Eesti Telekom                 NEWS RELEASE                      05/27/2004



MERGER OF SUBSIDIARY COMPANIES



From June one of the largest telecommunications and power

supply  networks is commencing operation under the common

brand Eltel Network. The company's sales forecast in  the

Baltic states for 2004 reaches to 400 million EEK.



Today the merger process of the network companies started

in  December  2003 as a result of which AS  Connecto,  AS

Reveko Telekom and ELTEL Networks AS were joined comes to

an  end.  According to Jaanus Paas, the chairman  of  the

Management Board of Eltel Networks AS the merger is going

to make a major change in the network construction market

in  Estonia  as  well  as  in the  company’s  development

outlook  in  the Baltic states. "From now on we  will  be

able  to  construct and maintain also  the  power  supply

networks  in addition to the telecommunications  networks

and  Eltel  provides us with the best  know-how  to  that

aim",  said  Jaanus  Paas. Paas  added  that  the  3-year

maintenance  contract concluded in March this  year  with

the distribution networks of Eesti Energia with the value

of  37.6  million kroons during the first year  could  be

pointed  out as the first accomplishment in the new  area

of activity.



According   to  Paas  the  involvement  of  the   largest

Scandinavian   network  construction   company   as   the

strategic  partner provides a major contribution  to  the

new  company  primarily  in  the  form  of  international

experience.  "This experience gives us an opportunity  to

become  successful also in the growing market of  network

maintenance",  said  Paas  adding  that  Eltel   Networks

provides  services  to  the networks  of  Eesti  Energia,

Fortum, Elion as well as EMT at this moment.



According to the estimation of Jaanus Paas the merger  of

the   companies  that  to  date  have  been  successfully

operating  in  different  areas of  network  construction

provides  a chance for the cross- usage of all resources,

ensuring thus the higher level of operational efficiency.

For  the  clients this means more favourable  conditions,

stable  quality and the opportunity to trust all  network

services into the care of one strong partner.



Eltel  Networks  plans  to apply  the  operational  model

implemented  in Estonia also in its companies  in  Latvia

and Lithuania. According to Eltel Networks’s forecast the

turnover of the companies in 2004 will amount to  ca  400

million EEK



The  shares of the merger company are divided as follows:

Elioni  Ettevõtete  AS  (a full subsidiary  of  AS  Eesti

Telekom)  owns  51% and the international  infrastructure

group ELTEL Networks Corporation 49% of the shares.



The  sales  of  the  companies consolidated  under  Eltel

Networks  AS amounted to 315 million kroons  in  2003  in

Estonia, the company employs about 500 people.



ELTEL   Networks  Corporations  is  the  largest  network

construction  company in Scandinavia.  The  international

company that started in Finland is engaged in the design,

construction   and  maintenance  of  networks   and   its

companies  are mainly operating in the countries  of  the

Baltic  Sea.  The Group's consolidated turnover  in  2003

amounted to 4.5 billion kroons and the profit was ca  300

million  kroons. The Group employs more than 2300  people

in the Nordic and Baltic countries, Russia and South East

Asia.





Further information:

Jaanus Paas

ELTEL Networks AS

Chairman of the Management Board

GSM 5023500

Jaanus.paas@connecto.ee





Hille Võrk

Financial Manager

6272460