Quarterly report : January to December 1999

Tuesday, February 22, 2000 NETCOM AB ANNOUNCES SIGNIFICANT GROWTH IN OPERATING RESULTS FOR THE QUARTER ENDED DECEMBER 31, 1999 QUARTERLY REPORT : JANUARY TO DECEMBER 1999 * EBITDA increased by 71% to MSEK 2,097 * EBITDA margins increased from 20.5% to 25.6% * EBIT increased by 120% to MSEK 1,142 * Operating revenue increased by 37% to MSEK 8,193 * Earnings per share accelerated to SEK 36.29 * Debt to equity ratio decreased from 1.41 to 0.66 New York and Stockholm - February 22, 2000 - NetCom AB ("NetCom", "the Group") (Nasdaq Stock Market: NECS), the leading provider of telecommunication services in the Nordic countries, the Baltic region and Poland, today announced its consolidated results for the quarter ended December 31, 1999. Financial Summary for the Year ended December 31, (in MSEK) 1999 1998 % Change Operating Revenue 8,193 5,969 +37 Operating Profit before depreciation and 2,097 1,223 +71 amortization (i) after depreciation and 1,142 518 +120 amortization (ii) Profit after financial items 4,179 232 +1701 Of which profit on sale of 3,228 - - associated companies Excluding profit on sale of 951 232 +310 associated companies Profit after taxes 3,769 67 +5525 Earnings per share (SEK) 36.29 0.64 +5570 (i) EBITDA (ii) EBIT (iii) Earnings per share figures include profit on sales of shares in an associated company and are after tax and full conversion. Lars-Johan Jarnheimer, President and CEO stated, "NetCom reported strong operating results for the 1999 financial year. This was driven by the strength of our mobile telephony offering where ARPU's and minutes of usage increased strongly, ensuring continuously more efficient network utilization. The profitability of our fixed operations are accelerating as we leverage preselect to substantially increase minutes of usage in addition to the significant cost benefits we continue to derive from initiatives implemented in June. We believe 2000 offers a number of future growth opportunities, our investment interest in SEC will enable us to leverage our product development and create cost efficient services for our customers. We will also continue to increase the functionality of our offering through the development and expansion of new ventures such as Everyday.com, SMS and mobile data services. Our fixed operations in Denmark and Norway are also shortly to turn EBITDA positive. We plan to offer our customers GPRS this year if handsets become available and are commercially viable." OPERATING HIGHLIGHTS *Inclusive of prepaid, Comviq added 362,000 gross new subscribers on an annualized basis for a total of 1,641,000 *48% annualized growth in activated prepaid card customers in Sweden to 909,000 *Monthly mobile average revenue per subscriber (ARPU) in Sweden, excluding prepaid subscribers, increased by over 14% to SEK 418 *During 1999, preselect was introduced in Denmark, Norway and Sweden resulting in an increase in minutes of usage and revenue *In March, the NetCom Board announced the appointment of Lars-Johan Jarnheimer as President and CEO of NetCom AB * In June, NetCom announced a business reorganization initiative to cut costs to meet future increases in market competition and will create annualized cost savings of MSEK 80, effective January 2000 *In September, NetCom's joint venture with Modern Times Group ("MTG") called Everyday.com, creating Scandinavia's biggest Internet portal, was launched offering free Internet, secure payments in addition to broad product content *In October, NetCom announced a collaboration with Cisco to launch a new fiber optic ring as part of Tele2's Internet back bone which will facilitate greater bandwidth *In November, NetCom announced the sale of its 24.8% shareholding in its associate company, NetCom ASA, in exchange for a 17.8% stake in Société Européenne de Communication SA *NetCom's operations were not, as previously indicated, effected by the changeover to Y2K and expenses were kept to a minimum. FINANCIAL RESULTS (The figures shown in parenthesis correspond to the comparable periods in 1998 and all negative amounts are distinguished with a minus sign) Results for the year ended December 31, 1999 Operating revenue increased by 37% to MSEK 8,193. There has been strong revenue growth in the Mobile Telephony operation in Sweden and an exceptional growth in NetCom's operations in Denmark and Norway. Operating profit before depreciation and amortization (EBITDA) increased by 71% to MSEK 2,097. The EBITDA margin increased to 25.6% (20.5%). This was a result of an increase in the profitability of NetCom's Mobile Telephony operations and a reduction in EBITDA losses contributed by Tele2 Norge AS and Tele2 A/S Denmark. The cost of the Employee Share Option Program is calculated relative to the market value of NetCom's shares. The increase in share price has increased the provisions due under the terms of the Program by MSEK -134 for the year, compared to a provision of MSEK -67 for 1998. Operating profit after depreciation and amortization (EBIT) increased by 120% to MSEK 1,142. The EBIT margin increased to 13.9% (8.7%). Net interest expense and other financial items totaled MSEK 241 (276). The decrease in net interest reflects lower interest rates despite an increase in debt outstanding. The average interest rate applied to debt outstanding in the year declined to 4.8% (6.6%). The profit after financial items increased to MSEK 4,179 (232). The increase reflects improving profitability at the operating level. It also includes a MSEK 3,228 profit on disposal of the Company's 24.8% shareholding in its associated company, NetCom ASA. The profit after financial items excluding the sale of associated companies was MSEK 951 for the twelve months ended December 31, 1999. Profit after tax also increased to MSEK 3,769 (67). This increase reflects the improving profitability of NetCom's operations and also the profit on disposal of investment interests. As a consequence, earnings per share increased to SEK 36.29 (0.64). Profit after tax, excluding the effect of profits on the sale of associated undertakings, increased to MSEK 541 (67) and earnings per share increased to SEK 5.21 (0.64). NetCom's total assets at December 31, 1999 increased by 44% to MSEK 14,693 compared to MSEK 10,189 reported at December 31, 1998, reflecting increased investment in the core operations and the purchases of operations. Results for the three months ended December 31, 1999 Total revenues increased by 42% to MSEK 2,368 (1,664) as a result of strong call volume growth in the Mobile Telephony operation in Sweden. The Fixed Telephony operations also reported significant volume increases as a consequence of preselect in Sweden, Norway and Denmark. NetCom's operations in Denmark and Norway also reported exceptional growth. Operating profit before depreciation and amortization (EBITDA) increased by 148% to MSEK 550 (222). The Group EBITDA margin increased to 23.2% (13.3%). Mobile Telephony operations contributed MSEK 501 (275) to Group EBITDA. The Fixed Telephony and Internet operations of Tele2 AB in Sweden, reported EBITDA of MSEK 200 (55). The results for the Fixed Telephony operation benefited particularly from the introduction of preselect in Sweden. The increase in share price increased the provisions due under the Employee Share Option Program by MSEK -146 for the three months ended December 31, 1999, compared to a provision of MSEK -30 for the comparable 1998 period. Operating profit after depreciation and amortization (EBIT) increased by 978% to MSEK 291, reflecting the strong performance of both the Mobile Telephony and Fixed Telephony operations. The EBIT margin increased to 12.3% (1.6%). ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/02/22/20000221BIT00480/bit0001.doc http://www.bit.se/bitonline/2000/02/22/20000221BIT00480/bit0002.pdf