Eesti Telekom                 FINANCIAL RESULTS           07/18/2002 09:00



FINANCIAL RESULTS, H1 2002, EUR



18 July 2002









    THE FINANCIAL RESULTS OF THE FIRST SIX MONTHS OF 2002

                              



Eesti  Telekom,  the  leading provider of  telecommunication

services  in Estonia, hereby announces its results  for  the

six-month period ended 30 June 2002.







Financial highlights

                            6 months     6 months  Change, %

                                2002         2001

Total revenue, mEUR              145          132         10

EBITDA, mEUR                      70           65          7

EBITDA margin, %                  48           49           

EBIT, mEUR                        37           32         17

EBIT margin, %                    25           24           

Profits  before  taxes,           37           34          8

mEUR

Net   profits  for  the           31           32         -4

period, mEUR

EPS, EUR                        0.22         0.23         -4

No. of A- shares         137,383,178  137,383,178           

Investments, mEUR                 13           27        -52

Net gearing, %                 -12.0          2.4           

ROA, %                            23           23           

ROE, %                            33           31           





Commenting  on  these  financial  results,  Chairman,   Jaan

Männik, stressed:



"Several  favourable trends in the operations of  the  Group

have  continued  to  prevail during the first  half-year  of

2002.  Measures  oriented  on  efficiency  improvement  have

started to show positive results."





For further information, please contact:



Krister Björkqvist                     +372  6272 465

CFO



Hille Võrk                              +372 6272 460

Financial Manager

CHAIRMAN’S STATEMENT



Results  of the first half-year of 2002 were favourable  for

the Eesti Telekom Group. Although the Estonian mobile market

has been intensively penetrated, AS EMT, the mobile operator

of   the  Group,  has  still  found  new  possibilities  for

increasing  its revenues and profits. The fixed  market  was

liberalized on January 1, 2001. AS Eesti Telefon, the  fixed

communications  operator,  has  adjusted  to  the   existing

working  environment  and has been  able  to  stabilize  its

market shares.



Last  year, we talked extensively about measures  meant  for

improving efficiency. Our investing policy and the structure

of  our tangible assets were reviewed. Changes were made  in

our customer service sphere. As a result, the profit margins

of  almost  all the companies of the Group improved  in  the

first half of 2002.



The  Eesti  Telekom  Group cash flow  has  continued  to  be

positive. Net gearing has reached -12%.



Revenues, expenses and profit



In  the  first  half of 2002, consolidated revenues  of  the

Eesti Telekom Group amounted to 145 mln EUR, showing a  rise

of  10%  compared to the first half-year of 2001.  Operating

expenses were 76 mln EUR, up by 12%. EBITDA of the Group was

70  mln EUR (margin 48%), showing a rise of 7%. Depreciation

for  the  period was 2% lower than a year ago. EBIT  of  the

Group  was up by 17%, amounting to 37 mln EUR. On  June  19,

2002,  AS Eesti Telekom paid out dividends in the amount  of

48 mln EUR to its shareholders for the year 2001. Income tax

on  dividends amounted to 6 mln EUR (2 mln EUR in 2001). The

net profit of the Eesti Telekom Group in the first half-year

of 2002 was 31 mln EUR, or 0.22 EUR per share.



Outcomes  of  the  first six months of 2001  and  2002  were

influenced by the following extraordinary factors:



                       2002                   2001

Total revenues AS Eesti Telefon sold  

               property    with    a

               capital gain  of  3.5

               mln EUR.

               

Total expenses                        AS    Eesti   Telefon

                                      released  a  2.9  mln

                                      EUR  reserve  related

                                      to  the  OÜ  Albufent

                                      claim.

                                      

Income    from                        AS Eesti Telefon sold

associates                            its  ownership in  AS

                                      Teabeliin.  2.1   mln

                                      EUR  of  profit  were

                                      accounted  as  income

                                      from associates.

                                      



The   consolidated  revenues  of  the  Eesti  Telefon  Group

amounted  to  85 mln EUR, down by 9% compared  to  the  same

period in 2001. Operating expenses were 51 mln EUR, down  by

16%.  EBITDA of the Group was 34 mln EUR. The EBITDA  margin

has  risen to 40%. Depreciation during the first six  months

of  the  year was significantly lower than in 2001 (down  by

9%).  EBIT of the group was up by 40%, amounting to  12  mln

EUR. The Eesti Telefon Group earned 11 mln EUR of net profit

in  the first half-year of 2002 (up by 18%, compared to  the

same period in 2001).



The operating revenues of AS Eesti Telefon were down by 11%,

compared  to  the  same period in 2001.  Revenues  from  all

categories  of voice-communication services to end-customers

were  down: domestic call revenues by 17%, dial-up  revenues

by 41%, international call revenues by 9%, and revenues from

calls  to  mobile  networks by 14%. On  the  positive  side,

revenues  from  monthly fees were up by 26%.  Revenues  from

data  communications and the Internet grew by  89%.  In  the

first half of 2002, Eesti Telefon made a capital gain of 3.5

mln  EUR  from  the  selling  of various  assets,  which  is

categorized under "other revenues".



Market  shares  of  AS Eesti Telefon have been  stable.  The

company  estimates its share of total call minutes, domestic

call  minutes,  fixed to mobile minutes,  and  international

call minutes to be 89%, 89%, 75%, and 71%, respectively.



The operating expenses of AS Eesti Telefon were down by 18%.

The   largest  part  of  the  decrease  was  due  to   lower

interconnection costs resulting from directing a large  part

of mobile calls directly from the network of one operator to

the network of another. Personnel expenses were down by 10%.

The  number of employees of AS Eesti Telefon had  fallen  to

1,418 by the end of June 2002 (June 2001: 1,797).



The  total revenues of the EMT Group amounted to 74 mln EUR,

up  by 10%. The operating expenses of the Group were 38  mln

EUR, also up by 10%. EBITDA of the EMT Group was 37 mln EUR,

with a margin of 49%. The net profit of the Group was 26 mln

EUR, up by 6%, compared to the same period in 2001.



The  number  of customers of AS EMT reached 406 thousand  by

the  end  of  June. The company had 267 thousand contractual

customers and 139 thousand prepaid-card users. Monthly  ARPU

(Average Revenues Per User) has been traditionally high over

the summer. Monthly ARPU in June 2002 was 29 EUR (June 2001:

30 EUR, December 2001: 28 EUR).



EMT’s  revenues from all main categories were up during  the

first  half-year of 2002. Revenues from SMS had the  highest

growth-rate, exceeding the corresponding figure in  2001  by

28%.  The growth resulted from a wider customer base and new

services being offered by EMT. A good example is the  multi-

SMS  service, which allows enterprises to send messages  via

Internet  to  their  numerous customers’ mobile  phones,  or

offers consumers the possibility of paying for purchases  by

mobile  phone.  For  instance,  at  the  recent  exceedingly

popular beer festival in Tallinn, it was possible to pay for

a  glass  of beer by mobile phone. In February, Sonera,  the

Finnish  mobile operator, and EMT successfully  demonstrated

the roaming and interconnection capability of the multimedia

messaging  service  (MMS)  between  the  various  pay   GPRS

networks   available   to  the  consumer.   The   successful

implementation   of   this  service   showed   that   mobile

subscribers  can send and receive multimedia  messages  even

through  other  networks.  Sonera and EMT also  demonstrated

how   multimedia  messages  can  be  exchanged  between  the

subscribers  of different operators. In June, EMT  continued

testing  MMS  in Estonia in cooperation with Ericsson.  But,

despite rapid growth, SMS revenues were only 3% of the total

revenues  of  AS  EMT  during the first half-year  of  2002,

thereby  showing  that there is still plenty  of  space  for

future growth.



Balance sheet and cash flows



At  the  end  of June, 2002, the total assets of  the  Eesti

Telekom  Group amounted to 258 mln EUR (December  2001:  271

mln  EUR).  Tangible assets were reduced, from the beginning

of the year, by 21 mln EUR. Current and non-current interest

bearing liabilities of the Group were reduced by 1 mln  EUR.

By  the end of the period, net debt of the Group amounted to

-26 mln EUR, and net gearing was -12%.



Net  cash  inflows of the Group in the first  half  of  2002

amounted 3 mln EUR. Net operating cash flow was 61  mln  EUR

(first  half-year of 2001: 51 mln EUR). The  operating  cash

flow  does not include income tax on dividends in the amount

of  6  mln  EUR. Cash outflow into investing activities  was

essentially smaller than a year ago: -8 mln EUR in 2002, -23

mln  EUR in 2001. Cash outflow into financing activities was

49 mln EUR, including dividends of 48 mln EUR.



Investments



The  Eesti Telefon Group invested 7 mln EUR during the first

half  of  2002  (first half-year of 2001: 19 mln  EUR).  The

majority of the investments went into improving the  quality

of  the network. By the end of June, the digitalisation rate

had  risen to 74.1% (December 2001: 71.8%). 5,400  new  ADSL

connections were installed during the six-month period.  The

total  number  of Atlas ADSL connections reached  22,300  (a

penetration of 1,7 lines per 100 people). In May, the  speed

of   most ADSL Internet permanent connection packages was as

much  as  doubled,  allowing customers to better  enjoy  the

various multi-media and content services. If, up until  now,

ADSL  services  could primarily be enjoyed by the  consumers

and  firms located in the more highly populated areas, then,

in  July  2002, Eesti Telefon began to offer a new  wireless

Internet  permanent  connection Atlas RDSL.  New  connection

functions  through of radio waves and gives rural  consumers

also  an  opportunity to make use of a  practical  and  even

faster Internet permanent connection.



The  number of main lines in use at the end of June was  477

thousand  (a penetration of 34.7 lines per 100 people).  The

number of main lines, compared to the beginning of the year,

has   been   reduced  by  29  thousand.  Mainly  residential

customers have been giving up their fixed lines. The  number

of lines per employee was 326.



The  second biggest sphere of investment for Eesti  Telefon,

during  the first half-year, was the development of  an  in-

house  IT  network. In February, the Group expanded  through

the  acquisition  of  a  new  firm.  So  as  to  extend  its

activities beyond Estonia, AS Connecto, a subsidiary of  the

Group,   acquired  100  %  of  the  shares  of  the  network

construction  company  SIA Connecto Latvia  (previously  SIA

Link),  which operates in Latvia. In April, AS Eesti Telefon

invested an additional 0.3 mln EUR into the Group associated

firm AS Sertifitseerimiskeskus.



The  EMT Group invested 6 mln EUR during the first half-year

(2001:  9 mln EUR). The majority of investments made by  EMT

went into base stations and exchanges. AS EMT also made also

a 0.3 mln EUR investment into AS Sertifitseerimiskeskus.



On  May  21,  2002, the Ministry of Roads and Communications

presented  to  the  Riigikogu (Parliament) an amendment  for

the Telecommunications Act, which establishes the conditions

for  the  issuing  of  the third generation  mobile  network

licenses. According to the Ministry’s proposal, the licenses

would be issued on a tender basis. The participation fee  in

the  tender would be 50 mln EUR. The Ministry’s plan  is  to

issue four third generation licenses. The tender is expected

to take place in the beginning of 2003. It is the opinion of

the  management  of  AS EMT, that for a  small  market  like

Estonia,  four licenses are too many. If four  licenses  are

issued,  the capacity of the frequency band of each operator

would  be  quite  limited, leading to  lower  efficiency  of

investments, and higher prices for the final consumers.



Relations with state regulators



During  the  second  quarter of  2002,  two  legal  disputes

between  AS  Eesti  Telefon and certain government  agencies

came to an end.



On  April  24, 2001, the Competition Board issued a precept,

based on the Competition Act, prohibiting Eesti Telefon from

levying  a per-minute rate of 0.02 euro-cents at peak  time,

0.017  euro-cents at off-peak time, and 0.01  euro-cents  at

night  for  voice  calls in its network. Eesti  Telefon  was

expected to levy a rate lower than the aforementioned rates.

According to the Competition Act, a fine in the amount of up

to  5%  of the net sales for the year preceding the decision

to  impose the fine can be imposed for the abuse of a market

dominant position.



Eesti  Telefon  was  of the opinion that the  aforementioned

rates  were  cost-based, and contested the  precept  at  the

Tallinn  Administrative Court on May 23, 2001.  The  Tallinn

Administrative Court agreed with Eesti Telefon and nullified

the  precept of the Competition Board on January  17,  2002.

The  Competition Board appealed to a higher court,  but  the

Circuit Court confirmed the Administrative Court’s decision.



On April 18, 2001, the Communications Board issued a precept

to  Eesti  Telefon, which required Eesti Telefon to  provide

interconnection  services below the  cost  of  the  service.

Eesti  Telefon  contested the precept. In June  2002,  Eesti

Telefon  decided to end the actions concerning the  legality

of  the  precept,  and   the conformity  of  the  underlying

provisions   of   the   Telecommunications   Act   to    the

Constitution, because the legal action had lost its  meaning

for   Eesti  Telefon.  Namely,  these  provisions   of   the

Telecommunications Act expired on December 31,  2001.  Thus,

the cause of the legal action became null and void.



Potential change in the ownership structure



On  March  26, 2002, Sonera of Finland and Telia of  Sweden,

the  strategic partners of AS Eesti Telekom, announced  that

they are planning to merge. Telia will make a purchase offer

to the shareholders of Sonera, offering 1.51440 Telia shares

for  one Sonera share. The Sonera and Telia merger plan  was

presented  to  the  European Union for approval,  which  was

given  on  July 10, 2002. However, the approval is dependent

upon  the  fulfilment of certain conditions  by  Sonera  and

Telia.



Annual General Meeting of  the Shareholders



The  Annual General Meeting of the Shareholders of AS  Eesti

Telekom  took  place on May 17, 2002. The  meeting  approved

Annual  Report 2001, and the proposal for allocation of  net

profit. It was decided that the owners of A-shares would  be

paid  dividends of 0.35 EUR per share (in total 48 mln  EUR,

or  97%  of the net profit of 2001).   The owner of  B-share

was entitled to dividends of 639 EUR.



The list of shareholders entitled to dividends was fixed  on

June 5, 2002 and dividends were paid out on June 19, 2002.



The  General Meeting authorised AS Eesti Telekom to acquire,

within  one year, AS Eesti Telekom A-series shares, so  that

the  total  nominal value of own shares  held  by  AS  Eesti

Telekom  would not exceed the legal limits, and so that  the

price  payable per share would not exceed the highest  price

paid  for  an AS Eesti Telekom A share on the Tallinn  Stock

Exchange,  on the day of acquiring the shares. Any  possible

share  buy-back  shall  be  approved  by  AS  Eesti  Telekom

council.



Kennet  Rådne,  Heido Vitsur, Raivo Vare, and Aimo  Eloholma

were elected to be new members of the Supervisory Council of

Eesti Telekom, where they replaced Mart Nurk, Andrus Villem,

Madis  Üürike, and Timo Virtanen. The remaining six  members

of  the council were re-elected for one more term. Aare Tark

continues as the chairman of the Council.



Villu  Vaino  from AS Deloitte & Touche Audit  continues  to

audit Eesti Telekom in 2002.





Definitions



Net debt - long term and short term debt, less cash and cash

equivalents and short term investments

ROA  - Net profit for the period expressed as percentage  of

average total assets

ROE - Pre-tax profit for the period expressed, as percentage

of average equity





AS EESTI TELEKOM AND SUBSIDIARY COMPANIES

INCOME STATEMENT

In thousands of euros (EUR)

                       6 mths to    6 mths to       2001

                      30 June 02   30 June 01           

                                     Restated           

Revenue                                       

Net sales                140,348      129,833    265,516

Change in work-in-           224          240         34

progress

Capitalized self-            374        1,128      5,568

constructed assets

Other revenue              4,234        1,145      2,714

Total revenue            145,180      132,346    273,832

                                                        

Operating expenses                                      

Materials,                44,591       37,220     82,492

consumables,

supplies and

services

Other operating           14,061       12,683     31,634

expenses

Personnel expenses        15,772       16,508     34,177

Other expenses             1,091        1,002      2,117

Total expenses            75,515       67,413    150,420

                                                        

Profit from               69,665       64,933    123,412

operations before

depreciation and

amortisation

                                                        

Depreciation and          32,712       33,302     72,582

amortisation

                                                        

Profit from               36,953       31,631     50,830

operations

                                                        

Income/ expenses            -224        2,089      1,715

from subsidiaries

and associated

companies (net)

Other net financing         -144          213       -749

items

                                                        

Profit before tax         36,585       33,933     51,796

                                                        

Income tax on              5,986        1,977      1,977

dividends

                                                        

Profit after tax          30,599       31,956     49,819

                                                        

Minority interest              0           36         36

                                                        

Net profit from           30,599       31,920     49,783

ordinary activities

                                                        

Net profit for the        30,599       31,920     49,783

period

                                                        

Earnings per share                                      

Basic earnings per          0.22         0.23       0.36

share (in EUR)

Diluted earnings per        0.22         0.23       0.36

share (in EUR)

AS EESTI TELEKOM AND SUBSIDIARY COMPANIES

BALANCE SHEET

In thousands of euros (EUR)

                          30 June    31 Dec   30 June

                             2002      2001      2001

                                             Restated

ASSETS                                          

Current assets                                  

Cash and cash              33,156    29,669    15,675

equivalents

Trade receivables,         30,009    25,777    27,297

net

Other receivables             790       685       459

Accrued income              7,702     6,342     6,105

Prepaid expenses              909     1,800     1,764

Inventories                 6,652     6,648    10,262

Total current assets       79,218    70,921    61,562

                                            

Non-current assets                              

Long term financial         2,093     1,692     2,353

assets

Tangible assets, net      173,830   194,538   199,914

Intangible assets,          2,844     3,588     3,596

net

Total non-current         178,767   199,818   205,863

assets

                                                     

TOTAL ASSETS              257,985   270,739   267,425

                                                

EQUITY AND                                      

LIABILITIES

Current liabilities                             

Interest bearing            5,319     5,635    13,287

loans and borrowings

Customer prepayments          232       590       389

Accounts payable to         8,362    16,677    13,071

suppliers

Other payables                  0        11        41

Tax liabilities            13,795     2,090     7,629

Accrued expenses           13,701     9,756     9,180

Provisions                    791     1,117       411

Prepaid revenue               104       661     2,774

Total current              42,304    36,537    46,782

liabilities

                                            

Non-current                                          

liabilities

Interest bearing            2,308     3,139     7,443

loans and borrowings

Total non-current           2,308     3,139     7,443

liabilities

                                                

                                                

Equity                                          

Issued capital             87,804    87,804    87,804

Share premium              19,810    19,810    19,810

Statutory legal             8,781     8,781     8,781

reserve

Retained earnings          66,379    64,885    64,885

Net profit for the         30,599    49,783    31,920

period

Total equity              213,373   231,063   213,200

                                                

TOTAL EQUITY AND          257,985   270,739   267,425

LIABILITIES



AS EESTI TELEKOM AND SUBSIDIARY COMPANIES

CASH FLOW STATEMENT

In thousands of euros (EUR)

                                 6 mths to  6 mths to

                                   30 June    30 June

                                        02         01

                                             Restated

Cash flows from operating                   

activities

Profit before tax and minority      36,585     33,933

interest

Adjustments for:                            

  Depreciation and                  32,712     33,302

amortisation

  Profit/loss from disposal of      -3,368       -300

fixed assets

  Income/ expense from                 224     -2,089

subsidiaries and associates,net

  Interests income/ expense,          -456       -292

net

  Other non-cash adjustments            44        147

Operating profit before working     65,741     64,701

capital changes

  Change in current                 -4,727     -4,663

receivables

  Change in inventories                 65       -725

  Change in current                   -115     -7,801

liabilities (except loans)

Adjusted cash generated from        60,964     51,512

operations

Interest paid                         -259       -701

Net cash flows provided by          60,705     50,811

operating activities

Cash flows from investing                   

activities

Purchase of tangible assets        -11,858    -25,540

Purchase of licenses                  -712       -605

Purchase of shares, investments       -639     -1,405

and other

Proceeds from sales of tangible      4,761        481

assets

Proceeds from sales of                   0      2,780

associates

Loans granted                           -8        -20

Cash receipts from repayment of          2          3

loans

Dividends received                       6          0

Interest received                      703      1,039

Net cash flows used in              -7,745    -23,267

investing activities

                                            

Cash flows from financing                   

activities

Proceeds from convertible long-          2         28

term debt

Proceeds from nonconvertible            79          0

long-term debt

Repayment of nonconvertible           -242       -217

long-term debt

Repayment of long-term              -1,019     -1,294

borrowings

Payment of finance lease                 0     -1,063

liabilities

Dividends paid                     -48,293    -48,293

Net cash flows used in             -49,473    -50,839

financing activities

                                            

Net increase /  (decrease) in        3,487    -23,295

cash and cash equivalents

                                            

Cash  and cash equivalents at       29,669     38,970

beginning of year

Cash and cash equivalents at        33,156     15,675

end of period





Hille Võrk

Financial manager

6 272 460