TeliaSonera January-June 2008

First half



· Net sales rose 6.5 percent to SEK 49,672 million (46,625). In local

currencies net sales rose 6.2 percent.

· Net income attributable to shareholders of the parent company

increased to SEK 8,595 million (7,808) and earnings per share to SEK

1.91 (1.74).

· Free cash flow was SEK 3,581 million (6,087).





Second quarter



· Net sales rose 5.7 percent to SEK 25,274 million (23,901). In local

currencies net sales rose 5.9 percent.

· EBITDA, excluding non-recurring items, increased to SEK 7,978 million

(7,516) and the margin to 31.6 percent (31.4).

· Operating income, excluding non-recurring items, increased to SEK

7,410 million (6,575).

· Net income attributable to shareholders of the parent company rose to

SEK 4,130 million (3,832) and earnings per share to SEK 0.92 (0.85).

· Free cash flow was SEK 2,471 million (3,558).

· The number of subscriptions reached 122.9 million at the end of the

second quarter with 1.4 million new subscriptions in the majority-owned

operations and 2.2 million in the associated companies, compared to the

end of the first quarter 2008.

· The group outlook for 2008 remains unchanged.









Comments from Lars Nyberg, President and CEO





“The overall market trends were essentially unchanged and we reported a

satisfactory set of numbers for the second quarter. For the first time

in more than a year, we managed to increase our margins. Our Eurasian

operations develop strongly and Mobility Services showed good growth

with improved margins, whereas margins within Broadband Services are

under continued pressure. Intensive campaigns to promote mobile

broadband affected the penetration growth of fixed broadband.



TeliaSonera is a strong business, based on leading market positions in

the Nordic and Baltic countries. We are also very well positioned in

several emerging markets with high growth potential and continue to look

for new investment opportunities. Our success is and will be based on

providing high quality networks and first class services at competitive

cost. Hence, we need to continuously improve our operational efficiency

to successfully manage the ongoing migration from traditional fixed

voice services to mobility and IP-based services. This will drive strong

and sustainable earnings growth and maximize value for our

shareholders.”







Financial Highlights







SEK in

millions,

except per

share data Apr-Jun Apr-Jun Jan-Jun Jan-Jun

and return 2008 2007 2008 2007

Net sales 25,274 23,901 49,672 46,625

EBITDA1)

excl. non-

recurring

items2) 7,978 7,516 15,733 15,099

Operating

income 6,818 5,796 13,388 11,857

Operating

income excl.

non-recurring

items 7,410 6,575 14,160 12,766

Net income 4,640 4,294 9,632 8,876

of which

attributable

to

shareholders

of the parent

company 4,130 3,832 8,595 7,808

Earnings per

share (SEK) 0.92 0.85 1.91 1.74

Return on

equity (%,

rolling 12

months) 18.5 16.1 18.5 16.1

Free cash

flow 2,471 3,558 3,581 6,087



1) Please refer to page 12 for definitions.

2) Non-recurring items; see table on page 16.



In this report, comparative figures are provided in parentheses

following the operational and financial results and refer to the same

item in the second quarter 2007, unless otherwise stated.







Group outlook for 2008 (unchanged from Year-end Report 2007)





Net sales are expected to show stable growth in the financial year 2008

compared to the previous year.



Despite continued aggressive investments in future growth and in the

quality of our net-works and services, TeliaSonera’s ambition for 2008

is to maintain the EBITDA margin level of 2007, excluding non-recurring

items.



Net income for 2008 is estimated to be somewhat higher than in 2007,

excluding the positive one-off items of approximately SEK 2.0 billion in

2007 and potential positive one-off items in 2008.



Capital expenditure will be driven by continued investments in broadband

and mobile capacity and is expected to be around SEK 15 billion in 2008.







Efficiency measures





Intensified efficiency improvement is imperative for TeliaSonera to be

able to continue shifting the product mix by investing in mobility and

IP-based services. Efficiency measures to be implemented primarily in

the Swedish and Finnish operations during 2008 and 2009 are in total

estimated to give annual gross savings effects of approximately SEK 5

billion compared to the cost base of 2007.



TeliaSonera estimates that about two-thirds of these efficiency measures

comprising savings of addressable costs and sustainable savings in

volume-related costs will be implemented during 2008 and the remaining

one-third in 2009. The efficiency measures are expected to result in a

reduction of approximately 2,900 employees, of whom about two-thirds in

Sweden and one-third in Finland. The related restructuring costs, to be

re-ported as non-recurring items, are estimated to be around SEK 4

billion, of which approximately two-thirds in 2008.





TeliaSonera estimates that the gross savings effect for 2008 from the

ongoing efficiency measures will be approximately SEK 1.5 billion

compared to the cost base of 2007.







Review of the Group, Second Quarter 2008





Net sales increased 5.7 percent to SEK 25,274 million (23,901). The net

effect of acquisitions on sales was a positive 2.7 percent and the

negative net effect from exchange rate changes was 0.2 percent. Organic

growth was 3.2 percent.



In Mobility Services, net sales increased 6.8 percent to SEK 12,071

million (11,301). A continued good development in Spain, healthy volume

growth in Sweden, wholesale revenues in Norway, higher usage in Denmark

and an overall increase in mobile data usage were the main contributors

to the rise.



In Broadband Services, net sales were SEK 11,089 million (11,054). Sales

were driven by voice and IP-traffic capacity within the international

carrier operations and supported by somewhat higher sales of IP-based

services in most markets. In Sweden the decline in traditional fixed

voice sales continued at a steady pace and was not offset by higher

sales of IP-based services. The consolidation of DLG Tele was the main

contributor to sales growth in Denmark.



In Eurasia, net sales rose 16.6 percent to SEK 2,858 million (2,451) as

a result of higher sales in all markets and also supported by the

acquisition of operations in Uzbekistan and Tajikistan. Net sales in

local currencies, including effects from acquisitions, increased 25.0

percent.



The number of subscriptions rose 19.3 percent from the end of the second

quarter 2007 to 122.9 million, of which 38.8 million in the majority-

owned operations and 84.1 million in the associated companies.



EBITDA, excluding non-recurring items, increased to SEK 7,978 million

(7,516), driven by continued good performance in Mobility Services and

Eurasia. The margin rose to 31.6 percent (31.4).



In the second quarter, the gross savings effect from ongoing efficiency

measures, primarily in the Swedish and Finnish operations, was about SEK

400 million. Thus far, 255 employees have accepted the offer for early

retirement and 335 employees have either been transferred to the

redeployment unit in Sweden or to the competence pool in Finland. The

gross savings effect for the first half of 2008 from ongoing efficiency

measures was approximately SEK 600 million, compared to the

corresponding period 2007.



Operating income, excluding non-recurring items, increased to SEK 7,410

million (6,575), due to higher income from associated companies in

Russia and Turkey and higher EBITDA. The comparable quarter last year

included positive one-off items of some SEK 140 million in Russia.



Non-recurring items affecting operating income totaled SEK -592 million

(-779), of which about SEK -545 million related to efficiency measures.

The comparable quarter last year included a write-down of the access

network in Finland and a provision for dismantling the network totaling

some SEK 450 million.



Financial items totaled SEK -631 million (-151), of which SEK -643

million (-266) related to net interest expenses.



Income taxes amounted to SEK -1,547 million (-1,351). The effective tax

rate was 25.0 percent (23.9).



Minority interests in subsidiaries were SEK 510 million (462) of which

SEK 381 million (360) related to operations managed by Fintur and SEK

119 million (103) to Eesti Telekom, LMT and TEO.



Net income attributable to shareholders of the parent company increased

to SEK 4,130 million (3,832) and earnings per share to SEK 0.92 (0.85).

Higher operating income and lower negative non-recurring items offset

higher negative net financial items and higher income taxes.

CAPEX increased to SEK 4,475 million (3,318), mainly due to the Swedish

2.6 GHz license auction and continued increased investments in network

capacity and coverage within Mobility Services and Broadband Services.

The CAPEX-to-sales ratio was 17.7 percent (13.9).



Free cash flow decreased to SEK 2,471 million (3,558) mainly as a result

of increased CAPEX and higher negative net financial items. The decrease

in free cash flow was partly offset by higher EBITDA and approximately

SEK 500 million received in the form of a one-off payment related to

historical interconnect disputes in Sweden.



Net debt increased during the second quarter to SEK 50,407 million

(33,985 at the end of the first quarter 2008) due to the payment of

ordinary and extraordinary dividend to shareholders for the fiscal year

2007 of SEK 17,962 million.



The equity/assets ratio increased during the second quarter to 49.3

percent (48.4 percent at the end of the first quarter 2008).





Significant events in the second quarter



· In April 2008, the privatization of the Republic of Azerbaijan’s 35.7

percent ownership in Azercell Telekom B.M. (Azercell) was completed.

Azertel Telekomünikasyon A.S., the parent company of Azercell and a

majority-owned subsidiary of Fintur Holdings B.V. (Fintur), acquired the

entire stake from the Republic of Azerbaijan, increasing Azertel’s

ownership in Azercell to 100 percent. At the same time, the previous

minority shareholders in Azertel increased their ownership to 49

percent. Fintur’s effective ownership in Azercell therefore remains at

51 percent. The largest minority shareholder was also granted a put

option, giving the shareholder the right to sell its 42 percent stake to

TeliaSonera at fair value in certain deadlock situations.



· After a dispute of several years, related to historical interconnect

fees, the Supreme Court in Sweden on April 4, 2008, refused Tele2 leave

to appeal. Therefore Tele2 paid approximately SEK 500 million to

TeliaSonera in the second quarter 2008.



· TeliaSonera on May 8, 2008, became one of the winners in the auction

for 4G, the new generation mobile network in Sweden. The license is

valid for 15 years and the cost for 4 frequency blocks totaling 2 * 20

MHz in the 2.6 GHz band was SEK 563 million. The payment was made to the

Swedish Post and Telecom Agency in the second quarter of 2008.



· TeliaSonera on May 15, 2008, named Per-Arne Blomquist Executive Vice

President and Chief Financial Officer of TeliaSonera, to succeed Kim

Ignatius. Currently, he is Executive Vice President and Chief Financial

Officer of SEB (the North-European financial group).



· Cygate, a TeliaSonera subsidiary specializing in systems integration,

closed the acquisition of Avansys AB in Sweden on May 27, 2008. Cygate

paid SEK 138 million for Avansys.



· On June 5, 2008, TeliaSonera’s Board of Directors rejected a non-

binding, indicative offer by France Telecom regarding a potential

acquisition of TeliaSonera AB. The indicative offer consisted of a

combination of cash and shares in France Telecom, representing a blended

spot value of approximately SEK 56 per TeliaSonera share. On June 29,

2008, France Telecom presented a revised indicative offer. The

structure, terms and conditions of the June 29 revised indicative offer

were largely unchanged. The cash part was increased to SEK 65 per share

(originally SEK 63 per share). As a consequence of a lower France

Telecom share value, the blended spot value of the combination of cash

and shares was on June 29, 2008, somewhat below SEK 56 per share. The

Board of TeliaSonera therefore maintained its view that the proposal

substantially undervalues the company. France Telecom withdrew its

indicative offer on June 30, 2008.





Significant events after the second quarter



· TeliaSonera on July 11, 2008, closed the acquisition of ComHouse on

approval by the Norwegian competition authority.



· TeliaSonera on July 11, 2008, began sales of Apple iPhone 3G in

Sweden, Finland, Norway and Denmark. TeliaSonera will also start

distributing iPhone 3G in Estonia, Latvia and Lithuania later this

summer.







Good sales growth and improved margins in Mobility Services







The business area Mobility Services is responsible for personal mobility

services for the consumer andenterprise mass markets. Products and

services in focus include mobile voice & data, mobile content, WLAN

Hotspots, mobile over broadband, mobile/PC convergence and Wireless

Office. The operations comprise the mobile operations in Sweden,

Finland, Norway, Denmark, Lithuania, Latvia, Estonia and Spain.





· Volume growth remained good in the mobile markets, with continued

strong demand for mobile broadband. Intensifying competition together

with regulatory interventions continue putting a downward pressure on

prices in all markets. Overall industry investments are driven by

technology evolution and aimed at meeting the growing demand for higher

network speeds required by mobile data services. TeliaSonera

successfully defended its market positions.





SEK in

millions,

except margins

and

operational Apr-Jun Apr-Jun Jan-Jun Jan-Jun

data 2008 2007 2008 2007

Net sales 12,071 11,301 23,590 21,831

EBITDA excl.

non-recurring

items 3,663 3,234 7,051 6,633

Margin (%) 30.3 28.6 29.9 30.4

Operating

income 2,341 2,029 4,594 4,333

Operating

income excl.

non-recurring

items 2,513 2,093 4,807 4,425

CAPEX 1,792 935 2,617 1,699

MoU 203 192 197 188

ARPU, blended

(SEK) 230 236 226 230

Churn, blended

(%) 27 27 26 27

Subscriptions,

period-end

(thousands) 15,086 13,998 15,086 13,998





Additional segment information available at www.teliasonera.com/ir



· Net sales increased 6.8 percent to SEK 12,071 million (11,301). A

continued good development in Spain, healthy volume growth in Sweden,

wholesale revenues in Norway, higher usage in Denmark and an overall

increase in mobile data usage were the main contributors to the rise.

Regulatory interventions, including reductions of interconnect and

roaming fees, weighed on sales particularly in Finland and Estonia. An

overall weaker economic development in the Baltic countries marginally

affected equipment sales and usage growth. Net sales in local

currencies, including effects from acquisitions, increased 5.6 percent.



· Interconnect fees that TeliaSonera receives from other mobile

operators were lowered in Denmark from DKK 0.72 to DKK 0.62 on May 1,

2008. On July 1, 2008, fees were lowered in Norway from NOK 0.70 to NOK

0.60 and on the same date in Sweden from SEK 0.55 to SEK 0.43. In

Finland fees will be lowered from EUR 0.051 to EUR 0.049 as of January

1, 2009.



In Norway, the reduction of the interconnect fees and symmetric prices

with Telenor from July 1, 2008, and the effect of losing the national

roaming agreement with Network Norway, expected as of the fourth quarter

2008, are estimated to have a total annual negative effect of

approximately SEK 500 million on sales.



· The number of subscriptions increased by close to 1.1 million from

the end of the second quarter 2007 to 15.1 million. Growth was strongest

in Spain where the number of subscriptions increased by 466,000 year-on-

year to 627,000. The positive year-on-year development continued in

Sweden with 363,000 net additions, in Finland with 204,000 and Denmark

with 78,000. From the end of the first quarter 2008 to the end of the

second quarter, the total number of subscriptions rose by 289,000 mainly

driven by growth in Sweden, Spain and Finland.



· Blended churn for business area Mobility Services was 27 percent

(27).





SEK in

millions,

except Apr-Jun Apr-Jun Jan-Jun Jan-Jun

margins 2008 2007 2008 2007

Net sales 12,071 11,301 23,590 21,831

of which

Sweden 3,420 3,243 6,529 6,307

of which

Finland 2,417 2,479 4,828 4,861

of which

Norway 2,417 2,263 4,697 4,388

of which

Denmark 1,665 1,537 3,325 2,858

of which

Lithuania 664 599 1,341 1,175

of which

Latvia 639 674 1,285 1,298

of which

Estonia 561 589 1,086 1,096

of which

Spain 420 117 755 193

EBITDA excl.

non-recurring

items 3,663 3,234 7,051 6,633

Margin (%),

total 30.3 28.6 29.9 30.4

Margin (%),

Sweden 37.0 31.6 36.6 35.2

Margin (%),

Finland 30.1 31.3 31.9 31.8

Margin (%),

Norway 37.3 36.0 36.2 36.7

Margin (%),

Denmark 18.1 11.1 18.0 14.2

Margin (%),

Lithuania 32.7 38.4 35.9 40.2

Margin (%),

Latvia 46.3 47.3 45.5 46.5

Margin (%),

Estonia 39.0 36.5 38.1 37.0

Margin (%),

Spain neg neg neg neg







· EBITDA, excluding non-recurring items, rose to SEK 3,663 million

(3,234) and the margin to 30.3 percent (28.6). EBITDA grew mainly as a

result of a mixture of lower sales and marketing expenses and lower

costs of goods sold, despite higher net sales, especially in Sweden,

Denmark and Norway. In addition, savings effects from efficiency

measures supported profitability in Sweden. The start-up in Spain is

running according to plan and the EBITDA loss was SEK 269 million,

adding up to a loss of SEK 657 million for the first half of 2008. The

negative net effect on EBITDA from changed interconnect fees in the

Nordic and Baltic markets was approximately SEK 125 million.



· CAPEX rose to SEK 1,792 million (935) driven by a one-off payment of

SEK 563 million for the acquisition of the 2.6 GHz license in Sweden and

continued investments in network coverage and capacity, including

upgrading and building capacity for mobile broadband. In addition, the

UMTS network build-out in Denmark increased CAPEX.







Flat sales amid challenging transition in Broadband Services







The businessarea Broadband Servicesis responsible for mass-market

services for connecting homes and offices and for home communications.

Products and services in focus include broadband over copper, fiber and

cable, IPTV, voice over Internet, home communications services, IP-VPN/

Business Internet, leased lines and traditional telephony. The business

area operates the group common core network, including the data network

of the international carrier business. The business area comprises

operations in Sweden, Finland, Norway, Denmark, Lithuania, Latvia (49

percent), Estonia and international carrier operations.





· Overall price erosion is still evident in all markets and the

migration from traditional fixed voice services persists. Intensive

campaigns to promote mobile broadband affected penetration growth of

DSL. Operators and other market actors are directing investments into

the backbone and transmission networks to support services that require

higher bandwidth, such as IPTV and mobile broadband. TeliaSonera

defended its positions in most markets.





SEK in

millions,

except margins

and

operational Apr-Jun Apr-Jun Jan-Jun Jan-Jun

data 2008 2007 2008 2007

Net sales 11,089 11,054 22,112 22,124

EBITDA excl.

non-recurring

items 2,769 3,108 5,880 6,144

Margin (%) 25.0 28.1 26.6 27.8

Operating

income 1,123 1,055 2,754 2,635

Operating

income excl.

non-recurring

items 1,515 1,771 3,338 3,451

CAPEX 1,541 1,376 2,634 2,451

Broadband ARPU

(SEK) 263 269 266 269

Subscriptions,

period-end

(thousands)

Broadband 2,379 2,143 2,379 2,143

Fixed voice 6,013 6,335 6,013 6,335

Associated

company, total 771 847 771 847





Additional segment information available at www.teliasonera.com/ir



· Net sales were marginally higher at SEK 11,089 million (11,054).

Sales were driven by voice and IP-traffic capacity, within the

international carrier operations, and supported by somewhat higher sales

of IP-based services in most markets. In Sweden, the decline in

traditional fixed voice sales continued at a steady pace and was not

offset by higher sales of IP-based services. The consolidation of DLG

Tele was the main contributor to sales growth in Denmark. Net sales in

local currencies, including effects from acquisitions, increased 0.1

percent.



· The number of subscriptions for broadband access rose by 236,000 from

the end of the second quarter 2007, to 2,379,000. The number of fixed

voice subscriptions declined year-on-year by 322,000 to 6,013,000. The

total number of TV subscriptions rose to 816,000, of which nearly

430,000 IPTV subscriptions. In Sweden alone, the push for IPTV resulted

in a year-on-year rise of 162,000 new subscriptions to 320,000. From the

end of the first quarter 2008 to the end of the second quarter, the

number of IPTV subscriptions in Sweden increased by 2,000. The number of

broadband access subscriptions increased by 11,000 from the end of the

first quarter 2008 to the end of the second quarter, while the number of

fixed voice subscriptions fell by 108,000.



· EBITDA, excluding non-recurring items, decreased to SEK 2,769 million

(3,108) and the EBITDA margin to 25.0 percent (28.1). The shift in sales

from high-margin traditional services to IP-based and international

carrier services continued putting pressure on EBITDA and the margin. In

Sweden and Finland the decline in traditional fixed voice sales was not

offset by savings effects from efficiency measures. In Denmark EBITDA

decreased mainly as a result of higher costs of goods sold.



· CAPEX increased to SEK 1,541 million (1,376), including investments

in common infrastructure and IP platforms, particularly in Denmark,

Sweden and the international carrier operations.





SEK in

millions,

except Apr-Jun Apr-Jun Jan-Jun Jan-Jun

margins 2008 2007 2008 2007

Net sales 11,089 11,054 22,112 22,124

of which

Sweden 4,917 5,138 9,784 10,286

of which

Finland 1,825 1,857 3,764 3,755

of which

Norway 228 221 459 434

of which

Denmark 559 455 1,130 923

of which

Lithuania 551 517 1,114 1,012

of which

Estonia 512 458 997 947

of which

Wholesale 2,836 2,680 5,451 5,176

EBITDA excl.

non-recurring

items 2,769 3,108 5,880 6,144

Margin (%),

total 25.0 28.1 26.6 27.8

Margin (%),

Sweden 25.2 27.3 27.4 27.4

Margin (%),

Finland 18.0 26.7 19.7 24.8

Margin (%),

Norway 20.2 22.2 21.8 21.4

Margin (%),

Denmark 0.4 12.1 5.9 12.8

Margin (%),

Lithuania 44.6 44.5 45.2 45.3

Margin (%),

Estonia 28.3 24.7 29.1 22.1

Margin (%),

Wholesale 26.9 28.5 27.5 29.3











Strong development in Eurasia







The businessarea Eurasiacomprises mobile operations managed by Fintur in

Kazakhstan, Azerbaijan, Uzbekistan, Tajikistan, Georgia and Moldova and

a shareholding of 12 percent in Afghanistan’s largest operator Roshan.

The business area is also responsible for developing TeliaSonera’s

shareholding in Russian MegaFon (44 percent) and Turkish Turkcell (37

percent). The main responsibility is to create shareholder value and to

exploit penetration growth in the respective countries.





· The region continues to show strong market growth in terms of

volumes, but due to the weakening of local currencies against the

Swedish krona this is not fully reflected in the reported numbers.

Higher penetration in an increasingly competitive market environment,

together with regulatory intervention, put pressure on margins. In

addition, slowing economic development and rising inflationary pressure

in the region may affect consumer spending. TeliaSonera maintained

market leadership in Kazakhstan and Azerbaijan, and upheld its positions

in all other markets.





SEK in

millions,

except margins

and

operational Apr-Jun Apr-Jun Jan-Jun Jan-Jun

data 2008 2007 2008 2007

Net sales 2,858 2,451 5,575 4,516

EBITDA excl.

non-recurring

items 1,422 1,248 2,761 2,394

Margin (%) 49.8 50.9 49.5 53.0

Income from

associated

companies

Russia 1,344 1,178 2,361 1,951

Turkey 1,033 602 1,881 1,266

Operating

income 3,373 2,744 6,175 5,018

Operating

income excl.

non-recurring

items 3,373 2,744 6,175 5,018

CAPEX 917 906 2,140 1,337

Subscriptions,

period-end

(thousands)

Subsidiaries 14,511 8,671 14,511 8,671

Associated

companies 83,365 70,303 83,365 70,303





Additional segment information available at www.teliasonera.com/ir





Consolidated operations



· Net sales rose 16.6 percent to SEK 2,858 million (2,451) with

continued strong revenue growth in all six markets. Consolidated since

July 1, 2007, the operations in Uzbekistan and Tajikistan affected net

sales positively by 8.2 percent. Net sales in local currencies,

including effects from acquisitions, increased 25.0 percent.



· The number of subscriptions rose by over 5.8 million from the end of

the second quarter 2007 to 14.5 million, including about 2.3 million

subscriptions from the acquired operations in Uzbekistan and Tajikistan.

Subscription growth year-on-year excluding acquisitions was 41.0

percent, or 3.5 million subscriptions, with around 2.4 million net

additions coming from Kazakhstan. From the end of the first quarter 2008

to the end of the second quarter, the total number of subscriptions rose

by close to 1.2 million, with the largest increase in Uzbekistan, driven

by a successful rebranding that helped increase the subscription base by

close to 0.5 million.



· EBITDA, excluding non-recurring items, increased to SEK 1,422 million

(1,248) as a result of higher sales. A more balanced approach to

capitalizing on the growth opportunities in the various markets,

utilizing the combined strength and resources of the business area,

resulted in the best year-on-year margin development in six quarters.

The margin was 49.8 percent (50.9).





· CAPEX was SEK 917 million (906), with continued investments in

capacity, coverage and service quality in the networks.





SEK in Apr-Jun Apr-Jun Jan-Jun Jan-Jun

millions 2008 2007 2008 2007

Net sales 2,858 2,451 5,575 4,516

of which

Kazakhstan 1,443 1,374 2,862 2,518

of which

Azerbaijan 802 716 1,543 1,315

of which

Uzbekistan 93 – 169 –

of which

Tajikistan 108 – 196 –

of which

Georgia 321 271 629 514

of which

Moldova 97 92 188 172







Associated companies – Russia



· MegaFon (associated company, 43.8 percent holding) in Russia

continued to show strong performance and increased its subscription base

by 1.9 million from the end of the first quarter 2008 to 38.9 million.

MegaFon maintained its market share in terms of subscriptions during the

quarter at 22 percent.



· TeliaSonera’s income from Russia rose to SEK 1,344 million (1,178),

fueled by continued strong sales and earnings growth at MegaFon. The

comparative quarter last year included a positive one-off effect of SEK

140 million mainly related to a partial reversal of write-downs of old

equipment. The Russian ruble depreciated against the Swedish krona,

which had a negative impact of SEK 63 million.



· TeliaSonera owns 26.1 percent in OAO Telecominvest (TCI), which owns

31.3 percent of the shares in MegaFon. TeliaSonera has signed agreements

with TCI and a shareholder of TCI in order to secure TeliaSonera’s

ownership in MegaFon, including an agreement under which TCI has pledged

8.2 percent of the shares in MegaFon to TeliaSonera. TCI has pledged its

remaining shares in MegaFon, corresponding to a 23.1 percent ownership

in MegaFon, in order to guarantee a loan in favor of AF Telecom Holding

which is one of the shareholders of TCI.





Associated companies – Turkey



· Turkcell (associated company, 37.3 percent holding, reported with a

one-quarter lag) in Turkey recorded a decrease of around 0.3 million

subscriptions from the end of the first quarter 2008 to 35.1 million,

due to regulatory developments regarding retail pricing and focus on

maintaining high value generating subscribers. In Ukraine, the number of

subscriptions rose by 0.6 million from the end of the first quarter 2008

to 9.4 million.



· TeliaSonera’s income from Turkcell, which showed continued strong

sales and earnings growth, rose to SEK 1,033 million (602). The Turkish

lira appreciated against the Swedish krona, which had a positive impact

of SEK 64 million.









Other operations







Other operationscomprise Other Business Services, TeliaSonera Holding

and Corporate functions. Other Business Services is responsible for

sales and production of managed-services solutions to business

customers.







SEK in

millions,

except Apr-Jun Apr-Jun Jan-Jun Jan-Jun

margins 2008 2007 2008 2007

Net sales 647 457 1,189 842

EBITDA excl.

non-recurring

items 116 -100 52 -85

Income from

associated

companies -16 88 -8 87

Operating

income -36 -68 -141 -161

Operating

income excl.

non-recurring

items -8 -69 -166 -160

CAPEX 223 101 312 168





Additional segment information available at www.teliasonera.com/ir



· Net sales for Other operations increased mainly due to a good

development of Other Business Services and TeliaSonera Holding.

TeliaSonera Holding and Other Business Services supported EBITDA. In

addition, EBITDA was positively affected by lower costs related to

Corporate functions.





The Board of Directors and the President and CEO certify that the

Interim Report gives a true and fair overview of the Parent Company’s

and Group’s operations, their financial position and results of

operations, and describes significant risks and uncertainties facing the

Parent Company and other companies in the Group.



Stockholm, July 24, 2008









Tom von Weymarn Agneta Ahlström

Chairman







Maija-Liisa Friman Elof Isaksson







Conny Karlsson Lars G Nordström







Timo Peltola Jon Risfelt







Caroline Sundewall Berith Westman







Lars Nyberg

President and CEO







This report has not been subject to review by TeliaSonera’s auditors.









TeliaSonera AB discloses the information provided herein pursuant to the

Swedish Securities Markets Act and/or the Swedish Financial Instruments

Trading Act. The information was submitted for publication at 07.30 CET

on July 24, 2008.



















Financial Information



Interim Report January–September 2008

October 28, 2008

Year-end Report January–December 2008 February

11, 2009

Annual General Meeting 2009 in Stockholm April

1, 2009

Interim Report January–March 2009

April 24, 2009

Interim Report January–June 2009

July 24, 2009

Interim Report January–September 2009

October 28, 2009

















Questions regarding the reports:



TeliaSonera AB

Investor Relations

SE–106 63 Stockholm, Sweden

Tel. +46 8 504 550 00

Fax +46 8 611 46 42

www.teliasonera.com/ir





















Definitions



EBITDA: Earnings Before Interest, Tax, Depreciation and Amortization.

Equals operating income before depreciation, amortization and impairment

losses and before income from associated companies.



ARPU, blended: Average monthly revenue per subscription.



Churn, blended: The number of lost subscriptions (postpaid and prepaid)

expressed as a percentage of the average number of subscriptions

(postpaid and prepaid).



MoU: Minutes of usage per subscription and month.



DSL: Digital Subscriber Line is a family of technologies that provide

digital data transmission over the wires of a local telephone network.













Condensed Consolidated Income Statements







SEK in

millions,

except per

share data

and number of Apr-Jun Apr-Jun Jan-Jun Jan-Jun

shares 2008 2007 2008 2007

Net sales 25,274 23,901 49,672 46,625

Cost of sales -13,854 -13,680 -27,318 -26,223

Gross profit 11,420 10,221 22,354 20,402

Selling,

admin., and

R&D expenses -6,584 -6,123 -12,772 -11,891

Other

operating

income and

expenses, net -349 -167 -392 20

Income from

associated

companies and



joint

ventures 2,331 1,865 4,198 3,326

Operating

income 6,818 5,796 13,388 11,857

Finance costs

and other

financial

items, net -631 -151 -644 -280

Income after

financial

items 6,187 5,645 12,744 11,577

Income taxes -1,547 -1,351 -3,112 -2,701

Net income 4,640 4,294 9,632 8,876

Attributable

to:

Shareholders

of the parent

company 4,130 3,832 8,595 7,808

Minority

interests in

subsidiaries 510 462 1,037 1,068



Shareholders’

basic and

diluted

earnings

per share

(SEK) 0.92 0.85 1.91 1.74

Number of

shares

(thousands)

Outstanding

at period-end 4,490,457 4,490,457 4,490,457 4,490,457

Weighted

average,

basic and

diluted 4,490,457 4,490,457 4,490,457 4,490,457



EBITDA 7,427 7,234 15,002 14,687

EBITDA excl.

non-recurring

items 7,978 7,516 15,733 15,099

Depreciation,

amortization

and

impairment

losses -2,940 -3,304 -5,812 -6,157

Operating

income excl.

non-recurring

items 7,410 6,575 14,160 12,766











Condensed Consolidated Balance Sheets







Jun 30, Dec 31,

SEK in millions 2008 2007

Assets

Goodwill and other

intangible assets 87,283 83,909

Property, plant and

equipment 53,971 52,602

Investments in

associates and joint

ventures, deferred tax

assets

and other non-current

assets 49,920 48,633

Total non-current

assets 191,174 185,144

Inventories 1,080 1,168

Trade receivables,

current tax assets and

other receivables 20,291 20,881

Interest-bearing

receivables 1,218 1,701

Cash and cash

equivalents 6,246 7,802

Total current assets 28,835 31,552

Non-current assets

held-for-sale 5 6

Total assets 220,014 216,702



Equity and liabilities

Shareholders’ equity 104,396 117,274

Minority interests 8,058 9,783

Total equity 112,454 127,057

Long-term borrowings 47,594 41,030

Deferred tax

liabilities, other

long-term provisions 22,529 16,748

Other long-term

liabilities 2,179 2,366

Total non-current

liabilities 72,302 60,144

Short-term borrowings 9,391 2,549

Trade payables, current

tax liabilities, short-

term provisions

and other current

liabilities 25,867 26,952

Total current

liabilities 35,258 29,501

Total equity and

liabilities 220,014 216,702









Condensed Consolidated Cash Flow Statements







SEK in Apr-Jun Apr-Jun Jan-Jun Jan-Jun

millions 2008 2007 2008 2007

Cash flow

before change

in working

capital 6,767 6,652 11,772 13,210

Change in

working

capital 298 256 -489 -1,406

Cash flow

from

operating

activities 7,065 6,908 11,283 11,804

Intangible

and tangible

fixed assets

acquired

(cash CAPEX) -4,594 -3,350 -7,702 -5,717

Free cash

flow 2,471 3,558 3,581 6,087

Cash flow

from other

investing

activities 392 -873 486 -1,059

Total cash

flow from

investing

activities -4,202 -4,223 -7,216 -6,776

Cash flow

before

financing

activities 2,863 2,685 4,067 5,028

Cash flow

from

financing

activities -10,467 -23,529 -5,547 -11,534

Cash flow for

the period -7,604 -20,844 -1,480 -6,506



Cash and cash

equivalents,

opening

balance 13,819 26,095 7,802 11,603

Cash flow for

the period -7,604 -20,844 -1,480 -6,506

Exchange rate

differences 31 -69 -76 85

Cash and cash

equivalents,

closing

balance 6,246 5,182 6,246 5,182









Condensed Consolidated Statements of Changes in Equity







Jan-Jun 2008 Jan-Dec 2007

SEK in Shareholders’ Minority Total Shareholders’ Minority Total

millions equity interests equity equity interests equity

Opening

balance 117,274 9,783 127,057 119,217 8,500 127,717

Reporting

financial

instruments

at fair value -38 – -38 39 – 39

Hedging of

foreign

operations,

net of tax 7 – 7 -114 – -114

Currency

translation

differences -3,480 -335 -3,815 8,748 160 8,908

Net income

recognized

directly in

equity -3,511 -335 -3,846 8,673 160 8,833

Net income 8,595 1,037 9,632 17,674 2,624 20,298

Comprehensive

income 5,084 702 5,786 26,347 2,784 29,131

Transactions

with minority

shareholders

in

subsidiaries – -1,496 -1,496 – -42 -42

Dividends -17,962 -931 -18,893 -28,290 -1,459 -29,749

Closing

balance 104,396 8,058 112,454 117,274 9,783 127,057









Basis of Preparation





General. As in the annual accounts for 2007, TeliaSonera’s consolidated

financial statements as of and for the six-month period ended June 30,

2008, have been prepared in accordance with International Financial

Reporting Standards (IFRS) and, given the nature of TeliaSonera’s

transactions, with IFRSs as adopted by the European Union. The parent

company TeliaSonera AB’s financial statements have been prepared in

accordance with the Swedish Annual Accounts Act as well as standard RFR

2.1 Accounting for Legal Entities and other statements issued by the

Swedish Financial Reporting Board. This report has been prepared in

accordance with IAS 34 Interim Financial Reporting.



New accounting standards (not yet adopted by the EU). Amendments to IFRS

1 First-time Adoption of International Financial Reporting Standards and

IAS 27 Consolidated and Separate Financial Statements (effective for

annual periods beginning on or after January 1, 2009, earlier

application permitted) were issued on May 22, 2008. The amendments

address retrospective determination of the cost of an investment in

separate financial statements when adopting IFRSs for the first time.

The amendments to IFRS 1 and IAS 27 are not applicable to TeliaSonera.



The first annualImprovements to IFRSs (mostly effective for annual

periods beginning on or after January 1, 2009; earlier adoption

permitted) were issued on May 22, 2008. These improvements to about 20

IFRSs make necessary, but non-urgent, amendments that have not been

included as part of other major projects. The amendments are presented

in two parts: (a) those that involve accounting changes for

presentation, recognition or measurement purposes, and (b) those

involving terminology or editorial changes with minimal effect on

accounting. All in all, the amendments to those IFRSs that are

applicable to TeliaSonera have in certain cases already been applied and

will otherwise have no or very limited impact on TeliaSonera’s results

or financial position.





IFRIC 15 Agreements for the Construction of Real Estate (effective for

annual periods beginning on or after January 1, 2009; to be applied

retrospectively) was issued on July 3, 2008. IFRIC 15 applies to the

accounting for revenue and associated expenses by entities that

undertake the construction of real estate directly or through

subcontractors. IFRIC 15 provides guidance on how to determine whether

an agreement for the construction of real estate is within the scope of

IAS 11 Construction Contracts or IAS 18 Revenue and when revenue from

the construction should be recognized. IFRIC 15 is not applicable to

TeliaSonera.



IFRIC 16 Hedges of a Net Investment in a Foreign Operation (effective

for annual periods beginning on or after October 1, 2008; prospective

application required) was issued on July 3, 2008. IFRIC 16 applies to

entities that hedge foreign currency risks arising from net investments

in foreign subsidiaries, associates, joint ventures or branches and wish

to qualify for hedge accounting in accordance with IAS 39. IFRIC 16 does

not apply to other types of hedge accounting and should not be applied

by analogy. IFRIC 16 clarifies that (a) the presentation currency does

not create an exposure to which hedge accounting may be applied and

consequently, an entity may designate as a hedged risk only the foreign

exchange differences arising from a difference between its own

functional currency and that of its foreign operation; (b) the hedging

instrument(s) may be held by any entity or entities within the group;

and (c) while IAS 39 Financial Instruments: Recognition and Measurement

must be applied to determine the amount that needs to be reclassified to

profit or loss from the foreign currency translation reserve in respect

of the hedging instrument, IAS 21 The Effects of Changes in Foreign

Exchange Rates must be applied in respect of the hedged item.

TeliaSonera already, in previous periods, applied the principles stated

by IFRIC 16.



For further information, see corresponding section in TeliaSonera’s

Annual Report 2007.







Non-recurring Items







SEK in Apr-Jun Apr-Jun Jan-Jun Jan-Jun

millions 2008 2007 2008 2007

Within EBITDA -551 -282 -731 -412

Restructuring

charges,

synergy

implementation

costs, etc.:

Mobility

Services -169 -64 -210 -92

Broadband

Services -354 -219 -546 -319

Other

operations -28 1 25 -1

of which

TeliaSonera

Holding -6 19 49 17

Within

Depreciation,

amortization

and impairment

losses -41 -497 -41 -497

Impairment

losses,

accelerated

depreciation:

Mobility

Services -3 – -3 –

Broadband

Services -38 -497 -38 -497

Within Income

from

associated

companies and

joint ventures – – – –

Within Finance

costs and

other

financial

items, net 15 – 290 –

Penalty

interest:

Tele2 15 – 290 –

Total -577 -779 -482 -909











Deferred Taxes







Jun 30, Dec 31,

SEK in millions 2008 2007

Deferred tax assets 11,394 12,017

Deferred tax

liabilities -10,134 -9,577

Net deferred tax assets 1,260 2,440









Segment and Group Operating Income







SEK in Apr-Jun Apr-Jun Jan-Jun Jan-Jun

millions 2008 2007 2008 2007

Mobility

Services 2,341 2,029 4,594 4,333

Broadband

Services 1,123 1,055 2,754 2,635

Eurasia 3,373 2,744 6,175 5,018

Other

operations -36 -68 -141 -161

Total

segments 6,801 5,760 13,382 11,825

Elimination

of inter-

segment

profits 17 36 6 32

Group 6,818 5,796 13,388 11,857









Related Party Transactions





MegaFon. As of June 30, 2008, TeliaSonera had interest-bearing claims of

SEK 280 million on its associated company OAO MegaFon.



Svenska UMTS-nät. In the three-month and the six-month period ended June

30, 2008, TeliaSonera purchased services from its 50 percent owned joint

venture Svenska UMTS-nät AB worth SEK 133 million and SEK 247 million,

respectively, and sold services worth SEK 46 million and SEK 180

million, respectively.







Investments







SEK in Apr-Jun Apr-Jun Jan-Jun Jan-Jun

millions 2008 2007 2008 2007

CAPEX 4,475 3,318 7,705 5,655

Intangible

assets 927 384 1,162 587

Property,

plant and

equipment 3,548 2,934 6,543 5,068

Acquisitions

and other

investments 3,716 1,676 3,955 2,340

Goodwill and

fair value

adjustments 3,698 1,271 3,931 1,934

Equity

holdings 18 405 24 406

Total 8,191 4,994 11,660 7,995





Relating to TeliaSonera’s operations in Azerbaijan, TeliaSonera has

granted the largest minority shareholder a put option giving the

shareholder the right to sell its 42 percent holding at fair value to

TeliaSonera in case of a deadlock situation regarding material decisions

at the general assembly. TeliaSonera has accounted for the present value

of the estimated option redemption amount as a provision (SEK 4,983

million) and derecognized the minority interest, which increased

goodwill by SEK 3,608 million. Any future changes in the estimated

redemption amount will be recognized in the income statement, while no

minority interest will be recognized.







Net Debt







Jun 30, Dec 31,

SEK in millions 2008 2007

Long-term and short-

term borrowings 56,985 43,579

Less short-term

investments, cash and

bank -6,578 -8,861

Net debt 50,407 34,718









Loan Financing and Credit Rating





The underlying cash-flow generation was positive also in the second

quarter of 2008. However, substantial dividend payouts to the

shareholders in early April contributed to a considerable increase in

the Group’s net debt during the quarter.



Funding activities during the second quarter have focused primarily on

the domestic Swedish Commercial Paper market which has functioned well.



Turbulence in the financial markets has continued and is expected to

linger for quite some time into 2009, with negative funding

implications.



In early July, Standard & Poor’s confirmed TeliaSonera AB’s long-term

and short-term credit rating of A-/A-2 with a “Stable” outlook.







Financial Key Ratios







Jun 30, Dec 31,

2008 2007

Return on equity (%,

rolling 12 months) 18.5 18.6

Return on capital

employed (%, rolling 12

months) 17.2 19.4

Equity/assets ratio (%) 49.3 50.3

Net debt/equity ratio

(%) 46.5 31.8

Shareholders’ equity

per share (SEK) 23.25 26.12









Business Combinations





For minor business combinations in the second quarter, the cost of

combination totaled SEK 138 million and the net cash outflow SEK 94

million. Goodwill was SEK 91 million, allocated to reportable segment

Other operations. Goodwill is explained by strengthened market

positions. The total cost of combination and fair values have been

determined provisionally, as they are based on preliminary appraisals

and subject to confirmation of certain facts. Thus, the purchase price

accounting is subject to refinement.



For minor business combinations after the balance sheet date, work on

the purchase price allocation has been initiated. The cost of

combination is expected to mainly be recognized as goodwill, allocated

to business area Mobility Services.









Collateral Pledged and Guarantees





Collateral pledged at June 30, 2008, totaled SEK 1,530 million, mainly

referring to blocked funds in bank accounts for Ipse 2000 S.p.A.’s

future license payments and for certain court proceedings, and to

pledges of shares in Svenska UMTS-nät AB. Guarantees totaled SEK 2,219

million, of which SEK 1,923 million referred to credit guarantees on

behalf of Svenska UMTS-nät. Under certain third-party agreements, the

credit guarantees on behalf of Svenska UMTS-nät are capped at SEK 2,400

million.







Contractual Obligations





Contractual obligations at June 30, 2008, totaled SEK 1,395 million, of

which SEK 926 million referred to contracted build-out of TeliaSonera’s

fixed networks in Sweden and Finland.







Parent Company







Condensed

Income

Statements

(SEK in Apr-Jun Apr-Jun Jan-Jun Jan-Jun

millions) 2008 2007 2008 2007

Net sales 4,164 4,671 8,183 9,100

Gross profit 825 2,085 1,356 3,734

Operating

income 561 1,333 21,164 3,054

Income after

financial

items 156 16,439 20,544 18,224

Income before

taxes 174 16,062 30,431 17,423

Net income 171 15,918 30,431 17,061





Net sales, primarily related to fixed network services in Sweden,

declined due to migration to mobile services and lower-priced IP-based

services, and to operations being transferred to the subsidiary

TeliaSonera Skanova Access AB (Skanova Access). Out of the total net

sales in the first half-year, SEK 6,402 million (6,545) was billed to

subsidiaries. Operating income increased strongly due to capital gains

on assets transferred to Skanova Access at the beginning of the year. In

2007, income after financial items was positively impacted by dividend

payments from subsidiaries.





Condensed Balance

Sheets Jun 30, Dec 31,

(SEK in millions) 2008 2007

Non-current assets 163,543 142,469

Current assets 52,153 39,967

Total assets 215,696 182,436

Shareholders’ equity 75,443 63,013

Untaxed reserves 10,174 20,061

Provisions 685 944

Liabilities 129,394 98,418

Total equity and

liabilities 215,696 182,436





Total investments in the first half-year were SEK 35,549 million

(10,569), of which SEK 602 million (1,217) in property, plant and

equipment primarily for the fixed network. Other investments totaled SEK

34,815 million (9,352), of which SEK 34,000 million related to a capital

contribution provided in kind in exchange for new shares issued by

Skanova Access. In 2007, other investments included the acquisitions of

Cygate and debitel Danmark (SEK 2,011 million) and intra-group transfers

of shareholdings (SEK 7,132 million).







Risks and Uncertainties





TeliaSonera operates in a broad range of geographic product and service

markets in the highly competitive and regulated telecommunications

industry. As a result, TeliaSonera is subject to a variety of risks and

uncertainties. TeliaSonera has defined risk as anything that could have

a material adverse effect on the achievement of TeliaSonera’s goals.



Risks can be threats, uncertainties or lost opportunities relating to

TeliaSonera’s current or future operations or activities. Additionally,

these risks may affect TeliaSonera’s share price from time to time.



TeliaSonera has an established risk management process in place to

regularly identify, analyze and assess, and report business and

financial risks and uncertainties, and to mitigate such risks when

appropriate. Risk management is an integrated part of Telia­Sonera’s

business planning process.



See “Report of the Directors – Risks and Risk Management” in

TeliaSonera’s Annual Report 2007 for a detailed description of some of

the factors that may affect TeliaSonera’s business, financial condition

and results of operations. TeliaSonera believes that the risk

environment has not materially changed from the one described in the

Annual Report 2007.



Risks and uncertainties that could specifically impact the quarterly

results of operations during the remainder of 2008 include, but may not

be limited to:



· Investments in future growth. TeliaSonera is currently investing in

future growth through, for example, building a customer base in Spain

and increasing the expenditure on sales and marketing to retain and

acquire customers in most markets. While TeliaSonera believes these

investments will improve market position and financial results in the

long term, they may not have the targeted positive effects yet in the

short term and related expenditure may impact the results of operations

between the quarters.



· Efficiency programs. TeliaSonera is in the process of shifting its

cost base from traditional to new services. In the short term, depending

on when the related decisions are made and carried out, these efficiency

programs may not yet bring the cost savings that will be visible in the

long term. Additionally, related amounts of restructuring costs and

their timing may increase the volatility of quarterly results in the

short term.



· Non-recurring items. In accordance with their nature, non-recurring

items such as capital gains and losses, restructuring costs, write-

downs, etc. may impact the quarterly results in the short term with

amounts or timing that deviate from those currently expected. Depending

on external factors or internal developments, TeliaSonera might also

experience non-recurring items that are not currently anticipated.



· Associated companies. A significant part of TeliaSonera’s results

derives from MegaFon and Turkcell, which TeliaSonera does not control

and which operate in growth markets but also in more volatile political,

economic and legal environments. Variations in the financial performance

of these associated companies have an impact on TeliaSonera’s results of

operations also in the short term.





· Acquisitions. TeliaSonera has made a number of targeted acquisitions

in accordance with its strategy. The efficient integration of these

acquisitions and the realization of related cost and revenue synergies,

as well as positive development of the acquired operations, are

significant for the results of operations both in the long and short

term. Integration of acquired companies always includes certain risks,

and the integration process may increase the volatility of quarterly

earnings in the short term.







Forward-Looking Statements





This report contains statements concerning, among other things,

TeliaSonera’s financial condition and results of operations that are

forward-looking in nature. Such statements are not historical facts but,

rather, represent TeliaSonera’s future expectations. TeliaSonera

believes that the expectations reflected in these forward-looking

statements are based on reasonable assumptions; however, forward-looking

statements involve inherent risks and uncertainties, and a number of

important factors could cause actual results or outcomes to differ

materially from those expressed in any forward-looking statement. Such

important factors include, but may not be limited to: TeliaSonera’s

market position; growth in the telecommunications industry; and the

effects of competition and other economic, business, competitive and/or

regulatory factors affecting the business of Telia­Sonera, its

associated companies and joint ventures, and the telecommunications

industry in general. Forward-looking statements speak only as of the

date they were made, and, other than as required by applicable law,

TeliaSonera undertakes no obligation to update any of them in light of

new information or future events.