EESTI TELEKOM

ANNOUNCEMENT



COMMENTARY TO FINANCIAL RESULTS, Q1 2000



Estonian  Telecom,  the  leading provider of telecommunication  services  in

Estonia,  today  announces its results for the three months ended  March  31

2000.



Highlights



·    Revenue up 15% to 939 mln kroons (US$ 59 mln)

·    EBITDA up 24% to 503 mln kroons (US$ 32 mln)

·    EBITDA margin 54% up from 50%

·    Profit before tax up 40% to 247 mln kroons (US$ 16 mln)

·    Earnings per share up 106% to 1.79 kroons (US$ 0.11)

·    Net gearing -5%



Commenting on the results the Chairman, Toomas Somera, said:



  "Year  2000 started with strong results following our focus on  innovation

and efficiency."



CHAIRMAN'S STATEMENT



Year  2000  has  started with strong growth indicators for Estonian  Telecom

Group.  The total revenue has increased by 15% to 939 mln kroons and  profit

before  taxes increased by 40% to 247 mln kroons. To my belief, an essential

part  of  the growth results from the success of the Group keeping  up  with

recent developments of the World telecommunications industry: innovative and

diversified  services  in  mobile  and  data  communication  areas,  complex

solutions, signifying customer relations management. Another factor of equal

importance to the   development of the Group is the expected changes of  the

Estonian  market:  the  opening of  the fixed communications  area  for  new

entrants which in 2001.





Revenue



Total revenue of Estonian Telecom Group in three months of 2000 amounted  to

939  mln  kroons.  Both major business segments of Estonian  Telecom:  fixed

network telecommunications and mobile telecommunication, contributed to  the

growth.



Total  revenue from fixed network services were up by 15% amounting  to  667

mln kroons.



Local  call  revenue was the fastest growing part of the  revenue  exceeding

1999 result by 34%. The main factor behind the growth has been Internet.



Total  number of Internet dial-up minutes in three months of 2000 is  almost

160%  higher  than  the  corresponding figure for 1999.  Currently,  dial-up

minutes are over 31% of the total minute volumes, including local, domestic,

international  and mobile calls. Even though the data communications  market

has been open for competition from the very beginning, the provider of fixed

line  services,  Estonian Telephone Company, has succeeded to  maintain  and

even  strengthen its position. By the end of the period, the company had  39

thousand dial-up clients which corresponds to a 49% market share. The market

share  is  growing  steadily. In order to get even  better  results,  active

marketing  actions are planned in the nearest future. Also,  development  of

value added services has high priority.



In the first quarter of 2000 Estonian Telephone Company started to advertise

the   trademark  "et",  a  trademark  for  telecommunication  services   and

solutions.  The  packages that relate to fixed telephone and data  services,

(in  cooperation  with Estonian Mobile Telephone Company,  the  provider  of

mobile  communication  services) mobile telephone  services,  ISDN  and  IN-

network based services, are expected to give a competitive advantage to  the

Group in the future telecommunications market



Call revenues in total increased by 13% and formed 62% of the total revenue.

Main  line  revenues  grew by 10% and formed 23% of  the  total.  Number  of

clients  of the company at the end of March 2000 was 513,000. Total  revenue

per client was up 7% compared to the corresponding period in 1999, amounting

to 1 232 kroons.



Total  revenue from mobile telecommunication services were up by 14% to  421

mln kroons. During the first three months of 2000, 15.7 thousand new clients

joint  the  operator  raising  the  total number  of  subscribers  to  259.6

thousand,  including  76.9  thousand prepaid  card  customers.  Addition  of

prepaid  card customers has slowed down in the beginning of 2000  with  more

new customers choosing traditional subscription-based packages. SMS and data

services keep growing at an impressive speed. The result of the three months

of  2000  exceeded  three months of 1999 by 125%. In  total,  SMS  and  data

services form almost 2% of the sales of Estonian Mobile Telephone Company.



Operating Expenses



Operating expenses of Estonian Telecom Group amounted to 436 mln kroons,  up

only by 6%. Ratio of operating expenses into total revenue has fallen to 46%

from the 50% level a year earlier.



70% decrease in the parent company, Estonian Telecom Ltd, operating expenses

contributes essentially to the consolidated result. Three months expenses of

1999  of  Estonian Telecom were affected by the costs related  to  the  IPO,

listing  of the shares of the company on Tallinn and London Stock  Exchanges

and restructuring.



Continuing  decrease of the headcount in Estonian Telephone Company  from  2

771  at  the  end of December 1999 to 2 614 by the end of March  2000,  also

contributed to the limited growth of operating expenses. Ratio of  operating

expenses  into total revenue in Estonian Telephone Company Group has  fallen

from  56% to 54%. Operating expenses of Estonian Mobile Telephone Group were

up  by  12%.  Ratio of the expenses into total revenue has remained  on  48%

level.



Depreciation and Amortisation



In  the  period  under  review, depreciation and  amortisation  of  Estonian

Telecom Group increased by 34 mln kroons (16%) to 247 mln kroons. A fastened

amortisation  of  NMT network in total amount of 14 mln kroons  by  Estonian

Mobile   Telephone  Company  took  place  in  the  first  quarter  of   2000

contributing to relatively high growth of the item.



Profit



Net  profit of Estonian Telecom Group in the first quarter of 2000  amounted

to  246 mln kroons. Restructuring of the Group that took place in the  first

half  of 1999 makes it impossible to compare net profits of the period  with

the corresponding period in 1999.





                  Fixed         Mobile      Consolidated

                 network     telecommunica

                telecommun       tions

                 ications

EBIT, mEEK         129            134            256

margin, %          19%            32%            27%

growth, %          40%            6%             33%

EBITDA, mEEK       302            209            503

margin, %          45%            50%            54%

growth, %          19%            16%            24%



Earnings  per share in the first quarter of 2000 increased by 106%  to  1.79

kroons (3 months of 1999: 0.87 kroons per share).



Investments



Estonian Telecom Group invested 244 mln kroons in three months of 2000.



One  of  the  most remarkable projects in year 2000 is "Tallinn  100"  (100%

digitalisation  of Tallinn). During this three months all the  planning  and

testing has been finished for the replacement of electromechanical exchanges

with  digital  exchanges.  RAS-1000  (development  of  radio-link  telephone

connections) and the Country Road (Internet connections to the public sector

institutions in rural areas) shall be mentioned as other ongoing  investment

projects in fixed communications area.



In  total,  fixed  line penetration increased to 35.6  main  lines  per  100

inhabitants with digitalisation rate 57.6% by the end of March 2000.



The  majority  of  investments of the mobile area focussed on  building  and

improving  of  base  stations,  exchanges and other  network  equipment.  On

December 10, 2000, Estonian Mobile Telephone Company will close its  NMT-450

network.  Clients  of  the  network will be  offered  to  subscribe  to  the

company's  GSM networks at favourable terms as the coverage of GSM  900  and

GSM 1800 networks has achieved practically the same level.



Development and Research



To  be  successful in the modern telecommunication market in the long  term,

emphasis has to be put on the development of new services.



Estonian  Telephone  Company  has  successfully  launched  its  ADSL   based

broadband  product  portfolio on March 1. The portfolio  consists  of  three

products  (ADSL Light, ADSL Plus and ADSL Premium) and covers  most  of  the

market  demand.  Due to the fast development of the Internet  currently  the

market  seems  to be ready for broadband connections - the market  need  for

year  2000 is expected to be around 1000, the number of clients will double.

Estonian  Telephone Company is also working actively on network rollout  and

in June, ADSL connections are available in all major cities within two weeks

delivery time.



The  company  is  integrating different technologies  in  order  to  provide

advanced communication solutions. In the near future several WEB based  VoIP

(Voice over IP), UMS (Universal messaging) solutions and WEB/WAP based value

added applications will be launched.



In March 2000, Estonian Telephone Company, Estonian Mobile Telephone Company

together  with  another  Estonian company, Privador  Ltd,  started  a  joint

project  to  analyse  the creation of PKI (Public Key Infrastructure).  This

offers  consumers a fast and secure authentication method  to  access  to  a

number  of  electronic  services, e.g. forwarding electronic  documents  and

digital  signatures. The PKI is named to be the cornerstone  of  information

society, allowing users to communicate via networks and identify each  other

safely.  Initially  the infrastructure is created on  the  client  bases  of

Estonian Telephone Company and Estonian Mobile Telephone Company, but  wider

founding  consortia will also be considered, to include  for  example  major

banks  of  Estonia. Privador participates in the project  as  the  technical

adviser  and consultant. The PKI infrastructure based services will be  also

offered  to  the State Agencies, allowing to accelerate the introduction  of

SmartCard  based  ID  cards, replacing the paper passports  and  helping  to

create the all-electronic interface between State and its citizens.



Early  April, a three-way frame agreement to create the testing  environment

for  GPRS  (General Packet Radio Services) services, named  as  project  WAY

(Wireless  Application  Odyssey) was signed  by  Ericsson  Estonia,  Tallinn

Technical  University  and  Estonian  Mobile  Telephone  Company.  The  test

environment, as open facility for IT companies and students, will be used to

stimulate the creation of specific software applications, to be run in  GPRS

infrastructure of Estonian Mobile Telephone Company or to be sold  to  other

operators  of  GSM  systems in the world. This will ensure  the  competitive

advantage to introduce new packet data based services on GSM infrastructure,

when  the  GPRS  system will be operational in the beginning of  next  year.

Within  the frameworks of the WAY project, a modern research centre will  be

opened at Tallinn Technical University, giving new boost to raise the  value

of telecommunications education and to stimulate research activities.



A  three-way  agreement  to  facilitate the implementation  of  MPS  (Mobile

Positioning System) services for Estonian Rescue Board was signed  in  April

by  Estonian  Rescue Board, Estonian Mobile Telephone Company and  Ericsson.

The  positioning  services will enable to locate all  callers  of  emergency

number 112 in electronic maps of Rescue Board emergency centres, enabling to

shorten  the  time between the call and the help to be delivered.  Also  the

fleet  management functions will be offered to the vehicles of Rescue Board,

to  automatically choose the nearest vehicle to reach the emergency spot and

to  choose the shortest route. Mobile emergency positioning service will  be

offered  knowingly  as  the  first country in the  world.  The  applications

software will be jointly created by agreement parties and Regio, the leading

electronic  map company of Estonia. Also commercial location based  services

will be offered to consumers.



WAP  (Wireless Applications Protocol) services were introduced  by  Estonian

Mobile Telephone Company in April.



Organisation



Starting from January 1 2000, a centralised Treasury function was started at

Estonian Telecom level.



On  April  1,  2000, Internal Audit Department was established  at  Estonian

Telecom  Ltd. Internal Audit is and independent body reporting  directly  to

the Audit Committee consisting of representatives of the Supervisory Council

and the Management Board of Estonian Telecom.



It has been decided to concentrate Risk Management functions of the Group to

the  parent  company  level  as well. The process  of  establishing  a  risk

assessment and management system has been started. The system is expected to

start functioning by the end of 2000.



Annual General Meeting



The  Annual  General  Meeting of the shareholders of Estonian  Telecom  took

place  on  May 25, 2000. The company's new Supervisory Council was  elected.

Mr.  Andres  Root from KPMG Estonia was appointed to audit Estonian  Telecom

Ltd. in 2000.



The  General  Meeting  passed  a  decision concerning  the  distribution  of

dividends  for  the  financial year of 1999. The number of  A-series  shares

eligible  for dividends was 137 383 178. It was decided to pay out  203  327

103  kroons  or  1.48  kroons  per share to  the  shareholders  as  ordinary

dividends, and to pay out 346 205 609 kroons or 2.52 kroons per share to the

shareholders  as "Anniversary Dividends". 10 000 kroons was decided  to  pay

out to the Government as the owner of one B-series share.



Taxation



A  draft  on amending the Income Tax Act effective from January1,  2000  has

been  approved by the Government of the Republic of Estonia and sent to  the

Parliament.  The draft aims at amending several principles of  the  act.  If

accepted,  this  would have a positive impact on Estonian Telecom  Ltd:  the

amount  of  income  tax  payable  at  the distribution  of  dividends  would

significantly  decrease and it would become possible to cover  part  of  the

income tax liability with extraordinary expenses of 1999 that resulted  from

the new Income Tax Act.



Opening telecommunication market for competition



The new Telecommunications Law was approved by the Parliament on February 9,

2000. The law will regulate telecommunications market and favour competition

after January 1, 2001 when special rights of Estonian Telephone Company  for

providing fixed communication services will expire.



Also,  negotiations are about to start in May 2000 between the  Ministry  of

Transport  and  Communications  and  Estonian  Telephone  Company  aimed  on

amending the Concession Agreement.





Raul Kalev

PR-manager

+372 6460 220