ELISA'S INTERIM REPORT FOR JULY-SEPTEMBER 2006
ELISA CORPORATION STOCK EXCHANGE RELEASE 20 OCTOBER 2006 AT 8.30am
ELISA'S INTERIM REPORT FOR JULY-SEPTEMBER 2006
The profit before tax improved from EUR 28 million to EUR 69
million and the EBITDA from EUR 85 million to EUR 123 million
Revenue increased by 19 per cent and was EUR 387 million
(326).
Revenue per subscription (ARPU) decreased slightly from EUR
31.3 in the second quarter to EUR 30.5 due to a reduction in
Saunalahti's interconnection fee
Churn in mobile communications decreased further to stand at
11.7 per cent, compared with 12.9 per cent in the second quarter.
The introduction of new 3G service bundles and prepaid
subscriptions contributed to an increase in the number of mobile
subscriptions.
The number of broadband subscriptions increased by
approximately 7,000 on the previous quarter.
The financial position remained stable: at the end of
September, the equity ratio was 65 per cent (62 per cent at the
end of 2005) and net debt at EUR 336 million (293 at the end of
2005)
In July-September, Elisa's key indicators were as follows:
Income statement 7-9/2006 7-9/2005 1-12/2005
EUR million
Revenue 387 326 1 337
EBITDA 123 85 446*
EBIT 73 33 233*
Profit before taxes 69 28 212*
Earnings per share, EUR 0.32 0.15 1.22*
Capital expenditures 40 45 204
* Excluding non-recurring items: EBITDA EUR 346 million, EBIT EUR
133 million, profit before taxes EUR 112 million and earnings per
share EUR 0.61
Figures describing the financial position and cash flow:
Financial position 30.9.2006 30.9.2005 31.12.2005
Net debt 336 363 293
Equity ratio, % 65.5 55.3 61.7
Cash flow statement 7-9/2006 7-9/2005 1-12/2005
Cash flow after investments 36 1 308
CEO Veli-Matti Mattila:
Uniform interconnection fees
Interconnection fees between operators have been widely
discussed. Different rates have a highly distorting effect on
competition and thus the fees should be adjusted to a uniform
level. Unless operators can soon come to a mutual agreement, the
regulatory authorities are positioned to promote a speedy solution
to the problem. The Ministry of Transport and Communications has
already forcibly expressed its opinions in this respect.
In this matter we should look at what is happening elsewhere in
Europe. The trend is towards uniform rates, which also corresponds
with the intent of the European Commission. For example, Sweden
has announced its aim to harmonise the interconnecting fees
already next year.
There are currently some 220,000 3G data terminals in Finland,
which means growth has been very strong. We estimate this number
to exceed 300,000 by the end of the year. One of the main
objectives was to update the countrys mobile phone base to
correspond to the requirements of the information society. Service
bundles have been an undeniable success.
Elisa's third-quarter performance was very successful. We retained
our leading position on the slackening broadband market and the
number of our mobile network subscriptions increased markedly.
Mobile subscription usage also increased favourably. I am
particularly pleased with the growing usage of new services, which
testifies to the popularity of our service bundles.
ELISA CORPORATION
Vesa Sahivirta
Director, IR and Financial Communications
Further information:
Mr Veli-Matti Mattila, President and CEO, tel. +358 10 262 2635
Mr Jari Kinnunen, CFO, tel. +358 10 262 9510
Mr Vesa Sahivirta, Director, IR and Financial Communication,
tel. +358 10 262 3036
Distribution:
Helsinki Stock Exchange
Principal media
Interim report for January-September 2006
This interim report has been prepared in accordance with the IFRS
recognition and measurement principles. The information presented
in this interim report is unaudited. This report concerns the July-
September period. The figures in the tables for the Stock Exchange
Release concern the January-September period.
Market situation
The new 3G service bundles, which have been permitted since 1
April, have clearly strengthened the service competition. These
bundles offer new services and have been highly popular. The
number of mobile network subscriptions developed positively, and
usage of subscriptions increased.
The fixed network business continued its earlier trend: the number
of broadband subscriptions continued to grow, while the number and
usage of traditional subscriptions decreased.
Revenue
EUR million 7-9/2006 7-9/2005 Change, %
Mobile communications 246 183 34
Fixed network 156 166 -6
Other businesses 0 5
Inter-segment sales -16 -28 -43
Total 387 326 19
Elisa's revenue for July-September was up 19 per cent on last
year. The growth was positively affected by Elisa's acquisition of
Saunalahti's business and an increase in the sale of mobile
handsets.
Performance
EUR million 7-9/2006 7-9/2005 Change,%
Mobile communications
EBITDA 72 46 57
EBITDA, % 29 25
EBIT 49 24 104
Fixed network
EBITDA 52 40 30
EBITDA, % 33 24
EBIT 26 12 117
Other business and
corporate functions
EBITDA -1 -1
EBIT -1 -3
Group, total
EBITDA 123 85 45
EBITDA, % 32 26
EBIT 73 33 121
Elisa's EBITDA grew 45 per cent on the corresponding period in
2005. This increase was attributable to improved profitability,
the synergy benefits created by the acquisition of Saunalahti and
the increased usage of service bundles and new services.
The Groups financial income and expenses totalled EUR -4
million (-5). Reduced financial expenses were mainly due to a
decrease in average net debt in the period under review.
Income taxes in the period under review amounted to EUR -16
million (-6).
The Group's July-September profit after taxes amounted to EUR 53
million (22). The Groups earnings per share (EPS) amounted to EUR
0.32 (0.15). At the end of September, the Group's equity per share
was EUR 8.01 (8.06 at the end of 2005).
Changes in corporate structure
Elisa sold the television business of TV Jyväskylä, a local
channel operating in Elisa's cable television network in the
Jyväskylä region, to TV Jyväskylä Ky with an agreement signed on
8 September 2006.
Mobile communication business
Number of subscriptions 30.9.2006 30.9.2005 31.12.2005
Total number of subscriptions
(Finland and Estonia) 2,452,487 1,738,624 2,228,101
Total number of subscriptions
in Finland * 2,163,887 1,480,794 1,962,101
Subscriptions in Estonia 288,600 257,830 266,000
* Elisa's network operator
in Finland
Operating figures in Finland 7-9/2006 7-9/2005 2005
Revenue/subscription**(ARPU), 30.5 31.2 32.5
Churn**, % 11.7 27.2 28.4
Usage, million minutes* 1,265 934 3,509
Usage, min/subscription/month** 207 177 172
SMS, million msg* 303 219 827
SMS, msg/subscription/month** 50 38 38
Value-added services/revenue,% 17 17 16
* Elisa's network operator in Finland (2005 figures include some
Saunalahti subscriptions)
** Elisa's service operator in Finland (2005 figures exclude
Saunalahti)
Elisas network operator increased the number of its subscriptions
by some 683,100 subscriptions during the year. The increase was
markedly due to Saunalahti shifting its subscriptions to Elisas
network. The third-quarter increase was approximately 103,500
subscriptions. The increase was affected by the positive demand
for 3G service bundles and prepaid subscriptions.
The call minutes per subscription of Elisa's own service operator
rose by approximately 17 per cent and the number of SMS messages
increased by approximately 32 per cent on the corresponding period
in 2005. The call minutes of the network operator rose by 35 per
cent and SMS messages by 38 per cent. The increase was affected by
e.g. the additional traffic generated by Saunalahti.
Revenue per subscription (ARPU) decreased by approximately 2 per
cent on the comparison period. This was due to a fall in consumer
prices and interconnection fees in June 2006. The increased usage
per subscription failed to completely compensate for the decrease
due to price erosion. Compared with the previous quarter, revenue
per subscription was down by some 3 per cent, decreasing from EUR
31.3 to EUR 30.5, which was partially due to the reduction of
Saunalahti's interconnection fees.
On 20 September 2006, Elisa began offering its 2G and 3G customers
the most comprehensive mobile TV service in Finland, providing
users with access to eight different TV channels.
From September to November, Elisa will expand its 3G network to
seven new locations. Elisa will also improve network functionality
by establishing new base stations at current 3G locations across
the whole country.
Elisas Estonian subsidiary continued to grow. Revenue was EUR
27.8 million (23.9), EBITDA EUR 9.6 million (7.5) and EBIT 6.9
million (5.2). The number of subscriptions increased by
approximately 12 per cent to 288,600 subscriptions at the end of
September (257,830). In July, Elisa launched its HSDPA network
in Tallinn and Pärnu. The maximum speed of the network is 1 Mbit/s.
Fixed network business
Number of subscriptions 30.9.2006 30.9.2005 31.12.2005
Broadband subscriptions 479,586 345,896 420,465
ISDN channels 110,226 135,716 128,665
Cable TV subscriptions 223,192 208,592 214,054
Analogue and other
subscriptions 528,776 592,663 578,002
Subscriptions, total 1,341,770 1,282,869 1,341,186
The number of broadband subscriptions rose by 7,054 in the July-
September period, showing an increase of 39 per cent on the
previous year.
The number of traditional subscriptions continued to decrease
steadily as voice calls shifted to the mobile communication
network and data transfers to broadband subscriptions.
Elisa continued its investments targeted at increasing the speeds
of the fixed broadband network and enabling the company to offer
new services.
Elisa introduced a broadband service bundle, which includes
a broadband subscription and a laptop PC.
Personnel
During July-September, the average number of personnel at Elisa
was 3,956 (an average of 4,989 in 2005).
30.9.2006 30.9.2005 31.12.2005
Mobile communications 1,355 1,449 1,629
Fixed network 2,267 3,102 3,001
Other business operations - 166 -
Corporate functions 39 55 51
Total 3,661 4,772 4,681
Elisa's business transfer agreements made in the first half of
2006 concerning the partial transfer of Elisa's field operations
in the area of customer installations and maintenance to Relacom
Finland Oy took effect as of 1 September 2006.
The business transfer agreement concerning the outsourcing of
external accounting processes related to Elisa's financial
administration to Pretax BSP Oy took effect as of 1 September
2006.
In connection with the outsourcing agreements, 337 employees
transferred from Elisa to Relacom and 32 employees to Pretax as
established employees.
Investments
EUR million 7-9/2006 7-9/2005 1-12/2005
Capital expenditures, of which 40 45 204
- mobile communication business 14 18 86
- GSM leasing liability buy-backs 0 0 4
- fixed network business 27 27 112
- others 0 0 2
Shares 7 5 415
- of which achieved through an
exchange of shares 361
Total 47 51 619
Financial position
Elisa's financial position and liquidity remained stable during
the third quarter. The Group's July-September cash flow after
investments amounted to EUR 36 million (1).
Financial key indicators
EUR million 30.9.2006 30.9.2005 31.12.2005
Net debt 336 363 293
Gearing, % 25.2 35.3 21.7
Equity ratio, % 65.5 55.3 61.7
7-9/2006 7-9/2005 1-12/2005
Cash flow after investments 36 1 308
Valid financing arrangements
EUR million Maximum In use on
amount 30.9.2006
Committed credit line 170 0
Commercial paper programme 1) 150 0
EMTN programme2) 1,000 336
1) The programme is not committed
2) European Medium Term Note programme, not committed.
Long-term credit ratings
Credit rating agency Rating Outlook
Moodys Investor Services Baa2 Stable
Standard & Poors BBB Negative
Share
At the end of September the company's total number of shares was
166,066,016 and its market capitalisation on 30 September 2006
stood at EUR 2,887 million.
In July-September, a total of 47.4 million shares were traded on
the Helsinki Stock Exchange for an aggregate of EUR 762.3 million.
The exchange was 28.6 per cent of the number of shares on the
market.
Treasury shares
The Annual General Meeting held on 27 March 2006 authorised the
Board of Directors to acquire and assign treasury shares. The
authorisation has not been used. At the end of September, the
companies consolidated in the Elisa Group's financial statements
held 125,000 Elisa Corporation shares. The nominal value of the
shares totalled EUR 62,500, and their proportion of the share
capital and voting rights was 0.1 per cent.
Significant legal issues
Since the publication of Elisa's Annual Report 2005 and the 2006
interim reports, the following legal developments concerning Elisa
have taken place:
A total of 379,800 shares held in Elisa's joint book-entry account
were sold on the Helsinki Stock Exchange between 27 July and 1
August 2006. These shares represent approximately 0.23 per cent of
Elisa's shares and votes. The sale was based on the decision made
by Elisa's Annual General Meeting on 14 March 2005 to sell the non-
transferred shares held in the joint book-entry account on behalf
of their owners in accordance with Chapter 31, section 3a of the
Finnish Companies Act.
The proceeds received from the sale have been deposited with the
State Provincial Office of Southern Finland. The owners of shares
held in the joint account or other assignees are entitled to
receive a share of the proceeds corresponding to the number of
shares owned.
Events after the reporting period
Elisa's tender offer to the shareholders of Lounet Oy continues
until 17 November 2006. As a result of the offer, Elisa's
ownership in Lounet is now almost 80 per cent.
Outlook for 2006
Competition in the Finnish telecommunications market remains
challenging, while the focus is increasingly shifting to services.
The use of mobile communications and broadband products continues
to increase. Elisa's aim is to further reinforce its position as
the leading service supplier.
The Group's revenue is expected to increase clearly on the
previous year. The growth will be partially attributable to an
increase in handset sales. Elisa expects to see a clear
improvement in EBITDA and EBIT excluding non-recurring items in
2006. This will be due to e.g. the synergy benefits created by the
Saunalahti deal and Elisa's rationalisation procedures.
Profitability in the fourth quarter will remain good, although a
slight fall in EBITDA and EBIT from third-quarter levels is
expected due to increasing market activities and seasonal
variation in personnel expenses.
Capital expenditures during the year are estimated to total 13 to
15 per cent of the revenue, and cash flow will remain clearly
positive. Certain non-recurring items due to IT and production
system reforms, which will support the "One Elisa" operational
model, are scheduled for 2006.
BOARD OF DIRECTORS
Figures are not audited.
CONSOLIDATED INCOME STATEMENT
EUR million
7-9 7-9 1-9 1-9 1-12
2006 2005 2006 2005 2005
Revenue 386,9 325,5 1117,7 994,3 1337,3
Other operating income 2,8 3,2 6,7 101,5 113,9
Operating expenses -266,7 -244,0 -808,1 -744,2 -1005,1
EBITDA 123,0 84,7 316,3 351,6 446,1
Depreciation and amortisation -49,8 -51,9 -161,3 -156,4 -213,2
EBIT 73,2 32,8 155,0 195,2 232,9
Share of associated companies'
profit 0,0 0,0 0,0 1,2 1,2
Financial income and expenses -3,9 -5,0 -12,3 -17,1 -22,2
Profit before tax 69,3 27,8 142,7 179,3 211,9
Income taxes -16,3 -5,7 -32,3 -29,5 -34,1
Profit for the period 53,0 22,1 110,4 149,8 177,8
Attributable to:
Equity holders of the parent 52,6 21,6 109,6 149,0 176,2
Minority interest 0,4 0,5 0,8 0,8 1,6
Profit for the period 53,0 22,1 110,4 149,8 177,8
Earnings per share (EUR)
Basic 0,32 0,15 0,66 1,05 1,22
Diluted 0,32 0,15 0,66 1,05 1,22
Average number of outstanding
shares (1000 shares)
Basic 165941 141757 165933 141769 144807
Diluted 165941 141757 165933 141769 144807
REVENUE BY BUSINESS SEGMENTS
EUR million
7-9 7-9 1-9 1-9 1-12
2006 2005 2006 2005 2005
Mobile 245,7 183,3 677,1 542,6 739,9
Fixed Network 156,4 166,0 502,6 497,9 670,9
Other Companies 5,4 0,1 36,7 38,2
Unallocated
Intra-segment sales elimination -15,2 -29,2 -62,3 -82,9 -111,7
Corporation total 386,9 325,5 1117,5 994,3 1337,3
EBITDA BY BUSINESS SEGMENTS
EUR million
7-9 7-9 1-9 1-9 1-12
2006 2005 2006 2005 2005
Mobile 72,3 45,6 182,6 168,3 220,1
Fixed Network 52,0 40,2 137,7 122,8 159,6
Other Companies 0,8 50,6 55,8
Unallocated -1,3 -1,9 -4,0 9,9 10,5
Corporation total 123,0 84,7 316,3 351,6 446,1
EBIT BY BUSINESS SEGMENTS
EUR million
7-9 7-9 1-9 1-9 1-12
2006 2005 2006 2005 2005
Mobile 48,7 24,0 107,9 102,8 129,9
Fixed Network 25,5 11,6 51,8 41,4 44,8
Other Companies 0,5 42,1 47,3
Unallocated -1,0 -3,3 -4,7 8,9 10,9
Corporation total 73,2 32,8 155,0 195,2 232,9
CONSOLIDATED BALANCE SHEET
EUR million
30.9. 30.9. 31.12.
2006 2005 2005
Non-current assets
Property, plant and equipment 629,6 693,6 660,6
Goodwill 772,2 471,1 770,6
Other intangible assets 183,7 81,0 178,7
Investments in associated companies 0,3 0,4 0,4
Available-for-sale investments 32,1 46,5 44,2
Other receivables 14,4 10,8 10,6
Deferred tax receivable 37,2 35,0 42,5
1669,5 1338,4 1707,6
Current assets
Inventories 24,4 17,6 20,3
Trade and other receivables 319,5 359,1 261,8
Cash and cash equivalents 38,8 156,3 212,7
382,7 533,0 494,8
Total assets 2052,2 1871,4 2202,4
Equity attributable to equity
holders of the parent 1328,8 1016,2 1337,3
Minority interest 6,6 12,5 12,4
Total equity 1335,4 1028,7 1349,7
Non-current liabilities
Deferred tax liabilities 36,9 31,4 40,6
Provisions 8,7 6,1 9,4
Interest-bearing debt 323,9 403,3 393,7
Other non-current liabilities 12,2 13,1 12,7
381,7 453,9 456,4
Current liabilities
Trade and other payables 279,7 268,5 280,5
Provisions 4,5 4,6 3,4
Interest-bearing debt 50,9 115,7 112,4
335,1 388,8 396,3
Total equity and liabilities 2052,2 1871,4 2202,4
STATEMENT OF CHANGES IN EQUITY
EUR million
Share
Share issue Treasury Other Retained Minority Total
capital premium shares reserves earnings interest equity
Total equity
at 31.12.2004 71,0 530,4 -3,1 34,5 250,8 31,0 914,5
Available for
sale investments 37,0 37,0
Other changes 3,2 -15,7 -12,5
Items recognised
directly in
equity 37,0 3,2 -15,7 24,5
Profit for
the period 149,0 0,8 149,8
Total recognised
income and
expense for the
period 37,0 152,2 -14,9 174,3
Dividends -56,8 -3,6 -60,4
Purchase of
treasury shares 0,2 0,2
Total equity
at 30.9.2005 71,0 530,4 -2,9 71,5 346,2 12,5 1028,7
Total equity
at 31.12.2005 83,0 530,4 -2,5 418,9 307,5 12,4 1349,7
Available for
sale investments -2,6 -2,6
Other changes -0,1 -0,2 -1,0 -4,5 -5,8
Items recognised
directly in
equity -0,1 -2,8 -1,0 -4,5 -8,4
Profit for
the period 109,6 0,8 110,4
Total recognised
income and
expense for the
period -0,1 -2,8 108,6 -3,7 102,0
Dividends -116,1 -2,1 -118,2
Sales of
treasury shares 0,8 0,1 0,9
Share based
compensation 1,0 1,0
Total equity
at 30.9.2006 83,0 530,4 -1,8 417,1 300,1 6,6 1335,4
CONSOLIDATED CASH FLOW STATEMENT
EUR million
1-9 1-9 1-12
2006 2005 2005
Cash flow from operating activities
Profit before tax 142,7 179,3 211,9
Depreciation and amortisation 161,3 156,4 213,2
Other adjustments to profit before tax 10,1 -66,5 -66,3
Change in working capital -69,5 -37,4 -23,7
Cash flow from operating activities 244,6 231,8 335,1
Received dividends and interests and interest
paid -18,5 -22,7 -20,5
Taxes paid -0,9 -4,2 -5,1
Net cash flow from operating activities 225,2 204,9 309,5
Cash flow from investments
Capital expenditure -136,7 -124,0 -194,9
Investments in shares and other investments -24,6 -17,2 -4,1
Proceeds from asset disposal 13,7 99,7 197,5
Net cash used in investment -147,6 -41,5 -1,5
Cash flow after investments 77,6 163,4 308,0
Cash flow from financing
Proceeds from treasury shares 0,9 0,8
Change in interest-bearing receivables 0,7 0,8
Repayment of long-term debt -122,4 -87,5 -102,4
Change in short-term debt -10,4 -18,6
Repayment of financing leases -7,5 -12,4 -16,7
Dividends paid -122,5 -60,3 -122,0
Net cash used in financing -251,5 -169,9 -258,1
Change in cash and cash equivalents -173,9 -6,5 49,9
Cash and cash equivalents at beginning of
period 212,7 162,8 162,8
Cash and cash equivalents at end of period 38,8 156,3 212,7
LIABILITIES
EUR million
30.9. 30.9. 31.12.
2006 2005 2005
Mortgages, pledges and guarantees
Mortgages
For own and group companies 0,0 1,9 18,7
Pledges given
Pledges given as surety 0,7 1,0 0,9
Guarantees given
For others 0,5 2,6 3,1
Mortgages, pledges and guarantees total 1,2 5,5 22,6
Leasing contracts and other commitments
Leasing commitments 12,0 14,3 14,3
Repurchase commitments 0,5 0,8 0,7
Real estate leases 57,2 57,7 63,3
Lease liabilities total 69,7 72,8 78,3
Other commitments
Lease-leaseback agreement (QTE facility)
Termination risk 19,4 23,1 23,5
Total value of the arrangement 160,3 168,7 171,5
Other commitments 0,0 0,1 0,6
KEY FIGURES
EUR million
7-9 7-9 1-9 1-9 1-12
2006 2005 2006 2005 2005
Shareholders' equity/share, EUR 8,01 7,17 8,06
Net debt 336,0 362,7 293,5
Gearing 25,2 % 35,3 % 21,7 %
Equity ratio 65,5 % 55,3 % 61,7 %
Gross investments in fixed assets 39,7 45,2 137,6 133,1 204,4
of which finance lease investments 0,1 0,4 1,0 9,2 9,5
Gross investments as % of
revenue 10,3 % 13,9 % 12,3 % 13,4 % 15,3 %
Investments in shares, 6,9 5,4 8,2 40,1 414,8
of which paid in equity issue 361,2
Average number of personnel 4239 5109 4989
Formulae for financial indicators
Gearing %
Interest-bearing debt - cash and cash equivalents
-------------------------------------------------x 100
Total equity
Equity ratio %
Total equity
------------------------------------------------ x 100
Balance sheet total - advances received
Net debt Interest-bearing debt - cash and cash equivalents
Shareholders' equity/share
Equity attributable to equity holders of the parent
--------------------------------------------------------
Number of shares outstanding at end of period
Earnings/share
Profit for the period attributable to equity holders of parent
----------------------------------------------------------------
Average number of outstanding shares
