Annual Report 2007 - TeliaSonera in SocietyCorporate Responsibility

Corporate responsibility means managing the impact we have on the societies and communities where we operate. To run a sustainable business we must be committed to behaving ethically in all aspects of our business - in the marketplace, workplace and community and in caring for the environment.

The TeliaSonera share is included in the Dow Jones Sustainability Index and FTSE4Good. TeliaSonera is a member of the Carbon Disclosure Project, which aims to facilitate the dialogue between shareholders and corporations on implications presented by climate change.

Industry challenges

The telecom industry in general is facing challenges with regards to corporate responsibility, CR, but at the same time the increase in usage of mobile communication and Internet creates new opportunities to develop society. People who never have had access to telecommunication now have increased possibilities to connect to others. However, simultaneously, there is an increased risk for a growing digital divide. The industry also plays a role in protecting its customers in terms of privacy and from crimes committed on the Internet. Without doubt, the telecom industry plays an important role in creating new solutions for communication that drive economic, environmental and social benefits.

How we make it happen

Our framework for CR issues is designed to match our stakeholders' expectations and our shared values. Our business has an impact on the marketplace, the workplace, the environment and the community and our framework for defining what CR issues are relevant to TeliaSonera originates in these four areas. The framework forms the platform for our CR work.

TeliaSonera has a code of ethics that covers the entire Group. There are a number of other policies relevant for governing specific CR issues. The encompassing CR policy is being revised due to the broader scope of our CR work developed during 2007.

The Marketplace

In the marketplace we act in accordance with our ethical values. Fair business is one of our main issues to deal with and demands the involvement of the entire workforce. It is important to us that the suppliers we select also have high standards regarding ethical behavior and environmental performance. For this reason, TeliaSonera is developing Group-wide supply chain requirements regarding environmental and social issues.

Sustainable communications

TeliaSonera has the possibility to have a constructive impact on global sustainable development through the products and services we place on the market. Our products and services can render economic, social and environmental benefits. Our ambition is to offer sustainable products and services that also support our customers in their efforts to improve their CR performance. For example, we help to reduce climate impact by providing new techniques for communication. Services for telephone, Internet or video meetings can substantially cut the need for our customers to travel, while other services can be used to optimize traffic flows, electricity consumption and plan logistics.

Customer satisfaction increases

Strong relationships with our customers are fundamental for our long term progress. In order to evaluate the strength of the relationships and understand how we can improve our performance we use a standardized and well-established tool, the European Performance Satisfaction Index, EPSI, which allows us to compare our performance across our own footprint as well as benchmark with competitors and other industries.

In 2007 we improved our index rating by 2 percent to 67.3 from 66.1 across our wholly-owned businesses in Sweden, Finland, Norway, Denmark and Lithuania. The rise shows that TeliaSonera is developing in the right direction, but by the same token, customers have also significantly increased their expectations.

Telia in Sweden ranked higher than its major competitors in all segments, which is unique as in general market leaders in the Nordic countries have less satisfied customers. Sonera in Finland showed the largest improvement and surpassed its closest competitor. In Denmark, Telia outpaced its largest rival. Chess in Norway maintained its advantage and NetCom ranked higher than the local incumbent. Omnitel in Lithuania achieved the highest customer satisfaction rating among mobile customers, closely followed by Chess in Norway, while the largest improvement was seen among mobility customers in Finland and Denmark.

Complaints

At the same time as TeliaSonera has improved its ratings, the industry has experienced a greater number of customer complaints over the past year. As an example, in Sweden, 30 percent of all corporate customers and 16 percent of consumers have logged complaints about their mobile operators. On average, the industry as a whole receives complaints from one in every four customers over a 12-month period.

Priority 2008

The annual measurements are mirrored on an operational level in order to ensure day-to-day improvement. Overall for TeliaSonera the product quality is outstanding in comparison with local competition while there is great potential to improve the service quality of our interactions with the customers.

Priority in 2008 is to shorten answering times and strive to resolve the customer request during the first call. We are also putting great emphasis on improving our customer service on the web.

The Workplace

We operate in one of the world's most rapidly changing and demanding industries. The telecom industry is facing a challenge related to the demands for a shift in the competence of our workforce resulting from the shift from fixed to mobile and Internet-based communication. Simultaneously, customer needs, technology, regulations, competition and lines of business definition are changing. This puts significant demands on the company as well as on its staff. It is more important than ever to have the right people in place and be prepared for the present and future challenges.

Imran Boghinov, 23 years old, works at Azercell's marketing department. Ayan Ahurlu, 21 years old, works at Azercell Corporate Communications, focusing on Corporate Responsibility.

Our competence-shift activities address some key areas

The business area organization, in place since January 1, 2007, has forced a more international approach to all we do. This has made it essential to be able to work across borders and drive international solutions.

New business logics are pushing TeliaSonera to become even more commercial and customer-oriented, and employees must, to a higher degree, possess a combination of competences. The migration from traditional to new services is accelerating. Competence development activities and targeted recruitments have been conducted, but this area is still an issue that needs to be addressed. The organizational capabilities, such as processes and support systems that function well, must aim at a higher degree of excellence than today. Managerial competence must be focused more on organizational development and performance management.

To meet the demand for employees who can take responsibility for driving forward change, TeliaSonera conducts Group-wide programs:

The Business Acumen Certificate, launched in 2007, aims to improve the general understanding of what drives the business. This is necessary as we have a legacy of technique and product orientation. In 2007, 120 employees were certified and will, together with another 150 to be certified in 2008, work as "change agents" within their own organizations. The program is run by the Stockholm School of Economics.

The IT/IP program targets a number of key employees and is aiming at creating 200 "IT/IP Ambassadors". Following their participation, 50 members who took the course in 2007 will through a reversed mentorship train their own managers. The program is run together with Sweden's Royal Institute of Technology.

TeliaSonera Business School for middle managers and a few key specialists is conducted with about 30 participants.

The Top Talent program generates a pool of top talents coming from a cross-section of our operations and who are expected to become future top leaders. 25 individuals are taking part in 2007/2008.

TeliaSonera International Trainee Program aims to attract external young talents that can form a future base for future top leaders and key specialists. The program started in February 2008 with 34 participants from our Nordic, Baltic and Eurasian operations.

Management succession - planning and diversity

A new process for tracking and logging talents and successors was introduced in 2007. The aim is to anchor the succession planning work more thoroughly in the business and market context. The positions that are most critical with regards to handling any challenges facing the company are identified by their financial impact and the uniqueness of the competence they require. Potential successors are matched with the description of the position, including needed qualifications. In addition, we also consider the time before the candidate is expected to be ready to take the position and the estimated risk to choose each successor.

The distribution of nationalities reflects the number of employees in general but with a bias towards Finland and Sweden. This is expected with the history of the company and the fact that the head office is in Sweden.

Distribution of nationalitiesClick to enlarge

The objective of our succession planning is to significantly improve the present situation. The individuals chosen in the succession planning process will improve our current mix of nationalities and also improve the gender equality, the area with the largest room for improvement.

In the majority-owned operations the share of women has increased to 45 from 42 percent since the merger of Telia and Sonera late 2002. At the same time the share of female managers has increased to 23 from 19 percent.

The share of women is highest in Moldova (55 percent), Azerbaijan (54 percent) and Tajikistan and Georgia (both 51 percent) but significantly lower in Denmark (33 percent) and Norway (30 percent).

Development of the number of employeesClick to enlarge

The Environment

TeliaSonera impacts the environment primarily through our usage of materials and energy, transports and travels. Our focus is to continuously use resources more efficiently. The precautionary principle is the basis of our way to handle environmental matters.

Telecom services as a driver to fight climate change

The environmental impact from telecom services is rather modest compared to the impact from other industries. The more important aspect is what telecom services can do to drive reduced emissions in society. TeliaSonera has compared the carbon-dioxide emissions from traveling by car and plane to emissions from using the phone. A car trip between Gothenburg and Stockholm, in Sweden, emits the same amount of CO₂ as talking on a fixed line telephone for 16 years. The amount of CO₂ emitted by a plane trip between Malmö and Stockholm equals that of talking on the fixed line for 30 years and on a mobile phone for 15 years. As an example, since 2001, TeliaSonera has replaced more than 40 percent of all its physical travel such as air and car trips in Sweden by virtual meetings.

We cut CO₂ emissions by purchasing green electricity

The energy consumption at TeliaSonera corresponds to approximately 56 percent of TeliaSonera's total CO₂ emissions. TeliaSonera's total carbon-dioxide emissions decreased by 12 percent in 2007 from 2006. Carbon-dioxide emissions from our energy consumption decreased 28 percent. In Sweden, we decided in 2007 to buy only eco-labeled green electricity. In Finland a contract was signed in 2007 for green certified electricity supplies during 2008. The sources of eco-labeled electricity are hydro power, bio fuel, solar power and wind power. In Norway and Lithuania, the electricity produced is practically carbon-neutral. Our objective is to buy green electricity throughout the entire Group, but the possibility to buy green electricity varies with regards to the ability of each country to supply it.

CO₂ emissions by source, 2007Click to enlarge

TeliaSonera in Sweden CO₂ emissions 2001-2007Click to enlarge

Increased energy efficiency

In Sweden, TeliaSonera's total energy consumption increased only slightly over the years 2001 to 2007. During the same period we increased our traffic in the networks substantially. This development is mainly due to increased energy efficiency in the operations of the base stations and a decrease in demand for office space.

Energy efficiency TeliaSonera in SwedenClick to enlarge

Fuel cells for backup energy

TeliaSonera is investigating the possibility of using fuel cell energy as backup for the base stations, by running four test sites in Sweden. Our experience so far is that the technology still needs to be developed to match the particular needs of a base station. Our ambition is to have in place an adapted solution for fuel cells as backup energy in 2009.

A systematic way of managing environmental and quality matters

In Sweden, TeliaSonera has had certified management systems since 1992. An integrated management system in accordance with ISO 14001 and ISO 9001 was implemented in 2001. The system ensures a systematic approach to handling environmental and quality issues relevant to our operations. TeliaSonera's changeover to a business area structure on January 1, 2007, led to the creation of a corporate strategy for handling the CR issues that put an increased focus on all units in the Group regarding environmental and social issues.

The Community

TeliaSonera, being a large provider of communication, has a great impact on society as a whole. We play an important role together with our competitors in the development of national and global networks for communication.

Increasing accessibility

Our networks provide opportunities for people to gain access to communication and a whole new range of services. However, all citizens are not likely apt to use the new tools for communicating. There might be thresholds to access, such as education, age and finances. This so-called digital divide is growing in today's society. TeliaSonera contributes to a broader range of accessibility by offering low cost brands in all our markets, such as Halebop in Sweden and Yoigo in Spain.

Customer protection

TeliaSonera in Denmark, Norway and Sweden participate in an industry cooperation to fight sexual exploitation of children on the Internet, and the cooperation will include Finland as of 2008. We block our customers' access to sites listed by the authorities.

We work closely with the World Childhood Foundation to support its efforts in the Baltic countries, Russia and Eastern Europe to help abandoned girls become healthy independent individuals reducing the risk that they will be recruited for criminal activity and subject to sexual abuse and trafficking.

Principles on freedom of expression and privacy

Since May 2007, six global ICT companies, including TeliaSonera, together with human rights organizations, e.g. Amnesty International and Human Rights Watch, and the Berkman Center for Internet & Society at Harvard Law School, Berkley Law School and the University of St. Gallen, are engaged in a formal multi stakeholder process to develop globally applicable principles applying international human rights law to the ICT industry. This process provides guidance on how to promote the right to freedom of expression and the right to privacy in the new digital age. Stakeholders around the world raise this complex issue as one of the most important to be addressed by the ICT industry. All participants learn about strategies to promote freedom of expression and privacy. The draft principles set out the participating companies' commitment to freedom of expression and privacy as essential human rights, and the belief that these rights should only be restricted in narrowly defined circumstances based on internationally recognized standards and the rule of law.

The adoption of the Data Retention Directive, (2006/24/EC) will be formally incorporated into national legislation by January 2009 and will require close attention to privacy issues. The implementation for the Internet environment can be postponed for 18 months. The Directive has left Member States with the responsibility to, subject to privacy constraints, further define key areas such as types of data, periods of retention, how to collect, how to store, how to secure, how to access and compensation of costs.

The requirements defined by this Directive are, subject to privacy constraints, amended by Member States for other purposes. TeliaSonera's ambition is to minimize the consequences of the data retention regulation for its customers and on its commercial activities and to obtain harmonization of these "minimizations" at the national level as well as throughout the European markets.

Eurasia

The Eurasian markets provide us with an excellent opportunity for growth, but there are also some challenges since our operations in these markets operate in an environment that is very different from that of TeliaSonera's Nordic and Baltic markets. During 2006, a code of ethics was developed and thoroughly implemented in all majority-owned Eurasian operations with the intention of ensuring that the TeliaSonera ethical values are abided by. We are convinced that we add value to these markets through our presence and by ensuring our local operations are run in accordance with the code.

TeliaSonera owns, either directly or via its 74 percent owned Fintur Holdings, mobile operations in Kazakhstan, Azerbaijan, Uzbekistan, Tajikistan, Georgia and Moldova. Most of the Eurasian operators are jointly owned with local partners, but Fintur is the majority shareholder in the companies. Being a good corporate citizen the company is an important contributor to the societies it operates in. TeliaSonera also has minority owned operators in Russia and Turkey and has a financial interest in Afghanistan. The operators in Eurasia are not part of the corporate reporting of CR issues in 2007. Our ambition is to include them in the reporting for 2008.

The updated TeliaSonera CR policy and framework will be implemented in our majority-owned Eurasian markets. Due to the differences in maturity, the focus of the CR activities will be somewhat varied in these markets. However, the framework will be the same.

Crisis management

TeliaSonera has developed a systematic approach to handling crises that might strike the company. In 2007 a crisis management plan and organization was put in place on a corporate as well as business area level. The system will be subject to testing and training on a yearly basis. Examples of possible crises include: extreme weather, infrastructural impacts and major disturbances in critical customer services.

Corporate responsibility reporting

TeliaSonera presents the full scope of its sustainability performance in the separate CR Report 2007. Based on the Global Reporting Initiative's Guidelines, the yearly reporting encompasses wholly owned companies in Sweden, Norway, Finland, Denmark and Lithuania, which also applies to the CR section of the Annual Report.

Introduction

Company Description

Financial Statements

Corporate Governance

Additional Information