Letter from the CEO

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Glossary

Strong performance despite a challenging environment

The Nordic telecommunications market, which has historically been characterized by high competition and strict regulation, was put under even more pressure by the recession in 2009. The Danish and Swedish Gross Domestic Products declined by 4.3%1 and 4.4%2, respectively, and Danish consumer spending fell by a record 4.7%3. The Swiss market was also influenced by the adverse macroeconomic environment albeit to a smaller degree.

I am pleased that TDC managed to deliver a strong performance under these conditions. Our top line grew by 0.9%, our customer base grew by 4.6%, EBITDA was up by 6.9%, cash flow from operating activities was up by 48.2% while we reduced our net debt by DKK 1.4bn. after dividend payments of DKK 8.0bn. In 4Q 2009, we reached an important milestone, as we managed to stabilize revenue in Nordic Business after three consecutive years of decline.

In 2009, we also reinforced our strong, leading domestic market positions in all our lines of business, including consumer landline and mobile telephony, broadband, TV, business communications, wholesale and systems integration. Finally, we fully delivered on our promises to our shareholders.

Competitive and focused market platform

In 2009, we completed the strategic shift of our focus on the Nordic communications markets. We divested our shareholding in Invitel in Hungary and signed an agreement to merge Sunrise and Orange Switzerland subject to confirmatory due diligence and regulatory approval.

We firmly believe that in-market scale and synergies are key value creation drivers. We therefore strengthened our domestic market platform through five targeted add-on acquisitions during 2009: Fullrate (the leading no-frills broadband provider), A+ (a supplier of broadband services to antenna and housing associations), the most attractive utility fiber network in Denmark from DONG Energy, and Unotel and M1 (two mobile service operators). We are already witnessing the initial benefits of these key strategic moves and expect their full potential to be further demonstrated in the next two years.

Both in the Nordic region and Switzerland, TDC experienced a positive development in its market shares in 2009.

Market-leading innovation and brands

TDC once again proved its innovation capacity. In January, we launched our HomeDuo and HomeTrio multi-play offers. Within triple-play bundles, TDC’s practically 0% market share soared to more than 60% by the end of the year. One month ahead of Denmark’s nationwide analog switch-off on November 1, 2009, YouSee removed its TV-signal encryption, providing almost all YouSee’s customers with digital TV at no additional charge. Such innovative moves allowed TDC to extend its leadership in the Danish TV market and build a strong platform for future growth.

In Denmark, we took the final step in moving from a singlebrand culture to being a truly multi-brand company making the most of the significant intrinsic potential in powerful brands such as TDC, NetDesign, YouSee, Dansk Kabel-TV, Telmore and Fullrate. Each brand plays a distinct role in covering all segments of the residential, public and corporate markets within telecommunications, TV and systems integration.

This year, we also continued to invest heavily in establishing best-in-class networks across all our platforms (copper, cable, fiber and mobile) to enable the provision of such cutting-edge services and products with the aim of maximizing reliability and speeds for Danish customers – now and in the future. In particular, we prioritized the upgrade of our cable infrastructure to DOCSIS 3.0, and extended our optical fiber reach to the point that now, including our cable footprint, the vast majority of Danish households can receive high broadband speeds of at least 20 Mbps.

Sunrise successfully launched new mobile rate plans and assumed a position as the leading provider of flat-rate products, while significantly expanding its ULL subscriber base.

Reinforced customer focus

We provide millions of excellent customer experiences every day, and our brands are all leaders within their specific segments. However, for situations where we fail to live up to the standards that our customers rightfully expect from us, we have launched extensive efforts to further improve customer experiences across our Company. This ongoing end-to-end process effort aims at reinforcing our customer-centric focus throughout the Company.

Social responsibility

In 2009, we reinforced our commitment to social responsibility by joining forces with the Red Cross on providing IT and telecommunications facilities in disaster scenarios. We committed to the UN Global Compact, the world’s largest network for social responsibility and also signed an agreement with the Danish Electricity Savings Trust in which we commit to increasing energy efficiency by 15% annually and reducing our CO2 emissions by 5% by 2014.

TDC played a crucial role in facilitating the industrial revolution and subsequently in the digital transformation of Denmark, and we continue to assume our role and responsibility as the backbone of Denmark’s world-leading communications infrastructure. TDC has continuously upgraded its technology and can now deliver first-class mobile and IP solutions, services and contents via best-inclass
infrastructures.

In the years to come, TDC will continue to push the technological boundaries to benefit our residential and corporate customers and society at large.

Navigating change

Due to the persistent pressure on our Nordic revenues caused by price competition, the recession, and the decline in traditional landline telephony, 2009 was another year with employee reductions for TDC. In collaboration with the unions, we continued to leverage attrition and voluntary agreements. While undergoing such changes naturally challenges any organization, we remain committed to the basic change principles of openness, respect and fairness. At Sunrise, the employees have handled the inevitable uncertainty caused by the announced merger with Orange in an exemplary and professional manner and are maintaining the necessary focus on daily operations.

Our employees deserve significant credit for their commitment and determination to succeed. Their dedication to TDC and the success of our company are sources of motivation for the Executive Committee. We will carry on working tirelessly to move the company forward and keep the wellbeing of the TDC organization in focus.

The years ahead

Today, following its ongoing successful transformation in recent years, TDC stands out as one of the most focused, efficient and competitive of all the European incumbents. Yet, by focusing on our core strengths and with continued disciplined execution, we can do much more to further improve our business and create added value for all our key stakeholders: customers, employees, shareholders, and the communities in which we operate.

We will maintain our focus on generating strong and growing cash flows in the years ahead and on our policy of financial discipline.

2010 must-win battles

TDC has defined a number of must-win battles for 2010 to further progress toward fulfilling its ambition. On the customer front, we will focus on further improving the customer experience, based on an end-to-end process approach and upgrade of customer touchpoints. We will pursue profitable growth pockets and new revenue streams to further reinforce our top line. We will continue to invest in and leverage our multiple brands and world-class networks. We will maintain strong cost and cash discipline across business lines and relentlessly focus on efficiency. Finally, we are committed to bolstering our winning culture, increasing leadership capabilities and improving employee motivation and productivity across the organization.

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Henrik Poulsen
CEO & President
TDC A/S

 
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  1. Ministry of Finance projection in Economic Survey, December 2009.
  2. Swedish National Institute of Economic Research projection in Economic Tendency Survey, December 2009.
  3. Ministry of Finance projection in Economic Survey, December 2009.