• Annual review 2005
• Annual report 2005

• President and CEO
• Report of the Board of Directors
• Financial statements:
  Telenor Group
  • Profit and loss
  • Balance Sheet
  • Cash Flow
  • Equity
  • According to Norwegian GAAP
  • Accounting policies
  • Notes
• Financial statements:
  Telenor ASA
• Auditor's report
• Financial calendar 2006

Note 01: Business combinations and disposals

The following significant acquisitions and disposals have taken place in 2005 and 2004. Each business combination is recorded using the acquisition method of accounting. The summary does not include capital increases or other types of financing by Telenor.

Significant acquisitions in 2005
NOK in millions Company	Country	Change in interest %		Business	Purchase price
DTAC/UCOM	Thailand	3.5%/61.3%		Mobil telecommunications	2 664
Bredbandsbolaget	Sweden	100%		Broadband operation	4 452
Cybercity	Denmark	100%		Broadband operation	1 313

Business combinations
Three significant business combinations have been effected in 2005, while one significant business combination was effected in the beginning of 2006.

Total Access Communication Ltd (DTAC) / United Communication Industy Pcl (UCOM)
Prior to 26 October 2005, Telenor owned 29.9% of the issued shares in DTAC. UCOM owned 41.6% of the issued shares in DTAC. On 26 October 2005 Telenor’s subsidiary Thai Telco Holding Ltd purchased shares in UCOM and increased Telenor’s economic stake in UCOM by 39.9 to 64.7% for a cash consideration of NOK 1.5 billion.

As of 31 December 2005, after the tender offers for DTAC and UCOM shares expired, Telenor’s direct and indirect economic stake in UCOM increased by 21.5% to 86.2% and the direct and indirect ownership in DTAC by 18.2% to 75%, for a total cash consideration of NOK 1.2 billion. The only operations in UCOM to be continued are the ownership in DTAC and the holding of interest bearing liabilities. The minority interests in DTAC as of 31 December 2005 were 25% directly and 5.7% indirectly through UCOM.

As of 31 December 2005 net interest-bearing debt in the companies was NOK 7.3 billion. The companies were consolidated from the date of acquisition, and the operations in UCOM, excluding the ownership in DTAC and the holding of interest bearing liabilities, were reported as a discontinued operations in the financial statements as of 31 December 2005.

DTAC is one of the leading mobile operators in Thailand and offers GSM mobile services. The value was set based on a fair value after negotiations between relevant parties and stock exchange regulations in Thailand and Singapore.

The initial purchase price allocation, which is performed by independent financial experts, has been determined to be provisional pending the completion of the final valuation of the fair values of assets acquired and liabilities assumed. The preliminary net assets acquired in the transactions, and the goodwill arising, are as follows:

	Estimated fair values
Deferred tax assets	799
Customer Base	1 278
Consession Rights	6 118
Trademarks	1 030
Software	247
Roaming agreements	753
Property, plant & equipment	738
Non-current financial assets	147
Currents assets excluding cash and cash equivalents	1 639
Assets held for sale	531
Cash and cash equivalents	200
Deferred tax liability	43
Non-current liabilities	5 752
Current liabilities	3 473
Liabilities held for sale	285
Net assets	3 927
Goodwill	2 243
Total	6 170
Total consideration, satisfied by cash	2 664
Book value as associated companies at the date of consolidation	940
Increased values in business combination recorded against equity	1 274
Minorities at fair values	1 292
Total	6 170

Useful life of intangible assets at the date of consolidation were estimated on average to: customer base of 3 years, concession rights of 13 years, trademarks of 13 years, administrative software systems of 3 years and roaming-agreements of 13 years. The goodwill arising on the acquisition of DTAC is attributable to the anticipated profitability of its operations. DTAC is involved in several disputes, most of which commenced several years ago. Only insignificant values were attributed to these contingent liabilities in the purchase price allocation.

DTAC/UCOM contributed NOK 1,191 million in revenues and NOK 29 million to the Telenor Group’s profit from total operations for the period between the date of consolidation and 31 December 2005. This does not include Telenor’s interest expenses related to the financing of the acquisition.

In the period 1 January 2005 to the acquisition date, when DTAC/UCOM were accounted for as associated companies, they contributed to a profit from total operations of NOK 94 million.

Bredbandsbolaget, Sweden
On 8 July 2005, Telenor acquired 100% of the issued share capital of Bredbandsbolaget (Bredbandsbolaget Holding AB and its subsidiaries) for a cash consideration of NOK 4.5 billion. The value was set based on fair value after negotiations between the parties. The transaction has been accounted for by the acquisition method of accounting.

Bredbandsbolaget offers high-speed broadband for Internet access, telephony, digital-TV and add-on broadband services.

The initial purchase price allocation, which is performed by independent financial experts, has been determined to be provisional pending the completion of the final valuation of the fair values of assets acquired and liabilities assumed. The preliminary net assets acquired in the transaction, and the goodwill arising, are as follows:

NOK in millions	Estimated fair values
Customer Base	313
Trademarks	140
Software/Other intangible assets	321
Property, plant & equipment	205
Currents assets excluding cash and cash equivalents	345
Cash and cash equivalents	239
Deferred tax liability	11
Non-current liabilities	1 050
Current liabilities	459
Net assets	43
Goodwill	4 409
Total consideration, satisfied by cash	4 452

Useful lives of intangible assets at the date of consolidation were estimated on average to: customer base of 5 years, trademark of 15 years and administrative software systems of 3 years.

The goodwill included deferred tax assets that did not meet recognition criteria to be capitalized in the balance sheet. In addition the goodwill arising on the acquisition of Bredbandsbolaget is attributable to the anticipated profitability of its operations and to the anticipated synergies.

Bredbandsbolaget contributed NOK 665 million in revenues and NOK 19 million to the Telenor Group’s profit from total operations for the period between the date of acquisition and 31 December 2005. This does not include Telenor’s interest expenses related to the financing of the acquisition.

Cybercity, Denmark
On 5 July, Telenor acquired 100% of the issued share capital of Esplanaden Holding A/S for a cash consideration of NOK 1.3 billion. The value was set based on fair value after negotiations between the parties. Esplanaden Holding A/S owns 100% of the shares in Cybercity A/S. The transaction has been accounted for by the acquisition method of accounting.

Cybercity develops, manages and sells broadband solutions and network-based products such as security and VPN products for residential and business customers in Denmark.

The initial purchase price allocation, which is performed by independent financial experts, has been determined to be provisional pending the completion of the final valuation of the fair values of assets acquired and liabilities assumed. The preliminary net assets acquired in the transaction, and the goodwill arising, are as follows:

NOK in millions	Estimated fair values
Customer Base	235
Trademarks	90
Software	91
Property, plant & equipment	45
Currents Assets excluding cash and cash equivalents	186
Cash and cash equivalents	42
Deferred tax liability	78
Non-current liabilities	155
Current liabilities	200
Net assets	256
Goodwill	1 057
Total consideration, satisfied by cash	1 313

Useful lives of intangible assets at the date of consolidation were estimated on average to: customer base of 5 years, trademark of 15 years and administrative software systems of 3 years.

The goodwill included deferred tax assets that did not meet recognition criteria to be capitalized in the balance sheet. In addition the goodwill arising on the acquisition of Cybercity is attributable to the anticipated profitability of its operations and to the anticipated synergies.

Cybercity contributed NOK 306 million in revenues and NOK 26 million to the Telenor Group’s profit from total operations for the period between the date of acquisition and 31 December 2005. This does not include Telenor’s interest expenses related to the financing of the acquisition.

Vodafone, Sweden
On 5 January 2006, Telenor acquired 100% of the issued share capital of Vodafone AB Sweden for a cash consideration of approximately NOK7.5 billion. The value was set based on fair value after negotiations between the parties. The transaction is not included in the financial statement of 2005. The transaction will be accounted for by the acquisition method of accounting.

Vodafone offers mobile services to residential and business customers in Sweden.

The initial purchase price allocation, which is performed by independent financial experts, has been determined to be provisional pending the completion of the final valuation of the fair values of assets acquired and liabilities assumed. The preliminary net assets acquired in the transaction, and the goodwill arising, are as follows:

NOK in millions	Estimated fair values
Deferred tax assets	41
Roaming agreements	584
Terminal supply contracts	337
Software	965
Property, plant & equipment	5 251
Non-current financial assets	148
Currents assets excluding cash and cash equivalents	1 808
Cash and cash equivalents	176
Deferred tax liabilities	1 075
Non-current liabilities	1 168
Current liabilities	1 142
Net assets	5 925
Goodwill	1 612
Total consideration, satisfied by cash	7 537

The goodwill arising on the acquisition of Vodafone is attributable to the anticipated profitability of its operations.

Disposals in 2005
At the end of 2005 the Group entered into agreements to sell 100% of the shares in Fixed Czech and Slovakia for a consideration of Euro 18.1 million in cash. The transactions were effected on 30 January 2006. Losses on disposal of NOK 63 million were recorded in 2005 due to reduction of the disposal group to fair value less costs to sell. The assets and liabilities are reported as current assets and liabilities held for sale as of 31 December 2005. The major classes of assets and liabilities comprising the disposal group classified as held for sale are as follows:

Intangible assets	34
Property, plant & equipment	71
Current assets excluding cash and cash equivalents	37
Cash and cash equivalents	23
Total assets	165
Non-current liabilities	29
Current liabilities	3
Total liabilities	32

As of 18 September 2005 the Group sold the remaining part of EDB Business Partner ASA’s Telecom business for a consideration of NOK 133 million. Gains on disposal of NOK 37 million before taxes were recorded in 2005.

None of these disposals are regarded as discontinued operations according to IFRS 5 as they do not, separately or in aggregate, represent a major line of business or geographical area of operations.

Discontinued Operations
At the same time as the Group increased its shareholding in UCOM, UCOM received irrevocable purchase offers for the company's core assets from parties external to the Group. These assets and liabilities are primarily organized in separate subsidiaries of the company, and are regarded as disposal groups that meet the criteria to be classified as held for sale and discontinued operations on acquisition according to IFRS 5. The disposals were approved by the General Meeting of UCOM in January and effected in February 2006.

Pro forma Information (unaudited)
The following unaudited pro forma financial information presents results as if the acquisition of DTAC, Bredbandsbolaget and Cybercity had occurred at the beginning of the respective periods

NOK in millions, except per share data	2005	2004
Pro forma revenues	75 532	68 435
Pro forma profit before taxes and minority interest	12 563	9 460
Pro forma net income	7 473	5 900
Pro forma net income per share in NOK	4.37	3.37

The pro forma results are adjusted for Telenor’s interest expenses and the results in the period prior to acquisition. These pro forma figures have been prepared for comparative purposes only and are not necessarily indicative of the result of operations which actually would have resulted had the acquisitions been in effect in the respective periods or of future results.

Significant acquisitions in 2004
NOK in millions Company	Country	Change in interest %		Business	Purchase price
Sonofon Holding A/S	Denmark	46.5		Mobile Communication	3 639
European Telecom Luxemburg SA. (ProMonte)	Montenegro	55.9		Mobile Communication	541
GrameenPhone Ltd.	Bangladesh	11.0		Mobile Communication	298
CBB A/S	Denmark	100.0		Mobile Communication	147
GMPCS Personal Communication Inc	USA	100.0		Satellite Mobile Communications	85
Utfors AB 1)	Sweden	8.3		Telecommunication	70
IT-operation 2)	Norway/Sweden	100.0		Operation and application services	738
1) Telenor owned 100% of the shares in the company as of 31 December 2004.
2) Asset purchased by EDB Business Partner ASA.

Acquisition of Sonofon Holding A/S in 2004
On 12 February 2004, Telenor acquired the remaining 46.5% of the outstanding common shares in Sonofon Holding A/S that we did not already own. Prior to the acquisition Sonofon was regarded as a joint venture with BellSouth and was accounted for using the equity method. After completion of the acquisition, Telenor owns 100% of the outstanding common shares and the result of operations has been included in the consolidated financial statements from that date. Sonofon Holding A/S is one of the leading mobile operators in Denmark and offers GSM voice and data communication services on 900 and 1800 MHz frequency in addition to fixed line telephony and Internet access primarily to the business market based on “Fixed Wireless Access (FWA) Technology”. This acquisition was part of Telenor's strategy to gain control of operations to take advantage of synergies stemming from coordinated activities in a number of markets. The aggregate cost of the business combination was approximately NOK 4.4 billion of which NOK 3.6 billion was paid in cash and liabilities of NOK 0.8 billion assumed from the former owner of the remaining 46.5% shares. The value was set based on a fair value after negotiations between the parties. The allocation of the purchase price has been based on independent financial experts’ estimates of the fair values of assets and liabilities acquired.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of consolidation 1):

NOK in millions	Estimated fair values
Property, plant & equipment	2 717
Customer base	1 158
Licences	48
Trademarks	801
Software	1 130
Roaming agreements	534
Currents assets excluding cash and cash equivalents	1 137
Cash and cash equivalents	52
Deferred tax liability	990
Non-current liabilities	3 041
Current liabilities	1 825
Net assets	1 721
Goodwill	6 512
Total	8 233
Total consideration, satisfied by cash 2)	3 639
Book value as an associated company at the date of consolidation	3 985
Increased values in business combination recorded against equity	609
Total	8 233
1) These figures include consideration for the last acquisition and the carrying value for the prior investment, when the company was accounted for using the equity method. They reflect the final purchase price allocation that differs in some respects from the preliminary allocation.
2) Does not include assumed liabilities of NOK 0.8 billion from the former owner of the shares.

Useful life of intangible assets at the date of consolidation were estimated on average to: customer base of 4 years, roaming-agreements of 8 years, trademarks of 15 years, licenses of 8 years and administrative software systems of 5 years.

The goodwill arising on the acquisition of Sonofon is attributable to the anticipated profitability of its operations and to the anticipated synergies. See note 17 for information regarding the write-down of goodwill in Sonofon in 2004.

Pro forma information (unaudited)
The following unaudited pro forma financial information presents results as if the acquisition of Sonofon Holding A/S, European Telecom Luxemburg SA (ProMonte GSM D.O.O.), CBB A/S, GMPCS Communication Inc and IT operations had occurred at the beginning of 2004:

NOK in millions, except per share data	2004
Pro forma revenues	62 407
Pro forma profit before taxes and minority interests	9 674
Pro forma net income	5 964
Pro forma net income per share in NOK	3.41

The pro forma results are adjusted for Telenor's interest expenses and the results in the period prior to the acquisitions. These pro forma figures have been prepared for comparative purposes only and are not necessarily indicative of the results of operations which actually would have resulted had the acquisitions been in effect in the respective periods or of future results.

Disposals in 2004
Telenor sold 100% of its shares in Securinet AS, which was owned by Telenor Venture III AS, and at the end of 2004, Telenor sold 100% of its shares in Telenor Venture III AS. Total consideration was NOK 394 million. A gain of NOK 135 million before taxes was recorded. Telenor sold 100% of its shares in Transacty Slovakia j.s.c for a consideration of NOK 133 million and recorded a gain before taxes of NOK 71 million. Telenor’s subsidiary EDB Business Partner ASA sold part of its telecom business during 2004 for NOK 400 million and recorded a gain of NOK 295 million.

None of these disposals are regarded as discontinued operations as they do not, separately or in aggregate, represent a major line of business or geographical area of operations.

NOTES: TELENOR GROUP - select note Note 01: Business combinations and disposals Note 02: Revenues Note 03: Key Figures Segment Note 04: Cost of materials and traffic charges Note 05: Own work capitalized Note 06: Salaries and personnel costs Note 07: Pension obligations Note 08: Other operating expenses Note 09: Other income and expenses Note 10: Bad debts Note 11: Research and development costs Note 12: Workforce reductions, onerous contracts and legal disputes Note 13: Financial income and expenses Note 14: Taxes Note 15: Amortization, depreciation and write-downs Note 16: Property, plant, equipment and intangible assets Note 17: Impairment testing of goodwill Note 18: Associated companies Note 19: Trade and other receivables Note 20: Other financial assets Note 21: Provisions etc. Note 22: Interest-bearing liabilities Note 23: Financial instruments and risk management Note 24: Trade and other payables and Current non-interest bearing financial liabilities Note 25: Earnings per share Note 26: Commitments and Contingencies Note 27: Contractual obligations Note 28: Related parties Note 29: Additional information about cash flow Note 30: Management compensation etc. Note 31: Share option plans Note 32: Number of shares, ownership etc. Note 33: Licenses Note 34: Pledges and guarantees Note 35: Events after the balance sheet date Note 36: Equity – notes Note 37: Adoption of International Financial Reporting Standards (IFRS) Note 38: United States Generally Accepted Accounting Principles (US GAAP)

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