WHAT WE DID IN 2015 ANNUAL + SUSTAINABILITY REPORT 2015 Our Company Contents Annual and Sustainability Report 2015 THE YEAR IN BRIEF WHAT WE DID 6 VALUE CREATION HOW WE CREATE VALUE 10 WHERE WE OPERATE OUR MARKETS AND BRANDS 12 OUR STRATEGY WHAT WE PRIORITIZE 18 2 Our Company Annual and Sustainability Report 2015 Contents The audited annual The corporate gov- The sustain- CONTENTS and consolidated ernance statement ability information accounts comprise examined by the reviewed by the pages 20–46, auditors comprises auditors com- 96–199 and 208. pages 47–67. prises pages 8–11, 16–17, 68–95 and 200–207. OUR COMPANY FINANCIAL STATEMENTS TeliaSonera in brief ................................................................. 4 Consolidated statements of comprehensive income .......... 96 The year in brief ..................................................................... 6 Consolidated statements of financial positions .................. 97 Comments by the CEO ......................................................... 8 Consolidated statements of cash flows .............................. 98 How we create value ........................................................... 10 Consolidated statements of changes in equity ................... 99 Where we operate ................................................................ 12 Notes to consolidated financial statements ...................... 100 Our market position .............................................................. 14 Parent company income statements ................................. 174 Our stakeholders .................................................................. 16 Parent company statements of comprehensive income ... 175 Our strategy .......................................................................... 18 Parent company balance sheets ....................................... 176 Parent company cash flow statements ............................. 177 DIRECTORS’ REPORT Parent company statements of changes in Board of Directors' Report .................................................. 20 shareholders' equity .......................................................... 178 Risks and uncertainties ....................................................... 41 Notes to parent company financial statements................. 179 GRI INDEX CORPORATE GOVERNANCE GRI index ........................................................................... 200 Corporate Governance Statement ...................................... 47 Board of Directors ............................................................... 64 Group Executive Management ............................................ 66 OTHER INFORMATION Board of Directors’ and President’s certification ................ 208 Auditors’ Report ................................................................ 209 SUSTAINABILITY WORK Auditors’ Limited Assurance Report on the Sustainability in TeliaSonera ................................................ 68 Sustainability Report .......................................................... 211 Sustainability focus area summary ...................................... 71 United Nations Global Compact principles ........................ 212 All In for an inclusive world ................................................... 73 Five-year summary ............................................................ 213 Anti-bribery and corruption ................................................. 76 Definitions .......................................................................... 215 Freedom of expression and privacy ..................................... 79 Annual General Meeting 2016 ........................................... 217 Customer privacy ................................................................. 82 Contact TeliaSonera .......................................................... 218 Occupational health and safety ............................................ 84 Responsible procurement .................................................... 86 Environmental responsibility ................................................ 89 Children online ...................................................................... 91 Responsible exit from region Eurasia ................................... 93 TeliaSonera AB (publ) • SE-106 63 Stockholm • Sweden Human rights impact assessment ........................................ 94 Corporate Reg. No. 556103-4249 • Registered office: Stockholm Sponsorships and donations ............................................... 95 Telephone: +46 (0)8 504 550 00 • www.teliasonera.com 3 Our Company TeliaSonera in brief Annual and Sustainability Report 2015 TELIASONERA IN BRIEF IN BRIEF PURPOSE TeliaSonera provides communication services helping millions of people to be connected and communicate, do BRINGING THE WORLD business and be entertained. By doing that we fulfil our purpose of bringing the world closer – on the customer’s CLOSER - ON THE terms. CUSTOMER’S TERMS OUR BUSINESS VALUES TeliaSonera’s operations stretch around the globe. We con- nect businesses, individuals, families and communities via DARE fixed and mobile communication solutions. Our services have a positive effect on social, economic and environmen- CARE tal development and pave the way for an inclusive society. SIMPLIFY People can stay in touch even when the geographical distance is far. In many of our markets, we are among the biggest employers and tax payers. We work with an ecosystem of new start-ups and major service providers. Together we provide the infrastructure for creativity, growth and change. 4 Our Company Annual and Sustainability Report 2015 AT YEAR-END 2015 515,437 Shareholders SEK billion 182.7 market cap 21,342 Employees Million mobile 20.0 subscriptions Million fixed voice 2.8 subscriptions Million broadband 2.6 subscriptions Million TV 1.6 subscriptions Year-end figures for number of employees and subscriptions refer to continuing operations, i.e. the group excluding the former segment region Eurasia. 5 Our Company The year in brief Annual and Sustainability Report 2015 2015 - AN EVENTFUL YEAR WITH MANY CHANGES 2015 was a year of tough challenges and crucial decisions about our future direction, and we also made some exciting new investments. We have taken important steps to achieve our vision to become a New Generation Telco. TeliaSonera and Arthur D. Little published a report on internet of things (IoT), showing a rapid growth in the Nordics. Advancements in connected TeliaSonera and Spotify cars, smart homes and digital expanded its innovation A Speak-up Line is health are expected to drive partnership. As part of the available around the clock market growth for IoT. boosted co-operation, in 22 languages. we made an equity investment of USD 115 million. After the earthquakes in Nepal, we made a USD 1 million donation to the Prime Minister Disaster Relief Fund to help rebuild Nearly 23,000 employees The Tele2 Norway the country. In addition, Ncell have completed the Code acquisition was approved by pledged USD 10 million over of Conduct e-learning the authorities and our several years for the same and virtually all, ambition is to provide 98 reason. percent population coverage 4,800 employees in Eurasia, for 4G in 2016. have participated in face-to-face anti-corruption training. 6 Our Company Annual and Sustainability Report 2015 The year in brief CONTINUING OPERATIONS CONTINUING AND DISCONTINUED OPERATIONS Financial overview Financial overview Financial key ratios 86,569 17,814 1.97 9.3 Operating income excluding non-recurring items Return on equity Net sales (SEK million) (SEK million) Earnings per share (SEK) (%, rolling 12 months) 25,281 9,532 16,550 8.9 EBITDA excluding non- Return on capital employed recurring items (SEK million) Net income (SEK million) Free cash flow (SEK million) (%, rolling 12 months) 29.2 9,362 3.00 1.53 Net income of which attribut- Net debt/EBITDA excluding able to owners of the parent non-recurring items EBITDA margin (%) company (SEK million) Proposed dividend (SEK) (multiple, rolling 12 months) Our Lithuanian subsidiaries – the fixed line operator TEO and the mobile operator Omnitel – joined forces, strengthening We announced that a our core business in process had been initiated in the Nordics and Baltics. Every three to four minutes order to reduce the presence around the clock, one Swedish in region Eurasia and over home is connected to Telia time fully leave. fiber. We published a Sustainability update January – June, including We agreed to sell our stake law enforcement disclosure in the Nepalese operator Johan Dennelind publicly report statistics, which were Ncell to Axiata, one of Asia’s endorsed the launch of the assured by the auditors. largest telecom operators. new United Nations Global We will also dissolve the Goals and all subsidiaries economic interests in helped making them known the local ownership. The to our customers across our transactions are conditional footprint. on each other. 7 Our Company Comments by the CEO Annual and Sustainability Report 2015 WE DON’T WANT TO BE SOMETHING ELSE. WE WANT TO BE SOMETHING MORE Dear shareholders and TeliaSonera followers. The only thing customers. We still have a lot of streamlining to do, but we know for sure about the future is that it will be different we aim for less manual work and lower costs, which will from now and the past and that the rate of development is improve our customer experience and competitiveness. unlikely to slow down. Those looking back with nostalgia The transition from