Telenor AS Group Centre (Group Management and Staff)

2 This is Telenor Telenor is the leading telecom, IT and media company in Norway. From its position as a national telecom operator, Telenor has expanded its area of activities to a broad range of products and services that build on and are related to elec- pursued international opportunities in areas tronic communication. Today, Telenor is the only where the company has particular expertise. company in Norway that offers a full range of An aggressive international strategy has made services within telephony and data communica- the company visible and the ambitions in the tion, mobile communication, internet, IT and European market are to position Telenor satellite communication. amongst; Through a continuous product development • the three largest within satellite communication process, in combination with measures designed • the five largest within directory services to reduce costs and increase efficiency, Telenor • the five largest within internet operations has positioned itself as a leading company within • the ten largest within mobile telephony its sector in Europe. Its prices are among the • the ten largest within international telephony lowest offered, with high quality and service. Using this as a basis, Telenor has Technological and market developments create a platform for development of new products and services across traditional boundaries. Through clear customer focus, Telenor intends to defend and develop its role as the leading innovative power in the Norwegian market and to pursue further opportunities abroad. 3 Organisation and management Jon Fredrik Baksaas Terje Thon Heidi Kvernevik EVP (Operations in Norway) EVP (International Operations) SVP (Corporate Communication) Torstein Moland Ole Petter Håkonsen SVP and C.F.O. EVP and C.T.O. Arve Johansen Peter Pay Tormod Hermansen EVP (International Operations) SVP (Business Development President and C.E.O. and New Services) Telenor AS Group centre (Group management and staff) Telenor Telenor R&D Capital and Finance Telenor Telenor Telenor Telenor Telenor Telenor Telenor Telenor Telenor Other Bedrift Programvare IT Service og International Mobil Privat Nett Nextel Plus Companies Installasjon 4 Highlights The deregulation of the telecommunications market Agreement to merge with Telia effective 1 January 1998 means that Telenor faces On 20 January 1999, the owners of Telenor AS and competition in all of its activities. During the year, a Telia AB, represented by the Ministers Odd Einar number of companies entered the Norwegian market Dørum and Björn Rosengren, announced a declara- offering telephony and data communication services. tion of intent to merge Telenor AS with Telia AB into a new company. The NOK 2 billion equity granted by Stortinget (the Norwegian Parliament) in April gave the Group The final agreement to merge the two companies was increased flexibility to consider further investments signed in Stockholm 30 March 1999. abroad. The agreement is subject to approval by the Parliaments The Thor III satellite, which was launched from in Norway and Sweden, and also requires approval by Cape Canaveral in Florida, is now operating from the the EU Commission before the merger can be accom- strategic position 1 degree west. The satellite supple- plished. The parliamentary discussions will probably ments Telenor’s capacity and increases the distribu- be concluded by the end of June. tion of TV signals substantially. The agreement implies the establishment of a The GSM 1800 network was opened in Oslo, new company that will be registered in Sweden. In Bergen, Trondheim and Stavanger during the summer exchange for its shares in Telenor AS, the Norwegian of 1998. GSM 1800 networks are now under con- State will receive 40 per cent of the shares in the new struction in other parts of the country. company. Correspondingly, the Swedish State will receive 60 per cent of the shares in the new company A letter of intent to acquire 25 per cent of the Russian in exchange for its shares in Telia AB. mobile telephone company Vimpel Communications (VimpelCom) was signed in December. The agree- Furthermore, the agreement stipulates that the new ment was subsequently approved by the General company be listed as soon as possible, and no later Meeting of VimpelCom, while approval by the than the year 2000. The owners will first offer 33.2 Russian authorities is still outstanding. per cent of the shares in the new company to the pub- lic, reducing their ownership to 33.4 per cent each. Internet traffic increased sharply throughout the The offering shall be concluded no later than 18 year, as well as the number of subscribers in both the months after the sale of the first shares, if the market private and business market segments. Sale of ISDN conditions allow this. The agreement opens for further subscriptions is a significant driving force in this sale of shares from the two owners at a later stage. market. Upon approval of the agreement, Jan Stenberg (cur- International expansion took another step forward rently the Chairman of the Board of Telia AB) will with the establishment of internet activities abroad. become the Chairman of the new company, while Telenor Nextel set up business in the Czech Republic, Tormod Hermansen (currently President and CEO of Slovakia and Austria. Telenor AS) will become the President and CEO and Jan-Åke Kark (currently President and CEO of Telia) Price reductions of another NOK 800 million were and Stig-Arne Larsson (currently Vice-President of put into effect, adding to a series of price cuts and Telia) will become Vice-Presidents. other improvements over the last years. Telenor offers some of the lowest prices in Europe, both for mobile and fixed telecommunication. 5 The leading commun 8 ication company in Norway Telenor has a long history and a strong position in Norway. In a time where size and strength are important prerequisites for growth and progress, we have expanded and strengthened our position IT and media services – a total supplier that, in our home market. In Norway, Telenor aims to through a broad range of services, a high service continue to be the leading supplier of telecom, level and efficient distribution will be the pre- ferred supplier both in the private and business market segments. 9 Report of the Board of Directors Arnfinn Hofstad Finn A. Hvistendahl Terje Moe Gustavsen Åshild Bendiktsen (Chairman) (Deputy Chairman) 1. MAIN DEVELOPMENTS profit before tax figure also includes Telenor’s share Effective 1 January 1998, Telenor’s remaining of profits in associated companies outside Norway. monopoly rights were dismantled and full competition The negative results from activities abroad had been became a reality for the entire telecommunication anticipated. This is due to the fact that new network- Turnover market. Telenor has been preparing to meet the chal- based activities often require substantial investments Telenor Group lenges of open competition since the beginning of the and incur start up costs the first years. As a whole, (NOK 000 mill.) decade, through introducing a number of initiatives. the activities abroad have developed positively and These have included substantial price reductions, a the Board anticipates that its long-term profitability rebalancing of traffic versus subscription prices and objectives will be met. comprehensive measures to improve efficiency, as 30 well as continuous restructuring and modernisation of During 1998, competition in the home market from 25 the organisation to meet the challenges posed by the Norwegian and international companies increased. rapid changes in technology and market conditions. At the same time, the Group has continued its sub- 20 Telenor has also invested substantial amounts abroad stantial investments in both Norway and abroad. The 15 during the last three to four years, to secure Telenor’s investments require considerable financial resources, long-term potential. This effort has been undertaken including access to sufficient equity to take advantage 10 partly in alliance with other players and in part inde- of profitable expansion opportunities and retain suffi- pendently, in areas where the company has competi- cient solidity. To date this has been achieved without 5 tive advantages or particular expertise. These invest- compromising Telenor’s capital strength targets. 0 ments offer potentially significant long-term financial The State, as the company’s owner, has supported 1996 1997 1998 returns, with the objective being to position Telenor the investment programmes and has supplied further as a major European company within the mobile and capital, most recently in May 1998 by NOK 2 billion. satellite communication, directory publishing, TV The Ministry of Transport and Communications in distribution and the rapidly growing internet sector. Parliamentary Bill no. 33 (1997-98), stated that the Growth Government would consider the issue of partially in Turnover Telenor Group The Group’s profit before taxes in 1998 amounted to privatising Telenor prior to any additional capital (per cent) NOK 2,507 million, an increase of NOK 592 million raise. As part of the state budget agreement in the compared to 1997. In the opinion of the Board of autumn of 1998 between the Government, Høyre and Directors, the result for 1998 was satisfactory. The Fremskrittspartiet, the Parliament has decided that the 20 result reflects a strong growth in network-based ser- Government shall put forward a proposal of a partially vices, which include satellite operations and mobile privatisation and a listing of the Group in 1999. 15 telephony. Telenor has retained a high market share in its central business areas, despite intense competition On 20 January 1999, the owners of Telenor AS and from newcomers. Telia AB issued a joint declaration of intent to merge 10 the two companies and subsequently partially priva- Turnover and profit before taxes for international tise and list the new company. The Board has advised 5 activities amounted to NOK 5.6 billion and NOK the Ministry of Transport and Communication that -1.4 billion, respectively.

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