Annual Report 2002

Contents A key factor underlying

Tele2’s success is that
Significant events ........................................................................ 1
Jan Hugo Stenbeck ................................................................... 2 we communicate
Tele2 in brief ..................................................................................... 6 with our customers
President’s message ............................................................. 10
in a way that appeals
Market – continuing growth ......................................... 12
Business concept and business model ........... 14 to them.
Services and products ........................................................ 17
page 10
Nordic ................................................................................................... 20
Eastern Europe and Russia .......................................... 23
Central Europe ............................................................................ 26
Southern Europe ....................................................................... 28
Luxembourg .................................................................................... 30
Branded products & services ...................................... 31
Report of the Directors ...................................................... 32 A central market
Income statement ................................................................... 37
driving force is that
Balance sheet .............................................................................. 38
Cash-flow statement ............................................................. 40 customers are
Change in shareholders’ equity ................................ 41 increasingly seeking
Notes .................................................................................................... 42
Audit report .................................................................................... 84 total solutions.
Personnel and environment ......................................... 85 page 12
Board of Directors ................................................................... 86
Senior executives ..................................................................... 87
Tele2 share ...................................................................................... 88
Addresses .......................................................................................... 90
History ................................................................................................ 92
Definitions ....................................................................................... 93

Annual General Meeting Tele2´s business
The Annual General Meeting will be held at 1:30 pm
on Thursday, May 15, 2003, at Gamla Stans Bryggeri, concept is to offer
Tullhus 2 at Skeppsbron in Stockholm.
simple, customer-
Shareholders who wish to attend the Annual General
friendly services at
Meeting
must be entered in the register of shareholders the lowest price.
maintained by VPC AB (the Securities Register
page 14
Center) for the Annual General Meeting
(registration must be completed by Monday
May 5, 2003).
and notify the Company of their intention to attend
no later than 1:00 pm on Friday, May 9, 2003.

Notification can be made by phone to
+46 33 724 12 67, or in writing to:
Tele2 AB, Box 2094, SE-103 13 Stockholm, Sweden
label the envelope “Annual General Meeting” or by The rapid growth in
e-mailing to: bolagsstamma03@tele2.com
Southern Europe is
Financial information
Quarterly report, January–March April 23
driven by the intro-
Annual General Meeting May 15 duction of local pre-
Quarterly report, January–June August 5
Quarterly report, January–September October 21 selection.

page 28

Significant events in 2002

• Profit after financial items rose by SEK 2,740 million to SEK 796 million.

• Cash flow after investments increased by SEK 2,903 million to SEK 1,849 million.

• Operating revenue jumped 25%, by SEK 6,197 m to SEK 31,282 m.

• EBITDA advanced to SEK 5,127 m, compared with SEK 1,698 m in 2001. + 25%
• A positive EBITDA was reported for fixed telephony in Central and Southern Europe,
SEK 4 million compared with a loss of SEK 1,916 m in 2001.

• 16.8 million customers at year-end, an increase of 12%.

Significant events at the beginning of 2003
+ 12%
• Tele2 acquires the British company Alpha Telecom.

Financial summary
MSEK 2002 2001
Operating revenue 31,282 25,085

Operating profit/loss before depreciation, EBITDA 5,127 1,698

Operating profit/loss after depreciation, EBIT 1,530 –1,356

Operating profit/loss after financial items, EBT 796 –1,944

Profit for the year 223 392

Earnings per share, after dilution 1.51 2.70

Average number of employees 3,115 2,172

Jan Hugo Stenbeck
1942-2002

2 TELE2 ANNUAL REPORT 2002

Tele2 AB

Dear Shareholder,

Jan Hugo Stenbeck was Chairman of the Board of Directors of Tele2 AB for nine years from
1993 to 2002. He was also Chairman of Industriförvaltnings AB Kinnevik, Invik & Co. AB,
Modern Times Group MTG AB, Millicom International Cellular S.A., Metro International S.A.
and Transcom WorldWide S.A.

Jan passed away on 19 August 2002. He possessed a seldom-rivaled energy, panache, ambi-
tion and sense of fun. His dynamism, curiosity and restlessness, combined with a charm,
determination and healthy fear, drove him to create one of Europe’s most innovative and
successful group of companies. He would not compromise on quality or efficiency and
never ceased to surprise by breaking with convention. His insight – the ability to grasp the
key elements of an issue and articulate his views clearly - was his greatest attribute. Loyalty
was the quality that he valued most in others.

Born in Stockholm in 1942, Jan graduated in Law from Uppsala University in 1968 and
with an MBA from Harvard Business School in 1970. He then joined US investment bank
Morgan Stanley and rose to become a Vice President in the Bank’s Corporate Finance depart-
ment. He became a member of the Board of Directors of Industriförvaltnings AB Kinnevik in
1971 and became Chairman in 1993, taking over at the helm of the Group that his father,
the prominent lawyer Hugo Stenbeck, and the Klingspor and von Horn families had built
into one of Sweden’s largest industrial investment companies. With uncanny foresight, Jan
built a multinational information empire from this industrial foundation and transformed
Kinnevik into a holding company for new telecommunications, media and service businesses
whose brands are now household names not just in his native Sweden but a large number of
markets around the world.

As one of the leading entrepreneurs and visionaries of his generation, he started hundreds of
companies in his lifetime.They ranged from a college sweatshirt business established in
1963 with 10,000 customers and less than US$1 million in annual sales to Europe’s leading
alternative telecommunications provider with over 16.8 million customers and US$3.7 bil-
lion in annual sales. All the businesses share several common features – they all break
monopolies in order to provide people with choice, grow sales aggressively, are highly com-
petitive businesses with low cost structures, and they all aspire to be “best in class”.

3

Jan Hugo Stenbeck

From Kinnevik’s roots in the traditional steel and forestry industries, Jan created a group of
companies that embraced new technologies and encouraged a competitive environment in
the Nordic region and then internationally. As a pioneer of mobile telephony in the early
1980s, Jan formed a joint venture with British defense company Racal to acquire the UK’s
second mobile phone license. Racal-Millicom evolved into the US$122 billion global
telecommunications giant,Vodafone. Jan also acquired one of the first mobile telephony
licenses in the United States and this model was repeated around the world. Millicom and
Tele2 today hold fixed line or mobile telephony licenses in 37 countries – from Estonia
to Sierra Leone, Bolivia to Russia, and Portugal to Laos – and have more than 20 million sub-
scribers around the world.

In similar fashion, Jan introduced the first commercial television channel,TV3, to Scandinavia
in 1987 by broadcasting commercial television into Scandinavia from London via the Astra
satellite in Luxembourg.The same approach enabled Sky Television to launch in the UK. TV3
is now the largest pan-Nordic television channel and the Viasat satellite TV platform broad-
casts 36 channels to nine countries, which are watched in 45 million homes.

The most recent project to achieve global scale and reflect the Group ambition is Metro
International, the free newspaper group. Again challenging local market monopolies and
established media in cities from Boston to Barcelona, Stockholm to Santiago, and Holland
to Hong Kong, Metro now reaches over 12 million readers and is the world’s largest news-
paper outside Japan.The company’s advertising revenues have grown at a compound annual
rate of 47% since the launch of the first edition in Stockholm in 1995.

All of these companies continue to shape and adapt successfully to new developments as third
generation mobile telephony and digital multi-channel television become realities, and as
exciting new markets in Eastern Europe and Asia offer significant new opportunities.

Kinnevik has generated a compound annual average rate of return since 1976 of 13%, with
the result that one dollar invested in Kinnevik in 1976 would be worth over US$25 today.
The Stenbeck Group of publicly listed companies had a combined market capitalization of
US$6 billion in February 2003 and employed more than 25,000 people in more than 50
countries around the world.

In typical style, the Stenbeck group of companies, combined established tradition with ground
breaking originality by welcoming in the new millennium with a spectacular fireworks and
multi-media display in Stockholm’s Old Town on New Year’s eve.The scale and complexity of
this event not only mesmerized the record breaking crowd of 700,000 people and won its


Jan Hugo Stenbeck

place in the Guinness Book of World Records, but also offered a unique showcase for group
brands such as Comviq,TV3 and Metro.The event perfectly illustrated Jan’s unusual combin-
ation of creative flair and intricate planning.

On the day after he passed away and only a few months before his 60th birthday, one of Jan’s
greatest dreams was realized when the second Victory Challenge yacht was launched
in Auckland, New Zealand. From the time that he had acquired the former committee boat
of the New York Yacht Club, Jan had nurtured a dream to compete for one of the sporting
world’s oldest and most coveted trophies – The America’s Cup.The Victory Challenge syndi-
cate brought together leading match race sailors from the Nordic countries in the
first challenge by a Nordic crew for twelve years.

The challenge exemplified Jan’s approach, as he acquired one of the yachts used by Team
New Zealand to win the Cup in 2000, then recruited and motivated world class boat design-
ers, builders, and sailors, forged a team, and pushed each member to the limits of their
potential, whilst maintaining a strict control on cost.This was an environment in which he
thrived – high adrenaline competition, pitting the Nordic team against the world’s best.
Every detail counted as seconds decided between success and failure. Victory Challenge won
eleven races, including two victories over the New York Yacht Club, reaching the quarterfinals
of the Louis Vuitton Cup and becoming the most successful Nordic entry ever.The Challenge
generated unparalleled media airtime for its group sponsors, including live television cover-
age in Sweden, Norway, Denmark, Switzerland, France, Italy, the United Kingdom, the United
States and Canada.

Despite, and perhaps because, of all the achievements above, Jan remained a very private and
modest man. “Tell them that I am only a Basett hound breeder” he would reply to the end-
less requests for interviews. As Jan always said, “if you can’t choose, you shouldn’t com-
plain”. He led a unique life and is greatly missed. His legacy is an opportunity to build on
his success and your Board is firmly committed to fulfilling this responsibility. On behalf
of the shareholders, customers, employees and business partners, the Board of Directors
wishes to express its gratitude for the enormous contribution of Jan Hugo Stenbeck to the
development of Tele2 and the other companies, which he founded and in which he engaged.

Stockholm, 27th February 2003
Tele2 AB
The Board of Directors

5

Tele2 in brief

Mobile telephony Fixed telephony and Internet

Nordic: Sweden, Norway, Denmark. Nordic: Sweden, Norway, Denmark, Finland.
Geographic markets:

Eastern Europe Eastern Europe
and Russia: Estonia, Latvia, Lithuania, Russia. and Russia: Estonia, Poland, Czech Republic.

Central Europe: Switzerland, the Netherlands, Austria. Central Europe: Germany, the Netherlands, Switzerland,
Austria, UK.

Southern Europe: — Southern Europe: France, Italy, Spain, Portugal.

Luxembourg: Liechtenstein, Luxembourg. Luxembourg: Liechtenstein, Luxembourg, Belgium.

12 countries 19 countries
Percentage of net sales:

30 % 68%
Number of customers:

Nordic: 3 221 000 Nordic: 2 822 000

Eastern Europe and Russia: 1 366 000 Eastern Europe and Russia: 144 000

Central Europe: 271 000 Central Europe: 3 316 000

Southern Europe: — Southern Europe: 5 129 000

Luxembourg: 181 000 Luxembourg: 41 000

5.0 11.4 million million

16.8 million customers in 22 countries

Tele2 AB, formed in 1993, is the leading alter- and billing; C3, which is active
native pan-European telecommunications com- in prepaid calling cards for
pany offering fixed and mobile telephony, as well fixed telephony; and
as data network and Internet services, under the Optimal Telecom, which
brands Tele2, Tango and Comviq to more than offers households low price
16.8 million customers in 22 countries. Tele2 guarantees for telephony services. The Group
operates Datametrix, which specializes in sys- also offers cable-TV services and jointly owns the
tems integration; 3C Communications, which Internet portal Everyday.com with MTG. Tele2
operates Internet payments, credit card trans- AB’s share is listed on Stockholmsbörsen
actions and public pay telephones; Transac, which (Stockholm Exchange) under TEL2A and TEL2B
offers data processing of credit card transactions and on Nasdaq under TLTOA and TLTOB.

7

MVNO iHear
MVNO (Mobile Virtual Network Operator) is a concept iHear is a cordless digital

that makes it possible for Tele2 to offer its customers telephone equipped with

mobile telephony without needing to invest in its own a calling-router.

mobile network. Tele2 buys the right to handle incom-

ing and outgoing mobile traffic. As an MVNO, Tele2

has its own SIM cards, bills its customers directly and

develops its own services. As a result, customers gain

access to Tele2’s services and lower rates. MVNO

offers major growth potential for Tele2 in countries in

which it has a large customer base in fixed telephony,

but lacks its own infrastructure.

Transcom Flexible solutions
Transcom is a pan-European partner that handles Tele2’s corporate culture is marked by flexibility and

Tele2’s customer relations. Transcom serves as Tele2’s adaptability in reacting to changes in customer

customer service and handles all of Tele2’s ongoing requirements and other market conditions – while

customers matters. focusing constantly on customer demand for attrac-

tive services and the lowest price.


Anders Igel , President of TeliaSonera Victory Challenge
“I think Tele2 is good at marketing, adopts a com- Tele2 sponsored Victory Challenge – the Swedish

mercial approach and has an ability to get things done. challenger for the America´s Cup in 2003. Victory

We’ve got a good deal to learn from them.” Challenge went all the way to the quarterfinals outside

Auckland in New Zealand. Tele2 is currently active in
Affärsvärlden, No. 3, 2003
22 countries and the exposure provided by the sailing

contests was a very effective way of strengthening the

brand among existing and new customers.

Network Management GSM licenses
in Russia
To provide 100% availability in the networks, they are

monitored 24 hours a day, 365 days a year. This Tele2 now has GSM licenses in all eleven of its oper-

ensures that our customers can communicate with as ations in Russia. Preparations for the GSM network

few interruptions as possible. build-out are well advanced and general agreements

for delivery of GSM infrastructure have been reached

with suppliers.

9

Tele2 is a unique company

Tele2 is the only telecom company that has more than SEK 2.3 billion. Another key Our fixed network companies are also
a pan-European market in fixed network benchmark of our solid financial base is becoming mobile companies in pace with
telephony. As the leading alternative tele- that net debt fell by SEK 1.6 billion dur- deregulation. We’re focusing on the MVNO
com company in Europe, we can state with ing the year and now amounts to SEK 7.7 concept, which means that we buy rights
satisfaction that our subsidiaries in country billion. to handle incoming and outgoing mobile
after country report positive operating profit This is a solid platform for continuing traffic from an established mobile opera-
before depreciation about three years after operations. tor. As an MVNO, we issue our own SIM
start-up. The question posed for most telecom cards, invoice customers directly and
The image of Tele2 as primarily a Swedish companies today is: “Are there sufficient develop proprietary services. For the cus-
or Nordic company is increasingly inaccur- funds?” The question I’m faced with is a tomer, the difference between a subscrip-
ate. Each of our subsidiaries in France, totally different one: “What will we do with tion with Tele2 as the MVNO or having a
Italy and the Netherlands have more fixed our funds?” The answer is easy to give: subscription with the operator who owns
network customers than Tele2 in Sweden. We will continue to be a growth compa- the infrastructure is merely Tele2’s lower
Tele2 is a unique telecom company ny and win market share in markets in rates and services. Being a Service Partner
since we are not burdened by major invest- which we are present. The exciting feature (SP) is less attractive for Tele2, since this
ments requiring write-offs. Tele2 reported is that we can personally set the pace with- does not permit the same type of customer
a positive bottom line in 2002 despite out viewing financial resources as a bottle- contact.
write-offs for our 3G venture in Norway. neck. Our efforts to develop fixed network cus-
Tele2’s profit before and after deprecia- Over a number of years I’ve stated that tomers and transform them into mobile
tion/amortization shows a much smaller we’ve got our fingers in the cookie jar. By customers is an expression of our cross-
difference than other telecom companies. that I mean we are as close as possible to selling strategy. Our large customer base is
Focusing on markets and customers our customers. We can see clearly how this being offered an increasing number of ser-
instead of on costly investments in tech- approach works in Estonia, Latvia and vices, which means lower costs for one
nology was the basic philosophy of Tele2’s Lithuania, countries in which we are high- “new” customer.
founder Jan Stenbeck from the very begin- ly successful. I’m convinced that these Through MVNO´s, Tele2 is now trans-
ning. Jan Stenbeck’s passing away in positive lessons can act as an excellent forming part of its large stock of fixed net-
August 2002 was of course a profound loss guide as we increase the pace in our work customers in country after country
for Tele2, but the founder’s basic ideas Russian operations. into Tele2 mobile customers. Mobile cus-
remain intact. Tele2 is now working active- Tele2 started its operations in Sweden. tomers accounted for the largest percent-
ly to develop these basic concepts through- Operations there are wide-ranging and age of the increase in customers in 2002.
out Europe. highly important. This applies not least to Tele2 returned its Norwegian UMTS
Tele2 now has a solid financial base. Comviq, which celebrated its tenth anni- license during the year, opting instead to
The fact that the company began to report versary in 2002, and reported 3 million sign an MVNO deal with Telenor.
a profit in 2002 is, of course, significant, mobile customers. Two million of these are European telecom deregulation is far
but perhaps what is even more impressive prepaid customers. Comviq’s mobile tele- from complete, but the EU and the various
is that cash flow during the year was boost- phony is based on our core values. Our aim national supervisory authorities are now
ed by almost SEK 3 billion after invest- is always to give customers minimum worried by the threat that has emerged in
ments. The company’s disposable liquid rates, while simultaneously developing a number of countries, namely, that mar-
funds, including unutilized overdraft facil- concepts and services. ket newcomers are disappearing so that
ities, amounted at year-end to slightly only the former monopolies remain. Since

“Tele2 is the world’s fourth fastest growing telecom/IT company…”
Business Week, June 19, 2002

10 T E L E 2 A N N U A L R E P O R T 2002

“Tele2 is the only
telecom company
with a pan-European
market in fixed
telephony.”

Tele2 is one of the few profitable European point remains the same as in the past. We Communication is fun, and fun shouldn’t
telecom operators, our operations attract gain a major advantage from expanding our cost too much.
substantial positive interest from the EU 3G network in Sweden in cooperation with By rolling out Tele2’s concept across
and national regulatory authorities. As the Telia. Our 3G operations will most likely be Europe and taking our experience with us
sole alternative pan-European telecom profitable earlier than in any other from previously deregulated markets, we
operator, we are currently one of the few European country. Our plan to commence are gaining a profitable customer base in
examples of the positive effects of dereg- commercial 3G operations at the end of country after country.
ulation for companies and consumers. 2003 remains in place. But for consumers, But there’s no shortage of challenges.
Competition must continue in order to voice communications, SMS and MMS will My colleagues and I continue to focus on
ensure consumer value. This means that remain the most important features. offering additional services to our enor-
the supervisory authorities have an interest Subsequently, long-term 3G factors will mous customer base. This is a guarantee
in maintaining competition. I definitely impact positively on earnings. But also in for continued growth and increased prof-
feel that this represents a significant guar- this case I believe that our close-to-the- itability in the sprit of a small company.
antee against national protection of the customer work approach will offer advan-
former monopolies regaining the upper tages. Our dialogue with customers is filled Stockholm, February 2003
hand. But there are definitely countries in with respect and interest in the customer’s
which one would wish for greater pressure requirements. Not least, we are following
for change. This applies primarily to with great interest the use of mobile tele-
Germany, but even in France this would be phony among young women, whom to date Lars-Johan Jarnheimer
very desirable. have been major trendsetters in this area.
UMTS (3G) continues to be a topical A key factor underlying Tele2’s success
subject. I never expected rapid 3G devel- is that we communicate with our cus-
opment and therefore my message on this tomers in a way that appeals to them.

11

Market – continuing growth

The European telecom market is charac- Continuing growth and market conditions permit. Tele2 has a
terized by stiff competition, acquisitions At the same time as competition is stiff- history of offering customers attractive
and mergers – but also by continuing ening, the telecom market continues to products at competitive prices.
growth in demand. expand. For example, the total market for
Following deregulation in the EU, fixed telephony, mobile telecom services Varying progress in deregulation
numerous new players established a pres- and Internet access in Sweden rose 7% EU telecom markets were deregulated to
ence in the market, at the same time as during the first six months of 2002, com- stimulate greater competition. The intro-
the former monopolies expanded into new pared with the same period a year earlier. duction of new legislation designed to lead
geographic markets. A central driving force in the market is to increased competition has, however,
Following a wave of investments in 3G that customers are increasingly seeking progressed differently in various countries.
licenses, data networks and other applica- total telecom solutions. Tele2 has access Germany, for example, has fallen behind
tions, many companies have abandoned to services and expertise in mobile teleph- other countries as regards local carrier pre-
the market, either as result of acquisition ony, fixed telephony, Internet, data net- selection. In those countries in which local
or bankruptcy. One feature of the com- works, cable-TV and broadband and is pre-selection is made available for players
panies that were pushed out is that they working continually to transfer know-how other than the former monopolies, such as
lacked financial strength and/or a feasible among the various areas and countries to France and Italy, Tele2 has gained consid-
business model. This trend has created strengthen its customer offering. Tele2 has erable successes.
opportunities for Tele2 to acquire cus- had major success in cross selling new Also, the EU Commission believes there
tomers from these companies. products to its existing customer base. is no effective competition in, for example,
In markets in which Tele2 is relatively broadband services via access networks,
recently established, the strategy is to add meaning copper wire that connects switch-
new services and products as deregulation es with end customers. The pricing applied

12

by the former monopolies discriminates leases an existing network and thus avoids with Telenor. Tele2 is already active as an
against newcomers. building a new mobile network. MVNO in Denmark and the Netherlands,
Also, interconnect traffic charges are an The difference between MVNO and SP and during 2002, an MVNO agreement
area in which improvements are required. is a fundamental one. In the latter case, was signed with Connect Austria in Austria,
The interconnect traffic charge is the fee the operator becomes a vendor of another where service was launched in February
paid by a telecom operator to enter the company’s telephony, since it only handles 2003.
access network. Interconnect traffic outgoing traffic. MVNO means simply that
charges are one of the largest expense a mobile operator purchases radio access UMTS – third generation mobile telephony
items for Tele2. Consequently, lower inter- from an existing mobile operator, but is Tele2 holds UMTS licenses for third gen-
connect traffic charges provide highly pos- otherwise completely independent and can eration telephony in Sweden, Finland
itive effects. develop services, payment forms and (through joint ownership of Suomen
The pricing originates from the former direct traffic accordingly as if it were a con- Kolmegee Oy), Liechtenstein, Luxembourg
monopoly’s attempts to retain control of ventional mobile operator. The only differ- and Latvia.
the access network. It is only when these ence between a conventional operator and In an effort to keep down costs of con-
– and thus subscriptions – are exposed to a real MVNO is that the MVNO has no construction and operation of the UMTS net-
competition that deregulation of the mar- trol of coverage build-out. For the cus- work in Sweden, Tele2 and Telia have
ket will have a full impact. tomer, there is no difference between hav- established a jointly owned company,
ing a subscription with a conventional Svenska UMTS-nät AB. Costs are curtailed
MVNO offers new growth opportunities operator or having one with an MVNO. through the use of both companies’ exist-
In cases in which deregulation is effective, The model opens major growth oppor- ing infrastructure, such as telecom masts.
new markets are opened up to new forms tunities for a company like Tele2, which Tele2 has a strong brand, large cus-
of service suppliers. Both Mobile Virtual has a large customer base in many coun- tomer base, service development close to
Network Operators (MVNO) and Service tries but which does not have its own infra- customers, an efficient organization and
Providers (SP) have emerged as new busi- structure. During the year, Tele2 returned comprehensive technical know-how – fac-
ness models that add to competition in the its UMTS license in Norway and instead tors that suggest success in the market for
mobile market. In both cases, the operator elected to conclude an MVNO agreement 3G-based services.

13

Business concept

Based on customers’ needs, Tele2 shall through
simple, customer-friendly sevices and the lowest
price have the most satisfied customers in the
market.

This is Tele2 Values

Tele2, formed in 1993, is the leading alternative Tele2’s corporate culture rests on three
pan-European telecommunications company and fundamental values:
is active in GSM, public telecommunications and
• flexibility
data networks, as well as Internet and cable-TV
• informality
services.
• cost-consciousness

Tele2’s organization

Tele2 AB
Lars-Johan Jarnheimer, CEO
Håkan Zadler, CFO

Nordic Eastern Europe Central Europe Southern Europe Luxembourg Branded products
and Russia Germany France & services
Sweden Luxembourg
Norway Estonia Netherlands Italy Liechtenstein C3
Denmark Latvia Switzerland Spain Belgium United Kingdom
Finland Lithuania Austria Portugal 3C Everyday
Optimal Telecom Poland Ireland Transac
Datametrix Czech Republic
Russia
X-source


Strength factors: Strategies

• profitability The company’s strategy is reflected in:

• low rates • Being the price-leading operator in all markets
in which the Group is present.
• large customer base
• Price-leadership and the role of challenger to the
• industry-leading efficiency
former monopolies have been decisive factors in
• well-known brands
successfully securing new customers and thus
• flexibility Tele2’s growth.

• prompt adjustment to new customer • When expanding into new markets, the aim is
requirements and market conditions to rapidly build up a customer base that can

• committed and skilled employees subsequently be cross sold services in pace
with market maturity and deregulation to offer
more people the opportunity to communicate
less expensively through Tele2.

Business model

In existing markets in continental Europe, when it is not necessary. In countries in Baltic states are extremely important for
future growth is expected to derive largely which Tele2 owns infrastructure, it would expansion in Russia. Know-how and experi-
from the cross-selling of services and not have been possible to compete with the ence from the Baltic market can be used
products to the existing customer base. In former monopoly without access to propri- to gain efficient growth in Russia.
less mature markets, the penetration rate etary infrastructure.
remains relatively low, permitting rapid The objective in each country is to reach Rapid growth
growth when an increasing number of a positive operating income before depre- In 2002, Tele2 was the fastest growing
people demand attractive communications ciation/amortization within three years telecom operator in Europe, thereby con-
services. Tele2 is also monitoring countries from the start of operations. Tele2 has firming the functional nature of its busi-
bordering on current market areas. achieved this in all markets except ness model.
Tele2 consistently attempts to transfer Germany, where deregulation has lagged
know-how among its various product areas behind the rest of Europe. Quality
and countries. Customer offerings and suc- In Southern Europe, with France and Tele2 has a quality policy that serves as a
cessful concepts create synergies since Italy as the largest markets, Tele2 has guide for all operations in the Group. One
they can be more used effectively in sev- established itself as a strong brand and has of the most important means of attaining
eral markets, creating conditions for high- had great success in fixed telephony. the Group’s target is high quality in every-
er profitability through economies of scale Operations in the Baltic States have thing it does. Tele2’s commitments,
and better resource utilization. largely emulated Nordic activities with actions and products will be perceived as
Cost-consciousness also entails not great success – the area is one of the most an expression of quality. The foundation
contracting and owning infrastructure rapidly growing in mobile telephony. The comprises the Group’s values and accu-

15

Business model cont.

mulated expertise. Constant improvement The rapid addition of new customers in with an expected introduction in Germany
is the work motto. the Baltic States is driven by mobile tele- during 2003, revenues in Central Europe
The experience of a product or service phony and particularly the prepaid card. In will grow in 2003 without triggering any
must always meet the customer’s expect- Latvia, Tele2 acquired one of two UTMS rise in costs. As an MVNO, new possibili-
ations. The customer is the center of atten- licenses. In January 2003, the market ties for growth are created. Tele2 has an
tion and the key quality benchmark is cus- opened for fixed telephony and Tele2 MVNO agreement with Telenor in Norway,
tomer satisfaction. Customer surveys are expects to introduce services during the with launch planned for the first quarter of
conducted regularly in an effort to improve first half of the year. Tele2 launched fixed 2003. During 2002, Tele2 rolled out an
results consistently. Customers must telephony in Poland during the first quarter MVNO in the Netherlands and signed an
always feel confidence in Tele2 as a sup- of 2003 and plans to introduce local pre- MVNO agreement with Connect Austria in
plier. selection in the Czech Republic during the Austria.
year. In February 2003, Tele2 acquired Alpha
Opportunities in 2003 In Continental Europe, fixed telephony Telecom, the leading prepaid fixed tele-
During 2002, Tele2 grew faster than its operations continued to post strong growth phony operator in the UK for private indi-
competitors, generated the best cash flow in 2002 and at year-end had 8.5 million viduals and the market leader in prepaid
and improved earnings sharply. customers. Central Europe and Southern cards for fixed telephony. Alpha will ben-
Maintaining the balance between cus- Europe combined reached breakeven at efit from Tele2’s strong market position
tomer growth, profitability and cash flow the EBITDA level during the year. and will be able to expand to Tele2’s mar-
continues to be the priority in 2003. Introduction of local pre-selection in kets in Europe.
Tele2’s mobile operations are “Best in Southern Europe fueled Tele2’s very rapid
Class” with very favorable margins in development in the market area. Fixed
Sweden. Tele2 has more than 3 million telephony was launched in Portugal in
mobile customers in Sweden. Profitability 2003.
in the Swedish fixed telephony operations With local pre-selection available in the
continues to be good. Netherlands since August 1, 2002, and

Good positioning
Tele2 always aims to improve


Products and services

Tele2 offers fixed telephony, mobile telephony, Internet services, and data network services,

cable-TV and content services in 22 countries in Europe.

Tele2’s product strategy is to have a joint product portfolio with fixed telephony as a base and

add dial-up Internet services, mobile telephony and broadband when the market in each country

is sufficiently mature. This strategy permits Tele2 to deliver and continually improve products that

satisfy customer demands for low-cost, high-quality communications services.

Fixed telephony Prepaid telephony
Prepaid fixed telephony means that the
customer pays his/her own “call account”
which they then use when calling via the
Carrier Pre-select fixed telecom network. For Tele2, the
Pre-selection means that customers can service means fewer unpaid receivables,
select to use Tele2’s lower prices for their lower customer churn and reduced invoicing
fixed telephony. They no longer need to dial costs, and at the same time, it is positive
a prefix. Local pre-selection means that for cash flow.
Tele2 also takes charge of local calls via Tele2 has had considerable success
pre-selection. with prepaid fixed telephony in France,
Following deregulation in France, Italy Italy, Spain and Finland.
and the Netherlands – Tele2 began to offer
iHear stores and news stands. C3 works closely
customers cheaper call rates using Tele2
iHear is a cordless telephone equipped with Tele2, which provides the network
via pre-selection. Tele2 continues to work
with a calling-router that always connects capacity.
with the authorities in countries in which
pre-selection and local pre-selection have the call via Tele2, and thus provides access
not yet been deregulated. to the company’s attractive rates. In recent Telephone booths, Internet
The access network, meaning the cop- years, Tele2 has used the iHear telephone terminals and WLAN Hot Spots
successfully to increase customer satis- Via 3C Communications, Tele2 operates
per wire connecting households with the
faction, customer loyalty and call volumes. credit card-based telephone kiosks and
telecom network, is still not open to com-
The telephone is particularly effective in Internet terminals in hotels, restaurants
petition but is instead handled almost ex-
countries where pre-selection is not avail- and other well-frequented locations
clusively by Europe’s former telecom mon-
able. Tele2 launched the latest Dect 3 throughout Europe. The kiosks and termin-
opolies. As a result, customers who have
model of iHear in 2002. als are an excellent base for adding WLAN
selected an alternative, must pay sub-
Hot Spots (Wireless LAN) which permit a
scription charges to the former monopoly.
Telephone cards link up with portable computers. Tele2
However, we have succeeded in offering
Since 1999, C – Calling Card Company –
3 operates via the operator organization
subscriptions to customers in Denmark
has sold calling cards for fixed telephony Pass-One for global roaming among vari-
and we are intensively pursuing this issue
in a number of markets in Europe. The call- ous Hot Spots.
in other countries. This gives our cus-
tomers one invoice and a better overview ing card is available in different denomi-
of their telephony costs, resulting in more nations for domestic and international VoIP
calls and features a code. The customer Voice over Internet Protocol – telephony via
satisfied customers and notably lower cus-
calls up the number indicated on the card the Internet.
tomer turnover.
and dials in his/her code – then it’s just a During 2002, Tele2 conducted a num-

matter of calling cheaper with Tele2. ber of successful tests using VoIP in broad-

The calling card is marketed under a band networks.

number of brands and is sold primarily in
17

Mobile telephony make calls outside Sweden using a pre-
paid card. This service has proved to be
very successful.

Tele2 offers mobile telephony via a number UMTS
of subscription forms and prepaid cards. UMTS technology increases capacity in
Regardless of whether the service targets mobile networks considerably compared infrastructure. Capacity is leased instead
consumers or the corporate market, it is with GSM. Tele2 believes firmly that third from a network owner. In countries in
positioned as price leader. generation mobile telephony, 3G, will which Tele2 does not have a mobile
Having a mobile telephone with a pre- involve a revolution for access to personal license, the MVNO concept permits Tele2
paid card is growing in popularity and has information and entertainment by con- to supply fixed telephony with a full range
contributed to Tele2’s rapid growth. It’s necting mobile customers with mobile of services in subscription and prepaid
easy to understand why many people opt broadband services such as e-mail, image calling cards for mobile telephony.
for prepaid calling cards. Customers can services, games and content portals. Tele2 expects MVNO´s to expand in the
start calling immediately, they have good Tele2 has UMTS licenses in Sweden, immediate future, since deregulation of
control of their telephone costs and can Finland (via the jointly owned Suomen the EU telecom market is gaining an
always check how much credit they have Kolmegee Oy), Luxembourg, Liechtenstein impact and the mobile market is maturing.
left. They also avoid bills and credit and Latvia. Tele2 operates as a MVNO in Denmark and
appraisals are unnecessary. the Netherlands. During 2002, a MVNO
A major innovation in Sweden during MVNO agreement was signed with Telenor in
2002 was the introduction of a service MVNO – Mobile Virtual Network Operator Norway and with Connect Austria in
allowing Tele2 customers to receive and – means that Tele2 can act as a complete Austria, where the service was subse-
mobile operator without owning its own quently launched in February 2003.

Internet services the conventional network are impossible
due to technical, legal or business reasons.
The success of wireless broadband also
indicates that the former monopolies have
Dial-up Internet an erroneous and ongoing monopolistic
Dial-up Internet means that customers are approach in the pricing of broadband ser-
not permanently connected but can use a vices.
modem when they wish to link up to the Tele2 offers wireless broadband via WLL
Internet. Dial-up Internet is available in in parts of Poland, Czech Republic,
subscription form and as a link-up without Finland, Norway, Sweden and Denmark.
a fixed charge, for which customers pay Metropolitan Area Networks
only for the time they are connected. The ADSL Tele2 offers broadband at 10 Mbit/s in a
primary growth in the area is represented ADSL – Asymmetric Digital Subscriber Line number of MANs (Metropolitan Area
by connections without a fixed charge. – is a technology that permits the use of Networks) in Sweden and Denmark.
Tele2 is the market leader in Scandi- broadband via conventional telephone In Sweden, the MAN is linked to Tele2’s
navia for dial-up Internet and has very suc- lines. This area offers major potential, wide-ranging trunk network, Swipnet,
cessfully launched Internet with subscrip- especially since customers find the product which was the first commercial IP network
tions as base in France and Italy in 2002. easy to use by customers, although pricing in Sweden. In Denmark, MAN is linked to
Dial-up Internet will be launched in more by the former monopolies presents a major the country’s largest trunk network.
countries during 2003. The Internet product obstacle to future growth. Tele2 is active-
is continually upgraded with new services. ly continuing its efforts to find solutions to Broadband via cable-TV
the monopoly problem. As early as 1998 in Sweden, Tele2 began
Wireless broadband Tele2 offers ADSL in Sweden, Norway, to offer broadband using cable-TV as the
Broadband is a method for transferring Denmark and Switzerland. Tele2’s ADSL carrier. During 2001 and 2002, a large
data in the form of text, images and voice services have made a definite impact in the portion of the network was upgraded to
at very high speeds. Wireless broadband Nordic market and the company has con- handle broadband. The offering is one of
via WLL (Wireless Local Loop, via radio net- solidated its position as the largest Internet the cheapest on the market.
works) is a way of circumventing the access supplier in Scandinavia. ADSL will be intro- Tele2 also offers broadband via cable-
network when broadband connections via duced in additional countries in 2003. TV network in Estonia and Lithuania.


Cable-TV
Under the Kabelvision brand, Tele2 offers
one of the market’s best basic packages in
Sweden at an attractive price. Kabel-
vision’s basic package (Pluspaket) offers
access to 15 popular TV channels such as
MTV, Visasat Sport, Discovery, Eurosport
and E!. In addition, Kabelvision offers two
highly competitive expanded packages,
Silver and Gold, as well as premium
channels such as Canal+ and TV1000.
Available throughout Sweden, Kabelvision
has 310,000 household subscribers –
making it the country’s second largest
cable-TV operator. Tele2 also conducts
cable-TV operations in Estonia and
Lithuania.

Content services
Tele2’s strategy is to organize but not During the year, the Tele2 SelfNavigator
develop content services (e-mail, news, service was launched, permitting cus-
games, ringtones, image services) which tomers to review, add to or terminate cer-
makes things easier for our customers. The tain services on the Internet. It is also pos-
services are linked to the portal sible to view billing information and account
Tele2Internet that can be accessed irre- information.
spective of the form of communication. Tele2 also offers a large amount of SMS
Tele2 has a payment solution attached to and WAP-based services in various mar-
the platform for micro-payments to the kets. For example, Tele2 was one of the
companies supplying services, indepen- first companies in Estonia to offer payment
dens of access. The business model is of parking charges via mobile telephone.
based on distribution of revenue. Tele2 was also the first operator to give
customers in Luxembourg the potential to
send images using MMS.

19

Market position
among alternative
Service Launch operators

Sweden Mobile 1981 Market area
Fixed
Internet
Cable TV
1993
1991
1986
1 Nordic
Norway Mobile 2000
Fixed
Internet
1998
1997
1
Denmark Mobile 2000
Fixed
Internet
1996
1997
1
Finland Fixed 2000
Internet 2001
Sweden Comviq was the first operator in Sweden
Tele2 was established in Sweden and this to offer all prepaid card customers the
market accounts for the Group’s broadest opportunity to call and receive calls from

Market area’s share
of the Group’s
43% product portfolio. Sweden is also a key test
market for new services and their develop-
ment, which are subsequently implement-
abroad.
For corporate customers, Tele2 launched
mobile centrex, which offers the potential
net sales ed in other Tele2 countries. to use switch functions directly in the
During 2002, Tele2 Sweden sharpened mobile phone. Customers are seeking to
its focus on profitability and sales volumes. integrate solutions between fixed and
Efforts in this direction have highlighted mobile telephony and the launch of cen-
the primary products – mobile telephony, trex is a step in this direction.
2002 2001 Change fixed telephony, Internet, data network ser-
vices and cable-TV. Fixed telephony
Number of
In February Tele2’s fixed telephony cus-
customers, 000s 6,252* 6,274
Sharper customer focus tomers were also offered pre-selection for
Net sales, SEK M 13,566 11,898 +14% Two customer areas were created: Private local calls. This means that customers
Customers and Corporate Customers. The were also able to benefit from Tele2’s low
EBITDA, SEK M 4,814 3,768 +28%
customer areas are in charge of services prices for local calls. Tele2 is working
*including adjustment to the Group’s definition of active customer and packaging as well as for reaching their towards achieving a solution to offer fixed
preset profitability targets. The change has telephony susbcriptions, since this offers
Brands Tele2, Comviq, Kabelvision, Datametrix, led to a clear customer focus. The primary additional potential to reduce customer
Uni2, Optimal, Tango, Everyday, Get2Net results are more effective distribution as costs and enhance customer loyalty.
well as a distinct product offering. The
2002 Increased market shares
measures are a major factor underlying Launch of ADSL
Improved profitability
higher profitability and have been con- In the case of Internet customers, the
ducted in all product areas. focus has been on ADSL, which was
launched in June. Due to unreasonable
Higher market shares pricing from the network owner, Tele2 is
“We’re stronger Tele2 Sweden won market share in all unfortunately unable to offer a price that
is substantially below that of competitors.
than ever in the product areas. The most aggressive growth
However, it is gratifying to see that the dial-
was noted in Comviq prepaid, with the num-
Nordic region.” ber of customers exceeding two million dur- up Internet service, Free2Connect, has
ing autumn 2002. The total number of cus- shown stable growth.
Fredrik Berglund tomers exceeded three million at year-end. Tele2 also launched IP-VPN for the data
Market Area Director, Nordic network market. The launch marked a
Consolidated price position in mobile major sales success and it is planned to
Tele2 has consolidated its price position in enhance the product portfolio in data net-
the private and corporate markets. Private works during 2002.
customers are offered “Five ways of
calling more cheaply” and corporate cus- Stronger brands
tomers have two new subscriptions A logical development of the above is the
“Company” and “Company+”. At the close growing recognition of the Tele2 and
of the year, Comviq celebrated its 10th Comviq brands. Currently, 97% of
anniversary with a number of activities, Sweden’s population recognizes both
which included presenting existing and brands.
20 T E L E 2 A N N U A L R E P O R T 2002 new customers with lower calling prices.

A taste for action
Tele2 – in pole position

Norway In September Tele2 signed an MVNO In August, Tele2 launched its ADSL ser-
Despite a slower growth rate in the market agreement with Telenor. The agreement vice for households, which offers cus-
as a whole, Tele2 continued to expand and offers Tele2 the potential to transfer customers access to the market’s lowest rates.
win market share. Growth, combined with tomers currently covered by the present
cost control, resulted in record high prof- Service Provider agreement to the more Corporate market
itability for Tele2 Norway. competitive MVNO service. The agreement Tele2 has a complete range of services for
permits Tele2 to develop new, price-lead- companies, but focuses particularly on
Fixed telephony ing services for its customers in Norway. offering standardized package solutions to
Tele2 strengthened its customer offering In November, Tele2 returned its UMTS small and large companies. Standard-
and sales rose throughout the year, despite license to the Norwegian authorities. ization of the product portfolio is a suc-
aggressive marketing from old and new Consequently, Tele2 no longer has any cessful concept in reaching profitability in
competitors. commitments or expenses linked to the the corporate market.
expansion of the UMTS network in Norway.
Mobile telephony Denmark
Tele2 increased its market share and Internet The Danish telecom market is undergoing
strengthened its position in the mobile Although the market for dial-up Internet restructuring and consolidation. A number
market, with revenue showing a stable continued to weaken in 2002, Tele2 man- of players have withdrawn from the mar-
increase during 2002. aged to raise its market share. Marketing ket. Tele2 is continually seeking to max-
Tele2 successfully recruited mobile campaigns in January and December were imise the resulting emerging opportuni-
customers from Tele2’s existing customer successful in recruiting a substantial num- ties.
base in fixed telephony. Cross-selling ber of new customers. Cross-selling has Tele2 focused on controlling growth and
offers lower costs in attracting new cus- also proved to be highly successful, result- costs and is entering 2003 with good
tomers, moreover this type of customer ing in a larger number of more loyal cus- prospects in terms of growth and earnings.
calls more frequently and is more loyal tomers.
than other customer groups.
21

Mobile telephony Tele2 operates a Wireless Local Loop for Datametrix
2002 was a year of consolidation, restruc- broadband in Jyväskylä. The service was Datametrix is a strong system integrator in
turing and reassessment of the market for launched in spring 2002 and Tele2 is the Nordic market. The company is char-
Danish mobile operators. Prices in the pri- studying the possibility of expanding into acterized by good geographic coverage,
vate market have declined and competi- other cities with other network owners. flexibility and cost-consciousness.
tion continues to be tough. Tele2 conduct- The market is driven by the develop-
ed measures aimed at raising profitability Monopolistic market ment of conventional telephony with innova-
from mobile services, which led to a reduc- The monopolistic nature of the Finnish tive applications and the ever-growing
tion in costs for customer procurement and market means that Tele2 cannot yet offer demand for mobile solutions. IP telephony
an increase in call volume per customer. local calls. Nevertheless the number of has established itself as a competitive
During early 2002, Tele2 launched a customers and revenue rose during 2002. alternative for commercial applications.
subscription service, which reported rapid During the year, new agreements were
growth. signed covering international calls and other Sweden
services that reduce costs for Tele2. During The Swedish organization has been
Internet 2002, Tele2 moved from the development streamlined and is now focusing on IP
Tele2 ASDL was launched in August 2002. phase to greater customer focus and further telephony and system integration of tele-
The strategy is to attain balanced and cost developed its fixed telephony services, phony and data. Like Tele2, Datametrix is
effective growth. The launch of broadband which were launched in autumn 2001. a unique total solution supplier with a
has meant a reduction in dial-up traffic in strong product and service profile.
the overall market. But customer intake Optimal Telecom
continues nonetheless. Optimal Telecom is a Service Provider Norway
A review of the company and its inter- offering individuals fixed telephony and In November 2002, Datametrix in Norway
nal processes permitted the achievement Internet and the Tango prepaid calling card celebrated its 20th anniversary. The com-
of synergies between Tele2 and UNi2, the for mobile telephony. pany has developed into a prominent sys-
brand for corporate Internet. tems integrator in the Norwegian market.
Lowest-price guarantee It has become a market heavyweight
Fixed telephony Optimal Telecom’s lowest price guarantee through its consistent efforts in its three
During the year, Tele2 launched what automatically gives customers the lowest core areas: infrastructure, IP telephony
could be viewed as an alternative to fixed ordinary rate from Telia, Tele2, TeleNordia, and security.
price telephony, namely, the Weekend+ Rix Telecom, Utfors, Glocalnet and ACN. The
service, which offers 24-hour free tele- guarantee is the primary factor underlying Denmark
phony each Sunday. The service attracted Optimal Telecom’s high customer loyalty. In September, Datametrix in Denmark was
considerable attention and appeals to the Optimal Telecom also sells cordless ranked number 18 on the Børsen Gazelle
conservative, fixed telephony market. telephones and speaker telephones index of the fastest growing companies in
Two small operators with the corporate equipped with a calling-router, which Denmark, computed by the daily paper
sector as their niche were acquired during means calls are always handled by Optimal Børsens Gazelle index. The factor underly-
the year, which contributed to an increase Telecom. ing the success of Datametrix is its keen
in the customer base and revenue in the focus on products for the call-center mar-
corporate segment. Expansion in the private market ket.
At the end of the year, the Danish Optimal Telecom continued to report
authorities presented new regulations that robust growth in fixed and mobile teleph- Partners
entail a reduction in interconnect charges ony, while the company also raised prof- In May 2002, Datametrix was appointed
in certain areas during 2003. itability, despite stiff competition in the Norway Gold Partner to Cisco. This is con-
market. firmation of the company’s leading-edge
Finland During 2003, the focus is on generat- expertise and business skills. In Sweden,
Tele2 offers fixed telephony in Finland in ing continued growth and improved prof- the company is Gold Partner to Avaya and
the form of domestic calls, international itability in fixed and mobile telephony a certified Ericsson Service and Sales
calls and calling cards. In the Helsinki through increased cross-selling and build- Partner. During the year, Datametrix signed
area, dial-up Internet is also offered. The ing long-term customer relations. an OEM agreement with Intel, making it
launch of iHear telephones commenced in the sole vendor of Intel’s product line for
the summer of 2002. VPN in Sweden.


Market position
among alternative
Licenses Launch* operators

Market area Estonia Mobile 1998
Fixed
Cable-TV
1998
1998 1
Eastern Europe Latvia Mobile 1999
1
and Russia Lithuania Mobile 2000
2
Czech
Republic
Fixed
Internet
2002
2000 1
Poland Fixed 2003
Internet 2000
Russia Estonia
Tele2 offers mobile telephony in eleven
regions in Russia. Most of the companies
Tele2 in Estonia offers a broad range of
telecom services: mobile telephony (sub-
Russia Mobile
7
operate under the FORA brand. In scription and prepaid calling cards), fixed *Year of launch by Tele2
November Tele2 sold its share of the telephony, Internet, content services and
Moscow-based NMT450 operator MCC.

Preparations for GSM
cable-TV.
2002 was one of the most successful
years in the history of the company. The
of the Group’s
8%
During the year, Tele2 received GSM sharp growth from 2001 continued into net sales
licenses for Nishny Novgorod, Chelyabinsk 2002. Tele2 is the most rapidly growing
and the St Petersburg region. Thus, all mobile operator in Estonia and now has a
companies have licenses for GSM1800 tight grip on the second place in the mar-
and work is in progress to launch the first ket. Tele2 now commands one-third of the
regions during 2003. Estonian mobile market.
2002 2001 Change
Tele2 is also clearly the leading alter-
Calling Party Pays native operator in fixed telephony. Number of
customers, 000s 1,574 996 +58%
Tele2’s company in Omsk was the first
mobile operator to launch CPP (Calling Supplementary services launched Net sales, SEK M 2,320 1,148 +102%
Party Pays) services, which, as the name During 2002, several supplementary ser-
EBITDA, SEK M 541 272 +99%
implies, means that the calling person vices were launched that create added
pays the call. CPP is unusual in Russia, value for customers and which offer com-
where it is most common that the mobile petitive advantages for Tele2. Among other
Brands Tele2, Fora, C gates, Zeta Zivtina
telephone owner pays (MPP, Mobile Party points, Tele2 is the only mobile operator to
Pays), even when that person is called. date that offers pan-Baltic roaming for pre- 2002 Revenue doubled
CPP has proved to be an attractive and paid customers. Tele2 has also introduced Continuing profitability
effective means of competition in the a uniform invoice for customers who have
Russia market. Tele2 has also launched fixed as well as mobile telephony.
CPP in Chelyabinsk. During 2003, Tele2 “Tele2 is growing rapidly
will continue its efforts in negotiating Attractive services
in the Baltic States, with
agreements for CPP in other regions. Tele2 is very positive about prospects in
2003, not least because of a highly attract- more than one million
Outlook for 2003 ive product and service offering, although satisfied customers.”
Prospects for the Russian economy in competition in the Estonian market has
2003 are positive. The mobile telephone stiffened in recent times. Johnny Svedberg
Market Area Director, Eastern Europe and Russia
market expanded by 125% in 2002. Rapid
growth is expected to continue during the
current year. The customer segments now
seeking to acquire mobile telephones are
the middle class, middle management in
companies and small business owners,
which traditionally have been strong cus-
tomer groups for Tele2.

23

Tele2 fångar de stora fiskarna
Thrives on competition
Tele2 – more efficient than the old monopolies

Latvia vice means that both subscription and pre- Recognition of Tele2 is very high. 80%
Tele2 is the leading alternative mobile paid customers can call from anywhere in of Latvians recognize the brand, even
operator in Latvia. The company’s growth the Baltic States and still enjoy call rates though it was launched less than two years
is being driven particularly by the success as if they were at home in Latvia. ago. This level of recognition is reflected
in prepaid calling cards. Tele2 plans to Prepaid customers now get a bonus in growth: Tele2 is the most rapidly grow-
launch fixed telephony during 2003. when they are called, which contributes to ing telecom company in Latvia.
raising call volumes. They can also refill
Leader in the prepaid calling card market the prepaid card directly from their bank
Tele2 leads the market for prepaid calling account, all that is required is an SMS –
cards with Zelta Zivtina, “Gold Fish”. making it simple for customers and offer-
Subscription services are the leading alter- ing a cost saving for Tele2.
native to the former monopoly. A new ser-


Increasingly comprehensive range Deregulation of fixed telephony In early 2002, Tele2 became the first
During 2002, Tele2 acquired one of two There are good prospects for the strong company to win a public license for fixed
UMTS licenses in Latvia. Tele2 also has growth in mobile telephony continuing. telephony. Negotiations for an intercon-
one of the two GSM licenses (900 and The market for fixed telephony was deregu- nect traffic agreement with the former
1800) for Internet services and a license lated in 2003 and Tele2 will maximise the monopoly were concluded in December
for broadband via radio networks. An opportunities for cross-selling as they and the launch of fixed telephony is
application for fixed telephony has been emerge. planned for the first quarter of 2003.
submitted, and Tele2 expects an allocation
during early 2003. Cable-TV and broadband Deregulation heralds new opportunities
During 2002, Tele2 achieved a dominant In November 2002, Tele2 signed a distri-
Exciting development position in cable-TV in all the company’s bution agreement for its prepaid calling
Both the customer base and revenue are areas in Vilnius. During the autumn the cards for fixed telephony with the Polish
expected to rise when Tele2 enters the cable-TV network was expanded to cover all Post Office, which sharply increased the
market for fixed telephony, at the same of Vilnius. number of sales outlets from 2,000 to
time as it continues to fuel growth in The number of broadband customers 10,000.
mobile telephony. doubled during the year. Tele2 offers cable- Since Poland has some of the highest
TV and broadband under the C gates brand. telephony rates in Europe, there are major
Lithuania opportunities awaiting Tele2 during the
Since its start-up in Lithuania in 2000, first quarter of 2003 with the finalization
Tele2 has established a strong position as Czech Republic of deregulation. This creates the potential
the leading operator among private cus- Tele2 has strengthened its position as one for Tele2 to market a more comprehensive
tomers. of the three largest suppliers of wireless service range in fixed telephony.
Mobile penetration rose sharply in 2002 broadband in the Czech Republic and has
and the customer base more than doubled. established a presence in the market for X-source
Tele2 is winning market share at the fixed telephony. X-source operates in IT outsourcing. The
expense of the two competitors; Bite and During 2002, Tele2 expanded wireless company was started by Tele2 in an effort
Omnitel. broadband to an additional two cities and to support IT operations in the group. The
the number of customers rose by 52%. head office is located in Stockholm.
Strong brand Depending on the business terms and con- During 2002, X-source expanded and
During the past year, strength and trust in ditions that can be achieved, Tele2 is like- opened offices in London, Luxembourg
the Tele2 brand have grown considerably, ly to offer ADSL during 2003. and Copenhagen. It also took over part of
with brand recognition rising to 71% dur- Transcom Sweden’s IT operations. As a
ing the fourth quarter of 2002. A contribu- Success in fixed telephony result, X-source is now established in six
tory factor is the fact that the GSM network In July, Tele2 became the first operator to locations in Sweden. The company plans
was expanded so that it now covers a little conclude an interconnect traffic agree- to established a presence in the Baltic
more than 90% of the population. ment with Cesky Telecom. The agreement States by spring 2003.
permits private customers to call more
Subscriptions launched cheaply with Tele2 by dialing a prefix. Competitive prices
During the first quarter of 2002, the Joker Tele2 is now a well-known brand in the X-source offers services in operations and
subscription service was launched, offer- Czech Republic and the largest alternative the development of PC workplaces, oper-
ing the market’s lowest monthly charge operator in the private market. During ations and maintenance of servers, data com-
and a price guarantee. During the third 2003 Tele2 plans to offer pre-selection munications and data security. X-source
quarter, a subscription was launched that and local calls. introduces a business approach to PC work-
is aimed at small and medium-sized com- places and assists client companies in
panies. Poland creating a secure and controlled IT infra-
Tele2 in Lithuania was also the first Tele2 Poland continued its rapid develop- structure, while simultaneously reducing IT
operator to launch pan-Baltic roaming for ment in IP telephony and wireless broad- costs.
prepaid customers. band access. The focus is on small and X-source’s services are also competitive
medium-sized companies. The number of for companies outside the Tele2 Group.
customers more than doubled during Customers include Datscha, Metro, MTG,
2002. Viasat, EIM. Iocore and Basset Support
Solutions.

25

Market position
among alternative
Licenses Launch operators

Market area
Germany Fixed 1998
3
The
Netherlands
Mobile
Fixed
2001
1997 1 Central Europe
Switzerland Mobile 2000
Fixed
Internet
1998
2002 2
Austria Mobile
Fixed
2003
1999 1
Ireland License for fixed telephony.

Germany The Netherlands
In 2002, Tele2 strengthened its position Tele2 bolstered its position as the second-

of the Group’s
18% as the third-largest alternative operator in
the German fixed telephony market and is
currently one of the fastest-growing oper-
largest alternative operator in the Dutch
fixed telephony market in 2002. At the end
of the year, 80% of the population was
net sales ators in the country. familiar with the Tele2 brand.

Focus on growth Fixed telephony
Growth is the result of several measures Greater focus on pre-selection customers
undertaken during the year such as a sim- and iHear phones led to a dramatic
2002 2001 Change plified price structure, successful market- increase in ARPU during the latter part of
ing campaigns focusing on comparing 2002. Efforts to increase customer loyalty
Number of Tele2’s prices with competitors’ and a dis- during the third and fourth quarter were
customers, 000s 3,587 3,191 +12%
tinct targeting of pre-selection customers. successful and contributed to the rise in
Net sales, SEK M 5,689 4,844 +17% Combined with an increased focus on volume. With huge success, Tele2 focused
measures to limit customer turnover, this its marketing on private customers, and
EBITDA, SEK M –81 –606
will pave the way for sustained growth in market share increased during the year.
2003.
Tele2Mobile – MVNO
Brands Tele2, Everyday, Calling Card Company, 3C
Deregulation lags behind rest of Europe Tele2Mobile experienced fantastic growth
2002 Sharp growth in earnings The deregulation of the German market as well as strong development during the
Fixed telephony provides positive EBITDA has lagged behind the rest of Europe. For second half of 2002. Tele2 operates as a
example: local calls are not deregulated, Mobile Virtual Network Operator, MVNO,
pre-selection rules are more complicated and is the sixth-largest mobile operator in
than in other countries and Deutsche the country. Cross-selling to current fixed
Telekom is allowed to package its services telephony customers has proven to be suc-
“Deregulation jointly despite the fact that local calls are cessful. Tele2’s success in the future is
not open to competition. After strong pres- founded on its ability to offer fixed tele-
opens up sure from the EU, Germany is expected to phony customers new services at more

opportunities start a deregulation process in 2003. attractive rates. The marginal cost stem-
ming from the new services is low.
for Tele2.” Tele2 gaining greater brand recognition
Tele2’s market strategy and comprehen- Switzerland
Roman Schwarz sive cost efficiency guarantee that Tele2 Tele2 has become the second-largest alter-
Market Area Director, Central Europe
will survive as one of the strongest players native fixed operator in Switzerland fol-
on the market. Market consolidation is pos- lowing its 1998 launch of fixed telephony
itive because it weeds out many operators in the country. The company is known for
that lack a sound business model. This its competitive rates, easy-to-understand
eases pressure from future competition. pricing and for challenging the former
Recognition of the Tele2 brand increased monopoly.
dramatically in 2002. Tele2 is the third
most recognized brand within fixed tele-
phony.


Confident outlook
Tele2 welcomes new challenges

Simple pre-selection sign-up Austria Focus on growth
Tele2 succeeded in building a strong base Tele2 is the largest alternative fixed tele- Tele2 will continue to focus on profitable
of pre-selection customers, a feat made phony operator in Austria. The number of growth while exploring new business
possible by actions such as being the first customers as well as operating revenue potential such as MVNO agreements and
operator in Switzerland to take advantage rose during 2002. Tele2 is known for its other value-added services. The launch of
of the so-called Third Party Verification, in attractive rates, excellent customer service mobile telephony as a MVNO occurred in
which, as the name implies, a third party and reliability. early 2003.
verifies that an agreement has actually
been reached. This makes it easy for cus- Increased recognition of Tele2 Ireland
tomers to sign up for pre-selection with one A growing number of Austrians know what Tele2 has a fixed telephony license in
simple phone call. Tele2 represents and as many as 85% of Ireland.
The launching of Tele2Mobile in May the population is familiar with the Tele2
2000, Tele2 Voicebox in April 2002 and brand. A high proportion of pre-selection
Tele2 Internet ADSL in November 2002 customers and a low churn reflect a great
has enabled Tele2 to broaden its product degree of customer satisfaction and loyalty.
offering substantially and has strengthen During the year, the company intro-
its market position. The focus is on private duced e-invoices and prepaid cards for
customers as well as on small businesses international calls.
and medium-size companies.

27

Market position
among alternative

Market area
France Fixed
Internet
1999
2002 1
Italy Fixed
Internet
1999
2002 2 Southern Europe
Spain Fixed 2001
4
Portugal Fixed 2003

of the Group’s
26% France
Tele2 provides a complete range of fixed
telephony services to private customers
Italy
Tele2 also has a complete range of services
in fixed telephony in Italy. Tele2 is Italy’s
net sales and smaller businesses: local calls, nation- second largest alternative operator, with a
al calls, international calls and calls to market share of about 9%.
mobile phones. Tele2 continued to experience fast-
The company is the leading alternative paced growth in Italy in 2002. Compared
operator in France with a market share of to 2001, revenues grew by more than 60%

2002 2001 Change 12%. With almost three million active cus- and traffic volumes rose 80%. The back-
tomers and 50% of the market area’s rev- ground to the rapid growth is that Tele2
Number of enue, France is also one of Tele2’s largest has been offering all customers local calls
customers, 000s 5,129 4,286 +20%
operations. via pre-selection since 2001.
Net sales, SEK M 8,105 5,124 +58%
Price-leading operator Strong brands
EBITDA, SEK M –101 –1,331
Tele2 is perceived as the price-leading With about 2 million customers and a high
operator and is known for its quality and ARPU, Tele2 Italy is a strong and profitable
customer service and for products that are part of the Group. Tele2, which is posi-
Brands Tele2, Everyday, Calling Card Company, 3C
easy to use. Tele2 enjoys a brand recogni- tioned as the price leader in the Italian
2002 Sharp rise in revenue growth tion rate exceeding 80% among the French market, is a well-known brand – more than
Robust earnings trend population. The French market offers major 80% of the population recognizes it.
potential for continuing growth. The strong Greater recognition of Tele2, combined
brand offers Tele2 the potential to strength- with higher customer satisfaction, has
en its position as the price-leading opera- increased customer loyalty.
tor and keep down costs in order to attract
new customers. Cross-selling to Tele2’s customers
Tele2 benefits from being able to offer
Higher revenue local calls and a stable competitive situa-
The launch of local calls in 2002 con- tion. During the third quarter of 2002,
“Tele2 continues to tributed to increases in revenue and cus- dial-up Internet was launched, which
tomer loyalty and helped Tele2 to report proved to be a remarkable success. The
attract an increasing profitability, three years after its opera- strategy of supplementing the product and
tional start. The improvements were service offering to the existing customer
number of customers.” gained at a very low cost. The trend towards base and an increased number of pre-
profitability remained strong throughout selection customers creates the potential
Jean-Louis Constanza
Market Area Director, Southern Europe the year, especially during the fourth quar- for continuing growth.
ter. Tele2 expects to launch ADSL suc- As in the case of Tele2 France, Tele2
cessfully this current year, against the Italy is undergoing strong development
background of the access network being and the rapid customer intake has contin-
opened up and the fact that Tele2 already ued in early 2003.
has an attractive dial-up Internet offering.


Gillar utveckling
A great future i Eurpoa
Tele2 växer snabbast

Tele2 for big and small

Spain MVNO license
In just a short period, Tele2 has estab- With a brand recognition rate of 60%
lished itself in the Spanish market and is among the Spanish population, Tele2 is
already the country’s fourth largest alter- beginning to capitalize on its marketing
native operator. Tele2 offers prepaid fixed and effective IP-based network. Spain is
telephony services for national calls, the first country in Southern Europe in
international calls and calls to and from which Tele2 received an MVNO license.
mobile networks.
The prepaid services are highly effect- Portugal
ive in curtailing billing costs, reducing bad Using Spain as the base, Tele2 is launch-
debts and reducing churn. ing fixed telephony in Portugal during the
Tele2’s revenue rose more than 160% first half of 2003.
compared with 2001.

29

Market position
among alternative

Luxembourg Mobile 1998 Market area
Fixed
Internet
1999
2000 1
Liechtenstein Mobile 2000
Luxembourg
Fixed
Internet
2000
2000 1
Belgium Fixed 2003

Luxembourg 2002 and plans to offer UMTS services in

of the Group’s
2% Tele2 has offered fixed telephony in
Luxembourg since 1999 and is clearly the
largest competitor to the former monopoly.
the new network during the second half of
2003. Fixed telephony has been available
under the Tele2 brand since June 2000.
net sales
Pre-selection customers comprise 40% of The company holds a license for GSM and
the customer base. After repeated appeals for all types of fixed-line telecommunica-
from Tele2, the authorities have forced the tion services, including the Internet.
former monopoly to cut its interconnection
fees by another 20% during 2003. In Belgium
2002 2001 Change
March 2002, Tele2 began to offer prepaid Tele2 has a license for fixed telephony in

Number of calling cards for fixed telephony. Belgium and services have been offered
customers, 000s 222 211 +5% since January 2003. The goal is to quickly
Growth in mobile telephony become the leading alternative to the for-
Net sales, SEK M 754 663 +14%
The Tango brand is one of the most appre- mer monopoly.
EBITDA, SEK M 126 5 ciated in Luxembourg. With a GSM 900
and GSM 1800 license, Tango is the largest 3C
mobile operator in Luxembourg with a share 3C has been active in public telecommu-
Brands Tele2, Tango, Everyday, 3C, Transac of almost 50% of the active customers in nications for more than 17 years.
the market. The traffic volume rose by The company currently offers integrated
2002 Increased revenue
Higher profitability
more than 40% compared to 2001, main- solutions for processing credit card trans-
ly because of strong growth within prepaid actions, solutions for payments via the web
calling cards. Tango received a UMTS and public credit card telephones.
license in May 2002 and services in the 3C approves and processes credit card
new network are scheduled for commercial transactions for 20 different national and
launch in the second quarter of 2003. international banks. Its pan-European
Everyday Media encompasses Tango TV presence in 650 hotels, 300 restaurants
and Tango Radio. The main purpose for and 550 parking companies makes the
this – apart from marketing Tango’s ser- company a unique player in the European
“An exciting 2003 vices – is to create interactivity between market for integrated credit card transactions.

with, among other the media and mobile telephony by using The Parking service is an overall con-
SMS, MMS, WAP and IVR as bearers of cept for parking lot operators. The concept
things, a launch content services being generated by the was developed in Britain, where 3C has
media companies. 95% of the market for parking spaces at
in Belgium.” the airports and in larger cities. Operations
Internet services are being expanded to Sweden, Norway
Jean-Claude Bintz
Internet services were launched in June and Germany.
Market Area Director, Luxembourg
2000 and are reporting steady growth, pri- 3C has credit card phones at major
marily thanks to its prices, which are the European airports, hotel chains and trade
lowest in the market. fairs.

Liechtenstein Transac
Tele2 is the largest alternative operator in Transac is a Luxembourg-based company
Liechtenstein. The company has provided offering services in data processing to
mobile telephony services in the country companies that process large amounts of
since March 2000 under the Tango brand. data, such as credit card transactions and
Tele2 was awarded a UMTS license in billing.


Market area
Branded products & services

United Kingdom Calling Card Company (C3)
Tele2 launched fixed telephony in cooper-
ation with the British Post Office in
November 2001. Tele2 had already sup-
C3 sells calling cards in the UK, France,
Germany, Italy, the Netherlands, Spain and
Austria and Tele2’s rechargeable interna-
of the Group’s
3%
net sales
plied national and international access for tional call card, which may be used in a
the Tele2 group. Prepaid calling cards for large number of countries. C3 operates in
fixed telephony are sold under the Post close cooperation with Tele2, which sup-
Office brand and may be purchased at post plies network capacity, with the focus on
offices, via Post Office telephone services price and quality in international lines.
or at the Post Office website. 2002 2001 Change
Prepaid calling cards are sold mainly in
During the year, the customer base in stores and kiosks, but C3 is continuing to Net sales, SEK M 848 1,408 –40%
fixed telephony grew constantly and the seek additional sales channels. The pre-
challenge ahead is to continue to capital- EBITDA, SEK M –172 –410
paid card was launched in cooperation
ize on the major potential of the Post with the British Post Office in October
Office brand, as represented by the Post 2001 and volumes increased steadily dur-
Office’s 40,000 cashier counters at Brands Tele2, C3, iHear, Everyday
ing 2002.
17,500 sales outlets. In February 2002, C3 won a tender from 2002 Success for calling cards
Tele2 has successfully managed trials AAFES (American Army and Air Force) for Improved earnings
to offer pre-selection services in the UK deliveries to bases in Italy, UK and the
and will continue its launch during the Netherlands. In October, the agreement
first quarter of 2003. was extended to include US naval bases.
Access operations doubled their traffic After trials during the summer, Tele2
volume during the year as Tele2 increased was selected as the supplier of calling
its presence in the tough market for access cards to the Travelex group in continental
services in London. Europe. C3 doubled its volume in the sec-
ond half of the year compared with the first
iHear six months.
Tele2 has its own product range of ana- C3 enhanced its prepaid calling card
logue and digital cordless phones, which technology to permit calls from Call Shops,
“Implementing
are marketed under the brand name iHear. a service now available in France, Italy and successful marketing
The telephones are equipped with a call- Spain, and which will be further expanded
ing-router that automatically routes the to include the UK and Germany during the based on best practices
calls to the Tele2 network. More than first half of 2003.
600,000 iHear telephones were sold Along with 3C, C3 has also developed a
across Europe”
across Europe during 2002, mainly through magnetic card that is undergoing trials in Anders Olsson
telemarketing. Italy and the UK. Market Area Director, Branded products & sevices

Everyday
Tele2 owns the Internet portal
Everyday.com jointly with MTG.

31

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
fiscal 2002.

Tele2 AB’s share is listed on Stock- 667 million (2001: SEK 1,376 million) amounting to SEK 1.9 billion, and in-
holmsbörsen (Stockholm Stock Exchange) and sales of shares amounted to SEK 40 creased pre-tax profit by more than SEK
under the abbreviations TEL2A and TEL2B million (2001: SEK 236 million). 2.7 billion to SEK 796 million. Main-
and Nasdaq under the abbreviations Tele2 had a total of 16.8 million cus- taining a balance between customer
TLTOA and TLTOB. tomers at December 31, 2002, to which a growth, profitability and cash flow will con-
The ten largest shareholders at one-off adjustment of –389,000 has been tinue to have priority during 2003, and as
December 31, 2002 held shares corre- applied to adjust all Group companies to a result of this it is probable that the Board
sponding to 60% (2001: 44%) of the cap- report in line with the Group’s definition of will propose a dividend for fiscal 2003.
ital and 80% (2001: 72%) of the voting an active customer (see Note 36). Net cus- Fixed telephony operations in continen-
rights, of which the Invik & Co AB, tomer intake for 2002 as a whole before tal Europe continue to show sharp growth
Industriförvaltnings AB Kinnevik, Emesco this adjustment was 15%, corresponding and now have 8.5 million customers.
and Millicom International Cellular S.A. to 2,195,000 (2001: 3,108,000). Tele2’s Combined, Southern and Central Europe
owns 30%, 26%, 9% and 3%, respectively, operating revenue amounted to SEK reached breakeven at the EBITDA level
of the voting rights, and 9%, 21%, 2% and 31,282 million (2001: SEK 25,085 mil- during 2002. Growth of 58% in Southern
7% of the capital. lion), or an increase of 25%. Europe is in turn being driven through the
EBITDA amounted to SEK 5,127 mil- introduction of local carrier pre-selection.
Operations lion (2001: SEK 1,698 million), with an This is encouraging since local pre-selec-
Tele 2 AB, formed in 1993, is the leading EBITDA margin of 16% (2001: 7%). EBIT tion is about to be introduced in Germany
alternative pan-European telecommunica- totaled SEK 1,530 million (2001:SEK during 2003, which will boost revenue in
tions company offering fixed and mobile –1,356 million) with an EBIT margin of Central Europe without raising costs. The
telephony, as well as data network and 5% (2001: –5%). EBITDA margin of 22% in our Swedish
Internet services, under the brands Tele2, Net interest expense and other financial fixed telephony operations remains within
Tango and Comviq to more than 16.8 mil- items totaled SEK –698 million (2001: our profitability target. Tele2’s mobile
lion customers in 22 countries. Tele2 oper- SEK –621 million). The average interest operations are “Best in Class”, with EBITDA
ates Datametrix, which specializes in sys- rate on outstanding liabilities was 6.4% in margins of 55% in Sweden, along with an
tems integration; 3C Communications, 2002. Net profit after financial items impressive customer intake, notably in the
which operates Internet payments, credit amounted to SEK 796 million (2001: SEK Baltic States. We are continuing to focus
card transactions and public pay tele- –1,944 million). on cutting costs in an effort to win new
phones; Transac, which offers data pro- Tax on net profit for the year amounted customers, reduce customer turnover, or
cessing of credit card transactions and to SEK –574 million, which was positive- churn, and gain control over operating
billing; C3, which is active in prepaid call- ly affected by SEK 576 million in respect expenses.
ing cards for fixed telephony; and Optimal of a revaluation of loss carry-forwards in a Local carrier pre-selection is being
Telecom, which offers households low number of European companies. In 2001, steadily introduced throughout Europe and
price guarantees for telephony services. tax on net profit was SEK 2,335 million, already in 2002 it was widely available in,
The Group also offers cable-TV services which reflected the tax effects in Swedish for example, Sweden, Denmark, France,
and jointly owns the Internet portal operations, and a tax effect of SEK 3,082 Spain and Italy. Local pre-selection made
Everyday.com with MTG. Tele2 AB’s share million in connection with the restructur- a major contribution to growth in Southern
is listed on Stockholmsbörsen (Stockholm ing of SEC. Profit after tax was SEK 223 Europe during the year, with revenue surg-
Exchange) under TEL2A and TEL2B and million (2001: SEK 392 million). Earnings ing by 58%. With local pre-selection
on Nasdaq under TLTOA and TLTOB. per share were SEK 1.51 (2001: SEK already available in the Netherlands since
During 2002, the Tele2 Group invested 2.70) after full dilution. August 2002 and with its introduction in
a net of SEK 1,890 million (2001: SEK During 2002, not only did Tele2 grow Germany during 2003, Central Europe is
2,145 million) in intangible and tangible faster than its competitors, with an organ- expected to experience the same benefits
fixed assets (see Not 32). Investments in ic growth of 25%, but also managed to during 2003.
shares in companies amounted to SEK generate the record cash flow to date,


Five-year summary
SEK million 2002* 2001 2000** 1999*** 1998

Income statement and balance sheet items:
Operating revenue 31,282 25,085 12,440 8,171 5,918
EBITDA 5,127 1,698 1,820 2,060 1,165
EBIT 1,530 –1,356 420 1,152 506
EBT 796 –1,944 165 4,184 219
Net profit/loss 223 392 –396 3,768 53
Shareholders' equity 28,728 29,517 26,539 6,659 2,926
Shareholders' equity, after dilution 28,870 29,547 26,584 6,659 2,926
Balance sheet total 46,872 49,156 42,345 14,401 9,995
Cash flow from current operations 4,365 413 883 1,753 971
Liquidity 2,332 1,625 1,304 1,123 821
Net borrowing 7,729 9,286 7,095 4,605 4,600
Net borrowing, after dilution 7,587 9,256 7,050 4,605 4,600
Investments, including financial leases 2,581 1,485 774 1,475 1,941

Key figures:

Solidity, % 61 60 63 46 29
Solidity, after dilution, % 61 60 63 46 29
Debt/equity ratio 0.27 0.31 0.27 0.69 1.57
EBITDA margin % 16.4 6.8 14.6 25.2 19.7
EBIT margin % 4.9 –5.4 3.4 14.1 8.6
Return on shareholders equity, % 0.8 1.4 –2.4 78.6 1.8
Return on shareholders equity, after dilution, % 0.8 1.4 –2.4 78.6 1.8
Return on capital employed, % 3.9 –3.3 1.9 45.2 6.8
Average interest expense, % 6.4 6.3 4.8 4.8 6.6
Average interest expense, after dilution, % 6.4 6.3 4.8 4.8 6.6

Value per share, SEK:

Profit/loss after tax 1.51 2.70 –3.47 36.28 0.51
Profit/loss after tax, after dilution 1.51 2.70 –3.47 36.28 0.51
Shareholders’ equity 194.95 203.56 232.62 64.12 28.24
Shareholders’ equity, after dilution 195.55 203.46 232.74 64.12 28.17
Cash flow 29.62 2.85 7.74 16.88 9.38
Cash flow, after dilution 29.56 2.85 7.73 16.88 9.35
Dividend — — — — —
Share price on closing date 230.50 378.00 392.00 598.00 330.00

* Operating revenue for 2002, include SEK 237 million, relating to a court case against Telia, which, for reasons of prudence was not previously
reported as income. During 2002, Tele2 Norway returned its UMTS license, whereby the net book value of capitalized costs was eliminated in its
entirety and was charged against depreciation for the year in an amount of SEK –400 million. EBT for 2002 was affected by a write-down of SEK 86
million, attributable to shares in XSource Corporation, which is under the item ”Interest expense and other financial expenses”.
** Net profit/loss for 2000 was affected by the acquisition of SEC Group on October 2, 2000.
***EBT for 1999 was affected by a non-recurring item of SEK 3,228 million, attributable to a capital gain on the acquisition of the associated company
NetCom ASA.

33

Tele2 Sweden has more than 3 million monthly average revenue per user (ARPU) Eastern Europe and Russia
mobile telephony customers, reflecting in mobile telephony, including cash cards, Operatng revenue, 2002: SEK 2,320 mil-
growth during 2002 when Tele2 expanded amounted to SEK 196 (2001: SEK 204) lion (2001: SEK 1,148 million), +102%.
faster than its two primary competitors, in 2002. Meanwhile, the monthly minutes EBITDA, 2002: 541 million (2001: 272),
attaining a market share of more than 50% per user and month (MoU) in 2002 +99%.
of the total number of new customers. amounted to 103 (2001: 107). Prepaid Eastern Europe and Russia comprises
Tele2 Sweden finalized the financing of customers accounted for 72% of the total Tele2’s operations in the Baltic States,
Svenska UMTS nät AB – the Swedish customer base in mobile telephony. Fixed (Estonia Latvia and Lithuania) Poland,
UMTS network company that is equally telephony and Internet had 1.9 million Czech Republic and Russia as well as
and jointly owned with Telia. Tele2 and customers at year-end. XSource operations.
Telia announced that a bank credit of SEK Operations in Denmark, Finland and In the Baltic States, Tele2’s services are
11 billion had been signed to finance the Norway are primarily involve fixed teleph- experiencing robust customer growth,
expansion of the UMTS network in ony and Internet. Competitive pressure which is primarily driven by mobile tel-
Sweden. continues to decline in these countries. ephony and especially prepaid customers.
Moreover, costs have fallen as a result of a In Latvia, Tele2 acquired one of two UMTS
Nordic 10% reduction in the workforce in licenses in 2002. In January 2003, the
Operating revenue, 2002: SEK 13,566 Denmark and 20% in Norway, among other market for fixed telephony in Latvia was
million (2001: SEK 11,898 million), factors. opened to competition and Tele2 expects
+14%. EBITDA, 2002: SEK 4,814 million During the third quarter, Tele2 signed to launch fixed telephony services there
(2001: SEK 3,768 million), +28%. an MVNO agreement for UMTS with during the next six months. Customer
The Nordic market area comprises Telenor in Norway in exchange for Telenor intake in the Czech Republic was high and
Tele2 operations in Sweden, Norway, Den- gaining access to Tele2’s UMTS network in Tele2 will introduce local pre-selection
mark and Finland, as well as Datametrix. Sweden. Tele2’s Norwegian MVNO will be during 2003. Meanwhile, in Poland, Tele2
As of January 1, 2002, Optimal Telecom launched during the first quarter of 2002. will launch fixed telephony during the first
is included in the Nordic Market Area. It The advantage for Tele2 is reduced invest- quarter of 2003, following deregulation of
was previously included in Branded ment costs of some SEK 5 billion for UMTS international calls on January 1.
Products & Services. in Norway. The decision to return the
Tele2 has reached agreement with Telia UMTS license in Norway to the Norwegian Central Europe
in Sweden, Telenor in Norway and TDC in authorities meant that Tele2 conducted a Operating revenue, 2002: SEK 5,689 mil-
Denmark on the terms and conditions for write-down of SEK 399 million during the lion (2001: SEK 4,844) million, +17%.
offering ADSL services, and Tele2 will fourth quarter. Margins in Norway and EBITDA, 2002: SEK –81 million (2001:
launch these services during the summer. Denmark have improved and in Denmark a SEK –606 million), of which SEK 105
Tele2 Sweden is the largest operation in review of switched traffic fees means that (2001: SEK –585 million) related to fixed
the Nordic market area. During 2002, suc- these will be reduced by the equivalent of telephony and Internet.
cessful marketing campaigns for both fixed DEK 20 million annually. Denmark is the Central Europe comprises Tele’s opera-
and mobile telephony led to larger market last country to start applying the Group’s tions in Germany, Netherlands, Switzer-
shares. During 2002, Telia 2 Sweden definition of active customers. This result- land and Austria, as well as a license in
retained its high margins, with an EBITDA ed in a one-off reduction in the number of Ireland.
margin of 55% for fixed telephony and customer by 461,000 as a result of the Central Europe displayed robust growth
22% for fixed telephony and Internet. data-processing system in Denmark being in revenue and EBITDA during the year,
Mobile telephony operations in Sweden upgraded to the same standard as the rest with EBITDA for fixed telephony at a pos-
reported 3 million customers, a rise of of the Group. Accordingly, all companies itive level throughout the year. The market
19% on an annual basis. Comviq increased within Tele2 apply the same definition of area’s ARPU was SEK 153 (2001: SEK
its share of new sales on the market. The active customer. 148) for 2002.


Tele2 is the third largest alternative expects to launch an MNVO in early 2003. 2002. The improvements were achieved at
operator in Germany in fixed telephony and In Switzerland, Tele2 is now the second minimal cost.
one of the fastest growing operators nation- largest alternative operator and has signed Tele2 France continued its high growth
wide. During 2002, recognition of Tele2 agreements with a large number of cus- and has consolidated its position as the
increased dramatically and it is now the tomers for pre-selection by using what is leading alternative operator. Tele2 Italy is
third best known brand in the country in referred to as Third Party Verification. the second largest alternative operator,
fixed telephony, just behind number two, During 2002, Tele2 broadened its offering and continues to report strong customer
Arcor. Tele2 simplified its price structure in Switzerland through the launch of intake and is adding new services, such as
and had considerable success with its mar- mobile telephony services in May, Tele2 the recently launched Internet services. In
keting, which focuses on comparisons with Voice box in April and Internet ADSL in Spain, Tele2 introduced local pre-selec-
competitor prices. During the fourth quarter, November. tion in June, which has increased call traf-
operating revenue increased and EBITDA fic considerably. Using Spain as a base,
strengthened. However, as a market, Southern Europe Tele2 will launch fixed telephony services
Germany has fallen behind the rest of Operating revenue, 2002: SEK 8,105 mil- in Portugal during 2003.
Europe, notably in the area of local pre- lion (2001: SEK 5,124 million), +58%.
select, which are not deregulated there- EBITDA, 2002: SEK –101 million (2001: Luxembourg
by benefiting the former monopoly. SEK –1,331 million). Operating revenue, 2002: SEK 754 mil-
Coordinated lobbying at the EU level has Southern Europe comprises Tele2’s lion (2001: SEK 663 million), +14%.
had an effect and Germany will start to operations in France, Italy, Spain and EBITDA, 2002: SEK 126 million (2001:
deregulate during 2003, thus suggesting Portugal. SEK 5 million).
that the Central Europe market area can Southern Europe continued to report The Luxembourg market area compris-
expect to gain the same benefits from local sharp growth in operating revenue, which es Tele2 operations in Liechtenstein and
pre-selection during the second half of rose 58% in 2002, and a highly significant Luxembourg, the newly launched opera-
2003 as experienced by Southern Europe improvement in EBITDA. The EBITDA- tions in Belgium, 3C’s operations and
during 2002. trend was robust during 2002, notably dur- Transac.
In the Netherlands, Tele2 is the second ing the fourth quarter, when it reached Tango is the largest mobile operator in
largest alternative operator and Tele2 has SEK 156 million, which reflects good Luxembourg. Tele2 has received a UMTS
a brand recognition rate of 80% of the popu- results in both Italy and France, and lower license and recently launched MMS ser-
lation. Tele2 launched an MVNO during marketing costs in the market area as a vices. TANGO TV, combined with the Tango
the first half of 2002, which enjoyed whole. Tele2 has begun to launch services Sunshine radio station, permits access to
strong growth during the second half of the in Portugal, which will be launched in their a young target group and also represents
year and is now the sixth largest mobile entirety during early 2003. Tele2 attained the first step towards interactivity between
operator nationwide. Tele2 attained its tar- a good ARPU of SEK 149 (2001: 129) in media and mobile telephony, which will act
get of converting 10% of the customer Southern Europe in 2002. as a driving force for SMS and MMS traf-
base in fixed telephony during the first year Tele2 offers a complete product port- fic. Tele2 launched fixed telephony in
of operations. These mobile customers folio with local, nationwide and interna- Belgium on January 15, 2003.
have been gained at a low cost. tional calls as well as calls for the fixed net-
Tele2 Austria is the country’s second work to mobile networks and has recently Branded products & services
largest alternative operator and experi- added Internet services. Local pre-selec- Operating revenue, 2002: SEK 848 mil-
enced sharp growth during 2002, with a tion has been available for all customers in lion (2001: SEK 1,408 million).
brand recognition rate of 85% of the popu- France, Italy and Spain, which has had a EBITDA, 2002: SEK –172 million (2001:
lation. The low customer turnover reflects very positive impact on call volumes, oper- SEK –410 million).
considerable customer satisfaction. Tele2 ating revenue and customer turnover in

35

Other trademarks comprise Tele UK, an the Board’s work. Matters placed before
operation launched in the UK in coopera- the Board are dealt with by the entire
tion with The Post Office, C3 operations, Board. In 2002, Tele2’s Board of Directors
Everyday operations and IntelliNet opera- held eleven meetings at which minutes
tions. were taken. Specific instructions govern-
ing the President’s responsibilities and
Significant events after the end authority were adopted. Each year, the
of the financial year company’s auditors report to the Board the
In February 2003 Tele2 Alpha Telecom result of their examination and provide
was acquired. This is the UK’s leading their assessment of internal control.
operator in prepaid fixed network teleph-
ony for individuals and a market leader in Parent Company
cash cards for fixed telephony. Tele2 Alpha The Parent Company performs functions
Telecom, sells about 1.25 million cash and conducts certain development pro-
cards per month from 60,000 sales outlets jects common to the Group.
in the UK and has sales of SEK 1.9 billion. A convertible debenture was converted
The acquisition will directly contribute to to 100,000 B-shares on December 31,
Tele2’s earnings per share in 2003, even 2002, which affected shareholders’ equi-
without the expected synergy effects. The ty by SEK 15 million. The Parent Company
acquisition price amounted to approxi- gave a shareholder contribution to sub-
mately SEK 780 million, on a debt-free sidiaries in the amount of SEK 400 million
basis. and received Group contributions totaling
The acquisition of Alpha Telecom is a SEK 3,035 million.
unique opportunity for Tele2 to attain crit-
ical mass in the UK and is line with Tele2’s Proposed appropriation of profit
strategy of steadily establishing a presence The Group’s non-restricted reserves
in the UK market. Alpha is a stable base amount to SEK 3,590 million. No alloca-
on which to further develop Tele2’s operation to restricted reserves is proposed for
tions in the UK. The objective is to emu- companies within the Group.
late Alpha’s successful product concept in The Board of Directors and President
other significant markets in Europe, in propose that the amount at the disposal of
which Tele2’s current presence will con- the Annual General Meeting, SEK
tribute major revenue and cost synergies. 2,253,624,328, be carried forward to a
new account.
Work of the Board of Directors
It was with great sorrow that the Board of
Directors of Tele2 AB announced the death
of Board Chairman Jan Hugo Stenbeck at
the age of 59. Bruce Grant was appointed
Board Chairman on August 22.
The work of the Board of Directors fol-
lows an annual plan, designed to secure
the Board’s need for information and in
other respects is affected by the specific
work procedure that has been adopted for


Income Statement
Group Parent Company
SEK million Note 2002 2001 2002 2001

Operating revenue 1 31,282 25,085 16 12

Cost of services sold –19,890 –17,715 — —

Gross profit 11,392 7,370 16 12

Selling expenses –7,279 –6,652 — —
Administrative expenses 39 –2,571 –2,188 –101 –73
Other operating revenues 3 50 189 12 4
Other operating expenses 4 –62 –75 — —

Operating profit/loss 2, 38 1,530 –1,356 –73 –57

Profit/loss on associated companies:
Result from shares in associated companies 5 –41 –58 — —
Sale of associated companies 6 5 91 — —

Profit/loss on financial investments:
Result from shares in Group companies 7 — –13,964
Result from other securities and receivables
classed as fixed assets 8 –84 4 182 64
Other interest revenue and similar income 9 165 65 — 14
Interest expenses and similar costs 10 –779 –690 –5 –15

Profit/loss after financial items 796 –1,944 104 –13,958

Tax on profit for the year 11 –574 2,335 –35 3,076
Minority interest 1 1

Profit/loss for the year 33–34 223 392 69 –10,882

Earnings/loss per share 25 SEK 1.51 SEK 2.70
Earnings/loss per share after full dilution 25 SEK 1.51 SEK 2.70

Number of shares 25 147,460,175 147,360,175
Average number of shares 25 147,360,175 145,003,847
Number of shares after dilution 25 148,223,175 147,560,175
Average number of shares after dilution 25 147,634,293 145,223,466

37

Balance Sheet
SEK million Note Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001

ASSETS
Fixed assets
Intangible assets
Licenses and right of use 12 509 736 — —
Goodwill 12 24,587 27,033 — —
Total intangible assets 25,096 27,769 — —

Tangible assets
Buildings and land 13 115 124 — —
Machinery and other technical plant 13 8,334 8,270 — —
Equipment, tools and installations 13 575 687 — —
Fixed plant under construction 13 233 350 — —
Total tangible assets 9,257 9,431 — —

Financial fixed assets
Shares in Group companies 14 2,686 1,987
Receivables from Group companies 15 15,353 12,526
Shares in associated companies 16 542 326 — —
Receivables from associated companies 17 19 115 19 115
Other long-term holdings of securities 18 139 202 28 5
Other long-term receivables 19 74 85 — —
Deferred tax receivable 11 1,246 1,764 1,771 2,656
Total financial fixed assets 2,020 2,492 19,857 17,289
Total fixed assets 36,373 39,692 19,857 17,289

Current asset
Materials and supplies 353 362 — —

Current receivables
Accounts receivable 20 4,373 3,624 — —
Current tax receivables 1 6 — —
Receivables from Group companies 7 2
Other receivables 21 250 530 — 2
Prepaid expenses and accrued revenues 22 3,049 2,769 1 1
Total current receivables 7,673 6,929 8 5

Cash and bank balances 23 2,473 2,275 10 8
Total current assets 10,499 9,566 18 13

Total assets 33–34 46,872 49,258 19,875 17,302


SEK million Note Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001

EQUITY AND LIABILITIES
Shareholders’ equity 24
Restricted equity
Share capital 25 737 737 737 737
Restricted reserves 24,401 35,741 16,562 23,935
Total restricted equity 25,138 36,478 17,299 24,672

Non-restricted reserves/accumulated losses
Non-restricted reserves/accumulated losses 3,367 –7,353 2,185 3,495
Profit/loss of the year 223 392 69 –10,882
Total non-restricted reserves/accumulated losses 3,590 –6,961 2,254 –7,387

Total shareholders’ equity 28,728 29,517 19,553 17,285


Provisions
Shares in associated companies 16 28 102 — —
Total provisions 28 102 — —

Long-term liabilities
Interest-bearing
Liabilities to financial institutions 26 7,876 10,843 — —
Liabilities to Group companies 303 —
Bank overdraft facility 23 — 14 — —
Other liabilities 27 23 115 — —
Total interest-bearing liabilities 7,899 10,972 303 —

Non-interest-bearing
Other liabilities — 8 — —
Total non-interest-bearing liabilities — 8 — —

Total long-term liabilities 7,899 10,980 303 —

Current liabilities
Interest-bearing
Liabilities to financial institutions 26 2,377 731 — —
Other liabilities 27 5 151 — —
Total interest-bearing 2,382 882 — —

Non-interest bearing
Accounts payable 3,542 3,344 6 10
Current tax liabilities 57 16 — —
Other liabilities 28 441 375 5 —
Accrued expenses and prepaid revenues 29 3,773 4,014 8 7
Total non-interest bearing liabilities 7,813 7,749 19 17

Total current liabilities 10,195 8,631 19 17

Total shareholders’ equity and liabilities 33–34 46,872 49,258 19,875 17,302

PLEDGED ASSETS AND CONTINGENT LIABILITIES
Pledged assets 30 23,678 24,139 None None
Contingent liabilities 31 None None 12,825 15,133

39

Cash Flow Statement
SEK million Note 2002 2001 2002 2001
Operating activities
Operating profit/loss 1,530 –1,356 –73 –57
Adjustments ofincome/expense items that do not
generate cash flow from operating activities:
Depreciation and amortization 3,597 3,054 — —
Capital losses/gains on sale of machinery, other technical plant 9 40 — —
Financial leases –20 –14 — —
Exchange rate differences 63 — — —
Interest received 157 54 2 4
Interest paid –619 –569 — –14
Financial expenses paid –104 –55 — –1
Tax paid/refund –49 7 — —
4,564 1,161 –71 –68
Change in working capital:
Materials and supplies –12 –66 — —
Accounts receivable –815 –837 — —
Other current receivables 167 –69 2 –2
Prepaid expenses and accrued revenues –185 –851 — —
Intra-Group transactions, current –4 –2
Accounts payable 236 566 –4 3
Other current liabilities 123 112 3 —
Accrued expenses and prepaid revenues 287 397 1 –1
–199 –748 –2 –2
Cash flow provided by operating activities 4,365 413 –73 –70

Investing activities
Acquisition of intangible fixed assets –208 –17 — —
Acquisition of tangible fixed assets –1,699 –2,167 1 —
Sale of tangible fixed assets 17 38 — 1
Acquisition of shares in Group companies, exc. Cash 14 –346 831 –299 –36
Acquisition of other long-term securities –317 –334 –23 –75
Sale of other long-term securities 40 236 — —
Lending to Group companies –128 –52
Payment received from Group companies 414 313
Other long-term lending –12 –103 –7 –71
Payment received from other long-term lending 9 49 102 —
Cash flow from investing activities 32 –2,516 –1,467 60 80

Financing activities
Raising of loans from credit institutions 528 12,139 — 1,285
Amortization of loans from credit institutions –1,744 –9,861 — –1,306
Raising of other interest-bearing liabilities 12 342 — 203
Amortization of other interest-bearing liabilities –209 –842 — –206
New share issue 15 15 15 15
Cash flow from financing activities –1,398 1,793 15 –9

Net change in cash 451 739 2 1

Liquid funds at beginning of year 23 2,275 1,511 8 7
Exchange-rate differences in liquid funds 23 –253 25 — —
Liquid funds at end of year* 23 2,473 2,275 10 8

*of which, blocked accounts 23 870 897 — —
For additional cash flow information, refer to: 32


Change in Shareholders’ Equity
Group
Note Share Restricted Unrestricted Total share-
SEK million capital reserves reserves hold.’ equity
Closing shareholders’ equity, Dec. 31, 2000 724 25,098 717 26,539
Items reported directly against shareholders’ equity
Gradual acquisitions — — –12 –12
Exchange-rate difference Note 24 — 1,844 –110 1,734
Total items reported directly against shareholders’ equity — 1,844 –122 1,722

Other changes in shareholders’ equity
New share issue, acquisition of Tele2 Russia 12 837 — 849
New share issue 1 14 — 15
Transfers within shareholders’ equity — 7,948 –7,948 —
Net profit/loss for the year — — 392 392
Closing shareholders’ equity, Dec. 31, 2001 737 35,741 –6 961 29,517

Closing shareholders’ equity, Dec. 31, 2001 737 35,741 –6,961 29,517
Exchange-rate difference Note 24 — –4,189 3,163 –1,026
Total items reported directly against shareholders’ equity — –4,189 3,163 –1,026

New share issue — 14 — 14
Utilization of share premium reserve — –7,387 7,387 —
Transfers within shareholders’ equity — 222 –222 —
Net profit/loss for the year — — 223 223
Closing shareholders’ equity, Dec. 31, 2002 737 24,401 3,590 28,728

Parent Company
Restricted shareholders’ equity Unrestricted equity Total
Share capital Share premium Profit/loss sharehold. equity
SEK million reserve brought forward
Group contribution, received — — 2,100 2,100
Group contribution, tax effect — — –588 –588
Rounding off — 1 — 1
Total items reported directly against shareholders’ equity — 1 1,512 1,513

New share issue, acquisition of Tele2 Russia 12 837 — 849
New share issue 1 14 — 15
Net profit/loss for the year — — –10,882 –10,882

Group contribution, received — — 3,035 3,035
Group contribution, tax effect — — –850 –850
Total items reported directly against shareholders’ equity — — 2,185 2,185

New share issue — 14 — 14
Utilization of share premium reserve — –7,387 7,387 —
Profit/loss for the year — — 69 69

41

Notes
(SEK million)

General accounting principles
The annual report has been prepared in accordance with the Annual Tele2’s management conducts continual appraisals to confirm
Accounts Act and recommendations of the Swedish Financial these assumptions remain reasonable.
Accounting Standards Council’s Emerging Issues Task Forece and • Tele2’s management continually makes assessments of the sus-
the Swedish Financial Accounting Standards Council’s recommen- tained value of intangible and tangible fixed assets. If manage-
dations RR1: 00-RR28, of which RR2:02, RR22 and RR24-RR28 ment identifies factors that entail a risk of reduced value of the
were applied before they came into force. particular asset, a revaluation of the asset is conducted by com-
In 2002, Tele2 modified its accounting principles to conform to paring the sum of the future discounted cash flow with the
recommendations RR2:02-Materials and Supplies, RR22-Layout asset’s book value. In cases in which the book value exceeds the
of Financial Reports, RR23-Information on Related Parties, RR24- future discounted cash flow, a write-down requirement emerges.
Managed Properties, RR25-Reporting for segments -operating The appraisal that concludes that there are factors indicating
areas and geographical areas, RR26- Events after the Closing Date, that an asset is exposed to a decline in value; the assessment
RR27-Financial Instruments: Information and Classification, and of future cash flow, including discounting factors; and the final
RR28-State support. decision regarding the real value of the asset, entail a require-
The new recommendations have no significant impact on Tele2’s ment for management to conduct essential estimates and
financial reporting. Effective 2003, Tele2 has begun to apply RR29 approximations. (Note 12–13).
Employee Benefits, which means that defined-benefit pension • The calculation of deferred taxes takes into consideration tem-
plans for all the Group’s subsidiaries are to be reported on the basis porary differences, including a valuation of unutilized loss carry-
of uniform principles. To date, Tele2 has reported such plans in line forwards. Deferred tax receivables are reported only for loss
with local rules and stipulations in each country. Since the com- carry-forwards to the extent that the loss-carry forwards will be
pany has largely had defined-contribution plans (Note 38), the utilized in the near future. A prudent valuation has been made
introduction of RR29 is not expected to have any material impact of deferred tax receivables and the company’s management con-
on the Group’s earnings and financial position. ducts continual appraisals to confirm that these assessments
Assets and liabilities in subsidiaries are valued on the basis of are reasonable. (Note 11).
the accounting principles applied by the Parent Company. • Receivables are valued continually and reported in the amounts
expect to be paid. Reserves for doubtful receivables are based
Critical accounting principles on various assumptions and historical experience (Note 20).
Assets and liabilities are valued at their acquisition value unless
otherwise stated. Consolidated accounts
The consolidated financial reports are, in part, based on account- The consolidated financial statements include the accounts of the
ing methods, assumptions and estimates in conjunction with the Parent Company and all companies in which the Parent Company,
drawing up of the consolidated accounts. The estimates and approxi- directly or indirectly, controls more than 50% of the votes, or in
mations are based on historical experience and a number of other some other respect has a decisive influence.
assumptions, which result in a decision regarding the value of the The consolidated accounts were prepared using the purchase
assets or liabilities that cannot be set in any other way. The actual method, which means that the Parent Company’s purchase cost of
outcome may deviate from these estimates and approximations. shares in each subsidiary is charged against that subsidiary’s acqui-
The account below presents the accounting principles applied sition value, that is, the subsidiary’s shareholders’ equity (includ-
to the most critical estimates and approximations used in drawing ing the equity component of untaxed reserves) at the time of acqui-
up the Group’s financial reports. sition based on a market appraisal of the subsidiary’s net assets.
• Depreciation according to plan is based on the acquisition value Consequently, the Group’s shareholders’ equity includes only that
and estimated utilization period of fixed assets. The utilization part of each subsidiary’s equity that has been earned after the
period for machinery and technical plant is estimated to amount acquisition.
to between 2–25 years. All depreciation is straight-line over the The difference between the purchase cost of shares in a sub-
utilization period (Note 2). sidiary and the market value of that subsidiary’s net assets at the
Amortization periods for goodwill are set on the basis of each time of acquisition is allocated to the subsidiary’s identifiable
acquisition date and the acquisition’s estimated long-term, assets if the book value is less than the market value. Remaining
strategic significance. An amortization period of 20 years amounts are reported as goodwill.
applies for each corporate acquisitions in new markets. This The current method is used to translate the accounts of foreign
means that goodwill arising from all strategic acquisitions in subsidiaries. Consequently, the exchange rate on the closing date
recent years (meaning acquisitions in the Baltic States, contin- is used to translate items in the balance sheet, while items in the
ental Europe and Russia) is written off over a period of 20 years. income statement are translated using the average exchange rate
for the year.

All non-Swedish companies in the Tele2 Group are regarded as Receivables and liabilities of Swedish and non-Swedish sub-
independent foreign operations since they conduct independent sidiaries denominated in foreign currencies
operations and operations that are pursued with transactions in Receivables and liabilities of Group companies denominated in for-
local currency, so that exchange rate differences arising from trans- eign currencies have been translated into Swedish kronor applying
lations are charged directly to shareholders’ equity. the year-end rate.
When an independent foreign operation is divested, the accu- Gains or losses on foreign exchange in international transactions
mulated exchange-rate differences attributable to the divested related to regular operations are included in the income statement
operation are reported in “Net assets in Group companies divest- under “Other operating revenues” and “Other operating expenses”,
ed” in the income statement. respectively, while differences in financial receivables and liabil-
ities are reported among financial items. Note 24 summarizes the
Accounting for associated companies and joint ventures exchange rate differences charged directly to shareholders’ equity
Companies in which the shareholding is regarded as long term and and the differences that affected profit/loss for the year.
in which the Group’s voting rights amount to a minimum of 20% Long-term lending to/borrowing from Tele2’s foreign operations
and a maximum of 50%, or in which the management believes that is regarded as a permanent part of the Parent Company’s financing
the shareholders have equal control, are treated as associated com- of/borrowing from foreign operations, and thus as an expansion/
panies. Companies in which the owners have major control pursuant reduction of the Parent Company’s investment in the independent
to agreement are regarded as joint ventures. foreign operation. This lending/ borrowing is translated at the his-
Associated companies and joint ventures (“associated com- torical rate of exchange if the borrowing is denominated in the for-
panies”) are reported in accordance with the equity method. This eign company’s currency.
means that the book value of the shares in the associated company
that is reported in the consolidated financial statements corre- Fixed assets
sponds to the Group’s share in the equity of the associated com- Intangible and tangible fixed assets are reported in net form after
pany and any residual value of consolidated surplus values after deductions for accumulated amortization and depreciation accord-
adjustment to the consolidated accounting principles. Participation ing to plan. Depreciation/amortization according to plan is based
in earnings after net financial items of the associated company are on the acquisition value of the assets and the estimated utilization
reported in the income statement in the item “Result from shares period. Note 2 presents depreciation and amortization schedules
in associated companies” along with amortization of acquired sur- for fixed assets and reasons for amortizing certain intangible fixed
plus values. The share of associated companies’ tax expense and assets over utilization period longer than five years.
deferred tax expense/income is reported in the income statement If there is an indication that a tangible or intangible asset has
in the item “Tax on profit for the year” and in the balance sheet as declined in value, an estimate is made of its recovery value. If the
“Shares in associated companies”. Earnings accrued in associated calculated recovery value is less than the reported value, a write-
companies arising after the acquisition date, and which have not down is made to the asset’s recovery value.
yet materialized through dividends, are allocated to the equity
method reserve, which comprises part of restricted shareholders’ Intangible assets
equity in the Group. The equity share reduces unrestricted share- License fees and right of use
holders’ equity in the event of losses. The Company holds a number of licenses issued by the Swedish
In the event of an increase or decrease in the Group’s equity National Post and Telecom Agency and the equivalent licensing
share in associated companies through share issues, the loss or gain authority in other countries. Capitalized expenses for these rights
is reported in the consolidated income statement in the item are amortized over the duration of the contract.
“Result from participations in associated companies”. If the non-
recurring effect is significant, the amount is reported in the item Goodwill
“Items affecting comparability”. Goodwill is defined as the difference between the purchase cost of
In the event of negative shareholders’ equity in associated com- shares or assets acquired and the market value of net assets.
panies and in which the company has pledged to contribute add-
itional capital, the negative portion is reported as a provision. Tangible assets
Group surplus values relating to foreign associated companies Buildings and land
are reported as assets in foreign currencies. These values are trans- Buildings and land pertain to fixed assets intended for use in actual
lated in accordance with the same principles as the income state- operations. Buildings are written off straight-line over the utilization
ments and balance sheets for associated companies. period. Acquisition value includes direct costs attributable to the
building.
Minority interest
The minority share in net profit/loss and shareholders’ equity is
reported as minority interest.
43

Machinery and technical plant Liquid funds
Machinery and technical plant include equipment and machinery Liquid funds consist of cash and bank balances as well as current
intended for use in operations, such as network installations. The investments with a maturity of a maximum three months. Liquid
asset is written off on a straight-line basis over the utilization funds according to the cash flow statement and balance sheet
period. The acquisition value includes direct expenses attributable include blocked bank accounts.
to the construction and installation of networks. Interest directly
relating to acquisition, construction or production of an asset that Financial items
necessarily requires considerable time to complete for the intended Financial items are reported originally at their acquisition value.
application is included in the acquisition value of the asset. Current financial assets are subsequently reported in line with the
Additional expenses for extensions and improvements that lower of cost and market value. Financial items such as cash and
increase value are capitalized, while additional expenses for repairs bank balances, current investments, receivables and liabilities, pre-
and maintenance are charged continually to income during the period paid income and current liabilities to financial institutions are
in which they arise. viewed as corresponding to their real value as they are of a short-
term nature. The book value of long-term liabilities to financial insti-
Equipment, tools and installations tutions is also regarded as corresponding to their real value.
Equipment comprises assets used in administration, sales and
operations. Shareholders’ equity
Shareholders’ equity consists of registered share capital, reserves
Proprietary software for internal use that are not available for distribution (statutory reserve, share pre-
Tele2 capitalizes certain direct development costs attributable to mium reserve and other restricted reserves) and disposable earn-
software for internal use. These are written off over the period of ings/accumulated losses, net profit/loss and shares in losses of
use, which commences when the asset is ready for application. associated companies.
Costs attributable to the project phase in the planning stage as well The share premium reserve pertains to surplus portions when a
as costs for maintenance and training are expensed as they arise. company’s shares are issued at a price that exceeds the normal
value. The equity reserve pertains to positive earnings of associat-
Leasing ed companies received after the acquisition date. According to the
Leases are classified as either financial or operating leases. A lease Swedish Companies Act, a provision must be made each year to the
is considered financial if all economic risks and benefits associated statutory reserve in a minimum amount corresponding to 10% of
with ownership of the asset have been transferred, to a material that portion of net profit for the year that is not used to cover
degree, to the lessee; otherwise, the lease is an operating lease. In retained losses until the statutory reserve and the share premium
the case of financial leases as reported in the consolidated finan- reserve, combined, correspond to 20% of the share capital.
cial statements, each asset is entered as a tangible fixed asset, and Restricted reserves in Tele2 and the Swedish Group companies may
a corresponding amount is entered as a loan on the liability side of be used to increase share capital in order to cover accumulated
the balance sheet. In the income statement, the cost of the lease losses, under certain conditions. Other restricted reserves pertain
is divided into a depreciation portion and an item in interest to the equity share of untaxed reserves, deferred tax receivables and
expense. The asset is written off on a straight-line basis over the a portion of exchange-rate differences.
utilization period. According to the Swedish Companies Act, Tele2’s disposable
Agreements covering financial leases before January 1, 1997 have earnings after the requisite provision to the statutory reserve and
been reported as operational leases in line with a transitional rule. after covering accumulated losses of previous years are available
for distribution to shareholders. The legal limit for distributable
Materials and supplies funds is represented by rules to the effect that dividends may not
Inventories of materials and supplies are valued in line with the threaten the company’s liquidity or overall position or exceed unre-
first-in, first-out principle at the lower of purchase cost and market stricted shareholders’ equity in the Group. The dividend is deter-
value. mined by shareholders at the Annual General Meeting and, gener-
ally, may not exceed the dividend proposed by the Board.
Receivables
Receivables are reported in the amounts expected to be paid.


Revenue recognition Transactions with related parties
Sales are reported net of VAT, discounts and exchange rate differ- Transactions with related parties are shown in Note 35.
ences for sales in foreign currency. Revenue from telephony, cable
TV and other services and products is recognized at the time the US accounting principles (US GAAP)
service/product is supplied to the customer. The Group’s balance sheet and income statement were drawn up
in accordance with Swedish accounting principles. These diverge
Marketing expenses to a certain extent from US accounting principles (US GAAP). Note
Expenditure for advertising and other marketing activities is 40 shows the adjustments necessary to report in accordance with
charged on an ongoing basis. US-GAAP.

Corporate income tax Other information
Consolidated profit or loss for the year is charged with the tax on Tele2 AB is a limited liability company domiciled in Stockholm,
taxable income for the year (“Current tax”) and with estimated tax Sweden. The company’s head office (phone +46 8 5620 0060) is
charges or credits for temporary differences (“Deferred tax”). A tem- located at Skeppsbron 18, Box 2094, 103 13 Stockholm, Sweden.
porary difference is a provision to appropriations made by an indi- The balance sheets and income statements will be approved at
vidual company or any other item that merely alters the time when the Annual General Meeting on May 15, 2003.
an item is considered taxable or entitling the company to a deduction.
The calculation of deferred tax receivables in the Group takes
into account the Group’s loss carry-forwards to the extent that it is
expected they can be used in the foreseeable future. Deferred tax
receivables and deferred tax liabilities are netted only among units
with the same domicile for tax purposes.
The tax effects of Group contributions paid and received are
reported in the individual companies as a tax expense or tax rev-
enue in the income statement (“Current tax”) and charged to
retained losses or earnings.

Earnings per share
Earnings per share after dilution 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. If the result for the year is negative,
this does not affect the calculation, since the dilution may not
reduce the loss per share.

Note 1 Operating revenue

Intra-group sales include sales to companies in the Tele2 Group. Intra-Group sales in each market area and additional information concerning the
segments are shown in Note 33, Market areas and Note 34, Operating areas. Sales of telephones are included in operating revenue in the amount of
SEK 453 million (2001: SEK 306 million). The number of customers per market area and business area is shown in Note 36.
Optimal Telecom, which was previously reported in the Branded products & services market area, is included in the concept “Tele2 Sweden” as
of January 1, 2002 and in the Nordic market area. Operating revenue for Optimal Telecom amounted to SEK 450 million in 2001.
During the first quarter of 2002, Tele2 won a case in the County Administrative Court against Telia regar-ding the principles of payment for joint
traffic charges, which means that Telia is responsible for paying SEK 350 million for switched traffic transited via its network (Cascade Accounting).
As a result, operating revenue was positively affected in the amount of SEK 237 million in 2002 for traffic attributable to earlier periods.
The entire operating revenue of the Parent Company pertains to sales to other Group companies.

45

Cont. note 1

Operating area by market area:
Group
Operating revenue
2002 2001 Change
Nordic:
Mobile telephony 7,109 6,029 18%
Fixed telephony and Internet 6,637 5,886 13%
Cable-TV 270 171 58%
Data processing 214 280 –24%
Intra-Group sales –664 –468 42%
Total, Nordic 13,566 11,898 14%
of which, Tele 2 in Sweden; Mobile telephony 6,611 5,720 16%
of which, Tele 2 in Sweden: Fixed telephony 3,877 3,183 22%
of which, Tele 2 in Sweden: Cable TV 253 157 61%
of which, Tele 2 in Sweden; Total 10,741 9,060 19%

Eastern Europe and Russia:
Fixed telephony and Internet 198 34 482%
Cable-TV 26 — —
Data processing 77 53 45%
Intra-Group sales –49 –33 48%
Total, Eastern Europe and Russia 2,320 1,148 102%

Central Europe:
Mobile telephony 145 25 480%
Intra-Group sales –378 –520 –27%
Total, Central Europe 5,689 4,844 17%

Southern Europe:
Total, Southern Europe 8,105 5,124 58%

Luxembourg:
Mobile telephony 535 471 14%
Fixed telephony and Internet 209 211 –1%
Cable-TV 2 — —
Data processing 124 104 19%
Total, Luxembourg 754 663 14%

Branded products & services:
Mobile telephony — 17 —
Fixed telephony and Internet 1,004 1,559 –36%
Total, Branded products & services: 848 1,408 –40%

Total by market 31,282 25,085 25%

Group
Operating revenue
2002 2001 Change

Cable TV 298 171 74%
Data processing 415 437 –5%
Intra-Group sales –1,673 –1,779 –6%
Total by operating area 31,282 25,085 25%


Note 2 Depreciation/amortization for the year and operating profit
Operating area by market:
Group
EBITDA* Depreciation/amortizat. EBIT**
2002 2001 2002 2001 2002 2001
Nordic:
Mobile telephony 3,576 2,917 –791 –354 2,785 2,563
Fixed telephony and Internet 1,187 847 –466 –484 721 363
Cable-TV 41 –11 –73 –72 –32 –83
Data processing 10 15 –5 –3 5 12
Total, Nordic 4,814 3,768 –1,335 –913 3,479 2,855
of which, Tele 2 in Sweden, Mobile telephony 3,646 3,111 –388 –352 3,258 2,759
of which, Tele 2 in Sweden, Fixed telephony 870 675 –347 –351 523 324
of which, Tele 2 in Sweden, Cable TV 41 –13 –70 –70 –29 –83
of which, Tele 2 in Sweden, Total 4,557 3,773 –805 –773 3,752 3,000

Mobile telephony 611 320 –339 –244 272 76
Fixed telephony and Internet –76 –56 –29 –23 –105 –79
Cable-TV –1 — –12 — –13 —
Data processing 7 8 –10 –11 –3 –3
Total, Eastern Europe and Russia 541 272 –390 –278 151 –6

Central Europe:
Mobile telephony –186 –21 –17 –3 –203 –24
Fixed telephony and Internet 105 –585 –116 –98 –11 –683
Total, Central Europe –81 –606 –133 –101 –214 –707

Southern Europe:
Fixed telephony and Internet –101 –1,331 –129 –96 –230 –1,427
Total, Southern Europe –101 –1,331 –129 –96 –230 –1,427

Luxembourg:
Mobile telephony 161 101 –65 –65 96 36
Fixed telephony and Internet 6 –61 –18 –48 –12 –109
Cable-TV –29 — –5 — –34 —
Data processing –12 –35 –4 –5 –16 –40
Total, Luxembourg 126 5 –92 –118 34 –113

Branded products & services:
Mobile telephony — –22 — — — –22
Fixed telephony and Internet –172 –388 –12 –36 –184 –424
Total, Branded products & sevices –172 –410 –12 –36 –184 –446

Group depreciation/amortization –1,506 –1,512 –1,506 –1,512
Total by market 5,127 1,698 –3,597 –3,054 1,530 –1,356

Group
EBITDA* Depreciation/amortizat. EBIT**
2002 2001 2002 2001 2002 2001
Mobile telephony 4,162 3,295 –1,212 –666 2,950 2,629
Fixed telephony and Internet 949 –1,574 –770 –785 179 –2,359
Cable-TV 11 –11 –90 –72 –79 –83
Data processing 5 –12 –19 –19 –14 –31
Group depreciation/amortization –1,506 –1,512 –1,506 –1,512
Total per operating area 5,127 1,698 –3,597 –3,054 1,530 –1,356

* EBITDA = Operating profit before depreciation/amortization
** EBIT = Operating profit after depreciation/amortization

47

Cont. note 2
Group
EBITDA-margin EBIT-margin
2002 2001 2002 2001

Nordic 35% 32% 26% 24%
of which, Tele 2 in Sweden, Mobile telephony 55% 54% 49% 48%
of which, Tele 2 in Sweden, Fixed telephony 22% 21% 13% 10%
of which, Tele 2 in Sweden, Cable-TV 16% –8% –11% –53%
of which, Tele 2 in Sweden, Total 42% 42% 35% 33%

Eastern Europe & Russia 23% 24% 7% –1%
Central Europe –1% –13% –4% –15%
Southern Europe –1% –26% –3% –28%
Luxembourg 17% 1% 5% –17%
Branded products & services –20% –29% –22% –32%
Total per operating area 16% 7% 5% –5%

The profit gauges above do not include internal sales to other companies in the Tele2 Group. Profit/loss including internal sales, depreciation by seg-
ment (with the exception of goodwill for the acquisition of SEC) and additional information on segments is shown in Note 33, Market areas and Note
34, Operating areas. Sales of telephones are included in operating expenses for the year in the amount of SEK –573 million (2001: SEK –543 million).
Optimal Telecom, which was previously reported in the Branded products * market area is included in the Nordic market area as of January, 2002.
Operating profit/loss before and after depreciation/ amortization for Optimal Telecom in 2001 amounted to SEK –20 million and SEK –43 million,
respectively.

By function:
Depreciation/Amortization
2002 2001 2002 2001
Cost of services sold –3,264 –2,782 — —
Selling expenses –83 –75 — —
Administration expenses –250 –197 — —
Total depreciation/amortization for the year by function –3,597 –3,054 — —

By type of asset:
Depreciation/Amortization
2002 2001 2002 2001
Licences and right of use –339 –46 — —
Goodwill –1,512 –1,506 — —
Buildings –19 –19 — —
Machinery and other technical plant –1,350 –1,276 — —
Equipment, tools and installations –240 –207 — —
Plant under construction –137 — — —
Total depreciation/amortization for the year by type of asset –3,597 –3,054 — —

Estimated utilization period:
Intangible fixed assets:
Licences and right of use 2–25 years —
Goodwill 3–20 years —

Tangible fixed assets:
Buildings 5–40 years —
Machinery and other technical plant 2–25 years —
Equipment, tools and installations 2–10 years —

Depreciation/amortization according to plan is based on the acquisition value of each fixed asset and its estimated utilization period. All deprecia-
tion/amortization is applied on a straight-line basis over the utilization period.
Goodwill arising from the original acquisition of Comviq GSM AB and Tele2 Sverige AB and other acquisitions before 1996 are amortized over ten
years. The goodwill arising in 1996 in conjunction with the acquisition of outstanding minority shareholding in Tele2 Sverige AB and outstanding
options in Comviq GSM AB, is amortized over 20 years. Goodwill arising from the acquisition of Datametrix, Ritabell, SIA Tele2, SEC, Fora and Levicom
Broadband is amortized over a period of 20 years. The amortization periods are set on the basis of the estimated long-term and strategic significance
of each acquisition on the acquisition date. In the case of corporate acquisitions in new markets, an amortization period of 20 years is applied. Other
goodwill is amortized over five years.


Note 3 Other operating revenue
2002 2001 2002 2001

Rental of capacity and antenna installations — 64 — —
Exchange gains in business operations 24 33 1 —
Divestment of fixed assets 9 2 — —
Other revenue, external 17 90 — —
Other revenue, Group — — 11 4
Total other operating revenue 50 189 12 4

Note 4 Other operating expenses
Group Parent company
2002 2001 2002 2001

Exchange loss from operations –35 –20 — —
Sale/scrapping of other fixed assets –18 –46 — —
Other costs –9 –9 — —
Total other operating expenses –62 –75 — —

Note 5 Profit/loss on shares in associated companies
Group Parent company
2002 2001 2002 2001

Participation in profit/loss of associated companies –41 –58 — —
Total profit/loss in associated companies –41 –58 — —

Holding Group Parent Company
Dec. 31, 2002 Dec. 31, 2001 2002 2001 2002 2001

Svenska UMTS-nät AB 50% 50% –1 –1 — —
Other associated companies Note 16 Not 16 –40 –57 — —
Total net profit/loss from associated companies –41 –58 — —

Profit/loss in associated companies:
2002 2001
Sv UMTS-nät Other Sv UMTS-nät Other
(9 mth)

Profit/loss in each associated company –2 –108 –2 –113
Holding 50% 20–50% 50% 20–50%
Share of profit/loss –1 –39 –1 –57
Change in share of profit/loss from preceding year — –1 — —
Total net profit/loss from associated companies –1 –40 –1 –57

In the fourth quarter of 2002, Tele2 sold its 20% shareholding in Moscow Cellular Communication, an associated company in Tele2 Russia Telecom
BV Group (formerly Fora BV), which was acquired in 2001.

Extracts from the balance sheets and income statements of each associated company:
2002 2001
(9 mån)
Income statement:
Revenue — 70 — 13
Operating profit/loss after depreciation/amortization –20 –86 –11 –103
Profit/loss for the year –2 –108 –2 –113

49

Cont. note 5
Dec. 31, 2002 Dec. 31, 2001
Balance sheet:
Tangible assets 468 — 12 432
Intangible and financial assets — 33 — 107
Current assets 545 80 492 141
Total assets 1,013 113 504 680

Shareholders’ equity 995 –8 498 130
Long-term liabilities — 37 — 349
Current liabilities 18 84 6 201
Total shareholders’ equity and liabilities 1,013 113 504 680

Note 6 Sales of associated companies
2002 2001 2002 2001

Sale of Moscow Cellular Communication 5 — — —
Sale of Transcom Worldwide S.A — 91 — —
Total sales of associated companies 5 91 — —

Note 7 Profit/loss on shares in Group companies
Parent Company
2002 2001

Liquidation loss in Société Europénne de Communication S.A. — –13,964
Total profit/loss from shares in Group companies — –13,964

Note 8 Profit/loss on other securities and receivables constituting fixed assets
2002 2001 2002 2001

Interest, Group 180 61
Interest, external receivables 2 5 2 3
Writedown of shares in XSource Corporation –86 — — —
Exchange rate difference — –1 — —
Total profit/loss on other securities and receivables constituting fixed assets –84 4 182 64

Note 9 Other interest income
2002 2001 2002 2001

Interest, Group — 14
Interest, bank balances, etc. 111 66 — —
Interest, penalty interest etc. 47 — — —
Exchange rate difference on financial fixed assets 7 –1 — —
Total other interest income 165 65 — 14

Note 10 Interest expense and similar profit/loss items
2002 2001 2002 2001

Interest, loans –679 –557 — –14
Interest, financial leasing –13 –11 — —
Interest, penalty interest rate and other liabilities –30 –53 — —
Interest, Group –5 —
Exchange rate difference on financial liabilities 57 2 — —
Other financial expense –114 –71 — –1
Total interest expense and similar profit/loss items –779 –690 –5 –15


Note 11 Tax on profit/loss for the year and deferred tax liability/receivable
Tax on profit/loss for the year
2002 2001 2002 2001
Current tax expense:
Eastern Europe and Russia –45 –2 — —
Central Europa –4 — — —
Southern Europe — –1 — —
Luxembourg — 4 — —
–49 1 — —

Deferred tax expense, as a result of temporary differences:
Nordic –835 2,334 –35 3,076
Eastern Europe and Russia 22 — — —
Central Europa 116 — — —
Southern Europe 127 — — —
Luxembourg 30 — — —
Branded products & services 15 — — —
–525 2,334 –35 3,076
Total tax expense (–)/tax income (+) on profit for the year –574 2,335 –35 3,076

Group
Profit before tax and
and minority share,
geographic breakdown
2002 2001
Sweden 2,532 2,072
Other countries –1,736 –4,016
Total profit/loss and minority share 796 –1,944

The difference between the booked tax expense for the Group and the tax expense based on prevailing tax rates in each country consists of the
following components:
Group
Calculation of effective tax rate
2002 2001
Profit/loss before tax and minority share 796 –1 944

Tax according to prevailing tax rate in:
Tax effect according to tax rates in Sweden –223 28,0% 544 28,0%
Difference between tax rate in Sweden for foreign subsidiaries 135 326
–88 870
Tax effect of:
Non-tax affecting items, Group adjustments –418 52.5% –422 –21.7%
Non-tax affecting items, other adjustments 18 –2.3% 40 2.1%
Liquidation of SEC and taxation of deferral — — 3 082 158.5%
Non-deductible expenses etc –81 10.2% –35 –1.8%
Loss carry-forwards:
– Valuation of loss carry-forwards in previous years 576 –72.4% — —
– Non-assessed additional loss carry-forward for the year –581 73.0% –1 200 –61.7%
Tax expense/income and effective tax rate –574 72.1% 2 335 120.1%

Group
Deferred tax receivable,
attributable to
Dec. 31, 2002 Dec. 31, 2001
Long-term receivables –3 –5
Machinery and technical plant –1,019 –928
Value of unutilized loss carry-forwards 2,268 2,697
Total deferred tax receivable (+)/tax liability (–) 1,246 1,764

51

Cont. note 11
Group
Deferred tax receivable
Dec. 31, 2002 Dec. 31, 2001
Deferred tax receivable:
Nordic 1,937 2,697
Eastern Europe and Russia 35 —
Central Europa 117 —
Southern Europe 128 —
Luxembourg 36 —
Branded products & services 15 —
2,268 2,697
Deferred tax liability:
Nordic –1,022 –933
Total deferred tax receivable (+)/tax liability (–) 1,246 1,764

Loss carry-forwards:
At December 31, 2002, the Tele2 Group had loss carry-forwards totaling SEK 19,173 million (2001: SEK 19,871million), of which SEK 1,744 mil-
lion (2001: SEK 3,300 million) expires within five years and the remaining amount, SEK 17,429 million (2001: SEK 16,571 million), expires after
five years or they continue to apply in perpetuity.
A deferred tax receivable in the case of loss carry-forwards is reported only to the extent that it is estimated that they can be utilized in the near future.
Due to the improved results in Continental Europe deferred tax receivables of a total amount of SEK 576 million has been recognized in the profit
and loss statement in 2002. Total losses carried forward for the Group at December 31 2002 amounted to SEK 19,173 million, of which SEK 7,881
million has been utilized for deferred tax accounting and the remaining part, SEK 11,292 million, is valued to zero.
The Swedish tax authorities have queried a loss carry-forward in Tele2 AB corresponding to a tax effect of SEK 176 million (2001: SEK 176 mil-
lion). These have been valued to SEK 169 million.

Note 12 Intangible assets

Dec. 31, 2002
Licences & Goodwill Total Licenses &
right of use right of use
Acquisition value:
Acquisition value at Jan. 1 996 29,755 30,751 1
Acquisition value in acquired companies 1 — 1 —
Investments for the year 147 460 607 —
Sales and scrapping –272 –9 –281 —
Reclassification –13 –498 –511 —
Translation differences for the year –37 –962 –999 —
Total acqusition value 822 28,746 29,568 1
Accumulated depreciation/amortization:
Accumulated depreciation/amortization at Jan 1 –260 –2,722 –2,982 –1
Accumulated depreciation/amortization in acquired companies — — — —
Depreciation/amortization for the year –339 –1,512 –1,851 —
Sales and scrapping 271 9 280 —
Reclassification 2 — 2 —
Translation differences for the year 13 66 79 —
Total accumulated depreciation/amortization –313 –4,159 –4,472 –1

Total intangible assets 509 24,587 25,096 —

Investments for the year in goodwill relate essentially to the supplementary purchase price paid for Tele2 Russia (SEK 407 million).
Sales and scrapping relate essentially to the phase-out of Tele2 Norway’s UMTS license, in which the net book value of capitalized license costs
was dissolved in its entirety and charged to depreciation in the amount of SEK –263 million.
When Tele2 acquired Société Europénne de Communication SA, through an offer to SEC’s shareholders, there were outstanding stock options in
SEC. Tele2’s offer did no encompass the stock options, thus in order to calculate net assets, these have been given a theoretical value as if they had
been encompassed by the offer and booked as a liability in the consolidated balance sheet. During 2002, this liability was adjusted vis-à-vis good-
will, shown above as a reclassification, in the amount of SEK 498 million, with no effect on cash and profit.


Note 13 Tangible assets
Dec. 31, 2002
Buildings Machinery, Equipment Plant under Total Inventarier
& land tech. plant construction
Acquisition value:
Acquisition value at Jan. 1 177 14,069 1,320 350 15,916 1
Acquisition value in acquired companies 1 14 13 — 28 —
Investments for the year 18 1,244 203 300 1,765 —
Sales and scrapping –1 –146 –54 –147 –348 —
Reclassification — 331 –55 –263 13 —
Translation differences for the year –13 –268 –49 –7 –337 —
Total acqusition value 182 15,244 1,378 233 17,037 1

Accumulated depreciation:
Accumulated depreciation at Jan. 1 –53 –5,799 –633 — –6,485 –1
Accumulated depreciation in acquired companies — –9 –11 — –20 —
Depreciation for the year –19 –1,350 –240 –137 –1,746 —
Sales and scrapping — 130 44 144 318 —
Reclassification — –11 9 — –2 —
Translation differences for the year 5 129 28 –7 155 —
Total accumulated depreciation –67 –6,910 –803 — –7,780 –1

Total tangible assets 115 8,334 575 233 9,257 —

Sales and scrapping relate essentially to the phase-out of Tele2 Norway’s UMTS license, in which the net book value of capitalized license costs was
dissolved in its entirety and charged to depreciation for the year in the amount of SEK –137 million.

Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001

Total capitalized interest expenses in fixed assets 205 193 — —

Financial leases:
All fixed assets utilized through financial leasing have been included in the consolidated accounts as fixed assets and loan liabilities, with the exception,
however, of contracts signed before 1997. The effects of these being included in the consolidated balance sheet are shown below and in Note 26.

Group
Booked assets Assets not booked
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
Machinery and other technical plant:
Acquisition value 298 306 155 155
Accumulated depreciation –57 –87 –49 –42
Book value 241 219 106 113

Financial leasing pertains primarily to the extension for transmission capacity in Sweden through Svenska Kraftnät, Vattenfall and agreements signed
in Denmark. Also, financial leasing occurs in Estonia, Russia and Luxembourg. During 2002, investments amounted to SEK 83 million, primarily in
Sweden in the amount of SEK 66 million and in Luxembourg in the amount of SEK 11 million. During the year, termination of financial leasing
occurred in Estonia and Latvia.

Tax-assessed value:
The tax-assessed value of the Group’s land in Sweden is SEK 1 million (2001: SEK 1 million).

53

Note 14 Shares in Group companies
Parent Company
Dec. 31, 2002 Dec. 31, 2001
Acquisition value:
Acquisition value at Jan. 1 1,987 24,488
Investments 699 885
Liquidation of Société Europénne de Communication S.A. — –23,386
Total shares in Group companies 2,686 1,987

During 2002, the Parent Company paid a supplementary purchase price for Tele2 Russia Telecom BV (formerly Fora) of SEK 299 million and pro-
vided a shareholder contribution to NetCom Luxembourg SA of SEK 400 million.

Effect on cash of corporate acquisitions and divestments during the year:
The Group’s book value of acquired/divested assets and liabilities in acquired/divested companies was:
Group
Acquired Divested
2002 2001 2002 2001
Intangible fixed assets –351 –394 — —
Tangible fixed assets –2 –614 — —
Financial fixed assets –1 –469 — —
Inventories — –21 — —
Current receivables –9 –238 — —
Current investments and liquid funds –4 –890 — —
Long-term liabilities 5 1,166 — —
Current liabilities 12 428 — —
Exchange rate difference — –11 — —
Purchase sum –350 –1,043 — —

Paid with own shares — 849 — —
Paid through loans from the seller — 135 — —
Paid/Received purchase sums –350 –59 — —
Cash in acquired/divested companies 4 890 — —
Effect on Group cash –346 831 — —


Cont. note 14
Legal structure of the Tele2 Group*:
* including associated companies and other investments
Parent Company
Number of Total par Holding Book value
Company, reg. No, reg’d. Office shares value (capital/votes) Dec. 31, 2002 Dec. 31, 2001
Tele2 Russia Telecom BV, 33287334, Rotterdam, Netherlands 400 pcs NLG 40 000 100% 1,150 851
Tele2 Russia Telecom Services BV, 33.287.334, Amsterdam, Netherlands 100%
PSNR Personal System Networks in region,
1025202610157, Niznhy Novgorod, Russia 100%
Tele2 Russia EKA Holding GmbH, FN 131600 f, Wien, Austria 100%
Fora Telecom M, no P-12721.17, Moscow, Russia 100%
Tele2 Russia VOL Holding GmbH, FN 131602 h, Wien, 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 75%
Udmurtiya Cellular Communications, no P-5818.16, Izhevsk, Russia 55%
Siberian Cellular Communications, no P-4458.16, Omsk, Russia 60%
Chelyabinsk Cellular Network, no P-3656.15, Chelyabinsk, Russia 51%
Tele2 Russia MAC Holding GmbH, FN 132666 y, Vienna, Austria 100%
CISC Cellular, no P-8068.17, Moscow, Russia 100%
Millicom New Tech. in Communications, no P-9894.17, Moscow, Russia 100%
Tele2 Russia International Holding BV, Nr 33221654, Amsterdam, Netherlands 100%
Tele2 Russia International Cellular BV, Nr 33227655, Amsterdam, Netherlands 100%
Suomen Kolmegee, Helsinki, Finland Note 18 27.44%/15%
SCD Invest AB, 556353-6753, Sweden Note 18 9.1%/49.9%
NetCom Luxembourg SA, RC B73.796 Luxembourg 1 000 pcs tEURO 35 100% 1,536 1,136
Tele2 Holding AB, 556579-7700, Stockholm, Sweden 100%
Tele2 Sweden AB, 556267-5164, Stockholm, Sweden 100%
Tele2 Sweden SA, RC B73.802, Luxembourg 100%
4 T Solutions Holding AB, 556580-2690, Stockholm, Sweden 100%
XSource Corporation, USA Note 18 11,88%
X-Source Holding AB, 556580-2682, Stockholm, Sweden 100%
X-Source AB, 556290-2238, Stockholm, Sweden 100%
X-Source SA, RC B 87235, Luxembourg 100%
Optimal Telecom Holding AB, 556580-7855, Stockholm, Sweden 100%
Optimal Telecom Sweden AB, 556440-1924, Stockholm, Sweden 100%
Datametrix Sweden Holding AB, 556580-7871, Stockholm, Sweden 100%
Datametrix AB, 556539-4870, Stockholm, Sweden 100%
Everyday Holding AB, 556579-7718, Stockholm, Sweden 100%
Stenblocket i Fruängen AB, 556058-8500, Stockholm, Sweden 100%
Everyday Webguide AB, 556182-6016, Stockholm, Sweden Note 16 50%
Svenska UMTS-nät Holding AB, 556606-7988, Stockholm, Sweden 100%
Svenska UMTS-nät AB, 556606-7996, Stockholm, Sweden Note 16 50%
Svenska UMTS-licens Holding AB, 556606-7764, Stockholm, Sweden, dormant 100%
Tele2 Norway Holding AB, 556580-8143, Stockholm, Sweden 100%
Tele2 AS, 974534703, Oslo, Norway 100%
Tele2 Norge UMTS AS, 982795761, Oslo, Norway 100%
Tele3 Norge AS, 932100975, Norway, dormant 100%
Tele2 Danmark Holding AB, 556580-8028, Stockholm, Sweden 100%
Tele2 Denmark A/S, 221234, Köpenhamn, Denmark 100%
In2Loop A/S, 25 48 43 47, Köpenhamn, Denmark 100%
In2loop Polska Sp. So.o, 54380, Warsawa, Poland 90%
Web Communication BV, 34112460, Amsterdam, Netherlands 100%
Tele2 Polska Sp, 57496, Warsawa, Poland 100%
Tele2 Holding AS, 10262238, Tallinn, Estonia 90%
Tele2 Eesti AS, 10069046, Tallinn, Estonia 52%
UAB Tele2, 1147164, Vilnius, Lithuania 100%
UAB Levi & Kuto Kaunas, 1149679, Kaunas, Lithuania, dormant 100%
UAB Levi & Kuto Klaipeda, 1150061, Klaipeda, Lithuania, dormant 100%
2,686 1,987

55

Cont. note 14
Parent Company
trsp 2,686 1,987
Belmus BV, 33261289, Amsterdam, Netherlands 100%
Tele2 Eesti AS, 10069046, Tallinn, Estonia 48%
Tele2 Holding SIA, 000351206, Latvia 100%
SIA Tele2, 000327285, Latvia 100%
OU Levicom BroadBand, 10309744, Tallinn, Estonia 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 65%
OU Trigger Software, 10687966, Tallinn, Estonia 100%
AS Eesti Telag AS, 10310799, Tallinn, Estonia, dormant 100%
SIA Levicom Broadband, 000353597, Riga, Latvia, dormant 100%
Montalto Investments BV, 33135957,Amsterdam, Netherlands, dormant 100%
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%
ProcureITright AB, 556600-9436, Stockholm, Sweden 100%
Proceedo Solution AB, 556599-5049, Stockholm, Sweden 100%
Datametrix Norway AS, 975993108, Oslo, Norway 100%
Datametrix Danmark A/S, 39419, Köpenhamn, Denmark 100%
Datametrix OY AS, 378548, Helsingfors, Finland 100%
OY Finland Tele2 AB, 1482343-8, Helsingfors, Finland 100%
Interloop AB, 556284-7565, Stockholm, Sweden 100%
NetCom GSM Sweden AB, 556304-7025, Stockholm, Sweden 100%
Åkersberga KV AB, 556326-3192, Österåker, Sweden 100%
Halmstads KV AB, 556380-6115, Halmstad, Sweden 100%
Skaraborgs Kabel-TV AB, 556483-6467, Mariestad, Sweden 60%
Hallstahammar KV KB, 916580-7912, Västerås, Sweden 90%
Kopparstaden KV KB, 916583-0564, Västerås, Sweden 80%
Nelab KV KB, 916597-8983, Västerås, Sweden 80%
Kabelvision KB, 916836-8828, Sweden, dormant 100%
KB Haninge Kabelvision, 916633-3485, Sweden, dormant 80%
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%
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%
Tele1 A/S, 955780132, Norway, dormant 100%
SNPAC Swedish Nr Portability Adm.Centre AB, 556595-2925, Sweden Note 16 20%
Travellink AB, 556596-2650, Stockholm, Sweden Note 18 15%
S.E.C. Luxembourg S.A., R.C. B-84.649, Luxembourg 100%
Managest Media SA, RCB87091, Luxembourg Note 16 40%
Managest Media Spa, Italy 100%
Tele2 Services Luxembourg SA, RC B 70203, Luxembourg 100%
Societe Europeenne de Communication (Ireland) Ltd, 316848, Dublin, Ireland, dormant 100%
3C Communications (Ireland) Ltd, 164025, Ireland, dormant 100%
2,686 1,987


Cont. note 14
Parent Company
trsp 2,686 1,987
Tele2 s.r.o., 25650009, Prag, Czech Republic 100%
Tele2 /Slovakia/ s.r.o., 35806486, Slovakia 100%
Tele2 Magyarorszag Kft., 0109695967, Hungary 100%
SEC Holding BV, 33141829, Rotterdam, Netherlands 100%
Kinnevik Telecommunications Int. SA, RC B 52976, Luxembourg 100%
Tele2 Europe SA, B 56944, Luxembourg 100%
Tele2 Telecommunication Services GmbH, FN 178222t, Vienna, Austria 100%
Tele2 Belgium SA, 609 392, Zellik, Belgium 100%
Télé2 France SA, FR48-409914058, 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, B 65774, Luxembourg 100%
Tele2 (Netherlands) BV, BV 291906, Amsterdam, Netherlands 100%
Tele2 Telecommunication Services S.L, B82051913, Madrid, Spain 100%
Tele2 Telecommunication Services AG, CH-020390 55 969, Zürich, Switzerland 100%
Tele2 Communications Serv. Ltd, 3565220, London, UK 100%
Telemilenio, Telecomunicacoes, Sociedade Unipessoal, 10468, Lissabon, Portugal 100%
TANGO SA, RC 59560, Luxembourg 100%
Transac SA, B49487, Luxembourg 100%
Everyday Media SA, R.C. B 78.227, Luxembourg 100%
Everyday Prod. SA, 69802, Luxembourg 100%
Calling Card Company SA, B 424 906 618, Paris, France 5%
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 99%
3C Communications Luxembourg SA, B39690, Luxembourg 100%
3C Kommunikacios Szolgaltato Kft, Budapest, Hungary 90%
3C Communications BV, Amsterdam, 14630454, Netherlands 99%
3C Communications A/S, Oslo, Norway 100%
3C Transac A/S, 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, B 25465, 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 Communications GmbH, HRB 24104, Germany 1%
3C Kommunikacios Szolgaltato Kft, Budapest, Hungary 10%
3C Communications BV, Amsterdam, 14630454, Netherlands 1%
3C Communicacoes Ltda, Domingos de Rana, Portugal 5%
3C Communications Espana SA, Madrid, Spain 1%
3C Communications AB, 556332-6346, Stockholm, Sweden 3%
3C Communications Ltd, 2343138, UK 4%
2,686 1,987

57

Cont. note 14
Parent Company
trsp 2,686 1,987
CCC Holding BV, 33 269 398, Amsterdam, Netherlands 100%
Calling Card Company Limited, 3794813, UK 100%
CCC Calling Card Company Germany GmbH, HRB 40498, Germany 100%
C3 Calling Card Company (Ireland) Limited, 309745, Ireland 100%
Calling Card Company SA, B 424 906 618, Paris, France 95%
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%
SEC Everyday Europe BV, 341124357, Amsterdam, Netherlands 100%
Everyday.com Internet Services GmbH, Austria 100%
Everyday.com Switzerland AG, CHF-0203023164-4, Zürich, Switzerland 100%
Everyday.com Germany GmbH, HR B 36232, Germany 100%
Everyday.com France SAS, B-430291898, Velizy, France 100%
Everyday.com Italia S.R.L, R.C. 1605497, Italia Srl, Italy 100%
Everyday Luxembourg SA, B 64 902, Luxembourg 100%
Everyday.com Netherlands BV, 34125168, Amsterdam, Netherlands 100%
IntelliNet Holding BV, 34126307, Amsterdam, Netherlands 100%
Intellinet Telecommunications GmbH, FN 190268 g, Vienna, Austria 100%
Intellinet Telecommunication GmbH, HRB 48344, Frankfurt, Germany 100%
IntelliNet S.p.A, R.C. 1615155, Segrate, Italy 99%
IntelliNet BV, 34120156, Amsterdam, Netherlands 100%
IntelliNet Telecommunication Services AG, CH-020.3.021.518-8, Zürich, Switzerland 100%
Fagersta AB, 556238-4171, Stockholm, Sweden 100%
Transcom Holding AB, 556468-0857, Sweden, dormant bolag 100%
3C Holding AB, 556491-9503, Sweden, dormant bolag 100%
Tele2 Marketing Dynamics AS, 932100975, Norway, dormant 100%
Tele2 Telecommunications Services Ltd, 292887, Dublin, Ireland, dormant 100%
IntelliNet S.p.A, R.C. 1615155, Segrate, Italy 1%
Total shares in Group companies 2,686 1,987

In October 2002, Tele2 acquired 100% of the shares in ProcureITright, a supplier of procurement function services and WEB-based procurement
systems, from XSource Corporation. During 2002, the sale was made of the Swedish UMTS license to Svenska-nät AB, which is 50% owned with
Telia; as well as a 20% share of OJSC Moscow Cellular Communication.

Significant events after the end of the financial year
In February 2003 Tele2 acquired Alpha Telecom. This is the UK’s leading operator in prepaid fixed network telephony for individuals and a market
leader in cash cards for fixed telephony. Alpha Telecom, sells about 1.25 million cash cards per month from 60,000 sales outlets in the UK and has
sales of SEK 1.9 billion. The acquisition price amounted to approximately SEK 780 million, on a debt-free basis.

Note 15 Receivables from Group companies

Parent company
Dec. 31, 2002 Dec. 31, 2001
Acquisition value at Jan. 1 12,526 1,028
Lending 3,337 11,904
Amortization and additions granted –510 –406
Total receivables from Group companies 15,353 12,526

Receivables from/liabilities to Group companies are subject to commercial terms and conditions.


Note 16 Shares in associated companies
Group
Company, reg. No, reg’d. Office shares value Dec. 31, 2002 Dec. 31, 2001
Svenska UMTS-nät AB, 556606-7996, Stockholm, Sweden 502,000 pcs tSEK 50,200 50% 498 249
OJSC Moscow Cellular Com., P7696.16, Moscow, Russia 1,250,000 pcs tRUBEL 1,250 — — 75
Managest Media SA, RCB87091, Luxembourg 12,000 pcs B tEURO 120 40% 44 —
SNPAC Swedish Number Portability Administrative
Centre AB, 556595-2925, Stockholm, Sweden 200 pcs tSEK 20 20% — 2
Total shares in associated companies 542 326

Everyday Webguide AB, 556182-6016, Stockholm, Sweden 1,750 pcs tSEK 175 50% –28 –102
Total provisions to associated companies –28 –102

During the fourth quarter of 2002, Tele2 sold its 20% shareholding in Moscow Cellular Communication.

Contribution of each associated company to Group equity:
2002 2001
(9 mth)
Goodwill:
Total goodwill, book value, Dec. 31 — — — —

Equity share:
Equity share, Jan. 1 249 –25 — –51
Acquired companies, opening balance — — — 75
Share of capital contributions and new share issues 250 147 250 8
Share of profit/loss –1 –40 –1 –57
Divestments during the year — –66 — —
Equity share, Dec. 31 498 16 249 –25

Total shares in associated companies 498 16 249 –25

Note 17 Receivables from associated companies
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
Acquisition value at Jan, 1 115 105 115 67
Shareholder contribution –102 –7 –102 –7
Lending 6 17 6 55
Total receivables from associated companies 19 115 19 115

Receivables from associated companies are subject to commercial terms and conditions.

59

Note 18 Other long-term holdings of securities
Group
Company, reg. No, reg’d. Office shares value capital voting rights Dec. 31, 2002 Dec. 31, 2001
Parent Company :
Suomen Kolmegee, Helsinki, Finland 1,924 pcs tFIM 1 924 27.44% 15% 28 5
SCD Invest AB, 556353-6753, Stockholm 1,058,425 A 9.1% 49.6% — —
28 5
Other, Group:
XSource Corporation, USA 1,806,575 pcs tUSD 18 11.88% 11.88% 36 122
Travellink AB, 556596-2650, Stockholm 15,000 pcs tSEK 1,500 15% 15% 75 75
Total long-term holdings of securities 139 202

Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
Acquisition value:
Acquisition value at Jan. 1 545 489 348 366
Investments for the year 23 74 23 —
Sales for the year — — — –18
Reclassification — –18 — —
Total acqusition value 568 545 371 348
Write-downs:
Accumulated write-downs at Jan, 1 –343 –343 –343 –343
Write-downs during the year –86 — — —
Total accummulated write-downs –429 –343 –343 –343

Total other long-term holdings of securities 139 202 28 5

During 2002, additional investments were made in Suomen Kolmegee OY for SEK 23 million, as well as share write-downs in XSource Corporation by
SEK 86 million. The book value is regarded as corresponding to real value.

Note 19 Other long-term receivables
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
Acquisition value at Jan. 1 85 106 — 46
Lending 8 23 — 12
Amortization –11 –5 — —
Reclassification –7 –41 — –58
Translation difference –1 2 — —
Total other long-term receivables 74 85 — —

Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
Receivable from Finvision 39 47 — —
Receivable from XSource Corporation 20 17 — —
Receivable from Alecta 6 6 — —
Other 9 15 — —
Total other long-term receivables 74 85 — —


Note 20 Accounts receivable, trade
Group
Accounts receivable, trade
Dec. 31, 2002 Dec. 31, 2001
Accounts receivable, trade 5,656 4,542
Reserve for doubtful receivables –1,283 –918
Total accounts receivable, trade 4,373 3,624

Group
Reserve for doubtful receivables
Dec. 31, 2002 Dec. 31, 2001
Reserve for doubtful receivables at Jan. 1 918 558
Reserves in companies acquired during the year — 15
Netincrease of reserve 415 349
Recovery of previous write-downs –30 –36
Translation difference in opening balance –20 32
Total reserve for doubtful receivables 1,283 918

Credit risk entails the book losses that should be reported as of the closing date if the counter-parties have completely neglected to fulfill their pay-
ment liability in accordance with agreements. The Group has limited its credit risk in respect of receivables by continually conducting credit assess-
ments of the customer stock. Since the Group has a highly varied customer stock that covers individuals as well as companies, this entails that the
credit risk is limited. The Group makes provisions for any credit losses, and these have remained within management’s expectations.

Note 21 Other current receivables
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
VAT receivables 174 262 — 2
Receivable from Kinnevik — 78 — —
Receivable from Millicom International BV — 113 — —
Receivable from Svenska UMTS-nät 32 11 — —
Receivable from suppliers 13 — — —
Miscellaneous 31 66 — —
Total other current receivables 250 530 — 2

Note 22 Prepaid expenses and accrued revenues
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
Accrued telephony revenue, other telecom operators 934 544 — —
Accrued telephony revenue, customers 1,525 1,511 — —
Finanacing fees 170 209 — —
Prepaid financing charges 420 505 1 1
Total prepaid expenses and accrued revenues 3,049 2,769 1 1

61

Note 23 Liquid funds and overdraft facilities
Liquidity
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
Cash and bank balances 2,473 2,275 10 8
Current investments — — — —
Total cash 2,473 2,275 10 8

Blocked accounts –870 –897 — —
Unutilized overdraft facilities and credit lines 729 247 — —
Total liquidity 2,332 1,625 10 8

Overdraft facilities
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
Overdraft facilities granted 19 26 — —
Overdraft facilities utilized — –14 — —
Total unutilized overdraft facilities 19 12 — —

Unutilized credit lines 710 235 — —
Unutilized overdraft facilities and credit lines 729 247 — —

Collateral pledged for overdraft facilities
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
Receivables — 18 — —
Other assets — 9 — —
Total collateral pledged for own overdraft facilities — 27 — —

Exchange-rate difference in liquid funds
Group
Dec. 31, 2002 Dec. 31, 2001
Liquid funds at Jan. 1 –185 83
Cash flow for the year –68 –58
Total exchange-rate difference in cash –253 25


Note 24 Shareholders' equity
Exchange-rate difference:
Group
Exchange-rate difference in shareholders' equity
Other restricted Unrestricted Total
reserves reserves
Opening shareholders' equity, Jan. 1, 2002 1,049 –320 729
Change during the year 1,844 –110 1,734
Year-end, Dec. 31, 2002 2,893 –430 2,463

Other changes during the year –4,189 3,165 –1,024
Tax effect this year, net — –2 –2
Total change during the year –4,189 3,163 –1,026

Closing adjusted shareholders’ equity, Dec. 31, 2002 –1,296 2,733 1,437

Exchange rate difference in consolidated income statement:
Exchange-rate differences that arise in operations are reported across the income statements and amount to:
2002 2001 2002 2001
Other operating revenue 24 33 1 —
Other operating expenses –35 –20 — —
Result from other securities and receivables treated as fixed assets — –1 — —
Other interest income and similar profit/loss items 7 –1 — —
Interest expense and similar profit/loss items 57 2 — —
Exchange-rate difference in the income statement 53 13 1 —

The consolidated balance sheet and income statement are affected by fluctuations in subsidiaries' currencies via-á-vis the Swedish krona. Group
operating revenue and EBITDA are distributed among the following currencies:
Operating revenue EBITDA
2002 2001 2002 2001
SEK 10,337 33% 9,289 37% 4,516 88% 3,690 217%
EURO 13,523 43% 10,084 40% –355 –7% –2,172 –128%
Other 7,422 24% 5,712 23% 966 19% 180 11%
Total 31,282 100% 25,085 100% 5,127 100% 1,698 100%

A 1% currency movement against the Swedish krona affects the Group's operating revenue and EBITDA on an annual basis by SEK 209 million
(2001: SEK158 million) and SEK 6 million (2001: SEK –20 million), respectively. At December 31, 2002 changes in exchange rates compared
with the preceding year affected operating revenue by SEK 57 million and EBITDA by SEK –1 million.

The change rates used to translate income statements and balance sheets to SEK are shown below.
Income statement Balance sheet
2002 2001 Dec. 31, 2002 Dec. 31, 2001
GBP 14.6394 14.8725 14.1475 15.4750
USD 9.82870 10.33080 8.825 10.6675
EURO 9.1698 9.2519 9.1925 9.4190
CHF 6.2494 6.1280 6.3235 6.3600
DKK 1.2340 1.2415 1.2375 1.2665
NOK 1.2150 1.1499 1.2595 1.1835
EEK 0.5860 0.5913 0.5875 0.6020
LVL 15.8860 16.5171 15.0200 16.9000
LTL 2.6490 2.5819 2.6600 2.6700
PLN 2.4076 2.5239 2.3000 2.6900
CZK 0.2971 0.2718 0.2933 0.2936
HUF 0.0377 0.0361 0.0390 0.0382

Currency risks:
In telephony operations a currency risk arises in connection with international call traffic, which means that a liability or a receivable arises between
Tele2 companies and foreign operators. In mobile telephony through December 2002, these transactions were calculated in SDRs (Special Drawing
Rights) but were invoiced and paid in USD. As of 2003, these are calculated and paid in EURO.
Currency risks in our international operations are limited by denominating loans to group companies in the subsidiary’s local currency.
The five-year loan facility is denominated partly in EURO. The exchange-rate difference that continually arises in translating the loan liability is
offset against the exchange-rate differences that arise on the corresponding net investment in subsidiaries. No hedging is undertaken against other
types of currency risk.
63

Not 25 Number of shares
The share capital in Tele2 AB is divided into two share classes, namely, Series A and 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 and
Series B shares to one voting right.

Parent Company
A-shares B-shares
Change Total Change Total Total Par value per Share capital
Number share (SEK) (MSEK)
Number of shares:
December 31, 1999 18,095,632 85,754,614 103,850,246 SEK 5 519
New share issue, acq. of SEC 11,911,315 30,006,947 28,837,165 114,591,779 144,598,726 SEK 5 723
New share issue, options 30,006,947 200,000 114,791,779 144,798,726 SEK 5 724
December 31, 2000 30,006,947 114,791,779 144,798,726 SEK 5 724

New share issue, acq.
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

Reclassification, A-
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

Outstandng convertibles and warrants:
Convertibles, 2000–2003 — 100,000 100,000
Warrants, 2002–2005 — 663,000 663,000
Total number of shares after full dilution 21,689,804 126,533,371 148,223,175

*) At December 31, 2002 the shares converted during 2002, 100 000 B-shares, were being registered at the Swedish Patent and Registration Office.

Convertibles and warrants:
In October 2000, three convertible debenture loans were issued at a par value of SEK 1, each with preference rights to subscribe for 100,000
B shares in Tele2 AB at a subscription price of SEK 150 per share, and maturing in 2001, 2002 and 2003. See Note 38 for further information.
The outstanding warrants at Dec. 31, 2002 correspond to 663,000 B shares, at a subscription price of SEK 191 per share and a subscription
period from 2005 to 2006. See Note 38 for further information.

Earnings per share:
Group
Earnings per share Earnings per share,
after full dilution
2002 2001 2002 2001
Net profit/loss for the year 223 392 223 392
Reversal: interest for the year after tax on outstanding convertibles — —
Adjusted profit/loss for the year after full dilution 223 392

Weighted average number of shares 147,360,175 145,003,847
Weighted average number of outstanding shares after full dilution 147,634,293 145,223,466
Earnings per share SEK 1.51 SEK 2.70 SEK 1.51 SEK 2.70

Dividend per share:
Tele2 AB did not pay a dividend during the year and does not foresee paying a dividend during the current fiscal year.


Note 26 Liabilities to financial institutions
Short-term liabilities to financial institutions
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
Five-year loan facility 2,344 707 — —
Alfa Bank /Omskpromstoy Bank 3 — — —
(collateralt: chattel mortgages in Seberian Cellular Comm., Omsk Russia)
Financial leases 30 24 — —
Total short-term interest-bearing loans 2,377 731 — —

Long-term liabilities to financial institutions
Creditors Group
(collateral provided) Interest-rate terms Maturity date Dec. 31, 2002 Dec. 31, 2001
Parent Company: — —
Other Group companies:
Five-year loan facility EURIBOR/LIBOR + 0.75–2.25% 2003–2006 6,954 9,834
(collateral: shares in Tele2 Sverige and SEC SA as well as
certain shares in Group companies which in turn are subject to guarantees
Tele2 AB and cross-guarantees among certain Group companies, and
collateral provided in the form of receivables from certain Group companies
and limitations in repayment potential of internal loans from Tele2 AB)
Banque Invik marginal 0.5%–1% 2004–2005 755 881
(collateral: Blocked bank accounts in Tele2 Russia Telecom BV)
Merita-Nordbanken variable rate 2004 1 3
(collateral: guarantees by Tele2)
Financial leasing, for machinery & technical plant 166 125
Total long-term interest-bearing loans 7,876 10,843

Collateral provided for liabilities to financial institutions
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
Chattel mortgages 11 — — —
Net assets in subsidiaries 22,778 23,197
Bank deposits 841 897 — —
Total collateral provided for liabilities to financial institutions 23,630 24,094 — —

During 2001, Tele2 Sverige AB signed a new five-year bank finance facility for SEK 10.8 billion, guaranteed by ABN Amro, CIBC World Markets, ING
Bank, Nordea, The Royal Bank of Scotland and West LB. The loan is partly denominated in SEK and partly in EUR. The five-year bank financing facil-
ity with amortization is divided up into three tranches, in which the agreed SEK 9.4 billion in Tranche A is to be repaid in seven repayments, and in
which each amortization amounts to between 5% an 15% of the original loan amount and the remaining 17.5% of the loan is to be repaid by June
30, 2006. During 2002, repayment of Tranche A was made in the amount of SEK 467 million. The potential to borrow under Tranche B is limited
to SEK 1.1 billion and is to be repaid by June 30, 2006. Tranche C, amounting to SEK 250 million, was repaid in its entirety in January 2002.
The five-year loan facility is based on requirements involving the fulfillment of certain financial key ratios. Tele2 expects to fulfill the requirements.
The loan liability carries a rate of interest corresponding to Euribor and Libor, respectively, 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 certain curtailment of Tele2
Group’s potential to raise other external loans and the potential to provide assets as collateral.
The loan in Banque Invik pertains to loan to the Russian operations. Tele2 has deposited the corresponding amount with Banque Invik. The inter-
est margin is 0.5%–1%.
Pledged shares are reported in the Group at an amount that corresponds to the book value of the net assets that each subsidiary represents in the
consolidated balance sheet.
The average rate of interest on loan liabilities during the year was 6.4% (2001: 6.3%).
Loan liability matures
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
Within1 year 2,377 731 — —
1–2 years 3,070 2,375 — —
2–3 years 2,646 3,254 — —
3–4 years 2,049 2,601 — —
4–5 years 16 2,553 — —
5–10 years 75 60 — —
10–15 years 20 — — —
Total loans to financial institutions 10,253 11,574 — —

65

Cont. note 26
Interest rate risk:
Of the total loan liability at December 31, 2002, SEK 9,330 million, corresponding to 91% (2001: SEK 10,824 million, 91%) carried a variable
rate of interest. An increase in interest rates of 100 basic points would entail an additional interest expense of SEK 93 million, calculated on the
basis of variable interest-bearing liabilities at December 31, 2002.
The Group’s interest-rate on borrowing is currently variable with fixed-interest periods of up to 12 months. However, Tele2 is monitoring trends on
interest-rate markets and decisions regarding the interest-rate fixing strategy are assessed continually.

Interest-bearing liabilities with variable interest rates mature for payment as follows:

Within 1 year 1–2 years 2–3 years 3–4 years 4–5 years 5–10 years Total
Interest-bearing liabilities
with variable interest rates 2,352 2,368 2,578 2,032 — — 9,330

Financial leasing:
All fixed assets utilized through financial leasing have been included in the consolidated accounts as fixed assets and loan liabilities, with the exception,
however, of contracts signed before 1997. The effects of these being included in the consolidated balance sheet are shown below and In Note 13.

Group
Financial leasing
Booked Not booked
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
Short-term portion 30 24 8 9
Long-term portion 166 125 84 91
Total loans for financial leasing objects 196 149 92 100

Dec. 31, 2002
Group
Loan liability matures
Booked Not booked
Within 1 year 43 12
1–2 years 30 12
2–3 years 28 12
3–4 years 25 12
4–5 years 23 11
5–10 years 79 42
10–15 years 22 13
Total loan liability and interest 250 114
Less interest portion: –54 –22
Total loans for financial leasing objects 196 92

Financial leasing pertains primarily to the extension of transmission capacity in Sweden through Svenska Kraftnät Vattenfall and agreements signed
in Denmark. Also, financial leasing occurs in Estonia, Russia and Luxembourg. During 2002, investments amounted to SEK 83 million, primarily
in Sweden in the amount of SEK 66 million and in Luxembourg in the amount of SEK 11 million. During the year, termination of financial leasing
occurred in Estonia and Latvia.

Note 27 Other interest-bearing liabilities

Other short-term interest-bearing liabilities
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
XSource Corporation 5 — — —
Levicom International — 134 — —
Ericsson — 17 — —
Total other short-term interest-bearing liabilities 5 151 — —

Other long-term interest-bearing liabilities
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
SCD Finans AB 23 — — —
Ericsson — 2 — —
Motorola — 55 — —
Kinnevik S.A. — 14 — —
Millicom International BV — 44 — —
Total other long-term interest-bearing liabilities 23 115 — —


Cont. note 27
Loan maturity schedule
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
Within 1 year 5 151 — —
1–2 years 23 115 — —
Total other interest-bearing liabilities 28 266 — —

Note 28 Other short-term liabilities
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
VAT liability 276 218 — —
Tax-at-source, personnel 27 37 — —
Other taxes 59 34 — —
Liability to SCD Finans AB — 30 — —
Liability to Motorola — 26 — —
Customer deposits 26 17 — —
Other 53 13 5 —
Total other short-term liabilities 441 375 5 —

Note 29 Accrued expenses and prepaid revenues
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
Personnel-related costs 168 734 4 3
Interest expenses 212 150 — —
Telephony expenses to other telecom operators 1,701 1,664 — —
Expenses for vendors 14 12 — —
Leasing and rental expenses 24 29 — —
Program costs 33 33 — —
External services expenses 715 602 4 4
Prepaid income 702 541 — —
Other 204 249 — —
Total accrued expenses and prepaid revenues 3,773 4,014 8 7

When Tele2 acquired Société Europénne de Communication SA, through an offer to SEC’s shareholders, there were outstanding stock options in SEC.
Tele2’s offer did not encompass the stock options, thus in order to calculate net assets, these have been given a theoretical value as if they had been
encompassed by the offer and booked as a liability in the consolidated balance sheet. During 2002, this liability was adjusted vis-à-vis goodwill,
shown above as a personnel-related cost, and adjusted against goodwill the amount of SEK 498 million, with no effect on cash and profit.

Note 30 Pledged assets
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
Chattel mortgages 11 — — —
Net assets in Group companies 22,778 23,197
Inventories 19 18 — —
Receivables — 18 — —
Bank bills 870 897 — —
Other assets — 9 — —
Total assets pledged for own liabilities 23,678 24,139 — —

The above information shows the book value of assets pledged as collateral for external loans (as in Note 26), overdraft facilities and blocked bank
funds (as in Note 23) and other liabilities (as in Note 27). In the Group, pledged shares are reported in an amount corresponding to the book value
of the net assets that each subsidiary represents in the consolidated balance sheet.

67

Note 31 Contingent liabilities and other commitments
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
Surety bonds benefiting Group companies — — 12,825 15,133
Total contingent liabiities — — 12,825 15,133

SEK 9,298 million (SEK 10,541 million) of the contingent liabilities in the Parent Company relates to a guarantee for the five-year loan facility (see
Note 26).

Operational leasing:
Operational leasing fees
2002 2001 2002 2001
Annual fees for operating leases 752 782 — —

Payment schedule for future fees
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
Within 1 year 621 471 — —
1–2 years 279 238 — —
2–3 years 197 189 — —
3–4 years 158 123 — —
4–5 years 135 112 — —
More than 5 years 759 727 — —
Total future fees for operating leases due for payment 2,149 1,860 — —

Contractual commitments/commercial pledges:
Group
Dec. 31, 2002
Within 1 year 1–3 years 3–5 years After 5 years Total
Liabilities to financial institutions 2,377 5,716 2,065 20 10,178
Other interest-bearing liabilities 5 23 — — 28
Financial leasing, agreements signed before 1997 8 16 16 52 92
Operational leasing 621 476 293 759 2,149
Total contractual commitments/commercial pledges 3,011 6,231 2,374 831 12,447

Note 32 Supplementary cash-flow information
Transactions not affecting cash are as follows:
In addition to the reported investing and financing operations, as shown in the cash flow statement, the following transactions occurred that did not affect
cash.

In addition to reported investments and loan liabilities in cash flow, investments and the raising of loans through financial leasing amounted to SEK
66 million (2001: SEK 17 million), as well as amortization of loans through financial leasing in the amount of SEK –20 million (2001: SEK –22
million).
During 2002, the Parent Company received a Group contribution from Tele2 Sweden amounting to SEK 3,035 million (2001: SEK 2,100 million)
and provided a shareholder contribution of SEK 400 million, which has not been reported as financial activities.
In the Parent Company, the acquisition of shares in 2001 in Tele2 Russia Telecom BV and in OU Levicom Broadband, respectively, was conduct-
ed through a limited share issue of SEK 849 million and through loan financing at the seller amounting to SEK 134 million and is not included in
cash flow as investing or financing. On the acquisition date, the companies had cash of SEK 884 million and SEK 5 million, respectively, which is
reported in the cash flow as a reduction in investment.
In addition to the reported sale of shares in subsidiaries in the cash flow in 2001, the Parent Company divested shares in OU Levicom Broadband
and Travellink AB for SEK 93 million to the subsidiary Tele2 Sverige AB.
In addition to the reported sale of shares in subsidiaries, Tele2 AB’s subsidiary, Société Européenne de Communication S.A., was liquidated in
2001. This represented a net reduction of SEK 9,421 million, since the shares were booked at a value of SEK 23,385 million and the loss on
liquidation amounted to SEK 13,964 million.


Cont. note 32

Cash flow statement based on net profit/loss:
Group
2002 2001
Current operations
Net profit/loss for the year 223 392
Adjustment of items in profit/loss for the year that do not
generate cash flow from current operations:
Depreciation/Amortization 3,597 3,054
Minority interest –1 –1
Profit/loss from shares in associated companies 36 –33
Deferred tax expense 525 –2,334
Financial leasing –9 –5
Unpaid interest 107 88
Write-down of shares 86 —
4,564 1,161
Change in working capital –199 –748
Cash flow from current operations 4,365 413

Investments according to the cash flow statement by market and operating area:
Group
Investments
2002 2001
Nordic 902 1 029
Eastern Europe and Russia 594 328
Central Europe 135 149
Southern Europe 142 454
Luxembourg 94 122
Branded products & other services 23 63
1,890 2,145
Change in long-term receivable 3 87
Acquisition/divestment of companies 623 –765
Total investments according to cash flow statement 2,516 1,467

Group
Investments
2002 2001
Mobile telephony 998 789
Fixed telephony and Internet 794 1,272
Cable-TV 85 52
Data processing 13 32
1,890 2,145
Change in long-term receivable 3 87
Acquisition/divestment of companies 623 –765
Total investments according to cash flow statement 2,516 1,467

Additional information on segments is presented in Notes 33–34.

Note 33 Market areas
The Group’s operations are primarily divided among six market areas: Nordic, Eastern Europe and Russia, Central Europe, Southern Europe,
Luxembourg and Branded products & services, which reflect internal reporting to the Board and executive management and the division of respon-
sibility and organization within the Group. Market control and prioritization is largely jointly undertaken for continental Europe, and thus goodwill and
depreciation/amortization attributable to the acquisition of the SEC Group is not broken down across market areas Central Europe, Southern Europe,
Luxembourg and Branded products & services.
The Nordic market area is acting on a more mature market, while continental Europe has not pursued operations for an equally long period. The
Eastern Europe and Russia market area is yet another market with its own particular risks and possibilities. The division is based on the geographi-
cal location of operations, which also reflects where customers are located. Relations between companies within the Group are based on commercial
terms and conditions and pricing.
The Nordic market area consists of Tele2 operations in Sweden, Norway, Denmark and Finland, Datametrix operation and ProcureITright. Optimal
Telecom are also included in the Nordic market area as of January 1, 2002, having previously been part of the Branded products & services market
area. The Eastern Europe and Russia market area encompasses Tele2 operations in the Baltic States (Estonia, Latvia and Lithuania), Poland, Czech

69

Cont. note 33
Republic and Russia as well as X-Source operations. The Central Europe market area comprises Tele2 operations in Germany, Netherlands, Switzerland,
Austria and a license in Ireland. The Southern Europe market area comprises Tele2 operations in France, Italy, Spain and Portugal. The Luxembourg
market area encompasses Tele2 operations in Liechtenstein and Luxembourg, plus the recently launched operations in Belgium, as well as 3C oper-
ations and Transac. The Branded products & services market area comprises Tele2 UK, C3-operations, Everyday operations and IntelliNet operations.

Operating revenue, operating profit before and after depreciation/amortization, as well as investments for the operating areas in each market area are
presented in Note 1, Note 2 and Note 32.

Group
Dec. 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 securities 103 36 — — — — — 139
Other financial fixed asets 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 —
Current 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

Group
2002
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

Profit/loss on assoc. companies –31 –4 — — –1 — — –36
Profit/loss on fixed assets –86 2 –84
Other interest income, etc. 165 165
Interest expense, etc. –779 –779
Profit/loss after financial items 3,348 –126 –214 –230 33 –184 –1,831 796

Tax on profit for the year –574 –574
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


Cont. note 33
Group
Dec. 31, 2001
Balance sheet
ASSETS
Intangible fixed assets 1,317 3,547 55 16 201 6 22,627 27,769
Tangible fixed assets 6,162 1,408 479 682 578 122 — 9,431
Shares in associated companies 251 75 — — — — — 326
Other long-term securities 80 122 — — — — — 202
Other financial fixed asets 9,935 577 — — 4,331 — –12,879 1,964
17,745 5,729 534 698 5,110 128 9,748 39,692

Current assets 4,459 2,554 1,367 2,027 2,643 590 –4,074 9,566
Total assets 22,204 8,283 1,901 2,725 7,753 718 5,674 49,258

LIABILITIES
Provisions 102 — — — — — — 102
Interest-bearing liabilities 11,094 6,843 1,424 1,531 4,359 1,076 –14,473 11,854
Long-term liabilities, other 7 1 — — — — — 8
Current liabilities, other 3,970 659 2,243 3,045 1,393 631 –4,192 7,749
Total liabilities 15,173 7,503 3,667 4,576 5,752 1,707 –18,665 19,713

Group
2001
Income statement
Operating revenue
external 11,898 1,148 4,844 5,124 663 1,408 — 25,085
internal, other Group 226 33 396 444 74 84 –1,257 —
internal, market area 242 — 124 23 49 84 –522 —
Operating revenue, total 12,366 1,181 5,364 5,591 786 1,576 –1,779 25,085

Depreciation/amortization –1,011 –447 –101 –96 –118 –36 –1,245 –3,054
Operating expenses, other –8,760 –907 –5,968 –6,923 –777 –1,986 1,820 –23,501
Other operating revenue 198 9 15 2 3 4 –42 189
Other operating expenses –36 –11 –17 –1 –7 –4 1 –75
Operating profit/loss 2,757 –175 –707 –1,427 –113 –446 –1,245 –1,356

Profit/loss on assoc. companies –58 — — — 91 — — 33
Profit/loss on fixed assets 4 4
Other interest income, etc. 65 65
Interest expense, etc. –690 –690
Profit/loss after financial items 2,699 –175 –707 –1,427 –22 –446 –1,866 –1,944

Tax on profit for the year 2,335 2,335
Profit/loss for the year 2,699 –175 –707 –1,427 –22 –446 470 392

Miscellaneous
Investments, intangible assets 1 –2 2 15 1 — 17
Investments, tangible assets 1,094 363 151 442 125 66 –32 2,209

71

Note 34 Operating areas
A secondary division of operations takes the form of a grouping into four operating areas: Mobile telephony, Fixed telephony & Internet, Cable-TV and
Data processing, which is based on services and products that differ from each other in terms of risks and possibilities.
The Fixed telephony & Internet operating area includes fixed telephony as well as the Dial-up and DNS data services. The Cable-TV operating area
encompasses broadband services, Cable-TV, the radio station Tango Sunshine and Tango TV. The Data processing operating area includes IT-out-
sourcing via X-source, as well as system integration through Datametrix, Internet payments, credit card transactions and call phone services via 3C,
data processing of card transactions and invoicing through Transac, cash cards for fixed telephony through C3 and the Internet portal, Everyday.
It is not practically possible to distribute financial fixed assets and current assets by operating area. Operating revenue, operating profit before and
after depreciation/amortization, as well as investments of the operating areas in each market area are presented in Note 1, Note 2 and Note 32.

Group
Dec. 31, 2002
Non-dist. and
Mobile Fixed telephony Data internal
telephony & Internet Cable-TV processing elimination Total
Balance sheet
Intangible fixed assets 3,687 1,014 3 41 20,351 25,096
Tangible fixed assets 4,232 4,226 736 63 — 9,257
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

Group
2002
Non-dist. and
Income statement
Operating revenue from external customers 9,819 20,843 298 322 — 31,282

Miscellaneous
Investments in intangible assets 121 26 — — — 147
Investments in tangible assets 901 763 88 13 — 1,765

Group
Dec. 31, 2001
Non-dist. and
Balance sheet
Intangible fixed assets 4,188 948 4 2 22,627 27,769
Tangible fixed assets 4,345 4,285 744 57 — 9,431
Financial fixed assets 2,492 2,492
Current assets 9,566 9,566
Total assets 8,533 5,233 748 59 34,685 49,258

Group
2001
Non-dist. and
Income statement
Operating revenue from external customers 7,615 16,937 172 361 — 25,085

Miscellaneous
Investments in intangible assets –2 18 — 1 — 17
Investments in tangible assets 841 1,280 57 31 — 2,209


Note 35 Transactions with related parties
As a result of its substantial direct and indirect shareholdings in the Tele2 Group, Invik Group, Kinnevik Group, Transcom Worldwide Group, Millicom
Group, XSource Corporation Group, MTG Group, Metro Group and other companies, the Stenbeck family has the potential to exert considerable influ-
ence in terms of financial and operational decisions regarding operations in these companies. These companies has been regarded as related parties
to Tele2. Business relations between Tele2 and all closely related parties are subject to commercial terms and conditions.

Significant transactions in recent years:
• At year-end 1998, Tele2 acquired 48% of Tele2 Eesti (formerly Ritabell AS), with mobile operations in Estonia, from Millicom.
• In November 1999 Tele2 sold its shareholding (24.8%) in the associated company Netcom ASA, a mobile telephony company in Norway, to SEC
in return for 17.8% in SEC. SEC gradually divested Netcom ASA during under 1999 and 2000.
• In August 2000, via a limited share issue corresponding to SEK 19,773 million, Tele2 acquired an additional 81.9% of SEC, which pursues fixed
telephony operations in continental Europe and mobile telephony operations in Luxembourg, etc., from Millicom.
• During 2000 Tele2 divested its holding in 4T Solutions, with billing systems operations, to XSource Corporation in return for 11.88% of XSource
Corporation.
• In January 2001, Tele2 Group divested its 37.45% holding in the associated company Transcom Worldwide to Industriförvaltings AB Kinnevik.
Transcom Worldwide is one of Europe’s largest customer service companies. The purchase price was based on the market share price 60 trading
days after Transcom Worldwide was listed on the Stockholm Stock Exchange.
• In December 2001, Tele2 Group acquired shares in Tele2 Russia Telecom BV from Millicom through a limited shares issue corresponding to a
value of SEK 849 million. Tele2 Russia Group conducts mobile operations in Russia.

Transactions in 2002:
• In October 2002, the Tele2 Group acquired all shares in the ProcureITright Group, a supplier of procurement function services and WEB-based
procurement systems, from XSource Corporation Group for SEK 42 million.

Operational agreements between Tele2 and related parties:
Tele2 supplies telephony and data services on commercial terms to closely related corporate groups.

Invik Group:
• Tele2 Group’s telephony operates are, with the exception of Russian operations, insured by Moderna Försäkringar AB.
• Banque Invik conducts certain financial services for the Tele2 Group. Bankque Invik is also a credit supplier and conducts credit transactions that
arise using the equipment of 3C-operations.

Kinnevik Group:
• CIS Credit International Service AB provides Tele2 with debt collection services.
• Collect Sweden AB is a company that managed a fidelity program and provided multi-bonus cards and was also in charge of marketing and man-
agement of benefit and offers within the framework of the Collect multi-bonus program. Collect is now being phased out.

Transcom Worldwide Group:
• Transcom provides customer services and telemarketing for Tele2.

Millicom Group:
• Millicom Group purchases certain consulting services from the Tele2 company ProcureITright.

XSource Corporation Group:
• Savera Systems Incorporated and its sister company Basset AB supplies Tele2 with operator billing systems. Savera also supplies Tango with an
invoicing system for cash cards.
• NetCom Consultants AB supplies Tele2 with consulting services in tele and data communications.

MTG Group:
• Tele2 buys advertising time on radio and TV channels owned by MTG.
• Tele2 Sverige AB purchases cable TV programs from TV1000 Sverige AB.

Other related companies:
• Viking Telecom provides Tele2 with most of the line routers that Tele2 supplies to its end customers.

73

Cont. note 35
Transactions between Tele2 and related parties:
Group
Operating revenues Operating costs
2002 2001 2002 2001
Invik Group — 10 124 10
Kinnevik Group 11 1 132 387
Transcom Worldwide Group 23 20 1,860 2,031
Millicom Group 17 16 14 7
XSource Corporation Group 7 9 266 236
MTG, Modern Times Group 28 32 108 163
Metro International Group 3 2 4 5
Other related companies 5 1 102 140
Total 94 91 2,610 2,979

Group
Interest revenue Interest costs
2002 2001 2002 2001
Invik Group 97 — 131 —
Total 97 — 131 —

Group
Materials & supplies Restricted cash
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
Invik Group — — 841 897
Kinnevik Group 1 — — —
XSource Corporation Group — 2 — —
MTG, Modern Times Group 7 — — —
Other related companies 5 39 — —
Total 13 41 841 897

Group
Acc. receivable, etc. Other liabilities
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
Invik Group — 1 — —
Kinnevik Group 9 — — 78
Transcom Worldwide Group 2 6 — —
Millicom Group 8 20 — 113
XSource Corporation Group 2 69 20 17
MTG, Modern Times Group 53 45 — —
Total 82 142 59 255

Group
Liabilities to suppliers, etc. Other liabilities
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
Invik Group 124 11 755 881
Kinnevik Group 23 43 — —
Transcom Worldwide Group 188 267 — —
Millicom Group — 43 — —
XSource Corporation Group 39 93 5 —
MTG, Modern Times Group 17 27 — —
Metro International Group 2 — — —
Total 456 582 783 911


Note 36 Customers
Operating area by market area: Group
Number of customers Net customer intake
(thousands) Dec. 31, 2002 Dec. 31, 2001 change 2002 2001

Nordic:
Mobile telephony 3,221 2,642 22% 579 517
Fixed telephony and Internet 2,822 3,632 –22% –810 285
Cable-TV 209 — — 209 —
Total, Nordic 6,252 6,274 0% –22 802

Mobile telephony 1,366 853 60% 513 576
Fixed telephony and Internet 144 77 87% 67 76
Cable-TV 64 66 –3% –2 66
Total, Eastern Europe and Russia 1,574 996 58% 578 718

Central Europe:
Mobile telephony 271 48 465% 223 16
Fixed telephony and Internet 3,316 3,143 6% 173 473
Total, Central Europe 3,587 3,191 12% 396 489

Southern Europe:
Fixed telephony and Internet 5,129 4,286 20% 843 1,344
Total, Southern Europe 5,129 4,286 20% 843 1,344

Luxembourg:
Mobile telephony 181 167 8% 14 42
Fixed telephony and Internet 41 44 –7% –3 9
Total, Luxembourg 222 211 5% 11 51

Total, by market area 16,764 14,958 12% 1,806 3,404

Group
Number of customers Net customer intake
(thousands) Dec. 31, 2002 Dec. 31, 2001 change 2002 2001
Mobile telephony 5,039 3,710 36% 1,329 1,151
of which, cash cards 3,363 2,179 54% 1,184 —
Fixed telephony and Internet 11,452 11,182 2% 270 2,187
Cable-TV 273 66 314% 207 66
Total, by business area 16,764 14,958 12% 1,806 3,404

Effective 2002, the number of active customers in Sweden and Denmark complies fully with the Group’s definition of an active customer. As a result
of this adjustment and the effect of the merger with Optimal Telecom, the number of customers in Sweden for fixed telephony and Internet has been
aligned by a one-off adjustment of –197,000 and the number of mobile telephony customers has been adjusted by +80,000. In addition, the num-
ber of Cable-TV customers was reported for the first time in 2002, which has resulted in an adjustment of +189,000. In the case of Denmark, a one-
off adjustment has been applied to fixed telephony and Internet during 2002 in an amount of –461,000. During 2001, the acquisition of Tele2
Russia and the Levicom Group meant that the number of customers rose by a total of 296,000.
Net customer intake in 2002, before the above one-off adjustment, amounted to 15%, corresponding to 2,195,000 (2001: 3,108,000) customers.

75

Note 37 Number of employees
Group
2002 2001
Average number of employees
Total of whom, men Total of whom, men
Nordic 1,169 70% 1,126 70%
Eastern Europe and Russia 1,456 52% 602 49%
Central Europe 116 59% 122 61%
Southern Europe 95 65% 81 65%
Luxembourg 231 68% 189 83%
Branded products & services 48 83% 52 73%
Total, by market 3,115 61% 2,172 65%

The average number of employees in the Parent Company is 3 (2001: 2), all of whom are men. The average number of employees for each year for
acquired companies is reported in relation to the period of time they have been part of the Tele2 Group. Tele2 Russia was acquired in December 2001.

Note 38 Personnel costs
Group
2002 2001
Salaries and Social security of which, pen- Salaries and Social security of which, pen-
remuneration expenses sion expenses remuneration expenses sion expenses
Board and President 67 20 5 52 13 3
Other employees 995 303 59 870 254 50
Total, personnel costs 1,062 323 64 922 267 53

Parent Company
2002 2001
Salaries and Social security of which, pen- Salaries and Social security of which, pen-
remuneration expenses sion expenses remuneration expenses sion expenses
Board and President 13 6 1 11 4 2
Other employees 4 1 1 2 1 —
Total, personnel costs 17 7 2 13 5 2

Salaries and remuneration for each year for acquired companies is reported in relation to the period they have been part of the Tele2 Group. Tele2
Russia was acquired in December 2001. Note 37 shows the workforce.

Pension expenses
2002 2001 2002 2001
Defined-benefit pension plans 20 4 — —
Defined-contribution pension plans 44 49 2 2
Total, pension expenses 64 53 2 2

In the case of defined-benefit plans, the company assumes the risk and responsibility on the pension payout date. In the case of defined-contribu-
tion plans, the company is not exposed to risk on the pension payout date.
Group
2002 2001
Salaries and remuneration Salaries and remuneration
Board of which, Other Board of which, Other
and President bonuses employees and President bonuses employees
Nordic 27 3 573 22 2 539
Eastern Europe and Russia 21 2 150 5 — 78
Central Europe 7 1 73 6 — 63
Southern Europe 4 1 54 3 1 50
Luxembourg 1 — 112 9 — 104
Branded products & services 7 1 33 7 1 36
Total, by market 67 8 995 52 4 870

In 2002, provision of SEK 16 million ( 2001: SEK 15 million) was made for bonuses to key personnel in the Group, plus social security expenses of
SEK 5 million (2001: SEK 5 million). Distribution of the amount will be decided in 2003.


Cont. note 38
Remuneration of senior executives:
The group “Other senior executives” consists of 13 people (2001: 13). In addition to the costs below, Tele2 also incurred costs relating to social
security expenses.

2002
Basic salary/ Variable Options Other Other Pension Total
Board fee remuneration program benefits remuneration costs remuneration
Chairman of the Board:
Jan Hugo Stenbeck 0.1 6.8 6.9
Bruce Grant 0.2 — 0.2

Group President and CEO:
Lars-Johan Jarnheimer 10.0 1.5 1.0 0.0 — 1.9 14.4

Other senior executives 21.8 10.3 13.5 1.3 — 1.3 48.2
32.1 11.8 14.5 1.3 6.8 3.2 69.7

2002
Previous years Allocation for the year Total
Options program Warrant program 2002/2005
Market
value on Acquisition
Number Number issuance price Benefit Number
Group President and CEO — 15,000 pcs 1.0 — 1.0 15,000 pcs
Other senior executives — 195,000 pcs 13.5 — 13.5 195,000 pcs
— 210,000 pcs 14.5 — 14.5 210,000 pcs

2001
Basic salary/ Variable Warrant Other Other Pension Total
Board fee remuneration program benefits remuneration costs remuneration
Chairman of the Board:
Jan Hugo Stenbeck 0.3 — 0.3

Group President and CEO:
Lars-Johan Jarnheimer 7.6 1.6 — 0.0 — 1.3 10.5

Other senior executives 18.9 10.4 — 1.1 — 1.0 31.4
26.8 12.0 — 1.1 — 2.3 42.2

Board of Directors:
Board chairman Jan Hugo Stenbeck passed away during the year and Board member Bruce Grant was appointed Chairman in August. Total Board
fees of SEK 1.9 million were paid compared with SEK 2.1 million decided of the Annual General Meeting of shareholders.
During the year, the parent company paid SEK 6.8 million to acompany owned by Jan Hugo Stenbeck, for consultations regarding services that can-
not be regarded as Board work. In addition Tele2 Group paid SEK 8.7 million (2001: SEK 17.3 million) to a company partly owned by Bruce Grant, for
consultations regarding services that cannot be regarded as Board work.

President and CEO:
In addition to a fixed salary, Lars-Johan Jarnheimer, President and CEO of Tele2, received a bonus of SEK 1.5 million (2001: SEK 1.6 million). The
bonus is based on individualized goals. The pension premium, which is defined-contribution, is paid in the form of 20% of the fixed basic salary.
The pension age is 65. The period of notice when served by the company is a minimum 12 and maximum 18 months in the case of the President of
Tele2 AB. Salary during a period of notification of 12 months is paid to the President if he serves notice of termination of employment to the com-
pany. Salary and remuneration for the President are determined annually by the Board of Directors following proposals by the Chairman of the Board.

Other senior executives
Variable salary paid to other senior executives includes a bonus of 0% –35% based on profit benchmarks, with the remainder being based on indi-
vidualized goals. Other benefits pertain primarily to car benefits. Pensions are paid in accordance with the public pension plan, of which SEK 1.1
million (2001: SEK 0.2 million) represents a defined-contribution plan and SEK 0.2 million (2001. SEK 0, 2 million) is 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. Salary during a period of notifica-
tion of six months is received if the person serves notice of termination of employment to the company. Not other remuneration is paid.

77

Cont. note 38
Incentive program 1997–2006
At the Annual General Meeting in 1997, it was decided to undertake an incentive program for a number of the senior executives employed at that
time and future senior executives in the Group. Through a company established for this purpose, NC Intressenter AB, these persons were provided
with the opportunity to acquire 100,000 shares per year during 1999–2003, up to a maximum total amount of 500,000 Series B shares. In October
2000, 200,000 shares were issued and three convertible-debenture notes corresponding to 300,000 shares were issued to NC Intressenter to ful-
fill the offer. At December 31, 2002, NC Intressenter held 400,000 Series B shares and a convertible debenture note corresponding to 100,000
Series B shares. The premium for the option amounted to SEK 7 million in 1997. This was based on a Black-Schole evaluation and an exercise price
of SEK 150 per share. In their turn, all partners in NC Intressenter made payments to NC Intressenter based on the Black-Schole evaluations.
On December 31, 2002, Invik & Co AB owned 42% of the shares in NC Intressenter. Invik & Co AB is not entitled to sell or transfer these shares
without the permission of Tele2 AB.

Incentive Program 2002–2007
At the Annual General Meeting in 2002, it was decided to undertake an incentive program corresponding to a maximum of 1,055,000 for current
and future key 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 price totaling the market value of the Series B share plus 10% at the time of allotment, on condition that
they remain employed by the Group. No premium is to be paid. At December 31, 2002, allotments corresponding to 663,000 shares had been imple-
mented. All of these had a redemption price of SEK 191. In addition, allotments corresponding to 153,700 shares had been made to a wholly owned
Group company to secure the future cash flow for social insurance costs.

Note 39 Auditors
2002 2001 2002 2001
Other Other Other Other
PWC auditors PWC auditors PWC auditors PWC auditors
Audit assignments* 17 4 18 1 1 — 1 —
Other assignments 13 4 13 3 6 — 8 2
30 8 31 4 7 — 9 2
Total 38 35 7 11
* Auditing assignments = examination of the annual report and the accounts as well as the administration by the Board and the President. All other is other
assignments.


Note 40 The United States generally accepted accounting principles (US GAAP)

The consolidated balance sheets and income statements are drawn up in accordance with Swedish accounting principles. These differ in certain
respects from generally accepted accounting principles in the United States (US GAAP).
The following adjustments are required for reporting profit/loss for the year and shareholders' equity in line with US GAAP.

Profit/loss for the year:
Group
2002 2001 2000
Profit/loss for the year according to Swedish accounting principles: 223 392 –396

Adjustments required for compliance with US GAAP.
a) Transactions between companies under common control 9 21 24
b) Amortization of goodwill 1,512 — —
c) Lease agreements 1 2 3
d) Tangible fixed assets –81 9 31
e) Stock options 9 5 –196
f) Software development cost — — 80
g) Accounting for step acquisitions — –8 –317
h) Accounting for acquisitions 25 –367 –104
i) Deferred tax liability — 828 —
j) Alecta refund — — –8
k) Changes in accounting principles — –156 21
l) Hedge accounting 1 –2 —
Net adjustment 1,476 332 –466

Deferred tax effect on above, US GAAP adjustments –7 39 –38
Profit/loss for the year according to US GAAP 1,692 763 –900

Earnings per share:
Group
2002 2001 2000
Profit/loss or the year according to US GAAP 1,692 763 –900
Number of shares, weighted average 147,360,175 145,003,847 114,087,366
Earnings per share SEK 11.48 SEK 5.26 SEK –7.89

Reversal: interest after tax on convertibles during the year — — —
Adjusted earnings for the year after full dilution 1,692 763 –900

Number of outstanding shares after full dilution, weighted average* 147,596,866 145,215,999 114,087,366
Earnings per share after full dilution SEK 11.46 SEK 5.25 SEK –7.89
* 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.

Adjusted profit/loss for the year:
Group
2002 2001 2000
Profit/loss for the year according to US GAAP 1,692 763 –900
Reversal: amortization of goodwill — 1,845 610
Adjusted profit/loss for the year according to US GAAP 1,692 2,608 –290

79

Cont. note 40
Adjusted earnings per share:
Group
2002 2001 2000
Adjusted earnings for the year 1,692 2,608 –290
Number of shares, weighted average 147,360,175 145,003,847 114,087,366
Adjusted earnings per share SEK 11.48 SEK 17.99 SEK –2.54

Reversal: interest after tax on convertibles during the year — — —
Adjusted earnings for the year after full dilution 1,692 2,608 –290
Number of outstanding shares after full dilution, weighted average* 147,596,866 145,215,999 114,087,366
Adjusted earnings per share after full dilution SEK 11.46 SEK 17.96 SEK –2.54
* 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.

Shareholders' equity:
Group
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2000
Shareholders' equity according to Swedish accounting principles 28,728 29,517 26,539

Adjustments required for compliance with US GAAP:
a) Transactions between companies under common control –18 –27 –47
b) Amortization of goodwill 1,512 — —
c) Lease agreements 14 13 11
d) Tangible fixed assets –21 60 51
e) Stock options –4 –25 –30
g) Accounting for step acquisitions –103 –102 –94
h) Accounting for acquisitions 6,500 6,630 6,592
i) Deferred tax liability — — –828
j) Alecta refund 2 –7 –7
k) Changes in accounting principles — — 156
l) Hedge accounting — –2 —
Net adjustment 7,882 6,540 5,804
Deferred tax effect on above US GAAP adjustments –32 –16 –54
Shareholders' equity according to US GAAP 36,578 36,041 32,289

Change in shareholders' equity:
Group
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2000
Opening shareholders' equity, Jan. 1, according to US GAAP 36,041 32,289 5,772

Items reported directly against shareholders' equity
Gradual acquisitions — –8 –33
Exchange-rate difference, according to US GAAP –1,181 2,144 785
Total items reported directly against shareholders' equity –1,181 2,136 752

Other changes in shareholders' equity
New share issue, acquisition of SEC according to US GAAP — — 26,628
New share issue, acquisition of Tele2 Russia, according to US GAAP — 838 —
New share issue, convertibles, according to US GAAP 26 15 37
Profit/loss for the year, according to US GAAP 1,692 763 –900
Closing shareholders' equity, Dec. 31, according to US GAAP 36,578 36,041 32,289


Cont. note 40
Deferred tax liability/asset:
Group
2002 2001
Deferred tax liability/asset, according to Swedish acc. principles 1,246 1,764
Deferred tax, adjustment according to US GAAP –32 –16
Total deferred tax liability (–)/asset (+) according to US GAAP 1,214 1,748

Extract from consolidated balance sheet:
Group
Swedish
accounting principles Adjustment items US GAAP
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001
Fixed assets 36,373 39,692 7,952 6,612 44,325 46,304
Current assets 10,499 9,566 — — 10,499 9,566
Total assets 46,872 49,258 7,952 6,612 54,824 55,870

Shareholders' equity 28,728 29,517 7,850 6,524 36,578 36,041
Minority interest 22 28 — — 22 28
Long-term liabilities 7,927 11,082 97 80 8,024 11,162
Current liabilities 10,195 8,631 5 8 10,200 8,639
Total shareholders' equity and liabilities 46,872 49,258 7,952 6,612 54,824 55,870

Explanation of current differences between Swedish accounting principles and US GAAP:
The account below presents a description of the adjustments that must be made to report Tele2 Group’s profit/loss for 2000, 2001 and 2002 and
shareholders’ equity as of December 31, 2000, 2001 and 2002 in accordance with US GAAP.

a) Transactions between companies under common control
In 1993 and 1994, the company acquired Tele2 and Comviq from the Industriförvaltnings AB Kinnevik Group. The acquisition method was used
to report the transactions. Accordingly, the difference between the acquisition value and market value of net assets was reported as goodwill.
According to US GAAP, acquisitions of operations from “jointly owned companies” should be conducted at historical values. Thus, as a US GAAP
adjustment, all re-evaluations of plants, materials and supplies, goodwill, etc. that arise on the transaction date are eliminated and the resulting
depreciation/amortization is reversed.

b) Amortization of goodwill
According to Swedish accounting principles, all intangible fixed assets, including goodwill, must be amortized. Amortization rates are based on
the acquisition value of the fixed assets and the estimated utilization period. According to US GAAP, effective 2002, goodwill and certain other
intangible assets need not be amortized but may instead be tested, at least annually, to identify any impairment loss. Accordingly, this year’s amort-
ization of these assets under Swedish GAAP is reversed and instead a potential write-down based on the completed impairment test is recognized.

c) Lease agreements
The Group has certain leasing transactions which, according to generally accepted accounting principles in Sweden, have been treated as operat-
ing leases, but which, according to US GAAP, are viewed as finance leases.

d) Tangible fixed assets
Certain costs have been capitalized in accordance with Swedish accounting principles should be expensed according to US GAAP. According to
US GAAP, certain costs attributable to installations of networks are capitalized and not expensed.

e) Stock options
According to US GAAP, as a result of the terms and conditions of the options programs in 1997, a liability is calculated based on the market value
of the underlying shares. According to US GAAP, the commitments to employees should not be dissolved. Commitments to others should be val-
ued at the value of the option on the date on which the decision was made to settle it through a new share issue and report it directly against
shareholders’ equity.

f) Software development cost
Through 1999, Tele2 has capitalized development costs for software for external sales. According to US GAAP, this should be expensed and depre-
ciation attributable to capitalization be reversed until the product is technically finalized. As a result of the sale of 4T Solutions AB in 2000, there
is currently no difference vis-a-vis US GAAP.

81

Cont. note 40
g) Accounting for step acquisitions
The gradual acquisitions of OU Levicom and Société Européene de Communications S.A. during 1999–2001 has, according to Swedish account-
ing principles, resulted in a restatement of adjustment of shareholders’ equity corresponding to shares in profit of the holdings from the original
acquisition date based on the equity method rather than historical acquisition values. According to US GAAP, not only should shareholders’ equity
be adjusted against the share in profit/loss but also goodwill and depreciation should be taken into account from the original acquisition date.

h) Accounting for acquisitions
The acquisition of Société Européene de Communications S.A. in 2000 was conducted via a non-cash share issue, in which newly issued shares
in Tele2 were offered in exchange for the outstanding shares in Société Européene de Communications S.A. According to Swedish accounting prin-
ciples, the acquisition price is calculated at a value corresponding to the share price of Tele2 on the transaction date. According to US GAAP, the
acquisition price should be set at the share price on the date at which the offer was announced. There are also certain differences between acquired
net assets according to US GAAP and Swedish accounting principles.

i) Deferred tax liability
According to US GAAP, deferred taxes should be reported for all temporary differences apart from certain exceptions. The reversal of deferred tax
liabilities as a result of changes in 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 of Société Européene de Communications S.A. in 2001, there was
no longer any differences vis-a-vis US GAAP.

j) Alecta refund
According to Swedish accounting principles, the value of the refund received by Tele2 from Alecta should be reported via the income statement
in 2000. According to US GAAP, only the cash portion received should be reported as income.

k) Changes in accounting principles
According to Swedish accounting principles, changes in accounting principles are reported through a recalculation of the opening shareholders’
equity as if the new principles had been applied already when the transaction arose. According to US GAAP, the change is reported across the
income statement when changes in principles are made.

l) Hedge accounting
According to US GAAP, to qualify a hedge for accounting purposes, the hedge has to comply with very strict criteria in terms of the documenta-
tion of hedge relationship with hedged item and proof of its effectiveness. Swedish accounting principles does not require compliance with this
strict criteria. Effective 2002, these requirements are fulfilled and thus there is no difference vis-à-vis US GAAP.

Stock options:
In accordance with Swedish accounting principles, the option liability for the 1997 incentive program was dissolved in its entirety in 2000 as a result
of the decision to settle the option through an issue of convertibles. According to US GAAP, depending on the conditions of the option program, a
liability should be calculated based on the difference between the market value of the underlying shares and the exercise price. During 2002, stock
options were issued as part of a new incentive program. This program is not reported as an expense in the income statement. A valuation in accor-
dance with the 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% (2001: 5.0%), no dividend (due to the uncertainty as to whether or not the Board will propose a dividend), volatility of
57.9% (2001: 45.5%) and the fact that the options expire on April 20, 2003 and September 1, 2005.

Group
2002 2001 2000
Profit/loss for the year, reported as above 1,692 763 –900

Profit/loss for the year, pro forma 1,687 760 –904

Advertising expenses:
Total advertising expenses for the year amount to SEK 979 million (2001: 1,031 million and 2000: 630 million).

Critical accounting principles according to US GAAP:
The presentation below shows the accounting principles that are based on the most cricital assessments and estimates used in drawing up the accounts
in line with US GAAP, and which differ from the preparation of financial reports in accordance with Swedish accounting principles:
• When assessing the need for future write-down requirements for intangible and tangible fixed assets, Swedish accounting principles indicate that
a future discounted cash flow be calculated and compared with the book value. Swedish accounting principles stipulate the application of sched-
ule amortization of goodwill. In contrast, according to US GAAP, a non-discounted cash flow is to be calculated. No further amortization of good-
will should be applied according to US GAAP as of 2002.


Effects of new US GAAP accounting pronouncements:
In June 2001, the Financial Accounting Standards Board (FASB) issued a Statement of Financial Accounting Standards No. 143 (SFAS 143), enti-
tled ”Accounting for Asset Retirement Obligations”. SFAS 143 states when and how accounting for liabilities and expenses attributable to the retire-
ment o fixed assets should be done. Tele2 will apply SFAS 143 as of January 1 2003. The application of this statement is not expected to have any
significant effect on Tele2's earnings and financial position.
In November 2002 FASB issued FASB Interpretation No. 45 (FIN 45), “Guarantor’s Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others.” FIN 45 requires that a liability should be reported at the fair value of assumed commit-
ments in accordance with certain guarantee agreements on the date on which a company issued a guarantee. The provisions shall be applied with
effect for guarantees that were issued or changed after December 31, 2002.

Stockholm, February 24, 2003

Bruce Grant
Chairman

Lars-Johan Jarnheimer Marc Beuls
President and CEO

Vigo Carlund Sven Hagströmer Håkan Ledin

Pelle Törnberg Lars Wohlin

Our auditors’ report was submitted on March 3, 2003

Pål Wingren Carl Lindgren
Authorized Public Accountant Authorized Public Accountant

83

Audit report

To the Annual General Meeting of the shareholders in Tele2 AB (publ)
Corporate registration number 556410-8917

We have audited the annual accounts, the consolidated financial statements, accounting records and the adminis-
tration of the Board of Directors and the President of Tele2 AB (publ) for the 2002 financial year. These accounts
and the administration of the Company are the responsibility of the Board of Directors and the President. Our respon-
sibility is to express an opinion on the annual accounts, consolidated financial statements and the administration
based on our audit.
We conducted our audit in accordance with generally accepted auditing standards in Sweden. Those standards
require that we plan and perform the audit to obtain reasonable assurance that the annual accounts and the con-
solidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evi-
dence supporting the amounts and disclosures in the accounts. An audit also includes assessing the accounting
principles used and their application by the Board of Directors and the President, as well as evaluating the overall
presentation of information in the annual accounts and consolidated financial statements. To support our opinion
in regard to freedom from liability, we have examined significant decisions, actions taken and circumstances of the
Company in order to determine the liability, if any, to the Company of any Board member, or the President. We have
also conducted examinations to establish whether any Board member or the President has in any other way acted
in contravention of the Swedish Companies Act, the Annual Accounts Act, or the Company’s Articles of Association.
We believe that our audit provides a reasonable basis for our opinion set out below.
The annual accounts and consolidated financial statements have been prepared in accordance with the Annual
Accounts Act and thus provide a true and fair picture of both the Company’s and the Group’s earnings and position
in accordance with generally accepted auditing standards in Sweden.
We recommend that the Annual General Meeting adopt the Income Statements and Balance Sheets of the Parent
Company and the Group, that the profit in the Parent Company be dealt with in accordance with the proposal in the
Board of Directors’ Report, and that the members of the Board and the President be discharged from liability for
the financial year.

Stockholm, March 3, 2003

Pål Wingren Carl Lindgren
Authorized Public Accountant Authorized Public Accountant


Personnel and environment
Strict environmental requirements
Tele2’s operations have only a limited mentally sound manner and purchasing standards, but that it keeps abreast of
impact on the environment. The company decisions must take the environment into research in Sweden and abroad. The Group
has drawn up an environmental policy that consideration. Tele2 is particularly con- is an active participant in public discus-
permeates all operations. The policy insists scious of environmental safety issues when sions about health, safety and the envir-
that environmentally approved products be it comes to mobile telephony. It is of the onment.
used. Office waste and other scrapped utmost importance that Tele2 does not
materials should be treated in an environ- only comply with prevailing environmental

Personnel and skills development
Tele2 pursues an ongoing skills develop- A number of new college graduates are The Group had an average of 3,115
ment effort to ensure that its employees chosen for a trainee program each year. employees in 2002, compared with 2,172
possess the kind of know-how that will The program is primarily devoted to on-the- in 2001. Tele2 is active in 22 European
enable us to keep pace with the evolution job training in various parts of the organi- countries.
of the market and the needs of customers. zation and abroad. There is also a 12-
All new employees complete a basic course month, multi-phase leadership project for
that covers Tele2’s operations, goals, prin- the Group’s managers.
ciples, and quality assurance objectives.

85

Board of Directors

From left: Marc J. A. Beuls, Vigo Carlund, Lars-Johan Jarnheimer, Pelle Törnberg, Håkan Ledin, Lars Wohlin and Bruce Grant.

Marc J. A. Beuls Pelle Törnberg Bruce Grant
(Born 1956) holds a B.Sc. in Economics. He has (Born 1956) President of Metro International since Chairman of the Board
been with Millicom International Cellular S.A. since 2000. In 1987, he started the TV production com- (Born 1959) Chairman and Managing Partner of
1992 and has been President & CEO since January pany Strix. From 1993, he was responsible for all Applied Value LLC. Member of the Board of Industri-
1998. In 1997 he was appointed President of media companies in what was formerly Kinnevik, förvaltnings AB Kinnevik, Korsnäs AB, Metro and
Banque Invik S.A. in Luxembourg. Marc Beuls pre- currently MTG. Chairman of the Board of MTG and Transcom.
viously held executive positions at Generale Bank in P4 Radio Hele Norge. Member of the Board of Invik,
Belgium. He has been member of the Board of Tele2 MediaCorp and Millicom. Member of the Board of Sven Hagströmer
since 1998. Tele2 since 2001. (Born 1943) President and Board Chairman of
Holding: 4,100 B shares. Hagströmer & Qviberg from start in 1980 to 1995.
Vigo Carlund Board Chairman of Investment AB Öresund, AB
(Born 1946) has worked for Kinnevik companies Håkan Ledin Custos and since 2001 also Acando. Member of the
since 1968. He is President of Industriförvaltnings (Born 1937) MSc Eng and MSc Econ. Worked many Board of LGP Telecom Holding AB, Avanza AB and
AB Kinnevik. Chairman of the Board of Transcom years at Ericcson prior to becoming President of HQ Fonder. Member of the Board of Tele2 since
WW and Korsnäs. Member of the Board of Millicom, Millicom in 1987, where he serves as Board 1997.
Metro and Viking Telecom. Member of the Board of Chairman as of 2002. He served as President of Holding: 130,000 B shares.
Tele2 since 1995. NetCom Systems in 1995–1996. Member of the
Holding: 379 B shares Board of Tele2 since 1994.
Holding: 30,000 B shares.
Lars-Johan Jarnheimer
President and CEO (not a member of the Board). Lars Wohlin
(Born 1960) MBA. President and CEO of Tele2 AB (Born 1933) PhD Econ. Head of the Industry
since March 1999. Mr. Jarnheimer has held various Research Institute 1973–1976, Undersecretary in
positions at IKEA, Hennes & Mauritz and SARA Finance Ministry 1976–1979 and Governor of the
Hotels, and was President of ZTV for a short time Central Bank 1979–1982. Served as President of
before coming to Comviq as Vice President in 1992. Stadshypotek 1983–1996. Board Chairman of the
President of Comviq during 1993–97. Member of Drott real-estate company since 1998. Member of
Group management at Saab Automobiles with the Board of Tele2 since 1996.
responsibility for the Nordic countries, Russia and Holding: 1,100 B shares.
the Baltic States, and was President of Saab Opel
Sverige AB during 1997–98. Board assignments:
MTG, Arvid Nordquist Handelsaktiebolag, Millicom
and Invik AB.
Holding: 52,000 B shares and 15,000 options.


Senior Executives

Lars-Johan Jarnheimer Håkan Zadler Fredrik Berglund Johnny Svedberg
Born 1960 Born 1960 Born 1961 Born 1962
President and CEO of Tele2 AB CFO Market Area Director, Nordic Market Area Director, Eastern Europe
M.B.A M.B.A President, Tele2 Sverige AB and Russia
Employed since 1992 Employed since 2000 BSc in market economics BSc in market economics
Holding: 2,000 B shares Holding: 5,000 B shares Employed since 1995 Employed since 1990
and 15,000 options*. and 15,000 options* Holding: 15,000 options* Holding: 1 A-share, 1,240 B shares
Holdings through companies**: Holdings through companies**: and 15,000 options*
50,000 B shares 30,000 B shares Holdings through companies**:
8,000 B shares

Roman Schwarz Jean-Louis Constanza Jean-Claude Bintz Jeanette Almberg
Market Area Director, Central Europe Market Area Director, Southern Europe Market Area Director, Luxembourg Customer Service Director
President, Tele2 Switzerland President, Tele2 France Employed since 1989 M.B.A
M.B.A M.B.A Holding: 15,000 options* Employed since 1995
Employed since 1991 Employed since 1998 Holding: 15,000 options*
Holding: 15,000 options* Holding: 15,000 options* Holdings through companies**:
1,500 B shares

Björn Lundström Ib Andersen Roger Mobrin Anders Olsson
Network Planning and Network Operations Director Billing Operations and Market Area Director, Branded products
Implementation Director M.B.A Coordination Director & services, Marketing coordinator and
MSc Engineering Employed since 2000 Technical college engineer President, Tele2 Germany
Employed since 1991 Holding: 15,000 options* Employed since 1995 MBA
Holding: 15,000 options* Holding: 50 B shares and Employed since 1997
Holdings through companies**: 15,000 options* Holding: 1,056 B shares
1,500 B shares Holdings through companies**: and 15,000 options*
1,500 B shares

Karl-Johan Nybell Lars-Erik Svegander
Born 1968 Born 1941 *relates to incentive program 2002/2007, see Note 38
Product Management Director Personnel Director
** relates to incentive program 1997/2006, see Note 38
MSc Engineering Employed since 1991
Employed since 1995 Holding 15,000 options*
Holding: 15,000 options* Holdings through companies**: 87
Holdings through companies**: 1,500 B shares
1,000 B shares

The Tele2 share

Number of shares responding to 6,700,000 B shares, thus and a convertible debenture with detach-
Tele2’s A and B series shares were listed on increasing Tele2’s shareholders’ equity by able warrants corresponding to 100,000 B
the O-List of Stockholmsbörsen (Stockholm SEK 335 M. shares.
Exchange) on May 14, 1996 in conjunction During the second quarter of 1998, all Series A shares carry 10 votes, while B
with the distribution of the Company to the outstanding debentures were converted into shares carry one vote.
shareholders of Industriförvaltnings AB 755,555 B shares.
Kinnevik. Following the distribution, At the Annual General Meeting in May Ownership structure
Kinnevik owned no shares in Tele2 but held 2000, the Board of Directors was authorized At year-end 2002, Tele2 had about 61,000
a convertible debenture corresponding to to settle an option commitment through a shareholders, compared with about 64,000
25,555,555 shares. During 1996, new share issue. In October 2000, 200,000 one year earlier. The proportion of institu-
Kinnevik sold portions of the debenture, new B series shares were issued, as well as tional owners corresponded to about 88%
after conversion to shares, to institutions three convertible debentures with detach- of the share capital and about 92% of the
and Invik & Co. AB. able warrants with rights to new subscrip- voting rights on December 31, 2002.
To promote interest in the Company’s tion of a total of 300,000 B shares.
share in the US and to increase its liquid- At an Extraordinary General Meeting of Analysts who followed Tele2 during 2002
ity, the Tele2 share was listed on the Nasdaq Tele2 AB on August 25, 2000, a proposal ABG Securities Henrik Wikström
exchange in the US on January 22, 1997. was approved to issue at most 40,901,585 Alfred Berg Lena Glader
A few months later, a new issue of two mil- series A and series B shares in Tele2 to Carnegie Fredrik Danielsson
lion B shares was implemented. With this shareholders and holders of depository EVLI Matti Riikonen
issue, Tele2 sought to broaden the receipts in Société Européenne de Enskilda Securities Per Trygg
Company’s international ownership interest Communication S.A. (SEC) in exchange for Hagströmer & Qviberg Johan Broström
and to support the Nasdaq listing. The pro- shares and depository receipts in SEC. By Handelsbanken Peter Warleus
ceeds for the share issue, which amounted the end of the issue period, a total of HSBC Securities Viking Kjellström
to SEK 220 M, were primarily used for ongo- 40,784,480 shares had been issued. Julius Baer Lena Hansson
ing investment requirements, in particular At the end of 2001, all shares in FORA JP Nordiska Fondk. Håkan Persson
for the development of Tele2’s Danish and Telecom B.V. were acquired in exchange for Öhman Fondkomm. Stefan Billing
Norwegian operations. 2,461,449 newly issued Tele2 B shares. In Swedbank Henrik Sandell
In conjunction with the new issue, 2001, 100,000 B shares were newly sub- UBS Warburg Jeremy Taylor
Industriförvaltnings AB Kinnevik sold the scribed. During 2002, 100,000 shares Schroder Salomon
major portion of its remaining convertible were newly subscribed, which was submit- Smith Barney Christian Kern
debenture in Tele2 after conversion to ted to PRV, the Swedish Patent and
6,000,000 B shares. Registration Office, for registration.
By the end of the first half of 1997, Invik As of December 31, 2002 there were a
& Co. AB had converted its debenture, cor- total of 147,360,175 shares in Tele2 AB

Ownership structure, December 31, 2002 Current ownership structure
Share of Share of
A shares B shares A+B shares No. of votes capital, % votes, %

Invik & Co AB 9,891,787 2,825,579 12,717,366 101,743,449 8.6 29.7
Industriförvaltnings AB Kinnevik 6,498,880 24,611,021 31,109,901 89,599,821 21.1 26.1
Emesco 3,205,379 75,100 3,280,479 32,128,890 2.2 9.4
Millicom International Cellular S.A. 0 10,012,543 10,012,543 10,012,543 6.8 2.9
Stenbeck, Jan (Estate) 914,157 0 914,157 9,141,570 0.6 2.7
SEB 0 9,067,781 9,067,781 9,067,781 6.1 2.6
Nordea 834 6,720,828 6,721,662 6,729,168 4.6 2.0
Swedish Fourth Pension Fond 0 5,251,500 5,251,500 5,251,500 3.6 1.5
ROBUR 0 5,037,730 5,037,730 5,037,730 3.4 1.5
AMF Pension 0 4,218,000 4,218,000 4,218,000 2.9 1.2
Total, ten largest shareholders 20,511,037 67,820,082 88,331,119 272,930,452 59.9 79.6

Other shareholders 1,178,767 57,950,289 59,129,056 69,737,959 40.1 20.4

Total 21,689,804 125,770,371 147,460,175 342,668,411 100.0 100.0


Share trend of Stockholmsbörsen

Tele2’s closing price each week AFGX Share turnover 000s (incl. off-floor trading)
900
800
700
600

500

400

300 30,000

25,000
200
20,000

15,000

100 10,000

5,000

60
96 97 98 99 00 01 02 03

Share trend on Nasdaq
Tele2’s closing price each month, USD Nasdaq composite index Share turnover 000s (incl. off-floor trading)
100
90
80
70

60

50

40
900

800
30
700

600

500
20
400

300

200

100
10
97 98 99 00 01 02 03

89

Addresses

Tele2 AB Norge Eastern Europe
Skeppsbron 18
Box 2094
Tele2 Norge AS and Russia
Ulvenveien 75A
SE-103 13 Stockholm, Sweden
NO-0581 Oslo, Norway
Estonia
Phone: +46 8 5620 0060 Tele2 Eesti AS
Phone: +47 21 31 90 00
Fax: +46 8 5620 0040 Joe 2a,
Fax: +47 21 31 91 00
EE-10151 Tallinn, Estonia
Investor Relations Datametrix AS Phone: +372 6888 866
30 St James’ Square Grenseveien 95 Fax: +372 6866 877
GB-SW1Y 4JH, London, England NO-0663 Oslo, Norway
Phone: +44 20 7321 5010 Phone: +47 23 03 59 00 Latvia
Fax: +44 20 7321 5020 Fax: +47 23 03 59 01
SIA Tele2
Kurzemes Prospectus 13
Nordic Danmark Riga LV-1067, Latvia
Sweden Tele2 A/S Phone: +371 960 99 99
Gammel Køge Landevej 55 Fax: +371 709 01 76
Tele2 Sverige AB
Borgarfjordsgatan 16 DK-2500 Valby, Denmark
Box 62 Phone: +45 77 30 10 01 Lithuania
SE-164 94 Kista, Sweden Fax: +45 77 30 10 00
UAB Tele2
Phone: +46 8 5626 4000 Sporto g. 7a
Fax: +46 8 5626 4200 Datametrix A/S
LT-20 51 Vilnius, Lithuania
Customer Service Private: Gammel Køge Landevej 55-57
Phone: +370 2 366 300
0200-25 25 25 (Internet) DK-2500 Valby, Denmark
Fax: +370 2 366 301
0200-25 25 25 (fixed telephony) Phone: +45 77 30 10 60
0200-22 20 40 (mobile telephony) Fax: +45 77 30 10 61
Poland
Optimal Telecom A/S Tele2 Polska
Comviq
Karl Jacobsen vej 20 ul. Poste-pu 15
Box 62
DK-2500 Valby, Danmark PL-02-676 Warszaw, Poland
SE-164 94 Kista, Sweden
Phone: +45 77 30 12 90 (switchboard) Phone: +48 (22) 549 50 60
Phone: +46 8 5626 4000 (switchboard)
Fax: +45 77 30 00 56 Fax: +48 (22) 549 50 61
Fax: +46 586 53 444
Customer Service:
0200-22 20 40 (private customers) Finland Czech Republic
0200-22 40 50 (corporate customers) Tele2 Finland Tele2 s. r. o.
Sentnerikuja 3 Vinohradská 184, Praha 3,
Kabelvision FI-00440 Helsingfors, Finland CZ-130 00, Czech Republic
Box 62 Phone: +358 9 74 22 12 45 Phone: +420 267 13 22 38
SE-164 94 Kista, Sweden Fax: +358 9 74 22 12 46 Fax: +420 274 77 82 40
Fax: +46 8 5865 4840 Russia
Customer Service:
Tele2 Russia Telecom
+26 2000-22 55 00
B. Gnezdnikovsky Per.,1str.2, 7 tr
RU-103 009, Moscow, Russia
Optimal Telecom AB
Phone: +7 095 797 21 61
Box 62
Fax: +7 095 797 21 62
SE-164 94 Kista, Sweden
Fax: +46 8 5626 2525 Sweden
X-source AB
Datametrix AB Box 416
Box 20078 SE-129 44, 129 04 Hägersten, Sweden
SE-161 02 Bromma, Sweden Phone: +46 8 5222 3500
Phone: +46 8 5220 0200 Fax: +46 8 5222 3552
Fax: +46 8 5220 0290


Central Europe Southern Europe Other Branded Products
Germany France & Services
Tele2 Telecom Services GmbH Tele2 (France) S.A.
In der Steele 39a, 14 Rue des Frères Caudron Tele2 UK Communications Ltd
DE-40599 Düsseldorf, Germany FR-78143 Vélizy cedex, France Kingstons House 15,
Phone: +49 211 7400 4600 Phone: +33 1 39 45 44 44 Coombe Road
Fax: +49 211 7400 4611 Fax: +33 1 39 45 44 00 GB-London RG2 OSY, England
Phone: +44 208 957 1900
Fax: +44 208 957 1901
Netherlands Italy
Tele2 Nederland B.V. Tele2 Italia SpA Everyday.com
Ellermanstraat 19 Via Cassanese 210 Box 17041
NL-1099BX Amsterdam, IT-20090 Segrate Milano, Italy SE-104 62 Stockholm, Sweden
Netherlands Phone: +39 02 269 571 Phone: +46 8 5889 8400
Phone: +31 207 020 202 Fax: +39 02 269 204 37 Fax: +46 8 5889 8401
Fax: +31 207 020 222
Spain Alpha Telecom Communications Ltd
Switzerland Tele2 Telecommunication Ryde House 391
TELE2 Telecommunication Services S.L. Richmond Road
Services AG Francisco de Ricci,3, GB-Twickenhan TW1 2EF England
Postfach 49 ES-28015 Madrid, Spain
CH-8037 Zürich, Switzerland Phone: +34 91 540 28 00 C3 Calling Card Company
Phone: +41 1 524 24 24 Fax: +34 91 540 28 01 1 Mill Street
Fax: +41 1 524 47 78 GB-London SE1 2DE, England
Phone: +44 207 232 4949
Luxembourg
Austria
Luxembourg
Tele2 Telecommunication
Tango S.A.
Services GmbH
177, rue de Luxembourg,
Schönbrunnerstr. 213-215, 4tr
LU-8077 Bertrange, Luxembourg
AT-1120 Vienna, Austria
Phone: +352 27 777 101
Phone: +43 181 101 300
Fax: +352 27 777 888
Fax: +43 181 101 100

Liechtenstein
Irland
Tele2 AG
Tele2 Telecommunication
75 route de Longwy,
Services Ltd
Office 4, O'Duffy Centre, Main Street,
Phone: +352 27 750 101
Carrickmacross,
Fax: +352 27 750 250
Co Monaghan, Irland
Phone: +353 42 969 2946
Fax: +353 42 969 2947 Belgium
Tele2 Belgium N.V.
75 route de Longwy,
Phone: +352 27 750 101
Fax: +352 27 750 250

3C Communications S.A.
75 route de Longwy
Phone: +352 27 750 101
Fax: +352 27 750 250

Transac S.A.
3, rue de l'Abattoir
LU-3409 Dudelange, Luxembourg
Phone: +352 27 754 101
Fax: +352 27 754 300

91

2002
History 2000 – Comviq celebrates 10th Anniversary, breaks Swedish record with more than
– NetCom is awarded UMTS licenses 2 million prepaid card subscribers.
in Norway and Sweden. – Tele2 is world’s fourth fastest-growing listed telecom/IT company.
– Netcom acquires Latvia’s next – MVNO launched in the Netherlands and MVNO agreements signed in Norway
largest mobile operator, and Austria.
Baltikom GSM. – Jan Hugo Stenbeck, Tele2’s founder and Chairman, dies at 59 years of age.

2000 2001
– NetCom becomes the first mobile virtual – Acquisition of FORA Telecom.
network operator (MVNO) in Denmark. – Joint UMTS company with Telia.
– NetCom acquires Société Européenne – NetCom changes corporate identity to Tele2.
de Communication S.A.

1999
– NetCom increases its holding in Ritabell to 94.8%.
– Pre-selection initiated in Denmark, Norway and Sweden. Year-end
– NetCom AB sells its holding in NetCom ASA to Société Européenne de 1997/1998
Communication S.A., SEC. In exchange, receives newly issued shares in SEC. – The Norwegian telecom market
After transaction, NetCom AB owns 17.8% of capital in SEC. is deregulated.

1998 1997
– Operations are extended to the Baltic States through – NetCom Systems is
the acquisition of 48% in the mobile operator Ritabell. listed on Nasdaq.
– NetCom Systems AB changes corporate identity to
1996
NetCom AB.
– The shares in NetCom Systems are distributed
to shareholders in Kinnevik. Meanwhile,
NetCom Systems is listed on the O-List of
the Stockholm Stock Exchange.
– NetCom Systems, via the subsidiary Tele2
1990 1993 A/S, becomes the first competitor to Tele
– Tele2 AB is established. – NetCom Systems starts the Danmark in the Danish telecom market,
(Currently Tele2 Sverige AB). predecessor to Tele2 Norge. breaking a 100-year old monopoly.

1992 1993
– Comviq GSM starts up its own – Deregulation of the market for fixed telephony.
GSM-network. – NetCom Systems is established in order to own and develop
the Kinnevik Group’s telecom companies in the Nordic region.
– Kinnevik and Orkla form the Norwegian company, NetCom
ASA. NetCom Systems owns 25% of the company.

1989 1980s
– Agreement with the Swedish Rail 1986 – Kinnevik complete the preparations
Administration (Banverket) covering – A satellite connection for for providing conventional
investment in a joint fiber-optic network. data traffic is opened. telecommunications in voice and data.

1988 1981 Late 1970s
– Comviq received – Comvik AB launched its – Industriförvaltnings AB
a GSM license. own analog network for Kinnevik decides to
mobile telephony. undertake a venture in the
telecommunications market.


Definitions

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 Shareholders’ equity (including convertible
credit facilities granted. and non-interest bearing liabilities. debentures) less minority interests, divided by
the weighted average number of shares out-
Net borrowing Return on capital employed standing during the fiscal year (that would
Interest-bearing liabilities (less convertible Profit/loss after financial items less items result from full conversion of convertible
debentures) less interest-bearing assets. affecting comparability and financial costs (less debentures).
interest expense for convertible debentures)
Investments divided by average capital employed. Cash flow per share
Acquisition and divestment of fixed assets, in- Based on cash flow from operating activities
cluding investments through financial leases, and Average interest expense before investment and financing activities.
investments not qualifying as cash equivalents. Interest expense (less interest expense for con-
vertible debentures) divided by average interest- Dividend per share
Equity/assets ratio bearing liabilities (less convertible debentures). Based on the dividend distributed or proposed
Shareholders’ equity (including convertible each year.
debentures) divided by total assets. Earnings per share
Profit/loss for the period (less interest expense ARPU
Debt/equity ratio on convertible debentures, and less tax deduc- Average monthly revenue per customer.
Interest-bearing net debt divided by share- tions) divided by the weighted average number
holders’ equity at the end of the period. of shares outstanding during the fiscal year MoU
(that would result from full conversion of con- Minutes of monthly usage per customer.
Return on shareholders’ equity vertible debentures).
Profit/loss after tax less items affecting compar-
ability, minority interests after tax deductions
(and interest expense for convertible debentures
after tax 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 tech- not have radio access network capacity, which A service that links a company’s local and tele-
nologies for datatransmission over fixed phone must be purchased from a network operator. com networks with the computers and phones
lines. of employees who work remotely, forming a
NMT – Nordic Mobile Telephone. telecom or data communications network that
GPRS – General Packet Radio Service. Ordinarily identified as the 1st-generation looks to users like a single business network.
A technology that permits high-capacity data mobile telephony. An analog technology
transmission using mobile phones. developed in the Nordic region. WAN – Wide Area Network.
A network of computers on different locations.
GSM – Global System of Mobile. SMS – Short Message Service. Often consists of several LANs linked together.
Communications or Groupe Spécial Mobile. Enables the transmission of short text messages
2nd-generation mobile telephony system. between mobile phones or between a computer WAP – Wireless Application Protocol.
Digital, as opposed to analog NMT. that is connected to the Internet and a mobile An industrial standard for Internet-based
phone. data communications over mobile networks.
IP – Internet Protocol. Developed by the WAP Forum, consisting of
A series of rules for communication among SP – Service Provider. big corporations like Ericsson, IBM, Motorola
computers over the Internet. A company that purchases capacity from net- and Nokia.
work operators with which it can sell telecom
LAN – Local Area Network. services to its subscribers. WLL – Wireless Local Loop.
Local network of computers, often in the same Wireless broadband access via radio networks.
room or building. UMTS – Universal Mobile Telecommunications
System.
MMS – Multimedia Messaging Services. A ser- A technology for 3rd-generation mobile tele- Sources: Computer Sweden, Mobiltelebranschen,
vice that makes it possible to send text, video phony intended to handle, text, images, and Svenska Datatermgruppen and Tele2.
and audio messages between mobile phones or video. UMTS has greater capacity than GSM.
between Internet-connected computers and a
mobile telephone.
93

TELE2 AB
Skeppsbron 18
P.O. Box 2094
SE-103 13 Stockholm
Phone +46 8 5620 0060
Solberg. Print: Göteborgstryckeriet.

Fax +46 8 5620 0040
E-mail info@tele2.com
www.tele2.com
Corporate identification No.:
556410-8917

Annual Report 2002

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Annual Report 2002