Last update: 27.11.2024 12:32 (GMT+2)
AS EESTI TELEKOM FINANCIAL RESULTS 10.03.2005
2004 AUDITED RESULTS, EEK
The consolidated statements of AS Eesti Telekom in 2004 cover the financial
results of the following companies:
AS Eesti Telekom
Elion Enterprises AS
AS EMT
AS Elion Esindus
AS EsData
AS Eltel Networks 1)
SIA Connecto Latvia 1)
UAB Lidivos Technologijos 1)
EMT Esindused AS
AS Mobile Wholesale
1) Consolidated until 30 November 2004
Changes in the corporate structure of the Eesti Telekom Group
Majority of the changes in the corporate structure of the Eesti Telekom Group
that took place in 2004 were related to the construction segment.
On 12 January 2004, AS Connecto signed an agreement for the purchase of 100% of
the shares of the Lithuanian company UAB Lidivos Technologijos. The primary
activity of the acquired company is the installation and maintenance of low-
current and security systems. The concluded transaction reinforces the expansion
of the AS Connecto's activities in the Baltic region.
In 2004, the merger process of the Connecto Group companies, which was started in
December 2003, was completed, as a result of which, on 8 June 2004, AS Connecto
and AS Eltel Networks were merged. The merged company continued operations as AS
Eltel Networks. On 8 December 2004, AS Reveko Telekom and AS Eltel Networks were
also merged.
In December 2004, Elion Enterprises AS sold its 51% stake in the subsidiary AS
Eltel Networks to the Finnish network construction company Eltel Networks
Corporation, which already possessed a 49% holding in the company. Price of the
deal was approximately 60 million EEK. Capital gain, approximately 43 million EEK
is recognised as financial income in the income statement for 2004.
On 30 December 2004, Elion Enterprises AS acquired Viru Net OÜ, a leading
Internet service provider in Ida-Viru County, in order to strengthen Elion's
market position in that county and consolidate the Estonian Internet market. In
2003, the net sales of Viru Net OÜ were 3 million EEK, and it earned profits of
0.4 million EEK. The company employs 17 people. The results of Viru Net OÜ will
be included in the Elion Group's consolidated financial results from January
2005.
On 23 December 2004, TeliaSonera AB, through its subsidiary Baltic Tele AB,
carried out transactions for the acquisition of 100 AS Eesti Telekom shares from
public investors, as a result of which TeliaSonera AB's holding in AS Eesti
Telekom raised to 50.00004%. When the holding surpassed 50%, TeliaSonera AB made
a bid for all of the shares of AS Eesti Telekom, as required by Estonian
Securities Market Act. The value of the bid is 109.84 EEK per share. The
acceptance period of the bid is from
13 January 2005 until 23 February 2005. At 14 February 2005, the ownership
structure of AS Eesti Telekom is as follows:
Baltic Tele AB 68,977,314 shares 50.00%
Republic of Estonia 37,485,100 shares 27.17%
Public investors 31,492,114 shares 22.83%
Since TeliaSonera AB's holding exceeds the 50 percent limit, AS Eesti Telekom
will be consolidated into the TeliaSonera Group.
Eesti Telekom Group
Revenues, expenses and profits
In 2004 the development of the Estonian telecommunications market was very rapid
in the area of both mobile and fixed-line communications. The year 2003 ended
with a mobile penetration of 77% in Estonia. By the end of 2004 mobile
penetration had reached 94%. The rapid growth in customer base has undoubtedly
been supported by the reduction in call rates. Although mobile number portability
only started on 1 January 2005, operators, including the Eesti Telekom Group's
mobile communications operator AS EMT, already began to make preparations for
this in 2004. Rates were adjusted and many discount packages were offered to
customers, with the aim to attract customer groups (families, groups of friends,
colleagues) to join EMT. In November 2004 the so-called discount service provider
Diil, which targets price-sensitive mobile phone users, entered the market.
Alongside voice communications, mobile data communications are acquiring
increasing popularity. In this area, AS EMT was the first operator in Estonia to
launch the EDGE technology in 2004. Despite the competition, which has become
increasingly strong, AS EMT maintained its 47% market share.
The keywords in fixed-line communications in 2004 were the Internet, data
communications and IT. The number of broadband connections provided by Elion
Enterprises AS increased 52% during the year. During the year, the company broke
several computer sales records with its subsidiaries. Elion Enterprises AS has
become one of Estonia's leading IT companies. In fixed-line communications, the
growth in the Internet and data communications in Estonia has been, as elsewhere
in Europe, overshadowed by the decline in the area of voice communications.
Customers increasingly use mobile phones for communication, and are terminating
their fixed-line telephone subscriptions. In order to remain in step with global
developments, i.e. offers where voice and Internet connections are an integral
package and for a single monthly fee, Elion launched new Kodulahendus packages in
October. The first months have shown that the offer has gained customers'
approval. In January 2005, Elion began to offer business customers Ärilahendus
packages, which are similar to Kodulahendus. Revenue from new spheres of business
has helped compensate for the decline in the area of voice communications. The
launching of combined communications solutions has helped curb the decline in the
number of fixed-line customers.
The Eesti Telekom Group's total revenues for 2004 were 5,143 million EEK (2003:
4,808 million EEK), which is an increase of 7% or by 335 million EEK in
comparison with 2003. The majority of the increase in revenue came from the area
of mobile communications. The significant increase in retail subsidiaries' sales
of telecommunications devices helped towards the growth of revenues in the area
of both mobile and fixed-line communications.
The Group's operating costs for 2004 increased 12%, reaching 3,020 million EEK
(2003: 2,691 million EEK). Operating costs were influenced by larger customer
base and fast growth of the retail subsidiaries' sales. EBITDA amounted to 2,122
million EEK, remained at the same level as for 2003. Depreciation and
amortisation was 816 million EEK (2003: 881 million EEK), down by 65 million EEK
during the year. The lower amortisation expenses of Elion Enterprises AS mainly
caused this reduction.
The net financial income fell by 13 million EEK. Total revenues for 2003 included
the 59 million EEK in profits earned from the sale of 49% of the shares of AS
Eltel Networks. The profits earned from the sale of 51% of the shares of AS Eltel
Networks in 2004 amounted to 43 million EEK. The price per share was the same in
the case of the sale of the minority and majority shareholdings.
The Eesti Telekom Group's profit before income tax was 1,381 million EEK (2003:
1,326 million EEK), which is 4% more than in 2003. Whereas in 2003 the company
paid its shareholders 6 EEK in dividends per A-share, in 2004 the value of the
dividend was 8 EEK per A-share. As a result, the amount of income tax paid on the
dividends also increased by 92 million EEK. AS Eesti Telekom, the parent company,
earned a net profit of 993 million EEK in 2004 (2003: 1,036 million EEK). The
revenue earned per share was 7.21 EEK in 2004.
Balance sheet and cash flows
As of the end of December 2004, the total assets of the Eesti Telekom Group
amounted to 4,524 million EEK (4,599 million EEK in December 2003). During the
year, non-current assets fell by 281 million EEK, and current assets increased
207 million EEK. The decrease in non-current assets resulted from the relatively
small volume of investments in recent years. The growth in current assets was
mainly the result of the increase in cash and cash equivalents (135 million EEK).
Trade receivables increased by 91 million EEK, of which 70 million EEK is the
increase in the receivables of retail chains in connection with the increase in
the volume of sales by instalment.
The Eesti Telekom Group's equity decreased 79.5 million EEK during the year, as a
result of the payment of 1,101 million EEK in dividends. As of the end of
December 2004, the Group had 1 million
EEK in long-term debt and 19 million EEK in short-term debt (at the end of
December 2003 these figures were 4 million EEK and 8 million EEK respectively).
The Group's net debt at the end of 2004 was
-1,463 million EEK, and net gearing was -36%. The Group's other short-term
liabilities increased
12 million EEK during 2004.
The Eesti Telekom Group's cash flows from operating activities were 1,645 million
EEK in 2004
(1,709 million EEK in 2003). The most significant factor leading to the decrease
in cash flows from operating activities was the increase in the income tax paid
on dividends. Cash flows into investing activities decreased in comparison with
2003 - 432 million EEK in 2003 (including the 68 million EEK earned from the sale
of the minority share in AS Eltel Networks), 421 million EEK in 2004 (including
the 52 million EEK earned from the sale of the majority share in AS Eltel
Networks). Cash flows into financing activities were 1,089 million EEK in 2004,
including 1,101 million EEK paid out in dividends (in 2003: 839 million EEK,
including 824 million EEK paid as dividends).
Return on assets (ROA) and return on equity (ROE) continued to be very high. ROE
increased from the previous year's 34.1% to 35.0%. ROA decreased from 23.1% to
22.1%, mostly due to the large portion of cash and cash equivalents in total
assets.
Management and personnel
As of 31 December 2004, there were 1,959 employees in the Eesti Telekom Group (31
December 2003: 2,452). The number of employees decreased primarily in connection
with the sale of AS Eltel Networks (in November 2004 there were 594 employees).
The total amount of employees' salaries paid in 2004 was 425 million EEK.
The number of employees of AS Eesti Telekom, the parent company of the Eesti
Telekom Group, as of 31 December 2004, was 7 (31 December 2003: 8). The overall
amount of employees' salaries paid in 2004 was 8 million EEK.
Elion Group
The Elion Group consists of Elion Enterprises AS, AS Elion Esindus, and AS
EsData. Until
30 November 2004 AS Eltel Networks, SIA Connecto Latvia and UAB Lidivos
Technologijos also belonged to the Elion Group.
The Elion Group's total revenues for 2004 were 2,679 million EEK, which is an
increase of 4% in comparison with 2003 or an absolute increase of 101 million
EEK.
Of the Elion Group's core activities, the most rapid increases in revenue were in
data communications and IT. In 2004 as a whole, the Elion Group's revenues from
data communications and IT services increased 19%. During 2004, Elion specialists
mapped the IT systems of approximately 200 firms, and began to service the
computer terminals of more than 1,000 other firms. Also, the product portfolio of
Elion Enterprises AS was expanded by a new complex server service, with a fixed
monthly fee, designed for smaller firms. The company signed a co-operation
contract with Columbus IT Partners to start offering Microsoft Business Solutions
business information systems. Connecting Tallinn's school computers with a high-
speed fiber-optic network completed the public tender of the Tallinn Educational
Authority that Elion Enterprises AS won a year ago. The construction of an
extensive private network for AS Eesti Post, which connected 42 larger post
offices across Estonia, ended in August. In September Elion signed an agreement
to provide nearly 500 computer worksites on the basis of operating lease to
schools, the public library and the government of Tartu.
The second important revenue growth area for the Elion Group was Internet. In
2004, the Group's revenues from the Internet grew 10%. During 2004, the number of
permanent connections provided by Elion grew by 26,000, reaching 76.8 thousand by
the end of December. The price of services, however, has fallen. In order to
remain in step with global developments, i.e. offers where voice and Internet
connections are an integral package and for a single monthly fee, Elion launched
new Kodulahendus packages in October. Kodulahendus offers individuals the
opportunity to use a permanent Internet connection, a telephone connection and 20
hours of free calls within the network for one monthly fee. Customers can choose
the package that best suits them from among the three Kodulahendus packages. The
monthly fee for Kodulahendus is less than the sum of the fees for the individual
services it comprises. By the end of 2004, over 22.3 thousand customers had
subscribed to the Kodulahendus packages. In January 2005 Elion began to offer
business customers Ärilahendus packages, which are similar to Kodulahendus.
The Elion Group's revenues from voice communications in 2004 were 5% less than
the results for 2003. At the end of December 2004, Elion had 426,000 main lines
at its disposal. During the year, the number of main lines decreased by 18.5
thousand. The decrease slowed down significantly during the second
half of 2004. The stabilisation of the number of main lines has been supported by
the launch of the above-mentioned Kodulahendus packages which promote the use of
fixed-line telephones in addition to offering Internet connections, and also by
Elion's campaigns for free subscription of telephone connections. During the
latest of the campaigns of the kind, which lasted from July to December
16 thousand customers were added to the Elion network.
The fall in mobile communications rates and the rapid increase in the number of
mobile phone users in 2004 led to a reduction in the number of local call minutes
made from fixed-line telephones. As a result, revenue from local calls was 18%
lower than the corresponding figure for 2003. Revenues from international calls
were up by 1%, compared to 2003. Revenues from calls made to the mobile telephone
network decreased 4% over 2004.
Elion Enterprises AS estimates its market share in the area of call minutes
initiated from the fixed-line network to be 86% (87% in December 2003). Market
share from local call minutes was 87% in December 2004 (87% in December 2003),
75% of calls to mobile phones (76% in December 2003), 69% of international call
minutes (67% in December 2003), and 95% of Internet dial-up minutes (95% in
December 2003).
Revenues from network services increased 18% during 2004. This growth is the
result of increased international traffic and income from the leased lines.
A significant contribution to the growth of the Elion Group's total revenues was
made by AS Elion Esindus, which is involved with the retail sale of telephones
and computing equipment. The company's revenues increased 33% over 2004. In
December 2004 another computer sales record was set - over 1,500 computers sold
in a one-month period. During 2004, nearly three times more computers were sold
at Elion Esindused than in 2003. About 60 percent of computers are paid for by
instalment. Computers are generally purchased with the ADSL start-up package, and
a permanent Internet connection is also usually ordered.
The results of the part of the Elion Group that is involved with network
construction, the Eltel Group, were only consolidated into the Elion Group until
November 2004. As a result of the sale of the Eltel Group, the revenues of the
Elion Group decreased by roughly 24 million EEK in 2004.
In 2004, the Elion Group's operating costs amounted to 1,818 million EEK, having
increased 6% during the year. The increase in the revenues of AS Elion Esindus
also led to an extensive increase in operating costs. The company's operating
costs for 2004 exceeded the figure for 2003 by 35%. The operating costs of the
group's parent company Elion Enterprises AS grew 1%. During the year, several
categories of direct sales expenses have decreased, and marketing and sub-
contracting expenses have also fallen. The growth in the number of call minutes
made to the networks of foreign operators has led to a certain increase in
interconnection expenses.
In 2004 the Elion Group's EBITDA was 861 million EEK, which is 1% less than the
corresponding result for 2003. The group's depreciation charges decreased 13%
over the year, and amounted to 467 million EEK. The Elion Group's EBIT was 394
million EEK, which is 20% greater than the result for 2003.
The Elion Group's consolidated net profit for 2004 was 342 million EEK, which is
24 million EEK less than in 2003. The result for 2003 includes the 59 million EEK
in profit earned from the sale of the minority shareholding in AS Eltel Networks.
The result for 2004, however, includes the 43 million EEK in profit earned from
the sale of the majority shareholding in AS Eltel Networks. In addition to this,
Elion Enterprises AS paid AS Eesti Telekom 100 million EEK more in dividends in
2004 than it did in 2003, which led to increased income tax on dividends of 35
million EEK in comparison with 2003.
The Elion Group invested a total of 243 million EEK (2003: 224 million EEK). The
majority of investments were targeted to the satisfaction of customers' needs and
the development of the network. The most significant investment projects were the
development of IT infrastructure, the expansion of the DSL network, the creation
of a data warehouse for AS Hansapank.
The Elion Group had 1,452 employees at the end of December 2004 (2,014 in
December 2003). The decrease was mainly the result of the sale of the Eltel
Group. The overall sum of the Elion Group employees' salaries was 313 million
EEK.
EMT Group
The EMT Group consists of AS EMT, EMT Esindused AS and AS Mobile Wholesale.
The total revenues of the EMT Group in 2004 exceeded 3 billion EEK (3,002 million
EEK), having increased 10% in comparison with 2003. The majority of the growth in
total revenues came from the operations of the parent company. A significant
factor that influenced the growth in total revenues was the increase in customer
base.
The EMT Group has been able to maintain its 47% market share successfully in
conditions of tough competition. As of the end of December 2004, the operator had
595.4 thousand customers
(491.4 thousand in December 2003). During the year 2004, the company's customer
base has increased by 104 thousand customers. The numbers of both contractual
customers and users of pre-paid cards have increased. At the end of December, AS
EMT had 363.4 thousand contractual customers (306.6 thousand in December 2003).
The number of pre-paid cards at the end of December was 232.0 thousand (184.8
thousand in December 2003). The increase in the number of pre-paid cards is
partly the result of changes in the terms and conditions of use of the Simpel pre-
paid call card, which came into effect from 21 September 2004. Up to September
2004, call card users were able to use their call time to make calls within a
maximum of five months from the last loading, which was supplemented with the
possibility of receiving calls for 1 more month. As of September, loaded calling
time can be used to make calls for up to six months, and calls can be received
for up to one month, as before. The purpose of this change was to harmonise the
conditions of use of AS EMT's call cards with those of call cards offered by
other operators.
In November 2004, the first virtual operator entered the Estonian mobile
telephone market. A couple of weeks later, AS EMT launched the so-called discount
service provider, Diil. Diil is an independent unit within the structure of EMT
that operates with a small workforce and low fixed costs, in order to offer the
most price-sensitive customers simple and inexpensive services. At the end of
2004, the discount service provider Diil had 7,100 customers.
The growth in the number of customers has led to an increase in call minutes, the
number of messages sent and data volume. At the same time, 2004 was also
characterised by a significant decrease in rates, which became intensified in the
final months of the year in connection with operators' preparations for the
transferability of mobile phone numbers, which was launched as of 1 January 2005.
The reduced rates have had the strongest influence on the revenues earned by AS
EMT from SMSs. At the end of the third quarter, the Tudengipakett (Student
Package), which has low charges for sending SMSs, was launched on the market.
Users of personal short numbers and the EMT self-service office can also send
SMSs at the discount rate. The lower rates have increased the number of SMSs
sent, although
AS EMT's fourth quarter revenues from SMSs increased just 1% in comparison with
the fourth quarter of 2003. In 2004 as a whole, revenues from this category
increased 11%.
AS EMT's revenues from voice communication increased 11% during 2004. The cause
of the increase in revenue from voice communication is both the growth in
customer base, the increase in the number of call minutes per customer and
increased revenue from roaming. The other revenues of AS EMT grew by 5% during
2004. This growth is mainly the result of the increase in the number of call
minutes made to EMT's customers from other networks.
In December 2004 AS EMT earned ARPU of 356 EEK (410 EEK in December 2003).
The revenues of EMT Esindused AS, the subsidiary of the EMT Group that is
involved with retail sales, increased 30% in 2004, and the revenues of AS Mobile
Wholesale, the subsidiary involved with wholesale, increased 17%. At the end of
2003, EMT Esindused AS began to offer customers the possibility of paying for
mobile phones by instalment, and as a result indicators pertaining to the retail
sale (and also the related wholesale) of telephones remained high through all
four quarters in 2004.
The EMT Group's operating costs increased 14%, reaching 1,714 million EEK. The
majority of the growth in operating costs comes from the expansion of customer
base and the direct costs connected with the increase in the number of call
minutes. The increase in operating costs has also been significantly influenced
by the growth in the operating volume of retail and wholesale sales of
telecommunications devices, which have low margins.
The EMT Group's EBITDA was 1,288 million EEK, which represents an increase of 1%
over the year. The Group earned net profits of 665 million EEK, which is 72
million EEK less than in 2003. Whereas in 2003 AS EMT paid AS Eesti Telekom 600
million EEK in dividends, in 2004 dividends amounted to
800 million EEK. As a result of the larger volume of dividends, AS EMT's income
tax expenditure from the dividends also increased 70 million EEK in comparison
with 2003.
In 2004, the EMT invested 273 million EEK (2003: 340 million EEK). The majority
of investments have been made in order to guarantee the quality of the
technological infrastructure. On 28 June 2004, AS EMT, the first Estonian
operator to do so, started the development of EDGE, which will make possible fast
data communications. Data communications are gaining popularity and customers'
demands are increasing. To keep pace with these developments, EMT decided to
start offering fast data communications by EDGE before the 3G becomes widely
available. During the first year, EMT plans to invest approximately 15 million
EEK into the development of EDGE. EMT's new mobile Internet environment, called
EMT Go!, which has rapidly gained in popularity, 'opened its doors' at the end of
June 2004.
On 31 December 2004, 498 people were employed by the EMT Group (31 December 2003:
430). The overall sum of the EMT Group employees' salaries was 104 million EEK.
Relations with state regulators
Litigation with the Estonian Competition Board
The court case between Elion Enterprises AS and the Competition Board over the
justification of rates, which became effective 1 April 2001, for calls inside the
network, has been concluded in 2004. On
19 January 2004, Tallinn City Court approved the Agreement reached by the
Estonian Competition Board and Elion Enterprises AS to end litigation over the
minute rates charged in Elion's fixed telephone network. The Competition Board no
longer seeks to have the voice service charges of Elion Enterprises AS changed.
Litigation with the Communications Board
The Estonian National Communications Board (ENCB) issued a precept on 5 September
2003, obligating Elion Enterprises AS to provide AS Uninet with special access to
Elion's network at the location and in a manner stipulated in AS Uninet suit. By
now, the ENCB has annulled the precept.
Precept of the Communications Board to Elion Enterprises AS regarding the
calculation of the domestic interconnection service charges
On 22 June 2004, the ENCB issued a precept to Elion Enterprises AS, whereby the
firm has to decrease domestic interconnection service charges in its telephone
network. Pursuant to the precept, Elion has to apply charges, which were
determined by the ENCB on the basis Regulation no. 313 of the Government of the
Republic of 11.12.2003, entitled "Cost Accounting Methodology for Leased Line and
Interconnection Service Charges". Elion filed an objection regarding the ENCB's
precept, as a result of which the ENCB changed its earlier precept. Pursuant to
the ENCB's new precept, Elion was required to lower its domestic interconnection
charges by an average of 17 percent by 1 October. Elion Enterprises AS has
performed the precept.
Being recognised as a SMP enterprise
On 29 November 2004, the ENCB declared Elion Enterprises AS to be an operator
with significant market power (SMP) in the fixed-line telephone services market,
the leased line services market and the interconnection services market. Based on
the analysis of the 2003 financial results, Elion Enterprises AS possessed a
market share of 82.68% in the telephone services market, 76.20% in the leased
line services market and 34.02% in the interconnection services market. Elion
Enterprises AS was also declared an operator with significant market power for
the years 2001 to 2004. The company was not surprised by the ENCB's intention to
declare Elion Enterprises AS an SMP in the three above-mentioned markets for 2005
also.
At the same day, the ENCB declared AS EMT to be an SMP in the mobile telephone
services market for 2005. EMT was an SMP also in 2002 to 2004. Based on the
analysis of the financial results for 2003, AS EMT possessed a market share of
59.39% in the mobile telephone services market. AS EMT submitted a complaint to
the Tallinn Administrative Court concerning the decision made by the ENCB. The
first hearing in the matter is set to take place on 19 April 2005.
According to the Telecommunications Act, the ENCB shall recognise in 2004 for the
last time an undertaking with significant market power. As of 2005, procedures
shall be changed according to the new regulatory framework of the European Union,
which is implemented in the Electronic Communication Act. As of the following
year, undertaking with significant market power shall be designated on sector
specific markets, and their obligations resulting from the new act shall be
determined.
Annual General Meeting of Shareholders
The Annual General Meeting of the Shareholders of AS Eesti Telekom, that took
place on 18 May 2004, approved the 2003 Annual Report and proposal for profit
distribution. It was decided to increase the statutory legal reserve of the
company by 0.3 million EEK, so that the legal reserve would meet the legal
requirements, which applied after the increasing of share capital in June 2003.
It was decided, that
a dividend of 8.00 EEK per share shall be paid to the holders of A-shares, and
10,000 EEK per share to the holder of B-share. It was decided, that total of
1,101 million EEK shall be paid to the shareholders. The list of shareholders, on
the basis of which dividends were to be paid, was set on 8 June 2004 at 08:00.
The dividends were paid out on 17 June 2004.
The Annual General Meeting decided to authorise AS Eesti Telekom to acquire,
within one year (i.e. until 18 May 2005), AS Eesti Telekom A-shares, so that the
total nominal value of AS Eesti Telekom shares held by AS Eesti Telekom would not
exceed the statutory limit, and that the price payable per share would not exceed
the highest price paid for A-shares of AS Eesti Telekom on the Tallinn Stock
Exchange on the day of acquiring the shares. The amount of shares to be acquired
shall be determined, on each individual occasion, by a resolution of the AS Eesti
Telekom's Supervisory Board.
A new Supervisory Board with seven members (instead of ten members as in previous
years) was elected. Annika Christiansson, Erik Hallberg, Alo Kelder, Tarmo
Porgand, Kennet Rådne, Mats Salomonsson and Raivo Vare were elected to be members
of the Supervisory Board.
AS Deloitte & Touche Audit was appointed to audit AS Eesti Telekom in 2004.
The General Meeting decided to amend the Articles of Association of AS Eesti
Telekom so that it wouldn't be necessary, in the future, to notify the
shareholders about the Annual General Meeting by publishing a notice in the
Financial Times. It was also decided to amend the Articles so as to make it
possible to convert the state owned B-share into one hundred A-shares of AS Eesti
Telekom in connection with the termination of the 1998 Shareholders Agreement
concluded in May 2004.
Perspectives for 2005
The "Electronic Communications Act" came into force on 1 January 2005. This Act
prescribes the requirements for public communications networks, the provision of
services using such networks, the operation of radio communications and the
management of radio frequencies and numeration. The purpose of the Act is to
bring the regulation concerning this area into compliance with the changes that
have taken place in Estonian regulations.
Another significant change in the Eesti Telekom Group's operating environment is
the transferability of mobile telephone numbers from one operator to another,
which for customers means the possibility to subscribe to another mobile services
provider, taking their mobile telephone number with them. The first month under
the new system proved successful for the Eesti Telekom Group. 2,200 customers
subscribed to AS EMT more than left the company. The process launched in January
will, however, definitely influence developments in the mobile telephone services
market throughout the whole of 2005.
The transferability of numbers is not the only factor influencing the development
of the mobile communications market in 2005. In 2004, AS EMT became the first
operator in Estonia to offer services based on the EDGE technology. The second
half of 2004 was characterised by a rapid increase in the number and volume of
mobile data communications customers. We see data communications as a significant
factor for growth in the area of mobile communications in 2005.
In fixed-line communications, we foresee continued rapid growth in the number of
broadband Internet connections in 2005. At the same time, we hope to stop the
fall in the number of voice communications customers in 2005, by offering package
solutions.
In the area of fixed-line communications, our main objective for 2005 regarding
our corporate clients is to secure our positions in the provision of data
communications and IT services.
INANCIAL STATEMENTS
INCOME STATEMENTS
FOR THE FINANCIAL YEARS 2004 AND 2003
Financial statements are prepared in thousands of EEK
INCOME STATEMENT
CONSOLIDATED
2004 2003
Revenues
Revenue 5,116,109 4,777,858
Other operating income 26,733 30,393
Total revenues 5,142,842 4,808,251
Operating expenses
Materials, consumables, supplies (1,896,398 (1,662,093)
and services )
Other operating expenses (520,166) (457,253)
Personnel expenses (579,316) (532,140)
Other expenses (24,610) (39,164)
Total operating expenses (3,020,490 (2,690,650)
)
Profit / (loss) from operations 2,122,352 2,117,601
before depreciation
Depreciation, amortisation and (816,472) (880,941)
impairment of fixed and
intangible assets
Profit / (loss) from operations 1,305,880 1,236,660
Net income/(expenses) from 45,183 55,462
subsidiaries and associates
Other net financing items 30,315 33,495
Profit before tax 1,381,378 1,325,617
Income tax on dividends (382,918) (286,022)
Profit after tax 998,460 1,039,595
Minority interest (4,892) (4,047)
Net profit for the period 993,568 1,035,548
Earnings per share
Including discontinuing
operations:
Basic earnings per share (in 7.21 7.53
EEK)
Diluted earnings per share (in 7.21 7.53
EEK)
Excluding discontinuing
operations:
Basic earnings per share (in 7.16 7.44
EEK)
Diluted earnings per share (in 7.16 7.43
EEK)
BALANCE SHEETS AS OF 31 DECEMBER 2004 AND 2003
Financial statements are prepared in thousands of EEK
BALANCE SHEETS
CONSOLIDATED
2004 2003
ASSETS
Non-current assets
Fixed assets 2,014,908 2,275,868
Intangible assets 91,190 124,095
Investments in subsidiaries 18,804 16,638
and associates
Non-current securities - 2,700
Other non-current receivables 19,985 6,852
Total non-current assets 2,144,887 2,426,153
Current assets
Inventories 124,382 97,417
Trade and other receivables 770,129 705,930
Current securities 28,874 48,709
Cash and cash equivalents 1,456,225 1,320,802
Total current assets 2,379,610 2,172,858
TOTAL ASSETS 4,524,497 4,599,011
EQUITY AND LIABILITIES
Capital and reserves
Issued capital 1,379,545 1,376,445
Reserves 493,663 468,410
Translation reserve - (11)
Accumulated profit 2,182,349 2,290,218
Total capital and reserves 4,055,557 4,135,062
Minority interest - 13,540
Non-current liabilities
Interest-bearing loans and 604 3,694
borrowings
Provisions 8,006 8,777
Total non-current liabilities 8,610 12,471
Current liabilities
Trade and other payables 436,906 423,567
Interest-bearing loans and 18,968 8,346
borrowings
Provisions 4,456 6,025
Total current liabilities 460,330 437,938
TOTAL EQUITY AND LIABILITIES 4,524,497 4,599,011
CASH FLOW STATEMENTS FOR THE FINANCIAL YEARS 2004 AND 2003
Financial statements are prepared in thousands of EEK
CASH FLOW STATEMENTS
CONSOLIDATED
2004 2003
Operating activities
Profit / (loss) from operations 1,305,880 1,236,660
Adjustments for:
Depreciation, amortization and 816,472 880,941
impairment of fixed and intangible
assets
(Profit) / loss from sales and (10,294) (6,231)
write-off of fixed assets
Creating of retirement - 2,273
benefit provisions
Operating cash flows before changes 2,112,058 2,113,643
in working capital
Change in current receivables (98,553) (43,213)
Change in inventories (34,365) (3,006)
Change in current liabilities 50,143 (70,512)
Cash generated by operations 2,029,283 1,996,912
Interest paid (908) (1,868)
Income tax on dividends paid (382,918) (286,022)
Net cash from / (used in) operating 1,645,457 1,709,022
activities
Investing activities
Purchase of property, plant and (502,587) (473,180)
equipment
Purchase of licences (12,400) (90,263)
nses
Proceeds from sales of fixed assets 18,476 30,652
Net cash outflow from acquisition (3,872) (24,593)
of subsidiaries
Net cash inflow from sales of 52,272 68,137
subsidiaries
Repayment of long-term promissory - -
note
Purchase of short-term securities (37,295) (48,709)
Proceeds on disposal of short-term 59,273 79,079
investments
Loans granted (36,256) (2,248)
Repayments of loans granted 3,829 60
Dividends received - 8
Interest received 38,036 28,941
Net cash from / (used in) investing (420,524) (432,116)
activities
Financing activities
Repayments of convertible debts (48) (224)
Proceeds from non-convertible debts 1,353 360
Repayments of non-convertible debts (7,377) (13,326)
Repayments of long-term borrowings - (23,273)
Repayments of finance lease (9,059) (1,066)
liabilities
Repayments of short-term borrowings (176) (810)
Shares issuance 27,782 23,413
Dividends paid (1,101,165) (824,309)
Net cash used in financing (1,088,690) (839,235)
activities
Net change in cash and cash 136,243 437,671
equivalents
Cash and cash equivalents at 1,320,802 883,989
beginning of year
Effect of foreign exchange rate (820) (858)
changes
Cash and cash equivalents at end of 1,456,225 1,320,802
year
Hille Võrk
CFO
+372 627 2460
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