NetCom AB announces significant customer intake driving strong operating results for the nine months ended september 30,
PART ONE : NETCOM FOR IMMEDIATE RELEASE Monday, November 6, 2000 NETCOM AB ANNOUNCES SIGNIFICANT CUSTOMER INTAKE DRIVING STRONG OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 * 64% Annualized increase in EBIT * 41% Annualized increase in EBITDA * 29% Annualized increase in Group Operating Revenue * 33% Annualized increase in Subscribers to 5.4 million (More than 10 million including SEC) * Announced successful SEK 27.9 billion Offer for SEC * New York and Stockholm -November 6, 2000 - NetCom AB ("NetCom", "the Group") (Nasdaq Stock Market: NECS), the leading provider of telecommunication services in Europe, today announced its consolidated results for the quarter and nine months ended September 30, 2000. NetCom Financial Summary for the Nine Months ended September 30, * MSEK 2000 1999 Change Operating Revenue 7,503 5,825 29% Operating Profit before depreciation and 2,182 1,547 41% amortization (i) after depreciation and 1,397 851 64% amortization (ii) Profit after financial items 1,243 715 74% Profit after taxes 833 410 103% Earnings per share, after 8.02 3.94 104% dilution (SEK) (i) EBITDA (ii) EBIT Lars-Johan Jarnheimer, President and CEO of NetCom AB stated: "Today, NetCom operates in 20 markets and is the largest telecom operator in Europe in terms of number of markets of operation offering products under the same brand name and is also one of the largest alternative telecoms provider in terms of number of customers. We are very positive about the outlook for the combined NetCom and SEC Group and using the recently completed disposal of Infostrada SpA a fixed line phone company as a guide, our fixed line subscriber base would be valued at approximately 80 billion SEK. Our aim is to be a growth company in new markets focused on customer acquisition, churn management and cost control." * Figures reported for NetCom for the nine months ended September 30, 2000 do not include SEC. At the end of the reporting period, 99.7% of SEC's shareholders had accepted NetCom's offer with the acquisition being finalized on October 2, 2000.A proforma consolidated Balance sheet and Quarterly historic financial review are appendixed. FINANCIAL AND OPERATING HIGHLIGHTS * Operating profit, before and after depreciation and amortization, increased by 41% and 64% respectively * NetCom's operating revenues were MSEK 7,503 for the nine months ended September 30, 2000, an increase of 29% over the same period last year * The total number of subscribers for the Group at September 30, 2000 was 5.4 million, an increase of 33% over the same period of 1999 (or more than 10 million subscribers including SEC) * Tele2 AB showed a encouraging increase in contract customers in Q3 showing the benefits of bundling fixed and mobile services * Tele2 AB's mobile telephony business reported stable monthly average revenue per subscriber (ARPU) of SEK 430, excluding prepaid customers, despite the higher customer intake during the period. * In August, NetCom became the first Mobile Virtual Network Operator (MVNO) in Denmark through an agreement with Sonofon, allowing NetCom to offer mobile telephony services to its existing fixed line customers. * In September, more than 99% of Société Européenne de Communication SA's (SEC) shareholders had accepted NetCom's SEK 27.9 billion offer for SEC's issued shared capital made in July. For accounting purposes, the SEC acquisition will be consolidated from October 2, 2000 and was therefore not reflected within NetCom's results for the nine months ended September 30, 2000 . * SEC has achieved the following: * Fixed line subscribers increased by 127% to 5.0 million from September 30, 1999 to September 30, 2000. * Cellular subscribers increased by 116% to 137,000. * Operating revenue of MSEK 3,899 (Euro 464 million) for the nine months ended September 30, 2000. * Launched broadband wireless internet access in the Czech Republic. * In October, NetCom acquired Baltkom GSM, the second largest mobile telecommunications company in Latvia. rd * In September, NetCom submitted its UMTS application for a 3 generation mobile network in Sweden, in addition to its application in Norway and its existing license in Finland. * Effective August 2000, NetCom AB appointed Håkan Zadler as Chief Financial Officer (CFO). Lars-Johan Jarnheimer comments: "The third quarter was a period of significant sales and marketing effort driving a 36% increase in our total subscriber base despite an increasingly competitive market place. The merger of NetCom and SEC will further consolidate the successful Tele2 branded operations and provide a platform for the development and bundling of fixed line, mobile, fixed wireless data, internet and related services on a pan European basis. There are considerable operational and marketing synergies in addition to the development of our MVNO concept across Europe." SUCCESSFUL OFFER FOR SEC In September, NetCom announced that its SEK 27.9 billion offer made on July 24 for Société Européenne de Communication (SEC) had been successful with 99.7% of SEC's shareholders accepting NetComs offer. For accounting purposes, SEC was not consolidated within NetCom's results for the nine months ended September 30, 2000 as the offer was finalised on October 2, 2000. NetCom believes that SEC is a strong and well-funded business that is now fully operational in eight European countries with licences in a further three. SEC has established the Tele2 brand in these markets and it is the belief of the Board that there will be benefits in terms of brand and synergy in combining the businesses and creating a company with significant critical mass. The terms of the offer were one NetCom class A share or one NetCom class B share, at the seller's election, in exchange for every 11.5 SEC Class A shares and one NetCom Class B share in exchange for every 11.5 SEC Class A and Class B shares held in combination. The new shares in NetCom were issued on October 2, 2000 resulting in 40,748,480 new shares, of which 11,911,315 are Class A shares and 28,837,165 are Class B shares. The total number of shares in issue are now 144,598,726, of which 40,748,480 are Class A share and 103,850,246 are Class B shares. FINANCIAL RESULTS (The figures shown in parenthesis correspond to the comparable periods in 1999 and all negative amounts are distinguished with a minus sign) Results for the nine months ended September 30, 2000 Operating revenue was MSEK 7503 (5,825) an increase of 29%. There has been strong revenue growth in Mobile Telephony and Fixed Telephony operations in Sweden and an encouraging performance from Tele2 Norway and Cable Television. The later operation benefited from an agreement with Viasat to return the responsibility for the provision of sales and programming services for individual households to NetCom. Operating profit before depreciation and amortization (EBITDA) increased by 41% to MSEK 2,182 (1,547). The EBITDA margin increased to 29.1% (26.6%). This was a result of continuing improvements in Fixed Telephony in Sweden and a positive EBITDA contribution from Tele2 Denmark, Tele2 Norway and Cable Television. The EBITDA at September 30, 2000 includes a fully reversed option cost following a decision by the Board to facilitate an increase of shares in issue. This has had an effect on the Income Statement of MSEK 229 (12). The EBITDA figure has also been affected by a loss on the sale in April of 4T Solutions of MSEK -36. Operating profit after depreciation and amortization (EBIT) increased by 64% to MSEK 1,397 (851). The EBIT margin increased to 18.6% (14.6%). Net interest expense and other financial items totaled MSEK -154, (-186). The average interest rate applied to debt outstanding remained stable at 4.8% (4.8%). Profit after financial items increased by 74% to MSEK 1,243 (715). This increase reflects the improving profitability at the operating level as well as the reversed option cost. Profit after tax increased to MSEK 833 (410). This increase reflects the profitability of NetCom's operations and the reversed option cost. Earnings per share consequently increased to SEK 8.02 (3.94), after dilution. NetCom's total assets at September 30, 2000 increased by 4% to MSEK 15,225 compared to MSEK 14,693 reported at December 31, 1999. Results for the three months ended September 30, 2000 Operating revenue was MSEK 2,648 (2,160) an increase of 23%. The Mobile Telephony operation in Tele2 Sweden contributed revenues of MSEK 1,305 (1,106), an increase of 18%, while Fixed Telephony in Sweden was MSEK 695 (603), an increase of 15%. NetCom's Fixed Telephony operation in Norway reported exceptional growth with revenues of MSEK 249 (120), an increase of 108%. Operating profit before depreciation and amortization (EBITDA) was MSEK 671 (687). The Group EBITDA margin was 25.3% (31.8%). Mobile Telephony in Sweden was MSEK 589 (612) as a result of increased sales and marketing activity during the quarter. Fixed Telephony in Sweden was MSEK 80 (107) due to price reductions not being fully compensated by lower interconnect charges and a change in minutes of traffic mix which favoured increased national traffic as a result of the introduction of preselect. Both Tele2 Norway and Tele2 Denmark are showing positive EBITDA of MSEK 8 (-22) and MSEK 20 (2) respectively. Cable operations benefited from an agreement with Viasat to return the responsibility for the provision of sales and programming services for individual households, thereby increasing NetCom's proportionate share of revenues and EBITDA. Operating profit after depreciation and amortization (EBIT) was MSEK 408 (446), due to increased sales and marketing activities in addition to increased depreciation. The EBIT margin was 15.4% (20.6%). GROUP REVIEW Associated Companies Everyday.com NetCom is the leading Internet service provider or ISP in the Nordic region and its 1,221,000 Internet subscribers are being offered Everyday.com as their starting page in 11 countries. MTG publishes content on the WWW and has significant experience in the mass media and marketing and advertising sales through TV channels, radio stations and newspapers. The Everyday.com content offering is growing continuously. The service was launched most recently in Denmark in June. Investments Europe On July 24 2000, NetCom announced a SEK 27.9 billion offer for Société Européenne de Communication SA, (SEC) a leading alternative pan-European telecommunications service provider in which it had a 17.8% shareholding. As at September 2000, shareholders representing more than 99% of the total issued share capital of SEC accepted NetCom's offer. For accounting purposes, SEC was not consolidated within NetCom's results for the nine months ended September 30, 2000 as the offer was finalized on October 2, 2000. SEC provides national and international long distance telephony services through Tele2 Europe in the Netherlands, Germany, Switzerland, Austria, France, Italy, Luxembourg and Liechtenstein and provides a broad range of mobile telecommunication services through Tango in Luxembourg and Liechtenstein and Tele2 Mobile in Switzerland. The SEC Group also includes 3C Communications, operating public pay telephones and public internet services; Transac, providing billing and transaction processing services; Everyday.com, the free internet service provider and portal; C³, offering co-branded pre-paid calling cards; IntelliNet, the price-guaranteed residential router device; and a 37.45% interest in Transcom World Wide, one of Europe's largest call center companies At the end of September, SEC reported a 127% increase to 5.0 million fixed telephony subscribers. Cellular subscribers increased by 116% to 137,000 over the same time period. Revenues totaled MSEK 3,899 (Euro 464 million), and SEC reported a loss after tax of MSEK 1,303 (Euro 155 million) in the first nine months. This loss reflects the increase in marketing spend to 3 continue the rapid growth of Tele2 subscribers and for the launches of C and Everyday.com in existing and new markets. Latvia In October, NetCom announced the acquisition of a 100% interest in Baltkom GSM, the second largest and most recent entrant to the mobile telephony market in Latvia. At the end of September, the operation reported 96,000 subscribers and gives NetCom a complete presence in the Baltics. NetCom plans to build out the network of this well run operation and is well poised to take advantage of positive developments in the mobile phone usage in the region. Finland NetCom is the largest shareholder in Suomen Kolmegee OY(3G), which has been granted one of only four nationwide licenses for a third generation mobile telephony network in Finland. The Everyday.com portal and free internet services have been launched in the capital of Helsinki and expansion will follow throughout the country. In addition, Tele2 is offering an extremely competitive tariff structure through its phone card offering for international and national calls. The cards are distributed through one of the major distribution chains in Finland. XSource Corporation In the second quarter of this year, NetCom sold 4T Solutions, a leader in developing invoicing systems for telecommunications service providers, to XSource Corporation in exchange for 11.88% of XSource Corporation's share capital. XSource Corporation is a global billing company consisting of the following major companies: Savera, Billing Paraguay, Basset, Praesidium, Get2net and NetCom Consultants, a leading telecoms consultancy firm. NetCom believes that XSource will be an attractive investment. ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2000/11/06/20001106BIT00030/bit0001.doc The full report http://www.bit.se/bitonline/2000/11/06/20001106BIT00030/bit0002.pdf The full report