20-F 1 u50062e20vf.htm FORM 20-F e20vf
Table of Contents

 
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 20-F
o REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
þ 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
OR
o SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from                     to                     .
Commission file number: 0-31054
Telenor ASA
(Exact name of Registrant as specified in its charter)
Norway
(Jurisdiction of incorporation or organization)
Snarøyveien 30, N-1331 Fornebu, Norway
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act: None
 
Securities registered or to be registered pursuant to Section 12(g) of the Act: Ordinary Shares, nominal value NOK 6.00 per share
 
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
 
     The number of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2005: 1,706,570,293 Ordinary Shares, nominal value NOK 6.00 per share.
     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes þ     No o
     If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes o     No þ
     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Yes þ     No o
     Indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 o     Item 18 þ
     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer.
Large Accelerated Filer              Accelerated Filer              Non-Accelerated Filer  þ 
     If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o     No þ
 
 


 

TABLE OF CONTENTS
             
        Page
         
 PRESENTATION OF FINANCIAL AND OTHER INFORMATION     3  
 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS     3  
 PART I
   IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS     4  
   OFFER STATISTICS AND EXPECTED TIMETABLE     4  
   KEY INFORMATION     4  
   INFORMATION ON THE COMPANY     15  
   UNRESOLVED STAFF COMMENTS     78  
   OPERATING AND FINANCIAL REVIEW AND PROSPECTS     78  
   DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES     131  
   MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS     144  
   FINANCIAL INFORMATION     146  
   THE OFFER AND LISTING     147  
   ADDITIONAL INFORMATION     149  
   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK     159  
   DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES     161  
 PART II
   DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES     161  
   MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS     161  
   CONTROLS AND PROCEDURES     161  
   AUDIT COMMITTEE FINANCIAL EXPERT     161  
   CODE OF ETHICS     162  
   PRINCIPAL ACCOUNTANT FEES AND SERVICES     162  
   EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES     163  
   PURCHASES OF EQUITY SECURITIES BY ISSUER AND AFFILIATED PURCHASERS     163  
 PART III
   FINANCIAL STATEMENTS     164  
   FINANCIAL STATEMENTS     164  
   EXHIBITS     165  
 Exhibit 1
 Exhibit 4(c)
 Exhibit 8
 Exhibit 12
 Exhibit 13

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PRESENTATION OF FINANCIAL AND OTHER INFORMATION
      Telenor publishes its financial statements in Norwegian Krone (“NOK”). Unless otherwise indicated, all amounts in this annual report are expressed in Norwegian Krone. In connection with Telenor’s international operations, certain amounts denominated in foreign currencies have been translated into Norwegian Krone, in accordance with Telenor’s accounting principles as described in our consolidated financial statements that form part of this report under the heading “Summary of Significant Accounting Principles — Foreign currency translation” and “— Derivative financial instruments and hedging” except where otherwise noted. These translations should not be construed as representations that the amounts referred to actually represent such translated amounts or could be converted into the translated currency at the rate indicated.
      Telenor’s annual audited consolidated financial statements as prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) differ in certain respects from U.S. GAAP. For a reconciliation of the material differences between IFRS and U.S. GAAP as they relate to Telenor, see note 38 to our consolidated financial statements.
      As used in this annual report, the terms “Telenor”, “we” or “us”, unless the context otherwise requires, refer to Telenor ASA and its consolidated subsidiaries.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
      This annual report contains forward-looking statements that involve risks and uncertainties. In addition, other written or oral statements which constitute forward-looking statements have been made and may in the future be made by or on behalf of Telenor. In this annual report, such forward-looking statements include, without limitation, statements relating to (1) the implementation of strategic initiatives, (2) the development of revenues overall and within specific business areas, (3) the development of operating expenses, (4) the development of personnel expenses, (5) expenses incurred in the development of associated companies, (6) the anticipated level of capital expenditures and associated depreciation and amortization expense, and (7) other statements relating to Telenor’s future business development and economic performance. The words “anticipate”, “believe”, “expect”, “estimate”, “intend”, “plan” and similar expressions identify certain of these forward-looking statements. Readers are cautioned not to put undue reliance on forward-looking statements because actual events and results may differ materially from the expected results described by such forward-looking statements.
      Many factors may influence Telenor’s actual results and cause them to differ materially from expected results as described in forward-looking statements. These factors include the following:
  the level of demand for our services, particularly with regard to mobile communications services, fixed telephony, Internet, pay television services, and other newer products and services;
 
  actions of our competitors;
 
  regulatory developments, including changes to our permitted tariffs, the terms of access to our network, the terms of interconnection and other issues; and
 
  the success of our international investments and expansion programs.
      Telenor disclaims any intention or obligation to update and revise any forward-looking statements, whether as a result of new information, future events or otherwise.

3


PART I
ITEM 1: IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
      Not applicable.
ITEM 2: OFFER STATISTICS AND EXPECTED TIMETABLE
      Not applicable.
ITEM 3: KEY INFORMATION
SELECTED CONSOLIDATED FINANCIAL AND STATISTICAL DATA
      The following tables set forth summary consolidated financial and statistical data of Telenor. They should be read together with “Item 5: Operating and Financial Review and Prospects” and our consolidated financial statements, including the notes to those financial statements included in this report.
      From January 1, 2005, as required by the European Union’s IAS Regulation and the Companies Act 1985, we have prepared the consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”). IFRS as adopted by the EU differ in certain respects from IFRS as issued by the International Accounting Standards Board (“IASB”). However, the consolidated financial statements for the periods presented would be no different had Company applied IFRS as issued by the IASB. References to “IFRS” hereafter should be construed as references to IFRS as adopted by the EU. Comparative figures are prepared for 2004.
      Solely for the convenience of the reader, the financial data at and for the twelve months ended December 31, 2005 have been translated into U.S. dollars at the rate of NOK 6.7444 to USD 1.00, the noon buying rate on December 30, 2005
                                                 
    Year ended December 31,
     
    2001   2002   2003   2004   2005   2005
                         
    (NOK)   (NOK)   (NOK)   (NOK)   (NOK)   (USD)
    (in millions, except per share amounts)
Income Statement Data
                                               
Revenues
                      60,591       68,927       10,220  
Operating expenses(1)
                      53,224       57,222       8,484  
Operating profit
                      7,367       11,705       1,736  
Share of profit in associated Companies
                      986       1,233       183  
Profit from continuing operations
                      7,413       9,138       1,355  
Profit (loss) from discontinued operations(2)
                            (4 )     (1 )
Profit from total operations
                      7,413       9,134       1,354  
Attributable to:
                                               
Non-controlling interests (minority interests)
                            1,320       1,488       220  
Equity holders of Telenor ASA (net income)
                      6,093       7,646       1,134  
Earnings per share from continuing operations — basic
                      3.49       4.47       0.66  
Earnings per share from continuing operations — diluted
                      3.48       4.47       0.66  
Earnings per share from total operations — basic
                      3.49       4.47       0.66  
Earnings per share from total operations — diluted
                      3.48       4.47       0.66  
Dividends per share(3)
                      1.50       2.00       0.30  
Weighted average number of shares (in millions of shares) — primary
                      1,748       1,711        

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    Year ended December 31,
     
    2001   2002   2003   2004   2005   2005
                         
    (NOK)   (NOK)   (NOK)   (NOK)   (NOK)   (USD)
    (in millions, except per share amounts)
Weighted average number of shares (in millions of shares) — diluted
                      1,749       1,712        
U.S. GAAP
                                               
Revenues
    40,581       47,879       52,826       67,801       70,352       10,431  
Net income from continuing operations (excluding Telenor Media)
    1,889                                
Net income
    7,004       (3,658 )     5,036       5,639       7,427       1,101  
Net income per share from continuing operations (excluding Telenor Media)
    1,066                                
Net income per share cumulative effect on prior years (prior to December 31, 2001) of change in accounting principles
    0,033             (0.10 )                  
Net income per share — primary (excluding treasury shares)
    3.95       (2.06 )     2.84       3.22       4.34       0.64  
Net income per share — diluted (excluding treasury shares)
    3.95       (2.06 )     2.84       3.22       4.34       0.64  
 
(1)  Including depreciation, amortization and writedowns.
 
(2)  Dividends in respect of 2005 will be paid in June 2006.
 
(3)  Assets and liabilities held for sale in United Communication Industry pcl (UCOM), excluding our ownership interests in Total Access Communications (DTAC) and the holding of interest bearing liabilities, were reported as discontinued operations as of December 31, 2005. Please see note 1 to our consolidated financial statements for more information.
                                                 
    Year ended December 31,
     
    2001   2002   2003   2004   2005   2005
                         
    (NOK)   (NOK)   (NOK)   (NOK)   (NOK)   (USD)
    (in millions)
Balance Sheet Data
                                               
IFRS
                                               
Total non current assets
                      73,181       98,646       14,626  
Total current assets
                      18,215       25,749       3,818  
Total assets
                      91,396       124,395       18,444  
Equity attributable to equity holders of Telenor ASA
                      40,122       46,399       6,879  
Non-controlling interests (Minority interests)
                      3,946       7,134       1,058  
Total equity
                      44,068       53,533       7,937  
Total non-current liabilities
                      26,655       33,756       5,005  
Total current liabilities
                      20,673       37,106       5,502  
Total equity and liabilities
                      91,396       124,395       18,444  
U.S. GAAP
                                               
Total assets
    90,129       97,511       101,088       101,171       131,384       19,480  
Non-current interest-bearing liabilities
    20,978       30,275       39,255       34,882       38,643       5,730  
Shareholders’ equity
    42,944       35,799       42,535       42,430       47,457       7,037  

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    Year ended December 31,
     
    2001   2002   2003   2004   2005   2005
                         
    (NOK)   (NOK)   (NOK)   (NOK)   (NOK)   (USD)
    (in millions)
Cash Flow
                                               
IFRS
                                               
Net cash flow from operating activities
                      18,991       22,340       3,312  
Net cash flow from investment activities
                      (13,031 )     (19,998 )     (2,965 )
Net cash flow from financing activities
                      (8,255 )     (832 )     (123 )
                                                 
    Year ended December 31,
     
    2001   2002   2003   2004   2005   2005
                         
    (NOK)   (NOK)   (NOK)   (NOK)   (NOK)   (USD)
    (in millions)
Investments and EBITDA
                                               
IFRS
                                               
Capital Expenditure(1)
                      12,745       16,439       2,437  
Investment in businesses(2)
                      5,809       8,858       1,313  
EBITDA(3)
                      21,535       23,836       3,534  
 
(1)  Capital expenditure (Capex) is investment in property, plant and equipment and intangible assets.
 
(2)  Investments in businesses are acquisitions of non-current shares and participations, including acquisitions of subsidiaries.
 
(3)  For the definition and discussion of EBITDA and the reconciliation of EBITDA to profit from total operations, you should read “Item 5: Operating and Financial Review and Prospects — Operating profit and EBITDA.”
                                             
    Year ended December 31,
     
    2001   2002   2003   2004   2005
                     
Other Operating Data
                                       
Mobile telephony (digital) subscriptions in
                                       
 
Telenor Mobile (Norway), period end (000s):
                                       
   
Contract
    1,210       1,215       1,228       1,395       1,509  
   
Prepaid
    1,027       1,115       1,099       1,228       1,222  
Mobile telephony (digital) subscriptions in
                                       
 
Sonofon (Denmark), period end (000s):
                                       
   
Contract
                      813       859  
   
Prepaid
                      462       425  
Mobile telephony (digital) subscriptions in
                                       
 
Telenor Mobile Sweden period end (000s)
                                       
   
Contract
                37       48       47  
   
Prepaid
                44       57       48  
Mobile telephony (digital) subscriptions in
                                       
 
Kyivstar (Ukraine), period end (000s):
                                       
   
Contract
          384       534       720       1,024  
   
Prepaid
          1,472       2,503       5,532       12,901  
Mobile telephony (digital) subscriptions in
                                       
 
Pannon GSM (Hungary), period end (000s):
                                       
   
Contract
          540       595       779       1,025  
   
Prepaid
          1,910       2,023       1,991       1,904  

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    Year ended December 31,
     
    2001   2002   2003   2004   2005
                     
Mobile telephony (digital) subscriptions in
                                       
 
DTAC (Thailand), period end (000s):
                                       
   
Contract
                            1,465  
   
Prepaid
                            7,212  
Mobile telephony (digital) subscriptions in
                                       
 
DiGi.Com (Malaysia), period end (000s):
                                       
   
Contract
    137       97       106       175       354  
   
Prepaid
    902       1,519       2,101       3,067       4,441  
Mobile telephony (digital) subscriptions in
                                       
 
GrameenPhone (Bangladesh), period end (000s):
                                       
   
Contract
    185       206       242       296       383  
   
Prepaid
    279       563       899       2,092       5,159  
Mobile telephony (digital) subscriptions in
                                       
 
Telenor Pakistan, period end (000s):
                                       
   
Contract and prepaid
                            1,868  
Mobile telephony (digital) subscriptions in
                                       
 
ProMonte GSM (Montenegro) period end (000s):
                                       
   
Contract
                      44       45  
   
Prepaid
                      235       265  
Fixed Norway
                                       
Fixed telephony access channels in Norway,
                                       
 
period end (000s):
                                       
   
Analog (PSTN)
    1,545       1,467       1,308       1,182       1,089  
   
Digital (ISDN)
    1,766       1,828       1,682       1,449       1,227  
Fixed telephony traffic in Norway (in millions of minutes):
                                       
   
National calls, excluding Internet traffic
    10,567       9,457       8,203       7,007       5,760  
   
Internet traffic
    6,067       5,293       4,619       3,577       2,081  
   
Calls to mobile
    1,412       1,499       1,442       1,362       1,332  
   
International
    383       378       340       308       277  
   
Value-added services and directory calls, etc. 
    624       710       781       772       620  
Internet, period end (000s):
                                       
   
Internet subscriptions, residential market Norway
    394       427       457       527       579  
   
 — of which xDSL
    23       90       163       286       414  
   
xDSL business subscriptions, Norway
    1       4       14       40       61  
Broadcast
                                       
Pay television subscribers in the Nordic region,
period end (000s):
                                       
   
Cable TV
    561       571       604       624       681  
   
Satellite master antenna TV- networks (SMATV)
    1,193       1,133       1,098       1,212       1,177  
   
Home satellite dish (DTH)(1)
    569       701       763       824       906  
   
Digital Terrestrial Television (DTT)
                      12       33  
Group
                                       
Number of full-time equivalent employees
    21,000       22,100       19,450       20,900       27,600  

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(1)  Includes all subscribers of Canal Digital, which we consolidated as a wholly-owned subsidiary starting on June 30, 2002.
DIVIDENDS AND DIVIDEND POLICY
      Under Norwegian law, dividends may only be paid in respect of a financial period for which audited financial statements have been approved by the annual general meeting of shareholders. Any proposal to pay dividend must be recommended by the board of directors, accepted by the corporate assembly and approved by the shareholders at a general meeting. The shareholders at the annual general meeting may vote to reduce, but not to increase, the dividend proposed by the board of directors.
      Dividends may be paid in cash or in kind and are payable only out of distributable reserves, which are calculated from Telenor ASA’s balance sheet. Distributable reserves consist of:
  annual profit according to the income statement approved for the preceding financial year, and
 
  retained profit from previous years,
after deduction for uncovered losses, the book value of research and development, goodwill, net deferred tax assets recorded in the balance sheet for the preceding financial year, the aggregate value of treasury shares that we have purchased or been granted security in during preceding financial years and of credit and security given pursuant to sections 8-7 to 8-9 of the Norwegian Public Limited Companies Act, and for any part of our annual profits that would be compatible with good and careful business practice to retain with due regard to any losses which we may have incurred after the last balance sheet date or which we may expect to incur. We cannot distribute any dividends if our equity, according to our balance sheet, amounts to less than 10% of the total assets reflected on our balance sheet without following a creditor notice procedure as required for reducing the share capital. These amounts are calculated on the basis of Telenor ASA’s unconsolidated financial statements.
      The following table shows the aggregate dividends we paid or expect to pay, for each of the past five fiscal years.
                 
    Total
    (in millions)(1)
     
Year   (NOK)   (USD)
         
2001
    621       69  
2002
    799       115  
2003
    1,764       265  
2004
    2,603       428  
2005(1)
    3,419       510  
 
(1)  A dividend of NOK 2.00 per share for the fiscal year 2005 was proposed by our board of directors due for acceptance by the corporate assembly and approval at the annual general meeting on May 23, 2006. The dividend, if approved, will be paid in June 2006 to the holders of record of Telenor shares on May 23, 2006. The total amounts for 2005 do not include dividends on own shares as of December 31, 2005.
      Since our initial public offering in 2000 and up to and including the fiscal year ended December 31, 2002, our stated dividend policy had been to declare and distribute an annual dividend in an amount equal to 20-30% of our annual net income after taxes adjusted for the effect of one-time gains or losses, if any. Effective from the fiscal year ended December 31, 2003, our board of directors revised our dividend policy to state our intention to distribute an annual dividend in an amount equal to 40-60% of our normalized net income. However, the amount of any dividends proposed by the board of directors may vary from year to year at the board’s discretion.

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      Because we will only pay dividends in Norwegian Krone, exchange rate fluctuations will affect the U.S. dollar amounts received by holders of ADSs after the ADR depositary converts cash dividends into U.S. dollars.
EXCHANGE RATES
      The table below shows the average noon buying rates in The City of New York for cable transfers in currencies as certified for customs purposes by the Federal Reserve Bank of New York for Norwegian Krone per USD 1.00. The average is computed using the noon buying rate on the last business day of each month during the period indicated.
         
Year ended December 31,   Average
     
2001
    9.0380  
2002
    7.9253  
2003
    7.0627  
2004
    6.7241  
2005
    6.7444  
      The table below shows the high and low noon buying rates for each month during the six months prior to the date of this annual report.
                 
    Low   High
         
October 2005
    6.4307       6.6155  
November 2005
    6.4591       6.7393  
December 2005
    6.5944       6.8023  
January 2006
    6.5242       6.7483  
February 2006
    6.6416       6.8490  
March 2006
    6.5726       6.7340  
April(1) 2006
    6.4190       6.5142  
 
(1)  Low and high noon buying rates for the period starting April 1, 2006 and ending on April 5, 2006.
      On April 5, 2006, the noon buying rate for Norwegian Krone was USD 1.00 = NOK 6.4340.
      Fluctuations in the exchange rate between the Norwegian Krone and the U.S. dollar will affect the U.S. dollar amounts received by holders of ADSs on conversion of dividends, if any, paid in Norwegian Krone on the ordinary shares and may affect the U.S. dollar price of the ADSs listed on the NASDAQ National Market.

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RISK FACTORS
Risks Related to Our Business
We face increasing competition in the Norwegian telecommunications market which may result in further reductions in tariffs and loss of market share and could affect our future revenues and profitability.
      We are experiencing competition from competing service providers in the Norwegian market for telecommunications services. Generally, the Norwegian regulatory regime poses few barriers to entry for new competitors.
      In fixed network services, a number of regulatory measures have been introduced that have strengthened and may strengthen the position of our competitors. Pursuant to regulatory requirements, we introduced carrier pre-selection for our customers in November 2000, enabling them to select alternative service providers. In April 2000, we began offering interconnection services for our local access network, or local loop, at cost-oriented prices. Competitors may also use alternative technologies, such as cable or wireless local loop connections, to provide telecommunications services, and in March 2000 the Norwegian regulator awarded licenses to our competitors to provide wireless access services. From 2003 onwards, we have offered wholesale line rental (PSTN and ISDN) to other operators, enabling the operators of telephony traffic to deliver fixed telephony subscription to their customers using our fixed network. Such unbundled telephony access also means that subscriptions and traffic may be delivered separately by different operators. In addition, a number of service providers have recently launched Voice over Internet Protocol (VoIP), which is a competitive technology to traditional telephony in the consumer market.
      In the mobile market, there are two Universal Mobile Telephony Service (UMTS) license holders apart from us, one of which is our primary competitor in the Norwegian mobile market, NetCom. The second license holder, Hi3G, a new entrant to the Norwegian mobile market, was awarded its license in August 2003. Apart from enjoying more favorable license conditions than NetCom and us, Hi3G was permitted to immediately claim national roaming in the existing GSM networks.
      Currently, several mobile service providers utilize our infrastructure, or that of our primary competitor, and the regulator may require us to reduce the prices we charge to these service providers. You should read “Risks related to regulatory matters” for further information. We have also launched an MVNO (Mobile Virtual Network Operator) offer in the market. Furthermore, pursuant to regulatory requirements, we provide network access to external providers of short messaging services (SMS).
      As competition continues to intensify, we expect that market pressures may require us to reduce tariffs further and to increase our marketing and sales expenses. However, we may nonetheless lose further market share, which may adversely affect our revenue growth and profit margin since the effect of lost market share in the retail market is unlikely to be fully offset by providing wholesale services to competing service providers.
If we fail to successfully develop and market new mobile communications services, our ability to achieve further revenue growth in mobile communications services in the Norwegian market and the more mature international markets in which we operate may be reduced.
      Because of being the market leader, the current high penetration rate and increased competition in the mobile telephony market in Norway and certain more mature international markets in which we operate, such as Denmark and Hungary, we expect that further revenue growth in mobile communications in these countries will depend on our ability to successfully develop and market new applications and services or have third parties provide services using our network. In particular, it is our goal to stimulate demand for value-added services. Failure to successfully do so may impair our ability to achieve further revenue growth in mobile communications services in these countries.

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Lack of control, or failure to increase our ownership and thus gain control, over companies in which we have minority interests, or disagreements with our principal shareholders in our international operations, may impede our strategic objectives.
      As part of our strategy, we intend to expand our minority ownership interests in, and gain control of, some of our investments in order to exercise a controlling influence over key business decisions, including the approval of strategy and business plans. If we fail to increase our ownership interests and gain control, our cost savings and revenue enhancement from these operations may be limited. A failure to increase our ownership interest in our associated companies may limit our ability to influence key business or strategic decisions, particularly in situations in which we disagree with other principal shareholders.
      For example, our ability to influence key business or strategic decisions in our associated company VimpelCom, a Russian mobile operator in which we own 26.6% of its voting share capital, is closely related to the fact that VimpelCom’s charter requires certain decisions to be approved by 80% of the members of VimpelCom’s board of directors. However, during the last two years, an individual shareholder of VimpelCom and Vimpelcom’s other principal shareholder, the Alfa Group (whose telecommunications division now does business under the name “Altimo”), have filed lawsuits in Russian courts aimed at undermining these provisions of VimpelCom’s charter. All of these lawsuits have now been dismissed or withdrawn, but our ability to influence decisions about important matters in VimpelCom might be limited as a result of future actions by the Alfa Group.
      In addition, when our other principal shareholders in our international mobile operations fail to adequately support these companies, not participate or disagree with us over key corporate actions, such companies may not be able to compete or operate effectively and the value of our investments may be impaired.
      For example, Ukrainian law requires the attendance of shareholders holding more than 60% of a company’s share capital for a quorum to be present at shareholder meetings, and the charter of Kyivstar, our 56.5% owned Ukrainian mobile operator, requires the attendance of at least one director from Storm, the other shareholder in Kyivstar and a wholly-owned subsidiary of the Alfa Group, for a valid quorum at board meetings. There have been situations arising in 2005 that resulted in the failure of Storm or its nominees to attend meetings.
      Telenor has therefore been involved in litigation with Storm LLC concerning these corporate governance and other issues involving Kyivstar, including but not limited to the lack of Storm or its nominees attendance at Board of Directors meetings. As provided for under Kyivstar’s shareholders’ agreement, we have also commenced arbitration proceedings against Storm to force Storm, and its affiliates in the Alfa Group, to comply with the terms of the shareholders’ agreement. Furthermore, we have also proposed certain amendments to the Kyivstar charter but the actions of Storm described above, including the failure of Storm or its nominees to attend meetings, could still adversely affect the ability of Kyivstar to operate and compete effectively.
      Your should read “Item 4: Information on the Company — Mobile Operations — Associated Companies — VimpelCom — Russian and other CIS countries” and “Item 4: Information on the Company — Kyivstar — Ukraine” for additional information about VimpelCom and Kyivstar, respectively.
The value of our international operations and investments may be adversely affected by political, social, economic and legal developments in foreign countries.
      Some of the countries in which we have operations or in which we have made significant equity investments in telecommunications operators, have political, social, economic and legal systems that may at times be unpredictable. Political or economic upheaval or changes in laws or their application may harm the operations of the companies in which we have invested and impair the value of these investments to us. A significant risk of operating in emerging market countries is that foreign exchange restrictions could be established. This could effectively prevent us from receiving profits from, or from selling our investments in, these countries.

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Increased exposure to currency exchange rate fluctuations may have an adverse effect on our reported earnings and the value of our international operations and investments.
      An increasing proportion of our revenues and profits are derived from our international mobile operations and investments. Fluctuations in currency exchange rates between the Norwegian Krone and the currencies, in particular the U.S. dollar, in which our international operations or investments report and operate, could adversely affect our earnings as reported in Norwegian Krone. We attempt to mitigate the effect of fluctuations in foreign currency exchange rates through foreign currency hedging. However, there can be no assurance that our efforts will be successful.
If we or international mobile operators in which we have invested fail to obtain, or fail to enter into agreements to utilize, licenses for third generation mobile services, we may be unable to achieve further revenue growth in mobile communications or to benefit from certain cost reductions related to network improvements in our target markets.
      Our ability to offer third generation mobile services, either directly, or through our international associated companies, depends upon our obtaining UMTS licenses or entering into agreements with operators that have been awarded such licenses in markets in which we are, or intend to be, present. Failure to establish ourselves or our associated companies among the providers of third generation mobile services may limit our ability:
  to achieve further revenue growth in mobile communications, if demand for improved or new services and products, which will work better on UMTS networks, proves to be strong; and/or
 
  to benefit from the low incremental costs of increases in UMTS network capacity compared to increases in GSM network capacity.
Continuing rapid changes in technologies could increase competition or require us to make substantial additional investments.
      The services we offer are technology-intensive. The development of new technologies may render our services non-competitive. We may have to make substantial additional investments in new technologies to remain competitive. New technologies we choose may not prove to be commercially successful. As a result, we could lose customers, fail to attract new customers or incur substantial costs in order to maintain our customer base.
In-orbit satellite failure may result in lost revenues in our satellite broadcasting business.
      The operation of satellites is subject to the risk of in-orbit failure, which could arise from various causes, such as a failure of satellite components, solar or other astronomical events or space debris. It is not feasible to repair satellites in space. The satellites themselves are insured in such cases, but we do not insure against lost revenues in the event of a total or partial loss of the communications capacity of a satellite while in orbit.
Actual or perceived health risks or other problems relating to mobile handsets or transmission masts could lead to decreased mobile communications usage.
      Concern has been expressed that the electromagnetic signals from mobile handsets and base stations and chemicals leaking from mobile handsets may pose health risks or interfere with the operation of electronic equipment, including automobile braking and steering systems. Actual or perceived risks of mobile handsets or base stations and related publicity, regulation or litigation could reduce our mobile telephone customer base, make it difficult to find attractive sites for base stations or cause mobile telephone customers to use their mobile phones less.

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Risks Related to Regulatory Matters
Increased regulation and changes in the regulatory environment could adversely affect our business operations in Norway.
      Our operations are subject to extensive regulatory requirements in Norway. In particular, we must comply with requirements regulating the licensing, construction and operation of our telecommunications, cable TV, broadcasting and satellite networks and services, and there are governmental authorities which monitor and enforce competition laws and consumer protection laws applicable to the telecommunications industry.
      It is difficult for us to predict the precise impact of any proposed or potential changes in regulatory, environmental or government policies on our operations. If regulators decide to expand or introduce restrictions and obligations applicable to our business operations or to extend them to new services and markets, this could adversely affect our business operations and competitiveness in existing and new markets.
      For additional information on the regulatory requirements to which we are subject, you should read “Item 4: Information on the Company — Regulation — Norway”.
Existing and new regulatory requirements may impair our flexibility in setting tariff structures, require us to further reduce tariffs, provide advantages to our competitors or provide grounds for legal proceedings against us.
      We are considered by the Norwegian Post and Telecommunications Authority to have significant market power with regard to both our fixed and our mobile operations in the Norwegian markets for voice telephony, transmission capacity and interconnection services. As a result, we are subject to specific obligations regarding pricing, accounting and reporting with respect to these services. In particular, we are required to offer these services to our wholesale customers and end users at cost-oriented prices and on non-discriminatory terms.
      These and other new requirements may impair our flexibility in setting tariff structures or may require us to further reduce tariffs, which may adversely affect our revenues and net income. In addition, if we are required to reduce interconnection prices or change the terms on which we provide certain services as a result of our obligation to provide cost-oriented pricing and non-discriminatory terms for interconnection and access, our competitors may be at an advantage, depending on the services provided.
      This regulatory environment also provides the grounds for several legal proceedings brought against us by our competitors and customers, alleging that our failure or delay in providing access to our network on the terms required by law has caused them loss. Our alleged failures and delays include failing to deliver cost-oriented pricing and late implementation of carrier pre-selection. For additional information on these legal proceedings, you should read “Item 8: Financial Information — Legal Proceedings”.
The regulatory framework in Norway, which is based on EU telecommunications regulation, may impair our ability to compete effectively in our existing or new markets.
      In February 2002, the European Union (EU) adopted a number of directives with the objective of developing a harmonized regulatory framework for electronic communications networks and services throughout the EU. In Norway, the new regulatory framework was implemented by the Electronic Communications Act of July 2003. The impact of the introduction of the new framework is still uncertain, in part because it will depend on the regulators’ interpretation of the framework and their assessment of the competitive situation in the relevant markets. Our ability to compete effectively in our existing or new geographical and product markets could be adversely affected by the regulators’ decision to extend the scope of the restrictions we are currently subject to, to new services and markets in the face of continuing convergence of information and communications services. You should read “Item 4: Information on the Company — Regulation — Norway — Regulatory framework and developments” and “Regulation — European Union Regulation” for more information on the new regulatory framework.

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Increased and unpredictable regulation of our international mobile operations and investments and the lack of institutional continuity and safeguards in certain of the emerging market countries in which we operate could adversely affect our competitive position, increase our costs of regulatory compliance and adversely affect our results and business prospects.
      We derive an increasingly higher portion of our revenues and profits (or losses) from our international mobile operations and investments,with increased regulation. As a consequence, regulatory uncertainty or unfavorable regulatory developments in certain countries could adversely affect our results and business prospects.
      We must comply with an extensive range of requirements that regulate the licensing, construction and operation of our telecommunications networks and services or restrict our ability to invest or increase our investment in local companies in these countries. In particular, there are agencies which regulate and supervise the allocation of frequency spectrum and which monitor and enforce regulation and competition laws which apply to the mobile telecommunications industry. Decisions by regulators regarding the granting, amendment or renewal of licences, to us or to third parties, could adversely affect our future operations in these countries.
      For example, our subsidiary Pannon has been identified as having significant market power in the mobile and interconnection markets in Hungary, and has been required to contribute to a fund established by the Hungarian authorities to compensate universal service providers. In Malaysia, we are required to reduce our current 61% ownership interest in our mobile subsidiary DiGi.Com to below 50% by the second half of 2006, unless we apply for additional extensions. In Thailand, where we operate through our consolidated subsidiary DTAC, we are exposed to uncertainty relating to the licensing system, the consequences of the build, operate and transfer regime applicable to mobile networks operated by private investors and uncertainty relating to restrictions on foreign investment in Thailand, in particular with respect to the cap on our direct ownership interest in DTAC. For additional information on these regulatory developments outside Norway, you should read “Item 4: Information about the Company”.
      Some of the emerging markets in which we operate are in the process of transition to market economies, stable political institutions and comprehensive regulatory systems. Overall, we expect the regulatory framework in most countries to converge with that of the European Union. However, some of the emerging market countries in which we operate lack the institutional continuity and strong procedural and regulatory safeguards typical of the more established countries in which we operate, such as Norway, Denmark and Sweden. In addition, in countries with a large and complicated structure of government and administration, such as Russia, national, regional, local and other governmental bodies may issue inconsistent decisions. As a result, in these emerging countries we are exposed to regulatory uncertainty, which could increase uncertainty for our business and our cost of regulatory compliance, and we enjoy less comprehensive protection for some of our rights.
Risks Related to Our Ownership by the Kingdom of Norway
We could be influenced by the Kingdom of Norway whose interest may not always be aligned with the interests of our other shareholders.
      As of March 31, 2006, the Kingdom of Norway holds 54.4% of our shares. Accordingly, the Kingdom of Norway continues to have the power to determine certain matters submitted for a vote of shareholders, including electing a majority of the corporate assembly which in turn has the power to elect our board of directors, as well as the power of approval of the annual financial statements and declarations of dividends. The interests of the Kingdom of Norway in deciding these matters and the factors it considers in exercising its votes could be different from the interests of our other shareholders.

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Risks Related to Our Ordinary Shares and the American Depositary Shares
The price of our ordinary shares and ADSs may be volatile and fluctuate significantly due to many factors, including variations in our operating results and changes to the regulatory environment.
      The trading price of our ordinary shares and ADSs could fluctuate widely in response to factors such as quarterly variations in our operating results, adverse business developments, interest rate changes, changes in financial estimates by securities analysts, announcements of technological or other developments by us or our major customers or competitors, changes to the regulatory environment in which we operate or the actual or expected sale of a large block of shares by the Kingdom of Norway.
An ADS holder may not be able to exercise voting rights as readily as an ordinary shareholder.
      Holders of ADSs may instruct the ADR depositary to vote the ordinary shares underlying the ADSs. However, in order to exercise their voting rights at meetings, holders of ADSs must instruct the ADR depositary to cause the temporary transfer of the underlying ordinary shares so as to register their ownership of such ordinary shares directly in our share register in the VPS (Norwegian Central Securities Depository System) prior to the meeting. In addition, the ADR holder must cause the delivery of such holder’s ADSs to a blocked account with The Depository Trust Company for the account of the ADR depositary and notify the ADR depositary that such ADSs are being held in a blocked account. The ADSs must remain in the designated account until the conclusion of the meeting at which such voting rights are to be exercised by the ADR depositary. There is no guarantee that you will receive voting materials in time to instruct the ADR depositary to vote and it is possible that ADS holders, or persons who hold their ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote.
ITEM 4: INFORMATION ON THE COMPANY
THE COMPANY
      We are the leading telecommunications company in Norway.
      We have substantial international operations, particularly in the area of mobile telephony.
      Telenor ASA is a public limited company organized under the laws of Norway.
      We were incorporated on July 21, 2000 and are subject to the provisions of the Norwegian Act relating to Public Limited Liability Companies. Our principal offices are located just outside Oslo at
  Snarøyveien 30,
  N-1331 Fornebu
  Norway.
      Our telephone number is +47 810 77 000.
      Our agent in the United States is Telenor Satellite Services Holdings Inc., 1101 Wootton Parkway, Rockville, Maryland.
OVERVIEW
      We are the leading telecommunications company in Norway, which is among the most advanced telecommunications markets in the world. Norway has either the highest, or one of the highest, penetration rates of mobile phone, fixed line digital telephony, personal computer and Internet usage worldwide. We also have substantial international operations, particularly in the areas of mobile telephony services, satellite operations and pay television services. In 2005, we had consolidated total revenues of approximately NOK 69 billion and profit after taxes attributable to equity holders of Telenor ASA (net income) of approximately NOK 8 billion.

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      Our predecessors and we have been responsible for telecommunications in Norway since 1855. We were established in 1994 as a limited liability company wholly-owned by the Kingdom of Norway. In December 2000, we completed our initial public offering, which reduced the ownership of the Kingdom of Norway to 79%, and our shares were listed on the Oslo Stock Exchange and the NASDAQ National Market. For additional information concerning our history, you should read “Item 7: Major Shareholders and Related Party Transactions — Relationship between Telenor and the Kingdom of Norway”.
Mobile operations
      We are the leading provider of mobile telecommunications services in Norway, with approximately 2.731 million subscriptions at December 31, 2005. Internationally, at December 31, 2005, we have interests in mobile operations in 11 countries, with principal investments in 9 operations, including:
  a 100% ownership interest in Sonofon in Denmark, with approximately 1.284 million subscribers;
 
  as of January 5, 2006, a 100% ownership interest in Vodafone Sweden, with approximately 1.7 million subscriptions, including Telenor Mobile Sweden.
 
  a 56.5% ownership interest in Kyivstar in Ukraine, with approximately 13.925 million subscriptions;
 
  a 100% ownership interest in Pannon GSM in Hungary, with approximately 2.929 million subscriptions;
 
  a 69.3% economic stake in DTAC in Thailand, with approximately 8.677 million subscriptions;
 
  a 61.1% ownership interest in DiGi.Com in Malaysia, with approximately 4.795 million subscriptions;
 
  a 62% ownership interest in GrameenPhone in Bangladesh, with approximately 5.542 million subscriptions
 
  a 100% ownership interest in Telenor Pakistan in Pakistan, with approximately 1.868 million subscriptions.
 
  a 100% ownership interest in ProMonte GSM in Montenegro, with approximately 310,000 subscriptions.
      In addition, we have participations in two other mobile operators in Europe. The number of subscriptions in our international mobile operations, calculated on the basis of our proportionate ownership interest in each company, was 41.4 million at December 31, 2005 and 22.1 million at December 31, 2004.
      In accordance with our strategy of strengthening our portfolio of international mobile operations by obtaining control of selected international mobile operations to maximize cross-border synergies and increase overall profitability, we made the following acquisitions in 2005:
  In October 2005, we entered into an agreement with Vodafone Group for the acquisition of its subsidiary Vodafone Sweden for EUR 1,035 million (NOK 8,170 million), including assumed debt. The acquisition was completed on January 5, 2006. In addition, we entered into a partner network agreement, allowing our customers to benefit from Vodafone’s global brand, products and services in Sweden.
 
  We increased our economic stake in Total Access Communication (DTAC) in Thailand to 56.9% in October 2005. Following transactions based on mandatory tender offers required under regulations in Thailand and Singapore, our economic stake in DTAC as at December 31, 2005 was 69.3%.
Telenor Fixed
      We are the leading provider of fixed network telecommunications services in Norway, offering a full range of services to residential, business and wholesale customers. As of December 31, 2005, we had approximately 1.089 million analog (PSTN) subscriptions in the residential and business markets. We also

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had, at December 31, 2005, approximately 509,000 digital, or integrated services digital network (ISDN) subscriptions and approximately 475,000 digital subscriber lines (xDSL) subscriptions.
      With the acquisition of Bredbandsbolaget and Cybercity in July 2005, we have taken a strong position in the growing broadband markets in Sweden and Denmark. Bredbandsbolaget is the second largest provider of broadband services in Sweden, offering a full “triple-play” of high-speed internet, VoIP and Internet Protocol (IP) television services on an all-IP fiber and xDSL network. Cybercity is the third largest supplier of broadband services in Denmark, providing xDSL-based internet access and voice services to both residential and business customers.
Telenor Broadcast
      We provide broadcasting services to customers in the Nordic region. We are the leading provider of television services in the Nordic countries through satellite dish, cable TV networks and satellite master antenna TV-networks systems. As at December 31, 2005, we had more than 3 million subscribers to our television services.
      We operate the national terrestrial broadcast network in Norway and we are the leading provider of satellite broadcasting services in the Nordic region, utilizing three geo-stationary satellites.
Other Businesses
      We conduct significant operations related to our core business areas through other businesses. EDB Business Partner, our 51.8% owned publicly listed subsidiary, is a leading information technology company in Norway. Our wholly-owned subsidiary Satellite Services offers satellite-based communications networks and services to a wide variety of governmental, intergovernmental and commercial organizations, and is one of the world’s leading providers of global mobile communications services, directed at the maritime, land mobile and aeronautical markets.
STRATEGY
      Our primary objective is to create greater value for our shareholders, customers, employees and partners, and for society in general. We strive to be a driving force in creating, simplifying and introducing communication and content solutions to the marketplace. In order to achieve this objective, we base our strategy on our customer oriented vision, “Here to Help” as well as our values, “Make it easy, Be respectful, Keep promises and Be inspiring”. We are committed to creating, developing and launching new solutions that simplify our customers’ workday. We believe that by simplifying our own organization and routines we can achieve competitive market power and value-creation.
      Indeed, our strategy to achieve our primary objective has the following focus:
  To strengthen the performance of our local mobile operations by combining Group industrialization with local drive and responsiveness.
 
  To maintain and further develop our leading position within telecommunications in the Nordic region with a broad range of services in both the residential and business markets and high market shares.
 
  To realize synergies across the Nordic region, primarily with respect to our mobile operations through our established Nordic unit, which comprises and coordinates our mobile and fixed operations in the Nordic region. By streamlining our Nordic operations, we aim at strengthening customer focus as well as cost-efficiency.
 
  To ensure value creation in our mobile portfolio by maximizing cash flow in mature markets, securing continued subscriber growth in our international companies with a particular emphasis on subscriber growth in emerging markets and achieving control in order to benefit from synergies across our international and domestic operations and as a result, to increase our overall profitability.
 
  To maintain and further develop a leading position within the Nordic TV distribution market.

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  To enhance the value of those companies which are not strategic for our main business areas and dispose of all or part of our interest in such companies.
      Our combined group of companies and services will form the basis for our future growth in both the short and long term. In order to achieve this growth objective, we aim to have a balanced presence in mature and emerging markets.
      We operate in an international market alongside global players. We focus on three geographical areas: the Nordic region, Central and Eastern Europe and Southeast Asia.
      Within our existing portfolio our activities are within mature markets and emerging markets. Our mature markets consist of activities in mobile, fixed, and broadcast operations. In emerging markets, our main focus is primarily within international mobile operations. We intend to constantly review, assess and evaluate which business is crucial for us to have control, to explore partnerships, and to develop new businesses.
      We are developing new services based on our experience in mature and emerging markets. We intend to coordinate product development and operations across our operations in order to provide greater competitive power through improved products and lower costs. We compete on the basis of a market and customer driven culture and organization, expertise, well-designed services, quality and the ability to innovate.
      We aim:
To strengthen our position as an international mobile operator.
      We intend to continue to strengthen our mobile industrialization mobile operations by obtaining control over selected mobile companies. Control is essential for us to benefit from cross-borders synergies, such as scale in procurement, to develop new services and implement best practices, to improve operational efficiency and to increase our overall profitability. We intend to manage our non-strategic investments as financial investments and to exit from international mobile operations where we cannot obtain control over time.
To strengthen our position in the Nordic region.
      We intend to continue to streamline our mobile and fixed operations in the Nordic region by exploiting the benefits resulting from economies of scale and cross-border synergies. We believe our Nordic presence will improve support to our customers by building upon our expertise in, and our range of, both mobile and fixed services.
To be the leading provider of communications services in Norway.
      Being the leader in a broad range of services in both the residential and business markets in Norway, we will seek to improve profit performance in the mobile and fixed areas by introducing new services and through a wide range of cost-cutting initiatives.
To continue to be the leading distributor of TV services to consumers in the Nordic region.
      We will continue to develop new opportunities to strengthen our strategic position as a leading distributor of subscription-based television in the Nordic region. We will focus on attracting new subscribers and increasing revenue per user by providing attractive content and new interactive services.
Organisation
      Since January of 2005, we have concentrated Telenor’s mobile and fixed activities in the Nordic region under one management unit in order to simplify and enable gains from coordination of operations. The objective of Telenor Nordic is to maintain our position in the Norwegian market, strengthen our position in the Swedish and Danish markets, increase efficiency of operations and secure a strong cash flow. In addition to the establishment of a common Nordic management and operations unit, we have two separate market units for the Nordic region (one for the business market and another for the residential market) which have been established to strengthen focus on local sales and marketing activities.

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      In 2005, Telenor also initiated a Group procurement program for the entire Telenor Group. The purpose of the procurement program is to contribute to profitability, quality, development and value creation. The Group procurement initiative intends to secure a predictable and adequate supply of equipment and services at the best achievable market rates and conditions.
      Telenor’s mobile commitments in Asia and Europe are becoming increasingly important to the Group. In January of 2006 we established Asia and Eastern/ Central Europe as separate areas of responsibility, with dedicated executive vice presidents, as we had previously done with Nordic operations. We strengthened Asia and Eastern/ Central Europe by appointing two of our most experienced executives. Arve Johansen will head Telenor’s commitments in Asia, and Jan Edvard Thygesen will head the Group’s commitments in Eastern/ Central Europe. Both Johansen and Thygesen are experienced members of our group management.
      Two new members have joined our Group Executive Management as we further strengthen our efforts for greater coordination. Executive Vice President Ragnar H. Korsæth will be responsible for global coordination and for the extraction of synergies between the mobile operations. Executive Vice President and Head of Group Human Resources, Bjørn Magnus Kopperud, will further strengthen our coordinated efforts through operational and human resources across countries where we have business activities. Both of these individuals possess extensive experience within their respective fields.
MOBILE OPERATIONS
Overview
Definitions
      In the overview of our mobile operations, and the discussions of each consolidated subsidiary and associated company, the following terms, unless otherwise defined, have the meaning specified:
      Subscriptions. The number of subscriptions at the end of any given period is the number of contract and prepaid services subscribed to by our customers at that time provided, however, that we only include prepaid customers who have reloaded their Subscriber Identity Module (SIM) card or had incoming or outgoing traffic during the last three months. A customer may subscribe to more than one subscription service at the same time.
      Churn. Churn, which measures customer turnover, is calculated as total gross disconnections from our network in any particular period divided by the average number of customers in the period. Disconnections include both voluntary disconnections (customer who terminate their service or switch to a competing service) and involuntary disconnections (customers whose service is terminated due to non-payment).
Mobile Operators
      We are the largest mobile telecommunications operator in Norway and a significant international operator, with a number of investments in mobile telecommunications companies outside Norway. As at December 31, 2005, we had subsidiaries in Norway, Denmark, Hungary, Ukraine, Thailand, Malaysia, Bangladesh, Pakistan, Montenegro and Sweden and owned a minority interest in two other international mobile operations.
      In accordance with our strategy of strengthening our portfolio of international mobile operations by obtaining control of selected international mobile operations, and in order to maximize the benefit of cross-border synergies and increase overall profitability, we made the following acquisitions in 2005:
  In October 2005, we entered into an agreement with Vodafone Group for the acquisition of its subsidiary Vodafone Sweden for a consideration of EUR 1,035 million (NOK 8,170 million), including the assumption of debt. The acquisition was completed on January 5, 2006. In addition, we entered into a partner network agreement, allowing our customers to benefit from Vodafone’s global brand, products and services in Sweden.

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  With effect from October 26, 2005, we increased our economic stake in Total Access Communication (DTAC) in Thailand to 56.9%. Following transactions based on mandatory tender offers in connection required under regulations in Thailand and Singapore, Telenor’s economic stake as of December 31, 2005 was 69.3%.
      You should read note 1 to our consolidated financial statements for additional information on the transactions mentioned above.
  Our mobile commitments in Asia and Eastern/ Central Europe are becoming increasingly important to us and we have now established dedicated Executive Vice Presidents for these operations. In addition, we have strengthened the co-ordination of operational and human resources across all countries in which we have operations with two new Executive Vice Presidents in the Group Management.
      The following table provides an overview of the principal investments in our mobile operations during the periods and for the dates specified below as of December 31, 2005.
                             
        Date of Commencement   Date of Initial   Ownership
Company   Market   of Operations(1)   Investment   percentage
                 
Subsidiaries
                           
Telenor Mobil
  Norway     May 1993               100.00  
Sonofon
  Denmark     July 1992       2000       100.00  
Telenor Mobile
                           
Sweden
  Sweden     June 2001       2001       100.00  
Kyivstar GSM
  Ukraine     October 1997       1998       56.51  
Pannon GSM
  Hungary     March 1994       1993       100.00  
DTAC(2)
  Thailand     July 1992       2000       69.30  
DiGi.Com
  Malaysia     May 1995       1999       61.00  
GrameenPhone
  Bangladesh     March 1997       1997       62.00  
Telenor Pakistan
  Pakistan     March 2005       2004       100.00  
ProMonte GSM
  Montenegro     July 1996       1996       100.00  
Associated Companies
                           
VimpelCom
  Russia/Other     June 1994       1999       29.91  
    countries                        
ONE
  Austria     October 1998       1997       17.45  
 
(1) Dates company commenced operations to provide commercial mobile services.
 
(2) As of December 31, 2005 Telenor’s combined direct and indirect interests in UCOM was 86.2% and in DTAC was 75%, which includes UCOM’s 41.6% economic interest in DTAC.
     We expect each of our international investments, including our associated companies, to benefit from the products, services and technical expertise which we have developed, and are continuing to develop, in the Telenor Group. For this purpose, we have seconded key managerial, technological and marketing personnel to Kyivstar, Pannon GSM, DTAC, DiGi.Com, GrameenPhone, Telenor Pakistan, and ProMonte. Our personnel assist local management in achieving rapid network roll-out, good network quality and sound marketing strategies as well as transferring of operational skills and best practice.
      In 2005, we successfully realized a number of cross-border synergies within our organization. We have successfully implemented common technologies for optimal spectrum and network utilization in each of our companies, and are focusing on the use of new technologies to improve service quality and reduce costs. In order to harmonize our approach to our customers across the markets, we developed a common segmentation model that enables a more effective target market execution so we can gain greater insights about our customers globally. We have developed a framework that provides our affiliates with a proven concept of developing targeted segment offerings and optimizing go-to-market strategies. In addition, we are presently implementing a common system and platform, CSF (Common Services Framework), for service delivery and developments. Following the recent launch in Telenor Pakistan in 2006, our youth brand “djuice” is now in Norway, Sweden, Hungary, Ukraine, Bangladesh and Pakistan.

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Alliances and Associations
      In October 2003, nine leading independent mobile operators formed the Starmap Mobile Alliance to provide seamless and enhanced voice and data solutions for business and consumer customers across Europe. There are currently eleven members of the Starmap Mobile Alliance, including our subsidiaries Telenor Mobil, Sonofon, Pannon GSM and our associated company ONE. Participation in the Starmap Mobile Alliance enhances the ability of these mobile operators to offer subscribers who are abroad the full range of services that they enjoy while in their home country. We continue to be committed to successfully reaping the benefits of the alliance.
      In addition, we are a member of the GSM Association (GSMA) which was established to provide leadership on a wide range of commercial and strategic matters on behalf of Global System for Mobile Communications (GSM) mobile operators around the world. The mission of GSMA is to promote the interests of GSM mobile operators, and to represent its members with one voice on a wide variety of national, regional and global issues. We play an active role in several GSMA initiatives, such as the initiatives to reduce prices for low cost terminals in emerging markets.
Customers
      As of December 31, 2005, we had a total of 41.4 million mobile subscriptions calculated on the basis of our proportional ownership interest in each company. The following table provides information relating to subscriptions for each of our mobile operations as of December 31, 2005.
                                             
        Mobile   Market Share       Growth in    
        Telephony   Based on   Total   Subscriptions   Prepaid
Company   Market   Penetration(1)   Subscriptions(1)   Subscriptions   From 2003   Share
                         
        (%)   (%)   (thousands)   (%)   (%)
Subsidiaries
                                           
Telenor Mobil
  Norway     107       56       2,731       3       45  
Sonofon
  Denmark     89       27       1,284       1       33  
Telenor Mobile
                                           
Sweden(2)
  Sweden     110       1       95       (10 )     51  
Kyivstar GSM
  Ukraine     64       46       13,925       123       93  
Pannon GSM
  Hungary     87       34       2,929       6       65  
DTAC
  Thailand     47       28       8,677       11       83  
DiGi.Com
  Malaysia     73       25       4,795       48       93  
GrameenPhone
  Bangladesh     6       62       5,542       132       93  
Telenor Pakistan
  Pakistan     13       9       1,868       n.a.       98  
ProMonte GSM
  Montenegro     88       58       310       11       85  
Associated companies(3)
                                           
VimpelCom(4)
  Russia     87       34       43,097       68       97  
    Other countries     n.a.       n.a.       2,317       n.a.       98  
ONE
  Austria     103       20       1,664       11       53  
 
(1)  Based on our and the local regulatory authorities’ estimates unless otherwise stated.
 
(2)  Figures do not include subscriptions for Vodafone Sweden, which we acquired on January 5, 2006.
 
(3)  All information for associated companies is based on figures published by the companies unless otherwise stated.
 
(4)  Based on 6 months churn for prepaid.

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Licenses and Networks
      Each of our mobile companies are dependent on the licenses they hold to operate mobile telecommunications services. The table below summarizes the significant licenses held and network types operated by our mobile operators as of December 31, 2005.
                                     
                Licence    
            Licence   Expiration   Licence
Company   Licences   Network Type   Granted   Date   Duration
                     
Telenor Mobil
  GSM 900   GSM/GPRS/EDGE     1992       2017     Extended 2006 to 2017
    GSM 900         2001       2013       12 yrs  
    GSM 1800         1998       2010       12 yrs  
    UMTS   W-CDMA     2000       2012       12 yrs  
Sonofon
  GSM 900   GSM/GPRS     1997       2012       15 yrs  
    GSM 1800         1997       2007       10 yrs  
    GSM 1800         2000       2010       10 yrs  
    UMTS   W-CDMA     2005       2021       16 yrs  
Kyivstar GSM(1)
  GSM 900   GSM/GPRS     1997       2012       15 yrs  
    GSM 1800         2001       2016       15 yrs  
Pannon GSM
  GSM 900   GSM/GPRS/EDGE     1993       2008       15 yrs  
    GSM 1800         1999       2014       15 yrs  
    UMTS   W-CDMA     2004       2019       15 yrs  
DTAC(2)
  AMPS 800   AMPS     1990       2018     Extended 1996 to 2018
    GSM 1800   GSM/GPRS     1990       2018          
DiGi.Com(3)
  GSM 1800   GSM/GPRS/EDGE     2000       2015       15 yrs  
    EGSM                            
GrameenPhone
  GSM 900   GSM     1996       2011       15 yrs  
    GSM 1800                            
Telenor Pakistan
  GSM 900   GSM/GPRS/     2004       2019       15 yrs  
    GSM 1800         2004       2019       15 yrs  
    LDI   LDI     2004       2024       20 yrs  
ProMonte
  GSM 900   GSM/GPRS     2002       2017       15 yrs  
    GSM 1800         2002       2017       15 yrs  
Associated companies:
                               
VimpelCom:(4)
                               
 
Moscow
  GSM 900/1800   GSM/GPRS     1998       2008       10 yrs  
 
Central and Central Black Earth
  GSM 900/1800   GSM/GPRS     2000       2008       8 yrs  
 
North-Caucasus
  GSM 900/1800   GSM/GPRS     2000       2008       8 yrs  
 
North and North-West
  GSM 900/1800   GSM/GPRS     2002       2012       10 yrs  
 
Siberia
  GSM 900/1800   GSM/GPRS     2000       2008       8 yrs  
 
Ural
  GSM 900/1800   GSM/GPRS     2002       2012       10 yrs  
 
Ural (whole Ural
                               
   
Territory)
  GSM 1800   GSM/GPRS     2002       2012       10 yrs  
 
Volga
  GSM 900/1800   GSM/GPRS     2002       2008       8 yrs  
ONE
  GSM 1800   GSM/GPRS     1997       2017       20 yrs  
    UMTS   W-CDMA     2000       2020       20 yrs  
 
(1) In addition to the operating licenses, Kyivstar holds a number of regional frequency licenses.
 
(2) Rather than a license, DTAC has the right to operate a mobile network pursuant to a concession.
 
(3) Rather than a license, DiGi.Com holds the right to operate a mobile network (“Spectrum allocation”).
 
(4) In addition, VimpelCom also holds several GSM/ AMPS/ D-AMPS licenses in other regions and countries.

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GSM
      As set out in the table above, each of the mobile companies holds a license to offer mobile telecommunications services on a GSM network, on which all companies but GrameenPhone also provide General Packet Radio Service (GPRS). GPRS has two main advantages over GSM: an “always on” environment and higher data transmission speed. In addition, each of our GSM networks is compatible with Enhanced Data GSM Environment (EDGE), which allows for further increased data transmission speeds.
UMTS
      Third generation (3G) products and services based on United Mobile Telecommunications Service (UMTS) UMTS technology will allow for even faster and more efficient data transmission than GPRS and EDGE. We currently hold UMTS licenses in Norway, Sweden, Denmark, Hungary and Austria. We launched 3G services based on UMTS in Austria in December 2003 and in Norway in December 2004. Vodafone Sweden launched 3G services for data in February 2004 and 3G services to the consumer market in November 2004. Pannon GSM plans to launch UMTS-based services in Hungary in early 2006 and Sonofon plans to launch UMTS-based services in Denmark during 2006. Each of our UMTS license-holders will offer UMTS-based services using the Wideband Code Division Multiple Access (W-CDMA) standard. In markets in which UMTS licenses have yet to be issued, or in which we have not acquired a UMTS license, we will evaluate the possibility of participating in additional UMTS license allocation procedures on a case-by-case basis. We will also explore the possibility of providing UMTS-based services on a service provider or MVNO basis in those countries in which we do not acquire a UMTS license.
Wireless LAN
      Telenor Mobil, in Norway, began offering wireless local area network (Wireless LAN) services in 2002. By using these services, companies may allow employees and authorized corporate partners to maintain a high-speed wireless connection to e-mail and the Internet on laptop computers and personal digital assistants while they are away from the office (or any partner site). In addition, Telenor Mobil has installed several “hot spots” throughout Norway, which provide mobile broadband access and data communication service to subscribers over a public access Wireless LAN. We view public access Wireless LAN as an important aspect of offering a complete data connectivity solution to our customers and, consequently, more of our companies are expected to launch Wireless LAN services in the future. We are continuing to study the emerging technologies in this area and will, if and when applicable, include emerging technologies in our Wireless LAN service offerings.
Network Development
      Each of our companies’ networks has been designed to provide for high levels of coverage, capacity, quality and reliability. We use redundant network structures to achieve the required reliability, and utilize state-of-the art systems and supervision technology to manage operations on an around-the-clock basis.
      We believe further development and improvement of our networks to be an ongoing and important part of our strategy. Our companies are continuing to build new base stations, add capacity to existing base stations and update the technology and functionality of existing networks in order to meet customer demands regarding coverage, capacity, quality and reliability. In order to facilitate network development across our mobile operations, each of our companies is involved in the development of common standards and guidelines for network developments. All network development will be in accordance with the international standardization ongoing in the relevant fields.
      Our mobile companies acquire network equipment from a number of international suppliers, including Ericsson, Nokia Siemens and Alcatel. We purchase equipment from multiple sources to spread technology risk and to retain influence over the development of new technology-related features. We are not dependent on any one supplier for the provision of network equipment.

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Products and services
      Each of our operators offers products and services to both the consumer segment and the business segment. We aim to offer high quality and advanced services to satisfy the mobile telecommunications needs of specific segments in both the consumer and business market in order to attract new customers, increase revenue per customer and create customer loyalty. Key products and services currently offered by our mobile operators include the following:
Voice services
      Revenues from voice services include traffic charges, interconnection fees, and roaming charges. For each of our companies, revenues from voice services make up the largest part of total revenue. As a consequence, we are continuing to focus on developing new products and services and initiatives that are intended to increase our customer base and encourage growth in usage of these services.
      Two important factors that affect both a customer’s choice of operator and usage patterns are tariff plans and network quality. Each of our subsidiaries offers a variety of prepaid and contract tariff plans that are intended to attract new customers and increase usage among targeted segments. In addition, each company continues to invest in improving network quality and coverage, thereby enabling customers to use voice services at all times. Each company also offers a range of value-added services, such as voicemail, mobile phonebooks and missed call notification, which have been shown to increase usage by mobile phone users. Other value-added voice services that our companies offer include call waiting, call forwarding, caller identification and itemized invoicing. We have also developed value-added voice services targeted specifically at the business segment. For example, Wireless PABX, which is offered by Telenor Mobil, Pannon GSM and Sonofon, is a mobile-based service that replaces the customer’s traditional fixed line switchboard.
      A less advanced solution — Closed User Group (CUG) solutions — is implemented in most operations. Our products and services are packaged, distributed and promoted efficiently towards our target customers, gaining more and more attention in the local market places (e.g. MTV power pack from Digi.Com).
Data services
      SMS and MMS. Each of our companies offers Short Messaging Services (SMS), which enable customers to send and receive short text messages using their mobile phones, and all but one (GrameenPhone) offer Multimedia Messaging Services (MMS), which enable customers to transmit graphics, video clips, sound files and short text messages over wireless networks using the Wireless Application Protocol (WAP). Other than GrameenPhone, all of our operators currently offer a WAP portal to customers.
      Content services. All our operators have implemented Telenor’s Content Provider Access (CPA) platform, which enables external content providers to supply content to our customers. Examples of content that can be provided to customers using this service include ring-tones and music, logos, pictures, Java-based games and directory enquiries. Content providers are responsible for the quality, pricing and marketing of content. Payment is made through the phone bill and a share of this is given to the content provider according to the operator’s “pricelist”.
      Internet/intranet access. As discussed above, all our companies (except GrameenPhone) offer a WAP portal which enables customers to access a number of web-based services such as news and weather. We are constantly seeking to improve the WAP portal in order to offer customers a higher quality and broader range of content. Telenor Mobil, Pannon GSM and VimpelCom offer software for easy connection to Internet via PC card. A common mobile email solution was launched across the Group in 2005, with commercial launch in VimpelCom, Pannon GSM, Telenor Mobil, DTAC and Digi.Com. The solution allows all customers to access their business email on the mobile phone.
      mCommerce. Several of our affiliates offer mCommerce services to their customers. Utilizing a public key infrastructure (PKI) secure payment system, mCommerce allows direct access from a mobile phone to a bank account. Customers may use mCommerce to top-up their prepaid subscriptions or purchase products, goods and services from companies and vendors who provide mobile commerce.

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Interconnection
      All of our mobile companies provide direct and indirect interconnection, in accordance with local regulations, to their respective networks for calls to and from domestic and international operators of public telephony. Our companies also have various agreements with other operators whose networks interconnect directly with ours, pursuant to which we receive fees for terminating incoming calls and pay fees for calls from our network to other operators’ networks.
International Roaming
      Each of our mobile companies has entered into international roaming agreements with a large number of telecommunications operators. These agreements allow our companies’ subscribers to make and receive calls on other networks when traveling abroad. The agreements also allow visitors to our companies’ networks from abroad to make and receive calls. Our companies charge an agreed fee to the respective home networks based on the duration of the calls made or received.
      Today, many of these roaming agreements enabling voice calls and SMS are accompanied by an agreement to enable our customers to use GPRS/ EDGE data services while traveling. Following the launch of 3G UMTS networks in many countries, especially in Europe, several operators have opened their networks to allow 3G roaming, enabling customers of Telenor Mobil, Vodafone Sweden, Pannon GSM and ONE to access their 3G services while abroad.
Wholesale services
      In Norway, we sell network capacity to both Mobile Virtual Network Operators (MVNOs) and service providers, and in Denmark we sell to service providers only. Both MVNOs and service providers sell mobile telephone service under their own brand name without controlling radio spectrum or radio network facilities. MVNOs purchase radio spectrum and access to core network components, but keep control over all other aspects of the service, including traffic routing and SIM card production. Service providers, however, buy a broader range of products and services, including SIM cards. Both MVNOs and service providers are responsible for customer service, marketing, invoicing and sales. Outside of the Nordic region, service providers and MVNOs are not currently present in the markets in which our mobile companies operate.
Marketing
      As a general matter, each of our mobile investments operates under its own brand. Our affiliate in Pakistan operates under the Telenor brand. At present, the only exception to this strategy is the “djuice” brand, a brand that is targeted at the youth segment and which includes products and services, such as special tariff plans, that are tailored to this segment’s needs. To date, djuice has been launched in Norway, Sweden, Hungary, Ukraine and Bangladesh.
      Similarly, each of our mobile operators is largely responsible for local marketing initiatives. The most notable exception to this general approach is the Nordic Mobile Unit, which is developing a shared product and service portfolio enabling a common marketing approach and swift reuse of proven concepts for our subsidiaries in Norway, Sweden and Denmark. In addition, our mobile companies have developed and implemented a common segmentation model in order to align market offerings and create synergies through common customer segment concepts (such as the djuice brand described above).
Telenor Mobil — Norway
      Our wholly-owned subsidiary Telenor Mobil AS (Telenor Mobil) is the leading provider of mobile telecommunications services in Norway. Telenor Mobil offers a broad range of digital services to the Norwegian corporate and consumer market and has extensive experience in providing mobile services and operating mobile communication networks in Norway.
      Telenor currently holds three licenses for the provision of GSM-based services in Norway (two GSM 900 licenses and one GSM 1800 license). In connection with the discontinuation of Nordic Mobile

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Telephone - 450 (NMT-450) services on December 31, 2004, we have increased GSM coverage along the Norwegian coast and in some mountain areas by utilizing extended cell technology, which more than doubles the range of coverage. Our GSM network currently covers 99.8% of Norway’s population. Upgrade to EDGE technology started in June 2004, and within the first quarter of 2006, Telenor Mobil will use EDGE technology on all GSM-900 sites in Norway. Telenor Mobil was the first Norwegian mobile operator to offer UMTS-based services on December 1, 2004.
      Telenor Mobil launched UMTS-based services on December 1, 2004 with a geographic coverage to the homes of approximately 2.4 million people (more than 50% of Norway’s population) with a minimum bit rate of 128 kbit/s (compared to a bit rate of approximately 40 kbit/s in the GSM/ EDGE network). As of March 1, 2006, our UMTS coverage was approximately 70.6% of the population with a minimum bit rate of 128 kbits/s. We are required by the regulator to provide such services to approximately 3.75 million people (approximately 80.9% of the population) by March 1, 2007, including 3.2 million with a bit rate of up to 384 kbit/s.
      The first of our two licenses in the GSM 900 band, which was due to expire on November 1, 2005, has been renewed until December 31, 2017. The renewal of the license involved capital expenditures of NOK 186 million.
Products and services
      Telenor Mobil is the leading provider of digital mobile telephony services in Norway. Although Telenor Mobil intends to continue developing and improving non-voice services, we anticipate that the bulk of Telenor Mobil’s revenues will continue to come from voice services. We are therefore committed to improving existing voice services and developing new voice services to meet the needs of retail customers in all segments, including the corporate segment.
      In addition to voice services, Telenor Mobil offers a broad range of advanced non-voice services to its retail subscribers, including SMS, MMS, content services, mobile Internet/intranet, e-mail access, mCommerce and video telephony.
      In addition to providing voice and non-voice services to retail subscribers, Telenor Mobil also offers wholesale services to Mobile Virtual Network Operators (MVNOs), national roaming and service providers. MVNOs and national roaming providers only purchase access to network capacity, while service providers also purchase other services, such as SIM card production. Telenor Mobil also has a national roaming agreement with Teletopia.
Marketing and distribution
      The Norwegian market is a highly developed and competitive market. Following the introduction of mobile number portability in November 2001, the mobile market has seen increased churn levels, consolidation among service providers and increased marketing efforts by various providers targeting both low and high value segments. In recent years, Telenor Mobil’s marketing and distribution efforts have become increasingly customer segment-oriented in order to ensure strength in both the business and consumer markets. During 2005, Telenor launched a new contract subscription portfolio for the consumer market. The portfolio is targeted towards all of our customer segments by including a variety of subscription plans differentiated according to minutes used and messages sent.
      During 2005, Telenor Mobil continued to focus its efforts on churn reduction, particularly with respect to its most valuable customers. As a part of this effort, Telenor Mobil has implemented specific “holdback” and “winback” activities such as reducing selected prices and simplifying mobile tariffs. Other marketing initiatives have focused on improving network quality and customer service levels.
      Telenor Mobil distributes its mobile telecommunications services through its own retail stores, the Internet and independent distributors. The total number of distribution outlets was approximately 12,000 at December 31, 2005. All of Telenor Mobil’s distribution outlets offer prepaid cards, while approximately 1,300 offer contract subscriptions. In addition, prepaid cards can now be purchased in kiosks, petrol stations

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and supermarkets across Norway. ATMs and mCommerce may also be used to recharge prepaid accounts, in addition to prepaid cards.
Customers
Retail
      Since 2001, growth in total subscriptions in the Norwegian mobile market has slowed down due to a high market penetration rate and increased competition from other network operators and service providers. Despite increased competition and slowed growth in total subscriptions in the market, Telenor Mobil continued to increase its subscription base during 2005. The increase is larger in Telenor Mobil’s contract segment compared to its prepaid segment.
      As of December 31, 2005, Telenor Mobil had approximately 2.73 million subscriptions for digital mobile telephone services in Norway, which represent approximately 56% of the total market in Norway. Telenor Mobil’s estimated net growth in new digital subscriptions was 108,000.
      The table below shows selected subscription data for Telenor Mobil’s retail services (both digital and analog) on the dates specified.
                             
    Year ended December 31
     
    2003   2004   2005
             
Mobile subscriptions (period end, 000s):
                       
Digital
                       
 
Contract
    1,228       1,395       1,509  
 
Prepaid
    1,099       1,228       1,232  
Analog
    37       22        
                   
   
Total
    2,364       2,645       2,731  
                   
Subscriptions through service providers and MVNOs
    487       540       660  
Mobile Telephony Penetration in Norway
    90 %     102 %     107 %
Churn rates for contract subscriptions
    21 %     15 %     21 %
      Although Telenor Mobil remains the leading mobile service provider in Norway, it is facing increased competition from other network operators and service providers, some of which have a service provider arrangement with Telenor Mobil to use its network. Telenor Mobil’s increase in churn from retail subscribers in 2005 is mainly due to the change in minimum contract period in 2004 from 18 months to 12 months, providing for a high number of expiring contracts in the late summer of 2005.
Wholesale
      Telenor Mobil currently has 7 service provider agreements. The service providers use Telenor Mobil’s network to offer mobile services in the market. It is the service provider’s responsibility to handle customer services, invoicing, marketing, and sales to the end user. They use their own branding, can bundle products and set their own prices.
      During the past year, there has been substantial consolidation in the service provider market. Ventelo has acquired several service providers operating on Netcom’s network and has moved their traffic to Telenor Mobil’s network. Telenor Mobil’s largest service provider, Chess, has been bought by TeliaSonera and our service provider contract with Chess has been terminated. Chess’s traffic will be moved to Netcom’s network during 2006.
      In addition to service provider agreements, Telenor Mobil offers MVNO agreements. Tele2 has been operating as an MVNO on Telenor Mobil’s network since 2003, and Ventelo and TDC have in the first

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quarter of 2006 signed MVNO agreements and are expected to launch mobile virtual networks services on Telenor Mobil’s network in 2006.
      Both service providers and MVNOs have access to Telenor Mobil’s GSM and UMTS network.
Traffic
      The following table sets forth selected traffic data for Telenor Mobil’s retail subscriptions. Digital data includes both contract and prepaid traffic in each of Telenor Mobil’s digital networks, while analog data includes customers in Telenor Mobil’s NMT networks (NMT 450 up until December 2004).
                         
    2003   2004   2005
             
Traffic:
                       
Digital
                       
Total outgoing traffic (in million of minutes)
    3,048       3,438       3,908  
Total incoming traffic (in million of minutes)
    1,832       1,939       2,017  
Average monthly incoming and outgoing traffic (minutes per digital subscription)
    176       184       184  
Number of outgoing SMS, MMS and content messages (in millions)
    2,409       2,785       3,459  
Analog
                       
Total outgoing traffic (in million of minutes)
    36       23        
Total incoming traffic (in million of minutes)
    14       9        
      Total outgoing traffic has increased in 2005 compared to 2004 due to the increased number of subscriptions and increased outgoing minutes per user. Total incoming traffic has increased in 2005 compared to 2004 due to the increased number of subscriptions, partly offset by decreased incoming minutes per user. Average minute per user was stable in 2005 compared to 2004. Total SMS, MMS and content message increased in 2005 compared to 2004 due to the increased number of subscriptions and increased number of messages per user.
Competition
      As of December 31, 2005, Telenor Mobil had a share of 56% in the mobile telephone subscriptions market in Norway. Our main competitor is NetCom, a wholly-owned subsidiary of TeliaSonera, with a market share of 26% as of December 31, 2005. The third GSM network operator in Norway is Teletopia, with a market share of less than 1%. In addition, there were 21 service providers and one mobile virtual network operator (Tele2) in the Norwegian mobile telephone market as of December 31, 2005.
      Three operators currently hold UMTS licenses in Norway: Telenor Mobil, NetCom and Hi3G. NetCom launched UMTS-based services in March 2005. Hi3G has not announced any plans to launch UMTS-based services.
      Telenor Mobil competes primarily on the basis of price, quality of network service, quality of customer service and the range of advanced products and services offered. Telenor Mobil believes that it has been able to sustain its high market share primarily through new market offers and by focusing on customer care.
Regulatory matters
      Current Norwegian telecommunications regulations impose cost-oriented pricing requirements on mobile network operators with significant market power in the national market for interconnection. Both NetCom and Telenor Mobil have been found to have significant market power in this market.
      In September 2005, the Norwegian regulatory authorities decided to reduce interconnection charges in the Norwegian market for mobile telephony. Prior to the decision, the interconnection charges consisted of a call set up charge of NOK 0.20 and a charge per minute of NOK 0.63. From November 1, 2005, we were instructed to reduce our interconnection charges, including set-up charges, by NOK 0.05 to NOK 0.68. From

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July 1, 2006, a further adjustment of Telenor Mobil’s interconnection charges of NOK 0.03 will reduce our charges to NOK 0.65. Telenor Mobil has appealed the decision, and enforcement has been temporarily suspended until a final decision is made.
      A new national legislative framework for the electronic communications sector was adopted in 2003 and 2004. In accordance with the new framework, the Norwegian Post and Telecommunications Authority is conducting an analysis of competition in the relevant national markets and will determine whether to impose, maintain, amend or withdraw obligations on undertakings that were found to have significant market power. For a further discussion of regulatory issues affecting Telenor Mobil, you should read “— Regulation”.
Sonofon — Denmark
      Telenor’s fully-owned subsidiary, Sonofon, is the second largest mobile operator in Denmark (as measured by number of subscriptions), with an estimated market share of 26.6%.
      Sonofon currently holds 4 licenses: a GSM license, two GSM 1800 licenses and, from December 2005, a UMTS license acquired for NOK 574 million, of which NOK 143 million was paid in 2005 and the remaining amount in ten annual installments. Under the terms of the UMTS license, our network coverage must exceed 30% of the population by 2009 and 80% of the population by 2013.
Products and services
      Sonofon’s mobile communications business offers voice traffic and value added services (non-voice services) to customers in both the consumer and business segment. Non-voice services include SMS and MMS, mobile Internet access via WAP and content services. Content provided exclusively to Sonofon subscribers pursuant to arrangements with partners is an important point of differentiation between Sonofon and our competitors. In 2005, Sonofon strengthened its mobile data concept targeted at the business segment by providing business customers access to the corporate network on their mobile phones.
      In addition to offering voice and non-voice services on a retail basis, Sonofon also offers wholesale mobile network services to a number of service providers, most notably Debitel Denmark, and to an MVNO (Tele2).
      We expect to launch 3G services in major Danish cities to business consumers during 2006. Subsequently, we will launch 3G services to retail consumers.
Marketing and distribution
      Sonofon aims to protect its market position as the second leading mobile operator by offering a range of simplified and user-friendly products and services. During 2005, we increased our efforts to improve the customer base by increasing average revenue per user per month (ARPU) and average minutes per user per month (AMPU) and decreasing churn. The focused efforts have been successful as customer and traffic figures below indicate. Initiatives including packaged offers and flat rate products have been an important reason for the significant growth in traffic experienced in 2005. Focused customer relationship management activities have helped to bring the churn rate to a historically low level.
      An increasingly important segment in Denmark is the youth segment, which tends to use the Internet, both as a means of purchasing subscriptions and as a means of accessing customer service more than other segments. Increased emphasis is placed on marketing competitive web-based products and services. At the beginning of 2006, we launched packaged solutions aimed at the youth segment.
      Sonofon’s primary distribution avenues are its own retail chain (“Sonofon Partner”, which covers all of Denmark) and external distributors. Among external distributors, Sonofon concentrates on distribution chains with the best coverage of its target segments. To strengthen its long-term distribution, Sonofon has recently begun to develop alternative channels of distribution, including web based distribution.

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Customers
      The following table sets forth selected subscription data for Sonofon on its GSM network:
                             
    Year ended December 31
     
    2003   2004   2005
             
Mobile subscriptions (period end, 000s):
                       
Digital
                       
 
Contract(1)
    772       813       859  
 
Prepaid(2)
    238       462       425  
                   
   
Total own subscriptions
    1,010       1,275       1,284  
                   
 
Subscriptions through service providers
    407       185       216  
 
Fixed-line customers(3)
    448       461       127  
Mobile Telephony Penetration in Denmark
    82 %     88 %     89 %
Churn rates for contract subscriptions
    38.6 %     33.1 %     24.4 %
 
(1) Contract subscriptions for the year end 2004 have been adjusted. SIM-cards used for telemetric applications are now excluded from the figures.
 
(2) The number of prepaid subscribers for the years ending 2004 and 2005 includes subscribers of CBB Mobil, a service provider which Sonofon acquired during 2004. CBB Mobil has continued to operate under its own name and brand.
 
(3) Figures from 2003 and 2004 are not comparable with 2005 figures as the method of calculation was adjusted in 2005 from the number of phone numbers published to the number of fixed lines actually sold.
Traffic
      The following table sets forth selected traffic data for Sonofon retail customers. The data refers to traffic generated by both contract and prepaid customers.
                         
    2003   2004   2005
             
GSM
                       
Traffic(1):
                       
Total outgoing traffic (in millions of minutes)
    1,027       1,192       1,679  
Total incoming traffic (in millions of minutes)
    701       826       1,013  
Average monthly incoming and outgoing traffic — (minutes per digital subscription)
    145       148       179  
Number of outgoing SMS and content messages (in millions)
    809       1,273       1,755  
 
(1) Data for 2004 and 2005 includes traffic generated by CBB Mobil subscriptions.
      Sonofon has experienced a significant traffic growth from retail customers from 2004 to 2005 with a 41% growth in outgoing traffic and 23% growth in incoming traffic. Improvement of the customer mix and introduction of flat rate products and package solutions has also led to a 21% increase in AMPU. Similar growth has occurred for outgoing SMS and content messages with a 38% increase in 2005 compared to 2004.
Competition
      In addition to Sonofon, there are two other GSM network operators in Denmark: TDC Mobil and TeliaSonera DK. UMTS licenses are currently held by Sonofon, TDC Mobil, TeliaSonera and Hi3G. Sonofon acquired a UMTS license for Danish Krone (DKK) 533 million in December 2005 in the re-auctioning of a

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UMTS license that had been handed back to the National IT and Telecom Agency (NITA) by TeliaSonera following its takeover of Orange Denmark in 2004.
      Taking into account the retail subscriptions of Sonofon and CBB Mobil, Sonofon had an estimated 26.6% market share as of December 31, 2005. Our main competitors are TDC Mobil, with an estimated market share of 41.1%, and TeliaSonera, with an estimated market share of 21.2%. Hi3G had an estimated market share of 2.3%.
Regulatory matters
      Sonofon has been designated as having significant market power (SMP) in the Danish mobile communications market, and as a consequence is subject to a number of obligations in regards to mobile access and mobile termination, including the obligation to meet all reasonable requests for interconnection agreements on transparent, objective and non-discriminatory terms. Furthermore, accounting separation is mandatory and interconnection agreements have to be made publicly available. Currently, no cost obligations apply to either mobile access or mobile termination charges.
      Following the market analysis as provided by EU Framework, the Danish regulatory authorities in January 2006 decided to reduce the interconnection charges in the Danish market for mobile telephony. From May 1, 2006, Sonofon is required to reduce its interconnection charges, including set-up charges, from the current DKK 0.94 to 0.96 range to DKK 0.84. From May 1, 2007, the interconnection charges will be reduced further to DKK 0.72 and, from May 1, 2008, to DKK 0.62. Sonofon has decided to appeal the decision.
      With respect to the market for mobile access, The NITA has published its final decision withdrawing all existing obligations on this area. The decision comes into effect on September 1, 2006.
      In November 2005, the Prime Minister’s office published a plan of action against terrorism in Denmark. Implementing the plan may lead to increased operating costs for the Danish telecommunications industry. If requirements in the plan are approved at the current level, the Danish telecommunications industry estimates costs in the range of DKK 1 to 2 billion.
Telenor Mobile Sweden — Sweden
      Following the acquisition of Vodafone Group’s Swedish mobile operations, we are now the third largest mobile operator in Sweden, with 1.7 million subscriptions and a market share of approximately 17%.
      We entered into the agreement to acquire Vodafone Sweden (Europolitan Vodafone AB) for EUR 1,035 million (NOK 8,170 million), including assumed debt, on October 31, 2005, and the acquisition was completed on January 5, 2006. We expect to achieve full integration of Vodafone Sweden and Telenor Mobile Sweden during the first half of 2006.
      The acquisition has increased our Scandinavian mobile customer base by approximately 39 per cent, totaling 5.7 million subscribers as of December 31, 2005. In addition, the acquisition strengthens our presence in the business segment, where large business customers to an increasing degree demand seamless communications solutions across Nordic countries. Under a partnership network agreement between Telenor and Vodafone for Sweden, our customers will have access to Vodafone products and services in the Swedish market.
      In September 2002, our wholly-owned subsidiary Telenor Mobile Sweden entered into a MVNO roaming agreement with Tele2 which allows us to provide mobile telecommunications services based on Tele2’s GSM and UMTS networks in Sweden. The agreement’s duration is five years. However, following price reductions in the Swedish market and reduced expectations with respect to future earnings potential concerning the contract in 2004 and our purchase of Vodafone Sweden in 2005, Telenor Mobil Sweden has provided for NOK 562 million and NOK 414 million as an estimated loss on the MVNO contract for 2004 and 2005, respectively. Please see “Item 5: Operating and Financial Review and Prospects — Telenor Mobile Sweden” for more information.

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Products and Services
      Telenor Mobile Sweden positions itself as an innovative and quality operator that seeks to provide simple and user-friendly products and services at a low cost. Revenues from Telenor Mobile Sweden’s core business of voice services include traffic charges, interconnection fees and roaming charges. In addition to voice services, Telenor Mobile Sweden offers data services such as SMS and MMS, content services based on premium SMS and Internet access via WAP.
Customers
      As of December 31, 2005, Telenor Mobile Sweden had approximately 95,000 subscriptions (down from approximately 105,000 subscriptions at December 31, 2004). Telenor Mobile Sweden estimates that it had an overall market share of 1% as of December 31, 2005. Vodafone Sweden had approximately 1.6 million subscriptions and a market share of approximately 16% as of December 31, 2005.
Traffic
      The following table sets forth selected traffic data for Telenor Mobile Sweden’s subscriptions.
                         
    2003   2004   2005
             
GSM
                       
Traffic:
                       
Total outgoing traffic (in millions of minutes)
    28.2       56.8       75.4  
Total incoming traffic (in millions of minutes)
    11.7       60.3       93.5  
Average monthly incoming and outgoing traffic — (minutes per digital subscription)
    49       111       132  
      The strong increase in incoming traffic is related to the change in customer mix from 2003 to 2005. During 2005, Telenor Mobile Sweden only has had MVNO customers with incoming traffic compared to 2003 when the customer base consisted of mainly service provider customers without incoming traffic.
Competition
      The Swedish mobile market is a mature market with a penetration rate of approximately 110%. Each of TeliaSonera, Vodafone (whose license we have acquired as a result of our acquisition of Vodafone Sweden) and Tele2 hold GSM licenses and operate GSM networks. The fourth GSM license holder in Sweden is SweFour, which provides GSM network capacity to service providers on a wholesale basis.
      There are four UMTS licenses of which TeliaSonera and Tele2 hold a single UMTS license through their joint venture Svenska UMTS-nät AB. In 2005, Vodafone (whose license we have acquired as a result of our acquisition of Vodafone Sweden) and Hi3G Access each had one UMTS license but they also had a cooperation agreement regarding network coverage outside the major metropolitan areas in Sweden. In addition to the cooperation agreement regarding the UMTS coverage, Hi3G Access has a national roaming agreement with Vodafone for GSM access. Hi3G Access has commercially launched UMTS-based services under the brand name “3”. The fourth UMTS license was returned to the Swedish regulator by Orange in 2005. No decision has been made by the regulator as to the possible re-use of this license.
Regulatory matters
      In 2004, the Swedish regulator determined that our youth brand Djuice has significant market power in the market for mobile voice call termination services and, as a consequence, will be required to reduce its interconnection fees from 0.97 SEK/minute to 0.52 SEK/minute by 2007.
Pannon GSM — Hungary
      Our wholly-owned subsidiary Pannon GSM (Pannon) is the second largest mobile operator in Hungary based on the number of subscriptions. Pannon currently holds two GSM licenses (GSM 900 and GSM 1800)

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and a UMTS license awarded in December 2004 for 15 years. The license has an extension option for an additional 7.5 years.
Products and services
      Pannon offers advanced voice and non-voice services to subscribers on both a prepaid and contract basis. Voice services include international calling using Voice over Internet Protocol (VoIP), which offers subscribers lower-cost international calling. Non-voice services include SMS, MMS, mobile content services and Internet service provider services via Internet Protocol and WAP. Pannon launched EDGE-based broadband services on its network in February 2005 and UMTS-based broadband services in October 2005.
Marketing and distribution
      Pannon has made significant investments in establishing its brand name and positioning itself as a provider of high-quality services with up-to-date features, competitive pricing and good customer service. Recently, Pannon has identified the youth segment and provided targeted offers for select services under the djuice brand.
      In addition to the 39 Pannon-owned regional service centers, Pannon sells its products through a nationwide network of agents and outlets on an exclusive basis. During 2006, Pannon is restructuring the distribution network by outsourcing 29 of its own shops to various franchisees. Five shops will be kept as “flagship” stores and five will be closed down.
      The quality, number and location of the outlets are evaluated frequently since Pannon seeks to optimize its distribution profile for the market. Pannon also has a direct sales force for major accounts and sales to small and medium-sized enterprises
Customers
      The following table sets forth selected subscription data for Pannon:
                             
    Year ended December 31
     
    2003   2004   2005
             
Mobile subscriptions (period end, 000s):
                       
 
Contract
    595       779       1,025  
 
Prepaid
    2,023       1,991       1,904  
                         
   
Total
    2,618       2,770       2,929  
                         
Mobile Telephony Penetration in Hungary
    73 %     80 %     87 %
      Mobile penetration rates in Hungary have been increasing, but the subscriber growth rate has been decreasing due to intensifying competition since 2004 for new subscribers. The majority of Pannon’s subscriber base subscribes to various prepaid tariff plans. Due to our continued focus on consumer contract and business sales, the percentage of contract subscriptions increased from 28% to 35% during 2005.
Competition
      In addition to Pannon, there are two other mobile operators in Hungary: T-Mobile (formerly Westel) and Vodafone, each holding both GSM and UMTS licenses. Pannon estimates that it had a market share of approximately 34% as of December 31, 2005. The market leader, T-Mobile, had an estimated market share of 45%, while Vodafone had an estimated market share of 21%. There are no service providers or MVNOs operating in the Hungarian market for mobile telecommunication services.

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Regulatory matters
      In November 2003, Pannon was identified by the Hungarian regulatory authority as having significant market power (SMP) in both the mobile market and the national market for interconnection. In Hungary, SMP operators are under an obligation to meet various strict legal requirements, such as applying a certain cost model as a basis for interconnection tariffs. Pannon accepted that it is an SMP operator in the mobile market, but filed a complaint against the regulator’s determination that it has SMP in the national market for interconnection. Since the decision of the regulator became effective immediately and was not suspended by the court, Pannon has complied with the decision and reduced its interconnection charges by 9% as of June 15, 2004. In January 2006, the Supreme Court of Hungary upheld the regulator’s 2003 SMP designation, thus exhausting Pannon’s potential judicial remedies with respect to this decision. Although our 2003 SMP designation is final, the Hungarian regulatory authority is reassessing the 2003 SMP designation for T-Mobile in the national market for interconnection.
      In January 2005, the Hungarian regulatory authorities again determined that Pannon and T-Mobile (as well as Vodafone) are required to reduce their interconnection charges. The decisions of the regulator to further reduce these charges were challenged by all three mobile operators.
      If the designation of Pannon as an SMP operator in the national market for interconnection is ultimately upheld in the cases described above, Pannon’s mobile interconnection charges will continue to be regulated and, as a consequence, Pannon’s interconnection charges may be adversely affected in the future.
USF contributions
      During 2002, Hungarian authorities established a Universal Service Fund (USF) with the aim of compensating universal service providers (i.e., fixed line operators) for offering low tariff packages to certain customer segments. All fixed and mobile operators are required to contribute to the USF in proportion to their revenues. In 2003, legislation was adopted which fixes the maximum contributions paid from 2004 onwards at 0.5% of an operator’s annual revenue. In 2002, the regulator determined the amount payable by determining the total amount payable by all operators and then allocating the amount payable by each operator. Pannon paid the required contribution of HUF 1.5 billion, but successfully appealed the requirement in the first instance court. The USF has filed an appeal against this decision which is still pending. In connection with this matter, Pannon has prevailed in its claim for damages against the regulator for discriminatory conduct in the Court of 1st instance. The Regulator has appealed the decision.
      Telenor, on behalf of Pannon, has also filed a claim in the International Center for Settlement of Investment Disputes (ICSID) for payments with respect to the 2002 USF. Telenor alleges that the regulator breached an international investment treaty between Norway and Hungary. The Hungarian 2002 USF has insufficient monies to pay the claims presented and a hearing presented against the government on the case is scheduled for the second quarter of 2006 to determine if the ICSID has valid jurisdiction over the case.
      On December 6, 2004, Pannon’s contribution for 2003 was fixed at HUF 798 million (an amount which reflects the 0.5% ceiling). Pannon successfully appealed this decision in September 2005 and has received the contribution back from the USF.
GVH investigation- The cartel case
      In February 2002, the Hungarian Competition Office (GVH) commenced an investigation against all three Hungarian mobile operators, including Pannon, and the fixed line operator, Matav, relating to pricing mechanisms and market practice for call termination charges between 1998 and 2001. A report issued in connection with this investigation alleged that the Hungarian mobile operators abused their dominant position in the call termination market and formed a price cartel in respect of call termination charges. The allegation of abuse of dominant position was ultimately abandoned, while the cartel charges were upheld. In July 2003, the Competition Counsel, an independent body within GVH, found that the mobile operators’ activities had lead to a distortion of competition and Pannon was fined HUF 150 million. Pannon appealed this decision

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before the Municipal Court of Budapest, and the court suspended the payment of the fine. The authority appealed the decision and the case is still pending. The fine will not be increased on appeal.
DiGi.Com — Malaysia
      We currently hold a 61% ownership interest in DiGi.Com, the third largest mobile operator in Malaysia. Under current Malaysia’s New Economic Policy (NEP), we are required to reduce our ownership interest in DiGi.Com to less than 50% by end of 2006. The NEP also requires at least 30% of the ownership interest in any publicly-listed company to be held by members of the Bumiputera community, the largest indigenous ethnic community in Malaysia. We will be required to comply with this requirement in the second half of 2006, unless we apply for additional extensions. In addition, the Bursa Malaysia Securities Berhad (Bursa Securities) requires that no less than 25% of DiGi’s shares, including shares held by institutional investors, be publicly held. The requirement has been satisfied, with public free float of DiGi.Com’s shares now exceeding the required amount of 25%.
Products and Services
      DiGi Telecommunications Sdn Bhd, a wholly owned subsidiary of DiGi.Com, currently holds a license for the operation of a GSM 1800 network and offers mobile voice, roaming and value-added services on both prepaid and contract basis. DiGi is currently one of the leading operators in the prepaid segment, which is the fastest growing segment in the Malaysian mobile market. With various valued-added services, such as MMS, enriched SMS, mobile content and Internet services, and innovative loyalty schemes, DiGi continues to be at the forefront of product innovation in the Malaysian market. In 2005, DiGi continued to take the innovative position and was first to launch many other new products and services to the market. The company also offers different subscription plans to suit the various needs of its contract customers.
Marketing and Distribution
      To reach both current and prospective customers, DiGi has established more than twenty DiGi service centers and cooperates with a large number of dealers throughout Malaysia including a number of DiGi specialised stores which only handle DiGi products and services. DiGi also offers efficient and innovative ways for customers to communicate with its customer service functions via the telephone or Internet.
Customers
      The following table sets forth selected subscription data for DiGi.:
                             
    Year ended December 31
     
    2003   2004   2005
             
Mobile subscriptions (period end, 000s):
                       
 
Contract
    104       172       354  
 
Prepaid
    2,101       3,067       4,441  
                         
   
Total
    2,205       3,239       4,795  
                         
Mobile Telephony Penetration in Malaysia
    44 %     57 %     73 %
      Total mobile subscriptions continued to increase mainly driven by the simple and relevant product offerings and promotions. The increase also is in line with the industry growth in Malaysian market with penetration rate estimated at 73%.
Competition
      DiGi is one of three mobile operators in the Malaysian market. The other two GSM network operators are Celcom, which is Telekom Malaysia’s mobile unit, and Maxis, each of which has licenses to operate both GSM 900 and GSM 1800 networks. Telekom Malaysia and Maxis were each assigned a block of the

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3G spectrum in 2002. Under the terms of the assignment, Telekom Malaysia and Maxis are required to offer access to their 3G networks to MVNOs. At present, there are no mobile service providers or MVNOs in Malaysia. Both Maxis and Telekom Malaysia launched their 3G services in the first half of 2005.
      As of December 31, 2005, DiGi was the third largest mobile operator in Malaysia, with an estimated market share of 25%. Maxis had a market share of 40% and Celcom had a market share of 35%.
Regulatory issues
      The Ministry of Energy, Water and Communication has announced the introduction of a nationwide coverage plan in Malaysia with the objective of achieving significant improvement on population coverage by the end of 2008. DiGi intends to expand its network in accordance with this plan.
      The Malaysian Communication and Multimedia Commission (MCMC) has determined new access prices effective for three years, from 2006 to 2008. Among other things, this determination has resulted in lower interconnection rates terminating on mobile network and higher interconnection rates terminating on fixed networks, with effect from February 15, 2006.
      Two additional 3G spectrum blocks were tendered by the Malaysian telecommunication authorities in November 2005, and the results were announced in March 2006. DiGi participated in the process but was not successful in its application for a 3G spectrum block. Despite this decision, DiGi remains committed to continue to enhance its mobile and broadband service offering. Today, DiGi has an extensive EDGE network that provides mobile broadband services to the overwhelming majority of Malaysia
      Other significant regulatory issues include the issues related to the ownership of DiGi described above.
Total Access Communication PCL (DTAC) — Thailand
      On October 26, 2005, Thai Telco Holdings (TTH), a 49% subsidiary of Telenor, completed the purchase of a 39.9% stake in United Telecommunications Industry PCL (UCOM). In compliance with relevant stock market regulations in Thailand and Singapore, TTH then launched a mandatory tender offer for all outstanding shares of UCOM and, along with Telenor Asia, a Chain Principle Offer for all of the shares of DTAC that they and their parties acting in concert, as defined by stock market regulation in Singapore, did not collectively own or control. The results of the mandatory tender offer resulted in an increase in Telenor’s economic stake in DTAC, held through TTH, UCOM and Telenor Asia, to 69.3% as at December 31, 2005. The Telecommunications Business Act limits the direct ownership of foreign investors in public communications license-holders to 49% of the total issued share capital.
Products and Services
      DTAC, which currently has a GSM 1800 and AMPS 800 concession, offers mobile voice, roaming and value-added services to its customers through contract and prepaid tariff plans. DTAC’s non-voice services include mobile Internet services based on WAP and EDGE.
Marketing and Distribution
      During 2005, DTAC has continued to focus on customer service and adopting an innovative and segmented approach to ensure that the needs of individual customers in both the consumer and corporate segment are met. Distribution, in particular, has been a key element of DTAC’s strategy. Key channels of distribution include DTAC shops, independent dealers and non-telecom outlets.

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Customers
      The following table sets forth certain subscription data for DTAC:
                             
    Year ended December 31
     
    2003   2004   2005
             
Mobile subscriptions (period end, 000s):
                       
 
Contract
    1,167       1,277       1,465  
 
Prepaid
    5,383       6,509       7,212  
                   
   
Total
    6,550       7,786       8,677  
                   
Mobile Telephony Penetration in Thailand
    35 %     43 %     47 %
      The subscriber base continued to grow in 2005 due to successful marketing activities and stronger brand attributes. The growth however was lower than 2004 due to the slow down in growth in general in the market.
Competition
      As of December 31, 2005, DTAC was the second largest mobile operator in Thailand, with an estimated subscriber market share of approximately 28%.
      The market leader in Thailand, Advanced Info Service plc (AIS), also owns 97.5% of the fifth largest operator in Thailand, Digital Phone Company (DPC). At December 31, 2005, we estimate that the combined market share of AIS and DPC was 54%. The other mobile operators in Thailand are TA Orange, with a market of approximately 15%, and Hutchinson-CAT Wireless Multimedia and Thai Mobile, with a combined market share of 3%.
Regulatory matters
      DTAC has a service concession arrangement where the Communication Authorities of Thailand (CAT) has granted DTAC the right to build, transfer and operate a mobile network in Thailand. In return for the right to provide mobile services for a fixed period, mobile operators must build out their infrastructure, and then transfer ownership of the infrastructure to the government and pay a concession fee, or revenue share, to the CAT and a 10% excise tax. The revenue share to CAT will increase from 20% to 25% in September 2006. The excise tax is included in the total amount of the revenue share.
      The government has proposed several frameworks for the conversion of previously issued concessions into licenses, but no proposal has yet been adopted. The process of conversion is dependent on successful bilateral commercial negotiations between the CAT and the Telephone Organization of Thailand (TOT), on the one hand, and concession holders on the other. The NTC is currently drafting competition regulations for the mobile market, which are expected to be adopted during 2006 and form the backbone of the regulatory environment in Thailand.
      At present, mobile operators in Thailand generally operate under a “sender keeps all” regime, a system in which the service provider originating a call keeps the entire revenue derived from it, since no interconnection regime is currently in place. The exception to this rule is that concessionaires of the CAT, such as DTAC, must compensate the TOT for the use of its fixed network. The establishment of a new interconnection regime, as provided for in the Telecommunications Business Act, is currently being discussed.
      DTAC has filed claims against Digital Phone Company Limited (DPC) in the Thai Arbitration Court in June and August 2003 for the DPC’s breach of contract of more than NOK 241 million pursuant to the terms of an agreement to unwind the service provider agreement dated January 7, 1977. DTAC had previously recognized approximately NOK 100 million revenues of the NOK 241 million amount claimed.
      The CAT brought an action against DTAC for payment of royalty fees for in the amount of NOK 112 million. DTAC disputes the method CAT used to calculate fees.

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      A recent assertion has been made by Telecom Public Company Limited against DTAC relating to the manner in which a certain discount shall be calculated. This will impact the revenue sharing between DTAC and Telecom Public Company Limited. An external legal opinion provided to DTAC agrees with the DTAC method of calculation. The dispute involves a difference of about NOK 76 million.
Kyivstar — Ukraine
      We have a 56.5% ownership interest in Kyivstar GSM, a major mobile operator in Ukraine. The only other shareholder is Storm LLC (Storm), with a 43.5% ownership interest. Storm LLC is 100% indirectly owned by Alfa Group. Kyivstar’s board of directors consists of nine members, five of which are nominated by Telenor and four of which are nominated by Storm, as provided by Kyivstar’s shareholder agreement and charter.
      Kyivstar currently owns a GSM 900 and GSM 1800 license. Kyivstar’s GSM network had geographical coverage of approximately 92% and population coverage of approximately 96% as of December 31, 2005. Kyivstar’s network is fully GPRS upgraded.
      Kyivstar launched EDGE in 2005, which at the end of year was operational in approximately half of the base stations of the 10 largest cities in Ukraine. In addition, Kyivstar continued to roll-out its own fiber backbone network during 2005.
Products and services
      In addition to voice telephony, Kyivstar provides voice messaging services, SMS, MMS and mobile internet services. In 2004, Kyivstar launched djuice, a product offering that targets the youth segment, and introduced campaigns with distribution of free start packs to targeted segments, including the youth segment.
Marketing and distribution
      Kyivstar distributes its products and services through both indirect sales channels (dealers, retailers, wholesalers) and direct sales channels (telemarketing and direct contact). The company also entered into co-branding agreements with selected companies.
      In order to attract and retain subscribers, Kyivstar focuses on providing a high level of customer service and care. At December 31, 2005, Kyivstar had 72 visitor centers throughout Ukraine. Visitor centers are independent dealers that have at least one of Kyivstar’s own employees on the staff. At December 31, 2005, Kyivstar also operated 18 information centers in the main urban areas.
Customers
      The following table sets forth selected subscription data for Kyivstar
                             
    Year ended December 31
     
    2003   2004   2005
             
Mobile subscriptions (period end, 000s):
                       
 
Contract
    534       720       1,024  
 
Prepaid
    2,503       5,532       12,901  
                         
   
Total
    3,037       6,252       13,925  
                         
Mobile Telephony Penetration in Ukraine
    14 %     29 %     64 %
      Kyivstar’s strong customer increase has been driven by the fast growth in market penetration and by attractive product and service offerings.

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Traffic
      Average monthly minutes of usage per subscriber increased in 2005 from 91 minutes per month in the first quarter to 108 minutes per month in the fourth quarter.
Competition
      As of December 31, 2005, Kyivstar was Ukraine’s largest mobile operator, with a market share of approximately 46%. The second largest mobile operator Ukrainian Mobile Communications (UMC), which is owned by the Russian group Mobile Telesystems, had a market share of approximately 44%.
      Life:), a brand which is operated by Astelit, a company owned by DCC and Türkcell, had approximately 2.7 million subscribers and a market share of approximately 9% by the end of 2005. Astelit holds a GSM 1800 license and launched services in January 2005.
      In November 2005, the Russian company VimpelCom announced to have acquired 100% of the Ukrainian mobile operator Ukrainian Radio Systems (URS), which operates the WellCom brand. In October 2005, URS received a GMS 1800 license (not full national coverage) in addition to its GSM 900 license. Telenor owns a 29.91% ownership stake in VimpelCom. For more information, see “— VimpelCom — Russia and other CIS Countries.”
      Further, there are two smaller mobile operators in Ukraine, including Golden Telecom Ukraine (GSM 1800) a wholly owned subsidiary of Golden Telecom, Inc. in which Telnor has a 20.3% ownership interest. Together, these operators had a market share of approximately 1% as of December 31, 2005.
Regulatory matters
      Under the Law on Telecommunications, a National Commission for Regulation of Communication (NCRC) was established, which was intended to begin regulating the telecommunications sector from January 1, 2005. However, in January 2005, the President Viktor Yushchenko dismissed the commission appointed by the previous President, Leonid Kuchma, and appointed a new commission on April 21, 2005. However, this appointment is legally disputed. If the appointment is deemed invalid, a new commission has to be appointed, and all decisions made by the existing commission may be declared null and void.
      The NCRC established in February 2006 new rules for settling interconnection issues. The new tariffs were established by commercial negotiations between operators and active involvement by NCRC.
      As a result of a recent decision by the Cabinet of Ministers, 76% of relevant spectrum is now dedicated for civil use. As there are no available funds for conversion, the use of this spectrum has not started. Proposals from the Ministry of Transport and Communication and NCRC propose some kind of upfront payment for operators to finance conversion.
      The state owned incumbent Ukrtelecom received a 3G license in December 2005 including the necessary relevant spectrum without having to go through any formal tendering process. The Ministry has proposed that additional 3G licenses will be made available during 2006/2007.
      The Antimonopoly Committee of Ukraine has requested all mobile operators to abolish call set-up charges as part of their tariffs, but since none of the mobile operators are currently deemed to exercise monopolistic market power, the Antimonopoly Committee cannot regulate these tariffs. The Antimonopoly Committee has begun a new investigation to determine if Kyivstar does exercise monopolistic market power. In previous similar investigations and during periods with less market players in the mobile sector, the Committee has declared that none of the mobile operators exercise monopolistic market power.
      NCRC has begun drafting an amendment to the Law on Telecommunication regarding Universal Service Obligations, including proposals on how to finance the amendments.

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Legal proceedings
      Over the past year, Storm has in a number of instances failed to have at least one representative from Storm attend Kyivstar’s shareholder and board meetings. For a valid quorum to be present at Kyivstar’s shareholder meetings, Ukrainian law requires the attendance of shareholders holding more than 60% of a company’s share capital and, for a valid quorum to be present at board meetings, Kyivstar’s charter and shareholder agreement require the attendance of at least one director from Storm. Storm and certain of their affiliates have also filed a number of related lawsuits in the Ukrainian courts contesting, among other things, the validity of parts of Kyivstar’s shareholder agreement and charter. These lawsuits contest the ability of Kyivstar’s chief executive officer to carry out his delegated duties, and the validity of previous decisions made by members of Kyivstar’s board of directors. Telenor believes that these lawsuits are without merit and is vigorously contesting all of the claims that are currently pending in Ukrainian courts. In accordance with Kyivstar’s shareholder agreement, Telenor also commenced in February 2006 an arbitration proceeding in New York against Storm for violating the Kyivstar shareholders agreement. Telenor has also proposed technical changes to Kyivstar’s charter to ensure that the Kyivstar board continues to function in accordance with the shareholder agreement, but the actions of Storm described above, including the failure of Storm or its nominees to attend meetings, could still adversely affect the ability of Kyivstar to operate and compete effectively.
      Kyivstar along with other major mobile operators in Ukraine are disputing the Ukrainian Tax Authority’s claim for value added tax, or VAT, on the Pension Fund Duty charged on subscriber’s phone bills. Kyivstar considers this an invalid tax. Kyivstar has exhausted its administrative remedies available in the Ukraine and proceeded to seek further relief in the Ukrainian Kyiv City Commercial Court. Lower court decisions in February 2006 were issued invalidating the tax claim concerning the same issues involving another mobile operator in the Ukraine as well as Kyivstar. The Ukrainian Tax Authority has decided to appeal these rulings, but Telenor has decided not to make any provision for this litigation.
GrameenPhone — Bangladesh
      Our 62%-owned subsidiary GrameenPhone is the leading provider of mobile telecommunication services in Bangladesh (based on the number of subscriptions).
      GrameenPhone currently holds both a GSM 900 and GSM 1800 license. The government has not yet announced any plans to issue UMTS licenses in Bangladesh.
Product and services
      In addition to core voice services, GrameenPhone offers a number of value-added services, in each case on both a contract and prepaid basis. Value-added services include voice messaging services, SMS, MMS and data services via WAP. GrameenPhone services are widely perceived as having the most advanced and up-to-date features in the Bangladeshi market. For example, GrameenPhone was the first Bangladeshi mobile operator to launch WAP in 2001 and interactive SMS in 2003. Additionally, GrameenPhone offers the widest population coverage in the market, increasing from approximately 58% in 2004 to approximately 85% in 2005. In addition, GrameenPhone also offers GPRS in most of the country and EDGE in urban areas. In February 2006, GrameenPhone awarded a two-year frame agreement to expand and upgrade its GSM/EDGE network. The contracted party will supply core and radio network equipment in addition to a range of other services. The contract will include Mobile Softwitch Solution and IP Multimedia Subsystem (IMS) which will enable GrameenPhone to significantly enhance network quality, performance and coverage.
Marketing and distribution
      GrameenPhone is taking an active role in the distribution of its services following a change in its distribution strategy during 2004. While the previous structure was based on a few key dealers that managed all distribution to the point of sale, GrameenPhone is now distributing directly to the point of sale through regional distribution centers. GrameenPhone will be able to reduce commission costs substantially at the same time as obtaining increased control at the end user point of sale.

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Customers
      The following table sets forth selected subscription data for GrameenPhone.
                             
    Year ended December 31
     
    2003   2004   2005
             
Mobile subscriptions (period end, 000s):
                       
 
Contract
    242       296       383  
 
Prepaid
    899       2,092       5,159  
                   
   
Total
    1,141       2,388       5,542  
                   
Mobile Telephony Penetration in Bangladesh
    1.3 %     2.8 %     6.2 %
      Based on the low current levels of mobile penetration, GrameenPhone expects strong growth in total subscribers in the future. At present, the number of billable minutes per customer in GrameenPhone is approximately 223 minutes per month.
Competition
      As of December 31, 2005, GrameenPhone estimates that it had a market share of approximately 62%. Besides GrameenPhone, there are five other mobile operators in Bangladesh: Aktel (with a market share of approximately 23%), Banglalink (with a market share of approximately 9%), Citycell (with a market share of approximately 4%), Teletalk (with a market share of approximately 1.8%) and Warid Telecom, which won its mobile phone license in December 2005.
Regulatory matters
      On June 9, 2005 the authorities in Bangladesh introduced a new fee per unit of sale of SIM cards of 900 BDT (approximately NOK 90). The SIM card fee is to be collected by the operators. At the same time, the import tax for mobile handsets has been reduced from 1500 Bangladeshi Taka (approximately NOK 150) to 300 Bangladeshi Taka (approximately NOK 30).
      Under the licenses granted to mobile operators in Bangladesh, all mobile operators are required to collect an annual license fee and royalty from each subscriber (GRLF). In November 2002, pursuant to a stay order issued by the Supreme Court, the Bangladesh Telecommunication Regulatory Commission (BTRC) instructed operators to stop collecting the fee from customers. In August 2004, the stay order was vacated and, in September 2004, BTRC issued a letter to GrameenPhone instructing it to make a payment in respect of the fee and royalty. It was unclear whether this instruction applies to fees and royalties that would otherwise have been collected in 2002, 2003 and 2004, or if it only applies from the date of the letter onwards. While GrameenPhone has collected the license fee from new users up until February of 2005, it has not collected fees from existing users following the court order. On March 20, 2006, the BTRC clarified these issues partially and announced that, with effect from July 1, 2005, all mobile operators must pay an annual license of 50 million Bangladeshi Taka, an annual revenue share of 5.5% on collected line rental and call charges and quarterly network spectrum charges as fixed by the BTRC. The BTRC’s decision, however, does not resolve the issue of whether fees must be collected from existing subscribers from November 2004 to June 30, 2005. The legitimacy and amount of the request for payment for this period has not yet been clarified and is still subject to negotiation between us and the BTRC. We are of the opinion that necessary payments for the royalty and license fees have been made to the BTRC. If it is determined that GrameenPhone is required to make a payment for this period, it will be extremely difficult for GrameenPhone to collect any such amounts from existing subscribers. If it is determined that no obligation to collect fees during that period existed, GrameenPhone might still be subject to claims from customers for reimbursement of license fees paid by them.
      The regulatory regime in Bangladesh currently requires mobile operators to give BTRC 15 days notice of any price changes. Such changes may only be implemented with BTRC’s approval. In addition, the

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Parliamentary Standing Committee (MOPT) has recently instructed BTRC to instruct mobile operators to decrease tariffs. If BTRC does not approve any proposed price changes or acts upon the MOPT’s instructions, GrameenPhone’s tariffs could be adversely affected in the future.
Telenor Pakistan — Pakistan
Overview
      Our wholly owned subsidiary, Telenor Pakistan, launched its GSM mobile network on March 15, 2005 and had a market share (based on the number of subscriptions) of approximately 9% as at December 31, 2005. Telenor was awarded its license to build and operate a mobile network in Pakistan in April 2004 for 291 million U.S. dollars. Telenor Pakistan paid half of the amount upfront in May 2004, with the remaining half payable in equal installments over 10 years starting in 2009. The nationwide license, which does not include Azad Jammu and Kashmir (AJK) or the Northern Areas, is valid for a 15 year period and is renewable upon application.
      Within 4 years of the effective date of the license (May 2004), Telenor Pakistan will be required to provide coverage to 70% of the 298 Tehsils in Pakistan with a minimum of 10% of Tehsil Headquarters in each province. A Tehsil (or sub district) is the smallest administrative area defined by the government and this obligation will require Telenor Pakistan to provide services to many areas of the country that currently have limited coverage, with potentially low average revenue per user. In order to facilitate coverage for such areas, the government has established a universal service fund and requires mobile operators to contribute 1.5% of their revenues to the fund. In connection with its obligation to provide services in the Tehsil headquarters, Telenor Pakistan is engaged in ongoing discussions regarding its share of the fund.
Product and services
      In addition to basic voice services, SMS and MMS, the company also offers mobile data services to all its customers. The company rolled out its GSM network rapidly during 2005 and had the fastest growing mobile network in the country during the year. The network currently being rolled-out is WAP and GPRS enabled and EDGE compatible. In addition, the company holds a Long Distance and International (LDI) license though which it is providing nationwide and international call services.
Marketing and distribution
      As on December 31, 2005, Telenor Pakistan was distributing its services through a network of 13 company owned sales and service centers, 58 franchisees and about 18,000 retail outlets selling subscriptions and refills.
Customers
      The following table sets forth selected subscription data for Telenor Pakistan.
             
    Year ended
    December 31, 2005
     
Mobile subscriptions (period end, 000s):
       
 
Contract
    32  
 
Prepaid
    1,836  
         
   
Total
    1,868  
         
Mobile Telephony Penetration in Pakistan
    13 %
      Based on the currently low levels of mobile penetration, Telenor Pakistan expects strong growth in total subscribers in the near to medium-term. At present, the number of billable minutes per customer in Telenor Pakistan is approximately 140 minutes per month.

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Competition
      Warid Telecom, which is controlled by a consortium based in United Arab Emirates, won the other of the licenses issued in 2004. In addition to Telenor Pakistan and Warid Telecom, there are four other mobile operators in Pakistan. Mobilink, which is the largest cellular mobile operator in Pakistan, held a market share of approximately 51% as of December 31, 2005. Ufone, the second largest operator by subscribers, held a market share of approximately 24% as of the end of 2005. The remaining two operators, Paktel and Instaphone, have market shares of roughly 5% and 2%, respectively.
Regulatory matters
      Pakistan began to liberalize its telecommunications sector in July 2003 when the government announced the end of the five decade old monopoly of the state-run Pakistan Telecommunication Company Limited (PTCL). This liberalization continued with the awarding of mobile network licenses to us and Warid Telecom in 2004.
      As a continuation of the deregulation process which began in 2003, the government agreed to sell a 26% stake in PTCL, which owns the second largest mobile operator, Ufone, to Etisalat, the UAE based incumbent telecommunications operator, in June 2005. However, the transaction was renegotiated in the second half of 2005 and is not expected to be completed until April 2006. Telenor Pakistan, along with other private operators in Pakistan, has requested the government bring PTCL under the same licensing regime as the other mobile network in connection with this transaction. Moreover, Telenor Pakistan requested the government ensure predictability and that PCTL’s rates for leased media, such as domestic private leased circuits, digital interface units and co-location rentals are not revised upwards. Telenor Pakistan believes that such steps are necessary to maintain a fair and competitive environment for private operators.
      In connection with the deregulation of fixed-line telephony in Pakistan, most local loop licensees are opting to use wireless in local loop systems to provide fixed wireless access solutions. For this purpose, the government has auctioned 4 frequency bands (450, 479, 1900 and 3500 MHz) to enable local loop operators to launch fixed wireless access solutions. These developments may result in competition increasing in the market for mobile services since it may enable local loop operators to offer mobile services as well. Telenor Pakistan and the GSM Association where Telenor is a member, have requested regulators to enact policies that prevent local loop operators from providing mobile services. In July 2005, The Pakistan Telecommunication Authority (PTA) issued a determination limiting the mobility of wireless local loop operators to a single pre-assigned radio base station (BTS). However, the majority of the WLL operators continue to exceed the lawful limits of mobility. We, along with other mobile operators, have been raising specific cases of violations with the PTA and pressing the PTA to enforce its determination.
      In July 2005, the government regulator reduced the per minute interconnection rate from 2 Pakistani rupees to 1.6 Pakistani rupees. The government regulator has also hired an independent consultant to determine the termination rate going forward based on LRIC methodology. If the regulator fails to agree on a rate with the operators, the interconnection rate will be reduced to 1.25 Pakistani rupees effective August 2006, to be billed on a per second basis.
      In connection with its obligation to provide services in the Tehsil headquarters, Telenor Pakistan is engaged in a consultation process regarding its share of the Universal Service Fund (USF), a policy initiated in 2005 with the intended purpose of disbursing the government funds for the provision of telecommunication services in underserved regions of the country. Telenor Pakistan is actively participating in the consultation process and is lobbying for its due share in the fund for facilitating rollout in 70% of the 298 Tehsils in Pakistan with a minimum of 10% of Tehsil Headquarters in each province.

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ProMonte GSM — Montenegro
      Our 100% owned subsidiary ProMonte GSM is the leading provider of mobile telecommunication services in Montenegro. ProMonte holds a GSM 900 and GSM 1800 license. Each license is scheduled to expire in January 2017. ProMonte’s GSM network had geographical coverage of approximately 75% and population coverage of 98.7% as of December 31, 2005.
Products and services
      Since its commercial launch of GSM services in 1996, ProMonte has positioned itself as an innovative and quality operator within all segments, focusing its products and services on simplicity of tariff structure and user-friendliness. The company primarily offers mobile voice, roaming, value-added services and mobile data services over GPRS to its subscribers on both a prepaid and contract basis. ProMonte now provides EDGE coverage in most big cities and urban areas.
Marketing and distribution
      As of December 31, 2005, ProMonte markets and distributes its mobile telephone services through independent dealers with 2,013 points of sale, including two wholly owned outlets in the capital, Podgorica. In addition, ProMonte entered into “shop-in-shop” agreements with six independent dealers during 2005 to market ProMonte mobile services within their shops.
Customers
      The following table sets forth certain subscription data for ProMonte:
                             
    Year ended December 31
     
    2003   2004   2005
             
Mobile subscriptions (period end, 000s):
                       
 
Contract
    46       44       45  
 
Prepaid
    207       235       265  
                         
   
Total
    253       279       310  
                         
Mobile Telephony Penetration in Montenegro
    69 %     78 %     88 %
      ProMonte’s subscriber base increases significantly during summer months. This is due primarily from tourists buying prepaid subscriptions. ProMonte has managed to increase its share in the contract market during 2005. The 2005 churn rate was 37%.
Competition
      As of December 31, 2005, ProMonte was Montenegro’s leading provider of mobile communication services, with a market share of 58%.
      In addition to ProMonte, the only other mobile operator is Monet, with a market share of 42% as of December 31, 2005. Monet is majority owned by Telecom Montenegro. Magyar Telekom, a Hungary based subsidiary of T-Mobile has acquired a 76.53% stake in Telekom Montenegro.
      The Agency for Telecommunications has publicly stated that tender for a third mobile communication license will be issued in May 2006, at the latest. The introduction of MVNOs is also under review.
VimpelCom — Russia and other CIS countries
      VimpelCom is the main associated company of Telenor and, according to AC&M Consulting data, is the second largest mobile operator in Russia, with an overall market share of 34.3% as of December 31, 2005. VimpelCom’s ADSs are listed on the New York Stock Exchange and registered with the SEC. In addition to Russia, VimpelCom has subsidiaries in Kazakhstan, Uzbekistan and Tajikistan. VimpelCom’s ownership of Ukrainian Radio Systems (URS) in the Ukraine is currently the subject matter of litigation between Telenor

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and VimpelCom. Telenor has initiated three lawsuit’s in Russia against VimpelCom this transaction and is seeking to cause this transaction to be unwound.
      VimpelCom operates under the Bee Line GSM brand.
      We initially invested in VimpelCom in 1999. Currently, the economic and voting ownership interests in VimpelCom are as follows:
                 
    Economic ownership   Voting ownership
         
Alfa Group (through Eco Telecom Limited)
    24.50%       32.91%  
Telenor (through “Telenor East Invest AS”)
    29.91%       26.58%  
Free float
    44.10%       39.20%  
Treasury stock
    0.50%       0.50%  
Other
    0.99%       0.81%  
      On March 20, 2006, Telenor made a proposal for the VimpelCom to acquire 100% of Ukrainian mobile operator Kyivstar, our consolidated subsidiary in which we hold a 56.5% ownership interest, for more than USD 5 billion cash. A condition to Telenor’s proposal is that Telenor and Alfa Group enter into a market-based separation mechanism. If implemented and activated, this mechanism would permit the party placing the highest value on VimpelCom to offer to purchase all of the other party’s shares and obligate the other party to sell all its shares.
      There has been no approval by the Board of Directors of VimpelCom’s annual budget for 2006.
Mergers and acquisitions
      On November 11, 2005, VimpelCom announced that it had consummated the purchase of Ukrainian Radio Systems (URS) for an aggregate cash purchase price of USD 231.3 million. Telenor disputes the validity of the alleged URS acquisition, stating that the transaction was consummated without the board authorizations required under the VimpelCom’s charter and Russian law. Telenor has initiated three lawsuits in Russia against VimpelCom in relation to this transaction and is seeking to cause this transaction to be unwound.
Licensing issues
      In Russia’s Far East region, VimpelCom operates in four sub-regions through its subsidiaries Sakhalin Telecom (GSM 800 and 1800 licenses) and Dal Telecom International (GSM 800 and 1800 licenses). VimpelCom has several times applied for frequencies and a cellular Telecommunication license on the territories of Russia’s Far East region. The Ministry of Communications and IT has rejected the applications.
Products and services
      VimpelCom operates a GSM 900/1800 network, as well as several small AMPS/ D-AMPS networks, that target both the business and consumer segment. VimpelCom’s Russian license portfolio covers approximately 94% of the population.
      VimpelCom offers voice services and value-added services on its GSM and D-AMPS networks on both a prepaid and contract basis, with around 99% of its Russian subscribers using GSM. It also provides interconnections with other fixed and mobile networks and access to roaming. Value-added services on the GSM network include messaging services (SMS, MMS), mobile Internet services (data and fax transmission, WAP and Internet based on CSD or GPRS technology), a wide range of information and entertainment services (news and entertainment channels, ring tones, logotypes, java-games, chats, forums and quizzes), corporate services (Mobile email, mobile budget and corporate GPRS access) and traditional services (Voice Mail, Caller ID and Conference Call)
      As part of its overall business strategy, VimpelCom has constructed and tested a pilot UMTS network, and intends to introduce UMTS technology in some of the larger cities if awarded a UMTS license.

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Customers
      The following table sets forth certain subscriber data for VimpelCom:
                             
    Year ended December 31
     
    2003   2004   2005
             
Mobile subscriptions (period end, 000s):(1)
                       
 
Russia
    11,437       25,725       43,097  
 
Other Countries
          859       2,317  
   
Total
    11,437       26,583       45,414  
                   
Mobile Telephony Penetration in Russia
    25 %     51 %     87 %
 
(1) Figures are based on statistics published by “Advanced Communications & Media”. The number of prepaid subscribers are based on a 6 month churn period.
Competition
      VimpelCom’s main competitors in Russia are Mobile Telesystems (MTS), with an overall market share of 35.2%, and Megafon, with an overall market share of 18.1%.
      Alfa Group acquired a 25.1% ownership interest in Megafon pursuant to consent by VimpelCom’s board of directors on August 2003. Under the terms of the consent, the parties are required to explore the possibility of a business combination between VimpelCom and Megafon in the future. VimpelCom, however, is under no obligation to enter into any such combination. In addition, Alfa Group is also an indirect investor in the Russian fixed-line and Internet provider Golden Telecom, in which Telenor has a 20.3% ownership interest.
Regulatory matters
Regulatory Environment
      The Law on Communications, a new law on telecommunications for the Russian Federation, came into force on January 1, 2004. The process for adopting secondary legislation implementing the new law is still ongoing, and the exact implications of the new law for Russian telecommunications operators are still unclear. However, pursuant to the new law, telecommunication operators have been obliged since March 2005 to pay a fee representing 1.2% of the operator’s revenues to a Universal Service Fund.
Legal proceedings
      Our ability to influence key business or strategic decisions in VimpelCom is closely related to the fact that VimpelCom’s charter requires certain decisions to be approved by 80% of the members of VimpelCom’s board of directors. However, during the last two years, an individual shareholder of VimpelCom and VimpelCom’s other principal shareholder, the Alfa Group (whose telecom division now does business under the name “Altimo”), filed lawsuits in Russian courts contesting these provisions in VimpelCom’s charter. Telenor contested such lawsuits in the Russian courts, including, in one case, by appealing to the Russian Supreme Court, and all such lawsuits have now been dismissed or withdrawn. Also, in November 2005, VimpelCom’s management announced that it consummated the purchase of Ukrainian Radio Systems (URS) for an aggregate purchase price of USD 231 million. Telenor believes that this transaction was completed without the proper authorizations required under VimpelCom’s charter and Russian law. As a result of these developments, Telenor has commenced three lawsuits in Russia against VimpelCom, and is seeking to cause this transaction to be unwound. In November 2005, Telenor also commenced arbitration proceedings in Geneva, Switzerland against the Alfa Group with respect to certain breaches by Alfa of the VimpelCom shareholders agreement.
      On January 10, 2005, VimpelCom’ Kazakh subsidiary KaR-Tel received an “order to pay” issued by The Savings Deposit Insurance Fund, a Turkish state agency responsible for collecting state claims arising

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from bank insolvencies (the “Fund”), for an amount equal to approximately USD5.5 billion. The order, which was dated October 7, 2004 and delivered to KaR-Tel by the Bostandykski Regional Court of Almaty, does not provide any information regarding the nature of, or basis for, the asserted debt, other than to state that it is a “debt to the Treasury” and that the term for payment is May 6, 2004. On January 17, 2005, KaR-Tel delivered to the Turkish consulate in Almaty a petition to the Turkish court objecting to the propriety of the order, and a similar petition to the Ministry of Justice of the Republic of Kazakhstan for forwarding to the Ministry of Justice of the Republic of Turkey. VimpelCom management believes that the Fund’s claim is without merit and that any attempted enforcement of the order to pay in relevant jurisdictions outside of Turkey is subject to procedural and substantive hurdles. However, there can be no assurance that KaR-Tel will prevail with respect to the objections filed (either on substantive or procedural grounds), that these claims or others targeting VimpelCom’s ownership of KaR-Tel will not be brought by the Fund directly against VimpelCom or its other subsidiaries or that KaR-Tel and/or VimpelCom or its other subsidiaries will not be required to pay amounts owed in connection with the order or on the basis of other claims made by the Fund. The adverse resolution of this matter, and any others that may arise in connection with the order by the Fund or any other claims made by the Fund, could have a material adverse effect on VimpelCom’s business, financial condition and results of operations, including an event of default under some or all of VimpelCom’s outstanding indebtedness.
      On December 30, 2004 VimpelCom received the tax inspectorate’s final decision of the review of VimpelCom’s 2001 Russian tax filing, stating that VimpelCom owes 284.9 million rubles (approximately USD 10.2 million in taxes) plus 205.0 million rubles (approximately USD 7.4 million) in fines and penalties, which is an 88.9% reduction from the tax inspectorate’s initial claim in November 2004. A significant portion of the tax claim exclusive of fines and penalties (252.2 million rubles or approximately USD 9.1 million) is the result of the authorities claiming that, in their opinion, value added tax offsets were made incorrectly. Although VimpelCom has filed an administrative complaint to the highest tax authority challenging the tax inspectorate’s final decision, VimpelCom has paid the value added taxes for 2001 and made offsets of these amounts in later tax years.
      On February 18, 2005 VimpelCom received a final decision of the tax inspectorate’s review of VimpelCom’s 2002 Russian tax filing, stating that VimpelCom owes an additional 344.9 million rubles (approximately USD 12.4 million) in taxes plus 129.1 million rubles or (approximately USD 4.7 million) in fines and penalties. The final decision reflects a reduction from the amount of 408.5 million rubles (approximately USD 14.7 million) in taxes plus 172.1 million rubles (approximately USD 6.2 million) in fines and penalties, set forth in the preliminary act of the tax inspectorate for 2002. A significant portion of the tax claim exclusive of fines and penalties (251.3 million rubles or approximately USD 9.1 million) is the result of the authorities claiming that, in their opinion, value added tax offsets were made incorrectly. Although VimpelCom filed a court claim to dispute the tax inspectorate’s final decision, the Company has paid this amount.
      In December 2004, individual purchasers of VimpelCom securities filed separate lawsuits in the United States District Court for the Southern District of New York against VimpelCom and VimpelCom’s Chief Executive Officer and Chief Financial Officer. Plaintiffs allege violations under Sections 10(b) and 20(a) of the Exchange Act and Rule 10b on behalf of themselves and persons or entities who purchased VimpelCom’s securities between March 25, 2004 and December 7, 2004. The principal allegations in these complaints relate VimpelCom’s 2001 tax filing, described in a VimpelCom December 8, 2004 press release. On July 11, 2005, the lead plaintiff and two individual purchasers of VimpelCom securities filed an amended complaint. The claims in the amended complaint allege in principal that VimpelCom failed to disclose prior to December 8, 2004 that (i) in August 2004 the Russian tax authorities began an inspection of the company’s tax filings for 2001 and other years, and (ii) following the inspection, the Russian tax authorities alleged that value added tax offsets were made incorrectly by the company. On August 25, 2005, the defendants submitted a motion to dismiss the plaintiff’s claims. On March 15, 2006, the court dismissed the plaintiff’s claim with prejudice. The decision is subject to appeal.

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TELENOR FIXED
      We are the leading provider of fixed network telecommunications services in Norway, with a strong position in the growing broadband market throughout the Nordic region. In Norway, we provide telecommunication solutions on a retail basis to both the residential and business markets. Solutions offered to the market include:
  analog (PSTN), digital fixed line telephony services (ISDN) and broadband voice services over Internet Protocol (VoIP);
 
  internet access via PSTN/ ISDN and digital subscriber lines (xDSL);
 
  value-added services; and
 
  leased lines.
We also provide telecom solutions to the Norwegian wholesale market, including interconnection to our networks and domestic and international transit and capacity services.
      With the acquisition of Bredbandsbolaget and Cybercity in July 2005 for SEK 6.0 billion (NOK 4.5 billion) and DKK 1.4 billion (NOK 1.3 billion), respectively, we have taken a strong position in the growing broadband markets in Sweden and Denmark. Bredbandsbolaget is the second largest provider of broadband services in Sweden, offering a full “triple-play” of high-speed internet, VoIP and Internet Protocol (IP) television services on an all-IP fiber and xDSL network. Cybercity is the third largest supplier of broadband services in Denmark, providing xDSL-based internet access and voice services to both residential and business customers.
      On February 8, 2006, we increased our shareholding in the Swedish residential voice and broadband provider Glocalnet AB by 13.5% for a consideration of SEK 136 million (NOK 118 million) to secure a 50.1% ownership interest. The acquisition triggered a mandatory offer for all outstanding shares in Glocalnet AB. This offer is valid until April 21, 2006. As of March 28, 2006, we hold a 96.6% ownership interest in Glocalnet.
      In the fourth quarter of 2005, we disposed of our operations in the Czech Republic and Slovakia with a loss of NOK 63 million.
      In addition, we also provide both basic and value-added fixed network telecommunication services and managed services to the business market, as well as certain wholesale services, in Sweden. We also hold a 20.3% ownership interest in the listed Russian telecom operator Golden Telecom.
Overview and Background
Fixed Norway
  •  Residential market. We provide voice services on a traditional public switched telephone network (PSTN), an integrated services digital network (ISDN) and via broadband Voice over Internet Protocol (VoIP). We also provide narrowband (PSTN/ ISDN) and broadband (xDSL) Internet access and services to homes across Norway. At December 31, 2005, we had approximately 922,000 PSTN subscriptions, 286,000 ISDN basic rate access subscriptions and 24,000 VoIP subscriptions for telephony services. We also had 579,000 Internet access subscriptions in the residential market, comprising 165,000 narrowband (ISDN/ PSTN) subscriptions and 414,000 broadband (xDSL) subscriptions.
 
  •  Business market. We provide our business customers, which include a number of public sector entities, with PSTN, ISDN and VoIP telephony services, Internet access via xDSL and leased lines services. At December 31, 2005, we had approximately 167,000 PSTN subscriptions, 216,000 basic rate, 7,000 primary rate ISDN subscriptions and 1,600 VoIP subscriptions for telephony services. We also had 61,000 subscriptions for Internet access via xDSL in this market. In addition, we provide integrated voice and data telecommunications, access and network services to the business market in Norway.

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  •  Wholesale market. We provide a range of interconnection and capacity services, including leased lines, in the Norwegian market. Our interconnection and capacity services allow other network operators, Internet service providers and other service providers to connect to our network or use our infrastructure in order to facilitate their own service offerings. We also provide international operators with transit and capacity services for international voice and data traffic into or through Norway. We provide unbundled telephony access (PSTN and ISDN) and xDSL access, to other operators and service providers. Further, we provide local loop unbundling (LLUB) and shared access to the local loop, which enables other operators able to provide end users with broadband.
Fixed Sweden
      We provide telephony, IP-based and data communication services and advanced network services to the business and wholesale market in Sweden through our wholly-owned Swedish subsidiary Utfors AB. From July 2005, we provide high-speed internet, VoIP, IP-TV and add-on broadband services to the Swedish residential market through our wholly-owned subsidiary Bredbandsbolaget. Bredbandsbolaget has approximately 369,000 subscriptions as of December 31, 2005, representing a 20 percent market share.
Fixed Denmark
      From July 2005, we provide broadband solutions and network-based products such as security and VPN products for residential and business customers through our wholly-owned subsidiary Cybercity. Cybercity serves small, medium and large business customers as well as residential customers. As of December 31, 2005, Cybercity has approximately 122,000 xDSL customers.
Fixed Norway
Residential Market
      We are the leading provider of fixed-line telecommunication services to the residential market in Norway. As of December 31, 2005, we had approximately 1,232,000 subscriptions for telephony services, comprising 922,000 PSTN subscriptions, 286,000 ISDN basic rate access subscriptions and 24,000 VoIP subscriptions. We also had 579,000 Internet access subscriptions, comprising 165,000 narrowband subscriptions and 414,000 xDSL subscriptions.
Services
      The core services offered to the residential market in Norway are voice services and Internet access. We currently offer each of these services on analog, ISDN and xDSL.
      Analog (PSTN). We offer basic voice, facsimile and dial-up Internet access services on our analog network via copper wire connecting our customers’ premises to our fixed network. Each analog access line provides a single telecommunications channel and is still the main access line for the residential market. Under the universal service obligation in our fixed telephony license, we are required to make analog services accessible at an affordable price to all households and enterprises in Norway.
      ISDN. We also offer basic voice and dial-up Internet services via ISDN access. ISDN allows a single copper wire access line to be used for a number of purposes simultaneously, including voice and data transmission. ISDN also provides a higher quality connection with faster transmission of signals and increases bandwidth capacity. ISDN basic rate access provides two digital channels. Customers install their own ISDN lines on a “plug & play” basis or by ordering installation. In October, we launched a lower priced, single line ISDN subscription aimed at customers that have less demand for ISDN because they acquired an xDSL subscription for Internet use and would thus only use ISDN access for basic voice services
      xDSL. xDSL provides broadband capacity, which means that data can be transmitted at much greater speeds than analog or ISDN lines over the existing installed copper line without interfering with the normal voice telephone connection. As at December 31, 2005, 89% of our local access lines were able to accommodate an xDSL line and 34% of our subscriptions were xDSL subscribers.

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      VoIP. We launched VoIP in March 2005 in the residential market. This technology, which initially only will be offered to our xDSL customers, allows customers to send voice signals via a broadband connection rather than via traditional telephony networks.
      Value-added services. We offer a broad range of value-added services on a subscription or usage basis. Our subscription-based services, for which we charge a monthly fee, include caller identification, call waiting, voice mail and remote call diversion. Our usage-based services, for which we charge a per-minute fee, include a “call back when occupied” service, three-party conference calling and an international calling card service. From September 2004, customers have been able to choose three value added services at no cost.
Fees and tariffs
      In 2005, connection fees and call tariffs were kept at a level that we regard as competitive compared to traditional competitors with PSTN/ ISDN. We have a strong belief in variation in tariff plans as a competitive strategy and, as a consequence, offer a variety of tariff plans, each with different subscription and traffic fees. As of December 31, 2005, we offered various discounts in connection with our Familie & Venner (Family and Friends) programs.
      The PSTN/ ISDN price structure consists of subscription fees and minutes-based traffic charges. Customers may choose between tariff plans with different subscription and traffic fees. Our VoIP service has at similar price structure as PSTN/ ISDN, but with a lower subscription fee and free traffic between other Telenor VoIP customers. xDSL has a fixed rate regime with no limitation on volume. Price segmentation for xDSL is based primarily on bandwidth. An additional fee is charged for unbundled xDSL subscribers (e.g. subscribers who do not have PSTN/ ISDN subscriptions for voice services).
Subscriptions
      The following table shows selected subscriber data for telephony services on our analog (PSTN) and digital (ISDN) access lines and Internet access on our PSTN/ ISDN lines and xDSL.
                           
    As of December 31,
     
    2003   2004   2005
             
    (in thousands)
Telephony
                       
 
Analog (PSTN)
    1,096       1,001       922  
 
Digital (ISDN)(1)
    454       371       286  
 
VoIP (Broadband)
                24  
                   
Total telephony subscriptions
    1,550       1,372       1,232  
                   
Internet Access
                       
 
PSTN/ ISDN access (dial-up)
    294       241       165  
 
xDSL access
    163       286       414  
                   
Total subscriptions
    457       527       579  
                   
 
(1) Each digital (ISDN) subscription in the residential market provides two access channels.
      The decrease in the number of PSTN/ ISDN subscriptions from 2003 to 2004 (for both telephony and Internet access services) was due to increased competition, including competition from operators to whom we sell access lines on a wholesale basis, and a decrease in the number of subscriptions in the market as a whole. We have attempted to reverse this trend with more cost competitive call plans and improved customer service. The decrease from 2004 to 2005 was mainly due to migration to VoIP subscriptions on competing networks. The decrease in PSTN/ ISDN Internet subscriptions was offset by an increase in xDSL lines due to the migration from PSTN/ ISDN to xDSL.

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Traffic
      The following table shows information on minutes of traffic generated by residential analog and ISDN subscribers. The decrease in voice minutes are partly due to a decrease in number of subscriptions and fewer minutes per user due to the migration to mobile, SMS and internet use, together with loss of high volume customers to VoIP. The migration to xDSL decreases the number of Internet traffic minutes as the use of xDSL is measured in capacity rather than minutes.
                                         
    Year ended December 31,   Increase (decrease)
         
    2003   2004   2005   2003/2004   2004/2005
                     
        %   %
    (millions of minutes)        
Traffic:
                                       
National traffic (exclusive internet traffic and calls to mobile phones)
    5,202       4,654       3,963       (10.5 )     (14.8 )
Internet traffic
    3,323       2,605       1,533       (21.6 )     (41.2 )
Calls to mobile phones
    847       810       781       (4.4 )     (3.6 )
International
    207       193       167       (6.8 )     (13.5 )
Other
    520       529       424       1.7       (19.8 )
                               
Total
    10,099       8,791       6,868       (13.0 )     (21.9 )
                               
Market share (based on minutes)
                                       
Total residential(1)
    67%       68%       65%                  
 
(1) Average during the year
Competition
      In the residential market, our main competitor in the area of fixed telephony and dial-up Internet access is Tele2, which offers services based on carrier pre-selection. Dial-up Internet access is also provided by several smaller Internet service providers, including Sense and Powertech. Our market share in fixed telephony and dial-up Internet has decreased in 2005 compared to 2004. Competition in fixed telephony has increased as a result of unbundled telephony access on a wholesale basis, which we introduced in 2003, and the emergence of VoIP telephony services. Migration from dial-up to broadband access solutions impacts competition in all segments by introducing new market players and products, such as VoIP.
      Several new competitors now offer low priced voice services based on VoIP. The growth in the number of VoIP competitors, together with increased media focus on how consumers can save money using VoIP, has led to significant growth in VoIP subscriptions in 2005. This development represents a competitive threat to us in the fixed telephony market. An estimated 160,000, or 10%, of all home telephony customers in Norway now have VoIP service.
      xDSL providers dominate the residential broadband access market. We are currently the major xDSL provider, but significant competition is offered by the local loop unbundling (LLUB) operators NextGenTel, Catch/ Bluecom and other locally based operators, as well as from other xDSL providers, such as Tele2, who purchase access to our xDSL network on a wholesale basis. In 2005, we also faced increased competition in the broadband market from local providers owned by municipalities and utility companies.
Business Market
      We are the leading provider of telecommunications services to the business market in Norway. Our objective is to provide our business customers with innovative communications services. Similar to our objectives in the residential market, we are seeking to develop and manage long-term customer relationships with our business customers.

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Services
      Basic network services. The principal services offered to our business customers are basic network services (voice) via analog and ISDN access lines. ISDN access lines include both basic rate access lines and primary rate access lines, the latter being more advanced lines that provide 12 to 30 access channels. As of December 31, 2005, we had approximately 390,000 telephone subscriptions in the business market, of which approximately 57% were ISDN subscriptions. We offer three levels of business discounts from the basic traffic charges, each of which are based on the volume of traffic.
      Leased Lines. We also provide analog and digital leased lines to businesses. Under the universal service obligation in our fixed telephony license, we are obligated to offer leased lines with a capacity of 64 Kbps and 2 Mbps on equal terms to all market participants. Demand for capacity has generally increased as customers are migrating from analog lines to digital lines and to higher capacity lines. The number of digital leased lines, however, has decreased as customers migrate to xDSL.
      Internet access. We offer our business customers a range of solutions for Internet access, from basic connection for single users to comprehensive solutions for large companies with many users. Companies using multiple users can choose among leased lines, ISDN, xDSL, or other technologies to connect their local network to the Internet. Also included in the portfolio are new secure services for Wireless Local Area Networks (Wireless LAN). Our xDSL offerings are mainly positioned towards the small and medium enterprise (SME) segment and our current offerings range from 640 to 8,048 Kbps connections. The deployment of xDSL is one of our priorities in the SME segment.
      VPN. We offer Virtual Private Network (VPN) solutions through which our customers may link their company’s sites and networks together and provide support to their remote users. Based on a combination of authentication, encryption and protection of data, our VPN solutions are designed to ensure the secure transfer of data and help reduce costs for our customers’ communication infrastructure.
      Nordicom. NordiCom is a Scandinavian ATM-based broadband network.
      Value-added telephony services. In addition to advanced routing and service access, we also offer our business customers basic voice communication services, including customer contact services such as virtual call center solutions, traffic routing and toll-free numbers and interactive services such as interactive voice response, short messaging and web services.
      Messaging. We provide domestic and international messaging services based on a wide range of integrated and user-friendly e-mail communications packages. These services include our IMAP-based mailboxes for the professional market, which facilitate users’ access to e-mail, faxes, cellular phones and pagers, as well as services which enable users to receive and send e-mail messages from both central and remote locations.
      Managed Voice Services. Managed voice services consist of operating and/or maintaining a business customer’s telephony system. Our services are divided into three levels, each involving a different level of service.

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Subscriptions
      The following table shows information regarding subscriptions in the business market for telephony services on our analog (PSTN) and digital (ISDN) access lines and channels (including courtesy lines, service lines and payphones) and on our VoIP service and for Internet access via xDSL as of December 31, 2003, 2004 and 2005.
                             
    As of December 31,
     
    2003   2004   2005
             
    (in thousands)
Telephony
                       
 
Analog (PSTN)
    212       181       167  
 
Digital (ISDN)(1)
    278       247       223  
   
Of which basic rate(1)
    270       239       216  
   
Of which primarly rate(1)
    8       8       7  
   
VoIP (Broadband)
                2  
                   
   
Total telephony subscriptions
    490       428       390  
                   
Internet Access
                       
 
xDSL access
    14       40       61  
                   
 
Total subscriptions
    14       40       61  
                   
 
(1) A basic rate digital (ISDN) subscription provides two access channels and a primary rate digital (ISDN) subscription provides 12 to 30 access channels.
      The decline in the number of subscribers for voice services is due both to lower market share and a decline in fixed subscriptions for voice services in the market as a whole.
Traffic
      The following table shows information on minutes of traffic generated by analog and ISDN subscribers in the business market for each year in the three-year period ended December 31, 2005. The migration of voice traffic from fixed to mobile and from analog or ISDN to VoIP, along with decreasing market shares, led to the continued decrease in traffic minutes in 2005.
                                         
    Year ended December 31,   Increase (decrease)
         
    2003   2004   2005   2003/2004   2004/2005
                     
    (millions of minutes)   %   %
Traffic:
                                       
National traffic (exclusive internet traffic and calls to mobile phones)
    3,001       2,353       1,797       (21.6 )     (23.6 )
Internet traffic
    1,296       972       548       (25.0 )     (43.6 )
Calls to mobile phones
    595       552       551       (7.2 )     (0.2 )
International
    133       115       110       (13.5 )     (4.3 )
Other
    261       243       196       (6.9 )     (19.3 )
                               
Total
    5,286       4,235       3,202       (19.9 )     (24.4 )
                               
Market share (based on minutes)
                                       
Total residential(1)
    74 %     72 %     68 %                

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(1) Average during the year
Distribution and marketing
      We distribute our products and services to the business segment through a variety of channels. These include our key account managers and our direct sales force for our larger business customers. Our internal direct sales force is dedicated to our large corporate customer segment. In addition to our sales force, we use a number of independent agents for distributing our services to small and medium size enterprises. We have also implemented a strategic program to improve our customer relationship management capabilities in this market segment.
Competition
      The competition in the business market is most significant in the central industrial regions of Norway, where TDC Song, BKK, Ventelo have each invested in their own network infrastructures and challenged us with competitive offerings of fixed line access, leased lines, broadband and data communication services. In the leased line and data communication markets, we are being challenged by the local loop unbundling (LLUB) operators NextGenTel and Catch (a subsidiary of Ventelo), who offer VPN solutions connecting business locations and home offices through xDSL access lines. In 2005, we faced increased competition in the broadband market from focused local providers and utility companies.
Wholesale Market
Domestic wholesale
      Interconnection services. In Norway, we provide interconnection services consisting of call termination, call transit and call origination, on both a carrier select and carrier pre-select basis. We are required to price our interconnection services on a cost-related basis. Our objective is to develop services to maintain our position as a leading supplier of interconnection services in the wholesale market. We offer interconnection services in 12 regional areas in Norway.
      Local loop unbundling. As required by regulation, we deliver LLUB to other telecom suppliers. Local loop access provides operators with access to our copper access network. In addition to full access to the local loop, we also offer shared access to the local loop. Through full and shared access, operators are able to provide end users with broadband.
      xDSL. We have launched xDSL in the wholesale market. xDSL access allows Internet service providers and other service providers to provide xDSL-based products and offerings without having to install any technical devices in connection with the copper pairs.
      Intelligent network services. We also provide access to intelligent network services on a wholesale basis. Intelligent network services allow service providers to offer value-added services hosted on our network and sophisticated routing of calls depending on factors such as the time of the call and the point of origination.
      Wholesale line rental. We provide telephony access (PSTN and ISDN) on a wholesale basis to other operators and service providers, which allow them to sell subscriptions for telephony services directly to the end customer.

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Access
      The following table shows information regarding the number of analog (PSTN) and digital (ISDN) access lines and channels, including courtesy lines, service lines and payphones, and xDSL and LLUB subscriptions in the wholesale market as of December 31, 2003, 2004 and 2005.
                           
    As of December 31,
     
    2003   2004   2005
             
    (in thousands)
Telephony
                       
 
Analog (PSTN)
    104       188       202  
 
Digital (ISDN)(1)
    57       114       111  
 
Of which basic rate(1)
    57       113       110  
 
Of which primarly rate(1)
          1       1  
                   
Total telephony subscriptions
    161       302       313  
                   
xDSL access
    56       91       109  
LLUB access
    80       145       235  
 
(1) A basic rate digital (ISDN) subscription provides two access channels and a primary rate digital (ISDN) subscription provides 12 to 30 access channels.
Competition
      Our main competitor in the domestic wholesale market is BaneTele, the only other provider of wholesale services with national coverage. In addition, TDC’s recent acquisition of Song Networks makes the combined TDC Norway/ Song Networks a significant alternative provider of wholesale capacity services in southern Norway. In the wholesale market for DSL, we face competition from NextGenTel, Catch, and TDC/ Song Networks, which provides xDSL to end users on the basis of LLUB.
      In addition, we face competition from a number of focused local or niche providers specializing in smaller segments of both the residential and business markets, including local broadband initiatives supported or owned by municipalities and local utility companies. In the residential market, we also face competition from cable networks.
International wholesale
      Through Telenor Global Services (TGS), we provide a broad range of services in the international wholesale market, including broadband capacity and worldwide traffic. Our objective is to be the leading supplier of voice and capacity services to and from Scandinavia, and to be a successful niche player in the wholesale traffic market in Europe
      International direct dialing. We offer inbound call termination for international traffic terminating in our network for which we receive payments from other carriers under a system of settlement arrangements, and purchase termination services from foreign carriers for outbound international traffic originating in our networks.
      Roaming. Telenor Global Services offers complete international roaming solutions which integrate IP connectivity with traditional voice services. Our roaming GSM service is global, with more than 220 international roaming partners connected through a single access line. The GPRS Roaming Exchange (GRX) connects mobile networks via a high-security and cost-efficient IP network. We are a registered GRX provider in the GSM Association.
      Leased capacity services. We offer leased capacity services, which provide fixed and dedicated connections. Leased lines are available in both analog and digital interfaces and with different capacities. We deliver these services within Scandinavia through our own telecoms network and deliver dedicated point-to-

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point connections between Scandinavia and most other countries in the world in cooperation with reputable operators. These services are well suited to users that generate a higher volume of traffic between fixed locations, for instance, connections between different local area networks (LANs) or private branch exchanges (PBXs). Leased lines are also a basic element in the production of other services, such as mobile phone and point of sale terminals.
Network Operations
Domestic infrastructure
      Our domestic network is a technologically advanced fixed line network designed to support our residential, business and wholesale service offerings and we also use the network to provide services to our other business areas.
      Trunk transmission network. We have a national ring topology backbone network using synchronous digital hierarchy (SDH) equipment on fiber optic cables. SDH provides faster and less expensive network interconnection than traditional plesiochronous digital hierarchy (PDH) technology. PDH is the conventional multiplexing technology for network transmission systems. For the regional backbone network, we have a similar structure based on SDH technology.
      Our entire national backbone network is based on optical dense wavelength division multiplexing. Dense wavelength division multiplexing is a transmission technology in which up to 200 optical channels are transmitted through the same fiber. We use systems based on this technology with 8, 16 and 32 optical channels at 2.5 Gbps or 10 Gbps (billion bits per second, which vastly exceeds the capacity of traditional copper cable or radio links). The national core network is designed to be the carrier for any transmission technology used on a higher layer. This may include synchronous digital hierarchy, asynchronous transfer mode (ATM) or IP technology.
      Our regional network layer comprises more than 300 installed connection or switching points in 185 rings distributed on 71 ring structures. The implementation of ring topology in the regional network has improved the quality of service of the network.
      Access network. Our local access network connects virtually all homes and businesses in Norway with nearly 4,000 digital telephony switches and concentrators. The network currently includes approximately 5.8 million kilometers of installed twisted pair copper wire. At December 31, 2005, the access network connected approximately 1,291,000 analog telephone lines, 612,000 ISDN basic rate and 8,000 ISDN primary rate access lines, 48,000 leased lines, 235,000 LLUB lines and 584,000 xDSL lines.
      In larger cities in Norway, we also provide optical fiber connections directly to larger businesses, universities and municipal locations. In total, we provide optical fiber connections to more than 2,300 locations.
International infrastructure
      International wholesale network. We offer an international wholesale network in the Nordic region between Oslo, Stockholm and Copenhagen. Our network capacity is one wavelength and is upgradeable.
      Our international switch in Oslo is connected to seven points of presence (PoPs), in Amsterdam, New York, London, Stockholm, Copenhagen, Paris and Frankfurt. These PoPs represent points of international interconnection with our customers and suppliers.
      Transatlantic submarine cable. We hold a 3.5% interest in the TAT-14 transatlantic submarine cable. The TAT-14 cable provides connection between five cable stations in Europe and two in North America. Service was launched on July 3, 2001, enabling us to provide capacity, including backhaul, between New York and major cities in Europe.
      In 2005, the submarine cable capacity market decreased as products and services migrate to more cost effective and wholly owned platforms.

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      Global Capacity Services. We provide global capacity services through wholly owned synchronous digital hierarchy (SDH) capacity to major destinations in Europe and the United States, International Private Leased Circuits (IPLC) services to worldwide destinations and IP Transit services in Western Europe and the United States. Based on a network of points of presence in major European and US cities, we provide SDH capacity services to carriers, operators and Internet services providers. Backed by service level agreements with leading providers, we offer a wide rage of leased line services worldwide. Through IP Transit, we offer internet access ports to Internet service providers. Our own network, Nextbone, connects customers and interconnect partners at the most important Internet exchange sites in Western Europe and the United States. As of December 31, 2005, we have connections to more than 300 customers and interconnect partners, with both private and public interconnect.
Fixed Sweden
      Fixed Sweden provides telephony, data communication, broadband and advanced network services to the business market, and telephony, DSL and IP-based communication services to the wholesale market in Sweden. We believe that the Swedish business market, in particular, provides growth opportunities due to the size and the growth rate of the market, our first class national data communications network and the preference of Swedish business customers towards single vendor relationships and outsourcing. We are currently Sweden’s second largest provider of business data communication services, as well as the second largest wholesale provider of fixed network services, after TeliaSonera.
      We also provide voice and DSL services on a wholesale basis in Sweden to service providers, which market these products to the residential retail market. Glocalnet, which is the third largest service provider within the fixed residential segment, is by far the largest of our wholesale customers. At December 31, 2005, Glocalnet has 133,000 fixed telephony subscriptions, 5,000 mobile telephony subscriptions, 108,000 dial-up Internet subscriptions and 104,000 xDSL subscriptions. As of March 28, 2006, we hold a 96.6% ownership interest in Glocalnet.
      On July 8, 2005, we acquired 100% of the issued share capital of Bredbandsbolaget AB and its subsidiaries (Bredbandsbolaget) for a cash consideration of NOK 4.5 billion. Bredbandsbolaget is the second largest provider of broadband services in Sweden with approximately 369,000 subscribers as of December 31, 2005, representing a 20% market share. Operating on all-IP fiber and xDSL network, Bredbandsbolaget is synonymous with high-speed broadband. The company launched VoIP service in 2003 and serves approximately 104,000 voice customers as of December 31, 2005. Bredbandsbolaget also recently launched IP-TV services, thus offering a full “triple-play” of Internet, voice and TV broadband services. Bredbandsbolaget also has a successful operation serving small and medium-sized Swedish companies with Internet access services.
      During 2005, price competition has increased significantly in the Swedish broadband market, with Glocalnet, Comhem and TDC Song representing the most price aggressive players. Bredbandsbolaget is differentiating itself in this market through product advancement and high quality service. The following table shows information regarding the number of subscriptions for Bredbandsbolaget’s broadband-related products and services over the last 2 years.
                 
    As of
    December 31,
     
    2004   2005
         
    (in thousands)
VoIP (Broadband)
    67       104  
Internet Access
               
LAN access(1)
    139       155  
xDSL access
    164       214  
TV subscriptions
    1       12  

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(1) “LAN” stands for Local Area Network
      Figures for 2004 in the above table reflect figures from Bredbandsbolaget prior to our acquisition of the company in 2005.
Fixed Denmark
      On 5 July, we acquired 100% of the issued share capital of Esplanaden Holding A/ S (Cybercity) for a cash consideration of NOK 1.3 billion. Cybercity is the third largest supplier of broadband services in Denmark, with approximately 122,000 subscribers as of December 31, 2005 and a 15% market share. Covering 70% of Denmark with its own DSL infrastructure, the company focuses on the high-end residential, home office and small and medium enterprise (SME) segments of the market. The company also operates a successful VoIP product over its DSL access lines.
      TDC is Cybercity’s main competitor, along with Tele2 and Telia Stofa also acting as important competitors.
      The table below provides information regarding the number of subscriptions for Cybercity’s DSL and VoIP services over the last three years.
                 
    As of
    December 31,
     
    2004   2005
         
    (in thousands)
VoIP (Broadband)
    2       26  
xDSL access
    77       122  
      The figures for 2004 above reflect subscription data for Cybercity prior to our acquisition of the company in 2005.
TELENOR BROADCAST
Overview
      We are the leading provider of television and broadcasting services to consumers and enterprises in the Nordic region, measured in subscribers and revenues. We also operate the national terrestrial broadcast network in Norway and are the leading provider of satellite broadcasting services in the Nordic region, utilizing three geostationary satellites. Our main objective is to further strengthen our position in the Nordic region.
      In 2005, the Telenor Broadcast business area comprised the following business lines:
      Distribution. We provide TV distribution services to more than 3 million households and businesses in the Nordic region. We offer basic tier, minipay and premium pay-TV services to subscribers with Direct To Home (DTH) satellite dishes. In Norway and Sweden, we offer basic tier TV services, pay-TV and Internet services to cable TV subscribers. In Denmark, we market the same services through a cable network, OE Kabel TV, which we acquired in November 2005. In Finland, we offer premium pay-TV services to subscribers with access to digital terrestrial television (DTT). We also offer TV services through privately owned satellite master antenna TV networks (SMATV), which serve multiple dwellings such as housing associations and antenna unions.
      Transmission. We provide transmission services for broadcasters through our subsidiaries Telenor Satellite Broadcasting and Norkring. Telenor Satellite Broadcasting owns and operates satellite transmission capacity on the satellite position 1-degree west. Norkring owns and operates the Norwegian analog and digital terrestrial radio transmission system and the Norwegian analog television transmission system.

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      Other. Other consists of Conax, which offers conditional access systems, the corporate support functions of Broadcast, and related interests.
Distribution
      Our wholly-owned subsidiary Canal Digital is the leading TV content distributor in the Nordic region, distributing a wide range of national and international TV channels to households that rely on DTH, cable, DTT or SMATV for their reception of television services.
      Canal Digital has exclusive Nordic distribution rights on DTH to CMore’s premium film and sport channels until June 13, 2006, in addition to exclusive content rights on other channels. Furthermore, in June 2005, Telenor Broadcast, together with Norwegian broadcaster TV2, acquired the rights for distribution of Norwegian football on TV, broadband Internet and 3G mobile for NOK 1 billion. The rights cover the period from 2006 through 2008 for the Norwegian premier league and the Norwegian first division, and 2006 through 2009 for Norway’s international matches (home matches only) for men, women and youth, the national cups for men and women and women’s national premier league. The NOK 1 billion commitment for the rights will be paid over four years, with NOK 300 million per year for the period 2006 through 2008 and NOK 100 million for 2009. The financial commitment is a joint liability owed to the Norwegian Football Association by TV2 and Telenor Broadcast. Telenor Broadcast and TV2 have agreed that the material part of the free to air TV rights will be managed by TV2, while the Pay-TV rights and certain free TV rights have been assigned to, and will be governed by, the television channel TV2 Zebra, in which Telenor Broadcast and TV2 will have an ownership interest of 45% and 55%, respectively. The broadband Internet football broadcast rights will be managed by Telenor Fixed and TV2 Interaktiv, while the 3G mobile rights will be managed by Telenor Mobile.
      As of December 31, 2005, we had more than 3 million subscribers to our different television services, consisting of 906,000 pay-TV subscribers and 222,000 basic tier households on DTH, 681,000 cable TV subscribers, 33,000 DTT pay-TV subscribers and 1,177,000 households in SMATV networks.
      In 2005, our distribution area generated external revenues of NOK 4.6 billion and more than 50% of our Nordic distribution revenues are from outside Norway.
      The table below shows our subscriber base per country as of December 31, 2005.
                                         
    Norway   Sweden   Denmark   Finland   Total
                     
Subscribers Broadcast
                                       
DTH pay-TV subscribers
    341,000       361,000       151,000       53,000       906,000  
DTH basic tier households
    135,000       48,000       36,000       3,000       222,000  
Cable TV subscribers
    409,000       242,000       30,000             681,000  
SMATV households
    196,000       271,000       634,000       76,000       1,177,000  
DTT pay-TV subscribers
                      33,000       33,000  
                               
Total
    1,081,000       922,000       851,000       165,000       3,019,000  
                               
DTH
      To our DTH subscribers, we offer more than 70 Nordic and international TV channels, multiple tiers of services, including interactive services and pay-per-view services. We distribute minipay and Premium pay-TV services to more than 906,000 digital subscribers and basic tier services to an additional 222,000 households in the Nordic region. Both basic tier households, minipay and premium pay-TV subscribers receive local television channels through the DTH equipment provided to them. The minipay and premium pay-TV subscribers subscribe to at least one pay-TV package from Canal Digital in addition to the basic tier.

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      The following table shows key subscriber data for our DTH operations over the past three years:
                         
    Year ended December 31,
     
    2003   2004   2005
             
Subscribers at period end
                       
DTH pay-TV subscribers
    763,000       824,000       906,000  
DTH basic tier households
    241,000       253,000       222,000  
                   
Total subscribers
    1,004,000       1,077,000       1,128,000  
                   
      We believe that the growth in the number of subscribers over the past few years is primarily due to the success of our high-quality program packages that combine major international content brands and the most important local language television channels combined with aggressive marketing, multi-channel distribution and a focus on customer service.
Cable TV
      We operate cable-TV networks that served 681,000 subscribers as of December 31, 2005, of which 409,000 subscribers were located in Norway, 242,000 in Sweden and 30,000 in Denmark.
      In Norway, we market an analog basic tier package comprising 17-24 channels to individual households, landlords and housing associations. In addition, we sell digital pay-TV packages to subscribers with a decoder and cable TV Internet access subscriptions to households connected to the upgraded part of our network. We market our cable television services through our own sales organization, which includes regional offices and sales representatives throughout Norway.
      In Sweden, we market the same services as in Norway, but with differences in programming to meet Swedish market demands. In Denmark, we operate a cable TV network and offer Internet services to our cable TV subscribers as well.
      The following table sets forth details of our cable operations for the years indicated.
                           
    Year ended December 31,
     
    2003   2004   2005
             
Subscribers at period end
                       
Basic tier
    604,000       624,000       681,000  
 
Of which digital pay-TV
    35,000       51,000       58,000  
 
Cable TV Internet subscribers
    31,000       44,000       73,000  
      Within cable TV, the growth in basic subscribers is fairly low due to the fact that cable TV has already been fully rolled out in the areas where cable TV development is financially viable. Further growth in this segment is primarily due to new building developments and acquisition of other cable operators. Therefore, the underlying revenue growth in the cable TV segment is partly driven by sale of additional services such as digital pay-TV and/or Internet subscriptions to our basic subscribers.
SMATV
      In the Nordic region, we are the leading reseller of analog and digital television channels and television services to privately owned SMATV networks, serving multiple dwelling units such as housing associations and antenna unions. We also provide technical services relating to SMATV networks and market pay-TV services to individual households in these networks.
      The following table sets forth operating information for our SMATV operations.
                         
    Year ended December 31,
     
    2003   2004   2005
             
SMATV households
    1,098,000       1,212,000       1,177,000  

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      We expect that the number of households using SMATV technology will decrease in the next five to ten years. This due to the fact that many small SMATV networks may choose to move from SMATV to DTT, enabling their users to access a full host of digital TV services without upgrading the network. Furthermore, over the last three to five years, SMATV networks are increasingly being acquired by cable operators. Due to the imminent decomissioning of the analogue terrestrial networks (which partly feeds the SMATV networks), this development is likely to accelerate in the future.
DTT
      In the first half of 2004, we started a digital terrestrial pay-TV operation in Finland, marketing pay-TV packages to households with DTT reception equipment. As of December 31, 2005, we had approximately 33,000 subscribers to this service. We are currently the only DTT pay-TV operator in Finland. Presently, we offer a package of three channels, in addition to several free to air channels. The number of digital TV-channels available in Finland is not expected to grow until new multiplexes offering more transmission capacity are developed.
      In August 2005, we entered into a partnership agreement with the Norwegian broadcasters NRK and TV2 to apply for a license to develop and operate the digital terrestrial (DTT) network in Norway. The license application was submitted by Norges Televisjon AS (NTV), in which we have an equal ownership share along with NRK and TV2. The DTT network would eventually replace the current analog terrestrial network owned by our subsidiary Norkring, which currently secures households TV reception via regular antennas. The parties have also established a new company, NTV Pluss AS, which if license is awarded, will offer pay-TV services over the DTT network.
Competition
      With regard to DTH, we compete throughout the Nordic region, with Viasat, a subsidiary of the Swedish media company Modern Times Group (MTG). Providers of digital terrestrial television (DTT) are a new type of competitor in the digital TV services market, with Boxer in Sweden emerging as the most important competitor.
      Boxer follows a low-price strategy in the Swedish market and competes in the low pay range of the market. We compete in the Nordic market for digital TV services primarily on the basis of quality and quantity of content, and the quality of customer service and operations.
      Within cable television, our primary competitor in Norway is UPC Norway. In Sweden, our primary competitors are Comhem, UPC Sweden and Kabelvision. In the Danish market, we face competition from TDC’s subsidiary OnCable and TeliaSonera’s subsidiary Stofa. We compete in the market for cable television on the basis of technical reliability and our ability to offer other access services, such as cable TV Internet access, and to tailor our content portfolio to the preferences of the majority of the households in the area.
      Within the Nordic market for wholesale services to SMATV networks, our primary competitor is Viasat. In the Danish market, we face additional competition from OnCable and Stofa. We compete in the market for households in SMATV networks on the basis of price, content portfolio and value-added services, such as technical support and advice.
      Canal Digital is the sole provider of premium content for households with DTT access in Finland.
      In Sweden, the government began to shut down the analogue terrestrial TV network in September 2005. Between 100,000 and 200,000 households were directly affected by this shut down in 2005. The shut down is expected to be complete in January 2008. As the affected households move from analogue TV reception to digital reception via cable, DTH or DTT, all of the major operators in the Swedish market expect a surge in subscriber growth. Thus far, however, the growth in digital pay-TV subscribers caused by the analogue shut down has been weaker than expected as most households have chosen a digital free to air TV solution consisting of 5 attractive TV channels (“freeview”).

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      In Norway, NTV, which is jointly owned by Broadcast and the Norwegian broadcasters NRK and TV2, is the only applicant for the DTT license. The roll out of the DTT network is planned to start within six months after possible license is awarded. The final shutdown of the analog terrestrial network in Norway is expected at the end of 2008 if the license is awarded in 2006 as expected. Our subsidiaries Canal Digital, Conax, Satellite Broadcasting and Norkring are all possible suppliers to the Norwegian DTT network and Norkring has developed a DTT transmission system in Norway on a test basis in limited areas.
Transmission
Telenor Satellite Broadcasting
      Through Telenor Satellite Broadcasting, we are the largest Nordic provider of commercial satellite services for the transmission of television and radio programs based on both capacity and revenue. Telenor Satellite Broadcasting also provides satellite capacity, teleport services and IP broadband services to value added resellers and business customers in Europe and the Middle East.
      We provide our satellite transmission services through a fleet of three geostationary satellites: the Thor II and III satellites and the Intelsat 10-02, in which we own a share representing 11 transponder equivalents (36Mhz). Transponders are the main devices that satellites use to receive and transmit signals. Our three satellites are located in orbit approximately 36,000 kilometers above the equator at approximately 1 degree west. 1 degree west is an advantageous position for transmitting signals to the Nordic region and we estimate that over 90% of the households satellite antennas in the Nordic region can receive transmission from our satellites. We provide our teleport services through two teleports in Europe, Nittedal (Norway) and London, and uplinks in Sofia, Stockholm, Copenhagen and Helsinki. Along with Satellitaktiebolaget (NSAB), we are currently one of two satellite transmitters of digital signals to home satellite dish receivers and cable TV companies in the Nordic region. Using digital transmission, each transponder can transmit six to eight channels simultaneously, while a transponder used for analog transmission can only transmit one channel.
                         
    Year ended December 31,
     
    2003   2004   2005
             
Used for digital transmission
    32       33       33  
Used for analog transmission
    6       3       3  
Spare capacity
    5       4       4  
                   
Total number of transponders
    43       40       40  
                   
      As at December 31, 2005, we transmitted 156 TV channels (three analog) and 66 radio channels.
      In the third quarter of 2005, we entered into an agreement for the construction and subsequent purchase of a new satellite with 24 transponders (36mhz equivalents) to replace the satellite Thor II, which has 15 transponders (36mhz equivalents). We expect to acquire the completed satellite at the end of 2007, and total payments until this time are expected to be NOK 1.2 billion
Competition
      Our principal competitor in satellite broadcasting is NSAB, but we also face competition from INTELSAT, EUTELSAT and SES Global. NSAB is owned by the Swedish Space Corporation (25%) and SES Global (75%) and operates three satellites. SES Global is based in Luxembourg and operates ASTRA, the largest satellite system for home satellite dish transmission in Europe.
Norkring
      Through our wholly owned subsidiary Norkring, we own and operate analog and digital terrestrial radio and television transmission systems in Norway.
      Norkring provides its analog services to two national television broadcasters, the national broadcaster NRK and the commercial channel TV2, several national radio broadcasters, and a number of local television

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and radio stations. Norkring’s analog network consists of approximately 2,700 large and small transmitting stations in Norway and covers more than 99% of the Norwegian population. Norkring also provides digital audio broadcasting (DAB) and limited DTT trial transmission services. Norkring’s DAB network currently covers 70% of Norwegian households and all main roads in Norway.
      Norkring has developed a DTT transmission system in Norway on a test basis in limited areas and in the third quarter of 2005, Norsk Television AS (NTV), applied for a DTT license. Norkring is a possible contractor for the construction and technical operation of the DTT network in Norway.
Other
Conditional access systems
      Conditional access systems enable broadcasters and content providers to encrypt their digital services so that programming may only be viewed by authorized subscribers. We believe that conditional access systems are essential for creating good business models for content irrespective of terminal or access method. Access control via Smart Card is most widely used in the Pay-TV area. Through Conax, we provide conditional access services for a variety of network types, including broadcasting networks and Internet/intranet networks.
      As of December 31, 2005, Conax had sales and support staff in India, Singapore, China, Brazil and Germany, and customers in more than 40 countries.
Related interests
      We currently own 44.8% of the shares in APR Media Holding AS, which holds 100% of the shares in A-pressen, one of the three largest private media corporations in Norway. A-pressen is a majority owner of Norwegian local and regional newspapers and a number of other related interests, including printing plants, newspapers, websites and local television channels. A-pressen also has investments in Russian media and printing facilities and owns a 33.33% interest in the Norwegian commercial television channel TV2.
      We also have a 33% ownership interest in Otrum ASA, which is a leading supplier of hotel TV solutions in Norway.
      In addition, we acquired a 33.31% ownership interest in Norges Television AS (NTV) in the third quarter of 2005. NTV is the only applicant for a license to develop and operate a digital terrestrial network for television in Norway. In November 2005, the owners of Norges Television AS (NTV) founded the company NTV Pluss AS (NTV+) in which we have an equal ownership share along with the Norwegian broadcasters NRK and TV 2. If NTV is awarded the license for developing and operating the DTT network for television in Norway, NTV+ will offer pay-TV services over this network.
EDB BUSINESS PARTNER ASA
Overview
      Our 51.8%-owned subsidiary, EDB Business Partner ASA, is a leading information technology company providing software solutions, software services and computer operations to the Nordic region. EDB Business Partner’s main customers are large and medium-sized companies and organizations in banking and finance, telecommunications, and the public and trade and industry sectors. Although its primary market is Norway, EDB Business Partner also has significant operations in Sweden. EDB Business Partner’s shares are listed on the Oslo Stock Exchange.
Strategy and recent developments
      EDB Business Partner’s strategy is:
  •  to be a leading expertise-based IT business, focusing on application development and infrastructure and network operations; and

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  •  to take advantage of current IT trends, such as increased outsourcing of IT departments, the growth of Internet applications, e-commerce, Internet banking, and business critical applications.
      On June 28, 2005, EDB Business Partner and i-flex® solutions entered into an agreement to jointly offer comprehensive UNIX-based retail banking solutions to financial institutions in the Nordic region. The product will utilize the core system components of FLEXCUBE®, the world’s No. 1 selling banking solution. Market release is planned for 2006/2007.
      On November 16, 2005, EDB Business Partner and DnB NOR further expanded their commercial and strategic partnership by signing a six-year agreement for electronic invoicing in the Norwegian corporate market for use by DnB NOR and its corporate customers. The new solution is expected to significantly reduce the cost of invoice management for companies and will be ready for use by DnB NOR and EDB Business Partner’s existing customers from the second quarter of 2006. Revenues generated from the new solution will be transaction-based, and will thus depend on the number of companies using the system.
      In addition to the strategic partnership agreements with i-flex® solutions and DnB NOR, EDB Business Partner has made several major acquisitions since January 2005, as described below.
      On May 12, 2005, EDB Business Partner entered into an agreement to acquire the Swedish software company BanqIT Business Applications AB. The contract provides for EDB to take over the company’s in-house developed solutions for bank branch offices as well as 30 employees.
      On December 19, 2005, EDB Business Partner entered into an agreement to acquire the Norwegian card company TAG Systems AS. This acquisition is expected to give EDB a stronger market position and expand its expertise in the card area. The business currently has 100 employees. The acquisition will take place with effect from January 15, 2006.
      On January 10, 2006, EDB Business Partner entered into an agreement to buy the operations of the Swedish IT company Datarutin AB and its subsidiary Datarutin Dokumentor AB. Datarutin is one of the market-leading players in the Swedish market for IT operations, consulting services and document management, offering solutions for customers such as the Swedish unemployment benefit offices and property companies. The business has 220 employees, and EDB plans to integrate Datarutin into its Swedish activities with effect from February 15, 2006.
      On January 16, 2006, EDB Business Partner entered into agreements to take over Ementor’s consultancy division, Avenir, and the IT consultancy company Spring Consulting. The agreements establish EDB Business Partner’s presence in the area of application services in the Nordic market. Avenir has 241 employees whereof 201 employees are located in Oslo, while 40 employees are located in Bergen. Avenir’s business focus is within the public sector, oil and energy and banking and finance. Avenir has significant expertise within Microsoft, SAP-, IBM and Oracle technology, as well as project management, system development and -integration, adjustment and implementation of standard systems. Spring Consulting has 114 employees in Norway, Sweden and Denmark, working with SAP solutions for the Scandinavian market. The operation taken over is focusing on implementation and development of SAP solutions as business support to the various customer demands.
      On March 13, 2006, EDB Business Partner entered into an agreement to buy the Swedish IT consulting group Guide Konsult, which represented a further step in EDB Business Partner’s program to create a broader platform for the group in the Nordic IT services market. The agreement positions EDB Business Partner as a leading supplier of IT consulting and applications services in the Swedish market. Guide is a leading supplier of IT consulting and applications services in Sweden with 520 employees, the majority working in Gothenburg and Stockholm. The group is a significant supplier for a number of major Nordic companies. The industrial focus of Guide’s activities is on the car industry, pharmaceuticals, the public sector, the bank and finance industry and commerce
      During 2005, EDB Business Partner divested in two separate agreements all its assets in the Telecom business area. Assets related to EDB Telecoms Network Inventory and European Mediation businesses were transferred to Comptel Corporation. Shares owned by EDB Business Partner ASA in Telesciences Inc. in the

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United States were sold to a U.S. management-owned company. The total consideration from the sale was approximately NOK 155 million.
Business Areas and Services
      EDB Business Partner has the following two business areas: IT Operations and Solutions. EDB Business Partner, IT Operations area represents one of the largest suppliers of IT operating services in the Nordic region. This business area comprises both centralized and remote operation of computer systems, data communications, including services related to data backup and publishing, and serves a wide variety of industries and sectors. The Solutions business area comprises the sale of software, systems and consultancy services to a worldwide customer base in the banking and finance, public, and trade and industry sectors. The company’s primary activities are operated out of Norway and Sweden.
Competition
      EDB Business Partner’s main competitors in the Nordic countries are TietoEnator and WM-data.
      The market in which EDB Business Partner operates is highly competitive and is characterized by the need for a high level of expertise and experience, as well as significant capital investment in new technology and products. It is of critical importance in our industry that our products are secure, reliable and competitive in terms of functionality, performance and interface. Products need to adapt for changing market requirements in the interaction with industry standard software and hardware.
SATELLITE SERVICES
Overview
      Our wholly owned subsidiary, Telenor Satellite Services, is a leading worldwide provider of satellite-based mobile services. Telenor Satellite Services provides mobile communication services through its business unit Mobile Satellite Services (MSS) and provides fixed satellite-based communication networks and services through its business unit Corporate Networks (CN) and Taide.
Mobile Satellite Services
Overview
      We provide our mobile satellite services by acting as a land earth station operator (LESO). LESOs provide the gateways that link communication satellites with the terrestrial telephone networks. Calls made on a mobile satellite unit (e.g. a ship, airplane or automobile) are relayed over the satellite to a designated operator’s land earth station (LES) before being relayed to a telephone network. We own the Eik LES in Norway and, following the acquisition of COMSAT Mobile Communications (CMC) in 2002, the Southbury and Santa Paula LESs in the United States.
      As an LESO, we offer our services primarily through the Inmarsat satellite system and, to a lesser extent, the Iridium and Intelsat satellite systems. Inmarsat operates a constellation of geostationary satellites that extend mobile phone, fax and data communications to every part of the world, except the poles. On June 22, 2005, Inmarsat was listed on the London Stock Exchange. As part of the listing, our stake in Inmarsat was diluted to 9.43%. In the first quarter of 2006, we disposed of our remaining ownership interest in Inmarsat.
Services
      Through MSS, we provide a full range of services and products for satellite-based telephony and data communications to and from mobile units all over the world. These services and products are primarily available to users of mobile units at sea, on land, or in airplanes. We are one of the world’s largest providers

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of mobile satellite-based communications services to maritime users, which include commercial and naval vessels and oil installations. Our in-flight customers consist primarily of airline passengers and cockpit crew.
Mobile telephony and data services
      Through our wholly-owned subsidiaries Marlink and GMPCS, which operate much of MSS’ retail activities, we offer a full range of analog and digital mobile telephony and data services, including voice and fax services and Internet and email access, to customers at sea, on land and in flight. In November 1999, we were the first LESO to receive certification from Inmarsat to commence commercial operation of Inmarsat’s then newest satellite service Global Area Network (GAN). GAN services provide high quality voice and fax transmission, as well as data transmission, at speeds up to 64 Kbps (which is comparable to a fixed network ISDN line). In addition, in 2001, we were the first LESO to receive commercial authorization from Inmarsat to offer the Mobile Packed Data Service (MPDS) extension, which users of GAN services can use for data applications such as Internet access and email. Our overall market share of GAN services as at December 31, 2005 is approximately 35%. In addition to being the first LESO to offer GAN services and the MPDS extension, we were also the first LESO to be approved by Inmarsat for commercial operation of FLEET, Inmarsat’s next generation of maritime communication services. We commercially launched FLEET in 2002.
      In 2005, Inmarsat launched its next generation I4-satellites, offering its new Broadband Global Area Network (BGAN) service, which will provide voice and data transmission services to users of mobile units at speeds of up to 256 Kbps. BGAN is currently limited to land based users, but will be expanded to both maritime and aeronautical use in the next several years. We have been appointed as a distribution partner for the BGAN service, though all traffic relating to BGAN services will be handled by Inmarsat’s own LESs in the Netherlands and Italy.
Leased lines
      We offer heavy users of mobile satellite-based communications services dedicated leased lines for multiple mobile units. Leased capacity is available through either our Inmarsat space segment or our own total communication solution, Sealink, which is a permanent satellite leased line for data transmissions that establishes customized communications solutions between a fleet of mobile sites and one or more land-based sites. Maritime vessels are our primary market for dedicated leased lines and, at the end of 2005, we operated high capacity Sealink installations on board approximately 400 deep-ocean going vessels.
Other services
      We also provide a full range of voice and data traffic accounting services, and our subsidiary Marlink has the authority to operate as the billing authority for Inmarsat LESOs in more than 70 countries. Furthermore, before a communications terminal on a mobile unit can be used in the Inmarsat system, it must first be activated for service. In our capacity as a provider of Point of Service Activation (PSA) services, we have been authorized by Inmarsat to activate terminals in the Inmarsat system in more than 100 countries worldwide.
Competition
      In the Inmarsat satellite system, a customer can select to place a call through any land earth station that serves the respective area. As a result, LESOs offering services in the Inmarsat system compete mainly on the basis of pricing, value-added services, global coverage and brand name.
      Our primary competitors in the LESO market are Xantic, Stratos, France Telecom, KDDI and SingTel. We handled approximately 23% of the worldwide traffic over Inmarsat in 2005 and, along with Xantic, Stratos and France Telecom, represented the world’s four largest LESOs and accounted for approximately 85% of Inmarsat traffic in 2005. We also compete with a number of smaller players operating their own land earth stations.

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      Strong competition in these markets has reduced margins, and we expect this pressure to continue. With the advent of new BGAN services, Inmarsat will handle all traffic relating to BGAN services from their own LESs in the Netherlands and Italy. This change may create competitive challenges for LESOs as it could lead to a tightening of their profit margins for GAN services. In the voice only market, Inmarsat itself is facing increased competition from other mobile satellite systems, such as Iridium, Globalstar and Thuraya. As a consequence, we are also facing increased competition from providers who primarily offer mobile satellite services on systems other than Inmarsat.
Corporate Networks (CN) and Taide
      Through Corporate Networks (CN) and Taide, we provide fixed satellite-based communication networks and services to a wide variety of governmental, intergovernmental and commercial organizations utilizing Very Small Aperture Terminal (VSAT) technology. VSATs are 2-way satellite ground stations with a dish antenna that is smaller than 3 meters. VSAT is one of the most prevalent satellite technologies in use today for various types public and private organizations. It is most commonly used for point of sale transactions including credit cards and can also be used for transmitting and receiving sales figures and orders, receiving internal communications and providing interactive distance learning training courses for employees in various locations. Our VSAT-related services range in complexity from the provision of point-to-point data links to complex satellite networks providing access to a full suite of telecommunications services including voice, data, internet and video-conferencing services.
      As a single supplier of services on a global scale, our satellite services are particularly attractive to customers with communication needs that span a number of countries. Our services are also attractive to customers operating in markets lacking competitive terrestrial infrastructure.
      We operate through subsidiaries in several European countries. The main network operating centers for each of CN’s and Taide’s operations are located at the Nittedal earth station, just north of Oslo in Norway. The VSAT terminals and additional equipment are supplied from selected major suppliers. We have access to necessary satellite capacity from Intelsat, Inmarsat, Eutelsat and other major satellite operators.
OPPLYSNINGEN AS
      Our subsidiary Opplysningen AS, which until 2005 operated under the name “Teleservice AS”, is responsible for our directory enquiries products, which are supplied to consumers in Norway both electronically and manually. Opplysningen AS aims to simplify and rationalize the customer’s working day by making information and communication services easily accessible to users.
      We own Opplysningen through our subsidiary Telenor Venture IV AS. 15% of the stake in Opplysningen is owned by an external investor, which also holds a 49% stake in Telenor Venture IV AS following the exercise of an option to increase its stake in Telenor Venture IV AS by 29% in June 2005.
      During 2005 Opplysningen AS was reorganized into the following divisions: Opplysningen 1881 AS (Voice services), Opplysningen Mobil AS (Mobile services) and Opplysningen Online AS (Internet sites), with Opplysningen AS as the mother company.
RESEARCH AND DEVELOPMENT
      We have Research and Development (R&D) capabilities focusing on new technology and applications in the information and communication technologies field.
      R&D activities are coordinated with each of our business areas with the aim of supporting present business and new business under development. We had approximately 180 employees in our R&D activities at the end of 2005. In addition, extensive cooperation with leading research establishments at home and abroad ensures that we have access to many results and findings of other institutions and companies. In 2004, R&D participated in 25 international projects, mainly under the direction of the EU and EURESCOM, in addition to substantial participation within various standardization bodies.

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      Our R&D activities are primarily directed towards future mobile systems but also address other issues. R&D contributes new concepts and product ideas to our business activities. Testing and demonstrating new services form an essential part of this activity.
      On January 20, 2006, we announced that we will establish an Asia Pacific Research and Innovation Centre in Malaysia which will strengthen our competitive advantage by providing all of our mobile network operations with insights into the latest Asian consumer trends and service innovations.
REGULATION
Regulatory Environment
      Our operations are subject to a number of industry-specific as well as general laws and regulations on the national and international level. The following section provides an overview of these regulations and describes their material effects on our business activities. In addition to general competition law at the European and national level, our business activities continue to be primarily governed by regulations specific to the telecommunications markets in each of the countries where we operate. For more information regarding these country-specific regulations outside of countries not discussed in this section, please see “Regulatory matters” for each of our business segments in “Item 4: Information on the Company.”
European Union Regulation
      EU legislation is generally applicable in Norway under the European Economic Area (EEA) Agreement, as well as in each of the EU Member States in which our subsidiaries operate. EU legislation can take a number of forms. Regulations have general application and are binding in their entirety and directly applicable in EU Member States. Directives are binding, but national authorities may choose the form and method of implementation.
      The EU legislation on the telecommunications sector consists of five main directives, which were adopted in 2002. They intend to create a harmonized regulatory framework in the EU and the EEA for electronic communications networks and services, while at the same time reducing the overall level of regulation of the sector.
      Under the EU/ EEA framework, national regulatory authorities throughout the EU and EEA are to undertake a market analysis to determine markets without effective competition. As a consequence, certain preemptive remedies are to be imposed against companies that have significant market power (SMP) in such markets. The standard remedies provided by the directives are transparency, non-discrimination, accounting separation, access, and price control and accounting obligations.
      The market analysis described above is conducted for 18 relevant markets according to a recommendation by the European Commission. It will be undertaken on a regular basis and, therefore, new market developments could possibly lead to the imposition of new regulations or to the amendment or withdrawal of existing regulations. The obligations imposed are intended to be proportionate to regulatory need and to the policy objectives of the directives. Where the market analysis indicates that there is effective competition in a relevant market, no obligations shall be imposed, and competition law shall form the sole basis for regulation. The national regulatory authorities are given discretionary power with respect to regulation based upon their own market analyses, restricted only by the harmonization procedure of the directives.
      In 2006, the EU will start reviewing the regulatory framework of the telecommunications sector. The review will include the directives and the recommendation including the list of relevant markets, and is expected to lead to a new recommendation on relevant markets by the end of 2006. Update and adoption of the revised directives is not expected earlier than 2009.
      As it develops, EU legislation will continue to have a significant effect on our markets, including developments relating to the convergence of Internet, media and information technology.

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WTO Obligations
      Each of the countries in which we have invested or have subsidiaries is a member of, or is negotiating accession to, the World Trade Organization (WTO). Those that are already WTO members have also signed the Basic Telecommunications Agreement (BTA), which is administered by the WTO. The BTA obliges signatories to provide foreign telecommunications service suppliers with market access to some or all of their basic telecommunications services on a non-discriminatory basis. In addition, a number of signatories, including Norway and certain other countries in which we have investments or subsidiaries, agreed to abide by certain pro-competitive principles, including the prevention of anti-competitive behavior, interconnection, universal service, transparency of licensing criteria, independence of the regulator and non-discriminatory allocation of scarce resources. As a result, the regulatory frameworks of these countries, with respect to both telecommunication services and services in general, must be consistent with their obligations under the BTA. As our Norwegian and other European subsidiaries are already governed by EU regulations, the WTO rules are of particular importance to our non-European investments and subsidiaries
Norway
      Although not an EU member, Norway is required, as a member of the European Economic Area (EEA), to adhere to the EU’s regulatory framework to the extent that the EU directives are adopted by the EEA pursuant to the EEA Agreement. As a result, Norwegian legislation, including the Norwegian Electronic Communications Act (ECA) of July 25, 2003 (which replaced the former Telecommunications Act of 1995), and the secondary legislation under this act, is in line with the European Union telecommunications framework.
      The telecommunications sector in Norway is regulated through both sector-specific and general laws and regulations, including the ECA, and the laws implementing the EU directives. Norwegian and EU/ EEA competition laws also apply to our telecommunications activities and our other core activities in Norway. In addition, various other intellectual property and data and consumer protection laws govern our core activities. The Norwegian Broadcasting Act of December 4, 1992 (Broadcasting Act) and secondary legislation under this act are applicable to our cable television and terrestrial broadcasting network activities.
Regulatory framework and developments
      The telecommunications sector in Norway is regulated by the ECA and the secondary legislation under this act, which implements the EU regulatory framework for the telecommunications sector. In accordance with the requirements of EU law, the Norwegian Post and Telecommunications Authority (PT) is currently conducting an analysis of the 18 telecommunications markets and expects to complete most of its review in 2006. To the extent the PT decides any of these markets to be subject to insufficient competition, it may impose certain preemptive remedies against companies that have significant market power (SMP) in any of these markets, as discussed under “Regulation — European Union Regulation”.
      For the period until the market analyses under the EU framework are finalized, we are subject to certain transition rules issued by the ECA. Under these rules, we are still considered to have SMP in the markets for voice telephony (both fixed and mobile), transmission capacity and interconnection (both our fixed and mobile operations) and, therefore, are required to comply with the specific regulatory provisions applicable to operators with SMP. In addition to specific regulatory provisions on SMP operators, the government also addresses universal service obligations (USO) and special service obligations (SSO) by designating certain operators as USO providers and by entering into purchasing agreements with preferred service providers. For further information on our current USO and SSO, you should read “— Universal service obligations” and “— Special service obligations”.
      So far, the PT has issued consultative documents for all of the 18 relevant markets. We have been identified as an operator with SMP in 16 of these markets. The PT has issued decisions on special regulatory measures in two wholesale mobile markets and in two wholesale fixed broadband markets. Telenor has filed appeals with the Norwegian Ministry of Transport and Communication (the Ministry) regarding the market for mobile termination, the wholesale market for access to and call origination in mobile networks and the

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market for the unbundling of access to the copper local loop. The final decisions are still pending. In the fixed retail markets, the PT has issued draft decisions in the fixed telephony markets and the market for leased lines up to and including 2Mbps. In the wholesale fixed markets the PT has issued draft decisions in all markets on the list. Before publishing the final decisions, the PT will notify the EFTA Surveillance Authority according to the consultation mechanism in the ECA. In the wholesale market for transmission of broadcasting signals to end-users and the wholesale market for international roaming, the PT proposes to refrain from sector regulation.
Regulations on the provision of networks and telecommunications services
      Generally, the Norwegian regulatory regime poses few barriers to entry for new service providers. Its regulations establish general rules regarding, among other matters, registration, information on terms of subscription, interconnection, universal service obligations, special service obligations and appeal procedures and sanctions. Operators that are deemed to have SMP in markets that are susceptible to sector specific regulation may be subject to additional regulatory requirements in such areas as network access, transparency, non-discrimination, accounting separation and price control. These regulations also regulate number allocation, number portability and carrier selection, which are important elements of the regulatory regime for telecommunications operators.
      There is no maximum number of registrations or licenses that may be granted under the ECA. However, since the radio spectrum is a limited resource, the number of licenses that are granted may be limited as a practical matter. Before granting a mobile license, the Ministry is required to announce publicly that there are new licenses available.
Regulation of satellite, cable television, terrestrial broadcasting networks and television distribution
      Our satellite transmission activities are mainly governed by the provisions relating to technical requirements and allocation of frequencies in the ECA and the secondary legislation under the ECA. Satellite activities are also governed by international rules issued by the International Telecommunications Union (ITU). The PT is formally responsible, on behalf of the Kingdom of Norway, for dealing with the ITU with regard to the international coordination process.
      In the countries where we have satellite installations, we must have licenses to operate radio equipment and use frequencies from the relevant national regulators. We also must comply with technical rules, including rules for type approval, in the relevant jurisdictions. In addition, we follow the decisions and recommendations of the European Conference of Postal and Telecommunications Administrations and the ITU. We are also required to adhere to the general international space law principles and conventions on liability and registration.
      Both the ECA and the Broadcasting Act, and secondary legislation under these acts, govern our cable television activities. The most important regulations relate to must-carry rules for public broadcasters, subscriber choice for programs/channels, re-transmission of broadcast channels with an unlawful content. Cable owners have a duty to retransmit the television broadcasts of the NRK, the broadcast company TV2, and certain terrestrial local public television services. Programs subject to obligatory retransmission must be transmitted via channels that are available to every subscriber to the network. The regulations in the Broadcasting Act with respect to transmission of unlawful content are also relevant for our satellite distribution activities.
      In connection with our terrestrial broadcasting network, we have been granted, in accordance with the ECA, radio line and transmitter network licenses authorizing us to, among other things, sell or lease capacity to broadcasting companies and to transmit programs for broadcasting. These licenses are valid until November 2006 and can be renewed after such date. The licenses may be withdrawn if numerous or substantial breaches of the terms of the licenses occur, subject to a fourteen-day notice period.

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Universal service obligations (USO)
      The regulatory framework for USO in Norway primarily covers the fixed public telephony service, leased lines (connections up to 2 Mbps) and certain data services. Our current USOs are set out in an agreement that we entered into with the government on September 1, 2004. Under this agreement, we are under an obligation to provide fixed public telephony services at an affordable price to all households and enterprises, while leased lines and data services must continue to be accessible for all enterprises. In addition, the agreement obliges us to provide consumers with cost control measures for their fixed telephony spending. Other services that are classified as USO include the provision of public pay phones, publicly available directory enquiry services and directories and services for the disabled.
      In 1999, the Storting (the Norwegian Parliament) restated that we are obliged to satisfy our USO without compensation unless our obligations are extended, our market share decreases substantially or USO becomes concentrated on the least profitable parts of the market.
Special service obligations (SSO)
      We have also entered into agreements with the Ministry, pursuant to the ECA, under which we are required to provide certain SSO, including special defense-related services, coastal radio services and services for the arctic islands of Svalbard. The government compensates us for the incremental cost of these services on a case-by-case basis. Under the ECA, we negotiated the scope of our SSO and our compensation for our SSO directly with the competent ministries and with the PT.
Non-discrimination, transparency and objectivity requirements
      Under the transition rules of the ECA, as an operator with SMP, we are required to offer our services in a manner that avoids discrimination between the buyers of our services, unless different conditions can be justified on objective grounds. The PT has increasingly focused on the non-discrimination requirement, with respect to both external services providers’ access to networks and special discounts for certain segments of our markets. We expect that, following completion of the PT’s market analysis under the ECA, these requirements will continue to apply in the relevant markets where it is determined that there are operators with SMP. In all decisions and in draft decisions on remedies, the PT has imposed non-discrimination clauses.
      On June 6, 2005, the PT issued a decision barring us from providing “win-back” and “welcome” offers to new end user customers without providing the same offers to existing customers. In addition, the PT required us to publish all of our offers and discounts on our website under it transparency requirements. We have implemented both of these requirements.
Cost accounting and price regulation
      Under the transition rules of the ECA as an operator with SMP, we are required to follow certain principles for pricing, accounting and reporting on public telephony service, interconnection and transmission capacity. We are responsible for specifying, implementing and maintaining cost accounts as a basis for monitoring that our prices for regulated services are cost-oriented, objective and non-discriminatory. The PT continuously evaluates our compliance with cost-orientation with respect to our regulated services. According to the PT, a strict interpretation of “cost-orientation” requires prices to be calculated based on costs, plus a reasonable rate of return. With regard to any special offers in the market, we are further required to furnish to the PT documentation relating to the relevant cost savings upon request. Furthermore, the PT also evaluates discounts from the point of view of non-discrimination.
      We submit the historic cost accounting information to PT on an annual basis in the ONP (Open Network Provision) report. The report contains financial and other required information about our regulated services for the previous fiscal year based on fully distributed historical costs (FDC). In practice, the PT reviews our compliance with the requirements for costing, pricing, non-discrimination and transparency through its review of our ONP report in addition to specific requests for more detailed information in selected areas. In

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considering whether our rate of return for our regulated services in a certain year is reasonable, we believe that other factors should be duly taken into account, including, without limitation, the characteristics of the relevant market, the long-term perspective of our underlying investments, and the risks associated with such investments.
      In December 2004, the PT decided that the ONP report should continue to be prepared in accordance with the principles of the former regulatory regime. We expect our ONP report for the fiscal year 2006 to be the first report required to be prepared pursuant to the principles of the new regulatory regime introduced by the ECA.
      The following table sets forth our operating profit and average capital employed for our regulated services as reported in our ONP reports for 2002, 2003 and 2004. We expect the PT to set forth guidelines for a new reporting system following completion of the market remedies decision for the relevant markets as required under the EU regulatory framework.
                         
    2002   2003   2004
             
    (NOK in millions)
Fixed telephony
                       
Operating profit
    2,184       2,607       2,660  
Average capital employed
    11,735       10,281       8,747  
Mobile telephony
                       
Operating profit
    2,221       2,222       2,369  
Average capital employed
    3,431       2,932       2,938  
Leased lines
                       
Operating profit
    295       316       469  
Average capital employed
    3,287       3,259       2,934  
      Under the former Telecommunications Act, the regulatory authorities had no legal basis to retroactively adjust our prices. However, in connection with the enactment of the ECA, the Storting requested the Ministry to assess whether it would be appropriate to give the regulatory authority a legal basis to decide that prices could be adjusted retroactively. The outcome of that assessment from the Ministry is still pending.
Accounting separation and review
      Under the transition rules of the ECA, we are required to keep our accounts for the provision of public telephony services, public networks, transmission capacity and interconnection separate from our accounts for other business activities. We are obliged to supply information to that respect in our annual ONP report to the PT. The accounts are subjected to a limited review by an external accountant and must be made publicly available.
Interconnection and access — General
      As an SMP operator, we are required to offer interconnection services and access to our fixed and mobile networks to our competitors in the wholesale market in a manner that avoids discrimination between our competitors and our business units, unless different conditions can be justified on objective grounds. Our current obligations with respect to interconnection and access will be evaluated as part of the PT’s market analysis of relevant markets under the ECA.
Fixed network interconnection
      Under the transition rules of the ECA, we are required to have cost-oriented interconnection tariffs for fixed network interconnection services. The PT has the authority to investigate whether the interconnection tariffs applied by operators with SMP are cost-oriented and to mandate that tariffs be changed if they do not satisfy the cost-orientation requirement. Fixed network interconnection tariffs are also calculated on the basis of forecasted costs and volumes.

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      On March 24, 2006, the PT issued decisions under the ECA framework designating us an operator with SMP in the wholesale markets for call origination, call termination and transit services in the fixed network. In addition, the PT also notified twelve other operators as having SMP for call termination on fixed networks. The special obligations imposed on us in these three markets include price regulation according to a maximum price in accordance with our current prices, until the PT makes a new price decision. In addition, wholesale inputs related to the basic interconnection products like co-location and port charges are subject to price regulation according to cost orientation (fully allocated historical cost). Obligations for cost accounting, non-discrimination and standard offers and transparency also apply for origination, termination and transit.
Mobile network interconnection
      Under the transition rules of the ECA, mobile network interconnection tariffs must also be cost-oriented if the PT has notified the mobile operator that it has SMP in the “national market for interconnection.” On September 19, 2005, the PT issued a decision finding that each of Telenor, NetCom, Teletopia and Tele2 have SMP in the market for mobile termination. According to the decision, however, only we and NetCom will be subject to price cap regulation. We appealed the decision on October 10, 2005. From November 1, 2005, Telenor Mobil was instructed to reduce its interconnection charges, including the set-up charges, by NOK 0.05 to NOK 0.68. From July 1, 2006 a further adjustment of Telenor Mobil’s interconnection charges of NOK 0.03, would reduce the charges to NOK 0.65. Upon our request, the Ministry issued a stay on the imposition of the regulated price of NOK 0.68 until final decision of the dispute.
Access for resellers in the fixed network (Wholesale line rental)
      On September 15, 2005, the PT issued a draft decision to us proposing certain wholesale access obligations on us for wholesale line rental for PSTN/ ISDN products. You should read “— Retail Markets” for further information.
Access for Mobile Virtual Network Operators (MVNOs)
      An MVNO provides mobile services without controlling radio spectrum or radio network facilities. The MVNO buys radio spectrum and access to core network components such as base stations, but keeps control over traffic routing and SIM-card production. Under the ECA, the PT may require mobile operators with SMP to give access to their networks to MVNOs on non-discriminatory commercial terms, following the completion of the PT’s market analysis under the ECA. On January 20, 2006, the PT issued a decision in the wholesale market for access to and call origination in mobile networks, requiring us to provide MVNOs access to our mobile network on the basis of a standard agreement at non-discriminatory terms. No price regulation applies to MVNO access. We appealed the decision on February 13, 2006.
Access for mobile service providers
      Both we and NetCom have signed wholesale agreements with mobile service providers. Under these agreements, we sell all network services, including SIM-cards, to mobile service providers, who then provide mobile services using our infrastructure. We are currently involved in a dispute with Sense Communication regarding pricing and other issues related to the service provider agreement. You should read “Item 8: Financial Information — Legal Proceedings” for additional information about this litigation.
      On January 20, 2006, the PT issued a decision in the wholesale market for access to and call origination in mobile networks. The decision removes the specific obligations on service provider access in Telenor’s mobile network under the transition rules. We appealed the decision on February 13, 2006.
Access for value-added telephony service providers
      We are required to provide network access for external providers of value-added telephony services. The terms and conditions must be non-discriminatory and similar to those which are offered to our internal providers of such services, that is, our business units. We offer access to all our competitors via standardized network external interfaces.

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Access for broadband service providers
      Wholesale DSL products, which complement other forms of access and local loop unbundling, have become increasingly important in the broadband market. From time to time, the PT (as well as the Competition Authority) has monitored the terms in our wholesale DSL agreements. On February 20 2006, the PT issued a decision on the wholesale broadband access market. According to the decision, we are designated an operator with SMP in the markets for wholesale broadband access. The special obligations imposed on us by the PT include a general access obligation on broadband access and obligations regarding transparency, non-discrimination and accounting separation.
Local loop unbundling
      Following various regulatory decisions we have been offering to our competitors the ability to lease capacity in the local loop and we allow competing operators to deploy technical equipment in connection with our installations. This offering is equivalent to full unbundled access to the local loop. In addition, we offer “shared access” to the local loop, as well as access to the local sub loops for our competitors. So far, none of our competing operators has requested such access. Our pricing structure is based on cost.
      On February 20 2006, the PT issued a decision for the market for the unbundling of access to the copper local loop. According to the decision we have SMP under the new ECA regulatory framework in this market. The special obligations imposed by the PT include price regulations for full unbundled access to the loop until December 31, 2007, with a proposed price decrease from the current price of NOK 135 per month to NOK 105 on June 1, 2006 and another decrease to NOK 95 per month on January 1, 2007, respectively. We appealed the decision on March 13, 2006.
Wholesale Leased Lines
      In August 2004, the PT decided, at the request of BaneTele, that we are required to offer a new dedicated capacity product (Wholesale Leased Line Part Circuit) on a wholesale basis. From May 1, 2005, we provided Digital Aksess, a new wholesale access product with a different price structure than ordinary leased lines.
      On December 21, 2005, the PT issued a draft decision in the wholesale markets for access and transport capacity. We were designated an SMP operator in both markets. Under the draft decision, we are required to give access to all reasonable requests for wholesale access capacity products including Digital Aksess, dark fiber and co-location. Prices for access capacity shall be cost oriented. In the wholesale transport capacity market no price regulation is proposed. In both markets requirements for non-discrimination, standard offers and transparency and accounting separation are suggested by the PT’s draft decision.
Mobile national roaming
      Mobile operators with SMP (currently both us and NetCom) are required to provide national roaming to other mobile operators in areas where the requesting operator’s network does not have geographical coverage. GSM 1800 licensees are required to build a network covering the four largest cities in Norway (Oslo, Bergen, Trondheim and Stavanger) before being entitled to have national roaming. In addition, UMTS licensees are entitled to roaming on the networks of GSM operators with SMP (Telenor and NetCom) in those areas where the UMTS operator’s network does not have coverage, without being subject to network coverage obligations similar to those of GSM operators.
      On January 20, 2006, the PT issued a decision in the wholesale market for access to and call origination in mobile networks. The decision obliges Telenor to grant any reasonable request for access for national roaming to the mobile network, requiring us to have cost oriented prices and keep cost accounts for national roaming. We appealed the decision on February 13, 2006.

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Retail Markets
      On September 15, 2005, the PT issued a draft decision notifying us as an SMP operator in all six of its designated fixed telephony retail markets. The special obligations imposed on us in the retail markets for access to the public telephone network include restrictions on our ability to bundle retail products except for broadband products, and restrictions on our ability to determine prices in the retail markets unless objectively justified by cost differences. The PT is also proposing general wholesale access obligations for wholesale line rental for PSTN/ISDN products, including transparency, non-discrimination and price regulation and costing obligations. On March 2, 2006 the PT referred the draft decision to EFTA Surveillance Authority.
Carrier selection
      All operators providing access to the fixed network are required to allow their customers to select other operators to handle their calls. This can be done on a call-by-call basis by dialing a four-digit prefix in addition to the called telephone number or by means of carrier pre-selection. Subscribers have the ability to make two pre-selections of carriers. The first pre-selection includes national traffic to geographical, most non-geographical and mobile numbers (traffic to numbers with extreme traffic fluctuations have been exempted), while the other pre-selection includes all international traffic.
Number portability
      Number portability allows subscribers to keep their telephone numbers when changing service providers. All telephony service providers in Norway must support number portability. In February 2001, the PT decided to extend number portability to mobile telephone numbers. Number portability in mobile networks became effective on November 1, 2001. In Norway, there is no requirement for cross portability between fixed and mobile telephone numbers. In addition, pursuant to the secondary legislation under the ECA, we are exempt from any portability obligation for IP-telephony numbers.
Rights of way
      We are currently involved in disputes with Vegdirektoratet, the Norwegian public highway operator, and some local municipalities, regarding the appropriate level of compensation for our use of their land for certain telecommunications purposes under the Norwegian Expropriations Act and the ECA. The level of compensation is important for our cost base, although the net effect of increased levels of compensation would potentially be offset by increases in service prices. We expect the Ministry to resolve this dispute with Vegdirektoratet, and we believe that a decision by the Ministry would also set a precedent for our dispute with the municipalities.
VoIP regulation
      The PT in 2005 issued a policy report clarifying the existing legislation for VoIP. In the report, the PT concluded that VoIP-services arranged for any-to-any communication should be considered a public telephony service, and that obligations put on public telephony services in principle should be valid for such VoIP-services as well. The PT however granted temporary exemption for some of these obligations. In the draft market analysis for the telephony markets the PT concluded that VoIP utilizing the public telephone network was considered to be a part of the retail telephony markets. The PT in 2005 also issued a hearing document regarding VoIP-services not arranged or partly arranged for any-to-any communication, proposing that these services are not public switched telephony services. The PT has not yet issued a policy document based upon this hearing.
Competition Law
      All of Telenor’s operations in Norway are subject to the rules of the Norwegian Competition Act of March 5, 2004 (the Competition Act) and the competition rules of the EEA Agreement. The Competition Act is based on prohibitions against anti-competitive behavior similar to the prohibitions contained in the EEA Agreement and EC Treaty. The Competition Authority may intervene and declare specific behavior anti-

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competitive, and may review acquisitions or mergers of enterprises if such acquisitions or mergers create or strengthen a significant restriction on competition. Violations of the Competition Act may result in periodic penalty payments, administrative fines or penalties and/ or imprisonment up to six years.
      The ESA and the EU Commission may intervene in transactions that meet certain size and turnover thresholds, and which create or strengthen a dominant position as a result of which effective competition would be significantly impeded in the EEA/ EU’s common market.
      From time to time, Telenor’s competitors and customers file complaints with the Competition Authority and the EFTA Surveillance Authority (ESA) alleging that Telenor is abusing its dominant market position in various respects or in respect to mergers. Moreover, these authorities may also start investigations on their own initiative. There are currently several cases currently pending before the Competition Authority and the EFTA Surveillance Authority.
Norwegian Competition Authority
      There are several cases involving us pending before the Competition Authority.
      In September 2004, Tele2 filed a complaint with the Competition Authority in connection with Telenor’s launch of certain free additional subscription services in the retail market. Tele2 claimed that the offering of additional services to consumers resulted in a margin squeeze. In October 2004, the Competition Authority requested a response to the allegations from Tele2. Telenor responded in a letter November 12, 2004. The case is pending.
      In November 2004, the Competition Authority received a complaint from Tele2 in connection with Telenor’s launch of “Mini”, a fixed telephone service subscription targeted at consumers who make limited use of the fixed telephone service. Tele2 maintains that the service establishes a margin squeeze. Tele2 has asked for an interim decision. The Competition Authority notified Telenor of this complaint and requested information about the alleged restrictive behavior. Telenor filed an answer with the Competition Authority in December 2004. On February 9, 2005, the Competition Authority rejected Tele2’s request for an interim decision. The case is pending.
      In January 2005, NetCom filed a complaint with the Competition Authority alleging that Telenor has infringed a previous decision by the Authority prohibiting Telenor from entering into exclusive distribution agreements for mobile subscriptions. The complaint also alleges that Telenor has circumvented the Competition Authority’s decision by distributing mobile subscriptions through a franchise company in which it holds a 49% ownership interest. Telenor filed an answer with the Competition Authority in January 2005. The case is pending.
      In February 2005, NetCom filed a complaint with the Competition Authority alleging that the launch of Telenor’s Total-customer concept (5% rebate when demanding three services from Telenor) involves an illegal bundling of separate services. Telenor submitted an answer to the Competition Authority in March 2005. The Competition Authority has in a letter dated January 23, 2006 asked Telenor to provide information concerning costs and prices for all services involved in the rebate. A more thorough explanation of the efficiencies that justifies the rebate has also been requested. The case is pending.
EFTA Surveillance Authority (ESA)
      In July 2001, Viasat AS filed a complaint to ESA alleging that Canal Digital AS’ exclusive right to distribute TV2 by satellite (DTH) infringes the competition provisions of the EEA Agreement. Before the complaint was filed with ESA, both the Competition Authority and the Norwegian Ministry of Labour and Administrative Affairs concluded that the agreement is not anti-competitive under the Norwegian Competition Act. In 2003, the parties reached an agreement with ESA, whereby Canal Digital’s exclusive right to distribute TV2 by satellite was discontinued from October 1, 2003. Following negotiations with both Viasat and Canal Digital, TV2 entered into new exclusive distribution agreements with Canal Digital. The agreement expired in October 2005 and no new agreement was entered into by the parties. The ESA final decision is still pending.

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      ESA has requested information on Telenor’s ADSL pricing to both wholesale and to end-users.
Consumer Protection
      From time to time, our competitors and customers file complaints with the Norwegian Data Inspectorate (Datatilsynet) or with the Consumer Ombudsman (Forbrukerombudet). The Consumer Ombudsman, in particular, has actively monitored our and other telecommunications operators’ marketing activities and standard consumer contracts. Among other things, the Consumer Ombudsman has required mobile operators to restrict the duration of lock-in periods and the conditions for terminating the contract within the specified lock-in period.
Gender Equality
      In order to promote gender equality, Norwegian law requires public and private companies to have a board of directors that is composed to at least 40% composed of women. This requirement is subject to a two year transitional period until August 2007 for privately-owned companies. We currently comply with the legislation.
Data Retention
      In December 2005, the European Parliament adopted a directive on traffic data retention, which mandates the systematic storage of traffic and location data created when using electronic communications services for the purpose of fighting terrorism and serious crime. Once formally adopted by the Council and implemented by EU Member States and Norway, the directive is expected to affect our operations in Norway and the European Union, as it will require us to collect and systematically store additional types of data compared to what is currently being stored for the purposes of customer billing and settlement of interconnection payments. In addition, increased data retention periods are expected to lead to higher storage costs.
ORGANIZATIONAL STRUCTURE
      Telenor ASA is considered a holding company that holds a majority of the group assets through various subsidiaries, which it owns or invests in. Each of the following is a significant subsidiary of Telenor ASA: Telenor Mobile Communications AS, Telenor Mobile Holding AS, Telenor Telecom Solutions AS, Telenor Network Holding, Telenor Mobil AS, Kyivstar GSM JSC, Pannon GSM RT and DiGi Telecommunications Sdn Bhd. You should read “Item 19: Exhibits — Exhibit 8” for additional information on our significant subsidiaries. For information on our new business structure, you should read “Strategy — Organization”.
PROPERTY, PLANTS AND EQUIPMENT
      Our principal executive offices are located at Snarøyveien 30, N-1331 Fornebu, Norway and comprise 147,000 square meters of office space. The total area of all our properties comprises 800,000 square meters. Substantially all of these properties are used for telecommunications and computer installations, service outlets, research and design centers and offices. Generally, we own most of our properties, although we also lease space in a number of locations. We currently lease approximately 160,000 square meters of office space pursuant to lease agreements
      Set forth below is a summary of our lease obligations through 2009:
                                                 
    2005   2006   2007   2008   2009   After 2009
                         
    (NOK in millions)
Total lease obligations
    151       90       72       65       58       218  
      Our headquarters comprise approximately 147,000 square meters of office space with a capacity for 7,000 to 8,000 employees. Surplus square meters available have been sub-let or sold.

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      We are actively engaged in the management of our properties. Through our division Telenor Eiendom Holding AS, we ensure that we have the use of sufficient office premises and floor space to enable our principal business activities to be carried out effectively and on favorable terms without substantial capital expenditures.
ITEM 4A: UNRESOLVED STAFF COMMENTS
      None.
ITEM 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS
INTRODUCTION
      The following discussion should be read in conjunction with our consolidated financial statements, which have been prepared in accordance with IFRS as adopted by the European Union, which differ in certain respects from US GAAP. For a reconciliation of the material differences between IFRS and US GAAP, you should read note 38 to our consolidated financial statements.
      You should read “Item 4 — Information on the company — Overview” for information on our operating segments.
      From January 1, 2005, as required by the European Union’s IAS Regulation and the Accounting Act, we have prepared the consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”). IFRS as adopted by the EU differ in certain respects from IFRS as issued by the International Accounting Standards Board (“IASB”). However, the consolidated financial statements for the periods presented would be no different had Company applied IFRS as issued by the IASB. References to “IFRS” hereafter should be construed as references to IFRS as adopted by the EU. Comparative figures are prepared for 2004.
      We are exposed to risks and uncertainties which could have a material adverse effect on our business, financial condition, liquidity, results of operations or prospects. Such risks and uncertainties relate to, among other things:
  •  the political, economic and legal environment in the foreign countries in which we operate;
 
  •  increased competition;
 
  •  the actions of other principal shareholders within consolidated or main associated companies;
 
  •  our exposure to currency exchange rate fluctuations, when reporting in Norwegian Krone;
 
  •  regulatory developments both in and outside Norway.
      You should read “Item 3: Key Information — Risk Factors” for a more detailed discussion of these risks and uncertainties. In addition, this Item 5 may contain certain forward-looking statements. You should read “Cautionary Statement Regarding Forward-Looking Statements” in this annual report on Form 20-F for a more detailed discussion of forward-looking statements.

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DEFINITIONS
      In the following overview of our operations and the discussion and analysis of each consolidated subsidiary and associated company, the following terms, unless otherwise defined, have the meanings specified below.
      Man-years. The number of full-time equivalent employees.
Mobile Operations
      Subscription and traffic consists of subscription and connection fees, revenues from voice outgoing airtime, non-voice traffic, outbound roaming and other mobile service revenues. Subscription and traffic include only revenues from the company’s own subscriptions.
      Interconnection revenues consists of revenues from incoming traffic. Revenues from incoming traffic related to service provider subscriptions are not included.
      Other mobile revenues consists of inbound roaming, national roaming and revenues related to service providers and MVNOs (Mobile Virtual Network Operators).
      Non-mobile revenues consists of revenues from customer equipment and businesses that are not directly related to mobile operations.
      Subscriptions. Contract subscriptions are counted until the subscription is terminated. Prepaid subscriptions are counted as active if there has been outgoing or incoming traffic or if the SIM-card has been reloaded during the last three months. Service provider and MVNO subscriptions are not included. Data only SIM-cards are included, but SIM-cards used for telemetric applications are excluded. Telemetric is defined as machine-to-machine SIM-cards (M2M), for example, vending machines and meter readings.
      Average traffic minutes per subscription per month (AMPU). Traffic minutes per subscription per month are calculated based on total outgoing and incoming rated minutes from the company’s own subscriptions. This includes zero rated minutes and outgoing minutes from own subscriptions while roaming. Outgoing and incoming minutes related to inbound roaming, national roaming, service providers and MVNOs are not included.
      Average revenue per subscription per month (ARPU). ARPU is calculated based on mobile revenues from the company’s own subscriptions, divided by the average number of subscriptions for the relevant period.
      Mobile revenues from company’s subscriptions consists of “Subscription and traffic” and “Interconnection revenues” and do not include revenues from inbound roaming, national roaming, service providers, MVNOs, sale of customer equipment and incoming traffic related to service provider subscriptions.
      SMS/MMS and content messages. The number of messages is based on outgoing and incoming messages from the company’s own subscriptions. Included are rated and free messages related to SMS, MMS and content domestically and when roaming. Outgoing and incoming messages related to inbound roaming, national roaming, service providers and MVNOs are not included.
      Costs of material and traffic charges. Costs of traffic and material charges include some operating lease costs, primarily lease of some dedicated network and satellite capacity within our Group companies.
      Other operating expenses. Other operating expenses include items such as operating leases of building, land and equipment, advertising expenses and costs associated with marketing and sales commissions. Please see note 8 to our consolidated financial statements for a fuller list.
Fixed Operations
      Telephony consists of subscription and connection fee, traffic (fixed-fixed, to mobile network, to other countries, value added services, other) for PSTN/ISDN and VoIP (Broadband telephony).

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      xDSL/Internet consists of subscription fee for xDSL and Internet and traffic charges for Internet traffic (810/815).
      Data services consists of Nordicom, Frame relay and IP-VPN.
      Other revenues consists of leased lines, managed services and other retail products.
      Wholesale revenues consists of sale to service providers of telephony (PSTN/ISDN) and xDSL, national and international interconnect, transit traffic, leased lines, other wholesale products and contractor services.
Broadcast Operations
      Distribution consists of Pay-TV subscribers and basic tier households on DTH (direct to home), cable TV subscribers, households in SMATV networks and DTT (digital terrestrial TV) Pay-TV subscribers.
      Transmission consists of revenues from satellite services from satellite position 1-degree west and revenue from terrestrial radio and TV transmission in Norway.
      Other consists of revenues from conditional access systems and revenue not directly related to Distribution and Transmission services.
GROUP OVERVIEW
      In 2005, our group results improved. Profit before taxes was NOK 12.6 billion in 2005 compared to NOK 9.9 billion in 2004. The underlying improvement was primarily due to increased revenues from our international mobile operations.
      Our international mobile operations, especially in emerging markets, grew significantly in 2005 and are increasingly important for our business and results of operations. In 2005, we consolidated DTAC (via UCOM) as a result of increased economic interest in these companies that we did not already own. In addition we acquired the fixed-line operations Bredbandsbolaget in Sweden and Cybercity in Denmark. In our Norwegian fixed-line operations, a mature market with increased competition, our revenues decreased. However, our operating profit margin in Fixed Norway increased slightly due to reduced depreciation and amortization. In Broadcast, our number of subscribers, revenues and EBITDA increased.
      Capital expenditure increased in 2005 compared to 2004 primarily due to the expansion of the network capacity of our international mobile operations driven by strong growth in the number of subscriptions.
      Concurrent with the increase in our capital expenditure, we generated significant and increased cash flows from our operations in 2005 and received payments for the sale of shareholdings. However, our net debt increased during 2005 primarily due to acquisition of companies, purchase of own shares and payment of dividends.

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RESULTS OF OPERATIONS — GROUP
Revenues
                                 
    2004   2005
         
        Of which       Of which
Revenues   Total   external   Total   external
                 
    (NOK in millions)
Telenor Mobil — Norway
    11,730       10,504       12,243       11,072  
Sonofon — Denmark
    4,404       4,351       5,191       5,059  
Kyivstar — Ukraine
    4,219       4,217       7,272       7,266  
Pannon GSM — Hungary
    5,907       5,901       6,061       6,051  
DiGi.Com — Malaysia
    3,946       3,943       4,932       4,928  
GrameenPhone — Bangladesh
    2,186       2186       2,970       2,969  
Other mobile operations
    423       335       2,219       2,076  
Fixed
    19,256       17,433       19,313       17,140  
Broadcast
    5,346       5211       5,649       5,518  
Other operations
    9,540       6,611       9,967       7,060  
Eliminations
    (6,366 )     (101 )     (6,890 )     (212 )
                         
Total revenues
    60,591       60,591       68,927       68,927  
                         
      External revenues increased by 13.8% in 2005 compared to 2004. In 2005, 57% of our external revenues derived from our mobile operations, compared to 52% in 2004. In 2005, the mobile operations in emerging markets experienced high growth in number of subscriptions and revenues. Part of the increase in external revenues in Sonofon and “Other mobile operations” was due to the full year effect of consolidating Sonofon and ProMonte in 2004 and the consolidation of DTAC in 2005. Measured by the number of subscriptions at the end of 2005, we increased or maintained our market share in our mobile operations in 2005 compared to 2004.
      Fixed’s external revenues in 2005 decreased by 1.7% compared to 2004. Increased external revenues due to the acquisitions of Bredbandsbolaget and Cybercity were more than offset by decreased external revenues in Fixed Norway. External revenues in Fixed Norway decreased by 6.5% mainly due to decreased revenues from fixed telephony operations.
      External revenues in Broadcast increased by 5.9%, primarily due to an increased number of subscribers.
      External revenues from Other operations increased by 6.8% primarily due to acquired businesses in EDB Business Partner, partially offset by operations disposed in 2004.
      The table below shows our revenues broken down by operations in and outside Norway, based on company location. Our proportional share of revenues from our associated companies are not included in our consolidated revenues. Some of our international operations are carried out in associated companies, primarily VimpelCom. Revenues outside Norway have increased in recent years due to the increased number of consolidated foreign entities as well as underlying growth in existing operations, especially in our international mobile operations.
                 
    2004   2005
         
    (NOK in millions)
Revenues
               
Norway
    33,397       33,556  
Outside Norway
    27,194       35,371  
             
Total revenues
    60,591       68,927  
             

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Operating Expenses
Costs of materials and traffic charges
                 
    2004   2005
         
    (NOK in millions)
Traffic charges — network capacity
    8,875       10,634  
Traffic charges — satellite capacity
    1,191       1,066  
Costs of materials etc
    5,858       6,011  
             
Costs of materials and traffic charges
    15,924       17,711  
             
      Traffic charges — network capacity expenses consist primarily of traffic charges for providing fixed and mobile services. Of the increase in traffic charges — network capacity expenses in 2005 compared to 2004, approximately NOK 0.8 billion was due to the effect of purchased companies, primarily Bredbandsbolaget and Cybercity and consolidation of the formerly associated companies DTAC, Sonofon and ProMonte. In addition, traffic charges — network capacity expenses increased primarily due to an increase in the number of subscriptions in our mobile operations. Traffic charges — network capacity costs decreased in Fixed Norway, primarily due to decreased traffic.
      Traffic charges — satellite capacity expenses are primarily related to sales of satellite broadcasting services (Broadcast) and satellite mobile services and satellite capacity services (Satellite Services). Rent of satellite capacity in Broadcast was primarily reduced due to the replacement of leased satellite capacity with our own satellite transponders from September 2004.
      Our mobile operations and Broadcast business area in the aggregate generated approximately 77% of our total costs of materials etc. in 2005, primarily due to sales of customer equipment in our mobile operations and TV-program fees and equipment in Broadcast. Broadcast showed an increase due to increased number of subscribers, new content and change from lease to sale of TV-decoders. This was partially offset by reduced sale of equipment, especially in Telenor Mobil Norway and Pannon.
Own work capitalized
                 
    2004   2005
         
    (NOK in millions)
Costs of materials etc. 
    162       216  
Salaries and personnel costs
    311       349  
Other operating expenses
    84       139  
             
Total own work capitalized
    557       704  
             
      Own work capitalized is presented as a separate caption and is not netted against the related expenses in the profit and loss statement. The various Group companies consolidated in Telenor perform work on their own long-lived assets, which are capitalized, if appropriate. The Group companies expense the related costs in the line items costs of materials, salaries and personnel costs, or other operating expenses as appropriate. The costs that are capitalized are then reversed as change in own work capitalized. Several companies in the Group also perform work on and deliver long-lived assets to other Group companies. The purchasing company capitalizes these long-lived assets. For the Group as a whole this is regarded as a change in own work capitalized and the expenses recorded in the selling companies are reversed as a change in own work capitalized for the Group. Own work capitalized increased in 2005 compared to 2004 due to increased capital expenditure.

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Salaries and personnel costs
                 
    2004   2005
         
    (NOK in millions)
Salaries and holiday pay
    7,554       7,794  
Social security tax
    1,142       1,138  
Pension costs including social security tax
    837       772  
Share-based payments, excluding social security tax(1)
    28       20  
Other personnel costs
    409       512  
             
Total salaries and personnel costs
    9,970       10,236  
             
 
(1) Include share options and employee share ownership program, excluding social security tax on these payments.
      The purchase of DTAC, Bredbandsbolaget and Cybercity increased total salaries and personnel costs by approximately NOK 150 million in 2005 compared to 2004.
      Salaries and holiday pay increased, due to net effect of purchased and sold companies, growth in mobile operations in emerging markets and general wage increases. This was partially offset by reductions in number of employees in the mobile operations the Nordic region and Fixed Norway.
      The number of full-time equivalent employees at December 31, 2005 increased by approximately 6,700 compared to December 31, 2004. The number of full-time equivalent employees outside of Norway increased by approximately 7,200 due to the consolidation of DTAC, Bredbandsbolaget and Cybercity and increased activity in GrameenPhone, Kyivstar and Pakistan. In Norway, we reduced the number of full-time equivalent employees by approximately 500, primarily due to cost efficiency activities and the sale of businesses. The average number of full-time equivalent employees was estimated to be approximately 2,850 higher in 2005 compared to 2004.
      Pension costs decreased in 2005 compared to 2004. In 2005, we adjusted our actuarial tables for death and disability and decided that a part of the defined benefit plan (spouse pension) in Norway should be terminated with effect from January 1, 2006. The net effect of the settlement and curtailment was recorded in 2005 with a gain of NOK 63 million (excluding social security tax) to the income statement. We also decided that our employees in 2006 may chose to change their pension plan to a defined contribution plan. The effect, if any, will be recorded as a curtailment in 2006.
Other operating expenses
                 
    2004   2005
         
    (NOK in millions)
Operating lease of building, land and equipment
    1,070       1,248  
Other cost of premises, vehicles, office equipment etc
    793       860  
Operation and maintenance
    3,628       4,315  
Travel and travel allowances
    482       489  
Postage freight, distribution and telecommunication
    296       389  
Concession fees
    582       862  
Marketing and sales commission
    3,735       4,873  
Advertising
    1,416       2,019  
Bad debt
    248       311  
Consultancy fees and external personnel
    1,350       1,757  
Other
    271       483  
             
Total other operating expenses
    13,871       17,606  
             

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      Other operating expenses increased by approximately NOK 3.7 billion, or 26.9%, in 2005 compared to 2004. The consolidation of DTAC, Bredbandsbolaget and Cybercity contributed to this increase by approximately NOK 0.7 billion.
      Expansion of owned and leased property, plant and equipment and consolidation of companies resulted in increased costs for operation and maintenance, operating lease and other cost of premises, vehicles, office equipment, etc.
      Costs for marketing, sales commissions and advertising increased by approximately NOK 1.7 billion, of which approximately NOK 0.2 billion was due to consolidation of companies acquired in 2005. The increase was primarily due to the significant increase in the number of new subscriptions, primarily in our mobile operations in Asia, but also in Telenor Mobil Norway.
      Increased costs for concession fees were primarily related to DTAC and increased costs for universal service obligations in DiGi.Com.
      Part of the increased costs for consultancy fees and external personnel was related to Fixed Norway due to implementing process improvement projects and costs related to increased speed for xDSL subscriptions.
Other income and expenses
                 
    2004   2005
         
    (NOK in millions)
Gains on disposal of fixed assets and operations
               
Sonofon — Denmark
          1  
Pannon GSM — Hungary
    5       10  
Fixed
    10       88  
Broadcast
    1       1  
EDB Business Partner
    303       31  
Other business units
    144       22  
Corporate functions and Group activities
    99       163  
Eliminations
          4  
                 
Total gains on disposal of fixed assets and operations
    562       320  
                 
Losses on disposal of fixed assets and operations
               
Telenor Mobil — Norway
          16  
Pannon GSM — Hungary
    3       19  
DiGi.Com — Malaysia
          5  
GrameenPhone — Bangladesh
    8       10  
Other mobile operations
          1  
Fixed
    25       65  
Broadcast
    1       1  
Other business units
    21       1  
Corporate functions and Group activities
    31       33  
Eliminations
    (15 )     1  
                 
Total losses on disposal of fixed assets and operations
    74       152  
                 

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    2004   2005
         
    (NOK in millions)
Expenses for workforce reductions and onerous (loss) contracts
               
Telenor Mobil — Norway
    24       (2 )
Sonofon — Denmark
    28       12  
Pannon GSM — Hungary
    16       10  
Other mobile operations
    562       414  
Fixed
    86       159  
Broadcast
    5        
EDB Business Partner
    33       18  
Other business units
    28       15  
Corporate functions and Group activities
    116       29  
Eliminations
    (562 )     (245 )
Total workforce reductions and onerous (loss) contracts
    336       410  
             
Total other (income) and expenses
    (152 )     242  
             
      Gains on disposals in 2005 were primarily due to the sale of properties, as well as some businesses.
      Gains on disposals in 2004 were primarily the sale of parts of the Telecom business of EDB Business Partner ASA and the sale of the subsidiaries Venture III AS, Securinet AS and Transacty AS.
      Losses on disposal in 2005 were primarily related to disposal of properties and equipment and Fixed Czech and Slovakia.
      Expenses for workforce reduction and onerous (loss) contracts in 2005 were primarily related to the Mobile Virtual Network Operator (MVNO) contract in Sweden and expenses for workforce reductions in Fixed. Expenses in 2004 were primarily workforce reductions related to the IT operations, Fixed and the Nordic mobile operations. In 2004, Telenor Mobile Sweden estimated a loss of NOK 562 million on the MVNO-contract in Sweden due to reduced expectations of the future earnings potential. The loss was estimated as the difference between expected future economic benefits and unavoidable costs in the contract. In 2005, the estimated loss under the MVNO contract for Mobile Sweden was increased by NOK 239 million. These losses were eliminated in the Group accounts in the tables above. See note 12 to our consolidated financial statements for a further discussion. In addition, at the beginning of 2006, Mobile Sweden will transfer its traffic to Vodafone Sweden’s network due to the acquisition of this company. As a consequence, we do not expect to utilize the MVNO agreement in Sweden. However, as we are required to make minimum variable payments under the contract, we recorded an additional loss of NOK 175 million as of December 31, 2005 which impacts the Group accounts. This loss is the net present value of payments up to and including the first quarter of 2008.
Depreciation, Amortization and Write-downs
                 
    2004   2005
         
    (NOK in millions)
Depreciation of property, plant and equipment
    7,737       8,059  
Amortization of intangible assets (excluding goodwill)
    2,900       3,411  
             
Amortization of prepaid leases
          74  
             
Total depreciation and amortization
    10,637       11,544  
             
Write-downs of property, plant and equipment
    282       488  
Write-downs of goodwill
    3,129       46  
Write-downs of intangible assets (excluding goodwill)
    120       53  
Total write-downs
    3,531       587  
             
Total depreciation, amortization and write-downs
    14,168       12,131  
             

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Specification of depreciation of property, plant and equipment and amortization of intangible assets (excluding goodwill) in 2004 and 2005:
                                         
    2004   2005
         
    Property,       Property,    
    plant and   Intangible   plant and   Intangible   Prepaid
    equipment   assets   equipment   assets   leases
                     
    (NOK in millions)
Telenor Mobil — Norway
    781       282       661       228        
Sonofon — Denmark
    340       850       416       869        
Kyivstar — Ukraine
    301       255       869       340        
Pannon GSM — Hungary
    689       605       594       577        
DiGi.Com — Malaysia
    779       123       912       127        
GrameenPhone — Bangladesh
    205       11       410       29        
Other mobile operations
    32       83       213       398        
Fixed
    3,173       399       2,689       494       54  
Broadcast
    605       99       486       68        
Other operations
    832       193       833       277        
                               
Total
    7,737       2,900       8,083       3,407       54  
                               
Specification of write-downs of property, plant and equipment, goodwill and other intangible assets in 2004 and 2005:
                                                 
    2004   2005
         
    Property,       Other   Property,       Other
    plant and       intangible   plant and       intangible
    equipment   Goodwill   assets   equipment   Goodwill   assets
                         
    (NOK in millions)
Telenor Mobil — Norway
    5             9       14       2        
Sonofon — Denmark
    208       3,074       8                    
Kyivstar — Ukraine
                      15              
Pannon GSM — Hungary
    21                   6             1  
DiGi.Com — Malaysia
                      5              
GrameenPhone — Bangladesh
    2                                
Other mobile operations
    15             61                    
Fixed
    13       27             571       (36 )     52  
Broadcast
    13       25       7       (128 )     75        
Other operations
    5       3       35       5       5        
                                     
Total
    282       3,129       120       488       46       53  
                                     
      In general, depreciation and amortization was affected by changes in exchange rates and investment levels in the previous years. The increase in total depreciation and amortization was primarily due to acquired businesses and increased capital expenditure, partially offset by fully depreciated assets.
      Estimated useful lives of property, plant and equipment and other intangible assets are reviewed annually to insure consistency with the expected economic recovery period for these assets based on current facts and circumstances. As of January 1, 2005, some changes were made in estimated useful lives, especially for some components in the different networks of our operations. Various components of the networks were affected, including switches, radio and transmission equipment in the mobile operations, masts, towers and network buildings in the mobile, fixed and broadcast operations, fibre cables in the fixed transportation network and digital transmission equipment for ADSL in Norway. As of January 1, 2005, the estimated useful lives for some of these assets were increased and others were decreased. The reasons for increasing useful lives were primarily based on recent experience that some assets are now being utilized over a longer economic life than previously expected because they are not as affected by changes in technological developments as previously

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expected and because we now expect a slower pace of changes in the network than in previous years. On the other hand, we decreased the expected useful lives for some assets, primarily due to a higher pace of replacements than previously expected, due to company or asset specific reasons.
      The change in useful lives as of January 1, 2005 is estimated to have increased depreciation and amortization by approximately NOK 270 million in 2005, of which the highest impact was for Kyivstar.
      The write-downs of property, plant and equipment and intangible assets in 2005 were primarily related to Fixed Sweden to its estimated recoverable amount. The write-down was due to loss of increased competition and a general shift in product demand to lower priced products. The assessment of the fair value was based on various valuation methods, with assistance of an external valuation expert. In 2005, Broadcast reversed a previous write-down of satellites by NOK 133 million. The write-downs of goodwill in 2005 was primarily due to previously not recognized deferred tax assets at acquisition of companies, partially offset by the excess of fair value of net assets over the cost of a business combination that was recognized immediately to income.
      As of December 31, 2004, we wrote down goodwill in Sonofon by NOK 3,074 million. In 2004, the Danish market was characterized by intense competition and price reductions. Our assessment of the write-down of goodwill in Sonofon was due to Sonofon’s slower than expected growth and a review of our expectations of the company’s growth potential as of year-end 2004. The assessment of the fair value was based on various valuation methods, with assistance of external valuation experts. The valuation was based on discounted cash flow analysis, calculation of value based on multiples for peers in the mobile industry and comparison with external valuation reports. In addition, we made a write-down equipment by NOK 215 million related to our transmission network in Sonofon, based on expected cash flows. We also made write-downs of NOK 75 million in 2004, of which NOK 61 million was intangible assets, as a consequence of the reduced expectations for our mobile business in Sweden. If, among other things, market values decline and market conditions deteriorate, we may have to continue to perform impairment tests, as well as the annual impairment test of goodwill. You should read “Critical Accounting Estimates under IFRS” in this Item 5 for additional information on our impairment tests and “Other Information” in this Item 5 for additional information on the differences between US GAAP and IFRS.
Operating Profit and EBITDA
      Our operating profit in 2004 and 2005 was affected by gains and losses on sales of fixed assets and operations, expenses for workforce reductions and onerous (loss) contracts as well as write-downs, as illustrated below.
                 
    2004   2005
         
    (NOK in millions)
Operating profit
    7,367       11,705  
Of which:
               
Gains on disposal of fixed assets and operations(1)
    562       320  
Losses on disposal of fixed assets and operations(1)
    (74 )     (152 )
Expenses for workforce reductions and onerous (loss) contracts(1)
    (336 )     (410 )
Write-downs(2)
    (3,531 )     (587 )
             
Total gains, losses, expenses for workforce reductions and onerous (loss) contracts and write-downs
    (3,379 )     (829 )
             
 
(1) For a discussion of our gains and losses on disposal of fixed assets and operations and expenses for workforce reductions and onerous (loss) contracts, you should read “— Other (income) and expenses”.
 
(2) For a discussion of our write-downs, you should read “— Depreciation, amortization and write-downs”.
      Our operating profit in 2005 was affected by gains and losses, expenses for workforce reductions, loss contracts, and write-downs compared to 2004. We discuss these items above under “— Other (income) and expenses “and “— Depreciation, amortization and write-downs”. Adjusted for these items, all of our

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operations except Fixed and our greenfield operation in Pakistan increased operating profit in 2005 compared to 2004, primarily due to a growth in revenues. The consolidation of acquired companies also contributed to the increase.
      We also focus on operating profit (loss) before the effects of amortization, depreciation and write-downs. We refer to this measure as “EBITDA” because, under IFRS, operating profit is reported in our consolidated income statement before taxes and net financial items. In addition, operating profit includes amounts attributable to minority interests but does not include results from associated companies or joint ventures which are accounted for using the equity method and included in net income. We believe that providing EBITDA enhances an understanding of our operating activities and the performance of the individual units because it provides investors with a measure of operating results that is unaffected by amortization and depreciation related to acquisitions and capital expenditures, differences in capital structures, e.g. book value of property, plant and equipment and intangible assets, among otherwise comparable companies or investments in and results from associated companies. We believe that EBITDA is also an indicator to demonstrate to what extent operational business activities generate earnings which are available to reduce net debt or to finance investments.
      EBITDA is not a measurement of financial performance either under IFRS or under US GAAP. You should not consider EBITDA as an alternative to operating profit, net income or cash flow from operating activities. Since other companies may not calculate EBITDA in the same way, our EBITDA figures are not necessarily comparable with similarly titled figures of other companies.
      The following table shows the reconciliation of EBITDA to profit from total operations.
                 
    2004   2005
         
    (NOK in millions)
Profit from total operations
    7,413       9,134  
Profit (loss) from discontinued operations
          (4 )
Profit from continuing operations
    7,413       9,138  
Taxes
    (2,461 )     (3,453 )
Profit before taxes
    9,874       12,591  
Net financial items
    1,521       (347 )
Associated companies
    986       1,233  
Depreciation and amortization
    10,637       11,544  
Write-downs
    3,531       587  
EBITDA
    21,535       23,836  
      Our EBITDA increased in 2005 compared to 2004 primarily due to the increase in revenues in our mobile operations and the positive effect of the consolidation of acquired companies.
Associated Companies
                 
    2004   2005
         
    (NOK in
    millions)
Telenor’s share of(1):
               
Profit after taxes
    954       1,406  
Write-down of Golden Telecom Inc. 
          (172 )
Gains (losses) on disposal of ownership interests
    32       (1 )
             
Net result from associated companies
    986       1,233  
             
 
(1)  For certain associated companies, financial statements as of the Group’s balance sheet date are not available. In such instances, the most recent financial statements (as of a date not more than three months prior to the Group’s balance sheet date) are used, and estimates for the last period are made based on publicly available information. Actual figures may deviate from the preliminary figures. The consolidated

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income statement contains only the line “Net result from associated companies”. Our share of the other items shown in the table is not specified in our consolidated financial statements, but this information is set forth in note 18 to our consolidated financial statements.

      You should read note 18 to our consolidated financial statements for additional information on our associated companies.
      The results from associated companies were influenced by our acquisitions, disposals and consolidation of subsidiaries in 2004 and 2005. Sonofon and ProMonte were consolidated as subsidiaries as of February 12, and August 12, 2004, respectively. As of October 26, 2005, DTAC (through our economic interest in UCOM) was consolidated as a subsidiary. In the beginning of 2006, we acquired a controlling ownership interest in Glocalnet. Please see “Item 4: Information on the Company” for more information regarding these transactions in 2005.
      The increase in net profit after taxes from associated companies in 2005 compared to 2004 was primarily due to the growth in VimpelCom. This was partly offset by increased losses in Bravida ASA mainly due to the fact that Bravida ASA in 2004 recorded a gain on sale of parts of its businesses.
      In 2005, we wrote down our carrying value of the listed company Golden Telecom Inc. to the quoted market price as of December 31, 2005.
Financial Income and Expenses
                 
    2004   2005
         
    (NOK in millions)
Interest income on liquid assets
    383       287  
Other financial income
    113       160  
Total financial income
    496       447  
Interest expenses on interest-bearing liabilities
    (1,582 )     (1,665 )
Other financial expenses
    (96 )     (120 )
Capitalized interest
    117       146  
Total financial expenses
    (1,561 )     (1,639 )
Net foreign currency (loss)
    (87 )     84  
Total change in fair value of financial instruments(1)
          243  
Gains on disposal of financial assets
    2,652       521  
Losses on disposal of financial assets
    (17 )     (2 )
Write-downs and reversal of write-downs of financial assets(2)
    38       (1 )
Net gains (losses and write-downs) of financial assets
    2,673       518  
Net financial items
    1,521       (347 )
 
(1)  As of January 1, 2005 Telenor implemented IAS 39, see note 37. The comparative figures for 2004 are not restated to the principles in IAS 39.
 
(2)  As from January 1, 2005, impairment losses recognised in the income statement for an investment in an equity instrument classified as available for sale shall not be reversed through the income statement.
      Borrowing costs included in the cost of qualifying assets (capitalized interest) during 2004 and 2005 arose in Norway on the general borrowing pool, and outside Norway, based on the relevant subsidiaries’ borrowing costs. Wholly owned subsidiaries are financed by Telenor. See note 22 to our financial statements for more information about interest rates on external borrowings.
      Change in fair value of financial instruments was primarily related to interest rate derivatives used for economic hedge of interest-bearing liabilities that do not fulfil the requirements for hedge accounting.

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      Gains on disposal in 2005 were primarily gain on sale of Telenor’s shares in Intelsat. Gains on disposal in 2004 were primarily the gain on sale of Telenor’s remaining shareholding in Cosmote SA.
      As of February 26, 2004, we sold our remaining shareholding in Cosmote for NOK 3.1 billion and we recorded a gain on sale of financial assets of approximately NOK 2.6 billion before taxes related to this transaction. In 2004, some write-downs, primarily in Venture-companies, were reversed due to increased market values. During the first quarter of 2006, we sold our remaining ownership interest in Inmarsat plc. with a gain on disposal of NOK 1.8 billion.
Income Taxes
      The corporate income tax rate in Norway is 28.0%. The table below shows our effective tax rate (income taxes as a percentage of profit before taxes) reconciled to the Norwegian tax rate of 28.0% for the years ended December 31:
                 
    2004   2005
         
    (NOK in
    millions)
Expected income taxes according to corporate income tax rate in Norway (28%)
    2,765       3,525  
Tax rates outside Norway different from 28%