Netcom AB announces strong customer intake driving revenue growth at its subsidiary, Societe Europeenne de Communication

NETCOM AB ANNOUNCES STRONG CUSTOMER INTAKE DRIVING REVENUE GROWTH AT ITS SUBSIDIARY, SOCIETE EUROPEENNE DE COMMUNICATION SA FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2000 * Q3 Revenues - up 107% * 5,002,122 Fixed Line Subscribers - up 127% * 136,786 Cellular Subscribers - up 116% * SEK 27.9 billion Offer by NetCom 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 results for the quarter and nine months ended September 30, 2000 for its subsidiary, Société Européenne de Communication S.A. ("SEC") SEC OPERATING HIGHLIGHTS January January Percentag 1, 2000 1,1999 e to to Change September September % 30, 2000 30, 1999 9 months 9 months Total fixed line subscribers 5,002,122 2,201,926 +127 (at September 30) Total cellular subscribers 136,786 63,344 +116 (at September 30) Revenue (EUROS '000) 464,498 192,661 +141 Operating loss before (256,710) (108,923) - interest, taxation, depreciation and amortization (EUROS '000) Loss before (155,187) (149,237) - taxation (EUROS '000) Loss after (155,203) (149,552) - taxation (EUROS '000) Basic and diluted (0.27) (0.48) - loss per share (EUROS) Anders Björkman, President and CEO of SEC commented: "SEC's third quarter results showed a continued and pleasing acceleration in subscriber intake demonstrating the growing awareness of the Tele2 brand across Europe." Lars-Johan Jarnheimer, President and CEO of NetCom AB stated: "The merger of NetCom and SEC has brought together two businesses with similar cultures and a focus on price to 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". Financial results for the nine months ended September 30, 2000 Total revenues for the first nine months of 2000 were EUR 464.5 million, an increase of 141% over the same period last year. Tele2 accounted for 83% of group revenue. The operating loss before interest, taxation, depreciation and amortization for the first nine months of 2000 was EUR 256.7 million, compared to a loss of EUR 108.9 million for the nine month period ended September 30, 1999, reflecting the continued marketing spend to acquire customers and grow the subscriber base. Operating losses before financing and taxation for the first nine months of 2000 were EUR 293.3 million, compared to EUR 137.3 million for the nine month period ended September 30, 1999. The loss after taxation for the first nine months of 2000 was EUR 155.2 million, or EUR 0.27 per share, compared to a loss of EUR 149.6 million, or EUR 0.48 per share for the nine months ended September 1999. The improvement in the loss after taxation reflected the capital gain on the sale of SEC's investment in NetCom ASA. Financial results for the three months ended September 30, 2000 Total revenues for the third quarter of 2000 were EUR 174.0 million, a 107% increase over the EUR 84.2 million reported in the third quarter of 2000. This high rate of growth reflects significant subscriber growth over the period driven by continued investment in sales and marketing initiatives and increased brand awareness. The operating loss before interest, taxation, depreciation and amortization for the third quarter of 2000 was EUR 118.6 million and the operating loss before financing and taxes was EUR 130.7 million. The profit after taxation for the third quarter of 2000 was EUR 20.1 million, or EUR 0.04 per share. CAPITAL STRUCTURE NetCom AB Offer for SEC In September, NetCom announced that its SEK 27.9 billion offer for SEC made on July 24, 2000 had been successful with NetCom's interest in SEC rising from its initial minority of 17.8% to a majority holding. 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 NetCom 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 Offer valued each SEC B share at SEK 61.04 and represented a premium of 22.3% against the closing price of SEC's B shares on the OM Stockholm Exchange O-list on July 21, 2000 or 35% against the average share price over the previous month. Share Delisting On November 3, 2000, SEC ceased trading on the OM Stockholm, Frankfurt and Luxembourg Stock Exchanges. SEC was delisted form the Nasdaq Stock Market on October 16, 2000. Sale of NetCom ASA shares SEC agreed to sell its entire 15.9% stake in NetCom ASA, the Norwegian mobile operator in June 2000. The disposal realized EUR 367 million, resulting in a strengthened cash position and a capital gain of EUR 144 million recognized in the third quarter. OPERATING REVIEW Fixed Line Telephony Tele2 Europe At the end of September 2000, Tele2's European operations and IntelliNet collectively had 5,002,122 subscribers, representing an increase of 127% from the 2,201,926 subscribers reported at the same date in 1999 and an increase of 20% since June 30, 2000. Germany and France performed particularly strongly in the period. In the extremely competitive German market, Tele2's marketing initiatives resulted in a strong 35% subscriber growth in the third quarter compared to the second quarter. In June of this year, SEC announced a joint project with Cisco Systems to introduce pan-European end-to-end telephony services over Internet Protocol (IP). Although SEC's initial investment in hardware will increase, the transmission costs will be reduced many times more when using 'Voice over IP' instead of a switched circuit solution, allowing for continued aggressive pricing. The technology will be launched in Spain and will be rolled-out in SEC's existing European operations and implemented in additional markets where licenses are won in the future. Tele2 continues to roll-out its router and Preselect services, currently 24% of subscribers use either routers or Preselect services. 3C - Credit card operated telephones, fax machines, internet terminals and card payment services 3C has now re-branded the majority of its public access telephones across Europe to Tele2 and has optimized phone locations in addition to introducing a new tariff structure. 3C is also launching new internet terminals under the Everyday.com brand. 3 - C Co-branded pre-paid calling cards 3 C traffic is carried on the Tele2 network, offering a predetermined tariff structure to call destinations with customer service managed by 3 Transcom World Wide. C has been launched in the UK, France, Italy and The Netherlands and currently has 203 cards in the market. SEC intends to launch the business in other markets in which Tele2 has operations. Wireless Local Loop (WLL) In October, SEC announced the launch of broadband WLL services under the Tele2 brand in the Czech Republic, commencing in the cities of Prague and Brno and with plans to roll out in other large cities. The service offers connection speeds of 128 kbps satisfying the significant demand for high speed internet access and data communication services in the region and competing with ISDN services. Cellular Telephony - Tango & Tele2 Mobile During the second quarter, the Group announced the launch of Tele2 Mobile branded mobile telephony services in Switzerland and by the end of the third quarter reported more than 24,000 subscribers. SEC has an agreement with Swisscom to use capacity from their network, giving Tele2 Mobile coverage of 98% of Switzerland. SEC's cellular operations, under the brands of Tango in Luxembourg and Liechtenstein and Tele2 Mobile in Switzerland, had a total of 136,786 subscribers as at September 30, 2000, representing an increase of 116% over the 63,344 subscribers reported on the same date in 1999 and an increase of 22% over the 112,226 subscribers reported at June 30, 2000. Everyday.com - Internet services Everyday.com offers free internet access and services including free e- mail, Short Message Service information, news, and a wide range of e- commerce opportunities. The service, has now been rolled out in all Tele2 countries, and is designed to create added value for the customer through the bundling of services and therefore, the Group believes, enhances customer loyalty while strengthening the Tele2 brand. SEC offers free internet access by leasing infrastructure from existing Internet Service Providers (ISPs), thereby avoiding direct network costs. SEC operates its own ISP in Luxembourg through Tele2. Transcom World Wide - Call Centers In March 2000, SEC announced the creation of one of Europe's largest call center operations through the merger of Transcom A.B. and Transcom Europe S.A. to form Transcom World Wide S.A. SEC owns 37.4% of the merged organization. Transcom World Wide S.A. has operations in 11 countries and has a total of 17 call centers across Europe employing around 4,300 people and handling over 3 million customer contacts every month. Transcom World Wide has recently reinforced its presence in France, the Netherlands and Italy and intends to open call centers in Spain and Morocco later this year. NetCom, formed in 1993, is a leading alternative pan-European telecommunications company offering fixed and mobile telephony, data network and internet services under the brands Tele2, Tango, Comviq and Q- GSM to approximately 10 million people in 20 countries. NetCom operates Datametrix, which specializes in systems integration, Optimal Telecom, 3C Communications, operating public pay telephones and public internet services; Transac, providing billing and transaction processing services; 3 C is also part of NetCom AB. The Group offers cable television services under the Kabelvision brand name. NetCom AB has a majority interest in Société Européenne de Communication SA. The Company is listed on the Stockholm Stock Exchange, under NCOMA and NCOMB, and an ADR listed on the Nasdaq Stock Market, under NECS. Contacts: Lars-Johan Jarnheimer Telephone: + 46 8 562 640 00 President and CEO, NetCom AB, Sweden Anders Björkman Telephone: +352 27 750 101 President and CEO, Société Européenne de Communication S.A. Samantha Drover/Andrew Best Telephone: + 44 (0)20 7321 5010 Shared Value Visit us at our homepage: http://www.netcom.se Presentation slides and an audio stream of NetCom's conference call to discuss these results will be available on NetCom's web site at: www.netcom.se .Please log on to the site at least 10 minutes prior to the conference call, which will commence at 15.00 CET, to allow for registration. APPENDICES * CONSOLIDATED STATEMENTS OF PROFIT AND LOSS * CONSOLIDATED BALANCE SHEETS * CONSOLIDATED SUMMARY STATEMENTS OF CASHFLOW Société Européenne de Communication S.A. CONSOLIDATED STATEMENTS OF PROFIT AND LOSS EURO '000 Jan 1, April 1, Jul 1, Jan 1, Jan 1, 2000 to 2000 2000 2000 1999 to to to to Mar 31, 2000 June 30, Sept 30, Sept 30, Sept 30 2000 2000 2000 1999 3 months 3 months 3 months 9 months 9 months Revenues 143,484 146,966 174,048 464,498 192,661 Operating expenses Cost of revenues (excluding depreciation and (109,535) (116,150) (150,596)(376,281)(154,513) amortization) Sales and (73,671) (88,911) (116,705)(279,287)(101,808) marketing General and (19,755) (20,496) (25,389) (65,640) (45,263) administrative Depreciation and (13,443) (11,100) (12,045) (36,588) (28,384) amortization OPERATING LOSS BEFORE FINANCING AND (72,920) (89,691) (130,687)(293,298)(137,307) TAXATION Interest expense and financial charges - external (3,489) (3,478) (3,924) (10,891) (5,976) Interest expense - (1,345) (2,140) (671) (4,156) (6,358) affiliates Interest and other 856 990 6,646 8,492 791 income Exchange gain / 275 (926) 4,030 3,379 (387) (loss) Share of - (80) - (80) - associates losses Partial disposal of underlying assets of current (3,314) - - (3,314) - investment Disposal of 144,681 144,681 current investment LOSS BEFORE (79,937) (95,325) 20,075(155,187)(149,237) TAXATION Taxation - (13) (3) (16) (315) LOSS AFTER (79,937) (95,338) 20,072(155,203)(149,552) TAXATION Société Européenne de Communication S.A. CONSOLIDATED BALANCE SHEETS EURO '000 SeptemberDecember 31, 30, 2000 1999 ASSETS Non-current assets Tangible fixed assets 136,796 128,499 Intangible assets 180,326 191,585 Licenses 31,834 32,257 Deferred costs 2,957 6,804 Equity accounted investments 15,758 - Total non-current assets 367,671 359,145 Current assets Current investments - 347,545 Trade debtors and unbilled 134,517 96,253 revenue Amounts due from affiliates 7,941 2,980 Inventory 14,698 6,137 Prepayments and other 73,959 29,492 current assets Cash and cash equivalents 356,165 114,936 Total current assets 587,280 597,343 Total assets 954,951 956,488 Société Européenne de Communication S.A. CONSOLIDATED BALANCE SHEETS SeptemberDecember 31, 30, 2000 1999 EURO '000 Shareholders' equity and liabilities Shareholders' equity Share Capital, no par value 858,422 858,422 Foreign currency / other (274) (565) reserve Retained losses (309,751) (81,240) Loss for the period (155,203) (228,511) Total shareholders' equity 393,194 548,106 Liabilities Non-current liabilities Debt and other financing 148,158 185,486 Other non current 239 225 liabilities Total non-current liabilities 148,397 185,711 Current liabilities Debt and other financing 78,188 15,074 Trade creditors 151,148 103,109 Amounts due to affiliates 46,439 36,265 Accrued expenses 110,586 59,691 Other current liabilities 26,999 8,532 Total current liabilities 413,360 222,671 Total liabilities 561,757 408,382 Total shareholders' equity 954,951 956,488 and liabilities Société Européenne de Communication S.A. CONSOLIDATED STATEMENTS OF CASH FLOW EURO '000 Jan 1, April 1, Jul 1, Jan 1, Jan 1, 2000 2000 2000 2000 1999 to to to to to Mar 31, June 30, Sept 30, Sept 30, Sept 30 2000 2000 2000 2000 1999 3 months 3 months 3 months 9 months 9 months Net cash used by operating activities (53,888) (9,304)(133,167)(196,359)(106,935) Net cash provided /(used) by investing 97,806 (47,522) 357,477 407,761 (55,975) activities Net cash provided/(used) by financing (5,616) 34,528 400 29,312 199,214 activities Cash effect of exchange rate changes - 160 355 515 - Net increase in cash and cash equivalents 38,302 (22,138) 225,065 241,229 36,304 Cash and cash equivalents, opening 114,936 153,238 131,100 114,936 23,534 Cash and cash equivalents, closing 153,238 131,100 356,165 356,165 59,838 ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2000/11/06/20001106BIT00100/bit0001.doc http://www.bit.se/bitonline/2000/11/06/20001106BIT00100/bit0002.pdf