Annual Report 2007 - Company Description A Review of Our Operations: Broadband Services

Rush hour, traffic jam, bus delay, dark when you travel to work and dark when you come home. Home, to find no time left for a walk or to play with your kids, but only that you have missed the family's favorite TV-show, again. For a working couple today, that's life. Right? "On the contrary," says Monica Larsson, a full-time working accounting consultant. She is looking forward to another day of efficiently serving her customers after her morning round to the stables and an early walk with Dotsie. The two-year old Dalmatian happily tails her mistress, who recounts how she and her husband Bengt, a sales support officer at an international cleaning equipment company, can make the most of the few hours of daylight offered in Sweden during the winter time. A broadband connection allows them to work safely and efficiently from their 19th century farm house, and be entertained on their own terms. They control their own time, save money and spare the nature they live in. "This is how we want to live, this is our dream," says Monica. "On a beautiful day I use my lunch break to ride Mirabelle," she says. "Instead, I can work late in the evening and thanks to Telia's Internet-broadband TV I won't have to struggle with incomprehensible technology instructions to record a program I may miss, or drive five kilometers to rent a movie."

Features allowing viewers to choose what day and time to a see a program, or time-shift TV, are currently available in Sweden and Finland as part of TeliaSonera's offer for Internet-broadband TV, or IPTV. Like video-on-demand, time-shift TV is a service that will add value and drive growth in the broadband business. TeliaSonera's sales of video-on-demand surged in Sweden during the summer 2007 and again over the Christmas and New Year holidays. Improving screen quality is adding to the development. As a high-speed broadband access provider TeliaSonera has an excellent opportunity to compete successfully in the TV market by delivering offerings that radically enhance the viewing experience for users and make the TV the center of the digital home for all kinds of Internet interaction. Network architecture will be impacted by the growth of new services. Our successful push for IPTV brought the number of IPTV subscriptions to 304,000 in Sweden. The total number of TV subscriptions, other Nordic and Baltic markets included, reached 770,000. In Finland, the building of a fiber optic network started 2007 in the country's 15 biggest cities.

Successfully managing the migration from traditional services to new IP-based services, including investments and costs, is crucial for TeliaSonera as our fixed business in Sweden generates approximately one third of the company's free cash flow. Looking ahead, TV will be the most important component of the digital home and opens up for a new range of services that users are willing to pay for, including the high quality brought by high definition TV that we are the first major broadband operator in Sweden to test. Following a HDTV trial in Gothenburg, Sweden, TeliaSonera expects to gradually launch HDTV commercially from 2008.

TeliaSonera offers multi-service packages in all its Nordic and Baltic markets and focuses investments on bundled solutions that cater to TV and other value added services requiring higher bandwidth. To enable users to easily use their connection for more than surfing, TeliaSonera became the first operator in the world to launch Smart Broadband in 2007. At the heart of the new digital home is an intelligent box that connects data, sound and voice equipment. Available in Sweden, Smart Broadband puts an end to complicated installations and tangled cords. The device is the natural development of the digital home and an integrated home environment.

To further strengthen its focus on IP-based services as part of managing the migration, TeliaSonera is re-engineering its Broadband Services business and has initiated a separation of traditional and IP-based services, both supported by a shared unit for infrastructure.

Following our ambition to strengthen our focus on IP-based services and in order to continue taking responsibility for building and maintaining a fixed nationwide telecom infrastructure in Sweden, we decided in 2007 to establish a fully owned infrastructure subsidiary, called TeliaSonera Skanova Access AB. The company owns copper and fiber networks and ducts. Skanova Access ensures that the market's requirements for transparency and full control are met. This means that all telecom operators and TeliaSonera's own wholesale operations are treated equally and that the products are sold on equal terms. To ensure the company fulfills its obligations, an Equality Access Board, reporting to the CEO, was established. Skanova Access started its operations on January 1, 2008, with approximately 700 employees.

Our ambitions require future investments in our networks and our ability to make those investments will be influenced by the outcome of ongoing discussions about regulation. On January 17, 2008, the Government of Sweden decided on a proposal for consideration by the Council of Legislation "Functional separation for better broadband competition." The proposal followed a recommendation by the Swedish telecommunications regulator PTS from June 14, 2007, that TeliaSonera be forced to place its fixed access network in Sweden in a separate unit in the company. TeliaSonera believes legislation would hamper the willingness to invest and consequently be a disadvantage for consumers.

In terms of quality, IP and cross-border services TeliaSonera's wholesale business, International Carrier, is the leading European carrier with over 40,000 kilometers of network in 44 countries and operates globally. In the fast growing market for online gaming, International Carrier is the leading provider of services to the industry. In stiff competition with telecom companies from all over the world, International Carrier won first prize for Best Wholesale Carrier at the annual World of Communications Awards in London in November 2007.

Making prime time television, TeliaSonera, game developer SimBin and Swedish broadcaster TV4 in 2007 teamed up to launch Virtual Grand Prix, VGP, a world first in online gaming programming. Providing and fully managing the online infrastructure for VGP, TeliaSonera ensured gamers could play without being hampered by technical difficulties. International Carrier also provided Internet connections at the ShgOpen in Copenhagen where the world elite of e-Sport attended to compete in 2007. The competition was to be followed by the Gathering Event, the largest computer party in the world, which chose TeliaSonera as a supplier of Internet access, and together with Cisco, TeliaSonera provided computer festival Dreamhack with the fastest Internet access in the world. Similarly, Sweden's biggest online gaming portal Spelarenan placed all its connectivity and co-location business with TeliaSonera, citing a superior network, excellent understanding of the technical requirements of online gaming and a large customer base.

Gaming, along with music, TV, films and photos, is part of the entertainment brought to the home by broadband. At the Larsson country-side home, Internet access brings 17-year old Joel his favorite games, Counter Strike and Diablo 2.

"Growth in broadband is driving sales. Offering bundled services in all our Nordic and Baltic markets, we see TV at the center of the digital home that will drive broadband growth ahead. We are shifting the product mix, including investments and costs, from traditional to new services to strengthen our positions."

Anders Bruse, President, Broadband Services

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TeliaSonera in Society

Financial Statements

Corporate Governance

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