mobile

In 2003, 42 per cent of Telenor’s external revenues were derived from its mobile operations. Mobile is Telenor’s principal focus area for future growth. Continued development of the mobile activities is vital to the Group’s positioning as an international telecommunications player.

Introduction
Mobile is Telenor’s business area for development and operation of mobile services for voice, data, Internet, content services and electronic commerce in the Norwegian, Nordic and international markets. As at 31 December 2003, Mobile had ownership interests in 12 mobile operations in 12 countries. Six of these were consolidated in Telenor’s accounts as at 31 December 2003, and Sonofon was consolidated as from 12 February 2004. Four companies in the mobile portfolio are associated companies, whereas Telenor disposed of its financial ownership share in Cosmote on 26 February 2004. The international commitments are geographically concentrated in selected countries in Europe and South East Asia.

In 2003, Mobile defined and emphasised its strategy known as “The Mobile Way” where the aim is to put greater focus on creating synergy effects between the mobile operations and to encourage increased industrialisation.

Consolidated subsidiaries:
Telenor Mobil AS is Norway’s leading provider of mobile services. The company provides services to both the private and business markets, spanning from text and image messaging to mobile exchange solutions. Telenor Mobil launched sound and image messaging (MMS) in 2002, and is strongly committed to mobile Internet, m-Commerce and mobile data services. When Telenor Mobil opens its third generation mobile network (UMTS) for commercial use, the current services will be extended, faster and more advanced.

Telenor Mobil was established in 1993 and provides services in both the GSM and NMT networks. The NMT 450 network will be operational only throughout 2004. GSM covers 99.2% of the population in their homes, and coverage is continuously expanded.

Pannon GSM, Hungary was established in 1993 and is the second largest of three mobile operators in Hungary. Telenor was involved in founding the company, and as from February 2002 it has held a 100% ownership share, after increasing its share by 74.22%. Pannon launched commercial operations for its GSM 900 network in 1994, and opened its GSM 1800 network early in 2001. GPRS was launched in 2001, and Pannon was the first operator in Hungary to offer national coverage. The company plans to participate in the auction bidding for UMTS licences if the conditions are right. Penetration in Hungary at year-end 2003 was 79%. Also during the course of 2003, Pannon had solid growth in the business sector, plus a solid increase in contract subscriptions. The company launched the “young at heart” subscription djuice in November 2003. Pannon was the first company in Europe to accomplish an EDGE call in 2003. Number portability for mobile communications will be introduced in the Hungarian market during 2004.

DiGi.com Berhad, Malaysia was established in 1995 and is one of three mobile operators in Malaysia. Telenor became part owner in 1999 and as at 31 December 2003 holds an ownership share of 61.0%. DiGi.Com has been listed on the stock exchange in Kuala Lumpur since 1997. The company operates a GSM 1800 network and launched GPRS in 2002. DiGi.com has a special focus on younger subscribers. The company made a strategic decision in 2002 not to apply for a UMTS licence, and aims to offer its customers 3G access through partnerships with other network operators. The Malaysian mobile industry has seen a number of consolidations and takeovers in 2003, which have reduced the number of operators from five to three. DiGi.com increased its market share in 2003.

Kyivstar GSM, Ukraine was established in 1997. Telenor became part owner in 1998, and as at 31 December 2003 holds an ownership share of 55.35%. The company operates a national GSM 900 network and a GSM 1800 network. In September 2003, an amendment to the 1995 telecommunications legislation took effect, preventing operators from charging their own subscribers for incoming calls. This has contributed to increased use and an increase in the number of customers. Even with a 64% increase in the number of subscriptions from 2002, plus an increased share of prepaid card subscriptions, Kyivstar managed to increase ARPU during 2003 as a result of increased average use per subscriber. The penetration in the Ukraine increased in the same period from 8% to 14%.

GrameenPhone Ltd., Bangladesh was established in 1997 and is the largest of four mobile operators in Bangladesh. Telenor became part owner in 1997, and as at 31 December 2003 it holds an ownership share of 51%. GrameenPhone launched its GSM 900 network in 1997 and the company is the only one in Bangladesh with nationwide service coverage. GrameenPhone has developed a rural network with a special Village Phone programme. The company had more than one million subscribers in 2003.

Telenor Mobile Sverige, Sweden was, in 2001, by means of an agreement with Europolitan AB (Vodafone SE), established as a service provider through the brand name djuice.se. In 2002, Telenor signed an MVNO agreement with Tele2. This agreement gives Telenor the capability to provide GSM and UMTS services via Tele2’s network in Sweden. djuice was re-launched through this MVNO agreement in the first quarter of 2003. djuice has a purely web-based sales outlet, and provides both prepaid cards and subscriptions through its web site. Telenor Mobile Sverige provides its corporate customers with a combined mobile/fixed network solution via Telenor AB in Sweden. Telenor Mobile Sverige was integrated with Nordic Mobile on 6 January 2004.

Associated companies and joint ventures:
Sonofon Holding A/S, Denmark was established in 1991 and is the second largest of four mobile operators in Denmark. Telenor became part owner in 2000 with an ownership share of 53.5%, and signed an agreement in December 2003 to purchase the remaining 46.5% of the shares. Sonofon operates GSM 900 and 1800 networks; GPRS was launched in 2000, and broadband via Fixed Wireless Access in 2001. MMS services were introduced in 2002. In 2003, the company launched a web-based product known as “Selvhenter” in order to meet the competition from such operators as Telmore. The company was consolidated as a subsidiary of Telenor from 12 February 2004, and was integrated with Nordic Mobile, on 6 January 2004.

VimpelCom, Russia was established in 1992 and is Russia’s second largest mobile operator, and the market leader in the Moscow region. Telenor became part owner in 1999, and was as at 31 December 2003 holding an ownership share of 28.98%. The company is listed on the New York Stock Exchange. VimpelCom operates a D-AMPS network in addition to GSM 900 and 1800 networks. It launched GPRS in 2001. The company’s operations outside the Moscow region are managed by the subsidiary VimpelCom-Region. It was decided at an extraordinary general meeting held in October 2003 to merge VimpelCom and the subsidiary VimpelCom-Region. After the merger, Telenor will hold an ownership share of 29.9% in VimpelCom. At the end of 2003, VimpelCom held licences covering 92% of the Russian population. In February 2004, the company had operations in 55 regions, from the Baltic Sea to Siberia.

Total Access Communication Company PCL (DTAC), Thailand was established in 1989 and is Thailand’s second largest mobile operator. Telenor became part owner in 2000, and was as at 31 December 2003 holding a total ownership share, directly or indirectly, of 40.3%, with 29.90% in DTAC and an indirect ownership share of 24.9% through its former parent company, United Communication Industry PCL (UCOM). DTAC is listed on the Singapore stock exchange and UCOM on the stock exchange in Thailand. DTAC operates an AMPS 800 mobile service and a GSM 1800 service. GPRS was launched in 2002. In 2003, the company positioned itself as the most innovative mobile operator in Thailand.

ONE, Austria (formerly Connect Austria) was established in 1997 and is the third largest of four mobile operators in Austria. Telenor became part owner in 1997, and was as at 31 December 2003 holding an ownership share of 17.45%. One operates a nationwide GSM 1800 network and provides Internet and fixed line solutions to the market. GPRS was launched in 2002. In 2000, the company was awarded a UMTS licence through auction.

ProMonte GSM, Montenegro was established in 1996 and is Montenegro’s first mobile operator. Telenor became part owner in 1996, and was as at 31 December 2003 holding an indirect ownership share of 44.1% through its shareholding in ETL Luxembourg.

THE YEAR 2003
In 2003, Mobile defined and reinforced “The Mobile Way” strategy, with emphasis on strengthening the hold on the company through industrialisation and synergies. Additionally, the investment strategy remains firm, namely by buying stakes in companies which are attractive and hold possibilities for gaining operational control, and further exit companies which are not attractive and which offer no possibilities for gaining operational control. Where the conditions are right, “greenfields” may also be of interest in regions in which Mobile already has a presence.

Telenor sold part of its shareholding in Cosmote in 2003, at a price of approximately NOK 2.1 billion, giving Telenor a gain before taxes of NOK 1.5 billion. Telenor sold its remaining Cosmote shares in 2004, at a price of approximately NOK 3.1 billion, giving Telenor a gain before taxes of approximately NOK 2.6 billion.

Focus in 2003 and in 2004 has been, and will continue to be implementing ARPU-increasing measures, rather than look for new pioneering technical innovations.

On 18 February 2004, the GSM Association (GSMA) ranked Telenor Mobile as the twelfth largest GSM operator in the world, which earned Senior Executive Vice President Arve Johansen a seat on the GSMA Board of Directors.

On October 1, Telenor Mobil and Pannon GSM, together with seven other mobile operators, formed a European mobile alliance where the Telenor-associated company One is also a member. The new alliance will cover the individual companies’ areas in Europe. The aim of the alliance is to be quick to implement new, innovative products and services across country borders, and to seek collaborations in such areas as technology and sales. From 1 April 2004, the alliance was expanded to include Sonofon.

In the Ukraine, an amendment to the telecommunications legislation took effect in September 2003, prohibiting operators from charging their own subscribers for incoming calls. As a result, Kyivstar registered an increase in both its number of subscriptions and use per subscriber.

The “young at heart” subscription djuice was launched in three countries in 2003, first in Telenor Mobil in Norway, then in Telenor Mobile Sverige in Sweden and finally in Pannon GSM in Hungary.

In 2003, a considerable effort was put into handling of the large customer growth successfully, not least through ensuring the quality of the networks.

In December, Telenor entered into an agreement with BellSouth, for the acquisition of BellSouth’s remaining ownership share of 46.5 per cent in the Danish mobile operator Sonofon, against DKK 3.050 million. The transaction was completed on 12 February 2004. Nordic Mobile was established on 6 January 2004 to secure comprehensive services and create synergies.

VALUE CREATION
Throughout 2003, Telenor strengthened its position as a mobile operator, primarily through continued growth in the international markets. At year-end 2003, the total number of subscriptions in Telenor’s portfolio of mobile companies was 34.8 million, compared with 25.2 million the previous year – on a 100% basis. The number of subscriptions in consolidated companies was 11.4 million, whilst the pro rata figure was 15.5 million. Kyivstar had a substantial increase and exceeded three million subscriptions in 2003.

In 2003, Telenor continued its work of further developing the mobile companies. Part of “The Mobile Way” strategy is to maximise the cash flow in mature markets, ensure organic growth in other markets, seek to gain control over companies, or else exit them, and finally to evaluate new possibilities for growth. Under the motto “10 Cents a day”, Telenor is seeking to increase ARPU in its mobile operations. This means that if each customer sends two extra text messages every day, makes one extra call, sends two extra images per week, downloads one extra Java game, or browses through an extra news item every day, ARPU will increase dramatically. It is therefore not through the pioneering technical innovations that Telenor envisages the growth being secured.

Key figures Mobile 2001–2003 (in NOK millions) 2003 2002 2001 Revenues 23,810 20,346 12,558 EBITDA 9,567 7,482 4,067 Operating profit 5,224 1,414 2,495 Associated companies 1,639 (2,030) 9,677 Investments 3,762 12,625 7,211 No. of man-years 6,924 6,551 4,217