Eesti Telekom                 FINANCIAL RESULTS           03/11/2004 09:00



COMMENTARY ON AUDITED RESULTS, EEK



During  2003, several changes took place in the corporate

structure of the Eesti Telekom Group.



On  18 June 2003, a 49% minority share in AS Connecto was

sold   to   Eltel   Networks   Corporation,   a   Finnish

telecommunications   network   development   firm.    The

transaction  price was 68 mln EEK, and the  capital  gain

declared  was  59.5 mln EEK.  Eltel Networks  Corporation

has  the  right to acquire 100% of the company shares  in

2005.  The involvement of a strategic partner accelerates

the  expansion of AS Connecto into the other  two  Baltic

States.  This  sale  also enables the parent  company  to

focus  on  its  core  business,  which  is  providing  of

telecommunications and IT services.



On  30  June 2003, AS Eesti Telefon changed its  business

name to Elion Enterprises AS. Its subsidiary company,  AS

Telefonipood,  changed its name to AS  Elion  Esindus.  A

reason  for  the  adoption  of  the  new  names  was  the

increasing  ratio of new business areas - Internet,  data

communications and IT - compared to the traditional fixed

line services.



On 3 July 2003, AS Connecto acquired all of the shares of

AS  Reveko Telekom. 55% of the shares were purchased from

TeliaSonera  AB,  and 45% from Estonian private  persons.

The  price of the deal was 14 mln EEK. AS Reveko  Telekom

was  founded  in  1995. The firm specialises  in  various

aspects  of  indoor  telecommunications:  the  sales  and

installation   of  telephone  relays  and  communications

systems,  the  construction  of  computer  and  telephone

networks,  the  design and installation  of  low  current

systems,   and  operating  services.  The  aim   of   the

acquisition was to strengthen the position of AS Connecto

in strategic business areas.



On 31 October 2003, AS Connecto bought 100% of the shares

of an Estonian company AS Eltel Networks from the Finnish

company  Eltel  Networks Corporation. The  price  of  the

transaction  was  11.5  mln EEK. AS  Eltel  Networks  was

founded  in  1999, and its main area of business  is  the

construction    of   electrical   and   telecommunication

networks.



On  25 November 2003, AS Esmofon changed its name to  EMT

Esindused AS.



On  3 December 2003, Elion Enterprises AS acquired all of

the  shares  of  the associated company AS EsData,  which

offers   data   communication  and   Internet   services.

In accordance with the purchase and sale agreement, Elion

Enterprises AS purchased 70% of the shares of  AS  EsData

from  TeliaSonera AB for 6.8 mln EEK. Prior to the  deal,

Elion  Enterprises  AS owned 30%  of  the  shares  of  AS

EsData. The aim of the acquisition was to consolidate the

Elion  Group’s data communication and Internet  services,

and to increase the synergy between the two companies  in

both network management and customer service.



On  18 December 2003, a merger agreement between AS Eltel

Networks  and AS Connecto was signed. The merger supports

the  company’s development plans, that foresee  combining

the resources and know-how in the field of electrical and

telecommunication networks, which provides an opportunity

to  offer  integrated  network solutions  for  customers.

After  the merger, the company’s name will be changed  to

be  AS  Eltel Networks. The merger shall be completed  by

spring  2004,  when  the  entry will  be  made  into  the

Commercial Register.



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

is  300  thousand EUR (4.7 mln EEK). The primary activity

of   the   company  acquired  is  the  installation   and

maintenance  of  low-current and  security  systems.  The

concluded transaction will support the expansion  of  the

activities of AS Connecto in the Baltic region.



Eesti Telekom Group

Revenues, expenses, and profits

The  consolidated revenues of the Eesti Telekom Group for

the  year  2003  amounted to 4,808 mln  EEK,  up  by  5%,

compared to 2002. The 2002 consolidated revenues included

a  non-recurring item, a 63 mln EEK capital gain from the

sale  of  real estate. With the elimination of this  gain

from  the revenues of the base-period, the revenue growth

would be 7%.



Mobile  communications  continued  to  make  the  largest

contribution  to  revenue growth. Non-core  activities  -

construction  and trade - increased at a fast  pace.  The

acquisition of two new subsidiaries in 2003 supported the

growth   of  the  construction  segment.  The  year   was

successful  for fixed data communications.  However,  the

increase  in the Internet and data communication revenues

did   not   fully  compensate  the  decrease   in   voice

communications,   and  the  total  revenue   from   fixed

communications was slightly down.



The  non-core activities of the Eesti Telekom  Group,  as

well as the data communications sphere, are characterised

by  lower  margins than the traditional telecommunication

services.  Revenue growth in the new spheres of  activity

was  accompanied by the growth in operating expenses. The

operating expenses of 2003 were 2,691 mln EEK, up by 11%.

The  EBITDA of the Eesti Telekom Group was 2,118 mln EEK,

down  by 1% compared to 2002. The EBITDA margin was  44%.

The  elimination of the abovementioned non-recurring item

from the revenues of 2002 would make the EBITDA growth to

be 2%.



The  depreciation  charge of the Eesti Telekom  Group  in

2003  amounted to 881 mln EEK, down by 120 mln EEK or  by

12%, compared to 2002.



The  net  financial  result  of  2003  was  89  mln  EEK.

Financial  revenues of the year include a  59.5  mln  EEK

capital  gain  from the sale of 49% of the shares  of  AS

Connecto. The net interest revenue of the Group, in 2003,

was 36 mln EEK (2002: 17 mln EEK).



The  net  profit of the Eesti Telekom Group in  2003  was

1,036 mln EEK or 7.53 EEK per share (2002: 1,040 mln  EEK

or  7.57  EEK  per  share). The net profit  of  2003  was

affected  by  an  amendment in the taxation  regulations,

which became effective in 2003. In 2002, the dividend tax

applied  only to dividend payments to private individuals

and   non-resident  legal  entities,  but  in  2003,  the

dividend  tax became effective for all dividend payments.

Thus,  for  the  Eesti  Telekom  Group,  this  amendment,

together with a higher dividend payout, brought with it a

significant increase in the dividend tax that had  to  be

paid. The dividend tax, in 2003, amounted to 286 mln EEK,

up by 195 mln EEK, compared to 2002.



Balance sheet and cash flows

At  the  end  of December 2003, the total assets  of  the

Eesti  Telekom  Group amounted to 4,599  mln  EEK  (2002:

4,443 mln EEK). Non-current assets were reduced, from the

beginning  of  the year, by 322 mln EEK.  Current  assets

were  increased by 477 mln EEK. This increase was  mainly

the  result  of an increase in cash and cash  equivalents

(bank  accounts, units of money-market funds) by 438  mln

EEK.  By  the  end  of 2003, the net debt  of  the  Group

amounted  to  -1,357 mln EEK, and net  gearing  was  -33%

(2002: -916 mln EEK and -23%).



The  net operating cash flows of the Eesti Telekom  Group

in 2003 amounted to 1,709 mln EEK, including a payment of

dividend  tax in the amount of -286 mln EEK (2002:  1,897

mln  EEK, including a dividend tax of -91 mln EEK).  Cash

outflows into investments amounted to -432 mln EEK (2002:

-553 mln EEK). The investing cash flows were affected  by

a  68  mln  EEK cash inflow from the sale of the minority

ownership  in AS Connecto, a 70 mln EEK payment  for  the

UMTS  licence,  and by a large investment into  improving

the  quality of the GSM-network that AS EMT made  in  the

fourth  quarter of 2003. The cash outflows into financing

were  -839  mln  EEK,  including  824  mln  EEK  paid  as

dividends (2002: -856 mln EEK, including 756 mln EEK paid

as dividends).



Return  on  assets  (ROA)  and  return  on  equity  (ROE)

continued  to  be  very  high.  ROE  increased  from  the

previous year’s 30% to 33%. The ROA decreased from 24% to

23%,  mostly  due to the large portion of cash  and  cash

equivalents,  and  the  low  interest  returns  on  those

assets.



Management and personnel

As of 31 December 2003, there were 2,452 employees in the

Eesti  Telekom  Group  (31  December  2002:  2,412).   An

increase  in  the number of employees was caused  by  the

acquisition  of  new subsidiaries. The  total  amount  of

employees’ salaries was 388 mln EEK.



The  number of employees of AS Eesti Telekom, the  parent

company  of  the Eesti Telekom Group, as of  31  December

2003, was 8 (31 December 2002: 7). The overall amount  of

employees’ salaries was

7 mln EEK.



Elion Group

The  Elion  group  consists of Elion Enterprises  AS,  AS

Elion Esindus, AS EsData, AS Connecto, AS Reveko Telekom,

AS Eltel Networks and SIA Connecto Latvia.



The  consolidated revenues of the Elion Group,  in  2003,

amounted  to 2,578 mln EEK, up by 1%, compared  to  2002.

The consolidated revenues of 2002 contain a non-recurring

capital  gain from the sale of real estate in the  amount

of 63 mln EEK. The elimination of this capital gain would

make the revenues of 2003 3% higher than the revenues  of

2002.



This   revenue   growth  was  the   result   of   various

circumstances.  The  Elion  Group  acquired  several  new

subsidiaries  in  2003  -  AS Reveko  Telekom,  AS  Eltel

Networks,  and  AS EsData (an associated company  of  the

Group   until  December  2003).  Revenues  from  non-core

activities, construction (the Connecto Group), and retail

sales  (AS  Elion  Esindus) were  substantially  up.  The

revenue  from voice communications was down. The  revenue

from  domestic calls decreased by 12%, compared to  2002.

The  revenue from international calls was down by 9%, and

the  revenue from calls into mobile networks was down  by

5%.  The  revenues from phone installations  and  monthly

fees  were down by 5%. Voice communication revenue, as  a

percentage of the total revenues of the Group,  was  down

from  60% (excl. non-recurring items) at the end of 2002,

to 56% at the end of 2003.



The  Internet and dial-up revenues increased  at  a  fast

pace.  The  revenues of 2002 were exceeded by  23%.  This

increase  was the result of the new permanent connections

made  during 2003, while the number of dial-up  customers

kept  falling. Expansion of wireless Internet  continues,

in  the  fourth  quarter of 2003,  Elion  Enterprises  AS

rolled  out  wireless hotspots in all Neste  A24  service

stations.  The total number of Elion’s wireless  hotspots

more  than  doubled during the year. At the  end  of  the

year,  a new Internet content service "ITV" was launched.

ITV makes it possible to watch TV programs, via Internet,

at any time convenient for the customer. ITV is a digital

media  archive consisting of the best programs and movies

made in Estonia, plus the latest news and sports.



The  revenues from IT and data communications were up  by

33%.  Elion  Enterprises AS successful  participation  in

state  tenders has contributed to this increase.  In  May

2003,   the   Tallinn  Education  Authority   and   Elion

Enterprises  AS  signed a framework agreement  concerning

the  installation  of new computers and  other  equipment

into  the computer classes of Tallinn schools. The  total

value of the procurement amounts to more than 63 mln EEK.

In  the fourth quarter of 2003, Elion Enterprises AS  won

the  tender  of the Tallinn Education Authority  for  the

procurement   of  139  laptop  computers  for   Tallinn’s

schools.  The company also signed a procurement agreement

with the Tallinn Education Authority for the installation

of  170  PC’s  in  Tallinn’s schools  and  kindergartens.

Internet and data communication revenues, as a percentage

of  the  total revenues of the Group, were up,  from  17%

(excl. non-recurring items) at the end of 2002 to 21%  at

the end of 2003.



The  revenues  from network services  were  down  by  6%,

compared  to  2002. The network services revenues,  as  a

percentage of the total revenues, was down, from  18%  to

16%.



The  operating  expenses  of the  year  were  up  by  7%,

amounting  to  1,712  mln  EEK.  This  increase  of   the

operating  expenses was the result of the acquisition  of

new  subsidiaries, and the higher volumes of construction

and  trading activities. The operating expenses were also

affected  by  the launching of a new brand  name.  On  18

August  2003,  Elion  Enterprises AS introduced  the  new

brand  name  of  Elion. Elion replaced the  former  brand

names  Eesti  Telefon,  et, Hot, Hallo,  and  Atlas.  One

objective  of  the  change was to make the  obtaining  of

services from, and communicating with the company  easier

for  the  customer. Elion Enterprises AS  rearranged  its

portfolio  to  customers’ needs by making  a  distinction

between  household,  business, and  corporate  customers.

Already starting this year, the company also "entertains"

its customers by launching Internet access to TV, movies,

computer games, and music. Operating expenses related  to

launching the new brand name amounted to approximately  8

mln EEK.



The  EBITDA of the Group was 866 mln EEK, and the  EBITDA

margin  was 34%. Depreciation of the Elion Group in  2003

was  down  by 116 mln EEK or 18%, compared to 2002.  This

decline is largely the





result of the revised depreciation rates at the beginning

of  2003 (the monetary value of the change being 100  mln

EEK).  The  new  rates are more differentiated  by  asset

groups  than  the  ones used in prior years.  The  useful

lifetime of the various categories of tangible assets  is

more  accurate. In addition, depreciation charges decline

as  a  result of the relatively low CAPEX that the  Group

has had

during  the past years, compared to earlier periods.  The

Elion  Group invested 224 mln EEK during 2003 (2002:  334

mln EEK; 2001: 495 mln EEK).



The  net  financing items of the Group  was  60  mln  EEK

(2002:  -19 mln EEK). The financial revenues of the  year

include a 59.5 mln EEK capital gain from the sale of  49%

of  the  shares of AS Connecto. The interest expenses  of

the  Group  were  down  by 19 mln EEK.  As  a  result  of

amendments in the regulations concerning income taxation,

the  Group declared a dividend income tax expense  of  67

mln EEK. The net profit of the Elion Group, for 2003, was

318 mln EEK, up by 11%, compared to 2002.



The  number  of main lines in use at the end of  December

was   444,661  (a  penetration  of  32.8  lines  per  100

persons).  The net decrease in the number of main  lines,

since   the  beginning  of  2003,  was  15,600.   Private

individuals  mainly caused this decrease. The  number  of

main  lines used by corporate customers increased  during

2003.  The total number of Internet permanent connections

was 50,841 at the end of December 2003.  The total number

of  ADSL connections was 49,448 (3.7 connections per  100

people).  The  net  increase  in  the  number   of   ADSL

connections, since the beginning of 2003, was 19,000.



The  market  shares  of Elion Enterprises  AS  have  been

stable.  The  company estimates its share of  total  call

minutes to be 87% (2002: 89%). The estimated market share

of domestic call minutes, international call minutes, and

fixed  to  mobile call minutes are 87% (2002:  88%),  67%

(2002:  70%),  and  76%  (2002:  75%)  respectively.  The

estimated  market share of dial-up minutes is 95%  (2002:

95%).



On  31  December 2003, 2,014 people were employed by  the

Elion Group (31 December 2002: 1,999). The overall amount

of the Elion Group employees’ salaries was 294 mln EEK.



EMT Group



The EMT Group consists of AS EMT, EMT Esindused AS and AS

Mobile Wholesale.



The  consolidated  revenues of the EMT Group,  for  2003,

amounted  to 2,730 mln EEK, up by 11%, compared to  2002.

Revenues of both AS EMT, the parent company of the Group,

and   of   the   subsidiary  companies  acting   in   the

telecommunication equipment wholesaler and retailer, were

up  significantly. In the area of mobile  communications,

the  revenues from SMS and data communications  continued

to  have the highest growth rate, showing an increase  of

28%.  The revenues from domestic and international  calls

were  up  by  9%.  In  December 2003, the  ARPU  (average

revenue per user) was

410  EEK  (December 2002: 423 EEK). The  lower  ARPU  was

mainly caused by an increase in the usage time of prepaid

call-cards.



The  revenue growth of the EMT Group was the result of  a

larger  customer  base.  The  total  number  of  AS   EMT

customers grew by 64 thousand during 2003. The number  of

contractual  customers was up by  26  thousand,  and  the

number  of prepaid customers was up by 38 thousand.  This

growth  in  the  number of prepaid customers  was  partly

caused  by changes in the terms of the Simpel call-cards,

which  became  effective  1 May 2003.  Until  that  date,

customers  could, in the course of two  months;  use  the

calling  time  stored on their cards for outgoing  calls,

plus,  for one more month, could receive incoming  calls.

According  to the new terms, the calling time  stored  on

the  cards can be used, in the course of five months, for

outgoing calls, plus, incoming calls can be received  for

an  additional month. Due to this change in terms, AS EMT

did  not close any prepaid cards between 2 August and the

end  of  October.  The total number of AS  EMT  customers

reached  492 thousand by the end of December, up  by  15%

compared to 2002. The number of contractual customers was

307 thousand, and the number of prepaid customers was 185

thousand  (2002: total number of customers: 427 thousand;

number of contractual customers: 280 thousand; number  of

prepaid customers: 147 thousand). Prepaid customers  form

38% of the number of total customers, compared to 34%  at

the end of 2002. AS EMT estimated its market share to  be

around  47%. In the second half of 2003, EMT was able  to

stop  its  market  share slide, but  at  the  expense  of

reduced  margins. Mobile penetration in  Estonia  reached

77% (2002: 65%).



The operating expenses for the year amounted to 1,451 mln

EEK,  up  by  15%. The operating expenses for  2003  were

influenced by a devaluation of assets at AS EMT, by 8 mln

EEK.  The EBITDA of the Group was 1,279 mln EEK, and  the

EBITDA  margin was 47%. Profit before tax was up by  11%,

amounting  to  948  mln EEK. As a result  of  amendments,

which  were  made  to  the  regulations  concerning   the

calculating  of  income  tax  on  dividends,  the   Group

declared a dividend income tax expense of

211  mln EEK in its income statement.  The net profit  of

the EMT Group, in 2003, was 737 mln EEK.





The EMT Group invested 340 mln EEK during 2003 (2002: 294

mln  EEK). On 8 May 2003, a direct offer was made by  the

Estonian  National  Communications  Board  to   AS   EMT,

Radiolinja  Eesti  AS,  and Tele2  AS  to  acquire  third

generation  mobile  communications  licences.  All  three

operators  submitted  their  applications  in  July,  and

received  licences  from the Communications  Board  after

paying  a licence fee and state duty of 70.7 mln EEK  per

licence.  By  acquiring the licence, each  operator  also

accepted the

obligation  to  establish,  within  seven  years  of  the

issuance of the licence, an UMTS (Universal Mobile

Telecommunication System) network, covering at least  30%

of   the   Estonian  population,  and   having   a   data

transmission speed of at least 144 Kb/sec in urban  areas

and 64Kb/sec anywhere else in Estonia.



On  17  September 2003, the minister of economic  affairs

and  communications and the CEO of AS EMT, made the first

UMTS-call  in  Estonia  via  the  EMT  trial  network.  A

commercial  UMTS-network is expected to start functioning

in 2005.



Almost half of the investments of the EMT Group were made

in  the  fourth  quarter of 2003. A large investment  was

made into improving the quality of the GSM network in the

fourth quarter of 2003.



On  31 December 2003, 428 people were employed by the EMT

Group  (31 December 2002: 406). The total amount  of  the

EMT Group employees’ salaries was 92 mln EEK.



Relations with state regulators

Procedure  of the Communications Board to cut the  mobile

interconnection fees

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  stipulated  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 3.06 EEK/min to

2.90 EEK/min, and the discounted termination fee from the

current 2.80 EEK/min to 2.75 EEK/min.



Elimination of the fixed phone waiting list

On 29 December 2000, the agreement for the termination of

the   concession  agreement  was  concluded  between  the

Republic of Estonia and Elion Enterprises AS (the  former

AS  Eesti Telefon). The agreement regulates some  aspects

of  the  relationship between the company and  the  state

until

1  January  2004. With that agreement, AS  Eesti  Telefon

accepted  the  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 from the payment of the invoice, and  to

eliminate,  by 28 February 2003, at 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. In 98% of cases,

a  new  application  for  a  fixed  phone  connection  is

fulfilled within 10 workdays.



Being recognised an a SMP enterprise

On  18  November, the Communications Board declared Elion

Enterprises AS to be an operator with significant  market

power  (SMP)  in  2004, in the public  telephone  service

market,  public  leased line service market,  and  public

interconnection  service market. AS EMT was  declared  to

have  SMP in 2004, in the public mobile telephone service

market.  Elion Enterprises AS was also declared  to  have

SMP in 2001, 2002, and 2003. AS EMT was also declared  to

have SMP in 2002 and 2003. The Communications Board based

the  determination  of operators with significant  market

power  in 2004 upon the market share percentages of 2002.

The  market  share of Elion Enterprises  AS  amounted  to

87.32%  of the telephone services market, 73.22%  of  the

leased   line   service  market,  and   43.78%   of   the

interconnection service market. The market  share  of  AS

EMT  amounted  to  63.22% of the public mobile  telephone

service  market.  Elion Enterprises AS and  AS  EMT  have

assumed in their prognoses that the Communications  Board

would  declare the firms to be operators with significant

market power in 2004.



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 on 1 April 2001, for calls  inside  the

network, has been concluded. On January 19, 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. On

15  January,  the Competition Board and Elion Enterprises

AS filed an application with Tallinn Administrative Court

to   approve  their  Agreement  for  ending  the  lawsuit

litigated  by  all instances of the court, because,  over

the  years,  the case has ceased to be an issue.  In  the

Agreement, Elion concedes, that the unified intra-network

minute  rates introduced on 1 April 2001 would have  been

too high, at that



time, if voice packages and volume discounts had not been

introduced.  In turn, the Competition Board acknowledges,

that  Elion  has been complying with the requirements  of

the  precept  by  introducing price packages  and  volume

discounts,  thus reducing the average minute rates  to  a

level below the price level established on 1 April 2001.



The  Competition Board is explicit in the agreement  that

its  decision and the issued precept were fully justified

at  that time, and does not wish to annul them. The Board

concedes,     however,    that    since     then,     the

telecommunications market has changed  irreversibly,  and

the  Board does not insist on any changes being  made  in

Elion’s   intra-network  voice  tariffs.   Besides,   the

legislation dealing with the malpractice of

companies with SMP has been amended, and therefore, it is

impossible to impose any penalty.



For  the above-mentioned reasons, including the fact that

Elion  has  taken the necessary measures,  and  that  the

dispute  has  lost its topicality, the Competition  Board

and  Elion have both lost interest in pursuing the  case.

According  to  the Agreement, Elion is to  indemnify  the

Competition  Board  in the amount of  440  thousand  EEK,

which partly covers the expenses incurred.



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 determined by  Uninet  in  its

application.  Elion Enterprises AS contested the  precept

in   Tallinn   Administrative  Court,  applying   for   a

cancellation of the obligation. The next session  of  the

Administrative Court is scheduled for 23 March  2004.  In

the  case  of  an  adverse decision by the  court,  Elion

Enterprise AS must provide AS Uninet with access  to  its

ATM-ADSL  equipment.  Such a development  would  have  an

impact  upon  competition in this activity.  However,  it

would  not have any significant effect upon the financial

results of the company.



Annual General Meeting of Shareholders

On  22  May  2003,  the  Annual General  Meeting  of  the

shareholders of AS Eesti Telekom approved the 2002 Annual

Report of the company, and the allocation of the profits.

It  was decided that an ordinary dividend of 3.75 EEK per

share,  plus  an extraordinary dividend of 2.25  EEK  per

share  (in total 824,299 thousand EEK) should be paid  to

the  holders of A shares. The dividend to the  holder  of

the B share was 10,000 EEK. The list of shareholders,  on

the  basis  of  which  dividends were  to  be  paid,  was

established on 10 June 2003 at 08:00. The dividends  were

paid out on 19 June 2003.



The  Annual General Meeting decided to authorise AS Eesti

Telekom  to reacquire, within one year (by 22 May  2004),

AS  Eesti  Telekom  A series shares, so  that  the  total

nominal value of AS Eesti Telekom shares held by AS Eesti

Telekom  would not exceed the legal 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  number of shares to be  acquired  shall  be

determined, on each individual occasion, by a  resolution

of the AS Eesti Telekom’s Supervisory Board. As of

18  February 2004, AS Eesti Telekom has acquired no  such

shares.



The Annual General Meeting elected ten new members to the

Supervisory Board. Villu Vaino from

AS  Deloitte & Touche Audit was appointed to audit  Eesti

Telekom in 2003.



Perspectives for 2004

Starting  on  1 January 2004, the subscribers  of  public

telephone  network services have the option of  retaining

their  telephone  number  if  they  should  change  their

telephone  service  provider.  Already  in  January,  two

operators - AS Uninet and OÜ Via Tel - started  to  offer

fixed line customers the possibility of switching over to

their  networks.  However, both operators  are  primarily

oriented  to  corporate customers. In January  2004,  the

Communications  Board issued to AS  Starman  the  licence

permitting call transmission via their cable network. The

company  intended  to  enter the fixed  voice  market  in

February  2004.  They  are mainly interested  in  private

customers.



It  is not yet definite when mobile telephone users  will

have  the  option of retaining their number when changing

their  mobile  service provider. Appropriate  legislation

needs  to  be  amended and certain technical  preliminary

work   needs   to  be  done  before  the  mobile   number

portability  requirement  can  become  effective.  It  is

estimated that mobile number portability could  become  a

reality in the fall of 2004 or at the beginning of 2005.



In  January  2004, the Communications Board  announced  a

public  tender  for  the fourth third  generation  mobile

telephone  network technical licence. The starting  price

of the public tender is 70 mln EEK, and the licence would

be  valid  for 10 years. Those wishing to participate  in

the  public tender must submit all required documents  to

the Communications Board by 23 April 2004. So far, it  is

not  known  if any operators are interested in  obtaining

the fourth UMTS licence.



In  August 2002, two virtual network service providers  -

Vertelson  Mobile  AS and OÜ CityGSM  -  announced  their

intention  of entering the mobile communications  market.

By  the beginning of 2004, neither of them had started to

actually provide the announced service. Vertelson  Mobile

AS  has announced that the summer of 2004 would be  their

new  deadline  for  doing so. At the  end  of  2003,  the

Communications Board also issued a licence and assigned a

mobile number-interval for OÜ Top Connect.





Hille Võrk

Financial Manager

6272460