BRINGING THE WORLD CLOSER ANNUAL AND SUSTAINABILITY REPORT 2019 CONTENT OUR COMPANY Telia Company in one minute ................................................ 4 2019 in brief ............................................................................ 6 How we create value ............................................................. 8 Comments from the CEO ..................................................... 10 Trends and strategy .............................................................. 12 DIRECTORS' REPORT Group development ............................................................. 16 Country development .......................................................... 32 Sustainability ....................................................................... 41 Risks and uncertainties ....................................................... 62 CORPORATE GOVERNANCE Corporate Governance Statement ....................................... 70 Board of Directors ............................................................... 82 Group Executive Management ............................................ 84 FINANCIAL STATEMENTS Consolidated statements of comprehensive income .......... 86 Consolidated statements of financial position .................... 87 Consolidated statements of cash flows .............................. 88 Consolidated statements of changes in equity ................... 89 Notes to consolidated financial statements ........................ 90 Parent company income statements.................................. 182 Parent company statements of comprehensive income .... 183 Parent company balance sheets ....................................... 184 Parent company cash flow statements .............................. 185 Parent company statements of changes in shareholders' equity ........................................................... 186 Notes to parent company financial statements.................. 187 SUSTAINABILITY NOTES Sustainability Notes ........................................................... 211 OTHER INFORMATION Board of Directors' and President's certification ............... 226 Auditors' Report ................................................................. 227 Auditors' Limited Assurance Report on the Sustainability Report .......................................................... 231 Five-year summary ............................................................ 232 Alternative performance measures ................................... 234 Definitions .......................................................................... 238 Annual General Meeting 2020 ............................................ 240 The audited annual and consoli- The sustainability information dated accounts comprise pages (which also constitutes the 16-210 and 226. The corporate statutory sustainability report) governance statemet examined reviewed by the auditors com- by the auditors comprises pages prises pages 41-61 and 211-225. 70-85. OUR VALUES DARE CARE SIMPLIFY Telia Company AB (publ) Mailing address: 169 94 Solna, Sweden Visiting address: Stjärntorget 1, Solna Corporate Reg. No.: 556103-4249 Registered office: Stockholm Telephone: +46 (0)8 504 550 00 www.teliacompany.com Production: Telia Company AB in cooperation with Narva Photo of the Board of Directors and Group Executive Management: Telia Company OUR COMPANY Telia Company in one minute TELIA COMPANY IN ONE MINUTE WHAT WE DO WHO WE ARE We connect businesses, individuals, families and We are Telia Company, the new generation telco. We communities via fixed and mobile communication provide communication services helping millions of solutions. Our services have a positive effect on social, people to be connected and communicate, do business economic and environmental development and pave the and be entertained. way for an inclusive society. People can stay in touch even when the geographical distance is far. We work with an ecosystem of new start-ups and major service providers. Together we provide the infrastructure for 20,800 86.0 creativity, growth and change. Employees SEK billion in net sales WE PROVIDE MOBILE VOICE IP CAPACITY FIXED VOICE ICT SERVICES AND DATA AND DATA TV AND DEVICES FINANCING MEDIA 4 TELIA COMPANY ANNUAL AND SUSTAINABILITY REPORT 2019 OUR COMPANY DIRECTORS’ REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SUSTAINABILITY NOTES OTHER WHERE WE OPERATE We stand firmly in the Nordics and Baltics and our fiber backbone stretches around the globe. All our mobile operations in Eurasia are divested, except for Moldcell in Moldova for which an agreement to divest was signed in February 2020. SVERIGESWEDEN NORWAY DENMARK FINLAND #1 35% #2 37% #3 19% #2 32% #1 51% #2 14% #3 7% #2 16% #1 32% #2 18% #5 4% #3 26% #2 18% #2 21% #4 1% #3 21% ESTONIA LATVIA LITHUANIA MOLDOVA #1 49% #1 47% #2 29% #2 29% #1 82% #1 82% #1 52% #1 52% Discontinued opera- #2 38% #1 36% tion and held for sale Telia Company’s market share estimate is based on the number of subscriptions. Mobile Fixed voice Broadband TV # Market position % Market share Ownership – Subsidiaries Country Main trademarks Ownership1, % Consolidated share, % Sweden Telia, halebop, Fello, TV4, C More 100 100 Finland Telia, MTV 100 100 Norway Telia, MyCall, OneCall, Phonero, get 100 100 Denmark Telia, Call me, Mit tele 100 100 Estonia Telia, Diil 100 100 Latvia Telia, Lmt 60.32 60.32 Lithuania Telia, Ezys 88.2 88.2 Moldova Moldcell 100 100 THE #1 GLOBAL INTERNET BACKBONE Across 65,000 km of optical Ownership – Associated companies fiber, Telia Carrier’s global Country Main trademarks Ownership1, % Consolidated share, % network footprint connects more than 300 points of pres- Latvia Tet 49.0 49.0 ence in 35 countries. Turkey Turkcell 24.0 24.2 1) Ownership is defined as direct and indirect ownership, i.e. effective ownership. 2) Telia Company directly owns 49 percent of LMT and controls the company through shareholder agreements. In addition, Telia Company indirectly holds an 11.3 percent share of the company. 5 TELIA COMPANY ANNUAL AND SUSTAINABILITY REPORT 2019 OUR COMPANY 2019 in brief 2019 IN BRIEF OUR DARING GOALS – ZERO CO2 & ZERO WASTE BY 2030 With the ambition of becoming the greenest telco on the planet, two daring environmental goals were launched. We aim for zero CO2 emissions in the value chain, and a circular approach to zero waste in our own operations. Read more about our daring goals in Sustainability. SUSTAINABILITY OPERATIONAL FREE CASH FLOW In October 2019, a green bond framework was released. The framework supports Telia Company’s ambition to be considered Outlook: Operational free cash flow is expected to grow to between SEK 12.0 and a leader in sustainable financial management and is an important 12.5 billion from the 2018 level part of realizing the daring environmental goals by supporting (SEK 10.8 billion). investments in energy efficiency and green digital solutions. Telia Company maintained its strong ESG profile, confirmed by Outcome (SEK billion): several external rating agencies. • AAA rating in MSCI ESG 12.6 • Inclusion in FTSE4Good • “Gold supplier” in EcoVadis CONTINUING OPERATIONS SERVICE REVENUES ADJUSTED EBITDA NET INCOME DIVIDEND 73,455 31,017 7,601 2.45 Proposed dividend per share, SEK million (69,553) SEK million (26,540) SEK million (9,523) SEK (2.36) 6 TELIA COMPANY ANNUAL AND SUSTAINABILITY REPORT 2019 OUR COMPANY DIRECTORS’ REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SUSTAINABILITY NOTES OTHER NET SALES Per country Per service Per segment n Sweden, 41% n Lithuania, 5% n Mobile, 44% n TV, 6% n B2B, 33% n Finland, 18% n Estonia, 4% n Equipment, 15% n Telia Carrier, 5% n B2C, 53% n Norway, 17% n Latvia, 3% n Fixed broadband, 9% n Fixed telephony, 4% n Wholesale and Other, 14% n Denmark, 6% n TV and Media, 1% n Business solutions, 8% n Other, 9% n Telia Carrier, 5% OPERATIONAL DATA HIGHLIGHTS 16.7 We established a new segment – TV and Media following the Mobile subscriptions, acquisition of Bonnier Broadcasting. By that Telia Company secured million the leader position in the Nordic media arena by quality content and diversified its revenue streams. 2.4 We maintained the best network leader position in the Nordics. M2M subscriptions, In Finland Telia launched 5G in October and in Norway Telia took the first million steps to upgrade its existing network including rolling-out 5G over the coming four years. In Sweden Telia again was awarded for having the best 1.5 mobile network according to the independent network test “P3”. Fixed voice subscriptions, million We delivered on the cost target to reduce operating expenses on group level by around 2 percent for the full year thanks to strong performance in the second half of the year, mainly driven by Sweden, 2.9 Denmark and common functions. Fixed broadband subscriptions, million 3.1 TV subscriptions, million 7 TELIA COMPANY ANNUAL AND SUSTAINABILITY REPORT 2019 OUR COMPANY How we create value CREATING STAKEHOLDER VALUE Each day, Telia Company helps shape the transition towards a truly digitalized Nordic and Baltic region. Our products and services play a vital role in tackling current and future societal and environmental challenges, but also bring risks and negative impacts. A stakeholder-based approach helps us understand and manage both opportunities and risks, to ensure sustainable profitability and growth. 43.6 SOCIETY Sourcing spend ICT solutions are a vital part of modern infra- (SEK billion) structure, intertwined with most critical societal functions. However, our systems and services can be used in potentially