2004 2005
(NOK in millions) EDB Business Partner******************************************************* 4,287 4,991 Satellite Services *********************************************************** 2,385 2,428 Venture******************************************************************* 901 490 Corporate functions and group activities **************************************** 2,154 2,266 Other********************************************************************* 174 25 Eliminations*************************************************************** (361) (233) Total revenues(1)*********************************************************** 9,540 9,967 Total operating expenses**************************************************** 8,426 8,876 EBITDA(4) *************************************************************** 1,114 1,091 Of which:
— EDB Business Partner***************************************************** 978 785 — Satellite Services********************************************************* 409 393 — Venture***************************************************************** 130 (2) — Corporate functions and group activities************************************** (417) (77) — Other ****************************************************************** (2) (4) — Eliminations************************************************************* 16 (4) Depreciation and amortization(2) ********************************************** 975 1,033 Write-downs(3)************************************************************* 43 10 Operating profit*********************************************************** 96 48
2004 2005 (NOK in millions) Of which:
— EDB Business Partner***************************************************** 736 377 — Satellite Services********************************************************* 133 125 — Venture***************************************************************** 97 (23) — Corporate functions and group activities************************************** (809) (420) — Other ****************************************************************** (76) (7) — Eliminations************************************************************* 15 (4) Capital expenditure
EDB Business Partner******************************************************* 233 401 Satellite Services *********************************************************** 158 181 Venture******************************************************************* 52 30 Corporate functions and group activities **************************************** 249 213 Other********************************************************************* 5 7 Total capital expenditure**************************************************** 697 832 Investments in businesses
EDB Business Partner******************************************************* 1,076 50 Satellite Services *********************************************************** 142 10 Venture******************************************************************* 57 43 Corporate functions and group activities **************************************** 54 214 Other********************************************************************* — 15 Total investments in businesses ********************************************** 1,329 332 Of which outside Norway**************************************************** 893 858 No. of man-years (end of period)
EDB Business Partner******************************************************* 3,008 2,631 Satellite Services *********************************************************** 537 523 Venture******************************************************************* 577 681 Corporate functions and group activities **************************************** 1,165 1,161 Other********************************************************************* 13 17 Total no. of man-years (end of period)**************************************** 5,300 5,013 Of which outside Norway**************************************************** 893 858 (1) Of which internal revenues*********************************************** 2,929 2,907 (2) Of which amortization of Telenor’s net excess values************************** 8 8 (3) Of which write-downs of Telenor’s net excess values************************** 3 5 (4) You should read ‘‘Results of Operations — Group — Operating Profit and EBITDA’’ for a discussion of
EBITDA and its importance to management as an indicator of performance for each of our operating segments.
EDB Business Partner ASA (ownership interest 51.8% as of December 31, 2005)
EDB Business Partner ASA’s results are impacted by the acquisitions of the Managed Services business from Fixed (May 1, 2004), Apoteket AB (April 1, 2004), IBM’s service activities in the Norway
(December 31, 2004), Capgemini’s infrastructure management operations in Sweden and Norway
(December 31, 2004) and BanqIT Business Applications (May 1, 2005). The System Integration area within Telecom was divested as from March 25, 2004 and the remaining part of the Telecom business area was divested as from September 30, 2005.
Revenues increased by 16% in 2005 compared to 2004 due to the businesses acquired. Revenues also increased as a result of the growth in the Solutions Bank & Finance area.
Operating profit decreased in 2005 compared to 2004, primarily due to gains of NOK 303 million from disposal of System Integration (part of the Telecom area) in 2004. For the same reason EBITDA decreased in 2005 compared to 2004. The decreases in operating profit and EBITDA were partially offset by the improved profitability in the Solutions Bank & Finance area. Increased depreciation and amortization was due to a shift from operating leases to own investments, as well as an increase in capital expenditure.
Capital expenditure in 2004 and 2005 related mainly to investments within the IT Operations area. These investments include computer hardware and software for the mainframe and Unix platforms and replacement of equipment used in IT operations outsourced from our customers. In 2005, we also invested in data centers in connection with general upgrading and centralization of the mainframe operations in Norway and Sweden.
In January 2006, EDB Business Partner has acquired four businesses; Tag Systems, Datarutin, Avenir and Spring Consulting for a total consideration of approximately NOK 660 million.
Telenor Satellite Services
In 2004, the sub-units Satellite Services and Satellite Networks were merged into one unit under the name of Telenor Satellite Services (TSS). TSS also acquired, in 2004, GMPCS Personal Communications Inc. (August) and Neratek AS (December).
The increase in revenues in Satellite Services in 2005 compared to 2004 was primarily due to the two companies acquired in 2004 and growth within the Corporate Networks and Sealink segments. Both the strengthening of the Norwegian Krone against the US Dollar in 2005 compared to 2004 as well as a continued downward pressure on prices on many of the Inmarsat products had a negative effect both on our revenue and on our overall results in 2005. Revenues and profits in 2004 were negatively impacted by adjusted accruals for project revenues.
The decrease in operating profit in 2005 compared to 2004 was primarily due to reduced sales and margins on many Inmarsat products, a settlement of a commercial dispute, the appreciation of the Norwegian Krone against the US Dollar, and costs for workforce reductions.
Total capital expenditure in 2005 amounted to NOK 181 million and in 2004 amounted to NOK 158 million related primarily to investments in Sealink equipment and to the technical up-grade of our operations at the land earth stations.
Telenor Venture
At the end of 2005, operations in Telenor Venture consisted of ownership in several companies. Opplysningen (changed name in 2005 from Teleservice) represented the primary subsidiary of the business.
Revenues in Telenor Venture decreased in 2005 compared to 2004 primarily due to disposals of subsidiaries, which were partially offset by increased revenues in Opplysningen in 2005 due to increased market share and the establishment of new products.
The operating profit in Telenor Venture decreased in 2005 compared to 2004 primarily due to gain from disposals of subsidiaries in 2004 and due to the costs of the establishment of new products by Opplysningen. Other
Other principally includes Telenor International Business and Telenor New Business. Revenues in Other decreased in 2005 due to the disposal of Telecom Management Partner in May 2005. The operating loss was reduced in 2005 compared to 2004 due to the sale of Software Services in 2004.
Corporate Functions and Group Activities
This area comprises Real Estate, Research and Development, Strategic Group Projects, Internal Insurance Company, Group Treasury, International Services and central staff and support functions.
In 2005, the EBITDA loss decreased as a result of increased revenues from the increased allocation of business service costs to the different segments in Telenor, as well as reduced pension costs in 2005 compared to 2004, reduced activity in strategic group projects, reduced costs for workforce reductions and increased gains on sale of operations, land and properties. The sale of properties also led to lower
depreciation compared to 2004.
In 2004, a change in the accounting treatment of our agreement-based early retirement pension plan in the Group led to more than NOK 100 million in additional pension costs in corporate functions and Group activities in 2004. The total effect for the Group was slightly negative.
In 2005, net gains on disposal of fixed assets (and operations) was NOK 163 million, an increase by NOK 64 million compared to 2004. Expenses for workforce reductions and onerous (loss) contracts was NOK 29 million in 2005 compared to NOK 115 million in 2004.
In 2004, Corporate Functions and Group Activities had higher operating expenses on strategic group projects, primarily the efficiency improvements program, and significant costs in relation to the assembling of Telenor’s IT operations in EDB Business Partner.
Capital expenditure decreased from 2004 to 2005, due to lower investments in IT systems in 2005. WORKING CAPITAL
Working capital (total current assets less total current liabilities) was negative by NOK 11.4 billion as of December 31, 2005 and negative by NOK 2.5 billion as of December 31, 2004. Installments on interest- bearing liabilities to be paid during the next 12 months are classified as short-term interest-bearing liabilities and contribute to the negative working capital. We believe that taking into consideration our established credit facilities and having due regard for our sources of liquidity reserves (including committed credit facilities), credit rating and access to capital markets, we have sufficient liquidity and working capital to meet our present and future requirements. Our capital resources are described below.