Sonera announces new 3G wireless strategy

The Board of Directors of Sonera Corporation has today adopted a new strategy for the company.

- Sonera's new strategy focuses on profitable growth in our advanced domestic operations and sharply reduced expenditure on the services businesses. Sonera has taken steps to cap its exposure to European 3G ventures and will aim to further reduce any current commitments. Additionally, the company will continue to reduce its debt through disposals of selected non-core assets, says President and CEO of Sonera Corporation, Mr. Harri Koponen.

Sonera's aim is to become market driven as a means of driving growth in its core domestic operations. Sonera also intends to reduce EBITDA losses in Sonera's new services businesses to a maximum of approx MEUR 40 in 2002 and to break even in the following year. Sonera is committed to taking all necessary measures to achieve this target, including sale or closure of these businesses.

- The revision of our strategy is a result of recent changes in our business environment, in particular the sharp decline in the rate of adoption and rollout of new technologies, Koponen continues.

The new corporate strategy is based on the following actions:

1) Investments in European 3G will be capped

While Sonera continues to believe that investments in UMTS consortia could bring important benefits to Sonera in the long term, Sonera has taken a number of steps to limit future financial exposure to these investments. Sonera has decided not to invest any additional funds in Group 3G, Sonera's German UMTS consortium, and to limit investments in IPSE 2000, Sonera's Italian UMTS consortium, and Xfera, Sonera's Spanish UMTS consortium, to the minimum amount allowable under existing commitments.

In October, Sonera entered into an agreement with Telefonica Moviles S.A., the other shareholder in Group 3G, whereby Sonera would not be required to make any additional contributions to Group 3G.

Sonera's maximum capital commitment to Xfera is approximately MEUR 300 through 2004 and to IPSE approximately MEUR 200 over ten years under existing agreements. The Board of Xfera has also decided to delay the launch of its services, which will defer and may reduce Sonera's capital commitment level. In the event of a failure to perform certain of its commitments, Xfera may be liable to the Spanish Government under performance guarantees. Sonera will remain liable for a share of its guarantees issued on behalf of Xfera in proportion to its shareholding. Sonera does not intend to provide any funding to IPSE in excess of its current commitments.

Sonera's investment in Broadband Mobile in Norway has been written off, and the company is currently in the process of being liquidated.

2) Sonera continues to divest selected non-core assets

- To reduce our debt and reallocate our assets Sonera will continue to implement a program of divesting selected non-core assets, Koponen stresses.

During 2001 Sonera has received total net proceeds of BNEUR 1.9 through the sale of non-core assets. Additionally, in July 2001 Sonera entered, together with the other selling shareholders, into a letter of intent with Telenor Mobile Communications to sell its stake in Hungarian GSM operator Pannon GSM for MEUR 310.

Sonera also plans to dispose of the remaining 38.6 million Deutsche Telekom shares, taking into consideration market conditions and its lock-up obligations.

Furthermore, Sonera is evaluating the potential divestiture of certain minority interests in operators outside of Finland, selected non-core services businesses and certain non-core support and infrastructure functions within its domestic mobile and fixed network businesses. Sonera expects that these divestitures will help to significantly reduce the current level of debt.

Turkcell remains a medium term financial investment with strong growth potential. MegaFon, the planned Russian GSM operator in which Sonera has a 26% interest, will be the first Pan-Russian operator in a large and relatively untapped 2G market. Sonera's current estimate of its total further investments in Megafon is MUSD 20-30 by the end of 2005. Sonera's Baltic joint ventures are all highly profitable and cash generative. These financial assets represent significant value to Sonera and the company does not plan accelerated sales of these assets.

3) Radical scale-down of new services businesses

- Sonera will significantly reduce its expenditure on new services businesses while seeking to retain its innovative strengths, Koponen says.

Sonera SmartTrust has been streamlining its operations since February 2001 and will continue to do so. SmartTrust is aiming to reach EBITDA break-even level in 2002.

Sonera Zed has decided to close down or sell its operations in markets where transaction volumes have not reached satisfactory targets (Netherlands, Turkey, USA, Singapore). Zed will focus on its operations in Finland, Germany, Italy, The Philippines, and the UK and expects to reach break-even level in 2003.

Sonera Juxto will continue to serve the corporate information technology market. Plaza will be refocused and more closely integrated with our domestic operations.

Sonera Info Communications continues to perform well and to show good profitability. New Communication Services will be refocused to serve as a corporate R&D function and all technology ventures within NCS have or will be sold or are in the process of being closed down.

4) Re-focusing Sonera's organization using a new customer-driven approach

Sonera will refocus its organization by using a more integrated and customer-driven approach instead of the earlier business-unit driven approach.

- We expect to be able to generate incremental revenues from the corporate customer segment through these efforts and should also be able to create better leverage of our sales force, Koponen said.

5) Maintaining position as a leading provider of telecommunications services in Finland

Sonera's domestic mobile operations target further growth through leadership in data services and high customer retention despite increased competition. Sonera's telecom operations enjoy stable growth and strong cash flows, with satisfactory margin development and growth opportunities outside its local areas in Finland.

- The reduced expenditure in new services businesses obviously implies a lower growth in the new services area. However, we will retain our innovative strengths in order to have the necessary capabilities to exploit growth opportunities in the new services area when market conditions improve.

- We also expect our new strategy to sharply improve our customer service levels, profitability and ability to generate positive cash flow. We will continue to grow organically in Finland while seeking to improve capital efficiency and cost control, Koponen concludes.