Annual Report 2017 CONTENT Letter from the CEO 4 Group Executive Management 6 Letter from the Chair 8 Board of Directors’ Report 10 The Board 22 Corporate Governance 24 FINANCIAL STATEMENTS TELENOR GROUP Consolidated Income Statement 42 Consolidated Statement of Comprehensive Income 43 Consolidated Statement of Financial Position 44 Consolidated Statement of Cash Flows 45 Consolidated Statement of Changes in Equity 46 Notes to the Financial Statements 47 FINANCIAL STATEMENTS TELENOR ASA Income Statement 110 Statement of Comprehensive Income 111 Statement of Financial Position 112 Statement of Cash Flows 113 Statement of Changes in Equity 114 Notes to the Financial Statements 115 Responsibility Statement 128 Statement from the Corporate Assembly of Telenor ASA 129 Auditor’s Report 130 Definitions 135 4 TELENOR ANNUAL REPORT 2017 LETTER FROM THE CEO LETTER FROM THE CEO CONNECTING YOU TO Good traction on transformation In 2017, we have been able to get good WHAT MATTERS MOST. traction on our transformation agenda EMPOWERING across all business units, realising efficiencies and simplifying both our Connecting people, business SOCIETIES. portfolio and our business processes. This and societies have been the has resulted in easier and more engaging core of our business for more than 160 years. Today, we do customer journeys and core operations so with more relevance and Connecting people, business and that lend themselves even better to personalisation than ever. societies have been the core of our automation and digitalisation. Our efforts We’re making sure that our business for more than 160 years. Today, make Telenor more fit for the future and customers are connected to we do so with more relevance and positions the company for further growth. what matters most in their personalisation than ever. Delivering with We have streamlined our portfolio, everyday lives. To us, it’s efficiency requires continually exploring preparing our exit from India and further more than good business. It’s smarter and simpler ways of working, and reduced our holding in VEON, and empowering societies. this transformation remains our top focused our investments, for instance of priority. We’re making sure that our online marketplaces, in Asia. Financially, customers are connected to what 2017 was a year with outstanding matters most in their everyday lives. To performance in all our business units – – Sigve Brekke, CEO us, it’s more than good business. It’s with improved profitability and reduced empowering societies. costs. As a result, our shareholders have seen more than 40 per cent return on More similar than different their investment during 2017. This is a Close to 70 percent of the world’s testimony to the robustness of our population are customers of a telecoms transformation agenda. company. 20-30 billion things are with global and local partners, we enable, expected in global networks by 2020. All Enabling and preparing for the develop and deliver innovations that turn of us spend more time on our future digital life into life itself. Today, we’re smartphones, raising demand for data: Transformation is challenging because it involved in making cities and from 3 to 22 GB/month in Europe, from 2 means stopping doing some things we’ve transportation systems smarter, making to 12 GB/month in Asia by 2022, some excelled at in the past. A focused Telenor healthcare more efficient and affordable, estimate. All of us – because we’re no means we will be directly involved in a and even help count polar bears at different from our customers – expect narrower set of activities. It means we Svalbard using drones. Doing this requires excellent connectivity, great coverage, shed legacy systems and embrace leaner, new ways of working, and updated skill speed and all the digital experiences the more software-based solutions. But sets and competences. We invest in internet can offer. Digitalisation offers prioritising and digitalising the core does reskilling and upskilling our workforce, for new and more efficient ways to deliver not limit our impact or reach: instance by mandating minimum 40 hours and capture this value. digitalisation continues to impact all of learning for all employees per year. sectors the societies we serve. Together However, higher efficiency in operations LETTER FROM THE CEO TELENOR ANNUAL REPORT 2017 5 and reduced demand for some of our to emerge in and outside of our markets, sustainable growth and competitiveness. traditional services, for instance 20 per from small and big players. We need to And we believe we can take leading cent reduction in inbound call centre continuously explore and adapt across digital positions in selected markets. traffic over the last year, means that our global footprint. As a group, however, Telenor will have less direct employees in we maintain four key beliefs that are the Telenor continues to seek growth and the years to come. We do not believe in driving forces behind our action plan: renewal, to simplify and become more digitalisation as a job killer: like previous efficient. We do so with a global winning technology advances, we believe new jobs We believe in internet access as the team bound together by a commitment to and opportunities will come in its wake. foundation of our business. We believe responsible business. This is how we personalisation, based on responsible continue to deliver what matters most to With focus and speed into 2018 application of customer data, will our customers. It is how we create value for Our industry, and the world, are moving stimulate customer engagement and shareholders and continue our policy of faster and are more unpredictable than capture value. We know that efficient continually increasing dividends. And, it’s ever. We see and expect new challenges operations will be a prerequisite for how we in sum are empowering societies. 6 TELENOR ANNUAL REPORT 2017 GROUP EXECUTIVE MANAGEMENT GROUP EXECUTIVE MANAGEMENT Sigve Brekke Wenche Agerup President and Chief Executive Officer EVP, General Counsel and Chief Corporate Affairs Officer Ruza Sabanovic Alexandra Reich EVP and Head of Technologies & EVP and Head of Central & Eastern Services Europe Cluster, CEO Hungary Petter-Børre Furberg * Up until 1.1.18 Jon Gravråk held the EVP Emerging Asia Cluster, Acting posistion as EVP & Head of Digital EVP & Head of Digital Businesses* Businesses. GROUP EXECUTIVE MANAGEMENT TELENOR ANNUAL REPORT 2017 7 Jørgen C. Arentz Rostrup Morten Karlsen Sørby EVP and Chief Financial Officer EVP and Head of Transformation Svein Henning Kirkeng Berit Svendsen EVP and Head of Products and EVP and Head of Scandinavian Marketing Cluster, CEO Norway On 14 March 2018 Lars-Åke Norling Cecilie Blydt Heuch stepped down from Group Executive EVP and Chief People Officer Management and as EVP and Head of Developed Asia Cluster. 8 TELENOR ANNUAL REPORT 2017 MESSAGE FROM THE CHAIR LETTER FROM THE CHAIR MESSAGE FROM THE CHAIR TELENOR ANNUAL REPORT 2017 9 The year of 2017 was characterised by transformation and Telenor’s strategy towards clarification of Telenor’s strategic direction, and the Board of 2020 is based on driving Directors expresses its acknowledgement to the employees of and capturing growth and becoming even more efficient Telenor for their strong efforts and achievements. in how Telenor operates, delivers services and how In 2017, the Board of Directors focused on implementing the customers experience the strategy set in December 2016. We entered the year with a clear company. To be the trusted roadmap on how to create and capture value for our shareholders, partner to our customers in customers, employees and society. Portfolio simplification, their digital life is the very digitalisation, innovation and governance are key elements of the essence. new strategic direction. Digitalisation of processes to foster strong and engaging relationships with customers, while at the same time capturing efficiency opportunities, have been pivotal to achieve the – Gunn Wærsted, Chair results in 2017 - as it will be also going forward. Changes in customer behaviour and preferences, as well as opportunities embedded in the use of new technologies are constant motivators and inspiration to Telenor’s innovative capabilities. Last year was also a year for a further strengthening of the governance framework. To support Telenor’s business integrity, risk management and performance in our diverse markets, we have strengthened the processes and structures connected to internal audit, investigation and compliance. Looking ahead, our focus will be on continued value creation. Telenor’s strategy towards 2020 is based on driving and capturing growth and becoming even more efficient in how Telenor operates, delivers services and how customers experience the company. To be the trusted partner to our customers in their digital life is the very essence. Telenor’s ambition is to be a top performing company delivering long term value for shareholders, customers, employees and society. 10 TELENOR ANNUAL REPORT 2017 BOARD OF DIRECTORS’ REPORT BOARD OF DIRECTORS’ REPORT KEY FINANCIAL PARAMETERS Financial priorities Telenor Group’s financial strategy and EBITDA margin around 36% and capex- delivering a year-on-year growth in financial ambitions are linked to our to-sales ratio of 15-16%. The outlook was dividend, are key elements in our corporate strategy, focusing on adjusted in the first quarter to reflect the approach to capital allocation. Also on continued growth, efficiency and new Group structure with India