1999 Nine Month Report

Europolitan reports strong nine months result with pre-tax income of SEK 1,070 million *166 000 net customer additions *Revenue of SEK 3,177 million *Operating cash flow up 35% *New individual subscription form with many services and new business subscriptions *High speed data service launched 1999 Nine Month Report Customer Growth Europolitan's customer base increased to 790,000 as of September 30, 1999, including 136,000 active Europolitan EASY prepaid cards. A total of 166,000 (150,000) new customers were added in the first nine months of 1999, including 125,000 contract customers (84,000). During the third quarter 62,000 (46,000) customers were added, including 50,000 contract customers (24,000). Revenue Europolitan's consolidated nine months net sales and other operating income increased 33% to SEK 3,177 million compared with the same period last year (SEK 2,387 million). Average monthly revenue per customer, excluding prepaid cards, increased 6% to SEK 575 (SEK 544), due to continued higher usage per customer and growth in value added services. Average monthly revenue per customer, including prepaid EASY customers, declined 4% to SEK 491 (SEK 514), reflecting the larger proportionate share of prepaid users in the customer base and their lower average usage compared with contract customers. Operating Expenses and Profit Operating expenses increased 30% to SEK 2,089 million (SEK 1,601 million) in the first nine months, excluding capitalised expenses for own use. This increase was largely due to the high level of contract customer growth and higher traffic volumes and depreciation cost. After net financial expense of SEK 18 million (SEK 47 million), profit after financial items increased 45% to SEK 1,070 million (SEK 739 million). After tax expense of SEK 300 million (SEK 155 million), net profit was SEK 770 million (SEK 584 million). Capital Expenditures Capital expenditure in the first nine months continued at the same rate as the previous period increasing slightly to SEK 504 million (SEK 499 million). In addition to continuing to increase network capacity, coverage and quality the company invested in new products and services such as High Speed Circuit Switched Data ("HSCSD"). Liquidity and Financing Cash flow after investing activities (free cash flow) rose sharply to SEK 794 million (SEK 418 million), up 90% compared with the same period last year. The outstanding balance on the SEK 1.4 billion long-term debt facility from the majority shareholder Vodafone AirTouch Plc was SEK 366 million at the end of the nine month period. Undrawn borrowing facilities as of September 30, 1999 were SEK 1,198 million (SEK 570 million). Parent Company Results The Group's parent company, Europolitan Holdings AB, had revenue in the first nine months of SEK 15.6 million (SEK 12.6 million) and posted a profit after financial items of SEK 0.4 million (loss SEK 3.6 million). There were no new investments made in the first nine months of 1999 (SEK 15 thousand). The parent company's change in cash was an outflow of SEK 800 thousand (inflow SEK 300 thousand). Net financing reduced by SEK 314 million (increase SEK 390 million). Market Overview Growth in the business segment was strong in the third quarter continuing the pattern witnessed in the first half. The flexible subscription packages aimed 1 at the private customer launched in May 1999 continued to fuel growth in Europolitan's customer base in the third quarter of 1999. Europolitan aims at creating long-term relationships with its customers and is very pleased with the strong growth and low churn. The company believes it has continued to attract a substantial share of new contract customers. Europolitan believes that one of the key factors in building strong long term relationships with its customers is its ability to provide a full range of services. During the third quarter the company's customers continued to expand their use of its value added services, including a strong growth in short message service ("SMS") use. Europolitan considers the expansion of data services will continue and has signed co-operation agreements with companies, which are among the leaders in their fields, to assist making the next wave of data services available on its network. Handsets will shortly be available which will enable users to access information on the internet or on organisations' intranets using Wireless Application Protocols ("WAP") and the partnerships forged will help Europolitan to maintain its record of being at the forefront of technical innovation on wireless. One new Europolitan store was opened in the quarter in Eskilstuna increasing the number of stores to 29 by September 30, 1999. Third Quarter Highlights In September, Europolitan became the first mobile operator in the world to offer services incorporating higher speed mobile data transmission rates. The new services enable transmission rates of 43 kilobits per second ("kb/s") compared to conventional mobile data rates of 9.6 kb/s. Terminals presently available only allow speeds of up to 14.4 kb/s but new handsets and accessories, available later in 1999, will enable the higher data speed to be achieved. (Press release September 3, 1999). In September, Europolitan launched two new subscriptions, one which allows customers the flexibility to add the services they require whilst the other provides the customer with a full range of services, including unified messaging, internet services and high speed data. Unified messaging enables faxes, voice messages and e-mails to be collected in a single personal mailbox that can be accessed by mobile phone or via the Internet. (Press releases September 6, 1999 and October 11,1999 ). Co-operation agreements were signed with: Nocom AB, to develop secure WAP services, "WAP Direct" (Press release September 10, 1999); Consafe Infotech AB, to develop mobile information solutions (Press release September 23, 1999) and WM-data Infrastruktur AB, to develop mobile information services and telematics (Press release October 5, 1999). Regulatory Update Several commentators have criticised the Swedish Post and Telecom Agency's ("PTS") proposal to force today's as well as the next generation's (UMTS) mobile network operators to allow service providers access to their networks. The Government, therefore, directed the PTS to carry out a further review of its proposal and, at the same time, asked Professor Lars Hultkrantz to investigate the likely impact on future investments if it is implemented. Professor Hulkrantz confirms in several important aspects the criticisms put forward by Europolitan and others and has stated that there is a large degree of uncertainty with respect to the motive behind (lack of competition) as well as the model of (mandatory access) the proposed regulation. PTS's position was unchanged at the end of its review. The proposal is still under review by the Ministry of Trade and Industry. Europolitan will continue to oppose it. In October 1999 PTS released a statement on a dispute between Telia Mobile AB and Telenordia AB. In brief, PTS stated that traffic originated by a Swedish operator and terminated within a Swedish mobile operator's network, independent of way of routing, is interconnect traffic and that the termination charge for such traffic should be "fair and reasonable". During June, 1999, Telia Mobile reduced its interconnect rates to a level that had been requested by the PTS. It is appropriate to assume that the PTS considers these rates to be "fair and reasonable". 2 Furthermore, it is appropriate to assume that PTS's statement means that Swedish operators should not be able to achieve a lower termination charge for traffic originated in Sweden and terminated in a mobile network in Sweden by routing the traffic internationally and taking advantage of historic imbalances in termination charges for national and international traffic. Europolitan will continue to actively follow the development of this issue. Future Reporting A proposal to change the Company's reporting period to March 31 will be put to shareholders at an Extraordinary Meeting later today. If the proposal is carried, the current financial period will be extended by three months to March 31 2000. In that event the Company will issue a twelve months report on 21 January 2000, a Final Report on 28 April 2000 and the Annual Report during June 2000. Stockholm, October 22, 1999 The Board of Directors - Europolitan Holdings AB (publ) For further information, please contact: Tomas Isaksson, President and CEO John Townsend, CFO Monica Enderstein, Investor Relations Tel: +46 (0)8 678 09 50 Previous financial reports and Nine Months Ended ChangePercent additional information regarding Europolitan can also be obtained on the internet at www.europolitan.se. NINE MONTHS Sept 30, Sept 30, 1999 1998 Number of customers end of 790 000 574 000 216 000 38% period Net customer additions 166 000 150 000 16 000 11% Average monthly revenue per (SEK) 491 514 -23 -4% customer * Average monthly revenue per (SEK) 575 544 31 6% subscriber * (excluding prepaid EASY cards) Net sales and other income (SEK 3 177 2 387 790 33% mil) Operating cash flow ** (SEK 1 400 1 039 361 35% mil) Operating cash flow margin (%) 44% 44% 0% 0% Profit after financial items (SEK 1 070 739 331 45% mil) Capital expenditures (SEK 504 499 5 1% mil) Free Cash Flow*** (SEK 794 418 376 90% mil) THIRD QUARTER Three Months Ended Change Percent Sept 30, Sept 30, 1999 1998 Number of customers end of 790 000 574 000 216 000 38% period Net customer additions 62 000 46 000 16 000 35% Average monthly revenue per (SEK) 502 522 -20 -4% 3 customer * Average monthly revenue per (SEK) 587 568 19 3% subscriber * (excluding prepaid EASY cards) Net sales and other income (SEK 1 174 882 292 33% mil) Operating cash flow ** (SEK 555 421 134 32% mil) Operating cash flow margin (%) 47% 48% -1% -2% Profit after financial items (SEK 440 318 122 38% mil) Capital expenditures (SEK 175 172 3 2% mil) Free Cash Flow*** (SEK 375 246 129 52% mil) * Europolitan AB Revenue (net sales) ** Cash Supplied from Operations before Changes in Working Capital, excluding financial items *** Cash Flow after Investing Activities 4 ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/10/22/19991022BIT00120/bit0001.pdf http://www.bit.se/bitonline/1999/10/22/19991022BIT00120/bit0002.doc