1. JYSKE MARKETS Telenor: A growing European telecom operator Jyske Markets, Vestergade 8-16 DK-8600 Silkeborg Senior equity analyst: Robert Jakobsen +45 89 89 70 44 jrj@jyskebank.dk Assisting Analyst Christoffer Thimsen +45 89 89 70 47 Christoffer.Thimsen@jyskebank.dk Assisting Analyst Kasper Friis Toft +45 89 89 71 62 Kasper.Friis.Toft@Jyskebank.dk ---------------------------------------------- Important investor information: Please see the last pages. Side 1/25

2. JYSKE MARKETS New case: Telenor (BUY, price target of NOK 150, medium risk) A growing European telecom operator. Exposure to EM is valuable. Telenor expects considerable lift in the cash flow. Jyske Bank is bullish about the telecom sector. Dividend increase of 17% in 2014, more in store in 2015. Jyske Quant score supports BUY recommendation. Telenor should be trading at a premium to the sector, but this is currently not the case. Side 2/25

3. JYSKE MARKETS Telenor in brief Telenor is the largest Nordic telecom operator. Its market value exceeds NOK 200bn. It has 33,000 employees. In 2014 sales of NOK 109bn and EBITDA of NOK 38bn are expected. Telenor's is headquartered in Norway, which is also the most important single market (28% of EBITDA). Telenor also has great exposure in Sweden, Eastern Europe and not least Asia. Telenor owns 33% of the shares in VimpelCom, which is a major mobile operator (200m subscriptions) in primarily Russia and Italy. The stake makes up a market value of NOK 30bn or 15% of Telenor's market capitalisation. The largest shareholder in Telenor is the Norwegian state which owns 54% of the outstanding shares. 40.5% of the shares is flowing freely. Telenor's 2013 results were released in early-February. Sales were a tad higher than expected. On the other hand, EBITDA was a tad lower than expected. For 2014 the management expects low one-digit sales growth and a stable EBITDA margin relative to 2013 (34.5%). Side 3/25

4. JYSKE MARKETS New case: Telenor (BUY, price target of NOK 150, medium risk) A growing European telecom operator. Exposure to EM is valuable. Telenor expects considerable lift in the cash flow. Jyske Bank is bullish about the telecom sector. Dividend increase of 17% in 2014, more in store in 2015. Jyske Quant score supports BUY recommendation. Telenor should be trading at a premium to the sector, but this is currently not the case. Side 4/25

5. JYSKE MARKETS A growing European telecom operator Telenor has historically performed well compared to its European rivals. This development is expected to continue. Note: Peers are Orange, Vodafone, Tele2, TeliaSonera, Deutsche Telekom, KPN, Swisscom, Belgacom and Portugal Telecom. Source: Bloomberg Side 5/25

6. JYSKE MARKETS New case: Telenor (BUY, price target of NOK 150, medium risk) A growing European telecom operator. Exposure to EM is valuable. Telenor expects considerable lift in the cash flow. Jyske Bank is bullish about the telecom sector. Dividend increase of 17% in 2014, more in store in 2015. Jyske Quant score supports BUY recommendation. Telenor should be trading at a premium to the sector, but this is currently not the case. Side 6/25

7. JYSKE MARKETS Exposure to EM is valuable Telenor generates 45% of EBITDA in Asia! This is unique for a European telecom operator. Telenor has a growth culture. Hence, the management will not hesitate if it sees new attractive investment opportunities that may deliver an excellent return. Most recently, Telenor won the rights to offer mobile telephony in Myanmar ahead of 90 other operators. – A market with 60m inhabitants. – Only 10% owns a telephone. – If things develop as Telenor wants, the share will be increased to 70% in 2019. Side 7/25

8. JYSKE MARKETS Exposure to EM is valuable. Penetration degree and Telenor's market position in Asian markets Side 8/25

9. JYSKE MARKETS New case: Telenor (BUY, price target of NOK 150, medium risk) A growing European telecom operator. Exposure to EM is valuable. Telenor expects considerable lift in the cash flow. Jyske Bank is bullish about the telecom sector. Dividend increase of 17% in 2014, more in store in 2015. Jyske Quant score supports BUY recommendation. Telenor should be trading at a premium to the sector, but this is currently not the case. Side 9/25

10. JYSKE MARKETS Telenor expects considerable lift in the cash flow Telenor expects a considerable lift in the cash flow. In more concrete terms, Telenor expects to deliver an adjusted cash flow of no less than NOK 28-30bn in 2015. This will be a lift of above 33% compared to NOK 21bn in 2013. The advance is to be driven by: – Growth in emerging-market countries – Break-even in India – Stabilisation in Norway – Cost savings – Normalisation of CAPEX – Expansion into new markets - e.g. Africa Side 10/25

11. JYSKE MARKETS Telenor expects considerable lift in the cash flow The market does not yet discount a fulfilment of cash flow forecast Source: Bloomberg Telenor forecast: NOK 28-30bn Side 11/25

12. JYSKE MARKETS New case: Telenor (BUY, price target of NOK 150, medium risk) A growing European telecom operator. Exposure to EM is valuable. Telenor expects a considerable lift in the cash flow. Jyske Bank is bullish about the telecom sector. Dividend increase of 17% in 2014, more in store in 2015. Jyske Quant score supports BUY recommendation. Telenor should be trading at a premium to the sector, but this is currently not the case. Side 12/25

13. JYSKE MARKETS Jyske Bank is bullish about the telecom sector The telecom sector has an 'overweight' recommendation. In a 10-year perspective the sector has a very attractive valuation. Indicators are pointing towards a reduced risk potential for global equities and defensive sectors are therefore preferable. The telecom sector fits well into this. Side 13/25

14. JYSKE MARKETS New case: Telenor (BUY, price target of NOK 150, medium risk) A growing European telecom operator. Exposure to EM is valuable. Telenor expects considerable lift in the cash flow. Jyske Bank is bullish about the telecom sector. Dividend increase of 17% in 2014, more in store in 2015. Jyske Quant score supports BUY recommendation. Telenor should be trading at a premium to the sector, but this is currently not the case. Side 14/25

15. JYSKE MARKETS Dividend increase of 17% in 2014, more in store in 2015 In May 2014 Telenor will pay a dividend of NOK 7 per share. This is 17% higher than the year before. The NOK 7 per share corresponds to a dividend yield of 5.8%. If everything proceeds as planned (particularly with respect to Telenor's increase of the adjusted cash flow) we expect Telenor to raise its 2015 dividend to NOK 8 per share. Side 15/25

16. JYSKE MARKETS Dividend increase of 17% in 2014, more in store in 2015 Telenor's dividend bears comparison with rivals Source: Bloomberg Side 16/25

17. JYSKE MARKETS New case: Telenor (BUY, price target of NOK 150, medium risk) A growing European telecom operator. Exposure to EM is valuable. Telenor expects considerable lift in the cash flow. Jyske Bank is bullish about the telecom sector. Dividend increase of 17% in 2014, more in store in 2015. Jyske Quant score supports BUY recommendation. Telenor should be trading at a premium to the sector, but this is currently not the case. Side 17/25

18. JYSKE MARKETS Jyske Quant score supports BUY recommendation The Jyske Quant score of 5.2 supports our BUY recommendation. The closest rivals are having a Jyske Quant score of 4.7 on average. Particularly Telenor's relatively high scores of Fundamental Value, Financial Strength and Quality were impressive. Fingerprint of the Jyske Quant score of Telenor Side 18/25

19. JYSKE MARKETS New case: Telenor (BUY, price target of NOK 150, medium risk) A growing European telecom operator. Exposure to EM is valuable. Telenor expects a considerable lift in the cash flow. Jyske Bank is bullish about the telecom sector. Dividend increase of 17% in 2014, more in store in 2015. Jyske Quant score supports BUY recommendation. Telenor should be trading at a premium to the sector, but this is currently not the case. Side 19/25

20. JYSKE MARKETS Telenor should be trading at a premium to the sector, but this is currently not the case In terms of estimated P/E Telenor is trading at an unjustified discount Source: Bloomberg Side 20/25

21. JYSKE MARKETS New case: Telenor (BUY, price target of NOK 150, medium risk) One of the few companies that can deliver growth. Exposure to EM is valuable. Telenor expects a considerable lift in the cash flow. Jyske Bank is bullish about the telecom sector. Dividend increase of 17% in 2014, more in store in 2015. Jyske Quant score supports BUY recommendation. Telenor should be trading at a premium to the sector, but this is currently not the case. Side 21/25

22. JYSKE MARKETS Security codes for Telenor Bloomberg: TEL NO Reuters: TEL.OL ISIN: NO0010063308 Jyske Bank: 97 54 0 39 Daily sales of the share: NOI 240m or 1.8m shares. Side 22/25

23. JYSKE MARKETS Side 23/25 Jyske Bank’s share recommendations – current allocation Allocation of recommendations, Danish shares (number)Allocation of recommendations, all shares (number) Source: Jyske Bank

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