Annual Report 2003

Annual Report 2003 Best year ever. Still hungry... ... HATE FAT CATS!

CONTENTS TELE2 ANNUAL REPORT 2003 2003. President’s message, Tele2 has an important mission, You just have to know this about Good growth in Tele2’s markets, page 2 page 4 Tele2, page 6 page 21 Contents Tele2 in brief 2 President’s message: Profitability and growth, with satisfied Tele2 is Europe’s leading and profitable alternative telecom operator. customers at the top of the agenda With our unique values, we provide cheap and simple telecom for all 4 Mission and values: Tele2 has an important mission Europeans every day. We have over 22 million customers in 23 countries. 6 Our working method: You just have to know this about Tele2 We offer products and services in fixed and mobile telephony, Internet access, 8 Products and services: What Tele2 offers data networks, cable TV and content services. Our main competitors are the former government monopolies. Tele2 was founded in 1993 by Jan Stenbeck 9 Board of Directors and has been listed on Stockholmsbörsen since 1996. The share has also 10 Senior executives been listed on Nasdaq since 1997. In 2003 we had an operating revenue of 12 The Tele2 share SEK 36,911 million and reported a profit of SEK 5,710 million (EBITDA). Tele2 always strives to offer the market’s best prices. 14 New market organization: New organization for growth in Europe 16 Market: Nicely aligned with the customers’ needs 18 Competition policies: Everyone wins with more competition 20 The right quality: The customer’s wellbeing – our reward 21 Tele2 on each market: Good growth in Tele2’s markets Financial information 22 Market area Nordic: Cross-selling with Nordic focus • Quarterly report, January–March April 21, 2004 24 Market area Southern Europe: ADSL already a success in France • Annual General Meeting May 12, 2004 26 Market area Central Europe: Germany now profitable • Quarterly report, January–June August 2, 2004 28 Market area Baltic and Russia: Strong foothold in • Quarterly report, January–September October 20, 2004 fast-growing countries 30 Market area Benelux: The successes continue 32 Market area Services: Growth in smart IT and telecom products Annual General Meeting 33 Tele2 and the community: Close cooperation For more information about the Annual General Meeting, see page 72. 34 Employees: Hungry for success 36 Accounts 38 Report of the Board of Directors 41 Income statement 42 Balance sheet 44 Cash flow statement 45 Changes in shareholders’ equity 46 Notes 68 Audit report 69 Definitions and Glossary 70 Addresses 72 Annual General Meeting

TELE2 ANNUAL REPORT 2003 THE YEAR THAT PASSED 1 2003 – our best year ever • Operating revenue rose by 18% to SEK 36,911 (2002: 31,282) million • 5.5 million net intake in 2003; a total of 22.3 million customers at year-end • Profit after tax increased to SEK 2,396 (2002: 223) million • Earnings per share after tax and dilution rose to SEK 16.20 (2002: 1.51) • Cash flow after investments increased by 85% to SEK 3,418 (2002: 1,849) million Increase in operating Cash flow, operations Cash flow, revenue after investments Financial summary MSEK 2003 2002 Operating revenue 36,911 31,282 Operating profit/loss before depreciation, EBITDA 5,710 5,127 Operating profit/loss after depreciation, EBIT 1,884 1,530 Operating profit/loss after financial items, EBT 1,267 796 Profit for the year 2,396 223 Earnings per share, after dilution, SEK 16.20 1.51 Average number of employees 3,274 3,115

2 THE PRESIDENT’S MESSAGE TELE2 ANNUAL REPORT 2003 Profitability and growth, with satisfied customers at the top of the agenda PRESIDENT’S MESSAGE. We have done what no one believed possible. Just over 20 years ago, when Jan Stenbeck planted the seed for what is now Tele2, many people shook their head. How could it be possible to build a profitable company in the telecom sector? Would it really be possible to break the government monopoly, offer customers better services and still make money? At the time of writing, over 22 million customers in 23 European Our target is for each new country of operations to reach an countries have entrusted us to be their supplier. Although the operating profit within three years. Progress in Germany fluctuated world’s telecom operators have experienced hard times, Tele2 can a little to start with, basically due to regulatory difficulties, but we report very good results for 2003. are now on the right side of the line. Once again, Tele2 had done We increased revenue by 18 percent to SEK 36,911 million and what few thought possible. operating profit before depreciation (EBITDA) increased by 15 percent, amounting to SEK 5,710 million. We have consolidated our already strong cash position and are well placed for the future. “Long-term development is Tele2 is currently Europe’s leading alternative telecom operator. Our mission is as follows: cheap and simple telecom for all positive and we are achieving Europeans. Tele2 strives to offer the market’s best prices. In short, this means good results and an excellent that we give our customers real value for their money. At Tele2, we hate complicated technology. We put our efforts cash flow” into making our services as simple as possible, and our customers appreciate this. We also make a point of only releasing new services on the market when customers are ready to pay for them. One Our values create results example is 3G on the Swedish market: we will launch our services Our success is not due to mere chance. Nor does it come from ten- only when there are phones to buy. This protects Tele2 from un- year plans or long workshops. necessary market risks and paves the way for future profitability. No, Tele2’s success is based on a unique corporate culture, central to which is our firm conviction that the customer is king. Our best year ever Tele2 must always deliver what the customers want. In a mar- There are several important events in 2003 I would like to high- ket where trends are fast-moving, we must match the pace. For light, starting with our good results. Revenue, profitability, cash this reason, we plan the details of our operations in three-month flow and customer intake are all factors which experienced positive periods. We are constantly helped by our simple targets and strong development during the past year. This would never have been values. possible without tailoring the Tele2 culture to all 23 countries. We also steadfastly believe in delaying investments as long as A strong organization enabled us to enter into three new mar- possible and preferably avoiding them. I have never had anyone kets: Belgium, the UK and Portugal, where we are already produ- come up to me and say, “It’s a crying shame we didn’t buy that a bit cing promising results. earlier.” Later in the annual report (page 21), we describe how the diffe- If you are not familiar with the expression MVNO, it is the rent market areas performed during the year. However, France and abbreviation for our preferred business model for our mobile ex- Germany deserve special mention here. pansion. In short, MVNO dispenses with heavy investment in own France has become a pilot market for our sharp ADSL concept. networks and enables us to own the whole customer relationship. Tele2 has quickly become the fastest growing supplier. At certain Both ourselves and the network owner providing the call minutes periods, we have even surpassed the historical supplier hands down see clear advantages in an MVNO setup. in terms of new intake. We look forward going into other markets On page 5, we describe how our values help us satisfy our custo- with a similar setup. mers, while also earning money.

TELE ANNUAL REPORT 2003 TELE22 ANNUAL REPORT 2003 THE PRESIDENT’S MESSAGE 3 XXXXX SID Future agenda I see five important items on Tele2’s agenda. The first is to ensure that our operations in new countries continue to grow, without ever losing sight of profitability. At Tele2, we have a tested model for activating new markets and we know what signs to take a quick look at. The second is to give Russia, where operations are still in their infancy, the support required. Tele2 has a good intake of new customers, but there is intense price pressure. We are working conscientiously to increase the revenue per customer. Russia has the potential to become an important part of Tele2’s future growth. The third is new products, such as ADSL in France and Italy, to achieve what we have envisaged. However good our own efforts are, every market has important issues connected with legislation and other regulations. Despite new EU regulations, many countries are putting off introducing improved competition rules. Correctly implemented, the new competition rules would mean better opportunities to compete on more reasonable terms with the former monopolies, resulting in lower prices for customers. Fourth on the agenda is cross-selling. When we enter a country, we tend to start by selling fixed telephony. Once we have established our brand and built a customer base, we launch new services. We can then increase revenue quickly and easily, paving the way for positive results. There are many interesting opportunities in all our countries of operation. The fifth item on the agenda is particularly important. In the next few years, growth is at the top of the agenda, closely followed by profitability. In the long term, they are both a prerequisite for each other. I have strong support from the Board of Directors and owners regarding continuing expansion. Europe is a large market and contains many potential customers. There are still more than ten European countries in which we are not established, so that should keep Tele2 busy for a long time. And finally As we leave 2003 behind, I will especially remember one thing. Despite doubts from the world at large, we have done what few thought possible. Long-term development is positive and we are achieving good results and an excellent cash flow. Without jeo- pardizing future expansion, the Board of Directors has therefore proposed to the Annual General Meeting that the shareholders be allocated a dividend of SEK 3 per share. This is an acknowledge- ment that our joint efforts have not been in vain. And as it says on the cover of our annual report: Best year ever – still hungry. At Tele2, we shall continue to follow our own path and work hard to exceed the expectations of the outside world. Stockholm, February 2004 Lars-Johan Jarnheimer

4 MISSION AND VALUES TELE2 ANNUAL REPORT 2003 Tele2 has an important mission

TELE2 ANNUAL REPORT 2003 MISSION AND VALUES 5 MISSION AND VALUES. Tele2 has an important mission: cheap and simple telecom for all Europeans. Our values are not there just for the sake of it. They are an important support in the day-to-day work in our Group. Our mission Cheap and simple telecom for all Europeans Our work is marked by... Flexibility. Positioned close to the customers’ needs and fast-acting. Openness. Unity, straight answers and a simple organization. Tele2 is Europe’s leading and profitable alternative Cost-consciousness. Careful with money, investing as telecom operator. With our unique values, we provide late as possible and always questioning costs. cheap and simple telecom for all Europeans every day. We currently have over 22 million customers in 23 countries. We offer products and services in fixed telephony, mobile telephony, Internet access, data networks, cable TV and content services. Our main competitors are the former …and we do so by government monopolies. Tele2 was founded in 1993 by Copying with pride. Making it simple, copying what Jan Stenbeck and has been listed on Stockholmsbörsen works and, above all, not changing what is successful. since 1996. The share has also been listed on Nasdaq Challenging. Doing the impossible by going since 1997. In 2003 we had an operating revenue of our own way. SEK 36,911 million and reported a profit of SEK 5,710 Acting. Focusing on the solutions, not the problems. million (EBITDA). Tele2 always strives to offer the market’s Reveling in speed and celebrating our successes. best prices . Tele2’s history Late 1970s 1981 1988 1990 1992 Industriförvaltnings AB Comvik AB launches its own Comviq is awarded a GSM Tele2 AB is formed. (Now Comviq GSM starts up its Kinnevik invests in the analog network for mobile license. Tele2 Sverige AB). own GSM network. telecommunications market. telephony. We find many names for those we love. NetCom Systems AB, which was established in 1993, changed its name to NetCom AB in 1998. NetCom AB changed its name to Tele2 AB in 2001.

6 OUR WORKING METHOD TELE2 ANNUAL REPORT 2003 You just have to know this about Tele2 1993 1996 Tele2 launches fixed The shares in Tele2 are telephony. Tele2 is distributed to shareholders 1997 1998 established to develop the in Kinnevik. Meanwhile, Tele2 is listed on Nasdaq Operations are extended Kinnevik Group’s telecom Tele2 is listed on the O-List in New York. to Estonia through the companies in the Nordic of Stockholmsbörsen. acquisition of 48% in the Region. mobile operator Ritabell.

TELE2 ANNUAL REPORT 2003 OUR WORKING METHOD 7 OUR WORKING METHOD. Tele2 is a rapidly-growing, fast-acting Company. This has a great bearing on our working methods and requires us to be close to the market and our customers’ needs at all times. While other companies are busy presenting ten-year planning documents, Tele2 prefers to build a corporate culture for growth and profitability. This means that every employee knows what is required to make Tele2 even more successful. Profitability and growth We are penny-wise, but not to the point of stupidity Tele2 is the fastest growing Pan-European telecom operator. The At Tele2, we keep a tight hold on our own money and that of our Group holds a leading position among European telecom operators customers. This means that we aim to give customers the lowest who are challenging the former monopolies. prices on the market. To keep our promise to the customers, For us, profitability is a natural part of our growth strategy. In we have to be price-conscious. This attitude is shared by all our the next few years, we will continue to prioritize rapid growth with employees and permeates our whole Company. Although we keep a our great focus on profitability. tight hold on money, we are prepared to invest when we know that our investments will produce results. Customers drive our market, not technology At Tele2, we love our customers, but detest unnecessary techno- Speed creates growth opportunities logy. We want to create simple, customer-friendly services. By Competition in the telecom market is fierce. Having light baggage selling what customers want to buy we can continue to develop our means we can quickly adapt our operations to new conditions. Company and generate long-term earnings for our shareholders. We can then launch new services and products on our markets more quickly than our competitors. We avoid investing heavily in A customer-focused product portfolio own networks, preferring MVNO as a business model for mobile Tele2 offers fixed and mobile telephony, Internet services, data net- telephony (more on page 17). We use this speed and freedom of works, cable TV and content services to over 22 million European action to grow more quickly than our competitors. customers. Our portfolio takes into account the customers’ needs and willingness to spend rather than leading-edge technology and Tested model for growth the latest possibilities. When we go into a new country, we usually start by establishing ourselves in the fixed telephony market. The priority is on quickly One European Company in 23 countries building a satisfactory customer base in the chosen segment and Tele2 is a truly European Company, with operations in 23 countries. then cross-selling. This means that we sell more of our services We use a well-tested model to develop our operations, but adapt it and products to the same customer. Our target is to have achieved to the unique conditions of each country. And Tele2 promotes en- profitability with this model within three years. In some cases, we trepreneurship and inventiveness in local operations by spreading augment organic growth by strategic acquisitions. best practice to other markets. 2000 2002 Tele2 becomes the first Comviq sets a new record mobile virtual network with more than 2 million operator (MVNO) in prepaid card subscribers. Denmark. Tele2 acquires Tele2 is the world’s fourth Société Européenne de fastest growing listed telecom/ 2003 Communication S.A. (SEC). IT company. MVNO launched Tele2 increases its number Tele2 is awarded a UMTS in the Netherlands and of customers by 5.5 million 1999 license in Sweden. Tele2 2001 MVNO agreements signed to 22.3 million. Successful Tele2 increases its holding acquires Latvia’s second Acquisition of FORA in Norway and Austria. Jan ADSL launch in France. in Ritabell to 94.8%, giving largest mobile operator Telecom (Russia). Stenbeck, Tele2’s founder Largest customer intake it access to a GSM1800 Baltkom GSM. Joint UMTS company with and Chairman, passed away ever in the Baltic and license in Lithuania. Telia in Sweden. at 59 years of age. Russia.

8 PRODUCTS AND SERVICES TELE2 ANNUAL REPORT 2003 What Tele2 offers PRODUCTS & SERVICES. Tele2 offers products and services in fixed and mobile telephony, dial-up Internet, broadband, prepaid calling cards and cable TV. Product area FIXED TELEPHONY MOBILE TELEPHONY DIAL-UP INTERNET BROADBAND CALLING CARDS CABLE TV Nordic Sweden ★ ★* ★ ★ ★ Norway ★ ★ ★ ★ Denmark ★ ★ ★ ★ Finland ★ ★ ★ ★ Baltic and Russia Estonia ★ ★* ★ ★ ★ Latvia ★ ★* Lithuania ★* ★ ★ Russia ★* ★ Central Europe Germany ★ ★ Austria ★ ★ ★ ★ ★ Poland ★ ★ ★ Czech Republic ★ ★ ★ Southern Europe France ★ ★ ★ ★ Italy ★ ★ ★ ★ Spain ★ ★ ★ Switzerland ★ ★ ★ ★ ★ Portugal ★ ★ United Kingdom ★ ★ Ireland ★ Benelux The Netherlands ★ ★ ★ ★ Luxembourg ★ ★* ★ Liechtenstein ★ ★* ★ Belgium ★ *Tele2 network.

TELE2 ANNUAL REPORT 2003 BOARD OF DIRECTORS 9 Board of Directors From left to right: Cristina Stenbeck, Vigo Carlund, Marc J.A. Beuls, Sven Hagströmer, John Shakeshaft, Lars-Johan Jarnheimer and Håkan Ledin. Cristina Stenbeck Sven Hagströmer Chairman of the Board Håkan Ledin Born 1977. Vice Chairman of the Board of Kinnevik, Born 1943. President and Board Chairman Hagströmer 1937–2004. It is with great sadness that Tele2 AB Invik and Metro. Board member of Millicom, MTG and & Qviberg from its inception in 1980 to 1995. Board announces that its Board Member Håkan Ledin, has Transcom. Member of the Board of Tele2 since 2003. Chairman of Investment AB Öresund, AB Custos and passed away in March 2004. He made invaluable Holding: - Avanza AB. Board assignments: AcandoFrontec AB, contributions during his time with Tele2 and was a Bilia AB, LGP Telecom Holding AB and HQ Fonder. strong force behind the Group’s success. He worked for Vigo Carlund Member of the Board of Tele2 since 1997. many years at LM Ericsson prior to becoming President Born 1946. Has worked for Kinnevik companies Holding: 130,000 B shares of Millicom, where he served as Chairman of the Board since 1968. He is President of Industriförvaltnings AB from 2002. He served as President of NetCom Systems Kinnevik. Chairman of the Board of Metro International John Shakeshaft from 1995 to 1996. He had been a member of the S.A., Transcom WW S.A. and Korsnäs AB. Member of Born 1954. Banker, is Managing Director at Cardona, Board of Tele2 since 1994. The memory of the expertise the Board of Millicom. Member of the Board of Tele2 Lloyd Limited, external member of the Audit Håkan brought to Tele2 will always burn bright. since 1995. Committee of Cambridge University and adviser, Holding: 379 B shares Quintain Estates and Development plc. Mr Shakeshaft AUDITORS was previously a partner of Lazard. Member of the Pål Wingren Auditor Marc J.A. Beuls Board of Tele2 since 2003. Born 1949. Authorized Public Accountant Born 1956. Holds a B.Sc. in Economics. Holding: - Öhrlings PricewaterhouseCoopers He has been with Millicom International Cellular S.A. since 1992 and has been President & CEO since Lars-Johan Jarnheimer President and CEO Carl Lindgren Auditor January 1998. From 1997 until 2003 he was Managing (not a member of the Board). Born 1959. Authorized Public Accountant Director of Banque Invik S.A. Currently he is a member Born 1960. MBA. President and CEO of Tele2 AB since KPMG of the Board of directors of Banque Invik S.A. and Tele2 March 1999. Mr. Jarnheimer has held various positions AB. Marc Beuls previously held executive positions at at IKEA, Hennes & Mauritz and SARA Hotels, and Mikael Winkvist Deputy Auditor Generale Bank in Belgium. Member of the Board of was President of ZTV for a short time before coming to Born 1962. Authorized Public Accountant Tele2 since 1998. Comviq as Vice President in 1992. President of Comviq Öhrlings PricewaterhouseCoopers Holding: - during 1993–97. Member of Group management at Saab Automobiles with responsibility for the Nordic Björn Flink Deputy Auditor countries, Russia and the Baltic States, and was Born 1959. Authorized Public Accountant President of Saab Opel Sverige AB during 1997–98. KPMG Board assignments: MTG, Millicom, Invik AB, Arvid Nordquist Handels AB. Holding: 52,000 B shares and 15,000 options

10 SENIOR EXECUTIVES TELE2 ANNUAL REPORT 2003 Senior executives 1 2 3 4 5 6 7 8 9

TELE2 ANNUAL REPORT 2003 SENIOR EXECUTIVES 11 Lars-Johan Jarnheimer (1) Jeanette Almberg (2) President and CEO, Tele2 AB Director Customer Operation Born 1960 Born 1965 MBA MBA Employed since 1992 Employed since 1995 Holding: 2,000 B shares Holding: 15,000 options 1) and 15,000 options 1) Holdings through companies: Holdings through companies: 1,500 B shares 2) 50,000 B shares 2) Jan Tjernell (8) Håkan Zadler (14) Director Legal, Regulatory CFO and Purchasing Born 1960 Born 1963 MBA LLB Employed since 2000 Employed since 1994 Holding: 5,000 B shares Holding: 304 B shares and and 15,000 options 1) 7,500 options 1) Holdings through companies: – Holdings through companies: 1,500 B shares 2) Johnny Svedberg (10) Market Area Director, Karl-Johan Nybell (11) 10 11 The Baltic and Russia Director Product Implementation Market Area Director, Services and New markets Chief Operating Officer Born 1968 Born 1962 M.Sc. in Engineering B.Sc. in Market Economics Employed since 1995 Employed since 1990 Holding: 15,000 options 1) Holding: 1 A share, 1,239 B shares Holdings through companies: and 15,000 options 1) 1,500 B shares 2) Holdings through companies: Roger Mobrin (5) 8,000 B shares 2) Director Billing Operations Fredrik Berglund (6) Born 1968 Market Area Director, Nordic Technical college engineer President, Tele2 Sverige AB Employed since 1995 Born 1961 Holding: 50 B shares and B.Sc. in Market Economics 15,000 options 1) Employed since 1995 Holdings through companies: Holding: 15,000 options 1) 1,500 B shares 2) Holdings through companies: Björn Lundström (13) 12 13 30,000 B shares 2) Director Network Jean-Louis Constanza (4) and Operations Market Area Director, Southern Europe Chief Technical Officer President, Tele2 France Born 1965 Born 1961 M.Sc. in Engineering MBA Employed since 1991 Employed since 1998 Holding: 15,000 options 1) Holding: 15 000 options 1) Holdings through companies: Holdings through companies: – 1,500 B shares 2) Anders Olsson (12) Ib Andersen (3) Market Area Director, Central Europe Director Carrier Business Marketing Coordinator and Revenue Assurance President, Tele2 Germany Born 1955 14 MBA Employed since 2000 Employed since 1997 Holding: 15,000 options 1) Holding: 1,056 B shares and Holdings through companies: – 15,000 options 1) Lars-Erik Svegander (9) Holdings through companies: – Personnel Director Per Borgklint (7) Born 1941 Market Area Director, Benelux Employed since 1991 President, Tele2 Netherlands Holding: 15,000 options 1) Born 1972 Holdings through companies: MBA 1,500 B shares 2) Employed since 2000 Holding: 7,500 options 1) Holdings through companies: – 1) relates to incentive program 2002/2007, please see Note 38 2) relates to incentive program 1997/2006, please see Note 38

12 THE TELE2 SHARE TELE2 ANNUAL REPORT 2003 Dividend for the first time THE TELE2 SHARE. In 2003, the price increase was 67 percent and average daily turnover was SEK 212 million (B share). Total international ownership in Sweden was 27.7 percent. At year-end the market value amounted to SEK 56.6 billion and the number of shareholders was 60,930. Share capital Stockholmbörsen was in conjunction with the distribution of the Tele2 has a share capital of SEK 738 million, distributed Company to the shareholders of Industriförvaltnings AB Kin- among 21,689,804 A shares and 125,870,371 B shares, totaling nevik. Following the distribution, Kinnevik did not own any 147,560,175 shares. Series A shares carry ten votes, while B shares shares in Tele2, but held a convertible debenture corresponding carry one vote. All shareholders are equally entitled to a share in to 25,555,555 shares. During 1996, Kinnevik sold portions of the the Company’s assets and profit. debenture, after conversion to shares, to institutions and Invik & Co AB. Listing To promote interest in the Company’s shares in the USA and to Tele2’s A and B shares was listed on the O-List of Stockholmbörsen increase liquidity outside Sweden, Tele2 A and B shares were listed on May 14, 1996 under TEL2A and TEL2B, and on the Nasdaq on the Nasdaq Stock Exchange in New York in January 1997. A Stock Exchange in New York on January 22, 1997 under TLTOA few months later, a new issue of 2,000,000 B shares was imple- and TLTOB. mented. With this issue, Tele2 sought to broaden the Company’s international ownership interest and to support the Nasdaq listing. Price movements and turnover The proceeds from the share issue, which amounted to SEK 220 During 2003, Tele2’s share price increased by 67 percent to SEK million, were primarily used for ongoing investment requirements, 384 (230.5) per B share. Affärsvärlden General Index rose by 28 in particular for the development of Tele2’s Danish and Norwegian percent. operations. At year-end, Tele2 had a market value of SEK 56.6 billion. In conjunction with the new share issue, Industriförvaltnings AB During 2003, B shares were sold for an average of SEK 212 million Kinnevik sold the majority of its remaining debenture in Tele2, per business day. On March 1, 2004, the market price was SEK 366 converted to 6,000,000 shares. (B share) and the total market value SEK 54 billion. During 1997, Invik & Co AB had converted its debenture, corresponding to 6,700,000 B shares, thus increasing Tele2’s sharehold- Debentures and share issues during listings ers’ equity by SEK 335 million. During the second quarter of 1998, This listing of Tele2’s A and B shares on the O-list of all outstanding debentures were converted into 755,555 B shares. Stockholmsbörsen Nasdaq

TELE2 ANNUAL REPORT 2003 THE TELE2 SHARE 13 Debentures and share issues been issued. At the end of 2001, all shares in FORA Telecom B.V. At the Annual General Meeting in May 2000, the Board of Directors (the Russian operations) were acquired in exchange for 2,461,449 was authorized to settle an option commitment through a new share newly issued Tele2 B shares. issue. In October 2000, 200,000 new B series shares were issued, as During 2002 8,317,143 A shares were remarked to B shares. well as three convertible debentures with detachable warrants with rights to a new subscription totaling 300,000 B shares. These shares Shareholders were subscribed with 100,000 B shares each year during 2001–2003. As of December 31, 2003, Tele2 had a total of about 61,000 (2002: At an Extraordinary General Meeting of Tele2 AB in August 61,000) shareholders. Tele2’s largest shareholders are Industriför- 2000, a proposal was approved to issue at most 40,901,585 series valtnings AB Kinnevik with 20,4 percent and Invik & Co AB with A and series B shares in Tele2 to shareholders and holders of 8,0 percent of the share capital. depository receipts in Société Européenne de Communication S.A. The proportion of institutional owners corresponded to about 89 (SEC), in exchange for shares and depository receipts in SEC. (2002: 88) percent of the share capital and 92 (2002: 92) percent of By the end of the issue period, a total of 40,784,480 shares had the voting rights on December 31, 2003. Ownership structure, December 31, 2003 Total Number of Share of Share of A shares B shares A and B shares votes capital. % votes. % Invik & Co AB 9,891,787 1,900,579 11,792,366 100,818,449 8.0 29.4 Industriförvaltnings AB Kinnevik 6,368,880 23,665,929 30,034,809 87,354,729 20.4 25.5 Emesco 3,205,379 0 3,205,379 32,053,790 2.2 9.4 Stenbeck. Jan (Estate) 914,157 0 914,157 9,141,570 0.6 2.7 SEB 0 7,023,328 7,023,328 7,023,328 4.8 2.1 Nordea 35,250 6,014,170 6,049,420 6,366,670 4.1 1.9 AMF Pension 0 6,285,000 6,285,000 6,285,000 4.3 1.8 ROBUR 0 5,235,933 5,235,933 5,235,933 3.5 1.5 Fidelity 0 4,653,000 4,653,000 4,653,000 3.2 1.4 Handelsbanken 150 4,237,826 4,237,976 4,239,326 2.9 1.2 Total, ten largest shareholders 20,415,603 59,015,765 79,431,368 263,171,795 53.8 76.8 Other shareholders 1,274,201 66,854,606 68,128,807 79,596,616 46.2 23.2 Total 21,689,804 125,870,371 147,560,175 342,768,411 100.0 100.0 Dividend For the financial year 2003, the Board of Directors proposes a di- Sell-side analysts during 2003 vidend for the first time in the Company of SEK 3. The proposed ABG Securities Henrik Vikström dividend is in line with a policy, which reflects the Board’s view that ABN AMRO Alfred Berg Mikael Rönnblad Tele2 is a high growth company. In recommending the dividend Carnegie Fredrik Danielsson Chevreux Peter Kurt Nielsen a balance is maintained among growth, profitability and available Citigroup Smith Barney Christian Kern cash flow. CSFB Ben Spincer Danske Equities Lars Horslund Deutsche Bank Peter Irblad Enskilda Securities Johan Michelsen EVLI Matti Riikonen Goldman Sachs Simon Weeden Shares per shareholder Hagströmer & Qviberg Sven Sköld Number of shares Number of shareholders Holding (%) Handelsbanken Andreas Ekström 1–100 33,536 1.1 Kaupthing Håkan Persson 101–500 19,020 3.4 Lehman Brothers James Britton 501–1,000 4,280 2.4 Morgan Stanley Michael Besley 1,001–2,000 2,046 2.1 Natexis Bleichroeder Philip Townsend 2,001–5,000 1,115 2.5 Swedbank Henrik Sandell 5,001–10,000 357 1.8 UBS Warburg Soomit Datta 10,001–20,000 203 1.9 Öhman Fondkommission Stefan Billing Published in March 2004 20,001– 373 84.9 Total number of shareholders 60,930 100

14 NEW MARKET ORGANIZATION TELE2 ANNUAL REPORT 2003 New organization for growth in Europe NORDIC • Sweden (incl. Optimal Telecom) • Norway • Denmark • Finland • Datametrix BALTIC AND RUSSIA • Estonia • Latvia • Lithuania • Russia BENELUX • Netherlands SERVICES CENTRAL EUROPE • Luxembourg • 3C (incl. Tango) • Germany • ProcureITright, PIR • Liechtenstein • Austria • X-Source • Belgium • Poland • Transac • Czech Republic SOUTHERN EUROPE • France • Italy • Spain • Switzerland • Portugal • UK • Ireland • Calling Card Company (C3) NEW MARKET ORGANIZATION. Tele2 is now PREVIOUS ORGANIZATION working in a new market organization which is Nordic: Sweden (incl. Optimal Telecom), Norway, Denmark, Finland, Datametrix, ProcureITright better adapted to growth and profitability. We are also Eastern Europe and Russia: Estonia, Latvia, Lithuania, changing our financial reporting in conjunction with Russia, Poland, Czech Republic, X-Source Central Europe: Germany, Netherlands, Switzerland, the change. More information on this can be found Austria, Ireland Southern Europe: France, Italy, Spain, Portugal later in the Annual Report on page 62 in Note 35. Luxembourg: Luxembourg (incl. Tango), Liechtenstein, Belgium, 3C, Transac Branded products and services: UK, Calling Card Company (C3), Everyday

TELE2 ANNUAL REPORT 2003 NEW MARKET ORGANIZATION 15 ★★★★★★★★★★★★★★★★★★★★★★★★★★★★ ★★★★★★★★★★★★★★★★★★★★★★★★★★★★ NORDIC BENELUX • Continuing increase in market shares • Tele2 is largest alternative operator in Sweden, despite relatively low growth. throughout Benelux New subscription forms launched during • Investment in cross-selling in the year the Netherlands turns out well • Agreement signed with Telenor for resale • Large proportion of pre-selection of monthly charge for fixed telephony in Norway customers in the Netherlands • Breakthrough for new sales in Denmark and Luxembourg • Operating revenue doubled in Finland • New operations in Belgium – already despite anti-competitive flaws in 35% of the Group’s operating revenue 10% of the Group’s operating revenue showing strong growth deregulation ★★★★★★★★★★★★★★★★★★★★★★★★★★★★ ★★★★★★★★★★★★★★★★★★★★★★★★★★★★ BALTIC AND RUSSIA SERVICES • Sharp upswing in number of • Market leader in Europe for integrated new customers in Baltic and Russia credit card transactions • Tele2 is fastest growing operator in • TIME procurement project carried out the Baltics and deregulation continues in 34 countries during the year • Russia is one of the world’s • IT outsourcing services grow in fastest growing markets the Baltic 7% of the Group’s operating revenue 1% of the Group’s operating revenue ★★★★★★★★★★★★★★★★★★★★★★★★★★★★ CENTRAL EUROPE • Germany becomes profitable during the year, with deregulation expected to increase • Successful year for Austria • Tele2 is largest alternative operator in Poland and the Czech Republic 9% of the Group’s operating revenue ★★★★★★★★★★★★★★★★★★★★★★★★★★★★ SOUTHERN EUROPE • Tele2 is the third-largest ADSL supplier in France – following launch during the year • Strong growth for Internet in Italy • Spanish advertising campaign helps accelerate growth • Good growth in Switzerland • Increase in sales for rechargeable calling cards • Successful launch of fixed 38% of the Group’s operating revenue telephony in the UK • Operations were launched in Portugal during the year

16 MARKET TELE2 ANNUAL REPORT 2003 Nicely aligned with the customers’ needs

TELE2 ANNUAL REPORT 2003 MARKET 17 MARKET. Despite fierce competition, 2003 was Tele2’s best year ever. A record number of new customers, strong growth and unparalleled profitability speak for themselves. Mere chance? Not likely! The Tele2 brand continues to grow. Almost half the population of Europe has scarcely a cent to spare at the end of the month. And, using Jan Stenbeck’s words as a star- This is MVNO ting point “Tele2 must do everything differently from the former Tele2 is more interested in customers than technology. The MVNO business monopolies, at a lower price and with the same quality”, Tele2 model provides a crystal-clear reflection of this. MVNO is an abbreviation of has systematically marketed itself as the price leader in Europe, mobile virtual network operator. MVNO means that Tele2 purchases radio without compromising quality. It is really quite simple: first build a access from an existing mobile operator, but is free to develop its own services large customer base in fixed telephony and then sell other services and payment forms, and direct traffic. However, unlike the network owner, to the same customers. an MVNO has no control over coverage build-out. The advantages of MVNO to Tele2 are fundamental. In particular, it creates large growth potential and requires relatively little capital investment. Europe’s mature markets In mature markets, in the sense that consumers are experienced users and competition exists, Tele2 generally aims to cross-sell services and create long-term, stable relationships with customers. tions are fixed telephony, but Tele2 also offers low-price mobile A satisfied customer stays with you; a dissatisfied customer chan- telephony in the Netherlands, Luxembourg and Liechtenstein. ges operator. In the mature, fiercely competitive Nordic markets, Tele2 has Europe’s growth markets successfully managed to cross-sell services. Tele2 won market sha- Competition has just begun in the emerging markets, where res and reduced customer turnover during 2003. customers are relatively inexperienced users. Tele2 is concentrating Unlike in Sweden, Tele2 can offer its Danish and Norwegian on quickly building a customer base in fixed telephony and then customers billing of monthly charges in fixed telephony. Consu- launching other services. Large-scale advertising campaigns and mer surveys show that one of the main reasons customers change commercials based on price comparisons with the former monopoly operators is that they receive one bill from Tele2 and yet another are highly effective. The Tele2 brand is held in high regard by the from the operator which owns the network, and therefore their man in the street and is associated with low prices and high quality. subscription. The reason for the switch is that it is easier for custo- Growth markets, such as Eastern Europe and the Baltic, expan- mers to receive everything on one bill. However, Sweden is also ded strongly in 2003. Tele2 is the fastest growing operator in the set to change its rules, which will have a positive impact on Tele2’s region, and the future looks bright. operations. With a population of 145 million and a low penetration of mobile telephony, the Russian market holds huge potential. Only one The Tele2 markets during 2003 in four Russians has a mobile phone, but in larger cities, such as In 2003, the United Kingdom implemented eagerly-awaited pre- Moscow and St. Petersburg, just over half of the residents use a cell selection reforms, which means that Tele2 can now start to com- phone. Tele2 is Russia’s fifth largest multi-regional telephony brand. pete on an equal footing for the business of the country’s 60 million Even though Poland and the Czech Republic are in the midst of residents. Tele2’s German operations are now showing a profit and a deregulation process, Tele2 has still enjoyed excellent success in the customer base is growing strongly. fixed telephony. In Austria, almost 20 percent of the households are Tele2 customers and 2003 saw the highly successful launch and cross-selling of both ADSL and mobile telephony. Despite the fact that the Southern European market area is characterized by a trend towards fewer large players and fiercer competition, Tele2 is growing in all its countries. Dial-up Internet and ADSL growth has been even stronger. In 2003, Tele2 successfully launched its operations in Portugal. With the establishment of operations in Belgium, Tele2 is now present in all the countries of the Benelux market area. Core opera-

18 COMPETITION POLICIES TELE2 ANNUAL REPORT 2003 Everyone wins with more competition This is how we rate competition policy in Europe: Come on, you politicians! Did you know that prices in mobile, national and international telephony fell by approximately 12–50 percent during the period 1998-2002? Yet fixed telephony prices rose by 20 percent during the same period. Guess where the competition is. Source: The Europe Commission’s 8th implementation report, December 2002

TELE2 ANNUAL REPORT 2003 COMPETITION POLICIES SID 19 COMPETITION POLICIES. Even though the European telecommunications market is open to competition, there still remains much to be done. Tele2 is encountering opposi- tion from monopolists and politicians who are using every trick in the book to sabotage increasing competition. And the result? Private customers and companies receive needlessly high telephone bills and inferior service. Competition on equal terms Tele2 desires one thing: to compete for customers on the same terms as the former monopolies. This may sound obvious, but unfortunately truly open competition is not so easily achieved. Difficulties remain, despite the fact that the EU’s new regulations on electronic communication were due to come into force on July 25, 2003. The Netherlands, France and Germany are examples of countries which are delaying introduction of the new rules. Elsewhere, the former monopolies are abusing their predominant positions, resulting in higher prices for consumers and companies. The advantages of a telecommunications market open to competition are crystal clear. Consumers and companies end up with lower prices and better service, and society is ensured a well func- nection relates to physical and logical interconnecting of networks. tioning telecommunications market, which is the foundation for a Access and interconnection are important points, as these are two knowledge-based economy. areas which need clear rules to ensure that competition is created There is no lack of explanations for the delay, but the EU com- and maintained. mission is active and it is only a matter of time before every country • With the new rules in place, Tele2 will be more able to compete will have to implement the EU’s decision. With the new rules in on equal terms. It will become easier to sign MVNO agreements, place, Tele2 will have moved a step closer to its goal to compete for to compete for fixed telephony subscriptions and pre-selection and customers on the same terms as the former monopolies. to offer ADSL under better commercial conditions. The new rules Monopolists still clinging on Competition must increase. Some of the most important points in The former monopolies dominate their respective European mar- the new rules are described below. kets. Tele2 believes that the way the new rules are implemented in • Bureaucratic obstructions to entering a market must be reduced. the different countries is crucial to achieving the desired effect of • Rules on access and interconnection with the old incumbent increased competition, resulting in lower prices and better services. operators are safeguarded. Access covers all forms of access to net- It is also essential that the regulatory authorities have the inclina- works and services which are open to the general public. Intercon- tion and the correct resources to ensure that the rules are followed. ★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★ TELE2’s REQUIREMENTS LIST FOR POLITICIANS AND MONOPOLISTS 1. Subscription for the people 2. Pre-selection for the people 3. ADSL for the people The former monopolies have taken the opportunity Introduction of pre-selection, involving no need to ADSL is the broadband service which has to increase their prices for fixed telephony dial a prefix when making a call, has accelerated the greatest potential to reach the majority of subscriptions as there is no competition. competition and lowered prices. Europeans. Tele2 believes that one way to put an end to this Tele2 believes that, if pre-selection is to be At present, the former monopolies are abusing cross-subsidization is for the former monopolies to developed, national regulatory authorities must their dominant position by keeping prices for be forced by legislation to open up subscriptions to facilitate pre-selection for customers and keep a wholesale of ADSL to other operators at an other operators for resale at wholesale prices. close eye on the former monopolies. unreasonably high level. Only when alternative operators can offer fixed The former monopolies of Europe are often quick In order to increase Internet use in Europe, subscription will competition be able to function. to come up with various pre-selection proposals Tele2 believes that the alternative operators must which all have one thing in common: they do not have access to ADSL under non-discriminatory allow simpler and cheaper calling for customers. conditions.

20 THE RIGHT QUALITY TELE2 ANNUAL REPORT 2003 The customer’s wellbeing – our reward THE RIGHT QUALITY. Even though we have won the confidence of over 22 million customers, we still work hard to improve our performance even more. Listening to the customers and taking heed of their needs is a clear responsibility which permeates our entire organization. Contact with the customer is crucial – do we really make the to help the customer and an invaluable source of knowledge about grade? Humility towards the customer is an attitude which is our customers. shown throughout our entire organization. Partly because this is Working in customer service is a real vocation. At Tele2, we con- proper common sense, but also because it represents an essential stantly ensure quality in relation to our rapidly growing number of competitive advantage. We must always be better than our com- customers. We have decided to outsource the majority of customer petitors at taking care of customers. contact to a specialist partner. This partner is Transcom, which is The customers’ wishes and interests act as our decision data for one of the largest call-center companies in Europe. It is vitally im- new products, services, offers and continuous improvement. Tele2 portant to provide an efficient and personal service in our handling has well-developed working methods, which draw advantage from of customer calls, letters and e-mails, and to ensure that this is the knowledge and experience in our customer service. Reports done in a cost-effective way. from customer service are a natural element of management work Our close partnership gives the customer simple, direct contact at all levels in the Group. with Tele2, while we receive invaluable feedback from our customers. At Tele2, we look on a call to customer service as an opportunity In this way, we really live up to our motto: “The customer is king”. The Fink family from Düsseldorf, Germany, is the 20 millionth customer choosing Tele2.

TELE2 ANNUAL REPORT 2003 TELE2 ON EACH MARKET 21 Good growth in Tele2’s markets

22 MARKET AREA NORDIC TELE2 ANNUAL REPORT 2003 Cross-selling with Nordic focus NORDIC. During 2003, Tele2, Comviq and Optimal Telecom continued to win market shares despite relatively low growth in the Nordic market. Tele2 is the second largest operator after the former monopolies in Sweden, Norway and Denmark. SWEDEN Tele2 won market shares in fixed and mobile telephony and dial- up Internet. Private and small business customers are canvassed through 15,000 vendors around the country and larger corporate customers through our own sales force. Telemarketing is an important sales channel in fixed telephony. Tele2 successfully uses a customer care program (CRM) to increase cross-selling and reduce customer turnover. Fixed and mobile Tele2 improved its position in mobile telephony with a higher market share. To meet customers’ needs and intensify Tele2’s price pressure, new forms of subscription were launched during the year. In fixed telephony, Tele2 took market shares among private and corporate customers. Tele2 now offers new forms of subscriptions in this area too, which has resulted in a marked increase in cross- selling, particularly to corporate customers. NORWAY Dial-up Internet experienced stable development during the year. In Norway, Tele2 increased its market shares in mobile telephony. However, unrealistic pricing from the incumbent operator, means This represents an important stepping stone for increased prof- that Tele2 is sadly unable to offer its customers ADSL at lower itability and average revenue per customer. Tele2 is the largest prices than its competitors. alternative operator in fixed telephony and dial-up Internet. During 2004, the focus will continue to be on customer care and One of the most important events of the year for Tele2 was the cross-selling. 3G service will also be launched. signing of an agreement with Telenor for the resale of monthly charges for fixed telephony. The subscription launch in the middle Optimal Telecom of October soon attracted customer interest. Its success is due to Optimal Telecom is a service provider which offers a lowest-price Tele2’s low prices and the fact that the agreement gives customers guarantee for fixed telephony, dial-up Internet and prepaid calling flexible invoice management, with one invoice from one operator cards to Swedish households. The market for dial-up Internet has decreased, to the advantage In 2003, the Company enjoyed strong growth and took market of ADSL, and Tele2 is currently one of the largest players in the shares. ADSL market. By offering customers pre-selection for fixed telephony via telemarketing campaigns and effective cross-selling, the Company in- Simpler for customers creased its customer intake. The Company strengthened customer During the year, Tele2 standardized its product range. The inten- loyalty by introducing various initiatives for building long-term tion was to make it easier for customers to buy Tele2’s services and customer relationships. to communicate more clearly that Tele2 is the price leader. Stand- Optimal Telecom’s operations in mobile telephony developed ardization will continue in 2004, mainly to cut costs in preparation extremely well in 2003. Sales of prepaid calling cards under for even tougher competition. the Tango brand increased and the Company won market shares The launch of the MVNO agreement with Telenor and the through aggressive cross-selling to existing fixed telephony fixed fee are two important milestones in Tele2’s operations in the customers. The brand also became stronger among the general Nordic mobile market. public. It appears the Company can look forward to a bright future. In DENMARK 2004, more new customers are expected to bring increased profit- Tele2 is constantly striving to find alternative ways of attracting ability. new customers. During 2003, Tele2 managed to increase customer

TELE2 ANNUAL REPORT 2003 MARKET AREA NORDIC 23 to double its revenue in 2003. Tele2 also offers Internet, and in February 2004, Tele2 launched mobile telephony under an MVNO agreement with Radiolinja. DATAMETRIX Datametrix has a strong position as a system integrator in the Nordic market. The Company is characterized by good geographic coverage, flexibility and cost-consciousness. The telephony market is driven by the following factors: • IP telephony is now a competitive alternative for commercial applications. • The demand for integrated mobile solutions is increasing. • The demand for call center integration is increasing. uptake by successfully using sales personnel in shopping malls, Datametrix has a good position and well-developed expertise in train stations and retail environments. all areas. Like Tele2, Datametrix is a unique total solution provider with a Increased market share strong product and service profile. In fixed-line telephony, Tele2 succeeded in persuading new and In Sweden, Datametrix is focusing on IP telephony and system existing customers to choose regular subscriptions leading to more integration of telephony and data. In 2003, there was a sharp in- loyal customers and an increase in market share. crease in the number of installed total solutions for IP telephony. In Over the past year, Tele2’s ADSL sales have boomed and, already, addition, the Company intensified its presence in the broadband/ by the end of 2003 the Company was one of the largest players in metropolitan area networks with LAN/WAN and VPN solutions. the market. Dial-up Internet services continue to make a positive In Norway, Datametrix is the country’s leading system integrator contribution to operations. Competition in mobile telephony is in networks, telephony and communications. Datametrix is recog- challenging and Tele2 adapted itself quickly to changes in the nized as a highly competent provider which focuses on customers market resulting in increased turnover for the year. Tele2 is one of and customer benefits. In 2003, Datametrix concentrated on IP the few companies in the Danish market offering a complete range telephony, MPLS networks, wireless solutions and security, while of telephony services. In 2004, the Company will continue to focus also expanding its range of services. on growth, profitability and the challenge of breaking the former In Denmark, Datametrix has a strong position in advanced call monopoly. center services and voice recording. Several of Denmark’s largest companies have opted for Datametrix solutions. FINLAND In Finland, Tele2 mainly sells international calls in fixed telephony. Partners Deregulation in the Finnish market has major defects, making it Datametrix Norway is a Cisco Gold Partner. From 2004, Datame- impossible for Tele2 to compete for local calls. trix Sweden will regain its status as an Avaya Gold Partner and Despite the anti-competitive flaws in the rules, Tele2 managed certified Ericsson Service and Sales Partner. Nordic Market Positions Position among alternative operators 2003 2002 Change Country Service Launch 2003 2002 Operating revenue , MSEK 12,942 13,557 1) –5% Sweden Mobile 1981 EBITDA1), MSEK 3,861 4,805 –20% Fixed 1993 1 1 Number of customers, 000s 6,720 6,252 7% Internet 1991 Cable 1986 Finland Norway Norway Mobile 2000 Fixed 1998 1 1 Sweden Internet 1997 35% Denmark Mobile 2000 Fixed 1996 1 1 Denmark Internet 1997 The market area’s share Finland Mobile 2004 of the Group’s operating revenue Fixed 2000 - - 1) One-off items are shown in Notes 1 and 2 Internet 2001

24 MARKET AREA SOUTHERN EUROPE TELE2 ANNUAL REPORT 2003 ADSL already a success in France SOUTHERN EUROPE. The Southern Europe market area comprises France, Italy, Spain, Switzerland, Portugal, the UK, Ireland and C3. Operations grew and profitability rose during 2003, despite stiff competition. During the year, Tele2 started successful operations in Portugal In December 2003, Tele2 was awarded a GSM license in Switzer- and launched ADSL in France amid much attention, soon becom- land. ing the third-largest ADSL supplier. Spanish operations showed Although Switzerland is a mature market, Tele2 has achieved very satisfying growth during the last quarter of 2003. its growth targets. New growth has come from ADSL and mobile Unfortunately, deregulation in the ADSL market is not reflected telephony. In a period of just 10 months, Tele2 has become the in mobile telephony where we continue to see anti-competitive second largest player in ADSL. cartel formations. Supported by EU directives, Tele2 is working actively to increase competition. PORTUGAL Tele2 views 2004 with optimism. More customers will mean Tele2’s fixed telephony launch in Portugal in September 2003 at- higher revenues, which in turn will have a positive effect on profit- tracted much attention and the addition of Tele2 as a new player ability. The concentration on ADSL and dial-up Internet continues, as growth opportunities in these areas appear to be excellent. FRANCE Tele2 remains the largest operator after the French monopoly for telephone services to private individuals and small and medium- sized companies. September 2003 saw the launch of Tele2 ADSL, with Tele2 France taking the largest share of growth in the market. By launching ADSL, Tele2 demonstrated to its existing and future customers in no uncertain terms that the Company is a price leader, always aspiring to offer top-quality products at the lowest prices. ITALY Tele2 offers a full range of products and services and is the second largest alternative operator in Italy. The Company’s growth spi- raled during the year, primarily due to the fantastic success of dial- up Internet, which will provide a good platform for a future ADSL launch. The combination of Tele2’s strong brand and an increased market share makes the future look very bright. SPAIN Growth for Tele2’s Spanish operations in fixed telephony accelerated rapidly after September 2003. This success can be attributed to Tele2’s improved products, networks and processes, and a successful advertising campaign during the year which strengthened the Tele2 brand among the general public and brought new customers. Towards the end of the year dial-up Internet was launched with the lowest prices in Spain. SWITZERLAND Tele2 Switzerland now comes under the Southern Europe market area. However, the Company has had a market presence in Switzer- land for five years. Switzerland has a broad offering of fixed and mobile telephony, Internet and ADSL services.

TELE2 ANNUAL REPORT 2003 MARKET AREA SOUTHERN EUROPE 25 gave the market an injection of energy. The future looks excep- tionally positive. Tele2 has good opportunities for strong growth, particularly as other competitors have failed to take any major market share from the former monopoly. Since the launch, Tele2’s operations have gone according to plan in terms of the number of new customers and revenue. UNITED KINGDOM In October 2003, Tele2 launched fixed telephony in the UK. Suc- cess was not long in coming – by the end of the year Tele2 was already one of the fastest growing operators. The recipe for success of this ultra-fast, highly productive introduction was the fact that Tele2 used existing, tested business models from other Tele2 companies around Europe and the launch was synchronized with simplifications in pre-selection reform. Future As the market for alternative operators in fixed telephony grows in 2004, Tele2’s main focus is to increase the number of customers. In addition, Ofcom (the UK telecommunications regulator) is likely to introduce a system whereby customers only receive one bill for all their fixed telephony services. Tele2 can quickly and cheaply launch new Internet services for fixed telephony, resulting in increased revenue, better margins and enhanced customer benefits. IRELAND Tele2 has a fixed telephony license in Ireland. Tele2 advertising on BT Tower, belonging to British Telecom, in February 2004. CALLING CARD COMPANY (C 3) Integration of telephone card customers from the Alpha Group, C3 sells international calling cards in Ireland, Austria, the UK, acquired in 2003, has gone smoothly. New sales channels, which France, Germany, Spain, the Netherlands, Switzerland, Poland, included electronic terminals and the Internet, were successfully Portugal and Italy. Tele2’s rechargeable international calling card launched during the year. can now be used to make calls from 45 countries and C3 ’s invest- In 2004, Tele2’s growth will increase by means of additional focus ment in Call Shops has been successful – the service is now availa- on new distribution channels, more services and expansion to more ble in many European countries. countries. Southern Europe Market Positions Position among alternative operators 2003 2002 Change Country Service Launch 2003 2002 Operating revenue, MSEK 13,859 10,293 35% Ireland France Fixed 1999 1 1 EBITDA, MSEK 1,096 –48 - United Kingdom Internet 2002 Number of customers, 000s 7,487 5,594 34% Italy Fixed 1999 2 2 Internet 2002 Spain Fixed 2001 France 4 4 Internet 2003 Switzerland Switzer- Mobile 2000 land Fixed 1998 2 2 Spain Internet 2002 38% Italy Portugal Portugal Fixed 2003 - - United The market area’s share Kingdom Fixed 2003 - - of the Group’s operating revenue Ireland License for fixed telephony

26 MARKET AREA CENTRAL EUROPE TELE2 ANNUAL REPORT 2003 Germany now profitable CENTRAL EUROPE. During the year, Austria launched mobile telephony and ADSL and Germany achieved its profitability goal. Tele2 has successfully joined the ranks of the most important players in the Polish and Czech markets. German operations have met the goal of becoming profitable and AUSTRIA are now showing very satisfying growth. Profitability increased and market shares were won in fixed telephony. The Austrian market is the most mature in the area. Tele2’s Tele2 is the largest alternative operator in fixed telephony to focus strategy is to use its large customer base to cross-sell mobile and on the important private market. Internet services. In February 2003, Tele2 successfully launched mobile telephony. Even though Poland and the Czech Republic are in the midst of Approximately 10 percent of Tele2’s fixed telephony customers a large-scale deregulation process, Tele2 has succeeded in beco- also had a mobile subscription with Tele2 at the end of the year. ming one of the most important players in fixed telephony in both The strategy to market the Company as a price reducer for prepaid markets. customers turned out well. Tests conducted by consumer organizations clearly show that GERMANY Tele2 has the lowest prices. Tele2 also comes out with top marks in Tele2 was one of the fastest-growing fixed telephony operators in independent customer surveys. Germany in 2003 and this fast growth enabled the Company to ADSL was introduced in the last quarter of 2003. The strategy show a profit in 2003. This success can be attributed to an effective for 2004 is continued growth in core operations, while also expand- advertising campaign which significantly increased the proportion of ing in ADSL and mobile operations. pre-selection customers and reduced customer turnover. Now that deregulation of local calls has taken place in 2003, the regulatory POLAND situation has been adapted to a similar level to other EU countries. In early 2003, Poland deregulated fixed telephony. Shortly after, in There still remain some steps to be taken, such as a simplified pre- April, Tele2 launched fixed telephony for the private market. The selection process. It is Tele2’s opinion that Germany is gradually launch was extremely successful and received a highly positive recep- conforming to other EU countries and Tele2s’ rapid overall growth tion from the general public. In the second half of 2003, Tele2 added is expected to continue in 2004. many new customers and was the fastest growing telecommunications Company.

TELE2 ANNUAL REPORT 2003 MARKET AREA CENTRAL EUROPE 27 Tele2 is the only independent operator targeting the mass mar- alternative operator. Apart from the former monopoly, Tele2 is ket. The sales channels are telemarketing, partner sales and direct currently the only Company focusing totally on the mass market. mail advertising. Tele2’s market positioning is as price leader. Innovations during the year Bright future During 2003, Tele2 introduced local calls, dial-up Internet and The market for calls from the fixed network to mobiles will prob- pre-selection. All the services were positively received and the ably be completely deregulated in 2004. Although there are still number of customers rose sharply. inadequacies in the rules, 2004 is expected to be a year in which Regulations in the telecom sector are in need of improvement. Tele2 enjoys rapid growth. However, the Czech Republic’s EU membership in May 2004 is expected to contribute towards better rules and regulations. As a CZECH REPUBLIC whole, Tele2 considers the trends to be positive, and believes that Towards the end of 2002, Tele2 started offering fixed telephony to strong growth will continue in 2004. private customers. Just one year later, the Company was the largest Central Europe Market Positions Position among alternative operators 2003 2002 Change Country Service Launch 2003 2002 Operating revenue, MSEK 3,441 2,465 40% Germany Fixed 1998 3 3 EBITDA, MSEK –303 –231 - Austria Mobile 2003 Number of customers, 000s 3,469 1,817 91% Fixed 1999 1 1 Poland Germany Internet 2003 Poland Fixed 2003 1 - Internet 2000 Czech Republic Czech Fixed 2002 1 1 Austria Republic Internet 2000 9% The market area’s share of the Group’s operating revenue

28 MARKET AREA BALTIC AND RUSSIA TELE2 ANNUAL REPORT 2003 Strong foothold in fast-growing countries BALTIC AND RUSSIA. 2003 was an even more successful year in Baltic and Russia. During the year, Tele2 consolidated its position in the Baltics and is the fastest growing operator in the region. Tele2 launched GSM in the Russian market, which means it is now competing for customers in one of the world’s fastest growing markets. ESTONIA – TELE2 WINS PRESTIGIOUS COMPETITION launch of pre-selection, which will bring in new customers who in Tele2’s successes in Estonia also continued in 2003. Last year was turn can be developed by cross-selling. the most successful ever. For the third year running, the Company In order to enhance the focus on customer orientation and flex- was the fastest growing mobile operator and is now the second ibility, a customer care program was introduced during the year. largest in Estonia. In addition, for a second year, Tele2 has won the Tele2 has a broad range of telecommunications services: mobile prestigious competition run by the Estonian business daily, Äripäev, telephony (subscription and prepaid calling cards), fixed telephony, which ranks the top 100 companies in Estonia. Internet, content services and cable TV. Tele2 also has a Company In fixed telephony, Tele2 is the first alternative to the Estonian which develops software for the Internet. monopoly. The future looks bright – December 2003 saw the New supplementary services In order to safeguard Tele2’s position as the price leader, as well as generate new income and create added value for customers, new products, such as GPRS and MMS, were launched during the year. For prepaid customers, international roaming was introduced, along with new ways to recharge calling cards electronically and a new, flexible price list. Tele2 also received a UMTS license. From December 2003, fixed telephony customers have been able to choose Tele2 as pre-selection. LATVIA Not only is Tele2 the leading alternative mobile operator in Latvia, it is also the Company which can demonstrate the fastest growth. The future looks bright and Tele2’s growth is expected to continue. Tele2 holds a strong position among the general public: nine out of ten recognize the Tele2 brand. Tele2’s services consist of mobile subscriptions and prepaid calling cards. The calling cards are marketed under the Zelta Zivtina brand and the subscriptions under Tele2. Tele2 also received a license to run fixed telephony during the year, but due to unsatis- factory rules decided to put off the launch until 2004. When operations are up and running there is expected to be a sharp increase in the customer base and revenue. Tele2 has one of two UMTS licenses. According to the license conditions, UMTS will be launched commercially during 2004. LITHUANIA Despite fierce competition in the Lithuanian market, Tele2 managed to strengthen its position and is now the second largest mobile operator. During the year, Tele2’s market share increased substantially. More and more Lithuanians are acquiring mobile phones, which means a bigger customer base.

TELE2 ANNUAL REPORT 2003 MARKET AREA BALTIC AND RUSSIA 29 The number of mobile users increased by almost 30 percent in 2004 mobile telephony will be launched in the other four. Tele2’s 2003. Tele2 is increasing its focus on customer benefits, which position in the different regions is constantly strengthening. The strengthens the perception of the Company as consumer-friendly Russian mobile telephony market rose sharply in 2003, and there and reliable, qualities which are vital for future expansion. is huge growth potential, even though the market is tough. As the Deregulation in fixed telephony continues and interconnection first mobile telephony operator, Tele2 launched subsidized phones rates were defined during the last quarter of 2003. For this reason, with a certain commitment period during 2003. Tele2 plans to offer international calls and calls between fixed Tele2’s strategy is to offer the lowest possible price to the grow- and mobile networks during the first quarter of 2004, and also to ing mass market. This strategy is supported by campaigns in which launch Internet services in the same quarter. Tele2 guarantees that it has the lowest prices. Good growth opportunities, a strong customer base and new In Russia, only the state monopoly offers residential fixed te- cross-selling opportunities point to a bright 2004 for Tele2. lephony at present. In 2003, Tele2 increased its holdings in five local mobile te- RUSSIA lephony companies. In August, a GSM license was also obtained in Tele2 has a license for mobile telephony in eleven regions of Russia Izhevsk. During the year Tele2 launched mobile telephony under with a total population of 31 million, which corresponds to around the Tele2 brand. Most companies had previously operated under 20 percent of Russia’s population. At year-end 2003 operations the FORA brand. are up and running in seven of the regions, and in the first half of Baltic and Russia Market Positions Position among alternative operators 2003 2002 Change Country Service Launch 1) 2003 2002 Operating revenue, MSEK 2,724 2,177 25% Estonia Mobile 1998 EBITDA, MSEK 800 602 33% Fixed 1998 1 1 Number of customers, 000s 2,327 1,491 56% Internet 2000 Cable 1998 Russia Latvia Mobile 1999 1 1 Estonia Lithuania Mobile 1999 1 2 Latvia Russia Mobile 20012) 5 7 Lithuania 7% The market area’s share 1) Year of launch, under Tele2’s management of the Group’s operating revenue 2) Tele2 acquires FORA Telecom

30 MARKET AREA BENELUX TELE2 ANNUAL REPORT 2003 The successes continue BENELUX. In 2003, Tele2 launched its operations in Belgium, which were marked by strong growth from day one. In the Netherlands, profitability rose and new customers streamed in. In Luxembourg, call traffic increased significantly. THE NETHERLANDS new telecommunications bill to promote better competition, which Tele2’s success in the Netherlands continues. After a profitable will benefit Tele2. 2003 and a strategic concentration on pre-selection customers, Tele2 is now the largest alternative fixed telephony operator. Eight LUXEMBOURG out of ten customers now have pre-selection. Furthermore, Tele2 In fixed telephony, Tele2 is by far the biggest competitor to the is rapidly taking market shares in mobile telephony and is now the former monopoly. Almost half of Tele2’s customer base consists of fastest growing operator. pre-selection customers. Tele2 has offered fixed telephony since Mobile telephony continued to experience strong growth in 1999 and from 2000 also Internet services. 2003. Customer loyalty increased and the concentration on cross- selling turned out extremely well. Mobile telephony The Tango brand is popular in Luxembourg and is currently the Lower costs only competitor to the former monopoly. Tango has a license for During the year Tele2 reduced its costs significantly, mainly due GSM 900 and GSM 1800. Mobile traffic increased by 14 percent to lower interconnection rates. The cost quantity also reduced as a during the year, and Tango has a strong market position, with al- result of synergies from cross-selling. most 50 percent of active customers. In May 2003, Tango received Tele2’s products are associated with low prices, high quality and a UMTS-license and schedules a commercial launch during 2004. user-friendliness. In 2003, parliament’s lower house approved a The competition for mobile telephony customers will grow when a

TELE2 ANNUAL REPORT 2003 MARKET AREA BENELUX 31 new rival operator launches its operations. Number portability will be introduced during 2004. LIECHTENSTEIN Tele2 has a very strong position in Liechtenstein, with the Tango brand making it the largest alternative operator. Mobile traffic increased by 13 percent during the year. A UMTS license was received in 2002. Fixed telephony and Internet have been offered under the Tele2 brand since 2000. BELGIUM Even though Tele2 only launched fixed telephony in July 2003, the Company is soon expected to become the largest alternative operator. The brand is strong – seven out of ten Belgians recognize the Company and Tele2 is perceived as a Company with low prices. Tele2 has a complete range of fixed telephony services, mainly intended for private customers and small business owners. Benelux Market Positions Position among alternative operators 2003 2002 Change Country Service Launch 2003 2002 Netherlands Operating revenue, MSEK 3,704 2,669 39% Netherlands Mobil 2001 EBITDA, MSEK 223 –11 - Fixed 1997 1 1 Number of customers, 000s 2,303 1,610 43% Belgium Internet 2003 Luxembourg Luxembourg Mobil 1998 Fixed 1999 1 1 Internet 2000 Liechten- Mobile 2000 stein Fixed 2000 1 1 Liechtenstein Internet 2000 10% Belgium Fixed 2003 2 - The market area’s share of the Group’s operating revenue

32 MARKET AREA SERVICES TELE2 ANNUAL REPORT 2003 Growth in smart IT and telecom products SERVICES. Market leader in Europe for integrated credit card transactions. Increase in net sales for IT outsourcing services with focus on reducing the customer’s overall IT costs. 3C Proceedo Solutions AB is a subsidi- 3C offers integrated solutions for processing credit card transac- ary of PIR. The Company is the Nor- tions via terminals, the Internet and public credit card telephones. dic Region’s leader in e-procurement The Company has a presence in 20 countries, with a customer base solutions, which include marketplace consisting of 650 hotels, 350 restaurants and 550 parking com- and electronic billing solutions. panies, which makes 3C a European market leader in integrated credit card transactions. 3C also has credit card phones at more X-SOURCE than 1,000 locations in Europe’s largest cities and airports. During 2003, X-Source grew by 3C’s excellent performance can be attributed to the successful over 25 percent in both revenue and launch of parking services in the Scandinavian market, good sales personnel. The Company merged with growth and a successful expansion to new countries in the hotel its Danish fellow subsidiary UNI2 and and restaurant segment. In 2003, 3C introduced new software for will during 2004 change its name to terminals and also produced new integrated chip and pin solutions, UNI2. which have been highly effective. X-Source is an IT outsourcing supplier with operations in Swe- den, Denmark, the UK, Luxembourg, Estonia, Latvia and Lithua- ProcureITright nia. The Company, with around one hundred employees, takes ProcureITright (PIR) is a procurement consultant which targets responsibility for all or part of the customer’s IT environment. the TIME segment (telecom, information, media and entertain- X-Source goes one step further than many of its rivals by offering ment). The Company focuses on strategic procurement and pro- functional responsibility, which means the Company guarantees curement of technically complex products and services. that a particular IT function is working. PIR offers a complete range of procurement services which X-Source has three different areas of service: operation of PC enable the customer to outsource procurement. The market for workplaces, servers and shared customer applications. Security is outsourcing procurement services is expected to grow in 2004. an important aspect of all the solutions. PIR works globally and has completed a number of projects in 34 The target group is primarily small and medium-sized companies. countries in Europe, Asia, Latin America and Africa. Its head office is located in Stockholm. Lower IT costs The Company works to standardize and streamline the customers’ business operations. Using centralized automated functions and re- mote access, X-Source can reduce the customer’s overall IT costs. Services 2003 2002 Change Operating revenue, MSEK 241 121 99% EBITDA, MSEK 33 10 230% 1% The market area’s share of the Group’s operating revenue

TELE2 ANNUAL REPORT 2003 TELE2 AND THE COMMUNITY 33 Close cooperation TELE2 AND THE COMMUNITY. Tele2’s mission is to offer cheap and simple telecom for all Europeans. The growth of businesses and the economy should positively affect the wider community. The concept of promoting increased communication for everyone is a common theme that runs throughout Tele2’s socially-oriented initiatives. Tele2 does not lay claim to broad social responsibility; others are entrusted with these responsibilities. However, we believe in our Company’s capacity to play an important role in the countries in which we operate. We achieve this by fulfilling our mission with sensitivity and in accordance with the law. We contribute what we know best by facilitating communication between people. Tele2 has a clearly defined mission as well as a clear under- standing of our broader responsibilities and the desire to provide something extra for our customers. Access to communication resource has become a prerequisite in the information society for positive development and successful customer relationships. The idea of facilitating communication A few examples between people is therefore common to all the socially-oriented Tele2 also participates in other projects in the countries in which we operate. projects in which Tele2 is engaged. One example of this commit- Here are a few examples: ment is The Glocal Forum. Latvia: Tele2 runs projects to encourage young people to take part in sports activities in order to enhance their leisure time. Tele2 has arranged a large number of events in children’s homes with the help of Olympic silver medalist The Glocal Forum Aigars Fadejevs. Good communication enables positive interaction between local Poland: Tele2 has supported a school for deaf children for the last few years and global players. In order to encourage this communication, by providing Internet access to open up an important channel for the children Tele2 joined with Metro, MTG, Millicom and ambassador and to access information and communicate via email. peace negotiator Uri Savir to establish The Glocal Forum. The Sweden: Tele2 supported Fryhuset in 2003, which runs youth projects Glocal Forum brings together politicians, mayors, institutions and designed to increase integration and communication between different groups in the community. companies from around the world to discuss and initiate sustai- Russia and Lithuania: Tele2 has participated in telecommunications projects nable development programmes. In close cooperation with local for people with disabilities in Russia and Lithuania. organizations and individuals, The Glocal Forum runs information technology, sports, culture and youth activity projects. The aim of all the projects is to promote peace, development and under- Ababa, Asmara, Nablus and Kabul. The centre is already up and standing between people. In 2003, the projects focused mainly on running in Kigali. helping children and young people in conflict and post-conflict regions. A world of vision and opportunity Inspired by its customers and in cooperation with The Glocal Forum, “We are the future” Tele2 has initiated the building and financing of a training centre in We are proud of our part in The Glocal Forum’s establishment of Dakar in Senegal. Close cooperation with the local authorities in Da- training and telecommunications centres in conflict and post-con- kar means that the centre’s future is assured and costs are controlled. flict zones. The Glocal Forum’s “We are the future” programme The centre will offer education, computers and Internet access is working to offer children and young people in these areas the for Senegalese children. opportunity to create a brighter future. Young people receive French children were asked to send in pictures of what their training including IT and how to set up and run a small business. schools and towns might look in 2020. Their ideas will be posted The purpose is to support local ideas and capacity in order to make on Tele2’s web site alongside drawings by children in Senegal. sustainable development possible. “We are the future” centres will Some of the young artists will be invited to The Glocal Forum initially be set up in six towns and cities: Kigali, Freetown, Addis Conference in May 2004 to share their vision of the future.

34 EMPLOYEES TELE2 ANNUAL REPORT 2003 Hungry for success

TELE2 ANNUAL REPORT 2003 EMPLOYEES 35 EMPLOYEES. Never giving up, becoming satisfied or losing focus on our core business is all part of Tele2’s corporate culture. A large part of our success is due to the drive and enthusiasm of our employees. Employees are our strength Tele2 had an average number of 3,274 (3,115) employees during 2003. The emplyees are in 23 countries, and 29 percent of them are women. Employee turnover is very low, at around 6 percent, and most employees work in sales and marketing. Employee recruitment is at the local level, and all the country managers are responsible for their own recruitment. Grassroots, close-to-the-customer leadership Our informal, grassroots leadership has one common thread: customer focus. Having the right attitude and totally sharing the Company’s values are essential to successful employment with Tele2. Our success is due to the quality of never giving up, being satisfied or shifting the focus too far away from core operations, which produce our revenue. Leadership is about not losing contact with the customer and the market, even though the organization is growing. It involves teaching and sharing with others, setting a good example in your role as manager, and not changing yourself or your values no matter where you happen to be in your career. Tele2’s brand is something in which our employees can truly take pride. Planning is short, with constantly fast and flexible adaptation. Tele2’s values Tele2’s values are flexibility, openness and cost-consciousness. These values strengthen our business concept of offering cheap and simple telecom to all Europeans. The strategy for living up to these values is to copy with pride, to challenge and to act, and constantly to check that the old still stands up to the new. And we do this in a quick and simple way. 2004 will see the group-wide launch of a program based on Tele2’s values. The aim is to provide a uniform vision of leadership, anchor the corporate culture and simplify everything that Tele2 does in all its countries. The customer is king Tele2 has many programs and training schemes for employees. There are also personal development plans. All programs and training schemes are based on teaching about Tele2’s sales organization, customer service and philosophy that the customer is king. Employees’ goals and results All employees must gain practical experience in customer service In their personal development plans, employees have follow-ups at least once a year, and managers twice a year. By selling, tak- with their managers. Monthly follow-ups deal with results, input ing orders, dealing with billing matters, claims, and complaints, and skills. Annual follow-ups take the form of a more thorough and having other direct contact with the customer, all employees employee interview, dealing with target fulfillment, goal planning, become more resolute in their focus: the customer is king. future input and training.

36 ACCOUNTS TELE2 ANNUAL REPORT 2003 Accounts

TELE2 ANNUAL REPORT 2003 ACCOUNTS 37 38 Report of the Board of Directors Five year summary 41 Income statement 42 Balance sheet 44 Cash flow statement 45 Changes in shareholders’ equity 46 Notes General accounting principles Note 1. Operating revenue Note 2. Depreciation/amortization for the year and operating profit Note 3. Other operating revenue Note 4. Other operating expenses Note 5. Result from shares in associated companies Note 6. Sales of associated companies Note 7. Result from other securities and receivables classified as fixed assets Note 8. Other interest revenue and similar income Note 9. Interest expenses and similar costs Note 10. Tax on profit/loss for the year and deferred tax liability/receivable Note 11. Intangible assets Note 12. Tangible assets Note 13. Shares in Group companies Note 14. Receivables from Group companies Note 15. Shares in associated companies Note 16. Receivables from associated companies Note 17. Other long-term holdings of securities Note 18. Other long-term receivables Note 19. Accounts receivable, trade Note 20. Other current receivables Note 21. Prepaid expenses and accrued income Note 22. Cash and cash equivalents and overdraft facilities Note 23. Exchange rate effects Note 24. Number of shares Note 25. Liabilities to financial institutions Note 26. Other interest-bearing liabilities Note 27. Other short-term liabilities Note 28. Accrued expenses and deferred income Note 29. Pledged assets Note 30. Contingent liabilities and other commitments Note 31. Supplementary cash flow information Note 32. Market areas Note 33. Business areas Note 34. Financial items Note 35. Changed reporting structure Note 36. Customers Note 37. Number of employees Note 38. Personnel costs Note 39. Remuneration to Auditors Note 40. Transactions with related parties Note 41. United States generally accepted accounting principles (US GAAP) 68 Audit report 69 Definitions and Glossary

38 REPORT OF THE BOARD OF DIRECTORS TELE2 ANNUAL REPORT 2003 Report of the Board of Directors The Board of Directors herewith presents the annual report for Tele2 AB (publ), company registration number 556410-8917, for the fiscal year 2003. Tele2 AB’s share is listed on Stockholmsbörsen under the abbreviations TEL2A SEK 1,890 million) in intangible and tangible fixed assets (Note 31). In 2003, and TEL2B, and Nasdaq under the abbreviations TLTOA and TLTOB. investments in shares in companies, after deductions for cash in these The ten largest shareholders at December 31, 2003 held shares companies, amounted to SEK 800 million (2002: SEK 663 million) and sales of corresponding to 54% (2002: 60%) of the capital and 77% (2002: 80%) of shares amounted to SEK 21 million (2002: SEK 40 million). the voting rights, of which Invik & Co AB, Industriförvaltnings AB Kinnevik and Tele2 had a total of 22.3 (2002: 16.8) million customers at December 31, Emesco own 8%, 20% and 2%, respectively, of the capital, and 29%, 26% 2003, (Note 36). Net customer intake for 2003 as a whole increased by 33% and 9% of the voting rights. corresponding to 5.5 million customers. Tele2’s operating revenue for 2003 amounted to SEK 36,911 million (2002: SEK 31,282 million), an increase of Operations 18%. Tele2 AB, formed in 1993, is the leading and profitable, alternative pan- EBITDA amounted to SEK 5,710 million (2002: SEK 5,127 million), with an European telecommunications company offering fixed and mobile telephony, EBITDA margin of 15% (2002: 16%). EBIT totaled SEK 1,884 million (2002: as well as data network and Internet services under the brands Tele2, SEK 1,530 million) with an EBIT margin of 5% (2002: 5%). Tango and Comviq to more than 22.3 million customers in 23 countries. Net interest expense and other financial items totaled SEK –599 million Tele2 operates Datametrix, which specializes in systems integration; 3C (2002: SEK –698 million). The average interest rate on outstanding liabilities Communications, which operates Internet payments, credit card transactions was 5.0% (2002: 6.4%) in 2003. Net profit after financial items, EBT, and public pay telephones; Transac, which operates data processing of credit amounted to SEK 1,267 million (2002: 796 million). card transactions and billing; C3, which is active in prepaid calling cards for During the year, one-off items totaling SEK –848 million (2002: SEK –249 fixed telephony; and Optimal Telecom, which offers households low price million) were charged against profit before tax (Note 1-2, 7 and 12). guarantees for telephony services. The Group also offers cable TV services and Tax on net profit for the year amounted to SEK 1,092 million (2002: SEK jointly owns the Internet portal Everyday.com with MTG. –574 million), which was positively affected by SEK 2,011 million (2002: SEK During 2003, the Tele2 Group invested a net of SEK 1,890 million (2002: 576 million) in respect of a valuation of loss carry-forwards in a number of Five year summary SEK million Note 2003 2002 2001 2000 1999 Income statement and balance sheet items: Operating revenue 36,911 31,282 25,085 12,440 8,171 EBITDA 5,710 5,127 1,698 1,820 2,060 EBIT 1,884 1,530 –1,356 420 1,152 EBT 1,267 796 –1,944 165 4,184 Profit/loss for the year 2,396 223 392 –396 3,768 Shareholders’ equity 30,360 28,728 29,517 26,539 6,659 Shareholders’ equity, after dilution 30,487 28,870 29,547 26,584 6,659 Total assets 47,970 46,872 49,258 42,397 14,408 Cash flow from operating activities 5,974 4,365 413 883 1,753 Liquidity 22 3,444 2,332 1,625 1,304 1,123 Net borrowing 4,427 7,729 9,286 7,095 4,605 Investments in intangible and tangible fixed assets, CAPEX 31 1,895 1,956 2,162 1,514 1,165 Investments in shares and long-term receivables 767 626 304 20,512 4,051 Key ratio: Solidity, % 63 61 60 63 46 Debt/equity ratio 0.15 0.27 0.31 0.27 0.69 EBITDA margin, % 15.5 16.4 6.8 14.6 25.2 EBIT margin, % 5.1 4.9 –5.4 3.4 14.1 Return on shareholders’ equity, % 8.1 0.8 1.4 –2.4 78.6 Return on shareholders’ equity, after dilution, % 8.1 0.8 1.4 –2.4 78.6 Return on capital employed, % 5.0 3.9 –3.3 1.9 45.2 Average interest rate, % 5.0 6.4 6.3 4.8 4.8 Value per share, SEK: Profit/loss after tax 16.25 1.51 2.70 –3.47 36.28 Profit/loss after tax, after dilution 16.20 1.51 2.70 –3.47 36.28 Shareholders’ equity 205.88 194.95 203.56 232.62 64.12 Shareholders’ equity, after dilution 206.17 195.55 203.46 232.74 64.12 Cash flow from operating activities 40.51 29.62 2.85 7.74 16.88 Proposed dividend 3.00 – – – – Market value on closing day 384.00 230.50 378.00 392.00 598.00

TELE2 ANNUAL REPORT 2003 REPORT OF THE BOARD OF DIRECTORS 39 European companies, as a consequence of improved results in continental January 2003. Tele2 Lithuania has signed an interconnect agreement for Europe. Profit after tax was SEK 2,396 million (2002: SEK 223 million). fixed telephony with the local incumbent and is planning to launch services in Earnings per share were SEK 16.20 (2002: SEK 1.51) after full dilution. February 2004. Tele2 will continue to monitor developments in deregulation In 2003, cash flow from operating activities amounted to SEK 5,974 million and will launch fixed telephony services when competitive conditions are more (2002: SEK 4,365 million) and cash flow after investments to SEK 3,418 favorable. million (2002: 1,849 million). Operations in Russia are developing extremely well. Tele2 has now launched seven GSM networks, Irkutsk and Rostov in April, St. Petersburg in June, Nordic Kemerovo in July, Omsk in August, Izhevsk in September and Smolensk at the Sweden end of the year. As a consequence, Tele2’s GSM network will reach 10 million The Nordic market area mainly comprises Tele2 operations in Sweden people in seven different regions. (including Optimal Telecom), Norway, Denmark and Finland, as well as In Poland, services in fixed telephony that Tele2 launched at the beginning Datametrix operations. of the year have developed better than expected, despite the difficult Mobile telephony operations in Sweden reported 3.3 million customers at the regulatory situation. end of 2003, a rise of 10%. The monthly average revenue per user (ARPU) In Czech Republic, dial-up Internet services were launched at the end of in mobile telephony, including prepaid calling card customers, amounted to 2003, and local carrier pre-selection was introduced in the fourth quarter of SEK 171 (2002: SEK 189) in 2003 and the monthly mobile minutes per user the year. (MOU) amounted to 87 (2002: 92) minutes. Prepaid calling card customers accounted for 76% of the total customer base in mobile telephony. Central Europe Dial-up Internet services showed stable growth during the year. The fixed Central Europe comprises Tele2 operations in Germany, the Netherlands, telephony and Internet operations in Sweden saw a degree of price pressure Switzerland and Austria. during the fourth quarter, pending Tele2’s decision to introduce further Tele2’s operations in Central Europe displayed robust growth during the year reductions in subscription charges, which should have a positive effect on while rising EBITDA margins were reported. The market area’s ARPU in fixed operations as has already been seen in Denmark. telephony and Internet was SEK 160 (2002: SEK 153) for 2003. Svenska UMTS-Nät AB, which holds a 3G license in which Tele2 has a In the fall, Tele2 continued with its marketing campaigns in Germany share of 50%, plans to acquire the fourth Swedish 3G license which will following the introduction of carrier pre-selection numbers for local calls at the produce increased capacity at a low price, thereby making it possible for end of April and local carrier pre-selection in July. The prospects in Germany Tele2 to consolidate its position as the price-leading operator in mobile continue to improve as operating revenue has increased appreciably, the communications. During the year, an agreement was made with a banking margins have developed positively and customer churn continues to fall. consortium to reduce the total loan facility for Svenska UMTS-Nät AB from In the Netherlands, market shares and margins continue to rise and MVNO SEK 11 billion to SEK 7 billion. This reduction was made possible by cost- operations are developing satisfactorily. cutting measures in infrastructure through the use of new technological Tele2 successfully launched mobile telephony services in Austria in the first solutions. The loan, following the reduction, will cover the expansion of the quarter of 2003 and launched ADSL in the fall. jointly-owned UMTS network. The facility will be available until December 31, Switzerland has a broad range of fixed telephony, mobile telephony, 2006. Internet and ADSL. In December 2003, Tele2 was awarded a GSM license in Switzerland. Norway, Denmark and Finland Operations in Norway, Denmark and Finland are primarily involved in fixed Southern Europe telephony and Internet. Tele2 is the leading alternative operator in Norway and Southern Europe comprises Tele2 operations in France, Italy, Spain and Denmark. Portugal. In Norway,Tele2 successfully launched the resale of fixed telephony Southern Europe continued to report strong growth in customers with a subscription fee at the end of 2003. This will strengthen operations in Norway, record customer intake of 1,857,000 customers in 2003. ADSL customers although the launch will also incur costs. In addition, at the end of the year, formed a large proportion of the customer intake during the year. ARPU of SEK an MVNO (Mobile Virtual Network Operator) agreement was launched in 146 (2002: SEK 149) was attained in fixed telephony and Internet services Norway. During the year, Tele2 decided to end sales of data network services in Southern Europe. Tele2 is still seeking an MVNO agreement in Southern in Norway, which is included in fixed telephony and Internet. Europe and is optimistic that an agreement will be achieved in at least one of In Denmark, Tele2 is now billing its customers for subscription fees. This is the countries in 2004. a significant development which has led to a reduction in customer turnover. In France, ADSL services continued to grow at a satisfactory pace following Trends in Denmark continue to be positive. its launch in May 2003. Tele2 France confirmed its position as the leading In May, Tele2 acquired the remaining shares in the Finnish company alternative operator and maintained its stable growth despite increased activity Suomen 3G Oy for SEK 74 million which corresponds to the acquired share from the incumbent. of the company’s cash. 3G Oy already has 3G networks in nine Finnish Tele2 Italy continues to report strong net customer intake and to add new towns. In accordance with the license conditions, the aim of the company is services, such as the recently launched dial-up Internet service. to expand its 3G network to 18 Finnish towns, but there is a possibility that In Spain, Tele2 introduced local carrier pre-selection in June 2002, which these conditions will be changed. In February 2004, Tele2 launched mobile has increased call traffic considerably. In addition to a dramatic increase in telephony operations in Finland under an MVNO agreement with Radiolinja. revenue, Tele2’s operating margin improved significantly as a consequence of modest reductions in interconnect charges and a steep decline in fees for Eastern Europe & Russia rented capacity. Eastern Europe & Russia comprises Tele2 operations in the Baltic countries Tele2 successfully launched its services in Portugal in the third quarter of (Estonia, Latvia and Lithuania), Poland, Czech Republic and Russia as well as 2003. X-Source operations. In August, Tele2 Estonia was awarded a 3G license which will be valid until August 5, 2014, launched mobile Internet and MMS (Multi Media Services) in November and carrier pre-selection for fixed telephony in December. In Latvia and Lithuania, the markets for fixed telephony were opened in

40 REPORT OF THE BOARD OF DIRECTORS TELE2 ANNUAL REPORT 2003 Luxembourg Tele2 is continually following changes in this area, making plans and working The Luxembourg market area comprises Tele2 operations in Luxembourg to reach a stage where the company will be able to submit its quarterly report (including Tango), Liechtenstein and Belgium as well as 3C’s operations and on March 31, 2005, including comparative figures, in accordance with IAS/ Transac. IFRS, as well as review reporting procedures so that the required data can be The successful launch of fixed telephony in Brussels in the first quarter collected for the financial statements for 2005. and the rest of Belgium in the third quarter has continued to force the pace of steady growth. This investment in new customers has affected the EBITDA Work of the Board of Directors margin. In Luxembourg, including Tango, stable growth continued. The Board of Directors of Tele2 is composed in such a manner that it can Tele2 has been awarded UMTS licenses in Luxembourg and Liechtenstein. effectively support and manage the work of the senior executives. At the Tango, Tele2’s mobile operator in Luxembourg, launched its 3G network which Annual General Meeting in May 2003, John Shakeshaft and Cristina Stenbeck covers 90% of the population and 70% of the land surface at the end of April. were appointed new members. Lars Wohlin and Pelle Törnberg left the Board The cautious launch means that Tele2 can use Luxembourg as a test market while other members were re-elected. At the Board meeting following the for its other 3G operations. Annual General Meeting, Sven Hagströmer was elected Chairman of the Board. In August 2003, Bruce Grant left the Board. Branded products & services During the year, the Board held 8 meetings. The Board has adopted a Branded products & services comprise Tele2 operations in the UK, Alpha specific work procedure that provides guidelines for the work of the Board Telecom in the UK, C3 operations, Everyday operations and IntelliNet and establishes the division of duties between the Board and the CEO. Among operations. other things, the work procedure regulates which matters are to be discussed At the end of 2003,Tele2 increased its presence in the UK through the at ordinary Board meetings, how the basis for decision making sent to the successful launch of full-scale fixed telephony in the private market. Our Board in advance should be formulated, and the number of ordinary Board experience in establishing operations in markets of approximately the same meetings to be held. Matters placed before the Board are dealt with by the size as that of the UK, indicates that a successful launch would initially require entire Board. Each year, the company’s auditors report to the Board the result market investments of approximately SEK 500 million in the first year of of their examination. During the year the Board of Directors appointed an audit operation. committee, that has held informal preparational meetings during the year. In December 2003, the nomination group, consisting of representatives Acquisitions and divestments of the three owner families Stenbeck, Klingspor and von Horn as well as the On February 17, 2003, Alpha Telecom was acquired for SEK 704 million presidents of the shareholders Industriförvaltnings AB Kinnevik and Invik & net, including an anticipated supplementary purchase price based on the Co. AB, announced that the nomination process before the Annual General company’s profit. Alpha Telecom is the leading UK-operator in prepaid fixed Meeting in 2004 will be chaired by Cristina Stenbeck as Chairman of the telephony for private individuals and the market leader in prepaid calling cards nomination committee. for fixed telephony. In May 2003, Tele2 acquired the remaining shares, 72.6%, in Suomen 3G Parent Company Oy, a company with 3G networks in nine Finnish towns. The Parent Company performs functions and conducts certain development As part of the company’s strategy in the mobile telephony operation in projects common to the Group. Russia, Tele2 acquired 62.5% of Radio Components Sweden AB in September A convertible debenture was converted to 100,000 B shares on December 2003. One of Radio Components’ products is an antenna solution for GSM 31, 2003, which affected shareholders’ equity by SEK 15 million. The Parent 1800 which reduces the need for base stations by three to four times. By Company has received group contributions totaling SEK 1,730 (2002: SEK investing, Tele2 has secured cost-effective expansion in Russia and in other 3,035) million. areas where mobile networks may be built. During the year, Tele2 also increased its holdings in several of the Russian Proposed appropriation of profit operations. The Group’s non-restricted reserves amount to SEK 5,916 million. No allocation to restricted reserves is proposed for companies within the Group. Tax issues concerning SEC The Board of Directors and President propose that of the total amount, In December 2003,Tele2 reported that the tax authorities’ review of Tele2’s SEK 3,662,853,918, at the disposal of the Annual General Meeting, SEK financial accounts for 2001 had been completed and that the tax authorities 442,680,525 be paid in dividends to shareholders and SEK 3,220,173,393, wished to change Tele2’s taxation. In 2000, Tele2 acquired the remaining be carried forward to a new account. majority in the listed company SEC SA. In connection with the fact that the operation was restructured, an external valuation was carried out which indicated a fall in value, and the operations in SEC SA were then transferred at this value. Tele2 has claimed a deduction for this realized loss (Note 10). Change-over to international IAS/IFRS accounting standards From January 1, 2005, Tele2 will change over to reporting in accordance with the international IAS/IFRS (International Financial Reporting Standards) accounting standards. A gradual change-over has already taken place in Sweden, conducted over a number of years, involving, by and large, the adaptation of the recommendations of the Swedish Financial Accounting Standards Council to comply with the international regulations. Tele2 is already following the recommendations issued by the Swedish Financial Accounting Standards Council and has therefore already been largely adapted to comply with the international regulations. As a consequence of this gradual transition, Tele2 expects no major changes to be made in its reports up to and including 2005. The most significant difference between Tele2’s current accounting principles and the future IFRS principles is expected to be the fact that goodwill will no longer be amortized in a straight line but based on an annual assessment of write-down requirements. (Note 2).

TELE2 ANNUAL REPORT 2003 INCOME STATEMENT 41 Income statement Group Parent Company SEK million Note 2003 2002 2003 2002 Operating revenue 1 36,911 31,282 17 16 Cost of services sold –23,109 –19,890 – – Gross profit 13,802 11,392 17 16 Selling expenses –8,820 –7,279 – – Administrative expenses 39 –3,110 –2,571 –106 –101 Other operating revenues 3 78 50 63 12 Other operating expenses 4 –66 –62 – – Operating profit/loss 2, 38 1,884 1,530 –26 –73 Profit/loss from associated companies: Result from shares in associated companies 5 –18 –41 – – Sale of associated companies 6 – 5 – – Profit/loss from financial investments: Result from other securities and receivables classified as fixed assets 7 –70 –84 295 182 Other interest revenue and similar income 8 106 165 – – Interest expenses and similar costs 9 –635 –779 –7 –5 Profit/loss after financial items 1,267 796 262 104 Taxes 10 1,092 –574 –98 –35 Minority interest 37 1 Profit/loss for the year 32–33 2,396 223 164 69 Earnings/loss per share 24 SEK 16.25 SEK 1.51 Earnings/loss per share after full dilution 24 SEK 16.20 SEK 1.51 Number of shares 24 147,560,175 147,460,175 Average number of shares 24 147,460,175 147,360,175 Number of shares after dilution 24 148,203,675 148,223,175 Average number of shares after dilution 24 147,869,175 147,634,293

42 BALANCE SHEET TELE2 ANNUAL REPORT 2003 Balance sheet Group Parent Company SEK million Note Dec. 31, 2003 Dec. 31, 2002 Dec. 31, 2003 Dec. 31, 2002 ASSETS Fixed assets Intangible assets: Licenses and rights of use 11 480 509 – – Goodwill 11 23,076 24,587 – – Total intangible assets 23,556 25,096 – – Tangible assets: Land and buildings 12 108 115 – – Machinery and technical plant 12 8,334 8,334 – – Equipment, tools and installations 12 301 575 – – Fixed plant under construction 12 293 233 – – Total tangible assets 9,036 9,257 – – Financial fixed assets: Shares in group companies 13 2,686 2,686 Receivables from group companies 14 17,381 15,353 Shares in associated companies 15 514 542 – – Receivables from associated companies 16 – 19 – 19 Other long-term holdings of securities 17 36 139 – 28 Other long-term receivables 18 48 74 – – Deferred tax receivable 10 2,459 1,246 1,188 1,771 Total financial fixed assets 3,057 2,020 21,255 19,857 Total fixed assets 35,649 36,373 21,255 19,857 Current assets Materials and supplies 350 353 – – Current receivables: Accounts receivable 19 5,569 4,373 – – Current tax receivable 2 1 – – Receivables from group companies 56 7 Other receivables 20 308 250 – – Prepaid expenses and accrued income 21 3,319 3,049 3 1 Total current receivables 9,198 7,673 59 8 Cash and cash equivalents 22 2,773 2,473 1 10 Total current assets 12,321 10,499 60 18 TOTAL ASSETS 32–33 47,970 46,872 21,315 19,875

TELE2 ANNUAL REPORT 2003 BALANCE SHEET 43 Group Parent Company SEK million Note Dec. 31, 2003 Dec. 31, 2002 Dec. 31, 2003 Dec. 31, 2002 EQUITY AND LIABILITIES Shareholders’ equity 23 Restricted equity Share capital 24 738 737 738 737 Restricted reserves 23,706 24,401 16,577 16,562 Total restricted equity 24,444 25,138 17,315 17,299 Unrestricted reserves Unrestricted reserves 3,520 3,367 3,499 2,185 Profit/loss for the year 2,396 223 164 69 Total unrestricted reserves 5,916 3,590 3,663 2,254 Total shareholders’ equity 30,360 28,728 20,978 19,553 Minority Interests 7 22 Provisions Shares in associated companies 15 6 28 – – Other provisions 20 – – – Total provisions 26 28 – – Long-term liabilities Interest-bearing Liabilities to financial institutions 25 4,752 7,876 – – Liabilities to group companies 309 303 Other liabilities 26 23 23 – – Total long-term liabilities 4,775 7,899 309 303 Short-term liabilities Interest-bearing Liabilities to financial institutions 25 2,449 2,377 – – Other liabilities 26 12 5 – – Total interest-bearing 2,461 2,382 – – Non-interest-bearing Accounts payable 4,486 3,542 6 6 Current tax liabilities 83 57 – – Other liabilities 27 598 441 13 5 Accrued expenses and deferred income 28 5,174 3,773 9 8 Total non-interest-bearing 10,341 7,813 28 19 Total short-term liabilities 12,802 10,195 28 19 TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 32–33 47,970 46,872 21,315 19,875 PLEDGED ASSETS AND CONTINGENT LIABILITIES Pledged assets 29 12,921 11,735 None None Contingent liabilities 30 363 None 14,308 12,825

44 CASH FLOW STATEMENT TELE2 ANNUAL REPORT 2003 Cash flow statement Group Parent Company SEK million Note 2003 2002 2003 2002 Operating activities Operating profit/loss 1,884 1,530 –26 –73 Adjustments for non-cash operating activities: Depreciation and amortization 3,826 3,597 – – Capital gain/loss on sale of machinery and technical plant 27 9 – – Financial leases –32 –20 – – Exchange rate differences –15 63 – – Interest received 124 157 – 2 Interest paid –532 –619 – – Financial expenses paid –118 –104 –1 – Tax paid –102 –49 – – 5,062 4,564 –27 –71 Changes in working capital: Materials and supplies –7 –12 – – Accounts receivable –1,250 –815 – – Other current receivables 37 167 – 2 Prepaid expenses and accrued income –274 –185 –2 – Intra-group transactions (current) –49 –4 Accounts payable 1,038 236 – –4 Other current liabilities 12 123 9 3 Accrued expenses and deferred income 1,361 287 1 1 Provisions –5 – – – 912 –199 –41 –2 Cash flow from operating activities 5,974 4,365 –68 –73 Investing activities Acquisition of intangible fixed assets –102 –208 – – Acquisition of tangible fixed assets –1,809 –1,699 – 1 Sale of tangible fixed assets 21 17 – – Acquisition of shares in group companies (excluding cash) 13 –699 –346 – –299 Acquisition of other long-term securities – –317 –74 –23 Sale of other long-term securities 21 40 – – Lending to group companies –16 –128 Repayments from group companies 137 414 Other long-term lending –64 –12 –3 –7 Other repayments from long-term lending 76 9 – 102 Cash flow from investing activities –2,556 –2,516 44 60 Financing activities Loans from credit institutions 1,399 528 – – Repayment of loans from credit institutions –4,327 –1,744 – – Other interest-bearing liabilities – 12 – – Repayment of other interest-bearing liabilities –27 –209 – – New share issues 15 15 15 15 Cash flow from financing activities –2,940 –1,398 15 15 Net change in cash 478 451 –9 2 Cash at beginning of year 22 2,473 2,275 10 8 Exchange rate differences in cash 22 –178 –253 – – Cash at end of year* 22 2,773 2,473 1 10 *Of which, restricted funds 22 830 870 – – For additional cash flow information, please refer to: 31

TELE2 ANNUAL REPORT 2003 CHANGES IN SHAREHOLDERS’ EQUITY 45 Changes in shareholders’ equity Group Note Share Restricted Unrestricted Total share- SEK million capital reserves reserves holders’ equity Opening shareholders’ equity, January 1, 2002 737 35,741 –6,961 29,517 Items reported directly against shareholders’ equity: Exchange rate differences 23 – –868 –158 –1,026 Total items reported directly against shareholders’ equity – –868 –158 –1,026 Other changes in shareholders’ equity: Utilization of share premium reserve – –7,387 7,387 – New share issue – 14 – 14 Transfers within shareholders’ equity – –3,099 3,099 – Net profit/loss for the year – – 223 223 Closing shareholders’ equity, December 31, 2002 737 24,401 3,590 28,728 Opening shareholders’ equity, January 1, 2003 737 24,401 3,590 28,728 Items reported directly against shareholders’ equity: Exchange rate differences 23 – –865 85 –780 Total items reported directly against shareholders’ equity – –865 85 –780 Other changes in shareholders’ equity: New share issue 1 15 – 16 Transfers within shareholders’ equity – 155 –155 – Net profit/loss for the year – – 2,396 2,396 Closing shareholders’ equity, December 31, 2003 738 23,706 5,916 30,360 Parent Company Restricted Unrestricted Total share- SEK million Share capital Reserves reserves holders’ equity Opening shareholders’ equity, January 1, 2002 737 23,935 –7,387 17,285 Items reported directly against shareholders’ equity: Group contribution, received – – 3,035 3,035 Group contribution, tax effect – – –850 –850 Total items reported directly against shareholders’ equity – – 2,185 2,185 Other changes in shareholders’ equity: Utilization of share premium reserve – –7,387 7,387 – New share issue – 14 – 14 Net profit/loss for the year – – 69 69 Closing shareholders’ equity, December 31, 2002 737 16,562 2,254 19,553 Opening shareholders’ equity, January 1, 2003 737 16,562 2,254 19,553 Items reported directly against shareholders’ equity: Group contribution, received – – 1,730 1,730 Group contribution, tax effect – – –485 –485 Total items reported directly against shareholders’ equity – – 1,245 1,245 Other changes in shareholders’ equity: New share issue 1 15 – 16 Net profit/loss for the year – – 164 164 Closing shareholders’ equity, December 31, 2003 738 16,577 3,663 20,978

46 NOTES TELE2 ANNUAL REPORT 2003 Notes (SEK million) General accounting principles Consolidated accounts The consolidated financial statements include the accounts of the Parent The annual report has been prepared in accordance with the Annual Accounts Company and all companies in which the Parent Company, directly or indirectly, Act, recommendations of the Swedish Financial Accounting Standards Council’s holds more than 50% of the voting rights, or in some other aspect has a controlling Emerging Issues Task Force and the Swedish Financial Accounting Standards interest. Council’s recommendations RR1:00-RR29, of which RR29 was applied before it The consolidated accounts were prepared using the purchase method, which came into force. means that the Group’s shareholders’ equity includes only that part of each In 2003, Tele2 modified its accounting principles to conform to recommendation subsidiary’s equity which has been earned after the acquisition. RR29 – Employee Benefits. Previously, Tele2 reported defined-benefit pension The difference between the acquisition value of shares in a subsidiary and the plans in line with local rules and regulations in each country. The application of market value of that subsidiary’s net assets at the time of acquisition is allocated to RR29 means that all the Group’s subsidiaries are now reported on the basis of the subsidiary’s identifiable assets. Remaining amounts are reported as goodwill. uniform principles. Since the Group has largely had defined-contribution plans, the The current method is used to translate the accounts of foreign subsidiaries. introduction of RR29 has not had any significant impact on Tele2’s earnings and Consequently, the exchange rate on the closing date is used to translate items in financial position (Note 38). the balance sheet, while items in the income statement are translated using the average exchange rate for the year. Critical accounting principles All non-Swedish companies in the Tele2 Group are regarded as independent Assets and liabilities have been valued at their acquisition value unless otherwise foreign operations as they conduct independent business activities and stated. transactions in local currencies, so that exchange rate differences arising from The consolidated financial statements are, in part, based on assumptions and translations are charged directly to shareholders’ equity. estimates in conjunction with the preparation of the consolidated accounts. The When an independent foreign operation is divested, the accumulated exchange estimates and approximations are based on historical experience and a number rate differences attributable to the divested operation are reported in “Net assets in of other assumptions, which result in a decision regarding the value of assets or Group companies divested” in the income statement. liabilities which cannot be determined in any other way. The actual outcome may The Group hedges some net investments in foreign subsidiaries by means of vary from these estimates and approximations. foreign-currency loans. All foreign exchange gains and losses, net of taxes, relating The explanation below presents the accounting principles that involve the most to the translation of a loan which hedges such an investment is reported directly significant judgement and estimates used in preparing the Group’s financial against shareholders’ equity. statements. • Depreciation and amortization according to plan is based on the acquisition Accounting for associated companies and joint ventures value and estimated utilization period of fixed assets. The utilization period for Companies in which the shareholding is regarded as long term, and in which the technical plant and machinery is estimated to amount to between 2–25 years. Company has a significant influence by means of voting rights amounting to a All depreciation is straight-line over the utilization period (Note 2). minimum of 20% and a maximum of 50% are treated as associated companies. Amortization periods for goodwill are determined on the basis of each Companies in which the owners have equal control pursuant to an agreement are acquisition date and the acquisition’s estimated long-term, strategic regarded as joint ventures. significance. An amortization period of 20 years applies to corporate Associated companies and joint ventures (“associated companies”) are reported acquisitions in new markets. This means that goodwill arising from all strategic in accordance with the equity method. The book value of the shares in the acquisitions in recent years (i.e., acquisitions in the Baltic States, Continental associated company which is reported in the consolidated financial statements Europe and Russia) is amortized over a period of 20 years. Tele2’s management corresponds to the Group’s share in the equity of the associated company and any conducts regular evaluations to confirm that these assumptions remain residual value of consolidated surplus values after adjustment to the consolidated reasonable. accounting principles. Participation in earnings after net financial items of the If technology develops more quickly than expected or competition, regulatory associated company is reported in the income statement under the item “Result requirements or market conditions develop differently than expected, this may from shares in associated companies” along with amortization of acquired affect the Company’s future assessment of utilization periods. Changes to the surplus values. The portion of associated companies’ tax expense and deferred assessments may in turn affect operating profit/loss. tax income/expense is reported in the income statement under the item “Tax on • Tele2’s management regularly makes assessments of the sustained value of profit for the year”. Tax receivables/liabilities is reported in the balance sheet as intangible and tangible fixed assets. If management identifies factors which “Shares in associated companies”. Earnings accrued in associated companies involve a risk of reduced value of the particular asset, a revaluation of the asset arising after the acquisition date, and which have not yet materialized through is conducted by comparing the sum of future discounted cash flows with the dividends, are allocated to the equity method reserve, which comprises part of asset’s book value. In cases in which the book value exceeds future discounted restricted shareholders’ equity in the Group. The equity share reduces unrestricted cash flows, a write-down requirement emerges. The assessment of whether shareholders’ equity in the event of losses. factors indicate an asset is vulnerable to a fall in value, the estimate of future In the event of an increase or decrease in the Group’s equity share in associated cash flows (including discounting factors), and the final decision regarding the companies through share issues, the gain or loss is reported in the consolidated fair value of the asset make it necessary for management to conduct critical income statement under the item “Return on shares in associated companies”. estimates and approximations. If the actual outcome varies from these estimates, In the event of negative shareholders’ equity in associated companies in which or if Tele2 changes these estimates in the future, this may have considerable the company has pledged to contribute additional capital, the negative portion is impact on the results (Notes 11-12). reported as a provision. • The calculation of deferred taxes takes into consideration temporary differences, Group surplus values relating to foreign associated companies are reported as including a valuation of unutilized loss carry-forwards. Deferred tax assets are assets in foreign currencies. These values are translated in accordance with the reported only for loss carry-forwards to the extent that the loss-carry forwards same principles as the income statements and balance sheets for associated will be utilized in the near future. Tele2’s management conducts regular companies. appraisals to confirm that previous assessments are reasonable. The valuation of deferred tax assets is based on expectations about future results and market Minority interest conditions, which is by nature subjective. Utilization of deferred tax assets may The minority share in net profit/loss and shareholders’ equity is reported as a therefore differ from the present estimates, which may affect future results minority interest. (Note 10). • Receivables are valued regularly and reported in the amounts expected to be Financial items paid. Reserves for doubtful receivables are based on various assumptions and Acquisition and sale of investments is reported on the trading day, which is historical experience. Payment received for doubtful receivables may vary from the date on which the Group has an undertaking to purchase or sell the asset. the amounts which have been reported in the financial statements (Note 19). Investments are initially reported at the acquisition value, including transaction

TELE2 ANNUAL REPORT 2003 NOTES 47 costs. Financial assets, both current and fixed are reported at the lower of cost or As Tele2 believe it is unlikely that antennas will be dismantled in the foreseeable market value. future, no provision has been made for dismantling costs. Tele2 also believes that Receivables from/liabilities to Group companies and associated companies are these potential dismantling costs do not represent a substantial amount. based on commercial terms and conditions. Financial loan receivables and loan liabilities are reported in accordance with the original amount. In the event of any Development work deviation between the market rate and the interest rate agreed at the time of the Tele2 capitalizes some direct development expenses relating to software for loan, the loan amount is discounted to the fair value. Financing costs relating to internal use. These are written off over the utilization period, which begins when the raising of loans are reported under prepaid expenses and expensed for the the asset is ready for use. Project-planning costs and maintenance and training duration of the agreement in relation to the size of the loan (Note 34). costs are expensed as they arise. Other development work is expensed as it arises when it does not satisfy the Receivables and liabilities of Swedish and non-Swedish Group companies criteria for reporting as an asset as defined in RR15 – Intangible assets. denominated in foreign currencies. Receivables and liabilities of Group companies denominated in foreign currencies Leasing have been converted into Swedish kronor applying the year-end rate. Leases are classified as financial or operating leases. A lease is considered Gains or losses on foreign exchange in international transactions related to financial if all economic risks and benefits associated with ownership of the asset regular operations are included in the income statement under “Other operating have been transferred, to a material degree, to the lessee; otherwise, the lease is revenues” and “Other operating expenses” respectively, while differences in an operating lease. In the case of financial leases as reported in the consolidated financial receivables and liabilities are reported within financial items. Note 23 financial statements, each asset is entered as a tangible fixed asset, and a summarizes the exchange rate differences charged directly to shareholders’ equity corresponding amount is entered as a loan on the liability side of the balance and the differences which affected profit/loss for the year. sheet. In the income statement, the cost of the lease is divided into a depreciation Long-term lending to/borrowing from Tele2’s foreign operations is regarded portion and an item in interest expense. The asset is depreciated on a straight-line as a permanent part of the Parent Company’s financing of/borrowing from basis over the utilization period (Notes 12 and 25). foreign operations, and thus as an expansion/reduction of the Parent Company’s Agreements covering financial leases before January 1, 1997 have been investment in the independent foreign operation. This lending/borrowing is reported as operational leases in line with a transitional rule. translated at the historical rate of exchange if the borrowing is denominated in the foreign company’s currency. This means that exchange rate fluctuations in Materials and supplies intra-Group transactions in the consolidated accounts are reported directly against Inventories of materials and supplies are valued in accordance with the first- shareholders’ equity. in, first-out principle at the lower of acquisition value and market value. Tele2’s inventories essentially consist of finished products and goods for resale. There is Fixed assets no further specification in the notes, as long as the total value of inventories is of a Intangible (Note 11) and tangible (Note 12) fixed assets are reported net after relatively insignificant value. deductions for accumulated depreciation and amortization according to plan. Depreciation according to plan is based on the acquisition value and estimated Receivables utilization period of fixed assets. Note 2 presents depreciation and amortization Receivables are reported in the invoiced amounts less the reserve for doubtful schedules for fixed assets and reasons for amortizing certain intangible assets over debts. The reserve for doubtful receivables is reported as soon as it is likely the a utilization period longer than five years. Group will not receive the balance outstanding in accordance with the original If there is an indication that a tangible or intangible asset has declined in value, billing terms (Note 19). an estimate is made of its recovery value. If the calculated recovery value is less Credit risk means the accounting loss which would be reported at year-end if than the reported value, a write-down is made to the asset’s recovery value. the other parties completely failed to fulfill their payment obligations under the agreement. Intangible assets Tele2 holds a number of licenses issued by the Swedish National Post and Cash and cash equivalents Telecom Agency and the equivalent licensing authority in other countries. Cash and cash equivalents consist of cash and bank balances as well as current Capitalized expenses for these rights are amortized on a straight-line basis over the investments with a maturity of a maximum three months. Cash and cash duration of the contract. equivalents according to the cash flow statement and balance sheet include Goodwill is defined as the difference between the purchase cost of shares or restricted funds (Note 22). assets acquired and the market value of net assets. Shareholders’ equity Tangible assets Shareholders’ equity consists of registered share capital, reserves which are not Land and buildings relates to fixed assets intended for use in actual operations. available for distribution (statutory reserve, share premium reserve and other Buildings are written off on a straight-line basis over the utilization period. restricted reserves) and disposable earnings/accumulated losses, net profit/loss Acquisition value includes direct costs attributable to the building. and shares in losses of associated companies. Machinery and technical plant includes equipment and machinery intended The share premium reserve applies to surplus portions when a company’s for use in operations, such as network installations. The asset is depreciated on a shares are issued at a price that exceeds the nominal value. The equity reserve straight-line basis over the utilization period. The acquisition value includes direct pertains to positive earnings of associated companies received after the acquisition expenses attributable to the construction and installation of networks. Interest date. According to the Swedish Companies Act, a provision must be made each directly relating to acquisition, construction or production of an asset which year to the statutory reserve in a minimum amount corresponding to 10% of that necessarily requires considerable time to complete for the intended application is portion of net profit for the year which is not used to cover retained losses until included in the acquisition value of the asset. the statutory reserve and the share premium reserve, combined, correspond to Additional expenses for extensions and improvements which increase value are 20% of the share capital. Restricted reserves in Tele2 AB and the Swedish group capitalized, while additional expenses for repairs and maintenance are regularly companies may be used to increase share capital in order to cover accumulated charged to income during the period in which they arise. losses, under certain conditions. Other restricted reserves pertain to the equity Equipment, tools and installations comprise assets used in administration, sales share of untaxed reserves. and operations. According to the Swedish Companies Act, Tele2 AB’s disposable earnings after the requisite provision to the statutory reserve, and after covering accumulated Dismantling costs losses for previous years, are available for distribution to shareholders. The legal Tele2 has a number of antennas and masts, which would involve costs if a decision limit for distributable funds is represented by rules to the effect that dividends were made to dismantle them. Tele2 expenses maintenance of antennas as it arises. may not threaten the company’s liquidity or overall position or exceed unrestricted

48 NOTES TELE2 ANNUAL REPORT 2003 shareholders’ equity in the Group. The dividend is determined by shareholders at Number of employees, salary and remuneration the Annual General Meeting and, generally, may not exceed the dividend proposed The average number of employees (Note 37) as well as salaries and remuneration by the Board. (Note 38) for each year in acquired companies is reported in relation to the length Additional direct costs relating to the issuance of new shares, except when of time the company has been part of the Tele2 Group. in connection with company acquisitions, are reported directly to shareholders’ The number of employees as well as salaries and remuneration is not reported equity as a reduction, net after tax, of proceeds from the share issue. Share issue by country but are grouped and presented by market area for the sake of clarity expenses relating to company acquisitions are included in the acquisition price. and to give a truer picture which is in keeping with other parts of the annual report, thereby allowing comparison of operating revenue and other income statement Provisions items. Provisions are reported when a company has a legal or constructive obligation in which it is probable that payments will be required to fulfill the commitment, and Pensions where it is possible to make a reliable estimate of the amount to be paid. In the case of defined-benefit plans, Tele2 has the risk and obligation at the time of the pension payment. In the case of defined-contribution plans, Tele2 does not Revenue recognition bear the risk at the time of the pension payment. Sales are reported net of VAT, discounts and exchange rate differences for sales in There are a number of pension plans in the Group, but the majority are defined- foreign currency. contribution plans (Note 38) for which the Group makes payments to public and Revenue from mobile telephony services consists mainly of monthly fees from private pension institutions. The regular payments represent the pension expenses subscription customers. This revenue is recognized at the time the mobile service for the year and are included in personnel costs. The Group’s outgoing payments is provided to the customer. Unbilled subscription charges for the period from the for defined-contribution pension plans are reported as an expense during the last billing date to the end of the reporting period are shown as accrued income, period in which the employees performed the services to which the contribution and billed subscription charges for periods after the end of the reporting period relates. are reported as deferred income. Revenue from the sale of prepaid calling cards is The provision for defined-benefit plans is made up of the present value of reported as deferred income and is recognized as the customer uses the card. the defined-benefit commitment minus the fair value of plan assets and an Revenue from fixed telephony services consists mainly of call time. This revenue adjustment for actuarial gains and losses and costs for service in previous years. is recognized at the time the service is provided. Revenue from international Actuaries calculate the defined-benefit commitment and also revalue the pension telephony traffic also consists of revenue from foreign telecommunications plan’s commitment each year using the Projected Unit Credit Method. These companies for traffic which goes through Tele2’s network. Unbilled revenue from commitments are valued at the present value of expected future payments using fixed telephony services to customers and from foreign telecommunications a discount rate which corresponds to the rate for high-grade corporate bonds companies from the last billing date to the end of the period is reported as accrued or government bonds with a remaining maturity which is more or less the same income. as the current commitment. Actuarial gains and losses outside the 10 percent Revenue from cable TV and other products and services is recognized at the corridor are distributed over the employees’ remaining period of service. time the product or service is supplied to the customer. Remuneration to Auditors Marketing expenses Auditing assignments consist of the auditing of the annual accounts, accounting Expenditures for advertising and other marketing activities are charged on an records and administration of the Board and President. All else comes under other ongoing basis. assignments (Note 39). Corporate income tax Transactions with related parties Consolidated profit or loss for the year is charged with the tax on taxable income Transactions with other related parties are listed in Note 40. for the year (“Current tax”) and with estimated tax charges or credits for temporary differences (“Deferred tax”). A temporary difference is an item which merely United States generally accepted accounting principles (US GAAP) alters the time when an item is considered taxable or entitles the company to a The consolidated balance sheets and income statements are drawn up in deduction. accordance with Swedish accounting principles. These differ in certain aspects The calculation of deferred tax receivables takes into account the company’s from generally accepted accounting principles in the United States (US GAAP). loss carry-forwards to the extent that it is expected they can be used against Note 41 shows the adjustments required for compliance with US GAAP. future profits. In cases where a company reports losses, an assessment is made of whether there are any convincing factors to indicate that there will be sufficient Other information future profits. One example of such a factor is if a company’s forecasts show a Tele2 is a limited company and has its registered office in Stockholm. The Head positive earnings trend and forecasts have proven to be historically reliable (Note Office (phone +46 8 5620 0060) is located at Skeppsbron 18, PO Box 2094, 10). Tax receivable and deferred tax payable are netted only among units with the SE-103 13 Stockholm, Sweden. same domicile for tax purposes. The balance sheets and income statements will be adopted at the Annual When an acquired company has loss carry-forwards and Tele2, at the time of General Meeting on May 12, 2004. acquisition, has made an assessment that tax receivables are not to be reported at any value, but a subsequent assessment results in tax receivables being valued and reported in the income statement as tax revenue, an amount corresponding to the reported value of the original loss carry-forward (adjusted to the remaining depreciation period of the acquisition’s goodwill item) will reduce the book value of goodwill by means of depreciation in the income statement. The tax effects of Group contributions paid and received are reported in the individual companies as tax expense or tax revenue in the income statement (“Current tax”) and charged to retained earnings. Earnings per share Earnings per share after dilution (Note 24) is calculated according to a method in which the present value of the exercise price of the option is assumed to be used to acquire shares at the average market value during the accounting period.

TELE2 ANNUAL REPORT 2003 NOTES 49 Note 1. Operating revenue Note 2. Depreciation/amortization for the year and operating profit Operating revenue by market area: Operating revenue by market area: Group Group EBITDA* Depreciation/amortization EBIT** Operating Revenue 2003 2002 2003 2002 2003 2002 2003 2002 Change Nordic: Nordic: Mobile telephony 3,299 3,339 –424 –791 2,875 2,548 Mobile telephony 7,330 6,872 7% Fixed telephony and Internet 899 1,192 –498 –472 401 720 Fixed telephony and Internet 6,310 6,557 –4% Cable TV 40 32 –61 –64 –21 –32 Cable TV 207 222 –7% Other operations 9 14 –9 –8 – 6 Other operations 346 342 1% Adjustment, mobile Sweden –374 237 – – –374 237 Adjustment, mobile Sweden –374 237 –258% Total, Nordic 3,873 4,814 –992 –1,335 2,881 3,479 Intra-Group sales –849 –664 28% Of which: Total, Nordic 12,970 13,566 -4% Tele2 in Sweden, mobile telephony 3,325 3,409 –413 –388 2,912 3,021 Of which: Tele2 in Sweden, fixed telephony 714 879 –406 –356 308 523 Tele2 in Sweden, mobile telephony 6,626 6,374 4% Tele2 in Sweden, cable TV 35 32 –58 –61 –23 –29 Tele2 in Sweden, fixed telephony 3,793 3,925 –3% Adjustment, mobile –374 237 – – –374 237 Tele2 in Sweden, cable TV 191 205 –7% Total for Tele2 in Sweden 3,700 4,557 –877 –805 2,823 3,752 Adjustment, mobile –374 237 –258% Total for Tele2 in Sweden 10,236 10,741 –5% Eastern Europe & Russia: Mobile telephony 809 611 –355 –339 454 272 Eastern Europe & Russia: Fixed telephony and Internet –224 –76 –28 –29 –252 –105 Mobile telephony 2,600 2,068 26% Cable TV –1 –1 –9 –12 –10 –13 Fixed telephony and Internet 348 198 76% Other operations 15 7 –12 –10 3 –3 Cable TV 26 26 0% Total, Eastern Europe & Russia 599 541 –404 –390 195 151 Other operations 99 77 29% Intra-Group sales –67 –49 37% Central Europe: Total, Eastern Europe & Russia 3,006 2,320 30% Mobile telephone –124 –186 –27 –17 –151 –203 Fixed telephony and Internet 307 105 –165 –116 142 –11 Central Europe: Total, Central Europe 183 –81 –192 –133 –9 –214 Mobile telephony 432 145 198% Fixed telephony and Internet 7,645 5,922 29% Southern Europe: Intra-Group sales –575 –378 52% Fixed telephony and Internet 1,024 –101 –106 –129 918 –230 Total, Central Europe 7,502 5,689 32% Total, Southern Europe 1,024 –101 –106 –129 918 –230 Southern Europe: Luxembourg: Fixed telephony and Internet 10,578 8,415 26% Mobile telephony 220 161 –73 –65 147 96 Intra-Group sales –345 –310 11% Fixed telephony and Internet –124 6 –95 –18 –219 –12 Total, Southern Europe 10,233 8,105 26% Cable TV –9 –29 –6 –5 –15 –34 Other operations –7 –12 –13 –4 –20 –16 Luxembourg: Total, Luxembourg 80 126 –187 –92 –107 34 Mobile telephony 601 535 12% Fixed telephony and Internet 314 209 50% Branded Products & Services: Cable TV 11 2 450% Fixed telephony and Internet –43 –172 –56 –12 –99 –184 Other operations 101 124 –19% Other operations –6 – –1 – –7 – Intra-Group sales –110 –116 –5% Total Branded Products & Services –49 –172 –57 –12 –106 –184 Total, Luxembourg 917 754 22% Group depreciation/amortization –1,888 –1,506 –1,888 –1,506 Branded Products & Services: Total by market 5,710 5,127 –3,826 –3,597 1,884 1,530 Fixed telephony and Internet 2,608 1,004 160% Other operations 14 – – Group Intra-Group sales –339 –156 117% EBITDA* Depreciation/amortization EBIT** Total Branded Products & Services 2,283 848 169% 2003 2002 2003 2002 2003 2002 Mobile telephony 4,204 3,925 –879 –1,212 3,325 2,713 Total by market 36,911 31,282 18% Fixed telephony and Internet 1,839 954 –948 –776 891 178 Cable TV 30 2 –76 –81 –46 –79 Group Other operations 11 9 –35 –22 –24 –13 Operating Revenue Adjustment, mobile Sweden –374 237 – – –374 237 2003 2002 Change Group depreciation/amortization –1,888 –1,506 –1,888 –1,506 Mobile telephony 10,963 9,620 14% Total by business area 5,710 5,127 –3,826 –3,597 1,884 1,530 Fixed telephony and Internet 27,803 22,305 25% Cable TV 244 250 –2% * EBITDA = Operating profit before depreciation/amortization Other operations 560 543 3% ** EBIT = Operating profit after depreciation/amortization Adjustment, mobile Sweden –374 237 –258% Group Intra-Group sales –2,285 –1,673 37% EBITDA margin EBIT margin Total by business area 36,911 31,282 18% 2003 2002 2003 2002 Nordic 30% 35% 22% 26% Telephony revenue is reported at the time the customers make calls. As such, prepaid calling Of which: cards which have been sold but not yet utilized are not included in revenue. To account for Tele2 in Sweden, mobile telephony 50% 53% 44% 47% this, revenue has been recognized according to a model which has been applied in Sweden Tele2 in Sweden, Mobile telephony 19% 22% 8% 13% since prepaid calling cards were introduced in 1997, in the absence of a system which could Tele2 in Sweden, Cable TV 18% 16% –12% –14% measure the value of cards sold but not yet utilized. Such a system was introduced by Comviq Tele2 in Sweden, Total 36% 42% 28% 35% towards the end of 2003 and it was established that the value of sold but unutilized cards was underestimated by a total of SEK –374 million for the period 1997 to September 30, 2003. Of Eastern Europe & Russia 20% 23% 6% 7% this amount, SEK –95 million relates to 2003. Central Europe 2% –1% –0% –4% In 2002, Tele2 won a lawsuit in the County Administrative Court against Telia regarding Southern Europe 10% –1% 9% –3% principles of payment of interconnection charges. The result of the ruling is that Telia is Luxembourg 9% 17% –12% 5% responsible for payment regarding traffic transited via its network (Cascade accounting) at Branded Products & Services –2% –20% –5% –22% certain tariffs rates. An amount of SEK 237 million has been included in the operating revenue Total by business area 15% 16% 5% 5% for 2002, thereby recognizing the receivable in its entirety in 2002. On June 26, 2003, the Stockholm Court of Appeal ruled that Telia is responsible for payment. In intra-Group sales, no sales were made to companies in the Tele2 Group. Internal sales in the market areas and additional information about segments are shown in Note 32 (Market areas) and Note 33 (Business areas). Sales of telephones, which amounted to SEK 387 million (2002: SEK 453 million), are included in operating revenue for the year. Numbers of customers by market area and business area are shown in Note 36. The entire operating revenue of the Parent Company relates to sales to other companies in the Group.

50 NOTES TELE2 ANNUAL REPORT 2003 The item Adjustment, mobile Sweden of SEK –374 million (2002: SEK 237 million) relates to Note 5. Result from shares in associated companies operating revenue and is described in Note 1. Group Parent Company Some of the tax effect of the year’s valued loss carry-forwards relates to acquired loss 2003 2002 2003 2002 carry-forwards which at the time of acquisition were valued at zero. This value, adjusted to Participation in profit/loss of associated companies –18 –41 – – the remaining depreciation period of the acquisition’s goodwill, has reduced the book value Total result from associated companies –18 –41 – – of goodwill through Group depreciation/amortization of SEK –322 million in the income statement (Note 10). Holding Group Parent Company Write-downs of fixed assets amounted to SEK –172 million and relates to an Atlantic 12/31/03 12/31/02 2003 2002 2003 2002 undersea cable, in which Tele2 invested in the late 1990s. They are expensed as a result of Svenska UMTS–Nät AB 50% 50% –9 –1 – – Tele2’s assessment of continued excess supply of capacity. Other associated companies Note 15 Note 15 –9 –40 – – Internal sales to other companies in the Tele2 Group are not included in the figures above. Total result from associated companies –18 –41 – – Profit/loss including internal sales, depreciation by segment and additional information about segments is shown in Note 32 (Market areas) and Note 33 (Business areas). Sales of telephones are included in operating expenses for the year at SEK –432 million Profit/loss in associated companies: (2002: SEK –573 million). 2003 2002 Depreciation/amortization by function: Sv UMTS–nät Other Sv UMTS–nät Other Group Parent Company Profit/loss in each associated company –17 –2 –2 –108 2003 2002 2003 2002 Holding 50% 20%-50% 50% 20%-50% Cost of services sold –3,413 –3,264 – – Selling expenses –55 –83 – – Share of profit/loss –8 –5 –1 –39 Administrative expenses –358 –250 – – Change in share of profit/loss from preceding year –1 –4 – –1 Depreciation/amortization for the year by function –3,826 –3,597 – – Total profit/loss from associated companies –9 –9 –1 –40 Depreciation/amortization by asset type: Extracts from the balance sheets and income statements of each associated company: Group Parent Company 2003 2002 2003 2002 2003 2002 Licenses and rights of use –85 –339 – – Sv UMTS–nät Other Sv UMTS–nät Other Goodwill –1,906 –1,512 – – Income statement: Buildings –24 –19 – – Revenue – 45 – 70 Machinery and technical plant –1,652 –1,350 – – EBIT –19 –2 –20 –86 Equipment, tools and installations –159 –240 – – Profit/loss for the year –17 –2 –2 –108 Plant under construction – –137 – – Total depreciation/amortization for the year by type of asset –3,826 –3,597 – – Dec. 31, 2003 Dec. 31, 2002 Sv UMTS–nät Other Sv UMTS–nät Other Balance sheet: Estimated utilization period: Tangible assets 1,574 – 468 – Group Parent Company Intangible and financial assets 1 22 – 33 Intangible fixed assets: Current assets 307 42 545 80 Licenses and rights of use 1 – 23 years – Goodwill 3 – 20 years – Total assets 1,882 64 1,013 113 Tangible fixed assets: Buildings 5 – 40 years – Shareholders’ equity 977 24 995 –8 Machinery and technical plant 2 – 25 years – Long-term liabilities 725 – – 37 Equipment, tools and installations 2 – 10 years – Current liabilities 180 40 18 84 Total shareholders’ equity and liabilities 1,882 64 1,013 113 Depreciation/amortization according to plan is based on the acquisition value and estimated utilization period of fixed assets. All depreciation is straight-line over the utilization period. Goodwill arising from the original acquisition of Comviq GSM AB and Tele2 Sverige AB Note 6. Sales of associated companies and other acquisitions before 1996, in addition to acquisition of Alpha during 2003, is Group Parent Company amortized over ten years. The goodwill arising in 1996 in conjunction with the acquisition of 2003 2002 2003 2002 the outstanding minority shareholding in Tele2 Sverige AB and outstanding options in Comviq Sale of Moscow Cellular Communication – 5 – – GSM AB, is amortized over 20 years. Goodwill arising from the acquisition of Datametrix, Tele2 Total sales of associated companies – 5 – – Eesti, SIA Tele2, SEC, Tele2 Russia and Tele2 OU (Levicom Broadband) is amortized over a period of 20 years. Amortization periods are set on the basis of each acquisition date and the acquisition’s estimated long-term, strategic significance. An amortization period of 20 years applies to corporate acquisitions in new markets. Other goodwill is amortized over five years. Note 7. Result from other securities and receivables classified as fixed assets Group Parent Company Note 3. Other operating revenue 2003 2002 2003 2002 Group Parent Company Interest, Group 299 180 2003 2002 2003 2002 Interest, external receivables 5 2 – 2 Exchange gains from operations 38 24 1 1 Write-down of shares in Travellink AB –75 – – – Disposal of fixed assets 2 9 – – Write-down of shares in Modern Holdings Inc – –86 – – Other revenue, external 38 17 – – Exchange-rate difference on receivables from Other revenue, Group 62 11 Group companies – – –4 – Total other operating revenue 78 50 63 12 Total result from other securities and receivables classified as fixed assets –70 –84 295 182 Note 4. Other operating expenses Group Parent Company 2003 2002 2003 2002 Exchange loss from operations –30 –35 – – Sale/scrapping of other fixed assets –29 –18 – – Other costs –7 –9 – – Total other operating expenses –66 –62 – –

TELE2 ANNUAL REPORT 2003 NOTES 51 Note 8. Other interest revenue and similar income Parent Company 2003 2002 Group Parent Company Profit/loss before tax and minority share 262 104 2003 2002 2003 2002 Interest, bank balances 90 111 – – Tax effect according to tax rate in Sweden –73 –28% –29 –28% Interest, penalty interest etc. 28 47 – – Exchange rate difference on financial current assets –12 7 – – Tax effect of: Total other interest revenue and similar income 106 165 – – Other non-deductible expenses/taxable revenue –25 –9.5% –6 –5.8% Tax expense/income and effective tax rate –98 –37.4% –35 –33.7% Note 9. Interest expenses and similar costs Deferred tax asset: Group Parent Company Deferred tax asset is attributable to the following items: 2003 2002 2003 2002 Interest, loans –479 –679 – – Group Interest, financial leasing –11 –13 – – Dec 31, 03 Dec 31, 02 Interest, penalty interest –24 –30 – – Long-term receivables – –3 Interest, Group –6 –5 Machinery and technical plant –1,005 –1,019 Exchange-rate difference on financial liabilities –3 57 – – Value of unutilized loss carry-forwards 3,464 2,268 Other financial expense –118 –114 –1 – Total deferred tax asset (+) / tax liability (–) 2,459 1,246 Total interest expenses and similar costs –635 –779 –7 –5 Group Other financial expense relates primarily to financing costs involved in the raising of the five- Dec 31, 03 Dec 31, 02 year loan facility. These are expensed during the period of agreement in proportion to the size Deferred tax asset: of the loan amount. Nordic 1,365 1,937 Eastern Europe & Russia 41 35 Central Europe 429 117 Note 10. Tax on profit/loss for the year and deferred tax liability/ Southern Europe 227 128 Luxembourg 1,270 36 receivable Branded Products & Services 159 15 3,491 2,268 Tax expense/income for the year: Deferred tax liability: Group Parent Company Nordic –1,005 –1,022 2003 2002 2003 2002 Eastern Europe & Russia –27 – Current tax expense: –1,032 –1,022 Eastern Europe & Russia –73 –45 – – Central Europe – –4 – – Total deferred tax asset (+) / tax liability (–) 2,459 1,246 Southern Europe –31 – – – –104 –49 – – Loss carry-forwards: Deferred tax expense, as a result of temporary differences: At December 31, 2003, the Tele2 Group had loss carry-forwards totaling SEK 18,486 million Nordic –604 –835 –98 –35 (2002: SEK 19,173 million), of which SEK 881 million (2002: SEK 1,744 million) expires Eastern Europe & Russia –1 22 – – within five years and the remaining amount, SEK 17,605 million (2002: SEK 17,429 million), Central Europe 317 116 – – expires after five years or may continue to apply in perpetuity. Southern Europe 101 127 – – Deferred tax asset are reported for loss carry-forwards only to the extent that the loss-carry Luxembourg 1,239 30 – – forwards can be utilized against future profits. Due to the improved results in Continental Branded Products & Services 144 15 – – Europe, the tax effect of deferred tax asset totaling SEK 2,011 million (2002: SEK 576 million) has been recognized in the income statement. Total losses carried forward for the Group at 1,196 –525 –98 –35 December 31, 2003 amounted to SEK 18,486 million (2002: SEK 19,173 million), of which SEK 11,575 million (2002: SEK 7,881 million) has been utilized for deferred tax accounting Total tax expense (–)/tax income (+) on profit for the year 1,092 –574 –98 –35 and the remainder, SEK 6,911 million (2002: SEK 11,292 million), is valued at zero. Some of the tax effect of the year’s valued loss carry-forwards relates to acquired loss Profit/(loss) before tax and minority share: carry-forwards which at the time of acquisition were valued at zero. This value, adjusted to the remaining depreciation period of the acquisition’s goodwill, has reduced the book value Group of goodwill through depreciation of SEK –322 million in the income statement. Remaining 2003 2002 acquired unvalued loss carry-forwards amount to SEK 1,241 million with a tax effect of SEK Sweden 3,473 2,532 558 million. Other countries –2,206 –1,736 In December 2003, Tele2 announced that the tax authorities’ review of Tele2’s financial Total profit/loss before tax and minority share 1,267 796 accounts for 2001 had been completed and that the authorities wished to change Tele2’s taxation. In 2000, Tele2 acquired the remaining majority in the listed company SEC SA. In Theoretical tax expense: connection with the fact that the operation was restructured, an external valuation was carried The difference between the booked tax expense for the Group and the tax expense based on out which indicated a fall in value, and the operations in SEC SA were then transferred for this prevailing tax rates in each country consists of the following components: value. Tele2 has claimed a deduction for this realized loss. We are convinced that we have fulfilled all possible requirements for submission of evidence and that the deduction claimed Group will be approved. We shall either request a reconsideration of the decision or lodge an appeal. 2003 2002 As our request for deferment of the tax payment has been granted, there is no effect on Profit/loss before tax and minority share 1,267 796 the cash flow or income statement. The tax authorities have questioned loss carry-forwards relating to this in Tele2 AB, which correspond to a tax effect of SEK 3,910 million, of which Tax according to prevailing tax rate in: SEK 2,888 million had been utilized at December 31, 2003. Other disputes in Tele2 amount Tax effect according to tax rate in Sweden –355 –28% –223 –28% to SEK 184 million (2002: SEK 176 million). We are convinced that the disputes will be settled Effect of foreign tax rates 66 135 in Tele2’s favor, which is why the loss carry-forwards have been valued at their full fiscal value. –289 –88 Tax effect of: Non-tax affecting items, goodwill amortization –522 –41.2% –418 –52.5% Non-tax affecting items, other Group adjustments –9 –0.7% 18 2.3% Write-downs of shares in other securities –21 –1.7% –24 –3.0% Write-downs of shares in Group companies, deductible 483 38.1% – – Other non-deductible expenses/taxable revenue 52 4.1% –57 –7.2% Loss carry-forwards: - Valuation of loss carry-forwards in previous years 1,700 134.2% 576 72.4% - Non-assessed additional loss carry-forwards –302 –23.8% –581 –73.0% Tax expense/income and effective tax rate 1,092 86.2% –574 –72.1%

52 NOTES TELE2 ANNUAL REPORT 2003 Note 11. Intangible assets Financial leases: All fixed assets utilized through financial leasing have been included in the consolidated Dec. 31, 2003 accounts as fixed assets and loan liabilities, with the exception, however, of contracts signed Group P. Comp. before 1997. The effects of these being included in the consolidated balance sheet are shown Licenses Licenses below and in Note 25. and rights & rights of use Goodwill Total of use Group Acquisition value: Booked assets Assets not booked Acquisition value at Jan. 1 822 28,746 29,568 1 Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 Valuation of acquired loss carry-forwards – –391 –391 – Machinery and technical plant: Investments for the year 78 913 991 – Acquisition value 299 298 155 155 Sales and scrapping –24 – –24 – Accumulated depreciation –75 –57 –56 –49 Reclassification 10 – 10 – Translation differences for the year –48 –591 –639 – Book value 224 241 99 106 Total acquisition value 838 28,677 29,515 1 Financial leasing relates mainly to the extension of transmission capacity in Sweden through Accumulated depreciation/amortization: Svenska Kraftnät Vattenfall. Accumulated depreciation/amortization at Jan. 1 –313 –4,159 –4,472 –1 Valuation of acquired loss carry-forwards – 391 391 – Depreciation according to plan –85 –1,906 –1,991 – Sales and scrapping 24 – 24 – Note 13. Shares in Group companies Reclassification –8 – –8 – Translation differences for the year 24 73 97 – Parent Company Dec 31, 03 Dec 31, 02 Total accumulated depreciation/amortization –358 –5,601 –5,959 –1 Acquisition value: Acquisition value at Jan. 1 2,686 1,987 Total intangible assets 480 23,076 23,556 – Investments 1,150 699 Sales –1,150 – Investments for the year in goodwill relate essentially to the acquisition of the Alpha Group Total shares in Group companies 2,686 2,686 (SEK 813 million). Other acquisitions in the year included Radio Components Sweden AB, the remaining shares in Suomen 3G OY and additional shares in the Russian companies. The valuation of acquired loss carry-forwards relates to an adjustment of the acquisition In an Intra-Group transaction during 2003, the Parent Company sold shares in Tele2 Russia value and accumulated amortization of goodwill relating to acquired loss carry-forwards, which BV to a wholly-owned Group company for SEK 1,150 million and provided a shareholder at the time of acquisition were valued at zero but during 2003 were valued and recognized as contribution of the same amount. tax income. In addition, this value, adjusted to the remaining amortization period at the time of In February 2003, Tele2 acquired Alpha Telecom, the leading prepaid fixed telephony the original acquisition, has been reported as amortization of SEK -322 million in the income operator in the UK for private individuals and the market leader in prepaid cards for fixed statement. telephony. In May 2003, Tele2 acquired the remaining shares (72.6%) in Suomen 3G Oy, a company with a 3G network in nine Finnish cities. As part of the Group’s mobile strategy in Russia, Tele2 acquired 62.5% of Radio Components Sweden AB in September. One of Radio Components’ products is an antenna solution for GSM 1800, which reduces the need for Note 12. Tangible assets base stations by three to four times. The investment has provided Tele2 with cost-effective Dec. 31, 2003 expansion in Russia and in other areas in which mobile networks may be built. In the fall of Group P. Comp. 2003, Tele2 increased its holdings in five of its Russian mobile operations. Fixed assets Land & Machinery & Equip- under Effect on cash of corporate acquisitions and divestments during the year: buildings tech. plant ment construction Total Equip. The Group’s book value of acquired/divested assets and liabilities in acquired/divested Acquisition value: companies was: Acquisition value at Jan. 1 182 15,244 1,378 233 17,037 1 Group Acquisition value in Acquired Divested acquired companies 11 77 11 1 100 – 2003 2002 2003 2002 Investments for the year 11 1,117 122 565 1,815 – Intangible fixed assets –945 –351 – – Sales and scrapping –6 –475 –77 –8 –566 – Tangible fixed assets –150 –2 – – Reclassification 1 703 –269 –445 –10 – Financial fixed assets – –1 – – Translation differences for the year –11 –282 –60 –53 –406 – Materials and supplies –9 – – – Total acquisition value 188 16,384 1,105 293 17,970 1 Current receivables –346 –9 – – Current investments and cash –211 –4 – – Accumulated depreciation: Long-term liabilities 209 5 – – Accumulated depreciation at Jan. 1 –67 –6,910 –803 – –7,780 –1 Current liabilities 441 12 – – Accumulated depreciation in Purchase sum –1,011 –350 – – acquired companies – –30 –6 – –36 – Depreciation according to plan –24 –1,480 –159 – –1,663 – Additional earn-out payments, restricted funds 68 – – – Sales and scrapping 6 453 63 – 522 – Paid through loans from the seller 33 – – – Reclassification – –56 64 – 8 – Paid purchase sums –910 –350 – – Translation differences for the year 5 145 37 – 187 – Total accumulated depreciation –80 –7,878 –804 – –8,762 –1 Cash in acquired companies 211 4 – – Accumulated write-downs: Effect on Group cash –699 –346 – – Write-downs for the year – –172 – – –172 – Total accumulated write-downs – –172 – – –172 – Total tangible assets 108 8,334 301 293 9,036 – Write-downs of fixed assets relates to an Atlantic undersea cable, in which Tele2 invested in the late 1990s. These are expensed as a result of Tele2’s assessment of continued excess supply of capacity. Fixed assets under construction relates mainly to investments in Russia. Group Parent Company Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 Total capitalized interest expense in fixed assets 5 5 – –

TELE2 ANNUAL REPORT 2003 NOTES 53 Legal structure of the Tele2 group*: * including associated companies and other investments Parent Company Number Total Holding Book value Company, reg. no., reg’d office of shares par value (capital/votes) Dec. 31, 2003 Dec. 31, 2002 NETCOM LUXEMBOURG SA, RC B73.796 Luxembourg 1,000 tEURO 35 100% 2,686 1,536 TELE2 HOLDING AB, 556579-7700, Stockholm, Sweden 100% Tele2 Sverige AB, 556267-5164, Stockholm, Sweden 100% Tele2 Sweden SA, RC B73.802, Luxembourg 100% X-Source Holding AB, 556580-2682, Stockholm, Sweden 100% X-Source AB, 556290-2238, Stockholm, Sweden 100% Uni2 Denmark, 26904056 Copenhagen, Denmark 100% X-Source Ltd 4381179 London, UK 100% X-Source SA, 20022211618, Luxembourg 100% Optimal Telecom Holding AB, 556580-7855, Stockholm, Sweden 100% Optimal Telecom Sverige AB, 556440-1924, 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 Norge AS, 974534703, Oslo, Norway 100% Tele2 Danmark Holding AB, 556580-8028, Stockholm, Sweden 100% Tele2 Denmark A/S, 221234, Copenhagen, Denmark 100% In2Loop A/S, 25 48 43 47, Copenhagen, Denmark 100% Svenska UMTS-licens Holding AB, 556606-7764, Stockholm, Sweden, dormant 100% Svenska UMTS-nät Holding AB, 556606-7988, Stockholm, Sweden 100% Svenska UMTS-nät AB, 556606-7996, Stockholm, Sweden Note 15 50% Svenska UMTS licens AB, 556606-7772, Stockholm, Sweden 100% Everyday Holding AB, 556579-7718, Stockholm, Sweden 100% Stenblocket i Fruängen AB, 556058-8500, Stockholm, Sweden 100% 4 T Solutions Holding AB, 556580-2690, Stockholm, Sweden 100% Modern Holdings Inc, 133799783, Delaware, USA Note 17 11.88% In2loop Polska Sp. So.o, 54380, Warsaw, Poland 90% Web Communication BV, 34112460, Amsterdam, Netherlands 100% Tele2 Polska Sp, 57496, Warsaw, Poland 100% Tele2 Holding AS, 10262238, Tallin, Estonia 90% Tele2 Eesti AS, 10069046, Tallin, Estonia 52% UAB Tele2, 1147164, Vilnius, Latvia 100% UAB Levi & Kuto Kaunas, 1149679, Kaunas, Latvia, dormant 100% UAB Levi & Kuto Klaipeda, 1150061, Klaipeda, Lithuania, dormant 100% Levi & Kuto Latvia SIA, 000307707, Riga, Latvia, dormant 100% Belmus BV, 33261289, Amsterdam, Netherlands 100% Tele2 Eesti AS, 10069046, Tallin, Estonia 48% Tele2 Holding SIA, 000351206, Riga, Latvia 100% SIA Tele2, 000327285, Riga, Latvia 100% SIA Tele2 Telecom Latvia, 000361693, Riga, Latvia 100% Tele2 OU, 10309744, Tallin, Estonia 100% UAB Tele2 Fiksuotas Rysys, 1179374, Vilnius, Lithuania 100% UAB KRT, 2304688, Vilnius, Lithuania 100% UAB C-Gates, 2424016, Vilnius, Lithuania 100% UAB Trigeris, 2123967, Vilnius, Lithuania 100% AS Levi Kaabel, 10417072, Tallinn, Estonia 100% AS Telset Telecommunications Group, 10673906,Tallinn, Estonia 100% Tallinna Kaabeltelevisiooni AS, 10375439,Tallinn, Estonia 100% OU Trigger Software, 10687966, Tallinn, Estonia 100% SIA Levicom Broadband, 000353597, Riga, Latvia, dormant 100% Montalto Investments BV, 33135957,Amsterdam, Netherlands, dormant 100% Tele2 S:t Pet Holding AB, 556636-7362, Stockholm, Sweden 100% St Petersburg Telecom, no AO-3177, St Petersburg, Russia 25.4% Oblcom, no P-7180.16, St Petersburg, Russia 36.4% Corporation Severnaya Korona, no P-6117.16, Irkutsk, Russia 100% St Petersburg Telecom, no AO-3177, St Petersburg, Russia 60.6% Oblcom, no P-7180.16, St Petersburg, Russia 60.6% Tele2 Russia Telecom BV, 33287334, Rotterdam, Netherlands 100% – 1,150 Tele2 Russia International Holding BV, Nr 33221654, Amsterdam, Netherlands 100% Tele2 Russia International Cellular BV, Nr 33227655, Amsterdam, Netherlands 100% Tele2 Russia Telecom Services BV, 33.287.334, Amsterdam, Netherlands 100% PSNR Personal System Networks in region, 1025202610157, Niznhy Novgorod, Russia 100% Tele2 Russia VOL Holding GmbH, FN 131602 h, Vienna, Austria 100% Kursk Cellular Communications, no P-16792.17, Kursk, Russia 100% Smolensk Cellular Communications, no P-2581.16, Smolensk, Russia 60% Belgorod Cellular Communications, no P-2586.16, Belgorod, Russia 65% Kemerovo Mobile Communications, no P-13742.17, Kemerovo, Russia 100% Rostov Cellular Communications, no P-1790.16, Rostov, Russia 87.5% Udmurtiya Cellular Communications, no P-5818.16, Izhevsk, Russia 77.5% Siberian Cellular Communications, no P-4458.16, Omsk, Russia 60% Chelyabinsk Cellular Network, no P-3656.15, Chelyabinsk, Russia 100% Tele2 Russia EKA Holding GmbH, FN 131600 f, Vienna, Austria 100% Fora Telecom M, no P-12721.17, Moscow, Russia 100% Tele2 Russia MAC Holding GmbH, FN 132666 y, Vienna, Austria 100% CISC Cellular, no P-8068.17, Moscow, Russia, dormant 100% Millicom New Tech. in Communications, no P-9894.17, Moscow, Russia 100% Oy Finland Tele2 AB, 1482343-8, Helsinki, Finland 100% Suomen 3G Oy, 502981, Helsinki, Finland 100% Datametrix Norge AS, 975993108, Oslo, Norway 100% 2,686 2,686

54 NOTES TELE2 ANNUAL REPORT 2003 Cont. Note 13 Parent Company Number Total Holding Book value Company, reg. no., reg’d office of shares par value (capital/votes) Dec. 31, 2003 Dec. 31, 2002 trsp 2,686 2,686 Datametrix Danmark A/S, 39419, Copenhagen, Denmark 100% ProcureITright AB, 556600-9436, Stockholm, Sweden 100% Proceedo Solution AB, 556599-5049, Stockholm, Sweden 100% Radio Components Sweden AB, 556573-3846, Stockholm, Sweden 70% Everyday Webguide AB, 556182-6016, Stockholm, Sweden Note 15 50% NetCom GSM Sverige AB, 556304-7025, Stockholm, Sweden 100% Hallstahammar Kabelvision KB, 916580-7912, Västerås, Sweden 90% Kopparstaden Kabelvision KB, 916583-0564, Västerås, Sweden 80% Nelab Kabelvision KB, 916597-8983, Västerås, Sweden 80% Kabelvision KB, 916836-8828, Sweden, dormant 100% Härnösand Kabelvision KB, 916589-2481, Sweden, dormant 80% KB June Kabelvision, 916702-4836, Sweden, dormant 65% KB Lidingö Kabelvision, 916631-3289, Sweden, dormant 80% Älmhults Kabelvison KB, 916525-1043, Sweden, dormant 80% Kabelvision Sverige AB, 556650-2455, Stockholm, Sweden 100% Åkersberga KV AB, 556326-3192, Österåker, Sweden 100% Halmstads KV AB, 556380-6115, Halmstad, Sweden 100% Skaraborgs Kabelvision AB, 556483-6467, Mariestad, Sweden 60% Datametrix OY, 378548, Helsinki, Finland, dormant 100% Tele1 AS, 955780132, Norway, dormant 100% Tele3 Norge AS, 932100975, Norway, dormant 100% Interloop AB, 556284-7565, Stockholm, Sweden, dormant 100% Trade2 (Sweden) AB, 556469-7836, Sweden, dormant 100% Comviq Broadband AB, 556405-6678, Sweden, dormant 100% SCD AB, 556353-6829, Sweden, dormant 100% Call2Web AB, 556403-7983, Sweden, dormant 100% NIU Nätteknik, Installation och Underhåll AB, 556041-1307, Sweden, dormant 100% Kalmar Kabelvision AB, 556244-2466, Sweden, dormant 100% Comviq GSM AB, 556450-2606, Sweden, dormant 100% Swipnet AB, 556411-9401, Sweden, dormant 100% NetCom Luxembourg Holding AB, 556580-7905, Sweden, dormant 100% SNPAC Swedish Nr Portability Adm.Centre AB, 556595-2925, Sweden Note 15 20% TravelLink AB, 556596-2650, Stockholm, Sweden Note 17 15% Tele2 Europe SA, R.C.B56944, Luxembourg 100% Tele2 Telecommunication Services GmbH, FN178222t, Vienna, Austria 100% Tele2 Belgium SA, 609392, Zellik, Belgium 100% Télé2 France SA, B409914058, Velizy, France 100% Tele2 Telecommunication Services GmbH, 36232, Düsseldorf, Germany 100% Tele2 Italia Spa, Ml-1998-247322, Segrate, Italy 100% Tele2 AG, H.1045/80, Liechstenstein 100% Tele2 Luxembourg SA, R.C.B65774, 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, London, England 100% Telemilenio, Telecomunicacoes, Sociedade Unipessoal, 10468, Lissabon, Portugal 100% Tele2 /Slovakia/ s.r.o., 35806486, Bratislava, Slovakia 100% Tele2 Magyarorszag Kft., 12634402-2-41, Budapest, Hungary 100% Tango SA, RC.B59560, Luxembourg 100% Transac SA, RC.B49487, Luxembourg 100% Everyday Media SA, R.C. B 78.227, Luxembourg 100% Everyday Prod. SA, R.C.B69802, Luxembourg 100% 3C Communications International SA, RC B 29697, Luxembourg 100% 3C Communications GmbH, FN695021, Vienna, Austria 100% 3C Communications BVBA, 514 274, Brussels, Belgium 99% 3C Communications SPA Italy, 28894/7359/14, Segrate, Italy 91% 3C Communications Czech s-r-s, Czech Republic, dormant 100% 3C Communications A/S,184462, Ballerup, Denmark 100% 3C Communications OY, 585632, Finland 100% 3C Communications SA, 345 343 396 00023 Orleans, France 99% 3C Communications GmbH, HRB 24104, Germany 100% 3C Communications Luxembourg SA, B39690, Luxembourg 100% 3C Kommunikacios Szolgaltato Kft, Budapest, Hungary, dormant 90% 3C Communications BV, 14630454, Amsterdam, Netherlands 99% 3C Communications A/S, Oslo, Norway 100% 3C Communicacoes Ltda, Domingos de Rana, Portugal 95% 3C Communications Espana SA, Madrid, Spain 99% 3C Communications AB, 556332-6346, Stockholm, Sweden 97% 3C Transac AB Sweden,556057-2116, Stockhom, Sweden 100% 3C Communications Ltd, 2343138, UK 96% 3C Transac Ltd, Kingston-upon-Thames, UK 100% Comviq Holding BV, 14630454, Amsterdam, Netherlands 100% 3C Communications Equipment SA, B25465, Luxembourg 100% 3C Communications BVBA, 514 274, Brussels, Belgium 1% 3C Communications SPA Italy, 28894/7359/14, Segrate, Italy 9% 3C Communications SA, 345 343 396 00023 Orleans, France 1% 3C Kommunikacios Szolgaltato Kft, Budapest, Hungary, dormant 10% 3C Communications BV, Amsterdam, 14630454, Netherlands 1% 3C Communicacoes Ltda, Domingos de Rana, Portugal 5% 3C Communications Espana SA, Madrid, Spain 1% 2,686 2,686

TELE2 ANNUAL REPORT 2003 NOTES 55 Parent Company Number Total Holding Book value Company, reg. no., reg’d office of shares par value (capital/votes) Dec. 31, 2003 Dec. 31, 2002 trsp 2,686 2,686 3C Communications AB, 556332-6346, Stockholm, Sweden 3% 3C Communications Ltd, 2343138, UK 4% CCC Holding BV, 33 269 398, Amsterdam, Netherlands 100% Calling Card Company Limited, 3794813, UK 100% Calling Card Company Germany GmbH, HRB 40498, Germany 100% C3 Calling Card Company Limited, 309745, Ireland 100% Calling Card Company SA, B424906618, Paris, France 100% Calling Card Company Italy SpA, 233372, Milano, Italy 100% Tele2 International Card Company S.A., RC 64 902, Luxembourg 100% Calling Card Company Netherlands BV, BV 82334, Amsterdam, Netherlands 100% Calling Card Company Spain, S.A. A-62426457, Spain 100% Calling Card Company Telecommunication Services GmbH, FN 215362i, Austria 100% Calling Card Company (UK) Ltd, 3812138, London, England 100% SEC Everyday Europe BV, 341124357, Amsterdam, Netherlands 100% Everyday.com Switzerland AG, CHF-0203023164-4, Zürich, Switzerland, dormant 100% Everyday.com Germany GmbH, HR B 36232, Germany, dormant 100% Everyday.com Italia S.R.L, R.C. 1605497, Italia Srl, Italy, dormant 100% Everyday.com Netherlands BV, 34125168, Amsterdam, Netherlands, dormant 100% IntelliNet Holding BV, 34126307, Amsterdam, Netherlands 100% Intellinet Telecommunication GmbH, HRB 48344, Frankfurt, Germany, dormant 100% IntelliNet S.p.A, R.C. 1615155, Segrate, Italy 99% IntelliNet BV, 34120156, Amsterdam, Netherlands, dormant 100% INT IntelliNet Telecommunications Services AG, CH02030215188, Zürich, Switzerland 100% IntelliNet S.p.A, R.C. 1615155, Segrate, Italy 1% Tele2 Marketing Dynamics AS, 932100975, Norway, dormant 100% Tele2 Telecommunications Services Ltd, 292887, Dublin, Ireland, dormant 100% Societe Europeenne de Communication (Irland) Ltd, 316848, Dublin, Ireland, dormant 100% Fagersta AB, 556238-4171, Stockholm, Sweden 100% Transcom Holding AB, 556468-0857, Sweden, dormant 100% 3C Holding AB, 556491-9503, Sweden, dormant 100% S.E.C. Luxembourg S.A., R.C. B-84.649, Luxembourg 100% Tele2 s.r.o., 25650009, Prague, Czech Republic 100% Managest Media SA, RCB87091, Luxembourg Note 15 40% Managest Media Spa, Italy 100% SEC Holding BV, 33141829, Rotterdam, Netherlands 100% Tele2 Services Luxembourg SA, RCB70203, Luxembourg 100% 3C Communications (Irland) Ltd, 164025, Ireland, dormant 100% Tele2 Communication Europe Ltd, 379462, Dublin, Ireland, dormant 100% Tele2 (UK) Ltd, 4940295, London, England 100% Bethany Group Ltd, 390385, Virgin Islands, UK 100% Alpha Telecom s.r.l, 252675/1999, Italy, dormant 100% Alpha Int. Overseas Telecomm. Services Ltd, 359452, Virgin Islands, UK 100% Alpha Int. Overseas Telecomm. Services Ltd, 06521/030616, Madeira, Portugal 100% Wiasing Consultores E Servicos Lda, 06521/030616, Madeira, Portugal 100% Alpha Telecom Communications Ltd, 4028792, London, England 100% Alpha Prepaid Ltd, 4270679, London, England, dormant 100% Prepaid Telecom Ltd, 4560605, London, England, dormant 100% SHARED SERVICES SA, B-97776, Luxembourg Note 17 14.3% SCD INVEST AB, 556353-6753, Sweden Note 17 9.1% / 49.9% Total shares in Group companies 2,686 2,686 Note 14. Receivables from Group companies Note 15. Shares in associated companies Parent Company Group Dec 31, 03 Dec 31, 02 Number of Total par Book value Acquisition value at Jan. 1 15,353 12,526 Company, reg. no., reg’d office shares value Holding Dec 31, 03 Dec 31, 02 Lending 2,187 3,337 Svenska UMTS-nät AB, Amortization and additions granted –159 –510 556606-7996, Stockholm, Sweden 501,000 tSEK 50,100 50% 489 498 Total receivables from Group companies 17,381 15,353 Managest Media SA, RCB87091, Luxembourg 12,000 B tEURO 120 40% 22 44 SNPAC Swedish Number Portability Administrative Centre AB, 556595-2925, Stockholm, Sweden 400 tSEK 40 20% 3 – Total shares in associated companies 514 542 Everyday Webguide AB, 556182-6016, Stockholm, Sweden 1,750 tSEK 175 50% –6 –28 Total provisions in associated companies –6 –28 Contribution of each associated company to Group equity: 2003 2002 Sv UMTS-nät Other Sv UMTS-nät Other Equity share: Equity share, Jan. 1 498 16 249 –25 Share of capital contributions and new share issues – 34 250 147 Repayment of capital employed – –22 – – Share of profit/loss –9 –9 –1 –40 Divestments during the year – – – –66 Total shares in associated companies 489 19 498 16

56 NOTES TELE2 ANNUAL REPORT 2003 Note 16. Receivables from associated companies Note 19. Accounts receivable, trade Group Parent Company Group Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 Accounts receivable, trade Acquisition value at Jan. 1 19 115 19 115 Dec 31, 03 Dec 31, 02 Converted to shareholder contribution –22 –102 – –102 Accounts receivable, trade 6,975 5,656 Lending 3 6 3 6 Reserve for doubtful receivables –1,406 –1,283 Divestment of receivables to Group companies –22 – Total accounts receivable, trade 5,569 4,373 Total receivables from associated companies – 19 – 19 Group Reserve for doubtful debts Note 17. Other long-term holdings of securities Dec 31, 03 Dec 31, 02 Reserve for doubtful receivables at Jan. 1 1,283 918 Reserves in companies acquired during the year 10 – Group Net increase in reserves 305 415 Number Total Holding Book value Company, reg. no., reg’d office of shares par value capital vot. rights Dec 31, 03 Dec 31, 02 Recovery of previous write-downs –163 –30 Translation difference in opening balance –29 –20 Parent Comapny: Total reserve for doubtful receivables 1,406 1,283 Suomen 3G Oy, 502981, Helsinki, Finland 1,924 tFIM 1,924 100% 100% – 28 SCD Invest AB, 556353– 6753, Stockholm 1,058,425 tSEK 5,292 91% 49.6% – – Note 20. Other current receivables Shared Service S.A., Group Parent Company B-97776, Luxembuorg 100 tEURO 4.5 14.3% 14.3% – – Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 – 28 VAT receivable 220 174 – – Other, Group: Receivable from Svenska UMTS-nät 45 32 – – Modern Holdings Inc, USA 1,806,575 tUSD 18 11.88% 11.88% 36 36 Receivable from suppliers 27 13 – – Travellink AB, Other 16 31 – – 556596-2650, Stockholm 15,000 tSEK 1,500 15% 15% – 75 Total other current receivables 308 250 – – Total other long-term holdings of securities 36 139 Note 21. Prepaid expenses and accrued income Group Parent Company Group Parent Company Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 Acquisition value: Telephony revenue, other telecom operators 774 934 – – Acquisition value at Jan. 1 568 545 371 348 Telephony revenue, customers 1,793 1,525 – – Investments for the year 74 23 74 23 Interest revenue 48 24 – – Sales for the year –102 – –102 – Accrued income, other 46 3 – – Total acquisition value 540 568 343 371 Financing fees 95 170 – – Write-downs: Rental costs 31 10 3 1 Accumulated write-downs at Jan. 1 –429 –343 –343 –343 ADSL costs 63 – – – Write-downs during the year –75 –86 – – Prepaid expenses, other 469 383 – – Total accumulated write-downs –504 –429 –343 –343 Total prepaid expenses and accrued income 3,319 3,049 3 1 Total other long-term holdings of securities 36 139 – 28 Note 22. Cash and cash equivalents and overdraft facilities Liquidity: In May 2003, Tele2 acquired the remaining shares (72.6%) in Suomen 3G Oy and the holding Group Parent Company was thereafter reported as a Group company. The shares in TravelLink AB were written down Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 by SEK 75 million in 2003. Cash and bank balances 2,773 2,473 1 10 As the holding in SCD Invest AB is only temporary and Tele2 intends to sell the shares, the Restricted funds –830 –870 – – holding was reported under other securities. Unutilized overdraft facilities and credit lines 1,501 729 – – Liquidity 3,444 2,332 1 10 Note 18. Other long-term receivables Overdraft facilities: Group Parent Company Group Parent Company Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 Acquisition value at Jan. 1 74 85 – – Overdraft facilities granted 231 19 – – Lending 61 8 – – Overdraft facilities utilized – – – – Amortization –87 –11 – – Total unutilized overdraft facilities 231 19 – – Reclassification – –7 – – Translation difference – –1 – – Unutilized credit lines 1,270 710 – – Total other long-term receivables 48 74 – – Unutilized overdraft facilities and credit lines 1,501 729 – – No specific collateral is provided for overdraft facilities, as these come under the loan facilities Group Parent Company for which collateral is provided and is listed in Note 25. Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 Receivables from Finvision 16 39 – – Exchange rate difference in cash and cash equivalents: Receivables from Modern Holdings Inc 14 20 – – Group Receivables from Travellink 6 – – – Dec 31, 03 Dec 31, 02 Receivables from Alecta 3 6 – – Cash and cash equivalents at Jan. 1 –122 –185 Other 9 9 – – Cash flow for the year –56 –68 Total other long-term receivables 48 74 – – Total exchange rate difference in cash and cash equivalents –178 –253

TELE2 ANNUAL REPORT 2003 NOTES 57 Note 23. Exchange rate effects A 1% currency movement against the Swedish krona affects the Group’s operating revenue Exchange rate difference in shareholders’ equity: and EBITDA on an annual basis by SEK 272 million (2002: SEK 209 million) and SEK 20 Group million (2002: SEK 6 million), respectively. In 2003, Tele2’s results were mainly affected by 2003 2002 fluctuations in GBP, USD, NOK and LVL. Operating revenue and EBITDA were negatively affected by SEK –627 million (2002: SEK –57 million) and SEK –17 million (2002: SEK 1 Other Un- Other Un- restricted restricted restricted restricted million) in 2003 (compared to results measured at stable exchange rates during the year). reserves reserves Total reserves reserves Total The charge rates used to translate income statements and balance sheets to SEK are shown Opening in shareholders’ below: equity, 1 Jan. 2,025 –588 1,437 2,893 –430 2,463 Income statement Balance sheet Change during the year –865 32 –833 –868 –156 –1,024 2003 2002 Dec 31, 03 Dec 31, 02 Tax effect this year, net – 53 53 – –2 –2 GBP 13.1946 14.6394 12.9125 14.1475 Total change during the year –865 85 –780 –868 –158 –1,026 USD 8.0894 9.82870 7.2750 8.825 Closing in shareholders’ EURO 9.1250 9.1698 9.0940 9.1925 equity, Dec. 31 1,160 –503 657 2,025 –588 1,437 CHF 6.0043 6.2494 5.8285 6.3235 DKK 1.2280 1.2340 1.2215 1.2375 Exchange rate difference in income statement: NOK 1.1418 1.2150 1.0805 1.2595 Exchange rate differences which arise in operations are reported in the income statements EEK 0.5832 0.5860 0.5810 0.5875 and amount to: LVL 14.2559 15.8860 13.6000 15.0200 Group Parent Company LTL 2.6431 2.6490 2.6300 2.6600 2003 2002 2003 2002 PLN 2.0787 2.4076 1.9400 2.3000 Other operating revenue 38 24 1 1 CZK 0.2866 0.2971 0.2795 0.2933 Other operating expenses –30 –35 – – HUF 0.0360 0.0377 0.0348 0.0390 Result from other securities and receivables classified as fixed assets – – –4 – Currency risks Other interest revenue and similar income –12 7 – – In telephony operations a currency risk arises in connection with international call traffic Interest expenses and similar costs –3 57 – – as a liability or a receivable is created between Tele2 companies and foreign operators. In Exchange rate differences in income statement –7 53 –3 1 mobile telephony, these transactions are calculated in SDRs (Special Drawing Rights) but are invoiced and paid in EUR. The consolidated balance sheet and income statement are affected by fluctuations in Currency risks in our international operations are limited by denominating loans to group subsidiaries’ currencies vis-à-vis the Swedish krona. Group operating revenue and EBITDA companies in the subsidiary’s local currency. are distributed among the following currencies: The five-year loan facility is denominated partly in EUR. The exchange rate difference which regularly arises in translating the loan liability is offset against the exchange rate differences Operating revenue EBITDA which arise in the corresponding net investment in subsidiaries. No hedging is undertaken 2003 2002 2003 2002 against other types of currency risk. At December 31, 2003, exchange rate differences after SEK 9,688 26% 10,337 33% 3,681 65% 4,516 88% tax of SEK 7 million (2002: SEK 40 million) relating to loan liabilities were booked directly to EURO 18,188 49% 13,523 43% 1,162 20% –355 –7% shareholders’ equity. Other 9,035 25% 7,422 24% 867 15% 966 19% Total 36,911 100% 31,282 100% 5,710 100% 5,127 100% Note 24. Number of shares The share capital in Tele2 AB is divided into two share classes, namely, Series A and Series B shares. Both types of shares have a par value of SEK 5 per share and offer equal participation in the company’s net assets and earnings. Series A shares, however, entitle the holder to 10 voting rights per share and Series B shares to one voting right per share Number of shares: A shares B shares Total Par value Share capital Change Total Change Total number per share (SEK) (SEK millions) December 31, 2000 30,006,947 114,791,779 144,798,726 SEK 5 724 New share issue, acquisition of Tele2 Russia 30,006,947 2,461,449 117,253,228 147,260,175 SEK 5 736 New share issue, convertibles 30,006,947 100,000 117,353,228 147,360,175 SEK 5 737 December 31, 2001 30,006,947 117,353,228 147,360,175 SEK 5 737 Restamping of A shares to B shares –8,317,143 21,689,804 8,317,143 125,670,371 147,360,175 SEK 5 737 New share issue, convertibles 21,689,804 100,000 125,770,371 147,460,175 SEK 5 737 December 31, 2002 21,689,804 125,770,371 147,460,175 SEK 5 737 New share issue, convertibles 21,689,804 100,000 125,870,371 147,560,175 SEK 5 738 December 31, 2003 21,689,804 125,870,371 147,560,175 SEK 5 738 Outstanding convertibles and warrants: Earnings per share: Group Dec 31, 2003 Dec 31, 2002 Earnings per share Earnings per share, Antal utestående aktier 147,560,175 147,460,175 after full dilution Convertibles, 2000–2003 – 100,000 2003 2002 2003 2002 Warrants, 2002–2007 643,500 663,000 Net profit/loss for the year 2,396 223 2,396 223 Total number of outstanding convertibles and warrants 643,500 763,000 Reversal: Interest for the year after tax on outstanding convertibles – – Total number of shares after full dilution 148,203,675 148,223,175 Adjusted profit/loss for the year after full dilution 2,396 223 Weighted average number of shares 147,460,175 147,360,175 147,460,175 147,360,175 Convertibles and warrants: Convertibles 100,000 200,000 In October 2000, three convertible debenture loans were issued at a par value of SEK 1, each Warrants 309,000 74,118 with preferential rights to subscribe for 100,000 B shares in Tele2 AB at a subscription price Weighted average number of outstanding of SEK 150 per share, and maturing in 2001, 2002 and 2003. On December 31, 2003 the shares after full dilution 147,869,175 147,634,293 last of these debenture loans had been converted. The outstanding warrants at Dec. 31, 2003 correspond to 643,500 B shares (2002: Earnings per share SEK 16.25 SEK 1.51 SEK 16.20 SEK 1.51 663,000) in Tele2 AB, at a subscription price of SEK 191 per share and a subscription period from 2005 to 2007. See Note 38 for further information. Dividend per share: The Board recommends to the Annual General Meeting that Tele2 pay a dividend of SEK 3 (2002: 0) per share for the financial year 2003.

58 NOTES TELE2 ANNUAL REPORT 2003 Note 25. Liabilities to financial institutions Short-term liabilities: Interest rate risk: Group Parent Company Of the total loan liability to financial institutions and other interest-bearing liabilities at December Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 31, 2003, SEK 6,555 million, corresponding to 91% (2002: SEK 9,527 million, 93%), carried Five-year loan facility 2,340 2,344 – – a variable rate of interest. An increase in interest rates of 100 basic points would entail an Ericson S.A./N.V. 72 – – – additional interest expense of SEK 66 million, calculated on the basis of variable interest- (collateral: guarantee from Tele2 AB and Tele2 Sverige AB) bearing liabilities at December 31, 2003. However, Tele2 is monitoring trends in interest-rate SEB 11 – – – markets and decisions regarding interest-rate fixing strategy are assessed regularly. Alfa bank / Omskpromstoy Bank 1 3 – – (collateral: chattel mortgage in Siberian Cellular Comm., Interest-bearing liabilities with variable interest rates mature for payment: Omsk Russia) Within 1 year 1-2 years 2–3 years 3–4 years 4–5 years 5–15 years Total Financial leases 25 30 – – Interest-bearing liabilities Total short-term interest-bearing loans 2,449 2,377 – – with variable interest rates 2,461 2,640 1,291 39 26 98 6,555 Long-term liabilities: Financial leasing: Group All fixed assets utilized through financial leasing have been included in the consolidated Creditors accounts as fixed assets and loan liabilities, with the exception, however, of contracts signed (collateral provided) Interest rate terms Maturity date Dec 31, 03 Dec 31, 02 before 1997. The effects of these being included in the consolidated balance sheet are shown Five-year loan facility EURIBOR/LIBOR + 0.75–2.25% 2003–2006 3,812 6,954 below and in Note 12. (collateral: shares in Tele2 Holding AB as well as certain shares in its Group companies. Guarantees from Tele2 AB Group and cross-guarantees among certain Group companies. Booked Not booked Also, collateral provided in the form of receivables from Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 certain Group companies and limitations in repayment Short-term 25 30 8 8 potential of internal loans from Tele2 AB) Long-term 144 166 76 84 Banque Invik marginal: 0.5%–1% 2004–2005 681 755 Total loans for financial leasing objects 169 196 84 92 (collateral: Restricted funds in Tele2 Russia Telecom BV) SEB EURIBOR + 0.75–3.00% 2004–2010 115 – Financial leasing relates mainly to the extension of transmission capacity in Sweden through (collateral: guarantee from Tele2 Sverige AB) Svenska Kraftnät Vattenfall. Merita-Nordbanken variable rate 2004 – 1 Financial leasing for machinery & technical plant 144 166 Loan liability matures: Total long-term interest-bearing loans 4,752 7,876 Group Dec 31, 2003 During 2001, Tele2 Sverige AB signed a five-year bank finance facility for SEK 10.8 billion, Booked Not booked guaranteed by ABN Amro, CIBC World Markets, ING Bank, Nordea, The Royal Bank of Within 1 year 34 11 Scotland and West LB. The loan is partly denominated in SEK and partly in EUR. The five-year 1-2 years 25 11 bank financing facility with amortization is divided into three tranches. The SEK 9.4 billion 2–3 years 21 11 agreed in Tranche A is to be repaid in seven repayments, and each amortization amounts 3–4 years 20 11 to between 5% and 15% of the original loan amount. The remaining 17.5% of the loan, 4–5 years 20 10 minus any voluntary repayments, is to be repaid by June 30, 2006. During 2003, repayment 5–10 years 77 41 of Tranche A was made in the amount of SEK 2,746 million. The potential to borrow under 10–15 years 6 4 Tranche B is limited to SEK 1.1 billion and is to be repaid by June 30, 2006. Total loan liability and interest 203 99 The five-year loan facility is based on requirements involving the fulfillment of certain Less interest portion: –34 –15 financial key ratios. Tele2 expects to fulfill these requirements. The loan liability carries a rate Total loans for financial leasing objects 169 84 of interest corresponding to Euribor and Libor, plus an interest margin. The interest margin, which is based on indebtedness in relation to EBITDA, starts at 2.25% and is reduced in line with the improvement in EBITDA. At December 31, 2002, Tele2 attained the minimum interest differential of 0.75%, with effect from February 2003. The five-year facility entails a Note 26. Other interest-bearing liabilities certain curtailment of Tele2 Group’s potential to raise other external loans and the potential to Short-term liabilities: provide assets as collateral. Group Parent Company The loan in Banque Invik pertains to the loan to Russian operations. Tele2 has deposited Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 the corresponding amount with Banque Invik. The interest margin is 0.5%–1%. Modern Holdings Inc – 5 – – The average rate of interest on loan liabilities during the year was 5.0% (2002: 6.4%). Digitel Com Ltd 11 – – – Other 1 – – – Collateral provided: Total other short-term interest-bearing liabilities 12 5 – – Group Parent Company Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 Chattel mortgages 3 11 – – Long-term liabilities: Net assets in subsidiaries 12,072 10,835 Group Parent Company Bank deposits 744 841 – – Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 Total collateral provided for own liabilities SCD Finans AB 1 23 – – to financial institutions 12,819 11,687 – – Digitel Com Ltd 22 – – – Total other long-term interest-bearing liabilities 23 23 – – Pledged shares are reported in the Group at an amount which corresponds to the book value of the net assets which each subsidiary represents in the consolidated balance sheet. Collateral provided: No collateral has been provided for other interest-bearing liabilities. Loan liability matures: Group Parent Company Loan liability matures: Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 Group Parent Company Within 1 year 2,449 2,377 – – Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 1-2 years 3,309 3,070 – – Within 1 year 12 5 – – 2-3 years 1,280 2,646 – – 1-2 years 12 23 – – 3-4 years 39 2,049 – – 2-3 years 11 – – – 4-5 years 26 16 – – Total other interest-bearing liabilities 35 28 – – 5-10 years 93 75 – – 10-15 years 5 20 – – Total loans to financial institutions 7,201 10,253 – –

TELE2 ANNUAL REPORT 2003 NOTES 59 Note 27. Other short-term liabilities Contractual commitments/commercial pledges: Group Group Parent Company Dec. 31, 2003 Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 Within 1 year 1-3 years 3-5 years After 5 years Total VAT liability 331 276 9 – Liabilities to financial institutions 2,449 4,589 65 98 7,201 Tax at source, personnel 36 27 1 – Other interest-bearing liabilities 12 23 – – 35 Other taxes 78 59 – – Financial leasing, agreements signed before 1997 8 16 16 44 84 Additional earn-out payment for Alpha 68 – – – Operational leasing 572 465 279 712 2,028 Customer deposits 26 26 – – Other 59 53 3 5 Tot. contractual commitments/commercial pledges 3,041 5,093 360 854 9,348 Total other short-term liabilities 598 441 13 5 Note 31. Supplementary cash flow information Note 28. Accrued expenses and deferred income Non-cash transactions: In addition to the reported investing and financing activities, as shown in the cash flow Group Parent Company statement, the following transactions occurred which did not affect cash. Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 Personnel-related costs 204 168 5 4 Group: Interest expenses 107 212 – – In addition to investments and loan liabilities reported in the cash flow, investments and loan Telephony expenses to other telecom operators 2,071 1,701 – – financing through financial leasing in the Group amounted to SEK 5 million (2002: SEK 66 Expenses for vendors 17 14 – – million), as well as amortization of loans through financial leasing in the amount of SEK –32 ADSL 55 – – – million (2002: SEK –20 million). Leasing and rental expenses 152 24 – – In addition to investments and loan liabilities reported in the cash flow, Tele2 acquired Program expenses 28 33 – – shares in Russian companies in 2003 through loan financing from Digitel Com Ltd amounting External services expenses 769 715 4 4 to SEK 33 million. Deferred income 1,516 702 – – Parent Company: Other 255 204 – – In 2003, the Parent Company had interest revenues from other Group companies of SEK 299 Total accrued expenses and deferred income 5,174 3,773 9 8 million (2002: SEK 179 million) and interest expenses from other Group companies of SEK –6 million (2002: SEK –5 million), which were capitalized on the loan amount. In addition to the sale of shares reported in the cash flow, the Parent Company sold its Note 29. Pledged assets shares in Tele2 Russia for SEK 1,150 million to Tele2 Sverige AB. In addition, promissory Group Parent Company notes of SEK 22 million in the associated company Everyday Webguide AB were transferred to Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 Group companies. Chattel mortgages 3 11 – – During 2003, the Parent Company received a Group contribution from Tele2 Sverige AB Net assets in Group companies 12,072 10,835 amounting to SEK 1,730 million (2002: SEK 3,035 million) and provided a shareholder Material and supplies 16 19 – – contribution of SEK 1,150 million (2002: SEK 400 million), which has not been reported in the Bank bills 830 870 – – cash flow statement. Total pledged assets for own liabilities 12,921 11,735 – – Cash flow statement based on net profit/loss: The above information shows the book value of assets pledged as collateral for external Group loans (as in Note 25), overdraft facilities and restricted bank funds (as in Note 22) and 2003 2002 other liabilities (as in Note 26). Pledged shares are reported in the Group in an amount Current operations corresponding to the book value of the net assets represented by each subsidiary in the Profit/loss for the year 2,396 223 consolidated balance sheet. Adjustments for non-cash operating activities: Depreciation/amortization 3,826 3,597 Minority interest –37 –1 Note 30. Contingent liabilities and other commitments Result from shares in associated companies 18 36 Group Parent Company Deferred tax expense –1,196 525 Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 Financial leasing –31 –9 Surety bonds benefiting Group companies 13,945 12,825 Unpaid interest –18 107 Surety bonds benefiting associated companies 363 – 363 – Unpaid tax 2 – Total contingent liabilities 363 – 14,308 12,825 Write-down of shares 75 86 Write-down of fixed assets 27 – SEK 6,152 million (2002: SEK 9,298 million) of the contingent liabilities in the Parent 5,062 4,564 Company relates to a guarantee for the five-year loan facility. Svenska UMTS-nät AB, an associated company of Tele2, has an approved loan facility of Change in working capital 912 –199 SEK 7 billion (2002: SEK 11 billion), whereby Tele2 guarantees utilized amounts up to 50 Cash flow from operating activities 5,974 4,365 percent or a maximum of SEK 3.5 billion (2002: 5.5 billion). At December 31, 2003, Tele2’s guarantee amounted to SEK 363 million (2003: 0). Investments according to the cash flow statement by market and business area: Operational leasing: Group Annual fees: 2003 2002 Group Parent Company Nordic 454 902 2003 2002 2003 2002 Eastern Europe & Russia 987 594 Annual fees for operating leases 957 752 – – Central Europe 186 135 Southern Europe 118 142 Future fees due for payment: Luxembourg 130 94 Group Parent Company Branded Products & Services 15 23 Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 Investments in intangible and tangible assets 1,890 1,890 Within 1 year 572 621 – – 1–2 years 261 279 – – Additional investments, not affecting cash flow: 2–3 years 204 197 – – Financial leasing 5 66 3–4 years 165 158 – – Total, CAPEX 1,895 1,956 4–5 years 114 135 – – 5–10 years 333 354 – – Group 10–15 years 197 201 – – 2003 2002 More than 15 years 182 204 – – Mobile telephony 1,250 998 Total future fees for operating leases 2,028 2,149 – – Fixed telephony and Internet 545 794 Cable TV 32 85 Data processing 63 13 Investments in intangible and tangible assets 1,890 1,890 Additional information on segments is presented in Note 33.

60 NOTES TELE2 ANNUAL REPORT 2003 Note 32. Market areas The Group’s operations are primarily divided among six market areas: Nordic, Eastern (Estonia, Latvia and Lithuania), Poland, the Czech Republic and Russia, as well as X-Source Europe & Russia, Central Europe, Southern Europe, Luxembourg and Branded products & operations. The Central Europe market area encompasses Tele2 operations in Germany, the services. This reflects internal reporting to the Board and senior executives and the division Netherlands, Switzerland and Austria. The Southern Europe market area encompasses Tele2 of responsibility and organization within the Group. Market control and prioritization are operations in France, Italy, Spain and Portugal. The Luxembourg market area encompasses largely undertaken jointly for continental Europe. Thus goodwill and depreciation/amortization Tele2 operations in Luxembourg (including Tango), Liechtenstein and Belgium, as well as attributable to the acquisition of the SEC Group is not broken down across the market areas 3C operations and Transac. The Branded Products & Services market area comprises Tele2 Central Europe, Southern Europe, Luxembourg and Branded products & services. operations in the UK, Alpha Telecom in the UK, C3-operations, Everyday operations and The Nordic market area is acting within a more mature market, while continental Europe IntelliNet operations. reflects companies which have not operated for an equally long period. The Eastern Europe Operating revenue, EBITDA, EBIT and investments for the operating areas in each market and Russia market area is yet another market with its own particular risks and possibilities. area are presented in Note 1, Note 2 and Note 31. The division is based on the geographical location of operations, which also reflects where In September 2003, Tele2 decided to report its results in line with a new market structure, customers are located. Relations between companies within the Group are based on beginning with the first interim report for 2004. All previous reporting, including the year-end commercial terms, conditions and pricing. accounts for 2003, follows the original market structure. The original six market areas form The Nordic market area encompasses of Tele2 operations in Sweden (including Optimal the basis of the new market structure. The new structure is the result of new internal reporting Telecom), Norway, Denmark and Finland, as well as Datametrix operations and ProcureITright. to the Board and senior executives and the division of responsibility and organization within The Eastern Europe & Russia market area encompasses Tele2 operations in the Baltic States the Group. The most important changes are described in Note 35. Group 2003 Eastern Branded Non distributed Europe Central Southern Products and internal Nordic & Russia Europe Europe Luxembourg & Services elimination Total Income Statement Operating revenue External 12,970 3,006 7,502 10,233 917 2,283 – 36,911 Internal, other Group 167 57 458 321 24 111 –1,138 – Internal, market area 682 10 117 24 86 228 –1,147 – Operating revenue, total 13,819 3,073 8,077 10,578 1,027 2,622 –2,285 36,911 Depreciation/amortization –1,073 –586 –192 –106 –187 –154 –1,528 –3,826 Operating expenses, other –10,062 –2,417 –8,185 –9,554 –961 –2,621 2,587 –31,213 Other operating revenue 132 23 293 – 17 357 –744 78 Other operating expenses –16 –80 –2 – –3 –407 442 –66 Operating profit/loss 2,800 13 –9 918 –107 –203 –1,528 1,884 Result from shares in associated companies –18 – – – – – – –18 Result from other securities and receivables classified as fixed assets –75 5 –70 Other interest revenue and similar income 106 106 Interest expenses and similar costs –635 –635 Profit/loss after financial items 2,782 –62 –9 918 –107 –203 –2,052 1,267 Taxes 1,092 1,092 Minority interest 37 37 Profit/loss for the year 2,782 –62 –9 918 –107 –203 –923 2,396 Miscellaneous Investments, intangible assets 14 61 – – 3 – 78 Investments, tangible assets 464 892 201 144 128 20 –34 1,815 Non-cash operating items: Capital gain/loss of fixed assets –15 –13 – – – 1 – –27 Financial leases 26 2 – – 4 – – 32 Group December 31, 2003 Eastern Branded Non distributed Europe Central Southern Products and internal Nordic & Russia Europe Europe Luxembourg & Services elimination Total Balance Sheet ASSETS Intangible fixed assets 937 3,092 41 2 158 703 18,623 23,556 Tangible fixed assets 5,512 1,730 626 563 506 99 – 9,036 Shares in associated companies 492 – – – 22 – – 514 Other long-term holdings of securities – 36 – – – – – 36 Other financial fixed assets 9,076 374 646 1,616 5,438 202 –14,845 2,507 16,017 5,232 1,313 2,181 6,124 1,004 3,778 35,649 Current assets 6,332 1,051 2,017 16,923 2,075 691 –16,768 12,321 Total assets 22,349 6,283 3,330 19,104 8,199 1,695 –12,990 47,970 LIABILITIES Provisions 6 – – – – 20 – 26 Interest-bearing liabilities 8,690 4,303 1,603 39 5,904 978 –14,281 7,236 Long-term liabilities, other – 1 – 745 1 1 –748 – Short-term liabilities, other 19,777 853 2,838 3,137 436 847 –17,547 10,341 Total liabilities 28,473 5,157 4,441 3,921 6,341 1,846 –32,576 17,603

TELE2 ANNUAL REPORT 2003 NOTES 61 Group 2002 Eastern Branded Non distributed Europe Central Southern Products and internal Nordic & Russia Europe Europe Luxembourg & Services elimination Total Income Statement Operating revenue External 13,566 2,320 5,689 8,105 754 848 – 31,282 Internal, other Group 79 41 265 263 29 95 –772 – Internal, market area 585 8 113 47 87 61 –901 – Operating revenue, total 14,230 2,369 6,067 8,415 870 1,004 –1,673 31,282 Depreciation/amortization –1,435 –577 –133 –129 –92 –12 –1,219 –3,597 Operating expenses, other –9,410 –1,877 –6,348 –8,514 –747 –1,181 1,934 –26,143 Other operating revenue 37 33 204 1 6 5 –236 50 Other operating expenses –43 16 –4 –3 –3 – –25 –62 Operating profit/loss 3,379 –36 –214 –230 34 –184 –1,219 1,530 Result from shares in associated companies –31 –4 – – –1 – – –36 Result from other securities and receivables classified as fixed assets –86 2 –84 Other interest revenue and similar income 165 165 Interest expenses and similar costs –779 –779 Profit/loss after financial items 3,348 –126 –214 –230 33 –184 –1,831 796 Taxes –574 –574 Minority interest 1 1 Profit/loss for the year 3,348 –126 –214 –230 33 –184 –2,404 223 Miscellaneous Investments, intangible assets 23 124 – – – – 147 Investments, tangible assets 885 504 339 142 95 19 –219 1,765 Non-cash operating items: Capital gain/loss of fixed assets –7 1 – –2 –1 – – –9 Financial leases 20 – – – – – – 20 Group December 31, 2002 Eastern Branded Non distributed Europe Central Southern Products and internal Nordic & Russia Europe Europe Luxembourg & Services elimination Total Balance Sheet ASSETS Intangible fixed assets 1,025 3,491 46 2 177 4 20,351 25,096 Tangible fixed assets 6,055 1,399 616 557 569 61 – 9,257 Shares in associated companies 498 – – – 44 – – 542 Other long-term holdings of securities 103 36 – – – – – 139 Other financial fixed assets 9,318 326 180 129 3,426 16 –12,056 1,339 16,999 5,252 842 688 4,216 81 8,295 36,373 Current assets 5,008 813 1,591 2,074 1,806 313 –1,106 10,499 Total assets 22,007 6,065 2,433 2,762 6,022 394 7,189 46,872 LIABILITIES Provisions 28 – – – – – – 28 Interest-bearing liabilities 9,931 4,140 1,523 680 5,195 976 –12,164 10,281 Long-term liabilities, other – 1 – 142 1 12 –156 – Short-term liabilities, other 3,274 651 2,402 2,297 637 422 –1,870 7,813 Total liabilities 13,233 4,792 3,925 3,119 5,833 1,410 –14,190 18,122

62 NOTES TELE2 ANNUAL REPORT 2003 Note 33. Business areas Note 35. Changed reporting structure A secondary division of operations takes the form of a grouping into four business areas: In September 2003, Tele2 decided to report in accordance with a new market structure, Mobile telephony, Fixed telephony & Internet, Cable TV and Other Operations. These beginning with the first interim report for 2004. All previous reporting, including the year-end are based on services and products which differ from each other in terms of risks and accounts for 2003, is in accordance with the original market structure. The original six market possibilities. areas form the basis of the new market structure. The new structure is the result of new The Fixed telephony & Internet business area includes fixed telephony, dial-up data network internal reporting to the Board and senior executives and the division of responsibilities and services and other broadband services. The Cable TV business area encompasses Cable TV organization within the Group. The most important changes are listed below. and Tango TV. Other Operations includes: IT-outsourcing via X-Source; system integration through Datametrix; Internet payments, credit card transactions and call phone services • ProcureITright/Proceedo moves from Nordic to Services. via 3C; processing of card transactions and invoicing through Transac; cash cards for fixed • Poland and the Czech Republic move from Eastern Europe & Russia to Central Europe. telephony through C3; and the Internet portal, Everyday. • The Netherlands and Switzerland move from Central Europe to Benelux It is not possible to distribute financial fixed assets and current assets by business area. and Southern Europe respectively. Operating revenue, EBITDA, EBIT and investments for the business areas in each market • Tele2 UK, Alpha and C3 operations move from Branded Products & Services area are presented in Note 1, Note 2 and Note 31. to Southern Europe. Group • 3C operations move from Luxembourg to Services. 2003 • X-Source operations move from Eastern Europe & Russia to Services. Fixed Other Non distr. • Everyday and Intellinet operations move from Branded Products & Services Mobile telephony opera- and internal to Central Europe, Southern Europe and Benelux. telephony & Internet Cable TV tions elimination Total Income Statement Operating revenue, EBITDA and number of customers before and after the reorganization are Operating revenue from external shown below. customers 10,421 25,887 224 379 – 36,911 Group Other Operating revenue Investments in intangible assets 66 2 – 10 – 78 New structure Original structure Investments in tangible assets 1,184 575 34 22 – 1,815 2003 2002 change 2003 2002 change Nordic 12,942 13,557 –5% 12,970 13,566 –4% Baltic & Russia (formerly Eastern Group Europe & Russia) 2,724 2,177 25% 3,006 2,320 30% December 31, 2003 Central Europe 3,441 2,465 40% 7,502 5,689 32% Fixed Other Non distr. Southern Europe 13,859 10,293 35% 10,233 8,105 26% Mobile telephony opera- and internal Benelux (formerly Luxembourg) 3,704 2,669 39% 917 754 22% telephony & Internet Cable TV tions elimination Total Services (formerly Branded Balance Sheet Products & Services) 241 121 99% 2,283 848 169% Intangible fixed assets 3,237 1,581 3 112 18,623 23,556 Total operating revenue 36,911 31,282 18% 36,911 31,282 18% Tangible fixed assets 4,757 3,466 708 105 – 9,036 Financial fixed assets 3,057 3,057 Group Current assets 12 321 12 321 EBITDA Total assets 7,994 5,047 711 217 34,001 47,970 New structure Original structure 2003 2002 change 2003 2002 change Group Nordic 3,861 4,805 –20% 3,873 4,814 –20% 2002 Baltic & Russia (formerly Eastern Fixed Other Non distr. Europe & Russia) 800 602 33% 599 541 11% Mobile telephony opera- and internal Central Europe –303 –231 183 –81 telephony & Internet Cable TV tions elimination Total Southern Europe 1,096 –48 1,024 –101 Income Statement Benelux (formerly Luxembourg) 223 –11 80 126 –37% Operating revenue from external Services (formerly Branded customers 9,819 20,843 298 322 – 31,282 Products & Services) 33 10 230% –49 –172 Total EBITDA 5,710 5,127 11% 5,710 5,127 11% Other Investments in intangible assets 121 26 – – – 147 Group Investments in tangible assets 901 763 88 13 – 1,765 Number of customers New structure Original structure Group (thousands) 2003 2002 change 2003 2002 change December 31, 2002 Nordic 6,720 6,252 7% 6,720 6,252 7% Fixed Other Non distr. Baltic & Russia (formerly Eastern Mobile telephony opera- and internal Europe & Russia) 2,327 1,491 56% 3,077 1,574 95% telephony & Internet Cable TV tions elimination Total Central Europe 3,469 1,817 91% 5,081 3,587 42% Balance Sheet Southern Europe 7,487 5,594 34% 6,986 5,129 36% Intangible fixed assets 3,687 1,014 3 41 20,351 25,096 Benelux (formerly Luxembourg) 2,303 1,610 43% 442 222 99% Tangible fixed assets 4,232 4,226 736 63 – 9,257 Total number of customers 22,306 16,764 33% 22,306 16,764 33% Financial fixed assets 2,020 2,020 Current assets 10,499 10,499 Total assets 7,919 5,240 739 104 32,870 46,872 Note 34. Financial items As Tele2’s receivables and liabilities are normally of a short-term nature, the book value and real value usually tally. The real value of financial receivables and financial loan liabilities is calculated by means of discounting at the current market rate. Our assessment is that the calculation of theoretical market value deviates from the book value only slightly. The Group has limited its credit risk in respect of receivables by continually conducting credit assessments of the customer base. Since the Group has a highly varied customer base which covers individuals as well as companies, this means that the credit risk is limited. The Group makes provisions for credit losses, and these have remained within management’s expectations.

TELE2 ANNUAL REPORT 2003 NOTES 63 Note 36. Customers Note 38. Personnel costs Operating area by market area: Group Group Salaries and remuneration Number of customers Net customer intake 2003 2002 (thousands) Dec 31, 03 Dec 31, 02 change 2003 2002 Board and of which other Board and of which other Nordic: President bonus employees President bonus employees Mobile telephony 3,600 3,221 12% 379 579 Nordic 35 6 549 27 3 573 Fixed telephony & Internet 2,942 2,822 4% 120 –810 Eastern Europe & Russia 19 2 157 21 2 150 Cable TV 178 209 –15% –31 209 Central Europe 7 3 112 7 1 73 Total, Nordic 6,720 6,252 7% 468 –22 Southern Europe 6 1 67 4 1 54 Luxembourg 4 – 98 1 – 112 Eastern Europe & Russia: Branded products and services 13 1 108 7 1 33 Mobile telephony 2,204 1,366 61% 838 513 Total per market 84 13 1,091 67 8 995 Fixed telephony & Internet 807 144 460% 663 67 Kabel-TV 66 64 3% 2 –2 In 2003, provision of SEK 15 million (2002: SEK 16 million) was made for bonuses to key Total, Eastern Europe & Russia 3,077 1,574 95% 1,503 578 personnel in the Group plus social security expenses of SEK 5 million (2002: SEK 5 million). Distribution of the amount will be decided in 2004. Centraleuropa: Mobile telephony 422 271 56% 151 223 Group Fixed telephony & Internet 4,659 3,316 41% 1,343 173 2003 2002 Total, Central Europe 5,081 3,587 42% 1,494 396 Salaries Social Salaries Social and remu- security of which and remu- security of which Sydeuropa: neration expenses pension neration expenses pension Fixed telephony & Internet 6,986 5,129 36% 1,857 843 Board and President 84 23 5 67 20 5 Total, Southern Europe 6,986 5,129 36% 1,857 843 Other employees 1,091 342 75 995 303 59 Total personnel costs 1,175 365 80 1,062 323 64 Luxemburg: Mobile telephony 196 181 8% 15 14 Parent Company Fixed telephony & Internet 246 41 500% 205 –3 2003 2002 Total Luxembourg 442 222 99% 220 11 Salaries Social Salaries Social and remu- security of which and remu- security of which Total by market 22,306 16,764 33% 5,542 1,806 neration expenses pension neration expenses pension Board and President 14 7 2 13 6 1 Group Other employees 3 1 – 4 1 1 Number of customers Net customer intake Total personnel costs 17 8 2 17 7 2 (thousands) Dec 31, 03 Dec 31, 02 change 2003 2002 Mobile telephony 6,422 5,039 27% 1,383 1,329 Commitments concerning defined-benefit pension plans: including prepaid cards 4,598 3,363 37% 1,235 1,184 Balance sheet: Fixed telephony & Internet 15,640 11,452 37% 4,188 270 Group Cable TV 244 273 –11% –29 207 Dec 31, 03 Total by business area 22,306 16,764 33% 5,542 1,806 Present value of funded commitment –13 Investment assets real value 13 Net customer intake in 2003 amounted to 33%, corresponding to 5,542,000 customers Net – (2002: 15%, 2,195,000 customers, before adjustment to comply with the Group’s definition Unrealized actuarial gains/losses 2 of an active customer in Sweden and Denmark, and additional Optimal Telecom and Cable TV Net receivables (+) / payables (–) in balance sheet 2 customers in 2002). of which assets 2 of which liabilities – Group Note 37. Number of employees Dec 31, 03 Group Net receivables (+) / payables (–) at beginning of year 4 Average number of employees Net costs reported in income statement –3 2003 2002 Payments 1 Total Men Total Men Net receivables (+) / payables (–) in balance sheet at year-end 2 Nordic 1,219 70% 1,169 70% Eastern Europe & Russia 1,449 50% 1,456 52% Income statement: Central Europe 166 70% 116 59% Group Southern Europe 114 66% 95 65% 2003 Luxembourg 160 76% 231 68% Costs in respect of service during current year –3 Branded Products & Services 166 74% 48 83% Interest on commitments –1 Anticipated return on investment assets 1 Total by market 3,274 61% 3,115 61% Net costs reported in income statement –3 The average number of employees in the Parent Company is 2 (2002: 3) people, all of whom Important actuarial assumptions (weighted average): are male. Group Group 2003 2003 Discount rate 4–6% Women Men Anticipated return on investment assets 4–7% Number of Board members in all Group companies 7% 93% Future annual salary increases 2–3% Number of other Senior Executives in all Group companies 16% 84% Future annual pension increases 3% Total number of Board members and other senior executives 11% 89% The Group’s pension commitments also comprise pension plans in Swedish companies insured in Skandia (somewhat similar to ITP, supplementary pensions for salaried employees), and Alecta (ITP). These commitments are, to some extent, defined-benefit pension plans, but due to equalization in the insurance companies, these pension plans constitute the type of plan that includes several employers (multi-employer plans). At present, there is insufficient information available from the insurers to be able to report the commitments as defined-benefit commitments. These plans have, therefore, been reported as if they were defined-contribution plans. The degree of funding in both insurance companies is considered to be such that accounting of the commitments concerned as defined-benefit would only involve marginal liability and asset effects for Tele2 compared with the accounts as they have now been drawn up. Pension expenses Group Parent Company 2003 2002 2003 2002 Defined-benefit pension plans 24 20 – – Defined-contribution pension plans 56 44 2 2 Total pension expenses 80 64 2 2

64 NOTES TELE2 ANNUAL REPORT 2003 Remuneration of senior executives: 31, 2003, Tele2 had outstanding warrants corresponding to 643,500 (2002: 663,000) shares. The Group Other senior executives consists of 13 people (2002: 13 people). In addition to the All of these had a redemption price of SEK 191. In addition, allotments corresponding to costs below, Tele2 also incurred costs relating to social security expenses. 153,700 shares were implemented in 2002 to a wholly-owned Group company to secure the future cash flow for social insurance costs. 2003 Basic salary/ Variable Other Total board remu- remu- Options- Other remu- Pension remu- Note 39. Remuneration to Auditors neration neration program benefits neration costs neration Chairman of the Board: Group Parent Company Sven Hagströmer 2003 2002 2003 2002 / Bruce Grant 0.4 – 0.4 Other Other Other Other Group President and CEO: PWC auditors PWC auditors PWC auditors PWC auditors Lars-Johan Jarnheimer 10.4 2.0 – 0.0 – 2.0 14.4 Audit assignments 17 2 17 4 2 – 1 – Other senior executives 23.4 4.3 – 0.7 – 1.4 29.8 Other assignments: 34.2 6.3 – 0.7 – 3.4 44.6 Audit-related 1 1 1 1 – – – – Taxes 14 3 11 1 7 – 5 – 2003 Other 2 2 1 2 – – 1 – Previous years Allocation for the year Total 34 8 30 8 9 – 7 – Warrants Warrants program 2002/2007 Total 42 38 9 7 Market value on Acquisition- Number Number issuance price Benefit Number Group President and CEO 15,000 pcs. – – – – 15,000 pcs. Note 40. Transactions with related parties Other senior executives 180,000 pcs. – – – – 180,000 pcs. 195,000 pcs. – – – – 195,000 pcs. As a result of substantial direct and indirect shareholdings by the Jan Hugo Stenbeck estate in the Tele2 Group, Invik Group, Kinnevik Group, Transcom Worldwide Group, Millicom In 2003, the warrants previously allotted changed by –15,000 pcs. Group, Modern Holdings Inc. Group, MTG Group, Metro Group, Viking Telecom Group and other companies, said estate has the potential to exert considerable influence in terms of 2002 financial and operational decisions regarding activities by these companies. Tele2’s associated Basic salary/ Variable Other Total companies (listed in Note 15) and the above companies are regarded as related parties board remu- remu- Options- Other remu- Pension remu- to Tele2. Business relations between Tele2 and all closely related parties are subject to neration neration program benefits neration costs neration commercial terms and conditions. Board Chairman: Jan H. Stenbeck Significant transactions in recent years: / Bruce Grant 0.3 6.8 7.1 • At year-end 1998, Tele2 acquired 48% of Tele2 Eesti (formerly Ritabell AS), with mobile Group President and CEO: operations in Estonia, from Millicom. Lars-Johan Jarnheimer 10.0 1.5 1.0 0.0 – 1.9 14.4 • In November 1999, Tele2 sold its holding (24.8%) in the associated company Netcom ASA, Other senior executives 21.8 10.3 13.5 1.3 – 1.3 48.2 a mobile telephony company in Norway, to SEC in return for 17.8% in SEC. SEC gradually 32.1 11.8 14.5 1.3 6.8 3.2 69.7 divested Netcom ASA during 1999 and 2000. • In August 2000, Tele2 acquired from Millicom an additional 81.9% of SEC via a limited Board of Directors: share issue corresponding to SEK 19,773 million. SEC pursues fixed telephony operations in Total Board fees of SEK 1.9 million were paid in 2003 compared with SEK 2.2 million decided continental Europe and mobile telephony operations in Luxembourg, etc. at the Annual General Meeting of shareholders. • During 2000, Tele2 divested its holding in 4T Solutions, with billing systems operations, to Modern Holdings Inc. (formerly XSource Corp) in return for 11.88% of Modern Holdings President and CEO: Inc. In addition to a fixed salary, Lars-Johan Jarnheimer, President and CEO of Tele2 AB received • In January 2001, Tele2 Group divested its 37.45% holding in the associated company a bonus of SEK 2.0 million (2002: SEK1.5 million). The bonus is based on individualized Transcom Worldwide to Industriförvaltings AB Kinnevik. Transcom Worldwide is one of goals. The pension premium, which is defined-contribution, is paid in the form of 20% of the Europe’s largest customer service companies. The purchase price was based on the market fixed basic salary. The pension age is 65. The period of notice when served by the company share price 60 trading days after Transcom Worldwide was listed on the Stockholm Stock is a minimum of 12 and maximum of 18 months in the case of the President of Tele2 AB. Exchange. Salary during a period of notification of 12 months is paid to the President if he serves notice • In December 2001, Tele2 Group acquired all the shares in Tele2 Russia Telecom BV of termination of employment to the company. Salary and remuneration for the President are (formerly Fora Telecom) from Millicom through a limited share issue corresponding to a determined annually by the Board of Directors following proposals by the Chairman of the value of SEK 849 million. Tele2 Russia Group conducts mobile operations in Russia. Board. • In October 2002, the Tele2 Group acquired all the shares in the ProcureITright Group, a supplier of procurement function services and WEB-based procurement systems, from Other senior executives: Modern Holdings Inc. Group for SEK 42 million. Variable salary paid to other senior executives includes a bonus of 0%–35% based on profit Transactions in 2003: benchmarks, with the remainder being based on individualized goals. Other benefits pertain primarily to car benefits. Pensions are paid in accordance with the public pension plan, of • There were no significant transactions with related parties in 2003. which SEK 1.1 million (2002: SEK 1.1 million) represents a defined-contribution plan and Operational agreements between Tele2 and related parties: SEK 0.3 million (2002: SEK 0.2 million) a defined-benefit plan. The pension age is 65. The period of notice when served by the company is a minimum 6 and maximum 12 months. Tele2 supplies telephony and data services on commercial terms to closely related parties. Salary during a period of notification of six months is received if the person serves notice of Tele2 is also one of two turnkey contractors for planning, expansion and operation in the termination of employment to the company. No other remuneration is paid. associated company Svenska UMTS-nät AB’s 3G-network. Invik Group: Incentive program 1997/2006 At the Annual General Meeting in 1997, it was decided to undertake an incentive program • Tele2 Group’s telephony operations are, with the exception of Russian operations, insured for a number of senior management employed at that time and future senior management by Moderna Försäkringar AB. in the Group. Through a company established for this purpose, NC Intressenter AB, these • Banque Invik conducts certain financial services for the Tele2 Group. Banque Invik is also a persons were provided with the opportunity to acquire 100,000 shares per year during 1999 credit card supplier and conducts credit transactions using the equipment of 3C-operations. - 2003 up to a maximum total amount of 500,000 Series B shares. In October 2000, 200,000 Kinnevik Group: shares were issued and three convertible debenture notes corresponding to 300,000 shares were issued to NC Intressenter AB to fulfill the offer. At December 31, 2003, NC Intressenter • Collect Sweden AB is a company which managed a fidelity program and provided multi- AB held 500,000 Series B shares. The premium for the option amounted to SEK 7 million in bonus cards. The company was also in charge of marketing and managing benefits and 1997. This was based on a Black-Schole evaluation with an exercise price of SEK 150 per offers within the framework of the Collect multi-bonus program. Collect was wound up share. In their turn, all partners in NC Intressenter AB made payments to NC Intressenter AB during the year. based on the Black-Schole evaluations. Transcom Worldwide Group: Incentive program 2002/2007 • Transcom provides customer services and telemarketing for Tele2. At the Annual General Meeting in 2002, it was decided to undertake an incentive program • CIS Collection AB provides debt collection services for Tele2. corresponding to a maximum of 1,055,000 Series B shares for current and future key Millicom Group: employees of the Group. These persons are to be offered the opportunity, via warrants, to subscribe for Series B shares during a period of three to five years after allotment, at a • Millicom Group purchases certain consulting services from ProcureITright, a Tele2 price totaling the market value of the Series B share plus +10% at the time of allotment, on company. condition that they remain employed by the Group. No premium is to be paid. At December

TELE2 ANNUAL REPORT 2003 NOTES 65 Modern Holdings Inc. Group: Note 41. United States generally accepted accounting • The Basset Group provides an operator settlement and anti-fraud system for Tele2. • NetCom Consultants AB provides Tele2 with consulting services in telecommunications and principles (US GAAP) data communications. The consolidated balance sheets and income statements are drawn up in accordance with Swedish accounting principles. These differ in certain respects from generally accepted MTG Group: accounting principles in the United States (US GAAP). • Tele2 buys advertising time on radio and TV channels owned by MTG. The following adjustments are required for reporting profit for the year and shareholders’ • Tele2 Sverige AB purchases cable TV programs from TV1000 Sverige AB. equity in line with US GAAP. Viking Telecom Group: Profit for the year: • Viking Telecom provides Tele2 with most of the line routers which Tele2 supplies to its end Group customers. 2003 2002 2001 Profit for the year according to Swedish accounting principles 2,396 223 392 Transactions between Tele2 and related parties: Group Adjustments required for compliance with US GAAP: Operating revenue Operating costs a) Transactions between companies under common control 6 21 21 2003 2002 2003 2002 b) Valuation of acquired loss carry-forwards –69 – – Invik Group 14 – 28 124 c) Amortization of goodwill 1,577 1,500 – Kinnevik Group 2 11 31 132 d) Tangible fixed assets 21 –81 9 Transcom Worldwide Group 37 23 2,049 1,860 e) Lease agreements 1 1 2 Millicom Group 11 17 13 14 f) Accounting for acquisitions through non-cash issue – 25 –367 Modern Holdings Inc. Group 2 7 129 266 g) Accounting for step acquisitions 1 –1 –8 MTG, Modern Times Group 27 28 73 108 h) Accounting for surplus value of acquisitions –42 – – Metro International Group – 3 17 4 i) Stock options 4 9 5 Viking Telecom Group –4 3 111 2 j) Connection charge –113 – – Associated companies 54 – – – k) Deferred tax liability – – 828 Other related companies 10 2 47 100 l) Changes in accounting principles – – –156 Total 153 94 2,498 2,610 m) Other 14 2 –2 Net adjustment 1,400 1,476 332 Group Deferred tax effect on above, US GAAP adjustments 61 –7 39 Interest revenue Interest costs Profit for the year according to US GAAP 3,857 1,692 763 2003 2002 2003 2002 Invik Group 52 100 –56 –128 Earnings per share: Total 52 100 –56 –128 Group 2003 2002 2001 Group Profit for the year according to US GAAP 3,857 1,692 763 Restricted cash Number of shares, weighted average 147,460,175 147,360,175 145,003,847 Dec 31, 03 Dec 31, 02 Earnings per share SEK 26.16 SEK 11.48 SEK 5.26 Invik Group 744 841 Group Total 744 841 2003 2002 2001 Profit for the year according to US GAAP 3,857 1,692 763 Group Reversal: Interest after tax on outstanding convertibles during the year – – – Other Interest-bearing receivables receivables Adjusted profit/loss for the year after full dilution 3,857 1,692 763 Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 Number of outstanding shares Invik Group 39 – – – after full dilution, weighted average*) 147,795,748 147,596,866 145,215,999 Kinnevik Group 2 9 – – Transcom Worldwide Group 7 2 – – Earnings per share, after full dilution SEK 26.10 SEK 11.46 SEK 5.25 Millicom Group 4 8 – – Modern Holdings Inc. Group 1 2 14 20 Adjusted profit for the year: MTG, Modern Times Group 14 53 – – When Tele2 began to apply FAS 142 on January 1, 2002, it ceased to amortize goodwill Viking Telecom Group – 4 – – and began instead to testing goodwill for imparement. In accordance with US GAAP, this Associated companies 45 32 – 19 impairment testing takes place at a level which is referred to as a reporting unit. This testing Other related companies – 4 16 39 revealed that there was no write-down requirement for 2002 and 2003. For comparative purposes, profit/loss for the year and earnings per share have been adjusted in the tables Total 112 114 30 78 below to show how the year 2001 would have appeared had no goodwill amortization taken place in 2001. Group Non-interest-bearing Interest-bearing Group liabilities liabilities 2003 2002 2001 Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 Profit for the year according to US GAAP 3,857 1,692 763 Invik Group 96 124 681 755 Reversal: amortization of goodwill – – 1,845 Kinnevik Group 1 23 1 – Adjusted profit for the year according to US GAAP 3,857 1,692 2,608 Transcom Worldwide Group 244 188 – – Millicom Group 43 – – – Modern Holdings Inc Group 27 39 – 5 Adjusted earnings per share: Group MTG, Modern Times Group 12 17 2 – 2003 2002 2001 Metro International Group 2 2 – – Viking Telecom Group 2 62 – – Profit for the year according to US GAAP 3,857 1,692 763 Other related companies 4 1 1 23 Reversal: amortization of goodwill – – 1,845 Total 431 456 685 783 Adjusted profit 3,857 1,692 2,608 Number of shares, weighted average 147,460,175 147,360,175 145,003,847 Adjusted earnings per share SEK 26.16 SEK 11.48 SEK 17.99 Group 2003 2002 2001 Profit/loss for the year according to US GAAP 3,857 1,692 763 Reversal: Interest after tax on outstanding convertibles during the year – – – Reversal: amortization of goodwill – – 1,845 Adjusted profit/loss for the year after full dilution 3,857 1,692 2,608 Number of outstanding shares after full dilution, weighted average*) 147,795,748 147,596,866 145,215,999 Adjusted earnings per share, after full dilution SEK 26.10 SEK 11.46 SEK 17.96 *) In contrast to Swedish accounting principles, US GAAP does not calculate earnings per share after dilution at the present value of the exercise price for the options.

66 NOTES TELE2 ANNUAL REPORT 2003 Shareholders’ equity: b) Valuation of acquired loss carry-forwards Group According to Swedish accounting principles, an amount representing acquired loss carry- Dec 31, 03 Dec 31, 02 Dec 31, 01 forwards, which on the date of acquisition is valued at zero, but which in subsequent years Shareholders’ equity according to Swedish accounting principles 30,360 28,728 29,517 is valued and recognized as tax income, is reported as amortization of goodwill in the income statements after an adjustment for the remaining amortization period of the original acquisition. Adjustments required for compliance with US GAAP: According to US GAAP, acquired loss carry-forwards are not reported as tax income, but a) Transactions between companies under common control – –6 –27 reduce goodwill. b) Valuation of acquired loss carry-forwards –69 – – c) Amortization of goodwill 3,077 1,500 – c) Amortization of goodwill d) Tangible fixed assets – –21 60 According to Swedish accounting principles, all intangible fixed assets, including goodwill, e) Lease agreements 15 14 13 must be amortized. Amortization rates are based on the acquisition value of the assets and the f) Accounting for acquisitions through non-cash issue 6,431 6,500 6,630 estimated utilization period. According to US GAAP, with effect from 2002, goodwill and certain g) Accounting for step acquisitions –102 –103 –102 other intangible assets need not be amortized but may instead be tested, at least annually, h) Accounting for surplus value of acquisitions –42 – – to identify any impairment loss. In this test, the book value of a reporting unit is compared i) Stock options – –4 –25 with its real value. If the book value is lower than the real value, a write-down of goodwill is j) Connection charge –113 – – reported equivalent to the difference between the book value of goodwill and the estimated m) Other 7 –7 –9 goodwill of the reporting unit. This estimated goodwill is the difference between the reporting Net adjustment 9,204 7,873 6,540 unit’s real value and the real value of the unit’s reported and non-reported assets and liabilities. Accordingly, this year’s amortization of such assets under Swedish accounting principles is Deferred tax effect on above, US GAAP adjustments 38 –23 –16 reversed and a potential write-down based on the completed impairment test is recognized. Shareholders’ equity according to US GAAP 39,602 36,578 36,041 d) Tangible fixed assets Change in Shareholders’ Equity: Certain expenditure which has been capitalized according to Swedish accounting principles Group must be expensed according to US GAAP. US GAAP requires certain costs relating to Dec 31, 03 Dec 31, 02 Dec 31, 01 installation of networks to be capitalized and not expensed. Opening shareholders’ equity, Jan. 1, according to US GAAP 36,578 36,041 32,289 e) Lease agreements Items reported directly against shareholders’ equity The Group has certain leasing transactions which, according to generally accepted accounting Step acquisitions – – –8 principles in Sweden, have been treated as operating leases, but which, according to US Exchange rate difference, according to US GAAP –849 –1,181 2,144 GAAP, are viewed as finance leases. Total items reported directly against shareholders’ equity –849 –1,181 2,136 f) Accounting for acquisitions through non-cash issue Other changes in shareholders’ equity Société Européenne de Communication SA (SEC) was acquired in 2000 by means of a non- New share issue, acquisition of Tele2 Russia, according to US GAAP – – 838 cash issue, in which newly issued shares in Tele2 were offered in exchange for the remaining New share issue, convertibles, according to US GAAP 16 26 15 shares in SEC. In accordance with Swedish accounting principles, the acquisition price is Profit/loss for the year according to US GAAP 3,857 1,692 763 calculated at a value corresponding to Tele2’s market price on the transaction date. In US Closing shareholders’ equity, Dec. 31, according to US GAAP 39,602 36,578 36,041 GAAP, the acquisition price is defined as the market price at the time when the offer is made public. There are also some differences between acquired net assets in accordance with US Items which are reported directly against shareholders’ equity and which do not represent GAAP and Swedish accounting principles. transactions with the owners (Comprehensive income) include the profit/loss for the year and changes in translation differences. . g) Accounting for step acquisitions The gradual acquisition of OU Levicom Broadband and Société Européene de Communications Group S.A. during 1999–2001 has, according to Swedish accounting principles, resulted in a 2003 2002 2001 restatement of adjustment to shareholders’ equity. This corresponds to shares in the profit Comprehensive Income: of the holdings from the original acquisition date, based on the equity method rather than Profit/loss for the year according to US GAAP 3,857 1,692 763 historical acquisition values. According to US GAAP, not only should shareholders’ equity be Change in translation differences according to US GAAP –849 –1,181 2,144 adjusted against the share in profit/loss, but goodwill and depreciation should also be taken into account from the original acquisition date. Comprehensive Income according to US GAAP 3,008 511 2,907 h) Purchase price allocation Group Under US GAAP, certain identifiable intangible assets are valued in the event of a company Dec 31, 03 Dec 31, 02 Dec 31, 01 acquisition. Only the remainder is reported as goodwill and therefore is not subject to Accumulated Comprehensive Income: amortization. Swedish accounting principles require the whole amount to be reported as Cum. Comprehensive Income according to US GAAP, Jan. 1 1,726 2,907 763 goodwill. The goodwill which, using Swedish accounting principles, arose upon the acquisition Change in translation differences according to US GAAP –849 –1,181 2,144 of Alpha in 2003 has, according to US GAAP, been divided into brands and interconnection Cum. Comprehensive Income according to US GAAP, Dec. 31 877 1,726 2,907 traffic. These intangible assets are amortized over five years. Extract from consolidated balance sheet: i) Stock options Group According to US GAAP, as a result of the conditions of the 1997 option program, a liability Sweden is calculated based on the market value of the underlying shares and the commitment to accounting principles Adjustment items US GAAP employees does not cease. The commitment to parties other than employees is valued at the Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 Dec 31, 03 Dec 31, 02 value of the option at the time the decision was made for settlement by a new share issue, and Fixed assets 35,649 36,373 9,431 7,952 45,080 44,325 is reported directly against shareholders’ equity. From 2003, there were no differences from Current assets 12,321 10,499 –3 – 12,318 10,499 US GAAP. Total assets 47,970 46,872 9,428 7,952 57,398 54,824 j) Connection charge Shareholders’ equity 30,360 28,728 9,242 7,850 39,602 36,578 According to US GAAP, connection charges are recognized as revenue over the period in Minority interest 7 22 – – 7 22 which there is a customer relationship, and direct charges are expensed immediately. The Long-term liabilities 4,801 7,927 79 97 4,880 8,024 estimated customer relationship period for which connection charges are recognized as revenue Short-term liabilities 12,802 10,195 107 5 12,909 10,200 is approximately three years. According to Swedish accounting principles, these charges are Tot. shareholders’ equity and liabilities 47,970 46,872 9,428 7,952 57,398 54,824 recognized as revenue and direct charges are expensed at the time when the service is provided. Explanation of differences between Swedish accounting principles and US GAAP k) Deferred tax liability The account below presents a description of the adjustments which must be made to report According to US GAAP, deferred taxes must be reported for all temporary differences apart Tele2 Group’s profit/loss for 2001, 2002 and 2003 and shareholders’ equity as of December from certain exceptions. The reversal of deferred tax liabilities as a result of changes in 31, 2001, 2002 and 2003 in accordance with US GAAP. circumstances is done restrictively. According to Swedish accounting principles, changes in circumstances can be taken into account in the assessment. In conjunction with the liquidation a) Transactions between companies under common control of Société Européene de Communications S.A. in 2001, there were no longer any differences In 1993 and 1994, the company acquired shares in formerly Tele2 AB and Comviq AB vis-à-vis US GAAP. (today are these operations a part of Tele2 Sverige AB) from the Industriförvaltnings AB Kinnevik Group. The acquisition method was used to report the transactions. Accordingly, l) Changes in accounting principles the difference between the acquisition value and market value of net assets was reported According to Swedish accounting principles, changes in accounting principles are reported as goodwill. According to US GAAP, acquisitions of operations from “companies under through a recalculation of the opening shareholders’ equity as if the new principles were common control” should be conducted at historical values. Thus, as a US GAAP already in force when the transaction arose. According to US GAAP, the change is reported adjustment, all revaluations of plants, inventories, goodwill, etc. which arise on the across the income statement when changes in principles are made. transaction date are eliminated and the resulting depreciation/amortization is reversed. From 2003, there is no difference between US GAAP and the book value in accordance m) Other with Swedish accounting principles. Other relates primarily to social security charges on options.

TELE2 ANNUAL REPORT 2003 NOTES 67 Expected amortization of intangible assets Group Estimated amortization of intangible assets according to US GAAP for the next five years: 2003 2002 Change in cash and cash equivalents according to Swedish accounting principles 300 198 Group Change in restricted funds 40 27 1 year –127 Change in liquid funds in the cash flow statement according 1–2 year –127 to Swedish accounting principles 340 225 2–3 year –127 3–4 year –127 Critical accounting principles according to US GAAP: 4–5 year –127 The presentation below shows the accounting principles which are based on the most critical assessments and estimates used in preparing the accounts in line with US GAAP, and which Deferred tax liability/receivable: differ from the preparation of financial statements in accordance with Swedish accounting Group principles. 2003 2002 • When assessing imparement of intangible and tangible fixed assets, and to calculate any Deferred tax liability/receivable according to Swedish accounting principles 2,459 1,246 write-down amount, Swedish accounting principles mandate that a future discounted Deferred tax, US GAAP adjustment 38 –23 cash flow be calculated and compared with the book value. According to US GAAP, a Total deferred tax liability (–) / receivable (+) according to US GAAP 2,497 1,223 non-discounted cash flow is calculated to assess the need for any imparement write-down, while, as with Swedish accounting principles, a discounted cash flow is used to calculate Stock options: any write-down amounts. In accordance with Swedish accounting principles, the option liability for the 1997 incentive • Swedish accounting principles stipulate the application of amortization of goodwill and program was dissolved in its entirety in 2000 as a result of the decision to settle the option other intangible assets. According to US GAAP, there is no amortization of goodwill and through an issue of convertibles. According to US GAAP, depending on the conditions of the other intangible assets with an indefinite life from and including 2002. These assets instead option program, a liability should be calculated based on the difference between the market undergo testing to determine whether imparement exist. The test is based on expected value of the underlying shares and the exercise price. future cash flow of the reporting unit to which goodwill is attributable. Expected cash flow During 2002, stock options were issued as part of a new incentive program. This program is based on the management’s best estimate but has an inherent uncertainty. Different is not reported as an expense in the income statement. A valuation in accordance with the estimates about the future may result in another valuation of goodwill. Black-Scholes option model would have the following effect on profit/loss according to US GAAP. The calculation is based on a risk-free rate of interest of 4.7%, no dividend, volatility of Effects of new US GAAP accounting recommendations: 57.9% and an options expiration date of September 1, 2005. In January 2003, the Emerging Issues Task Force issued EITF 00-21 “Accounting for Revenue Arrangements with Multiple Deliverables”. EITF 00-21 requires transactions with Group several components to have more than one reporting unit and deals with how payment is to 2003 2002 2001 be measured and distributed to the transaction’s different reporting units. EITF 00-21 must Profit/loss for the year, reported as above 3,857 1,692 763 be applied to transactions arising in the period after the financial year beginning on June 15, Adjusted earnings per share, after full dilution 26.10 kr 11.46 kr 5.25 kr 2003. Profit/loss for the year, pro forma 3,842 1,687 760 In January 2003, FASB issued FIN 46, “Consolidation of Variable Interest Entities, an Adjusted earnings per share, after full dilution 26.00 kr 11.43 kr 5.23 kr Interpretation of ARB 51”. FIN 46 deals with consolidation of companies for which control has been gained in a Advertising expenses: manner other than voting rights (“Variable interest entities or “VIE”). Total advertising expenses for the year amount to SEK 1,186 million (2002: 979 million and FIN 46 clarifies the application of ARB 51 for entities in which equity investors lack essential 2001: 1,031 million). characteristics of a controlling financial interest in the company or do not have sufficient equity to finance activities without additional subordinated financial support provided by Market area reporting other parties. FIN 46 provides guidance on how to define when and which company is to Both Swedish accounting principles and US GAAP require a company to divide its operations consolidate a VIE. In addition, FIN 46 requires the party which has the primary advantage into different market areas on the basis of how operations are run. According to US GAAP, from the investment (“primary beneficiary”) and all other companies with a considerable additional information for each market area is submitted for the operating profit/loss (EBIT) variable investment (“variable interest”) in a VIE to provide additional information. FIN 46 earnings measure. However, in Notes 1, 2 and 31, Tele2 has also provided additional must be applied immediately to all VIEs created after January 31, 2003. Listed companies information by market area for earnings measures which are not required by US GAAP. with a VIE established before February 1, 2003 must apply FIN 46 to this VIE for the first time in the financial year beginning after June 15, 2003. Tele2 does not believe that the new rules Classifications will have any substantial effect on its reporting. Tele2 uses the equity method for reporting associated companies. According to Swedish In Dec 2003, FASB issued Interpretation 46 (R), Consolidation of Variable Interest Entities. accounting principles, profit/loss from shares in associated companies is divided into profit/ FIN 46 (R) replaces FIN 46 and clarifies the procedure for accounting of interests in variable loss before tax and tax. Under US GAAP, profit/loss from shares in associated companies interest entities. From January 1, 2004 the Company will begin to apply FIN 46 (R) for entities is reported after tax. In the last three years, no tax has been booked to Tele2’s shares in deemed to be variable interest entities, which arose before January 31, 2003. Tele2 does not associated companies. believe that the new rules will have any substantial effect on its reporting. The cash flow statement according to Swedish accounting principles is in line with US On December 17, 2003, Staff Accounting Bulletin No. 104 (SAB 104), Revenue GAAP, with the exception that restricted funds are included in cash and cash equivalents. Recognition, was issued by the Securities and Exchange Commission. This replaces SAB 101, According to US GAAP, restricted funds are reported as an investing activity in the change of Revenue Recognition in Financial Statements. The main purpose of SAB 104 is to rescind cash flow during the year. The difference is shown in the table below. the accounting guidelines in SAB 101 for agreements containing several components as a Group result of the publication of EITF 00-21, “Accounting for Revenue Arrangements with Multiple 2003 2002 Deliverables.” The principles of revenue recognition in SAB 101 remain largely unchanged Liquid funds in the cash flow statement according to US GAAP 1,943 1,603 despite the issuance of SAB 104. The application of SAB 104 is not expected to affect Tele2’s Restricted funds 830 870 consolidated income statement and balance sheet. Liquid funds in the cash flow statement acc. to Swedish accounting principles 2,773 2,473 Stockholm, February 24, 2004 Sven Hagströmer Chairman Lars-Johan Jarnheimer Marc Beuls Vigo Carlund President and CEO John Shakeshaft Cristina Stenbeck Our auditors’ report was submitted on March 3, 2004 Pål Wingren Carl Lindgren Authorized Public Accountant Authorized Public Accountant

68 AUDIT REPORT TELE2 ANNUAL REPORT 2003 Audit report To the Annual General Meeting of the shareholders of Tele2 AB (publ), corporate registration no. 556410-8917 We have audited the annual accounts, the consolidated accounts, the taken and circumstances of the Company in order to determine the liability, accounting records and the administration of the Board of Directors and the if any, to the Company of any member of the Board or the President. We President of Tele2 AB (publ) for the financial year 2003. These accounts have also conducted examinations to establish whether any member of the and the administration of the Company are the responsibility of the Board of Board or the President has in any other way acted in contravention of the Directors and the President. Our responsibility is to express an opinion on the Swedish Companies Act, the Annual Accounts Act, or the Company’s Articles annual accounts, consolidated accounts and the administration based on our of Association. We believe that our audit provides a reasonable basis for our audit. opinion set out below. We conducted our audit in accordance with generally accepted auditing The annual accounts and consolidated financial statements have been standards in Sweden. Those standards require that we plan and perform prepared in accordance with the Annual Accounts Act and thus provide a true the audit to obtain reasonable assurance that the annual accounts and the and fair view of the Company’s and the Group’s financial position and results consolidated accounts are free of material misstatement. An audit includes of operations in accordance with generally accepted auditing principles in examining, on a test basis, evidence supporting the amounts and disclosures Sweden. in the accounts. An audit also includes assessing the accounting principles We recommend that the Annual General Meeting adopt the Income used and their application by the Board of Directors and the President, Statements and Balance Sheets of the Parent Company and the Group, that as well as evaluating the overall presentation of information in the annual the profit in the Parent Company be dealt with in accordance with the proposal accounts and consolidated accounts. As a basis for our opinion concerning in the Board of Directors’ Report, and that the members of the Board and the discharge from liability, we have examined significant decisions, actions President be discharged from liability for the financial year. Stockholm, March 3, 2004 Pål Wingren Carl Lindgren Authorized Public Accountant Authorized Public Accountant

TELE2 ANNUAL REPORT 2003 DEFINITIONS AND GLOSSARY 69 Definitions (Text in parentheses refers to financial ratios after full conversion.) Liquidity Capital employed Shareholders’ equity per share Cash and cash equivalents, including unutilized Total assets less provisions, minority interests and Shareholders’ equity (including convertible credit facilities granted. non-interest bearing liabilities. debentures) less minority interests, divided by the weighted average number of shares outstanding Investments Return on capital employed during the fiscal year (that would result from full Acquisition and divestment of fixed assets, including Profit/loss after financial items less items affecting conversion of convertible debentures). investments through financial leases and non-cash comparability and financial costs (less interest investments. expense for convertible debentures) divided by ARPU average capital employed. Average monthly revenue per customer. Solidity Shareholders’ equity (including convertible Average interest rate MoU debentures) divided by total assets. Interest expense (less interest expense for convertible Minutes of monthly usage per customer. debentures) divided by average interestbearing Debt/equity ratio liabilities (less convertible debentures). Interest-bearing net debt divided by shareholders’ equity at the end of the period. Earnings per share Profit/loss for the period (less interest expense on Return on shareholders’ equity convertible debentures, and less tax deductions) Profit/loss after tax less items affecting comparability, divided by the weighted average number of shares minority interests after tax deductions (and interest outstanding during the fiscal year (that would result expense for convertible debentures after tax from full conversion of convertible debentures). deductions) divided by average equity (including convertible debentures). ★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★ Glossary CRM – Customer Relationship Management, MVNO – Mobile Virtual Network Operator. VOIP – Voice Over Internet Protocol. often supported by computer-based systems. MVNO’s have greater network resources than Telephony that uses Internet Protocol. Service Providers with which to offer their own DSL - Digital Subscriber Line. telecom services to subscribers. But they do VPN – Virtual Private Network. Generic name covering several different technologies not have radio access network capacity, which A service that links a company’s local and telecom for datatransmission over fixed phone lines. must be purchased from a network operator. networks with the computers and phones of employees who work remotely, forming a telecom or GPRS – General Packet Radio Service. NMT – Nordic Mobile Telephone. data communications network that looks to users like A technology that permits high-capacity data Ordinarily identified as the 1st-generation a single business network. transmission using mobile phones. mobile telephony. An analog technology developed in the Nordic region. WAN – Wide Area Network. GSM – Global System of Mobile. A network of computers on different locations. Communications or Groupe Spécial Mobile. SMS – Short Message Service. Often consists of several LANs linked together. 2nd-generation mobile telephony system. Enables the transmission of short text messages Digital, as opposed to analog NMT. between mobile phones or between a computer WAP – Wireless Application Protocol. that is connected to the Internet and a mobile An industrial standard for Internet-based data IP – Internet Protocol. phone. communications over mobile networks. Developed A series of rules for communication among by the WAP Forum, consisting of big corporations like computers over the Internet. SP – Service Provider. Ericsson, IBM, Motorola and Nokia. A company that purchases capacity from network LAN – Local Area Network. operators with which it can sell telecom WLL – Wireless Local Loop. Local network of computers, often in the same services to its subscribers. Wireless broadband access via radio networks. room or building. UMTS – Universal Mobile Telecommunications MMS – Multimedia Messaging Services. System. A technology for 3rd-generation mobile A service that makes it possible to send text, video telephony intended to handle, text, images, and and audio messages between mobile phones or video. UMTS has greater capacity than GSM. between Internet-connected computers and a mobile telephone.

70 ADDRESSES TELE2 ANNUAL REPORT 2003 Addresses Tele2 AB Investor Relations: Skeppsbron 18 Shared Value P. O. Box 2094 30 St James’ Square SE-103 13 Stockholm, Sweden GB-SW1Y 4JH, London, Phone: +46 8 5620 0060 England Fax: +46 8 5620 0040 Phone: +44 20 7321 5010 www.tele2.com Fax: +44 20 7321 5020 NORDIC SOUTHERN EUROPE Sweden Norway France Portugal Tele2 Sverige AB Tele2 Norge AS Tele2 (France) S.A. Tele2 Portugal Borgarfjordsgatan 16 Ulvenveien 75A 14 Rue des Frères Caudron Rua de Artilharia 1, P. O. Box 62 NO-0581 Oslo, Norway FR-78143 Vélizy cedex, France n° 51 - Pateo Bagatella SE-164 94 Kista, Sweden Phone: +47 21 31 90 00 Phone: +33 1 39 45 44 44 Esc 3, Bloco B, Piso C Phone: +46 8 5626 4000 Fax: +47 21 31 91 00 Fax: +33 1 39 45 44 00 PT-1250-137 Lisboa, Portugal Fax: +46 8 5626 4200 www.tele2.no www.tele2.fr Phone: +351 21 383 97 68 Customer Service: Fax: +351 21 383 07 38 0200-25 25 25 (Internet) Datametrix AS Italy www.tele2.pt 0200-25 25 25 (fixed telephony) Grenseveien 95 Tele2 Italia SpA 0200-22 20 40 (mobile telephony) NO-0663 Oslo, Norway Via Cassanese 210 Storbritannien www.tele2.se Phone: +47 23 03 59 00 IT-20090 Segrate Milano, Italy Tele2 UK Communications Ltd Fax: +47 23 03 59 01 Phone: +39 02 269 571 Ryde House Comviq www.datametrix.no Fax: +39 02 269 204 37 391 Richmond Road P. O. Box 62 www.tele2.it Twickenham SE-164 94 Kista, Sweden Denmark Middx Phone: +46 8 5626 4000 Tele2 A/S Spain GB-London TW1 2EF, England Fax: +46 5865 3444 Gammel Køge Landevej 55 Tele2 Telecommunication Phone: +44 207 892 3600 Customer Service: DK-2500 Valby, Denmark Services S.L. Fax: +44 208 957 1901 0200-22 20 40 (private customers) Phone: +45 77 30 10 01 Francisco de Ricci,3, www.tele2uk.com 0200-22 40 50 (corporate customers) Fax: +45 77 30 10 00 ES-28015 Madrid, Spain www.comviq.se www.tele2.dk Phone: +34 91 540 28 00 Ireland Fax: +34 91 540 28 01 Kabelvision Datametrix A/S Tele2 Telecommunication www.tele2.es P. O. Box 62 Gammel Køge Landevej 55-57 Services Ltd SE-164 94 Kista, Sweden DK-2500 Valby, Denmark Office 4, O’Duffy Centre, Main Street, Switzerland Phone: +46 8 5626 4352 Phone: +45 77 30 10 60 Carrickmacross, Tele2 Telecommunication Fax: +46 8 5865 4840 Fax: +45 77 30 10 61 Co Monaghan, Ireland Services AG Customer Service: www.datametrix.dk Phone: +353 42 969 2946 Postfach 49 0200-22 55 00 Fax: +353 42 969 2947 CH-8037 Zürich, Switzerland www.kabelvision.se Finland Hardturmstr. 161 3 C , Calling Card Company Oy Finland Tele2 AB CH-8005 Zürich Optimal Telecom AB Rälssintie 10 1 Mill Street Phone: +41 1 524 24 24 P. O. Box 62 FIN-00720 Helsingfors, Finland GB-London SE1 2DE, England Fax: +41 1 524 47 78 SE-164 94 Kista, Sweden Phone: +358 432 000 200 Phone: +44 207 232 4949 www.tele2.ch Phone: +46 8 5626 2500 Fax: +358 9 223 64 57 www.cardsville.com Fax: +46 8 5626 2525 www.tele2.fi www.optimaltelecom.se Suomen 3G Oy Datametrix AB Rälssintie 10 P. O. Box 20078 FIN-00720 Helsingfors, Finland SE-161 02 Bromma, Sweden Phone: +358 432 000 200 Phone: +46 8 5220 0200 Fax: +358 9 223 64 57 Fax: +46 8 5220 0290 www.datametrix.se

TELE2 ANNUAL REPORT 2003 ADDRESSES 71 BALTIC CENTRAL EUROPE AND RUSSIA BENELUX SERVICES Germany Estonia The Netherlands 3C Communications S.A. Tele2 Telecom Services GmbH Tele2 Eesti AS Tele2 Nederland B.V. 75 route de Longwy In der Steele 39a, Jöe 2a, Ellermanstraat 19 LU-8080 Bertrange, Luxembourg DE-40599 Düsseldorf, Germany EE-10151 Tallinn, Estonia NL-1099BX Amsterdam, Phone: +352 27 750 101 Phone: +49 211 7400 4600 Phone: +372 6866 866 Netherlands Fax: +352 27 750 250 Fax: +49 211 7400 4611 Fax: +372 6866 877 Phone: +31 207 020 202 www.ccc.lu www.tele2.de www.tele2.ee Fax: +31 207 020 222 www.tele2.nl X-Source AB (UNI2) Austria Latvia Västertorpsvägen 135 Tele2 Telecommunication SIA Tele2 Luxembourg SE-129 44 Hägersten, Sweden Services GmbH Kurzemes Prospectus 13 Tele2 Luxemburg Phone: +46 8 5222 3500 Schönbrunnerstr. 213-215, 4tr Riga LV-1067, Latvia 75 route de Longwy, Fax: +46 8 5222 3552 AT-1120 Wien, Austria Phone: +371 706 00 69 LU-8080 Bertrange, Luxembourg www.uni2.com Phone: +43 181 101 300 Fax: +371 709 01 76 Phone: +352 27 750 101 Fax: +43 181 101 100 www.tele2.lv Fax: +352 27 750 250 ProcureITright, PIR www.tele2.at www.tele2.lu Linnégatan 89 E Lithuania P. O. Box 24 142 Poland UAB Tele2 Tango S.A. SE-104 51 Stockholm, Sweden Sporto g. 7a 177, rue de Luxembourg, Phone: +46 8 783 13 00 Tele2 Polska LT-20 51 Vilnius, Lithuania LU-8077 Bertrange, Luxembourg Fax: +46 8 783 13 01 ul. Marynarska 21 Phone: +370 2 366 300 Phone: +352 27 777 101 www.procureitright.com PL-02-674 Warzawa, Poland Phone: +48 (22) 607 06 50 Fax: +370 2 366 301 Fax: +352 27 777 888 Fax: +48 (22) 607 06 51 www.tele2.lt www.tango.lu www.tele2.pl Russia Liechtenstein Czech Republic Tele2 Russia Telecom Tele2 AG Tele2 s. r. o. B. Gnezdnikovsky Per.,1str.2, 7 tr 75 route de Longwy, Vinohradská 184, Praha 3, RU-103 009, Moskva, Russia LU-8080 Bertrange, Luxembourg CZ-130 00, Czech Republic Phone: +7 095 797 21 61 Phone: +352 27 750 101 Phone: +420 267 13 22 38 Fax: +7 095 797 21 62 Fax: +352 27 750 250 Fax: +420 274 77 82 40 www.tele2.ru www.tele2.li www.tele2.cz Belgium Tele2 Belgium S.A. Chausse de Wavre 1945 B-1160 Brussel, Belgium Phone: +322 213 02 01 Fax: +322 502 82 49 www.tele2.be

72 ANNUAL GENERAL MEETING TELE2 ANNUAL REPORT 2003 2004 Annual General Meeting Time and place The Annual General Meeting will be held on Wednesday, May 12, 2004, at 1.30 p.m. (CET) at Brasserie by the Sea, Tullhus 2, Skeppsbron, Stockholm. The doors will open at 12.30 p.m. and registration will take place until 1.30 p.m., when the doors will close. Who is entitled to participate? Shareholders who wish to participate in the Annual General Meeting shall – have entered in the register of shareholders maintained by VPC AB (the Swedish Securities Register Center) on Friday, April 30, 2004 – notify the Company of their intention of participating by no later than Thursday, May 6, 2004, at 1.00 p.m. (CET) How do I become recorded in the register of shareholders? In the VPC register of shareholders, shares may be recorded in the name of the shareholder or the name of the nominee. Shareholders whose shares are registered in the names of nominees must temporarily re-register the shares in their own name in order to be entitled to participate in the Meeting. In order to be entered in the register of shareholders by Friday, April 30, 2004, shareholders must request temporary re-registration a sufficient number of working days before this date. How do I notify the Company? The Company may be notified as follows: – on the Company’s website, www.tele2.com – by telephone +46 (0)433-747 56 – in writing to the Company to the following address: Tele2 AB, P.O. Box 2094, SE-103 13 Stockholm, Sweden. Please mark the envelope “AGM” When notifying the Company, the following information should be provided: – Name – Personal identification number (or company registration number) – Address and telephone number – Shareholdings – Any advisors attending Shareholders who wish to be represented by a representive shall submit a written power of attorney given authorisation to a specific person together with the notice of participation. The notification must be received by the Company no later than Thursday, May 6, 2004, at 1.00 p.m. (CET)

Tele2 in brief Tele2 is Europe’s leading and profitable alternative telecom operator. With our unique values, we provide cheap and simple telecom for all Europeans every day. We currently have over 22 million customers in 23 countries. We offer products and services in fixed and mobile telephony, Internet access, data networks, cable TV and content services. Our main competitors are the former government monopolies. Tele2 was founded in 1993 by Jan Stenbeck and has been listed on Stockholmsbörsen since 1996. The share has also been listed on Nasdaq since 1997. In 2003 we had an operating revenue of SEK 36,911 million and reported a profit of SEK 5,710 million (EBITDA). Tele2 always strives to offer the market’s best prices.

Tele2 was launched in the United Kingdom in 2003, much to the delight of our customers. But the historical supplier, British Telecom, did not appear to be joining in the celebrations. So Bill Butler, Head of Tele2’s UK operations, was kind enough to explain why he and the British people prefer Tele2. Mail on Sunday, February 2004 PRODUCTION Narva PRINTED BY Sörmlands Grafiska Quebecor, Katrineholm 2004 PHOTO Håkan Flank and Getty Images www.tele2.com

Annual Report 2003

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