Annual Review 2005

Annual review 2005

Page Annual Review 2005 42 Contents

This is Telenor 2 Securing fair regulatory Outlook 2006 32 Combining local strengths frameworks 12 Information to shareholders 33 – achieving global excellence 3 Global coordination 13 Board of Directors 36 Goals, vision and strategy 4 Research and development 14 Group Executive Management 37 Operations 5 Organisational development 16 Memorandum and articles Markets 7 Corporate Governance 17 of association 38 The Nordic region, Eastern and Commitment to society 26 Elected officers and managment 39 Central Europe and Asia Financial overview 29

2005 was Telenor’s best year ever. During the year Telenor reinforced its position as an international mobile communications provider and strengthened its position within Nordic mobile, fixed-line and TV distribution.

This Annual review is a summary of Telenor information for the year 2005. It is not a legal Annual report and is not audited. Telenor´s Annual report 2005 is audited and signed by the Group´s auditor. This document can be found on our website: www.telenor.com/ir

Page Annual Review 2005 Telenor is one of the largest mobile operators worldwide with ownership interests in 12 mobile operators across Europe and Asia, constituting a total subscriber base of 82.7 million at year-end 2005.

Telenor is Norway’s largest telecommunica- Telenor also has substantial ownership inter- tions company and one of the fastest growing ests in mobile providers VimpelCom in Russia providers of mobile communications services (29.9 per cent) and ONE in Austria (17.5 per worldwide. Telenor is also the largest provider cent). of TV services in the Nordic region. In 2005, 57% of the Group’s revenues were derived Group revenues for 2005 reached NOK 68.9 from the mobile operations. Telenor has mobile billion - a growth of 14 per cent compared to operations in some of the world’s fastest grow- 2004. At year-end 2005, Telenor employed ing markets, and the home market, Norway, is 27,600 people (man-years) – 16,700 of whom one of the most advanced in the world today. were employed outside Norway.

Telenor has controlling interests in the following mobile operations: Telenor in Norway; More information: www.telenor.com Sonofon in Denmark; Vodafone Sweden in Sweden; Kyivstar in Ukraine; Pannon in Hungary; ProMonte in Montenegro; DTAC in Thailand; DiGi in Malaysia; GrameenPhone in Bangladesh and Telenor Pakistan in Pakistan.

Page Annual Review 2005 Combining local strengths – achieving global excellence

Jon Fredrik Baksaas President and CEO

2005 was Telenor’s best year ever. We have During 2005, we made several new acquisi- Going forward, we aim to build a unique seen significant growth both in revenues tions, strengthening our position both with- group of companies in mature and emerg- and net additions in mobile. We have con- in mobile and broadband. In March, we ing markets with more than 100 million tinued to develop our company, ensuring launched our greenfield mobile operation customers making use of our services by that Telenor remains one of the fastest- in Pakistan, which at year-end 2005 had 2008. Together we will continue to work growing providers of mobile communica- 1.9 million subscriptions. In the Nordic towards our common goal: To help custom- tions worldwide, and we have put industrial region, we greatly enhanced our overall ers get the full benefit of communications ownership at the top of our agenda. As we position through the acquisitions of the services in their daily lives. move forward, we continue to build strong mobile operator Vodafone Sweden, and the ties between all our international opera- broadband suppliers Cybercity in Denmark, tions, developing a common mindset and and Bredbandsbolaget in Sweden. We also a global corporate culture. increased our economic exposure in DTAC in Thailand, and this allowed us to consoli- Our Global Coordination programme date the company. While we continue to enables us to develop and promote best look for new opportunities in emerging Jon Fredrik Baksaas practice in all our operations, and as a markets, we will pursue the same relentless President and CEO result we are able to extract synergies. The customer focus across all our operations. programme is progressing well, and we are starting to see the results of our renewed Working with colleagues from regions efforts in this field. As we grow our com- as far apart as Scandinavia, Central and pany, we will continue to work as one colla- Eastern Europe and Asia is both inspiring borative international telecommunications and highly rewarding. As we expand group, drawing on local expertise and Telenor’s international footprint, we exploiting to the full our group processes must all ensure that we are respectful of and knowledge. We want to leverage what prevailing mindsets, cultures and religious is common between all our markets and beliefs in all the countries where we ope- combine this with the local edge our rate. Mobile communication is a key driver companies already excel at. of economic growth, especially in financially constrained societies, but it can To help us provide real customer satisfac- also contribute to bridge cultural gaps. tion we have developed a new Telenor At Telenor, we are working to become one brand, with a new vision, new values and a company with one vision, but with local renewed visual identity. The brand focuses flavours and local competitiveness. and guides us for the future by making us stand out from the competition in a positive, distinct and relevant way and helps us deliver a tangible difference to our customers.

Page Annual Review 2005 Goals, vision and strategy

Goals and vision To strengthen the position as an interna- To be the leading provider of communi- Telenor’s primary goal is to create great- tional mobile operator. cations services in Norway. er value for our shareholders, customers, Telenor intends to continue to strengthen Being the leader in a broad range of servi- employees and partners, and for society its industrialization of the mobile opera- ces in both the residential and business in general. We strive to be a driving force tions by obtaining control over selected markets in Norway, Telenor will seek to in creating, simplifying and introducing mobile companies. Control is essential to improve profit performance in the mobile communication and content solutions to benefit from cross-borders synergies, such and fixed areas by introducing new services the marketplace. as scale in procurement, to develop new and through a wide range of cost-cutting services and implement best practices, initiatives. In order to achieve this goal, Telenor base to improve operational efficiency and to its strategy on its customer oriented vision, increase the overall profitability. Telenor To continue to be the leading distributor ‘‘Here to Help’’ as well as its core values, intends to manage the non-strategic in- of TV services to consumers in the Nordic ‘‘Make it easy, Keep promises, Be inspiring, vestments as financial investments and to region. and Be respectful’’. exit from international mobile operations Telenor will continue to develop new oppor- where the company can not obtain control tunities to strengthen our strategic position Strategy over time. as a leading distributor of subscription- Telenor’s strategy is to strengthen the based television in the Nordic region. The performance of the local mobile opera- To strengthen the position in the Nordic company will focus on attracting new sub- tions in the Nordic region, Eastern and region. scribers and increasing revenue per user Central Europe and Asia by combining Telenor intends to continue to stream- by providing attractive content and new Group industrialisation with local drive line its mobile and fixed operations in the interactive services. and responsiveness. Further, to develop Nordic region by exploiting the benefits its leading position in the Nordic region resulting from economies of scale and Non strategic companies. with a broad range of communication cross-border synergies. The company Telenor will enhance the value of those services. believes its Nordic presence will improve companies which are not strategic for our support to the customers by building upon main business areas and dispose of all or This strategy implies the following focus expertise in, and the range of, both mobile part of our interest in such companies. areas: and fixed services.

Page Annual Review 2005 Operations

Mobile the appointment of two new Executive Vice sound files and short text messages over Telenor is a leading provider of commu- Presidents to the Group Executive Manage- wireless networks using the Wireless Ap- nications services and one of the fastest ment. plication Protocol (WAP). growing mobile operators worldwide. At year-end 2005, Telenor held controlling During 2005, Telenor successfully ex- Content services interests in mobile operations in Norway, tracted a number of cross-border synergies Telenor’s mobile operations have all imple- Denmark, Sweden, Ukraine, Hungary, Mon- across the group. Common technologies mented Telenor’s Content Provider Access tenegro, Thailand, Malaysia, Bangladesh for optimal spectrum and network utilisa- (CPA) platform, which enables external and Pakistan. Telenor also holds minority tion have been successfully implemented content providers to supply content to the interests in mobile operations in Russia and at each of the group’s operations, and group’s customers. Such content includes Austria. Telenor maintains its focus on adopting ring-tones and music, logos, pictures, new technologies to improve service quality Java-based games and directory enquiries. In accordance with Telenor’s strategy of and reduce costs. The content providers are responsible for consolidating its position in international the quality, pricing and marketing of such mobile by obtaining control of selected In order to harmonise the group’s customer content. international mobile operations, and in orientation across all markets, Telenor order to maximize the benefit of cross-bor- has developed a common segmentation Internet/intranet access der synergies and increase overall profit- model that enables more effective target- All the international mobile operations, ability, Telenor also made new acquisitions ing, while also providing greater insight into with the exception of GrameenPhone, have in 2005. the global markets. Telenor has developed launched WAP portals that enable cus- a framework that provides affiliates with tomers to access a number of web-based In October, Telenor entered into an agree- a proven concept of developing target services such as news and weather reports. ment with Vodafone Group for the acquisi- segmented offerings and optimised go-to- Pannon, VimpelCom and Telenor in Norway tion of subsidiary Vodafone Sweden for a market strategies. offer software for easy connection to the consideration of NOK 8,170 million, includ- Internet via PC cards. A common mobile ing assumption of debt. Revenues from voice services include e-mail solution was introduced across the traffic charges, interconnection fees, and group in 2005, with commercial launch at Effective from 26 October 2005, Telenor roaming charges. All of Telenor’s mobile VimpelCom, Pannon, DTAC, DiGi and Telenor increased its economic stake in Total Ac- operations derive the greatest share of in Norway. The solution allows customers cess Communication (DTAC) in Thailand to their total revenues from voice services, to access their business e-mail from their 56.9 per cent. Following further transac- and Telenor continues to focus on develop- mobile terminals. tions based on mandatory tender offers, ing new products, services and initiatives Telenor’s economic stake was raised to 69.3 to increase Telenor’s customer base and mCommerce per cent by year-end 2005. encourage higher usage. Several of Telenor’s operations offer mCom- merce services to their customers. Utilising Telenor’s mobile commitments in Asia and Data services a Public Key Infrastructure (PKI) secure pay- Eastern and Central Europe are becom- All of Telenor’s mobile operations offer ment system, mCommerce allows direct ac- ing increasingly important and to ensure Short Messaging Services (SMS), which cess to bank accounts from mobile terminals. optimal follow-up, Telenor has appointed enable customers to send and receive short Customers may use mCommerce to top-up dedicated Executive Vice Presidents for text messages using their mobile phones, their prepaid subscriptions or purchase prod- these regions. Telenor has also strength- and with the exception of GrameenPhone, ucts, goods and services from companies and ened the co-ordination of operational and all operations also offer Multimedia Mes- vendors providing mobile commerce. human resources across all the countries saging Services (MMS), which enable in which the group has operations through customers to transmit graphics, video clips,

Page Annual Review 2005 International Roaming Internet access via PSTN/ISDN and digital Broadcast All of Telenor’s mobile operations have subscriber lines (xDSL), value-added serv- Telenor is the leading provider of television entered into international roaming agree- ices and leased lines. and broadcasting services to consumers ments with a large number of telecom- and enterprises in the Nordic region. Tel- munications operators. These agreements Through the acquisitions of Bredbands- enor also operates the national terrestrial enable our companies’ subscribers to place bolaget and Cybercity, made in July 2005 broadcast network in Norway and is the and receive calls through other operators’ for NOK 4.5 billion and NOK 1.3 billion, leading provider of satellite broadcasting networks when travelling abroad. Interna- respectively, Telenor has gained a strong services in the Nordic region, utilising three tional visitors are offered similar access to position in the fast-growing broadband geostationary satellites. Telenor’s key ob- Telenor’s networks when they visit coun- markets in Sweden and Denmark. Bred- jective is to further strengthen Broadcast’s tries where Telenor companies offer their bandsbolaget is Sweden’s second largest position in the Nordic region. services. provider of broadband services, offering full ‘‘triple-play’’ with high-speed Internet, Telenor Broadcast provides TV distribution Wholesale VoIP and Internet Protocol (IP) television services to more than three million house- In Norway, Telenor sells network capacity services on an all-IP fibre and xDSL net- holds and businesses in the Nordic region, to both Mobile Virtual Network Operators work. Cybercity is Denmark’s third largest offering basic tier, “minipay” and premium (MVNOs) and service providers, whereas broadband supplier, providing xDSL-based pay-TV services to subscribers with Direct in Denmark such network capacity is only Internet access and voice services to both To Home (DTH) satellite dishes. In Norway sold to service providers. Both MVNOs and residential and business customers. and Sweden, Telenor also offers basic tier service providers offer services under their TV services, pay-TV and Internet services own brand name without controlling radio On 8 February 2006, Telenor increased to cable TV subscribers, and in Denmark, spectrum or radio network facilities. MVNOs its shareholding in the Swedish residential the same services are marketed through purchase radio spectrum and access to core voice and broadband provider Glocalnet a cable network; OE Kabel TV, acquired in network components, but retain control AB by 13.5 per cent, for a consideration of November 2005. In Finland, Telenor offers over all other aspects of the service, includ- SEK 136 million (NOK 118 million), to secure premium pay-TV services to subscribers ing traffic routing and SIM card production. a 50.1 per cent ownership interest. The with access to digital terrestrial televi- Service providers, however, buy a wider acquisition triggered a mandatory offer for sion (DTT). Telenor also offers TV services range of products and services, including all outstanding shares in Glocalnet AB. This through privately owned satellite master SIM cards. Both MVNOs and service provid- offer is valid until 21 April 2006. As at 28 antenna TV networks (SMATV), which serve ers are responsible for their own customer March 2006, Telenor holds a 96.6 per cent multiple dwellings such as housing associa- service, marketing, invoicing and sales. ownership interest in Glocalnet. tions and antenna unions.

Fixed-line In the fourth quarter of 2005, Telenor Telenor’s wholly owned subsidiary Canal Telenor is Norway’s leading provider of disposed of its operations in the Czech Digital is the leading TV content distributor fixed-line telecommunications services, Republic and Slovakia with a loss of NOK 63 in the Nordic region, offering a wide range and is strongly positioned in the rapidly million. of national and international TV channels growing Nordic market for broadband serv- to households that rely on DTH, cable, DTT ices. In Norway, Telenor provides commu- Telenor holds a 20.3 per cent ownership or SMATV for their reception of television nications solutions on a retail basis to both interest in the listed Russian fixed-line services. residential and business customers. Offers operator Golden Telecom. include analogue (PSTN) and digital (ISDN) fixed-line telephony, as well as broadband voice services over Internet Protocol (VoIP),

Page Annual Review 2005 Markets

the NORDIC REGION voice services to meet the needs of retail to launch 3G services to business consum- customers in all segments. ers in a number of Danish key cities during THE mobile market 2006. Telenor in Norway The Norwegian mobile market is highly Telenor’s wholly owned Norwegian mobile developed and competitive. Following the Sonofon will defend its position as Den- operation is the country’s leading provider introduction of mobile number portability mark’s number-two mobile operator by of mobile communications services. Telenor in November 2001, the mobile market has offering a range of simple and user-friendly offers a broad range of digital services to seen increased levels of churn, consolida- products and services. During 2005, the the Norwegian corporate and consumer tion among service providers, and many company stepped up its efforts to increase markets and has extensive experience from players have stepped up their marketing monthly average revenue per user (ARPU) providing mobile services and operating efforts. In recent years, Telenor’s market- as well as monthly average minutes per mobile communication networks in Norway. ing and distribution efforts have become user (AMPU), and reduce churn. Sonofon’s increasingly segment-oriented. During initiatives, including packaged offers and Telenor currently holds three GSM licenses 2005, Telenor continued to focus on reduc- flat-rate products have contributed to sig- in Norway (two GSM 900 licenses and one ing churn, with special emphasis on its most nificant growth in traffic during 2005. GSM 1800 license). As Nordic Mobile Tel- valuable customers, implementing various ephone - 450 (NMT-450) was shut down ‘‘hold-back’’ and ‘‘win-back’’ activities such The Danish youth segment is becoming in- on 31 December 2004, Telenor increased as price reductions and simplified mobile creasingly important to Sonofon. Emphasis its GSM coverage along the Norwegian subscription plans. Other marketing initia- is on marketing competitive web-based coast and in certain mountainous regions tives have focused on improving network products and services. At the outset of by utilising extended cell technology, which quality and customer service. 2006, Sonofon introduced several special more than doubles the range of coverage. package solutions aimed at the youth seg- Telenor’s GSM network currently covers Sonofon in Denmark ment. 99.8 per cent of Norway’s population. Telenor’s wholly owned subsidiary, Sono- fon, is Denmark’s number-two operator, Telenor in Sweden Telenor first launched UMTS services in with an estimated market share of 26.6 per Following the acquisition of Vodafone’s Norway on 1 December 2004. As from 1 cent. Sonofon currently holds three GSM Swedish mobile operation, Telenor is March 2006, Telenor’s UMTS coverage licenses, and in December 2005, it also now the third largest mobile operator in extended to approximately 70.6 per cent acquired a UMTS license at a price of NOK Sweden, with 1.7 million subscriptions and a of the population. Pursuant to instructions 574 million. Under the terms of the UMTS market share of approximately 17 per cent. from the Norwegian regulator, Telenor is re- license, network coverage must exceed 30 Vodafone Sweden was acquired on 31 Oc- quired to provide UMTS services to approxi- per cent of the Danish population by 2009, tober 2005, at a price of NOK 8,170 million mately 3.75 million people (approximately and 80 per cent of the population by 2013. including assumed debt, and the acquisi- 80.9 per cent of the population) in Norway tion was completed on 5 January 2006. by 1 March 2007. Sonofon offers regular voice services as Telenor expects to achieve full integration well as value-added non-voice services of Vodafone Sweden and Telenor Mobile Telenor is Norway’s leading provider of to the consumer and business markets. Sweden during the first half of 2006. digital mobile telephony services, and Non-voice services include SMS and MMS, although Telenor will continue to develop mobile Internet access via WAP, as well as The acquisition has increased Telenor’s its non-voice services, it is anticipated that various content services. Content provided Scandinavian mobile customer base by the bulk of Telenor’s revenues will continue exclusively to Sonofon subscribers, pursu- approximately 39 per cent, bringing the to come from voice services. Telenor is ant to arrangements with partners, is an total number of subscriptions up to 5.7 therefore committed to improve the quality important point of differentiation between million by year-end 2005. The acquisition of existing services as well as develop new Sonofon and its competitors. Sonofon plans also strengthens Telenor’s presence in the

Page Annual Review 2005 business segment, and Telenor registers an services. Telenor also had 579,000 Internet Fixed Sweden increasing demand from key business cus- access subscriptions in the residential Telenor provides telephony, IP-based and tomers demanding seamless communica- market, comprising 165,000 narrowband data communication services and advanced tions solutions across the Nordic countries. (ISDN/PSTN) subscriptions and 414,000 network services to the business and Under an agreement between Telenor and broadband (xDSL) subscriptions. wholesale markets in Sweden through the Vodafone Sweden, Telenor’s customers will group’s wholly owned Swedish subsidiary enjoy access to various Vodafone products Fixed Norway – Business Utfors AB. As from July 2005, Telenor pro- and services in the Swedish market. Telenor provides its business customers, vides high-speed Internet, VoIP, IP-TV and which include a number of public sector add-on broadband services to the Swed- Telenor Mobile Sweden is positioned as entities, with PSTN, ISDN and VoIP te- ish residential market through the wholly an innovative, quality operator providing lephony services, Internet access via xDSL owned subsidiary Bredbandsbolaget, which simple and user-friendly products and and leased lines services. At year-end had approximately 369,000 subscriptions services at a low cost. In addition to voice 2005, Telenor had approximately 167,000 (a 20 per cent market share), at year-end services, Telenor Mobile Sweden offers data PSTN subscriptions, 216,000 basic rate 2005. services such as SMS and MMS, as well as and 7,000 primary rate ISDN subscriptions content services based on premium SMS, as well as 1,600 VoIP subscriptions for te- Fixed Denmark and Internet access via WAP. lephony services. Telenor also had 61,000 As from July 2005, Telenor provides subscriptions for Internet access via xDSL broadband solutions and network-based At year-end 2005, Telenor Mobile Sweden in this market. In addition, Telenor provides products, such as security and VPN prod- had approximately 95,000 subscriptions integrated voice and data communications ucts for residential and business custom- (a reduction from approximately 105,000 solutions, access and network services to ers, through its Danish broadband provider subscriptions at year-end 2004). Telenor the Norwegian business market. Cybercity. Cybercity serves small, medium Mobile Sweden estimates that its overall and large business customers as well as market share, at year-end 2005, was one Fixed Norway – Wholesale residential customers. As year-end 2005, per cent. Vodafone Sweden had ap- Telenor provides a range of interconnec- Cybercity had approximately 122,000 xDSL proximately 1.6 million subscriptions and a tion and capacity services, including leased customers. market share of approximately 16 per cent lines, in the Norwegian market. Telenor’s at year-end 2005. interconnection and capacity services allow The TV market other network operators, Internet service Telenor is the leading provider of television providers and other service providers to and broadcasting services to consumers The fixed network market connect to our network or use our infra- and enterprises in the Nordic region. Tel- Fixed Norway – Residential structure in order to facilitate their own enor also operates the national terrestrial Telenor provides voice services on a tradi- service offerings. Telenor also offers un- broadcast network in Norway and is the tional public switched telephone network bundled telephony access (PSTN and ISDN) leading provider of satellite broadcasting (PSTN), an integrated services digital and xDSL access to other operators and services in the Nordic region, utilising three network (ISDN) and via broadband Voice service providers. Further, Telenor provides geostationary satellites. Telenor’s key ob- over Internet Protocol (VoIP). Telenor also local loop unbundling (LLUB) and shared jective is to further strengthen Broadcast’s provides narrowband (PSTN/ISDN) and access to the local loop, which enables position in the Nordic region. broadband (xDSL) Internet access and other operators to provide end-users with services to households across Norway. At broadband. In June 2005, Canal Digital, in partnership year-end 2005, Telenor had approximately with the Norwegian broadcaster TV2, acqu- 922,000 PSTN subscriptions, 286,000 ired the rights to distribute Norwegian elite ISDN basic rate access subscriptions, and football on TV, broadband Internet and 3G 24,000 VoIP subscriptions for telephony mobile, at a price of NOK 1 billion.

Page Annual Review 2005 At year-end 2005, Telenor had more than ment for the acquisition of a new satellite Pannon has positioned itself as a high- three million subscribers to its different to replace the Thor II satellite, at a price of quality provider with up-to-date features, television services, consisting of 906,000 NOK 1.2 billion. Telenor will take posses- competitive rates and quality customer pay-TV subscribers and 222,000 basic sion of the new satellite towards the end of service. Pannon has recently targeted the tier households on DTH, 681,000 cable TV 2007. youth segment, providing offers for select subscribers, 33,000 DTT pay-TV subscrib- services under the djuice brand. ers and 1,177,000 households in SMATV Telenor’s wholly owned subsidiary Norkring networks. During 2005, Telenor’s distribu- owns and operates analogue and digital In addition to 39 Pannon-owned regional tion activities generated external revenues terrestrial radio and television transmission service centres, Pannon markets its of NOK 4.6 billion. More than 50 per cent systems in Norway. Norkring provides ana- products through a nationwide network of Telenor Broadcast’s Nordic distribution logue services to two nationwide television of agents and sales outlets on an exclusive revenues are currently generated outside broadcasters, the national broadcaster NRK basis. During 2006, Pannon will be restruc- Norway. and the commercial channel TV2, several turing its distribution network by outsourc- national radio broadcasters and a number ing 29 of its own sales outlets to various In Sweden, the government commenced of local television and radio stations. franchisees. Five sales outlets will be kept the shutdown of analogue terrestrial TV in as ‘‘flagship’’ stores, another five will be September 2005. Between 100,000 and Telenor’s wholly owned subsidiary Conax closed down. 200,000 households were directly affected offers conditional access systems that en- by this shutdown in 2005. As affected able broadcasters and content providers Kyivstar in Ukraine households migrate from analogue TV to encrypt their digital services. At year- Telenor holds a 56.5 per cent ownership reception to digital reception via cable, DTH end 2005, Conax had sales and support interest in Kyivstar, Ukraine’s largest mobile or DTT, the major operators in the Swedish staff in India, Singapore, China, Brazil and operator. Kyivstar currently holds a GSM market expect a surge in subscriber growth. Germany, and customers in more than 40 900 and a GSM 1800 license. At year-end countries. 2005, Kyivstar’s GSM network offered a In Norway, Norges Televisjon (NTV), geographical coverage of approximately which is jointly owned by Telenor and the EASTERN AND CENTRAL EUROPE 92 per cent and population coverage of ap- Norwegian broadcasters NRK and TV2, is proximately 96 per cent. Kyivstar’s network the only applicant for a DTT license. The Pannon in Hungary is fully GPRS upgraded. rollout of the DTT network is planned to Telenor’s wholly owned mobile operation commence within six months after such Pannon is Hungary’s number-two mobile In 2005, Kyivstar launched EDGE services, license is awarded. If, as expected, a licence operator. Pannon currently holds two GSM which at year-end were operational at ap- is awarded during 2006, final shutdown of licenses (GSM 900 and GSM 1800). In De- proximately half of the base stations in the the analogue terrestrial network in Norway cember 2004, the company was awarded a ten largest cities in Ukraine. Kyivstar also is expected towards the end of 2008. UMTS license. continued to roll out its own fibre backbone network during 2005. Telenor also provides transmission services Pannon offers advanced voice and non- for broadcasters through Telenor Satellite voice services to both prepaid and contract In addition to voice, Kyivstar also provides Broadcasting and Norkring. Telenor Satel- subscribers. Pannon’s voice services include voice messaging services, SMS, MMS and lite Broadcasting owns and operates satel- international connections through Voice mobile Internet services. Kyivstar focuses lite transmission capacity on the satellite over Internet Protocol (VoIP), which enables on providing quality customer service and position 1-degree west, and is the largest the company to offer subscribers lower customer care. At year-end 2005, Kyivstar Nordic provider of commercial satellite costs on international calls. Non-voice had 72 visitor centres throughout Ukraine. services for transmission of television and services include SMS, MMS, mobile content The visitor centres are independent radio programmes. services and services to Internet service dealerships, but all of them have at least providers via Internet Protocol and WAP. one Kyivstar employee among its staff. At In the third quarter of 2005, Telenor Satel- Pannon launched EDGE-based broadband year-end 2005, Kyivstar also operated 18 lite Broadcasting entered into an agree services in February 2005 and UMTS-based information centres in key urban areas. broadband services in October 2005.

Page Annual Review 2005 ProMonte in Montenegro On 20 March 2006, Telenor made a operator in Malaysia. DiGi currently holds a Telenor’s wholly owned subsidiary ProM- proposal for VimpelCom to acquire full GSM 1800 license, and offers mobile voice, onte is Montenegro’s leading provider of ownership of Kyivstar, Telenor’s consoli- roaming and value-added services on both mobile communications services. ProMonte dated mobile operation in Ukraine, in which prepaid and contract basis. DiGi is currently holds a GSM 900 and a GSM 1800 license. Telenor holds a 56.5 per cent ownership in- one of the leading operators in the prepaid At year-end 2005, ProMonte’s GSM net- terest, at a price of more than USD 5 billion segment, which is the fastest growing seg- work had achieved a geographical coverage in cash. A condition to Telenor’s proposal ment in the Malaysian mobile market. of approximately 75 per cent and popula- is that Telenor and Alfa Group enter into a tion coverage of 98.7 per cent. market based separation mechanism. If im- With various valued-added services, such plemented and activated, this mechanism as MMS, premium SMS, mobile content Since it first launched GSM services in 1996, would permit the party placing the highest and Internet services, and innovative ProMonte has positioned itself as an inno- value on VimpelCom to make an offer for all loyalty schemes, DiGi continues to be at the vative quality operator within all segments, of the other party’s shares and obligate the forefront with respect to innovation in the focusing on simplicity and user-friendliness. other party to dispose of its entire share- Malaysian market. The company offers mobile voice, roaming, holding. value-added services and mobile data Under Malaysia’s current New Economic services over GPRS to subscribers on both In Russia’s Far Eastern region, VimpelCom Policy (NEP), Telenor will be required to prepaid and contract basis. ProMonte pro- operates in four sub-regions through its reduce its ownership interest in DiGi to less vides EDGE coverage in most big cities and subsidiaries Sakhalin Telecom and Dal than 50 per cent by year-end 2006. The urban areas. Telecom International. NEP specifies that members of the Bumi- putera community, the largest indigenous At year-end 2005, ProMonte markets and VimpelCom operates a GSM 900/1800 ethnic community in Malaysia must control distributes its services through independ- network, as well as several small AMPS/ at least 30 per cent of the ownership inter- ent dealerships with 2,013 points of sale, D-AMPS networks, that target both the est in any publicly listed company. To avoid including two wholly owned sales outlets business and consumer segments. Vim- having to reduce its ownership, Telenor will in the capital, Podgorica. During 2005, pelCom’s Russian license portfolio covers have to apply for a further extension period. ProMonte entered into ‘‘shop-in-shop’’ approximately 94 per cent of the popu- agreements with six independent dealer- lation. VimpelCom offers voice services During 2005, DiGi continued to stand out ships, which committed themselves to and value-added services on its GSM and as an innovative player and was the first to market ProMonte’s mobile services within D-AMPS networks on both prepaid and launch a number of new products and serv- their shops. contract basis, with around 99 per cent of ices. The company also offers a variation of its Russian subscribers using GSM. subscription plans to meet the needs of its VimpelCom in Russia and CIS contract customers. VimpelCom is a key affiliate of Telenor and As part of its overall business strategy, Vim- Russia’s second largest mobile operator, pelCom has constructed and tested a pilot DTAC in Thailand with an overall market share of 34.3 per UMTS network, and intends to introduce On 26 October 2005, Thai Telco Holdings cent at year-end 2005. VimpelCom’s ADSs UMTS services in some of the larger cities if (TTH), a 49 per cent subsidiary of Telenor, are listed on the New York Stock Exchange awarded a UMTS license. completed the purchase of a 39.9 per cent and registered with the SEC. VimpelCom stake in United Telecommunications Indus- has subsidiaries in Kazakhstan, Uzbekistan ASIA try PCL (UCOM). In compliance with relevant and Tajikistan. VimpelCom’s ownership stock market regulations in Thailand and of Ukrainian Radio Systems (URS) in the DiGi in Malaysia Singapore, TTH then launched a mandatory Ukraine is currently the subject matter of Telenor holds a 61 per cent ownership tender offer for all outstanding shares of litigation between Telenor and VimpelCom. interest in DiGi, the third largest mobile UCOM and, along with Telenor Asia, a Chain

Page 10 Annual Review 2005 Principle Offer for all of the shares of DTAC saging services, SMS, MMS and data wide and international call services. that they and their parties acting in concert, services via WAP. GrameenPhone’s services Telenor Pakistan distributes its services as defined by stock market regulation in are widely perceived as having the most through a network of 13 own sales and Singapore, did not collectively own or con- advanced and up-to-date features in the service centres, 58 franchisees and ap- trol. The results of the mandatory tender Bangladeshi market. GrameenPhone also proximately 18,000 retail outlets selling offer resulted in an increase in Telenor’s offers the market’s widest coverage, which subscriptions and refills. economic stake in DTAC, held through TTH, increased from approximately 58 per cent UCOM and Telenor Asia, to 69.3 per cent at of the population in 2004 to approximately 31 December 2005. 85 per cent in 2005. GrameenPhone also offers GPRS in most of the country and The Thai Telecommunications Business EDGE in urban areas. Act limits the direct ownership of foreign investors in public communications license- In February 2006, GrameenPhone awarded holders to 49 per cent of the total issued a two-year framework agreement to ex- share capital. pand and upgrade its GSM/EDGE network. The contracted party will supply core and DTAC currently holds a GSM 1800 and an radio network equipment in addition to a AMPS 800 licence, and offers mobile voice, range of other services. The contract will roaming, and value-added services to its include Mobile Softwitch Solution and IP customers through contract and prepaid Multimedia Subsystem (IMS), which will subscription plans. DTAC’s non-voice serv- enable GrameenPhone to significantly ices also include mobile Internet services enhance network quality, performance and based on WAP and EDGE. coverage.

During 2005, DTAC has continued to focus Telenor Pakistan on enhancing customer services, adopting Telenor’s wholly owned subsidiary Telenor an innovative and segmented approach to Pakistan launched GSM mobile services ensure that the needs of individual custom- on 15 March 2005, and at year-end the ers in both the consumer and corporate company had acquired a market share segments are met. of approximately nine per cent. Telenor acquired the license to build and operate a GrameenPhone in Bangladesh mobile network in Pakistan in April 2004 at Telenor holds a 62 per cent ownership a price of USD 291 million. interest in GrameenPhone in Bangladesh, the country’s leading provider of mobile In addition to basic voice services, SMS and communication services. GrameenPhone MMS, Telenor Pakistan also offers mobile currently holds both a GSM 900 and a GSM data services to all its customers. The 1800 license. The Bangladeshi government company rolled out its GSM network rapidly has not yet announced any plans to issue during 2005 and had the fastest growing UMTS licenses. mobile network in the country during the year. The network currently being rolled- In addition to core voice services, Grameen- out is WAP and GPRS enabled and EDGE Phone offers a number of value-added compatible. In addition, the company holds services, on both contract and prepaid a Long Distance and International (LDI) basis. These services include voice mes- license though which it is providing nation-

Page 11 Annual Review 2005 Securing fair regulatory frameworks

Telenor’s objective is to con- able national frameworks that can attract long-term investments in the telecom tribute to fair regulatory sector. Outside Europe, membership of the frameworks through active WTO and alignment with the WTO Agree- engagement with political ment contribute to secure stable framework conditions for the international operations. decision-makers and public authorities, both at the The goal of ensuring a well-functioning telecommunications market will be difficult national and the international to achieve if players in Norway are subject level, firmly opposing biased to more detailed and extensive regulations than those which apply in other European and unpredictable competitive countries. Today, we are observing such a terms. trend in the Norwegian market, with respect to both fixed-line and mobile interconnec- Telenor’s operations adapt to the regulations. tory frameworks that they are subject to in individual markets. The development of During the course of 2005, broadband equal and fair competition is a key chal- telephony has gained a firm foothold in lenge for authorities in all countries, and the Nordic market. An extensive regulatory Telenor seeks to play an active role in the process has resulted in provisional clari- development of robust competition in all fication as regards regulatory obligations markets. Unpredictable framework condi- and dispensation schemes for the various tions and market intervention could affect broadband telephony services. This involves Telenor’s revenues and profitability, and far-reaching and important changes to the thus represent a regulatory risk. telecommunications industry.

The rapid development of the telecom- An increase in the regulation of mobile munications industry has resulted in a need operators is expected to take place in many for new and revised regulations in Europe. countries outside Europe. This develop- At the same time, European regulatory ment is likely to involve contributions to practices are becoming a blueprint for USO funds, introduction of mobile number the development of national regulatory portability and altered conditions for regimes in many markets. Being present in interconnections. Telenor will continue to emerging, maturing and advanced markets, work actively to ensure optimal regulatory Telenor is uniquely positioned to transfer framework conditions for all its operations. learning and set the right focus on regulatory issues.

Telenor actively cooperates with international organisations and industry as- sociations with the common objective of securing and developing fair and predict-

Page 12 Annual Review 2005 Global coordination

Telenor’s global coordination To date, a number of initiatives have been implemented across the Telenor family of programme was launched mobile operations. These initiatives not only early 2005 with a single goal: ensure optimised operation and synergies To increase the local competi- across the Telenor family but also stimulate service and product development in other tiveness of our mobile opera- sectors of the industry. tions by taking advantage of The youth concept djuice has been our global joint competence launched in Norway, Sweden, Hungary, and scale. Ukraine, Bangladesh and Pakistan. The Content Provider Access model (CPA), which Telenor has the recent years moved from allows content providers to bill customers a holding-company approach to a more directly, has been implemented success- collaborative united force, building on fully in Norway and Malaysia. A common a common culture and stimulating best E-load electronic prepaid top-up solution practice sharing and co-operation between has been introduced in Pakistan, Malaysia, markets, while maintaining local edge and Bangladesh and Ukraine. E-Phone, a com- market relevance. mon push-mail solution has been implemented in Hungary, Russia, the Nordic All companies have adopted common region, Malaysia and Thailand. This solution guidelines for developing a customer-ori- will be implemented at all operations in the ented focus and performance, and a system Telenor family. The Sales Tracking System, for monitoring goals and market positions an electronic tracking system for sim-packs secures follow-up activities and dynamic and reload coupons throughout the distri- operation. bution chain has also been implemented in several of Telenor’s operations. Telenor’s Segmentation Model has been adopted throughout Telenor’s portfolio, The programme of global coordination and establishing a common framework and seg- global teamwork ensures effective group- ment focus to ensure that diverse market wide decision-making and local respon- needs are met. Mobile Market Offering, a siveness. process tool for developing segmented go-to-market strategies, has been used at several of the operations as part of the business planning process for the next year.

Page 13 Annual Review 2005 Research and development

Telenor Research and Business Models and Disruptive enhanced customer experience, differen- Changes tiation, adjustment of terminals, adjust- Development is one of Telenor intends to be on the cutting edge ment of segments and development of new Norway’s leading research of understanding which sustainable models services. establishment within ICT can exploit the potential in the technological development - always keeping ahead Service Platforms (Information and Commun- of the market. This R&D research unit keeps Telenor needs common service frameworks ication Technology) and an abreast of challenges to Telenor’s interna- and platforms based on open standards tional value creation, both as an estab- to reduce platform costs and secure new important contributor to lished actor and as a challenger in mature revenues by supporting a multitude of new innovation in Telenor. and immature markets. innovate services and achieve synergies across Telenor’s different operations in The R&D achievements comprise future Through strategic competitive activities Norway and abroad. strategic long-term research, joint activi- the research unit Business models and ties with the Telenor business units world Disruptive Changes analyse the intersec- Service platforms have evolved from IN (In- wide, and collaboration with third parties tion between the market and regulatory telligent Networks) systems and platforms outside Telenor. The research results help boundaries. The unit helps to position Tel- into Service Delivery Platforms (SDP) that the Telenor Group stay at the forefront of enor by preparing analyses and scenarios provide new features and capabilities. The its chosen areas. Telenor R&D collaborates concerning new actors, relations between major advances in service platforms is their extensively with leading research establish- actors and central development trends ability to expose service capabilities to 3rd ments – both nationally and internationally. in the industry. An important part of this parties and Content Delivery capabilities is identifying the most important disrup- that may be used for provisioning of multi- Telenor Research and Development makes tive development trends that may impact media content to e.g. mobile devices. These an important contribution to Telenor’s value Telenor and its surroundings. New business capabilities can open up for new opportuni- creation through strategic consultancy, concepts and opportunities are analysed by ties to Telenor such as creating new content innovation and improvement of existing developing and using quantitative strategic rich services or enable growth of business in solutions. The research and development tools. cooperation with partners. activity is linked to new services, platforms and customer solutions across different Products and Markets Network Infrastructure networks, both in mature and emerging The R&D research unit Products and Mar- This research unit delivers expertise and markets. R&D also carries out work on new kets contributes to Telenor’s ability to offer authority within mobile, fixed and broadcast business models and takes part in strategic simple and user friendly products adapted technologies to continue Telenor’s market processes in the Telenor Group. to customer needs, to ensure customer leadership in its home markets and to meet loyalty and increased ARPU per customer. the challenges of international expansion. Telenor R&D is regarded as one of the leaders in specific areas within European Products and Markets also develops exist- R&D contributes to ensuring Telenor’s suc- research collaboration and has the following services to improve customer experi- cess in the broadband market by choosing ing focus areas. ence and value. Based on technological the winning distribution technology and possibilities and empirical user studies, this platforms for broadband services and by research unit analyses customer require- being a leader in identifying and choos- ments in different markets, both nationally ing new technology for fixed and mobile and internationally. It analyses possibilities access. R&D recommends methods to offered by the terminal development as to maximise capacity and achieve optimum

Page 14 Annual Review 2005 efficiency of Telenor’s network infrastruc- operations as test beds, in order to create ture and seamless cross platform solutions new concepts and drive value to Telenor with end-to-end service quality, security affiliates worldwide. and mobility. Telenor regards Asian consumers to be ear- R&D also evaluates system solutions to ly adopters of new technology. Following a facilitate and meet user requirements for different development pattern than Telenor services and content specific to time, loca- have experienced in Western Europe (fixed tion and terminal and is also experimental first, then mobile), Asia is already leading in in trying out new technology in co-opera- mobile service innovation both in terms of tion with business units and suppliers. technology and consumption.

Telenor Research & Innovation Centre Asia The R&I Centre is fully funded by Telenor. Pacific The goal of the Telenor Research & After a couple of years in operation the Innovation Centre Asia Pasific is to ensure staff is expected to reach 30 to 40 people, that Telenor is ahead of the competition mostly recruited from the Asian region. in providing unique customer experience Exchange of visiting researchers is encour- and go-to-market approaches. The R&I aged. Centre will leverage its Asian presence to better understand consumer behaviour and preferences, technology and services, and partners in the Asian region. Both local and international experts will be engaged to ensure that expertise and competence are shared between Telenor’s operations. The R&I Centre will utilise Telenor’s Asia

Page 15 Annual Review 2005 Organisational development

Organisation and personnel Telenor’s ambition for its people and All managers at Telenor’s Nordic compa- At year-end 2005, Telenor had 28,500 organisation focuses on the following four nies, with the exception of Sonofon, partici- employees (27,600 man-years), of whom areas: pated in the TDP process in 2005. Outside 11,300 were employed in Norway and the Nordic region, the top two management 17,200 abroad. This is an increase of 6,750 An organisation that provides a competi- levels of all mobile companies participated employees compared to year-end 2004. tive advantage by being simple, aligned in the process. As in previous years, Telenor restructured and efficient its operations in 2005, with the aim of Diversity and equal opportunities maximising operational efficiency. This is A culture centred on customers and char- In 2005, Telenor adopted a new policy increasingly important in view of the inten- acterised by our values, collaboration and underlining the significance of diversity sifying competition in the Nordic markets group mindset with respect to value creation. The policy and with respect to products that were has special emphasis on gender, age and formerly highly profitable, such as fixed- Managers with a passion for business, who ethnicity/nationality. line telephony. excel at empowering people and never compromise on Telenor’s values and ethical In Norway, Telenor’s compiled figures for Telenor has made a considerable effort to standards gender equality reveal that 37 per cent of ensure that all organisational restructuring Telenor’s total workforce, and 24 per cent is implemented in the most considerate way People who perform at the peak of their of Telenor’s managers, were women. In possible in relation to the group’s employ- ability because they feel a sense of mission, 2005, the Board of Directors of Telenor ASA ees. Whenever workforce reductions have accomplishment and growth consisted of 40 per cent women and 60 per been unavoidable, Telenor has introduced cent men. appropriate economic support schemes Competence and training and offered advisory services. Telenor recognises the importance of During 2005, and in accordance with attracting and retaining talented and mo- the Board’s adopted principles of gender Ambition for people and organisation tivated employees who, in accordance with equality, initiatives have been introduced Telenor’s highly skilled workforce is made Telenor’s Codes of Conduct, display a strong to ensure better balance in relation to up of people from a wide range of back- passion for business and who are capable gender and competence within the boards grounds and different nationalities. As the of motivating their colleagues to give their of Telenor’s own operations. All representa- company grows, it is important to maintain best. Two global processes – Telenor Devel- tives who are appointed to Telenor’s various a relentless focus on customer percep- opment Process (TDP) and Internal Value boards are offered training in board work. tion and customer satisfaction, and at the Creation (IVC) – were developed further same time acknowledge and respect local during 2005. TDP is a tool for systematic cultures. Wherever we operate, we want to evaluation, development and remuneration be part of the local community. For Telenor, of employees, while IVC monitors human responsibility and trust are inseparable. and process capital as well as the quality of the organisation.

Page 16 Annual Review 2005 Corporate Governance

Good Corporate Governance, Ethics by the Securities Exchange Commission tion. The Codes of Conduct apply to Board and Social responsibility and Nasdaq, and the Sarbanes-Oxley Act members, managers, employees, hired staff Telenor considers good corporate govern- (SOX), which includes strict requirements and anyone acting on behalf of Telenor. The ance to be a necessary requirement for and internal controls relating to financial Codes of Conduct have been implemented value creation and trustworthiness, and reporting. at the Norwegian and international com- for access to capital. In this context good panies of which Telenor has operational corporate governance means open interac- Telenor’s good corporate governance prin- control. tion and cooperation among the company’s ciples are formulated independently. How- owners, the Corporate Assembly, the Board ever, rules, requirements and recommen- On the basis of the company’s values and and Group Executive Management, as well dations to which the company is subject are Codes of Conduct, Telenor’s Ethical Council as other interested parties such as the included in the overall framework for good will promote ethical awareness within the Group’s employees, customers, suppliers, corporate governance. The Group Executive Group. The Ethical Council can bring up for creditors, public authorities and society in Management is responsible for ensuring discussion matters relating to ethics and general, etc. The presentation given herein the existence of internal rules, procedures reputation. The Council has no decision- is seeking to reflect that Telenor, when en- and structures which can efficiently secure making authority, but may make recom- gaging in corporate governance, includes value creation, and where i.a. authority mendations to the CEO. The Council is all these interested parties in an integrated and responsibilities are clearly set out and chaired by the Chief Executive Officer and is and comprehensive way. mutually understood. otherwise composed of the Group Executive Management, as well as employee repre- Earning public trust is essential for all com- Experience shows that Telenor’s estab- sentatives and relevant staff functions. The panies. When submitting reports, Telenor lished values are closely connected with Compliance Officer acts as secretary and is provides both financial and non-financial the values created by the company. In in charge of preparing matters for consid- information, emphasising transparency so order to secure long-term value creation eration. that interested parties may be able to make the Board will ensure that Telenor’s values informed decisions. Telenor also focuses are firmly anchored in the organisation and Telenor currently conducts business in on individual responsibility and personal that the company’s activities are based on countries in which corruption and busi- integrity – values that will be promoted by responsibility and good business practice at ness ethics issues represent a challenge. concentrating on value-based leadership all levels. Telenor’s activities may serve to illustrate and business ethics. Social, competitive and that it is possible to achieve success in industrial development will involve changes Telenor’s Codes of Conduct have been business in demanding markets without and restructuring. Flexible employees and adopted by the Board and are a key man- compromising adopted ethical principles a pliable organisation will be pivotal in agement tool for Telenor’s activities. The or international norms. Telenor will not achieving a successful development. Codes of Conduct cover areas which are tolerate corruption and works to prevent important for securing good business ethics corruption at all levels of the organisation. Telenor is subject to rules and regula- in all aspects of the Group’s activities. They The most important measures employed tions applicable in Norway as well as contain specific and practical rules, and set by the Group in the fight against corrup- the countries where the Group conducts the standards for how individual employ- tion involve ensuring a common business business. Telenor’s shares are listed on the ees should proceed when, in their daily ethics platform at all companies where Oslo Stock Exchange and Nasdaq in the US. work, they are faced with competition and Telenor has operational control, training As an issuer of shares the company must demands for meeting business objectives. of individual managers and employees in comply with both Norwegian and US stock Failure to comply with the Codes of Conduct how to deal with situations involving ethical exchange rules. Listing on Nasdaq involves will result in sanctions adapted to suit the dilemmas, and ensuring that ethical issues compliance with regulations promulgated nature and extent of the violation in ques- may be raised and discussed in all units in

Page 17 Annual Review 2005 the Group. Specific guidelines relating to joint venture partners, competitors, public It is important that the owners are aware these issues have been prepared on the authorities and other interested parties. of their responsibilities when exercising corporate level. Business ethics has featured prominently in their ownership rights and control through Telenor’s work on social responsibility. the company’s various bodies, and that Telenor’s efforts to ensure socially respon- management relates to these bodies as ac- sible business conduct involve more than Owners’ interests – Annual General tive and operative corporate bodies. More just good business ethics at all levels. They Meeting (AGM) than 50% of Telenor is owned by one single concern the manner in which we treat our The owners’ interests are primarily ensured shareholder – the Kingdom of Norway employees, our relationship to nature and through the company’s Annual General through the Ministry of Trade and Industry. our surrounding environment, our efforts to Meeting and by those members of the Telenor is of the opinion that the Ministry ensure safe products, as well as a number company’s other bodies who are elected by of Trade and Industry does not exert any of other factors. More information can be the shareholders. The AGM is the com- undue influence over the company. The found on www.telenor.com/csr pany’s highest authority. Telenor encour- expressed aim of the Ministry of Trade ages as many shareholders as possible to and Industry’s ownership of Telenor is to In 2006, Telenor will continue the work un- exercise their rights by attending the AGM, secure optimal value and to secure national dertaken to ensure that policies, guidelines, and aims to ensure that the AGM remains anchoring of the activities, cf. P. 119 of White training and control mechanisms are up an effective meeting place for shareholders Paper no. 22 (2001–2002). In its capacity to date and adequate, and that they meet and the Board. The shareholders receive as owner, the Ministry of Trade and Industry both Telenor’s own requirements as well as agenda papers, including the Nomination is subject to more clearly defined princi- the justified expectations of other interest- Committee’s recommendations, at least two ples relating to ownership, cf. Pp. 9 and 52 ed parties. During 2006, Telenor’s internal weeks prior to the AGM. Agenda papers are of White Paper no. 22 (2001–2002). The rules will be adapted to new US require- prepared in such a way as to enable share- Ministry of Trade and Industry’s owner- ments placing greater focus on internal holders to make decisions about all items ship management shall be based on 10 controls relating to financial reporting. for discussion. The deadline for registration principles relating to good ownership. Cf. is set as close to the meeting as possible, Pp. 9 and 52–59 of White Paper no. 22 One such requirement relating to internal and accords with the company’s Articles of (2001–2002), including equal treatment of control of financial reporting involves good, Association, i.e. three days before the AGM. shareholders, transparency with respect to efficient Corporate Level Controls. Telenor Shareholders who are unable to attend may Ministry of Trade and Industry’s ownership, has developed a set of principal docu- vote by proxy. The Board and the company’s owner decisions and resolutions shall be ments, e.g. the Codes of Conduct, as well auditor are present at the AGM, and so are made at the AGM and the composition of as policies and subordinate complimentary the representatives who sit on the Nomina- the Board shall ensure expertise, capacity procedures. During 2006, the adapted tion Committee when an election appears and diversity reflecting the distinctive na- internal rules will be implemented at inter- on the agenda of the AGM. The company ture of the individual companies concerned. national subsidiaries in which Telenor has has adopted procedures to ensure inde- operational control. pendent chairmanship of the AGM by stipu- Activities, strategic focus areas lating in the Articles of Association that the and management model Internal and external rules and procedures Chairman of the Corporate Assembly shall Telenor’s activities are clearly set out in provide Telenor with a sound platform for chair the company’s AGM. the company’s Articles of Association, and good corporate governance and for further its stated objectives and main strategies development of a positive, responsible and By pursuing its main objective of creating value lie within the framework provided by the healthy corporate culture. Telenor works for owners, the Board of Telenor attends to the Articles. The object clause of the Articles of systematically to install responsibility at all interests of the shareholders. The Board also Association and the company’s objectives levels of the Group’s activities – a require- ensures the interests of others, e.g. employees, and main strategies are presented in the ment to successfully achieve the Group’s customers, creditors and society in general. Annual report (page 153). goals of long-term value creation. Such Accordingly, such interests form an integral responsibility is also important in relation part of good corporate governance at Telenor. to Telenor’s customers, owners, employees,

Page 18 Annual Review 2005 The Group’s strategy identifies three should be rewarded for their contributions ner. This applies to a number of financial main focus areas, i.e. strategic direction, in respect of achieving financial results as parameters such as operating profits, operational excellence and value-driven set out in the company’s business plan, and capital yield and cash flow. It also applies management, as being important in respect also for their contribution to the develop- to a number of non-financial parameters of the realisation of Telenor’s goals. ment of the organisation in accordance such as Telenor’s position in the market, its with Telenor’s management requirements. capacity for innovation, internal procedures Strategic direction comprises a number and role as an employer. These matters are of factors, the main one being further Telenor’s management requirements followed up in Business Reviews, at Board development of Telenor as an international constitute a framework relating to how the meetings and under the company’s incen- mobile company with long-term industrial company’s style of management should tive system. ownership within limited geographical be developed and how individual manag- areas. It also comprises Telenor’s “control ers should develop within Telenor. These Company capital and dividends or exit” strategy, whereby the company will management requirements thus define the Telenor’s goal of creating value for its own- seek to dispose of activities of which it is framework for management at Telenor, and ers means a continuous focus on ensuring impossible or undesirable to gain opera- also take into account the different markets that the company’s equity is adapted to tional control. It also involves a commit- and cultures in which the Group conducts the company’s objectives, strategy and risk ment to seek new opportunities for mobile business. In 2005, these management profile. The Board believes that Telenor is expansion in defined markets, and ensure requirements were incorporated into and best served by drawing up a long-term and and maintain a strong position in the Nordic reviewed by all the management groups predictable dividend policy. This corresponds region. Strategic direction also involves at the international companies of which with the objective of providing its sharehold- continued development of Broadcast as Telenor has operational control. In addi- ers with a return on their investments at the leading TV distributor in Norway, as well tion to general management requirements, least equal to alternative investments with as the realisation of values in non-critical Telenor has initiated an integrated process similar risk profiles. Such return should come ownership positions. designed to evaluate, develop and reward in the form of cash dividends and increased managers in accordance with Telenor’s own share value. Telenor’s repurchases of Operational excellence involves stronger leadership demands and business results; treasury shares must be seen in this context. and clearer customer orientation, as well Telenor Development Process (TDP). This Telenor shares should be seen as liquid and as simplification, standardisation and process provides details of overall manage- interesting investment opportunities. Recent perfection of products and processes. ment capacity, management teams, key improvements in equity and cash flow ena- Furthermore, it also involves a focus on positions – and the extent to which Telenor ble Telenor to transfer value to shareholders optimising operations in the domestic recruits relevant expertise. Under this proc- in the form of increased dividends, as well as market, the Nordic region and internation- ess, candidates for key positions are identi- through the repurchase of shares. Based on ally. In 2005, a considerable amount of fied, along with the training required to fill Telenor’s financial position and anticipated work was undertaken to improve efficiency. such positions. Talents are also identified, capital requirements, the Board accounted This overall effort was focused on develop- as are candidates for future management for an amendment to dividends policy at ing Telenor towards a more simplified and positions. TDP also provides details relating the AGM in 2005. The aim is for sharehold- more customer-oriented company. The to career objectives for managers, and also ers to be paid annual dividends amounting importance of this work was emphasised reflects the diversity relating to e.g. gender to 40–60% of normalised annual profits, through the assignment of a responsibil- and nationality. and the company is aiming for a relatively ity for developing and ensuring the results even growth in annual ordinary dividends of these efforts to one of the members of Telenor has established a management per share. In 2005 the AGM authorised the the Group Executive Management. Value- model under which targets are set and Board to repurchase shares for a period of driven management means that managers results followed up in a systematic man- one year, i.e. until the AGM in May 2006.

Page 19 Annual Review 2005 Transferral rights, equal treat- Nomination committee tions on the choice of shareholder-elected ment of shareholders and transac- It is not a legal requirement for the com- members and alternates to the Corporate tions with close relatives/friends pany to have a nomination committee, Assembly, and also provides substanti- Telenor’s shares are freely transferable and but a nomination committee is set up in ated recommendations to the Corporate have no trading restrictions in the form of accordance with resolutions determined by Assembly on the choice of shareholder- Board consent, ownership limitations, etc. the AGM. Further stipulations regarding the elected Board members. The Nomination All Telenor shareholders have the same Nomination Committee are included in the Committee forwards these proposals to the status through one class of shares. Telenor Articles of Association. Chairman of the Board. strictly adheres to the principle relating to equal treatment of shareholders. This The Nomination Committee consists of four The Board’s annual self-evaluation report is also reflected in the fact that Telenor’s members who are shareholders or who is dealt with separately by the Nomination purchases of treasury shares take place on represent the shareholders. The Chairman Committee. the Stock Exchange. If the Board wishes to of the Corporate Assembly is a member propose to the AGM that the pre-emptive and chairs the Nomination Committee. On the company’s website, Telenor provides rights of existing shareholders be waived Two members are elected by the AGM and information about who the members of when undertaking capital expansions, one member is elected by and from the the Committee are, as well as information then such proposals will be based on the Corporate Assembly’s shareholder-elected regarding deadlines for the submission of common interests of the company and its members and alternates. Members are proposals to the Committee. shareholders. The reasons for such will be elected for a two-year period. outlined in detail in a working document The corporate assembly and board submitted to the AGM. Telenor prepares When appointing members to the Nomi- of directors, composition, inde- value assessments submitted by independ- nation Committee, consideration is given pendence and remuneration ent third parties when significant transac- i.a. to the fact that broad shareholders’ Pursuant to Norwegian law, Telenor has a tions take place between the company interests should be represented and to Corporate Assembly and a Board of Direc- and shareholders, Board members or close the need for independence in respect of tors. relatives/friends. In accordance with the general management and those who are Group’s Codes of Conduct, individuals shall, elected. The CEO or members of the Group The Corporate Assembly, which is a dis- at their own initiative, inform their superiors Management shall not be members of the tinctly Norwegian body, is primarily a super- of any vested interests or conflicts of inter- Committee. visory body which supervises the Board’s est. Board members must not participate in management of company business. discussions or decisions relating to issues The Nomination Committee works in ac- The Corporate Assembly also has decision- which, due to their particular relevance to cordance with instructions that are laid making powers in limited, but important them or any of their close relatives/friends, down by the Corporate Assembly’s share- areas. Further stipulations concerning the mean that the member concerned must be holder-elected members, in line with composition of the Corporate Assembly and considered to have strong vested personal proposals from the Board’s shareholder- of the Board are laid down by the AGM and or financial interests in the matter, or if elected members. The Nomination Commit- included in the company’s Articles of Asso- for other reasons the qualifications of the tee proposes candidates to the Corporate ciation. The Corporate Assembly has a total member concerned are open to question. Assembly and to the Board. It also proposes of 15 members who are appointed for a The same also applies to the Chief Execu- the remuneration to members of these period of two years. The shareholders elect tive Officer. bodies. ten of these members, with alternates, and five are selected from and by the employ- The Nomination Committee is responsible ees. The Board of Directors has a total of for submitting to the AGM recommenda- ten members who are elected for a period

Page 20 Annual Review 2005 of two years. Seven of these members are tion Committee’s responsibilities, expertise, dentiality, competence, responsibility to es- elected by the shareholders and three are hours worked and complexity of the work tablish a management system that ensures elected from and by the employees. involved. that activities are run in accordance with Telenor’s CEO is not a member of the Board. the company’s core values, ethical guide- When electing shareholder-elected mem- lines and generally accepted principles of The Corporate Assembly and the Board bers, emphasis is placed on the relevant corporate governance, information on the shall be made up to ensure a broad candidate not having cross-relations with use of steering committees and evaluation representation of Telenor’s shareholders. other members or the CEO, close family of the Board’s activity and competence. When appointing Telenor’s Corporate As- ties to the CEO, or having or represent- sembly and Board, emphasis is also placed ing substantial business relations with In accordance with the said guidelines on meeting Telenor’s needs for expertise, the company. The shareholder-elected and procedures, the Board is responsible, capacity and balanced decisions. Six of the members shall, for all material respects, to the degree necessary, for determining fifteen members of the Corporate Assembly be independent of the company’s main strategies, business plans and budgets for and four of the ten Board members are shareholder. the company, as well as ensure that the women. company has adequate systems for good Should vested interests or associated inter- internal controls. The Board is also respon- The shareholder-elected members of the est situations arise, the company’s provi- sible for ensuring that the company has a Corporate Assembly and of the Board are sions for vested interests and conflict of competent management with clear internal independent of the company’s manage- interests shall be applied. apportionment of responsibility and work. ment. The expertise and capacity of the company’s Board members are high- The company does not provide loans to The Board has elected a Deputy Chairman lighted in the Annual Report and Accounts. Board members or Group Management, who can act when the Chairman of the Furthermore, the shareholder-elected although Board members and the com- Board is unable to or ought not lead the members a) do not receive extra remunera- pany’s management are encouraged to work of the Board. tion from the company beyond the fees for own shares in the company. Details of the Corporate Assembly members and Board number of shares are included in Note 30 in The Board undertakes annual assessments members or fees for participation in sub- the Financial Statements. of its own work and expertise. committees, b) have not been employed by the company in recent years and c) do not The work of the Board of Directors The Board can choose to prepare issues in receive fees that are linked to profit per- Pursuant to Norwegian law, the Board is sub-committees which have been set up in formance or share options in the company. responsible for the management of the order to process specific issues. Two such Remunerations additional to the regular company and the proper organisation of sub-committees have been set up. These directors’ fees, in the form of fees payable the operation, including a responsibility committees do not have any independent for sitting on one of the Board’s sub-com- to supervise the company’s management. decision-making powers, other than powers mittees, are specified in the Annual Report Annually the Board adopts a plan for its specially bestowed on them by the Board. under Note 30 in the Financial Statements. work with special emphasis on objectives, strategy and implementation. Telenor’s Remuneration Committee con- Remuneration for members of the Corpo- sists of three shareholder-elected Board rate Assembly is determined by the AGM. In addition to statutory requirements, the members. The Vice Chairman of the Board Remuneration for Board members who Board works in accordance with special is also a Committee member. The Commit- are elected by the Corporate Assembly is regulations for the Board, as well as in ac- tee’s third member shall be elected by the determined by the latter. Remuneration for cordance with guidelines and procedures Board’s shareholder-elected members for members of the Nomination Committee is for Telenor ASA. a period of two years. The Committee shall determined by the shareholder-elected meet as required, normally two to three members of the Corporate Assembly. All The guidelines and procedures that apply times annually. On behalf of the Board, the remunerations are based on the Corporate to the Board include regulations for the Committee evaluates the total remunera- Assembly’s, the Board’s and the Nomina- preparation of agendas, privacy and confi- tion to the CEO and the policy for remu-

Page 21 Annual Review 2005 neration to managers. The Remuneration The Chief Executive Officer Executive Management’s weekly meetings, Committee held four meetings in 2005. The Chief Executive Officer (CEO) is in including the preparation of items for the charge of the day-to-day management of Board, the Corporate Assembly and AGM. Telenor’s Audit Committee consists of two operations at Telenor ASA and in the Tel- This also includes strategy, ongoing follow- members from the Board, one of which has enor Group, and is responsible for ensuring up of activities and coordination between been approved by the Board to meet the that the company and Group are organised, the company’s senior managers etc. requirements of being a Financial Expert run and developed in accordance with the in accordance with US standards. The law, Articles of Association and decisions Control functions Chairman of the Board is also the Chairman adopted by the Board, the Corporate As- Risk management and internal control are of the Committee. The Audit Committee sembly and the AGM. given high priority at Telenor. In connec- normally meet six times per year, for the tion with the annual reporting to the SEC purpose of identifying, understanding and The Board has devised guidelines and pro- (20-F), Telenor’s CEO and CFO submit a evaluating operational and financial risks. cedures for the CEO, covering the manage- comprehensive personal declaration relat- This shall include a thorough evaluation of ment of the Telenor Group, the manage- ing to the quality of financial reporting, the company’s financial reporting, internal ment of ownership interests, the powers of major changes in the company’s internal control of financial reporting, auditing, the CEO, the CEO’s submission of issues to controls and any irregularities committed and established procedures for advance be determined by the Board and the CEO’s by individuals with a central function in the approval of the auditor’s remuneration, and obligation to report to the Board. company’s financial reporting (SOX Section also the handling of complaints from the 302). employees in respect of accounts, control Guidelines on the exercise of authority in and audits. The Audit Committee held eight the Telenor Group have been drawn up Beginning in 2007, the CEO and CFO shall meetings in 2005. pursuant to the guidelines and procedures provide an assessment of the effectiveness for the CEO. of Telenor’s internal controls of its financial As regards offers for the company, the reporting (SOX Section 404). In order to Board of Telenor will not, without just cause, As a part of the day-to-day management implement the strict US requirements by seek to prevent or impede any offers made and running of the company, the CEO will the deadline of 31 December 2006, Telenor for the company’s operations or shares. be an owner representative in subsidiaries, has implemented a comprehensive high If an offer is submitted for the company’s provided that the issues in question do not priority project. shares, the Board will not exercise its issue require that they are handled by the Board, rights or adopt other measures designed to Corporate Assembly or the AGM. The Disclosure Committee supports the prevent the implementation of such offers company’s efforts to meet the requirements without such being approved by the AGM At the election to the boards of Telenor’s for financial reporting. The Committee after the offer in question becomes known. subsidiaries, such election of the board, issues guidelines for reporting, provides Transactions which in reality involve the and its functions, shall be made in ac- follow-up and helps to ensure that require- sale of the activities will be decided by the cordance with Telenor’s principles of good ments are met. The Committee is chaired by AGM, except in such cases where decisions corporate governance. the CFO, and consists of members who have should, in accordance with the law, be relevant expertise. The Disclosure Com- made by the Corporate Assembly. Group Executive Management mittee normally meets five times per year The Group Executive Management con- in connection with reviews of the quarterly The Board shall ensure that the company has sists of heads of key business areas and accounts and the Annual Report, as well as good internal controls in respect of those pro- functions at Telenor. Issues of important when required. visions which apply to the company, including strategic, financial or fundamental matters the Group’s values and Codes of Conduct. to the company are dealt with in the Group

Page 22 Annual Review 2005 The Compliance Officer gives quality assur- the Telenor Board, which determines rules tion schemes for employees are determined ance that the company acts in accordance relating to interest and currency risks, the by the Board, while the Compensation Com- with applicable law, regulations and legally Group’s capital structure, debt structure, mittee considers the CEO’s proposals for binding directions issued by public authori- profit liquidity and counter risks, as well allocations of options to the Group Execu- ties, and that internal conduct in the organ- as the capital structure and financing of tive Management as well as frameworks for isation does not conflict with Telenor’s own subsidiaries and financial investments. allocations to other employees. All aspects regulations and guidelines. Any breaches relating to remunerations for the CEO and of the Group’s Codes of Conduct should Executive remunerations total remunerations for other managerial be reported to the Compliance Officer or Telenor wishes to reward its executives and employees are shown in the Annual Report manager. The Compliance Officer reports to employees on the basis of performance under Note 30 in the Financial Statements. the CEO. which contributes towards the long-term value creation in the Group. Through work- Employees The Group Auditor helps to ensure good ing with the Compensation Committee, In accordance with Norwegian law, employ- risk management and provides follow-up the Board helps to ensure independence ees’ interests are protected by the provi- of general steering and control functions when formulating total compensation for sions in the Act relating to Public Limited through random testing, including ensuring the company’s chief executives, including Companies (Norway), which concern the compliance with internal steering direc- basic salaries, bonuses and commission, right to membership of the Board and the tions. The Group Internal Auditor reports share-based incentives, pensions and Corporate Assembly, etc. (representatives to the CEO and in some cases to the Audit other benefits. The Compensation Com- elected by the employees), and by the Committee and the Board. mittee considers the CEO’s total salary provisions in the Working Environment Act and presents its recommendations to the which concern company transfers, wages The Investment Committee shall provide Board, which in turn determines the CEO’s and working conditions, dismissal protec- quality assurance of the company’s invest- salary and other benefits at a meeting. The tion, information and talks with employees ments, including acquisitions and sales of total salary situation relating to execu- at an early stage, etc. These interests are activities. Investments of a certain size are tives who report directly to the CEO, as also protected by collective agreements. dealt with by the Investment Committee. well as amendment proposals before they The evaluation of such investments shall are implemented, are discussed by the Telenor regards skilled employees who subsequently be returned to the Invest- Compensation Committee. The Compensa- enjoy their work to be an important com- ment Committee for a final analysis. The tion Committee is also kept informed about petitive advantage. Telenor is engaged in Committee, which functions in an advisory the salary levels of the managers of the activities in markets which are subject to capacity to the CEO and the Group Man- company’s business areas and their man- change, and the company also has to relate agement, is chaired by the CFO and consists agement groups, as well as staff managers to technological developments in which of members who have relevant expertise. who report to other members of the Group it is also an active participant. In order for The company has devised a policy for Management. Recommendations relat- Telenor to maintain its competitiveness the investment criteria to be used in the ing to policy and schemes which affect the and provide for value creation under such processing of such matters. company’s executive remuneration policy, conditions, the company is subjected to including bonus programmes and share- considerable demands in its capacity as In order to ensure overall management and based schemes, etc., are submitted to the an organisation which is good at making control of the company’s financial affairs, Compensation Committee. changes. Telenor works actively to ensure the company has set up a central finance that all restructuring is implemented in a function, Telenor Finance. Telenor Finance The principal framework for option schemes predictable and fair manner. An important works in accordance with the guidelines is determined by the AGM. Frameworks re- aspect of these processes is to involve the of Telenor’s Finance Policy, adopted by lating to option schemes and share alloca- company’s employees in the planning and

Page 23 Annual Review 2005 implementation process. Good coopera- ing principles for its financial reporting. Telenor remains the preferred choice. The tion between managers and employees is As a consequence of being listed on Nas- company takes its reputation and market important to meet market demands and daq, Telenor is subject to further account- surveys seriously, and is engaged in con- expectations. ing and financial reporting requirements tinuous work on improvement measures. in accordance with US regulations. The Telenor places emphasis on developing compilation of quarterly reports, annual re- Telenor is committed to impartial and fair the expertise of its employees. Each year ports and 20-F shall be in accordance with treatment of suppliers. Suppliers competing employees respond to an Internal Value- Norwegian standards (up to and including for contracts with Telenor should always be Creation (IVC) which comprises targets 2004) and international standards (effec- confident of the integrity of Telenor’s selec- and management, human capital, process tive from 2005) and in accordance with US tion process. All choices of suppliers are capital, innovation and simplification. The principles and regulations for accounting. made in line with the Group’s established IVC process is one of several tools used for Business Reviews and Financial Reviews are guidelines and procedures for procure- achieving Telenor’s ambitions relating to conducted quarterly. ment. Telenor has adopted a principle individual employees and the organisation. whereby all procurement should be subject By comparing the results of the annual IVC Business Review is the Group’s internal to competition, regardless of whether or not survey with TDP, a basis is achieved for the quarterly results follow-up, additional to such competition relates to the signing of implementation of improvement measures the follow-up of the boards of the business framework agreements or project purchas- with respect to employees in general and units. The purpose is the strategic control es. As far as possible, and provided that managers in particular. and follow-up of results based on the technical requirements are met, the lowest prevailing strategic objectives and value life cycle costs (LCC) shall serve as the main Telenor aims to be a leader with respect drivers. criterion for the final choice of supplier. to work solutions and job satisfaction. Employees should enjoy their work. The Financial Reviews are conducted with each Information and communications Fornebu solution represents an opportunity of the Group’s business areas. The purpose The Board provides guidelines for the for employees to participate in value crea- is to analyse the economic and financial company’s reporting of financial and tion through new work forms in a dynamic situations in such a way as to form the basis other information based on openness environment. The manner in which the for external reporting and presentations, and transparency, and in accordance with Fornebu solution works for employees has and to provide quality assurance of the requirements relating to equal treatment been closely followed up in a number of financial reporting. of players in the share market. Each year, surveys. Emphasis has been placed on the Telenor announces the dates of important question of whether sufficient efforts have Customers and suppliers events such as the AGM, the publication of been made to ensure high levels of job- Telenor furthers its ongoing efforts to interim reports, open presentations and the satisfaction and high levels of productivity strengthen the group’s customer orienta- payment of any dividends etc. Information and efficiency. Employees are encouraged tion. In order to achieve this goal, Telenor to the company’s shareholders is made to suggest improvements to the working will base its strategy on the vision, “Here available on Telenor’s website at the same environment also with respect to productiv- to help”, and the core values, “Make it time as it is sent to the shareholders. Tel- ity and efficiency. easy, Keep promises, Be inspiring and Be enor’s Investor Relations function ensures respectful”. Workshops have been held for that contact with the company’s sharehold- Accounting and reporting all employees in Norway, focusing on initia- ers is maintained outside the AGM. See In accordance with Norwegian law, strict tives that can help employees live the vision www.telenor.com/ir accounting and financial reporting require- and values. Telenor believes it is essential ments must be met. The Group conducts its that customers be offered solutions that Auditor reporting in accordance with international fulfil their communications requirements In accordance with Norwegian and US reg- Financial Reporting Standards (IFRS), effec- in a simpler and better manner. A good ulations, Telenor is subject to strict require- tive from the first quarter of 2005, with cor- understanding of people’s communications ments for auditing, including restrictions on responding figures from 2004. The Group is needs, combined with the ability to deliver the type of work the auditor can undertake. thereby adapting to international account- as promised, is required to ensure that Prior approval from the Audit Committee

Page 24 Annual Review 2005 of services carried out by the auditor is a control routines etc. requirement. The Audit Committee is kept The auditor and the company’s internal informed, on a quarterly basis, of all work audit function review the company’s inter- undertaken by the auditor. Partner rotation nal controls on an annual basis, with the is a further requirement, and the auditor purpose of identifying weaknesses, and will cannot be employed by the company for a propose measures to amend such weak- period of one year after having carried out nesses. auditing work for the company. In accordance with US requirements, the The auditor provides the Board with an auditor and Audit Committee hold meetings annual written confirmation that he meets which are not attended by management. At a number of requirements, including inde- the AGM, the Board gives an account of the pendence and objectivity. auditor’s remuneration divided into statutory auditing work and remuneration linked The company’s auditor presented the main to other defined work. features in a plan for the execution of the auditing work to the Audit Committee in 2004. The auditor attends meetings of the Audit Committee and Board meetings that deal with the Financial Statements. In addition, the auditor attends Board meetings at least once a year to review the report on the auditor’s view of the company’s accounting principles, risk areas, internal

Page 25 Annual Review 2005 Commitment to society

Telenor is firmly committed to mercial television spots at the disposal of In the wake of the earthquake and the that organisation. Telenor customers who tsunami we witnessed a great amount of making a positive contribution found themselves in Thailand at the time involvement and a strong sense of cross- to society, primarily through were offered free calls, and emergency border solidarity throughout the group. partnerships and network- phones were set up both in Thailand and at Telenor also contributed financially, donat- Gardermoen Airport in Norway. Good coming NOK 7 million to the Red Cross and to ing and through a responsible munications is key to achieving efficient the President’s relief fund in Pakistan. Other management of our social relief work, and through our affiliate DTAC, Telenor companies also contributed by we quickly established emergency phones facilitating contact between next-of-kin lo- obligations. to assist the relief efforts. cated outside Pakistan, and by offering free phone calls and establishing emergency Telenor relies on building trusting relation- The earthquake that struck Pakistan on phone numbers. ships with customers, owners, employees 8 October 2005, and its powerful after- and society at large. Telenor’s ambition is shocks, killed more than 80,000 people Anniversary gift to Norwegian to be a leading company within the field and placed more than three million people schools of Corporate Social Responsibility (CSR), in a very difficult situation as houses and As a part of Telenor’s 150th anniversary, we and in integrating a socially responsible roads had collapsed, and food and water wanted to make a contribution to Norway’s approach into the group’s operations and became scarce throughout large areas. schools in an area where we posses much business development. Telenor Pakistan witnessed the disaster at experience and know-how: information and close hand, and quickly mobilised all avail- communications technology (ICT). Telenor’s The tsunami in South-East Asia at the able resources to bring relief to the stricken anniversary gift consists of four different beginning of 2005, and the earthquake in areas. Initiatives were also taken on behalf elements: Pakistan in the autumn of the year, hugely of the Telenor Group and Telenor opera- impacted several of the countries in which tions in other countries. • 7000 new, laptop computers from IBM we have operations, with extensive human with Microsoft XP Professional in school suffering and an urgent need for quick At Telenor Pakistan, clothes, blankets, sets of 15 PCs were donated to compre- relief. Telenor was strongly involved in the medicine and food were collected and hensive schools all over the country relief efforts on both occasions, and con- distributed to the stricken areas in the tributed both economically and through the company’s own vehicles. Mobile cover- • The training programme HITcomet, direct involvement of our employees. age was extended, and equipment was designed to raise the skills of young ICT made available to the authorities and to users, was offered to all comprehensive When the tsunami struck, and extent of the relief workers. Next-of-kin and earthquake schools via the Internet or CD-ROM. damages became known, Telenor was quick victims were offered free phone calls at HITcomet challenges students to start a to react. We launched a number of initia- emergency centres and hospitals around virtual band and participate in Telenor’s tives to support the relief efforts and to as- the country. Telenor employees in Norway “HITcomet of the Year” competition, sist those affected by the disaster. Thailand collected warm blankets, clothes, sleeping and was available for all 14 -17 year olds was hit hard, and became a natural focus bags and tents that were soon flown into during the autumn term of 2005 point for Telenor, due to our commitments Pakistan, while employees at other Telenor in Thai mobile operator DTAC, but also due companies donated a percentage of their • GlobalCountdown is a game where the to the fact that large numbers of Nordic salaries to the relief work. participants have to consider global holidaymakers were visiting Thailand dur- environment issues and dilemmas ing their Christmas holiday. In addition to involving modern technology. Students provide direct financial support to the Red in the age group 15-19 were invited to Cross, we immediately placed all our com-

Page 26 Annual Review 2005 spend an eventful day at one of the Telenor’s Codes of Conduct cover a wide In 2005, Telenor prepared its first GRI Telenor centres in Norway range of aspects that are important to report (Global Reporting Initiative). The GRI ensure good business ethics in all parts of reporting was carried out in accordance • In the autumn of 2005, Telenor toured the group’s activities. Relevant areas are: with common standards, which make it the length of Norway with the advanced confidentiality, discrimination, corruption easier for our partners to get an overview of negotiation game GlobalCountdown, and conflicts of interest. Telenor’s Codes of the group’s economic, environmental and starting in Kirkenes in the far north. Conduct are available on our website: www. social controls and performance. A 19-metre long semi-trailer was the telenor.com/csr main attraction, and students in remote A key part of Telenor’s environmental areas were given the opportunity to The training programme is an attempt efforts relates to more efficient energy play GlobalCountdown inside the trailer to exemplify business ethics in practice, consumption. Energy conservation contrib- thereby helping individuals to understand utes to improved profitability, and during Telenor in Nobel Peace Centre the Codes of Conduct. The dilemmas are 2005, Telenor has identified a number of partnership of varying degrees of difficulty and focus initiatives that contribute to reduce energy In 2005, Telenor entered into a partnership on difficult grey areas that employees are consumption. This has prepared the ground agreement with the Nobel Peace Centre in likely to encounter in their daily work. A for an energy savings programme with Oslo. The central aspects of this partner- recurring element in the feedback provided expected annual energy savings of 15 GWh, ship are peace and communication, as well throughout the programme is that employ- which amounts to NOK 9 million per year. as a focus on finding global solutions. The ees should always seek help and advice in Energy conservation initiatives have also partnership underpins Telenor’s commit- difficult situations, and always report any been introduced at Kyivstar’s headquarters ment to promote a positive social develop- irregularities. in Ukraine. ment. During a four-year period, Telenor will contribute a total of NOK 14 million to In 2006, Telenor will continue to focus on As part of the follow-up of Telenor’s goal of the Nobel Peace Centre. ethics, e.g. by adding new modules to our consuming a larger share of renewable en- leadership development programmes. ergy, Telenor has entered into a partnership Telenor’s contribution will partly consist with Norsk Hydro to promote the develop- of supplies of services and partly of direct Environmental efforts ment of new ways of supplying base sta- funding. The Nobel Peace Centre opened in The key goals of Telenor’s environmental tions with energy. The new solutions will be June 2005. efforts are to minimise the impact on the based on hydrogen, wind and solar energy. environment, meet local environmental Together, Telenor and Norsk Hydro will run Internal training programme for requirements and pursue the group’s ongo- tests to find out whether this solution could business ethics ing efforts to improve its environmental be interesting with respect to new base sta- In 2005, Telenor continued the implemen- standards. tions in areas without power, or where the tation of its training programme in ethics, power is of poor quality. which is mandatory for all managers and A revised environmental policy was adopted employees. The training programme is in 2005, applicable for all companies in Telenor’s total energy consumption designed as interactive e-learning modules which Telenor has operational control. This amounted to 882 GWh in 2005. This is an whereby individual employees are con- policy will be central to Telenor’s efforts to increase from 2004, and is mainly due to fronted with a number of ethical dilem- improve the group’s international environ- growth in the international operations, as mas. The dilemmas are presented as video mental control systems, and comprises the well as more accurate and comprehensive inquiries received from fictitious employees group’s governing principles with relation reporting from new companies. Per man- around the world who are faced with ethi- to radiation, masts and installations, emis- year, the energy consumption is just below cal challenges in their work situation that sions to water and air, energy consumption, 40,000 kWh, i.e. a 10 per cent reduction they need help resolving. The five-episode waste management and environmentally- from the previous year. Seen in relation to programme requires participants to provide friendly purchasing. Telenor’s overall value creation, the energy advice to the best of their ability, assisted consumption is relatively stable. Electricity by the Codes of Conduct. is the dominant energy source, accounting

Page 27 Annual Review 2005 for 78 per cent of the total consumption. Also included in the total energy consumption are transport and work-related travel, which accounted for approximately 150 “Dow Jones Sustainability Indexes” family GWh. This amounted to approximately 17 follows a best-in-class approach compris- per cent of the total energy consumption, ing the sustainability leaders in the invest- and 89 per cent of Telenor’s total emissions able universe from each industry. Since of CO2. Energy consumption relating to launch, 51 licenses have been sold to asset the operation of Telenor’s various networks managers in 14 countries. accounted for 53 per cent of the total consumption. The accounts show that during 2005, Telenor’s activities caused emissions of 41,000 tons of CO2.

For more information about Telenor’s “FTSE4Good Index Series” has been environmental accounting, please visit: designed to measure the performance of www.telenor.com/csr/environment/ companies that meet globally recognised key_figures corporate responsibility standards, and to facilitate investment in those companies. Ethical indexes In recent years, Telenor has registered a growing interest from analysts and investors who evaluate the group not only on the basis of profitability, but also include social, Storebrand kapitalforvaltning’s “Best in ethical and environmental criteria. Class” distinction is awarded to companies that meet the highest environmental and Based on such evaluations, Telenor has social standards from each industry. achieved a strong position on the world’s two most prestigious indexes of this kind, Dow Jones Sustainability Indexes (In 2005, For more information about Telenor’s com- Telenor was ranked as number two among mitments in relation to ethics, the environ- the world’s mobile operations) and FTSE- ment and social responsibility please visit: 4Good. www.telenor.com/csr

Page 28 Annual Review 2005 Financial overview

2005 was Telenor’s best year The operating profit for 2005 was NOK 11.7 operating revenues, while GrameenPhone billion, against NOK 7.4 billion in 2004. The in Bangladesh recorded a growth of 36%. ever. Operating revenues operating profit for 2004 was negatively Operations in mature markets showed a amounted to NOK 68.9 billion, affected by write-downs. Net financial modest level of growth. In Norway, Telenor’s representing a growth of NOK items were NOK 1.9 billion lower in 2005 mobile operation registered a 4% increase than in the previous year, mainly because in revenues, while the corresponding figure 8.3 billion, or around 14%, the 2004 figures included a realised gain of for Pannon in Hungary was 3%. compared with 2004. NOK 2.6 billion on the sale of shareholding in Cosmote. All of Telenor’s mobile operations, with the exception of Telenor Pakistan, which is cur- With significant growth in the number of net Cash flow from operational activities rently in a start-up phase, enhanced their additions, Telenor reinforced its position as increased by NOK 3.3 billion in 2004, to operating profits from 2004 to 2005. an international mobile communications NOK 22.3 billion in 2005, largely due to an provider. Telenor also strengthened its increase in revenues. The consolidation of Fixed position in the Nordic market, within mobile DTAC in Thailand and the acquisitions of Total revenues from Fixed were in line with and fixed-line services, as well as within Bredbandsbolaget and Cybercity also con- 2004. The reduction in revenues in Norway TV distribution. The increase in subscrip- tributed positively. During 2005, Telenor was due to a decline in telephony revenues, tions during 2005, combined with strong invested a total of NOK 25.3 billion. Of this although this was offset by the acquisi- cash flow from the home market, provide a amount, NOK 16.4 billion were capital ex- tions of Bredbandsbolaget in Sweden and sound basis for future profit performance penditure, which is an increase of NOK 3.7 Cybercity in Denmark, both of which were and value creation. billion compared to 2004. This was mainly made in July 2005. related to the international mobile opera- Results tions where network capacity has been The operating profit was NOK 0.7 billion In 2005, Telenor’s net income was NOK increased due to high customer growth. lower than in 2004. This was mainly due to 7,646 million, corresponding to NOK 4.47 writedowns relating to Fixed Sweden. per share. The corresponding figures for At year-end 2005, Telenor’s total assets 2004 were NOK 6,093 million and NOK amounted to NOK 124.4 billion and the Broadcast 3.49 per share, respectively. company’s equity ratio (including minority Total revenues increased by NOK 303 mil- interests) was 43.0%. The correspond- lion in 2005, reaching NOK 5,649 million. In 2005, Telenor’s profit before taxes and ing figures for 2004 were NOK 91.4 billion The operating profit was NOK 1,015 million, minority interests amounted to NOK 12,591 and 48.2%. Net interest-bearing liabilities against NOK 750 million in 2004. This in- million, compared to NOK 9,874 million in amounted to NOK 30.9 billion, reflecting an crease is due to growth in subscriptions and 2004. In both 2005 and 2004, the profit increase of NOK 11.7 billion during the year, lower leasing costs for satellite capacity. before taxes and minority interests was ad- due to high capital expenditure and new versely affected by a number of special items acquisitions. In the view of the Board the Other units (gains and losses on disposals, costs relating company’s financial position is satisfactory. Total revenues increased by NOK 427 mil- to workforce reductions, loss contracts and lion in 2005, reaching NOK 9,967 million. write-downs), and amounted to NOK 0.5 Telenor’s operations This was mainly due to higher revenues billion and NOK 0.7 billion, respectively. Mobile derived from EDB Business Partner. This Adjusted for these special items, the profit Total revenues from Telenor’s mobile was partly offset by reduced revenues from increased by NOK 2.5 billion, reaching NOK operations in emerging markets showed Venture, following the divestment of activi- 13.1 billion in 2005. The increase was largely significant growth in 2005, mainly due ties in 2004. due to growth in revenues during 2005, to an increase in new additions. Kyivstar resulting from significant customer growth at in Ukraine experienced a 72% increase in the international mobile operations. Page 29 Annual Review 2005 Consolidated Income Statement Telenor Group 1 January–31 December 2005

NOK in millions, except per share amounts Note 2005 2004

Revenues 2 68 927 60 591

Operating expenses Costs of materials and traffic charges 4 17 711 15 924 Own work capitalized 5 (704) (557) Salaries and personnel costs 6,7 10 236 9 970 Other operating expenses 8 17 606 13 871 Other (income) and expenses 9 242 (152) Depreciation and amortization 15 11 544 10 637 Write-downs 15, 17 587 3 531

Operating profit 11 705 7 367

Associated companies 18 1 233 986

Financial income and expenses Financial income 447 496 Financial expenses (1 639) (1 561) Net currency gains (losses) 84 (87) Change in fair value of financial instruments 243 Net gains (losses and write-downs) of financial items 518 2 673 Net financial items 13 (347) 1 521

Profit before taxes 12 591 9 874

Taxes 14 (3 453) (2 461) Profit from continuing operations 9 138 7 413

Profit (loss) from discontinued operations 1 (4) - Profit from total operations 9 134 7 413

Attributable to: Non-controlling interests (Minority interests) 1 488 1 320 Equity holders of Telenor ASA (Net income) 7 646 6 093

Earnings per share in NOK From continuing operations Basic 25 4.47 3.49 Diluted 25 4.47 3.48 From total operations Basic 25 4.47 3.49 Diluted 25 4.47 3.48

Page 10 Annual Report 2005 Page 30 Annual Review 2005 Consolidated Balance Sheet Telenor Group at 31 December 2005

NOK in millions Note 2005 2004

Assets Deferred tax assets 14 3 052 3 357 Goodwill 16 20 700 13 354 Other intangible assets 16 21 245 11 076 Property, plant and equipment 16 43 958 37 543 Associated companies 18 7 424 6 602 Financial non-current assets 20 2 267 1 249 Total non current assets 98 646 73 181

Current tax assets 110 207 Inventories 695 596 Trade and other receivables 19 13 852 11 487 Other financial current assets 20 3 619 844 Assets held for sale 1 667 - Cash and cash equivalents 29 6 806 5 081 Total current assets 25 749 18 215

Total assets 124 395 91 396

Equity and liabilities Equity attributable to equity holders of Telenor ASA 46 399 40 122 Non-controlling interests (Minority interests) 7 134 3 946 Total equity 53 533 44 068

Liabilities Non-current interest-bearing financial liabilities 22 27 139 20 602 Non-current non-interest-bearing financial liabilities 580 573 Deferred tax liabilities 14 2 669 2 292 Provisions etc. 21 3 368 3 188 Total non-current liabilities 33 756 26 655

Current interest-bearing financial liabilities 22 11 908 3 991 Trade and other payables 24 20 827 15 175 Current tax liabilities 853 321 Current non-interest bearing financial liabilities 24 2 314 431 Liabilities held for sale 1 287 - Provisions etc. 21 917 755 Total current liabilities 37 106 20 673

Total equity and liabilities 124 395 91 396

Bærum, 29 March 2006

Thorleif Enger Bjørg Ven Chairman of the Board of Directors Vice-chairman of the Board of Directors

Hanne de Mora Jørgen Lindegaard Liselott Kilaas John Giverholt Board member Board member Board member Board member

Harald Stavn Per Gunnar Salomonsen Irma Tystad Paul Bergqvist Jon Fredrik Baksaas Board member Board member Board member Board member President & CEO

PagePage11 31 Annual AnnualReport Review2005 2005 Outlook 2006

The strong subscriber growth It is expected high levels of capital expenditure in the coming period, and the in Telenor’s mobile operations ratio of capital expenditure to operating in 2005 provides the group revenues is expected to be above 20%. with a sound basis for further Capital expenditure is likely to be driven by rapid subscription growth in Telenor’s revenue growth. Reported rev- international mobile operations. enues is expected to increase A steadily increasing proportion of Tel- by 25 – 30%, based on the enor’s operating revenues and profits are current structure. generated by operations outside Norway. Fluctuations in exchange rates will affect It is also expected high EBITDA growth, the figures reported in NOK to an increas- mainly driven by the international mo- ing extent. Political risks, including regula- bile operations. Telenor will continue the tory matters, can also affect profits, and process of identifying initiatives that can seasonal variations can also be reflected in contribute to reduce costs. The EBITDA the interim results. margin for 2006, before other income and expenses, is expected to be around 33%.

Page 32 Annual Review 2005 Information to shareholders

Telenor seeks to have a close 20 largest shareholders and trusting relationship with Number Ownership its shareholders. Through sub- of shares share stantial information via several Name of shareholder Nominees 31.12.05 Citizenship 31.12.05 The Ministry of Trade and Industry 920,954,183 NOR 53.97% channels the stock market State Street Bank & Trust Co. x 70,678,407 USA 4.14% shall be kept informed of sig- Folketrygdfondet 58,457,361 NOR 3.43% Jpmorgan Chase Bank x 36,835,870 GBR 2.16% nificant developments in the Mellon Bank AS Agent x 23,704,040 USA 1.39% Group. JPMorgan Chase Bank x 21,078,068 GBR 1.24% State Street Bank & Trust Co. x 16,248 367 USA 0.95% Shareholder policy Fidelity Funds Europe 16,070,000 LUX 0.94% Telenor’s long-term primary objective is The Northern Trust Co. x 15,706,208 GBR 0.92% to give its shareholders a return on their Vital Forsikring ASA 13,624,580 NOR 0.80% investment that is at least equal to alterna- Telenor ASA 12,846,514 NOR 0.75% tive investments with a corresponding risk Jpmorgan Chase Bank 12,500,000 GBR 0.73% profile. The return shall be made in the form Ubs (Luxembourg) S.A 12,412,730 LUX 0.73% of a cash dividend in addition to the added Sis Segaintersettle AG x 11,783,777 CHE 0.69% value of the shares. The Telenor share shall Sli treaty 8,765,185 GBR 0.51% appear as a liquid and attractive investment Storebrand Livsforsikring AS 7,946,661 NOR 0.47% opportunity. JPMorgan Chase Bank 7,826,800 GBR 0.46% JPMorgan Chase Bank x 7,543,545 USA 0.44% Information to the stock market Pictet & Cie Banquiers x 7,464,988 CHE 0.44% Contact with the Norwegian and interna- DnB Nor Norge 7,176,000 NOR 0.42% tional stock markets has high priority at Total 1,289,623,284 75.57% Telenor, and the company wishes to have an open dialogue with its shareholders Total other 416,947,009 24.43% and other players in the stock market. The Total number of shares 1,706,570,293 100.00% reason being that the financial markets Total number of shareholders (pr 31.12.05) 41,340 at any given time shall have sufficient Ownership structure and Industry may reduce its shareholding information about the company in order to At year-end 2005, Telenor had 41,340 in Telenor, although no lower than 51%. The form the basis for an accurate share valu- shareholders. Of these, 40,030 were Ministry of Trade and Industry is also au- ation. Information that may be important private shareholders. Non-Norwegian thorised to dilute its shareholding through to shareholders and other players in the investors (not holding Norwegian citizen- structural transactions, reducing its owner- Norwegian and international markets ship) owned approximately 35.6% of the ship interest to a minimum of 34%. is provided in the form of notices to the total stock. This is an increase in foreign Oslo Stock Exchange and through press ownership of 13% since year-end 2004. releases. Telenor presents its results at its Share programme for employees The Norwegian State, through the Ministry headquarters at Fornebu outside Oslo every To encourage long-term shareholding of Trade and Industry, is the largest single quarter. In addition, regular meetings are among Telenor employees, all permanent owner with 54% of the shares. Pursuant held with investors in Europe and in the US. employees in Telenor ASA and in Nordic to authorisation given by the Norwegian Leading stockbrokers in Norway and abroad subsidiaries in which Telenor ASA’s owner- Parliament (Storting), the Ministry of Trade closely analyse Telenor’s activities. ship share directly or indirectly is greater

Page 33 Annual Review 2005 than 90%, were given the opportunity to that the Group will be aiming for a rela- As of 18 April 2006, and in accordance buy shares, with a 20% cash discount, for tively even annual growth in the ordinary with the authorisation granted by the AGM, up to NOK 7,500. Should the average share dividend per share. The Board of Directors Telenor has acquired 13,844,000 shares price during the last 30 days of trade, up proposes that a dividend of NOK 2.00 per at an average share price of NOK 50.22. to and including 1 December, 2006 (share share be distributed for 2005. Telenor has repurchased 1.54% of the quotation NOK 67.37), be at least 10% shares approved by the authorisation, in- higher than a corresponding average price Such dividend as will be determined at the cluding the Ministry of Trade and Industry’s during the last 30 days of trade up to and General Meeting will be paid on 8 June proportionate part. Of the total number of including 1 December 2005 (share quota- 2006 to the shareholders on the date of repurchased own shares, 1,738,818 shares tion NOK 61.24), those having subscribed the General Meeting. The shares will be were used in share option programmes and for shares on the terms of this offer will be traded exclusive of dividends on the Oslo employee stock ownership programmes. allocated “profit bonus shares” for NOK Stock Exchange from Wednesday 24 May 5,000, provided, however, that they still 2006. At the AGM on 20 May 2005, Telenor’s hold the allocated shares and are still per- shareholders approved to reduce the com- manent employees of Telenor. Repurchase of own shares pany’s share capital by NOK 263,186,550 Telenor will consider repurchasing of own through cancellation of 20,191,700 Around 32% of the employees who were shares in periods with high cash flow, in own shares and through redemption of offered shares took advantage of the offer. addition to payments of dividends. Such 23,672,725 shares from the Ministry of They were allocated 116 shares each at a considerations will be based on Telenor’s Trade and Industry. This was in accordance price of 64.25 per share, which was the potential investment opportunities and its with the authorisation given at the AGM on closing price on 1 December 2005. After financial situation. 6 May 2004 to repurchase own shares. deducting the discount, the effective price is NOK 51.40 per share. At the Annual General Meeting (AGM) 20 Share price performance May 2005, approval was given for the At the outset of 2005, the Telenor share On 21 November 2005 2,078 of the company to acquire up to 10% of the out- was quoted at NOK 56.25. The highest employees having taken part in the share standing shares. This authorisation is valid quotation during the year was NOK 66.75, programme for employees in 2004 were until 1 July 2006. The Kingdom of Norway and the lowest was NOK 49.50. At year- each alloted 39 bonus shares. represented by the Ministry of Trade and end, the quotation price was NOK 66.25. Industry, which is Telenor’s largest share- Inclusive of dividends, this amounted to Share capital and treasury holder, is obliged to participate in Telenor’s a 24% increase in value.The market value As of 31 December 2005, Telenor ASA had repurchase of own shares programme by as at 31 December 2004 was NOK 113.1 a share capital of NOK 10.2 billion, divided voting for a proposal to redeem and cancel billion, which makes Telenor ASA the third into 1.706.570.293 shares, each with a a proportionate part of its shares. As a largest company quoted on the Oslo Stock nominal value of NOK 6. The Group holds consequence the Ministry of Trade and Exchange. 12,846,514 shares. Industry’s ownership percentage in Telenor remains unchanged. Telenor will at the Trade Dividends time of redemption pay an amount to the The Telenor share is listed on the Oslo Stock On the basis of Telenor’s financial situa- Ministry of Trade and Industry equalling Exchange under the ticker code TEL. The tion and expected capital requirements, the volume weighted average of the price share is also listed on Nasdaq in the US under the Board of Directors has decided that Telenor paid for such shares in the market, the ticker code TELN, where it is traded Telenor’s objective is to distribute a divi- plus interest corresponding to NIBOR + 1%. through Telenor’s ADR programme. One ADR dend to its shareholders which is equal to share corresponds to three Norwegian shares. 40-60% of normalised annual profits, and The custodian bank is JP Morgan Chase Bank.

Page 34 Annual Review 2005 In 2005, 1.8 billion Telenor shares at a total distribution of shares as of. 31.12.2005 value of NOK 101 billion were traded on the Oslo Stock Exchange. The average trad- Interval Number of Share of all Number of Ownership ing volume for Telenor shares on the Oslo shareholders shareholders shares share Stock Exchange for the year was 7.1 million 1-1000 37,064 89.7% 31,565,046 1.8% shares per day of trading. A round lot for the 1 001-100 000 3,874 9.4% 4,956,553 0.3% Telenor share on the Oslo Stock Exchange 100 001-1 000 000 272 0.7% 98,465,297 5.8% is 200 shares. 1 000 001-10 000 000 116 0.3% 328,683,292 19.3% 10 000 001-1 129 842 400 14 0.0% 1,242,900,105 72.8% Voting rights and ownership Total 41,340 100.00% 1,706,570,293 100.00% Telenor has one class of shares and each share carries one vote. The Group does not have any ownership restrictions beyond geographic distribution of free-floating shares as of. 31.12.2005 those stipulated in the Norwegian conces- sion laws. The Norwegian Public Limited Country Number of shares Share of free- Companies Act regulates the exercising of floating shares shareholder rights. Pursuant to Norwegian Norway 166,050,587 21% law, only shares registered in the owner’s USA 205,648,128 27% name can be used for voting. Voting rights UK 157,885,940 20% can be exercised no earlier than two weeks Europe (outside the Nordic region) 175,333,593 23% after the shareholding has been reported to The Nordic region (outside Norway) 26,254,366 3% the Norwegian Central Securities Deposi- The rest of the world 41,596,982 5% tory (VPS). Total 772,769,596 100%

Risk adjustment In accordance with Norwegian tax regula- ary 2007. Shareholders who are not subject tions, such shareholders as are subject to to taxation in Norway are not affected by taxation in Norway must, when calculating the Norwegian RISK regulations. sales gains, make a downward or upward adjustment of the cost price of the shares Rating with a “RISK” amount (adjustment of origi- In March 2006, Telenor was rated by nal cost of shares by taxed profits). The RISK Moody’s at A2/P1 for long and short-term amount is calculated annually based on financing respectively. Also in November the change in Telenor’s retained, assessed 2005, Telenor was rated by Standard & capital, divided by the number of issued Poor at A-/A2 for corresponding long and Telenor shares. The RISK amount for 2004 short-term financing. was NOK -1.39 per share. Preliminary 2005 RISK adjustment (adjustment of shares tax More information – continuously updated base) for Telenor ASA is calculated to be – on shareholder related matters can be negative with NOK 1,95 per share, including found on the Telenor Investor Relations proposed dividend payments in the 2005 website: www.telenor.com/ir financial statements.The final RISK amount for 2005 will not be published until 1 Janu-

Page 35 Annual Review 2005 Board of Directors

Thorleif Enger (Chairman) was elected to the Board on 1 Liselott Kilaas was elected to the Board on May 8, 2003. October 2001 and was made Chairman on 6 March 2003. She is presently managing director of Zenitel ASA. She has He is Chief Executive Officer of Yara International ASA. He previously held leading positions in the oil industry, PA began working for Norsk Hydro in 1973 and has held a Consulting Group and Stento AS and is currently a board number of positions in the company. Mr. Enger is a member member of Norges Bank. She holds a M.Sc. from the Uni- of ABB’s corporate assembly. He has a doctorate in structural engineering versity of Oslo and an MBA from the International Institute for Management from the University of Colorado. Development (IMD) in Lausanne.

Bjørg Ven (Vice-Chairman) was elected to the Board on 1 Paul Bergqvist was elected to the Board on 7 April October 2001. She is a solicitor with attendance rights at 2005. Bergqvist currently serves as managing director the Supreme Court in Norway, and since 1980 has been a of Carlsberg Sweden. Since 1971 he has held managerial partner in the law firm, Haavind Vislie, in Oslo. She is Chair- positions in industrial companies such as Husqvarna and man of the Appeal Board of the Oslo Stock Exchange and Pripps/Ringnes/Carlsberg. Bergqvist has extensive experi- the Appeal Board for Public Acquisitions. Ms. Ven is substitute judge at the ence from having served on a number of boards of international companies. EFTA court in Luxembourg and Chairman of the Board of NOS ASA. Bergqvist has a B.Sc in Engineering and has studied Economics at MBA level. John Giverholt was elected to the Board on May 8, 2003. He is presently Chief Financial Officer of Ferd AS and has Harald Stavn was elected to the Board on 20 June 2000 previously held leading positions in Arthur Andersen, as an employee representative. Mr. Stavn joined Telenor in Actinor, Norsk Hydro, DnB and Orkla. He has a B.Sc. from the 1974 and has held various engineering positions. He is a University of Manchester, England and is a state authorized board member of Telenor Pensjonskasse (Pension Fund), public accountant in Norway. member of the executive board of NITO (the Norwegian Society of Engineers) and employee representative for NITO in Telenor. Jørgen Lindegaard was elected to the Board on 1 October Mr. Stavn has a technical education from the Technical College of Norwe- 2001. He is the Chief Executive Officer of the airline com- gian Telecom and was also educated as a business economist at Han- pany SAS. Lindegaard’s background is in the telecommu- delshøyskolen BI (the Norwegian School of Management) in Oslo. nications industry, and since 1975 he has held managerial positions at Fyns Telefon A/S, København Telefon A/S and Per Gunnar Salomonsen was elected to the Board on TeleDanmark A/S. He was Chairman of the Board of Sonofon Holding A/S 1 November 2000 as an employee representative. Mr. until 2004. Mr. Lindegaard is a telecommunications engineer and a mem- Salomonsen began working for Telenor in 1973. He has held ber of The Academy for Technical Sciences in Denmark and Norway. various positions in Telenor, most recently as operations engineer. From 1995 to 2000, he was a board member of Hanne de Mora was elected to the Board on 18 June 2002. Telenor Nett. Mr. Salomonsen is a group employee representative for the Her work experience includes Den norske Creditbank in Lux- Norwegian trade union EL & IT Forbundet. He is an engineer. embourg and Procter & Gamble in Geneva and Stockholm. She has been a partner with McKinsey & Company since Irma Tystad was elected to the Board of directors on 20 1996. Since June 2002, she has run her own management June 2000 as an employee representative. Ms. Tystad resource firm in Switzerland. She has an MBA from the IESE Business School began working for Telenor in 1962 and has served as a in Barcelona. board member of Telenor Plus since 1995 and of Telenor Pensjonskasse (Pension Fund) since 1997. She is the group employee representative for Kommunikasjonsforbundet (Union of Commu- nications). Ms. Tystad is a graduate of the Technical College of Norwegian Telecom and has subsequently studied business and management.

Page 36 Annual Review 2005 Group Executive Management

Jon Fredrik Baksaas, President and CEO - has been Stig Eide Sivertsen, Executive Vice President and head of President and CEO of Telenor since 21 June 2002. He joined Telenor’s Broadcast operations - has served as Executive Telenor in 1989. During his tenure with Telenor, Baksaas has Vice President since 1999. He is head of Telenor’s Broad- served as Finance Director, Executive Vice President and cast operations. Mr. Sivertsen joined the Company in 1997 CEO of TBK A/S (a wholly-owned Telenor subsidiary), before as the Director of Finance and chief accountant for Telenor serving as Group CFO from November 1994 until 1997 when he was ap- Link AS. Mr. Sivertsen previously held positions as Chief Executive Officer pointed Deputy CEO. Before joining Telenor, Baksaas held finance-related of Nettavisen AS and Chief Financial Officer of Petroleum Geo-Services positions in Aker AS, Stolt-Nielsen Seaway and Det norske Veritas. He is also ASA and Schibsted ASA. Mr. Sivertsen holds elementary and supplemen- a board member of Svenska Handelsbanken AB. Baksaas holds a Master of tary degrees in law from the University of Bergen and a Master of Business Science in Business Administration from the Norwegian School of Econom- Administration from Durham University. ics and Business Administration in Bergen and has additional qualifications from IMD in Lausanne, Switzerland. Trond Ø. Westlie, Executive Vice President and Chief Financial Officer (CFO) - has been Director of Finance at Arve Johansen, Senior Executive Vice President/Deputy Telenor ASA. He is a Certified Public Auditor and was CEO and Head of Telenor’s Asia operations - has served as educated in Norway. Westlie joined Telenor in 2004, com- Senior Execute Vice President/Deputy CEO and Head of ing from Aker Kværner ASA, previously Aker Maritime ASA, Telenor’s Asia operations since January 2006. Mr. Johansen where he was Executive Vice President and CFO. He has previously held a joined Telenor in 1989 and has held a number of positions number of positions at Aker RGI ASA, including Executive Vice President in the Group. He has served as Senior Executive Vice President and Head of Business Development and Senior Vice President Investor Relations. Mr. Mobile from 1999 to 2005 and was Chief Executive Officer of Telenor Inter- Westlie has also held managerial positions in auditing departments at national AS from its inception in 1993 to 1999. Prior to joining Telenor, Mr. KPMG (Norway) and Richard Eisner & Co (New York). Johansen was employed at EB Telecom (Ericsson Norway), where he served as Executive Vice President and at the Norwegian Institute of Technology, as Bjørn Magnus Kopperud, Executive Vice President and a research engineer at ELAB. Mr. Johansen received his M.Sc in Electrical En- Head of Human Resources - has served as Executive Vice gineering (Telecommunications) from the Norwegian Institute of Technol- President since January 2006. Since 2003 he has served ogy in 1973 and participated in the Program for Management Development as Head of Group Human Resources. Mr. Kopperud joined at Harvard Business School in 1988. Telenor in 1994 and has held a number of senior positions at Telenor, including Executive Vice President of Telenor Mobile AS, Manag- Morten Karlsen Sørby, Executive Vice President and head ing Director at Telenor Global Services AS and Managing Director at Telenor of Telenor’s Nordic mobile and fixed network operations Global AS. Mr. Kopperud holds a Master of Science in Computer Science - has served as Executive Vice President since January from the Norwegian Institute of Technology and has additional qualifica- 2003. Since January 2005 he has held the position as head tions from Business Management studies at both IMD and INSEAD. of Telenor’s Nordic mobile and fixed operations. Mr. Sørby joined Telenor in 1993 and has since held a number of senior positions in Ragnar H. Korsæth, Executive Vice President and Head of Telenor, including Deputy Chief Executive Officer of Telenor Mobile and Global Coordination - has served as Executive Vice Presi- General Manager of Telenor International AS. He has previously worked at dent and Head of Global Coordination since January 2006. Arthur Andersen & Co in Oslo. Mr. Sørby holds a M.Sc in Business admin- Mr. Korsæth joined Telenor in 1997, and has held a number istration and is a state licensed public accountant (Norway). He also has of senior positions, including Chief Operating Officer of qualifications from IMD. Telenor International Mobile, Chief Financial Officer of Telenor Mobile and Finance Director at Telenor International. Mr. Korsæth holds a Master of Sci- Jan Edvard Thygesen, Executive Vice President and Head ence in Business Administration from the Norwegian School of Economics of Telenor’s Central/Eastern European operations - has and Business Administration in Bergen and has additional qualifications as served as Executive Vice President since 1999. Since Janu- Certified Financial Analyst (EFFAS) from the Norwegian School of Business ary 2006, he has served as Head of Telenor’s Central/East- and Administration in Bergen. ern European operations. Since joining Telenor in 1979, Mr. Thygesen has held various positions, including Chief Executive Officer of Sonofon, Executive Vice President and General Manager of Telenor Nordic Mobile, Executive Vice President of Telenor Mobil, President of Telenor Invest AS, Executive Vice President of Telenor Bedrift AS and President of Telenor Nett AS. He has also served as President of Esat Digifone and Tel- Page 37 Annual Review 2005 everket. Mr. Thygesen holds a B.Sc in Electronics and Telecommunications from the Norwegian Institute of Technology. Memorandum and articles of association

Translation from Norwegian a term of 2 years. 10 members and three § 9 deputy members for those members shall The Company shall have an Election Com- MEMORANDUM AND ARTICLES OF ASSO- be elected by the General Meeting. Five mittee. The task of the Election Committee CIATION OF TELENOR ASA members and two observers with deputy is to submit nominations to the General (Last amended 20 May 2005) members shall be elected by and from Meeting for the election of shareholder- among the employees according to the elected members and deputy members § 1 rules in the Regulations to the Act relating to the Corporate Assembly, and to submit The Company’s name is Telenor ASA. The to Public Limited Companies (Norway) gov- nominations to the Corporate Assembly for Company is a public limited company. erning the employees’ right of representa- the election of shareholder-elected mem- tion on the board of directors and corporate bers and deputy members to the Board of § 2 assemblies of public limited companies, Directors. The Company’s registered office is in the etc. municipality of Bærum, Norway. The Election Committee shall consist of four § 8 members who must be shareholders or rep- § 3 The Company’s General Meeting shall be resentatives of shareholders. The Chairman The Company’s objects are to carry on a tel- chaired by the Chairman of the Corporate of the Corporate Assembly is a permanent ecommunications business and any other Assembly. member and Chairman of the Election business related thereto. The business may Committee. Two members shall be elected be carried on by the Company itself, or by The Annual General Meeting shall be held by the General Meeting, and one member its subsidiaries, or through participation as before the end of June each year. The An- shall be elected by and from among the a joint venture partner in other companies nual General Meeting shall be called with at shareholder-elected members and deputy or in co-operation with other companies. least two weeks’ written notice. The notice members of the Corporate Assembly. The of the meeting shall be accompanied by members of the Election Committee shall § 4 the agenda. Shareholders wishing to attend be elected for a term of two years. The Company’s share capital is the Annual General Meeting must, subject NOK 10.239.421.758,- divided into to further decision of the Board, notify the Subject to motion from shareholder- 1.706.570.293 shares of a nominal value of Company to that effect no later than three elected members of the Board of Directors, NOK 6 each. days prior to the Annual General Meeting. the shareholder-elected members of the Corporate Assembly may adopt instructions § 5 The Annual General Meeting shall transact for the Election Committee. The number of Directors shall be at least the following business: five but may not exceed eleven. 1. Approval of the financial statements § 6 and annual report, including distribu- The Chairman of the Board of Directors or tion of dividend. the Vice-Chairman and one other member 2. Other business which under Norwegian of the Board are authorised jointly to sign law or the Articles of Association falls for the Company. under the Annual General Meeting.

§ 7 The Company’s General Meetings may be The Company shall have a Corporate As- held in the municipality of Oslo, Norway. sembly of 15 members. The members and the deputy members shall be elected for

Page 38 Annual Review 2005 Elected Officers and Management

Corporate Assembly Telenor’s Board of Directors Group Management Members elected by the shareholders Members elected by the shareholders Jon Fredrik Baksaas Chairman: Jan Erik Korssjøen, Kongsberg Chairman: Thorleif Enger, Oslo President and Chief Executive Officer (CEO) Marianne Lie, Oslo Vice-Chairman: Bjørg Ven, Oslo Randi Braathe, Rygge Hanne de Mora, Switzerland Arve Johansen Jostein Devold, Kristiansand Jørgen Lindegaard, Sweden Senior Executive Vice President/Deputy Hans Olav Karde, Tromsø John Giverholt, Oslo CEO and Head of Telenor’s Asia operations Nils-Edvard Olsen, Kirkenes Liselott Kilaas, Oslo Signe Marie Jore Ritterberg, Oslo Paul Bergqvist, Sweden Morten Karlsen Sørby Stener Lium, Ranheim Executive Vice President and Head of Hanne Harlem, Oslo Members elected by the employees Telenor’s Nordic mobile and fixed network Inger-Grethe Solstad, Stavanger Per Gunnar Salomonsen, Søgne operations Irma Tystad, Trysil Alternates elected by the shareholders Harald Stavn, Kongsberg Jan Edvard Thygesen Siri Pettersen Strandenæs (1. alternate), Executive Vice President and Head of Bergen Alternates elected by the employees Telenor’s Central/Eastern European Ingvild Nybø Holth (2. alternate), Bjørn Andre Anderssen, Gol operations Sandefjord Marianne Losnegaard Jensen, Oslo Kaare Ingar Sletta, Mysen Stig Eide Sivertsen Members elected by the employees Roger Rønning, Skotterud Executive Vice President and head of Berit Kopren, Stavanger Helge Enger, Brandval Telenor’s Broadcast operations Astri Skare, Bergen Hjørdis Henriksen, Sortland Jan Riddervold, Lillehammer Trond Ø. Westlie Stein Erik Olsen, Flaktveit Executive Vice President and Chief Financial Arne Jenssen, Trondheim Officer (CFO)

Alternates elected by the employees Bjørn Magnus Kopperud Esther M. Strømme, Oslo Executive Vice President and Head of Francisco M. Rasmijn, Nesoddtangen Human Resources Ragnhild Holm, Bardu Ragnar H. Korsæth Observers for the employees Executive Vice President and Head of Grethe Elin Henriksen-Alves, Oslo Global Coordination Brit Østby Fredriksen, Drøbak

This Annual review contains statements regarding the future prospects of Telenor, involving growth initiatives, profit figures, strategies and objectives. The risks and uncertainties inherent in all statements regarding the future can lead to actual profits and development deviating substantially from what has been expressed or implied. The risk factors associated with Telenor’s business activities are also described in form 20-F, which has been submitted to the Securities and Exchange Commission (available on: www.telenor.com/ir).

Page 39 Annual Review 2005 Design: C obra . Photo: Massimo Leardini/PinUp.

recisors beretning

financial calendar 2006

Thursday 4 May Results for the 1st quarter 2006 Tuesday 23 May Annual General Meeting Wednesday 24 May Capital Markets Day Friday 21 July Results for the 2nd quarter 2006 Thursday 26 October Results for the 3rd quarter 2006

Telenor ASA N-1331 Fornebu, Norway Phone: +47 67 89 00 00

Investor Relations: Phone: +47 67 89 24 70 e-mail: [email protected] www.telenor.com Page 40 Annual Review 2005