**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

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**FORM 20-F**

(Mark One)

| **o**      | **REGISTRATION  STATEMENT PURSUANT TO SECTION 12(b) OR 12(g)**   |
|------------|----------------------------------------------------------------------------|
| ** ** | **OF THE  SECURITIES EXCHANGE ACT OF 1934**                                |
| ** ** | **OR**                                                                     |
| **x**      | **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)**                     |
| ** ** | **OF THE  SECURITIES EXCHANGE ACT OF 1934**                                |
| ** ** | **For the fiscal year ended December 31, 2005**                       |
| ** ** | **OR**                                                                     |
| **o**      | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE**    |
| ** ** | **SECURITIES  EXCHANGE ACT OF 1934**                                       |
| ** ** | **For the transition period from __________ to  ____________**             |
| ** ** | **OR**                                                                     |
| **o**      | **SHELL COMPANY REPORT PURSUANT TO SECTION 13  OR 15(d) OF THE** |
| ** ** | **SECURITIES  EXCHANGE ACT OF 1934**                                       |

 

**Dateof event requiring this shell company report ___________**

**CommissionFile No. 000-50121**

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**TeliaSonera AB**

(Exact name of Registrantas specified in its charter)

**Sweden**

(Jurisdiction ofincorporation)

**Sturegatan 1, SE-10663 Stockholm, Sweden**

(Address of principalexecutive offices)

Securities registeredpursuant to Section 12(b) of the Act: **None**

Securities registeredpursuant to Section 12(g) of the Act:

**Shares,nominal value SEK 3.20**

Securities for which there is a reporting obligationpursuant to Section 15(d) of the Act: **None**

Indicate the number of outstanding shares of each ofthe issuer’s classes of capital or common stock as of the close of the period coveredby the Annual Report:

Shares, nominal value SEK3.20: 4,490,457,213

Indicate by check mark if the registrant is awell-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x    No o

If this report is an annual or transition report,indicate by check mark if the registrant is not required to file reportspursuant to Section 13 or 15(d) of the Securities Exchange Act of1934. Yes o    No x

Indicate by check mark whether the registrant (1) hasfiled all reports to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2),has been subject to such filing requirements for the past 90days. Yes x    No o

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2of the Exchange Act. (Check one):

Large acceleratedfiler o    Acceleratedfiler o    Non-acceleratedfiler x

Indicate by check mark which statement item theregistrant has elected to follow. Item 17 x    Item 18 o

If this is an annual report, indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act). Yes o    No x

(APPLICABLE ONLY TO ISSUERS INVOLVED INBANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicateby check mark whether the registrant has filed all documents and reportsrequired to be filed by Section 12, 13 or 15(d) of the SecuritiesExchange Act of 1934 subsequent to the distribution of securities under a planconfirmed by a court. Yes o   No o

 

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**Contents**

| Cross Reference to  Form 20-F            |   | 2   |   |
|-----------------------------------------------|--------|-----|--------|
| Forward-looking  Statements                   |   | 6   |   |
| Non-GAAP  Financial Information               |   | 6   |   |
| Information on  the Company                   |   | 7   |   |
| Shareholder  Information                      |   | 20  |   |
| Corporate  Governance                         |   | 23  |   |
| Operating  and Financial Review and Prospects |   | 33  |   |
| Risk Factors                                  |   | 51  |   |
| Consolidated  Financial Statements            |   | 56  |   |
| Ten-Year Summary                              |   | 180 |   |
| Supplemental  Information                     |   | 185 |   |

 

TeliaSonera AB is a public limited liability companyincorporated under the laws of Sweden. TeliaSonera was created as a result ofthe merger of Telia AB and Sonera Corporation in December 2002. In thisannual report, references to “Group,” “Company,” “we,” “our,” “TeliaSonera” and“us” refer to TeliaSonera AB or TeliaSonera AB together with its subsidiaries,depending upon the context.

In this document, information about market share andpenetration for each country is based on our estimations. The market share isbased on the number of subscriptions, except for Sweden where the market shareis based on the estimated net sales of market participants. Penetration isbased on, for mobile services, the number of SIM cards as a percentage ofpopulation, for fixed voice services, the number of subscriptions as apercentage of population, and for Internet and broadband services, the numberof subscriptions as a percentage of households.

1

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**Cross Reference to Form 20-F**

Thefollowing cross reference table indicates where information required by Form 20-Fmay be found in this document.
| Form 20-F Item Heading | ** ** | ** **                                                   | ** ** | **Location in   this document**                                                                                                                                   | ** ** | **Page   No.** | ** ** |
|-----------------------------|------------|--------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------|------------|
| **PART I**             |       |                                                         |       |                                                                                                                                                              |       |
| **1**                       | ** ** | **Identity  of Directors, Senior Management and Advisors**   |       | Not applicable                                                                                                                                                    |       |           |       |
| **2**                       | ** ** | **Offer  Statistics and Expected Timetable**                 |       | Not applicable                                                                                                                                                    |       |           |       |
| **3**                       | ** ** | **Key  Information**                                         |       |                                                                                                                                                              |       |           |       |
|                        |       | A  Selected  Financial Data                        |       | Ten-Year Summary                                                                                                                                                  |       | 180            |       |
|                        |       |                                                         |       | Supplemental Information  Item 3.A—Selected Financial Data—  Exchange Rates                                                                             |       | 185            |       |
|                        |       | B  Capitalization  and Indebtedness                |       | Not applicable                                                                                                                                                    |       |           |       |
|                        |       | C  Reason  for the Offer and Use of Proceeds       |       | Not applicable                                                                                                                                                    |       |           |       |
|                        |       | D  Risk  Factors                                   |       | Risk Factors                                                                                                                                                      |       | 51             |       |
| **4**                       | ** ** | **Information  on the Company**                              |       |                                                                                                                                                              |       |           |       |
|                        |       | A  History  and Development of the Company         |       | Operating and Financial Review and Prospects  Liquidity and Capital Resources—  Acquisitions, Investments and Divestitures                                   |       | 39             |       |
|                        |       |                                                         |       | Liquidity and Capital Resources—Cash Flows                                                                                                                   |       | 38             |       |
|                        |       |                                                         |       | Information on the Company   History and Development of the Company                                                                                               |       | 7              |       |
|                        |       | B  Business  Overview                              |       | Information on the Company                                                                                                                                        |       | 7              |       |
|                        |       | C  Organizational  Structure                       |       | Supplemental Information   Item 4.C—Organizational Structure                                                                                                 |       | 186            |       |
|                        |       | D  Property,  Plants and Equipment                 |       | Notes to Consolidated Financial Statements Note 16  Property, Plant and Equipment, in particular section “Buildings and  land”                     |       | 97             |       |
|                        |       |                                                         |       | Note 27 Leasing Agreements, section “TeliaSonera as  lessee”                                                                                            |       | 128            |       |
| **4A**                      | ** ** | **Unresolved  Staff Comments**                               |       | Not applicable                                                                                                                                                    |       |           |       |
| **5**                       | ** ** | **Operating  and Financial Review and Prospects**            |       |                                                                                                                                                              |       |           |       |
|                        |       | A  Operating  Results                              |       | Non-GAAP Financial Information                                                                                                                                    |       | 6              |       |
|                        |       |                                                         |       | Operating and Financial Review and Prospects  Financial Results                                                                                                   |       | 33             |       |
|                        |       | B  Liquidity  and Capital Resources                |       | Operating and Financial Review and Prospects  Liquidity and Capital Resources                                                                                     |       | 38             |       |
|                        |       |                                                         |       | Notes to Consolidated Financial Statements Note 22  Financial Instruments and Financial Risk Management                                                           |       | 109            |       |
|                        |       | C  Research  and Development, Patents and Licenses |       | Operating and Financial Review and Prospects Research  and Development                                                                                            |       | 46             |       |
|                        |       |                                                         |       | Information on the Company   Licenses and Networks                                                                                                                |       | 15             |       |
|                        |       | D  Trend  Information                              |       | Operating and Financial Review and Prospects Trend  Information                                                                                                   |       | 47             |       |
|                        |       | E  Off-Balance  Sheet Arrangements                 |       | Operating and Financial Review and Prospects  Liquidity and Capital Resources—Off-Balance Sheet Arrangements                                                 |       | 42             |       |
|                        |       |                                                         |       | Notes to Consolidated Financial Statements Note 28  Contingencies, Other Contractual Obligations and Litigation, section  “Dependency on third parties” |       | 134            |       |
|                             |            |                                                              |            |                                                                                                                                                                   |            |                |            |  |  |

 

2

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| Form 20-F Item Heading | ** ** | ** **                                                            | ** ** | **Location in   this document**                                                                                                                                        | ** ** | **Page   No.** | ** ** |
|-----------------------------|------------|-----------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------|------------|
|                        |       | F  Tabular  Disclosure of Contractual Obligations           |       | Operating and Financial Review and Prospects  Liquidity and Capital Resources—Contractual Obligations                                                             |       | 40             |       |
| **6**                       | ** ** | **Directors,  Senior Management and Employees**                       |       |                                                                                                                                                                   |       |           |       |
|                        |       | A  Directors  and Senior Management                         |       | Corporate Governance                                                                                                                                                   |       | 23             |       |
|                        |       | B  Compensation                                             |       | Corporate Governance  Salary structure within TeliaSonera                                                                                                              |       | 30             |       |
|                        |       |                                                                  |       | Notes to Consolidated Financial Statements Note 31  Human Resources, sections “Remuneration to corporate officers” and “Stock-based  compensation” |       | 145            |       |
|                        |       |                                                                  |       | Note 4 Significant Accounting Policies, section  “Provisions for pensions and employment contracts”                                                          |       | 73             |       |
|                        |       | C  Board  Practices                                         |       | Corporate Governance  Responsibilities and duties of the Board of Directors                                                                                            |       | 26             |       |
|                        |       |                                                                  |       | Work of the Board of Directors during 2005                                                                                                                             |       | 26             |       |
|                        |       | D  Employees                                                |       | Information on the Company   Overview                                                                                                                                  |       | 7              |       |
|                        |       |                                                                  |       | Notes to Consolidated Financial Statements Note 31  Human Resources                                                                                                    |       | 143            |       |
|                        |       | E  Share  Ownership                                         |       | Corporate Governance   Composition of the Board of Directors                                                                                                           |       | 23             |       |
|                        |       |                                                                  |       | Executive Management and Group Vice Presidents                                                                                                                         |       | 28             |       |
|                        |       |                                                                  |       | Notes to Consolidated Financial Statements Note 31  Human Resources, section “Remuneration to corporate officers”                                            |       | 145            |       |
| **7**                       | ** ** | **Major  Shareholders and Related Party Transactions**                |       |                                                                                                                                                                   |       |           |       |
|                        |       | A  Major  Shareholders                                      |       | Shareholder Information                                                                                                                                                |       | 20             |       |
|                        |       |                                                                  |       | Supplemental Information   Item 7.A—Major Shareholders                                                                                                            |       | 186            |       |
|                        |       | B  Related  Party Transactions                              |       | Supplemental Information   Item 7.B—Related Party Transactions                                                                                                    |       | 186            |       |
|                        |       |                                                                  |       | Notes to Consolidated Financial Statements Note 10  Related Party Transactions                                                                                         |       | 81             |       |
|                        |       | C  Interests  of Experts and Counsel                        |       | Not applicable                                                                                                                                                         |       |           |       |
| **8**                       | ** ** | **Financial  Information**                                            |       |                                                                                                                                                                   |       |           |       |
|                        |       | A  Consolidated Statements and Other  Financial Information |       | Consolidated Financial Statements  See also Item 17                                                                                                                    |       | 56             |       |
|                        |       |                                                                  |       | Operating and Financial Review and Prospects Legal  and Regulatory Proceedings                                                                                         |       | 45             |       |
|                        |       |                                                                  |       | Shareholder Information                                                                                                                                                |       | 20             |       |
|                        |       | B  Significant  Changes                                     |       | Supplemental Information  Item 8.B—Significant Changes                                                                                                            |       | 187            |       |
| **9**                       | ** ** | **The  Offer and Listing**                                            |       |                                                                                                                                                                   |       |           |       |
|                        |       | A  Offer  and Listing Details                               |       | Supplemental Information  Item 9.A—Offer and Listing Details                                                                                                      |       | 187            |       |
|                        |       | B  Plan  of Distribution                                    |       | Not applicable                                                                                                                                                         |       |           |       |
|                        |       | C  Markets                                                  |       | Shareholder Information                                                                                                                                                |       | 20             |       |
|                        |       | D  Selling  Shareholders                                    |       | Not applicable                                                                                                                                                         |       |           |       |
|                        |       | E  Dilution                                                 |       | Not applicable                                                                                                                                                         |       |           |       |
|                        |       | F  Expenses  of the Issue                                   |       | Not applicable                                                                                                                                                         |       |           |       |
|                             |            |                                                                       |            |                                                                                                                                                                        |            |                |            |  |  |

 

3

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| Form 20-F Item Heading | ** ** | ** **                                                                        | ** ** | **Location in   this document**                                                                                  | ** ** | **Page   No.** | ** ** |
|-----------------------------|------------|-----------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------|------------|----------------|------------|
| **10**                      |       | **Additional  Information**                                                       |       |                                                                                                             |       |           |       |
|                        |       | A  Share  Capital                                                       |       | Not applicable                                                                                                   |       |           |       |
|                        |       | B  Memorandum  and Articles of Association                              |       | Supplemental Information  Item 10.B—Memorandum and Articles of Association                                  |       | 187            |       |
|                        |       | C  Material  Contracts                                                  |       | Supplemental Information  Item 10.C—Material Contracts                                                      |       | 191            |       |
|                        |       | D  Exchange  Controls                                                   |       | Supplemental Information  Item 10.D—Exchange Controls                                                       |       | 191            |       |
|                        |       | E  Taxation                                                             |       | Supplemental Information  Item 10.E—Taxation                                                                |       | 191            |       |
|                        |       | F  Dividends  and Paying Agents                                         |       | Not applicable                                                                                                   |       |           |       |
|                        |       | G  Statement  by Experts                                                |       | Not applicable                                                                                                   |       |           |       |
|                        |       | H  Documents  on Display                                                |       | Supplemental Information  Item 10.H—Documents on Display                                                    |       | 196            |       |
|                        |       | I  Subsidiary  Information                                              |       | Not applicable                                                                                                   |       |           |       |
| **11**                      | ** ** | **Quantitative  and Qualitative Disclosures About Market Risks**                  |       | Operating and Financial Review and Prospects  Financial Risk Management                                          |       | 42             |       |
|                        |       |                                                                              |       | Notes to Consolidated Financial Statements   Note 22 Financial Instruments and Financial Risk Management         |       | 109            |       |
| **PART II**            |       |                                                                              |       |                                                                                                             |       |
| **12**                      | ** ** | **Description  of Securities Other than Equity Securities**                       |       | Not applicable                                                                                                   |       |           |       |
| **13**                      | ** ** | **Defaults,  Dividend Arrearages and Delinquencies**                              |       | None                                                                                                             |       |           |       |
| **14**                      | ** ** | **Material  Modifications to the Rights of Security Holders and Use of Proceeds** |       | None                                                                                                             |       |           |       |
| **15**                      | ** ** | **Controls  and Procedures**                                                      |       | Supplemental Information  Item 15—Controls and Procedures                                                   |       | 196            |       |
| **16A**                     | ** ** | **Audit  Committee Financial Expert**                                             |       | Corporate Governance  Responsibilities and duties of the Board of Directors                                      |       | 26             |       |
| **16B**                     | ** ** | **Code of  Ethics**                                                               |       | Corporate Governance  Code of ethics                                                                             |       | 31             |       |
| **16C**                     | ** ** | **Principal  Accountants Fees and Services**                                      |       | Notes to Consolidated Financial Statements   Note 33 Auditors’ Fees and Services                            |       | 158            |       |
| ** **                  | ** ** | ** **                                                                        |       | Supplemental Information  Item 16.C—Principal Accountants Fees and Services                                 |       | 196            |       |
| **16D**                     | ** ** | **Exemptions  from the Listing Standards for Audit Committees**                   |       | Not applicable                                                                                                   |       |           |       |
| **16E**                     | ** ** | **Purchases  of Equity Securities by the Issuer and Affiliated Purchasers**       |       | Supplemental Information  Item 16.E—Purchases of Equity Securities by the Issuer and Affiliated  Purchasers |       | 197            |       |
| **PART III**           |       |                                                                              |       |                                                                                                             |       |
| **17**                      | ** ** | **Financial  Statements**                                                         |       | Consolidated Income Statements                                                                                   |       | 57             |       |
|                        |       |                                                                              |       | Consolidated Balance Sheets                                                                                      |       | 58             |       |
|                        |       |                                                                              |       | Consolidated Cash Flow Statements                                                                                |       | 59             |       |
|                        |       |                                                                              |       | Consolidated Statements of Changes in Equity                                                                     |       | 60             |       |
|                        |       |                                                                              |       | Notes to Consolidated Financial Statements                                                                       |       | 61             |       |
|                        |       |                                                                              |       | Reports of Independent Registered Public Accounting  Firms                                                       |       | 178            |       |
| **18**                      | ** ** | **Financial  Statements**                                                         |       | Not applicable                                                                                                   |       |           |       |
|                             |            |                                                                                   |            |                                                                                                                  |            |                |            |  |  |  |  |

 

 

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| Form 20-F   Item Heading | ** ** | ** **      | ** ** | **Location in   this document**                                                                                                                                                                                                                                                                                                         | ** ** | **Page   No.** | ** ** |
|-------------------------------|------------|-----------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------|------------|
| **19**                        | ** ** | **Exhibits**    |       |                                                                                                                                                                                                                                                                                                                                    |       |           |       |
|                          |       |   1   |       | Articles of Association of TeliaSonera AB  (incorporated herein by reference to Exhibit 1 to the Annual Report on  Form 20-F for the period ended December 31, 2004, filed by  TeliaSonera AB with the Securities and Exchange Commission on April 7,  2005)                                                        |       |           |       |
|                          |       |   4.1 |       | Combination Agreement, dated as of March 26,  2002, by and between Telia AB and Sonera Corporation (incorporated herein by  reference to Exhibit 2.1 to the Registration Statement on Form F-4  filed by Telia AB with the Securities and Exchange Commission on  October 1, 2002 (the “Form F-4”)). |       |           |       |
|                          |       |   4.2 |       | Amendment to the Combination Agreement, dated as of  September 27, 2002, by and between Telia and Sonera (incorporated herein  by reference to Exhibit 2.2 to the Form F-4).                                                                                                                                             |       |           |       |
|                          |       |   4.3 |       | Framework Agreement, dated as of March 15, 2001,  between Telia AB and Telia Mobile AB, NetCom AB and Tele2 AB (incorporated  herein by reference to Exhibit 10.1 to the Form F-4).                                                                                                                                      |       |           |       |
|                          |       |   4.4 |       | Shareholder Agreement, dated as of March 15,  2001, between Telia AB, Telia Mobile AB, NetCom AB and Tele2 AB (incorporated  herein by reference to Exhibit 10.2 to the Form F-4).                                                                                                                                       |       |           |       |
|                          |       |   4.5 |       | Registration Rights Agreement, dated as of September 27,  2002 between Telia AB and the Kingdom of Sweden (incorporated herein by  reference to Exhibit 10.3 to the Form F-4).                                                                                                                                           |       |           |       |
|                          |       |   4.6 |       | Registration Rights Agreement, dated as of  September 27, 2002, between Telia AB and the Republic of Finland  (incorporated herein by reference to Exhibit 10.4 to the Form F-4).                                                                                                                                        |       |           |       |
|                          |       |   6   |       | See Note 21 to Consolidated Financial Statements,  section “Earnings per share and dividends.”                                                                                                                                                                                                                                |       | 109            |       |
|                          |       |   7   |       | For definitions of certain ratios used in this  report, see Ten-Year Summary.                                                                                                                                                                                                                                                           |       | 180            |       |
|                          |       |   8   |       | For significant subsidiaries as of the end of the  year covered by this annual report, see Supplemental Information, Item  4.C—Organizational Structure.                                                                                                                                                                           |       | 186            |       |
|                          |       | 12.1            |       | Certification by  the Chief Executive Officer pursuant to Section 302 of the Sarbanes  Oxley Act 2002.                                                                                                                                                                                                                             |       |           |       |
|                          |       | 12.2            |       | Certification by  the Chief Financial Officer pursuant to Section 302 of the Sarbanes  Oxley Act of 2002.                                                                                                                                                                                                                          |       |           |       |
|                          |       | 13.1            |       | Certification by  the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as  adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.                                                                                                                                                                      |       |           |       |
|                          |       | 13.2            |       | Certification by the Chief Financial Officer pursuant  to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of  the Sarbanes Oxley Act of 2002.                                                                                                                                                                      |       |           |       |
|                               |            |                 |            |                                                                                                                                                                                                                                                                                                                                         |            |                |            |  |  |

 

5

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**Forward-looking Statements**

This annual report contains forward-lookingstatements. Statements that are not historical facts, including statementsabout our beliefs and expectations, are forward-looking statements andcan be identified by the context, including the use of forward-lookingterminology such as the words “believe,” “expect,” “seek,” “plan,” “intend,” “anticipate,”“estimate,” or “predict.” These statements are based on current plans,estimates and projections. Forward-looking statements involve inherentrisks and uncertainties. A number of factors, including factors beyond thecontrol or knowledge of TeliaSonera, could cause actual results or outcomes todiffer materially from those expressed in any forward-looking statement.These factors include, but are not limited to, the following:

·       the level of demand fortelecommunications services generally and for particular services such asmobile services;

·       regulatory developments andchanges, including with respect to the levels of tariffs, the terms ofinterconnection, customer access and national roaming;

·       the outcome of legal andregulatory proceedings in which we are involved, may become involved or areaffected by;

·       the effects of competitionfrom current and future competitors, products and services;

·       technological innovations,including the cost of developing new products and the need to increaseexpenditures to improve the quality of service;

·       the performance ofUniversal Mobile Telecommunications System (UMTS) networks and other new, enhancedor upgraded networks, systems, products and services;

·       the success of ourinternational investments;

·       changes in thetelecommunications industry generally, including as a result of mergers andconsolidations;

·       fluctuations in interestrates, exchange rates, currency devaluations and other macroeconomic factors,including governmental actions such as devaluations; and

·       other factors, includingthose described under “Risk Factors.”

We undertake no obligation to update or alter ourforward-looking statements, whether as a result of new information,future events or otherwise.

**Non-GAAP Financial Information**

Inthis document, we use non-GAAP financial measures called “EBITDA” and “EBITDAexcluding non-recurring items” in addition to the presentation of operatingincome. We believe that especially “EBITDA excluding non-recurring items” is ameasure commonly reported and widely used by analysts, investors and otherinterested parties in the telecommunications industry. Accordingly, we havepresented “EBITDA excluding non-recurring items” to enhance understanding ofour operating performance in 2005, 2004 and 2003. See Note 30 to ourconsolidated financial statements for more details and the reconciliation of “EBITDAexcluding non-recurring items” to operating income.

Additionally,we present a non-GAAP financial measure called “free cash flow,” which wedefine as cash flow from operating activities less cash used to acquireintangible assets and property, plant and equipment. We believe that “free cashflow” is a measure commonly reported and widely used by analysts, investors andother interested parties in the telecommunications industry. Accordingly, wehave presented “free cash flow” to enhance understanding of our cash flowgeneration in 2005, 2004 and 2003. However, our definition of “free cash flow”may not be directly comparable to other similarly titled measures for othercompanies.

6

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**Information on theCompany**

**Contents**

|                                         | ** ** | **Page** | ** ** |
|-----------------------------------------|------------|----------|------------|
| Overview                                |       |     | 7          |   |   |
| History  and Development of the Company |       |     | 7          |   |   |
| Strategic Focus                         |       |     | 8          |   |   |
| Business Structure                      |       |     | 8          |   |   |
| Markets  and Operations                 |       |     | 10         |   |   |
| Marketing  and Distribution             |       |     | 14         |   |   |
| Licenses  and Networks                  |       |     | 15         |   |   |
| Regulation                              |       |     | 16         |   |   |

 

*Overview*

We are the leadingprovider of telecommunications services in the Nordic and Baltic region. We arealso a leading provider of mobile services in Eurasia and have significantholdings in leading mobile operators in Turkey and Russia. For the year ended December 31,2005, our net sales amounted to SEK 87.7 billion and our operatingincome to SEK 17.5 billion, and we had on average approximately 27,400employees. For detailed information on our employees, see Note 31 to ourconsolidated financial statements.

*Historyand Development of the Company*

TeliaSonera AB is a public limited liability companyincorporated under the laws of Sweden. TeliaSonera was created as a result ofthe merger of Telia AB and Sonera Corporation in December 2002. Origins ofTelia date back to a public service corporation, Televerket, established by theSwedish State in the beginning of the 1850s. Origins of Sonera date back to astate organization, the Telegraph Office of Finland, established in 1917.

The merger of Telia and Sonera brought together two ofthe leading telecommunications companies in the Nordic region to form theleading telecommunications group in the Nordic and Baltic regions. Theformation of TeliaSonera in December 2002 was the culmination of a sharedstrategic vision of Telia and Sonera to create a leading telecommunicationscompany in the Nordic countries.

We present our segment information based on thefollowing principally geographical-based reporting units: (1) Sweden,(2) Finland, (3) Norway, (4) Denmark (5) the Balticcountries, (6) Eurasia, (7) Russia, (8) Turkey, and (9) Otheroperations, which comprise TeliaSonera International Carrier and TeliaSoneraHolding.

The shares of TeliaSonera are listed on the Stockholmand Helsinki stock exchanges. On August 6, 2004, we completed thedelisting of our ADSs from the Nasdaq National Market.

Our principal executiveoffice is located at Sturegatan 1, SE-106 63 Stockholm, Sweden, and ourtelephone number in Sweden is +46-8-504 550 00. Our agent in theUnited States is TeliaSonera International Carrier, Inc., 2201 CooperativeWay, Suite 302, Herndon, Virginia, 20171, and its telephone number is +1-703-546-4000.Our website is *www.teliasonera.com*.Information on our website does not form part of this document.

7

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*Strategic Focus*

Our strategy is based on dual opportunities stemmingfrom operations in markets with different degrees of maturity. In the moremature home markets in the Nordic and Baltic countries our strategic prioritiesare to create growth via new mobile and IP-based services and offers, increasesimplicity in services and consider selected acquisitions. In addition, we willmaintain profitability via the ongoing programs to achieve competitive costlevels and the focusing of the service portfolio. In the more emergingInternational Mobile operations in Eurasia, Russia and Turkey our strategy isto exploit the inherent growth and enhance the value of the companies. Based onthe current strengths in these regions, complementary acquisitions can beconsidered, which may lead to additional growth.

By taking advantage of the opportunities available inour two different markets, the Group creates value development that gives usthe strength to actively participate in a future consolidation of the Europeanmarket.

The strong multidomestic presence of our operationsenhances our strength from a more global perspective and provides us with notonly regional economies of scale but also the opportunity to lead the migrationfrom fixed to mobile and IP-based services.

We are also focusing ondeveloping the commercial competence that a customer-driven company with afocus on mobile and IP-based services requires.

*Business Structure*

We operate as an integrated company with country basedprofit centers and strong corporate Head Office control over group matters. Theindependence of the profit centers is limited by corporate control mainly toexploit synergies and scale advantages. A customer perspective analysis is thebasis for decision making in profit centers and on group level.

The geographic profit centers have full profitresponsibility for their business and are responsible for all operations,including marketing, sales, product and service development as well asproduction and network operations, unless decisions are made to exploit groupsynergies and scale advantages. In the latter case, certain operations areshared between profit centers and costs are allocated accordingly. The profitcenters make autonomous operational decisions within the framework of centrallyestablished corporate policies and road maps. Within the geographic profitcenters, operations are organized based on the offerings in each market andvary according to the demands of the local market.

Corporate Head Office acts on behalf of the CEO bymaking policies, by coordinating TeliaSonera group matters and by exercising astrong central control to exploit scale advantages and synergies.

As part of the Corporate Head Office, we have alsoestablished two group-wide units: (1) Marketing, Products and Services(MPS) and (2) Networks and Technology (NT). These are operational unitswith significant decision-making authorities and have the groupresponsibility for exploiting scale advantages and synergies. Corporatepolicies and road maps are used to set the framework for decisions in theprofit centers.

Our MPS unit is responsible for common products andservices, use of brands, pricing policies, common marketing and market segmentinitiatives, global account management, common research and development, andcommon lobbying initiatives. Our NT unit is responsible for network strategyand overall architecture, common network systems, IT strategy and overallarchitecture, common IT systems, corporate sourcing, and key vendor contracts.

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Norway, Denmark and the Baltic countries (NDB) is anoperational unit with the same responsibilities as profit centers but operatingwithin the Corporate Head Office on a delegated authority from the CEO toassist in managing the large number of country based profit centers.

Additionally,we have created several competence centers that focus on high-priority areasfor our business and take care of our common resources. These competencecenters are located and hosted within the geographical profit centers, andconsist of specialists with expertise within a particular technology or productor service area. MPS and NT manage the competence centers required to carry outtheir responsibilities. Other competence centers and common resources aremanaged by each profit center on behalf of others.

****

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*Markets andOperations*

The following tablespresent a summary of our operations, our market position and our maincompetitors in each of the markets we operate, as of December 31, 2005.

***Mobile customers and competition by market***

| **Country**            | ** ** | ** **    | ** ** | **Population   (1)** | ** ** | **Pene-  tration  (2)** | ** ** | **Our main  brands** | ** ** | **Owner-  ship(3)**             | ** ** | **Market  share(4)** | ** ** | **Sub-  scriptions(5)** | ** ** | **Of which  pre-paid** | ** ** | **Growth   (6)** | ** ** | **Main  competitors  (7)** | ** ** |
|------------------------|------------|---------------|------------|---------------------------|------------|-------------------------|------------|---------------------------|------------|---------------------------------|------------|----------------------|------------|-------------------------|------------|-----------------------------|------------|-----------------------|------------|----------------------------|------------|
| ** **             | ** ** | **(million)** | ** ** | **(%)**                   | ** ** | ** **              | ** ** | **(%)**                   | ** ** | **(%)**                         | ** ** | **(thousand)**       | ** ** | **(%)**                 | ** ** | **(%)**                     | ** ** | ** **            | ** ** |
| *Consolidated*         |       |          |       |                      |       |                    |       |                      |       |                            |       |                 |       |                    |       |                        |       |                  |       |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Sweden                 |       |          | 9.0        |                      |       |                    | 101        |                      |       | Telia,    Halebop               |       |                 | 100.0      |                    |       |                        | 52         |                  |       |                       | 4,387      |   |   |   | 55 |   |   |   | 3.4 |   |   |   | Tele2,    Telenor,   “3” |   |   |
| Finland                |       |          | 5.3        |                      |       |                    | 99         |                      |       | Sonera,    Tele Finland         |       |                 | 100.0      |                    |       |                        | 47         |                  |       |                       | 2,507      |   |   |   | 4 |   |   |   | 9.1 |   |   |   | Elisa,  DNA |   |   |
| Norway                 |       |          | 4.6        |                      |       |                    | 104        |                      |       | NetCom,    Chess                |       |                 | 100.0      |                    |       |                        | 34         |                  |       |                       | 1,651      |   |   |   | 35 |   |   |   | 26.2 |   |   |   | Telenor,    Tele2 |   |   |
| Denmark                |       |          | 5.4        |                      |       |                    | 97         |                      |       | Telia                           |       |                 | 100.0      |                    |       |                        | 22         |                  |       |                       | 1,154      |   |   |   | 27 |   |   |   | 3.5 |   |   |   | TDC,    Sonofon,   Debitel |   |   |
| Lithuania              |       |          | 3.4        |                      |       |                    | 112        |                      |       | Omnitel,    Ezys                |       |                 | 100.0      |                    |       |                        | 49         |                  |       |                       | 1,889      |   |   |   | 59 |   |   |   | 41.2 |   |   |   | Bite,  Tele2 |   |   |
| Latvia                 |       |          | 2.3        |                      |       |                    | 71         |                      |       | Latvijas    Mobilais   Telefons |       |                 | 60.3       |                    |       |                        | 45         |                  |       |                       | 735        |   |   |   | 34 |   |   |   | 13.3 |   |   |   | Tele2,    Zetcom |   |   |
| Estonia                |       |          | 1.3        |                      |       |                    | 106        |                      |       | EMT,   Diil                     |       |                 | 50.3       |                    |       |                        | 47         |                  |       |                       | 677        |   |   |   | 40 |   |   |   | 13.8 |   |   |   | Tele2,  Elisa |   |   |
| Kazakhstan             |       |          | 14.8       |                      |       |                    | 33         |                      |       | KCell                           |       |                 | 51.0       |                    |       |                        | 67         |                  |       |                       | 3,320      |   |   |   | 73 |   |   |   | 85.0 |   |   |   | K-mobile,    Altel,   Dalacom |   |   |
| Azerbaijan             |       |          | 8.4        |                      |       |                    | 27         |                      |       | Azercell                        |       |                 | 51.3       |                    |       |                        | 78         |                  |       |                       | 1,741      |   |   |   | 95 |   |   |   | 34.9 |   |   |   | Bakcell |   |   |
| Georgia                |       |          | 4.5        |                      |       |                    | 30         |                      |       | Geocell                         |       |                 | 83.2       |                    |       |                        | 49         |                  |       |                       | 715        |   |   |   | 91 |   |   |   | 48.6 |   |   |   | Magticom |   |   |
| Moldova                |       |          | 3.5        |                      |       |                    | 23         |                      |       | Moldcell                        |       |                 | 100.0      |                    |       |                        | 47         |                  |       |                       | 370        |   |   |   | 84 |   |   |   | 23.7 |   |   |   | Voxtel |   |   |
| Total                  |       |          | 62.5       |                      |       |                    |       |                      |       |                            |       |                 |       |                    |       |                        |       |                  |       |                       | 19,146     |   |   |   | 53 |   |   |   | 24.2 |   |   |   |   |   |   |
| *Associated companies* |       |          |       |                      |       |                    |       |                      |       |                            |       |                 |       |                    |       |                        |       |                  |       |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Russia                 |       |          | 143.2      |                      |       |                    | 87         |                      |       | MegaFon                         |       |                 | 43.8       |                    |       |                        | 18         |                  |       |                       | 22,836     |   |   |   | 36 |   |   |   | 67.3 |   |   |   | MTS,   Vimpelcom |   |   |
| Turkey                 |       |          | 73.2       |                      |       |                    | 60         |                      |       | Turkcell                        |       |                 | 37.3       |                    |       |                        | 64         |                  |       |                       | 26,700     | (8) |   |   | 80 |   |   |   | 19.7 |   |   |   | Telsim,    Avea |   |   |
| Ukraine                |       |          | 46.5       |                      |       |                    | 64         |                      |       | life:)                          |       |                 | 20.3       | (9)                     |       |                        | 5          |                  |       |                       | 1,300      | (8) |   |   | n/a | (10) |   |   | n/a |   |   |   | Kyivstar,  UMC |   |   |
| Total                  |       |          | 262.9      |                      |       |                    |       |                      |       |                            |       |                 |       |                    |       |                        |       |                  |       |                       | 50,836     |   |   |   | 61 |   |   |   | 41.4 |   |   |   |   |   |   |

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(1)             Source: UN Common Database, estimate as of December 31,2005. Except for Moldova, where the local official statistics are used.

(2)             Estimated penetration rate as of December 31,2005, measured as the number of SIM cards divided by the amount of population.Rates between countries may not be directly comparable especially due to manypre-paid customers holding more than one pre-paid SIM card at a time. Thehigher the share of pre-paid customers on the market, the higher the SIM cardpenetration rate is likely to be. Source: TeliaSonera estimates.

(3)             Ownership as of December 31, 2005. For Estonia,our ownership has increased in 2006 and was 53.7 percent as of March 2,2006. For Kazakhstan, Azerbaijan, Georgia and Moldova, the number indicates FinturHolding B.V’s ownership in the four companies. We hold directly and indirectly74.0 percent in Fintur Holdings. For other companies, the number indicatesour share of net income of the company, including both direct and indirectownership.

(4)             Based on the number of subscriptions on the market,except for Sweden where market share is based on estimated net sales of themarket participants. Source: TeliaSonera estimates.

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(5)             Excluding customers through service providers operatingin our networks. Amount of customers as of December 31, 2005, except forTurkey and Ukraine as of September 30, 2005.

(6)             Growth in the amount of subscriptions between December 31,2004 and December 31, 2005, except for Turkey between September 30,2004 and September 30, 2005.

(7)             Competitors with at least a five percent market share.

(8)             As of September 30, 2005. We report our holding inTurkcell with a one-quarter lag. As of December 31, 2005, Turkcell had27.9 million customers in Turkey and 2.5 million customers in Ukraine.

(9)             Through our ownership in Turkcell.

(10)       Information not available.

***Fixed voicecustomers and competition by market***

| **Country**            | ** ** | ** **    | ** ** | **Population (1)** | ** ** | **Pene-  tration  (2)** | ** ** | **Our main  brand** | ** ** | **Owner-  ship(3)**   | ** ** | **Market  share(4)** | ** ** | **End   customer   subscriptions** | ** ** | **Change   (5)** | ** ** | **Main  competitors   (6)** | ** ** |
|------------------------|------------|---------------|------------|-------------------------|------------|-------------------------|------------|--------------------------|------------|-----------------------|------------|----------------------|------------|----------------------------------------------|------------|-----------------------|------------|----------------------------------|------------|
| ** **             | ** ** | **(million)** | ** ** | **(%)**                 | ** ** | ** **              | ** ** | **(%)**                  | ** ** | **(%)**               | ** ** | **(thousand)**       | ** ** | **(%)**                                      | ** ** | ** **            | ** ** |
| *Consolidated*         |       |          |       |                    |       |                    |       |                     |       |                  |       |                 |       |                                         |       |                  |       |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Sweden                 |       |          | 9.0        |                    |       |                    | 70         |                     |       | Telia                 |       |                 | 100.0      |                                         |       |                  | 53         |                             |       |   | 5,036 |   |   |   | -17.6 |   |   |   | Tele2,  Telenor |   |   |
| Finland                |       |          | 5.3        |                    |       |                    | 40         |                     |       | Sonera,    Auria      |       |                 | 100.0      |                                         |       |                  | 31         |                             |       |   | 647 |   |   |   | -12.6 |   |   |   | Elisa,  Finnet |   |   |
| Denmark                |       |          | 5.4        |                    |       |                    | 63         |                     |       | Telia                 |       |                 | 100.0      |                                         |       |                  | 5          |                             |       |   | 195 |   |   |   | -8.0 |   |   |   | TDC,  Tele2 |   |   |
| Lithuania              |       |          | 3.4        |                    |       |                    | 23         |                     |       | Lietuvos    Telekomas |       |                 | 60.0       |                                         |       |                  | 99         |                             |       |   | 798 |   |   |   | -2.6 |   |   |   | — |   |   |
| Estonia                |       |          | 1.3        |                    |       |                    | 31         |                     |       | Elion                 |       |                 | 50.3       |                                         |       |                  | 85         |                             |       |   | 388 |   |   |   | -8.9 |   |   |   | Tele2, Starman |   |   |
| Total                  |       |          | 24.4       |                    |       |                    |       |                     |       |                  |       |                 |       |                                         |       |                  |       |                             |       |   | 7,064 |   |   |   | -15.0 |   |   |   |   |   |   |
| *Associated companies* |       |          |       |                    |       |                    |       |                     |       |                  |       |                 |       |                                         |       |                  |       |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Latvia                 |       |          | 2.3        |                    |       |                    | 27         |                     |       | Lattelekom            |       |                 | 49.0       |                                         |       |                  | 98         |                             |       |   | 624 |   |   |   | -1.1 |   |   |   | — |   |   |

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(1)             Source: UN Common Database, estimate as of December 31,2005.

(2)             Estimated penetration rate as of December 31,2005, measured as the number of subscriptions divided by the amount ofpopulation. Source: TeliaSonera estimates.

(3)             Ownership as of December 31, 2005. For Estonia,our ownership has increased in 2006 and was 53.7 percent as of March 2,2006.

(4)             Based on the number of subscriptions on the market,except for Sweden where market share is based on estimated net sales of themarket participants from fixed voice traffic. Source: TeliaSonera estimates.

(5)             Change in the amount of subscriptions between December 31,2004 and December 31, 2005.

(6)             Competitors with at least a five percentmarket share.

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***Internet andbroadband customers and competition by market***

| **Country**            | ** ** | ** **    | ** ** | **Population(1)** | ** ** | **Pene-  tration  (2)** | ** ** | **Our main  brand** | ** ** | **Owner-  ship(3)**   | ** ** | **Market  share(4)** | ** ** | **Sub-  scriptions(5)** | ** ** | **Of which  broadband** | ** ** | **Growth  (6)** | ** ** | **Main  competitors  (7)** | ** ** |
|------------------------|------------|---------------|------------|-------------------|------------|-------------------------|------------|--------------------------|------------|-----------------------|------------|----------------------|------------|-------------------------|------------|------------------------------|------------|-----------------|------------|----------------------------|------------|
| ** **             | ** ** | **(million)** | ** ** | **(%)**           | ** ** | ** **              | ** ** | **(%)**                  | ** ** | **(%)**               | ** ** | **(thousand)**       | ** ** | **(%)**                 | ** ** | **(%)**                      | ** ** | ** **      | ** ** |
| *Consolidated*         |       |          |       |              |       |                    |       |                     |       |                  |       |                 |       |                    |       |                         |       |            |       |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Sweden                 |       |          | 9.0        |              |       |                    | 81         |                     |       | Telia                 |       |                 | 100.0      |                    |       |                         | 41         |            |       |                       | 1,439      |   |   |   | 50 |   |   |   | 6.6 |   |   | Telenor,   Com Hem,   UPC |   |
| Finland                |       |          | 5.3        |              |       |                    | 56         |                     |       | Sonera                |       |                 | 100.0      |                    |       |                         | 32         |            |       |                       | 426        |   |   |   | 82 |   |   |   | 19.7 |   |   | Elisa, Finnet,   HTV |   |
| Denmark                |       |          | 5.4        |              |       |                    | 40         |                     |       | Telia,    Telia Stofa |       |                 | 100.0      |                    |       |                         | 14         |            |       |                       | 151        |   |   |   | 100 |   |   |   | 19.8 |   |   | TDC, Tele2,   Cybercity |   |
| Lithuania              |       |          | 3.4        |              |       |                    | 6          |                     |       | Lietuvos    Telekomas |       |                 | 60.0       |                    |       |                         | 45         |            |       |                       | 126        |   |   |   | 83 |   |   |   | 46.5 |   |   | Skynet,   Telerena,   Balticum TV |   |
| Estonia                |       |          | 1.3        |              |       |                    | 32         |                     |       | Elion                 |       |                 | 50.3       |                    |       |                         | 50         |            |       |                       | 121        |   |   |   | 88 |   |   |   | 22.2 |   |   | Tele2, |   |
|                   |       |          |       |              |       |                    |       |                     |       |                  |       |                 |       |                    |       |                         |       |            |       |                       |       |   |   |   |   |   |   |   |   |   |   | Starman |   |
| Total                  |       |          | 24.4       |              |       |                    |       |                     |       |                  |       |                 |       |                    |       |                         |       |            |       |                       | 2,263      |   |   |   | 63 |   |   |   | 12.2 |   |   |   |   |
| *Associated companies* |       |          |       |              |       |                    |       |                     |       |                  |       |                 |       |                    |       |                         |       |            |       |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Latvia                 |       |          | 2.3        |              |       |                    | 13         |                     |       | Lattelekom            |       |                 | 49.0       |                    |       |                         | 30         |            |       |                       | 68         |   |   |   | 100 |   |   |   | 74.4 |   |   | Baltkom TV,   Izzi |   |

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(1)             Source: UN Common Database, estimate as of December 31,2005.

(2)             Estimated consumer broadband household penetration rateas of December 31, 2005, measured as the number of consumer subscriptionsdivided by the number of households. Source: TeliaSonera estimates.

(3)             Ownership as of December 31, 2005. For Estonia,our ownership has increased in 2006 and was 53.7 percent as of March 2,2006.

(4)             Estimated broadband market share. Based on the numberof subscriptions on the market, except for Sweden where market share is basedon estimated net sales of the market participants from consumer broadbandservices. Source: TeliaSonera estimates.

(5)             Including dial-up Internet and broadband access. InDenmark and Latvia, only broadband access.

(6)             Growth in the amount of subscriptions between December 31,2004 and December 31, 2005.

(7)             Competitors in broadband with at least afive percent market share.

We are subject to substantial and historicallyincreasing competition. Virtually all of our markets are characterized bydirect and indirect competition. The scope and the potential financial impactof increasing competition are further discussed in “Risk Factors.”

**Sweden**

In Sweden, we offer a wide range of mobile, fixedvoice, datacom, Internet and broadband services for businesses, consumers andorganizations and also provide wholesale services to operators and serviceproviders. We do business on the retail market under the brands Telia andHalebop and market wholesale products under the brands Skanova and Telia. Weare the leader in Sweden within all our product areas. The Swedish marketrepresented approximately 44 percent of our consolidated net sales in2005.

**Finland**

InFinland, we offer a wide range of mobile, fixed voice, datacom, Internet andbroadband services for businesses, consumers and organizations and also providewholesale services to operators and service providers. We do business on theFinnish market under the brands Sonera, Auria and Tele Finland. We are theleading provider in Finland of mobile, broadband and corporate data servicesand one of the three largest operators in fixed voice services. The Finnishmarket represented approximately 18 percent of our consolidated net salesin 2005.

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**Norway**

We are the second largestmobile operator on the Norwegian market, where we offer mobile services underthe NetCom and Chess brands. We acquired the service operator Chess in November 2005,and are in the process of gradually transferring the traffic of Chess customersinto our network. The Norwegian market represented approximately eight percentof our consolidated net sales in 2005.

**Denmark**

We offer both mobile andfixed services, cable TV services and broadband Internet access in Denmark. Weoffer mobile and fixed voice services under the Telia brand and cable TV andbroadband services under the Telia Stofa brand. We have completed theintegration of our Danish mobile operations and the Orange Denmark operationswhich we acquired in  October 2004. Weare the third largest mobile operator, the third largest provider of fixedvoice to end users, the second largest provider of broadband services, and thesecond largest cable TV operator in Denmark. The Danish market representedapproximately eight percent of our consolidated net sales in 2005.

**The Baltic Countries**

We offer mobile, fixedvoice, Internet and broadband services in each of the three Baltic countries.In Lithuania, we offer mobile services under the Omnitel brand and fixednetwork services through Lietuvos Telekomas, our 60 percent ownedsubsidiary, which is also listed on the Vilnius and London stock exchanges. InLatvia, we offer mobile services through our 60.3 percent owned subsidiaryLatvijas Mobilais Telefons and fixed network services through Lattelekom, a49 percent owned associated company. In Estonia, we offer mobile servicesthrough EMT and fixed line services through Elion, both of which are53.7 percent owned subsidiaries. Eesti Telekom, the holding company forEMT and Elion, is listed on the Tallinn and London stock exchanges. The Balticmarkets represented approximately ten percent of our consolidated net sales in2005.

**Eurasia**

We offer mobile servicesin four Eurasian countries through Fintur, in which we have a direct and indirect74.0 percent interest. Fintur’s other shareholder is Turkcell, ourassociated company in Turkey. In Kazakhstan, Fintur owns 51 percent of thecountry’s leading mobile operator, KCell. In Azerbaijan, Fintur owns51.3 percent of the country’s leading mobile operator, Azercell. InGeorgia, Fintur owns 83.2 percent of Geocell, the country’s second largestmobile operator. In Moldova, Fintur holds 100 percent of Moldcell, thecountry’s second largest mobile operator. The Eurasian markets representedapproximately seven percent of our consolidated net sales in 2005.

**Russia**

We have a combined directand indirect 43.8 percent interest in MegaFon, the third largest mobileoperator in Russia. MegaFon is a pan-Russian operator offering mobile servicesin 76 of the 88 federal regions, with licenses covering all the 88 federalregions. The other major shareholders in MegaFon are OJSC Telecominvest, OJSCCT-Mobile, and IPOC International Growth Fund Limited. We do not consolidateMegaFon but include it as an associated company in our operating income.

**Turkey**

We have a combined directand indirect 37.3 percent interest in Turkcell, the largest mobileoperator in Turkey. Turkcell has also established a subsidiary in Ukraine witha local partner, which launched mobile operations in February 2005.Turkcell is listed on the Istanbul and New York stock exchanges. The othermajor shareholders are Cukurova Group, an industry conglomerate in Turkey,which has a combined 

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directand indirect 27.1 percent interest, and Alfa Group Consortium, an industryconglomerate in Russia, which, through Cukurova, purportedly has an indirect13.2 percent interest. We have disputed Cukurova’s right to sell the 13.2percent indirect stake to Alfa as a breach of shareholders’ agreement and aprevious share sale agreement with us, and have initiated arbitrationproceedings. We do not consolidate Turkcell but include it as an associatedcompany in our operating income.

**Other operations**

Other operations includes TeliaSonera InternationalCarrier, which comprises our international wholesale telecommunicationsoperations, and TeliaSonera Holding, which comprises our non-core/non-strategicoperations to be restructured, wound up or sold.

We provide wholesale services on the European market,offering international IP, capacity and voice services on a wholesale basis tolarger operators, service providers and system integrators. We are the largestprovider of wholesale services in the Nordic and Baltic regions and in thewestern part of Russia. We also have a strong position in the wholesaletelecommunications market in Central and Western Europe and with respect totrans-Atlantic traffic.

TeliaSonera Holding currently manages approximately110 investments, including investments in subsidiaries, associated companiesand other minority holdings. Our overall goal is to restructure, wind up,liquidate or sell all or a portion of our interest in the businesses managed byTeliaSonera Holding. In addition, we may also from time to time transferbusinesses from our profit centers to be managed by TeliaSonera Holding.

Other operationsrepresented approximately four percent of our consolidated net sales in 2005.

***Marketing and Distribution***

We are the leading telecommunications operator in theNordic and Baltic region. To maintain and improve our market position in theNordic and Baltic region we market our services to residential and businesssubscribers through sales agents, our own retailers in Sweden and Finland,independent distributors and resellers in all countries, and over the Internetvia our local web sites. We believe that our Internet channels provide a lowercost means of marketing our products and services than more traditionaldistribution and service channels. In each of the Nordic and Baltic countries,we operate using local brands.

Each of our subsidiaries in Kazakhstan, Azerbaijan,Georgia and Moldova, and our associated companies in Russia, Turkey andUkraine, operates using its own local brand and sells its services through itsown retail stores and/or external resellers.

We offer wholesale carrierservices under the TeliaSonera International Carrier brand, and sell ourservices primarily through our direct sales force.

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*Licenses andNetworks*

Thefollowing table presents the significant mobile network licenses held by oursubsidiaries and associated companies and information on the related networkinfrastructure:

| Country                    | ** ** | ** ** | ** ** | **License  type** | ** ** | **License  expiration date** | ** ** | **Network type**           | ** ** | **Network coverage** | ** ** | **Date when  commercial  services started** | ** ** |
|----------------------------|------------|------------|------------|-------------------|------------|-----------------------------------|------------|---------------------------------|------------|---------------------------|------------|-------------------------------------------------------|------------|
| ** **                 | ** ** | ** ** | ** ** | ** **        | ** ** | ** **                        | ** ** | **(% of population)** | ** ** | ** **                | ** ** |
| *Consolidated  operations* |       |       |       |              |       |                              |       |                            |       |                      |       |                                                  |       |   |   |
| Sweden                     |       |       | 1G         |              |       | December 2007                |       | NMT  450                        |       |                      | 99         |                                                  |       | October 1981 |   |
|                            |       |       | 2G         |              |       | December 2010                |       | GSM  900/1800                   |       |                      | 99         |                                                  |       | November 1992 |   |
|                            |       |       | 3G         | (1)               |       | December 2015                |       | UMTS                            |       |                      | 90         |                                                  |       | March 2004 |   |
| Finland                    |       |       | 2G         |              |       | November 2017                |       | GSM  900/1800                   |       |                      | 99         |                                                  |       | March 1992 |   |
|                       |       |       | 3G         |              |       | March 2019                   |       | UMTS                            |       |                      | 25         |                                                  |       | October 2004 |   |
| Norway                     |       |       | 2G         |              |       | December 2017                |       | GSM  900                        |       |                      | 99         | (2)                                                   |       | September 1993 |   |
|                            |       |       | 2G         |              |       | March 2010                   |       | GSM  1800                       |       |                      | 99         | (2)                                                   |       | — |   |
|                            |       |       | 3G         |              |       | December 2012                |       | UMTS                            |       |                      | 76         |                                                  |       | March 2005 |   |
| Denmark                    |       |       | 2G         |              |       | February 2011                |       | GSM  900                        |       |                      | 99         | (2)                                                   |       | — |   |
|                       |       |       | 2G         |              |       | June 2007                    |       | GSM  1800                       |       |                      | 99         | (2)                                                   |       | February 1998 |   |
|                       |       |       | 3G         |              |       | October 2021                 |       | UMTS                            |       |                      | —     |                                                  |       | No date set yet |   |
| Lithuania                  |       |       | 2G         |              |       | October 2007                 |       | GSM  900                        |       |                      | 99         | (2)                                                   |       | March 1995 |   |
|                            |       |       | 2G         |              |       | September 2008               |       | GSM  1800                       |       |                      | 99         | (2)                                                   |       | — |   |
|                            |       |       | 3G         |              |       | February 2026                |       | UMTS                            |       |                      | —     |                                                  |       | February 2006 |   |
| Latvia                     |       |       | 2G         |              |       | January 2016                 |       | GSM  900/1800                   |       |                      | 98         | (2)                                                   |       | January 1995 |   |
|                       |       |       | 3G         |              |       | December 2017                |       | UMTS                            |       |                      | 32         |                                                  |       | December 2004 |   |
| Estonia                    |       |       | 2G         |              |       | December 2010                |       | GSM  900/1800                   |       |                      | 99         |                                                  |       | January 1995 |   |
|                            |       |       | 3G         |              |       | July 2013                    |       | UMTS                            |       |                      | 20         |                                                  |       | October 2005 |   |
| Kazakhstan                 |       |       | 2G         |              |       | June 2013                    |       | GSM  900                        |       |                      | 62         |                                                  |       | February 1999 |   |
| Azerbaijan                 |       |       | 2G         |              |       | December 2016                |       | GSM  900                        |       |                      | 99         |                                                  |       | December 1996 |   |
| Georgia                    |       |       | 2G         |              |       | April 2007                   |       | GSM  900                        |       |                      | 96         | (2)                                                   |       | March 1997 |   |
|                       |       |       | 2G         |              |       | August 2009                  |       | GSM  900/1800                   |       |                      | 96         | (2)                                                   |       | — |   |
|                       |       |       | 2G         |              |       | May 2013                     |       | GSM  900                        |       |                      | 96         | (2)                                                   |       | — |   |
| Moldova                    |       |       | 2G         |              |       | November 2014                |       | GSM  900                        |       |                      | 89         |                                                  |       | May 2000 |   |
| *Associated companies*     |       |       |       |              |       |                              |       |                            |       |                      |       |                                                  |       |   |   |
| Russia                     |       |       | 2G         |              |       | 2008-2011(3)                      |       | GSM  900/1800                   |       |                      | n/a        | (4)                                                   |       | December 1994 |   |
| Turkey                     |       |       | 2G         |              |       | April 2023                   |       | GSM  900                        |       |                      | 100        | (5)                                                   |       | February 1994 |   |
| Ukraine                    |       |       | 2G         |              |       | November 2020                |       | GSM  900                        |       |                      | 66         | (2)                                                   |       | January 2006 |   |
|                            |       |       | 2G         |              |       | June 2008                    |       | GSM 1800                        |       |                      | 66         | (2)                                                   |       | February 2005 |   |

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(1)             Our network sharing agreement in Sweden, established in2001, gives us access to the UMTS license of our Swedish associated company,Svenska UMTS-nät AB, of which we own 50 percent. The other shareholder isTele2.

(2)             Combined GSM 900/1800 coverage.

(3)             Several regional licenses.

(4)             Information not available.

(5)             100% of population living in cities and towns of 5,000or more.

We have UMTS licenses in Finland, Norway, Denmark, thethree Baltic countries, and access to a UMTS license in Sweden through ournetwork sharing agreement with Tele2. No UMTS licenses have yet been issued inKazakhstan, Azerbaijan, Moldova, Russia and Turkey. In Georgia, one UMTS licensehas been issued to our main competitor, Magticom, after a license auction heldin 2005. In Ukraine, one UMTS license has been issued to Ukrtelecom, thenational fixed line operator.

In Denmark, following ouracquisition of Orange Denmark, we returned one of our two UMTS licenses to theDanish regulator in January 2005. We have not yet determined the timing ofthe launch for our third generation services in Denmark. We also currently holdtwo sets of GSM 900/1800 licenses and frequencies in Denmark, following ouracquisition of Orange Denmark. The Danish regulator issued a 

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decisionon November 11, 2005 that one set of GSM 900/1800 licenses and frequenciesshall be returned by October 1, 2006. We have filed an appeal on thedecision, and estimate that returning one set of licenses and frequencies wouldresult in additional network investments of approximately DKK 75 million, inorder to maintain the present service quality.

*Fixed-lineInfrastructure*

Our Swedish and Finnish fixed line networks featureall-digital transmission; all-digital local, trunk and international switchingwith wide access to ISDN; IP/Ethernet network; wide broadband access; and ATMand Frame Relay Network.

Our Danish fixed line networks feature all-digitaltransmission; all-digital local, trunk and international switching with wideaccess to ISDN; IP/Ethernet network; wide broadband access; and ATM.

Our Baltic companies’fixed line networks feature all-digital transmission; mainly digital localswitching, all-digital trunk and international switching with wide access toISDN; IP/Ethernet network; wide broadband access; and ATM and Frame RelayNetwork.

*InternationalNetwork*

We have established a highquality international fiber optic backbone network based on fiber optics andwavelength technology. Our network is based on a fully operational 19,800kilometer long duct/cable network with repeater stations in Europe. Our networkis connected to New York via the transatlantic cable system, TAT 14. Inaddition, our IP network is a global network with multiple high-speed links aswell as extensive interconnections to other Internet carriers across Europe andthe United States.

***Regulation***

**European Union**

As member states of the European Union (EU), Sweden,Finland, Denmark, Lithuania, Latvia and Estonia are required to follow EUregulations and enact domestic legislation to give effect to EU directives.Norway is under similar obligations as a party to the European Economic AreaAgreement.

In 2002, the European Parliament and the Counciladopted a new regulatory framework for electronic communications networks andservices (the “EU Communications Framework”), which applies to the types oftelecommunications services that we offer. It aims to bring the sector-specificrules for electronic communications more into line with the generalcompetition rules. Under the related Framework Directive, the definition ofsignificant market power is based on the concept of a dominant position used inEU competition law. It embraces single company dominance and joint dominance,and ex ante regulatory measures are intended to redress identified competitionconcerns.

National regulatory authorities (NRAs), including thosein the countries in which we operate, are expected to undertake a marketanalysis on the basis of markets listed in so-called Relevant MarketRecommendations established by the European Commission. The presentRecommendation comprises 18 markets that the NRAs must analyze. NRAs thendetermine and designate companies having significant market power (SMP) withinthose markets. They can also impose or maintain ex ante sector-specificobligations when ex post remedies of competition law are not adequate to meetthe market problems identified. Possible obligations could include inter aliatransparency, accounting separation, network access and price control. If amarket is found to be effectively competitive, existing obligations should,according to regulatory framework, be withdrawn.

Other applicable EU directives included in the EUCommunications Framework cover areas such as authorization of networks andservices, access and interconnection (including local loop access), universal 

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service, and privacy andsecurity issues. There are also special directives on electronic commerce andon a number of other areas of relevance to our operations. The regulatoryregimes in each of the aforesaid countries in which we operate are generallybased on the requirements of the EU Communications Framework and otherdirectives.

In December 2005,a political agreement was reached at EU level on a Directive on data retention.On February 21, 2006, the Directive was approved by the Council of theEuropean Union. The Directive will require all 25 member states to imposeobligations on the telecommunications service and network providers operatingin their jurisdiction to retain traffic data and location data for lawenforcement purposes. Depending on the national transpositions of theDirective, there may be adverse economic effects on our operations. Followingentry into force of the Directive, member states will have as a general rule 18months in which to comply with its provisions.

**Implementationof EU Communications Framework**

*Sweden*

In Sweden, the Act onElectronic Communication implements the legislation relating to the EUCommunications Framework. In 2005, the Swedish NRA published final SMPdecisions on the retail markets for access to the public telephone network andon the market for wholesale terminating segments of leased lines. In thesemarkets the NRA imposed obligations on TeliaSonera. On the retail markets fortelephone services and the wholesale market for access to mobile networks,TeliaSonera was not found to have SMP status, and hence no obligations wereimposed. On the wholesale market for international roaming, preliminaryassessments were published for consultation in January 2006. Finaldecisions on two remaining markets are expected in 2006. A decision on themarket for wholesale broadband access (bit stream access) in 2004 has beenstayed after appeal by TeliaSonera, with a decision in lower Court expectedduring 2006.

*Finland*

In Finland, we are subject tothe Communications Market Act, the Act on the Protection of Privacy inElectronic Communications, and related regulations, decrees and administrativedecisions, which implement the EU Communications Framework.

The Finnish NRA has publishedduring 2004 and 2005 its SMP decisions on all 18 relevant markets. TeliaSoneraand its competitors are subject to obligations in the following markets: accessto the fixed network and local telephone services (retail markets), callorigination and call termination on individual fixed networks, wholesaleunbundled access, regional transit in the fixed network, wholesale terminatingsegments of leased lines, wholesale broadband access and voice call terminationon individual mobile networks. Markets for access and call origination onpublic mobile networks, wholesale national market for international roaming,wholesale trunk segments of leased lines, retail international telephoneservices and retail national telephone services were found competitive.

Anamendment to the Communications Market Act was approved by the Finnish Parliamentin December 2005, allowing operators to offer subsidised 3G-handsets toend customers. The amendment will enter into force on April 1, 2006.

*Other*

In Denmark, the Danish NRA made several marketanalyses and published SMP decisions during 2005. Telia was designated an SMPoperator in the wholesale markets of fixed and mobile termination, and on January 24,2006, the NRA imposed price controls resulting in a 33 percent phased reductionover a two-year period for the mobile termination price. The latter decisionhas been appealed by TeliaSonera.

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In Norway, NetCom has beendesignated an SMP operator in the market for mobile termination. In September 2005,the Norwegian NRA imposed a reduction of NetCom’s termination price of NOK 0.18in total in a phased reduction starting November 1, 2005. NetCom hasappealed the decision and a stay of execution has been granted.

In Latvia and Lithuania,legislation which implements the EU Communications Framework entered into forceduring 2004, whereas in Estonia the implementation was delayed until January 1,2005. During 2005, the SMP process has started in all the Baltic countries. InLithuania, Omnitel was designated as an SMP operator in the market of mobiletermination and a number of obligations were imposed. The decision has beenappealed by TeliaSonera.

Implementation of pricingrestrictions such as fixed or cost-based pricing or other obligations by theNRAs on us in any of the jurisdictions we operate might have an adverse effecton our business, financial condition and results of operations.

**Competition Laws**

We are subject to thecompetition laws of the countries in which we operate, in particular Swedish,Finnish and EU competition laws.

*The European Union*

The EU competition rules set out in the EC Treatyand EU legislation are binding on EU member states and are therefore applicableto our operations in the EU. If those rules are breached, the EuropeanCommission may impose fines of up to ten percent of a company’s revenues on aconsolidated basis in the preceding financial year. Regulation 1/2003 onthe implementation of the rules on competition laid down in Articles 81and 82 of the EC Treaty, which entered into force on May 1, 2004, may leadto a more rigorous application of the EU competition rules at the nationallevel. The European Commission has prepared notices and guidelines implementingRegulation 1/2003. The EU competition rules will remain applicable torestrictions on competition which may have an appreciable effect on tradebetween member states.

So long as the Kingdom of Sweden exercises asignificant influence over our company, the European Commission could bringproceedings against us directly, under Articles 81 and 82 of the EC Treaty, orbring proceedings against the Kingdom of Sweden under Article 86 of the ECTreaty, to ensure that we comply with EU competition rules. This means that wemight face two different proceedings, the latter of which we could not directlyinfluence and to which we would not be a party.

Given that the SwedishState and the Finnish State hold 45.3 percent and 13.7 percent of ouroutstanding shares, respectively, there is always a risk that our competitorsmight allege that our transactions with the Finnish State or the Swedish Stateinvolve an element of state aid, or that the European Commission may launch aformal investigation of such a transaction on its own initiative. The EuropeanCommission has the power to order suspension of aid payments and require therecovery of aid already granted, including accrued interest. These rules donot apply when a state contributes capital in circumstances that would beacceptable to a private investor operating under normal market economyconditions.

*Sweden*

The Competition Act hasbeen harmonized with Regulation 1/2003 and the implementing amendmentsentered into force in July 2004. The Swedish Competition Authority isempowered to issue injunctions, and to enjoin a party to discontinueimmediately practices that are not permitted under the 

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CompetitionAct. The Swedish Competition Authority and the Swedish NRA cooperate tofacilitate investigations of anti-competitive behavior in thetelecommunications services sector.

*Finland*

The Act on CompetitionRestrictions has been harmonized with Regulation 1/2003 and theimplementing amendments entered into force in May 2004. The FinnishCompetition Authority is empowered to issue injunctions, and to enjoin a partyto discontinue immediately practices that are not permitted under the Act onCompetition Restrictions.

**International Obligations**

Over 70 member countriesof the World Trade Organization (WTO) have entered into a BasicTelecommunications Agreement (BTA) to provide market access to some or all oftheir basic telecommunications services. The BTA took effect in February 1998.Signatories under the BTA have made commitments to provide “market access”,requiring them to refrain from imposing certain quotas or other quantitativerestrictions in specified telecommunications services sectors, and to provide “nationaltreatment” by ensuring that foreign telecommunications service suppliers areaccorded the same treatment as national service suppliers. In addition, anumber of signatories, including Sweden and Finland, have agreed to abide bycertain pro-competitive principles set forth in a reference paper relating tothe prevention of anti-competitive behavior, interconnection, universalservice, transparency of licensing criteria, independence of the regulator andnon-discriminatory allocation of scarce resources.

**Environmental Matters**

The principal environmental impact of our operationsarises from vehicle use, travel, transport, energy use and the consumption anduse of materials. Pursuant to European Union legislation, we may be responsiblefor the recycling costs of used telephone poles and cleaning up of impregnationsites in several of the jurisdictions in which we operate.

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**Shareholder Information**

The Board of Directors and the CEO propose to theAnnual General Meeting (AGM) an increase of the ordinary dividend to SEK 1.25per share (1.20) due to the strong earnings in 2005 and the expected earningsimprovement for 2006. The proposed dividend totals SEK 5,613 million, which isin line with our policy to distribute 30-50 percent of net income,excluding minority interests. The Board of Directors and the CEO also recommendan extraordinary dividend of SEK 2.25 per share as a part of the distributionof capital to shareholders.

TeliaSonera has previously communicated that thecompany, in addition to the ordinary dividend, plans to distribute SEK 30billion to shareholders during the period 2005-2007. The amount may beadjusted if attractive investment opportunities arise that are beyond thecurrent plan.

As a first step, SEK 10,163 million was distributedduring 2005 through the repurchase of shares in a public offer that entitledshareholders to sell every twenty-fifth share at a price of SEK 55 per share,which corresponded to a premium of approximately 33 percent. A total of184,774,856 shares were sold by shareholders in the repurchase offer,representing a response rate of 98.8 percent. The payments for the repurchasedshares were made in the beginning of July 2005. The Board of Directorsproposes to the AGM that the shares acquired through the repurchase offer becancelled.

As a second step in thedistribution of capital to shareholders, the Board of Directors and the CEOdecided to propose to the AGM a transfer of SEK 10,104 million to shareholdersduring 2006. The method proposed for the distribution is an extraordinarydividend of SEK 2.25 per share. Payment of the extraordinary dividend isproposed to take place at the same time as the ordinary dividend.

**PriceDevelopment and Trading Volumes**

TeliaSonera’s share price on Stockholm Stock Exchangerose during 2005 from SEK 39.80 to SEK 42.70. On average, 15 millionshares were traded per trading day, corresponding to a value of SEK 585million per day.

TeliaSonera’s market capitalization totaled SEK 200billion at year-end, which is 5.7 percent of the total value of Stockholm StockExchange. The development of the share price during 2005 and during thethree-year period between 2003-2005 was weaker than Stockholm StockExchange on average. On Dow Jones STOXX Telecommunications index, whichincludes the larger telecom operators in Europe, the TeliaSonera share measuredover a three-year period was approximately in line with the industry index.

The number of shareholdersdecreased during the year from 822,306 to 745,172. TeliaSonera acquired 4.0percent of the total number of shares through the repurchase offer, whichdecreased the number of outstanding shares to 4,490,457,213. The Swedish andFinnish states’ holdings as a percentage of the outstanding shares remainedunchanged, 45.3 and 13.7 percent, respectively. Holdings outside of Sweden andFinland increased from 12.1 percent to 12.8 percent. At year-end, Swedishprivate investors owned 3.2 percent (3.5) and Finnish private investors 2.2percent (2.4) of the outstanding shares. Swedish institutional investors owned19.7 percent (19.1) of the outstanding shares and Finnish institutionalinvestors owned 3.2 percent (3.9).

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**The TeliaSonera Share**

Listing:Stockholm Stock Exchange and Helsinki Stock Exchange

| *Stockholm  Stock Exchange:*        |   |             |   |
|-------------------------------------|--------|------------------|--------|
| Ticker symbol                       |   | TLSN             |   |
| Highest price  2005                 |   | SEK  43.40       |   |
| Lowest price 2005                   |   | SEK  35.50       |   |
| At close 2005                       |   | SEK  42.70       |   |
| Shares traded  2005, volume         |   | 3,786  million   |   |
| Shares traded  2005, value          |   | SEK  148 billion |   |
| Market  capitalization Dec 31, 2005 |   | SEK  200 billion |   |
| *Helsinki  Stock Exchange:*         |   |             |   |
| Ticker symbol                       |   | TLS1V            |   |
| Shares traded  2005, volume         |   | 361  million     |   |
| Shares traded  2005, value          |   | EUR  1.5 billion |   |

 

*Nasdaq:*TeliaSonera terminated the listing of the company’s ADSs(American Depository Shares) on Nasdaq on August 6, 2004, in light of thelow trading level and high costs.

**The LargestShareholders**

| **As of December 31, 2005  Shareholder** | ** ** | ** ** | ** **        | **Number of   outstanding shares(1)** | ** ** | **Percent of outstanding  shares/votes** | ** ** |
|--------------------------------------------------------------|------------|------------|-------------------|------------------------------------------------------|------------|----------------------------------------------------|------------|
| Swedish State(2)                                             |       |       | 2,033,547,131     |                                                 |       |                                               | 45.3       |   |   |
| Finnish State(2)                                             |       |       | 616,128,221       |                                                 |       |                                               | 13.7       |   |   |
| Robur funds                                                  |       |       | 113,463,161       |                                                 |       |                                               | 2.5        |   |   |
| SHB/SPP funds                                                |       |       | 84,566,646        |                                                 |       |                                               | 1.9        |   |   |
| SEB funds                                                    |       |       | 80,575,748        |                                                 |       |                                               | 1.8        |   |   |
| Nordea funds                                                 |       |       | 50,897,140        |                                                 |       |                                               | 1.1        |   |   |
| Skandia Liv                                                  |       |       | 49,447,181        |                                                 |       |                                               | 1.1        |   |   |
| SEB—Trygg  Försäkring                         |       |       | 45,775,720        |                                                 |       |                                               | 1.0        |   |   |
| Alecta                                                       |       |       | 44,330,000        |                                                 |       |                                               | 1.0        |   |   |
| AFA Försäkring                                     |       |       | 42,179,250        |                                                 |       |                                               | 0.9        |   |   |
| Shareholders  outside Sweden and Finland(3)                  |       |       | 573,540,010       |                                                 |       |                                               | 12.8       |   |   |
| Total other  shareholders                                    |       |       | 756,007,005       |                                                 |       |                                               | 16.8       |   |   |
| **Total  shares outstanding**                                | ** ** | ** ** | **4,490,457,213** |                                                 | ** ** | ** **                                         | **100.0**  |   |   |
| Repurchased shares (treasury shares)(4)                      |       |       | 184,774,856       |                                                 |       |                                               |       |   |   |
| **Total shares issued**                                      | ** ** | ** ** | **4,675,232,069** |                                                 |       |                                               |       |   |   |

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Source:SIS Ägarservice AB

(1)          Eachshare of TeliaSonera represents one vote at the general meeting of shareholdersand no shareholder has any special voting rights.

(2)          Inconnection with the merger between Telia and Sonera, the Kingdom of Sweden andthe Republic of Finland entered into a shareholders’ agreement with respect totheir shareholdings in TeliaSonera and consult with each other from time totime on certain matters related to their shareholdings.

(3)          Ofwhich as nominees: State Street Bank and Trust 79,088,636 shares and JP MorganChase Bank 74,898,436 shares.

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(4)          The Board of Directors proposes to the AGM that the sharesacquired through the repurchase offer be cancelled.

**TheLargest Countries by Number of Shares**

| **As of December 31, 2005  Country** | ** ** | ** ** | ** **        | **Number of   outstanding shares** | ** ** | **Percent of outstanding  shares/votes** | ** ** |
|----------------------------------------------------------|------------|------------|-------------------|---------------------------------------------------|------------|----------------------------------------------------|------------|
| Sweden                                                   |       |       | 3,059,125,066     |                                              |       |                                               | 68.1       |   |   |
| Finland                                                  |       |       | 857,792,137       |                                              |       |                                               | 19.1       |   |   |
| United States                                            |       |       | 176,243,877       |                                              |       |                                               | 3.9        |   |   |
| United Kingdom                                           |       |       | 173,614,375       |                                              |       |                                               | 3.9        |   |   |
| Luxembourg                                               |       |       | 49,442,905        |                                              |       |                                               | 1.1        |   |   |
| France                                                   |       |       | 24,174,952        |                                              |       |                                               | 0.5        |   |   |
| Germany                                                  |       |       | 22,846,455        |                                              |       |                                               | 0.5        |   |   |
| Netherlands                                              |       |       | 20,441,256        |                                              |       |                                               | 0.5        |   |   |
| Norway                                                   |       |       | 15,264,871        |                                              |       |                                               | 0.3        |   |   |
| Ireland                                                  |       |       | 14,640,829        |                                              |       |                                               | 0.3        |   |   |
| Total others                                             |       |       | 76,870,490        |                                              |       |                                               | 1.7        |   |   |
| **Total shares outstanding**                             | ** ** | ** ** | **4,490,457,213** |                                              | ** ** | ** **                                         | **100.0**  |   |   |

 

Source: Swedish CentralSecurity Depository (VPC)

**Changesin Issued Share Capital**

| ** **                         | ** ** | **Number of shares** | ** **        | **Par value,  SEK/  share** | ** ** | **Share capital, SEK  thousand** | ** ** |
|------------------------------------|------------|--------------------------------|-------------------|----------------------------------|------------|--------------------------------------------|------------|
| Share capital,  Dec 31, 2001       |       |                           | 3,001,200,000     |                             |       |                                       | 3.20       |   |   |   | 9,603,840 |   |   |
| - New share  issue, Dec 3, 2002    |       |                           | 1,604,556,725     |                             |       |                                       | 3.20       |   |   |   | 5,134,582 |   |   |
| Share capital,  Dec 31, 2002       |       |                           | 4,605,756,725     |                             |       |                                       | 3.20       |   |   |   | 14,738,422 |   |   |
| - New share  issue, Feb 10, 2003   |       |                           | 69,475,344        |                             |       |                                       | 3.20       |   |   |   | 222,321 |   |   |
| Share capital,  Dec 31, 2003       |       |                           | 4,675,232,069     |                             |       |                                       | 3.20       |   |   |   | 14,960,743 |   |   |
| Share capital,  Dec 31, 2004       |       |                           | 4,675,232,069     |                             |       |                                       | 3.20       |   |   |   | 14,960,743 |   |   |
| **Share capital, Dec 31, 2005(1)** | ** ** | ** **                     | **4,675,232,069** |                             | ** ** | ** **                                 | **3.20**   |   | ** ** | ** ** | **14,960,743** |   |   |

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(1)          Includes 184,774,856treasury shares, which the Board of Directors proposes to the AGM be cancelled.In case the cancellation is approved by the AGM, share capital will decrease bySEK 591,280 thousand.

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**Corporate Governance**

TeliaSonera is a Swedishpublic limited liability company with its Annual General Meeting (AGM) as itshighest decision-making body.

**Compositionof the Board of Directors**

TeliaSonera’s Board of Directors consists of eightmembers elected by the AGM, serving one-year terms. The members elected by theAGM are considered to be independent in relation to the company and to theshareholders. The Board of Directors also includes three employeerepresentatives, with an additional employee representative being entitled tobe present at board meetings but not having the right to vote. The employeerepresentatives are not considered to be independent members.

Thecomposition of the Board of Directors and the shareholdings and biographies ofthe members of the Board of Directors is set forth below:

| **Name**               | ** ** | ** ** | ** ** | **Year  born** | ** ** | **Number of shares  owned as of  February 8, 2006** | ** ** | **Position**        | ** ** |
|------------------------|------------|------------|------------|----------------|------------|-----------------------------------------------------------------------------------|------------|---------------------|------------|
| *Ordinary Members:*    |       |       |       |           |       |                                                                              |       |                |       |
| Tom von Weymarn        |       | 1944       |       |           | 4,316      |                                                                              |       | Chairman            |       |
| Carl Bennet            |       | 1951       |       |           | 10,560     | (1)                                                                               |       | Vice  Chairman      |       |
| Eva Liljeblom          |       | 1958       |       |           | 999        |                                                                              |       | Director            |       |
| Lennart Låftman   |       | 1945       |       |           | —     |                                                                              |       | Director            |       |
| Sven-Christer  Nilsson |       | 1944       |       |           | —     |                                                                              |       | Director            |       |
| Timo Peltola           |       | 1946       |       |           | 3,000      |                                                                              |       | Director            |       |
| Paul Smits             |       | 1946       |       |           | —     |                                                                              |       | Director            |       |
| Caroline  Sundewall    |       | 1958       |       |           | 2,000      |                                                                              |       | Director            |       |
| Yvonne Karlsson        |       | 1959       |       |           | 175        |                                                                              |       | Director(2)         |       |
| Berith Westman         |       | 1945       |       |           | 1,000      |                                                                              |       | Director(2)         |       |
| Elof Isaksson          |       | 1942       |       |           | 750        | (1)                                                                               |       | Director(2)         |       |
| *Deputy Members:*      |       |       |       |           |       |                                                                              |       |                |       |
| Magnus Brattström |       | 1953       |       |           | —     |                                                                              |       | Deputy  Director(2) |       |
| Stefan Carlsson        |       | 1956       |       |           | 650        |                                                                              |       | Deputy  Director(2) |       |
| Arja Kovin             |       | 1964       |       |           | —     |                                                                              |       | Deputy Director(2)  |       |

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(1)          Including shareholdingsby spouse and/or affiliated persons.

(2)          Employee representativeappointed by the trade unions.

Below is a summary biography of the members of theboard of directors of TeliaSonera:

*Tomvon Weymarn* isthe Chairman of the Board of TeliaSonera. Mr. von Weymarn was elected tothe Board of Directors of TeliaSonera in 2002. He has participated in all 17meetings of the Board of Directors of TeliaSonera in 2005. Mr. von Weymarnis the Chairman of the Remuneration Committee of TeliaSonera and hasparticipated in all three meetings of the Committee in 2005. Mr. vonWeymarn is also a member of the Audit Committee of TeliaSonera and hasparticipated in all six meetings of the Committee in 2005. In addition to beinga member of the Board of Directors of TeliaSonera, Mr. von Weymarn is theChairman of the Board of Directors of Lännen Tehtaat Oyj and Turku Science ParkOy, a board member of OKO Bank Oyj, Kaukomarkkinat Oy, CPS Color Group Oy, HydriosBiotechnology Oy, a member of the Supervisory Board of Industri Kapital and ashareholder and board member of Boardman Oy. Mr. von Weymarn served as thePresident and Chief Executive Officer of Oy Rettig Ab between 1997 and 2004, asExecutive Vice President of Cultor Oyj between 1991 and 1997 and as a Directorof Oy Karl 

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Fazer Ab between 1983 and1991, the last two years as President and Chief Executive Officer of Oy KarlFazer Ab. Mr. von Weymarn holds a Master of Science degree in ChemicalEngineering.

*CarlBennet* isthe Vice Chairman of the Board of Directors of TeliaSonera. Mr. Bennet waselected to the Telia­Sonera Board of Directors in 2000. Mr. Bennet hasparticipated in all 17 meetings of the Board of Directors of TeliaSonera in2005. Mr. Bennet is a member of the Remuneration Committee of TeliaSoneraand has participated in all three meetings of the Committee in 2005. Inaddition to being a member of the Board of Directors of TeliaSonera, Mr. Bennetis the Chairman of the Boards of Directors of Elanders AB, Getinge AB, LifcoAB, Sorb Industri AB and the Swedish National Agency for Higher Education andthe Vice Chairman of the Boards of Directors of Boliden AB and SNS (Center forBusiness and Policy Studies). Mr. Bennet is a member of the Board of AMS(the National Labor Market Board) and SSAB and also a member of the SwedishGovernment’s Research Advisory Council. Mr. Bennet served as President andChief Executive Officer of Getinge AB between 1989 and 1997. Mr. Bennetholds a Bachelor of Science degree in Economics.

*EvaLiljeblom* waselected to the Board of Directors of TeliaSonera in 2002. Ms. Liljeblomhas participated in all 17 meetings of the Board of Directors of TeliaSonera in2005. Ms. Liljeblom is a member of the Audit Committee of TeliaSonera andhas participated in all six meetings of the Committee in 2005. In addition tobeing a member of the Board of Directors of TeliaSonera, Ms. Liljeblom isProfessor of Finance and the Head of the Department of Finance and Statisticsat the Swedish School of Economics and Business Administration in Helsinki,Finland. Furthermore, Ms. Liljeblom is a member of the Boards of Directorsof Stockmann Oyj, Fennia Mutual Insurance Company and Municipal Finance(Kuntarahoitus). Ms. Liljeblom is also the Official Controller of theHEX-indexes for the OMX and Chairman of the Investment Committee of the FinnishGovernment Pension Fund. Ms. Liljeblom is also a member of the investmentcommittee for the State Pension Fund Global in Norway. Ms. Liljeblom holdsa Doctor degree in Economics.

*LennartLåftman* waselected to the Board of Directors of TeliaSonera in 2004. Mr. Låftman hasparticipated in all 17 meetings of the Board of Directors of TeliaSonera in2005. Mr. Låftman is a member of the Remuneration Committee of TeliaSoneraand has participated in all three meetings of the Committee in 2005. Inaddition to being a member of the Board of Directors of TeliaSonera, Mr. Låftmanis the Chairman of the Pension Fund of Vattenfall, Stiftelsen FramtidensKultur, Stadshagen Fastighets AB, Intervalor AB and Plena AB. He is also aDeputy Chairman of the Board of Directors of the Swedish Foundation forStrategic Research and a non-executive director of several non-listed companiesand foundations. Mr. Låftman served as Chief Executive Officer ofAffärsvärlden between 1977 and 1984 and in the management of pension fundsbetween 1984 and 1991 and between 1996 and 1998. Mr. Låftman holds aBachelor of Science degree in Economics.

*Sven-ChristerNilsson* waselected to the Board of Directors of TeliaSonera in 2003. Mr. Nilssonparticipated in all 17 meetings of the Board of Directors in 2005. Mr. Nilssonis a member of the Audit Committee of TeliaSonera and has participated in allsix meetings of the Committee in 2005. He has held various executive positionswithin Saab-Scania AB, Computer and Electronics Group and TelefonaktiebolagetLM Ericsson, where he served as Chief Executive Officer and President 1998 -1999. In addition to being a member of the Board of Directors of TeliaSonera, Mr. Nilssonis a member of the Boards of Directors of Assa Abloy AB, CEVA, Inc., I3Micro Technologies AB, and Innovationsbron AB. Mr. Nilsson also serves asthe Chairman of the Boards of Directors of Swedish ICT Research AB and theSwedish Public Broadcasting Foundation. Mr. Nilsson holds a Bachelor ofScience degree.

*TimoPeltola* waselected to the Board of Directors of TeliaSonera in 2004. Mr. Peltola hasparticipated in 15 of the 17 meetings of the Board of Directors of TeliaSonerain 2005. Mr. Peltola is a member of the Remuneration Committee ofTeliaSonera and has participated in all three meetings of the Committee in2005. In addition to being a member of the Board of Directors of TeliaSonera, Mr. Peltola

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has been the President andCEO of the packaging company Huhtamäki Oyj until 2004. He is also the Chairmanof the Board of Directors of Neste Oil Oyj and AW-Energy Oy, Deputy Chairman ofthe Board of Directors of Nordea Bank AB, member of the Board of ScandinavianAirlines, Chairman of the Management Council for Keskinäinen VakuutusyhtiöIlmarinen, as well as a member of the Management Council for Suomen Messut. Mr. Peltolais also a member of the Advisory Board of CVC Capital Partners. Mr. Peltolaholds a Doctor degree in Economics hc.

*PaulSmits* waselected to the Board of Directors of TeliaSonera in 2003. Mr. Smits hasparticipated in 16 of the 17 Board of Directors meetings of TeliaSonera in2005. Mr. Smits was the Chairman of the Board of Directors and ChiefExecutive Officer of Royal KPN N.V. between 2000 and 2002. In addition to beinga board member of TeliaSonera, Mr. Smits is Chairman of the SupervisoryBoard of Telfort N.V. (Amsterdam), a member of the Supervisory Boards ofEnertel B.V. Rotterdam, Unit 4 Agresso, Byelex B.V. Rotterdam and FeyenoordRotterdam N.V., Chairman of the Advisory Board of Media Plaza, and Chairman ofthe Board of Stichting Centrale Discotheek Rotterdam. Mr. Smits holds aMaster degree in Electronic Engineering.

*CarolineSundewall* waselected to the TeliaSonera Board of Directors in 2001. Ms. Sundewall hasparticipated in 16 of the 17 Board of Directors meetings of TeliaSonera in2005. Ms. Sundewall is a Chairman of the Audit Committee of TeliaSoneraand has participated in all six meetings of the Committee in 2005. In additionto being a member of the TeliaSonera Board of Directors, Ms. Sundewall isa board member of Föreningssparbanken AB, Electrolux AB, Strålfors AB, HaldexAB, Lifco AB and Aktiemarknadsbolagens Förening. Ms. Sundewall has previouslyserved as business editor for Finanstidningen and business commentator andbusiness editor of Sydsvenska Dagbladet. Ms. Sundewall has also held theposition of business controller of Ratos AB. Ms. Sundewall holds aBachelor of Science degree in Economics.

*YvonneKarlsson,* anemployee representative, was appointed by the trade union to the Board ofDirectors of TeliaSonera in 2002. Ms. Karlsson has participated in 14 ofthe 17 Board of Directors meetings of TeliaSonera in 2005.In addition to beinga member of the Board of Directors of TeliaSonera, Ms. Karlsson is theVice Chairman of the Swedish Union of Clerical and Technical Employees inIndustry, telecommunications section (SIF-TELE).

*BerithWestman,* anemployee representative, was appointed by the trade union to the Board ofDirectors of TeliaSonera in 1993. Ms. Westman has participated in 13 ofthe 17 Board of Directors meetings of TeliaSonera in 2005.In addition to beinga member of the Board of Directors of TeliaSonera, Ms. Westman is theChairman of SIF-TELE and a board member of Telia Pension Fund.

*ElofIsaksson,* anemployee representative, was appointed by the trade union to the Board ofDirectors of TeliaSonera in 2000. Mr. Isaksson has participated in all 17meetings of the Board of Directors of TeliaSonera in 2005. In addition to beinga member of the Board of Directors of TeliaSonera, Mr. Isaksson is theChairman of the Union of Service and Communication Employees withinTeliaSonera, SEKO TELE, and a board member of the Telia Pension Fund.

Below is a summary biography of the deputy members ofthe TeliaSonera board of directors:

*MagnusBrattström,* anemployee representative, was appointed by the trade union SEKO TELE to serve asa deputy member of the Board of Directors of TeliaSonera in 2001.

*StefanCarlsson,* anemployee representative, was appointed by the trade union SIF-TELE to serve asa deputy member of the Board of Directors of TeliaSonera in 2002.

*ArjaKovin,* anemployee representative, was appointed by the trade union SIF-TELE to serve asa deputy member of the Board of Directors of TeliaSonera in 2002.

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No member or deputy member of the board of directorscurrently holds a management position in TeliaSonera. No member or deputymember of the board of directors has a family relationship with any other boardmember or any group management member.

No board member has beenelected pursuant to an arrangement or understanding between us and any majorshareholder, customer, supplier or other person.

**Responsibilitiesand duties of the Board of Directors**

The Board of Directors is responsible for the company’sorganization and the management of the company’s business, which means that theBoard of Directors determines the Group’s general strategy and makes strategicdecisions.

The AGM elects the Chairman and Deputy Chairman fromamong the Board members. The Board of Directors appoints the Chief ExecutiveOfficer, CEO, and issues guidelines for his management of the Group.

The guidelines for the work of the Board of Directorsare set down in standing orders. The standing orders contain rules regardingthe number of ordinary Board meetings (at least five per calendar year), thebusiness on the agenda of ordinary Board meetings, responsibilities within theBoard, including the duties of the Chairman of the Board, division of responsibilitiesof the members of the Board and the CEO, and how work is carried out incommittees.

To improve efficiency of the board work, the Board hasappointed two committees with special tasks. These committees handle businesswithin their respective areas and present recommendations and reports on whichthe Board may base its actions. However, all members of the Board of Directorshave the same responsibility for decisions made irrespective of whether theissue in question has been reviewed in a committee or not. The followingcommittees have been appointed:

***RemunerationCommittee.******  ***Handles issues regarding salary andother remuneration to the CEO, executive management and group vice presidentsand incentive programs that target a broader group of employees. The Committeeconsists of Tom von Weymarn (chairman), Carl Bennet, Lennart Låftman and TimoPeltola.

***Audit Committee.******  ***Reviews theGroup’s financial information, financial reporting processes and systems forinternal financial controls. The Committee consists of Caroline Sundewall(chairman), Eva Liljeblom, Sven-Christer Nilsson and Tom von Weymarn. AllCommittee members are considered to be independent and qualify as financialexperts.

**Workof the Board of Directors during 2005**

The Board of Directors held seven ordinary meetingsand ten extra meetings during the year.

In addition tofollowing up the day-to-day business of the Group, the Board of Directorsfocused on the following areas during 2005:

·       valuecreating strategic options,

·       definingtargets for the operations,

·       associatedcompanies in Russia and Turkey,

·       controlover financial reporting,

·       restructuringof operations in Sweden and Finland,

·       developmentof competencies and succession planning,

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·       companyacquisitions, and

·       remunerationissues.

TeliaSonera’s GeneralCounsel Jan Henrik Ahrnell served as secretary at the meetings.

**Evaluationof the Board of Directors’ work**

The Board of Directors hasengaged external consultants to evaluate the Board’s work. The Board hasdiscussed the results of the evaluation.

**External auditors**

TeliaSonera’s external auditors are appointed by theAGM and it is their task to audit the Group’s financial reporting as well asthe Board’s and CEO’s management of the Group. The auditors report to theshareholders at the AGM.

At the AGM 2004,PricewaterhouseCoopers AB was appointed as auditors for TeliaSonera. At thesame time, it was decided that the auditors’ remuneration would be paid basedon invoice. Fees to auditors are reported in Note 33 “Auditors’ Fees andServices” to our consolidated financial statements. The appointment is for aperiod of four years.

**Nomination of Board members**

At the 2005 AGM, a decision was made to establish anomination committee, which shall consist of between five and seven members.

Four members shall represent the four shareholdersthat are largest in terms of votes and wish to participate in the nominationprocess. The Chairman of the Board of Directors shall also be a member of thecommittee. The nomination committee can appoint additional two members.

At the moment, the nomination committee consists ofJonas Iversen, chairman (Swedish state), Markku Tapio (Finnish state), KGLindvall (Robur funds), Lennart Ribohn (SEB funds) and the Chairman of theBoard of Directors.

The 2005 AGM also adopted rules for the work ofthe nomination committee, which includes nominating members of the Board ofDirectors, nominating the Chairman of the Board and, where appropriate,nominating auditor, as well as presenting proposals for remuneration to Boardmembers. The nomination committee shall also nominate members for election tothe following year’s nomination committee.

All proposals made by thenomination committee shall be published in the AGM notice.

**Remunerationto the Board of Directors**

At the 2005 AGM, annual remuneration for the Chairmanof the Board of Directors was set at SEK 750,000 and for the DeputyChairman SEK 550,000, while other Board members elected by the AGM shallreceive annual remuneration of SEK 400,000.

The 2005 AGM also determined that annual remunerationshall be paid to the chairman of the Board’s Audit Committee in the amount ofSEK 150,000 and to other members of the Audit Committee in the amount of SEK100,000, and that annual remuneration shall be paid to the chairman of theBoard ́s Remuneration Committee in the amount of SEK 40,000 and to the othermembers of the Remuneration Committee in the amount of SEK 20,000.

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Remuneration is paidmonthly. No remuneration is paid to members who are employees of theTeliaSonera Group.

**ExecutiveManagement and Group Vice Presidents**

Thecomposition of our Executive Management and Group Vice Presidents and theirshareholdings and biographies are set forth below:

| **Name**                  | ** ** | ** ** | ** ** | **Year  born** | ** ** | **Number of shares  owned as of  February 8, 2006** | ** ** | **Principal occupation**                                                     | ** ** |
|---------------------------|------------|------------|------------|----------------|------------|-----------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------|------------|
| Anders Igel               |       | 1951       |       |           | 33,696     |                                                                              |       | President  and Chief Executive Officer                                            |       |
| Kim Ignatius              |       | 1956       |       |           | 3,028      |                                                                              |       | Executive Vice President, Chief Financial Officer                                 |       |
| Marie Ehrling             |       | 1955       |       |           | 2,000      |                                                                              |       | President of TeliaSonera Sweden                                                   |       |
| Juho Lipsanen             |       | 1961       |       |           | 8,000      |                                                                              |       | President of TeliaSonera Finland                                                  |       |
| Kenneth Karlberg          |       | 1954       |       |           | 1,600      | (1)                                                                               |       | President of TeliaSonera Norway, Denmark and the  Baltic Countries                |       |
| Terje Christoffersen      |       | 1952       |       |           | —     |                                                                              |       | Group Vice President responsible for Corporate  Marketing, Products and Services  |       |
| Håkan Dahlström |       | 1962       |       |           | 1,600      | (1)                                                                               |       | Group Vice President responsible for Corporate  Networks and Technology           |       |
| Rune Nyberg               |       | 1949       |       |           | 1,000      |                                                                              |       | Group Vice President responsible for Corporate Human  Resources                   |       |
| Michael Kongstad          |       | 1960       |       |           | 2,000      |                                                                              |       | Group Vice President responsible for Corporate  Communications                    |       |
| Jan Henrik  Ahrnell       |       | 1959       |       |           | 2,500      |                                                                              |       | Group Vice  President and General Counsel responsible for Corporate Legal Affairs |       |

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(1)          Including shareholdingsby spouse and minor.

Below is a summarybiography of the members of the executive management and group vice presidents:

*AndersIgel* isPresident and Chief Executive Officer of TeliaSonera. Mr. Igel previouslyserved as CEO of Esselte AB and, before that, as Executive Vice President ofTelefonaktiebolaget LM Ericsson. While at Ericsson, Mr. Igel was, over thecourse of his career, the Head of Infocom Systems, which was one of Ericsson’sthree global business areas comprising fixed networks, Internet and IPcommunication, the Head of Ericsson’s Public Networks business area, the Headof Ericsson UK and an operations executive for Ericsson in the Middle East,Southeast Asia and Latin America. Mr. Igel left Ericsson to become the CEOof Esselte in 1999. Mr. Igel holds a Master of Science degree inEngineering and a Bachelor of Science degree in Business Administration andEconomics.

*KimIgnatius* isExecutive Vice President and Chief Financial Officer of TeliaSonera. Mr. Ignatiuswas appointed Executive Vice President and Chief Financial Officer of Sonera in2000. Prior to joining Sonera, Mr. Ignatius was Chief Financial Officerand a member of the executive board of Tamro Corporation. 

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Mr. Ignatius has alsoheld various management positions at Amer Group Plc. Mr. Ignatius holds aBachelor of Science degree in Business Administration and Economics.

*MarieEhrling* isPresident of TeliaSonera Sweden. Ms. Ehrling was employed by TeliaSonerain 2003 and previously held the position of Deputy Chief Executive Officer ofSAS AB and Head of SAS Airlines. In addition, Ms. Ehrling has served asInformation Officer at the Swedish Ministry of Finance and the Swedish Ministryof Education and Science and as a financial analyst for the Fourth NationalPension Insurance Fund (Fjärde AP-fonden). Ms. Ehrling is a member of theBoard of Directors of Securitas AB. Ms. Ehrling holds a Bachelor ofScience degree in Business Administration and Economics.

*JuhoLipsanen* isPresident of TeliaSonera Finland. Mr. Lipsanen has been employed byTeliaSonera since 2005. Mr. Lipsanen was previously President and CEO ofAlma Media Corporation. He has held several management positions at ABB LtdSwitzerland and ABB Finland, including President of ABB New Ventures Ltd andChief Financial Officer of Automation Segment. Mr. Lipsanen holds a Masterof Science degree in Business Administration and Economics.

*KennethKarlberg* isPresident of TeliaSonera Norway, Denmark and the Baltic countries. Mr. Karlberghas been employed by TeliaSonera since 1987. Mr. Karlberg previously heldseveral executive positions in Telia, including Executive Vice President ofTelia and head of the Telia Mobile business area. Mr. Karlberg holds aSenior Officer examination from the Swedish Military Academy.

*TerjeChristoffersen* isGroup Vice President and head of the Group-wide unit Marketing, Products andServices. Mr. Christoffersen has been employed by TeliaSonera since 2001. Mr. Christoffersenpreviously served as President of Telia Danmark, CEO of NetCom in Norway andcountry manager for Hewlett-Packard in Norway and Sweden. Mr. Christoffersenholds a Master degree in Business Administration.

*HåkanDahlström* isGroup Vice President and head of the Group-wide unit Networks and Technology. Mr. Dahlströmhas been employed by TeliaSonera since 1998 and has served as the Head ofMobile Networks in TeliaSonera Sweden and Head of Wireless Communication atTelia Research AB. Mr. Dahlström previously served as an officer in theSwedish Royal Navy with the rank of Commander. Mr. Dahlström holds aMaster of Science degree in Engineering.

*RuneNyberg* isGroup Vice President and head of Corporate Human Resources. Mr. Nyberg wasemployed by TeliaSonera in 2003. Prior to joining TeliaSonera, Mr. Nybergwas Group Vice President of Human Resources at Sandvik AB, President of PairLtd. and Personnel Manager at Sandvik Coromant, JS Saba and Distributions ABDAGAB. Mr. Nyberg holds a Bachelor of Science degree in BusinessAdministration and Economics.

*MichaelKongstad* isGroup Vice President and head of Corporate Communications. Mr. Kongstadjoined TeliaSonera in 2001. He has served as managing director of SwedishOperations for Burson-Marsteller International Inc. and as communicationsdirector for Posten AB, WASA Insurance Group and the OM Group. Mr. Kongstadholds a Bachelor of Science degree in Business Administration and Economics.

*JanHenrik Ahrnell* is Group Vice President andGeneral Counsel of TeliaSonera. Mr. Ahrnell has been employed byTeliaSonera since 1989 and has served as General Counsel since 1999. Prior tohis service as General Counsel, Mr. Ahrnell was the head of various legaldepartments within the TeliaSonera Group and served as corporate counsel invarious TeliaSonera companies. Mr. Ahrnell holds a Master of Laws degree.

The business address of each of the members of theTeliaSonera board of directors, the CEO of TeliaSonera and each other member ofTeliaSonera’s executive management and group vice presidents is c/o TeliaSoneraAB, Sturegatan 1, SE-106 63 Stockholm, Sweden, telephone +46-8-504550 00.

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No member of the executivemanagement and group vice presidents has a family relationship with any othermember of the executive management and group vice presidents or any boardmember.

**Salarystructure within TeliaSonera**

According to the remuneration policy established bythe Board of Directors, TeliaSonera shall offer a competitive package ofrewards and remuneration to executives, managers and employees without beingmarket leader in this area. Employees’ remuneration consists of a fixed partand a variable part based on performance.

The fixed pay follows the pay structure in eachcountry in which the Group operates, while the variable pay is established in aplan for each calendar year and consists of a Group-related part, acountry-related part and individual performance objectives. Variable payis linked to the employee’s position and varies depending on the level of theposition in the company. The variable pay model has been approved by the Boardof Directors.

The CEO’s variable pay may be a maximum of50 percent of the fixed annual salary, while others within executivemanagement and group vice presidents may receive variable pay of a maximum of 25-35 percentof the fixed annual salary. For other managers and key employees who areincluded in the variable pay model for managers, variable pay can, with certainexceptions, total a maximum of 15-25 percent of the fixed annualpay.

Country-specific plans apply to remainingemployees where the variable pay can total a maximum of 6.25-16.6 percentof the fixed annual pay.

For employees who work with direct sales, a commission-basedpay system applies.

For more detail regardingcompensation, see Note 31 to our consolidated financial statements.

**Pensions**

The CEO is guaranteed early retirement at the age of 60,pursuant to which his total annual pension benefits will equal 70 percentof his base salary up to the age of 65. From the age of 65 onwards, the CEO’spension benefits will be paid according to the ITP plan with supplementalbenefits for that portion of his salary exceeding 20 “income base amounts” (asdefined under Swedish law), so that the total pension equals 50 percent ofthe base salary.

The retirement age for members of the executivemanagement other than the CEO varies between 60 and 65.

Almost all of our employees in Sweden, Finland andNorway are covered by defined pension benefit plans, providing a pension equalto a certain percentage of the employee’s final salary. The pension plansmainly include old-age pension, disability pension and family pension. Thepension obligations are secured mostly by pension funds, but also by provisionsin the balance sheet and by insurance premiums. The part of Swedish obligationthat is recorded as a provision is also secured through an external creditguarantee.

TeliaSonera’s employees outside Sweden, Finland andNorway are usually covered by defined contribution pension plans. Contributionsto these plans are normally set at a certain percentage of the employee’ssalary.

For additional detailsregarding our pensions, see Note 23 to our consolidated financialstatements.

**Severance pay**

TeliaSonera’s employment contract with the CEOrequires both parties to provide six months’ notice of resignation ortermination of employment. Upon termination by the company, the CEO shall beentitled 

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to severance pay equal tohis fixed monthly salary for a period of 24 months. Other income shall bededucted from the severance amount. If the CEO resigns his position, he shallnot be entitled to severance pay.

TeliaSonera’s employmentcontract with other members of the executive management requires a period ofnotice of six months from the employee and 12 months from the company.Upon termination by TeliaSonera, such member of the executive management andgroup vice presidents will be entitled to a severance pay equal to the fixedmonthly salary for a period of 12 months. Other income shall be deductedagainst the salary during the notice period and the severance amount. If amember of the executive management resigns his or her position, he or she shallnot be entitled to severance pay.

**Employee stock option plans**

In2001 and 2002, General Meetings of our shareholders decided to implement anumber of employee stock option plans. Due to non-fulfillment of certainsubscription criteria, most of the option programs were cancelled in 2003 and2004 and the subscription periods for the two remaining programs expired on May 31,2005 and June 30, 2005, respectively. No option holder subscribed forshares under these programs.

**Organizationand management principles**

See “Information on theCompany—Business Structure.”

**Planning and follow-up**

Planning and follow-up aredone in rolling 7-quarter plans. The CEO sets goals for the operationsbased on the guidelines of the Board of Directors. To ensure performance,managers usually have balanced scorecards with goals for their particularoperations.

**Internalcontrol and financial reporting procedures**

Corporate internal audit reviews various operations ofthe company and proposes measures to improve internal control, to streamlinecontrol processes and to increase internal efficiency.

In response to changes inSwedish, U.S. and other regulations, we continue to conduct a major review ofour internal control in processes and IT systems. We expect that as a result ofthis review we may identify areas where we believe changes or improvements areappropriate or required.

**Code of ethics**

We have adopted a code of ethics that applies to theChief Executive Officer, Chief Financial Officer and principal accountingofficers. The purpose of the code is to implement a system to deter dishonestconduct and to promote business ethics, in conformity with the requirements ofthe Sarbanes-Oxley Act of 2002.

Acopy of the code can be obtained free of charge by sending a request via e-mailto:

investor-relations@teliasonera.com.

**Personneland competence development**

The telecoms industry is knowledge-intensive andhighly competitive. Providing an effective supply of competent employees withgood opportunities for development is therefore of crucial importance forTeliaSonera.

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In order to share resources, make developmentopportunities evident to employees and strengthen the “we” feeling ofsolidarity within the Group, a common internal job marketplace has been createdfor the wholly owned operations. New jobs and large project assignments arenormally posted on a website to which all employees have access. In the longerterm, the ambition is also to involve the partially owned businesses.

To increase knowledge of TeliaSonera’s businessoperations—and how they can be developed—a Group-wide business educationprogram, TeliaSonera Business School has been established. This Group-wideprogram also enables participants to exchange experiences and build networks.

During 2005, TeliaSonerahas taken inventory of successors at senior management level and started atalent management process, including the relevant training programs.

**Corporate social responsibility**

TeliaSonera wishes to support sustainable developmentand be a “good corporate citizen.” The Board of Directors has therefore adopteda Corporate Social Responsibility (CSR) policy. TeliaSonera has also undertakento comply with the ETNO (European Telecommunications Network Operators’Association) Sustainability Charter and is a member of CSR Sweden, acorporate-run network that focuses on corporate social responsibility andsocial commitment.

In 2005, TeliaSonera Sweden decided to broaden thecoverage of its combined environmental/quality certification ISO 14001/9001from network issues to the customer front. The decision was made because agreat number of TeliaSonera’s large business customers demand that suppliershave environmental and quality certification.

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**Operating and Financial Review and Prospects**

**Contents**

|                                                                | ** ** | **Page** | ** ** |
|----------------------------------------------------------------|------------|----------|------------|
| Introduction                                                   |       |     | 33         |   |   |
| Merger of Telia  and Sonera                                    |       |     | 33         |   |   |
| Restructuring  and Streamlining Measures and Impairment Losses |       |     | 33         |   |   |
| Financial Results                                              |       |     | 34         |   |   |
| Liquidity and Capital Resources                                |       |     | 38         |   |   |
| Financial  Risk Management                                     |       |     | 42         |   |   |
| Critical Accounting Policies, Estimates and  Assumptions       |       |     | 45         |   |   |
| Legal and Regulatory Proceedings                               |       |     | 45         |   |   |
| Research  and Development                                      |       |     | 46         |   |   |
| Environment                                                    |       |     | 47         |   |   |
| Trend  Information                                             |       |     | 47         |   |   |
| Outlook for  2006                                              |       |     | 48         |   |   |
| Treasury  Shares                                               |       |     | 49         |   |   |
| Ordinary Dividend and Capital Distribution to  Shareholders    |       |     | 50         |   |   |

 

*Introduction*

The following information summarizes the results ofoperations of TeliaSonera in 2005, when we increased our customer base by 2.7million in majority-owned operations and by 14.8 million in associatedcompanies, increased our net sales by 7 percent, and recorded operating incomeof SEK 17.5 billion and free cash flow of SEK 15.6 billion.

Our consolidated financial statements are prepared inaccordance with International Financial Reporting Standards (IFRS). SeeNote 36 to our consolidated financial statements for a description of theprincipal differences between IFRS and U.S. GAAP and for a description of theanticipated impact of the adoption of recently issued U.S. GAAP accountingstandards.

Effective January 1,2004, TeliaSonera applies IFRS 3, which means that goodwill was no longeramortized in 2004 and 2005.

*Merger of Telia andSonera*

The merger of Telia and Sonera, first announced on March 26,2002, was carried out through an exchange offer in which Sonera shareholdersreceived shares in Telia. Upon completion of the exchange offer in December 2002,Telia changed its name to TeliaSonera. We have accounted for the merger as anacquisition by TeliaSonera of Sonera using the purchase method of accounting.

In connection with themerger, we set a goal of reaching an annual rate of SEK 2.7 billion ofpre-tax cash flow synergy savings at the end of 2005. Our actions in 2003 and2004 resulted in a rate of annual cost savings of SEK 1.8 billion andannual capital expenditure savings of SEK 0.9 billion, totalingSEK 2.7 billion, measured at the end of 2004. This means that thegoal we set in connection with the merger was reached a year early.

*Restructuringand Streamlining Measures and Impairment Losses*

Since the beginning of 2003, we have taken severalactions to restructure and streamline our operations and improve ourefficiency. For instance, in Sweden and Finland, we have launched transitionprograms to keep the profitability by achieving competitive cost levels andfocusing the service offerings. In 

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Sweden, the restructuringprogram is expected to reduce annual costs by SEK 4-5 billion as of 2008,and to reduce the amount of personnel by approximately 3,000. In Finland,streamlining efforts initiated in 2005 are expected to lower annual costs bySEK 1 billion as of 2006. Late in 2005, additional initiatives were taken and aturn-around program was launched in Finland, with estimated additional annualcost reduction of SEK 2 billion as of 2008.

Our restructuring and streamlining programs have alsoled to significant implementation costs and provisions since the beginning of2003, mainly related to a SEK 1.0 billion restructuring charge in 2003 forredundancies and streamlining in Sweden, Finland and Lithuania, and for thepost-merger integration of Telia’s and Sonera’s international carrieroperations; a SEK 0.6 billion restructuring charge in 2004 to integrate ourDanish mobile operations with Orange Denmark operations which we acquired in2004; and a SEK 2.6 billion restructuring charge in 2005 for redundancies andother streamlining in Sweden and Finland.

For a detailed discussion of each of theserestructuring and streamlining efforts, see Note 32 to our consolidatedfinancial statements.

Since the beginning of2003, we have also recorded significant non-cash impairment losses notconnected with our restructuring and streamlining programs, mainly related to aSEK 1.0 billion impairment loss on our minority investment in InfonetServices Corporation in 2003 and a SEK 3.3 billion impairment loss onour international carrier operations in 2004. For a detailed discussion of eachof these and other impairment losses, see Notes 11 and 12 to our consolidatedfinancial statements.

*Financial Results*

| **(SEK in millions, except earnings per share)** | ** ** | ** ** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|--------------------------------------------------------------------------------|------------|------------|------------|----------|------------|----------|------------|----------|------------|
| Net sales                                                                      |       | 87,661     |       | 81,937   |       | 82,425   |       |
| Operating  expenses (except depreciation, amortization and impairment losses)  |       | -60,153    |       | -51,096  |       | -50,390  |       |
| Depreciation,  amortization and impairment losses                              |       | -13,188    |       | -15,596  |       | -17,707  |       |
| Income from  associated companies                                              |       | 3,229      |       | 3,548    |       | 382      |       |
| Operating income                                                               |       | 17,549     |       | 18,793   |       | 14,710   |       |
| Financial  revenues and expenses                                               |       | -530       |       | -1,345   |       | -811     |       |
| Income after  financial items                                                  |       | 17,019     |       | 17,448   |       | 13,899   |       |
| Income taxes                                                                   |       | -3,325     |       | -3,184   |       | -3,850   |       |
| Net income                                                                     |       | 13,694     |       | 14,264   |       | 10,049   |       |
| Attributable to:                                                               |       |       |       |     |       |     |       |
| Shareholders of the parent company                                             |       | 11,697     |       | 12,964   |       | 9,080    |       |
| Minority interests in subsidiaries                                             |       | 1,997      |       | 1,300    |       | 969      |       |
| Earnings per share (SEK)                                                       |       | 2.56       |       | 2.77     |       | 1.95     |       |

 

Our net sales increased by 7.0 percent in 2005, mainlydue to the acquisition of majority in Eesti Telekom in December 2004, theacquisition of Orange Denmark operations in October 2004, the acquisitionof Chess operations in Norway in November 2005, and due to a positiveimpact of 1.2 percent from exchange rate fluctuations. In 2004, our net salesdecreased by 0.6 percent, mainly due to the divestments of our Swedishcable TV operations and Telia Mobile Finland in June 2003 that wererequired by the EU Commission as part of the merger of Telia and Sonera.

Throughout the period, volume growth within mobilecommunications and broadband has been strong in most markets, but the impact onnet sales has been partly offset by price erosion. Additionally, net sales fromfixed voice services have declined throughout the period.

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Thefollowing table presents net sales for each of our reporting segments:

| **SEK in millions, except percentages** | ** ** | ** ** | ** ** | **2005** | ** ** | **2004** | ** ** | **Change  (%)** | ** ** | **2003** | ** ** | **Change  (%)** | ** ** |
|-------------------------------------------------------------|------------|------------|------------|----------|------------|----------|------------|-----------------|------------|----------|------------|-----------------|------------|
| Sweden                                                      |       | 38,960     |       | 40,448   |       |     | -3.7       |            |       | 42,601   |       |            | -5.1       |   |   |
| Finland                                                     |       | 16,308     |       | 18,267   |       |     | -10.7      |            |       | 17,697   |       |            | 3.2        |   |   |
| Norway                                                      |       | 7,481      |       | 6,299    |       |     | 18.8       |            |       | 6,081    |       |            | 3.6        |   |   |
| Denmark                                                     |       | 7,178      |       | 4,495    |       |     | 59.7       |            |       | 3,278    |       |            | 37.1       |   |   |
| Baltic countries                                            |       | 9,293      |       | 5,868    |       |     | 58.4       |            |       | 5,881    |       |            | -0.2       |   |   |
| Eurasia                                                     |       | 6,367      |       | 4,084    |       |     | 55.9       |            |       | 2,742    |       |            | 48.9       |   |   |
| Other operations                                            |       | 4,922      |       | 5,422    |       |     | -9.2       |            |       | 7,478    |       |            | -27.5      |   |   |
| Corporate and  eliminations                                 |       | -2,848     |       | -2,946   |       |     | -3.3       |            |       | -3,333   |       |            | -11.6      |   |   |
| The Group                                                   |       | 87,661     |       | 81,937   |       |     | 7.0        |            |       | 82,425   |       |            | -0.6       |   |   |

 

·       Netsales in Sweden decreased throughout the period mainly due to lower volumes andnet sales in fixed voice, partly offset by growth in mobile and broadbandservices, where increased usage and amount of customers has been able to offsetor exceed the effects of price erosion. In 2004, net sales were also negativelyaffected by a change in reporting third-party content services on a net basisinstead of gross basis.

·       Netsales in Finland decreased in 2005 due to substantially reduced price level inmobile communications, which was not sufficiently offset by increased usage andnumber of mobile customers, and a loss of mobile wholesale revenues. In 2004,net sales increased due to the acquisition of Auria fixed network operations inOctober 2003, while increased usage of mobile and broadband services wasoffset by price erosion and decreases in fixed voice.

·       Netsales in Norway increased in 2005 due to the acquisition of Chess operations inNovember 2005, and increased throughout the period due to growth incustomer base and increased usage of services, partly offset by price erosion.

·       Netsales in Denmark increased in 2005 and 2004 due to the acquisition of OrangeDenmark operations in October 2004, and increased throughout the perioddue to growth in our mobile customer base and increased usage of services,which has exceeded the effects from price erosion.

·       Netsales in the Baltic countries increased in 2005 mainly due to the acquisitionof majority in Eesti Telekom in December 2004, and remained stable in2004. Excluding the effects from acquiring majority in Eesti Telekom, the netsales have been stable throughout the period, with the decline in fixed voiceoffsetting the growth in mobile and Internet services.

·       Netsales in Eurasia increased throughout the period due to significant andcontinued growth in customer base.

·       Netsales in Other operations decreased throughout the period mainly due tocontinued divestment of our non-core operations, and in 2004 also due to thediscontinuation of unprofitable operations and substantial price erosion inInternational Carrier. In 2005, net sales from International Carrier increaseddue to higher demand for voice services offsetting price erosion, but thegrowth was not enough to offset the effect of divestments within TeliaSoneraHolding.

Our operating expenses, excluding depreciation,amortization and impairment losses, increased in 2005, mainly due to theconsolidation of Orange Denmark operations and Eesti Telekom for the full year,and the consolidation of Chess operations since November 2005, and alsodue to the SEK 2.1 billion restructuring charge recorded for our Swedishoperations in 2005, a SEK 0.7 billion positive pension related one-timeadjustment in 2004, and capital gains of SEK 0.5 billion in 2004. Additionally,operating 

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expenses increasedespecially in Norway, Denmark and Eurasia due to growing traffic and customervolumes. In Finland, operating expenses also increased, despite decreased netsales, due to settlement compensations paid to other operators in 2005, andalso due to expenses for customer intake and increased traffic volumes. In2004, operating expenses, excluding depreciation, amortization and impairmentlosses, increased slightly, mainly due to lower capital gains than in 2003. SeeNotes 8 and 9 to our consolidated financial statements.

Our depreciation, amortization and impairment lossesdecreased in 2005, mainly due to the SEK 3.0 billion impairment loss recordedon our international carrier operations in 2004. Increased depreciation andamortization due to the full-year consolidation of Orange Denmark and EestiTelekom was partly offset by lower depreciation level in Sweden fixed network.In 2004, depreciation, amortization and impairment losses decreased due todiscontinued goodwill amortization and lower depreciation level in Sweden fixednetwork, partly offset by the impairment loss recorded on our internationalcarrier operations. See Note 11 to our consolidated financial statements.

Income from associated companies decreased in 2005 ascompared to 2004, due to a SEK 1.0 billion capital gain in 2004 related to theearlier sale of our investment in Telefos and due to consolidation of EestiTelekom which was an associated company in 2004, partly offset by improvedresults in MegaFon and Turkcell. Income from associated companies increased in2004 as compared to 2003, due to final recognition of gains in 2004 related tothe sale of our majority interest in Telefos in 2001; due to a SEK 1.0 billionimpairment loss on Infonet in 2003; and also due to improved results in MegaFonand Turkcell. See Note 12 to our consolidated financial statements.

Our operating income decreased in 2005, despiteincrease in net sales, mainly due to restructuring charges in 2005 thatexceeded the net amount of impairment losses, pension adjustment and capitalgains in 2004, due to increased traffic and customer volumes and to increasedcosts for customer intake, due to settlement compensations paid to otheroperators in Finland, and due to lower income from associated companies. In2004, our operating income increased mainly due to lower depreciation,amortization and impairment losses and higher income from associated companies.In 2003, our operating income increased mainly due to lower impairment lossesand restructuring charges compared to 2002.

Thefollowing table presents operating income/loss for each of our reporting segments:

| **SEK in millions** | ** ** | ** ** | ** ** | **2005** | ** ** | **2004** | ** ** | **Change** | ** ** | **2003** | ** ** | **Change** | ** ** |
|-------------------------------|------------|------------|------------|----------|------------|----------|------------|------------|------------|----------|------------|------------|------------|
| Sweden                        |       | 8,359      |       | 12,696   |       | -4,337   |       | 10,892     |       | +1,804   |       |
| Finland                       |       | 321        |       | 3,278    |       | -2,957   |       | 1,980      |       | +1,298   |       |
| Norway                        |       | 1,682      |       | 1,183    |       | +499     |       | 423        |       | +760     |       |
| Denmark                       |       | -174       |       | -909     |       | +735     |       | -561       |       | -348     |       |
| Baltic countries              |       | 2,303      |       | 1,799    |       | +504     |       | 994        |       | +805     |       |
| Eurasia                       |       | 2,813      |       | 1,803    |       | +1,010   |       | 889        |       | +914     |       |
| Russia                        |       | 1,170      |       | 653      |       | +517     |       | 509        |       | +144     |       |
| Turkey                        |       | 1,709      |       | 973      |       | +736     |       | 619        |       | +354     |       |
| Other operations              |       | 130        |       | -1,764   |       | +1,894   |       | -137       |       | -1,627   |       |
| Corporate and  eliminations   |       | -764       |       | -919     |       | +155     |       | -898       |       | -21      |       |
| The Group                     |       | 17,549     |       | 18,793   |       | -1,244   |       | 14,710     |       | +4,083   |       |

 

 

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·       Operatingincome in Sweden decreased in 2005, mainly due to SEK 2.5 billion restructuringcharges, decreased net sales and profitability for fixed voice, SEK 0.5 billionof increased costs and writedowns due to the exceptionally strong winter storm,and a SEK 0.7 billion positive pension related one-time adjustment in 2004. In2004, operating income increased mainly due to extended depreciation schedulesand the SEK 0.7 billion effect from a changed accounting practice for certainpension-related items.

·       Operatingincome in Finland decreased in 2005, mainly due to significantly decreased netsales and profitability for mobile communications, settlement compensations ofSEK 0.4 billion paid to other operators, and costs for increased customerintake in 2005. In 2004, operating income increased mainly due to discontinuedgoodwill amortization.

·       Operatingincome in Norway increased in 2005, mainly due to increased usage per customerand the acquisition of Chess in November 2005. In 2004, operating incomeincreased mainly due to discontinued goodwill amortization.

·       Operatingloss in Denmark decreased in 2005, mainly due to impairment losses, provisionsand other additional costs in 2004 from integrating Orange Denmark operations.Accordingly, in 2004, operating loss increased due to costs of integratingOrange Denmark.

·       Operatingincome in the Baltic countries increased in 2005, mainly due to theconsolidation of Eesti Telekom. In 2004, operating income increased mainly dueto discontinued goodwill amortization.

·       Operatingincome in Eurasia increased in 2005 due to growth in net sales, and increasedin 2004 due to growth in net sales and discontinued goodwill amortization.

·       Operatingincome from Russia and Turkey improved throughout the period mainly due tocontinued customer growth in our associated companies in these countries.Additionally, results in Turkey in 2004 were negatively affected by provisionsrecorded by Turkcell.

·       Operatingincome from Other operations increased in 2005 as compared to 2004, when werecorded a SEK 3.3 billion impairment loss on our international carrieractivities. This improvement was partly offset by lower capital gains inTeliaSonera Holding in 2005 as compared to 2004. Operating loss from Otheroperations deepened in 2004 compared to 2003 due to the impairment loss oninternational carrier activities in 2004. This improvement was partly offset byhigher capital gains in TeliaSonera Holding in 2004 as compared to 2003.

Our net financial expenses decreased in 2005, mainlydue to impairment losses and provisions recorded on minority investments in2004. Accordingly, net financial expenses increased in 2004 due to theseimpairment losses and provisions, as compared to capital gains from suchminority investments in 2003.

Our income tax expense increased in 2005, mainly dueto recording of previously unrecognized deferred tax assets in 2004.Accordingly, in 2004, income tax expense decreased despite higher income beforetaxes than in 2003, mainly due to the recording of previously unrecognizeddeferred tax assets. See Note 14 to our consolidated financial statements.

Our net income and ourearnings per share decreased in 2005, mainly due to lower operating income. In2004, net income and earnings per share increased mainly due to improvedoperating income.

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*Liquidityand Capital Resources*

**Cash Flows**

| **SEK in millions**                          | ** ** | ** ** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|--------------------------------------------------------|------------|------------|------------|----------|------------|----------|------------|----------|------------|
| Cash from  operating activities                        |       | 26,990     |       | 24,403   |       | 26,443   |       |
| Cash used in  capital expenditure                      |       | -11,396    |       | -10,285  |       | -9,092   |       |
| *Free cash flow*                                       | * *   | *15,594*   | * *   | *14,118* | * *   | *17,351* | * *   |
| Cash used in/from  other investing activities          |       | -840       |       | 2,294    |       | 5,649    |       |
| Cash flow before  financing activities                 |       | 14,754     |       | 16,412   |       | 23,000   |       |
| Cash used in  financing activities                     |       | -15,653    |       | -11,102  |       | -16,412  |       |
| Cash and cash  equivalents, opening balance            |       | 17,245     |       | 12,069   |       | 5,465    |       |
| Net cash flow for  the period                          |       | -899       |       | 5,310    |       | 6,588    |       |
| Exchange rate  difference in cash and cash equivalents |       | 488        |       | -134     |       | 16       |       |
| Cash and cash  equivalents, closing balance            |       | 16,834     |       | 17,245   |       | 12,069   |       |

 

Our principal source of liquidity is cash generatedfrom operations. Historically, we have also generated significant amounts ofcash from asset sales as part of our strategy to focus on our core business.Our liquidity requirements arise primarily from the need to fund capitalexpenditures for the maintenance of our facilities, to expand our businessshould management deem that such an expansion is in the interest ofshareholders, to fund our working capital requirements and to pay dividends andother returns to shareholders. We believe that we are capable of meetingpayables, when they become due, from our cash flow from operating activities.Additionally, we maintain credit facilities with available funds which can beused, if necessary, to meet current liabilities when they fall due.

Cash flow from operating activities increased in 2005,mainly due to lower tax payments than in 2004, a positive change in workingcapital compared to a negative change in 2004, and the consolidation of EestiTelekom. Cash flow from operating activities decreased in 2004 mainly due tohigher tax payments than in 2003.

Cash used in capital expenditure increased in 2005,mainly due to investments in the mobile network in Eurasia, Denmark and theBaltics, and also due to the consolidation of Eesti Telekom. In 2004, cash usedin capital expenditure increased due to higher investments in the growth areasbroadband, IP-based services and mobile communications.

Free cash flow (cash flow from operating activitiesless capital expenditure) increased in 2005 due to higher cash flow fromoperating activities, partly offset by higher capital expenditures. In 2004,free cash flow decreased due to both decreased cash flow from operatingactivities and increased capital expenditures.

Net cash was used in other investing activities in2005, due to the cash payment for the Chess acquisition exceeding the effectsfrom asset sales during the year. In 2004, net cash received from otherinvesting activities decreased mainly due to higher amount of acquisitions thanin 2003.

Net cash used in financingactivities increased in 2005, due to higher dividends paid and the SEK 10.2billion repurchase of shares in 2005, partly offset by net borrowings of newloans as compared to net repayment of loans in 2004. Net cash used in financingactivities decreased in 2004 compared to 2003, despite higher dividends paid,due to lower net repayments of loans.

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**Acquisitions,Investments and Divestitures**

We have made a number of significant acquisitions anddivestitures since the beginning of 2003.

·       In December 2003, weacquired Motorola’s 35 percent minority interest in our Lithuanian mobileoperator UAB Omnitel, increasing our interest in Omnitel from 55 percentto 90 percent. The purchase price was USD 117 million. In August 2004,we acquired the remaining 10 percent minority interest from the Kazickasfamily for a purchase price of USD 64 million.

·       To fulfill the EUconditions for the merger of Telia and Sonera, we sold our Swedish cable TVoperations Com Hem AB to EQT Northern Europe for approximately SEK2.2 billion and Telia’s Finnish mobile operations to Finnet Oy forapproximately EUR 14 million in cash, both in June 2003. We havesubsequently in 2004-2005 received an additional EUR 14 million in cashfor the sale of Telia’s Finnish mobile operations. We recorded a capital gainof SEK 1.8 billion from the sale of Com Hem and a capital loss of SEK0.1 billion from the sale of Telia’s Finnish mobile operations.

·       In March 2004, we soldour Telia Finans AB leasing portfolio and operations to De Lage LandenInternational B.V. for approximately SEK 6.2 billion, and recorded a gainof SEK 0.4 billion from the sale.

·       In October 2004, weacquired France Telecom’s Danish subsidiary, the mobile operator Orange A/S,for a purchase price of EUR 606 million.

·       In February 2005, wesold our 20 percent holding in Infonet Services Corporation to BritishTelecom for SEK 1.3 billion, and recorded a capital loss of approximatelySEK 20 million on the sale. We had in 2003 recorded a SEK 1.0 billionimpairment loss on our investment in Infonet.

·       OnNovember 7, 2005, we acquired 91.2 percent of the mobile service operatorVollvik Gruppen AS in Norway, subsequently renamed TeliaSonera Chess HoldingAS. After making a voluntary offer for the remaining shares, we owned all but asmall fraction of the shares at December 31, 2005. We paid SEK 2.0 billionas purchase consideration and expect to pay an additional purchaseconsideration of SEK 0.2 billion, subject to certain conditions.

**Credit Facilities**

Webelieve that our bank credit facilities and open-market financing programs aresufficient for our present liquidity requirements. Our cash and short-terminvestments totaled SEK 18.4 billion as of December 31, 2005. Inaddition, the aggregate principal unutilized amount we had available under ourcommitted credit facilities amounted to SEK 10.3 billion as of December 31,2005.

Wecurrently have a credit rating from Moody’s Investors Service of A2 forlong-term borrowing and Prime-1 for short-term borrowing. From Standard &Poor’s Ratings Services we have a rating of A- for long-term borrowing and A2for short-term borrowing.

Wegenerally seek to arrange our financing through our parent company TeliaSoneraAB. Our primary means of external borrowing are described in Note 22 “FinancialInstruments and Financial Risk Management” under subsections “Liquidity andbank credit facilities” and “Open-market financing programs.”

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**Contractual Obligations**

Thetable below sets forth certain information on our contractual obligations as ofDecember 31, 2005, including scheduled payment dates:

| **SEK in millions**       | ** ** | ** ** | ** ** | **Total  amount  outstanding** | ** ** | **Within  1 year** | ** ** | **More  than  1 year  but within  3 years** | ** ** | **More  than  3 years  but within  5 years** | ** ** | **After  5 years** | ** ** |
|-------------------------------------|------------|------------|------------|--------------------------------|------------|-------------------------|------------|------------------------------------------------------------|------------|-------------------------------------------------------------|------------|-------------------------|------------|
| Long-term  loans                    |       |       | 20,520     |                           |       | —                  |       |                                                       | 1,789      |                                                        |       |                    | 3,409      |   |   | 15,322 |   |
| Short-term  loans(1)                |       |       | 6,215      |                           |       | 6,215                   |       |                                                       | —     |                                                        |       |                    | —     |   |   | — |   |
| Operating leases                    |       |       | 9,817      |                           |       | 1,876                   |       |                                                       | 2,602      |                                                        |       |                    | 1,790      |   |   | 3,549 |   |
| Financial leases                    |       |       | 390        |                           |       | 181                     |       |                                                       | 192        |                                                        |       |                    | 14         |   |   | 3 |   |
| License fees                        |       |       | 456        |                           |       | 73                      |       |                                                       | 141        |                                                        |       |                    | 157        |   |   | 85 |   |
| Unconditional  purchase obligations |       |       | 2,088      |                           |       | 513                     |       |                                                       | 452        |                                                        |       |                    | 452        |   |   | 671 |   |
| Other contractual  obligations      |       |       | 4,704      |                           |       | 2,944                   |       |                                                       | 1,528      |                                                        |       |                    | 38         |   |   | 194 |   |
| Total contractual  obligations      |       |       | 44,190     |                           |       | 11,802                  |       |                                                       | 6,704      |                                                        |       |                    | 5,860      |   |   | 19,824 |   |

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(1)          Includingshort-term portion of long-term loans.

***Interest-bearing liabilities***

We had long-term loans amounting to SEK20,520 million as of December 31, 2005. Of such amount, SEK203 million was in the form of loans incurred through long-term financialleasing, foreign currency interest rate swaps and interest rate swaps. Further,SEK 18,610 million was in the form of other foreign currency loans andEMTN program loans and SEK 907 million was in the form of other loans.Finally, SEK 800 million was in the form of FTNs. Our short-term loansinclude short-term financial leasing, short-term FTNs, short-term EMTNs, loans,foreign currency interest rate swaps and interest rate swaps. During 2005, werefinanced maturing debt with new longer-dated public bond issuance, therebyprolonging our debt maturity profile.

Our interest-bearing liabilities, consisting oflong-term and short-term loans and our pension liability, totaled SEK26,735 million as of December 31, 2005, compared to SEK 24,675 millionas of December 31, 2004, and SEK 31,076 million as of December 31,2003.

In 2006, our scheduled debt repayments are somewhatlower than they were in 2005. In addition to scheduled amortizations, we havein the past and may in the future decide to redeem or repurchase outstandingdebt prior to its maturity.

In general, our policy isto place debt at the parent company level. However, as of December 31,2005, our wholly owned subsidiary TeliaSonera Finland Oyj had interest-bearingliabilities to external parties of approximately SEK 2 billionoutstanding. These liabilities were assumed as a result of the merger of Teliaand Sonera in December 2002.

***Leasing activities***

Our operating and financial lease obligationsprimarily relate to office space, technical sites, land, computers and otherequipment.

We are also a party to across-border finance lease-leaseback agreement under whichTeliaSonera Finland has leased some of its mobile telecommunications networkequipment to a group of equity trusts based in the United States, which have inturn leased the equipment back to TeliaSonera Finland. See Note 28 to ourconsolidated financial statements “Contingencies, Other Contractual Obligationsand Litigation” for more details regarding this transaction.

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***License fees***

License fees in the abovetable relate to our remaining annual payments for the UMTS license in Denmarkas of December 31, 2005.

***Unconditional purchase obligations***

Unconditional purchaseobligations consist mainly of future payments under our restructuringprovisions.

***Other contractual obligations***

Other contractual commitments consist of warrantyprovisions recorded in our balance sheet and our unrecognized contractualobligations to acquire intangible assets, property, plant and equipment and financialassets.

We have guarantee commitments on behalf of Ipse 2000S.p.A., our 12.55 percent held UMTS investment in Italy, which we haverecorded in our balance sheet as provisions. These commitments, consisting ofour portion of Ipse’s 3G license payments to the Italian government, have beensecured by bank guarantees. As of December 31, 2005, the amount ofprovision for our future payments totaled SEK 856 million.

We have a capital commitment to invest in XferaMóviles S.A. Our ownership in Xfera is 16.55 percent and our share of theshareholder capital commitments is 23.27 percent. Payments under theexisting capital commitment were originally scheduled to start by the end of2004, but have been postponed due to ongoing negotiations among Xfera owners.As of December 31, 2005, the amount of provision for our future paymentsand the amount of other unrecognized contractual obligations totaled SEK 2,463million.

As of December 31,2005, we had contractual obligations to acquire property, plant and equipmenttotaling SEK 871 million, mainly related to contracts for the constructionof fixed networks in Sweden.

***Other commercial commitments***

In addition to our contractual obligations presentedabove, we also have certain commercial commitments (contingent liabilities),which mainly relate to guarantees issued by us. If exercised or called, theseguarantees would affect our liquidity.

Thetable below sets forth certain information on our other commercial commitmentsas of December 31, 2005:

| **SEK in millions**         | ** ** | ** ** | ** ** | **Total  amount  committed** | ** ** | **Within  1 year** | ** ** | **More  than  1 year  but within  3 years** | ** ** | **More  than  3 years  but within  5 years** | ** ** | **After  5 years** | ** ** |
|---------------------------------------|------------|------------|------------|------------------------------|------------|-------------------------|------------|------------------------------------------------------------|------------|-------------------------------------------------------------|------------|-------------------------|------------|
| Credit and  performance guarantees(1) |       |       | 2,581      |                         |       |                    | 451        |                                                       |       |                                                        | 1,922      |                    |       |   | 1 |   |   |   | 207 |   |   |
|                                       |            |            |            |                              |            |                         |            |                                                            |            |                                                             |            |                         |            |  |  |  |  |  |  |  |  |  |  |

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(1)          Guarantees, for which wehave recorded a provision, are not included in the table.

For all guarantees, except the credit guarantee onbehalf of Svenska UMTS-nät AB and the performance guarantees on behalf ofXfera, the stated amounts in the table above equal the estimated maximum amountof future payments that we could be required to make under the respectiveguarantee.

As security for certain amounts borrowed by SvenskaUMTS-nät under a third-party credit facility, we have issued to thelenders a guarantee, which totaled a maximum of SEK 2,650 million as of December 31,2005. We have also granted pledges of our shares in Svenska UMTS-nät to thelenders. As of 

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December 31, 2005,Svenska UMTS-nät had, under the credit facility, borrowedSEK 2,950 million, of which we guarantee 50 percent, or SEK 1,475 million.

We have issued thefollowing guarantees on behalf of Xfera, which totaled SEK 898 million asof December 31, 2005:

·       Counterguarantee of EUR 41 million as our share on behalf of Xfera’s performancerequirements in relation to its UMTS license.

·       Counterguarantees of EUR 52 million as our share to cover the payment of Xfera’sspectrum fees for 2001-2005, which are currently subject to dispute withthe Spanish government.

·       Counterguarantee of EUR 3 million as our share to cover the payment of borrowingsunder Xfera’s credit facility.

The guarantees may be partly overlapping with thecapital commitment discussed above under “Other contractual obligations.” Forinstance, we believe that our investments pursuant to the contractual capitalcommitment would enable Xfera to meet the performance requirements in relationto its UMTS license. As of December 31, 2005, we had a provision of EUR49 million, equivalent to SEK 462 million, for our commitments andobligations on behalf of Xfera, and we believe that there is currently no needfor additional provisions.

As of December 31,2005, other guarantees included approximately SEK 500 million related todivested businesses, and certain other guarantees in the normal course ofbusiness.

**Off-Balance Sheet Arrangements**

Except for credit andperformance guarantees discussed above in “Contractual Obligations,” there areno off-balance sheet arrangements that have or are reasonably likely to have acurrent or future effect on our financial condition, revenues or expenses,results of operations, liquidity, capital expenditures or capital resourcesthat is material to investors.

*Financial RiskManagement*

Our financial policy contains guidelines for interestrates and the average maturity of borrowings. Our current policy is that theduration of interest-bearing loans should be from six months to fouryears. We arrived at this duration interval by balancing the estimated runningcost of borrowing and the risk of a significant negative impact on earningsshould there be a sudden, major change in interest rates. Our basic goal is tooptimize interest rate risk for the TeliaSonera group as a whole. We useSwedish krona as our accounting currency. Our borrowings are therefore normallyswapped into or denominated in Swedish krona, unless directly linked tointernational operations. If the available loan form does not directly reflectthe desired loan portfolio structure, in terms of interest or currency, variousforms of derivative instruments are used to adapt the structure in terms ofduration and currency. This adaptation is achieved chiefly through interestrate swaps and foreign currency interest rate swaps. Foreign currency interestrate swaps, normally, relate to loans denominated in foreign currencies thatare swapped into Swedish krona, and thus do not entail any currency risk.

We typically use our uncommitted facilities for ourfinancing needs.

See Note 22 to our consolidated financialstatements “Financial Instruments and Financial Risk Management” undersubsection “Foreign exposure / Foreign-exchange derivatives” for furtherreference regarding our portfolio of foreign currency interest rate swaps andour portfolio of foreign exchange derivatives hedging loans, investments andoperational transaction exposure, as of December 31, 2005.

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As of December 31, 2005, TeliaSonera AB andTeliaSonera Finland Oyj had interest-bearing liabilities of SEK25,602 million with a duration of interest of approximately0.9 years, including derivatives. The volume of loans exposed to changesin interest rates over the next 12-month period was, as of the same date,approximately SEK 21,145 million, assuming that existing loans maturingduring the year are refinanced and after accounting for derivatives. The exacteffect of a change in interest rates on the financial net depends on the timingof maturity of the debt as well as reset dates for floating rate debt, and thatthe volume of loans may vary over time, thereby affecting the estimate. Thefair value of the loan portfolio would, however, change by approximately SEK240 million, should the level in market interest rates make a parallelshift of one percentage point, and assuming the same volume of loans and asimilar duration on those loans as per year-end 2005. See Note 22 to ourconsolidated financial statements “Financial Instruments and Financial RiskManagement” under subsection “Borrowings, maturity structure, interest ratesand currencies” for further reference regarding the borrowings and the averagecost, including relevant hedges, of outstanding long-term and short-termborrowings as of December 31 for the past three years of TeliaSonera ABand TeliaSonera Finland Oyj.

Thefollowing table sets forth our portfolio of long-term and short-term borrowings(including accrued interest):

| ** **                                    | ** ** | **As of December 31,  _2005** | ** ** |
|-----------------------------------------------|------------|----------------------------------------------|------------|
| **SEK in millions**                 | ** ** | ** **                                   | ** ** | **Book value** | ** ** | **Fair value** | ** ** |
| Long-term  loans                              |       |                                         | 20,913     |   |   |   | 21,147 |   |   |
| Short-term  loans                             |       |                                         | 6,221      |   |   |   | 6,265 |   |   |
| Interest rate  swaps, gains                   |       |                                         | -534       |   |   |   | -534 |   |   |
| Foreign currency  interest rate swaps, gains  |       |                                         | -305       |   |   |   | -305 |   |   |
| Interest rate swaps,  losses                  |       |                                         | 124        |   |   |   | 124 |   |   |
| Foreign currency  interest rate swaps, losses |       |                                         | 52         |   |   |   | 52 |   |   |
| Other foreign  currency derivatives, gains    |       |                                         | 9          |   |   |   | 9 |   |   |
| Total borrowings  (including derivatives)     |       |                                         | 26,480     |   |   |   | 26,758 |   |   |
|                                               |            |                                              |            |  |  |  |  |  |  |  |  |

 

Our operational currency transaction exposure is notsignificant at present, but it is expected to increase over time. Assuming anoperational transaction exposure equivalent to that for the applicable year andprovided that no hedging measures were taken and not including any potentialimpact on income due to currency translation of other income statement items,the negative impact on pre-tax income would have been approximately SEK13 million for the year 2005 and SEK 17 million for the year 2004 ona full-year basis if the Swedish krona weakened by one percentage point againstall the transaction currencies, provided that no hedging measures were takenand excluding any potential impact on income due to currency translation ofother income statement items. Applying the same assumptions, the positive impacton income would have been approximately SEK 17 million for both 2005 and 2004on a full-year basis, should the euro have weakened by one percentage pointagainst all of the transaction currencies.

TeliaSonera Corporate Finance and Treasury is responsiblefor group-wide financial risk management, including netting and pooling ofcapital requirements and payment flows. TeliaSonera Corporate Finance andTreasury also seeks to optimize the cost of financial risk management, which incertain cases may mean that, for example, an intra-group transaction isnot replicated with an identical transaction outside the group. TeliaSoneraCorporate Finance and Treasury’s deviation mandates are clearly defined,however, and the impact on earnings of deals made within those mandates istherefore not deemed to be substantial. TeliaSonera Corporate Finance andTreasury’s risk mandate in the currency markets is currently capped at theequivalent of a nominal plus or minus SEK 200 million. As of December 31,2005, the risk mandate was utilized by less than SEK 50 million.

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Our conversion exposure is expected to continue togrow due to the ongoing expansion of our business operations outside Sweden.Any loss in value of currencies of such areas against the Swedish krona will havea negative impact on the shareholders’ equity in our Swedish krona-denominatedfinancial statements. We do not typically hedge our conversion exposure,unless the exposure is short-term and relates to a large amount of a freely-convertibleforeign currency of a country with smoothly functioning financial markets.

As of December 31, 2005, the conversion exposureamounted to approximately SEK 143 billion (and as of December 31,2004 to approximately SEK 123.5 billion). As of December 31, 2005, wedid not hedge our conversion exposure. The negative or positive impact on theTeliaSonera group’s equity would have been approximately SEK 1.4 billionas of December 31, 2005, and approximately SEK 1.2 billion as of December 31,2004, if the Swedish krona had strengthened or weakened, respectively, by onepercentage point against all currencies in which TeliaSonera has conversionexposure. This impact on the TeliaSonera group’s equity does not include anypotential positive or negative impact, respectively, due to our operationalneed to net purchase foreign currency.

We employ derivatives in our financial managementactivities. Derivatives are primarily used to obtain the duration of interestdesired on the loans within the portfolio, and the risk profile desired inforeign exchange dealings. We accept only creditworthy counterparties forfinancial transactions such as interest rate swaps, foreign currency swaps andother transactions in derivatives. We require each counterparty to have anapproved rating and an International Swaps and Derivatives Association, Inc.(ISDA) agreement. The permitted exposure to each counterparty depends on therating of that counterparty. As of December 31, 2005, TeliaSonera group’saggregate exposure to counterparties in derivatives was SEK 704 million,calculated as the sum of net claims on all of the respective counterparties.

The credit risk with respect to our trade receivablesis diversified among a large number of customers, both private individuals andcompanies in various industries. Solvency information is required for creditsales to minimize the risk of unnecessary bad debt expense and is based ongroup-internal information on payment behavior and, if necessary, creditand business information derived from external sources. Bad debt expense inrelation to consolidated revenues was 0.3 percent, 0.3 percent and0.7 percent in 2005, 2004 and 2003, respectively.

Almost all our employees in Sweden, Finland and Norwayare covered by defined benefit pension plans, pursuant to which individuals areguaranteed a pension equal to a certain percentage of his or her salary. Thepension plans mainly include old-age pensions, disability pensions and familypensions. The pension obligations are secured principally by pension funds, butalso through provisions reflected in our balance sheet and through insurancepolicies. In Finland, a part of the pension is funded in advance and theremaining part financed as a pay-as-you-go pension. Our employees outsideSweden, Finland and Norway are usually covered by defined contribution pensionplans. Contributions to the latter are normally set at a certain percentage ofthe employee’s salary. Pension obligations are calculated annually, on thebalance sheet date, based on actuarial principles. The assets of the pensionfunds constitute plan assets for pensions and are valued at market value. Whenthe net cumulative unrecognized actuarial gain or loss on pension obligationsand plan assets goes outside a “corridor” equal to ten percent of the greaterof either pension obligations or the market value of plan assets, the surplusamount is amortized over the remaining employment period. See Note 4 toour consolidated financial statements “Significant Accounting Policies,”section “Provisions for pensions and employment contracts” for furtherreference regarding actuarial calculation assumptions.

As of December 31, 2005, we had pensionobligations with a net present value of SEK 22,036 million. To securethese obligations we maintain pension funds, with plan assets equivalent toSEK 18,480 million based on market values as of December 31,2005. The pension funds assets are used as the primary funding source for thepension obligations, and at the end of 2005, these assets consisted ofapproximately 

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61 percent of fixedincome instruments and approximately 39 percent of shares and otherinvestments. The expected return on plan assets is approximately4.3 percent annually.

The pension obligationswould have been SEK 3,200 million higher if the weighted average discountrate had been one percentage point lower than the 3.5 percent that we have usedas of December 31, 2005. Such an increase in the pension obligations, wereinterest rates to fall, would be partly offset by a positive impact from thefixed income assets in the pension funds. Based on the duration of the pensionfunds’ fixed income portfolios (including index-linked bonds) as of December 31,2005, and assuming that the value of the other assets in the pension funds wereunchanged, a similar reduction in interest rates is estimated to increase thevalue of the pension funds’ assets by some SEK 1,000 million.

*CriticalAccounting Policies, Estimates and Assumptions*

The preparation of financial statements requiresmanagement and the Board of Directors to make estimates and judgments thataffect reported amounts of assets, liabilities, revenues and expenses, andrelated disclosure of contingent assets and liabilities. These estimates arebased on historical experience and various other assumptions that management andthe Board believe are reasonable under the circumstances, the results of whichform the basis for making judgments about the carrying values of assets andliabilities that are not readily apparent from other sources. Actual resultsmay differ from these estimates under different assumptions or conditions,significantly impacting our earnings and financial position.

Management believesthat the following significant accounting policies comprise its most criticalestimates and assumptions used in the preparation of the financial statements:

·       revenuerecognition,

·       incometaxes,

·       valuationof intangible and other non-current assets,

·       collectingtrade receivables,

·       provisionsfor pensions,

·       restructuringactivities, and

·       contingentliabilities and litigation,

all of which are discussedand separately marked in the respective sections of Note 4 to our consolidatedfinancial statements.

*Legaland Regulatory Proceedings*

We are involved in a number of legal proceedings inthe ordinary course of our business. These proceedings primarily involve claimsarising out of commercial law issues and regulatory matters. We are alsoinvolved in administrative proceedings relating principally totelecommunications regulations, competition law and consumer protection issues.In particular, we are involved in numerous proceedings related tointerconnection fees, which affects future revenues. Except for the proceedingsdescribed below, we or our subsidiaries are not involved in any legal,arbitration or regulatory proceedings which we believe could have a materialadverse effect on our business, financial condition or results of operations.

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The following is abrief summary of certain regulatory proceedings to which we or one of oursubsidiaries is a party:

·       Theadministrative courts in Sweden have ruled that Telia shall reimburse Tele2 forall traffic transferred by Telia to Tele2’s mobile network, while Telia isentitled to be reimbursed by the originating operators who have transferredtraffic on Telia’s network. In connection with the proceedings above, Tele2brought an action in the Swedish civil courts against Telia claiming SEK 1,000 millionand accrued interest for interconnection fees for the period September 1998-June 2004.The action has been stayed pending the administrative procedures. Presently thelevel of the interconnection fee is still pending in the county administrativecourt. We have made provisions with an amount we believe to be sufficient.

·       Teliais in disputes with Tele2 and Vodafone in Sweden regarding the level ofinterconnection fees for calls terminated in their respective mobile networks.The NPTA has decided that Tele2 and Vodafone were entitled to charge Teliaapproximately SEK 0.97 per minute until July 5, 2004 and thereafter SEK0.80 per minute. Tele2 and Vodafone claim that the interconnection fees shouldbe approximately SEK 1.40 per minute, while we claim that the fees should besubstantially lower than the NPTA has decided. The issues are presently pendingin the courts.

·       Duringthe second half of 2001, a number of operators filed complaints against Teliawith the Swedish Competition Authority and the Swedish Competition Authorityinitiated an investigation regarding Telia’s pricing of ADSL services. Thecomplaints suggest that the difference between Telia’s wholesale prices andretail prices is too low to effectively enable competition in the retailmarket. In December 2004 the Competition Authority sued us at theStockholm District Court claiming that we have abused our dominant position. TheAuthority demands a fee of SEK 144 million. Our position is that wehave not engaged in any prohibited pricing activities. Following theCompetition Authority’s lawsuit, Tele2 has on April 1, 2005 claimeddamages from Telia due to the alleged abuse of dominant position. We willvigorously contest Tele2’s claim.

The following is abrief summary of certain legal proceedings to which we or one of oursubsidiaries is a party:

·       Weare currently involved in litigations with former shareholders of the Brazilianmobile operator Tess relating to such shareholders’ disposal of theirinvestment in Tess as well as certain call options and subscription rights inTess. The litigations, which were initiated in 1998, are still in theprocedural stage.

·       Companies within the AlfaGroup have sued the parties to the MegaFon shareholders’ agreement in the Courtof Khanty-Mansi Autonomous Area and asked the Court to declare most ofthe shareholders agreement, including for example sections regarding boardrepresentation for TeliaSonera null and void. In its ruling in December 2004,the Court declared the relevant sections null and void. TeliaSonera and othershareholders have appealed this decision. The Alfa Group is also contesting thevalidity of the shareholders’ agreement in an arbitration proceeding inStockholm, Sweden.

*Research andDevelopment*

In a changing businessenvironment, we see the role of research and development as very important. Inorder to create sustainable growth, a strategic renewal of our research and developmenthas been initiated. We aim to have cost-efficient innovative servicedevelopment by establishing partnerships with key external competences andresources across the globe as well as the required local value-chain actors. In2005, we incurred research and development expenses of SEK 2,875 millionas compared to SEK 2,783 million for 2004 and SEK 2,543 millionfor 2003.

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In 2005, our research anddevelopment activities have also been preparing TeliaSonera for communicationtechnology disruption. IP multimedia communication affects not only theservices provided to customers, but also all parts of the value chain for a telecommunicationservice.

We have also been active inensuring that new IP communication services are easy to use and that they workseamlessly between different operator networks. There are more than 50 telecomoperators and vendors participating in a GSM Association project lead byTeliaSonera.

Mobile video and broadcastinghas been one of the focus areas in our research and development work. In 2005,we saw some of the results of this work, with TeliaSonera deploying its 3Gmobile video services and actively driving mobile broadcasting services onDVB-H (Digital Video Broadcast—Handheld) networks, and running a mobile TVtrial with 500 customers in the Helsinki area together with broadcasters,telecom operators and device vendors.

As of December 31,2005, we had approximately 650 patent “families” and approximately 2,400patents and patent applications, none of which, individually, is material toour business.

*Environment*

In2005, TeliaSonera Sweden decided to broaden the coverage of its combinedenvironmental/quality certification ISO 14001/9001 from network issues to thecustomer front. The decision was made because a great number of TeliaSonera’slarge business customers demand that suppliers have environmental and qualitycertification.

*Trend Information*

Our business and results of operations have beenaffected during the last several years by a number of important trends. Theglobal communications market has experienced rapid growth, especially as theareas of voice and data transmission have converged and become digitalized.Overall growth, however, has slowed down in the Nordic and Baltic markets, buthas continued to be rapid in the Eurasian, Russian and Turkish mobile servicesmarkets.

In the Swedish and Finnish mobile communicationsmarkets, growth has slowed as penetration levels have risen. However, priceerosion has had a negative effect on our revenue growth especially in Finland,where mobile revenues decreased in 2005.

Retail revenues from our fixed telephony operations inSweden have declined in the last several years as a result of the introductionof carrier pre-selection in long-distance, international and fixed to mobilecalls in 1999 and in local calls in 2002 as well as fierce competition, whichtogether have contributed to our declining market shares within the fixedtelephony traffic market. In Finland, our fixed telephony business has steadilydecreased over the last several years, mainly due to fixed-to-mobile migrationand people moving out from our traditional service areas in Eastern andNorthern Finland.

The Swedish and Finnish broadband markets havecontinued to expand with high demand for ADSL accesses. On the other hand, thishas decreased the number of minutes per subscriber in our fixed lineoperations, as customers switch from dial-up Internet services to ADSL.

Our mobile operations in Norway have experiencedrevenue growth due to expanded customer base, increased average minutes of use,and substantial increase in the use of SMS messaging. Our acquisition of theservice operator Chess in November 2005 further strengthened our numbertwo position in the Norwegian mobile market.

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In our Danish mobile operations, fast customer growthand restructuring measures have contributed to an increase in revenues and animprovement in profitability. Our acquisition of Orange Denmark in 2004reinforced our position in the Danish mobile market.

Our Baltic mobile operations have continued to showgrowth. As a consequence, however, our Baltic fixed network operations havepreviously suffered from fixed-to-mobile migration and declining revenues. In2005, this trend reversed especially in our Lithuanian fixed networkoperations, when the growth in Internet, broadband and data communicationsresulted in a three percent growth for the Lithuanian fixed network operationsas a whole.

Our Eurasian mobile operations in Kazakhstan,Azerbaijan, Georgia and Moldova have continued to show customer growth. Thesecountries currently have low GDP per capita but have been exhibiting strongeconomic development. The mobile penetration rate in these countries is stilllow.

Russia, where our associated company MegaFon operates,has continued to exhibit growth both generally and for the mobile market.Turkey, where our associated company Turkcell is the largest mobile operator,has exhibited strong recent economic growth after experiencing economicdifficulties in 2000-2002.

Our TeliaSoneraInternational Carrier operations have continued to face difficult marketconditions and price erosion, together with the closing down of unprofitablebusinesses, has resulted in declining net sales in 2003 and 2004. In 2005,however, higher demand for voice services exceeded the effects from priceerosion and net sales increased by five percent. Our restructuring effortsregarding our international carrier activities have been successful and we havesignificantly reduced losses, excluding impairment losses. In 2004, after anannual impairment test, we recorded the net book value of International Carrierfixed assets to zero.

*Outlook for 2006*

**Strategy**

Our strategy is based ondual opportunities stemming from operations in markets with different degreesof maturity. In the more mature home markets in the Nordic and Baltic countriesthe strategic priorities are to create growth via new mobile and IP basedservices and offerings, increased simplicity in services as well as selectedacquisitions, and to keep the profitability via the ongoing programs to achievecompetitive cost levels and focusing of the service offerings. In the moreemerging International Mobile operations in Eurasia, Russia and Turkey thestrategy is to exploit the inherent growth and enhance the value of thecompanies. Based on the current strengths in the regions, complementaryacquisitions can be considered, which may lead to additional growth.

**Group outlook**

Despite tough competitionand price pressure in the home markets, we have been able to keep our leadingposition during 2005, which provides a good platform for development in 2006.Group net sales and results before tax are expected to grow. CAPEX is mainlydriven by capacity and customer needs and CAPEX to sales ratio is expected tobe somewhat higher than for 2005. Free cash flow will remain strong. Changes inthe competitive landscape, currency fluctuations and political uncertainties,including tax and regulatory conditions, may impact the reported figures.

**Home markets**

The migration from traditional fixed voice to mobileand IP based services is estimated to continue. Competition in all productareas will remain strong in the home markets. Mobile and broadband volumegrowth is expected to be significant.

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In Sweden, the migration to mobile and IP basedservices is most evident. This is expected to result in a continued decline infixed voice sales. Mobile and broadband volumes are expected to show continuedsignificant growth whereas prices will be under pressure. Still 2006, totalsales are expected to decline. The ongoing restructuring program will affectpositively but not offset the impact on EBITDA excluding non-recurring items.

In Finland, focus has been shifted from market shareand price to customer loyalty, quality and services. However, in the short termthe average price is still expected to decrease due to historical pricechanges. New possibilities to subsidize 3G mobile terminals may accelerate theuse of mobile services. Subsidies should, however, be at moderate levelsallowing for profitable growth. Streamlining initiatives taken in 2005 areexpected to lower annual costs in 2006. Additional initiatives were taken and aturnaround program was launched to ensure future growth and restoreprofitability.

In Norway, organic growth is estimated to continue andthe consolidation of Chess will increase sales. The margin will be impacted bythe lower margin level of Chess and the synergies from the Chess transaction,which are mainly related to increased utilization of NetCom’s network. Beforeimplementation costs the transaction is expected to result in an annual EBITDAimprovement of about SEK 0.8 billion from mid 2006.

In Denmark, the sales growth is estimated to continue.The integration of Orange is completed successfully. The increased volumes andinternal efficiency improvements will impact profitability positively.

In the Baltic countries,competition and price pressure within the mobile operations is expected toincrease, which will affect margins. This will to some part be compensated bythe expected continued mobile volume growth. In the fixed operations, expecteddecline in fixed voice sales is estimated to be offset by continued growth inbroadband.

**International Mobile operations**

The income from International Mobile operations isexpected to grow in 2006.

In the Eurasian operations, strong sales growth isexpected to continue, but a tougher competitive environment is estimated toimpact sales and margins.

In Turkey, the competitive environment will changesignificantly due to new market entrants. In Russia, the increased penetrationis expected to lead to increased price competition. We view both Turkcell andMegaFon to be well positioned to meet the new challenges in the respectivemarkets.

In light of the prevailinguncertainties regarding ownership issues in both Turkcell and MegaFon, wereiterate our commitment to the Turkish and Russian markets and our interestand ambition to increase the ownership in both operators, should an opportunityarise.

*Treasury Shares*

As of December 31, 2005, TeliaSonera AB held184,774,856 treasury shares, as a result of a share repurchase program decidedby the Annual General Meeting of shareholders on April 26, 2005. Thetransaction was concluded in July 2005. The price paid for eachrepurchased share was SEK 55.00 in cash and pre-tax transaction costs amountedto SEK 55 million, reducing retained earnings within shareholders’ equity bySEK 10,203 million in total.

The repurchased shares represent 3.95 percent of allshares issued. The Board of Directors proposes to the Annual General Meeting of2006 that the treasury shares be cancelled.

See “ShareholderInformation” and Note 21 to the consolidated financial statements.

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*OrdinaryDividend and Capital Distribution to Shareholders*

Our dividend policy is to distribute 30-50percent of net income excluding minority interest in subsidiaries. For 2005,the Board of Directors and the CEO propose to the Annual General Meeting (AGM)an ordinary dividend of SEK 1.25 per share, totaling SEK 5,613 million.

The increase in the proposed dividend is made in lightof the strong results in 2005 and the expected growth in results in 2006. The dividendlevel is in accordance with our dividend policy.

In addition to the ordinary dividend, we havecommunicated that we are planning to distribute SEK 30 billion to ourshareholders during the period 2005-2007. As a first step, approximately10 billion of this SEK 30 billion was distributed in 2005 by repurchasingshares through a public offer with tradable rights. The Board of Directors andCEO propose to the AGM, as a second step, an extraordinary dividend of SEK 2.25per share, totaling SEK 10,104 million.

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**Risk Factors**

We operate in a broad range of geographic product andservice markets in the highly competitive and regulated telecommunicationsindustry. As a result, we are subject to a variety of risks and uncertainties.Set forth below is a description of some of the factors that may affect ourbusiness, financial condition and results of operations.

***Competition from a variety of sources, includingcurrent market participants, new entrants and new products and services, mayadversely affect our results of operations.***

We are subject to substantial and historicallyincreasing competition and price pressure. Competition has led to an increasedcustomer churn and a decrease in customer growth rates as well as to declinesin the prices we charge for our products and services and may have similareffects in the future.

Virtually all of our markets are characterized bydirect and indirect competition. We have, for example, experienced significantcompetition in mobile voice services from new market entrants such as Hi3GAccess AB (operating under the brand name “3”), which owns a UMTS license inSweden, Norway and Denmark. We are also experiencing increased competition fromnon-traditional operators, including service providers and mobile virtualnetwork operators (MVNOs), which are telecommunications service providers thattypically do not own their own network infrastructure but, rather, leasecapacity from network operators. In addition, our fixed network businesses facecompetition from mobile operators as a result of the trend of traditional usersof fixed network services switching some or all of their demand to mobile phoneservices. Our mobile operations may also be affected by how successful we arein implementing new technologies and capabilities, such as High-Speed DownlinkPacket Access (HSDPA).

Our fixed network businesses also face increasingcompetition from cable TV companies, broadband companies, internet serviceproviders and companies like Skype, which provide voice over Internet. There isalso a risk that our revenues will decline as market prices for servicesdecrease further. Furthermore our conversion to IP technology may not result incorresponding savings in our production cost and that traffic might beredirected to such new or existing competitors that provide IP networks at amuch lower cost. The reduction in traffic and revenues may also lead toimpairment losses on the existing platforms.

In order to meet the increased competition we havelaunched a program to focus our service portfolio to reduce technical andorganizational complexity, with the aim to seek growth in the selected servicesand to achieve a competitive cost level. There is, however, a risk that we willnot be successful in implementing our program due to operational or regulatoryreasons or otherwise.

Further, our International Carrier business hashistorically been subject to fierce competition and severe price pressure,which may continue.

***We face structuralimpediments in continuing to grow our Nordic telecommunications business.***

The telecommunications industry in the Nordiccountries is mature relative to many other European countries. In particular,each of Sweden, Finland, Norway and Denmark has among the highest mobilepenetration rates and lowest mobile calling tariffs in the world. The highpenetration rate in the Nordic countries for many of our products and servicesmay make it more difficult for us to match our previous subscriber growth or toachieve growth rates that are comparable to less developed markets.

***We operate in ahighly regulated industry and changes in, or adverse applications of, theregulations affecting us could harm our business, financial condition andresults of operations.***

Our mobile and fixed line telecommunications operationsare subject to regulatory and licensing requirements at both the national leveland the transnational level, such as by the European Union. If we are found notto have complied with applicable regulations, we may be subject to damageawards, fines, penalties, injunctions or suspensions.

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The regulations to which we are subject imposesignificant limits on our flexibility to manage our business. For example, inboth Sweden and Finland, we have been designated as a party with significantmarket power in certain markets in which we operate, including the fixed andmobile telecommunications markets. As a result, we are required to providecertain services on non-discriminatory, cost-based and transparent terms, whichmay differ from the terms on which we would otherwise have provided thoseservices.

Changes in legislation, regulation or governmentpolicy affecting our business activities, as well as decisions by competitionand other regulatory authorities or courts, including granting, amending orrevoking of licenses to us or other parties, could adversely affect ourbusiness and results.

For further information regarding the regulatoryregimes to which our business is subject, see “Information on the Company—Regulation.”

***We have onlylimited control of our associated companies and the success of our investmentsin these companies depends on the actions of our co-owners.***

We conduct some of our activities, particularlyoutside of the Nordic region, through associated companies in which we do nothave a controlling interest, such as Turkcell Iletisim Hizmetleri A.S. inTurkey, OAO MegaFon in Russia and Lattelekom SIA in Latvia and, as a result, wehave limited influence over the conduct of these businesses. Under thegoverning documents for certain of these entities, our partners have controlover or share control of key matters such as the approval of business plans andbudgets, and decisions as to timing and amount of cash distributions. The riskof actions outside our or our associated company’s control and adverse to ourinterests or disagreement or deadlock is inherent in jointly controlledentities. In Russia for instance, certain shareholders of MegaFon are involvedin a dispute relating to the ownership of a 25.1 percent interest inMegaFon.

As part of our strategy we may, where practical,increase our shareholdings in our associated companies. The implementation ofsuch strategy, however, may be difficult due to a variety of factors, includingfactors beyond our control, such as willingness on the part of other existingshareholders to dispose or accept dilution of their shareholdings and, in theevent we gain greater control, our ability to successfully manage the relevantbusinesses. For example, we have initiated arbitration proceedings with the CukurovaGroup as we claim that Cukurova has breached an agreement to sell an indirectshareholding in Turkcell to us and as we claim that Cukurova has breached theshareholders agreement with us in connection with the purported sale byCukurova of a portion of its indirect shareholding in Turkcell to the AlfaGroup.

***We are subject toemerging market risks including that the value of our investments intelecommunications companies may be adversely affected by political, economicand legal developments.***

We have made a number of significant investments intelecommunications providers with operations in countries such as Turkey,Russia, Kazakhstan, Azerbaijan, Georgia and Moldova. The political, economicand legal systems in these countries historically have been less predictablethan in countries with more developed institutional structures. Each of thesenations has in the past experienced financial difficulties, including weaklocal currencies and high external debt, and there is a risk that these typesof issues may arise in the future. For example, the political situation in eachof the Eurasian countries in which Fintur has operations has been unstable inthe past and may also be in the future.

Other risks associated with operating in emergingmarket countries include foreign exchange restrictions, which could effectivelyprevent us from receiving profits or selling our investments. While none of thecountries in which our international subsidiaries or associated companies arelocated currently have foreign exchange controls that affect us significantly,all of these countries have had such controls in the recent past and we cannotassure you that they will not reinstitute such controls in the future. Anotherrisk is the potential establishment of foreign ownership restrictions.

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***Changes in the economic, political, legal andregulatory environment and in our business plans or the business plans of ourassociated companies could cause us to record impairment losses or otherwiseadversely affect our results of operations and financial condition.***

Factorsgenerally affecting the telecommunications and technology markets, includingsignificant declines in stock prices and market capitalizations of marketparticipants, and changes in the economic, regulatory, business or politicalenvironment, as well as our ongoing review and refinement of our business planscould adversely affect our affairs. In the future we may be required torecognize additional impairment losses with respect to assets if ourexpectations of future cash flows attributable to these assets change,including but not limited to goodwill and fair value adjustments we haverecorded in the merger of Telia and Sonera, in our acquisitions of NetCom,Orange Denmark and Chess, and in connection with other acquisitions we have madeor may make in the future.

Inthe past, we have also undertaken a number of restructuring and streamlininginitiatives, including the restructuring and streamlining of our Swedish andFinnish operations and the restructuring of our international carrier andDanish operations, which have resulted in substantial restructuring andstreamlining charges. We may undertake similar initiatives in the future.

Inaddition to affecting our results of operations, these actions may adverselyaffect our ability to pay dividends. Under Swedish law, the amount of dividendsthat we may pay is generally limited to profits and other non-restrictedreserves available at the end of the preceding fiscal year for our parentcompany. Any write-down of intangible or other assets would have the effect ofreducing, or possibly eliminating, our dividend capacity.

***We may not realize the benefits we expect to derivefrom our investments in licenses and new technologies, including UMTS.***

Wehave made investments in UMTS licenses and have invested and expect to investsubstantial amounts over the next several years in the upgrading and expansionof our networks. The success of these investments will depend on a variety offactors beyond our control, including the availability of new and attractiveservices, the costs associated with providing these services, the timing oftheir introduction and competition. For example, we cannot be certain thatmultimedia services will achieve acceptance in the market, or that the demandfor such services will justify the related costs to develop, upgrade andmaintain our networks, including our UMTS networks.

Moreover,competition in this market could prove to be intense as a result of(1) new entrants such as MVNOs, which typically do not have their own networkinfrastructure and thus would not have our fixed cost burdens,(2) Wireless Local Area Network (WLAN) services, which are based onwireless short distance transmission networks and may be able to deliverwireless data services at a lower cost than UMTS in concentrated areas, and(3) operators using non-UMTS technological standards to delivercompetitive services.

Underthe terms of our UMTS licenses and the licenses of our joint venture UMTSinvestments, we have agreed to make significant investments in UMTS networks.If we or our UMTS joint ventures do not fulfill the conditions under such UMTSlicenses or obtain their modification, such licenses could be revoked or, incertain cases, we could be subject to monetary penalties. For example, we havesignificant ongoing investment and guarantee obligations in connection with ourinvestment in Xfera Móviles S.A. in Spain. For further information relating toour financial obligations in connection with our UMTS joint ventures, see“Operating and Financial Review and Prospects—Liquidity and Capital Resources—ContractualObligations.”

53

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***Our cooperation with Tele2 in connection with thebuild out and operation of a UMTS network in Sweden may not be successful.***

Whilewe were not awarded a UMTS license in Sweden in connection with a licensetender held by the Kingdom of Sweden in 2000, we have entered into acooperation arrangement with Tele2 to build and operate a UMTS network inSweden through our 50 percent owned associated company Svenska UMTS-nätAB, which has rights to the Swedish UMTS license originally granted to Tele2.We have made significant investments in and financial commitments to thisventure. As this is a jointly controlled venture, there is a risk that thepartners may disagree on important matters, including the funding of thecompany. This risk may be magnified because TeliaSonera and Tele2 aresignificant competitors. A disagreement or deadlock regarding the company or abreach by one of the parties of the material provisions of the cooperation arrangementscould have a negative effect on our ability to pursue our UMTS strategy. Inaddition, the current exemption for Svenska UMTS-nät from the prohibitionagainst anti-competitive agreements included in the Swedish Competition Actwill expire in 2007. Thereafter, a reassessment of the cooperation will be madefrom a competition law perspective. Accordingly, there can be no assurance thatthe Swedish Competition Authority will not in the future change its view on thecooperation, which could have a material adverse effect upon Svenska UMTS-nätand our operations.

***Aspart of our strategy, we may seek to participate in the consolidation of thetelecommunications industry through acquisitions, strategic alliances orbusiness combinations. A failure to participate successfully in theconsolidation of the industry could harm our business and results ofoperations.***

Ourconsolidation strategy entails a variety of risks that could negatively affectour business, our results of operations and our financial position. Forexample, due to competition in the identification of acquisition opportunitiesor strategic partners, we may make an acquisition or enter into a strategicalliance on unfavorable terms. There are also the risks that we will not beable to successfully integrate and manage any acquired company or strategicalliance, the acquisition or strategic alliance will fail to achieve thestrategic benefits or synergies sought, and that management’s attention will bediverted away from other ongoing business concerns. In addition, any potentialacquisition could negatively affect our financial position, including ourcredit ratings, or, if made using our shares, dilute our existing shareholders.

***Weare reliant upon a limited number of suppliers for the provision of importantequipment and services.***

Weare reliant upon certain suppliers, of which there are a limited number, tomanufacture and supply network equipment and related software as well ashandsets in our markets, to allow us to develop our networks and to offer ourservices on a commercial basis. We cannot be certain that we will be able toobtain network equipment or handsets from alternative suppliers on a timelybasis if our existing suppliers are unable to satisfy our requirements. Inaddition, like our competitors, we currently outsource many of our key supportservices, including network construction and maintenance in most of ouroperations. The limited number of suppliers of these services, and the terms ofour arrangements with current and future suppliers, may adversely affect us,including by restricting operational flexibility.

***MegaFon,our associated company operating in Russia, may not obtain future financing onsatisfactory terms and may be adversely affected by weaknesses in its internalcontrols.***

MegaFon,a GSM operator in Russia in which we hold a 43.8 percent interest, mayhave to secure additional financing if it is to implement its current strategyof becoming a provider of nationwide GSM services in Russia. If MegaFon isunable to secure such financing on satisfactory terms or if the company isadversely affected by weaknesses in its internal controls, this may adverselyaffect MegaFon’s growth prospects as well as the value we derive from ourinvestment.

***We may not be able to fully realize anticipated taxbenefits resulting from earlier-recorded impairment losses.***

Wehave a significant deferred tax asset resulting from an impairment loss onSonera’s UMTS investments in Germany and Italy in 2002. The major part of thedeferred tax asset relates to tax loss 

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carry-forwards in Finland, which expire afterten years, while the remaining part of the tax asset is related to temporarydifferences between carrying value and tax value on assets in Finland. Althoughwe currently estimate that the tax losses related to the impairment loss will berealized in eight to nine years from 2002 under different scenarios, there canbe no assurance of sufficient taxable income in Finland within this period.

Wealso have deferred tax assets in other jurisdictions, especially related to ourinternational carrier and Danish operations. There can be no assurance that wewill be able to use these tax assets in full to reduce our tax obligations inthe future.

***Wemay not be able to remain competitive and implement our strategy, or adapt tochanging technologies, if we cannot recruit and retain skilled personnel.***

Toremain competitive and implement our strategy, and to adapt to changingtechnologies, we will need to recruit, retain, and where necessary, retrainhighly skilled employees with particular expertise. In particular, competitionis intense for qualified telecommunications and information technologypersonnel in the Nordic countries and elsewhere. To a considerable extent, ourability to recruit and retain skilled personnel for growth business areas andnew technologies will depend on our ability to offer them competitiveremuneration packages. If we cannot implement competitive remunerationpackages, we may be unable to recruit and retain skilled employees, which maylimit our ability to develop our high growth business areas and new businessareas or remain competitive in our traditional business areas.

***Actualor perceived health risks or other problems relating to mobile handsets ortransmission masts could lead to decreased mobile communications usage.***

Concernshave been expressed that the electromagnetic signals from mobile handsets andbase stations, which serve as the platform for transmitting radio signals, maypose health risks and interfere with the operation of electronic equipment.These concerns may intensify with time and as new products are introduced.Actual or perceived risks of mobile handsets or base stations and relatedpublicity or litigation could reduce the growth rate, customer base or averageusage per customer of our mobile communications services, may result insignificant restrictions on the location and operation of base stations orcould subject us to claims for damages, any of which could have a negativeimpact on our business, financial condition and results of operations.

***Ouraffairs and the market prices of our shares could be influenced significantlyby actions of the Kingdom of Sweden and the Republic of Finland, whoseinterests may be different from other shareholders.***

TheKingdom of Sweden holds approximately 45.3 percent and the Republic of Finlandholds approximately 13.7 percent of our outstanding shares. The Kingdom ofSweden and the Republic of Finland have, furthermore, agreed to consult eachother with respect to voting on matters to be resolved by the shareholders atgeneral meetings of the company. Accordingly, the Kingdom of Sweden, actingalone, may have and the Kingdom of Sweden and the Republic of Finland, if theyshould choose to act together, will have the power to influence matterssubmitted for a vote of shareholders, including the approval of the annualfinancial statements, declarations of dividends, capital increases inconnection with acquisitions, and the election and removal of members of our Boardof Directors. The interests of the Kingdom of Sweden and the Republic ofFinland in deciding these matters and the factors they consider in exercisingtheir votes could be different from the interests of our other shareholders.

Inaddition, the Kingdom of Sweden and the Republic of Finland are not under anycontractual commitment that would restrict their ability to sell any shares. Itis currently not possible to assess the precise timing and manner of any futuresales, if any, by the Kingdom of Sweden or the Republic of Finland of ourshares. However, any sale by the Kingdom of Sweden or the Republic of Finlandof a significant number of our shares, or the public perception that thesesales could occur, may cause the market price of our shares to decline significantlyand may also make it more difficult for us to issue new shares.

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**Consolidated Financial Statements**

**Contents**

|                                                            | ** ** | **Page** | ** ** |
|------------------------------------------------------------|------------|----------|------------|
| Consolidated  Income Statements                            |       |     | 57         |   |   |
| Consolidated  Balance Sheets                               |       |     | 58         |   |   |
| Consolidated  Cash Flow Statements                         |       |     | 59         |   |   |
| Consolidated  Statements of Changes in Equity              |       |     | 60         |   |   |
| Notes to Consolidated  Financial Statements                |       |     | 61         |   |   |
| Reports of Independent  Registered Public Accounting Firms |       |     | 178        |   |   |

 

TeliaSonera’s holding in Turkcell Iletisim HizmetleriA.S. meets the requirements of SEC Rule 3-09 under Regulation S-Xfor the provision of separate financial statements of Turkcell, a New YorkStock Exchange listed company that has a December 31 fiscal year end andis required to file reports on Form 20-F with the Securities andExchange Commission. Pursuant to SEC rules, the financial statements ofTurkcell will be filed as an amendment to this Annual Report as soon aspracticable after they become available.

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**ConsolidatedIncome Statements**

|                                                                          | ** ** | ** ** | ** ** | **January-December** | ** ** |
|--------------------------------------------------------------------------|------------|------------|------------|----------------------|------------|
| **SEK in millions, except per share data** | ** ** | ** ** | ** ** | **Note**             | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Net sales                                                                |       | 7, 30      |       | 87,661               |       | 81,937 |   | 82,425 |   |
| Costs of  production                                                     |       | 8, 11      |       | -47,287              |       | -43,104 |   | -46,688 |   |
| **Gross income**                                                         | ** ** | ** ** | ** ** | **40,374**           | ** ** | **38,833** | ** ** | **35,737** | ** ** |
| Sales,  administrative, and research & development expenses     |       | 8, 11      |       | -23,706              |       | -21,367 |   | -23,161 |   |
| Other operating  revenues                                                |       | 9          |       | 1,031                |       | 1,474 |   | 2,743 |   |
| Other operating  expenses                                                |       | 9, 11      |       | -3,379               |       | -3,695 |   | -991 |   |
| Income from  associated companies                                        |       | 12, 30     |       | 3,229                |       | 3,548 |   | 382 |   |
| **Operating income**                                                     |       | 30         | ** ** | **17,549**           | ** ** | **18,793** | ** ** | **14,710** | ** ** |
| Financial  revenues and expenses                                         |       | 13         |       | -530                 |       | -1,345 |   | -811 |   |
| **Income after financial items**                                         | ** ** | ** ** | ** ** | **17,019**           | ** ** | **17,448** | ** ** | **13,899** | ** ** |
| Income taxes                                                             |       | 14         |       | -3,325               |       | -3,184 |   | -3,850 |   |
| **Net income**                                                           | ** ** | ** ** | ** ** | **13,694**           | ** ** | **14,264** | ** ** | **10,049** | ** ** |
| Attributable to:                                                         |       |       |       |                 |       |   |   |   |   |
| Shareholders of the parent company                                       | ** ** | ** ** |       | 11,697               |       | 12,964 |   | 9,080 |   |
| Minority interests                                                       | ** ** | ** ** |       | 1,997                |       | 1,300 |   | 969 |   |
| Shareholders’ earnings per share (SEK)                              |       | 21         |       |                 |       |   |   |   |   |
| Basic                                                                    | ** ** | ** ** |       | 2.56                 |       | 2.77 |   | 1.95 |   |
| Diluted                                                                  | ** ** | ** ** |       | 2.56                 |       | 2.77 |   | 1.95 |   |
|                                                                          |            |            |            |                      |            |  |  |  |  |  |  |

 

 

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**ConsolidatedBalance Sheets**

|                                                   | ** ** | ** ** | ** ** | **December 31,** | ** ** |
|---------------------------------------------------|------------|------------|------------|-----------------------|------------|
| **SEK in millions**                     | ** ** | ** ** | ** ** | **Note**              | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Assets**                                        | ** ** | ** ** | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Goodwill and  other intangible assets             |       | 15         |       | 74,367                |       | 69,534 |   | 61,820 |   |
| Property, plant  and equipment                    |       | 16, 27     |       | 48,201                |       | 47,212 |   | 49,161 |   |
| Investments in  associated companies              |       | 12         |       | 25,208                |       | 19,613 |   | 20,401 |   |
| Deferred tax  assets                              |       | 14         |       | 12,305                |       | 12,381 |   | 14,960 |   |
| Other financial  assets                           |       | 17, 22, 27 |       | 3,013                 |       | 3,359 |   | 6,700 |   |
| **Total non-current assets**                      | ** ** | ** ** | ** ** | **163,094**           | ** ** | **152,099** | ** ** | **153,042** | ** ** |
| **Non-current assets held-for-sale**              |       |       | ** ** | **186**               | ** ** | **—** | ** ** | **—** | ** ** |
| Inventories                                       |       | 18         |       | 765                   |       | 655 |   | 501 |   |
| Trade and other  receivables                      |       | 19, 27     |       | 18,919                |       | 20,007 |   | 20,156 |   |
| Current tax  assets                               |       |       |       | 1,570                 |       | 725 |   | 244 |   |
| Interest-bearing  receivables                     |       | 20, 22, 27 |       | 2,407                 |       | 1,241 |   | 4,048 |   |
| Cash and cash equivalents                         |       | 20, 22, 27 |       | 16,834                |       | 17,245 |   | 12,069 |   |
| **Total current assets**                          | ** ** | ** ** | ** ** | **40,495**            | ** ** | **39,873** | ** ** | **37,018** | ** ** |
| **Total assets**                                  | ** ** | ** ** | ** ** | **203,775**           | ** ** | **191,972** | ** ** | **190,060** | ** ** |
| **Equity  and liabilities**                       |       |       |       | ** **            |       |   |   |   |   |
| Share capital                                     |       |       |       | 14,961                |       | 14,961 |   | 14,961 |   |
| Other contributed  capital                        |       |       |       | 60,538                |       | 70,741 |   | 70,741 |   |
| Reserves                                          |       |       |       | 12,115                |       | 2,215 |   | 1,752 |   |
| Retained earnings                                 |       |       |       | 39,435                |       | 33,216 |   | 24,939 |   |
| Total  shareholders’ equity                  |       |       |       | 127,049               |       | 121,133 |   | 112,393 |   |
| Minority  interests in equity                     |       |       |       | 8,645                 |       | 6,934 |   | 3,441 |   |
| **Total equity**                                  | ** ** | ** ** | ** ** | **135,694**           | ** ** | **128,067** | ** ** | **115,834** | ** ** |
| Long-term loans                                   |       | 22, 27     |       | 20,520                |       | 12,942 |   | 25,867 |   |
| Provisions for  pensions and employment contracts |       | 23         |       | —                |       | — |   | 522 |   |
| Deferred tax  liabilities                         |       | 14         |       | 9,578                 |       | 7,906 |   | 8,537 |   |
| Other provisions                                  |       | 24         |       | 5,370                 |       | 4,983 |   | 5,564 |   |
| Other long-term  liabilities                      |       | 25, 27     |       | 2,343                 |       | 2,450 |   | 2,489 |   |
| **Total non-current liabilities**                 | ** ** | ** ** | ** ** | **37,811**            | ** ** | **28,281** | ** ** | **42,979** | ** ** |
| Short-term loans                                  |       | 22, 27     |       | 6,215                 |       | 11,733 |   | 4,687 |   |
| Short-term  provisions                            |       | 24         |       | 616                   |       | 513 |   | 674 |   |
| Current tax  liabilities                          |       |       |       | 706                   |       | 647 |   | 2,338 |   |
| Trade payables  and other current liabilities     |       | 26, 27     |       | 22,733                |       | 22,731 |   | 23,548 |   |
| **Total current liabilities**                     | ** ** | ** ** | ** ** | **30,270**            | ** ** | **35,624** | ** ** | **31,247** | ** ** |
| **Total equity and liabilities**                  | ** ** | ** ** | ** ** | **203,775**           | ** ** | **191,972** | ** ** | **190,060** | ** ** |
| Unrecognized contingent assets                    |       | 28         |       | —                |       | — |   | — |   |
| Unrecognized  collateral pledged                  |       | 28         |       | 1,584                 |       | 1,675 |   | 2,789 |   |
| Unrecognized contingent  liabilities              |       | 28         |       | 2,581                 |       | 2,289 |   | 3,099 |   |
|                                                   |            |            |            |                       |            |  |  |  |  |  |  |

 

 

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**ConsolidatedCash Flow Statements**

|                                                                           | ** ** | ** ** | ** ** | **January-December** | ** ** |
|---------------------------------------------------------------------------|------------|------------|------------|----------------------|------------|
| **SEK in millions**                                             | ** ** | ** ** | ** ** | **Note**             | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Net income                                                                |       |       |       |                 |       | 13,694 |   | 14,264 |   | 10,049 |   |
| Adjustments:                                                              |       |       |       |                 |       |   |   |   |   |   |   |
| Amortization, depreciation and impairment losses                          |       |       |       |                 |       | 13,211 |   | 15,726 |   | 18,248 |   |
| Capital gains/losses on sales/discards of fixed assets                    |       |       |       |                 |       | -43 |   | -1,468 |   | -2,618 |   |
| Income from associated companies net of dividends                         |       |       |       |                 |       | -2,470 |   | -1,790 |   | 251 |   |
| Pensions and other provisions                                             |       |       |       |                 |       | 343 |   | -1,611 |   | -2,880 |   |
| Financial items                                                           |       |       | 29         |                 |       | 150 |   | -435 |   | 363 |   |
| Income taxes                                                              |       |       | 29         |                 |       | 1,278 |   | 52 |   | 2,542 |   |
| Miscellaneous non-cash items                                              |       |       |       |                 |       | -5 |   | -52 |   | 9 |   |
| **Cash flow before change in working capital**                            | ** ** |       |       |                 | ** ** | **26,158** | ** ** | **24,686** | ** ** | **25,964** | ** ** |
| Increase  (-)/Decrease (+) in operating receivables                       |       |       |       |                 |       | 1,693 |   | 728 |   | 1,423 |   |
| Increase  (-)/Decrease (+) in inventories etc.                            |       |       |       |                 |       | -88 |   | -37 |   | 125 |   |
| Increase  (+)/Decrease (-) in operating liabilities                       |       |       |       |                 |       | -773 |   | -974 |   | -1,069 |   |
| **Change  in working capital**                                            | ** ** |       |       |                 | ** ** | **832** | ** ** | **-283** | ** ** | **479** | ** ** |
| **Cash flow from operating activities**                                   | ** ** |       |       |                 | ** ** | **26,990** | ** ** | **24,403** | ** ** | **26,443** | ** ** |
| Intangible assets  and property, plant and equipment acquired             |       |       | 29         |                 |       | -11,396 |   | -10,285 |   | -9,092 |   |
| Intangible assets  and property, plant and equipment divested             |       |       |       |                 |       | 208 |   | 130 |   | 358 |   |
| Compensation  received for divested IRUs                                  |       |       |       |                 |       | — |   | 8 |   | 10 |   |
| Compensation paid  for acquired IRUs                                      |       |       |       |                 |       | — |   | -1 |   | 0 |   |
| Shares,  participations and operations acquired                           |       |       | 29         |                 |       | -1,770 |   | -6,169 |   | -2,188 |   |
| Shares,  participations and operations divested                           |       |       | 29         |                 |       | 1,654 |   | 6,795 |   | 3,902 |   |
| Loans made and  other investments                                         |       |       |       |                 |       | -119 |   | -10 |   | -172 |   |
| Repayment of  loans made and other investments                            |       |       |       |                 |       | 131 |   | 1,128 |   | 1,215 |   |
| Investment in  finance lease receivables                                  |       |       |       |                 |       | -249 |   | -458 |   | -2,962 |   |
| Amortization of  finance lease receivables                                |       |       |       |                 |       | 285 |   | 823 |   | 3,400 |   |
| Compensation  from/Payment to pension fund                                |       |       |       |                 |       | 100 |   | — |   | 1,000 |   |
| Net change in  advances and short-term loans to associated companies etc. |       |       |       |                 |       | -1,080 |   | 48 |   | 1,086 |   |
| **Cash  flow from investing activities**                                  | ** ** |       |       |                 | ** ** | **-12,236** | ** ** | **-7,991** | ** ** | **-3,443** | ** ** |
| **Cash flow before financing activities**                                 | ** ** |       |       |                 | ** ** | **14,754** | ** ** | **16,412** | ** ** | **23,000** | ** ** |
| Purchase of  treasury shares including transaction costs                  |       |       |       |                 |       | -10,218 |   | — |   | — |   |
| Dividend to  shareholders                                                 |       |       |       |                 |       | -5,610 |   | -4,675 |   | -1,870 |   |
| Transactions with  minority shareholders                                  |       |       |       |                 |       | -1,087 |   | -441 |   | -468 |   |
| Loans raised                                                              |       |       |       |                 |       | 13,126 |   | 260 |   | 374 |   |
| Loans amortized                                                           |       |       |       |                 |       | -11,791 |   | -8,544 |   | -6,272 |   |
| Net change in  interest-bearing liabilities with short maturities         |       |       |       |                 |       | -73 |   | 2,298 |   | -8,176 |   |
| **Cash  flow from financing activities**                                  | ** ** |       |       |                 | ** ** | **-15,653** | ** ** | **-11,102** | ** ** | **-16,412** | ** ** |
| **Cash flow for the year**                                                | ** ** |       |       |                 | ** ** | **-899** | ** ** | **5,310** | ** ** | **6,588** | ** ** |
| **Cash and cash equivalents, opening balance**                            | ** ** |       |       |                 | ** ** | **17,245** | ** ** | **12,069** | ** ** | **5,465** | ** ** |
| Cash flow for the  year                                                   |       |       |       |                 |       | -899 |   | 5,310 |   | 6,588 |   |
| Exchange rate  differences in cash and cash equivalents                   |       |       |       |                 |       | 488 |   | -134 |   | 16 |   |
| **Cash and cash equivalents,  closing balance**                           |       |       | 20         |                 | ** ** | **16,834** | ** ** | **17,245** | ** ** | **12,069** | ** ** |
|                                                                           |            |            |            |                      |            |  |  |  |  |  |  |  |  |

 

 

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**ConsolidatedStatements of Changes in Equity**

| SEK in millions                                     | ** ** | ** ** | ** ** | **Note**   | ** ** | **Share  capital** | ** ** | **Other  contributed  capital** | ** ** | **Reserves** | ** ** | **Retained  earnings** | ** ** | **Total  shareholders’  equity** | ** ** | **Minority  interests  in equity** | ** ** | **Total  equity** | ** ** |
|---------------------------------------------------------------|------------|------------|------------|------------|------------|--------------------|------------|---------------------------------|------------|--------------|------------|------------------------|------------|---------------------------------------|------------|-----------------------------------------|------------|-------------------|------------|
| **Closing balance, December 31,  2002**                  |       |       | 21         | ** ** |       | **14,738**         | ** ** |                            | **68,913** | ** **   |       |                   | **7,436**  | ** **                            |       |                                    | **17,742** | ** **        |       |   | **108,829** | ** ** |   |   | **5,120** | ** ** |   | **113,949** | ** ** |
| Reporting financial instruments at fair value                 |       |       | 21         | ** ** |       | —             |       |                            | —     | ** **   |       |                   | -10        | ** **                            |       |                                    | —     | ** **        |       |   | -10 | ** ** |   |   | — | ** ** |   | -10 |   |
| Exchange rate differences                                     |       |       | 21         | ** ** |       | —             |       |                            | —     | ** **   |       |                   | -8,101     | ** **                            |       |                                    | —     | ** **        |       |   | -8,101 | ** ** |   |   | -314 | ** ** |   | -8,415 |   |
| Inflation adjustments                                         |       |       | 21         | ** ** |       | —             |       |                            | —     | ** **   |       |                   | 2,427      | ** **                            |       |                                    | —     | ** **        |       |   | 2,427 | ** ** |   |   | — | ** ** |   | 2,427 |   |
| Transactions with non-related parties                         |       |       |       | ** ** |       | —             |       |                            | —     | ** **   |       |                   | —     | ** **                            |       |                                    | -13        | ** **        |       |   | -13 | ** ** |   |   | -2,065 | ** ** |   | -2,078 |   |
| *Net income recognized directly in equity*                    |       |       |       | ** ** | * *   | *—*           | * *   | * *                        | *—*   | ** **   | * *   | * *               | *-5,684*   | ** **                            | * *   | * *                                | *-13*      | ** **        | * *   | * * | *-5,697* | ** ** | * * | * * | *-2,379* | ** ** | * * | *-8,076* | * * |
| Net income                                                    |       |       |       | ** ** |       | —             |       |                            | —     | ** **   |       |                   | —     | ** **                            |       |                                    | 9,080      | ** **        |       |   | 9,080 | ** ** |   |   | 969 | ** ** |   | 10,049 |   |
| *Total recognized net income*                                 |       |       |       | ** ** | * *   | *—*           | * *   | * *                        | *—*   | ** **   | * *   | * *               | *-5,684*   | ** **                            | * *   | * *                                | *9,067*    | ** **        | * *   | * * | *3,383* | ** ** | * * | * * | *-1,410* | ** ** | * * | *1,973* | * * |
| Dividends                                                     |       |       | 21         | ** ** |       | —             |       |                            | —     | ** **   |       |                   | —     | ** **                            |       |                                    | -1,870     | ** **        |       |   | -1,870 | ** ** |   |   | -269 | ** ** |   | -2,139 |   |
| New share issue at a premium                                  |       |       | 21         | ** ** |       | 223                |       |                            | 1,828      | ** **   |       |                   | —     | ** **                            |       |                                    | —     | ** **        |       |   | 2,051 | ** ** |   |   | — | ** ** |   | 2,051 |   |
| **Closing balance, December 31,  2003**                  |       |       |       | ** ** |       | **14,961**         | ** ** |                            | **70,741** | ** **   |       |                   | **1,752**  | ** **                            |       |                                    | **24,939** | ** **        |       |   | **112,393** | ** ** |   |   | **3,441** | ** ** |   | **115,834** | ** ** |
| Revaluing fair values of net assets in business  combinations |       |       | 21         | ** ** |       | —             |       |                            | —     | ** **   |       |                   | 1,098      | ** **                            |       |                                    | —     | ** **        |       |   | 1,098 | ** ** |   |   | 1,857 | ** ** |   | 2,955 |   |
| Reporting financial instruments at fair value                 |       |       | 21         | ** ** |       | —             |       |                            | —     | ** **   |       |                   | 146        | ** **                            |       |                                    | —     | ** **        |       |   | 146 | ** ** |   |   | — | ** ** |   | 146 |   |
| Exchange rate differences                                     |       |       | 21         | ** ** |       | —             |       |                            | —     | ** **   |       |                   | -2,233     | ** **                            |       |                                    | —     | ** **        |       |   | -2,233 | ** ** |   |   | -164 | ** ** |   | -2,397 |   |
| Inflation adjustments                                         |       |       | 21         | ** ** |       | —             |       |                            | —     | ** **   |       |                   | 1,452      | ** **                            |       |                                    | —     | ** **        |       |   | 1,452 | ** ** |   |   | — | ** ** |   | 1,452 |   |
| Transactions with non-related parties                         |       |       | 21         | ** ** |       | —             |       |                            | —     | ** **   |       |                   | —     | ** **                            |       |                                    | -12        | ** **        |       |   | -12 | ** ** |   |   | 968 | ** ** |   | 956 |   |
| *Net income recognized directly in equity*                    |       |       |       | ** ** | * *   | *—*           | * *   | * *                        | *—*   | ** **   | * *   | * *               | *463*      | ** **                            | * *   | * *                                | *-12*      | ** **        | * *   | * * | *451* | ** ** | * * | * * | *2,661* | ** ** | * * | *3,112* | * * |
| Net income                                                    |       |       |       | ** ** |       | —             |       |                            | —     | ** **   |       |                   | —     | ** **                            |       |                                    | 12,964     | ** **        |       |   | 12,964 | ** ** |   |   | 1,300 | ** ** |   | 14,264 |   |
| *Total recognized net income*                                 |       |       |       | ** ** | * *   | *—*           | * *   | * *                        | *—*   | ** **   | * *   | * *               | *463*      | ** **                            | * *   | * *                                | *12,952*   | ** **        | * *   | * * | *13,415* | ** ** | * * | * * | *3,961* | ** ** | * * | *17,376* | * * |
| Dividends                                                     |       |       | 21         | ** ** |       | —             |       |                            | —     | ** **   |       |                   | —     | ** **                            |       |                                    | -4,675     | ** **        |       |   | -4,675 | ** ** |   |   | -468 | ** ** |   | -5,143 |   |
| **Closing balance, December 31,  2004**                  |       |       |       | ** ** |       | **14,961**         | ** ** |                            | **70,741** | ** **   |       |                   | **2,215**  | ** **                            |       |                                    | **33,216** | ** **        |       |   | **121,133** | ** ** |   |   | **6,934** | ** ** |   | **128,067** | ** ** |
| Fair value amortization of revalued net assets                |       |       | 21         | ** ** |       | —             |       |                            | —     | ** **   |       |                   | -132       | ** **                            |       |                                    | 132        | ** **        |       |   | — | ** ** |   |   | — | ** ** |   | — |   |
| Reporting financial instruments at fair value                 |       |       | 21         | ** ** |       | —             |       |                            | —     | ** **   |       |                   | 46         | ** **                            |       |                                    | —     | ** **        |       |   | 46 | ** ** |   |   | — | ** ** |   | 46 |   |
| Exchange rate differences                                     |       |       | 21         | ** ** |       | —             |       |                            | —     | ** **   |       |                   | 8,809      | ** **                            |       |                                    | —     | ** **        |       |   | 8,809 | ** ** |   |   | 732 | ** ** |   | 9,541 |   |
| Inflation adjustments                                         |       |       | 21         | ** ** |       | —             |       |                            | —     | ** **   |       |                   | 1,177      | ** **                            |       |                                    | —     | ** **        |       |   | 1,177 | ** ** |   |   | — | ** ** |   | 1,177 |   |
| Transactions with non-related parties                         |       |       | 21         | ** ** |       | —             |       |                            | —     | ** **   |       |                   | —     | ** **                            |       |                                    | —     | ** **        |       |   | — | ** ** |   |   | -12 | ** ** |   | -12 |   |
| *Net income recognized directly in equity*                    |       |       |       | ** ** | * *   | *—*           | * *   | * *                        | *—*   | ** **   | * *   | * *               | *9,900*    | ** **                            | * *   | * *                                | *132*      | ** **        | * *   | * * | *10,032* | ** ** | * * | * * | *720* | ** ** | * * | *10,752* | * * |
| Net income                                                    |       |       |       | ** ** |       | —             |       |                            | —     | ** **   |       |                   | —     | ** **                            |       |                                    | 11,697     | ** **        |       |   | 11,697 | ** ** |   |   | 1,997 | ** ** |   | 13,694 |   |
| *Total recognized net income*                                 |       |       |       | ** ** | * *   | *—*           | * *   | * *                        | *—*   | ** **   | * *   | * *               | *9,900*    | ** **                            | * *   | * *                                | *11,829*   | ** **        | * *   | * * | *21,729* | ** ** | * * | * * | *2,717* | ** ** | * * | *24,446* | * * |
| Dividends                                                     |       |       | 21         | ** ** |       | —             |       |                            | —     | ** **   |       |                   | —     | ** **                            |       |                                    | -5,610     | ** **        |       |   | -5,610 | ** ** |   |   | -1,006 | ** ** |   | -6,616 |   |
| Treasury shares (repurchase decided by the AGM in  2005)      |       |       | 21         | ** ** |       | —             |       |                            | -10,203    | ** **   |       |                   | —     | ** **                            |       |                                    | —     | ** **        |       |   | -10,203 | ** ** |   |   | — | ** ** |   | -10,203 |   |
| **Closing  balance, December 31,  2005**                 |       |       |       | ** ** |       | **14,961**         | ** ** |                            | **60,538** | ** **   |       |                   | **12,115** | ** **                            |       |                                    | **39,435** | ** **        |       |   | **127,049** | ** ** |   |   | **8,645** | ** ** |   | **135,694** | ** ** |

 

 

60

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**Notesto Consolidated Financial Statements**

| Contents | ** ** | ** ** | ** ** | ** **                                                   | ** ** |
|----------|------------|------------|------------|--------------------------------------------------------------|------------|
| **Note** | ** ** | ** ** | ** ** | **Page**                                                     | ** ** |
|     | 1.         |       |       | Basis for  Preparation                                       |       |   | 62 |   |   |
|     | 2.         |       |       | Critical Accounting Policies, Estimates and  Assumptions     |       |   | 65 |   |   |
|     | 3.         |       |       | Consolidated Financial Statements                            |       |   | 65 |   |   |
|     | 4.         |       |       | Significant Accounting Policies                              |       |   | 67 |   |   |
|     | 5.         |       |       | Transactions in Foreign Currencies                           |       |   | 77 |   |   |
|     | 6.         |       |       | Changes in Group Composition                                 |       |   | 77 |   |   |
|     | 7.         |       |       | Net Sales                                                    |       |   | 78 |   |   |
|     | 8.         |       |       | Operating  Costs                                             |       |   | 79 |   |   |
|     | 9.         |       |       | Other Operating Revenues and Expenses                        |       |   | 81 |   |   |
|     | 10.        |       |       | Related Party Transactions                                   |       |   | 81 |   |   |
|     | 11.        |       |       | Amortization, Depreciation and Impairment Losses             |       |   | 85 |   |   |
|     | 12.        |       |       | Associated  Companies                                        |       |   | 87 |   |   |
|     | 13.        |       |       | Financial Revenues and Expenses                              |       |   | 89 |   |   |
|     | 14.        |       |       | Income  Taxes                                                |       |   | 90 |   |   |
|     | 15.        |       |       | Goodwill and Other Intangible Assets                         |       |   | 96 |   |   |
|     | 16.        |       |       | Property, Plant and Equipment                                |       |   | 97 |   |   |
|     | 17.        |       |       | Other  Financial Assets                                      |       |   | 102 |   |   |
|     | 18.        |       |       | Inventories                                                  |       |   | 102 |   |   |
|     | 19.        |       |       | Trade and Other Receivables                                  |       |   | 103 |   |   |
|     | 20.        |       |       | Interest-bearing Receivables, Cash and Cash  Equivalents     |       |   | 104 |   |   |
|     | 21.        |       |       | Equity and Earnings per Share                                |       |   | 104 |   |   |
|     | 22.        |       |       | Financial Instruments and Financial Risk Management          |       |   | 109 |   |   |
|     | 23.        |       |       | Provisions for Pensions and Employment Contracts             |       |   | 122 |   |   |
|     | 24.        |       |       | Other  Provisions                                            |       |   | 126 |   |   |
|     | 25.        |       |       | Other Long-term Liabilities                                  |       |   | 127 |   |   |
|     | 26.        |       |       | Trade Payables and Other Current Liabilities                 |       |   | 127 |   |   |
|     | 27.        |       |       | Leasing  Agreements                                          |       |   | 128 |   |   |
|     | 28.        |       |       | Contingencies, Other Contractual Obligations and  Litigation |       |   | 131 |   |   |
|     | 29.        |       |       | Cash  Flow Information                                       |       |   | 135 |   |   |
|     | 30.        |       |       | Business  Segments                                           |       |   | 138 |   |   |
|     | 31.        |       |       | Human  Resources                                             |       |   | 143 |   |   |
|     | 32.        |       |       | Restructuring  Costs                                         |       |   | 153 |   |   |
|     | 33.        |       |       | Auditors’  Fees and Services                            |       |   | 158 |   |   |
|     | 34.        |       |       | Business  Combinations                                       |       |   | 161 |   |   |
|     | 35.        |       |       | Specification of Shareholdings and Participations            |       |   | 164 |   |   |
|     | 36.        |       |       | U.S. GAAP                                                    |       |   | 167 |   |   |

 

61

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**Notes to Consolidated Financial Statements (Continued)**

**1.**   Basisfor Preparation

**General**

TeliaSonera’s consolidated financial statements havebeen prepared in accordance with International Financial Reporting Standards(IFRSs) and, given the nature of TeliaSonera’s transactions, in accordance withIFRSs as adopted by the European Union (EU).

In addition TeliaSoneracomplies with the Swedish Financial Accounting Standards Council’s standard RR30 “Supplementary Rules for Consolidated Financial Statements” and certainstatements issued by the Council’s Emerging Issues Task Force concerning purelySwedish circumstances. RR 30 is applicable to Swedish legal entities whoseequities are listed on a Swedish stock exchange or authorized equity marketplace on the balance sheet date and specifies supplementary rules and disclosuresin addition to IFRS requirements, caused by provisions in the Swedish Annual AccountsAct.

**Consolidationand accounting principles**

Applied consolidation andaccounting principles are described below. Discrepancies between TeliaSonera accountingprinciples and U.S. GAAP are discussed in a separate note.

**Amounts and dates**

Unless otherwisespecified, all amounts are in millions of Swedish kronor (SEK) or othercurrency specified and are based on the twelve-month period ended December 31for income statement items and as of December 31 for balance sheet items,respectively.

**New accounting standards**

***Summary***

On January 1, 2005, a number of new or revisedIFRSs, IASs, IFRICs and SICs became effective, the adoption of which did notentail such a change in accounting principles that require restatement ofcomparative figures. However, the revisions to IAS 1 involved reportingminority interests as a component of net income and equity, respectively, andthe revised IAS 27 affected computation of certain financial key ratios.Comparative figures have been reclassified accordingly.

On December 9, 2004, IFRS 6 “Exploration for andEvaluation of Mineral Resources” was issued. IFRS 6 is effective for annualperiods beginning on or after January 1, 2006. Earlier application is encouraged,and if an entity pre-adopts IFRS 6, transitional relief is available for somecomparative disclosures.

On December 16, 2004, an amendment to IAS 19 “EmployeeBenefits” was issued. Previously, IAS 19 required actuarial gains and losses tobe recognized in profit or loss, either in the period in which they occur orspread over the service lives of the employees. Under the amendment, entitiesthat at present spread the gains and losses are not required to change theirapproach, but are now free to choose to do so and recognize actuarial gains andlosses in full in the period in which they occur, outside profit or loss. Theamendment also (a) specifies how group entities should account for definedbenefit group plans in their separate or individual financial statements and (b) requiresadditional disclosures. The amendment to IAS 19 is effective for annualperiods beginning on or after January 1, 2006, with earlier applicationencouraged.

62

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**Notes to Consolidated Financial Statements (Continued)**

**1.**   Basis for Preparation (Continued)

Amendments to IAS 39 “Financial Instruments:Recognition and Measurement” on intragroup hedges of forecast transactions andto the fair value option were published on April 14 and June 16,2005, respectively. The amendments are effective January 1, 2006, withearlier application encouraged.

On June 30, 2005, amendments to IFRS 1 “First-timeAdoption of International Financial Reporting Standards” and the Basis forConclusions on IFRS 6 “Exploration for and Evaluation of Mineral Resources”were issued.

On August 18, 2005, IFRS 7 “FinancialInstruments: Disclosures”, an amendment on capital disclosures to IAS 1 “Presentationof Financial Statements” and limited amendments to IAS 39 “FinancialInstruments: Recognition and Measurement” and IFRS 4 “Insurance Contracts” wereissued. IFRS 7 adds certain new disclosure requirements and compiles allfinancial instruments disclosure requirements into one standard. Henceforth,IAS 32 deals only with financial instruments presentation matters. Theamendments to IAS 39 and IFRS 4 are intended to ensure that issuers offinancial guarantee contracts include the resulting liabilities in theirbalance sheet. IFRS 7 and the amendment to IAS 1 will be effective for annualperiods beginning on or after January 1, 2007. Earlier application isencouraged, and if an entity pre-adopts IFRS 7, some relief is given withrespect to comparative prior period disclosures. The amendments to IAS 39 andIFRS 4 must be applied for annual periods beginning on or after January 1,2006. Earlier application is encouraged.

On December 15, 2005, a limited amendment to IAS21 “The Effects of Changes in Foreign Exchange Rates” was issued, available foradoption with immediate effect. The amendment clarifies, as regards a monetaryitem that forms part of an entity’s investment in a foreign operation, that theaccounting treatment in consolidated financial statements should not be dependenton the currency of the monetary item. Also, the accounting should not depend onwhich entity within the group conducts a transaction with the foreignoperation.

On December 2, 2004, IFRIC 3 “Emission Rights”and IFRIC 4 “Determining whether an Arrangement contains a Lease” were issued.IFRIC 3 specifies the accounting for companies participating in governmentschemes aimed at reducing greenhouse gas emissions. IFRIC 4 gives guidance ondetermining whether arrangements that do not take the legal form of a leaseshould, nonetheless, be accounted for in accordance with IAS 17 “Leases.” On December 16,2004, IFRIC 5 “Rights to Interests arising from Decommissioning, Restorationand Environmental Rehabilitation Funds” was issued. IFRIC 5 explains howto treat expected reimbursements from funds set up to meet the costs ofdecommissioning plant or equipment or in undertaking environmental restorationor rehabilitation. IFRIC 3 and IFRICs 4 and 5 are effective for annualperiods beginning on or after March 1, 2005 and January 1, 2006,respectively, with earlier adoption encouraged. In June 2005, IFRIC 3 waswithdrawn, with immediate effect, in order to be able to address the underlyingaccounting in a more comprehensive way.

On September 1, 2005, IFRIC 6 “Liabilitiesarising from Participating in a Specific Market—Waste Electrical and ElectronicEquipment” was published, giving guidance on which date that is the triggeringevent for recognizing liabilities for waste management costs. IFRIC 6 iseffective for financial periods beginning on or after December 1, 2005.Earlier application is encouraged.

On November 24, 2005, IFRIC 7 “Applying theRestatement Approach under IAS 29 Financial Reporting in HyperinflationaryEconomies,” was issued. IFRIC 7 clarifies the requirements under IAS 29 

63

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**Notes to Consolidated Financial Statements (Continued)**

**1.**   Basis for Preparation (Continued)

relating to howcomparative amounts in financial statements should be restated when an entityidentifies the existence of hyperinflation in its functional currency and howdeferred tax items in the opening balance sheet should be restated. IFRIC 7 iseffective for annual periods beginning on or after March 1, 2006. Earlierapplication is encouraged.

On January 12, 2006, IFRIC 8 “Scope of IFRS 2”was issued, clarifying that IFRS 2 “Share-based Payment” applies toarrangements where an entity makes share-based payments for apparently nil orinadequate consideration. IFRIC 8 explains that, if the identifiableconsideration given appears to be less than the fair value of the equityinstruments granted or liability incurred, this situation typically indicatesthat other consideration has been or will be received. IFRS 2 thereforeapplies. IFRIC 8 is effective for annual periods beginning on or after May 1,2006. Earlier application is encouraged.

On March 1, 2006,IFRIC 9 “Reassessment of Embedded Derivatives” was issued, clarifying thatreassessment of the treatment of an embedded derivative is prohibited unlessthere is a change in the terms of the host contract that significantly modifiesthe cash flows that otherwise would be required under the contract, in whichcase reassessment is required. IFRIC 9 is effective for annual periodsbeginning on or after June 1, 2006.

***Effects on TeliaSonera***

IFRSs 1 and 6 as well as IFRIC 5 are not applicable toTeliaSonera. TeliaSonera decided to pre-adopt the amendments to IAS 39 onintra-group hedges of forecast transactions and to the fair value option as of January 1,2005. TeliaSonera had no such hedges that would require restatement of previousperiods. As regards the amendments to IAS 39 and IFRS 4 on financial guaranteecontracts, TeliaSonera in accordance with IAS 37 already recognizes financialguarantees at the best estimate of the expenditure required to settle theobligations. If the outflow of resources is not probable, the guarantees havebeen disclosed as contingent liabilities. TeliaSonera has decided not torecognize actuarial gains and losses according to the new option allowed underthe amended IAS 19. Currently, TeliaSonera has no such monetary items that areaddressed by the amendment to IAS 21.

Previously lacking IFRSguidance, TeliaSonera has recognized transactions involving Indefeasible Rightsof Use as leases in accordance with U.S. GAAP, thereby pre-adopting IFRIC 4 inthat respect. Adoption of IFRIC 6 will not have a material effect onTeliaSonera’s consolidated financial statements. IFRIC 7, IFRIC 8 and IFRIC 9are currently not relevant to TeliaSonera.

***EU endorsement status***

As of December 31, 2005, all standards,amendments to standards, and interpretations mentioned above had been adoptedby the EU, except for IFRS 7, the amendments to IFRS 1 and IFRS 6, theamendments on financial guarantee contracts to IAS 39 and IFRS 4, the amendmenton capital disclosures to IAS 1, and IFRIC 6, which were all adopted in January 2006;and the amendmentto IAS 21, IFRIC 7, IFRIC 8 and IFRIC 9, which at the end of March 2006were still waiting to be endorsed.

The EU Commission hasannounced that, if an IFRS (or equivalent) is endorsed after the balance sheetdate but before the date the financial statements are issued, it can be treatedas endorsed for the purposes of those financial statements if application priorto the date of endorsement is permitted by both the Regulation endorsing thedocument and the related IFRS, as is the case with all five of the IFRSs thatwere endorsed in January 2006.

64

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**Notes to Consolidated Financial Statements (Continued)**

**1.**   Basis for Preparation (Continued)

**New Swedishlegislation**

As of January 1,2006, a new Swedish Companies Act was effective, among other things nullifyingthe requirement to divide equity into restricted and non-restricted funds. Thischange is applicable on financial statements decided upon by the AGM in 2006.Consequently, TeliaSonera has rearranged its presentation of equity components(see section “Shareholders’ equity” in note “Significant Accounting Principles”)for all periods presented, see section “Reclassification within equity” in note“Equity and Earnings per Share.”

**Completionof provisional purchase price allocations**

The provisional purchaseprice allocations for Orange Denmark and Eesti Telekom were finalized in thefirst quarter of 2005, which resulted in a restatement of certain preliminaryfigures recognized in 2004. For more information, see section “Acquisition ofOrange Denmark and Eesti Telekom” in note “Business Combinations.”

**2.**   CriticalAccounting Policies, Estimates and Assumptions

The preparation of financial statements requiresmanagement and the Board of Directors to make estimates and judgments thataffect reported amounts of assets, liabilities, revenues and expenses, and relateddisclosure of contingent assets and liabilities. These estimates are based onhistorical experience and various other assumptions that management and theBoard believe are reasonable under the circumstances, the results of which formthe basis for making judgments about the carrying values of assets andliabilities that are not readily apparent from other sources. Actual resultsmay differ from these estimates under different assumptions or conditions,significantly impacting TeliaSonera’s earnings and financial position.

Management believes thatthe following significant accounting policies comprise its most criticalestimates and assumptions used in the preparation of the financial statements:revenue recognition, income taxes, valuation of intangible and othernon-current assets, collecting trade receivables, provisions for pensions,restructuring activities, and contingent liabilities and litigation, all ofwhich are discussed and separately marked in the respective sections of note “SignificantAccounting Policies.”

**3.**   ConsolidatedFinancial Statements

**General**

The consolidated financial statements comprise theparent company TeliaSonera AB and all companies in which TeliaSonera directlyor indirectly owns more than 50 percent of the voting rights or otherwise hascontrol. Telia­Sonera’s consolidated financial statements are based on accountsprepared by all controlled companies as of December 31, and have beenprepared using the purchase method of accounting, as in previous years.

Values for companies acquired or divested during theyear are included in the consolidated income statement only for the periodduring which they were controlled. Goodwill and fair value adjustments arisingfrom the acquisition of foreign entities are considered to be denominated inthe respective foreign currency. In subsidiaries not wholly owned, the share ofequity and untaxed reserves owned by external shareholders is recorded asminority interests.

Internal sales and otherinter-company transactions and profits within the Group have been eliminated inthe consolidated financial statements.

65

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**Notes to Consolidated Financial Statements (Continued)**

**3.**   Consolidated Financial Statements(Continued)

**Minority interests**

Transactions with minorityinterests are treated as transactions with parties external to the Group.Disposals to minority interests result in capital gains or losses which arerecorded in the income statement. Purchases from minority interests result ingoodwill, being the difference between any consideration paid and the relevantshare acquired of the Group’s carrying value of net assets of the subsidiary.

**Foreigncurrency translation and inflation adjustments**

Items included in the financial statements of each ofthe Group’s entities are measured using the currency of the primary economicenvironment in which the entity operates, normally the local currency.

The consolidated financial statements are presented inSwedish kronor (SEK), which is the functional currency of the parent company.Income statements and balance sheets of foreign operations (subsidiaries,associated companies, and branch offices) are translated into SEK based on thecurrent rate method, that is, the exchange rate prevailing on the balance sheetdate (closing rate) is used to convert all items in the balance sheets exceptfor equity, which is converted at the historical rate. Each income statementitem is translated using the average rate for that period. Differencesresulting from translation, as well as realized and unrealized post-tax gainsor losses on financial instruments used to hedge net foreign investments, donot affect income but are charged directly to equity.

When the functionalcurrency for a subsidiary or an associated company is the currency of ahyperinflationary economy, the reported non-monetary assets and liabilities,and equity are restated in terms of the measuring unit current at the balancesheet date. The restated financial statements are translated into SEK at theclosing rate. The restating effects are recorded as financial revenue orexpense and in income from associated companies, respectively.

**Associated companies**

Companies in which the TeliaSonera Group has along-term interest and directly or indirectly owns shares or participationsgranting control of 20-50 percent of the voting rights or otherwise has asignificant influence are recorded as associated companies.

Holdings in associated companies are recorded in theconsolidated income statement and balance sheet according to the equity methodof accounting. In the income statement, the Group’s share of net income inassociated companies is recorded in operating income because the operations ofassociated companies are related to telecommunications and it is the Group’sstrategy to capitalize on industry know-how by means of investing in jointlyowned operations. The income statement item Income from associated companiesalso includes amortization (until 2003) of and impairment losses on goodwilland similar assets on consolidation in associated companies as well as gainsand losses on the sale of participations in associated companies.

Any internal profits areeliminated in relation to the share of equity owned.

**Business segments**

The Group’s operations aremanaged and reported primarily by Profit Center and reported secondarily byproduct area. Segments are consolidated based on the same principles as theGroup as a whole. When material operations are transferred between segments,comparative period figures are restated.

66

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**Notes to Consolidated Financial Statements (Continued)**

**4.**   SignificantAccounting Policies

**Revenue recognition (Net sales)**

Net sales are recorded at the sales value, adjustedfor discounts granted and sales-related taxes. Sales principally consist oftraffic charges including interconnect and roaming, subscription fees,connection and installation fees, service charges and sales of customerpremises equipment.

Revenue is recognized for the period in which theservice is performed, based on actual traffic or over the contract term, asapplicable, or when the product is delivered. Subscription fees are recognizedas revenue over the subscription period. Sales relating to pre-paid phonecards, primarily mobile, are deferred and recognized as revenue based on theactual usage of the cards.

Connection fees are separately recognized atcompletion of connection, if the fees do not include any amount for subsequentservicing but only cover the connection costs. Customer hookup fees in theSwedish cable TV operations disposed of in the first half of 2003 were recordedas cost reductions over the useful life of the facility in question.

When invoicing end-customers for third-party contentservices, revenue is reported on a net basis if TeliaSonera under the agreementacts as an agent or broker without assuming the risks and rewards of ownershipof the services.

TeliaSonera may bundle services and products into onecustomer offering. Offerings may involve the delivery or performance ofmultiple products, services, or rights to use assets (multiple deliverables).In some cases, the arrangements include initial installation, initiation, oractivation services and involve consideration in the form of a fixed fee or afixed fee coupled with a continuing payment stream. Telecom equipment isaccounted for separately from service where a market for each deliverable existand if title to the equipment passes to the end-customer. Costsassociated with the equipment are recognized at the time of revenue recognized.The revenue is allocated to equipment and services in proportion to the fairvalue of the individual elements. Customized equipment that can be usedonly in connection with services or products provided by TeliaSonera is not accountedfor separately and revenue is deferred over the total service arrangementperiod.

To corporate customers, TeliaSonera offers long-termfunctional service agreements for total telecom services, which may includeswitchboard services, fixed telephony, mobile telephony, data communication andother customized services. There are generally no options for the customer toacquire the equipment at the end of the service contract period. Revenue forsuch functionality agreements is recognized over the service period but part ofthe periodic fixed fee is deferred to meet the costs at the end of the contractperiod (maintenance and up-grades).

Service and construction contract revenues arerecognized using the percentage of completion method. Assessment of the degreeof completion is based on the value of contractual phases completed as apercentage of total undertakings. When it is probable that total contract costswill exceed total contract revenue, the expected loss is immediately expensed.

Within the international carrier operations, sales ofIndefeasible Rights of Use (IRU) regarding fiber and duct are recognized asrevenue over the period of the agreement (see also subsection “TeliaSonera asoperating lessor” in section “Leasing agreements” below). When entering intoswap contracts for infrastructure and capacity with other carriers, evenlybalanced swap-deals and the non-cash part of unbalanced swap-deals are notrecorded as revenue or expense in the consolidated accounts, as the contractsrefer to assets of similar nature and value.

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**Notes to Consolidated Financial Statements (Continued)**

**4.**   SignificantAccounting Policies (Continued)

For a telecomoperator, management judgment is required in a number of cases to determine ifand how revenue should be recognized and to determine fair values, such as whensigning agreements with third-party providers for content services (isTeliaSonera principal or agent under a certain agreement?); in complex bundlingof products, services and rights to use assets into one customer offering(should TeliaSonera recognize the separate components up-front or defer?); thesales of Indefeasible Rights of Use; when signing swap contracts for infrastructure,capacity and services; and in assessing the degree of completion in service andconstruction contracts.

**Operating costs**

TeliaSonera presents its analysis of expenses using aclassification based on function. The production function comprises all costsfor services and products sold as well as for installation, maintenance, service,and support. The sales function comprises all costs for selling and marketingservices and products and includes expenses for advertising, PR, pricelists,commission fees, credit information, debt collection, etc. Bad debt losses aswell as doubtful debts allowances are also included. Recovery of receivableswritten-off in prior years is included in Other operating revenues. Theresearch and development (R&D) function includes expenses for developingnew or substantially improving already existing services, products, processesor systems. Maintenance and minor adjustments to already existing products,services, processes or systems is not included in R&D. Activities that aretied to specific customer orders (customization) are included in the productionfunction. Amortization, depreciation and impairment losses are included in eachfunction to the extent referring to intangible assets or property, plant andequipment used for that function.

Costs for retailercommissions, other customer acquisition costs, advertising, and other marketingcosts are expensed as incurred. Costs for customer-specific product developmentare recognized over the period necessary to match them with the relatedrevenue. Applied research is expensed as incurred.

**Otheroperating revenues and expenses**

Other operating revenuesand other operating expenses include: gains and losses on the sale of shares oroperations in subsidiaries (cf. section “Associated companies” below), gains orlosses on the sale or retirement of intangible assets or property, plant andequipment, and public grants. Exchange rate differences on operatingtransactions are also recorded here; including value changes in derivatives forhedging operational transaction exposure and possible hedging ineffectiveness(see also section “Financial Instruments” below). This item also includesrestructuring costs, non-capitalizable costs in 2003 related to the merger withSonera and other items of a non-recurring nature.

**Associated companies**

Income from associated companies includes TeliaSonera’sshare of earnings in each company’s net income. The share of earnings is basedon the company’s most recent accounts, adjusted for any discrepancies in accountingprinciples, and with estimated adjustments for significant events andtransactions up to TeliaSonera’s close of books.

Income from associated companies also includesamortization of goodwill (until 2003) and fair value adjustments, and other consolidationadjustments made upon the acquisition of associated companies as well ascapital gains and losses on divestitures of stakes in associated companies.

68

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**Notes to Consolidated Financial Statements (Continued)**

**4.**   Significant Accounting Policies (Continued)

The principles forconsolidating associated companies are described in note “Consolidated FinancialStatements” above. Effective January 1, 2004, goodwill and otherindefinite lived intangible assets are not amortized. Negative equityparticipations in associated companies are recognized only for companies forwhich the Group has contractual obligations to contribute additional capitaland are then recorded as Other provisions.

**Financial revenues and expenses**

Interest revenues and expenses are recognized asincurred, using the effective interest rate method, with the exception ofinterest during installation periods, which is capitalized (see also section “Valuationof non-current assets” below). Dividend revenues from equity investments arerecognized when TeliaSonera’s rights to receive payment have been established.

The change in fair value of the interest component ofborrowings recorded at fair value and of derivatives hedging loans andborrowings is included in Other interest revenues (gain) or in Interestexpenses (loss).

Revenues and expensesrelating to guarantee commissions are included in line items Other interestrevenues and Interest expenses, respectively. Interest expenses includefunding-related bank fees and fees to rating institutions and market makers.

**Income taxes**

The income statement item Income Taxes includescurrent and deferred corporate income tax. TeliaSonera Group companies areliable for taxation under current legislation in the countries where they aredomiciled. The corporate income tax rate in Sweden was 28 percent in 2005, 2004and 2003, and is applied to the nominal income recorded, plus non-deductibleitems such as share impairment losses and capital losses, and less non-taxablerevenues such as share dividends and capital gains.

Income taxes are recognized using the liabilitymethod. According to this method, deferred tax liabilities and assets arerecorded for temporary differences between carrying values and tax-effectivevalues of assets and liabilities and for other tax-effective deductions orlosses. Deferred tax liabilities and assets are calculated based on the taxrate expected when the temporary difference will be reversed. The effects ofchanges in applicable tax rates are charged to income in the period when thechange is substantively enacted. Deferred tax assets are reduced by means of avaluation allowance to the extent that the ability of utilizing the tax assetwithin the foreseeable future is not likely. To the extent the likely recoveryof a deferred tax asset changes, the effect is brought to income for therelevant period.

Deferred tax liabilities for undistributed earnings insubsidiaries and associated companies are not recognized because such retainedearnings can be withdrawn as non-taxable dividends and the companies normallycan be sold without tax consequences. However, some foreign jurisdictionsimpose withholding tax on dividends. In such cases, a deferred tax liabilitycalculated based on the respective withholding tax rate is recognized.

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**Notes to Consolidated Financial Statements (Continued)**

**4.**   Significant Accounting Policies (Continued)

Significant management judgment is required indetermining current tax liabilities and assets as well as provisions fordeferred tax liabilities and assets, in particular as regards valuation ofdeferred tax assets. As part of this process, income taxes have to be estimatedin each of the jurisdictions in which TeliaSonera operates. The processinvolves estimating the actual current tax exposure together with assessingtemporary differences resulting from the different valuation of certain assetsand liabilities in the financial statements and in the tax returns. Managementmust also assess the likelihood that the deferred tax assets will be recoveredfrom future taxable income. Actual results may differ from these estimates dueto, among other factors, future changes in business environment, currentlyunknown changes in income tax legislation, or results from the final review oftax returns by tax authorities or by courts of law.

**Valuation of non-current assets**

Non-current assets represent approximately 80 percentof TeliaSonera’s total assets.

Intangible assets are recorded in the balance sheet atacquisition value, including directly attributable borrowing costs, lessaccumulated scheduled amortization (for goodwill only until 2003), andimpairment losses. Direct external and internal charges for the development ofsoftware for in-house administrative use are capitalized, provided that futureeconomic benefits are probable and will exceed expenses incurred. Activities inprojects at the feasibility study stage as well as maintenance and trainingactivities are expensed as incurred.

Property, plant and equipment are recorded in thebalance sheet at cost less accumulated scheduled depreciation, and impairmentlosses. Software that is a direct prerequisite for end-user service productionis capitalized as plant and machinery. Property and plant under construction isvalued at the expense already incurred, including interest during theinstallation period. Capitalized interest is normally calculated, based on theGroup’s estimated average cost of borrowing (4.75 percent for 2005, 5.25percent for 2004 and 5.0 percent for 2003). However, actual borrowing costs arecapitalized if individually identifiable, as interest paid on constructionloans for buildings.

To the extent a legal or constructive obligation to athird party exists, the acquisition cost includes estimated costs ofdismantling and removing the asset and restoring the site. A change inestimated expenditures for dismantling, removal and restoration is added toand/or deducted from the carrying value of the related asset. To the extentthat the change would result in a negative carrying amount, this effect isrecognized as income. The change in depreciation charge is recognizedprospectively.

For a discussion on the valuation of financial assets,see section “Financial instruments” below.

Scheduled amortization on intangible assets anddepreciation on tangible assets is based on historical acquisition values (purchasecost), with appropriate adjustment for impairment and taking into account theestimated useful lives of various asset classes or individual assets.Government grants are deducted from the carrying value of related assets andare recognized as income over the life of an asset by way of a reduceddepreciation charge. For assets acquired during a year, amortization anddepreciation is calculated from the date of acquisition. Amortization anddepreciation is mainly recorded on a straight-line basis.

Effective January 1, 2004, TeliaSonera adoptedIFRS 3, involving, among other things, that goodwill and other intangibleassets with indefinite useful lives are not amortized but tested for impairmentat least annually. Also effective January 1, 2004, the useful life ofcopper cables in the fixed local access network in 

70

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**Notes to Consolidated Financial Statements (Continued)**

**4.**   Significant Accounting Policies (Continued)

Sweden was changed from 8years to 20 years and of switching equipment for ADSL customers from 3 years to10 years. In 2005 and 2003, no general changes in useful lives were applied.

Determination of the useful lives of asset classesinvolves taking into account historical trends and making assumptions relatedto future socio-economical and technological development and expected changesin market behavior. These assumptions are subject to review by management andthe Audit Committee of the Board of Directors.

Further, non-current assets are reviewed forimpairment at least annually and else whenever events or changes incircumstances indicate that the carrying value of an asset may not berecoverable, by analyzing individual assets or classes of assets that naturallybelong together. If an analysis indicates that the carrying value is too high,the asset’s recoverable amount is set, which is the higher of the fair valueless costs to sell and value in use. Value in use is measured based on theexpected future discounted cash flows (DCF model) attributable to the asset. Animpairment loss is the difference between the carrying value and therecoverable amount of the asset.

A number of significant assumptions and estimates areinvolved in using DCF models to forecast operating cash flows, for example withrespect to factors such as market growth rates, revenue volumes, market pricesfor telecommunications services, costs to maintain and develop communicationsnetworks and working capital requirements. Forecasts of future cash flows arebased on the best estimates of future revenues and operating expenses usinghistorical trends, general market conditions, industry trends and forecasts andother available information. These assumptions are subject to review bymanagement and the Audit Committee of the Board of Directors. The cash flowforecasts are adjusted by an appropriate discount rate derived from TeliaSonera’scost of capital plus a reasonable risk premium at the date of evaluation.

If the projectionsfor future cash flows for any of TeliaSonera’s non-current assets change as aresult of changes in business model or strategy, competitive pressures, orregulatory environment, impairment losses may have to be recognized.

**Assets-held-for-sale**

Non-current assets anddisposal groups are classified as held for sale if their carrying amount willbe recovered through a sale transaction rather than through continuing use.This condition is regarded as met only when the sale is highly probable and theasset (or disposal group) is available for immediate sale in its presentcondition. An asset-held-for-sale is measured at the lower of its previouscarrying amount and fair value less costs to sell.

**Inventories**

Inventories and stock intrade are valued at acquisition value, based on FIFO (first in/first out), ornet selling price, which-ever is lower. Write-downs for obsolescence are madeseparately for each individual store. Obsolescence is assessed with referenceto the age and rate of turnover of the articles. The entire difference betweenthe opening and closing balance of the obsolescence allowance is charged tooperating income for the year.

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**Notes to Consolidated Financial Statements (Continued)**

**4.**   Significant Accounting Policies (Continued)

**Trade receivables**

Trade receivables, which are non-interest-bearing andgenerally have 30 day terms, are recognized and carried at original invoiceamount less an allowance for any uncollectible amounts. An estimate of doubtfulreceivables is made when collection of the full amount is no longer probable.Bad debt is written-off when identified.

TeliaSonera’sallowance for doubtful receivables reflects estimated losses that result fromthe inability of customers to make required payments. Management determines thesize of the allowance based on the likelihood of recoverability of accountsreceivable taking into account actual losses in prior years and currentcollection trends. Should economic or specific industry trends worsen comparedto management estimates, the allowance may have to be increased, negativelyimpacting earnings. See also section “Credit risk” in note “FinancialInstruments and Financial Risk Management” for a description of how creditrisks related to trade receivables are mitigated.

**Cash and cash equivalents**

Cash and cash equivalentsinclude short-term investments with maturities up to and including threemonths, cash at hand and demand deposits in banks. Short-term investmentsconsist primarily of surplus liquidity invested in the overnight market and arevalued at the acquisition value plus accrued interest revenue, whichapproximates fair value. Investments with maturities over three months arereported as interest-bearing receivables, valued at fair value.

**Shareholders’ equity**

Shareholders’ equity is divided into share capital,other contributed capital, reserves and retained earnings. Share capital is thelegally issued share capital. Other contributed capital comprises contributionsmade by shareholders in the form of share premiums in connection with new shareissues, specific share holder contributions, etc. This item is reduced byreimbursements to shareholders made in accordance with separately decided andcommunicated capital repayment programs. Reserves include revaluation reserve,fair value reserve, translation reserve and inflation adjustment reserve. Allother equity is retained earnings.

Dividend payments are proposedby the Board of Directors in accordance with the regulations of the CompaniesAct and decided by the General Meeting of shareholders. The proposed but notyet decided cash dividend for 2005 has not been recorded as a liability.

**Financial instruments**

Financial assets and liabilities are recognized andderecognized applying settlement date accounting.

Financial assets, with certain exceptions, arerecorded at fair value. Official public quotes as of the close of books areused for determining fair value. If such a quote is not available, theinstrument is valued by discounting future cash flows at a quoted market rateof interest for each maturity. Currency swaps and forward exchange contractsare valued at the forward rate. Conversion to Swedish kronor (SEK) is made atquoted exchange rates as per the close of books.

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**Notes to Consolidated Financial Statements (Continued)**

**4.**   Significant Accounting Policies (Continued)

Receivables arisingfrom own lending and assets held to maturity are valued at amortized cost,using the effective interest rate method. TeliaSonera considers quotedsecurities as available for sale, with the unrealized gains and losses up tothe date of sale recorded as a component of equity. Unlisted equity instrumentswhose fair value cannot be reliably determined are valued at cost.

Financial liabilities are valued primarily atamortized cost, using the effective interest rate method. Liabilities that arenot held for trading and that are hedged against changes in fair value,however, are recorded at fair value.

Balances and transactions are hedged and hedgeaccounting is applied if the hedging actions have the express purpose ofserving as a hedge, have a direct correlation to the hedged position andeffectively hedge the position. An effective hedge produces financial effectsthat counteract the effects created by the position that is hedged.

TeliaSonera uses derivative instruments (interest andcross currency interest rate swaps, forward contracts, etc.) primarily tocontrol exposure to fluctuations in exchange rates and interest rates.Derivatives and embedded derivatives, when their economic characteristics andrisks are not clearly and closely related to other characteristics of the hostcontract, are recognized at fair value on the balance sheet. For fair valuehedges, the effective and ineffective portions of the change in fair value ofthe derivative, along with the gain or loss on the hedged item attributable tothe risk being hedged, are recorded in the income statement as incurred. Theeffective portion of the change in fair value of outstanding derivatives usedto hedge anticipated cash flows is booked directly to equity until theunderlying transaction is reflected in the income statement, at which time anydeferred hedging gains or losses are recorded in earnings. The ineffectiveportion of the change in fair value of a derivative used as a cash flow hedge isrecorded as incurred on the same line item as the gain or loss on the itembeing hedged.

Amounts to be paid or received as a result of crosscurrency interest rate swaps or interest rate swaps, which are expresslyintended to and do effectively hedge interest-bearing assets or liabilities asspecified above, are recorded on an ongoing basis as an interest revenue orexpense.

Derivatives used for hedging of foreign netinvestments are designated as cash flow hedges. Upon maturity of the derivativethe accumulated change of value is retained in equity until the subsidiary isdivested or closed down.

Derivative instruments that do not meet the criteriafor hedge accounting are recorded on the balance sheet at fair value andchanges in fair value are recorded in the income statement immediately.

**Provisions forpensions and employment contracts**

Almost all of TeliaSonera’s employees in Sweden,Finland and Norway are covered by defined benefit pension plans, which meanthat the individual is guaranteed a pension equal to a certain percentage ofhis or her salary. The pension plans mainly include old-age pension, disabilitypension and family pension. Employees in TeliaSonera AB and most of its Swedishsubsidiaries are eligible for retirement benefits under the ITP-Tele definedbenefit plan. TeliaSonera’s employees in Finland are entitled to statutorypension benefits pursuant to the Finnish Employees’ Pension Act, a definedbenefit pension arrangement with retirement, disability, unemployment and deathbenefits (TEL pension). In addition, certain employees have additional pensioncoverage through a supplemental pension plan.

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**Notes to Consolidated Financial Statements (Continued)**

**4.**   SignificantAccounting Policies (Continued)

The pension obligations are secured mostly by pensionfunds, but also by provisions in the balance sheet and by insurance premiums.In Sweden, the part of the ITP multiemployer pension plan that is secured by payingpension premiums is accounted for as a defined contribution plan due to lack ofinformation necessary to account for the plan as a defined benefit plan. InFinland, a part of the pension is funded in advance and the remaining part financedas a pay-as-you-go pension.

The Group’s employees outside Sweden, Finland andNorway are usually covered by defined contribution pension plans. Contributionsto the latter are normally set at a certain percentage of the employee’ssalary.

The present value of pension obligations and pensioncosts are calculated annually, using the projected unit credit method.Actuarial assumptions are determined close to the balance sheet date. Theassets of TeliaSonera’s pension funds constitute pension plan assets and arevalued at market value.

Changes in the present value of obligations due torevised actuarial assumptions as well as differences between expected andactual return on plan assets are treated as actuarial gains or losses. When thenet cumulative unrecognized actuarial gain or loss on pension obligations andplan assets goes outside a corridor equal to 10 percent of the higher of eitherpension obligations or the market value of plan assets at the beginning of theyear, the surplus amount is amortized over the average expected remainingemployment period.

Net provisions or receivables for post-employmentbenefits in the balance sheet represent the present value of obligations atyear-end less the market value of plan assets, unrecognized actuarial gains andlosses and unrecognized past-service costs.

The most significant assumptions that management hasto make in connection with the actuarial calculation of pension obligations andpension expenses affect the discount rate, the expected annual rate ofcompensation increase, the expected employee turnover rate, the expectedaverage remaining working life, the expected annual income base amountincrease, the expected annual adjustments to pensions, and the expected annualreturn on plan assets. These assumptions are subject to review by the AuditCommittee of the Board of Directors. A change in any of these key assumptionsmay have a significant impact on the projected benefit obligations, funding requirementsand periodic pension cost.

The discount rate reflects the rates at which thepension benefits could be effectively settled, which means a period somewherefrom 15 to 30 years. Management has chosen to base the estimated discount rateon yields derived from domestic government bonds, as management regards suchbonds as high-quality fixed income investments currently available and expectedto be available during the period to maturity of the pension benefits. However,the longest term of domestic nominal bonds is 15 years. Yields for terms over15 years have been estimated by extrapolating the yield-curve. See section “Pensionobligation risk” in note “Financial Instruments and Financial Risk Management”for a sensitivity analysis related to a change in the weighted average discountrate in calculating pension provisions.

The expected annualrate of compensation increase reflects expected future salary increases as acompound of inflation, seniority and promotion. The estimate is based onhistorical data on salary increases and on the expected future inflation rate(see also below). Historical data is also the basis for estimating the employeeturnover rate, which reflects the expected level of employees, by age class,leaving the company through natural attrition.

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**Notes to Consolidated Financial Statements (Continued)**

**4.**   Significant Accounting Policies (Continued)

The estimate for expected average remaining workinglife is based on current employee age distribution and the expected employeeturnover rate. The income base amount, existing only in Sweden, is set annuallyand inter alia used for determining the ceiling for pensionable income in thepublic pension system. The estimate for the expected annual income base amountincrease is based on the expected future inflation rate and the historical annualrate of compensation increase on the total labor market.

Expected annual adjustments to pensions reflect theinflation rate. In determining this rate, management has chosen to use theinflation target rates set by the national and European central banks.

The expected annual return on plan assets reflects theaverage rate of earnings expected on the investments made (or to be made) toprovide for the pension benefit obligations that are secured by the pensionfunds. Plan assets chiefly consist of fixed income instruments and equityinstruments.

The expected nominal return from the Swedish pensionfund portfolio, representing approximately 85 percent of total plan assets, isapproximately 4.1 percent per annum over a 10-year period, whereinflation is assumed to be 2 percent per annum. The strategic allocation ofplan assets is composed to give the expected average return, based onhistorical data, with some adjustment reflecting the lower inflation rate thatis currently in place. More specifically the expected nominal return in theSwedish pension fund is based on the following assumptions; domestic fixedincome 3.4 percent, domestic and global equity 6.9 percent and otherinvestments 6.9 percent.

The assumptions used in the Finnish and Norwegianpension funds are similar.

As of December 31, 2005, the strategic assetallocation decided by the board of the Swedish pension fund was 60 percentfixed income, 30 percent equities and 10 percent other investments. Otherinvestments include hedge funds, private equity, emerging market debt and highyield bonds. Out of the total assets 40 percent are domestic index (inflation)linked government bonds and 20 percent refers to other domestic fixed incomeassets with low credit risk. Out of the equity holdings one third is domesticand the rest is global equities. The actual allocation may fluctuate from thestrategic allocation in a range of +/-10 percent between fixed income andequities.

All assets in theSwedish pension fund are managed by appointed external managers with specialistmandates.

**Restructuring and other provisions**

Provisions for restructuring costs, warrantycommitments, environmental restoration, litigation, etc. are recognized when: alegal or constructive obligation exists as a result of past events; it isprobable that an outflow of resources will be required to settle theobligation; and a reliable estimate can be made of the amount of theobligation. Provisions are not recognized for future operating losses.Provisions are measured at management’s best estimate of the expenditurerequired to settle the obligation at the balance sheet date, and are discountedto present value where the effect is material.

Where there are a number of similar obligations, theprobability that an outflow will be required in settlement is determined byconsidering the class of obligations as a whole. A provision is recognized evenif the likelihood of an outflow with respect to any one item included in thesame class of obligations may be small but it is probable that some outflow ofresources will be needed to settle the class of obligations as a whole.

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**Notes to Consolidated Financial Statements (Continued)**

**4.**   Significant Accounting Policies (Continued)

TeliaSonera hasengaged, and may in the future need to engage, in restructuring activities,which require management to make significant estimates related to expenses forseverance and other employee termination costs, lease cancellation, sitedismantling and other exit costs and to realizable values of assets maderedundant or obsolete (see section “Valuation of non-current assets” above).Should the actual amounts differ from these estimates, future results could bematerially impacted.

**Leasing agreements**

Leases are classified asfinance leases whenever the terms of the lease transfer substantially all therisks and rewards of ownership to the lessee. All other leases are classifiedas operating leases.

***TeliaSonera as lessee***

As a lessee, TeliaSonerahas entered into finance and operating leases and rental contracts. For afinance lease agreement, the accounts include the leased asset as a tangiblenon-current asset and the future obligation to the lessor as a liability in thebalance sheet, capitalized at the inception of the lease at the fair value ofthe leased property or, if lower, at the present value of the minimum leasepayments. Initial direct costs are added to the capitalized amount. Lease paymentsare apportioned between the finance charges and reduction of the leaseliability to produce a constant rate of interest on the remaining balance ofthe liability. Finance charges are charged directly to income. Other agreementsare operating leases, with the leasing costs recognized evenly throughout theperiod of the agreement.

***TeliaSonera as finance lessor***

TeliaSonera owns assets that it leases to customersunder finance lease agreements. Amounts due from lessees are recorded asreceivables at the amount of the net investment in the leases. Initial directcosts are included in the initial measurement of the financial lease receivableand reduce the amount of income recognized over the lease term.

In 2004, most ofTeliaSonera’s customer financing operations was divested. Some of the divestedleasing receivables were securitized. Based on the terms of the securitizationcontracts, these leasing receivables were included in the Group balance sheet.

***TeliaSonera as operating lessor***

Rental revenues from operating leases are recognizedon a straight-line basis over the term of the relevant lease. Initial directcosts incurred in negotiating and arranging an operating lease are added to thecarrying amount of the leased asset and are recognized on the same basis as thelease revenues.

Fiber and duct are sold aspart of the operations of TeliaSonera’s international carrier business.TeliaSonera has decided to view these as integral equipment to land. Under theagreements, title is not transferred to the lessee. The transactions aretherefore recorded as operating lease agreements. The contracted sales price ischiefly paid in advance and sales not recognized in income are recorded aslong-term liabilities and deferred revenues.

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**Notes to Consolidated Financial Statements (Continued)**

**4.**   Significant Accounting Policies (Continued)

**Contingencies,other contractual obligations and litigation**

A provision is recognized if an adverse outcome isprobable and the amount is reliably estimable. If the likelihood of an adverseoutcome is less than probable but reasonably possible, or a reliable estimateis not determinable, the matter is disclosed provided that the contingency orthe legal claim is material.

Determination ofthe treatment of contingent assets and liabilities in the financial statementsis based on management’s view of the expected outcome of the applicablecontingency. Management consults with legal counsel on matters related tolitigation and other experts both within and outside the company with respectto matters in the ordinary course of business.

**5.**   Transactionsin Foreign Currencies

Transactions denominatedin foreign currencies are translated at the exchange rates prevailing at thetime of each transaction. Monetary assets and liabilities denominated inforeign currencies and related forward contracts for foreign exchange aretranslated at the closing rate, any resulting exchange rate differences beingcharged to income. Accordingly, realized as well as unrealized exchange ratedifferences are recorded in the income statement. Exchange rate differencesarising from operating receivables or liabilities are recorded in operatingincome, while differences attributable to financial assets or liabilities arerecorded as earnings or losses on financial investments.

**6.**   Changesin Group Composition

**Eventsin 2005 and after the balance sheet date**

***Satellite companies***

TeliaSonera’s minorityholding in the satellite company Intelsat, Ltd. was sold on January 28,2005.

***Eesti Telekom***

On December 28, 2004,TeliaSonera became the owner of slightly more than 50 percent of the shares inEesti Telekom, making Eesti Telekom a consolidated subsidiary. Exceeding the 50percent threshold required Telia­Sonera to make a mandatory public offer forthe remaining shares in Eesti Telekom. The offer period expired on February 23,2005, resulting in a minor increase in TeliaSonera’s shareholding, to 50.3percent. For more information, see note “Business Combinations.” In February andMarch 2006, TeliaSonera acquired an additional 3.4 percent of the sharesin Eesti Telekom.

***Infonet***

On February 25, 2005,the major shareholders of Infonet Services Corporation, including TeliaSonerawith a 20 percent holding, sold their stakes in Infonet to BritishTelecommunications plc.

***Teleadress and Multicom Security***

On February 2 and 28,2005, respectively, the shareholders of TA Teleadress Information AB andMulticom Security AB, including TeliaSonera with an indirect holding of 46 and47 percent, respectively, sold all shares in Tele­adress to Aftonbladet HiertaAB and in Multicom Security to the British investment company GMT CommunicationsPartners.

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**Notes to Consolidated Financial Statements (Continued)**

**6.**   Changes in Group Composition(Continued)

***MicroLink***

On October 31, 2005,TeliaSonera acquired the leading Baltic IT services company MicroLink AS, withoperations in Estonia, Latvia and Lithuania.

***Chess Holding***

On November 7, 2005,TeliaSonera AB acquired 91.2 percent of Vollvik Gruppen AS (now renamedTeliaSonera Chess Holding AS) in Norway for cash consideration. At December 31,2005, following a voluntary offer to acquire the remaining shares, TeliaSoneraheld all but a small fraction of the company’s shares. Chess Holding owns 100percent of the mobile service provider Chess/Sense. For more information, seenote “Business Combinations.”

**Majoracquisitions and divestitures during 2003-2005**

In 2005, 2004 and 2003,TeliaSonera acquired and divested a number of companies and businesses from andto independent parties outside the Group. None of those acquisitions or divestitures,individually or collectively, was of a size that would have had a materialeffect on the Group’s pro forma net sales or net income for the year in whichthe transaction was executed or the year immediately preceding.

**7.**   Net Sales

Netsales are broken down geographically by business segment in note “BusinessSegments,” section “Profit Center breakdown.” Sales (including exports) weredistributed among economic regions as follows.

|                                              | ** ** | **January-December**      | ** ** |
|----------------------------------------------|------------|---------------------------|------------|
| ** **                                   | ** ** | **2005**                  | ** ** | **2004** | ** ** | **2003** | ** ** |
| ** **                                   | ** ** | **SEK in  millions** | ** ** | **Percent** | ** ** | **SEK in  millions** | ** ** | **Percent** | ** ** | **SEK in  millions** | ** ** | **Percent** | ** ** |
| European Economic  Area (EEA)                |       |                      | 80,030     |   |   |   | 91.3 |   |   |   | 76,638 |   |   |   | 93.5 |   |   |   | 71,824 |   |   |   | 87.1 |   |   |
| of which European Union (EU) member states   |       |                      | 72,743     |   |   |   | 83.0 |   |   |   | 70,379 |   |   |   | 85.9 |   |   |   | 65,472 |   |   |   | 79.4 |   |   |
| of which other countries                     |       |                      | 7,287      |   |   |   | 8.3 |   |   |   | 6,259 |   |   |   | 7.6 |   |   |   | 6,352 |   |   |   | 7.7 |   |   |
| Rest of Europe                               |       |                      | 782        |   |   |   | 0.9 |   |   |   | 675 |   |   |   | 0.8 |   |   |   | 6,941 |   |   |   | 8.4 |   |   |
| North-American  Free Trade Agreement (NAFTA) |       |                      | 626        |   |   |   | 0.7 |   |   |   | 442 |   |   |   | 0.6 |   |   |   | 657 |   |   |   | 0.8 |   |   |
| Rest of world                                |       |                      | 6,223      |   |   |   | 7.1 |   |   |   | 4,182 |   |   |   | 5.1 |   |   |   | 3,003 |   |   |   | 3.7 |   |   |
| **Total**                                    | ** ** | ** **                | **87,661** |   | ** ** | ** ** | **100.0** |   | ** ** | ** ** | **81,937** |   | ** ** | ** ** | **100.0** |   | ** ** | ** ** | **82,425** |   | ** ** | ** ** | **100.0** |   |   |
| of which outside Sweden                      |       |                      | 49,812     |   |   |   | 56.8 |   |   |   | 42,279 |   |   |   | 51.6 |   |   |   | 40,641 |   |   |   | 49.3 |   |   |
| of which Nordic  markets outside Sweden      |       |                      | 31,130     |   |   |   | 35.5 |   |   |   | 28,301 |   |   |   | 34.5 |   |   |   | 27,921 |   |   |   | 33.9 |   |   |

 

78

----

**Notes to Consolidated Financial Statements (Continued)**

**7.**   NetSales (Continued)

Netsales were broken down by product category as follows.

|                                               | ** ** | **January-December** | ** ** |
|-----------------------------------------------|------------|----------------------|------------|
| **SEK in millions**                 | ** ** | ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Mobile  communications                        |       | 44,191               |       | 38,382 |   | 36,737 |   |
| Fixed telephony                               |       | 24,796               |       | 25,023 |   | 27,791 |   |
| Internet                                      |       | 6,246                |       | 5,586 |   | 4,325 |   |
| Data  communications and network capacity     |       | 7,864                |       | 7,972 |   | 8,524 |   |
| Service,  installation and customer equipment |       | 1,810                |       | 2,473 |   | 1,324 |   |
| Cable TV                                      |       | 655                  |       | 606 |   | 981 |   |
| Financial  services                           |       | 22                   |       | 174 |   | 382 |   |
| Other                                         |       | 2,077                |       | 1,721 |   | 2,361 |   |
| **Total**                                     | ** ** | **87,661**           | ** ** | **81,937** | ** ** | **82,425** | ** ** |
|                                               |            |                      |            |  |  |  |  |  |  |

 

Thedistribution of change in net sales in terms of volume effects, structuraleffects, exchange rate effects, and price effects was as follows.

|                         | ** ** | **January-December** | ** ** |
|-------------------------|------------|----------------------|------------|
| **Percent**             | ** ** | ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Change in net  sales    |       |                 | 7.0        |   |   |   | -0.6 |   |   | 38.6 |   |
| of which volume  growth |       |                 | 9.0        |   |   |   | 7.0 |   |   | 6.1 |   |
| structural changes      |       |                 | 5.9        |   |   |   | -0.7 |   |   | 37.7 |   |
| exchange rate effects   |       |                 | 1.2        |   |   |   | -0.6 |   |   | -1.3 |   |
| price reductions        |       |                 | -8.5       |   |   |   | -5.9 |   |   | -3.9 |   |
|                         |            |                      |            |  |  |  |  |  |  |  |  |  |  |

 

**8.**   OperatingCosts

Operatingcosts were distributed by function as follows.

|                               | ** ** | **January-December** | ** ** |
|-------------------------------|------------|----------------------|------------|
| **SEK in millions** | ** ** | ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Production**                | ** ** | **47,287**           | ** ** | **43,104** | ** ** | **46,688** | ** ** |
| **Other functions**           | ** ** | ** **           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Sales                         |       | 14,253               |       | 12,739 |   | 12,786 |   |
| Administration                |       | 6,578                |       | 5,845 |   | 7,832 |   |
| Research and  development     |       | 2,875                |       | 2,783 |   | 2,543 |   |
| **Total  other functions**    | ** ** | **23,706**           | ** ** | **21,367** | ** ** | **23,161** | ** ** |
| **Total**                     | ** ** | **70,993**           | ** ** | **64,471** | ** ** | **69,849** | ** ** |
|                               |            |                      |            |  |  |  |  |  |  |

 

Each function includes amortization, depreciation andimpairment losses as specified in note “Amortization, Depreciation andImpairment Losses.” This is also broken down by class of asset.

79

----

**Notes to Consolidated Financial Statements (Continued)**

**8.**   Operating Costs (Continued)

Operating costs weredistributed by nature as follows.

|                                                   | ** ** | **January-December** | ** ** |
|---------------------------------------------------|------------|----------------------|------------|
| **SEK in millions**                     | ** ** | ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Goods purchased                                   |       | 13,853               |       | 12,273 |   | 13,947 |   |
| Network expenses,  interconnect traffic           |       | 15,927               |       | 12,915 |   | 11,816 |   |
| Change in  inventories                            |       | 45                   |       | 91 |   | 250 |   |
| **Total**                                         | ** ** | **29,825**           | ** ** | **25,279** | ** ** | **26,013** | ** ** |
| Salaries and  remuneration                        |       | 9,023                |       | 8,674 |   | 8,460 |   |
| Employer’s social  security contributions    |       | 1,970                |       | 1,902 |   | 1,950 |   |
| Capitalized work  by employees                    |       | -118                 |       | -127 |   | -2 |   |
| Pension expenses                                  |       | 1,293                |       | 441 |   | 1,406 |   |
| Other personnel  expenses                         |       | 737                  |       | 656 |   | 587 |   |
| **Total**                                         | ** ** | **12,905**           | ** ** | **11,546** | ** ** | **12,401** | ** ** |
| Rent and leasing fees                             |       | 2,503                |       | 2,491 |   | 1,771 |   |
| Energy expenses                                   |       | 534                  |       | 445 |   | 434 |   |
| Travel expenses                                   |       | 637                  |       | 649 |   | 654 |   |
| Consultants’  services                       |       | 1,433                |       | 1,695 |   | 1,739 |   |
| Marketing  expenses                               |       | 6,057                |       | 5,404 |   | 4,475 |   |
| Bad debt expense                                  |       | 254                  |       | 249 |   | 476 |   |
| Information  technology                           |       | 1,754                |       | 1,679 |   | 1,760 |   |
| Other expenses                                    |       | 2,053                |       | 2,346 |   | 2,471 |   |
| **Total**                                         | ** ** | **15,225**           | ** ** | **14,958** | ** ** | **13,780** | ** ** |
| Amortization,  depreciation and impairment losses |       | 13,038               |       | 12,688 |   | 17,655 |   |
| **Total**                                         | ** ** | **70,993**           | ** ** | **64,471** | ** ** | **69,849** | ** ** |
|                                                   |            |                      |            |  |  |  |  |  |  |

 

Advertising expensestotaled SEK 1,476 million, SEK 1,312 million and SEK 1,022 million for theyears 2005, 2004 and 2003, respectively.

80

----

**Notes to Consolidated Financial Statements (Continued)**

**9.**   OtherOperating Revenues and Expenses

Otheroperating revenues and expenses were distributed as follows.

|                                      | ** ** | **January-December** | ** ** |
|--------------------------------------|------------|----------------------|------------|
| **SEK in millions**        | ** ** | ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Other operating revenues**         | ** ** | ** **           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Capital gains,  shares               |       | 127                  |       | 679 |   | 1,868 |   |
| Capital gains,  divested operations  |       | 2                    |       | 43 |   | 20 |   |
| Capital gains,  other                |       | 81                   |       | 43 |   | 86 |   |
| Exchange rate  gains                 |       | 399                  |       | 335 |   | 450 |   |
| Commissions etc.                     |       | 222                  |       | 316 |   | 275 |   |
| Grants, etc.                         |       | 18                   |       | 15 |   | 13 |   |
| Recovered  accounts receivable       |       | 71                   |       | 40 |   | 27 |   |
| Damages received                     |       | 111                  |       | 3 |   | 4 |   |
| **Total  other operating revenues**  | ** ** | **1,031**            | ** ** | **1,474** | ** ** | **2,743** | ** ** |
| **Other  operating expenses**        | ** ** | ** **           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Capital losses,  shares              |       | -35                  |       | -50 |   | -13 |   |
| Capital losses,  divested operations |       | -1                   |       | -4 |   | -43 |   |
| Capital losses,  other               |       | -242                 |       | -136 |   | -296 |   |
| Provisions for  onerous contracts    |       | -68                  |       | — |   | -3 |   |
| Exchange rate  losses                |       | -394                 |       | -270 |   | -294 |   |
| Sonera merger  expenses              |       | —               |       | — |   | -3 |   |
| Restructuring  costs                 |       | -2,142               |       | -314 |   | -247 |   |
| Impairment charge                    |       | -150                 |       | -2,906 |   | — |   |
| Damages paid                         |       | -347                 |       | -15 |   | -92 |   |
| **Total  other operating expenses**  | ** ** | **-3,379**           | ** ** | **-3,695** | ** ** | **-991** | ** ** |
| **Net effect on income**             | ** ** | **-2,348**           | ** ** | **-2,221** | ** ** | **1,752** | ** ** |
|                                      |            |                      |            |  |  |  |  |  |  |

 

**10.**   RelatedParty Transactions

**Group units**

Commercial terms andmarket prices apply for the supply of goods and services between Group units.Inter-company sales totaled SEK 45,254 million, SEK 44,963 million and SEK50,914 million for the years 2005, 2004 and 2003, respectively. On ProfitCenter level internal sales totaled SEK 2,842 million in 2005, SEK 2,948million in 2004 and SEK 3,336 million in 2003.

**TheSwedish State and the Finnish State**

The Swedish State currently owns 45.3 percent and theFinnish State 13.7 percent of the outstanding shares in TeliaSonera AB. Bothstates fully participated in the share repurchase program decided by the 2005Annual General Meeting of shareholders. See section “Treasury shares” in note “Equityand Earnings per Share” for further details on the program.

The TeliaSonera Group’s services and products areoffered to the Swedish and the Finnish State, their agencies, and state-ownedcompanies in competition with other operators and on conventional commercialterms. Certain state-owned companies run businesses that compete withTeliaSonera. Likewise, TeliaSonera buys services from state-owned companies atmarket prices and on otherwise conventional 

81

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**Notes to Consolidated Financial Statements (Continued)**

**10.**   Related Party Transactions(Continued)

commercial terms. Neitherthe Swedish and Finnish State and their agencies, nor state-owned companiesrepresent a significant share of TeliaSonera’s net sales or earnings.

The Swedish telecommunications market is governedmainly by the Electronic Communications Act and ordinances, regulations anddecisions in accordance with the Act. Operators that have a significantpublicly available communications network are required to pay a fee to financemeasures to prevent serious threats and disruptions to electroniccommunications during peacetime. Until 2003, TeliaSonera was the only operatorobliged to pay this fee. Under the act, the fee from 2004 is apportioned tomore operators. The required fee from TeliaSonera was SEK 59 million in 2005,SEK 30 million in 2004 and SEK 50 million in 2003. In addition, TeliaSonera,like other operators, pays annual fees to the Swedish National Post and TelecomAgency (PTS) to fund the Agency’s activities under the Electronic CommunicationsAct and the Radio and Telecommunications Terminal Equipment Act. TeliaSonerapaid fees of SEK 60 million in 2005, SEK 65 million in 2004 and SEK 64 millionin 2003.

The Finnishtelecommunications market is governed mainly by the Communications Market Actand the Act on the Protection of Privacy and Data Security in ElectronicCommunications as well as by regulations, decisions and technical directions inaccordance with these acts. In 2005, 2004 and 2003, TeliaSonera paid EUR 2.1million, EUR 2.4 million and EUR 2.8 million, respectively, for the use ofradio frequencies and EUR 0.9 million, EUR 0.9 million and EUR 1.6 million,respectively, for the use of numbers. In 2005 and 2004, TeliaSonera paid EUR0.3 million and EUR 0.2 million, respectively, for data privacy supervision andEUR 1.2 and EUR 1.0 million, respectively, as communications market fee, i.e. ageneral fee paid for the regulatory activities of the Finnish CommunicationsRegulatory Authority (FICORA).

**TeliaSonerashares held by other related parties**

Shares in TeliaSonera ABconstitute a limited portion of the assets of TeliaSonera’s pension funds. Seesection “Plan-asset allocation” in note “Provisions for Pensions and EmploymentContracts” for further details.

**Svenska UMTS-nät**

In 2005, 2004 and 2003,TeliaSonera sold services and products to its 50 percent owned associatedcompany Svenska UMTS-nät AB worth SEK 160 million, SEK 180 million and SEK 131million, respectively, and, in 2005 and 2004, bought services and productsworth SEK 204 million and SEK 43 million, respectively.

**Telekolmio**

In 2005 and 2004,TeliaSonera sold services to its associated company Telekolmio Oy worth SEK 19million and SEK 34 million, respectively, and bought services worth SEK 2million and SEK 95 million, respectively.

**Kasteam**

In 2005, TeliaSonera soldservices to its indirectly owned associated company Kasteam Oy worth SEK 42million. In 2005 and 2004, TeliaSonera bought services worth SEK 68 million andSEK 50 million, respectively.

82

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**Notes to Consolidated Financial Statements (Continued)**

**10.**   Related Party Transactions (Continued)

**Isoworks**

In 2005, TeliaSonera soldservices to its associated company Isoworks Oy worth SEK 18 million and boughtservices worth SEK 94 million.

**Lattelekom**

In 2005, 2004 and 2003,TeliaSonera sold services to the Latvian associated company Lattelekom SIAworth SEK 116 million, SEK 112 million and SEK 114 million, respectively, andpurchased services worth SEK 56 million, SEK 70 million and SEK 73 million,respectively. Further, in 2003, the Annual General Meeting of shareholders inLattelekom decided to annul the company’s class C shares, resulting in arepayment of SEK 350 million to Telia­Sonera.

**MegaFon**

As of December 31,2005, TeliaSonera had interest-bearing claims on the Russian associated companyOAO MegaFon of SEK 372 million.

**Unisource/AUCS**

TeliaSonera previously held equal stakes in UnisourceN.V. together with Swisscom and KPN of the Netherlands. All operations inUnisource, with the exception of AUCS Communications Services (AUCS) and itssubsidiaries, were sold or shut down in 1999 and the company was dissolved on July 1,2000. In May 2003, TeliaSonera and the other shareholders of AUCS approveda liquidation plan for the AUCS group of companies.

Unisource and its jointowners, including TeliaSonera, signed a three-year management agreement withInfonet Services Corp. (see below) in 1999 on the operations in AUCS. Theagreement provided for the sale of a large part of AUCS’s operations toInfonet. The management agreement was supplemented in December 2002 by atermination agreement, valid until the first quarter of 2004. Under the termsof various contracts, Unisource was required to provide services to Infonet. Unisourceand its joint owners were also liable for any losses in AUCS and had to payInfonet a bonus if the losses were lower than an amount specified in thecontract. In total, this meant that TeliaSonera’s share of Unisource’s expensesas per the agreement was at least SEK 1,348 million. Telia­Sonera receivedcompensation for these undertakings through the acquisition of shares inInfonet at a price less than market value shortly prior to Infonet’s listing onthe stock exchange. Based on the selling price at the time of listing, thevalue of the shares was SEK 2,758 million, while TeliaSonera paid SEK 110million. The profit on this transaction, that is, the difference between themarket value of the shares after deducting the purchase price (SEK 2,648million) and the obligations that TeliaSonera undertook (SEK 1,348 million, asexplained above), was recorded as share of earnings in AUCS over the combinedterm of the management and termination agreements.

**Infonet**

In 2004 and 2003,TeliaSonera sold services and products to the American associated companyInfonet Services Corp. worth SEK 35 million and SEK 48 million, respectively,and purchased services and products worth SEK 116 million and SEK 225 million,respectively. TeliaSonera’s holding in Infonet was sold on February 25,2005.

83

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**Notes to Consolidated Financial Statements (Continued)**

**10.**   Related Party Transactions (Continued)

**Telefos**

As of December 31,2005, TeliaSonera had interest-bearing claims on the associated company TelefosAB of SEK 93 million. In 2004 and 2003, TeliaSonera sold services and productsto the Telefos Group worth SEK 94 million and SEK 139 million, respectively,and in 2005, 2004 and 2003, bought services and products worth SEK 2,087million, SEK 1,908 million and SEK 2,675 million, respectively. Most of theservices purchased by Telia­Sonera relate to network construction.

**Overseas Telecom**

In 2003, the AnnualGeneral Meeting of shareholders in TeliaSonera’s associated company OverseasTelecom AB decided to reduce the company’s equity, resulting in a repayment ofSEK 274 million to TeliaSonera.

**Othertransactions with associated companies**

In addition, TeliaSonerasold and bought services and products to a limited extent to and from otherassociated companies. These transactions, as well as the transactions mentionedabove, were based on commercial terms.

**Commitmentson behalf of related parties**

In addition, TeliaSonerahas made certain commitments on behalf of group and associated companies. Seenote “Contingencies, Other Contractual Obligations and Litigation” for furtherdetails.

**Key management**

See section “Remuneration to corporate officers” innote “Human Resources” for further details.

84

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**Notes to Consolidated Financial Statements (Continued)**

**11.**   Amortization,Depreciation and Impairment Losses

**Scheduledamortization and depreciation**

Thefollowing rates are applied when recording scheduled amortization anddepreciation.

| Goodwill (until 2003)                                           |   | Individual evaluation, minimum 5%                                              |
|-----------------------------------------------------------------|--------|--------------------------------------------------------------------------------|
| —Sonera and NetCom  goodwill (until 2003)                  |   | 5%                                                                             |
| Trade names                                                     |   | Individual evaluation,  minimum 10%                                            |
| Licenses for mobile and  fixed communications                   |   | License period, minimum  5%                                                    |
| Contractual agreements                                          |   | Individual evaluation,  based on historic and projected churn                  |
| Other intangible assets                                         |   | 7-33%                                                                          |
| Buildings                                                       |   | 2-10%                                                                          |
| Land improvements                                               |   | 5-20%                                                                          |
| Expenditure on  improvements to property not owned by the Group |   | Remaining term of  corresponding lease                                         |
| Mobile networks                                                 |   |                                                                           |
| —Base stations                                             |   | 9.5-14.5%                                                                      |
| —Other installations                                       |   | 10-33%                                                                         |
| Fixed networks                                                  |   |                                                                           |
| —Switching systems and  transmission systems               |   | 10-33%                                                                         |
| —Transmission media  (cable)                               |   | 5-12.5%                                                                        |
| —Equipment for special  networks                           |   | 20-33%                                                                         |
| —Usufruct agreements of  limited duration                  |   | Agreement period or time  corresponding to the underlying tangible fixed asset |
| —Other installations                                       |   | 3-33%                                                                          |
| Cable TV networks and  alarm systems                            |   | 10-33%                                                                         |
| Equipment, tools and  installations                             |   | 12.5-33%                                                                       |

 

In late 2005, managementinitiated a group-wide review of useful lives, taking into account historicalexperience and expected future development in relation to technology changes,market conditions and regulatory environment. As a result, useful lives of anumber of classes of intangible and tangible assets will be adjusted upwards aswell as downwards as of January 1, 2006. The isolated aggregate full yeareffect for 2006 is expected to be a reduction of amortization and depreciationtotaling approximately SEK 0.9 billion.

**Goodwill and impairment testing**

Substantially all goodwill recorded (see specificationin note “Goodwill and Other Intangible Assets”) has been recognized inconnection with the acquisition of Chess Holding in 2005, Orange Denmark in2004, the merger with Sonera Oyj in 2002 and the acquisition of NetCom ASA in2000. TeliaSonera 

85

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**Notes to Consolidated Financial Statements (Continued)**

**11.**   Amortization, Depreciation and Impairment Losses (Continued)

Finland (formerly Sonera),the total Danish mobile operations and NetCom all constitute cash-generatingunits. As of 2006, NetCom and Chess are part of the same cash-generating unit.

According to generally accepted principles andstandard company procedures, carrying values of all cash-generating units havebeen tested for impairment. The recoverable amounts (that is, higher of valuein use and fair value less cost to sell) are normally determined on the basisof value in use, applying discounted cash flow calculations. However, certainexternal events, such as market values for mobile operators falling after theacquisition of NetCom and the strong price pressure on the Finnish telecommarket starting in 2004, have made Telia­Sonera request independent appraisalsof fair values to determine recoverable amounts for NetCom in 2002,International Carrier in 2004 and TeliaSonera Finland in 2005.

Using what management believes are reasonableassumptions based on the best information available as of the date of thefinancial statements, the recoverable values of the cash-generating units werefound to be in excess of their December 31, 2005 carrying values at alltests and therefore the related goodwill was not impaired. In 2004, thecarrying amount of International Carrier was determined to be impaired, due tocontinued weak market conditions as a result of overcapacity and fallingprices, and the net fixed asset value of SEK 3,263 million was written down tozero. SEK 357 million referred to financial assets. The weighted average costof capital (WACC) used in calculating the recoverable value was 13.1 percent.Excluding financial assets, the impairment losses were recognized as Otheroperating expenses, most of which in the Fixed networks class of assets.

The key assumptions used in the 2005 value in usecalculations were sales growth, EBITDA margin development and WACC. Thecalculations were based on forecasts approved by management, which managementbelieves reflect past experience and externally available information. For theDanish mobile operations the projected margins are higher than past experience,based on the synergies expected from the merger of Orange Denmark and theexisting Danish mobile operations. Planned growth rates have been extrapolatedusing what management believes are rates consistent with the long term growthin each of the markets in which TeliaSonera operates. The WACC rates usedvaries by market and were in the range of 6.7-13.8 percent in 2005; for theNorwegian operations the WACC rate was 7.2 percent and for the Danish mobileoperations it was 7.4 percent.

The fair value less cost to sell of TeliaSoneraFinland was determined based on independent appraisal. The appraisal was basedprimarily on a discounted cash flow calculation in which the key assumptionswere the same as those in the value in use calculations discussed above. Thelong-term sales growth used in the calculation is in line with the assumedlong-term rate of inflation, and the WACC rate used was 8.1 percent. The mostsensitive assumption is the EBITDA margin, and the fair value of TeliaSoneraFinland is dependent on the successful implementation of the turn-aroundprogram announced on November 29, 2005 and the gradual recovery of EBITDAmargin to the same type of levels as before 2005.

86

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**Notes to Consolidated Financial Statements (Continued)**

**11.**   Amortization, Depreciation and Impairment Losses (Continued)

Amortization, depreciationand impairment losses on intangible assets and property, plant and equipmentwere distributed by function as follows.

|                                                             | ** ** | **January-December** | ** ** |
|-------------------------------------------------------------|------------|----------------------|------------|
| **SEK in millions, except proportions** | ** ** | ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Production                                                  |       | 10,910               |       | 10,968 |   | 14,503 |   |
| Sales                                                       |       | 1,102                |       | 678 |   | 1,533 |   |
| Administration                                              |       | 796                  |       | 888 |   | 1,136 |   |
| Research and  development                                   |       | 230                  |       | 154 |   | 483 |   |
| Other operating  expenses                                   |       | 150                  |       | 2,908 |   | 52 |   |
| **Total**                                                   | ** ** | **13,188**           | ** ** | **15,596** | ** ** | **17,707** | ** ** |
| Proportion to net  sales (%)                                |       | 15.0                 |       | 19.0 |   | 21.5 |   |
|                                                             |            |                      |            |  |  |  |  |  |  |

 

Amortization, depreciation and impairment losses arebroken down by business segments in note “Business Segments.”

Amortization,depreciation and impairment losses were distributed by asset class as follows.

|                               | ** ** | **January-December** | ** ** |
|-------------------------------|------------|----------------------|------------|
| **SEK in millions** | ** ** | ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Goodwill                      |       | —               |       | — |   | 3,488 |   |
| Other intangible  assets      |       | 2,289                |       | 2,422 |   | 1,987 |   |
| Buildings                     |       | 349                  |       | 321 |   | 335 |   |
| Land improvements             |       | 6                    |       | 8 |   | 8 |   |
| Mobile networks               |       | 4,492                |       | 3,905 |   | 3,833 |   |
| Fixed networks                |       | 5,291                |       | 8,033 |   | 6,372 |   |
| Other plant and  equipment    |       | 761                  |       | 907 |   | 1,684 |   |
| **Total**                     | ** ** | **13,188**           | ** ** | **15,596** | ** ** | **17,707** | ** ** |
|                               |            |                      |            |  |  |  |  |  |  |

 

Accelerated amortizationand depreciation, to the extent allowed by local tax legislation, is recordedin the individual Group companies as appropriations and untaxed reserves (seecorresponding section in note “Income Taxes”).

**12.**   AssociatedCompanies

**Income from associated companies**

Thenet effect on income from holdings in associated companies was as follows.

|                                                                   | ** ** | **January-December** | ** ** |
|-------------------------------------------------------------------|------------|----------------------|------------|
| **SEK in millions**                                     | ** ** | ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Share in net  income for the year                                 |       | 3,328                |       | 2,820 |   | 2,096 |   |
| Amortization of  goodwill (until 2003) and fair value adjustments |       | -43                  |       | -64 |   | -565 |   |
| Impairment losses  on goodwill, fair value adjustments, etc.      |       | -11                  |       | -67 |   | -1,436 |   |
| Net capital  losses/gains                                         |       | -45                  |       | 859 |   | 287 |   |
| **Net effect on income**                                          | ** ** | **3,229**            | ** ** | **3,548** | ** ** | **382** | ** ** |
|                                                                   |            |                      |            |  |  |  |  |  |  |

 

87

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**Notes to Consolidated Financial Statements (Continued)**

**12.**   Associated Companies (Continued)

Income from associated companies is broken down bybusiness segments in note “Business Segments.”

Largeindividual stakes (including intermediate holding companies, when applicable)impacted earnings as follows.

|                                               | ** ** | **January-December** | ** ** |
|-----------------------------------------------|------------|----------------------|------------|
| **SEK in millions**                 | ** ** | ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Svenska UMTS-nät  AB, Sweden             |       | -105                 |       | 12 |   | -9 |   |
| Lattelekom SIA,  Latvia                       |       | 220                  |       | 219 |   | 205 |   |
| AS Eesti Telekom,  Estonia                    |       | —               |       | 274 |   | 177 |   |
| OAO MegaFon,  Russia                          |       | 1,175                |       | 653 |   | 509 |   |
| Turkcell Iletisim  Hizmetleri A.S., Turkey    |       | 1,761                |       | 972 |   | 618 |   |
| Overseas Telecom  AB, Sweden                  |       | 94                   |       | 285 |   | 141 |   |
| Telefos AB,  Sweden                           |       | 22                   |       | 1,071 |   | 254 |   |
| INGROUP Holding  AB, Sweden                   |       | —               |       | — |   | -123 |   |
| Unisource  N.V./AUCS, the Netherlands         |       | -170                 |       | 43 |   | 227 |   |
| Infonet Services  Corp., USA                  |       | 206                  |       | -67 |   | -1,517 |   |
| Metro One  Telecommunications, Inc., USA |       | —               |       | — |   | -309 |   |
| Bharti Mobile  Ltd., India                    |       | —               |       | — |   | 341 |   |
| Other holdings                                |       | 26                   |       | 86 |   | -132 |   |
| **Net effect on income**                      | ** ** | **3,229**            | ** ** | **3,548** | ** ** | **382** | ** ** |
|                                               |            |                      |            |  |  |  |  |  |  |

 

Turkcell’s financials are included in TeliaSonera’sreporting with a one-quarter lag. As of January 1, 2006, the Turkisheconomy is from an accounting perspective no longer considered to behyperinflationary, affecting Telia­Sonera in the second quarter of 2006. ASEesti Telekom became a consolidated subsidiary on December 28, 2004. Seealso note “Specification of Shareholdings and Participations.”

In 2004, the final capitalgain from the sale of a majority stake in Telefos AB was recognized. In 2003,as a result of a management decision that TeliaSonera’s ownership interest inInfonet Services Corp. was defined as an asset possible to divest in light ofmarket conditions or otherwise in an effort to maximize its return on the investmentand Infonet’s reported operating performance, the carrying value was writtendown by SEK 1,028 million. TeliaSonera’s holding in Infonet was divested in February 2005.

**Investmentsin associated companies**

Thebook value was distributed as follows.

|                                               | ** ** | **December 31,** | ** ** |
|-----------------------------------------------|------------|-----------------------|------------|
| **SEK in millions**                 | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Goodwill and  similar assets on consolidation |       | 9,039                 |       | 8,079 |   | 8,934 |   |
| Share of equity                               |       | 16,169                |       | 11,534 |   | 11,467 |   |
| **Total**                                     | ** ** | **25,208**            | ** ** | **19,613** | ** ** | **20,401** | ** ** |
|                                               |            |                       |            |  |  |  |  |  |  |

 

Book value is broken down by business segments in note“Business Segments.”

88

----

**Notes to Consolidated Financial Statements (Continued)**

**12.**   Associated Companies (Continued)

Summarized information onthe associated companies’ aggregate balance sheets and income statements wereas follows.

|                                       | ** ** | **December 31 or  January-December** | ** ** |
|---------------------------------------|------------|------------------------------------------------|------------|
| SEK in millions             | ** ** | ** **                                     | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Non-current  assets                   |       | 95,007                                         |       | 65,072 |   | 45,298 |   |
| Current assets                        |       | 22,745                                         |       | 25,999 |   | 24,662 |   |
| Provisions and  long-term liabilities |       | 20,502                                         |       | 13,967 |   | 12,888 |   |
| Current  liabilities                  |       | 20,738                                         |       | 25,097 |   | 19,055 |   |
| Net sales                             |       | 63,011                                         |       | 46,209 |   | 43,590 |   |
| Gross income                          |       | 33,198                                         |       | 17,392 |   | 8,418 |   |
| Net income                            |       | 9,694                                          |       | 6,034 |   | 4,711 |   |
|                                       |            |                                                |            |  |  |  |  |  |  |

 

**13.**   FinancialRevenues and Expenses

Thenet effect on income from financial revenues and expenses was as follows.

|                                       | ** ** | **January-December** | ** ** |
|---------------------------------------|------------|----------------------|------------|
| SEK in millions             | ** ** | ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Income from financial investments** | ** ** | ** **           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Dividends                             |       | 9                    |       | 1 |   | 3 |   |
| Capital  gains/losses                 |       | 141                  |       | -460 |   | 685 |   |
| Impairment losses                     |       | -23                  |       | -131 |   | -695 |   |
| **Total**                             | ** ** | **127**              | ** ** | **-590** | ** ** | **-7** | ** ** |
| **Other financial revenues**          | ** ** | ** **           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Interest on  finance leases           |       | 60                   |       | 153 |   | 611 |   |
| Other interest  revenues              |       | 613                  |       | 554 |   | 608 |   |
| Exchange rate  gains                  |       | 232                  |       | 453 |   | 544 |   |
| **Total**                             | ** ** | **905**              | ** ** | **1,160** | ** ** | **1,763** | ** ** |
| **Other financial expenses**          | ** ** | ** **           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Interest expenses                     |       | -1,357               |       | -1,572 |   | -2,065 |   |
| Capitalized  interest                 |       | 13                   |       | 20 |   | 43 |   |
| Exchange rate  losses                 |       | -218                 |       | -363 |   | -545 |   |
| **Total**                             | ** ** | **-1,562**           | ** ** | **-1,915** | ** ** | **-2,567** | ** ** |
| **Net effect on income**              | ** ** | **-530**             | ** ** | **-1,345** | ** ** | **-811** | ** ** |
|                                       |            |                      |            |  |  |  |  |  |  |

 

89

----

**Notes to Consolidated Financial Statements (Continued)**

**14.**   IncomeTaxes

**Income tax expense**

Pre-taxincome, distributed by taxation domicile, was as follows.

|                                        | ** ** | **January-December** | ** ** |
|----------------------------------------|------------|----------------------|------------|
| SEK in millions              | ** ** | ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Sweden, subsidiaries                   |       | 6,328                |       | 7,911 |   | 9,878 |   |
| Sweden,  associated companies          |       | 59                   |       | 599 |   | 103 |   |
| **Total  Sweden**                      | ** ** | **6,387**            | ** ** | **8,510** | ** ** | **9,981** | ** ** |
| Finland,  subsidiaries                 |       | 159                  |       | 2,437 |   | -14 |   |
| Finland,  associated companies         |       | 7                    |       | 1 |   | 22 |   |
| Other countries,  subsidiaries         |       | 7,257                |       | 4,411 |   | 3,939 |   |
| Other countries,  associated companies |       | 3,209                |       | 2,089 |   | -29 |   |
| **Total  outside Sweden**              | ** ** | **10,632**           | ** ** | **8,938** | ** ** | **3,918** | ** ** |
| **Total**                              | ** ** | **17,019**           | ** ** | **17,448** | ** ** | **13,899** | ** ** |
|                                        |            |                      |            |  |  |  |  |  |  |

 

Recordedtax expense was distributed as follows.

|                           | ** ** | **January-December** | ** ** |
|---------------------------|------------|----------------------|------------|
| SEK in millions | ** ** | ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Current tax**           | ** ** | ** **           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Sweden                    |       | 130                  |       | 67 |   | 1,994 |   |
| Finland                   |       | 0                    |       | -43 |   | 7 |   |
| Other countries           |       | 1,121                |       | 946 |   | 760 |   |
| **Total  current tax**    | ** ** | **1,251**            | ** ** | **970** | ** ** | **2,761** | ** ** |
| **Deferred tax**          | ** ** | ** **           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Sweden                    |       | 1,648                |       | 1,029 |   | 513 |   |
| Finland                   |       | -27                  |       | 1,631 |   | 16 |   |
| Other countries           |       | 453                  |       | -446 |   | 560 |   |
| **Total  deferred tax**   | ** ** | **2,074**            | ** ** | **2,214** | ** ** | **1,089** | ** ** |
| **Total**                 | ** ** | **3,325**            | ** ** | **3,184** | ** ** | **3,850** | ** ** |
|                           |            |                      |            |  |  |  |  |  |  |

 

Currenttax expense for each fiscal year attributable to the previous years’ earningsand tax booked directly to equity were as follows.

|                                            | ** ** | **January-December** | ** ** |
|--------------------------------------------|------------|----------------------|------------|
| **SEK in millions**              | ** ** | ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Current tax  attributable to previous year |       | -339                 |       | -180 |   | -305 |   |
| Tax booked directly to  equity             |       | 26                   |       | 15 |   | 7 |   |
|                                            |            |                      |            |  |  |  |  |  |  |

 

90

----

**Notes to Consolidated Financial Statements (Continued)**

**14.**   Income Taxes (Continued)

The difference between thenominal tax rate in Sweden and the effective tax rate comprises the followingcomponents.

| ** **                                                | ** ** | **January-December** | ** ** |
|-----------------------------------------------------------|------------|----------------------|------------|
| **Percent**                                               | ** ** | ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Swedish income  tax rate                                  |       | 28.0                 |       | 28.0 |   | 28.0 |   |
| Differences in  tax rates on foreign operations           |       | -4.0                 |       | -4.6 |   | 1.7 |   |
| Adjustment of  current taxes for previous periods         |       | -2.0                 |       | -1.0 |   | -2.5 |   |
| Adjustment of  deferred taxes for previous periods        |       | -0.7                 |       | -6.1 |   | -2.1 |   |
| Changes in tax  rates                                     |       | 1.3                  |       | 5.4 |   | — |   |
| Income from  associated companies                         |       | -5.4                 |       | -4.1 |   | -0.7 |   |
| Losses for which  deferred tax assets were not recognized |       | 0.3                  |       | 1.2 |   | 0.4 |   |
| Non-deductible  expenses                                  |       | 3.5                  |       | 2.7 |   | 8.2 |   |
| Non-taxable  revenues                                     |       | -1.5                 |       | -3.3 |   | -5.3 |   |
| **Tax  rate as per the income statement**                 | ** ** | **19.5**             | ** ** | **18.2** | ** ** | **27.7** | ** ** |
| Tax booked  directly to equity                            |       | 0.2                  |       | 0.1 |   | 0.1 |   |
| **Effective  tax rate**                                   | ** ** | **19.7**             | ** ** | **18.3** | ** ** | **27.8** | ** ** |
| **Tax  rate, current tax**                                | ** ** | **7.4**              | ** ** | **5.6** | ** ** | **19.9** | ** ** |
|                                                           |            |                      |            |  |  |  |  |  |  |

 

Differences in tax rateson foreign operations are partly due to time limited tax incentives forTeliaSonera subsidiaries in certain countries. The current tax incentive inKazakhstan expired at December 31, 2005. On June 30, 2004, theFinnish parliament passed new tax laws, including, among other things, areduction of the Finnish corporate income tax rate from 29 percent to 26percent effective January 1, 2005. This triggered a recalculation ofdeferred tax assets and liabilities in TeliaSonera’s Finnish operations,resulting in a deferred tax expense of SEK 949 million in 2004.

91

----

**Notes to Consolidated Financial Statements (Continued)**

**14.**   IncomeTaxes (Continued)

**Income tax assets and liabilities**

Deferredtax assets and liabilities changed as follows.

|                                  | ** ** | **December 31,** | ** ** |
|----------------------------------|------------|-----------------------|------------|
| **SEK in millions**    | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Deferred tax assets**          | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Book value,  opening balance     |       | 12,381                |       | 14,960 |   | 15,931 |   |
| Operations  acquired             |       | 77                    |       | 607 |   | — |   |
| Income statement  period change  |       | -647                  |       | -2,807 |   | -258 |   |
| Recorded in  equity              |       | -19                   |       | — |   | — |   |
| Operations  divested             |       | —                |       | -37 |   | — |   |
| Reclassifications                |       | —                |       | -295 |   | -482 |   |
| Exchange rate  differences       |       | 513                   |       | -47 |   | -231 |   |
| **Book  value, closing balance** | ** ** | **12,305**            | ** ** | **12,381** | ** ** | **14,960** | ** ** |
| **Deferred tax liabilities**     | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Book value,  opening balance     |       | 7,906                 |       | 8,537 |   | 10,673 |   |
| Operations  acquired             |       | 138                   |       | — |   | 184 |   |
| Income statement  period change  |       | 1,427                 |       | -593 |   | 831 |   |
| Recorded in  equity              |       | 7                     |       | 15 |   | 7 |   |
| Operations  divested             |       | -16                   |       | — |   | -53 |   |
| Reclassifications                |       | -48                   |       | -11 |   | -2,983 |   |
| Exchange rate  differences       |       | 164                   |       | -42 |   | -122 |   |
| **Book value, closing balance**  | ** ** | **9,578**             | ** ** | **7,906** | ** ** | **8,537** | ** ** |
|                                  |            |                       |            |  |  |  |  |  |  |

 

92

----

**Notes to Consolidated Financial Statements (Continued)**

**14.**   Income Taxes (Continued)

Deferred tax assets andliabilities were distributed as follows.

|                                                               | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------|------------|-----------------------|------------|
| **SEK in millions**                                 | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Gross deferred tax assets**                                 | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Shares and  participations                                    |       | 48                    |       | — |   | 131 |   |
| Other non-current  assets                                     |       | —                |       | — |   | 5,258 |   |
| Gross deferred tax assets                                     |       | 5,541                 |       | 5,686 |   | — |   |
| Off-set deferred tax liabilities/assets                       |       | -1,042                |       | -1,108 |   | — |   |
| Provisions and  other long-term liabilities                   |       | —                |       | — |   | 1,282 |   |
| Gross deferred tax assets                                     |       | 426                   |       | 684 |   | — |   |
| Off-set deferred tax liabilities/assets                       |       | -316                  |       | -485 |   | — |   |
| Current  receivables and liabilities                          |       | 71                    |       | 113 |   | 32 |   |
| Tax loss  carry-forwards                                      |       | —                |       | — |   | 10,561 |   |
| Gross deferred tax assets                                     |       | 13,925                |       | 9,759 |   | — |   |
| Off-set deferred tax liabilities/assets                       |       | -4,119                |       | — |   | — |   |
| **Subtotal**                                                  | ** ** | **14,534**            | ** ** | **14,649** | ** ** | **17,264** | ** ** |
| **Valuation  allowance**                                      |       |                  |       |   |   |   |   |
| Other non-current  assets                                     |       | -119                  |       | -303 |   | -1,183 |   |
| Provisions and  other long-term liabilities                   |       | —                |       | -24 |   | -402 |   |
| Current  receivables and liabilities                          |       | —                |       | -104 |   | — |   |
| Tax loss  carry-forwards                                      |       | -2,110                |       | -1,837 |   | -719 |   |
| **Subtotal**                                                  | ** ** | **-2,229**            | ** ** | **-2,268** | ** ** | **-2,304** | ** ** |
| **Total deferred tax assets**                                 | ** ** | **12,305**            | ** ** | **12,381** | ** ** | **14,960** | ** ** |
| **Deferred  tax liabilities**                                 | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Shares and  participations                                    | ** ** | —                | ** ** | — | ** ** | 447 | ** ** |
| Gross deferred tax liabilities                                | ** ** | 4,734                 | ** ** | 187 | ** ** | — | ** ** |
| Off-set deferred tax assets/liabilities                       | ** ** | -4,119                | ** ** | — | ** ** | — | ** ** |
| Other non-current  assets                                     | ** ** | —                | ** ** | — | ** ** | 6,299 | ** ** |
| Gross deferred tax liabilities                                | ** ** | 8,044                 | ** ** | 5,906 | ** ** | — | ** ** |
| Off-set deferred tax assets/liabilities                       | ** ** | -316                  | ** ** | -485 | ** ** | — | ** ** |
| Provisions                                                    | ** ** | —                | ** ** | — | ** ** | 749 | ** ** |
| Gross deferred tax liabilities                                | ** ** | 1,606                 | ** ** | 2,334 | ** ** | — | ** ** |
| Off-set deferred tax assets/liabilities                       | ** ** | -1,042                | ** ** | -1,108 | ** ** | — | ** ** |
| Current  receivables and liabilities                          | ** ** | 38                    | ** ** | 30 | ** ** | 2 | ** ** |
| Off-balance-sheet  items                                      | ** ** | 633                   | ** ** | 1,042 | ** ** | 1,040 | ** ** |
| **Total  deferred tax liabilities**                           | ** ** | **9,578**             | ** ** | **7,906** | ** ** | **8,537** | ** ** |
| **Net  deferred tax assets (+)/liabilities (****-)**          | ** ** | **2,727**             | ** ** | **4,475** | ** ** | **6,423** | ** ** |
| **Net  increase (+)/decrease (****-) in valuation allowance** | ** ** | **-39**               | ** ** | **-36** | ** ** | **589** | ** ** |
|                                                               |            |                       |            |  |  |  |  |  |  |

 

The provisional purchase price allocation for OrangeDenmark was finalized in the first quarter of 2005, which resulted in arestatement of certain preliminary figures recognized in 2004, increasing deferred

93

----

**Notes to Consolidated Financial Statements (Continued)**

**14.**   Income Taxes (Continued)

tax assets with respect toother non-current assets. For more information, see section “Acquisition ofOrange Denmark and Eesti Telekom” in note “Business Combinations.”

Deferred tax assets originating from tax losscarry-forwards mainly refers to impairment losses on 3G investments in foreignassociated companies and other minority holdings recognized by TeliaSoneraFinland Oyj (formerly Sonera Oyj) in 2002. In 2005, one of TeliaSonera Finland’sDutch subsidiaries retroactively utilized a possibility in the Dutch CorporateIncome Tax Act to benefit from a temporary deduction related to its equityinvestment in an associated 3G company in 2000 and subsequent impairment lossin 2002. The deduction led to a substantial tax loss. However, as the deductionis temporary it has to be evenly reversed during 2005-2009. As the Dutchtax rate has been gradually decreased during 2000-2006, the deferral ofthe taxable income has decreased tax expenses with approximately EUR 6 million,equivalent to SEK 56 million. The gross effect of the additional deferred taxasset in the tax loss has been off-set towards the deferred tax liabilityrelated to shares and participations.

In 2005 and 2003, deferred tax liabilities withrespect to other non-current assets mostly referred to untaxed reserves (seebelow), while amounts in 2004 chiefly referred to temporary differences betweentax base and carrying value on assets in the parent company. Unrecognizeddeferred tax liabilities for undistributed earnings in subsidiaries totaled SEK493 million in 2005, SEK 415 million in 2004 and SEK 436 million in 2003.

Accumulatedtax loss carry-forwards were distributed as follows.

|                               | ** ** | **December 31,** | ** ** |
|-------------------------------|------------|-----------------------|------------|
| **SEK in millions** | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Sweden                        |       | 633                   |       | 546 |   | 871 |   |
| Finland                       |       | 28,042                |       | 28,769 |   | 31,178 |   |
| Other countries               |       | 21,543                |       | 6,720 |   | 5,725 |   |
| **Total**                     | ** ** | **50,218**            | ** ** | **36,035** | ** ** | **37,774** | ** ** |
|                               |            |                       |            |  |  |  |  |  |  |

 

Swedishtax loss carry-forwards have no expiration date, while Finnish tax losscarry-forwards expire after 10 years. Total loss carry-forwards as of December 31,2005 expire in the following years.

| **Expiry**                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **    | ** ** | ** **    | ** ** |
|-------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|---------------|------------|---------------|------------|
| **SEK in millions** | ** ** | ** ** | ** ** | **2006**   | ** ** | **2007**   | ** ** | **2008**   | ** ** | **2009**   | ** ** | **2010**   | ** ** | **2011-2024** | ** ** | **Unlimited** | ** ** | **Total** | ** ** |
| Tax loss  carry-forwards      |       |       | 295        |       |       |       | 35         |       |       |       | 10         |       |       |          | 101        |          |       |   | 115 |   |   |   | 28,292 |   |   |   | 21,370 | ** ** |   | **50,218** | ** ** |
|                               |            |            |            |            |            |            |            |            |            |            |            |            |            |               |            |               |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

**Appropriationsand untaxed reserves**

Tax legislation in Sweden, Finland and certain othercountries allows companies to postpone tax payments by making allocations tountaxed reserves in the balance sheet via the Appropriations line item in theincome statement. Of particular interest to TeliaSonera, with its extensivecapital expenditure in infrastructure, are Swedish and Finnish tax regulationsthat make it possible to amortize or depreciate assets at an accelerated rate(see also note “Amortization, Depreciation and Impairment Losses”). However,appropriations and untaxed reserves are not recorded in the consolidatedfinancial statements.

In the consolidated accounts, a portion of untaxed reservesafter eliminations is recorded a deferred tax liability, while the remainingportion from 2005 is recorded as retained earnings and until 2004 was recordedas a restricted reserve in shareholders’ equity. If brought to income andtaxed, the last-mentioned would have been transferred to non-restrictedreserves (see note “Equity and Earnings per Share”).

94

----

**Notes to Consolidated Financial Statements (Continued)**

**14.**   Income Taxes (Continued)

Overall, the individualGroup companies recorded the following untaxed reserves.

|                                                   | ** ** | **December 31,** | ** ** |
|---------------------------------------------------|------------|-----------------------|------------|
| **SEK in millions**                     | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Profit  equalization reserve                      |       | 1,846                 |       | 3,239 |   | 3,114 |   |
| Accumulated  excess amortization and depreciation |       | 16,129                |       | 3,845 |   | 14,136 |   |
| Contingency  reserve                              |       | 43                    |       | 166 |   | 353 |   |
| **Total**                                         | ** ** | **18,018**            | ** ** | **7,250** | ** ** | **17,603** | ** ** |
|                                                   |            |                       |            |  |  |  |  |  |  |

 

In 2005, the parent company for tax purposes applieddepreciation as in the books. As a precondition, the difference at thebeginning of the year between carrying value and tax base has been added to thetaxable income with one third 2005 and the remaining two thirds will be evenlyadded in 2006 and 2007. A deferred tax liability has been recognized withrespect to the additional taxable income in 2006 and 2007. Accordingly, anuntaxed reserve, related to excess depreciation, has been recognized and thedeferred tax liability, concerning the difference between carrying value andtax base, recorded in 2004, was reversed.

Excessamortization and depreciation was as follows.

|                               | ** ** | **December 31,** | ** ** |
|-------------------------------|------------|-----------------------|------------|
| ** **                    | ** ** | **2005**              | ** ** | **2004** | ** ** | **2003** | ** ** |
| **SEK in millions** | ** ** | ** **            | ** ** | **Intangible  assets** | ** ** | **Property, plant  and equipment** | ** ** | **Intangible  assets** | ** ** | **Property, plant  and equipment** | ** ** | **Intangible  assets** | ** ** | **Property, plant  and equipment** | ** ** |
| Opening balance               |       |                  | 959        |   |   |   | 2,886 |   |   |   | 769 |   |   |   | 13,367 |   |   |   | 582 |   |   |   | 13,635 |   |   |
| Operations acquired/divested  |       |                  | —     |   |   |   | -1 |   |   |   | -7 |   |   |   | -76 |   |   |   | 183 |   |   |   | 592 |   |   |
| Provisions                    |       |                  | 1,366      |   |   |   | 12,446 |   |   |   | 199 |   |   |   | 1,170 |   |   |   | 12 |   |   |   | 597 |   |   |
| Reversals                     |       |                  | -29        |   |   |   | -1,498 |   |   |   | -2 |   |   |   | -11,575 |   |   |   | -8 |   |   |   | -1,457 |   |   |
| **Closing balance**           | ** ** | ** **            | **2,296**  |   | ** ** | ** ** | **13,833** |   | ** ** | ** ** | **959** |   | ** ** | ** ** | **2,886** |   | ** ** | ** ** | **769** |   | ** ** | ** ** | **13,367** |   |   |
|                               |            |                       |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

95

----

**Notes to Consolidated Financial Statements (Continued)**

**15.**   Goodwilland Other Intangible Assets

Thetotal book value of goodwill and other intangible assets changed as follows.

|                                                      | ** ** | **December 31,** | ** ** |
|------------------------------------------------------|------------|-----------------------|------------|
| ** **                                           | ** ** | **2005**              | ** ** | **2004** | ** ** | **2003** | ** ** |
| **SEK in millions**                        | ** ** | ** **            | ** ** | **Goodwill** | ** ** | **Other** | ** ** | **Goodwill** | ** ** | **Other** | ** ** | **Goodwill** | ** ** | **Other** | ** ** |
| Acquisition  value, opening balance                  |       |                  | 57,797     |   |   | 19,736 |   |   | 61,235 |   |   | 14,124 |   |   | 64,058 |   |   | 12,758 |   |
| Accumulated  amortization as of January 1, 2004 |       |                  | —     |   |   | — |   |   | -7,956 |   |   | — |   |   | — |   |   | — |   |
| Purchases                                            |       |                  | 2,186      |   |   | 1,525 |   |   | 4,170 |   |   | 4,562 |   |   | 1,903 |   |   | 1,292 |   |
| Operations  acquired                                 |       |                  | 2          |   |   | 270 |   |   | — |   |   | 769 |   |   | — |   |   | 57 |   |
| Sales/discards                                       |       |                  | -4         |   |   | -1,697 |   |   | -1 |   |   | -142 |   |   | — |   |   | -259 |   |
| Operations  divested                                 |       |                  | -25        |   |   | -4 |   |   | -47 |   |   | -61 |   |   | — |   |   | -65 |   |
| Reclassifications                                    |       |                  | -15        |   |   | 733 |   |   | 410 |   |   | 641 |   |   | -679 |   |   | 677 |   |
| Exchange rate  differences                           |       |                  | 2,890      |   |   | 829 |   |   | -14 |   |   | -157 |   |   | -4,047 |   |   | -336 |   |
| **Accumulated  acquisition value, closing balance**  | ** ** | ** **            | **62,831** |   | ** ** | **21,392** | ** ** | ** ** | **57,797** |   | ** ** | **19,736** | ** ** | ** ** | **61,235** |   | ** ** | **14,124** | ** ** |
| Amortization,  opening balance                       |       |                  | —     |   |   | -6,213 |   |   | -7,956 |   |   | -4,321 |   |   | -5,078 |   |   | -2,641 |   |
| Accumulated  amortization as of January 1, 2004 |       |                  | —     |   |   | — |   |   | 7,956 |   |   | — |   |   | — |   |   | — |   |
| Operations  acquired                                 |       |                  | —     |   |   | -160 |   |   | — |   |   | -214 |   |   | — |   |   | -27 |   |
| Sales/discards                                       |       |                  | —     |   |   | 707 |   |   | — |   |   | 98 |   |   | — |   |   | 128 |   |
| Operations  divested                                 |       |                  | —     |   |   | 4 |   |   | — |   |   | 75 |   |   | — |   |   | 60 |   |
| Reclassifications                                    |       |                  | —     |   |   | -748 |   |   | — |   |   | -84 |   |   | 220 |   |   | -245 |   |
| Amortization for  the year                           |       |                  | —     |   |   | -2,301 |   |   | — |   |   | -1,807 |   |   | -3,450 |   |   | -1,686 |   |
| Exchange rate  differences                           |       |                  | —     |   |   | -287 |   |   | — |   |   | 40 |   |   | 352 |   |   | 90 |   |
| **Accumulated  amortization, closing balance**       | ** ** | ** **            | **—** |   | ** ** | **-8,998** | ** ** | ** ** | **—** |   | ** ** | **-6,213** | ** ** | ** ** | **-7,956** |   | ** ** | **-4,321** | ** ** |
| Impairment  losses, opening balance                  |       |                  | -364       |   |   | -1,424 |   |   | -357 |   |   | -905 |   |   | -396 |   |   | -595 |   |
| Operations  acquired                                 |       |                  | 1          |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |
| Sales/discards                                       |       |                  | 40         |   |   | 883 |   |   | — |   |   | — |   |   | — |   |   | — |   |
| Reclassifications                                    |       |                  | —     |   |   | 17 |   |   | 7 |   |   | 96 |   |   | — |   |   | — |   |
| Losses/reversals  of losses for the year             |       |                  | -0         |   |   | 12 |   |   | -16 |   |   | -621 |   |   | -38 |   |   | -301 |   |
| Exchange rate  differences                           |       |                  | -10        |   |   | -19 |   |   | 2 |   |   | 6 |   |   | 77 |   |   | -9 |   |
| **Accumulated  impairment losses, closing balance**  | ** ** | ** **            | **-333**   |   | ** ** | **-531** | ** ** | ** ** | **-364** |   | ** ** | **-1,424** | ** ** | ** ** | **-357** |   | ** ** | **-905** | ** ** |
| **Advances**                                         | ** ** | ** **            | **—** |   | ** ** | **6** | ** ** | ** ** | **—** |   | ** ** | **2** | ** ** | ** ** | **—** |   | ** ** | **0** | ** ** |
| **Total book value, closing balance**                | ** ** | ** **            | **62,498** |   | ** ** | **11,869** | ** ** | ** ** | **57,433** |   | ** ** | **12,101** | ** ** | ** ** | **52,922** |   | ** ** | **8,898** | ** ** |
|                                                      |            |                       |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

The provisional purchase price allocations for OrangeDenmark and Eesti Telekom were finalized in the first quarter of 2005, whichresulted in a restatement of the preliminary figures recognized in 2004,decreasing Goodwill and Other intangible assets. For more information, seesection “Acquisition of Orange Denmark and Eesti Telekom” in note “BusinessCombinations.”

The acquisition value includes accumulated interest ofSEK 22 million for 2005, SEK 22 million for 2004 and SEK 22 million for 2003.

96

----

**Notes to Consolidated Financial Statements (Continued)**

**15.**   Goodwill and Other Intangible Assets (Continued)

Capitalized software for in-house administrative useamounted to SEK 72 million in 2005, SEK 80 million in 2004 and SEK 110 millionin 2003. In the three years, amortization was SEK 85 million, SEK 122 millionand SEK 140 million, respectively.

Thetotal book value of goodwill and other intangible assets was distributed asfollows.

|                                           | ** ** | **December 31,** | ** ** |
|-------------------------------------------|------------|-----------------------|------------|
| **SEK in millions**             | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Goodwill,  TeliaSonera Finland            |       | 29,185                |       | 28,063 |   | 28,217 |   |
| Goodwill, NetCom                          |       | 21,551                |       | 20,085 |   | 19,857 |   |
| Goodwill, Chess                           |       | 1,995                 |       | — |   | — |   |
| Goodwill, mobile  (former Orange) Denmark |       | 3,748                 |       | 3,605 |   | — |   |
| Goodwill, other                           |       | 6,019                 |       | 5,680 |   | 4,848 |   |
| Administrative  software systems          |       | 703                   |       | 670 |   | 680 |   |
| Trade names,  licenses, patents, etc.     |       | 5,349                 |       | 5,912 |   | 6,429 |   |
| Contractual  agreements                   |       | 4,026                 |       | 4,065 |   | 424 |   |
| Leases, etc.                              |       | 961                   |       | 835 |   | 908 |   |
| Work in progress,  advances               |       | 830                   |       | 619 |   | 457 |   |
| **Total**                                 | ** ** | **74,367**            | ** ** | **69,534** | ** ** | **61,820** | ** ** |
|                                           |            |                       |            |  |  |  |  |  |  |

 

See note “Business Combinations” for more informationon significant acquisitions in 2005 and 2004.

Giventhe current ownership structure and the same exchange rates as in 2005, andthat no events will occur that would trigger impairment charges, TeliaSoneraexpects the following amortization of other intangible assets during the nextfive-year period.

| **SEK in millions**                            | ** ** | ** ** | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** |
|----------------------------------------------------------|------------|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| Expected future  amortization of other intangible assets |       | 2,156      |       | 2,182    |       | 1,763    |       | 1,682    |       | 1,636    |       |

 

**16.**   Property,Plant and Equipment

**Buildings and land**

TeliaSonera’s real estate holdings include some 4,000properties, mainly in Sweden and Finland. The substantial majority is usedsolely for technical facilities, like network installations, computerinstallations, research centers and service outlets.

97

----

**Notes to Consolidated Financial Statements (Continued)**

**16.**   Property, Plant and Equipment (Continued)

The total book value ofbuildings and land changed as follows.

|                                                     | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------|------------|-----------------------|------------|
| **SEK in millions**                       | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Acquisition  value, opening balance                 |       | 7,514                 |       | 6,043 |   | 5,859 |   |
| Purchases                                           |       | 313                   |       | 294 |   | 157 |   |
| Operations  acquired                                |       | —                |       | 1,358 |   | 51 |   |
| Sales/discards                                      |       | -357                  |       | -140 |   | -102 |   |
| Operations  divested                                |       | —                |       | — |   | -1 |   |
| Reclassifications                                   |       | -125                  |       | 19 |   | 221 |   |
| Exchange rate  differences                          |       | 285                   |       | -60 |   | -142 |   |
| **Accumulated  acquisition value, closing balance** | ** ** | **7,630**             | ** ** | **7,514** | ** ** | **6,043** | ** ** |
| Depreciation,  opening balance                      |       | -2,839                |       | -2,024 |   | -1,756 |   |
| Operations  acquired                                |       | —                |       | -580 |   | -28 |   |
| Sales/discards                                      |       | 231                   |       | 82 |   | 44 |   |
| Reclassifications                                   |       | -20                   |       | -4 |   | 1 |   |
| Depreciation for  the year                          |       | -343                  |       | -328 |   | -308 |   |
| Exchange rate  differences                          |       | -87                   |       | 15 |   | 23 |   |
| **Accumulated  depreciation, closing balance**      | ** ** | **-3,058**            | ** ** | **-2,839** | ** ** | **-2,024** | ** ** |
| Impairment  losses, opening balance                 |       | -324                  |       | -354 |   | -298 |   |
| Sales/discards                                      |       | 1                     |       | 15 |   | 7 |   |
| Reclassifications                                   |       | -9                    |       | 13 |   | -32 |   |
| Losses for the  year                                |       | -12                   |       | — |   | -35 |   |
| Exchange rate  differences                          |       | -15                   |       | 2 |   | 4 |   |
| **Accumulated  impairment losses, closing balance** | ** ** | **-359**              | ** ** | **-324** | ** ** | **-354** | ** ** |
| **Advances**                                        | ** ** | **5**                 | ** ** | **36** | ** ** | **5** | ** ** |
| **Total book value, closing  balance**              | ** ** | **4,218**             | ** ** | **4,387** | ** ** | **3,670** | ** ** |
|                                                     |            |                       |            |  |  |  |  |  |  |

 

The provisional purchase price allocation for EestiTelekom was finalized in the first quarter of 2005, which resulted in arestatement of the preliminary figures recognized in 2004, decreasing theacquisition value. For more information, see section “Acquisition of OrangeDenmark and Eesti Telekom” in note “Business Combinations.”

No interest is included in the acquisition value forthe years 2005, 2004 and 2003.

TheGroup’s Swedish real estate holdings have been assessed for tax purposes at thefollowing values.

| ** **                    | ** ** | **December 31,** | ** ** |
|-------------------------------|------------|-----------------------|------------|
| **SEK in millions** | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Buildings                     |       |                  | 178        |   |   |   | 178 |   |   |   | 199 |   |   |
| Land and land  improvements   |       |                  | 57         |   |   |   | 57 |   |   |   | 58 |   |   |
| **Tax-assessed value**        | ** ** | ** **            | **235**    |   | ** ** | ** ** | **235** |   | ** ** | ** ** | **257** |   |   |
|                               |            |                       |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

At the 2005 propertyassessment for tax purposes, a number of properties were assessed for the firsttime, while others had their assessments adjusted. The number of real estateproperties valued for tax purposes is limited as many of them are classified asnon-taxable communication buildings. Tax-assessed properties were sold in 2005.

98

----

**Notes to Consolidated Financial Statements (Continued)**

**16.**   Property, Plant and Equipment (Continued)

**Plant and machinery**

Thetotal book value of plant and machinery changed as follows.

|                                                     | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------|------------|-----------------------|------------|
| **SEK in millions**                       | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Acquisition  value, opening balance                 |       | 145,995               |       | 135,184 |   | 138,065 |   |
| Purchases                                           |       | 9,366                 |       | 9,137 |   | 7,545 |   |
| Operations  acquired                                |       | 5                     |       | 5,211 |   | 664 |   |
| Dismantling/restoration                             |       | 194                   |       | 25 |   | 106 |   |
| Sales/discards                                      |       | -2,043                |       | -3,327 |   | -2,305 |   |
| Operations  divested                                |       | -12                   |       | -537 |   | -4,113 |   |
| Reclassifications                                   |       | -350                  |       | 777 |   | -2,300 |   |
| Exchange rate  differences                          |       | 3,956                 |       | -475 |   | -2,478 |   |
| **Accumulated  acquisition value, closing balance** | ** ** | **157,111**           | ** ** | **145,995** | ** ** | **135,184** | ** ** |
| Depreciation,  opening balance                      |       | -91,424               |       | -81,495 |   | -77,975 |   |
| Operations  acquired                                |       | —                |       | -4,002 |   | -584 |   |
| Sales/discards                                      |       | 1,782                 |       | 3,067 |   | 1,894 |   |
| Operations  divested                                |       | 8                     |       | 482 |   | 3,039 |   |
| Reclassifications                                   |       | 20                    |       | -798 |   | 1,291 |   |
| Depreciation for  the year                          |       | -8,962                |       | -8,909 |   | -10,120 |   |
| Exchange rate  differences                          |       | -1,859                |       | 231 |   | 960 |   |
| **Accumulated  depreciation, closing balance**      | ** ** | **-100,435**          | ** ** | **-91,424** | ** ** | **-81,495** | ** ** |
| Impairment  losses, opening balance                 |       | -13,325               |       | -10,447 |   | -10,929 |   |
| Operations  acquired                                |       | —                |       | -15 |   | — |   |
| Sales/discards                                      |       | 102                   |       | 172 |   | 156 |   |
| Reclassifications                                   |       | -70                   |       | -120 |   | 382 |   |
| Losses for the  year                                |       | -599                  |       | -2,948 |   | -289 |   |
| Exchange rate  differences                          |       | -445                  |       | 33 |   | 233 |   |
| **Accumulated  impairment losses, closing balance** | ** ** | **-14,337**           | ** ** | **-13,325** | ** ** | **-10,447** | ** ** |
| **Advances**                                        | ** ** | **67**                | ** ** | **40** | ** ** | **45** | ** ** |
| **Total book value, closing  balance**              | ** ** | **42,406**            | ** ** | **41,286** | ** ** | **43,287** | ** ** |
|                                                     |            |                       |            |  |  |  |  |  |  |

 

The acquisition value includes accumulated interest ofSEK 607 million, SEK 594 million and SEK 617 million for the years 2005,2004 and 2003, respectively.

The provisional purchase price allocation for EestiTelekom was finalized in the first quarter of 2005, which resulted in arestatement of the preliminary figures recognized in 2004, decreasing theacquisition value. For more information, see section “Acquisition of OrangeDenmark and Eesti Telekom” in note “Business Combinations.” In 2004, the carryingvalue of the international carrier operations was written down.

99

----

**Notes to Consolidated Financial Statements (Continued)**

**16.**   Property,Plant and Equipment (Continued)

**Equipment, tools and installations**

Thetotal book value of equipment, tools and installations changed as follows.

|                                                     | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------|------------|-----------------------|------------|
| SEK in millions                           | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Acquisition  value, opening balance                 |       | 6,515                 |       | 6,730 |   | 10,092 |   |
| Purchases                                           |       | 653                   |       | 639 |   | 744 |   |
| Operations  acquired                                |       | 43                    |       | 1,276 |   | 722 |   |
| Sales/discards                                      |       | -1,417                |       | -573 |   | -661 |   |
| Operations  divested                                |       | -5                    |       | -317 |   | -664 |   |
| Reclassifications                                   |       | 412                   |       | -1,227 |   | -3,245 |   |
| Exchange rate  differences                          |       | 238                   |       | -13 |   | -258 |   |
| **Accumulated  acquisition value, closing balance** | ** ** | **6,439**             | ** ** | **6,515** | ** ** | **6,730** | ** ** |
| Depreciation,  opening balance                      |       | -4,676                |       | -4,249 |   | -6,349 |   |
| Operations  acquired                                |       | -25                   |       | -1,011 |   | -783 |   |
| Sales/discards                                      |       | 1,155                 |       | 538 |   | 611 |   |
| Operations  divested                                |       | —                |       | 188 |   | 319 |   |
| Reclassifications                                   |       | -18                   |       | 830 |   | 3,235 |   |
| Depreciation for  the year                          |       | -977                  |       | -978 |   | -1,444 |   |
| Exchange rate  differences                          |       | -166                  |       | 6 |   | 162 |   |
| **Accumulated  depreciation, closing balance**      | ** ** | **-4,707**            | ** ** | **-4,676** | ** ** | **-4,249** | ** ** |
| Impairment  losses, opening balance                 |       | -300                  |       | -277 |   | -464 |   |
| Operations  acquired                                |       | —                |       | -22 |   | 213 |   |
| Sales/discards                                      |       | 149                   |       | 7 |   | — |   |
| Operations  divested                                |       | —                |       | 1 |   | — |   |
| Reclassifications                                   |       | -2                    |       | — |   | -15 |   |
| Losses for the  year                                |       | -6                    |       | -10 |   | -8 |   |
| Exchange rate  differences                          |       | -0                    |       | 1 |   | -3 |   |
| **Accumulated  impairment losses, closing balance** | ** ** | **-159**              | ** ** | **-300** | ** ** | **-277** | ** ** |
| **Advances**                                        | ** ** | **4**                 | ** ** | **—** | ** ** | **—** | ** ** |
| **Total book value, closing  balance**              | ** ** | **1,577**             | ** ** | **1,539** | ** ** | **2,204** | ** ** |
|                                                     |            |                       |            |  |  |  |  |  |  |

 

No interest is included inthe acquisition value for the years 2005, 2004 or 2003.

100

----

**Notes to Consolidated Financial Statements (Continued)**

**16.**   Property, Plant and Equipment(Continued)

**Distribution byclass of asset**

Thetotal book value of property, plant and equipment was distributed as follows.

|                                                                  | ** ** | **December 31,** | ** ** |
|------------------------------------------------------------------|------------|-----------------------|------------|
| SEK in millions                                        | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Buildings and land**                                           | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Capitalized  improvements to leased premises                     |       | 125                   |       | 108 |   | 123 |   |
| Buildings                                                        |       | 3,733                 |       | 3,881 |   | 3,152 |   |
| Land and land  improvements                                      |       | 360                   |       | 398 |   | 395 |   |
| **Total  buildings and land**                                    | ** ** | **4,218**             | ** ** | **4,387** | ** ** | **3,670** | ** ** |
| **Plant and machinery**                                          | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Mobile networks                                                  |       | 15,308                |       | 12,989 |   | 12,181 |   |
| Fixed networks—switching  systems and peripheral equipment  |       | 4,331                 |       | 6,114 |   | 7,692 |   |
| Fixed networks—transmission  systems                        |       | 7,284                 |       | 10,048 |   | 11,074 |   |
| Fixed networks—transmission  media and other types of media |       | 12,299                |       | 8,869 |   | 9,361 |   |
| Cable TV networks                                                |       | 421                   |       | 416 |   | 550 |   |
| Alarm systems                                                    |       | —                |       | 9 |   | 16 |   |
| Assets under construction,  advances                             |       | 2,763                 |       | 2,841 |   | 2,413 |   |
| **Total  plant and machinery**                                   | ** ** | **42,406**            | ** ** | **41,286** | ** ** | **43,287** | ** ** |
| **Equipment, tools and installations**                           | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Finance leases,  vehicles                                        |       | 187                   |       | 271 |   | 271 |   |
| Other equipment,  tools and installations                        |       | 1,390                 |       | 1,268 |   | 1,933 |   |
| **Total  equipment, tools and installations**                    | ** ** | **1,577**             | ** ** | **1,539** | ** ** | **2,204** | ** ** |
| **Total property, plant and  equipment**                         | ** ** | **48,201**            | ** ** | **47,212** | ** ** | **49,161** | ** ** |
|                                                                  |            |                       |            |  |  |  |  |  |  |

 

Assets under construction under Plant and machineryare chiefly installations for mobile and fixed networks. Assets owned by Groupcompanies and leased to other Group companies are included in Plant and machineryand Other equipment, tools and installations as appropriate.

See note “BusinessCombinations” for more information on significant acquisitions in 2005 and2004.

101

----

**Notes to Consolidated Financial Statements (Continued)**

**17.**   OtherFinancial Assets

Thetotal book value of other financial assets was distributed as follows.

|                                                             | ** ** | December 31, | ** ** |
|-------------------------------------------------------------|------------|-------------------|------------|
| SEK in millions                                   | ** ** | ** **        | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Associated companies**                                    | ** ** | ** **        | ** ** | ** ** | ** ** | ** ** | ** ** |
| Interest-bearing  receivables from associated companies     |       | 265               |       | 232 |   | 809 |   |
| Non-interest-bearing  receivables from associated companies |       | 2                 |       | 0 |   | 2 |   |
| **Total  associated companies**                             | ** ** | **267**           | ** ** | **232** | ** ** | **811** | ** ** |
| **Other holdings of securities**                            | ** ** | ** **        | ** ** | ** ** | ** ** | ** ** | ** ** |
| Shares and  participations                                  |       | 209               |       | 326 |   | 357 |   |
| Other securities                                            |       | 213               |       | 205 |   | 201 |   |
| **Total  other holdings of securities**                     | ** ** | **422**           | ** ** | **531** | ** ** | **558** | ** ** |
| **Other long-term receivables**                             | ** ** | ** **        | ** ** | ** ** | ** ** | ** ** | ** ** |
| *Interest-bearing*                                          | * *   | * *          | * *   | * * | * * | * * | * * |
| Receivables for  pension obligations                        |       | 437               |       | 573 |   | — |   |
| Finance lease  agreements                                   |       | 337               |       | 333 |   | 3,298 |   |
| Service-financing  agreements                               |       | 242               |       | 254 |   | 503 |   |
| Loans to  employees                                         |       | 6                 |       | 7 |   | 14 |   |
| Interest rate  swaps                                        |       | 68                |       | 104 |   | — |   |
| Cross currency  interest rate swaps                         |       | 229               |       | 113 |   | 306 |   |
| Other                                                       |       | 166               |       | 301 |   | 624 |   |
| *Non-interest-bearing*                                      | * *   | * *          | * *   | * * | * * | * * | * * |
| Deferral of paid  pension-related social charges and taxes  |       | 384               |       | 621 |   | — |   |
| Operating lease  agreements                                 |       | 142               |       | 44 |   | 344 |   |
| Other                                                       |       | 313               |       | 246 |   | 242 |   |
| **Total  other long-term receivables**                      | ** ** | **2,324**         | ** ** | **2,596** | ** ** | **5,331** | ** ** |
| **Total**                                                   | ** ** | **3,013**         | ** ** | **3,359** | ** ** | **6,700** | ** ** |
|                                                             |            |                   |            |  |  |  |  |  |  |

 

Leasing agreements arediscussed in note “Leasing Agreements” and receivables for pension obligationsin note “Provisions for Pensions and Employment Contracts.” Shares and participationsin other holdings of securities are specified in note “Specification ofShareholdings and Participations.”

**18.**   Inventories

Afterdeductions for obsolescence amounting to SEK 2 million, SEK 15 million and SEK7 million for the years 2005, 2004 and 2003, respectively, the total book valuewas distributed as follows.

|                                           | ** ** | **December 31,** | ** ** |
|-------------------------------------------|------------|-----------------------|------------|
| SEK in millions                 | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Raw materials and  essential inputs       |       |                  | 95         |   |   |   | 109 |   |   |   | 244 |   |   |
| Products at work                          |       |                  | 24         |   |   |   | 20 |   |   |   | 7 |   |   |
| Finished goods  and goods for resale      |       |                  | 570        |   |   |   | 473 |   |   |   | 206 |   |   |
| Expense incurred,  construction contracts |       |                  | 70         |   |   |   | 51 |   |   |   | 24 |   |   |
| Advances to  suppliers                    |       |                  | 6          |   |   |   | 2 |   |   |   | 20 |   |   |
| **Total**                                 | ** ** | ** **            | **765**    |   | ** ** | ** ** | **655** |   | ** ** | ** ** | **501** |   |   |
|                                           |            |                       |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

102

----

**Notes to Consolidated Financial Statements (Continued)**

**18.**   Inventories(Continued)

Finished goods includepurchased supplies that are mainly intended for use in constructing TeliaSonera’sown installations and for repair and maintenance. Inventories carried at netrealizable value totaled SEK 16 million in 2005. Supplies valued at SEK 180million, SEK 173 million and SEK 6 million for the years 2005, 2004 and 2003,respectively, were stored at a central location. The remainder was held atlocal warehouses and worksites.

**19.**   Tradeand Other Receivables

Thetotal book value of trade and other receivables was distributed as follows.

|                                                   | ** ** | **December 31,** | ** ** |
|---------------------------------------------------|------------|-----------------------|------------|
| SEK in millions                         | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Accounts receivable**                           | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Invoiced receivables                              |       | 12,570                |       | 13,186 |   | 12,914 |   |
| Allowance for  doubtful receivables               |       | -692                  |       | -704 |   | -904 |   |
| **Total  accounts receivable**                    | ** ** | **11,878**            | ** ** | **12,482** | ** ** | **12,010** | ** ** |
| **Other current receivables**                     | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Receivables from  associated companies            |       | 121                   |       | 423 |   | 628 |   |
| Value-added tax                                   |       | 607                   |       | 364 |   | 296 |   |
| Currency swaps,  forward exchange contracts       |       | 14                    |       | 54 |   | 84 |   |
| Receivables from  others                          |       | 1,236                 |       | 1,447 |   | 1,521 |   |
| **Total  other current receivables**              | ** ** | **1,978**             | ** ** | **2,288** | ** ** | **2,529** | ** ** |
| **Accrued revenues and deferred expenses**        | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Call charges                                      |       | 2,091                 |       | 2,383 |   | 2,549 |   |
| Interconnect and  roaming, other traffic charges  |       | 1,481                 |       | 1,177 |   | 1,192 |   |
| Prepaid rent and  leasing fees                    |       | 295                   |       | 290 |   | 397 |   |
| Other accrued or  deferred items                  |       | 1,196                 |       | 1,387 |   | 1,479 |   |
| **Total  accrued revenues and deferred expenses** | ** ** | **5,063**             | ** ** | **5,237** | ** ** | **5,617** | ** ** |
| **Total trade and other  receivables**            | ** ** | **18,919**            | ** ** | **20,007** | ** ** | **20,156** | ** ** |
|                                                   |            |                       |            |  |  |  |  |  |  |

 

Written-down accountsreceivable (bad debt expense) and recovered accounts receivable for the years2005, 2004 and 2003 are recorded in note “Operating Costs” and note “OtherOperating Revenues and Expenses.” For information on leases, see note “LeasingAgreements.”

103

----

**Notes to Consolidated Financial Statements (Continued)**

**20.**   Interest-bearingReceivables, Cash and Cash Equivalents

**Interest-bearing receivables**

Thetotal book value of interest-bearing receivables was distributed as follows.

|                                                               | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------|------------|-----------------------|------------|
| SEK in millions                                     | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Current interest-bearing  receivables**                     | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Receivables from  associated companies                        |       | 37                    |       | 5 |   | 226 |   |
| Finance lease  agreements                                     |       | 244                   |       | 269 |   | 3,157 |   |
| Cross currency  interest rate swaps                           |       | 139                   |       | 209 |   | 47 |   |
| Receivables from  others                                      |       | 459                   |       | 390 |   | 340 |   |
| **Total  current interest-bearing receivables**               | ** ** | **879**               | ** ** | **873** | ** ** | **3,770** | ** ** |
| **Short-term  investments with maturities over three months** | ** ** | **1,528**             | ** ** | **368** | ** ** | **278** | ** ** |
| **Total interest-bearing  receivables**                       | ** ** | **2,407**             | ** ** | **1,241** | ** ** | **4,048** | ** ** |
|                                                               |            |                       |            |  |  |  |  |  |  |

 

For information on leases,see note “Leasing Agreements.”

**Cash and cash equivalents**

Cashand cash equivalents was distributed as follows.

|                                                                          | ** ** | **December 31,** | ** ** |
|--------------------------------------------------------------------------|------------|-----------------------|------------|
| SEK in millions                                                | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Short-term  investments with maturities up to and including three months |       | 11,846                |       | 11,702 |   | 8,380 |   |
| Cash and bank                                                            |       | 4,988                 |       | 5,543 |   | 3,689 |   |
| **Cash and cash equivalents**                                            | ** ** | **16,834**            | ** ** | **17,245** | ** ** | **12,069** | ** ** |
|                                                                          |            |                       |            |  |  |  |  |  |  |

 

See also notes “FinancialInstruments and Financial Risk Management” and “Contingencies, OtherContractual Obligations and Litigation.”

**21.**   Equityand Earnings per Share

**Share capital**

According to the by-laws of TeliaSonera AB theauthorized share capital shall amount to no less than SEK 8,000,000,000 and nomore than SEK 32,000,000,000. All issued shares have been paid in full andcarry equal rights to vote and participate in the assets of the company.

104

----

**Notes to Consolidated Financial Statements (Continued)**

**21.**   Equity and Earnings perShare (Continued)

During the last six years,the issued share capital changed as follows.

|                                                      | ** ** | **Number of   issued shares** | ** ** | **Par value  (SEK/share)** | ** ** | **Issued share  capital (SEK)** | ** ** |
|------------------------------------------------------|------------|----------------------------------------------|------------|---------------------------------|------------|-------------------------------------------|------------|
| Issued share  capital, December 31, 1999        |       | 8,800,000                                    |       |                            | 1,000.00   |                                      |       | 8,800,000,000 |   |
| Bonus issue, May 20, 2000                       |       | —                                       |       |                            | 1,036.80   |                                      |       | 323,840,000 |   |
| Split 324:1, May 20, 2000                       |       | 2,842,400,000                                |       |                            | 3.20       |                                      |       | — |   |
| New share issue at a premium, June 16, 2000     |       | 150,000,000                                  |       |                            | 3.20       |                                      |       | 480,000,000 |   |
| Issued share  capital, December 31, 2000        |       | 3,001,200,000                                |       |                            | 3.20       |                                      |       | 9,603,840,000 |   |
| Issued share capital,  December 31, 2001        |       | 3,001,200,000                                |       |                            | 3.20       |                                      |       | 9,603,840,000 |   |
| New share issue at a premium, December 3, 2002  |       | 1,604,556,725                                |       |                            | 3.20       |                                      |       | 5,134,581,520 |   |
| Issued share  capital, December 31, 2002        |       | 4,605,756,725                                |       |                            | 3.20       |                                      |       | 14,738,421,520 |   |
| New share issue at a premium, February 10, 2003 |       | 69,475,344                                   |       |                            | 3.20       |                                      |       | 222,321,101 |   |
| Issued share  capital, December 31, 2003        |       | 4,675,232,069                                |       |                            | 3.20       |                                      |       | 14,960,742,621 |   |
| Issued share  capital, December 31, 2004        |       | 4,675,232,069                                |       |                            | 3.20       |                                      |       | 14,960,742,621 |   |
| Issued share capital,  December 31, 2005        |       | 4,675,232,069                                |       |                            | 3.20       |                                      |       | 14,960,742,621 |   |

 

**Treasury shares**

On April 26, 2005, the Annual General Meeting ofshareholders decided on a share repurchase program with tradable rights,comprising every twenty-fifth share, or a maximum of 187,009,282 shares. Afterexecuting the program, TeliaSonera AB as of December 31, 2005 held184,774,856 treasury shares. The price paid for each repurchased share was SEK55.00 in cash and pre-tax transaction costs amounted to SEK 55 million,reducing other contributed capital within shareholders’ equity by SEK 10,203million in total.

No TeliaSonera shares areheld by the company’s subsidiaries.

**Reclassification within equity**

As of January 1, 2006, a new Swedish CompaniesAct was effective, among other things nullifying the requirement to divideequity into restricted and non-restricted funds. This change is applicable onfinancial statements decided upon by the AGM in 2006. Consequently, TeliaSonerahas rearranged its presentation of equity components as required by applicableIFRSs (see section “Shareholders’ equity” in note “Significant Accounting Principles”).The reclassification is primarily based on; a survey of shareholder relatedtransactions since the parent company’s inception in 1966, classifying relevantentries as Other contributed capital; a pooling of accumulated restricted andnon-restricted exchange rate differences into one translation reserve; thedissolution of the former equity method reserve transferring the funds to theinflation adjustment reserve and retained earnings, respectively; and thereversal of previous years’ transfers between restricted and non-restrictedequity with respect to inter alia untaxed reserves and non-restricted equity insubsidiaries.

According to the Swedish Companies Act in force until December 31,2005, shareholders’ equity should be divided into funds available fordistribution (non-restricted) and not available for distribution (restricted).In a group, the shareholders could receive as distribution only the lower ofthe non-restricted funds in the parent company or in the group.

105

----

**Notes to Consolidated Financial Statements (Continued)**

**21.**   Equity and Earnings per Share (Continued)

Restricted shareholders’ equity was made up of theshare capital, the share premium reserve, the statutory reserve and otherrestricted reserves. In the consolidated accounts, the group’s non-restrictedequity included only that part of a subsidiary’s non-restricted equity thatcould be assigned to the parent company without having to write down the valueof the shares in the subsidiary. Under the Companies Act, the General Meetingof shareholders might decide to reduce the share premium reserve and thestatutory reserve provided these funds were used in a specified manner. Inaccordance with these regulations, the TeliaSonera AGMs in 2002 and 2005 decidedto transfer substantial amounts from the share premium reserve tonon-restricted equity.

Earnings in associated companies that had not beendistributed were recorded in the Group’s equity as an equity method reserve inrestricted reserves. Likewise, the revaluation reserve, arising from revaluingthe fair values of net assets in a previous associate accounted for under theequity method to the fair values of net assets at the date that entity became aconsolidated subsidiary, constituted a restricted reserve. Further, the equitycomponent of untaxed reserves was recognized in restricted equity. Until 2003,the equity effect of recording financial instruments at fair value wasattributed to a fair value reserve in restricted reserves. Following a changein the Swedish Annual Accounts Act, effective January 1, 2004, the fairvalue reserve was transferred to non-restricted equity.

106

----

**Notes to Consolidated Financial Statements (Continued)**

**21.**   Equityand Earnings per Share (Continued)

**Reserves**

|                                                           | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------|------------|-----------------------|------------|
| SEK in millions                                 | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Revaluation reserve**                                   | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Book value,  opening balance                              |       | 1,098                 |       | — |   | — |   |
| Operations  acquired                                      |       | —                |       | 1,641 |   | — |   |
| Transfer of  amortization and depreciation for the year   |       | -132                  |       | — |   | — |   |
| **Book  value, closing balance**                          | ** ** | **966**               | ** ** | **1,641** | ** ** | **—** | ** ** |
| Restatement of  Eesti Telekom purchase price allocation   |       | —                |       | -543 |   | — |   |
| **Restated  book value, closing balance**                 | ** ** | **966**               | ** ** | **1,098** | ** ** | **—** | ** ** |
| **Fair  value reserve—Securities**                   | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Book value,  opening balance                              |       | 129                   |       | -11 |   | -11 |   |
| Provisions                                                |       | 60                    |       | 129 |   | — |   |
| Reversals                                                 |       | —                |       | 11 |   | — |   |
| Tax effect                                                |       | -26                   |       | — |   | — |   |
| **Book  value, closing balance**                          | ** ** | **163**               | ** ** | **129** | ** ** | **-11** | ** ** |
| **Fair  value reserve—Derivatives**                  | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Book value, opening  balance                              |       | -61                   |       | -67 |   | -57 |   |
| Provisions                                                |       | -85                   |       | 76 |   | -57 |   |
| Reversals                                                 |       | 101                   |       | -55 |   | 43 |   |
| Tax effect                                                |       | -4                    |       | -15 |   | 4 |   |
| **Book  value, closing balance**                          | ** ** | **-49**               | ** ** | **-61** | ** ** | **-67** | ** ** |
| **Translation  reserve**                                  | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Book value,  opening balance                              |       | -2,830                |       | -597 |   | 7,504 |   |
| Translation of  foreign operations                        |       | 8,470                 |       | -2,243 |   | -7,783 |   |
| Foreign  operations divested                              |       | 339                   |       | -10 |   | -318 |   |
| **Book  value, closing balance**                          | ** ** | **5,979**             | ** ** | **-2,850** | ** ** | **-597** | ** ** |
| Restatement of  Eesti Telekom purchase price allocation   |       | —                |       | 20 |   | — |   |
| **Restated  book value, closing balance**                 | ** ** | **5,979**             | ** ** | **-2,830** | ** ** | **-597** | ** ** |
| **Inflation  adjustment reserve**                         | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Book value,  opening balance                              |       | 3,879                 |       | 2,427 |   | — |   |
| Translation of  operations in hyperinflationary economies |       | 1,177                 |       | 1,452 |   | 2,427 |   |
| **Book  value, closing balance**                          | ** ** | **5,056**             | ** ** | **3,879** | ** ** | **2,427** | ** ** |
| **Total reserves book value,  closing balance**           | ** ** | **12,115**            | ** ** | **2,215** | ** ** | **1,752** | ** ** |
|                                                           |            |                       |            |  |  |  |  |  |  |

 

The provisional purchase price allocation for EestiTelekom was finalized in the first quarter of 2005, which resulted in arestatement of the preliminary figures recognized in 2004, adjusting therevaluation and translation reserves. For more information, see section “Acquisitionof Orange Denmark and Eesti Telekom” in note “Business Combinations.”

No part of the reversedamounts within the fair value reserves referred to reversals that necessitateadjusting the acquisition value. See also section “Financial Instruments” innote “Significant Accounting Policies.” There was neither any tax effectarising from the translation of foreign associated companies or 

107

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**Notes to Consolidated Financial Statements (Continued)**

**21.**   Equity and Earnings per Share (Continued)

any tax effect arising from the translation ofassociated companies in hyperinflationary economies. As of January 1,2006, the Turkish economy is from an accounting perspective no longerconsidered to be hyperinflationary, affecting TeliaSonera in the second quarterof 2006, as Turkcell’s financials are reported with a one-quarter lag.

**Minority interests in equity**

Exchangerate differences in minority interests changed as follows.

|                                    | ** ** | **December 31,** | ** ** |
|------------------------------------|------------|-----------------------|------------|
| SEK in millions          | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Book value,  opening balance       |       | -550                  |       | -386 |   | -72 |   |
| Translation of  foreign operations |       | 732                   |       | -164 |   | -314 |   |
| **Book value, closing balance**    | ** ** | **182**               | ** ** | **-550** | ** ** | **-386** | ** ** |
|                                    |            |                       |            |  |  |  |  |  |  |

 

Thebook value was distributed as follows (including intermediate holdingcompanies, when applicable).

|                                         | ** ** | **December 31,** | ** ** |
|-----------------------------------------|------------|-----------------------|------------|
| SEK in millions               | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| UAB Omnitel,  Lithuania                 |       | —                |       | — |   | 156 |   |
| AB Lietuvos  Telekomas, Lithuania       |       | 1,206                 |       | 1,183 |   | 1,204 |   |
| Latvijas Mobilais  Telefons SIA, Latvia |       | 707                   |       | 669 |   | 574 |   |
| AS Eesti Telekom,  Estonia              |       | 2,950                 |       | 3,549 |   | — |   |
| Fintur Holdings  B.V., the Netherlands  |       | 3,777                 |       | 2,051 |   | 1,425 |   |
| Other  subsidiaries                     |       | 5                     |       | 5 |   | 82 |   |
| **Total book value**                    | ** ** | **8,645**             | ** ** | **7,457** | ** ** | **3,441** | ** ** |
|                                         |            |                       |            |  |  |  |  |  |  |

 

108

----

**Notes to Consolidated Financial Statements (Continued)**

**21.**   Equity and Earnings per Share (Continued)

**Earnings per share and dividends**

|                                                                              | ** ** | **January-December** | ** ** |
|------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                   | ** ** | **2005**             | ** ** | **2004** | ** ** | **2003** | ** ** |
| Net income  attributable to shareholders of the parent company (SEK million) |       | 11,697               |       | 12,964 |   | 9,080 |   |
| Average number of  outstanding shares (thousands)                            |       |                 |       |   |   |   |   |
| —Basic                                                                  |       | 4,573,986            |       | 4,675,232 |   | 4,667,618 |   |
| —Diluted                                                                |       | 4,573,986            |       | 4,675,232 |   | 4,668,426 |   |
| Average number of  treasury shares (thousands)                               |       |                 |       |   |   |   |   |
| —Basic                                                                  |       | 101,246              |       | — |   | — |   |
| —Diluted                                                                |       | 101,246              |       | — |   | — |   |
| Earnings per share (SEK)                                                     |       |                 |       |   |   |   |   |
| —Basic                                                                  |       | 2.56                 |       | 2.77 |   | 1.95 |   |
| —Diluted                                                                |       | 2.56                 |       | 2.77 |   | 1.95 |   |
| Ordinary cash dividend  (for 2005 as proposed by the Board)                  |       |                 |       |   |   |   |   |
| —Per share (SEK)                                                        |       | 1.25                 |       | 1.20 |   | 1.00 |   |
| —Total (SEK  million)                                                   |       | 5,613                |       | 5,610 |   | 4,675 |   |
| Extra cash dividend for  2005 as proposed by the Board                       |       |                 |       |   |   |   |   |
| —Per share (SEK)                                                        |       | 2.25                 |       | — |   | — |   |
| —Total (SEK million)                                                    |       | 10,104               |       | — |   | — |   |

 

In2002 and 2001, General Meetings of shareholders decided to implement a numberof employee stock option schemes (see section “Stock-Based Compensation” innote “Human Resources”). Due to non-fulfillment of certain subscriptioncriteria, most of the option programs were cancelled in 2004 and 2003 and thesubscription periods for the two remaining programs expired on May 31 and June 30,2005, respectively. No option holder subscribed for shares under theseprograms. Under the terms and conditions that applied to the employee stockoption schemes, the option programs had no dilution effect upon computation ofearnings per share for 2004 and a very limited dilution effect for 2003.

**22.**   FinancialInstruments and Financial Risk Management

**Bookvalue and fair value of interest-bearing financial instruments**

The table below presents book values and fair valuesdistributed by type of interest-bearing financial instrument based on theprerequisites stated below. Non-interest-bearing financial instruments, likeaccounts receivable and accounts payable, are recorded at fair value and arenot shown in the table.

The estimated fair value is based on market rates andgenerally accepted valuation methods. Values recorded are indicative and willnot necessarily be realized.

The market value for publicly quoted associatedcompanies is reduced by loans made by Group companies to the company inquestion. For leasing receivables, any credit losses arising are reduced bygains from the sale of equipment returned.

Market interest rates apply to other interest bearinglong-term and current accounts receivable, including claims on associatedcompanies and personnel. Thus, the book value of these items is regarded ascorresponding to the fair value.

109

----

**Notes to Consolidated Financial Statements (Continued)**

**22.**   Financial Instruments and Financial Risk Management(Continued)

The values for interestrate swaps and cross currency interest rate swaps include underlying principaland accrued interest. Swaps received and paid refer to the respective legs of aswap deal (see notes “Other Financial Assets” and “Interest-bearingReceivables, Cash and Cash Equivalents,” and section “Borrowings, maturity structure,interest rates and currencies” below).

|                                                 | ** ** | **December 31,** | ** ** |
|-------------------------------------------------|------------|-----------------------|------------|
| ** **                                      | ** ** | **2005**              | ** ** | **2004** | ** ** | **2003** | ** ** |
| SEK in millions                       | ** ** | ** **            | ** ** | **Book value** | ** ** | **Fair value** | ** ** | **Book value** | ** ** | **Fair value** | ** ** | **Book value** | ** ** | **Fair value** | ** ** |
| Equity  participations in associated companies  |       |                  | 25,208     |   |   |   | 40,695 |   |   |   | 19,613 |   |   |   | 32,024 |   |   |   | 20,401 |   |   |   | 23,315 |   |   |
| Other holdings of  securities                   |       |                  | 422        |   |   |   | 422 |   |   |   | 531 |   |   |   | 531 |   |   |   | 558 |   |   |   | 558 |   |   |
| Receivables for  pension obligations       |       |                  | 437        |   |   |   | 437 |   |   |   | 573 |   |   |   | 573 |   |   |   | — |   |   |   | — |   |   |
| Leasing receivables                             |       |                  | 581        |   |   |   | 581 |   |   |   | 602 |   |   |   | 602 |   |   |   | 6,455 |   |   |   | 6,367 |   |   |
| Other long-term  and short-term receivables     |       |                  | 2,300      |   |   |   | 2,300 |   |   |   | 1,457 |   |   |   | 1,457 |   |   |   | 2,647 |   |   |   | 2,647 |   |   |
| Cash and cash  equivalents                      |       |                  | 16,834     |   |   |   | 16,834 |   |   |   | 17,245 |   |   |   | 17,245 |   |   |   | 12,069 |   |   |   | 12,069 |   |   |
| Interest rate  swaps received                   |       |                  | 16,640     |   |   |   | 16,640 |   |   |   | 5,757 |   |   |   | 5,757 |   |   |   | 2,178 |   |   |   | 2,178 |   |   |
| Interest rate  swaps paid                       |       |                  | -16,106    |   |   |   | -16,106 |   |   |   | -5,543 |   |   |   | -5,543 |   |   |   | -2,084 |   |   |   | -2,084 |   |   |
| Cross currency  interest rate swaps received    |       |                  | 12,687     |   |   |   | 12,687 |   |   |   | 4,781 |   |   |   | 4,781 |   |   |   | 5,989 |   |   |   | 5,989 |   |   |
| Cross currency  interest rate swaps paid        |       |                  | -12,382    |   |   |   | -12,382 |   |   |   | -4,469 |   |   |   | -4,469 |   |   |   | -5,583 |   |   |   | -5,583 |   |   |
| Other currency  derivatives                     |       |                  | 14         |   |   |   | 14 |   |   |   | 54 |   |   |   | 54 |   |   |   | 84 |   |   |   | 84 |   |   |
| **Assets**                                      | ** ** | ** **            | **46,635** |   | ** ** | ** ** | **62,122** |   | ** ** | ** ** | **40,601** |   | ** ** | ** ** | **53,012** |   | ** ** | ** ** | **42,714** |   | ** ** | ** ** | **45,540** |   |   |
| Provisions for pensions                         |       |                  | —     |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 522 |   |   |   | 522 |   |   |
| Long-term loans                                 |       |                  | 20,913     |   |   |   | 21,147 |   |   |   | 12,975 |   |   |   | 13,241 |   |   |   | 25,940 |   |   |   | 27,023 |   |   |
| Short-term loans                                |       |                  | 6,221      |   |   |   | 6,265 |   |   |   | 11,736 |   |   |   | 12,215 |   |   |   | 4,686 |   |   |   | 4,710 |   |   |
| Interest rate  swaps received                   |       |                  | -1,159     |   |   |   | -1,159 |   |   |   | -1,313 |   |   |   | -1,313 |   |   |   | -1,314 |   |   |   | -1,314 |   |   |
| Interest rate  swaps paid                       |       |                  | 1,283      |   |   |   | 1,283 |   |   |   | 1,471 |   |   |   | 1,471 |   |   |   | 1,442 |   |   |   | 1,442 |   |   |
| Cross currency  interest rate swaps received    |       |                  | -3,510     |   |   |   | -3,510 |   |   |   | -2,340 |   |   |   | -2,340 |   |   |   | -1,795 |   |   |   | -1,795 |   |   |
| Cross currency  interest rate swaps paid        |       |                  | 3,562      |   |   |   | 3,562 |   |   |   | 2,471 |   |   |   | 2,471 |   |   |   | 1,927 |   |   |   | 1,927 |   |   |
| Other currency  derivatives                     |       |                  | 23         |   |   |   | 23 |   |   |   | 12 |   |   |   | 12 |   |   |   | 85 |   |   |   | 85 |   |   |
| **Liabilities**                                 | ** ** | ** **            | **27,333** |   | ** ** | ** ** | **27,611** |   | ** ** | ** ** | **25,012** |   | ** ** | ** ** | **25,757** |   | ** ** | ** ** | **31,493** |   | ** ** | ** ** | **32,600** |   |   |
| Less book value of:                             |       |                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| —pension  provisions                       |       |                  | —     |   |   |   |   |   |   |   | — |   |   |   |   |   |   |   | -522 |   |   |   |   |   |   |
| —accrued interest                          |       |                  | -575       |   |   |   |   |   |   |   | -325 |   |   |   |   |   |   |   | -332 |   |   |   |   |   |   |
| —other currency  derivatives               |       |                  | -23        |   |   |   |   |   |   |   | -12 |   |   |   |   |   |   |   | -85 |   |   |   |   |   |   |
| **Book value of interest-bearing  liabilities** | ** ** | ** **            | **26,735** |   | ** ** | ** ** | ** ** |   | ** ** | ** ** | **24,675** |   | ** ** | ** ** | ** ** |   | ** ** | ** ** | **30,554** |   | ** ** | ** ** | ** ** |   |   |
|                                                 |            |                       |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

110

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**Notes to Consolidated Financial Statements (Continued)**

**22.**   Financial Instruments and Financial Risk Management (Continued)

The market capitalizationsof the Group’s holdings of publicly quoted shares were as follows.

|                                                             | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------|------------|-----------------------|------------|
| SEK in millions                                   | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Subsidiaries**                                            | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| AB Lietuvos  Telekomas, Lithuania                           |       | 3,602                 |       | 2,748 |   | 2,018 |   |
| AS Eesti Telekom,  Estonia                                  |       | 4,921                 |       | 4,483 |   | — |   |
| **Total  subsidiaries**                                     | ** ** | **8,523**             | ** ** | **7,231** | ** ** | **2,018** | ** ** |
| **Associated companies and other  minority holdings**       | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| AS Eesti Telekom,  Estonia                                  |       | —                |       | — |   | 4,038 |   |
| Turkcell Iletisim  Hizmetleri A.S., Turkey                  |       | 33,634                |       | 25,415 |   | 13,261 |   |
| Infonet Services  Corp., USA                                |       | —                |       | 1,264 |   | 1,154 |   |
| Elisa Oyj (in  2004 and 2003 Saunalahti Group Oyj), Finland |       | 221                   |       | 125 |   | 80 |   |
| Digital  Telecommunications Phils. Inc., Philippines        |       | 84                    |       | 123 |   | 55 |   |
| Other holdings                                              |       | 11                    |       | 1 |   | 31 |   |
| **Total  associated companies and other minority holdings** | ** ** | **33,950**            | ** ** | **26,928** | ** ** | **18,619** | ** ** |
| **Total**                                                   | ** ** | **42,473**            | ** ** | **34,159** | ** ** | **20,637** | ** ** |
|                                                             |            |                       |            |  |  |  |  |  |  |

 

**Principlesof financing and financial risk management**

TeliaSonera’s financing and financial risks aremanaged under the control and supervision of the Board of Directors ofTeliaSonera AB. Financial management is centralized within the CorporateFinance and Treasury unit of TeliaSonera AB, which functions as TeliaSonera’sinternal bank and is responsible for the management of financing and financialrisks.

TeliaSonera Corporate Finance and Treasury (CFT) isresponsible for Group-wide financial risk management including netting andpooling of capital requirements and payment flows. CFT also seeks to optimizethe cost of financial risk management, which in certain cases may mean thate.g. an inter company transaction is not replicated with an identicaltransaction outside the Group or that derivative transactions are initiated inorder to adjust e.g. the overall interest rate duration of the debt portfolio,if deemed appropriate. This means that situations may arise in which certainderivative transactions with parties outside the Group do not fully satisfy therequirements for hedge accounting. CFT’s deviation mandates are clearlydefined, however, and the impact on earnings of deals made within thosemandates is therefore not deemed to be substantial. CFT’s deviation mandate inthe currency markets is currently capped at the equivalent of a nominal SEK +/-200million. As of December 31, 2005, the risk mandate was utilized by lessthan SEK 50 million.

SEK is the functional currency of TeliaSonera AB. Itsborrowings are therefore normally denominated in, or swapped into, SEK unlessdirectly linked to international operations. TeliaSonera Finland Oyj’sborrowings are denominated in EUR.

If the available loan formdoes not directly reflect the desired loan portfolio structure in terms ofinterest or currency, various forms of derivative instruments are used to adaptthe structure in terms of duration and currency. This adaptation is achievedchiefly through interest rate swaps and cross currency interest rate swaps.Cross currency interest rate swaps are normally used to hedge financial flowssuch as loans and investments longer than one year, while shorter terms arehedged using currency swaps or forward exchange contracts.

111

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**Notes to Consolidated Financial Statements (Continued)**

**22.**   Financial Instruments and Financial Risk Management (Continued)

**Liquidity and bankcredit facilities**

TeliaSonera’s policy is tohave a strong liquidity position in terms of available cash and/or unutilizedcommitted credit facilities. As of December 31, 2005, the surplusliquidity (short-term investments and cash and bank) amounted to the equivalentof SEK 18,362 million. Surplus liquidity is typically deposited in banks orinvested in short-term interest-bearing instruments with good credit ratings.At year-end, TeliaSonera AB had no such investments in interest-bearingsecurities with maturities exceeding three months. In addition to availablecash, Te­liaSonera AB has a revolving credit facility, which is a committedsyndicated bank credit facility with final maturity in December 2011,capped at EUR 1,000 million and used for short-term financing and back-up purposes.This facility was not utilized as of December 31, 2005. In total, as ofthe balance sheet date, the available unutilized amount under committed bankcredit lines was approximately SEK 10.3 billion.

**Open-market financing programs**

As of December 31, 2005, the equivalent of EUR2,041 million (EUR 914 million in 2004) had been utilized of Te­liaSonera AB’sEuro Medium Term Note (EMTN) program, an uncommitted international programaimed at long-term borrowing with a limit of EUR 5,000 million (5,000). Theaverage term to maturity was approximately 7.1 years.

TeliaSonera AB’s Euro Commercial Paper (ECP) programis an uncommitted international program aimed at short-term borrowing and has alimit of EUR 1,000 million (1,000). As of December 31, 2005, the ECPprogram was not utilized (no utilization as of December 31, 2004).

In the Swedish market, TeliaSonera AB’s Flexible TermNote (FTN) program provides loan facilities, both short-term and long-term, onan uncommitted basis, of up to SEK 12,000 million (12,000). FTNs outstanding atDecember 31, 2005, totaled SEK 4,050 million (4,800), with an averageremaining maturity of approximately 0.5 years.

In addition, TeliaSonera AB has a Finnish CommercialPaper (CP) program for non-domestic issuers, aimed at short-term borrowing,with a limit of EUR 300 million (300). As of December 31, 2005, the CPprogram was not utilized (no utilization as of December 31, 2004).

TeliaSonera Finland Oyj has an old EMTN program with alimit of EUR 3,000 million (3,000). As of December 31, 2005, theequivalent of EUR 203 million (1,082) was utilized under the EMTN program, withan average remaining maturity of approximately 3.3 year. This program will notbe used for any new financing or refinancing.

The intention is thatTeliaSonera AB will make future refinancing of the outstanding TeliaSoneraFinland debt.

112

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**Notes to Consolidated Financial Statements (Continued)**

**22.**   Financial Instruments and Financial Risk Management (Continued)

**Borrowings,maturity structure, interest rates and currencies**

As of December 31,2005, the Group’s interest-bearing borrowings had the following book values andmaturity structure.

| **SEK in millions** | ** ** | **TeliaSonera AB  (incl. debt derivatives)** | ** ** | **TeliaSonera Finland** | ** ** | ** **             | ** ** | ** **          | ** ** | ** **             | ** ** |
|-------------------------------|------------|-------------------------------------------------------------|------------|------------------------------|------------|------------------------|------------|---------------------|------------|------------------------|------------|
| **Maturity**                  | ** ** | ** **                                                  | ** ** | **Fixed rate**          | ** ** | **Floating rate** | ** ** | **Fixed rate** | ** ** | **Floating rate** | ** ** | **Total** | ** ** | **Other units** | ** ** | **Group** | ** ** |
| 2006                          |       |                                                        | 1,408      |                         |       |                   | 4,500      |                |       |                   | 3          |   |   |   | — |   |   | 5,911 |   |   | 304 |   |   | 6,215 |   |
| 2007                          |       |                                                        | 826        |                         |       |                   | —     |                |       |                   | —     |   |   |   | — |   |   | 826 |   |   | 142 |   |   | 968 |   |
| 2008                          |       |                                                        | —     |                         |       |                   | 777        |                |       |                   | —     |   |   |   | — |   |   | 777 |   |   | 44 |   |   | 821 |   |
| 2009                          |       |                                                        | —     |                         |       |                   | —     |                |       |                   | 1,993      |   |   |   | — |   |   | 1,993 |   |   | 7 |   |   | 2,000 |   |
| 2010                          |       |                                                        | 1,405      |                         |       |                   | —     |                |       |                   | —     |   |   |   | — |   |   | 1,405 |   |   | 4 |   |   | 1,409 |   |
| Later years                   |       |                                                        | 816        |                         |       |                   | 14,457     |                |       |                   | —     |   |   |   | — |   |   | 15,273 |   |   | 49 |   |   | 15,322 |   |
| **Total**                     | ** ** | ** **                                                  | **4,455**  |                         | ** ** | ** **             | **19,734** |                | ** ** | ** **             | **1,996**  |   | ** ** | ** ** | **—** |   | ** ** | **26,185** | ** ** | ** ** | **550** |   | ** ** | **26,735** | ** ** |
|                               |            |                                                             |            |                              |            |                        |            |                     |            |                        |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

Debt derivatives relate to interest rate swaps andcross currency interest rate swaps.

In2005, maturing debt was refinanced with new longer-dated public bond issuance,thereby prolonging the debt maturity profile. Long-term borrowings weredistributed as follows.

|                                                         | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------|------------|-----------------------|------------|
| SEK in millions                               | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Loans from  associated companies                        |       | 3                     |       | — |   | — |   |
| Finance leases,  vehicles                               |       | 116                   |       | 165 |   | 201 |   |
| TeliaSonera FTN/FTO                                     |       | 800                   |       | 4,167 |   | 4,903 |   |
| TeliaSonera EMTN,  other foreign currency loans         |       | 16,617                |       | 5,476 |   | 7,272 |   |
| TeliaSonera  Finland EMTN, other foreign currency loans |       | 1,993                 |       | 1,941 |   | 11,997 |   |
| Other loans                                             |       | 904                   |       | 968 |   | 1,227 |   |
| Interest rate  swaps                                    |       | 28                    |       | 47 |   | 108 |   |
| Cross currency  interest rate swaps                     |       | 59                    |       | 178 |   | 159 |   |
| **Total**                                               | ** ** | **20,520**            | ** ** | **12,942** | ** ** | **25,867** | ** ** |
|                                                         |            |                       |            |  |  |  |  |  |  |

 

For the years 2005, 2004 and 2003, SEK 15,322 million,SEK 1,733 million and SEK 4,995 million, respectively, of the loans were duemore than five years after the balance sheet date.

113

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**Notes to Consolidated Financial Statements (Continued)**

**22.**   FinancialInstruments and Financial Risk Management (Continued)

Short-termborrowings were distributed as follows.

|                                                         | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------|------------|-----------------------|------------|
| **SEK in millions**                           | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Loans from  associated companies                        |       | —                |       | — |   | 17 |   |
| Finance leases,  vehicles                               |       | 92                    |       | 83 |   | 73 |   |
| TeliaSonera FTN                                         |       | 3,275                 |       | 752 |   | 300 |   |
| TeliaSonera EMTN,  other foreign currency loans         |       | 2,650                 |       | 2,706 |   | 523 |   |
| TeliaSonera  Finland EMTN, other foreign currency loans |       | 3                     |       | 7,930 |   | 2,726 |   |
| Other loans                                             |       | 188                   |       | 248 |   | 953 |   |
| Interest rate  swaps                                    |       | 0                     |       | 4 |   | 25 |   |
| Cross currency  interest rate swaps                     |       | 7                     |       | 10 |   | 70 |   |
| **Total**                                               | ** ** | **6,215**             | ** ** | **11,733** | ** ** | **4,687** | ** ** |
|                                                         |            |                       |            |  |  |  |  |  |  |

 

Bank overdraft facilities had a total limit of SEK 892million, SEK 879 million and SEK 984 million for the years 2005, 2004 and 2003,respectively.

Theaverage cost, including relevant hedges, of outstanding long-term andshort-term borrowings as per the balance sheet date was as follows.

|                                   | ** ** | **December 31,** | ** ** |
|-----------------------------------|------------|-----------------------|------------|
| **Percent**                       | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| **TeliaSonera AB (SEK)**          | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Long-term  borrowings             |       | 3.35                  |       | 4.54 |   | 5.32 |   |
| Short-term  borrowings            |       | 4.36                  |       | 5.22 |   | 5.52 |   |
| **TeliaSonera Finland Oyj (EUR)** | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Long-term  borrowings             |       | 4.63                  |       | 4.63 |   | 5.39 |   |
| Short-term borrowings             |       | 2.07                  |       | 5.63 |   | 3.03 |   |
|                                   |            |                       |            |  |  |  |  |  |  |

 

Normally, borrowings by TeliaSonera AB denominated inforeign currencies are swapped into SEK. The exceptions are funds borrowed tofinance the Group’s ventures abroad. TeliaSonera AB’s portfolio of interestrate swaps and cross currency interest rate swaps as of December 31, 2005,2004 and 2003 had a nominal value of approximately SEK 17,700 million, SEK13,500 million and SEK 10,700 million, respectively.

114

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**Notes to Consolidated Financial Statements (Continued)**

**22.**   Financial Instruments and Financial Risk Management(Continued)

As of the balance sheetdate, the TeliaSonera Group’s long-term loan portfolio was composed of thefollowing currencies, with Swedish krona equivalents based on swap contracts.

|                      | ** ** | **December 31,**                          | ** ** |       |
|----------------------|------------|------------------------------------------------|------------|------------|
| ** **           | ** ** | **2005**                                       | ** ** | **2004**   | ** ** | **2003** | ** ** |
| ** **           | ** ** | **For the respective currency** | ** ** |       |
| ** **           | ** ** | **Interest**                                   | ** ** | **Amount** | ** ** | **Interest** | ** ** | **Amount** | ** ** | **Interest** | ** ** | **Amount** | ** ** |
| **Currency**         | ** ** | ** **                                     | ** ** | **(%)**    | ** ** | **(in millions)** | ** ** | **(%)** | ** ** | **(in millions)** | ** ** | **(%)** | ** ** | **(in millions)** | ** ** |
| **Swapped into SEK** | ** ** |                                           | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   |
| EUR                  |       |                                           | 2.7        | ** ** |   |   | 1,265 | ** ** |   |   | 5.2 | ** ** |   |   | 430 | ** ** |   |   | 5.9 | ** ** |   |   | 772 | ** ** |   |   |
| JPY                  |       |                                           | 2.6        | ** ** |   |   | 3,000 | ** ** |   |   | 3.0 | ** ** |   |   | 3,000 | ** ** |   |   | 3.8 | ** ** |   |   | 3,000 | ** ** |   |   |
| **Total  SEK**       | ** ** |                                           | **2.7**    | ** ** |   |   | **13,386** | ** ** |   |   | **5.2** | ** ** |   |   | **4,245** | ** ** |   |   | **5.9** | ** ** |   |   | **6,903** | ** ** |   |   |
| **Swapped into EUR** | ** ** |                                           | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   |
| USD                  |       |                                           | —     | ** ** |   |   | — | ** ** |   |   | 3.9 | ** ** |   |   | 3 | ** ** |   |   | 3.6 | ** ** |   |   | 5 | ** ** |   |   |
| **Total  SEK**       | ** ** |                                           | **—** | ** ** |   |   | **—** | ** ** |   |   | **3.9** | ** ** |   |   | **17** | ** ** |   |   | **3.6** | ** ** |   |   | **36** | ** ** |   |   |
| **Non-swapped**      | ** ** |                                           | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   |
| SEK                  |       |                                           | 4.2        | ** ** |   |   | 5,025 | ** ** |   |   | 4.2 | ** ** |   |   | 6,562 | ** ** |   |   | 4.8 | ** ** |   |   | 6,475 | ** ** |   |   |
| EUR                  |       |                                           | 4.6        | ** ** |   |   | 219 | ** ** |   |   | 4.4 | ** ** |   |   | 226 | ** ** |   |   | 4.3 | ** ** |   |   | 1,296 | ** ** |   |   |
| DKK                  |       |                                           | 3.1        | ** ** |   |   | 43 | ** ** |   |   | 2.3 | ** ** |   |   | 52 | ** ** |   |   | 4.5 | ** ** |   |   | 61 | ** ** |   |   |
| EEK                  |       |                                           | 2.9        | ** ** |   |   | 5 | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   |
| NOK                  |       |                                           | 3.2        | ** ** |   |   | 4 | ** ** |   |   | — | ** ** |   |   | — | ** ** |   |   | 5.0 | ** ** |   |   | 32 | ** ** |   |   |
| LVL                  |       |                                           | 3.1        | ** ** |   |   | 1 | ** ** |   |   | 4.1 | ** ** |   |   | 4 | ** ** |   |   | 5.0 | ** ** |   |   | 1 | ** ** |   |   |
| **Total  SEK**       | ** ** |                                           | ** ** | ** ** |   |   | **7,134** | ** ** |   |   | ** ** | ** ** |   |   | **8,680** | ** ** |   |   | ** ** | ** ** |   |   | **18,928** | ** ** |   |   |
| **Total SEK**        | ** ** |                                           | ** ** | ** ** |   |   | **20,520** | ** ** |   |   | ** ** | ** ** |   |   | **12,942** | ** ** |   |   | ** ** | ** ** |   |   | **25,867** | ** ** |   |   |
|                      |            |                                                |            |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

**Financial risk management**

***Foreign exchange risk***

Foreign exchange risk isthe risk that fluctuations in exchange rates will adversely affect items in theGroup’s income statement, balance sheet and/or cash flows. Foreign exchangerisk can be divided into transaction exposure and conversion exposure. Transactionexposure is the risk that arises from net inflow or outflow of a foreigncurrency required by operations (exports and imports) and financing (interestand amortization). Conversion exposure is the risk that arises from equity in aforeign subsidiary or associated company that is denominated in a foreigncurrency and any goodwill arising from acquisitions.

115

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**Notes to Consolidated Financial Statements (Continued)**

**22.**   Financial Instruments and Financial Risk Management (Continued)

*Transactionexposure*

Netforeign exchange outflow (expressed as equivalent value in SEK million) on afull-year basis was distributed as follows in the Group’s Nordic operations.

|                       | ** ** | **January-December**                | ** ** |
|-----------------------|------------|-------------------------------------|------------|
| ** **            | ** ** | **Sweden**                          | ** ** | **Finland** | ** ** | **Norway** | ** ** | **Denmark** | ** ** |
| **Currency**          | ** ** | ** **                          | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| ** **            | ** ** | **Equivalent value in SEK million** | ** ** |
| EUR                   |       | 1,051                               |       | 1,008 |   | 523 |   |   | — |   |   |   | — |   |   | — |   | 838 |   |   | 734 |   |   |   | 295 |   |   |   | 363 |   |   |   | 111 |   |   |   | 30 |   |   |
| USD                   |       | 452                                 |       | 546 |   | 556 |   |   | 445 |   |   |   | 11 |   |   | 135 |   | 158 |   |   | 103 |   |   |   | 127 |   |   |   | 47 |   |   |   | 15 |   |   |   | 7 |   |   |
| GBP                   |       | 34                                  |       | 55 |   | 70 |   |   | 18 |   |   |   | 8 |   |   | -24 |   | 9 |   |   | 11 |   |   |   | 8 |   |   |   | 9 |   |   |   | 38 |   |   |   | 26 |   |   |
| NOK                   |       | 14                                  |       | 65 |   | 23 |   |   | 7 |   |   |   | 41 |   |   | 10 |   | — |   |   | — |   |   |   | — |   |   |   | 6 |   |   |   | 2 |   |   |   | 0 |   |   |
| SEK                   |       | —                              |       | — |   | — |   |   | 87 |   |   |   | 19 |   |   | -55 |   | 12 |   |   | -19 |   |   |   | 4 |   |   |   | 215 |   |   |   | 60 |   |   |   | -3 |   |   |
| DKK                   |       | -8                                  |       | -25 |   | 41 |   |   | 4 |   |   |   | 0 |   |   | 24 |   | 8 |   |   | 17 |   |   |   | 24 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |
| Other currencies      |       | 24                                  |       | 71 |   | 18 |   |   | 16 |   |   |   | 1 |   |   | 11 |   | 10 |   |   | 6 |   |   |   | 8 |   |   |   | 4 |   |   |   | 4 |   |   |   | 1 |   |   |
| **Total net outflow** | ** ** | **1,567**                           | ** ** | **1,720** | ** ** | **1,231** | ** ** | ** ** | **577** |   | ** ** | ** ** | **80** |   | ** ** | **101** | ** ** | **1,035** | ** ** | ** ** | **852** |   | ** ** | ** ** | **466** |   | ** ** | ** ** | **644** |   | ** ** | ** ** | **230** |   | ** ** | ** ** | **61** |   |   |
| —gross outflow   |       | 2,896                               |       | 2,863 |   | 2,876 |   |   | 580 |   |   |   | 105 |   |   | 566 |   | 1,048 |   |   | 883 |   |   |   | 467 |   |   |   | 662 |   |   |   | 302 |   |   |   | 88 |   |   |
| —gross inflow    |       | -1,329                              |       | -1,143 |   | -1,645 |   |   | -3 |   |   |   | -25 |   |   | -465 |   | -13 |   |   | -31 |   |   |   | -1 |   |   |   | -18 |   |   |   | -72 |   |   |   | -28 |   |   |
|                       |            |                                     |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

The operational need to net purchase foreign currencyis primarily due to settlement deficits in international telecom traffic andthe import of equipment and supplies.

Emanating from the operations in the above-mentionedcountries, the negative impact on pre-tax income would be approximately SEK 13million on a full-year basis, should the Swedish krona weaken by one percentagepoint against all of the transaction currencies, assuming an operationaltransaction exposure equivalent to that in 2005, and provided that no hedgingmeasures were taken and not including any potential impact on income due tocurrency translation of other income statement items. Applying the sameassumptions, the positive impact on income would be approximately SEK 17million on a full-year basis, should the euro weaken by one percentage pointagainst all of the transaction currencies.

TeliaSonera’s operational transaction exposure is notsignificant at present, but it is expected to increase over time. In order tolimit earnings fluctuation, TeliaSonera’s general policy is normally to hedgethe majority of known operational transaction exposure up to 12 months into thefuture. This hedging is primarily initiated via forward exchange contracts andrefers to invoiced transactions. Financial flows, however, are usually hedgeduntil maturity, even if that is longer than 12 months.

Cross currency interestrate swaps are normally used to hedge financial flows such as loans andinvestments longer than one year, while shorter terms are hedged using currencyswaps or forward exchange contracts. Currency options are also used from timeto time.

*Conversion exposure*

TeliaSonera’s conversion exposure is expected tocontinue to grow due to ongoing expansion of the international businessoperations. TeliaSonera does not typically hedge its conversion exposure,unless the exposure would be short-term and relate to a large amount of a freelyconvertible foreign currency of a country with smoothly functioning financialmarkets.

116

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**Notes to Consolidated Financial Statements (Continued)**

**22.**   Financial Instruments and Financial Risk Management(Continued)

The conversion exposure isdistributed as follows.

|                  | ** ** | **December 31,** | ** **  |
|------------------|------------|-----------------------|-------------|
| ** **       | ** ** | **2005**              | ** **  | **2004** | ** ** | **2003** | ** ** |
| **Currency**     | ** ** | ** **            | ** **  | **Amount in  SEK million** | ** ** | **Percent** | ** ** | **Amount in  SEK million** | ** ** | **Percent** | ** ** | **Amount in  SEK million** | ** ** | **Percent** | ** ** |
| EUR              |       |                  | 60,628      |   |   |   | 42.4 |   |   |   | 54,165 |   |   |   | 43.9 |   |   |   | 60,320 |   |   |   | 51.8 |   |   |
| NOK              |       |                  | 29,188      |   |   |   | 20.4 |   |   |   | 27,352 |   |   |   | 22.2 |   |   |   | 26,156 |   |   |   | 22.5 |   |   |
| TRY              |       |                  | 20,389      |   |   |   | 14.2 |   |   |   | 12,972 |   |   |   | 10.5 |   |   |   | 10,428 |   |   |   | 9.0 |   |   |
| LTL              |       |                  | 7,113       |   |   |   | 5.0 |   |   |   | 6,413 |   |   |   | 5.2 |   |   |   | 6,009 |   |   |   | 5.2 |   |   |
| DKK              |       |                  | 6,742       |   |   |   | 4.7 |   |   |   | 6,367 |   |   |   | 5.2 |   |   |   | 1,021 |   |   |   | 0.9 |   |   |
| USD              |       |                  | 6,364       |   |   |   | 4.4 |   |   |   | 5,180 |   |   |   | 4.2 |   |   |   | 5,592 |   |   |   | 4.8 |   |   |
| EEK              |       |                  | 5,147       |   |   |   | 3.6 |   |   |   | 4,577 |   |   |   | 3.7 |   |   |   | 1,069 |   |   |   | 0.9 |   |   |
| LVL              |       |                  | 3,718       |   |   |   | 2.6 |   |   |   | 3,764 |   |   |   | 3.1 |   |   |   | 3,081 |   |   |   | 2.6 |   |   |
| KZT              |       |                  | 1,523       |   |   |   | 1.1 |   |   |   | 915 |   |   |   | 0.7 |   |   |   | 756 |   |   |   | 0.7 |   |   |
| GBP              |       |                  | 989         |   |   |   | 0.7 |   |   |   | 835 |   |   |   | 0.7 |   |   |   | 587 |   |   |   | 0.5 |   |   |
| AZM              |       |                  | 746         |   |   |   | 0.5 |   |   |   | 423 |   |   |   | 0.3 |   |   |   | 974 |   |   |   | 0.8 |   |   |
| CZK              |       |                  | 203         |   |   |   | 0.1 |   |   |   | 182 |   |   |   | 0.1 |   |   |   | 157 |   |   |   | 0.1 |   |   |
| UGX              |       |                  | 144         |   |   |   | 0.1 |   |   |   | 131 |   |   |   | 0.1 |   |   |   | 110 |   |   |   | 0.1 |   |   |
| LKR              |       |                  | 137         |   |   |   | 0.1 |   |   |   | 145 |   |   |   | 0.1 |   |   |   | 134 |   |   |   | 0.1 |   |   |
| GEL              |       |                  | 111         |   |   |   | 0.1 |   |   |   | 21 |   |   |   | 0.0 |   |   |   | -65 |   |   |   | -0.0 |   |   |
| Other currencies |       |                  | 30          |   |   |   | 0.0 |   |   |   | -9 |   |   |   | 0.0 |   |   |   | 45 |   |   |   | 0.0 |   |   |
| **Total**        | ** ** | ** **            | **143,172** |   | ** ** | ** ** | **100.0** |   | ** ** | ** ** | **123,433** |   | ** ** | ** ** | **100.0** |   | ** ** | ** ** | **116,374** |   | ** ** | ** ** | **100.0** |   |   |
| of which hedged  |       |                  | —      |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |
|                  |            |                       |             |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

The negative impact onGroup equity would be approximately SEK 1,430 million if the Swedish kronastrengthened by one percentage point against all of the currencies in whichTeliaSonera has conversion exposure, based on the exposure as of December 31,2005 and not including any potential equity impact due to TeliaSonera’soperational need to net purchase foreign currency or to currency translation ofother income statement items.

117

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**Notes to Consolidated Financial Statements (Continued)**

**22.**   Financial Instruments and Financial Risk Management(Continued)

*Foreign exchangederivatives*

As of December 31,2005, TeliaSonera’s portfolio of cross currency interest rate swaps representedthe following currencies and maturities. Amounts indicated include underlyingprincipal and accrued interest.

| **Maturity**                                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Later** | ** ** | ** ** | ** ** |
|---------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|-----------|------------|------------|------------|
| **SEK in millions**                     | ** ** | ** ** | ** ** | **2006**   | ** ** | **2007**   | ** ** | **2008**   | ** ** | **2009**   | ** ** | **2010**  | ** ** | **years**  | ** ** | **Total** | ** ** |
| **Cross currency interest rate  swaps, received** | ** ** | ** ** | ** ** |       | ** ** | ** ** |       |       | ** ** | ** ** |       |      | ** ** | ** ** |       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Buy EUR                                           |       | 2,646      |       |       | —     | ** ** |       |       | —     | ** ** |       |      | —     | ** ** |       | 1,561 |   | 11,780 |   | 15,987 |   |
| Buy JPY                                           |       | —     |       |       | —     | ** ** |       |       | —     | ** ** |       |      | —     | ** ** |       | — |   | 203 |   | 203 |   |
| Buy USD                                           |       | 7          |       |       | —     | ** ** |       |       | —     | ** ** |       |      | —     | ** ** |       | — |   | — |   | 7 |   |
| **Total,  received**                              | ** ** | **2,653**  | ** ** |       | **—** | ** ** |       |       | **—** | ** ** |       |      | **—** | ** ** |       | **1,561** | ** ** | **11,983** | ** ** | **16,197** | ** ** |
| **Cross currency interest rate  swaps, paid**     | ** ** | ** ** | ** ** |       | ** ** | ** ** |       |       | ** ** | ** ** |       |      | ** ** | ** ** |       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Total,  paid**                                  | ** ** | **-2,586** | ** ** |       | **—** | ** ** |       |       | **—** | ** ** |       |      | **—** | ** ** |       | **-1,412** | ** ** | **-11,946** | ** ** | **-15,944** | ** ** |
| **Net position**                                  | ** ** | **67**     | ** ** |       | **—** | ** ** |       |       | **—** | ** ** |       |      | **—** | ** ** |       | **149** | ** ** | **37** | ** ** | **253** | ** ** |
|                                                   |            |            |            |            |            |            |            |            |            |            |            |           |            |            |            |  |  |  |  |  |  |  |  |

 

118

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**Notes to Consolidated Financial Statements (Continued)**

**22.**   Financial Instruments and Financial Risk Management(Continued)

As of December 31,2005, the TeliaSonera Group’s portfolio of other foreign exchange derivativeshedging loans, investments, and operational transaction exposures representedthe following currencies and maturities. Amounts indicated include underlyingprincipal.

| **Maturity**                  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Later**  | ** ** | ** ** | ** ** |
|-------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| **SEK in millions** | ** ** | ** ** | ** ** | **2006**   | ** ** | **2007**   | ** ** | **2008**   | ** ** | **2009**   | ** ** | **2010**   | ** ** | **years**  | ** ** | **Total** | ** ** |
| Sell DKK                      |       | 2,332      |       |       | —     |       |       |       | —     |       |       |       | —     |       |       |   | — |   |   |   | — |   |   | 2,332 |   |
| Sell USD                      |       | 1,339      |       |       | —     |       |       |       | —     |       |       |       | —     |       |       |   | — |   |   |   | — |   |   | 1,339 |   |
| Sell EUR                      |       | 648        |       |       | 32         |       |       |       | 2          |       |       |       | 2          |       |       |   | — |   |   |   | — |   |   | 684 |   |
| Sell CZK                      |       | 97         |       |       | —     |       |       |       | —     |       |       |       | —     |       |       |   | — |   |   |   | — |   |   | 97 |   |
| Sell LVL                      |       | 79         |       |       | —     |       |       |       | —     |       |       |       | —     |       |       |   | — |   |   |   | — |   |   | 79 |   |
| Sell CHF                      |       | 35         |       |       | —     |       |       |       | —     |       |       |       | —     |       |       |   | — |   |   |   | — |   |   | 35 |   |
| Sell PLN                      |       | 21         |       |       | —     |       |       |       | —     |       |       |       | —     |       |       |   | — |   |   |   | — |   |   | 21 |   |
| Sell HUF                      |       | 9          |       |       | —     |       |       |       | —     |       |       |       | —     |       |       |   | — |   |   |   | — |   |   | 9 |   |
| Sell LTL                      |       | 8          |       |       | —     |       |       |       | —     |       |       |       | —     |       |       |   | — |   |   |   | — |   |   | 8 |   |
| Sell SGD                      |       | 5          |       |       | —     |       |       |       | —     |       |       |       | —     |       |       |   | — |   |   |   | — |   |   | 5 |   |
| Sell HKD                      |       | 4          |       |       | —     |       |       |       | —     |       |       |       | —     |       |       |   | — |   |   |   | — |   |   | 4 |   |
| Sell NOK                      |       | 2          |       |       | —     |       |       |       | —     |       |       |       | —     |       |       |   | — |   |   |   | — |   |   | 2 |   |
| **Sell  total**               | ** ** | **4,579**  | ** ** | ** ** | **32**     |       | ** ** | ** ** | **2**      |       | ** ** | ** ** | **2**      |       | ** ** | ** ** | **—** |   | ** ** | ** ** | **—** |   | ** ** | **4,615** | ** ** |
| Buy NOK                       |       | -1,944     |       |       | —     |       |       |       | —     |       |       |       | —     |       |       |   | — |   |   |   | — |   |   | -1,944 |   |
| Buy EUR                       |       | -1,660     |       |       | —     |       |       |       | —     |       |       |       | —     |       |       |   | — |   |   |   | — |   |   | -1,660 |   |
| Buy GBP                       |       | -563       |       |       | —     |       |       |       | —     |       |       |       | —     |       |       |   | — |   |   |   | — |   |   | -563 |   |
| Buy USD                       |       | -248       |       |       | -1         |       |       |       | —     |       |       |       | —     |       |       |   | — |   |   |   | — |   |   | -249 |   |
| Buy DKK                       |       | -8         |       |       | —     |       |       |       | —     |       |       |       | —     |       |       |   | — |   |   |   | — |   |   | -8 |   |
| Buy CHF                       |       | -4         |       |       | —     |       |       |       | —     |       |       |       | —     |       |       |   | — |   |   |   | — |   |   | -4 |   |
| Buy CZK                       |       | -3         |       |       | —     |       |       |       | —     |       |       |       | —     |       |       |   | — |   |   |   | — |   |   | -3 |   |
| Buy HUF                       |       | -1         |       |       | —     |       |       |       | —     |       |       |       | —     |       |       |   | — |   |   |   | — |   |   | -1 |   |
| **Buy  total**                | ** ** | **-4,431** | ** ** | ** ** | **-1**     |       | ** ** | ** ** | **—** |       | ** ** | ** ** | **—** |       | ** ** | ** ** | **—** |   | ** ** | ** ** | **—** |   | ** ** | **-4,432** | ** ** |
| **Net position**              | ** ** | **148**    | ** ** | ** ** | **31**     |       | ** ** | ** ** | **2**      |       | ** ** | ** ** | **2**      |       | ** ** | ** ** | **—** |   | ** ** | ** ** | **—** |   | ** ** | **183** | ** ** |
|                               |            |            |            |            |            |            |            |            |            |            |            |            |            |            |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

***Interest rate risk***

The TeliaSonera Group’s sources of funds are primarilyshareholders’ equity, cash flows from operating activities, and borrowing. Theinterest-bearing borrowing exposes the Group to interest rate risk.

Interest rate risk is the risk that a change ininterest rates will negatively affect the Group’s net interest income and/orcash-flows. TeliaSonera’s financial policy provides guidelines for interestrates and the average maturity of borrowings. The Group aims at balancing theestimated running cost of borrowing and the risk of significant negative impacton earnings, should there be a sudden, major change in interest rates. TheGroup’s policy is that the duration of interest of the debt portfolio should befrom six months to four years.

If the available loan form does not directly reflectthe desired loan portfolio structure, various forms of derivative instrumentsare used to adapt the structure in terms of duration and currency. Thisadaptation is achieved chiefly through interest rate swaps and cross currencyinterest rate swaps.

119

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**Notes to Consolidated Financial Statements (Continued)**

**22.**   Financial Instruments and Financial Risk Management (Continued)

As of December 31, 2005, TeliaSonera AB andTeliaSonera Finland Oyj had interest-bearing debt of SEK 25,602 million withduration of interest of approximately 0.9 years, including derivatives. Thevolume of loans exposed to changes in interest rates over the next 12-monthperiod was at the same date approximately SEK 21,145 million, assuming thatexisting loans maturing during the year are refinanced and after accounting forderivatives. The exact effect of a change in interest rates on the financialnet stemming from this debt portfolio depends on the timing of maturity of thedebt as well as reset dates for floating rate debt, and that the volume ofloans may vary over time, thereby affecting the estimate. Fair value of theloan portfolio would, however, change by approximately SEK 240 million, shouldthe level in market interest rates make a parallel shift of one percentagepoint, and assuming the same volume of loans and a similar duration on thoseloans as per year-end 2005.

TeliaSonera AB has designated certain interest rateswaps as cash flow hedges to hedge against changes in the amount of future cashflows related to interest payments on existing liabilities. Hedgeineffectiveness related to outstanding cash flow hedges was immaterial andrecognized in earnings during the year. Net changes in fair value recognized inshareholders’ equity are separately reported in a fair value reserve (seesection “Reserves” of note “Equity and Earnings per Share”). In 2005, no cashflow hedges were discontinued due to the original forecasted transactions nothaving occurred in the originally specified time period.

As of December 31,2005, the TeliaSonera Group’s portfolio of interest rate swap contracts wascomposed as follows. Amounts indicated include underlying principal and accruedinterest.

| **Maturity**                  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Later** | ** ** | ** ** | ** ** |
|-------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|-----------|------------|------------|------------|
| **SEK in millions** | ** ** | ** ** | ** ** | **2006**   | ** ** | **2007**   | ** ** | **2008**   | ** ** | **2009**   | ** ** | **2010**  | ** ** | **years**  | ** ** | **Total** | ** ** |
| **Interest received**         | ** ** | ** ** | ** ** |       | ** ** | ** ** |       |       | ** ** | ** ** |       |      | ** ** | ** ** |       |   | ** ** | ** ** |   | ** ** | ** ** | ** ** | ** ** |
| Fixed interest  rate          |       | 2,937      |       |       | —     | ** ** |       |       | —     | ** ** |       |      | —     | ** ** |       |   | — | ** ** |   | 13,702 |   | 16,639 |   |
| Floating interest  rate       |       | —     |       |       | 502        | ** ** |       |       | —     | ** ** |       |      | —     | ** ** |       |   | 658 | ** ** |   | — |   | 1,160 |   |
| **Total**                     | ** ** | **2,937**  | ** ** |       | **502**    | ** ** |       |       | **—** | ** ** |       |      | **—** | ** ** |       |   | **658** | ** ** |   | **13,702** | ** ** | **17,799** | ** ** |
| **Interest  paid**            | ** ** | ** ** | ** ** |       | ** ** | ** ** |       |       | ** ** | ** ** |       |      | ** ** | ** ** |       |   | ** ** | ** ** |   | ** ** | ** ** | ** ** | ** ** |
| Fixed interest  rate          |       | —     |       |       | 540        | ** ** |       |       | —     | ** ** |       |      | —     | ** ** |       |   | 744 | ** ** |   | — |   | 1,284 |   |
| Floating interest  rate       |       | 2,828      |       |       | —     | ** ** |       |       | —     | ** ** |       |      | —     | ** ** |       |   | — | ** ** |   | 13,277 |   | 16,105 |   |
| **Total**                     | ** ** | **2,828**  | ** ** |       | **540**    | ** ** |       |       | **—** | ** ** |       |      | **—** | ** ** |       |   | **744** | ** ** |   | **13,277** | ** ** | **17,389** | ** ** |
|                               |            |            |            |            |            |            |            |            |            |            |            |           |            |            |            |  |  |  |  |  |  |  |  |  |  |

 

***Pension obligation risk***

As of December 31, 2005, the TeliaSonera Grouphad pension obligations which net present value amounted to SEK 22,036 million(see note “Provisions for Pensions and Employment Contracts” below). To securethese obligations, the TeliaSonera Group has pension funds, with plan assetsequivalent to SEK 18,480 million based on market values as of December 31,2005. The pension funds’ assets are used as prime funding source for thepension obligations, and consisted of approximately 61 percent fixed incomeinstruments and approximately 39 percent shares and other investments at year-end2005. The expected return on the pension funds’ plan assets is approximately4.3 percent annually. The portion of the pension obligations not covered byplan assets is recognized in the balance sheet, adjusted for actuarial gainsand losses.

120

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**Notes to Consolidated Financial Statements (Continued)**

**22.**   Financial Instruments and Financial Risk Management(Continued)

The approximate impact on the pension obligations isSEK 3,200 million, should the weighted average discount rate decrease by onepercentage point from the approximately 3.5 percent which is currently used.Such an increase in the obligations, were interest rates to fall, should bepartly offset by a positive impact from the fixed income assets in the pensionfunds. Based on the existing asset structure and the duration of the pensionfunds’ fixed income portfolios (including index-linked bonds) as of December 31,2005, and assuming that the value of the other assets in the pension funds wereunchanged, a similar reduction in interest rates is estimated to increase thevalue of the pension funds assets by some SEK 1,000 million.

Exogenous risk factorsimpacting pension obligations include changes in population life expectancy.Current anticipation is that there will be actuarial modifications implying anextension of average life expectancy in the near future. Should suchmodifications be realized, they are assumed to increase TeliaSonera’s pensionobligations. At this stage, however, the impact cannot be quantified.

***Financing risk***

TeliaSonera’s aggregate borrowings usually have alonger maturity than duration (principal is fixed longer than interest rates).This allows the Group to obtain the desired interest rate risk without havingto assume a high financing risk. The Group’s policy is that the average maturityof borrowings should normally exceed 2 years. In order to reduce financingrisk, the Group aims to spread loan maturity dates over a longer period.

TeliaSonera AB enjoys a strong credit rating with therating agencies Standard & Poor’s and Moody’s. Standard &Poor’s has lowered its assigned credit rating on TeliaSonera AB to A- forlong-term borrowings and A-2 for short-term borrowings. Moody’s creditrating on TeliaSonera AB is unchanged at A2 for long-term borrowings and P-1for short-term borrowings. These ratings represent a solid investment gradelevel and are thus expected to allow TeliaSonera continued good access to thefinancial markets.

TeliaSonera finances itsoperations chiefly by borrowing under its uncommitted open-market financing programsdirectly in Swedish and international money markets and capital markets.TeliaSonera AB and TeliaSonera Finland Oyj also use bank financing, whichrepresented approximately 3 percent of the Group’s total borrowing as of December 31,2005. The open-market financing programs provide a cost-effective and flexiblealternative to bank financing. Most of the open-market borrowing is issued atfixed interest rates, along with some floating rate notes.

***Credit risk***

TeliaSonera accepts only creditworthy counterparts forfinancial transactions such as interest rate swaps, cross currency swaps andother transactions in derivatives. TeliaSonera requires each counterpart tohave an approved rating and an International Swaps and DerivativesAssociation, Inc. (ISDA) agreement. The permitted exposure to eachcounterpart depends on the rating of that counterpart. As of December 31,2005, the aggregate exposure to counterparts in derivatives was SEK 704million, calculated as a net claim on each counterpart.

Any surplus cash is typically deposited in banks orinvested in short-term interest-bearing instruments with good credit ratings.The permitted exposure to each counterpart depends on the rating of thatcounterpart.

121

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**Notes to Consolidated Financial Statements (Continued)**

**22.**   FinancialInstruments and Financial Risk Management (Continued)

The credit risk withrespect to TeliaSonera’s trade receivables is diversified among a large numberof customers, both private individuals and companies in various industries.Solvency information is required for credit sales to minimize the risk ofunnecessary bad debt expense and is based on group-internal information onpayment behavior, if necessary completed by credit and business informationfrom external sources. Bad debt expense in relation to consolidated net saleswas approximately 0.3 percent, 0.3 percent and 0.6 percent in 2005, 2004 and2003, respectively.

***Insurable risks***

The insurance cover isgoverned by corporate guidelines and includes a common package of differentproperty and liability insurance programs. The business units and other unitsbeing responsible for assessing the risks decide the extent of actual cover.Corporate Insurance at TeliaSonera AB manages the common Group insuranceprograms and uses a captive, TeliaSonera Försäkring AB, as a strategic tool inmanaging the insurance programs. The risks in the captive are in part reinsuredin the international reinsurance market.

**23.**   Provisionsfor Pensions and Employment Contracts

**General**

Receivables/provisionsfor pension obligations were recorded in the balance sheet as follows.

|                                                                | ** ** | **December 31,** | ** ** |
|----------------------------------------------------------------|------------|-----------------------|------------|
| **SEK in millions**                                  | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Present value of  pension obligations                          |       | 22,036                |       | 18,047 |   | 16,977 |   |
| Fair value of  plan assets                                     |       | -18,480               |       | -15,838 |   | -14,295 |   |
| **Pension  obligations less plan assets**                      | ** ** | **3,556**             | ** ** | **2,209** | ** ** | **2,682** | ** ** |
| Unrecognized past  service cost                                |       | 26                    |       | 20 |   | 34 |   |
| Unrecognized  transition gains                                 |       | —                |       | — |   | 152 |   |
| Unrecognized  actuarial gains (+)/losses (-)                   |       | -4,019                |       | -2,802 |   | -2,346 |   |
| **Receivables (****-)/Provisions (+) for pension obligations** | ** ** | **-437**              | ** ** | **-573** | ** ** | **522** | ** ** |
|                                                                |            |                       |            |  |  |  |  |  |  |

 

122

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**Notes to Consolidated Financial Statements (Continued)**

**23.**   Provisions for Pensions and Employment Contracts(Continued)

Total pension expenseswere distributed as follows.

|                                                                                                                       | ** ** | **January-December** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|----------------------|------------|
| **SEK in millions**                                                                                         | ** ** | ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Current service  cost                                                                                                 |       | 472                  |       | 430 |   | 328 |   |
| Interest on  pension provisions                                                                                       |       | 880                  |       | 902 |   | 878 |   |
| Expected return  on assets                                                                                            |       | -970                 |       | -940 |   | -892 |   |
| Amortization of  past service cost                                                                                    |       | -8                   |       | -34 |   | -3 |   |
| Amortization of  transition gains                                                                                     |       | —               |       | -158 |   | -42 |   |
| Amortization of  actuarial gains (-)/losses (+)                                                                       |       | 88                   |       | 66 |   | 68 |   |
| **Pension  expenses, defined benefit pension plans**                                                                  | ** ** | **462**              | ** ** | **266** | ** ** | **337** | ** ** |
| Settlement of  pension obligations                                                                                    |       | -4                   |       | — |   | — |   |
| Termination  benefits (excl. premiums and pension-related social charges)                                             |       | 888                  |       | 76 |   | 150 |   |
| Pension premiums,  defined benefit/defined contribution pension plans and pay-as-you-go systems                       |       | 626                  |       | 661 |   | 661 |   |
| Pension-related  social charges and taxes, other pension expenses                                                     |       | 506                  |       | -562 |   | 258 |   |
| Less termination  benefits (incl. premiums and pension-related social charges) reclassified as  restructuring charges |       | -1,185               |       | — |   | — |   |
| **Total  pension expenses**                                                                                           | ** ** | **1,293**            | ** ** | **441** | ** ** | **1,406** | ** ** |
| of which pension  premiums paid to the ITP pension plan                                                               |       | 204                  |       | 192 |   | 196 |   |
|                                                                                                                       |            |                      |            |  |  |  |  |  |  |

 

**Actuarialcalculation assumptions**

Theactuarial calculation of pension obligations and pension expenses is based onthe following principal assumptions, each presented as a weighted average forthe different pension plans.

|                                                                    | ** ** | **December 31,** | ** ** |
|--------------------------------------------------------------------|------------|-----------------------|------------|
| **Percentages, except remaining working life** | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Discount rate                                                      |       | 3.5                   |       | 5.0 |   | 5.5 |   |
| Expected rate of  compensation increase                            |       | 3.1                   |       | 3.5 |   | 3.5 |   |
| Employee turnover  rate                                            |       | 3.0                   |       | 2.8 |   | 2.7 |   |
| Average expected  remaining working life, years                    |       | 14.7                  |       | 15.1 |   | 15.1 |   |
| Increase in  income base amount (only Swedish Group units)         |       | 2.8                   |       | 2.8 |   | 2.5 |   |
| Annual  adjustments to pensions                                    |       | 1.9                   |       | 2.0 |   | 2.0 |   |
| Expected return on plan  assets                                    |       | 4.3                   |       | 5.7 |   | 6.5 |   |
|                                                                    |            |                       |            |  |  |  |  |  |  |

 

123

----

**Notes to Consolidated Financial Statements (Continued)**

**23.**   Provisions for Pensions and Employment Contracts (Continued)

**Specifications topension obligations and pension expenses**

Changesin projected benefit obligation, plan assets, and the net receivable/liabilityin the balance sheet and actuarial net gains or losses for the defined benefitpension plans were as follows.

|                                                  | ** ** | **December 31,** | ** ** |
|--------------------------------------------------|------------|-----------------------|------------|
| **SEK in millions**                    | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Present value of pension  obligations**        | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Opening balance                                  |       | 18,047                |       | 16,977 |   | 16,398 |   |
| Current service  cost                            |       | 472                   |       | 430 |   | 328 |   |
| Interest expenses                                |       | 880                   |       | 902 |   | 878 |   |
| Benefits paid                                    |       | -989                  |       | -1,360 |   | -1,089 |   |
| Benefits paid,  early retirement                 |       | -249                  |       | — |   | — |   |
| Termination benefits                             |       | 888                   |       | 76 |   | 150 |   |
| Operations acquired/divested                     |       | -19                   |       | 23 |   | -93 |   |
| Settlement of  pension obligations               |       | -4                    |       | — |   | — |   |
| Past service cost                                |       | -16                   |       | -20 |   | — |   |
| Actuarial gains (-)/losses  (+)                  |       | 2,942                 |       | 1,027 |   | 430 |   |
| Exchange rate  differences                       |       | 84                    |       | -8 |   | -25 |   |
| **Closing  balance**                             | ** ** | **22,036**            | ** ** | **18,047** | ** ** | **16,977** | ** ** |
| **Plan assets**                                  | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Opening balance                                  |       | 15,838                |       | 14,295 |   | 13,987 |   |
| Expected return on plan  assets                  |       | 970                   |       | 940 |   | 892 |   |
| Contribution to pension  fund                    |       | 1,000                 |       | 1,122 |   | 96 |   |
| Payment from pension  fund                       |       | -1,029                |       | -1,028 |   | -1,026 |   |
| Operations acquired  (+)/divested (-)            |       | —                |       | 13 |   | -21 |   |
| Actuarial gains  (+)/losses (-)                  |       | 1,616                 |       | 506 |   | 395 |   |
| Exchange rate differences                        |       | 85                    |       | -10 |   | -28 |   |
| **Closing balance**                              | ** ** | **18,480**            | ** ** | **15,838** | ** ** | **14,295** | ** ** |
| **Return on plan assets**                        | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Expected return on plan  assets                  |       | 970                   |       | 940 |   | 892 |   |
| Actuarial gains  (+)/losses (-)                  |       | 1,616                 |       | 506 |   | 395 |   |
| **Actual return**                                | ** ** | **2,586**             | ** ** | **1,446** | ** ** | **1,287** | ** ** |
| **Provisions for pension obligations**           | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Opening balance                                  |       | -573                  |       | 522 |   | 224 |   |
| Pension expenses,  defined benefit pension plans |       | 462                   |       | 266 |   | 337 |   |
| Benefits paid                                    |       | -989                  |       | -1,360 |   | -1,089 |   |
| Benefits paid, early  retirement                 |       | -249                  |       | — |   | — |   |
| Contribution to pension  fund                    |       | -1,000                |       | -1,122 |   | -96 |   |
| Payment from pension  fund                       |       | 1,029                 |       | 1,028 |   | 1,026 |   |
| Termination benefits                             |       | 888                   |       | 75 |   | 150 |   |
| Operations  acquired/divested, net               |       | -9                    |       | 20 |   | -29 |   |
| Settlement of pension  obligations               |       | -1                    |       | — |   | — |   |
| Exchange rate  differences                       |       | 5                     |       | -2 |   | -1 |   |
| **Closing balance**                              | ** ** | **-437**              | ** ** | **-573** | ** ** | **522** | ** ** |
|                                                  |            |                       |            |  |  |  |  |  |  |

 

124

----

**Notes to Consolidated Financial Statements (Continued)**

**23.**   Provisions for Pensionsand Employment Contracts (Continued)

|                                                                       | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------------|------------|-----------------------|------------|
| **SEK in millions**                                         | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Actuarial gains/losses**                                            | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Opening balance,  actuarial gains (+)/losses (-)                      |       | -2,802                |       | -2,346 |   | -2,423 |   |
| Actuarial gains (-)/losses  (+) to be recognized                      |       | 88                    |       | 66 |   | 68 |   |
| Actuarial gains (-)/losses  (+), settlement of pension obligations    |       | 4                     |       | — |   | — |   |
| Actuarial gains (-)/losses  (+), acquired/divested operations         |       | 10                    |       | 10 |   | 43 |   |
| Actuarial gains  (+)/losses (-), pension obligations                  |       | -2,942                |       | -1,027 |   | -430 |   |
| Actuarial gains  (+)/losses (-), plan assets                          |       | 1,616                 |       | 506 |   | 395 |   |
| Exchange rate  differences                                            |       | 7                     |       | -11 |   | 1 |   |
| **Closing balance, actuarial  gains (+)/losses (****-)**              | ** ** | **-4,019**            | ** ** | **-2,802** | ** ** | **-2,346** | ** ** |
| **Operations acquired**                                               | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Increase in pension  obligations                                      |       | —                |       | 43 |   | 29 |   |
| Increase in plan assets                                               |       | —                |       | -13 |   | -12 |   |
| **Net position**                                                      | ** ** | **—**            | ** ** | **30** | ** ** | **17** | ** ** |
| **Operations divested**                                               | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Decrease in pension  obligations                                      |       | -19                   |       | -20 |   | -122 |   |
| Decrease in plan assets                                               |       | —                |       | — |   | 33 |   |
| Decrease in unrecognized  net transition gain/loss, past service cost |       | —                |       | -0 |   | 0 |   |
| Decrease in unrecognized  net transition gain/loss                    |       | —                |       | -0 |   | 0 |   |
| Changes in unrecognized  actuarial gains (-)/losses (+)               |       | 10                    |       | 10 |   | 43 |   |
| **Net position**                                                      | ** ** | **-9**                | ** ** | **-10** | ** ** | **-46** | ** ** |
|                                                                       |            |                       |            |  |  |  |  |  |  |

 

**Plan-assetallocation**

As ofthe balance sheet date, actual market values of pension plan assets were as follows.

|                                      | ** ** | **December 31,** | ** ** |
|--------------------------------------|------------|-----------------------|------------|
| ** **                           | ** ** | **2005**              | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Asset category**              | ** ** | ** **            | ** ** | **SEK in  millions** | ** ** | **Percent** | ** ** | **SEK in  millions** | ** ** | **Percent** | ** ** | **SEK in  millions** | ** ** | **Percent** | ** ** |
| Fixed income  instruments, liquidity |       |                  | 11,286     |   |   |   | 61.1 |   |   |   | 8,884 |   |   |   | 56.1 |   |   |   | 8,425 |   |   |   | 58.9 |   |   |
| Shares and other  investments        |       |                  | 7,194      |   |   |   | 38.9 |   |   |   | 6,954 |   |   |   | 43.9 |   |   |   | 5,870 |   |   |   | 41.1 |   |   |
| **Total**                            | ** ** | ** **            | **18,480** |   | ** ** | ** ** | **100.0** |   | ** ** | ** ** | **15,838** |   | ** ** | ** ** | **100.0** |   | ** ** | ** ** | **14,295** |   | ** ** | ** ** | **100.0** |   |   |
| of which shares in TeliaSonera  AB   |       |                  | 70         |   |   |   | 0.4 |   |   |   | 84 |   |   |   | 0.5 |   |   |   | 81 |   |   |   | 0.6 |   |   |
|                                      |            |                       |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

**Future cash flows**

***Contributions***

For companies in Sweden,part of the pension liabilities is secured also by credit insurance. Thismeans, should the pension obligations increase, that each company can choose ifand when to contribute to the pension fund or otherwise to recognize a pensionprovision in the balance sheet. To pension funds outside Sweden, TeliaSoneraexpects to contribute SEK 145 million in 2006.

125

----

**Notes to Consolidated Financial Statements (Continued)**

**23.**   Provisions for Pensions and Employment Contracts (Continued)

***Estimated benefits paid***

Giventhe current actuarial calculation assumptions, TeliaSonera expects thefollowing benefit payments during the next ten-year period.

| **SEK in millions** | ** ** | ** ** | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **2011-2015** | ** ** | **Total**  | ** ** |
|-------------------------------|------------|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|---------------|------------|------------|------------|
| Expected benefits  paid       |       | 1,024      |       | 1,028    |       | 1,040    |       | 1,047    |       | 1,068    |       |     | 5,883      | ** **    |       | **11,090** | ** ** |
|                               |            |            |            |          |            |          |            |          |            |          |            |          |            |               |            |            |            |  |  |

 

**24.**   OtherProvisions

Changesin total other provisions were as follows.

|                                   | ** ** | **December 31,** | ** ** |
|-----------------------------------|------------|-----------------------|------------|
| **SEK in millions**     | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Book value,  opening balance      |       | 5,496                 |       | 6,238 |   | 7,509 |   |
| Provisions for  the period        |       | 3,365                 |       | 1,250 |   | 1,668 |   |
| Utilized  provisions              |       | -1,294                |       | -1,592 |   | -2,749 |   |
| Operations  divested              |       | -36                   |       | — |   | — |   |
| Reclassifications                 |       | -1,185                |       | 229 |   | 941 |   |
| Reversals of  provisions          |       | -632                  |       | -666 |   | -1,076 |   |
| Timing and  interest-rate effects |       | 89                    |       | 54 |   | 67 |   |
| Exchange rate  differences        |       | 183                   |       | -17 |   | -122 |   |
| **Book value, closing balance**   | ** ** | **5,986**             | ** ** | **5,496** | ** ** | **6,238** | ** ** |
|                                   |            |                       |            |  |  |  |  |  |  |

 

The book value wasdistributed and classified as follows.

|                                                 | ** ** | **December 31,** | ** ** |
|-------------------------------------------------|------------|-----------------------|------------|
| **SEK in millions**                   | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Payroll taxes on  future pension payments       |       | 148                   |       | 241 |   | 302 |   |
| Restructuring  provisions                       |       | 2,920                 |       | 2,445 |   | 3,289 |   |
| Warranty  provisions                            |       | 1,813                 |       | 1,995 |   | 2,294 |   |
| Asset retirement  obligations                   |       | 489                   |       | 256 |   | 115 |   |
| Onerous and other  loss-making contracts        |       | 291                   |       | 143 |   | 87 |   |
| Other                                           |       | 325                   |       | 416 |   | 151 |   |
| **Total  other provisions**                     | ** ** | **5,986**             | ** ** | **5,496** | ** ** | **6,238** | ** ** |
| Less other  provisions classified as short-term |       | -616                  |       | -513 |   | -674 |   |
| **Total other long-term  provisions**           | ** ** | **5,370**             | ** ** | **4,983** | ** ** | **5,564** | ** ** |
|                                                 |            |                       |            |  |  |  |  |  |  |

 

Provisions forrestructuring are discussed in note “Restructuring Costs.” Warranty provisionsinclude warranties, provisions for potential litigation and other provisionsrelated to disposals and winding-up of group entities, associated companies andother equity holdings, such as Xfera Móviles S.A. and Ipse 2000 S.p.A. (forfurther details on the latter, see note “Contingencies, Other ContractualObligations and Litigation.”

126

----

**Notes to Consolidated Financial Statements (Continued)**

**25.**   OtherLong-term Liabilities

Otherlong-term non-interest-bearing liabilities were distributed as follows.

|                                            | ** ** | **December 31,** | ** ** |
|--------------------------------------------|------------|-----------------------|------------|
| **SEK in millions**              | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Prepaid leasing  agreements                |       | 966                   |       | 1,194 |   | 1,340 |   |
| License fees                               |       | 383                   |       | 438 |   | 494 |   |
| Prepaid contracts  for broadband build-out |       | 712                   |       | 648 |   | 462 |   |
| Other liabilities                          |       | 282                   |       | 170 |   | 193 |   |
| **Total**                                  | ** ** | **2,343**             | ** ** | **2,450** | ** ** | **2,489** | ** ** |
|                                            |            |                       |            |  |  |  |  |  |  |

 

For information on leases,see notes “Leasing Agreements” and “Contingencies, Other ContractualObligations and Litigation.” Of the other long-term liabilities for the years2005, 2004 and 2003, SEK 415 million, SEK 68 million and SEK 136 million,respectively, fell due more than five years after the balance sheet date.

**26.**   TradePayables and Other Current Liabilities

Tradepayables and other current liabilities were distributed as follows.

|                                                                | ** ** | **December 31,** | ** ** |
|----------------------------------------------------------------|------------|-----------------------|------------|
| **SEK in millions**                                  | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Accounts  payable**                                          | ** ** | **7,676**             | ** ** | **8,057** | ** ** | **8,017** | ** ** |
| **Liabilities  to associated companies**                       | ** ** | **538**               | ** ** | **470** | ** ** | **632** | ** ** |
| **Other liabilities**                                          | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Telephone card  reserve, rollover minutes                      |       | 937                   |       | 1,022 |   | 742 |   |
| Advances,  deposits, etc.                                      |       | 204                   |       | 248 |   | 512 |   |
| Value-added tax,  excise taxes                                 |       | 1,282                 |       | 1,168 |   | 1,176 |   |
| Employee  withholding tax, payable to employees                |       | 475                   |       | 463 |   | 420 |   |
| Currency swaps,  forward exchange contracts                    |       | 23                    |       | 12 |   | 85 |   |
| Other                                                          |       | 1,085                 |       | 1,110 |   | 1,040 |   |
| **Total  other liabilities**                                   | ** ** | **4,006**             | ** ** | **4,023** | ** ** | **3,975** | ** ** |
| **Accrued expenses and deferred  revenues**                    |       |                  |       |   |   |   |   |
| Accrued payroll  expenses, social security contributions, etc. |       | 1,971                 |       | 1,906 |   | 1,927 |   |
| Accrued interest                                               |       | 273                   |       | 642 |   | 1,052 |   |
| Accrued payables  to suppliers                                 |       | 1,712                 |       | 1,831 |   | 1,544 |   |
| Accrued  interconnect and roaming charges                      |       | 1,051                 |       | 1,084 |   | 721 |   |
| Accrued retailer  commissions                                  |       | 309                   |       | 160 |   | 183 |   |
| Accrued leasing  fees                                          |       | 480                   |       | 496 |   | 520 |   |
| Deferred  subscription charges                                 |       | 1,683                 |       | 1,911 |   | 2,090 |   |
| Prepaid leasing  agreements                                    |       | 332                   |       | 291 |   | 689 |   |
| Other accrued or  deferred items                               |       | 2,702                 |       | 1,860 |   | 2.198 |   |
| **Total  accrued expenses and deferred revenues**              | ** ** | **10,513**            | ** ** | **10,181** | ** ** | **10,924** | ** ** |
| **Total trade payables and other  current liabilities**        | ** ** | **22,733**            | ** ** | **22,731** | ** ** | **23,548** | ** ** |
|                                                                |            |                       |            |  |  |  |  |  |  |

 

127

----

**Notes to Consolidated Financial Statements (Continued)**

**27.**   LeasingAgreements

**TeliaSonera as lessee**

***Finance leases***

The Group’s finance leases concerns computers andother IT equipment, production vehicles, company cars to employees, and othervehicles. There is no subleasing.

Thebook value of the leased assets as of the balance sheet date was as follows.

|                                            | ** ** | **December 31,** | ** ** |
|--------------------------------------------|------------|-----------------------|------------|
| **SEK in millions**              | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Acquisition value                          |       | 1,008                 |       | 1,516 |   | 1,834 |   |
| Less accumulated  depreciation             |       | -679                  |       | -1,035 |   | -1,302 |   |
| **Net value of finance lease  agreements** | ** ** | **329**               | ** ** | **481** | ** ** | **532** | ** ** |
|                                            |            |                       |            |  |  |  |  |  |  |

 

Depreciation and impairment losses totaled SEK 206million, SEK 261 million and SEK 274 million for the years 2005, 2004 and 2003,respectively. Leasing fees paid in these years totaled SEK 216 million, SEK 274million and SEK 301 million, respectively.

As ofDecember 31, 2005, future minimum leasing fees and their present values asper finance lease agreements that could not be canceled in advance and werelonger than one year in duration were as follows.

| **Maturity  SEK in millions**         | ** ** | ** ** | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **Later  years** | ** ** | **Total** | ** ** |
|-------------------------------------------------|------------|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|------------------|------------|-----------|------------|
| Future minimum  leasing fees                    |       |       | 181        |     |       |     | 139        |     |       |     | 53         |     |       |             | 6          |      |       |   | 8 |   |   |   | 3 | ** ** |   |   | **390** | ** ** |   |
| Present value of future  minimum lease payments |       |       | 173        |     |       |     | 127        |     |       |     | 46         |     |       |             | 5          |      |       |   | 6 |   |   |   | 2 | ** ** |   |   | **359** | ** ** |   |

 

As ofthe balance sheet date, the present value of future minimum leasing fees undernon-cancelable finance lease agreements was as follows.

|                                                   | ** ** | **December 31,** | ** ** |
|---------------------------------------------------|------------|-----------------------|------------|
| **SEK in millions**                     | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Total future  minimum leasing fees                |       |                  | 390        |   |   |   | 538 |   |   |   | 583 |   |   |
| Less interest  charges                            |       |                  | -31        |   |   |   | -51 |   |   |   | -57 |   |   |
| **Present value of future minimum  leasing fees** | ** ** | ** **            | **359**    |   | ** ** | ** ** | **487** |   | ** ** | ** ** | **526** |   |   |
|                                                   |            |                       |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

128

----

**Notes to Consolidated Financial Statements (Continued)**

**27.**   LeasingAgreements  (Continued)

***Operating leases***

TeliaSonera’s operating lease agreements primarilyconcern office space, technical sites, land, computers and other equipment.Certain contracts include renewal options for various periods of time. Subleasingconsists mainly of home computers leased to employees and certain officepremises.

Futureminimum leasing fees under operating lease agreements in effect as of December 31,2005 that could not be canceled in advance and were in excess of one year wereas follows.

| **Maturity   SEK in millions** | ** ** | ** ** | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **Later  years** | ** ** | **Total** | ** ** |
|-----------------------------------------------|------------|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|------------------|------------|-----------|------------|
| Future leasing  fees                          |       | 1,876      |       | 1,371    |       | 1,231    |       |     | 975        |     |       |     | 815        |             |       | 3,549     | ** ** | **9,817** | ** ** |
| Subleasing                                    |       | 60         |       | 47       |       | 44       |       |     | 44         |     |       |     | 44         |             |       | 110       | ** ** | **349** | ** ** |

 

Total rent and leasing fees paid were SEK 2,503million, SEK 2,491 million and SEK 1,771 million for the years 2005, 2004 and2003, respectively. For these years, revenue for subleased items totaled SEK 65million, SEK 61 million and SEK 56 million, respectively.

At the end of 2005 officespace and technical site leases covered approximately 755,000 square meters,including approximately 5,000 square meters of office space for TeliaSonera’sprincipal executive offices, located at Sturegatan 1 in Stockholm, Sweden.Apart from certain short-term leases, leasing terms range mainly between 3 and17 years with an average term of approximately 8 years. All leases have beenentered into on conventional commercial terms. Certain contracts includerenewal options for various periods of time.

**TeliaSonera as lessor**

***Finance leases***

The leasing portfolio comprises financing of productsand services related to TeliaSonera’s product and service offerings in Swedenand Denmark. At the end of 2005, the Danish part of the total portfolio was 15percent. The term of the contract stock is approximately 15 quarters. The termof new contracts signed in 2005 is 15 quarters. Of all contracts, 72 percentcarry a floating interest rate and 28 percent a fixed rate. Most contractsinclude renewal options. Most of TeliaSonera’s customer financing operationswas divested in 2004.

As ofthe balance sheet date, the present value of future minimum lease paymentreceivables under non-cancelable finance lease agreements was as follows.

|                                                                                         | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------|------------|-----------------------|------------|
| **SEK in millions**                                                           | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Gross investment  in finance lease contracts                                            |       |                  | 663        |   |   |   | 679 |   |   | 7,129 |   |
| Less unearned  finance revenues                                                         |       |                  | -82        |   |   |   | -77 |   |   | -674 |   |
| **Net  investment in finance lease contracts**                                          | ** ** | ** **            | **581**    |   | ** ** | ** ** | **602** |   | ** ** | **6,455** | ** ** |
| Less:  Unguaranteed residual values of leased properties for the benefit of the  lessor |       |                  | -0         |   |   |   | -0 |   |   | -33 |   |
| **Present value of future minimum  lease payment receivables**                          | ** ** | ** **            | **581**    |   | ** ** | ** ** | **602** |   | ** ** | **6,422** | ** ** |
|                                                                                         |            |                       |            |  |  |  |  |  |  |  |  |  |  |

 

129

----

**Notes to Consolidated Financial Statements (Continued)**

**27.**   Leasing Agreements  (Continued)

As of December 31,2005, the gross investment and present value of receivables relating to futureminimum lease payments under non-cancelable finance lease agreements weredistributed as follows.

| **Maturity   SEK in millions**                           | ** ** | ** ** | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **Later  years** | ** ** | **Total** | ** ** |
|-------------------------------------------------------------------------|------------|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|------------------|------------|-----------|------------|
| Gross investment                                                        |       |       | 256        |     |       |     | 157        |     |       |     | 117        |     |       |             | 56         |      |       |   | 31 |   |   |   | 46 | ** ** |   |   | **663** | ** ** |   |
| Present value of  receivables relating to future minimum lease payments |       |       | 244        |     |       |     | 139        |     |       |     | 98         |     |       |             | 45         |      |       |   | 23 |   |   |   | 32 | ** ** |   |   | **581** | ** ** |   |

 

Reserve for doubtfulreceivables regarding minimum lease payments totaled SEK 8 million as of December 31,2005.

***Operating leases***

The leasing portfolio includes some twenty agreementswith other international operators and over 100 other contracts. Contractperiods range between 10 and 25 years, with an average term of 20 years.

The book value of theleased assets as of the balance sheet date was as follows:

|                                              | ** ** | **December 31,** | ** ** |
|----------------------------------------------|------------|-----------------------|------------|
| **SEK in millions**                | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Acquisition value                            |       | 3,547                 |       | 3,146 |   | 3,260 |   |
| Less accumulated  depreciation               |       | -1,755                |       | -1,366 |   | -1,259 |   |
| Less accumulated  impairment losses          |       | -300                  |       | -300 |   | — |   |
| **Gross  book value**                        | ** ** | **1,492**             | ** ** | **1,480** | ** ** | **2,001** | ** ** |
| Plus prepaid  sales costs                    |       | 2                     |       | 2 |   | 2 |   |
| Less prepaid  lease payments                 |       | -965                  |       | -1,044 |   | -1,030 |   |
| **Net value of operating lease  agreements** | ** ** | **529**               | ** ** | **438** | ** ** | **973** | ** ** |
|                                              |            |                       |            |  |  |  |  |  |  |

 

Depreciation and impairment losses totaled SEK 385million, SEK 622 million and SEK 548 million in the years 2005, 2004 and 2003.

** **

Future minimum leasepayment receivables under operating lease agreements in effect as of December 31,2005 that could not be canceled in advance and were in excess of one year wereas follows.

| **Maturity  SEK in millions** | ** ** | ** ** | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **Later  years** | ** ** | **Total** | ** ** |
|-----------------------------------------|------------|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|------------------|------------|-----------|------------|
| Future minimum  lease payments          |       |       | 238        |     |       |     | 106        |     |       |     | 62         |     |       |             | 25         |      |       |   | 7 |   |   |   | 1 | ** ** |   |   | **439** | ** ** |   |
|                                         |            |            |            |          |            |          |            |          |            |          |            |          |            |                  |            |           |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

130

----

**Notes to Consolidated Financial Statements (Continued)**

**28.**   Contingencies,Other Contractual Obligations and Litigation

**Contingentassets, collateral pledged and contingent liabilities**

As ofthe balance sheet date, unrecognized contingent assets, collateral pledged andcontingent liabilities were distributed as follows.

|                                                              | ** ** | **December 31,** | ** ** |
|--------------------------------------------------------------|------------|-----------------------|------------|
| **SEK in millions**                                | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Contingent  assets**                                       | ** ** | **—**            | ** ** | **—** | ** ** | **—** | ** ** |
| **Collateral  pledged**                                      | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| *For warranty provisions:*                                   | * *   | * *              | * *   | * * | * * | * * | * * |
| Blocked funds in  bank accounts                              |       | 1,004                 |       | 996 |   | 1,168 |   |
| *For deposits from customers:*                               | * *   | * *              | * *   | * * | * * | * * | * * |
| Blocked funds in  bank accounts                              |       | 86                    |       | 93 |   | 91 |   |
| *For pension obligations:*                                   | * *   | * *              | * *   | * * | * * | * * | * * |
| Real estate  mortgages                                       |       | 18                    |       | 18 |   | 18 |   |
| Current  receivables                                         |       | 44                    |       | 38 |   | 36 |   |
| *For operating leases:*                                      | * *   | * *              | * *   | * * | * * | * * | * * |
| Real estate  mortgages                                       |       | 3                     |       | 2 |   | 2 |   |
| *For long-term liabilities to  credit institutions:*         | * *   | * *              | * *   | * * | * * | * * | * * |
| Chattel mortgages                                            |       | —                |       | 15 |   | 262 |   |
| Shares in Turun  Puhelin Oy                                  |       | —                |       | — |   | 570 |   |
| Shares in Svenska UMTS-nät AB                           |       | 429                   |       | 513 |   | 489 |   |
| Shares in OAO  MegaFon                                       |       | —                |       | — |   | 153 |   |
| **Total  collateral pledged**                                | ** ** | **1,584**             | ** ** | **1,675** | ** ** | **2,789** | ** ** |
| **Contingent  liabilities**                                  | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Credit guarantee  on behalf of Svenska UMTS-nät AB      |       | 1,475                 |       | 1,007 |   | 363 |   |
| Credit guarantees  on behalf of OAO MegaFon                  |       | —                |       | — |   | 338 |   |
| Credit guarantee  on behalf of Xfera Móviles S.A.       |       | 31                    |       | — |   | — |   |
| Credit guarantees  on behalf of other associated companies   |       | 2                     |       | 8 |   | 25 |   |
| Performance  guarantees on behalf of Xfera Móviles S.A. |       | 574                   |       | 544 |   | 1,159 |   |
| Other credit and  performance guarantees, etc.               |       | 295                   |       | 548 |   | 1,038 |   |
| Guarantees for  pension obligations                          |       | 204                   |       | 182 |   | 176 |   |
| **Total contingent liabilities**                             | ** ** | **2,581**             | ** ** | **2,289** | ** ** | **3,099** | ** ** |
|                                                              |            |                       |            |  |  |  |  |  |  |

 

As of December 31,2005, total contingent liabilities represented the following maturities.

| **Maturity  SEK in millions** | ** ** | ** ** | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **Later  years** | ** ** | **Total** | ** ** |
|-----------------------------------------|------------|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|------------------|------------|-----------|------------|
| Contingent  liabilities                 |       |       | 451        |     |       |     | 255        |     |       | 1,667    |       |     | —     |             |       |      | 1          |   |   |   | 207 | ** ** |   | **2,581** | ** ** |
|                                         |            |            |            |          |            |          |            |          |            |          |            |          |            |                  |            |           |            |  |  |  |  |  |  |  |  |  |  |

 

Some loan covenants agreed limit the scope fordivesting or pledging certain assets.

For all guarantees, except the credit guarantee onbehalf of Svenska UMTS-nät AB and the performance guarantees on behalf of XferaMóviles S.A., stated amounts equal the maximum potential amount of futurepayments that TeliaSonera could be required to make under the respectiveguarantee.

131

----

**Notes to Consolidated Financial Statements (Continued)**

**28.**   Contingencies, Other Contractual Obligations and Litigation(Continued)

As security for certain amounts borrowed byTeliaSonera’s 50 percent owned associated company Svenska UMTS-nät AB under athird-party credit facility totaling SEK 5,300 million, TeliaSonera and Tele2,the other shareholder of Svenska UMTS-nät, have each severally but not jointlyissued guarantees of a maximum of SEK 2,650 million to the lenders and grantedpledges of their shares in Svenska UMTS-nät. The indebtedness under the credit facilitymay become due on an accelerated basis, under certain circumstances, includingif either Telia­Sonera or Tele2 ceases to hold, directly or indirectly, 50percent of the company, unless the lenders provide their advance consent.TeliaSonera is not contractually required to provide any further capitalcontributions to or guarantees in favor of Svenska UMTS-nät. As of December 31,2005, Svenska UMTS-nät had, under the credit facility, borrowed SEK 2,950million, of which TeliaSonera guarantees 50 percent, or SEK 1,475 million.

As of December 31,2005, TeliaSonera had four commitments in relation to Xfera Móviles S.A.

·       Aremaining capital commitment to invest EUR 272 million, equivalent to SEK 2,553million (see also section “Other unrecognized contractual obligations” below).TeliaSonera’s ownership in Xfera is 16.55 percent and its share of theshareholder capital commitments is 23.27 percent. Payments under this capitalcommitment were originally scheduled to start by the end of 2004, but have beenpostponed due to ongoing negotiations among Xfera owners.

·       Acounter guarantee of EUR 41 million as TeliaSonera’s share on behalf of Xfera’sperformance requirements in relation to its UMTS license.

·       Counterguarantees of EUR 52 million as TeliaSonera’s share to cover the payment ofXfera’s spectrum fees for 2001-2005, which are currently subject todispute with the Spanish government.

·       Acounter guarantee of EUR 3 million as TeliaSonera’s share to cover the paymentof borrowings under Xfera’s credit facility.

These commitments may be partly overlapping. Forinstance, management believes that TeliaSonera’s investments pursuant to itscontractual capital commitment would enable Xfera to meet the performancerequirements in relation to its UMTS license. As of December 31, 2005,TeliaSonera had recognized a warranty provision of EUR 49 million, equivalentto SEK 462 million, for its commitments and obligations on behalf of Xfera andmanagement believes that there is currently no need for additional provisions.

As of December 31, 2005, TeliaSonera hadrecognized all of its commitments on behalf of Ipse 2000 S.p.A. in the balancesheet as warranty provisions. Ipse’s 3G license payments to the Italiangovernment have been secured by bank guarantees. According to an agreement withthe bank, Ipse and its shareholders, including TeliaSonera, have given cashcollateral for the remaining license payments in 2006 and onwards. TeliaSonera’spart of the cash collateral amounts to EUR 93 million, equivalent to SEK 870 million.

In December 1998,TeliaSonera’s subsidiary TeliaSonera Finland Oyj (formerly Sonera Oyj) enteredinto a cross-border finance lease-leaseback agreement under which TeliaSoneraFinland leased some of its mobile telecommunications network equipment (“HeadLease”) to a group of U.S. equity trusts which simultaneously leased theequipment back to TeliaSonera Finland (“Back Lease”). The ownership of theequipment, total book value of which was EUR 3 million, EUR 3 million and EUR19 million as of December 31, 2005, 2004 and 2003, respectively, isretained with TeliaSonera Finland. Both the Head Lease receivables and the BackLease obligations were settled at the inception of the lease agreements, andTeliaSonera Finland received a net cash consideration of USD 11 million (EUR 9million) which is 

132

----

**Notes to Consolidated Financial Statements (Continued)**

**28.**   Contingencies, Other Contractual Obligations and Litigation (Continued)

recordedin the balance sheet as an advance payment received and recognized in income asother financial income over the lease term. No other cash payments arecurrently expected to be made by TeliaSonera Finland under the leaseagreements. The agreement is valid for 15 years, but TeliaSonera Finland has anoption to terminate the agreement 11 years after the inception of theagreement. Separate financial institutions are taking care of the annualrepayments received by the equity investors and debt financiers participatingin the agreement. The funds securing the repayments to equity investors havebeen invested in U.S. Treasury and other similar bonds, and a bank deposit hasbeen made to secure the repayments of debt financing. At the inception of theagreement, the total amount of funds invested was USD 224 million.

**Otherunrecognized contractual obligations**

As of December 31,2005, the Group had the following unrecognized contractual obligationsregarding future acquisitions (or equivalent) of intangible assets, property,plant and equipment and financial assets.

| **Maturity  SEK in millions** | ** ** | ** ** | ** ** | **2006**   | ** ** | **2007** | ** ** | **2008**   | ** ** | **2009** | ** ** | **2010**   | ** ** | **Later  years** | ** ** | **Total**  | ** ** |
|-----------------------------------------|------------|------------|------------|------------|------------|----------|------------|------------|------------|----------|------------|------------|------------|------------------|------------|------------|------------|
| Intangible assets                       |       | 9          |       |       | —     |     |       |       | —     |     |       |       | —     |             |       |       | —     |   |   |   | — | ** ** |   | **9** | ** ** |
| Property, plant  and equipment          |       | 845        |       |       | 17         |     |       |       | 9          |     |       |       | —     |             |       |       | —     |   |   |   | — | ** ** |   | **871** | ** ** |
| Xfera capital  commitment               |       | 668        |       |       | 666        |     |       |       | 667        |     |       |       | —     |             |       |       | —     |   |   |   | — | ** ** |   | **2,001** | ** ** |
| Other holdings of  securities           |       | 10         |       |       | —     |     |       |       | —     |     |       |       | —     |             |       |       | —     |   |   |   | — | ** ** |   | **10** | ** ** |
| **Total**                               | ** ** | **1,532**  | ** ** | ** ** | **683**    |     | ** ** | ** ** | **676**    |     | ** ** | ** ** | **—** |             | ** ** | ** ** | **—** |   | ** ** | ** ** | **—** | ** ** |   | **2,891** | ** ** |

 

Most of the obligationsrelating to property, plant and equipment cover the construction under contractof Telia­Sonera’s fixed networks in Sweden. The Xfera capital commitment (EUR213 million) is recorded net of recognized provisions and certain guarantees.See section “Contingent assets, collateral pledged and contingent liabilities”above for more information on this and other commitments related to Xfera.

**Legaland administrative proceedings**

In its normal course of business, TeliaSonera isinvolved in a number of legal proceedings. These proceedings primarily involveclaims arising out of commercial law issues and regulatory matters. TeliaSonerais also involved in administrative proceedings relating principally totelecommunications regulations, competition law and consumer protection issues.Except for proceedings described below, TeliaSonera is not involved in anylegal, arbitration or regulatory proceedings expected to have a materialadverse effect on its business, financial condition or results of operations.

TeliaSonera has disputes with Tele2 and Vodafoneconcerning interconnect prices in Sweden. TeliaSonera believes that it hasrecorded sufficient provisions.

TeliaSonera is currentlyinvolved in litigations with former shareholders of the Brazilian mobileoperator Tess, relating to such shareholders’ disposal of their investments inTess as well as certain call options and subscription rights in Tess.

133

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**Notes to Consolidated Financial Statements (Continued)**

**28.**   Contingencies, Other Contractual Obligations and Litigation (Continued)

**Dependency on thirdparties**

***Commercial relationships***

The TeliaSonera Groupoffers a diversified portfolio of services and products in extremelycompetitive markets. Hence, the Group has limited exposure to individualcustomers, suppliers, lenders, products or services sold, geographic markets,materials procured, personnel, services purchased, or licenses.

***Off-balance sheet arrangements***

Except for credit andperformance guarantees, there are no off-balance sheet arrangements that haveor are reasonably likely to have a current or future effect on TeliaSonera’sfinancial condition, changes in financial condition, revenues or expenses,results of operations, liquidity, capital expenditures or capital resourcesthat is material to investors. See section “Contingent assets, collateralpledged and contingent liabilities” above for information related to credit andperformance guarantees issued by TeliaSonera.

**29.**   Cash FlowInformation

**Financial items**

Interestreceived and interest paid was as follows.

|                               | ** ** | **January-December** | ** ** |
|-------------------------------|------------|----------------------|------------|
| **SEK in millions** | ** ** | ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Interest received             |       | 605                  |       | 601 |   | 1,060 |   |
| Interest paid                 |       | -1,474               |       | -1,559 |   | -1,622 |   |
| **Net position**              | ** ** | **-869**             | ** ** | **-958** | ** ** | **-562** | ** ** |
|                               |            |                      |            |  |  |  |  |  |  |

 

**Income taxes**

Income taxes paid for theyears 2005, 2004 and 2003, totaled SEK 2,048 million, SEK 3,132 million and SEK1,308 million, respectively.

**Non-cash transactions**

***Vehicles***

TeliaSonera leasesvehicles through finance lease agreements. In 2005, 2004 and 2003, newacquisitions entailed non-cash investments of SEK 35 million, SEK 54 millionand SEK 47 million, respectively.

134

----

**Notes to Consolidated Financial Statements (Continued)**

**29.**   CashFlow Information (Continued)

***Asset retirement obligations (AROs)***

In 2005, 2004 and 2003,obligations regarding future dismantling and restoration of technical sitesentailed non-cash investments of SEK 194 million, SEK 25 million and SEK 106million, respectively.

**Acquisitions and divestitures**

TheTeliaSonera Group is continually restructured through the acquisition anddivestiture of subsidiaries and lines of business as well as associatedcompanies and companies outside the Group. The fair value of assets acquiredand liabilities assumed in subsidiaries and the total cash flow fromacquisitions were broken down as follows.

|                                                                          | ** ** | **January-December** | ** ** |
|--------------------------------------------------------------------------|------------|----------------------|------------|
| **SEK in millions**                                            | ** ** | ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Intangible assets                                                        |       | 2,569                |       | 10,081 |   | 1,735 |   |
| Property, plant  and equipment                                           |       | 11                   |       | 3,062 |   | 577 |   |
| Financial assets,  accounts receivable, inventories etc.                 |       | 328                  |       | 1,556 |   | 1,316 |   |
| Assets  held-for-sale                                                    |       | 31                   |       | — |   | — |   |
| Cash and cash  equivalents                                               |       | 746                  |       | 1,024 |   | 223 |   |
| Revaluation  reserve                                                     |       | —               |       | -1,641 |   | — |   |
| Minority interests                                                       |       | 92                   |       | -3,615 |   | 1,400 |   |
| Provisions                                                               |       | -128                 |       | -153 |   | -237 |   |
| Long-term  liabilities                                                   |       | -635                 |       | -558 |   | -856 |   |
| Current  liabilities                                                     |       | -262                 |       | -850 |   | 232 |   |
| **Total  purchase consideration**                                        | ** ** | **2,752**            | ** ** | **8,906** | ** ** | **4,390** | ** ** |
| Less purchase  consideration paid prior to 2005                          |       | -286                 |       | — |   | — |   |
| Less purchase  consideration paid prior to 2004                          |       | —               |       | -366 |   | — |   |
| Less purchase  consideration in terms of new share issue (prior to 2004) |       | —               |       | -1,843 |   | -2,051 |   |
| Less cash and  cash equivalents in acquired group companies              |       | -746                 |       | -1,024 |   | -223 |   |
| **Net  cash outflow (+)/inflow (****-) from acquired  group companies**  | ** ** | **1,720**            | ** ** | **5,673** | ** ** | **2,116** | ** ** |
| Purchase  consideration for other acquisitions                           |       | 50                   |       | 496 |   | 72 |   |
| **Total cash outflow (+)/inflow (****-) from acquisitions**              | ** ** | **1,770**            | ** ** | **6,169** | ** ** | **2,188** | ** ** |
|                                                                          |            |                      |            |  |  |  |  |  |  |

 

See note “Business Combinations” for more informationon significant transactions in 2005 and 2004.

135

----

**Notes to Consolidated Financial Statements (Continued)**

**29.**   Cash Flow Information (Continued)

The fair value of assetsdivested and liabilities transferred in subsidiaries and the total cash flowfrom divestitures were broken down as follows.

|                                                             | ** ** | **January-December** | ** ** |
|-------------------------------------------------------------|------------|----------------------|------------|
| **SEK in millions**                               | ** ** | ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Intangible assets                                           |       | —               |       | 1,747 |   | 2,067 |   |
| Property, plant  and equipment                              |       | —               |       | 187 |   | 1,154 |   |
| Financial assets,  accounts receivable, inventories etc.    |       | —               |       | 5,618 |   | 509 |   |
| Cash and cash  equivalents                                  |       | 69                   |       | 276 |   | 82 |   |
| Provisions                                                  |       | 37                   |       | -14 |   | -108 |   |
| Long-term  liabilities                                      |       | —               |       | -20 |   | -229 |   |
| Current  liabilities                                        |       | —               |       | -6,278 |   | -806 |   |
| **Total  sales consideration**                              | ** ** | **106**              | ** ** | **1,516** | ** ** | **2,669** | ** ** |
| Less cash and  cash equivalents in divested group companies |       | -69                  |       | -276 |   | -82 |   |
| Repayment of  loans in group companies divested             |       | —               |       | 5,046 |   | 375 |   |
| **Net  cash inflow from divested group companies**          | ** ** | **37**               | ** ** | **6,286** | ** ** | **2,962** | ** ** |
| Sales  consideration for other divestitures                 |       | 1,617                |       | 509 |   | 940 |   |
| **Total cash inflow from divestitures**                     | ** ** | **1,654**            | ** ** | **6,795** | ** ** | **3,902** | ** ** |
|                                                             |            |                      |            |  |  |  |  |  |  |

 

**Other cash flow information**

Cashflow before financing activities and cash/non-cash effects of restructuringprograms are broken down by business segment as follows.

| ** **            | ** ** | ** ** | ** ** | **January-December 2005**                                |
|-----------------------|------------|------------|------------|---------------------------------------------------------------|
| **Business segment**  | ** ** | ** ** | ** ** | **Cash flow before  financing activities  (SEK in millions)** | ** ** | **Cash/non-cash effects of restructuring  programs  (see corresponding sections in note  “Restructuring Costs”)** |
| Sweden                |       |       | 11,778     |                                                          |   | Transition programs in  Sweden and Finland Redundancies in the Swedish, Finnish and Lithuanian operations |
| Finland               |       |       | 1,677      |                                                          |   | Transition programs in  Sweden and Finland |
| Norway                |       |       | -380       |                                                          |   | — |
| Denmark               |       |       | -623       |                                                          |   | Implementation of  integration synergies in and refocusing of the Danish operations |
| Baltic countries      |       |       | 3,586      |                                                          |   | — |
| Eurasia               |       |       | 1,374      |                                                          |   | — |
| Russia                |       |       | 23         |                                                          |   | — |
| Turkey                |       |       | 192        |                                                          |   | — |
| International Carrier |       |       | -341       |                                                          |   | Implementation of  post-merger integration synergies in the international carrier operations,  Strategic refocusing of the international carrier operations |
| Holding               |       |       | 2,995      |                                                          |   | — |
| Corporate             |       |       | -5,527     |                                                          |   | — |
| **Total**             | ** ** | ** ** | **14,754** |                                                          |   |   |

 

136

----

**Notes to Consolidated Financial Statements (Continued)**

**29.**   Cash Flow Information (Continued)

Investments by class ofasset over the last ten-year period were as follows.

|                                              | ** ** | **January-December** | ** ** |
|----------------------------------------------|------------|----------------------|------------|
| **SEK in millions**                | ** ** | ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** | **2000** | ** ** | **1999** | ** ** | **1998** | ** ** | **1997** | ** ** | **1996** | ** ** |
| **CAPEX**                                    | ** ** | **11,583**           | ** ** | **10,331** | ** ** | **9,267** | ** ** | **14,345** | ** ** | **17,713** | ** ** | **16,580** | ** ** | **7,701** | ** ** | **7,663** | ** ** | **9,637** | ** ** | **8,304** | ** ** |
| Other intangible assets                      |       | 1,233                |       | 752 |   | 850 |   | 5,119 |   | 1,316 |   | 509 |   | 373 |   | 248 |   | 233 |   | 317 |   |
| Property                                     |       | 302                  |       | 103 |   | 196 |   | 237 |   | 269 |   | 552 |   | 53 |   | 370 |   | 1,478 |   | 477 |   |
| Plant and equipment                          |       | 10,048               |       | 9,476 |   | 8,221 |   | 8,989 |   | 16,128 |   | 15,519 |   | 7,275 |   | 7,045 |   | 7,926 |   | 7,510 |   |
| Mobile networks                              |       | 5,579                |       | 3,908 |   | 2,884 |   | 2,336 |   | 2,124 |   | 1,411 |   | 1,166 |   | 1,273 |   | 1,360 |   | 1,188 |   |
| Fixed networks                               |       | 3,954                |       | 3,485 |   | 2,855 |   | 4,527 |   | 7,022 |   | 4,115 |   | 3,364 |   | 2,158 |   | 3,023 |   | 3,367 |   |
| Other plant and equipment                    |       | 515                  |       | 2,083 |   | 2,482 |   | 2,126 |   | 6,982 |   | 9,993 |   | 2,745 |   | 3,614 |   | 3,543 |   | 2,955 |   |
| **Acquisitions and other investments**  | ** ** | **2,732**            | ** ** | **9,099** | ** ** | **2,851** | ** ** | **40,093** | ** ** | **3,022** | ** ** | **31,162** | ** ** | **4,444** | ** ** | **4,075** | ** ** | **1,227** | ** ** | **2,704** | ** ** |
| Asset retirement obligations                 |       | 194                  |       | 25 |   | 106 |   | — |   | — |   | — |   | — |   | — |   | — |   | — |   |
| Goodwill and fair value adjustments          |       | 2,466                |       | 8,495 |   | 2,413 |   | 30,929 |   | 448 |   | 22,893 |   | 335 |   | 223 |   | 50 |   | 740 |   |
| Shares and participations                    |       | 72                   |       | 579 |   | 332 |   | 9,164 |   | 2,574 |   | 8,269 |   | 4,109 |   | 3,852 |   | 1,177 |   | 1,964 |   |
| **Total**                                    | ** ** | **14,315**           | ** ** | **19,430** | ** ** | **12,118** | ** ** | **54,438** | ** ** | **20,735** | ** ** | **47,742** | ** ** | **12,145** | ** ** | **11,738** | ** ** | **10,864** | ** ** | **11,008** | ** ** |
|                                              |            |                      |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

Investments are broken down by business segments innote “Business Segments.” The provisional purchase price allocations for OrangeDenmark and Eesti Telekom were finalized in the first quarter of 2005, whichresulted in a restatement of certain preliminary figures recognized in 2004.

Changesin net debt, net borrowings and net interest-bearing liability over the lastten-year period were as follows.

|                                                            | ** ** | **December 31,** | ** ** |
|------------------------------------------------------------|------------|-----------------------|------------|
| **SEK in millions**                              | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** | **2000** | ** ** | **1999** | ** ** | **1998** | ** ** | **1997** | ** ** | **1996** | ** ** |
| **Opening balance**                                        | ** ** | **3,741**             | ** ** | **8,847** | ** ** | **25,034** | ** ** | **10,661** | ** ** | **20,235** | ** ** | **7,527** | ** ** | **6,767** | ** ** | **14,609** | ** ** | **13,534** | ** ** | **12,065** | ** ** |
| Increase (+)/Decrease (-) in long-term loans               |       | 7,578                 |       | -12,925 |   | -6,257 |   | 6,931 |   | 4,317 |   | 11,753 |   | 2,632 |   | -591 |   | 2,658 |   | 2,404 |   |
| Increase (+)/Decrease (-) in short-term loans              |       | -5,518                |       | 7,046 |   | -7,921 |   | 8,677 |   | -9,235 |   | 6,232 |   | -128 |   | -669 |   | 2,318 |   | 2,920 |   |
| Increase (-)/Decrease (+) in short-term investments        |       | -1,304                |       | -3,412 |   | -4,832 |   | 3,776 |   | -7,424 |   | 1,086 |   | -1,062 |   | 315 |   | -345 |   | 586 |   |
| Increase (-)/Decrease (+) in cash and bank                 |       | 555                   |       | -1,854 |   | -858 |   | -1,313 |   | -166 |   | -839 |   | -32 |   | 561 |   | -87 |   | -371 |   |
| **Change in net debt**                                     | ** ** | **1,311**             | ** ** | **-11,145** | ** ** | **-19,868** | ** ** | **18,071** | ** ** | **-12,508** | ** ** | **18,232** | ** ** | **1,410** | ** ** | **-384** | ** ** | **4,544** | ** ** | **5,539** | ** ** |
| Increase (-)/Decrease (+) in interest-bearing  receivables |       | 268                   |       | 6,561 |   | 3,383 |   | -1,564 |   | 4,101 |   | -5,803 |   | -2,163 |   | -2,258 |   | -298 |   | -426 |   |
| **Change in net borrowings**                               | ** ** | **1,579**             | ** ** | **-4,584** | ** ** | **-16,485** | ** ** | **16,507** | ** ** | **-8,407** | ** ** | **12,429** | ** ** | **-753** | ** ** | **-2,642** | ** ** | **4,246** | ** ** | **5,113** | ** ** |
| Increase (+)/Decrease (-) in pension provisions            |       | —                |       | -522 |   | 298 |   | -2,134 |   | -1,167 |   | 279 |   | 1,513 |   | -5,200 |   | -3,171 |   | -3,644 |   |
| **Change in net interest-bearing liability**               | ** ** | **1,579**             | ** ** | **-5,106** | ** ** | **-16,187** | ** ** | **14,373** | ** ** | **-9,574** | ** ** | **12,708** | ** ** | **760** | ** ** | **-7,842** | ** ** | **1,075** | ** ** | **1,469** | ** ** |
| **Closing  balance**                                       | ** ** | **5,320**             | ** ** | **3,741** | ** ** | **8,847** | ** ** | **25,034** | ** ** | **10,661** | ** ** | **20,235** | ** ** | **7,527** | ** ** | **6,767** | ** ** | **14,609** | ** ** | **13,534** | ** ** |
|                                                            |            |                       |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

137

----

**Notes to Consolidated Financial Statements (Continued)**

**29.**   Cash Flow Information (Continued)

Over the last ten-yearperiod, capital employed and operating capital developed as follows.

|                                                   | ** ** | **December 31,** | ** ** |
|---------------------------------------------------|------------|-----------------------|------------|
| **SEK in millions**                     | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** | **2000** | ** ** | **1999** | ** ** | **1998** | ** ** | **1997** | ** ** | **1996** | ** ** |
| Non-current assets                                |       | 163,094               |       | 152,099 |   | 153,042 |   | 172,812 |   | 94,914 |   | 91,340 |   | 53,487 |   | 49,198 |   | 49,471 |   | 47,399 |   |
| Current assets                                    |       | 40,681                |       | 39,873 |   | 37,018 |   | 33,844 |   | 33,277 |   | 31,375 |   | 23,117 |   | 18,080 |   | 16,439 |   | 15,116 |   |
| Non-interest-bearing liabilities                  |       | -25,782               |       | -25,828 |   | -28,375 |   | -29,569 |   | -25,871 |   | -21,014 |   | -16,956 |   | -16,436 |   | -13,042 |   | -13,901 |   |
| Non-interest-bearing provisions              |       | -15,564               |       | -13,402 |   | -14,775 |   | -18,182 |   | -10,749 |   | -7,826 |   | -7,242 |   | -6,002 |   | -5,329 |   | -4,042 |   |
| Non-interest-bearing financing                    |       | -41,346               |       | -39,230 |   | -43,150 |   | -47,751 |   | -36,620 |   | -28,840 |   | -24,198 |   | -22,438 |   | -18,371 |   | -17,943 |   |
| Dividend (for 2005 as proposed by the Board)      |       | -15,717               |       | -5,610 |   | -4,675 |   | -1,870 |   | -600 |   | -1,501 |   | -1,470 |   | -1,400 |   | -1,210 |   | -1,152 |   |
| **Total capital employed**                        | ** ** | **146,712**           | ** ** | **147,132** | ** ** | **142,235** | ** ** | **157,035** | ** ** | **90,971** | ** ** | **92,374** | ** ** | **50,936** | ** ** | **43,440** | ** ** | **46,329** | ** ** | **43,420** | ** ** |
| Shareholders’ equity                         |       | 127,049               |       | 121,133 |   | 112,393 |   | 108,829 |   | 59,885 |   | 55,988 |   | 32,893 |   | 29,344 |   | 25,487 |   | 24,413 |   |
| Minority interests                                |       | 8,645                 |       | 6,934 |   | 3,441 |   | 5,120 |   | 204 |   | 320 |   | 210 |   | 210 |   | 306 |   | 218 |   |
| Less dividend (for 2005 as proposed by the Board) |       | -15,717               |       | -5,610 |   | -4,675 |   | -1,870 |   | -600 |   | -1,501 |   | -1,470 |   | -1,400 |   | -1,210 |   | -1,152 |   |
| Long-term interest-bearing liabilities            |       | 20,520                |       | 12,942 |   | 25,867 |   | 32,124 |   | 25,193 |   | 20,876 |   | 9,123 |   | 6,491 |   | 7,082 |   | 4,424 |   |
| Current interest-bearing liabilities              |       | 6,215                 |       | 11,733 |   | 4,687 |   | 12,608 |   | 3,931 |   | 13,166 |   | 6,934 |   | 7,062 |   | 7,731 |   | 5,413 |   |
| Provisions for pensions                           |       | —                |       | — |   | 522 |   | 224 |   | 2,358 |   | 3,525 |   | 3,246 |   | 1,733 |   | 6,933 |   | 10,104 |   |
| External financing                                |       | 26,735                |       | 24,675 |   | 31,076 |   | 44,956 |   | 31,482 |   | 37,567 |   | 19,303 |   | 15,286 |   | 21,746 |   | 19,941 |   |
| **Total financing**                               | ** ** | **146,712**           | ** ** | **147,132** | ** ** | **142,235** | ** ** | **157,035** | ** ** | **90,971** | ** ** | **92,374** | ** ** | **50,936** | ** ** | **43,440** | ** ** | **46,329** | ** ** | **43,420** | ** ** |
| Interest-bearing financial non-current assets     |       | -2,172                |       | -2,448 |   | -6,112 |   | -8,419 |   | -7,510 |   | -4,968 |   | -5,563 |   | -5,561 |   | -4,401 |   | -4,058 |   |
| Interest-bearing current assets                   |       | -19,241               |       | -18,486 |   | -16,117 |   | -11,503 |   | -13,311 |   | -12,364 |   | -6,213 |   | -2,958 |   | -2,736 |   | -2,349 |   |
| **Operating  capital**                            | ** ** | **125,299**           | ** ** | **126,198** | ** ** | **120,006** | ** ** | **137,113** | ** ** | **70,150** | ** ** | **75,042** | ** ** | **39,160** | ** ** | **34,921** | ** ** | **39,192** | ** ** | **37,013** | ** ** |
|                                                   |            |                       |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

Operating capital isbroken down by business segments in note “Business Segments.” The provisionalpurchase price allocations for Orange Denmark and Eesti Telekom were finalizedin the first quarter of 2005, which resulted in a restatement of certain preliminaryfigures recognized in 2004.

**30.**   BusinessSegments

**Profit Center breakdown**

The Group’s operations are managed and reportedprimarily by country-based Profit Centers (PC). PC consolidation is based onthe same principles as for the Group as a whole. Inter-segment transactions arebased on commercial terms.

The country-based PCs have full profit responsibilityfor their business and are responsible for all operations, including marketing,sales, product and service development as well as production and networkoperations. The PCs make operational decisions within the framework ofcentrally established corporate policies and road maps.

Other operations comprise TeliaSonera InternationalCarrier and TeliaSonera Holding. TeliaSonera International Carrier is a commonoperations unit supporting the Group’s business in the Nordic and Baltic homemarkets by operating TeliaSonera’s capacity network on the internationalcarrier market. In 2004, the carrying value of International Carrier waswritten down by SEK 3,263 million. TeliaSonera Holding is responsible for theGroup’s non-core/non-strategic operations. The operations in Holding are beinggradually divested through sales or closing-down of operations.

138

----

**Notes to Consolidated Financial Statements (Continued)**

**30.**   Business Segments (Continued)

Corporate comprises Corporate Head Office, includingthe two operational units Marketing, Products and Services, and Networks andTechnology, which acts on behalf of the CEO by making corporate policies, bycoordinating TeliaSonera group matters and by exercising a strong centralcontrol to exploit scale advantages and synergies. Corporate also includeseliminations of inter-segment transfers and similar items.

Besidesnet sales and operating income, principal segment control and reportingconcepts are EBITDA excluding non-recurring items and operating capital,respectively (see definitions to “Ten-Year Summary” and section “Reconciliationof EBITDA excluding non-recurring items to operating income” below). No incomestatement items below operating income have been allocated to reportablesegments.

|                               | ** ** | **January-December 2005 or December 31, 2005** | ** ** |
|-------------------------------|------------|-------------------------------------------------------------------------|------------|
| **SEK in millions** | ** ** | ** **                                                              | ** ** | **Sweden** | ** ** | **Finland** | ** ** | **Norway** | ** ** | **Denmark** | ** ** | **Baltic  countries** | ** ** | **Eurasia** | ** ** | **Russia** | ** ** | **Turkey** | ** ** | **Other  operations** | ** ** | **Corporate** | ** ** | **Group** | ** ** |
|                               |            |                                                                         |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

| Net sales                                               |   |   | 38,960  |   |   |   | 16,308 |   |   |   | 7,481  |   |   |   | 7,178  |   |   |   | 9,293  |   |   |   | 6,367  |   |   |   | — |   |   |   | — |   |   |   | 4,922  |   |   |   | -2,848  | ** ** |   | **87,661**  | ** ** |
|---------------------------------------------------------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|---------|------------|--------|-------------|------------|
| External net sales                                      |   |   | 38,215  |   |   |   | 15,969 |   |   |   | 7,240  |   |   |   | 7,029  |   |   |   | 9,136  |   |   |   | 6,365  |   |   |   | — |   |   |   | — |   |   |   | 3,721  |   |   |   | -14     | ** ** |   | **87,661**  | ** ** |
| EBITDA excluding non-recurring items                    |   |   | 15,255  |   |   |   | 3,618  |   |   |   | 2,614  |   |   |   | 817    |   |   |   | 4,255  |   |   |   | 3,576  |   |   |   | -6     |   |   |   | -52    |   |   |   | 102    |   |   |   | -768    | ** ** |   | **29,411**  | ** ** |
| Non-recurring items                                     |   |   | -2,104  |   |   |   | -111   |   |   |   | — |   |   |   | 62     |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 275    |   |   |   | -25     | ** ** |   | **-1,903**  | ** ** |
| EBITDA                                                  |   |   | 13,151  |   |   |   | 3,507  |   |   |   | 2,614  |   |   |   | 879    |   |   |   | 4,255  |   |   |   | 3,576  |   |   |   | -6     |   |   |   | -52    |   |   |   | 377    |   |   |   | -793    | ** ** |   | **27,508**  | ** ** |
| Amortization, depreciation and impairment losses        |   |   | -4,687  |   |   |   | -3,273 |   |   |   | -932   |   |   |   | -1,059 |   |   |   | -2,172 |   |   |   | -763   |   |   |   | — |   |   |   | — |   |   |   | -331   |   |   |   | 29      | ** ** |   | **-13,188** | ** ** |
| Income from associated companies                        |   |   | -105    |   |   |   | 87     |   |   |   | — |   |   |   | 6      |   |   |   | 220    |   |   |   | — |   |   |   | 1,176  |   |   |   | 1,761  |   |   |   | 84     |   |   |   | 0       | ** ** |   | **3,229**   | ** ** |
| Operating income/loss                                   |   |   | 8,359   |   |   |   | 321    |   |   |   | 1,682  |   |   |   | -174   |   |   |   | 2,303  |   |   |   | 2,813  |   |   |   | 1,170  |   |   |   | 1,709  |   |   |   | 130    |   |   |   | -764    | ** ** |   | **17,549**  | ** ** |
| Operating capital                                       |   |   | 17,292  |   |   |   | 43,540 |   |   |   | 27,175 |   |   |   | 7,027  |   |   |   | 14,836 |   |   |   | 7,162  |   |   |   | 5,303  |   |   |   | 18,126 |   |   |   | -2,634 |   |   |   | -12,528 | ** ** |   | **125,299** | ** ** |
| of which Segment assets                                 |   |   | 32,201  |   |   |   | 46,839 |   |   |   | 29,082 |   |   |   | 9,911  |   |   |   | 15,821 |   |   |   | 8,324  |   |   |   | 5,314  |   |   |   | 18,198 |   |   |   | 3,926  |   |   |   | 12,746  | ** ** |   | **182,362** | ** ** |
| of which Segment liabilities                            |   |   | -14,909 |   |   |   | -3,299 |   |   |   | -1,907 |   |   |   | -2,884 |   |   |   | -985   |   |   |   | -1,162 |   |   |   | -11    |   |   |   | -72    |   |   |   | -6,560 |   |   |   | -25,274 | ** ** |   | **-57,063** | ** ** |
| Equity participation in associated companies  |   |   | 432     |   |   |   | 102    |   |   |   | — |   |   |   | 3      |   |   |   | 598    |   |   |   | — |   |   |   | 5,311  |   |   |   | 18,146 |   |   |   | 615    |   |   |   | 1       | ** ** |   | **25,208**  | ** ** |
| Investments                                             |   |   | 4,107   |   |   |   | 2,009  |   |   |   | 3,275  |   |   |   | 835    |   |   |   | 1,152  |   |   |   | 2,448  |   |   |   | 2      |   |   |   | — |   |   |   | 417    |   |   |   | 70      | ** ** |   | **14,315**  | ** ** |
| of which CAPEX                                          |   |   | 4,067   |   |   |   | 1,914  |   |   |   | 876    |   |   |   | 833    |   |   |   | 1,085  |   |   |   | 2,447  |   |   |   | 2      |   |   |   | — |   |   |   | 233    |   |   |   | 126     | ** ** |   | **11,583**  | ** ** |
| Number of employees                                     |   |   | 10,704  |   |   |   | 6,217  |   |   |   | 854    |   |   |   | 1,461  |   |   |   | 6,331  |   |   |   | 1,607  |   |   |   | 2      |   |   |   | 3      |   |   |   | 740    |   |   |   | 256     | ** ** |   | **28,175**  | ** ** |
| Average number of  full-time employees                  |   |   | 10,561  |   |   |   | 6,151  |   |   |   | 748    |   |   |   | 1,403  |   |   |   | 6,031  |   |   |   | 1,478  |   |   |   | 2      |   |   |   | 3      |   |   |   | 761    |   |   |   | 265     | ** ** |   | **27,403**  | ** ** |

 

139

----

**Notes to Consolidated Financial Statements (Continued)**

**30.**   Business Segments(Continued)

| ** **                                              | ** ** | **January-December 2004 or December 31, 2004** | ** ** |
|---------------------------------------------------------|------------|-------------------------------------------------------------------------|------------|
| **SEK in millions**                           | ** ** | ** **                                                              | ** ** | **Sweden** | ** ** | **Finland** | ** ** | **Norway** | ** ** | **Denmark** | ** ** | **Baltic  countries** | ** ** | **Eurasia** | ** ** | **Russia** | ** ** | **Turkey** | ** ** | **Other  operations** | ** ** | **Corporate** | ** ** | **Group** | ** ** |
| Net sales                                               |       | 40,448                                                                  |       |   | 18,267 |   |   |   | 6,299 |   |   |   | 4,495 |   |   |   | 5,868 |   |   |   | 4,084 |   |   |   | — |   |   |   | — |   |   |   | 5,422 |   |   |   | -2,946 | ** ** |   | **81,937** | ** ** |
| External net sales                                      |       | 39,667                                                                  |       |   | 17,898 |   |   |   | 6,142 |   |   |   | 4,389 |   |   |   | 5,810 |   |   |   | 4,082 |   |   |   | — |   |   |   | — |   |   |   | 3,987 |   |   |   | -38 | ** ** |   | **81,937** | ** ** |
| EBITDA excluding non-recurring items                    |       | 16,730                                                                  |       |   | 6,663 |   |   |   | 2,059 |   |   |   | 414 |   |   |   | 2,795 |   |   |   | 2,321 |   |   |   | 0 |   |   |   | 1 |   |   |   | 162 |   |   |   | -949 | ** ** |   | **30,196** | ** ** |
| Non-recurring items                                     |       | 645                                                                     |       |   | -35 |   |   |   | — |   |   |   | -142 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 177 |   |   |   | 0 | ** ** |   | **645** | ** ** |
| EBITDA                                                  |       | 17,375                                                                  |       |   | 6,628 |   |   |   | 2,059 |   |   |   | 272 |   |   |   | 2,795 |   |   |   | 2,321 |   |   |   | 0 |   |   |   | 1 |   |   |   | 339 |   |   |   | -949 | ** ** |   | **30,841** | ** ** |
| Amortization, depreciation and impairment losses        |       | -4,693                                                                  |       |   | -3,350 |   |   |   | -876 |   |   |   | -1,181 |   |   |   | -1,490 |   |   |   | -518 |   |   |   | — |   |   |   | — |   |   |   | -3,516 |   |   |   | 28 | ** ** |   | **-15,596** | ** ** |
| Income from associated companies                        |       | 14                                                                      |       |   | 0 |   |   |   | — |   |   |   | 0 |   |   |   | 494 |   |   |   | — |   |   |   | 653 |   |   |   | 972 |   |   |   | 1,413 |   |   |   | 2 | ** ** |   | **3,548** | ** ** |
| Operating income/loss                                   |       | 12,696                                                                  |       |   | 3,278 |   |   |   | 1,183 |   |   |   | -909 |   |   |   | 1,799 |   |   |   | 1,803 |   |   |   | 653 |   |   |   | 973 |   |   |   | -1,764 |   |   |   | -919 | ** ** |   | **18,793** | ** ** |
| Operating capital                                       |       | 20,530                                                                  |       |   | 43,192 |   |   |   | 23,075 |   |   |   | 6,350 |   |   |   | 15,496 |   |   |   | 4,790 |   |   |   | 3,376 |   |   |   | 13,029 |   |   |   | -887 |   |   |   | -2,753 | ** ** |   | **126,198** | ** ** |
| of which Segment assets                            |       | 34,432                                                                  |       |   | 46,690 |   |   |   | 24,601 |   |   |   | 9,595 |   |   |   | 16,255 |   |   |   | 5,435 |   |   |   | 3,385 |   |   |   | 13,030 |   |   |   | 6,707 |   |   |   | 10,908 | ** ** |   | **171,038** | ** ** |
| of which Segment liabilities                            |       | -13,902                                                                 |       |   | -3,498 |   |   |   | -1,526 |   |   |   | -3,245 |   |   |   | -759 |   |   |   | -645 |   |   |   | -9 |   |   |   | -1 |   |   |   | -7,594 |   |   |   | -13,661 | ** ** |   | **-44,840** | ** ** |
| Equity participation in associated companies  |       | 518                                                                     |       |   | 43 |   |   |   | — |   |   |   | 4 |   |   |   | 541 |   |   |   | — |   |   |   | 3,380 |   |   |   | 13,010 |   |   |   | 2,117 |   |   |   | 0 | ** ** |   | **19,613** | ** ** |
| Investments                                             |       | 4,087                                                                   |       |   | 2,522 |   |   |   | 866 |   |   |   | 4,624 |   |   |   | 4,885 |   |   |   | 1,710 |   |   |   | — |   |   |   | — |   |   |   | 729 |   |   |   | 7 | ** ** |   | **19,430** | ** ** |
| of which CAPEX                                          |       | 3,949                                                                   |       |   | 2,375 |   |   |   | 866 |   |   |   | 485 |   |   |   | 717 |   |   |   | 1,710 |   |   |   | — |   |   |   | — |   |   |   | 212 |   |   |   | 17 | ** ** |   | **10,331** | ** ** |
| Number of employees                                     |       | 11,256                                                                  |       |   | 6,795 |   |   |   | 709 |   |   |   | 1,730 |   |   |   | 6,222 |   |   |   | 1,272 |   |   |   | 1 |   |   |   | 3 |   |   |   | 814 |   |   |   | 280 | ** ** |   | **29,082** | ** ** |
| Average number of  full-time employees                  |       | 10,346                                                                  |       |   | 6,427 |   |   |   | 713 |   |   |   | 1,150 |   |   |   | 4,271 |   |   |   | 1,136 |   |   |   | 1 |   |   |   | 3 |   |   |   | 1,046 |   |   |   | 288 | ** ** |   | **25,381** | ** ** |
|                                                         |            |                                                                         |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

The provisional purchaseprice allocations for Orange Denmark and Eesti Telekom were finalized in thefirst quarter of 2005, which resulted in a restatement of certain preliminaryfigures recognized in 2004.

| ** **                                             | ** ** | **January-December 2003 or December 31, 2003** | ** ** |
|--------------------------------------------------------|------------|-------------------------------------------------------------------------|------------|
| **SEK in millions**                          | ** ** | ** **                                                              | ** ** | **Sweden** | ** ** | **Finland** | ** ** | **Norway** | ** ** | **Denmark** | ** ** | **Baltic  countries** | ** ** | **Eurasia** | ** ** | **Russia** | ** ** | **Turkey** | ** ** | **Other  operations** | ** ** | **Corporate** | ** ** | **Group** | ** ** |
| Net sales                                              |       | 42,601                                                                  |       |   | 17,697 |   |   |   | 6,081 |   |   |   | 3,278 |   |   |   | 5,881 |   |   |   | 2,742 |   |   |   | — |   |   |   | — |   |   |   | 7,478 |   |   |   | -3,333 | ** ** |   | **82,425** | ** ** |
| External net sales                                     |       | 41,607                                                                  |       |   | 17,324 |   |   |   | 6,011 |   |   |   | 3,188 |   |   |   | 5,823 |   |   |   | 2,740 |   |   |   | — |   |   |   | — |   |   |   | 5,809 |   |   |   | -77 | ** ** |   | **82,425** | ** ** |
| EBITDA excluding non-recurring items                   |       | 17,723                                                                  |       |   | 6,738 |   |   |   | 2,499 |   |   |   | 70 |   |   |   | 2,846 |   |   |   | 1,490 |   |   |   | 0 |   |   |   | 1 |   |   |   | 262 |   |   |   | -929 | ** ** |   | **30,700** | ** ** |
| Non-recurring items                                    |       | -341                                                                    |       |   | -71 |   |   |   | 0 |   |   |   | 0 |   |   |   | -50 |   |   |   | 0 |   |   |   | — |   |   |   | — |   |   |   | 1,796 |   |   |   | 1 | ** ** |   | **1,335** | ** ** |
| EBITDA                                                 |       | 17,382                                                                  |       |   | 6,667 |   |   |   | 2,499 |   |   |   | 70 |   |   |   | 2,796 |   |   |   | 1,490 |   |   |   | 0 |   |   |   | 1 |   |   |   | 2,058 |   |   |   | -928 | ** ** |   | **32,035** | ** ** |
| Amortization, depreciation and impairment losses  |       | -6,484                                                                  |       |   | -4,757 |   |   |   | -2,076 |   |   |   | -619 |   |   |   | -2,181 |   |   |   | -601 |   |   |   | — |   |   |   | — |   |   |   | -1,019 |   |   |   | 30 | ** ** |   | **-17,707** | ** ** |
| Income/Loss from associated companies             |       | -6                                                                      |       |   | 70 |   |   |   | 0 |   |   |   | -12 |   |   |   | 379 |   |   |   | 0 |   |   |   | 509 |   |   |   | 618 |   |   |   | -1,176 |   |   |   | — | ** ** |   | **382** | ** ** |
| Operating income/loss                                  |       | 10,892                                                                  |       |   | 1,980 |   |   |   | 423 |   |   |   | -561 |   |   |   | 994 |   |   |   | 889 |   |   |   | 509 |   |   |   | 619 |   |   |   | -137 |   |   |   | -898 | ** ** |   | **14,710** | ** ** |
| Operating capital                                      |       | 20,656                                                                  |       |   | 44,023 |   |   |   | 22,852 |   |   |   | 2,368 |   |   |   | 12,789 |   |   |   | 3,924 |   |   |   | 2,890 |   |   |   | 12,208 |   |   |   | 221 |   |   |   | -1,925 | ** ** |   | **120,006** | ** ** |
| of which Segment assets                           |       | 34,245                                                                  |       |   | 47,875 |   |   |   | 24,131 |   |   |   | 4,178 |   |   |   | 13,366 |   |   |   | 4,441 |   |   |   | 2,899 |   |   |   | 12,208 |   |   |   | 10,400 |   |   |   | 14,088 | ** ** |   | **167,831** | ** ** |
| of which Segment liabilities                           |       | -13,589                                                                 |       |   | -3,852 |   |   |   | -1,279 |   |   |   | -1,810 |   |   |   | -577 |   |   |   | -517 |   |   |   | -9 |   |   |   | 0 |   |   |   | -10,179 |   |   |   | -16,013 | ** ** |   | **-47,825** | ** ** |
| Equity participation in associated companies      |       | 492                                                                     |       |   | 45 |   |   |   | 0 |   |   |   | 2 |   |   |   | 2,999 |   |   |   | 0 |   |   |   | 3,028 |   |   |   | 12,208 |   |   |   | 1,626 |   |   |   | 1 | ** ** |   | **20,401** | ** ** |
| Investments                                            |       | 3,105                                                                   |       |   | 4,506 |   |   |   | 861 |   |   |   | 391 |   |   |   | 1,401 |   |   |   | 1,077 |   |   |   | — |   |   |   | — |   |   |   | 718 |   |   |   | 59 | ** ** |   | **12,118** | ** ** |
| of which CAPEX                                         |       | 3,105                                                                   |       |   | 2,529 |   |   |   | 861 |   |   |   | 391 |   |   |   | 797 |   |   |   | 1,027 |   |   |   | — |   |   |   | — |   |   |   | 500 |   |   |   | 57 | ** ** |   | **9,267** | ** ** |
| Number of employees                                    |       | 10,948                                                                  |       |   | 6,661 |   |   |   | 722 |   |   |   | 1,030 |   |   |   | 4,741 |   |   |   | 1,024 |   |   |   | 1 |   |   |   | 3 |   |   |   | 1,266 |   |   |   | 298 | ** ** |   | **26,694** | ** ** |
| Average number of  full-time employees                 |       | 10,476                                                                  |       |   | 5,984 |   |   |   | 718 |   |   |   | 1,014 |   |   |   | 5,011 |   |   |   | 962 |   |   |   | 1 |   |   |   | 3 |   |   |   | 1,756 |   |   |   | 263 | ** ** |   | **26,188** | ** ** |
|                                                        |            |                                                                         |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

140

----

**Notes to Consolidated Financial Statements (Continued)**

**30.**   Business Segments (Continued)

**Product areabreakdown**

The Group’s operations are reported secondarily byproduct area. Consolidation by product area is based on the same principles asfor the Group as a whole.

Fixed Communicationsinclude Internet and data services and equipment sales. Other includesnon-core/non-strategic operations and Corporate as well as eliminations of inter-segmenttransfers and similar items.

|                                                  | ** ** | **January-December or December 31,** | ** ** |
|--------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                       | ** ** | **2005**                                            | ** ** | **2004** | ** ** | **2003** | ** ** |
| **SEK in millions**                    | ** ** | ** **                                          | ** ** | **Mobile  Communi-  cations** | ** ** | **Fixed  Communi-  cations** | ** ** | **Other** | ** ** | **Group** | ** ** | **Mobile  Communi-  cations** | ** ** | **Fixed  Communi-  cations** | ** ** | **Other** | ** ** | **Group** | ** ** | **Mobile  Communi-  cations** | ** ** | **Fixed  Communi-  cations** | ** ** | **Other** | ** ** | **Group** | ** ** |
| External net sales                               |       |                                                | 44,721     |   |   |   | 39,233 |   |   | 3,707 | ** ** | **87,661** |   |   | 38,199 |   |   |   | 42,491 |   |   | 1,247 | ** ** | **81,937** |   |   | 35,889 |   |   |   | 44,114 |   |   | 2,422 | ** ** | **82,425** | ** ** |
| Amortization, depreciation and impairment losses |       |                                                | -5,846     |   |   |   | -7,042 |   |   | -300 | ** ** | **-13,188** |   |   | -5,312 |   |   |   | -10,262 |   |   | -22 | ** ** | **-15,596** |   |   | -7,477 |   |   |   | -9,718 |   |   | -512 | ** ** | **-17,707** | ** ** |
| Income/Loss from associated companies            |       |                                                | 2,795      |   |   |   | 350 |   |   | 84 | ** ** | **3,229** |   |   | 1,820 |   |   |   | 315 |   |   | 1,413 | ** ** | **3,548** |   |   | 975 |   |   |   | 587 |   |   | -1,180 | ** ** | **382** | ** ** |
| Operating income/loss                            |       |                                                | 13,333     |   |   |   | 4,850 |   |   | -634 | ** ** | **17,549** |   |   | 12,973 |   |   |   | 4,863 |   |   | 957 | ** ** | **18,793** |   |   | 9,905 |   |   |   | 5,577 |   |   | -772 | ** ** | **14,710** | ** ** |
| Operating capital                           |       |                                                | 102,099    |   |   |   | 39,986 |   |   | -16,786 | ** ** | **125,299** |   |   | 84,379 |   |   |   | 47,773 |   |   | -5,954 | ** ** | **126,198** |   |   | 88,342 |   |   |   | 34,045 |   |   | -2,381 | ** ** | **120,006** | ** ** |
| of which Segment assets                          |       |                                                | 115,066    |   |   |   | 52,548 |   |   | 14,748 | ** ** | **182,362** |   |   | 95,897 |   |   |   | 71,858 |   |   | 3,283 | ** ** | **171,038** |   |   | 98,237 |   |   |   | 52,098 |   |   | 17,496 | ** ** | **167,831** | ** ** |
| of which Segment liabilities                     |       |                                                | -12,967    |   |   |   | -12,562 |   |   | -31,534 | ** ** | **-57,063** |   |   | -11,518 |   |   |   | -24,085 |   |   | -9,237 | ** ** | **-44,840** |   |   | -9,895 |   |   |   | -18,053 |   |   | -19,877 | ** ** | **-47,825** | ** ** |
| Equity participation in associated companies     |       |                                                | 23,455     |   |   |   | 1,138 |   |   | 615 | ** ** | **25,208** |   |   | 16,936 |   |   |   | 560 |   |   | 2,117 | ** ** | **19,613** |   |   | 19,608 |   |   |   | -834 |   |   | 1,627 | ** ** | **20,401** | ** ** |
| Investments                                      |       |                                                | 8,623      |   |   |   | 5,206 |   |   | 486 | ** ** | **14,315** |   |   | 7,219 |   |   |   | 11,632 |   |   | 579 | ** ** | **19,430** |   |   | 5,149 |   |   |   | 6,425 |   |   | 544 | ** ** | **12,118** | ** ** |
| of which CAPEX                              |       |                                                | 6,222      |   |   |   | 5,001 |   |   | 360 | ** ** | **11,583** |   |   | 5,079 |   |   |   | 5,190 |   |   | 62 | ** ** | **10,331** |   |   | 4,088 |   |   |   | 4,854 |   |   | 325 | ** ** | **9,267** | ** ** |
| Number of employees                              |       |                                                | 10,451     |   |   |   | 16,728 |   |   | 996 | ** ** | **28,175** |   |   | 10,808 |   |   |   | 17,706 |   |   | 568 | ** ** | **29,082** |   |   | 9,022 |   |   |   | 16,371 |   |   | 1,301 | ** ** | **26,694** | ** ** |
| Average number of  full-time employees           |       |                                                | 10,167     |   |   |   | 16,210 |   |   | 1,026 | ** ** | **27,403** |   |   | 9,191 |   |   |   | 15,395 |   |   | 795 | ** ** | **25,381** |   |   | 8,478 |   |   |   | 16,005 |   |   | 1,705 | ** ** | **26,188** | ** ** |
|                                                  |            |                                                     |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

 

141

----

**Notes to Consolidated Financial Statements (Continued)**

**30.**   BusinessSegments (Continued)

The provisional purchaseprice allocations for Orange Denmark and Eesti Telekom were finalized in thefirst quarter of 2005, which resulted in a restatement of certain preliminaryfigures recognized in 2004.

**Reconciliationof EBITDA excluding non-recurring items to operating income**

TeliaSonera management uses “EBITDA excludingnon-recurring items” as one of the principal measures for monitoringprofitability in segment reporting. Management believes that, besides operatingincome, EBITDA excluding non-recurring items is also a measure commonlyreported and widely used by analysts, investors and other interested parties inthe telecommunications industry. Accordingly, EBITDA excluding non-recurringitems is presented to enhance the understanding of TeliaSonera’s historicaloperating performance.

EBITDA equals operating income before amortization,depreciation and impairment losses and excluding income from associatedcompanies. Non-recurring items include impairment losses, capital gains/losses,restructuring/phase-out of operations and personnel redundancy costs. Onlyimpairment losses, capital gains/losses, restructuring programs or similaritems that represent more than the equivalent to SEK 100 million on anindividual basis, are considered to be reported as non-recurring items. Whencalculating EBITDA excluding non-recurring items, management does not excludeitems that are part of the underlying business operations, even though suchitems may not recur in the near future.

EBITDA excluding non-recurring items, however, shouldnot be considered as an alternative to operating income as an indicator ofoperating performance or as an alternative to cash flows from operatingactivities as a measure of liquidity. EBITDA excluding non-recurring items isnot a measure of consolidated financial performance under IFRS or U.S. GAAP andmay not be comparable to other similarly titled measures for other companies.EBITDA excluding non-recurring items is not meant to be predictive of potentialfuture results.

Forillustrative purposes, the following table sets forth the relationship betweenoperating income, EBITDA and EBITDA excluding non-recurring items.

|                                                             | ** ** | **January-December** | ** ** |
|-------------------------------------------------------------|------------|----------------------|------------|
| **SEK in millions**                               | ** ** | ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| **EBITDA  excluding non-recurring items**                   | ** ** | **29,411**           | ** ** | **30,196** | ** ** | **30,700** | ** ** |
| Non-recurring  items                                        |       | -1,903               |       | 645 |   | 1,335 |   |
| **EBITDA**                                                  | ** ** | **27,508**           | ** ** | **30,841** | ** ** | **32,035** | ** ** |
| Amortization,  depreciation and impairment losses (Note 11) |       | -13,188              |       | -15,596 |   | -17,707 |   |
| Income from  associated companies (Note 12)                 |       | 3,229                |       | 3,548 |   | 382 |   |
| **Operating income**                                        | ** ** | **17,549**           | ** ** | **18,793** | ** ** | **14,710** | ** ** |
|                                                             |            |                      |            |  |  |  |  |  |  |

 

Thefollowing table sets forth non-recurring items.

|                                                                      | ** ** | **January-December** | ** ** |
|----------------------------------------------------------------------|------------|----------------------|------------|
| **SEK in millions**                                        | ** ** | ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Restructuring  charges, implementation costs to gain synergies, etc. |       | -1,964               |       | -617 |   | -368 |   |
| Certain  pension-related items                                       |       | —               |       | 741 |   | — |   |
| Net capital  gains/losses (excluding associated companies)           |       | 61                   |       | 521 |   | 1,703 |   |
| **Total**                                                            | ** ** | **-1,903**           | ** ** | **645** | ** ** | **1,335** | ** ** |
|                                                                      |            |                      |            |  |  |  |  |  |  |

 

142

----

**Notes to Consolidated Financial Statements (Continued)**

**30.**   Business Segments (Continued)

Restructuring charges and implementation costs to gainsynergies are excluding amortization, depreciation and impairment losses ofintangible and tangible assets but include reversals of provisions and foreignexchange rate effects.

EBITDA excludingnon-recurring items, non-recurring items, EBITDA and operating income arebroken down by country-based business segments in section “Profit Center breakdown”above.

**31.**   HumanResources

**Employees,salaries, and social security expenses**

Acquired operations in 2005 added 320 employees, ofwhich 144 in Chess Holding in Norway and 176 in MicroLink in the Baltics. Atthe same time, streamlining efforts resulted in a decrease of the number ofemployees by 1,227. Hence, the net change during 2005 was a decrease by 907employees to 28,175 (29,082) at year-end.

The breakdown by business segment is presented in note“Business Segments.” The number of employees net increased by 145 in ProfitCenter Norway, by 109 in the Baltic countries and by 335 in Eurasia. The numberof employees net decreased by 552 in Sweden, by 578 in Finland and by 269 inDenmark, while the other business segments in total reported a decrease by 97 employeesyear on year.

The average number offull-time employees was as follows.

|                 | ** ** | **January-December** | ** ** |
|-----------------|------------|----------------------|------------|
| ** **      | ** ** | **2005**             | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Country**     | ** ** | ** **           | ** ** | **Total** | ** ** | **of which men** | ** ** | **Total** | ** ** | **of which men** | ** ** | **Total** | ** ** | **of which men** | ** ** |
| Sweden          |       | 11,061               |       |   | 6,040 |   |   | 10,948 |   |   | 5,933 |   |   | 11,321 |   |   | 6,211 |   |   |
| Finland         |       | 6,369                |       |   | 3,277 |   |   | 6,750 |   |   | 3,666 |   |   | 6,408 |   |   | 4,103 |   |   |
| Norway          |       | 748                  |       |   | 516 |   |   | 718 |   |   | 486 |   |   | 738 |   |   | 496 |   |   |
| Denmark         |       | 1,409                |       |   | 916 |   |   | 1,160 |   |   | 614 |   |   | 1,048 |   |   | 679 |   |   |
| Lithuania       |       | 3,446                |       |   | 1,895 |   |   | 3,672 |   |   | 2,060 |   |   | 4,386 |   |   | 2,459 |   |   |
| Latvia          |       | 583                  |       |   | 338 |   |   | 632 |   |   | 369 |   |   | 632 |   |   | 377 |   |   |
| Estonia         |       | 2,045                |       |   | 885 |   |   | 38 |   |   | 34 |   |   | 48 |   |   | 39 |   |   |
| Kazakhstan      |       | 609                  |       |   | 307 |   |   | 401 |   |   | 196 |   |   | 300 |   |   | 123 |   |   |
| Azerbaijan      |       | 452                  |       |   | 197 |   |   | 382 |   |   | 206 |   |   | 351 |   |   | 177 |   |   |
| Georgia         |       | 180                  |       |   | 91 |   |   | 159 |   |   | 83 |   |   | 154 |   |   | 79 |   |   |
| Moldova         |       | 227                  |       |   | 111 |   |   | 185 |   |   | 91 |   |   | 149 |   |   | 68 |   |   |
| Russia          |       | 68                   |       |   | 46 |   |   | 79 |   |   | 32 |   |   | 89 |   |   | 53 |   |   |
| United Kingdom  |       | 48                   |       |   | 33 |   |   | 52 |   |   | 35 |   |   | 96 |   |   | 55 |   |   |
| Germany         |       | 35                   |       |   | 27 |   |   | 45 |   |   | 32 |   |   | 66 |   |   | 48 |   |   |
| United States   |       | 30                   |       |   | 25 |   |   | 32 |   |   | 29 |   |   | 53 |   |   | 39 |   |   |
| Sri Lanka       |       | —               |       |   | — |   |   | — |   |   | — |   |   | 198 |   |   | 160 |   |   |
| Other countries |       | 93                   |       |   | 65 |   |   | 128 |   |   | 88 |   |   | 151 |   |   | 86 |   |   |
| **Total**       | ** ** | **27,403**           | ** ** | ** ** | **14,769** |   | ** ** | **25,381** | ** ** | ** ** | **13,954** |   | ** ** | **26,188** | ** ** | ** ** | **15,252** |   |   |
|                 |            |                      |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

The Swedish operations were conducted virtuallythroughout the country, and operations outside Sweden in 24, 26 and 28countries during the years 2005, 2004 and 2003, respectively.

143

----

**Notes to Consolidated Financial Statements (Continued)**

**31.**   Human Resources (Continued)

The number of female andmale Group senior executives was as follows. Senior executives include ordinarymembers of boards of directors, presidents and those on executive managementteams at the corporate level, profit center level and company level.

|            | ** ** | **December 31,** | ** ** |
|------------|------------|-----------------------|------------|
| ** ** | ** ** | **2005**              | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Number** | ** ** | ** **            | ** ** | **Boards of  directors** | ** ** | **Other senior  executives** | ** ** | **Boards of  directors** | ** ** | **Other senior  executives** | ** ** | **Boards of  directors** | ** ** | **Other senior  executives** | ** ** |
| Women      |       |                  | 73         |   |   |   | 41 |   |   |   | 54 |   |   |   | 30 |   |   |   | 50 |   |   |   | 34 |   |   |
| Men        |       |                  | 222        |   |   |   | 111 |   |   |   | 219 |   |   |   | 116 |   |   |   | 224 |   |   |   | 124 |   |   |
|            |            |                       |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

Absencedue to illness, as a percentage of ordinary work hours excluding leave time andvacation, was distributed as follows in the Group’s Swedish units.

|                                                                                 | ** ** | **January-December** | ** ** |
|---------------------------------------------------------------------------------|------------|----------------------|------------|
| **Percent**                                                                     | ** ** | ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Total absence due  to illness                                                   |       |                 | 6.0        |   |   |   | 6.3 |   |   |   | 6.3 |   |   |
| Absence due to illness that concerns a period of 60  consecutive days or longer |       |                 | 4.2        |   |   |   | 4.5 |   |   |   | 4.2 |   |   |
| Total absence due to illness, men                                               |       |                 | 3.3        |   |   |   | 3.4 |   |   |   | 3.3 |   |   |
| Total absence due to illness, women                                             |       |                 | 9.2        |   |   |   | 9.8 |   |   |   | 9.7 |   |   |
| Total absence due to illness, employees 29 years of  age and younger            |       |                 | 5.6        |   |   |   | 4.5 |   |   |   | 5.6 |   |   |
| Total absence due to illness, employees 30-49  years of age                     |       |                 | 5.1        |   |   |   | 5.6 |   |   |   | 5.5 |   |   |
| Total absence due  to illness, employees 50 years of age and older              |       |                 | 7.1        |   |   |   | 7.3 |   |   |   | 7.4 |   |   |
|                                                                                 |            |                      |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

Salaries and otherremuneration for the Group, along with social security expenses, were asfollows.

|                                                | ** ** | **January-December** | ** ** |
|------------------------------------------------|------------|----------------------|------------|
| **SEK in millions**                  | ** ** | ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Salaries  and other remuneration**           | ** ** | **9,023**            | ** ** | **8,674** | ** ** | **8,460** | ** ** |
| **Social security expenses**                   | ** ** | ** **           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Employer’s social  security contributions |       | 1,970                |       | 1,902 |   | 1,950 |   |
| Pension expenses                               |       | 1,293                |       | 441 |   | 1,406 |   |
| **Total  social security expenses**            | ** ** | **3,263**            | ** ** | **2,343** | ** ** | **3,356** | ** ** |
| **Total**                                      | ** ** | **12,286**           | ** ** | **11,017** | ** ** | **11,816** | ** ** |
|                                                |            |                      |            |  |  |  |  |  |  |

 

Pension expenses for all boards of directors andpresidents in the TeliaSonera Group totaled SEK 15 million, SEK 17 million andSEK 23 million for the years 2005, 2004 and 2003, respectively. No pensionexpenses were recorded for external board members of the parent companyTeliaSonera AB.

144

----

**Notes to Consolidated Financial Statements (Continued)**

**31.**   Human Resources (Continued)

Salaries and otherremuneration were divided between boards of directors and presidents and otheremployees as follows. Variable salary was expensed in the respective year, butsettled in cash in the following year.

|                               | ** ** | **January-December**                                               | ** ** |
|-------------------------------|------------|--------------------------------------------------------------------|------------|
| **SEK in millions** | ** ** | **2005**                                                           | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Country**                   | ** ** | **Boards and  presidents  (of which  variable  salary)** | ** ** | **Other  employees** | ** ** | **Boards and  presidents  (of which  variable  salary)** | ** ** | **Other  employees** | ** ** | **Boards and  presidents  (of which  variable  salary)** | ** ** | **Other  employees** | ** ** |
| Sweden                        |       |                                                               | 23         | (3) |   |   | 4,472 |   |   |   | 28 | (5) |   |   | 4,467 |   |   |   | 40 | (10) |   |   | 4,576 |   |   |
| Finland                       |       |                                                               | 15         | (2) |   |   | 2,346 |   |   |   | 40 | (3) |   |   | 2,461 |   |   |   | 31 | (11) |   |   | 2,125 |   |   |
| Norway                        |       |                                                               | 7          | (1) |   |   | 413 |   |   |   | 4 | (1) |   |   | 366 |   |   |   | 3 | (1) |   |   | 417 |   |   |
| Denmark                       |       |                                                               | 2          | (0) |   |   | 690 |   |   |   | 17 | (4) |   |   | 566 |   |   |   | 4 | (1) |   |   | 437 |   |   |
| Lithuania                     |       |                                                               | 15         | (1) |   |   | 320 |   |   |   | 13 | (2) |   |   | 311 |   |   |   | 11 | (2) |   |   | 329 |   |   |
| Latvia                        |       |                                                               | 7          | (0) |   |   | 84 |   |   |   | 6 | (0) |   |   | 88 |   |   |   | 2 | (0) |   |   | 98 |   |   |
| Estonia                       |       |                                                               | 16         | (4) |   |   | 223 |   |   |   | 0 | (0) |   |   | 5 |   |   |   | 0 | (0) |   |   | 6 |   |   |
| Kazakhstan                    |       |                                                               | 5          | (0) |   |   | 55 |   |   |   | 2 | (0) |   |   | 28 |   |   |   | 1 | (0) |   |   | 19 |   |   |
| Azerbaijan                    |       |                                                               | 1          | (0) |   |   | 55 |   |   |   | 4 | (0) |   |   | 35 |   |   |   | 1 | (0) |   |   | 37 |   |   |
| Georgia                       |       |                                                               | 0          | (0) |   |   | 17 |   |   |   | 0 | (0) |   |   | 7 |   |   |   | 0 | (0) |   |   | 7 |   |   |
| Moldova                       |       |                                                               | 1          | (0) |   |   | 15 |   |   |   | 1 | (0) |   |   | 9 |   |   |   | 1 | (0) |   |   | 7 |   |   |
| Russia                        |       |                                                               | 0          | (0) |   |   | 21 |   |   |   | 0 | (0) |   |   | 19 |   |   |   | 0 | (0) |   |   | 17 |   |   |
| United Kingdom                |       |                                                               | 0          | (0) |   |   | 38 |   |   |   | 0 | (0) |   |   | 43 |   |   |   | 3 | (0) |   |   | 96 |   |   |
| Germany                       |       |                                                               | 3          | (1) |   |   | 21 |   |   |   | 2 | (0) |   |   | 27 |   |   |   | 2 | (0) |   |   | 8 |   |   |
| United States                 |       |                                                               | 0          | (0) |   |   | 28 |   |   |   | 2 | (0) |   |   | 28 |   |   |   | 2 | (0) |   |   | 49 |   |   |
| Sri Lanka                     |       |                                                               | —     | (—) |   |   | — |   |   |   | — | (—) |   |   | — |   |   |   | 1 | (0) |   |   | 11 |   |   |
| Other countries               |       |                                                               | 4          | (0) |   |   | 126 |   |   |   | 5 | (1) |   |   | 90 |   |   |   | 6 | (0) |   |   | 113 |   |   |
| **Total**                     | ** ** | ** **                                                         | **99**     | **(12)** | ** ** | ** ** | **8,924** |   | ** ** | ** ** | **124** | **(16)** | ** ** | ** ** | **8,550** |   | ** ** | ** ** | **108** | **(25)** | ** ** | ** ** | **8,352** |   |   |

 

**Remuneration to corporate officers**

***Principles***

As resolved by the Annual General Meeting,remuneration is paid to the chairman of the Board and directors in the amountof SEK 750,000 per year to the chairman, SEK 550,000 per year to the vicechairman and SEK 400,000 per year to each of the other directors, elected bythe Annual General Meeting. In addition, remuneration is paid to the chairmanof the Board’s Audit Committee in the amount of SEK 150,000 per year and SEK100,000 per year to each of the other members of the Audit Committee.Additional remuneration is also paid to the chairman of the Board’sRemuneration Committee in the amount of SEK 40,000 per year and SEK 20,000 peryear to each of the other members of the Remuneration Committee. Remunerationis paid monthly. No separate remuneration is paid to directors for othercommittee work. Directors appointed as employee representatives are not remunerated.

Remuneration to the Chief Executive Officer (CEO), theExecutive Vice President and other members of Executive Management consists ofa base salary, variable salary, certain taxable benefits and pension benefits. “Othermembers of Executive Management” refers to the six individuals who are directlyreporting to the CEO and which, along with the CEO and the Executive VicePresident, constituted TeliaSonera Executive Management on December 31,2005.

145

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**Notes to Consolidated Financial Statements (Continued)**

**31.**   Human Resources (Continued)

Variable salary to the CEO and to the Executive VicePresident is capped at an amount equal to 50 percent and 35 percent of the basesalary, respectively. For other members of Executive Management, the variablesalary is capped at 35 percent of the base salary. Variable salary is based onthe financial performance of the group, financial performance in each officer’sarea of responsibility and individual performance objectives.

In addition to general employment benefits,TeliaSonera offers the following benefits to members of Executive Management employedin Sweden: health insurance (including coverage for the spouse of an employee),an annual medical examination, a telephone subscription for private use free ofcharge and the choice of the following: use of a company car, domestic serviceor a salary increase of an equivalent amount. All benefits, except for healthinsurance for the employee and the annual medical examination, are treated astaxable income in Sweden. One other member of Executive Management employed inFinland has the standard local benefits provided to other TeliaSonera Finlandmanagers.

Pension benefits and otherbenefits to the CEO, the Executive Vice President and other members of ExecutiveManagement as described above form part of each individual’s total remunerationpackage.

***Remuneration andother benefits during the year***

| **SEK**                                                 | ** ** | ** ** | ** **     | **Board  remuneration  /Base salary** | ** ** | **Variable  salary** | ** ** | **Other  benefits** | ** ** | **Pension  expense** | ** ** | **Financial  instruments** | ** ** | **Other  remuneration** | ** ** | **Total**  | ** ** |
|---------------------------------------------------------|------------|------------|----------------|--------------------------------------------|------------|----------------------|------------|---------------------|------------|----------------------|------------|----------------------------|------------|-------------------------|------------|------------|------------|
| Chairman of the Board                                   |       |       | 860,998        |                                       |       | —               |       | —              |       | —               |       |                       | —     |                    |       |       | —     | ** ** |   | **860,998** | ** ** |
| Chief Executive Officer                                 |       |       | 6,490,000      |                                       |       | 1,298,000            |       | 619,196             |       | 6,407,245            |       |                       | —     |                    |       |       | —     | ** ** |   | **14,814,441** | ** ** |
| Executive Vice President                                |       |       | 3,570,000      |                                       |       | 499,800              |       | 133,038             |       | 1,724,203            |       |                       | —     |                    |       |       | —     | ** ** |   | **5,927,041** | ** ** |
| Other members of Executive Management (six individuals) |       |       | 14,728,804     |                                       |       | 1,818,796            |       | 801,345             |       | 9,076,124            |       |                       | —     |                    |       |       | —     | ** ** |   | **26,425,069** | ** ** |
| **Total**                                               | ** ** | ** ** | **25,649,802** |                                       | ** ** | **3,616,596**        | ** ** | **1,553,579**       | ** ** | **17,207,572**       | ** ** | ** **                 | **—** |                    | ** ** | ** ** | **—** | ** ** |   | **48,027,549** | ** ** |

 

Comments on thetable:

·       Boardremuneration to the Chairman includes remuneration for Audit Committee andRemuneration Committee work amounting to SEK 110,998.

·       Basesalary in 2006 amounts to SEK 6,814,500 (+5.0 percent) for the CEO, SEK3,800,000 (+6.4 percent) for the Executive Vice President and the equivalent toSEK 18,470,127 (+4.5 percent) for other members of Executive Management.

·       Variablesalary was expensed in 2005, but will be settled in cash in 2006. Actualvariable salary for 2005 corresponds to 20 percent of the base salary for theCEO, to 14 percent for the Executive Vice President and for other members ofExecutive Management to 7-15 percent of the base salary. Variable salarywith respect to performance in 2004 was paid in 2005 to the CEO in an amount ofSEK 2,215,000, to the Executive Vice President in an amount of SEK 844,900 andto other members of current Executive Management in an amount equivalent to SEK2,929,983.

·       Otherbenefits refer chiefly to company car benefit but also to a number of othertaxable items.

·       Pension expense refersmainly to defined benefit pension plans and to the expense that affectedearnings for the year. See further disclosures concerning the terms andconditions of pension benefits below.

146

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**Notes to Consolidated Financial Statements (Continued)**

**31.**   Human Resources (Continued)

***Stock options***

As of December 31,2005, TeliaSonera had no outstanding stock option programs.

***Pension benefits***

The age of retirement for the CEO is 60. Pensionbenefits between age 60 and 65 shall equal 70 percent of pensionable salary.Pension benefits after age 65 shall be paid in accordance with the ITP planwith supplementation of benefits for that part of salary exceeding 20 incomebase amounts, so that the total pension equals 50 percent of the pensionablesalary. Pensionable salary equals the base salary. All pension benefits areunassailable, i.e., are not subject to conditions concerning future employment.

The age of retirement for the Executive Vice Presidentis 60. Pension benefits between age 60 and 65 shall equal 70 percent ofpensionable salary. Pension benefits after age 65 shall be paid in accordancewith the ITP plan with supplementation of benefits, amounting to 32.5 percentof the pensionable salary, for that part of salary exceeding 20 income baseamounts. Pensionable salary equals the base salary. All pension benefits areunassailable, i.e. are not subject to conditions concerning future employment.

The age of retirement for other members of ExecutiveManagement employed in Sweden varies between 60, 62 and 65. Pension benefitsbetween age 60 (62) and 65, for those having a retirement age below 65, shallequal 70 percent of pensionable salary, except in one case where pensionbenefits equal 43 percent of pensionable salary. Pension benefits after age 65shall be paid in accordance with the ITP plan with supplementation of benefits,amounting to 32.5 percent of the pensionable salary, for that part of salaryexceeding 20 income base amounts except in one case where pension benefitsamounts to 32.5 percent for that part of the salary exceeding 30 income baseamounts. Pensionable salary includes base salary and variable salary for thoseemployed prior to July 1, 2002. For those employed after that date thepensionable salary equals the base salary. All pension benefits are unassailable,i.e. are not subject to conditions concerning future employment.

The age of retirement forone other member of Executive Management employed in Finland is 60. Pension benefitsas from the age of 60 shall be the same as they would have been, according tothe statutory TEL pension plan, at normal retirement age of 63 if the servicewith the company would have continued to that date. The pensionable salaryincludes variable salary.

***Severance pay***

The contract between the company and the CEO requiresboth parties to provide six months’ notice of resignation or termination ofemployment. Upon termination by the company, the CEO shall be entitled toseverance pay equal to his monthly base salary for a period of 24 months. Otherincome shall be deducted from the severance amount. If the CEO resigns hisposition, he shall not be entitled to severance pay.

The contract between thecompany and the Executive Vice President as well as other members of ExecutiveManagement, requires a period of notice of six months from the employee and 12months from the company with respect to resignation or termination ofemployment. Upon termination by the company, the employee shall be entitled toseverance pay equal to the monthly base salary for a period of 12 months. Otherincome shall be deducted against the salary during the notice period andagainst the severance amount. If the employee resigns his or her position, heor she shall not be entitled to severance pay.

147

----

**Notes to Consolidated Financial Statements (Continued)**

**31.**   HumanResources (Continued)

***Planning and decision process***

Remuneration to the CEO is decided by the Board ofDirectors based on the recommendation of the Remuneration Committee.

Remuneration to othermembers of Executive Management is approved by the Remuneration Committee,based on the CEO’s recommendation.

**Stock-based compensation**

***General***

At General Meetings of shareholders of TeliaSonera ABin 2002 and 2001, a number of stock option schemes were adopted. Under IFRSapplicable until 2004, TeliaSonera did not record an expense with respect tothese option schemes. The option schemes are described below, together with proforma information regarding net income and earnings per share, determined as ifTeliaSonera had accounted for its stock options at fair value.

Due to non-fulfillment of certain subscriptioncriteria, most of the option programs were cancelled in 2004 and 2003 and thesubscription periods for the two remaining programs expired on May 31 and June 30,2005, respectively. No option holder subscribed for shares under theseprograms.

Thefair value of the options was estimated at the date of grant using aBlack-Scholes option-pricing model. The estimated fair value of the options wasamortized to expense over the options’ vesting period. TeliaSonera’s aggregatepro forma information was as follows.

| SEK in millions                             | ** ** | ** ** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|-------------------------------------------------------|------------|------------|------------|----------|------------|----------|------------|----------|------------|
| Reported net  income                                  |       | 13,964     |       | 14,264   |       | 10,049   |       |
| Less:  Compensation expense                           |       | —     |       | —   |       | -18      |       |
| Pro forma net  income                                 |       | 13,964     |       | 14,264   |       | 10,031   |       |
| Pro forma basic and  diluted earnings per share (SEK) |       | 2.56       |       | 2.77     |       | 1.94     |       |

 

The Black-Scholes optionvaluation model was developed for use in estimating the fair value of tradedoptions, which have no vesting restrictions and are fully transferable. Inaddition, option valuation models require the input of highly subjectiveassumptions including the expected stock price volatility. Because most ofTeliaSonera’s stock options had characteristics significantly different fromthose of traded options, and because changes in the subjective inputassumptions can materially affect the fair value estimate, in management’sopinion, the existing models did not necessarily provide a reliable singlemeasure of the fair value of its employee stock options.

***2001 Employee stock option program (ESOP)***

The 2001 Annual General Meeting voted in favor ofestablishing an employee stock option program involving issue of debtinstruments with option rights to subscribe for shares in TeliaSonera AB. Theemployee stock options were allotted free of charge and all employees affectedwere given 1,000 options.

The program covered a total of no more than 21,000,000options that entitled the holder to acquire an equal number of shares inTeliaSonera AB. Furthermore; a maximum of 6,500,000 options could betransferred to the market in order to counteract the effect of payroll overheadincurred by the option 

148

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**Notes to Consolidated Financial Statements (Continued)**

**31.**   Human Resources (Continued)

program. Payroll overheadwould then be charged to expense, while consideration for options issued wouldbe booked directly to shareholders’ equity.

The 2001 stock options were exercisable from May 31,2003 to May 31, 2005. The exercise price was set at SEK 69. The terms ofthe ESOP might be recalculated as a consequence of share issues, etc.

The fair value of theseoptions, estimated at the date of grant, was SEK 273 million. The fair valuewas estimated using the following weighted-average assumptions. No options weregranted in 2005, 2004 and 2003.

| ** **                                     | ** ** | **2002** | ** ** | **2001** | ** ** |
|------------------------------------------------|------------|----------|------------|----------|------------|
| Fair market value  of underlying share (SEK)   |       | 45.60    |       | 62.00    |       |
| Expected  volatility of underlying share (%)   |       | 50.0     |       | 47.3     |       |
| Expected dividend  yield (%)                   |       | 0.4      |       | 0.3      |       |
| Risk-free  interest rate for expected term (%) |       | 4.59     |       | 4.24     |       |
| Expected life of options  (years)              |       | 2.4      |       | 3.0      |       |

 

For the years ended December 31, 2003, 2002 and2001, compensation costs amortized over the vesting period amounted to SEK 18million, SEK 121 million and SEK 91 million, respectively, totaling SEK 230million. Due to forfeitures and all options being fully vested, no compensationcost was incurred as from 2004.

Asummary of the 2001 stock option activity for the years ended December 31,2005, 2004 and 2003 is presented below.

|                                                  | ** ** | **Number of  options** | ** ** | **Weighted average  exercise price (SEK)** | ** ** |
|--------------------------------------------------|------------|-----------------------------|------------|-----------------------------------------------------------|------------|
| *Options  outstanding at December 31, 2002* | * *   | *14,302,000*                | * *   |                                                      | *69.00*    | * * |   |
| Forfeited                                        |       | -1,752,000                  |       |                                                      | 69.00      | * * |   |
| *Options  outstanding at December 31, 2003* | * *   | *12,550,000*                | * *   |                                                      | *69.00*    | * * |   |
| Forfeited                                        |       | -625,000                    |       |                                                      | 69.00      | * * |   |
| *Options  outstanding at December 31, 2004* | * *   | *11,925,000*                | * *   |                                                      | *69.00*    | * * |   |
| Cancelled                                        |       | -11,925,000                 |       |                                                      | 69.00      | * * |   |
| *Options outstanding at  December 31, 2005* |       | —                      | * *   |                                                      | *—*   | * * |   |

 

***2002 stock option scheme—series 2002/2005:A-B***

On November 4,2002, the extraordinary General Meeting of TeliaSonera AB (then Telia AB)adopted a resolution to issue warrants of series 2002/2005:A and 2002/2005:Bwarrants in exchange for Sonera Oyj warrants of series 1999A and 1999B,respectively, as follows.

| ** **  | ** ** | ** ** | ** **     | **Number of warrants**                             | ** ** | ** **                                                     | ** **  | ** **                                         | ** ** |
|-------------|------------|------------|----------------|--------------------------------------------------------------|------------|----------------------------------------------------------------|-------------|----------------------------------------------------|------------|
| **Series**  | ** ** | ** ** | ** **     | **Issued in the merger  exchange offer** | ** ** | **Issued in the merger  redemption offer** | ** **  | **Exercise price  per share (SEK)** | ** ** | **Subscription period** | ** ** |
| 2002/2005:A |       |       | 5,798,880      |                                                         |       |                                                           | 157,870     |                                               |       |   | 69.42 |   |   | June 1,  2001—June 30, 2005 |   |
| 2002/2005:B |       |       | 5,145,708      |                                                         |       |                                                           | 132,082     |                                               |       |   | 132.82 |   |   | June 1,  2003—June 30, 2005 |   |
| **Total**   | ** ** | ** ** | **10,944,588** |                                                         | ** ** | ** **                                                     | **289,952** |                                               |       |   |   |   | ** ** | ** ** | ** ** |

 

149

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**Notes to Consolidated Financial Statements (Continued)**

**31.**   Human Resources (Continued)

Each warrant entitled the warrant holder to subscribefor one and a half (1.5) new share in TeliaSonera AB. The exercise price aswell as the number of new shares that each warrant entitled to subscribe formight be recalculated as a consequence of share issues, cash dividends, etc.

Series 2002/2005:A warrants were immediatelyexercisable. On December 9, 2002, series A warrants were listed on theHelsinki Exchange, and an employee could sell the warrants on the stockexchange, at a price determined by public quotes. However, option holders couldexercise their options no later than June 30, 2005. In 2005, 2004 and2003, according to the said terms, the exercise price of the series A warrantswas adjusted by the 2004, 2003 and 2002 cash dividend per share, respectively.

The subscription rights could be exercised with series2002/2005:B warrants provided that certain financial performance conditionswere fulfilled. In May 2003, the Board of Directors of TeliaSonera ABconcluded that these subscription criteria were not fulfilled and consequentlydecided to cancel all warrants of series B.

Thefair value, in total SEK 49.4 million, of all 10,944,588 warrants issued in theexchange offer was recognized in 2002 as part of the purchase price for themerger. The fair value, in total SEK 0.7 million, of all 289,952 warrantsissued in the mandatory redemption offer, was recognized as part of thecompleted purchase price calculation recorded in 2003. The assumptions used incalculating the fair value of the 2002/2005 option schemes, at the date ofgrant, relating to the exercise price of warrants is presented in the tableabove. The other weighted average assumptions used in calculating the fairvalue were as follows. No options were granted in 2005 and 2004.

| ** **                                     | ** ** | **2003** | ** ** | **2002** | ** ** |
|------------------------------------------------|------------|----------|------------|----------|------------|
| Fair market value  of underlying share (SEK)   |       | 29.50    |       | 34.70    |       |
| Expected  volatility of underlying share (%)   |       | 50.0     |       | 50.0     |       |
| Expected dividend  yield (SEK)                 |       | 0.74     |       | 0.73     |       |
| Risk-free  interest rate for expected term (%) |       | 5.5      |       | 5.5      |       |
| Expected life of  warrants (years)             |       | 2.39     |       | 2.58     |       |

 

150

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**Notes to Consolidated Financial Statements (Continued)**

**31.**   Human Resources (Continued)

A summary of the series2002/2005 option schemes as of and changes in the years ended December 31,2005, 2004 and 2003 is presented below.

|                                                              | ** ** | **Number of  warrants** | ** ** | **Weighted average  exercise price (SEK)** | ** ** | **Weighted average  fair value (SEK)** | ** ** |
|--------------------------------------------------------------|------------|------------------------------|------------|-----------------------------------------------------------|------------|-------------------------------------------------------|------------|
| **Series 2002/2005:A**                                  | ** ** | ** **                   | ** ** |                                                      | ** ** | ** **                                            |       |   | ** ** | ** ** |   |
| *Warrants  outstanding on December 31, 2002*            | * *   | *5,798,880*                  | * *   | * *                                                  | *72.02*    | ** **                                            | * *   | * * | * * | ** ** |   |
| Granted (exercise  price higher than the share market price) |       | 157,870                      |       |                                                      | 72.02      | ** **                                            |       |   | 3.77 | ** ** |   |
| Forfeited                                                    |       | -100                         |       |                                                      | 71.62      | ** **                                            |       |   |   | ** ** |   |
| *Warrants  outstanding on December 31, 2003*            | * *   | *5,956,650*                  | * *   | * *                                                  | *71.62*    | ** **                                            | * *   | * * | * * | ** ** |   |
| *Warrants  outstanding on December 31, 2004*            | * *   | *5,956,650*                  | * *   | * *                                                  | *70.62*    | ** **                                            | * *   | * * | * * | ** ** |   |
| Cancelled                                                    |       | -5,956,650                   |       |                                                      | 69.42      | ** **                                            |       |   |   | ** ** |   |
| *Warrants  outstanding on December 31, 2005*            |       | —                       |       |                                                      | —     | ** **                                            |       |   |   | ** ** |   |
| **Series 2002/2005:B**                                  | ** ** | ** **                   | ** ** |                                                      | ** ** | ** **                                            |       |   | ** ** | ** ** |   |
| *Warrants  outstanding on December 31, 2002*            | * *   | *5,145,708*                  | * *   | * *                                                  | *132.82*   | ** **                                            | * *   | * * | * * | ** ** |   |
| Granted (exercise  price higher than the share market price) |       | 132,082                      |       |                                                      | 132.82     | ** **                                            |       |   | 0.87 | ** ** |   |
| Cancelled                                                    |       | -5,277,790                   |       |                                                      | 132.82     | ** **                                            |       |   |   | ** ** |   |
| *Warrants outstanding on  December 31, 2003*            |       | —                       |       |                                                      | —     | ** **                                            |       |   |   | ** ** |   |

 

***2002 stock option scheme—series 2002/2008:A-F and2002/2010:A-F***

On November 4,2002, the extraordinary General Meeting of TeliaSonera AB (then Telia AB)adopted a resolution to issue warrants of series 2002/2008:A-F and2002/2010:A-F in exchange for Sonera warrants of series 2000/A1-C2 and2000/A3-C4, as follows.

| **Number of warrants** | ** ** |
|----------------------------------|------------|
| **Series**                       | ** ** | ** ** | ** ** | **Issued in the merger  exchange offer** | ** ** | **Issued in the merger  redemption offer** | ** ** | **Exercise price  per share (SEK)** | ** ** | **Subscription period** | ** ** |
| 2002/2008:A                      |       |   | 2,433,350 |   |   |   | 73,800 |   |   |   | 347.38 |   |   | November 2,  2002—May 31, 2008 |   |
| 2002/2008:B                      |       |   | 2,433,350 |   |   |   | 73,800 |   |   |   | 347.38 |   |   | May 2,  2003—May 31, 2008 |   |
| 2002/2008:C                      |       |   | 4,866,700 |   |   |   | 147,600 |   |   |   | 347.38 |   |   | May 2,  2004—May 31, 2008 |   |
| 2002/2008:D                      |       |   | 30,600 |   |   |   | 3,600 |   |   |   | 108.17 |   |   | November 2, 2002—May 31,  2008 |   |
| 2002/2008:E                      |       |   | 30,600 |   |   |   | 3,600 |   |   |   | 108.17 |   |   | May 2,  2003—May 31, 2008 |   |
| 2002/2008:F                      |       |   | 61,200 |   |   |   | 7,200 |   |   |   | 108.17 |   |   | May 2,  2004—May 31, 2008 |   |
| 2002/2010:A                      |       |   | 915,146 |   |   |   | 2,501 |   |   |   | 49.09 |   |   | November 2,  2002—May 31, 2010 |   |
| 2002/2010:B                      |       |   | 915,146 |   |   |   | 2,501 |   |   |   | 49.09 |   |   | May 2,  2003—May 31, 2010 |   |
| 2002/2010:C                      |       |   | 1,830,292 |   |   |   | 5,002 |   |   |   | 49.09 |   |   | May 2,  2004—May 31, 2010 |   |
| 2002/2010:D                      |       |   | 571,500 |   |   |   | 3,000 |   |   |   | 33.64 |   |   | November 2,  2002—May 31, 2010 |   |
| 2002/2010:E                      |       |   | 571,500 |   |   |   | 3,000 |   |   |   | 33.64 |   |   | May 2,  2003—May 31, 2010 |   |
| 2002/2010:F                      |       |   | 1,143,000 |   |   |   | 6,000 |   |   |   | 33.64 |   |   | May 2,  2004—May 31, 2010 |   |
| **Total**                        | ** ** | ** ** | **15,802,384** |   | ** ** | ** ** | **331,604** |   |   |   |   |   | ** ** | ** ** | ** ** |

 

Each warrant entitled the warrant holder to subscribefor one and a half (1.5) new share in TeliaSonera AB. The exercise price as wellas the number of new shares that each warrant entitled to subscribe for mightbe recalculated as a consequence of share issues, cash dividends, etc.

151

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**Notes to Consolidated Financial Statements (Continued)**

**31.**   Human Resources (Continued)

The subscription rights could be exercised with series2002/2008:A-F and 2002/2010:A-F warrants provided that certain financialperformance conditions were fulfilled. In February and March 2004,the Board of Directors of TeliaSonera AB concluded that these subscriptioncriteria were not fulfilled and consequently decided to cancel all warrants ofseries 2002/2008 and 2002/2010.

Thefair value, in total SEK 177.5 million, of all 15,802,384 warrants issued inthe exchange offer was recognized in 2002 as part of the purchase price. Thefair value, in total SEK 0.9 million, of all 331,604 warrants issued in themandatory redemption offer, was recognized as part of the completed purchaseprice calculation for the merger recorded in 2003. The assumptions used incalculating the fair value of the 2002/2008 and the 2002/2010 option schemes,at the date of grant, relating to the exercise price of warrants is presentedin the table above. The other weighted average assumptions used were asfollows. No options were granted in 2004.

| ** **                                     | ** ** | **Series  2002/2008:A-F** | ** ** | **Series  2002/2010:A-F** | ** ** |
|------------------------------------------------|------------|---------------------------|------------|---------------------------|------------|
| ** **                                     | ** ** | **2003**                  | ** ** | **2002**                  | ** ** | **2003** | ** ** | **2002** | ** ** |
| Fair market value  of underlying share (SEK)   |       | 29.50                     |       | 34.70                     |       | 29.50 |   | 34.70 |   |
| Expected  volatility of underlying share (%)   |       | 50.0                      |       | 50.0                      |       | 50.0 |   | 50.0 |   |
| Expected dividend  yield (SEK)                 |       | 1.67                      |       | 1.74                      |       | 2.20 |   | 2.48 |   |
| Risk-free  interest rate for expected term (%) |       | 5.5                       |       | 5.5                       |       | 5.5 |   | 5.5 |   |
| Expected life of  warrants (years)             |       | 5.31                      |       | 5.49                      |       | 7.31 |   | 7.49 |   |

 

A summary of the 2002/2008and 2002/2010 stock option schemes as of and changes in the years ended December 31,2004 and 2003 is presented below:

|                                                              | ** ** | **Number of  warrants** | ** ** | **Weighted average  exercise price (SEK)** | ** ** | **Weighted average  fair value (SEK)** | ** ** |
|--------------------------------------------------------------|------------|------------------------------|------------|-----------------------------------------------------------|------------|-------------------------------------------------------|------------|
| **Series 2002/2008:A-C**                                | ** ** | ** **                   | ** ** |                                                      | ** ** | ** **                                            |       |   | ** ** | ** ** |   |
| *Warrants  outstanding on December 31, 2002*            | * *   | *9,733,400*                  | * *   | * *                                                  | *347.38*   | ** **                                            | * *   | * * | * * | ** ** |   |
| Granted (exercise  price higher than the share market price) |       | 295,200                      |       |                                                      | 347.38     | ** **                                            |       |   | 1.27 | ** ** |   |
| Forfeited                                                    |       | -584,000                     |       |                                                      | 347.38     | ** **                                            |       |   |   | ** ** |   |
| *Warrants  outstanding on December 31, 2003*            | * *   | *9,444,600*                  | * *   | * *                                                  | *347.38*   | ** **                                            | * *   | * * | * * | ** ** |   |
| Cancelled                                                    |       | -9,444,600                   |       |                                                      | 347.38     | ** **                                            |       |   |   | ** ** |   |
| *Warrants  outstanding on December 31, 2004*            | * *   | *—*                     | * *   | * *                                                  | *—*   | ** **                                            | * *   | * * | * * | ** ** |   |
| **Series 2002/2008:D-F**                                | ** ** | ** **                   | ** ** |                                                      | ** ** | ** **                                            |       |   | ** ** | ** ** |   |
| *Warrants  outstanding on December 31, 2002*            | * *   | *122,400*                    | * *   | * *                                                  | *108.17*   | ** **                                            | * *   | * * | * * | ** ** |   |
| Granted (exercise  price higher than the share market price) |       | 14,400                       |       |                                                      | 108.17     | ** **                                            |       |   | 7.04 | ** ** |   |
| Forfeited                                                    |       | -35,000                      |       |                                                      | 108.17     | ** **                                            |       |   |   | ** ** |   |
| *Warrants  outstanding on December 31, 2003*            | * *   | *101,800*                    | * *   | * *                                                  | *108.17*   | ** **                                            | * *   | * * | * * | ** ** |   |
| Cancelled                                                    |       | -101,800                     |       |                                                      | 108.17     | ** **                                            |       |   |   | ** ** |   |
| *Warrants outstanding on  December 31, 2004*            | * *   | *—*                     | * *   | * *                                                  | *—*   | ** **                                            | * *   | * * | * * | ** ** |   |

 

152

----

**Notes to Consolidated Financial Statements (Continued)**

**31.**   Human Resources (Continued)

|                                                              | ** ** | **Number of  warrants** | ** ** | **Weighted average  exercise price (SEK)** | ** ** | **Weighted average  fair value (SEK)** | ** ** |
|--------------------------------------------------------------|------------|------------------------------|------------|-----------------------------------------------------------|------------|-------------------------------------------------------|------------|
| **Series 2002/2010:A-C**                                | ** ** | ** **                   | ** ** |                                                      | ** ** | ** **                                            |       |   | ** ** | ** ** |   |
| *Warrants  outstanding on December 31, 2002*            | * *   | *3,660,584*                  | * *   | * *                                                  | *49.09*    | ** **                                            | * *   | * * | * * | ** ** |   |
| Granted (exercise  price higher than the share market price) |       | 10,004                       |       |                                                      | 49.09      | ** **                                            |       |   | 18.50 | ** ** |   |
| Forfeited                                                    |       | -241,352                     |       |                                                      | 49.09      | ** **                                            |       |   |   | ** ** |   |
| *Warrants  outstanding on December 31, 2003*            | * *   | *3,429,236*                  | * *   | * *                                                  | *49.09*    | ** **                                            | * *   | * * | * * | ** ** |   |
| Cancelled                                                    |       | -3,429,236                   |       |                                                      | 49.09      | ** **                                            |       |   |   | ** ** |   |
| *Warrants  outstanding on December 31, 2004*            | * *   | *—*                     | * *   | * *                                                  | *—*   | ** **                                            | * *   | * * | * * | ** ** |   |
| **Series 2002/2010:D-F**                                |       |                         |       |                                                      |       | ** **                                            |       |   |   | ** ** |   |
| *Warrants  outstanding on December 31, 2002*            | * *   | *2,286,000*                  | * *   | * *                                                  | *33.64*    | ** **                                            | * *   | * * | * * | ** ** |   |
| Granted (exercise  price lower than the share market price)  |       | 12,000                       |       |                                                      | 33.64      | ** **                                            |       |   | 22.35 | ** ** |   |
| Forfeited                                                    |       | -52,000                      |       |                                                      | 33.64      | ** **                                            |       |   |   | ** ** |   |
| *Warrants  outstanding on December 31, 2003*            | * *   | *2,246,000*                  | * *   | * *                                                  | *33.64*    | ** **                                            | * *   | * * | * * | ** ** |   |
| Cancelled                                                    |       | -2,246,000                   |       |                                                      | 33.64      | ** **                                            |       |   |   | ** ** |   |
| *Warrants outstanding on  December 31, 2004*            | * *   | *—*                     | * *   | * *                                                  | *—*   | ** **                                            | * *   | * * | * * | ** ** |   |

 

**32.   RestructuringCosts**

Majorrestructuring activities were as follows.

**Transitionprograms in Sweden and Finland**

In Sweden and Finland, management has launchedtransition programs to keep the profitability by achieving competitive costlevels and focusing of the service offerings. In Sweden, the restructuringprogram is expected to reduce annual costs by SEK 4-5 billion as of 2008.The changes are expected to result in a reduction of approximately 3,000employees. The program is proceeding as planned. At year-end 2005, 802employees had accepted an early retirement offer and 560 employees were transferredto the redeployment unit. The number of hired personnel decreased by 400. Intotal, employees and hired personnel in the operative units decreased by 15 percentduring 2005.

In Finland, streamlining efforts initiated in 2005 areexpected to lower annual costs by SEK 1 billion as of 2006. Late in the year,additional initiatives were taken and a turn-around program was launched. A newbusiness organization was introduced. The program accelerates the focusing ofthe service portfolio and the migration to the IP based network technologythrough investments in infrastructure and services. At the same time,additional efficiency measures were implemented to achieve competitive costlevels in the operations. The program is estimated to result in an additionalannual cost reduction of SEK 2 billion as of 2008.

153

----

**Notes to Consolidated Financial Statements (Continued)**

**32.**   Restructuring Costs (Continued)

Each of the elements ofthe transition costs would result in future cash outflows except for impairmentlosses, which are non-cash in nature. The material elements of the transitioncosts and related cash outflows were as follows.

|                                           | ** ** | **2005**   | ** ** |
|-------------------------------------------|------------|------------|------------|
| ** **                                | ** ** | **Sweden** | ** ** | **Finland** | ** ** |
| **SEK in millions**             | ** ** | ** ** | ** ** | **Transition  charges** | ** ** | **Cash  outflow** | ** ** | **Change in transition  provision** | ** ** | **Transition  charges** | ** ** | **Cash  outflow** | ** ** | **Change in transition  provision** | ** ** |
| *Transition  provision, opening balance*  | * *   |       | *—*   | * * |   |   | *—* | * * |   |   | *—* | * * |   |   | *—* | * * |   |   | *—* | * * |   |   | *—* | * * |   |
| Workforce  reduction                      |       |       | 1,837      | * * |   |   | -127 | * * |   |   | 1,710 | * * |   |   | 110 | * * |   |   | -107 | * * |   |   | 3 | * * |   |
| Reclassification  to pension provision    |       |       | -1,138     | * * |   |   | *—* | * * |   |   | -1,138 | * * |   |   | *—* | * * |   |   | *—* | * * |   |   | *—* | * * |   |
| Leasing  contracts, offices               |       |       | 267        | * * |   |   | -6 | * * |   |   | 261 | * * |   |   | *—* | * * |   |   | *—* | * * |   |   | *—* | * * |   |
| Exchange rate  differences                | * *   |       | *—*   | * * |   |   | *—* | * * |   |   | *—* | * * |   |   | *—* | * * |   |   | *—* | * * |   |   | *-1* | * * |   |
| *Transition  provision, closing balance*  | * *   |       | *—*   | * * |   |   | *—* | * * |   |   | *833* | * * |   |   | *—* | * * |   |   | *—* | * * |   |   | *2* | * * |   |
| Impairment losses  on plant and equipment |       |       | 405        | * * |   |   | *—* | * * |   |   |   | * * |   |   | *—* | * * |   |   | *—* | * * |   |   |   | * * |   |
| **Total charges/total cash outflow**      | ** ** | ** ** | **1,371**  | * * | ** ** | ** ** | **-133** | * * | ** ** | ** ** | ** ** | * * | ** ** | ** ** | **110** | * * | ** ** | ** ** | **-107** | * * | ** ** | ** ** | ** ** | * * |   |
|                                           |            |            |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

**Implementation ofintegration synergies in and refocusing of the Danish operations**

TeliaSonera’s Danish operations have continuously beenreviewed by management. During 2002, the Danish fixed network operations werereviewed in order to value their assets and determine a new focus. Looking forward,the operations were focused on telephony sales to businesses and consumers andwholesale network capacity to operators and service providers. Unprofitableproducts were discontinued or frozen to serve current customers under atransition period. Most of the workforce reduction was effectuated in the lastfew months of 2002, when the number of employees was reduced by approximately100 people and consultants and temporary staff were reduced by more than 100people. In terms of product offerings and workforce the restructuring programgained full effect at the end of 2003. Settlement of leasing and otherlong-term contracts will take place during the next three-year period.

Following the acquisition of Orange Denmark and torealize synergy gains, management in 2004 decided to integrate the Danishmobile operations previously run separately by Telia and Orange. Theintegration program involved branding, customer migration, new serviceportfolio, premises, personnel and handling of overlapping GSM networks andUMTS licenses. Personnel overlaps existed mainly within management,administration, network operations and product and services development. Atyear-end 2004, the two companies employed a workforce of 1,050 and notice wasgiven of a redundancy of 300 employees. The redundancy process began in 2005.

In 2005, management decided to further improveefficiency in the Danish operations by integrating the mobile operations TeliaMobile and the fixed network operations Telia Networks. The integration willdecrease annual costs and reduce the number of full-time positions byapproximately 110. Most activities are expected to be completed in 2006.

154

----

**Notes to Consolidated Financial Statements (Continued)**

**32.**   RestructuringCosts (Continued)

Under this programTeliaSonera recorded integration provisions and impairment charges related totangible assets, licenses and other intangible assets as well as a release of alicense fee liability. Each of the elements of the Danish integration costswould result in future cash outflows except for impairment losses and releases,which are non-cash in nature. The material elements of the integration costsand related cash outflows were as follows.

|                                                                      | ** ** | **2002**   | ** ** | **2002-2003**            | ** ** | **2004**          | ** ** | **2005**                                   | ** ** |
|----------------------------------------------------------------------|------------|------------|------------|--------------------------|------------|-------------------|------------|--------------------------------------------|------------|
| **SEK in millions**                                        | ** ** | ** ** | ** ** | **Integration  charges** | ** ** | **Cash  outflow** | ** ** | **Change in  integration  provision** | ** ** | **Additional  integration  charges** | ** ** | **Cash  outflow** | ** ** | **Change in  integration  provision** | ** ** | **Cash  outflow** | ** ** | **Change in  integration  provision** | ** ** |
| *Integration  provision, opening balance*                            | * *   |       | *—*   | * *                 |       |              | *—*   | * *                                   |       |   | *—* | * * |   |   | *—* | * * |   |   | *—* | * * |   |   | *250* | * * |   |   | *—* | * * |   |   | *528* | * * |   |
| Workforce reduction                                                  |       |       | 45         | * *                 |       |              | -54        | * *                                   |       |   | -9 | * * |   |   | 154 | * * |   |   | -1 | * * |   |   | 158 | * * |   |   | -70 | * * |   |   | -53 | * * |   |
| Leasing and  service contracts, technical sites                      |       |       | 113        | * *                 |       |              | -68        | * *                                   |       |   | 45 | * * |   |   | 2 | * * |   |   | -9 | * * |   |   | -37 | * * |   |   | -6 | * * |   |   | -6 | * * |   |
| Leasing  contracts, offices                                          |       |       | 11         | * *                 |       |              | -22        | * *                                   |       |   | -11 | * * |   |   | 22 | * * |   |   | — | * * |   |   | 20 | * * |   |   | -31 | * * |   |   | -15 | * * |   |
| Dismantling of  technical sites and offices                          |       |       | 157        | * *                 |       |              | -19        | * *                                   |       |   | 138 | * * |   |   | 176 | * * |   |   | — | * * |   |   | 176 | * * |   |   | -28 | * * |   |   | -28 | * * |   |
| Legal and other  expert fees, other costs                            |       |       | 193        | * *                 |       |              | -105       | * *                                   |       |   | 88 | * * |   |   | 10 | * * |   |   | -44 | * * |   |   | -35 | * * |   |   | -6 | * * |   |   | -6 | * * |   |
| Reversal, not  utilized                                              |       |       | —     | * *                 |       |              | —     | * *                                   |       |   | — | * * |   |   | — | * * |   |   | — | * * |   |   | — | * * |   |   | — | * * |   |   | -140 | * * |   |
| Exchange rate  differences                                           |       |       | —     | * *                 |       |              | —     | * *                                   |       |   | -1 | * * |   |   | -1 | * * |   |   | — | * * |   |   | -4 | * * |   |   | — | * * |   |   | 11 | * * |   |
| *Integration  provision, closing balance*                            | * *   |       | *—*   | * *                 |       |              | *—*   | * *                                   |       |   | *250* | * * |   |   | *—* | * * |   |   | *—* | * * |   |   | *528* | * * |   |   | *—* | * * |   |   | *291* | * * |   |
| Impairment losses  on and discards of intangible and tangible assets |       |       | 3,033      | * *                 |       |              | —     | * *                                   |       |   |   | * * |   |   | — | * * |   |   | — | * * |   |   |   | * * |   |   | — | * * |   |   |   | * * |   |
| Impairment losses  on licenses and other intangible assets           |       |       | —     | * *                 |       |              | —     | * *                                   |       |   |   | * * |   |   | 497 | * * |   |   | — | * * |   |   |   | * * |   |   | — | * * |   |   |   | * * |   |
| Release of  license fee liability                                    |       |       | —     | * *                 |       |              | —     | * *                                   |       |   |   | * * |   |   | -221 | * * |   |   | — | * * |   |   |   | * * |   |   | — | * * |   |   |   | * * |   |
| **Total charges/total cash  outflow**                                | ** ** | ** ** | **3,552**  | * *                 | ** ** | ** **        | **-268**   | * *                                   | ** ** | ** ** | ** ** | * * | ** ** | ** ** | **639** | * * | ** ** | ** ** | **-54** | * * | ** ** | ** ** | ** ** | * * | ** ** | ** ** | **-141** | * * | ** ** | ** ** | ** ** | * * |   |
|                                                                      |            |            |            |                          |            |                   |            |                                            |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

Possibilities to use alarger part of the Orange network than anticipated, which reduced the need fordismantling activities, and lower than expected redundancy payments enabled areversal of the integration provision in 2005.

**Implementation ofpost-merger integration synergies in the international carrier operations**

To realize post-merger synergy gains, management in2003 decided to integrate the international carrier operations previously runseparately by Telia and Sonera. Overlapping operations will be phased out andthe traffic moved over from leased capacity to the wholly owned network. Partsof Sonera’s operations in the United Kingdom, the United States, Sweden andGermany have been closed down. Under this program TeliaSonera recorded integrationprovisions, but to some extent costs were also expensed as incurred. Theintegration program also incurred impairment charges related to network 

155

----

**Notes to Consolidated Financial Statements (Continued)**

**32.**   Restructuring Costs (Continued)

capacity and equipment.The program activities are completed. The remaining part of the integrationprovision will be used later, when phasing out long-term contracts.

Eachof the elements of the international carrier integration costs would result infuture cash outflows except for impairment losses, which are non-cash innature. The material elements of the integration costs and related cash outflowswere as follows.

|                                                 | ** ** | **2003**   | ** ** | **2004**                 | ** ** | **2005**          | ** ** |
|-------------------------------------------------|------------|------------|------------|--------------------------|------------|-------------------|------------|
| **SEK in millions**                   | ** ** | ** ** | ** ** | **Integration  charges** | ** ** | **Cash  outflow** | ** ** | **Change in  integration  provision** | ** ** | **Cash  outflow** | ** ** | **Change in  integration  provision** | ** ** | **Cash  outflow** | ** ** | **Change in  integration  provision** | ** ** |
| *Integration  provision, opening balance*       | * *   |       | *—*   | * *                 |       |              | *—*   | * * |   |   | *—* | * * |   |   | *—* | * * |   |   | *327* | * * |   |   | *—* | * * |   |   | *329* | * * |   |
| Workforce  reduction                            |       |       | 27         | * *                 |       |              | -10        | * * |   |   | 17 | * * |   |   | -21 | * * |   |   | -21 | * * |   |   | — | * * |   |   | — | * * |   |
| Leasing and  service contracts, technical sites |       |       | 211        | * *                 |       |              | -3         | * * |   |   | 208 | * * |   |   | -32 | * * |   |   | 38 | * * |   |   | -35 | * * |   |   | -35 | * * |   |
| Leasing  contracts, offices                     |       |       | 66         | * *                 |       |              | -4         | * * |   |   | 62 | * * |   |   | -8 | * * |   |   | -8 | * * |   |   | -1 | * * |   |   | -1 | * * |   |
| Dismantling of  technical sites and offices     |       |       | 19         | * *                 |       |              | —     | * * |   |   | 19 | * * |   |   | — | * * |   |   | — | * * |   |   | -19 | * * |   |   | -19 | * * |   |
| Other costs                                     |       |       | 16         | * *                 |       |              | -1         | * * |   |   | 15 | * * |   |   | -2 | * * |   |   | -2 | * * |   |   | -1 | * * |   |   | -1 | * * |   |
| Reversal, not  utilized                         |       |       | —     | * *                 |       |              | —     | * * |   |   | — | * * |   |   | — | * * |   |   | -12 | * * |   |   | — | * * |   |   | -62 | * * |   |
| Exchange rate  differences, timing effects      |       |       | —     | * *                 |       |              | —     | * * |   |   | 6 | * * |   |   | — | * * |   |   | 7 | * * |   |   | — | * * |   |   | 29 | * * |   |
| *Integration  provision, closing balance*       | * *   |       | *—*   | * *                 |       |              | *—*   | * * |   |   | *327* | * * |   |   | *—* | * * |   |   | *329* | * * |   |   | *—* | * * |   |   | *240* | * * |   |
| Workforce  reduction                            |       |       | 8          | * *                 |       |              | -8         | * * |   |   |   | * * |   |   | — | * * |   |   |   | * * |   |   | — | * * |   |   |   | * * |   |
| Leasing and  service contracts, technical sites |       |       | 3          | * *                 |       |              | -3         | * * |   |   |   | * * |   |   | — | * * |   |   |   | * * |   |   | — | * * |   |   |   | * * |   |
| Leasing  contracts, offices                     |       |       | 4          | * *                 |       |              | -4         | * * |   |   |   | * * |   |   | — | * * |   |   |   | * * |   |   | — | * * |   |   |   | * * |   |
| Dismantling of  technical sites and offices     |       |       | 9          | * *                 |       |              | -9         | * * |   |   |   | * * |   |   | — | * * |   |   |   | * * |   |   | — | * * |   |   |   | * * |   |
| Impairment losses  on plant and equipment       |       |       | 54         | * *                 |       |              | —     | * * |   |   |   | * * |   |   | — | * * |   |   |   | * * |   |   | — | * * |   |   |   | * * |   |
| **Total charges/total cash outflow**            | ** ** | ** ** | **417**    | * *                 | ** ** | ** **        | **-42**    | * * | ** ** | ** ** | ** ** | * * | ** ** | ** ** | **-63** | * * | ** ** | ** ** | ** ** | * * | ** ** | ** ** | **-56** | * * | ** ** | ** ** | ** ** | * * |   |
|                                                 |            |            |            |                          |            |                   |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

**Redundancies in theSwedish, Finnish and Lithuanian operations**

The organization and control models introduced in 2003significantly increased efficiency and created potential to eliminate duplicatefunctions within several areas, like product and service development.Efficiency was also enhanced within administration and certain supportfunctions.

The management of TeliaSonera Sweden under thisprogram established a redundancy of approximately 1,200 employees, including500 hired personnel. TeliaSonera negotiated with the trade unions to determinewhich of the permanent employees were affected by the redundancy. Of theseemployees, approximately 300 have left Telia­Sonera Sweden or been redeployedwithin the Group. The remaining redundancies were handled through naturalattrition, tailored pension plans and within the framework of TeliaSoneraRedeployment, which manages redundancies in wholly-owned Swedish operations.

156

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**Notes to Consolidated Financial Statements (Continued)**

**32.**   Restructuring Costs (Continued)

In Finland, a redundancy of 400 employees wasdetermined after negotiations with the employee organizations. 176 permanentemployees were given notice and the remainder of the reduction was handled throughpension plans, non-renewal of temporary contracts and redeployment within theGroup.

In the Lithuanian fixed-line operations an efficiencyenhancement program was started in 2003 to further reduce personnel, operatingcosts and CAPEX. In the second half of 2003, the number of employees wasreduced by 478 to 3,586 at year-end, and in 2004, the workforce was reduced byanother 466 employees. The Lithuanian program also incurred impairment chargesrelated to real estate, network capacity and equipment.

Eachof the elements of the restructuring costs would result in future cash outflowsexcept for impairment losses, which are non-cash in nature. The materialelements of the restructuring costs and related cash outflows were as follows.

|                                                                     | ** ** | **2003**   | ** ** | **2004**                   | ** ** | **2005**          | ** ** |
|---------------------------------------------------------------------|------------|------------|------------|----------------------------|------------|-------------------|------------|
| **SEK in millions**                                       | ** ** | ** ** | ** ** | **Restructuring  charges** | ** ** | **Cash  outflow** | ** ** | **Change in  restructuring  provision** | ** ** | **Cash  outflow** | ** ** | **Change in  restructuring  provision** | ** ** | **Cash  outflow** | ** ** | **Change in  restructuring  provision** | ** ** |
| *Restructuring  provision, opening balance*                         | * *   |       | *—*   | * *                   |       |              | *—*   | * * |   |   | *—* | * * |   |   | *—* | * * |   |   | *190* | * * |   |   | *—* | * * |   |   | *10* | * * |   |
| Workforce  reduction                                                |       |       | 435        | * *                   |       |              | -44        | * * |   |   | 391 | * * |   |   | -127 | * * |   |   | -127 | * * |   |   | -7 | * * |   |   | -7 | * * |   |
| Reclassification  to pension provision                              |       |       | —     | * *                   |       |              | —     | * * |   |   | -173 | * * |   |   | — | * * |   |   | -8 | * * |   |   | — | * * |   |   | — | * * |   |
| Other costs                                                         |       |       | 4          | * *                   |       |              | -4         | * * |   |   | 0 | * * |   |   | -1 | * * |   |   | -1 | * * |   |   | — | * * |   |   | — | * * |   |
| Reversal, not  utilized                                             |       |       | —     | * *                   |       |              | —     | * * |   |   | -28 | * * |   |   | — | * * |   |   | -44 | * * |   |   | — | * * |   |   | -3 | * * |   |
| *Restructuring  provision, closing balance*                         | * *   |       | *—*   | * *                   |       |              | *—*   | * * |   |   | *190* | * * |   |   | *—* | * * |   |   | *10* | * * |   |   | — | * * |   |   | *—* | * * |   |
| Impairment losses  on and discards of property, plant and equipment |       |       | 120        | * *                   |       |              | —     | * * |   |   |   | * * |   |   | — | * * |   |   |   | * * |   |   | — | * * |   |   |   | * * |   |
| **Total charges/total cash outflow**                                | ** ** | ** ** | **559**    | * *                   | ** ** | ** **        | **-48**    | * * | ** ** | ** ** | ** ** | * * | ** ** | ** ** | **-128** | * * | ** ** | ** ** | ** ** | * * | ** ** | ** ** | **-7** | * * | ** ** | ** ** | ** ** | * * |   |
|                                                                     |            |            |            |                            |            |                   |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

** **

**Strategicrefocusing of the international carrier operations**

In 2002, TeliaSonera completed a comprehensive reviewof its international carrier operations. Management decided to change the strategicfocus of Telia International Carrier and significantly restructure itsoperations. As part of the restructuring program, management decided to closedown Telia International Carrier’s Asian operations as well as its domesticvoice reseller business in the United Kingdom and Germany, discontinue offeringdomestic network services in the United States and terminate its co-locationbusiness. TeliaSonera has also centralized Telia International Carrier’s sales,administration and customer care resources. Further, the strategic refocusingand restructuring has enabled Telia International Carrier to substantiallyscale down the number of offices and technical facilities, as well as led toreduced operating and maintenance costs and leased lines.

Management also estimated that, as part of therestructuring, Telia International Carrier would reduce its original workforceof approximately 800 persons by more than 50 percent, most of which wasexecuted in 2002 and 2003. Approximately half of the restructuring provisionwas used in 2003 and 2004. The remaining part will be used later during thephase-out of long-term contracts.

157

----

**Notes to Consolidated Financial Statements (Continued)**

**32.**   Restructuring Costs (Continued)

Each of the elements ofthe international carrier restructuring costs would result in future cashoutflows except for impairment losses, which are non-cash in nature. Thematerial elements of the restructuring costs and related cash outflows were asfollows.

|                                                          | ** ** | **2002**   | ** ** | **2002-2003**              | ** ** | **2004**          | ** ** | **2005**                                     | ** ** |
|----------------------------------------------------------|------------|------------|------------|----------------------------|------------|-------------------|------------|----------------------------------------------|------------|
| **SEK in millions**                            | ** ** | ** ** | ** ** | **Restructuring  charges** | ** ** | **Cash  outflow** | ** ** | **Change in  restructuring  provision** | ** ** | **Cash  outflow** | ** ** | **Change in  restructuring  provision** | ** ** | **Cash  outflow** | ** ** | **Change in  restructuring  provision** | ** ** |
| *Restructuring  provision, opening balance*              | * *   |       | *—*   | * *                   |       | *—*          | * *   |                                         | *—*   | * * |   |   | *—* | * * |   |   | *2,267* | * * |   |   | *—* | * * |   |   | *1,817* | * * |   |
| Workforce reduction                                      |       |       | 303        | * *                   |       | -205              |       |                                         | 103        | * * |   |   | -32 | * * |   |   | -72 | * * |   |   | -12 | * * |   |   | -12 | * * |   |
| Leasing and  service contracts, technical sites and land |       |       | 2,860      | * *                   |       | -893              |       |                                         | 1,967      | * * |   |   | -190 | * * |   |   | -489 | * * |   |   | -126 | * * |   |   | -177 | * * |   |
| Leasing contracts,  offices                              |       |       | 186        | * *                   |       | -33               |       |                                         | 166        | * * |   |   | -93 | * * |   |   | -81 | * * |   |   | -110 | * * |   |   | -110 | * * |   |
| Dismantling of  technical sites and offices              |       |       | 230        | * *                   |       | -55               |       |                                         | 188        | * * |   |   | -53 | * * |   |   | -53 | * * |   |   | -58 | * * |   |   | -58 | * * |   |
| Customer compensation                                    |       |       | 233        | * *                   |       | -66               |       |                                         | 167        | * * |   |   | -1 | * * |   |   | -101 | * * |   |   | — | * * |   |   | -52 | * * |   |
| Legal and other  expert fees                             |       |       | 151        | * *                   |       | -16               |       |                                         | 135        | * * |   |   | -8 | * * |   |   | -8 | * * |   |   | -3 | * * |   |   | -3 | * * |   |
| Timing effects                                           |       |       | —     | * *                   |       | —            |       |                                         | 68         | * * |   |   | — | * * |   |   | 36 | * * |   |   | — | * * |   |   | 76 | * * |   |
| Reversal, not  utilized                                  |       |       | —     | * *                   |       | —            |       |                                         | -427       | * * |   |   | — | * * |   |   | -103 | * * |   |   | — | * * |   |   | -169 | * * |   |
| Allocation of  previous year’s reversal             |       |       | —     | * *                   |       | —            |       |                                         | —     | * * |   |   | — | * * |   |   | 427 | * * |   |   | — | * * |   |   | 103 | * * |   |
| Exchange rate  differences                               |       |       | —     | * *                   |       | —            |       |                                         | -100       | * * |   |   | — | * * |   |   | -6 | * * |   |   | — | * * |   |   | 76 | * * |   |
| *Restructuring  provision, closing balance*              | * *   |       | *—*   | * *                   |       | *—*          | * *   |                                         | *2,267*    | * * |   |   | *—* | * * |   |   | *1,817* | * * |   |   | *—* | * * |   |   | *1,491* | * * |   |
| Impairment losses  on intangible and tangible assets     |       |       | 5,307      | * *                   |       | —            |       |                                         |       | * * |   |   | — | * * |   |   |   | * * |   |   | — | * * |   |   |   | * * |   |
| Write-downs of  financial assets                         |       |       | 824        | * *                   |       | —            |       |                                         |       | * * |   |   | — | * * |   |   |   | * * |   |   | — | * * |   |   |   | * * |   |
| **Total charges/total cash  outflow**                    | ** ** | ** ** | **10,094** | * *                   | ** ** | **-1,268**        | ** ** | ** **                                   | ** ** | * * | ** ** | ** ** | **-377** | * * | ** ** | ** ** | ** ** | * * | ** ** | ** ** | **-309** | * * | ** ** | ** ** | ** ** | * * |   |
|                                                          |            |            |            |                            |            |                   |            |                                              |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

Lower than expectedrestructuring costs, mainly due to the foreign operations but also toredundancies in Sweden and certain customer contracts, enabled reversals of therestructuring reserve in 2005, 2004 and 2003.

**33.**   Auditors’Fees and Services

**Remuneration**

The following remuneration was paid to auditors andaccounting firms for audits and other reviews based on applicable legislationand for advice and other assistance resulting from observations in the reviews.Remuneration was also paid for independent advice, using Group auditors orother audit firms, in the fields of Tax/Law and Corporate Finance as well asother consulting services. Audit fees to other accounting firms refer tosubsidiaries not audited by the Group auditors. Auditors are elected by theAnnual General Meeting.

158

----

**Notes to Consolidated Financial Statements (Continued)**

**33.**   Auditors’ Fees and Services (Continued)

PricewaterhouseCoopers ABhas served as TeliaSonera AB’s independent auditor (Group auditor) since April 28,2004. Ernst & Young AB and KPMG Bohlins AB jointly served asTeliaSonera’s independent auditors for fiscal 2003 and up to April 28,2004.

|                                                              | ** ** | **January-December** | ** ** |
|--------------------------------------------------------------|------------|----------------------|------------|
| **SEK in  millions**                                         | ** ** | ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| **PricewaterhouseCoopers AB**                                | ** ** | ** **           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Audits                                                       |       | 49                   |       | 41 |   | 9 |   |
| Audit-related  services                                      |       | 6                    |       | 0 |   | 2 |   |
| Tax services                                                 |       | 2                    |       | 1 |   | 2 |   |
| All other services                                           |       | 6                    |       | 3 |   | 3 |   |
| **Total**                                                    | ** ** | **63**               | ** ** | **45** | ** ** | **16** | ** ** |
| **Ernst & Young AB**                                | ** ** | ** **           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Audits                                                       |       | —               |       | 7 |   | 28 |   |
| Audit-related  services                                      |       | 2                    |       | 3 |   | 11 |   |
| Tax services                                                 |       | 1                    |       | 2 |   | 7 |   |
| All other  services                                          |       | 28                   |       | 24 |   | 0 |   |
| **Total**                                                    | ** ** | **31**               | ** ** | **36** | ** ** | **46** | ** ** |
| **KPMG Bohlins AB**                                          | ** ** | ** **           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Audits                                                       |       | —               |       | 10 |   | 25 |   |
| Audit-related services                                       |       | 1                    |       | 1 |   | 11 |   |
| Tax services                                                 |       | 6                    |       | 1 |   | 3 |   |
| All other  services                                          |       | 3                    |       | 5 |   | 1 |   |
| **Total**                                                    | ** ** | **10**               | ** ** | **17** | ** ** | **40** | ** ** |
| **Other accounting firms**                                   | ** ** | ** **           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Audits                                                       |       | 1                    |       | 3 |   | 1 |   |
| Audit-related  services, tax services and all other services |       | 6                    |       | 8 |   | 0 |   |
| **Total**                                                    | ** ** | **7**                | ** ** | **11** | ** ** | **1** | ** ** |
| **Total**                                                    | ** ** | **111**              | ** ** | **109** | ** ** | **103** | ** ** |
|                                                              |            |                      |            |  |  |  |  |  |  |

 

In addition, fees foraccounting firm services in 2005 capitalized as transaction costs in businesscombinations and similar transactions totaled SEK 11 million (tax services:KPMG SEK 4 million and other accounting firms SEK 1 million; other non-audit services:Ernst & Young SEK 6 million).

**Audit Committeepre-approval policies and procedures**

The Audit Committee of the Board of Directors ofTeliaSonera AB is responsible, among other matters, for the oversight ofTeliaSonera’s independent auditors, subject to the requirement of Swedish law.The Board of Directors has adopted a policy regarding pre-approval of audit andpermissible non-audit services provided by the independent auditors.

This policy outlines theprocedures for the approval of four categories of services provided by theindependent auditors, namely, audit, audit-related, tax and other services.

159

----

**Notes to Consolidated Financial Statements (Continued)**

**33.**   Auditors’ Fees and Services (Continued)

***Audit services***

Audit services include, among other things, the annualfinancial statement audit, quarterly reviews, information system and proceduralreviews, attestation engagements and other procedures required to be performedby the independent auditors to be able to form an opinion on TeliaSonera’s consolidatedfinancial statements.

The annual auditengagement is subject to the specific approval of the Audit Committee. TheAudit Committee monitors the audit services engagement on a quarterly basis andhas the authority to approve any changes in the terms, conditions or fees inthe annual audit engagement. All audit services, not specifically includedunder the audit services engagement letter, which exceed SEK 250,000 on aproject basis, must be approved by the Audit Committee or the chairman of theAudit Committee. Any other audit services, not specifically included under theaudit services engagement letter which cost less than SEK 250,000 on a projectbasis, may be approved by TeliaSonera’s chief executive officer or chieffinancial officer subject to such services being reported to the AuditCommittee in the following quarterly meeting of the Committee.

***Audit-related services***

Audit-related services comprise assurance and relatedservices that are reasonably related to the performance of the audit or reviewof TeliaSonera’s financial statements, including, among other things, certaindue diligence services, assistance with understanding and implementingaccounting and reporting requirements, financial audits of employee benefitplans, audit procedures required to comply with regulatory reporting matters,and assistance with internal control reporting requirements.

All audit-related servicesto be provided by the independent auditors, which individually exceed SEK250,000 on a project basis, must be approved by the Audit Committee or thechairman of the Audit Committee. Any audit-related services which cost lessthan SEK 250,000 on a project basis may be approved by the chief executiveofficer or chief financial officer subject to such services being reported tothe Audit Committee in the following quarterly meeting of the Committee.

***Tax services***

Tax services consist of services such as taxcompliance, tax planning assistance and general tax advice.

All tax services to beprovided by the independent auditors, which individually exceed SEK 250,000 ona project basis, must be approved by the Audit Committee or the chairman of theAudit Committee. Any tax services which cost less than SEK 250,000 on a projectbasis may be approved by the chief executive officer or chief financial officersubject to such services being reported to the Audit Committee in the followingquarterly meeting of the Committee.

***Any other services***

As a general rule any other services to beprovided by the independent auditors are either prohibited or require thespecific approval of the Audit Committee or the chairman of the AuditCommittee.

Any services pre-approvedby the chairman of the Audit Committee must be reported to the full AuditCommittee at the next scheduled meeting of the Committee.

160

----

**Notes to Consolidated Financial Statements (Continued)**

**34.**   BusinessCombinations

**Acquisition ofChess Holding**

***Description of and reasons for the acquisition***

On November 7, 2005, TeliaSonera for cashconsideration acquired 91.2 percent of the shares in Vollvik Gruppen AS (nowrenamed TeliaSonera Chess Holding AS) in Norway. After making a voluntary offerat the same price per share for the remaining shares, TeliaSonera held all buta small fraction of the shares in Chess Holding at December 31, 2005.

The acquisition has been accounted for using thepurchase method of accounting. Under this method, TeliaSonera has allocated thetotal purchase price to assets acquired and liabilities assumed based on theirrespective fair values. The determination of fair values has been made usinggenerally accepted procedures. The results of the operations in Chess Holdinghave been included in the consolidated financial statements as of November 7,2005.

Chess Holding owns 100percent of the mobile service provider Chess/Sense in Norway with 396,000subscribers at the end of October 2005. The acquisition strengthensTeliaSonera’s position on the Norwegian mobile market and emphasizesTeliaSonera’s ability to progress successfully with its strategy to enhancegrowth in the home markets. The transaction is expected to be earnings and cashflow accretive to TeliaSonera, before any synergies. The synergies are mostlyrelated to increased utilization of NetCom’s network. Chess/Sense continues tooperate as a service provider under its own brand on the Norwegian market.

***Financial effects***

In the period November 7—December 31, 2005, Chess Holding contributed net sales ofSEK 208 million and net income of SEK 19 million to the Group.

Thefollowing table shows the TeliaSonera Group pro forma net sales, net income andearnings per share, including fair value adjustments, had the acquisition takenplace at January 1, 2005.

| ** **                                                               | ** ** | **January—December 2005** | ** ** |
|--------------------------------------------------------------------------|------------|-------------------------------------|------------|
| **SEK in millions, except per share data** | ** ** | ** **                          | ** ** | **TeliaSonera  Group** | ** ** | **Chess  Holding** | ** ** | **TeliaSonera  Group pro forma** | ** ** |
| Pro forma net  sales                                                     |       |                                | 87,661     |   |   |   | 1,036 |   |   |   | 88,697 |   |   |
| Pro forma net  income                                                    |       |                                | 13,694     |   |   |   | 38 |   |   |   | 13,732 |   |   |
| Pro forma basic and  diluted earnings per share (SEK)                    |       |                                | 2.56       |   |   |   | 0.01 |   |   |   | 2.57 |   |   |
|                                                                          |            |                                     |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

**Purchaseconsideration, goodwill and cash-flow effects**

Detailsof purchase consideration and goodwill were as follows.

| **SEK in millions**                                | ** ** | ** ** | ** ** | ** ** | ** ** |
|--------------------------------------------------------------|------------|------------|------------|------------|------------|
| **Purchase  consideration**                                  |       |       |       |
| Basic purchase  consideration                                |       | 2,048      |       |
| Estimated  additional purchase consideration                 |       | 186        |       |
| Transaction  related direct expenses                         |       | 19         |       |
| **Total  purchase consideration**                            | ** ** | **2,253**  | ** ** |
| Less fair value  of net assets acquired (as specified below) |       | -164       |       |
| **Goodwill**                                                 | ** ** | **2,089**  | ** ** |

 

161

----

**Notes to Consolidated Financial Statements (Continued)**

**34.**   Business Combinations (Continued)

Transaction related direct expenses capitalized byTeliaSonera in connection with the acquisition represent bankers’ fees as wellas transaction related legal and accounting fees, and other direct fees and expenses.

Total purchase consideration and the determination offair values of assets acquired and liabilities assumed is based on preliminaryappraisal; thus, such values and goodwill are subject to refinement.

Thecash-flow effects were as follows.

| **SEK in millions**            | ** ** | ** ** | ** ** | ** ** | ** ** |
|------------------------------------------|------------|------------|------------|------------|------------|
| Total cash  purchase consideration       |       | 2,054      |       |
| Less acquired  cash and cash equivalents |       | -199       |       |
| **Net cash outflow from  acquisition**   | ** ** | **1,855**  | ** ** |

 

***Assets acquired and liabilities assumed***

Bookvalues and fair values of assets acquired and liabilities assumed were as follows.

| **SEK in millions**         | ** ** | ** ** | ** ** | **Book value** | ** ** | **Fair value  adjustments** | ** ** | **Fair value** | ** ** |
|---------------------------------------|------------|------------|------------|---------------------|------------|----------------------------------|------------|---------------------|------------|
| Trade names                           |       |       | 4          |                |       |                             | —     |                |       |   | 4 |   |   |
| Licenses                              |       |       | 7          |                |       |                             | —     |                |       |   | 7 |   |   |
| Subscriber  contracts                 |       |       | 248        |                |       |                             | 136        |                |       |   | 384 |   |   |
| Equipment, tools  and installations   |       |       | 4          |                |       |                             | —     |                |       |   | 4 |   |   |
| Deferred tax  assets                  |       |       | 86         |                |       |                             | -9         |                |       |   | 77 |   |   |
| Inventories                           |       |       | 3          |                |       |                             | —     |                |       |   | 3 |   |   |
| Receivables and  other current assets |       |       | 247        |                |       |                             | —     |                |       |   | 247 |   |   |
| Cash and cash  equivalents            |       |       | 199        |                |       |                             | —     |                |       |   | 199 |   |   |
| **Total  assets acquired**            | ** ** | ** ** | **798**    |                | ** ** | ** **                       | **127**    |                | ** ** | ** ** | **925** |   |   |
| Deferred tax  liabilities             |       |       | -99        |                |       |                             | -39        |                |       |   | -138 |   |   |
| Long-term  liabilities                |       |       | -388       |                |       |                             | —     |                |       |   | -388 |   |   |
| Short-term  liabilities               |       |       | -235       |                |       |                             | —     |                |       |   | -235 |   |   |
| **Total  liabilities assumed**        | ** ** | ** ** | **-722**   |                | ** ** | ** **                       | **-39**    |                | ** ** | ** ** | **-761** |   |   |
| **Net assets acquired**               | ** ** | ** ** | **76**     |                | ** ** | ** **                       | **88**     |                | ** ** | ** ** | **164** |   |   |

 

There were no purchasedin-process research and development assets acquired nor any collateral pledgedand contingent liabilities arising from the acquisition.

**Acquisitionof Orange Denmark and Eesti Telekom**

***General***

On October 11, 2004,TeliaSonera acquired Orange’s mobile operations in Denmark (Orange Denmark).The previously associated company AS Eesti Telekom became a majority-ownedsubsidiary of TeliaSonera as of De-cember 28, 2004. The determination of fairvalues of assets acquired and liabilities assumed as presented in TeliaSonera’s2004 Annual Report was based on preliminary appraisal. After finalizing thevaluations and taking into account the additional Eesti Telekom shares acquiredin the first quarter of 2005 as a result of the mandatory public offer, the followingamendments have been made.

162

----

**Notes to Consolidated Financial Statements (Continued)**

**34.**   Business Combinations (Continued)

***Purchase consideration and additional goodwill***

Detailsof purchase consideration and additional goodwill were as follows.
|                                                                                          | ** ** | **Orange Denmark** | ** ** | **Eesti Telekom** | ** ** |
|------------------------------------------------------------------------------------------|------------|-------------------------|------------|------------------------|------------|
| ** **                                                                               | ** ** | **2004**                | ** ** | **2004**               | ** ** | **2005** | ** ** |
| **SEK in millions**                                                            | ** ** | ** **              | ** ** | **Reported**           | ** ** | **Adjustments** | ** ** | **Restated** | ** ** | **Reported** | ** ** | **Adjustments** | ** ** | **Restated** | ** ** | **Additional  acquisition** | ** ** | **Reported** | ** ** |
| **Purchase consideration**                                                               |       |                    |       |                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash consideration                                                                       |       |                    | 5,522      |                   |       |   | — |   |   |   | 5,522 |   |   |   | 472 |   |   |   | — |   |   |   | 472 |   |   |   | 23 |   |   |   | 495 |   |   |
| Consideration in terms of new share issue (prior to  2004)                               |       |                    | —     |                   |       |   | — |   |   |   | — |   |   |   | 1,843 |   |   |   | — |   |   |   | 1,843 |   |   |   | — |   |   |   | 1,843 |   |   |
| Transaction related direct expenses                                                      |       |                    | 26         |                   |       |   | — |   |   |   | 26 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 8 |   |   |   | 8 |   |   |
| **Total purchase consideration**                                                    | ** ** | ** **              | **5,548**  |                   | ** ** | ** ** | **—** |   | ** ** | ** ** | **5,548** |   | ** ** | ** ** | **2,315** |   | ** ** | ** ** | **—** |   | ** ** | ** ** | **2,315** |   | ** ** | ** ** | **31** |   | ** ** | ** ** | **2,346** |   |   |
| Less fair value of net assets acquired (for 2004 as  specified below)               |       |                    | -1,685     |                   |       |   | -243 |   |   |   | -1,928 |   |   |   | -1,655 |   |   |   | -20 |   |   |   | -1,675 |   |   |   | -12 |   |   |   | -1,687 |   |   |
| Less amortization of fair values before the company  becoming a subsidiary               |       |                    | —     |                   |       |   | — |   |   |   | — |   |   |   | -142 |   |   |   | 20 |   |   |   | -122 |   |   |   | — |   |   |   | -122 |   |   |
| Less goodwill (net of amortization until 2003) before  the company becoming a subsidiary |       |                    | —     |                   |       |   | — |   |   |   | — |   |   |   | -515 |   |   |   | — |   |   |   | -515 |   |   |   | — |   |   |   | -515 |   |   |
| **Additional  goodwill**                                                                 | ** ** | ** **              | **3,863**  |                   | ** ** | ** ** | **-243** |   | ** ** | ** ** | **3,620** |   | ** ** | ** ** | **3** |   | ** ** | ** ** | **—** |   | ** ** | ** ** | **3** |   | ** ** | ** ** | **19** |   | ** ** | ** ** | **22** |   |   |
|                                                                                          |            |                         |            |                        |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

***Assets acquired and liabilities assumed***

Bookvalues and fair values of assets acquired and liabilities assumed were as follows.
|                                                                      | ** ** | **Orange Denmark** | ** ** | **Eesti Telekom** | ** ** |
|----------------------------------------------------------------------|------------|-------------------------|------------|------------------------|------------|
| **SEK in millions**                                        | ** ** | ** **              | ** ** | **Book   value**  | ** ** | **Preliminary   fair value  adjustments** | ** ** | **Final   fair value  adjustments** | ** ** | **Restated  fair value** | ** ** | **Book   value** | ** ** | **Preliminary   fair value  adjustments** | ** ** | **Final   fair value  adjustments** | ** ** | **Restated  fair value** | ** ** |
| Trade names                                                          |       | —                  |       |                   | —     |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 101 |   |   |   | 40 |   |   |   | 141 |   |   |
| Patents, licenses and rights of way                                  |       | 1,133                   |       |                   | -629       |   |   |   | — |   |   |   | 504 |   |   |   | 52 |   |   |   | — |   |   |   | — |   |   |   | 52 |   |   |
| Interconnect and roaming agreements                                  |       | —                  |       |                   | —     |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 1,004 |   |   |   | -352 |   |   |   | 652 |   |   |
| Subscriber contracts                                                 |       | —                  |       |                   | 536        |   |   |   | — |   |   |   | 536 |   |   |   | — |   |   |   | 2,891 |   |   |   | -404 |   |   |   | 2,487 |   |   |
| Buildings, land and land improvements                                |       | 628                     |       |                   | -258       |   |   |   | — |   |   |   | 370 |   |   |   | 207 |   |   |   | 180 |   |   |   | -64 |   |   |   | 323 |   |   |
| Mobile networks                                                      |       | 618                     |       |                   | -326       |   |   |   | — |   |   |   | 292 |   |   |   | 449 |   |   |   | 365 |   |   |   | -266 |   |   |   | 548 |   |   |
| Fixed networks                                                       |       | —                  |       |                   | —     |   |   |   | — |   |   |   | — |   |   |   | 465 |   |   |   | 198 |   |   |   | — |   |   |   | 663 |   |   |
| Equipment, tools and installations                                   |       | 422                     |       |                   | -241       |   |   |   | — |   |   |   | 181 |   |   |   | 42 |   |   |   | 20 |   |   |   | — |   |   |   | 62 |   |   |
| Investments in associated companies and other equity  holdings  |       | 1                       |       |                   | —     |   |   |   | — |   |   |   | 1 |   |   |   | 12 |   |   |   | — |   |   |   | — |   |   |   | 12 |   |   |
| Deferred tax asset                                                   |       | 365                     |       |                   | —     |   |   |   | 243 |   |   |   | 608 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |
| Other financial fixed assets                                         |       | —                  |       |                   | —     |   |   |   | — |   |   |   | — |   |   |   | 11 |   |   |   | — |   |   |   | — |   |   |   | 11 |   |   |
| Inventories                                                          |       | 23                      |       |                   | —     |   |   |   | — |   |   |   | 23 |   |   |   | 72 |   |   |   | — |   |   |   | — |   |   |   | 72 |   |   |
| Receivables and other current assets                                 |       | 596                     |       |                   | —     |   |   |   | — |   |   |   | 596 |   |   |   | 432 |   |   |   | — |   |   |   | — |   |   |   | 432 |   |   |
| Cash and cash equivalents                                            |       | 183                     |       |                   | —     |   |   |   | — |   |   |   | 183 |   |   |   | 840 |   |   |   | — |   |   |   | — |   |   |   | 840 |   |   |
| **Total assets acquired**                                            | ** ** | **3,969**               | ** ** | ** **             | **-918**   |   | ** ** | ** ** | **243** |   | ** ** | ** ** | **3,294** |   | ** ** | ** ** | **2,582** |   | ** ** | ** ** | **4,759** |   | ** ** | ** ** | **-1,046** |   | ** ** | ** ** | **6,295** |   |   |
| Revaluation reserve                                                  |       | —                  |       |                   | —     |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | -1,641 |   |   |   | 543 |   |   |   | -1,098 |   |   |
| Minority interests                                                   |       | —                  |       |                   | —     |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | -3,776 |   |   |   | 523 |   |   |   | -3,253 |   |   |
| Other provisions                                                     |       | —                  |       |                   | —     |   |   |   | — |   |   |   | — |   |   |   | -3 |   |   |   | — |   |   |   | — |   |   |   | -3 |   |   |
| Long-term liabilities                                                |       | -553                    |       |                   | —     |   |   |   | — |   |   |   | -553 |   |   |   | -4 |   |   |   | — |   |   |   | — |   |   |   | -4 |   |   |
| Short-term liabilities                                               |       | -813                    |       |                   | —     |   |   |   | — |   |   |   | -813 |   |   |   | -262 |   |   |   | — |   |   |   | — |   |   |   | -262 |   |   |
| **Total liabilities assumed**                                        | ** ** | **-1,366**              | ** ** | ** **             | **—** |   | ** ** | ** ** | **—** |   | ** ** | ** ** | **-1,366** |   | ** ** | ** ** | **-269** |   | ** ** | ** ** | **-5,417** |   | ** ** | ** ** | **1,066** |   | ** ** | ** ** | **-4,620** |   |   |
| **Net  assets acquired**                                             | ** ** | **2,603**               | ** ** | ** **             | **-918**   |   | ** ** | ** ** | **243** |   | ** ** | ** ** | **1,928** |   | ** ** | ** ** | **2,313** |   | ** ** | ** ** | **-658** |   | ** ** | ** ** | **20** |   | ** ** | ** ** | **1,675** |   |   |
|                                                                      |            |                         |            |                        |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

163

----

**Notes to Consolidated Financial Statements (Continued)**

**35.**   Specification ofShareholdings and Participations

**Associatedcompanies**

|                                                                                    | ** ** | ** **        | ** ** | ** **         | ** ** | **Par value in** | ** ** | **Equity  participation in  consolidated  accounts** | ** ** | **Book value in  each parent  company** | ** ** |
|------------------------------------------------------------------------------------|------------|-------------------|------------|--------------------|------------|----------------------------|------------|-----------------------------------------------------------|------------|--------------------------------------------------------|------------|
| **Associated company,**                                                       | ** ** | **Participation** | ** ** | **Number of** | ** ** | **local currency**    | ** ** | **2005**                                                  | ** ** | **2004**                                               | ** ** | **2005** | ** ** | **2004** | ** ** |
| **Corp. Reg. No., registered office**                          | ** ** | ** **        | ** ** | **(%)**            | ** ** | **shares**                 | ** ** | **(in millions)**                                    | ** ** | **SEK in millions**                          | ** ** |
| **Parent company holdings**                                                        | ** ** |              | ** ** | ** **         |       |                       | ** ** | ** **                                                |       |                                                   | ** ** | ** ** |   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Swedish companies**                                                              | ** ** |              | ** ** | ** **         |       |                       | ** ** | ** **                                                |       |                                                   | ** ** | ** ** |   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Overseas Telecom AB, 556528-9138, Stockholm                                        |       |              | 65         | ** **         |       |                       | 1,180,575  | ** **                                                |       |                                                   | SEK  118   | ** ** |   | 318 | ** ** | 504 | ** ** | 198 | ** ** | 198 | ** ** |
| isMobile AB, 556575-0014, Luleå                                               |       |              | 50         | ** **         |       |                       | 996,008    | ** **                                                |       |                                                   | SEK  0     | ** ** |   | 0 | ** ** | 0 | ** ** | 0 | ** ** | 0 | ** ** |
| Lokomo Systems AB, 556580-3326, Stockholm                                          |       |              | 40         | ** **         |       |                       | 676,504    | ** **                                                |       |                                                   | SEK  0     | ** ** |   | 1 | ** ** | 1 | ** ** | 0 | ** ** | 0 | ** ** |
| Telefos AB, 556523-6865, Stockholm                                                 |       |              | 26         | ** **         |       |                       | 2,560,439  | ** **                                                |       |                                                   | SEK  0     | ** ** |   | 256 | ** ** | 177 | ** ** | 104 | ** ** | 104 | ** ** |
| SNPAC Swedish Number Portability Administrative  Centre AB, 556595-2925, Stockholm |       |              | 20         | ** **         |       |                       | 400        | ** **                                                |       |                                                   | SEK  0     | ** ** |   | 3 | ** ** | 5 | ** ** | 1 | ** ** | 1 | ** ** |
| Service Factory SF AB, 556575-5682, Stockholm                                      |       |              | 19         | ** **         |       |                       | 1,620,960  | ** **                                                |       |                                                   | SEK  1     | ** ** |   | 0 | ** ** | 0 | ** ** | 0 | ** ** | 20 | ** ** |
| Other operating, dormant and divested companies                                    |       |              |       | ** **         |       |                       |       | ** **                                                |       |                                                   |       | ** ** |   | — | ** ** | 287 | ** ** | — | ** ** | 0 | ** ** |
| **Companies outside Sweden**                                                       |       |              |       | ** **         |       |                       | ** ** | ** **                                                |       |                                                   |       | ** ** |   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Drutt Corp., 3186891, Wilmington, DE                                               |       |              | 30         | ** **         |       |                       | 1,000,000  | ** **                                                |       |                                                   | USD  0     | ** ** |   | 6 | ** ** | 6 | ** ** | 3 | ** ** | 15 | ** ** |
| OAO Telecominvest, St. Petersburg                                                  |       |              | 26         | ** **         |       |                       | 4,262,165  | ** **                                                |       |                                                   | RUR  43    | ** ** |   | 1,294 | ** ** | 865 | ** ** | 700 | ** ** | 700 | ** ** |
| Other operating, dormant and divested companies                                    |       |              |       | ** **         |       |                       | ** ** | ** **                                                |       |                                                   |       | ** ** |   | — | ** ** | 1,045 | ** ** | — | ** ** | 1,474 | ** ** |
| **Total  parent company**                                                          | ** ** |              | ** ** | ** **         |       |                       | ** ** | ** **                                                |       |                                                   | ** ** | ** ** |   | ** ** | ** ** | ** ** | ** ** | **1,006** | ** ** | **2,512** | ** ** |
|                                                                                    |            |                   |            |                    |            |                            |            |                                                           |            |                                                        |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

164

----

**Notes to Consolidated Financial Statements (Continued)**

**35.**   Specification of Shareholdings and Participations(Continued)

|                                                             | ** ** | ** **        | ** ** | ** **         | ** ** | **Par value in** | ** ** | **Equity  participation in  consolidated  accounts** | ** ** | **Book value in  each parent  company** | ** ** |
|-------------------------------------------------------------|------------|-------------------|------------|--------------------|------------|----------------------------|------------|-----------------------------------------------------------|------------|--------------------------------------------------------|------------|
| **Associated company,**                                | ** ** | **Participation** | ** ** | **Number of** | ** ** | **local currency**    | ** ** | **2005**                                                  | ** ** | **2004**                                               | ** ** | **2005** | ** ** | **2004** | ** ** |
| **Corp. Reg. No., registered office**   | ** ** | ** **        | ** ** | **(%)**            | ** ** | **shares**                 | ** ** | **(in millions)**                                    | ** ** | **SEK in millions**                          | ** ** |
| **Subsidiaries’ holdings**                             | ** ** |              | ** ** | ** **         |       | ** **                 | ** ** |                                                      | ** ** | ** **                                             |       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Swedish companies**                                       | ** ** |              | ** ** | ** **         |       | ** **                 | ** ** |                                                      | ** ** | ** **                                             |       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Svenska UMTS-nät AB, 556606-7996, Stockholm            |       |              | 50         | ** **         |       | 501,000                    |       |                                                      | SEK  50    | ** **                                             |       | 429 |   | 513 |   | 500 |   | 500 |   |
| SmartTrust AB, 556179-5161, Stockholm                       |       |              | 30         | ** **         |       | 70,991,460                 |       |                                                      | SEK  1     | ** **                                             |       | 33 |   | 80 |   | 84 |   | 80 |   |
| Other operating, dormant and divested companies             | ** ** |              | ** ** | ** **         |       | ** **                 | ** ** |                                                      | ** ** | ** **                                             |       | 0 |   | 0 |   | 0 |   | 0 |   |
| **Companies outside Sweden**                                | ** ** |              | ** ** | ** **         |       | ** **                 | ** ** |                                                      | ** ** | ** **                                             |       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| AS Sertifitseerimiskeskus, 10747013, Tallinn                |       |              | 50         | ** **         |       | 16                         |       |                                                      | EEK  2     | ** **                                             |       | 1 |   | 2 |   | 10 |   | 6 |   |
| Päämies-kauppiaat Oy, 1090044-0, Helsinki         |       |              | 50         | ** **         |       | 66,055                     |       |                                                      | EUR  1     | ** **                                             |       | 93 |   | — |   | 8 |   | — |   |
| Lattelekom SIA, 4000305278, Riga                            |       |              | 49         | ** **         |       | 71,581,000                 |       |                                                      | LVL  72    | ** **                                             |       | 596 |   | 526 |   | 1,058 |   | 1,020 |   |
| Punwire Paging Services Ltd, S/RP/PB/000196, Chandigarh     |       |              | 49         | ** **         |       | 14,699,780                 |       |                                                      | INR  147   | ** **                                             |       | 0 |   | 0 |   | 0 |   | 0 |   |
| Turkcell Holding A.S., 430991-378573, Istanbul         |       |              | 47         | ** **         |       | 214,871,670                |       |                                                      | TRY  215   | ** **                                             |       | 8,762 |   | 6,767 |   | 1,833 |   | 1,763 |   |
| Turkcell Iletisim Hizmetleri A.S., 304844-252426,  Istanbul |       |              | 13         | ** **         |       | 246,603,233                |       |                                                      | TRY  247   | ** **                                             |       | 9,384 |   | 6,243 |   | 1,258 |   | 1,210 |   |
| OAO MegaFon, 7812014560, Moscow                             |       |              | 36         | ** **         |       | 2,207,234                  |       |                                                      | RUR  22    | ** **                                             |       | 4,017 |   | 2,515 |   | 402 |   | 410 |   |
| AUCS Communications Services v.o.f., 34097149, Hoofddorp    |       |              | 33         | ** **         |       | —                     |       |                                                      | EUR  -     | ** **                                             |       | 1 |   | 17 |   | 2 |   | 0 |   |
| Johtotieto Oy, 0875145-8, Helsinki                          |       |              | 33         | ** **         |       | 170                        |       |                                                      | EUR  0     | ** **                                             |       | 1 |   | 1 |   | 0 |   | 0 |   |
| Operators Clearing House A/S, 18936909, Copenhagen          |       |              | 33         | ** **         |       | 1,333                      |       |                                                      | DKK  1     | ** **                                             |       | 3 |   | 4 |   | 5 |   | 2 |   |
| UAB TietoEnator Consulting, 2594163, Vilnius           |       |              | 26         | ** **         |       | 4,160                      |       |                                                      | LTL  0     | ** **                                             |       | 3 |   | 3 |   | 1 |   | 0 |   |
| Voicecom OÜ, 10348566, Tallinn                         |       |              | 26         | ** **         |       | —                     |       |                                                      | EEK  0     | ** **                                             |       | 2 |   | 2 |   | 0 |   | 1 |   |
| Suomen Numerot NUMPAC Oy, 1829232-0, Helsinki               |       |              | 25         | ** **         |       | 3,000                      |       |                                                      | EUR  0     | ** **                                             |       | 0 |   | 0 |   | 0 |   | 0 |   |
| Eltel Networks Länsi Oy, 0731522-4, Paimio             |       |              | 21         | ** **         |       | 11,430                     |       |                                                      | EUR  0     | ** **                                             |       | 5 |   | 7 |   | 6 |   | 6 |   |
| Other operating, dormant and divested companies             | ** ** |              | ** ** | ** **         |       | ** **                 | ** ** |                                                      | ** ** | ** **                                             |       | 0 |   | 43 |   | 0 |   | 39 |   |
| **Total**                                                   | ** ** |              | ** ** | ** **         |       | ** **                 | ** ** |                                                      | ** ** | ** **                                             |       | **25,208** | ** ** | **19,613** | ** ** | ** ** | ** ** | ** ** | ** ** |
|                                                             |            |                   |            |                    |            |                            |            |                                                           |            |                                                        |            |  |  |  |  |  |  |  |  |  |  |

 

The share of voting power in Overseas Telecom AB is 42percent. OAO Telecominvest owns an additional 31 percent of the shares in OAOMegaFon. Turkcell Holding A.S. owns 51 percent of the shares in TurkcellIletisim Hizmetleri A.S.

The parent company’s andsubsidiaries’ respective holdings of Other associated companies for thecomparative year chiefly related to companies acquired and divested. The formerassociated companies IKT I Holding AB (formerly Lagrummet Juni nr 74 AB) andIKT II Holding AB (formerly Lagrummet Juni nr 75 AB) became subsidiaries in2005. Divestitures in 2005 included Infonet Services Corp., AS Intergate,Telekolmio Oy and Helsingin GSM-Palvelut Oy. Altogether, the Group’s equityparticipation in the named companies amounted to SEK 1,375 million and the bookvalue in each parent company to SEK 1,513 million.

165

----

**Notes to Consolidated Financial Statements (Continued)**

**35.**   Specification of Shareholdings and Participations(Continued)

**Other holdings of securities**

|                                                                       | ** ** | ** **        | ** ** | ** ** | ** ** | **Par value  in local** | ** ** | **Book/fair  value in  consolidated  accounts** | ** ** | **Book value  in each  parent  company** | ** ** |
|-----------------------------------------------------------------------|------------|-------------------|------------|------------|------------|-----------------------------------|------------|------------------------------------------------------|------------|----------------------------------------------------|------------|
| **Company, Corp.**                                               | ** ** | **Participation** | ** ** | **Number** | ** ** | **currency**                      | ** ** | **2005**                                             | ** ** | **2004**                                           | ** ** | **2005** | ** ** | **2004** | ** ** |
| **Reg. No., registered office**                        | ** ** | ** **        | ** ** | **(%)**    | ** ** | **of shares**                | ** ** | **(in millions)**                               | ** ** | **SEK in millions**                      | ** ** |
| **Parent company holdings**                                           | ** ** |              | ** ** | ** ** |       |                              |       |                                                 | ** ** | ** **                                         |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| **Swedish companies**                                                 | ** ** |              | ** ** | ** ** |       |                              |       |                                                 | ** ** | ** **                                         |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| NGF NetGame Factory AB, 556588-3344, Stockholm                        |       |              | 10         | ** ** |       | 147,000                           |       |                                                 | SEK  0     | ** **                                         |       |   | 0 | ** ** |   |   | 0 | ** ** |   |   | 0 | ** ** |   |   | 0 | ** ** |   |
| Slottsbacken Fund Two KB, 969660-9875,  Stockholm                     |       |              | 18         | ** ** |       | —                            |       |                                                 | SEK  -     | ** **                                         |       |   | 6 | ** ** |   |   | 5 | ** ** |   |   | 6 | ** ** |   |   | 5 | ** ** |   |
| Hyglo AB, 556601-6761, Stockholm                                      |       |              | 8          | ** ** |       | 16,800                            |       |                                                 | SEK  0     | ** **                                         |       |   | 0 | ** ** |   |   | 0 | ** ** |   |   | 0 | ** ** |   |   | 0 | ** ** |   |
| Other operating, dormant and divested companies                       |       |              |       | ** ** |       |                              |       |                                                 |       | ** **                                         |       |   | 0 | ** ** |   |   | 0 | ** ** |   |   | 0 | ** ** |   |   | 0 | ** ** |   |
| **Companies outside Sweden**                                          |       |              |       | ** ** |       |                              |       |                                                 |       | ** **                                         |       |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |
| Digital Telecommunications Philippines Inc.,  Manila-Quezon City      |       |              | 9          | ** ** |       | 600,000,000                       |       |                                                 | PHP  600   | ** **                                         |       |   | 84 | ** ** |   |   | 124 | ** ** |   |   | 84 | ** ** |   |   | 124 | ** ** |   |
| Vision Capital L.P., LP64, Saint Helier                               |       |              | 6          | ** ** |       | —                            |       |                                                 | USD  2     | ** **                                         |       |   | 2 | ** ** |   |   | 4 | ** ** |   |   | 2 | ** ** |   |   | 4 | ** ** |   |
| Atrica, Inc., 770532447, Santa Clara, CA                         |       |              | 0          | ** ** |       | 249,377                           |       |                                                 | USD  0     | ** **                                         |       |   | 0 | ** ** |   |   | 0 | ** ** |   |   | 0 | ** ** |   |   | 0 | ** ** |   |
| Other operating, dormant and divested companies                       |       |              |       | ** ** |       |                              |       |                                                 |       | ** **                                         |       |   | 0 | ** ** |   |   | 7 | ** ** |   |   | 0 | ** ** |   |   | 7 | ** ** |   |
| **Total parent company**                                              |       |              |       | ** ** |       |                              |       |                                                 |       | ** **                                         |       |   |   | ** ** |   |   |   | ** ** |   |   | **92** | ** ** |   |   | **140** | ** ** |   |
| **Subsidiaries’ holdings**                                       | ** ** |              | ** ** | ** ** |       |                              |       |                                                 | ** ** | ** **                                         |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| **Swedish companies**                                                 | ** ** |              | ** ** | ** ** |       |                              |       |                                                 | ** ** | ** **                                         |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Other operating, dormant and divested companies                       |       |              |       | ** ** |       |                              |       |                                                 |       | ** **                                         |       |   | 0 | ** ** |   |   | 0 | ** ** |   |   | 0 | ** ** |   |   | 0 | ** ** |   |
| **Companies outside Sweden**                                          |       |              |       | ** ** |       |                              |       |                                                 |       | ** **                                         |       |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |
| Digital Media & Communications II L.P.,  3037042, Boston, MA |       |              | 22         | ** ** |       | —                            |       |                                                 | USD  -     | ** **                                         |       |   | 6 | ** ** |   |   | 8 | ** ** |   |   | 6 | ** ** |   |   | 8 | ** ** |   |
| Eveo Inc., 3028413, San Francisco, CA                                 |       |              | 10         | ** ** |       | 2,000,000                         |       |                                                 | USD  0     | ** **                                         |       |   | 0 | ** ** |   |   | 0 | ** ** |   |   | 0 | ** ** |   |   | 0 | ** ** |   |
| Wideray Corp., 3269105, San Francisco, CA                             |       |              | 7          | ** ** |       | 11,147,967                        |       |                                                 | USD  0     | ** **                                         |       |   | 10 | ** ** |   |   | 10 | ** ** |   |   | 10 | ** ** |   |   | 10 | ** ** |   |
| Media Technology Equity Partners, L.P., 199817710056,  Los Altos, CA  |       |              | 7          | ** ** |       | —                            |       |                                                 | USD  -     | ** **                                         |       |   | 0 | ** ** |   |   | 0 | ** ** |   |   | 0 | ** ** |   |   | 0 | ** ** |   |
| Magnum Communications L.P., Cayman Islands                            |       |              | 7          | ** ** |       | —                            |       |                                                 | USD  -     | ** **                                         |       |   | 14 | ** ** |   |   | 14 | ** ** |   |   | 14 | ** ** |   |   | 14 | ** ** |   |
| CellGlide Inc., 51-0411553, Netanya                                   |       |              | 6          | ** ** |       | 136,081                           |       |                                                 | USD  0     | ** **                                         |       |   | 0 | ** ** |   |   | 11 | ** ** |   |   | 0 | ** ** |   |   | 11 | ** ** |   |
| Oy Merinova Ab, 0778620-2, Vaasa                                      |       |              | 6          | ** ** |       | 800                               |       |                                                 | EUR  0     | ** **                                         |       |   | 1 | ** ** |   |   | 1 | ** ** |   |   | 1 | ** ** |   |   | 1 | ** ** |   |
| Diamondhead Ventures, L.P., 3145188, Menlo Park, CA                   |       |              | 4          | ** ** |       | —                            |       |                                                 | USD  -     | ** **                                         |       |   | 13 | ** ** |   |   | 10 | ** ** |   |   | 13 | ** ** |   |   | 10 | ** ** |   |
| Siennax International B.V., 23074433, Amstelveen                      |       |              | 3          | ** ** |       | 1,841,211                         |       |                                                 | EUR  0     | ** **                                         |       |   | 0 | ** ** |   |   | 0 | ** ** |   |   | 0 | ** ** |   |   | 0 | ** ** |   |
| Santapark Oy, 1095079-8, Rovaniemi                                    |       |              | 3          | ** ** |       | 10,000                            |       |                                                 | EUR  0     | ** **                                         |       |   | 2 | ** ** |   |   | 2 | ** ** |   |   | 2 | ** ** |   |   | 2 | ** ** |   |
| Codetoys Oy, 1082133-9, Espoo                                         |       |              | 2          | ** ** |       | 636,851                           |       |                                                 | EUR  0     | ** **                                         |       |   | 0 | ** ** |   |   | 0 | ** ** |   |   | 0 | ** ** |   |   | 0 | ** ** |   |
| Bytemobile, Inc., 3255024, Mountain View, CA                     |       |              | 2          | ** ** |       | 735,476                           |       |                                                 | USD  0     | ** **                                         |       |   | 5 | ** ** |   |   | 5 | ** ** |   |   | 5 | ** ** |   |   | 5 | ** ** |   |
| Pargas Telefon Ab—Paraisten Puhelin Oy, 0135996-3,  Pargas  |       |              | 2          | ** ** |       | 7,100                             |       |                                                 | EUR  0     | ** **                                         |       |   | 1 | ** ** |   |   | 1 | ** ** |   |   | 1 | ** ** |   |   | 1 | ** ** |   |
| SysOpen Digia Oyj, 0831312-4, Helsinki                                |       |              | 1          | ** ** |       | 220,710                           |       |                                                 | EUR  0     | ** **                                         |       |   | 2 | ** ** |   |   | 49 | ** ** |   |   | 2 | ** ** |   |   | 49 | ** ** |   |
| Helsinki Halli Oy, 1016235-3, Helsinki                                |       |              | 1          | ** ** |       | 42                                |       |                                                 | EUR  0     | ** **                                         |       |   | 4 | ** ** |   |   | 4 | ** ** |   |   | 4 | ** ** |   |   | 4 | ** ** |   |
| Intellect Capital Ventures, L.L.C., 3173982, Los Angeles,  CA    |       |              | 0          | ** ** |       | —                            |       |                                                 | USD  -     | ** **                                         |       |   | 17 | ** ** |   |   | 24 | ** ** |   |   | 17 | ** ** |   |   | 24 | ** ** |   |
| TelAdvent LP, 2705077, Wilmington, DE                                 |       |              | 0          | ** ** |       | —                            |       |                                                 | USD  -     | ** **                                         |       |   | 11 | ** ** |   |   | 11 | ** ** |   |   | 11 | ** ** |   |   | 11 | ** ** |   |
| Radioliikkeiden Oy, 0113089-4, Espoo                                  |       |              | 0          | ** ** |       | 7,515                             |       |                                                 | EUR  0     | ** **                                         |       |   | 1 | ** ** |   |   | 0 | ** ** |   |   | 1 | ** ** |   |   | 0 | ** ** |   |
| Asunto Oy Helsingin Oskar, 0881553-8, Helsinki                        |       |              | 0          | ** ** |       | 280                               |       |                                                 | EUR  0     | ** **                                         |       |   | 1 | ** ** |   |   | 1 | ** ** |   |   | 1 | ** ** |   |   | 1 | ** ** |   |
| Kiinteistö Oy Turun Monitoimihalli, 0816425-3,  Turku            |       |              | 0          | ** ** |       | 1                                 |       |                                                 | EUR  0     | ** **                                         |       |   | 1 | ** ** |   |   | 1 | ** ** |   |   | 1 | ** ** |   |   | 1 | ** ** |   |
| Participations in other real estate and housing  companies, Finland   |       |              | —     | ** ** |       | —                            |       |                                                 | EUR  -     | ** **                                         |       |   | 22 | ** ** |   |   | 21 | ** ** |   |   | 22 | ** ** |   |   | 21 | ** ** |   |
| Participations in other phone companies, Finland                      |       |              | —     | ** ** |       | —                            |       |                                                 | EUR  -     | ** **                                         |       |   | 6 | ** ** |   |   | 7 | ** ** |   |   | 6 | ** ** |   |   | 7 | ** ** |   |
| Other operating, dormant and divested companies                       |       |              |       | ** ** |       |                              |       |                                                 |       | ** **                                         |       |   | 0 | ** ** |   |   | 6 | ** ** |   |   | 0 | ** ** |   |   | 6 | ** ** |   |
| **Total**                                                             |       |              |       | ** ** |       |                              |       |                                                 |       | ** **                                         |       |   | **209** | ** ** |   |   | **326** | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |
|                                                                       |            |                   |            |            |            |                                   |            |                                                      |            |                                                    |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

The parent company’s and subsidiaries’ respectiveholdings of Other securities for the comparative year chiefly related tocompanies divested. Divestitures in 2005 included Intelsat, Ltd., Dejima, Inc.,PacketVideo Corp. and Technopolis Oyj. SX Holdings, LLC was liquidated. Altogether,carrying values of 

166

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**Notes to Consolidated Financial Statements (Continued)**

**35.**   Specification of Shareholdings and Participations(Continued)

thenamed companies were SEK 13 million in the Group and SEK 13 million in eachparent company. The carrying value of SysOpen Digia Oyj for the comparativeyear refers to the ownership in former Digia Oy.

**36.**   U.S.GAAP

**Differences in principles**

TeliaSonera’s consolidatedfinancial statements are prepared in accordance with International FinancialReporting Standards (IFRS), which differ in certain respects from United StatesGenerally Accepted Accounting Principles (U.S. GAAP). Application of U.S. GAAPwould have affected shareholders’ equity as of December 31, 2005, 2004 and2003 and net income for each of the years in the three-year period ended December 31,2005. The significant differences between IFRS and U.S. GAAP as related toTeliaSonera are discussed below.

***Revenue recognition***

The SEC Staff Accounting Bulletin No. 104 “RevenueRecognition” (SAB 104) addresses revenue recognition under U.S. GAAP. Underthis guidance, revenue earned from access, connection and similar fees shouldbe recognized over the estimated life of the customer relationship. Also, SAB104 permits, but does not require, companies to defer costs directly associatedwith such revenue and to also recognize these costs over the life of thecustomer relationship. Under IFRS, TeliaSonera recognizes this revenue andrelated costs when the services are provided and the related costs areincurred.

Under U.S. GAAP, TeliaSonera has adjusted revenues toreflect the deferral of access, connection and similar revenues and subsequentamortization over the estimated average customer life of 7 years. TeliaSonerahas elected not to defer any associated costs and accordingly, as permittedunder U.S. GAAP, such costs are expensed as incurred. In early 2005, theSwedish National Post and Telecom Agency (PTS) decided that consumers canfreely choose which supplier to subscribe to for fixed telephony. During theyear, 850,000 retail subscriptions were transformed into wholesalesubscriptions. As a consequence, a release of deferred revenue related to thetransformed subscriptions has been recognized in income. On the other hand, theconnection fee paid for transformation is deferred and recognized over theestimated average customer life.

TeliaSonera may bundle services and products into onecustomer offering. Offerings may involve the delivery or performance ofmultiple products, services, or rights to use assets (multiple deliverables).In some cases, the arrangements include initial installation, initiation, oractivation services and involve consideration in the form of a fixed fee or afixed fee coupled with a continuing payment stream. Telecom equipment isaccounted for separately from service where a market for each deliverableexists and if title to the equipment passes to the end customer. Costsassociated with the equipment are recognized at the time of revenue recognized.The revenue is allocated to equipment and services in proportion to the fairvalue of the individual elements and recognized when the respective equipmentis delivered and services rendered.

Under U.S. GAAP, theamount allocated to delivered items is limited to the amount that is notcontingent upon delivery of additional items or meeting other specifiedperformance conditions. Costs associated with the equipment are under U.S. GAAPrecognized in an amount equal to the revenue recognized and cost in excess is deferredto the extent those costs are not in excess of the expected remaining revenuesfor the item.

167

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**Notes to Consolidated Financial Statements (Continued)**

**36.**   U.S.GAAP (Continued)

***Sale andleaseback***

In 1998 and in 2001, TeliaSonera sold certain realestate properties to external buyers, while TeliaSonera group companies stayedon as tenants. The profit from the divestitures was recognized as revenue inits entirety, under IFRS, because the rental contracts are considered operatingleases and the real estate was sold at market value.

Under U.S. GAAP additional conditions must be met inorder to immediately recognize gains on sale-leaseback transactions. As TeliaSoneraretained use of more than an insignificant portion, but less than substantiallyall of the properties sold, gain recognition is being deferred. Under U.S.GAAP, during the periods 1998-2012 and 2001-2013, respectively,that portion of the profit in excess of the discounted present value of the relatedfuture gross rental payments at the time of sale is recognized as revenue inproportion to the gross rental payments.

Other than relatedoperating lease commitments, which extend for 3-15 years from therespective transaction dates, TeliaSonera is not bound by any other outstandingcommitments or contingent obligations related to these properties.

***Stock-based compensation***

Under IFRS applicable until 2004, TeliaSonera did notrecord an expense with respect to its employee stock option programs,implemented in 2001 and 2002. Until the third quarter of 2001, TeliaSoneraunder U.S. GAAP accounted for employee stock options under the recognition andmeasurement provisions of APB Opinion No. 25 “Accounting for Stock Issuedto Employees” (APB 25) and related interpretations under this method. In December 2002,FASB Statement No. 148 “Accounting for Stock-Based Compensation—Transitionand Disclosure” (FAS 148) was issued. FAS 148 amends FAS 123 “Accounting for Stock-BasedCompensation” and provides alternative methods of transition for a voluntarychange to the fair value based method of accounting for stock-based employee compensationunder FAS 123. In addition, FAS 148 amends the disclosure requirements of FAS123 to require more prominent and more frequent disclosures in financialstatements about the effects of stock-based compensation. FAS 148 becameeffective for fiscal years ending after December 15, 2002. Under U.S.GAAP, TeliaSonera began expensing the cost of employee stock options in thefourth quarter of 2002 and has elected to use the retroactive restatementmethod of FAS 148. Accordingly, all prior periods presented have been restatedto reflect compensation costs that would have been recognized had therecognition provisions of FAS 123, as amended by FAS 148, been applied to allawards granted to employees.

By decisions made by theBoard of Directors of TeliaSonera AB in February and March 2004, allunvested employee stock option series were cancelled, due to non-fulfillment ofcertain exercise criteria.

***Non-current Assets-Held-for-Sale***

Under U.S. GAAP and underIFRS 5 “Non-current Assets Held for Sale and Discontinued Operations,” anentity should classify a non-current asset as held for sale if its carryingamount will be recovered principally through a sale transaction rather thanthrough continuing use. Once classified as held for sale, the asset should bemeasured at the lower of its carrying amount and fair value less costs to selland cease amortization and depreciation. TeliaSonera did not adopt IFRS 5 untilJanuary 1, 2005 and consequently assets held for sale in prior periodswere not separately disclosed or accounted for.

168

----

**Notes to Consolidated Financial Statements (Continued)**

**36.**   U.S. GAAP (Continued)

***Pensions***

Under IFRS, pension assets, defined benefit pensionliabilities and expenses are determined in a similar manner to U.S. GAAP.However, under IFRS, prior service cost, transition adjustments and expensesresulting from plan amendments are generally recognized immediately. Under U.S.GAAP, these expenses are generally recognized over a longer period.Additionally, any related pay-roll taxes are adjusted for differences betweenIFRS and U.S. GAAP.

Under U.S. GAAP and unlike IFRS, when the accumulatedbenefit obligation (ABO) exceeds the fair value of plan assets, a liability atleast equal to the unfunded ABO must be recognized in the balance sheet. To theextent that the unfunded ABO exceeds the liability already recognized, anadditional minimum liability (AML) must be recognized as a reduction ofshareholders’ equity, net of tax. If the unfunded ABO is less than theliability already recognized, no further liability is recognized. Anaccumulated AML was initially recognized in 2004.

In 2000, Alecta, a Swedishpension insurance company, announced a refund of pension premiums paid. Part ofthe refund was repaid in cash and the remaining balance could be appliedagainst future premiums, be paid in cash over several years, or be paid in alump sum. Under IFRS, TeliaSonera recognized the present value of the totalrefund as other operating revenue. Under U.S. GAAP, cash refunds wererecognized up until 2003 as other operating revenue when received.

***Restructuring costs***

Under IFRS, a provision for restructuring costs isrecognized when the general requirements for recording provisions are met.Under U.S. GAAP, a restructuring charge is recorded when a detailed plan forexit costs has been developed and those costs relating to employee terminationbenefits have been developed in sufficient detail so that employees who may besubject to termination would be aware of the benefit they were to receive uponinvoluntary termination. U.S. GAAP requires that significant changes in theplan are unlikely. Certain provisions of the restructuring accruals recordedunder IFRS in 2005, 2004 and in 2002 related to workforce reduction and certainother exit costs did not meet the U.S. GAAP requirements and accordingly werereversed and instead recognized as incurred. For restructuring accrualsrecorded in 2003, the U.S. GAAP requirements related to workforce reductionwere met.

Under IFRS, unavoidablecosts of meeting obligations under a contract that exceed the economic benefitsto be received under the contract are recognized as a provision, for instance acontract for office space to be left vacant, when the vacation is decided andthe amount is reliably estimable. Under U.S. GAAP, a provision is notrecognized until the contract is terminated in accordance with the contract terms.

***Share of earnings in associated companies***

TeliaSonera’s share of netincome of its associated companies is determined using the equity method and isbased on financial statements of the investees prepared in accordance withIFRS. This reconciliation item reflects adjustments for the differences betweenIFRS and U.S. GAAP relating to the associates.

***Financing of associated companies***

TeliaSonera, under IFRS,records interest costs arising from financing of associated companies in itsoperations as incurred. U.S. GAAP requires that interest costs be capitalizedto the extent that such costs relate to an associated company while theassociated company has activities in progress necessary to 

169

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**Notes to Consolidated Financial Statements (Continued)**

**36.**   U.S. GAAP (Continued)

commenceits planned principal activities as prescribed by FASB Statement No. 34 “Capitalizationof Interest Costs.”

***Associated companies in hyperinflationary economies***

Under IFRS, when the functional currency for asubsidiary or an associated company is the currency of a hyper-inflationaryeconomy, the reported non-monetary assets and liabilities, and equity arerestated in terms of the measuring unit current at the balance sheet date. Therestated financial statements are translated into SEK at the closing rate. Therestating effects are recognized as financial revenue or expense and in incomefrom associated companies, respectively.

Under U.S. GAAP, thetemporal method should be used to translate the financial statements of subsidiariesand equity accounted investees where they are denominated in currencies ofhighly-inflationary economies. The remeasurement of the financial statements isdone as if the reporting currency of the parent had been the functionalcurrency.

***Goodwill***

Until 2003, under IFRS applicable at the time,TeliaSonera amortized goodwill and other intangible assets. In accordance withFASB Statement No. 142 “Goodwill and Other Intangible Assets” (FAS 142),goodwill and indefinite lived intangible assets are not amortized but will bereviewed annually for impairment. Intangible assets that are not deemed to havean indefinite life will continue to be amortized over their useful lives. Theamortization provisions of FAS 142 applied to goodwill and intangible assets acquiredafter June 30, 2001. With respect to goodwill and intangible assetsacquired prior to July 1, 2001, TeliaSonera began applying the newaccounting rules starting January 1, 2002.

Effective January 1,2004, TeliaSonera adopted IFRS 3 “Business Combinations,” involving among otherthings that goodwill is no longer amortized but will be tested for impairmentat least annually. According to generally accepted principles and standardcompany procedures, carrying values of all cash-generating units (reportingunits) have been tested for impairment. The recoverable amounts of thecash-generating units were found to be in excess of their carrying values atall tests under IFRS and therefore the related goodwill was not impaired. Testswere also performed under U.S. GAAP, in 2005 showing that the carrying value ofTeliaSonera Finland was too high and consequently an impairment loss wasrecognized relating to TeliaSonera Finland goodwill. This was mainly due to thedifferences between IFRS and U.S. GAAP with respect to the determination of thepurchase consideration in the merger of Telia and Sonera, leading to asubstantially higher TeliaSonera Finland carrying value under U.S. GAAP (asfurther described below).

***Business combinations***

*Merger with SoneraOyj*

The merger of Telia and Sonera was announced in March 2002and finalized in 2003. Under IFRS, the TeliaSonera shares and warrants issuedto Sonera shareholders and warrantholders in the exchange offer and the mandatoryredemption offer were valued based on the quoted closing market price ofTeliaSonera shares as of the respective dates of the Board of Directorsdecisions to issue new shares. Under U.S. GAAP, the average market price for areasonable period before and after the date the terms of a transaction are agreedand announced is to be used in determining the fair value of securities issued.

170

----

**Notes to Consolidated Financial Statements (Continued)**

**36.**   U.S. GAAP (Continued)

Accordingly, under U.S.GAAP, all TeliaSonera shares and warrants issued to Sonera shareholders andwarrantholders in consideration for the merger were valued based on a weightedaverage share price for the five consecutive trading days starting two daysbefore and ending two days after the announcement day.

Furthermore, under IFRS, the total fair value ofTeliaSonera warrants issued was recorded as part of the purchase consideration.Under U.S. GAAP, the fair value of fully vested warrants was recognized as partof the purchase consideration, while the fair value of the unvested warrantswas amortized to expense over the future remaining vesting period asstock-based employee compensation cost. By decisions made by the Board of Directorsof TeliaSonera AB in February and March 2004, all unvested warrantswere cancelled, due to non-fulfillment of certain exercise criteria.

In assessing the fair value of other intangible assetsunder IFRS applicable at the time of the merger, roaming and interconnect agreementswith other operators as well as most of the customer list (‘‘portfolio ofcustomers’’) did not meet the definition of an intangible asset. Therefore,TeliaSonera under IFRS did not assign any value to Sonera’s roaming andinterconnect agreements and only assigned a limited value to Sonera’s customerlist, reflecting certain long-term contractual agreements with customers. UnderU.S. GAAP, the fair values of roaming and interconnect agreements and the totalcustomer list were recorded as intangible assets and are amortized over theirremaining useful lives.

Besides different carryingvalues of Sonera’s net assets and of Sonera’s investments in associatedcompanies, differences in the methods of calculating the fair value ofTeliaSonera shares and warrants issued and the fair value of other intangibleassets affected the amount of goodwill from the transaction under U.S. GAAP.Under IFRS applicable at the time of the merger, the purchase price allocatedto identifiable assets and liabilities was amortized based on the estimateduseful life of the identifiable assets and liabilities. The excess purchase considerationafter this allocation is described as goodwill and recognized as a separateasset. Under IFRS applicable at the time of the merger, TeliaSonera amortizedgoodwill arising from the merger over a useful life of 20 years. Under U.S.GAAP, goodwill arising in a business combination shall not be amortized.Effective January 1, 2004, TeliaSonera adopted IFRS 3 “BusinessCombinations,” involving among other things that goodwill is no longer amortized.

*Other businesscombinations*

Effective January 1, 2004, TeliaSonera adoptedIFRS 3 “Business Combinations.” IFRS 3 states that acquired identifiableassets, liabilities, and contingent liabilities should be measured initially at100 percent of the fair values at the acquisition date, irrespective of the extentof any minority interest. In other words, the identifiable assets acquired, andliabilities and contingent liabilities incurred or assumed, must be initiallymeasured at full fair value, including any minority interest’s share of theacquired item.

Consequently, minority interest under IFRS 3 includesthe minority’s portion of the net fair values acquired. Under U.S. GAAP, fairvalues are only included to the share of net assets acquired and the interest’shistorical carrying value prior to the acquisition of the additional interestremains unchanged. In step acquisitions under IFRS, the fair values of the netassets in a previously held associate are revalued to the fair values on thedate it becomes a consolidated subsidiary. An increase in the fair values isrecorded directly in equity and included in a revaluation reserve, while adecrease is recorded as an impairment loss in the income statement. Under U.S.GAAP any previous interest is not restated.

171

----

**Notes to Consolidated Financial Statements (Continued)**

**36.**   U.S. GAAP (Continued)

Under IFRS 3, a provision for restructuring costs onacquisition may be recognized only if the acquiree already recognized aprovision. Under U.S. GAAP, a provision may be recognized if a plan to exit anactivity or terminate employees has been initiated before the acquisition.

Under IFRS, the UMTSlicense acquired in the Orange Denmark transaction in 2004 was valued at zeronet of a related liability to the Danish authorities. As of the acquisitiondate, management had decided to hand back the license which led to animpairment loss on the value of the license and a release of part of therecorded liability. The remaining liability equaled the fee agreed to be paidon returning the license. Under U.S. GAAP, since it was TeliaSonera’s intentionto return the license, the net liability equivalent to the fee agreed to bepaid to the Danish authorities was recorded already in the purchase priceallocation. The different treatment also affected the amount of goodwill fromthe transaction under U.S. GAAP.

*Cost of a businesscombination contingent on future events*

Under IFRS, when abusiness combination agreement provides for an adjustment to the cost of thecombination contingent on future events the amount of that adjustment should beincluded in the cost of the combination at the acquisition date if theadjustment is probable (more likely than not) and can be measured reliably. Thepurchase consideration recognized for one business combination in 2005 includesan estimated additional cost. Under U.S. GAAP, this cost is not recognizeduntil the contingency is resolved or the amount is determinable.

*Hedgingacquisitions of shares*

Unlike IFRS, to be able touse hedge accounting under U.S. GAAP, the hedged item, inter alia, cannot be relatedto a minority interest in a consolidated subsidiary. The acquisition price fora foreign subsidiary should be calculated by using the currency rate at thetransaction date. The change in fair value of the derivative that has been usedto hedge the acquisition is recognized as foreign currency gain or loss inother operating revenues or expenses.

***Minority interests***

Starting January 1, 2005,with retrospective application, minority interest under IFRS is a component ofshareholders’ equity, whereas under U.S. GAAP it should be presented outside ofshareholders’ equity, between shareholders’ equity and liabilities.Consequently, in the income statement under IFRS, minority interest is acomponent of net income, while under U.S. GAAP it is a separate line item.

***Income taxes and exchange rate differences***

Deferred income tax andexchange rate differences are calculated for all differences between IFRS andU.S. GAAP, when applicable, for deferred tax including related recalculationsto reflect enacted tax rate changes.

172

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**Notes to Consolidated Financial Statements (Continued)**

**36.**   U.S. GAAP (Continued)

**Translation intoU.S. GAAP**

Applicationof U.S. GAAP had the following effects on consolidated net income andshareholders’ equity.

|                                                      | ** ** | **January-December** | ** ** |
|------------------------------------------------------|------------|----------------------|------------|
| **SEK in millions**                        | ** ** | ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Net income under  IFRS                               |       | 13,694               |       | 14,264 |   | 10,049 |   |
| Revenue  recognition                                 |       | -159                 |       | -415 |   | -325 |   |
| Sale and  leaseback                                  |       | 119                  |       | 120 |   | 120 |   |
| Stock-based  compensation                            |       | —               |       | — |   | -18 |   |
| Pensions                                             |       | -91                  |       | -145 |   | 6 |   |
| Restructuring costs                                  |       | 461                  |       | 77 |   | -335 |   |
| Share of earnings  in associated companies           |       | -1                   |       | -41 |   | 8 |   |
| Financing of  associated companies                   |       | 0                    |       | 0 |   | 0 |   |
| Associated  companies in hyperinflationary economies |       | 121                  |       | -174 |   | -743 |   |
| Goodwill                                             |       | -6,142               |       | — |   | 4,205 |   |
| Business  combinations                               |       | -1,806               |       | -1,584 |   | -2,073 |   |
| Deferred income  taxes                               |       | 378                  |       | 1,491 |   | 703 |   |
| Minority  interests                                  |       | -2,155               |       | -1,300 |   | -969 |   |
| **Net income under U.S. GAAP**                       | ** ** | **4,419**            | ** ** | **12,293** | ** ** | **10,628** | ** ** |
|                                                      |            |                      |            |  |  |  |  |  |  |

 

The provisional purchase price allocations under IFRSfor Orange Denmark and Eesti Telekom were finalized in the first quarter of2005, which resulted in a restatement of certain preliminary figures recognizedin 2004. For more information, see section “Acquisition of Orange Denmark andEesti Telekom” in note “Business Combinations.” Under U.S. GAAP, completion ofthe provisional purchase price allocations also triggered restatement ofcertain 2004 reconciliation items, reflecting the differences in accountingtreatment related to business combinations.

|                                                       |       | December 31, | ** ** |
|-------------------------------------------------------|------------|-------------------|------------|
| **SEK in millions**                         | ** ** | ** **        | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Total equity  under IFRS                              |       | 135,694           |       | 128,067 |   | 115,834 |   |
| Revenue  recognition                                  |       | -5,002            |       | -4,843 |   | -4,428 |   |
| Sale and leaseback                                    |       | -837              |       | -956 |   | -1,076 |   |
| Pensions                                              |       | -4,435            |       | -2,672 |   | — |   |
| Restructuring  costs                                  |       | 673               |       | 212 |   | 135 |   |
| Share of earnings  in associated companies            |       | -0                |       | — |   | 41 |   |
| Financing of  associated companies                    |       | 3                 |       | 3 |   | 3 |   |
| Associated  companies in hyper inflationary economies |       | -5,975            |       | -4,919 |   | -3,292 |   |
| Goodwill                                              |       | -131              |       | 6,011 |   | 6,011 |   |
| Business  combinations                                |       | -2,894            |       | -1,088 |   | 1,593 |   |
| Deferred income  taxes                                |       | 5,156             |       | 4,310 |   | 2,111 |   |
| Minority  interests in equity                         |       | -8,803            |       | -6,934 |   | -3,441 |   |
| Exchange rate  differences                            |       | -1,296            |       | 81 |   | -1,711 |   |
| **Shareholders’ equity under U.S.  GAAP**        | ** ** | **112,153**       | ** ** | **117,272** | ** ** | **111,780** | ** ** |
|                                                       |            |                   |            |  |  |  |  |  |  |

 

173

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**Notes to Consolidated Financial Statements (Continued)**

**36.**   U.S. GAAP (Continued)

The adjustments would havechanged certain items in the consolidated income statements and balance sheets.The following tables show summary income statements and balance sheets afterthe application of U.S. GAAP.

|                                                                          | ** ** | **January-December** | ** ** |
|--------------------------------------------------------------------------|------------|----------------------|------------|
| **SEK in millions, except per share data** | ** ** | ** **           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Income  statements under U.S. GAAP**                                   | ** ** | ** **           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales                                                                |       | 87,522               |       | 81,395 |   | 82,099 |   |
| Income from  associated companies                                        |       | 3,262                |       | 3,108 |   | 284 |   |
| Operating income                                                         |       | 10,052               |       | 16,632 |   | 15,555 |   |
| Income after  financial items                                            |       | 9,522                |       | 15,286 |   | 14,744 |   |
| Income taxes                                                             |       | -2,948               |       | -1,693 |   | -3,147 |   |
| Minority  interests                                                      |       | -2,155               |       | -1,300 |   | -969 |   |
| Net income                                                               |       | 4,419                |       | 12,293 |   | 10,628 |   |
| Basic and diluted  earnings per share (SEK)                              |       | 0.97                 |       | 2.63 |   | 2.28 |   |
|                                                                          |            |                      |            |  |  |  |  |  |  |

 

|                                                    | ** ** | **December 31,** | ** ** |
|----------------------------------------------------|------------|-----------------------|------------|
| **SEK in  millions**                               | ** ** | ** **            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Balance sheets under U.S. GAAP**                 | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Non-current  assets                                |       | 155,058               |       | 154,154 |   | 163,769 |   |
| Current assets                                     |       | 43,624                |       | 41,946 |   | 37,018 |   |
| Assets-held-for-sale                               |       | 186                   |       | 1,052 |   | — |   |
| *Total  assets*                                    | * *   | *198,868*             | * *   | *197,152* | * * | *200,787* | * * |
| Shareholders’  equity                         |       | 112,153               |       | 117,272 |   | 111,780 |   |
| Minority  interests                                |       | 6,871                 |       | 5,077 |   | 3,441 |   |
| Provisions                                         |       | 19,474                |       | 16,250 |   | 21,072 |   |
| Long-term loans                                    |       | 20,520                |       | 12,942 |   | 25,867 |   |
| Short-term loans                                   |       | 6,215                 |       | 11,733 |   | 4,687 |   |
| Long-term  liabilities                             |       | 3,426                 |       | 4,182 |   | 4,826 |   |
| Current  liabilities                               |       | 30,209                |       | 29,696 |   | 29,114 |   |
| *Total shareholders’ equity and  liabilities* | * *   | *198,868*             | * *   | *197,152* | * * | *200,787* | * * |
|                                                    |            |                       |            |  |  |  |  |  |  |

 

**Expectedfuture amortization of other intangible assets**

Giventhe current ownership structure and the same exchange rates as in 2005, andthat no events will occur that would trigger impairment charges, TeliaSoneraexpects the following amortization of other intangible assets during the nextfive-year period.

| **SEK in millions**                     | ** ** | ** ** | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** |
|---------------------------------------------------|------------|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| Expected  amortization of other intangible assets |       | 4,139      |       | 4,077    |       | 3,630    |       | 3,525    |       | 3,366    |       |

 

174

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**Notes to Consolidated Financial Statements (Continued)**

**36.**   U.S.GAAP (Continued)

**Recentlyissued accounting pronouncements**

***FAS 123(R)***

In December 2004,FASB Statement No. 123 (revised 2004) “Share-Based Payment” (FAS 123(R))was issued. FAS 123(R) is a revision of FASB Statement No. 123 “Accountingfor Stock-Based Compensation” and supersedes APB Opinion No. 25 “Accountingfor Stock Issued to Employees,” and its related implementation guidance. FAS123(R) requires a public entity to measure the cost of employee servicesreceived in exchange for an award of equity instruments based on the grant-datefair value of the award (with limited exceptions). FAS 123(R) is effectiveas of the beginning of the first interim or annual reporting period that beginsafter June 15, 2005. Telia­Sonera under U.S. GAAP accounts for anystock-based awards at fair value in accordance with FAS 123 and the adoption ofFAS 123(R) does not have a material effect on its earnings and financialposition.

***FAS 150***

In May 2003, FASBStatement No. 150 “Accounting for Certain Financial Instruments withCharacteristics of both Liabilities and Equity” (FAS 150) was issued. FAS 150establishes standards for how an issuer classifies and measures certainfinancial instruments with characteristics of both liabilities and equity. Itrequires that an issuer classify a financial instrument that is within itsscope as a liability (or an asset in some circumstances). Many of thoseinstruments were previously classified as equity. FAS 150 is effective forfinancial instruments entered into or modified after May 31, 2003, andotherwise is effective at the beginning of the first interim period beginningafter June 15, 2003. It is to be implemented by reporting the cumulativeeffect of a change in an accounting principle for financial instruments createdbefore the issuance date of FAS 150 and still existing at the beginning of theinterim period of adoption. Restatement is not permitted. The effective date ofcertain provisions of FAS 150 for certain mandatorily redeemable financialinstruments has been deferred by FASB Staff Position (FSP) No. 150-3.Under the FSP, certain mandatorily redeemable shares are subject to theprovisions of FAS 150 for the first fiscal period beginning after December 15,2004. Other mandatorily redeemable shares are deferred indefinitely but may besubject to classification or disclosure provisions of FAS 150. Adoption of FAS150 did not have a material effect on TeliaSonera’s earnings and financialposition under U.S. GAAP.

***FAS 151***

In November 2004,FASB Statement No. 151 “Inventory Costs—an amendment of ARB No. 43,Chapter 4” (FAS 151) was issued. FAS 151 is effective for inventory costsincurred during fiscal years beginning after June 15, 2005. Earlierapplication is permitted for inventory costs incurred during fiscal years beginningafter November 24, 2004. FAS 151 should be applied prospectively. Theprovisions of FAS 151 do not have a material effect on Telia­Sonera’searnings and financial position under U.S. GAAP.

***FAS 152***

In December 2004,FASB Statement No. 152 “Accounting for Real Estate Time-SharingTransactions—an amendment of FASB Statements No. 66 and 67” (FAS 152) wasissued. FAS 152 is effective for financial statements for fiscal yearsbeginning after June 15, 2005. Restatement of previously issued financialstatements is not permitted. Currently, the provisions of FAS 152 are notrelevant to TeliaSonera.

175

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**Notes to Consolidated Financial Statements (Continued)**

**36.**   U.S. GAAP (Continued)

***FAS 153***

In December 2004,FASB Statement No. 153 “Exchanges of Nonmonetary Assets—an amendment ofAPB Opinion No. 29” (FAS 153) was issued. FAS 153 amends APB 29 toeliminate the exception for non-monetary exchanges of similar productive assetsand replaces it with a general exception for exchanges of non-monetary assetsthat do not have commercial substance. A non-monetary exchange has commercialsubstance if the future cash flows of the entity are expected to changesignificantly as a result of the exchange. FAS 153 is effective fornon-monetary asset exchanges occurring in fiscal periods beginning after June 15,2005. Earlier application is permitted for non-monetary asset exchangesoccurring in fiscal periods beginning after December 16, 2004. FAS 153should be applied prospectively. TeliaSonera does not expect that the adoptionof FAS 153 will materially affect its financial position or results ofoperations under U.S. GAAP.

***FAS 154***

In May 2005, FASBStatement No. 154 “Accounting Changes and Error Corrections” (FAS 154) wasissued, replacing APB Opinion No. 20 “Accounting Changes” (APB 20) andFASB Statement No. 3 “Reporting Accounting Changes in Interim FinancialStatements.” FAS 154 requires retrospective application to prior periods’ financialstatements of a change in accounting principle. It applies both to voluntarychanges and to changes required by an accounting pronouncement if thepronouncement does not include specific transition provisions. APB 20 previouslyrequired that most voluntary changes in accounting principles be recognized byrecording the cumulative effect of a change in accounting principle. FAS 154 iseffective for fiscal years beginning after December 15, 2005. TeliaSoneradoes not expect that the adoption of FAS 154 will materially affect itsfinancial position or results of operations under U.S. GAAP.

***FIN 47***

In March 2005, FASBInterpretation No. 47 “Accounting for Conditional Asset Retirement Obligations”(FIN 47) was issued. FIN 47 clarifies that FASB Statement No. 143 “Accountingfor Asset Retirement Obligations” requires that a liability for the fair valueof a conditional asset retirement obligation is recognized when incurred if theliability’s fair value can be reasonably estimated. FIN 47 is effective nolater than at the end of fiscal years ending after December 15, 2005. Theadoption of FIN 47 did not have a material impact on TeliaSonera’s financialposition or results of operations under U.S. GAAP.

***EITF 03-1***

In March 2004, theEmerging Issues Task Force (EITF) within FASB reached a consensus on Issue No. 03-1“The Meaning of Other-Than-Temporary Impairment and Its Application to CertainInvestments” (EITF 03-1). The issue is to determine the meaning ofother-than-temporary impairment and its application to debt and equity securitieswithin the scope of FASB Statement No. 115 “Accounting for CertainInvestments in Debt and Equity Securities.” The impairment methodology forinvestments accounted for under the equity method is predicated on the notionof other-than-temporary. The taskforce reached a consensus that the applicationguidance in EITF 03-1 should be used in determining when an investment isconsidered impaired, whether that impairment is other-than-temporary and themeasurement of the impairment. EITF 03-1 was effective forother-than-temporary impairment evaluation 

176

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**Notes to Consolidated Financial Statements (Continued)**

**36.**   U.S. GAAP (Continued)

made inreporting periods beginning after June 15, 2004. Paragraphs 10-18 inEITF 03-1 were later nullified by FASB FAS 115-1 and 124-1,issued in November, 2005. Applying the other provisions of EITF 03-1did not have a material effect on TeliaSonera’s consolidated financialstatements under U.S. GAAP.

***FSP FAS 143-1***

In June 2005, FASB Staff Position No. FAS 143-1“Accounting for Electronic Equipment Waste Obligations” (FSP FAS 143-1)was issued. FSP FAS 143-1 addresses accounting by commercial users andproducers of electrical and electronic equipment, in connection with Directive2002/96/EC on Waste Electrical and Electronic Equipment (“WEEE”) issued by theEuropean Union (EU) on February 13, 2003. This Directive requires EUmember countries to adopt legislation to regulate the collection, treatment,recovery, and environmentally sound disposal of electrical and electronic wasteequipment, and sets forth certain obligations relating to covering the cost ofdisposal of such equipment by commercial users. Producers will also be requiredto cover the cost of disposal of such equipment under the WEEE legislation ifthey are participating in the market as of August 13, 2005. FSP FAS 143-1shall be applied the later of the first reporting period ending after June 8,2005 or the date of the adoption of the law by the applicable EU member country(in Sweden adopted on August 13, 2005). Adoption of FSP FAS 143-1did not have a material effect on TeliaSonera’s consolidated financial statementsunder U.S. GAAP.

177

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**Reportof Independent Registered Public Accounting Firm**

To the Shareholders of TeliaSonera AB

We have audited the accompanying consolidated balancesheets of TeliaSonera AB and its subsidiaries as of December 31, 2004 and2005, and the related consolidated statements of income, of cash flows and ofchanges in shareholders equity for each of the two years in the period ended December 31,2005. These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financial statementsbased on our audits.

We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statementsreferred to above present fairly, in all material respects, the financialposition of TeliaSonera AB and its subsidiaries at December 31, 2004 and2005, and the results of their operations and their cash flows for each of thetwo years in the period ended December 31, 2005, in conformity with InternationalFinancial Reporting Standards.

As discussed in Note 4 to the consolidated financialstatements, with effect from January 1, 2004, the Company prospectivelyadopted IFRS 3, “Business Combinations.”

International Financial Reporting Standards vary incertain significant respects from accounting principles generally accepted inthe United States of America. Information relating to the nature and effect ofsuch differences is presented in Note 36 to the consolidated financialstatements.

PricewaterhouseCoopers AB

Göran TidströmAuthorized Public Accountant

Stockholm, SwedenApril 6, 2006

178

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**Reportof Independent Registered Public Accounting Firms**

To the Board of Directors and Shareholders ofTeliaSonera AB

We have audited the accompanying consolidated balancesheet of TeliaSonera AB as of December 31, 2003, and the relatedconsolidated income statement, statement of cash flows and statement of changesin shareholders’ equity for the year ended December 31, 2003. Thesefinancial statements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based onour audit.

We conducted our audit in accordance with thestandards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis for our opinion.

In our opinion, based on our audit, the financialstatements referred to above present fairly, in all material respects, theconsolidated financial position of TeliaSonera AB at December 31, 2003,and the consolidated results of its operations and its cash flows for the yearended December 31, 2003, in conformity with International FinancialReporting Standards.

InternationalFinancial Reporting Standards differ in certain respects from accountingprinciples generally accepted in the United States of America. Informationrelating to the nature and effect of such differences is presented in Note 36to the consolidated financial statements.
| Ernst & Young AB    | KPMG Bohlins AB              |
|------------------------------|------------------------------|
| Lars Träff              | Thomas Thiel                 |
| Authorized Public Accountant | Authorized Public Accountant |
| Stockholm, Sweden            |                         |
| March 3, 2004           |                         |

 

179

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**Ten-Year Summary**

| **TeliaSonera Group  Financial Data (IFRS)**                    | ** **   | **2005**     | ** **   | **2004**     | ** **   | **2003**     | ** **   | **2002**     | ** **   | **2001**     | ** **   | **2000**     | ** **   | **1999**     | ** **   | **1998**     | ** **   | **1997**     | ** **   | **1996**     | ** **   |
|--------------------------------------------------------------------------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|
| ***Income  statements (SEK in millions)***                                     | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** |
| Net sales                                                                      |         | 87,661       |         | 81,937       |         | 82,425       |         | 59,483       |         | 57,196       |         | 54,064       |         | 52,121       |         | 49,569       |         | 45,665       |         | 42,430       |         |
| Operating income                                                               |         | 17,549       |         | 18,793       |         | 14,710       |         | -10,895      |         | 5,460        |         | 12,006       |         | 5,946        |         | 7,220        |         | 3,218        |         | 3,264        |         |
| Income after financial items                                                   |         | 17,019       |         | 17,448       |         | 13,899       |         | -11,616      |         | 4,808        |         | 11,717       |         | 5,980        |         | 7,143        |         | 3,128        |         | 3,353        |         |
| Net income                                                                     |         | 13,694       |         | 14,264       |         | 10,049       |         | -7,997       |         | 1,891        |         | 10,270       |         | 4,226        |         | 5,051        |         | 2,182        |         | 2,323        |         |
| of which attributable to parent company shareholders                           |         | 11,697       |         | 12,964       |         | 9,080        |         | -8,067       |         | 1,869        |         | 10,278       |         | 4,222        |         | 5,011        |         | 2,222        |         | 2,337        |         |
| EBITDA excluding non-recurring items                                           |         | 29,411       |         | 30,196       |         | 30,700       |         | 15,692       |         | 12,915       |         | 13,087       |         | 14,059       |         | 13,309       |         | 12,324       |         | 13,185       |         |
| EBITDA                                                                         |         | 27,508       |         | 30,841       |         | 32,035       |         | 9,421        |         | 13,299       |         | 21,425       |         | 12,875       |         | 15,070       |         | 10,679       |         | 10,961       |         |
| Amortization, depreciation and impairment losses                               |         | 13,188       |         | 15,596       |         | 17,707       |         | 20,844       |         | 13,975       |         | 8,222        |         | 7,652        |         | 7,146        |         | 7,298        |         | 7,154        |         |
| ***Balance  sheets (SEK in millions)***                                        | *** *** | *** *** | *** *** | *** *** |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |
| Goodwill and other intangible assets                                           |         | 74,367       |         | 69,534       |         | 61,820       |         | 68,106       |         | 26,816       |         | 25,198       |         | 2,146        |         | 1,844        |         | 1,566        |         | 1,809        |         |
| Property, plant and equipment                                                  |         | 48,201       |         | 47,212       |         | 49,161       |         | 56,172       |         | 47,314       |         | 43,807       |         | 33,318       |         | 34,801       |         | 39,239       |         | 38,366       |         |
| Financial assets                                                               |         | 40,526       |         | 35,353       |         | 42,061       |         | 48,534       |         | 20,784       |         | 22,335       |         | 18,023       |         | 12,553       |         | 8,666        |         | 7,224        |         |
| Non-current assets held-for-sale and current assets                            |         | 40,681       |         | 39,873       |         | 37,018       |         | 33,844       |         | 33,277       |         | 31,375       |         | 23,117       |         | 18,080       |         | 16,439       |         | 15,116       |         |
| *Total assets*                                                                 | * *     | *203,775*    | * *     | *191,972*    | * *     | *190,060*    | * *     | *206,656*    | * *     | *128,191*    | * *     | *122,715*    | * *     | *76,604*     | * *     | *67,278*     | * *     | *65,910*     | * *     | *62,515*     | * *     |
| Total equity                                                                   |         | 135,694      |         | 128,067      |         | 115,834      |         | 113,949      |         | 60,089       |         | 56,308       |         | 33,103       |         | 29,554       |         | 25,793       |         | 24,631       |         |
| of which shareholders’ equity                                             |         | 127,049      |         | 121,133      |         | 112,393      |         | 108,829      |         | 59,885       |         | 55,988       |         | 32,893       |         | 29,344       |         | 25,487       |         | 24,413       |         |
| Provisions                                                                     |         | 15,564       |         | 13,402       |         | 15,297       |         | 18,406       |         | 13,107       |         | 11,351       |         | 10,488       |         | 7,735        |         | 12,262       |         | 14,146       |         |
| Interest-bearing liabilities                                                   |         | 26,735       |         | 24,675       |         | 30,554       |         | 44,732       |         | 29,124       |         | 34,042       |         | 16,057       |         | 13,553       |         | 14,813       |         | 9,837        |         |
| Non-interest-bearing liabilities                                               |         | 25,782       |         | 25,828       |         | 28,375       |         | 29,569       |         | 25,871       |         | 21,014       |         | 16,956       |         | 16,436       |         | 13,042       |         | 13,901       |         |
| *Total equity and liabilities*                                                 | * *     | *203,775*    | * *     | *191,972*    | * *     | *190,060*    | * *     | *206,656*    | * *     | *128,191*    | * *     | *122,715*    | * *     | *76,604*     | * *     | *67,278*     | * *     | *65,910*     | * *     | *62,515*     | * *     |
| Capital employed                                                               |         | 146,712      |         | 147,132      |         | 142,235      |         | 157,035      |         | 90,971       |         | 92,374       |         | 50,936       |         | 43,440       |         | 46,329       |         | 43,420       |         |
| Operating capital                                                              |         | 125,299      |         | 126,198      |         | 120,006      |         | 137,113      |         | 70,150       |         | 75,042       |         | 39,160       |         | 34,921       |         | 39,192       |         | 37,013       |         |
| Net debt                                                                       |         | 8,373        |         | 7,062        |         | 18,207       |         | 38,075       |         | 20,004       |         | 32,512       |         | 14,280       |         | 12,870       |         | 13,254       |         | 8,710        |         |
| Net interest-bearing liability                                                 |         | 5,320        |         | 3,741        |         | 8,847        |         | 25,034       |         | 10,661       |         | 20,235       |         | 7,527        |         | 6,767        |         | 14,609       |         | 13,534       |         |
| ***Cash  flows (SEK in millions)***                                            | *** *** | *** *** | *** *** | *** *** |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |
| Cash flow from operating activities                                            |         | 26,990       |         | 24,403       |         | 26,443       |         | 12,449       |         | 10,416       |         | 10,152       |         | 10,715       |         | 10,301       |         | 8,920        |         | 9,783        |         |
| Cash flow from investing activities                                            |         | -12,236      |         | -7,991       |         | -3,443       |         | -5,553       |         | 3,632        |         | -37,121      |         | -10,701      |         | -8,967       |         | -12,426      |         | -14,744      |         |
| *Cash flow before financing activities*                                        | * *     | *14,754*     | * *     | *16,412*     | * *     | *23,000*     | * *     | *6,896*      | * *     | *14,048*     | * *     | *-26,969*    | * *     | *14*         | * *     | *1,334*      | * *     | *-3,506*     | * *     | *-4,961*     | * *     |
| Cash flow from financing activities                                            |         | -15,653      |         | -11,102      |         | -16,412      |         | -10,344      |         | -6,608       |         | 26,818       |         | 1,005        |         | -2,301       |         | 3,896        |         | 4,784        |         |
| *Cash flow for the year*                                                       | * *     | *-899*       | * *     | *5,310*      | * *     | *6,588*      | * *     | *-3,448*     | * *     | *7,440*      | * *     | *-151*       | * *     | *1,019*      | * *     | *-967*       | * *     | *390*        | * *     | *-177*       | * *     |
| Free cash flow                                                                 |         | 15,594       |         | 14,118       |         | 17,351       |         | 3,877        |         | -6,506       |         | -5,845       |         | 2,828        |         | 2,638        |         | -707         |         | 1,480        |         |
| ***Investments  (SEK in millions)***                                           | *** *** | *** *** | *** *** | *** *** |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |
| CAPEX                                                                          |         | 11,583       |         | 10,331       |         | 9,267        |         | 14,345       |         | 17,713       |         | 16,580       |         | 7,701        |         | 7,663        |         | 9,637        |         | 8,304        |         |
| Acquisitions and other investments                                             |         | 2,732        |         | 9,099        |         | 2,851        |         | 40,093       |         | 3,022        |         | 31,162       |         | 4,444        |         | 4,075        |         | 1,227        |         | 2,704        |         |
| *Total investments*                                                            | * *     | *14,315*     | * *     | *19,430*     | * *     | *12,118*     | * *     | *54,438*     | * *     | *20,735*     | * *     | *47,742*     | * *     | *12,145*     | * *     | *11,738*     | * *     | *10,864*     | * *     | *11,008*     | * *     |
| ***Business  ratios***                                                         | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** |
| EBITDA margin (%)                                                              |         | 33.6         |         | 36.9         |         | 37.2         |         | 26.4         |         | 22.6         |         | 24.2         |         | 27.0         |         | 26.8         |         | 27.0         |         | 31.1         |         |
| Operating margin (%)                                                           |         | 20.0         |         | 22.9         |         | 17.8         |         | -18.3        |         | 9.5          |         | 22.2         |         | 11.4         |         | 14.6         |         | 7.0          |         | 7.7          |         |
| Return on sales (%)                                                            |         | 15.6         |         | 17.4         |         | 12.2         |         | -13.4        |         | 3.3          |         | 19.0         |         | 8.1          |         | 10.2         |         | 4.8          |         | 5.5          |         |
| Amortization, depreciation and impairment losses as a  percentage of net sales |         | 15.0         |         | 19.0         |         | 21.5         |         | 35.0         |         | 24.4         |         | 15.2         |         | 14.7         |         | 14.4         |         | 16.0         |         | 16.9         |         |
| CAPEX as a percentage of net sales                                             |         | 13.2         |         | 12.6         |         | 11.2         |         | 24.1         |         | 31.0         |         | 30.7         |         | 14.8         |         | 15.5         |         | 21.1         |         | 19.6         |         |
| Total asset turnover (multiple)                                                |         | 0.44         |         | 0.43         |         | 0.42         |         | 0.36         |         | 0.46         |         | 0.54         |         | 0.72         |         | 0.74         |         | 0.71         |         | 0.70         |         |
| Turnover of capital employed (multiple)                                        |         | 0.60         |         | 0.57         |         | 0.55         |         | 0.48         |         | 0.62         |         | 0.75         |         | 1.10         |         | 1.10         |         | 1.02         |         | 1.01         |         |
| Return on assets (%)                                                           |         | 9.4          |         | 10.5         |         | 8.7          |         | -5.7         |         | 5.7          |         | 13.6         |         | 9.4          |         | 11.9         |         | 6.0          |         | 6.6          |         |
| Return on capital employed (%)                                                 |         | 12.6         |         | 13.9         |         | 11.6         |         | -7.7         |         | 7.8          |         | 18.9         |         | 14.4         |         | 17.6         |         | 8.6          |         | 9.6          |         |
| Return on equity (%)                                                           |         | 10.3         |         | 11.6         |         | 8.5          |         | -9.7         |         | 3.3          |         | 23.9         |         | 14.2         |         | 19.2         |         | 9.3          |         | 10.3         |         |
| Equity/assets ratio (%)                                                        |         | 58.9         |         | 63.8         |         | 58.5         |         | 54.2         |         | 46.4         |         | 44.7         |         | 41.3         |         | 41.8         |         | 37.3         |         | 37.6         |         |
| Net debt/equity ratio (%)                                                      |         | 7.0          |         | 5.8          |         | 16.4         |         | 34.0         |         | 33.6         |         | 59.3         |         | 45.1         |         | 45.7         |         | 53.9         |         | 37.1         |         |
| Interest coverage ratio (multiple)                                             |         | 11.7         |         | 7.6          |         | 5.1          |         | -4.7         |         | 3.0          |         | 7.3          |         | 8.5          |         | 10.4         |         | 5.3          |         | 6.1          |         |
| Self-financing rate (multiple)                                                 |         | 1.89         |         | 1.26         |         | 2.18         |         | 0.23         |         | 0.50         |         | 0.21         |         | 0.88         |         | 0.88         |         | 0.82         |         | 0.89         |         |
| ***Share  data***                                                              | *** *** | *** *** | *** *** | *** *** |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |
| Number of outstanding  shares (millions)                                       |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |
|  - at the end  of the period                                              |         | 4,490.5      |         | 4,675.2      |         | 4,675.2      |         | 4,605.8      |         | 3.001.2      |         | 3.001.2      |         | 8.8          |         | 8.8          |         | 8.8          |         | 8.8          |         |
|  - average,  basic 1)                                                |         | 4,574.0      |         | 4,675.2      |         | 4,667.6      |         | 3,124.3      |         | 3,001.2      |         | 2,932.8      |         | 2,851.2      |         | 2,851.2      |         | 2,851.2      |         | 2,851.2      |         |
|  - average,  diluted 1)                                              |         | 4,574,0      |         | 4,675.2      |         | 4,668.4      |         | 3,125.3      |         | 3,001.2      |         | 2,932.8      |         | 2,851.2      |         | 2,851.2      |         | 2,851.2      |         | 2,851.2      |         |
| Basic and diluted earnings/loss per share (SEK)                                |         | 2.56         |         | 2.77         |         | 1.95         |         | -2.58        |         | 0.62         |         | 3.50         |         | 1.48         |         | 1.76         |         | 0.78         |         | 0.82         |         |
| Cash dividend per share (SEK) 2)                                          |         | 3.50         |         | 1.20         |         | 1.00         |         | 0.40         |         | 0.20         |         | 0.50         |         | 0.52         |         | 0.49         |         | 0.42         |         | 0.40         |         |
| Cash dividend per share (USD) 2, 3)                                       |         | 0.45         |         | 0.17         |         | 0.13         |         | 0.05         |         | 0.02         |         | 0.05         |         | 0.06         |         | 0.06         |         | 0.05         |         | 0.05         |         |
| Total cash dividend (SEK in millions) 2)                                  |         | 15,717       |         | 5,610        |         | 4,675        |         | 1,870        |         | 600          |         | 1,501        |         | 1,470        |         | 1,400        |         | 1,210        |         | 1,152        |         |
| Payout ratio (%)                                                               |         | 136.7        |         | 43.3         |         | 51.4         |         | n/a          |         | 32.1         |         | 14.3         |         | 34.8         |         | 27.9         |         | 54.5         |         | 49.3         |         |
| Shareholders’ equity per share (SEK)                                      |         | 28.29        |         | 25.91        |         | 24.04        |         | 23.63        |         | 19.95        |         | 18.66        |         | 11.54        |         | 10.29        |         | 8.94         |         | 8.56         |         |
| ***Comparative  figures under U.S. GAAP***                                     | *** *** | *** *** | *** *** | *** *** |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |
| Net sales (SEK in millions)                                                    |         | 87,522       |         | 81,395       |         | 82,099       |         | 59,336       |         | 56,957       |         | 53,849       |         | 51,931       |         | 49,389       |         | 45,542       |         | 42,363       |         |
| Net income (SEK in millions)                                                   |         | 4,419        |         | 12,293       |         | 10,628       |         | -8,755       |         | 4,443        |         | 9,991        |         | 4,218        |         | 3,600        |         | 2,133        |         | 2,288        |         |
| Shareholders’ equity (SEK in millions)                                    |         | 112,153      |         | 117,272      |         | 111,780      |         | 110,269      |         | 58,589       |         | 51,870       |         | 29,168       |         | 25,575       |         | 23,167       |         | 22,253       |         |
| Balance sheet total (SEK in millions)                                          |         | 198,868      |         | 197,152      |         | 200,787      |         | 217,464      |         | 132,495      |         | 123,689      |         | 77,974       |         | 68,598       |         | 66,716       |         | 63,356       |         |
| Basic and diluted earnings/loss per share (SEK)                                |         | 0.97         |         | 2.63         |         | 2.28         |         | -2.80        |         | 1.48         |         | 3.41         |         | 1.48         |         | 1.26         |         | 0.75         |         | 0.80         |         |

----

1)                   Adjusted for 324-to-1 share split in 2000.

2)                   For 2005 as proposed by the Board of Directors andincluding an extra dividend of SEK 2.25 (USD 0.29) per share totaling SEK10,104 million.

3)                   Dividend amounts have been translated intoUSD at the Noon Buying Rate for the relevant dividend payment date except forthe 2005 dividend, which amount has been translated into USD at the Noon BuyingRate on March 31, 2006.

180

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| **TeliaSonera Group  Operational Data**                                              | ** **   | **2005**     | ** **   | **2004**     | ** **   | **2003**     | ** **   | **2002**     | ** **   | **2001**     | ** **   | **2000**     | ** **   | **1999**     | ** **   | **1998**     | ** **   | **1997**     | ** **   | **1996**     | ** **   |
|------------------------------------------------------------------------------------------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|--------------|
| ***Sweden***                                                                                   | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** |
| Mobile telephony, total subscriptions (thousands)                                              |         | 4,387        |         | 4,243        |         | 3,838        |         | 3,604        |         | 3,439        |         | 3,257        |         | 2,638        |         | 2,206        |         | 1,935        |         | 1,745        |         |
| Mobile telephony, total GSM/UMTS (thousands)                                                   |         | 4,267        |         | 4,117        |         | 3,706        |         | 3,467        |         | 3,295        |         | 3,076        |         | 2,348        |         | 1,703        |         | 1,180        |         | 824          |         |
| Mobile telephony, total NMT (thousands)                                                        |         | 120          |         | 126          |         | 132          |         | 137          |         | 144          |         | 181          |         | 290          |         | 503          |         | 755          |         | 921          |         |
| Mobile telephony, outgoing traffic (millions of  minutes)                                      |         | 4,456        |         | 3,814        |         | 3,313        |         | 3,201        |         | 3,016        |         | 2,591        |         | 2,089        |         | 1,745        |         | 1,554        |         | 1,221        |         |
| Mobile telephony, incoming traffic (millions of  minutes)                                      |         | 2,750        |         | 2,573        |         | 2,400        |         | 2,272        |         | 2,067        |         | 1,766        |         | 1,416        |         | 1,091        |         | 885          |         | 677          |         |
| Mobile telephony, traffic per customer and month  (minutes)                                    |         | 139          |         | 131          |         | 128          |         | 131          |         | 127          |         | 123          |         | 121          |         | 114          |         | 111          |         | 99           |         |
| Mobile telephony, SMS messages (millions)                                                      |         | 923          |         | 905          |         | 794          |         | 488          |         | 389          |         | 185          |         | 46           |         | 13           |         | 4            |         | —       |         |
| Mobile telephony, GSM churn (%)                                                                |         | 11           |         | 10           |         | 11           |         | 12           |         | 8            |         | 8            |         | 9            |         | 14           |         | 12           |         | n/a          |         |
| Mobile telephony, ARPU (SEK)                                                                   |         | 213          |         | 227          |         | 252          |         | 262          |         | 285          |         | 308          |         | 332          |         | 362          |         | 345          |         | 366          |         |
| Broadband ADSL/LAN, subscriptions (thousands)                                                  |         | 711          |         | 526          |         | 394          |         | 317          |         | 194          |         | 27           |         | 2            |         | —       |         | —       |         | —       |         |
| Broadband dedicated access, subscriptions (thousands)                                          |         | 6            |         | 7            |         | 5            |         | 4            |         | 3            |         | 2            |         | 1            |         | 1            |         | 1            |         | 1            |         |
| Internet dial-up access, subscriptions (thousands)                                             |         | 722          |         | 817          |         | 823          |         | 763          |         | 747          |         | 687          |         | 598          |         | 439          |         | 230          |         | 105          |         |
| Fixed telephony, PSTN subscriptions (thousands)                                                |         | 4,369        |         | 5,390        |         | 5,493        |         | 5,579        |         | 5,663        |         | 5,783        |         | 5,889        |         | 5,965        |         | 6,010        |         | 6,032        |         |
| Fixed telephony, ISDN channels (thousands)                                                     |         | 667          |         | 725          |         | 790          |         | 836          |         | 922          |         | 838          |         | 630          |         | 424          |         | 244          |         | 129          |         |
| ***Finland***                                                                                  |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |
| Mobile telephony, total subscriptions (thousands)                                              |         | 2,507        |         | 2,297        |         | 2,428        |         | 2,790        |         | 239          |         | 149          |         | 33           |         | 8            |         | —       |         | —       |         |
| of which Sonera                                                                                |         | 2,507        |         | 2,297        |         | 2,428        |         | 2,490        |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         |
| Mobile telephony, outgoing traffic (millions of  minutes)                                      |         | 5,642        |         | 4,820        |         | 4,743        |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         |
| Mobile telephony, incoming traffic (millions of  minutes)                                      |         | 2,405        |         | 2,147        |         | 2,090        |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         |
| Mobile telephony, traffic per customer and month  (minutes)                                    |         | 277          |         | 253          |         | 232          |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         |
| Mobile telephony, SMS messages (millions)                                                      |         | 1,216        |         | 993          |         | 832          |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         |
| Mobile telephony, GSM churn (%)                                                                |         | 26           |         | 29           |         | 17           |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         |
| Mobile telephony, ARPU (EUR)                                                                   |         | 30           |         | 38           |         | 38           |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         |
| Broadband, subscriptions (thousands)                                                           |         | 350          |         | 243          |         | 150          |         | 82           |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         |
| Internet dial-up access, subscriptions households  (thousands)                                 |         | 76           |         | 113          |         | 149          |         | 181          |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         |
| Fixed telephony, PSTN subscriptions (thousands)                                                |         | 456          |         | 525          |         | 570          |         | 503          |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         |
| Fixed telephony, ISDN channels (thousands)                                                     |         | 191          |         | 215          |         | 234          |         | 219          |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         |
| ***Norway***                                                                                   |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |
| Mobile telephony, total subscriptions (thousands)                                              |         | 1,651        |         | 1,308        |         | 1,195        |         | 1,089        |         | 970          |         | 850          |         | —       |         | —       |         | —       |         | —       |         |
| *Norway,  NetCom*                                                                              |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |
| Mobile telephony, traffic per customer and month  (minutes)                                    |         | 194          |         | 175          |         | 164          |         | 156          |         | 133          |         | 130          |         | —       |         | —       |         | —       |         | —       |         |
| Mobile telephony, SMS messages (millions)                                                      |         | 1,444        |         | 1,171        |         | 1,043        |         | 756          |         | 501          |         | 302          |         | —       |         | —       |         | —       |         | —       |         |
| Mobile telephony, ARPU (NOK)                                                                   |         | 338          |         | 339          |         | 342          |         | 330          |         | 310          |         | 308          |         | —       |         | —       |         | —       |         | —       |         |
| ***Denmark***                                                                                  | *** *** | *** *** | *** *** | *** *** |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |
| Mobile telephony, total subscriptions (thousands)                                              |         | 1,154        |         | 1,115        |         | 472          |         | 421          |         | 288          |         | 263          |         | 170          |         | 112          |         | —       |         | —       |         |
| Mobile telephony, SMS messages (millions)                                                      |         | 3,579        |         | 2,542        |         | 1,041        |         | 175          |         | 61           |         | 39           |         | 23           |         | —       |         | —       |         | —       |         |
| Internet dial-up access, subscriptions (thousands)                                             |         | 24           |         | 43           |         | 28           |         | 34           |         | n/a          |         | n/a          |         | n/a          |         | n/a          |         | n/a          |         | —       |         |
| Cable TV, subscriptions (thousands)                                                            |         | 204          |         | 201          |         | 195          |         | 188          |         | 179          |         | 175          |         | 170          |         | 164          |         | 145          |         | 137          |         |
| Broadband, subscriptions (thousands)                                                           |         | 151          |         | 126          |         | 104          |         | 81           |         | 58           |         | 30           |         | 11           |         | 3            |         | —       |         | —       |         |
| Fixed telephony, prefix and contract customers (thousands)                                     |         | 195          |         | 212          |         | 172          |         | 223          |         | n/a          |         | n/a          |         | n/a          |         | n/a          |         | n/a          |         | n/a          |         |
| ***Baltic countries***                                                                         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |
| Mobile telephony, subscriptions, Estonia (thousands)                                           |         | 677          |         | 595          |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         |
| Fixed telephony, subscriptions, Estonia (thousands)                                            |         | 388          |         | 426          |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         |
| Mobile telephony, subscriptions, Latvia (thousands)                                            |         | 735          |         | 649          |         | 534          |         | 447          |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         |
| Mobile telephony, subscriptions, Lithuania  (thousands)                                        |         | 1,889        |         | 1,338        |         | 1,052        |         | 851          |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         |
| Fixed telephony, subscriptions, Lithuania (thousands)                                          |         | 798          |         | 819          |         | 828          |         | 936          |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         |
| ***Eurasia***                                                                                  |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |
| Mobile telephony, subscriptions (thousands)                                                    |         | 6,146        |         | 3,866        |         | 2,385        |         | 1,614        |         | —       |         | —       |         | —       |         | —       |         | —       |         | —       |         |
| ***Human Resources***                                                                          |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |         |
| Number of employees as of December 31                                                     |         | 28,175       |         | 29,082       |         | 26,694       |         | 29,173       |         | 17,149       |         | 29,868       |         | 30,643       |         | 30,593       |         | 32,549       |         | 34,192       |         |
| Average number of employees during the year                                                    |         | 27,403       |         | 25,381       |         | 26,188       |         | 17,277       |         | 24,979       |         | 30,307       |         | 29,546       |         | 31,320       |         | 33,930       |         | 34,031       |         |
| of which, in Sweden                                                                            |         | 11,061       |         | 10,948       |         | 11,321       |         | 12,593       |         | 20,922       |         | 25,383       |         | 25,414       |         | 27,540       |         | 30,474       |         | 31,290       |         |
| of which, in Finland                                                                           |         | 6,369        |         | 6,750        |         | 6,408        |         | 1,142        |         | 775          |         | 999          |         | 662          |         | 521          |         | 421          |         | 178          |         |
| of which, in other countries                                                                   |         | 9,973        |         | 7,683        |         | 8,459        |         | 3,542        |         | 3,282        |         | 3,925        |         | 3,470        |         | 3,259        |         | 3,035        |         | 2,563        |         |
| of which, women                                                                                |         | 12,634       |         | 11,427       |         | 10,936       |         | 7,546        |         | 9,196        |         | 11,521       |         | 11,268       |         | 11,486       |         | 13,703       |         | 12,416       |         |
| of which, men                                                                                  |         | 14,769       |         | 13,954       |         | 15,252       |         | 9,731        |         | 15,783       |         | 18,786       |         | 18,278       |         | 19,834       |         | 20,227       |         | 21,615       |         |
| Salaries and remuneration (SEK in millions)                                                    |         | 9,023        |         | 8,674        |         | 8,460        |         | 6,732        |         | 8,852        |         | 9,543        |         | 9,184        |         | 9,098        |         | 9,472        |         | 8,876        |         |
| Employer’s social security contributions (SEK in  millions)                               |         | 1,970        |         | 1,902        |         | 1,950        |         | 1,804        |         | 2,614        |         | 3,055        |         | 2,895        |         | 2,762        |         | 2,807        |         | 2,719        |         |
| Salaries and employer’s social security contributions  as a percentage of operating costs |         | 15.5         |         | 16.4         |         | 14.9         |         | 14.9         |         | 19.4         |         | 25.5         |         | 26.2         |         | 25.8         |         | 28.5         |         | 29.9         |         |
| Net sales per employee (SEK in thousands)                                                      |         | 3,199        |         | 3,228        |         | 3,147        |         | 3,443        |         | 2,290        |         | 1,784        |         | 1,764        |         | 1,583        |         | 1,346        |         | 1,247        |         |
| Operating income per employee (SEK in thousands)                                               |         | 640          |         | 740          |         | 562          |         | -631         |         | 219          |         | 396          |         | 201          |         | 230          |         | 95           |         | 96           |         |
| Change in labor productivity (%)                                                               |         | 8.3          |         | 10.8         |         | -4.9         |         | 53.5         |         | 31.9         |         | 8.3          |         | 17.9         |         | 20.2         |         | 8.4          |         | 5.4          |         |
| Net income per employee (SEK in thousands)                                                     |         | 500          |         | 511          |         | 347          |         | -467         |         | 75           |         | 339          |         | 143          |         | 160          |         | 65           |         | 69           |         |

 

181

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**Definitions**

**Concepts**

***EBITDA***

An abbreviation of “EarningsBefore Interest, Tax, Depreciation and Amortization.” Equals operating income beforeamortization, depreciation and impairment losses, and before income fromassociated companies.

***Non-recurring items***

Non-recurring itemsinclude capital gains and losses, costs for phasing out operations, personnelredundancy costs, and non-capitalized expenses in conjunction with the mergerwith Sonera in 2002. Effective January 1, 2003, only capital gains/losses,write-downs, restructuring programs or similar that represent more than SEK 100million on an individual basis, will be reported as non-recurring. Comparableperiods have not been restated.

***Adjusted shareholders’ equity***

Reported equity (excludingminority interests) less the (proposed) dividend.

***Capital employed***

Total assets lessnon-interest-bearing liabilities and non-interest-bearing provisions recorded,and the (proposed) dividend.

***Operating capital***

Non-interest-bearingassets less non-interest-bearing liabilities, including the (proposed)dividend, and non-interest-bearing provisions.

***Net interest-bearing liability***

Interest-bearingliabilities and provisions less interest-bearing assets but includingparticipations in associated companies.

***Net borrowings***

Interest-bearingliabilities less interest-bearing assets but including participations inassociated companies.

***Net debt***

Interest-bearingliabilities less short-term investments and cash and bank.

***Free cash flow***

Cash flow from operatingactivities less cash CAPEX.

***CAPEX***

An abbreviation of “CapitalExpenditure.” Investments in intangible and tangible non-current assets butexcluding goodwill, fair-value adjustments and asset retirement obligations.

***Acquisitions and other investments***

Investments in goodwilland fair-value adjustments, shares and participations, and asset retirementobligations.

***EBITDA margin***

EBITDA excludingnon-recurring items expressed as a percentage of net sales.

182

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***Operating margin (EBIT margin)***

Operating income expressedas a percentage of net sales.

***Return on sales***

Net income (includingminority interests) expressed as a percentage of net sales.

***Total asset turnover***

Net sales divided by theaverage balance sheet total.

***Turnover of capital employed***

Net sales divided by theaverage capital employed.

***Return on assets***

Operating income plusfinancial revenues expressed as a percentage of the average balance sheettotal.

***Return on capital employed***

Operating income plusfinancial revenues expressed as a percentage of average capital employed.

***Return on equity***

Net income (excludingminority interests) expressed as a percentage of average adjusted shareholders’equity.

***Equity/assets ratio***

Adjusted shareholders’equity and minority interests expressed as a percentage of total assets.

***Net debt/equity ratio***

Net debt expressed as apercentage of adjusted shareholders’ equity and minority interests.

***Interest coverage ratio***

Operating income plusfinancial revenues divided by financial expenses.

***Self-financing rate***

Cash flow from operatingactivities divided by gross investments.

***Share data***

Earnings per share arebased on the weighted average number of shares before and after dilution withpotential ordinary shares, while shareholders’ equity per share is based on thenumber of shares at the end of the period.

***Pay-out ratio***

Dividend per share dividedby basic earnings per share.

***ARPU***

Average monthly revenueper user.

***Churn***

The number of post-paidcustomers that have left the company expressed as a percentage of the averagenumber of post-paid customers.

183

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***Labor productivity***

Year-on-year percentagechange in the ratio of net sales at fixed prices to the average number offull-time employees.

**Notation conventions**

Inconformance with Swedish and international standards, this report applies thefollowing currency notations:

| SEK |   | Swedish krona    |   | GBP |   | Pound sterling   |   | LVL |   | Latvian lat      |
|-----|--------|------------------|--------|-----|--------|------------------|--------|-----|--------|------------------|
| AZM |   | Azerbaijan manat |   | HKD |   | Hong Kong dollar |   | NOK |   | Norwegian krone  |
| CHF |   | Swiss franc      |   | HUF |   | Hungarian forint |   | PHP |   | Philippine peso  |
| CZK |   | Czech koruna     |   | ILS |   | Israeli shekel   |   | PLN |   | Polish zloty     |
| DEM |   | German mark      |   | INR |   | Indian rupee     |   | RUR |   | Russian ruble    |
| DKK |   | Danish krone     |   | JPY |   | Japanese yen     |   | SGD |   | Singapore dollar |
| EEK |   | Estonian kroon   |   | KZT |   | Kazakhstan tenge |   | TRY |   | Turkish lira     |
| EUR |   | European euro    |   | LKR |   | Sri Lankan rupee |   | UGX |   | Ugandan shilling |
| GEL |   | Georgian lari    |   | LTL |   | Lithuanian lita  |   | USD |   | U.S. dollar      |

 

184

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**SupplementalInformation**

Thefollowing information is provided for purposes of complying with certainrequirements of the Form 20-F which are not satisfied in full by theinformation in other sections of this annual report.

**Item 3.A Selected Financial Data—Exchange Rates**

Thefollowing table provides information with respect to the exchange rate for SEKper USD 1.00, based on the noon buying rate for cable transfers in SEK ascertified for customs purposes by the Federal Reserve Bank of New York. On March 31,2006, the noon buying rate for SEK was USD 1.00 = SEK 7.7653. The annualaverage is computed using the noon buying rate on the last business day of eachmonth.

| **USD/SEK exchange rate** | ** ** | ** ** | ** ** | **Average** | ** ** | **High** | ** ** | **Low** | ** ** | **Period end** | ** ** |
|-------------------------------------|------------|------------|------------|-------------|------------|----------|------------|---------|------------|---------------------|------------|
| **Year**                            |       |       |       |        |       |     |       |    |       |                |       |
| 2001                                |       | 10.3425    |       | 11.0270     |       | 9.3250   |       |    | 10.4571    |                |       |
| 2002                                |       | 9.7233     |       | 10.7290     |       | 8.6950   |       |    | 8.6950     |                |       |
| 2003                                |       | 8.0828     |       | 8.7920      |       | 7.1950   |       |    | 7.1950     |                |       |
| 2004                                |       | 7.3320     |       | 7.7725      |       | 6.5939   |       |    | 6.6687     |                |       |
| 2005                                |       | 7.5170     |       | 8.2434      |       | 6.6855   |       |    | 7.9370     |                |       |
| **Month**                           |       |       |       |        |       |     |       |    |       |                |       |
| October 2005                   |       | 7.8433     |       | 7.9695      |       | 7.6870   |       |    | 7.9489     |                |       |
| November 2005                  |       | 8.1157     |       | 8.2434      |       | 7.9749   |       |    | 8.0733     |                |       |
| December 2005                  |       | 7.9518     |       | 8.1162      |       | 7.8323   |       |    | 7.9370     |                |       |
| January 2006                   |       | 7.6697     |       | 7.8097      |       | 7.5385   |       |    | 7.6029     |                |       |
| February 2006                  |       | 7.8226     |       | 7.9656      |       | 7.6487   |       |    | 7.9154     |                |       |
| March 2006                     |       | 7.8109     |       | 7.9604      |       | 7.6491   |       |    | 7.7653     |                |       |

 

The effects of exchange rate fluctuations aredescribed in section “Financial Risk Management” in Note 22 to ourconsolidated financial statements.

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**Item 4.C Organizational Structure**

TeliaSonera AB is the ultimate parent company of theTeliaSonera Group and is also responsible for carrying out the Swedish fixednetwork operations. We carry out the remainder of our operations throughsubsidiaries, the most significant of which are listed below:

| **Name of company**          | ** ** | ** **                  | ** ** | **Domicile** | ** ** | **Ownership  (%)** | ** ** | **External net sales  January-December 2005  (SEK in millions)** | ** ** |
|----------------------------------------|------------|-----------------------------|------------|--------------|------------|--------------------|------------|-------------------------------------------------------------------------------------------|------------|
| **Parent company**                     |       |                        |       |         |       |               |       |                                                                                      |       |   |   |
| TeliaSonera AB                         |       | Stockholm,  Sweden          |       |         | —     |               |       |                                                                                      | 4,750      |   |   |
| **Significant subsidiaries**           |       |                        |       |         |       |               |       |                                                                                      |       |   |   |
| TeliaSonera  Sverige AB                |       | Stockholm,  Sweden          |       |         | 100.0      |               |       |                                                                                      | 30,002     |   |   |
| TeliaSonera  Finland Oyj               |       | Helsinki,  Finland          |       |         | 100.0      |               |       |                                                                                      | 11,497     |   |   |
| NetCom AS                              |       | Oslo,  Norway               |       |         | 100.0      |               |       |                                                                                      | 7,040      |   |   |
| TeliaSonera  Mobile Networks AB        |       | Nacka,  Sweden              |       |         | 100.0      |               |       |                                                                                      | 6,498      | (1) |   |
| Fintur Holdings  B.V.                  |       | Rotterdam,  the Netherlands |       |         | 74.0  | (2)                |       |                                                                                      | 6,365      | (3) |   |
| AS Eesti Telekom                       |       | Tallinn,  Estonia           |       |         | 50.3  | (4)                |       |                                                                                      | 2,948      | (3) |   |
| Latvijas Mobilais  Telefons SIA        |       | Riga,  Latvia               |       |         | 60.3  | (2)                |       |                                                                                      | 2,188      |   |   |
| UAB Omnitel                            |       | Vilnius,  Lithuania         |       |         | 100.0      |               |       |                                                                                      | 2,157      |   |   |
| Sonera Mobile  Networks Oy             |       | Helsinki,  Finland          |       |         | 100.0      |               |       |                                                                                      | 2,096      |   |   |
| AB Lietuvos  Telekomas                 |       | Vilnius,  Lithuania         |       |         | 60.0       |               |       |                                                                                      | 1,849      | (3) |   |
| TeliaSonera International Carrier AB   |       | Stockholm,  Sweden          |       |         | 100.0      |               |       |                                                                                      | 1,445      |   |   |
| Auria Oy                               |       | Loimaa,  Finland            |       |         | 100.0      |               |       |                                                                                      | 1,373      | (3) |   |
| TeliaSonera Chess  Holding AS          |       | Bergen,  Norway             |       |         | 100.0      |               |       |                                                                                      | 208        | (3)(5) |   |
| Telia Nättjänster Norden  AB |       | Stockholm, Sweden           |       |         | 100.0      |               |       |                                                                                      | 1,210      | (1) |   |

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(1)          Including Danish branch

(2)          Including direct andindirect holdings

(3)          Including subsidiaries

(4)          In 2006, we haveincreased our ownership in AS Eesti Telekom to 53.7 percent.

(5)          Consolidatedsubsidiary as of November 7, 2005. Full year net sales in 2005 were SEK1,244 million.

**Item 7.A Major Shareholders**

TeliaSonera terminated its ADS program in the firstquarter of 2005 and, consequently, TeliaSonera only has one class of shares.

Based on informationreceived from the Finnish and Swedish book entry depository systems, FinnishCentral Securities Depository Ltd and VPC AB, we estimate that as of December 31,2005, there were approximately 750 registered holders of TeliaSonera shares inthe United States.

**Item 7.B Related Party Transactions**

We provide services to andobtain services and products from the Swedish and Finnish States, who are alsoour largest shareholders, on commercial terms. We have also purchased from andprovided telecommunications and related services to certain of our associatedcompanies on commercial terms. We have also provided guarantees on behalf of,and pledged our shares in, Svenska UMTS-nät, in which we have a 50 percentinterest, and we have interest-bearing claims on MegaFon, a company inwhich we hold a participating interest. For additional information on these andother related party transactions, see Notes 10 and 28 to our consolidatedfinancial statements.

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**Item 8.B Significant Changes**

No significant change hasoccurred since the date of our consolidated financial statements included inthis annual report.

**Item9.A Offer and Listing Details**

| ** **         | ** ** | **Stockholm Stock  Exchange(1)  (SEK)** | ** ** | **Helsinki Stock  Exchange(2)  (EUR)** | ** ** |
|--------------------|------------|----------------------------------------------|------------|---------------------------------------------|------------|
| **Period**         | ** ** | ** **                                   | ** ** | **High**                                    | ** ** | **Low** | ** ** | **High** | ** ** | **Low** | ** ** |
| **Year**           |       |                                         |       |                                        |       |   |   |   |   |
| 2001               |       | 71.00                                        |       | 36.00                                       |       | — |   | — |   |
| 2002               |       | 48.60                                        |       | 21.10                                       |       | 4.15 |   | 3.30 |   |
| 2003               |       | 38.70                                        |       | 23.70                                       |       | 4.24 |   | 2.57 |   |
| 2004               |       | 42.20                                        |       | 29.50                                       |       | 4.73 |   | 3.22 |   |
| 2005               |       |                                         |       |                                        |       |   |   |   |   |
| **2004**           |       |                                         |       |                                        |       |   |   |   |   |
| First Quarter      |       | 40.20                                        |       | 32.00                                       |       | 4.42 |   | 3.46 |   |
| Second Quarter     |       | 35.40                                        |       | 29.50                                       |       | 3.87 |   | 3.22 |   |
| Third Quarter      |       | 36.90                                        |       | 31.10                                       |       | 4.05 |   | 3.38 |   |
| Fourth Quarter     |       | 42.20                                        |       | 35.30                                       |       | 4.73 |   | 3.89 |   |
| **2005**           |       |                                         |       |                                        |       |   |   |   |   |
| First Quarter      |       | 43.20                                        |       | 38.60                                       |       | 4.75 |   | 4.24 |   |
| Second Quarter     |       | 43.40                                        |       | 35.50                                       |       | 4.73 |   | 3.79 |   |
| Third Quarter      |       | 39.70                                        |       | 35.60                                       |       | 4.21 |   | 3.78 |   |
| Fourth Quarter     |       | 43.40                                        |       | 36.30                                       |       | 4.61 |   | 3.83 |   |
| **2006**           |       |                                         |       |                                        |       |   |   |   |   |
| First Quarter      |       | 47.60                                        |       | 40.90                                       |       | 5.06 |   | 4.37 |   |
| **Month**          |       |                                         |       |                                        |       |   |   |   |   |
| October 2005  |       | 40.20                                        |       | 36.30                                       |       | 4.20 |   | 3.83 |   |
| November 2005 |       | 41.80                                        |       | 38.20                                       |       | 4.38 |   | 3.98 |   |
| December 2005 |       | 43.40                                        |       | 40.90                                       |       | 4.61 |   | 4.33 |   |
| January 2006  |       | 44.60                                        |       | 41.10                                       |       | 4.79 |   | 4.44 |   |
| February 2006 |       | 44.40                                        |       | 40.90                                       |       | 4.79 |   | 4.37 |   |
| March 2006    |       | 47.60                                        |       | 41.80                                       |       | 5.06 |   | 4.42 |   |
|                    |            |                                              |            |                                             |            |  |  |  |  |  |  |

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(1)          Beginning June 13,2000

(2)          BeginningDecember 9, 2002

**Item 10.B Memorandum and Articles of Association**

**Organization and Register**

TeliaSonera is a publiclimited company organized under the laws of Sweden. TeliaSonera is registeredin the Swedish Companies Registration Office under the company registrationnumber 556103-4249.

**Line of Business**

Pursuant to Section 3of TeliaSonera’s articles of association, TeliaSonera’s corporate purpose is tooffer, directly and indirectly, in a broad sense, telecommunications servicesand thereto related information services, as well as to conduct otheractivities which are compatible with such services.

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**Corporate Governance**

TeliaSonera’s articles of association do not stipulateanything regarding: (1) a director’s power to vote on a proposal,arrangement or contract in which the director is materially interested; (2) borrowingpowers exercisable by the directors; (3) retirement or non-retirement ofdirectors; and (d) shareholding requirements for a director’squalifications.

Pursuant to TeliaSonera’s articles of association, thegeneral meeting of shareholders decides on the amount of compensation for themembers of the board of directors and, as a result, the directors do not havethe power to vote regarding their own compensation.

Matters pertaining tocorporate governance are mainly regulated under the Swedish Companies Act.Pursuant to the Companies Act, members of our board of directors are prohibitedfrom participating in the preparation or making of decisions in which they havea personal interest. This prohibition includes the participation in thenegotiation or performance of contracts between TeliaSonera and a third partyif such member of the board of directors would receive a material benefit inconflict with our interests. In addition, pursuant to the Companies Act thecompany is prevented from lending money to shareholders, board members or thepresident. Consequently there are no borrowing powers exercisable by thedirectors.

**Rights,Preferences and Restrictions**

Dividends are declared and paid annually on the basisof income and retained earnings as of the end of the preceding year. For adescription of TeliaSonera’s dividend policy and the dividend rights attachedto the shares, see “Item 8.A Consolidated Statement and Other FinancialInformation.”

Each share confers the right of one vote at thegeneral meetings of the shareholders. Each of the shares also confers an equalright to share in TeliaSonera’s profits. Treasury shares have no voting rightsor rights to receive dividends while held in treasury.

In connection with future offerings of TeliaSonerashares for cash, the existing shareholders have a pre-emptive right tosubscribe for shares offered in proportion to the amount of shares in theirpossession. However, a general meeting of the shareholders may vote, by amajority of two-thirds of the votes cast and two-thirds of the sharesrepresented at the meeting, to waive this pre-emptive right.

Pursuant to the Companies Act, preferential rightsattached to certain shares or pre-emptive rights to the existing shareholders,which are not conferred upon the shareholders by law, must be stated in thecompany’s articles of association. Our current articles of association do notconfer any such rights nor do they restrict the pre-emptive right described inthe preceding paragraph.

Amendments to the articlesof association generally require a decision by the general meeting of theshareholders, supported by two-thirds of the votes cast and two-thirds of theshares represented at such meeting. For certain changes to the articles of association,for example changes creating pre-emptive or preferential rights, the decisionhas to be supported by all the shares represented at the general meeting of theshareholders, provided that such represented shares constitute nine-tenths ofall the shares of the company. Similarly, decisions limiting voting rights mustbe supported by two-thirds of the votes cast and nine-tenths of the sharesrepresented at the general meeting of the shareholders.

**PossibleUnavailability of Pre-Emptive Rights For U.S. Holders**

U.S. holders ofTeliaSonera shares may not be able to exercise any preemptive rights andpreferential rights in respect of their shares unless a registration statementunder the Securities Act of 1933, as amended, is effective with respect tothese rights or an exemption from the registration requirements thereunder isavailable.

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**General Meeting of Shareholders**

Under the Companies Act, shareholders exercise theirpower to decide on corporate matters at the general meeting of theshareholders. At the annual general meeting, financial statements, includingthe income statement, the balance sheet, the annual report and the consolidatedincome statement, and the auditor’s report are presented to the shareholdersfor adoption. Also, at the annual general meeting the shareholders decide anymeasure warranted by the profit or loss shown in the adopted balance sheet orconsolidated balance sheet, discharge members of the board of directors and thechief executive officer from liability, decide on the number of members of theboard of directors and their remuneration and elect members of the board ofdirectors. When required, the number of auditors and deputy auditors is decidedand they are elected.

Under our articles of association, a shareholder mustgive notice to TeliaSonera of his or her intention to attend a general meetingno later than 4:00 p.m. on the day stated in the notice of the generalmeeting. This day must not be a Saturday, Sunday, Midsummer Eve, Christmas Eve,New Year’s Eve or other public holiday and must not be earlier than the fifthworking day before the general meeting. Under our articles of association, anotice of an annual general meeting and a notice of any extraordinary generalmeeting at which resolutions to amend TeliaSonera’s articles of associationwill be considered, shall be issued no earlier than 6 weeks and no later than 4weeks prior to the meeting in question. Notice of any other extraordinarygeneral meeting shall be issued no earlier than 6 weeks and no later than 2weeks prior to the meeting. Notice of a general meeting shall be made in theform of an advertisement placed in the Swedish Official Gazette and in theSwedish newspapers Dagens Nyheter and Svenska Dagbladet.

In order to have the rightto attend a general meeting, a shareholder must according to the Companies Actbe registered on the fifth working day prior to the relevant general meeting inthe register of shareholders kept by VPC and must also notify TeliaSonera ofhis or her intention to attend the meeting in the manner stated in the previousparagraph. At the general meeting, a shareholder may be accompanied at themeeting by at most 2 persons assisting him or her, but only if the shareholdernotifies TeliaSonera of the number of accompanying persons in the manner statedin the previous paragraph.

**Voting**

Each shareholder is, at the general meeting, entitledto vote for the total number of shares he or she owns or represents. Each shareis entitled to one vote. A shareholder may attend and vote at the general meetingin person or by proxy. Proxies are not valid for a longer period than one yearfrom the date of issuance.

Voting rights may not be exercised by a shareholder ifsuch shareholder’s shares are registered in the name of a nominee. Beneficialowners whose shares are registered in the name of a nominee may vote suchshares provided that such holder or owner arranges to have his or her nametemporarily entered in the register of shareholders as of the record date ofmeeting, which must according to law be on the fifth working day prior to ageneral meeting.

Pursuant to the Companies Act, most resolutions at ageneral meeting are passed by a simple majority of the votes cast with thechairman of the meeting having the decisive vote (except in the situation of anelection where a tie is decided by coin-toss or similar methods). Certainresolutions require a higher rate of approval amongst the shareholders in orderto be passed.

Normally, resolutions to amend the articles ofassociation will require two-thirds of the votes cast as well as two-thirds ofthe shares present or represented at the meeting. However, under certaincircumstances where such resolution limits shareholders’ right to dividends orother asset distribution, restricts the transferability of shares or alters thelegal relationship between shares, unanimous support by the shareholdersattending the meeting, which has to constitute nine-tenths of all shares in thecompany, is 

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required. In addition,under certain circumstances where such resolution restricts the voting rightsor requires the company to retain a larger amount of the net profit thanotherwise required under the Companies Act or amends shareholders’ rights in aliquidation or dissolution, approval by shareholders representing two-thirds ofthe votes cast and nine-tenths of the shares present or represented at themeeting is required. Slightly different supermajority requirements are appliedin situations where the resolution described above will only adversely affectcertain groups of shareholders.

In addition, the followingresolutions will normally require a two-thirds majority of votes cast at thegeneral meeting as well as two-thirds of the shares present or represented atthe meeting: (1) a resolution to issue, approve or authorize the issuancefor cash of new shares or convertible debt or debt instruments with the rightto subscribe for new shares, if such issuance deviates from the preferentialright for existing shareholders under the Companies Act; (2) a resolutionto redeem any or all of the outstanding share capital of the company; and (3) aresolution approving the merger of the company with another entity. Aresolution described in (2) above, may under certain circumstances requirethe unanimous approval of the shareholders present at the meeting, withnine-tenths of all outstanding shares present or represented at the meeting.

**Disclosureof Shareholder Ownership**

Pursuant to prevailing market practice in Sweden,which takes the form of rules issued by the Swedish Industry and CommerceStock Exchange Committee (NBK), any seller or purchaser of securities of aSwedish limited company listed on the Stockholm Exchange is required todisclose any transaction in which such purchaser or seller acquires or disposesof five percent or any subsequent percentage that is a multiple of five, up toand including 90 percent, of either the voting rights of all shares or thetotal number of shares in the company. Disclosure shall be made no later than9:00 a.m. on the day following the trading on the Stockholm Exchange andin the form of reports to the Stockholm Exchange and the company and pressreleases to an established news agency and to a nationally published newspaperin Sweden.

In addition, pursuant to the Swedish FinancialInstruments Trading Act, a person acquiring or disposing of certain numbers ofshares in a Swedish limited company with shares listed on a stock exchangewithin the European Economic Area or otherwise quoted on an exchange or anauthorized market place in Sweden, shall within seven days thereafter report inwriting such acquisition or transfer to the company and the Swedish exchange ormarket place in question (and to the Swedish Financial Supervisory Authority,if the shares are not quoted on a Swedish exchange or market place). Therelevant thresholds for the reporting requirement are acquisitions where theacquirer reaches or exceeds ten, 20, 33 1¤3, 50 and 66 2¤3 percent of the number of votes for all sharesin the company or where the transferor’s shareholding falls below any suchnumber.

Pursuant to the SwedishAct on Reporting Obligations Regarding Certain Holdings of FinancialInstruments, certain individuals who own shares representing ten percent ormore of the share capital or the voting rights in a publicly traded Swedishlimited company shall report such shareholding and any changes thereto to theSwedish Financial Supervisory Authority.

**Liquidation**

If TeliaSonera were to beliquidated, any liquidation proceeds remaining after all of our liabilitieswere paid would be distributed to our shareholders in proportion to theirshareholdings.

**Purchase Obligations**

Pursuant to prevailing market practice in Sweden,which takes the form of rules issued by NBK, a person who obtains30 percent or more of the votes for all shares in a publicly tradedSwedish limited company as a result of purchase, subscription, conversion orsome other form of acquisition of shares in 

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the company, either aloneor together with a related party, must make a public offer both for theacquisition of all remaining shares in the company, not held by the company orits subsidiaries, and for other financial instruments issued by the companywhose price might be materially affected if the listing of shares covered bythe offer were to cease. The terms of such mandatory offer shall be the same asthe terms of the acquisition triggering the mandatory offer.

Pursuant to the CompaniesAct, a holder owning more than 90 percent of the shares in another Swedishlimited company may initiate a compulsory acquisition process for the remainingminority shareholdings. Similarly, the holders of such minority interest mayrequire the Swedish parent company to acquire their holdings in the company.

**Restrictions of Foreign Ownership**

There are no restrictionsof foreign ownership of TeliaSonera shares under Swedish law.

**Item 10.C Material Contracts**

In March 2001, we entered into a cooperationagreement with Tele2, the holder of a UMTS license in Sweden, to jointly buildand operate a UMTS network in Sweden. Under the agreement, the parties haveorganized a Swedish limited liability company, Svenska UMTS-nät, to carry outthe building and operations relating to the UMTS network in Sweden. The companyis owned on an equal basis by the parties. The UMTS license is held by a whollyowned subsidiary of Svenska UMTS-nät. The cooperation between TeliaSonera andTele2 has been reviewed by the Swedish Competition Authority and, in March 2002,the cooperation was given a five year exemption from the anti-competitiveagreements prohibition under the Swedish Competition Act. TeliaSonera and Tele2will, on a pro rata basis, finance the construction of the UMTS network throughcapital contributions and the issuance of guarantees that are necessary inorder for Svenska UMTS-nät to obtain third party financing to build a UMTSnetwork in accordance with the license conditions. TeliaSonera has made anaggregate capital contribution of SEK 500 million to Svenska UMTS-nät.

In September 2002,Svenska UMTS-nät signed a SEK 11 billion term loan and revolving creditfacility, which amount was decreased to SEK 7 and further to SEK5.3 billion in September 2003 and February 2005, respectively,for the construction of its UMTS network infrastructure in Sweden. TeliaSoneraand Tele2 have each severally but not jointly guaranteed up to a maximum ofSEK 2.65 billion of the principal amount borrowed by Svenska UMTS-nätunder the credit facility and have pledged their shares in Svenska UMTS-nät assecurity for such amount. The indebtedness under the credit facility may becomedue on an accelerated basis, under certain circumstances, including if eitherTeliaSonera or Tele2 ceases to hold, directly or indirectly, 50 percent ofSvenska UMTS-nät, unless the lenders provide their advance consent. TeliaSonerais not contractually required to provide any further capital contributions toor guarantees in favor of Svenska UMTS-nät.

**Item 10.D Exchange Controls**

There are currently noSwedish laws, which may affect the import or export of capital, or theremittance of interest or other payments.

**Item 10.E Taxation**

The following summary isbased on the tax laws of Sweden and the United States and the U.S.—Sweden TaxTreaty as of the date of this report, and is subject to changes in Swedish orU.S. law, including changes that could have a retroactive effect. The followingsummary is not exhaustive and does not take into account or discuss the taxlaws of any countries other than Sweden or the United States. Prospectiveinvestors and current holders of TeliaSonera shares or TeliaSonera warrants areadvised to consult their 

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own taxadvisors as to Swedish, U.S. or other tax consequences of the purchase,ownership and disposition of TeliaSonera shares, including, in particular, theeffect of tax laws in any other jurisdiction.

**Swedish Taxation**

The following is a description of the material Swedishincome and net wealth tax consequences with respect to holders of TeliaSonerashares that are not Swedish residents (“Non-residents”). This section appliesonly to holders of portfolio investments representing less than 10 percentof the capital and votes of TeliaSonera and is not applicable if theTeliaSonera shares pertain to a permanent establishment or fixed base ofbusiness in Sweden. Holders of TeliaSonera shares should consult their own taxadvisors regarding the Swedish and other tax consequences of acquiring, owningand disposing of shares.

The description below isbased on the Income Tax Act (1999:1229), the Net Wealth Tax Act (1997:323), theWithholding Tax Act (1970:624) and relevant tax treaties as currently ineffect.

***Taxation of Capital Gains***

Non-residents aregenerally not liable for Swedish capital gains taxation with respect to thesale of TeliaSonera shares. However, under Swedish tax law, capital gains fromthe sale of certain Swedish securities, such as the TeliaSonera shares, byprivate individuals may be taxed in Sweden if such individuals have beenresidents of Sweden or have lived permanently in Sweden at any time during theyear of the sale or the ten calendar years preceding the year of the sale. Thisprovision may, however, be limited by tax treaties which Sweden has concludedwith other countries. The Nordic tax treaty currently in force reduces thisperiod to the five years following the year when the individual became aNon-resident. The tax treaty currently in force between Sweden and the UnitedStates gives Sweden the right to tax gains at any time during the ten yearsfollowing the date on which the individual has ceased to be a resident ofSweden. Capital losses are deductible if the Non-resident would have beentaxable for a corresponding capital gain.

***Taxation of Dividends***

According to Swedish internal law, a dividendwithholding tax at a rate of 30 percent is imposed on dividends paid by aSwedish company, such as TeliaSonera, on Non-residents. Exemption from thewithholding tax or a lower tax rate may apply by virtue of a tax treaty. Underboth the current Nordic tax treaty and the tax treaty currently in forcebetween Sweden and the United States, the withholding tax on dividends paid onportfolio investments, to eligible U.S. holders or Nordic holders, as the casemay be, is limited to 15 percent.

Under all Swedish tax treaties, with the exception ofthe tax treaty currently in force between Sweden and Switzerland, thewithholding tax at the applicable treaty rate should be withheld by the payerof the dividends. With regard to dividends paid for shares in companiesregistered with the VPC (such as the TeliaSonera shares), a reduced rate ofdividend withholding tax under a tax treaty is generally applied at the sourceby VPC or, if the shares are registered with a nominee, by the nominee, so longas the person entitled to the dividend is registered as a Non-resident andsufficient information regarding the tax residency of the beneficial owner isavailable to VPC or the nominee.

In those cases where Swedish tax is withheld at therate of 30 percent and the person that received the dividends is entitledto a reduced rate of withholding tax under an applicable tax treaty, a refundmay be claimed from the Swedish tax authorities not later than at the end ofthe fifth calendar year after the distribution.

It should be noted that,due to technical issues, a Swedish withholding tax of 30 percent may alsobe withheld for dividends and similar payments to Swedish tax residents onTeliaSonera shares that are registered at the Finnish Central SecuritiesDepositary.

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***Net Wealth Taxation***

Swedish net wealth tax isbased on the conditions at the end of each calendar year. The TeliaSonerashares are not subject to Swedish net wealth taxation in the hands of a holderthat is not a resident in Sweden at the end of a calendar year.

**UnitedStates Federal Income Taxation**

The following is adescription of the material U.S. federal income tax consequences of theownership of our shares. The description addresses only the U.S. federal incometax consequences to U.S. holders (as defined below) who hold our shares ascapital assets. This section does not apply to you if you are a member of aspecial class of holders subject to special rules, including:

·       adealer in securities,

·       atrader in securities that elects to use a mark-to-market method of accountingfor securities holdings,

·       atax-exempt organization,

·       alife insurance company,

·       aperson liable for alternative minimum tax,

·       aperson that actually or constructively owns 10% or more of our voting stock,

·       aperson that holds shares as part of a straddle or a hedging or conversiontransaction, or

·       aU.S. holder (as defined below) whose functional currency is not the U.S.dollar.

Moreover, this summary does not address the U.S.federal estate and gift or alternative minimum tax consequences of theownership of shares. This summary is based on the Internal Revenue Code of1986, as amended (the “Code”), its legislative history existing or proposedU.S. Treasury Regulations and judicial and administrative interpretationsthereof, in each case as in effect on the date hereof. All of the foregoing issubject to change, possibly with retroactive effect.

For purposes ofthis summary, a “U.S. Holder” is a beneficial owner of our shares that, forU.S. federal income tax purposes, is:

·       acitizen or resident of the United States,

·       adomestic corporation

·       anestate the income of which is subject to U.S. federal income taxationregardless of its source, or

·       atrust if a court within the United States is able to exercise primarysupervision over the administration of the trust and one or more United Statespersons have the authority to control all substantial decisions of the trust.

*You should consult your own tax advisor regarding theUnited States federal, state and local and the Swedish and other taxconsequences of owning and disposing of shares in your particularcircumstances.*

**Taxation of Dividends**

Under the United States federal income tax laws, andsubject to the passive foreign investment company, or PFIC, rules discussedbelow, the gross amount of any dividend we pay out of our current oraccumulated earnings and profits (as determined for United States federalincome tax purposes) is subject to United States federal income taxation. Ifyou are a noncorporate U.S. holder, dividends paid to you in taxable yearsbeginning before January 1, 2009 that constitute qualified dividend incomewill be taxable to 

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you at a maximum tax rateof 15% provided that you hold the shares for more than 60 days during the121-day period beginning 60 days before the ex-dividend date andmeet other holding period requirements. Dividends we pay with respect to theshares generally will be qualified dividend income.

You must include any Swedish tax withheld from thedividend payment in this gross amount even though you do not in fact receiveit. The dividend is taxable to you when you receive the dividend, actually orconstructively. The dividend will not be eligible for the dividends-receiveddeduction generally allowed to United States corporations in respect ofdividends received from other United States corporations. The amount of thedividend distribution that you must include in your income as a U.S. holderwill be the U.S. dollar value of the Swedish krona payments made, determined atthe spot Swedish krona/U.S. dollar rate on the date the dividend distributionis includible in your income, regardless of whether the payment is in factconverted into U.S. dollars. Generally, any gain or loss resulting fromcurrency exchange fluctuations during the period from the date you include thedividend payment in income to the date you convert the payment into U.S.dollars will be treated as ordinary income or loss and will not be eligible forthe special tax rate applicable to qualified dividend income. The gain or lossgenerally will be income or loss from sources within the United States forforeign tax credit limitation purposes. Distributions in excess of current andaccumulated earnings and profits, as determined for United States federalincome tax purposes, will be treated as a non-taxable return of capital to theextent of your basis in the shares and thereafter as capital gain.

Subject to certain limitations, the Swedish taxwithheld in accordance with the Treaty and paid over to Sweden will becreditable against your United States federal income tax liability. Special rules applyin determining the foreign tax credit limitation with respect to dividends thatare subject to the maximum 15% tax rate. To the extent a refund of the taxwithheld is available to you under Swedish law or under the Treaty, the amountof tax withheld that is refundable will not be eligible for credit against yourUnited States federal income tax liability

Dividends will be income from sources outside theUnited States. Dividends paid in taxable years beginning before January 1,2007 generally will be “passive” or “financial services” income, and dividendspaid in taxable years beginning after December 31, 2006 will, depending onyour circumstances, be “passive” or “general” income which, in either case, istreated separately from other types of income for purposes of computing theforeign tax credit allowable to you.

Distributions ofadditional shares to you with respect to shares that are made as part of a prorata distribution to all of our shareholders generally will not be subject toUnited States federal income tax.

**Sale or Exchange of Shares**

Subject to the PFIC rules discussedbelow, a U.S. holder who sells or otherwise disposes of shares will recognizecapital gain or loss for United States federal income tax purposes equal to thedifference between the U.S. dollar value of the amount that you realize andyour tax basis, determined in U.S. dollars, in your shares. Capital gain of anoncorporate U.S. holder that is recognized in taxable years beginning before January 1,2009 is generally taxed at a maximum rate of 15% where the holder has a holdingperiod greater than one year. The gain or loss will generally be income or lossfrom sources within the United States for foreign tax credit limitationpurposes.

**PassiveForeign Investment Company Rules**

We believe that our sharesshould not be treated as stock of a PFIC for United States federal income taxpurposes, but this conclusion is a factual determination that is made annuallyand thus may be subject to change. If we were to be treated as a PFIC, gainrealized on the sale or other disposition of your shares would in general notbe treated as capital gain. Instead, if you are a U.S. Holder, you would betreated as if you had realized such gain and certain “excess distributions”ratably over your holding period for the 

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sharesand would be taxed at the highest tax rate in effect for each such year towhich the gain was allocated, together with an interest charge in respect ofthe tax attributable to each such year. With certain exceptions, your shareswill be treated as stock in a PFIC if we were a PFIC at any time during yourholding period in your shares. Dividends that you receive from us will not beeligible for the special tax rates applicable to qualified dividend income ifwe are treated as a PFIC with respect to you either in the taxable year of thedistribution or the preceding taxable year, but instead will be taxable atrates applicable to ordinary income.

**BackupWithholding and Information Reporting.**

If you are anoncorporate U.S. holder, information reporting requirements, on InternalRevenue Service Form 1099, generally will apply to:

·       dividendpayments or other taxable distributions made to you within the United States,and

·       thepayment of proceeds to you from the sale of shares effected at a United Statesoffice of a broker.

Additionally,backup withholding may apply to such payments if you are a noncorporate U.S.holder that:

·       failsto provide an accurate taxpayer identification number,

·       isnotified by the Internal Revenue Service that you have failed to report allinterest and dividends required to be shown on your federal income tax returns,or

·       incertain circumstances, fails to comply with applicable certification requirements.

If you are anon-U.S. holder, you are generally exempt from backup withholding andinformation reporting requirements with respect to:

·       dividendpayments made to you outside the United States by us or another non-UnitedStates payor and

·       other dividend payments andthe payment of the proceeds from the sale of shares effected at a United Statesoffice of a broker, as long as the income associated with such payments isotherwise exempt from United States federal income tax, and:

·        thepayor or broker does not have actual knowledge or reason to know that you are aUnited States person and you have furnished the payor or broker:

·       anInternal Revenue Service Form W-8BEN or an acceptable substituteform upon which you certify, under penalties of perjury, that you are anon-United States person, or

·       otherdocumentation upon which it may rely to treat the payments as made to anon-United States person in accordance with U.S. Treasury regulations, or

·        you otherwise establish anexemption.

Payment of the proceedsfrom the sale of shares effected at a foreign office of a broker generally willnot be subject to information reporting or backup withholding. However, a saleof shares that is effected at a foreign office of a broker will be subject toinformation reporting and backup withholding if:

·       theproceeds are transferred to an account maintained by you in the United States,

·       thepayment of proceeds or the confirmation of the sale is mailed to you at aUnited States address, or

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·       thesale has some other specified connection with the United States as provided inU.S. Treasury regulations,

unless the broker does not have actual knowledge orreason to know that you are a United States person and the documentationrequirements described above are met or you otherwise establish an exemption.

In addition, a saleof shares effected at a foreign office of a broker will be subject toinformation reporting if the broker is:

·       aUnited States person,

·       acontrolled foreign corporation for United States tax purposes,

·       aforeign person 50% or more of whose gross income is effectively connected withthe conduct of a United States trade or business for a specified three-yearperiod, or

·       aforeign partnership, if at any time during its tax year:

·        one or more of its partnersare “U.S. persons”, as defined in U.S. Treasury regulations, who in theaggregate hold more than 50% of the income or capital interest in thepartnership, or

·        such foreign partnershipis engaged in the conduct of a United States trade or business,

unless the broker does not have actual knowledge orreason to know that you are a United States person and the documentationrequirements described above are met or you otherwise establish an exemption. Backupwithholding will apply if the sale is subject to information reporting and thebroker has actual knowledge that you are a United States person.

You generally may obtain arefund of any amounts withheld under the backup withholding rules thatexceed your income tax liability by filing a refund claim with the UnitedStates Internal Revenue Service.

**Item 10.H Documents on Display**

The documents referred toin this report can be read at the Securities and Exchange Commission’s publicreference facilities at 100 F Street, N.E., Room 1580, Washington, D.C.20549 or obtained by mail upon payment of prescribed rates. Please call the SECat 1-800-SEC-0330 for further information. Copies may also beobtained from the SEC website at *http: //www.sec.gov*.

**Item 15. Controls and Procedures**

(a)   *Disclosure Controls and Procedures.* OurChief Executive Officer and our Chief Financial officer, after evaluating theeffectiveness of the Group’s disclosure controls and procedures (as defined inUS Exchange Act Rules 13a-15(e)) as of the end of the period coveredby this Form 20-F, have concluded that, as of such date, the Group’sdisclosure controls and procedures were effective.

(b)   *Internal Control over FinancialReporting*. There were no changes in the Group’s internal controlover financial reporting that occurred during the year ended December 31,2005 that have materially affected, or are reasonably likely to materiallyaffect, the Group’s internal control over financial reporting.

**Item 16.C Principal Accountant Fees and Services**

PricewaterhouseCoopers AB has served as our independentauditor (Group auditor) since April 28, 2004. Ernst & Young ABand KPMG Bohlins AB jointly served as our independent auditors for the fiscalyear 2003 and up to April 28, 2004. See Note 33 to our consolidatedfinancial statements for information on audit firm fees and services, includingpre-approval policies and procedures.

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No professional services and other services have beenapproved by using the *de minimis*exception to the pre-approval requirement provided by paragraph (c)(7)(i)(C) ofRule 2-01 of Regulation S-X.

In 2004, one of our formerauditors, Ernst & Young, disclosed to us that an affiliated firm hadprovided services for one of our subsidiaries that may have been prohibited bythe SEC’s auditor independence rules. The aggregate fees for the service wereless than USD 7,000 each year during 2001-2004. The audit committeereviewed the information provided by Ernst & Young and determined thatit was reasonable to conclude that Ernst & Young’s independence wasnot affected by this matter.

**Item16.E Purchases of Equity Securities by the Issuer and Affiliated Purchasers**

| **Period**              | ** ** | ** ** | ** **  | **(a) Total number  of shares  purchased (1)** | ** ** | **(b) Average price paid  per share** | ** **     | **(c) Total number of  shares purchased as  part of the publicly  announced program (2)** | ** ** | **(d) Maximum number  of shares that may yet  be purchased under the  program** | ** **  |
|-------------------------|------------|------------|-------------|--------------------------------------------------------------------|------------|-----------------------------------------------------------|----------------|---------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------|-------------|
| July 4 to 5,  2005 |       |       | 184,774,856 |                                                               |       |                                                      | SEK 55.00 each |                                                                                                                                        |       |                                                                                                                         | 184,774,856 |   |   |   | — |   |   |
|                         |            |            |             |                                                                    |            |                                                           |                |                                                                                                                                             |            |                                                                                                                              |             |  |  |  |  |  |  |  |  |

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(1)          No shares wererepurchased other than through the publicly announced program.

(2)          The share repurchaseprogram of maximum 187,009,282 shares was announced on April 26, 2005.Each shareholder was offered to sell every twenty-fifth share toTeliaSonera for a cash payment of SEK 55 per share. The acceptance period forshareholders to sell their shares under the program began on May 11, 2005 and expired on June 14,2005. Sales rights were detachable from the shares and were separately tradedon the Stockholm and Helsinki stock exchanges during the period from May 11to June 9, 2005. Cash payments were made by TeliaSonera, against the titleof ownership,  on July 4 and 5,2005.****The total amount of sharerepurchases under the program was SEK 10,163 million.

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**SIGNATURES**

Theregistrant hereby certifies that it meets all of the requirements for filing onForm 20-F and that it has duly caused and authorized the undersignedto sign this annual report on its behalf.

|                    | ** ** | **TELIASONERA AB** |
|--------------------|------------|--------------------|
|               |       | By:                |   | /s/ ANDERS IGEL |
| April 6, 2006 |       |               |   | * *Name:  Anders Igel  Title:* President  and Chief Executive Officer* |
|               |       | By:                |   | /s/ KIM IGNATIUS |
|               |       |               |   |  Name: Kim  Ignatius  Title:* Chief  Financial Officer* |

 

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**SECURITIES AND EXCHANGE COMMISSIONWashington D.C. 20549**

**TELIASONERAABExhibits to Form 20-F**

| 1    |   | Articles of Association  of TeliaSonera AB (incorporated herein by reference to Exhibit 1 to the  Annual Report on Form 20-F for the period ended December 31,  2004, filed by TeliaSonera AB with the Securities and Exchange Commission on  April 7, 2005).                                                            |
|------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.1  |   | Combination Agreement,  dated as of March 26, 2002, by and between Telia AB and Sonera  Corporation (incorporated herein by reference to Exhibit 2.1 to the  Registration Statement on Form F-4 filed by Telia AB with the  Securities and Exchange Commission on October 1, 2002 (the “Form F-4”)). |
| 4.2  |   | Amendment to the  Combination Agreement, dated as of September 27, 2002, by and between  Telia and Sonera (incorporated herein by reference to Exhibit 2.2 to the  Form F-4).                                                                                                                                                 |
| 4.3  |   | Framework Agreement,  dated as of March 15, 2001, between Telia AB and Telia Mobile AB, NetCom  AB and Tele2 AB (incorporated herein by reference to Exhibit 10.1 to the  Form F-4).                                                                                                                                          |
| 4.4  |   | Shareholder Agreement,  dated as of March 15, 2001, between Telia AB, Telia Mobile AB, NetCom AB  and Tele2 AB (incorporated herein by reference to Exhibit 10.2 to the  Form F-4).                                                                                                                                           |
| 4.5  |   | Registration Rights  Agreement, dated as of September 27, 2002 between Telia AB and the  Kingdom of Sweden (incorporated herein by reference to Exhibit 10.3 to  the Form F-4).                                                                                                                                               |
| 4.6  |   | Registration Rights  Agreement, dated as of September 27, 2002, between Telia AB and the  Republic of Finland (incorporated herein by reference to Exhibit 10.4 to  the Form F-4).                                                                                                                                            |
| 6    |   | See Note 21 to  Consolidated Financial Statements, section “Earnings per share.”                                                                                                                                                                                                                                              |
| 7    |   | For definitions of  certain ratios used in this report, see “Ten-Year Summary.”                                                                                                                                                                                                                                                    |
| 8    |   | For significant  subsidiaries as of the end of the year covered by this annual report, see  “Supplemental Information, Item 4.C—Organizational Structure.”                                                                                                                                                                    |
| 12.1 |   | Certification by the  Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley  Act of 2002.                                                                                                                                                                                                                               |
| 12.2 |   | Certification by the  Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley  Act of 2002.                                                                                                                                                                                                                               |
| 13.1 |   | Certification by the  Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes Oxley Act of 2002.                                                                                                                                                                           |
| 13.2 |   | Certification by the Chief  Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes Oxley Act of 2002.                                                                                                                                                                           |

 

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