financial statements for 2000 & business and strategy overview

Q4 Report February 12, 2001 / 1

Financial Statements for 2000 &Business and Strategy Overview

February 12, 2001


Contents

• Financial OverviewKim Ignatius

• Business and Strategy OverviewKaj-Erik Relander


Consolidated Income StatementMEUR

RevenuesEBITDAOperating profit

2000 %1999 Q4/2000

1,849668387

11206352

560849

511180102

• Revenue growth of 11% as targeted• EBITDA gains from Turkcell IPO and Aerial/VoiceStream merger• Comparable EBITDA of MEUR 501 lower due to increased inputs by

MEUR 240 in New Services; impact highest in Q4 (MEUR 90)• Excluding additional inputs, comparable EBITDA margin 36%

Q4/1999

2,0572,0471,748


Equity incomeNet financial expensesProfit before extraord. items and taxesEarnings per share

• Interest expenses related to German 3G license capitalized in Sonera’s accounts• High financial income partly offsets increased interest expenses• Amortization of 3G licenses in Sonera’s accounts begins when operations start• Comparable profit before extraordinary items and taxes MEUR 314• Comparable Earnings per Share EUR 0.31

2000 %1999 Q4/2000 Q4/1999

121(9)

1,8602.05

110-

4970.51

10n/a274302

18(3)24

0.09

65

1130.11

Consolidated Income Statement (cont’d)MEUR


Divisional ProfitabilityMobile CommunicationsMEUR

• Strengthened GSM market share• 18% increase in GSM subscriptions during 2000 • 36% growth in non-voice revenues during 2000• Increased ARPU and continuously lower churn• EBITDA impacted by international 3G licence costs (MEUR 2),

and capital gains (MEUR 11) in Q4• Domestic Mobile EBITDA above 47%


2000 %1999 Q4/2000

966468345

151418

290147111

25812087

Q4/1999

1,108535406


Divisional ProfitabilityMedia Communications and New ServicesMEUR

• SmartTrust: full year pro forma revenues increased 79% from MEUR 14 to MEUR 25• Zed: access to 80 million customers through announced operator deals, full year pro

forma revenues MEUR 9.3• EBITDA impacted by increased inputs towards year-end, and capital losses MEUR 13 in Q4

SmartTrustZedOther New servicesTotal

2000 %1999 Q4/2000 Q4/1999

187

229254

n/an/a175175

n/an/a3145

82

6474

n/an/a4545

Total revenues

SmartTrustZedOther New servicesTotal

(65)(102)(136)(303)

n/an/a(47)(47)

n/an/a

(189)(545)

(21)(44)(62)(127)

n/an/a(22)(22)

EBITDA


Divisional ProfitabilityFixed Network Voice and Data ServicesMEUR

• Sales on Russian cable capacity increased leased lines revenues by 63%– Voice revenues decreased by 4%

• Full year EBITDA includes capital gains of MEUR 26• Increased efficiency of operations


2000 %1999 Q4/2000

57020098

12639

1475223

1555634

Q4/1999

573252136


Divisional ProfitabilityEquipment Sales and Other OperationsMEUR

• Total revenues impacted by sale of maintenance operations to IsoWorks in 1999– Equipment sales up 10%– Construction and maintenance up 42%

• Full year EBITDA includes capital gains of MEUR 12


2000 %1999 Q4/2000

173474

(2)2

550

61126

62267

Q4/1999

1694826


Associated CompaniesMEUR

2G mobile associates3G mobile associatesFixed network associatesOther associated companiesGoodwill amortizationTotal

147(2)384

(66)121

156-

275

(78)110

88990855713n/a

2,367

2000 1999 2000Equity income Book value

• Turkcell customers at 10 million– Result impacts from accounting change, interconnection expense and lower

ownership• Good profitability in Baltic fixed network joint ventures


UMTS Financing

• Sonera invested EUR 4 bn in four European UMTS licenses

– Germany 42.8% (license term 20 years)

– Italy 12.55% (15 years)

– Spain 14.25% (20 years)

– Norway 50% (12 years)

• Investments in 3G to be financed by sale of 2G and other assets

– Turkcell IPO in July 2000

– VoiceStream + Powertel to Deutsche Telekom

– Other sales


UMTS Financing (cont’d)

• Capital structure in 3G joint ventures to be 50% debt financed

– Non-recourse financing in place for Xfera as targeted

– Similar financing negotiations for German JV in final stages

• Sonera and Telefónica implementing potential strategic sell-down

in Germany

• Sonera’s total equity investments through 2005 EUR 5 - 6 bn

• Committed to maintain single-A rating


UMTS Financing through 2005

Major partners includeTelefónica in Germany and Italy,

Vivendi and ACS in Spain, and Enitel in Norway

Sonera´s total share of financingthrough 2005 EUR 5-6 billion

Total Joint Ventures

Licence fees36%

Network capex 32%

Cash opex + interest

32%

Financing needs

Financingstructure

n the region of EUR 30 bn

Equity50%

Debt50%

Non-recoursefinancing

Turkcell IPO ~15%

Sale of US stakes ~65%

Sale of Other Assets ~20%


Outlook for Year 2001

• Revenue growth to accelerate

• Media and New Services EBITDA slightly better than 2000

• Group comparable EBITDA to grow from 2000 level

• Profits from 2G associates to offset losses from 3G associates

• Significant sale of non-strategic 2G assets to strengthen the balance sheet

• Financial expenses to grow due to higher net debt level

• No significant cash investments planned


Sonera’s Business Environment

• Economic growth to slow down in many markets

• Intensifying competition in Sonera’s business areas

• Increased competition and price pressures make Sonera’s growth

targets challenging• Revenue growth acceleration possible only through Sonera’s growth strategy

• Implementation of Sonera strategy requires market driven participationin consolidation


Sonera’s Objectives

• Strong 2G and 3G mobile operator in Europe

• Growing fixed line operator in the Baltic Sea area

• New service businesses in selective global markets


Sonera’s Strategy

• To grow and develop existing 2G operations

• To start 3G operations in Europe

• To launch new service businesses in selective European, Asian and US markets

• To participate in industry consolidation to ensure scale economics


Sonera’s Key Targets• To maintain good profitability through increased cost efficiency

• Strong partnerships in marketing and product development

• Reallocation of assets from 2G to 3G

• To utilize growth opportunities in new service businesses as markets open:- efficient risk management achieved by closely monitoring

market performance in each market

• Using expertise as service provider and network operator to build scale


3G Markets Update

• Group 3G in Germany (estimated launch 1Q 2002):- vendor selection and financing negotiations in final stages- management in place, brand under development- aim to launch service in 2001- market being thoroughly researched enabling customer segmentation

• Xfera in Spain (estimated launch in 2H 2001):- network under construction, non-recourse financing in place

- organization in full speed, personnel 300

• IPSE in Italy and Broadband in Norway (estimated launches 1Q 2002):- vendor selection and financing negotiations underway

• Sonera in Finland:- Nokia and Ericsson providing network, financed by own cash flow- services up and running in major cities in January 2002


Sonera Zed Progress

Recent operator deals in Germany, Italy and Finland (Radiolinja)> access to 80 million customers

Service launch expected:• D1, Germany 16.8 Q2/2001• D2, Germany 17.3 Q2/2001• E-Plus, Germany 5.8 Q2/2001• KPN Mobile, Netherlands 4.4 launched Q3/00• Mobile One, Singapore 0.6 Q1/2001• Powertel, USA 0.8 Q1/2001• Radiolinja, Finland 1.2 Q1/2001• Sonera, Finland 2.3 launched Q2/99• Smart Comm, Philippines 2.6 launched Q4/00• TIM, Italy 20.7 Q2-Q3/2001• Turkcell, Turkey 7.2 Q1/2001


Sonera Zed Progress (cont’d)

Five data centers up and running in Europe, Asia and US:• enables worldwide delivery of zed services

Zed for Business launched in Finland:• first services company calendar and e-mail via SMS/WAP• mobile access to company intranet

Revenues:• 2000 pro rata about MEUR 10 up to MEUR 50 in 2001• primarily from SMS text messages until year end 2002


Sonera SmartTrust Progress

• Across Wireless and iD2 operationally and legally merged:SmartTrust in a possession of complete product range to enablesecure and manageable e-services on fixed and wireless Internet

• Strengthened its position in Europe, and advanced strongly inAsia-Pacific and South Africa

• To date 60 operator and 160 corporate customers

• Market for secure wireless Internet solutions predicted to grow rapidly• Revenues to double this year from MEUR 25 pro forma in 2000


Other New Service UpdateSonera Plaza, number one ISP and Internet portal in Finland:

• nearly 1.5 million different monthly visitors• 239 000 subscribers at the end of last year• developing new center with personal financial services, info,

e-commerce, entertainment etc.

Sonera Info Communications, global growth of directory services: • operations in Finland, Sweden, France, Netherlands, Philippines

and Singapore• start-ups in Italy, Spain and UK• strategic partners in UK, US, Israel and Finland

Sonera Juxto, focus on wireless ASP:• following the acquisition of Swedish Frontec

corporate services launched also in Sweden


Outlook for Year 2001

• Revenue growth to accelerate

• Media and New Services EBITDA slightly better than 2000

• Group comparable EBITDA to grow from 2000 level

• Profits from 2G associates to offset losses from 3G associates

• Significant sale of non-strategic 2G assets to strengthen the balance sheet

• Financial expenses to grow due to higher net debt level

• No significant cash investments planned

financial statements for 2000 & business and strategy overview

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