1 annual report 2004

8/3/2019 1 Annual Report 2004

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Annual Report 2004


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Dear shareholder

Managements Review

Financial highlights for the year

Selected financial and operational data

The TDC Group

Outlook

Managements Discussion and Analysis of

Financial Statements

The TDC Group

TDC Solutions

TDC Mobile International

TDC SwitzerlandTDC Cable TV

TDC Directories

Other activities

Financial management and

market-risk disclosures

Legal proceedings

Critical accounting policies

Change to International Financial

Reporting Standards (IFRS)

Recent developments

Risk factors related to TDCs business

Safe harbor statement

Financial Statements

Significant Accounting Policies

Statements of Income

Balance Sheets

Statements of Cash Flow

Notes

Management Statement

Auditors Report

Supplementary information

Information to shareholders and

financial calendar

Corporate governance

Strategy

Employees

Vision and corporate social responsibility

Glossary

Management executives

Board of Directors

Executive Committee

Table of Content

3

4

7

8

11

12

12

17

23

3035

39

42

43

46

46

47

48

49

54

57

65

66

68

69

109

110

112

115

116

117

119

120

122

123

125


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Dear shareholder

2004 was an exciting year for TDC. We acquired and

divested a number of companies, SBC sold its shares in

TDC, and all the markets we serve were characterized

by continued competition and development. We gained

strength and experience throughout the year and are

now better posit ioned than ever before to realize our

vision of being the best provider of communications

solutions in Europe.

Developments in the telecoms market have followed

their familiar course of high growth in mobile telephony

and broadband solutions, strong growth in IP-based

products and declining demand for traditional landline

services. We have adopted a proactive stance by focusing

on cost control and adapting our operations and infra-

structure to suit rapidly changing technological reality

while creating value for our shareholders.

In 2004, we continued a second phase of the redundancy

programs and invested many resources in training and

developing our employees. We maintained our clear

focus on ensuring that our customers experience even

better service, and continued taking the social respon-

sibility that can justifiably be expected of a corporationsuch as TDC.

In 2004, we achieved continued growth in our f inancial

results and outperformed the Outlook for 2004. EBITDA1

grew 6.7% and our year-end net interest-bearing debt

fell from DKK 28.7bn at year-end 2003 to DKK 20.0bn.

In 2004, we divested Dan Net and our stake in Belgacom,

and acquired Song Networks and NetDesign as well as

the remaining shares in Telmore. We now have a unique

platform that meets the growing broadband, IP/VPN

and voice service needs of business customers in all the

Nordic countries. Similarly, acquiring Telmore has also

helped TDC secure and consolidate its position in the

Danish mobile market.

SBC sold its shares in TDC in 2004 after six years as the

main shareholder. Our present major shareholders are

Danish, British and American institutional investors,

most with long-term investment strategies that contribute

toward continuity at TDC.

The vacancy left by SBC was quickly filled by three highly

qualified board members, and the new Board of Directors

subsequently reviewed our strategy. This resulted in

some adjustments, but no significant change of direction.

We no longer attach great importance to owning networks

in all our operations, as the experience gained from

Talkline and Telmore shows that favorable results can be

achieved by leasing network capacity from other operators.

The easyMobile product is also based on this concept,

which will be tried initially on the British market.

2004 was a prosperous year for TDC with major changesthat have left us well-equipped for the future.

1 Earnings before interest, taxes, depreciation and amortization.

Henning Dyremose

President and Chief Executive Of ficer

Thorleif Krarup

Chairman of the Board

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The TDC Groups (TDC) net revenues rose 5.2% to DKK43,570m, with earnings before interest, taxes, depreciation

and amortization (EBITDA) up 6.7% to DKK 12,432m. Including

one-time items and fair value adjustments, net income

rose DKK 6,997m to DKK 8,742m. Net income, excluding one-

time items and fair value adjustments, was DKK 2,411m,

unchanged compared with 2003. Adjusted for the divest-

ment of Belgacom, net income, excluding one-time items

and fair value adjustments, increased 27.4% to DKK 2,212m.

TDCs EBITDA has increased since 2001 and in the same

period the EBITDA margin increased from 22.9% to 28.5%

and the CAGR (Compounded Annual Growth Rate) inEBITDA was 6.6%. The capex-to-net revenues ratio fell

from 22.2% in 2001 to 12.1% in 2004.

Capital expenditures, excluding share acquisitions,

decreased DKK 251m or 4.6% to DKK 5,254m in 2004. This

decrease was driven mainly by lower investments in

TDC Switzerland due primarily to capitalization of asset

retirement obligations mainly concerning mobile sites

in 2003. This was partly offset by preparations to launch

UMTS in the Danish and Swiss markets in 2005.

Cash flow from operating activities amounted to DKK

11,134m, up DKK 412m or 3.8% compared with 2003, due

primarily to the improved EBITDA from 2003 to 2004 and


1 The impact of net interest-bearing debt from acquisition and divestment of enterprises is calculated on the basis of cash amounts.2 This Outlook is an update of the Outlook provided in the Annual Report 2003 and reflects primarily the new

accounting policies, cf. the description on major events in 2004, and the divestment of Belgacom.

improved working capital. These improvements werepartly offset by payments relating to the redundancy

programs.

Net interest-bearing debt fell DKK 8.7bn to DKK 20.0bn

at year-end 2004, impacted1 by the improved EBITDA, the

divestment of Belgacom, DKK 11.8bn, and Dan Net, DKK 1.2bn,

and was offset partly by the acquisition of treasury shares

for DKK 3.5bn net, TDC Song for DKK 4.3bn, NetDesign for DKK

0.3bn, and the remaining stake in Telmore for DKK 0.1bn.

EBITDA less capex and plus working capital changes

improved DKK 1,817m, or 27.2% compared with 2003.

With these results, TDC has outperformed the Outlook2

for 2004 described in its first-quarter report. Compared

with the Outlook, net revenues were DKK 1.6bn higher,

stemming primarily from higher activit y levels than ex-

pected in TDC Mobil and Talkline, as well as the inclusion

of TDC Song from November 2004. EBITDA was DKK 0.3bn

better than expected due mainly to EBITDA in TDC Mobile

International that exceeded the Outlook. Net income,

excluding one-time items and fair value adjustments,

was DKK 0.3bn higher than expected, reflecting the

improved EBITDA and lower f inancial expenses than

anticipated.

Net revenues were DKK 1.2bn higher than stated in the

latest Outlook for 2004 presented in the third-quarter

report, due mainly to the development in TDC Mobile

International and the inclusion of TDC Song from

November 2004. Both EBITDA and net income, excluding

one-time items and fair value adjustments, exceeded

the Outlook by DKK 0.2bn.

The above achievements were supported by stringent

cost control in the domestic operations, including the

effect of the redundancy programs, and by TDCs success-ful xDSL sales and strong growth in the domestic mobile

business. TDC Cable TV increased its customer base and

earnings, while TDC Switzerland continued its positive

development in earnings, which stemmed from reduced

costs and a higher activity level in mobile telephony.

These results were achieved despite fierce competition,

price decreases in the domestic mobile market and a

general decline in traditional landline telephony.

The above results are reviewed in detail on pages 12-42.Note: Capex excludes share acquisitions and capitalization of assetretirement obligations.


Net revenuesEBITDADKKm

Capex-to-net revenues ratioEBITDA margin

%

EBITDA CapexCapex-to-net revenues ratio EBITDA margin

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Major events in 2004

The second phase of the redundancy programsIn January 2004, TDC decided to implement a second

phase of the redundancy programs, which was initiated

in May 2003. The one-time items related to the second

phase totaled DKK 450m after tax, which was expensed

in the first quarter 2004.

In total, 1,558 employees have now left the Group in

connection with the redundancy programs. The total

one-time items were DKK 1,050m after tax, of which DKK

600m related to 2003.

TDC Mobile International acquired theremaining shares in TelmoreIn January, TDC agreed with Telmores shareholders

to buy the remaining 80% stake in the company. TDC

Mobile International now owns Telmore 100%. The price

for the remaining shares was DKK 0.3bn.

Belgacom listingBelgacom, the leading telecommunications provider in

Belgium, was listed on March 25. TDC had a 16.5% stake

in Belgacom through the ADSB consortium, which owned50% less one share. The other consort ium partners were

SBC Communications and Singapore Telecommunications.

All the shares in Belgacom owned by the consortium

were divested, and TDCs share of the proceeds totaled

DKK 11.8bn.

TDC changed its accounting policiesIn April, TDC announced that the Group was to discon-

tinue proportional consolidation of jointly controlled

enterprises and implement the new Danish accounting

standard regarding revenue recognition. These changes

are reviewed in detail in the sect ion on SignificantAccounting Policies.

SBC sold its shares in TDCIn June, SBC reduced its shareholding in TDC from 41.6%

to 9.5%. TDC acquired 8.4% of these shares for DKK

3.4bn. TDCs port folio of treasury shares equals 10%

of the Companys total common shares. SBC sold its

remaining 9.5% stake in TDC in November.

Note: Broadband customers includes xDSL and cable modem witha capacity of at least 144 kbit/s.

Broadband customersEnd-of-period (1,000)

Mobile customersEnd-of-period (1,000)

0

150

300

450

600

750

900

Domestic mobile traffic(million min.)

Domestic mobile customers International mobileDomestic mobile traffic customers

Domestic International

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GSM license in OmanIn March, TDC signed a collaboration agreement with

Qatar Telecom. And in June, the two companies, together

with a number of local investors, won a GSM mobile

telephony license in Oman. A new mobile company,

Nawras Telecom, was subsequently created with Qatar

Telecom as main shareholder. TDC owns 16% of the

shares, but due to concluded shareholder agreements,

the investment involves no significant risk.

Divestment of Dan NetIn August, we sold Dan Net, which operates with data

clearing for mobile and landline operators, electronicdata interchange and e-commerce solutions. The

selling price was DKK 1.2bn, and dividends from Dan Net

amounted to DKK 159m.

TDC signed an agreement with easyGroupIn August, TDC signed a brand license agreement with

the British company easyGroup, which allows us to use

the easy brand when of fering mobile telephony in up to

12 European countries. In November, TDC announced the

signing of a contract with the British company T-Mobile

for the right to use the companys network on service

provider terms. TDC intends to of fer mobile telephony

in Great Britain under the easyMobile name following

the Telmore concept, which offers cheap-rate mobile

telephony with web-based subscriptions based on

leased network capacity.

Song NetworksIn September, TDC announced its acquisition offer to the

owners of shares and convertible bonds in Song Net-

works Holding AB, and at the beginning of November TDC

announced that the offer had been accepted. By year-

end 2004 TDC owned 99.4% and the purchase price totaled

DKK 4.6bn. The name of the company has now been

changed to TDC Song.

Share option program for employees in foreigncompaniesIn November, TDC decided that options to buy shares in

TDC should be issued to employees in the fully-owned

foreign subsidiaries. The decision follows TDCs share

option program for Danish employees announced in

November 2003. The options can be exercised in five

years. 3,095 employees participated in the program. A

total of 278,711 opt ions with an option value of approx.

DKK 27m cover the share option program.

TDC acquired NetDesign

In December, TDC acquired NetDesign A/S, a leadingprovider of IP/LAN infrastructure for business customers.

The purchase price totaled DKK 0.3bn.

Financial highlights for the year / Selected financial and operational data

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Selected financial and operational data

TDC Group 2000 2001 2002 2003 2004 2004 2004

Statements of Income DKKm USDm EURm

Net revenues 34,813 42,008 42,011 41,413 43,570 7,969 5,858

Total revenues 36,395 43,900 43,794 42,939 45,038 8,237 6,055

Total operating expenses (25,843) (34,268) (33,091) (31,285) (32,606) (5,963) (4,384)

Earnings before interest, taxes, depreciation and amortization (EBITDA) 10,552 9,632 10,703 11,654 12,432 2,274 1,671

Depreciation, amortization and write-downs (4,400) (6,719) (7,342) (7,743) (8,193) (1,498) (1,101)

Earnings before interest and taxes (EBIT), excluding one-time items 6,152 2,913 3,361 3,911 4,239 775 570

One-time items 6,161 (2,548) (1,133) (1,719) 5,825 1,065 783

EBIT including one-time items 12,313 365 2,228 2,192 10,064 1,841 1,353

Net financials 154 417 3,562 1,190 27 5 4

Income before income taxes 12,467 782 5,790 3,382 10,091 1,846 1,357

Total income taxes (3,239) (1,397) (1,559) (1,629) (1,351) (247) (182)

Income before minority interests 9,228 (615) 4,231 1,753 8,740 1,599 1,175

Minority interests 74 534 227 (8) 2 0 0

Net income 9,302 (81) 4,458 1,745 8,742 1,599 1,175

Net income excluding one-time items and fair value adjustments1

EBIT, excluding one-time items 6,152 2,913 3,361 3,911 4,239 775 570

Net financials 10 (206) 305 618 (151) (28) (20)

Income before income taxes 6,162 2,707 3,666 4,529 4,088 748 550

Total income taxes (2,590) (1,815) (1,772) (2,110) (1,679) (307) (226)

Net income before minority interests 3,572 892 1,894 2,419 2,409 441 324

Minority interests 74 482 191 (8) 2 0 0

Net income 3,646 1,374 2,085 2,411 2,411 441 324

Balance Sheets DKKbn USDbn EURbn

Total assets 67.7 86.7 83.6 89.5 87.5 16.1 11.8

Net interest-bearing debt 11.0 33.0 25.8 28.7 20.0 3.7 2.7

Total shareholders equity 35.1 32.7 34.7 33.0 36.0 6.6 4.8

Shares outstanding 2 (million) 216.5 216.5 216.5 216.5 204.6 204.6 204.6

Statements of Cash Flow DKKm USDm EURm

Operating activities 7,396 4,062 9,950 10,722 11,134 2,036 1,497

Investing activities (3,860) (18,963) (1,254) (11,585) 4,243 776 570Financing activities 931 10,863 (6,759) 4,943 (12,562) (2,298) (1,689)

Change in cash and cash equivalents 4,467 (4,038) 1,937 4,080 2,815 515 378

Capital expenditures DKKbn USDbn EURbn

Excluding share acquisitions 5.9 9.3 6.3 5.5 5.3 0.9 0.7

Including share acquisitions 12.1 21.6 7.4 13.6 10.1 1.8 1.3

Key financial ratios

Reported EPS 3 DKK 43.0 (0.4) 20.6 8,1 42,7

Adjusted EPS 4 DKK 16.8 6.3 9.6 11,1 11,8

Dividend per share DKK 10.5 11.0 11.5 12,0 12,5

EBITDA margin 5 % 30.3 22.9 25.5 28,1 28,5

Capex-to-net revenues ratio 6 % 16.9 22.2 15.1 13,3 12,1

Return on capital employed (ROCE) 7 % 17.6 9.5 11.7 12,6 11,1

Subscriber base (end of year) (1,000)

Landline 8 3,691 3,913 3,598 3,631 3,483

Mobile 8 3,522 4,575 4,939 6,199 7,126

Internet 923 1,403 1,285 1,696 1,814

Cable TV 801 828 885 924 982

Total subscribers 8,937 10,719 10,707 12,450 13,405

Number of employees 9 19,946 22,485 22,263 21,125 20,573

DKK/USD exchange rate 5.4676

DKK/EUR exchange rate 7.4381

1 Excluding consolidated one-time items and fair value adjustments, as well as excluding fair value adjustments in associated enterprises included in the captions Incomebefore income taxes from associated enterprises and Income taxes related to income excl. one-time items and fair value adjustments.

2 The number of shares in 2000 - 2003 has not been adjusted for treasury shares according to Danish practice as these amountedto less than 2% of the total number of shares outstanding.

3 Net income, including one-time items and fair value adjustments, divided by the average number of outstanding shares.4 Net income, excluding one-time items and fair value adjustments, divided by the average number of outstanding shares.5 Earnings before interest, taxes, depreciation and amortization divided by net revenues.6 Capital expenditures excluding share acquisitions.7 ROCE is defined as EBIT excluding one-time items plus interest and other financial income excluding fair value adjustments divided

by total shareholders equity plus interest-bearing debt.8 The definition of active and inactive customers in TDC Switzerland was changed in 2004. Comparative figures from 2000 to 2003

have been changed accordingly.9 The number denotes end-of-year full-time employee equivalents including permanent employees, trainees and temporary employees.

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Today, TDC is the leading provider of communicationssolutions in Denmark, the second-largest telecoms

provider in the Swiss market, and is represented by sig-

nificant presence in selected markets in Northern and

Central Europe.

By the end of 2004, the TDC Group had more than 13.4m

customers in Europe: 3.5m landline customers, 7.1m

mobile customers, 1.8m Internet customers, and 1.0m

cable-TV customers. In 2004, TDCs total net revenues

were DKK 43.6bn, of which 47% stemmed from interna-

tional activities compared with 45% in 2003 and 46% in

2002. By comparison, EBITDA from international activitiescontributed 25% in 2004 and 2003 compared with 16%

in 2002.

In recent years, it has been necessary to reduce our do-

mestic workforce, primarily to adjust to the decline in

traditional landline telephony and intensified competi-

tion in the domestic market. Increased customer interest

in self-service and Internet-based solutions has also

contributed to this trend. The adjustment was effected

partly by natural attrition and the completion of redun-

dancy programs in 2003 and 2004. At year-end 2004, TDChad 20,573 full-time employee equivalents compared

with 21,125 in 2003. Our domestic operations account for

the majority of the decrease, and at year-end 2004 TDC

had 14,998 full-time employee equivalents compared

with 16,014 in 2003.

History

Over the past ten years, TDC has developed from a tradi-

tional and mainly Danish provider of landline and mo-

bile telephony services into the Danish-based European

provider of communications solutions it is today.

Deregulation of the Danish telecommunications market

in 1996 created a highly competitive market. In 2004,

the Danish telecoms market was fully liberalized and

highly competitive.

TDC was partly privatized in 1994 and fully privatized in

1998, and at year-end 2004 our shares were held mainly

by institutions and retail investors in Denmark, Great

Britain and the USA.

The TDC Group

Note: The number denotes end-of-year full-time employee equivalentsincluding permanent employees, trainees and temporary employees.

The TDC Group

CustomersEnd-of-period (1,000)

2000

0

2001 2002 2003 2004

Number of employeesEnd-of-period

0

Landline Mobile Internet Cable TV Domestic International

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The telecommunications sectorIn recent years, the fierce competition in the tele-

communications sector has intensified. Competition in the

domestic market is especially tough with many operators,

and public regulation aimed particularly at TDC. The

combination of price competition, regulatory require-

ments and a saturated market has resulted in moderate

revenue growth. The Nordic network operators have

addressed this situation in several ways, e.g. by market

consolidation and international expansion. TDC has

established easyMobile, which provides mobile telephony

based on the Telmore concept, initially in the British market.

And as part of our effor ts to achieve operational efficiency,we have implemented redundancy programs in 2003 and

2004, which meant that a total of 1,558 employees left

the Group. Finally, we have focused on integrated pan-

Nordic communications solutions, illustrated by TDCs

acquisition of TDC Song and NetDesign.

With regard to regulations in Denmark, the Danish Na-

tional IT and Telecom Agency performs market analyses

on a number of submarkets in the telecoms sector that

are specifically defined in advance. The Agency will use

these market analyses as its basis for deciding whether

a particular market is subject to suf ficient competition.

If that is not the case, it will designate one or more

operators as holding strong market positions and im-

pose one or more obligations to eliminate the imperfect

competition.

The technological advances have caused the followingkey trends in the telecoms market: migration from land-

line to mobile telephony, a shift from circuit-switched

to package-switched traf fic (VoIP, IP-VPN, GPRS, UMTS),

a change to consumption independent f lat-rate pricing,

and increased self-services and web-based distribution

channels.

TDC continuously adapts to technological and market

developments and in 2004 launched a range of new

products. In the domestic market, TDC successfully

launched TDC Samtale giving unlimited landline

minutes in off-peak hours at a flat monthly rate. In2004, TDC was the first Danish operator to launch a

nationwide network of wireless hotspots in selected

geographical areas, from where the Internet can be

accessed. At year-end 2004, TDC had 435 wireless hotspots

in Denmark. As a continuation of our successful web-

based discount product, Mixit, TDC launched a similar

product for business customers, MobilFlex Let, in 2004.

TDC plans to launch Internet-based telephony (VoIP) for

residential customers, 3G mobile telephony and Inter-

net-based TV (TVoIP) in 2005.

Business lines

TDC is organized as six main business lines:

TDC Solutionsprovides communications services primarily

in Denmark and the Nordic countries. Its activities include

landline telephony services, convergence products

(combined landline and mobile telephony), broadband

solutions, advanced security and hosting services, data

communications services and Internet services, leased

lines, sale of terminals and installation. TDC Solutions

major subsidiaries include the following companies: TDC

Song, a pan-Nordic network operator mainly for businesscustomers, NetDesign, a leading provider of IP/LAN in-

frastructure primarily for business customers, Contactel,

a provider of Internet and telephony services in the

Czech Republic, TDC Internordia, a Swedish-based

provider of telecoms equipment for business customers,

and TDC Norge, which provides Internet, telephony and

data services.

EBITDAper business line 2004

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TDC Mobile Internationalprovides mobile telecommuni-cations services in Denmark and a number of European

countries. The domestic activities include the fully-owned

companies TDC Mobil, a Danish-based mobile operator,

and Telmore, a Danish service provider. The international

activities include the fully-owned subsidiaries Talkline,

a German service provider, and Bit, a Lithuanian mobile

operator. TDC Mobile International also holds a 19.6%

stake in Polkomtel, a Polish mobile operator, and a 15.0%

stake in the Austrian mobile operator, One, and finally, an

80% stake in Telmore International, which takes care of

cooperation with easyGroup.

TDC Switzerlandis the second-largest telecommunications

provider in the Swiss market. Its ac tivities include land-

line, mobile and Internet communications services.

TDC Cable TVis a Danish provider of cable TV and

broadband access.

TDC Directoriespublishes printed, electronic and Inter-

net-based directories in Denmark, Sweden and Finland.

Othersinclude primarily TDC Services, which provides

mainly business services for the TDC Groups domestic

business lines.

The TDC Group / Outlook

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The Outlook for 2005 is based on thorough financial plans foreach individual business line. However, information concern-

ing the future is by nature associated with a certain level

of risk and uncertainty. These risks are described in more detail

in the Safe harbor statement and the section on risk factors.

In general, all figures are excluding one-time items and fair

value adjustments and are prepared in line with the account-

ing policies applied in 2004. An updated Outlook in accord-

ance with International Financial Reporting Standards

(IFRS) will be included in the first-quarter 2005 report.

TDC expects net revenues of DKK 45.7bn for 2005, a 4.9%increase compared with 2004.

EBITDA is expected to increase 3.8% to DKK 12.9bn in 2005,

compared with an EBITDA growth of 4.1% in the second half

of 2004. The positive development in EBITDA in 2005 will

stem primarily from growth in Internet and data communi-

cations as well as mobile telephony. The impact of the

Outlook for 2005 (excluding one-time items and fair value adjustments) DKKbn

TDC Group

2004 2005 Growth in %

TDC Group

Net revenues 43.570 45.7 4.9

EBITDA 12.432 12.9 3.8

Net income 2.411 1.8 (25.3)

TDC Solutions

Net revenues 18.590 20.9 12.4

EBITDA 5.894 6.4 8.6

TDC Mobile International

Net revenues 15.105 14.5 (4.0)

EBITDA 2.682 2.7 0.7

TDC Switzerland

Net revenues 9.692 10.0 3.2

EBITDA 2.455 2.6 5.9TDC Cable TV


EBITDA 0.355 0.5 41.0

TDC Directories


EBITDA 0.472 0.5 5.9

Other 1

Net revenues (3.019) (3.3) (9.3)

EBITDA 0.574 0.2 (65.2)

redundancy programs and the full-year effect of theacquisition of TDC Song in November 2004 are also

expected to contribute to the positive developments,

but will be partly off set by the divestment of Talkline

Infodienste, a provider of value-added services, with

effect from 2005 and the roll-out of easyMobile.

TDCs net income is expected to decrease to DKK 1.8bn in

2005, which includes goodwill amortization of DKK 1.7bn.

An increase in EBITDA in all business lines is expected, but

the results are impacted by f inance costs and depreciation

and amortization, including goodwill amortization, related

to the inclusion of TDC Song. The general level of depre-ciation is also expected to increase, primarily due to the

extension of TDC Switzerlands network. In addition, net

income is adversely affected as Belgacom was included as

an associated enterprise in the first three months of 2004.

The outlook for the individual business lines are included

in the following.

Outlook

1 Includes TDC Services, TDC A/S and eliminations.

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Managements Discussion and Analysis of Financial Statements

Key financial figures DKKm

TDC Group

2003 2004 Growth in %

Net revenues 41,413 43,570 5.2

Total revenues 42,939 45,038 4.9

Total operating expenses (31,285) (32,606) (4.2)

Earnings before interest, taxes, depreciation

and amortization (EBITDA) 11,654 12,432 6.7

Depreciation, amortization and write-downs (7,743) (8,193) (5.8)

Earnings before interest and taxes (EBIT),

before one-time items 3,911 4,239 8.4

One-time items (1,719) 5,825 -

Earnings before interest and taxes (EBIT) 2,192 10,064 -

Net financials (incl. fair value adjustments) 1,190 27 (97.7)

Total income taxes (1,629) (1,351) 17.1

Net Income 1,745 8,742 -

Net income excluding one-time items

and fair value adjustments1 2,411 2,411 -

EBITDA margin (%) 28.1 28.5 -

Capital expenditures excluding share acquisitions 5,505 5,254 4.6

Capex-to-net revenues ratio 13.3 12.1 -

Net debt 28,682 20,010 30.2

Cash flow from operating activities 10,722 11,134 3.8

The TDC Group

Net revenuesTDCs net revenues amounted to DKK 43,570m in 2004, up

DKK 2,157m or 5.2% compared with 2003. This growth

stemmed mainly from our mobile businesses in Denmark,

Germany and Switzerland, our domestic broadband and

cable-TV businesses, increased revenues in Talkline Info-

dienste and the inclusion of TDC Song from November 2004.

This positive increase was partly offset by lower revenues

from traditional landline telephony caused by the mi-

gration toward mobile telephony and private IP-based

networks, as well as lower volumes of transit traffic.

Transmission costs,raw materials and suppliesTransmission costs, raw materials and supplies in TDC rose

8.8% or DKK 1,327m to DKK 16,376m in 2004 due primarily to

higher transmission costs in TDC Mobil and Talkline as aresult of increased voice and SMS traffic. A modest increase

resulted from higher transmission costs in TDC Solutions.

Other external chargesOther external charges, including marketing and customer-

acquisition costs as well as rent, leases and service

agreements amounted to DKK 8,234m in 2004, up DKK

202m or 2.5% on 2003. The increase stemmed largely

from higher marketing and customer-acquisition costs

in TDC Mobil and Talkline and the inclusion of TDC Song

from November 2004, partly offset by stringent cost

control in the domestic operations.

Wages, salaries and pension costsIn 2004, TDCs wages, salaries and pension costs dropped

DKK 208m or 2.5% to DKK 7,996m. The decrease reflected

primarily a 6.5% decline in the number of average full-

1 Excluding consolidated one-time items and fair value adjustments, as well as excluding fair value adjustments in associatedenterprises included in the captions Income before income taxes from associated enterprises and income taxes related to incomeexcl. one-time items and fair value adjustments.


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time employee equivalents to 1,395 stemming mainly

from the redundancy programs and natural attrition

mainly in TDC Solutions.

Earnings before interest, taxes, depreciationand amortization (EBITDA)TDCs EBITDA rose DKK 778m or 6.7% to DKK 12,432m.

TDC Mobile Internationals EBITDA increased DKK 308m

or 13.0%, resulting primarily from the domestic mobile

business. TDC Switzerlands EBITDA rose DKK 250m or

11.3%, due mainly to increased mobile revenues. EBITDA

in TDC Cable TV increased DKK 182m or 105.2% as a re-

sult of increased revenues following the growth in the

customer base and increased revenues per customer.

EBITDA in TDC Solutions grew DKK 180m or 3.2% and

comprised primarily increased earnings from xDSL sales

and stringent cost control in the domestic operations,partly of fset by declining earnings from traditional

landline telephony.

Depreciation, amortization and write-downsDepreciation, amortization and write-downs rose DKK

450m or 5.8% to DKK 8,193m in 2004. This increase

related primarily to reassessment of the useful lives of

non-current assets in TDC Solutions at year-end 2003,

and increased depreciation and amortization in connec-

tion with the inclusion of Telmore from February 2004,

and TDC Song from November 2004.

Earnings before interest and taxes (EBIT)Earnings before interest and taxes, excluding one-time

items and fair value adjustments, increased DKK 328m or

8.4% to DKK 4,239m, and reflected primarily improved

EBITDA, partly of fset by increased depreciation, amorti-

zation and write-downs.

One-time itemsIn 2004, one-time items before tax amounted to DKK

5,825m with a net income impact of DKK 6,190m compared

with one-time items before tax of DKK (1,719)m in 2003

with a net income impact of DKK (1,174)m. One-time

items include profit on sales of major enterprises, im-

pairment losses and restructuring costs, etc.

Profit before tax on divestment of major enterprises in

2004 amounted to DKK 6,440m and includes DKK 5,472m

profit from the divestment of Belgacom and profit of

DKK 968m from the divestment of Dan Net.

Restructuring costs in 2004 amounted to DKK (615)m

before tax and related primarily to the second phase of

the redundancy programs in the domestic operations.

Net revenues DKKm

TDC Group

2003 2004 Growth in %

TDC Solutions 18,585 18,590 0.0

TDC Mobile International 13,175 15,105 14.6

Domestic operations 5,613 6,503 15.9

Talkline 6,692 7,675 14.7

Bit 870 927 6.6

TDC Switzerland 9,471 9,692 2.3

TDC Cable TV 1,524 1,766 15.9

TDC Directories 1,463 1,436 (1.8)Other 1 (2,805) (3,019) (7.6)

TDC Group 41,413 43,570 5.2

1 Includes TDC Services and eliminations.

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Restructuring costs after tax amounted to DKK (213)m, ofwhich DKK 218m related to a change in the tax value of

goodwill in Talkline.

In 2003, TDC realized gains of DKK 171m before tax f rom

profit on divestment of major enterprises resulting

primarily from Belgacoms repurchase of treasury shares

from TDC. Write-downs for impairment losses in 2004

totaled DKK (220)m before tax and related primarily

to TDC Norge, and the closure of Storbyguiden by TDC

Directories. Restructuring costs, etc. amounted to DKK

(1,670)m before tax and related primarily to the transfer

of Belgacoms pension obligations to the Belgian govern-ment and the redundancy program in the domestic

operations.

Net financialsNet financials, including fair value adjustments,

amounted to DKK 27m in 2004, compared with DKK

1,190m in 2003.

Income before income taxes from associated enterprises

totaled DKK 749m in 2004 compared with DKK 1,769m in

2003, reflecting primarily the divestment of Belgacom.

In 2004, fair value adjustments amounted to income ofDKK 178m. This comprised other fair value adjustments

of DKK 166m, which related mainly to foreign currency

adjustment of a cash receivable.

In 2003, fair value adjustments amounted to income of

DKK 579m of which fair value adjustments of minority

passive investments were DKK 412m and related prima-

rily to the Ukrainian mobile company UMC.

Interest and other f inancial income amounted to DKK

2,539m in 2004, a decrease of DKK 172m compared with

DKK 2,711m in 2003.

Interest and other financial expenses totaled DKK

(3,439)m in 2004, down DKK 430m compared with DKK

(3,869)m in 2003.

Interest and other f inancial expenses, net, amounted to

DKK (900)m in 2004, a decrease of DKK 258m, compared

with DKK (1,158)m in 2003. This development reflected

mainly lower average net interest-bearing debt, due

mainly to proceeds from the sale of our shares in Belgacom.

One-time items DKKm

TDC Group

2003 2004

Pre-tax After tax Pre-tax After tax

Profit on sale of major enterprises 171 170 6,440 6,403

Impairment losses (220) (164) 0 0

Restructuring costs, etc. (1,670) (1,180) (615) (213)

One-time items, total (1,719) (1,174) 5,825 6,190


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Income taxesIncome taxes amounted to DKK 1,351m in 2004, down

DKK 278m or 17.1% on 2003.

Income taxes related to net income excluding one-time

items and fair value adjustments totaled DKK 1,679m in

2004, down DKK 431m or 20.4% compared with 2003.

Income taxes relating to one-time items amounted to

tax income of DKK 365m in 2004 compared with tax in-

come of DKK 545m in 2003.

Income taxes relating to fair value adjustments totaled atax expense of DKK 37m in 2004 compared with DKK 58m

in 2003.

The effective tax rate, excluding one-time items and fair

value adjustments, was 41.1% in 2004 compared with

46.6% in 2003. The high tax rate for 2003 was impacted

primarily by a limitation of the deductibility of goodwill

amortization as a result of amendments to Danish tax law.

Net incomeNet income, including one-time items and fair value

adjustments, rose DKK 6,997m to DKK 8,742m. Net in-

come, excluding one-time items and fair value adjust-

ments, was unchanged compared with 2003 and totaled

DKK 2,411m. Adjusted for the divestment of Belgacom,

net income, excluding one-time items and fair value

adjustments, increased 27.4% to DKK 2,212m.

Balance SheetsThe Consolidated Balance Sheets totaled DKK 87,546m at

year-end 2004, down DKK 1,969m compared with 2003.

The decrease in total assets during 2004 was due mainly

to a decrease in investments in associated enterprises

resulting from the divestment of Belgacom. The impact

of the divestment was partly of fset by an increase in

cash and cash equivalents and in intangible assets and

property, plant and equipment stemming primarily from

the acquisition of TDC Song in November 2004.

Shareholders equity aggregated DKK 35,963m at year-end 2004. This increase of DKK 2,990m compared with

year-end 2003 was generated primarily by net income in

2004 of DKK 8,742m stemming mainly from the gain in

connection with the divestment of Belgacom. This was

partly of fset by dividend payments of DKK 2,555m and

the acquisition of treasury shares of DKK 3,531m net.

Total liabilities amounted to DKK 51,583m, down DKK

4,959m compared with year-end 2003, and stemmed

mainly from repayment of bond debt.

Net interest-bearing debt totaled DKK 20,010m at year-

end 2004, a decrease of DKK 8,672m over the year due

mainly to the divestment of Belgacom partly offset

by the repurchase of treasury shares f rom SBC and the

acquisition of TDC Song in November 2004.

Fair value adjustments DKKm

TDC Group

2003 2004

Pre-tax After tax Pre-tax After tax

Fair value adjustments of minority passive investments 412 412 12 12

Other fair value adjustments 167 109 166 129

Fair value adjustments, total 579 521 178 141

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Capital expendituresIn 2004, capital expenditures, including share acquisi-

tions, fell DKK 3,492m to DKK 10,098m, compared with

DKK 13,590m in 2003. This decrease related mainly to the

acquisition of the remaining shares in TDC Switzerland

in 2003, which amounted to DKK 7,871m, partly offset by

the inclusion of TDC Song from November 2004.

Capital expenditures, excluding share acquisitions, fell

DKK 251m or 4.6% to DKK 5,254m in 2004.

The capex-to-net revenues ratio was 12.1% compared

with 13.3% in 2003.

Statements of Cash FlowCash flow from operating activities amounted to DKK

11,134m in 2004, up DKK 412m compared with 2003, due

primarily to higher EBITDA in 2004 and improved working

capital, partly offset by payments relating to the redun-

dancy programs.

Cash flow from investing activities totaled DKK 4,243min 2004, compared with DKK (11,585)m in 2003 and

stemmed mainly from dividends received in connect ion

with the divestment of Belgacom. The amount achieved

in 2004 also related to the proceeds from the sale of

Dan Net, partly of fset by the acquisitions of TDC Song in

November 2004, and NetDesign as well as the remaining

80% stake in Telmore. The investing activities in 2003

related mainly to the acquisition of the remaining shares

in TDC Switzerland.

Cash flow from financing activities totaled DKK (12,562)m

in 2004 compared with DKK 4,943m in 2003 and relatedmainly to reduced borrowing and repayment of long-

term debt and the repurchase of treasury shares in 2004.

TDCs cash and cash equivalents increased from DKK

7,458m in 2003 to DKK 10,250m in 2004.

Capital expenditures DKKm

TDC Group

2003 2004 Growth in %

TDC Solutions 2,419 2,457 (1.6)

TDC Mobile International 934 1,023 (9.5)

Domestic operations 669 747 (11.7)Talkline 61 112 (83.6)

Bit 204 164 19.6

TDC Switzerland 1,675 1,196 28.6

TDC Cable TV 276 225 18.5

TDC Directories 35 54 (54.3)

Other 1 166 299 (80.1)

TDC excluding share acquisitions 5,505 5,254 4.6

Share acquisitions in other companies 8,085 4,844 40.1

TDC including share acquisitions 13,590 10,098 25.7

1 Includes TDC A/S, TDC Services and eliminations.


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TDC SolutionsTDC Solutions offers a wide range of communications ser-

vices in Denmark and the Nordic countries as well as in

the Czech Republic through our subsidiary, Contactel. Our

activities include landline telephony, convergence products,

broadband solutions, advanced security and hosting

services, data communications services and Internet

services, leased lines, sale of terminals and installation.

At year-end 2004, TDC Solutions had 4.4m customers,

with 4.2m in the domestic market and 237,000 in in-

ternational subsidiaries and 11,432 full-time employee

equivalents. Net revenues were DKK 18,590m in 2004and EBITDA was DKK 5,894m.

Business areasTDC Solutions main business areas are described below:

Landline telephonyLandline telephony represents the major share of net

revenues in TDC Solutions and totaled DKK 9,643m in

2004, corresponding to 52% of net revenues, down DKK

444m compared with 54% in 2003.

The general market for t raditional landline telephony is

sagging because of the migration toward mobile

telephony and IP-based technology. TDC Solutions market

share has also declined. To counter this development,

TDC Solutions launched TDC Samtale in 2004 givingunlimited landline minutes in off-peak hours at a flat

monthly rate. The number of customers using this

product has rapidly increased since it was launched, and

was 173,000 at year-end 2004. TDC Solutions plans to

launch Internet-based telephony (VoIP) for residential

customers and Internet-based TV (T VoIP) in 2005.

Data communications and Internet servicesIn 2004, net revenues from data communications and In-

ternet services totaled DKK 3,840m, corresponding to 21% of

total net revenues compared with 18% in 2003. The business

area comprises mainly broadband, dial-up traffic, datacommunications services and private IP-based networks.

The migration from dial-up toward broadband products

continued in 2004. The xDSL penetration per Danish

household continued to rise in 2004 to approximately

23% at year-end. This area has grown considerably, with

556,000 customers at year-end 2004 compared with

405,000 in 2003.

In 2004, TDC was the first Danish operator to launch a

nationwide network of wireless hotspots in selected

geographical areas, from where the Internet can be

accessed. At year-end 2004, TDC had 435 wireless hotspots

in Denmark. We expect continued progress within wireless

technology.

TDC SolutionsNet revenues per business area 2004

TDC SolutionsCustomers end of 2004

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Terminal equipment, installation etc.With net revenues of DKK 2,578m in 2004, terminal equip-

ment etc. was the third-largest contributor to TDC Solutions

net revenues, corresponding to a share of 14% compared

with 13% in 2003. This business area includes sales and

installation of hardware ranging from handsets to large

switchboards and service agreements.

Leased linesNet revenues from leased lines aggregated DKK 1,117m in

2004 and represented 6% of total net revenues compared

with 7% in 2003. This business area includes both domestic

and international leased-line services.

Other servicesTDC Solutions remaining share of net revenues includes

mainly operator services such as directory inquiries and

mobile telephony, primarily Dut.

SubsidiariesTDC Solutions has significant investments in a number

of subsidiaries in addition to our domestic operations.

TDC Song, our 99.4% owned pan-Nordic network

operator mainly for business customers, had 858 full-

time employee equivalents at year-end 2004. Of our

fully-owned subsidiaries, NetDesign, a leading provider

of IP/LAN infrastructure, had 122 full-time employee

equivalents at year-end 2004, and Contactel, our provider

of Internet and landline telephony in the Czech Republic,

had 268 full-time employee equivalents at year-end

2004. TDC Norge, our fully-owned Norwegian-based

provider of Internet, telephony and data services, had103 full-time employee equivalents at year-end 2004.

And finally, TDC Internordia, our fully-owned Swedish-

based provider of telecoms equipment for business

customers, had 237 full-time employee equivalents at

year-end 2004.

Selected financial and operational data Excluding one-time items

TDC Solutions Group

Growth in %

2002 2003 2004 02-03 03-04

DKKm

Net revenues 19,393 18,585 18,590 (4.2) 0.0

Total revenues 20,942 19,930 19,874 (4.8) (0.3)

Total operating expenses (15,168) (14,216) (13,980) 6.3 1.7


and amortization (EBITDA) 5,774 5,714 5,894 (1.0) 3.2

Depreciation, amortization and write-downs (3,079) (3,401) (3,608) (10.5) (6.1)

Earnings before interest and taxes (EBIT) 2,695 2,313 2,286 (14.2) (1.2)

Capital expenditures1 3,510 2,419 2,457 31.1 (1.6)


EBITDA margin2 % 29.8 30.7 31.7 - -Capex-to-net revenues ratio1 % 18.1 13.0 13.2 - -

Subscriber base (end-of-year) (1,000)

Landline customers 3,078 3,000 2,910 (2.5) (3.0)

Mobile customers 282 337 369 19.5 9.5

Internet customers 787 1,052 1,157 33.7 10.0

Subscriber base, total 4,147 4,389 4,436 5.8 1.1

Number of employees3 12,715 11,765 11,432 (7.5) (2.8)

1 Capital expenditures excluding share acquisitions.2 Earnings before interest, taxes, depreciation and amortization divided by net revenues.3 The number denotes end-of-year full-time employee equivalents including permanent employees, trainees and temporary employees.


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Financial highlightsIn 2004, net revenues from TDC Solutions rose DKK 5m to

DKK 18,590m, reflecting primarily continued broadband

(xDSL) growth as the number of domestic customers in

this area increased 37.3% to 556,000. In addition, the

customer base for convergence products increased from

337,000 to 350,000 at year-end 2004, partly offset by

continued migration from landline-to-mobile telephony

and private IP-based networks resulting in declining

revenues from traditional landline telephony. The number

of landline customers totaled 2.9m down 3.0% or

90,000 at year-end 2004.

As a result of continuous cost control, including the

impact of our redundancy programs, TDC Solutions

EBITDA increased 3.2% to DKK 5,894m, and the EBITDA

margin was 31.7% compared with 30.7% in 2003 and

29.8% in 2002. However, EBITDA growth declined from

6.9% in the fir st half of 2004 to (0.3)% in the second.

This development was due mainly to declining growth

in Internet and data communications services as well as

the divestment of Dan Net in August 2004.

In 2004, EBIT decreased DKK 27m or 1.2% to DKK 2,286m

reflecting mainly higher depreciation charges partly

offset by improved EBITDA.

TDC Solutions capital expenditures increased DKK 38m

to DKK 2,457m in 2004. As a result of the development

capital expenditures and almost unchanged net

revenues, the capex-to-net revenues ratio increased

from 13.0% in 2003 to 13.2% in 2004.

* Note: The market for domestic xDSL- and broadband customers as well as landline traffic volume (minutes) are published by the DanishNational IT and Telecom agency in half-year reports. The data for 2004 has not yet been published. The above broadband marketshare is TDC Solutions share of the total broadband market, which is defined as the sum of xDSL and cable modem. In datafrom the Danish National IT and Telecom Agency, broadband subscriptions are defined as subscriptions with a capacityof at least 14 4 kbit/s as of the second half of 2002. Optical fiber, wireless and housing association networks arenot included in the market share stated above.

Domestic xDSL customersEnd-of-period (1,000)

Market share *%

Domestic Traffic min.Landline (million)

xDSL customersBroadband market share xDSL market share

Market share *%

Traffic min.Market share

EBITDACapital expendituresDKKm

Net revenuesDKKm

EBITDA Net revenuesCapital expenditures

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TDC Solutions net revenues were DKK 0.4bn higher thanstated in the Outlook for 2004 presented in the first-

quarter report, due mainly to the inclusion of TDC Song

from November 2004, whereas EBITDA was in line with

the Outlook.



report, due mainly to the inclusion of TDC Song f rom

November 2004, whereas EBITDA was in line with the

Outlook.

OutlookTDC Solutions net revenues are expected to increase12.4% to DKK 20.9bn in 2005, reflecting the full-year

impact of the acquisition of TDC Song in November 2004

and a continuation of the development in data commu-

nications and Internet services, although with declining

growth rates. Decreasing revenues from traditional

landline telephony such as voice traf fic, subscriptions

and leased lines, partly offset this growth. EBITDA is

expected to increase 8.6% to DKK 6.4bn in 2005, reflecting

the above-mentioned revenue growth, the continued

focus on cost saving and the full-year impact of the

redundancy programs.

Net revenuesIn 2004, TDC Solutions net revenues totaled DKK

18,590m, which is in line with 2003. Net revenues from

data communications and Internet services increased,

impacted by the inclusion of TDC Song f rom November

2004. This increase was partly offset by the decline in

traditional landline telephony stemming from migration

from traditional landline telephony to mobile telephony

and private IP-based networks. In addition, net revenues

were negatively impacted by lower international transit

traff ic and declining revenues from leased lines, due to

migration toward private IP-based networks.

Net revenues from landline telephony, retail decreasedDKK 151m or 2.0% to DKK 7,453m in 2004. This net re-

venue category consists primarily of retail voice traff ic

and subscription fees. Net revenues from subscriptions

decreased DKK 169m or 4.4% to DK 3,659m in 2004. The

decline was driven mainly by a fall in the number of

domestic customers of approximately 140,000 to 2.4m

at year-end 2004 reflecting the migration from traditional

landline telephony to mobile telephony and private

IP-based networks as well as increased competition

between landline operators. Net revenues from landline

trafficamounted to DKK 3,794m in 2004, up DKK 18m or

0.5% and reflected primarily the inclusion of TDC Songfrom November 2004. To this should be added increased

revenues from convergence products and the full consoli-

dation of Contactel in the second half of 2003 following

an increased ownership share. This increase was partly

offset by reduced net revenues from traditional landline

traff ic in the domestic operations.

Net revenues from landline telephony, wholesalefell

DKK 293m or 11.8% to DKK 2,190m. This revenue category

consists primarily of domest ic and international whole-

sale traffic as well as domestic service provider rev-

enues. Net revenues from transit traffic decreased DKK

307m or 30.4%, driven primarily by lower international

transit traff ic revenues due to lower prices and a fall in

traff ic minutes of approximately 22.6%.

Net revenues from data communicationsand Internet

servicesrose DKK 583m or 17.9% to DKK 3,840m in 2004.

This revenue category includes primarily xDSL, dial-up

and IP services as well as Internet activities. The growth

was generated primarily by increased xDSL sales, driven

by migration from dial-up to xDSL. The domestic xDSL

customer base grew 37.3% to 556,000 customers at

year-end 2004. The growth was also impacted by the

inclusion of TDC Song from November 2004, and by the

Outlook for 2005 DKKbn

TDC Solutions Group

2004 2005 Growth in %

Net revenues 18.590 20.9 12.4

EBITDA 5.894 6.4 8.6


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full consolidation of Contactel in the second half of 2003following an increased ownership share, partly of fset by

declining net revenues f rom dial-up customers and the

impact of the divestment of Dan Net in August 2004.

Net revenues from terminal equipment etc. amounted

to DKK 2,578m, up DKK 153m or 6.3% compared with

2003. This revenue category includes primarily sales and

installation of hardware ranging from handsets to large

switchboards, and service agreements with domestic

and international business customers. The increase

stemmed primarily from higher terminal sales in the

domestic operations and the impact of the inclusion ofNetDesign from December 2004, partly offset by lower

terminal sales in the Nordic subsidiaries, TDC Norge and

TDC Internordia.

Net revenues from leased lines, including domestic and

international leased-line services, aggregated DKK 1,117m

in 2004, a fall of DKK 117m or 9.5% compared with 2003,

which stemmed primarily from a decrease in national

leased lines that was impacted by migration toward

private IP-based networks as well as fewer subscriptionfees following a 7% price reduction. The decline was

further impacted by lower revenues from servicing of

companies with private data lines.

Net revenues from other servicesamounted to DKK

1,412m, down DKK 170m compared with 2003, and

related largely to the divestment of Dan Net as at

August 1, 2004.

Transmission costs, raw materials and suppliesTransmission costs, raw materials and supplies

amounted to DKK 5,576m in 2004, up DKK 122m or 2.2%compared with 2003. The increase stemmed mainly from

the inclusion of TDC Song from November 2004 and the

full consolidation of Contactel in the second half of 2003

following an increased ownership share. Transmission

costs were also impacted by increased traffic from

convergence products. These increases were partly offset

by declining transmission costs caused by lower

international transit traffic and falling landline traffic,

balancing declining net revenues from these areas.

Total revenues DKKm

TDC Solutions Group

2003 2004 Growth in %

Net Revenues 18,585 18,590 (0.0)

Landline telephony 10,087 9,643 (4.4)

Retail 7,604 7,453 (2.0)

Subscriptions 3,828 3,659 (4.4)

Traffic 3,776 3,794 0.5

Wholesale 2,483 2,190 (11.8)Transit traffic 1,011 704 (30.4)

Other1 1,472 1,486 1.0

Data communications and internet services 3,257 3,840 17.9

Terminal equipments etc. 2,425 2,578 6.3

Leased lines 1,234 1,117 (9.5)

Other2 1,582 1,412 (10.7)

Work performed for own purposes and capitalized 1,166 1,115 (4.4)

Other operating income 179 169 (5.6)

Total revenues 19,930 19,874 (0.3)

1 Includes incoming traffic, pre-fix traffic and service provision.2 Includes mobile telephony, operator services etc.

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Other external chargesOther external charges fell DKK 50m or 1.2% to DKK 4,101m

in 2004. The decrease resulted primarily from stringent

cost control in domestic operations and the divestment

of Dan Net at August 1, 2004. The decline was partly

offset by the inclusion of TDC Song from November 2004.

Wages, salaries and pension costsWages, salaries and pension costs fell DKK 308m or 6.7%

to DKK 4,303m. The decrease ref lected primarily a 10.5%

decline in the number of average full-time employee

equivalents in domestic operations stemming mainly

from the redundancy programs and natural attrition.Wages, salaries and pension costs in TDC Norge fell due

to fewer full-time employees. The average number of

full-time employee equivalents fell 1,138 to 11,014 result-

ing mainly from the redundancy programs.

Earnings before interest, taxes, depreciationand amortization (EBITDA)EBITDA amounted to DKK 5,894m in 2004, up DKK 180m

or 3.2%. The result reflect s increased earnings from

xDSL sales, savings from stringent cost control in the

domestic operations and the impact of the redundancy

programs. The increase was partly offset by a decline in

traditional landline telephony.

Depreciation, amortization and write-downsTDC Solutions depreciation, amortization and write-

downs rose DKK 207m or 6.1% to DKK 3,608m in 2004,

reflecting primarily reassessment of the useful lives of

assets in domestic operations at year-end 2003. The

increase also reflects the impact of the inclusion of TDC

Song from November 2004, and higher depreciation and

amortization in Contactel as a result of the full consoli-

dation of Contactel in the second half of 2003 following

an increased ownership share.

Earnings before interest and taxes (EBIT)

In 2004, EBIT, excluding one-time items, decreased DKK27m or 1.2% to DKK 2,286m and mainly reflected higher

depreciation partly offset by higher EBITDA.

Capital expendituresTDC Solutions capital expenditures increased DKK 38m to

DKK 2,457m in 2004.

Operating expenses DKKm

TDC Solutions Group

2003 2004 Growth in %

Transmission costs, raw materials and supplies (5,454) (5,576) (2.2)

Other external charges (4,151) (4,101) 1.2

Wages, salaries and pension costs (4,611) (4,303) 6.7

Total operating expenses (14,216) (13,980) 1.7


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TDC Mobile InternationalTDC Mobile International is the leading provider of mo-

bile telecommunications services in Denmark and also

provides telecommunications services in a number of

European countries. Its activit ies include primarily mo-

bile telephony, sale of terminals, data services and sale

of traffic to Danish service providers.

Over the past few years, the domestic mobile sector has

experienced fierce price competition that has resulted

in a market consolidation in 2004, where the two largest

service providers Telmore and CBB were acquired by TDC

and Sonofon, respectively, and Orange Danmark wastaken over by TeliaSonera. Earnings from operations were

impacted by price competition, with many customers

choosing to switch to cheaper Internet-based solutions,

and the continued use of handset subsidies.

At year-end 2004, TDC Mobile International had 2,464

full-time employee equivalents and 5.6m customers,

with 2.1m in domestic operations, 2.6m in Talklineand

929,000 in Bit. Net revenues were DKK 15,105m in 2004,

and EBITDA was DKK 2,682m.

SubsidiariesTDC Mobile International has three main business areas:

the domestic operations, Talkline and Bit. TDC Mobile

International also has ownership shares in the mobile

companies One, Polkomtel and Telmore International.

The domestic operations include primarily TDC Mobil, a

Danish-based mobile operator and Telmore, a Danish

provider of mobile services.

TDC MobilTDC Mobils business areas include: retail activities, includ-

ing mobile telephony and sale of terminals, and whole-sale activities. In 2004, net revenues from these areas

were as follows: 51% from retail, of which 81% came from

mobile telephony and 19% from terminals, 46% from

wholesale, and revenues from other activities totaled 3%.

The domestic mobile market is characterized by high

penetration. Further growth must therefore be achieved

by developing new services and products. However,

we expect increased minute usage due to customer

migration from landline to mobile telephony.

TDC Mobile InternationalNet revenues per business area 2004

TDC Mobile InternationalCustomers end of 2004

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Talkline (Germany)TDC Mobile International owns 100% of Talkline, a German

service provider. At year-end 2004, the company had 2.6m

mobile customers, up 23.9%.

Talkline operates in three business areas: mobile

telephony, content services and Call by Call pre-fix

telephony. An agreement for the divestment of Talkline

Infodienste, which offers content services and Call by

Call pre-fix telephony, was signed in December 2004.

The divestment is expected to be fully effected in the

first quarter of 2005. Net revenues in these two business

areas totaled DKK 1,249m in 2004. Talkline operatesas a service provider mainly through Internet-based

customer service. At year-end, Talkline had more than

500,000 customers receiving electronic bills.

In 2004, mobile business represented 84% of Talklines

total net revenues.

Bit (Lithuania)Bit is a Lithuanian mobile operator that is 100% owned

by TDC Mobile International. Bits revenues are generated

primarily by mobile telephony. The company also offers

a wide range of mobile content and data services for

business customers. In addition, Bit is the f irst mobile

operator in Lithuania to offer wholesale to service

providers.

Throughout 2004, the Lithuanian market experienced

significant growth, and penetration has been estimated

at 98.8% at year-end 2004 compared with 61.6% in

2003. This increase stemmed mainly from fierce com-

petition between the country s three mobile operators,

resulting in falling retail prices. In 2004, Bits customer

base increased 75.0% to 929,000 customers.

Polkomtel (Poland)TDC Mobile International holds a 19.6% stake in Polkomtel, a

Polish mobile operator that topped seven million custom-

ers in 2004 and maintained its one-third share of the

mobile market. Polkomtel has successfully maintained its

leading position in the business customer segment.

The number of SMS text messages sent continues to rise.MMS and GPRS data traff ic is also strongly increasing,

supported by recently launched services such as FLY,

which is a mobile phone portal of fering information,

services, entertainment and games.

TelmoreTelmore offers primarily mobile telephony, mainly as

web-based self-services, in which increasing customer

interest was shown in 2004.

At the beginning of 2004, TDC Mobile International

acquired the remaining 80% of the shares in Telmore.

Telmore InternationalIn August, TDC signed a brand license agreement with

easyGroup, which allows us to use the easy brand when

offering mobile telephony in up to 12 European countries.

In November TDC announced that an agreement had

been signed with a British mobile network operator.

Telmore International was subsequently established and

assumed ownership of a newly founded mobile company

called easyMobile, which will offer mobile telephony in

Great Britain following the Telmore concept.


Talkline mobile customersEnd-of-period (1,000)

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One (Austria)TDC Mobile International owns 15% of One, the third-

largest mobile operator in Austria. Mobile phone

penetration is 89.4% and the Austrians are also among

the highest spenders in Europe in terms of mobile tele-

communications. In 2004, Ones customer base increased

6.0% to 1.9m customers. In October 2004, One beganoffering UMTS services, which cover downloading of

music files, video telephony etc.

Polkomtel and One are recognized in TDCs Financial

Statements using the equity method.


TDC Mobile International Group

Growth in %

2002 2003 2004 02-03 03-04

DKKm

Net revenues 13,688 13,175 15,105 (3.7) 14.6

Domestic operations 5,304 5,613 6,503 5.8 15.9

Talkline 7,633 6,692 7,675 (12.3) 14.7

Bit 751 870 927 15.8 6.6

Total revenues 13,839 13,230 15,172 (4.4) 14.7

Total operating expenses (11,590) (10,856) (12,490) 6.3 (15.1)


and amortization (EBITDA) 2,249 2,374 2,682 5.6 13.0

Domestic operations 1,624 1,672 2,041 3.0 22.1

Talkline 493 513 450 4.1 (12.3)

Bit 132 189 191 43.2 1.1


Earnings before interest and taxes (EBIT) 1,185 1,281 1,404 8.1 9.6

Capital expenditures1 998 934 1,023 6.4 (9.5)


EBITDA margin2 % 16.4 18.0 17.8 - -Capex-to-net revenues ratio1 % 7.3 7.1 6.8 - -

Subscriber base (end of year) (1,000)

Domestic operations 1,699 2,134 2,050 25.6 (3.9)

Talkline 1,713 2,091 2,590 22.1 23.9

Bit 488 531 929 8.8 75.0

Subscriber base, total 3,900 4,757 5,569 22.0 17.1

Number of employees3 2,668 2,636 2,464 (1.2) (6.5)

1 Capital expenditures excluding share acquisitions.2 Earnings before interest, taxes, depreciation and amortization divided by net revenues.3 The number denotes end-of-year full-time employee equivalents including permanent employees,

trainees and temporary employees.

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Financial highlightsIn 2004, TDC Mobile Internationals net revenues

increased 14.6% to DKK 15,105m despite fierce compe-

tition in the domestic mobile market and lower average

prices compared with 2003. TDC Mobile Internationals

customer base rose 17.1% to 5.6m customers driven

primarily by more mobile customers in Telmore, Talkline

and Bit.

Net revenues from domestic operationsrose 15.9% to

DKK 6,503m driven primarily by a significant growth in

traff ic volumes of 15.3%. In 2004, the number of mobile

customers in domestic operationsfell 3.9% or 84,000to 2,1m, reflecting mainly a reduction in the number

of prepaid customers in TDC Mobil as inactive pre-paid

SIM cards were deactivated. This was offset partly by a

growing number of post-paid subscriptions in TDC Mobil

and a higher customer base in Telmore.

Net revenues from Talklinewere DKK 7,675m, up 14.7% in

2004 stemming primarily from a DKK 686m increase in

mobile operations due to rising traffic volumes and

more customers. The growth was also impacted by

favorable developments in content services, partly

offset by declining revenues from pre-fix telephony.

In 2004, Talklinesmobile customer base totaled 2.6m,

up 499,000.

Net revenues from Bitamounted to DKK 927m, up 6.6%in 2004, and the number of customers increased 398,000

to 929,000 in 2004. Voice traff ic increased 39.0% partly

offset by price reductions and lower average consumption

per customer.

Primarily as a result of increased traffic, partly offset by

rising customer-acquisition costs, TDC Mobile Internationals

EBITDA increased 13.0% to DKK 2,682m. The EBITDA mar-

gin was 17.8%, almost unchanged compared with 18.0%

in 2003, whereas the margin was 16.4% in 2002. However,

EBITDA growth declined in 2004 with a growth rate of

17.8% in the first half and 9.2% in the second half 2004,due mainly to higher customer-acquisition costs.

EBITDA in the domestic operationstotaled DKK 2,041m,

up 22.1% or DKK 369m in 2004, reflecting primarily in-

creased traff ic, partly of fset by higher customer-acqui-

sition costs.

TalklinesEBITDA declined DKK 63m to DKK 450m in

2004, resulting mainly from a lower result from pre-fix

telephony and increased customer-acquisition costs in

connection with the higher customer intake in 2004.

TDC Mobile Internationals EBIT increased 9.6% from DKK

1,281m in 2003 to DKK 1,404m in 2004.

* Note: Retail market shares for domestic mobile customers and domestic traff ic volume (minutes) are published by the Danish National IT and Telecom Agency inhalf-year reports. The market shares for 2004 have not yet been published.


Domestic mobile customersEnd-of-period (1,000)

Market share*%

Domestic traffic min.Mobile (million)

Market share*%

Retail WholesaleMarket share (retail and wholesale)

Traffic min. (retail and wholesale)Market share (retail and wholesale)

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TDC Mobile Internationals capital expenditures increasedDKK 89m from DKK 934m in 2003 to DKK 1.023m in 2004

stemming primarily from higher investments in the UMTS

network. In 2004, the capex-to-net revenues ratio was

6.8% compared with 7.1% in 2003.

TDC Mobile Internationals net revenues were 1.2bn higher

than stated in the Outlook for 2004 presented in the

first-quarter report, due mainly to increased traffic in

TDC Mobil and higher revenues in Talkline. EBITDA was

DKK 0.2bn higher, resulting primarily from increased

traffic in the domesticoperations.



report. EBITDA was DKK 0.1bn higher than expected,

resulting primarily from increased traffic in the domestic

operations and Talkline.

OutlookTDC Mobile Internationals net revenues are expected

to decline 4.0% to DKK 14.5bn in 2005. This reflects the

divestment of Talkline Infodienste, with effect from

2005. This development is partly offset by growth in the

domestic market, reflecting traffic growth and more

customers partly offset by lower average prices. Further,

growth is also expected in both Talklines mobile opera-

tions and Bit. EBITDA is expected to increase 0.7%. The

relatively low growth reflects the divestment of Talkline

Infodienste, a provider of value-added services, and the

expansion of easyMobile, almost offsetting growth in

the remaining part of the business line.

Net revenuesIn 2004, TDC Mobile Internationals net revenues totaled

DKK 15,105m, up DKK 1,930m or 14.6%, stemming from

increased traffic volumes in the domest ic and German

markets, partly offset by lower prices, due to fierce

competition in the domestic mobile market.

Net revenues from domestic operationsrose DKK 890m

or 15.9% to DKK 6,503m in 2004. This category includes

mobile traffic as well as subscriptions and terminal sales.

Growth was driven in particular by increased revenues

from TDC Mobil and the inclusion of Telmore from February2004. Growth in retail revenues from TDC Mobil stemmed

primarily from 11.1% more voice traffic and 34.8% more

SMS traffic. Net revenues from wholesale in TDC Mobil

rose 19.1% in 2004, due mainly to increasing incoming

traffic.

The growth in net revenues from domestic operations

was partly offset by declining average retail prices as well

as reduced subscription revenues. This reflect s customer

migration toward cheaper mobile solutions with self-services

via the Internet and lower subscription fees, and a reduced

customer base compared with 2003, reflecting primarily

the deactivation of inactive pre-paid SIM cards.

Net revenues from Talklinerose DKK 983m or 14.7% to

DKK 7,675m in 2004, resulting mainly from mobile opera-

tions that increased its customer base 23.9% to 2.6m in

2004, and significant revenue growth in content services.

The growth was partly offset by an EBITDA neutral



2004 2005 Growth in %

Net revenues 15.105 14.5 (4.0)

EBITDA 2.682 2.7 0.7

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change from gross to net accounting of content servicesin Talkline Infodienste in the second quarter of 2003 as a

consequence of transferring the debtor risk to the content

providers.

Net revenues in Bittotaled DKK 927m, up 6.6% or DKK

57m, driven primarily by 75.0% growth in the customer

base to 929,000 customers in 2004 and an increase in

voice traffic of 39.0% partly offset by price reductions

and lower average consumption per customer.

Transmission costs, raw materials and supplies

Transmission costs, raw materials and supplies rose18.4% or DKK 1,227m to DKK 7,879m in 2004. Transmission

costs, raw materials and supplies in domestic opera-

tionsincreased 19.5% or DKK 387m reflecting primarily

increased voice and SMS text t raffic. Talklinestrans-

mission costs, raw materials and supplies rose 18.6%

or DKK 807m and related primarily to rising traff ic and

higher costs s temming from the purchase of handsets

for resale, partly offset by the change from gross to netaccounting in Talkline Infodienste. Transmission costs,

raw materials and supplies in Bit totaled DKK 350m, up

10.5% or DKK 33m.

Other external chargesOther external charges amounted to DKK 3,628m in

2004, up DKK 395m or 12.2%. Other external charges in

domestic operationstotaled DKK 1,603m, up 9.6% or

DKK 140m in 2004, stemming primarily from increased

marketing and customer-acquisition costs. In Talkline,

other external charges rose DKK 233m to DKK 1,709m due

mainly to increased customer-acquisition costs in 2004.Bitsother external charges totaled DKK 316m, up DKK

22m in 2004.

Wages, salaries and pension costsWages, salaries and pension costs amounted to DKK

983m, up DKK 12m or 1.2%, DKK 529m of which was

generated by domestic operations. Talklineswages,

Total revenues DKKm

TDC Mobile International Group2003 2004 Growth in %

Net revenues 13,175 15,105 14.6

Domestic operations 5,613 6,503 15.9

Talkline 6,692 7,675 14.7

Bit 870 927 6.6

Work performed for own purposes and capitalized 17 11 (35.3)

Other operating income 38 56 47.4

Total revenues 13,230 15,172 14.7

Operating expenses DKKm


2003 2004 Growth in %

Transmission costs, raw materials and supplies (6,652) (7,879) (18.4)

Other external charges (3,233) (3,628) (12.2)

Wages, salaries and pension costs (971) (983) (1.2)

Total operating expenses (10,856) (12,490) (15.1)


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salaries and pension costs totaled DKK 380m comparedwith DKK 378m in 2003. Wages, salaries and pension costs

in Bittotaled DKK 74m compared with DKK 70m in 2003.

Earnings before interest, taxes, depreciationand amortization (EBITDA)TDC Mobile Internationals EBITDA rose DKK 308m or

13.0% to DKK 2,682m and stemmed primarily from

domestic operationswith an increase of DKK 369m or

22.1%. This growth reflects mainly increased traffic in

TDC Mobil, partly of fset by higher customer-acquisition

costs. The growth was partly offset by lower EBITDA in

Talklineof DKK 63m or 12.3% resulting primarily fromincreased customer-acquisition costs in connection

with a higher intake of customers. BitsEBITDA growth

amounted to DKK 2m or 1.1% in 2004.

Depreciation, amortization and write-downsDepreciation, amortization and write-downs in TDC

Mobile International increased DKK 185m or 16.9% to

DKK 1,278m, driven primarily by domestic operationsas aresult of increased amortization in connection with the

inclusion of Telmore from February 2004.

Earnings before interest and taxes (EBIT)EBIT rose DKK 123m or 9.6% to DKK 1,404m due to EBITDA

growth partly offset by increased depreciation and

amortization.

Capital expendituresTDC Mobile Internationals capital expenditures increased

DKK 89m to DKK 1,023m in 2004. Capital expenditures

relating to domestic operationstotaled DKK 747m, upDKK 78m compared with 2003. The increase stemmed

mainly from higher investments in the UMTS network,

partly offset by reduced capitalization of asset retirement

obligations.

EBITDACapital expendituresDKKm

Net revenuesDKKm

EBITDA Capital expenditures Net revenues

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TDC SwitzerlandTDC Switzerlands activities cover mobile and landline

telephony and Internet services.

TDC Switzerland has maintained its position as the sec-

ond-largest telecommunications provider in the Swiss

market, which is characterized by fierce competition and

a falling penetration growth rate.

At year-end 2004, TDC Switzerland had 2,307 full-time

employee equivalents and 2.2m customers. Net revenues

were DKK 9,692m in 2004, and EBITDA was DKK 2,455m.

Business areasTDC Switzerland operates in the following business areas:

Mobile telephonyMobile telephony represents the major share of net rev-

enues in TDC Switzerland and totaled DKK 5,795m in

2004, up DKK 326m or 6.0% compard with 2003. The

number of mobile subscriptions at year-end 2004 was 1.2m,

an increase of 7.4%, impacted negatively by mandatory

registration of pre-paid customers required by Swiss

legislation. As a consequence non-registered customers

have been eliminated from the customer base.

Mobile telephony comprised 60% of total net revenues

compared with 58% in 2003.

UMTS network roll-out is progressing as planned, andTDC Switzerland had fulfilled all UMTS license require-

ments by year-end 2004.

Landline telephonyNet revenues from landline telephony totaled DKK

3,138m in 2004, down 5.0% compared with 2003.

Landline telephony comprised 32% of total net revenues

compared with 35% in 2003.

The fall in landline telephony in 2004 related primarily

to migration from landline to mobile telephony combinedwith fierce competition in the Swiss market.

In 2004, TDC Switzerland added a new sunrise family

product to its range the f irst of its k ind on the Swiss

market. The product combines the total consumption of

landline and mobile telephony in one bill with attractive

discounts.

Internet servicesIn 2004, the Internet services business area contributed

8% of net revenues in TDC Switzerland compared with

7% in 2003. The majority of the increase was driven by

increasing xDSL activities part ly offset by fewer dial-up

customers.


TDC SwitzerlandNet revenues per business area 2004

TDC SwitzerlandCustomersend of 2004

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TDC Switzerland Group

Growth in %

2002 2003 2004 02-03 03-04

DKKm

Net revenues 8,932 9,471 9,692 6.0 2.3

Total revenues 9,033 9,577 9,791 6.0 2.2

Total operating expenses (7,764) (7,372) (7,336) 5.0 0.5


and amortization (EBITDA) 1,269 2,205 2,455 73.8 11.3


Earnings before interest and taxes (EBIT) (1,224) (368) (245) 69.9 33.4

Capital expenditures1 1,557 1,675 1,196 (7.6) 28.6


EBITDA margin2 % 14.2 23.3 25.3 - -

Capex-to-net revenues ratio1 % 17.4 17.7 12.3 - -

Subscriber base (end of year)3 (1,000)

Landline customers 660 630 573 (4.5) (9.0)

Mobile customers 975 1,108 1,190 13.6 7.4

Internet customers 549 526 469 (4.2) (10.8)

Subscriber base, total 2,184 2,264 2,232 3.7 (1.4)

Number of employees4 2,319 2,380 2,307 2.6 (3.1)

1 Capital expenditures excluding share acquisitions.2 Earnings before interest, taxes, depreciation and amortization divided by net revenues.3 The definition of active and inactive customers was changed in 2004. Comparative figures for 2002 and 2003 have beenchanged accordingly.

3 The number denotes end-of-year full-time employee equivalents including permanent employees, trainees and temporaryemployees.

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Financial highlightsIn 2004, TDC Switzerland maintained its position as the

second-largest telecommunications provider in the Swiss

market and continued its positive financial development

from 2003. The number of mobile customers grew 7.4%

to 1.2m, and the number of xDSL customers increased

from 92,000 to 148,000 at year-end 2004. Net revenues

increased DKK 221m or 2.3% to DKK 9,692m in 2004.

Compared with revenue growth of 6.0% in 2003, the

growth rate decreased due especially to lower growth

in mobile telephony, impacted by lower handset sales,

combined with a modest decline in the landline business.

EBITDA increased DKK 250m or 11.3% to DK 2,455m in 2004,

and the EBITDA margin was 25.3% compared with 23.3%

in 2003 and 14.2% in 2002. This development reflec ts the

combination of continued significant cost reductions

stemming from synergies achieved after the creation of

TDC Switzerland, and revenue increases over the period,

as well as lower marketing costs compared with 2003.

In 2004, EBIT grew DKK 123m or 33.4% to DKK (245)m as aresult of the improved EBITDA.

TDC Switzerlands capital expenditures fell DKK 479m to

DKK 1,196m in 2004. Compared with the growth in rev-

enues, the capex-to-net revenues ratio fell from 17.7%

in 2003 to 12.3% in 2004.

With these results, TDC Switzerland performed in ac-

cordance with the Outlook for 2004 presented in the

first-quarter report 2004 and subsequently confirmed

by the third-quarter report.

OutlookTDC Switzerlands net revenues are expected to increase

3.2% to DKK 10.0bn in 2005, reflec ting primarily higher

activity within mobile telephony, due mainly to more

customers and higher average consumption per customer.

EBITDA of DKK 2.6bn is expected, which is 5.9% higher

than in 2004.



2004 2005 Growth in %


EBITDA 2.455 2.6 5.9

Total revenues DKKm


2003 2004 Growth in %

Net revenues 9,471 9,692 2.3

Mobile 5,469 5,795 6.0

Landline 3,302 3,138 (5.0)

Internet 700 759 8.4

Work performed for own purposes and capitalized 106 99 (6.6)

Total revenues 9,577 9,791 2.2


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Net revenuesNet revenues from mobile telephony, containing sub-

scription fees, traff ic revenues and handsets, amounted

to DKK 5,795m in 2004, up DKK 326m or 6.0%. Our mobile

customer base expanded 82,000 or 7.4% to 1.2m, which

was the main driver for our revenue growth, partly off-

set by a decrease in revenues from the resale of handsets

compared with 2003.

Net revenues from landline telephony, containing retail,

pre-fix, and pre-select products as well as wholesale

activities, decreased DKK 164m or 5.0% to DKK 3,138m.

This development was d

1 annual report 2004

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