ELISA CORPORATION?S INTERIM REPORT FOR J
ELISA CORPORATION STOCK EXCHANGE RELEASE
29 APRIL 2004 AT 8.00am
ELISA CORPORATIONS INTERIM REPORT FOR JANUARY-MARCH 2004
Elisas comparable revenue decreased slightly. The profit before
extraordinary items and taxes improved considerably. The market
situation was very challenging in early 2004, and competition
intensified in mobile communications in particular.
Elisas key figures for January-March are as follows:
Income statement Q1/2004 Q1/2003 Pro forma
EUR million Q1/2003*
Revenue 333 371 339
EBITDA 119 85 86
EBIT 59 7 17
Profit before extraordinary
items and taxes
51 -5 6
Earnings per share, EUR 0.23 -0.06
Investments 43 40 36
Financial position Q1/2004 Q1/2003 2003
Net debt, EUR million 587 767 654
Equity ratio, % 44 38 40
Cash flow after investments
19 -10 105
*Exclusive of Germany-based business
Market situation
Fierce competition continued in the market. Price erosion in the
mobile business also continued and the use of subscriptions
increased. The service operator market was divided into two main
segments. In traditional full-service subscriptions Elisa
maintained its strong position. New operators in the low-rate
subscription market increased their market share. Elisa launched
new subscriptions in this segment. The robust growth of broadband
subscriptions in the fixed network market prevailed and the number
of traditional subscriptions decreased.
Change in corporate structure
Elisa revised its structure in January. The new domestic
organisation for the core business comprises three units:
Customers, Products and Networks. The groups performance will
be reported as previously, by mobile business, fixed network
business and other business.
Streamlining the corporate structure has removed overlaps and
operations of the business segments have been partly regrouped.
Therefore, the figures are not fully comparable.
Owing to the divestment of Germany-based business, the figures
from the German operations have not been consolidated in Elisas
corporate figures for the year 2004.
Revenue
EUR million Q1/2004 Q1/2003 Change
Mobile communications 179 174 3%
Fixed network 164 172 -5%
Germany * 32 -
Other business 23 24 -4%
Sales between segments -33 -31 6%
Total 333 371 -10%
*The non-consolidated revenue of German operations for January-
March amounted to EUR 32 million.
Segment figures for the Q1/2004 and Q1/2003 are not comparable
with the previously reported figures for the business areas.
Elisas revenue for January-March decreased by 10 per cent
compared to the corresponding period last year. Excluding the
impact of divesting the Germany-based business, the revenue
decreased by 2 per cent, i.e. EUR 6 million. In addition to the
divested German operations, the reduced revenue was also affected
by EUR 10 million from the change in the revenue booking practice
as well as the volume development of the fixed network products.
Revenue for the mobile business rose by 3 per cent on the previous
year. The revenue was affected by the increase in the average
utilisation rate of mobile subscriptions. The growth was slowed
down by the continued fierce price erosion during early 2004 and
the decrease in the number of subscriptions.
Revenue for the fixed network business decreased by 5 per cent
compared to the corresponding period last year. The change in
revenue was mainly due to the declining volume development in
traditional subscription products and equipment sales and the
shifting of voice to mobile networks.
Performance
EUR million Q1/2004 Q1/2003 Change
Mobile communications
EBITDA 66 43 53%
EBIT 37 8 372%
Fixed network
EBITDA 52 45 15%
EBIT 25 17 47%
Germany
EBITDA - -1 -
EBIT - -10 -
Other business
EBITDA 3 -1 -
EBIT 1 -3 -
Corporate staff
EBITDA -2 -2
EBIT -4 -4
Total
EBITDA 119 85 40%
EBIT 59 7 743%
Segment figures for the Q1/2004 and Q1/2003 are not comparable
with the previously reported figures for the business areas.
The measures initiated to streamline the business had a boosting
impact on Elisas profitability. The revenue development also
had a positive effect on the profitability of the mobile
business.
The groups share of the associated companies' results was
EUR -0.3 million (-0.5).
The groups other financing income and expenses totalled
EUR -8 million (-11). Reduced interest expenses were mainly
due to the decreased net debt and a low interest rate.
Income taxes in the income statement amounted to EUR -18 million
(-4).
The groups January-March result after taxes and minority
interests were EUR 32 million (-8). The groups earnings per share
(EPS) amounted to EUR 0.23 (-0.06). The group shareholders equity
per share stood at EUR 5.32 (5.09 at the end of 2003).
Mobile business
Q1/2004 Q1/2003 2003
Number of subscriptions* 1 319 007 1 348 183 1 374 146
Revenue/subscription**(ARPU), 38.6 38.5 41.6
Churn*, % 47.4 14.4 18.6
Usage, million minutes* 596 531 2310
Usage, min./subscription/mth** 150 136 146
SMS, million messages* 121 109 453
SMS, msg./subscription/mth** 31 28 29
Value-added services/revenue 13% 13% 12%
* Elisas network operator in Finland
** Elisas service operator
From the turn of the year, the number of subscriptions decreased
by 55 000 subscriptions. In traditional full-service subscriptions
Elisa maintained its strong position. New operators in the low-
rate subscription market increased their market share. Elisa
launched a new Kolumbus subscription into this market.
The usage of subscriptions in Elisas mobile business continued to
grow in the first quarter. The number of calls and SMS messages
per subscription a month increased by approximately 10 per cent on
the previous year. The average revenue per subscription (ARPU) was
at the same level with the period in comparison. This was due to a
change in the revenue booking practice which took place in early
2004. This practice means that certain remunerations associated
with customer billing and paid to service providers are presented
as a deduction of revenue. The effect was EUR 10 million. The
comparable ARPU rose by EUR 2.7, or 7 per cent.
The revenue of Elisas subsidiary operating in Estonia was EUR
15.4 (13.6). EBITDA amounted to EUR 4.5 million (3.7) and EBIT
EUR 2.3 million (1.5). At the end of March, there were 173 550
(157 600) subscriptions.
Fixed network business
No. of subscriptions 31.3.2004 31.3.2003 31.12.2003
Broadband subscriptions 148 270 81 871 127 388
ISDN channels 190 921 229 252 200 455
Cable TV subscriptions 186 097 172 375 183 469
Analogue and other
subscriptions 669 192 700 814 675 272
Subscriptions, total 1 194 480 1 184 312 1 186 584
Brisk demand for broadband subscriptions continued. The number of
subscriptions increased by 81 per cent on the previous year. The
number of traditional subscriptions continued to decrease as voice
shifts to the mobile network and data to broadband subscriptions.
Elisa is a provider of a certificate service for Finnish banks and
Luottokunta, a credit card service company. In the future, the
service will facilitate the verification of shops card payment
terminals during data communications connections.
The Finnish Ministry of Justice is revising its voice services by
outsourcing the telephone systems of 9 500 employees and over 350
offices under Elisas service provision.
Finnet International was the first telecommunications operator to
launch international Ethernet services between Helsinki and
Tallinn. These services have now been extended to cover routes
between Helsinki and Stockholm and also between Tallinn and
Stockholm. The Ethernet technology offers customers a more cost-
efficient and manageable telecommunications solution for services
between Finland, the Baltic countries and Scandinavia.
On 12 March 2004, Nordea and Elisa signed a letter of intent,
Which states that Elisa will be Nordeas main provider of
telecommunication services in Finland as of the beginning of May
2004. The agreement entails voice telephony of the fixed network,
mobile communications and data transfer services throughout
Finland.
Changes concerning the group
On 30 March 2004, Elisa and the minority shareholders of Tropolys
GmbH signed an agreement, according to which Elisa sold the entire
share capital of its subsidiary Elisa Kommunikation GmbH to a
consortium consisting of the Apax Private Equity Funds and other
minority shareholders of Tropolys GmbH. The sale price was EUR 70
million, and after a write-down booked in the financial statements
for the year 2003 it will have no substantial effect on the result
in 2004.
The Boards of Directors of Elisa and Yomi Plc signed a merger
plan, according to which Yomi Plc will merge into Elisa on or
about 31 December 2004. Before the merger the group has a 51.46
per cent ownership of Yomi.
Personnel
In January-March, the Elisa group employed an average of 5 909
people (7 365, exclusive of Germany the figure is 6 796).
31.3.2004 31.3.2003 31.12.2003
Mobile communications 1 435 1 750 1 577
Fixed network 3 364 3 579 3 472
Germany - 569 426
Other business 902 1 119 905
Corporate functions 232 318 303
Total 5 982 7 335 6 683
The labour negotiations initiated last October were completed on
12 January 2004. As a consequence of these negotiations the number
of personnel will decrease by approximately 900 people. During the
period under review the aforementioned personnel reduction was
applied to about 140 people. As at 31 March 2004, 446 employees
have been given notice.
Investments
EUR million Q1/2004 Q1/2003 Pro forma
Q1/2003*
Investments
- in fixed assets 42 39 35
- in shares 1 1 1
Total 43 40 36
GSM leasing buy-backs
ncluded in fixed asset,
investments 19 9 9
*Exclusive of Germany-based business
Capital expenditures in the mobile business were EUR 26 million
(16) and EUR 15 million (18) in the fixed network business. The
mobile business investments included GSM leasing liability buy-
backs from telcos for EUR 19 million (9).
Financial position
The groups financial position and liquidity strengthened and
remained stable. This was particularly affected by the divestment
of Germany-based business. The cash flow from business activities
conforming to the present corporate structure amounted to
EUR 19 million.
Owing to the disposal of Germany-based business, the groups
interest-bearing liabilities were reduced by EUR 65 million and
the leasing liabilities outside the balance sheet decreased by
EUR 133 million.
Financial key indicators
EUR million 31.3.2004 31.3.2003 31.12.2003
Net debt 587 767 654
Gearing, % 75.9 97.0 87.5
Equity ratio, % 44.5 38.1 40.4
Q1/2004 Q1/2003 2003
Cash flow after investments 19 -10 105
Ratings per long-term loans
Credit rating agency Rating Outlook
Moodys Investor Services Baa2 Stable
Standard & Poors BBB Stable
Share
At the end of March, the company's total number of shares was
138 011 757. The market capitalisation on 31 March 2004 stood
at EUR 1 880 million.
In January-March, a total of 28.8 million A shares of the company
were traded on the Helsinki Exchanges for an aggregate of EUR
361.7 million. The exchange was 21.0 per cent of the number of
A shares in the market.
The number of Elisa Corporation's A warrants for the year 2000 was
3 600 000 and B warrants for the year 2000 was 3 600 000. At the
end of March, the market capitalisation of the warrants amounted
to EUR 2.1 million.
Treasury shares
The total number of Elisa Corporation's A Shares owned by the
subsidiaries was 781 563 (781 563 at the end of 2003). The nominal
value of the shares totalled EUR 390 781.50, and their proportion
of the share capital and voting rights was 0.57 per cent.
Moreover, the Elisa group's pension fund owned 267 363 A shares
(722 363 at the end of 2003).
Annual General Meeting on 31 March 2004
Elisa Corporation's Annual General Meeting decided on 31 March
2004, in accordance with the proposal of the Board of Directors,
that no dividend be paid for 2003. The Annual General Meeting
accepted the parent company's income statement and balance sheet,
and the consolidated income statement and the balance sheet. The
members of the Board of Directors and the CEOs were discharged
from liability for 2003.
The number of the members of the Board of Directors was confirmed
at six (6), and the following members were elected for the
following one-year term ending at the closing of the next General
Meeting: Keijo Suila, Ossi Virolainen, Matti Aura, Pekka Ketonen,
Mika Ihamuotila, plus a new member Jussi Länsiö.
KPMG Wideri Oy Ab (authorized public accountants, with APA Pekka
Pajamo as the responsible auditor) was appointed the company's
external auditor.
The proposal of the Board of Directors to amend Articles 4, 5 and
15 of the Articles of Association was approved. After registering
the amendments the clauses on series A and B shares will be
removed from the Articles of Association.
The Annual General Meeting approved the proposal of the Board of
Directors to authorize the Board of Directors within one year from
the Annual General Meeting to decide on increasing the company's
share capital. The Board was to achieve this through one or more
new issues, one or more convertible bonds and/or warrants so that,
in a new issue, the subscription of shares in exchange for the
convertible bonds and pursuant to warrants may be 27.6 million
shares at the maximum, and the company's share capital can be
increased by a maximum of EUR 13.8 million in total. The
authorization is valid for one year, starting from this Annual
General Meeting. The authorization entitles the Board of Directors
to dissapply the pre-emptive rights of existing shareholders,
providing there is an important financial reason to do so from the
companys point of view.
At the Annual General Meeting the Board of Directors held its
organisational meeting on 31 March 2004. The said meeting
appointed Keijo Suila the Chairman and Ossi Virolainen Deputy
Chairman.
The amendments to the Articles of Association decided at the
Annual General Meeting were entered in the Trade Register on 16
April 2004.
Major legal issues
The following changes have taken place in the legal processes
referred to in Elisas annual report of 2003 (published on 19
March 2004):
With regards to the redemption procedure of Oy Radiolinja Abs
minority shares, the Helsinki District Court has given a ruling on
the redemption price of 7 379 shares. According to this ruling,
the previous decision, EUR 7 904.83 per share, remains valid.
Legal proceedings regarding the redemption price of 325 shares are
still pending.
The Supreme Court has ruled that a district court must handle the
action for annulment, filed against a decision made at Oy
Radiolinja Ab's Annual General Meeting in spring 2000, on
increasing the share capital, and that the people who filed the
action are entitled to have the legality of the decision's content
investigated.
Investigations and clarifications associated with the competition
and telecommunication legislation concerning the pricing and
delivery terms of Elisa group companies' services and network
products are pending at the Finnish Communications Regulatory
Authority and the Finnish Competition Authorities.
Events after the financial period
Elisa Corporation is to revamp its brand as part of its overall
strategy process. The principal umbrella brand of the whole group
will be Elisa. However, selected retail and product brands may be
used.
On 15 April 2004, the Finnish Government amended the 3G mobile
communication licences. Therefore, the terms and conditions of
Radiolinja Origo Oy's 3G licence have also been amended. The
amended licenses allow partial joint constructing and use of the
networks.
Three objections by creditors to the merger of Oy Radiolinja Ab
have been entered in the Trade Register. Therefore, consent to the
merger cannot be granted before the objections have been
withdrawn, or the payment of the debt or a legally valid
resolution of a sufficient security by a tribunal has been made.
Owing to this, the merger of Oy Radiolinja Ab with Elisa
Corporation will not take place on the original scheduled date
of 1 July 2004.
Outlook
The telecommunications market in Finland is envisaged to grow at
a slow pace and the situation regarding competition to remain
challenging. No substantial changes in Elisa's market position
are expected.
Owing to both the new billing practice of interconnection traffic
and price reductions, the comparable revenue is estimated to
decrease from the previous year's level. The operational result
for 2004 is expected to improve considerably. However, the
profitability of the remainin three quarters will be at a clearly
lower level compared to the first quarter due to market activities
and price erosion.
Information in this interim report is not audited.
ELISA CORPORATION
BOARD OF DIRECTORS
Additional information:
Mr Veli-Matti Mattila, President and CEO, tel. +358 10 262 2635
Ms Tuija Soanjärvi, CFO, tel. +358 10 262 2606
Mr Vesa Sahivirta, Vice President, Investor Relations,
tel. +358 10 262 3036
Distribution:
HEX
Major media
Appendix
ELISA CORPORATION
INTERIM REPORT 1 JANUARY-31 MARCH 2004 (eur million)
(Figures in this interim report are not audited)
Jan- Jan- Jan-
CONSOLIDATED INCOME STATEMENT Mar Mar Dec
2004 2003 2003
Revenue 333 371 1 538
Other operating income 7 4 34
Operating expenses -221 -290 -1 187
Depreciation and value
adjustments:
On fixed assets -49 -65 -273
On Corporation's goodwill -11 -14 -145
EBIT 59 7 -34
Financial income and expenses:
Share of associated companies'
profit 0 -1 -0
Other financial income and
expenses -8 -11 -40
Profit before extraordinary items 51 -5 -74
Extraordinary items
Profit after extraordinary items 51 -5 -74
Income taxes -18 -4 60
Minority interest -1 0 -3
Net profit 32 -8 -17
CONSOLIDATED BALANCE SHEET 31.3. 31.3. 31.12.
2004 2003 2003
Fixed assets
Intangible assets 54 76 64
Consolidated goodwill 446 569 460
Tangible assets 711 930 856
Share in associated companies 17 21 20
Other investments 11 13 12
1 239 1 609 1 412
Current assets
Inventories 14 20 16
Deferred tax receivable 90 28 82
Receivables 416 344 353
Marketable securities 24 1 6
Cash in hand and in banks 44 84 61
588 477 518
Total assets 1 827 2 086 1 930
Shareholders' equity
Share capital 69 69 69
Share premium account 517 517 517
Contingency fund 3 3 3
Retained earnings 110 127 127
Net profit 32 -8 -17
731 708 699
Minority interests 75 83 77
Provisions for liabilities and
charges 31 64 52
Liabilities
Long-term creditors 562 714 617
Short-term creditors 428 517 485
990 1 231 1 102
Total shareholders' equity
and liabilities 1 827 2 086 1 930
Income taxes refer to taxes
incurred during the period.
CONSOLIDATED CASH FLOW
STATEMENT 1) Jan- Jan- Jan-
Mar Mar Dec
2004 2003 2003
Cash inflow from
operating activities
Profit before extraordinary
items 51 -5 -74
Adjustments:
Depreciation and value
adjustments 60 79 418
Other financial income
and expenses 7 11 40
Sales profits from
the disposal of fixed assets 0 0 -3
Sales profits from business
operations -2 0 -1
Other adjustments 0 0 1
Cash inflow before working
capital 116 85 381
Change in working capital -32 -13 -21
Cash inflow before taxes
and financials 85 72 360
Received dividends and interests
and interest paid -20 -24 -40
Taxes paid -5 -20 -15
Free funds from operations 60 29 305
Cash flow in investments
Investments in fixed assets -42 -39 -194
Disposal of fixed assets 1 1 5
Investments in shares
and other investments -1 -1 -28
Disposal of shares
and other investments 0 0 16
Disposal of business operations 2 0 1
Cash flow in investments -41 -39 -200
Cash flow after investments 19 -10 105
Cash flow in financing
Change in interest-bearing
receivables 0 8 -17
Change in long-term loans 0 -6 -97
Change in short-term loans -2 27 12
Dividends paid -2
Cash flow in financing -1 29 -104
Change in financial assets 18 19 1
Financial assets at the beginning
of the financial period 67 66 66
Change in group structure -17
Financial assets at the end
of the financial period 68 85 67
1) Consolidated cash flow statement
shows received and paid interests
and taxes as new information.
Financial assets on period Jan-Mar
2003 have been adjusted to
2003 reporting standard.
Jan- Jan- Jan-
Mar Mar Dec
2004 2003 2003
KEY FIGURES
Earnings/share (EPS), EUR 0,23 -0,06 -0,12
Shareholders' equity/share, EUR 5,32 5,16 5,09
Gross investments in fixed assets 42 39 194
Gross investments as % of
revenue 12,7 10,5 12,6
Purchase of shares 1 1 28
Non-interest-bearing debt 310 379 355
Average number of personnel 5 909 7 365 7 172
LIABILITIES 31.3. 31.3. 31.12.
2004 2003 2003
Mortgages
For own and group companies 77 75 77
Pledges given
Pledges given as surety 24 10 24
Guarantees given
For others 11 11 11
Total liabilities 112 96 112
Derivative contracts
Forward contracts
Market value of underlying
security 15 16 14
Market value 1 1 2
LEASING CONTRACTS AND 31.3. 31.3. 31.12.
OTHER COMMITMENTS 2004 2003 2003
Leasing commitments 27 36 35
Repurchase commitments 2 3 3
Real estate leases 132 134 136
Lease liabilities total 161 173 174
Leasing commitments consists
mainly from leases of IT and
office equipment and cars.
Real estate leases consists both
office and technical space.
Leasing contracts and other
commitments contains real estate
leases as new information.
Leasing and rental agreements of
telecom networks
Fixed network 15 16 16
German business 122 133
Mobile network 1) 41 66 56
Rental agreement liabilities,
total 56 204 205
*) Added to this, an obligatory
reserve for the future redemptions
of GSM network financial
agreements 10 65 27
Lease-leaseback agreement
commitment (QTE facility) 166 186 161
Other commitments 4 43 6
ADJUSTED GROUP KEY FIGURES
(exclusive of non-recurring items)
Jan- Jan- Jan-
Mar Mar Dec
2004 2003 2003
Revenue 333 371 1538
EBITDA 119 85 407
EBITDA, % 35,6 22,9 26,5
EBIT 59 7 83
EBIT, % 17,7 1,9 5,4
Profit before extraordinary
items 51 -5 43
Adjusted key figures have been
calculated without the following
non-recurring items:
Restructuring costs -22
Write-downs in Germany -94
Non-recurring items, total -116
Impact on EBITDA -22
Impact on EBIT -116
Impact on profit before
extraordinary items -116
Items presented in the tables
for each row have been rounded.
THE CORPORATION'S REVENUE, EBITDA AND EBIT BY SEGMENTS *)
Revenue EBITDA EBIT
1-3/04 1-3/03 1-3/04 1-3/03 1-3/04 1-3/03
Segment:
Mobile 179 174 66 43 45 17
Corporation bookings -8 -9
Total 179 174 66 43 37 8
Segment:
Fixed Network 164 172 52 45 26 18
Corporation bookings -1 -1
Total 164 172 52 45 25 17
Germany
Carrier-business 32 -1 -9
Corporation bookings -1
Total 32 -1 -10
Other Companies
Comptel 13 12 3 1 3 0
Other Companies **) 10 12 0 -2 -2 -3
Total 23 24 3 -1 1 -3
Corporate functions ***) -2 -2 -4 -4
Corporation, total 333 371 119 85 59 7
KEY FIGURES BY SEGMENT
(EXCLUSIVE OF
NON-RECURRING ITEMS)
Segments Revenue EBITDA EBIT
(adjusted) (adjusted)
1-3/04 1-3/03 1-3/04 1-3/03 1-3/04 1-3/03
Mobile 179 174 66 43 37 8
Fixed Network 164 172 52 45 25 17
Germany 32 -1 -10
Other Companies 23 24 1 -3 -3 -8
Intra-segment sales -33 -31
Corporation Total,
(adjusted) 333 371 119 85 59 7
*) Business has been re-grouped to match new organisation.
**) Includes Yomi IT companies and the parent company
of Yomi Group.
***) Includes corporate headquarters and administration.
FINANCIAL SITUATION AS AT 31.3.2004
(eur million) 31.3.04 31.12.03 30.9.03 30.6.03 31.3.03
Long-term debt
Bonds and notes 472 472 572 572 572
Loans from
the Pension funds 80 80 80 80 80
Loans from financial
institutions 3 57 57 55 48
Total 554 609 709 707 700
Short-term debt
Bonds and notes 100 100
Loans from
financial institutions 2 13 7 2 2
Committed credit line 1) 0 0 0 0 0
Commercial papers 2) 0 0 37 81 124
Others 24 3) 25 27 26 27
Total 126 138 71 109 153
Interest-bearing debt, total 680 747 780 816 853
Security deposits 25 4) 25 8 8 7
Securities 24 6 7 12 1
Cash and bank 44 61 42 54 78
Interest-bearing receivables 93 92 57 74 86
Net debt 5) 587 654 723 742 767
1) The committed credit line is a joint EUR 170 million revolving
credit facility with eight banks, which Elisa Corporation may
flexibly use on agreed pricing. The loan arrangement is valid
until 16 June 2008.
2) Elisa Corporation has agreed on a joint programme with seven
banks on issuing commercial papers. The arrangement is not
committed. The maximum amount of the arrangement is EUR 150
million.
3) Redemption liability for minority shareholders in Radiolinja
(EUR 16m) and deposits in the Financial Services Office
(Eur 8m).
4) Security deposit for redemption liability of Radiolinja
(8 MEUR), security deposit for QTE guarantee (16 MEUR)
and other interest-bearing receivables (1 MEUR).
5) Net debt is interest-bearing debt less cash and
interest-bearing receivables.
Key financial indicators 31.3.04 31.12.03 30.9.03 30.6.03 31.3.03
Gearing 76 % 87 % 88 % 91 % 97 %
Equity ratio 44 % 40 % 40 % 40 % 38 %
Formulae for financial indicators
Gearing %
Interest-bearing debt - cash and bank - securities
------------------------------------------------- x 100
Shareholders' equity + minority interests
Equity ratio %
Shareholders' equity + minority interests
---------------------------------------- x 100
Balance sheet total - advances received
