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Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
Annual Report 2000
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Annual Report 2000

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Tele2s Annual Report 2000

Tele2s Annual Report 2000

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  • 1. A n n u a l R e p o r t 2 0 0 0
  • 2. Contents 1 Significant events 2 President’s Message 4 Tele2 at a glance 10 The Group 12 The Board of Directors 13 Senior Executives Tele2 AB (formerly NetCom AB), which 14 Financial Review was established in 1993, is the leading 16 The Share alternative pan-European telecom 18 The Nordic Countries operator. Tele2 offers fixed and mobile 32 The Baltic States telephony, as well as data communica- and Eastern Europe tions and Internet services, to 11.5 36 Central Europe million subscribers in 20 countries 39 Southern Europe under the Tele2, Tango, Comviq, and 42 Luxembourg Q-GSM brands. 45 Other brands 47 Report of Directors Annual General Meeting The Annual General Meeting will be held at 1:30 pm on 49 Income Statements Thursday, May 17, 2001, at Gamla Stans Bryggeri in Stockholm. 50 Balance Sheets Shareholders who wish to attend the Annual General Meeting 52 Cash Flow Statements must be entered in the share register maintained by the Securities Register Center (Värdepapperscentralen VPC) for 53 Notes the Annual General Meeting (registration must be completed by Monday May 7, 2001) and notify the Company of their 82 Audit Report intention to attend no later than 1:00 pm on Monday, May 14, 2001. 83 Addresses 85 Definitions Notification can be made by telephone, to +46 8 562 00060, or in writing, to Tele2 AB, Box 2094, SE-103 13 Stockholm, Sweden, or by e-mailing to bolagsstamma01@tele2.se Financial information First Quarter Results April 25 Annual General Meeting May 17 Second Quarter Results August 6 Third Quarter Results October 24
  • 3. Significant events • Tele2’s pro forma net sales for full-year 2000 • During the fourth quarter, ARPU for fixed telephony in central were SEK 16,273 million, an increase of 53% Europe was an encouraging SEK 130, as opposed to SEK 109 for the entire year. from the previous year. • Southern Europe showed a similar trend, posting an ARPU of • Tele2 Sweden’s net sales for full-year 2000 SEK 113 in the fourth quarter and SEK 105 for all of 2000. totaled SEK 7,997 million, up 21% from the pre- • Tele2 had some 2 million French subscribers and was able to vious year. The operating profit before deprecia- recruit 50% of the subscribers who had left France Telecom. tion and amortization increased by 20% to SEK • Tele2 launched fixed telephony in Spain during February 2,749 million. 2001. • At December 31, 2000, the Group had 11.5 mil- • In October, Tele2 acquired SIA Tele2 (formerly lion subscribers, an increase of 59% from Baltkom GSM), the second largest mobile opera- December 31, 1999. tor in Latvia. • Tele2 Sweden’s mobile telephony business posted stable average monthly revenue per subscriber • In December, Tele2 was awarded a UMTS license (ARPU) of SEK 219 including prepaid card cus- in Sweden in addition to its previous licenses in tomers, who represented 59% of all customers. Finland and Norway. Tele2 signed an agreement in principle with Telia in January 2001 on a joint • An agreement with Sonofon in Denmark in UMTS network company. The collaboration will August made Tele2 the first mobile virtual net- considerably reduce costs for constructing and work operator (MVNO). The agreement enables operating a UMTS network in Sweden. Tele2 to offer mobile telephony services to exist- ing fixed telephony customers. The Group antici- • Tele2 divested its 37.45% stake in Transcom pates additional MVNO agreements. World Wide S.A. during January 2001. • Tele2 completed its acquisition of Société • On February 16, 2001, the shareholders voted Européenne de Communication S.A. (SEC) in to change the company’s name from NetCom October. AB to Tele2 AB to further strengthen the Tele2 • SEC’s net sales for the full-year 2000 were SEK 5,879 million, brand in Europe. an increase of 133%. • The operating loss before amortization and depreciation was reduced. Margins and profitability per subscriber improved in the fourth quarter. Financial ratios SEK million 2000 1999 Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,470 8,175 Operating profit/loss before depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,841 2,062 Operating profit/loss after depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 441 1,154 Profit/loss after financial items* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186 4,186 Profit/loss after tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 381 3,769 Earnings per share after full conversion . . . . . . . . . . . . . . . . . . . . . . . . – 3.34 36.29 * The 1999 profit after financial items includes the divestment of an associated company for SEK 3,228 million. Tele2 Annual Report 2000 1
  • 4. President’s Message • Tele2 operates in 20 countries. • Tele2 is now the largest pan-European telecom brand. • Tele2 had a customer base of over 11.5 million at year-end. The year 2000 was a turning point for Tele2. The acquisition of SEC transformed Tele2 from a Nordic company with businesses in Estonia, Lithuania and Poland to a genuine European operator. By obtaining 3G licenses in our domestic markets of Sweden, Finland and Norway, we have demonstrated that we are the most proficient and ambitious telecom operator in the Nordic region. Tele2 can look back on 2000 with pride. We posted: • pro forma net sales for the full year of over SEK 16 billion, • net sales in Sweden of SEK ‘‘ 8 billion, an increase of 21%, My first duty is to ensure that Tele2 is an efficient company. Such • an operating profit in Sweden …always seeking efficiency will benefit our customers before amortization and depre- new opportunities when it comes to price and quality, ciation that rose by 20% to SEK as well as look after the interests of 2.7 billion, for earnings and our shareholders. • an increase in net sales of 133% ” growth Tele2’s various brands – particu- to SEK 5.9 billion for SEC, larly Tele2, Tele2Mobil and Comviq which Tele2 acquired during the – have won respect for their ability year. to combine high quality with low For Tele2 to make the transition to a pan-European prices. Such recognition is the fruit of a corporate culture operator is a major challenge but this development repre- that has learned to manage its assets properly and to sents an enormous opportunity for the company. From invest in such a way that safeguards efficiency and quality the beginning, Tele2 has cultivated a corporate culture at very low costs. that encourages change and welcomes challenges. We are constantly crossing new boundaries. The “nomadic” A glance at the past aspect of our corporate culture constantly propels us The Comviq Kontant prepaid calling card has continued toward new opportunities for growth and earnings. to expand rapidly in the mobile telephony market, main- A cautious, short-term observer may regard such an taining its firm leadership in Sweden. approach as reckless. That was how we were frequently Comviq subscriptions (payment by invoice) and perceived before Tele2 was listed in 1996, and even after- Tele2Mobil for business customer numbers also increased wards, but such scepticism is rare these days. Tele2 has significantly in 2000. demonstrated its capacity to take on new challenges suc- Tele2 companies had 7,740,000 fixed telephony cus- cessfully and utilize fresh commercial opportunities to tomers, an increase of 72%, at year-end. Those customers forge profitable businesses. represent our foundation for expansion in the next few The key to success for a company that operates in years. Much of that expansion will come from opening Tele2’s sectors is to constantly reconsider what it is doing, virtual networks to mobile telephony and cross-selling a remain sensitive to the wishes and expectations of con- variety of our services. sumers, and avoid rigidity and bureaucracy. From the very beginning, Tele2’s business concept has MVNO – a strategic breakthrough been to reduce prices. That is still at the heart of the The biggest and most strategically important change for company’s mission. For a growing number of subscribers, our mobile telephony business in 2000 was our Danish we are the company that offers high-quality services in subsidiary’s agreement with Danish operator Sonofon. the markets where we operate but at lower prices than The agreement makes Tele2 A/S a mobile virtual net- the old monopolies (or even our infrastructure-oriented work operator (MVNO). competitors). 2 Tele2 Annual Report 2000
  • 5. President’s Message As an MVNO, Tele2 can operate as a full-fledged Once mobile telephony has incorporated mobile GSM operator in Denmark with its own infrastructure Internet, demand will, in all probability, take a big leap for services. There is a fundamental difference between forward. There is understandable scepticism in that MVNO status and the service provider agreements that regard today – that which is totally unknown is always were previously so common in the industry. A service hard to imagine. Still, the question isn’t whether it will provider agreement turns a company into a distributor of happen, but when. another operator’s telephony with the ability to handle I can still remember all the pundits in 1995 who said outgoing traffic only. The MVNO agreement gives Tele2 that Comviq’s business concept of mobile telephony for its own exchanges and thus the capacity to handle the common man was totally out of the question. For incoming traffic as well. them, mobile telephony was destined permanently to Tele2 AS’s very large customer base (more than remain a tool of exclusive business customers. And for 800,000 at the time of the agreement) was the source of many European countries, they were right in the short its appeal for Sonofon. term. But Comviq got to work in Sweden. Today we can Early in the year, Tele2 Mobile in Switzerland con- boast of being Europe’s most profitable mobile operator cluded a service provider agreement with Swisscom, a business, including an operating margin before write-offs GSM operator. The Swiss subsidiary has already brought of more than 50% in the fourth quarter of 2000. 10% of its fixed-line customers over to mobile telephony UMTS will revolutionize the ability of mobile tele- as well. phony to provide personalized information and enter- Tele2’s broad customer base throughout Europe firmly tainment. When the services are appealing enough, they positions it for similar MVNO will automatically create a vigorous, agreements in one country after rapidly growing market. What another. Given that both parties in an MVNO agreement have something to gain from such col- laboration, I believe that Tele2 will substantially augment its sub- scriber base by this means over ‘‘ MVNO is one of the keys to the success of Tele2’s ambitious might seem like nothing more than a wild fantasy is likely to be com- monplace in a few years for those who are GSM users today. Deregulation is halfway there the next few years. expansion strategy The European telecom market is far ” MVNO status is one of the from fully deregulated. Tele2’s vari- keys to the success of Tele2’s ous subsidiaries report mixed results ambitious expansion strategy. in terms of how efficient that dereg- The prospect of being able to ulation has been. It is of the utmost grow without constructing too many of our own net- importance that both the European Commission and works is highly promising for our business, especially as national deregulation agencies (including the PTS, where Tele2 does have its own infrastructure – which will Swedish Competition Authority and Swedish Consumer include third-generation mobile telephony networks Agency) consistently pursue a proactive competition pol- (UMTS) in Sweden, Norway and Finland within a few icy. years – we will be a very attractive partner. The process won’t happen overnight. It will be many years before new companies are able to compete on equal UMTS terms with the old monopolies. Whether it’s the politi- The National Post and Telecom Agency (PTS) cians, deregulation bodies or antitrust authorities, the announced in December that it was awarding Tele2 establishment of each country tends to protect the old Sweden AB one of the four UMTS licenses in Sweden. monopolies to the bitter end. This puts us in the unique position of having obtained But the European telecom market is entering a whole licenses in the three major Nordic markets. new era. Each step in that direction means higher vol- Having a strong core business in the Nordic countries is umes and sales. Tele2 will make a major contribution in highly important for Tele2. We also have our own infra- revolutionizing the accessibility of personal information structure in those markets – although the actual owner- and entertainment – not to the exclusive few, but to the ship, construction and operation of the infrastructure is broad European masses. only peripheral to our business concept. The infrastruc- ture stems from the commercial realities of the Swedish That’s the way of tomorrow. telecom market at the time we launched our business. Our proposal to Telia that we construct a UMTS net- Lars-Johan Jarnheimer work together was a logical move. The competition between the two companies will remain as fierce as ever, but the collaboration will reduce construction costs and thus benefit our customers. Tele2 Annual Report 2000 3
  • 6. Tele2 at a glance Tele2 (formerly NetCom), which was established in 1993, is the leading alternative pan-European telecom operator. The company offers GSM, pub- lic telecommunications and data communications, and Internet services. Tele2’s corporate culture rests on the fundamental principles of flexi- bility, non pretentiousness and cost awareness. Tele2’s business concept is to have the most loyal Tele2’s quality assurance policy is based on guidelines and satisfied customers in the market by cost- that apply to the entire Group. The policy is based on effectively selling and supplying voice, data and the belief that one of the keys to achieving the compa- image communications solutions while providing ny’s goals is to maintain high quality in everything that a high-quality service. it does. The Group’s fundamental principles and collec- Developments in 2000 are proof that Tele2 is attaining tive skills are the backbone of that effort. The watch- its objectives. As the annual accounts demonstrate, the word is constant improvement. company is experiencing rapid growth in both customer A customer’s experience of a product or service must recruitment and revenue per subscriber, even in mature meet his or her expectations. We always place the cus- markets like Sweden, Norway and Denmark. tomer at center stage, and our chief gauge of quality is his or her satisfaction. Twice a year we conduct cus- The Group’s strong suits are low rates, a large tomer surveys, the purpose of which is to ensure steady customer base, access to well known brands and improvement. According to the 2000 surveys, customers the ability to adapt rapidly to new customer believe that Tele2 is living up to to their expectations. requirements and market conditions. For instance, customer satisfaction with our Internet With its mobile telephony, fixed telephony, Internet, services was up 3 index points from the year before. data communications, and cable TV capabilities, Tele2 Tele2’s commitments, actions and products must be per- is able to provide the total solution that customers are ceived as quality-oriented. Our customers must always increasingly looking for. The Group is continually work- be able to trust Tele2 as a service provider. ing to spread know-how across product lines and coun- Det svenska teleundret (The Swedish Telecom tries in order to broaden its offering and thereby boost Miracle), released by Ekerlids Publishers in June 2000, is profitability. an excellent history of Tele2 and Comviq. The book chronicles events from the very beginnings in the late 19th century through the groundbreaking deregulation of the 1990s. Tele2 AB Lars Johan Jarnheimer, CEO Håkan Zadler, CFO The Nordic The Baltic Central Europe Southern Luxembourg Other Brands Luxemburg countries States and Germany Europe Luxembourg Optimal Telecom Eastern Europe Belgien Sweden Netherlands France Liechtenstein IntelliNet Liechtenstein Norway Estonia Switzerland Italy Belgium Denmark Latvia Spain C3 T2 Austria Tango Tango Finland Lithuania Ireland Portugal 3C 3C Datametrix Poland Transac Transac Czech Republic X-Source – Industriförvaltnings AB Kinnevik – Kinnevik gets ready to provide tradi- decides to enter the telecommunica- tional voice and data telecommunica- tions market. tions services. Late 1970s 1980s 4 Tele2 Annual Report 2000
  • 7. Tele2 at a glance Tele2 at the end of 2000 SEC joins Tele2 At the end of the year, the new Tele2 business ran fixed The acquisition of Société Européenne de and mobile telephony operations under the Tele2, Communication S.A. was the biggest event of the year Tele2Mobil, Comviq, Tango, and Q-GSM brands. Tele2 for the Group. The merger turned Tele2 into a competi- provided telecom services to 11.5 million customers in tor against most of Europe’s old telephone monopolies. 20 countries. Tele2 is now the leading alternative pan-European tele- The Tele2 Group also includes a series of other com- com operator. As individual markets deregulate, Tele2 panies that provide telecom and data communications moves in and offers innovative, customized telephony services: services at the most advantageous prices. The growth • X-Source is an IT outsourcing business, strategy reflects the company’s conviction that it is easi- est and most economical to recruit customers at an early • Datametrix specializes in systems integration, stage of deregulation. SEC has made the recruitment of • Optimal Telecom offers the Optimal Selector, Internet fixed-line customers its first priority with the intention and Optimal Wireless, of subsequently offering mobile telephony and Internet • 3C Communications markets telephony and Internet services. At year-end 2000, Tele2/SEC had more than services for public telephones and terminals, 11.5 million customers. • Transac processes credit card transactions, invoices and the like, Tele2 scores hat trick in UMTS • C3 offers prepaid calling cards for fixed telephony, Testimony to Tele2’s proficiency and competitive strength is its unique position in the Nordic 3G market. • IntelliNet guarantees the lowest available rate to fixed- Tele2 is the only operator to have been awarded UMTS line customers. licenses in Finland, Norway and Sweden. As a result, The Group also offers cable TV services under the Tele2 faces major opportunities for synergies and Kabelvision, Tele2 and C-Gates brands, as well as broad- alliances, as demonstrated by its UMTS partnership band services. with Telia in Sweden (still semi-government-owned). The Everday.com Internet portal, which has expand- With its large customer base, technical know-how ed rapidly in Europe over the past two years, is a joint and three licenses, Tele2 is the most attractive prospec- venture between Tele2 and Modern Times Group tive partner for both service providers and other opera- (MTG). tors. Tele2 is quoted on the Attract 40 list of the Stockholm Stock Exchange under the TEL2A and Tele2 becomes the first MVNO in the world TEL2B ticker symbols and on Nasdaq under the Denmark permitted the Mobile Virtual Network TLTOA and TLTOB symbols. Operator (MVNO) option late in the spring of 2000. Tele2 was the first to take advantage of the opportunity. Advances in 2000 Like Service Providers (SP’s), MVNO’s are a means of Tele2 enjoyed an eventful and successful 2000. At the making the mobile telephony market more competitive. beginning of the year, Tele2 was a leading alternative In both cases, an operator rents capacity in an existing telecom operator in the Nordic market. By the end of network instead of having to construct its own radio the year, the acquisition of SEC had made Tele2 – with network. There is a fundamental distinction between businesses in 20 countries – the leading alternative pan- MVNO’s and SP’s. A Service Provider agreement turns a European telecom operator. company into a distributor of another operator’s tele- phony with the ability to handle outgoing traffic only. An MVNO agreement gives the company its own exchanges and thus the capacity to handle incoming traffic as well. An MVNO has its own SIM cards, can bill its subscribers directly, and is able to develop its own services – all of these aspects are obvious advantages in a highly competitive market. – Comvik AB launches its own NMT – A satellite link for data – Comviq obtains network. communications is estab- a GSM license. 1981 1986 lished. 1988 Tele2 Annual Report 2000 5
  • 8. Tele2 at a glance On August 30, 2000, Tele2 and Sonofon concluded Continental Europe the world’s first MVNO agreement. A month later, the director of the Danish telecom authority made the first – an overview call over the new MVNO network. The company has established itself very quickly in the Tele2 will gradually offer mobile services based on the French market, is the largest alternative operator and is MVNO concepts that are permitted in each country. well positioned for negotiations on MVNO agreements. Subscribers will obtain the same level of service from an Tele2 is one of the three leading fixed telephony opera- MVNO as they do from a traditional operator. The tors in Italy and is beginning to move into the Spanish arrangement represents major growth potential for market in 2001. Tele2, which has a large customer base in a number of Tele2 is the fifth largest alternative fixed telephony countries but lacks a mobile telephony infrastructure. operator in Germany. The company is the largest alter- native fixed telephony operator in the Netherlands. The Tele2 breaks new ground in Poland Group plans to launch Tele2 as an MVNO operator in and the Czech Republic the Netherlands during 2001. Tele2 is the second largest Tele2 (SEC at the time) launched wireless broadband alternative fixed telephony operator in Switzerland. services (Wireless Local Loop – WLL) in the Czech Tele2 Mobile, which was successfully launched in May Republic under the Tele2 brand during 2000. The ser- 2000, offers Switzerland’s first prepaid calling card. Tele2 vice was initially offered in Prague and Brno, the coun- is the largest alternative fixed telephony operator in try’s two largest cities. Tele2 also began providing WLL Austria. in Warsaw. While awaiting the deregulation of the Tele2 has mobile operations in Luxembourg and Polish telecom market, Tele2 launched IP telephony for Liechtenstein under the Tango brand. both businesses and consumers in 2000. In both countries, Tele2 is focusing on carving out its share of the rapidly growing Internet market. Approximately 15% of both Poles and Czechs were mobile telephony customers in 2000, a figure that is likely to rise sharply in the next few years. Tele2 obtains GSM licenses in three Baltic countries In December, Tele2 received final approval for a GSM 900 license in Lithuania. That makes the company a GSM operator in all three Baltic states. Tele2 operates under the brands of Q GSM in Estonia, SIA Tele2 (for- merly Baltkom GSM) –acquired in October 2000 – in Latvia and Tele2 in Lithuania. In anticipation of the deregulation of the fixed telephony market on January 1, 2001, Tele2 launched an intensive marketing effort in Estonia during the autumn. – Agreement with the National –Tele2 AB is formed. – Comviq GSM starts its own Swedish Rail Administration on a GSM network. 1989 joint fiber optic network. 1990 1992 6 Tele2 Annual Report 2000
  • 9. Tele2 at a glance Challenges ahead Europe continues to deregulate Lingering resistance by the old monopolies Deregulation of the European telecom market is far from The entrenched monopolies are slowing down the devel- uniform. The terms on which operators are allowed to opment of European telecom markets. There is still work compete with the old monopolies vary from country to to be done to create the proper conditions for genuine country. As a result, the European Commission spent competition, conditions that will in turn lead to more 2000 looking more closely at competitive conditions rapid rate cuts and the accelerated development of fixed among the EU’s various members. One of the key issues telephony services, ADSL and the like. Europe needs vig- that the Commission brought to light was the way in orous antitrust authorities that look out for the interests which the old monopolies limit access to the copper of telecom consumers. Deregulation is proceeding at very phone lines that link sub-exchanges to households. To different paces in the various EU countries. The coun- compete on equal terms, all operators must have the tries that have subjected their old monopolies to the same ability to offer local telephony and to utilize access most competition have been rewarded with the highest networks, such as ADSL for broadband. per capita use of mobile telephony, the Internet and In November 2000, the EU’s ministers of industry other telecom services. passed the Local Loop Unbundling ordinance, requiring owners of access networks to make their capacity avail- The potential of 3G able to other operators. This represents an important step As Tele2 sees it, there are a number of reasons to be opti- in the right direction. mistic about UMTS: Tele2 is well established in all of the major European • It will be a common standard throughout the western markets and is keeping a close eye on the commercial world and Japan. The fact that AT&T is moving opportunities that emerge as deregulation unfolds. toward GSM and UMTS suggests that a very broad- based standard is emerging. • Since one of the criteria during the contest for UMTS licenses in the Nordic markets was the ability to con- struct networks rapidly, these countries will have a head start in Europe. The experience garnered and the busi- ness concepts that have proved successful in Nordic telecom can be applied in new markets. • Data communications is marching steadily towards greater bandwidth and mobility. • Tele2 in Sweden will share its infrastructure with Telia, considerably lowering the cost for the construction of the UMTS network. – The fixed telephony market is deregulated. – NetCom Systems is formed to hold and develop the Kinnevik group’s telecommunications companies in the Nordic countries. – Kinnevik and Orkla set up NetCom ASA, Norway. – NetCom Systems launches the NetCom Systems owns 25% of the company. forerunner to Tele2 Norway. 1993 1993 Tele2 Annual Report 2000 7
  • 10. Tele2 at a glance Personnel and the environment Environmental policies program, the various phases of which will extend over 18 Tele2's operations have only a limited impact on the months. Both line managers and specialists are partici- environment. Nevertheless, customers are increasingly pating. insistent that the Group produces evidence of practices All new employees complete a two-day basic course that are as environmentally friendly as possible. The that covers Tele2's operations, goals, principles, and qual- Group's guidelines specify that environmentally ity assurance objectives. approved products be used whenever possible. In addi- In addition, the Group pursues a wide-ranging skills tion, every effort should be made to treat waste materials development programme to ensure that Tele2 employees generated throughout the office network in an environ- possess the kind of know-how that will keep pace with mentally sound manner. Scrapped materials should be the evolution of the market and the needs of customers. handled in a similar way. Finally, purchasing decisions must take the environment into consideration. The Group is particularly attentive to environmental issues when it comes to mobile telephony. Tele2 closely follows the research in both Sweden and abroad, participating actively in the public discussion of health, environment and safety, and disseminating information about these matters on the Group’s web sites. Ongoing skills development To ensure a steady supply of new managers and special- ists, Tele2 has instituted a one-year trainee program, as well as a leadership project for current employees. A series of new graduates are chosen for the trainee pro- gram each year. For the most part, they undergo hands- on training in various parts of the organization, on a pan-European basis. Most managers in the Nordic orga- nization have started on a management development – NetCom Systems’ stock is spun off to Kinnevik shareholders. At the same time, these shares are listed on the Stockholm Stock Exchange’s O list. – Through its Tele2 A/S subsidiary, NetCom Systems becomes Tele Danmark's very first rival on the Danish telecom market, shattering a century-old monopoly. 1996 8 Tele2 Annual Report 2000
  • 11. Tele2 at a glance The various mobile technologies Universal Mobile Telecommunications Systems (UMTS), Transitional technologies the technology for third-generation (3G) mobile telepho- During the transition from GSM to UMTS, several ny, will make it possible to do much more than simply technologies have emerged to augment the capacity of talk and send text messages. For instance, mobile phone GSM networks. The most well known technology is users will be able to surf the Internet, download images General Packet Radio Service (GPRS). Although Tele2 and watch video sequences. With a potential bandwidth offers GPRS, it is constrained by the number of compati- of up to 2 Mbit/s, UMTS has considerably higher capac- ble mobile phones in the market. ity than GSM. UMTS represents an attempt to create a GPRS permits much more rapid data transmission, global 3G standard. UMTS licenses were awarded in potentially 115 kbit/s, over GSM networks than earlier Finland during 1999 and in Sweden and Norway during technologies. Furthermore, a user can be continually 2000. In addition to its licenses in Sweden and Norway, connected to the GSM network even when not calling Tele2 has rights to a Finnish UMTS license through its from his or her mobile phone so minimizing switching partnership with Suomen Kolmegee Oy. The first times. Instead of paying for the time that he or she is UMTS systems are expected to be up and running in connected to the network, the user is charged according 2002. to the quantity of data sent. First generation – NMT Although the various types of telephone-based mobile communications date back to the 1930s, Nordic Mobile Telephone (NMT) is ordinarily regarded as the first gen- eration of mobile telephony. As the name implies, NMT is an analog technology developed in the Nordic countries. Comvik AB launched the first NMT network (in Sweden) in 1981. NMT was an attempt to create a system that would work both domestically and internationally. Telia operated its Swedish NMT network in two frequency bands: 450 Mhz and 900 Mhz. The com- pany discontinued its NMT 900 network as of December 31, 2000. Second generation – GSM The digital Global System for Mobile Communications (GSM) is the second generation of mobile telephony. GSM was introduced in 1991, the same year that the first GSM call was placed (from Finland). In 1992 the first portable digital mobile phones were produced and Comviq started its own GSM network. GSM, which can transmit data at Capacity 9.6 kbit/s, is now global standard. Maximum Initially GSM 9,6 kbit/s 9,6 kbit/s GPRS 115 kbit/s approx 50 kbit/s UMTS 2 Mbit/s 384 kbit/s – NetCom Systems is listed on – The Norwegian telecom market is Nasdaq. deregulated. 1997 Year-end 1997/1998 Tele2 Annual Report 2000 9
  • 12. Marknadsområde Baltikum och Östeuropa The Group Rubrik The Nordic countries Total subscribers: 5,472,000 Central Europe Total subscribers: 2,702,000 The Baltic States and Eastern Europe Total subscribers: 278,000 Luxembourg Total subscribers: 160,000 Southern Europe Total subscribers: 2,942,000 – NetCom AB increases its Ritabell stake to 94.8%. – Equal access pre-selection reform in Denmark, Norway and Sweden. – Acquisition of a 48% stake in Ritabell (mobile telepho- – NetCom AB divests its NetCom ASA stake to Société Européenne de ny operator), the initial penetration of the Baltic market. Communication S.A. (SEC) in exchange for newly issued SEC stock. – NetCom Systems AB changes its name to NetCom AB. Following the deal, NetCom AB holds 17.8% of SEC's capital. 1998 1999 10 Tele2 Annual Report 2000
  • 13. The Group Since the merger of Tele2 and SEC, the unusual for Tele2 to have as much or more of the market than all the other new operators put together. Group consists of six market areas: the Cross-selling – the marketing of additional products and Nordic region, the Baltic states and Eastern services to existing customers – is a key strategy, the Europe, Central Europe, Southern Europe, emphasis being on supplementing fixed with mobile tele- phony. Tele2 has come a long way in Sweden, Norway Luxembourg, and Other brands. and Denmark. There are also major opportunities in the rest of Europe for the cross-selling of new products and The Nordic operations comprises the largest market area services to the existing customer base. and have been up and running longest, with the Swedish Tele2 is continually working on spreading know-how operations being the oldest. Tele2 offers a broad range of across product lines and countries to broaden its offering products and services in Sweden, Norway and Denmark. and thereby boosting Group profitability. The company Tele2 has one or a variety of products and services in takes concepts that have proven successful and carries most of the other countries. The normal strategy has them over to other countries, frequently using the same been to launch fixed telephony and then to gradually employees. This approach maximizes economies of scale, incorporate new products and services. minimizes personnel requirements and ensures that mis- In most of Tele2’s markets, the company is by far the takes are not repeated. biggest challenger to the previous monopoly. It is not Total subscribers 12-31-2000 12-31-1999 % pro forma Per market area The Nordic countries............................................................................... 5,472,000 4,192,000 +31 The Baltic states and Eastern Europe.......................................... 278,000 56,000 +394 Central Europe ............................................................................................. 2,702,000 1,692,000 +60 Southern Europe ........................................................................................ 2,942,000 1,233,000 +139 Luxembourg .................................................................................................. 160,000 82,000 +95 11,554,000 7,255,000 +59 Per line of business Fixed telephony........................................................................................... 7,740,000 4,492,000 +72 Mobile telephony ...................................................................................... 2,559,000 1,775,000 +44 of which prepaid cards....................................................................... 1,396,000 959,000 +46 Dial-up Internet ........................................................................................... 1,255,000 988,000 +27 11,554,000 7,255,000 +59 Total subscribers per market area per segment 12,000 9,000 6,000 Luxembourg Southern Europe 3,000 Central Europe Dial-up Internet Baltics and Eastern Europe Mobile telephony 0 Nordic countries Fixed telephony 00 99 00 99 20 19 20 19 – NetCom is awarded UMTS – NetCom becomes the first mobile virtual licenses in Norway and network operator (MVNO) in Denmark. Sweden. – NetCom acquires Société Européenne de – NetCom acquires Baltkom Communication S.A. GSM, Latvia’s second largest – NetCom changes its name to 2000 2000 mobile operator. 2001 Tele2. Tele2 Annual Report 2000 11
  • 14. The Board of Directors Standing: Stig Nordin, Håkan Ledin, Lars Wohlin, Vigo Carlund and Sven Hagströmer. Sitting: Marc J. A. Beuls, Jan Hugo Stenbeck and Lars-Johan Jarnheimer. Vigo Carlund Lars-Johan Håkan Ledin Sven Hagströmer (born 1946) has worked for Jarnheimer (born 1937) has an M.Eng. (born 1943) was chairman of Kinnevik companies since and M.B.A. He worked for the board of Hagströmer & President and CEO 1968, including as President LM Ericsson for many years Qviberg from its inception in (not a member of the Board). of Svenska Motor AB and before becoming President 1980 until 1995. He is chair- (born 1960) has an M.B.A. (now Vice President) of man of the boards of Korsnäs AB. In 1997, he He has been CEO and Millicom in 1987. Between Investment AB Öresund and became Vice President of Managing Director of Tele2 1995 and 1996, he was AB Custos and has been a Industriförvaltnings AB AB since March 1999. President of NetCom Systems. member of the Board of Tele2 Kinnevik (Kinnevik), and in Jarnheimer has held various He has been a member of the since 1997. Other board assign- May 1999 he took over as posts with IKEA, Hennes & Board of Tele2 since 1994. ments: Acando, Arkivator, President. He has been a Mauritz and SARA Hotels, Bokförlaget Atlantis, member of the Board of Tele2 Holding: 50,000 class B shares. and was President of ZTV for ProtectData, Quartz Pro and since 1995. a short time before coming to HQ.se. Holding: 379 class B shares. Comviq as Vice President. He Stig Nordin was President of Comviq in (born 1943) has an M.Eng. Lars Wohlin Marc J. A. Beuls 1993-97. Jarnheimer was part and worked for two decades in (born 1933) has a D.Econ. (born 1956) has a B.S. in of group management at Saab the forest products industry. and was head of the Swedish Economics. He has been Automobiles with responsibili- After joining Kinnevik in Industrial Institute for President of Millicom since ty for the Nordic countries, 1989, he built up TV3 in Economic and Social Research January 1998, and President Russia and the Baltic states, London. Nordin became Vice in 1973-76. He served as of Banque Invik in and was CEO of Saab Opel President of Kinnevik in 1991 Undersecretary of State in the Luxembourg since June 1997. Sverige AB in 1997-98. and served as President from non-Socialist Cabinet from Beuls previously held execu- Board assignments: MTG and May 1992 to May 1999. He 1976 to 1979 and as a tive positions at Generale Arvid Nordquist HAB. has been President of Invik & Governor of the Swedish cen- Bank in Belgium. He has been Co AB since 1999. Nordin tral bank from 1979 to 1982. Holding: 2,000 class B shares member of the Board of Tele2 was President of Korsnäs in From 1983 to 1996, he was and 48,000 options. since 1998. 1993–98. He has been a chairman of the board of the member of the Board of Tele2 Drott real estate company and Jan Hugo Stenbeck since 1993. Other Board President of the Urban Chairman of the Board assignments: Kinnevik, Mortgage Bank of Sweden. (born 1942) is also chairman of Millicom and MTG. He has been a member of the the boards of Kinnevik, Holding: 11 class B shares. Board of Tele2 since 1996. Millicom, Invik and MTG. He Through family or associates: Holding: 400 class B shares. has been a member of the 4,878 class B shares. Board of Tele2 since 1993. Holding: 892,832 class A shares. 12 Tele2 Annual Report 2000
  • 15. Senior Executives Lars-Johan Jarnheimer Håkan Zadler Born 1960 Born 1960 President and CEO Chief Financial Officer Tele2 AB M.B.A. M.B.A. Employed since 2000 Employed since 1992 Holding: 30,000 options Holding: 2,000 class B shares 48,000 options Fredrik Berglund Johnny Svedberg Born 1961 Born 1962 Head of Nordic market area Head of Baltic states and President of Tele2 Sweden AB Eastern Europe market area Marketing economist Marketing economist Employed since 1995 Employed since 1990 Holding: 30,000 options Holding: 1 class A share, 240 class B shares and 8,000 options Roman Schwarz Jean-Louis Constanza Born 1947 Born 1961 Head of Central European Head of southern Europe market area market area President of Tele2 Germany President of Tele2 France and Switzerland M.B.A. M.B.A. Employed since 1998 Employed since 1998 Jean-Claude Bintz Magnus Mandersson Born 1956 Born 1959 Head of Luxembourg Head of business area, IntelliNet, market area Optimal Telecom, C3 and Router Employed since 1989 Distribution M.B.A. Employed since 1995 Björn Lundström Ib Andersen Born 1965 Born 1955 Head of Network Planning and Head of Network Operation Implementation Employed since 2000 M.Eng. Employed since 1991 Holding: 1,500 options Roger Mobrin Jeanette Almberg Born 1968 Born 1965 Head of Billing Operations and Head of Customer Service Coordination M.B.A. Technical college engineer Employed since 1995 Employed since 1995 Holding: 2,000 options Holding: 34 class B shares 1,500 options Per-Ivan Selinder Lars-Erik Svegander Born 1965 Born 1941 Head of Product Management Director of Human Resources Employed since 2000 Employed since 1991 Holding: 1,500 options Tele2 Annual Report 2000 13
  • 16. Financial Review Results for full-year 2000 Net interest and other financial expenses totaled SEK –211 million (–241). The average interest on out- standing liabilities was unchanged at 4.8%. Tele2’s operating revenue was SEK 12,470 million (8,175), an increase of 53%. Pro forma net sales were The profit after financial items was SEK 186 million up by 53% to SEK 16,273 (10,640). Net sales increased (4,186). The previous year’s figure included the divest- substantially for both mobile telephony and fixed tele- ment of an associated company for SEK 3,228 million. phony, with SEC enjoying particularly robust growth. Tele2 Sweden’s net sales totaled SEK 7,997 million, an increase of 21%, including 24% growth for mobile The loss after tax was SEK –381 million (3,769). telephony. Earnings per share were SEK –3.34 (36.29) after full conversion. The operating profit before depreciation and amorti- zation was SEK 1,841 million (2,062). Tele2’s total assets rose by 194% from SEK 14,402 Tele2 Sweden posted an operating profit before million at December 31, 1999 to SEK 42,345 million depreciation and amortization of SEK 2,749 million at December 31, 2000 – an increase that reflected the (2,290), an increase of 20%, and a stable operating mar- acquisition of SEC. gin before depreciation and amortization of 34%. The operating profit was SEK 441 million (1,154). Tele2 Sweden’s operating profit was SEK 2,038 million (1,655), an increase of 23%. Operating profit before depreciation Operating revenues and amortization Operating profit Capital expenditure 14,000 SEK million 2,000 SEK million 1,000 SEK million 2,000 SEK million 12,000 1,500 750 1,500 10,000 8,000 1,000 500 1,000 6,000 4,000 500 500 250 2,000 0 0 0 0 96 97 98 99 00 96 97 98 99 00 96 97 98 99 00 96 97 98 99 00 14 Tele2 Annual Report 2000
  • 17. Financial Review FIVE-YEAR OVERVIEW 2000 1999 1998 1997 1996 Income-statement and balance-sheet items (SEK million) Operating revenue 12,470 8,175 5,957 4,030 2,872 Operating profit/loss before depreciation and amortization 1,841 2,062 1,192 1,026 508 Operating profit/loss after depreciation and amortization 441 1,154 533 507 198 Profit/loss after financial items 186 4,186 246 78 – 26 Profit/loss for the year – 381 3,769 73 130 199 Shareholders’ equity 26,651 6,756 3,022 2,903 1,942 Shareholders’ equity after conversion 26,696 6,756 3,022 2,940 2,589 Total assets 42,345 14,401 9,958 8,435 7,194 Cash flow provided by operating activities 883 1,753 971 441 467 Liquidity 1,304 1,123 821 1,499 819 Net borrowing 7,095 4,605 4,600 3,579 3,894 Net borrowing after conversion 7,095 4,605 4,600 3,542 3,247 Investments, including financial leases* 774 1,475 1,941 1,147 873 Financial ratios Equity/assets ratio 63% 47% 30% 34% 27% Equity/assets ratio after conversion 63% 47% 30% 35% 36% Debt-equity ratio (multiple) 0.27 0.68 1.52 1.23 2.00 Operating margin before depreciation and amortization 14.8% 25.2% 20.0% 25.5% 17.7% Operating margin after depreciation and amortization 3.5% 14.1% 8.9% 12.6% 6.9% Return on shareholders’ equity – 2.3% 77.1% 2.5% 6.9% – 31.3% Return on shareholders’ equity after conversion – 2.3% 77.1% 2.5% 6.4% – 11.8% Return on capital employed 1.9% 44.8% 7.1% 6.8% 0.3% Average interest rate 4.8% 4.8% 6.6% 7.1% 8.9% Average interest rate after conversion 4.8% 4.8% 6.6% 7.1% 8.6% Value per share (SEK)** Profit/loss after tax – 3.34 36.29 0.71 1.32 2.25 Profit/loss after tax and conversion – 3.34 36.29 0.70 1.36 2.30 Shareholders’ equity 233.60 65.06 29.17 29.60 22.00 Shareholders’ equity after conversion 233.72 65.06 29.10 28.42 25.42 Cash flow 7.74 16.88 9.38 4.50 5.29 Cash flow after conversion 7.73 16.88 9.35 4.26 4.59 Dividends – – – – – Share price on closing date 392.00 598.00 330.00 170.50 110.50 P/E multiple – 117.33 16.48 467.07 128.82 49.04 P/E multiple after conversion – 117.47 16.48 468.21 125.61 48.10 Number of shares 144,798,726 103,850,246 103,850,246 103,094,691 88,294,691 Average number of shares 114,087,366 103,850,246 103,598,394 98,061,358 88,294,691 Number of shares after conversion 145,098,726 103,850,246 103,850,246 103,850,246 101,850,246 Average number of shares after conversion 114,224,866 103,850,246 103,850,246 103,433,579 101,850,246 * Financial leases are reported as of January 1, 1997. ** Outstanding option commitments at December 31, 2000 include 300,000 shares. Tele2 Annual Report 2000 15
  • 18. The share Number of shares debentures with attached warrants for the subscription Tele2’s class A and class B shares were first quoted on the for a total of 300,000 new class B shares. A special meet- Stockholm Stock Exchange’s O list on May 14, 1996, ing of Tele2 AB’s stockholders’ on August 25, 2000 voted when the stock was distributed to shareholders in to issue a maximum of 40,901,585 class A and class B Industriförvaltnings AB Kinnevik. After the distribution, Tele2 shares to the shareholders and depository receipt Kinnevik held no shares in Tele2 but retained a convert- holders in Société Européenne de Communication S.A. ible debenture corresponding to 25,555,555 shares. In (SEC) in exchange for stock and depository receipts in 1996, Kinnevik sold shares obtained from converting part SEC. At the end of the issue period, a total of 40,748,480 of the loan to institutional investors and Invik & Co AB. shares had been issued. At December 31, 2000, there were a total of 144,798,726 shares in Tele2 AB, as well To attract interest in the United States for the company’s as three convertible debentures with attached warrants shares and to increase liquidity in trading outside of representing 300,000 class B shares. Sweden, Tele2’s shares were listed on the Nasdaq exchange One class A share entitles the holder to 10 votes, and as of January 22, 1997. Some months later, 2,000,000 one class B share entitles the holder to one vote. new class B shares were issued. Tele2 issued the shares with the aim of expanding its circle of international share- Shareholders holders and bolstering the trading of its shares on Nasdaq. At year-end 2000, Tele2 had some 68,000 shareholders, The SEK 220 million proceeds from the issue were util- as opposed to 54,000 at year-end 1999. Institutional ized chiefly for investment requirements, particularly the shareholders held approximately 85% (60) of the capital development of Tele2’s Danish and Norwegian operations. and 88% (74) of the votes at December 31, 2000. In conjunction with the issue, Industriförvaltnings AB Kinnevik sold the majority of its remaining convertible Analysts who cover Tele2 debenture loan in Tele2, converted into 6,000,000 class Below are some of the financial analysts who cover Tele2: B shares. Johan Broström, Hagströmer & Qviberg, ABG Securities, Henrick Vikstrom In mid-1997, Invik & Co AB converted its holding of Alfred Berg, Inge Heydorn convertible debentures in the company. The conversion, Aros Maizels, Mattias Gredmark which represented 6,700,000 class B shares, increased Carnegie, Frederik Danielsson Tele2’s shareholders’ equity by SEK 335 million. Danske Securities, Lars Horslund Deutsche Bank, Peter Kurt neilson During the second quarter of 1998, all outstanding Enskilda Securities, Rickard Rosenbacke convertible debentures were redeemed for 755,555 class Erik Penser, Daniel Nordstrom B shares. HSBC Securities, Viking Kjellstrom Hagstromer & Qviberg, Johan Brostom The May 2000 annual general meeting authorized the Handelsbanken IB, Peter Warleus board of directors to adjust the option commitment by Ohman fondkommission, Joachim Grebe means of an issue of new shares. In October 2000, Tele2 UBS Warburg, Niclas Isaksson issued 200,000 new class B shares and three convertible Shareholders, December 31, 2000 Current distribution Pctg. of Pctg. of Class A Class B Class A & B Number of votes capital votes Invik ..................................................................................................... 9,642,608 3,172,196 12,814,804 99,598,276 8.9 24.0 Kinnevik.......................................................................................... 6,498,880 16,125,426 22,624,306 81,114,226 15.6 19.6 Millicom Telecommunication S.A. .................... 5,384,316 9,331,334 14,715,650 63,174,494 10.2 15.2 Emesco ............................................................................................ 2,209,997 24,000 2,233,997 22,123,970 1.5 5.3 Confidentia Förvaltnings AB .................................. 898,076 — 898,076 8,980,760 0.6 2.2 Stenbeck, Jan Hugo ....................................................... 892,832 — 892,832 8,928,320 0.6 2.2 Nordbankens Allemandsfond Beta ................. 618,050 856,400 1,474,450 7,036,900 1.0 1.7 Brotherton Corporation N.V.............................. — 5,091,544 5,091,544 5,091,544 3.5 1.2 Euroclear Bank....................................................................... — 2,495,152 2,495,152 2,495,152 1.7 0.6 Livförsäkrings AB Skandia ....................................... 198,000 485,335 683,335 2,465,335 0.5 0.6 Total, ten largest shareholders............... 26,342,759 37,581,387 63,924,146 301,008,977 42.0 71.4 Other shareholders ......................................................... 3,664,188 77,210,392 80,874,580 113,852,272 58.0 28.6 Total.................................................................................................. 30,006,947 114,791,779 144,798,726 414,861,249 100.0 100.0 16 Tele2 Annual Report 2000
  • 19. The share Share Price, Stockholm Stock Exchange Tele2 AFGX Monthly trading volume, ´000shares 840 720 600 480 360 30,000 240 25,000 20,000 15,000 120 10,000 5,000 60 96 97 98 99 00 01 Share Price, Nasdaq Stock Market Tele2 Nasdaq composite index Monthly trading volume, `000shares 100 90 80 70 60 50 40 900 800 30 700 600 500 20 400 300 200 100 10 97 98 99 00 01 Tele2 Annual Report 2000 17
  • 20. The Nordic countries The Nordic market area comprises Sweden, Norway, Denmark and Finland, plus the Group company Datametrix. There were a total of 5,472,000 subscribers at the end of 2000. Market position NORDIC among alternative COUNTRIES Licenses Fixed Mobile Internet Launched operators Sweden X X X X 1981/1993* 1 Norway X X X X 1998 1 Denmark X X X X 1996 1 * Mobile telephony Finland X X 2000 New entrant was launched in 1981 and fixed telephony in 1993. 18 Tele2 Annual Report 2000
  • 21. Nordic countries Sweden With a complete offering in the areas Growth continues of mobile telephony, fixed telephony, The number of mobile telephony subscribers, including prepaid calling card users, increased in 2000 by 27% to the Internet, data communications, cable 2,087,000 (1,641,000). At December 31, 2000, there TV and broadband alternative, Tele2 were 1,224,000 (909,000) active prepaid card customers, an increase of 35%. Sverige AB is Sweden’s leading provider of Including prepaid card customers, the average month- telecommunications services. ly call minutes per subscriber rose by 11% to 98 (88). The Average monthly Revenue Per User (ARPU) Among Tele2 Sweden’s strengths are attractive rates, a was unchanged at SEK 219. large customer base, its own infrastructure and access to well-known brands, as well as the ability to adapt quickly High brand recognition to new customer requirements and market conditions. 96% of the Swedish population knows of Tele2, whereas Tele2 offers a highly advanced range of services. With its 97% recognizes the Comviq brand. mobile telephony, fixed telephony, Internet, data com- munications, and cable TV capabilities, Tele2 is able to Tele2 is awarded a UMTS license provide the total solutions that customers are increasingly In December the Swedish National Post and Telecom looking for. Agency (PTS) awarded Tele2 one of the country’s four UMTS licenses to construct and operate third-generation Mobile telephony – the Comviq and mobile networks. In January 2001, Tele2 and Telia’s Tele2Mobil brands wholly-owned Telia Mobile AB subsidiary signed an Tele2 markets its mobile services under the Comviq and agreement in principle to form a joint (50/50) company Tele2Mobil brands. Comviq addresses the consumer to construct and operate the network. The collaboration market, while Tele2Mobil primarily serves the business will considerably reduce the costs for constructing the market. The services are positioned as price leaders. network. Tele2 and Modern Times Group (MTG) will work together to develop the service offering. Tele2 Annual Report 2000 19
  • 22. Nordic countries Tele2 Sverige AB markets its mobile services under the Comviq and Tele2Mobil brands. Comviq addresses the consumer market, while Tele2Mobil primarily serves the business market. The services are positioned as price leader. Mobil telephony Comviq and Tele2Mobil 20 Tele2 Annual Report 2000
  • 23. Nordic countries High per capita use of mobile telephony Mobile telephony penetration in Sweden is Tele2Mobil lowered both daytime and nighttime rates among the highest worldwide. Including pre- during the year. paid card customers, Comviq and Tele2Mobil had 34% of the Swedish mobile telephony market at the Agreement with Dial n’ Smile end of 2000. Telia Mobile (50% of the market) and Tele2 and telecom company Dial n’ Smile signed a service Europolitan (16%) are their two main rivals. Comviq has provider agreement in 2000 under which Dial n’ Smile a very strong position in the prepaid calling card sector, will purchase Tele2 network capacity for use in selling which is growing more rapidly than any other sector. mobile services to end customers under its own brand. New agreements in the business market Innovative new services by Comviq Tele2 continues to score triumphs in the business market. Comviq’s business concept is simple: to make mobile The company signed an agreement with SAAB in 2000 telephony available to as many people as possible at the involving the integration of fixed and mobile telephony. lowest possible rates. The Comviq brand encompasses The agreement runs through September 2002. The many different types of subscriptions that are suitable for Stockholm County Council (SLL) signed a new four-year particular calling patterns, not to mention prepaid calling mobile telephony agreement initially comprising 14,000 cards. The success of prepaid cards has contributed to subscriptions. Tele2 is the SLL’s only provider of mobile Tele2’s rapid growth. services. The City of Stockholm renewed its mobile tele- Comviq introduced a series of innovative new services phony agreement. Tele2 provides all of the city’s 18,000 in 2000, including bonuses for incoming calls and inter- mobile subscriptions. Tele2 signed a Nordic agreement est on prepaid card balances. New SMS services included with Forex (currency exchange) for Lan2Lan, fixed tele- sports results and quiz games. Rates were lowered for phony, a 2 Mbit/s Internet connection for the head office, both subscribers and prepaid card customers. and some 300 mobile subscriptions. The Salvation Army A number of notable marketing efforts were carried and the Salaried Employees’ Educational Association out during 2000, including an outdoor campaign in (TBV) also became Tele2 mobile subscribers in 2000. collaboration with the Swedish Society for the Protection of Children’s Rights in the Community (BRIS). Tele2 SMS usage accelerates and the celebrities who participated donated the proceeds SMS usage increased substantially during the year. In to BRIS. Comviq successfully recruited new subscribers addition to growing use among subscribers, new SMS- through marketing efforts during the European Football related services are constantly emerging. More and more Championships, the Olympics and the Christmas season. media outlets – including television channels, newspa- pers and radio stations – are fleshing out their offerings Tele2Mobil – now for consumers too with SMS services. For instance, Tele2 is working with During 2000, Tele2Mobil introduced several new ser- MTG on Baren (The Bar), a documentary soap opera. vices, including Flatrate, T2 Larm, Dataabonnemang The trend is expected to continue. and WAP. Flatrate allows a subscriber to call at the same rate 24 hours a day. T2 Larm provides alarm services WAP services through GPRS based on positioning technology. Dataabonnemang is for Tele2 will offer data and WAP services through GPRS subscribers who are primarily interested in sending and to all of its mobile telephony subscribers in 2001. The receiving data messages. range of services is continually expanding. For instance, In October, Tele2Mobil launched the Tele2 Senior game and surfing applications have multiplied. GPRS, subscription for the retired sector, a very large target with the ability it gives the user to remain online for 24 group. The introduction was accompanied by a market- hours a day, will spur the use of such services. ing campaign that engaged well known older actors and actresses. Tele2 Annual Report 2000 21
  • 24. Nordic countries Growing competition has meant that customers can call more cheaply, regardless of the destination and time of day. Tele2 led the market in 2000 by cutting Fixed rates even further. telephony 22 Tele2 Annual Report 2000
  • 25. Nordic countries Tele2 – the leading alternative operator New agreements In 1993, Tele2 became the first operator to When Canon moved its Swedish head office, it signed compete with the former Telia monopoly. agreements with Tele2 for new subscriptions and the Tele2 has provided competitive telephony solutions ever upgrade of existing subscriptions. since. The company is the leading alternative operator in The Axel Johnson group made Tele2 its main fixed the Swedish fixed telephony market. telephony provider in 2000. Tele2 provides telephony services to all chapters of the Salaried Employees’ Greater share of the market Educational Association (TBV) in Sweden. At the end of 2000, Tele2 was Telia’s biggest challenger Among new customers in 2000 were SAAB, the by far. Tele2 and Telia are the only operators that offer Salvation Army and Västra Götalandsregionen (the complete solutions. Competition is skewed by the fact Western Götaland Region). that Telia – which owns access networks, the copper Tele2 signed a Nordic agreement with Forex (currency phone lines between sub-exchanges and households – exchange) for Lan2Lan, fixed telephony, a 2 Mbit/s refuses to make them available on commercially accept- Internet connection at the head office, and some 300 able terms and is thus holding on to a de facto mono- mobile subscriptions. poly in those areas. Ongoing evolution of products and services Intelligent new traffic solutions Continual development and enhanced network function- The integration of Tele2’s data, mobile and telecom net- ality make it increasingly possible for Tele2 to provide works has created an efficient new transmission network. intelligent traffic solutions and thus products and services By integrating the functionality required for new services, that render a customer’s business more profitable. The this network facilitates the development of intelligent functionality that Tele2 offers represents a key competi- traffic solutions. Tele2, which leads the market in terms tive advantage at a time when quality, customer service of customer-friendly offers, was the first operator to and pricing are of growing importance. introduce a flat rate for all calls within Sweden. Rates generally declined in 2000. Tele2 targeted a number of large companies with an ambi- tious advertising campaign that promised to lower their telephony costs. Tele2 Annual Report 2000 23
  • 26. Nordic countries Spurred by both customer recruitment and demands for greater capacity, growth continued in 2000. Internet & data communication networks 24 Tele2 Annual Report 2000
  • 27. Nordic countries This product area includes services for Increased Internet usage Internet access, data communications, leased According to a Stelacon survey, 56% of Swedish house- lines, web hosting and e-commerce. Growth holds, or 80% of those that own a computer, use the for Lan2Internet, leased lines and Lan2Lan (data com- Internet. The amount of time spent on the Internet is munications) stems from both an increase in the number also increasing. The regular use of e-mail, information of customers and demand for greater capacity. Web host- searches and Internet banking accounts for most of the ing comprises home page services and streaming media. increase. Sharper Scandinavian image Tele2 – a pioneer in the Internet market In 2000 Tele2 focused on designing specific Scandina- In 1991, Tele2 became the first company in Sweden to vian services (Scandinavian Leased Lines and Scandi- provide Internet access. The early launch got Tele2 off to navian Lan2Internet), as well as on developing new a head start over its competitors in terms of expertise. concepts, particularly in the area of web hosting. The Today Tele2 is the biggest alternative provider of Internet new services are based on a joint technological platform services in Scandinavia and offers two kinds of dial-up across national borders, including common monitoring, Internet. Everyday Free2Connect carries no fixed fee, support and customer service standards. In addition to while Tele2Internet involves a prepaid subscription. The higher quality, the solutions generate economies of scale brand is a symbol of high quality, attractive capacity and that lead to lower prices for the services. competitive rates. High quality and reliability Premium services provide value-added Beyond cost-effectiveness, Tele2’s strength lies in a com- As greater proportion of the population uses the Internet, bination of technical solutions in its own network and the market’s emphasis has shifted from price to the advanced know-how, amounting to high quality and delivery of value-added services. Tele2 launched new reliability. As a result, Tele2 enjoys a significant competi- premium services in 2000 aimed at providing consumers tive advantage in an area that is increasingly decisive for with greater security, geographic mobility, knowledge business customers. Tele2 has a strong offering of flexible, resources and entertainment. Among these services are Scandinavia-oriented services. The company’s strategic anti-virus software, personalized firewalls, the ability to focus is to offer value-added services and packages to all surf the Internet on a subscription regardless of location, business sectors. popular games and top-quality reference works. By intro- ducing a surfing discount during the year, Tele2 recap- Advances in the business market tured the price initiative among leading providers of ABB IT-Partners signed an agreement on a Lan2Internet Internet services. solution for all ABB companies in Sweden, the central node being its head office in Västerås. Internet access becomes independent The University of Umeå Data Processing Center of conventional network access (UMDAC) has one of Tele2’s largest Internet connec- Since many of the premium services introduced during tions. Capacity has been updated from 2 Mbit/s at the the year are independent of conventional network access, time of the original agreement to 28 Mbit/s in 1999 and a subscriber to dial-up Internet can easily transfer his or 51 Mbit/s in 2000. her services to a Tele2 broadband subscription. No Name 4 Us signed a Lan2Internet agreement in 2000. One use of the 34 Mbit/s capacity will be for Internet traffic to TV3’s documentary soap opera Baren. Tele2 bolstered its position as the largest alternative oper- ator in this sector as well. Tele2 Annual Report 2000 25
  • 28. Nordic countries Cable TV and Broadband 26 Tele2 Annual Report 2000
  • 29. Nordic countries Cable TV and Broadband The cable TV market continues to advance Early broadband effort Taking advantage of its cable TV lines, Tele2 started toward digitalization, broadband and offering broadband services to consumers in Stockholm greater options for customers. The mass in 1998. Since 1999, Tele2 also offers broadband services media have shown a great deal of interest over local area networks (LAN’s). Tele2 utilizes wireless local loop (WLL) technology as well. The company has in broadband services. Consumer demand access to a highly developed trunk network in Swipnet, is modest so far but will certainly grow. which was Sweden’s first commercial IP network. In addition, Tele2 has good connections with other providers in Sweden and abroad. The construction of a Attractive basic package UMTS network will set the stage for mobile broadband Under the Kabelvision brand, Tele2 offers one of the solutions. best basic packages on the market at an attractive price. In addition, Kabelvision offers three highly competitive The battle for content expanded packages (Plus, Silver and Gold), plus premi- As more and more households subscribe to broadband, um and movie channels. Kabelvision offers programs Tele2’s marketing initiatives have switched to focusing on from channels such as TV3, ZTV, Kanal 5, TV6, TV8, content services. Various radio, music, video and game Discovery, MTV, BBC, CNN, Viasat Sport, Eurosport packages are being designed. One of Tele2’s strong suits and TV1000. Moreover, the cable TV network is contin- is its ongoing collaboration with companies like ually upgrading to offer broadband services. Operating Everyday.com and Modern Times Group (MTG). In throughout Sweden, Kabelvision counts 310,000 house- addition, Tele2 has the advantage of being able to pack- holds among its subscribers. age together other services, such as mobile telephony, fixed telephony Internet and cable TV. Digital entertainment growing rapidly Technological advances are broadening the range of New broadband agreements digital entertainment and information services available Tele2 signed several new agreements during the year, to television viewers. The greater the interactive options, including one with Västerviks Bostads AB (municipal the more the viewers will be able to shape their own pro- housing corporation) covering the installation of cable gramming. Various systems are being developed to pro- TV and broadband services in more than 2,000 apart- vide these services. ments in Västervik’s population center. Tele2 and the Stockholm Student Housing Foundation (SSSB) signed New television channels an agreement for the provision of broadband services to Kabelvision will continue to focus on providing an all 7,000 of SSSB’s apartments. Installation is to be com- attractive range of TV channels in 2001. To make the pleted during 2001. Vätterhem Bostads AB (municipal offering even more appealing, new channels will be housing corporation) in Jönköping town signed an agree- introduced. ment on broadband and cable TV for more than 7,500 apartments. Tele2 Annual Report 2000 27
  • 30. Nordic countries Norway Tele2 Norge AS continued to show solid Tele2 brand is well-known The Tele2 brand commands a high degree of recognition growth in 2000. The company launched in Norway. A survey conducted in October–November mobile telephony in June and was able to concluded that 88% of Norwegians over 15, 96% in the recruit subscribers successfully, primarily 39–49 age group, and 99% in the 15–29 age group are aware of Tele2. from among its own fixed telephony cus- tomers. Greater focus on business market As part of its heavier emphasis on the business market, Tele2 Norway is awarded UMTS license Tele2 signed several key agreements during the year. In November 2000, Tele2 Norway was awarded one of Tele2 offers a full range of services from small standard the country’s four licenses to build a third-generation packages to customized solutions for big companies with UMTS network. Scheduled to begin in 2001, construc- extensive needs and high traffic volumes. Tele2 provides tion of the network will be an integral part of the com- Internet over its wireless network to small and medium- pany’s activities for a number of years. Tele2 Norway sized businesses. The company obtained a license in pursues a highly aggressive mobile telephony strategy. 2000 to provide wireless access in the 40 Ghz frequency band. Tele2 signed several Lan2Lan agreements with big Call free of charge companies that operate throughout Scandinavia. In the autumn of 2000, Tele2 became the first Nor- Among Tele2’s customers are the Choice hotel chain, wegian operator to introduce free domestic calling. The CBF Energimegling and the student organization offer, which included all calls made on Saturdays from Studentskipnaden in Oslo. home over the fixed network, ran from September 23 until Christmas. The purpose of the widely acclaimed Stiffer competition campaign was to underscore Tele2’s price leadership in Tele2’s primary strength is its reputation as price leader Norway. and main challenger to the old Telenor monopoly. The In October, Tele2 launched a network of 140 credit company is also widely recognized for its flexibility, cus- card phones at airports, hotels, restaurants, and exhibi- tomer orientation and cost awareness. Based on the tion & conference halls. launch of mobile telephony and its UMTS license, Tele2 Norway is now a complete provider of telecommunica- Price leader tions solutions. The company is in a strong competitive Rate competition between Tele2 and Telenor set much position as it faces the future. of the tone for 2000. It began in the spring when Tele2 Tele2 has a 15–20% share of the fixed telephony issued a guarantee that it could always beat Telenor’s market. Competition grew more fierce during the year. standard rates. Telenor carried out a major marketing There are over 20 rivals in the Internet market and Tele2 effort during the summer to persuade consumers that it is one of the foremost. had the cheapest rates.The government stopped the cam- Now that it has obtained a UMTS license, Tele2 is paign however, when Telenor was unable to substantiate prepared to play a central role in Norwegian mobile its claims. Tele2 remains the price leader in Norway. telephony and to strive toward becoming number 2 within a few years. An advertising campaign offering free domestic calls on Saturdays was widely hailed. 28 Tele2 Annual Report 2000
  • 31. Nordic countries Denmark Based on the motto “The customer’s telecom company”, Tele2 Denmark is working hard to offer the best and most economical services in the most cost-effective way possible. First Mobile Virtual Network Operator (MVNO) in the world On August 30, Tele2 and mobile operator Sonofon concluded the world’s first MVNO agreement. A month later, the director of the Danish telecom authority made the first call over the new MVNO network. At the same time, Tele2 announced Tele2 Mobil Tank Op, a calling card that is paid for per fixed telephony invoice. Price leader in fixed telephony Danish commercials Tele2 continues to be price leader in the Danish fixed focus on positioning telephony market. In January, Tele2 became the first Tele2 as price company to introduce a flat rate. Initially it applied to leader. This com- domestic calls within Denmark. The second stage extend- mercial concludes ed the flat rate to Sweden, Norway and Finland. with: You can call a Tele2 is the biggest alternative operator in the market. lot more cheaply. get2net growing rapidly The get2net Internet service showed rapid growth again in 2000. Through get2net, Tele2 is the biggest alternative Major new agreements for UNI2 Internet provider. Everyday.com was launched during the UNI2 provided several large Virtual Private Network summer as the start page for all get2net customers. (VPN) solutions in 2000 to companies that operate in multiple countries. A number of the applications involve UNI2 for the business market scanning e-mail for possible viruses. UNI2 signed an UNI2, Tele2’s Internet application for businesses, has a agreement during the year to host all of Nestlé’s Danish considerable percentage of the market. UNI2 markets web sites. Tele2 and two other providers signed an agree- technologically advanced services with an emphasis on ment to supply a telecom application that will broaden dependability, capacity and support. Forskningsnettet, a network comprising 110 research UNI2 became a separate business area within Tele2 institutes in Denmark. The capacity of the new national A/S in March 2001. UNI2 comprises fixed Internet, web trunk network will be 20 times that which is available hosting and data security solutions. today. UNI2 added new servers in 2000 to the point that As Denmark’s most experienced Internet provider, Tele2 can now offer services for the largest web servers as UNI2 has the expertise required to ensure that customers well. obtain functional and well-considered solutions that meet their particular needs. The web hosting and data security sectors in which UNI2 is so advanced both offer high growth potential and profitability. Tele2 Annual Report 2000 29
  • 32. Nordic countries Finland Greater focus on business market In March 1999, Finland became the first A nationwide campaign in the second half of 2000 country in the world to award UMTS emphasized customer service and Tele2’s knowledge of customers’ requirements in the area of telecommuni- licenses. cations. The result was some 5,000 new business cus- tomers. Denmark’s customs and tax board chose Tele2 as Tele2 has a 20% stake in Suomen Kolmegee Oy, which its new telephony provider during the year. Tele2 also holds one of the four licenses to construct a UMTS launched an ADSL initiative in Copenhagen during the network in Finland. The commercial launch of the net- year. work is scheduled for January 2002. Finland is one of the most advanced countries in the Well-established brand world when it comes to mobile telephony. By the spring Tele2 is a highly recognizable brand in Denmark. Accord- of 1999, more than 65% of the population already had ing to a survey conducted in November, 81% of Danes mobile subscriptions. At the end of 2000, there were know about Tele2. more mobile than fixed subscriptions. Since April 2000, Tele2 Finland has offered prepaid UMTS auction in late 2001 cards for international calls. The service now includes Three or four UMTS licenses will be auctioned off in domestic calling as well. The card is sold by one of Denmark late in 2001. Finland’s biggest retail chains. Given its mobile telephony, fixed telephony and In November 2000, the prepaid fixed telephony Internet services, Tele2 is well positioned to develop service was launched, enabling customers to choose packaged solutions and market new services to its Tele2 by dialing a prefix when making international 800,000 plus existing customers, not to mention or long-distance calls. the rest of the expanding Danish market. As in other countries, Tele2 maintains a low-price image in Finland. Fixed telephony ad in Finland. 30 Tele2 Annual Report 2000
  • 33. Nordic countries Datametrix Datametrix continued to recruit a steady (VPN) and Managed Security Services (MSS). VPN provides a company with the ability to link remote stream of new customers in 2000. The offices in a safe and cost-effective manner. Security is proportion of external sales remained high. of growing concern when designing Internet-based communications services. MSS is a total concept in Although Datametrix in Sweden was once largely a accordance with which the company operates, monitors distributor of other manufacturers’ equipment, it has and updates a customer's firewalls. been steadily moving towards becoming a complete provider of integrated services ever since the NätTeknik Leading provider of in-house applications merger. Specializing in Customer Relationship Manage- Datametrix in Norway is one of the leading providers of ment (CRM), Internetworking, Internet Communica- complete in-house applications for a company’s voice and tion Services and Broadband Access, Datametrix offers data communications needs, both for local area networks consulting, operating, and integration services. (LAN’s) and wide area networks (WAN’s). Datametrix provides complete systems solutions for businesses and Leadership in complete CRM solutions public administration. When it comes to CRM, call centers represent a rapidly growing market in which integrated data communica- Leading provider of broadband services tions and telecom applications are needed. In mid-2000, Datametrix’s 50 broadband technicians and selected around 90,000 people were employed at call centers subcontractors in Sweden afford the company a strong throughout the Nordic region. Independent forecasts position in the rapidly growing broadband services suggest that the number will triple over the next four market. years. In less than three years, Datametrix has set up Datametrix also offers its cutting-edge systems more than 40 call centers and employed more than solutions through its companies in Denmark and 4,000 agents. The company is now one of the leading Finland. Nordic providers of complete call center applications. External sales remain high Internet security applications As Datametrix scores new successes in the marketplace, Datametrix’s Internet Communication Services focuses the percentage of sales generated by Tele2 companies on effective security applications for the Internet. Among steadily declines. 70% of Datametrix Sweden’s sales came the spheres of application are Virtual Private Networks from external customers in 2000, as opposed to 29% in 1997. The figure is over 80% in other countries. In this ad, Datametrix refers to a satisfied customer. Datametrix helped Transcom to set up the largest call center in the Nordic countries.. Tele2 Annual Report 2000 31
  • 34. The Baltic States and Eastern Europe Estonia, Latvia, Lithuania, Poland, the Czech Republic and X-Source AB constitute the Baltic States and Eastern Europe market area. Market position THE BALTIC STATES among alternative & EASTERN EUROPE Licenses Fixed Mobile Internet Launched operators Estonia X X X X 1998 1 Latvia X X 1999 1 Lithuania X X 1999 2 Poland X X X 2000 New entrant Czech Republic X 2000 New entrant 32 Tele2 Annual Report 2000
  • 35. The Baltic States and Eastern Europe Estonia Ritabell, which offers mobile services in people subscribed as a result of the campaign. The sec- ond marketing effort, which centered on the business Estonia under the Q-GSM brand, had its sector, was even more successful: 4,500 businesses, or most successful year ever in 2000. The 15% of all companies in Estonia, subscribed to Tele2. company was the most rapidly growing Broadband via cable TV operator in the market. During the year, Tele2 began offering fixed Internet access through Levicom Broadband’s cable TV network New subscriptions in Tallinn. Tele2 Estonia has already carved out substan- Following success with the new types of subscriptions tial market share in the areas covered by the cable TV introduced in 1999, Q-GSM launched the Dynamo network. subscription package in August 2000, restoring its price leadership. The subscription comes with low, easily com- Picking up greater share of the prehensible rates. dial-up Internet market Approximately 17% of Estonian households use the Market position has strengthened Internet – higher than in either France or Germany – and Q-GSM captured significant market share in 2000. competition is stiff. Telia established itself in the Estonian The brand enjoyed the largest subscriber growth and the dial-up Internet market by starting to offer access with- largest total customer growth in 2000. Q-GSM has out a subscription fee in September 1999. After scarcely attracted widespread attention, not only for being price more than a year however, Tele2 is already the largest leader, but also as the operator that spearheads new ser- alternative operator and is shoring up its position all the vices. For instance, in April, Q-GSM became the first time. Through Everyday.com and the largest web-based operator (in collaboration with Everyday.com) to start e-mail service in Estonia, Tele2 has the biggest web site its own WAP portal. During the autumn, Q-GSM (in terms of pages exposed). launched positioning services via GPS, e-mail to mobile phones and SMS to e-mail. Cable TV restructures Levicom Broadband’s cable TV companies, which had Fixed telephony deregulated as of January 1 a network spanning eleven cities, were restructured as part In September 2000, Tele2 began the first of two intensive of Tele2 in September 1999. To bolster its position in marketing initiatives aimed at recruiting subscribers ahead Tallinn, Tele2 acquired its competitor Telset during 2000. of the deregulation of fixed telephony in Estonia on January 1, 2001. Deregulation provides new opportunities The focus of the first effort was to increase public The deregulation of fixed telephony in Estonia is creating awareness of deregulation and to position Tele2 as an fresh opportunities for Tele2 to offer total solutions in alternative to the old monopoly. Seventeen thousand the areas of mobile telephony, fixed telephony, Internet services, data communications and cable TV. As wireless January 2001, Tele2’s services in Estonia include broad- band access. In December 2000, the company launched a package for businesses that provides customized services in each of the above areas. Q-GSM launched Dynamo, its new subscription package, in August 2000. Tele2 Annual Report 2000 33
  • 36. The Baltic States and Eastern Europe Latvia Lithuania In October, Tele2 AB acquired the total Tele2 successfully established its brand in share capital in Baltkom GSM, one of the Lithuanian market during the year, Latvia’s two mobile communications com- while launching two new mobile telephony panies. Baltkom GSM, which holds GSM products. On December 22, Tele2 was 900 and GSM 1800 licenses, changed its awarded a national GSM 900 license, creat- name to SIA Tele2 in March 2001. ing a level playing field for all three GSM operators in Lithuania. Strong brands SIA Tele2, the biggest alternative operator in Latvia, has Excellent customer growth strong brands in both the prepaid calling card and sub- Tele2’s customer base has experienced rapid growth, scription market, and pursues an explicit strategy of and the company took a considerable percentage of total being price leader. Zelta Zivitna (“the golden fish”), the new customers in the fourth quarter. As a result, Tele2 company’s brand of prepaid cards, has a substantial lead had a total of 278,000 mobile customers in Estonia, in the consumer market, while each subscription is less Latvia and Lithuania as of December 31, 2000. Per capita expensive than those of its competitors. mobile telephony usage in Lithuania rose from 9% to In addition to its role as price leader, SIA Tele2 is more than 13% during the year. known for its dynamism and innovative product develop- ment efforts. For instance, the company recently intro- Second biggest alternative operator duced SMS Chat, the first such service in either the Baltic Tele2 is the second biggest alternative GSM operator in or Nordic market and a huge success among consumers. Lithuania. A severe lack of competition has stymied the SIA Tele2 is continuing to expand its network and make growth of the mobile telephony market. Thus, there is its customer care and distribution operations more effec- substantial growth potential for the next few years. tive. X-GSM prepaid card In May, Tele2 launched X-GSM, its first consumer product, as the price leader in prepaid subscriptions. The economical call rate and free introductory SMS offer has made X-GSM the most popular prepaid card in Lithuania today. Tele2Mobile Tele2 launched billable subscriptions under the Tele2Mobile brand on November 1. Broadband up and running During the year, Tele2 began offering Internet access over Levicom Broadband’s cable TV network in Vilnius, under the C-gates brand. 34 Tele2 Annual Report 2000
  • 37. The Baltic States and Eastern Europe Poland The Czech Republic Tele2 has a national data communications Tele2 launched wireless broadband services franchise and a wireless local loop (WLL) in the Czech Republic in October 2000. license for wireless broadband access via Tele2, holds a WLL license covering the country’s more radio networks in eight cities. The compa- than 10 million inhabitants. The service was first offered ny provides wireless broadband services in in the two biggest cities of Prague and Brno, with a total of almost 2 million people. Tele2 targets small and Warsaw, Krakow, Gdansk and Poznan, medium-sized businesses as a provider of inexpensive, which together house a total of more than high-capacity Internet access. Demand for the service has surpassed all expectations. Tele2 will launch wireless five million inhabitants and half a million broadband services in three more cities during the first businesses. Four new cities will come half of 2001 and in most of the other big cities by the online in 2001. end of the year. Although only 15% of Czechs currently use the Tele2 began business in Poland in 1999 by offering pre- Internet, Tele2 anticipates rapid growth over the next paid cards for international fixed-line calls. The company year. In addition, the company has applied for a fixed launched two new services in September 2000. Based on telephony license in the newly deregulated market. voice-over IP, Gadatek addresses the consumer market, while Air2Net wireless broadband is for small and medi- um-sized businesses. Tele2 has conducted an aggressive X-Source and highly successful marketing campaign with an explicit emphasis on price leadership. X-Source specializes in IT outsourcing. Tele2 formed the company in March 1999 An Internet market with potential to support intra-Group IT operations. The Internet market is not as far advanced in Poland as it is in the Nordic countries. Some 15% of Poland’s 40 It currently has 50 employees at its million inhabitants use the Internet, and 40% of the Stockholm office and is experiencing country’s businesses have some kind of Internet access. Approximately 60% of the connections are dial-up by a rapid growth phase. way of analog modems. In other words, the market offers enormous growth opportunities. With 1,500,000 busi- Competitive services nesses, Poland has one of the largest potential markets in X-Source provides services in the areas of PC workplace Europe. The current low rate of Internet usage represents operation, maintenance & operation of servers, data an opportunity for Tele2 to achieve rapid growth. communications and data security. The company’s business concept is to guarantee various functions at Fixed telephony is still regulated a fixed price and always to try to surpass the customer’s Poland’s fixed telephony market remains regulated, under- expectations. X-source helps businesses forge a secure and developed and expensive. About half of Polish households manageable IT infrastructure at lower costs. have telephone subscriptions. A handful of licenses have X-Source also provides competitive services for busi- been awarded for local calling, while three were awarded nesses outside the Tele2 Group. Among the company’s for long-distance calls in 2000. Current expectations are customers are Datscha.com, Metro, MTG, ZoomOn that the market will be deregulated in 2002 or 2003. and 4T Solutions. External clients account for some 60% of X-Source’s sales. Most competition is domestic TP SA has more than 90% of Poland’s fixed telephony market. There are a number of domestic operators in the Internet and data communications market, of which TP SA, Internet Partners, Netia and NASK control a total of 95%. Tele2 expects to grow rapidly to the point of becoming one of the leading Internet providers by the end of 2001. Tele2 Annual Report 2000 35
  • 38. Central Europe The Central Europe market area consists of Germany, the Netherlands, Switzerland, Austria and Ireland. Market position CENTRAL among alternative EUROPE Licenses Fixed Mobile Internet Launched operators Germany X X X 1998 5 The Netherlands X X X 1997 1 Switzerland X X X X 1998 2 Austria X X X 1999 1 Ireland X 36 Tele2 Annual Report 2000
  • 39. Central Europe Germany The Netherlands Having entered the German fixed telephony Tele2, which began offering services in market in March 1998, Tele2 is now the the Netherlands during 1997, is now the fifth largest alternative operator. country’s largest alternative fixed tele- phony operator. Heavy subscriber recruitment The company conducted a marketing campaign in Growth has been fueled by demand for simple, transpar- 2000 that led to accelerated subscriber growth and ent rates, as well as the introduction of pre-selection in traffic volumes. Moreover, the company simplified its May 2000. The launch of selector devices also boosted rate schedule. The total impact was a quadrupling in the average monthly revenue per subscriber. At December number of calls placed. At the end of the year, 40% of 31, 2000, pre-selection customers accounted for 35% Tele2’s customers used pre-selection. of the total. More and more Germans know about Tele2 Investments Recognition of the Tele2 brand greatly increased in To handle its rapid subscriber growth, Tele2 invested in Germany during 2000. In January 2000, 49% of the new exchanges and a new invoicing system during 2000. population was familiar with it. The company has aimed its marketing efforts at house- holds, as well as small and medium-sized businesses. By Focus on packaging of services the end of the year, Tele2’s share of the consumer market Tele2 launched Everyday.com in June and Internet had increased substantially and there was room for more services in October. Tele2 obtained its first regional WLL growth. The company continued to perform well in the license during the year and is considering applying for business market as well. additional ones. In 2001 Tele2 is focusing on establishing itself in the mobile telephony market which will enable it High brand recognition to package mobile telephony. with fixed telephony and The Tele2 brand is well known in the Netherlands. Internet services. In January 2001, 77% of the population was familiar with it. Tele2 Annual Report 2000 37
  • 40. Central Europe Switzerland Austria Tele2 launched fixed telephony in Switzer- Tele2 is the largest alternative fixed tele- land as soon as the market was deregu- phony operator in Austria. lated in October 1998. In February 2000, Tele2 successfully launched Internet Tele2Mobile started up in May 2000. services and access to the Everyday.com portal. The com- Tele2 is the second largest alternative to pany’s introduction of the Tele2 Comfort pre-selection service in May also enjoyed great popularity. By Swisscom, the former government-owned November, approximately 10% of the customer base monopoly. used Tele2 for both fixed telephony and the Internet. Pre-selection customers, using either a selector or the More pre-selection customers new iHear telephone with built-in selector, accounted for Tele2 is positioned as price leader in Switzerland. The some 50% of all customers at the end of 2000. perception was confirmed in a survey conducted by the TV program Marktplatz showing Tele2 in first place. Price leadership More than 55% of its customers use pre-selection, a Tele2 is regarded as the price leader. The company’s boost to average monthly call minutes. strong market position and rapidly growing customer base make it one of the most attractive MVNO partners Adopting new marketing approaches in Austria. Tele2 will carry on with its aggressive growth Tele2 expanded its marketing efforts beyond traditional strategy and continue to focus on the target groups of advertising in 2000. For instance, the company offered households, small businesses and medium-sized business- telephones with built-in selectors (iHear telephones) at es. Increased traffic volumes per subscriber will generate an attractive price. Everyday.com started up in Switzer- economies of scale. The company’s margins remain high. land in June 2000. Tele2 is planning similar offers for mobile telephony and the Internet in 2001. Brand attracts attention The Tele2 brand has achieved a high level of recognition Growing awareness of Tele2 in Austria. According to a January 2001 survey, 67% of The Tele2 brand is well known in Switzerland. In January the population knows about it. 2001, 76% of the population was familiar with it. Launch of mobile telephony a success Ireland The May launch of Tele2Mobile, including the first pre- Tele2 has a fixed telephony license in Ireland. paid calling card offer in Switzerland, was a big success. The company sold 10,000 start-up packets during the first month. 38 Tele2 Annual Report 2000
  • 41. Southern Europe The Southern Europe market area consists of France, Italy, Spain and Portugal. Market position SOUTHERN among alternative EUROPE Licenses Fixed Mobile Internet Launched operators France X X X 1999 1 Italy X X X 1999 3 Spain X 2000 New entrant Portugal X Tele2 Annual Report 2000 39
  • 42. Southern Europe France After starting up in the French market in Price leader With its simple, transparent pricing (flat rate 24 hours March 1999, Tele2 became the largest a day), Tele2 is the price leader in the French telecom alternative fixed telephony operator during market. The company’s aggressive marketing has led to 2000. The company’s share of the market high brand recognition and rapid recruitment of new subscribers. In January 2001, 66% of the population was increased considerably and its customer familiar with Tele2. base grew twice as rapidly as that of The introduction of pre-selection has been key to increasing average monthly revenue per customer. The Cegetel, its closest rival. launch of the iHear telephone and its built-in selector is expected to reduce customer turnover (churn) and boost The French telecom authority released its first official call minutes per subscriber. study of the domestic telecom market in February 2001. According to the survey, Tele2 is the leading new opera- MVNO potential tor, offering the best customer service and projecting the Tele2’s large customer base puts it in a strong position most appealing image (ahead of France Telecom). for negotiating with mobile operators to attain MVNO Since France deregulated its telecom market in January status. The company is also negotiating to become a 1998, Tele2 has attracted as many former France virtual operator in broadband networks based on WLL Telecom customers as Cegetel, which was established a and DSL. Tele2 will collaborate with Everyday.com to year earlier than Tele2. Tele2 is the second largest alterna- provide broadband services in the first half of 2001. tive operator in the business market. Local calling open for competition Tele2 expects to double its traffic volumes per subscriber once local calling has opened for competition as of the fourth quarter of 2001. The company will invest in new capacity during 2001 in order to satisfy that increased demand. Tele2 believes that its long-term billing costs will decline as a result of the prepayment for fixed telephony that it launched in December 2000. 40 Tele2 Annual Report 2000
  • 43. Southern Europe Italy Spain Tele2, which is now one of the three lead- Tele2 entered the Spanish market in ing alternative fixed telephony operators February 2001 with an offer of telephony in Italy, saw its customer base more than via VOIP (Voice Over the Internet Protocol). double in 2000. Tele2 provides prepaid fixed telephony for households and subscriptions for businesses. The company launched Customer recruitment has been excellent since Tele2 Everyday.com early in 2001. started business in Italy in April 1999. Public recognition Tele2 will expand its customer base in 2001 by means of the Tele2 brand has risen sharply. In January 2001, of an aggressive pricing and marketing strategy that in- 72% of the population was familiar with it. cludes the introduction of iHear telephones with built-in selectors. Generating high average revenue Chiefly as a result of the high percentage of calls from the fixed to mobile network, total traffic volumes more than doubled in 2000. Tele2 continues to report high Portugal average revenue per subscriber in Italy compared to other Tele2 Portugal obtained a fixed telephony license in countries. February 2001. Greater functionality After having been one of the first operators to provide pre-selection to all of its Italian customers, Tele2 success- fully launched local calling in Milan and Rome during the third quarter of 2000. In the fourth quarter, the company introduced wireless iHear telephones with built-in selectors and flat rates for frequent callers. As in France, Tele2 has positioned itself as price leader. Focus on greater revenue In 2001, Tele2’s focus in Italy will be on introducing local calling and strengthening its image as price leader, as well as boosting average revenue per subscriber through offers for iHear telephones and pre-selection. Tele2 Annual Report 2000 41
  • 44. Luxembourg The Luxembourg market area includes Belgium, Liechtenstein, Luxembourg, 3C and Transac. Market position among alternative LUXEMBOURG Licenses Fixed Mobile Internet Launched operators Luxembourg X X X X 1998 1 Liechtenstein X X X X 2000 1 Belgium X New entrant 42 Tele2 Annual Report 2000
  • 45. Luxembourg Luxembourg Belgium Growing rapidly in fixed telephony Tele2 has a fixed telephony license in Belgium. With a license to provide all types of fixed telecom ser- vices, Tele2 has offered fixed telephony in Luxembourg since October 1999. The company launched Internet Tango services in June 2000. Fueled by rate cuts, traffic volumes increased almost fivefold during the year. Tango has a license for GSM 900 and GSM 1800 in After its launch in June, Everyday.com has offered Luxembourg. Tele2 also expects to obtain a UMTS more and more services, including local news. The license in 2001. Fixed telephony, including the Internet, Everyday Shopping e-commerce platform started in is marketed under the Tele2 brand. November. Striving to be seen as the real alternative The Tango Sunshine radio station – which plays most- ly popular music and broadcasts local traffic and weather Tango is Luxembourg’s biggest alternative mobile opera- information over FM, cable and the Internet – began in tor. The introduction of pre-selection for fixed telephony February. The station helps Tele2 market its products and lower interconnection fees are setting the stage for and services. Tele2 to continue capturing market share in fixed tele- phony. The perception that Tele2 is innovative and the price leader is buoying the company’s chances of Liechtenstein establishing itself as the real alternative to the former monopoly. Tele2 has provided mobile telephony services in Liechten- stein since March 2000 under the Tango brand and fixed Growing mobile usage telephony since June 2000 under its own brand. The Tango introduced new services during the year which company holds a license for GSM and for all types of boosted subscriber growth and traffic volumes. Among fixed telecom services, including the Internet. It also has the services were High-Speed Circuit-Switched Data an option on a UMTS license. (HSCSD), Easy Fun & Crazy SMS, WAP and mobile Tele2 is the biggest alternative operator in Internet. Tele2 anticipates a commercial launch of GPRS Liechtenstein. in the summer of 2001. Tele2 Annual Report 2000 43
  • 46. Luxembourg 3C 3C has been operation in the telecommuni- Everyday.com terminals A total of 1,200 public Everday.com Internet terminals cations industry for more than 15 years. allow 3C to provide international brands with a network Nowadays the company specializes in for interactive advertising. The free terminals are located transaction services, interactive advertising where large number of people gather, including airport concourses, airline lounges, hotels and restaurants. 3C and pay phones. has plans to launch a second generation of high-profile terminals with more interactive advertising. The combi- Rapid growth throughout Europe nation of contemporary design, convenient locations, Transac and Parking transaction services, which consti- advertising options and free usage is unique. tute 3C’s primary activities, are expected to show consid- erable growth throughout Europe. Transac will broaden Broad coverage and new services its operations from 8 to 13 countries in the first quarter 3C has placed credit card phones at 4,500 sites through- of 2001. out Europe. The company installed a large number of In collaboration with leading international banks, 3C phones at attractive locations in 2000, but since the provides a pan-European credit card transaction process- increased usage of mobile phones has made public ing service. As one of only two companies to offer this phones less popular, 3C is now focusing on maintaining service, 3C plans to solidify its leadership in 2001 by existing installations and adding new services. introducing pan-European applications and reporting systems which add value for customers. The Parking service is a total concept for parking lot operators. The concept was developed in Britain, where Transac the company dominates the market for parking spaces at Based in Luxembourg, Transac provides back-office pro- airports and in metropolitan areas. Working together cessing services to companies that handle large quantities with parking lot operators and parking meter manufac- of data. 3C, MACH, Banque Invik and Inlux are among turers, 3C plans to bring the concept to the rest of Transac’s customers. Europe in 2001. 44 Tele2 Annual Report 2000
  • 47. Other brands Everyday.com Optimal Telecom Everyday.com became one of the dominant operators Optimal Telecom provides consumers with fixed tele- in the Nordic and Baltic portal markets during 2000. phony and the Internet. Started in the autumn of 1998, The French and Dutch businesses are growing rapidly, the company has operated in Denmark since December while the company is building up its organization in 2000. Optimal Telecom enjoyed rapid growth in 2000. other markets. Rapid expansion in the consumer market Growing rapidly Optimal Telecom continued to expand rapidly in the As a jointly owned (50/50) company of Tele2 and MTG, Swedish consumer market during the year. Successful Everyday.com passed the 1 million member mark in marketing efforts and attractive services spurred customer September 2000. Everyday.com’s revenue stems primarily recruitment, particularly for fixed telephony. Optimal from advertising on the Internet, a market that appears Telecom began operating in Denmark in December. to be growing by 50–100% annually in all countries For greater effectiveness, marketing efforts in Sweden where the portal has been set up. and Denmark were coordinated with those conducted by fellow subsidiary IntelliNet in France, the Netherlands, Success for documentary soap opera Baren Switzerland, Austria, Italy and Germany. The collabora- Everyday.com updated its technological platform in 2000 tion will grow even closer in 2001. to include WAP and SMS services. The company serves Optimal Telecom cut its rates for international calls as a web site in Sweden, Norway and Denmark for the from mobile phones several times during the year. The popular intermedia production Baren (The Bar), a docu- rates for Internet access remained unchanged. mentary soap opera and contest, the plot of which unfolds in a real bar. Baren is broadcast on MTG’s TV3 Optimal Linjeväljaren-selector and ZTV channels. The success of the program repre- By connecting the Optimal Linjeväljaren-selector device sents Everday.com’s first step toward positioning itself as to the telephone jack, a customer can be assured of auto- a provider of entertainment in addition to its e-mail, matically obtaining the lowest ordinary rates from among SMS and Internet services. Telia, Tele2 or Telenordia, the three operators that domi- nate the Swedish market. The Optimal Linjeväljaren- Benefiting from its member base selector gets continuously updated with the operators’ Everyday.com is stepping up its marketing effort and rates in order to provide the lowest rate to the customer. focusing on attractive new services in 2001. Another pri- In Denmark, it has five big operators to choose from. ority is continually improving its quality and capitalizing Although most fixed telephony calls in Sweden are on its large member base. local, they are not covered by the September 1999 pre- selection reform. Nevertheless, the Optimal Linjeväljaren- selector allows customers to obtain lower rates for those calls as well. None of Tele2’s competitors offer a device similar to the selector. 45 Tele2 Annual Report 2000 45
  • 48. Other brands Optimal Wireless C3 The Optimal Wireless phone has a built-in selector. The C3 (Calling Card Company) sells prepaid fixed telephony product appeals to customers who do not wish to install cards in Britain, France, Germany, Italy, the Netherlands their own Optimal Linjeväljaren-selector. and Spain. Optimal Internet Close collaboration with Tele2 The Optimal Internet subscription carries no monthly C3 works hand in hand with Tele2, which provides net- fee. Customers in Sweden can connect through Optimal work capacity. The key to the company’s success is a solid Telecom’s modem pool at the lowest ordinary rate offered distribution network and flexible price strategy. With by Telia, Tele2 and Telenordia. The company offers currently over 90 brands in Europe, C3 has sold upwards value-added services like e-mail and free SMS in collabo- of 5 million prepaid cards. The total market for prepaid ration with Everyday.com. cards in the countries in which C3 operates is an estimat- ed SEK 9 billion. Infrastructure As a Service Provider, Optimal Telecom does not have its Taking the next step with prepaid cards own infrastructure in either Sweden or Denmark, it pur- Though the cards are sold primarily at stores and news- chases capacity from existing networks instead. stands, C3 is also designing a card for the business mar- ket, where there is little competition. The company has IntelliNet concluded an agreement with a French retail chain that IntelliNet is Optimal Telecom’s counterpart in continen- offers the potential for 300,000 card sales per month. tal Europe. The company offers its customers in France, C3 has also signed agreements with major airlines and the Netherlands, Switzerland, Austria, Italy and Germany travel agencies in Britain. The company markets the card the lowest rates from those offered by a large number of in collaboration with Nestlé in Italy. Both Deutsche major fixed telephony operators. Bank and Dresdner Bank are among C3’s German customers. IntelliNet Box C3 has also produced a card with a magnetic strip for Like Optimal Telecom, IntelliNet guarantees for low 3C’s public phones. rates long-distance and international calls, as well as to mobile networks, by means of a device attached to the Agreements with Disney and Dali telephone jack. Depending on the particular market, the C3 has obtained the rights to use Walt Disney characters, device chooses the lowest price among 5–10 operators. such as Donald Duck and Mickey Mouse. The company The IntelliNet Box gets continuously updated with the also has a license to use Salvador Dali’s art on its prepaid operators’ rates in order to provide the lowest rate to the cards in Europe. customer. IntelliNet will devote even more resources to customer European expansion recruitment in 2001 through partnership efforts such as Although there are up to ten companies offering similar customer clubs and loyalty programs, as well as over the cards in each country, there is little pan-European com- Internet. petition. C3, which launched the card in Belgium, Switzerland, and Austria in early 2001, has plans to launch it in the Scandinavian and Baltic markets as well. 46 Tele2 Annual Report 2000
  • 49. Report of the directors The Board of Directors and President present the Annual enue for Tele2 Sweden was SEK 7,997 million, an increase of Report for Tele2 AB (publ), corporate registration number 21%, with an encouraging 24% increase in Mobile Telephony in 556410–8917, for fiscal 2000. Tele2 Sweden. Class A and class B shares in Tele2 AB (“Tele2”) have been Operating profit before depreciation and amortization quoted on the O list of the Stockholm Stock Exchange since (EBITDA) was SEK 1,841 million (1999: SEK 2,062 million). 1996 (TEL2A and TEL2B), and, through American depositary EBITDA for Tele2 Sweden was SEK 2,749 million (1999: SEK receipts (ADRs), on NASDAQ since 1997 (symbols TLTOA 2,290 million) an annualized increase of 20% and a stable and TLTOB). EBITDA margin of 34%. Operating profit after depreciation and amortization (EBIT) was SEK 441 million (1999: SEK Operations 1,154 million). Earnings include fourth-quarter results for the Formed in 1993,Tele2 AB (formerly NetCom AB) is the lead- SEC Group and goodwill amortization attributable to this ing alternative pan-European telecommunications company acquisition in the amount of SEK – 290 million. As a result of offering fixed and mobile telephony, data network and Internet the Board’s decision to redeem option commitments through services under the brands Tele2,Tango, Comviq and Q-GSM to a new share issue, the option provision in 2000 was utilized in approximately 11.5 million people in 20 countries.Tele2 oper- its entirety across the income statement in the amount of ates Datametrix, which specializes in systems integration, 3C SEK 229 million. Earnings in 1999 were charged with an Communications, operating public pay telephones and public option provision of SEK – 134 million. Operating profit after Internet services,Transac, providing billing and transaction depreciation and amortization (EBIT) for Tele2 Sweden was processing services and C3, offering co-branded pre-paid call- SEK 2,038 million (1999: SEK 1,655 million), an increase of 23%. ing cards, Optimal Telecom and IntelliNet, the price-guaran- Net interest expense and other financial items totaled SEK teed residential router device.The Group also offers cable – 211 million (1999: SEK – 241 million).The average interest television services under the Kabelvision brand. rate applied to debt outstanding remained stable at 4.8% In 2000, investment activity maintained a brisk pace. During (1999: 4.8%). Profit after financial items was SEK 186 million the year,Tele2-group invested a total of SEK 1,510 million (1999: SEK 4,186 million).The comparative year included SEK (1999: SEK 1,130 million) in tangible and intangible assets. In 3,228 million relating to the sale of an associated company. October 2000, an additional 81.9% was acquired in Société Tax on profit for the year amounted to SEK – 567 million Européenne de Communication S.A. (SEC), whose operations (1999: SEK – 419 million), which reflects the tax effect on include fixed telephony in eight countries, and 100% was Swedish operations. Deferred income tax receivable is report- acquired in SIA Tele2 (formerly Baltkom GSM), the second- ed only as a loss carry-forward for that portion which it is largest mobile operator in Latvia.The Tele2-Group also includes estimated can be used in the near future. A prudent valuation earnings in SEC for the period October 1–December 31, 2000 has been made of the deferred income tax receivable in for- and in SIA Tele2 for the period November 1–December 31, eign operations, which, at December 31, 2000, was reported 2000. as zero.The loss after tax and full dilution was SEK – 381 mil- During 2000,Tele2 enjoyed ongoing strong growth in both lion (1999 profit: SEK 3,769 million), and the loss per share its customer base and operating profit. Operating revenue was was SEK – 3.34 (1999 profit: SEK 36.29). SEK 12,470 million (1999 SEK 8,175 million) an increase of Tele2’s total assets at December 31, 2000 increased by 53%. Pro forma operating revenue increased by 53% to SEK 194% to SEK 42,345 million compared with SEK 14,402 mil- 16,273 million (1999: SEK 10,640 million). Mobile Telephony lion at December 31, 1999 reflecting the acquisition of SEC. and Fixed Telephony operations reported strong growth and Trend in growth and profitability in recent years (SEK mil- SEC displayed an encouraging performance. Operating rev- lion): SEK million 2000 1999 1998 1997 1996 Operating revenue 12,470 8,175 5,957 4,030 2,872 Operating profit/loss: - before depreciation and amortization 1,841 2,062 1,192 1,026 508 - after depreciation and amortization 441 1,154 533 507 198 Profit/Loss after financial items 186 4,186 246 78 – 26 Earnings in 2000 were affected by the acquisition of the SEC Group with effect from October 2, 2000. 1999 profit after financial items include a nonrecurring item of SEK 3,228 million attributable to capital gains from the divestment of the associated company NetCom ASA. 1996 profit included a nonrecurring gain of SEK 316 attributable to the issue of new shares in the associated company NetCom ASA. Tele2 Annual Report 2000 47
  • 50. Report of the directors The number of customers amounts to: 2000 1999 Dec 31, 00 Dec 31, 99 Change Operating revenue 16,273 10,640 pro forma Operating profit/loss before Geographic markets: depreciation and amortization – 350 573 Nordic 5,472,000 4,192,000 31% Profit/Loss after financial items – 3,042 – 1,562 Baltic States Profit/loss for the year – 3,603 – 1,964 and Eastern Europe 278,000 56,000 394% Central Europe 2,702,000 1,692,000 60% In October, Tele2 acquired SIA Tele2 (formerly: Baltkom Southern Europe 2,942,000 1,233,000 139% GSM), the second largest mobile telecommunications company Luxembourg 160,000 82,000 95% in Latvia. Total 11,554,000 7,255,000 59% On April 1, 2000, the Tele2 Group divested 4T Solutions, a company active in the development of invoicing systems for Business areas: telecom companies, to XSource Corporation in exchange for Fixed telephony 7,740,000 4,492,000 72% newly issued shares in XSource Corporation. XSource Corpor- Mobile telephony 2,559,000 1,775,000 44% ation is a global invoicing company consisting of the Savera, of which, pre-paid 1,396,000 959,000 46% Billing Paraguay, Basset, Praesidium and NetCom Consultants, Dial-up Internet 1,255,000 988,000 27% one of the leading consulting companies in the telecom sector. Total 11,554,000 7,255,000 59% Outlook Tele2 Sweden’s mobile telephony operations report stable aver- No events occurred in 2000 or in 2001 to date to give manage- age monthly revenue per subscriber (“ARPU”) of SEK 219, ment reason to expect anything other than continued healthy including cash card customers. Cash card customers represent growth in the market areas of the Company. 59% of the total number of customers. In August,Tele2 Denmark became the first Mobile Virtual Significant events after year-end Network Operator (MVNO) through an agreement with In January, 2001,Tele2’s subsidiary SEC divested its 37.45% Sonofon, allowing Tele2 to offer mobile telephony services to holding in the call center company Transcom World Wide S.A. its existing fixed line customers. Further MVNO agreements (“Transcom”) to Industriförvaltnings AB Kinnevik (“Kinnevik”). are anticipated. Kinnevik’s Board plans to propose to the AGM to approve a In October,Tele2’s acquisition of SEC was finalized. Operating spin-off of Transcom to Kinnevik’s shareholders and a listing of revenue in SEC was SEK 5,879 million for the 12 months 2000, the shares in connection with this.Tele2’s sales proceeds depend an increase of 133%. EBITDA losses contained an improvement on the share price 60 trading days after the market listing. in margins in Q4 increasing profitability per subscriber. Strong In January 2001 Tele2 announced a joint venture with Telia Q4 ARPU’s for Central Europe of SEK 130 compared to SEK to substantially reduce the cost of developing and operating a 109 for the year. Strong Q4 ARPU’s for Southern Europe of UMTS network in Sweden. SEK 113 compared to SEK 105 for the year.Tele2 France secured approximately 2 million customers and 50% market Work of the Board of Directors share of customers leaving France Telecom. February 2001, In 2000,Tele2’s Board of Directors held ten meetings at which launched fixed telephony services in Spain. minutes were taken. In December,Tele2 was awarded a UMTS license in Sweden in addition to its previously awarded licenses in Finland and Other Norway. Effective February 16, 2001, NetCom AB changed its name to Tele2 AB to reflect the pan European strength of its Tele2 brand. Acquisitions and divestments On the same date, the subsidiary Tele2 AB changed its corpo- October 2, 2000,Tele2 AB acquired SEC in exchange for newly rate name to Tele2 Sverige AB. issued shares in Tele2 AB.Thereby Tele2 owns 99.7% of the Earnings for 2000 include SEK 10 million pertaining to the shares in SEC compared with 17.8% at December 31,1999. refund of pension premiums from the Swedish insurer SPP. SEC is fully operational in eight European countries with licenses in a further three. SEC has established the Tele2 brand in these Parent Company markets and provides national and international long distance The Parent Company performs functions and conducts certain telephony services through Tele2 Europe in the Netherlands, development projects common to the Group.As a result of the Germany, Switzerland, Austria, France, Italy, Luxembourg and decision of the Board to redeem option commitments through Liechtenstein and provides a broad range of mobile telecom- a new share issue, the option provision made in the second munication services through Tango in Luxembourg and quarter of 2000 was utilized it its entirety across the income Liechtenstein and Tele2 Mobile in Switzerland.The SEC-group statement in the amount of SEK 201 million. Earnings in 1999 also includes 3C Communications, which operates public pay were charged with an option provision of SEK 134 million. telephones and public Internet services;Transac, which provides During the fourth quarter of 2000, the number of outstand- billing and transaction processing services; Everyday.com, the ing shares in Tele2 increased by 40,948,480. free Internet Service Provider and portal; C3 offering co- branded pre-paid calling cards; and a 37.45% interest in Proposed appropriation of earnings Transcom World Wide, one of Europe’s largest call center The Group’s unrestricted reserves amount to SEK 829 mil- companies. Pro forma accounting, which assumes that Tele2 lion. An allocation of SEK 55 thousand to restricted reserves had acquired SEC on January 1, 1999, is presented below: is proposed. The Board of Directors and President propose that the funds at the disposal of the Annual General Meeting, SEK 1,982,645,929, be carried forward to a new account. 48 Tele2 Annual Report 2000
  • 51. Consolidated income statements R Group Parent Company SEK million Note 2000 1999 2000 1999 Operating revenue ....................................................................................................... 1 12,470 8,175 8 10 Cost of services sold ................................................................................................ 2 – 8,087 – 4,372 — — Gross profit ....................................................................................................................... 4,383 3,803 8 10 Selling expenses ................................................................................................................ 2 – 3,499 – 2,075 — — Administrative expenses ...................................................................................... 2 – 797 – 652 – 54 – 41 Options issued to management ................................................................ 26 229 – 134 201 – 134 Other operating revenue.................................................................................... 3 212 213 — — Other operating expenses................................................................................ 4 – 87 –1 — — Operating profit ....................................................................................................... 1 441 1,154 155 – 165 Share of profit/loss in associated companies: Profit/loss on shares and participations in associated companies ............................................................................... 5 – 44 45 2 – 19 Divestment of associated companies................................................ 6 — 3,228 — — Profit/loss on financial investments: Result from participations in Group companies .............. 7 103 1 045 Profit/loss on other securities and receivables classified as fixed assets ................................................................................ 8 6 –2 62 50 Other interest revenue and similar income............................ 9 57 31 — 8 Interest expenses and similar costs .................................................... 10 – 274 – 270 –2 –5 Profit after financial items ................................................................... 186 4,186 320 914 Tax on profit for the year.................................................................................. 11 – 567 – 419 – 69 42 Minority interests .......................................................................................................... — 2 Profit/loss for the year ................................................................................. – 381 3,769 251 956 Earnings per share ........................................................................................................ 25 SEK – 3.34 SEK 36.29 Earnings per share after full conversion ....................................... 25 SEK – 3.34 SEK 36.29 Tele2 Annual Report 2000 49
  • 52. Consolidated balance sheets B Group Parent Company SEK million Note Dec. 31, 00 Dec. 31, 99 Dec. 31, 00 Dec. 31, 99 ASSETS Fixed assets Intangible assets Capitalized license fees and right of use ...................................... 12 607 104 — — Goodwill...................................................................................................................................... 12 26,745 1,926 — — Total intangible assets................................................................................................... 27,352 2,030 — — Tangible assets Buildings and land .......................................................................................................... 13 99 16 — — Machinery and other technical plant ................................................. 13 7,226 5,848 — — Equipment, tools and installations.......................................................... 13 564 186 — 1 Fixed plant under construction and advances ..................... 13 142 104 1 — Total tangible assets........................................................................................................ 8,031 6,154 1 1 Long-term financial assets Participations in Group companies...................................................... 14 24,488 1,481 Receivables from Group companies .................................................. 15 1,028 847 Shares and participations in assoc. companies .................... 16 88 –6 — –2 Receivables from associated companies ....................................... 17 105 6 67 6 Other long-term holdings of securities ......................................... 18 146 3,542 23 3,541 Other long-term receivables......................................................................... 19 106 58 46 14 Deferred tax benefit .................................................................................................. 11 — — 168 237 Total long-term financial assets......................................................................... 445 3,600 25,820 6,124 Total fixed assets ..................................................................................................... 35,828 11,784 25,821 6,125 Current assets Materials and supplies Finished goods and merchandise............................................................. 246 34 — — Total materials and supplies................................................................................. 246 34 — — Current receivables Accounts receivable ................................................................................................... 20 2,454 1,471 — 1 Current tax benefits .................................................................................................. 5 — — — Receivables from Group companies .................................................. 1 4 Other receivables .......................................................................................................... 21 298 30 — — Prepaid expenses and accrued revenues ..................................... 22 2,003 662 1 1 Total current receivables ............................................................................................ 4,760 2,163 2 6 Short-term investments ............................................................................................... 23 — 4 — — Cash and cash equivalents ..................................................................................... 23 1,511 417 7 7 Total current assets ........................................................................................... 6,517 2,618 9 13 Total assets ........................................................................................................................ 42,345 14,402 25,830 6,138 50 Tele2 Annual Report 2000
  • 53. Consolidated balance sheets B Group Parent Company SEK million Note Dec. 31, 00 Dec. 31, 99 Dec. 31, 00 Dec. 31, 99 EQUITY AND LIABILITIES Shareholders’ equity 24 Restricted equity Share capital ........................................................................................................................... 25 724 519 724 519 Restricted reserves ..................................................................................................... 25,098 4,242 23,083 3,479 Total restricted equity .................................................................................................... 25,822 4,761 23,807 3,998 Non-restricted reserves/retained losses Retained losses/retained earnings .......................................................... 1,210 – 1,773 1,732 775 Profit/loss for the year ........................................................................................... – 381 3,769 251 956 Total non-restricted reserves/retained losses .................................... 829 1,996 1,983 1,731 Total shareholders’ equity..................................................................... 26,651 6,757 25,790 5,729 Untaxed reserves Foreign exchange reserve .................................................................................. 1 1 Total untaxed reserves ................................................................................ 1 1 Minority interest ..................................................................................................... 8 1 Provisions Deferred tax liability.................................................................................................. 11 615 60 — — Options issued ................................................................................................................... 26 — 236 — 236 Total provisions .......................................................................................................... 615 296 — 236 Long-term liabilities Interest-bearing Liabilities to financial institutions ............................................................ 27 5,490 4,757 — 21 Liabilities to Group companies .................................................................. — 2 Bank overdraft facility .............................................................................................. 23 14 8 — — Other liabilities .................................................................................................................. 28 86 75 — 3 Total interest-bearing liabilities........................................................................... 5,590 4,840 — 26 Non-interest-bearing Other liabilities .................................................................................................................. 25 15 — — Total non-interest-bearing liabilities .............................................................. 25 15 — — Total long-term liabilities ....................................................................... 5,615 4,855 — 26 Current liabilities Interest-bearing Liabilities to financial institutions ............................................................ 27 2,682 174 21 116 Other liabilities .................................................................................................................. 28 546 74 3 3 Total interest-bearing liabilities........................................................................... 3,228 248 24 119 Non-interest-bearing Accounts payable............................................................................................................ 2,546 790 6 1 Current tax liabilities ................................................................................................ 27 — — — Liabilities to associated companies ...................................................... 60 — — — Other liabilities .................................................................................................................. 29 322 190 1 1 Accrued expenses and prepaid revenues ................................... 30 3,273 1,265 8 25 Total non-interest-bearing liabilities .............................................................. 6,228 2,245 15 27 Total current liabilities ................................................................................ 9,456 2,493 39 146 Total shareholders’ equity and liabilities................... 42,345 14,402 25,830 6,138 PLEDGED ASSETS AND CONTINGENT LIABILITIES Pledged assets .............................................................................................................. 31 1,195 405 None 410 Contingent liabilities ....................................................................................... 32 None None 334 323 Tele2 Annual Report 2000 51
  • 54. Consolidated cash flow statement K Group Parent Company SEK million Note 2000 1999 2000 1999 Operating activities Operating profit ............................................................................................................... 441 1,154 155 – 165 Adjustments of income/expense items that do not generate cash flow from operating activities: Depreciation and amortization .......................................................... 1,400 909 1 — Capital losses/gains on sale of machinery, other technical plant .................................................................................. 16 5 — — Financial leases ......................................................................................................... – 13 – 16 — — Exchange rate differences .................................................................................. –5 10 2 7 Interest received.............................................................................................................. 61 26 — 4 Interest paid ........................................................................................................................... – 280 – 292 –2 –7 Financial expenses paid.......................................................................................... – 16 – 19 3 — Tax received ........................................................................................................................... –9 — — — 1,595 1,777 159 – 161 Change in working capital: Materials and supplies.............................................................................................. – 25 2 — — Accounts receivable ................................................................................................... – 79 – 453 1 — Other current receivables ................................................................................ – 51 13 — 7 Prepaid expenses and accrued revenues ..................................... – 448 – 133 — — Intra-Group transactions, current.......................................................... 3 — Accounts payable............................................................................................................ 105 2 5 –1 Other current liabilities ........................................................................................ 100 62 — 1 Accrued expenses and prepaid revenues ................................... – 78 349 – 17 15 Provisions................................................................................................................................... – 236 134 – 236 134 – 712 – 24 – 244 156 Cash flow provided by operating activities ........... 883 1,753 – 85 –5 Investing activities Acquisition of intangible assets .................................................................. – 228 –7 — — Sale of intangible assets ......................................................................................... 3 1 — — Acquisition of tangible assets ....................................................................... – 1,386 – 1,128 –1 — Sale of tangible assets .............................................................................................. 101 4 — — Acquisition of shares in Group companies, excl. cash .......................................................... 14 843 – 237 – 61 – 27 Sale of shares in Group companies ..................................................... 14 — — — – 13 Acquisition of other long-term holdings of securities ......................................................................................... –1 – 40 — – 31 Sale of other long-term holdings of securities.................... — – 13 — — Lending to Group companies....................................................................... – 137 –8 Payment received from Group companies ............................... 461 180 Other long-term lending ..................................................................................... – 103 – 20 – 94 – 20 Payments received on other long-term lending ................ 1 — 1 — Cash flow from investing activities....................................... 2 – 770 – 1,440 169 81 Financing activities Proceeds from loans from credit institutions ...................... 2 446 806 — 21 Amortization of loans from credit institutions .................. – 787 – 1,053 – 116 – 235 Amortization of other interest-bearing liabilities ........... – 575 – 75 –3 –3 Amortization of loans from Group companies ................. –2 — New share issue............................................................................................................... 37 — 37 — Cash flow from financing activities ...................................... 1,121 – 322 – 84 – 217 Net change in cash.............................................................................................. 1,234 –9 — – 141 Cash at beginning of year................................................................................... 23 421 433 7 148 Adjustment for exchange rate differences ................................ 23 – 144 –3 — — Cash at end of year ............................................................................................ 23 1,511 421 7 7 See Note 33 for additional cash flow information on transactions that had no net effect on cash flow. 52 Tele2 Annual Report 2000
  • 55. Notes (SEK million) General accounting principles and changes in 2000 in associated companies.” However, if the one-off effect is sub- In 2000,Tele2 modified its accounting principles to conform to stantial, the amount is reported under “Non-recurring items.” the following recommendation of the Swedish Financial Goodwill on consolidation attributable to a non-Swedish asso- Accounting Standards Council: RR1:00 – Consolidated ciated company is reported as an asset in the foreign currency. Accounts, RR9 – Income tax, RR11 – Revenues, RR12 –Tangible These values are translated applying the same principles as for assets, RR15 – Intangible assets and draft recommendation for the associated companies’ income statements and balance sheets. the Cost of Loans.This means that Tele2 follows recommenda- tions RR1:00-RR17. Figures from previous years have been Minority interests recalculated in line with the new accounting principles. See fur- The minority share in net profit and shareholders’ equity is ther Note 24. reported as minority interest. Assets and liabilities in subsidiaries are valued based on the accounting principles applied by the Parent Company. Receivables and liabilities of Swedish and non-Swedish subsidiaries denominated in foreign currencies Consolidated accounts The receivables and liabilities of Group companies that are The consolidated financial statements include the accounts of denominated in foreign currencies have been translated into the Parent Company and all companies in which the Parent Swedish kronor using the closing rate. Company controls, directly or indirectly, more than 50% of the Gains or losses on foreign exchange in international transac- votes. tions related to regular operations are included in the income The consolidated accounts were prepared based on the pur- statement under “Other operating revenues” and “Other oper- chase method, which means that the Parent Company’s pur- ating expenses,” respectively, while differences in financial receiv- chase cost of shares in each subsidiary is charged against that ables and liabilities are reported among financial items. Note 24 subsidiary’s acquisition value, in other words, the subsidiary’s summarizes the exchange rate differences charged directly to shareholders’ equity (including the equity component of shareholders’ equity and the differences that affected profit/loss untaxed reserves) at the time of acquisition based on a market for the year. appraisal of the subsidiary’s net assets. Consequently, the Long-term lending to/borrowing from Tele2’s foreign opera- Group’s shareholders’ equity includes only that part of each tions is regarded as a permanent part of the Parent Company’s subsidiary’s equity that has been earned after the acquisition. financing of/borrowing from foreign operations, and thus as an The difference between the purchase cost of shares in a sub- expansion/reduction of the Parent Company’s investment in the sidiary and the market value of that subsidiary’s net assets at the independent foreign operation, the lending/borrowing is trans- time of acquisition is allocated to the subsidiary’s identifiable lated at the historical rate of exchange if the borrowing is assets if the book values were less than the market values.Any denominated in the foreign company’s currency. amounts in book value exceeding market value are reported as goodwill. Valuation principles The current method is used to translate the accounts of for- Assets and liabilities have been valued at their purchase cost eign subsidiaries. Consequently, the exchange rate on the closing unless otherwise specified. date (year-end rate) is used to translate items in the balance sheet, while items in the income statement are translated using Fixed assets the average exchange rate for the year (average rate). Intangible and tangible fixed assets are reported net after All of Tele2’s companies are regarded as independent foreign deductions for accumulated amortization and depreciation operations, so that exchange-rate differences arising from trans- according to plan. Depreciation and amortization according to lation are charged directly to shareholders’ equity. plan is based on the acquisition value of the assets and the esti- When an independent foreign operation is divested, the accu- mated utilization period. mulated exchange-rate differences attributable to the divested Note 2 presents depreciation and amortization schedules for operation, which were previously charged directly to sharehold- fixed assets and reasons for amortizing certain intangible fixed ers’ equity, are reported in “Net assets in Group companies assets over utilization periods longer than five years. divested” in the income statement. Intangible assets Reporting associated companies Capitalized license fees and right of use An associated company is any company in which the Group’s The Company holds a number of licenses issued by the Swedish holding is regarded as long-term and entitles the Group to at National Post and Telecom Agency and the equivalent licensing least 20% but not more than 50% of the votes in the company. authority in other countries. Based on a contract between Associated companies are reported using equity accounting. Industriförvaltnings AB Kinnevik (“Kinnevik”) and Tele2 Sverige Accordingly, the book value of shares in each associated compa- AB, the Company is entitled to exercise Kinnevik’s license from ny as reported in the consolidated balance sheet corresponds the National Rail Administration. Capitalized expenses for these to the Group’s participation in the associated company’s share- rights are amortized straight-line over the duration of the con- holders’ equity plus any residual goodwill on consolidation fol- tract. lowing adjustment to the Group’s accounting principles. The Group’s participation in associated companies’ earnings Goodwill after financial items is reported in the income statement under Goodwill is defined as the difference between the purchase cost “Profit/loss on shares and participations in associated companies” of shares or assets acquired and the market value of net assets. together with amortization of acquired goodwill. Participation in Goodwill is amortized on a straight-line basis over 5–20 years. associated companies’ actual tax paid and deferred tax liabilities or benefits is reported in the income statement under “Tax on Tangible assets profit/loss for the year” and in the balance sheet under “Shares Machinery and technical plant and participations in associated companies”. Profits earned by Machinery and technical plant includes equipment and machines an associated company after acquisition that have not yet been intended for use in operations, such as network installations. distributed are allocated to the equity component of associated The asset is depreciated on a straight-line basis over the utiliza- companies’ shareholders’ equity, which is part of the Group’s tion period.The acquisition value includes direct expenses restricted equity. In the event of losses, the participation in the attributable to the construction and installation of networks. loss is deducted from non-restricted equity. Interest directly relating to acquisition, construction or produc- If the Group’s participation in the undistributed earnings of tion of an asset that necessarily requires considerable time to an associated company increases or decreases because of a complete for the intended application is included in the acquisi- share issue, the loss or gain is reported in the consolidated in- tion value of the asset. come statement under “Profit/loss on shares and participations Tele2 Annual Report 2000 53
  • 56. Notes Additional expenses for extensions and improvements that Revenue recognition increase value are capitalized, while additional expenses for Revenue from telephony, cable TV and other services and prod- repairs and maintenance are charged continually against profit ucts is recognized at the time the service/product is supplied to during the period they arise. the customer. Equipment, tools and installations Marketing expenses Equipment comprises assets used in administration, sales and Expenditure for advertising and other marketing activities is operations. charged on an ongoing basis. Leases Estimates and approximations In the consolidated accounts, leases are classified as either finan- Some items in the consolidated accounts are based on esti- cial or operating leases.A lease is considered financial if all eco- mates and approximations.Actual results could differ from nomic risks and benefits associated with ownership of the asset those estimates. have been transferred, to a material degree, to the lessee; other- wise, the lease is an operating lease. For financial leases, each Corporate income tax asset is entered as a tangible fixed asset, and a corresponding Consolidated profit or loss for the year is charged with the tax liability is entered on the liabilities side of the balance sheet. In on taxable income for the year (“Tax paid”) and with estimated the income statement, the cost of the lease is divided into a tax charges or credits for temporary differences (“Deferred depreciation portion and an item in interest expense. The asset tax”).A temporary difference is a provision to appropriations is depreciated on a straight-line basis during the utilization period. made by an individual company or any other item that merely alters the time when an item is considered taxable or entitling Receivables the company to a deduction. Receivables have been reported in the amount expected to be The calculation of deferred tax benefits in the Group has paid. taken into account the Group’s loss carry-forwards to the extent that it is expected they can be used in the foreseeable Materials and supplies future. Deferred tax receivables and deferred tax liabilities are Inventories of materials and supplies are valued at the lesser of netted only among units having the same domicile for tax pur- purchase cost and market value. poses. The tax effects of Group contributions paid and received are reported in the individual companies as a tax expense or tax revenue in the income statement (“Tax paid”) and charged to retained losses or earnings. Number of employees Average number of employees 2000 of whom, men 1999 of whom, men Group: Sweden .............................................................................................................................................................................................. 947 72% 990 72% Norway ............................................................................................................................................................................................. 105 71% 89 65% Denmark ......................................................................................................................................................................................... 134 66% 113 72% Finland................................................................................................................................................................................................. 6 83% 3 33% Nordic ..................................................................................................................................................................................................... 1,192 72% 1,195 71% Baltic States ................................................................................................................................................................................. 439 42% 164 51% Poland.................................................................................................................................................................................................. 21 71% 4 25% Baltic States and Eastern Europe......................................................................................................... 460 43% 168 50% Germany.......................................................................................................................................................................................... 13 62% — — Netherlands ................................................................................................................................................................................ 7 57% — — Switzerland................................................................................................................................................................................... 6 50% — — Austria ................................................................................................................................................................................................ 6 67% — — United Kingdom ................................................................................................................................................................... 4 100% — — Ireland ................................................................................................................................................................................................. — — 1 100% Central Europe ....................................................................................................................................................................... 36 64% 1 100% France.................................................................................................................................................................................................. 10 60% — — Italy.......................................................................................................................................................................................................... 8 63% — — Spain ...................................................................................................................................................................................................... 1 100% — — Southern Europe................................................................................................................................................................. 19 63% — — Luxembourg................................................................................................................................................................................ 40 50% — — Luxembourg ................................................................................................................................................................................ 40 50% — — Total average number of employees in the Group................................................ 1,747 64% 1,364 69% Parent Company: Sweden .............................................................................................................................................................................................. 2 100% 2 100% Total average number of employees in Parent Company ........................ 2 100% 2 100% The average number of employees in companies acquired during the year is reported in relation to how long the subsidiary was included in the Group. 54 Tele2 Annual Report 2000
  • 57. Notes Costs of personnel 2000 1999 of which of which Salaries and Social security pension Salaries and Social security pension remuneration expenses expences remuneration expenses expences Group: Board and President................................. 18 9 2 16 7 2 Other employees............................................ 563 215 36 487 166 29 Total Group .............................................................. 581 224 38 503 173 31 Parent Company: Board and President................................. 7 3 1 9 5 2 Other employees............................................ 2 1 — 1 1 — Total Parent Company......................... 9 4 1 10 6 2 Of total wages, salaries and remuneration in the Parent Company, SEK 7 million (1999: 9) was paid to the Board and President, of which SEK 0 million (1999: 1) related to bonuses. Bonuses paid to other employees amounted to SEK 2 million (1999: 1). Wages, salaries and remuneration in companies acquired during the year are reported in relation to how long the subsidiary was included in the Group. Group 2000 1999 Board and of which other Board and of which other President bonuses employees President bonuses employees Salaries and remuneration Sweden.......................................................................... 9 — 355 11 1 376 Norway......................................................................... 2 — 52 2 — 40 Denmark..................................................................... 3 1 63 2 1 58 Finland ............................................................................ — — 2 — — 1 Nordic................................................................................. 14 1 472 15 2 475 Baltic states ............................................................. 1 — 43 1 — 12 Poland ............................................................................. — — 2 — — — Baltic states and Eastern Europe 1 — 45 1 — 12 Germany ..................................................................... — — 6 — — — Netherlands............................................................ — — 3 — — — Switzerland .............................................................. 1 — 4 — — — Austria ........................................................................... — — 2 — — — United Kingdom............................................... 1 — 3 — — — Central Europe .................................................. 2 — 18 — — — France ............................................................................. — — 7 — — — Italy ..................................................................................... 1 1 3 — — — Southern Europe ............................................ 1 1 10 — — — Luxembourg........................................................... — — 18 — — — Luxembourg............................................................ — — 18 — — — Total salaries and remuneration 18 2 563 16 2 487 In 2000, in addition to remuneration stated above, provisions In the case of termination of employment by Tele2 AB, the equaling SEK 12 million (1999 SEK 7.5 million) were made for President is entitled to salary for a period of notice of not less bonuses to senior executives in the Group plus social security than six and not more than 18 months, and other persons in expenses of SEK 4 million (1999 SEK 2.5 million).The allocation Company management are entitled to not less than six and not of the amount will be determined in 2001. more than 24 months’ salary. No other severance compensa- The Chairman of the Board of Tele2 AB, Jan Hugo Stenbeck, tion will be paid to Company management on termination of received compensation from the Group in 2000 in the form of employment other than the salaries specified above. a director’s fee totaling SEK 0.3 million (1999 SEK 0.3 million). Pensions are paid based on a general pension insurance plan. Directors’ fees paid to other Members of the Board equaled In 1997, a decision was made to execute an incentive program SEK 1.5 million (1999 SEK 1.6 million). for senior management in the Tele2 Group (as per Note 26). Of The President of Tele2 AB, Lars-Johan Jarnheimer, received the original options representing a total of 500,000 shares in salary and remuneration during 2000 SEK 5.1 million (1999 SEK Tele2 AB, options corresponding to a total of 48,000 shares 3.9 million during the period April–December 1999. Furthermore were for Lars-Johan Jarnheimer, the Company’s President. Anders Björkman, during his term as President of Tele2 AB, re- During the year, a total of 2/5 of outstanding options was exer- ceived SEK 3.6 million during the period January–March 1999). cised, corresponding to 200,000 shares in Tele2 AB. Tele2 Annual Report 2000 55
  • 58. Notes Auditor Group Parent Company 2000 1999 2000 1999 PricewaterhouseCoopers Audit assignments ....................................................................................................... 3 2 — — Other assignments..................................................................................................... 6 1 6 1 9 3 6 1 Other auditors Audit assignments ....................................................................................................... — 1 — — Other assignments..................................................................................................... 1 — — — 1 1 — — Total fees and reimbursement ........................................................... 10 4 6 1 Audit assignments refer to the evaluation of the annual report and accounting records as well as the administration by the President and Board of Directors.All other work is Other assignments. US accounting principles (US GAAP) The Group’s balance sheet and income statement have been prepared in accordance with Swedish accounting principles.These deviate in certain respects from US accounting principles (US GAAP). Note 34 shows the adjustments required to report in accordance with US GAAP. 56 Tele2 Annual Report 2000
  • 59. Notes Note 1 Operating revenue and operating profit Group Net sales Operating profit/loss By business areas: 2000 1999 2000 1999 Mobile telephony .................................................................................................................................................................. 5,115 4,005 1,942 1,444 Fixed telephony and Internet................................................................................................................................. 7,596 4,400 – 1,127 – 159 Cable TV ............................................................................................................................................................................................. 190 121 – 37 – 68 Data processing...................................................................................................................................................................... 428 229 86 56 Intra-Group sales.................................................................................................................................................................. – 859 – 580 Group depreciation ........................................................................................................................................................... – 423 – 119 Total, by business areas .............................................................................................................................................. 12,470 8,175 441 1,154 Group Net sales Operating profit/loss Geographic markets: 2000 1999 2000 1999 Sweden ................................................................................................................................................................................................. 8,653 7,131 2,149 1,505 Norway ................................................................................................................................................................................................ 1,127 526 – 45 – 81 Denmark ............................................................................................................................................................................................ 1,141 984 25 – 109 Finland.................................................................................................................................................................................................... 25 10 – 39 –1 Nordic ........................................................................................................................................................................................................ 10,946 8,651 2,090 1,314 Baltic States..................................................................................................................................................................................... 221 104 – 62 – 33 Poland..................................................................................................................................................................................................... 3 — – 17 –4 Czech Republic .......................................................................................................................................................................... 1 — –7 — Baltic States and Eastern Europe ............................................................................................................... 225 104 – 86 – 37 Germany ............................................................................................................................................................................................. 302 — – 324 — Netherlands .................................................................................................................................................................................... 344 — – 168 — Switzerland ...................................................................................................................................................................................... 253 — – 23 — Austria ................................................................................................................................................................................................... 151 — – 35 — United Kingdom........................................................................................................................................................................ 32 — – 38 — Ireland .................................................................................................................................................................................................... — — — –4 Central Europe ........................................................................................................................................................................... 1,082 — – 588 –4 France..................................................................................................................................................................................................... 500 — – 242 — Italy ............................................................................................................................................................................................................ 425 — – 204 — Greece .................................................................................................................................................................................................. 1 — — — Turkey..................................................................................................................................................................................................... 1 — — — Spain ......................................................................................................................................................................................................... 1 — –3 — Southern Europe ..................................................................................................................................................................... 928 — – 449 — Luxembourg ................................................................................................................................................................................... 143 — – 97 — Belgium ................................................................................................................................................................................................. 2 — –2 — Liechtenstein ................................................................................................................................................................................. 3 — –4 — Luxembourg.................................................................................................................................................................................... 148 — – 103 — Intra-Group sales.................................................................................................................................................................. – 859 – 580 Group depreciation .............................................................................................................................................................. – 423 – 119 Total geographic markets ......................................................................................................................................... 12,470 8,175 441 1,154 The geographic market is determined on the basis of the country in Changes in accounting principles during the year in terms of start- which each company has its primary market. up expenses and cash cards resulted in a retroactive rise in operating The accounting principles were changed during 2000 to the effect profit for 1999 in a net amount of SEK 12 million, attributable to that revenue from cash cards does not arise on the sales date but fixed telephony and Internet in Norway, Denmark and Sweden, as instead in pace with the utilization of the service by the customer. A well as mobile telephony in Sweden. retroactive reduction in revenue for 1999 was thus made in the Of the Parent Company’s total purchases in terms of SEK, 0.1% of amount of SEK 18 million, attributable to Sweden and mobile tele- operating costs and 100% of revenue are attributable to other com- phony. panies in the Group. Tele2 Annual Report 2000 57
  • 60. Notes Note 2 Depreciation and investments for the year Group Depreciation Investments By business areas: 2000 1999 2000 1999 Mobile telephony ..................................................................................................................................................................... – 337 – 298 773 446 Fixed telephony and Internet ................................................................................................................................... – 538 – 399 719 615 Cable TV ............................................................................................................................................................................................. – 64 – 64 73 14 Data processing ......................................................................................................................................................................... – 38 – 29 48 75 Acquisition/sale of shares .............................................................................................................................................. – 843 290 Group depreciation .............................................................................................................................................................. – 423 – 119 Total by business areas .................................................................................................................................................. – 1,400 – 909 770 1,440 Depreciation Investments Geographic markets: 2000 1999 2000 1999 Sweden ................................................................................................................................................................................................. – 756 – 681 1,022 994 Norway ................................................................................................................................................................................................ – 66 – 20 275 48 Denmark ............................................................................................................................................................................................ – 65 – 62 84 93 Finland.................................................................................................................................................................................................... –1 — 2 — Nordic – 888 – 763 1,383 1,135 Baltic States..................................................................................................................................................................................... – 48 – 26 174 11 Poland..................................................................................................................................................................................................... –1 –1 12 4 Czech Republic .......................................................................................................................................................................... — — 2 — Baltic States and Eastern Europe – 49 – 27 188 15 Germany ............................................................................................................................................................................................. – 10 — 10 — Netherlands .................................................................................................................................................................................... –3 — 10 — Switzerland ...................................................................................................................................................................................... –3 — 2 — Austria ................................................................................................................................................................................................... –2 — 1 — United Kingdom........................................................................................................................................................................ –1 — 3 — Central Europe – 19 — 26 — France..................................................................................................................................................................................................... – 12 — 1 — Italy ............................................................................................................................................................................................................ –4 — 7 — Spain ......................................................................................................................................................................................................... — — 1 — Southern Europe – 16 — 9 — Luxembourg ................................................................................................................................................................................... –4 — 6 — Liechtenstein ................................................................................................................................................................................. –1 — 1 — Luxembourg –5 — 7 — Acquisition/sale of shares .............................................................................................................................................. – 843 290 Group depreciation .............................................................................................................................................................. – 423 – 119 Total Geographic markets ....................................................................................................................................... – 1,400 – 909 770 1,440 The geographic market is determined on the basis of the country in assets in 1999 by SEK 292 million.The changes are attributable to which each country has its primary market. fixed telephony and Internet in Norway, Denmark and Sweden. Changes in accounting principles governing start-up expenses and In addition to the SEK 290 million reported above, investment in interest attributable to the construction of assets, which by necessity, shares in 1999 amounted to SEK 223 million, which refers to non- require considerable time to complete, have resulted in a retroactive cash transactions in conjunction with the acquisition of shares in reduction in depreciation for 1999 in a net amount of SEK 47 million, Tele2 Eesti AS and Levicom Broadband. Also see Note 33. increased investments in 1999 by SEK 19 million and reduced total Depreciation Group Parent Company By type of asset: 2000 1999 2000 1999 Licenses and right of use ............................................................................................................................................... – 16 –7 — — Goodwill ............................................................................................................................................................................................. – 426 – 134 — — Buildings............................................................................................................................................................................................... –3 –1 — — Machinery and other technical plant .............................................................................................................. – 875 – 711 — — Equipment, tools and installations....................................................................................................................... – 80 – 56 –1 — Total depreciation for the year by type of asset ................................................................. – 1,400 – 909 –1 — 58 Tele2 Annual Report 2000
  • 61. Notes Estimated period of use: Group Parent Company amortized over 10 years. Goodwill that arose in 1996 with the pur- Intangible assets: chases of the outstanding minority interest in Tele2 Sverige AB and Licenses and right of use................................................... 2–25 years 5 years the outstanding option in Comviq GSM AB is amortized over 20 years. Goodwill that arose with the acquisition of the Datametrix, Ritabell, Goodwill ................................................................................................. 5–20 years — SIA Tele2 and SEC companies will also be amortized over 20 years. Tangible assets: The depreciation period is based on the long-term, strategic impor- Land improvements .................................................................. 3–25 years — tance determined at the time of each acquisition. A depreciation Machinery and other technical plant..................... 2–25 years — period of 20 years is applied for acquisitions of companies in new Equipment, tools and installations ............................. 3–10 years 3–5 years markets. Goodwill arising from the acquisition of customers in mobile tele- Depreciation/amortization according to plan is based on the acquisi- phony and the acquisition of the UNI-C Internet operations is amor- tion value of each fixed asset and its estimated period of use.The tized over 10 years, which is based on the estimated strategic value depreciation rate is a straight-line depreciation in the period of use. of the customer base and operations, respectively. Other goodwill is Goodwill that arose upon the original acquisition of Comviq GSM amortized over five years. AB and Tele2 Sverige AB as well as other acquisitions before 1996 is Note 3 Other operating revenue Group Parent Company 2000 1999 2000 1999 Rental of capacity and antenna installations .......................................................................................... 105 121 — — Divestment of fixed assets........................................................................................................................................... 4 1 — — Sales of mobile telephone equipment ........................................................................................................... 17 5 — — Administrative services .................................................................................................................................................... 56 38 — — Exchange gains in business operations ......................................................................................................... — 2 — — Other revenue ............................................................................................................................................................................ 30 46 — — Total other operating revenue.......................................................................................................................... 212 213 — — Note 4 Other operating expenses Group Parent Company 2000 1999 2000 1999 Sale of shares in 4T Solution AB .......................................................................................................................... – 17 — — — Sale/scrapping of other fixed assets ................................................................................................................. –5 — — — Exchange losses from operations ....................................................................................................................... – 57 –1 — — Other expenses......................................................................................................................................................................... –8 — — — Total other operating expenses .................................................................................................................. – 87 –1 — — Note 5 Profit/loss on shares and participations in associated companies Group Parent Company Profit generated by: 2000 1999 2000 1999 Share of earnings for the year................................................................................................................................. – 44 75 2 – 19 Amortization of goodwill acquired ................................................................................................................... — – 30 — — Total Profit/loss on shares and participations in associated companies – 44 45 2 – 19 Holding Group Parent Company By company: Dec. 31, 2000 Dec. 31, 1999 2000 1999 2000 1999 Everyday Webguide AB.................................................. 50% 50% – 48 –5 — — Gamla Stans Millennium............................................... 25% 25% 2 – 19 2 – 19 Transcom Worldwide S.A. ........................................ 37.5% — 2 — — — SNPAC Swedish Number Port.Adm. ......... 20% — — — — — NetCom ASA, Norway ................................................. — 25% — 71 — — Ritabell, Estonia ...................................................................... — 48% — –2 — — Total Profit/loss on shares and participations in associated companies – 44 45 2 – 19 Tele2 Annual Report 2000 59
  • 62. Notes 2000 Everyday Gamla Stans Transcom SNPAC Contribution of each associated company to consolidated profit/loss: Millennium (3 months) Profit/loss in each associated company...................................................................................................................... – 96 79 3 — Participating interest in profit ................................................................................................................................................ – 48 20 2 — Transfer to sales expenses ......................................................................................................................................................... — – 18 — — Contribution to profit/loss in the Tele2 Group .................................................................................... – 48 2 2 — 1999 Everyday Gamla Stans NetCom ASA Ritabell Contribution of each associated company to Group profit/loss: Millennium (11 months) (1 month) Profit in each associated company................................................................................................................................... – 10 – 77 359 — Participating interest in profit ................................................................................................................................................ –5 – 19 90 — New share issue in associated company.................................................................................................................. — — 9 — Depreciation of surplus value ................................................................................................................................................ — — – 28 –2 Contribution to profit in the Tele2 Group................................................................................................... –5 – 19 71 –2 Additional shares in associated companies during the year pertain, in In order to provide a more accurate impression of earnings for the part, to Transcom Worldwide S.A, which is part of the SEC Group year, the share in the profit of Gamla Stans Millennium KB is reported acquired during the year, and a recently acquired company, SNPAC net against the costs that Gamla Stans Millennium KB invoiced Tele2 Swedish Number Portability Administrative Centre AB. in 2000 for completed marketing campaigns. Net accounting has been Changes in the Tele2 Group’s accounting principles for start-up made in the amount of SEK 18 million, the profit share arising as a expenses resulted in an adjustment of the earnings of Everyday result of this invoicing. Webguide AB for 2000 in with SEK –41 and a retroactive adjustment of earnings for previous years with SEK –5 million. Note 6 Divestment of associated companies Group Parent Company 2000 1999 2000 1999 Divestment of NetCom ASA ................................................................................................................................................. — 3,228 — — Total Divestment of associated companies............................................................................................... — 3,228 — — In November 1999,Tele2 AB sold its 24.8% shareholding in NetCom ASA to Société Européenne de Communication S.A. (SEC) in exchange for new shares in SEC.The sale was executed by the wholly owned holding company Comvik International AS, which owned shares in NetCom ASA, so the Parent Company reports its capital gain in “Profit/loss on shares in Group companies” in the income statement. See also Note 7. Note 7 Profit/loss on shares in Group companies Parent Company 2000 1999 Capital gain on the sale of Belmus BV............................................................................................................................................................................................................................................................... 103 — Capital gain on the sale of Comvik International AS....................................................................................................................................................................................................................... — 2,957 Capital loss on the sale of Tele2 Sverige AB .......................................................................................................................................................................................................................................... — – 1,912 Total profit/loss on shares in Group companies .......................................................................................................................................................................................................... 103 1,045 In March 2000, the company sold all its shares in Belmus BV to the wholly owned Group company,Tele2 Sverige AB. In November 1999, the Parent Company divested shares in its wholly owned subsidiary Comvik International AS, which owns 24.8% of the shares in NetCom ASA, which is listed on the Norwegian stock exchange. In the Group, the capital gain is reported as “Divestment of associated companies”. See also Note 6. At December 31 1999,Tele2 AB sold all shares in Tele2 Sverige AB to the Group company Tele2 Holding AB.The sale was priced at the tax- effective purchase cost, resulting in a capital loss for the Company. 60 Tele2 Annual Report 2000
  • 63. Notes Note 8 Gains/losses on other securities and receivables classified as fixed assets Group Parent Company 2000 1999 2000 1999 Interest, Group .................................................................................................................................................................................. 57 52 Interest, external receivables............................................................................................................................................ 3 — 3 — Exchange rate difference ....................................................................................................................................................... 3 –2 2 –2 Total gains/losses on securities/receivables as fixed assets ................................ 6 –2 62 50 Note 9 Other interest revenue Group Parent Company 2000 1999 2000 1999 Interest on bank deposits .................................................................................................................................................... 58 26 — 4 Exchange rate differences on short-term financial assets ........................................................... –1 5 — 4 Total other interest revenue ................................................................................................................................ 57 31 — 8 Note 10 Interest expense and similar costs Group Parent Company 2000 1999 2000 1999 Interest on loans.............................................................................................................................................................................. – 205 – 231 –2 –6 Interest on financial leases................................................................................................................................................... – 11 – 13 — — Interest, penalty interest and other liabilities .............................................................................................. – 34 – 16 — –1 Exchange rate differences on financial liabilities....................................................................................... –6 6 — 2 Other financial expenses....................................................................................................................................................... – 18 – 16 — — Total interest expenses and similar costs ...................................................................................... – 274 – 270 –2 –5 Note 11 Tax on profit/loss for the year and deferred tax liability/benefit Group Parent Company Tax on profit for the year is distributed geographically as follows 2000 1999 2000 1999 Current tax expense: Luxembourg...................................................................................................................................................................................... –9 — — — Netherlands ...................................................................................................................................................................................... –3 — — — – 12 — — — Deferred tax expense resulting from temporary differences: Sweden .................................................................................................................................................................................................... – 555 – 377 – 69 42 Norway ................................................................................................................................................................................................... — – 37 — — Estonia ...................................................................................................................................................................................................... — –3 — — Netherlands ...................................................................................................................................................................................... — –2 — — – 555 – 419 – 69 42 Total tax on profit/loss for the year ..................................................................................................... – 567 – 419 – 69 42 For the Group, the change in accounting principles in 2000 for start-up expenses resulted in a retroactive increase of SEK 8 million in the deferred tax expense for 1999 and a reduction of SEK 79 million in the deferred tax liability. In the case of the Parent Company, the change in accounting principles during the year for income tax resulted in a retroactive crediting of tax income of SEK 42 million in 1999. Group Geographic distribution of profit/loss before tax and minority shares 2000 1999 Sweden ........................................................................................................................................................................................................ 1,925 4,483 Other countries.............................................................................................................................................................................. – 1,739 – 297 Total profit/loss before tax and minority shares ........................................................... 186 4,186 Tele2 Annual Report 2000 61
  • 64. Notes Difference between booked tax and tax on profit/loss for the year in accordance with statutory tax rates The difference between the Group’s tax expense and the tax expense based on current tax rates consists of the following items: Group 2000 1999 Profit/loss before tax and minority shares...................................................................................................... 186 4,186 Tax according to current tax rate in: Tax effect according to the tax rates in Sweden ............................................................................. – 52 28.0% – 1,172 28.0% Deviation between tax rates in Sweden for foreign subsidiaries................................ 49 5 –3 – 1,167 Tax effect of: Items not affecting tax (Group adjustments) ....................................................................................... 119 64.0% 25 – 0.6% Permanent differences....................................................................................................................................................... 22 – 11.8% 829 – 19.8% Loss carry-forwards: Non-utilization of net loss for the year .................................................................................................... – 708 380.6% – 93 2.2% From previous year’s profit/loss not included in profit/loss for the year ......... 3 – 1.6% – 13 0.3% Tax expenses for the year and effective tax rate............................................................... – 567 304.8% – 419 10.0% The 1999 item for permanent differences essentially refers to the tax The item Non-utilization of loss for the year relates primarily to effect of the Parent Company’s capital gain on the sale of NetCom foreign operations. ASA, SEK 828 million, which is not reported for taxation for the rea- sons stated below. Group At December 31, 2000, the Tele2-Group has loss carry-forwards in a Deferred tax liability(-)/benefit(+): Dec. 31, 2000 Dec. 31, 1999 net amount of SEK 7,229 million, of which SEK 2,757 million expires In untaxed reserves ....................................................................... – 814 – 397 within five years and the remaining SEK 4,472 million expires in 2006 or later, or proceeds with no time limit.The deferred tax receivable is In value of unutilized loss carry-forwards......... 199 337 reported as a loss carry-forward only in the amount it is estimated can Total deferred tax liability......................................... – 615 – 60 be utilized in the near future. A prudent calculation has been made of the deferred tax receivables in foreign operations, which were report- ed as zero at December 31, 2000. Total loss carry-forwards in foreign operations amount to SEK 6,570 million. The change in accounting principles in 2000 for start-up expenses The tax authorities have challenged loss carry-forwards in Tele2 AB resulted in a retroactive decrease of SEK 79 million in the deferred tax corresponding to SEK 176 million (1999: SEK 170 million) in deferred liability for 1999. tax revenue.Those loss carry-forwards have been reported at their full Unutilized loss carry-forwards include temporary differences. amounts. The shares in NetCom ASA sold in 1999 were actually exchanged Geographic breakdown of deferred Group for shares in SEC, so a postponement will be obtained for the tax-effec- tax liability(-)/benefit(+): Dec. 31, 2000 Dec. 31, 1999 tive capital gain. Because Tele2 exercises control over whether or not Deferred tax benefit: the profit will be brought forward for taxation, no tax effect from the Sweden................................................................................................... 199 337 sale has been charged in the accounts.A divestment of SEC shares out- Deferred tax liability: side the Tele2 Group would incur taxes for Tele2 of SEK 828 million. The company’s control has been further strengthened as a result of the Sweden................................................................................................... – 814 – 397 acquisition of the remaining shares in SEC. Total deferred tax liability........................................ – 615 – 60 62 Tele2 Annual Report 2000
  • 65. Notes Note 12 Intangible assets Dec. 31, 2000 Group Licenses and right of use Goodwill Total Acquisition value at Jan. 1 .................................................................................................................................................................................................. 141 2,312 2,453 Acquisition value in acquired companies ........................................................................................................................................................ 356 1,896 2,252 Investment for the year........................................................................................................................................................................................................ 226 22,795 23,021 Reclassified items ......................................................................................................................................................................................................................... 6 — 6 Translation difference for the year.......................................................................................................................................................................... 7 886 893 Acquisition value.................................................................................................................................................................................................................................. 736 27,889 28,625 Accumulated depreciation/amortization at Jan. 1 ................................................................................................................................. – 37 – 386 – 423 Accumulated depreciation/amortization in acquired companies ....................................................................................... – 80 – 304 – 384 Depreciation/amortization for the year ........................................................................................................................................................... – 16 – 426 – 442 Translation difference for the year.......................................................................................................................................................................... 4 – 28 – 24 Accumulated depreciation/amortization................................................................................................................................................................. – 129 – 1,144 – 1,273 Book value.............................................................................................................................................................................................................................................. 607 26,745 27,352 Changes in accounting principles governing start-up expenses and Acquisition cost and accumulated depreciation in acquired compa- interest attributable to the construction of assets that necessarily nies are attributable to the acquisition during the year of the SEC require considerable time to complete have resulted in a retroactive Group and SIA Tele2 (formerly Baltkom GSM). Investments in good- reduction in depreciation for 1999 in a net amount of SEK 47 million. will during the year relate essentially to these two acquisitions. Note 13 Tangible assets Dec. 31, 2000 Group Buildings Machinery, Fixed plant under and land Technical plant Equipment construction Total Acquisition value at Jan. 1 ............................................................................................................... 17 8,666 386 104 9,173 Acquisition value in acquired companies ..................................................................... 112 1,733 331 63 2,239 Acquisition costs in divested companies...................................................................... — – 175 — — – 175 Investment for the year .................................................................................................................... 3 1,231 158 67 1,459 Divestment and retirement.......................................................................................................... –3 – 110 –7 –6 – 126 Reclassified items ...................................................................................................................................... 3 41 41 – 90 –5 Translation difference for the year ...................................................................................... –5 22 12 4 33 Acquisition value .............................................................................................................................................. 127 11,408 921 142 12,598 Accumulated depreciation/amortization at Jan. 1.............................................. –1 – 2,818 – 200 — – 3,019 Accum. depr./amortiz. in acquired companies........................................................ – 26 – 542 – 75 — – 643 Accum. depr./amortiz. in divested companies ........................................................ — 42 — — 42 Depreciation/amortization for the year........................................................................ –3 – 875 – 80 — – 958 Divestment and retirement.......................................................................................................... — 9 1 — 10 Translation difference for the year ...................................................................................... 2 2 –3 — 1 Accumulated depreciation/amortization ............................................................................. – 28 – 4,182 – 357 — – 4,567 Book value .......................................................................................................................................................... 99 7,226 564 142 8,031 Changes in accounting principles governing start-up expenses and inter- Acquisition cost and accumulated depreciation in acquired companies est attributable to the construction of assets that necessarily require are attributable to the acquisition during the year of the SEC Group and considerable time to complete have, in the case of the 1999 figures, SIA Tele2 (formerly Baltkom GSM). Divested companies relate to 4T resulted in a retroactive increase in Machinery and technical plant in the Solutions AB. amount of SEK 17 million and a retroactive decrease of SEK 29 million in Fixed plant under construction. Dec. 31, 2000 Parent Company Fixed plant under Equipment construction Total Acquisition value at Jan. 1 .................................................................................................................................................................................................. 1 — 1 Investment for the year........................................................................................................................................................................................................ — 1 1 Acquisition value.................................................................................................................................................................................................................................. 1 1 2 Accumulated depreciation/amortization at Jan. 1 ................................................................................................................................. — — — Depreciation/amortization for the year ........................................................................................................................................................... –1 — –1 Accumulated depreciation amortization ................................................................................................................................................................ –1 — –1 Book value.............................................................................................................................................................................................................................................. — 1 1 Tele2 Annual Report 2000 63
  • 66. Notes Capitalized interest expenses Group Parent Company Dec. 31, 2000 Dec. 31, 1999 Dec. 31, 2000 Dec. 31, 1999 Total capitalized interest expenses in fixed assets ................................................................................ 193 193 — — Changes in accounting principles governing start-up expenses and interest attributable to the construction of assets that necessarily require consider- able time to complete have resulted in a retroactive reduction in depreciation for 1999 in a net amount of SEK 41 million. Financial leases All assets related to financial leases signed since 1997 and utilized through financial leasing have been included in the consolidated accounts.The following table contains these values and values for assets utilized under financial leases but which have not been restated in the consolidated accounts, that is, those pertaining to leases signed before January 1, 1997. Group Book value assets Assets not booked Dec. 31, 2000 Dec. 31, 1999 Dec. 31, 2000 Dec. 31, 1999 Machinery and other technical plant: Acquisition value.............................................................................................................................................................................. 278 267 155 155 Accumulated depreciation/amortization ........................................................................................................... – 62 – 40 – 36 – 29 Book value.......................................................................................................................................................................................... 216 227 119 126 Tax-assessed value The tax-assessed value of the Group’s land in Sweden equaled SEK 1 million (1999: SEK 1 million). Note 14 Shares in Group companies Parent Company SEC compared with 17.8% at December 31, 1999.The acquisition of 99.7% Dec. 31, 2000 Dec. 31, 1999 of SEC resulted in a goodwill item totaling SEK 22,240 million. In addition to the above acquisitions, Belmus BV and Trade2 AB were sold to the Acquisition value at Jan. 1............................................................. 1,481 3,542 Group company Tele2 Sverige AB. Investment for the year................................................................... 23,352 1,264 In October 2000, a subsidiary in the Tele2 Group acquired all the shares Divestment ....................................................................................................... – 345 – 3,325 in SIA Tele2 (formerly Baltkom GSM) for SEK 2,162 million.The acquisi- Acquisition value ............................................................................................ 24,488 1,481 tion resulted in a goodwill item of SEK 2,322 million. On April 1, 2000, a subsidiary in the Tele2 Group divested 4T Solutions AB to XSource Accumulated write-ups at Jan. 1.......................................... — 269 Corporation in exchange for newly issued shares in XSource Divestment ....................................................................................................... — – 269 Corporation.Tele2’s shareholding in XSource Corporation thus amounts Accumulated write-ups .......................................................................... — — to 11.88%. During 1999, the Parent Company divested the shares in its wholly Total shares in Group companies ....................... 24,488 1,481 owned subsidiary Comvik International AS, which in turn owned 24.8% of the shares in he Norwegian listed company, NetCom ASA. In addition to During the year, the Parent Company acquired the shares outstanding in this, the Parent Company conducted an internal restructuring of the com- SEC in exchange for 40,748,480 newly issued shares in Tele2 AB and cor- panies comprising the Group and in conjunction with this sold the shares responding to a value of SEK 19,722 million.Tele2 thus owns 99.7% of in Tele2 Sverige AB to the Group company Tele2 Holding AB. Effect on cash of corporate acquisitions and divestments during the year: Group The Group’s book value of acquired assets and liabilities in acquired Acquired Divested companies and assets and liabilities in divested companies amounted to: 2000 1999 2000 1999 Intangible fixed assets ................................................................................................................................................................ – 24,764 – 467 — — Tangible fixed assets .................................................................................................................................................................... – 1,540 – 184 — — Financial fixed assets ................................................................................................................................................................... – 135 — — — Inventories ............................................................................................................................................................................................... – 131 –6 — — Current receivables ..................................................................................................................................................................... – 1,876 – 23 — — Current investments and liquid funds................................................................................................................... – 3,050 –7 — — Long-term liabilities...................................................................................................................................................................... 2,458 63 — — Current liabilities ............................................................................................................................................................................. 3,686 157 — — Exchange rate difference ....................................................................................................................................................... – 145 — — — Purchase price........................................................................................................................................................................................ – 25,497 – 467 — — Paid with shares................................................................................................................................................................................ 23,290 — — — Paid through loans from the seller ........................................................................................................................... — 223 — — Paid/Received purchase price................................................................................................................................................. – 2,207 – 244 — — Liquid funds in acquired/divested companies .............................................................................................. 3,050 7 — — Effect on the Group’s liquid funds............................................................................................................... 843 – 237 — — 64 Tele2 Annual Report 2000
  • 67. Notes Shares in Group companies Number Dec. 31, 2000 Dec. 31, 1999 (Company, reg. no, reg’d. Office) of shares Par value Holding Book value Book value In2loop Polska Sp. So.o,Warsaw, Poland .............................................................................. 49 pcs tPLN 49 49% — — Web Communication BV,Amsterdam, Netherlands ............................................. 400 pcs tNLG 40 100% — — Tele2 Polska Sp,Warsawa, Poland ........................................................................................... 100% — — NetCom Luxembourg Holding AB, 556580-7905, Stockholm, Sweden 1,000 pcs tSEK 100 100% — — NetCom Luxembourg SA, Luxembourg ............................................................................. 1,000 pcs tEURO 35 100% 1,136 1,136 Everyday Holding AB, 556579-7718, Stockholm, Sweden.......................... 100% — — Stenblocket i Fruängen AB, 556058-8500, Stockholm, Sweden .. 100% — — Everyday Webguide AB, 556182-6016, Stockholm, Sweden ... 50% — — Tele2 Holding AB, 556579-7700, Stockholm, Sweden .................................... 100% — — Tele2 Sverige AB, 556267-5164, Stockholm, Sweden .............................. 100% — — Tele2 Sweden SA, Luxembourg ................................................................................ 100% — — 4 T Solutions Holding AB, 556580-2690, Stockholm, Sweden 100% — — XSource Corporation, USA ................................................................................. 11.88% — — Optimal Telecom Holding AB, 556580-7855, Stockholm, Sweden 100% — — Optimal Telecom Sverige AB, 556440-1924, Stockholm, Sweden 100% — — X-Source Holding AB, 556580-2682, Stockholm, Sweden 100% — — X-Source AB, 556290-2238, Stockholm, Sweden ............... 100% — — Datametrix Sverige Holding AB, 556580-7871, Stockholm, Sweden 100% — — Datametrix AB, 556539-4870, Stockholm, Sweden.......... 100% — — Tele2 Norge Holding AB, 556580-8143, Stockholm, Sweden 100% — — Tele2 AS Norge, 974534703, Oslo, Norway............................. 100% — — Tele2 Norge UMTS AS, 982795761, Oslo, Norway 100% — — Tele3 Norge AS, 932100975, dormant company ........ 100% — — Tele2 Danmark Holding AB, 556580-8028, Stockholm, Sweden 100% — — Tele2 A/S, 221234, Copenhagen, Denmark ................................ 100% — — Optimal Telecom A/S, Copenhagen, Denmark............... 100% — — In2Loop A/S, Copenhagen, Denmark........................................ 100% — — Tele2 Holding SIA, 000351206, Latvia....................................................... 100% — — SIA Tele2 (former: Baltkom GSM SIA), 000327285, Latvia ..................................................................................... 100% — — Tele2 Eesti AS, 10262238,Tallin, Estonia ................................................. 90% — — AS Ritabell, 10069046,Tallin, Estonia.................................................. 52% — — UAB Tele2, 1147164, Lithuania .................................................................. 100% — — UAB Levi & Kuto Kaunas, 1149679, Lithuania ....................... 100% — — UAB Levi & Kuto Klaipeda, 1150061, Lithuania ................... 100% — — Belmus BV,33261289,Amsterdam, Netherlands .......................... 100% — 330 AS Ritabell, 10069046,Tallin, Estland.................................................. 48% — — Datametrix Norway AS, 975993108, Oslo, Norway............... 100% — — Datametrix Danmark A/S, 39419, Copenhagen, Denmark 100% — — Datametrix OY AS, 378548, Helsinki, Finland ................................. 100% — — OY Finland Tele2 AB, Helsinki, Finland ..................................................... 100% — — Interloop AB, 556284-7565, Stockholm, Sweden ........................ 100% — — NetCom GSM Sverige AB, 556304-7025, Stockholm, Sweden 100% — — Trade2 (Sweden) AB, 556469-7836, Stockholm, Sweden .. 100% — 15 Åkersberga KV AB, 556326-3192, Österåker, Sweden......... 100% — — Halmstads KV AB, 556380-6115, Halmstad, Sweden.............. 100% — — Skaraborgs Kabel-TV AB, 556483-6467, Mariestad, Sweden 60% — — Hallstahammar KV KB, 916580-7912,Västerås, Sweden.... 90% — — Kopparstaden KV KB, 916583-0564,Västerås, Sweden....... 80% — — Nelab KV KB, 916597-8983,Västerås, Sweden ............................. 80% — — Comviq GSM AB, 556450-2606, dormant company ............... 100% — — Call2Web AB, 556403-7983, dormant company ......................... 100% — — Swipnet AB, 556411-9401, dormant company ............................... 100% — — SCD AB, 556353-6829, dormant company ........................................ 99.97% — — Comviq Broadband AB, 556405-6678, dormant company 100% — — NIU Nätteknik, Installation och Underhåll AB, 556041-1307, dormant company ............................................................................................................ 100% — — Kalmar Kabelvision AB, 556244-2466, dormant company 100% — — Tele1 A/S, 955780132, Oslo, Norway ........................................................ 100% — — Danu Wireless Security Ltd, Ireland ........................................................... 100% — — Tele2 Sweden Ltd, England, dormant company ............................. 100% — — Société Européenne de Communication S.A. (SEC),..............................A-shares: 463,586,764 No par value 99.7% 23,352 — RC B 46 698, Luxembourg ............................................................................................B-shares: 106,872,772 — — SEC Services Luxembourg S.A. RC B 70 203, Luxembourg.. 100% — — Tele2, sro, 25 65 00 09, Prague, Czech Republic .................................. 100% — — TANGO SA, RC 59560, Luxembourg .............................................................. 100% — — SEC Holding BV, 33141829, Rotterdam, Netherlands ................... 100% — — Tele2 Annual Report 2000 65
  • 68. Notes Shares in Group companies (cont.) Number Dec. 31, 2000 Dec. 31, 1999 (Company, reg. no, reg’d. Office) of shares Par value Holding Book value Book value Tele2 Marketing Dynamics AS, .......................................................................... 100% — — Tele2 BLR, 429 569 486,Velizy, France ..................................................... 100% — — Télé2 France SA, FR48-409914058,Velizy, Frankrike.............. 80% — — Transac SA, Luxemburg.............................................................................................. 100% — — Everyday Media SA, Luxembourg .................................................................. 100% — — Kinnevik Telecommunications In SA,RC B 52976, Luxembourg 100% — — Tele2 Europe SA, B 56944, Luxembourg ...................................... 100% — — Tele2 Telecommunication Services GmbH, FN 178222t,Vienna,Austria 100% — — Tele2 Belgium NV, 609 392, Zellik, Belgium ...................... 100% — — Tele2 Telecommunication Services GmbH, 36232, Düsseldorf, Germany 100% — — Tele2 Italia Spa, Ml-1998-247322, Segrate, Italy............. 99% — — Tele2 AG, Liechtenstein ............................................................................. 100% — — Tele2 Luxembourg SA, B 65774, Luxembourg .............. 100% — — Tele2 (Netherlands) BV, BV 291906,Amsterdam, Netherlands 100% — — Tele2 Telecommunication Services S.L., B82051913, Madrid, Spain 100% — — Tele2 Telecommunication Services AG, CH-020390 55 969, Zürich, Switzerland 100% — — Tele2 Communications Services Ltd, 3565220, Reading-Berkshire, United Kingdom 100% — — Tele2 Telecommunications Services Ltd, 292887, Dublin, Ireland 100% — — Telemilenio,Telecomunicacoes, Sociedade Unipessoal, LDA, 10468, Lisboa, Portugal 100% — — 3C Communications International SA, RC B 29697, Luxembourg 100% — — 3C Equipment Management SA, B 25465, Luxembourg 100% — — 3C Communications Ltd, United Kingdom ...................... 41% — — 3C Communications Ltd, Kingston-upon-Thames, United Kingdom 59% — — 3C Transac Ltd, Kingston-upon-Thames, United Kingdom 100% — — 3C Communications GmbH,Vienna,Austria........................... 100% — — 3C Communications BVBA, 514 274, Brussels, Belgium 90% — — 3C Communications (Ireland) Ltd, 164025, Ireland ........ 100% — — 3C Communications SPA Italy, 28894/7359/14, Segrate, Italy 97% — — 3C Communications Ceska Republ, Czech Republic ... 100% — — 3C Communications International Chile Ltda, Chile, dormant company 99% — — 3C Communications A/S, Ballerup, Denmark ......................... 97% — — 3C Communications OY, Finland........................................................... 100% — — 3C Communications SA, 345 343 396 00023 Orleans, France 99% — — 3C Communications GmbH, Germany ......................................... 99% — — 3C Communications Luxembourg SA, B39690, Luxembourg 100% — — 3C Kommunikacios Szolgaltato Kft, Budapest, Hungary 90% — — 3C Communications Mexico Sa, Mexico, dormant company 100% — — 3C Communications BV, Maastricht, Netherlands............ 99% — — 3C Communications A/S, Oslo, Norway ...................................... 100% — — 3C Transac A/S, Norway ................................................................................... 100% — — C.C. Comunicacoes a Credito Lda, Domingos de Rana, Portugal 95% — — 3C Communications Espana SA, Madrid, Spain .................... 90% — — 3C Communications AB, Stockholm, Sweden........................ 70% — — 3C Transac AB Sweden, Sweden ............................................................. 100% — — 3C Komunikasyon Dis Tic.Sti, Istanbul,Turkey....................... 99% — — Comviq Holding BV, Maastricht, Netherlands ........................ 100% — — CCC Holding BV, 33 269 398,Amsterdam, Netherlands . 100% — — Calling Card Company SA, B 424 906 618, Paris, France 95% — — Calling Card Company Limited, 3794813 (Head office), United Kingdom 100% — — Calling Card Company Italy SpA, 233372, Milan, Italy .. 100% — — C3 Calling Card Company (Ireland) Limited, 309745, Ireland 100% — — Calling Card Company Netherlands BV, BV 82334,Amsterdam, Netherlands 100% — — Calling Card Company (UK) Limited, 3812138, United Kingdom, dormant company 100% — — C3 Germany GmbH, Germany ............................................................... 100% — — C3 Luxembourg SA, RC 64 902, Luxembourg ................... 100% — — SEC Everyday Europe BV, 341124357,Amsterdam, Netherlands 100% — — Everyday.com Internet Services GmbH,Austria.................. 100% — — Everyday.com Switzerland AG, CHF-0203023164-4, Zürich, Switzerland 97% — — Everyday.com Germany GmbH, HR B 36232, Germany 100% — — Everyday.com France SAS, B-430291898,Velizy, France 100% — — Everyday.com Italia Srl, Italy.......................................................................... 100% — — Everyday Luxembourg SA, B 64 902, Luxembourg .......... 100% — — Everyday.com Netherlands BV,Amsterdam, Netherlands 100% — — IntelliNet SA, 69802, Luxembourg................................................................ 100% — — IntelliNet Holding BV, 34126307,Amsterdam, Netherlands 100% — — Intellinet SAS, B429 508 583,Velizy, France ............................... 100% — — IntelliNet BV,Amsterdam, Netherlands ......................................... 100% — — 66 Tele2 Annual Report 2000
  • 69. Notes Shares in Group companies (cont.) Number Dec. 31, 2000 Dec. 31, 1999 (Company, reg. no, reg’d. Office) of shares Par value Holding Book value Book value IntelliNet Telecommunication Services AG, CH-020.3.021.518-8, Zürich, Switzerland 100% — — Intellinet Telecommunications GmbH, FN 190268 g,Vienna,Austria 100% — — Intellinet Telecommunication GmbH, Frankfurt, Germany 100% — — IntelliNet S.p.A, Segrate, Italy ...................................................................... 99% — — Fagersta AB, Sweden...................................................................................................... 100% — — Transcom Holding AB, Sweden, dormant company......... 100% — — 3C Holding AB, Sweden, dormant company ............................ 100% — — Total shares in group companies .................................................................................... 24,488 1,481 Note 15 Receivable from Group companies Parent Company Dec. 31, 2000 Dec. 31, 1999 Acquisition value at Jan. 1 ...................................................... 847 1,071 Loans................................................................................................................. 639 1,320 Amortization and additions paid .................................. – 458 – 1,542 Translation difference for the year............................. — –2 Total receivable from Group companies 1,028 847 Note 16 Shares and participations in associated companies Number Dec. 31, 2000 Dec. 31, 1999 (Company, reg. no., reg’d. Office) of shares Par value Holding Book value Book value Parent company: Gamla Stans Millennium Evenemang KB, 969653-5997, Stockholm ........................ — — 25.0% –2 — –2 Group (additional): Everyday Webguide AB ................................................................................................................................................... 1,750 pcs tSEK 175 50.0% – 52 –4 Transcom Worldwide S.A, RC B 59 528, Luxembourg .......................................................... 937 pcs tLUF 1 37.5% 139 — SNPAC Swedish Number Portability Administrative Centre AB .............................. 200 pcs tSEK 20 20.0% 1 — Total shares and participations in associated companies, Group........... 88 –6 Changes in accounting principles for the Tele2 Group governing start-up expenses resulted in a retroactive reduction of SEK 5 million in participations in associated companies. 2000 Gamla Stans Transcom Contribution of each associated company to Group profit/loss: Everyday Millennium (3 months) SNPAC Goodwill, acquisition value, Jan. 1 ............................................................................................................................... — — — — Goodwill, acquisition value, Dec. 31........................................................................................................................ — — — — Goodwill, accumulated. depreciation/amortization, Jan. 1 ............................................................ — — — — Goodwill, accumulated depreciation/amortization, Dec. 31 ..................................................... — — — — Goodwill, book value, Dec. 31 ................................................................................................................................................ — — — — Percentage of shareholders’ equity, Jan. 1 ........................................................................................... –4 –2 — — Acquired companies, opening balance .................................................................................................... — — 137 — Share of capital contributions/new share issues during the year ............................. — — — 1 Share of profit/loss for the year .................................................................................................................... – 48 20 2 — Reclassification .................................................................................................................................................................. Note 5 — – 18 — — Share of shareholders’ equity, Dec. 31 ........................................................................................................... – 52 — 139 1 Net book value, Dec. 31 .................................................................................................................................. – 52 — 139 1 Tele2 Annual Report 2000 67
  • 70. Notes 1999 Gamla Stans NetCom ASA Ritabell Contribution of each associated company to Group profit/loss: Everyday Millennium (11months) (1month) Goodwill, acquisition value, Jan. 1 ............................................................................................................................... — — 316 381 Divestments during the year ............................................................................................................................................ — — – 316 — Reclassification.................................................................................................................................................................................... — — — – 391 Exchange rate difference for the year .................................................................................................................. — — — 10 Goodwill, acquisition value, Dec. 31........................................................................................................................ — — — — Goodwill, accum. depriciation/amortization value, Jan. 1 .............................................................. — — – 172 –5 Depreciation for the year .................................................................................................................................................... — — – 28 –2 Divestments for the year...................................................................................................................................................... — — 200 — Reclassification.................................................................................................................................................................................... — — — 7 Goodwill, accum. depreciation/amortization, Dec. 31 ...................................................................... — — — — Goodwill, book value, Dec. 31 ................................................................................................................................................ — — — — Share of shareholders’ equity, Jan 1 ........................................................................................................... — — 33 –2 Share of capital contributions/new share issues during the year ............................. 1 — 9 — Share of profit/loss for the year .................................................................................................................... — –2 89 — Divestments for the year...................................................................................................................................................... — — – 131 — Change in accounting principles .................................................................................................................................. –5 — — — Reclassification .................................................................................................................................................................. — — — 2 Share of shareholders’ equity, Dec. 31 ......................................................................................................... –4 –2 — — Net book value, Dec. 31............................................................................................................................................... –4 –2 — — Note 17 Receivable from associated companies Group Parent Company Dec. 31, 2000 Dec. 31, 1999 Dec. 31, 2000 Dec. 31, 1999 Acquisition value at Jan. 1.................................................................................................................................................... 6 — 6 — Opening receivable in acquired companies.................................................................................................. 21 — — — Loans .............................................................................................................................................................................................................. 78 6 61 6 Total receivable from associated companies ............................................................................. 105 6 67 6 Companies that directly or indirectly fulfil the definition of an associated company are reported as associated companies. Note 18 Other long-term holdings of securities Number of Holding Dec. 31, 2000 Dec 31, 1999 shares Par value Capital Votes Book value Book value Parent company: Société Européenne de Communication S.A. (SEC), Luxembourg — — — — — 3,518 AS Levicom Broadband, Estonia ............................................................................................... 1 pce tEEK 8 19.0% 19.0% 18 18 Suomen Kolmegee Oy, Helsinki, Finland ........................................................................ 1,924 pcs tFIM 1,924 20.1% 15.0% 5 5 23 3,541 Group (additional): XSource Corporation ........................................................................................................................... 1,806,575 pcs tUSD 18 11.88% 11.88% 122 — Brf Sundsvallshus.......................................................................................................................................... — — — — 1 1 Total Group .......................................................................................................................................................... 146 3,542 Group Parent Company Other long-term holdings of securities: Dec. 31, 2000 Dec. 31, 1999 Dec. 31, 2000 Dec. 31, 1999 Acquisition value at Jan. 1..................................................................................................................................................... 3,885 343 3,884 343 Investment for the year .......................................................................................................................................................... 122 3,542 — 3,541 Reclassification.................................................................................................................................................................................... – 3,518 — – 3,518 — Acquisition value ................................................................................................................................................................................... 489 3,885 366 3,884 Accumulated write-downs at Jan. 1 ........................................................................................................... – 343 – 343 – 343 – 343 Accumulated write-downs ........................................................................................................................................................ – 343 – 343 – 343 – 343 Total other long-term holdings of securities ............................................................................ 146 3,542 23 3,541 Reclassification for the year, in the amount of SEK 3,518 million, relates to the conversion of shares in SEC to shares in subsidiaries. 68 Tele2 Annual Report 2000
  • 71. Notes Note 19 Other long-term receivables Group Parent Company Dec. 31, 2000 Dec. 31, 1999 Dec. 31, 2000 Dec. 31, 1999 Acquisition value at Jan. 1..................................................................................................................................................... 58 2 14 — Loans .............................................................................................................................................................................................................. 43 15 30 14 Reclassified items ............................................................................................................................................................................ 3 42 — — Translation differences.............................................................................................................................................................. 2 –1 2 — Total other long-term receivables.............................................................................................................. 106 58 46 14 Note 20 Accounts receivable Group Group Accounts receivable: Dec. 31, 2000 Dec. 31, 1999 Reserve for doubtful receivables: Dec. 31, 2000 Dec. 31, 1999 Accounts receivable ............................................................... 3,012 1,643 Reserve for doubtful receivables at Jan. 1 .......... 172 99 Reserve for doubtful receivables ........................... – 558 – 172 Reserves in companies acquired during the year 111 10 Book value .................................................................................... 2,454 1,471 Receivables recorded ................................................................... 273 65 Previous write-downs recovered .................................. — –2 Translation difference in opening balance ........... 2 — Reserve for doubtful receivables ..................... 558 172 Credit risk entails the book loss that would be reported on the closing date if the counter-parties failed totally to fulfill payment obligations according to agreements.The Group has limited its credit risk relating to accounts receivable by continually conducting credit ratings of the customer stock. The Group’s highly varied customer stock, which includes private individuals and companies, limits the credit risk.The Group makes provisions for any possible credit risks and these have been kept within management expectations. Note 21 Other current receivables Group Parent Company Dec. 31, 2000 Dec. 31, 1999 Dec. 31, 2000 Dec. 31, 1999 VAT receivable.................................................................................................................................................................................... 230 9 — — Receivable from suppliers .................................................................................................................................................... 15 7 — — Receivable from XSource Corporation ............................................................................................................. 15 — — — Other ............................................................................................................................................................................................................. 38 14 — — Total other current receivables ...................................................................................................................... 298 30 — — Note 22 Prepaid expenses and accrued revenues Group Parent Company Dec. 31, 2000 Dec. 31, 1999 Dec. 31, 2000 Dec. 31, 1999 Accrued telephony revenue, other telecom operators ................................................................. 218 106 — — Accrued telephony revenue, customers ............................................................................................................ 1,510 407 — — Prepaid leasing costs and rent ........................................................................................................................................ 43 68 — — Other ............................................................................................................................................................................................................. 232 81 1 1 Total prepaid expenses and accrued revenue ......................................................................... 2,003 662 1 1 Tele2 Annual Report 2000 69
  • 72. Notes Note 23 Cash and cash equivalents Group Parent Company Dec. 31, 2000 Dec. 31, 1999 Dec. 31, 2000 Dec. 31, 1999 Cash and cash equivalents................................................................................................................................................... 1,511 417 7 7 Short-term investments.......................................................................................................................................................... — 4 — — Total cash and cash equivalents...................................................................................................................... 1,511 421 7 7 Of the Group’s cash and cash equivalents at December 31, 2000, some portions can be used only within the Tele2 Sweden Group and certain limita- tions also apply within the SEC Group. Of the Group’s liquid funds, SEK 434 million is deposited in blocked accounts as security for guarantees granted. Group Parent Company Dec. 31, 2000 Dec. 31, 1999 Dec. 31, 2000 Dec. 31, 1999 Bank overdraft facilities granted................................................................................................................................... 267 261 — — Bank overdraft facilities used ........................................................................................................................................... – 14 –8 — — Unutilized credit granted.......................................................................................................................................... 253 253 — — In addition, the Group has unutilized credit lines of SEK 200 million. Fees during the year for credit limits and so forth amounted to SEK 5 million in the Group. Group Parent Company Dec. 31, 2000 Dec. 31, 1999 Dec. 31, 2000 Dec. 31, 1999 Collateral pledged for overdraft facility: Materials and supplies ............................................................................................................................................................... 11 7 — — Receivables.............................................................................................................................................................................................. 11 10 — — Other assets.......................................................................................................................................................................................... 11 6 — — Total collateral pledged for overdraft facility........................................................................... 33 23 Group Dec. 31, 2000 Dec. 31, 1999 Exchange rate differences in cash and cash equivalents are attributable to the following: Cash at beginning of year ..................................................................................................................................................... – 36 2 Cash flow for the year ............................................................................................................................................................. – 108 –5 Total adjustment for exchange rate differences in cash ........................................ – 144 –3 Note 24 Shareholders’ equity Non-restricted Restricted equity reserves Share Share Legal Shares Other restric- Other non-re- Total share- Group: capital premium reserve in equity ted reserves stricted reserves holders’ equity Shareholders’ equity, Jan 1, 2000 ............ 519 3,466 1 — 775 2,242 7,003 Effects of changes in Accounting principles........................................ — — — — — – 246 – 246 Adjusted shareholders’ equity, Jan 1, 2000 .................................................................. 519 3,466 1 — 775 1,996 6,756 New share issue, SEC acquisition ......... 204 19,569 — — — — 19,773 New share issue, options.................................. 1 36 — — — — 37 Gradual acquisition, SEC .................................... — — — — — – 284 – 284 Transfers relating to: Participation in assoc. companies... — — — 2 — –2 — Other transfers ....................................................... — — — — 199 – 199 — Currency reserve ........................................................ — — — — 1,050 – 301 749 Net profit/loss for the year ........................... — — — — — – 381 – 381 Shareholders’ equity, Dec 31, 2000 724 23,071 1 2 2,024 829 26,651 Retroactive adjustments in connection with gradual acquisitions: As a result of the gradual acquisition of the shares in SEC in October 2000, a retroactive adjustment has been made of the original investment of 17.8% in November 1999 so that shareholders’ equity is recalculated as if SEC had been a subsidiary already on that date.This means that an adjustment in share- holders’ equity arises corresponding to Tele2’s share in the earnings of SEC during the period November 1999 – September 2000. The item New share issue for the redemption of options issued includes SEK 7 million relating to the 1997 option premium. 70 Tele2 Annual Report 2000
  • 73. Notes Exchange rate differences Other restricted Non-restricted Exchange rate differences in consolidated shareholders’ equity: reserves reserves Total Shareholders’ equity brought forward ...................................................................................................................................................................... –1 –21 –22 Effects of changes in accounting principles .......................................................................................................................................................... — 2 2 Adjusted shareholders’ equity brought forward....................................................................................................................... –1 – 19 – 20 Other changes for the year.................................................................................................................................................................................................... 1,050 – 301 749 Ammount carried forward.......................................................................................................................................................................................... 1,049 – 320 729 Exchange rate difference in the consolidated income statement: After the acquisition of the SEC Group, the Tele2 Group is more affected than previously by fluctuations in exchange rates. Following the acquisition, companies reporting in Swedish kronor account for about 32% of the Group’s revenue and companies using other currencies account for 68%.About 56% of revenue consists of FRF, ITL, DEM, NOK, DKK, NLG and CHF.The recently acquired SEC group represents about 52% and foreign subsidiaries in the remaining Tele2 Group represent about 16%.A 1% change in the Swedish krona vis-à-vis other currencies results in an annual increase in revenue of some SEK 150 million. In fixed telephony operations and in mobile telephony operations, a currency risk arises in connection with international call traffic, which means that a liability or a receivable arises between Tele2 companies and foreign operators. In mobile telephony, these transactions are calculated in SDRs (Special Drawing Rights) but are invoiced and paid for in USD: The table below shows the exchange rates used by the Group in translating the income statements and balance sheets to Swedish kronor. Income statement Balance sheet 2000 1999 Dec. 31, 2000 Dec. 31, 1999 EURO............................................................................................................................................................................................................. 8.4463 8.8128 8.8570 8.5635 DEM................................................................................................................................................................................................................. 4.3185 — 4.5285 — FRF .................................................................................................................................................................................................................... 1.2876 — 1.3502 — GBP .................................................................................................................................................................................................................. 13.8579 — 14.2200 — LUF ................................................................................................................................................................................................................... 0.2094 — 0.2196 — CHF ................................................................................................................................................................................................................. 5.4250 — 5.8135 — NLG................................................................................................................................................................................................................. 3.8328 — 4.0191 — DKK ................................................................................................................................................................................................................ 1.1332 1.1852 1.1870 1.1505 NOK............................................................................................................................................................................................................... 1.0411 1.0601 1.0715 1.0605 FIM..................................................................................................................................................................................................................... 1.4206 1.4822 1.4896 1.4403 ITL...................................................................................................................................................................................................................... 0.0044 — 0.0046 — ATS.................................................................................................................................................................................................................... 0.6138 — 0.6437 — ESP..................................................................................................................................................................................................................... 0.0508 — 0.0532 — EEK ................................................................................................................................................................................................................... 0.5398 0.5631 0.5660 0.5480 LVL..................................................................................................................................................................................................................... 15.1085 14.0723 15.3900 14.5600 LTL..................................................................................................................................................................................................................... 2.2869 2.0651 2.3800 2.1300 PTE.................................................................................................................................................................................................................... 0.0421 — 0.0442 — PLN .................................................................................................................................................................................................................. 2.1073 2.0886 2.3000 2.0600 CZK................................................................................................................................................................................................................. 0.2371 — 0.2550 — HUF ................................................................................................................................................................................................................. 0.0325 — 0.0339 — USD ................................................................................................................................................................................................................. 9.16080 8.2635 9.535 8.525 Group Parent Company Translation differences reported in the income statement amount to: 2000 1999 2000 1999 Other operating revenue...................................................................................................................................................... — 2 — — Other operating expenses .................................................................................................................................................. – 57 –1 — — Loss/gain on other securities and receivables classified as fixed assets ................................................................................................................................................... 3 –2 2 –2 Other interest revenue and similar income.................................................................................................. –1 5 — 4 Interest expense and similar costs ........................................................................................................................... –6 6 — 2 Translation differences in the income statement................................................................. – 61 10 2 4 Tele2 Annual Report 2000 71
  • 74. Notes Effects of changes in accounting principles: During 2000,Tele2 adjusted its accounting principles in line with recommendation RR1: 00 Consolidated Accounting, RR9 Income tax, RR12 Tangible fixed assets, RR15-Intagible assets and the draft for the recommendation for Loan expenses issued by the Swedish Financial Accounting Standards Council.This entails the Tele2 complies with recommendation RR1: 00-RR17. Figures for previous years have been recalculated in line with the new recommendations and essentially reflect the reversal of previous start-up expenses reported as assets. The changes in the accounting principles had the following retroactive effect on the Group’s income statement and balance sheet: Consolidated income statement: 1999 1998 1997 1996 1995 1994 1993 Operating revenue ..................................................... – 18 – 12 –6 — — — — Cost of services sold ................................................ 31 26 121 – 56 98 – 364 – 182 of which, depreciation ............................................ 47 45 89 87 41 114 43 Gross profit/loss ....................................................... 13 14 115 – 56 98 – 364 – 182 Administrative expenses .................................... –1 — — — — — — Operating profit/loss ........................................ 12 14 115 – 56 98 – 364 – 182 Shares in profit/loss of assoc. comp. –5 — — — — — — Interest expense ........................................................... — — — — — — 42 Profit/loss after financial items ....... 7 14 115 – 56 98 – 364 – 140 Deferred tax expense ........................................... –8 –8 – 34 7 – 31 101 51 Profit/loss for the year................................... –1 6 81 – 49 67 – 263 – 89 Consolidated balance sheet: Dec. 31, 1999 Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Assets Intangible assets Goodwill, acquisition value ................................ 10 — — — — — — Goodwill, accum. amortization ..................... –5 — — — — — — Goodwill, book value................................................ 5 — — — — — — Tangible assets Start-up expenses, acq. value .......................... – 769 – 761 – 755 – 789 – 645 – 703 – 225 Start-up expenses, accum. deprec............ 489 435 387 295 204 160 43 Start-up expenses, book value ...................... – 280 – 326 – 368 – 494 – 441 – 543 – 182 Mach/tech plant, acq. value.............................. 34 41 41 42 42 42 42 Mach/tech plant, accum. deprec ............... – 18 – 15 – 12 –9 –6 –3 — Mach/tech plant, book value ......................... 16 26 29 33 36 39 42 Fixed plant in progress ......................................... – 29 – 18 –4 — — — — Financial fixed assets Participations in assoc. comps ................... –5 — — — — — — Total assets....................................................................... – 293 – 318 – 343 – 461 – 405 – 504 – 140 Equity and liabilities ............................................. Shareholders’ equity Profit/loss brought forward .............................. – 248 – 253 – 334 – 284 – 352 – 89 — Profit/loss for the year............................................ –1 6 81 – 49 67 – 263 – 89 Translation differences ............................................ 2 –1 — –1 1 — — Total shareholdeers’ equity............................... – 247 – 248 – 253 – 334 – 284 – 352 – 89 Provisions Deferred tax ........................................................................ – 79 – 86 – 94 – 127 – 121 – 152 – 51 Current, noninterest-bearing liabilities Accrued costs .................................................................. 33 16 4 — — — — Total equity and liabilities........................ – 293 – 318 – 343 – 461 – 405 – 504 – 140 72 Tele2 Annual Report 2000
  • 75. Notes Share capital Restricted equity Non-restricted equity (SEK million) Share Share Non-restricted Total share- Parent Company: Class A Class B capital premium equity holders’ equity Shareholders’ equity, Jan 1, 2000 ................ 90 429 519 3,479 1,495 5,493 Effect of changes in accounting principles ......................................... — — — — 236 236 Adjusted shareholders’ equity Jan 1, 2000 .................................................................. 90 429 519 3,479 1,731 5,729 New share issue, SEC acquisition ............. 60 144 204 19,568 — 19,772 New share issue, options .................................... — 1 1 36 — 37 Round-off................................................................................. — — — — 1 1 Profit/loss for the year............................................ — — — — 251 251 Shareholders’ equity, Dec 31, 2000. 150 574 724 23,083 1,983 25,790 The adjustment of the Parent Company to the Swedish Financial Accounting Standards’ Council recommendation of RR9 resulted in a retroactive increase of SEK 236 million in earnings for the preceding year. Shareholders’ equity: Legal reserve: Shareholders’ equity consists of registered share capital, reserves not According to the Swedish Companies Act, provisions must be made to a available for distribution (legal reserve, share premium reserve and legal reserve each year, equaling 10% of the portion of net profit for the other restricted reserves) and retained earnings/losses including year not used to cover retained losses, until the legal reserve and the profit/loss for the year and share of profit/loss in associated companies. share premium reserve together equal 20% of share capital. Restricted reserves in Tele2 AB and its Swedish subsidiaries can be used to increase Registered share capital: share capital or, under certain circumstances, to cover retained losses. The share capital in Tele2 AB is divided into two types of stock: class A and class B (see Note 25). Other restricted reserves: Other restricted reserves are the equity component of untaxed Restricted reserves: reserves, deferred tax and Group participation in translation differences. Share premium reserve: The share premium reserve contains the surplus funds raised when the Unappropriated earnings and dividends: Company’s shares are issued at a price that exceeds the par value. According to the Companies Act,Tele2 AB’s unappropriated earnings are available for distribution to shareholders after the requisite provisions Equity method reserve: have been made to the legal reserve and after previous years’ retained The equity method reserve relates to earnings in associated companies losses have been covered. Statutory limitations to distribution of funds arising after the acquisition date. include general rules for dividends not endangering the company’s liq- uidity or financial position in other respects or exceeding non-restricted equity in the Group.The dividend is decided by the shareholders at the Annual General Meeting and generally cannot exceed the dividend pro- posed by the Board of Directors. Note 25 Number of shares Class A Class B Par value Share capital Change Total Change Total Total number (SEK) (SEK million) At Jan. 1, 2000 .................................................... 18,095,632 85,754,614 103,850,246 5 519 New share issues, SEC acq................. 11,911,315 30,006,947 28,837,165 114,591,779 144,598,726 5 723 New share issues, options.................... 30,006,947 200,000 114,791,779 144,798,726 5 724 At Dec. 31, 2000 .............................................. 30,006,947 114,791,779 144,798,726 5 724 The share capital in Tele2 AB is divided into two types of stock: class A and class B. Stock of both types has a par value of SEK 5 per share and entitles the owners to equal participation in the net assets and profits of the Company. However, each class A share entitles its owner to 10 votes, while each class B share entitles its owner to one vote. The Annual General Meeting held in May 2000 authorized the Board to settle the option commitment through a new share issue. In October 2000, 200,000 shares were issued through a new share issue and three convertible debt instruments with option rights entitling holders to subscribe for a total of 300,000 shares. Refer also to Note 26. Group Calculation of earnings per share: 2000 1999 Profit/loss for the year................................ – 381 3,769 Weighted avg. No. of shares ................ 114,087,366 103,850,246 Earnings per share ................................... SEK – 3.34 SEK 36.29 Tele2 Annual Report 2000 73
  • 76. Notes Group Calculation of earnings per share after full conversion: 2000 1999 Profit/loss for the year ........................................................................................................................................................... – 381 3,769 Reversal: interest for the year on the outstanding convertible debenture........ — — Adjusted profit/loss for the year after full conversion ........................................................................ – 381 3,769 Weighted average No. of shares outstanding after full conversion ................................. 114,224,866 103,850,246 Earnings per share after full conversion.......................................................................................... SEK – 3.34 SEK 36.29 Note 26 Options issued Group Parent Company Dec. 31, 2000 Dec. 31, 1999 Dec. 31, 2000 Dec. 31, 1999 Current portion ............................................................................................................................................................................... — 94 — 94 Long-term portion ........................................................................................................................................................................ — 142 — 142 Total options issued ............................................................................................................................................................ — 236 — 236 Parent Company: previously booked debt provision was dissolved via the income with The Parent Company’s Annual General Meeting in May 1997 voted to SEK –236 million plus the original option premium of SEK 7 million. implement an incentive program for key personnel in the Tele2 Group. In October 2000, the Board decided to issue 200,000 shares through The incentive program was based on an initial seven senior managers in a new share issue, as shown in Note 24, and three convertible debt the Group forming a limited liability company, NetCom Intressenter AB, instruments at a par value of SEK 1 with attached option rights entitling to enable them to acquire an option written by Tele2 and entitling the holders to subscribe for 100,000 new shares at a subscription price of holder to acquire 100,000 class B shares each year from 1999 through SEK 150 per share and a lifetime extending over 2001, 2002 and 2003, 2003, for a maximum of 500,000 shares in all. In 1998, a wider circle of respectively. approximately 50 more senior managers in the Group was offered the opportunity of subscribing for shares in NetCom Intressenter AB.The Subsidiaries subscription price is SEK 150 per share.When the incentive program When SEC was acquired, there were a number of options programs in was introduced, no decision was made regarding settlement of the progress for senior executives in SEC S.A.The programs were not option commitment. encompassed by Tele2’s bid for the acquisition of SEC as of October 2, The Annual General Meeting in May 2000 authorized the Board to 2000.The table below shows the terms and conditions of the options settle the option commitment through a new share issue, whereby the programs: Options program Number of shares Exercise price Maturity date 17 May 1998 ........................................................................................................................................................................................ 8,424,000 1) 31 July 2002 17 May 1998 ........................................................................................................................................................................................ 3,045,000 DEM 3.50 19 May 2004 17 May 1999 ........................................................................................................................................................................................ 2,484,000 SEK 30.50 19 May 2005 14 September 1999 ................................................................................................................................................................... 100,000 SEK 26.80 14 May 2005 31 May 2000 ........................................................................................................................................................................................ 3,563,000 SEK 44.90 31 May 2006 1) 2,411,000 options for USD 0,99. 2,410,000 options for USD 1.57 and 3,603,000 options for USD 1.09. Note 27 Liabilities to financial institutions Group Parent Company Short-term interest-bearing loans: Dec. 31, 2000 Dec. 31, 1999 Dec. 31, 2000 Dec. 31, 1999 Nordbanken .......................................................................................................................................................................................... 21 124 21 116 CIBC ............................................................................................................................................................................................................... 2,266 — — — Nodiska Investeringsbanken .............................................................................................................................................. 125 — — — ABN Amro Bank.............................................................................................................................................................................. 114 — — — Dexia .............................................................................................................................................................................................................. 98 — — — BCEE ............................................................................................................................................................................................................... 7 — — — Armada ........................................................................................................................................................................................................ — 1 — — Bank overdraft facilities ........................................................................................................................................................... — 3 — — Financial leases.................................................................................................................................................................................... 51 46 — — Total short-term interest-bearing loans ........................................................................................... 2,682 174 21 116 When the CIBC loan in the amount of SEK 2,266 million falls due for payment during 2001, refinancing will be conducted in spring 2001.That portion falling due for payment in 2001 is reported as a current liability. 74 Tele2 Annual Report 2000
  • 77. Notes Group Long-term interest-bearing loans and terms of interest: Interest terms Maturity date Dec. 31, 2000 Dec. 31, 1999 Parent Company: Nordbanken ............................................................................................................................................................................................ LIBOR+ 0.45% — 21 (security:Tele2 Sverige AB’s shares in Belmus BV and receivables on Belmus SEK 108 million) Total — 21 Group (additional): Nordbanken............................................................................................................................................................................................... LIBOR+ 0.45% 2004 270 270 (security:Tele2 Sverige AB’s, shares in Tele2 Eesti AS) CIBC Wood Gundy Plc ............................................................................................................................................................. LIBOR+ 0.45–0.55% 2004 3,847 4,175 (security:Tele2 Holding AB’s, shares in Tele2 Sverige AB) Nordiska Investeringsbanken ............................................................................................................................................. Fixed rate: 9.16% — 125 (guaranteed by the CIBC Wood Gundy syndicate) CIBC World Markets and ING Barings ................................................................................................................ EURIBOR+ 2.25% 2002 1,134 — (security:Tele2 Europe’s shares in all subsidiaries) Banque International à Luxembourg ........................................................................................................................ EURIBOR+ 1.75% 2001 54 — (security: guaranteed by SEC) Dexia ................................................................................................................................................................................................................ Fixed rate: 13% 2002 1 — (security: Building at 3C Communications SA) BCEE ................................................................................................................................................................................................................. 12 Interbank+ 0.625% 2006 23 — (security: Investment AB Kinnevik) Svenska Handelsbanken .............................................................................................................................................................. SHB funding rate+ 0.75% 2001 22 — (security: Investment AB Kinnevik) Merita-Nordbanken ....................................................................................................................................................................... variable rate 2001 8 — (security: guaranteed by Tele2 ) Financial leases on transmission capacity ........................................................................................................... 131 166 Total long-term interest-bearing loans ........................................................................................................ 5,490 4,757 (LIBOR = London Interbank Offered Rate) Group Parent Company Security pledged for liabilities for credit: Dec. 31, 2000 Dec. 31, 1999 Dec. 31, 2000 Dec. 31, 1999 Chattel mortgages ......................................................................................................................................................................... — 16 — — Shares in subsidiaries.................................................................................................................................................................. — 331 Net assets in subsidiaries...................................................................................................................................................... 37 366 Buildings ...................................................................................................................................................................................................... 14 — — — Machinery and technical equipment ....................................................................................................................... 112 — — — Receivables.............................................................................................................................................................................................. — — — 79 Total assets pledged for own liabilities with credit institutions 163 382 — 410 The loan from CIBC Wood Gundy, CIBC World Markets and ING Barings is Pledged assets in the Group are reported in an amount that corresponds based on the requirement that certain key data are consistently fulfilled, and to the book value of the net assets that the particular subsidiary represents thus this partly limits the dividend-payment potential of Tele2 Sverige AB and in the consolidated balance sheet. Tele2 Europe S.A.Tele2 Sverige AB and Tele2 Europe S.A. expect to be able The average rate of interest paid on the above loans for the year was 4.8% to meet these demands. (1999: 4.8%). Group Parent Company Maturity schedule for total loan liability: Dec. 31, 2000 Dec. 31, 1999 Dec. 31, 2000 Dec. 31, 1999 2000 ..................................................................................................................................................................................................................... 174 116 2001 ..................................................................................................................................................................................................................... 2,682 865 21 21 2002 ..................................................................................................................................................................................................................... 2,166 932 — — 2003 ..................................................................................................................................................................................................................... 963 924 — — 2004 ..................................................................................................................................................................................................................... 2,262 1,967 — — 2005 ..................................................................................................................................................................................................................... 18 43 — — 2006–2010 ................................................................................................................................................................................................... 81 26 — — Total loans ............................................................................................................................................................................................... 8,172 4,931 21 137 Interest rate risk: The interest rate risk is limited by varying the fix-interest terms for outstanding loans.Tele2 Sverige AB’s interest-rate on borrowing is variable. In order to be able to manage the risk of rising interest rates,Tele2 Sverige AB has concluded agreements with a number of banks covering an interest rate cap for a large portion of its borrowing.Tele2 Sverige AB has concluded agreements covering compensation of the STIBOR rate for 1 and 3 months respectively for certain set reconciliation dates exceeding 3.45% (for a nominal amount of SEK 2,200 million) and 5.95% (for a nominal amount of SEK 1,350 million).The agreement expires during 2001. Tele2 Annual Report 2000 75
  • 78. Notes Financial leases: All assets related to financial leases signed since 1997 have been included in the consolidated accounts.Values for these assets and assets that have not been restated, that is, those pertaining to leases signed before January 1, 1997, are specified below. Group Book value assets Assets not booked Loan liability, financial leases: Dec. 31, 2000 Dec. 31, 1999 Dec. 31, 2000 Dec. 31, 1999 Short-term component........................................................................................................................................................... 51 46 9 9 Long-term component............................................................................................................................................................. 131 166 99 108 Total loans for assets under financial leases ............................................................................. 182 212 108 117 Group On-balance-sheet Off-balance-sheet Loans pertaining to financial leases expiring the following years: Dec. 31, 2000 Dec. 31, 2000 2001 ................................................................................................................................................................................................................. 51 9 2002 ................................................................................................................................................................................................................. 28 9 2003 ................................................................................................................................................................................................................. 20 10 2004 ................................................................................................................................................................................................................. 14 10 2005 ................................................................................................................................................................................................................. 13 44 2006–2010............................................................................................................................................................................................... 56 26 Total loans for assets under financial leases ............................................................................. 182 108 Note 28 Other interest-bearing liabilities Group Parent Company Other current interest-bearing liabilities: Dec. 31, 2000 Dec. 31, 1999 Dec. 31, 2000 Dec. 31, 1999 Levicom International................................................................................................................................................................ 77 74 3 3 Ericsson ....................................................................................................................................................................................................... 469 — — — (security:Total assets in Tango SA) Total other current interest-bearing liabilities ...................................................................... 546 74 3 3 Group Parent Company Other long-term interest-bearing liabilities: Dec. 31, 2000 Dec. 31, 1999 Dec. 31, 2000 Dec. 31, 1999 Levicom International................................................................................................................................................................ — 75 — 3 Kinnevik S.A.......................................................................................................................................................................................... 49 — — — MIC Inc. ...................................................................................................................................................................................................... 37 — — — Total other long-term interest-bearing liabilities.............................................................. 86 75 — 3 Group Parent Company Assets pledged for other liabilities: Dec. 31, 2000 Dec. 31, 1999 Dec. 31, 2000 Dec. 31, 1999 Machinery and technical plant ....................................................................................................................................... 374 — — — Materials and supplies .............................................................................................................................................................. 6 — — — Receivables ............................................................................................................................................................................................. 115 — — — Bank accounts .................................................................................................................................................................................... 13 — — — Other assets ......................................................................................................................................................................................... 57 — — — Total assets pledged for other liabilities .......................................................................................... 565 — — — Group Parent Company Maturity schedule for other interest-bearing liabilities: Dec. 31, 2000 Dec. 31, 2000 2001 ................................................................................................................................................................................................................. 546 3 2002 ................................................................................................................................................................................................................. 86 — Total other interest-bearing liabilities.................................................................................................. 632 3 76 Tele2 Annual Report 2000
  • 79. Notes Note 29 Other current liabilities Group Parent Company Dec. 31, 2000 Dec. 31, 1999 Dec. 31, 2000 Dec. 31, 1999 VAT liability ............................................................................................................................................................................................. 154 118 1 1 Tax deducted at source, personnel .......................................................................................................................... 24 20 — — Liability to SCD Finans AB .................................................................................................................................................. 20 19 — — Customer deposits ....................................................................................................................................................................... 15 6 — — Costs of programs and revenue on subscriptions, cable TV .................................................... 18 8 — — Other ............................................................................................................................................................................................................. 91 19 — — Total other current liabilities .............................................................................................................................. 322 190 1 1 Note 30 Accrued expenses and prepaid revenues Group Parent Company Dec. 31, 2000 Dec. 31, 1999 Dec. 31, 2000 Dec. 31, 1999 Accrued expenses related to personnel ........................................................................................................... 891 67 1 1 Accrued interest expense.................................................................................................................................................... 13 43 1 2 Accrued selling expenses, company divestment ...................................................................................... — 13 — 13 Accrued telephony expense to other telecom operators ......................................................... 1,383 461 — — Accrued expense to dealers............................................................................................................................................. 45 56 — — Accrued leasing costs and rent ..................................................................................................................................... 2 109 — — Accrued costs of programs ............................................................................................................................................... — — — — Accrued expenses for external services........................................................................................................... 586 15 6 9 Prepaid revenues ............................................................................................................................................................................. 233 351 — — Other ............................................................................................................................................................................................................. 120 150 — — Total accrued expenses and prepaid revenues ...................................................................... 3,273 1,265 8 25 Changes in the consolidated accounting principles as regards cash card accounting resulted in a retroactive increase in previous years’ reserves for accrued expenses in the amount of SEK 33 million. Note 31 Pledged assets Group Parent Company Dec. 31, 2000 Dec. 31, 1999 Dec. 31, 2000 Dec. 31, 1999 Assets pledged for own liabilities: Chattel mortgages.................................................................................................................................................................. — 16 — — Shares in subsidiaries .......................................................................................................................................................... — 331 Net assets in Group companies ........................................................................................................................... 37 366 Buildings............................................................................................................................................................................................... 14 — — — Machinery and technical plant................................................................................................................................. 486 — — — Materials and supplies ........................................................................................................................................................ 17 7 — — Receivables ...................................................................................................................................................................................... 126 10 — 79 Bank invoices................................................................................................................................................................................. 447 — — — Other assets .................................................................................................................................................................................. 68 6 — — Total assets pledged............................................................................................................................................................ 1,195 405 — 410 The data above show the book value of assets pledged as collateral for in the Group are reported in an amount that corresponds to the book external loans (as in Note 27), overdraft facilities and blocked bank value of the net assets that the particular subsidiary represents in the funds (as in Note 23) and other liabilities (as in Note 28). Pledged assets consolidated balance sheet. Tele2 Annual Report 2000 77
  • 80. Notes Note 32 Contingent liabilities and other commitments Group Parent Company Contingent liabilities Dec. 31, 2000 Dec. 31, 1999 Dec. 31, 2000 Dec. 31, 1999 Surety bonds benefiting Group companies.................................................................................................... — — 334 323 Total contingent liabilities ........................................................................................................................................ — — 334 323 Group Parent Company Fees contracted to be paid in the future for operating leases are distributed as follows: Dec. 31, 2000 Dec. 31, 2000 2001................................................................................................................................................................................................................. 907 — 2002 ............................................................................................................................................................................................................... 1,285 — 2003 ............................................................................................................................................................................................................... 120 — 2004 ............................................................................................................................................................................................................... 97 — 2005 ............................................................................................................................................................................................................... 71 — 2006 or later ........................................................................................................................................................................................ 488 — Total future contractual fees for operating leases........................................................... 2,968 — Group Parent Company 2000 2000 Fees for operating leases for the year ................................................................................................................. 628 — Note 33 Supplemental cash flow information Transactions attributable to investing and financing activities In addition to the reported investment and loan liability in cash flow, but which do not affect cash were as follows. investment and the raising of loans through financial leasing in the In addition to the reported investment in shares, the Parent Company Group amounted to SEK 0 million (1999: 35), and the amortization of acquired SEC in 2000 for SEK 19,772 million in exchange for newly loans through financial leasing amounted to SEK –13 million (1999: –16). issued shares in Tele2.The acquired cash balance is included in invest- In addition to the reported investment in the cash flow of the Parent ment operations in cash flow, in a negative amount. Company in 1999, investments were made in subsidiaries through the In addition to the reported investment operations in cash flow, the granting of shareholder contributions of SEK 1,135 million to NetCom Parent Company divested its shares in NetCom ASA in 1999 in Luxembourg SA and SEK 1 million to Trade 2 AB and a new share issue exchange for newly issued shares in SEC for SEK 3,518 million. During in an amount of SEK 101 million to Comvik International AS. 2000, these shares were converted into shares in subsidiaries. In addition to the reported sale of shares in subsidiaries in the cash In addition to reported investment in shares and financing operations, flow in 1999, the Parent Company sold the subsidiary Tele2 Sverige AB the Group also acquired shares in Levicom Cellular and Levicom for SEK 1,133 million to the subsidiary Tele2 Holding AB. In 1998 and in Broadband in 1999 for an additional SEK 223 million in the Group, of addition to the reported sale in the cash flow, the Parent Company also which SEK 9 million was reported in the Parent Company.The amounts sold the subsidiary Comviq GSM AB to the subsidiary Tele2 Sverige AB pertain to that portion of the purchase price settled through a reduc- (SEK 464 million). tion in liabilities to the seller, and for which payment is made in line with a fixed schedule. 78 Tele2 Annual Report 2000
  • 81. Notes Note 34 U.S. generally accepted accounting principles The consolidated accounts were prepared based on accounting principles generally accepted in Sweden.These rules differ in certain respect from generally accepted accounting principles (U.S. GAAP) in the United States. The following is a description of the adjustments based on U.S. GAAP that affect the consolidated profit/loss for the year and shareholders’ equity. Group Group Profit/loss for the year: 2000 1999 1998 Shareholders’ equity: Dec. 31, 2000 Dec. 31, 1999 Dec. 31, 1998 Profit/loss for the year based on Shareholders’ equity based on Swedish accounting principles ...... – 381 3,769 73 Swedish accounting principles ....... 26,651 6,757 3,021 Adjustments to comply with Adjustments for reporting in U.S. GAAP: accordance with U.S. GAAP: a) Transactions between companies a) Transactions between companies with the same owners ....................... 24 20 20 with the same owners ........................ – 47 – 72 – 92 b) Reporting associated comp. ........ — 134 30 b) Reporting associated comp. ......... — — – 134 c) Leasing contracts ...................................... 3 3 3 c) Leasing contracts ....................................... 11 9 6 d) Tangible assets .............................................. 31 29 37 d) Tangible assets ............................................... 51 20 –9 e) Stock options ................................................. – 196 9 — e) Stock options .................................................. – 30 9 — f) Proprietary software ............................ 80 – 81 — f) Proprietary software ............................. — – 80 — g) Accounting for gradual acq. ......... – 310 – 56 — g) Accounting for gradual acq. .......... – 82 – 56 — h) Accounting for acquisitions ......... – 104 — — h) Accounting for acquisitions .......... 6,592 — — i) Deferred tax liability ............................. — – 828 — i) Deferred tax liability .............................. – 828 – 828 — j) Refund from SPP ....................................... -8 — — j) Refund from SPP ........................................ –7 — — Net adjustment ....................................................... – 480 – 770 90 Net adjustment ....................................................... 5,660 – 998 – 229 Tax effect of above adjustments Tax effect of above adjustments for U.S. GAAP ................................................... – 32 9 – 14 for U.S. GAAP .................................................... – 10 18 11 Profit/loss for the year Shareholders’ equity based based on U.S. GAAP ...................... – 893 3,008 149 on U.S. GAAP ............................................. 32,301 5,777 2,803 Adjusted profit/loss per share ............. SEK – 7.83 SEK 28.96 SEK 1.44 Weighted average No. of shares outstanding ....................................... 114,087,366 103,850,246 103,598,394 Adjusted profit/loss per share after full conversion ................................... SEK – 7.83 SEK 28.96 SEK 1.43 Weighted average No. of shares out- standing after full conversion .......... 114,087,366 103,850,246 103,850,246 Official U.S. GAAP Extract from the consolidated balance sheets: Dec. 31, 2000 Dec. 31, 1999 Dec. 31, 2000 Dec. 31, 1999 Balance sheet: Current assets .................................................................................................................................................................................... 6,517 2,618 6,517 2,618 Fixed assets ............................................................................................................................................................................................ 35,828 11,784 42,474 11,722 Total assets.............................................................................................................................................................................................. 42,345 14,402 48,991 14,340 Current liabilities ............................................................................................................................................................................. 9,456 2,493 9,476 2,494 Long-term liabilities...................................................................................................................................................................... 6,230 5,151 7,206 6,068 Minority interest .............................................................................................................................................................................. 8 1 8 1 Total liabilities ...................................................................................................................................................................................... 15,694 7,645 16,690 8,563 Total shareholders’ equity.................................................................................................................................................... 26,651 6,757 32,301 5,777 Retroactive adjustments in connection with gradual acquisitions: zation of the resulting goodwill.The retroactive adjustment of the 1999 As a result of the gradual acquisition of the shares in SEC in October profit, according to US GAAP, was negative in an amount of SEK 79 mil- 2000, a retroactive adjustment of 17.8% was made of the original invest- lion, with an effect on earnings per share before and after full conver- ment from November 1999, to the effect that this was recalculated in sion of SEK 0.77.The retroactive adjustment of shareholders’ equity at accordance with the equity method for associated companies instead of December 31, 1999 amounts to a reduction of SEK 1,856 million in according to the acquisition cost.This means that an adjustment arises shareholders’ equity, which primarily derives from the reversal of unreal- in shareholders’ equity corresponding to Tele2’s share in the profit of ized profit arising from a market valuation of the SEC shares as of SEC during the period November 1999 to September 2000 and amorti- December 31, 1999. Tele2 Annual Report 2000 79
  • 82. Notes Explanation of current differences between As a result of the authorization of the Board by the Annual General Swedish accounting principles and U.S. GAAP Meeting in May 2000 to settle the options commitment through a new share issue, the previously booked liability provision was dissolved via The consolidated accounts were prepared using generally accepted the income statement.According to U.S. GAAP, the commitment to accounting principles in Sweden.These rules differ in certain respects employees should not be dissolved. Commitments to others should be from U.S. GAAP.The following is a description of the adjustments based valued at the value of the option on the date on which a decision was on U.S. GAAP that affect the consolidated profit/loss of Tele2-group for made to settle through a new share issue and should be reported fiscal 1998, 1999 and 2000 and the Group’s shareholders’ equity at directly against shareholders’ equity. December 31, 1998, 1999 and 2000. f) Proprietary software Revised accounting principles Up to 1999,Tele2 capitalized development costs for software intended During 2000,Tele2 revised its accounting principles for start-up expens- for external sale.According to U.S. GAAP, this should be expensed, and es, capitalized interest expenses and the reporting of revenue from cash depreciation attributable to capitalization should be reversed until the cards. Changes in accounting principles were applied retroactively and product is technically feasible.As a result of the sale of 4T Solution AB have thus affected profit/loss for each year (refer also to Note 24). during 2000, there is currently no discrepancy vis-à-vis U.S. GAAP. These accounting principles previously represented a discrepancy between Swedish and U.S. accounting principles. Since there are no g) Accounting for gradual acquisitions longer any differences, the opening adjustment items, which previously As a result of the gradual acquisition of SEC during 1999 and 2000, reflected these differences, have been excluded for all periods. Tele2, according to Swedish accounting principles, adjusted shareholders’ equity in line with the share in the profit of the holding from the original a) Transactions between companies under joint ownership acquisition date in 1999 up until the supplementary acquisition date in In 1993 and 1994, the company acquired Tele2 and Comviq, respectively, October 2000.According to U.S. GAAP the original acquisition of 17.8% from the Industriförvaltings AB Kinnevik Group.The acquisition method is to be reported in accordance with the equity method instead of at was used for accounting this transaction.Accordingly, the difference the historic acquisition value.This means that goodwill and amortization between the acquisition value and market value of net assets was should be taken into account in the acquisition in 1999 and January – reported as goodwill.According to U.S. GAAP, the acquisition of opera- September 2000. tions from “companies under joint control” should be reported at his- torical cost. Consequently, as a U.S. GAAP adjustment, all revaluation of h) Accounting for acquisitions plant, inventories, goodwill, etc. arising on the transaction date has been The acquisition of SEC in 2000 was conducted through a non-cash issue eliminated and the resulting depreciation reversed. in which new shares in Tele2 were offered in exchange for the outstand- During 1998, SEC was formed through the transfer by Industriförvalt- ing shares in SEC.According to Swedish accounting principles, the acqui- nings AB Kinnevik and Millicom International Cellular S.A. of certain sition price is calculated at a value corresponding to the market price of assets and liabilities to the newly established company.The transferred Tele2 on the transaction date.According to U.S. GAAP, the acquisition assets and liabilities were valued at market. In line with the above, U.S. price should be set on the basis of the share price on the date the offer GAAP view this type of transaction as having occurred between “com- was made.There are also certain differences between acquired net panies under joint control,” and thus the acquisition cost should be assets according to U.S. GAAP and Swedish accounting principles.As a applied and resulting depreciation should be reversed. result of these differences, the reported goodwill value, including amorti- zation according to U.S. GAAP, has been adjusted. b) Accounting for associated companies In 1993, the company acquired shares in the Norwegian associated i) Deferred tax liability company, NetCom ASA, from a company in Industriförvaltnings AB According to U.S. GAAP, deferred taxes should be reported for all tem- Kinnevik Group.The investment was reported in accordance with the porary differences, with certain exceptions.The reversal of deferred tax equity method.A surplus value was reported in connection with the liabilities due to changing circumstances is restrictive. According to investment.According to U.S. GAAP, this surplus value and the resulting Swedish accounting principles, changes in circumstances may be taken amortization is reversed since it arose as a result of a transaction into account in the appraisal. between “companies under joint control.” During 1999, the company divested its shares and thus there is no longer any difference in relation j) Refund from SPP to U.S. GAAP. According to Swedish accounting principles, the present value of the refund received by Tele2 from SPP should be reported via the income c) Leasing agreements statement in 2000.According to U.S. GAAP, only the amount received in In the Group, certain leasing transactions have been treated as opera- cash should be reported in the income statement. tional leasing, in line with generally accepted accounting principles in Sweden, while according to U.S. GAAP, these should be regarded as U.S. GAAP supplementary information: financial leasing. Significant acquisitions during the year d) Tangible fixed assets The following table shows the profit/loss for 1999 and 2000 pro Certain expenses, which have been capitalized in line with Swedish forma in accordance with U.S. GAAP as if the acquisition of SEC had accounting principles, should be expensed according to U.S. GAAP. been conducted on January 1, 1999. According to U.S. GAAP, certain expenses attributable to the installation of networks should be capitalized and not expensed. 2000 1999 Net income ......................................................................................................... 16,273 10,640 e) Options Profit/loss before tax ............................................................................... – 2,071 – 1,996 According to U.S. GAAP, a liability should be calculated based on the Profit/loss for the year ........................................................................... – 2,661 – 3,313 market value of the underlying share as a result of the conditions under- Earnings per share, SEK ........................................................................ – 18.40 – 22.91 lying the options programs.According to Swedish accounting principles, Number of shares before and after all options are valued according to the Black-Scholes model. full conversion ........................................................................................... 144,598,726 144,598,726 80 Tele2 Annual Report 2000
  • 83. Notes Earnings per share Pensions As of 2000, earnings per share are calculated after dilution, in line with The Group provides pension benefits for all employees in Sweden U.S. GAAP, and in accordance with a method in which option proceeds through public pension plans.These Swedish pension plans are Defined are assumed to be used to acquire shares at their average market value Benefit Plans. Since a third party insures the plans, they should be treat- during the accounting period. Since earnings for the year were negative, ed as Defined Contribution Plan. In Norway, Denmark and Switzerland, the calculation is not affected by this, as the dilution effect does not pension benefits are provided in accordance with a Defined Benefit Plan. reduce the loss per share. The total cost of these commitments in 2000 amounted to SEK 3 million. In the U.K, pensions are provided through a Defined 2000 1999 1998 Contribution Plan, with a total cost of SEK 1 million.The section Profit/loss for the year .................................. – 893 3,008 149 entitled “Costs of personel” shows total pension costs. Number of shares, weighted average 114,087,366 103,850,246 103,598,394 Real value of financial items Earnings per share ................................... SEK – 7.83 SEK 28.96 SEK 1.44 According to U.S. GAAP, information should be provided regarding the estimated real value of financial items whenever these are possible to Profit/loss for the year ................................ – 893 3,008 149 estimate. Group financial items such as cash and bank balances, current Reversal of interest for the year after investments, receivables and liabilities, prepaid revenue and current tax on outstanding convertibles — — — liabilities to financial institutions are regarded as largely corresponding to Adjusted profit/loss for the year their real value since these are short-term in nature.The book value of after full dilution ........................................... – 893 3,008 149 long-term liabilities to financial institutions and options issued is also Number of shares outstanding after regarded as largely corresponding to their real value.The real value of full dilution, weighted average ..... 114,087,366 103,850,246 103,850,246 Tele2’s loan with a fixed interest rate and in a nominal amount of SEK Earnings per share after 125 million amounts to SEK 122 million based on a discount rate of full dilution .................................................... SEK – 7.83 SEK 28.96 SEK 1.43 4.8%. To cover the Group’s interest rate exposure,Tele2 has concluded a Deferred tax number of interest-rate cap agreements with various banks (refer also to The estimated tax effect for temporary differences reported as a note 27).The total cost of these instruments amounted in 2000 to SEK deferred tax receivable in reconciliation vis-à-vis accounting according 18 million.The real value at December 2000 amounted to SEK 3 million. to U.S. GAAP, is shown below. Proprietary software for internal use 2000 1999 Tele2 capitalizes certain direct development expenses attributable to Deferred tax liability (–) /-receivable (+) software for internal use.These are written off over the utilization peri- acc. to Swedish account. principles – 615 – 60 od, which commences when the asset is ready for use. Expenses attrib- Adjustment items............................................... – 838 – 809 utable to the preliminary project phase, as well as expenses for mainte- nance and training are expensed as they arise. Total deferred tax liability (–) /-receivable (+) according to Financial Leasing U.S. GAAP – 1,453 – 869 Financial leasing falls due for payment as follows: Cash flow analyses Dec. 31, 2000 According to U.S. GAAP, cash flow from current operations must be 2001 ................................................................................................................................ 77 reported on the basis of the net profit after tax. 2002 ................................................................................................................................ 51 2003 ................................................................................................................................ 42 2000 1999 1998 2004 ................................................................................................................................ 34 Current operations 2005 ................................................................................................................................ 64 Profit/loss for the year ................................ – 381 3,769 67 2006 – 2010 ........................................................................................................... 85 Adjustment for items in operating profit 353 that do not generate cash flow from Less: Interest portion:............................................................................... – 62 current operations: Current value of future leasing payments.... 291 Depreciation .............................................. 1,400 909 705 Minority interest................................... — –2 — “Comprehensive Income” Result from shares in “Comprehensive Income” includes profit/loss for the year and changes associated companies ..................... 44 – 45 10 in translation differences. Deferred tax cost ............................... 567 419 165 Financial leasing ...................................... –6 –6 – 10 2000 1999 1998 Unpaid interest....................................... – 31 – 33 18 “Comprehensive Income”: Sale of associated companies — – 3,228 — Net income based on U.S. GAAP................... – 893 3,008 149 Miscellaneous............................................ 2 –6 — Change in translation differences 1,595 1,777 955 according to U.S. GAAP...................................... 751 – 73 21 Changes in working capital .................... – 712 – 24 35 “Comprehensive Income” Cash flow from current based on U.S. GAAP ................................................. – 142 2,935 170 operations....................................................... 883 1,753 990 Cumulative “Comprehensive Income”: Cumulative Comprehensive Income Advertising expenses based on U.S. GAAP, Jan 1................................. – 21 52 31 Total advertising cost for the year amounted to SEK 630 million Change in translation differences (1999: 168 and 1998: 209). according to U.S. GAAP...................................... 751 – 73 21 Cumulative Comprehensive Income based on U.S. GAAP, Dec 31 ......................... 730 – 21 52 Tele2 Annual Report 2000 81
  • 84. Notes Effects of new recommendations ing to U.S. GAAP. Effective January 1, 2001,Tele 2, in accordance with Effective January 1, 2001,Tele2 must begin to apply recommendation U.S. GAAP, will report interest rate cap instruments with a real value FASB 133 “Accounting for derivative instruments and hedging”. of SEK 3 million. According to the recommendation all derivative instruments must be Effective January 1, 2001,Tele2 must begin to apply the Financial reported at their real value on the closing date. Changes in real value Accounting Standards Council’s recommendations RR18 “Earnings per are reported in the income statement or comprehensive income, share”, RR19 “Operations being phased out” and RR20 “Interim report- depending on the nature of the transaction.As a result of the limited ing”.Application of the new recommendations is not expected to have holding of derivative instruments, the recommendation is not expected any significant effect on the Group’s earnings and financial position to have any significant impact on earnings and financial position accord- according to Swedish accounting principles or according to U.S. GAAP. Stockholm, March 16 2001 Jan Hugo Stenbeck Chairman Lars-Johan Jarnheimer Marc Beuls President and CEO Vigo Carlund Sven Hagströmer Håkan Ledin Stig Nordin Lars Wohlin Our auditors’ report was submitted on 19 March, 2001 Pål Wingren Hans Karlsson Authorized Public Accountant Authorized Public Accountant Audit report To the General Meeting of the shareholders of Tele2 AB (publ) accounts. As a basis for our opinion concerning discharge from Corporate identity number 556410-8917 liability, we examined significant decisions, actions taken and circumstances of the company in order to be able to determine We have audited the annual accounts, the consolidated accounts, the liability, if any, to the company of any board member or the the accounting records and the administration of the board of managing director. We also examined whether any board mem- directors and the managing director of Tele2 AB ( publ) for the ber or the managing director has, in any other way, acted in year 2000. These accounts and the administration of the compa- contravention of the Companies Act, the Annual Accounts Act ny are the responsibility of the board of directors and the manag- or the Articles of Association. We believe that our audit pro- ing director. Our responsibility is to express an opinion on the vides a reasonable basis for our opinion set out below. annual accounts, the consolidated accounts and the administra- The annual accounts and the consolidated accounts have tion based on our audit. been prepared in accordance with the Annual Accounts Act We conducted our audit in accordance with generally accepted and, thereby, give a true and fair view of the company’s and the auditing standards in Sweden. Those standards require that we group’s financial position and results of operations in accor- plan and perform the audit to obtain reasonable assurance that dance with generally accepted accounting principles in Sweden. the annual accounts and the consolidated accounts are free of We recommend to the general meeting of shareholders that material misstatement. An audit includes examining, on a test the income statements and balance sheets of the parent compa- basis, evidence supporting the amounts and disclosures in the ny and the group be adopted, that the profit for the parent accounts. An audit also includes assessing the accounting princi- company be dealt with in accordance with the proposal in the ples used and their application by the board of directors and the administration report and that the members of the board of managing director, as well as evaluating the overall presentation directors and the managing director be discharged from liability of information in the annual accounts and the consolidated for the financial year. Stockholm, March 19, 2001 Pål Wingren Hans Karlsson Authorized Public Accountant Authorized Public Accountant 82 Tele2 Annual Report 2000
  • 85. Addresses Tele2 AB Norway Baltic States and Skeppsbron 18, P.O Box 2094 Tele2 Norge AS Eastern Europe SE-103 13 Stockholm, Sweden Ulvenveien 75A Estonia Phone: +46 8 5626 40 00 NO-0581 Oslo, Norway OÜ Levicom BroadBand Fax: +46 8 5626 42 00 Phone: +47 21 31 90 00 Ahtri 12, Fax: +47 21 31 91 00 EE-10151 Tallinn, Estonia Investor Relations Phone: +372 6105 780 30 St James’ Square Datametrix AS Fax: +372 6105 781 GB-SW1Y 4JH, London, Great Britain Grenseveien 95 Phone: +44 20 7321 5010 NO-0663 Oslo, Norway Q GSM (Ritabell) Fax: +44 20 7321 5020 Phone: +47 23 03 59 00 Jõe 2, Fax: +47 23 03 59 01 EE-10151 Tallinn, Estonia Nordic countries Denmark Phone: +372 6205 230 Sweden Fax: +372 6205 231 Tele2 A/S Tele2 Sverige AB Gammel Køge Landevej 55, P.O Box 62 Latvia DK-2500 Valby, Denmark SE-164 94 Kista, Sweden SIA Tele2 Phone:+45 77 30 10 01 Phone: +46 8 56 26 40 00 Kurzemes Prospectus 13 Fax: +45 77 30 10 00 Customer services: Riga LV-1067, Latvia 0200-24 24 24 (Internet) Phone: +371 960 99 99 Datametrix A/S 0200-25 25 25 (fixed Fax: +371 706 01 76 Gammel Køge Landevej 55-57 telephony) DK-2500 Valby, Denmark 0200-25 40 50 (mobile Lithuania Phone: +45 77 30 10 60 telephony) UAB Tele2 Fax: +45 77 30 10 61 Fax: +46 8 56 26 42 00 Sporto g. 7a LT-20 51 Vilnius, Lithuania Finland Phone: +370 2 366 300 Comviq GSM Tele2 Finland P.O Box 62 Fax: +370 2 366 301 Sentnerikuja 3, SE-164 94 Kista, Sweden FIN-00440 Helsinki, Finland Phone: +46 8 562 640 00 Poland Phone: +358 9 74 22 12 45 Fax: +46 586-534 44 Tele2 Polska Fax: +358 9 74 22 12 46 ul. Poste-pu 15 Kabelvision PL-02-676 Warsaw, Poland Datametrix Oy P.O Box 62 Phone: +48 (22) 549 50 60 P.O. Box 5 SE-164 94 Kista, Sweden Fax: +48 (22) 549 50 61 FIN-01301 Vantaa, Finland Phone: +46 8 562 643 52 Phone: +358 9 47 64 82 00 Fax: +46 586 548 40 Czech Republic Fax: +358 9 47 64 82 10 Tele2 s. r. o. Datametrix AB Vinohradská 184, Praha 3, P.O Box 79 CZ-130 00, Czech Republic SE-164 94 Kista, Sweden Phone: +420 267 13 22 38 Phone: +46 8 522 002 00 Fax: +420 274 778 240 Fax: +46 8 522 002 90 Sweden X-Source AB P.O Box 416 SE-129 44, 129 04 Hägersten, Sweden Phone: +46 852 22 35 00 Fax: +46 852 22 35 52 Tele2 Annual Report 2000 83
  • 86. Addresses Central Europe Italy Other brands Tele2 Italia SpA Germany Optimal Telecom AB Via Cassanese 210 Tele2 Telecom Services GmbH P.o. Box 62 IT-20090 Segrate Milano, Italy In der Steele 39a, SE-164 94 Kista, Sweden Phone: +39 02 269 571 DE-40599 Düsseldorf, Germany Phone: +46 8 562 625 00 (vxl) Fax: +39 02 26 92 04 37 Phone: +49 211 7600 4600 Fax: +46 8 562 625 25 Fax: +49 211 7400 448 Spain Optimal Telecom A/S Tele2 Telecommunication Netherlands Karl Jacobsen vej 20 Services S.L. Tele2 Nederland B.V. DK-2500 Valby, Denmark Francisco de Ricci,3, Ellermanstraat 19 Phone: +45 77 30 12 90 ES-28015 Madrid, Spain NL-1099BX Amsterdam, Fax: +45 77 30 00 56 Phone: +34 91 540 28 00 Netherlands Fax: +34 91 540 28 01 Phone: +31 207 020 202 IntelliNet France S.A. Fax: +31 207 020 222 75, route de Longwy Luxembourg LU-8080 Bertrange, Luxembourg Switzerland Luxembourg Phone: +352 459 54 51 TELE2 Telecommunication Fax: +352 45 95 51 Tango S.A. Services AG 177, rue de Luxembourg, P.O. Box 49 IntelliNet Telecom.Serv.GmbH LU-8077 Bertrange, Luxembourg CH-8037 Zürich, Switzerland Schmidtstrasse, 51 Phone: +352 27 777 101 Phone: +41 1 524 24 24 D-60326 Frankfurt, Germany Fax: +352 27 777 888 Fax: +41 1 524 47 78 Phone: +49 697 500 140 Fax: +49 69 75 00 14 29 3C Communications S.A. Austria 75, route de Longwy Tele2 Telecommunication Everyday.com LU-8080 Bertrange, Luxembourg Services GmbH Box 17041 Phone: +352 27 750 101 Schönbrunnerstr. 213-215, 4floor SE-104 62 Stockholm, Sweden AT-1120 Wien, Austria Phone: +46 8 5889 8400 Transac S.A. Phone: +43 181 101 300 Fax: +46 8 5889 8401 3, rue de l'Abattoir Fax: +43 181 101 100 LU-3409 Dudelange, Luxembourg C3 Calling Card Company Phone: +352 27 754 101 Ireland 1 Mill Street Tele2 Telecommunication GB-London SE1 2DE, Great Britain Liechtenstein Services Ltd Phone: +44 207 232 4949 Tele2 AG Office 4, O'Duffy Centre, Main 75 route de Longwy, Street, Carrickmacross, LU-8080 Bertrange, Luxembourg Co Monaghan, Ireland Phone: Operated from Luxembourg Phone: +353 42 969 2946 Fax: +353 42 969 2947 Belgium Tele2 Belgium N.V. Southern Europe 75, route de Longwy, LU-8080 Bertrange, Luxembourg France Phone: +352 27 750 101 Tele2 (France) S.A. Fax: +352 27 750 250 14 Rue des Frères Caudron - FR-78143 Vélizy cedex, France Phone: +33 1 39 45 44 44 Fax: +33 1 39 45 44 00 84 Tele2 Annual Report 2000
  • 87. Definitions DEFINITIONS GLOSSARY Text in parentheses refers to financial ratios after full conversion CRM – Customer Relationship Management – often uses com- puter-based systems. ARPU Average revenue per user DSL – Digital Subscriber Line. Generic name covering several different technologies for data Liquidity transmission over fixed phone lines Cash and cash equivalents, including unutilized credit facilities granted GPRS – General Packet Radio Service. A technology that permits high-capacity data transmission using Net borrowing mobile phones Interest-bearing liabilities (less convertible debentures) less inter- est-bearing assets GSM – Global System of Mobile Communications or Groupe Spécial Mobile. 2nd-generation mobile telephony system. Digital, Investments as opposed to analog NMT Acquisition and divestment of fixed assets, including investments through financial leases, and investments not qualifying as cash HSCSD – High Speed Circuit Switched Data.A technology for equivalents data transmission over mobile networks. Uses the GSM system as a base Equity/assets ratio Shareholders’ equity (including convertible debentures) divided IP – Internet Protocol. by total assets A series of rules for communication among computers over the Internet Debt-equity ratio Interest-bearing net debt divided by shareholders’ equity at the LAN – Local Area Network. end of the period Local network of computers, often in the same room or building Return on shareholders’ equity MVNO – Mobile Virtual Network Operator. Profit/loss after tax less items affecting comparability, minority MVNO’s have greater network resources than Service Providers interests after tax deductions (and interest expense for convert- with which to offer their own telecom services to subscribers. ible debentures after tax deductions) divided by average equity But they do not have radio access network capacity, which must (including convertible debentures) be purchased from a network operator Return on capital employed NMT – Nordic Mobile Telephone. Profit/loss after financial items less items affecting comparability Ordinarily identified as the 1st-generation mobile telephony.An and financial costs (less interest expense for convertible deben- analog technology developed in the Nordic region tures) divided by average capital employed SMS – Short Message Service. Capital employed Enables the transmission of short text messages between mobile Total assets less provisions, minority interests and non-interest- phones or between a computer that is connected to the Internet bearing liabilities and a mobile phone Average interest expense SP – Service Provider. Interest expense (less interest expense for convertible deben- A company that purchases capacity from network operators with tures) divided by average interest-bearing liabilities (less convert- which it can sell telecom services to its subscribers ible debentures) UMTS – Universal Mobile Telecommunications System. Profit/loss per share A technology for 3rd-generation mobile telephony intended to Profit/loss for the period (less interest expense on convertible handle, text, images, and video. UMTS is based on GSM technolo- debentures, and less tax deductions) divided by the weighted gy but has much greater capacity average number of shares outstanding during the fiscal year (that would result from full conversion of convertible debentures) VOIP – Voice Over Internet Protocol. Telephony that uses Internet Protocol Shareholders’ equity per share Shareholders’ equity (including convertible debentures) less minor- VPN – Virtual Private Network. ity interests, divided by the weighted average number of shares A service that links a company’s local and telecom networks with outstanding during the fiscal year (that would result from full con- the computers and phones of employees who work remotely, version of convertible debentures) forming a telecom or data communications network that looks to users like a single business network Cash flow per share Based on cash flow from operating activities before investment WAN – Wide Area Network. and financing activities A network of computers on different locations. Often consists of several LANs linked together Dividend per share Based on the dividend distributed or proposed each year WAP – Wireless Application Protocol. An industrial standard for Internet-based data communications P/E multiple over mobile networks. Developed by the WAP Forum, consisting Share price divided by profit/loss per share. of big corporations like Ericsson, IBM, Motorola and Nokia WLL – Wireless Local Loop. Wireless broadband access via radio networks. Sources: Computer Sweden, Mobiltelebranschen, Svenska Datatermgruppen, and Tele2
  • 88. Produced by: Solberg Kommunikation. Printed by: On Paper. TELE2 AB Skeppsbron 18 P.O. Box 2094 SE-103 13 Stockholm Phone +46-8-562 000 60 Fax +46-8 562 000 40 E-mail info@TELE2.com www.TELE2.com Corporate identification No.: 556410-8917

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