AS EESTI TELEKOM               FINANCIAL RESULTS             10.03.2005



2004 AUDITED RESULTS, EUR



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 3.8 million EUR. Capital gain,  approximately  2.7  million

EUR 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 0.2 million EUR, and it earned profits  of

0.03 million EUR. 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 7.02 EUR 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 328.7  million  EUR  (2003:

307.3 million EUR), which is  an  increase  of  7%  or  by  21.4  million  EUR  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  193.0  million  EUR

(2003: 172.0 million EUR). Operating costs  were  influenced  by  larger  customer

base and fast growth of the retail subsidiaries' sales. EBITDA amounted  to  135.6

million  EUR,  remained  at  the  same  level  as  for  2003.   Depreciation   and

amortisation was 52.2 million EUR (2003: 56.3 million EUR), down  by  4.1  million

EUR during the year. The lower  amortisation  expenses  of  Elion  Enterprises  AS

mainly caused this reduction.



The net financial income  fell  by  0.8  million  EUR.  Total  revenues  for  2003

included the 3.8 million EUR 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 2.7 million EUR. 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  88.3  million  EUR  (2003:

84.7 million EUR), which is 4% more than in 2003.  Whereas  in  2003  the  company

paid its shareholders 0.38 EUR in dividends per A-share, in 2004 the value of  the

dividend was 0.51 EUR per A-share. As a result, the amount of income tax  paid  on

the dividends also increased by 6.2 million EUR.  AS  Eesti  Telekom,  the  parent

company, earned a net profit of 63.5 million  EUR  in  2004  (2003:  66.2  million

EUR). The revenue earned per share was 0.46 EUR in 2004.



Balance sheet and cash flows

As of the end of December 2004, the  total  assets  of  the  Eesti  Telekom  Group

amounted to 289.2 million EUR (293.9 million EUR in  December  2003).  During  the

year, non-current assets fell by 18.0 million EUR, and  current  assets  increased

13.2 million EUR. 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 (8.7 million  EUR).

Trade receivables increased by 5.8 million EUR, of which 4.5 million  EUR  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 5.1 million EUR during the year,  as  a

result of the payment of 70.4 million EUR in dividends. As of the end of  December

2004, the Group had 0.04 million



EUR in long-term debt and 1.2 million EUR  in  short-term  debt  (at  the  end  of

December  2003  these  figures  were  0.2  million  EUR  and   0.5   million   EUR

respectively). The Group's net debt at the end of 2004 was -93.5 million EUR,  and

net gearing was -36%. The Group's other short-term liabilities increased



0.8 million EUR during 2004.



The Eesti Telekom Group's cash flows from operating activities were 105.2  million

EUR in 2004 (109.2 million EUR 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 - 27.6 million EUR in 2003 (including  the  4.3  million  EUR

earned from the sale of the minority share in AS  Eltel  Networks),  26.9  million

EUR in 2004 (including the 3.3 million EUR earned from the sale  of  the  majority

share in AS Eltel Networks).  Cash  flows  into  financing  activities  were  69.6

million EUR in 2004, including 70.4 million EUR paid out in  dividends  (in  2003:

53.6 million EUR, including 52.7 million EUR 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 27.2 million EUR.



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 0.5 million EUR.



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 171.2  million  EUR,  which  is  an

increase of 4% in comparison with 2003 or an  absolute  increase  of  6.5  million

EUR.



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 1.5 million EUR in 2004.



In 2004, the Elion Group's operating costs amounted to 116.2 million  EUR,  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 55.0 million EUR, which is 1% less  than  the

corresponding result for 2003. The  group's  depreciation  charges  decreased  13%

over the year, and amounted to 29.8 million EUR. The Elion Group's EBIT  was  25.2

million EUR, which is 20% greater than the result for 2003.



The Elion Group's consolidated net profit for 2004 was 21.9 million EUR, which  is

1.5 million EUR less than in 2003. The result for 2003 includes  the  3.8  million

EUR in profit earned from the sale  of  the  minority  shareholding  in  AS  Eltel

Networks. The result for 2004, however, includes the 2.7  million  EUR  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 6.4 million EUR  more

in dividends in 2004 than it did in 2003, which led to  increased  income  tax  on

dividends of 2.2 million EUR in comparison with 2003.



The Elion Group invested a total of 15.5 million EUR in 2004 (2003:  14.3  million

EUR). 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  20.0  million

EUR.





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  were  191.9  million  EUR,  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 22.8 EUR (26.2 EUR 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  109.5  million  EUR.  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 82.3 million EUR, which represents an  increase  of  1%

over the year. The Group earned net profits of 42.5  million  EUR,  which  is  4.6

million EUR less than in 2003. Whereas in 2003 AS EMT paid AS Eesti  Telekom  38.3

million EUR in dividends, in 2004 dividends amounted to 51.1  million  EUR.  As  a

result of the larger volume of dividends, AS EMT's  income  tax  expenditure  from

the dividends also increased 4.5 million EUR in comparison with 2003.



In 2004, the EMT invested 17.4 million EUR (2003: 21.7 million EUR). 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 1 million  EUR

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 6.6 million EUR.



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 0.02 million EUR, 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 0.51  EUR  per  share  shall  be  paid  to  the

holders of A-shares, and 639 EUR per share  to  the  holder  of  B-share.  It  was

decided, that total of 70.4 million EUR 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.



INCOME STATEMENTS

FOR THE FINANCIAL YEARS 2004 AND 2003



Financial statements are prepared in thousands of EUR



INCOME STATEMENT





                                             CONSOLIDATED      

                                     2004        2003          

 Revenues                                                      

 Revenue                             326,980     305,360       

 Other operating income              1,709       1,942         

 Total revenues                      328,689     307,302       

 Operating expenses                                            

 Materials, consumables, supplies    (121,201)   (106,226)     

 and services                                                  

 Other operating expenses            (33,245)    (29,224)      

 Personnel expenses                  (37,025)    (34,010)      

 Other expenses                      (1,573)     (2,503)       

 Total operating expenses            (193,044)   (171,963)     

 Profit / (loss) from operations     135,645     135,339       

 before depreciation                                           

 Depreciation, amortisation and      (52,182)    (56,302)      

 impairment of fixed and intangible                            

 assets                                                        

 Profit / (loss) from operations     83,463      79,037        

 Net income/(expenses) from          2,888       3,545         

 subsidiaries and associates                                   

 Other net financing items           1,937       2,140         

 Profit before tax                   88,288      84,722        

 Income tax on dividends             (24,473)    (18,280)      

 Profit after tax                    63,815      66,442        

 Minority interest                   (313)       (259)         

 Net profit for the period           63,502      66,183        

 Earnings per share                                            

 Including discontinuing operations:                           

 Basic earnings per share (in EUR)   0.46        0.48          

 Diluted earnings per share (in EUR) 0.46        0.48          

 Excluding discontinuing operations:                           

 Basic earnings per share (in EUR)   0.46        0.48          

 Diluted earnings per share (in EUR) 0.46        0.48          









BALANCE SHEETS AS OF 31 DECEMBER 2004 AND 2003



Financial statements are prepared in thousands of EUR



BALANCE SHEETS



                              CONSOLIDATED              

                              2004          2003        

 ASSETS                                                 

 Non-current assets                                     

 Fixed assets                 128,776       145,454     

 Intangible assets            5,828         7,931       

 Investments in subsidiaries  1,202         1,063       

 and associates                                         

 Non-current securities       -             172         

 Other non-current            1,277         439         

 receivables                                            

 Total non-current assets     137,083       155,059     

 Current assets                                         

 Inventories                  7,949         6,226       

 Trade and other receivables  49,221        45,116      

 Current securities           1,845         3,113       

 Cash and cash equivalents    93,070        84,414      

 Total current assets         152,085       138,869     

 TOTAL ASSETS                 289,168       293,928     

 EQUITY AND LIABILITIES                                 

 Capital and reserves                                   

 Issued capital               88,169        87,971      

 Reserves                     31,550        29,937      

 Translation reserve          -             (1)         

 Accumulated profit           139,478       146,370     

 Total capital and reserves   259,197       264,277     

 Minority interest            -             865         

 Non-current liabilities                                

 Interest-bearing loans and   38            236         

 borrowings                                             

 Provisions                   512           561         

 Total non-current            550           797         

 liabilities                                            

 Current liabilities                                    

 Trade and other payables     27,924        27,071      

 Interest-bearing loans and   1,212         533         

 borrowings                                             

 Provisions                   285           385         

 Total current liabilities    29,421        27,989      

 TOTAL EQUITY AND LIABILITIES 289,168       293,928     







CASH FLOW STATEMENTS FOR THE FINANCIAL YEARS 2004 AND 2003



Financial statements are prepared in thousands of EUR



CASH FLOW STATEMENTS



                                    CONSOLIDATED           

                                    2004        2003       

 Operating activities                                      

 Profit / (loss) from operations    83,463      79,037     

 Adjustments for:                                          

 Depreciation, amortization and     52,182      56,302     

 impairment of fixed and intangible                        

 assets                                                    

 (Profit) / loss from sales and     (658)       (399)      

 write-off of fixed assets                                 

         Creating of retirement     -           145        

 benefit provisions                                        

 Operating cash flows before        134,987     135,085    

 changes in working capital                                

 Change in current receivables      (6,299)     (2,762)    

 Change in inventories              (2,196)     (192)      

 Change in current liabilities      3,204       (4,506)    

 Cash generated by operations       129,696     127,625    

 Interest paid                      (58)        (119)      

 Income tax on dividends paid       (24,473)    (18,280)   

 Net cash from / (used in)          105,165     109,226    

 operating activities                                      

                                                           

 Investing activities                                      

 Purchase of property, plant and    (32,121)    (30,241)   

 equipment                                                 

 Purchase of licences               (793)       (5,769)    

                                                           

 nses                                                      

 Proceeds from sales of fixed       1,181       1,959      

 assets                                                    

 Net cash outflow from acquisition  (247)       (1,573)    

 of subsidiaries                                           

 Net cash inflow from sales of      3,341       4,355      

 subsidiaries                                              

 Repayment of long-term promissory  -           -          

 note                                                      

 Purchase of short-term securities  (2,384)     (3,113)    

 Proceeds on disposal of short-term 3,788       5,054      

 investments                                               

 Loans granted                      (2,317)     (144)      

 Repayments of loans granted        245         4          

 Dividends received                 -           1          

 Interest received                  2,430       1,850      

 Net cash from / (used in)          (26,877)    (27,617)   

 investing activities                                      

                                                           

 Financing activities                                      

 Repayments of convertible debts    (3)         (14)       

 Proceeds from non-convertible      86          23         

 debts                                                     

 Repayments of non-convertible      (471)       (852)      

 debts                                                     

 Repayments of long-term borrowings -           (1,487)    

 Repayments of finance lease        (579)       (68)       

 liabilities                                               

 Repayments of short-term           (11)        (52)       

 borrowings                                                

 Shares issuance                    1,775       1,496      

 Dividends paid                     (70,377)    (52,683)   

 Net cash used in financing         (69,580)    (53,637)   

 activities                                                

                                                           

 Net change in cash and cash        8,708       27,972     

 equivalents                                               

 Cash and cash equivalents at       84,414      56,497     

 beginning of year                                         

 Effect of foreign exchange rate    (52)        (55)       

 changes                                                   

 Cash and cash equivalents at end   93,070      84,414     

 of year                                                   







Hille Võrk

CFO

+372 627 2460