This is the Teracom Group

Annual Report 2010

This is the Teracom Group The Teracom Group is a nordic network operator and Pay-Tv Group that offers reliable media and communication solutions. The main product areas are: Pay-Tv, Tv and radio broadcasting, ird (integrated receiver Decoders) testing, co-location, service and capacity. The Group currently has operations in Sweden, Denmark and Finland. in Sweden and Denmark, the Teracom Group owns and operates the terrestrial networks and simultaneously offers Pay-Tv. in the Finnish market, the Teracom Group owns and operates Pay-Tv activities. Our ambition is to grow in all of our existing markets by developing and strengthening the terrestrial platform. The Teracom Group started up its business activities in the 1920s, in conjunction with the first radio broadcasts in Sweden and Denmark. The Teracom Group has approximately 700 employees, of which 570 work at the Group s network companies and 130 work within the area of Pay-Tv. The Group has approximately 944,000 Pay-Tv customers and more than 200 corporate customers. The Teracom Group is wholly owned by the Swedish state.

VISION we deliver the best viewing and listening experience, characterized by personality, portability, simplicity and reliability. MISSION Teracom Group owns and operates terrestrial broadcasting networks and offers distribution and Pay-Tv services utilizing this platform. GROuP GOALS Revenue growth: 5 10% EBIT margin: 18 20% Customer: Mo s ts atis fie d customers of our industry. Employee: highly motivated and engaged employees. Environmental: yearly decrease BROADCASTERS, TV AND RADIO Free TV and Radio TERACOM Network activities Co-Location, Service and Capacity IRD testing Pay-TV BOXER, PlusTV Pay-TV Activities Sales via retailers and own channels TELECOM CUSTOMERS VIEWERS AND LISTENERS HARDWARE MANUFACTURERS in environmental impact. Income Group income and earnings trend 2001 2010 SeK million 5,000 500 4,000 400 3,000 300 2,000 200 1,000 100 0 0-1,000 01 02 03 04 05 06 07 08 09 10-100 -2,000-200 -3,000-300 -4,000 Income Net income -400 01 02 03 04 05 06 07 08 09 10 Key ratios, Teracom Group 2010 2009 2008 2007 2006 income 3,852 3,408 2,991 3,312 3,004 Operatingprofit / loss 293 496 635 625 495 Operating margin, % 8 15 21 19 16 net income 201 269 460 470 354 earnings per share 804 1,076 1,840 1,560 1,191 return on equity, % 12 16 26 26 21 equity ratio, % 31 40 44 48 45 average number of employees at year-end 707 638 669 674 687 The figures stated above are related to continuing operations. This is a translation of the original Swedish annual report. in the event of differences between the english translation and the Swedish original, the Swedish annual report shall prevail.

A couple of years ago, the Group consisted of just two companies in one country. Since then, we have successfully pursued a strategy to expand internationally and we currently have five companies in three countries. now, it s time to focus on consolidation, but we are still prepared to act on any new business opportunities that arise. Crister Fritzson President and CEO, Teracom Group Contents The year in review 01 Comments from the CEO 02 Vision, goals and strategic focus areas 04 Surrounding world and market 08 Sweden 15 Denmark 21 Finland 25 Employees 28 Social responsibility 29 Comments from the Chairman of the Board 32 Group management 34 Board of Directors 36 ANNuAL REPORT Board of Directors report 38 Corporate Governance Report 46 Financial overview - Group 54 Income statement - Group 55 Statement of comprehensive income Group 55 Balance sheet Group 56 Cash flow statement Group 57 Statement of changes in equity Group 58 Income statement Parent Company 59 Statement of comprehensive income Parent Company 59 Balance sheet Parent Company 60 Cash flow statement Parent Company 62 Statement of changes in equity Parent Company 63 Notes 64 Auditors report 95 Explanations and definitions 96 Addresses Inside cover

teracom group 2010 The year in review The year in review On 1 October, the Teracom Group made its largest acquisition to date by taking over the Danish network company, BSD from DR and TV2. Included in the acquisition were BSD s 34 transmitter stations and its distribution network. hdtv was launched in the Swedish terrestrial network on 1 November. This was possible due to investments in new technology aimed at strengthening the Group s competitiveness. Broadcasts of HDTV are comprised of both free TV channels and Pay-TV channels. The Pay-TV channels are distributed via Boxer Sweden. At year-end, approximately 75 percent of all Swedish households were able to receive HDTV via the terrestrial network. The network will be gradually expanded and it is expected that nearly all Swedish households will have coverage by the end of 2012. During the year, the transmitting network for TV was expanded at more than 100 locations in Sweden. As a result, the number of households that have access to the entire TV selection in the terrestrial network has substantially increased. This work was completed on 1 June. One of the tasks completed by Teracom Denmark during the year was a comprehensive update of the DAB network aimed at improving indoor radio reception for households. in August, SR (Swedish Radio) entrusted Teracom Sweden with the task of supplying the company s new computer networks in order to link up all of the local newsrooms. The contract covers more than 40 locations for a four-year period. in June, as part of the effort to focus more on the core business areas, Boxer Sweden started to divest its TV via Broadband (IPTV) activities. By year-end, all of those customers had been transferred to other Pay-TV operators. The scope of these operations was quite small, with less than 2,000 paying customers. Boxer Denmark conducted a number of marketing activities during the year. For example, BOXER TANK-SELV was launched. Consumers who select this product are able to choose for themselves which months they want to subscribe for Pay-TV. Also, a very small terrestrial TV set-top box designed for Boxer s Pay-TV card was introduced. It is connected to a computer, which can then be used as a portable TV screen. in December, PlusTV Finland ran a campaign with Elgiganten offering consumers a great price when they purchased a Pay-TV set-top box (PVR) together with a subscription, which is a new approach in the Finnish Pay-TV market. in February, the Teracom Group made organizational changes in order to achieve a distinct Group structure. The Group management team was strengthened by the addition of the man agers in charge of the operating companies ( Teracom Sweden, Boxer Sweden and PlusTV) as well as managers in charge of the following staff functions: Finance, Strategy Communication and HR. in February, Stephan Guiance was appointed Head of Teracom Sweden. in September, Marianne Winblad von Walter took over as HR Director for the Teracom Group. On 1 November, Gunilla Berg started working as the Executive Vice President and CFO of the Teracom Group. Significant events after year-end 2010 in January 2011, BSD s name was changed to Teracom Denmark and Managing Director, Finn Søndergaard joined the Group management team. 01

teracom group 2010 COMMENTS FROM THE CEO An intensive year for the Teracom Group 2010 has been an intensive year for the Teracom Group - major organizational changes were made and competition has become even tougher. We purchased the Danish terrestrial network operator, BSD, so that we could develop the Danish market. We also discontinued Boxer Sweden s IPTV activities. In addition, we launched HDTV in Sweden and fortified the Pay-TV sales efforts at Boxer Denmark and PlusTV in Finland. All of this was the result of shifting to a more focused strategy that is based on the strengths of the terrestrial network and aimed at getting maximum competitive advantage from the money invested. Traditional TV media and ordinary TV channels are stronger than ever. However, the increasing popularity of TV has made it a very important product to the major broadband and telecommunications operators. We are no longer just competing against the ordinary TV platforms, cable and satellite. Now we also compete against the major telecom companies that sell TV via their telecom and fiber networks. It is also becoming increasingly easy to find TV-like services via the open internet (free, pay and illegal services), which indirectly compete for people s time, money and interest. The competitive situation illustrates how important it is for us to focus on our terrestrial networks and their unique advantages and competitiveness. The Group finds itself in a situation where the market in Sweden is mature and after many years of investments, we are now making a profit, even though our margins are squeezed by necessary new investments. During the fall, Teracom Sweden and Boxer Sweden carried out a very successful launch of HDTV in two new transmitting networks. Besides Great Britain, we are the only country now using the new broadcasting standard, DVB-T2. With more than 75 percent household coverage, we have the most comprehensive T2 network in the world. In 2011, we plan on launching Video-On-Demand, which is a necessary supplement to live TV. Further investments must be made in the Danish and Finnish Pay-TV companies. We know that it takes time to establish a new Pay-TV platform and the competition today is much tougher than it was ten years ago, when Boxer Sweden started up. However, we believe that there is just as much potential in these countries right now, as there was back then in the Swedish market. That is why we are working very 02

teracom group 2010 COMMENTS FROM THE CEO hard on new packages, prices and more efficient sales efforts. In Denmark, our acquisition of the Danish network operator will enable us to coordinate network and Pay-TV activities and, together with the public service companies, develop the Danish market so that it is strong well into the future. For many years, we have been broadcasting digital radio in Denmark. The knowledge that we have gained from this will come in handy when digital radio broadcasts start up in Sweden, which may occur already in 2011. A couple of years ago, the Group consisted of just two companies in one country. Since then, we have successfully pursued a strategy to expand internationally and we currently have five companies in three countries. Now, it s time to focus on consolidation, but we are still prepared to act on any new business opportunities that arise. During the year, we put a great deal of effort into designing a new, more efficient Group structure with a new Group management team. This process has been closely linked to the development of our new, focused strategy. One result of this was major changes to Boxer Sweden s management. We have also worked to become more efficient through increased collaboration between the various parts of the Group. However, we still realize that loyalty, job satisfaction and performance accountability are typically easier to achieve in smaller working groups or by an individual company. Our challenge is to combine the efficiency of a smaller company that is accountable for its own performance with the synergies existing in a shared value chain between networks and Pay-TV. Our terrestrial network commands between 25 and 60 percent of TV viewing and nearly 100 percent of radio listening, depending on the country and how the calculation is performed. Our networks are specially designed for broadcasting capacity and quality-intensive services like TV and radio to an infinite number of recipients within the area of coverage. The terrestrial networks provide the foundation for our democracies national media policies and ensure that many of our independent broadcasters can be heard. They are also fundamentally important to competition in the TV market and consumers freedom of choice. We have an obligation to ensure that these terrestrial networks fulfill their role and provide the highest possible level of competition, freedom of expression and freedom of information. This is a responsibility that the Teracom Group neither can nor wishes to ignore. Our business revolves around balancing this social responsibility with the more specific requirements on us as a business-driven Group. Neither may take precedence over the other and both must be able coexist at all times. That is our challenge and it is what makes my job of leading the Teracom Group so incredibly stimulating. Crister Fritzson President and CEO, Teracom Group 03

teracom group 2010 VISION, GOALS AND STRATEGIC FOCUS AREAS Profitable growth via the digital terrestrial network The Teracom Group s strategy has been derived from the terrestrial networks strengths: reliability, simplicity, coverage and portability. These strengths enable us to offer products and services that provide significant value to our customers who are primarily TV viewers, radio listeners, TV companies and radio companies. The Teracom Group has been in business for almost 90 years. What started out as radio broadcasting to listeners in Sweden is now a Nordic Group that operates the terrestrial network for radio and TV and also provides Pay-TV services. The extensive range of knowledge and experience that the Teracom Group has acquired through the years will be put to good use in its pursuit of international expansion. During 2011, the Group will concentrate on creating a strong Nordic foundation with a focus on, among others, growth in the newly established markets of Denmark and Finland. Looking more long term, the Teracom Group s strategy is to continue growing outside the Nordic region by investing in markets where it is possible for the Group to act as both network operator and Pay-TV provider. Finn Sondergaard is the Managing Director of Teracom Denmark, which operates the Danish terrestrial network. The expansion in Denmark strengthens our position in the value chain On 1 October 2010, the Danish terrestrial network operator, BSD (Broadcast Service Danmark A/S) became part of the Teracom Group under the name Teracom A/S (hereinafter referred to as Teracom Denmark). The acquisition is part of a clear strategy to create a foundation for future growth and profitability by integrating network services and Pay-TV in the Teracom Group s core business. A major integration project got underway already last summer, with the goal of identifying new business opportunities and synergies. Ingrid Bardh, who is in charge of the project, explains. We see direct advantages in having both networks and Pay-TV in the same area in order to be able to coordinate efforts in a new way. This primarily has to do with working together to identify common denominators. We need to identify the strengths of our company culture and best practices within the Group, as well as ensuring that all resources are used in the best possible way, she says. A group consisting of approximately forty employees from both countries was formed and assigned the task of identifying primary business opportunities and collaboration strategies before year-end 2010. All new measures and ideas that came forth have since been implemented within the line functions during 2011. A number of working groups were created to focus on the most important areas: Legal, Finance, Company Structure, Sourcing, Sales and Business Development, HR, Technology and Products, Service, IT and Communications. Already during the first month, the project groups succeeded in identifying many ways of becoming more efficient and several new business opportunities. Some examples of this are joint insurance and purchasing agreements, IT solutions, collaboration routines and HR strategies. For example, Teracom Denmark didn t have its own HR function, since they only had around 70 employees. In Sweden, on the other hand, there are well-established strategies in place for conducting employee performance reviews, salary reviews and other routines. So, we have set up a Danish HR function that is part of the Group s HR function. There is much to be gained in general from coordination between the Danish companies, continues Ingrid Bardh. The technical gains, however, are the most obvious. Teracom Denmark has a modern and efficient infrastructure consisting of masts for radio and TV broadcasting and a fiber optic network that connects them. Valuable specialist expertise exists on each side, which enables cost savings and the ability to provide a strong offering to the market. Examples of the specialist expertise at Teracom Denmark is experience and knowledge on transport networks and DAB technology for digital radio. The Teracom Group is confident that it will identify more synergies and business opportunities going forward. 04

teracom group 2010 VISION, GOALS AND STRATEGIC FOCUS AREAS Vision We deliver the best viewing and listening experience, characterized by personality, portability, simplicity and reliability. Mission Teracom Group owns and operates terrestrial broadcasting networks and offers distribution and Pay-TV services utilizing this platform. GROUP GOALS Revenue growth: 5 10% Sales growth shows the Group s annual rate of growth as a percentage figure. EBIT margin: 18 20% Operating margin measures the Teracom Group s profitability before net financial items and tax in relation to its sales. Customer: Most satisfied customers of our industry. Employee: Highly motivated and engaged employees a prerequisite for achieving other goals. Environmental: Yearly decrease in environmental impact. 05

teracom group 2010 VISION, GOALS AND STRATEGIC FOCUS AREAS Focus on the Nordic region, competitiveness and profitability The Teracom Group has expanded its business and it now has operations in Sweden, Denmark and Finland. The long-term aim is to continue growing both within and beyond the Nordic region. However, before the Group takes the next steps towards international expansion, it must focus on consolidating operations, creating good growth in Denmark and Finland, and strengthening its position in all markets. Second year with a shared vision and strategy In 2010, the Teracom Group made additional progress by establishing a shared vision, mission and strategic focus that applies to all of its companies. In order to support this effort, all of the Group s companies formulated shared values which serve as important pillars. They also came up with a shared vision of leadership and joint guidelines that summarize the Teracom Group s strengths. Each company belonging to the Group operates within its national boundaries on its focused assignment. Working together, the Teracom Group can create greater value for its customers, increase customer satisfaction, ensure competitiveness and achieve long-term profitability. The main features of the Group s strategy are the same as they were before - the Teracom Group is a Nordic network and Pay-TV operator. The Group sees great benefits in being able to work with the entire broadcasting value chain - from a program company s signal to the consumer s receiver and packaging of the content. The Teracom Group is a Nordic player and this characterizes all of its actions. Its foundation lies in the terrestrial network for radio and TV and the organization has been built on those strengths. At all times, the Group must find new ways of working smarter and more efficiently. Long-term perspective The Teracom Group has expanded its operations such that it is now comprised of network and Pay-TV activities in Sweden, Denmark and Finland. The long-term ambition is to continue growing both within and beyond the Nordic region. However, before the Group takes its next steps towards international expansion, it must focus on consolidating operations. The Teracom Group is a Nordic network operator that owns the Kaknäs tower media hub and subnodes in Denmark and other locations outside the Nordic region. With this infrastructure, the Teracom Group is the natural entry point for broadcasters, service providers and platform operators when moving program content to and within this region. Strengths of the core business The Teracom Group s focus in 2010 and its strategy going forward is to strengthen the unique advantages of the core business - simplicity and portability in terms of radio and TV broadcasting. One consequence of this was the Teracom Group s decision in 2010 to discontinue its IPTV activities. Within the area of TV, major investments were made in Sweden in 2010 in conjunction with the launch of HDTV. In 2011 we expect there to be opportunities for testing 3D TV in the terrestrial network. Within the area of radio, Teracom Denmark, on behalf of Danish Radio, has expanded the indoor coverage of the digital radio network. Teracom Sweden is continuing its efforts to prepare for the launch of digital radio. The technology is reliable and there are no technical problems associated with starting up regular digital radio broadcasts. One of the strengths of being a Nordic Group is the ability to use the knowledge that has been acquired in Denmark to its advantage when working with digital radio in Sweden. In order to strengthen the core business, terrestrial TV, the Group believes there are opportunities for supplementing it with new functions that are not currently being offered to customers. During the year, an On-Demand platform based on reception of terrestrial TV has been developed. It will offer On-Demand services, such as a video store, On-Demand TV, an applications store and other interactive services. An offering that includes a TV set-top box, content packaging and other service will be launched in Sweden in 2011. In order to remain competitively strong and profitable in the long-term, there must be a focus on constantly developing active leadership practices and the skills of employees. 06

teracom group 2010 VISION, GOALS AND STRATEGIC FOCUS AREAS STRATEGIC FOCUS AREAS Strengthen the competitiveness of core products The Group must continue investing in and developing products and services that create long-term value for customers. This is necessary in order to increase the number of Pay-TV subscriptions in the terrestrial network, maintain the Group s position as a prioritized partner/platform for broadcasters and increase market penetration in new segments. The Teracom Group will develop products and invest in the technical platform in order to increase its competitiveness in terms of coverage, portability, simplicity, reliability and affordability. When appropriate, functions from other technologies can be added in order to strenghten the products attractiveness. The Teracom Group will coordinate product and technology development within the Group by using a common road map and a launch schedule for each individual geographic market. As necessary, the Group will cooperate with other stakeholders in order to obtain specific expertise or product functions. Offer the most attractive content and packaging Competitive packaging and attractive content is crucial in order to provide appealing visual and audio experiences. To a great extent, market penetration and ARPU are dependent on a competitive customer offering. The Teracom Group will focus on strategies and potential partnerships to ensure its access to attractive (or sometimes unique) content, while maintaining a Group perspective at all times. The Teracom Group will have an innovative, smart way of working so that it can offer both content and packaging that appeals to customers and which results in profitability, market penetration and customer satisfaction. Strengthen its position in the value chain Through control of its network and Pay-TV activities, the Teracom Group can, in the same way as its competitors, create a business process that significantly strengthens its competitiveness and solidifies its position in the value chain. The Group must develop a business process which ensures that it makes the right investments and develops the right products relative to customer demand. It will develop a business process that benefits customers every step of the way, from a broadcasters signal to the consumer s receiver (including Pay-TV services). Everything must be based on the customer s needs. Future international expansion will be based on opportunities that will enable the Group to integrate both network and Pay-TV services. Build a strong position in the Nordic region By treating the Nordic countries as a single, joint market for core business activities, the Teracom Group will be able to strengthen its position relative to its competitors, broadcasters and suppliers. The small geographic area and cultural similarities enable the Group to benefit from synergies, economies of scale and knowledge exchange. The Teracom Group will build up a large, profitable base of Nordic viewers and listeners and capitalize on the synergies and economies of scale resulting from geographically well-integrated activities. The Teracom Group has recently been through a period of rapid expansion. Now, in the short to medium term, it must focus on integration and deriving benefits from the new value that has been added to the Group. In the long term, the Teracom Group will investigate opportunities for expanding in Europe based on its strong position in the Nordic region. Work cost-efficient and smartly Increased competition, particularly between different distribution platforms, requires the Teracom Group to continually strive for increased efficiency in all areas. The Group operates in three geographically neighboring markets, which creates economies of scale and synergies. The Teracom Group always chooses the most cost-efficient, smart solutions. It identifies and uses the best practices existing within the Group in terms of brand, IT systems, processes, methods of analysis, etc. The Group will balance its expenditures on maintenance of its core business activities, development of new products and services and investments in new business opportunities. Strenghten skills and leadership In order to become more competitive, it is necessary to have highly motivated and engaged employees and this requires continual development of professional skills and leadership practices. Key success factors are a shared culture and good understanding of the entire business process. The Teracom Group s shared culture and values enable it to become more efficient. The Teracom Group focuses on continual development of its employees core competencies. The Teracom Group will develop a performance management culture that ensures a strong and motivational leadership. 07

teracom group 2010 SURROUNDING WORLD AND MARKET Freedom of choice and flexibility drive development TV s position in the overall Nordic media market continues to be strong and terrestrial TV has held its position as the dominant platform for TV broadcasting in Western Europe. For both TV and radio, it is evident that there is an increased demand for greater flexibility and freedom of choice. Digital radio, On-Demand services and On-Demand TV all meet this need by giving TV viewers and radio listeners the ability to watch or listen wherever and whenever they want to. Overall, the consumption of all types of media has increased during the last few years. Terrestrial TV is a very important platform throughout the Western World and broadcast TV accounts for a continually growing share of media consumption. Competition for consumers time is stiff, as is the competition between broadcasters. The situation in each Nordic country is about the same when it comes to per capita TV consumption, i.e. approximately three hours per day. In Europe, digital TV development varies from country to country. However, most countries belonging to the EU either already have made, or soon will (within the next few years) make the transition to digital TV. Another trend is that actual TV content has become more fragmented. TV viewing is spread out across a greater number of channels and in Sweden, Denmark and Finland, the number of channels has increased during recent years. Public service is still the leader, but it is steadily losing viewers. Market share of the biggest commercial channels is also shrinking, while market share of niche channels is growing. From a European perspective, HDTV development is still in its infancy. However, it is expected to break through on a broad front in several countries during the next few years as the broadcasting networks are updated. In 2009 Great Britain launched HDTV in the terrestrial network, making it the first European country to do so. By the end of 2010, it had four MUXs in the terrestrial network and a total of approximately 60 HDTV channels. OFCOM, which is the British equivalent of the Swedish Post and Telecom Agency (PTS), published a study in December 2010 revealing that 59 percent of all British households own at least one HDTV. Accordingly, households in Great Britain have the greatest share of HDTVs in the world. For radio, the transition to digital technology using the DAB+ broadcasting standard is occurring on a large scale throughout the world. During fall 2008, Malta became the first European country to launch DAB+. In spring 2009, Australia launched DAB+ as the official digital radio standard. Other countries that have already implemented DAB+ are Switzerland, Germany and Singapore. Countries besides Sweden that are expected to launch DAB+ sometime during the next few years are Italy, the Netherlands, Czech Republic, Malaysia, China and Denmark. THE SWEDISH TV MARKET Compared to last year, TV viewing in Sweden increased to a record high level of 166 08

teracom group 2010 SURROUNDING WORLD AND MARKET minutes, which corresponds to nearly 3 hours of viewing per day, per person. Historically, this is a very high figure, even though there are countries reporting much higher viewing statistics. When it comes to TV distribution, cable TV commands the greatest share, with 2.8 million connected households. Terrestrial TV is next, with approximately 1 million connected households. For satellite TV, the corresponding figure is approximately 660,000 and for IPTV it is 420,000. Mature Pay-TV market where competition is tough The Swedish Pay-TV market is mature and competition is extremely tough. Besides Boxer, the major competitors in the Swedish Pay-TV market are Comhem, Viasat, Canal Digital and Telia. In 2007, when the transition to digital TV occurred, neither Telia s nor Telenor s broadband companies were competitors in the TV market. But, when the analogue terrestrial network was shut down, the Pay-TV market increased substantially when many households decided to switch over to Pay-TV solutions in the terrestrial network. That rapid growth has now leveled off, simultaneous to more Pay-TV companies with similar offerings becoming established. As competition has increased, a growing number of Pay-TV suppliers have opted to compete by offering triple play services. Just like Boxer, the major cable TV companies offer combined packages of broadband, TV and telephony. In addition, two of the major telecom companies have launched TV via broadband (IPTV) together with broadband and telephony. It is estimated that slightly more than 60 percent of all Swedish households have an individual Pay-TV subscription. There is stiff competition between the broadcasters and in Sweden, there are seven national free TV channels and approximately 40 Pay-TV channels offered in the terrestrial network. Although the number of free TV channels decreases the demand for Pay-TV to a certain extent, it also makes the terrestrial network more attractive to all viewers. Accessibility is decisive The supply of Video-on-Demand (VoD) services has increased to meet viewer demand for being able to watch movies and other programs at any time. The trend towards increased flexibility and choice is particularly evident when it comes to Pay-TV viewers, who want to be able to watch the content that they paid for whenever they feel like it. Internet TV viewing is becoming increasingly popular, especially On-Demand services for TV channels. Breakthrough of HDTV on a broad front On 1 November, HDTV was launched in the Swedish terrestrial network. However, it is not a particularly new phenomenon. SVT and TV4 were already broadcasting World Cup soccer matches with HD quality in the terrestrial network back in 2006. Now, however, HDTV has been launched on a larger scale using MPEG4 and DVB-T2 technology. At the end of 2010, household coverage reached 75 percent and expansion of the transmitting network will be completed in 2012, at which time essentially the entire Swedish population will have coverage. In 1968, technological advances were hurried along to enable an international breakthrough for color TV in conjunction with the 1968 Olympic games in Mexico. Likewise, it is hoped that HDTV will achieve a similar breakthrough in time for the London Olympics in 2012. Changes in consumer behavior and needs are often driven by changes in technology. This also holds true for HDTV, where sales have, to a great extent, driven the developments in technology. The sales volumes for HDTVs have gained momentum in line with steadily increasing consumer demand. Figures indicate that nearly twothirds of the Swedish population already have a flat-screen TV at home. Most of 09

teracom group 2010 SURROUNDING WORLD AND MARKET these are HD-ready. HDTV is particularly suitable for programs where there are quickly moving objects, such as sports, nature shows and similar programs that exist among the wide range of channels included in Pay-TV operators HDTV offerings. Therefore, HDTV is expected to strengthen the digital terrestrial network s position and also increase the demand for Pay-TV. Unlike HDTV, there still isn t a very significant demand for 3D TV in the Swedish market. But, it is expected that as the sales of 3D TV sets increase, so will the demand for 3D broadcasts. 3D TV has been offered to a limited extent in the Pay-TV market since the end of 2010. However, the terrestrial network is quite prepared to meet the future demand, since the current technology is well suited for 3D broadcasts as well. THE DANISH TV MARKET In total, the Danish TV market consists of approximately 2.5 million households and of that number, a full 2.2 million already have some form of Pay-TV. Just like in Sweden, TV media is very strong. This can be seen in the high sales figures for new flat-screen TVs. TV consumption is steadily growing in Denmark and per capita viewing is currently slightly more than three hours per day. One overall trend is that the major channels are losing viewers to niche channels. There are currently a total of nine free TV channels offered in Denmark s digital terrestrial network. Pay-TV is predominantly distributed via cable TV. 60 percent of Danish households have cable TV and another 15 percent could get cable TV if they chose to. Lately, however, Pay-TV via the terrestrial network and broadband TV has been the fastest growing sector. In Denmark, both Boxer Denmark and YouSee offer Pay-TV subscriptions that also make it possible to watch TV on a computer. Low price sensitivity for Danish Pay-TV The Danish Pay-TV market has two components: four operators who have been in the market for a long time and three new operators. The established competitors are the cable TV companies, YouSee and Stofa and the satellite operators, Viasat and Canal Digital. During the last two years, new competitors have joined the market: the broadband TV companies, TDC and Waoo, offering HomeTrio and Boxer Denmark, which offers digital terrestrial Pay-TV. The trend shows that the new competitors are taking customers away from the more established ones. Both viasat, owned by MTG and Canal Digital, owned by Telenor, are losing customers. The broadband company, Waoo, is the most recent competitor to enter the Danish market. Waoo, a merger of 15 smaller internet operators controlled by energy companies, has launched triple play services. With approximately 55 percent of all Pay-TV customers in Denmark, the cable TV operator, YouSee, is clearly the dominant player. In 2010, the company digitalized its networks. YouSee is owned by TDC, which also owns the new upstart, Home Trio. Pay-TV is popular in Denmark and Danish viewers are less price sensitive than they are in both Sweden and Finland. The free TV channels are facing increasing tough competition for advertising revenue. One such company is the state-owned, commercial public service channel, TV2 and advertising is that channel s only source of revenue. These operators are now turning to Pay-TV instead, which provides them with both advertising and licensing as sources of revenue. THE FINNISH TV MARKET In Finland, TV viewing hasn t changed much since 2009 and it is currently slightly 10

teracom group 2010 SURROUNDING WORLD AND MARKET less than 3 hours per day, per person. In total, the Finnish market consists of approximately 2.5 million households, of which 2.2. million have access to TV. However, only 0.6 million households have some form of Pay-TV. When it comes to platforms, there is an even distribution between cable TV and terrestrial digital TV. Both have market share of approximately 45 percent. Satellite TV s share of the market is approximately 7 percent and broadband TV s share of the Finnish Pay-TV market is approximately 3 percent. Some households have both satellite TV and terrestrial digital TV. Low Pay-TV penetration in Finland In Finland, the free TV offering is quite strong compared to the other Nordic countries and the majority of these channels are financed through advertising revenues. The low market penetration of Pay-TV, just 27 percent of Finnish households, is associated with the large number of free TV channels. Pay-TV viewing accounts for just 10 percent of total TV viewing in Finland. However, the free TV channels are owned by the same media companies as the Pay-TV channels. The Finnish market for Pay-TV viewing has remained basically the same since 2008. Thus far, the ones who have shown the most interest in Pay-TV are primarily viewers interested in sports, particularly Formula 1. But, the popularity of Formula 1 has dropped during the last few years. PlusTV faces competition from other Pay-TV operators that also broadcast terrestrial TV, as well as competition from cable-tv, satellite TV and IPTV providers. There are many companies offering cable TV. The biggest one is DNA, which has more than 40 percent share of the Finnish cable TV market. Via its Welho cable TV network, DNA currently offers 16 HDTV channels. Canal Digital is the dominant competitor for satellite TV. Its offering is basically the same in all of the Nordic countries. The most popular channels in the Finnish free TV market are YLE 1 (public service channel) and MTV3 (an advertising TV channel owned by Bonnier). Other popular advertising-funded free TV channels are Nelonen and SubTV. Double play instead of triple play Unlike Sweden and Denmark, triple play is not offered in the Finnish market. This is because very few households have fixed telephony. The trend is moving in this direction in many countries, but it has gone a bit faster in Finland. However, there are companies in the Finnish market offering double play - broadband and TV. The major competitors offering double play are TeliaSonera and Elisa. RADIO BROADCASTING The trend is clear across the world: more and more countries have either already implemented digital radio or are considering doing so and the advantages associated with this are numerous. One major advantage is that there is space for more channels and new services, thanks to more efficient transmission technology. It also enables the use of flexible and interactive forms of broadcasting. Already in 1995, Sveriges Radio (SR) began broadcasting with DAB technology and it was the first country to do so. Great Britain was a close second, when it started broadcasting just one hour later. Today, digital radio is a big success in Great Britain. More than one out of every three residents of that country have access to at least one DAB radio in the household. In Denmark, digital radio was launched in 2002. Norway s broadcasts got underway in the mid 1990s and Finland started broadcasting already in 1999. However, in 2005 the Finnish public service company, YLE, decided to cancel DAB New European forum for terrestrial radio and TV Broadcast Networks Europe (BNE) is a new, non-profit organization that is open to all network operators in the area of terrestrial TV and radio. The goal is to promote a better climate in the TV market in terms of the rules and regulations, operating terms and new technology. The organization was founded in February 2010 and by year-end, 14 network operators with operations in 25 European countries had joined. The idea was to create a counterweight that could represent the industry in its interactions with the EU Commission, the European Parliament, regulatory agencies, politicians and other stakeholders who can influence the conditions for terrestrial radio and TV. Most other sectors, such as satellite, cable and telecom established similar organizations in Brussels years ago. However, in our sector, there was no forum for exchanging ideas and discussing policy issues, spectrum issues and other types of regulations, says Lars Backlund, Vice Chairman of BNE and Director of Public Affairs at Teracom. Throughout Europe, efforts are underway to transition to digital technology. In light of this, the formation of BNE is even more important in order to benefit from the new opportunities. Working groups have been set up to deal with commercial, policy-related and technical issues, with a particular focus on spectrum issues and protecting terrestrial radio and TV from disturbances originating from new mobile systems. There is also a great deal of interest in working with more future-oriented issues, like efficient broadcasting of HDTV and, more long-term, 3D TV as well. Other focus areas are: the development of digital radio platforms, various types of multimedia services, commercial terms and more overall aspects of accessibility. It is important that we work together to achieve a common goal in order to retain the competitiveness of terrestrial radio and TV media. BNE already has representatives from most European countries and it has established a clear position in Brussels. Nevertheless, we anticipate that more operators will join in the near future, which will help even more to make our voice heard, concludes Lars Backlund. 11

teracom group 2010 SURROUNDING WORLD AND MARKET broadcasts until further notice. In the Nordic region, Denmark is the strongest country in terms of digital radio. Market penetration in that country is 34 percent. In Norway, it has been decided that FM radio will be shut down in 2017. The Swedish radio market SIFO s survey from the end of 2010 on coverage showed that 72.9 percent of the population listens to radio for at least five minutes on an average day, which corresponds to slightly more than five million people between the ages of 9 and 79. This demonstrates that radio is still strong, even though the figures are slightly lower than last year (75.6 percent). However, the numbers tend to fluctuate between periods. The average amount of time spent listening to radio for the entire population was just less than 2.5 hours per day. Public service radio is doing better than the commercial channels and approximately half of the Swedish population has stated that they listen to Sveriges Radio (SR) for at least five minutes on an average day. Radio listening is decreasing, particularly for younger listeners. The big winner in the competition for listeners has been Spotify, which has attracted listeners from music radio, MP3 and CD markets. For internet radio, growth has leveled off in recent years. During the last year, the most important event that occurred in the Swedish radio market was the new radio and TV legislation, which came into force in August. Furthermore, last autumn the Swedish Government decided to allocate broadcasting space for digital radio. As a result, digital transition of the Swedish radio network may soon be possible. Preparations for this shift in technology are underway. The new, more efficient digital broadcasting technology, DAB+ is based on MPEG4 and it provides the space for considerably more channels than today s 4 to 7 nationwide channels that are broadcast in the analogue FM network. It total, the Swedish terrestrial network has room for up to 60 digital nationwide radio channels. Sveriges Radio (SR) is already sending digital broadcasts via DAB within a limited area. However, the public still hasn t shown a great deal of interest since commercial radio channels are not included. However, a major breakthrough is expected as soon as the commercial channels obtain a license, which will significantly increase the selection. The licensing process for additional digital broadcasts is expected to be concluded during 2011. The Danish radio market The Danish digital radio network was launched in 2002. It has gradually been expanded since then and the last phase of this work is expected to be completed in 2011. Teracom Denmark is planning to start broadcasting with DAB+ as of 2014. At present, broadcasting takes place using DAB technology. However, with DAB+, it will be possible to broadcast twice as many channels. In Sweden, there is uncertainty concerning the launch of digital radio, but in Denmark it has been a huge success. Sales of small, portable radios has increased and users appreciate the high sound quality and variety of radio programs. In 2010, DAB radio listening increased 10 percent in Denmark, which means that nearly one in every three residents of that country listens to digital radio. Danmarks Radio (DR) has recommended a full nationwide conversion from FM radio to digital radio no later than 2015. In Denmark, 1.3 million households currently have a DAB radio at home. Public service companies dominate the Danish radio market. There are also several commercial radio channels, but the competition for advertising revenues has been extremely tough. As a result, a number of companies have stopped broadcasting. 12

teracom group 2010 The competitive situation illustrates how important it is for us to focus on our terrestrial networks and their unique advantages and competitiveness. Crister Fritzson President and CEO, Teracom Group Operations 13

TV CHANNELS SVT1 SVT1 HD SVT2 SVT2 HD SVT 24 SVTB Kunskapskanalen TV6 TV Finland TV3 TV3 HD Kanal 5 Kanal 5 HD TV10 TV11 TV4 TV4+ TV4 HD TV4 FILM TV4 FAKTA TV4 SPORT TV8 Kanal 9 Eurosport Eurosport 2 Discovery Channel TLC Comedy Central MTV Vh1 TCM Silver CNN Nickelodeon Disney Channel Canal+ HD Canal+ Series Canal+ First Canal+ Hits Canal+ Sport 1 SF-Kanalen TNT 7 Animal Planet Discovery Science Star! Showtime BBC World Cartoon Network Disney XD Kanal Global Axess TV National Geographic Channel HD MTVN HD 24Corren 24.UNT. RADIO Sveriges Radio (SR) FM Radio: P1, P2, P3, P4 (local radio in all counties), Din gata and Metropol Digital Radio: SR Atlas, P3 Star, SR Klassiskt, SR Minnen, SR P1, Radioapans knattekanal, P7 Sisuradio MTG Radio: RIX FM, Lugna Favoriter, NRJ, STAR FM and Bandit SBS Radio: Mix Megapol

teracom group 2010 Sweden The Swedish TV market consists of approximately 4.9 million households. Of this number, approximately 350,000 households watch free TV. The remaining 4.5 million households have some form of Pay-TV. TV viewing in Sweden has increased somewhat and it is currently almost 3 hours per day, per person, which is slightly lower than per capital TV viewing in Denmark and Finland. For radio, the average listening time for the entire population is almost 2.5 hours per day. A few large operators dominate the Swedish TV market. Besides Boxer Sweden, the largest operators are Comhem (cable TV), Viasat (satellite TV), Canal Digital (primarily cable and satellite, but also broadband TV) and Telia (broadband TV). Two other major competitors are Telenor, which offers broadband TV via Bredbandsbolaget and Tele 2, which offers cable TV. Share of sales Teracom Sweden 42% Boxer Sweden 58% Number of Pay-TV customers 636,449 Customer satisfaction Teracom Sweden 66.0 Customer satisfaction Boxer Sweden 67.4 Read more about the survey at www.kvalitetsindex.se Average number of employees: Teracom Sweden: 506 Boxer Sweden: 74 Teracom Sweden is essentially the only provider of terrestrial radio and digital TV in Sweden. Its customers include Sveriges Radio and Sveriges Television (both public service companies), TV operators and production companies. The Swedish Pay-TV offering via the terrestrial network is delivered by Boxer Sweden, and in addition to TV broadcasting, Teracom Sweden offers service, co-location and capacity services. 15

teracom group 2010 Sweden The Teracom Group s operations in Sweden In Sweden, the Teracom Group s Pay-TV offering is delivered via the terrestrial network by Boxer Sweden. Teracom Sweden, on the other hand, owns and operates the Swedish terrestrial network, which broadcasts both radio and TV. Boxer Sweden offers attractive program packages at competitive prices and it currently offers 40 Pay-TV channels that have been allocated to several program packages. One-third of all Swedish households watch TV via the terrestrial network and the digital terrestrial network reaches at most 99.8 percent of the country s households. Teracom Sweden has Sweden s most comprehensive media network for national and radio broadcasting of radio and TV. It is comprised of 54 major stations and approximately 700 other facilities in the terrestrial network. Teracom Sweden also offers co-location in masts and other facilities, as well as capacity and service. The Kaknäs tower in Stockholm is the terrestrial network s media hub. All reception and packaging of signals for TV and radio broadcasting pass through this hub. The media hub receives high quality signals and then sends out the material in the requested format to the platform designated by the customer, which might be in Sweden, another Nordic country or elsewhere in the world. Distribution occurs via Teracom Sweden s own digital TV network, broadband, radio networks, satellite and fiber. Flexible terrestrial broadcasting appeals to advertisers In 1956, Teracom started transmitting the very first TV signals in Sweden and much has happened since then. The launch of new products has strengthened the position of the terrestrial network. Customers are continually demanding better picture and sound quality and one of the terrestrial network s biggest strengths is, in fact, high quality. It also offers viewers wide coverage and simplicity. The only thing required to receive the TV signals wirelessly is an antenna. Another advantage of terrestrial TV is its portability, i.e. the ability to take the receiver and program selection with you wherever you go, e.g. a recreational boat or caravan. The content in the terrestrial TV network can be divided up into regional and national broadcasts. This is a prerequisite for being able to send local content and commercials, which appeals to many advertisers. HDTV in the terrestrial network The digital transition of the terrestrial network has made it possible to develop new services and program concepts for TV. It has also paved the way for HDTV. HDTV was launched on 1 November 2010, at which time approximately 70 percent of the popu lation had access via the terrestrial network. The lead time from the decision to the actual launch of HDTV in the terrestrial network has been quite short. The entire Swedish portion of the Teracom Group has 16

teracom group 2010 Sweden worked in a very focused and efficient manner in order to achieve a tough goal, explains Stephan Guiance, Head of Teracom Sweden. For quite some time, there have been 5 nationwide transmitting networks (MUXs) for TV in Sweden. At the end of 2009, Teracom Sweden began to simultaneously build a sixth and seventh MUX for reception of HDTV. The broadcasts are made possible via a combination of the more efficient compression method, MPEG4 and DVB-T2, which is the second generation standard for terrestrial digital TV. DVB- T2 also increases the quality of the terrestrial network due to more efficient bug fixing and higher stability in the transmission network. In order to facilitate the launch of a large number of HDTV channels in the terrestrial network, it was also necessary to set aside frequency space in the VHF band in certain parts of the country. Boxer Sweden strengthens its customer offering Boxer Sweden offers attractive program packages at competitive prices and it develops, packages, prices, markets and administers Pay-TV and related services in the digital terrestrial network. For the second year in a row, Boxer Sweden received top placement in the Swedish Quality Index s (SKI) survey on how customers perceive digital TV operators. According to SKI, Boxer Sweden has the most satisfied customers in the country. Boxer Sweden streamlined its business during the year by discontinuing its IPTV (TV via broadband) operations. Significant investments in broadband TV would have been required in order to reach an acceptable volume. Focus is now on strengthening the core business. The launch of HDTV helped strengthen Boxer s competitiveness and position in the Swedish market. The first DVB-T2 receivers for HDTV started being sold in stores in September. They are available as set-top boxes or as receivers built- in TV screens. During the year, Boxer Sweden prepared a number of On-Demand services to supplement the traditional TV service. These will be launched in 2011 and they represent the start of a development of new TV services aimed at providing even higher flexibility and freedom of choice. Boxer Sweden has invested in a number of new channels during the year. On 1 February, MPEG4 broadcasts of Discovery Travel & Living and Discovery Sciences started up as part of the Boxer Max package. At the same time, Axess TV, which used to be a free channel, became part of Boxer s offering. That channel, as well as Canal7, is now broadcast with MPEG4. In September, TV10 from Viasat became part of the Boxer Mix package. This new sports and documentary channel replaced ZTV, which, after slightly more than 18 years, has been discontinued. Two new channels are now offered in the terrestrial network, Eurosport 2 and TLC, a channel that specifically targets women. In total, 15 new channels were launched in the terrestrial network in 2010. Boxer Sweden s new HDTV channels are offered in 2 packages: National Geographic HD and MTVN HD are included in the Boxer HD package, while Canal+ Sport HD is included in the Canal+ package with the HD add-on. The local advertising market is still uncharted territory within the area of TV and a great deal of potential exists. In the terrestrial network, many of our customers have shown an increased interest in regionalization, says Håkan Axén, Product Manager for TV. Roadshow to launch HDTV On 1 November, HDTV was launched in the Swedish terrestrial network. However, it is not a particularly new phenomenon. SVT and TV4 were already broadcasting with HD quality in the terrestrial network back in 2006. Already by year-end, approximately 75 percent of the Swedish population could get HDTV via the terrestrial network and the goal is to reach full nationwide coverage by 2012. Boxer Sweden put a great deal of effort into marketing the new technology and the new HD channels. For example, a large print campaign was launched, as well as a roadshow that was directed towards electronics retailers and aerial installers. During 2010, nine channels obtained a license for broadcasting HDTV in the terrestrial network: SVT1 HD, SVT2 HD, TV3 HD, TV4 HD, Kanal 5 HD, MTVN HD, National Geographic Channel HD, Canal+ HD and viasat Sport HD. With Boxer Sweden s program selection, together with the advantages associated with the terrestrial network (i.e. simplicity, coverage and portability), the prerequisites now exist for HDTV to finally take off in Sweden. HDTV will now be something that everyone can enjoy, says Crister Fritzson, President and CEO, Teracom Group. 17

teracom group 2010 Sweden Digital radio pilot project with images application Teracom Sweden ran a digital radio pilot project during the year. The pilot project is a cooperative effort between Teracom and broadcasters, including public service, commercial channels, local radio and exclusively internet channels. The pilot project makes it possible to evaluate the technology, content and reception as part of the preparations for a widespread launch of digital radio. The channels are broadcast using DAB+ technology to listeners in Stockholm, Uppsala and Gävle. Besides nationwide coverage, digital radio broadcasts also provide considerably more flexibility and opportunities for creating entirely new services. As part of the digital radio pilot project, Teracom Sweden also developed an images application for digital radio in cooperation with the radio channel, Dansbandskanalen. The application enables listeners to interact with digital radio via MMS, which has never been done before. We currently have more than 3,000 fans interacting via Facebook and following our broadcasts from dance clubs throughout Sweden. The new application provides us with a commercial opportunity to allow our listeners to submit pictures of themselves, regardless of whether the picture was taken at a dance club or at home in front of the radio, explains Robin Calmegård, Producer for Dansbandskanalen at DB Media. Digital radio gaining ground Teracom Sweden made the first analogue radio broadcasts in Sweden back in 1921. Historically, radio has had a strong position, with good coverage and the largest range of all media, even though radio listening has decreased in the last few years. Since the beginning, radio broadcasts have primarily been analogue. However, there has been some digital broadcasting since 1995. The next obvious step is a full-scale digital transition. In 2010, the Government decided to allocate broadcasting space for digital commercial radio. It also decided to issue new licenses for SR and UR to broadcast digital radio. For commercial radio broadcasts, two frequency layers have been created that can be divided up into 34 regions. As a result of the decision, three of the four frequency layers that are available for digital radio may be claimed. That means that there is initially space for 30 digital radio channels. Later on, this number could grow to approximately 60 channels. Additionally, a digital radio pilot project was launched in cooperation with broadcasters, which were offered the opportun ity to broadcast over the DAB+ network in Stockholm, Gävle and Uppsala. There are many advantages associated with digital radio. For example, it offers a much larger selection of channels, greater flexibility and more services. Examples of some of the new functions are: downloading, text information, the ability to pause or rewind during a broadcast, interactive traffic services and moving pictures. Co-Location, Service and Capacity Teracom Sweden has a nationwide infrastructure of stations and masts which range from just a few meters to as much as 330 meters in height. Most facilities are associated with a mast and 54 of these are tall masts. The masts are of interest to all companies that need to send radio waves across long distances or that need to locate their equipment high in a mast for other reasons. Teracom Sweden is not the biggest operator in terms of the number of facilities. However, thanks to its high, strategically placed masts that have a large amount of space, the company is still a major competitor in the market. At ground level, customers can use the infrastructure to route broadband traffic. Through shared utilization of the infrastructure, operators are able to achieve a higher level of efficiency and safe distribution at a low investment cost. The market for co-location, service and capacity represents approximately 15 to 20 percent of Teracom Sweden s business. For co-location, customer agreements can be as long as 10 years. Service, on the other hand, is typically provided to resolve a specific issue and these types of contracts run for short periods of time. The largest customer segment for co-location, service and capacity is mobile operators and major customers in this segment are Nokia Siemens Networks, TeliaSonera, Net 1, 3GIS and Telenor. Other customer segments are: broadband suppliers, carriers and others that lease or utilize space for such things as antennas, cables and electrical equipment. 18

teracom group 2010 Sweden Service of facilities and equipment Teracom Sweden offers 24-hour service on customer equipment. Service technicians are available throughout the country, ready to be dispatched to resolve problems, regardless of whether the equipment is in Teracom Sweden s own facility or the customer s facillity. Service consists of four overall areas: corrective maintenance, preventive maintenance, facility management and network monitoring. Corrective maintenance is the largest area. It involves having Teracom Sweden conduct an error analysis and correct the errors that have been identified within the agreed-upon time. The second largest area is facility maintenance, which includes all activities required for maintaining a well-functioning facility. Preventive maintenance involves Teracom Sweden performing regular service on equipment. Network monitoring, on the other hand, is performed on the customer s network and it is comprised of all tasks from the receipt of an alarm to identification of the problem. There is now a trend of more and more mobile operators choosing to outsource network service, which will increase even further due to the new generation network, 4G. Expansion of the 4G network, which was well underway by the end of the year, will also result in new co-locations, since network operators need to lease more space in Teracom Sweden s facilities. Among other things, Teracom Sweden has constructed and is now operating a network for blue light services on behalf of the Swedish Civil Contingencies Agency (MSB). Teracom Sweden also leases space for transmitters and equipment to public authorities, such as police, ambulance, fire services and other functions that are critical to society. 19

TV CHANNELS DR1 DR2 DR K DR HD DR Update FTV DR Ramasjang Mux1 lokal-tv TV2 TV2 NEWS TV2 Charlie TV2 Zulu TV2 FILM Kanal 5 dk4 Kanal 4 6 eren CANAL 9 Discovery Channel MTV CNN TV2 Sport Animal Planet Cartoon Network Nickelodeon Disney XD The Voice Vh1 Discovery Science Travel & Living HISTORY Travel Channel Star! Body in Balance CANAL+ First CANAL+ Hits Canal+ Sport 1 TV4 Sverige TV2 Norge, ARD Radio P1 P2 P3 P4 Bornholm P4 Fyn P4 Esbjerg P4 København P4 Midt og Vest P4 Nordjylland P4 Nordvestsjælland P4 Sjælland P4 Syd P4 Trekanten P4 Østjylland DR Det Elektriske Barometer DR Boogieradio DR Dansktop DR Evergreen DR Jazz DR Klassisk DR Oline DR P5 DR Hit DR R&B DR Rock DR Soft DR Unga Bunga DR World Nova FM

teracom group 2010 denmark The Danish TV market in total consists of approximately 2.5 million households, of which 2.2. million has some form of Pay-TV. TV media has a strong position in the country, which, for example, is evident in the high sales figures for new flat-screen TVs. TV consumption is steadily increasing and per capita viewing is now about 3 hours per day. One overall trend is that the major channels are losing viewers to niche channels. For radio, listening has remained relatively constant. So far, the public service channels have held the strongest position. However, the commercial channels and niche channels are attracting more and more viewers and listeners. The Danish Pay-TV market consists of seven competitors. The four established companies are: YouSee, Stofa (which are both cable TV companies), Viasat and Canal Digital (which are both satellite operators). The more newly established companies are: TDC Hometrio, Waoo (which are both broadband TV companies) and the Teracom Group s company, Boxer Denmark, which operates Pay-TV activities via the terrestrial network. The overall trend shows that the new competitors are taking customers away from the more established ones. Share of sales Teracom Denmark 42% Boxer Denmark 58% Number of Pay-TV customers 63,511 Customer satisfaction Boxer Denmark 67.0 Read more about the survey at: www.wilke.dk Average number of employees: Teracom Denmark: 71 Boxer Denmark: 27 Teracom Denmark, which was acquired on 1 October 2010, owns and operates the Danish terrestrial network. Its customers are Danmarks Radio (DR) and the commercial public service channel, TV2. The Danish Pay-TV offering via the terrestrial network is delivered by Boxer Denmark. In addition to digital TV, Teracom Denmark offers radio broadcasting, co-location, service and network monitoring. 21

teracom group 2010 denmark The Teracom Group s operations in Denmark Boxer showed all of the FIFA World Cup games During the FIFA World Cup games in South Africa between 11 June and 11 July 2010, Boxer was one of the few Pay-TV companies in the Danish market that broadcasted all of the FIFA World Cup games. Boxer promoted this in its TV, print and internet marketing campaigns. As a result, we got a good deal of press coverage, which also contributed to our high sales during the FIFA World Cup games, says Managing Director, Steen Ulf Jensen. The World Cup games and other campaigns have made Boxer s brand very well known in Denmark. A survey that was conducted in 2010 revealed that 80 percent of Danes were familiar with Boxer. Boxer Denmark also won an award during the year for one of the ten most effective marketing campaigns. In the Danish market, the Teracom Group owns and operates Pay-TV activities via the terrestrial network via its subsidiary, Boxer Denmark. It also owns and operates the Danish terrestrial network through Teracom Denmark. Boxer Denmark offers a total of 32 Pay-TV channels that have been allocated to a large number of program packages. The packaging structure also provides a great deal of freedom of choice. Boxer Denmark has a license that gives it exclusive rights to offer Danish households Pay-TV in the digital terrestrial network until 2020. The Danish transmitting network consists of a total of 34 tall masts. 26 of those masts are more than 100 meters tall. The transmitting network is very compact and efficient. The strategy is to purchase uniform equipment in order to keep costs down. The terrestrial network has five broadcasting networks for digital TV. analogue radio and digital radio are also broadcast in the network. Large potential for Pay-TV At the start of 2010, Boxer Denmark s sales were lower than expected. However, the rate of sales has increased since then, particularly during the last six months of the year. The Danish Pay-TV market is relatively mature and competition is fierce. Furthermore, due to the large number of free TV channels (nine in total), there are still approximately 300,000 households that only have free TV. But, there is still a great deal of potential for Pay-TV in the Danish market, since the selection is both strong and in demand. Consumers are not very price sensitive and we are on the right path. Our goal is to make our customers even more satisfied, says Steen Ulf Jensen, Managing Director of Boxer Denmark. Dismantling of analogue transmitters On 1 November 2009, the analogue TV network in Denmark was shut down and replaced by digital transmitters. But, the work did not stop there. Throughout 2010, Teracom Denmark put a great deal of effort into dismantling the analogue TV transmitters throughout the country. Teracom Denmark joins the Teracom Group Teracom Denmark (previously BSD), started up its business in 1925. The company distributes public service and commercial TV and radio from masts located throughout the country. Digital radio is currently broacast via two transmitting network from 64 stations, which means that essentially the entire country is able to receive DAB. 99.8 percent of Danish households are able to receive TV and radio from Teracom Denmark. Teracom Denmark became part of the Teracom Group on 1 October 2010. The acquisition makes it possible to coordinate and develop network and Pay-TV activities. Besides terrestrial digital TV, Teracom Denmark also offers radio broadcasting in the form of AM and FM radio, as well as the digital radio format, DAB. The Danish DAB network was launched in 2002, with coverage in the five major cities and along all of the highways. 22

teracom group 2010 denmark Teracom Denmark develops its service offering In addition to TV and radio, Teracom Denmark also offers co-location and service. Co-location is rapidly growing and customers are primarily mobile operators. The company has a service team at ten locations around the country, which enables it to offer service quickly and efficiently at all of its transmitter stations in Denmark. As part of the service and co-location business, Teracom Denmark also offers network monitoring. Broadcasting is Teracom Denmark s core business and it provides the foundation for any future expansion of operations. We want to utilize our production facilities and offer more service, says Finn Søndergaard, Managing Director of Teracom Denmark. Teracom Denmark s customers are both public service companies and commercial companies. Its largest customers are Danmarks Radio (DR), TV2 and Boxer Denmark. DR and TV2 broadcast TV in two transmitting networks. Boxer Denmark broadcasts in three. In Denmark, six nationwide FM channels and 16 nationwide channels are broadcast using DAB technology. Besides DR, approximately 30 private companies broadcast commercial radio in Denmark. Teracom Denmark has also built up and is operating a network for public authorities, such as police, ambulance, fire services and other functions that are critical to society. During the year, Teracom Denmark has put a great deal of effort into a comprehensive update of the DAB network. The purpose has primarily been to improve indoor reception for DAB. Coverage will increase by a factor of 4, partly by building new stations and partly by increasing the transmission power at existing stations. The work will be concluded during 2011, at which time 99 percent of Danish households will have access to the updated digital radio network. Expansion of the DAB network During 2010, major updates were made to the Danish DAB network in order to increase transmission power. This results in better indoor reception. Teracom Denmark is both building new stations and increasing the transmission power at existing stations. As a result, coverage will increase by a factor of 4 when this work is completed during 2011. Boxer Denmark strengthens its customer offering During the year, Boxer Denmark has worked to make its sales channels more efficient. As a result, the direct sales channels now account for a larger share of the Pay-TV subscription sales. Boxer Denmark has also increased its collaboration with Danish retailers, which currently account for the largest portion of sales. For example, households that purchase a box without a subscription have been able to obtain a program card that gives them access to Boxer s offering for one month. After that, Boxer can contact the customer to find out if he or she is interested in a package subscription. We have attracted many new customers in this way, says Steen Ulf Jensen, Managing Director of Boxer TV A/S. Boxer Denmark has also made changes to its packages. It has made the smallest package more attractive by adding three more channels from TV2 so that the package now contains all of TV2 s channels. That package has been offered for DKK 99 per month. During 2010, Boxer Denmark started marketing and selling a small indoor antenna that enables reception of the company s offering. Furthermore, in December, a small terrestrial receiver for computers was launched, which enables customers to watch Boxer s broadcasts directly in their computer. Another new product that was launched is called BOXER TANK-SELV. Consumers who select this product are able to choose for themselves which months they want to subscribe for Pay-TV. Danish terrestrial network operator enhances competitiveness On 1 October 2010, the Teracom Group took over ownership of the Danish terrestrial network operator, Broadcast Danmark A/S (BSD), which is now called Teracom Denmark. The acquisition also included the company s infrastructure consisting of masts for radio and TV broadcasting and a fiber optic network that connects them. The acquisition was in accordance with the long-term strategy to integrate Pay-TV and terrestrial network activities within the Group. Cooperation between the Swedish and Danish network activities will result in synergies. The same thing will happen through cooperation between Teracom Denmark and Boxer Sweden, just as we benefit from the cooperation between Teracom Sweden and Boxer Sweden, says Finn Søndergaard, Managing Director of Teracom Denmark. The acquisition makes it possible to derive benefits from each other s competencies and coordinate efforts in a new way. This also increases the opportunities for being able to offer affordable services and products in the very competitive TV market. Ownership of the new Danish network operations provides more transparency. It helps a lot when you can see what you are paying for. Furthermore, we can discuss technical issues, coverage and solutions in an entirely new way when we encounter problems, concludes Finn Søndergaard. 23

TV CHANNELS MTV 3 MAX MTV 3 FAKTA MTV 3 Lefta MTV 3 Junini Nelonen Kino Nelonen Perhe Nelonen Maailma Nickelodeon Discovery Channel Eurosport Disney Channel MTV DIGIVIIHDE CANAL+ First CANAL+ Series CANAL+ Urheikl CANAL+ Aitio Nelonen Pro1 Nelonen Pro2 URHOtv

teracom group 2010 Finland The Finnish TV market still has a great deal of growth potential. 2.2 million households have access to TV, but the share of households with a Pay-TV subscription is only about 25 percent, compared to approximately 60 percent in Sweden. A big reason why there hasn t been a major breakthrough for Pay-TV is because there are so many free TV channels, which have historically been very strong. In Finland, free TV accounts for 90 percent of total TV viewing. Commercial terrestrial TV was introduced in Finland already in 1957. This didn t occur until 1988 in Denmark and in Sweden, it wasn t launched until 1991. The major media companies have all invested in a wide selection of free TV in the terrestrial network. The challenge facing the Pay-TV industry is to create attractive offerings and program packages. Currently, the market is characterized by many short subscriptions and a high level of customer turnover. Share of sales Average number of employees: PlusTV Finland: 29 PlusTV Finland 100% Number of Pay-TV customers 244,170 Customer satisfaction PlusTV Finland 63.4 Read more about the survey at www.epsi-finland.org For Pay-TV there is an even distribution between cable TV and terrestrial digital TV. Both have a share of approximately 45 percent of the total market. Satellite TV and broadband TV command the remaining share. For the last two years, there has not been any growth in the Finnish Pay-TV market. In terms of viewer behavior, the pattern is the same as in the other Nordic countries, i.e. the niche channels are gaining ground. 25

teracom group 2010 finland The Teracom Group s operations in Finland In the Finnish market, the Teracom Group offers Pay- TV through its subsidiary, PlusTV, in which ownership is 53 percent. In total, PlusTV offers 18 channels. The channels are broadcast via three networks which are owned and operated by the network operator, Digita. PlusTV started broadcasting Pay-TV in the digital terrestrial network in 2006. Since that time, sports broadcasts, particularly Formula 1, have attracted the most Pay-TV viewers. 26 PlusTV sells boxes along with a subscription In December 2010, PlusTV started cooperating with Finnish specialty stores and box manufacturers to sell set-top boxes and subscriptions as a package. Customers have traditionally purchased hardware and subscriptions separately. We are now running a campaign to sell recordable boxes along with a Pay-TV subscription, which enables the consumer to get a great price on the box. This concept has worked well in Sweden and Denmark, says Jyri Ratia, Managing Director of PlusTV. This is one of the first times that a Pay-TV company, specialty stores and box manufacturers have cooperated with each other in Finland. The aim is to attract more Pay-TV customers. It is necessary to constantly reevaluate packaging and the types of subscriptions that are offered. It s a constant balancing act, says Jyri Ratia. In Finland, the situation in the TV market is not the same as it is in the other Nordic countries. There are more network operators and two additional companies are planning to start offering terrestrial Pay-TV. Sweden, Denmark and Norway have only one Pay-TV provider in each terrestial digital network. In Finland, however, both DNA and TDF Entertainment (network operators) are planning to start selling terrestrial digital TV from new broadcasting networks along with offering HDTV via DVB- T2 and MPEG4. Although this increases competition, it also results in more active cultivation of the market, which all of the competing companies benefit from. One uncertainty factor in Finland is that the Finnish authorities will be conducting a thorough evaluation of network licenses within the next couple of years. This could have major consequences for the network companies that are already established in the market. The new licenses will come into effect on 1 January 2017. This could result in an entirely new infrastructure in the network market, says Jyri Ratia, Managing Director of PlusTV. As a rule, set-top boxes haven t been sold together with a subscription in Finland like they are in Sweden and Denmark. Up until now, consumers have purchased the hardware first and then chosen freely from the Pay-TV offerings. As a result, sales in Finland have historically been high, but so has the churn rate. Closer cooperation with radio and TV stores The goal for PlusTV is to offer attractive subscriptions with shorter subscription periods. During the year, PlusTV focused on increasing the loyalty of its customers. This has primarily been achieved through a tighter coordination of telephone sales and anti-churn efforts at customer service. Improved sales initiatives have resulted in fewer customers cancelling their order. Also, due to better offers by customer service, more customers who had wanted to cancel their order, decided not to after all. Like Boxer Denmark, PlusTV has also worked during the year to make its sales channels more efficient. In particular, emphasis has been placed on working more closely with radio and TV stores. For example, PlusTV ran a campaign offering consumers a great price when they purchased a Pay-TV set-top box (PVR) together with a subscription. Customer satisfaction at PlusTV is currently somewhat below the industry average. Studies conducted in 2010 show that lower price points would likely attract more customers. Accordingly, the company has put together entirely new packages that were launched in February 2011. During the year, PlusTV also worked to renew and improve its own organization.

teracom group 2010 SOCIAL RESPONSIBILITY Through the services that it offers, the Teracom Group helps create the conditions for freedom of expression, which is fundamental to basic human rights. The Group s business activities thus involve a responsibility to respect such rights in a trustworthy manner, thereby ensuring continued access to important community information and free media. As a state-owned company the Teracom Group has a special obligation to act as a role model and behave responsibly in all parts of its business. The Teracom Group s goal is to achieve sound economic development that does not conflict with its efforts to help bring about a society that is sustainable in the long term. It also strives to take responsibility for issues relating to ethics, the environment, human rights, equality and diversity. The environment represents a large portion of the Teracom Group s sustainability efforts and one of the most important issues is the Group s greenhouse gas emissions. Thus, one of the Group s most important areas of responsibility is ensuring that there is a stimulating, cooperative and safe work environment. It must also run the business with a focus on high quality and professionalism. How the Group s employees interact with customers, suppliers and cooperation partners has a considerable impact on its competitiveness as a media operator. Social re 27

teracom group 2010 EMPLOYEES New Guiding Stars for a shared future The Teracom Group is a Nordic Group in a European market. The combined business is the starting point for a shared culture, while still, of course, allowing room for differences. It is important for us to strengthen cooperation within the Group because it leads to higher profitability and more business. And that, in turn, causes employees to feel a greater sense of solidarity, says Marianne Winblad von Walter, who has worked as the HR Director for the Teracom Group since September 2010. One important piece of the puzzle in terms of making the Group more cohesive has involved formulating a number of Guiding Stars. The Group and its companies must constantly strive to become an even more attractive employer. The Guiding Stars should provide guidance as employees go about their daily tasks and when they interact with both external and internal stakeholders. The Guiding Stars were presented to the organization during spring 2011. Freedom with responsibility is a reality at the Teracom Group. It provides employees with good opportunities to develop. Job rotation within the organization is actively promoted and all employees are encouraged to try working in a different part of the organization now and again. Internal job rotation is a key to retaining talented employees and new jobs are always advertised within the organization first. At the individual level, there is a development plan that involves each employee taking responsibility for his or her own skill development, yet still with support from their manager, of course. Clear leadership is required in order to get the most out of employee competencies. Teracom has formulated five leadership principles to help support its managers. In many ways, these also represent the core of the company culture. The principles state that the company s management style should be business-driven, action-oriented, communicative, involving and goal-oriented. Specifically, this has to do with always being proactive, making sure that there are clearly defined areas of responsibility and distinct lines of authority; encouraging dialogue and deriving benefits from the diversity and expertise that exists by involving employees; and clarifying the link between individual goals and the overall strategy. Because the Teracom Group is state-owned, it has a special obligation to achieve the ambition of having a large share of women in upper management positions. But, as with other hightech companies, network companies have a disproportionate gender distribution, which is reflected in the numbers for the entire Group (approximately 76 percent men, 24 percent women). There is a more equal gender distribution in the Pay-TV companies. The Group actively works to achieve gender balance among managers. One example of this is the mentor program, Womentor, which helps promote women managers in the IT and telecommunications sector. Teracom has had both mentors and apprentices in the program for the last three years. There are also many clear guidelines for the business. For example, job ads must be formulated in a gender neutral way, new managers are provided training on discrimination legislation, any salary differences between men and women are countered by documenting salary differences and job evaluations and there are good benefits for men and women on parental leave. In addition, if two equally qualified individuals apply for a position, and both meet the basic requirements, the underrepresented gender will be given preference. The employment terms also allow for flexible working hours (time bank), which enables employees to take leave for surplus hours when it is most convenient to them. The work environment is also a prioritized area. All employees are entitled to regular health examinations. Analyses are also performed on sickness statistics, incidents, overtime and more. Safety is also highly prioritized, particularly for service technicians who are sometimes required to work high up in masts. Each year, the Teracom Group conducts an employee survey to evaluate employee work satisfaction and identify areas for improvement. The 2010 results show that there has been a significant downturn compared to the prior year. This has been a turbulent year, involving major changes to both the organizational structure and the management structure. So, the decline in results does not come as a complete surprise. However, the Group is concerned about the results. It has decided on measures to address this problem and activities are already underway. Within their own unit, however, employees remain satisfied with the work environment in terms of both managers and colleagues. They also feel that the atmosphere is good and friendly. More information about employees is available on pages 8-9 of the Teracom Group s Sustainability Report. Guiding Stars We simplify We build trust We make a difference 28

teracom group 2010 SOCIAL RESPONSIBILITY Teracom s social responsibility During 2010, the Group evaluated which sustainability areas it should prioritize along with the goals that should be linked to those areas. A large portion of the Teracom Group s sustainability efforts are focused on the environment and one of its most important issues is the Group s greenhouse gas emissions. Other prioritized areas are skill development, sustainability assessments of the Teracom Group s biggest suppliers and ensuring a high reliability of service in order to maintain the access to free media. The Teracom Group has worked for quite some time with issues pertaining to social responsibility, such as ethics, diversity, transparency and reliable distribution of radio and TV. However, in order for sustainability efforts to be firmly anchored in the organization, they must be integrated into the routines and daily tasks performed within the Group. In 2008, the Group took a new comprehensive approach to the sustainability aspects of its business. Today, the work environment, quality, the environment and safety are important components of the effort to achieve sustainable development. Through the services that it offers, the Group helps create the conditions for freedom of expression, which is fundamental to basic human rights. The Group s business activities also involve a responsibility to respect such rights in a trustworthy manner, thereby ensuring continued access to important community information and free media. It is also very important to maintain high reliability in the radio and TV networks in order to provide listeners and viewers with information and entertainment. Teracom s services are also important to society since the FM network is used to warn the public about very serious accidents/disasters and similar events. It should also be simple and affordable to obtain a wider TV selection than what is already available on free TV. There is increasing interest in and growing knowledge of sustainability issues in society. Correspondingly, stakeholders (primarily customers) are placing increasingly high requirements on operators regarding social responsibility and the environment. A high level of awareness of the sustainability aspects relevant for the company will not only make the Teracom Group more attractive as a business partner and employer but also improve its relationships with other stakeholders who are affected by its operations. This is also important for long-term business development and management of the Group s internal and external risk factors. The Teracom Group s goal is to achieve sound economic development that does not conflict with its efforts to help bring about a society that is sustainable in the long term. An important component of Teracom s social responsibility is striving to be an attractive employer. Please read more about Teracom s HR activities on page 28. 29

teracom group 2010 SOCIAL RESPONSIBILITY New governance policies During 2010 the Board decided on a number of new Group-wide policies aimed at defining the Group s fundamental values in the following areas: ethics, information, investments, safety and remuneration. In addition to these areas, the Board is also responsible for policies on diversity, the environment and information security. The new policies provide the foundation for sustainability work. The Ethics Policy is based on OECD guidelines for multinational companies and the UN Global Compact s ten principles on areas such as human rights, diversity, information and the work environment. The Ethics Policy provides support and guidance to both managers and employees. It takes precedence over other policies and governing documents in the Group and its companies. Among other things, its purpose is to ensure that all of the companies belonging to the Teracom Group, and the employees who work there, act in a way that supports profitability while striving to achieve a long-term sustainable society from a social, environmental and financial perspective. Clearer requirements for suppliers In 2009 the Teracom Group decided to start looking at sustainability issues in a more structured way. This also applies to its procurement processes. Teracom Group actively strives to ensure that its suppliers have sustainable manufacturing processes. The Teracom Group has approximately 2,500 suppliers and Teracom Sweden has started up a project to review the most significant ones in terms of quality, environmental protection and social responsibility. A questionnaire on sustainability was distributed to 120 of Teracom Sweden s suppliers. This corresponds to approximately 80 percent of Teracom Sweden s total purchasing volume. As a result of this effort, the Group s purchasers now regularly collaborate with the environmental and quality functions. The Group is also better prepared to answer its customers questions and relationships with suppliers are now stronger. Efficient use of resources for a better environment We all need to take into account the Earth s limited resources by protecting ecocycles, refraining from living beyond our means and diminishing our impact from emissions. Efforts have been underway to document the Group s environmental impact since 2008 and there is now a good understanding of the source of emissions and the areas to focus on in order to improve. 30

teracom group 2010 SOCIAL RESPONSIBILITY The Teracom Group s main environmental impact is from energy and fuel consumption and emissions resulting from the purchase of goods and services, such as business travel and shipments. The Teracom Group s environmental goal is for the Group to decrease its environmental impact each year. The companies belonging to the Group must decrease their greenhouse gas emissions by an average of 3 percent per year until 2020. In order to achieve these reductions, the Teracom Group s main strategy is to make its operations more efficient. More efficient use of resources reduces environmental impact. Gradually switching over to renewable energy sources and more modern technology will also help the Teracom Group achieve its environmental goals. One example of how the Group tries to reduce its environmental impact is Boxer s environmental bonus program for employees who choose to leave their cars at home. Other examples are: recycling of waste heat from Teracom s transmitters, recycling of equipment that has reached the end of its useful life and better waste management practices. Active ownership The catchwords for the government s administration of wholly owned companies are openness, active ownership and orderliness. For the Teracom Group, this means that the company must act as a role model for others and behave responsibly in all parts of its organization. In addition to a number of financial requirements, the Teracom Group must take responsibility for such issues as ethics, the environment, human rights, equality and diversity. Since 2008, all state-owned companies must prepare a sustainability report in accordance with GRI guidelines (Global Reporting Initiative). The Teracom Group reports at the C+ level. The owner also monitors sustainability issues through its representation in the Board of Directors and at each AGM. The Teracom Group has also participated it network meetings for state-owned companies arranged by its owner. Examples of issues that were discussed are sustainability reporting and sustainable travel/shipments. More in-depth information can be found in the Teracom Group s 2010 Sustainability Report. 31

teracom group 2010 COMMENTS FROM THE CHAIRMAN OF THE BOARD Investments ensure a long-term profitable business The Teracom Group s unique strength is its ability to offer network and Pay-TV in an integrated value chain. This makes it possible for the Group to compete with TV offerings from all other Pay-TV platforms. It is also able to compete with the offerings from strong telecom companies that deliver TV via IP technology. The ability to offer a mix of free TV and appealing Pay-TV makes the Group s terrestrial network a unique strength and it actively contributes to increased competitiveness in the Pay-TV market, as well as a more interesting TV environment in each country. The Group has significantly expanded its operations internationally during the last few years. In 2010, we were very happy to supplement Boxer Denmark via our acquisition of the Danish terrestrial network operator, BSD, which is now called Teracom Denmark. We currently own two terrestrial networks and we have an unbroken value chain in both Sweden and Denmark, which strengthens our competitiveness. It is particularly interesting that we were able to achieve this in Denmark, given that Boxer Denmark obtained its Pay-TV operator s license with the explicit political objective of increasing competition in the Danish TV market. That is exactly what has happened, with better and cheaper offerings to end customers as a result. In order for us to further contribute to these dynamics, we are coordinating efforts within the company so that we obtain more development and competitive advantage for the money. Developments at PlusTV have been in the right direction as well. It now has a more stable customer base and increased focus on its sales channels. Competition is becoming even more stringent in Sweden s mature market and we are investing in new services to counter the ever-increasing competition. We are very pleased to have launched HDTV and we expect sales to grow as more channels are added. We made major investments in 2010 and operating profit is lower than it was last year. The Board is fully aware of this and is of the opinion that the investments we ve made in our network and Pay-TV companies are necessary in order for us to maintain our competiveness and increase profits in the long run. In 2011 investments will be made in network expansion and new Pay-TV services in Sweden. We must also simultaneously continue our efforts to increase sales in Denmark and Finland. Attracting more Pay-TV customers in these new markets is crucial in order for the Group to achieve its long-term goals. The Group has an explicit strategy of international expansion. Volume is important because it helps us reach favorable agreements with both broadcasters and technology providers. It also important for us to be able to allocate development 32

teracom group 2010 COMMENTS FROM THE CHAIRMAN OF THE BOARD costs across many units. Growth is thus necessary so that we can offer viewers and listeners affordable services in the long term, regardless of whether they live in Sweden or somewhere else. The strategy is focused on the digital terrestrial market and is thus dependent on the emergence of new investment opportunities. However, our international strategy must be implemented with discretion. In 2008, we obtained a Pay-TV license for the Irish terrestrial network. However, it was necessary for us to withdraw our application due to the tougher investment climate. This turned out to be a wise decision, which proves how important it is to move forward with caution. We are currently working to consolidate the Group s holdings and developing the markets where we already have operations. We are preparing the Group for even tougher competition. Traditional TV and radio remains strong among viewers and listeners. However, the selection is increasing in the distribution market as more strong competitors become established. Overall, I am pleased that we are both investing in growth and achieving good results. I believe that a great deal of potential exists in the Group, its companies and this industry. The transition to digital radio and TV represents the start of a fantastic journey that we have basically only just begun. Our task is to take advantage of opportunities that are created through technological developments as efficiently and creatively as possible. Åsa Sundberg Chairman of the Board for the Teracom Group 33

teracom group 2010 Finn Søndergaard Steen Ulf Jensen Gunilla Berg Stephan Guiance Crister Fritzson Jyri Ratia Helena Nathhorst Johan Bobert Marianne Winblad von Walter Pierre Helsén 34

teracom group 2010 GROUP MANAGEMENT Group management Members of the Group management team The Group management team was reorganized in March 2010 in conjunction with the implementation of a new Group structure. Crister Fritzson Group CEO, President of Teracom AB and Acting President of Boxer TV-Access AB Born 1961. Diploma in Market Economy and MBA from Nordic School of Marketing. Previous positions include: President of Boxer TV-Access (2001 2006), Vice President with global responsibility for Marketing & Sales at Allgon Systems (1999-2001), Channel Manager at Motorola (1997-1999) and Head of the Nordic/ Baltic Region at Motorola (1994-1996). Board assignments at Boxer TV-Access AB (Chairman), Digi TV Plus Oy (Chairman) and Boxer TV A/S (Board Member). Employed since 2007. Gunilla Berg Executive Vice President and CFO Born 1960. MSc in Business and Economics from the Stockholm School of Economics. Previous positions include: Executive Vice President and CFO for the SAS Group (2002-2009), Executive Vice President and CFO for the Swedish Cooperative Union, KF (1997-2001) and various management positions at AGA and Swedish Shell. Member of the Board of Directors at Alfa Laval AB, Lundbergföretagen AB and DNB NOR ASA. Employed since 2010. Johan Bobert Acting Director of Communications Born 1960. Studies in political science and history at Stockholm University. Studies in marketing communications at RMI Berghs. Previous positions include: Partner and Executive Vice President at Hill & Knowlton Sweden AB (1996 2004) and Senior Consultant at Jerry Bergström AB (1995 96). Affiliated with Teracom and Boxer since 2002. Stephan Guiance Head of Teracom Sweden Born 1960. Business Management Studies at Stockholm University. Previous positions include: President of FastTV. net AB (2003 2007) and employed at Sweden On Line (1989 2002) during period 1998 2002, as President. Employed since 2008. Pierre Helsén Director of Strategy and Business Development Born 1951. Business management studies at Uppsala University. Previous positions include Head Secretary at the Digital TV Commission (2004 2007), Investment Manager Skandia Mediainvest (2001 2003), CFO at SVT (1999 2000) and CFO at TV4 (1990 1998). Board assignments: NGB AB (member) and IFTS AB (Chairman). Employed since July 2007. Steen Ulf Jensen Managing Director of Boxer TV A/S Born 1966. MBA from Copenhagen Business School. Previous positions include: Founder and Partner at Jensen Group Consulting (2002 2008) playing a key role in Boxer s application as operator in Denmark, CEO of Viasat Distribution (2001 2002), Chief Operating Officer Viasat Broadcasting (1999 2002), CEO of Viasat Denmark (1996 1998). Board assignments at Jensen Group Consulting (Chairman) and AH Metal Solution (Board Member). Employed since 2008, associated with Boxer since 2006. Helena Nathhorst Finance Manager Born 1967. MSc in Business and Economics from Uppsala University. Previous positions include: management positions at KPMG Transaction Services (2000 2009), KPMG Revision (1996 2000) and the Swedish Tax Agency (1994 1996). Board assignments at Boxer TV-Access AB (Board Member) and Digi TV Plus Oy (Board Member). Employed since 2009. Jyri Ratia Managing Director of Digi TV Plus Oy Born in 1972. MSc in Business and Economics from the Helsinki School of Economics. Previous positions include: Senior Vice President, Business Development, Sanoma Entertainment Oy (2008 2009), Vice President, Television, Welho cable operator business Sanoma Television Oy (2007 2008), Head of Marketing and Sales, Marketing Manager, Brand Manager at Sanoma Television Oy (2001 2007). Employed since 1 January 2010. Finn Søndergaard Managing Director of Teracom A/S Born 1947. MScEE from the Technical University of Denmark. Previous positions include: Managing Director of Broadcast Service Denmark (2001-2010), Executive Vice President and Technical Director of TDC Cable TV (1994 2001), managerial positions at TDC (1987 2001), President and CEO of RE Instruments Corporation USA (1984 1987), Technical Director of RE Instruments A/S (1981 1984). Board assignments at Scansatel Kabel TV A/S, Scantemo Kabel TV A/S, Dansk Kabel TV A/S and NSAB. Employed since 2010. Marianne Winblad von Walter HR Director Born 1969. BSc from Uppsala University. Previous positions include: HR Director NASDAQ OMX (2003-2010), HR Manager Gillette Group nordic (1998-2003) HR Specialist and Acting Head of HR at MTG AB (1994 1998). Employed since 2010. 35

teracom group 2010 Stig-Arne Celin Tobias Henmark Lars Grönberg Kristina Axberg Bohman Claes-Göran Persson Åsa Sundberg Ingrid Engström John-Olof Blomkvist Maria Curman Magnus Ahxner Urban Lindskog 36

teracom group 2010 Board of Directors Board of Directors Composition of the Board of Directors Teracom s Board of Directors consists of nine members, two of whom are appointed by employee organizations. Besides the ordinary members, the Board also has two deputy members appointed by employee organizations. Åsa Sundberg Chairman since 2008 Born 1959. MSc from the Royal Institute of Technology, Stockholm. Active in, and partner of the risk capital company, Provider Venture Partner. Other board assignments (member) are: Aspiro AB, The Cloud Networks Ltd, Fox Technologies Inc, APTV AB and Mobilaris AB. Previous operational experience includes: CEO of Telia Engineering and Telia Prosoft (1996 1999), as well as head of Telia s International Network and Carrier business (1994 1995). Kristina Axberg Bohman Member since 2007 Born 1959. MSc in Business and Economics from Linköping University. CFO at Manpower. Other board assignments are: Manpower Health Partner AB and Manpower El and Tele AB. Previous operational experience includes: SVP and Head of Treasury and Legal Affairs at LGP Telecom (1999 2002), Financial Controller at Telia AB (1995 1998) and Financial Controller at Akzo Nobel (1990 1995). Maria Curman Member since 2007 Born 1950. MSc in Business and Economics from the Stockholm School of Economics. President of Bonnier Books. Other board assignments include: Axfood (member), Bonnier Media Germany (Chairman), Cappelen Damm Norway (Chairman), Bonnierförlagen AB (Chairman) and AdLibris (Chairman). Previous operational experience includes: CEO for SVT (2000 2002) and President and Director of Bonnier Utbildning AB (1993 1996). Ingrid Engström Member since 2003 Born 1958. MA in Applied Psychology from Uppsala University. Senior Executive Advisor SEB. Previous operational experience includes: Senior Vice President Operations, Purchase and HR at Eniro AB (2003 2007), President of Know It AB (2000 2003) and President of ComHem AB (1998 2000). Lars Grönberg Member since 2005 Born 1949. MSc in Business and Economics from the Stockholm School of Economics. Other board assignments are: Matkompaniet AB (Chairman), Bindomatic AB (member), Connecta AB (member), Narva Project (Chairman), Br. Perssons Byggnads AB (Chairman) Business Security AB (member), Qamcom AB (Chairman) and Quadracom AB (Chairman). Previous operational experience includes: President and CEO of Intrum Justitia (1998 2000) and director responsible for foreign operations at TeleDenmark (1996 1998). Tobias Henmark Member since 2003 Born 1968. M.Pol.Sc. and MBA from Stockholm University/ London School of Economics. Administrator, Swedish Government Offices. Other board assignments include: Samhall AB (member) and Arbetslivsresurs AB (member). Previous operational experience includes: Analyst at AB Stelacon (2001 2002) and project manager at various advertising agencies (1993 2001). Urban Lindskog Member since 2007 Born 1965. MSc in system engineering from the Royal Institute of Technology, Stockholm and MBA from INSEAD, in Fontainbleau, France. CEO of Scharp and Lindskog AB and of Lindskog and Partners, Venture Management AB. Other board assignments are: Oryx Simulations AB (Chairman), Algoryx Simulation AB (Chairman), Carmenta Sverige AB (member) and Sonetel AB (member). Previous positions include: CEO of Catella IT AB (1998 2003). John-Olof Blomkvist Member since 1995 Born 1949. Union Representative for ST at Teracom. Works as maintenance planner at Customer Delivery Service Group, Facility Maintenance. Magnus Ahxner Deputy member since 2010 Born 1973. Union Representative for SACO at Teracom. Works with business development at the Teracom Group. Claes-Göran Persson Member since 2006 Born 1958. Union Representative for SEKO (The Union of Service and Communication Employees). Service engineer for Customer Delivery at Kiruna FM/TV station. Deputy Board Member at Teracom 2003 2005. Stig-Arne Celin Deputy member since 2002 Born 1953. Union Representative for ST at Teracom. Works as a service at Gävle FM/TV station, Customer Delivery. Auditors PWC AB Head Auditor Sten Håkansson Authorised Public Accountant 37

Board of Directors Report Board of Directors Report The Board of Directors and President of Teracom AB, CIN: 556441-5098, hereby submit the annual report for the Group and Parent Company for the 2010 financial year. THE YEAR IN SUMMARY Income increased by 13 percent to SEK 3,852 (3,408) million Operating profit was SEK 293 (496) million Net income was SEK 201 (269) million Return on equity was 12 (16) percent The equity ratio was 31 (40) percent The number of Pay-TV subscriptions was 944,000 (969,000) The comparison figures stated above are related to continuing operations. THE ORGANIZATION AND BUSINESS The Parent Company for the Teracom Group, Teracom AB, is a limited liability company that is wholly owned by the Swedish state. During 2010, operations were conducted in Teracom AB, the subsidiaries Boxer TV-Access AB, Boxer TV A/S, Digi TV Plus Oy and since October 2010 in the Danish network company Broadcast Service Denmark A/S, Broadcast Stations Company 1 A/S and Broadcast Stations Company 2 A/S. NETWORK ACTIVITIES Teracom AB (Teracom Sweden and Group functions) The Parent Company, Teracom AB, owns and operates a broadcasting network for radio and TV that reaches nearly 99.8 percent of all Swedish households. Teracom AB s nationwide network makes it possible to offer a variety of integrated communications solutions. Customers include broadcasters, TV operators and production companies. The largest customers are SVT, SR, TV4 and Boxer Sweden. Teracom A/S (Teracom Denmark) On 30 September the Teracom Group acquired the terrestrial network operator, Broadcast Service Denmark (BSD). The company s name was changed to Teracom A/S in January 2011. Teracom A/S owns and operates a broadcasting network for radio and TV that reaches approximately 99 percent of all Danish households. Customers include Danmarks Radio (DR), the commercial public service channel TV2 and Boxer Denmark, which is also one of the Group s subsidiaries. PAY-TV ACTIVITIES Boxer TV-Access AB (Boxer Sweden) The subsidiary, Boxer TV-Access AB, packages, markets and sells digital Pay-TV subscriptions in the digital terrestrial network. Its competitors are suppliers of cable TV, satellite operators and providers of TV via broadband. Customers are Swedish households. Boxer TV A/S (Boxer Denmark) Boxer TV A/S, Boxer Denmark, runs Pay-TV activities in the Danish digital terrestrial network. The business model is the same as that of Boxer in Sweden, i.e. packaging, marketing, selling and administering program channels that are licensed to broadcast Pay-TV in the terrestrial network. Sales of Pay-TV subscriptions began in February 2009 and the launch occurred in conjunction with Denmark s transition to digital TV in November 2009. Digi TV Plus Oy (PlusTV Finland) Digi TV Plus Oy, which is marketed as PlusTV, is the leading Pay- TV operator in Finland. Like Boxer, PlusTV packages, markets, sells and administers program channels that are licensed to broadcast Pay-TV in the terrestrial network. Teracom AB owns 53 percent of Digi TV Plus Oy. SIGNIFICANT EVENTS JANUARY DECEMBER 2010 In June 2010, an agreement was reached with the sellers concerning acquisition of the network operator in the Danish terrestrial network, Broadcast Service Denmark (BSD). The deal was concluded on 30 September 2010. In February, new channels were launched in the Swedish terrestrial network using MPEG4 technology and in June the Swedish Radio and TV Authority granted new broadcasting licenses for both HDTV and standard TV. The licenses are valid until March 2014. During the first half of the year, a comprehensive Groupwide reorganization was executed and a distinct Group structure was created. On 1 November, HDTV was launched in the Swedish terrestrial network using the new DVB-T2 standard. Five new channels were part of the launch and more will be added later, such as TV3 HD and Kanal 5 HD. For the second year in a row, Boxer Sweden received top placement in the Swedish Quality Index s (SKI) ranking of Pay- TV operators and overall, Boxer Sweden had the most satisfied customers. Broadcast Service Denmark was integrated as part of the Group during the fourth quarter and a project is underway to identify and verify synergies with the other Group companies. 38

Boxer Denmark introduced a very small terrestrial TV receiver box designed for Boxer s Pay-TV card. It can be connected to a computer, which can then be used as a portable TV screen. Gunilla Berg became the new CFO and Executive Vice President of the Teracom Group on 1 November. The Swedish Government received approval from the Parliament to create a holding company for the Teracom Group, which makes it possible to adapt the company s legal structure to its business structure. SIGNIFICANT EVENTS AFTER THE END OF THE REPORTING PERIOD Broadcast Service Denmark changed its name to Teracom A/S on 27 January 2011. Broadcasts of TV3 HD, TV4HD, and Kanal 5 HD got underway in the terrestrial network during the first quarter. Owner requirements and dividends Teracom s owner has established long-term goals for the equity ratio and return on equity that are to be met by the Teracom Group. The equity ratio shall be at least 30 percent and the goal for return on equity is 17 percent. At the end of 2010, the equity ratio was 31 (40) percent and return on equity for the year was 12 (16) percent. Provided it has achieved its financial goals, Teracom will strive to distribute dividends of between 40-60 percent of net profit for the year, after the elimination of minority interests. REPORTING SEGMENTS The Group reported income and profit for 2010 in the following three segments: Pay-TV TV and Radio Co-Location, Service and Capacity The Pay-TV segment consists of Pay-TV subscriptions in the digital networks in Sweden, Denmark and Finland. The TV and Radio segment consists of TV and radio broadcasts in the Swedish and Danish terrestrial networks. The Co-Location, Service and Capacity segment consists of such services in Sweden. The Broadband segment consisted of the subsidiary Comet Network s activities, which were divested in 2009. In 2010, the Teracom Group made changes to its internal structure and a distinct Group structure was created. The Group s new internal structure is organized as market companies based on how customers are cultivated in each country and each company is accountable for its own performance. This has resulted in new internal financial reporting requirements. The Teracom Group has thus replaced the three prior reporting segments with five new ones as of year-end 2010 and onwards, which reflects how the Group management team makes decisions concerning the allocation of resources and how it assesses performance based on operating profit/loss: Teracom Sweden Boxer Sweden Teracom Denmark Boxer Denmark Board of Directors Report PlusTV Finland The previous segment, Pay-TV, has been divided into three new segments, which are the Pay-TV companies in Sweden, Denmark and Finland. The two prior segments, TV and radio; and Co-Location, Service and Capacity have been merged and then recombined as two new segments, which correspond to the network activities in Sweden (Teracom Sweden) and the network activities in Denmark (Teracom Denmark). Annual 39

Board of Directors Report MARKET DEVELOPMENT Tv and Radio Sweden Teracom Sweden s digital terrestrial network reaches at most 99.8 percent of the country s households and one-third of all Swedish households watch TV via the terrestrial network. For quite some time, there have been 5 nationwide transmitting networks (MUXs) for TV in Sweden. At the end of 2009, Teracom Sweden began to simultaneously build a sixth and seventh MUX for reception of HDTV. The HDTV broadcasts are made possible via a combination of the more efficient compression method, MPEG4 and DVB-T2, which is the second generation standard for terrestrial digital TV. The five initial transmitting networks have at least 99.8 coverage without any local deviations and at the end of 2010, approximately 75 percent of the Swedish population had access to the sixth and seventh transmitting networks. There is stiff competition between the various operators, each of whom provides services (e.g. triple play, mobile TV and TV via broadband) through their own technical platforms. However, the digital terrestrial network has remained strong thanks to the development of new services, a large program offering and its unique advantages - simplicity, coverage and mobility. When it comes to TV distribution, cable TV commands the greatest share, with 2.8 million connected households. Terrestrial TV is next, with approximately 1 million connected households. For satellite TV, the corresponding figure is 661,000 and for IPTV it is 420,000. In 2010, the Government announced that it would be granting new broadcasting licenses to a number of commercial digital radio channels as a result of the new Radio and TV Act, which came into effect in August. It is estimated that there will be up to thirty new commercial channels initially. Later on, this number could grow to approximately 60 channels. Denmark Teracom Denmark s digital terrestrial network consists of five transmitting networks and a total of 34 tall masts. The Danish Pay-TV market is relatively mature and competition is tough. However, due to the large number of free TV channels, there are still approximately 300,000 households that only have free TV via the terrestrial network. Nearly 60 percent of Danish households have cable TV. Fastest growing among the new broadcasting platforms are terrestrial digital TV and broadband TV. Besides terrestrial digital TV, Teracom Denmark also offers radio broadcasting in the form of AM and FM radio, as well as the digital radio format, DAB. The Danish digital radio network has gradually been expanded since the time of its launch in 2002 and the final phase is expected to be completed during 2011. Digital radio is currently broacast via two transmitting network from 64 stations, which means that essentially the entire country is able to receive DAB. Teracom Denmark is also planning to start broadcasting with DAB+ as of 2014. Pay-TV Via its subsidiaries, Boxer Sweden, Boxer Denmark and PlusTV Finland, the Teracom Group currently has Pay-TV operations in Sweden, Denmark and Finland. Boxer Sweden competes in a mature Pay-TV market in Sweden where there is a low level of growth and intense competition between the various companies and broadcasting platforms. It is estimated that slightly more than 90 percent of households have a Pay-TV subscription and in Sweden there are 7 nationwide free TV channels and approximately 40 Pay-TV channels. At the end of 2010, Boxer Sweden had an existing customer base of 636,449 (664,533) Pay-TV customers. Boxer Denmark has been broadcasting Pay-TV in the terrestrial network since February 2009 and it has exclusive rights to offer Pay-TV to Danish households via the digital terrestrial network until 2020. It is estimated that slightly more than 85 percent of households have a Pay-TV subscription and in Denmark, there are 9 nationwide free TV channels and approximately 32 Pay-TV channels in the terrestrial network. At the end of 2010, Boxer Denmark had 63,511 (44,753) Pay-TV customers. The Finnish Pay-TV operator, Digi TV Plus Oy, has belonged to the Teracom Group since June 2009 and it has been operating in the Finnish market since 2006. In the Finnish market, free TV is very strong, which is one reason why the penetration of Pay-TV in Finland is much lower than it is in the other Nordic markets. The share of households with a Pay-TV subscription is approximately 25 percent and free TV accounts for 90 percent of total TV viewing. At the end of 2010, PlusTV had 244,170 (259,214) subscriptions. In Europe, digital TV development varies from country to country. However, most countries belonging to the EU either already have made, or soon will (within the next few years) make the transition to digital TV. One clear trend that can be seen in countries that have already made the transition to digital terrestrial TV is that the size of the Pay-TV market has increased. From a European perspective, HDTV development is still in its infancy. However, it is expected to break through on a broad front in several countries during the next few years as the broadcasting networks are updated. Co-Location, Service and Capacity Teracom is active in the co-location market in both Sweden and Denmark. Teracom in Sweden is a major competitor in the market thanks to its high, strategically placed masts that have a large amount of space. However, the need for local coverage is typically a deciding factor. During the year, many customers replaced equipment or upgraded outdated networks, which resulted in a large number of service assignments. The largest customer segment is mobile operators, who are increasingly 40

Board of Directors Report choosing to outsource their network service. This trend is expected to continue in conjunction with 4G expansion. Mobile operators are also interested in highly experienced cooperation partners, but for the service market in general, there are many competitors and downward pressure on prices. There is a steady demand for capacity services, yet there is also stiff competition in this market as well. INCOME AND PROFITS The Group reported income of SEK 3,852 (3,408) million. The 13 percent increase in income is primarily attributed to the Group s operations in Finland and Denmark. Operating profit was lower than it was in 2009 and it amounted to SEK 293 (496) million. The decline was primarily the result of negative results in Denmark and Finland, where the Pay-TV markets are still in the start-up phase. The Group s operating margin declined by 7 percentage points to 8 (15) percent. Operating margin excluding non-recurring costs was 9 percent. Operations in Sweden continued to be stable with an operating margin of 21 (20) percent. Non-recurring costs were SEK 47 million, which had an impact on net profit/loss for the year. This amount consisted of restructuring costs of SEK 23 million, as well as SEK 24 million related to the decision to discontinue TV via Broadband (IPTV), which was primarily impairment losses on intangible assets and inventories. Profit after financial items was SEK 281 (483) million. Net financial items was in line with the previous year and the amount reported was SEK -12 (-13) million. Net income worsened by 25 percent and was SEK 201 (269) million. There was a positive impact on profits from a deferred tax asset of SEK105 (0) million that was recognized pertaining to the deficit in Denmark. No deferred tax asset has been reported for the year s deficit in Finland. A deferred tax asset of SEK 46 million and a deferred tax liability of SEK 46 million were included in the acquisition of the Pay-TV business in Finland. The net effect was 0. Pay-TV Segment The Pay-TV segment was responsible for 72 (71) percent of the Group s total income from external sources in 2010. Total income for the segment increased by 15 percent to SEK 2,783 (2,415) million. The Finnish operations, which were acquired in June 2009, were responsible for 63 percent of the segment s increase in income. The segment s operating margin was -3 (5) percent, which is a decline of 8 percentage points. The decline was primarily the result of negative results in Finland and Denmark, where the businesses are still in the start-up phase. At the end of the year, there were a total of 944 (969) thousand pay-tv subscriptions reported by the Swedish, Danish and Finnish businesses. TV and Radio Segment The TV and Radio segment was responsible for 18 (18) percent of the Group s total income from external sources in 2010. Income for the year, including sales to other segments, increased 21 percent compared to 2009 and was SEK 1,200 (989) million. The Danish network operations, which were acquired on 30 September were responsible for 55 percent of the segment s increase in income. Income from the Swedish TV and Radio business improved due to additional capacity in the transmitting networks. The segment s operating margin declined 4 percentage points to 26 (30) percent. Co-Location, Service and Capacity Segment The Co-Location, Service and Capacity segment was responsible for 10 (11) percent of the Group s total income from external sources in 2010. Total income from this segment was SEK 395 (424) million, which is a decline of 7 percent compared to 2009. Operating margin for the year declined 3 percentage points to 14 (17) percent. Non-recurrent items, consisting primarily of a write-down reversal, had a positive impact on the segment s operating margin for 2009. FINANCIAL POSITION On 30 September, Teracom acquired 100 percent of the shares in Broadcast Service Denmark A/S, Broadcast Stations Company 1 A/S and Broadcast Stations Company 2 A/S. These companies own and operate the Danish terrestrial network for radio and TV and together, they form the cash generating unit called BSD. The purchase price of SEK 1,394 million was financed through loans from credit institutions. According to the preliminary acquisition analysis, SEK 144 million of the company s total value was allocated to customer agreements, customer relations and goodwill. The Group s interest-bearing liabilities increased as a result of the acquisition of BSD to SEK 2,381 (1,016) million. Total assets increased by SEK 1,508 million to SEK 5,698 (4,190) million. The Group s equity ratio worsened by 9 percentage points to 31 (40) percent compared to the same point in time last year. At the end of the year, cash equivalents and current investments, including available bank credit, was SEK 1,577 (998) million. CASH FLOW, FINANCING AND INVESTMENTS The Group reported a significantly improved cash flow from operating activities for the year, which amounted to SEK 789 (286) million. During the year, there has been a positive effect on cash flow from efforts aimed at reducing the amount of capital tied up in inventories and accounts receivable, as well as lower tax payments. The impact on cash flow from the acquisition of BSD was SEK -1,241 million, resulting from the purchase price less the amount of consideration entered as a liability and cash equiva- 41

Board of Directors Report lents. Group investments in tangible and intangible fixed assets for the year were SEK 284 (239) million. Dividends were SEK 110 (150) million, which is SEK 40 million less than the previous year. Cash flow for the year was SEK 301 (60) million. NON-FINANCIAL INFORMATION Employees The Teracom Group had an average number of permanent employees in 2010 of 707. Of this number, 506 were employed by the Parent Company, Teracom AB. In Teracom AB, 90 percent of employees held business-related positions, while 10 percent held staff positions. For the Group, 24 percent of the average number of employees were women. There were 3 women in the Group management team, which consisted of 10 persons in total. This corresponds to 30 percent. Employee turnover in the Parent Company was 7.5 (5.3) percent during 2010. In order to help prevent health problems, the company offers its employees participation in various types of fitness activities. In 2010, 49.6 (39) percent of employees participated in some type of fitness activity that was subsidized by Teracom AB. Within the Teracom Group, there was still a very low level of absence due to illness for the year. In the Parent Company, absence due to illness was 1.72 (2) percent and in Boxer TV-Access AB, it was 1.65 (1.81) percent. Of the total amount of absence due to illness in the Parent Company, 17.5 (27.6) percent was for less than a total of 60 days. For this item, Boxer TV-Access AB, reported 15.5 (20.1) percent. More information about employees is available in note 6 on pages 72 74. During 2010, the Teracom Group made comprehensive changes to its organization and created a distinct Group structure. For example, certain Group-wide functions were created, which facilitates coordination of competencies within the Group. The newly created Group functions are: Accounting/ Finance, Communications, Strategy & Business Development and Human Resources. The number of employees increased by 69 when Teracom A/S was acquired. The integration of Teracom A/S got underway during autumn 2010. The operational part of Teracom AB, i.e. Teracom Sweden, conducted a review of a number of functions during 2010. The following areas of the Customer Delivery department were strengthened: inspection, maintenance and installation of masts and facilities. A total of 16 new employees and a group manager were added due to the increased demand for maintenance and installations that is anticipated during the next few years. Furthermore, within the Sales and Product departments, an efficiency review was conducted of the placement of certain staff and competencies at the Sundsvall office. As a result, it was decided to move the Order and Customer Agreement function from Sundsvall to Stockholm, which will take place during the first half of 2011. Each year, the Teracom Group conducts an employee survey to evaluate employee work satisfaction and identify areas for improvement. The response rate was 85 percent, which is approximately the same as last year. For Teracom Sweden, the satisfied employee index (NMI) was 64 on a scale of 100 (it was 73 the last time the survey was conducted, in 2009). This is significantly worse than last year and well below the established goal. A number of changes have been made at Teracom Sweden and efforts are still required to clarify certain areas of responsibility. Areas where the level of satisfaction has remained high are the working environment and leadership. However, improvements can still be made to these areas as well. The area where the level of satisfaction increased compared to last year is customer and business orientation. This is due to Teracom Sweden s efforts in 2010 to make the value provided to customers more visible in many parts of the organization. Similar surveys were conducted at Boxer Sweden, Boxer Denmark and PlusTV. Lower results were reported by Boxer Sweden and PlusTV. Boxer Denmark, on the other hand, reported higher results. Boxer Sweden s NMI was 67 on a scale of 1 to 100 (in 2009 it was 79, but the figures are not fully comparable). Boxer Denmark s NMI was 76 (74) and PlusTV s NMI was 60 (63). Both leadership and working climate received high ratings in all three companies. The areas that did not receive high enough ratings are: cooperation between units and the link between own goals and the overall goals for the Teracom Group. The response rate at the three companies is between 97 and 100 percent, which indicates a high commitment to improve the working climate. Work environment A significant portion of operations personnel working in Teracom s network business work with the service of transmitter stations and masts. These tasks are often physically demanding and require close proximity to high voltage lines and electromagnetic fields. The electromagnetic fields are insignificant in areas where the general public has access. However, they are sometimes at such a high level in employee work areas that it is necessary to reduce the transmission signal at Teracom s stations in order to conduct work in a safe manner. Each year, Teracom conducts several priority trainings related to the work environment. These are aimed at preventing work-related injuries and accidents. All accidents that occur in the workplace are recognized, investigated, reported and followed-up systematically. Statistics on accidents in the workplace are categorized as follows: Near-accidents/unsafe situations mean that someone has come close to being injured or safety deficiencies have made a situation dangerous. Accidents not resulting in absence pertain to accidents that result in bodily harm without the employee requiring sick leave the following day. Accidents resulting in sick leave pertain to accidents that result in at least one day of sick leave. 42

Board of Directors Report Diversity and equal opportunity Diversity among employees helps to create a more dynamic, creative and pleasant workplace. The Teracom Group has a Group-wide diversity policy, which describes the long-term ambition and plans for promoting rights and opportunities for all employees regarding such things as recruitment, equality, working conditions, how salaries are determined, and how it deals with any incidents of harassment or discrimination. The Group companies establish goals, plans and activities pertaining to equality and diversity. The equality plans cover such items as gathering statistics on wage differences, action plans on how to deal with any cases of harassment and how to conduct parental leave discussions. Evaluations are conducted to determine whether progress is being made in achieving our diversity ambitions. This is done through internal reviews and by collecting feedback from employees via the annual employee survey. Environmental impact of operations In 2009, the Teracom Group decided on a new Group-wide environmental policy. It is founded on the Group s desire to take responsibility for its environmental impact by working on prioritized environmental issues. A clear environmental awareness strengthens competitiveness in interactions with customers, cooperation partners and in the Group s role as an employer. The Group s largest impact on the environment is from fuel and energy consumption, a measure of which is its greenhouse gas emissions. The Group s overall climate impact has been documented and the Group has established the goal of decreasing its negative impact on the environment each year. Each Group company must develop goals, plans and activities for decreasing their environmental impact. Primary focus, however, is on the network companies. Teracom AB has some areas of operations that, in accordance with the Environmental Code, require a permit or must be reported. One such area that must be reported is cooling systems with ozone-depleting refrigerants. A description of how the Group manages environmental risks is provided on page 44. Each company is required to identify its own environmental risks and strive to achieve continual improvements. RISKS AND RISK MANAGEMENT Executive management has primary responsibility for corporate control and managing policy risks. The Group s work is based on a clear and documented control model, decision making processes and Group policies. The company s management structure and processes ensure that important information is efficiently disseminated throughout the organization. Business development risks Systematic management of the Teracom Group s strategic development and business development minimizes the risks of failing to recognize opportunities and threats, suboptimal behavior within the company and making incorrect decisions. Operational risks are identified and assessed in terms of the stated goals in the strategy, business and organization plans. Risks associated with business development and long-term planning are primarily dealt with by the Strategic Forum, which consists of the entire Group management team. Among other things, the Strategic Forum is responsible for developing and making suggestions pertaining to the Group s strategic plan, which is then adopted after discussions have been held with the Group s Board of Directors. It is also responsible for monitoring world events and determining whether they present any new opportunities or threats to the organization. Specific measures may be initiated and/or it may be required to update business plans and strategic plans based on the follow-up and assessment of risks. Market risks Market risks are primarily factors that can affect the Group s future market position. One risk area is platform competition. This could result in a lower market share for the terrestrial network, as more and more customers switch to other digital TV platforms such as satellite, cable TV and TV via broadband. Competition from additional operators could potentially have a negative impact on the Pay-TV business in Sweden, as well as on the newly established businesses in Denmark and Finland. The Group manages market risks by continually developing its customer offering and by implementing corrective measures if development deviates from plan. Risks related to operations In general, customers of the Teracom Group s network activities have high demands when it comes to reliability of service. This applies not only during normal circumstances, but also in the event of a crisis, extraordinary circumstances or during a state of alert. In order to meet customers high expectations, Teracom must strive to achieve a high level of quality in each of the following areas: network design, work methods, routines, emergency measures and safety/security issues. There are controls in place to monitor risks associated with processes and delivered quality. ACCIDENT FREQUENCY 2010 Year Nearaccidents Accidents not resulting in absence Accidents resulting in absence >1 day Reported workrelated illness Accidents resulting in absences > 1 day/million work hours Million work hours 2010 10 4 1 0 0.9 1.094 2009 11 3 1 0 0.9 1.105 43

Board of Directors Report Measures are taken to eliminate such risks. Should more complicated, long-term, or larger scope errors arise or any other serious risks, then a special temporary organization would be formed to deal with the situation. A comprehensive system with alternative routes has been implemented in order to meet the strict security requirements that apply to operations. The company has an alternative location for the functions it provides, alternative routes for radio links and fibers and also back-up production servers. All of this contributes to strengthening Teracom s reliability. It also has mobile equipment, such as mast vehicles, masts, links, transmitters and power stations, which help minimize the recovery time in the event of a more serious shutdown. Risk analyses are performed in the line organization in order to maintain a high level of security and stable operations. Critical and important IT systems comply with the Swedish Civil Contingencies Agency s established level (BITS) for IT security. The Teracom Group s security policy, company-specific information security policies and network security policy dictate the security level. There is also a companyinternal incident group that is trained and ready to act in the event of any hostile IT operations. Trainings are regularly conducted in cooperation with customers in order to create and maintain the required skills for managing crises. Environmental risks There are routines in place for the Teracom Group s network activities in Sweden to continuously and systematically identify and assess environmental risks. Environmental risk management is coordinated with other risk management activities. The primary purpose is to prevent accidents and minimize the effects of the company s operations on the environment. Efforts are underway to ensure that all of the subsidiaries regularly and systematically identify and assess environmental risks. The Teracom Group is also involved in the process of evaluating its suppliers in terms of the environment, quality and sustainability. During 2010, the Group has had a dialogue with many of its suppliers. This work will continue during 2011 on a wider scale throughout the Group. Insurable risks The Teracom Group insures all of its facilities against property damages and interruptions. Insurance protection for property damages is based upon the replacement cost of the fixed asset. Own-risk deductibles are max SEK 1 million per incident. Regulatory risks The Teracom Group s business is affected by government decisions and legislation, primarily on media and electronic communications. Examples of important issues are: frequency use, the design of licenses and permits for Teracom s customers in the terrestrial network, rights, and the regulation of prices and access through SMP (Single Market Providers) decisions pertaining to networks and other infrastructures. One issue that received a great deal of attention last year has to do with how Europe should balance the future use of radio frequencies for wireless communications. The EU Commission has published several studies on this issue and submitted a proposal to the EU Parliament and Council of Ministers for Europe s first Radio Spectrum Policy Program. Each change that is made to the available spectrum for radio and TV broadcasting has a significant impact on the Teracom Group s business. A decision on the direction of future spectrum policy is expected during 2011. The Teracom Group is actively working with regulatory issues via its contacts with government authorities and politicians in Sweden, Finland and Denmark. The Teracom Group also actively participates in several European forums in order to monitor and influence these issues. Financial risks Teracom is exposed to various types of financial risks, the most significant of which are financing risk, interest rate risk, currency risk and credit risk. These risks are dealt with in accordance with the finance policy established by the Group s Board of Directors, which is characterized by the desire to maintain a low level of risk. The overriding principle is to minimize all factors that could have a negative impact on earnings and cash flow due to short-term fluctuations in financial markets. Within the given limits, the company strives to achieve optimal net financial income. More information about financial instruments and financial risk management is available in note 21 on pages 87-89. The section called, The Board s report on internal controls related to financial reporting, in the Corporate Governance Report, describes such things as how the risks associated with financial reporting are dealt with. REMUNERATION LEVELS FOR SENIOR EXECUTIVES Teracom s Board of Directors is responsible for appointing the company s President and CEO along with establishing the terms of employment. The Board applies the Government-established guidelines when determining remuneration and other employment terms for its senior executives. As a result of the owner s new guidelines, which were established in April 2009, a review was conducted during the year of the remuneration and other employment terms for senior executives. The purpose of the review was to ensure that the owner s new guidelines are being followed. For 2011, the Board proposes that the AGM should adopt as guidelines the ones that were established by the Government in April 2009, Guidelines for the employment terms of senior executive in companies that are State owned. Details about remuneration to the Board of Directors, President/CEO and other senior executives are available in note 6 on pages 72-74. 44

Board of Directors Report PARENT COMPANY The Parent Company reported income of SEK 1,489 (1,455) million, which was an increase of 2 percent. Operating profit increased by 23 percent to SEK 383 (311) million. Included in operating profit were restructuring costs of SEK 12 million. Operating margin improved and was 26 (22) percent. Profit after financial items was SEK 490 (463) million. Cash flow from operating activities was SEK 572 (470) million. The improvement of SEK 102 million was primarily due to higher profits, lower tax payments and more timely payments from customers. Dividends from subsidiaries were SEK 100 (233) million, which is SEK 133 million less than last year. The parent company invested SEK 245 (187) million in property, plant and equipment and intangible assets. Primarily, these were investments in the digital TV network. In conjunction with a new issue in May 2010 by the subsidiary, Digi TV Plus Oy, the Parent Company acquired shares for a total of SEK 29 million. The Parent Company s ownership of Digi TV Plus Oy thus increased from 51 percent to 53 percent. On 30 September 2010, the Parent Company acquired 100 percent of the shares in the following companies: Broadcast Service Denmark A/S, Broadcast Stations Company 1 A/S and Broadcast Stations Company 2 A/S. These companies own and operate the Danish terrestrial network for radio and TV and together, they form the cash generating unit called BSD. The preliminary acquisition cost for BSD, including transaction costs of SEK 16 million, was SEK 1,410 million. The acquisition was financed through loans from credit institutions. Dividends were SEK 110 (150) million. Cash flow for the year was SEK 123 (28) million. Indebtedness increased as a result of the acquisition of BSD and long-term liabilities amounted to SEK 2,160 (934) million. At the end of the year, the Parent Company reported an equity ratio of 44 (56) percent. The Board of Directors statement on value transfer according to Chapter 18 Section 4 of the Swedish Companies Act As described in the annual report, there has been stable development of profits and financial position for both the Parent Company and the Group. The Group reported equity of SEK 1,743 million, of which SEK 889 million was earned profits. The equity ratio for the Group was 31 (40) percent and for the Parent Company, it was 44 (56) percent. During the year, the Group had a positive cash flow from operating activities of SEK 789 (286) million, of which SEK 572 (470) was the Parent Company s cash flow from operating activities. In its proposal for the appropriation of profits, the Board suggests that the AGM decide on total dividends of SEK 110 million for the 2010 financial year. The company assesses that development of the Group s and Parent Company s business continues to be positive. This, in combination with the company s financial position, means that the Parent Company s future development and investment needs are assessed as being secure, even after the proposed dividend is paid. Having considered this and all of the information presented in the annual report, it is the Board s opinion that its proposed dividend is justifiable. This applies not only to the Parent Company but also the Group as regards the equity requirements that are based upon the type, size and associated risks of the business as well as consolidation and investment needs, liquidity and overall financial position, as stated in the Swedish Companies Act, ABL chapter 17, paragraph 3 (Prudence Rule). PROPOSED APPROPRIATION OF PROFITS Non-restricted equity in the Parent Company Profit brought forward Profit (loss) for the year Total non-restricted equity 713,260,349 SEK 365,088,204 SEK 1,078,348,553 SEK The Board of Directors suggests the following appropriation of profits: Dividends Carried forward Total 110,000,000 SEK 968,348,553 SEK 1,078,348,553 SEK 45

CORPORATE GOVERNANCE REPORT Corporate Governance Report 2010 The Corporate Governance Report has been examined by Teracom AB s auditors and it is considered to be part of the annual report. The report contains a description of the internal controls related to financial reporting, along with a presentation of the board of directors and group management team. CORPORATE GOVERNANCE WITHIN THE TERACOM GROUP Teracom AB is a limited liability company that is wholly owned by the Swedish state. Its registered office is in Sundbyberg. Teracom Group s governance is primarily based on the Companies Act (ABL, in Swedish), the Government Ownership Policy and the Swedish Code of Corporate Governance ( the Code ). According to government guidelines, external reporting for state-owned companies must be just as transparent as it is for companies that are listed on the stock exchange. The full text of the Government Ownership Policy is avai lable on the Government s website: www.regeringen.se. The Swedish Code of Corporate Governance is available on the Swedish Corporate Governance Board s website: www.bolagsstyrning.se. Framework and governance structure In accordance with the Swedish Companies Act, there are three decision-making bodies at Teracom AB: the AGM, Board of Directors and President/CEO. In a state-owned company such as Teracom, the owner reports important matters of principle related to corporate governance via the Government Ownership Policy. The Articles of Association provide the owner with guidelines for such items as Teracom AB s business and focus. Via the Board of Directors formal work plan, which is established by the Board at least once per year, the relationship between the Board of Directors and the President/CEO is regulated. Other internal governance documents are the Teracom Group s strategic plan and its shared policies, guidelines and instructions. Additionally, there are a number of policies and guidelines that have been adapted to the activities of the companies belonging to the group. Governance is conducted from Teracom AB, which is formally the Group s parent company. At the end of 2010, the Group consisted of the following operating companies: Boxer TV-Access AB, Boxer TV A/S Digi TV Plus Oy and the Danish companies Broadcast Service Danmark A/S, Broadcast Stations Company 1 A/S, Broadcast Stations Company 2 A/S, I/S Fordelingsnet and I/S 4M København. On 27 January 2011 the name of the BSD companies was changed to Teracom Denmark A/S. The diagram on page 47 provides an overview of the Group s governance structure. Deviations from the Code The Code must be applied for companies that are majorityowned by the government. The overall purpose of the Code is to contribute to improved governance at Swedish limited liability companies. The Code addresses the decision making systems through which the owners directly or indirectly control the company. The rules pertain to an individual company s organization and working methods, along with the interaction between the two. The Code should be applied according to the principle, comply or explain. A revised version of the Code came into effect on 1 February 2010. For certain issues and in accordance with the Code s principle of comply or explain, the Government has found reasons to justify deviations from the Code. The Government s reasons for deviating from the Code are explained below. Teracom deviates from the Code on the following items: Rule 2 on the selection of and remuneration to the Board and auditors The provisions of the Code are primarily intended for public companies with widespread ownership. Teracom deviates from these rules because the nomination process follows the Government Ownership Policy. According to the Government Ownership Policy, the owners, via the Ministry of Enterprise, Energy and Communications (the Ministry of Finance since January 2011), nominate the members of the Board of Directors and the auditors. For the Government s state-owned companies, there are common uniform principles for a structured nomination process, which is run and coordinated by the Ministry. Rule 4.4 on the independence of the Board of Directors According to rule 4.4, the majority of Board members must be independent in relation to the owners. Teracom deviates from this rule because, for companies that are 100 percent stateowned, there is no reason to report on independence. The Government Ownership Policy stipulates that nominations of Board members are to be made public, in accordance with the 46

CORPORATE GOVERNANCE REPORT GOVERNANCE STRUCTURE The Government The Government Ownership Policy Nomination process The Government Ownership Policy Annual General Meeting Articles of Association External audit Audit plan Teracom AB s Board of Directors Work plan Audit committee Remuneration committee Internal Auditing Internal audit plan President/CEO Directive for the President/CEO Teracom Sweden Teracom Denmark Boxer Sweden Boxer Denmark PlusTV Finland guidelines of the Code. However, an exception is made for reporting members independence in relation to major owners. The Code rule stipulates that companies must have at least two Board members who are independent of major owners. It also stipulates that the independence of all Board members to major owners must be reported. The purpose of this rule is to protect minority owners interest in companies where there is widespread ownership. Rule 6.1 on the Chairman of the Board The Chairman of the Board is appointed by the AGM. The Code addresses the special role of the Chairman of the Board. If the Chairman of the Board steps down during the term of office, the owner must immediately appoint a new Chairman at an extraordinary general meeting of shareholders. This is a deviation from the Code, which stipulates that the Board may appoint the new Chairman. Rules 6.3 and 8.2 on evaluation of the Board of Directors and the President/CEO The work performed by the Board of Directors must be evaluated each year. The Code stipulates that the Chairman of the Board is responsible for ensuring that the Board s work is evaluated and that the election committee is informed of the results of that evaluation. For companies that are wholly owned by the state, the Swedish Government Offices, rather than the election committee, must be informed of the evaluation results. The Government Ownership Policy fully describes all deviations from the Code. This information is available at: www.regeringen.se. OWNER The catchwords for the government s administration of wholly owned companies are openness, active ownership and order liness. The Government Ownership Policy states that state-owned companies must take responsibility for issues relating to ethics, the environment, human rights, equality and diversity. The owner is thus obligated to have a well thought out strategy for these issues. Owner s goal Teracom AB s business purpose is to broadcast radio and TV and conduct activities associated with that. With this as its starting point, and adherence to the regulatory requirements, the company must always act in a businesslike manner. The Teracom Group s financial goals and dividends policy: Equity ratio of 30 percent. Return on equity shall be calculated as the profit after net financial items (taxed at the standard rate) divided by average adjusted equity. The goal is to obtain a long-term return on equity of 17 percent. Between 40 and 60 percent of net profits should be distributed as dividends, provided that the goal for equity ratio has been achieved. ANNUAL GENERAL MEETING The Annual General Meeting (AGM) is Teracom AB s highest decision-making body. It is the forum in which shareholders formally exercise their control. It appoints the Board of Directors and auditors. It also makes decisions concerning such things as changes to the Articles of Association and adopting 47

CORPORATE GOVERNANCE REPORT the balance sheet and income statement. Teracom AB s AGM is held either in Stockholm, or in Sundbyberg (where the company has its registered office). Notice of the AGM and any extraordinary general meetings of shareholders, where issues pertaining to a change in the articles of association will be discussed, must be given no earlier than six weeks and no later than four weeks prior to the meeting. Notice of any other extraordinary general meetings of shareholders must be given no earlier than six weeks and no later than two weeks prior to the meeting. In addition to the rules contained in the Swedish Companies Act and the Code, the following principles apply to the shareholder meetings of state-owned companies. Notice of the time and location of the AGM must be sent to the Swedish Parliament (Riksdagens Centralkansli) simultaneous to issuing such notice to shareholders. Members of Parliament who wish to attend the AGM must notify the Board in advance. Such notice should be submitted at least one week prior to the AGM. The public should be invited to attend the AGMs of stateowned companies. For state-owned companies, arrangements should be made in conjunction with the AGM for allowing the public to present questions to the Board of Directors and management team. State-owned companies must hold their AGM before 30 April and any distribution of dividends must take place not later than two weeks after the AGM. Notice of the time and location of the AGM must be sent to the Parliament (Riksdagens Centralkansli) simultaneous to issuing such notice to shareholders. Extraordinary General Meetings of Shareholders in 2010 Teracom held an extraordinary general meeting of shareholders to approve its remuneration policy for senior executives. The remuneration policy applies to the entire Group and it regulates application of the owner s guidelines pertaining to the employment terms and conditions for senior executives. The policy covers remuneration principles, other employment terms, decision processes and documentation. The remuneration policy is available at www.teracom.se. See also the owner s guidelines in the Government Ownership Policy. AGM 2010 Teracom AB s AGM was held on 31 March 2010. At the AGM, Åsa Sundberg was reelected as Chairman of the Board. Kristina Axberg Bohman, Maria Curman, Ingrid Engström, Lars Grönberg, Tobias Henmark and Urban Lindskog were all reelected as Board members. The employee representatives are John-Olof Blomkvist (ST Union Representative) and Stig-Arne Celin (Deputy), Claes-Göran Persson (SEKO) and Magnus Ahxner (AK, Deputy). The AGM-appointed Board members and employee representatives are presented on pages 36-37. Persons appointed as members of Teracom s Board of Directors have a high level of expertise and experience in financial governance, operations management and as the President/ CEO of an organization. Board members also have specific expertise about the telecom and media industry. At the 2010 AGM, the auditors from Ernst and Young delivered their auditors report to the owner, which then discharged the Board of Directors from liability. At the 2010 AGM, the audit firm PWC was appointed as the new audit firm, with Sten Håkansson as the auditor-in-charge, until the 2014 AGM. The AGM adopted the annual report for the 2009 financial year and decided, in accordance with the Board s proposal, to distribute SEK 110 million as dividends to the owner. The AGM approved the proposal that was presented on remuneration, in accordance with the remuneration policy, along with the other employment terms and conditions for senior executives. The minutes from general meetings of shareholders, along with information about all decisions that were made is available at: www.teracom.se. AGM 2011 The 2011 AGM will be held in Stockholm on 14 April. BOARD OF DIRECTORS Composition According to the Government Ownership Policy, the starting point for nomination of a Board member shall be the competence that is required by the company s Board of Directors. The Government s goal is that the Board shall have a high level of expertise, which is well adapted to the company s business, situation and future challenges. Board members are expected to have a high level of integrity and exercise good judgment, as demanded of state representatives. Each Board member must be capable of making an independent assessment of the company s operations. The composition of the Board shall also be such that there is balance between the number of men and women (at least 40 percent representation for each gender). The percentage of members elected by the AGM who are male is 43 (43) percent for Teracom AB s Board of Directors. The average age of Board members is 53 (52) years. The owner s assessment is that, on the whole, the Board of Directors meets or exceeds the requirements stated in the Government Ownership Policy. Within Teracom AB s Board of Directors there is an audit committee responsible for such things as monitoring auditor impartiality, assisting the Board with its efforts to ensure the quality of financial reporting and monitoring internal control. During 2010, the Board set up a remuneration committee that was assigned the task of reviewing and providing the Board with recommendations on remuneration to the Group s senior executives in accordance with the Group s policies and the owner s guidelines. The remuneration committee is also respon- 48

CORPORATE GOVERNANCE REPORT sible for preparing a recommendation to the Board on remuneration and other employment terms and conditions for the President/CEO. Responsibility of the Board of Directors The Board has the ultimate responsibility for the organization and administration of the Teracom Group s affairs. It also has the ultimate responsibility for ensuring that company reporting to its owner and the public provides a true and complete picture of the group s development, financial position and risks. The Board is responsible for making sure that financial reports are prepared in accordance with the applicable laws and generally accepted accounting principles. It must also ensure that the Teracom Group complies with the OMX Nordic Exchange Stockholm listing agreement. This means that Teracom must prepare a corporate governance report and a report on its internal controls, in accordance with the Swedish Code of Corporate Governance. The Board must reconcile its views with the owner on issues of significant importance, such as the capital structure and longterm financing issues, changes in strategy and acquisitions, mergers or divestitures. The work plan that is established by the Board each year regulates its work as well as how responsibilities are divided between the Board of Directors and the President/CEO. The work plan also includes instructions regarding financial reporting, which complement the requirements found in the Companies Act and the Swedish Code of Corporate Governance. The Chairman of the Board has special responsibility for leading the work done by the Board and making sure that it carries out all of its assigned duties. Among other things, the Chairman is responsible for making sure that every new Board member receives appropriate introductory training and that the Board regularly updates and deepens its knowledge of the Teracom Group. The Chairman is responsible for the company s contacts with the owner and for relaying the owner s views on ownership issues to the rest of the Board. The duties of the Board of Directors There were 13 board meetings held in 2010, of which one was an extra meeting and two were per capsulam meetings. The company s auditors who were elected at the AGM participated in a board meeting that was not attended by the company s management team. Essentially, the work done by the Board followed the established plan, which consisted of standing information and decision items as well as special issues that must be approved by the Board each year. Each meeting followed the approved agenda and the underlying documentation that was distributed to each Board member prior to the meeting. The President/CEO participated in all of the regular and extra board meetings. However, representatives from the Teracom Group s senior management team were invited to present certain issues. Standing items that were covered at Board meetings included the President/CEO s report and monthly financial reporting. Additionally, the Board addressed several other issues at its meetings held in 2010. Particular attention was given to the following items: Strategy and business plans Budget Development of Boxer A/S Acquisition of Teracom A/S (previously BSD) The Group s organizational structure Reports from the audit committed on such items as internal control and audit Corporate governance issues and Group-wide policies Annual report, interim reports and monthly reports Remuneration The Chairman of the Board and all Board members are paid for their efforts and the responsibility that their assignment entails, in accordance with the decisions taken at the AGM. Members also received payment for their work in committees. Composition of the Board of Directors 2010 Name Year of birth Role in the Board of Directors Elected Audit committee Remuneration committee Åsa Sundberg 1959 Chairman of the Board 2008 Chairman of the Board Kristina Axberg Bohman 1959 Board Member 2007 Chairman of the Board Maria Curman 1950 Board Member 2007 Board Member Ingrid Engström 1958 Board Member 2003 Board Member Lars Grönberg 1949 Board Member 2005 Board Member Tobias Henmark 1968 Board Member 2003 Urban Lindskog 1965 Board Member 2007 Board Member Board Member John-Olof Blomkvist 1949 Board Member 1995 Stig-Arne Celin 1953 Deputy Member 2002 Claes-Göran Persson 1958 Board Member 2006 Magnus Ahxner 1973 Deputy Member 2010 Stefan Thylander 1953 Deputy Member 2007 49

CORPORATE GOVERNANCE REPORT The Board of Directors decides on the President/CEO s remuneration based on preparatory work by the remuneration committee. When deciding on the remuneration and other employment terms and conditions for senior executives, consideration is given to the guidelines stated in the remuneration policy, which are established by the owner at the AGM. For more information on remuneration, please see note 6 on page 72 of the annual report. Audit committee Each year, the Board appoints an audit committee to obtain more in-depth knowledge on, and to be able to work more efficiently on, matters relating to risk assessment, internal control, external reporting and auditing. The audit committee is a preparatory body, whose proposals are always passed on to the Board. In addition, the committee s work is regulated by a formal written work plan. The committee s tasks also include monitoring auditor impartiality and independence by supervising the independent audit tasks that auditors may be given by the company s management team. The audit committee also assists the Board of Directors in assuring the quality of financial reporting. Subsequent to the 2010 AGM, the committee consisted of the following three members: Kristina Axberg Bohman (Chairman), Lars Grönberg and Urban Lindskog. The person in charge the internal audit serves as the secretary to the audit committee. During the 2010 financial year, the committee held seven meetings and particular attention was devoted to the following items: Q4/Year-end report and Annual Report for 2009 Interim Reports 2010 Risk assessments Critical accounting issues Evaluation of the internal controls Evaluation of the work done by auditors Governing policies for Board decisions Internal Auditing The Swedish Code of Corporate Governance Planning of the audit The following also attended these meetings: the auditors, Executive Vice President/CFO and accounting manager for consolidation. However, the auditors were not present at the meeting to evaluate the auditors work. Company officers from the Teracom Group were invited to present certain issues. The audit committee always submitted information about its meetings at the next scheduled Board meeting. The minutes from meetings of the audit committee were distributed to each Board member. Remuneration committee The remuneration committee is responsible for reviewing and providing recommendations on remuneration principles, including performance based remuneration and pension terms for the company s senior executives in accordance with the Group s policies. It is also responsible for reviewing and providing recommendations on the President/CEO s terms of employment, remuneration and other benefits prior to a decision on such matters by the Board of Directors. The remuneration is a preparatory body that submits its recommendations to the Board of Directors. PRESIDENT/CEO AND SENIOR MANAGEMENT TEAM Responsibilities of the President/CEO The Board of Directors is responsible for appointing the President/CEO of Teracom AB. Crister Fritzson has been the President/CEO since 1 January 2007. During 2010, Gunilla Berg became employed as the Executive Vice President/CFO. Board members attendance at meetings Name Role in the Board of Directors Board meeting Audit committee Åsa Sundberg Chairman of the Board 13/13 1/1 Kristina Axberg Bohman Board Member 12/13 7/7 Maria Curman Board Member 10/13 1/1 Ingrid Engström Board Member 11/13 1/1 Lars Grönberg Board Member 13/13 5/5 Tobias Henmark Board Member 13/13 2/2 1/1 Urban Lindskog Board Member 13/13 7/7 John-Olof Blomkvist Board Member 12/13 Stig-Arne Celin Deputy Member 1/1* Claes-Göran Persson Board Member 10/13 Magnus Ahxner Deputy Member 2/2* Stefan Thylander Deputy Member 1/1 * attendance for employee representative replacements (deputies) is only reported when they have replaced an ordinary member (employee representative) at a Board meeting. Remuneration committee 50

CORPORATE GOVERNANCE REPORT According the Companies Act and the Board of Directors formal work plan, The President/CEO is responsible for the on-going administration of the Group s business activities. The Board s directive for the President/CEO provides detailed information on the President/CEO s authority and obligations. Management structure and organization Cooperation and exchange of information between the President/CEO and the Chairman of the Board occurs at regularly scheduled meetings. Among other things, these meetings are used to plan upcoming Board meetings. The President/CEO provides the Board with monthly reports that help facilitate the Board s ability to continuously monitor the Group s financial position. The Group management team meets every other week in order to discuss issues relevant to the Group as a whole, allocation of resources, acquisitions and divestments, finances, budget/forecasts, decisions pertaining to business operations, governance, risk management, sustainability issues and Boardrelated issues. In 2010, the Group management team consisted of the following: Crister Fritzson, Group CEO and President of Teracom AB, Gunilla Berg, CFO and Executive Vice President of Teracom AB, the heads of the market companies in Sweden, Denmark and Finland and the heads of the following Group functions: Finance, Communications, Human Resources and Strategy. The Group management team formulates and develops the Group s mission, goals and strategies through discussions with the Board and it is also responsible for the on-going administration of the Group. The Group CEO decides on the control mechanisms for the market companies and the Group functions. The market companies are responsible for daily operations and their own performance. The Group functions are primarily responsible for actively supporting the Group management team and the market companies in their efforts to achieve the Group s goals. The Decision Forum s main task is to act as the coordinating decision body within certain areas. Evaluation of the Board of Directors and President/CEO The Board s formal work plan stipulates that there shall be a written evaluation of the work done by the Board. Such evaluations cover how well the Board has collectively executed its tasks, as well as the performance of individual Board members. The evaluation is then submitted to the unit within the Ministry of Enterprise, Energy and Communications (since January 2011, the Ministry of Finance) that is responsible for the nomination process. The Board executed an evaluation of its work and the work done by the President/CEO during 2010. A meeting to evaluate the President/CEO was held without any members of the senior management team present. INTERNAL CONTROL Effective risk management and internal controls within the Group provide the foundation for long-term growth in value. The Teracom Group has established a set of rules, routines and policy documents aimed at reducing risks and increasing commercial advantages. Examples of such governing policies are the ethics policy and information policy. Risk management within the Teracom Group is based upon established goals, which are both overall and secondary in nature. Risk is defined as a negative deviation from goals and is categorized according to significance. There is continual assessment of all risks that are deemed to be critical to the Teracom Group s ability to fulfill its goals. More information about risk factors and how they are managed by the Group is available in the Board of Directors Report on pages 43-45. Based on risk assessments, measures are taken and responsibility is assigned to further investigate and, if possible, minimize the identified risks. Based upon the type of risk and its significance, it is either managed by the Board of Directors, the Group management team or in other parts of the organization, as appropriate. Internal Auditing Since 2005, the Teracom Group has had a special internal auditing function. The Internal Audit Unit examines, analyses and evaluates the company s internal controls for such items as financial reporting within the Group. The Internal Audit Unit is organized as a separate, independent unit within the Group functions and it reports to the Board s audit committee. The Internal Audit Unit complies with IIA guidelines (IIA Institute for Internal Auditors) on how to conduct professional internal audits. Internal Audit conducts internal audit work in accordance with the audit plan that is established each year by the Board of Directors and it regularly reports to the audit committee. Auditors Auditors elected at the AGM are responsible for examining the annual report, the accounts, the work done by the Board of Directors and the President/CEO s administration. The owner is responsible for appointing the company s auditors. An administrator from the Swedish Government Offices monitors each step in the procurement process, from procurement criteria to selection and evaluation. The final decision is made by the owner at the AGM. In accordance with the Companies Act, auditors are appointed to serve for a period of four years. Whenever auditors are reelected, their work is always evaluated and the reappointment is for a 3-year period. Ongoing evaluations are conducted to correct any deficiencies that may arise and to clarify owner requirements. At the 2010 AGM, the audit firm PWC was appointed as the new audit firm, with Sten Håkansson as the auditor-in-charge, 51

CORPORATE GOVERNANCE REPORT until the 2014 AGM. In addition to the Teracom audit assignment, Sten Håkansson has audit assignments at COOR, Eniro and the Swedish Trade Council, among others. At the March 2010 meeting of the Board of Directors, Teracom s auditors presented their findings from the audit of the 2009 financial statements. THE BOARD S REPORT ON INTERNAL CONTROLS RELATED TO FINANCIAL REPORTING As per the Swedish Companies Act and the Code, the Board of Directors is responsible for internal controls. This report on internal controls was prepared in accordance with section 7.4 of the Swedish Code of Corporate Governance. As such, it is limited to a description of the internal controls and risk management related to the financial statements. The Teracom Group uses the Internal Control Integrated Framework, which was launched in 1992 by The Committee of Sponsoring Organizations of the Treadway Commission (COSO). This is a recognized and established framework for internal control. The Teracom Group applies the framework described in the guidance to the Code. Any decisions about courses of action and measures taken at Teracom are, and will remain, the responsibility of the Board of Directors and the Group management team. This framework advocates that internal control should be comprised of the following: Control Environment Risk Assessment Control Activities Information and Communication Monitoring Control environment The control environment provides the basis for internal control. It is comprised of the culture and values that exist within the Teracom Group. To a great extent, these are described and clarified in the form of policies, guidelines and instructions. The Teracom Group s ethics policy provides support and guidance to the company s managers and employees on ethical issues and it is based on the UN Global Compact on: Human Rights Labor Legislation Environment Anti-Corruption Each year, the Board reviews the Group s policies regarding ethics, information, financing, investments and security. Review of the Teracom Group s other governing documents occurs on a regular basis. The control environment is also comprised of the allocation of responsibilities, authorities and decision paths that have been defined for the company. Risk assessment Risk assessment is based upon the financial and non-financial goals that have been established for the Teracom Group. Such assessments are made on a regular basis. The Group goals are broken down into business goals for each market company and for each Group function. These goals are communicated to the organization. In order to achieve these goals, the Teracom Group has a process that is based upon materiality criteria. The process also involves identifying any external or internal risks that could present obstacles to the company s ability to achieve its goals. In conjunction with preparing the internal audit plan, a number of different critical areas for financial reporting are identified and selected for special examination. These areas include the revenue process, facilities management, how external risks are dealt with, purchasing, closing procedures and IT issues. One aspect of the critical processes related to the financial statements is to conduct risk assessment in order to make sure that controls are in place that provide reasonable assurance on the accuracy of the company s financial reporting. The Teracom Group s processes for acquisitions and financing are also reviewed. When preparing the financial statements, an assessment is made of the risks that could affect reporting. This risk assessment results in several control goals, which are used to design work processes for reviewing the critical areas. Control activities Control activities exist within each area where management has assessed that there is the greatest risk of a significant impact on the financial statements. Among other things, these activities include reporting on deviations, attestation controls, follow-up on budgets and business plans, review of authorizations and authorities, and follow-up on investments. They also include several key controls related to the reporting process, which are performed by the person in the organization who has been allocated responsibility for that task. The effectiveness and design of controls are periodically reviewed and tested. In order to minimize risks, the audit investigates the extent of compliance with the established key controls within critical areas. Any findings are reported to the person in charge, along with recommendations for improvement. Another task of the internal audit is to follow up on whether such suggestions have been implemented. Internal control efforts have intensified for such critical areas as internationalization of the Group, for example. The Group management team also relies on the information in employee surveys regarding opportunities for improvement that exist throughout the organization. Information and communication The purpose of the Teracom Group s information activities is to regularly provide employees, as well as external stakeholders, 52

CORPORATE GOVERNANCE REPORT GROUP GOVERNANCE Annual General Meeting Teracom AB Board of Directors Chairman Åsa Sundberg DECISION FORUM Strategy Product development Regulatory issues Executive Vice President/CFO Gunilla Berg GROUP FUNCTIONS Legal Internal Auditing Purchasing Office operations and the environment Group management President/CEO Crister Fritzson IT GROUP FUNCTIONS Accounting and Finance Gunilla Berg Communications Johan Bobert HR Marianne Winblad von Walter Strategy and Business Development Pierre Helsén Market companies Teracom Sweden Stephan Guiance Boxer Sweden Crister Fritzson Teracom Denmark Finn Søndergaard Boxer Denmark Steen Ulf Jensen PlusTV Finland Jyri Ratia with true and fair information about the Group. Such information should be factual, accessible, honest and relevant. Whenever applicable, when distributing information externally, the company follows the recommendations stated in NASDAQ OMX Stockholm AB s regulations. Annual reports, interim reports and year-end reports are available on Teracom s website: www.teracom.se. Primarily, internal information is communicated via the company s intranet. Policies, guidelines and instructions are available to all employees via the company s intranet and commonly accessible disks. Statements from the Group management team are recorded and made available on the Intranet. Such statements are also communicated at meetings. The Teracom Group s information and communication channels for financial reporting purposes are deemed to be appropriate and well-known. As such, reporting and feedback from the business to the Board of Directors and management team is thus possible. Financial information is collected in conjunction with month-end closings. Those in charge of the market companies and Group functions are responsible for commenting on this information, as well as any follow-up. This is compiled in a monthly report that describes the Group s development. These reports are distributed to the Board of Directors, the Group management team and the management teams of each subsidiary. Follow-up In this phase of control activities, it is possible to assure the quality of financial reporting and identify any potential deficiencies. The company s controller function is responsible for monitoring the business and reporting to the Group management team. The Group management team and Board of Directors are assisted by internal audit function and the company s auditors, which regularly examine and test how risk management, controls and the management systems are functioning within the organization. They also help to ensure that the internal controls that are in place are working as intended to achieve the stated goals. Additionally, any deficiencies discovered in the internal controls of the organization are reported as incidents. During 2010, the COSO framework was used to evaluate whether selected critical areas were meeting the established goals. Assessments and recommendations were provided and followed up with the persons in charge. Sundbyberg, 16 March 2011 Board of Directors 53

FINANCIAL OVERVIEW for THE GROUP Financial Overview The Group SEK millions 2010 2009 2008 2008* 2007 2006 2005 Profit/loss items Operating income 3,852 3,408 2,991 3,188 3,312 3,004 2,700 Operating expenses 3,210 2,631 2,079 2,233 2,258 2,101 1,929 Depreciation/amortization and impairment 349 281 277 374 429 408 411 Operating profit/loss 293 496 635 581 625 495 360 Net financial income/expense 12 13 13 13 44 5 1 Profit (loss) before taxes 281 483 622 568 669 490 359 Holdings without a controlling interest Taxation 80 214 162 147 199 136 82 Profit (loss) for the year 201 269 460 421 470 354 277 of which holdings without a controlling interest 91 91 80 56 33 Balance sheet items* Fixed assets 4,718 3,187 3,074 3,074 2,306 2,493 2,656 Current assets 980 1,003 691 691 1,497 1,426 988 Equity 1,743 1,685 1,666 1,666 1,810 1,776 1,602 of which holdings without a controlling interest 0 0 0 0 80 86 60 Long-term liabilities 2,567 1,293 1,179 1,180 1,050 1,099 1,159 Current liabilities 1,388 1,212 920 919 943 1,044 883 Total capital 5,698 4,190 3,765 3,765 3,803 3,919 3,644 Cash flow Cash flow from operating activities 789 286 618 581 995 738 827 Cash flow from investing activities 1,528 519 1,200 1,242 238 263 447 Cash flow from financing activities 1,040 293 180 180 436 219 208 Cash flow for the year 301 60 762 841 321 256 172 Key ratios Operating margin, % 8 15 21 18 19 16 13 Profit margin, % 7 14 21 18 20 16 13 Return on equity, % 12 16 26 24 26 21 19 Return on total capital, % 6 12 17 17 16 13 11 Return on capital employed, % 10 22 34 32 34 27 18 Equity ratio, % 31 40 44 52 48 45 44 Average number of employees 707 638 669 669 674 687 697 Income per employee, SEK thousands 5,448 5,342 4,470 4,765 4,914 4,373 3,874 Share-related key figures Earnings per share before and after dilution, SEK 804 1,076 1,476 1,320 1,560 1,191 975 Equity per share, SEK 6,972 6,740 6,664 6,664 7,240 7,104 6,408 Cash flow per share, SEK 3,156 1,144 2,472 2,324 4,276 2,952 3,308 Company-specific key figures Number of digital TV subscriptions, Pay-TV 944,000 968,500 689,000 689,000 709,000 654,000 531,000 * Including operations that were discontinued in 2009. 54

INCOME STATEMENT and STATEMENT OF COMPREHENSIVE INCOME for THE GROUP Income Statement The Group SEK millions Note 2010 2009 Operating income 2, 3, 4, 29 Net sales 3,848 3,402 Other income 4 6 3,852 3,408 Work performed by the company for its own use and capitalized 5 9 9 Operating expenses Material costs 235 200 Personnel expenses 6, 7 571 472 Depreciation/amortization 8 331 293 Impairment 9 18 12 Other expenses 10 2,413 1,968 Operating profit/loss 293 496 Financial income 11 37 16 Financial expenses 12 49 29 Profit (loss) before taxes 281 483 Tax on profit for the year 13 80 214 Net profit/loss for the year for continuing operations 14 201 269 Net profit/loss for the year from discontinued operations 29 0 78 Profit (loss) for the year 201 191 Statement Of Comprehensive Income The Group SEK millions 2010 2009 Net profit/loss from continuing operations 201 269 Net profit/loss from discontinued operations 0 78 Profit (loss) for the year 201 191 Other comprehensive income*: Translation differences 33 22 Income tax related to "Other comprehensive income" items 0 0 Other comprehensive income for the year, net after tax 33 22 Total comprehensive income for the year 168 169 Comprehensive income for the period related to: Parent Company shareholders 168 169 Holdings without a controlling interest 0 0 Total comprehensive income for the year 168 169 Per share information Continuing operations Earnings per share before and after dilution, SEK 804 1,076 Total, including discontinued operations Number of shares at year-end 250,000 250,000 Average number of shares before and after dilution 250,000 250,000 Earnings per share before and after dilution, SEK 804 764 *Other comprehensive income is entirely related to continuing operations for the comparison year. 55

BALANCE SHEET FOR THE GROUP Balance Sheet The Group SEK millions Note 2010-12-31 2009-12-31 ASSETS Fixed assets Land and buildings 16 771 200 Plant and machinery 16 2,071 1,330 Equipment, tools, fixtures and fittings 16 33 30 Construction-in-progress 16 164 115 Goodwill 17 1,214 1,142 Other intangible assets 17 351 263 Other financial assets 18 114 95 Deferred tax assets 19 0 12 Total fixed assets 4,718 3,187 Current assets Inventories 20 25 62 Accounts receivable 21 295 429 Income tax recoverable 0 57 Other receivables 24 37 Prepaid expenses and accrued income 22 242 336 Derivative instruments 21 17 4 Cash equivalents 21 377 78 Total current assets 980 1,003 TOTAL ASSETS 14 5,698 4,190 EQUITY AND LIABILITIES Equity attributable to the Parent Company s shareholders 23 Share capital 250 250 Other contributed capital 653 653 Translation reserve 49 16 Earned profits including net profit/loss for the year 889 798 Total equity attributable to the Parent Company's shareholders 1,743 1,685 Holdings without a controlling interest 0 0 Total equity 1,743 1,685 Long-term liabilities Liabilities to credit institutions 3, 21 2,134 780 Deferred income 21, 24 70 65 Deferred tax liabilities 19 362 446 Provisions for pensions and similar obligations 7, 25 1 2 Total long-term liabilities 2,567 1,293 Current liabilities Liabilities to credit institutions 3, 21 76 1 Accounts payable 329 312 Other current liabilities 21 217 199 Accrued expenses and deferred income 21, 24 764 699 Provisions 25 2 1 Total current liabilities 1,388 1,212 Total liabilities 3,955 2,505 TOTAL EQUITY AND LIABILITIES 14 5,698 4,190 Pledged assets 30 0 0 Contingent liabilities 31 0 0 56

CASH FLOW STATEMENT FOR THE GROUP Cash Flow Statement The Group SEK millions Note 2010 2009 Operating activities Profit/loss after financial items 281 483 Adjustments for items not included in cash flow Depreciation/amortization 331 293 Impairment 18 12 Provisions 1 8 Capital gains (losses) on sales/disposals 1 4 Increase/decrease in long-term deferred income 0 69 Other 38 2 Income tax paid 165 255 Cash flow from operating activities before changes in working capital 505 564 Cash flow from changes in working capital Increase( )/decrease(+) in inventories 37 50 Increase( )/decrease(+) in accounts receivable 134 87 Increase( )/decrease(+) in other operating assets 27 74 Increase(+)/decrease( ) in accounts payable 17 91 Increase(+)/decrease( ) in other operating liabilities 69 24 Cash flow from operating activities 789 286 Investing activities Acquisition of property, plant and equipment 242 161 Sale and disposal of property, plant and equipment 0 4 Acquisition of intangible assets 42 78 Acquisition of subsidiaries 28 1,241 201 Sale of subsidiaries 29 0 63 Acquisition of financial assets 3 20 Cash flow from investing activities 1,528 519 Financing activities New loans 27 1,809 476 Amortization of loans 659 33 Dividends 110 150 Cash flow from financing activities 1,040 293 Cash flow from continuing operations 301 60 Cash flow from discontinued operations Cash flow from operating activities 0 26 Cash flow from investing activities 0 28 Cash flow from financing activities 0 0 Cash flow from discontinued operations 29 0 54 Cash flow for the year 301 6 Cash equivalents at the beginning of the year 78 72 Exchange rate differences on cash equivalents 2 0 Cash equivalents at the end of the year 27 377 78 57

statement of CHANGEs IN EQUITY for the group Statement of Changes In Equity The Group SEK millions Share capital Attributable to the Parent Company s shareholders Other contributed capital Reserves Retained earnings Total equity Opening balance, 1 January 2009 250 653 6 757 1,666 Comprehensive income Profit (loss) for the year 191 191 Other comprehensive income Exchange rate differences 22 22 Total other comprehensive income 22 0 22 Total comprehensive income 250 653 16 948 1,835 Transactions with shareholders Dividend pertaining to 2008 150 150 Total transactions with shareholders 0 0 0 150 150 Opening balances, 1 January 2010 250 653 16 798 1,685 Comprehensive income Profit (loss) for the year 201 201 Other comprehensive income Exchange rate differences 33 33 Total other comprehensive income 33 0 33 Total comprehensive income 250 653 49 999 1,853 Transactions with shareholders Dividend pertaining to 2009 110 110 Total transactions with shareholders 0 0 0 110 110 Closing balance, 31 December 2010 250 653 49 889 1,743 58

INCOME STATEMENT and STATEMENT OF COMPREHENSIVE INCOME FOR THE PARENT COMPANY Income Statement The Parent Company SEK millions Note 2010 2009 Operating income 2, 3, 4 Net sales 1,477 1,440 Work performed by the company for its own use and capitalized 5 9 9 Other operating income 3 6 1,489 1,455 Operating expenses Material costs 22 36 Other external expenses 10 396 441 Personnel costs 6, 7 421 407 Depreciation/amortization and impairment of property, plant and equipment and intangible assets 8, 9 267 260 Operating profit/loss 383 311 Profit from financial investments Interest income and similar items 11 32 2 Income from Group companies 11 100 169 Interest expenses and similar items 12 25 19 Profit/loss after financial items 490 463 Appropriations 15 27 6 Tax on profit for the year 13 98 85 PROFIT (LOSS) FOR THE YEAR 14 365 384 Statement Of Comprehensive Income The Parent Company SEK millions Note 2010 2009 Net profit/loss for the period 365 384 Profit (loss) for the year 365 384 Other comprehensive income: Group contributions, gross 0 1 Income tax related to "Other comprehensive income" items 0 0 Other comprehensive income for the year, net after tax 0 1 Total comprehensive income for the year 365 383 Per share information Number of shares at year-end 250,000 250,000 Average number of shares before and after dilution 250,000 250,000 Earnings per share before and after dilution, SEK 1,460 1,536 59

BALANCE SHEET FOR THE PARENT COMPANY Balance Sheet The Parent Company SEK millions Note 2010-12-31 2009-12-31 ASSETS Fixed assets Intangible assets Patents, licenses and similar rights 17 13 25 Total intangible assets 13 25 Property, plant and equipment Land and buildings 16 199 200 Plant and machinery 16 1,259 1,330 Equipment, tools, fixtures and fittings 16 26 19 Construction-in-progress 16 164 115 Total property, plant and equipment 1,648 1,664 Financial assets Participations in Group companies 26 3,234 1,776 Other financial assets 18 57 27 Deferred tax assets 19 9 9 Total financial assets 3,300 1,812 Total fixed assets 4,961 3,501 Current assets Current receivables Accounts receivable 21 137 167 Receivables from Group companies 26 148 44 Other receivables 0 16 Prepaid expenses and accrued income 22 42 76 Total current receivables 327 303 Cash and bank balances 21 167 44 Total current assets 494 347 TOTAL ASSETS 14 5,455 3,848 60

BALANCE SHEET FOR THE PARENT COMPANY Balance Sheet The Parent Company SEK millions Note 2010-12-31 2009-12-31 EQUITY AND LIABILITIES Equity 23 Restricted equity Share capital 250 250 Statutory reserve 50 50 Total restricted equity 300 300 Non-restricted equity Profit brought forward 713 439 Profit (loss) for the year 365 384 Total non-restricted equity 1,078 823 Total equity 1,378 1,123 Untaxed reserves 15 1,415 1,387 LIABILITIES Long-term liabilities Liabilities to credit institutions 21 2,134 700 Liabilities to Group companies 21 1 169 Other long-term liabilities 21 13 0 Deferred income 24 12 65 Provisions for pensions and similar obligations 25 10 32 Total long-term liabilities 2,170 966 Current liabilities Liabilities to credit institutions 21 75 0 Accounts payable 108 75 Liabilities to Group companies 26 2 6 Income tax liability 30 0 Other current liabilities 41 38 Accrued expenses and deferred income 21, 24 234 252 Provisions 25 2 1 Total current liabilities 492 372 TOTAL EQUITY AND LIABILITIES 14 5,455 3,848 MEMORANDUM ITEMS Pledged assets 30 0 0 Contingent liabilities 31 0 0 61

CASH FLOW STATEMENT FOR THE PARENT COMPANY Cash Flow Statement The Parent Company SEK millions Note 2010 2009 Operating activities Profit/loss after financial items 490 463 Adjustments for items not included in cash flow Depreciation/amortization 267 272 Impairment 0 12 Provisions 20 15 Capital gains (losses) on sales/disposals 2 4 Dividends 100 234 Capital gains (losses) on sale of subsidiaries 0 65 Other 3 11 Income tax paid 92 131 Cash flow from operating activities before changes in working capital 544 393 Cash flow from changes in working capital Increase( )/decrease(+) in accounts receivable 31 9 Increase( )/decrease(+) in other operating assets 70 1 Increase(+)/decrease( ) in accounts payable 34 9 Increase(+)/decrease( ) in other operating liabilities 33 94 Cash flow from operating activities 572 470 Investing activities Dividends received from subsidiaries 100 234 Acquisition of property, plant and equipment 240 182 Sale and disposal of property, plant and equipment 0 5 Acquisition of intangible assets 5 5 Acquisition of subsidiaries 1,452 365 Disposal of participations in subsidiaries 0 53 Cash flow from other investing activities 30 26 Cash flow from investing activities 1,627 392 Financing activities New loans 27 1,809 100 Amortization of loans 521 0 Dividends 110 150 Cash flow from financing activities 1,178 50 Cash flow for the year 123 28 Cash equivalents at the beginning of the year 44 16 Cash equivalents at the end of the year 27 167 44 62

statement of CHANGEs IN EQUITY FOR THE PARENT COMPANY Statement of Changes In Equity The Parent Company SEK millions Share capital Attributable to the Parent Company s shareholders Other contributed capital Statutory reserve Retained earnings Opening balances, 1 January 2009 250 0 50 590 890 Total equity Comprehensive income Profit (loss) for the year 384 384 Other comprehensive income Group contributions paid, net 1 1 Total other comprehensive income 0 1 1 Total comprehensive income 250 0 50 973 1,273 Dividend pertaining to 2008 150 150 Total transactions with shareholders 0 0 0 150 150 Opening balances, 1 January 2010 250 0 50 823 1,123 Comprehensive income Profit (loss) for the year 365 365 Other comprehensive income Group contributions paid, net 0 0 Total other comprehensive income 0 0 0 Total comprehensive income 250 0 50 1,188 1,488 Transactions with shareholders Dividend pertaining to 2009 110 110 Total transactions with shareholders 0 0 0 110 110 Closing balances, 31 December 2010 250 0 50 1,078 1,378 63

notes Notes Content Note Description Page 1 Summary of important accounting principles 64 2 Operating income 69 3 Leases 69 4 Segment reporting 70 5 Work performed by the company for its own use and capitalized 72 6 Personnel 72 7 Pensions 75 8 Depreciation/amortization 78 9 Impairment 79 10 Other expenses/other external expenses 79 11 Financial income 79 12 Financial expenses 79 13 Tax on profit for the year 80 14 Information concerning related parties 81 15 Appropriations and untaxed reserves 81 16 Property, plant and equipment 82 Note Description Page 17 Intangible assets 84 18 Other financial assets 86 19 Deferred tax 86 20 Inventories 86 21 Financial instruments and financial risk management 87 22 Prepaid expenses and accrued income 90 23 Equity 90 24 Accrued expenses and deferred income 90 25 Provisions 90 26 Group companies 91 27 Cash flow statement 91 28 Acquired businesses 92 29 Discontinued operations 93 30 Pledged assets 93 31 Contingent liabilities/guarantees 93 32 Significant events after the reporting date 93 note 01 Summary of important accounting principles The most important accounting principles that were applied in preparing the consolidated financial statements and the annual report are presented below. Company information The Teracom Group is comprised of Teracom AB (the Parent Company) and its subsidiaries. The Parent Company is a limited liability company, registered in Sweden. Its registered office is in Sundbyberg and the corporate identity number is 556441-5098. The Swedish Government has a controlling interest in the Group. The consolidated financial statements and annual report for the financial year-ending on 31 December 2010 were approved for issue by the Board of Directors and Group CEO/President on 16 March 2011 and will be brought forth for adoption at the Annual General Meeting on 14 April 2011. Amounts and dates Unless otherwise stated all amounts are in SEK millions (MSEK). Income statement items refer to the period 1 January through 31 December. Balance sheet items are as of 31 December. Amounts shown in parentheses are comparative year figures. Guidelines for the preparation of the accounts The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Commission for application within the EU. The application of these standards has been supplemented by the interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC). In addition to these international accounting standards, the company has applied recommendations from the Swedish Financial Reporting Board, RFR 1.3 Supplementary Accounting Rules for Groups, as well as UFR Statements of the Swedish Financial Reporting Board. Additionally, consolidated reporting is in accordance with the Government Ownership Policy. The Parent Company s financial statements have been prepared in accordance with RFR 2.3, Accounting for Legal Entities, as well as the Annual Accounts Act. Basis for the preparation of the accounts Financial derivatives and current investments are valued at fair value via the income statement. Other valuations in the consolidated financial statements are based on historic cost. The income statement is classified by type of cost, which means that costs are combined based on their character. New accounting principles as of 1 January 2010 IFRS 3 (Revised) Business Combinations. The revised standard continues to stipulate application of the purchase accounting method, yet with some significant changes. For example, all payments that are made to purchase a business must be reported at fair value on the date of acquisition. This also includes conditional consideration, which is initially classified as a financial liability and then revalued via the income statement. The revised standard gives entities the option, on an individual transaction basis, to measure noncontrolling interests (minority interest) at the fair value of their proportion of identifiable assets and liabilities or at full fair value. All transaction costs are expensed as incurred. The revised standard has been applied to the acquisition of a controlling interest (100 percent of the shares) in the BSD Group (name is being changed to Teracom A/S) as of 30 September 2010. Costs related to the acquisition in the amount of SEK 16 million have been reported in the Group income statement. Based on the prior rules, these costs would have been included as part of the purchase price for the business combination. Revised IAS27 Consolidated and Separate Financial Statements: This standard requires the effects of all transactions concerning shareholdings without a controlling interest to be reported in equity, provided that the controlling interest remains. Furthermore, these types of transactions no longer result in goodwill or gains/losses. Furthermore, should the Parent Company lose its controlling interest, the standard requires remeasurement of the residual holding to fair value and any gain or loss is recognized in the income statement. IAS 27 (revised) has not had any effect on the current period, since there have not been any transactions where the company has lost its controlling interest while still retaining some ownership. Neither have there been any transactions involving holdings without a controlling interest. Forthcoming standards, amendments and interpretations that are expected to impact the Teracom Group once they come into force IFRS 9 Classification and Measurement of Financial Instruments: This standard is the first step in the process of replacing IAS 39, Financial Instruments: Recognition and Measurement. IFRS 9 introduces two new requirements for measuring and classifying financial assets, which will likely affect how the Group reports its financial assets. However, the effects of this are currently being investigated. IFRS 9 is expected to come into force in 2013, but early adoption is allowed. The standard has not yet been adopted by the EU. IAS 24 (revised) Related Party Disclosures: The revised standard clarifies and simplifies the definition of a related party. It also removes the requirement on state affiliates to provide detailed disclosures on all transactions with the government or other state affiliates. Once the revised standard is 64

notes Continuation Note 1 applied, the Group will need to provide disclosures on transactions between companies belonging to the Group. The Group will apply the revised standard as of 1 January 2011. Use of estimated values Certain assumptions about future events as well as certain estimates and assessments that are made as of the reporting date have significant importance to how assets and liabilities are valued in the balance sheet. Discussed below are those areas where there is the greatest risk of changes in value during the subsequent year due to a potential need to revise prior assumptions or estimates. Valuation of fixed assets Fixed assets within the Group have a carrying amount in excess of SEK 4.5 billion, most of which is in the Parent Company. Given the considerable size of these fixed assets, the assessments of useful life and any write-down requirement have a major effect on the Group and the Parent Company financial statements. At the start of 2011, there were no indications of any significant write-down requirement. Pension obligations The Teracom Group has both defined benefit pension plans and defined contribution pension plans. The defined benefit plans entail actuarial risk and investment risk for the Group. Actuarial calculations of pension commitments and pension expenses are based on a number of assumptions, such as the discount rate, anticipated salary increases, anticipated remaining periods of employment and anticipated return on plan assets. A change in any of these fundamental assumptions could have a significant impact on calculated pension commitments, financing requirements and pension expenses. Transactions with minority shareholders (IFRS 3) On 5 June 2009, Teracom AB acquired 51 percent of the shares in the Finnish Pay-TV operator, Digi TV Plus Oy. In addition, Teracom has a put option on the remaining 49 percent of shares and there is also a call option to acquire the same percentage. The obligation, related to the put option, is included in the total acquisition cost. The liability has been reported at fair value based on Teracom s best assessment of what it will have to pay for the outstanding equity stake. The future payment of the outstanding equity stake is based on the company s future results and it may be adjusted if the assumptions underlying Teracom s assessment change. The option s interest rate effect and currency effect are reported in the income statement on an ongoing basis. A changed assessment of the liability for the outstanding equity stake would affect the amount of goodwill that has been reported. Consolidated financial statements The consolidated accounts have been prepared in accordance with IAS 27 Consolidated and Separate Financial Statements as well as IFRS 3 Business Combinations and the Revised IFRS 3. This applies to Teracom AB and all of its subsidiaries. Subsidiaries are companies in which Teracom AB either directly or indirectly, holds more than 50 percent of the voting rights or in some other way has a controlling influence. Purchase accounting method Subsidiaries are reported in accordance with the purchase accounting method, which implies that the identified assets, liabilities and contingent liabilities of the operations acquired are reported at fair value at the time of the acquisition, in accordance with the acquisition analysis. Goodwill arises and is reported as an asset whenever the acquisition value exceeds the fair value as per the acquisition analysis. Goodwill is tested for impairment at least once per year, or whenever events or circumstances indicate a write-down requirement. Consequently, after the first reporting occasion, goodwill is reported at cost less any accumulated impairment losses. Inter-company transactions Intra-Group sales, other transactions and intra-group profits are eliminated in the consolidated accounts. Intra-Group sales are based on market prices. Translation of foreign subsidiary income statements and balance sheets Assets and liabilities in foreign subsidiaries are translated at the closing date rate. Foreign subsidiaries income statements are translated based on the average rate of exchange during the year. Exchange rate differences that arise in translation are recognized directly in equity. When a foreign subsidiary is divested, the accumulated exchange-rate differences are reported in the income statement together with the gain or loss on the divestment. Parent Company accounting principles There are certain discrepancies between the Group s and the Parent Company s accounting principles due to the fact that there are limitations on the ability of the Parent Company to fully apply IFRS. The limitations are motivated by the Parent Company s application of RFR 2.3 (Accounting for Legal Entities), the Annual Accounts Act, the Pension Obligations Vesting Act, statements issued by the Swedish Financial Supervisory Authority and the taxation rules that apply to the Parent Company. Tax legislation in Sweden allows companies to defer payment of income tax through allocations to untaxed reserves in the balance sheet via the income statement item, Appropriations. Accordingly, the Parent Company reports untaxed reserves in the balance sheet and appropriations in the income statement. In the consolidated balance sheet, these items are treated as temporary differences and are divided between the deferred tax liability and equity. In the consolidated income statement, an allocation to or dissolution of untaxed reserves is distributed between deferred tax and profit/loss for the year. The accounting principles discussed below apply to the Group. Any discrepancies with the accounting principles applied by the Parent Company are discussed separately. Foreign currency translation Transactions in foreign currencies are converted to the functional currency using the exchange rate that was applicable on the transaction date. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency using the exchange rate prevailing on the balance sheet date. Any unrealized exchange rate differences are reported in the income statement for the period in which they arise. Such differences arise when the exchange rate on the transaction date or the exchange rate that was calculated in prior financial statements differs from the closing day rate. Exchange rate differences pertaining to operating receivables and operating liabilities are reported as part of operating profit, whereas exchange rate differences attributable to financial assets and liabilities are reported as part of the profit from financial investments. Hedging of acquired net assets is primarily achieved through loans in the local currency. Upon acquisition of the BSD Group (which is being renamed Teracom A/S) this year, the net assets were hedged through loans in DKK, which is the same currency as the net assets. Translation differences on both the net assets and loans are reported in equity in accordance with hedge accounting. Income Revenue is recognized when it is probable that the financial benefits will flow to the Group and when the amount of revenue can be measured reliably. The following specific criteria must be met in order to recognize revenue: Sale of goods Revenue is recognized when the seller has transferred to the buyer the significant risks and rewards of ownership and when the amount of revenue can be measured reliably. Rendering of services Revenue from fixed-price contracts for all segments is reported in the Parent Company in accordance with the percentage of completion method. Profit is thus recorded at the same rate as the work is completed, provided that the costs incurred or to be incurred in respect of the transaction can be measured reliably. Any expected loss on such contracts is recognized as an expense as soon as such loss is probable. For contracts that provide the customer access to TV programs, revenue is recognized on a linear basis 65

notes Continuation Note 1 over the course of the contract term. This also applies to any direct costs associated with such contracts. Net sales Net sales pertains to revenue from goods and services that have been sold, as well as subscriptions, that are part of the Group s ordinary operations, less any discounts and value-added tax. Other income/other operating income Other income is income obtained from activities that are not part of the Group s ordinary operations. Segment reporting IFRS 8 Operating Segments has been applied as of 1 January 2009 for the Group. This standard requires that disclosures are provided based on management s perspective. Management s perspective refers to reports to the seniormost decision making body, which means that reports must correspond with how they are presented internally. For the Teracom Group, the Group management team has been identified as the senior-most decision making body. Due to reorganization of the Group in 2010, segmentation has been changed in order to correspond with internal monitoring. Monitoring is done by each company, which is also the basis of the new segmentation. Comparison figures for 2009 have been recalculated based on the new segmentation. The segments are reported in accordance with the same accounting principles applied by the Group. Sales between segments occur at prices that are fair estimates of current market prices. The Group management team considers the operating profits of these segments when making decisions regarding the allocation of resources, as well as for profit analysis. Operating profit is used to assess the performance of each segment. Financial expenses, financial income and income tax are dealt with at the Group level. Interest income Interest income is recognized as earned that is, it is reported in the income statement in the period in which it arises. Borrowing costs Borrowing costs are interest and other costs incurred in connection with the borrowing of funds. Borrowing costs are recognized in the income statement in the period in which they arise, regardless of how the borrowed funds are used. Income tax Reported tax is made up of current tax and deferred tax. Current tax refers to the profit or loss for the period and is valued at the tax rate prevailing on the closing date. Deferred tax is comprised of amounts to be paid in the future or a reduction of future tax. Deferred tax receivables and liabilities are based on the tax rates that are expected to apply during the period in which the receivables or liabilities are settled, based on the tax rates (and the tax legislation) that exist or have been announced on the closing date. Deferred tax is based on all identifiable temporary differences that exist on the closing date. Temporary differences are defined as the difference between the carrying amount of an asset or liability and its tax base. A deferred tax liability is reported in the balance sheet for all taxable temporary differences. Deferred tax assets are reported for deductible temporary differences and unused deficit deductions to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilized. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilized. Any such reduction is subsequently reversed to the extent that it becomes probable that sufficient taxable profit will be available. Earnings per share Earnings per share are calculated as the Group s profit attributable to Parent Company shareholders divided by the weighted average of outstanding common stock during the period. Since the Teracom Group does not have any convertible instruments or options programs, there is thus no dilutive effect. Property, plant and equipment Items of property, plant and equipment are recognized as assets when it is probable that the future economic benefits associated with the asset will flow to the Group, and the cost of the asset can be measured reliably. In accordance with the cost method, these types of assets are carried at cost less accumulated depreciation and impairment. Construction-in-progress Construction in progress refers primarily to facilities that are being built. Construction-in-progress is valued in the same way as acquired assets, i.e. in accordance with the cost method at the cost of acquisition including directly attributable expenses that is, valuation in accordance with the actual costs incurred. Intangible assets Intangible assets are recognized when it is probable that the future economic benefits that are attributable to the asset will flow to the Group and the cost of the asset can be measured reliably. Intangible assets that have been acquired or developed separately are reported in the balance sheet, in accordance with the cost method, at cost less any accumulated amortization and impairment losses. Depreciation/amortization Amortization of intangible assets (besides goodwill) and depreciation of property, plant and equipment is based on historical cost, with a deduction for any impairment losses and having given consideration to the estimated useful lives of various groups of assets or individual assets. For assets acquired during the year, depreciation is calculated from the point when an asset is acquired or starting when a new plant is put into operation. Depreciation is primarily made on a straight-line basis. Land is not depreciated, since its useful life is unlimited. The applied depreciation times and total depreciation for the year are specified in note 8. Test of impairment on fixed assets Assets with an uncertain useful life, such as goodwill, are not amortized. Rather, they are tested annually for impairment. A write-down is made for the amount that the asset s reported value exceeds its recoverable amount. The recoverable amount is equal to the assets fair value less selling costs and its value in use. When testing for impairment, assets are grouped together at the lowest level where there are separate, identifiable cash flows (cash generating units). The carrying amount of items of property, plant and equipment, as well as intangible assets is tested for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. An assessment of whether there are any indications of a write-down requirement is made at least once per year during the third quarter. If such indications exist and if the carrying amount exceeds the expected recoverable amount, the assets or the cash-generating units are written down to the recoverable amount. The recoverable amount of an asset is either the fair value less selling expenses or the value-in-use (whichever is higher). Value-in-use is calculated as the present value of expected future cash flows that the asset is expected to generate. The recoverable amount for the cash generating unit is calculated for essentially independent assets belonging to the unit that do not generate an expected future cash flow of their own. Any impairment losses are immediately recognized in the income statement. If there are indications that a prior write-down is no longer motivated, then the asset s recoverable amount is thus calculated. Reversal of a prior impairment loss may only occur if the assumptions that motivated the prior assessment of the recoverable amount have changed. There are never any reversals of write-downs on the value of goodwill. Employee benefits In Sweden, there are two types of pension plans: defined benefit plans and 66

notes Continuation Note 1 defined contribution plans. In Finland, employees are entitled to statutory pensions benefits in accordance with Finnish legislation on pensions for employees, a defined benefit pension plan (TEL pension). The pension benefits have been secured through insurances and do not fall within the scope of IAS 19. Employees in Denmark are covered by a defined contribution pension plan, which has been secured through insurances. Defined benefit plans A majority of the Group s employees are included in defined benefit pension plans, which means that employees are guaranteed a pension corresponding to a certain percentage of their final salary. Defined benefit pension plans imply that the Group has an obligation to pay contractual benefits to current and former employees. In addition, defined benefit pension plans imply that the Group carries both actuarial risk and investment risk. Actuarial risk refers to the risk that the benefits will cost more than anticipated. Defined benefit pension plans are financed mainly through ongoing premium payments to life insurance companies, as well as through provisions in the balance sheet. The defined benefit plans consist mainly of collectively agreed pension commitments as well as pension commitments in accordance with the transitional rules agreed on in conjunction with the incorporation of the operations previously conducted by the Swedish PTT. Over and above these plans, most employees earn their pensions from the ITP-Tele supplementary pension plan for salaried employees in the tele com industry, which includes a retirement pension, survivor benefits and disability pension, among other things. Employees of Boxer TV-Access AB are entitled to pension benefits in accordance with the ITP pension plan, which is a plan that covers many employers and which is secured through insurance with Alecta. The ITP pension plan is a defined benefit plan. However, since the managed assets and obligations may not be allocated to each employer, it is thus reported as a defined contribution plan in accordance with item 30 in IAS 19. The design of the plan does not entitle Alecta to allocate to each employer their share of the assets and obligations or the information to which the disclosures apply. Therefore, it is reported as a defined contribution plan, which means that paid premiums are reported as costs as the benefits are earned. In addition, defined benefit plans are in place in the form of life annuities that have their origin from the time before the business was incorporated. There are also defined pension commitments to certain senior executives. In determining the Group s pension commitments and the current managed assets in existence, an actuary was engaged to apply the projected unit credit method (PUCM) to establish the present value of the Group s defined-benefit commitments and employment-related expenses during the current period. Under the PUCM method, every employment period is considered as giving rise to an additional unit of the total final commitment and every such unit is calculated separately to build up the commitment on the closing date. The reporting of defined benefit plans also implies that the Group must establish: The total of actuarial gains and losses, as well as the amount to be reported. Costs that arise in the establishment of, or changes to, a plan with reference to employment during a prior period. Gains or losses that arise in conjunction with the reduction or settlement of a plan. Any managed assets that exist have been valued on the closing date at fair value, which corresponds to market value. Actuarial gains and losses are reported as income or costs if the accumulated actuarial gain or loss exceeds 10 percent of the higher of the value of the commitment and the fair value of the managed assets. Any amount in excess of that is distributed over the remaining expected period of employment for the employee covered by the particular plan. The estimated commitment is reported net as a defined benefit liability, which corresponds to the present value of the commitment on the closing date less the fair value of the managed asset, any expenses relating to prior employment that have not yet been reported, any actuarial losses not yet reported, and increased by any actuarial gains that have not yet been reported. Parent Company The Parent Company applies other rules for its accounting of defined benefit plans as compared to the rules that are applied in the consolidated financial statements. For its deductible pension commitments, the Parent Company adheres to the rules of the Pension Obligations Vesting Act as well as the Swedish Financial Supervisory Authority s statement FFFS 2007:13 in order to determine the capital value for its pension provision. The most significant differences compared to the consolidated financial statements are that insured defined benefit plans are shown as defined contribution plans, actuarial gains and losses are reported in the income statement when they arise and finally, future salary increases and guaranteed index linking of pensions is not considered when calculating the capital value. Defined contribution pension plans In contrast to the defined benefit pension plans, defined contribution pension plans imply that Teracom s commitment is limited to the amount that Teracom has accepted to contribute, which implies that the employee bears the actuarial risk as well as the investment risk. The defined contribution pension plans consist of the ITPK-Tele agreement, any alternate pension solution and defined contribution pension commitments to the Group CEO/President and Executive Vice President/CFO. To secure the above-named commitments, Teracom pays a premium to an independent insurance company. As such, no actuarial assumptions are required and neither are there any actuarial gains or losses. Teracom reports the expenses that are to be paid to a defined contribution plan as a liability (accrued expense) during the period in which the employee performs the service, less any expenses that have already been paid, which are reported as costs. If the expenses that have already been paid are higher than the outstanding expenses for services rendered before the closing date, then the difference is reported as an asset (prepaid expense) whenever the prepaid amount will result in a reduction of future payments or cash reimbursement. Severance pay The Teracom Group reports severance pay upon termination of employment as soon as the Group is obligated to: terminate an employee s or a group of employees employment prematurely or provide compensation in conjunction with an employee s voluntary resignation. Leases Leases are classified as either finance or operating leases. A lease is classified as a financial lease if it transfers substantially all of the risks and rewards incident to ownership from the lessor to the lessee. All other leases are classified as operating leases. Teracom as lessor Leases where the lessor retains substantially all of the risks and rewards incident to ownership are classified as operating leases. The Group s income from operating leases primarily comes from rental agreements related to co-locations in the Group s masts. Any leasing income that arises is allocated to the proper period and revenue is recognized linearly over the lease term. However, any costs that arise, including depreciation, are expensed as occurred. Depreciation is in accordance with the rules for each type of asset, respectively. Teracom as lessee Leasing agreements pertaining to fixed assets, where the Group retains substantially all of the risks and rewards incident to ownership, are classified as financial leases. At the inception of the lease, financial leases are reported in the balance sheet at the leased asset s fair value or the present value of the minimum lease payments (whichever is lower). Fixed assets obtained through financial lease agreements are primarily vehicles, which are depreciated over the asset s useful life or the term of the lease (whichever is shorter). Financial lease payments are appropriated between financial expenses, interest and the reduction (amortization) of the outstanding financial lia- 67

notes Continuation Note 1 bility, so as to produce a constant periodic rate of interest on the remaining balance of the liability. The corresponding payment obligations, less the deduction of financial expenses, are included in the balance sheet items: Liabilities to credit institutions (long-term and short-term financial liabilities, respectively). Financial expenses are recognized in the income statement. For operating leases, the lease payments are recognized as an expense in the income statement over the lease term on a straight-line basis. Parent Company All lease agreements are reported in the Parent Company according to the rules that apply for operating leases. Inventories Inventories are valued at the lower of cost and net realizable value. Cost includes all costs incurred in bringing the inventories to their present location and condition. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and the estimated costs necessary to make the sale. The first-in, first-out method (FIFO) is applied when determining cost. Any write-down to NRV or losses associated with inventories are recognized in the income statement in the period in which they occur. Financial instruments Financial instruments are any type of contract that gives rise to a financial asset, financial liability or one s own capital instrument in another company. For the Group, financial instruments are comprised of the following: cash equivalents, interest-bearing receivables, accounts receivable, accounts payable, borrowings and derivatives. Cash and cash equivalents include cash and bank balances, which means cash and available funds, bank balances and short-term liquid investments with a maturity of not more than three months, that can be easily converted to a known cash amount and that are only exposed to negligible risk of fluctuation in value. Recognition of financial assets and liabilities Financial assets that are receivables are reported in the balance sheet as soon as the Group has transferred essentially all of the risks and rewards associated with the transaction and the counterpart has an obligation to pay. Financial liabilities are recognized as soon as the counterpart has performed the service and there is a contractual obligation to pay. A financial asset, or portion of a financial asset, is removed from the balance sheet as soon as the rights associated with the contract have been realized, fall due, or the company no longer has control over them. A financial liability, or portion of a financial liability, is removed from the balance sheet as soon as the contractual obligation has been fulfilled, discharged/cancelled, or expired. The Teracom Group applies settlement date accounting. Classification of financial instruments The Group classifies its financial instruments according to the following categories: a) Financial assets and financial liabilities valued at fair value via the income statement Financial assets and financial liabilities that are held for trading purposes are comprised of all of the Group s derivatives, which are valued at fair value via the income statement. Derivatives are classified as held-fortrading if they have not already been identified as hedging instruments. The only trading in derivatives is for the purpose of managing the Group s electricity price risk, currency risk and interest rate risk. b) Loan receivables and accounts receivable Loan receivables and accounts receivable are financial assets with fixed payments or payments that can be determined. The Group s cash equivalents, accounts receivable and loan receivables are included in this category. c) Financial assets that are available-for-sale This category consists of financial assets that are not classified in any other category, such as shares and participations in both listed and non-listed companies. The Group does not have any financial instruments classified in this category. d) Other financial liabilities This category consists of financial liabilities that are not held for trading. The Group s accounts payable and borrowings are included in this category. Valuation of financial instruments Financial assets and liabilities are initially reported at cost, which, at the time, is equivalent to the fair value. Financial assets and liabilities in foreign currencies are revalued in SEK using the closing day rate of exchange. Any subsequent revaluations are adjustments to fair value or accumulated cost: a) Financial assets valued at fair value via the income statement are adjusted to fair value on a continual basis. The bank s market value is used as the fair value of currency derivatives, while a market value according to Nordpool is used as the fair value of electricity derivatives. Realized gains (losses) are reported in operating profit, while unrealized gains (losses) are reported in net financial items. b) Loan receivables and accounts receivable are valued in the balance sheet at amortized cost, less any allowance for doubtful accounts. A receivable is recognized at the time when the invoice is sent. An individual assessment of doubtful debts is made when it is no longer likely that the full amount will be received. c) Financial assets that are available for sale are continually adjusted to fair value. Changes in value are recorded directly against equity. Whenever assets are removed from the balance sheet, any prior recorded accumulated profit or loss that was taken up as part of equity is transferred to the income statement. The Group does not have any financial instruments classified in this category. d) Other financial liabilities are initially recorded at market value, which, at the time, is equal to the amount received, less any transaction costs. Following valuation, all interest bearing liabilities are recorded at amortized cost, which is equal to the present value of the remaining payments, using the effective interest rate. Valuation of financial instruments in the Parent Company Unlike the Group, the Parent Company does not adjust financial instruments to fair value. Shareholder contributions and Group contributions (Parent Company) Shareholder contributions are reported directly against the recipient s equity with a corresponding increase in Participations in Group companies by the contributor. Group contributions refer to transfers of capital between Group companies, which are reported in accordance with their financial significance. Group contributions are intended to minimize the consolidated tax burden and are reported directly against retained earnings, less tax effects. Provisions Provisions for environmental rehabilitation, restructuring costs and legal requirements are reported when the Group has a legal or informal obligation as a result of past events and when settlement is expected to result in an outflow of resources and when the amount can be estimated reliably. Provisions for restructuring include the costs associated with cancellation of a lease agreement and for severance payments. No provisions are made for future operating losses. If a number of similar obligations exist, the likelihood that settlement will result in a future outflow of resources is assessed for the entire group as a whole. A provision is reported even if the likelihood of an outflow related to one special item in that group of obligations is low. The provisions are measured at the present value of the amount that is 68

notes Continuation Note 1 expected to be required in order to settle the obligation. A before tax discount rate is used in order to reflect an actual market assessment of the time value of money and risks associated with the provision. Any increase in the provision that is based on the passage of time is reported as interest expense. Contingent liabilities/guarantees In the consolidated financial statements, the terminology contingent liabilities (in Swedish, Eventualförpliktelser) is used, while the Parent Company uses the term Guarantees (in Swedish, Ansvarsförbindelser). Contingent liabilities/guarantees are recognized whenever the following exist: a) a possible obligation as a result of past events or depending on whether one or more uncertain future events occur that are not fully within the control of the company b) a present obligation as a result of past events that cannot be recognized as a liability or provision because it is not probable that it will result in an outflow of resources (payment) or that it is not possible to reliably estimate the amount. Cash flow statement The cash flow statement shows the Group s cash receipts and disbursements during the period that are related to operating activities, investing activities and financing activities. The cash flow statement is prepared in accordance with the indirect method, which means that the result from operating activities is adjusted for: transactions that did not result in cash receipts or cash disbursements, accrued and prepaid items related to prior or future periods, and other items where the effect on cash flow is related to investing or financing activities. Cash flow from discontinued operations is reported separately. Information concerning related parties Information is disclosed whenever transactions are conducted with related parties that is, when a transfer of resources, services or obligations has occurred, regardless of whether or not remuneration was involved. Parties that are closely related to the Group include the Parent Company, subsidiaries, the Swedish Government and state-owned companies/ businesses that conduct commercial operations. In addition, senior executives, Board members and their close family members are also defined as related parties. Presentation of the financial statements and terminology The Group s financial statements and terminology differ from those of the Parent Company. This is because the Group s financial statements have been prepared in accordance with IAS 1 Presentation of Financial Statements, while the Parent Company s financial statements have been prepared in accordance with RFR 2.3 Accounting for Legal Entities, and thus in accordance with the Annual Accounts Act, including appendices. Significant events after the reporting date Significant events after the reporting date refer to favorable or unfavorable events that occur during the period from the reporting date through the date when the financial reports are approved for publication. These events may be of either of two types: When an event occurs that confirms circumstances that existed on the reporting date, amounts in the consolidated financial statements are adjusted. When an event occurs that indicates circumstances arising after the reporting date, amounts in the consolidated financial statements are not adjusted. However, information on significant events is provided. These are events where it is necessary to provide information because it could impact the financial decisions made by users of the financial statements. Note 02 Operating income Net sales by revenue category The Group Parent Company Revenue category 2010 2009 2010 2009 Service assignments 3,848 3,402 1,477 1,440 Total 3,848 3,402 1,477 1,440 Net sales for the Group includes income from operating leases in the amount of SEK 187 (173) million. The Group Parent Company Other income/other operating income 2010 2009 2010 2009 Exchange gains on receivables or payables from operating activities 4 2 3 2 Gains on disposal of equipment 0 4 0 4 Total 4 6 3 6 Exchange gains on receivables or payables from operating activities These are primarily exchange gains on accounts payable. Note 03 Leases Leases where the lessor retains substantially all of the risks and rewards incident to ownership are classified as operating leases. The Teracom Group as lessor in operating lease agreements The Group s income from operating leases is reported as part of net sales in the income statement. This income primarily comes from co-locations. The Teracom Group has a nationwide network in Sweden and Denmark of strategically located masts and stations with high performance and radio coverage. The Group Minimum lease payments Maturity date 2010 2009 Within one year 194 183 More than one year, but less than five years 379 490 More than five years 3 2 Total 576 675 The Teracom Group as lessee in operating lease agreements The Group has operating lease agreements primarily relating to commercial rental contracts for premises for offices and technical equipment, colocation contracts and communication contracts. For the remaining term, these contracts are non-cancelable. The majority of leasing contracts have terms that allow for indexing of the minimum lease payments according to established indexation. The future minimum lease payments that are required according to noncancelable operating lease agreements are as follows: The Group Minimum lease payments Maturity date 2010 2009 Within one year 52 57 More than one year, but less than five years 64 90 More than five years 26 37 Total 142 184 For the 2010 financial year, total operating lease expenses were SEK 105 (108) million. The Teracom Group as lessee in financial lease agreements The Group leases certain items of property, plant and equipment, such as service vehicles, company cars and other vehicles. Leasing agreements pertaining to fixed assets, where the Group retains substantially all of the risks and rewards incident to ownership, are classified as financial leases. At the inception of the lease, financial leases are reported in the balance sheet at the leased asset s fair value or the present value of the minimum lease payments (whichever is lower). Financial lease agreements, adjusted for depreciation and disposals, amounted to SEK 1 (1) million. 69

notes Note 04 Segment reporting Segmentation has changed due to a reorganization. The Group management team has established operating segments based on the information used to make strategic decisions. The operating segments are responsible for operating profit and the working capital that they manage. Group functions are reported on the line, Other. These function-based departments have income of insignificant amounts, which is why they are not considered to be separate operating segments (in accordance with IFRS 8). For sales between segments, market terms and market prices are used. The new segments are as follows: Teracom Sweden Teracom Denmark (acquired on 30 September 2010) Boxer Sweden Boxer Denmark PlusTV Finland (acquired in June 2009) Operating income The Group's operating segments, SEK millions 2010 2009 Teracom Sweden 1,473 1,414 Boxer Sweden 2,041 2,041 Teracom Denmark 115 Boxer Denmark 158 42 PlusTV Finland 584 351 Other 7 2 Adjustments made upon consolidation 526 442 Total continuing operations 3,852 3,408 Discontinued operations 136 Total 3,852 3,544 Operating profit/loss The Group's operating segments, SEK millions 2010 2009 Teracom Sweden 450 410 Boxer Sweden 311 433 Teracom Denmark 21 Boxer Denmark 297 241 PlusTV Finland 79 54 Other 66 84 Adjustments made upon consolidation 47 32 Total continuing operations 293 496 Discontinued operations 16 Total 293 480 Assets / Liabilities Assets Liabilities The Group's operating segments, SEK millions 2010 2009 2010 2009 Teracom Sweden 5,447 3,842 2,662 1,133 Boxer Sweden 631 988 491 539 Teracom Denmark 1,842 340 Boxer Denmark 123 154 227 153 PlusTV Finland 104 134 166 192 Adjustments made upon consolidation 2,449 928 294 488 Total 5,698 4,190 3,592 2,505 Investments The Group's operating segments, SEK millions 2010 2009 Teracom Sweden 245 187 Boxer Sweden 29 51 Teracom Denmark 2 Boxer Denmark 0 1 PlusTV Finland 8 0 Total 284 239 Depreciation/amortization The Group's operating segments, SEK millions 2010 2009 Teracom Sweden 257 269 Boxer Sweden 28 15 Teracom Denmark 21 Boxer Denmark 1 1 PlusTV Finland 10 2 Adjustments made upon consolidation 14 10 Total 331 293 Impairment The Group's operating segments, SEK millions 2010 2009 Teracom Sweden 10 12 Boxer Sweden 3 0 Teracom Denmark 0 Boxer Denmark 0 0 PlusTV Finland 0 0 Adjustments made upon consolidation 5 0 Total 18 12 Geographic information Income from external customers 2010 2009 Sweden 2,980 2,945 Finland 616 403 Denmark 221 43 Other countries 35 20 Total continuing operations 3,852 3,411 Discontinued operations Sweden 0 133 Total 3,852 3,544 The Group s property, plant and equipment and intangible assets, not including Group surplus values, is distributed to each respective country in the table below: Fixed assets 2010 2009 Sweden 1,714 3,032 Finland 36 44 Denmark 1,480 4 Total 3,230 3,080 In the past, the Group s segments were based on the nature of the products and services offered. Prior segmentation is related to the new segments in the following way: Pay-TV is comprised of Boxer Sweden, Boxer Denmark and PlusTV Finland. TV and Radio is included in Teracom Sweden and Teracom Denmark (as of 2010) and it comprises radio and TV broadcasting, among others. Co-Location, Service and Capacity is included in Teracom Sweden. The Broadband segment consists of the operations in Quadracom wireless AB, which was divested in September 2009. Group functions and consolidation adjustments have been allocated to the segments. For sales between segments, market terms and market prices are used. 70

notes Continuation Note 4 The Group 2010 Operating segments as per the prior definition, SEK millions Income Pay-TV TV and Radio Co-Location, Service and Capacity Elimination Total for the Group Sales to external customers 2,757 700 395 0 3,852 Sales between segments 26 500 0 526 0 Total income 2,783 1,200 395 526 3,852 Net profit/loss Operating profit/loss 74 310 57 0 293 Finance income and expenses 12 Profit (loss) before taxes 281 Income tax 80 Profit (loss) for the year 201 Assets Assets belonging to the segment 485 3,895 941 0 5,321 Non-distributed assets 377 Total assets 5,698 Liabilities Liabilities belonging to the segment 790 2,094 709 0 3,593 Non-distributed liabilities 362 Total liabilities 3,955 Other segment information Investments Property, plant and equipment 0 177 65 0 242 Intangible assets 37 0 5 0 42 Financial assets 0 0 2 0 2 Total investments 37 177 72 0 286 Depreciation of property, plant and equipment 4 227 41 0 272 Amortization of intangible assets 45 7 7 0 59 Impairment 3 15 0 0 18 Total amortization and impairment losses 52 249 48 0 349 The Group 2009 Operating segments as per the prior definition, SEK millions Income Pay-TV TV and Radio Co-Location, Service and Capacity Elimination Total continuing operations Broadband Total incl. divested operations Sales to external customers 2,415 615 381 0 3,411 133 3,544 Sales between segments 0 374 43 420 3 3 0 Total income 2,415 989 424 420 3,408 136 3,544 Net profit/loss Operating profit/loss 128 295 73 0 496 16 480 Capital loss on sale of Group company 0 66 66 Finance income and expenses 13 0 13 Profit (loss) before taxes 483 82 401 Income tax 214 4 210 Profit (loss) for the year 269 78 191 Assets Assets belonging to the segment 1,010 2,242 848 0 4,100 0 4,100 Non-distributed assets 90 0 90 Total assets 4,190 0 4,190 71

notes Continuation Note 4 The Group 2009 Operating segments as per the prior definition, SEK millions Liabilities Pay-TV TV and Radio Co-Location, Service and Capacity Elimination Total continuing operations Broadband Total incl. divested operations Liabilities belonging to the segment 926 884 249 0 2,059 0 2,059 Non-distributed liabilities 446 0 446 Total liabilities 2,505 0 2,505 Other segment information Investments Property, plant and equipment 7 142 12 0 161 28 189 Intangible assets 73 4 1 0 78 0 78 Financial assets 0 0 20 0 20 0 20 Total investments 80 146 33 0 259 28 287 Depreciation of property, plant and equipment 4 189 76 0 269 31 300 Amortization of intangible assets 16 0 8 0 24 25 49 Impairment 0 0 12 0 12 0 12 Total amortization and impairment losses 20 189 72 0 281 56 337 Note 05 work performed by the company for its own use and capitalized Work performed by the company for its own use and capitalized consists of labor costs that are directly related to investments in property, plant and equipment. Note 06 Personnel Parent The Group Company Personnel expenses, SEK thousands 2010 2009 2010 2009 Salaries and other remuneration 364,200 338,162 262,712 247,302 Social security expenses 160,264 153,868 148,452 144,519 (of which pension expenses) (47,412) (38,430) (51,138) (47,673) Total 524,464 492,030 411,164 391,821 Wages and other remuneration distributed by country and between Board members, the Group CEO/President and other employees 2010 2009* SEK thousands Board members, President/CEO and senior executives Other employees Total Board members, President/CEO and senior executives Other employees Total Parent Company Sweden 10,092 252,620 262,712 4,719 242,583 247,302 Total in the Parent Company 10,092 252,620 262,712 4,719 242,583 247,302 Subsidiaries and sales offices Sweden 212 45,364 45,576 2,561 46,875 49,436 Denmark 2,582 33,119 35,701 1,364 16,009 17,373 Finland 1,616 18,595 20,211 2,233 21,818 24,051 Total in subsidiaries and sales offices 4,410 97,078 101,488 6,158 84,702 90,860 Total in the Group 14,502 349,698 364,200 10,877 327,285 338,162 *) information pertaining to 2009 has been recalculated because changes were made to the Teracom Group s team of senior executives during 2010. For more information, please see the text, Remuneration to senior executives. 72

notes Continuation Note 6 The Group Parent Company Pension expenses, SEK thousands 2010 2009 2010 2009 Defined benefit plans 12,782 10,229 25,803 29,161 Defined contribution pension plans 34,630 28,201 25,335 18,512 Total 47,412 38,430 51,138 47,673 Included in the defined benefit pension plans listed in the table above are TEL pension premiums in the amount of SEK 3 (4) million for employees in Finland. No bonuses or comparable remuneration have been paid to the Group management team, Board members or persons with the title of president, managing director or executive vice president within the Group. Of the total pension expenses for the Parent Company, SEK 896 (882) thousand was for the Board members, the President/CEO and the Executive Vice President. Of the Group s pension expenses, SEK 1 486 (2 247) thousand was for the Board of Directors and persons with the title of president, managing director or executive vice president within the Group. Outstanding pension obligations to these individuals are SEK 0 (0) thousand. Remuneration paid to Åsa Sundberg, Chairman of the Board, was SEK 210 (190) thousand. Apart from the fee that the Annual General Meeting established for Board members and the fee that the Board of Directors established for employee representatives on the Board, no remuneration was paid in 2010. Crister Fritzson, Group CEO, received SEK 3 073 (3 047) thousand in total salary, remuneration and other benefits. Crister Fritzson has also been assured of pension benefits corresponding to monthly pension premium payments amounting to 30 percent of his base salary. The retirement age for Crister Fritzson is 65. Other senior managers of the Parent Company are subject to the same pension rules that apply to the other employees of the Company (ITP-Tele and a retirement age of 65). Senior managers of the Parent Company (including the President) received a total of SEK 7 632 (13 423) thousand in salary, remuneration and other benefits. Remuneration to senior executives Principles Changes were made to the Teracom Group s team of senior executives due to reorganization of the Group management team in March 2010. Senior executives are individuals who belong to the Group management team. Before, the definition of this was the Parent Company s management team (not including the President/CEO) and the President or managing director of each subsidiary. Figures for the comparison year have been recalculated to reflect the new organization. The Chairman of the Board and the Board members receive an annual fee that is decided at the Annual General Meeting. For the Chairman, the annual fee was SEK 190 (190) thousand and for Board members, the annual fee was SEK 95 (95) thousand. A fee is paid for participation in the audit committee in the amount of SEK 60 (60) thousand to the Chairman and SEK 30 (40) thousand to each committee member. A fee is paid for participation in the remuneration committee in the amount of SEK 30 (0) thousand to the Chairman and SEK 15 (0) thousand to each committee member. This fee is not based on the calendar year, rather, the period May through April. In addition, Board members are compensated for expenses arising in conjunction with company business. The President/CEO and Executive Vice President receive a marketcompetitive salary, company car (only the President/CEO), premium-based pension benefits in addition to what is stipulated in the Swedish National Insurance Act, health insurance, individually negotiated terms for termination of employment and severance pay. Senior executives refers to the 9 (4) persons in the Group who, at some point during 2010 belonged to the Group management team, excluding the President/CEO and Executive Vice President. All pension plans for senior executives are vesting. Senior executives in the subsidiaries are persons holding the title of president or managing director at each company. Teracom s Board of Directors is responsible for appointing the President/CEO and establishing the terms of employment. The Board of Directors complies with Government guidelines regarding remuneration to senior executives. Remuneration and benefits paid in 2010 to senior executives, SEK thousands Position Name Basic salary Other remuneration and benefits Total Pension expense Comment Notice period Severance pay Group CEO and President of Teracom AB Crister Fritzson 2,760 313 3,073 896 6 months 18 months Executive Vice President of Teracom AB Gunilla Berg 400 5 405 0 Started on 2010-11-01 6 months 12 months Senior executives 9 persons 9,365 779 10,144 3,210 Total 12,525 1,097 13,622 4,106 Remuneration and benefits paid in 2009 to senior executives, SEK thousands Position Name Basic salary Other remuneration and benefits Total Pension expense Comment Notice period Severance pay Group CEO and President of Teracom AB Crister Fritzson 2,775 272 3,047 882 6 months 18 months Senior executives 4 persons 6,642 249 6,891 1,069 Total 9,417 521 9,938 1,951 Comments about the table remuneration to the President/CEO, Executive Vice President and other senior executives consists of a base salary, other benefits and a pension. all amounts are excluding social security contributions and payroll tax. Basic salary refers to the fixed monthly salary. Other remuneration and benefits refers to vacation pay, deductions/benefits for absence due to illness, parental leave deductions/benefits, subsidized lunch coupons, company cars, including fuel and parking benefits (only for senior executives that have opted out of having a company car). Pension expenses also include health insurance for the President/CEO and other senior executives. The stated notice period is for termination initiated by the company. The Group s auditors have conducted a special review of remuneration to senior executives. Senior executives include persons that belong to, or have belonged to, the Group management team. Notice period and severance pay Between the Company and the President/CEO, Crister Fritzson, a notice period of six months applies, regardless of whether termination is initiated by the Company or by the President. If employment termination is initiated by the Company, the President/ CEO receives severance pay in accordance with the above table. Severance pay is offset against other income. If employment termination is initiated by the President/CEO, there is accordingly no severance pay. The same terms apply to the Executive Vice President and CFO, Gunilla Berg. The remuneration to the President/CEO for the 2010 financial year was established by the Board of Directors. Remuneration to other senior executives was decided by the President/CEO in consultation with the Chairman of the Board. 73

notes Continuation Note 6 Remuneration to Board of Directors in 2010, SEK thousands Position Name Comment Board fee Other remuneration Chairman of the Board Åsa Sundberg 190 20 Board member Kristina Axberg Bohman 95 60 Board member Maria Curman 95 10 Board member Ingrid Engström 95 10 Board member Lars Grönberg 95 20 Board member Tobias Henmark 32 13 Board member Urban Lindskog 95 33 Employee representative John-Olof Blomkvist 12 0 Employee representative Claes-Göran Persson 5 0 Employee representative, deputy Stig-Arne Celin 0 0 Employee representative, deputy Stefan Thylander 0 0 Total 714 166 Remuneration to Board of Directors in 2009, SEK thousands Position Name Comment Board fee Other remuneration Chairman of the Board Åsa Sundberg 190 0 Board member Kristina Axberg Bohman 95 60 Board member Maria Curman 95 0 Board member Ingrid Engström 95 0 Board member Lars Grönberg 95 0 Board member Tobias Henmark 95 40 Board member Urban Lindskog 95 40 Employee representative John-Olof Blomkvist 22 0 Employee representative Claes-Göran Persson 18 0 Employee representative, deputy Stig-Arne Celin 0 0 Employee representative, deputy Stefan Thylander 0 0 Total 800 140 Average number of employees and gender distribution 2010 2009 Average number of employees Men Women Total Men Women Total Parent Company Sweden 398 (79%) 108 (21%) 506 398 (78%) 110 (22%) 508 Total in the Parent Company 398 (79%) 108 (21%) 506 398 (78%) 110 (22%) 508 Subsidiaries and sales offices Sweden 44 (59%) 30 (41%) 74 46 (58%) 33 (42%) 79 Denmark 77 (79%) 21 (21%) 98 10 (56%) 8 (44%) 18 Finland 15 (52%) 14 (48%) 29 18 (55%) 15 (45%) 33 Total in subsidiaries and sales offices 136 (68%) 65 (32%) 201 74 (57%) 56 (43%) 130 Total in the Group 534 (76%) 173 (24%) 707 472 (74%) 166 (26%) 638 Proportion of male Board members Proportion of men in senior management Proportion at year-end and gender distribution 2010 2009 2010 2009 Parent Company 60% 60% 80% 60% Subsidiaries 78% 100% 78% 83% Total in the Group 71% 81% 79% 76% The calculation of the proportion of men on the Board includes the President and is based on the number of members elected by the Annual General Meeting. 74

notes Employee absence due to illness In accordance with the Annual Accounts Act, the company reports absence due to illness for the Parent Company s employees in Sweden. Approximately 72 (80) percent of all employees in the Group belong to the Parent Company. Absence related to the care of children is not included in absence due to illness figures. Parent Company Absence due to illness in relation to regular work time % 2010 2009 Total absence due to illness 1.7 2.0 Women, 60 days or more of total absence due to illness 9.9 7.6 Men, 60 days or more of total absence due to illness 7.6 20.0 Total absence due to illness, 60 days or more of total absence due to illness 17.5 27.6 Absence due to illness for women 2.8 2.6 Absence due to illness for men 1.4 1.8 Absence due to illness for employees 29 years old and younger 2.2 1.5 Absence due to illness for employees 30 49 years old 1.7 1.7 Absence due to illness for employees 50 years old and above 1.7 2.6 Note 07 Pensions A majority of the Group s employees are primarily covered by defined benefit pension plans, which means that they are guaranteed a pension that corresponds to a certain percentage of their salary. The pension plans include a retirement pension, a disability pension and a survivor pension. Employees of Boxer TV-Access AB are entitled to pension benefits in accordance with the ITP pension plan, which is secured through insurance with Alecta. Other employees within the Group in Sweden are covered by the ITP-Tele pension plan. Pension obligations are calculated annually as per the reporting date, based on actuarial assumptions. Pension obligations are secured through provisions in the balance sheet and through insurance premiums. In Finland, employees are entitled to statutory pensions benefits in accordance with Finnish legislation on pensions for employees, a defined benefit pension plan (TEL pension). The pension benefits have been secured through insurances and do not fall within the scope of IAS 19. Employees in Denmark are covered by a defined contribution pension plan. Pension benefits are secured through insurances. In addition to the ITP plan, there is a pension liability that Teracom assumed from the former Swedish PTT when it was incorporated in 1992. The liability consists of a non-vesting and a vesting portion. The nonvesting liability refers to employees whose retirement age is 60 or 63 and is also referred to as a liability under government-defined transitional rules. The vesting liability refers to employees pensions starting at 65 years of age and retirement pensions. Employees hired after incorporation have an insurance-only solution as of 65 years of age. Retirement pensions to employees who have been invited to take early retirement are secured through provisions in the balance sheet or insurances and are paid as a retirement pension until the person reaches 65 years of age. Actuarial gains and losses are taken up as income over the employee s remaining period of employment to the extent that the total gain or loss per plan falls outside the 10 percent corridor corresponding to the higher of the pension obligation and the fair value of the managed assets for each plan, respectively. The cost related to service during the current year refers to the capital value of earned pension benefits during the year as calculated by the Projected Unit Credit Method. Total pension expenses are distributed as follows: The Group Pension expense for the period 2010 2009 Forecast 2011 Cost related to service during the current year 11 11 7 Interest expense 18 13 20 Expected return on managed assets 12 21 13 Change in asset reduction (IAS 19.58b) 27 0 2 Actuarial profit/loss (+/ ) to report for the year 22 3 1 Total cost for defined benefit plans 22 6 17 Pension expense to report in the income statement 22 6 17 Other effects to report in the income statement Reductions, profit/loss ( /+) 9 1 0 Total 9 1 0 75

notes Continuation Note 7 Detailed description of pension obligations and pension expense Pension obligations, managed assets and receivables/provisions for pension obligations as well as actuarial gains/loss for defined benefit pension plans have developed as follows: The Group Pension liability 2010 2009 Forecast 2011 Present value of wholly or partially funded obligations (+) 389 469 401 Fair value of managed assets 424 401 438 Net value of wholly or partially funded obligations (+/ ) 35 68 37 Present value of unfunded obligations (+) 8 25 5 Present value of net obligation (+/ ) 27 93 32 Unaccounted actuarial gain/loss (+/ ) 51 133 50 Effect of the limitation rule for net assets 27 0 29 Pension liability/asset to report in the balance sheet 51 40 53 Present value of defined benefit plans 2010 2009 Forecast 2011 Present value of the obligation on 1 January 494 454 397 Cost related to service during the current period 11 11 7 Interest expense 18 13 20 Paid remuneration 21 25 18 Reductions and adjustments 10 1 0 Actuarial profit/loss on the obligation (+/ ) 95 42 0 Present value of the obligation on 31 December 397 494 406 Return on managed assets 2010 2009 Forecast 2011 Expected return on managed assets 12 21 13 Actuarial profit/loss on the managed assets (+/ ) 8 11 0 Actual return on managed assets 20 10 13 Managed assets 2010 2009 Forecast 2011 Fair value of managed assets on 1 January 401 371 424 Expected return on managed assets 12 21 13 Fees/premiums (+) 16 31 15 Paid remuneration ( ) 13 11 14 Actuarial profit/loss (+/ ) on managed assets 8 11 0 Fair value of managed assets on 31 December 424 401 438 Reconciliation of change in pension liability 2010 2009 Forecast 2011 Net liability/asset on 1 January 40 0 51 Pension expense for the period 22 6 17 Paid remuneration ( ) 21 25 18 Avgifter, premier ( ) 16 31 15 Reimbursement (+) 13 11 14 Reductions and adjustments 9 1 0 Net liability/asset on 31 December 51 40 53 2010 2009 Forecast 2011 Accumulated unaccounted actuarial profits /losses (+/ ) on 1 January 133 83 51 Reported actuarial profits/losses (+/ ) during the year 22 3 1 Profit/loss (+/ ) on obligation 95 42 0 Profit/loss (+/ ) on managed assets 8 11 0 Profit/loss (+/ ) on reductions and adjustments 1 0 0 Accumulated unaccounted actuarial profits /losses (+/ ) on 31 December 51 133 50 Number entitled to pension on 1 January 2010 2009 Forecast 2011 Employees 512 605 504 Vested benefits 729 694 743 Retired persons 228 188 256 Total 1,469 1,487 1,503 76

notes Continuation Note 7 Five-year overview 2010 2009 2008 2007 2006 Present value of the obligation (+) 397 494 454 478 480 Fair value of managed assets ( ) 424 401 371 358 347 Present value of net obligation (+/ ) 27 93 83 120 133 Profit/loss (+/ ) on the obligation, actual effects 7 22 7 7 3 Profit/loss (+/ ) on managed assets, actual effects 8 11 14 3 4 Managed assets 2010 2009 2008 2007 2006 Insurance contract 424 401 371 358 347 The annual fees for pension insurance with Alecta (reported as a defined contribution plan) were SEK 7 (9) million. Alecta s surplus may be distributed amongst the policy holder(s) and/or the insured. As of 31 December 2010, Alecta s surplus in the form of the collective funding ratio amounted to 146 (141) %. The collective funding ratio was calculated in accordance with IAS19. Actuarial assumptions The actuarial calculation of the Group s pension obligations and pension costs is based on the following key assumptions stated as weighted averages for the various pension plans. A change in any of these fundamental assumptions can have a significant impact on calculated pension obligations, financing requirements and pension costs. Actuarial assumptions 2010 2009 Forecast 2011 Discount rate (%) 5.00 3.80 5.00 Annual salary increase (%) 3.00 3.00 3.00 Increase in the income base amount (%) 3.00 3.00 3.00 Inflation/annual increase in pension benefits (%) 2.00 2.00 2.00 Termination rate (%) 3.00 3.00 3.00 Expected remaining term of service (years) 18.8 16.5 17.8 Expected return on managed assets (%) 3.00 3.00 3.00 Discount rate The interest rate used to discount both funded and unfunded obligations for remuneration after the employment has been terminated. When establishing the discount rate, consideration is given to the market yield on mortgage bonds with the same maturities as the obligation as of the closing date. Annual salary increase The assessment of the annual salary increase reflects anticipated future salary increases as a combined effect of inflation, period of service, promotion and other relevant factors such as supply and demand in the labor market. Increase in the income base amount The income base amount, set annually, is used to determine the pensionable income ceiling in the national pension system. The assessment is based on the anticipated rate of inflation and historical salary trend of the entire labor market. Termination rate Historical information has been used in order to make an assessment of the termination rate. Teracom has used this information to estimate the future termination rate. Expected remaining term of service The average expected remaining term of service. This calculation is based upon the age distribution for employees and the expected future rate of employee turnover. Expected return on plan assets The assessment is based on the average expected return on existing and future plan assets. Mortality rate Assumptions regarding the mortality rate are in accordance with the Swedish Financial Supervisory Authority s regulation, DUS06 (DUS06). Inflation/annual increase in pension benefits The assumption is based upon the expected rate of inflation in the market. 77

notes Continuation Note 7 Remuneration to employees (as per RFR 2.2) Note 08 Depreciation/amortization Parent Company Specification of amounts reported in the balance sheet have been calculated as follows: 2010 2009 The present value of the obligation (calculated in accordance with Swedish principles) pertaining to wholly or partially funded pension plans ( ) 9 30 Present value of obligations (calculated in accordance with Swedish principles) related to unfunded pension plans ( ) 9 30 Net liability in the balance sheet ( ) (excluding untaxed reserves related to pension obligations) 9 30 Specification of the changes in net liability are reported in the balance sheet related to pensions 2010 2009 Net liability at the beginning of the year related to pension obligations 30 37 Reported expense in the income statement for in-house pensioning excluding taxes 12 7 Pension payments ( ) 9 14 Net liability at the end of the year 9 30 Of the total net liability, SEK 8,945 (30,260) thousand is covered by the Pension Obligations Vesting Act. Specification of the period's expenses and income related to pensions 2010 2009 In-house pension Expense for earned pensions, etc. 0 6 Interest expense (calculated discount effect) (+) 0 1 Profit impact from the redemption of obligations, etc. (+/ ) 12 0 Expense related to in-house pensioning, excluding taxes 12 7 Pension through insurance Insurance premiums and equivalent 64 51 Year's pension expense, excluding taxes 52 58 Reported net expense related to pensions, excluding taxes 52 58 The most important actuarial assumptions: Discount rate in accordance with the National Government Employee Pension Board s (SPV) assumptions 1.10 % (1.00 %). Assumptions otherwise are in accordance with FFFS 2007:24. Assumptions are calculated based on salary levels in effect as of each reporting date. Next year s expected payment for defined benefit plans is SEK 4 (9) million. Tangible and intangible fixed assets are depreciated/amortized systematically over the estimated useful life of the asset. Useful life refers to the period during which the asset is expected to be used for its intended purpose in the Group. Land is not depreciated, since its useful life is unlimited. Goodwill and trademarks are not amortized because it is not possible to estimate useful life. An assessment of the residual value and useful life is performed on each closing date, and an adjustment is made if necessary. During 2010, no changes have been made to the lengths of useful lives. Straight-line depreciation, whereby assets are depreciated by a fixed annual amount systematically over their useful life until the residual value is reached, is applied as follows: Assets Land and buildings Buildings Land improvements Plant and machinery Permanent equipment in buildings Distribution equipment Radio equipment Power generating equipment Antenna sites Mast installations Equipment, tools, fixtures and fittings Vehicles Other equipment Intangible assets Patents, licenses and similar rights Customer agreements Customer relations Useful life, years 20 40 years 10 20 years 10 15 years 3 10 years 7 15 years 10 15 years 10 20 years 20 30 years 3 6 years 3 5 years 3 10 years 3 years 8 9 years Depreciation/amortization according to type of asset. Parent The Group Company Assets 2010 2009 2010 2009 Depreciation on buildings and land 19 16 15 16 Depreciation on plant and machinery 235 227 221 226 Depreciation on equipment, tools, fixtures and fittings 18 26 14 16 Amortization on licenses and similar rights 47 18 7 14 Amortization of customer agreements 2 0 Amortization of customer relationships 10 6 Total continuing operations 331 293 257 272 78

notes Note 09 Impairment Note 11 Financial income The Group Parent Company Assets 2010 2009 2010 2009 Impairment loss on patents, licenses and similar rights 18 0 10 0 Impairment loss on plant and machinery 0 12 0 12 Total 18 12 10 12 Impairment of intangible assets The impairment loss reported by the Group for the year was the result of the decision to discontinue TV via broadband (IPTV) and it pertains to intangible assets of SEK 10 million within the Teracom Sweden segment and SEK 3 million within the Boxer Sweden segment. In addition, SEK 5 million was associated with Group surplus value. Impairment loss on plant and machinery Reversal of the 2009 impairment loss on plant and machinery, SEK 12 million, was associated with customer specific equipment within the Teracom Sweden segment. Note 10 Other expenses/other external expenses The Group s other expenses amounted to SEK 2,413 ( 1,968) million. The largest expense items are program company costs and transmission costs. In the Parent Company, other external expenses for the year were SEK 396 ( 441) million. The largest expense items are costs for network utilization and energy costs. Parent The Group Company Exchange losses on receivables/ payables from operating activities 2010 2009 2010 2009 Exchange losses on accounts payable 11 3 1 2 Total 11 3 1 2 During the 2010 financial year, the net amount of exchange rate differences from operating activities was SEK 7 ( 1) million. The net amount of exchange rate differences for the Parent Company was SEK 2 (0) million. Parent The Group Company Remuneration to auditors 2010 2009 2010 2009 PWC Audit engagement 2 1 Other services 0 0 Ernst & Young Audit engagement 0 2 0 1 Other services 0 2 0 1 Total 2 4 1 2 The Group The Group Financial income 2010 2009 Interest income 5 2 Other financial income 32 14 Total 37 16 A unrealized gain of SEK 14 million related to electricity derivatives is included in other financial income in 2010. Parent Company Parent Company Financial income 2010 2009 Net profit/loss on participations in Group companies Dividends 100 234 Capital gains (losses) 0 65 Exchange rate differences 27 1 Interest income 5 1 Total 132 171 The dividends pertains to dividends from Boxer TV-Access AB of SEK 100 (233) million as well as anticipated dividends from Teracom Mobile TV AB for SEK 0 (1) million. Note 12 Financial expenses The Group The Group Financial expenses 2010 2009 Interest expenses 23 13 Other financial expenses 26 16 Total 49 29 For the 2010 financial year, the net amount of exchange rate differences of a financial nature was SEK 22 (9) million for the Group and this amount is reported in other financial expenses. The net amount for the Parent Company was SEK 3 (0) million. Parent Company Parent Company Financial expenses 2010 2009 Interest expenses 18 16 Other financial expenses 7 3 Total 25 19 The audit engagement includes the audit of the financial statements, accounting records and the administration of the Board of Directors and the Group CEO/President, as well as other duties that the company s auditor is obliged to conduct and advice or other assistance resulting from observations made during the audit or performance of these other duties. Everything else is considered as other services. This refers to consulting on audit related issues such as accounting principles. 79

notes Note 13 Tax on profit for the year The Group Parent Company 2010 2009* 2010 2009 Current tax Sweden 158 160 97 70 Total current tax 158 160 97 70 Adjustment of tax prior year's taxation 0 3 0 3 Change in deferred tax temporary differences 78 51 1 12 Tax on Group contributions 0 0 Total continuing operations 80 214 98 85 Total discontinued operations 4 0 0 Total tax 80 210 98 85 Tax was calculated using the applicable tax rates, based on the estimated taxable net profit for the financial year. The Group 2010 2009* Tax, % Net profit/loss Tax, % Net profit/loss Profit (loss) before taxes 281 483 Tax according to tax rate in Sweden (26.3 %) 26 74 26 127 Difference between the tax rate in Sweden and abroad 1 4 1 3 Tax effect of non-deductible expenses Other non-deductible expenses 3 8 0 2 Tax effect of non-taxable income Other non-taxable income 2 5 1 3 Tax effect of non-utilized deficit deduction 8 21 16 76 Tax effect of deficit deduction 9 26 0 0 Tax on fictitious income related to opening balance of tax allocation fund 1 4 0 2 Adjustment of tax prior year's taxation 0 0 1 3 Other 0 0 1 4 Tax expense and effective tax rate for the financial year related to continuing operations 28% 80 44% 214 Parent Company 2010 2009 Tax, % Net profit/loss Tax, % Net profit/loss Profit/loss before appropriations 490 463 Appropriations 27 6 Profit (loss) before taxes 463 469 Tax according to tax rate in Sweden (26.3 %) 26 122 26 123 Tax effect of non-deductible expenses Loss on disposal of shares in subsidiaries 0 0 4 17 Other non-deductible expenses 0 0 0 1 Tax effect of non-taxable income Other non-taxable income 5 26 14 64 Correction to temporary differences due to reclassification 0 0 1 3 Tax on fictitious income regarding opening balance of tax allocation funds 0 2 0 2 Adjustment of tax prior year's taxation 0 0 1 3 Tax expense and effective tax rate for the financial year 21% 98 18% 85 * Information pertaining to the Group for 2009 is for continuing operations. 80

notes Note 14 Information concerning related parties The Swedish State owns 100 percent of the shares in Teracom AB. The Teracom Group s services are offered to the Swedish government, public authorities and companies in competition with other companies on ordinary commercial terms. In a corresponding manner, the Teracom Group purchases services from government authorities and companies on ordinary commercial terms. Taken individually, none of the transactions are for significant amounts, with the exception of the Parent Company s purchase of electricity from Vattenfall Kundservice AG and its purchase of electricity derivatives from Vattenfall Trading Services AB. Vattenfall Kundservice AB Teracom AB purchased electricity from Vattenfall Kundservice AB for a total of SEK 116 (88) million during 2010. The operating liability to the company as per 31 December was SEK 8.7 (9.2) million. Vattenfall Trading Services AB Teracom AB received SEK 9 million from Vattenfall Trading Services AB related to the settlement of electricity derivatives that had fallen due during 2010. Last year, Teracom AB paid SEK 7.5 million to Vattenfall Trading Services AB related to the settlement of electricity derivatives that had fallen due during 2009. The operating liability to the company as of 31 December 2010 was SEK 0 (0.7) million. In addition to these related parties, the Parent Company has close relationships that entail a controlling influence in its Group companies, see note 26. Intra-Group sales were SEK 526 (438) million. Parent Company s sales and purchases of goods and services from subsidiaries 2010 2009 Subsidiaries Sales Purchases Sales Purchases Boxer TV-Access AB 443 0 374 0 Boxer TV A/S 1 0 0 0 Broadcast Service Danmark A/S (which is being renamed Teracom A/S) 0 0 Quadracom Wireless AB (Comet Networks) divested 2009-09-04 42 3 Total 444 0 416 3 Parent Company s outstanding receivables and payables to subsidiaries 2010 2009 Subsidiaries Receivables Liabilities Receivables Liabilities Boxer TV-Access AB 50 1 43 173 Boxer TV A/S 1 0 0 0 Broadcast Service Danmark A/S (which is being renamed Teracom A/S) 97 0 Teracom Mast AB 0 1 0 0 Teracom Mobile TV AB 0 1 1 2 Quadracom Wireless AB (Comet Networks) divested 2009-09-04 Total 148 3 44 175 Senior executives Remuneration to the Board of Directors, Group CEO/President and senior executives is described in note 6. Note 15 Appropriations and untaxed reserves Parent Company Appropriations 2010 2009 Change in tax allocation reserve 124 89 Difference between recorded depreciation and depreciation according to plan 97 95 Total 27 6 Parent Company Untaxed reserves 2010 2009 Tax allocation fund, Tax 2011 124 0 Tax allocation fund, Tax 2010 89 89 Tax allocation fund, Tax 2009 46 46 Tax allocation fund, Tax 2008 110 110 Tax allocation fund, Tax 2007 65 65 Tax allocation fund, Tax 2006 50 50 Accumulated excess depreciation/amortization 931 1,027 Total 1,415 1,387 81

notes Note 16 Property, plant and equipment The Group Parent Company Land and buildings 2010 2009 2010 2009 Opening cost, 1 January 573 601 574 601 Acquisitions 586 Investments 11 1 11 1 Sales/disposals 0 31 0 30 Exchange rate differences 10 Reclassifications 3 2 3 2 Closing accumulated cost, 31 December 1,163 573 588 574 Opening depreciation, 1 January 373 370 374 370 Sales/disposals 0 13 0 12 Depreciation for the year 19 16 15 16 Closing accumulated depreciation, 31 December 392 373 389 374 Closing carrying amount, net, 31 December 771 200 199 200 The Parent Company s properties and buildings on non-freehold property are generally taxed as special properties and are exempt from property tax under the Property Tax Act (SFS 1979:1152). Land improvements are included in the carrying amount together with buildings and land. The Group Parent Company Plant and machinery 2010 2009 2010 2009 Opening cost, 1 January 4,281 4,393 4,216 4,328 Acquisitions 837 Investments 18 47 16 47 Sales/disposals 40 275 40 275 Exchange rate differences 15 0 0 0 Reclassifications 135 116 135 116 Closing accumulated cost, 31 December 5,216 4,281 4,327 4,216 Opening depreciation 2,949 2,857 2,883 2,791 Sales/disposals 39 133 39 134 Dissolution retroactive depreciation 0 2 0 0 Depreciation for the year 235 227 221 226 Closing accumulated depreciation, 31 December 3,145 2,949 3,065 2,883 Opening impairment losses, 1 January 2 14 3 15 Sales/disposals 0 0 0 0 Reclassifications 2 0 0 0 Impairment losses for the year 0 12 0 12 Closing accumulated impairment losses, 31 December 0 2 3 3 Closing carrying amount, net, 31 December 2,071 1,330 1,259 1,330 The reversal of impairment losses during 2009 on plant and machinery for SEK 12 million was related to customer specific equipment within the Teracom Sweden segment. 82

notes Continuation Note 16 The Group Parent Company Equipment, tools, fixtures and fittings 2010 2009 2010 2009 Opening cost, 1 January 358 546 296 492 Investments 21 11 21 5 Acquisitions 3 1 8 0 Sales/disposals 9 238 0 239 Reclassifications 0 38 0 38 Closing accumulated cost, 31 December 373 358 309 296 Opening depreciation, 1 January 328 498 277 457 Sales/disposals 8 196 8 196 Depreciation for the year 18 26 14 16 Closing accumulated depreciation, 31 December 338 328 283 277 Opening impairment losses, 1 January 0 0 0 0 Reclassifications 2 0 0 0 Impairment losses for the year 0 0 0 0 Closing accumulated impairment losses, 31 December 2 0 0 0 Closing carrying amount, net, 31 December 33 30 26 19 The Group Parent Company Construction-in-progress 2010 2009 2010 2009 Opening cost, 1 January 115 149 115 149 Investments 192 129 192 129 Sales 2 7 2 7 Reclassifications 141 156 141 156 Closing accumulated cost, 31 December 164 115 164 115 Closing carrying amount, net, 31 December 164 115 164 115 Investment projects and the inventory of spare parts related to investment projects is for construction-in-progress. 83

notes Note 17 Intangible assets During the third quarter of 2010, Teracom AB acquired 100 percent of the shares in the Danish terrestrial network operator, BSD (name is being changed to Teracom A/S). According to the preliminary acquisition analysis, SEK 144 million of the company s total value has been allocated to customer agreements, customer relations and goodwill, see note 28. In 2009, Teracom AB acquired 51 percent of the shares in the Finnish Pay-TV operator, Digi TV Plus Oy. In accounting terms, the acquisition analysis comprises 100 percent since Teracom AB has a put option on the remaining 49 percent of the shares and Teracom AB also has a call option to acquire the same percentage, see note 28. As of 31 December 2010, Goodwill pertained to Boxer TV-Access AB, Digi TV Plus Oy and BSD (name is being changed to Teracom A/S). Intangible assets Goodwill Brand Accumulated cost The Group 2010 Patents, licenses and similar rights Customer agreements Customer relations Opening balance, 1 January 1,158 84 209 0 84 1,535 Investments 0 0 42 0 0 42 Acquisitions 112 0 120 20 12 264 Exchange rate differences 37 11 7 0 11 66 Closing accumulated cost, 31 December 1,233 73 364 20 85 1,775 Total Accumulated amortization and impairment losses Opening balance, 1 January 16 0 108 0 6 130 Reclassifications 3 0 0 0 0 3 Depreciation for the year 47 2 10 59 Impairment losses for the year 0 0 18 0 0 18 Closing accumulated amortization and impairment losses, 31 December 19 0 173 2 16 210 Carrying amount 1 January 1,142 84 101 0 78 1,405 31 December 1,214 73 191 18 69 1,565 The Group 2009 Patents, Intangible assets Goodwill Brand licenses and similar rights Customer relations Total Accumulated cost Opening balance, 1 January 865 0 416 0 1,281 Investments 0 0 113 0 113 Acquisitions 307 89 0 88 484 Disposals 0 0 318 0 318 Exchange rate differences 14 5 2 4 25 Closing accumulated cost, 31 December 1,158 84 209 84 1,535 Accumulated amortization and impairment losses Opening balance, 1 January 16 0 201 0 217 Disposals 0 0 115 0 115 Reclassifications 0 0 4 0 4 Depreciation for the year 18 6 24 Closing accumulated amortization and impairment losses, 31 December 16 0 108 6 130 Carrying amount 1 January 849 0 215 0 1,064 31 December 1,142 84 101 78 1,405 84

notes Continuation Note 17 Intangible assets Accumulated cost Parent Company 2010 2009 Patents, licenses and similar rights Patents, licenses and similar rights Opening balance, 1 January 77 384 Investments 5 5 Sales/disposals 0 315 Reclassifications 0 3 Closing accumulated cost, 31 December 82 77 Accumulated amortization Opening balance, 1 January 52 171 Sales/disposals 0 133 Depreciation for the year 7 14 Closing accumulated depreciation, 31 December 59 52 Accumulated impairment losses Opening balance, 1 January 0 0 Årets nedskrivning 10 0 Closing accumulated impairment losses, 31 December 10 0 Carrying amount 1 January 25 213 31 December 13 25 Testing for impairment of goodwill Goodwill is allocated to the Group s cash generating units that have been identified by operating segment. A summary of the allocation of goodwill to each operating segment is provided below. Goodwill The Group's operating segments SEK millions 2010 Teracom Sweden 0 Boxer Sweden 832 Teracom Denmark 110 Boxer Denmark 0 PlusTV Finland 272 Total 1,214 The Teracom Group s goodwill and intangible assets that have an uncertain useful life are not amortized. Rather, they are tested annually for impairment. When testing for impairment, the recoverable amount for each cash generating unit (CGU) is calculated. The recoverable amount is either the fair value or the value-in-use of the CGU (whichever is higher). The recoverable amount of a CGU has been established based on calculations of the value-in-use. These calculations are derived from an estimation of future cash flows before tax, based on the most recent financial business plans that have been approved by the Group management team. The Teracom Group has selected a discount rate after tax that reflects current market assessments of the time value of money and the risks specific to the asset. The discount rate does not reflect risks for which future cash flows have been adjusted. The starting point for calculating the discount rate is the company s weighted average cost of capital. Boxer Sweden Impairment testing of Boxer Sweden is based on a calculation of the valuein-use. The calculated value is based on cash flow forecasts through 2015, which are based on reasonable and verifiable assumptions representing the Group s best estimates of the financial conditions that are expected to prevail during the period. The estimated future cash flows are comparable to the amount that would most likely be received in a sale between independent parties. The present value of the forecasted cash flows has been calculated using a discount rate of approximately 11.5%. The expected future scenario is based on prior experience and external sources. The Group management team has determined that there have not been any changes to important assumptions such that the calculated value-in-use is now less than the carrying amount. PlusTV Finland Impairment testing of PlusTV Finland is based on a calculation of the valuein-use. The calculated value is based on cash flow forecasts through 2017, which are based on reasonable and verifiable assumptions representing the Group s best estimates of the financial conditions that are expected to prevail during the period. The calculations apply to periods that are more than five years in the future because the company is still in the start-up phase and it will be quite some time before long-term stable profitability is achieved. The estimated future cash flows are comparable to the amount that would most likely be received in a sale between independent parties. The present value of the forecasted cash flows has been calculated using a discount rate of approximately 11.5%. Price-earnings ratios, improved margins and growth in sales are important variables to consider when calculating PlusTV s value-in-use. The expected future scenario is based on prior experience and external sources. The Group management team has determined that there have not been any changes to important assumptions such that the calculated value-in-use is now less than the carrying amount. Boxer Denmark Impairment testing of the value of shares in Boxer TV A/S is based on a calculation of the value-in-use. The calculated value is based on cash flow forecasts through 2019, which are based on reasonable and verifiable assumptions representing the Group s best estimates of the financial conditions that are expected to prevail during the period. The calculations apply to periods that are more than five years in the future because the company is still in the start-up phase and it will be quite some time before long-term stable profitability is achieved. The estimated future cash flows are comparable to the amount that would most likely be received in a sale between independent parties. The present value of the forecasted cash flows has been calculated using a discount rate of approximately 11.5%. Important variables to consider when calculating Boxer Denmark s value-in-use are improved margins, growth in sales and price-earnings ratios. The expected future scenario is based on prior experience and external sources. The Group management team has determined that there have not been any changes to important assumptions such that the calculated value-in-use is now less than the carrying amount. 85

notes Note 18 Other financial assets The Group Parent Company Other financial assets 2010 2009 2010 2009 Net asset, pensions 51 40 0 0 Prepaid broadcasting rights in Denmark 0 28 0 0 Long-term loan receivable 56 26 56 26 Endowment insurance 1 1 1 1 Other 6 0 0 0 Total 114 95 57 27 A detailed description of the item, Net asset, pensions is provided in note 7. Note 19 Deferred tax The Group Parent Company 2010 2009 2010 2009 Deferred tax assets 120 12 9 9 Deferred tax liabilities 482 446 Deferred tax asset/tax liability, net 362 434 9 9 The tables below present deferred tax assets and liabilities for the Group and the Parent Company according to category and how the assets and liabilities changed during the year. The Group Deferred tax assets/liabilities Untaxed reserves Intangible assets Pension liability Deficit deduction Other Total Opening balance, 1 January 422 46 19 44 9 434 Acquisitions 0 0 6 6 Exchange rate differences 6 6 7 7 Taken up as income during the year 27 2 1 96 1 71 Closing balance, 31 December 2010 449 38 18 134 9 362 Parent Company Deferred tax assets/liabilities Real estate Pension liability Total Opening balance, 1 January 6 3 9 Taken up as income during the year 1 1 0 Closing balance, 31 December 2010 7 2 9 As of the reporting date, the Group did not have any unutilized deficit deductions related to the Swedish business. The total deficit pertaining to the Danish operations was SEK 572 (271) million on the closing date, which corresponds to a deferred tax asset of SEK 143 (68) million (using the Danish tax rate). Having taken into consideration uncertainties about future profits and other factors, a deferred tax asset of SEK 105 (0) million has been reported by the Boxer Denmark segment. Unutilized deficit deductions for the Danish operations amount to SEK 151 (271) million. For the Finnish operations, the total deficit as of the closing date was SEK 571 (526) million, which corresponds to a deferred tax asset of SEK 148 (137) million (using the Finnish tax rate). For the PlusTV Finland segment, SEK 38 (44) million has been reported as a deferred tax asset having taken into consideration uncertainties about future profits and other factors. Unutilized deficit deductions for the Finnish operations amount to SEK 424 (358) million. The unutilized deficit deductions have an unlimited life, except for the deduction in Finland, which has a 10-year life. Note 20 Inventories The Group Type of goods 2010 2009 Finished goods and goods for resale 25 62 Total 25 62 Valued at cost 25 62 Total 25 62 86

notes Note 21 Financial instruments and financial risk management Teracom s operations expose the Group to various types of financial risk. The Group s overall financial operations and management of financial risk are centralized to the Teracom Group s Finance department. These activities are based upon the finance policy established by the Board of Directors, which is characterized by the desire to maintain a low level of risk. The Group s financial strategy and goals are designed to achieve maximum return on equity based upon reliable, cost-effective financial management practices that help ensure adequate control and high quality risk management within the Group. The overriding principle is to minimize all factors that could have a negative impact on earnings and cash flow due to shortterm fluctuations in financial markets. This applies to both the Parent Company and the Group, in its entirety. The Group may use derivative instruments in order to hedge certain exposures to risk, however, only for the following purposes: To convert future payments for electricity consumption to a fixed electricity price. To convert future expected commercial payments in foreign currencies (primarily EUR) to Swedish crowns (SEK). To convert the fixed interest term for borrowing. Financial risks are categorized as follows: currency risk, interest rate risk, electricity price risk, credit risk, liquidity risk and capital risk. Currency risk This is the risk that changes in exchange rates will negatively impact the Group s financial position. This type of risk is divided into two categories (below): transactional and translational. Transactional exposure Transaction exposure encompasses all future contractual and forecasted income and expenses in foreign currencies, which thus involve a risk that the Group s profitability will be negatively impacted by changes in exchange rates. The Teracom Group has limited transactional exposure. This is because the value-added from international business activities is primarily created locally by having expenses in the same currency as the sales revenues. As a result, the Group s financial currency risks are low. As of the reporting date, currency derivatives aimed at minimizing transaction exposure amounted to SEK 0 (0) million. Sensitivity analysis of currency risk The Teracom Group s currency transactions are primarily in SEK, EUR and DKK. During 2010, the net outflow of EUR was an amount corresponding to SEK 146 ( 88) million. In 2010, the average exchange rate for EUR was SEK 9.0664. A fluctuation in the exchange rate of +/ 15 percent would impact profits by SEK +/ 22 million. The net outflow of DKK was an amount corresponding to SEK 102 ( 199) million. In 2010, the average exchange rate for DKK was SEK 1.2165. A fluctuation in the exchange rate of +/ 15 percent would impact profits by SEK +/ 15 million. Translation exposure Because the company has international business activities, there is also a certain translation exposure. This is rooted in the value of foreign investments as well as the profits generated on an ongoing basis. Such profits are translated using the average rate for the year as the opening value and comparing it to the year s ending rate, which is provided by the Swedish Central Bank. The difference is reported against equity. Accordingly, the only time that an actual cash flow is involved is in connection with disposals, investments and dividends from subsidiaries. Hedging primarily involves loans in local currencies. It is possible to hedge net investments in foreign operations by financing the acquisition of foreign companies with loans in the same foreign currency. Any exchange gains/losses that arise because of such loans are dealt with via an adjustment of translation differences against equity such that the loans act as a currency hedge on the acquired net assets. The translation difference on the foreign subsidiary is then reported upon consolidation against the Group s equity. Translation exposure on net assets in foreign subsidiaries amounted to SEK 33 (22) million. Interest rate risk Interest rate risk is defined as the risk that changes in market interest rates will have a negative impact on the Group s profit and cash flow. The interest rate risk associated with the Teracom Group s financing activities shall be limited in accordance with its financial goals and having considered all of the Group s other risks and margin for such risks. The Group has both interest-bearing liabilities and cash equivalents. In terms of risks, these two items balance each other to a certain extent. Given the desire to limit risks, the goal is to minimize interest expenses. Interest-bearing assets should primarily be used to reduce existing borrowings and as such, fixed interest terms should not extend beyond the closest date for amortizing the Group s loans. Derivatives in the form of interest swaps and futures may be used to influence the fixed interest term without changing the underlying conditions of the loans. Sensitivity analysis of interest rate risk As of 31 December 2010, the Group had bank loans for SEK 2,209 (1,016) million. The loans are subject to variable interest rates and at the end of 2010 and 2009, the Group did not have any holdings of interest rate derivative contracts. The fixed interest term on the liability in DKK, which corresponds to SEK 1,509 million, has been 1 month and the average base lending rate amounted to 0.94 percent in 2010. The fixed interest term on the liability in SEK of SEK 700 million, has been 3 months and the average base lending rate amounted to 0.76 percent in 2010. A change in the interest rate of 1 percentage point would have an impact on the Group s interest expenses of SEK +/ 7 million for the SEK liability and +/ 13 million for the DKK liability. Electricity price risk Teracom AB has broadcasting activities that consume significant amounts of electricity. To limit the exposure to changes in electricity prices, the majority of purchased electricity is hedged. Hedging is conducted using financial electricity contracts based upon an electricity trading policy that has been established by the Board of Directors for Teracom AB. This type of derivative only exists in the Parent Company and such contracts fall due during the period 2011 2013. Teracom AB hedges electricity prices for 70 95 percent of estimated total consumption over the next 12 months. There after, within the interval from 13 to 36 months, prices are hedged for a certain portion of the estimated consumption volume according to a ladder model. Within the interval13 to 24 months, prices are hedged 40 80 percent and within the interval 25 to 36 months, prices are hedged 10 50 percent. In the financial statements, valuation of electricity derivatives has resulted in a positive impact on the Group s profit before tax equal to SEK 14 (9) million. Sensitivity analysis of electricity price risk For 2010, Teracom s total electricity consumption was 110,976 MWh. In 2010, Teracom AB had hedged 95,142 MWh. The volume that was not hedged was 15,834 MWh. The average spot price for 2010 was 542.53 SEK/ MWh with a variation of approximately +/ 160 SEK/MWh. Accordingly, Teracom s electricity price sensitivity amounted to SEK 3 million. If the total electricity consumption had not been hedged at all, fluctuations in electricity prices could have had an effect on profits of SEK +/ 18 million. Credit risk Credit risks are divided into two categories: financial credit risks and credit risks in commercial accounts receivable. Financial credit risk is also divided into two categories: issuer risk is the risk that the Group fails to get back the amount that was invested (including interest) due to default, i.e. the counterparty runs into financial difficulties or goes into bankruptcy. 87

notes Continuation Note 21 Counterparty risk is the risk that the counterparty defaults and is unable to fulfill its obligations as per the financial contract, such as a forward exchange agreement. As a result, the Group could then encounter losses by having to enter into a new contract at going market rates. Counterparty risk and issuer risk are managed in accordance with the Finance Policy, which stipulates that the Group may only enter into financial contracts and investments with established Nordic banks. The credit terms for various types of contracts and customer categories are defined in a special credit policy. A report from the Swedish credit information agency, UC, is required for corporate sales on credit in order to minimize the risk of bad debt losses. At the end of 2010, the company s allowance for doubtful accounts was SEK 11 (24) million. Bad debt losses for the Group were SEK 2 (39) million. Due dates for accounts receivable The Group SEK millions Total Of which neither due nor writtendown as of the reporting date < 30 days 30 60 days 61 90 days 91 120 days > 121 days Accounts receivable, carrying amount as of 2010-12-31 295 188 94 6 2 2 3 Accounts receivable, carrying amount as of 2009-12-31 429 391 29 5 2 1 1 Liquidity risk The Group is exposed to the risk of not having sufficient liquid funds at a certain point in time and thus not being able to fulfill its payment obligations. Liquidity risk is dealt with by making sure that the Group has sufficient liquid funds and short-term investments in a liquid market, accessible financing through contracted credit facilities and the ability to close market positions. The Group maintains financing flexibility by entering into credit agreements to make sure that it has both immediate and long-term access to credit facilities. The Group can also take action to influence the maturity dates on its loan stock and by making sure to take loans with at least two creditors. The liquidity reserve is comprised of the Group s cash equivalents (credit balances and marketable securities) which must total at least SEK 100 million. In addition to the liquidity reserve, the Group must have unused available credit facilities. At the end of 2010, the liquidity reserve was SEK 1,577 (998) million. Cash equivalents The Group Parent Company SEK millions 2010 2009 2010 2009 Cash and bank balances 377 78 167 44 Total 377 78 167 44 Maturity dates for liability items (excluding interest) The table below is an analysis of the Group s non-derivative financial liabilities, which have been categorized according to the time remaining until the contractual maturity date as of the closing date. Derivative instruments that are financial liabilities have been included in the analysis if their contractual maturity dates significantly impact the timing of future cash flows. The amounts shown in the table represent contractual undiscounted cash flows. Maturity dates for liability items The Group SEK millions Within one year 1 2 years 2 3 years 3 4 years 4 5 years More than five years Total Bank loan 75 0 100 0 2,034 0 2,209 Other loans 33 13 0 0 0 0 46 Put option, Digi TV Plus Oy 125 0 0 0 0 0 125 Financial leasing 1 0 0 0 0 0 1 Total 234 13 100 0 2,034 0 2,381 Parent Company SEK millions Within one year 1 2 years 2 3 years 3 4 years 4 5 years More than five years Total Bank loan 75 0 100 0 2,034 0 2,209 Other loans 33 13 0 0 0 0 46 Loans from Group companies 0 1 0 0 0 0 1 Total 108 14 100 0 2,034 0 2,256 88

notes Continuation Note 21 Capital risk The Teracom Group s goal for its capital structure is to make sure that the Group is able to continue its business activities so that it generates a return for its shareholders. The Group shall also generate value for other stakeholders and maintain an optimal capital structure in order to minimize the costs of capital. In order to maintain and adjust capital structure, the Group can adjust the amount that it distributes to shareholders as dividends. It can also sell assets in order to reduce its liabilities. The Teracom Group s financial strategy and long-term goal is to generate a return on equity that is at least 17 percent, along with a long-term equity ratio of 30 percent. During 2010, the Group s strategy was to maintain a maximum net debt/ equity ratio of 3 (2) times, which means that the amount of capital loaned by the Group may not exceed an amount that is 3 times the carrying amount of the Group s equity. As of 31 December 2010 and 2009, the net debt/equity ratio was as follows: SEK millions 2010 2009 Interest-bearing liabilities 2,381 1,016 Less: Cash equivalents 377 78 Other interest-bearing assets 52 28 Net liability 1,952 910 Equity 1,743 1,685 Net debt/equity ratio 1.12 0.54 UC AB Sweden s largest and leading business and credit information agency has given Teracom AB a risk class rating of 5. Financial loan conditions Teracom AB has entered into agreements relating to credit facilities for DKK 1,250 (1,000) million with Nordea (for the acquisition of BSD) and SEK 1,000 million with SEB. The financing agreement with SEB replaces the prior financing agreement with Handelsbanken. The credit agreements includes financial loan conditions, i.e. covenants, relating to the net debt/ equity ratio, interest coverage ratio and the equity ratio that must be satisfied each quarter. Should the agreed-upon covenants not be satisfied, this would then entitle the lender to cancel the credit agreement. During 2010, the values of all key ratios satisfied the agreed-upon covenants. Contract terms, pledged assets and financial obligations The scope of Teracom Group s pledged assets and contingent liabilities is limited. Disclaimers are typically in place whenever the Group enters into agreements to obtain credit. The disclaimer states that Group companies do not grant the lender any type of security in the form of chattel mortgages or similar items. Rather, they only commit to not providing any collateral to another party. Calculation of fair value The table below shows financial instruments measured at fair value, based on how classification in the fair value hierarchy has been done. The different levels are defined as follows: Level 1 quoted prices (unadjusted) on active markets for identical assets or liabilities. Level 2 other observable market inputs for assets or liabilities besides Level 1 inputs. Such data may either be directly observable (such as quotations) or indirectly observable (i.e. derived from quotations). Level 3 inputs for assets or liabilities that are not based on observable market data (i.e. non-observable data). The following table shows the Group s financial assets and liabilities measured at fair value as of 31 December 2010. SEK millions Level 1 Level 2 Level 3 Total Assets Financial assets valued at fair value via the income statement electricity derivatives included in the item, Derivative instruments 17 17 Total assets 17 17 Liabilities Financial liabilities valued at fair value via the income statement Put option included in the item, Other current liabilities 125 125 Total liabilities 125 125 The following table shows the Group s financial assets and liabilities measured at fair value as of 31 December 2009. SEK millions Level 1 Level 2 Level 3 Total Assets Financial assets valued at fair value via the income statement electricity derivatives included in the item, Derivative instruments 4 4 Total assets 4 4 Liabilities Financial liabilities valued at fair value via the income statement Put option included in the item, Other current liabilities 137 137 Total liabilities 137 137 The fair value of financial instruments that are traded on an active market is based on quoted market prices as of the closing date. A market is considered to be active if quoted prices from a stock exchange, broker, trade association, pricing service or surveillance authority are easily and regularly available. The prices must also represent actual and regularly occurring arm s length market transactions. The quoted market price used for the Group s financial assets is the current bid price. These instruments are shown at Level 1 and they are comprised of electricity derivatives traded on the Nordpool exchange. The fair value of financial instruments that are not held in an active market is established by using valuation techniques. To the extent possible, market information is used whenever it is available and company-specific information is used as little as possible. If all significant input data required for fair value measurement of an instrument is observable, the instrument will then be categorized in Level 2. The liability reported in Level 2 represents the put option for the minority interest in Digi TV Plus Oy. In instances where one or more significant input data items are not based on observable market information, the instrument will then be classified as Level 3. 89

notes Note 22 Prepaid expenses and accrued income Note 25 Provisions The Group Parent Company Prepaid expenses and accrued income 2010 2009 2010 2009 Accrued income 51 86 35 67 Prepaid project expenses 98 123 0 0 Prepaid boxes in customer agreements 71 90 0 0 Other items 22 37 7 9 Total 242 336 42 76 Prepaid project expenses Prepaid project expenses refer to costs for fixed-price contracts. These expenses are reported in accordance with the percentage of total service that has been delivered. These expenses consist of program company expenses in order to provide customers with access to TV programs, as well as direct expenses related to taking orders. Prepaid boxes in customer agreements Prepaid boxes in customer agreements are expenses for boxes that are included in agreements with customers. These expenses are reported in accordance with the percentage of total service that has been delivered. Note 23 Equity Share capital According to the Articles of Association for Teracom AB, the Company s share capital shall amount to not less than SEK 250 million and not more than SEK 1,000 million. The quotient value is SEK 1,000. All 250,000 (250,000) shares are fully paid and carry full entitlement to an equal voting right and share in the Company s assets. No shares are held by the Company itself or its subsidiaries. Accumulated exchange rate differences Consolidated equity was affected by exchange rate differences that arise from the use of the current method. For the Group, accumulated exchange rate differences were SEK 49 ( 16) million. Taxation The Group reported SEK 6 million in deferred tax directly against equity. Long-term provision The Group Pension provisions Provisions 2010 2009 Opening balance, 1 January 2 3 Provisions made 1 0 Provisions utilized 2 1 Closing balance, 31 December 1 2 Short-term provision The Group Restructuring Provisions 2010 2009 Opening balance, 1 January 1 7 Provisions made 5 0 Provisions utilized 4 6 Closing balance, 31 December 2 1 Long-term provision Parent Company Pension provisions Provisions 2010 2009 Opening balance, 1 January 32 41 Provisions made 1 0 Provisions utilized 23 9 Closing balance, 31 December 10 32 Short-term provision Parent Company Restructuring Provisions 2010 2009 Opening balance, 1 January 1 7 Provisions made 5 0 Provisions utilized 4 6 Closing balance, 31 December 2 1 Provisions made and utilized consist of estimated personnel expenses resulting from the Group s decision to execute a reorganization of the company. These expenses primarily consist of retirement pensions. Included in the provisions is the Parent Company s pensions liability, which was reported in note 7. Proposed dividends As of 31 December 2010, the Parent Company had unrestricted equity of SEK 1 078 million. A decision about dividends will be made at the AGM on 14 April 2011. The Board of Directors proposed dividend is SEK 110 million. Note 24 Accrued expenses and deferred income Deferred income primarily pertains to deferred income for Pay-TV subscriptions and deferred income for capacity and co-location. The long-term portion of deferred income amounts to SEK 70 (65) million for the Group and SEK 12 (65) million for the Parent Company. The components of the current portion of deferred income are shown in the table below. The Group Parent Company Accrued expenses and deferred income 2010 2009 2010 2009 Accrued personnel expenses 66 50 47 40 Deferred income 463 429 128 125 Accrued expenses for broadcasters 61 82 Other items 174 138 59 87 Total 764 699 234 252 90

notes Note 26 Group companies Participations in Group companies Company name Corporate identity number Registered office Boxer TV-Access AB 556548-1131 Sundbyberg Oy Boxer TV AB 1589479-9 Helsinki Boxer TV A/S 29939470 Copenhagen Digi TV Plus Oy 1988050-3 Helsinki Teracom Mobile TV AB 556392-5303 Sundbyberg Teracom Mast AB 556711-9168 Sundbyberg Broadcast Service Danmark A/S (which is being renamed Teracom A/S) 25598008 Taastrup Broadcast Stations Company 1 A/S 33165676 Taastrup Broadcast Stations Company 2 A/S 33165609 Taastrup Company name Number of shares Equity Profit (loss) for the year Book value Capital/share of votes, % 2010 2009 Boxer TV-Access AB 3,332 297 160 100 1,410 1,410 Oy Boxer TV AB 392 100 Boxer TV A/S 5,000 1 196 100 Digi TV Plus Oy 2,922 15 81 53 413 365 Broadcast Service Danmark A/S (which is being renamed Teracom A/S) 500 51 4 100 1410 Broadcast Stations Company 1 A/S 500,000 433 8 100 Broadcast Stations Company 2 A/S 500,000 769 7 100 Teracom Mobile TV AB 10,000 1 0 100 0 0 Teracom Mast AB 10,000 1 0 100 1 1 Quadracom Wireless AB (marketed under the name Comet Networks and divested in September 2009) 1,000 100 3,234 1,776 Amounts reported in the income statement Parent Company Type of goods 2010 2009 Sales to subsidiaries 444 416 Purchases from subsidiaries 0 3 Total 444 419 Sales to subsidiaries consist primarily of transmission services to Boxer TV- Access AB. Market prices have consistently been used. Purchases from subsidiaries consist of the costs for customer service from Boxer TV-Access AB. Amounts reported in the balance sheet Parent Company Receivables from subsidiaries 2010 2009 Accounts receivable 48 43 Current receivables 100 1 Total 148 44 Parent Company Liabilities to subsidiaries 2010 2009 Long-term liabilities 1 169 Current liabilities 2 6 Total 3 175 Last year, a loan in the amount of SEK 169 million from Boxer TV-Access AB was included in the item, Long-term liabilities. The loan was given at a market-competitive rate of interest. Note 27 Cash flow statement Cash and cash equivalents Cash and cash equivalents amounted to SEK 377 (78) million. For more information on cash and cash equivalents, as well as available credit, please see note 21, Financial instruments and financial risk management. Net investments, operations Investments in property, plant and equipment and intangible assets amounted to SEK 284 (239) million. Acquisition of subsidiaries The total purchase sum for last year s acquisition of subsidiaries was SEK 1,394 (365) million, of which SEK 1,388 million was paid and SEK 6 million was entered as a liability. The amount of acquired cash equivalents was SEK 147 (164) million. Net financial liability/asset During the year, the Group s net financial liabilities increased by SEK 1,079 (394) million. On the reporting date, the Group reported a net financial liability of SEK 1,878 ( 799) million. The Group Increase/decrease of loans 2010 2009 New loans 1,809 476 Amortization 659 33 Change in loans, net 1,150 443 Interest Interest received 1 2 Interest paid 17 12 Total 16 10 Interest paid and received is included as part of the cash flow from operating activities. 91

notes Note 28 Acquired businesses On 30 September 2010, Teracom AB acquired 100 percent of the shares in the Danish terrestrial network operator, BSD, which consists of the following three companies: Broadcast Service Danmark A/S, Broadcast Stations Company 1 A/S and Broadcast Stations Company 2 A/S. The purchase sum was SEK 1,394 million, of which SEK 1,388 was paid in cash. The remaining portion of the purchase sum was entered as a liability while the buyer and seller complete the final review of the opening balances. Acquisition costs amounted to SEK 16 million and have been included in the Group s income statement for 2010 as other expenses. The acquired companies form the cash generating unit called BSD, which is in the process of changing its name to Teracom A/S. According to the preliminary acquisition analysis, the assets and liabilities included in the acquisition of BSD are as follows: Acquired businesses in 2009 On 5 June 2009, Teracom AB acquired 51 percent of the shares in the Finnish Pay-TV operator, Digi TV Plus Oy. The purchase sum was SEK 503 million. In addition, Teracom has a put option on the remaining 49 percent of shares and there is also a call option to acquire the same percentage. The obligation, related to the put option, was valued at SEK 138 million at the time when the acquisition was made and it is included in the total acquisition cost. The liability has been reported at a value that represents Teracom s best assessment, having considered the time value of money. The option price is dependent on the company s future results and it may be adjusted if the assumptions underlying Teracom s assessment change. Value according to SEK millions acquisition analysis Property, plant and equipment 1,426 Customer agreements 20 Customer relations 12 Intangible assets 120 Current receivables interest-bearing 47 Current receivables non interest-bearing 4 Cash and bank balances 147 Provisions (deferred tax liabilities) 8 Long-term liabilities interest-bearing 241 Long-term liabilities non interest-bearing 98 Current liabilities interest-bearing 43 Current liabilities non interest-bearing 104 Acquired identifiable net assets 1,282 Goodwill 112 Purchase sum for shares in subsidiary 1,394 Purchase sum entered as a liability 6 Purchase sum, amount paid 1,388 Cash equivalents in acquired subsidiaries 147 Change in Group's cash equivalents from year's acquisitions 1,241 The amount of income from BSD that has been included in the Group s income statement since 1 October 2010 is SEK 60 million. BSD also contributed profit before tax of SEK 18 million. It is not possible to calculate the total amount of income that the Group would have had if BSD had been consolidated on 1 January 2010. That is because BSD consisted of several companies during 2010 and the legal structure was changed just prior to the acquisition. Value according to SEK millions acquisition analysis Property, plant and equipment 1 Brand 89 Customer relations 88 Intangible assets 46 Long-term receivables (deferred tax assets) 46 Current receivables 74 Prepaid expenses and accrued income 34 Cash and bank balances 164 Provisions (deferred tax liabilities) 46 Long-term liabilities 6 Current liabilities 294 Acquired identifiable net assets 196 Goodwill 307 503 Purchase sum for shares in subsidiary 355 Costs of acquisition 10 Liability related to issued put option for 49% 138 Total acquisition cost 503 Acquisition cost for year's acquisitions 365 Cash equivalents in acquired subsidiaries 164 Change in Group's cash equivalents from year's acquisitions 201 92

notes Note 29 Discontinued operations Note 30 Pledged assets In 2009, 100 percent of Comet Networks (Broadband segment) was divested. An agreement to sell the company to CSIT (the buyer) was signed on 4 September 2009. These operations had a negative operating profit and the buyer took over the business along with the contracted future obligations. The contracted purchase sum of SEK 1 takes into consideration the extensive obligations that were taken over by the buyer. The capital loss amounted to SEK 66 million. Income statement for discontinued operations 2010-01-01 2010-12-31 2009-01-01 2009-09-04 Net sales 0 136 Other income 0 0 Total income 0 136 Other external expenses 0 68 Personnel costs 0 28 Depreciation/amortization 0 56 Capital loss 0 66 Operating profit/loss 0 82 Net financial income/expense 0 0 Profit/loss after financial items 0 82 Tax on profit for the year 0 4 Profit (loss) for the year 0 78 At the end of the year, the Group s pledged assets were SEK 0 (0) million. Note 31 Contingent liabilities/guarantees Neither the Group nor the Parent Company reported any contingent liabilities or guarantees as of year-end 2010. At year-end 2009, the Parent Company had reported the following guarantees: SEK 0.250 million to the Swedish Board of Customs and SEK 0.050 million to the Customs Authority in Malmö. The Group did not report any other contingent liabilities besides these. Note 32 Significant events after the reporting date No significant events occurring subsequent to the reporting date have been identified that would affect the Group s profit or financial position as of 31 December 2010. Furthermore, no other events have been identified that would require additional disclosures. Cash flow from discontinued operations 2010-01-01 2010-12-31 2009-01-01 2009-09-04 Cash flow from operating activities 0 26 Cash flow from investing activities 0 28 Cash flow from financing activities 0 0 Cash flow from discontinued operations 0 54 93

The undersigned hereby declare that the consolidated financial statements and annual report have been prepared in accordance with international financial reporting standards (IFRS), as adopted by the EU, as well as generally accepted accounting principles. These give a true and fair view of the Group s and the company s financial position and earnings. In addition, the Group s Directors Report and the company s Director s Report provide a fair overview of how the Group and the company s businesses have developed, along with financial position and earnings. The significant risks and uncertainty factors facing the companies that belong to the Group have also been described. Sundbyberg, 16 March 2011 Åsa Sundberg Chairman of the Board Kristina Axberg Bohman John-Olof Blomkvist Maria Curman ingrid Engström Lars Grönberg Tobias Henmark Urban Lindskog Claes-Göran Persson Crister Fritzson President/CEO Our audit report was submitted on 16 March 2011 PricewaterhouseCoopers AB Sten Håkansson Authorised Public Accountant 94

Auditor s Report Auditor s Report To the annual meeting of the shareholders of Teracom AB, corporate identity number 556441-5098. We have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the Board of Directors and the president of Teracom AB for the year 2010. The annual accounts and the consolidated accounts of the company are included in the printed version of this document on pages 38 94. The Board of Directors and the president are responsible for these accounts and the administration of the company as well as for the application of the Annual Accounts Act when preparing the annual accounts and the application of international financial reporting standards IFRSs as adopted by the EU and the Annual Accounts Act when preparing the consolidated accounts. Our responsibility is to express an opinion on the annual accounts, the consolidated accounts and the administration based on our audit. We conducted our audit in accordance with generally accepted auditing standards in Sweden. Those standards require that we plan and perform the audit to obtain reasonable assurance that the annual accounts and the consolidated accounts are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts. An audit also includes assessing the accounting principles used and their application by the Board of Directors and the president and significant estimates made by the Board of Directors and the president when preparing the annual accounts and consolidated accounts as well as evaluating the overall presentation of information in the annual accounts and the consolidated accounts. As a basis for our opinion concerning discharge from liability, we examined significant decisions, actions taken and circumstances of the company in order to be able to determine the liability, if any, to the company of any board member or the president. We also examined whether any board member or the president has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association. We believe that our audit provides a reasonable basis for our opinion set out below. The annual accounts have been prepared in accordance with the Annual Accounts Act and give a true and fair view of the company s financial position and results of operations in accordance with generally accepted accounting principles in Sweden. The consolidated accounts have been prepared in accordance with international financial reporting standards IFRSs as adopted by the EU and the Annual Accounts Act and give a true and fair view of the Group s financial position and results of operations. A corporate governance statement has been prepared. The statutory administration report and the corporate governance statement are consistent with the other parts of the annual accounts and the consolidated accounts. We recommend to the annual meeting of shareholders that the income statement and balance sheet of the Parent Company and the Group be adopted, that the profit of the Parent Company be dealt with in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the president be discharged from liability for the financial year. Stockholm, 16 March 2011 PricewaterhouseCoopers AB Sten Håkansson Authorized Public Accountant 95

Explanations and definitions Explanations and definitions Technical glossary Broadcasting Radio and TV broadcasting. Co-location When companies and organizations rent space in a network operator s masts and stations. Typically, the equipment belongs to the customer. DAB Digital Audio Broadcasting, digital radio. DAB+ Future digital radio standard for the terrestrial radio network. DVB-T Digital Video Broadcasting Terrester. The European standard for terrestrial digital TV. DVB-T2 The future digital TV standard for the terrestrial TV network. Environmental Code This refers to the portion of Swedish legislation that protects human health and the environment. The work environment is regulated in other legislation. Free TV Channels that do not require any special subscription. Global Compact is a UN initiative to unite companies with UN bodies, trade unions and the civil sector. The initiative supports ten principles concerning human rights, labor legislation, the environment and efforts to counteract corruption. Its vision is for a more sustainable economy that does not marginalize different groups in society or have a negative impact on the environment. HDTV (High-Definition TV) High-definition TV that provides a sharper picture than standard TV. IPA Important Public Announcement is society s information channel that is used to reach those who are affected by very serious accidents/disasters and similar events. IPTV Broadband TV that is distributed via fiber or ADSL, for example. MPEG-2/MPEG-4 Moving Pictures Expert Group. Compression for digital TV broadcasts. With MPEG-2 coding technology, there is room for 5 to 7 standard TV channels in each multiplex. With the new MPEG-4 technology, there is room for 10 to 12 standard TV channels, or 2 to 4 HDTV channels. MUX (multiplex) Frequency space for digitally compressed signals. A MUX utilizes a frequency channel for transmission. Pay-TV Channels that require a subscription. Radio newspapers Recordings of newspaper articles for the visually impaired and dyslectics. Distributed via the FM network. RDS Radio Data System, technology for broadcasting texts and program-related messages in FM radio. Triple play An offering that includes telephony, Internet and TV that is distributed via the same network using shared technology. TV Operator The Teracom Group s common position as both a Pay-TV operator and a network operator. UHF Ultra High Frequency. Bandwidth between 300 3,000 MHz. VHF Very High Frequency. Bandwidth between 30 300 MHz. VoD Video-on-demand, films or TV programs distributed to viewers at the exact moment they themselves desire to view the content. 3G Third generation mobile telephony. It offers more rapid transmission speeds between mobile telephones, with the possibility of sending moving pictures, among other things. 4G Fourth generation mobile telephony. Financial definitions Average number of employees The number of employees at the beginning of the year, plus the number of employees at year-end, divided by two. Capital employed Total assets less non interest-bearing liabilities including deferred tax liabilities. Cash flow per share Cash flow from operating activities divided by the average number of shares. Earnings per share, before and after dilution Profit for the year attributable to the Parent Company s shareholders divided by the weighted average number of outstanding shares during the period. Equity per share Equity divided by the number of shares at year-end. Equity ratio Equity expressed as a percentage of total assets. Income per employee Operating income divided by the average number of employees. Operating expenses All operating expenses including work performed by the company for its own use and capitalized. Operating income Income that has been earned or is from work completed during the period. Pertains to all income except work performed by the company for its own use and capitalized, which is included as part of operating expenses. Operating margin Operating profit expressed as a percentage of operating income. Profit margin Profit before tax expressed as a percentage of operating income. Return on equity Profit for the year expressed as a percentage of average adjusted equity. Return on total capital Operating profit expressed as a percentage of average total assets. Return on capital employed Profit after net financial income/expense plus financial expenses expressed as a percentage of average capital employed. 96

Photos: Mats Lundqvist, pages 4, 11, 22, 23, 26. Dawid, pages 2, 32, 34 (excl. Johan Bobert, Pierre helsén photo Mats Lundqvist) 36. Dominique Faget, Scanpix ema 2010, page 14. Boxer page 17. Johan Modig page 18. Gudmund Thai/Tv2 Denmark page 20. Miguel riopa, Scanpix, page 22. niels Dreijer page 23. Martti Kainulainen, Scanpix, page 24. CONTACT INFORMATION: Teracom AB Box 1366 Se-172 27 Sundbyberg Street address: esplanaden 3C, 1st floor Sundbyberg Tel: +46 8 555 420 00 Fax: +46 8 555 420 01 www.teracom.se/teracom-koncernen/ CIN: 556441-5098 Teracom Sweden Box 1366 Se-172 27 Sundbyberg Street address: esplanaden 3C, 1st floor Sundbyberg Tel: +46 8 555 420 00 Fax: +46 8 555 420 01 Customer service +46 771-91 00 85 www.teracom.se Teracom A/S Banestrøget 19-2 DK-2630 Taastrup Street address: Banestrøget 19-2 Taastrup Tel: +45 7011 80 11 Fax: +45 4371 11 43 info@teracom.dk www.teracom.dk Boxer TV-Access AB Box 6239 Se-102 34 Stockholm Street address: S:t eriksgatan 117, 5th floor, Stockholm Tel: +46 8 587 899 00 Fax: +46 8 587 899 99 Customer service +46 771 21 10 00 kundtjanst@boxer.se www.boxer.se Boxer TV A/S Postbox 118 DK-1004 Copenhagen K Street address: Langebrogade 6e, 1. sal Copenhagen K Tel: +45 7025 1588 info@boxertv.dk Customer service +45 7033 2033 kundeservice@boxertv.dk www.boxertv.dk Digi TV Plus Oy Pasilankatu 2 Fi-00240 helsinki Street address: Pasilankatu 2 (huolintatalo) helsinki Tel: +358 10 387 3001 Fax +358 10 387 3088 Customer service +358 10 309 8008 asiakaspalvelu@plustv.fi www.plustv.fi