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



COMMENTARY ON AUDITED RESULTS, EUR



Changes in the corporate structure of the Eesti Telekom

Group



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 4.4 mln EUR, and the capital  gain

declared was 3.8 mln EUR.  Eltel Networks Corporation has

the  right to acquire 51% 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 0.9 mln EUR. 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

0.7  mln EUR. 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 0.4 mln EUR. 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  0.3  mln  EUR. 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 307.3 mln  EUR,  up  by  5%,

compared to 2002. The 2002 consolidated revenues included

a non-recurring item, a 4.0 mln EUR 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 172 mln EUR, up  by  11%.

The  EBITDA of the Eesti Telekom Group was 135.3 mln EUR,

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 56.3 mln EUR, down by 7.7mln EUR or  by

12%, compared to 2002.



The  net  financial  result of  2003  was  5.7  mln  EUR.

Financial  revenues of the year include  a  3.8  mln  EUR

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

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

was 2.3 mln EUR (2002: 1.1 mln EUR).



The  net  profit of the Eesti Telekom Group in  2003  was

66.2 mln EUR or 0.48 EUR per share (2002:

66.5  mln  EUR or 0.48 EUR 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 18.3 mln EUR, up by 12.4 mln EUR, compared to

2002.



Balance sheet and cash flows

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

Eesti  Telekom  Group amounted to 293.9  mln  EUR  (2002:

284.0 mln EUR). Non-current assets were reduced, from the

beginning  of  the year, by 20.3 mln EUR. Current  assets

were  increased by 30.2 mln EUR. This increase was mainly

the  result  of an increase in cash and cash  equivalents

(bank accounts, units of money-market funds) by 27.9  mln

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

amounted  to  -86.8  mln EUR, and net  gearing  was  -33%

(2002: -58.5 mln EUR and -23%).



The  net operating cash flows of the Eesti Telekom  Group

in 2003 amounted to 109.2 mln EUR, including a payment of

dividend tax in the amount of -18.3 mln EUR (2002:  121.2

mln  EUR, including a dividend tax of -5.8 mln EUR). Cash

outflows  into  investments amounted  to  -27.6  mln  EUR

(2002:

-35.3 mln EUR). The investing cash flows were affected by

a  4.4  mln EUR cash inflow from the sale of the minority

ownership in AS Connecto, a 4.5 mln EUR 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  -53.6  mln  EUR, including 52.7  mln  EUR  paid  as

dividends  (2002: -54.7 mln EUR, including 48.3  mln  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 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 24.8 mln EUR.



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

0.4 mln EUR.



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 164.8 mln EUR, 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  4.0  mln  EUR. 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  4.0  mln

EUR. 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  109.4  mln  EUR.  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

0.5 mln EUR.



The  EBITDA of the Group was 55.3 mln EUR, and the EBITDA

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

was  down  by 7.4 mln EUR 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 -6.4 mln

EUR).  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 14.3 mln EUR during 2003 (2002: 21.3

mln EUR; 2001: 31.6 mln EUR).



The  net  financing items of the Group was  3.8  mln  EUR

(2002: -1.2 mln EUR). The financial revenues of the  year

include a 3.8 mln EUR capital gain from the sale  of  49%

of  the  shares of AS Connecto. The interest expenses  of

the  Group  were  down by 1.2 mln EUR.  As  a  result  of

amendments in the regulations concerning income taxation,

the  Group declared a dividend income tax expense of  4.3

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

20.3 mln EUR, 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 18.5 mln EUR.



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 174.5 mln EUR, 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

26.2  EUR  (December 2002: 27.0 EUR). 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 92.7 mln

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

influenced by a devaluation of assets, at AS EMT, by  0.5

mln  EUR.  The EBITDA of the Group was 81.7 mln EUR,  and

the  EBITDA margin was 47%. Profit before tax was  up  by

11%,   amounting  to  60.6  mln  EUR.  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 13.5 mln EUR in

its  income statement.  The net profit of the EMT  Group,

in 2003, was

47.1 mln EUR.



The  EMT  Group invested 21.7 mln EUR during 2003  (2002:

18.8 mln EUR). 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 4.5 mln  EUR  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 5.9 mln EUR.



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 0.20 EUR/min to

0.19 EUR/min, and the discounted termination fee from the

current 0.179 EUR/min to 0.176 EUR/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

19  January,  Tallinn City Court approved  the  Agreement

reached  by  the  Estonian Competition  Board  and  Elion

Enterprises  AS to end litigation over the  minute  rates

charged  in  Elion’s  fixed  telephone  network.  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 28  121  EUR,  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 0.24 EUR per

share,  plus  an extraordinary dividend of 0.14  EUR  per

share (in total

52,682 thousand EUR) should be paid to the holders  of  A

shares. The dividend to the holder of the

B  share  was 639 EUR. 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 4.5 mln EUR, 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