Atnaujinta: 2024.07.21 13:01 (GMT+3)
Eesti Telekom FINANCIAL RESULTS 04/15/2004 09:00
3 MONTHS RESULTS. EEK
15 April 2004
THE FINANCIAL RESULTS OF THE FIRST THREE MONTHS OF 2004
Eesti Telekom, the leading provider of telecommunication
services in Estonia, hereby announces its results for the
three month period, which ended 31 March 2004.
Financial highlights
Q1 Q1 Change %
2004 2003
Total revenues, mEEK 1,218 1,107 10
EBITDA, mEEK 522 540 -3
EBITDA margin, % 43 49
EBIT, mEEK 310 311 -1
EBIT margin, % 25 28
Profit before taxes, mEEK 319 319 0
Net profit for the period, 319 39 717
mEEK
EPS, EEK 2.32 0.28 716
CAPEX, mEEK 107 43 147
Net gearing, % -39 -34
ROA (annualised), % 27 3
ROE (annualised), % 30 33
Commenting on these financial results, Chairman Jaan
Männik stresses:
"The year started with strong growth and maintained
profits."
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, in
the first quarter of 2004, amounted to 1,218 mln EEK, up
by 10%, compared to the same period in 2003. The
operating expenses of the Group were up by 23%, amounting
to 697 mln EEK. The EBITDA of the first quarter was 522
mln EEK and the EBITDA margin was 43%. The EBITDA was
down by 3%, compared to the first quarter of 2003.
The fast growth of revenues and operating expenses,
accompanied by lower margins, is the result of changes,
which have taken place in the structure of the Group’s
activities. The largest injection into this revenue
growth has been made by the sale and service subsidiaries
of the EMT Group and the Elion Group - AS Elion Esindus,
EMT Esindused AS and AS Mobile Wholesale. In 2003, both
Elion Enterprises AS and AS EMT established the objective
of shifting from technology-based companies into service
companies. Several processes were initiated, that are
oriented to co-operation within the sphere of customer
services. The first large change to take place, which was
also visible to customers, was the coordinating of the
outward appearance of and services offered by the sales
and service offices. In addition to voice communications
and Internet services, AS Elion Esindus started to offer
mobile phones, and to handle AS EMT contracts. EMT
Esindused AS now also handles products and services
connected with the Elion Group. In addition to the
traditional sales facilities, both retailers also use
electronic sales channels. Several payment-by-instalment
plans have been introduced for stimulating sales
activities. This expansion in the sales sphere has
lowered the profit margins of the Eesti Telekom Group.
But comfortable and convenient sales channels are an
important factor in ensuring customer satisfaction.
Co-operation between the Elion Group and the EMT Group is
not limited to sales activities. The variety of services
offered by both operators of the Eesti Telekom Group is
becoming ever more diversified. And, especially in the
case of data communications, it may even be difficult for
customers unfamiliar with appropriate technology to chose
the optimal solutions for their needs. Therefore, Elion
and EMT have established the concept of simplicity as the
principle guideline for dealing with their customers. And
customers’ technical selections and decisions should be
made under the direct advice and guidance of the
operators.
It has been decided not to formally merge Elion
Enterprises AS and AS EMT. At the same time, co-operation
between the two must be intensified. A uniform segment-
based customer analyses system has been established, that
enables the development, especially for business clients,
of integrated fixed, mobile, and data communications
solutions. To further improve customer relations, the
work regimen of customer service personnel is in the
process of being reorganised. The aim of this overhaul is
to increase the capability to satisfy telecommunications
needs within the framework of the Telekom Group, and to
thereby increase the share of loyal steady customers.
Another Eesti Telekom Group growth factor, affecting both
revenues and operating expenses, has been the widening of
construction activities. In 2003, AS Connecto acquired a
strategic investor, when 49% of the firm’s shares were
sold to the Finnish telecommunications network
development company Eltel Networks Corporation. After
this development, AS Connecto has expanded its activities
with the acquisition of new subsidiaries, and, in
addition to the establishing of new telecommunications
networks, with the construction of electric-power grids.
The profit margins of construction activities are,
compared to those of telecommunications services, low.
Thereby, the expansion of Connecto has lowered the profit
margins of the Eesti Telekom Group as a whole. As Eltel
Networks Corporation has the option of acquiring the
remaining 51% of the shares of AS Connecto during the
first half of 2005, developments in the construction
sphere will only have a short-term effect upon the
financial results of the Eesti Telekom Group.
The depreciation of the Eesti Telekom Group, in the first
quarter of 2004, was 212 mln EEK, down by 17 mln EEK or
7%, compared to the first quarter of 2003. Depreciation
is continuously falling as a result of the relatively low
CAPEX that the Group has had during the past years. The
net financial result of the first quarter was 9 mln EEK.
The net profit of the Eesti Telekom Group in the first
quarter was 319 mln EEK or 2.32 EEK per share (Q1 2003:
39 mln EEK or 0.28 EEK per share). The result of the
first quarter of 2003 was impacted by income tax on
dividends in the amount of 280 mln EEK. In 2003,
dividends payable by subsidiary companies to AS Eesti
Telekom were decided in March, and the corresponding
income tax on dividends was shown as an expense of the
first quarter. In 2004, dividends for the financial year
2003 were not decided by the end of March.
At the end of March 2004, the total assets of the Eesti
Telekom Group amounted to 4,922 mln EEK (December 2003:
4,599 mln EEK). Non-current assets were reduced by 102
mln EEK and current assets were increased by 425 mln EEK.
This increase was mainly the result of an increase in
cash and cash equivalents (bank accounts, units of money
market funds) by 331 mln EEK. By the end of March 2004,
the net debt of the Group amounted to -1,719 mln EEK, and
net gearing was -39% (December 2003: -1,357 mln EEK, and
-33%).
The net operating cash flow of the Eesti Telekom Group,
in the first quarter of 2004, amounted to 464 mln EEK (Q1
2003: 455 mln EEK). Cash flow into investments was -131
mln EEK (Q1 2003: 37 mln EEK). Cash flow into financing
was -2 mln EEK (Q1 2003: -13 mln EEK).
Elion Group
Q1 Q1 Change
2004 2003 %
Total revenues, mEEK 652 605 8
EBITDA, mEEK 225 231 -3
EBITDA margin, % 35 38
EBIT, mEEK 99 92 8
EBIT margin, % 15 15
Profit before taxes, 101 91 11
mEEK
Net profit for the 101 22 360
period, mEEK
CAPEX, mln EEK 52 19 172
ROA, % 18 4
ROE, % 21 22
Revenues of the Elion Group continued to grow in the
first quarter of 2004. The consolidated revenues amounted
to 652 mln EEK, up by 8%, compared to the first quarter
of 2003. The operating expenses of the first quarter were
426 mln EEK, up by 14%. The EBITDA was 225 mln EEK, and
the EBITDA margin was 35%. Depreciation of the Elion
Group is continuously falling, as a result of the
relatively low CAPEX that the Group has had during the
past years. Compared to the first quarter of 2003,
depreciation of 2004 was down by 9%. The EBIT of the
Elion Group amounted to 99 mln EEK, and the EBIT margin
was 15%. The net profit for the first quarter was 101 mln
EEK, up by 360 %, compared to the same period in 2003.
This increase is mainly the result of dividend tax
expenses (69 mln EEK) that were declared in the
statements of the first quarter in 2003, while in 2004,
the profit allocation was not confirmed by the end of
March.
Revenues of Elion Enterprises AS were up by 2%, amounting
to 573 mln EEK . The operating expenses were up by 5%,
amounting to 346 mln EEK. These increases were the result
of new areas of activities - the Internet, and IT and
data communications. The revenues of the company from the
Internet exceeded those of the first quarter of 2003 by
17%. The revenues from IT and data communications were up
by 54%. Internet, IT and data communications revenues
formed 21% of the firm’s first quarter total revenues.
The revenues from voice communications were down by 6%,
compared to the first quarter of 2003. On 1 January 2004,
the operator pre-selection requirement and the fixed
phone number portability requirement came into force.
Elion Enterprises AS has already offered its customers
the operator pre-selection service free-of-charge since 1
December 2003. By dialling the appropriate code,
customers can choose, or cancel the pre-selection of, a
particular operator for their domestic and international
calls. Different operators can be chosen for different
kinds of calls. By the end of the first quarter of 2004,
approximately 6,500 customers had made use of the
services of an operator other than Elion Enterprises. 344
customers had used the portability for leaving the Elion
network since 1 January 2004. Neither operator pre-
selection nor number portability have had any significant
effect upon the revenues or market shares of Elion
Enterprises AS. During an Elion Enterprises free
installation campaign, that lasted from the beginning of
2004, until 15 February, 3,800 customers joined up. 85%
of the new customers were private individuals, and 22% of
the new customers also applied for an ADSL permanent
connection. The number of main lines in use at the end of
March 2004 was 440,201 (a penetration of 32.6 lines per
100 persons). Since the beginning of 2004, the number of
main lines has fallen by 4.5 thousand. The company
estimates its share of total call minutes to be 87%
(March 2003: 88%). The estimated market share of domestic
call minutes, international call minutes, and fixed to
mobile call minutes is 87% (March 2003: 87%), 68% (March
2003: 68%), and 75% (March 2003: 74%), correspondingly.
The estimated market share of dial-up minutes is 96%
(March 2003: 95%).
The Elion Group’s spheres of activity with the fastest
growth, in both revenues and expenses, have been
construction and trade. Growth in the construction sphere
has been supported by the acquisition of new subsidiaries
by the Connecto Group, which has enabled the Group to
expand operations and diversify its activities. During
the second half of 2003, AS Reveko Telekom and AS Eltel
Network became part of the Connecto Group. 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 transaction price was 300 thousand EUR
(4,7 mln EEK). 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 Connecto Group’s
activities in the Baltic region.
So far, AS Eltel Networks has mainly maintained and
constructed the grids of Fortum Elekter in Estonia. On 31
March 2004, AS Eltel Networks and Distribution Network of
Eesti Energia AS, signed a contract concerning the
scheduled maintenance and construction of the
distribution grids of Eesti Energia. The contract was
signed for a 2+1 year term. The value of the first year
of the contract is 37.6 mln EEK.
The Elion Group invested 52 mln EEK during the first
quarter of 2004. Almost half of the investments went into
development of the DSL network. The total number of
Internet permanent connections was 56.0 thousand by the
end of March 2004. The net increase in the number of
permanent connections since March 2003 has been 20.2
thousand. This rapid growth has been promoted by the sale
of ADSL starter kits, which was launched at the end of
2002. Starter kits enable customers to install Internet
permanent connections by themselves. About 80% of the new
customers of Elion’s Home ADSL or Home Office ADSL prefer
to use starter kits. At the beginning of 2004, the
Wireless Home ADSL starter kit also became available,
with which it is possible to set up a wireless network at
home or at the office, and to securely share Internet
connection between several computers.
In 2003, Elion Enterprises AS determined to transform
itself from a technology oriented firm into a customer
oriented one. In March 2004, Elion Enterprises AS became
the first Estonian telecommunication services provider
whose quality management system has earned the ISO
9001:2000 certification. As a matter of fact, the ISO
9001:2000 certificate was awarded to all the operational
processes of Elion Enterprises AS. However, in AS
Elion Esindus outlets it concerns only the sale of
Elion’s products and services, including the relevant
after-sale service provided. The Elion management system
was certified as fulfilling ISO 9001:2000 qualifications
by the worldwide certification body Bureau Veritas
Quality International. The ISO 9001:2000 certificate
confirms Elion’s commitment to be the most preferred
service provider in the residential and business
communication sectors. The receiving of this certificate
attests to the fact that Elion Enterprises AS
systematically and constantly upgrades the quality of the
various services that it provides, implements documented
quality requirements on a daily basis, and monitors
customer satisfaction with the firm’s endeavours.
On 31 March 2004, 2,029 people were employed by the Elion
Group (31 December 2003: 2,014).
EMT Group
Q1 Q1 Change
2004 2003 %
Total revenues, mEEK 682 610 12
EBITDA, mEEK 301 313 -4
EBITDA margin, % 44 51
EBIT, mEEK 216 225 -4
EBIT margin, % 32 37
Profit before taxes, 220 228 -4
mEEK
Net profit for the 220 17 1182
period, mEEK
CAPEX, mln EEK 55 24 136
ROA, % 44 4
ROE, % 49 73
The consolidated revenues of the EMT Group in the first
quarter of 2004 were up by 12%, compared to the first
quarter of 2003, and amounted to 682 mln EEK. The
operating expenses of the Group were 380 mln EEK, up by
28%. The EBITDA of the EMT Group in the first quarter of
2004 was 301 mln EEK and the EBITDA margin 44%. The
relatively low CAPEX of the past years has lead to lower
depreciation expenses. Depreciation of the first quarter
amounted to 85 mln EEK, down by 4%, compared to the same
period in 2003. The EBIT of the first three months was
216 mln EEK, down by 4%, compared to the first quarter of
2003. The EBIT margin was 32%. The net profit for the
first quarter of the EMT Group was 220 mln EEK (Q1 2003:
17 mln EEK). This increase was mainly the result of the
dividend tax expense (211 mln EEK) that was declared in
the statements of the first quarter in 2003, while in
2004, the profit allocation had not been confirmed by the
end of March.
Approximately half of the revenue growth in the first
quarter resulted from the activities of the subsidiaries
of the EMT Group - AS Mobile Wholesale and EMT Esindused
AS. An increase in the demand for new mobile handsets,
that started at the end of 2003, continues. Sale of the
handsets has been supported by several promotional
campaigns launched by AS EMT. New contractual customers,
for instance, have been offered handsets at discounted
prices. From the end of 2003 on, customers can buy
handsets on the instalment plan. The profit margins of
telephone sales are traditionally low. The growth of the
costs of sales activities in the first quarter of 2004
was of the same magnitude as revenue growth.
Revenues of AS EMT, the parent company of the EMT Group,
were up by 7%, amounting to 587 mln EEK. The revenues
from SMS and data communications continued to have the
highest growth rate, showing an increase of 22%, compared
to the first quarter of 2003. The revenues from domestic
and international calls were up by 7%. Other revenues
were up by 6%.
The revenue growth of AS EMT is mainly the result of its
wider customer base. The annual net change in the total
number of customers of AS EMT, by the end of March 2004,
was 76.8 thousand (this growth has been affected by
changes in the terms of the prepaid Simpel card, which
became effective on 1 May 2003). At the end of 2003, AS
EMT undertook to change the image of the Simpel trade
mark. The aim was to attract new customers primarily from
the younger generation. At the beginning of 2004, AS EMT
introduced the POP! prepaid card, which is primarily
targeted at school children who are just becoming
acquainted with the world of mobile communications. New
contractual customers have been offered 5 hours of free
talking time, distributed over 15 months. The total
number of AS EMT customers has grown by 16.1 thousand,
compared to the end of December 2003. The number of
contractual customers has grown by 12.3 thousand, and the
number of prepaid card users has grown by 3.8 thousand.
The total number of AS EMT customers reached 507.5
thousand by the end of March 2004. The number of
contractual customers was 318.9 thousand, and the number
of prepaid customers was 188.6 thousand (March 2003:
430.7 thousand customers; 285.8 thousand contractual
customers; 144.9 thousand prepaid customers). The monthly
ARPU (average revenue per user) of the operator has
fallen as a result of the higher ratio of prepaid
customers (compared to March 2003) and several
promotional campaigns that have taken place or are still
continuing. The ARPU in March 2004 was 391 EEK (March
2003: 423 EEK; December 2003: 410 EEK). AS EMT estimates
that its market share, based upon the number of
customers, is stable at around 47%. Mobile penetration in
Estonia has reached 80%.
The operating expenses of AS EMT in the first quarter of
2004 were 288 mln EEK, up by 20%, compared to the first
quarter of 2003. This rapid growth in the number of
customers has been caused by an increase in traffic with
other Estonian and foreign operators. The growth of
interconnection and roaming charges formed more than half
of the additional operating expenses of AS EMT.
Introduction of the POP! prepaid card and promotional
campaigns have increased marketing expenses.
The EMT Group invested 55 mln EEK in the first quarter of
2004 (Q1 2003: 24 mln EEK). On 31 March 2004, the EMT
Group had 445 employees (December 2003: 428).
Relations with state regulators
Litigation with the Competition Board
The court case between Elion Enterprises AS and the
Competition Board over the justification of rates for
calls inside the network, which became effective 1 April
2001, has been concluded. On 19 January, 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.
Litigation with the Communications Board
The Communications Board issued a precept on 5 September
2003, obligating Elion Enterprises AS to provide AS
Uninet with special access to Elion’s network at a
location and in a manner stipulated in Uninet’s suit.
Elion Enterprises Ltd. contested the precept in Tallinn
Administrative Court and appealed for a reversal of the
precept. The next session of the Administrative Court was
scheduled for 23 March 2004, but, due to an application
by the Board, it was postponed till 9 June 2004. The
Communications Board has affirmed that it initiated an
annulment of the precept, since the factual and legal
circumstances concerning the matter have changed.
Information to the Shareholders
The Annual General Meeting of AS Eesti Telekom shall be
held on 18 May 2004, at 12.30 p.m., at the Estonian
National Library (Tõnismägi 2, Tallinn). The 2003 Annual
Report and resolution projects are available for all
shareholders on Internet page <a href='http://www.telekom.ee' target='_blank'>http://www.telekom.ee</a> and
in the office of AS Eesti Telekom at Roosikrantsi 2,
Tallinn, starting 19 April 2004, on working days, from
10.00 a.m. to 2.00 p.m. Any inquiries regarding the
General Meeting can be made by phone: +372 6311212; or by
e-mail: mailbox@telekom.ee.
AS EESTI TELEKOM AND SUBSIDIARY COMPANIES
INCOME STATEMENT
Financial statements are prepared in thousands of
Estonian kroons (EEK)
3 months to 3 months 2003
31 March to
2004 31 March
2003
Restated
Revenues
Net sales 1,212,950 1,102,396 4,777,858
Other revenues 5,273 4,733 30,393
Total revenues 1,218,223 1,107,129 4,808,251
Operating expenses
Materials, consumables, (425,680) (331,565) (1,662,093)
supplies and services
Other operating expenses (112,605) (101,968) (457,253)
Personnel expenses (153,314) (127,394) (532,140)
Other expenses (5,086) (6,374) (39,164)
Total operating expenses (696,685) (567,301) (2,690,650)
Profit from operations 521,538 539,828 2,117,601
before depreciation
Depreciation and (211,850) (228,445) (880,941)
amortisation
Profit from operations 309,688 311,383 1,236,660
Net financial income / (182) (729) 55,462
(expenses) from associates
Other net financing items 9,498 8,245 33,495
Profit before tax 319,004 318,899 1,325,617
Income tax on dividends - (279,816) (286,022)
Profit after tax 319,004 39,083 1,039,595
Minority interest 347 - (4,047)
Net profit for the period 319,351 39,083 1,035,548
Earning per share
Basic earning per share 2.32 0.28 7.53
(in kroons)
Diluted earning per share 2.32 0.28 7.53
(in kroons)
AS EESTI TELEKOM AND SUBSIDIARY COMPANIES
BALANCE SHEET
Financial statements are prepared in thousands of
Estonian kroons (EEK)
31 March 31 Dec 2003 31 March
2004 2003
Restated
ASSETS
Non-current assets
Property, plant and 2,178,888 2,275,868 2,492,653
equipment
Goodwill 11,230 10,287 2,540
Licenses, patents and 107,767 113,808 34,516
trademarks
Investments in subsidiaries 16,457 16,638 21,967
and associates
Other investments 2,700 2,700 2,710
Other non-current assets 7,122 6,852 2,017
Total non-current assets 2,324,164 2,426,153 2,556,403
Current assets
Inventories 94,959 97,417 98,923
Trade receivables 526,852 486,037 421,593
Other receivables 246,261 219,893 191,790
Investments held for 78,064 48,709 10,192
trading
Cash and cash equivalents 1,651,701 1,320,802 1,362,515
Total current assets 2,597,837 2,172,858 2,085,013
TOTAL ASSETS 4,922,001 4,599,011 4,641,416
EQUITY AND LIABILITIES
Equity
Issued capital 1,376,445 1,376,445 1,373,833
Reserves 468,410 468,410 447,348
Translation reserve 12 (11) (34)
Retained earnings 2,290,218 1,254,670 2,078,979
Net profit for the period 319,351 1,035,548 39,083
Total equity 4,454,436 4,135,062 3,939,209
Minority interest 13,194 13,540 -
Non-current liabilities
Interest-bearing loans and 2,173 3,694 12,178
borrowings - due after one
year
Provisions 8,602 8,777 7,503
Total non-current 10,775 12,471 19,681
liabilities
Current liabilities
Trade payables 174,387 226,042 124,685
Other current liabilities 190,421 161,829 179,499
Tax liabilities 66,793 35,696 343,509
Interest-bearing loans and 8,583 8,346 21,730
borrowings - due within one
year
Provisions 3,412 6,025 13,103
Total current liabilities 443,596 437,938 682,526
TOTAL EQUITY AND 4,922,001 4,599,011 4,641,416
LIABILITIES
AS EESTI TELEKOM AND SUBSIDIARY COMPANIES
CASH FLOW STATEMENT
Financial statements are prepared in thousands of
Estonian kroons (EEK)
3 months 3 months
to to
31 March 31 March
2004 2003
Operating activities
Profit from operations 309,688 311,383
Adjustments for:
Depreciation and amortisation 211,850 228,445
(Profit) from sales and write- (3,016) (849)
off of fixed assets
Operating cash flow before 518,522 538,979
movements in working capital
Change in current receivables (60,796) 30,793
Change in inventories 4,865 (7,154)
Change in current liabilities 1,984 (107,846)
Cash generated by operations 464,575 454,772
Interest paid (451) (231)
Net cash from operating 464,124 454,541
activities
Investing activities
Purchases of property, plant and (105,058) (42,819)
equipment
Purchases of licenses (1,748) (390)
Proceeds from sales of property, 3,537 1,851
plant and equipment
Acquisition of subsidiaries (3,872) -
Purchases of trading investments (29,356) -
Proceeds on disposal of trading - 68,862
investments
Loans granted (1,283) (217)
Cash receipt from repayment of - 24
loans
Interest received 6,416 9,865
Net cash used in investing (131,364) 37,176
activities
Financing activities
Repayment of long-term (8) (3)
convertible debt
Proceeds from nonconvertible 111 240
long-term debt
Repayment of nonconvertible long- (1,844) (1,845)
term debt
Repayment of long-term - (11,636)
borrowings
Repayment of obligations under (65) -
finance lease
Repayment of short-term (116) -
borrowings
Net cash used in financing (1,922) (13,244)
activities
Net increase in cash and cash 330,838 478,473
equivalents
Cash and cash equivalents at 1,320,802 883,988
beginning of year
Effect of foreign exchange rate 61 54
changes
Cash and cash equivalents at end 1,651,701 1,362,515
of period
Hille Võrk
Financial Manager
6272460
Schema