EESTI TELEKOM

ANNOUNCEMENT

27.05.99

 

 

EXPLANATORY NOTES TO THE UNAUDITED FINANCIAL STATEMENTS OF THE FIRST 

QUARTER OF 1999

 

Unconsolidated interim financial statements of the first three months 

of 1999 are in accordance with the International Accounting Standards 

(IAS). In the main, the same accounting principles were followed as 

in preparation of the financial statements of 1998.

 

Still, in comparison with 1998, principles of expressing revenue and 

expenses of international transactions have been changed in 

consolidated accounts. Until now, net results of quarterly 

international settlements were shown. Starting from 1999, gross 

method based on the amounts of minutes of outgoing from Estonia and 

incoming into Estonia international calls is in use. Respective 

changes have been made into the statements of 1998 to make them 

comparable: net sales and operating expenses on materials, 

consumables, supplies and services were increased by 171 217 th. 

Estonian kroons.

 

Changes in structure of the Group

 

Based on the Restructuring Agreement that was introduced in the 

Offering Circular of Estonian Telecom, the Subscription List of the 

Shares of Estonian Telecom and the Share Subscription and Payment 

Settlement Agreement were signed on March 24, 1999. Accordingly the 

new shares were issued as follows:

 

Telia AB			14 425 234 A-shares with nominal value EEK 10 

per share;

Sonera Holding B.V.	14 425 234 A-shares with nominal value EEK 10 

per share;

Baltic Tele AB		35 032 710 A-shares with nominal value EEK 10 

per share.

 

As determined in the Restructuring Agreement, the above mentioned new 

shares were issued in exchange for all the shares of Estonian Mobile 

Telephone Company and Estonian Telephone Company owned by Telia AB, 

Sonera Holding B.V. and Baltic Tele AB.

 

Telia AB and Sonera Holding B.V. both acquired 1 717 289 A-shares 

during the IPO as agreed in the Restructuring Agreement.

 

The current ownership structure of Estonian Telecom is following:

Republic of Estonia		37 485 000 A-shares	=	27,28%

				               1 B-share

Public Investors			32 580 422 A-shares	=	23,72%

Telia AB				16 142 523 A-shares	=	11,75%

Sonera Holding B.V.		16 142 523 A-shares	=	11,75%

Baltic Telia AB			35 032 710 A-shares 	=	25,50%

 

At the same time, Estonian Telecom become 100%-owner of Estonian 

Mobile Telephone Company and Estonian Telephone Company.

 

In April 1999, the Commercial Register of the Tallinn City Court 

registered the increase of the share capital of Estonian Telecom to 

EEK 1 373 832 780.

 

Income Statement

 

Net sales of Estonian Telecom of the first three months of 1999 

increased by 123,5 mln kroons or 17,9% in comparison with the same 

period of 1998. Net profit of the Group fell by 17,6 mln kroon or 

21,6%. The decrease was mainly caused by expenses of quotation of the 

share on the Tallinn Stock Exchange and on the London Stock Exchange, 

and by essential growth in depreciation expenses of Estonian 

Telephone Company in the first quarter of 1999, amounting to 159,3 

mln kroons (107,0 mln kroons in the first quarter of 1998). 

Depreciation includes revaluation of real estate objects in the 

amount of 16 mln kroons.

 

Net sales and net profit of Estonian Mobile Telephone Company of the 

first three months of 1999 increased by 60,0 mln kroons or 22,1%, and 

by 14,0 mln kroons or 16,5% respectively  in comparison with the same 

period of 1998. Consolidated net sales and net profit of the mobile 

services group were 346,4 mln kroons and 99,98 mln kroons 

respectively.

 

Net sales of Estonian Telephone Company of the first three months of 

1999 increased by 74,4 mln kroons or 15,0%. Net profit of the company 

was 66,6 mln kroons which is less by 8,9 mln kroons or 11% than the 

result of the same period of 1998 (three months in 1998: 75,5 mln 

kroons). Consolidated net sales and net profit of the fixed network 

services group were 573,1 mln kroons and 67,1 mln kroons 

respectively.

 

Changes were introduced into tariffs of the main services of Estonian 

telephone Company on February 1, 1999: monthly fees were lifted and 

connection fees were cut for private clients. Starting from May 1, 

1999, call set-up fee was established and minute tariffs were cut.

 

The amount of income tax in the three months financial statements is 

30,9 mln kroons, consisting on the current income tax in the amount 

of 27,7 mln kroons, and deferred income tax in  the amount of 3,2 mln 

kroons. In accordance with the Income Tax Law, income tax allowances 

on investments of the current financial year made outside Tallinn and 

neighbouring counties were employed when calculating the tax.

 

Balance Sheet

 

In the first quarter of 1999, Estonian Telecom acquired bonds of  

Leonia Bank in the amount of 1,9 mln kroons, bearing interests of 

13,3% (maturity date on April 14, 1999), and bonds of Swedbank in the 

amount of 6,8 mln kroons and with the interest rate of 13,25% 

(maturity date on March 4, 1999). Shares of Hansa Money Market Fund 

in the amount of 42,0 mln kroons and shares of Hansa Interest Fund in 

the amount of 5,0 mln kroons were purchased during the first three 

months of 1999 as short-term investments.

 

Total assets of Estonian Telecom Group grew from 3 517,7 mln kroons 

at the end of the first quarter of 1998 to 3 999,3 mln kroons by the 

end of the first quarter of 1999. Equity capital increased from 1 350 

mln kroons to 2 594 mln kroons. Non-current assets increased from 2 

693,6 mln kroons at the end of the first quarter of 1998 to 2 952,5 

mln kroons by the end of the first quarter of 1999.

 

Management Board of Estonian Telecom Ltd.