A n n u a l R e p o r t 2 0 0 2

Tele2´s business

concept is to offer

simple, customer-

friendly services at

the lowest price.

page 14

The rapid growth in

Southern Europe is

driven by the intro-

duction of local pre-

selection.

page 28

Annual General Meeting

The Annual General Meeting will be held at 1:30 pm

on Thursday, May 15, 2003, at Gamla Stans Bryggeri,

Tullhus 2 at Skeppsbron in Stockholm.

Shareholders who wish to attend the Annual General

Meeting

must be entered in the register of shareholders

maintained by VPC AB (the Securities Register

Center) for the Annual General Meeting

(registration must be completed by Monday

May 5, 2003).

and notify the Company of their intention to attend

no later than 1:00 pm on Friday, May 9, 2003.

Notification can be made by phone to

+46 33 724 12 67, or in writing to:

Tele2 AB, Box 2094, SE-103 13 Stockholm, Sweden

label the envelope “Annual General Meeting” or by

e-mailing to: bolagsstamma03@tele2.com

Financial information

Quarterly report, January–March April 23

Annual General Meeting May 15

Quarterly report, January–June August 5

Quarterly report, January–September October 21

A key factor underlying

Tele2’s success is that

we communicate

with our customers

in a way that appeals

to them.

page 10

Significant events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Jan Hugo Stenbeck . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Tele2 in brief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

President’s message . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Market – continuing growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Business concept and business model . . . . . . . . . . . 14

Services and products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Nordic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Eastern Europe and Russia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Central Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Southern Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Luxembourg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Branded products & services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Report of the Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Cash-flow statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Change in shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Audit report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

Personnel and environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

Senior executives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Tele2 share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

Addresses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

Contents

A central market

driving force is that

customers are

increasingly seeking

total solutions.

page 12

+25%+12%

Significant events in 2002

• Profit after financial items rose by SEK 2,740 million to SEK 796 million.

• Cash flow after investments increased by SEK 2,903 million to SEK 1,849 million.

• Operating revenue jumped 25%, by SEK 6,197 m to SEK 31,282 m.

• EBITDA advanced to SEK 5,127 m, compared with SEK 1,698 m in 2001.

• A positive EBITDA was reported for fixed telephony in Central and Southern Europe,

SEK 4 million compared with a loss of SEK 1,916 m in 2001.

• 16.8 million customers at year-end, an increase of 12%.

• Tele2 acquires the British company Alpha Telecom.

Financial summary

MSEK 2002 2001

Operating revenue 31,282 25,085

Operating profit/loss before depreciation, EBITDA 5,127 1,698

Operating profit/loss after depreciation, EBIT 1,530 –1,356

Operating profit/loss after financial items, EBT 796 –1,944

Profit for the year 223 392

Earnings per share, after dilution 1.51 2.70

Average number of employees 3,115 2,172

Significant events at the beginning of 2003

2 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Jan Hugo Stenbeck 1942-2002

3

Tele2 AB

Dear Shareholder,

Jan Hugo Stenbeck was Chairman of the Board of Directors of Tele2 AB for nine years from1993 to 2002. He was also Chairman of Industriförvaltnings AB Kinnevik, Invik & Co. AB,Modern Times Group MTG AB, Millicom International Cellular S.A., Metro International S.A.and Transcom WorldWide S.A.

Jan passed away on 19 August 2002. He possessed a seldom-rivaled energy, panache, ambi-tion and sense of fun. His dynamism, curiosity and restlessness, combined with a charm,determination and healthy fear, drove him to create one of Europe’s most innovative andsuccessful group of companies. He would not compromise on quality or efficiency andnever ceased to surprise by breaking with convention. His insight – the ability to grasp thekey elements of an issue and articulate his views clearly - was his greatest attribute. Loyaltywas the quality that he valued most in others.

Born in Stockholm in 1942, Jan graduated in Law from Uppsala University in 1968 andwith an MBA from Harvard Business School in 1970. He then joined US investment bankMorgan Stanley and rose to become a Vice President in the Bank’s Corporate Finance depart-ment. He became a member of the Board of Directors of Industriförvaltnings AB Kinnevik in1971 and became Chairman in 1993, taking over at the helm of the Group that his father,the prominent lawyer Hugo Stenbeck, and the Klingspor and von Horn families had builtinto one of Sweden’s largest industrial investment companies.With uncanny foresight, Janbuilt a multinational information empire from this industrial foundation and transformedKinnevik into a holding company for new telecommunications, media and service businesseswhose brands are now household names not just in his native Sweden but a large number ofmarkets around the world.

As one of the leading entrepreneurs and visionaries of his generation, he started hundreds ofcompanies in his lifetime.They ranged from a college sweatshirt business established in1963 with 10,000 customers and less than US$1 million in annual sales to Europe’s leadingalternative telecommunications provider with over 16.8 million customers and US$3.7 bil-lion in annual sales. All the businesses share several common features – they all breakmonopolies in order to provide people with choice, grow sales aggressively, are highly com-petitive businesses with low cost structures, and they all aspire to be “best in class”.

4 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Jan Hugo Stenbeck

From Kinnevik’s roots in the traditional steel and forestry industries, Jan created a group ofcompanies that embraced new technologies and encouraged a competitive environment inthe Nordic region and then internationally. As a pioneer of mobile telephony in the early1980s, Jan formed a joint venture with British defense company Racal to acquire the UK’ssecond mobile phone license. Racal-Millicom evolved into the US$122 billion globaltelecommunications giant,Vodafone. Jan also acquired one of the first mobile telephonylicenses in the United States and this model was repeated around the world. Millicom andTele2 today hold fixed line or mobile telephony licenses in 37 countries – from Estonia to Sierra Leone, Bolivia to Russia, and Portugal to Laos – and have more than 20 million sub-scribers around the world.

In similar fashion, Jan introduced the first commercial television channel,TV3, to Scandinaviain 1987 by broadcasting commercial television into Scandinavia from London via the Astrasatellite in Luxembourg.The same approach enabled Sky Television to launch in the UK. TV3is now the largest pan-Nordic television channel and the Viasat satellite TV platform broad-casts 36 channels to nine countries, which are watched in 45 million homes.

The most recent project to achieve global scale and reflect the Group ambition is MetroInternational, the free newspaper group. Again challenging local market monopolies andestablished media in cities from Boston to Barcelona, Stockholm to Santiago, and Holland to Hong Kong, Metro now reaches over 12 million readers and is the world’s largest news-paper outside Japan.The company’s advertising revenues have grown at a compound annualrate of 47% since the launch of the first edition in Stockholm in 1995.

All of these companies continue to shape and adapt successfully to new developments as thirdgeneration mobile telephony and digital multi-channel television become realities, and asexciting new markets in Eastern Europe and Asia offer significant new opportunities.

Kinnevik has generated a compound annual average rate of return since 1976 of 13%, withthe result that one dollar invested in Kinnevik in 1976 would be worth over US$25 today.The Stenbeck Group of publicly listed companies had a combined market capitalization ofUS$6 billion in February 2003 and employed more than 25,000 people in more than 50countries around the world.

In typical style, the Stenbeck group of companies, combined established tradition with groundbreaking originality by welcoming in the new millennium with a spectacular fireworks andmulti-media display in Stockholm’s Old Town on New Year’s eve.The scale and complexity ofthis event not only mesmerized the record breaking crowd of 700,000 people and won its

5

Jan Hugo Stenbeck

place in the Guinness Book of World Records, but also offered a unique showcase for groupbrands such as Comviq,TV3 and Metro.The event perfectly illustrated Jan’s unusual combin-ation of creative flair and intricate planning.

On the day after he passed away and only a few months before his 60th birthday, one of Jan’sgreatest dreams was realized when the second Victory Challenge yacht was launched in Auckland, New Zealand. From the time that he had acquired the former committee boatof the New York Yacht Club, Jan had nurtured a dream to compete for one of the sportingworld’s oldest and most coveted trophies – The America’s Cup.The Victory Challenge syndi-cate brought together leading match race sailors from the Nordic countries in the first challenge by a Nordic crew for twelve years.

The challenge exemplified Jan’s approach, as he acquired one of the yachts used by TeamNew Zealand to win the Cup in 2000, then recruited and motivated world class boat design-ers, builders, and sailors, forged a team, and pushed each member to the limits of theirpotential, whilst maintaining a strict control on cost.This was an environment in which hethrived – high adrenaline competition, pitting the Nordic team against the world’s best.Every detail counted as seconds decided between success and failure. Victory Challenge woneleven races, including two victories over the New York Yacht Club, reaching the quarterfinalsof the Louis Vuitton Cup and becoming the most successful Nordic entry ever.The Challengegenerated unparalleled media airtime for its group sponsors, including live television cover-age in Sweden, Norway, Denmark, Switzerland, France, Italy, the United Kingdom, the UnitedStates and Canada.

Despite, and perhaps because, of all the achievements above, Jan remained a very private andmodest man. “Tell them that I am only a Basett hound breeder” he would reply to the end-less requests for interviews. As Jan always said, “if you can’t choose, you shouldn’t com-plain”. He led a unique life and is greatly missed. His legacy is an opportunity to build onhis success and your Board is firmly committed to fulfilling this responsibility. On behalf of the shareholders, customers, employees and business partners, the Board of Directorswishes to express its gratitude for the enormous contribution of Jan Hugo Stenbeck to thedevelopment of Tele2 and the other companies, which he founded and in which he engaged.

Stockholm, 27th February 2003Tele2 AB

The Board of Directors

Tele2 in brief

6 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Geo

grap

hic

mar

kets

:P

erce

ntag

e of

net

sal

es:

Nordic: 3 221 000

Eastern Europe and Russia: 1 366 000

Central Europe: 271 000

Southern Europe: —

Luxembourg: 181 000

Nordic: 2 822 000

Eastern Europe and Russia: 144 000

Central Europe: 3 316 000

Southern Europe: 5 129 000

Luxembourg: 41 000

Nordic: Sweden, Norway, Denmark, Finland.

Eastern Europe and Russia: Estonia, Poland, Czech Republic.

Central Europe: Germany, the Netherlands, Switzerland,Austria, UK.

Southern Europe: France, Italy, Spain, Portugal.

Luxembourg: Liechtenstein, Luxembourg, Belgium.

Num

ber

of c

usto

mer

s:

12countries 19countries

Nordic: Sweden, Norway, Denmark.

Eastern Europe and Russia: Estonia, Latvia, Lithuania, Russia.

Central Europe: Switzerland, the Netherlands, Austria.

Southern Europe: —

Luxembourg: Liechtenstein, Luxembourg.

11.4million5.0million

30% 68%

Mobile telephony Fixed telephony and Internet

7

Tele2 AB, formed in 1993, is the leading alter-

native pan-European telecommunications com-

pany offering fixed and mobile telephony, as well

as data network and Internet services, under the

brands Tele2, Tango and Comviq to more than

16.8 million customers in 22 countries. Tele2

operates Datametrix, which specializes in sys-

tems integration; 3C Communications, which

operates Internet payments, credit card trans-

actions and public pay telephones; Transac, which

offers data processing of credit card transactions

and billing; C3, which is active

in prepaid calling cards for

fixed telephony; and

Optimal Telecom, which

offers households low price

guarantees for telephony services. The Group

also offers cable-TV services and jointly owns the

Internet portal Everyday.com with MTG. Tele2

AB’s share is listed on Stockholmsbörsen

(Stockholm Exchange) under TEL2A and TEL2B

and on Nasdaq under TLTOA and TLTOB.

16.8 million customers in 22 countries

8 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Tele2’s corporate culture is marked by flexibility and

adaptability in reacting to changes in customer

requirements and other market conditions – while

focusing constantly on customer demand for attrac-

tive services and the lowest price.

Flexible solutions

Transcom is a pan-European partner that handles

Tele2’s customer relations. Transcom serves as Tele2’s

customer service and handles all of Tele2’s ongoing

customers matters.

Transcom

MVNO (Mobile Virtual Network Operator) is a concept

that makes it possible for Tele2 to offer its customers

mobile telephony without needing to invest in its own

mobile network. Tele2 buys the right to handle incom-

ing and outgoing mobile traffic. As an MVNO, Tele2

has its own SIM cards, bills its customers directly and

develops its own services. As a result, customers gain

access to Tele2’s services and lower rates. MVNO

offers major growth potential for Tele2 in countries in

which it has a large customer base in fixed telephony,

but lacks its own infrastructure.

MVNO

iHear is a cordless digital

telephone equipped with

a calling-router.

iHear

9

“I think Tele2 is good at marketing, adopts a com-

mercial approach and has an ability to get things done.

We’ve got a good deal to learn from them.”

Affärsvärlden, No. 3, 2003

To provide 100% availability in the networks, they are

monitored 24 hours a day, 365 days a year. This

ensures that our customers can communicate with as

few interruptions as possible.

Anders Igel, President of TeliaSonera Victory Challenge

Tele2 sponsored Victory Challenge – the Swedish

challenger for the America´s Cup in 2003. Victory

Challenge went all the way to the quarterfinals outside

Auckland in New Zealand. Tele2 is currently active in

22 countries and the exposure provided by the sailing

contests was a very effective way of strengthening the

brand among existing and new customers.

Network Management

Tele2 now has GSM licenses in all eleven of its oper-

ations in Russia. Preparations for the GSM network

build-out are well advanced and general agreements

for delivery of GSM infrastructure have been reached

with suppliers.

GSM licenses in Russia

10 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Tele2 is a unique company

Tele2 is the only telecom company that has

a pan-European market in fixed network

telephony. As the leading alternative tele-

com company in Europe, we can state with

satisfaction that our subsidiaries in country

after country report positive operating profit

before depreciation about three years after

start-up.

The image of Tele2 as primarily a Swedish

or Nordic company is increasingly inaccur-

ate. Each of our subsidiaries in France,

Italy and the Netherlands have more fixed

network customers than Tele2 in Sweden.

Tele2 is a unique telecom company

since we are not burdened by major invest-

ments requiring write-offs. Tele2 reported

a positive bottom line in 2002 despite

write-offs for our 3G venture in Norway.

Tele2’s profit before and after deprecia-

tion/amortization shows a much smaller

difference than other telecom companies.

Focusing on markets and customers

instead of on costly investments in tech-

nology was the basic philosophy of Tele2’s

founder Jan Stenbeck from the very begin-

ning. Jan Stenbeck’s passing away in

August 2002 was of course a profound loss

for Tele2, but the founder’s basic ideas

remain intact. Tele2 is now working active-

ly to develop these basic concepts through-

out Europe.

Tele2 now has a solid financial base.

The fact that the company began to report

a profit in 2002 is, of course, significant,

but perhaps what is even more impressive

is that cash flow during the year was boost-

ed by almost SEK 3 billion after invest-

ments. The company’s disposable liquid

funds, including unutilized overdraft facil-

ities, amounted at year-end to slightly

more than SEK 2.3 billion. Another key

benchmark of our solid financial base is

that net debt fell by SEK 1.6 billion dur-

ing the year and now amounts to SEK 7.7

billion.

This is a solid platform for continuing

operations.

The question posed for most telecom

companies today is: “Are there sufficient

funds?” The question I’m faced with is a

totally different one: “What will we do with

our funds?” The answer is easy to give:

We will continue to be a growth compa-

ny and win market share in markets in

which we are present. The exciting feature

is that we can personally set the pace with-

out viewing financial resources as a bottle-

neck.

Over a number of years I’ve stated that

we’ve got our fingers in the cookie jar. By

that I mean we are as close as possible to

our customers. We can see clearly how this

approach works in Estonia, Latvia and

Lithuania, countries in which we are high-

ly successful. I’m convinced that these

positive lessons can act as an excellent

guide as we increase the pace in our

Russian operations.

Tele2 started its operations in Sweden.

Operations there are wide-ranging and

highly important. This applies not least to

Comviq, which celebrated its tenth anni-

versary in 2002, and reported 3 million

mobile customers. Two million of these are

prepaid customers. Comviq’s mobile tele-

phony is based on our core values. Our aim

is always to give customers minimum

rates, while simultaneously developing

concepts and services.

Our fixed network companies are also

becoming mobile companies in pace with

deregulation. We’re focusing on the MVNO

concept, which means that we buy rights

to handle incoming and outgoing mobile

traffic from an established mobile opera-

tor. As an MVNO, we issue our own SIM

cards, invoice customers directly and

develop proprietary services. For the cus-

tomer, the difference between a subscrip-

tion with Tele2 as the MVNO or having a

subscription with the operator who owns

the infrastructure is merely Tele2’s lower

rates and services. Being a Service Partner

(SP) is less attractive for Tele2, since this

does not permit the same type of customer

contact.

Our efforts to develop fixed network cus-

tomers and transform them into mobile

customers is an expression of our cross-

selling strategy. Our large customer base is

being offered an increasing number of ser-

vices, which means lower costs for one

“new” customer.

Through MVNO´s, Tele2 is now trans-

forming part of its large stock of fixed net-

work customers in country after country

into Tele2 mobile customers. Mobile cus-

tomers accounted for the largest percent-

age of the increase in customers in 2002.

Tele2 returned its Norwegian UMTS

license during the year, opting instead to

sign an MVNO deal with Telenor.

European telecom deregulation is far

from complete, but the EU and the various

national supervisory authorities are now

worried by the threat that has emerged in

a number of countries, namely, that mar-

ket newcomers are disappearing so that

only the former monopolies remain. Since

“Tele2 is the world’s fourth fastest growing telecom/IT company…”Business Week, June 19, 2002

11

Tele2 is one of the few profitable European

telecom operators, our operations attract

substantial positive interest from the EU

and national regulatory authorities. As the

sole alternative pan-European telecom

operator, we are currently one of the few

examples of the positive effects of dereg-

ulation for companies and consumers.

Competition must continue in order to

ensure consumer value. This means that

the supervisory authorities have an interest

in maintaining competition. I definitely

feel that this represents a significant guar-

antee against national protection of the

former monopolies regaining the upper

hand. But there are definitely countries in

which one would wish for greater pressure

for change. This applies primarily to

Germany, but even in France this would be

very desirable.

UMTS (3G) continues to be a topical

subject. I never expected rapid 3G devel-

opment and therefore my message on this

point remains the same as in the past. We

gain a major advantage from expanding our

3G network in Sweden in cooperation with

Telia. Our 3G operations will most likely be

profitable earlier than in any other

European country. Our plan to commence

commercial 3G operations at the end of

2003 remains in place. But for consumers,

voice communications, SMS and MMS will

remain the most important features.

Subsequently, long-term 3G factors will

impact positively on earnings. But also in

this case I believe that our close-to-the-

customer work approach will offer advan-

tages. Our dialogue with customers is filled

with respect and interest in the customer’s

requirements. Not least, we are following

with great interest the use of mobile tele-

phony among young women, whom to date

have been major trendsetters in this area.

A key factor underlying Tele2’s success

is that we communicate with our cus-

tomers in a way that appeals to them.

Communication is fun, and fun shouldn’t

cost too much.

By rolling out Tele2’s concept across

Europe and taking our experience with us

from previously deregulated markets, we

are gaining a profitable customer base in

country after country.

But there’s no shortage of challenges.

My colleagues and I continue to focus on

offering additional services to our enor-

mous customer base. This is a guarantee

for continued growth and increased prof-

itability in the sprit of a small company.

Stockholm, February 2003

Lars-Johan Jarnheimer

“Tele2 is the only telecom company with a pan-European market in fixed telephony.”

12

Market – continuing growth

The European telecom market is charac-

terized by stiff competition, acquisitions

and mergers – but also by continuing

growth in demand.

Following deregulation in the EU,

numerous new players established a pres-

ence in the market, at the same time as

the former monopolies expanded into new

geographic markets.

Following a wave of investments in 3G

licenses, data networks and other applica-

tions, many companies have abandoned

the market, either as result of acquisition

or bankruptcy. One feature of the com-

panies that were pushed out is that they

lacked financial strength and/or a feasible

business model. This trend has created

opportunities for Tele2 to acquire cus-

tomers from these companies.

Continuing growth

At the same time as competition is stiff-

ening, the telecom market continues to

expand. For example, the total market for

fixed telephony, mobile telecom services

and Internet access in Sweden rose 7%

during the first six months of 2002, com-

pared with the same period a year earlier.

A central driving force in the market is

that customers are increasingly seeking

total telecom solutions. Tele2 has access

to services and expertise in mobile teleph-

ony, fixed telephony, Internet, data net-

works, cable-TV and broadband and is

working continually to transfer know-how

among the various areas and countries to

strengthen its customer offering. Tele2 has

had major success in cross selling new

products to its existing customer base.

In markets in which Tele2 is relatively

recently established, the strategy is to add

new services and products as deregulation

and market conditions permit. Tele2 has a

history of offering customers attractive

products at competitive prices.

Varying progress in deregulation

EU telecom markets were deregulated to

stimulate greater competition. The intro-

duction of new legislation designed to lead

to increased competition has, however,

progressed differently in various countries.

Germany, for example, has fallen behind

other countries as regards local carrier pre-

selection. In those countries in which local

pre-selection is made available for players

other than the former monopolies, such as

France and Italy, Tele2 has gained consid-

erable successes.

Also, the EU Commission believes there

is no effective competition in, for example,

broadband services via access networks,

meaning copper wire that connects switch-

es with end customers. The pricing applied

by the former monopolies discriminates

against newcomers.

Also, interconnect traffic charges are an

area in which improvements are required.

The interconnect traffic charge is the fee

paid by a telecom operator to enter the

access network. Interconnect traffic

charges are one of the largest expense

items for Tele2. Consequently, lower inter-

connect traffic charges provide highly pos-

itive effects.

The pricing originates from the former

monopoly’s attempts to retain control of

the access network. It is only when these

– and thus subscriptions – are exposed to

competition that deregulation of the mar-

ket will have a full impact.

MVNO offers new growth opportunities

In cases in which deregulation is effective,

new markets are opened up to new forms

of service suppliers. Both Mobile Virtual

Network Operators (MVNO) and Service

Providers (SP) have emerged as new busi-

ness models that add to competition in the

mobile market. In both cases, the operator

13

leases an existing network and thus avoids

building a new mobile network.

The difference between MVNO and SP

is a fundamental one. In the latter case,

the operator becomes a vendor of another

company’s telephony, since it only handles

outgoing traffic. MVNO means simply that

a mobile operator purchases radio access

from an existing mobile operator, but is

otherwise completely independent and can

develop services, payment forms and

direct traffic accordingly as if it were a con-

ventional mobile operator. The only differ-

ence between a conventional operator and

a real MVNO is that the MVNO has no con-

trol of coverage build-out. For the cus-

tomer, there is no difference between hav-

ing a subscription with a conventional

operator or having one with an MVNO.

The model opens major growth oppor-

tunities for a company like Tele2, which

has a large customer base in many coun-

tries but which does not have its own infra-

structure. During the year, Tele2 returned

its UMTS license in Norway and instead

elected to conclude an MVNO agreement

with Telenor. Tele2 is already active as an

MVNO in Denmark and the Netherlands,

and during 2002, an MVNO agreement

was signed with Connect Austria in Austria,

where service was launched in February

2003.

UMTS – third generation mobile telephony

Tele2 holds UMTS licenses for third gen-

eration telephony in Sweden, Finland

(through joint ownership of Suomen

Kolmegee Oy), Liechtenstein, Luxembourg

and Latvia.

In an effort to keep down costs of con-

struction and operation of the UMTS net-

work in Sweden, Tele2 and Telia have

established a jointly owned company,

Svenska UMTS-nät AB. Costs are curtailed

through the use of both companies’ exist-

ing infrastructure, such as telecom masts.

Tele2 has a strong brand, large cus-

tomer base, service development close to

customers, an efficient organization and

comprehensive technical know-how – fac-

tors that suggest success in the market for

3G-based services.

14 T E L E 2 A N N U A L R E P O R T 2 0 0 2

This is Tele2

Tele2, formed in 1993, is the leading alternative

pan-European telecommunications company and

is active in GSM, public telecommunications and

data networks, as well as Internet and cable-TV

services.

Tele2 AB

Lars-Johan Jarnheimer, CEO

Håkan Zadler, CFO

Southern Europe

France

Italy

Spain

Portugal

Branded products & services

C3

United Kingdom

Everyday

Eastern Europeand Russia

Estonia

Latvia

Lithuania

Poland

Czech Republic

Russia

X-source

Central EuropeGermany

Netherlands

Switzerland

Austria

Ireland

Nordic

Sweden

Norway

Denmark

Finland

Optimal Telecom

Datametrix

Luxembourg

Luxembourg

Liechtenstein

Belgium

3C

Transac

Based on customers’ needs, Tele2 shall through

simple, customer-friendly sevices and the lowest

price have the most satisfied customers in the

market.

Business concept

Tele2’s organization

Tele2’s corporate culture rests on three

fundamental values:

• flexibility

• informality

• cost-consciousness

Values

15

Strength factors:

The company’s strategy is reflected in:

• Being the price-leading operator in all markets

in which the Group is present.

• Price-leadership and the role of challenger to the

former monopolies have been decisive factors in

successfully securing new customers and thus

Tele2’s growth.

• When expanding into new markets, the aim is

to rapidly build up a customer base that can

subsequently be cross sold services in pace

with market maturity and deregulation to offer

more people the opportunity to communicate

less expensively through Tele2.

In existing markets in continental Europe,

future growth is expected to derive largely

from the cross-selling of services and

products to the existing customer base. In

less mature markets, the penetration rate

remains relatively low, permitting rapid

growth when an increasing number of

people demand attractive communications

services. Tele2 is also monitoring countries

bordering on current market areas.

Tele2 consistently attempts to transfer

know-how among its various product areas

and countries. Customer offerings and suc-

cessful concepts create synergies since

they can be more used effectively in sev-

eral markets, creating conditions for high-

er profitability through economies of scale

and better resource utilization.

Cost-consciousness also entails not

contracting and owning infrastructure

Baltic states are extremely important for

expansion in Russia. Know-how and experi-

ence from the Baltic market can be used

to gain efficient growth in Russia.

Rapid growth

In 2002, Tele2 was the fastest growing

telecom operator in Europe, thereby con-

firming the functional nature of its busi-

ness model.

Quality

Tele2 has a quality policy that serves as a

guide for all operations in the Group. One

of the most important means of attaining

the Group’s target is high quality in every-

thing it does. Tele2’s commitments,

actions and products will be perceived as

an expression of quality. The foundation

comprises the Group’s values and accu-

Strategies

Business model

• profitability

• low rates

• large customer base

• industry-leading efficiency

• well-known brands

• flexibility

• prompt adjustment to new customer

requirements and market conditions

• committed and skilled employees

when it is not necessary. In countries in

which Tele2 owns infrastructure, it would

not have been possible to compete with the

former monopoly without access to propri-

etary infrastructure.

The objective in each country is to reach

a positive operating income before depre-

ciation/amortization within three years

from the start of operations. Tele2 has

achieved this in all markets except

Germany, where deregulation has lagged

behind the rest of Europe.

In Southern Europe, with France and

Italy as the largest markets, Tele2 has

established itself as a strong brand and has

had great success in fixed telephony.

Operations in the Baltic States have

largely emulated Nordic activities with

great success – the area is one of the most

rapidly growing in mobile telephony. The

16 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Business model cont.

mulated expertise. Constant improvement

is the work motto.

The experience of a product or service

must always meet the customer’s expect-

ations. The customer is the center of atten-

tion and the key quality benchmark is cus-

tomer satisfaction. Customer surveys are

conducted regularly in an effort to improve

results consistently. Customers must

always feel confidence in Tele2 as a sup-

plier.

Opportunities in 2003

During 2002, Tele2 grew faster than its

competitors, generated the best cash flow

and improved earnings sharply.

Maintaining the balance between cus-

tomer growth, profitability and cash flow

continues to be the priority in 2003.

Tele2’s mobile operations are “Best in

Class” with very favorable margins in

Sweden. Tele2 has more than 3 million

mobile customers in Sweden. Profitability

in the Swedish fixed telephony operations

continues to be good.

The rapid addition of new customers in

the Baltic States is driven by mobile tele-

phony and particularly the prepaid card. In

Latvia, Tele2 acquired one of two UTMS

licenses. In January 2003, the market

opened for fixed telephony and Tele2

expects to introduce services during the

first half of the year. Tele2 launched fixed

telephony in Poland during the first quarter

of 2003 and plans to introduce local pre-

selection in the Czech Republic during the

year.

In Continental Europe, fixed telephony

operations continued to post strong growth

in 2002 and at year-end had 8.5 million

customers. Central Europe and Southern

Europe combined reached breakeven at

the EBITDA level during the year.

Introduction of local pre-selection in

Southern Europe fueled Tele2’s very rapid

development in the market area. Fixed

telephony was launched in Portugal in

2003.

With local pre-selection available in the

Netherlands since August 1, 2002, and

with an expected introduction in Germany

during 2003, revenues in Central Europe

will grow in 2003 without triggering any

rise in costs. As an MVNO, new possibili-

ties for growth are created. Tele2 has an

MVNO agreement with Telenor in Norway,

with launch planned for the first quarter of

2003. During 2002, Tele2 rolled out an

MVNO in the Netherlands and signed an

MVNO agreement with Connect Austria in

Austria.

In February 2003, Tele2 acquired Alpha

Telecom, the leading prepaid fixed tele-

phony operator in the UK for private indi-

viduals and the market leader in prepaid

cards for fixed telephony. Alpha will ben-

efit from Tele2’s strong market position

and will be able to expand to Tele2’s mar-

kets in Europe.

Good positioningTele2 always aims to improve

Carrier Pre-select Pre-selection means that customers can

select to use Tele2’s lower prices for their

fixed telephony. They no longer need to dial

a prefix. Local pre-selection means that

Tele2 also takes charge of local calls via

pre-selection.

Following deregulation in France, Italy

and the Netherlands – Tele2 began to offer

customers cheaper call rates using Tele2

via pre-selection. Tele2 continues to work

with the authorities in countries in which

pre-selection and local pre-selection have

not yet been deregulated.

The access network, meaning the cop-

per wire connecting households with the

telecom network, is still not open to com-

petition but is instead handled almost ex-

clusively by Europe’s former telecom mon-

opolies. As a result, customers who have

selected an alternative, must pay sub-

scription charges to the former monopoly.

However, we have succeeded in offering

subscriptions to customers in Denmark

and we are intensively pursuing this issue

in other countries. This gives our cus-

tomers one invoice and a better overview

of their telephony costs, resulting in more

satisfied customers and notably lower cus-

tomer turnover.

Prepaid telephonyPrepaid fixed telephony means that the

customer pays his/her own “call account”

which they then use when calling via the

fixed telecom network. For Tele2, the

service means fewer unpaid receivables,

lower customer churn and reduced invoicing

costs, and at the same time, it is positive

for cash flow.

Tele2 has had considerable success

with prepaid fixed telephony in France,

Italy, Spain and Finland.

iHeariHear is a cordless telephone equipped

with a calling-router that always connects

the call via Tele2, and thus provides access

to the company’s attractive rates. In recent

years, Tele2 has used the iHear telephone

successfully to increase customer satis-

faction, customer loyalty and call volumes.

The telephone is particularly effective in

countries where pre-selection is not avail-

able. Tele2 launched the latest Dect 3

model of iHear in 2002.

Telephone cardsSince 1999, C3 – Calling Card Company –

has sold calling cards for fixed telephony

in a number of markets in Europe. The call-

ing card is available in different denomi-

nations for domestic and international

calls and features a code. The customer

calls up the number indicated on the card

and dials in his/her code – then it’s just a

matter of calling cheaper with Tele2.

The calling card is marketed under a

number of brands and is sold primarily in

stores and news stands. C3 works closely

with Tele2, which provides the network

capacity.

Telephone booths, Internet terminals and WLAN Hot SpotsVia 3C Communications, Tele2 operates

credit card-based telephone kiosks and

Internet terminals in hotels, restaurants

and other well-frequented locations

throughout Europe. The kiosks and termin-

als are an excellent base for adding WLAN

Hot Spots (Wireless LAN) which permit a

link up with portable computers. Tele2

operates via the operator organization

Pass-One for global roaming among vari-

ous Hot Spots.

VoIPVoice over Internet Protocol – telephony via

the Internet.

During 2002, Tele2 conducted a num-

ber of successful tests using VoIP in broad-

band networks.

Tele2 offers fixed telephony, mobile telephony, Internet services, and data network services,

cable-TV and content services in 22 countries in Europe.

Tele2’s product strategy is to have a joint product portfolio with fixed telephony as a base and

add dial-up Internet services, mobile telephony and broadband when the market in each country

is sufficiently mature. This strategy permits Tele2 to deliver and continually improve products that

satisfy customer demands for low-cost, high-quality communications services.

17

Products and services

Fixed telephony

18 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Tele2 offers mobile telephony via a number

of subscription forms and prepaid cards.

Regardless of whether the service targets

consumers or the corporate market, it is

positioned as price leader.

Having a mobile telephone with a pre-

paid card is growing in popularity and has

contributed to Tele2’s rapid growth. It’s

easy to understand why many people opt

for prepaid calling cards. Customers can

start calling immediately, they have good

control of their telephone costs and can

always check how much credit they have

left. They also avoid bills and credit

appraisals are unnecessary.

A major innovation in Sweden during

2002 was the introduction of a service

allowing Tele2 customers to receive and

infrastructure. Capacity is leased instead

from a network owner. In countries in

which Tele2 does not have a mobile

license, the MVNO concept permits Tele2

to supply fixed telephony with a full range

of services in subscription and prepaid

calling cards for mobile telephony.

Tele2 expects MVNO´s to expand in the

immediate future, since deregulation of

the EU telecom market is gaining an

impact and the mobile market is maturing.

Tele2 operates as a MVNO in Denmark and

the Netherlands. During 2002, a MVNO

agreement was signed with Telenor in

Norway and with Connect Austria in

Austria, where the service was subse-

quently launched in February 2003.

Dial-up InternetDial-up Internet means that customers are

not permanently connected but can use a

modem when they wish to link up to the

Internet. Dial-up Internet is available in

subscription form and as a link-up without

a fixed charge, for which customers pay

only for the time they are connected. The

primary growth in the area is represented

by connections without a fixed charge.

Tele2 is the market leader in Scandi-

navia for dial-up Internet and has very suc-

cessfully launched Internet with subscrip-

tions as base in France and Italy in 2002.

Dial-up Internet will be launched in more

countries during 2003. The Internet product

is continually upgraded with new services.

Wireless broadbandBroadband is a method for transferring

data in the form of text, images and voice

at very high speeds. Wireless broadband

via WLL (Wireless Local Loop, via radio net-

works) is a way of circumventing the access

network when broadband connections via

the conventional network are impossible

due to technical, legal or business reasons.

The success of wireless broadband also

indicates that the former monopolies have

an erroneous and ongoing monopolistic

approach in the pricing of broadband ser-

vices.

Tele2 offers wireless broadband via WLL

in parts of Poland, Czech Republic,

Finland, Norway, Sweden and Denmark.

ADSLADSL – Asymmetric Digital Subscriber Line

– is a technology that permits the use of

broadband via conventional telephone

lines. This area offers major potential,

especially since customers find the product

easy to use by customers, although pricing

by the former monopolies presents a major

obstacle to future growth. Tele2 is active-

ly continuing its efforts to find solutions to

the monopoly problem.

Tele2 offers ADSL in Sweden, Norway,

Denmark and Switzerland. Tele2’s ADSL

services have made a definite impact in the

Nordic market and the company has con-

solidated its position as the largest Internet

supplier in Scandinavia. ADSL will be intro-

duced in additional countries in 2003.

Metropolitan Area NetworksTele2 offers broadband at 10 Mbit/s in a

number of MANs (Metropolitan Area

Networks) in Sweden and Denmark.

In Sweden, the MAN is linked to Tele2’s

wide-ranging trunk network, Swipnet,

which was the first commercial IP network

in Sweden. In Denmark, MAN is linked to

the country’s largest trunk network.

Broadband via cable-TVAs early as 1998 in Sweden, Tele2 began

to offer broadband using cable-TV as the

carrier. During 2001 and 2002, a large

portion of the network was upgraded to

handle broadband. The offering is one of

the cheapest on the market.

Tele2 also offers broadband via cable-

TV network in Estonia and Lithuania.

Mobile telephony

Internet services

make calls outside Sweden using a pre-

paid card. This service has proved to be

very successful.

UMTSUMTS technology increases capacity in

mobile networks considerably compared

with GSM. Tele2 believes firmly that third

generation mobile telephony, 3G, will

involve a revolution for access to personal

information and entertainment by con-

necting mobile customers with mobile

broadband services such as e-mail, image

services, games and content portals.

Tele2 has UMTS licenses in Sweden,

Finland (via the jointly owned Suomen

Kolmegee Oy), Luxembourg, Liechtenstein

and Latvia.

MVNOMVNO – Mobile Virtual Network Operator

– means that Tele2 can act as a complete

mobile operator without owning its own

Cable-TV

19

Content services

Tele2’s strategy is to organize but not

develop content services (e-mail, news,

games, ringtones, image services) which

makes things easier for our customers. The

services are linked to the portal

Tele2Internet that can be accessed irre-

spective of the form of communication.

Tele2 has a payment solution attached to

the platform for micro-payments to the

companies supplying services, indepen-

dens of access. The business model is

based on distribution of revenue.

During the year, the Tele2 SelfNavigator

service was launched, permitting cus-

tomers to review, add to or terminate cer-

tain services on the Internet. It is also pos-

sible to view billing information and account

information.

Tele2 also offers a large amount of SMS

and WAP-based services in various mar-

kets. For example, Tele2 was one of the

first companies in Estonia to offer payment

of parking charges via mobile telephone.

Tele2 was also the first operator to give

customers in Luxembourg the potential to

send images using MMS.

Under the Kabelvision brand, Tele2 offers

one of the market’s best basic packages in

Sweden at an attractive price. Kabel-

vision’s basic package (Pluspaket) offers

access to 15 popular TV channels such as

MTV, Visasat Sport, Discovery, Eurosport

and E!. In addition, Kabelvision offers two

highly competitive expanded packages,

Silver and Gold, as well as premium

channels such as Canal+ and TV1000.

Available throughout Sweden, Kabelvision

has 310,000 household subscribers –

making it the country’s second largest

cable-TV operator. Tele2 also conducts

cable-TV operations in Estonia and

Lithuania.

20 T E L E 2 A N N U A L R E P O R T 2 0 0 2

2002 2001 Change

Number ofcustomers, 000s 6,252* 6,274

Net sales, SEK M 13,566 11,898 +14%

EBITDA, SEK M 4,814 3,768 +28%

*including adjustment to the Group’s definition of active customer

“We’re stronger than ever in theNordic region.”

Market area

Nordic

SwedenTele2 was established in Sweden and this

market accounts for the Group’s broadest

product portfolio. Sweden is also a key test

market for new services and their develop-

ment, which are subsequently implement-

ed in other Tele2 countries.

During 2002, Tele2 Sweden sharpened

its focus on profitability and sales volumes.

Efforts in this direction have highlighted

the primary products – mobile telephony,

fixed telephony, Internet, data network ser-

vices and cable-TV.

Sharper customer focus

Two customer areas were created: Private

Customers and Corporate Customers. The

customer areas are in charge of services

and packaging as well as for reaching their

preset profitability targets. The change has

led to a clear customer focus. The primary

results are more effective distribution as

well as a distinct product offering. The

measures are a major factor underlying

higher profitability and have been con-

ducted in all product areas.

Higher market shares

Tele2 Sweden won market share in all

product areas. The most aggressive growth

was noted in Comviq prepaid, with the num-

ber of customers exceeding two million dur-

ing autumn 2002. The total number of cus-

tomers exceeded three million at year-end.

Consolidated price position in mobile

Tele2 has consolidated its price position in

the private and corporate markets. Private

customers are offered “Five ways of

calling more cheaply” and corporate cus-

tomers have two new subscriptions

“Company” and “Company+”. At the close

of the year, Comviq celebrated its 10th

anniversary with a number of activities,

which included presenting existing and

new customers with lower calling prices.

Comviq was the first operator in Sweden

to offer all prepaid card customers the

opportunity to call and receive calls from

abroad.

For corporate customers, Tele2 launched

mobile centrex, which offers the potential

to use switch functions directly in the

mobile phone. Customers are seeking to

integrate solutions between fixed and

mobile telephony and the launch of cen-

trex is a step in this direction.

Fixed telephony

In February Tele2’s fixed telephony cus-

tomers were also offered pre-selection for

local calls. This means that customers

were also able to benefit from Tele2’s low

prices for local calls. Tele2 is working

towards achieving a solution to offer fixed

telephony susbcriptions, since this offers

additional potential to reduce customer

costs and enhance customer loyalty.

Launch of ADSL

In the case of Internet customers, the

focus has been on ADSL, which was

launched in June. Due to unreasonable

pricing from the network owner, Tele2 is

unfortunately unable to offer a price that

is substantially below that of competitors.

However, it is gratifying to see that the dial-

up Internet service, Free2Connect, has

shown stable growth.

Tele2 also launched IP-VPN for the data

network market. The launch marked a

major sales success and it is planned to

enhance the product portfolio in data net-

works during 2002.

Stronger brands

A logical development of the above is the

growing recognition of the Tele2 and

Comviq brands. Currently, 97% of

Sweden’s population recognizes both

brands.

Fredrik Berglund

Market Area Director, Nordic

Brands Tele2, Comviq, Kabelvision, Datametrix,

Uni2, Optimal, Tango, Everyday, Get2Net

2002 Increased market shares

Improved profitability

Market positionamong alternative

Service Launch operators

Sweden Mobile 1981

1Fixed 1993Internet 1991Cable TV 1986

Norway Mobile 2000

1Fixed 1998Internet 1997

Denmark Mobile 2000

1Fixed 1996Internet 1997

Finland Fixed 2000 Internet 2001

Market area’s share

of the Group’s

net sales

43%

21

NorwayDespite a slower growth rate in the market

as a whole, Tele2 continued to expand and

win market share. Growth, combined with

cost control, resulted in record high prof-

itability for Tele2 Norway.

Fixed telephony

Tele2 strengthened its customer offering

and sales rose throughout the year, despite

aggressive marketing from old and new

competitors.

Mobile telephony

Tele2 increased its market share and

strengthened its position in the mobile

market, with revenue showing a stable

increase during 2002.

Tele2 successfully recruited mobile

customers from Tele2’s existing customer

base in fixed telephony. Cross-selling

offers lower costs in attracting new cus-

tomers, moreover this type of customer

calls more frequently and is more loyal

than other customer groups.

In September Tele2 signed an MVNO

agreement with Telenor. The agreement

offers Tele2 the potential to transfer cus-

tomers currently covered by the present

Service Provider agreement to the more

competitive MVNO service. The agreement

permits Tele2 to develop new, price-lead-

ing services for its customers in Norway.

In November, Tele2 returned its UMTS

license to the Norwegian authorities.

Consequently, Tele2 no longer has any

commitments or expenses linked to the

expansion of the UMTS network in Norway.

Internet

Although the market for dial-up Internet

continued to weaken in 2002, Tele2 man-

aged to raise its market share. Marketing

campaigns in January and December were

successful in recruiting a substantial num-

ber of new customers. Cross-selling has

also proved to be highly successful, result-

ing in a larger number of more loyal cus-

tomers.

In August, Tele2 launched its ADSL ser-

vice for households, which offers cus-

tomers access to the market’s lowest rates.

Corporate market

Tele2 has a complete range of services for

companies, but focuses particularly on

offering standardized package solutions to

small and large companies. Standard-

ization of the product portfolio is a suc-

cessful concept in reaching profitability in

the corporate market.

Denmark The Danish telecom market is undergoing

restructuring and consolidation. A number

of players have withdrawn from the mar-

ket. Tele2 is continually seeking to max-

imise the resulting emerging opportuni-

ties.

Tele2 focused on controlling growth and

costs and is entering 2003 with good

prospects in terms of growth and earnings.

A taste for actionTele2 – in pole position

Mobile telephony

2002 was a year of consolidation, restruc-

turing and reassessment of the market for

Danish mobile operators. Prices in the pri-

vate market have declined and competi-

tion continues to be tough. Tele2 conduct-

ed measures aimed at raising profitability

from mobile services, which led to a reduc-

tion in costs for customer procurement and

an increase in call volume per customer.

During early 2002, Tele2 launched a

subscription service, which reported rapid

growth.

Internet

Tele2 ASDL was launched in August 2002.

The strategy is to attain balanced and cost

effective growth. The launch of broadband

has meant a reduction in dial-up traffic in

the overall market. But customer intake

continues nonetheless.

A review of the company and its inter-

nal processes permitted the achievement

of synergies between Tele2 and UNi2, the

brand for corporate Internet.

Fixed telephonyDuring the year, Tele2 launched what

could be viewed as an alternative to fixed

price telephony, namely, the Weekend+

service, which offers 24-hour free tele-

phony each Sunday. The service attracted

considerable attention and appeals to the

conservative, fixed telephony market.

Two small operators with the corporate

sector as their niche were acquired during

the year, which contributed to an increase

in the customer base and revenue in the

corporate segment.

At the end of the year, the Danish

authorities presented new regulations that

entail a reduction in interconnect charges

in certain areas during 2003.

FinlandTele2 offers fixed telephony in Finland in

the form of domestic calls, international

calls and calling cards. In the Helsinki

area, dial-up Internet is also offered. The

launch of iHear telephones commenced in

the summer of 2002.

Tele2 operates a Wireless Local Loop for

broadband in Jyväskylä. The service was

launched in spring 2002 and Tele2 is

studying the possibility of expanding into

other cities with other network owners.

Monopolistic market

The monopolistic nature of the Finnish

market means that Tele2 cannot yet offer

local calls. Nevertheless the number of

customers and revenue rose during 2002.

During the year, new agreements were

signed covering international calls and other

services that reduce costs for Tele2. During

2002, Tele2 moved from the development

phase to greater customer focus and further

developed its fixed telephony services,

which were launched in autumn 2001.

Optimal TelecomOptimal Telecom is a Service Provider

offering individuals fixed telephony and

Internet and the Tango prepaid calling card

for mobile telephony.

Lowest-price guarantee

Optimal Telecom’s lowest price guarantee

automatically gives customers the lowest

ordinary rate from Telia, Tele2, TeleNordia,

Rix Telecom, Utfors, Glocalnet and ACN. The

guarantee is the primary factor underlying

Optimal Telecom’s high customer loyalty.

Optimal Telecom also sells cordless

telephones and speaker telephones

equipped with a calling-router, which

means calls are always handled by Optimal

Telecom.

Expansion in the private market

Optimal Telecom continued to report

robust growth in fixed and mobile teleph-

ony, while the company also raised prof-

itability, despite stiff competition in the

market.

During 2003, the focus is on generat-

ing continued growth and improved prof-

itability in fixed and mobile telephony

through increased cross-selling and build-

ing long-term customer relations.

DatametrixDatametrix is a strong system integrator in

the Nordic market. The company is char-

acterized by good geographic coverage,

flexibility and cost-consciousness.

The market is driven by the develop-

ment of conventional telephony with innova-

tive applications and the ever-growing

demand for mobile solutions. IP telephony

has established itself as a competitive

alternative for commercial applications.

Sweden

The Swedish organization has been

streamlined and is now focusing on IP

telephony and system integration of tele-

phony and data. Like Tele2, Datametrix is

a unique total solution supplier with a

strong product and service profile.

Norway

In November 2002, Datametrix in Norway

celebrated its 20th anniversary. The com-

pany has developed into a prominent sys-

tems integrator in the Norwegian market.

It has become a market heavyweight

through its consistent efforts in its three

core areas: infrastructure, IP telephony

and security.

Denmark

In September, Datametrix in Denmark was

ranked number 18 on the Børsen Gazelle

index of the fastest growing companies in

Denmark, computed by the daily paper

Børsens Gazelle index. The factor underly-

ing the success of Datametrix is its keen

focus on products for the call-center mar-

ket.

Partners

In May 2002, Datametrix was appointed

Norway Gold Partner to Cisco. This is con-

firmation of the company’s leading-edge

expertise and business skills. In Sweden,

the company is Gold Partner to Avaya and

a certified Ericsson Service and Sales

Partner. During the year, Datametrix signed

an OEM agreement with Intel, making it

the sole vendor of Intel’s product line for

VPN in Sweden.

22 T E L E 2 A N N U A L R E P O R T 2 0 0 2

23

RussiaTele2 offers mobile telephony in eleven

regions in Russia. Most of the companies

operate under the FORA brand. In

November Tele2 sold its share of the

Moscow-based NMT450 operator MCC.

Preparations for GSM

During the year, Tele2 received GSM

licenses for Nishny Novgorod, Chelyabinsk

and the St Petersburg region. Thus, all

companies have licenses for GSM1800

and work is in progress to launch the first

regions during 2003.

Calling Party Pays

Tele2’s company in Omsk was the first

mobile operator to launch CPP (Calling

Party Pays) services, which, as the name

implies, means that the calling person

pays the call. CPP is unusual in Russia,

where it is most common that the mobile

telephone owner pays (MPP, Mobile Party

Pays), even when that person is called.

CPP has proved to be an attractive and

effective means of competition in the

Russia market. Tele2 has also launched

CPP in Chelyabinsk. During 2003, Tele2

will continue its efforts in negotiating

agreements for CPP in other regions.

Outlook for 2003

Prospects for the Russian economy in

2003 are positive. The mobile telephone

market expanded by 125% in 2002. Rapid

growth is expected to continue during the

current year. The customer segments now

seeking to acquire mobile telephones are

the middle class, middle management in

companies and small business owners,

which traditionally have been strong cus-

tomer groups for Tele2.

EstoniaTele2 in Estonia offers a broad range of

telecom services: mobile telephony (sub-

scription and prepaid calling cards), fixed

telephony, Internet, content services and

cable-TV.

2002 was one of the most successful

years in the history of the company. The

sharp growth from 2001 continued into

2002. Tele2 is the most rapidly growing

mobile operator in Estonia and now has a

tight grip on the second place in the mar-

ket. Tele2 now commands one-third of the

Estonian mobile market.

Tele2 is also clearly the leading alter-

native operator in fixed telephony.

Supplementary services launched

During 2002, several supplementary ser-

vices were launched that create added

value for customers and which offer com-

petitive advantages for Tele2. Among other

points, Tele2 is the only mobile operator to

date that offers pan-Baltic roaming for pre-

paid customers. Tele2 has also introduced

a uniform invoice for customers who have

fixed as well as mobile telephony.

Attractive services

Tele2 is very positive about prospects in

2003, not least because of a highly attract-

ive product and service offering, although

competition in the Estonian market has

stiffened in recent times.

Market area

Eastern Europe

and Russia

Johnny Svedberg

Market Area Director, Eastern Europe and Russia

Brands Tele2, Fora, C gates, Zeta Zivtina

2002 Revenue doubled

Continuing profitability

2002 2001 Change

Number of customers, 000s 1,574 996 +58%

Net sales, SEK M 2,320 1,148 +102%

EBITDA, SEK M 541 272 +99%

“Tele2 is growing rapidlyin the Baltic States, withmore than one million satisfied customers.”

Market positionamong alternative

Licenses Launch* operators

Estonia Mobile 1998

1Fixed 1998Cable-TV 1998

Latvia Mobile 1999 1Lithuania Mobile 2000 2Czech Fixed 2002 1Republic Internet 2000

Poland Fixed 2003Internet 2000

Russia Mobile 7*Year of launch by Tele2

Market area’s share

of the Group’s

net sales

8%

Tele2 fångar de stora fiskarna

24 T E L E 2 A N N U A L R E P O R T 2 0 0 2

LatviaTele2 is the leading alternative mobile

operator in Latvia. The company’s growth

is being driven particularly by the success

in prepaid calling cards. Tele2 plans to

launch fixed telephony during 2003.

Leader in the prepaid calling card market

Tele2 leads the market for prepaid calling

cards with Zelta Zivtina, “Gold Fish”.

Subscription services are the leading alter-

native to the former monopoly. A new ser-

vice means that both subscription and pre-

paid customers can call from anywhere in

the Baltic States and still enjoy call rates

as if they were at home in Latvia.

Prepaid customers now get a bonus

when they are called, which contributes to

raising call volumes. They can also refill

the prepaid card directly from their bank

account, all that is required is an SMS –

making it simple for customers and offer-

ing a cost saving for Tele2.

Recognition of Tele2 is very high. 80%

of Latvians recognize the brand, even

though it was launched less than two years

ago. This level of recognition is reflected

in growth: Tele2 is the most rapidly grow-

ing telecom company in Latvia.

Thrives on competitionTele2 – more efficient than the old monopolies

25

Increasingly comprehensive range

During 2002, Tele2 acquired one of two

UMTS licenses in Latvia. Tele2 also has

one of the two GSM licenses (900 and

1800) for Internet services and a license

for broadband via radio networks. An

application for fixed telephony has been

submitted, and Tele2 expects an allocation

during early 2003.

Exciting development

Both the customer base and revenue are

expected to rise when Tele2 enters the

market for fixed telephony, at the same

time as it continues to fuel growth in

mobile telephony.

LithuaniaSince its start-up in Lithuania in 2000,

Tele2 has established a strong position as

the leading operator among private cus-

tomers.

Mobile penetration rose sharply in 2002

and the customer base more than doubled.

Tele2 is winning market share at the

expense of the two competitors; Bite and

Omnitel.

Strong brand

During the past year, strength and trust in

the Tele2 brand have grown considerably,

with brand recognition rising to 71% dur-

ing the fourth quarter of 2002. A contribu-

tory factor is the fact that the GSM network

was expanded so that it now covers a little

more than 90% of the population.

Subscriptions launched

During the first quarter of 2002, the Joker

subscription service was launched, offer-

ing the market’s lowest monthly charge

and a price guarantee. During the third

quarter, a subscription was launched that

is aimed at small and medium-sized com-

panies.

Tele2 in Lithuania was also the first

operator to launch pan-Baltic roaming for

prepaid customers.

Deregulation of fixed telephony

There are good prospects for the strong

growth in mobile telephony continuing.

The market for fixed telephony was deregu-

lated in 2003 and Tele2 will maximise the

opportunities for cross-selling as they

emerge.

Cable-TV and broadband

During 2002, Tele2 achieved a dominant

position in cable-TV in all the company’s

areas in Vilnius. During the autumn the

cable-TV network was expanded to cover all

of Vilnius.

The number of broadband customers

doubled during the year. Tele2 offers cable-

TV and broadband under the C gates brand.

Czech RepublicTele2 has strengthened its position as one

of the three largest suppliers of wireless

broadband in the Czech Republic and has

established a presence in the market for

fixed telephony.

During 2002, Tele2 expanded wireless

broadband to an additional two cities and

the number of customers rose by 52%.

Depending on the business terms and con-

ditions that can be achieved, Tele2 is like-

ly to offer ADSL during 2003.

Success in fixed telephony

In July, Tele2 became the first operator to

conclude an interconnect traffic agree-

ment with Cesky Telecom. The agreement

permits private customers to call more

cheaply with Tele2 by dialing a prefix.

Tele2 is now a well-known brand in the

Czech Republic and the largest alternative

operator in the private market. During

2003 Tele2 plans to offer pre-selection

and local calls.

PolandTele2 Poland continued its rapid develop-

ment in IP telephony and wireless broad-

band access. The focus is on small and

medium-sized companies. The number of

customers more than doubled during

2002.

In early 2002, Tele2 became the first

company to win a public license for fixed

telephony. Negotiations for an intercon-

nect traffic agreement with the former

monopoly were concluded in December

and the launch of fixed telephony is

planned for the first quarter of 2003.

Deregulation heralds new opportunities

In November 2002, Tele2 signed a distri-

bution agreement for its prepaid calling

cards for fixed telephony with the Polish

Post Office, which sharply increased the

number of sales outlets from 2,000 to

10,000.

Since Poland has some of the highest

telephony rates in Europe, there are major

opportunities awaiting Tele2 during the

first quarter of 2003 with the finalization

of deregulation. This creates the potential

for Tele2 to market a more comprehensive

service range in fixed telephony.

X-sourceX-source operates in IT outsourcing. The

company was started by Tele2 in an effort

to support IT operations in the group. The

head office is located in Stockholm.

During 2002, X-source expanded and

opened offices in London, Luxembourg

and Copenhagen. It also took over part of

Transcom Sweden’s IT operations. As a

result, X-source is now established in six

locations in Sweden. The company plans

to established a presence in the Baltic

States by spring 2003.

Competitive prices

X-source offers services in operations and

the development of PC workplaces, oper-

ations and maintenance of servers, data com-

munications and data security. X-source

introduces a business approach to PC work-

places and assists client companies in

creating a secure and controlled IT infra-

structure, while simultaneously reducing IT

costs.

X-source’s services are also competitive

for companies outside the Tele2 Group.

Customers include Datscha, Metro, MTG,

Viasat, EIM. Iocore and Basset Support

Solutions.

Roman Schwarz

Market Area Director, Central Europe

Market area

Central Europe

GermanyIn 2002, Tele2 strengthened its position

as the third-largest alternative operator in

the German fixed telephony market and is

currently one of the fastest-growing oper-

ators in the country.

Focus on growth

Growth is the result of several measures

undertaken during the year such as a sim-

plified price structure, successful market-

ing campaigns focusing on comparing

Tele2’s prices with competitors’ and a dis-

tinct targeting of pre-selection customers.

Combined with an increased focus on

measures to limit customer turnover, this

will pave the way for sustained growth in

2003.

Deregulation lags behind rest of Europe

The deregulation of the German market

has lagged behind the rest of Europe. For

example: local calls are not deregulated,

pre-selection rules are more complicated

than in other countries and Deutsche

Telekom is allowed to package its services

jointly despite the fact that local calls are

not open to competition. After strong pres-

sure from the EU, Germany is expected to

start a deregulation process in 2003.

Tele2 gaining greater brand recognition

Tele2’s market strategy and comprehen-

sive cost efficiency guarantee that Tele2

will survive as one of the strongest players

on the market. Market consolidation is pos-

itive because it weeds out many operators

that lack a sound business model. This

eases pressure from future competition.

Recognition of the Tele2 brand increased

dramatically in 2002. Tele2 is the third

most recognized brand within fixed tele-

phony.

The NetherlandsTele2 bolstered its position as the second-

largest alternative operator in the Dutch

fixed telephony market in 2002. At the end

of the year, 80% of the population was

familiar with the Tele2 brand.

Fixed telephony

Greater focus on pre-selection customers

and iHear phones led to a dramatic

increase in ARPU during the latter part of

2002. Efforts to increase customer loyalty

during the third and fourth quarter were

successful and contributed to the rise in

volume. With huge success, Tele2 focused

its marketing on private customers, and

market share increased during the year.

Tele2Mobile – MVNO

Tele2Mobile experienced fantastic growth

as well as strong development during the

second half of 2002. Tele2 operates as a

Mobile Virtual Network Operator, MVNO,

and is the sixth-largest mobile operator in

the country. Cross-selling to current fixed

telephony customers has proven to be suc-

cessful. Tele2’s success in the future is

founded on its ability to offer fixed tele-

phony customers new services at more

attractive rates. The marginal cost stem-

ming from the new services is low.

SwitzerlandTele2 has become the second-largest alter-

native fixed operator in Switzerland fol-

lowing its 1998 launch of fixed telephony

in the country. The company is known for

its competitive rates, easy-to-understand

pricing and for challenging the former

monopoly.

2002 2001 Change

Number of customers, 000s 3,587 3,191 +12%

Net sales, SEK M 5,689 4,844 +17%

EBITDA, SEK M –81 –606

“Deregulation opens up opportunities for Tele2.”

26 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Market positionamong alternative

Licenses Launch operators

Germany Fixed 1998 3The Mobile 2001 1Netherlands Fixed 1997

Switzerland Mobile 2000

2Fixed 1998Internet 2002

Austria Mobile 2003 1Fixed 1999

Ireland License for fixed telephony.

Market area’s share

of the Group’s

net sales

18%Market area’s share

of the Group’s

net sales

Brands Tele2, Everyday, Calling Card Company, 3C

2002 Sharp growth in earnings

Fixed telephony provides positive EBITDA

Simple pre-selection sign-up

Tele2 succeeded in building a strong base

of pre-selection customers, a feat made

possible by actions such as being the first

operator in Switzerland to take advantage

of the so-called Third Party Verification, in

which, as the name implies, a third party

verifies that an agreement has actually

been reached. This makes it easy for cus-

tomers to sign up for pre-selection with one

simple phone call.

The launching of Tele2Mobile in May

2000, Tele2 Voicebox in April 2002 and

Tele2 Internet ADSL in November 2002

has enabled Tele2 to broaden its product

offering substantially and has strengthen

its market position. The focus is on private

customers as well as on small businesses

and medium-size companies.

AustriaTele2 is the largest alternative fixed tele-

phony operator in Austria. The number of

customers as well as operating revenue

rose during 2002. Tele2 is known for its

attractive rates, excellent customer service

and reliability.

Increased recognition of Tele2

A growing number of Austrians know what

Tele2 represents and as many as 85% of

the population is familiar with the Tele2

brand. A high proportion of pre-selection

customers and a low churn reflect a great

degree of customer satisfaction and loyalty.

During the year, the company intro-

duced e-invoices and prepaid cards for

international calls.

Focus on growth

Tele2 will continue to focus on profitable

growth while exploring new business

potential such as MVNO agreements and

other value-added services. The launch of

mobile telephony as a MVNO occurred in

early 2003.

IrelandTele2 has a fixed telephony license in

Ireland.

27

Confident outlookTele2 welcomes new challenges

2002 2001 Change

Number of customers, 000s 5,129 4,286 +20%

Net sales, SEK M 8,105 5,124 +58%

EBITDA, SEK M –101 –1,331

Jean-Louis Constanza

Market Area Director, Southern Europe

Market area

Southern Europe

FranceTele2 provides a complete range of fixed

telephony services to private customers

and smaller businesses: local calls, nation-

al calls, international calls and calls to

mobile phones.

The company is the leading alternative

operator in France with a market share of

12%. With almost three million active cus-

tomers and 50% of the market area’s rev-

enue, France is also one of Tele2’s largest

operations.

Price-leading operator

Tele2 is perceived as the price-leading

operator and is known for its quality and

customer service and for products that are

easy to use. Tele2 enjoys a brand recogni-

tion rate exceeding 80% among the French

population. The French market offers major

potential for continuing growth. The strong

brand offers Tele2 the potential to strength-

en its position as the price-leading opera-

tor and keep down costs in order to attract

new customers.

Higher revenue

The launch of local calls in 2002 con-

tributed to increases in revenue and cus-

tomer loyalty and helped Tele2 to report

profitability, three years after its opera-

tional start. The improvements were

gained at a very low cost. The trend towards

profitability remained strong throughout

the year, especially during the fourth quar-

ter. Tele2 expects to launch ADSL suc-

cessfully this current year, against the

background of the access network being

opened up and the fact that Tele2 already

has an attractive dial-up Internet offering.

ItalyTele2 also has a complete range of services

in fixed telephony in Italy. Tele2 is Italy’s

second largest alternative operator, with a

market share of about 9%.

Tele2 continued to experience fast-

paced growth in Italy in 2002. Compared

to 2001, revenues grew by more than 60%

and traffic volumes rose 80%. The back-

ground to the rapid growth is that Tele2

has been offering all customers local calls

via pre-selection since 2001.

Strong brands

With about 2 million customers and a high

ARPU, Tele2 Italy is a strong and profitable

part of the Group. Tele2, which is posi-

tioned as the price leader in the Italian

market, is a well-known brand – more than

80% of the population recognizes it.

Greater recognition of Tele2, combined

with higher customer satisfaction, has

increased customer loyalty.

Cross-selling to Tele2’s customers

Tele2 benefits from being able to offer

local calls and a stable competitive situa-

tion. During the third quarter of 2002,

dial-up Internet was launched, which

proved to be a remarkable success. The

strategy of supplementing the product and

service offering to the existing customer

base and an increased number of pre-

selection customers creates the potential

for continuing growth.

As in the case of Tele2 France, Tele2

Italy is undergoing strong development

and the rapid customer intake has contin-

ued in early 2003.

Brands Tele2, Everyday, Calling Card Company, 3C

2002 Sharp rise in revenue growth

Robust earnings trend

“Tele2 continues toattract an increasingnumber of customers.”

28 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Market positionamong alternative

Licenses Launch operators

France Fixed 1999 1Internet 2002

Italy Fixed 1999 2Internet 2002

Spain Fixed 2001 4Portugal Fixed 2003

Market area’s share

of the Group’s

net sales

26%

29

Gillar utvecklingTele2 växer snabbast i Eurpoa

SpainIn just a short period, Tele2 has estab-

lished itself in the Spanish market and is

already the country’s fourth largest alter-

native operator. Tele2 offers prepaid fixed

telephony services for national calls,

international calls and calls to and from

mobile networks.

The prepaid services are highly effect-

ive in curtailing billing costs, reducing bad

debts and reducing churn.

Tele2’s revenue rose more than 160%

compared with 2001.

MVNO license

With a brand recognition rate of 60%

among the Spanish population, Tele2 is

beginning to capitalize on its marketing

and effective IP-based network. Spain is

the first country in Southern Europe in

which Tele2 received an MVNO license.

PortugalUsing Spain as the base, Tele2 is launch-

ing fixed telephony in Portugal during the

first half of 2003.

A great futureTele2 for big and small

30 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Jean-Claude Bintz

Market Area Director, Luxembourg

Brands Tele2, Tango, Everyday, 3C, Transac

2002 Increased revenue

Higher profitability

2002 2001 Change

Number of customers, 000s 222 211 +5%

Net sales, SEK M 754 663 +14%

EBITDA, SEK M 126 5

“An exciting 2003with, among otherthings, a launch in Belgium.”

2002 and plans to offer UMTS services in

the new network during the second half of

2003. Fixed telephony has been available

under the Tele2 brand since June 2000.

The company holds a license for GSM and

for all types of fixed-line telecommunica-

tion services, including the Internet.

BelgiumTele2 has a license for fixed telephony in

Belgium and services have been offered

since January 2003. The goal is to quickly

become the leading alternative to the for-

mer monopoly.

3C3C has been active in public telecommu-

nications for more than 17 years.

The company currently offers integrated

solutions for processing credit card trans-

actions, solutions for payments via the web

and public credit card telephones.

3C approves and processes credit card

transactions for 20 different national and

international banks. Its pan-European

presence in 650 hotels, 300 restaurants

and 550 parking companies makes the

company a unique player in the European

market for integrated credit card transactions.

The Parking service is an overall con-

cept for parking lot operators. The concept

was developed in Britain, where 3C has

95% of the market for parking spaces at

the airports and in larger cities. Operations

are being expanded to Sweden, Norway

and Germany.

3C has credit card phones at major

European airports, hotel chains and trade

fairs.

TransacTransac is a Luxembourg-based company

offering services in data processing to

companies that process large amounts of

data, such as credit card transactions and

billing.

Market area

Luxembourg

LuxembourgTele2 has offered fixed telephony in

Luxembourg since 1999 and is clearly the

largest competitor to the former monopoly.

Pre-selection customers comprise 40% of

the customer base. After repeated appeals

from Tele2, the authorities have forced the

former monopoly to cut its interconnection

fees by another 20% during 2003. In

March 2002, Tele2 began to offer prepaid

calling cards for fixed telephony.

Growth in mobile telephony

The Tango brand is one of the most appre-

ciated in Luxembourg. With a GSM 900

and GSM 1800 license, Tango is the largest

mobile operator in Luxembourg with a share

of almost 50% of the active customers in

the market. The traffic volume rose by

more than 40% compared to 2001, main-

ly because of strong growth within prepaid

calling cards. Tango received a UMTS

license in May 2002 and services in the

new network are scheduled for commercial

launch in the second quarter of 2003.

Everyday Media encompasses Tango TV

and Tango Radio. The main purpose for

this – apart from marketing Tango’s ser-

vices – is to create interactivity between

the media and mobile telephony by using

SMS, MMS, WAP and IVR as bearers of

content services being generated by the

media companies.

Internet services

Internet services were launched in June

2000 and are reporting steady growth, pri-

marily thanks to its prices, which are the

lowest in the market.

LiechtensteinTele2 is the largest alternative operator in

Liechtenstein. The company has provided

mobile telephony services in the country

since March 2000 under the Tango brand.

Tele2 was awarded a UMTS license in

Market positionamong alternative

Licenses Launch operators

Luxembourg Mobile 1998

1Fixed 1999Internet 2000

Liechtenstein Mobile 2000

1Fixed 2000Internet 2000

Belgium Fixed 2003

Market area’s share

of the Group’s

net sales

2%

31

United KingdomTele2 launched fixed telephony in cooper-

ation with the British Post Office in

November 2001. Tele2 had already sup-

plied national and international access for

the Tele2 group. Prepaid calling cards for

fixed telephony are sold under the Post

Office brand and may be purchased at post

offices, via Post Office telephone services

or at the Post Office website.

During the year, the customer base in

fixed telephony grew constantly and the

challenge ahead is to continue to capital-

ize on the major potential of the Post

Office brand, as represented by the Post

Office’s 40,000 cashier counters at

17,500 sales outlets.

Tele2 has successfully managed trials

to offer pre-selection services in the UK

and will continue its launch during the

first quarter of 2003.

Access operations doubled their traffic

volume during the year as Tele2 increased

its presence in the tough market for access

services in London.

iHear

Tele2 has its own product range of ana-

logue and digital cordless phones, which

are marketed under the brand name iHear.

The telephones are equipped with a call-

ing-router that automatically routes the

calls to the Tele2 network. More than

600,000 iHear telephones were sold

across Europe during 2002, mainly through

telemarketing.

Calling Card Company (C3)C3 sells calling cards in the UK, France,

Germany, Italy, the Netherlands, Spain and

Austria and Tele2’s rechargeable interna-

tional call card, which may be used in a

large number of countries. C3 operates in

close cooperation with Tele2, which sup-

plies network capacity, with the focus on

price and quality in international lines.

Prepaid calling cards are sold mainly in

stores and kiosks, but C3 is continuing to

seek additional sales channels. The pre-

paid card was launched in cooperation

with the British Post Office in October

2001 and volumes increased steadily dur-

ing 2002.

In February 2002, C3 won a tender from

AAFES (American Army and Air Force) for

deliveries to bases in Italy, UK and the

Netherlands. In October, the agreement

was extended to include US naval bases.

After trials during the summer, Tele2

was selected as the supplier of calling

cards to the Travelex group in continental

Europe. C3 doubled its volume in the sec-

ond half of the year compared with the first

six months.

C3 enhanced its prepaid calling card

technology to permit calls from Call Shops,

a service now available in France, Italy and

Spain, and which will be further expanded

to include the UK and Germany during the

first half of 2003.

Along with 3C, C3 has also developed a

magnetic card that is undergoing trials in

Italy and the UK.

EverydayTele2 owns the Internet portal

Everyday.com jointly with MTG.

Market area

Branded products & services

Brands Tele2, C3, iHear, Everyday

2002 Success for calling cards

Improved earnings

Market area’s share

of the Group’s

net sales

2002 2001 Change

Net sales, SEK M 848 1,408 –40%

EBITDA, SEK M –172 –410

3%

“Implementing successful marketingbased on best practicesacross Europe”Anders Olsson

Market Area Director, Branded products & sevices

32 T E L E 2 A N N U A L R E P O R T 2 0 0 2

The Board of Directors herewith presents the Annual Report for Tele2 AB (publ) company registration number 556410-8917 for

fiscal 2002.

667 million (2001: SEK 1,376 million)

and sales of shares amounted to SEK 40

million (2001: SEK 236 million).

Tele2 had a total of 16.8 million cus-

tomers at December 31, 2002, to which a

one-off adjustment of –389,000 has been

applied to adjust all Group companies to

report in line with the Group’s definition of

an active customer (see Note 36). Net cus-

tomer intake for 2002 as a whole before

this adjustment was 15%, corresponding

to 2,195,000 (2001: 3,108,000). Tele2’s

operating revenue amounted to SEK

31,282 million (2001: SEK 25,085 mil-

lion), or an increase of 25%.

EBITDA amounted to SEK 5,127 mil-

lion (2001: SEK 1,698 million), with an

EBITDA margin of 16% (2001: 7%). EBIT

totaled SEK 1,530 million (2001:SEK

–1,356 million) with an EBIT margin of

5% (2001: –5%).

Net interest expense and other financial

items totaled SEK –698 million (2001:

SEK –621 million). The average interest

rate on outstanding liabilities was 6.4% in

2002. Net profit after financial items

amounted to SEK 796 million (2001: SEK

–1,944 million).

Tax on net profit for the year amounted

to SEK –574 million, which was positive-

ly affected by SEK 576 million in respect

of a revaluation of loss carry-forwards in a

number of European companies. In 2001,

tax on net profit was SEK 2,335 million,

which reflected the tax effects in Swedish

operations, and a tax effect of SEK 3,082

million in connection with the restructur-

ing of SEC. Profit after tax was SEK 223

million (2001: SEK 392 million). Earnings

per share were SEK 1.51 (2001: SEK

2.70) after full dilution.

During 2002, not only did Tele2 grow

faster than its competitors, with an organ-

ic growth of 25%, but also managed to

generate the record cash flow to date,

amounting to SEK 1.9 billion, and in-

creased pre-tax profit by more than SEK

2.7 billion to SEK 796 million. Main-

taining a balance between customer

growth, profitability and cash flow will con-

tinue to have priority during 2003, and as

a result of this it is probable that the Board

will propose a dividend for fiscal 2003.

Fixed telephony operations in continen-

tal Europe continue to show sharp growth

and now have 8.5 million customers.

Combined, Southern and Central Europe

reached breakeven at the EBITDA level

during 2002. Growth of 58% in Southern

Europe is in turn being driven through the

introduction of local carrier pre-selection.

This is encouraging since local pre-selec-

tion is about to be introduced in Germany

during 2003, which will boost revenue in

Central Europe without raising costs. The

EBITDA margin of 22% in our Swedish

fixed telephony operations remains within

our profitability target. Tele2’s mobile

operations are “Best in Class”, with EBITDA

margins of 55% in Sweden, along with an

impressive customer intake, notably in the

Baltic States. We are continuing to focus

on cutting costs in an effort to win new

customers, reduce customer turnover, or

churn, and gain control over operating

expenses.

Local carrier pre-selection is being

steadily introduced throughout Europe and

already in 2002 it was widely available in,

for example, Sweden, Denmark, France,

Spain and Italy. Local pre-selection made

a major contribution to growth in Southern

Europe during the year, with revenue surg-

ing by 58%. With local pre-selection

already available in the Netherlands since

August 2002 and with its introduction in

Germany during 2003, Central Europe is

expected to experience the same benefits

during 2003.

Tele2 AB’s share is listed on Stock-

holmsbörsen (Stockholm Stock Exchange)

under the abbreviations TEL2A and TEL2B

and Nasdaq under the abbreviations

TLTOA and TLTOB.

The ten largest shareholders at

December 31, 2002 held shares corre-

sponding to 60% (2001: 44%) of the cap-

ital and 80% (2001: 72%) of the voting

rights, of which the Invik & Co AB,

Industriförvaltnings AB Kinnevik, Emesco

and Millicom International Cellular S.A.

owns 30%, 26%, 9% and 3%, respectively,

of the voting rights, and 9%, 21%, 2% and

7% of the capital.

Operations

Tele 2 AB, formed in 1993, is the leading

alternative pan-European telecommunica-

tions company offering fixed and mobile

telephony, as well as data network and

Internet services, under the brands Tele2,

Tango and Comviq to more than 16.8 mil-

lion customers in 22 countries. Tele2 oper-

ates Datametrix, which specializes in sys-

tems integration; 3C Communications,

which operates Internet payments, credit

card transactions and public pay tele-

phones; Transac, which offers data pro-

cessing of credit card transactions and

billing; C3, which is active in prepaid call-

ing cards for fixed telephony; and Optimal

Telecom, which offers households low

price guarantees for telephony services.

The Group also offers cable-TV services

and jointly owns the Internet portal

Everyday.com with MTG. Tele2 AB’s share

is listed on Stockholmsbörsen (Stockholm

Exchange) under TEL2A and TEL2B and

on Nasdaq under TLTOA and TLTOB.

During 2002, the Tele2 Group invested

a net of SEK 1,890 million (2001: SEK

2,145 million) in intangible and tangible

fixed assets (see Not 32). Investments in

shares in companies amounted to SEK

Report of the Board of Directors

33

Five-year summary

SEK million 2002* 2001 2000** 1999*** 1998

Income statement and balance sheet items:Operating revenue 31,282 25,085 12,440 8,171 5,918EBITDA 5,127 1,698 1,820 2,060 1,165EBIT 1,530 –1,356 420 1,152 506

EBT 796 –1,944 165 4,184 219

Net profit/loss 223 392 –396 3,768 53

Shareholders' equity 28,728 29,517 26,539 6,659 2,926

Shareholders' equity, after dilution 28,870 29,547 26,584 6,659 2,926

Balance sheet total 46,872 49,156 42,345 14,401 9,995

Cash flow from current operations 4,365 413 883 1,753 971

Liquidity 2,332 1,625 1,304 1,123 821

Net borrowing 7,729 9,286 7,095 4,605 4,600

Net borrowing, after dilution 7,587 9,256 7,050 4,605 4,600

Investments, including financial leases 2,581 1,485 774 1,475 1,941

Key figures:

Solidity, % 61 60 63 46 29

Solidity, after dilution, % 61 60 63 46 29

Debt/equity ratio 0.27 0.31 0.27 0.69 1.57

EBITDA margin % 16.4 6.8 14.6 25.2 19.7

EBIT margin % 4.9 –5.4 3.4 14.1 8.6

Return on shareholders equity, % 0.8 1.4 –2.4 78.6 1.8

Return on shareholders equity, after dilution, % 0.8 1.4 –2.4 78.6 1.8

Return on capital employed, % 3.9 –3.3 1.9 45.2 6.8

Average interest expense, % 6.4 6.3 4.8 4.8 6.6

Average interest expense, after dilution, % 6.4 6.3 4.8 4.8 6.6

Value per share, SEK:

Profit/loss after tax 1.51 2.70 –3.47 36.28 0.51

Profit/loss after tax, after dilution 1.51 2.70 –3.47 36.28 0.51

Shareholders’ equity 194.95 203.56 232.62 64.12 28.24

Shareholders’ equity, after dilution 195.55 203.46 232.74 64.12 28.17

Cash flow 29.62 2.85 7.74 16.88 9.38

Cash flow, after dilution 29.56 2.85 7.73 16.88 9.35

Dividend — — — — —

Share price on closing date 230.50 378.00 392.00 598.00 330.00

* Operating revenue for 2002, include SEK 237 million, relating to a court case against Telia, which, for reasons of prudence was not previously

reported as income. During 2002, Tele2 Norway returned its UMTS license, whereby the net book value of capitalized costs was eliminated in its

entirety and was charged against depreciation for the year in an amount of SEK –400 million. EBT for 2002 was affected by a write-down of SEK 86

million, attributable to shares in XSource Corporation, which is under the item ”Interest expense and other financial expenses”.

** Net profit/loss for 2000 was affected by the acquisition of SEC Group on October 2, 2000.

***EBT for 1999 was affected by a non-recurring item of SEK 3,228 million, attributable to a capital gain on the acquisition of the associated company

NetCom ASA.

34 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Tele2 Sweden has more than 3 million

mobile telephony customers, reflecting

growth during 2002 when Tele2 expanded

faster than its two primary competitors,

attaining a market share of more than 50%

of the total number of new customers.

Tele2 Sweden finalized the financing of

Svenska UMTS nät AB – the Swedish

UMTS network company that is equally

and jointly owned with Telia. Tele2 and

Telia announced that a bank credit of SEK

11 billion had been signed to finance the

expansion of the UMTS network in

Sweden.

Nordic

Operating revenue, 2002: SEK 13,566

million (2001: SEK 11,898 million),

+14%. EBITDA, 2002: SEK 4,814 million

(2001: SEK 3,768 million), +28%.

The Nordic market area comprises

Tele2 operations in Sweden, Norway, Den-

mark and Finland, as well as Datametrix.

As of January 1, 2002, Optimal Telecom

is included in the Nordic Market Area. It

was previously included in Branded

Products & Services.

Tele2 has reached agreement with Telia

in Sweden, Telenor in Norway and TDC in

Denmark on the terms and conditions for

offering ADSL services, and Tele2 will

launch these services during the summer.

Tele2 Sweden is the largest operation in

the Nordic market area. During 2002, suc-

cessful marketing campaigns for both fixed

and mobile telephony led to larger market

shares. During 2002, Telia 2 Sweden

retained its high margins, with an EBITDA

margin of 55% for fixed telephony and

22% for fixed telephony and Internet.

Mobile telephony operations in Sweden

reported 3 million customers, a rise of

19% on an annual basis. Comviq increased

its share of new sales on the market. The

monthly average revenue per user (ARPU)

in mobile telephony, including cash cards,

amounted to SEK 196 (2001: SEK 204)

in 2002. Meanwhile, the monthly minutes

per user and month (MoU) in 2002

amounted to 103 (2001: 107). Prepaid

customers accounted for 72% of the total

customer base in mobile telephony. Fixed

telephony and Internet had 1.9 million

customers at year-end.

Operations in Denmark, Finland and

Norway are primarily involve fixed teleph-

ony and Internet. Competitive pressure

continues to decline in these countries.

Moreover, costs have fallen as a result of a

10% reduction in the workforce in

Denmark and 20% in Norway, among other

factors.

During the third quarter, Tele2 signed

an MVNO agreement for UMTS with

Telenor in Norway in exchange for Telenor

gaining access to Tele2’s UMTS network in

Sweden. Tele2’s Norwegian MVNO will be

launched during the first quarter of 2002.

The advantage for Tele2 is reduced invest-

ment costs of some SEK 5 billion for UMTS

in Norway. The decision to return the

UMTS license in Norway to the Norwegian

authorities meant that Tele2 conducted a

write-down of SEK 399 million during the

fourth quarter. Margins in Norway and

Denmark have improved and in Denmark a

review of switched traffic fees means that

these will be reduced by the equivalent of

DEK 20 million annually. Denmark is the

last country to start applying the Group’s

definition of active customers. This result-

ed in a one-off reduction in the number of

customer by 461,000 as a result of the

data-processing system in Denmark being

upgraded to the same standard as the rest

of the Group. Accordingly, all companies

within Tele2 apply the same definition of

active customer.

Eastern Europe and Russia

Operatng revenue, 2002: SEK 2,320 mil-

lion (2001: SEK 1,148 million), +102%.

EBITDA, 2002: 541 million (2001: 272),

+99%.

Eastern Europe and Russia comprises

Tele2’s operations in the Baltic States,

(Estonia Latvia and Lithuania) Poland,

Czech Republic and Russia as well as

XSource operations.

In the Baltic States, Tele2’s services are

experiencing robust customer growth,

which is primarily driven by mobile tel-

ephony and especially prepaid customers.

In Latvia, Tele2 acquired one of two UMTS

licenses in 2002. In January 2003, the

market for fixed telephony in Latvia was

opened to competition and Tele2 expects

to launch fixed telephony services there

during the next six months. Customer

intake in the Czech Republic was high and

Tele2 will introduce local pre-selection

during 2003. Meanwhile, in Poland, Tele2

will launch fixed telephony during the first

quarter of 2003, following deregulation of

international calls on January 1.

Central Europe

Operating revenue, 2002: SEK 5,689 mil-

lion (2001: SEK 4,844) million, +17%.

EBITDA, 2002: SEK –81 million (2001:

SEK –606 million), of which SEK 105

(2001: SEK –585 million) related to fixed

telephony and Internet.

Central Europe comprises Tele’s opera-

tions in Germany, Netherlands, Switzer-

land and Austria, as well as a license in

Ireland.

Central Europe displayed robust growth

in revenue and EBITDA during the year,

with EBITDA for fixed telephony at a pos-

itive level throughout the year. The market

area’s ARPU was SEK 153 (2001: SEK

148) for 2002.

35

Tele2 is the third largest alternative

operator in Germany in fixed telephony and

one of the fastest growing operators nation-

wide. During 2002, recognition of Tele2

increased dramatically and it is now the

third best known brand in the country in

fixed telephony, just behind number two,

Arcor. Tele2 simplified its price structure

and had considerable success with its mar-

keting, which focuses on comparisons with

competitor prices. During the fourth quarter,

operating revenue increased and EBITDA

strengthened. However, as a market,

Germany has fallen behind the rest of

Europe, notably in the area of local pre-

select, which are not deregulated there-

by benefiting the former monopoly.

Coordinated lobbying at the EU level has

had an effect and Germany will start to

deregulate during 2003, thus suggesting

that the Central Europe market area can

expect to gain the same benefits from local

pre-selection during the second half of

2003 as experienced by Southern Europe

during 2002.

In the Netherlands, Tele2 is the second

largest alternative operator and Tele2 has

a brand recognition rate of 80% of the popu-

lation. Tele2 launched an MVNO during

the first half of 2002, which enjoyed

strong growth during the second half of the

year and is now the sixth largest mobile

operator nationwide. Tele2 attained its tar-

get of converting 10% of the customer

base in fixed telephony during the first year

of operations. These mobile customers

have been gained at a low cost.

Tele2 Austria is the country’s second

largest alternative operator and experi-

enced sharp growth during 2002, with a

brand recognition rate of 85% of the popu-

lation. The low customer turnover reflects

considerable customer satisfaction. Tele2

expects to launch an MNVO in early 2003.

In Switzerland, Tele2 is now the second

largest alternative operator and has signed

agreements with a large number of cus-

tomers for pre-selection by using what is

referred to as Third Party Verification.

During 2002, Tele2 broadened its offering

in Switzerland through the launch of

mobile telephony services in May, Tele2

Voice box in April and Internet ADSL in

November.

Southern Europe

Operating revenue, 2002: SEK 8,105 mil-

lion (2001: SEK 5,124 million), +58%.

EBITDA, 2002: SEK –101 million (2001:

SEK –1,331 million).

Southern Europe comprises Tele2’s

operations in France, Italy, Spain and

Portugal.

Southern Europe continued to report

sharp growth in operating revenue, which

rose 58% in 2002, and a highly significant

improvement in EBITDA. The EBITDA-

trend was robust during 2002, notably dur-

ing the fourth quarter, when it reached

SEK 156 million, which reflects good

results in both Italy and France, and lower

marketing costs in the market area as a

whole. Tele2 has begun to launch services

in Portugal, which will be launched in their

entirety during early 2003. Tele2 attained

a good ARPU of SEK 149 (2001: 129) in

Southern Europe in 2002.

Tele2 offers a complete product port-

folio with local, nationwide and interna-

tional calls as well as calls for the fixed net-

work to mobile networks and has recently

added Internet services. Local pre-selec-

tion has been available for all customers in

France, Italy and Spain, which has had a

very positive impact on call volumes, oper-

ating revenue and customer turnover in

2002. The improvements were achieved at

minimal cost.

Tele2 France continued its high growth

and has consolidated its position as the

leading alternative operator. Tele2 Italy is

the second largest alternative operator,

and continues to report strong customer

intake and is adding new services, such as

the recently launched Internet services. In

Spain, Tele2 introduced local pre-selec-

tion in June, which has increased call traf-

fic considerably. Using Spain as a base,

Tele2 will launch fixed telephony services

in Portugal during 2003.

Luxembourg

Operating revenue, 2002: SEK 754 mil-

lion (2001: SEK 663 million), +14%.

EBITDA, 2002: SEK 126 million (2001:

SEK 5 million).

The Luxembourg market area compris-

es Tele2 operations in Liechtenstein and

Luxembourg, the newly launched opera-

tions in Belgium, 3C’s operations and

Transac.

Tango is the largest mobile operator in

Luxembourg. Tele2 has received a UMTS

license and recently launched MMS ser-

vices. TANGO TV, combined with the Tango

Sunshine radio station, permits access to

a young target group and also represents

the first step towards interactivity between

media and mobile telephony, which will act

as a driving force for SMS and MMS traf-

fic. Tele2 launched fixed telephony in

Belgium on January 15, 2003.

Branded products & services

Operating revenue, 2002: SEK 848 mil-

lion (2001: SEK 1,408 million).

EBITDA, 2002: SEK –172 million (2001:

SEK –410 million).

36 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Other trademarks comprise Tele UK, an

operation launched in the UK in coopera-

tion with The Post Office, C3 operations,

Everyday operations and IntelliNet opera-

tions.

Significant events after the end

of the financial year

In February 2003 Tele2 Alpha Telecom

was acquired. This is the UK’s leading

operator in prepaid fixed network teleph-

ony for individuals and a market leader in

cash cards for fixed telephony. Tele2 Alpha

Telecom, sells about 1.25 million cash

cards per month from 60,000 sales outlets

in the UK and has sales of SEK 1.9 billion.

The acquisition will directly contribute to

Tele2’s earnings per share in 2003, even

without the expected synergy effects. The

acquisition price amounted to approxi-

mately SEK 780 million, on a debt-free

basis.

The acquisition of Alpha Telecom is a

unique opportunity for Tele2 to attain crit-

ical mass in the UK and is line with Tele2’s

strategy of steadily establishing a presence

in the UK market. Alpha is a stable base

on which to further develop Tele2’s opera-

tions in the UK. The objective is to emu-

late Alpha’s successful product concept in

other significant markets in Europe, in

which Tele2’s current presence will con-

tribute major revenue and cost synergies.

Work of the Board of Directors

It was with great sorrow that the Board of

Directors of Tele2 AB announced the death

of Board Chairman Jan Hugo Stenbeck at

the age of 59. Bruce Grant was appointed

Board Chairman on August 22.

The work of the Board of Directors fol-

lows an annual plan, designed to secure

the Board’s need for information and in

other respects is affected by the specific

work procedure that has been adopted for

the Board’s work. Matters placed before

the Board are dealt with by the entire

Board. In 2002, Tele2’s Board of Directors

held eleven meetings at which minutes

were taken. Specific instructions govern-

ing the President’s responsibilities and

authority were adopted. Each year, the

company’s auditors report to the Board the

result of their examination and provide

their assessment of internal control.

Parent Company

The Parent Company performs functions

and conducts certain development pro-

jects common to the Group.

A convertible debenture was converted

to 100,000 B-shares on December 31,

2002, which affected shareholders’ equi-

ty by SEK 15 million. The Parent Company

gave a shareholder contribution to sub-

sidiaries in the amount of SEK 400 million

and received Group contributions totaling

SEK 3,035 million.

Proposed appropriation of profit

The Group’s non-restricted reserves

amount to SEK 3,590 million. No alloca-

tion to restricted reserves is proposed for

companies within the Group.

The Board of Directors and President

propose that the amount at the disposal of

the Annual General Meeting, SEK

2,253,624,328, be carried forward to a

new account.

3737

Income Statement

Group Parent Company

SEK million Note 2002 2001 2002 2001

Operating revenue 1 31,282 25,085 16 12

Cost of services sold –19,890 –17,715 — —

Gross profit 11,392 7,370 16 12

Selling expenses –7,279 –6,652 — —

Administrative expenses 39 –2,571 –2,188 –101 –73

Other operating revenues 3 50 189 12 4

Other operating expenses 4 –62 –75 — —

Operating profit/loss 2, 38 1,530 –1,356 –73 –57

Profit/loss on associated companies:

Result from shares in associated companies 5 –41 –58 — —

Sale of associated companies 6 5 91 — —

Profit/loss on financial investments:

Result from shares in Group companies 7 — –13,964

Result from other securities and receivablesclassed as fixed assets 8 –84 4 182 64

Other interest revenue and similar income 9 165 65 — 14

Interest expenses and similar costs 10 –779 –690 –5 –15

Profit/loss after financial items 796 –1,944 104 –13,958

Tax on profit for the year 11 –574 2,335 –35 3,076

Minority interest 1 1

Profit/loss for the year 33–34 223 392 69 –10,882

Earnings/loss per share 25 SEK 1.51 SEK 2.70

Earnings/loss per share after full dilution 25 SEK 1.51 SEK 2.70

Number of shares 25 147,460,175 147,360,175

Average number of shares 25 147,360,175 145,003,847

Number of shares after dilution 25 148,223,175 147,560,175

Average number of shares after dilution 25 147,634,293 145,223,466

38 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Balance Sheet

Group Parent Company

SEK million Note Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001

ASSETS

Fixed assets

Intangible assets

Licenses and right of use 12 509 736 — —

Goodwill 12 24,587 27,033 — —

Total intangible assets 25,096 27,769 — —

Tangible assets

Buildings and land 13 115 124 — —

Machinery and other technical plant 13 8,334 8,270 — —

Equipment, tools and installations 13 575 687 — —

Fixed plant under construction 13 233 350 — —

Total tangible assets 9,257 9,431 — —

Financial fixed assets

Shares in Group companies 14 2,686 1,987

Receivables from Group companies 15 15,353 12,526

Shares in associated companies 16 542 326 — —

Receivables from associated companies 17 19 115 19 115

Other long-term holdings of securities 18 139 202 28 5

Other long-term receivables 19 74 85 — —

Deferred tax receivable 11 1,246 1,764 1,771 2,656

Total financial fixed assets 2,020 2,492 19,857 17,289

Total fixed assets 36,373 39,692 19,857 17,289

Current asset

Materials and supplies 353 362 — —

Current receivables

Accounts receivable 20 4,373 3,624 — —

Current tax receivables 1 6 — —

Receivables from Group companies 7 2

Other receivables 21 250 530 — 2

Prepaid expenses and accrued revenues 22 3,049 2,769 1 1

Total current receivables 7,673 6,929 8 5

Cash and bank balances 23 2,473 2,275 10 8

Total current assets 10,499 9,566 18 13

Total assets 33–34 46,872 49,258 19,875 17,302

39

Group Parent Company

SEK million Note Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001

EQUITY AND LIABILITIES

Shareholders’ equity 24

Restricted equity

Share capital 25 737 737 737 737

Restricted reserves 24,401 35,741 16,562 23,935

Total restricted equity 25,138 36,478 17,299 24,672

Non-restricted reserves/accumulated losses

Non-restricted reserves/accumulated losses 3,367 –7,353 2,185 3,495

Profit/loss of the year 223 392 69 –10,882

Total non-restricted reserves/accumulated losses 3,590 –6,961 2,254 –7,387

Total shareholders’ equity 28,728 29,517 19,553 17,285

Minority interest 22 28

Provisions

Shares in associated companies 16 28 102 — —

Total provisions 28 102 — —

Long-term liabilities

Interest-bearing

Liabilities to financial institutions 26 7,876 10,843 — —

Liabilities to Group companies 303 —

Bank overdraft facility 23 — 14 — —

Other liabilities 27 23 115 — —

Total interest-bearing liabilities 7,899 10,972 303 —

Non-interest-bearing

Other liabilities — 8 — —

Total non-interest-bearing liabilities — 8 — —

Total long-term liabilities 7,899 10,980 303 —

Current liabilities

Interest-bearing

Liabilities to financial institutions 26 2,377 731 — —

Other liabilities 27 5 151 — —

Total interest-bearing 2,382 882 — —

Non-interest bearing

Accounts payable 3,542 3,344 6 10

Current tax liabilities 57 16 — —

Other liabilities 28 441 375 5 —

Accrued expenses and prepaid revenues 29 3,773 4,014 8 7

Total non-interest bearing liabilities 7,813 7,749 19 17

Total current liabilities 10,195 8,631 19 17

Total shareholders’ equity and liabilities 33–34 46,872 49,258 19,875 17,302

PLEDGED ASSETS AND CONTINGENT LIABILITIES

Pledged assets 30 23,678 24,139 None None

Contingent liabilities 31 None None 12,825 15,133

40 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Cash Flow Statement

Group Parent Company

SEK million Note 2002 2001 2002 2001

Operating activities

Operating profit/loss 1,530 –1,356 –73 –57

Adjustments ofincome/expense items that do not

generate cash flow from operating activities:

Depreciation and amortization 3,597 3,054 — —

Capital losses/gains on sale of machinery, other technical plant 9 40 — —

Financial leases –20 –14 — —

Exchange rate differences 63 — — —

Interest received 157 54 2 4

Interest paid –619 –569 — –14

Financial expenses paid –104 –55 — –1

Tax paid/refund –49 7 — —

4,564 1,161 –71 –68

Change in working capital:

Materials and supplies –12 –66 — —

Accounts receivable –815 –837 — —

Other current receivables 167 –69 2 –2

Prepaid expenses and accrued revenues –185 –851 — —

Intra-Group transactions, current –4 –2

Accounts payable 236 566 –4 3

Other current liabilities 123 112 3 —

Accrued expenses and prepaid revenues 287 397 1 –1

–199 –748 –2 –2

Cash flow provided by operating activities 4,365 413 –73 –70

Investing activities

Acquisition of intangible fixed assets –208 –17 — —

Acquisition of tangible fixed assets –1,699 –2,167 1 —

Sale of tangible fixed assets 17 38 — 1

Acquisition of shares in Group companies, exc. Cash 14 –346 831 –299 –36

Acquisition of other long-term securities –317 –334 –23 –75

Sale of other long-term securities 40 236 — —

Lending to Group companies –128 –52

Payment received from Group companies 414 313

Other long-term lending –12 –103 –7 –71

Payment received from other long-term lending 9 49 102 —

Cash flow from investing activities 32 –2,516 –1,467 60 80

Financing activities

Raising of loans from credit institutions 528 12,139 — 1,285

Amortization of loans from credit institutions –1,744 –9,861 — –1,306

Raising of other interest-bearing liabilities 12 342 — 203

Amortization of other interest-bearing liabilities –209 –842 — –206

New share issue 15 15 15 15

Cash flow from financing activities –1,398 1,793 15 –9

Net change in cash 451 739 2 1

Liquid funds at beginning of year 23 2,275 1,511 8 7

Exchange-rate differences in liquid funds 23 –253 25 — —

Liquid funds at end of year* 23 2,473 2,275 10 8

*of which, blocked accounts 23 870 897 — —

For additional cash flow information, refer to: 32

41

Change in Shareholders’ Equity

Group

Note Share Restricted Unrestricted Total share-SEK million capital reserves reserves hold.’ equity

Closing shareholders’ equity, Dec. 31, 2000 724 25,098 717 26,539

Items reported directly against shareholders’ equity

Gradual acquisitions — — –12 –12

Exchange-rate difference Note 24 — 1,844 –110 1,734

Total items reported directly against shareholders’ equity — 1,844 –122 1,722

Other changes in shareholders’ equity

New share issue, acquisition of Tele2 Russia 12 837 — 849

New share issue 1 14 — 15

Transfers within shareholders’ equity — 7,948 –7,948 —

Net profit/loss for the year — — 392 392

Closing shareholders’ equity, Dec. 31, 2001 737 35,741 –6 961 29,517

Closing shareholders’ equity, Dec. 31, 2001 737 35,741 –6,961 29,517

Items reported directly against shareholders’ equity

Exchange-rate difference Note 24 — –4,189 3,163 –1,026

Total items reported directly against shareholders’ equity — –4,189 3,163 –1,026

Other changes in shareholders’ equity

New share issue — 14 — 14

Utilization of share premium reserve — –7,387 7,387 —

Transfers within shareholders’ equity — 222 –222 —

Net profit/loss for the year — — 223 223

Closing shareholders’ equity, Dec. 31, 2002 737 24,401 3,590 28,728

Parent Company

Restricted shareholders’ equity Unrestricted equity TotalShare capital Share premium Profit/loss sharehold. equity

SEK million reserve brought forward

Closing shareholders’ equity, Dec. 31, 2000 724 23,083 1,983 25,790

Items reported directly against shareholders’ equity

Group contribution, received — — 2,100 2,100

Group contribution, tax effect — — –588 –588

Rounding off — 1 — 1

Total items reported directly against shareholders’ equity — 1 1,512 1,513

Other changes in shareholders’ equity

New share issue, acquisition of Tele2 Russia 12 837 — 849

New share issue 1 14 — 15

Net profit/loss for the year — — –10,882 –10,882

Closing shareholders’ equity, Dec. 31, 2001 737 23,935 –7,387 17,285

Closing shareholders’ equity, Dec. 31, 2001 737 23,935 –7,387 17,285

Items reported directly against shareholders’ equity

Group contribution, received — — 3,035 3,035

Group contribution, tax effect — — –850 –850

Total items reported directly against shareholders’ equity — — 2,185 2,185

Other changes in shareholders’ equity

New share issue — 14 — 14

Utilization of share premium reserve — –7,387 7,387 —

Profit/loss for the year — — 69 69

Closing shareholders’ equity, Dec. 31, 2002 737 16,562 2,254 19,553

42 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Notes

The annual report has been prepared in accordance with the Annual

Accounts Act and recommendations of the Swedish Financial

Accounting Standards Council’s Emerging Issues Task Forece and

the Swedish Financial Accounting Standards Council’s recommen-

dations RR1: 00-RR28, of which RR2:02, RR22 and RR24-RR28

were applied before they came into force.

In 2002, Tele2 modified its accounting principles to conform to

recommendations RR2:02-Materials and Supplies, RR22-Layout

of Financial Reports, RR23-Information on Related Parties, RR24-

Managed Properties, RR25-Reporting for segments -operating

areas and geographical areas, RR26- Events after the Closing Date,

RR27-Financial Instruments: Information and Classification, and

RR28-State support.

The new recommendations have no significant impact on Tele2’s

financial reporting. Effective 2003, Tele2 has begun to apply RR29

Employee Benefits, which means that defined-benefit pension

plans for all the Group’s subsidiaries are to be reported on the basis

of uniform principles. To date, Tele2 has reported such plans in line

with local rules and stipulations in each country. Since the com-

pany has largely had defined-contribution plans (Note 38), the

introduction of RR29 is not expected to have any material impact

on the Group’s earnings and financial position.

Assets and liabilities in subsidiaries are valued on the basis of

the accounting principles applied by the Parent Company.

Critical accounting principles

Assets and liabilities are valued at their acquisition value unless

otherwise stated.

The consolidated financial reports are, in part, based on account-

ing methods, assumptions and estimates in conjunction with the

drawing up of the consolidated accounts. The estimates and approxi-

mations are based on historical experience and a number of other

assumptions, which result in a decision regarding the value of the

assets or liabilities that cannot be set in any other way. The actual

outcome may deviate from these estimates and approximations.

The account below presents the accounting principles applied

to the most critical estimates and approximations used in drawing

up the Group’s financial reports.

• Depreciation according to plan is based on the acquisition value

and estimated utilization period of fixed assets. The utilization

period for machinery and technical plant is estimated to amount

to between 2–25 years. All depreciation is straight-line over the

utilization period (Note 2).

Amortization periods for goodwill are set on the basis of each

acquisition date and the acquisition’s estimated long-term,

strategic significance. An amortization period of 20 years

applies for each corporate acquisitions in new markets. This

means that goodwill arising from all strategic acquisitions in

recent years (meaning acquisitions in the Baltic States, contin-

ental Europe and Russia) is written off over a period of 20 years.

Tele2’s management conducts continual appraisals to confirm

these assumptions remain reasonable.

• Tele2’s management continually makes assessments of the sus-

tained value of intangible and tangible fixed assets. If manage-

ment identifies factors that entail a risk of reduced value of the

particular asset, a revaluation of the asset is conducted by com-

paring the sum of the future discounted cash flow with the

asset’s book value. In cases in which the book value exceeds the

future discounted cash flow, a write-down requirement emerges.

The appraisal that concludes that there are factors indicating

that an asset is exposed to a decline in value; the assessment

of future cash flow, including discounting factors; and the final

decision regarding the real value of the asset, entail a require-

ment for management to conduct essential estimates and

approximations. (Note 12–13).

• The calculation of deferred taxes takes into consideration tem-

porary differences, including a valuation of unutilized loss carry-

forwards. Deferred tax receivables are reported only for loss

carry-forwards to the extent that the loss-carry forwards will be

utilized in the near future. A prudent valuation has been made

of deferred tax receivables and the company’s management con-

ducts continual appraisals to confirm that these assessments

are reasonable. (Note 11).

• Receivables are valued continually and reported in the amounts

expect to be paid. Reserves for doubtful receivables are based

on various assumptions and historical experience (Note 20).

Consolidated accounts

The consolidated financial statements include the accounts of the

Parent Company and all companies in which the Parent Company,

directly or indirectly, controls more than 50% of the votes, or in

some other respect has a decisive influence.

The consolidated accounts were prepared using the purchase

method, which means that the Parent Company’s purchase cost of

shares in each subsidiary is charged against that subsidiary’s acqui-

sition value, that is, the subsidiary’s shareholders’ equity (includ-

ing the equity component of untaxed reserves) at the time of acqui-

sition based on a market appraisal of the subsidiary’s net assets.

Consequently, the Group’s shareholders’ equity includes only that

part of each subsidiary’s equity that has been earned after the

acquisition.

The difference between the purchase cost of shares in a sub-

sidiary and the market value of that subsidiary’s net assets at the

time of acquisition is allocated to the subsidiary’s identifiable

assets if the book value is less than the market value. Remaining

amounts are reported as goodwill.

The current method is used to translate the accounts of foreign

subsidiaries. Consequently, the exchange rate on the closing date

is used to translate items in the balance sheet, while items in the

income statement are translated using the average exchange rate

for the year.

(SEK million)

General accounting principles

43

All non-Swedish companies in the Tele2 Group are regarded as

independent foreign operations since they conduct independent

operations and operations that are pursued with transactions in

local currency, so that exchange rate differences arising from trans-

lations are charged directly to shareholders’ equity.

When an independent foreign operation is divested, the accu-

mulated exchange-rate differences attributable to the divested

operation are reported in “Net assets in Group companies divest-

ed” in the income statement.

Accounting for associated companies and joint ventures

Companies in which the shareholding is regarded as long term and

in which the Group’s voting rights amount to a minimum of 20%

and a maximum of 50%, or in which the management believes that

the shareholders have equal control, are treated as associated com-

panies. Companies in which the owners have major control pursuant

to agreement are regarded as joint ventures.

Associated companies and joint ventures (“associated com-

panies”) are reported in accordance with the equity method. This

means that the book value of the shares in the associated company

that is reported in the consolidated financial statements corre-

sponds to the Group’s share in the equity of the associated com-

pany and any residual value of consolidated surplus values after

adjustment to the consolidated accounting principles. Participation

in earnings after net financial items of the associated company are

reported in the income statement in the item “Result from shares

in associated companies” along with amortization of acquired sur-

plus values. The share of associated companies’ tax expense and

deferred tax expense/income is reported in the income statement

in the item “Tax on profit for the year” and in the balance sheet as

“Shares in associated companies”. Earnings accrued in associated

companies arising after the acquisition date, and which have not

yet materialized through dividends, are allocated to the equity

method reserve, which comprises part of restricted shareholders’

equity in the Group. The equity share reduces unrestricted share-

holders’ equity in the event of losses.

In the event of an increase or decrease in the Group’s equity

share in associated companies through share issues, the loss or gain

is reported in the consolidated income statement in the item

“Result from participations in associated companies”. If the non-

recurring effect is significant, the amount is reported in the item

“Items affecting comparability”.

In the event of negative shareholders’ equity in associated com-

panies and in which the company has pledged to contribute add-

itional capital, the negative portion is reported as a provision.

Group surplus values relating to foreign associated companies

are reported as assets in foreign currencies. These values are trans-

lated in accordance with the same principles as the income state-

ments and balance sheets for associated companies.

Minority interest

The minority share in net profit/loss and shareholders’ equity is

reported as minority interest.

Receivables and liabilities of Swedish and non-Swedish sub-

sidiaries denominated in foreign currencies

Receivables and liabilities of Group companies denominated in for-

eign currencies have been translated into Swedish kronor applying

the year-end rate.

Gains or losses on foreign exchange in international transactions

related to regular operations are included in the income statement

under “Other operating revenues” and “Other operating expenses”,

respectively, while differences in financial receivables and liabil-

ities are reported among financial items. Note 24 summarizes the

exchange rate differences charged directly to shareholders’ equity

and the differences that affected profit/loss for the year.

Long-term lending to/borrowing from Tele2’s foreign operations

is regarded as a permanent part of the Parent Company’s financing

of/borrowing from foreign operations, and thus as an expansion/

reduction of the Parent Company’s investment in the independent

foreign operation. This lending/ borrowing is translated at the his-

torical rate of exchange if the borrowing is denominated in the for-

eign company’s currency.

Fixed assets

Intangible and tangible fixed assets are reported in net form after

deductions for accumulated amortization and depreciation accord-

ing to plan. Depreciation/amortization according to plan is based

on the acquisition value of the assets and the estimated utilization

period. Note 2 presents depreciation and amortization schedules

for fixed assets and reasons for amortizing certain intangible fixed

assets over utilization period longer than five years.

If there is an indication that a tangible or intangible asset has

declined in value, an estimate is made of its recovery value. If the

calculated recovery value is less than the reported value, a write-

down is made to the asset’s recovery value.

Intangible assets

License fees and right of use

The Company holds a number of licenses issued by the Swedish

National Post and Telecom Agency and the equivalent licensing

authority in other countries. Capitalized expenses for these rights

are amortized over the duration of the contract.

Goodwill

Goodwill is defined as the difference between the purchase cost of

shares or assets acquired and the market value of net assets.

Tangible assets

Buildings and land

Buildings and land pertain to fixed assets intended for use in actual

operations. Buildings are written off straight-line over the utilization

period. Acquisition value includes direct costs attributable to the

building.

44 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Machinery and technical plant

Machinery and technical plant include equipment and machinery

intended for use in operations, such as network installations. The

asset is written off on a straight-line basis over the utilization

period. The acquisition value includes direct expenses attributable

to the construction and installation of networks. Interest directly

relating to acquisition, construction or production of an asset that

necessarily requires considerable time to complete for the intended

application is included in the acquisition value of the asset.

Additional expenses for extensions and improvements that

increase value are capitalized, while additional expenses for repairs

and maintenance are charged continually to income during the period

in which they arise.

Equipment, tools and installations

Equipment comprises assets used in administration, sales and

operations.

Proprietary software for internal use

Tele2 capitalizes certain direct development costs attributable to

software for internal use. These are written off over the period of

use, which commences when the asset is ready for application.

Costs attributable to the project phase in the planning stage as well

as costs for maintenance and training are expensed as they arise.

Leasing

Leases are classified as either financial or operating leases. A lease

is considered financial if all economic risks and benefits associated

with ownership of the asset have been transferred, to a material

degree, to the lessee; otherwise, the lease is an operating lease. In

the case of financial leases as reported in the consolidated finan-

cial statements, each asset is entered as a tangible fixed asset, and

a corresponding amount is entered as a loan on the liability side of

the balance sheet. In the income statement, the cost of the lease

is divided into a depreciation portion and an item in interest

expense. The asset is written off on a straight-line basis over the

utilization period.

Agreements covering financial leases before January 1, 1997 have

been reported as operational leases in line with a transitional rule.

Materials and supplies

Inventories of materials and supplies are valued in line with the

first-in, first-out principle at the lower of purchase cost and market

value.

Receivables

Receivables are reported in the amounts expected to be paid.

Liquid funds

Liquid funds consist of cash and bank balances as well as current

investments with a maturity of a maximum three months. Liquid

funds according to the cash flow statement and balance sheet

include blocked bank accounts.

Financial items

Financial items are reported originally at their acquisition value.

Current financial assets are subsequently reported in line with the

lower of cost and market value. Financial items such as cash and

bank balances, current investments, receivables and liabilities, pre-

paid income and current liabilities to financial institutions are

viewed as corresponding to their real value as they are of a short-

term nature. The book value of long-term liabilities to financial insti-

tutions is also regarded as corresponding to their real value.

Shareholders’ equity

Shareholders’ equity consists of registered share capital, reserves

that are not available for distribution (statutory reserve, share pre-

mium reserve and other restricted reserves) and disposable earn-

ings/accumulated losses, net profit/loss and shares in losses of

associated companies.

The share premium reserve pertains to surplus portions when a

company’s shares are issued at a price that exceeds the normal

value. The equity reserve pertains to positive earnings of associat-

ed companies received after the acquisition date. According to the

Swedish Companies Act, a provision must be made each year to the

statutory reserve in a minimum amount corresponding to 10% of

that portion of net profit for the year that is not used to cover

retained losses until the statutory reserve and the share premium

reserve, combined, correspond to 20% of the share capital.

Restricted reserves in Tele2 and the Swedish Group companies may

be used to increase share capital in order to cover accumulated

losses, under certain conditions. Other restricted reserves pertain

to the equity share of untaxed reserves, deferred tax receivables and

a portion of exchange-rate differences.

According to the Swedish Companies Act, Tele2’s disposable

earnings after the requisite provision to the statutory reserve and

after covering accumulated losses of previous years are available

for distribution to shareholders. The legal limit for distributable

funds is represented by rules to the effect that dividends may not

threaten the company’s liquidity or overall position or exceed unre-

stricted shareholders’ equity in the Group. The dividend is deter-

mined by shareholders at the Annual General Meeting and, gener-

ally, may not exceed the dividend proposed by the Board.

45

Revenue recognition

Sales are reported net of VAT, discounts and exchange rate differ-

ences for sales in foreign currency. Revenue from telephony, cable

TV and other services and products is recognized at the time the

service/product is supplied to the customer.

Marketing expenses

Expenditure for advertising and other marketing activities is

charged on an ongoing basis.

Corporate income tax

Consolidated profit or loss for the year is charged with the tax on

taxable income for the year (“Current tax”) and with estimated tax

charges or credits for temporary differences (“Deferred tax”). A tem-

porary difference is a provision to appropriations made by an indi-

vidual company or any other item that merely alters the time when

an item is considered taxable or entitling the company to a deduction.

The calculation of deferred tax receivables in the Group takes

into account the Group’s loss carry-forwards to the extent that it is

expected they can be used in the foreseeable future. Deferred tax

receivables and deferred tax liabilities are netted only among units

with the same domicile for tax purposes.

The tax effects of Group contributions paid and received are

reported in the individual companies as a tax expense or tax rev-

enue in the income statement (“Current tax”) and charged to

retained losses or earnings.

Earnings per share

Earnings per share after dilution is calculated according to a

method in which the present value of the exercise price of the option

is assumed to be used to acquire shares at the average market value

during the accounting period. If the result for the year is negative,

this does not affect the calculation, since the dilution may not

reduce the loss per share.

Transactions with related parties

Transactions with related parties are shown in Note 35.

US accounting principles (US GAAP)

The Group’s balance sheet and income statement were drawn up

in accordance with Swedish accounting principles. These diverge

to a certain extent from US accounting principles (US GAAP). Note

40 shows the adjustments necessary to report in accordance with

US-GAAP.

Other information

Tele2 AB is a limited liability company domiciled in Stockholm,

Sweden. The company’s head office (phone +46 8 5620 0060) is

located at Skeppsbron 18, Box 2094, 103 13 Stockholm, Sweden.

The balance sheets and income statements will be approved at

the Annual General Meeting on May 15, 2003.

Intra-group sales include sales to companies in the Tele2 Group. Intra-Group sales in each market area and additional information concerning thesegments are shown in Note 33, Market areas and Note 34, Operating areas. Sales of telephones are included in operating revenue in the amount ofSEK 453 million (2001: SEK 306 million). The number of customers per market area and business area is shown in Note 36.

Optimal Telecom, which was previously reported in the Branded products & services market area, is included in the concept “Tele2 Sweden” asof January 1, 2002 and in the Nordic market area. Operating revenue for Optimal Telecom amounted to SEK 450 million in 2001.

During the first quarter of 2002, Tele2 won a case in the County Administrative Court against Telia regar-ding the principles of payment for jointtraffic charges, which means that Telia is responsible for paying SEK 350 million for switched traffic transited via its network (Cascade Accounting).As a result, operating revenue was positively affected in the amount of SEK 237 million in 2002 for traffic attributable to earlier periods.

The entire operating revenue of the Parent Company pertains to sales to other Group companies.

Note 1 Operating revenue

46 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Cont. note 1

Operating area by market area:Group

Operating revenue

2002 2001 ChangeNordic:Mobile telephony 7,109 6,029 18%Fixed telephony and Internet 6,637 5,886 13%Cable-TV 270 171 58%Data processing 214 280 –24%Intra-Group sales –664 –468 42%Total, Nordic 13,566 11,898 14%

of which, Tele 2 in Sweden; Mobile telephony 6,611 5,720 16%of which, Tele 2 in Sweden: Fixed telephony 3,877 3,183 22%of which, Tele 2 in Sweden: Cable TV 253 157 61%of which, Tele 2 in Sweden; Total 10,741 9,060 19%

Eastern Europe and Russia:Mobile telephony 2,068 1,094 89%Fixed telephony and Internet 198 34 482%Cable-TV 26 — —Data processing 77 53 45%Intra-Group sales –49 –33 48%Total, Eastern Europe and Russia 2,320 1,148 102%

Central Europe:Mobile telephony 145 25 480%Fixed telephony and Internet 5,922 5,339 11%Intra-Group sales –378 –520 –27%Total, Central Europe 5,689 4,844 17%

Southern Europe:Fixed telephony and Internet 8,415 5,591 51%Intra-Group sales –310 –467 –34%Total, Southern Europe 8,105 5,124 58%

Luxembourg:Mobile telephony 535 471 14%Fixed telephony and Internet 209 211 –1%Cable-TV 2 — —Data processing 124 104 19%Intra-Group sales –116 –123 –6%Total, Luxembourg 754 663 14%

Branded products & services:Mobile telephony — 17 —Fixed telephony and Internet 1,004 1,559 –36%Intra-Group sales –156 –168 –7%Total, Branded products & services: 848 1,408 –40%

Total by market 31,282 25,085 25%

Group Operating revenue

2002 2001 Change

Mobile telephony 9,857 7,636 29%Fixed telephony and Internet 22,385 18,620 20%Cable TV 298 171 74%Data processing 415 437 –5%Intra-Group sales –1,673 –1,779 –6%Total by operating area 31,282 25,085 25%

47

Note 2 Depreciation/amortization for the year and operating profit

Operating area by market:

Group

EBITDA* Depreciation/amortizat. EBIT**

2002 2001 2002 2001 2002 2001Nordic:Mobile telephony 3,576 2,917 –791 –354 2,785 2,563Fixed telephony and Internet 1,187 847 –466 –484 721 363Cable-TV 41 –11 –73 –72 –32 –83Data processing 10 15 –5 –3 5 12Total, Nordic 4,814 3,768 –1,335 –913 3,479 2,855

of which, Tele 2 in Sweden, Mobile telephony 3,646 3,111 –388 –352 3,258 2,759of which, Tele 2 in Sweden, Fixed telephony 870 675 –347 –351 523 324of which, Tele 2 in Sweden, Cable TV 41 –13 –70 –70 –29 –83of which, Tele 2 in Sweden, Total 4,557 3,773 –805 –773 3,752 3,000

Eastern Europe and Russia:Mobile telephony 611 320 –339 –244 272 76Fixed telephony and Internet –76 –56 –29 –23 –105 –79Cable-TV –1 — –12 — –13 —Data processing 7 8 –10 –11 –3 –3Total, Eastern Europe and Russia 541 272 –390 –278 151 –6

Central Europe:Mobile telephony –186 –21 –17 –3 –203 –24Fixed telephony and Internet 105 –585 –116 –98 –11 –683Total, Central Europe –81 –606 –133 –101 –214 –707

Southern Europe:Fixed telephony and Internet –101 –1,331 –129 –96 –230 –1,427Total, Southern Europe –101 –1,331 –129 –96 –230 –1,427

Luxembourg:Mobile telephony 161 101 –65 –65 96 36Fixed telephony and Internet 6 –61 –18 –48 –12 –109Cable-TV –29 — –5 — –34 —Data processing –12 –35 –4 –5 –16 –40Total, Luxembourg 126 5 –92 –118 34 –113

Branded products & services:Mobile telephony — –22 — — — –22Fixed telephony and Internet –172 –388 –12 –36 –184 –424Total, Branded products & sevices –172 –410 –12 –36 –184 –446

Group depreciation/amortization –1,506 –1,512 –1,506 –1,512Total by market 5,127 1,698 –3,597 –3,054 1,530 –1,356

Group

EBITDA* Depreciation/amortizat. EBIT**

2002 2001 2002 2001 2002 2001Mobile telephony 4,162 3,295 –1,212 –666 2,950 2,629Fixed telephony and Internet 949 –1,574 –770 –785 179 –2,359Cable-TV 11 –11 –90 –72 –79 –83Data processing 5 –12 –19 –19 –14 –31Group depreciation/amortization –1,506 –1,512 –1,506 –1,512Total per operating area 5,127 1,698 –3,597 –3,054 1,530 –1,356

* EBITDA = Operating profit before depreciation/amortization

** EBIT = Operating profit after depreciation/amortization

48 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Cont. note 2Group

EBITDA-margin EBIT-margin

2002 2001 2002 2001

Nordic 35% 32% 26% 24%of which, Tele 2 in Sweden, Mobile telephony 55% 54% 49% 48%of which, Tele 2 in Sweden, Fixed telephony 22% 21% 13% 10%of which, Tele 2 in Sweden, Cable-TV 16% –8% –11% –53%of which, Tele 2 in Sweden, Total 42% 42% 35% 33%

Eastern Europe & Russia 23% 24% 7% –1%Central Europe –1% –13% –4% –15%Southern Europe –1% –26% –3% –28%Luxembourg 17% 1% 5% –17%Branded products & services –20% –29% –22% –32%Total per operating area 16% 7% 5% –5%

The profit gauges above do not include internal sales to other companies in the Tele2 Group. Profit/loss including internal sales, depreciation by seg-ment (with the exception of goodwill for the acquisition of SEC) and additional information on segments is shown in Note 33, Market areas and Note34, Operating areas. Sales of telephones are included in operating expenses for the year in the amount of SEK –573 million (2001: SEK –543 million).

Optimal Telecom, which was previously reported in the Branded products * market area is included in the Nordic market area as of January, 2002.Operating profit/loss before and after depreciation/ amortization for Optimal Telecom in 2001 amounted to SEK –20 million and SEK –43 million,respectively.

By function:Depreciation/Amortization

Group Parent Company

2002 2001 2002 2001Cost of services sold –3,264 –2,782 — —Selling expenses –83 –75 — —Administration expenses –250 –197 — —Total depreciation/amortization for the year by function –3,597 –3,054 — —

By type of asset:Depreciation/Amortization

Group Parent Company

2002 2001 2002 2001Licences and right of use –339 –46 — —Goodwill –1,512 –1,506 — —Buildings –19 –19 — —Machinery and other technical plant –1,350 –1,276 — —Equipment, tools and installations –240 –207 — —Plant under construction –137 — — —Total depreciation/amortization for the year by type of asset –3,597 –3,054 — —

Group Parent Company

Estimated utilization period:Intangible fixed assets:Licences and right of use 2–25 years —Goodwill 3–20 years —

Tangible fixed assets:Buildings 5–40 years —Machinery and other technical plant 2–25 years —Equipment, tools and installations 2–10 years —

Depreciation/amortization according to plan is based on the acquisition value of each fixed asset and its estimated utilization period. All deprecia-tion/amortization is applied on a straight-line basis over the utilization period.

Goodwill arising from the original acquisition of Comviq GSM AB and Tele2 Sverige AB and other acquisitions before 1996 are amortized over tenyears. The goodwill arising in 1996 in conjunction with the acquisition of outstanding minority shareholding in Tele2 Sverige AB and outstandingoptions in Comviq GSM AB, is amortized over 20 years. Goodwill arising from the acquisition of Datametrix, Ritabell, SIA Tele2, SEC, Fora and LevicomBroadband is amortized over a period of 20 years. The amortization periods are set on the basis of the estimated long-term and strategic significanceof each acquisition on the acquisition date. In the case of corporate acquisitions in new markets, an amortization period of 20 years is applied. Othergoodwill is amortized over five years.

49

Note 3 Other operating revenue

Note 4 Other operating expenses

Note 5 Profit/loss on shares in associated companies

Group Parent Company

2002 2001 2002 2001

Rental of capacity and antenna installations — 64 — —Exchange gains in business operations 24 33 1 —Divestment of fixed assets 9 2 — —Other revenue, external 17 90 — —Other revenue, Group — — 11 4Total other operating revenue 50 189 12 4

Group Parent company

2002 2001 2002 2001

Exchange loss from operations –35 –20 — —Sale/scrapping of other fixed assets –18 –46 — —Other costs –9 –9 — —Total other operating expenses –62 –75 — —

Group Parent company

2002 2001 2002 2001

Participation in profit/loss of associated companies –41 –58 — —Total profit/loss in associated companies –41 –58 — —

Holding Group Parent Company

Dec.31,2002 Dec.31,2001 2002 2001 2002 2001

Svenska UMTS-nät AB 50% 50% –1 –1 — —Other associated companies Note 16 Not 16 –40 –57 — —Total net profit/loss from associated companies –41 –58 — —

Profit/loss in associated companies:2002 2001

Sv UMTS-nät Other Sv UMTS-nät Other(9 mth)

Profit/loss in each associated company –2 –108 –2 –113Holding 50% 20–50% 50% 20–50%Share of profit/loss –1 –39 –1 –57Change in share of profit/loss from preceding year — –1 — —Total net profit/loss from associated companies –1 –40 –1 –57

In the fourth quarter of 2002, Tele2 sold its 20% shareholding in Moscow Cellular Communication, an associated company in Tele2 Russia TelecomBV Group (formerly Fora BV), which was acquired in 2001.

Extracts from the balance sheets and income statements of each associated company:2002 2001

Sv UMTS-nät Other Sv UMTS-nät Other(9 mån)

Income statement:Revenue — 70 — 13Operating profit/loss after depreciation/amortization –20 –86 –11 –103Profit/loss for the year –2 –108 –2 –113

50 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Note 6 Sales of associated companies

Note 7 Profit/loss on shares in Group companies

Note 8 Profit/loss on other securities and receivables constituting fixed assets

Note 9 Other interest income

Note 10 Interest expense and similar profit/loss items

Cont. note 5

Dec. 31, 2002 Dec. 31, 2001

Sv UMTS-nät Other Sv UMTS-nät OtherBalance sheet:Tangible assets 468 — 12 432Intangible and financial assets — 33 — 107Current assets 545 80 492 141Total assets 1,013 113 504 680

Shareholders’ equity 995 –8 498 130Long-term liabilities — 37 — 349Current liabilities 18 84 6 201Total shareholders’ equity and liabilities 1,013 113 504 680

Group Parent Company

2002 2001 2002 2001

Sale of Moscow Cellular Communication 5 — — —Sale of Transcom Worldwide S.A — 91 — —Total sales of associated companies 5 91 — —

Parent Company

2002 2001

Liquidation loss in Société Europénne de Communication S.A. — –13,964Total profit/loss from shares in Group companies — –13,964

Group Parent Company

2002 2001 2002 2001

Interest, Group 180 61Interest, external receivables 2 5 2 3Writedown of shares in XSource Corporation –86 — — —Exchange rate difference — –1 — —Total profit/loss on other securities and receivables constituting fixed assets –84 4 182 64

Group Parent Company

2002 2001 2002 2001

Interest, Group — 14Interest, bank balances, etc. 111 66 — —Interest, penalty interest etc. 47 — — —Exchange rate difference on financial fixed assets 7 –1 — —Total other interest income 165 65 — 14

Group Parent Company

2002 2001 2002 2001

Interest, loans –679 –557 — –14Interest, financial leasing –13 –11 — —Interest, penalty interest rate and other liabilities –30 –53 — —Interest, Group –5 —Exchange rate difference on financial liabilities 57 2 — —Other financial expense –114 –71 — –1Total interest expense and similar profit/loss items –779 –690 –5 –15

51

Note 11 Tax on profit/loss for the year and deferred tax liability/receivable

Tax on profit/loss for the yearGroup Parent Company

2002 2001 2002 2001Current tax expense:Eastern Europe and Russia –45 –2 — —Central Europa –4 — — —Southern Europe — –1 — —Luxembourg — 4 — —

–49 1 — —

Deferred tax expense, as a result of temporary differences:Nordic –835 2,334 –35 3,076Eastern Europe and Russia 22 — — —Central Europa 116 — — —Southern Europe 127 — — —Luxembourg 30 — — —Branded products & services 15 — — —

–525 2,334 –35 3,076Total tax expense (–)/tax income (+) on profit for the year –574 2,335 –35 3,076

Group Profit before tax andand minority share,

geographic breakdown

2002 2001Sweden 2,532 2,072Other countries –1,736 –4,016Total profit/loss and minority share 796 –1,944

The difference between the booked tax expense for the Group and the tax expense based on prevailing tax rates in each country consists of the following components:

Group Calculation of effective tax rate

2002 2001Profit/loss before tax and minority share 796 –1 944

Tax according to prevailing tax rate in:Tax effect according to tax rates in Sweden –223 28,0% 544 28,0%Difference between tax rate in Sweden for foreign subsidiaries 135 326

–88 870Tax effect of:Non-tax affecting items, Group adjustments –418 52.5% –422 –21.7%Non-tax affecting items, other adjustments 18 –2.3% 40 2.1%Liquidation of SEC and taxation of deferral — — 3 082 158.5%Non-deductible expenses etc –81 10.2% –35 –1.8%Loss carry-forwards:– Valuation of loss carry-forwards in previous years 576 –72.4% — —– Non-assessed additional loss carry-forward for the year –581 73.0% –1 200 –61.7%Tax expense/income and effective tax rate –574 72.1% 2 335 120.1%

Group Deferred tax receivable,

attributable to

Dec.31,2002 Dec.31,2001Long-term receivables –3 –5Machinery and technical plant –1,019 –928Value of unutilized loss carry-forwards 2,268 2,697Total deferred tax receivable (+)/tax liability (–) 1,246 1,764

52 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Cont. note 11

Note 12 Intangible assets

Group Deferred tax receivable

Dec.31,2002 Dec.31,2001Deferred tax receivable:Nordic 1,937 2,697Eastern Europe and Russia 35 —Central Europa 117 —Southern Europe 128 —Luxembourg 36 —Branded products & services 15 —

2,268 2,697Deferred tax liability:Nordic –1,022 –933Total deferred tax receivable (+)/tax liability (–) 1,246 1,764

Loss carry-forwards:At December 31, 2002, the Tele2 Group had loss carry-forwards totaling SEK 19,173 million (2001: SEK 19,871million), of which SEK 1,744 mil-lion (2001: SEK 3,300 million) expires within five years and the remaining amount, SEK 17,429 million (2001: SEK 16,571 million), expires afterfive years or they continue to apply in perpetuity.

A deferred tax receivable in the case of loss carry-forwards is reported only to the extent that it is estimated that they can be utilized in the near future.Due to the improved results in Continental Europe deferred tax receivables of a total amount of SEK 576 million has been recognized in the profitand loss statement in 2002. Total losses carried forward for the Group at December 31 2002 amounted to SEK 19,173 million, of which SEK 7,881million has been utilized for deferred tax accounting and the remaining part, SEK 11,292 million, is valued to zero.

The Swedish tax authorities have queried a loss carry-forward in Tele2 AB corresponding to a tax effect of SEK 176 million (2001: SEK 176 mil-lion). These have been valued to SEK 169 million.

Dec. 31, 2002Group Parent Company

Licences & Goodwill Total Licenses & right of use right of use

Acquisition value:Acquisition value at Jan. 1 996 29,755 30,751 1Acquisition value in acquired companies 1 — 1 —Investments for the year 147 460 607 —Sales and scrapping –272 –9 –281 —Reclassification –13 –498 –511 —Translation differences for the year –37 –962 –999 —Total acqusition value 822 28,746 29,568 1Accumulated depreciation/amortization:Accumulated depreciation/amortization at Jan 1 –260 –2,722 –2,982 –1Accumulated depreciation/amortization in acquired companies — — — —Depreciation/amortization for the year –339 –1,512 –1,851 —Sales and scrapping 271 9 280 —Reclassification 2 — 2 —Translation differences for the year 13 66 79 —Total accumulated depreciation/amortization –313 –4,159 –4,472 –1

Total intangible assets 509 24,587 25,096 —

Investments for the year in goodwill relate essentially to the supplementary purchase price paid for Tele2 Russia (SEK 407 million).Sales and scrapping relate essentially to the phase-out of Tele2 Norway’s UMTS license, in which the net book value of capitalized license costs

was dissolved in its entirety and charged to depreciation in the amount of SEK –263 million.When Tele2 acquired Société Europénne de Communication SA, through an offer to SEC’s shareholders, there were outstanding stock options in

SEC. Tele2’s offer did no encompass the stock options, thus in order to calculate net assets, these have been given a theoretical value as if they hadbeen encompassed by the offer and booked as a liability in the consolidated balance sheet. During 2002, this liability was adjusted vis-à-vis good-will, shown above as a reclassification, in the amount of SEK 498 million, with no effect on cash and profit.

53

Note 13 Tangible assets

Dec. 31, 2002

Group Parent Company

Buildings Machinery, Equipment Plant under Total Inventarier& land tech. plant construction

Acquisition value:Acquisition value at Jan. 1 177 14,069 1,320 350 15,916 1Acquisition value in acquired companies 1 14 13 — 28 —Investments for the year 18 1,244 203 300 1,765 —Sales and scrapping –1 –146 –54 –147 –348 —Reclassification — 331 –55 –263 13 —Translation differences for the year –13 –268 –49 –7 –337 —Total acqusition value 182 15,244 1,378 233 17,037 1

Accumulated depreciation:Accumulated depreciation at Jan. 1 –53 –5,799 –633 — –6,485 –1Accumulated depreciation in acquired companies — –9 –11 — –20 —Depreciation for the year –19 –1,350 –240 –137 –1,746 —Sales and scrapping — 130 44 144 318 —Reclassification — –11 9 — –2 —Translation differences for the year 5 129 28 –7 155 —Total accumulated depreciation –67 –6,910 –803 — –7,780 –1

Total tangible assets 115 8,334 575 233 9,257 —

Sales and scrapping relate essentially to the phase-out of Tele2 Norway’s UMTS license, in which the net book value of capitalized license costs wasdissolved in its entirety and charged to depreciation for the year in the amount of SEK –137 million.

Group Parent Company

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001

Total capitalized interest expenses in fixed assets 205 193 — —

Financial leases:All fixed assets utilized through financial leasing have been included in the consolidated accounts as fixed assets and loan liabilities, with the exception,however, of contracts signed before 1997. The effects of these being included in the consolidated balance sheet are shown below and in Note 26.

Group

Booked assets Assets not booked

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001Machinery and other technical plant:Acquisition value 298 306 155 155Accumulated depreciation –57 –87 –49 –42Book value 241 219 106 113

Financial leasing pertains primarily to the extension for transmission capacity in Sweden through Svenska Kraftnät, Vattenfall and agreements signedin Denmark. Also, financial leasing occurs in Estonia, Russia and Luxembourg. During 2002, investments amounted to SEK 83 million, primarily inSweden in the amount of SEK 66 million and in Luxembourg in the amount of SEK 11 million. During the year, termination of financial leasingoccurred in Estonia and Latvia.

Tax-assessed value:The tax-assessed value of the Group’s land in Sweden is SEK 1 million (2001: SEK 1 million).

54 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Note 14 Shares in Group companies

Parent Company

Dec.31,2002 Dec.31,2001

Acquisition value:Acquisition value at Jan. 1 1,987 24,488Investments 699 885Liquidation of Société Europénne de Communication S.A. — –23,386Total shares in Group companies 2,686 1,987

During 2002, the Parent Company paid a supplementary purchase price for Tele2 Russia Telecom BV (formerly Fora) of SEK 299 million and pro-vided a shareholder contribution to NetCom Luxembourg SA of SEK 400 million.

Effect on cash of corporate acquisitions and divestments during the year:The Group’s book value of acquired/divested assets and liabilities in acquired/divested companies was:

Group Acquired Divested

2002 2001 2002 2001Intangible fixed assets –351 –394 — —Tangible fixed assets –2 –614 — —Financial fixed assets –1 –469 — —Inventories — –21 — —Current receivables –9 –238 — —Current investments and liquid funds –4 –890 — —Long-term liabilities 5 1,166 — —Current liabilities 12 428 — —Exchange rate difference — –11 — —Purchase sum –350 –1,043 — —

Paid with own shares — 849 — —Paid through loans from the seller — 135 — —Paid/Received purchase sums –350 –59 — —Cash in acquired/divested companies 4 890 — —Effect on Group cash –346 831 — —

55

Cont. note 14

Legal structure of the Tele2 Group*:* including associated companies and other investments

Parent Company

Number of Total par Holding Book valueCompany, reg. No, reg’d. Office shares value (capital/votes) Dec.31,2002 Dec.31,2001Tele2 Russia Telecom BV, 33287334, Rotterdam, Netherlands 400 pcs NLG 40 000 100% 1,150 851

Tele2 Russia Telecom Services BV, 33.287.334, Amsterdam, Netherlands 100%PSNR Personal System Networks in region, 1025202610157, Niznhy Novgorod, Russia 100%Tele2 Russia EKA Holding GmbH, FN 131600 f, Wien, Austria 100%

Fora Telecom M, no P-12721.17, Moscow, Russia 100%Tele2 Russia VOL Holding GmbH, FN 131602 h, Wien, Austria 100%

Kursk Cellular Communications, no P-16792.17, Kursk, Russia 100%Smolensk Cellular Communications, no P-2581.16, Smolensk, Russia 60%Belgorod Cellular Communications, no P-2586.16, Belgorod, Russia 65%Kemerovo Mobile Communications, no P-13742.17, Kemerovo, Russia 100%Rostov Cellular Communications, no P-1790.16, Rostov, Russia 75%Udmurtiya Cellular Communications, no P-5818.16, Izhevsk, Russia 55%Siberian Cellular Communications, no P-4458.16, Omsk, Russia 60%Chelyabinsk Cellular Network, no P-3656.15, Chelyabinsk, Russia 51%

Tele2 Russia MAC Holding GmbH, FN 132666 y, Vienna, Austria 100%CISC Cellular, no P-8068.17, Moscow, Russia 100%Millicom New Tech. in Communications, no P-9894.17, Moscow, Russia 100%

Tele2 Russia International Holding BV, Nr 33221654, Amsterdam, Netherlands 100%Tele2 Russia International Cellular BV, Nr 33227655, Amsterdam, Netherlands 100%

Suomen Kolmegee, Helsinki, Finland Note 18 27.44%/15%SCD Invest AB, 556353-6753, Sweden Note 18 9.1%/49.9%NetCom Luxembourg SA, RC B73.796 Luxembourg 1 000 pcs tEURO 35 100% 1,536 1,136

Tele2 Holding AB, 556579-7700, Stockholm, Sweden 100%Tele2 Sweden AB, 556267-5164, Stockholm, Sweden 100%

Tele2 Sweden SA, RC B73.802, Luxembourg 100%4 T Solutions Holding AB, 556580-2690, Stockholm, Sweden 100%

XSource Corporation, USA Note 18 11,88%X-Source Holding AB, 556580-2682, Stockholm, Sweden 100%

X-Source AB, 556290-2238, Stockholm, Sweden 100%X-Source SA, RC B 87235, Luxembourg 100%

Optimal Telecom Holding AB, 556580-7855, Stockholm, Sweden 100%Optimal Telecom Sweden AB, 556440-1924, Stockholm, Sweden 100%

Datametrix Sweden Holding AB, 556580-7871, Stockholm, Sweden 100%Datametrix AB, 556539-4870, Stockholm, Sweden 100%

Everyday Holding AB, 556579-7718, Stockholm, Sweden 100%Stenblocket i Fruängen AB, 556058-8500, Stockholm, Sweden 100%

Everyday Webguide AB, 556182-6016, Stockholm, Sweden Note 16 50%Svenska UMTS-nät Holding AB, 556606-7988, Stockholm, Sweden 100%

Svenska UMTS-nät AB, 556606-7996, Stockholm, Sweden Note 16 50%Svenska UMTS-licens Holding AB, 556606-7764, Stockholm, Sweden, dormant 100%Tele2 Norway Holding AB, 556580-8143, Stockholm, Sweden 100%

Tele2 AS, 974534703, Oslo, Norway 100%Tele2 Norge UMTS AS, 982795761, Oslo, Norway 100%

Tele3 Norge AS, 932100975, Norway, dormant 100%Tele2 Danmark Holding AB, 556580-8028, Stockholm, Sweden 100%

Tele2 Denmark A/S, 221234, Köpenhamn, Denmark 100%In2Loop A/S, 25 48 43 47, Köpenhamn, Denmark 100%

In2loop Polska Sp. So.o, 54380, Warsawa, Poland 90%Web Communication BV, 34112460, Amsterdam, Netherlands 100%

Tele2 Polska Sp, 57496, Warsawa, Poland 100%Tele2 Holding AS, 10262238, Tallinn, Estonia 90%

Tele2 Eesti AS, 10069046, Tallinn, Estonia 52%UAB Tele2, 1147164, Vilnius, Lithuania 100%UAB Levi & Kuto Kaunas, 1149679, Kaunas, Lithuania, dormant 100%UAB Levi & Kuto Klaipeda, 1150061, Klaipeda, Lithuania, dormant 100%

2,686 1,987

56 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Cont. note 14

Parent Company

Number of Total par Holding Book valueCompany, reg. No, reg’d. Office shares value (capital/votes) Dec.31,2002 Dec.31,2001

trsp 2,686 1,987Belmus BV, 33261289, Amsterdam, Netherlands 100%

Tele2 Eesti AS, 10069046, Tallinn, Estonia 48%Tele2 Holding SIA, 000351206, Latvia 100%

SIA Tele2, 000327285, Latvia 100%OU Levicom BroadBand, 10309744, Tallinn, Estonia 100%

UAB KRT, 2304688, Vilnius, Lithuania 100%UAB C-Gates, 2424016, Vilnius, Lithuania 100%UAB Trigeris, 2123967, Vilnius, Lithuania 100%

AS Levi Kaabel, 10417072, Tallinn, Estonia 100%AS Telset Telecommunications Group, 10673906,Tallinn, Estonia 100%

Tallinna Kaabeltelevisiooni AS, 10375439,Tallinn, Estonia 65%OU Trigger Software, 10687966, Tallinn, Estonia 100%AS Eesti Telag AS, 10310799, Tallinn, Estonia, dormant 100%SIA Levicom Broadband, 000353597, Riga, Latvia, dormant 100%Montalto Investments BV, 33135957,Amsterdam, Netherlands, dormant 100%

Corporation Severnaya Korona, no P-6117.16, Irkutsk, Russia 100%St Petersburg Telecom, no AO-3177, St Petersburg, Russia 60.6%Oblcom, no P-7180.16, St Petersburg, Russia 60.6%ProcureITright AB, 556600-9436, Stockholm, Sweden 100%

Proceedo Solution AB, 556599-5049, Stockholm, Sweden 100%Datametrix Norway AS, 975993108, Oslo, Norway 100%Datametrix Danmark A/S, 39419, Köpenhamn, Denmark 100%Datametrix OY AS, 378548, Helsingfors, Finland 100%OY Finland Tele2 AB, 1482343-8, Helsingfors, Finland 100%Interloop AB, 556284-7565, Stockholm, Sweden 100%NetCom GSM Sweden AB, 556304-7025, Stockholm, Sweden 100%Åkersberga KV AB, 556326-3192, Österåker, Sweden 100%Halmstads KV AB, 556380-6115, Halmstad, Sweden 100%Skaraborgs Kabel-TV AB, 556483-6467, Mariestad, Sweden 60%Hallstahammar KV KB, 916580-7912, Västerås, Sweden 90%Kopparstaden KV KB, 916583-0564, Västerås, Sweden 80%Nelab KV KB, 916597-8983, Västerås, Sweden 80%Kabelvision KB, 916836-8828, Sweden, dormant 100%KB Haninge Kabelvision, 916633-3485, Sweden, dormant 80%Härnösand Kabelvision KB, 916589-2481, Sweden, dormant 80%KB June Kabelvision, 916702-4836, Sweden, dormant 65%KB Lidingö Kabelvision, 916631-3289, Sweden, dormant 80%Älmhults Kabelvison KB, 916525,1043, Sweden, dormant 80%Trade2 (Sweden) AB, 556469-7836, Sweden, dormant 100%Comviq Broadband AB, 556405-6678, Sweden, dormant 100%SCD AB, 556353-6829, Sweden, dormant 100%Call2Web AB, 556403-7983, Sweden, dormant 100%NIU Nätteknik, Installation och Underhåll AB, 556041-1307, Sweden, dormant 100%Kalmar Kabelvision AB, 556244-2466, Sweden, dormant 100%Comviq GSM AB, 556450-2606, Sweden, dormant 100%Swipnet AB, 556411-9401, Sweden, dormant 100%NetCom Luxembourg Holding AB, 556580-7905, Sweden, dormant 100%Tele1 A/S, 955780132, Norway, dormant 100%SNPAC Swedish Nr Portability Adm.Centre AB, 556595-2925, Sweden Note 16 20%Travellink AB, 556596-2650, Stockholm, Sweden Note 18 15%

S.E.C. Luxembourg S.A., R.C. B-84.649, Luxembourg 100% Managest Media SA, RCB87091, Luxembourg Note 16 40%

Managest Media Spa, Italy 100%Tele2 Services Luxembourg SA, RC B 70203, Luxembourg 100%Societe Europeenne de Communication (Ireland) Ltd, 316848, Dublin, Ireland, dormant 100%3C Communications (Ireland) Ltd, 164025, Ireland, dormant 100%

2,686 1,987

57

Cont. note 14

Parent Company

Number of Total par Holding Book valueCompany, reg. No, reg’d. Office shares value (capital/votes) Dec.31,2002 Dec.31,2001

trsp 2,686 1,987Tele2 s.r.o., 25650009, Prag, Czech Republic 100%Tele2 /Slovakia/ s.r.o., 35806486, Slovakia 100%Tele2 Magyarorszag Kft., 0109695967, Hungary 100%

SEC Holding BV, 33141829, Rotterdam, Netherlands 100%Kinnevik Telecommunications Int. SA, RC B 52976, Luxembourg 100%

Tele2 Europe SA, B 56944, Luxembourg 100%Tele2 Telecommunication Services GmbH, FN 178222t, Vienna, Austria 100%Tele2 Belgium SA, 609 392, Zellik, Belgium 100%Télé2 France SA, FR48-409914058, Velizy, France 100%Tele2 Telecommunication Services GmbH, 36232, Düsseldorf, Germany 100%Tele2 Italia Spa, Ml-1998-247322, Segrate, Italy 100%Tele2 AG, H.1045/80, Liechstenstein 100%Tele2 Luxembourg SA, B 65774, Luxembourg 100%Tele2 (Netherlands) BV, BV 291906, Amsterdam, Netherlands 100%Tele2 Telecommunication Services S.L, B82051913, Madrid, Spain 100%Tele2 Telecommunication Services AG, CH-020390 55 969, Zürich, Switzerland 100%Tele2 Communications Serv. Ltd, 3565220, London, UK 100%Telemilenio, Telecomunicacoes, Sociedade Unipessoal, 10468, Lissabon, Portugal 100%TANGO SA, RC 59560, Luxembourg 100%Transac SA, B49487, Luxembourg 100%Everyday Media SA, R.C. B 78.227, Luxembourg 100%Everyday Prod. SA, 69802, Luxembourg 100%Calling Card Company SA, B 424 906 618, Paris, France 5%3C Communications International SA, RC B 29697, Luxembourg 100%

3C Communications GmbH, FN695021, Vienna, Austria 100%3C Communications BVBA, 514 274, Brussels, Belgium 99%3C Communications SPA Italy, 28894/7359/14, Segrate, Italy 91%3C Communications Czech s-r-s, Czech Republic, dormant 100%3C Communications A/S,184462, Ballerup, Denmark 100%3C Communications OY, 585632, Finland 100%3C Communications SA, 345 343 396 00023 Orleans, France 99%3C Communications GmbH, HRB 24104, Germany 99%3C Communications Luxembourg SA, B39690, Luxembourg 100%3C Kommunikacios Szolgaltato Kft, Budapest, Hungary 90%3C Communications BV, Amsterdam, 14630454, Netherlands 99%3C Communications A/S, Oslo, Norway 100%3C Transac A/S, Norway 100%3C Communicacoes Ltda, Domingos de Rana, Portugal 95%3C Communications Espana SA, Madrid, Spain 99%3C Communications AB, 556332-6346, Stockholm, Sweden 97%3C Transac AB Sweden,556057-2116, Stockhom, Sweden 100%3C Communications Ltd, 2343138, UK 96%3C Transac Ltd, Kingston-upon-Thames, UK 100%Comviq Holding BV, 14630454, Amsterdam, Netherlands 100%3C Communications Equipment SA, B 25465, Luxembourg 100%

3C Communications BVBA, 514 274, Brussels, Belgium 1%3C Communications SPA Italy, 28894/7359/14, Segrate, Italy 9%3C Communications SA, 345 343 396 00023 Orleans, France 1%3C Communications GmbH, HRB 24104, Germany 1%3C Kommunikacios Szolgaltato Kft, Budapest, Hungary 10%3C Communications BV, Amsterdam, 14630454, Netherlands 1%3C Communicacoes Ltda, Domingos de Rana, Portugal 5%3C Communications Espana SA, Madrid, Spain 1%3C Communications AB, 556332-6346, Stockholm, Sweden 3%3C Communications Ltd, 2343138, UK 4%

2,686 1,987

58 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Cont. note 14

Note 15 Receivables from Group companies

Parent Company

Number of Total par Holding Book valueCompany, reg. No, reg’d. Office shares value (capital/votes) Dec.31,2002 Dec.31,2001

trsp 2,686 1,987CCC Holding BV, 33 269 398, Amsterdam, Netherlands 100%

Calling Card Company Limited, 3794813, UK 100%CCC Calling Card Company Germany GmbH, HRB 40498, Germany 100%C3 Calling Card Company (Ireland) Limited, 309745, Ireland 100%Calling Card Company SA, B 424 906 618, Paris, France 95%Calling Card Company Italy SpA, 233372, Milano, Italy 100%Tele2 International Card Company S.A., RC 64 902, Luxembourg 100%Calling Card Company Netherlands BV, BV 82334, Amsterdam, Netherlands 100%Calling Card Company Spain, S.A. A-62426457, Spain 100%Calling Card Company Telecommunication Services GmbH, FN 215362i, Austria 100%

SEC Everyday Europe BV, 341124357, Amsterdam, Netherlands 100%Everyday.com Internet Services GmbH, Austria 100%Everyday.com Switzerland AG, CHF-0203023164-4, Zürich, Switzerland 100%Everyday.com Germany GmbH, HR B 36232, Germany 100%Everyday.com France SAS, B-430291898, Velizy, France 100%Everyday.com Italia S.R.L, R.C. 1605497, Italia Srl, Italy 100%Everyday Luxembourg SA, B 64 902, Luxembourg 100%Everyday.com Netherlands BV, 34125168, Amsterdam, Netherlands 100%

IntelliNet Holding BV, 34126307, Amsterdam, Netherlands 100%Intellinet Telecommunications GmbH, FN 190268 g, Vienna, Austria 100%Intellinet Telecommunication GmbH, HRB 48344, Frankfurt, Germany 100%IntelliNet S.p.A, R.C. 1615155, Segrate, Italy 99%IntelliNet BV, 34120156, Amsterdam, Netherlands 100%IntelliNet Telecommunication Services AG, CH-020.3.021.518-8, Zürich, Switzerland 100%

Fagersta AB, 556238-4171, Stockholm, Sweden 100%Transcom Holding AB, 556468-0857, Sweden, dormant bolag 100%3C Holding AB, 556491-9503, Sweden, dormant bolag 100%

Tele2 Marketing Dynamics AS, 932100975, Norway, dormant 100%Tele2 Telecommunications Services Ltd, 292887, Dublin, Ireland, dormant 100%IntelliNet S.p.A, R.C. 1615155, Segrate, Italy 1%

Total shares in Group companies 2,686 1,987

In October 2002, Tele2 acquired 100% of the shares in ProcureITright, a supplier of procurement function services and WEB-based procurementsystems, from XSource Corporation. During 2002, the sale was made of the Swedish UMTS license to Svenska-nät AB, which is 50% owned withTelia; as well as a 20% share of OJSC Moscow Cellular Communication.

Significant events after the end of the financial yearIn February 2003 Tele2 acquired Alpha Telecom. This is the UK’s leading operator in prepaid fixed network telephony for individuals and a marketleader in cash cards for fixed telephony. Alpha Telecom, sells about 1.25 million cash cards per month from 60,000 sales outlets in the UK and hassales of SEK 1.9 billion. The acquisition price amounted to approximately SEK 780 million, on a debt-free basis.

Parent company

Dec.31,2002 Dec.31,2001Acquisition value at Jan. 1 12,526 1,028Lending 3,337 11,904Amortization and additions granted –510 –406Total receivables from Group companies 15,353 12,526

Receivables from/liabilities to Group companies are subject to commercial terms and conditions.

59

Note 16 Shares in associated companies

Note 17 Receivables from associated companies

Group

Number of Total par Holding Book valueCompany, reg. No, reg’d. Office shares value Dec.31,2002 Dec.31,2001Svenska UMTS-nät AB, 556606-7996, Stockholm, Sweden 502,000 pcs tSEK 50,200 50% 498 249OJSC Moscow Cellular Com., P7696.16, Moscow, Russia 1,250,000 pcs tRUBEL 1,250 — — 75Managest Media SA, RCB87091, Luxembourg 12,000 pcs B tEURO 120 40% 44 —SNPAC Swedish Number Portability Administrative

Centre AB, 556595-2925, Stockholm, Sweden 200 pcs tSEK 20 20% — 2Total shares in associated companies 542 326

Everyday Webguide AB, 556182-6016, Stockholm, Sweden 1,750 pcs tSEK 175 50% –28 –102Total provisions to associated companies –28 –102

During the fourth quarter of 2002, Tele2 sold its 20% shareholding in Moscow Cellular Communication.

Contribution of each associated company to Group equity:2002 2001

Sv UMTS-nät Other Sv UMTS-nät Other(9 mth)

Goodwill:Total goodwill, book value, Dec. 31 — — — —

Equity share:Equity share, Jan. 1 249 –25 — –51Acquired companies, opening balance — — — 75Share of capital contributions and new share issues 250 147 250 8Share of profit/loss –1 –40 –1 –57Divestments during the year — –66 — —Equity share, Dec. 31 498 16 249 –25

Total shares in associated companies 498 16 249 –25

Group Parent Company

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001Acquisition value at Jan, 1 115 105 115 67Shareholder contribution –102 –7 –102 –7Lending 6 17 6 55Total receivables from associated companies 19 115 19 115

Receivables from associated companies are subject to commercial terms and conditions.

60 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Note 18 Other long-term holdings of securities

Note 19 Other long-term receivables

Group

Number of Total par Holding Book valueCompany, reg. No, reg’d. Office shares value capital voting rights Dec.31,2002 Dec.31,2001Parent Company :Suomen Kolmegee, Helsinki, Finland 1,924 pcs tFIM 1 924 27.44% 15% 28 5SCD Invest AB, 556353-6753, Stockholm 1,058,425 A 9.1% 49.6% — —

28 5Other, Group:XSource Corporation, USA 1,806,575 pcs tUSD 18 11.88% 11.88% 36 122Travellink AB, 556596-2650, Stockholm 15,000 pcs tSEK 1,500 15% 15% 75 75Total long-term holdings of securities 139 202

Group Parent Company

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001Acquisition value:Acquisition value at Jan. 1 545 489 348 366Investments for the year 23 74 23 —Sales for the year — — — –18Reclassification — –18 — —Total acqusition value 568 545 371 348Write-downs:Accumulated write-downs at Jan, 1 –343 –343 –343 –343Write-downs during the year –86 — — —Total accummulated write-downs –429 –343 –343 –343

Total other long-term holdings of securities 139 202 28 5

During 2002, additional investments were made in Suomen Kolmegee OY for SEK 23 million, as well as share write-downs in XSource Corporation bySEK 86 million. The book value is regarded as corresponding to real value.

Group Parent Company

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001Acquisition value at Jan. 1 85 106 — 46Lending 8 23 — 12Amortization –11 –5 — —Reclassification –7 –41 — –58Translation difference –1 2 — —Total other long-term receivables 74 85 — —

Group Parent Company

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001Receivable from Finvision 39 47 — —Receivable from XSource Corporation 20 17 — —Receivable from Alecta 6 6 — —Other 9 15 — —Total other long-term receivables 74 85 — —

61

Note 20 Accounts receivable, trade

Note 21 Other current receivables

Note 22 Prepaid expenses and accrued revenues

Group

Accounts receivable, trade

Dec.31,2002 Dec.31,2001Accounts receivable, trade 5,656 4,542Reserve for doubtful receivables –1,283 –918Total accounts receivable, trade 4,373 3,624

Group

Reserve for doubtful receivables

Dec.31,2002 Dec.31,2001Reserve for doubtful receivables at Jan. 1 918 558Reserves in companies acquired during the year — 15Netincrease of reserve 415 349Recovery of previous write-downs –30 –36Translation difference in opening balance –20 32Total reserve for doubtful receivables 1,283 918

Credit risk entails the book losses that should be reported as of the closing date if the counter-parties have completely neglected to fulfill their pay-ment liability in accordance with agreements. The Group has limited its credit risk in respect of receivables by continually conducting credit assess-ments of the customer stock. Since the Group has a highly varied customer stock that covers individuals as well as companies, this entails that thecredit risk is limited. The Group makes provisions for any credit losses, and these have remained within management’s expectations.

Group Parent Company

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001VAT receivables 174 262 — 2Receivable from Kinnevik — 78 — —Receivable from Millicom International BV — 113 — —Receivable from Svenska UMTS-nät 32 11 — —Receivable from suppliers 13 — — —Miscellaneous 31 66 — —Total other current receivables 250 530 — 2

Group Parent Company

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001Accrued telephony revenue, other telecom operators 934 544 — —Accrued telephony revenue, customers 1,525 1,511 — —Finanacing fees 170 209 — —Prepaid financing charges 420 505 1 1Total prepaid expenses and accrued revenues 3,049 2,769 1 1

62 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Note 23 Liquid funds and overdraft facilities

LiquidityGroup Parent Company

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001Cash and bank balances 2,473 2,275 10 8Current investments — — — —Total cash 2,473 2,275 10 8

Blocked accounts –870 –897 — —Unutilized overdraft facilities and credit lines 729 247 — —Total liquidity 2,332 1,625 10 8

Overdraft facilitiesGroup Parent Company

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001Overdraft facilities granted 19 26 — —Overdraft facilities utilized — –14 — —Total unutilized overdraft facilities 19 12 — —

Unutilized credit lines 710 235 — —Unutilized overdraft facilities and credit lines 729 247 — —

Collateral pledged for overdraft facilitiesGroup Parent Company

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001Receivables — 18 — —Other assets — 9 — —Total collateral pledged for own overdraft facilities — 27 — —

Exchange-rate difference in liquid funds Group

Dec.31,2002 Dec.31,2001Liquid funds at Jan. 1 –185 83Cash flow for the year –68 –58Total exchange-rate difference in cash –253 25

63

Note 24 Shareholders' equity

Exchange-rate difference:Group

Exchange-rate difference in shareholders' equity

Other restricted Unrestricted Totalreserves reserves

Opening shareholders' equity, Jan. 1, 2002 1,049 –320 729Change during the year 1,844 –110 1,734Year-end, Dec. 31, 2002 2,893 –430 2,463

Other changes during the year –4,189 3,165 –1,024Tax effect this year, net — –2 –2Total change during the year –4,189 3,163 –1,026

Closing adjusted shareholders’ equity, Dec. 31, 2002 –1,296 2,733 1,437

Exchange rate difference in consolidated income statement:Exchange-rate differences that arise in operations are reported across the income statements and amount to:

Group Parent Company

2002 2001 2002 2001Other operating revenue 24 33 1 —Other operating expenses –35 –20 — —Result from other securities and receivables treated as fixed assets — –1 — —Other interest income and similar profit/loss items 7 –1 — —Interest expense and similar profit/loss items 57 2 — —Exchange-rate difference in the income statement 53 13 1 —

The consolidated balance sheet and income statement are affected by fluctuations in subsidiaries' currencies via-á-vis the Swedish krona. Groupoperating revenue and EBITDA are distributed among the following currencies:

Operating revenue EBITDA

2002 2001 2002 2001SEK 10,337 33% 9,289 37% 4,516 88% 3,690 217%EURO 13,523 43% 10,084 40% –355 –7% –2,172 –128%Other 7,422 24% 5,712 23% 966 19% 180 11%Total 31,282 100% 25,085 100% 5,127 100% 1,698 100%

A 1% currency movement against the Swedish krona affects the Group's operating revenue and EBITDA on an annual basis by SEK 209 million(2001: SEK158 million) and SEK 6 million (2001: SEK –20 million), respectively. At December 31, 2002 changes in exchange rates comparedwith the preceding year affected operating revenue by SEK 57 million and EBITDA by SEK –1 million.

The change rates used to translate income statements and balance sheets to SEK are shown below.

Income statement Balance sheet

2002 2001 Dec.31,2002 Dec.31,2001GBP 14.6394 14.8725 14.1475 15.4750USD 9.82870 10.33080 8.825 10.6675EURO 9.1698 9.2519 9.1925 9.4190CHF 6.2494 6.1280 6.3235 6.3600DKK 1.2340 1.2415 1.2375 1.2665NOK 1.2150 1.1499 1.2595 1.1835EEK 0.5860 0.5913 0.5875 0.6020LVL 15.8860 16.5171 15.0200 16.9000LTL 2.6490 2.5819 2.6600 2.6700PLN 2.4076 2.5239 2.3000 2.6900CZK 0.2971 0.2718 0.2933 0.2936HUF 0.0377 0.0361 0.0390 0.0382

Currency risks:In telephony operations a currency risk arises in connection with international call traffic, which means that a liability or a receivable arises betweenTele2 companies and foreign operators. In mobile telephony through December 2002, these transactions were calculated in SDRs (Special DrawingRights) but were invoiced and paid in USD. As of 2003, these are calculated and paid in EURO.

Currency risks in our international operations are limited by denominating loans to group companies in the subsidiary’s local currency.The five-year loan facility is denominated partly in EURO. The exchange-rate difference that continually arises in translating the loan liability is

offset against the exchange-rate differences that arise on the corresponding net investment in subsidiaries. No hedging is undertaken against othertypes of currency risk.

64 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Not 25 Number of shares

The share capital in Tele2 AB is divided into two share classes, namely, Series A and B shares. Both types of shares have a par value of SEK 5 pershare and offer equal participation in the company’s net assets and earnings. Series A shares, however, entitle the holder to 10 voting rights andSeries B shares to one voting right.

Parent Company

A-shares B-shares

Change Total Change Total Total Par value per Share capitalNumber share (SEK) (MSEK)

Number of shares:December 31, 1999 18,095,632 85,754,614 103,850,246 SEK 5 519New share issue, acq. of SEC 11,911,315 30,006,947 28,837,165 114,591,779 144,598,726 SEK 5 723New share issue, options 30,006,947 200,000 114,791,779 144,798,726 SEK 5 724December 31, 2000 30,006,947 114,791,779 144,798,726 SEK 5 724

New share issue, acq.of Tele2 Russia 30,006,947 2,461,449 117,253,228 147,260,175 SEK 5 736

New share issue, convertibles 30,006,947 100,000 117,353,228 147,360,175 SEK 5 737December 31, 2001 30,006,947 117,353,228 147,360,175 SEK 5 737

Reclassification, A- to B-shares –8,317,143 21,689,804 8,317,143 125,670,371 147,360,175 SEK 5 737

New share issue, convertibles*) 21,689,804 100,000 125,770,371 147,460,175 SEK 5 737December 31, 2002 21,689,804 125,770,371 147,460,175 SEK 5 737

Outstandng convertibles and warrants:Convertibles, 2000–2003 — 100,000 100,000Warrants, 2002–2005 — 663,000 663,000Total number of shares after full dilution 21,689,804 126,533,371 148,223,175

*) At December 31, 2002 the shares converted during 2002, 100 000 B-shares, were being registered at the Swedish Patent and Registration Office.

Convertibles and warrants:In October 2000, three convertible debenture loans were issued at a par value of SEK 1, each with preference rights to subscribe for 100,000 B shares in Tele2 AB at a subscription price of SEK 150 per share, and maturing in 2001, 2002 and 2003. See Note 38 for further information.

The outstanding warrants at Dec. 31, 2002 correspond to 663,000 B shares, at a subscription price of SEK 191 per share and a subscriptionperiod from 2005 to 2006. See Note 38 for further information.

Earnings per share:Group

Earnings per share Earnings per share,after full dilution

2002 2001 2002 2001Net profit/loss for the year 223 392 223 392Reversal: interest for the year after tax on outstanding convertibles — —Adjusted profit/loss for the year after full dilution 223 392

Weighted average number of shares 147,360,175 145,003,847Weighted average number of outstanding shares after full dilution 147,634,293 145,223,466Earnings per share SEK 1.51 SEK 2.70 SEK 1.51 SEK 2.70

Dividend per share:Tele2 AB did not pay a dividend during the year and does not foresee paying a dividend during the current fiscal year.

65

Note 26 Liabilities to financial institutions

Short-term liabilities to financial institutionsGroup Parent Company

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001Five-year loan facility 2,344 707 — —Alfa Bank /Omskpromstoy Bank 3 — — —

(collateralt: chattel mortgages in Seberian Cellular Comm., Omsk Russia)Financial leases 30 24 — —Total short-term interest-bearing loans 2,377 731 — —

Long-term liabilities to financial institutionsCreditors Group

(collateral provided) Interest-rate terms Maturity date Dec.31,2002 Dec.31,2001Parent Company: — —Other Group companies:Five-year loan facility EURIBOR/LIBOR + 0.75–2.25% 2003–2006 6,954 9,834

(collateral: shares in Tele2 Sverige and SEC SA as well ascertain shares in Group companies which in turn are subject to guarantees Tele2 AB and cross-guarantees among certain Group companies, andcollateral provided in the form of receivables from certain Group companies and limitations in repayment potential of internal loans from Tele2 AB)

Banque Invik marginal 0.5%–1% 2004–2005 755 881(collateral: Blocked bank accounts in Tele2 Russia Telecom BV)

Merita-Nordbanken variable rate 2004 1 3(collateral: guarantees by Tele2)

Financial leasing, for machinery & technical plant 166 125Total long-term interest-bearing loans 7,876 10,843

Collateral provided for liabilities to financial institutions Group Parent Company

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001Chattel mortgages 11 — — —Net assets in subsidiaries 22,778 23,197Bank deposits 841 897 — —Total collateral provided for liabilities to financial institutions 23,630 24,094 — —

During 2001, Tele2 Sverige AB signed a new five-year bank finance facility for SEK 10.8 billion, guaranteed by ABN Amro, CIBC World Markets, INGBank, Nordea, The Royal Bank of Scotland and West LB. The loan is partly denominated in SEK and partly in EUR. The five-year bank financing facil-ity with amortization is divided up into three tranches, in which the agreed SEK 9.4 billion in Tranche A is to be repaid in seven repayments, and inwhich each amortization amounts to between 5% an 15% of the original loan amount and the remaining 17.5% of the loan is to be repaid by June30, 2006. During 2002, repayment of Tranche A was made in the amount of SEK 467 million. The potential to borrow under Tranche B is limitedto SEK 1.1 billion and is to be repaid by June 30, 2006. Tranche C, amounting to SEK 250 million, was repaid in its entirety in January 2002.

The five-year loan facility is based on requirements involving the fulfillment of certain financial key ratios. Tele2 expects to fulfill the requirements.The loan liability carries a rate of interest corresponding to Euribor and Libor, respectively, plus an interest margin. The interest margin, which isbased on indebtedness in relation to EBITDA, starts at 2.25% and is reduced in line with the improvement in EBITDA. At December 31, 2002 Tele2attained the minimum interest differential of 0.75% with effect from February 2003. The five-year facility entails a certain curtailment of Tele2Group’s potential to raise other external loans and the potential to provide assets as collateral.

The loan in Banque Invik pertains to loan to the Russian operations. Tele2 has deposited the corresponding amount with Banque Invik. The inter-est margin is 0.5%–1%.

Pledged shares are reported in the Group at an amount that corresponds to the book value of the net assets that each subsidiary represents in theconsolidated balance sheet.

The average rate of interest on loan liabilities during the year was 6.4% (2001: 6.3%).Loan liability matures

Group Parent Company

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001Within1 year 2,377 731 — —1–2 years 3,070 2,375 — —2–3 years 2,646 3,254 — —3–4 years 2,049 2,601 — —4–5 years 16 2,553 — —5–10 years 75 60 — —10–15 years 20 — — —Total loans to financial institutions 10,253 11,574 — —

66 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Cont. note 26

Note 27 Other interest-bearing liabilities

Interest rate risk:Of the total loan liability at December 31, 2002, SEK 9,330 million, corresponding to 91% (2001: SEK 10,824 million, 91%) carried a variablerate of interest. An increase in interest rates of 100 basic points would entail an additional interest expense of SEK 93 million, calculated on thebasis of variable interest-bearing liabilities at December 31, 2002.

The Group’s interest-rate on borrowing is currently variable with fixed-interest periods of up to 12 months. However, Tele2 is monitoring trends oninterest-rate markets and decisions regarding the interest-rate fixing strategy are assessed continually.

Interest-bearing liabilities with variable interest rates mature for payment as follows:

Within 1 year 1–2 years 2–3 years 3–4 years 4–5 years 5–10 years TotalInterest-bearing liabilities

with variable interest rates 2,352 2,368 2,578 2,032 — — 9,330

Financial leasing:All fixed assets utilized through financial leasing have been included in the consolidated accounts as fixed assets and loan liabilities, with the exception,however, of contracts signed before 1997. The effects of these being included in the consolidated balance sheet are shown below and In Note 13.

Group

Financial leasingBooked Not booked

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001Short-term portion 30 24 8 9Long-term portion 166 125 84 91Total loans for financial leasing objects 196 149 92 100

Dec. 31, 2002Group

Loan liability matures

Booked Not bookedWithin 1 year 43 121–2 years 30 122–3 years 28 123–4 years 25 124–5 years 23 115–10 years 79 4210–15 years 22 13Total loan liability and interest 250 114Less interest portion: –54 –22Total loans for financial leasing objects 196 92

Financial leasing pertains primarily to the extension of transmission capacity in Sweden through Svenska Kraftnät Vattenfall and agreements signedin Denmark. Also, financial leasing occurs in Estonia, Russia and Luxembourg. During 2002, investments amounted to SEK 83 million, primarily in Sweden in the amount of SEK 66 million and in Luxembourg in the amount of SEK 11 million. During the year, termination of financial leasingoccurred in Estonia and Latvia.

Other short-term interest-bearing liabilitiesGroup Parent Company

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001XSource Corporation 5 — — —Levicom International — 134 — —Ericsson — 17 — —Total other short-term interest-bearing liabilities 5 151 — —

Other long-term interest-bearing liabilitiesGroup Parent Company

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001SCD Finans AB 23 — — —Ericsson — 2 — —Motorola — 55 — —Kinnevik S.A. — 14 — —Millicom International BV — 44 — —Total other long-term interest-bearing liabilities 23 115 — —

67

Cont. note 27

Note 28 Other short-term liabilities

Note 29 Accrued expenses and prepaid revenues

Note 30 Pledged assets

Loan maturity scheduleGroup Parent Company

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001Within 1 year 5 151 — —1–2 years 23 115 — —Total other interest-bearing liabilities 28 266 — —

Group Parent Company

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001VAT liability 276 218 — —Tax-at-source, personnel 27 37 — —Other taxes 59 34 — —Liability to SCD Finans AB — 30 — —Liability to Motorola — 26 — —Customer deposits 26 17 — —Other 53 13 5 —Total other short-term liabilities 441 375 5 —

Group Parent Company

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001Personnel-related costs 168 734 4 3Interest expenses 212 150 — —Telephony expenses to other telecom operators 1,701 1,664 — —Expenses for vendors 14 12 — —Leasing and rental expenses 24 29 — —Program costs 33 33 — —External services expenses 715 602 4 4Prepaid income 702 541 — —Other 204 249 — —Total accrued expenses and prepaid revenues 3,773 4,014 8 7

When Tele2 acquired Société Europénne de Communication SA, through an offer to SEC’s shareholders, there were outstanding stock options in SEC.Tele2’s offer did not encompass the stock options, thus in order to calculate net assets, these have been given a theoretical value as if they had beenencompassed by the offer and booked as a liability in the consolidated balance sheet. During 2002, this liability was adjusted vis-à-vis goodwill,shown above as a personnel-related cost, and adjusted against goodwill the amount of SEK 498 million, with no effect on cash and profit.

Group Parent Company

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001Chattel mortgages 11 — — —Net assets in Group companies 22,778 23,197Inventories 19 18 — —Receivables — 18 — —Bank bills 870 897 — —Other assets — 9 — —Total assets pledged for own liabilities 23,678 24,139 — —

The above information shows the book value of assets pledged as collateral for external loans (as in Note 26), overdraft facilities and blocked bankfunds (as in Note 23) and other liabilities (as in Note 27). In the Group, pledged shares are reported in an amount corresponding to the book valueof the net assets that each subsidiary represents in the consolidated balance sheet.

68 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Note 31 Contingent liabilities and other commitments

Note 32 Supplementary cash-flow information

Group Parent Company

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001Surety bonds benefiting Group companies — — 12,825 15,133Total contingent liabiities — — 12,825 15,133

SEK 9,298 million (SEK 10,541 million) of the contingent liabilities in the Parent Company relates to a guarantee for the five-year loan facility (seeNote 26).

Operational leasing:Operational leasing fees

Group Parent Company

2002 2001 2002 2001Annual fees for operating leases 752 782 — —

Payment schedule for future feesGroup Parent Company

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001Within 1 year 621 471 — —1–2 years 279 238 — —2–3 years 197 189 — —3–4 years 158 123 — —4–5 years 135 112 — —More than 5 years 759 727 — —Total future fees for operating leases due for payment 2,149 1,860 — —

Contractual commitments/commercial pledges:Group

Dec. 31, 2002

Within 1 year 1–3 years 3–5 years After 5 years TotalLiabilities to financial institutions 2,377 5,716 2,065 20 10,178Other interest-bearing liabilities 5 23 — — 28Financial leasing, agreements signed before 1997 8 16 16 52 92Operational leasing 621 476 293 759 2,149Total contractual commitments/commercial pledges 3,011 6,231 2,374 831 12,447

Transactions not affecting cash are as follows:In addition to the reported investing and financing operations, as shown in the cash flow statement, the following transactions occurred that did not affectcash.

In addition to reported investments and loan liabilities in cash flow, investments and the raising of loans through financial leasing amounted to SEK66 million (2001: SEK 17 million), as well as amortization of loans through financial leasing in the amount of SEK –20 million (2001: SEK –22million).

During 2002, the Parent Company received a Group contribution from Tele2 Sweden amounting to SEK 3,035 million (2001: SEK 2,100 million)and provided a shareholder contribution of SEK 400 million, which has not been reported as financial activities.

In the Parent Company, the acquisition of shares in 2001 in Tele2 Russia Telecom BV and in OU Levicom Broadband, respectively, was conduct-ed through a limited share issue of SEK 849 million and through loan financing at the seller amounting to SEK 134 million and is not included incash flow as investing or financing. On the acquisition date, the companies had cash of SEK 884 million and SEK 5 million, respectively, which isreported in the cash flow as a reduction in investment.

In addition to the reported sale of shares in subsidiaries in the cash flow in 2001, the Parent Company divested shares in OU Levicom Broadbandand Travellink AB for SEK 93 million to the subsidiary Tele2 Sverige AB.

In addition to the reported sale of shares in subsidiaries, Tele2 AB’s subsidiary, Société Européenne de Communication S.A., was liquidated in2001. This represented a net reduction of SEK 9,421 million, since the shares were booked at a value of SEK 23,385 million and the loss onliquidation amounted to SEK 13,964 million.

69

Cont. note 32

Note 33 Market areas

Cash flow statement based on net profit/loss:Group

2002 2001Current operations

Net profit/loss for the year 223 392Adjustment of items in profit/loss for the year that do not

generate cash flow from current operations:

Depreciation/Amortization 3,597 3,054Minority interest –1 –1Profit/loss from shares in associated companies 36 –33Deferred tax expense 525 –2,334Financial leasing –9 –5Unpaid interest 107 88Write-down of shares 86 —

4,564 1,161Change in working capital –199 –748Cash flow from current operations 4,365 413

Investments according to the cash flow statement by market and operating area:Group

Investments

2002 2001Nordic 902 1 029Eastern Europe and Russia 594 328Central Europe 135 149Southern Europe 142 454Luxembourg 94 122Branded products & other services 23 63

1,890 2,145Change in long-term receivable 3 87Acquisition/divestment of companies 623 –765Total investments according to cash flow statement 2,516 1,467

GroupInvestments

2002 2001Mobile telephony 998 789Fixed telephony and Internet 794 1,272Cable-TV 85 52Data processing 13 32

1,890 2,145Change in long-term receivable 3 87Acquisition/divestment of companies 623 –765Total investments according to cash flow statement 2,516 1,467

Additional information on segments is presented in Notes 33–34.

The Group’s operations are primarily divided among six market areas: Nordic, Eastern Europe and Russia, Central Europe, Southern Europe,Luxembourg and Branded products & services, which reflect internal reporting to the Board and executive management and the division of respon-sibility and organization within the Group. Market control and prioritization is largely jointly undertaken for continental Europe, and thus goodwill anddepreciation/amortization attributable to the acquisition of the SEC Group is not broken down across market areas Central Europe, Southern Europe,Luxembourg and Branded products & services.

The Nordic market area is acting on a more mature market, while continental Europe has not pursued operations for an equally long period. TheEastern Europe and Russia market area is yet another market with its own particular risks and possibilities. The division is based on the geographi-cal location of operations, which also reflects where customers are located. Relations between companies within the Group are based on commercialterms and conditions and pricing.

The Nordic market area consists of Tele2 operations in Sweden, Norway, Denmark and Finland, Datametrix operation and ProcureITright. OptimalTelecom are also included in the Nordic market area as of January 1, 2002, having previously been part of the Branded products & services marketarea. The Eastern Europe and Russia market area encompasses Tele2 operations in the Baltic States (Estonia, Latvia and Lithuania), Poland, Czech

70 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Cont. note 33

Republic and Russia as well as X-Source operations. The Central Europe market area comprises Tele2 operations in Germany, Netherlands, Switzerland,Austria and a license in Ireland. The Southern Europe market area comprises Tele2 operations in France, Italy, Spain and Portugal. The Luxembourgmarket area encompasses Tele2 operations in Liechtenstein and Luxembourg, plus the recently launched operations in Belgium, as well as 3C oper-ations and Transac. The Branded products & services market area comprises Tele2 UK, C3-operations, Everyday operations and IntelliNet operations.

Operating revenue, operating profit before and after depreciation/amortization, as well as investments for the operating areas in each market area arepresented in Note 1, Note 2 and Note 32.

GroupDec. 31, 2002

Eastern Branded Non-distributedEurope & Central Southern products and internal

Nordic Russia Europe Europe Luxembourg & services elimination TotalBalance sheetASSETSIntangible fixed assets 1,025 3,491 46 2 177 4 20,351 25,096Tangible fixed assets 6,055 1,399 616 557 569 61 — 9,257Shares in associated companies 498 — — — 44 — — 542Other long-term securities 103 36 — — — — — 139Other financial fixed asets 9,318 326 180 129 3,426 16 –12,056 1,339

16,999 5,252 842 688 4,216 81 8,295 36,373

Current assets 5,008 813 1,591 2,074 1,806 313 –1,106 10,499Total assets 22,007 6,065 2,433 2,762 6,022 394 7,189 46,872

LIABILITIESProvisions 28 — — — — — — 28Interest-bearing liabilities 9,931 4,140 1,523 680 5,195 976 –12,164 10,281Long-term liabilities, other — 1 — 142 1 12 –156 —Current liabilities, other 3,274 651 2,402 2,297 637 422 –1,870 7,813Total liabilities 13,233 4,792 3,925 3,119 5,833 1,410 –14,190 18,122

Group2002

Eastern Branded Non-distributedEurope & Central Southern products and internal

Nordic Russia Europe Europe Luxembourg & services elimination TotalIncome statementOperating revenue

external 13,566 2,320 5,689 8,105 754 848 — 31,282internal, other Group 79 41 265 263 29 95 –772 —internal, market area 585 8 113 47 87 61 –901 —

Operating revenue, total 14,230 2,369 6,067 8,415 870 1,004 –1,673 31,282

Depreciation/amortization –1,435 –577 –133 –129 –92 –12 –1,219 –3,597Operating expenses, other –9,410 –1,877 –6,348 –8,514 –747 –1,181 1,934 –26,143Other operating revenue 37 33 204 1 6 5 –236 50Other operating expenses –43 16 –4 –3 –3 — –25 –62Operating profit/loss 3,379 –36 –214 –230 34 –184 –1,219 1,530

Profit/loss on assoc. companies –31 –4 — — –1 — — –36Profit/loss on fixed assets –86 2 –84Other interest income, etc. 165 165Interest expense, etc. –779 –779Profit/loss after financial items 3,348 –126 –214 –230 33 –184 –1,831 796

Tax on profit for the year –574 –574Minority interest 1 1Profit/loss for the year 3,348 –126 –214 –230 33 –184 –2,404 223

MiscellaneousInvestments, intangible assets 23 124 — — — — 147Investments, tangible assets 885 504 339 142 95 19 –219 1,765

71

Cont. note 33

GroupDec. 31, 2001

Eastern Branded Non-distributedEurope & Central Southern products and internal

Nordic Russia Europe Europe Luxembourg & services elimination TotalBalance sheetASSETSIntangible fixed assets 1,317 3,547 55 16 201 6 22,627 27,769Tangible fixed assets 6,162 1,408 479 682 578 122 — 9,431Shares in associated companies 251 75 — — — — — 326Other long-term securities 80 122 — — — — — 202Other financial fixed asets 9,935 577 — — 4,331 — –12,879 1,964

17,745 5,729 534 698 5,110 128 9,748 39,692

Current assets 4,459 2,554 1,367 2,027 2,643 590 –4,074 9,566Total assets 22,204 8,283 1,901 2,725 7,753 718 5,674 49,258

LIABILITIESProvisions 102 — — — — — — 102Interest-bearing liabilities 11,094 6,843 1,424 1,531 4,359 1,076 –14,473 11,854Long-term liabilities, other 7 1 — — — — — 8Current liabilities, other 3,970 659 2,243 3,045 1,393 631 –4,192 7,749Total liabilities 15,173 7,503 3,667 4,576 5,752 1,707 –18,665 19,713

Group2001

Eastern Branded Non-distributedEurope & Central Southern products and internal

Nordic Russia Europe Europe Luxembourg & services elimination TotalIncome statementOperating revenue

external 11,898 1,148 4,844 5,124 663 1,408 — 25,085internal, other Group 226 33 396 444 74 84 –1,257 —internal, market area 242 — 124 23 49 84 –522 —

Operating revenue, total 12,366 1,181 5,364 5,591 786 1,576 –1,779 25,085

Depreciation/amortization –1,011 –447 –101 –96 –118 –36 –1,245 –3,054Operating expenses, other –8,760 –907 –5,968 –6,923 –777 –1,986 1,820 –23,501Other operating revenue 198 9 15 2 3 4 –42 189Other operating expenses –36 –11 –17 –1 –7 –4 1 –75Operating profit/loss 2,757 –175 –707 –1,427 –113 –446 –1,245 –1,356

Profit/loss on assoc. companies –58 — — — 91 — — 33Profit/loss on fixed assets 4 4Other interest income, etc. 65 65Interest expense, etc. –690 –690Profit/loss after financial items 2,699 –175 –707 –1,427 –22 –446 –1,866 –1,944

Tax on profit for the year 2,335 2,335Minority interest 1 1Profit/loss for the year 2,699 –175 –707 –1,427 –22 –446 470 392

MiscellaneousInvestments, intangible assets 1 –2 2 15 1 — 17Investments, tangible assets 1,094 363 151 442 125 66 –32 2,209

72 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Note 34 Operating areas

A secondary division of operations takes the form of a grouping into four operating areas: Mobile telephony, Fixed telephony & Internet, Cable-TV andData processing, which is based on services and products that differ from each other in terms of risks and possibilities.

The Fixed telephony & Internet operating area includes fixed telephony as well as the Dial-up and DNS data services. The Cable-TV operating areaencompasses broadband services, Cable-TV, the radio station Tango Sunshine and Tango TV. The Data processing operating area includes IT-out-sourcing via X-source, as well as system integration through Datametrix, Internet payments, credit card transactions and call phone services via 3C,data processing of card transactions and invoicing through Transac, cash cards for fixed telephony through C3 and the Internet portal, Everyday.

It is not practically possible to distribute financial fixed assets and current assets by operating area. Operating revenue, operating profit before andafter depreciation/amortization, as well as investments of the operating areas in each market area are presented in Note 1, Note 2 and Note 32.

GroupDec. 31, 2002

Non-dist. andMobile Fixed telephony Data internal

telephony & Internet Cable-TV processing elimination TotalBalance sheetIntangible fixed assets 3,687 1,014 3 41 20,351 25,096Tangible fixed assets 4,232 4,226 736 63 — 9,257Financial fixed assets 2,020 2,020Current assets 10,499 10,499Total assets 7,919 5,240 739 104 32,870 46,872

Group2002

Non-dist. andMobile Fixed telephony Data internal

telephony & Internet Cable-TV processing elimination TotalIncome statementOperating revenue from external customers 9,819 20,843 298 322 — 31,282

MiscellaneousInvestments in intangible assets 121 26 — — — 147Investments in tangible assets 901 763 88 13 — 1,765

GroupDec. 31, 2001

Non-dist. andMobile Fixed telephony Data internal

telephony & Internet Cable-TV processing elimination TotalBalance sheetIntangible fixed assets 4,188 948 4 2 22,627 27,769Tangible fixed assets 4,345 4,285 744 57 — 9,431Financial fixed assets 2,492 2,492Current assets 9,566 9,566Total assets 8,533 5,233 748 59 34,685 49,258

Group2001

Non-dist. andMobile Fixed telephony Data internal

telephony & Internet Cable-TV processing elimination TotalIncome statementOperating revenue from external customers 7,615 16,937 172 361 — 25,085

MiscellaneousInvestments in intangible assets –2 18 — 1 — 17Investments in tangible assets 841 1,280 57 31 — 2,209

As a result of its substantial direct and indirect shareholdings in the Tele2 Group, Invik Group, Kinnevik Group, Transcom Worldwide Group, MillicomGroup, XSource Corporation Group, MTG Group, Metro Group and other companies, the Stenbeck family has the potential to exert considerable influ-ence in terms of financial and operational decisions regarding operations in these companies. These companies has been regarded as related partiesto Tele2. Business relations between Tele2 and all closely related parties are subject to commercial terms and conditions.

Significant transactions in recent years:• At year-end 1998, Tele2 acquired 48% of Tele2 Eesti (formerly Ritabell AS), with mobile operations in Estonia, from Millicom.• In November 1999 Tele2 sold its shareholding (24.8%) in the associated company Netcom ASA, a mobile telephony company in Norway, to SEC

in return for 17.8% in SEC. SEC gradually divested Netcom ASA during under 1999 and 2000.• In August 2000, via a limited share issue corresponding to SEK 19,773 million, Tele2 acquired an additional 81.9% of SEC, which pursues fixed

telephony operations in continental Europe and mobile telephony operations in Luxembourg, etc., from Millicom. • During 2000 Tele2 divested its holding in 4T Solutions, with billing systems operations, to XSource Corporation in return for 11.88% of XSource

Corporation.• In January 2001, Tele2 Group divested its 37.45% holding in the associated company Transcom Worldwide to Industriförvaltings AB Kinnevik.

Transcom Worldwide is one of Europe’s largest customer service companies. The purchase price was based on the market share price 60 tradingdays after Transcom Worldwide was listed on the Stockholm Stock Exchange.

• In December 2001, Tele2 Group acquired shares in Tele2 Russia Telecom BV from Millicom through a limited shares issue corresponding to avalue of SEK 849 million. Tele2 Russia Group conducts mobile operations in Russia.

Transactions in 2002:• In October 2002, the Tele2 Group acquired all shares in the ProcureITright Group, a supplier of procurement function services and WEB-based

procurement systems, from XSource Corporation Group for SEK 42 million.

Operational agreements between Tele2 and related parties:Tele2 supplies telephony and data services on commercial terms to closely related corporate groups.

Invik Group:• Tele2 Group’s telephony operates are, with the exception of Russian operations, insured by Moderna Försäkringar AB.• Banque Invik conducts certain financial services for the Tele2 Group. Bankque Invik is also a credit supplier and conducts credit transactions that

arise using the equipment of 3C-operations.

Kinnevik Group:• CIS Credit International Service AB provides Tele2 with debt collection services.• Collect Sweden AB is a company that managed a fidelity program and provided multi-bonus cards and was also in charge of marketing and man-

agement of benefit and offers within the framework of the Collect multi-bonus program. Collect is now being phased out.

Transcom Worldwide Group:• Transcom provides customer services and telemarketing for Tele2.

Millicom Group:• Millicom Group purchases certain consulting services from the Tele2 company ProcureITright.

XSource Corporation Group:• Savera Systems Incorporated and its sister company Basset AB supplies Tele2 with operator billing systems. Savera also supplies Tango with an

invoicing system for cash cards.• NetCom Consultants AB supplies Tele2 with consulting services in tele and data communications.

MTG Group:• Tele2 buys advertising time on radio and TV channels owned by MTG.• Tele2 Sverige AB purchases cable TV programs from TV1000 Sverige AB.

Other related companies:• Viking Telecom provides Tele2 with most of the line routers that Tele2 supplies to its end customers.

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Note 35 Transactions with related parties

74 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Cont. note 35

Transactions between Tele2 and related parties:Group

Operating revenues Operating costs

2002 2001 2002 2001Invik Group — 10 124 10Kinnevik Group 11 1 132 387Transcom Worldwide Group 23 20 1,860 2,031Millicom Group 17 16 14 7XSource Corporation Group 7 9 266 236MTG, Modern Times Group 28 32 108 163Metro International Group 3 2 4 5Other related companies 5 1 102 140Total 94 91 2,610 2,979

GroupInterest revenue Interest costs

2002 2001 2002 2001Invik Group 97 — 131 —Total 97 — 131 —

GroupMaterials & supplies Restricted cash

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001Invik Group — — 841 897Kinnevik Group 1 — — —XSource Corporation Group — 2 — —MTG, Modern Times Group 7 — — —Other related companies 5 39 — —Total 13 41 841 897

GroupAcc. receivable, etc. Other liabilities

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001Invik Group — 1 — —Kinnevik Group 9 — — 78Transcom Worldwide Group 2 6 — —Millicom Group 8 20 — 113XSource Corporation Group 2 69 20 17MTG, Modern Times Group 53 45 — —Other related companies 8 1 39 47Total 82 142 59 255

GroupLiabilities to suppliers, etc. Other liabilities

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001Invik Group 124 11 755 881Kinnevik Group 23 43 — —Transcom Worldwide Group 188 267 — —Millicom Group — 43 — —XSource Corporation Group 39 93 5 —MTG, Modern Times Group 17 27 — —Metro International Group 2 — — —Other related companies 63 98 23 30Total 456 582 783 911

75

Note 36 Customers

Operating area by market area: GroupNumber of customers Net customer intake

(thousands) Dec.31,2002 Dec.31,2001 change 2002 2001

Nordic:Mobile telephony 3,221 2,642 22% 579 517Fixed telephony and Internet 2,822 3,632 –22% –810 285Cable-TV 209 — — 209 —Total, Nordic 6,252 6,274 0% –22 802

Eastern Europe and Russia:Mobile telephony 1,366 853 60% 513 576Fixed telephony and Internet 144 77 87% 67 76Cable-TV 64 66 –3% –2 66Total, Eastern Europe and Russia 1,574 996 58% 578 718

Central Europe:Mobile telephony 271 48 465% 223 16Fixed telephony and Internet 3,316 3,143 6% 173 473Total, Central Europe 3,587 3,191 12% 396 489

Southern Europe:Fixed telephony and Internet 5,129 4,286 20% 843 1,344Total, Southern Europe 5,129 4,286 20% 843 1,344

Luxembourg:Mobile telephony 181 167 8% 14 42Fixed telephony and Internet 41 44 –7% –3 9Total, Luxembourg 222 211 5% 11 51

Total, by market area 16,764 14,958 12% 1,806 3,404

GroupNumber of customers Net customer intake

(thousands) Dec.31,2002 Dec.31,2001 change 2002 2001Mobile telephony 5,039 3,710 36% 1,329 1,151

of which, cash cards 3,363 2,179 54% 1,184 —Fixed telephony and Internet 11,452 11,182 2% 270 2,187Cable-TV 273 66 314% 207 66Total, by business area 16,764 14,958 12% 1,806 3,404

Effective 2002, the number of active customers in Sweden and Denmark complies fully with the Group’s definition of an active customer. As a resultof this adjustment and the effect of the merger with Optimal Telecom, the number of customers in Sweden for fixed telephony and Internet has beenaligned by a one-off adjustment of –197,000 and the number of mobile telephony customers has been adjusted by +80,000. In addition, the num-ber of Cable-TV customers was reported for the first time in 2002, which has resulted in an adjustment of +189,000. In the case of Denmark, a one-off adjustment has been applied to fixed telephony and Internet during 2002 in an amount of –461,000. During 2001, the acquisition of Tele2Russia and the Levicom Group meant that the number of customers rose by a total of 296,000.

Net customer intake in 2002, before the above one-off adjustment, amounted to 15%, corresponding to 2,195,000 (2001: 3,108,000) customers.

76 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Note 37 Number of employees

Note 38 Personnel costs

Group2002 2001

Average number of employeesTotal of whom, men Total of whom, men

Nordic 1,169 70% 1,126 70%Eastern Europe and Russia 1,456 52% 602 49%Central Europe 116 59% 122 61%Southern Europe 95 65% 81 65%Luxembourg 231 68% 189 83%Branded products & services 48 83% 52 73%Total, by market 3,115 61% 2,172 65%

The average number of employees in the Parent Company is 3 (2001: 2), all of whom are men. The average number of employees for each year foracquired companies is reported in relation to the period of time they have been part of the Tele2 Group. Tele2 Russia was acquired in December 2001.

Group2002 2001

Salaries and Social security of which, pen- Salaries and Social security of which, pen-remuneration expenses sion expenses remuneration expenses sion expenses

Board and President 67 20 5 52 13 3Other employees 995 303 59 870 254 50Total, personnel costs 1,062 323 64 922 267 53

Parent Company2002 2001

Salaries and Social security of which, pen- Salaries and Social security of which, pen-remuneration expenses sion expenses remuneration expenses sion expenses

Board and President 13 6 1 11 4 2Other employees 4 1 1 2 1 —Total, personnel costs 17 7 2 13 5 2

Salaries and remuneration for each year for acquired companies is reported in relation to the period they have been part of the Tele2 Group. Tele2Russia was acquired in December 2001. Note 37 shows the workforce.

Pension expensesGroup Parent Company

2002 2001 2002 2001Defined-benefit pension plans 20 4 — —Defined-contribution pension plans 44 49 2 2Total, pension expenses 64 53 2 2

In the case of defined-benefit plans, the company assumes the risk and responsibility on the pension payout date. In the case of defined-contribu-tion plans, the company is not exposed to risk on the pension payout date.

Group2002 2001

Salaries and remuneration Salaries and remuneration

Board of which, Other Board of which, Otherand President bonuses employees and President bonuses employees

Nordic 27 3 573 22 2 539Eastern Europe and Russia 21 2 150 5 — 78Central Europe 7 1 73 6 — 63Southern Europe 4 1 54 3 1 50Luxembourg 1 — 112 9 — 104Branded products & services 7 1 33 7 1 36Total, by market 67 8 995 52 4 870

In 2002, provision of SEK 16 million ( 2001: SEK 15 million) was made for bonuses to key personnel in the Group, plus social security expenses ofSEK 5 million (2001: SEK 5 million). Distribution of the amount will be decided in 2003.

77

Cont. note 38

Remuneration of senior executives:The group “Other senior executives” consists of 13 people (2001: 13). In addition to the costs below, Tele2 also incurred costs relating to socialsecurity expenses.

2002

Basic salary/ Variable Options Other Other Pension TotalBoard fee remuneration program benefits remuneration costs remuneration

Chairman of the Board:Jan Hugo Stenbeck 0.1 6.8 6.9Bruce Grant 0.2 — 0.2

Group President and CEO:Lars-Johan Jarnheimer 10.0 1.5 1.0 0.0 — 1.9 14.4

Other senior executives 21.8 10.3 13.5 1.3 — 1.3 48.232.1 11.8 14.5 1.3 6.8 3.2 69.7

2002Previous years Allocation for the year Total

Options program Warrant program 2002/2005

Marketvalue on Acquisition

Number Number issuance price Benefit NumberGroup President and CEO — 15,000 pcs 1.0 — 1.0 15,000 pcsOther senior executives — 195,000 pcs 13.5 — 13.5 195,000 pcs

— 210,000 pcs 14.5 — 14.5 210,000 pcs

2001

Basic salary/ Variable Warrant Other Other Pension TotalBoard fee remuneration program benefits remuneration costs remuneration

Chairman of the Board:Jan Hugo Stenbeck 0.3 — 0.3

Group President and CEO:Lars-Johan Jarnheimer 7.6 1.6 — 0.0 — 1.3 10.5

Other senior executives 18.9 10.4 — 1.1 — 1.0 31.426.8 12.0 — 1.1 — 2.3 42.2

Board of Directors:Board chairman Jan Hugo Stenbeck passed away during the year and Board member Bruce Grant was appointed Chairman in August. Total Boardfees of SEK 1.9 million were paid compared with SEK 2.1 million decided of the Annual General Meeting of shareholders.

During the year, the parent company paid SEK 6.8 million to acompany owned by Jan Hugo Stenbeck, for consultations regarding services that can-not be regarded as Board work. In addition Tele2 Group paid SEK 8.7 million (2001: SEK 17.3 million) to a company partly owned by Bruce Grant, forconsultations regarding services that cannot be regarded as Board work.

President and CEO:In addition to a fixed salary, Lars-Johan Jarnheimer, President and CEO of Tele2, received a bonus of SEK 1.5 million (2001: SEK 1.6 million). Thebonus is based on individualized goals. The pension premium, which is defined-contribution, is paid in the form of 20% of the fixed basic salary.The pension age is 65. The period of notice when served by the company is a minimum 12 and maximum 18 months in the case of the President ofTele2 AB. Salary during a period of notification of 12 months is paid to the President if he serves notice of termination of employment to the com-pany. Salary and remuneration for the President are determined annually by the Board of Directors following proposals by the Chairman of the Board.

Other senior executivesVariable salary paid to other senior executives includes a bonus of 0% –35% based on profit benchmarks, with the remainder being based on indi-vidualized goals. Other benefits pertain primarily to car benefits. Pensions are paid in accordance with the public pension plan, of which SEK 1.1million (2001: SEK 0.2 million) represents a defined-contribution plan and SEK 0.2 million (2001. SEK 0, 2 million) is a defined-benefit plan. Thepension age is 65. The period of notice when served by the company is a minimum 6 and maximum 12 months. Salary during a period of notifica-tion of six months is received if the person serves notice of termination of employment to the company. Not other remuneration is paid.

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Cont. note 38

Note 39 Auditors

Incentive program 1997–2006At the Annual General Meeting in 1997, it was decided to undertake an incentive program for a number of the senior executives employed at thattime and future senior executives in the Group. Through a company established for this purpose, NC Intressenter AB, these persons were providedwith the opportunity to acquire 100,000 shares per year during 1999–2003, up to a maximum total amount of 500,000 Series B shares. In October2000, 200,000 shares were issued and three convertible-debenture notes corresponding to 300,000 shares were issued to NC Intressenter to ful-fill the offer. At December 31, 2002, NC Intressenter held 400,000 Series B shares and a convertible debenture note corresponding to 100,000Series B shares. The premium for the option amounted to SEK 7 million in 1997. This was based on a Black-Schole evaluation and an exercise priceof SEK 150 per share. In their turn, all partners in NC Intressenter made payments to NC Intressenter based on the Black-Schole evaluations.

On December 31, 2002, Invik & Co AB owned 42% of the shares in NC Intressenter. Invik & Co AB is not entitled to sell or transfer these shareswithout the permission of Tele2 AB.

Incentive Program 2002–2007At the Annual General Meeting in 2002, it was decided to undertake an incentive program corresponding to a maximum of 1,055,000 for currentand future key employees of the Group. These persons are to be offered the opportunity, via warrants, to subscribe for Series B shares during a periodof three to five years after allotment, at a price totaling the market value of the Series B share plus 10% at the time of allotment, on condition thatthey remain employed by the Group. No premium is to be paid. At December 31, 2002, allotments corresponding to 663,000 shares had been imple-mented. All of these had a redemption price of SEK 191. In addition, allotments corresponding to 153,700 shares had been made to a wholly ownedGroup company to secure the future cash flow for social insurance costs.

Group Parent Company2002 2001 2002 2001

Other Other Other OtherPWC auditors PWC auditors PWC auditors PWC auditors

Audit assignments* 17 4 18 1 1 — 1 —Other assignments 13 4 13 3 6 — 8 2

30 8 31 4 7 — 9 2Total 38 35 7 11

* Auditing assignments = examination of the annual report and the accounts as well as the administration by the Board and the President. All other is otherassignments.

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Note 40 The United States generally accepted accounting principles (US GAAP)

The consolidated balance sheets and income statements are drawn up in accordance with Swedish accounting principles. These differ in certainrespects from generally accepted accounting principles in the United States (US GAAP).

The following adjustments are required for reporting profit/loss for the year and shareholders' equity in line with US GAAP.

Profit/loss for the year:Group

2002 2001 2000Profit/loss for the year according to Swedish accounting principles: 223 392 –396

Adjustments required for compliance with US GAAP.a) Transactions between companies under common control 9 21 24b) Amortization of goodwill 1,512 — —c) Lease agreements 1 2 3d) Tangible fixed assets –81 9 31e) Stock options 9 5 –196f) Software development cost — — 80g) Accounting for step acquisitions — –8 –317h) Accounting for acquisitions 25 –367 –104i) Deferred tax liability — 828 —j) Alecta refund — — –8k) Changes in accounting principles — –156 21l) Hedge accounting 1 –2 —Net adjustment 1,476 332 –466

Deferred tax effect on above, US GAAP adjustments –7 39 –38Profit/loss for the year according to US GAAP 1,692 763 –900

Earnings per share:Group

2002 2001 2000Profit/loss or the year according to US GAAP 1,692 763 –900Number of shares, weighted average 147,360,175 145,003,847 114,087,366Earnings per share SEK 11.48 SEK 5.26 SEK –7.89

Profit/loss or the year according to US GAAP 1,692 763 –900Reversal: interest after tax on convertibles during the year — — —Adjusted earnings for the year after full dilution 1,692 763 –900

Number of outstanding shares after full dilution, weighted average* 147,596,866 145,215,999 114,087,366Earnings per share after full dilution SEK 11.46 SEK 5.25 SEK –7.89

* In contrast to Swedish accounting principles, US GAAP does not calculate earnings per share after dilution at the present value of the exercise price for the options.

Adjusted profit/loss for the year:Group

2002 2001 2000Profit/loss for the year according to US GAAP 1,692 763 –900Reversal: amortization of goodwill — 1,845 610Adjusted profit/loss for the year according to US GAAP 1,692 2,608 –290

80 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Cont. note 40

Adjusted earnings per share:Group

2002 2001 2000Profit/loss or the year according to US GAAP 1,692 763 –900Reversal: amortization of goodwill — 1,845 610Adjusted earnings for the year 1,692 2,608 –290Number of shares, weighted average 147,360,175 145,003,847 114,087,366Adjusted earnings per share SEK 11.48 SEK 17.99 SEK –2.54

Profit/loss or the year according to US GAAP 1,692 763 –900Reversal: interest after tax on convertibles during the year — — —Reversal: amortization of goodwill — 1,845 610Adjusted earnings for the year after full dilution 1,692 2,608 –290Number of outstanding shares after full dilution, weighted average* 147,596,866 145,215,999 114,087,366Adjusted earnings per share after full dilution SEK 11.46 SEK 17.96 SEK –2.54

* In contrast to Swedish accounting principles, US GAAP does not calculate earnings per share after dilution at the present value of the exercise price for the options.

Shareholders' equity:Group

Dec.31,2002 Dec.31,2001 Dec.31,2000Shareholders' equity according to Swedish accounting principles 28,728 29,517 26,539

Adjustments required for compliance with US GAAP:a) Transactions between companies under common control –18 –27 –47b) Amortization of goodwill 1,512 — —c) Lease agreements 14 13 11d) Tangible fixed assets –21 60 51e) Stock options –4 –25 –30g) Accounting for step acquisitions –103 –102 –94h) Accounting for acquisitions 6,500 6,630 6,592i) Deferred tax liability — — –828j) Alecta refund 2 –7 –7k) Changes in accounting principles — — 156l) Hedge accounting — –2 —Net adjustment 7,882 6,540 5,804Deferred tax effect on above US GAAP adjustments –32 –16 –54Shareholders' equity according to US GAAP 36,578 36,041 32,289

Change in shareholders' equity:Group

Dec.31,2002 Dec.31,2001 Dec.31,2000Opening shareholders' equity, Jan. 1, according to US GAAP 36,041 32,289 5,772

Items reported directly against shareholders' equityGradual acquisitions — –8 –33Exchange-rate difference, according to US GAAP –1,181 2,144 785Total items reported directly against shareholders' equity –1,181 2,136 752

Other changes in shareholders' equityNew share issue, acquisition of SEC according to US GAAP — — 26,628New share issue, acquisition of Tele2 Russia, according to US GAAP — 838 —New share issue, convertibles, according to US GAAP 26 15 37Profit/loss for the year, according to US GAAP 1,692 763 –900Closing shareholders' equity, Dec. 31, according to US GAAP 36,578 36,041 32,289

81

Cont. note 40

Deferred tax liability/asset:Group

2002 2001Deferred tax liability/asset, according to Swedish acc. principles 1,246 1,764Deferred tax, adjustment according to US GAAP –32 –16Total deferred tax liability (–)/asset (+) according to US GAAP 1,214 1,748

Extract from consolidated balance sheet:Group

Swedishaccounting principles Adjustment items US GAAP

Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001 Dec.31,2002 Dec.31,2001Fixed assets 36,373 39,692 7,952 6,612 44,325 46,304Current assets 10,499 9,566 — — 10,499 9,566Total assets 46,872 49,258 7,952 6,612 54,824 55,870

Shareholders' equity 28,728 29,517 7,850 6,524 36,578 36,041Minority interest 22 28 — — 22 28Long-term liabilities 7,927 11,082 97 80 8,024 11,162Current liabilities 10,195 8,631 5 8 10,200 8,639Total shareholders' equity and liabilities 46,872 49,258 7,952 6,612 54,824 55,870

Explanation of current differences between Swedish accounting principles and US GAAP:The account below presents a description of the adjustments that must be made to report Tele2 Group’s profit/loss for 2000, 2001 and 2002 andshareholders’ equity as of December 31, 2000, 2001 and 2002 in accordance with US GAAP.

a) Transactions between companies under common controlIn 1993 and 1994, the company acquired Tele2 and Comviq from the Industriförvaltnings AB Kinnevik Group. The acquisition method was usedto report the transactions. Accordingly, the difference between the acquisition value and market value of net assets was reported as goodwill.According to US GAAP, acquisitions of operations from “jointly owned companies” should be conducted at historical values. Thus, as a US GAAPadjustment, all re-evaluations of plants, materials and supplies, goodwill, etc. that arise on the transaction date are eliminated and the resultingdepreciation/amortization is reversed.

b) Amortization of goodwillAccording to Swedish accounting principles, all intangible fixed assets, including goodwill, must be amortized. Amortization rates are based onthe acquisition value of the fixed assets and the estimated utilization period. According to US GAAP, effective 2002, goodwill and certain otherintangible assets need not be amortized but may instead be tested, at least annually, to identify any impairment loss. Accordingly, this year’s amort-ization of these assets under Swedish GAAP is reversed and instead a potential write-down based on the completed impairment test is recognized.

c) Lease agreementsThe Group has certain leasing transactions which, according to generally accepted accounting principles in Sweden, have been treated as operat-ing leases, but which, according to US GAAP, are viewed as finance leases.

d) Tangible fixed assetsCertain costs have been capitalized in accordance with Swedish accounting principles should be expensed according to US GAAP. According toUS GAAP, certain costs attributable to installations of networks are capitalized and not expensed.

e) Stock optionsAccording to US GAAP, as a result of the terms and conditions of the options programs in 1997, a liability is calculated based on the market valueof the underlying shares. According to US GAAP, the commitments to employees should not be dissolved. Commitments to others should be val-ued at the value of the option on the date on which the decision was made to settle it through a new share issue and report it directly againstshareholders’ equity.

f) Software development costThrough 1999, Tele2 has capitalized development costs for software for external sales. According to US GAAP, this should be expensed and depre-ciation attributable to capitalization be reversed until the product is technically finalized. As a result of the sale of 4T Solutions AB in 2000, thereis currently no difference vis-a-vis US GAAP.

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Cont. note 40

g) Accounting for step acquisitionsThe gradual acquisitions of OU Levicom and Société Européene de Communications S.A. during 1999–2001 has, according to Swedish account-ing principles, resulted in a restatement of adjustment of shareholders’ equity corresponding to shares in profit of the holdings from the originalacquisition date based on the equity method rather than historical acquisition values. According to US GAAP, not only should shareholders’ equitybe adjusted against the share in profit/loss but also goodwill and depreciation should be taken into account from the original acquisition date.

h) Accounting for acquisitionsThe acquisition of Société Européene de Communications S.A. in 2000 was conducted via a non-cash share issue, in which newly issued sharesin Tele2 were offered in exchange for the outstanding shares in Société Européene de Communications S.A. According to Swedish accounting prin-ciples, the acquisition price is calculated at a value corresponding to the share price of Tele2 on the transaction date. According to US GAAP, theacquisition price should be set at the share price on the date at which the offer was announced. There are also certain differences between acquirednet assets according to US GAAP and Swedish accounting principles.

i) Deferred tax liabilityAccording to US GAAP, deferred taxes should be reported for all temporary differences apart from certain exceptions. The reversal of deferred taxliabilities as a result of changes in circumstances is done restrictively. According to Swedish accounting principles, changes in circumstances canbe taken into account in the assessment. In conjunction with the liquidation of Société Européene de Communications S.A. in 2001, there wasno longer any differences vis-a-vis US GAAP.

j) Alecta refundAccording to Swedish accounting principles, the value of the refund received by Tele2 from Alecta should be reported via the income statementin 2000. According to US GAAP, only the cash portion received should be reported as income.

k) Changes in accounting principlesAccording to Swedish accounting principles, changes in accounting principles are reported through a recalculation of the opening shareholders’equity as if the new principles had been applied already when the transaction arose. According to US GAAP, the change is reported across theincome statement when changes in principles are made.

l) Hedge accountingAccording to US GAAP, to qualify a hedge for accounting purposes, the hedge has to comply with very strict criteria in terms of the documenta-tion of hedge relationship with hedged item and proof of its effectiveness. Swedish accounting principles does not require compliance with thisstrict criteria. Effective 2002, these requirements are fulfilled and thus there is no difference vis-à-vis US GAAP.

Stock options:In accordance with Swedish accounting principles, the option liability for the 1997 incentive program was dissolved in its entirety in 2000 as a resultof the decision to settle the option through an issue of convertibles. According to US GAAP, depending on the conditions of the option program, aliability should be calculated based on the difference between the market value of the underlying shares and the exercise price. During 2002, stockoptions were issued as part of a new incentive program. This program is not reported as an expense in the income statement. A valuation in accor-dance with the Black-Scholes option model would have the following effect on profit/loss according to US GAAP. The calculation is based on a risk-free rate of interest of 4.7% (2001: 5.0%), no dividend (due to the uncertainty as to whether or not the Board will propose a dividend), volatility of57.9% (2001: 45.5%) and the fact that the options expire on April 20, 2003 and September 1, 2005.

Group

2002 2001 2000Profit/loss for the year, reported as above 1,692 763 –900Adjusted earnings per share after full dilution SEK 11.46 SEK 5.25 SEK –7.89

Profit/loss for the year, pro forma 1,687 760 –904Adjusted earnings per share after full dilution SEK 11.43 SEK 5.23 SEK –7.92

Advertising expenses:Total advertising expenses for the year amount to SEK 979 million (2001: 1,031 million and 2000: 630 million).

Critical accounting principles according to US GAAP:The presentation below shows the accounting principles that are based on the most cricital assessments and estimates used in drawing up the accountsin line with US GAAP, and which differ from the preparation of financial reports in accordance with Swedish accounting principles:• When assessing the need for future write-down requirements for intangible and tangible fixed assets, Swedish accounting principles indicate that

a future discounted cash flow be calculated and compared with the book value. Swedish accounting principles stipulate the application of sched-ule amortization of goodwill. In contrast, according to US GAAP, a non-discounted cash flow is to be calculated. No further amortization of good-will should be applied according to US GAAP as of 2002.

83

Effects of new US GAAP accounting pronouncements:In June 2001, the Financial Accounting Standards Board (FASB) issued a Statement of Financial Accounting Standards No. 143 (SFAS 143), enti-tled ”Accounting for Asset Retirement Obligations”. SFAS 143 states when and how accounting for liabilities and expenses attributable to the retire-ment o fixed assets should be done. Tele2 will apply SFAS 143 as of January 1 2003. The application of this statement is not expected to have anysignificant effect on Tele2's earnings and financial position.

In November 2002 FASB issued FASB Interpretation No. 45 (FIN 45), “Guarantor’s Accounting and Disclosure Requirements for Guarantees,Including Indirect Guarantees of Indebtedness of Others.” FIN 45 requires that a liability should be reported at the fair value of assumed commit-ments in accordance with certain guarantee agreements on the date on which a company issued a guarantee. The provisions shall be applied witheffect for guarantees that were issued or changed after December 31, 2002.

Stockholm, February 24, 2003

Bruce GrantChairman

Lars-Johan Jarnheimer Marc BeulsPresident and CEO

Vigo Carlund Sven Hagströmer Håkan Ledin

Pelle Törnberg Lars Wohlin

Our auditors’ report was submitted on March 3, 2003

Pål Wingren Carl LindgrenAuthorized Public Accountant Authorized Public Accountant

84 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Audit report

We have audited the annual accounts, the consolidated financial statements, accounting records and the adminis-

tration of the Board of Directors and the President of Tele2 AB (publ) for the 2002 financial year. These accounts

and the administration of the Company are the responsibility of the Board of Directors and the President. Our respon-

sibility is to express an opinion on the annual accounts, consolidated financial statements and the administration

based on our audit.

We conducted our audit in accordance with generally accepted auditing standards in Sweden. Those standards

require that we plan and perform the audit to obtain reasonable assurance that the annual accounts and the con-

solidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evi-

dence supporting the amounts and disclosures in the accounts. An audit also includes assessing the accounting

principles used and their application by the Board of Directors and the President, as well as evaluating the overall

presentation of information in the annual accounts and consolidated financial statements. To support our opinion

in regard to freedom from liability, we have examined significant decisions, actions taken and circumstances of the

Company in order to determine the liability, if any, to the Company of any Board member, or the President. We have

also conducted examinations to establish whether any Board member or the President has in any other way acted

in contravention of the Swedish Companies Act, the Annual Accounts Act, or the Company’s Articles of Association.

We believe that our audit provides a reasonable basis for our opinion set out below.

The annual accounts and consolidated financial statements have been prepared in accordance with the Annual

Accounts Act and thus provide a true and fair picture of both the Company’s and the Group’s earnings and position

in accordance with generally accepted auditing standards in Sweden.

We recommend that the Annual General Meeting adopt the Income Statements and Balance Sheets of the Parent

Company and the Group, that the profit in the Parent Company be dealt with in accordance with the proposal in the

Board of Directors’ Report, and that the members of the Board and the President be discharged from liability for

the financial year.

Stockholm, March 3, 2003

Pål Wingren Carl Lindgren

Authorized Public Accountant Authorized Public Accountant

To the Annual General Meeting of the shareholders in Tele2 AB (publ)

Corporate registration number 556410-8917

85

Personnel and environment

Tele2’s operations have only a limited

impact on the environment. The company

has drawn up an environmental policy that

permeates all operations. The policy insists

that environmentally approved products be

used. Office waste and other scrapped

materials should be treated in an environ-

mentally sound manner and purchasing

decisions must take the environment into

consideration. Tele2 is particularly con-

scious of environmental safety issues when

it comes to mobile telephony. It is of the

utmost importance that Tele2 does not

only comply with prevailing environmental

standards, but that it keeps abreast of

research in Sweden and abroad. The Group

is an active participant in public discus-

sions about health, safety and the envir-

onment.

Tele2 pursues an ongoing skills develop-

ment effort to ensure that its employees

possess the kind of know-how that will

enable us to keep pace with the evolution

of the market and the needs of customers.

All new employees complete a basic course

that covers Tele2’s operations, goals, prin-

ciples, and quality assurance objectives.

A number of new college graduates are

chosen for a trainee program each year.

The program is primarily devoted to on-the-

job training in various parts of the organi-

zation and abroad. There is also a 12-

month, multi-phase leadership project for

the Group’s managers.

The Group had an average of 3,115

employees in 2002, compared with 2,172

in 2001. Tele2 is active in 22 European

countries.

Strict environmental requirements

Personnel and skills development

86 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Board of Directors

Marc J. A. Beuls

(Born 1956) holds a B.Sc. in Economics. He has

been with Millicom International Cellular S.A. since

1992 and has been President & CEO since January

1998. In 1997 he was appointed President of

Banque Invik S.A. in Luxembourg. Marc Beuls pre-

viously held executive positions at Generale Bank in

Belgium. He has been member of the Board of Tele2

since 1998.

Vigo Carlund

(Born 1946) has worked for Kinnevik companies

since 1968. He is President of Industriförvaltnings

AB Kinnevik. Chairman of the Board of Transcom

WW and Korsnäs. Member of the Board of Millicom,

Metro and Viking Telecom. Member of the Board of

Tele2 since 1995.

Holding: 379 B shares

Lars-Johan Jarnheimer

President and CEO (not a member of the Board).

(Born 1960) MBA. President and CEO of Tele2 AB

since March 1999. Mr. Jarnheimer has held various

positions at IKEA, Hennes & Mauritz and SARA

Hotels, and was President of ZTV for a short time

before coming to Comviq as Vice President in 1992.

President of Comviq during 1993–97. Member of

Group management at Saab Automobiles with

responsibility for the Nordic countries, Russia and

the Baltic States, and was President of Saab Opel

Sverige AB during 1997–98. Board assignments:

MTG, Arvid Nordquist Handelsaktiebolag, Millicom

and Invik AB.

Holding: 52,000 B shares and 15,000 options.

From left: Marc J. A. Beuls, Vigo Carlund, Lars-Johan Jarnheimer, Pelle Törnberg, Håkan Ledin, Lars Wohlin and Bruce Grant.

Pelle Törnberg

(Born 1956) President of Metro International since

2000. In 1987, he started the TV production com-

pany Strix. From 1993, he was responsible for all

media companies in what was formerly Kinnevik,

currently MTG. Chairman of the Board of MTG and

P4 Radio Hele Norge. Member of the Board of Invik,

MediaCorp and Millicom. Member of the Board of

Tele2 since 2001.

Holding: 4,100 B shares.

Håkan Ledin

(Born 1937) MSc Eng and MSc Econ. Worked many

years at Ericcson prior to becoming President of

Millicom in 1987, where he serves as Board

Chairman as of 2002. He served as President of

NetCom Systems in 1995–1996. Member of the

Board of Tele2 since 1994.

Holding: 30,000 B shares.

Lars Wohlin

(Born 1933) PhD Econ. Head of the Industry

Research Institute 1973–1976, Undersecretary in

Finance Ministry 1976–1979 and Governor of the

Central Bank 1979–1982. Served as President of

Stadshypotek 1983–1996. Board Chairman of the

Drott real-estate company since 1998. Member of

the Board of Tele2 since 1996.

Holding: 1,100 B shares.

Bruce Grant

Chairman of the Board

(Born 1959) Chairman and Managing Partner of

Applied Value LLC. Member of the Board of Industri-

förvaltnings AB Kinnevik, Korsnäs AB, Metro and

Transcom.

Sven Hagströmer

(Born 1943) President and Board Chairman of

Hagströmer & Qviberg from start in 1980 to 1995.

Board Chairman of Investment AB Öresund, AB

Custos and since 2001 also Acando. Member of the

Board of LGP Telecom Holding AB, Avanza AB and

HQ Fonder. Member of the Board of Tele2 since

1997.

Holding: 130,000 B shares.

87

Senior Executives

Håkan ZadlerBorn 1960CFOM.B.AEmployed since 2000Holding: 5,000 B shares and 15,000 options*

Roman SchwarzBorn 1947Market Area Director, Central EuropePresident, Tele2 SwitzerlandM.B.AEmployed since 1991Holding: 15,000 options*

Jean-Louis ConstanzaBorn 1961Market Area Director, Southern EuropePresident, Tele2 FranceM.B.AEmployed since 1998Holding: 15,000 options*

Jean-Claude BintzBorn 1956Market Area Director, LuxembourgEmployed since 1989Holding: 15,000 options*

Ib AndersenBorn 1955Network Operations DirectorM.B.A Employed since 2000Holding: 15,000 options*

Anders OlssonBorn 1969Market Area Director, Branded products& services, Marketing coordinator andPresident, Tele2 GermanyMBAEmployed since 1997Holding: 1,056 B shares and 15,000 options*

Lars-Johan JarnheimerBorn 1960President and CEO of Tele2 ABM.B.AEmployed since 1992Holding: 2,000 B shares and 15,000 options*. Holdings through companies**: 50,000 B shares

Fredrik BerglundBorn 1961Market Area Director, NordicPresident, Tele2 Sverige ABBSc in market economicsEmployed since 1995Holding: 15,000 options*Holdings through companies**: 30,000 B shares

Johnny SvedbergBorn 1962Market Area Director, Eastern Europeand RussiaBSc in market economicsEmployed since 1990Holding: 1 A-share, 1,240 B shares and 15,000 options* Holdings through companies**: 8,000 B shares

Jeanette AlmbergBorn 1965Customer Service Director M.B.AEmployed since 1995Holding: 15,000 options*Holdings through companies**: 1,500 B shares

Lars-Erik SveganderBorn 1941Personnel Director Employed since 1991Holding 15,000 options*Holdings through companies**:1,500 B shares

Roger MobrinBorn 1968Billing Operations and Coordination Director Technical college engineerEmployed since 1995Holding: 50 B shares and 15,000 options* Holdings through companies**: 1,500 B shares

Karl-Johan NybellBorn 1968Product Management Director MSc EngineeringEmployed since 1995Holding: 15,000 options*Holdings through companies**: 1,000 B shares

Björn LundströmBorn 1965Network Planning and Implementation Director MSc EngineeringEmployed since 1991Holding: 15,000 options*Holdings through companies**: 1,500 B shares

*relates to incentive program 2002/2007, see Note 38

** relates to incentive program 1997/2006, see Note 38

88 T E L E 2 A N N U A L R E P O R T 2 0 0 2

The Tele2 share

Number of shares

Tele2’s A and B series shares were listed on

the O-List of Stockholmsbörsen (Stockholm

Exchange) on May 14, 1996 in conjunction

with the distribution of the Company to the

shareholders of Industriförvaltnings AB

Kinnevik. Following the distribution,

Kinnevik owned no shares in Tele2 but held

a convertible debenture corresponding to

25,555,555 shares. During 1996,

Kinnevik sold portions of the debenture,

after conversion to shares, to institutions

and Invik & Co. AB.

To promote interest in the Company’s

share in the US and to increase its liquid-

ity, the Tele2 share was listed on the Nasdaq

exchange in the US on January 22, 1997.

A few months later, a new issue of two mil-

lion B shares was implemented. With this

issue, Tele2 sought to broaden the

Company’s international ownership interest

and to support the Nasdaq listing. The pro-

ceeds for the share issue, which amounted

to SEK 220 M, were primarily used for ongo-

ing investment requirements, in particular

for the development of Tele2’s Danish and

Norwegian operations.

In conjunction with the new issue,

Industriförvaltnings AB Kinnevik sold the

major portion of its remaining convertible

debenture in Tele2 after conversion to

6,000,000 B shares.

By the end of the first half of 1997, Invik

& Co. AB had converted its debenture, cor-

responding to 6,700,000 B shares, thus

increasing Tele2’s shareholders’ equity by

SEK 335 M.

During the second quarter of 1998, all

outstanding debentures were converted into

755,555 B shares.

At the Annual General Meeting in May

2000, the Board of Directors was authorized

to settle an option commitment through a

new share issue. In October 2000, 200,000

new B series shares were issued, as well as

three convertible debentures with detach-

able warrants with rights to new subscrip-

tion of a total of 300,000 B shares.

At an Extraordinary General Meeting of

Tele2 AB on August 25, 2000, a proposal

was approved to issue at most 40,901,585

series A and series B shares in Tele2 to

shareholders and holders of depository

receipts in Société Européenne de

Communication S.A. (SEC) in exchange for

shares and depository receipts in SEC. By

the end of the issue period, a total of

40,784,480 shares had been issued.

At the end of 2001, all shares in FORA

Telecom B.V. were acquired in exchange for

2,461,449 newly issued Tele2 B shares. In

2001, 100,000 B shares were newly sub-

scribed. During 2002, 100,000 shares

were newly subscribed, which was submit-

ted to PRV, the Swedish Patent and

Registration Office, for registration.

As of December 31, 2002 there were a

total of 147,360,175 shares in Tele2 AB

and a convertible debenture with detach-

able warrants corresponding to 100,000 B

shares.

Series A shares carry 10 votes, while B

shares carry one vote.

Ownership structure

At year-end 2002, Tele2 had about 61,000

shareholders, compared with about 64,000

one year earlier. The proportion of institu-

tional owners corresponded to about 88%

of the share capital and about 92% of the

voting rights on December 31, 2002.

Analysts who followed Tele2 during 2002

ABG Securities Henrik Wikström

Alfred Berg Lena Glader

Carnegie Fredrik Danielsson

EVLI Matti Riikonen

Enskilda Securities Per Trygg

Hagströmer & Qviberg Johan Broström

Handelsbanken Peter Warleus

HSBC Securities Viking Kjellström

Julius Baer Lena Hansson

JP Nordiska Fondk. Håkan Persson

Öhman Fondkomm. Stefan Billing

Swedbank Henrik Sandell

UBS Warburg Jeremy Taylor

Schroder Salomon

Smith Barney Christian Kern

Ownership structure, December 31, 2002 Current ownership structure

Share of Share ofA shares B shares A+B shares No. of votes capital, % votes, %

Invik & Co AB 9,891,787 2,825,579 12,717,366 101,743,449 8.6 29.7

Industriförvaltnings AB Kinnevik 6,498,880 24,611,021 31,109,901 89,599,821 21.1 26.1

Emesco 3,205,379 75,100 3,280,479 32,128,890 2.2 9.4

Millicom International Cellular S.A. 0 10,012,543 10,012,543 10,012,543 6.8 2.9

Stenbeck, Jan (Estate) 914,157 0 914,157 9,141,570 0.6 2.7

SEB 0 9,067,781 9,067,781 9,067,781 6.1 2.6

Nordea 834 6,720,828 6,721,662 6,729,168 4.6 2.0

Swedish Fourth Pension Fond 0 5,251,500 5,251,500 5,251,500 3.6 1.5

ROBUR 0 5,037,730 5,037,730 5,037,730 3.4 1.5

AMF Pension 0 4,218,000 4,218,000 4,218,000 2.9 1.2

Total, ten largest shareholders 20,511,037 67,820,082 88,331,119 272,930,452 59.9 79.6

Other shareholders 1,178,767 57,950,289 59,129,056 69,737,959 40.1 20.4

Total 21,689,804 125,770,371 147,460,175 342,668,411 100.0 100.0

89

5,000

10,000

15,000

20,000

25,000

30,000

100

200

300

400

500

600

900

60

700

800

96

Share turnover 000s (incl. off-floor trading)

98 99 00

Tele2’s closing price each week AFGX

97 01 02 03

Share trend of Stockholmsbörsen

Share trend on Nasdaq

10

50

60

80

90

100

20

30

40

70

100

200

300

400

500

600

700

800

900

97 98 99 00 01 02 03

Tele2’s closing price each month, USD Share turnover 000s (incl. off-floor trading)Nasdaq composite index

90 T E L E 2 A N N U A L R E P O R T 2 0 0 2

Addresses

Tele2 ABSkeppsbron 18 Box 2094SE-103 13 Stockholm, SwedenPhone: +46 8 5620 0060Fax: +46 8 5620 0040

Investor Relations30 St James’ SquareGB-SW1Y 4JH, London, EnglandPhone: +44 20 7321 5010Fax: +44 20 7321 5020

NordicSwedenTele2 Sverige ABBorgarfjordsgatan 16Box 62SE-164 94 Kista, SwedenPhone: +46 8 5626 4000Fax: +46 8 5626 4200Customer Service Private:0200-25 25 25 (Internet)0200-25 25 25 (fixed telephony)0200-22 20 40 (mobile telephony)

Comviq Box 62SE-164 94 Kista, SwedenPhone: +46 8 5626 4000 (switchboard)Fax: +46 586 53 444Customer Service:0200-22 20 40 (private customers)0200-22 40 50 (corporate customers)

KabelvisionBox 62SE-164 94 Kista, SwedenPhone: +46 8 5626 4352 (switchboard)Fax: +46 8 5865 4840Customer Service:+26 2000-22 55 00

Optimal Telecom ABBox 62 SE-164 94 Kista, SwedenPhone: +46 8 5626 2500 (switchboard)Fax: +46 8 5626 2525

Datametrix ABBox 20078SE-161 02 Bromma, SwedenPhone: +46 8 5220 0200Fax: +46 8 5220 0290

NorgeTele2 Norge ASUlvenveien 75ANO-0581 Oslo, NorwayPhone: +47 21 31 90 00Fax: +47 21 31 91 00

Datametrix ASGrenseveien 95NO-0663 Oslo, NorwayPhone: +47 23 03 59 00Fax: +47 23 03 59 01

DanmarkTele2 A/S Gammel Køge Landevej 55 DK-2500 Valby, DenmarkPhone: +45 77 30 10 01Fax: +45 77 30 10 00

Datametrix A/SGammel Køge Landevej 55-57DK-2500 Valby, DenmarkPhone: +45 77 30 10 60Fax: +45 77 30 10 61

Optimal Telecom A/SKarl Jacobsen vej 20DK-2500 Valby, DanmarkPhone: +45 77 30 12 90 (switchboard)Fax: +45 77 30 00 56

FinlandTele2 FinlandSentnerikuja 3 FI-00440 Helsingfors, FinlandPhone: +358 9 74 22 12 45Fax: +358 9 74 22 12 46

Eastern Europe and RussiaEstoniaTele2 Eesti ASJoe 2a, EE-10151 Tallinn, EstoniaPhone: +372 6888 866Fax: +372 6866 877

LatviaSIA Tele2Kurzemes Prospectus 13Riga LV-1067, LatviaPhone: +371 960 99 99Fax: +371 709 01 76

LithuaniaUAB Tele2Sporto g. 7aLT-20 51 Vilnius, LithuaniaPhone: +370 2 366 300Fax: +370 2 366 301

PolandTele2 Polskaul. Poste-pu 15PL-02-676 Warszaw, PolandPhone: +48 (22) 549 50 60Fax: +48 (22) 549 50 61

Czech RepublicTele2 s. r. o. Vinohradská 184, Praha 3, CZ-130 00, Czech RepublicPhone: +420 267 13 22 38Fax: +420 274 77 82 40

RussiaTele2 Russia TelecomB. Gnezdnikovsky Per.,1str.2, 7 trRU-103 009, Moscow, RussiaPhone: +7 095 797 21 61Fax: +7 095 797 21 62

SwedenX-source ABBox 416SE-129 44, 129 04 Hägersten, SwedenPhone: +46 8 5222 3500Fax: +46 8 5222 3552

91

Central EuropeGermanyTele2 Telecom Services GmbHIn der Steele 39a, DE-40599 Düsseldorf, GermanyPhone: +49 211 7400 4600Fax: +49 211 7400 4611

NetherlandsTele2 Nederland B.V.Ellermanstraat 19NL-1099BX Amsterdam, NetherlandsPhone: +31 207 020 202Fax: +31 207 020 222

SwitzerlandTELE2 Telecommunication Services AGPostfach 49CH-8037 Zürich, SwitzerlandPhone: +41 1 524 24 24Fax: +41 1 524 47 78

AustriaTele2 Telecommunication Services GmbHSchönbrunnerstr. 213-215, 4tr AT-1120 Vienna, AustriaPhone: +43 181 101 300Fax: +43 181 101 100

IrlandTele2 Telecommunication Services LtdOffice 4, O'Duffy Centre, Main Street,Carrickmacross, Co Monaghan, IrlandPhone: +353 42 969 2946Fax: +353 42 969 2947

Southern EuropeFranceTele2 (France) S.A.14 Rue des Frères Caudron FR-78143 Vélizy cedex, FrancePhone: +33 1 39 45 44 44Fax: +33 1 39 45 44 00

ItalyTele2 Italia SpAVia Cassanese 210IT-20090 Segrate Milano, ItalyPhone: +39 02 269 571Fax: +39 02 269 204 37

SpainTele2 Telecommunication Services S.L.Francisco de Ricci,3, ES-28015 Madrid, SpainPhone: +34 91 540 28 00Fax: +34 91 540 28 01

LuxembourgLuxembourgTango S.A.177, rue de Luxembourg, LU-8077 Bertrange, LuxembourgPhone: +352 27 777 101Fax: +352 27 777 888

LiechtensteinTele2 AG75 route de Longwy, LU-8080 Bertrange, LuxembourgPhone: +352 27 750 101Fax: +352 27 750 250

BelgiumTele2 Belgium N.V.75 route de Longwy, LU-8080 Bertrange, LuxembourgPhone: +352 27 750 101Fax: +352 27 750 250

3C Communications S.A.75 route de LongwyLU-8080 Bertrange, LuxembourgPhone: +352 27 750 101Fax: +352 27 750 250

Transac S.A.3, rue de l'AbattoirLU-3409 Dudelange, LuxembourgPhone: +352 27 754 101Fax: +352 27 754 300

Other Branded Products& Services

Tele2 UK Communications LtdKingstons House 15,Coombe RoadGB-London RG2 OSY, EnglandPhone: +44 208 957 1900Fax: +44 208 957 1901

Everyday.comBox 17041SE-104 62 Stockholm, SwedenPhone: +46 8 5889 8400Fax: +46 8 5889 8401

Alpha Telecom Communications LtdRyde House 391Richmond RoadGB-Twickenhan TW1 2EF England

C3 Calling Card Company1 Mill StreetGB-London SE1 2DE, EnglandPhone: +44 207 232 4949

92 T E L E 2 A N N U A L R E P O R T 2 0 0 2

History

Late 1970s– Industriförvaltnings AB

Kinnevik decides to

undertake a venture in the

telecommunications market.

1981– Comvik AB launched its

own analog network for

mobile telephony.

1988– Comviq received

a GSM license.

1980s– Kinnevik complete the preparations

for providing conventional

telecommunications in voice and data.

1986– A satellite connection for

data traffic is opened.

1989– Agreement with the Swedish Rail

Administration (Banverket) covering

investment in a joint fiber-optic network.

1993– Deregulation of the market for fixed telephony.

– NetCom Systems is established in order to own and develop

the Kinnevik Group’s telecom companies in the Nordic region.

– Kinnevik and Orkla form the Norwegian company, NetCom

ASA. NetCom Systems owns 25% of the company.

1992– Comviq GSM starts up its own

GSM-network.

1990– Tele2 AB is established.

(Currently Tele2 Sverige AB).

1993– NetCom Systems starts the

predecessor to Tele2 Norge.

1996– The shares in NetCom Systems are distributed

to shareholders in Kinnevik. Meanwhile,

NetCom Systems is listed on the O-List of

the Stockholm Stock Exchange.

– NetCom Systems, via the subsidiary Tele2

A/S, becomes the first competitor to Tele

Danmark in the Danish telecom market,

breaking a 100-year old monopoly.

1998– Operations are extended to the Baltic States through

the acquisition of 48% in the mobile operator Ritabell.

– NetCom Systems AB changes corporate identity to

NetCom AB.

1997– NetCom Systems is

listed on Nasdaq.

1999– NetCom increases its holding in Ritabell to 94.8%.

– Pre-selection initiated in Denmark, Norway and Sweden.

– NetCom AB sells its holding in NetCom ASA to Société Européenne de

Communication S.A., SEC. In exchange, receives newly issued shares in SEC.

After transaction, NetCom AB owns 17.8% of capital in SEC.

Year-end1997/1998

– The Norwegian telecom market

is deregulated.

2000– NetCom becomes the first mobile virtual

network operator (MVNO) in Denmark.

– NetCom acquires Société Européenne

de Communication S.A.

2000– NetCom is awarded UMTS licenses

in Norway and Sweden.

– Netcom acquires Latvia’s next

largest mobile operator,

Baltikom GSM.

2001– Acquisition of FORA Telecom.

– Joint UMTS company with Telia.

– NetCom changes corporate identity to Tele2.

2002– Comviq celebrates 10th Anniversary, breaks Swedish record with more than

2 million prepaid card subscribers.

– Tele2 is world’s fourth fastest-growing listed telecom/IT company.

– MVNO launched in the Netherlands and MVNO agreements signed in Norway

and Austria.

– Jan Hugo Stenbeck, Tele2’s founder and Chairman, dies at 59 years of age.

93

Definitions

LiquidityCash and cash equivalents, including unutilizedcredit facilities granted.

Net borrowingInterest-bearing liabilities (less convertibledebentures) less interest-bearing assets.

InvestmentsAcquisition and divestment of fixed assets, in-cluding investments through financial leases, andinvestments not qualifying as cash equivalents.

Equity/assets ratioShareholders’ equity (including convertibledebentures) divided by total assets.

Debt/equity ratioInterest-bearing net debt divided by share-holders’ equity at the end of the period.

Return on shareholders’ equityProfit/loss after tax less items affecting compar-ability, minority interests after tax deductions(and interest expense for convertible debenturesafter tax deductions) divided by average equity(including convertible debentures).

Definitions (Text in parentheses refers to financial ratios after full conversion.)

Glossary

CRM - Customer Relationship Management,often supported by computer-based systems.

DSL - Digital Subscriber Line. Generic name covering several different tech-nologies for datatransmission over fixed phonelines.

GPRS – General Packet Radio Service.A technology that permits high-capacity datatransmission using mobile phones.

GSM – Global System of Mobile.Communications or Groupe Spécial Mobile.2nd-generation mobile telephony system.Digital, as opposed to analog NMT.

IP – Internet Protocol.A series of rules for communication amongcomputers over the Internet.

LAN – Local Area Network.Local network of computers, often in the sameroom or building.

MMS – Multimedia Messaging Services. A ser-vice that makes it possible to send text, videoand audio messages between mobile phones orbetween Internet-connected computers and amobile telephone.

MVNO – Mobile Virtual Network Operator.MVNO’s have greater network resources thanService Providers with which to offer their owntelecom services to subscribers. But they donot have radio access network capacity, whichmust be purchased from a network operator.

NMT – Nordic Mobile Telephone.Ordinarily identified as the 1st-generationmobile telephony. An analog technology developed in the Nordic region.

SMS – Short Message Service.Enables the transmission of short text messagesbetween mobile phones or between a computerthat is connected to the Internet and a mobilephone.

SP – Service Provider.A company that purchases capacity from net-work operators with which it can sell telecomservices to its subscribers.

UMTS – Universal Mobile TelecommunicationsSystem.

A technology for 3rd-generation mobile tele-phony intended to handle, text, images, andvideo. UMTS has greater capacity than GSM.

VOIP – Voice Over Internet Protocol.Telephony that uses Internet Protocol.

VPN – Virtual Private Network.A service that links a company’s local and tele-com networks with the computers and phonesof employees who work remotely, forming atelecom or data communications network thatlooks to users like a single business network.

WAN – Wide Area Network.A network of computers on different locations.Often consists of several LANs linked together.

WAP – Wireless Application Protocol.An industrial standard for Internet-based data communications over mobile networks. Developed by the WAP Forum, consisting of big corporations like Ericsson, IBM, Motorolaand Nokia.

WLL – Wireless Local Loop.Wireless broadband access via radio networks.

Sources: Computer Sweden, Mobiltelebranschen,Svenska Datatermgruppen and Tele2.

Capital employedTotal assets less provisions, minority interestsand non-interest bearing liabilities.

Return on capital employedProfit/loss after financial items less itemsaffecting comparability and financial costs (lessinterest expense for convertible debentures)divided by average capital employed.

Average interest expenseInterest expense (less interest expense for con-vertible debentures) divided by average interest-bearing liabilities (less convertible debentures).

Earnings per shareProfit/loss for the period (less interest expenseon convertible debentures, and less tax deduc-tions) divided by the weighted average numberof shares outstanding during the fiscal year(that would result from full conversion of con-vertible debentures).

Shareholders’ equity per shareShareholders’ equity (including convertibledebentures) less minority interests, divided bythe weighted average number of shares out-standing during the fiscal year (that wouldresult from full conversion of convertibledebentures).

Cash flow per shareBased on cash flow from operating activitiesbefore investment and financing activities.

Dividend per shareBased on the dividend distributed or proposedeach year.

ARPUAverage monthly revenue per customer.

MoUMinutes of monthly usage per customer.

TELE2 AB

Skeppsbron 18

P.O. Box 2094

SE-103 13 Stockholm

Phone +46 8 5620 0060

Fax +46 8 5620 0040

E-mail info@tele2.com

www.tele2.com

Corporate identification No.:

556410-8917

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