TeliaSonera operates in a broad range of geographic product and service markets in the highly competitive and regulated telecommunications industry. As a result, TeliaSonera is subject to a variety of risks and uncertainties. Management has defined risk as anything that could have a material adverse effect on the achievement of TeliaSonera's goals. Risks can be threats, uncertainties or lost opportunities relating to TeliaSonera's current or future operations or activities.

TeliaSonera has an established risk management framework in place to regularly identify, analyze, assess, and report business and financial risks and uncertainties and to mitigate such risks when appropriate. Risk management is an integrated part of TeliaSonera's business planning process.

Set forth below is a description of factors that may affect TeliaSonera's business, results of operations, financial condition or the share price from time to time.




Risks related to the industry and market conditions

Competition and price pressure

TeliaSonera is subject to substantial and historically increasing competition and price pressure. Competition from a variety of sources, including current market participants, new entrants and new products and services, may adversely affect TeliaSonera's results of operations. Competition has led to increased customer churn and a decrease in customer growth rates as well as to declines in the prices TeliaSonera charges for its products and services, and it may have similar effects in the future.

In order to meet the increased competition and price pressure, TeliaSonera has carried out and continues to carry out efficiency improvement programs to adjust its cost base accordingly. There is, however, a risk that TeliaSonera will not be successful in implementing its programs due to operational or regulatory reasons or otherwise.

Regulation

TeliaSonera operates in a highly regulated industry. The regulations TeliaSonera is subject to impose significant limits on its flexibility to manage its business. For example, in both Sweden and Finland, TeliaSonera has been designated as a party with significant market power in certain markets in which it operates. As a result, TeliaSonera is required to provide certain services on regulated terms and prices, which may differ from the terms on which it would otherwise have provided those services.

Changes in legislation, regulation or government policy affecting TeliaSonera's business activities, as well as decisions by regulatory authorities or courts, including granting, amending or revoking of licenses to TeliaSonera or other parties, could adversely affect TeliaSonera's business and results.

Emerging markets

TeliaSonera has made significant investments in telecommunications operators in Kazakhstan, Azerbaijan, Uzbekistan, Tajikistan, Georgia, Moldova, Russia and Turkey. The political, economic, legal and regulatory systems in these countries historically have been less predictable than in countries with more mature institutional structures. Additionally, the political situation in each of the Eurasian countries in which TeliaSonera has operations has been unstable in the past and may also become unstable in the future.

Other risks associated with operating in emerging market countries include foreign exchange restrictions, which could effectively prevent TeliaSonera from receiving profits or selling its investments, if such restrictions were introduced in countries where TeliaSonera has significant operations. Another risk is the potential establishment of foreign ownership restrictions or other potential actions against entities with foreign ownership, formally or informally.

Allegations of possible health risks

Concerns have been expressed that the electromagnetic signals from mobile handsets and base stations, which serve as the platform for transmitting radio signals, may pose health risks and interfere with the operation of electronic equipment. These concerns may intensify with time and as new products are introduced. Actual or perceived risks of mobile handsets or base stations and related publicity or litigation could reduce the growth rate, customer base or average usage per customer of TeliaSonera's mobile communications services, may result in significant restrictions on the location and operation of base stations or could subject TeliaSonera to claims for damages, any of which could have a negative impact on its business, financial condition and results of operations.

Risks related to TeliaSonera's operations and strategic activities

Impairment losses and restructuring charges

Factors generally affecting the telecommunications and technology markets, and changes in the economic, regulatory, business or political environment, as well as TeliaSonera's ongoing review and refinement of its business plans, could adversely affect its affairs. TeliaSonera could be required to recognize impairment losses with respect to assets if management's expectations of future cash flows attributable to these assets change, including but not limited to goodwill and fair value adjustments that TeliaSonera has recorded in the merger of Telia and Sonera, in the acquisition of NetCom and in connection with other acquisitions TeliaSonera has made or may make in the future.

In the past, TeliaSonera has undertaken a number of restructuring and streamlining initiatives, including the restructuring and streamlining of the Swedish and Finnish operations and the restructuring of the international carrier and Danish operations, which have resulted in substantial restructuring and streamlining charges. Similar initiatives may be undertaken in the future.

TeliaSonera has also significant deferred tax assets resulting from earlier recorded impairment losses and restructuring charges. Significant adverse changes in the economic, regulatory, business or political environment, as well as in TeliaSonera's business plans, could also result in TeliaSonera not being able to use these tax assets in full to reduce its tax obligations in the future, and would consequently lead to an additional tax charge when such tax asset is derecognized.

In addition to affecting TeliaSonera's results of operations, such losses and charges may adversely affect TeliaSonera's ability to pay dividends. Any write-down of intangible or other assets would have the effect of reducing, or possibly eliminating, TeliaSonera's dividend capacity.

Investments in networks, licenses, new technology and start-up operations

TeliaSonera has made substantial investments in telecom networks and licenses and also expects to invest substantial amounts over the next several years in the upgrading and expansion of networks. From time to time, TeliaSonera may also establish start-up operations, such as Xfera Móviles S.A. in Spain, which require substantial investments and expenditure in the build-up phase. The success of these investments and start-ups will depend on a variety of factors beyond TeliaSonera's control, including the availability of new and attractive services, the costs associated with providing these services, the timing of their introduction, the market demand and prices for such services, and competition. A failure to realize the benefits expected from these investments and start-ups may adversely affect TeliaSonera's business and results of operation.

Acquisitions, strategic alliances and business combinations

TeliaSonera may participate in the consolidation of the telecommunications industry through acquisitions, strategic alliances or business combinations. A failure in such transactions could harm TeliaSonera's business and results of operations. For example, due to competition in the identification of acquisition opportunities or strategic partners, TeliaSonera may make an acquisition or enter into a strategic alliance on unfavorable terms. There are also the risks that TeliaSonera will not be able to successfully integrate and manage any acquired company or strategic alliance, the acquisition or strategic alliance will fail to achieve the strategic benefits or synergies sought, and that management's attention will be diverted away from other ongoing business concerns. In addition, any potential acquisition could negatively affect TeliaSonera's financial position, including its credit ratings, or, if made using TeliaSonera shares, dilute the existing shareholders.

Limited number of suppliers

TeliaSonera is reliant upon certain suppliers, of which there are a limited number, to manufacture and supply network equipment and related software as well as handsets, to allow TeliaSonera to develop its networks and to offer its services on a commercial basis. TeliaSonera cannot be certain that it will be able to obtain network equipment or handsets from alternative suppliers on a timely basis if the existing suppliers are unable to satisfy TeliaSonera's requirements. In addition, like its competitors, TeliaSonera currently outsources many of its key support services, including network construction and maintenance in most of its operations. The limited number of suppliers of these services, and the terms of TeliaSonera's arrangements with current and future suppliers, may adversely affect TeliaSonera, including by restricting its operational flexibility.

Ability to recruit and retain skilled personnel

To remain competitive and implement its strategy, and to adapt to changing technologies, TeliaSonera will need to recruit, retain, and where necessary, retrain highly skilled employees with particular expertise. In particular, competition is intense for qualified telecommunications and information technology personnel. To a considerable extent, TeliaSonera's ability to recruit and retain skilled personnel for growth business areas and new technologies will depend on its ability to offer them competitive remuneration packages. If TeliaSonera cannot implement competitive remuneration packages, it may be unable to recruit and retain skilled employees, which may limit its ability to develop high growth business areas and new business areas or remain competitive in the traditional business areas.

Risks related to associated companies and joint ventures

Limited influence in associated companies and joint ventures

TeliaSonera conducts some of its activities, particularly outside of the Nordic region, through associated companies in which TeliaSonera does not have a controlling interest, such as Turkcell Iletisim Hizmetleri A.S. in Turkey, OAO MegaFon in Russia and Lattelecom SIA in Latvia and, as a result, TeliaSonera has limited influence over the conduct of these businesses. Under the governing documents for certain of these entities, TeliaSonera's partners have control over or share control of key matters such as the approval of business plans and budgets, and decisions as to timing and amount of cash distributions. The risk of actions outside TeliaSonera's or its associated company's control and adverse to TeliaSonera's interests, or disagreement or deadlock, is inherent in associated companies and jointly controlled entities.

As part of its strategy TeliaSonera may, where practical, increase its shareholdings in some of its associated companies. The implementation of such strategy, however, may be difficult due to a variety of factors, including factors beyond TeliaSonera's control, such as willingness on the part of other existing shareholders to dispose or accept dilution of their shareholdings and, in the event TeliaSonera gains greater control, its ability to successfully manage the relevant businesses.

In Sweden TeliaSonera has entered into a cooperation arrangement with Tele2 to build and operate a UMTS network through a 50 percent owned joint venture, Svenska UMTS-nät AB, which has rights to a Swedish UMTS license. TeliaSonera has made significant investments in and financial commitments to this venture. As this is a jointly controlled venture, there is a risk that the partners may disagree on important matters, including the funding of the company. This risk may be magnified because TeliaSonera and Tele2 are significant competitors. A disagreement or deadlock regarding the company or a breach by one of the parties of the material provisions of the cooperation arrangements could have a negative effect on TeliaSonera's business in Sweden.

Other risks related to owning TeliaSonera shares

Volatility in share prices

The market price of TeliaSonera share has been volatile in the past, partly due to volatility in the securities market in general and for telecom companies in particular, and may be volatile in the future. TeliaSonera's share price may be affected by many factors in addition to TeliaSonera's financial results, operations and direct business environment, including but not limited to: expectations of financial analysts and investors compared to the actual financial results, acquisitions or disposals that TeliaSonera makes or is expected or speculated to make, TeliaSonera's potential participation in the industry consolidation or speculation thereof, and speculation of financial analysts and investors regarding TeliaSonera's future dividend policy compared to the current dividend policy.

Actions by the largest shareholders

The Kingdom of Sweden holds 37.3 percent and the Republic of Finland holds 13.7 percent of TeliaSonera's outstanding shares. Accordingly, the Kingdom of Sweden, acting alone, may have and the Kingdom of Sweden and the Republic of Finland, if they should choose to act together, will have the power to influence any matters submitted for a vote of shareholders. The interests of the Kingdom of Sweden and the Republic of Finland in deciding these matters could be different from the interests of TeliaSonera's other shareholders.

In addition, any sale by the Kingdom of Sweden or the Republic of Finland of a significant number of TeliaSonera shares, or the public perception that these sales could occur, may cause the market price of TeliaSonera shares to fluctuate significantly. Other than the current lock-up period for the Kingdom of Sweden, preventing it to sell any shares before April 1, 2008, without the consent of Deutsche Bank and UBS Investment Bank, the Kingdom of Sweden and the Republic of Finland are not under any contractual commitment that would restrict their ability to sell any shares.

Financial risk management

TeliaSonera is exposed to financial risks such as liquidity risk, foreign exchange risk, interest rate risk, financing risk, pension obligation risk and credit risk. Financial risk management is centralized in the Corporate Finance and Treasury unit.

TeliaSonera manages the liquidity risk by depositing its surplus liquidity in banks or investing it in short-term interest-bearing instruments, with good credit ratings. In addition to available cash, TeliaSonera has committed revolving credit facilities and overdraft facilities. In total the available unutilized amount under committed facilities was SEK 12.6 billion at year-end.

TeliaSonera's operational currency transaction exposure is not significant. TeliaSonera's conversion exposure, however, is significant and is expected to continue to grow due to the ongoing expansion of business operations outside Sweden. TeliaSonera does not typically hedge its conversion exposure. At year-end, the conversion exposure amounted to SEK 170 billion (SEK 147 billion at year-end 2006). Strengthening of the Swedish krona by ten percentage points against all currencies in which TeliaSonera has conversion exposure would have had a negative impact of SEK 17 billion (15) on the TeliaSonera Group's equity as of December 31, 2007.

TeliaSonera manages interest rate risk by aiming to balance the estimated running cost of borrowing and the risk of significant negative impact on earnings, should there be a sudden, major change in interest rates. TeliaSonera's policy is that the duration of interest of the debt portfolio should be from six months to four years.

By having most of its borrowings with a longer maturity than the duration of interest, TeliaSonera is able to obtain the desired interest rate risk without having to assume a high financing risk. In order to further reduce the financing risk, TeliaSonera aims to spread loan maturity dates over a longer period. TeliaSonera enjoys a strong credit rating with the rating agencies Moody's and Standard & Poor's.

TeliaSonera has a significant amount of pension obligations, with a net present value of SEK 20.8 billion (21.5) at year-end. TeliaSonera maintains pension funds to secure these obligations, with plan assets totaling SEK 19.3 billion (19.0), based on market values at year-end. A decrease of one percentage point in the weighted average discount rate would have increased the pension obligations by SEK 3.5 billion (3.6) as of December 31, 2007. The effect would, however, be partly offset by a positive impact from the fixed income assets in the pension funds. A similar reduction in the interest rates would have increased the value of the fixed-income plan assets by SEK 1.0 billion (1.0).

The credit risk with respect to TeliaSonera's trade receivables is diversified among a large number of customers, both private individuals and companies in various industries. Bad debt expense in relation to consolidated net sales was 0.5 percent (0.4) in 2007.

Financial risk management is described in more detail in Note 28 to the consolidated financial statements.