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Annual

REPORT

2014

Calendar 2015

Annual General Meeting

2015

Stockholm

May 19

Interim Report

January – March 2014

Financial Reports

Interim Report

January – March

2015

Full year Report

January – December

2014

Interim Report

January – June

2015

Interim Report

January – September

2015

Jan 30

Jul 21 Oct 21

Mar 30 Apr 21

Annual Report

2014

Financial statements – Group Page

Consolidated income statement 25

Consolidated comprehensive income 26

Consolidated balance sheet 27

Consolidated cash ﬂow statement 29

Change in consolidated equity 30

Financial statements – parent company Page

The parent company’s income statement 61

The parent company’s comprehensive income 61

The parent company’s balance sheet 61

The parent company’s cash ﬂow statement 62

Change in the parent company’s equity 62

Notes – Group

Note 1 Accounting principles and other information 31

Note 2 Financial risk management and ﬁnancial instruments 38

Note 3 Exchange rate effects 39

Note 4 Segment reporting 40

Note 5 Net sales and number of customers 41

Note 6 EBITDA and EBIT as well as depreciation/

amortization and impairment 42

Note 7 Result from shares in joint ventures and associated companies 43

Note 8 Other operating income 43

Note 9 Other operating expenses 43

Note 10 Interest income 44

Note 11 Interest costs 44

Note 12 Other ﬁnancial items 44

Note 13 Taxes 44

Note 14 Intangible assets 45

Note 15 Tangible assets 47

Note 16 Acquisitions and divestments 48

Note 17 Shares in joint ventures and associated companies 49

Note 18 Other ﬁnancial assets 49

Note 19 Inventories 49

Note 20 Accounts receivable 49

Note 21 Other current receivables 49

Note 22 Prepaid expenses and accrued income 49

Note 23 Current investments 49

Note 24 Cash and cash equivalents and unutilized overdraft facilities 50

Note 25 Equity, number of shares and earnings per share 50

Note 26 Financial liabilities 51

Note 27 Provisions 53

Note 28 Accrued expenses and deferred income 53

Note 29 Pledged assets 53

Note 30 Contingent liabilities and other commitments 53

Note 31 Leases 54

Note 32 Supplementary cash ﬂow information 54

Note 33 Number of employees 54

Note 34 Personnel costs 55

Note 35 Fees to the appointed auditor 58

Note 36 Discontinued operations 58

Note 37 Joint operations and other related parties 59

Note 38 Corporate Responsibility results 60

Notes – parent company

Note 1 Accounting principles and other information 63

Note 2 Net sales 63

Note 3 Result of shares in group companies 63

Note 4 Other interest revenue and similar income 63

Note 5 Interest expense and similar costs 63

Note 6 Taxes 63

Note 7 Tangible assets 63

Note 8 Shares in group companies 64

Note 9 Receivables from group companies 64

Note 10 Other ﬁnancial assets 64

Note 11 Cash and cash equivalents and unutilized overdraft facilities 64

Note 12 Financial liabilities 64

Note 13 Accrued expenses and deferred income 64

Note 14 Contingent liabilities and other commitments 65

Note 15 Supplementary cash ﬂow information 65

Note 16 Number of employees 65

Note 17 Personnel costs 65

Note 18 Fees to the appointed auditor 65

Note 19 Legal structure 65

Contents

CEO Word 2

Board of Directors 4

Leadership Team 6

Administration report 8

Financial statements 25

Auditor’s report 67

Deﬁnitions 68

Contacts 69

Tele2 – Annual Report 2014 1

In just a few years, the mobile device has become our most

beloved asset, even more dear to us than our wallets. Did

you know that around 80 percent of the smartphone users

check their mobile phones within the ﬁrst 15 minutes of

when they wake up? Moreover, did you know that we look

at our phones on average 125-150 times per day? And we,

Tele2, make the expensive device you hold in your hand

worth something. Because without the connectivity that

we provide, it is just pieces of glass, metal and plastic.

Hence, I feel conﬁdent that our mobile focus is spot on.

The year has been vibrant in many ways. I have had the pleasure of

welcoming several new members to the Leadership Team - new

faces bringing new ideas and perspectives to the table. Also the

Tele2 Group saw some change to the set-up as we sold our Norwe-

gian business. The sale has been completed during 2015 after

approval by regulatory authorities, and is beneﬁcial for both Tele2,

our Norwegian customers and the buyer – although it was a big step

away from the original plan that we had for our Norwegian opera-

tions. Moreover, on the operational side we have seen good devel-

opment in for example Sweden, where we are really hitting it off

when it comes to monetizing data. The prepaid to postpaid migra-

tion has slowed down and instead the voice to data transition is

really picking up speed. And we are only seeing the beginning of

that journey.

Everything starts with a good trend, someone said. I really think

that is true and in our business that trend is data growth. The differ-

ence between winners and losers will be the ability to monetize

data and take good care of the customer, I know that we at Tele2 can

do both.

Hitting change before change hits us

Last year, I said that 2014 would be the year when we were going to

remove uncertainty around Tele2. To a large extent we have man-

aged to do that. We have a clear path forward and now it is just con-

tinued hard work that is needed to get our Rockets in the Nether-

lands, Kazakhstan and Croatia to bear fruit. Adding to the clarity,

wecommunicated our renewed strategy to the Board, our employ-

ees and the market during the year. Our strategic process landed in

four strategic choices, or Way2Win, as we call it; Value Champion,

Focused Technology Choices, Step Change Productivity and

Winning People & Culture. If we manage to excel in each of these

areas, we will be unbeatable. Within Step Change Productivity, we

announced the Challenger Program as an initiative. It is a program

to increase efﬁciency across the whole Group by doing what we do

even smarter and better. It will lead to productivity improvements

amounting to around SEK 1 billion annually as of 2018.

In Sweden, we fully transitioned to becoming Value Champions

during 2014 when we introduced a new commercial concept which

we refer to as Tele2.0. Putting the customers ﬁrst and abolishing old

truths like binding periods and expiry dates for top-ups. Instead, we

introduced things like a one-subscription-solution for everyone and

trial periods for both B2C and B2B customers. The purpose of the

concept is to improve customer satisfaction and build the Tele2

brand. It is a bold move but the industry needs to change and in

Sweden we are in a position of strength, giving us the courage to

take these steps. During the year, Sweden maintained its status as

the leader in mobile data for the Group.

In the Netherlands, we are continuing one of the Group’s most

exciting projects at full speed. In the beginning of 2015, some of our

base stations started to radiate and by pushing on with the network

2014 – yet another dynamic and

successful year! Perfect for us at Tele2

who see change as the only constant

Everything starts with a good trend, someone said.

I really think that is true and in our business that trend

is data growth. The difference between winners and

losers will be the ability to monetize data and take good

care of the customer, I know that we at Tele2 can do both.

“

”

2 Tele2 – Annual Report 2014

CEO Word

build-out we expect to have a full coverage by Q1 2016. As far as I

know, it will be the ﬁrst 4G-only full covering operation in the world.

In the year, we have seen geopolitical developments that affected

our value in Kazakhstan, as it brought monetary instability with it.

Businesswise, on the contrary, we saw more stability in our coun-

tries neighboring Russia. In Kazakhstan, we are back at a strong

positive customer intake. We have increased the number of points of

sales, applied a more regional approach to our business and saw the

revenue sharing retail model continue to yield results. We main-

tained our successful network roll-out and at the end of the year, we

had 30 percent of our revenues coming from data. The voice to data

transition is present everywhere.

I am glad to see that Tele2 Croatia continues its positive trajectory

after last year’s turn-around. Once again I would like to emphasize

the strong management team and employees that are really giving it

all to make that happen. In 2014 we secured 15 MHz in the 1800

MHz spectrum which puts us in a strong position for future data

growth.

Estonia went from a very tough position, to a tough one. A dawn-

ing improvement which I hope will continue. Lithuania continues to

stand out as one of the stars of the Group with a number one position

(no matter how you count) and with impressive EBITDA-margins.

Latvia focused on customer service and managed to reach beyond

world class levels, hitting 86 percent customer satisfaction during

the year.

Germany continued on its present path and in Austria we took the

decision to invest in B2B whilst also launching mobility (through an

MVNO agreement) as a complement to our ﬁxed operations.

2014 was also the year when our M2M business got some traction

in its partnership strategy. That strategy gives us the right tools to

take our M2M business further at a great tempo. The Tele2 M2M

Global Solution organization feels solid and I am hopeful that 2015

will be even more of a springboard year for our M2M activities.

If you are not paranoid,

you do not have enough information

Sustainability and Corporate Responsibility remains a clear focus

for us at Tele2. By providing our customers with great products and

offerings that give access to society’s full range of services and com-

munication, we feel that we are contributing to a better tomorrow at

our very core. However, we are well aware that there are plenty of

challenges along the way in order to get that done in a cautious and

responsible way across our footprint. Our strategy for Corporate Sus-

tainability described in two words would be: transparent action. We

take action when we see wrongdoings within our operational con-

trol. We discuss human rights and ethical dilemmas in our Board.

I,myself, have worked hard to increase transparency around our

business in Kazakhstan towards investors and relevant stakehold-

ers. We try to be as open as we can possibly be about our challenges

(e.g. reporting incidents in our Annual Reports and on our corporate

website, organizing Corporate Responsibility round-tables, drafting

public White Papers etc.) and when things go bad (because they do)

we act upon it. Fulﬁlling the company’s responsibility to respect

human rights as deﬁned by the United Nations in the best possible

way. This needs to be done to maintain our customers’ trust and

generate maximum shareholder value – and to allow me to sleep

well at night. We follow political and macro-economic trends which

could inﬂuence performance and delivery and we are disciplined

when it comes to risk appetite, culture, values and challenger spirit.

We, and our owners, will continue to have tough expectations on

ourselves for the coming years.

The Tele2 Way or the highway

Internally, we have had a continued focus on our unique and price-

less set of values. It is important not to feel satisﬁed and relaxed

even though employee engagement levels (a combination of clarity

and energy) at Tele2 are world class. In the year, we therefore rolled

out a new Tele2 Way training. Everyone in the Leadership Team are

teachers and all managers have attended the updated training ses-

sions. We have a strong culture and DNA that needs to be taken care

of. Winning People & Culture is one of the Way2Win areas in the

renewed strategy because it is the people at Tele2 that makes us

who we are and deﬁnes who we will be.

Just do it

In 2015, we will roll-up our sleeves even further (at Tele2 they are

well above the elbows at any given time) because we have a lot of

work to do. I sometimes say that we are more or less “fully booked”

for 2015. It will be a year of investments and setting up the company

for future continued success. The Netherlands remains a clear focus

and we need to get that right. We are also rolling out networks in

Kazakhstan and Sweden to cater for future needs. Moreover, we

have kick-started the Challenger Program and need to get good

traction from that in 2015.

Mats Granryd

President and CEO

Tele2 – Annual Report 2014 3

CEO Word

Board of Directors

Mike Parton

Chairman of the Board,

elected in 2007

Born: 1954

Nationality: British citizen

Independence: Independent in

relation to the company and

management as well as in

relation to the company’s major

shareholders

Holdings in Tele2: 17,825

Bshares

Committee work: Member of

the Remuneration Committee

Mike Parton is a member of the

Chartered Institute of

Management Accountants.

Furthermore, he is a member of

the Advisory Board of a UK

charity called Youth at Risk.

He was CEO and Chairman of

Damovo Group Ltd, an

international IT company

between 2007 and 2014 and

CEO and Executive member of

Marconi plc between 2001 and

2006.

Trained as Chartered

Management Accountant.

Lorenzo Grabau

Non-Executive Director,

elected in 2014

Born: 1965

Nationality: Italian citizen

Independence: Independent in

relation to the company and

management but not

independent in relation to the

company’s major shareholders

Holdings in Tele2: -

Committee work: Member of the

Audit Committee and the

Remuneration Committee

Lorenzo Grabau is President and

CEO of Investment AB Kinnevik

since 2014. He is also Chairman of

Rocket Internet AG and Avito AB

since 2014 and in Global Fashion

Holding SA since 2015. In addition

he is deputy Chairman of Zalando

SE since 2013, as well as Non-

Executive Director of Millicom

International Cellular S.A., since

2013, Modern Times Group MTG

AB since 2011, Qliro Group AB and

Secure Value EEIG since 2014.

During 2013 and 2014 he was

Non-Executive Director of

Investment AB Kinnevik, CTC

Media, Inc. and Softkinetic BV. He

was a Partner and Managing

Director at Goldman Sachs Inter-

national in London until 2011. He

joined the Investment Banking

division of Goldman Sachs in 1994

and during his 17years at the ﬁrm

held various leadership positions

within the Consumer/Retail and

Media/Online industry practices,

and the Financial Sponsors Group.

He began his career in Investment

Banking in 1990 when he joined

Merrill Lynch, where he remained

for ﬁve years working in the

Mergers & Acquisitions depart-

ment in London and NewYork.

Dottore in Economia e

Commercio, from Università degli

Studi di Roma, La Sapienza, Italy.

Lars Berg

Non-Executive Director,

elected in 2010

Born: 1947

Nationality: Swedish citizen

Independence: Independent in

relation to the company and

management as well as in

relation to the company’s major

shareholders

Holdings in Tele2: 2,000

Bshares

Committee work: Chairman of

the Remuneration Committee

Lars Berg is the European

venture partner of Constellation

Growth Capital since 2006. He is

non-executive Chairman of Net

Insight AB since 2001 (a Board

member since 2000), a non-

executive Board member of

Ratos AB since 2000 and of

OnePhone Holding since 2009

as well as a non-executive

supervisory Board member of

NORMA Group AG, Frankfurt

since 2011.

He was a member of the

executive Board of Mannesmann

AG as Head of its telecommuni-

cations business from 1999 until

the Vodafone takeover of

Mannesmann in 2000. From

1994 until 1999, he was Chief

Executive Ofﬁcer of the Telia

Group and President of Telia AB.

Between 1970 and 1994 he held

various executive positions in

the Ericsson Group and was a

member of the Ericsson

Corporate Executive Committee

for ten years, as well as

President of the subsidiaries

Ericsson Cables AB and Ericsson

Business Networks AB.

M.Sc. in Business

Administration and Economics,

Gothenburg School of

Economics.

Mia Brunell Livfors

Non-Executive Director,

elected in 2006

Born: 1965

Nationality: Swedish citizen

Independence: Not

independent in relation to the

company and management (due

to engagement as a Board

member of Transcom Worldwide

AB) and not independent in

relation to the company’s major

shareholders

Holdings in Tele2: 1,000

Bshares

Committee work: -

Mia Brunell Livfors is a member

of the Board of Millicom

International Cellular S.A.,

Modern Times Group MTG AB,

Qliro Group AB, Transcom

Worldwide AB, Stena AB and

Efva Attling Stockholm AB. She

also works as an advisor for Axel

Johnson AB and has been

appointed as a Board member of

Axel Johnson AB from March 25,

2015.

She was President and CEO of

Investment AB Kinnevik

between 2006 and 2014 and

she held several managerial

positions within the Modern

Times Group MTG AB from 1992

to 2001 and was Chief Financial

Ofﬁcer between 2001 and 2006.

Studies in Economics and

Business Administration,

Stockholm University.

4 Tele2 – Annual Report 2014

Board of Directors

Carla Smits-Nusteling

Non-Executive Director,

elected in 2013

Born: 1966

Nationality: Dutch citizen

Independence: Independent in

relation to the company and

management as well as in

relation to the company’s major

shareholders

Holdings in Tele2: -

Committee work: Chairman of

the Audit Committee and

member of the Remuneration

Committee

Carla Smits-Nusteling is a Non-

Executive Director at ASML. She

is also a member of the

management board of the

Foundation Unilever NV Trust

Ofﬁce since February 2015.

She has over 10 years’

experience from Koninklijke KPN

N.V., and was KPN’s Chief

Financial Ofﬁcer between 2009

and 2012. She joined KPN in

2000 and held various ﬁnancial

positions, whereof three years

as Director of Corporate Control.

During 1990–2000, she worked

at TNT Post Group N.V., an

international express and mail

delivery service, and held

various managerial positions

before her appointment as

Regional Director in 1999.

M.Sc. Business Economics,

Erasmus University, Rotterdam.

Mario Zanotti

Non-Executive Director,

elected in 2013

Born: 1962

Nationality: Italian citizen

Independence: Independent in

relation to the company and

management but not

independent in relation to the

company’s major shareholders

Holdings in Tele2: -

Committee work: -

Mario Zanotti is Senior Executive

VP Operations at Millicom

International Cellular S.A

He has over 20 years of

experience in the Telecom

Service Industry. In 1992 he

founded Telecel in Paraguay and

was also the Managing Director

of the company during 1992–

1998. He was Managing Director

of Tele2 Italy during 1998–2000

and of YXK Systems during

2001–2002. After 2002 he has

held several other managerial

positions within Millicom,

starting as Head of Central

America for Millicom before

becoming Head of Latin America

and later COO of Categories &

Global Sourcing.

M.Sc. in Electrical

Engineering from the Pontiﬁcia

Universidade Catolica in Porto

Alegre (Brazil), MBA from INCAE

and the Universidad Catolica de

Asuncion (Paraguay).

Erik Mitteregger

Non-Executive Director,

elected in 2010

Born: 1960

Nationality: Swedish citizen

Independence: Independent in

relation to the company and

management but not

independent in relation to the

company’s major shareholders

Holdings in Tele2: 10,000

Bshares

Committee work: Member of

the Audit Committee

Erik Mitteregger is member of

the Board of Investment AB

Kinnevik since 2004 and of

Rocket Internet AG and Avito AB

since 2014. He is also chairman

of the Boards of Fireﬂy AB and

Wise Group AB.

Previously, he was member of

the Board of Invik & Co. AB

2004–2007 and Metro

International SA 2009–2013. He

was founding partner and Fund

Manager of Brummer & Partners

Kapitalförvaltning AB 1995–

2002. In 1989–1995, he was

Head of Equity Research and

member of the Management

Board at Alfred Berg

Fondkommission.

B.Sc. in Economics and

Business Administration at

Stockholm School of Economics.

Irina Hemmers

Non-Executive Director,

elected in 2014

Born: 1972

Nationality: Austrian citizen

Independence: Independent in

relation to the company and

management as well as in

relation to the company’s major

shareholders

Holdings in Tele2: -

Committee work: Member of

the Audit Committee

Irina Hemmers is Investment

Managing Director at Moonray

Investors, the Principal Investing

Arm of Fidelity International.

She was Non-Executive

Director of Trader Corporation,

Trader Media Group and Top

Right Group until 2013, of Hit

Entertainment until 2012,

Incisive Media/American

Lawyer Media until 2009 and

SULO Group until 2007.

Previously, she was a Partner

with private equity ﬁrm Apax

Partners from 2001 to 2013.

During her 12 years with Apax

Partners, she worked in Munich,

Hong Kong and London. She

began her career at McKinsey &

Company in Vienna 1996.

M.Sc. in International

Business and Economic Studies

from University of Innsbruck,

Austria, and an MPA from John F.

Kennedy School of Government,

Harvard University, USA.

Tele2 – Annual Report 2014 5

Board of Directors

Leadership Team

Mats Granryd

President and CEO Tele2 Group

Joined the company in 2010

Born 1962

M.Sc. in Mechanical Engineering,

KTH Royal Institute of Technology

Holdings in Tele21)

57,725 B shares

56,000 share rights (LTI 2012)

56,000 share rights (LTI 2013)

56,000 share rights (LTI 2014)

Joachim Horn

Executive Vice President /

Group CTIO

Joined the company in 2011

Born 1960

M.Sc. in Informatics, Fachhochschule Wedel

Holdings in Tele21)

12,000 B shares

24,000 share rights (LTI 2012)

24,000 share rights (LTI 2013)

24,000 share rights (LTI 2014)

Lars Torstensson

Executive Vice President / Group

Communication & Strategy

Joined the company in 2007

Born 1973

M.Sc. in Business Administration,

Jönköping University

Holdings in Tele21)

16,000 B shares

24,000 share rights (LTI 2012)

24,000 share rights (LTI 2013)

24,000 share rights (LTI 2014)

Allison Kirkby

Executive Vice President /

Group CFO

Joined the company in 2014

Born 1967

FCMA, Fellow of the Chartered Institute

of Management Accountants, SHND in

Accounting, University of Caledonia

Holdings in Tele21)

4,000 B shares

24,000 share rights (LTI 2014)

Anders Olsson

Executive Vice President /

Group CCO

Joined the company in 1997

Born 1969

M.Sc. in Business Administration

and Economics, Uppsala University

Holdings in Tele21)

30,000 B shares

24,000 share rights (LTI 2012)

24,000 share rights (LTI 2013)

24,000 share rights (LTI 2014)

Caroline Fellenius-Omnell

Executive Vice President /

Group General Counsel

Joined the company in 2014

Born 1968

LL.M. College of Europe and LL.M.,

Stockholm University

Holdings in Tele21)

4,000 B shares

24,000 share rights (LTI 2014)

6 Tele2 – Annual Report 2014

Leadership Team

1) Share rights = allocated share rights at grant date, before compensation for dividend

Thomas Ekman

Executive Vice President /

CEO Tele2 Sweden

Joined the company in 2006

Born 1969

M.Sc. in Business administration and

Economics, Stockholm University

Holdings in Tele21)

12,012 B shares

24,000 share rights (LTI 2012)

24,000 share rights (LTI 2013)

24,000 share rights (LTI 2014)

Jeff Dodds

Executive Vice President /

CEO Tele2 Netherlands

Joined the company in 2014

Born 1973

MBA, University of Westminster and M.Sc. in

Marketing Management, Aberdeen Business

School

Holdings in Tele21)

4,000 B shares

24,000 share rights (LTI 2014)

Elinor Skogsfors

Executive Vice President /

Group Human Resources

Joined the company in 2013

Born 1963

B.Sc. in Political Administration major in

HR, Stockholm University

Holdings in Tele21)

3,000 B shares

18,000 share rights (LTI 2014)

Niklas Sonkin

Executive Vice President / Central Europe

and Eurasia

Joined the company in 2009

Born 1967

M.Sc. in Engineering, Helsinki University

of Technology

Holdings in Tele21)

14,500 B shares

24,000 share rights (LTI 2012)

24,000 share rights (LTI 2013)

24,000 share rights (LTI 2014)

In addition, not received 8,307

B shares for LTI 2011

Tele2 – Annual Report 2014 7

Leadership Team

Financial overview

With 14 million customers in nine countries, Tele2 is one of Europe’s

leading telecom operators. We offer mobile services, ﬁxed broad-

band and telephony, data network services and content services.

Ever since Jan Stenbeck founded the company in Sweden in 1993,

Tele2 has been a tough challenger to the former government

monopolies and other established providers.

Our mission is to always offer our customers what they need for

less, and ultimately our vision is to be the champions of customer

value in everything we do.

Mobile services is Tele2’s primary focus and most important

growth segment. In 2014, revenue from mobile operation accounted

for 74 (68) percent of Tele2’s net sales.

In 2014, the Group generated net sales of SEK 26 billion and

reported an operating proﬁt (EBITDA) of SEK 5.9 billion.

Net customer intake

In 2014, the total customer base increased to 13,594,000

(13,582,000) customers. Net customer intake, excluding one-time

adjustments, was 397,000 (253,000) customers. The customer

intake in mobile services amounted to 598,000 (594,000) custom-

ers. The increase was mainly driven by positive customer intake

through Tele2 Kazakhstan, Tele2 Netherlands, Tele2 Germany and

Tele2 Croatia. The ﬁxed broadband base lost –45,000 (–86,000)

customers in 2014, attributable to Tele2’s operation in Sweden,

Austria, Germany and the Netherlands. As expected, the number

ofﬁxed telephony customers fell during the year.

Net sales

Tele2’s net sales amounted to SEK 25,955 (25,757) million corre-

sponding to a positive growth of 1 percent including, or –1 percent

decline excluding, exchange rate effects. The net sales development

was mainly a result of strong usage of mobile services increasing 8

percent, however hampered by the negative net sales development

within consumer ﬁxed broadband and ﬁxed telephony.

EBITDA

EBITDA amounted to SEK 5,926 (5,891) million, equivalent to an

EBITDA margin of 22.8 (22.9) percent. This corresponding to an

increase in EBITDA of 1 percent including, or –2 percent excluding,

exchange rate effects. The EBITDA growth was mainly a result of a

strong development in mobile services, and monetising of data.

However, it was also affected by expansion costs in mobile services.

EBIT

Operating proﬁt, EBIT amounted to SEK 3,216 (2,982) million exclud-

ing one-off items. Including one-off items and including the capital

gain from the sale of the Swedish residential cable and ﬁber opera-

tion, EBIT amounted to SEK 3,490 (2,548) million. The EBIT margin

was 13.4 (9.9) percent.

Proﬁt before tax

Net interest expense and other ﬁnancial items amounted to SEK 10

(–551) million. Exchange differences of SEK –27 (–28) million were

reported under other ﬁnancial items. The average interest rate on

outstanding liabilities was 5.0 (5.2) percent. Proﬁt after ﬁnancial

items, EBT, amounted to SEK 3,500 (1,997) million.

Net proﬁt

Proﬁt after tax amounted to SEK 2,626 (968) million. Earnings per

share amounted to SEK 5.86 (2.15) after dilution. Income tax

expenses for the year amounted to SEK –874 (–1,029) million. Tax

payments for continuing operations affecting cash ﬂow amounted to

SEK –327 (–302) million.

Cash ﬂow

For continuing operations, cash ﬂow from operating activities

amounted to SEK 4,661 (4,983) million and cash ﬂow after paid

CAPEX to SEK 1,162 (799) million.

CAPEX

During 2014, Tele2 made investments of SEK 3,450 (4,399) million

in tangible and intangible assets, driven mainly by further network

expansion in Netherlands, Sweden, Kazakhstan and the Baltics.

Net debt

Net debt amounted to SEK 9,061 (8,007) million on December 31,

2014, or 1.51 times EBITDA in 2014. Tele2’s available liquidity

amounted to SEK 8,224 (9,306) million.

Challenger program

A group-wide program focused on increasing productivity was

launched in the end of 2014. The program will be implemented over

the next 3 years and reap full beneﬁts of SEK 1 billion per annum

starting in 2018. The investment required will be SEK 1 billion,

phased over the next 3 years. In 2014 EBIT was impacted by

SEK–10 million by the program, which was reported as one-off

items (Note 6).

Administration report

The Board of Directors and the CEO herewith present the annual

report and consolidated ﬁnancial statements for Tele2 AB (publ),

corporate reg. no. 556410-8917 for the ﬁnancial year 2014.

The ﬁgures shown in parentheses correspond to the comparable period last year and continuing operations unless otherwise stated.

8 Tele2 – Annual Report 2014

Administration report

Five-year summary

SEK million 2014 2013 2012 2011 2010

CONTINUING OPERATIONS

Net sales 25,955 25,757 25,993 26,219 27,361

Number of customers (by thousands) 13,594 13,582 14,229 12,392 11,845

EBITDA 5,926 5,891 6,040 6,755 6,880

EBIT 3,490 2,548 2,190 3,613 4,088

EBT 3,500 1,997 1,668 3,074 3,664

Net proﬁt 2,626 968 1,158 2,169 3,986

Key ratios

EBITDA margin, % 22.8 22.9 23.2 25.8 25.7

EBIT margin, % 13.4 9.9 8.4 13.8 14.9

Value per share (SEK)

Net proﬁt 5.89 2.17 2.61 4.88 9.03

Net proﬁt, after dilution 5.86 2.15 2.59 4.85 9.00

TOTAL

Equity 22,682 21,591 20,429 21,452 28,875

Total assets 39,848 39,855 49,189 46,864 42,085

Cash ﬂow from operating activities 4,578 5,813 8,679 9,690 9,966

Cash ﬂow after CAPEX 432 572 4,070 4,118 6,008

Available liquidity 8,224 9,306 12,933 9,986 13,254

Net debt 9,061 8,007 15,745 13,518 3,417

Investments in intangible and tangible assets, CAPEX 3,976 5,534 5,294 6,095 4,094

Investments in shares and other ﬁnancial assets –439 –17,235 215 1,563 1,424

Average number of employees 5,484 6,143 8,379 7,539 7,402

Key ratios

Equity/assets ratio, % 57 54 42 46 69

Debt/equity ratio, multiple 0.40 0.37 0.77 0.63 0.12

Return on equity, % 10.0 69.5 15.6 18.9 24.0

ROCE, return on capital employed, % 10.1 48.0 15.4 20.5 22.2

Average interest rate, % 5.0 5.2 6.7 6.2 7.3

Value per share (SEK)

Net proﬁt 4.96 32.77 7.34 10.69 15.67

Net proﬁt, after dilution 4.93 32.55 7.30 10.63 15.61

Equity 50.90 48.49 45.95 48.33 65.44

Cash ﬂow from operating activities 10.27 13.06 19.53 21.83 22.59

Dividend, ordinary 4.851) 4.40 7.10 6.50 6.00

Extraordinary dividend 10.001) – – 6.50 21.00

Redemption – 28.00 – – –

Market price at closing day 94.95 72.85 117.10 133.90 139.60

1) Proposed dividend.

Tele2 – Annual Report 2014 9

Administration report

Where we operate

Overview by country

Tele2’s footprint includes both emerging and mature markets,

where cultural, economic and competitive differences are signiﬁ-

cant. However, the trend towards mobility and mobile data is uni-

versal, and is clearly evident in all our countries of operation.

While mobile communication services are fairly standardized

across different countries, the level of maturity differs widely. Tele2

is present in nine countries, of which three are considered larger

markets for Tele2: Sweden, the Netherlands and Kazakhstan. These

three markets comprise 75 percent of the total net sales. Sweden is

the home turf and test bed for new products and services. The Neth-

erlands has its origin in ﬁxed communication services but is now

pursuing a unique mobile opportunity as a 4G only operator.

Kazakhstan is in many ways still virgin territory. However, during

2014 Tele2 Kazakhstan started to deliver positive EBITDA and the

customer intake is accelerating, Tele2 Kazakhstan is the main com-

petitor for other operators in the country, delivering affordable com-

munication services.

Tele2’s position and priorities vary across its footprint. Local

market characteristics differ in many ways, even within the same

country.

Looking forward, Tele2 remains conﬁdent in its strategy and ability

to monetize a great customer experience throughout its footprint.

Sweden will maintain its leadership in 4G/LTE, and the company will

take its learning from Sweden to the Baltics and of course the Nether-

lands. 2015 will be another exciting year of investments in the com-

pany’s future ‘Rockets’ of Kazakhstan, Croatia and the Netherlands,

supported by continued strength in Sweden and the Baltics.

While there are important local differences, Tele2 has established

it’s ‘How we win choices’ going into 2015, supporting the overall

objective for the Group. These areas go beyond the local context and

are common to all the regions and countries where Tele2 operates.

How we win choices

• Value Champion – Tele2 aim to be the leader within the transi-

tion from voice to data and go from a discounter to a champion of

value for our customers.

• Focused technology choices – Tele2 shall increase quality

where it matters for the customers, drive down technology costs

continuously in all areas and selectively push for new technolo-

gies and innovations.

• Step change our productivity – Tele2 is in a position of strength

and has therefore invested in a multi-year program to ﬁnd ways

to become the number one in effectiveness. This will be done by

simpliﬁcation, discipline, consolidation and transformation.

• Winning people and culture – Tele2 is and will continue to be

an organisation that is driven by our values. We are today also an

organisation with highly engaged employees, something that we

aim to leverage upon.

Objectives

• Happiest customers – Tele2 shall be the operator of choice. By

providing the best value for money we shall be the operator of

choice and grow our market share.

• Engaged employees – We shall be considered a great place to

work. By being a great place to work we shall attract and retain

the best people who can deliver on our vision and mission.

• Proﬁtable growth – We shall have the best Total Shareholder

Return (TSR). By having the happiest customers, engaged employ-

ees and work to become as effective as possible, we shall deliver

proﬁtable growth and the best TSR within our peer group.

These fundamental priorities and objectives will continue to guide

the company’s regional activities moving forward.

10 Tele2 – Annual Report 2014

Administration report

2014 in brief

Despite high level of competition, Tele2 Sweden managed to dem-

onstrate solid results in 2014, driven by strong demand for mobile

data. Mobile end-user service revenue grew by SEK 302 million and

the EBITDA contribution for mobile services was SEK 3,224 (2,971)

million in 2014, representing a growth of 9 percent compared to last

year. Total mobile net intake amounted to –51,000 (38,000) in 2014.

In the end of 2013, Tele2 announced the sale of its Swedish resi-

dential cable and ﬁber operations to Telenor for SEK 793 million.

The sale was completed on January 2, 2014, after approval by regu-

latory authorities and the capital gain in 2014 amounted to SEK 258

million.

In 2014, Tele2 Sweden prioritised four areas:

• brand repositioning Tele2.0

• upselling of data

• cost efﬁciency from operating joint-operation networks and

further roll-out of 4G network

• market share gain in the business segment

Brand repositioning Tele2.0

In November 2014, Tele2 Sweden launched its new game changing

commercial concept, Tele2.0, including changes such as no binding

periods, a one-subscription solution, trial periods for both B2C and

B2B customers as well as removed expiry date for all top-ups. This is

expected to improve customer satisfaction, and through this the long

term positioning of Tele2 Sweden’s brands. The reaction from cus-

tomers and media was very positive.

Upselling of data

2014 was characterized by a strong demand for mobile data. Within

the consumer segment the request for mobile data shifted sales

towards higher data buckets. Also, the revenue from data-top ups

increased with about 327 percent compared to 2013, proving that

the consumer behavior has shifted from voice to data services. The

demand for 4G enabled smartphones maintained during the year,

and now stands for 98 percent of total sales.

Further roll-out of 4G network

During the year, Tele2 Sweden continued the rollout of the com-

bined 2G and 4G networks in the joint operation Net4Mobililty, with

aggressive geographic coverage targets. With this rollout, Tele2

Sweden will improve the coverage in all areas of Sweden with the

aim of reaching 90 percent geographic coverage in 2016. Through

this rollout, Tele2 Sweden will cement its position as the operator

offering the best mobile 4G coverage in Sweden while further

future-prooﬁng its network.

Moreover, Tele2 Sweden continued the roll-out of both LTE 800

and LTE 1800, which will further strengthen the network in terms

of 4G capacity and coverage in order to cater for customers’ increas-

ing demand for data.

Net sales

3,000

6,000

9,000

12,000

15,000

20142013201220112010

SEK million

EBITDA & EBITDA margin

1,000

2,000

3,000

4,000

20142013201220112010

SEK million Percent

Net sales per service

Mobile SEK , million

Fixed broadband SEK  million

Fixed telephony SEK  million

Other operations SEK  million

SEK million 2014 2013 Growth

Number of customers (in thousands) 3,976 4,476 –11%

Net sales 12,629 12,453 1%

of which mobile end-user service revenue 7,252 6,950 4%

EBITDA 3,612 3,448 5%

EBIT1) 2,371 2,063

1) excluding one-off items (Note 6)

Sweden

Tele2 – Annual Report 2014 11

Administration report

Market share gain in the business segment

The business segment saw continued strong mobile revenue

growth, driven by an increased customer stock as well as continued

strong intake within cloud PBX. Only 18 months after its launch, the

PBX service was number two in the market. The latest PTS report

(Post- och Telestyrelsen – National Regulatory Authority in Sweden)

showed that Tele2 Business gained most mobile market share dur-

ing the ﬁrst half of 2014 with an increase of 1 percentage unit, lead-

ing to an estimated total mobile market share of 18 percent. Simi-

larly the Swedish Quality Index for the business market showed that

the customer satisfaction has improved substantially over the year

with Tele2 taking the number one position for broadband and the

number two position for mobile.

The company acquired signiﬁcant new and extended contracts

such as NCC, Bonnier, Åklagarmyndigheten and Kriminalvården.

Also, the segment continued to see an increased market demand for

communication as a service, driven by the new Kammarkollegiet

frame agreement for the Public sector.

Challenges to address in 2015

Tele2 Sweden will continue its dual brand strategy, positioning

Comviq as the modern mobile price ﬁghter and Tele2 as the full suite

value proposition to meet the different customer needs and follow

the Tele2.0 strategy by continuously aim to see things from the cus-

tomers’ perspective.

The company expects mobile data demand to keep growing as

customers become more and more mobile. Consequently, Tele2

Sweden will increase its focus on the upsell of data, optimizing the

network, and drive sales towards high speed data offerings, thereby

increasing customer value and lowering production cost.

Tele2 Sweden will also keep improving coverage and capacity

throughout the network and continue the roll-out of the 800 MHz

frequency complemented by 1800 MHz in order to enhance its 4G

network.

In summary, Tele2 Sweden aims to continue to deliver good

proﬁtability during 2015 through:

• Leverage increased data consumption among our customers,

mainly driven by upsell of data and transition towards larger

data buckets

• Effective use of distribution channels

• Continue to lever on efﬁciency in joint operation set-up

• Steering towards online activities and self-service

• Continued cost efﬁciency in all areas within Tele2 Sweden

operations

Continued Sweden

12 Tele2 – Annual Report 2014

Administration report

2014 in brief

In 2014 Tele2 Netherlands continued to further strengthen its abili-

ties to be able to deliver on the Group’s mission, to offer what our

customers need, for less. This by expanding and improving its

nationwide ﬁber network, rolling out its LTE-advanced 4G network

and developing products and services for both consumer and B2B

customers.

EBITDA amounted to SEK 903 (1,251) million, reﬂecting the

investment in the MNO rollout as well as maintained price pressure

in the ﬁxed broadband market.

Mobile

During the year Tele2 noted a positive customer base development.

Since the fourth quarter 2014 Tele2 only offers 4G enabled devices,

to ensure that these customers are able to beneﬁt from the new

4G-network. 2014 ended with the thirteenth consecutive quarter of

customer growth bringing the total mobile customer base to

813,000 (694,000).

Announcing commercial launch of its 4G network

In 2014 Tele2 Netherlands executed successfully on its 4G rollout

and in the end of 2014 the company announced that it would open

its 4G network for commercial services in the beginning of 2015.

This announcement marked an important milestone for the rollout,

which began when Tele2 obtained a frequency license in the

beginning of 2013.

From launch, the network will be LTE-advanced and will cover an

area stretching from Rotterdam to Amsterdam and Utrecht, covering

2,100 square kilometres. Tele2 expects to reach nationwide cover-

age in the beginning of 2016, only three years after the frequency

license was awarded.

Fixed broadband

Tele2 Netherlands has focused on improving its ﬁxed service port-

folio during 2014. This by further improving the quality of its TV

product, adding popular channels like HBO and expanding the

amount of channels that can be watched in high deﬁnition. The

upgrade of the TV product in the beginning of 2014 was combined

with a new pricing strategy titled; ‘what you need for less’, shifting

the company’s position from a price ﬁghter to a communications pro-

vider that offers a balance of great price and good quality.

As a result of this focus, Tele2 Netherlands managed to once again

grow its residential customer base after a 36 month period of

decline. On December 31, 2014, the total residential broadband base

was 369,000 (374,000).

Expansion of the business portfolio

The Dutch business sales team managed during the year to add sev-

eral new big clients to its already impressive customer list. Among

these were companies like; Royal Dutch Airlines KLM, the Dutch

Salvation Army and the Vattenfall Group.

Challenges to address in 2015

Tele2 Netherlands will continue during 2015 to expand its 4G net-

work. Throughout the year the rollout will continue to spread across

the entire country at a pace that ensures the best possible user

experience for the customers. Tele2 Netherlands is the ﬁrst provider

in the world in the process of building and launching a nationwide

4G only network.

SEK million 2014 2013 Growth1)

Number of customers (in thousands) 1,257 1,175 7%

Net sales 5,439 5,435 –5%

of which mobile end-user service revenue 1,203 944 21%

EBITDA 903 1,251 –32%

EBIT2) 237 650

1) less exchange rate ﬂuctuations

2) excluding one-off items (Note 6)

Netherlands

Net sales

2,000

4,000

6,000

8,000

20142013201220112010

SEK million

EBITDA & EBITDA margin

500

1,000

1,500

2,000

20142013201220112010

SEK million Percent

Net sales per service

Mobile SEK , million

Fixed broadband SEK , million

Fixed telephony SEK  million

Other operations SEK  million

Tele2 – Annual Report 2014 13

Administration report

Net sales

300

600

900

1,200

1,500

20142013201220112010

SEK million

EBITDA & EBITDA margin

-500

-400

-300

-200

-100

100

20142013201220112010 -150

-120

-90

-60

-30

SEK million Percent

2014 in brief

2014 was a successful year for Tele2 Kazakhstan and the company

delivered its ﬁrst positive EBITDA results since commercial launch.

Starting from January 1, 2014 the interconnect level in the country

was lowered by 15 percent leading to an improved gross margin for

Tele2 Kazakhstan. This, together with better economies of scale,

were the main reasons for improved operational results in 2014.

Most affordable telecom operator

Increased competition on the telecom market resulted in a move

from pay as you go price plans to bucket price plans. As a result,

Tele2 further increased its price leadership in the market. The new

bucket price plan offers unlimited on-net voice, limited amount of

off-net calls and large amount of data. The plan has attracted a lot of

attention and customers to Tele2.

Earlier in the year Tele2 launched an unlimited on-net tariff plan,

which also attracted new subscribers. Furthermore, the ﬁrst online

re-registration of a mobile number was launched by Tele2 Kazakh-

stan in June 2014.

The “ComNews Research” agency conducted a comparative

research on all mobile operators’ tariff plans in Kazakhstan (Febru-

ary 2013 - February 2014). The results of this research conﬁrmed

that Tele2 Kazakhstan offers the best value proposition for custom-

ers in the market and Tele2 Kazakhstan was acknowledged to be

the most affordable mobile operator in the country.

Network expansion to improve quality

During the year, Tele2 Kazakhstan continued to invest in the mobile

network to improve the quality perception in the market. Most

efforts were concentrated on expanding the geographical coverage,

increasing capacity and improving quality.

Challenges to address in 2015

The company will continue to work toward increasing customer

market share through improved customer intake quality, leading to

revenue growth and expanding EBITDA level.

The competitive environment is expected to intensify as the mar-

ket has gone from three to four mobile operators. The main chal-

lenge for Tele2 Kazakhstan will be to defend its customer base

through maintained price leadership.

SEK million 2014 2013 Growth1)

Number of customers (in thousands) 3,297 2,751 20%

Net sales 1,334 1,344 11%

of which mobile end-user service revenue 978 909 20%

EBITDA 43 –138

EBIT2) –178 –450

1) less exchange rate ﬂuctuations

2) excluding one-off items (Note 6)

Net sales per service

Mobile SEK , million

Kazakhstan

14 Tele2 – Annual Report 2014

Administration report

2014 in brief

2014 was an important milestone for Tele2 Croatia and the company

made signiﬁcant operational progress during the year. The

increased proﬁtability was delivered through a combination of solid

subscriber growth and operational cost efﬁciency. This was man-

aged despite a tough environment with declining market revenues.

Tele2’s subscriber growth came through strong campaigns and

value for money based offers. This was acknowledged by ICERTIAS

(International Certiﬁcation Association), who awarded Tele2 Croatia

the “Best Buy award 2014” for offering the best value among tele-

communications operators overall. Tele2 also launched a new data

offer within the prepaid segment, which generated great traction in

the market. Another success was the summer tourist season where

Tele2 had highly competitive offers, both for tourist SIMs and visitor

roaming.

In the end of 2014, Tele2 secured 15 MHz of additional spectrum

in the 1800 MHz band in order to continue to improve the network

quality.

Increased prices due to frequency fees

During 2014 the regulatory environment became more uncertain as

the local government unexpectedly announced the increase of radio

frequency fees in the country by three times by December 2014. As

a proactive measure Tele2 Croatia increased its prices from July 1 for

all its customers to cover the increased cost for frequencies.

Challenges to address in 2015

Tele2 Croatia will continue to have a good balance between cus-

tomer intake and improving proﬁtability. The good momentum in

postpaid residential sales is expected to continue and the company

will further develop the business customer segment.

Continuous improvement of Tele2 voice and data network quality

is an imperative, as well as the overall customer experience. How-

ever, to do so the company emphasizes the need for regulatory and

legislative stability in Croatia.

Net sales

300

600

900

1,200

1,500

20142013201220112010

SEK million

EBITDA & EBITDA margin

-100

100

200

20142013201220112010

-10

SEK million Percent

SEK million 2014 2013 Growth1)

Number of customers (in thousands) 823 793 4%

Net sales 1,390 1,397 –5%

of which mobile end-user service revenue 803 749 3%

EBITDA 169 95 71%

EBIT2) 87 –6

1) less exchange rate ﬂuctuations

2) excluding one-off items (Note 6)

Net sales per service

Mobile SEK , million

Croatia

Tele2 – Annual Report 2014 15

Administration report

2014 in brief

In 2014 the mobile market was increasingly competitive in the Lith-

uanian market. However Tele2 Lithuania managed to maintain a

stable operational performance. In the beginning of the year the

company successfully upgraded its mobile network and the upgrade

enabled Tele2 Lithuania to provide all network services including

2G, 3G and 4G. Throughout the year the company has focused on

the 4G rollout and successfully achieved the plan to cover 47 per-

cent of the population by year end 2014.

Market leading

In 2014, Tele2 Lithuania reported the highest mobile revenue among

all three operators in the country and in Q3 2014 the company’s

mobile revenue market share was at an all-time high at 40 percent.

Challenges to address in 2015

The key priority for Tele2 Lithuania in 2015 is to continue with the

LTE rollout to achieve the target to cover 90 percent of the popula-

tion by the end of the year.

The company will also continue to aggressively grow its market

share in the business segment.

Net sales

300

600

900

1,200

1,500

20142013201220112010

SEK million

EBITDA & EBITDA margin

100

200

300

400

500

600

20142013201220112010

SEK million Percent

Net sales per service

Mobile SEK , million

SEK million 2014 2013 Growth1)

Number of customers (in thousands) 1,810 1,851 –2%

Net sales 1,364 1,280 1%

of which mobile end-user service revenue 847 843 –5%

EBITDA 506 461 5%

EBIT 430 342

1) less exchange rate ﬂuctuations

Lithuania

16 Tele2 – Annual Report 2014

Administration report

2014 in brief

The mobile market was characterized by price competition, how-

ever Tele2 Latvia was able to keep a robust revenue proﬁle and sta-

ble operational development. This was achieved through successful

customer base management, upselling and data revenue growth.

Successful efforts

In the beginning of 2014, Tele2 Latvia launched several new initia-

tives in the customer service area and deployed market leading bill-

ing and customer care solutions. Furthermore, Tele2 Latvia ﬁnalized

its network swap and commercially introduced LTE technology to its

mobile broadband services, combined with a new price plan port-

folio. The company also achieved a signiﬁcant gain in reputation

and trust as a result of ongoing attention to service excellence and

performance.

During the second half of 2014, Tele2 Latvia also launched roaming

data buckets for EU countries, making it more convenient for cus-

tomers to use mobile data abroad. Also new data tariff plans for

domestic use was introduced during the year.

Challenges to address in 2015

The key focus in 2015 is the aggressive LTE rollout as the LTE 800

MHz license allows the company to deploy LTE 800 network rollout

from mid–2015. The target is to cover 90 percent of the population

by year end 2015.

Tele2 Latvia will also continue to strengthen its market position

through focus on revenue growth, customer satisfaction and inno-

vation.

Net sales

300

600

900

1,200

1,500

20142013201220112010

SEK million

EBITDA & EBITDA margin

100

150

200

250

300

350

400

20142013201220112010

SEK million Percent

SEK million 2014 2013 Growth1)

Number of customers (in thousands) 975 1,031 –5%

Net sales 907 915 –6%

of which mobile end-user service revenue 551 533 –2%

EBITDA 294 292 –4%

EBIT 187 188

1) less exchange rate ﬂuctuations

Net sales per service

Mobile SEK  million

Latvia

Tele2 – Annual Report 2014 17

Administration report

2014 in brief

2014 was characterized by high competitive pressure on the Estonia

mobile market and especially through telemarketing initiatives.

However, Tele2 Estonia has, under these circumstances, managed

to obtain a satisfactory ﬁnancial performance throughout 2014 and

achieved a record high Customer Satisfaction score.

Modernisation

In the beginning of 2014 Tele2 Estonia secured two mobile licenses

in the 800 MHz and 2100 MHz frequency bands. The company also

completed a network modernization through a network swap of old

equipment in order to provide the best voice and data service qual-

ity. The upgrade enabled Tele2 Estonia to provide all network ser-

vices including 2G, 3G and 4G to its customers.

In the second half of 2014, Tele2 Estonia introduced data centric

bundled subscriptions with unlimited voice and SMS, to stimulate

further growth of data usage.

In 2014, the EBITDA for mobile in Estonia was positively impacted

by SEK 20 million as a result of the sales of a mobile license in the

2600 MHz frequency band.

Challenges to address in 2015

The key priorities for Tele2 Estonia in 2015 is to continue with the

LTE rollout, monetize increasing data usage and focus on selling

more carrier services with the infrastructure the company has after

the acquisition of Televõrgu.

SEK million 2014 2013 Growth1)

Number of customers (in thousands) 491 507 –3%

Net sales 634 674 –11%

of which mobile end-user service revenue 382 391 –7%

EBITDA 173 161 2%

EBIT 55 55

1) less exchange rate ﬂuctuations

Estonia

Net sales

200

400

600

800

1,000

20142013201220112010

SEK million

EBITDA & EBITDA margin

100

200

300

400

20142013201220112010

SEK million Percent

Net sales per service

Mobile SEK  million

Fixed telephony SEK  million

Other operations SEK  million

18 Tele2 – Annual Report 2014

Administration report

2014 in brief

Tele2 Austria’s result were impacted by effective marketing activi-

ties, a steady performance within the business segment and a good

contribution from the wholesale data business.

During the year, Tele2 Austria had its strategic focus on growth

and innovation in the business and residential segments, building

on existing areas of operational excellence. Tele2 Austria also con-

centrated its efforts on retaining high value customers across all

segments. The level of customer satisfaction was as a result very

high.

Challenges to address in 2015

In 2015, Tele2 Austria’s growth focus will concentrate on the launch

of mobile B2B services based on an MVNO setup. With the high-

speed broadband and TV products launched in 2014, the residential

segment will continue the focus on retention and selective growth.

Net sales

500

1,000

1,500

2,000

20142013201220112010

SEK million

EBITDA & EBITDA margin

100

200

300

400

20142013201220112010

SEK million Percent

Net sales per service

Fixed broadband SEK  million

Fixed telephony SEK  million

Other operations SEK  million

SEK million 2014 2013 Growth1)

Number of customers (in thousands) 256 285 –10%

Net sales 1,209 1,244 –8%

EBITDA 231 308 –28%

EBIT 94 183

1) less exchange rate ﬂuctuations

Austria

Tele2 – Annual Report 2014 19

Administration report

2014 in brief

During 2014 Tele2 Germany saw positive effects of its transforma-

tion from a ﬁxed operator to a ﬁxed and mobile service provider.

Despite the tough competition on the market, Tele2 Germany kept its

good balance between proﬁtability and growth within the mobile

segment, supported by a solid performance in the ﬁxed and broad-

band segments.

Going mobile

The mobile segment had a steady accelerated growth during the

year. The results reﬂect partly the improved sales channels setup

during Q2 2014 and partly the transformation to a ﬁxed and mobile

provider. Within ﬁxed services both the ﬁxed telephony (CPS: Carrier

Pre-Selection and OCBC: Open Call-by-Call) and the ﬁxed broad-

band followed the general declining market trend. However the

segments generated cash contributions above plan and provided a

source for cross-sale to mobile services - both regular mobile ser-

vices and higher ARPU ﬁxed-via mobile services.

Challenges to address in 2015

In the ﬁxed business, Tele2 Germany will aim to defend its position

in CPS and OCBC and continue to maximize proﬁts from those

declining segments.

SEK million 2014 2013 Growth1)

Number of customers (in thousands) 709 713 –1%

Net sales 916 867 0%

of which mobile end-user service revenue 439 316 32%

EBITDA 131 138 –9%

EBIT 78 99

1) less exchange rate ﬂuctuations

Germany

Net sales

500

1,000

1,500

2,000

2,500

20142013201220112010

SEK million

EBITDA & EBITDA margin

100

200

300

400

500

20142013201220112010

SEK million Percent

Net sales per service

Mobile SEK  million

Fixed broadband SEK  million

Fixed telephony SEK  million

20 Tele2 – Annual Report 2014

Administration report

Acquisitions and divestments

On February 5, 2015 the Norwegian competition authorities

announced that they have approved Tele2’s divestment of its Nor-

wegian operations to TeliaSonera announced in July 2014. The Nor-

wegian operation was sold for SEK 4.8 billion and resulted in a capi-

tal gain in 2015 of SEK 1.7 billion, including costs for central support

system for the Norwegian operation and other transaction costs. The

capital gain include a positive effect of SEK 143 million related to

exchange rate differences previously reported in other comprehen-

sive income which will be recycled over the income statement but

with no effect on total equity. The divested operations have been

reported separately under discontinued operations in the income

statement, with a retrospective effect on previous periods, and as

assets held for sale in the balance sheet on December 31, 2014. Fur-

ther information can be found in Note 36.

On October 23, 2013 Tele2 announced the sale of its Swedish res-

idential cable and ﬁber operations to Telenor for SEK 793 million.

The sale was completed on January 2, 2014 after approval by regu-

latory authorities and the capital gain in 2014 amounted to SEK 258

million. Further information can be found in Note 16.

No material operations were acquired during 2014.

Events after the end of the ﬁnancial year

The sale of the Norwegian operation was completed in February

2015 after approval by regulatory authorities. Further information

can be found in Note 36. As a result of the transaction, the Board of

Tele2 has decided to recommend an extraordinary dividend pay-

ment of SEK 10.00 per ordinary A and B shares to the Annual Gen-

eral Meeting in May 2015, in addition to the proposed dividend pay-

ment of SEK 4.85 per ordinary A and B shares.

In February 2015, Tele2 delivered 26,032 B shares in own cus-

tody as a result of share rights in the incentive program LTI 2011

being exercised.

Risks and uncertainty factors

At Tele2, we believe that every risk also presents an opportunity.

Tele2 works proactively to identify and monitor the most important

risks through an enterprise risk management process for the pur-

pose of minimizing surprises, improved decision making, reduced

losses and increased reward.

Strategic risks

Risks and uncertainties which could threaten Tele2’s ability to

achieve its strategic objectives are assessed by the senior executives

as well as the Board of Directors. Summaries of some of these risks

are presented below.

Availability of frequencies and telecom licences

Tele2’s ability to retain customers may be hampered by not obtain-

ing required licences or frequencies, at all or, at a reasonable price.

Hence, Tele2 has put in place processes to ensure compliance with

licence requirements, increase changes for renewal and extension

of existing licences and for obtaining adjacent and new licences.

Tele2 also works in close contact with regulators and industry asso-

ciations to become aware of upcoming licence distributions or redis-

tributions but the outcome of such distributions is coupled with

uncertainty.

Integration of new business models

Tele2’s business environment is experiencing continuous changes

which may affect our position in the market. These include new

forms of connectivity (e.g. VoIP and SoftSIM), new market segments

(e.g. machine-to-machine) and changed customer behaviour (such

as revenue migration from voice to data). Tele2’s senior executives

closely monitors technological advances and market changes to

adapt its strategies to be able to beneﬁt from their possibilities.

Changes in regulatory legislation

Changes in legislation, regulations and decisions from authorities

for telecommunications services can have a considerable effect on

Tele2’s business operations and the competitive situation in its

operating markets. Price regulation, in the area of access and inter-

connect, have great impact on Tele2, and could also result in a risk

for disputes with other operators. Access regulation, which ensures

access to incumbents copper and ﬁbre networks, must ensure and

protect a well-balanced competition in each market. Tele2 works

actively with telecom regulators and industry associations, in order

to promote sufﬁcient regulation which supports fair competition in

its operating markets.

Data privacy

Another area where European regulation is increasing is data pri-

vacy where breaches of customer’s personal information could

potentially result in major ﬁnes and signiﬁcant reputational damage.

Tele2 works actively to be able to comply with any such require-

ment and continuously works to strengthen its procedures to ensure

that our customer’s personal data is secured and protected.

Dependency on suppliers and business partners

Tele2 is dependent on handset manufacturers such as for example

Apple and Samsung for attracting customers. Tele2 is also depen-

dent on equipment and network suppliers for rolling out networks

and be able to offer good quality access services. In Sweden and the

Netherlands, Tele2 has reached agreements with other telecom

operators to build and operate common network infrastructures. In

some other countries, Tele2 depends on agreements with other net-

work operators to provide mobile services. Any of these third party

agreements impose risks, be it in the form of delays in roll-out, limi-

tations for customised development or limitations on operating prof-

itability. Tele2 continuously evaluates existing agreements and the

form of its co-operations in dialogue with its partners.

Operation in Kazakhstan

The political, economic, regulatory and legal environment as well as

the tax system in Kazakhstan is still developing and is less predict-

able than in countries with more mature institutional structures.

This also applies to prevailing corporate governance codes, busi-

ness practices and the reporting and disclosure standards. The mar-

ket and the operations in Kazakhstan therefore represent a different

risk from those associated with investments in other countries and

can affect Tele2’s abilities to operate and develop its operation in

this market. Tele2 continuously monitors the development in this

market and has contact with relevant authorities. Tele2 also contin-

uously monitors its internal operation in Kazakhstan through inter-

nal audits and other central oversight functions.

Geopolitical risks

Depending on how the situation evolves the changed geopolitical

situation following the Crimea crisis could potentially affect some of

Tele2’s operations, particularly in the countries bordering Russia.

Tele2 – Annual Report 2014 21

Administration report

Tele2 is therefore closely monitoring the development and world

events and is kept informed by local management, government ofﬁ-

cials and independent sources.

Financial Risk Management

Through its operations, the Tele2 Group is exposed to various ﬁnan-

cial risks such as currency risk, interest risk, liquidity risk and credit

risk. Financial risk management is mainly centralized to the Group

treasury function. The aim is to control and minimize the Group’s

ﬁnancial risks as well as ﬁnancial costs, and optimize the relation

between risk and cost. Further information on ﬁnancial risk man-

agement can be found in Note 2.

Employees

On December 31, 2014, the number of employees in Tele2 was 5,387

(4,945) excluding Norway. Please refer to Note 33 and Note 34 for

additional information regarding Number of employees, split per

gender and age groups, and Personnel costs.

Tele2 is a growth-oriented organization. The aim of Tele2’s

human resources management is to prepare and grow our employ-

ees in order to meet the requirements and future needs of the busi-

ness. Tele2’s employees should be highly engaged and motivated

and experience a great sense of pride and identiﬁcation with the

corporate values of the company and its overall strategy. To attract

and retain the right people is vital to our growth strategy; being

considered a great place to work is a prioritised goal for Tele2 in the

area of people management.

Focus areas

Our main focus areas are stated below.

Leadership and Tele2 Way

Exemplary leadership behaviours are primarily based on the corpo-

rate values, the Tele2 Way. Managers are meant to be the culture

role models that lead by example and truly “walk the talk”. The

Tele2 Way, along with the Code of Conduct, provides a framework

and guides employees in their professional behaviour and decision

making every day. All managers are trained in the Tele2 Way;

which includes refreshment courses every second year.

Performance and Talent management

Tele2 has a common performance management process for the

whole Group, which provides a consistent way of setting goals and

assessing performance. It also serves as a foundation to deal with

talent management. All employees are assessed in two dimensions:

what and how, i.e. goal completion as well as professional behav-

iour based on Tele2’s corporate values, the Tele2 Way.

When it comes to managing talent, Tele2 strongly supports and

encourages internal promotions, both horizontal and vertical. A

greater emphasis has been put on diversity, the aim being that the

percentage of female managers and leaders reﬂects the percentage

of female employees within the company.

The mapping of top performers, top talents and key roles are con-

ducted every year via the Talking Talent sessions. The purpose of the

talent management process is to ensure long-term succession to man-

agerial and key roles, develop the company’s existing workforce and

minimise business risk if key position holders leave the company.

Tele2 use Tele2 People, an online tool for managing performance

and talent. The tool provides our managers and the organisation

with more accurate and reliable data and serves as base for sound

decision making.

Learning and Development

Tele2 has a common framework for learning and development

based on 70:20:10 principles. According to these principles 70 per-

cent of learning comes from experience, such as learning by doing,

job rotation, participation in cross-functional projects and challeng-

ing work tasks; 20 percent comes from learning from relationships,

such as mentoring, coaching and networking; and 10 percent comes

from ofﬁcial training programs such as academic courses, e-learn-

ing, books/periodicals and media.

Reward and Recognition

Tele2 offers competitive compensation and beneﬁt packages in

order to attract, retain and motivate employees. Tele2’s packages are

determined by the local market and Tele2 participates in local sal-

ary surveys annually to ensure that its offerings remain competitive

in terms of base salary, short-term incentives, long-term incentives

and beneﬁts. The company believes in pay for performance; high-

performing individuals should be rewarded well.

Engagement

Every year, Tele2 conducts an employee survey called ‘My Voice’.

The survey measures:

• Managers´ leadership capabilities by means of the Leadership

Index (LSI);

• Employee engagement;

• Tele2’s internal attractiveness as an employer by means of the Net

Promoter Score (NPS);

• Tele2 Way Index (TWI), assessing how well we live our corporate

values.

A total of 93 percent of all employees participated in the 2014 sur-

vey. My Voice showed that a total of 47 (43) percent of Tele2’s

employees are fully engaged with high energy and high clarity, a

result which is signiﬁcantly higher compared to 37 percent for the

benchmarked companies. One reason for such good result is that all

managers and organizational units each year identify engagement-

related goals to work with. Tele2 is very proud of its results and will

continue focusing on engagement as engaged employees perform

well, walk the extra mile and are personally motivated to make

Tele2 an even better place to work.

Employer branding

Tele2 has a common global employer branding standard which con-

sists of employer brand offer, guidance for implementation, career

web page, employer branding movie, image library as well as

LinkedIn account. The implementation of the concept is localized,

i.e. each country deﬁnes which channels and activities to use based

on local needs and requirements.

Corporate responsibility (CR)

Tele2’s strategic CR-efforts are focused on potential risks and areas

where the Group can contribute positively. Tele2’s CR strategy

deﬁnes the areas where added value can be created, the areas that

requires compliance and identiﬁes aspects that do not have material

impact for the operations. Being explicit internally and externally

about the priorities ﬁt in with being the responsible challenger.

Thereby resources are dedicated to the areas where they are best

utilized, something that works well from the Board to employees.

Tele2’s prioritized focus areas are privacy and integrity, child pro-

tection and greenhouse gases.

Issues related to privacy and integrity have continued to dominate

this years’ work. Tele2 deals with questions on data protection and

22 Tele2 – Annual Report 2014

Administration report

authorities’ requests for lawful interception in all countries of opera-

tion on a regular basis. This requires continuous monitoring of law

amendments and to conﬁrm that there are always legal basis for

interception, through for example court decisions. Situations when

local laws diverge from the principles in the company’s Code of Con-

duct need careful considerations to ensure Tele2 does not compro-

mise with integrity and judgment. One example is in April 2014,

when Tele2 Sweden ceased the storage of data in accordance with

the Swedish law on electronic communication (LEK). The company

deemed that there was no legal grounds after the law had been

invalidated by the EC Court of Justice. The Court’s judgment claimed

that the law was in conﬂict with international proclaimed human

rights. After the Swedish Post and Telecom Authority (PTS) ﬁled an

injunction against Tele2 Sweden in June, to resume storage of data

in accordance with LEK, the company complied. As an operator

Tele2 Sweden is obliged to comply with the regulatory authority’s

injunction, which is in accordance with the associated UN guiding

principles.

These issues will continue to require evaluation, analysis and

active standpoints in all countries where Tele2 operates. Tele2 is

committed to being transparent and to challenge. Since more than

two years, Tele2 has a clear process to assess requests for shut

downs of for instance networks.

Review of the Board

The CR advisory group (CRAG) is composed of Board members Mia

Brunell Livfors, Lars Berg and Carla Smits-Nusteling, who succeeded

John Shakeshaft after the annual general meeting. Participating

from Leadership team is CEO Mats Granryd, and Caroline Fellenius-

Omnell, General Counsel. In addition, Tele2’s Head of CR is part of

the group. In the four ordinary CRAG meetings during the year, the

discussions involved anti-corruption, human rights due diligences,

regulatory compliance, development of stakeholder dialogues as

well as privacy and data protection. An extra CRAG meeting also

took place, to which the entire board was invited.

CRAG works close to the board’s audit committee, chaired by

Carla Smits-Nusteling, in matters related to data and integrity. Dur-

ing the year, Tele2 conducted internal audits of compliance with the

data protection regulation in ﬁve of Tele2’s markets.

The work to integrate CR in all the company’s processes, gover-

nance and control measures has continued. Tele2’s long-term

objective is for the CR dimension to be taken into account in all deci-

sions, this is a priority and Tele2 deems the progress as positive.

The responsible challenger

In 2013, Tele2 arranged Sweden’s ﬁrst CR Capital Market Day. Dur-

ing late spring in 2014, a number of stakeholders participated in

dialogue on highly relevant subjects with managers, Board mem-

bers as well as members of Tele2’s Leadership team, at the Tele2

premises in Kista, Sweden. Themes included how the machine-to-

machine (M2M/IoT) technique contribute to climate beneﬁts, hand-

ling of requests for lawful interception, child protection measures,

anti-corruption and Tele2’s Code of Conduct for Business Partners.

Tele2 has a zero-tolerance stance against corruption and has

internal control measures to detect deviations. An intense focus on

anti-corruption combined with effective control routines have

shown positive results, with rare corruption incidents. During the

year, one of Tele2’s largest shareholders, Nordea, visited the opera-

tions in Almaty, Kazakhstan, among other things to observe the

anti-corruption work on site. Tele2 values engaged investors and

stakeholders, and site visits are an important measure of transpar-

ency in Tele2’s CR work. Additional visits to the operations for inves-

tors are planned during ﬁrst half of 2015.

No picnic, just hard work

It is Tele2’s responsibility to always be up to date within relevant CR

matters. During 2014, Tele2’s Code of Conduct has been amended to

include the Grandfather principle and the Four eyes principle to fur-

ther limit the risk of for example conﬂicts of interest in contract

agreements.

In April 2014, Tele2 received top ranking for the work with child

protection in a study conducted by Boston Consulting Group on

behalf of Global Child Forum. In a population of one thousand com-

panies, Tele2 was among the fourteen to receive full score in the

assessment. This is a welcomed testimony on Tele2’s work. The

Tele2 Group continues to comply with the objectives on blocking

Child Sexual Abuse Images (CSAI) for customers and employees, and

works systematically to detect such material internally.

Telecom operators have a relatively limited direct environmental

impact. Tele2 can however be an enabler of environmental gains for

customers through, among other things, machine-to-machine. This

is a growth area that has received several new partnerships and

customers during the year. One of the environmental beneﬁts with

M2M/IoT is that customers can automate, standardize and install

their procedures and systems remotely which reduce energy con-

sumption and physical travel.

Compliance with tax law is another area highlighted by NGO’s

and investors during the year. Tele2 comply with local tax laws and

the OECD’s Guidelines for Multinational Enterprises, as well as

Tele2’s Code of Conduct.

Do you want to challenge us?

GRI G4 Indicators, presented in Note 38, are the ones assessed to be

most relevant for Tele2’s stakeholders and are based on reporting

from each reporting entity. The reported G4 Indicators are Diversity

& equal opportunities, Environmental regulations, Corruption, Anti-

competitive behaviour, anti-trust & monopoly practices, Laws &

regulations, Products & services health & safety impacts, Marketing

communication, advertising & sponsorship, Customer privacy &

losses of customer data and Use of products & services. For addi-

tional information please refer to Note 38.

Tele2 will continue to include CR results and key performance

indicators in the annual report as the information, criteria and reli-

ability is evolving and maturing to par with ﬁnancial data and infor-

mation. For additional reporting and information about Tele2’s CR

work, see the corporate website for the 2014 GRI-index, in accor-

dance with G4 from Global Reporting Initiative.

Work of the board of directors

The Board of Directors is appointed by the Annual General Meeting

for terms extending until the next Annual General Meeting. At the

Annual General Meeting in May 2014, Irina Hemmers and Lorenzo

Grabau were appointed as new Board members, John Hepburn and

John Shakeshaft left the Board, while the other Board members

were re-elected. In addition, Mike Parton was re-elected as Chair-

man of the Board of Directors.

The Board is responsible for the company’s organization and

management, and is composed in such a way as to enable it to effec-

tively support and manage the work of the company’s senior execu-

tives. The Board makes decisions on overall strategies, organiza-

tional matters, acquisitions, divestments, corporate transactions,

major investments, and establishes the framework of Tele2’s opera-

tions by deﬁning the company’s ﬁnancial goals and guidelines. In

2014, the Board convened 6 times at different locations in Europe. In

addition, 8 per capsulam meetings and 13 telephone conference

meetings were held.

Tele2 – Annual Report 2014 23

Administration report

In order to carry out its work more effectively, the Board has

appointed members for a Remuneration Committee and an Audit

Committee with special tasks. These committees are the Board’s

preparatory bodies and do not reduce the Board’s overall and joint

responsibility for the handling of the company and the decisions

made. Furthermore, where needed, the Board appoints members to

form preparatory working groups on topics of special interest, such

as questions regarding dividends and capital structure and the

Corporate Responsibility Advisory Group for questions regarding

corporate responsibility related risks and opportunities.

The Remuneration Committee’s main work includes presenting

recommendations to the Board regarding remuneration and terms of

employment for CEO and other senior executives. The recommenda-

tions, including recommendations for long-term incentive pro-

grammes are submitted by the Board to the AGM for adoption.

The Audit Committee has the primary task of assisting the Board

in its supervision and review of the internal and external audit pro-

cesses, and reviewing and ensuring the quality of the company’s

external ﬁnancial reporting. Furthermore, the Audit Committee

supervises the internal control functions of the company.

Additional information is stated in Tele2’s separate Corporate

Governance Report available on Tele2’s website www.tele2.com.

Remuneration to the Board is stated in Note 34.

Proposal of remuneration guidelines

for senior executives

The Board proposes the following guidelines for determining remu-

neration for senior executives for 2015, to be approved by the

Annual General Meeting in May 2015.

The objectives of Tele2’s remuneration guidelines are to offer

competitive remuneration packages to attract, motivate, and retain

key employees within the context of an international peer group.

The aim is to create incentives for the management to execute stra-

tegic plans and deliver excellent operating results, and to align

management’s incentives with the interests of the shareholders.

Senior executives covered by the proposed guidelines include the

CEO and members of the Leadership Team (“senior executives”). At

present, Tele2 has ten senior executives.

Remuneration to the senior executives should comprise annual

base salary, and variable short-term incentive (STI) and long-term

incentive (LTI) programs. The STI shall be based on the performance

in relation to established objectives. The objectives shall be related

to the company’s overall result and the senior executives’ individual

performance. The STI can amount to a maximum of 100 percent of

the annual base salary.

Over time, it is the intention of the Board to increase the propor-

tion of variable performance-based compensation as a component

of the senior executives’ total compensation.

The Board is continually considering the need of imposing restric-

tions in the STI program regarding making payments, or a propor-

tion thereof, of such variable compensation conditional on whether

the performance on which it was based has proved to be sustain-

able over time, and/or allowing the company to reclaim components

of such variable compensation that have been paid on the basis of

information which later proves to be manifestly misstated.

Other beneﬁts may include e.g. company cars and for expatriated

senior executives e.g. housing beneﬁts for a limited period of time.

The senior executives may also be offered health care insurances.

The senior executives are offered deﬁned contribution pension

plans. Pension premiums for the CEO can amount to a maximum of

25 percent of the annual salary (base salary and STI). For the other

senior executives pension premiums can amount to a maximum of

20 percent of the annual salary (base salary and STI).

The maximum period of notice of termination of employment shall

be 12 months in the event of termination by the CEO and six months

in the event of termination by any of the other senior executives. In

the event of termination by the company, the maximum notice

period during which compensation is payable is 18 months for the

CEO and 12 months for any of the other senior executives.

Under special circumstances, the Board may deviate from the

above guidelines. In such a case, the Board is obligated to give

account of the reason for the deviation during the following Annual

General Meeting.

Board Members, elected at General Meetings, may in certain

cases receive a fee for services performed within their respective

areas of expertise, outside of their Board duties. Compensation for

these services shall be paid at market terms and be approved by the

Board of Directors.

There are no deviations during 2014 compared with the remuner-

ation guidelines for senior executives approved by the Annual

General Meeting in May 2013 and May 2014.

The guidelines for 2014 as proposed by the Board and approved

by the Annual General Meeting in May 2014 are stated in Note 34

Personnel costs.

Parent company

Tele2 AB’s shares are listed on the NASDAQ Stockholm Large Cap list

under the ticker symbols TEL2 A and TEL2 B. Tele2’s ﬁfteen largest

shareholders on December 31, 2014 hold shares corresponding to

53 percent of the capital and 64 percent of the voting rights, of

which Investment AB Kinnevik owns 30 percent of the capital and

48 percent of the voting rights. No other shareholder owns, directly

or indirectly, more than 10 percent of the shares in Tele2.

The Board of Directors received authorization from the Annual

General Meeting in May 2014 to purchase up to 10 percent of the

shares in the company, which the Board has not made use of.

For further information on the number of shares and their condi-

tions and important agreements which cease to apply if control over

the company is changed, see Note 25 Equity, numbers of shares and

earnings per share.

The parent company performs Group functions and conducts cer-

tain Group wide development projects. In 2014, the parent company

paid to its shareholders an ordinary dividend of SEK 4.40 per share

for 2013 corresponded to a total of SEK 1,960 million.

Proposed appropriation of proﬁt

The Board propose that, from the SEK 12,076,636,623 at the dis-

posal of the Annual General Meeting, an ordinary dividend of SEK

4.85 per share and an extraordinary dividend of SEK 10.00 per

share should be paid to shareholders, corresponding on December

31, 2014 to SEK 2,161,756,419 and SEK 4,457,229,730 respectively,

resulting in a total dividend of SEK 6,618,986,149, and that the

remaining amount, SEK 5,457,650,474, should be carried forward.

Based on this annual report, the consolidated ﬁnancial statements

and other information which has become known, the Board has

considered all aspects of the parent company’s and the Group’s

ﬁnancial position. This evaluation has led the Board to the conclu-

sion that the dividend is justiﬁable in view of the requirements that

the nature and scope of and risks involved in Tele2’s operations have

on the size of the company’s and the Group’s equity as well as on its

consolidation needs, liquidity and ﬁnancial position in general.

24 Tele2 – Annual Report 2014

Administration report

Consolidated income statement

SEK million Note 2014 2013

CONTINUING OPERATIONS

Net sales 4, 5 25,955 25,757

Cost of services sold 6 –15,054 –15,441

Gross proﬁt 10,901 10,316

Selling expenses 6 –5,298 –5,541

Administrative expenses 6 –2,518 –2,321

Result from shares in joint ventures and associated companies 7 –14 –17

Other operating income 8 647 206

Other operating expenses 9 –228 –95

Operating proﬁt 4, 6 3,490 2,548

Interest income 10 18 49

Interest costs 11 –396 –417

Other ﬁnancial items 12 388 –183

Proﬁt after ﬁnancial items 3,500 1,997

Income tax 13 –874 –1,029

NET PROFIT FROM CONTINUING OPERATIONS 2,626 968

DISCONTINUED OPERATIONS

Net proﬁt/loss from discontinued operations 36 –415 13,622

NET PROFIT 42,211 14,590

ATTRIBUTABLE TO

Equity holders of the parent company 2,211 14,590

Earnings per share, SEK 25 4.96 32.77

Earnings per share, after dilution, SEK 25 4.93 32.55

FROM CONTINUING OPERATIONS

ATTRIBUTABLE TO

Equity holders of the parent company 2,626 968

Earnings per share, SEK 5.89 2.17

Earnings per share, after dilution, SEK 5.86 2.15

Tele2 – Annual Report 2014 25

Financial statements

Consolidated comprehensive income

SEK million Note 2014 2013

NET PROFIT 2,211 14,590

OTHER COMPREHENSIVE INCOME

COMPONENTS NOT TO BE RECLASSIFIED TO NET PROFIT

Pensions, actuarial gains/losses 34 –82 203

Pensions, actuarial gains/losses, tax effect 13 18 –45

Total components not to be reclassiﬁed to net proﬁt –64 158

COMPONENTS THAT MAY BE RECLASSIFIED TO NET PROFIT

Exchange rate differences

Translation differences in foreign operations 1,137 272

Tax effect on above 13 –179 –20

Reversed cumulative translation differences from divested companies 16 –3 1,719

Translation differences 955 1,971

Hedge of net investments in foreign operations 4 –6

Tax effect on above 13 –1 2

Reversed cumulative hedge from divested companies 16 – –3

Hedge of net investments 3 –7

Total exchange rate differences 958 1,964

Cash ﬂow hedges

Gain/loss arising on changes in fair value of hedging instruments 2, 9 –172 33

Reclassiﬁed cumulative loss to income statement 2 61 49

Tax effect on cash ﬂow hedges 13 25 –18

Total cash ﬂow hedges –86 64

Total components that may be reclassiﬁed to net proﬁt 872 2,028

TOTAL OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF TAX 808 2,186

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 3,019 16,776

ATTRIBUTABLE TO

Equity holders of the parent company 3,019 16,776

26 Tele2 – Annual Report 2014

Financial statements

SEK million Note Dec 31, 2014 Dec 31, 2013

ASSETS

NONCURRENT ASSETS

Intangible assets

Goodwill 14 9,503 9,537

Other intangible assets 14 4,913 5,183

Total intangible assets 14,416 14,720

Tangible assets

Machinery and technical plant 15 8,442 9,079

Other tangible assets 15 2,696 2,668

Total tangible assets 11,138 11,747

Financial assets

Shares in joint ventures and associated companies 17 13 28

Other ﬁnancial assets 18 518 337

Total ﬁnancial assets 531 365

Deferred tax assets 13 2,062 2,753

TOTAL NONCURRENT ASSETS 28,147 29,585

CURRENT ASSETS

Inventories 19 500 471

Current receivables

Accounts receivable 20 2,480 3,317

Current tax receivables 25 127

Other current receivables 21 422 321

Prepaid expenses and accrued income 22 4,252 4,183

Total current receivables 7,179 7,948

Current investments 23 38 55

Cash and cash equivalents 24, 32 151 1,348

TOTAL CURRENT ASSETS 7,868 9,822

ASSETS CLASSIFIED AS HELD FOR SALE 16, 36 3,833 448

TOTAL ASSETS 439,848 39,855

Consolidated balance sheet

Tele2 – Annual Report 2014 27

Financial statements

SEK million Note Dec 31, 2014 Dec 31, 2013

EQUITY AND LIABILITIES

EQUITY

Attributable to equity holders of the parent company

Share capital 25 561 561

Other paid-in capital 4,985 4,985

Reserves 1,413 541

Retained earnings 15,721 15,502

Total attributable to equity holders of the parent company 22,680 21,589

Non-controlling interest 25 2 2

TOTAL EQUITY 22,682 21,591

NONCURRENT LIABILITIES

Interest-bearing

Liabilities to ﬁnancial institutions and similar liabilities 26 4,263 5,302

Provisions 27 760 584

Other interest-bearing liabilities 26 330 396

Total interest-bearing liabilities 5,353 6,282

Non-interest-bearing

Deferred tax liability 13 358 441

Total non-interest-bearing liabilities 358 441

TOTAL NONCURRENT LIABILITIES 5,711 6,723

CURRENT LIABILITIES

Interest-bearing

Liabilities to ﬁnancial institutions and similar liabilities 26 2,495 1,535

Provisions 27 47 95

Other interest-bearing liabilities 26 1,295 1,518

Total interest-bearing liabilities 3,837 3,148

Non-interest-bearing

Accounts payable 26 2,848 3,140

Current tax liabilities 291 80

Other current liabilities 26 467 516

Accrued expenses and deferred income 28 3,263 4,604

Total non-interest-bearing liabilities 6,869 8,340

TOTAL CURRENT LIABILITIES 10,706 11, 4 88

LIABILITIES DIRECTLY ASSOCIATED WITH ASSETS

CLASSIFIED AS HELD FOR SALE 16, 36 749 53

TOTAL EQUITY AND LIABILITIES 439,848 39,855

Continued Consolidated balance sheet

28 Tele2 – Annual Report 2014

Financial statements

SEK million Note 2014 2013

OPERATING ACTIVITIES

Cash ﬂow from operations before changes in working capital

Operating proﬁt from continuing operations 3,490 2,548

Operating proﬁt from discontinued operations –388 13,791

Operating proﬁt 3,102 16,339

Adjustments for non-cash items in operating proﬁt

Depreciation and amortization 6 3,097 3,545

Impairment 6 25 536

Result from shares in joint ventures and associated companies 7 15 17

Gain/loss on sale of ﬁxed assets and operations 8-9 –257 –13,253

Incentive program 29 14

Interest received 26 55

Interest paid –306 –429

Finance items paid 34 –82

Dividend received – 1

Taxes paid 13 –327 –479

Cash ﬂow from operations before changes in working capital 32 5,438 6,264

Changes in working capital

Materials and supplies 19 –22 –17

Operating assets 261 152

Operating liabilities –1,099 –586

Changes in working capital 32 –860 –451

CASH FLOW FROM OPERATING ACTIVITIES 4,578 5,813

INVESTING ACTIVITIES

Acquisition of intangible assets 32 –726 –2,195

Sale of intangible assets 32 24 7

Acquisition of tangible assets 32 –3,476 –3,142

Sale of tangible assets 32 32 89

Acquisition of shares in group companies 16 6 –

Sale of shares in group companies 16 677 17,252

Acquisition of shares in associated companies 16 –4 –

Capital contribution to/repayment from associated companies 16 –5 –25

Dividend from associated companies 16 – 1

Other ﬁnancial assets, lending –255 –

Other ﬁnancial assets, received payments 20 7

Cash ﬂow from investing activities –3,707 11,994

CASH FLOW AFTER INVESTING ACTIVITIES 871 17,807

FINANCING ACTIVITIES

Proceeds from credit institutions and similar liabilities 26 1,365 755

Repayment of loans from credit institutions and similar liabilities 26 –1,542 –3,165

Repayment of other interest-bearing lending 26 –23 –23

Dividends 25 –1,960 –3,163

Redemption of shares 25 – –12,474

Purchase of non-controlling interests 25 – –94

Cash ﬂow from ﬁnancing activities –2,160 –18,164

NET CHANGE IN CASH AND CASH EQUIVALENTS –1,289 –357

Cash and cash equivalents at beginning of the year 24 1,348 1,673

Exchange rate differences in cash and cash equivalents 24 92 32

CASH AND CASH EQUIVALENTS AT END OF THE YEAR 24, 32 151 1,348

For cash ﬂow from discontinued operations, please refer to Note 36.

For additional cash ﬂow information, please refer to Note 32.

Consolidated cash ﬂow statement

(total operations)

Tele2 – Annual Report 2014 29

Financial statements

Change in consolidated equity

Attributable to equity holders of the parent company

SEK million Note Share

capital

Other

paid-in

capital

Hedge

reserve

Translation

reserve

Retained

earnings Total

Non-

controlling

interests Total equity

Equity at January 1, 2013 561 4,980 –414 –1,073 16,372 20,426 3 20,429

Net proﬁt – – – – 14,590 14,590 – 14,590

Other comprehensive income for the year, net of tax – – 57 1,971 158 2,186 – 2,186

Total comprehensive income for the year – – 57 1,971 14,748 16,776 – 16,776

OTHER CHANGES IN EQUITY

Share-based payments 34 – – – – 14 14 – 14

Share-based payments, tax effect 34 – – – – 10 10 – 10

Sale of own shares 25 – 5 – – –5 – – –

Dividends 25 – – – – –3,163 –3,163 – –3,163

Redemption of shares 25 –280 – – – –12,194 –12,474 – –12,474

Bonus issue 25 280 – – – –280 – – –

Purchase of non-controlling interests 16 – – – – – – –1 –1

EQUITY AT DECEMBER 31, 2013 561 4,985 –357 898 15,502 21,589 2 21,591

Equity at January 1, 2014 561 4,985 –357 898 15,502 21,589 2 21,591

Net proﬁt – – – – 2,211 2,211 – 2,211

Other comprehensive income for the year, net of tax – – –83 955 –64 808 – 808

Total comprehensive income for the year – – –83 955 2,147 3,019 – 3,019

OTHER CHANGES IN EQUITY

Share-based payments 34 – – – – 29 29 – 29

Share-based payments, tax effect 34 – – – – 3 3 – 3

Dividends 25 – – – – –1,960 –1,960 – –1,960

EQUITY AT DECEMBER 31, 2014 561 4,985 –440 1,853 15,721 22,680 2 22,682

30 Tele2 – Annual Report 2014

Financial statements

Notes to the consolidated

ﬁnancial statements

NOTE 1 ACCOUNTING PRINCIPLES

AND OTHER INFORMATION

The consolidated ﬁnancial statements are prepared in accordance with

International Financial Reporting Standards (IFRS) and interpretations

of the International Financial Reporting Interpretations Committee (IFRIC)

as endorsed by the EU at the date of publication of this annual report.

The Group also applies the Swedish Financial Reporting Board recom-

mendation RFR 1 Supplementary Accounting Rules for groups which

speciﬁes additional disclosures required under the Swedish Annual

Accounts Act.

The ﬁnancial reports are prepared on the basis of historical cost, apart

from ﬁnancial instruments which are normally carried at amortized cost,

with the exception of other non-current securities and derivatives which

are carried at fair value.

Change in accounting principles

From 2014 the new standards, amendments and interpretations presented

below are applied.

New and amended IFRS standards and IFRIC interpretations

The new and amended IFRS standards and IFRIC interpretations (IFRS

10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS

12 Disclosures of Interests in Other Entities, IAS 27 Separate Financial

Statements, IAS 28 Investments in Associates and Joint Ventures, IAS 32

Offsetting Financial Assets and Financial Liabilities, IAS 36 Recoverable

Amount Disclosures for Non-Financial Assets and IAS 39 Novation of

Derivatives and Continuation of Hedge Accounting ), which became effec-

tive January 1, 2014, have had no material effect on the consolidated

ﬁnancial statements.

Already in 2013 Tele2 chose to in advance apply the amended IAS 36.

The introduction of IFRS 10 resulted in the deﬁnition of controlling

interest was changed, which had no effect for Tele2.

IFRS 11 covers the accounting for joint arrangements. The joint arrange-

ments that Tele2, under the previously effective standard, reported as

joint ventures according to the proportionate method are viewed as joint

operations according to the new standard. The introduction of IFRS 11

has therefore not had any material effects on the consolidated ﬁnancial

statements.

New regulations

The following new and revised standards have been issued by the Inter-

national Accounting Standards Board (IASB) and endorsed by the EU:

• Amendments to IAS 19 Deﬁned Beneﬁt Plans: Employee Contribu-

tions and Improvements to IFRSs 2010-2012 and 2011-2013 (effec-

tive for annual periods beginning on or after July 1, 2014) and

• IFRIC 21 Levies (effective for annual periods beginning on or after

June 17, 2014).

IASB has also issued, which have not yet been endorsed by the EU:

• IFRS 14 Regulatory Deferral Accounts (effective for annual periods

beginning on or after January 1, 2016),

• Amendments to: IFRS 10 and IAS 28 Sale or Contribution of Assets

between an Investor and its Associate or Joint Venture, IFRS 10,

IFRS12 and IAS 28 Investment Entities: Applying the Consolidation

Exception, IFRS 11 Accounting for Acquisitions of Interests in Joint

Operations, IAS 1 Disclosure Intiative, IAS 16 and IAS 38 Clariﬁca-

tion of Acceptable Methods of Depreciation and Amortisation, IAS 16

and IAS 41 Bearer Plants, IAS 27 Equity Method in Separate

Financial Statements and Improvements to IFRSs 2012-2014 (effec-

tive for annual periods beginning on or after January 1, 2016),

• IFRS 15 Revenue from Contracts with Customers (effective for annual

periods beginning on or after January 1, 2017) and

• IFRS 9 Financial Instruments (effective for annual periods begin-

ning on January 1, 2018).

IFRS 15 replaces all previously published standards and interpretations

concerning revenue recognition and provides detailed guidance for

example for bundled offers and expenses directly associated with signing

a customer contract as well as additional disclosures. Tele2’s current

preliminary opinion is that the existing accounting principles concerning

revenue recognition of bundled offers related to the allocation between

equipment and services is in line with IFRS 15. The model that Tele2

applies today may need to be somewhat adjusted to completely fulﬁl the

requirements in the new standard. Expenses directly associated with

the signing of customer contracts may include retailer sales provisions

and subsidies of equipment given to retailers for speciﬁc contracts. These

initial expenses shall be activated and amortized over the contract length

if they are recoverable. If the contract period is less than one year the

expenses may be recognized as cost when incurred. Today these initial

expenses are recognized as cost in the period in which they occur. The

effects to the ﬁnancial statements will be further analysed and presented

before the new standard becomes effective.

The other new and revised standards are estimated to have no material

effect for Tele2.

Consolidation

Subsidiaries

The consolidated accounts include the parent company and companies

in which the parent company directly or indirectly holds more than 50

percent of the voting rights or in any other way has control. Control is

achieved when Tele2 is exposed, or has rights, to variable returns from

its involvement with an entity and has the ability to affect those returns

through its power over the entity.

The consolidated accounts are prepared in accordance with the acqui-

sition method. This means that consolidated equity only includes the

subsidiary’s equity that has arisen after the acquisition and the consoli-

dated income statements only include earnings from the date of acquisi-

tion until the date of divestment, if the subsidiary is sold. The Group’s

acquisition value of the shares in subsidiaries consists of the total of the

fair value at the time of the acquisition of what was paid in cash, incurred

liabilities to former owners or emitted shares, the value of the non-

controlling interests in the acquired subsidiary and the fair value of the

previously owned share. Contingent consideration is included in the

acquisition value and is reported at its fair value at the time of the acquisi-

tion. Subsequent effects from the revaluation of contingent consideration

are reported in the income statement. Acquired identiﬁable assets and

assumed liabilities are reported initially at their fair value at the time of

the acquisition. Exemptions from this principle are made for acquired

tax assets/liabilities, employee beneﬁts, share-based payment awards

and assets held for sale which are measured according to the principles

described below for each item. Exemptions are also made for indemnity

assets and reacquired rights. Indemnity rights are valued according to

the same principle as the indemniﬁed item. Reacquired rights are valued

based on the remaining contractual period even if other market partici-

pants would consider the possibilities for contract renewal when doing

the valuation. Reported goodwill is measured as the difference between

on the one hand the total purchase price for the shares in the subsidiary,

Tele2 – Annual Report 2014 31

Notes

the value of the non-controlling interests in the acquired subsidiary and

the fair value of the previously owned share and on the other hand the

Group’s reported value of acquired assets and assumed liabilities. Acqui-

sition related costs (transaction costs) are recognized as expenses in the

period in which they arise.

Non-controlling interest is reported at the time of the acquisition either

at its fair value or at its proportional share of the Group’s reported value

of the acquired subsidiary’s identiﬁed assets and liabilities. The choice

of valuation method is made for each business combination. Subsequent

proﬁt or loss and other comprehensive income that are related to the

non-controlling interests are allocated to the non-controlling interest

even if it leads to a negative value for the non-controlling interest.

The acquisition of a non-controlling interest is accounted for as a trans-

action between the equity holders of the parent company and the non-

controlling interest. The difference between paid purchase price and

the proportional share of the acquired net assets is reported in equity.

Thus no goodwill arises in connection with such transactions.

When the Group loses control of a subsidiary, a gain or loss is calculated

as the difference between:

• the aggregate of the fair value of the consideration received and the

fair value of any retained interests and

• the previous carrying amount of the assets (including goodwill), and

liabilities and any non-controlling interests

Any gain or loss is recognised in proﬁt or loss. All amounts previously

recognised in other comprehensive income in relation to that subsidiary

are reclassiﬁed to proﬁt or loss.

Joint arrangements

Joint arrangements are arrangements of which two or more parties have

a joint control. Joint arrangements are classiﬁed either as joint operation

or joint venture. For joint operations Tele2 reports its part of assets, liabili-

ties, revenues and expenses and its share of joint assets, liabilities, rev-

enues and expenses line by line in the consolidated ﬁnancial statements.

Sales and other transactions with joint operations are eliminated in the

consolidated ﬁnancial statements. For Tele2 joint operations consists of

jointly owned companies. Joint ventures are arrangements where Tele2

has right to the net assets and are accounted for under the equity method.

This means that the Group’s carrying amount of the shares in the joint

venture corresponds to the Group’s share of equity as well as any residual

value of consolidated surplus values after application of the Group’s

accounting principles. The Group’s share of the joint venture’s proﬁt or

loss after tax is reported under “Operating proﬁt”, along with depreciation

of the acquired surplus value.

At the acquisition of a share in a joint arrangement a purchase price

allocation is prepared at the acquisition date. The acquisition date is the

date when the Group becomes a part to and jointly shares the control of

the joint arrangement. The starting-point for the purchase price alloca-

tion consists of the acquisition value of the share in the joint arrangement.

The acquisition value is allocated on the Group’s share of the acquisition

date fair values of acquired assets and assumed liabilities including

related deferred taxes and any goodwill.

Associated companies

Associated companies are companies in which Tele2 has a voting power

of between 20 percent and 50 percent or has signiﬁcant inﬂuence in

some other way.

Associated companies are accounted for in accordance with the equity

method. This means that the Group’s carrying amount of the shares in

the company corresponds to the Group’s share of equity as well as any

residual value of consolidated surplus values after application of the

Group’s accounting principles. The share of the company’s proﬁt or loss

after tax is reported under “Operating proﬁt”, along with depreciation of

the acquired surplus value.

Foreign currency

The accounts of all foreign group companies, joint arrangements and

associated companies are prepared in the currency used in the primary

economic environment of each company, i.e. the functional currency

which is normally the local currency.

The assets and liabilities of foreign group companies, joint arrange-

ments and associated companies are translated into Tele2’s reporting

currency (SEK) at the closing exchange rates, while revenues and

expenses are translated at the period’s average exchange rates. Exchange

rate differences arising from translation are reported in other compre-

hensive income. When foreign group companies, joint arrangements and

associated companies are divested, the accumulated exchange rate dif-

ference attributable to the sold operation is recognized in the income

statement.

Goodwill and adjustments at fair value that are made in connection

with the acquisition of a foreign operation are treated as assets and liabili-

ties in the functional currency of the acquired operation.

Discontinued operations

A discontinued operation is a component of the Group which either has

been disposed of or is classiﬁed as held for sale, and represents a separate

line of business or geographical area of operation. A discontinued opera-

tion is reported separately from continuing operations, and comparable

information for prior periods is re-presented.

Assets classiﬁed as held for sale and associated liabilities are presented

separately on the face of the balance sheet. Prior periods are not affected.

Assets classiﬁed as held for sale are valued at the lower of carrying value

and fair value less costs to sell (Note 36).

Revenue recognition

Net sales include customer related revenue from services within mobile

and ﬁxed telephony, broadband and cable TV, such as connection charges,

subscription charges, call charges, data and information services and

other services. Net sales also include interconnect revenue from other

operators and income from the sale of products such as mobile phones

and modems. Revenues are reported at fair value which usually is the

selling value, less discounts and VAT.

Connection charges are recognized at the time of the sale to the extent

that they cover the connection costs. Any excess is deferred and amortized

over the estimated contract period. Subscription charges for mobile and

ﬁxed telephony services, cable TV, ADSL, dial-up internet, leased capacity

and internet connection for direct access customers are recognized in

the period covered by the charge. Call charges and interconnect revenue

are recognized in the period during which the service is provided. Rev-

enue from the sale of products is recognized at the time the product is

supplied to the customer. Revenue from the sale of cash cards is recog-

nized based on the actual use of the card or at the expiry date.

Revenue from data and information services such as text messages and

ring tones is recognized when the service is provided. When Tele2 acts

as an agent for another supplier, the revenue is reported net, i.e. only the

part of the revenue that is allocated to Tele2 is reported as revenue.

Revenue recognition for agreements containing

multiple deliverables

For customer agreements containing multiple deliverables or parts, rev-

enue is allocated to each part, based on its relative fair value to the total

contracted revenue. Services invoiced based on usage are not included

in the allocation. Revenues for each part are recognized in the period

the component is delivered to the customer. If functionally important

parts have not been delivered and the fair value of any of these is not

available, revenue recognition is postponed until all important parts

have been delivered and the fair value of non-delivered parts has been

determined.

Continued Note 1

32 Tele2 – Annual Report 2014

Notes

Operating expenses

Operating expenses are classiﬁed according to function, as described

below. Depreciation and amortization and personnel costs are stated by

function. Total costs for depreciation and amortization are presented in

Note 6 and total personnel costs are presented in Note 34.

Cost of services sold

Cost of services sold consists of costs for renting networks and capacity,

interconnect charges as well as costs for equipment sold (e.g. hand-sets)

to the extent the costs are covered by recognized revenues. The cost of

services sold also includes the part of the cost for personnel, premises,

purchased services and depreciation and amortization of non-current

assets attributable to the production of sold services.

Selling expenses

Selling expenses include costs for the internal sales organization, pur

chased services, personnel costs, rental costs, bad debt losses as well as

depreciation and amortization of non-current assets attributable to sales

activities. Advertising and other marketing activities as well as costs for

discounts and subsidies for equipment sold are also included and are

expensed as incurred.

Administrative expenses

Administrative expenses consist of the part of the personnel costs, rental

costs, purchased services as well as depreciation and amortization of

non-current assets attributable to the other joint functions. Costs associ-

ated with the Board of Directors, executive management and corporate

functions are included in administrative expenses.

Other operating income and other operating expenses

Other operating income and other operating expenses include secondary

activities, exchange rate differences in operating activities and gain/loss

on the sale of tangible and intangible assets.

Employee beneﬁts

The average number of employees (Note 33) as well as salaries and

remuneration (Note 34) in companies acquired during each year are

reported in relation to how long the company has been part of the Tele2

Group.

Share-based payments

Tele2 grants share-based instruments to certain employees.

Share-based payments are mainly settled with the company’s own

shares. The costs for share-based payments are based on the fair value

of the share rights calculated by an independent party at the date of

grant. These payments are reported as employee costs during the vesting

period with a corresponding increase in equity. To the extent the vesting

conditions in the program are linked to market conditions (TSR) and

non-vesting conditions (investment in Tele2 shares), these factors are

taken into consideration when determining the fair value of the share

rights. Performance conditions (return on capital employed) and service

conditions (being employed) are affecting the employee cost during the

vesting period by the change in the number of shares that are expected

to ﬁnally vest.

Tele2 records a liability for social security expenses, at each reporting

period, for all outstanding share-based payments. The liability for social

security expenses is calculated according to UFR 7 IFRS 2 and social

security contributions for listed enterprises. The liability is revalued at

the end of each reporting period and is based on the share-based pay-

ment’s fair value at the end of the reporting date distributed over the

vesting period.

Post-employment beneﬁts

The Group has a number of pension schemes. The main part of Tele2’s

pension plans consist of deﬁned-contribution plans (Note 34) for which

the Group makes payments to public and private pension institutions.

Fees with regard to deﬁned-contribution pension plans are reported as

an expense during the period in which the employees perform the ser-

vices to which the contribution relates. The deﬁned-contribution plans

ensure a certain predeﬁned payment of premiums and negative changes

in the value of investments are not compensated by Tele2. Therefore

Tele2 does not bear the risk at the time of pension payment. Only a small

part of the Group’s pension commitments relate to deﬁned beneﬁt plans.

The net present value of the obligation for these are calculated separately

for each deﬁned beneﬁt plan on the basis of assumptions of the future

beneﬁts earned during previous and currents periods. The obligation is

reported in the balance sheet as the net present value of the obligation

less the fair value of any plan assets.

The cost for the deﬁned-beneﬁt plans are calculated by application of

the so called Projected Unit Credit Method, which means that the cost is

distributed over to the employee’s period of service. The calculation is

performed annually by an independent actuary. The obligation is valued

at the net present value of the expected future payments, taking into

account assumptions such as expected future increases in salaries, inﬂa-

tion, health expenses and life span. Expected future payments are dis-

counted with an interest rate that is effective on the closing day for ﬁrst

class commercial bonds or government bonds considering the estimated

remaining tenor for each obligation. Actuarial gains and losses are

reported in other comprehensive income.

Termination beneﬁts

A cost for termination beneﬁts is recognized only if the Group is commit-

ted by a formal plan to prematurely terminate an employee’s employment

without any possibility of withdrawing the commitment.

Income tax

Income taxes consist of current and deferred tax. Income tax is reported

in the income statement except when the underlying transaction is

reported in other comprehensive income or in equity. In those cases the

related tax effect is also reported in other comprehensive income or in

equity.

Current tax is tax that is to be paid or received in respect of the taxable

proﬁt (tax loss) for the year including any adjustment of current tax related

to previous periods and tax on dividends from subsidiaries.

When accounting for deferred taxes, the balance sheet method is

applied. The method implies that deferred tax liabilities and assets are

recognized for all temporary differences between the carrying amount

of an asset or liability and its tax base, as well as other tax-related deduc-

tions or deﬁcits. The following temporary differences are not considered:

temporary difference that arises at the initial recognition of goodwill

and the initial recognition of assets and liabilities that are not part of a

business combination and at the time of the transaction affect neither

accounting nor taxable proﬁt/loss. An item which alters the time when

an item is taxable or deductible is considered a temporary difference.

Deferred tax liabilities and assets are measured at the tax rates that are

expected to apply to the period when the asset is realized or the liability

settled, based on the tax rates (and tax laws) that have been enacted or

substantially enacted by the end of the reporting period.

The recognition of deferred tax assets takes into account tax loss carry-

forwards and temporary differences where it is probable that losses and

temporary differences will be utilized against future taxable proﬁts. In

cases where a company reports losses, an assessment is made of whether

there is any convincing evidence that there will be sufﬁcient future

proﬁts.

Valuation and accounting of deferred taxes in connection with business

combinations is made as part of the measurement of assets and liabilities

at the time of acquisition. In these circumstances, the deferred tax assets

are assessed at a value corresponding to what the Group expects to utilize.

Deferred income tax liabilities are recognized on temporary differences

related to subsidiaries, joint arrangements and associates, except when

the timing of the reversal of the temporary difference is controlled by the

Group and it is probable that the temporary difference will not reverse

in the foreseeable future.

Continued Note 1

Tele2 – Annual Report 2014 33

Notes

If a deferred tax liability exists and unvalued tax loss carry-forwards

exist, a deferred tax asset is reported to the extent it can be netted against

the deferred tax liability.

Current and deferred tax assets and liabilities are netted only among

group companies within the same tax jurisdiction. This form of reporting

is only applied when Tele2 intends to offset tax assets and liabilities.

Non-Current Assets

Intangible assets (Note 14) and tangible assets (Note 15) with a ﬁnite

useful life are reported at acquisition value with deductions for accumu-

lated depreciation and amortization. Depreciation and amortization are

based on the acquisition value of the assets less estimated residual value

at the end of the useful life and are recognized on a straight-line basis

throughout the asset’s estimated useful life. Useful lives and residual

values are subject to annual assessments. Useful lives for ﬁxed assets

are presented below.

Intangible assets

Licences, utilization rights and software 2–25 years

Customer agreements 3–5 years

Trademarks 4–5 years

Tangible assets

Buildings 5–15 years

Modems 1.5–3 years

Machinery and technical plant 2–30 years

Equipment and installations 2–10 years

At the end of each reporting period an assessment is made of whether

there is any indication of impairment of any of the Group’s assets over

and above the depreciation according to plans. If there is any indication

that a non-current asset has declined in value, a calculation of its recov-

erable amount is made.

The recoverable amount is the higher of the asset’s value in use and

its fair value less costs to sell, which is the value that is obtainable from

the sale of the asset to an independent party less costs of disposal. The

value in use consists of the present value of all cash ﬂows from the asset

during the utilization period as well as the addition of the present value

of the fair value less costs to sell at the end of the utilization period. If the

estimated recoverable amount is less than the carrying amount, the asset

is written down to its recoverable amount.

Impairments are reported in the income statement. Impairments that

have been recorded are reversed if changes are made in the assumptions

that led to the original impairment. The impairment reversal is limited

to the carrying amount, net of depreciation according to plan, had the

original impairment not occurred. A reversal of impairment is reported

in the income statement. Impairment of goodwill is not reversed.

Intangible assets

Tele2 holds a number of licences entitling it to conduct telephony opera-

tions. The expenses related to the acquisition of these licences are rec-

ognized as an asset and amortized on a straight-line basis through the

duration of the licence agreements.

Goodwill is measured as the difference between on the one hand the

total purchase price for the shares in the subsidiary alternatively the

acquired assets and liabilities, the value of the non-controlling interest

in the acquired subsidiary and the fair value of the previously owned

share, and on the other hand the Group’s reported value of acquired

assets and assumed liabilities less any write-downs.

Goodwill is allocated to the cash generating units that are expected to

obtain beneﬁts as a result of the acquisition and is, along with the intan-

gible assets with indeﬁnite lives and intangible assets that are not yet

ready to use, subject to annual impairment testing even if there is no

indication of a decline in value. Impairment testing of goodwill is at the

lowest level at which goodwill is monitored for internal management

purposes and for which there are separately identiﬁable cash ﬂows (cash

generating units). The recoverable value of the respective cash generating

unit is based on the higher of estimated value in use and fair value less

costs to sell. The most important factors that have inﬂuenced this year’s

impairment testing are presented in Note 14.

In the case of reorganization or divestment involving a change in the

composition of cash generating units to which goodwill has been allo-

cated, the goodwill is allocated to the relevant units. The allocation is

based on the relative value of the part of the cash generating unit to

which the reorganization or divestment relates, and the part that remains

after the reorganization or the divestment.

Customer agreements are valued at fair value in conjunction with busi-

ness combinations. Tele2 applies a model where the average historical

customer acquisition cost or, alternatively, the present value of expected

future cash ﬂows, is applied to value customer agreements.

Tele2 capitalizes direct development expenses for software which are

speciﬁc to its operations if the recognition criteria are fulﬁlled. These

expenses are amortized over the utilization period, which begins when

the asset is ready for use. Expenses relating to the planning phase of the

projects as well as expenses of maintenance and training are expensed

as incurred. Other expenses relating to development work are expensed

as they arise, since they do not meet the criteria for being reported as an

asset. Tele2 doesn’t conduct own research activities.

Tangible assets

Buildings relate to assets intended for use in operations. The acquisition

value includes the direct costs attributable to the building.

Machinery and technical plant include equipment and machinery

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

tion value includes the direct costs attributable to the construction and

installation of networks.

Additional costs for extension and value-increasing improvements are

reported as an asset, while additional costs for repairs and maintenance

are expensed during the period in which they arise.

Equipment and installations comprise assets used in administration,

sales and operations.

Costs for modems that are rented to or used for free by customers are

capitalized.

Borrowing costs

Borrowing costs which are directly attributable to the acquisition, con-

struction or production of an asset which requires considerable time to

complete for its intended use are included in the acquisition value of the

asset. Other borrowing costs are expensed in the period in which they

arise.

Leases

Leases are classiﬁed as ﬁnance or operating leases.

Tele2 as ﬁnance lessee

A lease is classiﬁed as a ﬁnance lease if it transfers substantially all the

economic risks and rewards of ownership of an asset to the lessee. When

reporting a ﬁnancial lease in the consolidated accounts, the leased object

is recognized as a tangible asset at the lower of its fair value and the

present value of the minimum lease payments, and a corresponding

amount is recognized as a lease obligation under ﬁnancial liabilities

(Note 15, Note 26 and Note 31). The asset is depreciated on a straight-line

basis over the shorter of the lease term and its useful life, with the esti-

mated residual value deducted at the end of the utilization period. Lease

payments are apportioned between interest and repayment of the out-

standing liability.

Tele2 as operating lessee

A lease is classiﬁed as an operating lease if substantially all the economic

risks and rewards of ownership of an asset remain with the leasing

company. Payments are expensed in the income statement on a straight-

line basis over the leasing period.

Tele2 as operating lessor

Rental revenues from operating leases are recognized on a straight-line

basis over the term of the relevant lease. The leased asset is kept on the

balance sheet and depreciated over its estimated useful life.

Continued Note 1

34 Tele2 – Annual Report 2014

Notes

Dismantling costs

When there is a legal or constructive obligation to a third party, the

estimated cost of dismantling and removing the asset and restoring the

site/area is included in the acquisition value. Any change to the estimated

cost of dismantling and removing an asset and restoring the site is added

to or subtracted from the carrying amount of the particular asset.

Inventories

Inventories of materials and supplies are valued in accordance with the

ﬁrst-in, ﬁrst-out principle at the lower of acquisition value and net realiz-

able value. Tele2’s inventories essentially consist of telephones, SIM

cards and modems held for sale.

Financial assets and liabilities

Financial assets recognized in the balance sheet include other ﬁnancial

assets, accounts receivable, other current receivables, current invest-

ments and cash and cash equivalents. Financial liabilities recognized

in the balance sheet include liabilities to credit institutions and similar

liabilities, other interest-bearing liabilities, accounts payable and other

current liabilities.

Acquisitions and sales of ﬁnancial assets are reported on the trade

date, which is the date that the Group has an undertaking to acquire or

sell the asset. Financial liabilities are recognized in the balance sheet

when Tele2 becomes a party to the contractual provisions of the

instrument.

A ﬁnancial asset is derecognized when the rights to receive beneﬁts

have been realized, expired or the company loses control over the asset.

The same applies to components of a ﬁnancial asset. A ﬁnancial liability

is derecognized when the contractual obligation is discharged or extin-

guished in some other way. The same applies to components of a ﬁnancial

liability.

Financial instruments are initially recognized at the acquisition date

fair value and subsequently to either fair value or amortized cost based

on the initial categorization. The categorization reﬂects the purpose of

the holding and is determined on initial recognition.

Measurement of the fair value of ﬁnancial instruments

Various measurement methods are used to estimate the fair value of

ﬁnancial instruments not traded on an active market. When determining

the fair value of interest swaps and currency derivatives ofﬁcial market

listings are used as input in calculations of discounted cash ﬂows. The

fair value of loan liabilities is measured using generally accepted methods,

such as discounting expected future cash ﬂows at prevailing interest

rates.

Calculation of amortized cost of ﬁnancial instruments

Amortized cost is calculated by using the effective interest method, which

means that any premiums or discounts and directly attributable costs or

income are recognized on an accrual basis over the life of the contract

using the calculated effective interest rate. The effective interest rate is

the rate which gives the instrument’s cost of acquisition as a result when

discounting the future cash ﬂows.

Offsetting ﬁnancial assets and liabilities

Financial assets and liabilities are offset and the net amount is presented

in the balance sheet when a legal right of set-off exists and the Group

intends to settle on a net basis or to realize the asset and settle the liability

simultaneously.

Financial assets

Tele2’s other non-current securities mainly consist of holdings of unlisted

shares, and these are classiﬁed as “Assets at fair value through proﬁt or

loss”. Assets in this category are initially reported at acquisition value,

i.e. fair value at the time of acquisition, and valued thereafter on a con-

tinuous basis at fair value. Transaction costs are recognized in the income

statement. The fair value change is reported in the income statement

among other ﬁnancial items. If Tele2 has not been able to determine a

reliable fair value, the securities are valued at cost.

Tele2’s accounts receivables and other receivables are categorized as

“Loans and receivables” initially reported at fair value and subsequently

at amortized cost, which corresponds to their nominal amounts as the

duration is short. On each closing day, an impairment assessment of these

assets is made based on the time each individual accounts receivable

has been overdue. Any impairment loss is reported as an operating

expense.

Cash and cash equivalents are categorized as “Loans and receivables”

initially reported at fair value and subsequently at amortized cost. Cash

and cash equivalents consist of cash and bank balances as well as cur-

rent investments with a maturity of less than three months from the time

of acquisition.

Restricted cash and cash equivalents are reported as current invest-

ments if they may be released within 12 months and as non-current

ﬁnancial assets if they are to be restricted for more than 12 months.

Financial liabilities

Financial liabilities are categorized as “Financial liabilities valued at

amortized cost”. These are initially measured at fair value and then at

amortized cost using the effective interest method. Direct costs related

to the origination of loans are included in the acquisition value. For

accounts payables and other ﬁnancial debts, with a short maturity, the

subsequent valuation is done at the nominal amount.

Derivatives and hedge accounting

Exchange rate ﬂuctuations on loans in foreign currency and changes in

value of other ﬁnancial instruments (currency derivatives) that meet the

hedge accounting requirements of net investment in foreign operations

are reported on a continuous basis in other comprehensive income. The

ineffective portion of the exchange rate ﬂuctuation and the change in

value are reported in the income statement under other ﬁnancial items.

When divesting foreign operations, the previously recognized accumu-

lated exchange rate difference attributable to the divested operation is

recycled to the income statement.

Cash ﬂow hedges are reported in the same way as hedges of net invest-

ments in foreign operations. This means that the effective portion of the

gain or loss on an interest swap which meets the criteria for cash-ﬂow

hedge accounting is recognized in other comprehensive income and the

ineffective portion is recognized in proﬁt or loss within ﬁnancial items.

When cash ﬂows relating to the hedged item are reported in proﬁt or loss,

amounts are transferred from equity to offset them. For more information

regarding cash ﬂow hedges, please refer to Note 2 and Note 26.

When a hedging instrument related to future cash ﬂows is due, sold,

divested or settled or the Group discontinues the hedge relation before

the hedged transaction has occurred and the forecasted transaction is

still expected to occur, the accumulated reported gain or loss remains in

the hedge reserve in equity and is reported in the income statement

when the transaction occurs. If the hedged transaction is no longer

expected to occur, the hedging instrument’s accumulated gain or loss is

immediately reported in the income statement.

Other derivatives are measured at their fair value through proﬁt or loss.

Receivables and liabilities in foreign currency

Receivables and liabilities of the Group denominated in foreign currencies

are translated into Swedish kronor by applying the period-end rates.

Gains or losses on foreign exchanges relating to regular operations are

included in the income statement under Other operating income/

expenses. Gains or losses on foreign exchanges in ﬁnancial assets and

liabilities are reported within proﬁt/loss from ﬁnancial items.

When 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 foreign operations, the

exchange rate changes of these intra-group balances are reported in

Other comprehensive income.

A summary of the exchange rate differences reported in other compre-

hensive income is presented in the statement of comprehensive income

Continued Note 1

Tele2 – Annual Report 2014 35

Notes

and the differences which affected proﬁt or loss for the year are presented

in Note 3.

Equity

Equity consists of registered share capital, other paid-in capital, hedge

reserve, translation reserve, retained earnings, proﬁt/loss for the year

and non-controlling interests.

Other paid-in capital relates to share premiums from the issues of new

shares. Additional direct costs attributable to the issue of new shares

are reported directly against equity as a reduction, net after taxes, of

proceeds from the share issue.

The hedge reserve includes translation differences on external loans

in foreign currencies and changes in values of ﬁnancial instruments

(currency derivatives) which are used to hedge net investments in foreign

operations and the effective portion of gains or losses on interest swaps

used to hedge future interest payments.

Translation reserve includes translation differences attributable to the

translation of foreign operations into Tele2’s reporting currency as well

as translation differences on intra-group balances which are considered

an expansion/reduction of the parent company’s net investment in foreign

operations.

Non-controlling interests represent the value of minority shares in

subsidiaries included in the consolidated accounts. The reporting and

valuation of non-controlling interests are presented in the section regard-

ing consolidation above.

Number of shares and earnings per share

Earnings per share before dilution are calculated by dividing the proﬁt

or loss of the year attributable to the parent company’s owners by the

weighted average number of outstanding shares during the period. To

calculate earnings per share after dilution the weighted average numbers

of outstanding shares are adjusted for the dilutive effect of the total

potential number of shares consisting of share based instruments settled

with shares. The shared based instruments have a dilutive effect if the

exercise price plus the fair value of future services is below the quoted

price and the dilutive effect increases when the size of this difference

increases (Note 25).

Provisions

Provisions are reported when a company within the Group has a legal

or constructive obligation as a result of past events, and it is probable

that payments, which can be reliably estimated, will be required in order

to settle the obligation.

Provisions are measured at the present value of the expenditures

expected to be required to settle the obligation using a pre-tax rate that

reﬂects current market assessments of the time value of money and the

risks speciﬁc to the obligation. The increase in the provision due to pas

sage of time is recognized as interest expense.

Contingent liabilities

A contingent liability exists if there is a possible obligation related to a

past event and whose existence is conﬁrmed only by one or several

uncertain future events, and when there is an obligation that is not

reported as a liability or a provision because it is not probable that an

outﬂow of resources will be required, or the amount of the obligation

cannot be calculated with sufﬁcient reliability. Disclosure is presented

unless the probability of an outﬂow of resources is remote.

Segment reporting

Segment

Since the risks in Tele2’s operations are mainly linked to the various

markets in which the company operates, Tele2 follows up and analyses

its business on country level. Hence each country represents Tele2’s

operating segments apart from the segment Other. The segment reporting

is in line with the internal reporting to the chief operating decision maker,

which is Tele2’s “Leadership Team” (LT).

The segment Other mainly includes the parent company Tele2 AB,

central functions and Procure IT Right, and other minor operations.

Tele2 Sweden is split into core operations and central group functions.

Core operations is reported in the segment Sweden and central functions

are included in the segment Other. The core operations of Tele2 Sweden

comprise the commercial activities within Sweden, including the com-

munications services of mobile, ﬁxed telephony, ﬁxed broadband, and

domestic carrier business. The central functions of Tele2 Sweden com-

prise the activities which provide services for the beneﬁt of Tele2 AB’s

shareholders, other group companies (including the core operations of

Sweden), and to divested operations. These services are provided for

example from group-wide departments such as group ﬁnance, legal,

product development, sales & marketing, billing, information technology,

international network, and international carrier.

Assets in each segment include all operating assets that are utilized

by the segment and consist mainly of intangible and tangible assets,

shares in associated companies, inventories, accounts receivable, other

receivables, prepaid expenses and accrued revenues. Goodwill is dis-

tributed among the Group’s cash generating units, identiﬁed in accor-

dance with Note 14.

Liabilities in each segment include all operating liabilities that are

utilized by the segment and consist mainly of accounts payable, other

non-interest-bearing liabilities, accrued expenses and deferred income.

Assets and liabilities not allocated to segments include current and

deferred taxes and items of a ﬁnancial nature.

Segment information is presented in Note 4.

The same accounting principles are applied to the segments and the

Group.

Internal pricing

The sales of services in the Tele2 Group are made on market terms.

Group-wide costs are invoiced to operations that have used the

services.

Services

Services that are offered within the segments are mobile telephony, ﬁxed

broadband and ﬁxed telephony.

The mobile service comprises various types of subscriptions for resi-

dential and business customers as well as prepaid cards. Mobile also

includes mobile broadband, ﬁxed telephony via mobile network (FVM),

machine-to-machine communication (M2M) and mobile carrier. Tele2

either owns the networks or rents them from other operators a set-up

called MVNO.

Fixed broadband includes direct access & LLUB, i.e. our own services

based on access via copper cable, and other forms of access, such as ﬁbre

networks, wireless broadband and metropolitan area networks. Fixed

broadband also includes resold broadband. The product portfolio within

direct access & LLUB includes telephony services (including IP telephony),

internet access services (including Tele2’s own ADSL and ﬁbre) and TV

services.

Fixed telephony includes resold products within ﬁxed telephony. The

product portfolio within resold ﬁxed telephony consists of preﬁx tele-

phony, pre-selection (dial the number without a prefix) and

subscriptions.

Other operations mainly include carrier operations and wholesale.

Choice of accounting principles

When choosing and applying Tele2’s accounting principles, the Board

and the President have made the following choices:

Choice of accounting principle for put options

Put options issued or received by Tele2 in connection with business

combinations, where the put options give the minority owner a right to

sell its shares or part of its shares to Tele2, are initially, at the acquisition

date, recognized as a non-controlling interest. The non-controlling inter-

est is then immediately reclassiﬁed as a ﬁnancial liability. The ﬁnancial

liability is subsequently recognized at its fair value at each reporting

date, with the fair value changes reported within ﬁnancial items in proﬁt

or loss.

Continued Note 1

36 Tele2 – Annual Report 2014

Notes

An alternative method, not chosen by Tele2, would be to initially report

both a non-controlling interest and a ﬁnancial liability with opposite

booking of the liability directly to equity and the following changes in

the liability’s fair value reported in proﬁt or loss. Another alternative is

to report on a current basis a non-controlling interest which is reclassi-

ﬁed as a ﬁnancial liability at each reporting period. The difference

between the reclassiﬁed non-controlling interest and the fair value of

the ﬁnancial liability would be reported as a change of the non-control-

ling interest within equity.

Customer acquisition costs

Customer acquisition costs are normally expensed in proﬁt or loss.

When companies and operations are acquired, customer agreements

and customer contacts acquired as part of the acquisition are fair valued

and capitalized as intangible assets.

Goodwill – choice of level for goodwill impairment testing

Goodwill arising from business combinations is allocated to the cash-

generating units which are expected to receive future economic beneﬁts,

in the form of synergies, for example, from the acquired operation. Ifsepa-

rate cash-generating units cannot be identiﬁed, goodwill is allocated to

the lowest level at which the operation and its assets are monitored for

internal management purposes, which is the operating segment.

Estimates and judgments

As part of preparing the consolidated ﬁnancial statements management

is required to make certain estimates and judgments. The estimates and

judgments are based on historical experience and a number of other

assumptions aimed at providing a decision regarding the value of the

assets or liabilities which cannot be determined in any other way. The

actual outcome may vary from these estimates and judgments.

The most crucial assessments and estimates used in preparing the

Group’s ﬁnancial reports are as follows:

Joint arrangements

Tele2 is in Sweden part of two joint arrangements concerning mobile

networks that are classiﬁed as joint operations, Svenska UMTS-nät AB

(together with TeliaSonera) and Net4Mobility HB (together with Telenor).

Tele2 has chosen to classify these two joint arrangements as joint opera-

tions as Tele2 is considered through agreements between the parties to

have the rights to the assets and obligations for the liabilities as well as

corresponding revenues and expenses related to each arrangement. As

basis for the classiﬁcation additional decisive factors are that the parties

in each arrangement have the rights to substantially all of the economic

beneﬁts from the assets in each operation and the jointly owned com-

panies are dependent on its owners for settling its liabilities on a continu-

ous basis.

Revenue recognition

Revenue recognition in Tele2 requires management to make judgments

and estimates in a number of cases, mainly to determine fair values and

the period in which the revenue should be recognized. Many agreements

bundle products and services into one customer offering which for

accounting purposes require allocating revenue to each part based on

its relative fair value using accounting estimates. Determining whether

revenues should be recognized immediately or be deferred require man-

agement to make judgments as to when the services and equipment have

been provided, the fair value of each part as well as estimates regarding

the remaining contract period. Please refer to Note 22 concerning accrued

revenues.

Valuation of acquired intangible assets

When acquiring businesses, intangible assets are measured at fair value.

If there is an active market for the acquired assets, the fair value is mea-

sured based on the prices on this market. Since there are often no active

markets for these assets, valuation models have been developed to esti-

mate the fair value. Examples of valuation models are discounted cash

ﬂows models and estimates of Tele2’s historical costs of acquiring equiva-

lent assets. Please refer to Note 16 for acquisitions during the year.

Valuation of goodwill

When estimating the recoverable amount of cash generating units for

goodwill impairment purposes the Group makes assumptions regarding

future events and key parameters. The assumptions made and sensitivity

analyses are disclosed in Note 14. These kinds of assessments include

some uncertainty. Should the actual outcome for a speciﬁc period differ

from the expected outcome, the expected future cash ﬂows may need to

be reconsidered, which could lead to a write-down.

Valuation of non-current assets with a ﬁnite useful life

If the recoverable amount falls below the book value, an impairment loss

is recognized. At each balance sheet date, a number of factors are ana-

lysed in order to assess whether there is any indication of impairment.

If such indication exists, an impairment test is prepared based on man-

agement’s estimate of future cash ﬂows including the applied discount

rate. Please refer to Note 14 and Note 15.

Useful lives of non-current assets

When determining the useful life of groups of assets, historical experi-

ence and assumptions about future technical development are taken into

account. Depreciation rates are based on the acquisition value of the

non-current assets and the estimated utilization period less the estimated

residual value at the end of the utilization period. If technology develops

faster than expected or competition, regulatory or market conditions

develop differently than expected, the company’s evaluation of utilization

periods and residual values will be inﬂuenced.

Valuation of deferred income tax receivables

Recognition of deferred income tax takes into consideration temporary

differences and unutilized loss carry-forwards. Deferred tax assets are

reported for deductible temporary differences and loss carry-forwards

only to the extent that it is considered probable that they can be utilized

to offset future taxable proﬁts. Management updates its assessments at

regular intervals. The valuation of deferred tax assets is based on expec-

tations of future results and market conditions, which are naturally sub-

jective. The actual outcome may differ from the assessments, partly as a

result of future changes in business circumstances, which were not

known at the time of the assessments, changes in tax laws or interpreta-

tions or the result of the taxation authorities’ or courts’ ﬁnal examination

of submitted tax returns. See further Note 13.

Provisions for disputes and damages

Tele2 is party to a number of disputes. For each separate dispute an

assessment of the most likely outcome is made, and reported in the

ﬁnancial statements accordingly, see Note 27 and Note 30.

Valuation of accounts receivable

Accounts receivables are valued on a current basis and reported at amor-

tized cost. Reserves for doubtful accounts are based on various assump-

tions as well as historical experience, see Note 20.

Other information

Tele2 AB (publ) is a limited company, with its registered ofﬁce in Stock-

holm, Sweden. The company’s registered ofﬁce (phone +46 8 5620 0060)

is at Skeppsbron 18, Box 2094, 103 13 Stockholm, Sweden. The annual

report was approved by the Board of Directors on March 17, 2015. The

balance sheet and income statement are subject to adoption by the Annual

General Meeting on May 19, 2015.

Continued Note 1

Tele2 – Annual Report 2014 37

Notes

million, derivatives to SEK –2 (19) million and ﬁnancial assets and liabili-

ties at fair value through proﬁt/loss to SEK 422 (–166) million.

The Group has derivative contracts which are covered by master netting

agreements. That means a right exists to set off assets and liabilities with

the same party, which is not reﬂected in the accounting where gross

accounting is applied. The value of reported derivatives at December 31,

2014 amounted on the asset side to SEK 47 (8) million and on the liabilities

side to SEK 294 (146) million of which SEK 28 (-) million can be netted

against the asset side.

Through its operations, the Group is exposed to various ﬁnancial risks

such as currency risk, interest risk, liquidity risk and credit risk. Financial

risk management is mainly centralized to the Group treasury function.

The aim is to control and minimize the Group’s ﬁnancial risks as well as

ﬁnancial costs, and optimize the relation between risk and cost.

Capital structure management

The Tele2 Group’s view on capital structure management incorporates

several inputs, of which the main items are listed below.

• Tele2 will adopt a progressive ordinary dividend policy which aims

to deliver 10 percent growth per annum in the coming 3 years.

Authorization to pay extraordinary dividends will be sought when

the company has excess capital. Pursuant to the approval received

at the 2014 AGM, Tele2 has the authorization to repurchase up to 10

percent of its share capital.

• Tele2 believes the ﬁnancial leverage should be in line with both the

industry and the markets in which it operates and reﬂect the status

of its operations, future strategic opportunities and obligations. This

would imply a target net debt to EBITDA ratio of 1.5-2.0 times (ear-

lier 1.25-1.75 times) over the medium term.

• On a continuous basis, Tele2 will diversify its ﬁnancing both in

terms of duration and funding sources. A stable ﬁnancial position is

important in order to minimize reﬁnancing risk.

The Board of Directors reviews the capital structure annually and as needed.

Net debt amounted to SEK 9,061 (8,007) million on December 31, 2014,

or 1.51 (1.34) times EBITDA. Tele2’s available liquidity amounted to SEK

8,224 (9,306) million. For additional information please refer to Note 26.

Currency risk

Currency risk is the risk of changes in exchange rates having a negative

impact on the Group’s result and equity. Currency exposure is associated

with payment ﬂows in foreign currency (transaction exposure) and the

translation of foreign subsidiaries’ balance sheets and income statements

to SEK (translation exposure).

The Group does not generally hedge transaction exposure. When con-

sidered appropriate, the translation exposure related to some investments

in foreign operations is hedged by issuing debt or entering into derivative

transactions in the currencies involved. In the hedge reserve in equity the

total amount related to net investment hedges amounts to SEK –255 (–258)

million. During the year SEK - (3) million related to divested companies were

reclassiﬁed to proﬁt/loss. Outstanding currency swaps designated for net

investment hedging amounted to EUR 270 (270) million and NOK 2,440 (-)

million of which NOK 640 (-) million is used to swap external loans to NOK

and NOK 1,800 (-) million is used to hedge the net investment in NOK. The

reported fair value on the currency swaps amounted to SEK –51 (–2) million

and SEK 42 (-) million respectively. Outstanding currency swaps designated

to swap loans in NOK to EUR, amounted to NOK - (939) million and reported

fair value to SEK - (–9) million.

After taking into account currency swaps, the borrowings in SEK mil-

lion are carried in the following currencies (equivalent SEK amounts):

Dec 31, 2014 Dec 31, 2013

SEK1, 2) 1,129 3,154

EUR1) 3,493 3,210

NOK2) 2,103 378

USD 33 84

LVL – 11

Total loans 6,758 6,837

1) Including adjustment for currency swaps designated to swap loans in SEK to EUR of

SEK2,569 (2,415)

2) Including adjustment for currency swaps designated to swap loans in SEK to NOK of

SEK673million (p y NOK to SEK of SEK –993 million)

NOTE 2 FINANCIAL RISK MANAGEMENT

AND FINANCIAL INSTRUMENTS

Tele2’s ﬁnancial assets consist mainly of receivables from end customers,

other operators and resellers and cash and cash equivalents. Tele2’s

ﬁnancial liabilities consist mainly of loans, bonds and accounts payables.

Classiﬁcation of ﬁnancial assets and liabilities including their fair value

is presented below.

Dec 31, 2014

Assets and

liabilities

at fair value

through

proﬁt/loss

Loans and

receivables

Derivative

instruments

designated

for hedge

accounting

Financial

liabilities

amortized

cost

Total

reported

value

Fair

value

Other ﬁnancial assets 81) 465 – – 473 473

Accounts receivables – 2,480 – – 2,480 2,480

Other current receivables – 375 473) – 422 422

Current investments – 38 – – 38 38

Cash and cash equivalents – 151 – – 151 151

Assets classiﬁed as held for sale 1 337 338 338

Total ﬁnancial assets 9 3,846 47 – 3,902 3,902

Liabilities to ﬁnancial institu-

tions and similar liabilities – – – 6,758 6,758 7,0853)

Other interest-bearing liabilities 8872) – 2943) 444 1,625 1,5533)

Accounts payable – – – 2,848 2,848 2,848

Other current liabilities – – – 467 467 467

Liabilities directly associated

with assets classiﬁed as held for

sale – – – 249 249 249

Total ﬁnancial liabilities 887 – 294 10,766 11,947 12,202

Dec 31, 2013

Assets and

liabilities

at fair value

through

proﬁt/loss

Loans and

receivables

Derivative

instruments

designated

for hedge

accounting

Financial

liabilities

amortized

cost

Total

reported

value

Fair

value

Other ﬁnancial assets 141) 233 – – 247 247

Accounts receivables – 3,317 – – 3,317 3,317

Other current receivables – 313 83) – 321 321

Current investments – 55 – – 55 55

Cash and cash equivalents – 1,348 – – 1,348 1,348

Total ﬁnancial assets 14 5,266 8 – 5,288 5,288

Liabilities to ﬁnancial institu-

tions and similar liabilities – – – 6,837 6,837 7,0213)

Other interest-bearing liabilities 1,3502) – 1463) 418 1,914 1,8893)

Accounts payable – – – 3,140 3,140 3,140

Other current liabilities – – – 516 516 516

Total ﬁnancial liabilities 1,350 – 146 10,911 12,407 12,566

For the determination of fair values on ﬁnancial assets and liabilities the

following levels and inputs have been used:

Level 3: measured at fair value through proﬁt/loss, which on initial

recognition were designated for this type of measurement. Discounted

future cash ﬂow models are used to estimate the fair value.

Level 3: put option Tele2 Kazakhstan. Fair value determined on the

basis of future discounted cash ﬂows to determine the exercise price

on the put option owned by the minority owner in Tele2 Kazakhstan.

The valuation is based on the same assumptions that been used for the

impairment test of goodwill, please refer to Note 14 and Note 26.

Level 2: observable market data have been used as input to determine

the fair value of interest- and foreign exchange rate derivatives, loans

with ﬁxed interest rate and other non-current non-interest bearing

liabilities valued at fair value at initial recognition with subsequent

measurement at amortized cost.

Since accounts receivables, accounts payables and other current liabilities

are short-term, discounting of cash ﬂows does not cause any material

differences to their carrying amount.

During the period no reclassiﬁcation of ﬁnancial instruments between

the different categories has been made.

Net gains/losses on ﬁnancial instruments amounted to SEK 426 (–211)

million, of which loan and trade receivables amounted to SEK 6 (–64)

38 Tele2 – Annual Report 2014

Notes

In 2014, 49 (49) percent of net sales is related to SEK and 35 (32) percent

to EUR. For other currencies please refer to Note 3. During the year, Tele2’s

results were foremost affected by ﬂuctuations in EUR and devaluation in

Kazakhstan of KZT.

The Group’s total net assets on December 31, 2014 of SEK 22,682 (21,591)

million were distributed by currency in SEK million as follows (including

loan and currency derivatives designated for hedge accounting):

Dec 31, 2014 Dec 31, 2013

SEK 7,025 6,913

EUR1) 10,854 7,866

NOK2) 984 2,394

KZT 1,742 1,102

HRK 557 409

LTL 1,579 1,321

LVL – 1,703

USD –59 –117

Total 22,682 21,591

1) Loans and derivatives denominated in EUR designated for net investment hedging are

included by SEK 3,276 (3,080) million

2) Loans and derivatives denominated in NOK designated for net investment hedging are

included by SEK 2,040 (382) million

A ﬁve percent currency ﬂuctuation against the Swedish krona would

affect the Group’s total net assets by SEK 783 (734) million.

Interest rate risk

Tele2 keeps a close watch on interest market trends and decisions to

change the interest duration strategy are assessed regularly. Of interest-

bearing ﬁnancial liabilities as of December 31, 2014, SEK 4,531 (4,834)

million, corresponding to 54 (55) percent, were carried at a variable

interest rate. Calculated at variable interest-bearing liabilities at Decem-

ber 31, 2014 and assuming that these loans were traded per January 1,

2015 to 1 percent higher interest rate, this would result in an additional

interest expense for 2015 of SEK 45 (48) million, and affect proﬁt/loss

after tax by SEK 37 (41) million. For additional information please refer

to Note 26.

The capital amount of outstanding interest rate derivatives on December

31, 2014 amounts to SEK 2.5 billion converting variable interest rate to

ﬁxed interest rate. The cash ﬂows related to outstanding interest rate

derivative is expected to affect the income statement during the remain-

ing duration of the interest rate swaps. Ofﬁcial market listings have been

used to determine the fair value of interest rate derivatives. The Group

will settle the difference between the ﬁxed and ﬂoating interest rate on

a net basis.

Outstanding interest rate derivatives for cash ﬂow hedging on December

31, 2014 are shown below.

Dec 31, 2014 Dec 31, 2013

Currency

Fixed interest

rate terms % Maturity

Capital

amount,

nominal

Reported

fair value

Capital

amount,

nominal

Reported

fair value

SEK 3.865 2018 1,400 –166 1,400 –109

SEK 2.7225 2018 300 –25 300 –8

SEK 2.5050 2016 300 –11 300 –8

SEK 2.6950 2018 200 –17 200 –5

SEK 2.1575 2020 250 –19 250 3

Total outstanding interest rate

derivatives 2,450 –238 2,450 –127

The total change in fair values on the interest rate derivatives amounted

to SEK –172 (33) million and are recognized in other comprehensive

income as cash ﬂow hedges. Of the total change in fair value SEK 61 (49)

million was reclassiﬁed to the income statement and included in interest

costs for the year.

Liquidity risk

The Group’s excess liquidity is invested on a short-term basis or used for

loan repayments. Liquidity reserves consist of available cash, undrawn

committed credit facilities and committed overdraft facilities. At the end

of 2014, the Group had available liquidity of SEK 8.2 (9.3) billion. For

additional information please refer to Note 24.

Tele2 has entered into an EUR 0.8 billion credit facility with a syndicate

of 11 banks. The facility has maturity in May 2018. On December 31, 2014

and 2013 the facility was unutilized. Tele2 AB’s EUR 3 billion Euro

Medium-Term Note (EMTN) Program forms the basis for Tele2’s medium

and long term debt issuance in both international and domestic bond

markets. On December 31, 2014 issued bonds under the Program

amounted to SEK 3,797 (4,295) million. For additional information please

refer to Note 26.

Undiscounted contractual commitments are presented below.

Dec 31, 2014

Note

Within

1 year 1–3 years 3–5 years

After

5 years Total

Financial liabilities1) 26 7,535 4,007 576 461 12,579

Commitments, other 30 1,171 509 41 80 1,801

Operating leases 31 1,442 1,246 657 1,023 4,368

Total contractual commitments 10,148 5,762 1,274 1,564 18,748

Dec 31, 2013

Note

Within

1 year 1–3 years 3–5 years

After

5 years Total

Financial liabilities1) 26 6,912 1,712 4,036 649 13,309

Commitments, other 30 2,325 1,926 71 100 4,422

Operating leases 31 1,489 1,360 770 1,117 4,736

Total contractual commitments 10,726 4,998 4,877 1,866 22,467

1) Including future interest payments

Credit risk

Tele2’s credit risk is mainly associated with accounts receivables, receiv-

ables related to handsets and cash and cash equivalents. The Group

regularly assesses its credit risk arising from accounts receivables. As

the customer base is highly diversiﬁed and includes individuals and

companies, the exposure and associated overall credit risk is limited.

Whenever favourable, companies within the Group are entitled to sell

overdue receivables to debt collection agencies either as a one-time

occasion or on ongoing basis. The Group makes provisions for expected

credit losses.

Maximum credit exposure for accounts receivables amounts to

SEK2,480 (3,317) million.

NOTE 3 EXCHANGE RATE EFFECTS

The consolidated balance sheet and income statement are affected by

ﬂuctuations in subsidiaries’ currencies against the Swedish krona. Net

sales and EBITDA are distributed among the following currencies.

Net sales EBITDA

2014 2013 2014 2013

SEK 12,762 49% 12,601 49% 3,471 59% 3,322 56%

EUR 9,105 35% 8,220 32% 1,737 29% 1,857 32%

KZT 1,334 5% 1,344 5% 43 1% –138 –2%

HRK 1,390 6% 1,397 5% 169 3% 95 1%

LTL 1,364 5% 1,280 5% 506 8% 461 8%

LVL – – 915 4% – – 294 5%

Total 25,955 100% 25,757 100% 5,926 100% 5,891 100%

A ﬁve percent currency movement against the Swedish krona affects the

Group’s net sales and EBITDA on an annual basis by SEK 660 (658) million

and SEK 123 (128) million, respectively.

Tele2’s operating proﬁt for the year was mainly affected by ﬂuctuations

in EUR and devaluation in Kazakhstan of KZT. Last year’s net sales as

well as EBITDA have been affected negatively by SEK –456 million and

SEK –154 million, as opposed to if this year’s exchange rates had been

used also for last year. Proﬁt for last year have been affected positively

by SEK 58 million. Assets and liabilities per country is presented in Note

4 and net assets per currency is presented in Note 2.

The annual change of net sales and EBITDA was –1 (–0) and –2 (–2)

percent respectively, excluding exchange rate differences.

Exchange rate differences which arise in operations are reported in

the income statements and totals to the following amounts.

2014 2013

Other operating income 52 52

Other operating expenses –59 –53

Other ﬁnancial items –27 –28

Total exchange rate differences in income statement –34 –29

Continued Note 2

Tele2 – Annual Report 2014 39

Notes

The segment reporting is based on country level. Services offered within

the segments are mobile telephony, ﬁxed broadband and ﬁxed telephony.

Additional information regarding split on services per sergment is pre-

sented in Note 5, Note 6 and Note 15.

The segment Other mainly includes the parent company Tele2 AB,

central functions and Procure IT Right, as well as other minor operations.

Tele2 Sweden has been split into core operations and central group

functions. Core operations are reported in segment Sweden and central

functions are included in the segment Other. For additional information

please refer to section Segment reporting in Note 1.

2014

Sweden Netherlands Kazakhstan Croatia Lithuania Latvia Estonia Austria Germany Other

Undistributed

and internal

elimination Total

INCOME STATEMENT

Net sales

External 12,629 5,439 1,334 1,390 1,364 907 634 1,209 916 133 – 25,955

Internal 12 2 – – 11 9 – – – 2 –36 –

Net sales 12,641 5,441 1,334 1,390 1,375 916 634 1,209 916 135 –36 25,955

EBITDA 3,612 903 43 169 506 294 173 231 131 –136 – 5,926

Depreciation/amortization and other impairment –1,228 –666 –221 –82 –76 –107 –118 –136 –53 –9 – –2,696

Result from shares in joint ventures and associated companies –13 – – – – – – –1 – – – –14

One-off items (Note 6)

Sale of operations 258 – – – – – – – – 3 – 261

Other one-off items 41 –4 –18 – – – – – – –6 – 13

Operating proﬁt 2,670 233 –196 87 430 187 55 94 78 –148 – 3,490

Interest income – – – – – – – – – – 18 18

Interest costs – – – – – – – – – – –396 –396

Other ﬁnancial items – – – – – – – – – – 388 388

Income tax – – – – – – – – – – –874 –874

NET PROFIT/LOSS FROM CONTINUING OPERATIONS 2,670 233 –196 87 430 187 55 94 78 –148 –864 2,626

OTHER INFORMATION

CONTINUING OPERATIONS

CAPEX 622 1,527 319 116 107 82 138 62 15 462 – 3,450

Non-cash-generating proﬁt/loss items

Depreciation/amortization and impairments –1,228 –666 –221 –82 –76 –107 –118 –136 –53 –9 – –2,696

Sales of ﬁxed assets and operations 255 –1 – – – 22 – –1 – –1 – 274

Incentive program – – – – – – – – – –29 – –29

Dec 31, 2014

BALANCE SHEET

Assets 10,196 10,726 3,535 1,140 1,868 2,016 1,688 463 201 1,779 6,236 39,848

Liabilities 2,747 1,731 734 598 287 216 144 353 185 393 9,778 17,166

Instead of only reporting non-current assets by segment, total assets by segment have beeen reported as this is more relevant for Tele2.

2013

Sweden Netherlands Kazakhstan Croatia Lithuania Latvia Estonia Austria Germany Other

Undistributed

and internal

elimination Total

INCOME STATEMENT

Net sales

External 12,453 5,435 1,344 1,397 1,280 915 674 1,244 867 148 – 25,757

Internal 7 1 – – 9 11 – – – 4 –32 –

Net sales 12,460 5,436 1,344 1,397 1,289 926 674 1,244 867 152 –32 25,757

EBITDA 3,448 1,251 –138 95 461 292 161 308 138 –125 – 5,891

Depreciation/amortization and other impairment –1,367 –601 –312 –101 –119 –104 –106 –126 –39 –17 – –2,892

Result from shares in joint ventures and associated companies –18 – – – – – – 1 – – – –17

One-off items (Note 6)

Impairment of goodwill and other assets – – – –457 – – – – – – – –457

Sale of operations – – – – – – – – – 23 – 23

Operating proﬁt 2,063 650 –450 –463 342 188 55 183 99 –119 – 2,548

Interest income – – – – – – – – – – 49 49

Interest costs – – – – – – – – – – –417 –417

Other ﬁnancial items – – – – – – – – – – –183 –183

Income tax – – – – – – – – – – –1,029 –1,029

NET PROFIT/LOSS FROM CONTINUING OPERATIONS 2,063 650 –450 –463 342 188 55 183 99 –119 –1,580 968

OTHER INFORMATION

CONTINUING OPERATIONS

CAPEX 965 2,067 464 62 93 103 65 80 24 476 – 4,399

Non-cash-generating proﬁt/loss items

Depreciation/amortization and impairments –1,367 –601 –312 –558 –119 –104 –106 –126 –39 –17 – –3,349

Sales of ﬁxed assets and operations –12 –3 –1 – – – – – – 28 – 12

Incentive program – – – – – – – – – –12 – –12

Dec 31, 2013

BALANCE SHEET

Assets 10,777 9,178 3,382 926 1,649 1,912 1,577 504 187 2,932 6,831 39,855

Liabilities 3,305 1,670 818 535 320 198 130 343 165 473 10,307 18,264

NOTE 4 SEGMENT REPORTING

40 Tele2 – Annual Report 2014

Notes

Net sales

Net sales Internal sales

2014 2013 2014 2013

Sweden

Mobile 11,113 10,075 12 7

Fixed broadband 728 1,411 – –

Fixed telephony 660 841 – –

Other operations 140 133 – –

12,641 12,460 12 7

Netherlands

Mobile 1,957 1,682 – –

Fixed broadband 2,496 2,632 – –

Fixed telephony 421 551 – –

Other operations 567 571 2 1

5,441 5,436 2 1

Kazakhstan

Mobile 1,334 1,344 – –

1,334 1,344 – –

Croatia

Mobile 1,390 1,397 – –

1,390 1,397 – –

Lithuania

Mobile 1,375 1,289 11 9

1,375 1,289 11 9

Latvia

Mobile 916 926 9 11

916 926 9 11

Estonia

Mobile 582 606 – –

Fixed telephony 7 10 – –

Other operations 45 58 – –

634 674 – –

Austria

Fixed broadband 783 811 – –

Fixed telephony 165 190 – –

Other operations 261 243 – –

1,209 1,244 – –

Germany

Mobile 440 321 – –

Fixed broadband 164 171 – –

Fixed telephony 312 375 – –

916 867 – –

Other

Other operations 135 152 2 4

135 152 2 4

TOTAL

Mobile 19,107 17,640 32 27

Fixed broadband 4,171 5,025 – –

Fixed telephony 1,565 1,967 – –

Other operations 1,148 1,157 4 5

25,991 25,789 36 32

Internal sales, elimination –36 –32

TOTAL NET SALES AND

INTERNAL SALES 25,955 25,757 36 32

In 2014, the net sales in Sweden was positively impacted by SEK 73

million as a result of decisions by the Swedish Post and Telecom

Authority (PTS) regarding termination rates for previous periods, of

which mobile amounted to SEK 78 million and ﬁxed broadband to

SEK –5 million.

In 2014, the net sales in Lithuania was positively impacted by SEK 15

million as a result of expired prepaid balances.

NOTE 5 NET SALES AND NUMBER OF CUSTOMERS

Net sales from external customers are comprised of the following

categories.

2014 2013

Equipment revenue, mobile 3,818 3,129

Equipment revenue, ﬁxed broadband 22 46

Equipment revenue 3,840 3,175

Sales of service 22,115 22,582

Total net sales 25,955 25,757

Mobile external net sales can be split into additional categories of

revenues, which is presented below.

2014 2013

Sweden, mobile

End-user service revenue 7,252 6,950

Operator revenue 955 982

Service revenue 8,207 7,932

Equipment revenue 2,258 1,535

Other revenue 636 601

11,101 10,068

Netherlands, mobile

End-user service revenue 1,203 944

Operator revenue 149 131

Service revenue 1,352 1,075

Equipment revenue 605 607

1,957 1,682

Kazakhstan, mobile

End-user service revenue 978 909

Operator revenue 338 402

Service revenue 1,316 1,311

Equipment revenue 18 33

1,334 1,344

Croatia, mobile

End-user service revenue 803 749

Operator revenue 274 298

Service revenue 1,077 1,047

Equipment revenue 313 350

1,390 1,397

Lithuania, mobile

End-user service revenue 847 843

Operator revenue 183 145

Service revenue 1,030 988

Equipment revenue 334 292

1,364 1,280

Latvia, mobile

End-user service revenue 551 533

Operator revenue 203 225

Service revenue 754 758

Equipment revenue 153 157

907 915

Estonia, mobile

End-user service revenue 382 391

Operator revenue 64 65

Service revenue 446 456

Equipment revenue 136 150

582 606

Germany, mobile

End-user service revenue 439 316

Service revenue 439 316

Equipment revenue 1 5

440 321

TOTAL, MOBILE

End-user service revenue 12,455 11,635

Operator revenue 2,166 2,248

Service revenue 14,621 13,883

Equipment revenue 3,818 3,129

Other revenue 636 601

TOTAL MOBILE EXTERNAL NET SALES 19,075 17,613

In 2014, equipment revenue in Sweden was positively impacted by

SEK445 (-) million as a result of sale to other than end-users.

Tele2 – Annual Report 2014 41

Notes

Number of customers

Number of customers Net customer intake

by thousands Note Dec 31, 2014 Dec 31, 2013 2014 2013

Sweden

Mobile 3,687 3,738 –51 38

Fixed broadband 57 465 –23 –19

Fixed telephony 232 273 –41 –68

3,976 4,476 –115 –49

Netherlands

Mobile 813 694 119 224

Fixed broadband 369 374 –5 –47

Fixed telephony 75 107 –32 –34

1,257 1,175 82 143

Kazakhstan

Mobile 3,297 2,751 546 154

3,297 2,751 546 154

Croatia

Mobile 823 793 30 40

823 793 30 40

Lithuania

Mobile 1,810 1,851 –41 81

1,810 1,851 –41 81

Latvia

Mobile 975 1,031 –56 –9

975 1,031 –56 –9

Estonia

Mobile 488 503 –15 –

Fixed telephony 3 4 –1 –1

491 507 –16 –1

Austria

Fixed broadband 108 118 –10 –9

Fixed telephony 148 167 –19 –24

256 285 –29 –33

Germany

Mobile 242 176 66 66

Fixed broadband 64 71 –7 –11

Fixed telephony 403 466 –63 –128

709 713 –4 –73

TOTAL

Mobile 12,135 11,537 598 594

Fixed broadband 598 1,028 –45 –86

Fixed telephony 861 1,017 –156 –255

TOTAL NUMBER OF CUSTOMERS

AND NET CUSTOMER INTAKE 13,594 13,582 397 253

Divested companies 16 –385 –

Changed method of calculation – –900

TOTAL NUMBER OF CUSTOMERS

AND NET CHANGE 13,594 13,582 12 –647

In 2014, the ﬁxed broadband customer stock in Sweden decreased with

–385,000 customers as a result of the sale of the Swedish residential

cable and ﬁber operations.

In 2013, the mobile customer stock was negatively impacted by a one-

time adjustment of –811,000 customers in Kazakhstan as a result of a

changed method for calculating the number of customers so that a cus-

tomer with only incoming calls to its voicemail is no longer counted as

an active customer.

In 2013, the deﬁnition for an active customer in the customer stock was

changed to exclude Machine-to-Machine subscriptions (M2M). The one

time effect on the customer stock in each segment is presented below.

Sweden –57,000

Netherlands –8,000

Kazakhstan –4,000

Croatia –1,000

Lithuania –13,000

Latvia –3,000

Estonia –3,000

Total mobile –89,000

No customer represent 10 percent or more of net sales.

Continued Note 5

NOTE 6 EBITDA AND EBIT AS WELL AS DEPRECIATION/

AMORTIZATION AND IMPAIRMENT

EBITDA EBIT

Note 2014 2013 2014 2013

Sweden

Mobile 3,224 2,971 2,139 1,937

Fixed broadband 85 143 –13 –134

Fixed telephony 195 243 178 219

Other operations 108 91 67 41

3,612 3,448 2,371 2,063

Netherlands

Mobile –182 –20 –244 –52

Fixed broadband 693 854 178 371

Fixed telephony 142 137 126 121

Other operations 250 280 177 210

903 1,251 237 650

Kazakhstan

Mobile 43 –138 –178 –450

43 –138 –178 –450

Croatia

Mobile 169 95 87 –6

169 95 87 –6

Lithuania

Mobile 506 461 430 342

506 461 430 342

Latvia

Mobile 294 292 187 188

294 292 187 188

Estonia

Mobile 149 124 47 32

Fixed telephony 4 4 3 3

Other operations 20 33 5 20

173 161 55 55

Austria

Mobile –2 – –2 –

Fixed broadband 119 184 37 109

Fixed telephony 95 106 61 74

Other operations 19 18 –2 –

231 308 94 183

Germany

Mobile –27 –30 –61 –52

Fixed broadband 22 13 16 4

Fixed telephony 136 155 123 147

131 138 78 99

Other

Other operations –136 –125 –145 –142

–136 –125 –145 –142

TOTAL

Mobile 4,174 3,755 2,405 1,939

Fixed broadband 919 1,194 218 350

Fixed telephony 572 645 491 564

Other operations 261 297 102 129

5,926 5,891 3,216 2,982

One-off items 4, 6 274 –434

TOTAL EBITDA AND EBIT 5,926 5,891 3,490 2,548

In 2014, the EBITDA in Sweden was positively impacted by SEK 8 million

as a result of decisions by PTS, as stated in Note 5, regarding termination

rates for previous periods, of which mobile amounted to SEK 35 million,

ﬁxed broadband to SEK –15 million and ﬁxed telephony to SEK –12

million.

In 2014, the EBITDA for ﬁxed telephony in Netherlands was positively

impacted by SEK 48 million as a result of settled disputes regarding

wholesale line rental.

In 2014, the EBITDA for mobile in Estonia was positively impacted by

SEK 20 million as a result of the sales of a mobile license in the 2600 MHz

frequency band.

42 Tele2 – Annual Report 2014

Notes

Continued Note 6

Depreciation/amortization and impairment

By function

2014 2013

Depreciation/amortization

Cost of service sold –2,002 –2,189

Selling expenses –190 –248

Administrative expenses –479 –376

Total depreciation/amortization –2,671 –2,813

Impairment

Cost of service sold –13 –463

Administrative expenses –12 –73

Total impairment –25 –536

TOTAL DEPRECIATION/AMORTIZATION

AND IMPAIRMENT FOR THE YEAR –2,696 –3,349

By type of asset

2014 2013

Depreciation/amortization

Utilization rights and software –298 –271

Licenses (frequency) –239 –223

Customer agreements –78 –82

Buildings –9 –8

Machinery and technical plant –1,863 –2,073

Equipment and installations –184 –156

Total depreciation/amortization –2,671 –2,813

Impairment

Utilization rights and software –12 –3

Licenses (frequency) – –111

Machinery and technical plant –13 –417

Equipment and installations – –5

Total impairment –25 –536

TOTAL DEPRECIATION/AMORTIZATION

AND IMPAIRMENT FOR THE YEAR –2,696 –3,349

Impairment losses

In 2013, Kazakhstan was negatively affected by SEK 89 million, related

to an impairment loss of SEK 73 million due to change to a new billing

system, and an extra depreciation of SEK 16 million. In addition, an

impairment loss on non-current assets was recognized in 2013 of the

cash generating unit Croatia amounting to SEK 457 million. The impair-

ment loss was based on an estimated value in use of SEK 400 million by

using pre-tax discount rate of 10 percent. Due to unsatisfactory develop-

ment, Tele2 assessed that the estimated future proﬁt levels did not support

the previous book value. The negative effect was reported as a one-off

item for segment reporting purposes. Additional information is presented

in Note 14.

Speciﬁcation of items between EBITDA and EBIT

Note 2014 2013

EBITDA 5,926 5,891

Impairment of non-current assets 6 – –457

Sale of operations 8, 16 261 23

Challenger program: restructuring costs 6 –10 –

Other one-off items 6, 9 23 –

Total one-off items 274 –434

Depreciation/amortization and other impairment –2,696 –2,892

Result from shares in joint ventures

and associated companies 7 –14 –17

EBIT 3,490 2,548

Other one-off items for segment reporting

In 2014, Tele2 announced its Challenger Program, which is a program

to step change productivity in the Tele2 Group. The program will

strengthen the organization further and enable it to continue to challenge

the industry. The costs associated with the program are reported as

one-off items, and amount to SEK –10 million for 2014. Additional infor-

mation is presented in the Administration report.

In 2014, Sweden has been positively affected by SEK 41 million, due to

the counterparty withdrew its claim concerning the ruling from the

Administrative Court of Appeal in June 2010 regarding price on whole

and split copper cable. The positive effect was reported as a one-off item.

In 2014, other operating expenses was negatively affected by SEK 18

million, related to the devaluation in Kazakhstan. The negative effect

has been reported as a one-off item. Additional information is presented

in Note 9.

NOTE 7 RESULT FROM SHARES IN JOINT VENTURES AND

ASSOCIATED COMPANIES

Holding

Dec 31, 2014 Dec 31, 2013 2014 2013

4T Sverige AB, Sweden 25.0% 25.0% –13 –18

Adworx Internetservice GmbH, Austria 47.4% 47.4% –1 1

Total result of shares in joint ven-

tures and associated companies –14 –17

Extracts from the income statements of joint

ventures and associated companies

2014 2013

Net sales 86 96

Operating loss –51 –70

Loss before tax –51 –69

Net loss –52 –70

Additional information is presented in Note 17.

NOTE 8 OTHER OPERATING INCOME

2014 2013

Sale of residential cable and ﬁber operations, Sweden (Note 16) 258 –

Service level agreements, for sold operations 198 21

Sale to joint operations 102 95

Exchange rate gains from operations 52 52

Sale of non-current assets 23 9

Settlements of previous years' divestments – 23

Liquidation of Versapoint, Germany 3 –

Other income 11 6

Total other operating income 647 206

In 2014, the EBITDA for mobile in Estonia was positively impacted by SEK

20 million as a result of the sales of a mobile license in the 2600 MHz

frequency band.

NOTE 9 OTHER OPERATING EXPENSES

2014 2013

Service level agreements, for sold operations –156 –20

Exchange rate loss from operations –41 –53

Devaluation in Kazakhstan –18 –

Sale/scrapping of non-current assets –9 –20

Other expenses –4 –2

Total other operating expenses –228 –95

In 2014, other operating expenses was negatively affected by SEK 18

million, related to the devaluation in Kazakhstan. The negative effect

has been reported as a one-off item. The total foreign exchange rate effect

on assets and liabilities in Kazakhstan was reported in other compre-

hensive income and amounted at the time for the devaluation to SEK –117

million. Please refer to Note 26 regarding effects on change in fair value

of put option Kazakhstan.

Tele2 – Annual Report 2014 43

Notes

In 2014, net taxes were negatively affected by SEK 36 million due to a

write down of expected expired tax loss carry-forwards in the Nether-

lands and in 2013, net taxes were positively affected by a valuation of

deferred tax assets in Austria of SEK 10 million.

The weighted average tax rate was 22.8 (28.6) percent. The decrease

on the previous year’s ﬁgure was mainly due to the fact that countries

with a higher tax rate, such as Netherlands, having a relatively lower

impact on the result than countries with lower tax rate, such as the Baltics

and Kazakhstan.

Deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following items.

Dec 31, 2014 Dec 31, 2013

Deferred tax assets

Unutilized loss carry-forwards 2,055 2,725

Tangible assets 68 95

Receivables 2 13

Liabilities 67 71

Pensions 12 8

Total deferred tax assets 2,204 2,912

Netted against deferred liabilities –142 –159

Total deferred tax assets according to the balance sheet 2,062 2,753

Deferred tax liabilities

Intangible assets –30 –91

Tangible assets –293 –385

Other –177 –124

Total deferred tax liabilities –500 –600

Netted against deferred assets 142 159

Total deferred tax liabilities according to the balance sheet –358 –441

TOTAL DEFERRED TAX ASSETS AND TAX LIABILITIES 1,704 2,312

The movement in deferred income tax assets and liabilities during the

year is as follows.

Dec 31, 2014 Dec 31, 2013

Deferred tax assets/-liabilities as of January 1 2,312 3,330

Reported in income statement –406 –704

Reported in income statement, discontinued operations –31 67

Reported in other comprehensive income 29 –81

Reported in equity 3 10

Divested companies – –356

Assets classiﬁed as held for sale –313 –

Exchange rate differences 110 46

Deferred tax assets/-liabilities as of December 31 1,704 2,312

Tax loss carry-forwards

The Group’s total tax loss carry-forwards (LCF) as of December 31, 2014

were 12,392 (13,564) million of which SEK 7,711 (10,315) million were

recognized as a deferred tax asset and the remaining part, SEK 4,681

(3,249) million, were not recognized. Total tax loss carry-forwards expire

according to below.

Recognized Not recognized Total

Dec 31, 2014 Dec 31, 2013 Dec 31, 2014 Dec 31, 2013 Dec 31, 2014 Dec 31, 2013

Expires in ﬁve

years – 212 939 1,403 939 1,615

Expires after ﬁve

years 327 404 1,472 692 1,799 1,096

With expiration

date 327 616 2,411 2,095 2,738 2,711

No expiration

date 7,384 9,699 2,270 1,154 9,654 10,853

Total tax loss

carry-forwards 7,711 10,315 4,681 3,249 12,392 13,564

Dec 31, 2014 Dec 31, 2013

Deferred tax assets

Companies reported a proﬁt this year and previous year 2,062 2,383

Companies reported a loss this year – 370

Total deferred tax assets 2,062 2,753

Deferred tax assets were reported for deductible temporary differences

and tax loss carry-forwards to the extent convincing evidence showed

that these can be utilized against future taxable proﬁts.

NOTE 10 INTEREST INCOME

2014 2013

Interest, bank balances 11 43

Interest, penalty interest 7 6

Total interest income 18 49

All interest income is for ﬁnancial assets reported at amortized cost.

Interest income related to impaired ﬁnancial assets, such as accounts

receivable, are not signiﬁcant.

NO T E 11 INTEREST COSTS

2014 2013

Interest, ﬁnancial institutions and similar liabilities –288 –327

Interest, other interest-bearing liabilities –73 –63

Interest, penalty interest –18 –8

Other ﬁnance expenses –17 –19

Total interest costs –396 –417

All interest costs are for ﬁnancial instruments not valued at fair value

through the income statement.

NOTE 12 OTHER FINANCIAL ITEMS

2014 2013

Change in fair value, put option Kazakhstan 427 –166

Exchange rate differences –27 –28

EUR net investment hedge, interest component 9 17

NOK net investment hedge, interest component –11 2

Impairment of shares in Modern Holding Inc –5 –

Other ﬁnance expenses –5 –8

Total other ﬁnancial items 388 –183

For information regarding the put option in Kazakhstan as well as EUR

and NOK net investment hedges please refer to Note 2 and Note 26.

NOTE 13 TAXES

Tax expense/income

2014 2013

Current tax expense, on proﬁt current year –469 –329

Current tax income, on proﬁt prior periods 1 4

Current tax expense –468 –325

Deferred tax expense –406 –704

Total tax on proﬁt for the year –874 –1,029

Theoretical tax expense

The difference between recorded tax expense for the Group and the tax

expense based on prevailing tax rates in each country consists of the

below listed components.

2014 2013

Proﬁt before tax 3,500 1,997

Tax expense/income

Theoretic tax according to prevailing tax

rate in each country –798 –22.8% –572 –28.6%

Tax effect of

Sales of shares in subsidiaries, non-taxable 96 2.7% – –

Result from associated companies –3 –0.1% –4 –0.2%

Other non-deductible expenses/ non-taxable revenue –23 –0.7% –264 –13.2%

Valuation of tax assets relating to tax

loss carry-forwards from previous years – – 11 0.6%

Adjustment due to changed tax rate 5 0.1% – –

Expired tax loss carry-forwards –36 –1.0% – –

Adjustment of tax assets from previous years 33 0.9% –4 –0.2%

Change of not valued loss-carry forwards –148 –4.2% –196 –9.8%

Tax expense/income and

effective tax rate for the year –874 –25.0% –1,029 –51.5%

44 Tele2 – Annual Report 2014

Notes

NOTE 14 INTANGIBLE ASSETS

Dec 31, 2014

Note

Utilization rights

and software

Licenses

(frequency)

Customer

agreements

Construction

in progress

Total other

intangible assets Goodwill Total

Acquisition value

Acquisition value at January 1 3,262 4,409 3,027 668 11,366 13,522 24,888

Acquisition value for assets classiﬁed as held for sale 16, 36 –320 –60 – –50 –430 –495 –925

Acquisition value in divested companies 16 – – – –2 –2 – –2

Investments 50 110 – 610 770 – 770

Sales and scrapping –35 –90 – –5 –130 – –130

Reclassiﬁcation 520 57 – –628 –51 – –51

Exchange rate differences 39 133 121 2 295 692 987

Total acquisition value 3,516 4,559 3,148 595 11,818 13,719 25,537

Accumulated amortization

Accumulated amortization at January 1 –1,914 –1,150 –2,688 –5,752 –5,752

Accumulated amortization for assets classiﬁed

as held for sale 16, 36 172 22 – 194 194

Amortization –346 –245 –258 –849 –849

Sales and scrapping 23 88 – 111 111

Exchange rate differences –30 –29 –108 –167 –167

Total accumulated amortization –2,095 –1,314 –3,054 –6,463 –6,463

Accumulated impairment

Accumulated impairment at January 1 –273 –114 –44 –431 –3,985 –4,416

Impairment –12 – – –12 – –12

Sales and scrapping 12 – – 12 – 12

Exchange rate differences – –8 –3 –11 –231 –242

Total accumulated impairment –273 –122 –47 –442 –4,216 –4,658

TOTAL INTANGIBLE ASSETS 1,148 3,123 47 595 4,913 9,503 14,416

In 2014, Tele2 Estonia acquired two mobile licenses in the 800 MHz and 2100 MHz frequency bands for SEK 54 million and sold a mobile license in

the 2600 MHz frequency band for SEK 24 million.

Tele2 does not have any capitalized research and development or any intangible assets from internal work.

CAPEX per service within each country is presented in Note 15.

Dec 31, 2013

Utilization rights

and software

Licenses

(frequency)

Customer

agreements

Construction

in progress

Total other

intangible assets Goodwill Total

Acquisition value

Acquisition value at January 1 4,360 3,646 3,076 515 11,597 14,028 25,625

Acquisition value for assets classiﬁed as held for sale – – – – – –9 –9

Acquisition value in divested companies –1,436 –766 –40 –69 –2,311 –792 –3,103

Investments 104 1,449 – 653 2,206 – 2,206

Sales and scrapping –60 –34 – –57 –151 – –151

Reclassiﬁcation 331 95 – –370 56 – 56

Exchange rate differences –37 19 –9 –4 –31 295 264

Total acquisition value 3,262 4,409 3,027 668 11,366 13,522 24,888

Accumulated amortization

Accumulated amortization at January 1 –2,105 –1,255 –2,385 –5,745 –5,745

Accumulated amortization in divested companies 510 322 40 872 872

Amortization –375 –246 –327 –948 –948

Sales and scrapping 52 23 – 75 75

Reclassiﬁcation –1 – – –1 –1

Exchange rate differences 5 6 –16 –5 –5

Total accumulated amortization –1,914 –1,150 –2,688 –5,752 –5,752

Accumulated impairment

Accumulated impairment at January 1 –270 – –42 –312 –3,854 –4,166

Impairment –3 –111 – –114 – –114

Exchange rate differences – –3 –2 –5 –131 –136

Total accumulated impairment –273 –114 –44 –431 –3,985 –4,416

TOTAL INTANGIBLE ASSETS 1,075 3,145 295 668 5,183 9,537 14,720

In 2013, Tele2 Netherlands acquired two mobile licenses (2x10 MHz spectrum) in the 800 MHz band for SEK 1,391 million. With the acquired

spectrum in the 800 MHz band and earlier obtained spectrum in the 2600 MHz band, the roll out is ongoing for the next generation 4G network.

In2014 Tele2 Netherlands executed successfully on its 4G rollout and in the end of 2014 the company announced that it will open its 4G network for

commercial services in the beginning of 2015.

Tele2 – Annual Report 2014 45

Notes

Goodwill

In connection with the acquisition of operations, goodwill is allocated

to the cash generating units that are expected to receive future ﬁnancial

beneﬁts such as for example synergies as a result of the acquired

operations. In the event that separate cash generating units cannot be

identiﬁed, goodwill is allocated to the lowest level at which the opera-

tion and its assets are controlled and monitored internally, which is

on country level.

Dec 31, 2014 Dec 31, 2013

Sweden 1,091 1,091

Netherlands 4,744 4,458

Norway – 498

Kazakhstan 818 809

Lithuania 803 755

Latvia 1,152 1,083

Estonia 867 816

Austria 9 8

Other 19 19

Total goodwill 9,503 9,537

Allocation of goodwill and test for goodwill impairment

Tele2 tests goodwill for impairment annually by calculating the recover-

able value for the cash-generating units to which goodwill are allocated.

The recoverable value of the respective cash generating unit is based on

the higher of estimated value in use and fair value less costs to sell.

The most important criteria in the calculations of values in use are

growth rates, proﬁt margins, investment levels and discount rates. The

expected revenue growth rate, proﬁt margin and investment level are

based on sector data as well as management’s assessment of market-

speciﬁc risks and opportunities, including expected changes in competi-

tion, the business model used by Tele2 and the regulatory environment.

Management’s assessment of the range of revenues, proﬁts and invest-

ments are limited to Tele2’s current telecom licences and assets. The

discount rate takes into account the prevailing interest rates and speciﬁc

risk factors in a particular cash-generating unit. The discount rate before

tax varies between 10 and 16 (9 and 24) percent.

Tele2 calculates future cash ﬂows based on the most recently to the

Board presented three-year plan. In two (two) cases we extend the busi-

ness case for an additional seven (seven) years until the forecasted cash

ﬂow growth is considered more stable. For the period after this, annual

growth of up to 2 (up to 1) percent is assumed. They do not exceed the

average long-term growth for the sector as a whole nor do they exceed

the expected long term GDP growth rates in the markets. In 2014, Tele2

recognized no goodwill impairment (2013: recognized impairment loss

in Croatia, however with no goodwill impairment). For additional infor-

mation see Note 6.

Changes to important assumptions

For cash-generating units to which goodwill have been allocated Tele2

assesses that reasonable possible changes in the major assumptions

should not have such signiﬁcant effects that they individually would

reduce the value in use to a value that is lower than the carrying value

on the cash generating units, except for Estonia for which a negative

deviation from the assumptions used could trigger an impairment.

The value in use calculations are based on the following assumptions

per country.

WACC pre tax Forecast period, in year

Growth rate after the

forecast period

2014 2013 2014 2013 2014 2013

Sweden 11% 11% 3 3 0% 0%

Netherlands 15% 16% 10 10 0% 0%

Kazakhstan 16% 24% 10 10 2% 0%

Lithuania 10% 10% 3 3 2% 1%

Latvia 10% 12% 3 3 2% 1%

Estonia 10% 10% 3 3 2% 1%

Austria 10% 9% 3 3 0% –4%

This year’s reduction of the WACC in Kazakhstan is related to lower

execution risk in the 2014 ﬁnancial plan. Following the devaluation and

increased competition in the market we have reassessed the Kazakh

business during the year. As a result the fair value of the put option has

been reduced correspondently, please refer to Note 26.

Other non-current assets

For impairment of other non-current assets, please refer to Note 6.

Continued Note 14

46 Tele2 – Annual Report 2014

Notes

NOTE 15 TANGIBLE ASSETS

Dec 31, 2014

Note Buildings

Equipment and

installations

Construction

in progress

Total other

tangible assets

Machinery and

technical plant

of which

ﬁnance leases Total

Acquisition value

Acquisition value at January 1 192 1,584 2,273 4,049 31,805 569 35,854

Acquisition value for assets classiﬁed as held for sale 16, 36 – –35 –497 –532 –2,012 ––2,544

Acquisition value in divested companies 16 – – –4 –4 –7 ––11

Investments 8 57 2,906 2,971 235 –3,206

Dismantling costs – – – – 226 –226

Sales and scrapping –5 –148 – –153 –2,709 –8 –2,862

Reclassiﬁcation 30 297 –2,647 –2,320 2,371 551

Exchange rate differences 16 72 71 159 700 13 859

Total acquisition value 241 1,827 2,102 4,170 30,609 579 34,779

Accumulated depreciation

Accumulated depreciation at January 1 –129 –1,242 –1,371 –21,725 –414 –23,096

Accumulated depreciation at January 1, assets classiﬁed as held for sale 16, 36 – 20 20 415 –435

Depreciation –9 –191 –200 –2,048 –30 –2,248

Sales and scrapping 6 145 151 2,682 82,833

Exchange rate differences –8 –55 –63 –443 –12 –506

Total accumulated depreciation –140 –1,323 –1,463 –21,119 –448 –22,582

Accumulated impairment

Accumulated impairment at January 1 –3 –7 –10 –1,001 – –1,011

Impairment – – – –13 – –13

Sales and scrapping – – – 7 –7

Exchange rate differences –1 – –1 –41 – –42

Total accumulated impairment –4 –7 –11 –1,048 – –1,059

TOTAL TANGIBLE ASSETS 97 497 2,102 2,696 8,442 131 11,138

Machinery and technical plant in Kazakhstan of SEK 30 (142) million is pledged for loan in Kazakhstan according to Note 26. Finance leases relate

to the expansion of transmission capacity in Sweden and Austria, please refer to Note 31.

Dec 31, 2013

Buildings

Equipment and

installations

Construction in

progress

Total other

tangible assets

Machinery and

technical plant

of which

ﬁnance leases Total

Acquisition value

Acquisition value at January 1 250 1,854 2,216 4,320 39,501 714 43,821

Acquisition value for assets classiﬁed as held for sale – –31 – –31 –1,760 ––1,791

Acquisition value in divested companies –111 –427 –384 –922 –8,196 –152 –9,118

Investments 3 100 2,271 2,374 954 26 3,328

Dismantling costs – 18 – 18 306 –324

Sales and scrapping –4 –45 –14 –63 –597 –23 –660

Reclassiﬁcation 50 93 –1,762 –1,619 1,563 ––56

Exchange rate differences 4 22 –54 –28 34 46

Total acquisition value 192 1,584 2,273 4,049 31,805 569 35,854

Accumulated depreciation

Accumulated depreciation at January 1 –144 –1,354 –1,498 –23,649 –410 –25,147

Accumulated depreciation at January 1, assets classiﬁed as held for sale – 31 31 1,331 –1,362

Accumulated depreciation in divested companies 26 237 263 2,656 11 2,919

Depreciation –12 –180 –192 –2,405 –31 –2,597

Sales and scrapping 4 47 51 512 22 563

Reclassiﬁcation – –1 –1 2 –1

Exchange rate differences –3 –22 –25 –172 –6 –197

Total accumulated depreciation –129 –1,242 –1,371 –21,725 –414 –23,096

Accumulated impairment

Accumulated impairment at January 1 –3 –1 –4 –591 – –595

Accumulated impairment in divested companies – – – 16 – 16

Impairment – –5 –5 –417 ––422

Sales and scrapping – – – 6 –6

Exchange rate differences – –1 –1 –15 – –16

Total accumulated impairment –3 –7 –10 –1,001 – –1,011

TOTAL TANGIBLE ASSETS 60 335 2,273 2,668 9,079 155 11,747

Tele2 – Annual Report 2014 47

Notes

NOTE 16 ACQUISITIONS AND DIVESTMENTS

Acquisitions and divestments of shares and participations affecting cash

ﬂow were as follows:

2014 2013

ACQUISITIONS

Acquisitions of group companies 6 –

Total group companies 6 –

Capital contributions to joint ventures –9 –25

Repayment capital contribution joint ventures 4 –

Dividend from associated companies – 1

Acquisitions of associated companies –4 –

Total joint ventures and associated companies –9 –24

TOTAL ACQUISITION OF SHARES AND PARTICIPATIONS –3 –24

DIVESTMENTS

Residential cable and ﬁber operations, Sweden 709 –

Tele2 Russia – 17,252

Settlements of previous years' divestment of Tele2 Russia –32 –

TOTAL SALE OF SHARES AND PARTICIPATIONS 677 17,252

TOTAL CASH FLOW EFFECT 674 17,228

Acquisitions

In November, 2014 Tele2 Lithuania acquired 100 percent in a company

with independent dealers in order to strengthen the quality perception

and the customer satisfaction, and as a result the company added 50

shops to the Tele2 distribution network. The acquired company held

liquid funds of SEK 6 million.

In June, 2014 Tele2 Norway acquired 33.3 percent in the joint venture,

Strex AS for SEK 4 million. The company holds a license to perform

ﬁnancial services.

Divestments

Tele2 Norway

On July 7, 2014 Tele2 announced the divestment of its Norwegian opera-

tions to TeliaSonera Group. The sale was completed in February 2015

after approval by regulatory authorities. The divested operation has been

reported separately under discontinued operations in the income state-

ment, with a retrospective effect on previous periods. Additional informa-

tion are presented in Note 36.

Residential cable and ﬁber operations, Sweden

On October 23, 2013 Tele2 announced the sale of its Swedish residential

cable and ﬁber operations to Telenor for SEK 793 million. The sale was

completed on January 2, 2014 after approval by regulatory authorities

and the capital gain amounted to SEK 258 million. In 2013, the operation

affected Tele2’s net sales by SEK 564 million and EBITDA by SEK –9

million.

Assets, liabilities and contingent liabilities included in the divested

operation at the time of divestment is stated below:

Goodwill 9

Other intangible assets 2

Tangible assets 440

Prepaid expenses and accrued income 10

Deferred tax liabilities –18

Accrued expenses and deferred income –35

Divested net assets 408

Capital gain 258

Tax income 18

Sales price, net sales costs 684

Unpaid sales costs etc 25

TOTAL CASH FLOW EFFECT 709

Continued Note 15

CAPEX

Dec 31, 2014 Dec 31, 2013

Intangible assets 770 2,206

Tangible assets 3,206 3,328

Total CAPEX 3,976 5,534

Less intangible assets in discontinued operations –70 –191

Less tangible assets in discontinued operations –456 –944

TOTAL CAPEX IN CONTINUING OPERATIONS 3,450 4,399

The difference between CAPEX and paid CAPEX is presented in Note 32.

CAPEX

Dec 31, 2014 Dec 31, 2013

Sweden

Mobile 553 766

Fixed broadband 46 165

Fixed telephony 8 7

Other operations 15 27

622 965

Netherlands

Mobile 1,042 1,648

Fixed broadband 426 379

Fixed telephony 15 8

Other operations 44 32

1,527 2,067

Kazakhstan

Mobile 319 464

319 464

Croatia

Mobile 116 62

116 62

Lithuania

Mobile 107 93

107 93

Latvia

Mobile 82 103

82 103

Estonia

Mobile 133 62

Other operations 5 3

138 65

Austria

Fixed broadband 30 38

Fixed telephony 23 29

Other operations 9 13

62 80

Germany

Mobile 13 19

Fixed broadband 2 3

Fixed telephony – 2

15 24

Other

Other operations 462 476

462 476

TOTAL

Mobile 2,365 3,217

Fixed broadband 504 585

Fixed telephony 46 46

Other operations 535 551

TOTAL CAPEX ACCORDING TO BALANCE SHEET 3,450 4,399

48 Tele2 – Annual Report 2014

Notes

NOTE 17 SHARES IN JOINT VENTURES

AND ASSOCIATED COMPANIES

Company

Holding

(capital/votes) Dec 31, 2014 Dec 31, 2013

4T Sverige AB, Sweden 25% 3 6

MPayment AS, Norway 33.3% – 11

SNPAC Swedish Nr Portability Adm.Centre AB,

Sweden 20% 3 3

Adworx Internetservice GmbH, Austria 47.4% 4 5

GH Giga Hertz HB as well as 15 other trading

companies with licenses, Sweden 33.3% 3 3

Total shares in joint ventures

and associated companies 13 28

Dec 31, 2014 Dec 31, 2013

Acquisition value

Acquisition value at January 1 28 22

Opening balance in assets held for sale –11 –

Investments 9 23

Share of loss for the year –13 –17

Total shares in joint ventures and associated companies 13 28

None of the associated companies are listed on stock exchanges.

Extracts from the balance sheets of associated

companies

Dec 31, 2014 Dec 31, 2013

Intangible assets 2 8

Tangible assets 1 1

Financial assets 1 1

Current assets 114 146

Total assets 118 156

Equity 39 84

Current liabilities 79 72

Total equity and liabilities 118 156

Additional information is presented in Note 7.

NOTE 18 OTHER FINANCIAL ASSETS

Dec 31, 2014 Dec 31, 2013

Prepayment T-Mobile Netherlands, Mobile site access 243 –

VAT receivable, Kazakhstan 200 215

Pension funds 45 90

Non-current holdings of securities 8 14

Restricted bankdeposits – 10

Other receivables 22 8

Total other ﬁnancial assets 518 337

As part of the Network Sharing Agreement, Tele2 Netherlands has agreed

with T-Mobile to prepay part of the mobile site access rent cost to ﬁnance

the investments of T-Mobile to modernize their network.

Non-current securities consist of shares in the companies listed below.

Company

Holding

(capital/votes) Dec 31, 2014 Dec 31, 2013

Modern Holdings Inc, US 11.88% 6 11

Radio National Skellefteå AB, Sweden 5.5% 1 1

Telering AS, Norway 10% – 1

Estonian Broadband Development Foundation,

Estonia 13% 1 1

Total non-current securities 8 14

NOTE 19 INVENTORIES

Dec 31, 2014 Dec 31, 2013

Finished products & goods for resale 497 462

Other 3 9

Total inventories 500 471

Tele2’s inventories consist of mainly telephones, but also SIM cards and

modems held for sale. In 2014 inventories was expensed by SEK 4,255

(3,532) million, of which SEK 10 (12) million was related to write-down.

NOTE 21 OTHER CURRENT RECEIVABLES

Dec 31, 2014 Dec 31, 2013

VAT receivable 124 126

Receivable from Net4Mobility, joint operation in Sweden 128 113

Derivatives 47 8

Receivable from Svenska UMTS-nät, joint operation in Sweden 38 29

Prepayment T-Mobile Netherlands, Mobile site access (Note 18) 20 –

Receivable from suppliers 14 13

Receivable from insurance companies 11 –

Receivable from credit card companies, prepaid 9 8

Receivable from 4T, associated company in Sweden 6 8

Receivable related to divestment of operations 4 –

Other 21 16

Total other current receivables 422 321

Derivatives consists of interest swaps and currency swaps, valued at fair

value. The effective part of the swaps were reported in the hedge reserve

in other comprehensive income and the ineffective part were reported

as interest costs and other ﬁnancial items, respectively, in the income

statement. The Group has derivative contracts which are covered by

master netting agreements. That means a right exists to set off assets

and liabilities with the same party, which is not reﬂected in the account-

ing where gross accounting is applied. For additional information please

refer to Note 2.

NOTE 20 ACCOUNTS RECEIVABLE

Dec 31, 2014 Dec 31, 2013

Accounts receivable 3,059 3,914

Reserve for doubtful accounts –579 –597

Total accounts receivable, net 2,480 3,317

Dec 31, 2014 Dec 31, 2013

Reserve for doubtful accounts

Reserve for doubtful accounts at January 1 597 582

Reserve for doubtful accounts for assets classiﬁed as held for sale –42 –

Reserves in companies divested during the year – –57

Provisions 116 134

Recovery of previous provisions –122 –70

Exchange rate differences 30 8

Total reserve for doubtful accounts 579 597

Dec 31, 2014 Dec 31, 2013

Accounts receivable, overdue with no reserve

Overdue between 1–30 days 429 456

Overdue between 31–60 days 90 75

Overdue more than 60 days 169 108

Total accounts receivable, overdue with no reserve 688 639

NOTE 22 PREPAID EXPENSES AND ACCRUED INCOME

Dec 31, 2014 Dec 31, 2013

Revenues from sold equipment 2,807 2,595

Trafﬁc revenues, from other telecom operators 362 536

Trafﬁc revenues, from end-users 332 388

Subscription fees etc, from end-users 146 132

Accrued income, other 110 96

Rental cost 217 268

Frequency usage 127 49

Fixed subscription charges 34 42

Retailers' commissions, prepaid cards 15 15

Prepaid expenses, other 102 62

Total prepaid expenses and accrued revenues 4,252 4,183

SEK 818 (1,076) million of the balance sheet item is estimated to be paid

more than 12 months after the closing date, of which SEK 802 (1,062)

million is attributable to revenues from equipment.

NOTE 23 CURRENT INVESTMENTS

Dec 31, 2014 Dec 31, 2013

Restricted funds 38 55

Total current investments 38 55

Tele2 – Annual Report 2014 49

Notes

NOTE 24 CASH AND CASH EQUIVALENTS AND UNUTILIZED OVERDRAFT FACILITIES

Available liquidity

Dec 31, 2014 Dec 31, 2013

Cash and cash equivalents 151 1,348

Unutilized overdraft facilities and credit lines 8,073 7,958

Total available liquidity 8,224 9,306

Dec 31, 2014 Dec 31, 2013

Unutilized overdraft facilities and credit lines

Overdraft facilities granted 1,143 826

Overdraft facilities utilized –682 –22

Total unutilized overdraft facilities 461 804

Unutilized credit lines 7,612 7,154

TOTAL UNUTILIZED OVERDRAFT FACILITIES

AND CREDIT LINES 8,073 7,958

Tele2’s share of liquid funds in joint operations, for which Tele2 has

limited disposal rights, amounted at December 31, 2014 to SEK 4 (11)

million and was included in the Group’s cash and cash equivalents.

No speciﬁc collateral is provided for overdraft facilities or unutilized

credit lines.

Exchange rate difference in cash and cash

equivalents

Dec 31, 2014 Dec 31, 2013

Exchange rate differences in cash and

cash equivalents at January 1 3 71

Exchange rate differences in cash ﬂow for the year 89 –39

Total exchange rate differences in cash and

cash equivalents for the year 92 32

NOTE 25 EQUITY, NUMBER OF SHARES AND EARNINGS PER SHARE

Number of shares

A shares B shares C shares Total

Change Total Change Total Change Total

As of January 1, 2013 20,987,981 423,746,358 4,049,000 448,783,339

Reclassiﬁcation of A shares to B shares –15 20,987,966 15 423,746,373 – 4,049,000 448,783,339

Reclassiﬁcation of C shares to B shares – 20,987,966 900,000 424,646,373 –900,000 3,149,000 448,783,339

Share split 2:1 20,987,966 41,975,932 424,646,373 849,292,746 3,149,000 6,298,000 897,566,678

Redemption of shares –20,987,966 20,987,966 –424,646,373 424,646,373 –3,149,000 3,149,000 448,783,339

Reclassiﬁcation of A shares to B shares –726,650 20,261,316 726,650 425,373,023 – 3,149,000 448,783,339

As of December 31, 2013 20,261,316 425,373,023 3,149,000 448,783,339

Reclassiﬁcation of A shares to B shares –406 20,260,910 406 425,373,429 – 3,149,000 448,783,339

Reclassiﬁcation of C shares to B shares – 20,260,910 150,000 425,523,429 –150,000 2,999,000 448,783,339

Total number of shares as of December 31, 2014 20,260,910 425,523,429 2,999,000 448,783,339

2014 2013

Number of outstanding shares 445,722,973 445,497,600

Number of shares in own custody 3,060,366 3,285,739

Number of shares, weighted average 445,594,010 445,228,097

Number of shares after dilution 448,799,576 448,465,420

Number of shares after dilution, weighted average 448,606,438 448,181,516

The share capital in Tele2 AB is divided into three classes of shares: Class

A, B and C shares. All types of shares have a quota value of SEK 1.25 per

share and Class A and B shares have the same rights in the company’s

net assets and proﬁts while Class C shares are not entitled to dividend.

Shares of Class A entitle the holder to 10 voting rights per share and Class

B and C shares to one voting right per share.

There are no limitations regarding how many votes each shareholder

may vote for at general meetings of shareholders. The Articles of Associa-

tion make no stipulation that limits the right to transfer the shares.

In the case of a bid for all shares or a controlling part of the shares in

Tele2, the ﬁnancing facility may be accelerated and due for immediate

repayment. In addition, some interconnect agreements and some other

agreements may be terminated.

In 2014, 406 A shares and 150,000 C shares were reclassiﬁed to B

shares.

Shares in own custody

B shares C shares Total

Change Total Change Total

As of January 1, 2013 73,128 4,049,000 4,122,128

Reclassiﬁcation of C shares

to B shares 900,000 973,128 –900,000 3,149,000 4,122,128

Delivery of own shares under

LTI program –836,389 136,739 – 3,149,000 3,285,739

As of December 31, 2013 136,739 3,149,000 3,285,739

Reclassiﬁcation of C shares

to B shares 150,000 286,739 –150,000 2,999,000 3,285,739

Delivery of own shares

under LTI program –225,373 61,366 – 2,999,000 3,060,366

Total number of shares

in own custody as of

December 31, 2014 61,366 2,999,000 3,060,366

Shares in own custody amount to 0.7 (0.7) percent of the share capital.

As a result of share rights in the LTI 2011 (2010) being exercised during

2014, Tele2 delivered 225,373 (836,389) B-shares in own custody to

share right holders.

Outstanding share rights

Dec 31, 2014 Dec 31, 2013

Incentive program 2014–2017 1,117,168

Incentive program 2013–2016 1,029,026 1,132,228

Incentive program 2012–2015 896,070 968,263

Incentive program 2011–2014 34,339 867,329

Total number of outstanding share rights 3,076,603 2,967,820

Further information is provided in Note 34.

Number of shares after dilution

Dec 31, 2014 Dec 31, 2013

Number of shares 448,783,339 448,783,339

Number of shares in own custody –3,060,366 –3,285,739

Number of outstanding shares, basic 445,722,973 445,497,600

Number of outstanding share rights 3,076,603 2,967,820

Total number of shares after dilution 448,799,576 448,465,420

50 Tele2 – Annual Report 2014

Notes

NOTE 26 FINANCIAL LIABILITIES

Dec 31, 2014 Dec 31, 2013

Liabilities to ﬁnancial institutions and similar liabilities 6,758 6,837

Other interest-bearing liabilities 1,625 1,914

Total interest-bearing ﬁnancial liabilities 8,383 8,751

Accounts payable 2,848 3,140

Other current liabilities 467 516

Total non-interest-bearing ﬁnancial liabilities 3,315 3,656

TOTAL FINANCIAL LIABILITIES 11,698 12,407

Financial risk management and ﬁnancial instruments are presented in

Note 2.

Financial liabilities fall due for payment according to below.

Dec 31, 2014 Dec 31, 2013

Nominal

value

Recorded

value

Nominal

value

Recorded

value

Within 3 months 5,655 5,655 5,001 5,001

Within 3–12 months 1,450 1,450 1,719 1,708

Within 1–2 years 140 106 1,221 1,186

Within 2–3 years 3,586 3,554 161 103

Within 3–4 years 325 281 3,599 3,541

Within 4–5 years 202 202 312 241

Within 5–10 years 450 450 627 627

Total ﬁnancial liabilities 11,808 11,698 12,640 12,407

Interest-bearing ﬁnancial liabilities

Interest-bearing ﬁnancial liabilities fall due for payments as follows:

Within

1 year

Within

1-2 years

Within

2-3 years

Within

3-4 years

Within

4-5 years

Within

5-15 years Total

Variable interest rates 2,777 15 1,164 173 202 200 4,531

Fixed interest rates 1,013 91 2,390 108 – 250 3,852

Total interest-bearing

liabilities 3,790 106 3,554 281 202 450 8,383

Collateral provided

Dec 31, 2014 Dec 31, 2013

Fixed assets 30 142

Total collateral provided for own liabilities 30 142

Earnings per share

Earnings per share Earnings per share, after dilution

2014 2013 2014 2013

Net proﬁt attributable to equity

holders of the parent company 2,211 14,590 2,211 14,590

Weighted average

number of shares 445,594,010 445,228,097 445,594,010 445,228,097

Incentive program 2014–2017 665,045 –

Incentive program 2013–2016 1,071,624 670,041

Incentive program 2012–2015 930,283 1,026,452

Incentive program 2011–2014 345,476 942,657

Incentive program 2010–2013 314,269

Weighted average number

of share rights 3,012,428 2,953,419

Weighted average number of

outstanding shares after dilution 448,606,438 448,181,516

EARNINGS PER SHARE, SEK 4.96 32.77 4.93 32.55

Dividend and redemption

In respect of the ﬁnancial year 2014, the Board of Tele2 AB has decided

to recommend to the Annual General Meeting (AGM) in May 2015, a total

dividend payment of SEK 14.85 (4.40) per ordinary A and B share, to be

comprised of an ordinary dividend of SEK 4.85 (4.40) and an extraordinary

dividend of SEK 10.00 (0). At December 31, 2014 this correspond to a total

of SEK 6,619 (1,960) million, of which ordinary dividend SEK 2,162 (1,960)

million and extraordinary dividend SEK 4,457 (0) million.

As a result of the sale of Tele2 Russia in April 2013 a mandatory share

redemption program of SEK 28 per share was issued in 2013, equivalent

to SEK 12,474 million. The redemption program implied a share split

where each share was split into two shares, of which one was a redemp-

tion share. Retirement of redemption shares in own custody of SEK 92

million was transferred to unrestricted equity. A bonus issue was per-

formed in order to increase the share capital to its prior level, SEK 561

million, through a transfer of SEK 280 million from unrestricted equity.

Thereafter, the quota value of each share amounts to SEK 1.25, the same

as prior to the share redemption program. In total SEK 15,637 million

was paid to the shareholders in 2014 as dividend and redemption.

For information regarding dividend policy please refer to Note 2.

Purchase of non-controlling interest

In 2013, Tele2 acquired the remaining 7.76 percent of the shares in the

subsidiary Ofﬁcer AS in Norway for SEK 1 million.

In 2009 and 2010, Tele2 acquired the remaining 25.5 and 12.5 percent

respectively of the shares in Tele2 Izhevsk and Tele2 Rostov in Russia.

The ﬁnal purchase price of SEK 3 and 90 million respectively was paid

in 2013.

Subsidiaries with material non-controlling interests

Tele2 owns 51 percent of the shares in Tele2 Kazakstan with a call option

to buy the remaining 49 percent. The non-controlling shareholder has

a put option to sell its shares to Tele2. Tele2 Kazakhstan is accounting-

wise treated as a wholly-owned subsidiary to Tele2 and Tele2 account

for the put option held by the other owner as a liability at fair value (please

refer to Note 1 and Note 26). Through agreements the other owner has

protective rights in matters such as changes in the ownership structure,

approval of dividends and other shareholder-related matters.

The tables below shows summarized ﬁnancial information for Tele2

Kazakhstan before intra-group eliminations. No other material non-

controlling interests exist.

Tele2 Kazakhstan

2014 2013

Income statement

Net sales 1,334 1,344

Operating loss –196 –450

Loss before tax –590 –879

Net loss –590 –879

Tele2 Kazakhstan

Dec 31, 2014 Dec 31, 2013

Balance sheet

Intangible assets 1,336 1,385

Tangible assets 1,959 1,775

Financial assets 200 215

Current assets 240 222

Total assets 3,735 3,597

Non-current liabilities 5,178 3,757

Current liabilities 1,678 2,274

Total liabilities 6,856 6,031

Net assets –3,121 –2,434

Tele2 Kazakhstan

2014 2013

Cash ﬂow statement

Cash ﬂow from operations before changes in working capital –170 –288

Changes in working capital –5 –43

CASH FLOW FROM OPERATING ACTIVITIES –175 –331

Cash ﬂow from investing activities –370 –511

CASH FLOW AFTER INVESTING ACTIVITIES –545 –842

Cash ﬂow from ﬁnancing activities 564 805

NET CHANGE IN CASH AND CASH EQUIVALENTS 19 –37

Cash and cash equivalents at beginning of the year 9 47

Exchange rate differences in cash and cash equivalents 3 –1

CASH AND CASH EQUIVALENTS AT END OF THE YEAR 31 9

Continued Note 25

Tele2 – Annual Report 2014 51

Notes

Liabilities to ﬁnancial institutions and similar liabilities

Dec 31, 2014 Dec 31, 2013

Creditors

(collateral provided)

Interest

rate terms

Maturity

date

Current

liabilities

Non-

current

liabilities

Current

liabilities

Non-

current

liabilities

Bonds NOK NIBOR +1.7% 2015 315 – – 316

Bonds NOK NIBOR +2.35% 2017 – 1,049 – 1,055

Bonds SEK STIBOR +2.85% 2017 – 1,498 – 1,497

Bonds SEK ﬁxed: 4.875% 2017 – 799 – 798

Bonds SEK STIBOR +1.1% 2015 750 – – 750

Bonds SEK – – 500 –

Bonds SEK STIBOR +2.45% 2020 – 250 – 250

Bonds SEK variable interest

rates

2020 500 – 500 –

Total Bonds 1,565 3,596 1,000 4,666

Commercial paper ﬁxed: 0.504%–

0.9310%

2015 215 – 325 –

Nordic Investment

Bank (NIB)

variable

interest rates

2017-

2020

– 705 – 663

Syndicated loan

facilities

variable

interest rates

2018 – –38 – –55

Kazkommertsbank

(collateral: ﬁxed assets

in Tele2 Kazakhstan)

variable

interest rates

2014-

2015

33 – 188 28

Utilized bank

overdraft facility

variable

interest rates

682 – 22 –

2,495 4,263 1,535 5,302

Total liabilities to ﬁnancial institutions

and similar liabilities 6,758 6,837

Tele2 has entered into a EUR 0.8 billion credit facility with a syndicate

of 11 banks. The facility has maturity in May 2018. The loans can be

drawn in several currencies and the interest base is the relevant IBOR

for that currency. On December 31, 2014, the syndicated loan facility was

unutilized and prepaid upfront fees to be recognized in proﬁt/loss over

the remaining contract period amounted to SEK –38 (–55) million. The

facility is conditioned by covenant requirements which Tele2 expects to

fulﬁl.

Tele2 AB has NOK 1.3 billion bonds issued in the Norwegian bond

market. The amount is split between a bond issue of NOK 300 million

and a bond issue of NOK 1 billion. The bonds are listed on Oslo børs.

Tele2 AB’s Euro Medium-Term Note (EMTN) Program forms the basis

for Tele2’s medium and long term debt issuance in both international

and domestic bond markets. The program enables Tele2 to issue bonds

and notes up to a total aggregate amount of EUR 3 billion. On December

31, 2014 issued bonds under the program amounted to SEK 3,797 (4,295)

million.

Tele2 AB’s established Swedish commercial paper program enables

to issue commercial papers up to a total amount of SEK 5 billion. Com-

mercial papers can be issued with a tenor up to 12 months under the

program. The commercial paper program is a complement to Tele2’s core

funding. On December 31, 2014 outstanding commercial papers amounted

to SEK 215 (325) million.

As a further step towards the diversiﬁcation of Tele2’s funding sources,

Tele2 AB has an 8-year-maturity loan agreement with Nordic Investment

Bank (NIB) totalling EUR 74 million.

Since the acquisition in 2010, Tele2 holds 51 percent of the shares in

Tele2 Kazakhstan. The company had, at the time of acquisition, existing

liabilities to several ﬁnancial institutions. The interest base is LIBOR. On

December 31, 2014 these liabilities amounted to EUR 0 (15) million and

USD 4 (13) million.

The average interest rate on loans during the year was 5.0 (5.2)

percent.

Other interest-bearing liabilities

Dec 31, 2014 Dec 31, 2013

Current

liabilities

Non-

current

liabilities

Current

liabilities

Non-

current

liabilities

Put option, Kazakhstan 887 – 1,350 –

Kazakhtelecom 98 292 – 347

Derivatives 294 – 146 –

Finance leases 16 38 21 49

Supplier ﬁnanced, Silver Server in Austria – – 1 –

1,295 330 1,518 396

Total other interest-bearing liabilities 1,625 1,914

Tele2 owns 51 percent of the shares in Tele2 Kazakhstan with a call

option to buy the remaining 49 percent from December 14, 2014 to April

14, 2015. The non-controlling shareholder, Asianet Holding BV, has a put

option to sell its shares to Tele2. The exercise price of both options is the

fair market value of the shares at the date of exercise. The put option is

reported at its estimated fair value at the balance sheet date, determined

on the basis of expected future discounted cash ﬂows. The change in

value consists of changes in fair value reported as other ﬁnancial items

in the income statement of SEK 427 (166) million and exchange rate dif-

ferences of SEK –36 (–30) million recognized in other comprehensive

income. Following the devaluation and increased competition in the

market Tele2 has reassessed the Kazakh business during the year. As a

result the fair value of the put option has been reduced correspondently.

Additional information is presented in Note 25.

At the time of the acquisition of Tele2 Kazakhstan the company had

an existing interest free liability to the former owner. On December 31,

2014 that reported debt amounted to SEK 390 (347) million and the

nominal value to SEK 500 (495) million.

Derivatives consists of interest swaps and currency swaps, valued at

fair value. The effective part of the swaps were reported in the hedge

reserve in other comprehensive income and the ineffective part were

reported as interest costs and other ﬁnancial items, respectively, in the

income statement. The Group has derivative contracts which are covered

by master netting agreements. That means a right exists to set off assets

and liabilities with the same party, which is not reﬂected in the account-

ing where gross accounting is applied. For additional information please

refer to Note 2.

For information on ﬁnance leases please refer to Note 31.

Other current liabilities

Dec 31, 2014 Dec 31, 2013

VAT liability 173 182

Liability to Net4Mobility, joint operation in Sweden 103 107

Liability to Svenska UMTS-nät, joint operation in Sweden 73 73

Employee withholding tax 64 70

Debt to customers 17 46

Debt to other operators 16 16

Customer deposit 12 8

Debt to content suppliers 3 6

Other 6 8

Total current liabilities 467 516

Continued Note 26

52 Tele2 – Annual Report 2014

Notes

NOTE 27 PROVISIONS

2014

Dis mant-

ling

costs

Rented

buildings

and

cables

Legal

disputes

Claims and

guarantees

for

divested

operations

Pension

and

similar

commit-

ments Total

Provisions as of January 1 488 56 51 39 45 679

Provisions directly associated

with assets classiﬁed as held

for sale –105 – – – – –105

Additional provisions 226 10 – – 22 258

Utilized/paid provisions –10 –9 – –3 – –22

Reversed unused provisions –26 – –41 – – –67

Present value adjustment 45 – – – – 45

Exchange rate differences 16 – 1 2 – 19

Total provisions as of

December 31 634 57 11 38 67 807

Dec 31, 2014 Dec 31, 2013

Provisions, current 47 95

Provisions, non-current 760 584

Total provisions 807 679

Provisions are expected to fall due for payment according to below:

Dec 31, 2014 Dec 31, 2013

Within 1 year 47 95

Within 1–3 years 81 78

Within 3–5 years 23 20

More than 5 years 656 486

Total provisions 807 679

Dismantling costs refer to dismantling and restoration of mobile and ﬁxed

network sites. Remaining provision as of December 31, 2014 is expected

to be fully utilized during the coming 30 years.

For additional information on ﬁnance leases please refer to Note 31.

NOTE 28 ACCRUED EXPENSES AND DEFERRED INCOME

Dec 31, 2014 Dec 31, 2013

Trafﬁc expenses to other telecom operators 500 1,171

Investments in non-current assets 558 728

External service expenses 509 527

Personnel-related expenses 486 562

Leasing and rental expenses 95 174

Expenses for dealers 86 146

Interest costs 43 63

Other accrued expenses 55 113

Deferred income, prepaid cards 337 383

Deferred income, other 594 737

Total accrued expenses and deferred income 3,263 4,604

NOTE 29 PLEDGED ASSETS

Dec 31, 2014 Dec 31, 2013

Fixed assets 30 142

Current investments, bank deposits 38 55

Other non-current receivables, bank deposits – 10

Total pledged assets 68 207

The opposite parties can only take over the pledged items in case Tele2

neglects its duty to pay its debts according to the agreements.

NOTE 30 CONTINGENT LIABILITIES AND

OTHER COMMITMENTS

Contingent liabilities

Dec 31, 2014 Dec 31, 2013

Asset dismantling obligation 137 126

Disputes 83 220

Total contingent liabilities 220 346

Tele2 has obligations to dismantle assets and restore premises within

ﬁxed telephony and ﬁxed broadband in the Netherlands as well as in

Austria. Tele2 assesses the dismantling of these sites as unlikely and

consequently only reports this obligation as contingent liabilities.

Tele2 Netherlands is, in the ordinary course of its business, involved

in several regulatory complaints and disputes pending with the appropri-

ate governmental authorities. In a speciﬁc case regarding the rental fees

of copper lines, which Tele2 Netherlands uses as part of its ﬁxed opera-

tions, the regulator (ACM) has determined that the rental fees are to be

adjusted with retroactive effect from 2009. This has resulted in a claim

from KPN amounting to EUR 8.7 million (SEK 83 million) and is subject

to pending appeals and court cases. Our assessment is that it is unlikely

that Tele2 will have to pay these fees and consequently no provision has

been made. We estimate that the Administrative Court will give its ruling

in 2015.

The tax authorities in Russia are currently performing tax audits on

several of Tele2’s former subsidiaries in Russia. Per the sales agreement

with the VTB-Group Tele2 is liable for any additional taxes payable as

result of the tax audits. During 2014, Tele2 has won tax disputes of SEK

124 million, of which the Russian tax authorities has appealed disputes

of SEK 86 million, and lost tax disputes of SEK –25 million, of which Tele2

has appealed one dispute of SEK –22 million. Even though it cannot be

ruled out that Tele2 may be liable to certain costs, Tele2 assesses that it

is not likely that any additional taxes will be paid and consequently no

provision has been made.

On December 31, 2013 Tele2 Sweden was defendant in a dispute with

Verizon Sweden AB of SEK 220 million. In 2014, the District court issued

its award and ruled in favor of Tele2 after which the case was settled

where the parties agreed to pay for their own litigation costs.

Other contractual commitments

Dec 31, 2014 Dec 31, 2013

Commitments, investments 610 704

Commitments, other 1,191 3,718

Total future fees for other contractual commitments 1,801 4,422

Other commitments mainly relate to commitments for ordered and con-

tracted goods and services that can not be cancelled without economic

effects. During the year a large portion of contractual commitments have

been fulﬁlled through purchase of goods.

Tele2 – Annual Report 2014 53

Notes

NOTE 31 LEASES

Finance leases

Finance leases relate to the expansion of transmission capacity in Sweden

and Austria. The carrying value of the lease assets is stated in Note 15.

The contracts span over periods ranging from 5 to 25 years. Contracts

with shorter lease periods contain purchase or extension options. Some

of the agreements contain index clauses.

Total future minimum lease payments and their present value amount to:

Dec 31, 2014 Dec 31, 2013

Present

value

Nominal

value

Present

value

Nominal

value

Within 1 year 18 18 24 25

Within 1–2 years 15 17 16 17

Within 2–3 years 13 15 13 15

Within 3–4 years 7 8 11 13

Within 4–5 years 1 1 6 7

Total loan liability and interest 59 77

Less interest portion –5 –7

TOTAL FINANCE LEASES 54 54 70 70

Operating leases

2014 2013

Leased capacity 1,304 1,326

Other operating leases 786 738

Annual leasing expenses for operating leases 2,090 2,064

The cost of operating leases relates mainly to leased capacity. Other assets

that are held under operating leases relate to rented premises, machines

and ofﬁce equipment. Tele2 has a multitude of agreements relating to

leased lines. The majority of these involve some type of initiation fee and

thereafter monthly or quarterly fees. Most of the agreements have terms

ranging from six months to three years with the option of extending the

terms. Generally these agreements have no index clauses or possibilities

to acquire the asset.

Contractual future lease expenses are stated below:

Dec 31, 2014 Dec 31, 2013

Within 1 year 1,442 1,489

Within 1–2 years 736 819

Within 2–3 years 510 541

Within 3–4 years 355 430

Within 4–5 years 302 340

Within 5–10 years 606 682

Within 10–15 years 199 205

More than 15 years 218 230

Total future lease expenses for operating leases 4,368 4,736

Operating leases with Tele2 as the lessor

Leasing income during the year amount to SEK 75 (60) million and relates

mainly to rent from other operators placing equipment on Tele2 sites as

well as leased equipment (mainly modems) to customers. Contract periods

range from 3 to 25 years.

Contractual future lease income are stated below:

Dec 31, 2014 Dec 31, 2013

Within 1 year 70 50

Within 1–2 years 17 21

Within 2–3 years 16 17

Within 3–4 years 16 16

Within 4–5 years 14 15

Within 5–10 years 59 57

Within 10–15 years 49 47

More than 15 years 59 57

Total future lease income for operating leases 300 280

NOTE 32 SUPPLEMENTARY CASH FLOW INFORMATION

Cash ﬂow from operating activities based

on the net result (total operations)

2014 2013

OPERATING ACTIVITIES

Net proﬁt 2,211 14,590

Adjustments for non-cash items in operating proﬁt

Depreciation/amortization and impairment 3,122 4,081

Result from shares in joint ventures and associated companies 15 17

Gain/loss on sale of ﬁxed assets –13 8

Gain/loss on sale of operations –244 –13,261

Incentive program 29 14

Unpaid ﬁnancial items –261 260

Income tax 142 –82

Deferred tax expense 437 637

Cash ﬂow from operations before changes in working capital 5,438 6,264

Changes in working capital –860 –451

CASH FLOW FROM OPERATING ACTIVITIES 4,578 5,813

CAPEX

The difference between investments in intangible and tangible assets

(CAPEX) in the balance sheet and paid CAPEX, net, in the cash ﬂow

statement is stated below.

2014 2013

CAPEX –3,976 –5,534

This year’s unpaid CAPEX and paid CAPEX from previous year –226 186

Received payment of sold non-current assets 56 107

CAPEX paid –4,146 –5,241

Of the year’s investment in intangible and tangible assets, SEK 101 (469)

million is unpaid on December 31, 2014 and has therefore not been

reported as investments in the cash ﬂow statement. Payment of the previ

ous year’s investment of SEK –327 (–283) million has been reported as

investment in the cash ﬂow for 2014. These items amount to a net of SEK

–226 (186) million.

CAPEX per service within each segment are presented in Note 15.

NOTE 33 NUMBER OF EMPLOYEES

Average number of employees

2014 2013

Note Total

of whom

women

of whom

men Total

of whom

women

of whom

men

Sweden 1,474 32% 68% 1,505 32% 68%

Netherlands 963 26% 74% 904 26% 74%

Kazakhstan 735 53% 47% 664 54% 46%

Croatia 123 43% 57% 120 43% 58%

Lithuania 140 54% 46% 105 44% 56%

Latvia 231 60% 40% 250 61% 39%

Estonia 249 58% 42% 255 60% 40%

Austria 274 22% 78% 283 22% 78%

Germany 121 31% 69% 80 30% 70%

Other 788 34% 66% 730 33% 67%

5,098 37% 63% 4,896 37% 63%

Discontinued

operations 36 386 36% 64% 1,247 47% 53%

Total average number

of employees 5,484 37% 63% 6,143 39% 61%

54 Tele2 – Annual Report 2014

Notes

Continued Note 33

NOTE 34 PERSONNEL COSTS

2014 2013

Note

Board of

Directors

and CEO

of which

bonus

Other

employees

Board of

Directors

and CEO

of which

bonus

Other

employees

Sweden 5 2756 6 1716

Netherlands 3 2568 11 2495

Kazakhstan 3 289 3 187

Croatia 5 343 4 341

Lithuania 3 139 3 130

Latvia 2 143 3 139

Estonia 2 –44 1 –45

Austria 4 1158 3 1150

Germany 4 165 3 144

Other 30 7461 27 7414

61 20 2,266 64 18 2,061

Discontinued

operations 36 6 2282 10 2481

Total salaries and

remuneration 67 22 2,548 74 20 2,542

2014 2013

Note

Salaries

and

remune-

rations

Social

security

expenses

of which

pension

expenses

Salaries

and

remune-

rations

Social

security

expenses

of which

pension

expenses

Board and President 61 22 964 19 6

Other employees 2,266 768 177 2,061 727 189

2,327 790 186 2,125 746 195

Discontinued

operations 36 288 57 13 491 110 15

Total 2,615 847 199 2,616 856 210

Pensions

2014 2013

Deﬁned-beneﬁt plans, retirement pension 24 42

Deﬁned-beneﬁt plans, survivors' and disability pension 2 4

Deﬁned-contribution plans 160 149

Total pension expenses 186 195

The deﬁned beneﬁt plans essentially relates to Sweden. Additional infor-

mation regarding deﬁned-beneﬁt retirement plans is shown in the table

below.

2014 2013

Income statement

Current service costs –19 –45

Net interest cost –6 –2

Curtailments/settlements 1 5

–24 –42

Special employer's contribution –2 –2

Net cost recognized in the income statement –26 –44

Numbers of employees

On December 31, 2014, the number of employees in Tele2 was 5,387

(4,945) excluding Norway of which 42 (37) percent women and 58 (63)

percent men. A breakdown per gender and age group etc is presented

below.

Dec 31, 2014 Dec 31, 2013 Dec 31, 2014 Dec 31, 2013

Total Total Women Men Women Men

Managers

< 30 years 1% 1% 7% 5% 4% 7%

30–50 years 9% 11% 25% 55% 24% 58%

> 50 years 1% 1% 2% 6% 2% 5%

Total managers 11% 13% 34% 66% 30% 70%

Other employees

< 30 years 29% 32% 17% 16% 18% 19%

30–50 years 49% 50% 19% 36% 19% 38%

> 50 years 11% 5% 8% 4% 2% 4%

Total other employees 89% 87% 44% 56% 39% 61%

TOTAL 100% 100%

2014-12-31 2013-12-31

Women Men Women Men

For all group companies

Board members 32% 68% 19% 81%

Senior executives 34% 66% 33% 67%

Total 33% 67% 25% 75%

Dec 31, 2014 Dec 31, 2013

Balance sheet

Present value of funded obligations –228 –140

Fair value of plan assets 217 194

Net –11 54

Special employer’s contribution –11 –9

Net asset (+) / obligation (–) in balance sheet –22 45

of which assets 45 90

of which liabilities –67 –45

2014 2013

Net asset (+) / obligation (–) at beginning of year 45 –152

Assets/liabilities classiﬁed as held for sale 2 –3

Net cost –26 –44

Payments 39 41

Actuarial gains/losses in other comprehensive income –82 203

Net asset (+) / obligation (–) in balance sheet at end of year –22 45

The deﬁned beneﬁt pension obligation in Sweden is calculated using a

discount rate based on interest on mortgage bonds. The Swedish covered

mortgage bonds are considered high-quality bonds, the market is con-

sidered deep and the bonds are issued by large banks, thereby meeting

IAS19 requirements. There are no outstanding commitments for retired

and resigned employees no longer employed by Tele2, since their future

pensions are limited by the return on paid fees. Consequently, these

persons are not included in the reported pension liability.

Dec 31, 2014 Dec 31, 2013

Important actuarial assumptions

Discount rate 2.5% 4.0%

Annual salary increases 3.0% 3.0%

Annual pension increases 3.0% 3.0%

Average expected remaining years of employment 9 years 9 years

Remuneration for senior executives

2014

Basic

salary

Variable

remune-

ration

Share-

based

payment

costs

Other

beneﬁts

Other

remune-

ration

Pension

expenses

Total

remune-

ration

CEO and President,

Mats Granryd 9.2 5.0 1.8 1.0 – 4.0 21.0

Other senior executives 28.7 13.6 5.0 6.4 7.41) 7.1 68.2

Total salaries and

remuneration to

senior executives 37.9 18.6 6.8 7.4 7.4 11.1 89.2

1) Remunerations during notice period

The group Other senior executives comprises 10 (10) persons.

2013

Basic

salary

Variable

remune-

ration

Share-

based

payment

costs

Other

beneﬁts

Other

remune-

ration

Pension

expenses

Total

remune-

ration

CEO and President,

Mats Granryd, 9.1 8.3 1.3 1.6 – 3.9 24.2

Other senior executives 27.6 29.01) 2.2 3.7 6.92) 8.9 78.3

Total salaries and

remuneration to

senior executives 36.7 37.3 3.5 5.3 6.9 12.8 102.5

1) Variable remuneration include a transaction incentive of SEK 9.9 million paid to the former

CEO of Tele2 Russia, related to the divestement of Tele2 Russia

2) Remuneration during notice period

During 2014 the senior executives received 290,000 (272,000) share

rights in the 2014 incentive program and 16,101 (127,886) share rights

in the 2012 and 2013 (2011 and 2012) incentive programs as compensa-

tion for dividend. The market value of the share rights at the time of issue

was SEK 3.7 (5.6) million for the CEO and SEK 14.8 (19.3) million for other

senior executives. No premium was paid for the share rights.

Tele2 – Annual Report 2014 55

Notes

Continued Note 34

LTI 2014 LTI 2013

Number of share rights CEO

Other senior

executives CEO

Other senior

executives

Outstanding as of January 1, 2013 56,000 192,000

Allocated 56,000 234,000

Allocated, compensation for dividend – – 2,117 5,448

Forfeited – – – –48,000

Total outstanding rights as of

December 31, 2014 56,000 234,000 58,117 149,448

LTI 2012 LT I 2011

Number of share rights CEO

Other senior

executives CEO

Other senior

executives

Outstanding as of January 1, 2013 71,832 184,710 77,544 166,155

Allocated, compensation for dividend 2,716 5,820 – –

Forfeited – –30,785 – –

Adjustments for outcome of

the performance conditions – – –59,819 –124,620

Exercised – – – –24,921

Total outstanding rights as of

December 31, 2014 74,548 159,745 17,725 16,614

Remuneration guidelines for senior executives 2014

The following guidelines for determining remuneration for senior executives

for 2014 were approved by the Annual General Meeting in May 2014.

The objectives of Tele2’s remuneration guidelines are to offer competi-

tive remuneration packages to attract, motivate, and retain key employees

within the context of an international peer group. The aim is to create

incentives for the management to execute strategic plans and deliver

excellent operating results, and to align management’s incentives with

the interests of the shareholders. Senior executives covered by the guide-

lines include the CEO and members of the Leadership Team (“senior

executives”). In May 2014 Tele2 had eleven senior executives.

Remuneration to the senior executives should comprise annual base

salary, and variable short-term incentive (STI) and long-term incentive

(LTI) programs. The STI shall be based on the performance in relation to

established objectives. The objectives shall be related to the company’s

overall result and the senior executives’ individual performance. The STI

can amount to a maximum of 100 percent of the annual base salary.

Over time, it is the intention of the Board to increase the proportion of

variable performance-based compensation as a component of the senior

executives’ total compensation.

The Board is continually considering the need of imposing restrictions

in the STI program regarding making payments, or a proportion thereof,

of such variable compensation conditional on whether the performance

on which it was based has proved to be sustainable over time, and/or

allowing the company to reclaim components of such variable compensa-

tion that have been paid on the basis of information which later proves

to be manifestly misstated.

Other beneﬁts may include e.g. company cars and for expatriated senior

executives e.g. housing beneﬁts for a limited period of time. The senior

executives may also be offered health care insurances.

The senior executives are offered deﬁned contribution pension plans.

Pension premiums for the CEO can amount to a maximum of 25 percent

of the annual salary (base salary and STI). For the other senior executives

pension premiums can amount to a maximum of 20 percent of the annual

salary (base salary and STI).

The maximum period of notice of termination of employment shall be

12 months in the event of termination by the CEO and six months in the

event of termination by any of the other senior executives. In the event

of termination by the company, the maximum notice period during which

compensation is payable is 18 months for the CEO and 12 months for any

of the other senior executives.

Under special circumstances, the Board may deviate from the above

guidelines. In such a case, the Board is obligated to give account of the

reason for the deviation during the following Annual General Meeting.

Board Members, elected at General Meetings, may in certain cases

receive a fee for services performed within their respective areas of

expertise, outside of their Board duties. Compensation for these services

shall be paid at market terms and be approved by the Board of

Directors.

Board of directors

Total fees to the Board of Directors amount to SEK 5,729 (5,829) thousand

following a decision by the Annual General Meeting in May 2014.

Fees to the board

committees Total fees

SEK 2014 2013 2014 2013 2014 2013

Mike Parton 1,365,000 1,365,000 38,000 38,000 1,403,000 1,403,000

Lars Berg 525,000 525,000 75,000 100,000 600,000 625,000

Mia Brunell Livfors 525,000 525,000 – 38,000 525,000 563,000

Lorenzo Grabau 525,000 – 138,000 – 663,000 –

Irina Hemmers 525,000 – 100,000 – 625,000 –

John Hepburn – 525,000 – 75,000 – 600,000

Erik Mitteregger 525,000 525,000 100,000 100,000 625,000 625,000

John Shakeshaft – 525,000 – 200,000 – 725,000

Carla Smits-

Nusteling 525,000 525,000 238,000 138,000 763,000 663,000

Mario Zanotti 525,000 525,000 – 100,000 525,000 625,000

Total fee to board

members 5,040,000 5,040,000 689,000 789,000 5,729,000 5,829,000

Share-based payments

The objective of the long-term incentive programs (LTI) is to create condi-

tions for retaining competent employees in the Tele2 Group. The plan

has been designed based on the view that it is desirable that senior

executives and other key employees within the group are shareholders

in Tele2 AB. By offering an allotment of retention rights and performance

rights which are based on proﬁts and other retention and performance-

based conditions, the participants are rewarded for increasing share-

holder value. Furthermore, the Plan rewards employees’ loyalty and

long-term growth in the Group. In that context, the Board of Directors is

of the opinion that the Plan will have a positive effect on the future

development of the Tele2 Group and thus be beneﬁcial to both the com-

pany and its shareholders.

Number of

participants

at grant date Measure period Dec 31, 2014 Dec 31, 2013

LTI 2014 198 Apr 1, 2014–Mar 31, 2017 1,117,168 –

LTI 2013 204 Apr 1, 2013–Mar 31, 2016 1,029,026 1,132,228

LTI 2012 304 Apr 1, 2012–Mar 31, 2015 896,070 968,263

LTI 2011 283 Apr 1, 2011–Mar 31, 2014 34,339 867,329

Total number of outstanding share rights 3,076,603 2,967,820

34,339 share rights were exercisable at the end of the year.

Cost before tax for outstanding incentive programs and liability is stated

below.

Actual costs before tax Estimated cumulative cost Liability

2014 2013 2014 2013 Dec 31, 2014 Dec 31, 2013

LTI 2014 12 – 56 – 4 –

LTI 2013 18 10 52 54 6 2

LTI 2012 11 5 32 21 12 5

LTI 2011 –2 2 39 62 1 10

LTI 2010 – 6 – 75 – –

Total 39 23 179 212 23 17

of which cash

based programs 1 – 1 –

During the Annual General Meeting held on May 12, 2014, the sharehold-

ers approved a performance-based incentive program (the Plan) for senior

executives and other key employees in the Tele2 Group. The plan has

the same structure as last year’s incentive program.

In general, the participants in the Plan are required to own shares in

Tele2. Thereafter, the participants were granted retention rights and

performance rights free of charge. As a consequence of market conditions,

employees in Kazakhstan were offered to participate in the Plan without

being required to hold shares in Tele2. In such cases, the number of

allotted rights has been reduced, and corresponds to 37.5 percent of the

number of rights allotted for participation with a personal investment.

Subject to the fulﬁlment of certain retention and performance-based

conditions during the period April 1, 2014 - March 31, 2017 (the measure

period), the participant maintaining employment within the Tele2 Group

at the release of the interim report January - March 2017 and subject to

56 Tele2 – Annual Report 2014

Notes

Continued Note 34

the participant maintaining the invested shares (where applicable) dur-

ing the vesting period,each right entitles the employee to receive one

Class B share in the company. Dividends paid on the underlying share

will increase the number of shares that each retention and performance

right entitles to in order to treat the shareholders and the participants

equally.

In the event delivery of shares under the plan cannot be achieved at

reasonable costs, with reasonable administrative efforts or due to market

conditions, participants may instead be offered a cash-based settlement.

Outstanding share rights that will be settled in cash are remeasured to

fair value in each period and the obligation is reported as a liability.

The rights are divided into Series A, Series B and Series C. The number

of shares the participant will receive depends on which category the

participant belongs to and on the fulﬁlment of the following deﬁned

conditions:

Series A Tele2’s total shareholder return on the Tele2 shares (TSR) during

the measure period exceeding 0 percent as entry level.

Series B Tele2’s average normalized return of capital employed (ROCE)

during the measurement period being at least 9 percent as entry

level and at least 12 percent as the stretch target.

Series C Tele2’s total shareholder return on the Tele2 shares (TSR) during

the measure period being equal to the average TSR for a peer

group including Elisa, Iliad, Millicom International Cellular,

TalkTalk Telecom Group, Telenor, TeliaSonera and TDC as entry

level, and exceeding the average TSR for the peer group with

10 percentage points as the stretch target.

The determined levels of the conditions include an entry level and a

stretch target with a linear interpolation applied between those levels

as regards the number of rights that vests. The entry level constitutes

the minimum level which must be reached in order to enable the vesting

of the rights in that series. If the entry level is reached, the number of

rights that vests is proposed to be 100 percent for Series A and 20 percent

for Series B and C. If the entry level is not reached, all rights to retention

and performance shares (as applicable) in that series lapse. If a stretch

target is met, all retention rights or performance rights (as applicable)

vest in that series.

The Plan comprised a total number of 273,192 shares, of which 259,692

related to employees who invested in Tele2 shares and 13,500 related

to employees in Kazakhstan who chose not to invest in Tele2 shares. In

total this resulted in an allotment of 1,180,268 share rights, of which

267,556 Series A, 546,356 Series B and 546,356 Series C. The partici-

pants were divided into different categories and were granted the fol-

lowing number of share rights for the different categories:

Share right

No of

participants

Maximum

no of shares

per Series Total

allotment At grant date ABCTotal

CEO 1 8,000 1 3 3 7 56,000

Other senior executives

and other key employees 11 4,000 1 2.5 2.5 6 258,000

Category 1 42 2,000 1 1.5 1.5 4 315,400

Category 2 39 1,500 1 1.5 1.5 4 196,212

Category 2, no investment 2 1,500 0.375 0.5625 0.5625 1.5 4,500

Category 3 97 1,000 1 1.5 1.5 4 341,156

Category 3, no investment 6 1,000 0.375 0.5625 0.5625 1.5 9,000

Total 198

1,180,268

Total costs before tax for outstanding rights in the incentive program are

expensed over the three-year vesting period.

The participant’s maximum proﬁt per share right in the Plan is limited

to SEK 355, ﬁve times the average closing share price of the Tele2 Class

B shares during February 2014 with deduction for the dividend paid in

May 2014.

The estimated average fair value of the granted rights was SEK 54 on

the grant date, June 2, 2014. The calculation of the fair value was carried

out by an external expert. The following variables were used:

Series A Series B Series C

Expected annual turnover of personnel 7.0% 7.0% 7.0%

Weighted average share price SEK 79.39 SEK 79.39 SEK 79.39

Expected life 2.90 years 2.90 years 2.90 years

Expected value reduction parameter market condition 70% – 35%

Estimated fair value SEK 55.60 SEK 79.40 SEK 27.80

To ensure the delivery of Class B shares under the Plan, the Annual

General Meeting decided to authorise the Board of Directors to resolve

on a directed issue of a maximum of 1,700,000 Class C shares and sub-

sequently to repurchase the Class C shares. The Class C-shares will then

be held by the company during the vesting period, after which the appro-

priate number of Class C shares will be reclassiﬁed into Class B shares

and delivered to the participants under the Plan. In 2014, the Board of

Directors did not make use of the authorization from the Extraordinary

General Meeting.

LTI 2014 LTI 2013

Number of rights 2014 Cumulative 2014 Cumulative

Allocated at grant date 1,180,268 1,180,268 1,204,128

Outstanding as of January 1, 2014 1,132,228

Allocated, compensation for dividend – – 39,922 39,922

Forfeited –63,100 –63,100 –143,124 –215,024

Total outstanding rights

as of December 31, 2014 1,117,168 1,117,168 1,029,026 1,029,026

of which will be settled in cash 12,000 11,690

LTI 2012 LT I 2011

Number of rights 2014 Cumulative 2014 Cumulative

Allocated at grant date 1,132,186 1,056,436

Outstanding as of January 1, 2014 968,263 867,329

Allocated, compensation for dividend 34,986 274,177 – 294,579

Cancelled, Russia – –163,660 – –92,041

Exercised, Russia – – – –44,156

Forfeited –107,179 –346,633 –3,807 –351,296

Adjustments for outcome of

the performance conditions – – –602,796 –602,796

Exercised, cash settled – – –1,014 –1,014

Exercised, share settled – – –225,373 –225,373

Total outstanding rights as of

December 31, 2014 896,070 896,070 34,339 34,339

of which will be settled in cash 4,995 –

Corresponding principles and conditions have been used for 2012 and

2013 year incentive program except for the measure period and levels

for retention and performance based conditions.

Retention and performance based conditions

Maximum

proﬁt/right

Series A

TSR

Series B

ROCE

Series C

TSR peer group

LTI 20121) SEK 590 > 0% 19%–23%/8%–12.5% > 10%

LTI 2013 SEK 347 > 0% 8–12.5% > 10%

1) The targets are split into two parts; before and after the divestment of Tele2 Russia

The exercise of the share rights in LTI 2011 was conditional upon the

fulﬁlment of certain retention and performance based conditions, mea-

sured from April 1, 2011 until March 31, 2014. The outcome of these

decided performance conditions was in accordance with below and the

outstanding share rights were exchanged for shares or cash in Tele2

during 2014, except for a limited number that is expected to be settled

with shares in 2015.

Tele2 – Annual Report 2014 57

Notes

Continued Note 34

Series Retention and performance based conditions

Minimum

hurdle

(20%)

Stretch

target

(100%)

Perfor-

mance

outcome Allotment

ATotal Shareholder Return Tele2 (TSR) ≥ 0% 9.7% 100%

BAverage normalised Return on Capital

Employed (ROCE)1) 20%/8%

24%/

12.5%

20.5%/

7.2% 20%

CTotal Shareholder Return Tele2 (TSR)

compared to a peer group > 0% ≥ 10% –5.6% 0%

1) The targets are split into two parts; before and after the divestment of Tele2 Russia

Weighted average share price for share rights at date of exercise amounted

to SEK 88.50 during 2014.

NOTE 35 FEES TO THE APPOINTED AUDITOR

Total fees to the appointed auditor (Deloitte) during the year related to

continued operations amounted to SEK 14 (15) million of which audit fees

amounted to SEK 9 (9) million, audit-related fees amounted to SEK 1 (1)

million and other consultation fees amounted to SEK 4 (5) million. There

was no tax-related consultation fees. In addition, audit fees for discon-

tinued operations amounted to SEK 2 (4) million.

Audit fees consisted of fees expensed for the annual audit of the statu-

tory ﬁnancial statements and statutory audits of subsidiaries.

Audit-related fees consisted of fees expensed for assurance and other

services which were closely related to the audit of the company’s ﬁnancial

statements or which are normally performed by the appointed auditor,

and consultations concerning ﬁnancial accounting and reporting stan-

dards. Examples are limited reviews of quarterly reports, comfort letters

and opinions.

All other fees included fees expensed for all other consultations, such

as costs of investigations and analyses in conjunction with corporate

acquisitions (due diligence).

NOTE 36 DISCONTINUED OPERATIONS

On February 5, 2015 the Norwegian competition authorities announced

that they have approved Tele2’s divestment of its Norwegian operations

to TeliaSonera announced in July 2014. The Norwegian operation was

sold for SEK 5.1 billion and resulted in a capital gain in 2015 of SEK 1.7

billion, including costs for central support system for the Norwegian

operation and other transaction costs. The capital gain include a positive

effect of SEK 89 million related to exchange rate differences previously

reported in other comprehensive income which will be recycled over the

income statement but with no effect on total equity.

On April 4, 2013 Tele2 completed the divestment of its Russian

operations.

The Norweigan and Russian operations reported as discontinued opera-

tions are stated below.

Income statement

2014 2013

Net sales 4,009 7,375

Cost of services sold –3,115 –4,822

Gross proﬁt 894 2,553

Selling expenses –932 –1,459

Administrative expenses –332 –546

Result from shares in joint ventures and associated companies –1 –

Other operating income –14 13,246

Other operating expenses –3 –3

EBIT –388 13,791

Interest income 8 6

Interest costs –4 –151

Other ﬁnancial items – –19

EBT –384 13,627

Income tax –31 –5

of which from the normal operation –31 –46

of which from the capital gain – 41

NET PROFIT/LOSS –415 13,622

Earnings per share, SEK –0.93 30.60

Earnings per share, after dilution, SEK –0.93 30.40

Balance sheet

Assets held for sale refer to the Norweigan operation.

Dec 31, 2014

ASSETS

NON-CURRENT ASSETS

Goodwill 495

Other intangible assets 236

Intangible assets 731

Tangible assets 2,109

Financial assets 22

Deferred tax assets 313

NON-CURRENT ASSETS 3,175

CURRENT ASSETS

Inventories 4

Current receivables 654

CURRENT ASSETS 658

ASSETS CLASSIFIED AS HELD FOR SALE 3,833

LIABILITIES

NON-CURRENT LIABILITIES

Interest-bearing 109

NON-CURRENT LIABILITIES 109

CURRENT LIABILITIES

Interest-bearing 10

Non-interest-bearing 630

CURRENT LIABILITIES 640

LIABILITIES DIRECTLY ASSOCIATED WITH

ASSETS CLASSIFIED AS HELD FOR SALE 749

Cash ﬂow statement

2014 2013

OPERATING ACTIVITIES

EBIT –388 13,791

Adjustments for non-cash items in operating proﬁt 444 –12,507

Finance items paid 7 –75

Taxes paid – –177

Cash ﬂow from operations before changes in working capital 63 1,032

Changes in working capital –146 –202

CASH FLOW FROM OPERATING ACTIVITIES –83 830

INVESTING ACTIVITIES

CAPEX paid –647 –1,057

Cash ﬂow after CAPEX –730 –227

Acquisition of shares – –8

Sale of shares –32 17,252

Change of non-current receivables 13 2

Cash ﬂow from investing activities –666 16,189

CASH FLOW AFTER INVESTING ACTIVITIES –749 17,019

FINANCING ACTIVITIES

Change of loans, net – –899

Other ﬁnancing activities – –94

Cash ﬂow from ﬁnancing activities – –993

NET CHANGE IN CASH AND CASH EQUIVALENTS –749 16,026

Additional information

Net sales EBITDA EBIT

2014 2013 2014 2013 2014 2013

Mobile 3,832 7,135 36 1,280 –402 537

Fixed telephony 198 252 40 24 32 21

Other operations – 6 –20 –19 –1 –5

4,030 7,393 56 1,285 –371 553

Internal sales, elimination –21 –18

Sale of operations –17 13,238

TOTAL 4,009 7,375 56 1,285 –388 13,791

58 Tele2 – Annual Report 2014

Notes

Continued Note 36

NOTE 37 JOINT OPERATIONS AND OTHER RELATED PARTIES

Business relations and pricing between Tele2 and all related parties are

based on commercial terms and conditions. During 2014, Tele2 engaged

in transactions with the following related companies/persons.

Joint operations

Svenska UMTS-nät AB, Sweden

Tele2 is one of two turnkey contractors which plan, expand and operate

the joint operation Svenska UMTS-nät AB’s 3G network. Tele2 and Telia-

Sonera each own 50 percent and both companies have contributed capital

to the 3G company. In addition to this, the build-out has owner ﬁnancing.

Tele2 and TeliaSonera are technically MVNO’s with the 3G company and

hence act as capacity purchasers. The size of the fee is based on used

capacity.

Net4Mobility HB, Sweden

Net4Mobility is an infrastructure joint operation between Tele2 Sweden

and Telenor Sweden, where each party owns 50 percent. The company’s

mission is to build and operate the combined 2G and 4G network, which

is the most extensive 4G network in Sweden. The network enable Tele2

and Telenor to offer their customers mobile services for data communica

tions and voice. The build-out has owner ﬁnancing. During the year sites

were transferred from the owners to Net4Mobility. The transfer did not

have any material effect to Tele2’s ﬁnancial statments.

Extracts from the income statements, balance sheets

and cash ﬂow statements of joint operations

Amounts below shows summarized ﬁnancial information for joint

operations before inter-company eliminations.

2014 2013

Sv UMTS-nät

Sweden

Net4Mobility

Sweden

Sv UMTS-nät

Sweden

Net4Mobility

Sweden

Income statement

Net sales 1,411 983 1,422 838

Operating proﬁt 131 84 110 78

Proﬁt before tax 37 27 –8 26

Net proﬁt 29 27 –7 26

2014 2013

EBITDA 56 1,285

Sale of operations –17 13,238

Total one-off items –17 13,238

Sale of shares in joint ventures and associated companies –1 –

Depreciation/amortization and other impairment –426 –732

EBIT –388 13,791

Number of customers Net intake

In thousands Dec 31, 2014 Dec 31, 2013 2014 2013

Mobile 1,125 1,119 6 186

Fixed telephony 51 63 –12 –18

Number of customers

and net customer intake 1,176 1,182 –6 168

Changed method of calculation – –37

Number of customers and net change 1,176 1,182 –6 131

CAPEX

2014 2013

Mobile 513 1,105

Fixed telephony 13 30

Total 526 1,135

Additional cash ﬂow information:

2014 2013

CAPEX –526 –1,135

This year’s unpaid CAPEX and paid CAPEX from previous year –121 29

Received payment of sold non-current assets – 49

CAPEX paid –647 –1,057

Dec 31, 2014 Dec 31, 2013

Sv UMTS-nät

Sweden

Net4Mobility

Sweden

Sv UMTS-nät

Sweden

Net4Mobility

Sweden

Balance sheet

Intangible assets – 2,479 – 2,679

Tangible assets 3,032 2,059 3,410 1,825

Deferred tax assets 137 – 145 –

Current assets 481 269 506 303

Total assets 3,650 4,807 4,061 4,807

Equity 510 2,131 481 2,104

Non-current liabilities 2,650 1,984 3,147 2,019

Current liabilities 490 692 433 684

Total equity and liabilities 3,650 4,807 4,061 4,807

Dec 31, 2014 Dec 31, 2013

Sv UMTS-nät

Sweden

Net4Mobility

Sweden

Sv UMTS-nät

Sweden

Net4Mobility

Sweden

Cash ﬂow statement

Cash ﬂow from operations before

changes in working capital 616 475 558 394

Changes in working capital 79 16 46 18

CASH FLOW FROM OPERATING

ACTIVITIES 695 491 604 412

Cash ﬂow from investing activities –270 –464 –319 –1,280

Cash ﬂow from ﬁnancing activities –425 –41 –285 760

NET CHANGE IN CASH AND

CASH EQUIVALENTS – –14 – –108

Cash and cash equivalents at begin-

ning of the year – 22 – 130

CASH AND CASH EQUIVALENTS

AT END OF THE YEAR – 8 – 22

Other related parties

Senior executives and Board members

Information for senior executives and Board members is presented in

Note 34.

Kinnevik Group

Tele2 rents premises from Kinnevik, buys internal audit services from

Audit Value as well as advertising from Metro.

Joint ventures and associated companies

Information for joint ventures and associated companies is presented in

Note 7 and Note 17.

Transactions and balances

Transactions between Tele2 and joint operations are below included to

100 percent. In the consolidated ﬁnancial statements the joint operations

are however based on Tele2’s share of assets, liabilities, revenues and

expenses (50 percent).

Net sales Operating expenses Interest revenue

2014 2013 2014 2013 2014 2013

Kinnevik – 1 –14 –17 – –

Joint ventures and associated

companies 6 7 –80 –77 – –

Joint operations 296 269 –1,122 –1,057 74 85

Total 302 277 –1,216 –1,151 74 85

Other receivables

Interest-bearing

receivables

Non-interest-bearing

liabilities

Dec 31,

2014

Dec 31,

2013

Dec 31,

2014

Dec 31,

2013

Dec 31,

2014

Dec 31,

2013

Kinnevik 1 – – – 2 2

Joint ventures and associated

companies 8 9 – – – 4

Joint operations 332 284 2,318 2,571 292 300

Total 341 293 2,318 2,571 294 306

Tele2 – Annual Report 2014 59

Notes

NOTE 38 CORPORATE RESPONSIBILITY RESULTS

The 2014 GRI G4 Indicators, presented below, are the ones assessed to

be most relevant for Tele2’s stakeholders. A complete GRI index is pre-

sented on Tele2’s website. Reported facts and ﬁgures are based on the

reporting from each reporting entity and each reported case have been

veriﬁed in accordance with Tele2’s procedures for internal controls.

GRI G4 Indicator

Diversity and equal opportunities (G4-LA12)

Number of employees split on managers and other employees with break-

down per gender and age are presented in Note 33.

Environmental regulations (G4-EN29)

No signiﬁcant ﬁnes1), non-monetary sanctions or cases associated with

environmental regulations brought through dispute resolution mecha-

nisms has been reported during the year.

Corruption (G4-SO5)

Tele2 has not had any reported cases of corruption during the year.

Furthermore, there has not been any reported concluded public legal

cases related to corruption brought against Tele2 during the year. The

Tele2 deﬁnition of corruption exclude pure telecom fraud cases. Tele2’s

deﬁnition of corruption is when offering, giving, soliciting, or acceptance

of an inducement or reward which may inﬂuence any person to act inap-

propriately. For additional information please refer to Tele2’s website,

CR section.

Anti-competitive behaviour, anti-trust, and monopoly practices

(G4-SO7)

Number of reported legal actions for anti-competitive behaviour, anti-

trust, and monopoly practices, pending or completed, in which Tele2 has

been identiﬁed as a participant during the year is stated below.

Country Number Status of legal actions

Latvia 1 Pending case concerning advertisement3)

Estonia 1 Closed, no remarks

Laws and regulations (G4-SO8)

During the year, there were two reported cases of sanctions for non-

compliance with applicable laws and regulations, both in Sweden where

Tele2 Sweden acted in the interest of receiving an interpretation by the

Court of Law. However, there were no reported cases brought through

dispute resolutions.

Products and services health and safety impacts (G4-PR2)

Tele2 has had two reported non-compliance incidents concerning the

products’ and services’ health and safety impacts during their life cycle.

Both were in Kazakhstan and one resulted in a ﬁne2) and one in a warn-

ing. There were no reported non-compliance with voluntary codes during

the year.

Marketing communication, advertising and sponsorship (G4-PR7)

Number of reported incidents of non-compliance regarding marketing

communication, advertising and sponsorship, resulting in ﬁnes, penal-

ties, warnings or non-compliance with voluntary codes during the year

are stated below.

Country

Fine or

penalty Warning

Non-compliance

with voluntary

codes Comments

Sweden – 2 –

Kazakhstan 3 3 – 2)

Latvia – 1 –

Estonia 1 – – 2)

Germany 1 5 – 2)

Customer privacy and losses of customer data (G4-PR8)

Number of reported substantiated complaints during the year, regarding

breaches of customer privacy and losses of customer data, from outside

parties and substantiated by Tele2 or from regulatory bodies as well as

reported leaks, thefts or losses of customer data is stated below.

Country

From outside

parties and

substantiated

by Tele2

From

regulatory

bodies

Leaks, thefts,

or losses of

customer data Comments

Sweden – – 4 In addition, Sweden has had a

major incident with a data center

ﬁre, but there was no loss of

customer data

Netherlands 1 – 4

Lithuania – 5 – Two of the cases originated

from customer complaints

Austria – – 3

None of reported issues is considered to be signiﬁcant.

The use of products and services (G4-PR9)

No signiﬁcant ﬁnes1) have been reported during the year for non-com-

pliance with laws and regulations concerning the use of products and

services.

1) Signiﬁcant ﬁnes are deﬁned as exceeding EUR 250,000 (equivalent to SEK 2.3 million)

2) The ﬁnes have not been signiﬁcant1)

3) If we receive negative outcomes, Tele2 expects the ﬁnes to be insigniﬁcant

60 Tele2 – Annual Report 2014

Notes

The parent company’s

income statement

SEK million Note 2014 2013

Net sales 2 55 47

Gross proﬁt 55 47

Administrative expenses –122 –95

Operating loss –67 –48

PROFIT/LOSS FROM FINANCIAL INVESTMENTS

Result from shares in group companies 3 967 9,900

Other interest revenue and similar income 4 35 147

Interest expense and similar costs 5 –338 –229

Proﬁt after ﬁnancial items 597 9,770

Appropriations, group contribution 372 265

Tax on proﬁt for the year 6 – –23

NET PROFIT 969 10,012

The parent company’s

comprehensive income

SEK million Note 2014 2013

Net proﬁt 969 10,012

OTHER COMPREHENSIVE INCOME

COMPONENTS NOT TO BE RECLASSIFIED TO NET PROFIT

Pensions, actuarial gains/losses –1 –

Total components not to be reclassiﬁed to net proﬁt –1 –

COMPONENTS THAT MAY BE RECLASSIFIED TO NET PROFIT

Gain/loss arising on changes in fair value

of hedging instruments 12 –172 33

Reclassiﬁed cumulative loss to income statement 12 61 49

Tax effect on cash ﬂow hedges 25 –18

Total components that may be reclassiﬁed to net proﬁt –86 64

TOTAL OTHER COMPREHENSIVE INCOME FOR THE YEAR,

NET OF TAX –87 64

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 882 10,076

Parent company’s ﬁnancial statement

The parent company’s balance sheet

SEK million Note Dec 31, 2014 Dec 31, 2013

ASSETS

NONCURRENT ASSETS

Tangible assets

Equipment and installations 7 2 –

Total tangible assets 2 –

Financial assets

Shares in group companies 8 13,520 13,520

Deferred tax assets 6 63 38

Other ﬁnancial assets 10 34 28

Total ﬁnacial assets 13,617 13,586

TOTAL NONCURRENT ASSETS 13,619 13,586

CURRENT ASSETS

Current receivables

Accounts receivables from group companies 11 19

Other receivables from group companies 9 10,392 11,909

Other current receivables 3 4

Prepaid expenses and accrued income 1 1

Total current receivables 10,407 11,933

Cash and cash equivalents 11 3 –

TOTAL CURRENT ASSETS 10,410 11,933

TOTAL ASSETS 24,029 25,519

SEK million Note Dec 31, 2014 Dec 31, 2013

EQUITY AND LIABILITIES

EQUITY

Restricted equity

Share capital 561 561

Restricted reserve 4,985 4,985

Total restricted equity 5,546 5,546

Unrestricted equity

Reserves –185 –99

Retained earnings 11,293 3,213

Net proﬁt 969 10,012

Total unrestricted equity 12,077 13,126

TOTAL EQUITY 17,623 18,672

NONCURRENT LIABILITIES

Interest-bearing

Liabilities to ﬁnancial institutions and similar liabilities 12 4,263 5,274

Pension and similar commitments 42 34

TOTAL NONCURRENT LIABILITIES 4,305 5,308

CURRENT LIABILITIES

Interest-bearing

Liabilities to ﬁnancial institutions and similar liabilities 12 1,780 1,325

Other interest-bearing liabilities 12 238 127

Total interest-bearing liabilities 2,018 1,452

Non-interest-bearing

Accounts payable 12 4 4

Other current liabilities 12 3 4

Accrued expenses and deferred income 13 76 79

Total non-interest-bearing liabilities 83 87

TOTAL CURRENT LIABILITIES 2,101 1,539

TOTAL EQUITY AND LIABILITIES 24,029 25,519

PLEDGED ASSETS AND

CONTINGENT LIABILITIES

Pledged assets None None

Contingent liabilities 14 1,120 4,627

Tele2 – Annual Report 2014 61

Parent company’s ﬁnancial statement

The parent company’s cash ﬂow statement

SEK million 2014 2013

OPERATING ACTIVITIES

Operating loss –67 –48

Adjustments for non-cash items in operating proﬁt

Depreciation/amortization and impairment 1 –

Incentive program 4 3

Interest received – 1

Interest paid –260 –304

Finance items paid –1 –5

Cash ﬂow from operations before changes in working capital –323 –353

Changes in working capital

Operating assets 2 –2

Operating liabilities –1 2

Changes in working capital 1 –

CASH FLOW FROM OPERATING ACTIVITIES –322 –353

INVESTING ACTIVITIES

Acquisition of tangible assets –3 –

Received dividend from group companies 967 9,900

Repayments from group companies 1,958 7,426

Cash ﬂow from investing activities 2,922 17,326

CASH FLOW AFTER INVESTING ACTIVITIES 2,600 16,973

FINANCING ACTIVITIES

Proceeds from credit institutions and similar liabilities – 750

Repayment of loans from credit institutions and similar liabilities –637 –2,088

Dividends –1,960 –3,163

Redemption of shares – –12,474

Cash ﬂow from ﬁnancing activities –2,597 –16,975

NET CHANGE IN CASH AND CASH EQUIVALENTS 3 –2

Cash and cash equivalents at beginning of the year – 2

CASH AND CASH EQUIVALENTS AT END OF THE YEAR 3 –

For additional cash ﬂow information, please refer to Note 15.

Change in the parent company’s equity

Restricted equity Unrestricted equity

Total equitySEK million Note Share

capital

Restricted

reserve

Hedge

reserve

Retained

earnings

Equity at January 1, 2013 561 4,985 –163 18,833 24,216

Net proﬁt 1 – – – 10,012 10,012

Other comprehensive income

for the year, net of tax – – 64 – 64

Total comprehensive income

for the year – – 64 10,012 10,076

OTHER CHANGES IN EQUITY

Share-based payments 1 – – – 15 15

Share-based payments, tax effect – – – 2 2

Dividends – – – –3,163 –3,163

Redemption of shares –280 – – –12,194 –12,474

Bonus issue 280 – – –280 –

EQUITY AT DECEMBER 31, 2013 561 4,985 –99 13,225 18,672

Equity at January 1, 2014 561 4,985 –99 13,225 18,672

Net proﬁt – – – 969 969

Other comprehensive income

for the year, net of tax – – –86 –1 –87

Total comprehensive income

for the year – – –86 968 882

OTHER CHANGES IN EQUITY

Share-based payments – – – 29 29

Dividends – – – –1,960 –1,960

EQUITY AT DECEMBER 31, 2014 561 4,985 –185 12,262 17,623

62 Tele2 – Annual Report 2014

Parent company’s ﬁnancial statement

NOTE 1 ACCOUNTING PRINCIPLES AND

OTHER INFORMATION

The parent company’s ﬁnancial statements have been prepared according

to the Swedish Annual Accounts Act and RFR 2 Reporting for legal enti-

ties and other statements issued by the Swedish Financial Reporting

Board.

The parent company follows the same accounting policies as the Group

(see Group Note 1) with the following exceptions.

Business combination

At a business combination all expenses directly related to the acquisition

are included in the acquisition value.

Financial assets and liabilities and other ﬁnancial instruments

IFRS 7 Financial Instruments: Disclosures has not been applied to the

parent company’s ﬁnancial statements, as its disclosures do not deviate

materially from the Group’s disclosures already presented.

Group contributions

Group contributions are reported as appropriations in the income

statement.

Other information

The annual report has been approved by the Board of Directors on March

17, 2015. The balance sheet and income statement are subject to adoption

by the Annual General Meeting on May 19, 2015.

NOTE 2 NET SALES

Net sales relates to sales to other companies in the Group.

NOTE 3 RESULT OF SHARES IN GROUP COMPANIES

2014 2013

Dividend from subsidiary 967 9,900

Total result of shares in group companies 967 9,900

NOTE 4 OTHER INTEREST REVENUE AND SIMILAR INCOME

2014 2013

Interest, Group 36 130

Interest, bank balances – 1

Exchange rate difference on ﬁnancial current assets –1 16

Total other interest revenue and similar income 35 147

NOTE 5 INTEREST EXPENSE AND SIMILAR COSTS

2014 2013

Interest, credit institutions and similar liabilities –300 –339

Exchange rate difference on ﬁnancial liabilities –34 118

Other ﬁnance expenses –4 –8

Total interest expenses and similar costs –338 –229

NOTE 6 TAXES

2014 2013

Deferred tax expense – –23

Total tax on proﬁt for the year – –23

The difference between recorded tax expense and the tax expense based

on prevailing tax rate consists of the below listed components.

2014 2013

Proﬁt before tax 969 10,035

Tax effect according to tax rate in Sweden –213 –22.0% –2,208 –22.0%

Tax effect of

Non-taxable dividend from group company 213 22.0% 2,178 21.7%

Deductible not recorded expenses – – 7 0.1%

Tax expense/income and effective tax rate – – –23 –0.2%

Deferred tax asset of SEK 63 (38) million is attributable to liabilities of

SEK 54 (31) million and pensions of SEK 9 (7) million.

NOTE 7 TANGIBLE ASSETS

Equipment and installations

Dec 31, 2014 Dec 31, 2013

Acquisition value

Investments 3 –

Total acquisition value 3 –

Accumulated depreciation

Depreciation –1 –

Total accumulated depreciation –1 –

TOTAL TANGIBLE ASSETS 2 –

Notes to the parent company’s ﬁnancial statements

Tele2 – Annual Report 2014 63

Parent company’s Notes

NOTE 8 SHARES IN GROUP COMPANIES

Company, reg. No., reg’d ofﬁce

Number

of shares

Total

par value

Holding

(capital/

votes) Dec 31, 2014 Dec 31, 2013

Tele2 Holding AB, 556579-7700,

Stockholm, Sweden 1,000 tSEK 100 100% 13,520 13,520

Total shares in group companies 13,520 13,520

A list of all subsidiaries, excluding dormant companies, is presented in

Note 19.

Dec 31, 2014 Dec 31, 2013

Acquisition value

Acquisition value at January 1 13,520 13,518

Shareholders contribution – 2

Total shares in group companies 13,520 13,520

NOTE 9 RECEIVABLES FROM GROUP COMPANIES

Non-current receivables Current receivables

Dec 31, 2014 Dec 31, 2013 Dec 31, 2014 Dec 31, 2013

Acquisition value at January 1 – 18,698 11,909 224

Lending – – 1,364 10,866

Repayments – – –2,597 –17,676

Reclassiﬁcation – –18,698 – 18,698

Other changes in cash pool – – –284 –203

Total receivables from group companies – – 10,392 11,909

Current receivables from group companies relate to balances in the cash

pool.

NOTE 10 OTHER FINANCIAL ASSETS

Dec 31, 2014 Dec 31, 2013

Pension funds 34 28

Total other ﬁnancial assets 34 28

NO T E 11 CASH AND CASH EQUIVALENTS AND

UNUTILIZED OVERDRAFT FACILITIES

Dec 31, 2014 Dec 31, 2013

Cash and cash equivalents 3 –

Unutilized overdraft facilities and credit lines 7,612 7,154

Total available liquidity 7,615 7,154

NOTE 12 FINANCIAL LIABILITIES

Dec 31, 2014 Dec 31, 2013

Liabilities to ﬁnancial institutions and similar liabilities 6,043 6,599

Other interest-bearing liabilities 238 127

Total interest-bearing ﬁnancial liabilities 6,281 6,726

Accounts payable 4 4

Other current liabilities 3 4

TOTAL FINANCIAL LIABILITIES 6,288 6,734

Financial liabilities fall due for payment according to below.

Dec 31, 2014 Dec 31, 2013

Within 3 months 2,025 1,460

Within 1–2 years – 1,067

Within 2–3 years 3,447 –

Within 3–4 years 164 3,445

Within 4–5 years 202 135

Within 5–10 years 450 627

Total ﬁnancial liabilities 6,288 6,734

Interest-bearing ﬁnancial liabilities

No specific collateral is provided for interest-bearing financial

liabilities.

Liabilities to ﬁnancial institutions and similar liabilities

Dec 31, 2014 Dec 31, 2013

Liabilities

(collateral provided) Interest rate terms

Maturity

date

Current

liabilities

Non-current

liabilities

Current

liabilities

Non-current

liabilities

Bonds NOK NIBOR +1.7% 2015 315 – – 316

Bonds NOK NIBOR +2.35% 2017 – 1,049 – 1,055

Bonds SEK STIBOR +2.85% 2017 – 1,498 – 1,497

Bonds SEK ﬁxed: 4.875% 2017 – 799 – 798

Bonds SEK STIBOR +1.1% 2015 750 – – 750

Bonds SEK – – 500 –

Bonds SEK STIBOR +2.45% 2020 – 250 – 250

Bonds SEK variable interest rates 2020 500 – 500 –

Total Bonds 1,565 3,596 1,000 4,666

Commercial paper ﬁxed: 0.504%–

0.9310%

2015 215 – 325 –

Nordic Investment

Bank (NIB)

variable

interest rates

2017-

2020

– 705 – 663

Syndicated loan

facilities

variable

interest rates

2018 – –38 – –55

1,780 4,263 1,325 5,274

Total liabilities to ﬁnancial institutions

and similar liabilities 6,043 6,599

For additional information please refer to Group Note 26.

Other interest-bearing liabilities

Current liabilities

Dec 31, 2014 Dec 31, 2013

Derivatives 238 127

Total other interest-bearing liabilities 238 127

Derivatives consisted of interest swaps, valued at fair value. For additional

information please refer to Group Note 2.

Other current liabilities

Dec 31, 2014 Dec 31, 2013

VAT liability 2 3

Other taxes 1 1

Total current liabilities 3 4

NOTE 13 ACCRUED EXPENSES AND DEFERRED INCOME

Dec 31, 2014 Dec 31, 2013

Interest costs 44 49

Personnel-related expenses 32 27

External services expenses - 3

Total accrued expenses and deferred income 76 79

64 Tele2 – Annual Report 2014

Parent company’s Notes

NOTE 14 CONTINGENT LIABILITIES AND

OTHER COMMITMENTS

Contingent liabilities

Dec 31, 2014 Dec 31, 2013

Guarantee related to group companies 1 120 4 627

Total contingent liabilities 1 120 4 627

Operating leases

The parent company’s operating lease expenses amounted to SEK 2 (1)

million during the year. Future lease expenses amount to SEK 1 (1) million

and these are due for payment during the next year.

NOTE 15 SUPPLEMENTARY CASH FLOW INFORMATION

In 2014, the parent company had interest revenues from other group

companies of SEK 36 (132) million and interest expenses to other group

companies of SEK – (2) million which were capitalized on the loan amount.

NOTE 16 NUMBER OF EMPLOYEES

The average number of employees in the parent company is 7 (6), of whom

2 (2) are women.

NOTE 17 PERSONNEL COSTS

2014 2013

Salaries

and

remune-

rations

Social

security

expenses

of which

pension

expenses

Salaries

and

remune-

rations

Social

security

expenses

of which

pension

expenses

Board and CEO 27 12 524 10 4

Other employees 30 14 422 11 4

Total salaries and remuneration 57 26 946 21 8

The parent company’s pension expenses relate to deﬁned-contribution

plans. Salary and remuneration for the CEO are presented in Group

Note34.

NOTE 18 FEES TO THE APPOINTED AUDITOR

Audit fees to the appointed auditor are SEK 1 (1) million and audit-related

fees are SEK 1 (1) million.

Company, reg. No., reg’d ofﬁce Note

Holding

(capital/

votes)

NOTE 19 LEGAL STRUCTURE

The table below lists all the subsidiaries, associated companies, joint

ventures and other holdings that are not dormant companies or branches.

SECURE VALUE EEIG, Luxembourg 17 25%

TELE2 HOLDING AB, 556579-7700, Stockholm, Sweden 100%

Tele2 Treasury AB, 556606-7764, Stockholm, Sweden 100%

Tele2 Sverige AB, 556267-5164, Stockholm, Sweden 100%

Triangelbolaget D4 AB, 556007-9799, Stockholm, Sweden 17 25%

Modern Holdings Inc, 133799783, Delaware, US 18 11,88%

e-Village Nordic AB, 556050-1644, Stockholm, Sweden 100%

Radio National Luleå AB, 556475-0411, Stockholm, Sweden 18 5,5%

GH Giga Hertz HB as well as 15 other partnerships with licenses 17 33,3%

Datametrix AB, 556580-2682, Stockholm, Sweden 100%

Tele2Butikerna AB, 556284-7565, Stockholm, Sweden 100%

4T Sverige AB, 556857-8495, Stockholm, Sweden 17 25%

Svenska UMTS-nät Holding AB, 556606-7988, Stockholm, Sweden 100%

Svenska UMTS-nät AB, 556606-7996, Stockholm, Sweden 17 50%

Interloop AB, 556450-2606, Stockholm, Sweden 100%

Net4Mobility HB, 969739-0293, Stockholm, Sweden 17 50%

Procure IT Right AB, 556600-9436, Stockholm, Sweden 100%

SNPAC Swedish Nr Portability Adm.Centre AB,

556595-2925, Stockholm, Sweden 17 20%

Tele2 Netherlands Holding NV, 33272606, Amsterdam, Netherlands 100%

Tele2 Nederlands BV, 33303418, Amsterdam, Netherlands 100%

Tele2 Norge AS, 974534703, Oslo, Norway 100%

Mobile Norway AS, 888 137 122, Oslo, Norway 50%

Tele2 Butikkene AS, 998 894 468, Oslo, Norway 100%

MPayment AS, 999 504 655, Oslo, Norway 17 33,3%

Strex AS, 985 867 569, Oslo, Norway 17 33,3%

Network Norway AS, 983714463, Oslo, Norway 100%

Mobile Norway AS, 888 137 122, Oslo, Norway 50%

Ofﬁcer AS, 992 898 089, Oslo, Norway 100%

Mobile Telecom Service LLP, 66497-1910-TOO, Almaty, Kazakhstan 51%

Tele2 d.o.o. Za telekomunikacijske usulge, 1849018, Zagreb, Croatia 100%

Tele2 Holding Lithuania AS, 11920703, Tallinn, Estonia 100%

Tele2 Holding Lithuania AS Filialas, 302514793, Vilnius, Lithuania 100%

UAB Tele2, 111471645, Vilnius, Lithuania 100%

UAB Personalo valdymas, 302473332, Vilnius, Lithuania 100%

Viesoji istaiga Numerio perkelimas, 303386211, Vilnius, Lithuania 17 25%

UAB Tele2 Fiksuotas Rysys, 111793742, Vilnius, Lithuania 100%

Tele2 Holding SIA, 40003512063, Riga, Latvia 100%

SIA Tele2, 40003272854, Riga, Latvia 100%

SIA Tele2 Shared Service Center, 40003690571, Riga, Latvia 100%

Tele2 Eesti AS, 10069046, Tallinn, Estonia 100%

Televõrgu AS, 10718810, Tallinn, Estonia 100%

Estonian Broadband Development Foundation, Estonia 17 12,5%

Tele2 Europe SA, R.C.B56944, Luxembourg 100%

Tele2 Austria Holding GmbH, FN178222t, Vienna, Austria 100%

Tele2 Telecommunication GmbH, FN138197g, Vienna, Austria 100%

Tele2 communication GmbH s.r.o., 35820616,

Bratislava, Slovakia 100%

Adworx Internetservice GmbH, FN207118k, Vienna, Austria 17 47,4%

Communication Services Tele2 GmbH, 36232, Düsseldorf, Germany 100%

Collecta Forderungsmanagement GmbH, HRB 67126,

Düsseldorf, Germany 100%

Tele2 International Call GmbH, HRB64239, Düsseldorf, Germany 100%

Tele2 Beteiligungs GmbH, HRB64230, Düsseldorf, Germany 100%

T&Q Netz GmbH Co KB, HRA21263, Düsseldorf, Germany 17 50%

FonExperten GmbH, HRB71231, Düsseldorf, Germany 100%

Tele2 Service GmbH, HRB79647, Düsseldorf, Germany 100%

IntelliNet Holding BV, 34126307, Amsterdam, Netherlands 100%

010033 Telecom GmbH, HRB 48344, Frankfurt, Germany 100%

S.E.C. Luxembourg S.A., R.C. B-84.649, Luxembourg 100%

SEC Finance SA, B104730, Luxembourg 100%

Tele2 Luxembourg AB, 556304-7025, Stockholm, Sweden 100%

Tele2 Finance Luxembourg SARL, RCB112873, Luxembourg 100%

Tele2 – Annual Report 2014 65

Parent company’s Notes

The consolidated ﬁnancial statements and Annual Report have been prepared in accordance with the interna-

tional ﬁnancial reporting standards referred to in European Parliament and Council of Europe Regulation (EC) No.

1606/2002 of 19 July 2002, on application of International Financial Reporting Standards and generally accepted

accounting principles, and give a fair overview of the parent company’s and Group’s ﬁnancial position and results

of operations.

The administration report for the group and parent company gives a fair overview of the Group’s and parent

company’s operations, ﬁnancial position and results of operations, and describes signiﬁcant risks and uncertain-

ties that the parent company and companies included in the Group face.

Stockholm March 17, 2015

Mike Parton

Chairman

Lars Berg Mia Brunell Livfors

Lorenzo Grabau Irina Hemmers Erik Mitteregger

Carla Smits-Nusteling Mario Zanotti Mats Granryd

President and CEO

Our auditors' report was submitted on March 17, 2015

Deloitte AB

Thomas Strömberg

Authorized Public Accountant

66 Tele2 – Annual Report 2014

To the annual meeting of the shareholders of Tele2 AB (publ), corporate identity number 556410-8917

Report on the annual accounts and

consolidated accounts

We have audited the annual accounts and consolidated accounts of

Tele2 AB (publ) for the ﬁnancial year 2014. The annual accounts and

consolidated accounts of the company are included in the printed

version of this document on pages 8-66.

Responsibilities of the Board of Directors and the Managing

Director for the annual accounts and consolidated accounts

The Board of Directors and the Managing Director are responsible

for the preparation and fair presentation of these annual accounts

and consolidated accounts in accordance with International Finan-

cial Reporting Standards, as adopted by the EU, and the Annual

Accounts Act, and for such internal control as the Board of Directors

and the Managing Director determine is necessary to enable the

preparation of annual accounts and consolidated accounts that are

free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on these annual accounts

and consolidated accounts based on our audit. We conducted our

audit in accordance with International Standards on Auditing and

generally accepted auditing standards in Sweden. Those standards

require that we comply with ethical requirements and plan and

perform the audit to obtain reasonable assurance about whether the

annual accounts and consolidated accounts are free from material

misstatement.

An audit involves performing procedures to obtain audit evidence

about the amounts and disclosures in the annual accounts and con-

solidated accounts. The procedures selected depend on the auditor’s

judgement, including the assessment of the risks of material mis-

statement of the annual accounts and consolidated accounts,

whether due to fraud or error. In making those risk assessments, the

auditor considers internal control relevant to the company’s prepa-

ration and fair presentation of the annual accounts and consolidated

accounts in order to design audit procedures that are appropriate in

the circumstances, but not for the purpose of expressing an opinion

on the effectiveness of the company’s internal control. An audit also

includes evaluating the appropriateness of accounting policies used

and the reasonableness of accounting estimates made by the Board

of Directors and the Managing Director, as well as evaluating the

overall presentation of the annual accounts and consolidated

accounts.

We believe that the audit evidence we have obtained is sufﬁcient

and appropriate to provide a basis for our audit opinion.

Opinions

In our opinion, the annual accounts have been prepared in accor-

dance with the Annual Accounts Act and present fairly, in all mate-

rial respects, the ﬁnancial position of the parent company as of 31

December 2014 and of its ﬁnancial performance and its cash ﬂows

for the year then ended in accordance with the Annual Accounts

Act. The consolidated accounts have been prepared in accordance

with the Annual Accounts Act and present fairly, in all material

respects, the ﬁnancial position of the Group as of 31 December 2014

and of its ﬁnancial performance and cash ﬂows for the year then

ended in accordance with International Financial Reporting Stan-

dards, as adopted by the EU, and the Annual Accounts Act. The stat-

utory administration report is consistent with the other parts of the

annual accounts and consolidated accounts.

We therefore recommend that the annual meeting of shareholders

adopt the income statement and balance sheet for the parent com-

pany and the Group.

Report on other legal and regulatory requirements

In addition to our audit of the annual accounts and consolidated

accounts, we have also audited the proposed appropriations of the

company’s proﬁt or loss and the administration of the Board of

Directors and the Managing Director of Tele2 AB (publ) for the ﬁnan-

cial year 2014.

Responsibilities of the Board of Directors and the Managing Director

The Board of Directors is responsible for the proposal for appropria-

tions of the company’s proﬁt or loss, and the Board of Directors and

the Managing Director are responsible for administration under the

Companies Act.

Auditor’s responsibility

Our responsibility is to express an opinion with reasonable assur-

ance on the proposed appropriations of the company’s proﬁt or loss

and on the administration based on our audit. We conducted the

audit in accordance with generally accepted auditing standards in

Sweden.

As a basis for our opinion on the Board of Directors’ proposed

appropriations of the company’s proﬁt or loss, we examined the

Board of Directors’ reasoned statement and a selection of supporting

evidence in order to be able to assess whether the proposal is in

accordance with the Companies Act.

As a basis for our opinion concerning discharge from liability, in

addition to our audit of the annual accounts and consolidated

accounts, we examined signiﬁcant decisions, actions taken and cir-

cumstances of the company in order to determine whether any

member of the Board of Directors or the Managing Director is liable

to the company. We also examined whether any member of the

Board of Directors or the Managing Director has, in any other way,

acted in contravention of the Companies Act, the Annual Accounts

Act or the Articles of Association.

We believe that the audit evidence we have obtained is sufﬁcient

and appropriate to provide a basis for our opinions.

Opinions

We recommend to the annual meeting of shareholders that the proﬁt

be appropriated in accordance with the proposal in the statutory

administration report and that the members of the Board of Directors

and the Managing Director be discharged from liability for the

ﬁnancial year.

Stockholm March 17, 2015

Deloitte AB

Thomas Strömberg

Authorized Public Accountant

Auditor’s report

Tele2 – Annual Report 2014 67

Auditor's report

Deﬁnitions

The ﬁgures shown in parentheses correspond to the comparable

period last year

EBITDA

Operating proﬁt/loss before depreciation/amortization and impair-

ments, acquisition costs, one-off items and result from shares in

associated companies and joint ventures

EBIT

Operating proﬁt/loss including depreciation/amortization and

impairments, acquisition costs, one-off items and result from shares

in associated companies and joint ventures

EBT

Proﬁt/loss after ﬁnancial items

Cash ﬂow from operating activities

Operating transactions affecting cash (cash ﬂow) and change in

working capital

Cash ﬂow after CAPEX

Cash ﬂow after paid net investments in CAPEX and paid dismantling

costs, but before net investment in shares and other ﬁnancial assets

Available liquidity

Cash and cash equivalents including undrawn borrowing facilities

Net debt

Interest-bearing liabilities less interest-bearing assets

CAPEX

Investments in intangible assets and property, plant and equipment

excluding capitalized dismantling costs

Average number of employees

The average number of employees during the year, in which an

acquired/sold company is reported in relation to the length of time

the company has been a part of the Tele2 Group

Equity/assets ratio

Shareholders’ equity in relation to total assets

Debt/equity ratio

Net debt in relation to shareholders’ equity at the end of the period

Return on equity

Proﬁt/loss after tax attributable to holders of the parent company in

relation to average shareholders’ equity attributable to holders of

the parent company

ROCE (return on capital employed)

The total of EBIT and ﬁnancial revenues in relation to capital

employed (average total assets reduced with non-interest bearing

liabilities and provision for asset dismantling)

Average interest rate

Interest expense in relation to average interest-bearing liabilities

Earnings per share

Proﬁt/loss for the period attributable to the parent company share-

holders in relation to the weighted average number of shares out-

standing during the ﬁscal year

Equity per share

Equity attributable to parent company shareholders in relation to

the weighted average number of shares outstanding during the

ﬁscal year

ARPU (average revenue per user)

Average monthly service revenue (end user service revenue and

operator revenue) for each customer excluding machine-to-machine

revenue

68 Tele2 – Annual Report 2014

TELE2 IS ONE OF EUROPE’S FASTEST GROWING TELECOM OPERATORS, ALWAYS PROVIDING CUSTOMERS WITH WHAT THEY NEED FOR LESS.

We have 14 million customers in 9 countries. Tele2 offers mobile services, ﬁxed broadband and ﬁxed telephony, data network services, and

content services. Ever since Jan Stenbeck founded the company in 1993, it has been a tough challenger to the former government monopolies

and other established providers. Tele2 has been listed on the NASDAQ OMX Stockholm since 1996. In 2014, we had net sales of SEK 26

billion and reported an operating proﬁt (EBITDA) of SEK 5.9 billion.

Mats Granryd

President & CEO

Telephone: + 46 (0)8 5620 0060

Allison Kirkby

CFO

Telephone: + 46 (0)8 5620 0060

Lars Torstensson

EVP, Group Communication & Strategy

Telephone: + 46 (0)8 5620 0042

Tele2 AB

Company registration nr: 556410-8917

Skeppsbron 18

P.O. Box 2094

SE-103 13 Stockholm

Sweden

Tel + 46 (0)8 5620 0060

www.tele2.com

VISIT OUR WEBSITE: www.tele2.com

Contacts

Interim Report January June 2011 TL 2020 TL2020 AR14 ENG 150324 2

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