Swedish Government Presentation
Objective and Vision
Parliament objective
 Professional management of state portfolio
Government’s vision
 Valuable corporations create valuable jobs
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Implementation
 Introducing private sector discipline
—
Shareholder value
 Active ownership
—
Exit not an option
 Commercial ownership tools
—
Transparency is the key to unlock “the black box”
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Changing the Government’s Role as Owner

Earlier
Ownership responsibility
spread between
several ministries
 Closely related to political
issues

Now
Ownership concentrated
to Ministry
 Independent units with only
one focus
 Conflict of interest at
all levels
 Separation of sector political aspects and ownership
 Competence, focus and resources
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Value of Portfolio
Estimated market value of managed portfolio (e billion)(1)
60
60
50
40
30
20
20
10
8
3.5
1.8
1.7
1.7
1.2
0.8
0.5
0
Note:
1 As of 30 June 2000
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The Swedish Government’s Portfolio
Total value: e 60 billion
Others
23%
AssiDomän AB
1%
Vasakronan AB
2%
LKAB
2%
Telia AB
31%
Akademiska Hus AB
3%
Posten AB
3%
V&S Vin & Sprit AB
Nordic Baltic
4%
Holding AB
7%
Vattenfall AB
14%
Svenska Spel AB
10%
Note:
1 As of 4 September 2000
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&
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o
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B
Te
lia
The Larger Companies—Total Sales
Total sales e37 billion
7
6
5
4
3
2
1
0
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Source: Sweden’s largest companies
SA
S
S
Sa J
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yg dv
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sa
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el
si
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an
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ot
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et
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S
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tte
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al
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di
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om
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ic
ss
on
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AB
B
Number of Employees in Sweden, 1999
50
45
Wholly or partly Government owned
35
30
25
20
15
10
5
0
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Ministries Responsible for the Government Portfolio
Government owned companies by responsible Ministry
(by number of employees)
Ministry
Ministry of
of the
Culture
Environment
0.8%
Ministry of Health
0.1%
Ministry for
and Social Affairs
Foreign Affairs
6.0%
0.1%
Ministry of
Finance
9.0%
Ministry of
Industry,
Employment and
Communications
84.0%
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Transformation
Phase 1
Financial transformation
Phase 2
e-Transformation
 Transparency
 e-enabling the Portfolio
 Capital structure
 Board nomination
companies
 Creating value
 Survival
 Year 1998–2000
 Year 2000–2002
 Quarterly report the
 No internet strategy
ultimate transparency
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Phase I: Financial Transformation
Enhance Operating
Performance
Maximise
Shareholder
Value
Optimise Capital
Structure
Focus and Earn Growth
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Portfolio Management—Main Tools
 Transparency
—
—
—
Consistent
Swift
Transparent
 Capital structure
—
—
—
Optimise capital structure
Dividend policy
Profit sharing based on value based management system for all
 Board nominations
—
—
Transparent and active
Based on company’s strategic situation
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Transparency
 Consolidated balance sheet and income statement
 Quarterly reporting
 Value based management system foundation for profit sharing
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Capital Structure
 Common understanding of cost of equity
 Investments exceeding WACC
 Focus on core business
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Board Nomination
 Six to eight persons
 Remuneration
—
Competitive
 Cutting-edge corporate government guidelines
—
—
—
Clear responsibility and accountability
Committees
Evolution and feedback
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Active Ownership—Examples of Recent Events
Trade sales
 Sale of 25% stake in Celsius
to Saab AB / Bae
 Sale of SAQ Kontroll to Det
Norske Veritas
 Sale of 50% stake in VPC to
Equity offerings
 Sale of 30% of Telia in
e9.1 billion IPO
 Sale of remaining stake in
Pharmacia & Upjohn for
e1.8 billion
a group of Swedish banks
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Active Ownership—Examples of Recent Events
(continued)
Portfolio company
acquisitions / divestitures
 Telia acquisition of
Netcom asa
 Vattenfall acquisitions in
Germany, Poland, Finland
 Nordic Baltic Holding
acquisition of Unibank and bid
for CBK
 Sweden Post sale of Postgirot
Portfolio company
restructurings
 Sveaskog—the Government
gained control over 1/3 of the
forestry assets of AssiDomän
 SJ—focus on passenger traffic,
divestment of hotels, ferries,
restaurants etc.
 AssiDomän—restructuring and
focus on industrial portfolio
to a group of Swedish banks
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Phase II: e-Transformation
In the new economy, corporations will need to marry business and
financial strategy with technology strategy
Define and Implement
Technology Strategies
Understand how
technology changes
business model
Develop new technology
strategies
Maximise
Shareholder
Value
Enhance Operating
Performance
Optimise Capital
Structure
Focus and Earn Growth
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Potential Impact Varies by Industry
Average
Many buyers,
many sellers
eBay
Schwab
Transform
the industry
Industry
fragmentation
Average
Cost reduction
opportunity
One buyer,
one seller
Boeing
40%
Low spending
Information
intensity
High spending
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Most Companies ...
… are facing a significant discontinuity
Average
Many buyers,
many sellers
Lernia
Posten
SAS
SJ
Telia
SOS Alarm
Sv. Bilprovning
Sv. Kraftnät
Rymdaktiebolaget
Vattenfall
Industry
fragmentation
Average
LKAB
Luftfartsverket
Samhall
Sveaskog
Sv. Skogsplantor
One buyer,
one seller
Low spending
Information
intensity
High spending
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The Greatest Benefits ...
are also the most difficult to achieve
Internal
processes
Supplier /
procurement
management
Customer /
distribution
management
 Internal policies
 Company information
 Product information
 On-line admin / HR
 Pricing and inventory
 Electronic ordering
Processes / Transactions
 Intranet for primary
processes
 Seamless data flow /
knowledge sharing
visible to suppliers
 Electronic buying /
auctions
 Electronic-only
supply chain
and payment possible
 Value added
services online
 Unique online
offering
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Savings Achieved
40
35
34
30
(%)
25
20
20
16
15
11
10
10
5
5
0
Electronic
components
Forest
products
Computing
Steel
MRO
Healthcare
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Determination of Threat / Opportunity
Securities
Insurance
Industry fragmentation
Banks
Aerospace
Financial Services
Publishing
Computers
Utilities
Telecom
Chemicals
Consumer
Products
Mining
Transportation
Electronic
Construction
Automotive
Health
Capital
Goods
Metal Fabrication
Oil and Gas
Information intensity
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100
100
88
80
60
60
40
31
20
14
8
0
Cost
ROI %
position
Percentage of total
Inventory
turns
Times per year
Stock price index (1-Jan-1990) = 100
Dell Outperforms the Competition
125
100
75
50
25
0
1990
DELL
1994
CPQ
1998
Nasdaq
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The Panel Sees Far Less Impact Today ...
… than others
100%
% of CEO mentions
90%
None
80%
70%
60%
50%
Little
impact
Major
impact
40%
30%
Very high
impact /
transform
20%
10%
0%
Mol panel
(N=15)
Bain Swedish
(N=14)
Bain RoW
(N=280)
EU
e-commerce
survey
(N=410)
What is the impact of e-commerce on your business today?
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Anxiety About Competitors ...
… is much higher elsewhere
100%
90%
more
more
80%
70%
60%
same
50%
same
40%
30%
less
less
20%
10%
do not know/none
do not know/none
0%
Mol panel
(N=15)
The conference board panel
(N=80)
How much do your competitors spend on e-business?
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There is a Clearly Recognised Gap …
… especially in procurement
100
90
94%
87%
80%
% of responses
80
70
60
Should be
e-enabled
50
40
30
20
Is e-enabled
10
0
Customers
Suppliers
Internal
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Procurement is a Gap for all Companies
100%
100%
80%
80%
60%
60%
60%
50%
50%
40%
40%
40%
40%
40%
30%
20%
20%
20%
0%
0%
0%
Group medium
Group low
Customers
Suppliers
Group high
Internal
What percentage of companies are e-enabled?
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Procurement Savings can be Substantial
Efficiency improvement
Procurement cost savings
30
25
40
21
20
15
9
10
5
5
Percent of total
Days of process time
25
50
30%
30
20
15%
14%
10
0
0
Caterpillar
Pilot
Before
GE Lighting
GE
Freemarkets
United
Average
Technology
Savings
After
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Government-owned Companies
 25% of domestic business community
 Total sales e39 billion
 Indirect material 60% of total costs
 Cost reductions through e-procurement 5–10%
Total savings e1.5–2.5 billion
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Transparency Shows the Real Value
Government balance sheet 1999, e billion
Companies valued at book value
Asset s
Authorities
Companies valued at market value
Asset s
Liabilities
78.9
45.2
0
163.5
Central Bank
27.3
13.5
AP-fund
74.1
0.2
(17.3)
0
Government debt
Elimination
Authorities
78.9
45.2
0
163.5
Central Bank
27.3
13.5
AP-fund
74.1
0.2
(17.3)
0
companies
59.7
0
Net wealth
0.2
Government debt
Elimination
Government-
Government-
owned
owned
companies
16.7
Net wealth
(42.7)
0
Liabilities
Sources: The Swedish National Financial Management Authority and Ministry of Industry
With government owned companies valued at market price the
government position is positive.
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Listed Companies—Relative Performance
Share price performance 2000 to 30 August 2000
Nordic Baltic Holding
SAS
1
2
AssiDomän 3
29
(3)
(0.4)
OM Gruppen AB 4
143
5
Telia (20)
8
SX Gen. index
(30)
(10)
10
Notes:
Government shareholding
1 NBH
18.1%
2 SAS
21.4%
3 AssiDomän
35.3%
4 OM Gruppen AB
7.7%
5 Telia
70.6% since listing (13 June)
30
(%)
50
70
90
150
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Value creation can also be measured using…
… the EVA methodology
1998 EVA (economic value added) (e million)
180
171.0
Total EVA: e267.9m
160
140
120
100
80
65.3
60
1.0
15.0
19.8
Svenska
Kraftnät
1.0
Vägverket
Produktion &
Konsult
20
LKAB
40
Vattenfall
39.9
46.5
27.0
0
(20)
Telia
SAS²
Posten
Luftfartsverket
SJ
(31.9)
AssiDomän¹
(40)
Notes:
1 35.3% of AssiDomän
2 21.4% of SAS
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