Pēd. atjaunots: 30.11.2024 05:19 (GMT+2)
Eesti Telekom FINANCIAL RESULTS 04/24/2003 09:00
RESULTS OF THE 3 MONTHS OF 2003, EUR
24 April 2003
THE FINANCIAL RESULTS OF THE FIRST THREE MONTHS OF 2003
Eesti Telekom, the leading provider of telecommunication
services in Estonia, hereby announces its results for the
nine-month period, which ended 31 March 2003.
Financial highlights
3 months 3 months Change, %
2003 2002
Total revenues, mEUR 71 67 5
EBITDA, mEUR 35 32 7
EBITDA margin, % 49 48
EBIT, mEUR 20 16 24
EBIT margin, % 28 24
Profits before taxes, 20 16 27
mEUR
Net profits for the 2 16 -84
period, mEUR
EPS, EUR 0.02 0.12 -84
No. of A- shares 137,383,178 137,383,178
Investments, mEUR 3 5 -46
Net gearing, % -34 -16
ROA, % 3 23
ROE, % 32 27
Commenting on these financial results, Chairman Jaan
Männik stressed:
"The year started well for Eesti Telekom"
For further information, please contact:
Krister Björkqvist +372 6272 465
CFO
Hille Võrk +372 6272 460
Financial Manager
CHAIRMAN’S STATEMENT
A break-through is being made in the development of the
Eesti Telekom Group companies.
When AS Eesti Telefon was created in 1993, 146,000 people
were waiting to be provided with a telephone connection,
i.e. almost every tenth inhabitant of Estonia. By 28
February 2003, this waiting list had been eliminated.
Fast developments in the area of mobile communications
have created the situation where many private individuals
are giving up their fixed lines. Fixed phones are still
indispensable for business customers. The number of main
lines used by business customers continued to grow in the
first quarter of 2003. However, the decreasing volume and
revenues of voice communication are increasingly
compensated for by Eesti Telefon’s success in the area of
data communication. During 2002, the number of users of
Eesti Telefon’s Atlas ADSL permanent connections almost
doubled. The ADSL start-up packages launched in stores at
the end of the year have accelerated the growth in the
number of connections in 2003 even further. By now,
Estonia is among the leading countries not only in
Europe, but in the whole world, in the field of ADSL
penetration. Eesti Telefon is already taking the next
steps - the company supports computer training, the
introduction of ID-cards and the electronic signature,
and promotes remote working facilities.
Mobile penetration in Estonia exceeded 60 % in 2002. This
is a very high rate considering Estonian living
standards. But the addition of new customers has slowed
down. Operators are, rather, taking over competitors’
customers by offering more favourable tariffs or
contracts. AS EMT has, over the years, been oriented more
on offering the most innovative services, rather than the
lowest prices. Therefore, a wide variety of additional
services has secured for it a continuous growth of SMS
volume. The number of GPRS-users is growing fast. In
2003, the company is intending to acquire the third
generation mobile communication license.
Changes in the development trends of the
telecommunication market have not threatened the
financial position of the Eesti Telekom Group. The EBITDA
margin of the Group reached 49% in the first quarter of
2003. The cash flow was strongly positive. Net debt of
the Group amounted to -85 mln EUR, and net gearing was
-34%.
Revenues, expenses, and profits
During the first three months of 2003, consolidated
revenues of the Eesti Telekom Group amounted to 71 mln
EUR, showing an increase of 5% compared to the same
period in 2002. Operating expenses were 36 mln EUR, up by
5%. The EBITDA of the Group showed an increase of 7%,
amounting to 35 mln EUR. The EBITDA margin reached 49%.
In 2003, Estonia started transition to the new Accounting
Law. The new law harmonizes Estonian "good accounting
practices" with International Financial Reporting
Standards. In connection with the transition, the
structure of an income statement has been amended.
"Change in work-in-progress" and "Capitalized self-
constructed assets" have been removed from "Revenue" to
"Operating expenses". Comparison data in 2002 was
calculated correspondingly. In accordance with the new
structure of an income statement, consolidated revenues
and expenses of the first three months of 2002 are lower
by 0.1 mln EUR, compared to the data published in 2002.
15 mln EUR were calculated as depreciation in the first
three months of 2003, a decrease of 11%, compared to the
same period in 2002. The decrease in depreciation is
mainly caused by new depreciation rates employed in AS
Eesti Telefon at the beginning of 2003. The new rates are
more differentiated than the previous ones. Therefore,
the presumed useful lifetime of different categories of
tangible assets is determined more accurately.
Financial revenues exceeded financial expenses by 0.5 mln
EUR in the first quarter of 2003 (Q1 2002: 0.1 mln EUR).
The majority of financial revenues consisted of interest
earned on cash balances of the Group.
The general meeting of the shareholders of AS Eesti
Telefon, that took place on 4 March 2003, decided to
distribute 13 mln EUR, out of the company’s net profit
for the year 2002, to its 100%-owner, AS Eesti Telekom.
The general meeting of the shareholders of AS EMT, that
took place on 4 March 2003, decided to distribute 38 mln
EUR as dividends to AS Eesti Telekom. Starting in 2003, a
resident company shall pay 26/74 income tax on all
dividends paid. In accordance with that, AS Eesti Telefon
has shown 4 mln EUR, and AS EMT has shown 13 mln EUR as
dividend income tax expenses in their income statements.
As a result of the high income tax expenses, the net
profit of the Eesti Telekom Group was 2 mln EUR (in the
corresponding three months of 2002: 16 mln EUR).
AS Eesti Telekom will propose to the general meeting of
shareholders the payment of 53 mln EUR, or 0.38 EUR per
share, to the shareholders, as dividends for 2002. When
the meeting approves the proposal, an income tax
liability will arise in the amount of 19 mln EUR. In
accordance with the Income Tax Law, AS Eesti Telekom can
treat the dividend income tax paid by subsidiary
companies as tax-credit. Therefore, AS Eesti Telekom can
reduce its 19 mln EUR tax liability by 18 mln EUR, paid
by subsidiary companies.
The consolidated revenues of the Eesti Telefon Group were
39 mln EUR, during the first three months of 2003, down
by 1% compared to the same period in 2002. Operating
expenses of the period amounted to 24 mln EUR, up by 2%.
The EBITDA of the Group was 15 mln EUR, down by 7%
compared to the same period in 2002. The EBITDA margin
reached 38%. Resulting from implementation of the new
depreciation rates, depreciation of the Eesti Telefon
Group, for the first three months of 2003, was down by
18%. Compared to the same period in 2002, interest
expenses were significantly lower. The net financing item
of the Eesti Telefon Group, in the first quarter of 2003,
was -0.1 mln EUR (corresponding 3 months in 2002: -0.5
mln EUR). The pre-tax profit of the Eesti Telefon Group
amounted to 6 mln EUR, up by 31%, compared to the same
period in 2002. The net profit of the Group was 1 mln
EUR, as tax on dividends was accounted in the income
statement.
The operating revenues of AS Eesti Telefon, the parent
company of the Eesti Telefon Group, were down by 4%,
compared to the same period in 2002. Operating expenses
of the company were down by 3%. Among voice communication
revenues, the revenue from domestic calls decreased the
most, as much as 12%, compared to the same period in
2002. The decrease was mainly caused by competition with
mobile operators. Revenues from international calls and
calls into mobile networks are stabilizing. Both
categories were down by 2%. Revenues from installation
and monthly fees were lower by 6%, compared to the same
period in 2002. Revenue from Internet dial-up was down by
40%. At the same time, other revenues from Internet
connections were up by 50%, and total revenue from
Internet and data communication was up by 6%. The
company’s revenue from network services was down by 5%.
Revenue from IT-services was up by 35%.
The market shares of AS Eesti Telefon have been
continuously stable. The company estimates its share of
total call minutes, domestic call minutes, fixed to
mobile minutes, and international minutes to be 88%
(March 2002: 90%), 87% (89%), 74% (74%), and 68% (70%),
respectively. The estimated market share of dial-up
minutes is 95% (95%).
The total revenues of the EMT Group amounted to 40 mln
EUR, up by 13%. The operating expenses of the Group were
19 mln EUR, up by 7%. The EBITDA of the EMT Group was 20
mln EUR, up by 19%. The EBITDA margin was 51%.
Depreciation of the EMT Group was up by 3%, compared to
the same period in 2002. The net financing item of the
Group was 0.2 mln EUR. The pre-tax profit of the EMT
Group was up by 27%, compared to the first quarter in
2002, amounting to 15 mln EUR. As tax on dividends, in
the amount of 13 mln EUR, was accounted in the income
statement of March, the net profit of the Group was 1 mln
EUR.
AS EMT’s (the parent company of the EMT Group) revenues
in all main categories, except the monthly fees, were up
during the first three months of 2003. Revenues from SMS
and data continued to have the highest growth-rate. The
number of SMS, sent by AS EMT’s customers, has grown from
year to year. Revenues from SMS formed 5% of the net
sales of the company for the first three months of 2003
(corresponding 3 months in 2002: 4.4%).
The number of customers of AS EMT grew by 3.2 thousand by
the end of March 2003, as compared to the end of the year
2002. The total number of customers reached 430,700. The
number of contractual customers was up by 5.5 thousand.
The number of prepaid customers was down by 2.3 thousand.
Mobile penetration in Estonia exceeded 60% in 2002. The
market share of AS EMT is around 50%. Against that
background, some slow-down in the addition of new
customers is inevitable. At the same time, there is
noticeable customer interest in the new possibilities
that mobile communication can offer. AS EMT has been
always made it a point to be the most innovative operator
in Estonia. AS EMT was the first one to launch GPRS-
services in Estonia. During the last twelve months, the
number of GPRS-users has almost six-folded. The revenue
from GPRS has grown over seven times. The monthly ARPU
(monthly average revenue per user) in March 2003 was 27.0
EUR (March 2002: 26.9 EUR, December 2002: 27.0 EUR).
Balance sheet and cash flow
At the end of March 2003, the total assets of the Eesti
Telekom Group amounted to 297 mln EUR (December 2002: 284
mln EUR). Tangible assets were reduced, from the
beginning of the year, by 12 mln EUR. Current assets were
enlarged by 25 mln EUR. This enlargement was mainly the
result of an increase in cash and cash equivalents by 26
mln EUR. At the end of March 2003, the Group’s non-
current debt amounted to 1 mln EUR and current debt
amounted to 1 mln EUR (December 2002: 1 mln EUR and 2 mln
EUR respectively). By the end of the period, net debt of
the Group amounted to -85 mln EUR, and net gearing was
-34%. Other current liabilities of the Group were up by
11 mln EUR, including a 20 mln EUR increase in tax
liabilities. The majority of the increase in tax
liabilities was income tax calculated on dividends
payable by AS Eesti Telefon and AS EMT.
The balance of cash and cash equivalents of the Eesti
Telekom Group grew by 26 mln EUR during the first three
months of 2003. Net operating cash flow was 29 mln EUR
(corresponding 3 months of 2002: 24 mln EUR). Cash
outflow into investing activities was essentially smaller
than a year ago: 2 mln EUR in 2003, 5 mln EUR in 2002.
Cash outflow into financing activities was 1 mln EUR
(corresponding 3 months of 2002: 1 mln EUR).
Investments
The Eesti Telefon Group invested 1 mln EUR during the
first three months of 2003 (first three months of 2002: 2
mln EUR). The reduction in investments has been caused by
harsh weather conditions leading to projects being
postponed, and changes in accounting principles - small-
volume investments into equipment at customers’ locations
are written directly into expenses. The number of main
lines in use at the end of March was 460,888 (a
penetration of 34.0 lines per 100 people). The net
decrease in the number of main lines was 4,200. The
number of lines per employee was 329. The digitalisation
rate reached 77.4% by the end of March 2003.
The total number of Atlas ADSL connections was 34,659 at
the end of March 2003 (a penetration of 2.6 connections
per 100 people). During the last year, the ADSL-coverage
area has grown by one third, 200 populated points are
covered. An ADSL permanent Internet connection can be
installed to nine phone lines out of ten. Analysts from
Point-Topic, in their quarter four, 2002, report, placed
Estonia first, among Eastern European countries, on the
basis of DSL-penetration level. Estonia also exceeds
countries like Netherlands, Italy, and Great Britain.
According to the data of the DSL Forum, Estonia is in
second place, after Hungary, in Eastern Europe, on the
basis of the absolute number of DSL-connections. The ADSL
start-up packages launched in stores at the end of last
year make it possible for everyone to install an ADSL-
connection. Over 75% of the new ADSL-connections have
been installed using the start-up packages. AS Eesti
Telefon is intending to further accelerate the spread of
the ADSL-connections with the promotion of remote working
facilities.
On 29 December 2000, the agreement for the termination of
the concession agreement was concluded between the
Republic of Estonia and AS Eesti Telefon. The agreement
regulates some aspects of the relationship between the
company and the state until 1 January 2004. With the
agreement, AS Eesti Telefon accepted an obligation to
ensure that 95% of the applications for telephone
connections submitted to AS Eesti Telefon, after 28
February 2003, will be fulfilled within two weeks of the
payment of the invoice, and to eliminate, by 28 February
2003, at the latest, the waiting list of those who had
submitted applications before the concluding of the
agreement.
At the end of the year 2000, 24,290 people were waiting
for phones. By the end of February 2003, the waiting list
of subscribers, resulting from applications received
before the end of 2000, was eliminated. New applications
for fixed phone connection are fulfilled within 10
business days in 98% of the cases.
AS Eesti Telefon has participated on several public
tenders successfully. In October 2002, the company won
the tender for government procurement to supply a virtual
private network for the Estonian Land Board. The network
between the head office and 14 local offices of the Board
was established in February 2003. In February 2003, AS
Eesti Telefon won the tender for government procurement
to supply the server hosting service for the central
database of the Estonian libraries and the web-library.
The EMT Group invested 2 mln EUR during the first three
months of 2003 (corresponding 3 months of 2002: 3 mln
EUR). The majority of investments made by EMT went into
base stations and exchanges.
On 11 February 2003, the Riigikogu (Parliament) decided
that four third generation mobile communication licenses
would be issued for a ten-year period. At the first
stage, a direct offer will be made to the existing
licensed mobile operators in Estonia, with a fee of 4 mln
EUR per license. The second stage will be an auction of
the licenses not issued during the first stage, with an
initial price of 4 mln EUR per license. A precondition
for the licensee will be the obligation to establish,
within seven years of the license issuance, a third
generation network covering at least 30% of the Estonian
population. The decision became effective on 17 March
2003. AS EMT, as an operator oriented upon innovations,
continues to be interested in acquiring the license. The
investment is budgeted to take place in 2003.
Relations with state regulators
The Communications Board started procedures in November
2002 to reduce the termination fees of calls made to
mobile networks. The Board analysed interconnection fees
of the mobile operators and came to the conclusion that
the operators have not based their charges on a
reasonable profit percentage, as determined by the
Telecommunication Act. The opinion of the Communications
Board is that lower interconnection charges would improve
the quality of mobile calls made from abroad to Estonia,
and would lead to lower retail rates. As a result, on 31
January 2003, AS EMT announced its intention to reduce
the termination fee, starting 1 March 2003, from the
current 0.20 EUR/min to 0.19 EUR/min, and the discounted
termination fee from the current 0.178 EUR/min to 0.176
EUR/min.
On 24 April 2001, the Competition Board issued a precept,
based on the Competition Act, prohibiting
AS Eesti Telefon from levying a per-minute rate of 0.022
EUR at peak time, 0.018 EUR at off-peak time, and 0.009
EUR at night for voice calls in its network. The
Competition Board thereby instructed AS Eesti Telefon to
levy rates lower than those which it had established on 1
April 2001. But AS Eesti Telefon is of the opinion that
the basic price of 0.009-0.022 EUR, for calls within the
network, is cost-based. Therefore, AS Eesti Telefon
disagreed with the precept of the Competition Board, and
contested it in court in May 2001. The first and the
second level courts made their decisions in favour of AS
Eesti Telefon, and the Competition Board appealed to the
Supreme Court, which, on 18 December 2002, annulled the
earlier judgments and forwarded the case to the
Administrative Court for revision. The Supreme Court
found that the precept of the Competition Board,
regarding minute rates of the voice communication
services within a network, is inadequate for making the
final judgment. The Administrative and the District Court
had, according to the Supreme Court, not assessed all
items of available evidence. The Supreme Court considered
it necessary for the Administrative Court to use the
assistance of the Communications Board when revising the
case.
Information to the Shareholders
The Annual General Meeting of Eesti Telekom shall be held
on 22 May 2003, at 1.00 p.m. at Vanalinnastuudio (Sakala
3, Tallinn). The 2002 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 29 April
2003, 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 6 311 212, or by e-mail:
mailbox@telekom.ee.
AS EESTI TELEKOM AND SUBSIDIARY COMPANIES
INCOME STATEMENT
Financial statements are prepared in thousands of euros
kroons (EUR)
3 mths 3 mths to 2002
to 31 March Restated
31 March 2002
2003 Restated
Revenues
Net sales 70,408 66,603 285,513
Other revenues 302 425 5,863
Total revenues 70,710 67,028 291,376
Operating expenses
Change in work-in- 49 60 55
progress
Capitalized self- 137 112 4,179
constructed assets
Materials, (21,284) (20,112) (96,107)
consumables,
supplies and
services
Other operating (6,535) (6,296) (27,792)
expenses
Personnel expenses (8,168) (7,846) (32,787)
Other expenses (408) (554) (2,735)
Total operating (36,209) (34,636) (155,187)
expenses
Profit from 34,501 32,392 136,189
operations before
depreciation
Depreciation and (14,600) (16,392) (63,941)
amortisation
Profit from 19,901 16,000 72,248
operations
Financial income / (47) (141) (329)
(expenses) from
subsidiaries and
associates
Other net financing 527 158 411
items
Profit before tax 20,381 16,017 72,330
Income tax on (17,883) - (5,835)
dividends
Net profit for the 2,498 16,017 66,495
period
Earning per share
Basic earning per 0.02 0.12 0.48
share (in euros)
Diluted earning per 0.02 0.12 0.48
share (in euros)
AS EESTI TELEKOM AND SUBSIDIARY COMPANIES
BALANCE SHEET
Financial statements are prepared in thousands of euros
(EUR)
31 March 31 Dec 31 March
2003 2002 2002
ASSETS
Non-current assets
Property, plant and 159,309 170,879 183,350
equipment
Goodwill 162 236 790
Licenses, patents and 2,206 2,483 2,154
trademarks
Investments in 1,404 1,451 1,005
subsidiaries and
associates
Other investments 173 173 176
Other non-current 129 130 369
assets
Total non-current 163,383 175,352 187,844
assets
Current assets
Inventories 6,459 5,971 7,229
Trade receivables 26,942 27,504 28,214
Other receivables 12,124 13,483 9,811
Cash and cash 87,732 61,549 48,429
equivalents
Total current assets 133,257 108,507 93,683
TOTAL ASSETS 296,640 283,859 281,527
EQUITY AND LIABILITIES
Equity
Issued capital 87,804 87,804 87,804
Reserves 28,591 28,591 28,591
Translation reserve (3) (2) -
Retained earnings 132,870 66,375 114,668
Net profit for the 2,498 66,495 16,017
period
Total equity 251,760 249,263 247,080
Non-current liabilities
Interest-bearing loans 1,258 1,263 2,414
and borrowings - due
after one year
Current liabilities
Trade payables 7,970 15,648 10,547
Other current 11,472 12,536 11,375
liabilities
Tax liabilities 21,954 1,825 3,708
Interest-bearing loans 1,430 2,282 5,577
and borrowings - due
within one year
Provisions 796 1,042 826
Total current 43,622 33,333 32,033
liabilities
TOTAL EQUITY AND 296,640 283,859 281,527
LIABILITIES
AS EESTI TELEKOM AND SUBSIDIARY COMPANIES
CASH FLOW STATEMENT
Financial statements are prepared in thousands of euros
(EUR)
3 mths 3 mths
to to
31 March 31 March
2003 2002
Restated
Operating activities
Profit operations 19,901 16,000
Adjustments for:
Depreciation and amortisation 14,600 16,392
(Profit) / loss from sales and (54) 158
write-off of fixed assets
Operating cash flow before 34,447 32,550
movements in working capital
Change in current receivables 1,877 (3,219)
Change in inventories (487) (512)
Change in current liabilities (6,759) (4,708)
Cash generated by operations 29,078 24,111
Interest paid (15) (95)
Net cash from operating 29,063 24,016
activities
Investing activities
Purchase of property, plant and (2,736) (5,101)
equipment
Purchase of licenses (25) (42)
Proceeds from sales of property, 118 493
plant and equipment
Loans granted (14) (3)
Cash receipt from repayment of 2 1
loans
Interest received 630 140
Net cash used in investing (2,025) (4,512)
activities
Financing activities
Proceeds from long-term - 2
convertible debt
Proceeds from nonconvertible 15 40
long-term debt
Repayment of nonconvertible long- (128) (114)
term debt
Repayment of long-term (744) (744)
borrowings
Net cash used in financing (857) (816)
activities
Net increase in cash and cash 26,181 18,688
equivalents
Cash and cash equivalents at 61,549 29,669
beginning of year
Effect of foreign exchange rate 2 72
changes
Cash and cash equivalents at end 87,732 48,429
of period
Hille Võrk
Financial Manager
6 272 460
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