fixed

In 2003, 35 per cent of Telenor’s external revenues were derived from its fixed network activities. Stable revenues, reduced costs and moderate capital expenditure resulted in a solid cash flow in 2003. Revenues from fixed telephony have seen a slight drop, but are compensated through increased revenues from ADSL and wholesale. The operations in Sweden are showing growth.

Introduction
Telenor has fixed network activities in Norway, Sweden, the Czech Republic and Slovakia. As from December 2003, the activities in Russia are run through an associated company. Norway accounts, however, for the main part of the activity and is responsible for approximately 90% of the revenues generated in the Fixed business area.

Through Fixed Norway, Telenor is the leading supplier of fixed network services to the Norwegian market. The business and residential markets provide communications solutions within analogue (PSTN) and digital telephony (ISDN), ADSL, Internet access, data services, value-adding services and leased lines. A broad range of services is provided to operators and service providers in the wholesale market, from access to basic infrastructure, to more comprehensive network services that are re-sold through other companies. Solutions such as direct dialling and capacity are provided on an international basis.

Fixed Sweden consists of Telenor AB/Utfors AB, which provides the business market with telephony and data services. Telephony, ADSL and IP-based services are offered in the wholesale market. Fixed Sverige also holds an ownership share of 37.5% in Glocalnet AB, a listed company providing fixed network services to the Swedish residential market.

Internet access and data communication services are provided to the business and wholesale markets in the Czech Republic and Slovakia. As at 31 December 2003, Telenor also had a 20.4% ownership share in the Russian listed company Golden Telecom.

The Year 2003
Telenor has provided the resale of subscriptions to other operators in the Norwegian market since 1 January 2003. From November the operators could also choose between several IP wholesale services.

Telenor is committed to the supply of mobile business solutions, and has entered into an agreement to provide wireless WLAN zones at 300 service stations in Norway.

As at 31 December 2003, Telenor held an ownership share of 90% in Utfors. In December 2003, Telenor implemented a redemption process to enable the acquisition of the remaining shares in the company. The operation is marketed under the name Telenor AB.

In December, Telenor exchanged 100% of the shares in Comincom/Combellga against an ownership share in the Russian listed company Golden Telecom. As at 31 December 2003, Telenor’s ownership share was 20.4%.

Value creation
Despite the increasing competition, migration of voice traffic to the mobile network and fewer active lines, Revenues in 2003 were stable in the Norwegian fixed network market. Systematic market efforts and increased revenues from ADSL and wholesale have compensated for lower telephony revenues. Revenues per access line also increased.

Reduced annual capital expenditure since 2001 show that Fixed can now reap the rewards from early digitalisation and improvements to the network. The tempo of the ADSL rollout is determined by customer demand. A total of 80% of the investments in infrastructure are customer driven, whilst 20% are steered by operational requirements. This is mainly related to systematic efforts to increase the efficiency of processes and operations.

The broadband market is experiencing strong growth. In 2003, Telenor’s market penetration increased by an average of 10,000 accesses per month. At year-end 2003, preparations had been made whereby 67% of the households in Norway were able to use ADSL. 75% of all installed ADSL lines are supplied on Telenor’s platform. The remaining 25% are based on operator access, which at year-end was 80,000. Telenor had 177,000 online ADSL subscriptions and 56,000 on re-sales. Telenor’s market share in the end user market for ADSL dropped from 63% at the end of 2002 to 58% at the end of 2003.

Our subscribers generated 15,385 million traffic minutes in 2003, which is a drop of 11% from 2002. The reduction was 10% in the residential market and 13% in the business market. Telenor’s market share for PSTN/ISDN generated traffic in the end user market was 70% in 2003 compared with 72% in 2002. The market shares in 2003 in the residential and business markets were 67% and 74% respectively, compared with 70% and 76% in 2002. At year-end 2003, Fixed Norge had 1,308,000 telephony subscriptions (PSTN), in addition to 1,682,000 ISDN subscriptions (lines). Compared to the situation at year-end 2002, this entailed a reduction of 159,000 telephony subscriptions and 146,000 ISDN subscriptions (lines) respectively. The ISDN penetration is 35%, one of the highest in the world.

The integration between TBS and Utfors AB in Telenor AB was completed in 2003. Costs have been reduced and the underlying business activity shows stable growth and increased volumes. Telenor is the strongest challenger to TeliaSonera in the Swedish business market.

As at 31 December 2003, Telenor held an ownership share of 20.4% in Golden Telecom. The company is the largest alternative supplier of voice, data and Internet services in Russia and can refer to a positive development in revenues and results.

Key Figures Fixed 2001–2003 (in NOK million) 2003 2002 2001 Revenues 20,509 20,022 19,691 EBITDA 6,665 5,597 5,546 Operating profit (loss) 2,531 731 1,035 Associated companies 8 (5) (874) Investments 2,161 3,530 5,528 No. of man-years 6,087 7,215 7,766