Last update: 22.07.2024 11:08 (GMT+3)
Eesti Telekom FINANCIAL RESULTS 10/16/2003 09:00
3Q AND 9 MONTHS RESULTS (EEK)
16 October 2003
THE FINANCIAL RESULTS OF THE FIRST NINE MONTHS OF 2003
Eesti Telekom, the leading provider of telecommunications
services in Estonia, hereby announces its results for the
third quarter, and nine-month period, which ended 30
September 2003.
Financial highlights
Q3 Q3 Ch. 9 M 9 M Ch.
2003 2002 % 2003 2002 %
Total revenues, 1243 1125 10 3536 3388 4
mEEK
EBITDA, mEEK 566 561 1 1669 1651 1
EBITDA margin, % 46 50 47 49
EBIT, mEEK 351 315 12 1004 893 13
EBIT margin, % 28 28 28 26
Profit before 356 316 13 1085 888 22
taxes, mEEK
Net profit for the 353 318 11 796 797 -0
period, mEEK
EPS, EEK 2.57 2.32 11 5.79 5.80 -0
CAPEX, mEEK 178 135 32 307 332 -8
Net gearing, % -30 -19 -30 -19
ROA (annualised), 33 31 24 25
%
ROE (annualised), 38 36 38 33
%
Commenting on these financial results, Chairman Jaan Männik
stresses:
"Strong revenue growth combined with healthy margins
continued."
For further information, please contact:
Krister Björkqvist +372 6272
465
CFO
Hille Võrk +372 6272 460
Financial Manager
CHAIRMAN’S STATEMENT
Financial results
The consolidated revenues, of the Eesti Telekom Group, for
the third quarter of 2003 amounted to 1,243 mln EEK, up by
10%, compared to the third quarter of 2002. Operating
expenses of the third quarter were up by 20%, amounting to
677 mln EEK. The EBITDA of the Eesti Telekom Group was 566
mln EEK and the EBITDA margin was 46%. Both the revenues and
operating expenses of the third quarter were affected by a
significant transaction between Elion Enterprises Ltd. and
the Tallinn Education Authority (see section"Fixed
communications"), and by a new subsidiary, AS Reveko
Telekom, being added to the Group. Revenue growth from
mobile communications was traditionally high. In the area of
fixed communications, higher revenues from the Internet,
data communications, and IT compensated the declining
revenue from voice communications.
Depreciation charge of the Eesti Telekom Group in the third
quarter of 2003 amounted to 215 mln EEK, down by 13%. This
decrease is mainly caused by revised depreciation rates
applied in a subsidiary company, Elion Enterprises Ltd., at
the beginning of 2003. In addition to that, depreciation has
started to fall as a result of the relatively low CAPEX that
the Group has had during the past years, compared to earlier
periods.
The financial revenues of the third quarter exceeded
financial expenses by 6 mln EEK.
The net profit of the Eesti Telekom Group in the third
quarter of 2003 was 353 mln EEK or 2.57 EEK per share.
Corresponding figures in the third quarter of 2002 were 318
mln EEK and 2.32 EEK per share.
During the first nine months of 2003, the consolidated
revenues of the Eesti Telekom Group amounted to 3,536 mln
EEK, growing by 4%, compared to the first nine month period
in 2002. Operating expenses were up by 8%, amounting to
1,867 mln EEK. The EBITDA of the Group was 1,669 mln EEK,
up by 1%. The EBITDA margin was 47%. The first nine month
consolidated revenues of 2002 included a non-recurring item,
a 54 mln EEK capital gain from the sale of real estate. The
elimination of this capital gain from the revenues of the
base-period would make the revenue growth to be 6% and the
EBITDA growth to be 5%.
The net profit of the Eesti Telekom Group in the first nine
months of 2003 was 796 mln EEK or 5.79 EEK per share.
Corresponding figures for the first nine months of 2002 were
797 mln EEK and 5.80 EEK per share. The net profit of the
current year has been affected by an amendment in the
taxation regulations, which became effective in 2003. In
2002, the dividend tax applied only to dividend payments to
private individuals or nor-resident legal entities. But in
2003, the dividend tax became effective for all dividend
payments. Thus, for the Eesti Telekom Group, this tax
amendment brought with it a significant increase in the
dividend taxes that had to be paid.
At the end of September 2003, the total assets of the Eesti
Telekom Group amounted to 4,327 mln EEK (in December 2002,
4,441 mln EEK). Tangible assets were reduced, from the
beginning of the year, by 355 mln EEK. Current assets were
increased by 240 mln EEK. This enlargement was mainly the
result of an increase of cash and cash equivalents (cash,
bank accounts, units of money-market funds and other short-
term financial investments) by 228 mln EEK. By the end of
the period, the net debt of the Group amounted to -1,170 mln
EEK, and net gearing was -30%.
The balance of cash and cash equivalents (cash, bank
accounts, and units of money-market funds) of the Eesti
Telekom Group grew by 259 mln EEK during the first nine
months of 2003. The net operating cash flow was 1,270 mln
EEK (during the corresponding 9 months of 2002, 1,405 mln
EEK). Cash outflow into investments was essentially smaller
than a year ago: 176 mln EEK in 2003 (incl. 68 mln EEK from
the sale of the minority ownership in AS Connecto, and a 70
mln EEK payment for the UMTS licence), compared with 306 mln
EEK in 2002. The cash outflow into financing was 834 mln
EEK, including 824 mln EEK paid as dividends (during the
corresponding 9 months of 2002, 791 mln EEK, including 756
mln EEK paid as dividends).
Fixed communications
Q3 Q3 Ch. 9M 9M Ch.
2003 2002 % 2003 2002 %
Total revenues, 661 607 9 1897 1924 -1
mEEK
EBITDA, mEEK 221 229 -4 682 756 -10
EBITDA margin, % 33 38 36 39
EBIT, mEEK 91 69 32 277 257 8
EBIT margin, % 14 11 15 13
Profit before 91 66 39 336 239 41
taxes, mEEK
Net profit for the 87 66 33 266 239 11
period, mEEK
CAPEX, mln EEK 63 79 -21 125 184 -32
ROA, % 17 11 16 13
ROE, % 21 16 26 20
The decrease in the consolidated revenues of the Elion Group
stopped in the third quarter of 2003. The consolidated
revenues of the Elion Group amounted to 661 mln EEK, showing
an increase of 9%, compared to the same period in 2002. The
operating expenses of the third quarter were up by 17%,
amounting to 441 mln EEK. The EBITDA of the Group was 221
mln EEK and the EBITDA margin was 33%.
In May 2003, the Tallinn Education Authority and Elion
Enterprises Ltd. signed a framework agreement concerning the
installation of new computers and other equipment into the
computer classes of Tallinn schools. The total value of the
procurement amounts to more than 63 mln EEK. In July, within
the framework of the agreement, computers were sold to the
Tallinn Education Authority for 32 mln EEK. This transaction
had a significant impact on both revenues ("revenue from IT
and data communications") and expenses ("materials,
consumables, supplies, and services") of the third quarter.
Since the transaction was extensive, but with a low margin,
it resulted in a decrease of the EBITDA margin of the third
quarter, compared to the same period in 2002.
The operating expenses of the third quarter were also
affected by the launching of a new brand name. On 18 August
2003, Elion Enterprises Ltd. introduced the new brand name
of Elion. Elion replaced the former brand names Eesti
Telefon, et, Hot, Hallo, and Atlas. One objective of the
change was to make the obtaining of services from, and
communicating with the company easier for the customer.
Elion adjusted its portfolio to customers’ needs by making a
distinction between household, business, and corporate
customers. Already starting this year, the company will also
"entertain" its customers at home by launching Internet
access to TV, movies, computer games, and music. In addition
to that, the company will help to finance the obtaining of
IT and communication equipment with hire purchase and
leasing opportunities. Operating expenses related to the new
brand name amounted to approximately 8 mln EEK.
Among the main revenue categories of the Group, the revenues
from domestic calls decreased by 12%, compared to the third
quarter of 2002. Revenues from international calls were also
down by 12%. Revenues from calls into mobile networks were
lower by 8%. Revenues from phone installations and monthly
fees were down by 4%. Revenues from the Internet, and
revenues from IT and data communications were up by 27% and
99% respectively. Revenues from network services were up by
6%.
The market shares of Elion Enterprises Ltd. have been
stable. The company estimates its share of total call
minutes to be 87% (September 2002: 89%). The estimated
market share of domestic call minutes, international call
minutes, and fixed to mobile call minutes are 87% (88%), 68%
(73%) and 76% (76%) respectively. The estimated market share
of dial-up minutes is 95% (95%).
The net profit of the Elion Group in the third quarter of
2003 was 87 mln EEK, showing an increase of 33%, compared to
the same period in 2002. This growth is largely the result
of the implementation of the revised depreciation rates from
the beginning of 2003. The new rates are more differentiated
than the previous ones. The useful lifetime of different
categories of tangible assets is determined more accurately.
In addition to that, depreciation charge has started to fall
as a result of the relatively low CAPEX that the Group has
had during the last years, compared to earlier periods.
Depreciation of the Elion Group, in the third quarter of
2003, was reduced by 30 mln EEK or 19%.
The consolidated revenues of the Elion Group, during the
first nine months of 2003, amounted to 1,897 mln EEK, down
by 1%, compared to the first nine months of 2002. However,
the consolidated revenues of the first nine months of 2002
contain a capital gain from the sale of real estate in the
amount of 54 mln EEK. Elimination of the capital gain would
make the revenues of 2003 2% higher than the revenues of
2002. Operating expenses of the period were up by 4%,
amounting to 1,215 mln EEK. The EBITDA of the Group was 682
mln EEK and the EBITDA margin was 36%. As a result of
amendments in regulations on income taxation, the Group
declares a dividend income tax expense of 67 mln EEK in its
first nine months’ income statement. The net profit of the
Elion Group for the first nine months of 2003 was 266 mln
EEK, up by 11%, compared to the same period in 2002.
The Elion Group invested 125 mln EEK during the first nine
months of 2003 (2002: 184 mln EEK).
The number of main lines in use at the end of September was
446,240 (a penetration of 32.9 lines per 100 people). The
net decrease in the number of main lines, since the
beginning of 2003, was 14,020. After launching the new brand
name, Elion Enterprises Ltd. started a campaign, which
provided customers with the opportunity of joining the
company’s network without having to pay an installation fee.
A total of 5,300 customers applied to be connected in the
course of the campaign. 87% of the additions were private
individuals. 12% of the new customers also applied for an
ADSL connection. The total number of ADSL connections at the
end of September was 41,132 (3 connections per 100 people).
The net increase in the number of ADSL connections since the
beginning of 2003 was 10,650.
The sale of minority interests in AS Connecto, a subsidiary
of Elion Enterprises, were completed in June. A 49% minority
stake in AS Connecto was sold to ELTEL Networks Corporation,
a Finnish telecommunications network development firm. The
price of the deal was 68 mln EEK, and the capital gain
declared was 59.5 mln EEK. Elion Enterprises will remain an
active owner of Connecto, but ELTEL Networks has the right
to acquire 100% of the company shares after two years. This
sale enables Elion Enterprises to focus on its core
business, which is the providing of telecommunications and
IT solutions. The involvement of a strategic partner will
also accelerate the expansion of AS Connecto into the other
Baltic states.
On 1 July 2003, AS Connecto, a 51% owned subsidiary of Elion
Enterprises Ltd., acquired all of the shares of AS Reveko
Telekom. 55% of the shares were purchased from TeliaSonera,
and 45% from Estonian private individuals. The price of the
deal was 14 mln EEK. AS Reveko Telekom was founded in 1995.
The firm specialises in various aspects of indoor
telecommunications: the sales and installation of telephone
relays and communications systems, the construction of
computer and telephone networks, the design and installation
of low current systems, and operating services. Reveko
Telekom has 22 employees.
The number of employees of the Elion Group at the end of
September 2003 was 1,974 (in December 2002: 1,999).
Mobile communications
Q3 Q3 Ch. 9M 9M Ch.
2003 2002 % 2003 2002 %
Total revenues, 702 635 11 1995 1799 11
mEEK
EBITDA, mEEK 353 336 5 1006 910 11
EBITDA margin, % 50 53 50 51
EBIT, mEEK 268 250 8 746 651 15
EBIT margin, % 38 39 37 36
Profit before 269 249 8 755 654 16
taxes, mEEK
Net profit for the 269 249 8 544 654 -17
period, mEEK
CAPEX, mln EEK 115 56 105 181 148 22
ROA, % 66 69 42 55
ROE, % 80 82 77 64
The growth of the consolidated revenues of the EMT Group
accelerated again in the third quarter of 2003. Revenues of
the second quarter were up by 9%, compared to the same
period in 2002. In the third quarter, the growth reached
11%. Revenues from SMS and data continued to have the
highest growth rate, showing an increase of 28%. Revenues
from domestic calls, prepaid call-cards, and interconnection
have also increased. There was some decline in the revenue
from monthly fees, compared to the third quarter of 2002. In
September 2003, the ARPU was 423 EEK (in September 2002, 433
EEK; in December 2002, 423 EEK). The lower ARPU was mainly
caused by an increase in the usage time of prepaid call-
cards.
The operating expenses of the EMT Group in the third quarter
of 2003 amounted to 349 mln EEK, up by 17%, compared to the
same period in 2002. The growth resulted from higher
interconnection expenses, caused by an increase of outgoing
call minutes, and the increased business activities of a
subsidiary of the Group, AS Mobile Wholesale.
The EBITDA of the third quarter was 353 mln EEK, up by 5%.
The EBITDA margin was 50%. The net profit of the EMT Group
was 269 mln EEK, showing an increase of 8%, compared to the
third quarter of 2002.
The total number of customers of EMT grew by 24.3 thousand
during the third quarter of 2003. The number of contractual
customers was up by 3.8 thousand and the number of customers
with prepayment was up by 20.5 thousand. The growth in the
number of customers was partly caused by changes in the
terms of the Simpel call-cards, which became effective 1 May
2003. Until 1 May 2003, customers could use the calling time
stored on their cards in the course of two months for
calling out, plus, for one more month, they could receive
incoming calls. In accordance with the new terms, the
calling time stored on the card can be used for calling out
in the course of five months, plus, incoming calls can be
received for an additional month. Due to the change in
terms, EMT will not close any prepaid cards between 2 August
and the end of October. The total number of AS EMT customers
reached 463.8 thousand by the end of September. The number
of contractual customers was 295.1 thousand, and the number
of prepaid customers was 168.7 thousand. EMT estimated its
market share to be around 47%.
The consolidated revenues of the EMT Group, during the first
nine months of 2003, amounted to 1,995 mln EEK, up by 11%,
compared to the same period in 2002. Operating expenses of
the period amounted to 989 mln EEK, also up by 11%. The
EBITDA of the Group was 1,006 mln EEK, and the EBITDA margin
was 50%. As a result of amendments, which were made to the
regulations concerning the calculating of income tax on
dividends, the Group declared a dividend income tax expense
of 211 mln EEK in its income statement. The net profit of
the EMT Group for the nine-month period was 544 mln EEK.
The EMT Group invested 181 mln EEK during the first nine
months of 2003 (during the first nine months of 2002, 148
mln EEK).
On 8 May 2003, a direct offer was made by the Estonian
National Communications Board to AS EMT, Radiolinja Eesti
AS, and Tele2 AS to acquire third generation mobile
communications licences. All three operators submitted their
applications in July, and received licences from the
Communications Board after paying a licence fee and state
duty of 70.7 mln EEK per licence. By acquiring a licence,
each operator also accepted an obligation to establish,
within seven years of the issuance of the licence, a third
generation network, covering at least 30% of the Estonian
population, and having a data transmission speed of at least
144 Kb/sec in urban areas and 64Kb/sec anywhere else in
Estonia.
On 17 September 2003, Meelis Atonen, the minister of
economic affairs and communications, and Peep Aaviksoo, the
CEO of AS EMT, made the first UMTS-call in Estonia via the
EMT trial network. A commercial UMTS-network is expected to
start functioning in 2005.
The number of employees of the EMT Group at the end of
September 2003 was 417 (in December 2002, 406).
Relations with state regulators
On 25 August 2003, the Estonian National Communications
Board presented letters to AS EMT and Elion Enterprises
Ltd., in which the Board announces its intention to declare
AS EMT and Elion Enterprises Ltd. to be firms with
significant market power (SMP) for the year 2004. The
Communications Board intends to declare AS EMT to have SMP
in the public mobile communications services market
throughout Estonia. It intends to declare Elion Enterprises
Ltd. to have SMP in the public telephone services market,
the public leased line services market, and the public
interconnection services market.
AS EMT had also been declared to have SMP in the public
mobile communications services market for the years 2002 and
2003. Elion Enterprises Ltd. had also been declared to have
SMP in the public telephone services market, the public
leased line services market, and the public interconnection
services market for the years 2001, 2002, and 2003.
The lawsuit continues between Elion Enterprises Ltd. and the
Competition Board over the justification of tariffs for
calls inside the network, which were established 1 April
2001. The first and second level courts made their decisions
in favour of AS Elion, but the Competition Board appealed to
the Supreme Court, which, on 18 December 2002, annulled the
earlier judgments and forwarded the case to the
Administrative Court for revision. The Supreme Court found
that the precept of the Competition Board, regarding minute
rates of the voice communication services within a network,
is inadequate for making the final judgment. The
Administrative and the District Court had, according to the
Supreme Court, not assessed all available evidence. The
Supreme Court considered it necessary for the Administrative
Court to use the assistance of the Communications Board when
revising the case.
Reporting schedule in 2004
In 2004, the financial reports of the Eesti Telekom Group
will be published on the following dates:
Preliminary results for 2003 5 February 2004
Final results for 2003 5 March 2004
1st quarter results for 2004 15 April 2004
Half-year results for 2004 15 July 2004
9 month results for 2004 14 October 2004
INCOME STATEMENT
Financial statements are prepared in thousands of Estonian
kroons (EEK)
9 mnth to 9 mnth to 2002
30 09 2003 30 09 2002
Restated
Revenues
Net sales 3513470 3316331 4467311
Other revenues 22662 71367 91737
Total revenues 3536132 3387698 4559048
Operating expenses
Change in work-in- 967 2104 864
progress
Capitalized self- 23457 31803 65384
constructed assets
Materials, (1163884) (1082720) (1503759)
consumables, supplies
and services
Other operating (328593) (305828) (434844)
expenses
Personnel expenses (382100) (357905) (513005)
Other expenses (17227) (23834) (42786)
Total operating (1867380) (1736380) (2428146)
expenses
Profit from 1668752 1651318 2130902
operations before
depreciation
Depreciation and (664705) (758572) (1000468)
amortisation
Profit from 1004047 892746 1130434
operations
Net financial income 56509 (4541) (5153)
/ (-expenses) from
associates
Other net financing 24928 255 6443
items
Profit before tax 1085484 888460 1131724
Income tax on (286022) (91298) (91298)
dividends
Minority interest (3485) - -
Net profit for the 795977 797162 1040426
period
Earning per share
Basic earning per 5.79 5.80 7.57
share (in kroons)
Diluted earning per 5.79 5.80 7.57
share (in kroons)
BALANCE SHEET
Financial statements are prepared in thousands of Estonian
kroons (EEK)
30 092003 31 12 2002 30 09
2002
ASSETS
Non-current assets
Property, plant and 2250506 2673673 2632148
equipment
Goodwill 4095 3687 6316
Licenses, patents and 108424 38853 31138
trademarks
Investments in 20562 22696 23308
subsidiaries and
associates
Other investments 2895 2710 2758
Other non-current assets 2649 2048 5637
Total non-current assets 2389131 2743667 2701305
Current assets
Inventories 102840 93428 105450
Trade receivables 460187 430330 406533
Other receivables 183086 210971 158157
Investments held for 48524 79054 114540
trading
Cash and cash equivalents 1143390 883988 704954
Total current assets 1938027 1697771 1489634
TOTAL ASSETS 4327158 4441438 4190939
EQUITY AND LIABILITIES
Equity
Issued capital 1376445 1373833 1373833
Reserves 468410 447348 447348
Translation reserve (38) (25) 72
Retained earnings 1254670 1038553 1038553
Net profit for the period 795977 1040426 797162
Total equity 3895464 3900135 3656968
Minority interest 12978 - -
Non-current liabilities
Interest-bearing loans 12784 19761 23798
and borrowings - due
after one year
Current liabilities
Trade payables 162089 244850 154822
Other current liabilities 159028 196134 193972
Tax liabilities 58100 28553 47951
Interest-bearing loans 9210 35706 96933
and borrowings - due
within one year
Provisions 17505 16299 16495
Total current liabilities 405932 521542 510173
TOTAL EQUITY AND 4327158 4441438 4190939
LIABILITIES
CASH FLOW STATEMENT
Financial statements are prepared in thousands of Estonian
kroons (EEK)
9 mnth to 9 mnth to
30 09 2003 30 09 2002
Restated
Operating activities
Profit from operations 1004047 892746
Adjustments for:
Depreciation and amortisation 664705 758572
(Profit) from sales and write- (13330) (53070)
off of fixed assets
Operating cash flow before 1655422 1598248
movements in working capital
Change in current receivables 4273 (20777)
Change in inventories (8664) (346)
Change in current liabilities (94733) (75486)
Cash generated by operations 1556298 1501639
Interest paid (459) (5141)
Income tax on dividends paid (286022) (91298)
Net cash from operating 1269817 1405200
activities
Investing activities
Purchases of property, plant (229169) (315793)
and equipment
Purchases of licenses (77465) (16285)
Proceeds from sales of 20520 77128
property, plant and equipment
Acquisition of subsidiaries (13339) -
Proceeds from sales of 68137 -
subsidiaries
Acquisition of associates - (10000)
Purchases of other long-term (185) -
investments
Purchases of trading (48523) (227105)
investments
Proceeds on disposal of 79080 173236
trading investments
Loans granted (1393) (218)
Cash receipt from repayment of 45 24
loans
Dividends received 8 96
Interest received 26400 12857
Net cash used in investing (175884) (306060)
activities
Financing activities
Proceeds from long-term - 32
convertible debt
Repayment of long-term (169) (8)
convertible debt
Proceeds from nonconvertible 360 2813
long-term debt
Repayment of nonconvertible (9042) (5789)
long-term debt
Repayment of long-term (23273) (27578)
borrowings
Repayment of obligations under (1066) (5002)
finance lease
Shares issues (Rights 23413 -
Offering)
Dividends paid (824309) (755 617)
Net cash used in financing (834086) (791149)
activities
Net increase in cash and cash 259847 307991
equivalents
Cash and cash equivalents at 883988 403633
beginning of year
Effect of foreign exchange (445) (6670)
rate changes
Cash and cash equivalents at 1143390 704954
end of period
STATEMENT OF CHANGES IN EQUITY
Financial statement is prepared in millions of Estonian
kroons (EEK)
Issued Reserves Transl Ret. Net TOTAL
cap res. earn. prof.
period
Share Stat.
prem.legal
res.
31 12 2001 1374 310 137 - 1015 779 3615
Net profit for - - - - 779 (779) -
2001 transf.
to retained
earnings
Exch. Diff. - - - 0 - - 0
Arising
from transl.
of
foreign
operations
Dividends paid - - - - (756) - (756)
Net profit for - - - - - 797 797
the period
30 09 2002 1374 310 137 0 1039 797 3657
31 12 2002 1374 310 137 (0) 1039 1040 3900
Net profit for - - - - 1 040 (1 040) -
2002 transf.
to retained
earnings
Exch. Diff. - - - (0) - - (0)
Arising
from transl.
of
foreign
operations
Dividends paid - - - - (824) - (824)
Share issuance 3 21 - - - - 24
Net profit for - - - - - 796 796
the period
30 09 2003 1376 331 137 (0) 1255 796 3895
Hille Võrk
Financial manager
6272460
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