tdc tele danmark tdc mobile international tdc switzerland tdc internet tdc directories tdc cable tv tdc innovation tdc services

Transcription

1 01 tdc tele danmark tdc mobile international tdc switzerland tdc internet tdc directories tdc cable tv tdc innovation tdc services annual report

2 > > > > > > contents 3 dear shareowner 4 highlights of the year 7 selected financial and operating data tdc tele danmark tdc mobile international tdc switzerland tdc internet tdc directories tdc cable tv tdc innovation tdc services management s discussion and analysis significant accounting policies statements of income balance sheets statements of cash flow 53 notes 85 management financial calendar board of directors executive committee

3 > > > > > > > Each new year is a journey toward new horizons, fresh opportunities and familiar landmarks

4 > > > > > > > TDC is a Danish-based European full-service provider of communications solutions. It is organized in seven main business lines: TDC Tele Danmark, TDC Mobile International, TDC Internet, TDC Switzerland, TDC Cable TV, TDC Services and TDC Directories. TDC is the leading provider of communications services in Denmark, the second-largest communications provider in Switzerland and holds significant interests in a range of communications companies across Northern and Continental Europe. TDC was partly privatized in 1994 and fully privatized in Today, SBC Communications owns a 41.6% stake in TDC, and the remaining shares are held by individual and institutional shareowners all over the world.

5 > > > > > > > dear shareowner 2001 was a significant and eventful year for TDC. It was TDC s first year with our new focused corporate structure. TDC Switzerland was included in our Group, and our roll-out of broadband ADSL in Denmark continued at full speed. These achievements support our vision for the future; that TDC will strive to be the best provider of communications solutions in Europe. We are well prepared for changes in our rapidly developing industry yet remain focused on creating value and delivering the best services for our customers. We use state-of-the-art technology to create sophisticated, user-friendly solutions while expanding in high-growth, high-value markets both at home and abroad. Since we are operating in Europe s first fully liberalized and therefore highly competitive telecommunications market, TDC expects to benefit from the advantages of early roll-back of regulation in our sector. knud heinesen Chairman of the Board henning dyremose President and CEO In Denmark, we have made significant progress with rolling out ADSL connections to cover almost the entire Danish population. 95% of the Danish population will have the option of access to a TDC broadband solution by summer And we are ready to deliver customized solutions that fully exploit the benefits derived from the continued convergence of different means of communications. We wish to extend our gratitude to our competent and committed employees. As Danish market leader in a very competitive and rapidly changing global industry, we emphasize the targeted development of our employees at all levels of the organization. This focus ranges from the continuous training of our specialists in new processes and technologies to tailored change management training programs.

6 > net revenues dkk 51.6bn > ebitda dkk 12.8bn > ebit excl. oti dkk 4.3bn > net income excl. oti dkk 1.3bn > highlights of the year 2001 was another exciting year for TDC with our new, focused subsidiaries improving their positions and maintaining or gaining market shares. TDC met EBITDA and exceeded its net income outlook for 2001 Net revenues of DKK 51.6bn, up 16% EBITDA of DKK 12.8bn Net income excluding one-time items of DKK 1.3bn 13.5m pro rata customers at yearend 2001, up 19% Broadband roll-out continued across the country. By the end of 2001, 111,000 end-users had already bought into our high-speed ADSL technology a market share of more than 70%. TDC Mobil, our domestic provider of mobile services, acquired a coveted UMTS license at less than one sixth the price per capita paid in the UK and Germany. We are now well-equipped for future landline and mobile developments. Further afield, TDC Switzerland, the second-largest communications provider in the Swiss market, achieved better earnings than expected. In 2001, we streamlined and strengthened the entire structure of the company and brought 19% growth in customer base and an increase in market share. tdc s vision tdc will strive to be the best provider of communications solutions in europe To realize the vision, we will focus on: Consistently delivering customer value through customer-focused solutions and outstanding customer care Dedicated, enthusiastic and proud employees Creation of outstanding shareowner value Active and responsible participation in the developmentofsociety 4

7 customers (pro rata) 13.5m > > > > > > percentage of total revenues from international activities group total revenues bn dkk group ebitda bn dkk % 12.7% 15.6% 15.7% % 12.0% (1.2%) 11.5% More than half our total revenues are generated internationally. Our revenue growth continues. Total revenues was DKK 54.1bn in 2001, up 15.9%. Our EBITDA fell 1.2%, but we met our outlook for

8 > > > > > > > As seen, this dynamic company continues to enhance its position and increases TDC s exposure in highgrowth segments. A rationalization process is now optimizing performance at Talkline, our German subsidiary. Talkline Nederland has been divested and we have initiated closure of Talkline s landline and Internet businesses. Finally, our revenue share of international operations continues to grow. In 2001, more than one half of our total revenues DKK 29.3bn was generated outside Denmark. customers (pro rata) Cable TV 828,000 Internet 1,579,000 Landline 4,740, group customers m (pro rata) 15.2% 18.5% 23.7% 18.8% Mobile 6,316,000 3 Mobile customers continue to grow and now comprise 47% of our customer base % more costomers in

9 > > > > > > > selected financial and operating data Statements of Income USDm EURm Net revenues 29,386 33,989 38,206 44,552 51,564 6,131 6,931 Total revenues 31,036 35,867 40,437 46,757 54,082 6,431 7,269 Total operating expenses (21,189) (24,889) (28,139) (33,786) (41,272) (4,908) (5,547) Earnings before interest, taxes, depreciation and amortization 9,847 10,978 12,298 12,971 12,810 1,523 1,722 Depreciation, amortization and write-downs (5,265) (5,270) (5,583) (6,178) (8,472) (1,007) (1,139) Operating income before one-time items 4,582 5,708 6,715 6,793 4, One-time items (2,292) ,161 (2,548) (303) (342) Operating income 2,290 6,463 6,715 12,954 1, Net financials 21 (108) (215) (612) (1,569) (187) (211) Income before income taxes 2,311 6,355 6,500 12, Total income taxes (1,162) (1,888) (2,685) (3,240) (1,366) (162) (184) Income before minority interests 1,149 4,467 3,815 9,102 (1,145) (136) (154) Minority interests 27 (34) (62) (15) Net income 1,176 4,433 3,753 9,087 (738) (88) (99) Operating income before one-time items 4,582 5,708 6,715 6,793 4, Net financials 21 (108) (215) (612) (1,569) (187) (211) Income before income taxes 4,603 5,600 6,500 6,181 2, Income taxes related to ordinary income (1,995) (2,044) (2,685) (2,575) (1,807) (215) (243) Income before minority interests 2,608 3,556 3,815 3, Minority interests share of ordinary income 27 (34) (62) (15) Net income, excluding one-time items 2,635 3,522 3,753 3,591 1, Balance Sheets DKKbn USDbn EURbn Total assets Total shareowners' equity Shares issued (million) Statements of Cash Flow USDm EURm Operating activities 7,781 8,968 8,469 8,903 6, Investing activities (8,948) (5,894) (11,283) (7,476) (20,781) (2,471) (2,793) Financing activities (1,013) (8,830) 2,997 3,277 10,511 1,250 1,413 Change in cash and cash equivalents (2,180) (5,756) 183 4,704 (3,330) (396) (447) Capital expenditures DKKbn USDbn EURbn Excluding share acquisitions Including share acquisitions Key figures and ratios Reported EPS (DKK) (3.4) EPS excl. one-time items (DKK) Pro forma EPS 1 (DKK) Dividend per share (DKK) Net interest-bearing debt 2 (DKKbn) Operating profit ratio (EBIT margin) (%) Return on capital employed (ROCE) 3 (%) Subscriber base 4 pro rata ('000, end of period) Landline 3,998 4,277 4,410 4,559 4,740 Domestic 3,182 3,204 3,203 3,182 3,139 International 816 1,073 1,207 1,377 1,601 Mobile 1,791 2,312 3,233 4,888 6,316 Domestic ,294 1,648 1,911 International 897 1,317 1,939 3,240 4,405 Internet ,063 1,579 Cable TV Total subscribers 6,707 7,728 9,130 11,311 13,463 Number of employees 5 17,268 16,410 17,464 18,363 19,130 USD/DKK exchange rate 8.41 EUR/DKK exchange rate Pro forma EPS excludes goodwill amortization and one-time items. 2 Net interest-bearing debt is interest-bearing liabilities less interest-bearing assets. 3 ROCE is income before income taxes, one-time items and interest expenses divided by total shareowners equity plus interest-bearing debt. 4 The definition of active and inactive customers was changed in Corporate figures for previous years have been changed accordingly. 5 Fully-owned enterprises. 7

10 > net revenues dkk 19.5bn > ebitda dkk 6.9bn > customers (pro rata) 3.5m > employees 10,775 > tdc tele danmark We offer our customers reliable and advanced communications solutions Peder Østermark Andreasen, President TDC Tele Danmark delivers a full range of landline services in Denmark and neighboring Nordic countries, including telephony, broadband, data, leased lines, system integration and operator services. powerful player in an advanced market The Danish landline market is streets ahead in terms of solutions, competition and liberalization, with among the lowest interconnect and end-user prices on the continent. TDC Tele Danmark thrives in this dynamic environment and for the first time since liberalization, our share of landline traffic is rising net revenues bn dkk business market specialist We manage entire corporate communications networks for our business customers from operating complete voice and data networks to running call centers. This leaves them free to focus on their core businesses TDC Tele Danmark net revenues amounted to DKK 19.5bn in

11 > > > > > > > Our range of tailored products includes: isdn2 customers ' % 114% 47.3% 12.1% The number of ISDN2 connections continues to grow, although the roll-out of ADSL has slowed the growth rate somewhat value added services '000 contracts?? In 2001, we had [x.x]m contracts with value added services in addition to our traditional landline products. The Flexible Office, for a completely mobile workplace ASP (Application Service Provision) solutions such as edesk, which accesses central applications such as Microsoft Office and is managed, maintained and upgraded by TDC Tele Danmark KIK, for local authorities, which integrates various institutions networks and offers services to the public. cost control At TDC Tele Danmark, we value high efficiency and keep costs under strict control. We continuously review internal systems and procedures to maintain a lean and flexible cost structure, while optimizing customer service. 9

12 > > > > > > > leveraging our network We are on schedule with the roll-out of broadband infrastructure and services. By July 2002, high-speed Internet access will be an attractive option for 95% of the Danish population. We have already begun migrating from the traditional switched network to an entirely IP-based network, ready to provide new products and services as further convergence develops between data, voice, media and IT. Operations, too, will become more cost-efficient. Our diverse, customized solutions for residential customers integrate voice, data transmission, surveillance, entertainment on demand and much more besides. Fast broadband connections will be the backbone that allows modern families to benefit fully from these developments. nordic activities Our pan-nordic infrastructure is reinforced by national sales teams and operations that target and support large businesses with a full range of services. In Norway and Sweden, our subsidiaries are branded as Tele Danmark Internordia. We will be rolling out fiber closer to the home and office to give even faster broadband connections and facilitate intelligent living. 10

13 > > > > > > > Perhaps people are islands. But communication keeps us in touch

14 > net revenues dkk 17.6bn > ebitda dkk 2.3bn > customers (pro rata) 5.4m > employees 2,791 tdc mobile international We develop new services for people on the move Henning Vest, President TDC Mobile International now has mobile operations in seven European countries: Denmark, Germany, Lithuania, Poland, Austria, Ukraine and the Netherlands. Our key competencies are customer segmentation, the creation and operation of efficient networks, and knowledge exchange between operations. We combine these skills with attractive partnerships to enhance our performance and offer popular services and applications. umts roll-out synergies In 2001, the Danish operation acquired a UMTS license. The TDC Group can now benefit from reasonably priced UMTS licenses in Denmark, Switzerland, Poland, Austria, Belgium and the Netherlands, and will be fully exploiting the synergies created by prices for umts licenses dkk'000 per capita mobile customers per company millions pro rata UK Germany Italy The Netherlands Denmark Austria Poland Switzerland TDC Mobil Talkline Bité Connect Austria Polkomtel UMC 12

15 > > > > > > > tdc mobile international net revenues dkk bn UMTS operations in several countries. Sharing knowledge and experience throughout the operations will have a high priority when rolling out networks and services. Developments will be driven mainly by market demand, while honoring license obligations. sms messaging takes off SMS is a very high-growth service. In 2001, our domestic SMS traffic topped 390m messages up 84% on SMS revenues rose still higher as premium-rate SMS messages were linked to popular news services and TV shows. New partnerships further enhance our services and content a strategy we are promoting in areas such as news, micropayments, office solutions, messaging and entertainment services. Advanced mobile Internet services are a future growth driver. Together with CMG, TDC Mobile International formed the MIGway joint venture in The first MIGway product is a pan- European platform for two-way SMS messaging. Shortly after MIGway s launch, we joined forces with Microsoft to roll-out MSN Hotmail and other services across Europe. In December 2001, MIGway MSN Hotmail services were successfully launched in Denmark, Germany and Switzerland. Introducing GPRS services will open up a new dimension for the mobile Internet as data transmission speeds increase. tdcmobil(denmark) TDC Mobil, our fully-owned subsidiary, leads the Danish mobile market. In 2001, customer loyalty increased significantly among the most-consuming customers due to the best customer service, the best network in Denmark and new products and services focused clearly on customer needs. Nordic one rate, CNN breaking news and Mobil VPN, for example, combine simplicity with mobility and add more scope for customers. The roaming agreement made with Vodafone in 2001 means our customers enjoy the best and simplest new mobile services as they travel across Europe. key figures: net revenues dkk 4.8bn ebitda dkk 1.4bn mobile customers 1.9m 2001 brought high growth in revenues, and in retail and wholesale customer bases. This has boosted our already strong position, reflected by the number of service providers in our network and our large share of the wholesale market. TDC Mobil s newly acquired UMTS license will add to long-term opportunities in the mobile Internet and data solutions. By January 2001, we had finished rolling out GPRS nationwide in a move toward UMTS. TDC Mobile International net revenues totaled DKK 17.6bn in

16 > > > > > > > talkline (germany) Talkline, which is fully-owned by TDC Mobile International, has been providing the German market with mobile, landline and Internet services. The company is now well into a restructuring process to optimize and improve financial performance. After selling Talkline Nederland and closing Talkline s landline and Internet businesses, Talkline will become a focused mobile service provider with one of the highest ARPUs in the German market. Efficient self-services for customers via the Internet and effective retention programs are already reducing churn and increasing earnings. key figures: net revenues dkk 9.3bn ebitda dkk 114m mobile customers 1.7m bité (lithuania) Bité, our fully-owned subsidiary in Lithuania, holds a strong position in mobile Internet services and the business segment. Its GPRS launch and strong content alliances have blazed a trail for attractive, innovative mobile Internet solutions for residential and business customers. In 2001, Bité s customer base increased by 102,000 up 60% on key figures: net revenues dkk 410m ebitda dkk 147m mobile customers 271,000 polkomtel (poland) TDC Mobile International owns 19.6% of Polkomtel, a Polish mobile operator that continues to increase revenues, EBITDA and customer totals. Tailored solutions strengthen the company s leading position in the business segment of the Polish mobile market and in 2001, Polkomtel s customer base grew 40%. Polkomtel has a high volume of SMS traffic, especially in the residential market, partly because of its popular game platform for the mass market. In January 2001, Polkomtel launched GPRS to pave the way for using the UMTS license it acquired in key figures (pro rata): net revenues dkk 1.7bn ebitda dkk 611m mobile customers 675,000 umc (ukraine) With a 16.33% stake in UMC, a Ukrainian mobile operator, TDC Mobile International has a firm foothold in this promising market. UMC provides customers with GSM and NMT technologies, and is currently introducing GPRS technology. With market penetration of just 4.3% and a population of 49 million, Ukraine represents interesting growth opportunities. In 2001, customer growth totaled 470,000 indicating an increase of 105%. At the end of 2001, UMC had attracted more than 900,000 customers and its network covered 62% of the population nationwide. key figures (pro rata): net revenues dkk 287m ebitda dkk 137m mobile customers 150,000 connect austria (austria) TDC Mobile International holds a 15% stake in Connect Austria, which is marketed under the brand name ONE. Connect Austria has 1.3 million mobile subscribers and is number three in the national mobile market. Connect Austria is the only Austrian mobile operator supplying GPRS high-speed mobile data solutions. The company launched GPRS in 2001 to bridge the development from GSM to UMTS, and already has a UMTS license. In December 2001, the first UMTS voice call was made on Connect Austria s network, and commercial applications are scheduled for key figures (pro rata): net revenues dkk 577m ebitda dkk 107m mobile customers 195,000 ben (the netherlands) TDC Mobile International has an agreement with German T-Mobil regarding the sale of our 14.7% stake in Ben. TDC Mobile International no longer has operational influence and will have completely divested its stake by In 2001, Ben increased its market share in the competitive Dutch market to 9.7% with a net customer gain of 408,000. Ben launched GPRS in December 2001, having acquired a UMTS license in

17 > > > > > > > Distance is relative when contact is close

18 > net revenues dkk 7.8bn > ebitda dkk (77)m > customers 2.2m > employees 2,183 > tdc switzerland We are the second-largest telecoms provider in Switzerland Kim Frimer, President TDC Switzerland strengthened its position as the second-largest telecoms provider in Switzerland, offering landline, mobile and Internet services under the sunrise brand. growth in all areas With 786,000 landline customers (75% pre-select), and a mobile customer base of 944,000, we are the second-largest provider in the landline and mobile markets. 20% of all Swiss voice traffic originates from our customers. And by year-end 2001, we were the largest ISP in Switzerland, with 499,000 Internet customers. At year-end, TDC Switzerland held an estimated 21% of the landline market, 18% of the mobile market and 37% of the Internet market. Market shares in all areas were up, with growth in both residential and business segments tdc switzerland customers '000 Landline Mobile Internet TDC Switzerland had 2.2m customers in Mobile customers comprised the largest group. 16

19 > > > > > > > merger brought synergies The merger of sunrise and diax to form TDC Switzerland led to consolidation and valuable synergies. The investment will soon pay off as performance in terms of financials, customers and market share improves. The merger has improved our network business considerably. With increased traffic in a single, combined network, we have negotiated even better deals with competitors and partners, increasing profitability in our landline, Internet and wholesale businesses traffic in network m minutes Traffic in TDC Switzerland s networks has increased since Central functions are being streamlined. We now have just one customer system and two main billing systems for mobile and landline business. Eliminating dual functions has reduced staff from 2,700 to 2,200. With a broader set of capabilities under the TDC umbrella, cross selling and bundling have become important growth areas. Under sunrise, landline telephony is bundled with attractive Internet services to increase sales, retain customers and reduce churn. synergies and the tdc group Synergies have also evolved from membership of the TDC Group. Home zone products launched in Switzerland have been adapted and successfully introduced by other TDC companies. And the MIGway cooperation with Microsoft for rolling out two-way mobile MSN Hotmail messaging services has been launched in Switzerland the first European country to follow Denmark. TDC companies join forces to purchase mobile handsets and share know-how in key technologies such as GPRS and UMTS. This is also expected to benefit TDC Switzerland. 17

20 > > > > > > > > advanced services create revenues TDC Switzerland offers many technologically advanced services and products ranging from mobile and Internet Value Added Services (VAS) to GPRS and ADSL solutions. VAS already generate more than 10% of our mobile revenues. Attractive services increase customer loyalty, so an SMS platform has been launched that allows new SMS services to be introduced and implemented quickly. This will appeal to external companies wishing to launch new services on the Swiss market as our partner. TDC Switzerland now offers more mobile VAS than any other provider in Switzerland. GPRS was introduced in December Our mobile customers enjoy this new technology at no extra subscription charge. TDC Switzerland is one of the few operators in Europe offering GPRS to prepaid and postpaid customers. Experience gained will be used to roll out third-generation UMTS networks, for which TDC Switzerland acquired a license in December The whole process will be carefully implemented and linked closely to customer demand. Our extensive portfolio has helped us become the second-largest provider in the data-networking area. And our popular range of products for the business segment has won the company a foothold in landline and Internet. The minority shareowners in TDC Switzerland hold a put option allowing them to sell their shares in the company to TDC A/S at the beginning of 2003 for up to CHF 1.7bn. 18

21 > > > > > > > When we travel, we explore the world - and find our own roots

22 > net revenues dkk 1.0bn > ebitda dkk (353)m > customers 0.6m > employees 1,173 > tdc internet tdc internet net revenues dkk m We offer portal, hosting and security in addition to traditional ISP services Lars Torpe Christoffersen, President In 2001, TDC Internet net revenues increased 71%. TDC Internet, the top Danish Internet Service Provider, offers a wide product range from simple Internet connections to broadband access and more complex security and hosting services. TDC Internet is the leading Danish ISP, with more than 610,000 dial-up customers. Together, TDC Internet and TDC Tele Danmark are also market leaders in the Danish broadband market, where the TDC Group provides more than 70% of all ADSL connections. TDC Internet delivers the technology and support while TDC Tele Danmark rolls out the infrastructure. stronghold in the business market Our Internet and broadband services for the business market, known as Zillion, span access, hosting, security and e-commerce. New developments include a major new hosting center and Zillion Shop, our user-friendly e- business solution for customers wishing to offer electronic shopping facilities to their customers. Zillion Shop has a record 50% share of the Danish market. Our security solutions are some of the best on the Danish market. In spring 2001, the Danish Government chose TDC Internet, with its unique competencies, as the provider of digital signatures for future dealings between authorities and the public. opasia evolves beyond traditional portal Opasia, our coherent, seamless portal, features many communities and functions that cater to a wide variety of interests. Already much more than a conventional portal, it features streaming video in cooperation with Danish TV shows as well as our Photosite. Boomtown, the gaming part of the portal, offers broadband access products and Internet cafés. Payment for content has been introduced successfully and revenue prospects are very promising. So far, two Boomtown Internet cafés have opened and the concept has increased usage significantly while developing both the gaming and community experience. subsidiaries TDC Internet owns 50% of Contactel in the Czech Republic, a highquality telecoms provider with a streamlined organization offering Internet access, data communications solutions, hosting and voice products for the business segment. In 2001, Contactel became ISO 9001 certified, incorporated a new ISP platform and introduced voice over IP for businesses. These and other moves have reinforced Contactel s benefits from the ongoing liberalization of the Czech market. 20

23 > > > > > > > > In May 2001, we acquired a 51% stake in each of six Polish ISPs. These companies will merge into TDC Internet Polska the thirdlargest ISP in Poland, offering Internet access, data communications solutions, web design, hosting and ASP. More growth is expected following the integration process implemented in Dan Net, a fully-owned Danish subsidiary, is a global provider of data clearing and electronic data interchange services. For Dan Net, which exchanges roaming data for more than 100 GSM operators worldwide, 2001 was an exciting year. A subsidiary was established in Singapore to provide services for the growing ranks of Asian GSM operators and Dan Net itself won a number of contracts with large GSM operators. By the second quarter of 2001, we had overtaken our biggest competitor to become the largest GSM clearing house in the world. 21

24 > net revenues dkk 1.5bn > ebitda dkk 503m > employees 1,189 > > > tdc directories Our aim is efficiency and modern services in a traditional market Keld Holland, President TDC Directories provides electronic and online products as well as traditional directories and has activities in Denmark, Sweden, Norway and the Czech Republic. As an efficient, streamlined business, we lead the Danish directory market, where we continue to achieve high margins and returns. electronic products continue to evolve Sales of Internet ads are steadily growing, mainly through our De Gule Sider (Yellow Pages) web site where we have the lion s share of banner ads and online services in Denmark. We have increased both our revenues and market share, despite the dot.com decline in online advertising worldwide. Our recognized position in data and address sales holds firm. In January 2001, we expanded our address sales activities by purchasing DM Huset, an established specialist. We also update databases for companies and offer enriched data of special relevance in many different segments. expansion in sweden We continue to expand in Sweden, where we are already market leaders in local and B2B directories. In 2001, we sent the first edition of Gulan, our Swedish yellow pages, to 1.6m households and businesses in three major Swedish cities. Subsequent editions are set to attract even more advertisers tdc directories net revenues dkk bn 4.4% 21.7% 47.4% 10.8% brought a 10.8% increase in TDC Directories net revenues. 22

25 > > > > > > > > 23

26 > net revenues dkk 1.2bn > ebitda dkk (50)m > customers 0.8m > employees 681 > tdc cable tv We offer a wide choice of TV channels and high-speed Internet access Niels Breining, President TDC Cable TV is a leading provider in Denmark and also supplies advanced telecoms services such as broadband Internet access. improved cost control We have enforced strict cost control while improving our service levels. Increased sales of high-end products have generated a 6% increase in revenue per customer and our customer base grew 3% up 27,000 to 828,000. By January 1, 2002, TDC Cable TV gained a further 17,000 customers as a direct result of purchasing a Danish electricity utility s cable-tv business. choice of channels As the user voting method of selecting our network TV and radio channels was abolished, we no longer have to include a number of channels based on voting. Our negotiating position has therefore improved, with customer 24

27 > > > > > > > > customers ' Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 TDC Cable TV managed to increase customer figures further during demands and content provider choice balanced more favorably against relatively low customer prices. more than just tv Digital Selector set-top boxes, sold or rented, provide users with access to varied services and a broader range of TV programs. In September 2001, we staged a very successful pay-per-view sporting event that attracted an unprecedented one third of our digital customers. Rolling out two-way communication in our cable network is on schedule. By year-end 2001, 25,000 end-users, including members of local antenna and housing associations, were benefiting from high-speed Internet access products in speed classes ranging up to 2Mb/s. 25

28 > > > > > > > > tdc innovation We support promising start-up and growth companies in line with corporate strategies Carsten Gaarn-Larsen, Vice President TDC Innovation, a group venture established in April 2000, supports, cultivates and invests in promising start-up and growth companies to enhance future value and synergies for the Group. TDC Innovation further refined its focus in 2001, integrating lessons learned from the first period of operation and adjusting to market developments. Our focus on pure Internet businesses was widened to align more closely with corporate interests. more synergies from innovation TDC Innovation s portfolio creates measurable synergies through specific business lines and subsidiaries. Zellsoft, for example, helped launch a number of new services for Bité and TDC Mobil. Our new strategy is to target clustering investing in companies that complement and strengthen other portfolio companies around a specific set of products or expertise. For example, 26

29 > > > > > > > > one cluster includes Zellsoft (mobile applications), Kaisai (digital photography) and Pine Tree Systems (digital asset management). We stimulate relations between companies to encourage new forms of services and applications that can be channeled through TDC business lines. investments reviewed During 2001, TDC Innovation re-evaluated its portfolio. Shares in two companies were sold to founders, secondround funding for a number of companies was completed successfully, and new investments were made. promising new investments In June 2001, we invested in Pricerunner a Swedish Internet company specializing in web-based pricecomparison services. This dynamic company has won awards for the best technical solutions in Scandinavia, and licenses these solutions to consumeroriented portals. Pricerunner also develops solutions that provide focused usage statistics for online traders. In January 2002, we invested in Pine Tree Systems, a more mature company specializing in digital asset management software. Pine Tree Systems, which is well established in Denmark, the Netherlands, UK and USA, has a proven track record in the graphics industry and is now pursuing market leadership in the web-based, crossmedia, digital asset management sector. 27

30 > net revenues dkk 3.4bn > ebitda dkk 1.2bn > employees 2,102 > > > tdc services We offer cost-effectiveness and tailor-made quality services for the Group Hans Kovsted, President TDC Services is primarily an internal service company. It ensures TDC has immediate access to the best, most cost-effective solutions in billing, procurement, logistics, facility management, IT, accounting, payroll administration, risk management and security. new systems introduced In October 2001, TDC Services launched a new customer care & billing system at TDC Mobil, specially tailored to improve customer service while ensuring that new products are introduced faster and with much greater flexibility. top quality low costs TDC Services offers top-quality services at the lowest rates on the market and regularly benchmarks performance against external providers of the same services. TDC Services will provide TDC Tele Danmark with the same advanced system and will expand the mobile system by adding UMTS functionality. 28

31 > > > > > > > > 29

32 > > > > > > > 2001, impacted by substantial growth in European mobile operations, offset partly by lower EBITDA stemming from Belgacom, the inclusion of new international Internet operations, expansion of Nordic directory activities and Talkline. Excluding one-time items, operating income (EBIT) amounted to DKK 4,338m, down 36% on The decrease in EBIT was heavily affected by depreciation and amortization related to the Swiss investment, including goodwill amortization. Net income amounted to DKK 1,317m and earnings per share (EPS) equaled DKK 6.08, both decreased 63% compared with The development in net income and earnings per share was further influenced by the cost of funding the Swiss investment. According to the February outlook for 2001 presented in the TDC Annual Report 2000, total revenues of DKK 57.5bn, EBITDA of DKK 12.8bn and net income excluding one-time items of DKK 0.6bn were expected. This outlook was updated in connection with TDC s quarterly earnings releases during The lower level of actual total revenues was attributable primanagement s discussion and analysis introduction 2001 was a milestone year for TDC. Firstly, TDC s financial performance reflected the impact of the strategic investment in TDC Switzerland and secondly, 2001 was the first year with quarterly financial outlooks based on TDC s new structure. In 2001, total revenues amounted to DKK 54,082m, a 16% increase compared with The increase was heavily impacted by the full consolidation of TDC Switzerland. Earnings before interest, taxes, depreciation and amortization (EBITDA) decreased 1% to DKK 12,810m in The second half of 2001 saw 17% growth compared with 2000, a significant improvement compared with the first half of EBITDA from domestic activities decreased DKK 418m or 4% to DKK 9,512m in 2001, impacted by a DKK 811m or 15% decrease in the first half of However, with continuous performance improvements throughout the year, domestic EBITDA in the second half of 2001 was DKK 393m or 8% better than in EBITDA from international operations increased DKK 257m or 8% to DKK 3,298m in marily to a change in strategy for Talkline that focuses this company exclusively on mobile services. EBITDA was in line with the February projections. The improved net income excluding one-time items was driven primarily by the lower cost of funding the Swiss investment and lower depreciation in a number of operations. The capitalization of the tax value related to incurred losses for 2001 in TDC Switzerland also improved net income. As foreseen, TDC's financial performance was heavily impacted by the TDC Switzerland transaction completed on January 23, 2001, resulting in significant earnings dilution through depreciation and amortization as well as the cost of funding. Importantly, however, the Swiss operation performed better on earnings than expected in As a counterbalance to the shortterm Swiss dilution impact, TDC s European mobile operations contributed an increase in EBITDA compared with This value creation was based on international investment strategies implemented during the 90s followed by well-managed operations. key financial figures (excl. one-time items) tdc group Growth (%) Total revenues 54,082 46, EBITDA 12,810 12,971 (1.2) EBIT 4,338 6,793 (36) Net income 1,317 3,591 (63) EPS (DKK) (63) During 2001, TDC s Management considered the strategic options for Talkline and decided to restructure the company. The decision led to the commenced closure of the landline and Internet activities and divest- 30

33 > > > > > > > > ment of the Dutch mobile activities. The German mobile and Infodienste activities will continue as operating activities. This restructuring resulted in a one-time item after tax of DKK (2,113)m in Total one-time items in 2001 amounted to DKK (2,055)m after tax, reflecting primarily the restructuring of Talkline. Other restructuring costs and impairment charges had a negative impact of DKK 696m on one-time items after tax, offset by an option gain in Ceske Radiokommunikace and Belgacom s partial divestment of its Ben stake, aggregating DKK 754m after tax. In 2001, Group capital expenditures amounted to DKK 23.0bn compared with DKK 16.1bn in 2000, a DKK 6.9bn increase reflecting mainly the final acquisition transactions in January 2001 related to TDC Switzerland. Net interest-bearing debt increased to DKK 34.6bn compared with DKK 14.1bn at year-end 2000, mainly as a result of the Swiss investment. net revenues TDC s net revenues increased DKK 7,012m or 16% to DKK 51,564m in Net revenues from domestic activities rose 1% to DKK 23,023m. This development was affected by significant growth in the focus areas of mobile and Internet services, including considerable revenue growth generated by ADSL sales that positioned TDC as a clear market leader. However, this growth was offset partly by lower revenues from landline telephony, operator services and data communications services. Net revenues originating from international activities rose 31% to DKK 28,541m in International activities were impacted significantly by TDC Switzerland, which generated net revenues of DKK 7,769m in Considerable organic growth in European mobile operations also contributed to the net revenue growth together with new international Internet operations and the expansion of Nordic directory activities. Net revenues from Talkline decreased DKK 460m, driven mainly by the commenced closure of landline telephony and Internet activities as well as the divestment of Talkline Nederland. In 2001, net revenues from landline telephony rose 10% to DKK 17,126m. The landline telephony revenue segment consists of domestic connection and subscription fees, domestic and international retail and wholesale traffic revenues, and customer calling services as well as landline telephony revenues from TDC Switzerland and Talkline. Growth in landline telephony net revenues was driven mainly by the impact of TDC Switzerland in 2001, offset partly by lower landline telephony revenues from Talkline and by the divestment of Telenordia in Domestic landline telephony decreased DKK 389m in 2001, due primarily to lower international transit traffic, as some activities were transferred from TDC Tele Danmark A/S (domestic) to Tele Denmark USA (international). TDC s net revenues from mobile telephony increased DKK 4,477m or 35% to DKK 17,348m in This revenue segment includes domestic one-time items net net tdc group ebit income ebit income Talkline restructuring costs (2,720) (2,113) - - Other restructuring costs and impairment charges (972) (696) (479) (486) Sale or change of shareholdings 1, ,640 5,982 One-time items, total (2,548) (2,055) 6,161 5,496 31

34 > > > > > > > management s discussion and analysis subscription and connection fees, domestic mobile traffic revenues, and net revenues from European mobile operations, including mobile revenues from TDC Switzerland. Net revenues from domestic mobile activities grew 13%, driven mainly by voice traffic and SMS. The number of domestic traffic minutes increased 19% to 2,736m in In addition, the number of domestic SMS messages grew 84% to 390m. Net revenues from international mobile activities grew 42%, influenced by TDC Switzerland s mobile activities and by the significant organic growth in European mobile operations. This was offset partly by Talkline s mobile revenues, which decreased 5% or DKK 351m to DKK 6,570m in 2001 due primarily to the divestment of Talkline Nederland. The general growth in mobile telephony was driven by a 29% increase in the consolidated mobile customer base. Net revenues from terminal equipment decreased 3% to DKK 2,698m. The revenue segment includes sales and installation of hardware ranging from handsets to large PBXs, service sales and outsourcing agreements. The decrease in net revenues from terminal equipment sales was driven mainly by the divestment of Trend Communications in Internet services net revenues rose 82% to DKK 2,177m in The revenue segment includes Internet dial-up access and traffic, ADSL, hosting, security and other Internet services as well as Internet revenues from Dan Net and European Internet operations. Domestic Internet net revenues grew DKK 321m or 39%, driven primarily by ADSL sales. Net revenues from international activities grew DKK 661m or 176% due mainly to the impact of TDC Switzerland. The 49% growth in the consolidated Internet customer base included dial-up, ADSL, cable modems and wholesale customers. Net revenues from leased lines, including domestic and international leased-line services and Tele Danmark InterNordia, increased 6% to DKK 1,558m in This growth related primarily to Tele Danmark InterNordia. Net revenues from operator services amounted to DKK 479m in 2001, a 15% decrease reflecting that customers are using Internet-based rather than traditional inquiry services. Net revenues from directories increased 13% to DKK 1,377m in The revenue segment includes printed directories, publishing catalogs and online services. Higher sales of business-to-business catalogs and Internet services generated 7% growth in domestic operations whereas international operations grew 27%, reflecting the Nordic expansion. Net revenues from data communications services decreased 8% to DKK 670m. Data communications services include domestic traditional broadband, narrowband and dedicated data services. The decrease in this segment was influenced by the shift from traditional services toward products based on ADSL and IP technologies. Net revenues from cable TV grew 9% or DKK 97m to DKK 1,193m in The revenue segment includes basic cable-tv subscriptions and connection fees and revenues from set-top boxes and cable modems. This growth was related to a larger customer base as well as the sale of new cable-tv services. total revenues Total revenues consist of net revenues, other operating income and work performed for own purposes and capitalized. Total revenues grew 16% or DKK 7,325m to DKK 54,082m in This increase was due primarily to TDC Switzerland and growth in TDC Mobile International. In 2001, International subsidiaries and associated enterprises accounted for 54% of TDC s total revenues, compared with 48% in total operating expenses Total operating expenses consist of raw materials and supplies, other external charges and wages, salaries and pension costs. Total operating expenses increased 22% in 2001 to DKK 41,272m compared with DKK 33,786m in This was related primarily to TDC Switzerland. In TDC Tele Danmark, total operating expenses fell 5% to DKK 14,398m in This decrease resulted mainly from the sale of Telenordia and Trend Communications, and the change in 32

35 > > > > > > > > consolidation method for TDC Switzerland. Total operating expenses in TDC Mobile International rose 4% or DKK 601m to DKK 15,612m in 2001 as a result of the increased focus on mobile activities supporting revenue growth. In TDC Internet, total operating expenses increased 46% to DKK 1,437m in 2001 and related to significant growth in revenues. Total operating expenses in TDC Cable TV amounted to DKK 1,258m in 2001, total revenues an increase of 8%. In TDC Directories, total operating expenses increased to DKK 1,017m in 2001, mainly as a result of the Nordic expansion. Total operating expenses in TDC Services increased 9% to DKK 2,603m in raw materials and supplies Raw materials and supplies increased 3% or DKK 154m to DKK 5,106m in This increase was driven mainly by TDC Switzerland, increased costs related to the purchase of mobile Growth (%) TDC Tele Danmark 21,293 21,987 (3.2) Domestic 20,337 20, International 956 1,963 (51) TDC Mobile International 17,944 16, Domestic 4,922 4, International 13,022 12, TDC Switzerland (international) 7, TDC Internet 1, Domestic 1, International TDC Directories 1,520 1, Domestic International TDC Cable TV (domestic) 1,208 1, TDC Services (domestic) 3,824 3, Other 1 (567) 1,339 (142) TDC Group 54,082 46, Domestic 24,815 24, share of TDC s total revenues (%) International 29,267 22, share of TDC s total revenues (%) Including TDC A/S, Belgacom and eliminations. handsets for resale in the domestic business, and the expansion of Nordic directory activities. The increase was partly offset by Talkline, impacted by lower purchase of handsets for resale. other external charges Other external charges include transmission costs, costs related to marketing activities and general administrative expenses. Other external charges increased 28% to DKK 26,970m in 2001 up DKK 5,963m on This increase resulted mainly from TDC Switzerland and higher transmission costs in Talkline and was also influenced by Belgacom and the inclusion of new international Internet operations. wages, salaries and pension costs Wages, salaries and pension costs rose DKK 1,369m or 17% to DKK 9,196m in 2001 vs. DKK 7,827m in The increase in wages, salaries and pension costs was heavily impacted by TDC Switzerland. In TDC Tele Danmark, the sale of Telenordia and Trend Communications as well as the change in consolidation method for TDC Switzerland resulted in lower wage costs. Expanding mobile and Internet areas resulted in increased wage costs in TDC Mobile International and TDC Internet. Expanding Nordic directory activities and general wage increases in Belgacom also impacted the development. 33

36 > > > > > > > management s discussion and analysis earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) decreased 1% to DKK 12,810m in The second half of 2001 saw 17% growth compared with 2000, a significant improvement compared with the first half of EBITDA from domestic activities decreased DKK 418m or 4% to DKK 9,512m in 2001, impacted by a 15% or DKK 811m decrease in the first half of However, with continuous performance improvements throughout the year, domestic EBITDA in the second half of 2001 was DKK 393m or 8% better than in EBITDA from international operations increased DKK 257m or 8% to DKK 3,298m in 2001, impacted by substantial growth in European mobile operations, offset partly by lower EBITDA stemming from Belgacom, the inclusion of new international Internet operations, expansion of Nordic directory activities and Talkline. ebitda Growth (%) TDC Tele Danmark 6,895 6, Domestic 6,955 7,021 (0.9) International (60) (158) 62 TDC Mobile International 2,332 1, Domestic 1,341 1,524 (12.0) International TDC Switzerland (international) (77) - - TDC Internet 1 (353) (351) (0.6) Domestic 1 (250) (331) 24.5 International (103) (20) - TDC Directories (11.8) Domestic (8.9) International (23.9) TDC Cable TV (domestic) (50) (58) 13.8 TDC Services (domestic) 1,221 1, Other 2 2,339 3,018 (22.5) TDC Group 12,810 12,971 (1.2) Domestic 9,512 9,930 (4.2) share of TDC s EBITDA (%) International 3,298 3, share of TDC s EBITDA (%) Including capitalization of ADSL fees. 2 Including TDC A/S, Belgacom and eliminations. In TDC Tele Danmark, EBITDA increased DKK 32m to DKK 6,895m in The growth was due to increased wholesale activities, e.g. ADSL, partly offset by lower EBITDA from retail telephony. In TDC Mobile International, EBITDA increased DKK 418m or 22% from DKK 1,914m in 2000 to DKK 2,332m in This was driven by growth in international subsidiaries and associated enterprises, primarily Ben, Connect Austria and Polkomtel. Talkline recorded a fall in EBITDA. In TDC Switzerland, EBITDA aggregated DKK (77)m in In TDC Internet, EBITDA amounted to DKK (353)m in 2001, which was almost unchanged compared with DKK (351)m in Higher revenues from domestic Internet services, e.g. ADSL, were offset by higher costs related to expansion in the Internet area, including new international operations. In TDC Directories, EBITDA fell 12% from DKK 570m in 2000 to DKK 503m in 2001, impacted by the expansion into the Nordic region. In TDC Cable TV, EBITDA aggregated DKK (50)m in 2001 compared with DKK (58)m in In TDC Services, EBITDA increased DKK 206m to DKK 1,221m in The decrease in the category Other was due primarily to increased elimination of internal profit and lower EBITDA in Belgacom. 34