Q4 Report February 12, 2001 / 1
Financial Statements for 2000 &Business and Strategy Overview
February 12, 2001
Q4 Report February 12, 2001 / 2
Contents
• Financial OverviewKim Ignatius
• Business and Strategy OverviewKaj-Erik Relander
Q4 Report February 12, 2001 / 3
Consolidated Income StatementMEUR
RevenuesEBITDAOperating profit
2000 %1999 Q4/2000
1,849668387
11206352
560849
511180102
• Revenue growth of 11% as targeted• EBITDA gains from Turkcell IPO and Aerial/VoiceStream merger• Comparable EBITDA of MEUR 501 lower due to increased inputs by
MEUR 240 in New Services; impact highest in Q4 (MEUR 90)• Excluding additional inputs, comparable EBITDA margin 36%
Q4/1999
2,0572,0471,748
Q4 Report February 12, 2001 / 4
Equity incomeNet financial expensesProfit before extraord. items and taxesEarnings per share
• Interest expenses related to German 3G license capitalized in Sonera’s accounts• High financial income partly offsets increased interest expenses• Amortization of 3G licenses in Sonera’s accounts begins when operations start• Comparable profit before extraordinary items and taxes MEUR 314• Comparable Earnings per Share EUR 0.31
2000 %1999 Q4/2000 Q4/1999
121(9)
1,8602.05
110-
4970.51
10n/a274302
18(3)24
0.09
65
1130.11
Consolidated Income Statement (cont’d)MEUR
Q4 Report February 12, 2001 / 5
Divisional ProfitabilityMobile CommunicationsMEUR
• Strengthened GSM market share• 18% increase in GSM subscriptions during 2000 • 36% growth in non-voice revenues during 2000• Increased ARPU and continuously lower churn• EBITDA impacted by international 3G licence costs (MEUR 2),
and capital gains (MEUR 11) in Q4• Domestic Mobile EBITDA above 47%
RevenuesEBITDAOperating profit
2000 %1999 Q4/2000
966468345
151418
290147111
25812087
Q4/1999
1,108535406
Q4 Report February 12, 2001 / 6
Divisional ProfitabilityMedia Communications and New ServicesMEUR
• SmartTrust: full year pro forma revenues increased 79% from MEUR 14 to MEUR 25• Zed: access to 80 million customers through announced operator deals, full year pro
forma revenues MEUR 9.3• EBITDA impacted by increased inputs towards year-end, and capital losses MEUR 13 in Q4
SmartTrustZedOther New servicesTotal
2000 %1999 Q4/2000 Q4/1999
187
229254
n/an/a175175
n/an/a3145
82
6474
n/an/a4545
Total revenues
SmartTrustZedOther New servicesTotal
(65)(102)(136)(303)
n/an/a(47)(47)
n/an/a
(189)(545)
(21)(44)(62)(127)
n/an/a(22)(22)
EBITDA
Q4 Report February 12, 2001 / 7
Divisional ProfitabilityFixed Network Voice and Data ServicesMEUR
• Sales on Russian cable capacity increased leased lines revenues by 63%– Voice revenues decreased by 4%
• Full year EBITDA includes capital gains of MEUR 26• Increased efficiency of operations
RevenuesEBITDAOperating profit
2000 %1999 Q4/2000
57020098
12639
1475223
1555634
Q4/1999
573252136
Q4 Report February 12, 2001 / 8
Divisional ProfitabilityEquipment Sales and Other OperationsMEUR
• Total revenues impacted by sale of maintenance operations to IsoWorks in 1999– Equipment sales up 10%– Construction and maintenance up 42%
• Full year EBITDA includes capital gains of MEUR 12
RevenuesEBITDAOperating profit
2000 %1999 Q4/2000
173474
(2)2
550
61126
62267
Q4/1999
1694826
Q4 Report February 12, 2001 / 9
Associated CompaniesMEUR
2G mobile associates3G mobile associatesFixed network associatesOther associated companiesGoodwill amortizationTotal
147(2)384
(66)121
156-
275
(78)110
88990855713n/a
2,367
2000 1999 2000Equity income Book value
• Turkcell customers at 10 million– Result impacts from accounting change, interconnection expense and lower
ownership• Good profitability in Baltic fixed network joint ventures
Q4 Report February 12, 2001 / 10
UMTS Financing
• Sonera invested EUR 4 bn in four European UMTS licenses
– Germany 42.8% (license term 20 years)
– Italy 12.55% (15 years)
– Spain 14.25% (20 years)
– Norway 50% (12 years)
• Investments in 3G to be financed by sale of 2G and other assets
– Turkcell IPO in July 2000
– VoiceStream + Powertel to Deutsche Telekom
– Other sales
Q4 Report February 12, 2001 / 11
UMTS Financing (cont’d)
• Capital structure in 3G joint ventures to be 50% debt financed
– Non-recourse financing in place for Xfera as targeted
– Similar financing negotiations for German JV in final stages
• Sonera and Telefónica implementing potential strategic sell-down
in Germany
• Sonera’s total equity investments through 2005 EUR 5 - 6 bn
• Committed to maintain single-A rating
Q4 Report February 12, 2001 / 12
UMTS Financing through 2005
Major partners includeTelefónica in Germany and Italy,
Vivendi and ACS in Spain, and Enitel in Norway
Sonera´s total share of financingthrough 2005 EUR 5-6 billion
Total Joint Ventures
Licence fees36%
Network capex 32%
Cash opex + interest
32%
Financing needs
Financingstructure
n the region of EUR 30 bn
Equity50%
Debt50%
Non-recoursefinancing
Turkcell IPO ~15%
Sale of US stakes ~65%
Sale of Other Assets ~20%
Q4 Report February 12, 2001 / 13
Outlook for Year 2001
• Revenue growth to accelerate
• Media and New Services EBITDA slightly better than 2000
• Group comparable EBITDA to grow from 2000 level
• Profits from 2G associates to offset losses from 3G associates
• Significant sale of non-strategic 2G assets to strengthen the balance sheet
• Financial expenses to grow due to higher net debt level
• No significant cash investments planned
Q4 Report February 12, 2001 / 14
Sonera’s Business Environment
• Economic growth to slow down in many markets
• Intensifying competition in Sonera’s business areas
• Increased competition and price pressures make Sonera’s growth
targets challenging• Revenue growth acceleration possible only through Sonera’s growth strategy
• Implementation of Sonera strategy requires market driven participationin consolidation
Q4 Report February 12, 2001 / 15
Sonera’s Objectives
• Strong 2G and 3G mobile operator in Europe
• Growing fixed line operator in the Baltic Sea area
• New service businesses in selective global markets
Q4 Report February 12, 2001 / 16
Sonera’s Strategy
• To grow and develop existing 2G operations
• To start 3G operations in Europe
• To launch new service businesses in selective European, Asian and US markets
• To participate in industry consolidation to ensure scale economics
Q4 Report February 12, 2001 / 17
Sonera’s Key Targets• To maintain good profitability through increased cost efficiency
• Strong partnerships in marketing and product development
• Reallocation of assets from 2G to 3G
• To utilize growth opportunities in new service businesses as markets open:- efficient risk management achieved by closely monitoring
market performance in each market
• Using expertise as service provider and network operator to build scale
Q4 Report February 12, 2001 / 18
3G Markets Update
• Group 3G in Germany (estimated launch 1Q 2002):- vendor selection and financing negotiations in final stages- management in place, brand under development- aim to launch service in 2001- market being thoroughly researched enabling customer segmentation
• Xfera in Spain (estimated launch in 2H 2001):- network under construction, non-recourse financing in place
- organization in full speed, personnel 300
• IPSE in Italy and Broadband in Norway (estimated launches 1Q 2002):- vendor selection and financing negotiations underway
• Sonera in Finland:- Nokia and Ericsson providing network, financed by own cash flow- services up and running in major cities in January 2002
Q4 Report February 12, 2001 / 19
Sonera Zed Progress
Recent operator deals in Germany, Italy and Finland (Radiolinja)> access to 80 million customers
Service launch expected:• D1, Germany 16.8 Q2/2001• D2, Germany 17.3 Q2/2001• E-Plus, Germany 5.8 Q2/2001• KPN Mobile, Netherlands 4.4 launched Q3/00• Mobile One, Singapore 0.6 Q1/2001• Powertel, USA 0.8 Q1/2001• Radiolinja, Finland 1.2 Q1/2001• Sonera, Finland 2.3 launched Q2/99• Smart Comm, Philippines 2.6 launched Q4/00• TIM, Italy 20.7 Q2-Q3/2001• Turkcell, Turkey 7.2 Q1/2001
Q4 Report February 12, 2001 / 20
Sonera Zed Progress (cont’d)
Five data centers up and running in Europe, Asia and US:• enables worldwide delivery of zed services
Zed for Business launched in Finland:• first services company calendar and e-mail via SMS/WAP• mobile access to company intranet
Revenues:• 2000 pro rata about MEUR 10 up to MEUR 50 in 2001• primarily from SMS text messages until year end 2002
Q4 Report February 12, 2001 / 21
Sonera SmartTrust Progress
• Across Wireless and iD2 operationally and legally merged:SmartTrust in a possession of complete product range to enablesecure and manageable e-services on fixed and wireless Internet
• Strengthened its position in Europe, and advanced strongly inAsia-Pacific and South Africa
• To date 60 operator and 160 corporate customers
• Market for secure wireless Internet solutions predicted to grow rapidly• Revenues to double this year from MEUR 25 pro forma in 2000
Q4 Report February 12, 2001 / 22
Other New Service UpdateSonera Plaza, number one ISP and Internet portal in Finland:
• nearly 1.5 million different monthly visitors• 239 000 subscribers at the end of last year• developing new center with personal financial services, info,
e-commerce, entertainment etc.
Sonera Info Communications, global growth of directory services: • operations in Finland, Sweden, France, Netherlands, Philippines
and Singapore• start-ups in Italy, Spain and UK• strategic partners in UK, US, Israel and Finland
Sonera Juxto, focus on wireless ASP:• following the acquisition of Swedish Frontec
corporate services launched also in Sweden
Q4 Report February 12, 2001 / 23
Outlook for Year 2001
• Revenue growth to accelerate
• Media and New Services EBITDA slightly better than 2000
• Group comparable EBITDA to grow from 2000 level
• Profits from 2G associates to offset losses from 3G associates
• Significant sale of non-strategic 2G assets to strengthen the balance sheet
• Financial expenses to grow due to higher net debt level
• No significant cash investments planned