quarter of 2006 were positively
impacted by a SEK 500 million reversal of a provision related to the
settlement of a dispute regarding a potential co-location site in London
(West Ferry Road).

·  CAPEX increased due to expansion of the carrier operations into new
regions and markets.


Stockholm, February 13, 2007


Anders Igel
President and CEO


Each year, TeliaSonera's auditors review the interim reports for the
first three quarters. Accordingly, this report has not been subject to
review by the auditors.









Financial Information

More details on the new reporting structure and restated comparable
figures, following the new organization introduced on January 1, 2007,
will be published well in advance of the Interim Report January-March
2007.

Interim Report January-March 2007                           April 24,
2007
Annual General Meeting, Stockholm                           April 24,
2007
Shareholders' information meeting, Helsinki           April 25, 2007
Interim Report January-June 2007                             July 27,
2007
Interim Report January-September 2007                  October 26, 2007
Year-end Report January-December 2007               February 13, 2008








Questions regarding content in the
reports:
                                   Ordering of individual hard copies of
TeliaSonera AB                     the reports:
Investor Relations
SE-106 63 Stockholm, Sweden        Tel. +46 372 851 42
Tel. +46 8 504 550 00              Fax +46 372 843 56
Fax +46 8 611 46 42                www.teliasonera.com/ir
www.teliasonera.com/ir










Definitions

EBITDA: Earnings Before Interest, Tax, Depreciation and Amortization.
Equals operating income before depreciation, amortization and impairment
losses and before income from associated companies.

ARPU: Average monthly revenue per user.

Churn: The number of postpaid subscribers that have left the company
expressed as a percentage of the average number of postpaid subscribers.

PSTN: Public Switched Telephone Network.

LLUB: Local Loop Unbundling.

HSDPA: High Speed Downlink Packet Access.






Condensed Consolidated Income Statements



SEK in                                            Jan-Dec        Jan-Dec
millions,                                            2006           2005
except per
share data
and number of       Oct-Dec        Oct-Dec
shares                 2006           2005
Net sales            23,187         22,876         91,060         87,661
Costs of
production          -13,269        -12,933        -48,640        -47,287
Gross income          9,918          9,943         42,420         40,374
Selling,
admin., and
R&D expenses         -5,634         -6,277        -22,367        -23,706
Other
operating
revenues and
expenses, net           351           -636           -143         -2,348
Income from
associated
companies             1,555            992          5,579          3,229
Operating
income                6,190          4,022         25,489         17,549
Net financial
revenues and
expenses                -90           -145           -263           -530
Income after
financial
items                 6,100          3,877         25,226         17,019
Income taxes         -1,562           -535         -5,943         -3,325
Net income            4,538          3,342         19,283         13,694
Attributable
to:
Shareholders
of the parent
co.                   4,029          2,734         16,987         11,697
Minority
interests in
subsidiaries            509            608          2,296          1,997

Shareholders'
basic and
diluted
earnings per
share (SEK)            0.90           0.61           3.78           2.56
Number of
shares
(thousands)
Outstanding
at period-end     4,490,457      4,490,457      4,490,457      4,490,457
Weighted
average,
basic and
diluted           4,490,457      4,490,457      4,490,457      4,573,986
Number of
treasury
shares
(thousands)
At period-end             -        184,775              -        184,775
Weighted
average                   -        184,775        125,546        101,246

EBITDA                7,455          6,744         31,113         27,508
EBITDA excl.
non-recurring
items                 7,766          7,098         32,266         29,411
Depreciation,
amortization
and
impairment
losses               -2,820         -3,714        -11,203        -13,188
Operating
income excl.
non-recurring
items                 6,504          4,890         26,751         20,107





Condensed Consolidated Balance Sheets



                                        Dec 31,                  Dec 31,
SEK in millions                            2006                     2005
Assets
Goodwill and other
intangible assets                        74,172                   74,367
Property, plant and
equipment                                48,195                   48,201
Investments in
associates, deferred
tax assets and
other financial assets                   41,826                   40,526
Total non-current
assets                                  164,193                  163,094
Inventories                                 997                      765
Trade receivables,
current tax receivables
and
other receivables                        20,631                   20,489
Interest-bearing
receivables                               1,958                    2,407
Cash and cash
equivalents                              11,603                   16,834
Total current assets                     35,189                   40,495
Non-current assets
held-for-sale                                10                      186
Total assets                            199,392                  203,775

Equity and liabilities
Shareholders' equity                    119,217                  127,049
Minority interests                        8,500                    8,645
Total equity                            127,717                  135,694
Long-term borrowings                     24,311                   20,520
Deferred tax
liabilities, other
long-term provisions                     14,635                   14,948
Other long-term
liabilities                               2,382                    2,343
Total non-current
liabilities                              41,328                   37,811
Short-term borrowings                     3,418                    6,215
Trade payables, current
tax payables, short-
term
provisions and other
current liabilities                      26,929                   24,055
Total current
liabilities                              30,347                   30,270
Total equity and
liabilities                             199,392                  203,775





Condensed Consolidated Cash Flow Statements



SEK in              Oct-Dec        Oct-Dec        Jan-Dec        Jan-Dec
millions               2006           2005           2006           2005
Cash flow
before change
in working
capital               4,575          5,424         28,034         26,158
Change in
working
capital               1,881            795           -533            832
Cash flow
from
operating
activities            6,456          6,219         27,501         26,990
Intangible
and tangible
fixed assets
acquired
(cash CAPEX)         -3,591         -3,028        -10,905        -11,396
Free cash
flow                  2,865          3,191         16,596         15,594
Cash flow
from other
investing
activities              599         -3,068         -2,179           -840
Total cash
flow from
investing
activities           -2,992         -6,096        -13,084        -12,236
Cash flow
before
financing
activities            3,464            123         14,417         14,754
Cash flow
from
financing
activities              524           -421        -19,382        -15,653
Cash flow for
the period            3,988           -298         -4,965           -899

Cash and cash
equivalents,
opening
balance               7,834         16,936         16,834         17,245
Cash flow for
the period            3,988           -298         -4,965           -899
Exchange rate
differences            -219            196           -266            488
Cash and cash
equivalents,
closing
balance              11,603         16,834         11,603         16,834





Condensed Consolidated Statements of Changes in Equity



                      Jan-Dec 2006                    Jan-Dec 2005
SEK in       Shareholders'  Minority   Total Shareholders'  Minority   Total
millions            equity interests  equity        equity interests  equity
Opening
balance            127,049     8,645 135,694       121,133     6,934 128,067
Business
combinations            25         -      25             -         -       -
Reporting
financial
instruments
at fair
value                  -25         -     -25            46         -      46
Currency
translation
differences         -8,955      -608  -9,563         8,809       732   9,541
Inflation
adjustments           -147         -    -147         1,177         -   1,177
Transactions
with
minority
shareholders
in
subsidiaries             -      -215    -215             -       -12     -12
Net income
recognized
directly in
equity              -9,102      -823  -9,925        10,032       720  10,752
Net income          16,987     2,296  19,283        11,697     1,997  13,694
Total
recognized
net income           7,885     1,473   9,358        21,729     2,717  24,446
Dividend           -15,717    -1,618 -17,335        -5,610    -1,006  -6,616
Treasury
shares                   -         -       -       -10,203         - -10,203
Closing
balance            119,217     8,500 127,717       127,049     8,645 135,694




Basis for Preparation


General. As in the annual accounts for 2005, TeliaSonera's consolidated
financial statements as of and for the year ended December 31, 2006,
have been prepared in accordance with International Financial Reporting
Standards (IFRS) and, given the nature of TeliaSonera's transactions,
with IFRSs as adopted by the European Union. The parent company
TeliaSonera AB's financial statements have been prepared in accordance
with the Swedish Annual Accounts Act and the Swedish Financial
Accounting Standards Council's standard RR 32 "Accounting for Legal
Entities" and statements issued by its Emerging Issues Task Force. This
report has been prepared in accordance with IAS 34 "Interim Financial
Reporting."

New accounting standards (not yet adopted by the EU). IFRS 8 "Operating
Segments" (applies to annual financial statements for periods beginning
on or after January 1, 2009, with earlier application permitted), was
issued on November 30, 2006, as part of the joint project with the US
FASB to reduce differences between IFRSs and US GAAP. IFRS 8 replaces
IAS 14 "Segment Reporting" and is aligned with the requirements of FAS
131. IFRS 8 requires an entity to report financial and descriptive
information about its reportable segments. Reportable segments are
operating segments or aggregations of operating segments that meet
specified criteria. Operating segments are components of an entity about
which separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. TeliaSonera has decided
to adopt IFRS 8 in 2007.

IFRIC 11 "IFRS 2 - Group and Treasury Share Transactions" (effective for
annual periods beginning on or after March 1, 2007, with earlier
application permitted) was issued on November 2, 2006. IFRIC 11
addresses how to apply IFRS 2 "Share-based Payment" to share-based
payment arrangements involving an entity's own equity instruments or
equity instruments of another entity in the same group (e.g. equity
instruments of its parent). IFRIC 11 is currently not relevant to
TeliaSonera.

IFRIC 12 "Service Concession Arrangements" (effective for annual periods
beginning on or after January 1, 2008) was issued on November 30, 2006.
IFRIC 12 addresses how service concession operators should apply
existing IFRSs to account for the obligations they undertake and rights
they receive in service concession arrangements. IFRIC 12 is not
relevant to TeliaSonera.

For further information, see corresponding sections in the Q2 2006
Interim Report and in the 2005 Annual Report.



Non-Recurring Items



SEK in               Oct-Dec       Oct-Dec        Jan-Dec        Jan-Dec
millions                2006          2005           2006           2005
Within EBITDA           -311          -354         -1,153         -1,903
Restructuring
charges,
synergy
implementation
costs, etc.:
Sweden                  -628          -577         -1,255         -2,095
Finland                 -105            -1           -288           -111
Denmark                  -45            92            -77             62
International
Carrier                   44           134             77            216
Other                    416            -9            383            -36
Capital gains:
Telia Finans               7             7              7             61
Within
Depreciation,
amortization
and impairment
losses                   -13          -514            -13           -636
Impairment
losses,
accelerated
depreciation:
Sweden                     -          -405              -           -405
Norway                     -             1              -           -121
Denmark                    -            40              -             40
International
Carrier                  -13          -150            -13           -150
Within Income
from
associates                10             -            -96            -19
Impairment
losses,
capital gains/
losses,
provisions and
other:
Finland                   10             -            -96              -
Infonet
Services                   -             -              -            -19
Within
Financial net              -             -            183              -
Capital gains:
Elisa                      -             -            183              -
Total                   -314          -868         -1,079         -2,558




Deferred Taxes



                                        Dec 31,                  Dec 31,
SEK in millions                            2006                     2005
Deferred tax assets                      12,054                   12,305
Deferred tax
liabilities                             -10,121                   -9,578
Net deferred tax assets
(+)/liabilities (-)                       1,933                    2,727




Related Party Transactions


MegaFon. As of December 31, 2006, TeliaSonera had interest-bearing
claims on its associated company OAO MegaFon of SEK 321 million.

Telefos. As of December 31, 2006, TeliaSonera had interest-bearing
claims of SEK 101 million on its associated company Telefos AB. In the
three-month period and the year ended December 31, 2006, TeliaSonera
purchased services and products from Telefos worth SEK 643 million and
SEK 1,812 million, respectively, mostly referring to network
construction.

Svenska UMTS-nät. In the year ended December 31, 2006, TeliaSonera
purchased services from its associated company Svenska UMTS-nät AB worth
SEK 505 million and sold services worth SEK 158 million.



Acquisition of Cygate


On November 16, 2006, TeliaSonera announced an agreement to acquire a
majority stake in Cygate Group AB. After obtaining relevant regulatory
approval closing took place on January 26, 2007. TeliaSonera acquired
98.76 percent of the shares for a cash consideration of SEK 639 million.

Cygate is a leading supplier of secure and managed IP network solutions
as well as system integration in the Nordic market. The acquisition
underlines TeliaSonera's strategic direction to strengthen its position
within managed services.

The transaction is a strategic acquisition providing TeliaSonera with
broader competence within business solution sales, technology and
project management. Cygate provides solutions within networking,
security and IP telephony and services within support, maintenance and
IT management. Cygate, which has strong brand recognition in the market,
will operate as a separate business within TeliaSonera.

Cygate is expected to generate 2006 net sales of approximately SEK 805
million. Total assets as of September 30, 2006 were SEK 327 million.
Work on the purchase price allocation has started. To some extent the
cost of combination will be allocated to certain identifiable intangible
assets (e.g. trade names), but will mainly be recognized as goodwill.
The results of the Cygate operations are included in the consolidated
financial statements as of February 1, 2007.




Investments



SEK in               Oct-Dec       Oct-Dec        Jan-Dec        Jan-Dec
millions                2006          2005           2006           2005
CAPEX                  3,688         3,091         11,101         11,583
Intangible
assets                   357           488          1,152          1,233
Property,
plant and
equipment              3,331         2,603          9,949         10,350
Acquisitions
and other
investments              111         2,630          3,951          2,732
Asset
retirement
obligations               64           194             67            194
Goodwill and
fair value
adjustments               46         2,408          3,778          2,466
Shares and
participations             1            28            106             72
Total                  3,799         5,721         15,052         14,315




Net Debt



                                       Dec 31,                  Dec 31,
SEK in millions                           2006                     2005
Long-term and short-
term borrowings                         27,729                   26,735
Less short-term
investments, cash and
bank                                   -12,772                  -18,362
Net debt                                14,957                    8,373




Loan Financing and Credit Rating


Cash-flow generation was positive during 2006, but substantial dividend
pay-outs in May led to some refinancing need. During the year financing
activities have been focused on issuance in Swedish kronor and overall
the terms have been relatively attractive, even though public
discussions relating to the ownership structure in TeliaSonera AB led to
a deterioration of the funding conditions during the latter part of
2006.

In the fourth quarter Moody's changed the Outlook on its TeliaSonera AB
A2/P-1 credit rating from Stable to Negative.

During the year, a bond originally issued by the acquired company
NextGenTel in Norway was prepaid in full. Furthermore, the remaining
Eurobond maturing in April 2009, originally issued by TeliaSonera
Finland Oyj (former Sonera Oyj), changed its listing from the London
Stock Exchange's Gilt-Edged and Fixed Interest Market to the
Professional Securities Market.

Financing needs are expected to increase rather substantially in 2007,
primarily due to extraordinary dividends that are expected to be paid in
the spring.




Financial Key Ratios



                                        Dec 31,                  Dec 31,
                                           2006                     2005
Return on equity (%,
rolling 12 months)                         17.2                     10.3
Return on capital
employed (%, rolling 12
months)                                    19.5                     12.6
Equity/assets ratio (%)                    49.9                     58.9
Net debt/equity ratio
(%)                                        15.0                      7.0
Shareholders' equity
per share (SEK)                           26.55                    28.29




Collateral Pledged and Guarantees


Collateral pledged at December 31, 2006 totaled SEK 1,403 million,
mainly referring to blocked funds in bank accounts for Ipse 2000
S.p.A.'s future license payments and pledges of shares in Svenska UMTS-
nät AB. Guarantees totaled SEK 2,058 million, of which SEK 1,685 million
referred to credit guarantees on behalf of Svenska UMTS-nät. Under
certain third-party agreements, the credit guarantees on behalf of
Svenska UMTS-nät are capped at SEK 2,400 million.



Contractual Obligations


Contractual obligations at December 31, 2006 totaled SEK 1,869 million,
of which SEK 1,535 million referred to contracted build-out of
TeliaSonera's mobile network in Spain and fixed networks in Sweden and
Lithuania.



Parent Company


Net sales for the year were SEK 19,705 million (21,363), of which SEK
14,424 million (16,046) was billed to subsidiaries. Earnings before
appropriations and taxes decreased to SEK 7,631 million (11,526), mainly
due to lower dividends from subsidiaries. Net income was SEK 3,228
million (1,853).

Total investments for the year amounted to SEK 17,332 million (7,009),
including SEK 2,382 million (2,754) in property, plant and equipment,
primarily for the fixed network. The acquisition price for NextGenTel
Holding was SEK 2,335 million. Other investments totaling SEK 12,615
million (4,255) were mainly attributable to capital infusions in
subsidiaries and other equity holdings. Of the capital infusions, SEK
12,113 million (921) was provided through debt conversion.



Financial Information/"Underlying" Measures of
Results of Operations


This year-end 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
impairment losses, excluding income from associated companies. Non-
recurring items include impairment losses, 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 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.



Forward-Looking Statements


This year-end 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.
      

a d v e r t i s e m e n t