Telenor’s Global Impact A Quantification of Telenor’s Impact on the Economy and Society Final KPMG Report 7 November 2016 Document Classification - KPMG Confidential Important notice This document has been prepared by KPMG United Kingdom Plc (“KPMG”) solely for Telenor ASA (“Telenor” or “Addressee”) in accordance with terms of engagement agreed between Telenor and KPMG. KPMG’s work for the Addressee was performed to meet specific terms of reference agreed between the Addressee and KPMG and that there were particular features determined for the purposes of the engagement. The document should not be regarded as suitable to be used or relied on by any other person or any other purpose. The document is issued to all parties on the basis that it is for information only. This document is not suitable to be relied on by any party wishing to acquire rights against KPMG (other than Telenor) for any purpose or in any context. Any party other than Telenor that obtains access to this document or a copy and chooses to rely on this document (or any part of it) does so at its own risk. To the fullest extent permitted by law, KPMG does not accept or assume any responsibility to any readers other than Telenor in respect of its work for Telenor, this document, or any judgements, conclusions, opinions, findings or recommendations that KPMG may have formed or made. KPMG does not assume any responsibility and will not accept any liability in respect of this document to any party other than Telenor. KPMG does not provide any assurance on the appropriateness or accuracy of sources of information relied upon and KPMG does not accept any responsibility for the underlying data used in this document. No review of this document for factual accuracy has been undertaken. The opinions and conclusions expressed in this document are those of KPMG and do not necessarily align with those of Telenor. Document Classification - KPMG Confidential © 2016 KPMG United Kingdom Plc, a UK public limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Contents 1 Overview of Telenor’s socio-economic impact in its 13 markets in 2015 5 2 Introduction 7 2.1 Telenor and its role in the global telecommunications market 7 2.2 About the study 9 3 Driving macro-economic growth 11 3.1 Introduction 11 3.2 The contribution of Telenor to GVA 12 3.3 The employment impact of Telenor 15 3.4 Capital investment 19 3.5 Telenor’s role in contributing to public finances 24 4 Enabling the wider economy 28 4.1 Introduction 28 4.2 The socio-economic effects of Telenor’s impact on digital inclusion 29 4.3 Telenor’s impact on financial inclusion 37 4.4 Telenor’s contribution to boosting entrepreneurship and innovation 42 4.5 Telenor’s role in supporting improved gender equality 45 5 Sustainability in the supply chain 52 5.1 The positive socio-economic impacts associated with sustainable sourcing 52 5.2 Telenor’s Supply Chain Sustainability policy 55 5.3 The impact of Telenor’s Supply Chain Sustainability policy 56 6 Telenor’s contribution in crisis situations 61 6.1 The importance of communication infrastructure during emergencies 61 Document Classification - KPMG Confidential 3 © 2016 KPMG United Kingdom Plc, a UK public limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. 6.2 Examples of Telenor’s response in times of crisis 61 TELENOR IN BANGLADESH 66 TELENOR BULGARIA 75 TELENOR in DENMARK 81 TELENOR in HUNGARY 87 TELENOR India 96 TELENOR in Malaysia 102 TELENOR Montenegro 110 TELENOR Myanmar 116 TELENOR in Norway 123 TELENOR Pakistan 130 TELENOR Serbia 138 TELENOR in Sweden 146 TELENOR in Thailand 153 Appendix 1 Approach to the analysis 154 Document Classification - KPMG Confidential 4 © 2016 KPMG United Kingdom Plc, a UK public limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. 1 Overview of Telenor’s socio-economic impact in its 13 markets in 2015 GROSS VALUE ADDED (GVA) $ $20.3 billion in direct, indirect and induced GVA in 2015. EMPLOYMENT 1.2 million employees comprising direct, indirect and induced employees in 2015. INVESTMENT $3.2 billion of total investment in 2015, including $3.1 billion of capital expenditure. FISCAL CONTRIBUTIONS $11.7 billion comprising contributions directly, through the supply chain and induced activity, and through employees in 2015. DIGITAL INCLUSION $8.0 billion estimated net GDP contribution through greater digital access (2G and the shift to 3G and 4G) between 2014 and 2015. Document Classification - KPMG Confidential 5 © 2016 KPMG United Kingdom Plc, a UK public limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. FINANCIAL INCLUSION 11.8 million subscribers accessed financial transactions via mobile in 2015. $27.6 billion in financial transactions in 2015 using Telenor’s network, including $1.1 billion in transactions using Telenor’s mobile money services as well as $7.8 billion in Over the Counter financial transactions using Telenor’s financial services including Easypaisa. GENDER 13,000 female employees directly employed by Telenor in 2015 (approximately 36% Telenor direct employees). $3.1 billion of the estimated $8.0 billion net GDP contribution across all subscribers between 2014 and 2015 from greater digital access attributed specifically to female subscribers. SUPPLY CHAIN SUSTAINABILITY 2.1 million employees benefitting from working for companies with high standards of labour rights and working conditions, following Telenor’s supply chain sustainability policy in 2015. Document Classification - KPMG Confidential 6 © 2016 KPMG United Kingdom Plc, a UK public limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. 2 Introduction 2.1 Telenor and its role in the global telecommunications market Telenor is one of the largest 500 companies globally by market value1. It was founded in Norway in 1855 when the first Norwegian telegraph line was opened by the Norwegian Telegraph Administration (Telegrafverket)2. It is now an international provider of tele, data and media communication services, operating mobile services in 13 markets across the Nordics, Central and Eastern Europe and Asia and fixed telecommunication services in Norway. 3 Telenor’s international expansion of operations has happened relatively recently in its history. For example, Telenor: — launched operations in Bangladesh in 1997; — launched operations in Thailand and Denmark in 2000; — became the majority owner in Malaysia’s Digi in 2001; — purchased an initial licence in Pakistan in 2004; — launched in Sweden and Serbia in 2006; — acquired the second largest mobile operator in Bulgaria, GLOBUL, in 2013; and — signed an agreement with the Union Government of Myanmar for a nationwide telecommunications licence in 2014. As of end 2015, Telenor had nearly 203 million connections with over 185 million unique subscribers across its 13 markets, approximately 4% of all global mobile telecoms subscribers. Its expansion has resulted in a substantial contribution by Telenor to rising global mobile penetration rates and increased coverage of 3G and 4G services. The GSMA4 estimates that in Q4 2015 there were 4.6 billion unique subscribers globally, which is expected to rise at a compound annual growth rate (CAGR) of 3.9% between 2015 and 2020 to reach approximately 5.6 billion global unique subscribers (almost 75% of the world’s population). As the largest mobile operator in Norway, Montenegro, Hungary, Malaysia, Myanmar and Bangladesh in terms of connections, the second largest operator in Serbia, Denmark, Bulgaria, Pakistan, and Thailand in terms of connections, and with operations in Sweden and India, Telenor is expected to make a significant contribution to this growth. Although mobile telephony use continues to grow globally, the growth is expected to slow as many markets, particularly in developed countries, reach saturation. However, the accelerating technology shift towards 3G and 4G and increasing digitisation across most industry sectors is changing the dynamics of the market and connectivity is of increasing importance and value. Telenor has played a part in this technological movement. In 2015, LTE (a 4G communications standard) network services were launched in Bulgaria and expanded across markets including 1 Financial Times, Global 500, 2015. 2 In 1969 the Norwegian Telegraph Administration changed its name to Norwegian Telecommunications (Televerket), becoming Telenor in 1995 after another name change. 3 Telenor is also present in 14 further markets through ownership of VimpelCom Ltd. Telenor has an interest of 33% in VimpelCom Ltd. VimpelCom Ltd provides mobile services in Russia, Ukraine, Kazakhstan, Uzbekistan, Tajikistan, Armenia, Georgia, Kyrgyzstan, Laos, Algeria, Bangladesh, Pakistan, Zimbabwe and Italy. 4 GSMA, The Mobile Economy 2016. Document Classification - KPMG Confidential 7 © 2016 KPMG United Kingdom Plc, a UK public limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Norway, Malaysia and Thailand. And after launching services in Myanmar in late 2014, Telenor Myanmar experienced a 347% increase in its 3G connections, which is the highest increase across all Telenor markets in 2015. Across all markets, on average, Telenor’s 3G services reach over 40% of the population, with 4G reaching 7%. Figure 1: Telenor connections split by 2G/3G/4G, 2015 Telenor’s European Telenor’s Asian markets markets 2% 25% 23% 37% 75% 38% 2G 3G 4G Source: Telenor data The expansion of 3G and 4G networks and increased smartphone penetration is enabling societies to be more connected and access a wider range of digital services.