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

From Uvdal in the heart of Norway's winter land Frode Bakkan, Tele and Datacom manager at DHL in Norway, sends an urgent report to one of his customer support colleagues. The next minute he is out in the sun, into his skis and down the slopes at the foot of Hardangervidda, Europe's largest mountain plateau. Working for a global market leader in logistics, Frode needs to be able to get connected whenever and wherever required in order to ensure that DHL's employees around Norway get the support they need to serve their customers. "I can bring my laptop to DHL's offices, terminals and warehouses around Norway or even work from my cabin in Uvdal," he says. In the end, an easy-to-use communications tool that works anytime and anywhere helps professionals who need to deliver on time, on the go, and succeed all the way. Or for anyone who just wants to stay in touch and enjoy the beauty of nature.

Mobility in itself - communication, interaction, information and entertainment independent of location - is the raison d'être of our Mobility Services business. Simply put, customers are showing us they value freedom of movement for the individual and our purpose is to offer just that. Embedded mobile broadband in the portable PC, or laptop, is at the core of that vision. Launched in most of TeliaSonera's Nordic markets, the solution, for example the joint product offer with Dell laptops integrated with TeliaSonera 3G/HSPA services, is one of the important major steps in developing the mobile broadband market, both for enterprises and individual consumers. Allowing users to connect their laptops to a mobile network and surf the Internet at similar speeds as normal broadband access in the fixed network, the offer has been very well received. The success during 2007 marked the take off for mobile data and broadband, clear drives for future growth and areas where we, for example by being the first operator to offer the SIM-card equipped laptop, are well positioned. TeliaSonera rolled out fast mobile Internet, or turbo 3G, in 2007 in all of its Nordic and Baltic markets, accompanied by attractive offerings for mobile broadband.

In Sweden, where the migration from fixed voice has the most pronounced effect on our business, mobile broadband and data usage has exploded. Usage is increasing both among consumers who have a mobile connection in their computer and those who use their mobiles to e-mail or listen to music, watch TV or play interactive games via TeliaSonera's mobile Internet portal Surfport, or surf the web directly. Mobile broadband was a big seller in Telia's retail stores and USB modems topped sales lists for several months in a row. 3G mobile phones sales accelerated and new models entered the top-ten sales lists. Alongside mobile broadband, the blockbuster hit of the summer were mobiles with GPS-navigation. In its other Nordic and Baltic markets, TeliaSonera is also well positioned to capitalize on this growth. Our Lithuanian operator Omnitel, the leader in the Baltic region, has the best coverage of turbo 3G, or 3.5G, in Western Europe and is the country's largest laptop distributor.

ezys has developed from a low-cost prepaid brand to a youth community brand by the upgrade of ezys city - a brand community interactive website

TeliaSonera had over 14.5 million mobile subscriptions in total in the Nordic and Baltic region and in Spain at the end of 2007, a rise of eight percent from the previous year. We entered Spain late 2006 with the successful launch of low-price, easy-to-use services by our operator Yoigo and by year-end, the number of subscriptions had reached 427,000, outpacing the 2007 target of 350,000. Mobility Services total net sales increased 6.1 percent to SEK 44,519 million, with increased sales in all markets. In particular, the acquisition of debitel in Denmark in April, good underlying development in Sweden and Estonia and the Yoigo start-up in Spain drove sales higher.

In the mature but rapidly changing Nordic markets, exploiting mobile broadband and mobile data is an opportunity for TeliaSonera to successfully handle the migration to new services as they drive usage growth and increase the number of subscriptions per user. However, there are challenges. Growing competition and regulatory intervention are putting pressure on prices and the needs of mobile users continuously change.

In order to stay in the forefront of the market to provide mobility for the individual, make a profit on these services and bring value to our shareholders, we work hard to bring innovative services to the market faster and at lower costs. Underlying technology drivers are higher network speeds, the development of IP telephony, new terminal design and increased capacity of devices and, as a consequence, the development of content, such as TV and music. At the same time, actors from neighbouring sectors are entering the cellular territory and challenging existing business models of mobile operators. To grow and maintain our strong market positions amid the convergence of wireless and Internet industries we strive to give users better, more personal and more flexible mobile experiences. SurfOpen, unveiled in October 2007, is an Internet tool designed to make mobile surfing easier, improve security for subscribers and add new possible revenue streams, for example advertising. Available from the first quarter 2008, SurfOpen will simplify surfing by staying in sight at the top of the mobile display in a similar way as web browser icons.

As part of its growth strategy, TeliaSonera strengthened its position in 2007 by making complementary acquisitions and expanding distribution channels. In Denmark we acquired service provider debitel and signed an exclusive agreement with electronics chain Merlin. Merlin sells exclusively TeliaSonera mobile services at 48 stores across the country. In addition to the acquisition of debitel, which added some 300,000 new mobile subscriptions that have to a large extent been successfully transferred to TeliaSonera's network, the purchase of virtual mobile operator ZetCOM in Latvia, operating under the brand Amigo, also contributed to Mobility Services' solid sales development.

Across our markets, regulatory intervention affects prices and for example in 2007 the net effect on net sales from changes in interconnect fees was more than SEK 700 million negative. Managing the effects from regulation is part of our business. The impact from regulatory intervention varies from country to country and is in addition to EU regulation.

"We provide freedom of movement for the individual. Mobility - that's our business and the customers are showing us they value it. We have strong positions and are unmatched in experience in most of our Nordic and Baltic markets. By letting our customers guide us and increasing speed to market, we are in an excellent position to develop our operations."

Kenneth Karlberg, President, Mobility Services

Introduction

TeliaSonera in Society

Financial Statements

Corporate Governance

Additional Information