Pēd. atjaunots: 23.07.2024 23:04 (GMT+3)
Eesti Telekom FINANCIAL RESULTS 10/17/2002
FINANCIAL RESULTS, 9 MONTHS 2002, EUR
17 October 2002
THE FINANCIAL RESULTS OF THE FIRST NINE MONTHS OF 2002
Eesti Telekom, the leading provider of telecommunication
services in Estonia, hereby announces its results for the
nine-month period ended 30 September 2002.
Financial highlights
9 months 9 months Change, %
2002 2001
Total revenue, mEUR 219 202 9
EBITDA, mEUR 106 96 10
EBITDA margin, % 48 48
EBIT, mEUR 57 46 24
EBIT margin, % 26 23
Profits before taxes, 57 48 19
mEUR
Net profits for the 51 46 12
period, mEUR
EPS, EUR 0.37 0.33 12
No. of A- shares 137,383,178 137,383,178
Investments, mEUR 22 44 -50
Net gearing, % -19.1 -1.5
ROA, % 25.2 21.7
ROE, % 32.6 27.8
Commenting on these financial results, Chairman, Jaan
Männik, stressed:
"The healthy revenue growth of the Group continued in the
third quarter. The financial position of the Group has
become even stronger."
For further information, please contact:
Krister Björkqvist +372 6272
465
CFO
Hille Võrk
+372 6272 460
Financial Manager
CHAIRMAN’S STATEMENT
For already the second year, the Eesti Telekom Group faces
competition in all the main areas of its operations. And
during the last quarter, news reached us concerning new
companies intending to enter the market. The Estonian
economy, in general, has remained relatively untouched by
the problems currently ailing some larger economies.
However, a worsening of the Estonian economic environment in
the future cannot be excluded. Keeping this in mind, it is
especially heartening to see the continued revenue growth
and strengthened financial position of the Group. The free
cash flow of the Group has doubled, compared to the same
period in 2001. These developments will enable the Group to
continue carrying on successful operations even in a less
favourable environment.
The results of the first nine months of 2002 indicate an
improved efficiency in both operating segments of the Eesti
Telekom Group. The ratio of operating expenses to total
revenues has fallen in both mobile communications and fixed
communications. The EBITDA margin of the EMT Group has
exceeded the 50% level again. The EBITDA margin of the Eesti
Telefon Group is close to 40%.
The investments of the Eesti Telekom Group are substantially
lower this year then they were a year ago, since efficiency
of investments has become a subject for more radical
analyses. Lower investments have had a positive impact on
cash flow. Net gearing of the Group had reached -19% by the
end of September.
Revenues, expenses, and profits
During the first nine months of 2002, consolidated revenues
of the Eesti Telekom Group amounted to 219 mln EUR, showing
an increase of 9% compared to the same period in 2001.
Operating expenses were 113 mln EUR, up by 7%. The EBITDA of
the Group was 106 mln EUR (with a margin of 48%), showing an
increase of 10%. Depreciation during the period was 3% lower
than a year ago. The EBIT of the Group was up by 24%,
amounting to 57 mln EUR. A strong and positive cash flow has
led to lower financing costs. On 19 June 2002, AS Eesti
Telekom paid out dividends in the amount of 48 mln EUR to
its shareholders for the year 2001. Income tax on dividends
amounted to 6 mln EUR (2 mln EUR in 2001). The net profit of
the Eesti Telekom Group was 51 mln EUR, or 0.37 EUR per
share.
The results of the first nine months of 2001 and 2002 were
influenced by the following extraordinary factors:
2002 2001
Total revenues AS Eesti Telefon sold
property with a
capital gain of 3.5
mln EUR. The gain was
accounted as "other
revenues".
Total expenses AS Eesti Telefon
released a 2.9 mln
EUR reserve related
to the OÜ Albufent
claim.
Income from AS Eesti Telefon sold
associates its ownership in AS
Teabeliin. 2.1 mln
EUR of profit was
accounted as income
from associates.
The consolidated revenues of the Eesti Telefon Group were
125 mln EUR during the first nine months of 2002, down by 9%
compared to the same period in 2001. Operating expenses of
the period amounted to 77 mln EUR, down by 17%. The EBITDA
of the Group was 48 mln EUR (698 mln EUR in 2001). The
EBITDA margin rose, compared to the first 9 months in 2001,
and reached 39% (32% in 2001). The operating profit and net
profit of the Group grew by 74% and 61% respectively. The
Eesti Telefon Group earned 15 mln EUR of net profit during
the first nine months of 2002.
The operating revenues of AS Eesti Telefon, the parent
company of the Eesti Telefon Group, amounted to 115 mln EUR,
down by 11%, compared to the same period in 2001. This
decrease was caused by lower voice communications revenues.
Domestic call revenues were down by 18%, international call
revenues were down by 10%, revenues from calls from fixed to
mobile networks were 10% lower, and dial-up revenues were
42% lower. The decrease in voice communications revenues
resulted mainly from lower mobile transit revenues. Starting
this year, a large part of mobile calls go directly from the
network of one operator to the network of another
(interconnection costs are down as well). The decrease in
the dial-up revenues has been the result of a wider
propagation of permanent connections. Main line revenues of
AS Eesti Telefon were up by 21%. Revenues from the internet
and data communications almost doubled, showing a growth of
81%.
The market shares of AS Eesti Telefon have been stable. The
company estimates its share of total call minutes, domestic
call minutes, fixed to mobile minutes, and international
minutes to be 89%, 88%, 76%, and 73%, respectively. A slight
decrease in the market share of domestic call minutes was
the result of active advertising campaigns by competitors
during the summer months.
The Estonian fixed communications market opened up to full
competition at the beginning of 2001. Estonia has a well-
developed mobile communications market. Some decrease in the
revenues of AS Eesti Telefon has been inevitable. But the
company intends to maintain its profitability, and has
prioritized the improving of its cost-efficiency. The
operating expenses of AS Eesti Telefon were down by 20%,
compared to the same period in 2001. The expenses of the
third quarter were down by as much as 25%. The largest part
of the decrease was due to lower interconnection costs, but
there were also reductions in other categories. Personnel
expenses were down by 11%. The number of employees of AS
Eesti Telefon had fallen to 1,413 by the end of September
2002 (September 2001: 1,701). The EBITDA of the company was
741 mln EUR, up by 8%. The EBITDA of the third quarter was
even up 22%. The EBITDA margin of AS Eesti Telefon in 2002
has remained at over 40%. Depreciation was down by 9%.
Greater cost efficiency and lower investments have caused a
strong positive cash flow and lower financing costs.
Starting from October 2002, payment terms for customers will
be brought forward by seven days, which will further improve
Eesti Telefon’s financial position. The net profit of AS
Eesti Telefon was 15 mln EUR, up by 61% compared to 2001.
Another company of the Eesti Telefon Group, AS Connecto, has
achieved a healthy revenue growth. Revenues of the company,
together with its subsidiary SIA Connecto Latvia, were up by
38%. By now, almost half of AS Connecto’s revenues come from
outside of the Eesti Telefon Group. In June, AS Connecto and
AS EMT concluded a contract according to which AS EMT will
order its network construction services from AS Connecto,
and give up its own network construction department.
The total revenues of the EMT Group amounted to 115 mln EUR,
up by 11%. The operating expenses of the Group were 57 mln
EUR, up by 10%. The EBITDA of the EMT Group was 58 mln EUR.
The EBITDA margin has exceeded the 50% level again. For the
first nine months of this year it was an average 51%, with
the margin of the third quarter even reaching 53%. The net
profit of the Group was 42 mln EUR, up by 10%, compared to
the same period in 2001.
EMT’s revenues in all main categories were up during the
nine months of 2002. Revenues from SMS and data had the
highest growth-rate, exceeding the corresponding figure in
2001 by 28%. The growth resulted from a wider customer base
and new services being offered by EMT. A good example is the
multi-SMS service, which allows businesses to send messages,
via the internet, to their numerous customers’ mobile
phones. Private customers were offered the possibility of
paying for purchases by mobile phone. For instance, at the
exceedingly popular Tallinn summer beer festival, it was
possible to pay for a glass of beer by mobile phone. In
August, m-bus tickets were tried out in two major Estonian
cities, Tallinn and Tartu.
The number of customers of AS EMT reached 414,000 by the end
of September. The company had 270,000 contractual customers
and 144,000 prepaid-card users. Client base growth has
traditionally been rapid during the spring and summer
months, with a gradual slow-down in the third quarter. The
company estimates its market share to be approximately 50%.
Monthly ARPU (monthly average revenue per user) in September
2002 was 27.7 EUR (September 2001: 27.9 EUR, December 2001:
28.1 EUR).
Balance sheet and cash flow
At the end of September 2002, the total assets of the Eesti
Telekom Group amounted to 268 mln EUR (December 2001: 271
mln EUR). Tangible assets were reduced, from the beginning
of the year, by 26 mln EUR. Current and non-current interest
bearing liabilities of the Group were reduced by 1 mln EUR.
By the end of the period, net debt of the Group amounted to
-45 mln EUR, and net gearing was -19%.
Net cash inflows of the Group in the first nine months of
2002 amounted to 23 mln EUR. Net operating cash flow was 89
mln EUR (first nine months of 2001: 76 mln EUR). Cash
outflow into investing activities was essentially smaller
than a year ago: 16 mln EUR in 2002, 40 mln EUR in 2001.
Cash outflow into financing activities was 51 mln EUR,
including dividends of 48 mln EUR.
Investments
The Eesti Telefon Group invested 12 mln EUR during the first
nine months of 2002 (first nine months of 2001: 24 mln EUR).
The majority of the investments went into improving the
quality of the network development of the broadband access
network. In September, an important stage was completed in
the establishing of a nationwide fibre-optic cable backbone
network, and all county centres were connected to the
network. This network is based upon the cable circuits
principle. Therefore, in the case of a possible technical
failure, network traffic is automatically redirected, and
the connection is not interrupted. The fibre-optic cable
network improves speed and quality of data communications,
and widens the area where ADSL permanent connections can be
installed.
Another fibre-optic cable network is in the process of
construction. The network will connect schools and social
centres in Tartu. This will be the most modern network of
its kind in Estonia, and will therefore be the fastest. It
will be used by 14,000 schoolchildren, the Central Library
and all of its branches, and five internet access points,
which are open to the public. Among other things, it will be
possible, in real time, to transfer a lecture from one
school to all the other schools connected to the network.
7,245 new ADSL connections were installed during the nine
month period. The total number of Atlas ADSL connections
reached 24,136 (a penetration of 1.8 lines per 100 people).
By data of Point Topic, Estonia has the 12th position in the
World by the ration of ADSL lines to the total number of
main lines in use. Estonia is ahead of USA, Spain, Austria,
Norway. In July 2002, Eesti Telefon began to offer a new
wireless internet permanent connection Atlas RDSL. The new
connection functions on the basis of radio waves. It also
gives rural consumers an opportunity to make use of
permanent internet connections. In August, Eesti Telefon
changed three of its old internet permanent connection
packages for new ones, which are more oriented to the needs
of specific customer groups.
The number of main lines in use at the end of September was
466,852 (a penetration of 34.3 per 100 people). The number
of main lines, compared to the beginning of the year, has
been reduced by 35 thousand. Mainly residential customers
have been giving up their lines. The number of lines per
employee was 331.
In addition to the access business, the development of
communication solutions and content services has continued.
In September, as an AS Eesti Telefon and Estonian Air joint
venture, one of Estonia’s first IP-based call processing
systems was established. The new system, rented from Eesti
Telefon, integrates Estonian Air’s telephone and e-mail
communications. Eesti Telefon values the project as an
opportunity to promote the advantages and potential of IP-
based voice communications solutions.
In May 2002, a multimedia section, Broadband Hot, was added
to Eesti Telefon’s communication environment Hot. This has
made it possible to offer customers several new internet
facilities. The operation was launched in May with coverage
of the latest international Eurovision song contest, which
took place in Tallinn. Viewers were able to see three live
broadcasts, which differed from the regular TV coverage. The
fall has brought with it less glamorous, but more serious
and academic events. Thanks to Eesti Telefon, students in
Tallinn had an opportunity to follow internet coverage of
the Tartu Management Conference, and to participate, for
free, in the telecommunications and IT conference "From a
Vision to Solutions", via web coverage.
In February, the Group expanded through the acquisition of a
new firm. So as to extend its activities beyond Estonia, AS
Connecto, a subsidiary of the Group. acquired 100% of the
shares of the network construction company SIA Connecto
Latvia (previously SIA Link), which operates in Latvia. In
April, AS Eesti Telefon invested an additional 0.3 mln EUR
into the Group’s associated firm AS Sertifitseerimiskeskus.
The EMT Group invested 10 mln EUR during the first nine
months of 2002 (first 9 months of 2001: 20 mln EUR). The
majority of investments made by EMT went into base stations
and exchanges. AS EMT also made a 0.3 mln EUR investment
into AS Sertifitseerimiskeskus. In August, GPRS roaming was
introduced to the market. The service can currently be used
in Finland, Latvia, and Lithuania.
The first m-tickets were introduced to the Estonian market
this summer. In August, AS EMT, in co-operation with AS
Connex, presented a new public transport ticket solution
based on a GSM mobile phone and an electron card. Initially,
the new system will be used only for making payments for
public transport fares. In the future, all kind of
additional functions can be added to the service.
Developments in the mobile communications market
For five years already, the Estonian mobile communications
market has been shared by three operators - AS EMT,
Radiolinja and Tele2. In August 2002, two new operators
announced their intention to enter the market. Each of the
current operators has built it’s own physical network. The
newcomers will act as virtual network providers. One of the
new operators, OÜ Vetrelson Haldus, plans to start bulk
purchases of call minutes from other operators already
within the course of this year. These minutes will be used
for introducing new services to the Estonian market. The
second new operator, Citygsm, will launch a prepaid-card in
the beginning of 2003. The operator will use Radiolinja’s
network. The prepaid-card will make it possible to use all
services offered to contractual customers. The company hopes
to attract up to 20,000 customers.
On 21 May 2002, the Ministry of Roads and Communications
presented to the Riigikogu (Parliament) an amendment to the
Telecommunications Act, which establishes the conditions for
the issuing of the third generation mobile network licenses.
According to the Ministry’s proposal, the licenses would be
issued on a "beauty contest" basis. The participation fee in
the tender would be 3 mln EUR. The Ministry’s plan is to
issue four third generation licenses. Revenues from issuing
the licences have already been written into the federal
budget for 2003. However, it is the opinion of the
management of AS EMT, that for a small market like Estonia,
four licenses are too many. If four licenses are issued, the
capacity of the frequency band of each operator would be
quite limited, leading to lower efficiency of investments,
and higher prices for the final consumers.
Relations with state regulators
On 3 September 2002, the Estonian National Communications
Board announced the names of the companies it intends to
name as companies with significant market power (SMP) for
the year 2003. The intention is to declare AS Eesti Telefon
to be a company with SPM for the year 2003 in the public
telephone service market, the public leased line service
market, and the public interconnection service market. AS
Eesti Telefon was named as an operator with SMP in these
same fields also in 2001 and 2002.
The intention is to name AS EMT as a company with SMP, for
the year 2003, in the nationwide general mobile services
market. AS EMT was also declared to be an operator with SMP
for 2002. In 2002, AS EMT contested the decision, since the
company found its activities to be in accordance with the
rules of free competition. In September 2002, the lawsuit
was terminated by mutual agreement, as the potential outcome
of the dispute had lost its importance for both parties.
AS Eesti Telefon is still in litigation with the Estonian
Competition Board. On 24 April 2001, the Competition Board
issued a precept, based on the Competition Act, prohibiting
Eesti Telefon from levying a per-minute rate of 2.2 euro-
cents at peak time, 1.8 euro-cents at off-peak time, and 0.9
euro-cents at night for voice calls in its network. The
Competition Board thereby instructed Eesti Telefon to levy a
rates lower than those which it had established on 1 April
2001. According to the Competition Act, a fine in the amount
of up to 5% of the net sales for the year preceding the
decision to impose a fine can be imposed for the abuse of a
dominant position.
Eesti Telefon is of the opinion that the basic price of 0.9-
2.2 euro-cents, for calls within the network, is cost-based.
Therefore, Eesti Telefon disagreed with the precept of the
Competition Board, and contested it in the Tallinn
Administrative Court on 23 May 2001. The Tallinn
Administrative Court agreed with Eesti Telefon and cancelled
the Competition Board’s precept on 17 January 2002. The
Competition Board appealed this decision to the higher
Circuit Court, which ended up confirming the Tallinn
Administrative Court’s judgement. The Competition Board, in
turn, appealed the decision to the Supreme Court, which has
agreed to hear the case.
Potential change in the ownership structure
On 26 March 2002, Sonera of Finland and Telia of Sweden, the
strategic partners of AS Eesti Telekom, announced that they
are planning to merge. Telia is making a purchase offer to
the shareholders of Sonera, offering 1.51440 Telia shares
for one Sonera share. The Sonera and Telia merger plan was
presented to the European Union for approval, which was
given on 10 July 2002. The results of the share exchange
should be evident by 14 November 2002. The merged
TeliaSonera will be the leading telecommunications group in
the Nordic and Baltic regions. In the TeliaSonera merger
prospectus, Estonia is considered to be a part of the
group’s home market, where TeliaSonera will provide a full
range of telecommunications services to its customers.
TeliaSonera will be in the business of providing
telecommunications services, rather than providing
technology or access to networks. TeliaSonera will sEUR to
be innovative in packaging its products and services, so
that they will be conveniently accessible for both consumers
and business customers. If the share exchange proves to be
successful, Telia/Sonera will have 49% ownership of Eesti
Telekom.
Annual General Meeting of the Shareholders
The Annual General Meeting of the Shareholders of AS Eesti
Telekom took place on 17 May 2002. The meeting approved
Annual Report 2001, and the proposal for the allocation of
the net profits. It was decided that the owners of A-shares
would be paid dividends of 0.35 EUR per share (a total of 48
mln EUR, or 97% of the net profits of 2001). The owner of
the B-share was paid dividends in the total amount of 639
EUR.
The list of shareholders entitled to dividends was fixed on
5 June 2002, and the dividends were paid out on 19 June
2002.
The General Meeting authorised AS Eesti Telekom to acquire,
within one year, AS Eesti Telekom A-series shares, so that
the total nominal value of own shares held by AS Eesti
Telekom does not exceed the legal limits; and so that the
price payable per share does not exceed the highest price
paid for an AS Eesti Telekom A share on the Tallinn Stock
Exchange, on the day of acquiring the shares. Any possible
share buy-back must be approved by the AS Eesti Telekom
Council. No share buy-backs has taken place until now.
Definitions
Net debt - long term and short term debt, less cash and cash
equivalents and short term investments
ROA - Net profit for the period expressed as percentage of
average total assets
ROE - Pre-tax profit for the period expressed, as percentage
of average equity
AS EESTI TELEKOM AND SUBSIDIARY COMPANIES
INCOME STATEMENT
Financial statements are prepared in thousands of euros
(EUR)
9 mths 9 mths 2001
to to
30 Sept 30 Sept
2002 2001
Restated
Revenue
Net sales 211,952 196,760 265,516
Change in work-in- 134 278 34
progress
Capitalized self- 2,033 2,879 5,568
constructed assets
Other revenue 4,561 1,606 2,714
Total revenue 218,680 201,523 273,832
Operating expenses
Materials, 66,822 59,216 82,492
consumables,
supplies and
services
Other operating 21,923 21,108 31,634
expenses
Personnel expenses 22,874 23,835 34,177
Other expenses 1,523 1,412 2,117
Total expenses 113,142 105,571 150,420
Profit from 105,538 95,952 123,412
operations before
depreciation and
amortization
Depreciation and 48,481 49,890 72,582
amortization
Profit from 57,057 46,062 50,830
operations
Income/ expenses -290 1,844 1,715
from subsidiaries
and associated
companies (net)
Other net financing 16 -335 -749
items
Profit before tax 56,783 47,571 51,796
Income tax on 5,835 1,977 1,977
dividends
Profit after tax 50,948 45,594 49,819
Minority interest 0 36 36
Net profit from 50,948 45,558 49,783
ordinary activities
Net profit for the 50,948 45,558 49,783
period
Earnings per share
Basic earnings per 0.37 0.33 0.36
share (in EUR)
Diluted earnings per 0.37 0.33 0.36
share (in EUR)
AS EESTI TELEKOM AND SUBSIDIARY COMPANIES
BALANCE SHEET
Financial statements are prepared in thousands of euros
(EUR)
30 Sept 31 Dec 30 Sept
2002 2001 2001
Restated
ASSETS
Current assets
Cash and cash 52,375 29,669 12,532
equivalents
Trade receivables, 25,983 25,777 28,674
net
Other receivables 862 685 662
Accrued income 8,353 6,342 6,290
Prepaid expenses 893 1,800 1,302
Inventories 6,739 6,648 10,093
Total current assets 95,205 70,921 59,553
Non-current assets
Long term financial 2,026 1,692 2,298
assets
Tangible assets, net 168,224 194,538 200,145
Intangible assets, 2,394 3,588 3,034
net
Total non-current 172,644 199,818 205,477
assets
TOTAL ASSETS 267,849 270,739 265,030
EQUITY AND
LIABILITIES
Current liabilities
Interest bearing 6,195 5,635 2,571
loans and borrowings
Customer prepayments 205 590 535
Accounts payable to 9,894 16,677 12,166
suppliers
Other payables 12 11 0
Tax liabilities 3,065 2,090 3,310
Accrued expenses 12,003 9,756 9,106
Provisions 1,054 1,117 1,062
Prepaid revenue 177 661 2,940
Total current 32,605 36,537 31,690
liabilities
2,571
Non-current
liabilities
Interest bearing 1,521 3,139 6,502
loans and borrowings
Other long-term 0 0 0
payables
Total non-current 1,521 3,139 6,502
liabilities
Equity
Issued capital 87,804 87,804 87,804
Share premium 19,810 19,810 19,810
Statutory legal 8,781 8,781 8,781
reserve
Retained earnings 66,375 64,885 64,885
Net profit for the 50,948 49,783 45,558
period
Foreign exchange 5 0 0
differences
Total equity 233,723 231,063 226,838
TOTAL EQUITY AND 267,849 270,739 265,030
LIABILITIES
Hille Võrk
Financial Manager
6 272 460
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