Growth comes from truly 2009 report Annual Telenor understanding the needs of people, to drive relevant change Annual report 2009 www.telenor.com Contents Dear shareholder // 01 Report from the Board of Directors 2009 // 02 Financial Statements Telenor Group Consolidated Income Statement // 16 Consolidated Statement of Comprehensive Income // 17 Consolidated Statement of Financial Position // 18 Consolidated Statement of Cash Flows // 19 Consolidated Statement of Changes in Equity // 20 Notes to the Consolidated Financial Statements // 21 Telenor ASA Income Statement // 88 Statement of Comprehensive Income // 89 Statement of Financial Position // 90 Statement of Cash Flows // 91 Statement of Changes in Shareholders’ Equity // 92 Notes to the Financial Statements // 93 Responsibility Statement // 106 Auditor’s report for 2009 // 107 Statement from the Corporate Assembly of Telenor ASA // 108 Financial Calendar 2010 // 108 Norway Hungary Bangladesh Denmark Montenegro Thailand Sweden Serbia Pakistan Ukraine India Russia Malaysia Dear shareholder Telenor Group has strengthened its position as a leading global telecoms operator through 2009. We delivered solid results and strong operating cash flow in spite of challenging macro economic conditions. With 10 million net subscriber additions during the year the Telenor Group reached 174 million mobile subscribers world- wide. The announcement of our agreement with Altimo in October to establish VimpelCom Ltd, the listing of Grameenphone in November and the launch of opera- tions in India in December are key milestones for the Telenor Group this year. The main focus within the Telenor Group this year has marking the completion of the first phase of the been to secure market positions while scaling our Uninor launch activities. Brand awareness and 1 mil- activities to a challenging business environment. The lion subscribers within the first weeks of operations Telenor Group continued its industrial strategy of provide a good basis for the next launch phase in the capturing growth opportunities combined with fastest growing telecoms market in the world. One of measures for cost efficiency and control of capital our main priorities in 2010 will be to focus Uninor’s expenditure. position and development. We had a strong operating cash flow in 2009 with Telenor Group continues to be ranked one of the top the Nordic region as the main contributor. In spite of companies on the Dow Jones Sustainability Indexes weak macro economic conditions, our operations in in the telecoms sector. We have focused on responsi- Central and Eastern Europe have delivered solid ble and sustainable business by systematically results throughout the year. The Asian operations addressing the health, safety, security and environ- have shown substantial improvements where sub- mental conditions in our companies and towards our scriber growth picked up in all our operations. suppliers. The climate challenge has been high on the agenda also in 2009 with the goal of reducing Telenor’s performance in Norway was strong in 2009, the CO2 emission intensity of Telenor Group’s global particularly within the mobile area where the operations by 40% in the period from 2008 to 2017. demand for mobile broadband was one of the main In addition, we aim to develop and deliver solutions revenue drivers. The new vendor agreements for enabling our customers to reduce their CO2 emis- mobile infrastructure in the Nordic region will secure sions and energy costs. enhanced customer experience and profitability on mobile broadband in the years to come. Moving into 2010, the Telenor Group will strive to secure our market positions while capturing organic The process of combining Kyivstar and OJSC Vimpel- growth opportunities. We will continue to implement Com into a leading emerging markets mobile opera- necessary efficiency measures and provide innova- tor, VimpelCom Ltd, is on track as we enter 2010. We tive and attractive solutions to our customers. With expect to finalise the transaction around mid 2010. more than 40 000 employees worldwide sharing the same visions and values, I am confident that we will The successful launch of operations in India in continue to strengthen our position through 2010. December was a significant milestone for the Group, telenor annual report 2009 page 01 Report from the Board of Directors 2009 Harald Norvik John Giverholt Chairman Vice-Chairman Dr. Burckhard Kjersti Kleven Olav Volldal Liselott Kilaas Barbara Milian Bergmann Boardmember Boardmember Boardmember Thoralfsson Boardmember Boardmember Sanjiv Ahuja Bjørn André Brit Østby Harald Stavn Boardmember Anderssen Fredriksen Boardmember, Boardmember, Boardmember, employee employee employee representative representative representative page 02 telenor annual report 2009 RepoRt fRom the BoaRd of diRectoRs The Telenor Group delivered strong perform- ance in 2009. Despite global recession Telenor upheld its margins and significantly increased cash flow. The Group passed 174 million mobile subscriptions by the end of the year. Main events during 2009 During 2009 the Telenor Group Com Ltd. VimpelCom Ltd., will have The Telenor Group delivered on maintained its market positions operations in Russia, Ukraine and the financial priorities for 2009. and added 10 million mobile sub- other CIS countries, and may seek Activities were scaled to the diffi- scriptions, reaching a total of 174 to expand in other emerging mar- cult business environment, cash million. Our operations in Pakistan, kets. The management of Vimpel- flow was significantly increased, Bangladesh and Russia were the Com Ltd. will be headquartered in and our market positions were main contributors to the subscriber the Netherlands, registered on upheld. growth. Uninor in India launched Bermuda and listed on the New its services in December and York Stock Exchange. The corpo- The NOK 10 billion cash flow target contributed with more than one rate governance structure agreed for the Nordic operations was million subscriptions. between the Telenor Group and achieved, led by revenue growth Altimo will reduce the potential for and cost control in the Norwegian In our Nordic markets the sub- new disputes. operations. In Asia, our Bangla- scription growth was driven by deshi operation Grameenphone the strong development in mobile As part of the proposed solution proved its leading position while broadband, reaching more than between the Telenor Group and Telenor in Pakistan soon will reach half a million mobile broadband Altimo, the parties will suspend cash flow breakeven. Despite deep subscriptions. The development all ongoing legal proceedings contraction in economic activity in was fuelled by attractive price and withdraw or settle them prior Central and Eastern Europe (CEE) plans and more user friendly to the expected completion of the and a challenging revenue devel- handsets. In Norway, Sweden and transaction mid 2010. Disappear- opment, our CEE operations were Denmark, Telenor entered into ance of the USD 1.7 billion claim able to generate strong margins substantial 3G and 4G equipment from Farimex, a minor shareholder and cash flow. All in all, the agreements that will enable in VimpelCom, is also a condition Telenor Group demonstrated its Telenor to provide future high precedent for completion. resilience to economic downturn quality data services at a low and by substantially increasing cash predictable cost. The agreement to acquire a con- flow from operations and, com- trolling stake in the Indian mobile bined with dividends received In October 2009 the Telenor operator Unitech Wireless was from Kyivstar and VimpelCom Group and Altimo, the telecom completed in March 2009. The during the year, this resulted branch of Alfa Group, signed an Board of Telenor ASA is aware of in Telenor closing 2009 with agreement to create a new lead- the market reactions to the invest- a strong financial position. ing emerging markets mobile ment in India. However, a number operator by combining their of Telenor Group’s operations are holdings in Kyivstar and OJSC reaching a more mature phase VimpelCom into a new jointly and India represents a unique owned mobile operator, Vimpel- business opportunity with still telenor annual report 2009 page 03 RepoRt fRom the BoaRd of diRectoRs more than 600 million Indians EBITDA 1) before other income and Profit before taxes was NOK 14.8 not connected to mobile networks expenses increased by NOK 1.3 billion compared to NOK 19.4 bil- by the end of 2009. billion to NOK 31.7 billion, while lion in 2008. Profit from associ- the corresponding EBITDA margin ated companies decreased by The business model in India offers of 32.5% increased by around NOK 3.1 billion to NOK 3.7, mainly flexibility as it is based on out- 1 percentage point compared to due to lower net income from sourcing principles and infra- 2008. Margin improvements in Kyivstar as a result of organic rev- structure provided by separate most operations, in particular in enue decline and a significant infrastructure service companies. Bangladesh, Norway and Pakistan, depreciation of the Ukrainian Hry- During the year Unitech Wireless were partially offset by costs in vnia against the Norwegian Krone, entered into a number of agree- the new operation in India and as well as the sales gain on the ments and contracts, including lower EBITDA from the CEE opera- disposal of Golden Telecom in roaming agreements securing tions. In addition, EBITDA before 2008. Net financial items national coverage. The service other income and expenses was decreased by NOK 1.0 billion, launch in December 2009 positively impacted by a one-time which was mainly due to the marked a milestone for the effect of NOK 570 million in EDB change in fair value of financial Telenor Group, as this was by far Business Partner, related to instruments related to derivatives the most rapid rollout ever under- change of pension plan. used for economic hedges that taken by the Group. Services were did not fulfil the requirements for successfully launched under the Operating profit was NOK 13.3 bil- hedge accounting. In addition, Uninor brand and based on the lion compared to NOK 15.7 billion operating profit decreased as Telenor brand design and content.