Year End Report 1998

FOR IMMEDIATE RELEASE Thursday, February 25, 1999 NETCOM AB ANNOUNCES OPERATING RESULTS FOR THE FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 1998 @ 48% Annualized Increase in Group Operating Revenue 126% Annualized Increase in Operating Profit from Mobile Telephony Operations @ 93% Annualized Increase in Tele2 Sweden's Fixed Telephony and Internet Subscribers @ 170% Annualized Increase in Activated Prepaid Card Customers New York and Stockholm - February 25, 1999 - NetCom AB ("NetCom") (Nasdaq : NECSY), the leading alternative provider of telecommunication services in Scandinavia, today announced its consolidated results for the fourth quarter and fiscal year ended December 31, 1998 FINANCIAL HIGHLIGHTS (in MSEK) T welve Months Ended, December 31 1998 1997 % Change MSEK (except per share amounts) 5 ,969 4 ,036 4 8 Operating Revenue Operating Profit before depreciation and 1,223 1,000 2 2 amortization * after depreciation and 5 18 3 92 3 2 amortization ** Gain after financial items 2 32 ( 37) - *** G ain after tax for the period 6 7 49 3 7 Gain per common share (SEK) 0 .64 0 .57 1 2 **** * EBITDA EBIT * The 1997 comparative figure excludes a deferral to the first quarter of 1997 of MSEK (38) elating to NetCom ASA's fourth quarter of 1996 financial results ** Earnings per share figures are after tax and full conversion. Anders Björkman, President and CEO stated, "1998 was a year of significant operational growth for the Group with the total customer base growing by more than 80% to in excess of 3 million customers. NetCom continued to increase the functionality of its offering, the profitability and cost efficiency of its operations and the strong price message of its brands. Mobile Telephony operations will continue to benefit from the success of its prepaid offering and Fixed Telephony will benefit from the recent introduction of new more favorable interconnect rates. Encouraging existing Internet customers to also become fixed line customers will be a further positive development. We remain optimistic of the strong opportunities for growth which exist in our markets." FINANCIAL AND OPERATING HIGHLIGHTS NetCom's operating revenue increased by 48% to MSEK 5,969 in the twelve months ended December 31, 1998 compared to MSEK 4,036 in the same period of 1997; Operating profit before and after depreciation and amortization, increased by 22% and 32% respectively; Mobile telephony operations increased operating profits by a substantial 126% from MSEK 444 to MSEK 1,004 over the twelve month period; Comviq had a record twelve months of 1998 with the addition of 469,000 gross new subscribers for a total of 1,279,000, an increase of 58% on the comparative period of 1997; A significant 170% annualized growth in activated prepaid card customers to 615,000; Tele2 in Sweden reported a 121% increase in fixed telephony customers to 691,000 at the year end; Tele2 in Sweden had 421,000 dial up Internet customers at December 31, 1998, an increase of 60% on the comparable 1997 period; A new interconnect agreement with Telia was introduced on December 1, 1998 which will benefit the future margin structure of Tele2's fixed telephony operations; The sum of fixed telephony and Internet subscribers for Tele2 Norway and Tele2 Denmark increased by 676% and 196% respectively to 194,000 and 423,000 subscribers respectively on an annualized basis; NetCom announced the acquisition of a 48% interest in Ritabell, a cellular operation in Estonia in September 1998, which at the year-end reported 43,000 subscribers. NetCom increased its stake in Ritabell to 94.8% in January 1999; NetCom AB announced its name change from NetCom Systems AB, effective from October 15, 1998. REVIEW OF OPERATIONS Financial Results for the twelve months ended December 31, 1998 Operating revenues for the twelve months ended December 1998 were MSEK 5,969, an increase of 48% compared to the MSEK 4,036 reported in the comparative period of 1997. The increase in operating revenues was fueled by strong volume growth in the major operating companies. The Mobile Telephony operation in Sweden contributed MSEK 2,958 to group operating revenue, an increase of 44% over the MSEK 2,058 reported in the comparative period of 1997. The Fixed Telephony and Internet Operations increased operating revenue by 40% to MSEK 2,223 from MSEK 1,584 reported in the comparable period of 1997. There has been strong growth in NetCom's operations in Denmark and Norway in the period reported. Tele2 Denmark reported a 184% increase in operating revenues from MSEK 192 to MSEK 546 and Tele2 Norway reported a 383% increase in operating revenues from MSEK 35 to MSEK 169 over the twelve month period. The Cable Television operation contributed revenues of MSEK 137 for the twelve month period, compared to MSEK 227 in the comparative period of 1997. The reduction in revenue is primarily a result the transfer of the management responsibility for individual household accounts to Viasat in May 1998 resulting in sales and programing services being provided by Viasat as part of the collaboration announced earlier in the year. Operating profit before depreciation and amortization in the twelve-month period increased by 22% to MSEK 1,223 from MSEK 1,000 reported in the comparable period of 1997. The operating profit margin before depreciation and amortization, decreased during 1998 to 20.5% from 24.8% reported in the comparative period of 1997. This was a result of reduced margins in the Swedish market for fixed telephony and Internet, following a 20% price reduction introduced in May and also costs associated with continued market efforts in the Danish and Norwegian operations. The Employee Share Option Program operates relative to the market value of the Groups equity. The increase in share price has increased the provisions due under the terms of the Program by MSEK 67 for a total of MSEK 102 for fiscal 1998 compared to a total of MSEK 35 for fiscal 1997. In the twelve months ended December 31, 1998, operating profit after depreciation and amortization increased by 32% to MSEK 518 from MSEK 392 reported in the comparative period of 1997. The operating profit margin after depreciation and amortization, marginally declined from 9.7% in 1997 to 8.7% in 1998. In the period ended December 31, 1998, Mobile Telephony operations contributed MSEK 1,004 to Group operating profit after depreciation and amortization, an increase of 126% compared to MSEK 444 in the corresponding period of 1997. The Fixed Telephony and Internet operations of Tele2 AB in Sweden, reported an operating profit after depreciation and amortization of MSEK 46, compared to MSEK 211 reported in the comparable period of 1997. The results for the Fixed Telephony operation for the twelve-month period were negatively impacted by pricing initiatives in international and national fixed telephony services to maintain market position as the price leader. With the introduction of a new interconnect agreement with Telia on December 1, 1998, the margin pressure in this operation will improve. Results were also impacted by the costs associated with the successful launch of the new brand for Fixed Telephony called Optimal Telecom. NetCom's Norwegian listed associated company, NetCom ASA, reported an operating profit after depreciation and amortization of MNOK 247 in the twelve months ended December 31, 1998, compared to a loss of MNOK 24 in the comparative period of 1997. NetCom has a 25% holding in NetCom ASA. Net interest expense and other financial items for the year amounted to MSEK 276, compared to MSEK 310 for the comparative period of 1997. The reduction in net interest reflects lower interest rates on debt outstanding during the period with a declining average interest rate from a yearly average of 7.1% for the 1997 financial year to 6.6% in 1998. The comparative interest expense for 1997 includes the expensing of one off interest costs amounting to MSEK 45 associated with loan agreements prior to the refinancing of the total Group. The gain after financial items amounted to MSEK 232 compared to a loss of MSEK 37 in the corresponding period of 1997. The net gain reported for the twelve months ended 1998 amounted to MSEK 67, or a profit of SEK 0.64 per share, compared with a net gain of MSEK 49 or SEK 0.57 per share in the comparable period of 1997. The net profit reported over the twelve months ended December 1998 reflects the improving profitability of NetCom's operations. NetCom's total assets at December 31, 1998 increased by 17% to MSEK 10,183 compared to MSEK 8,684 reported at December 31, 1997 reflecting increased investment in the core operations and purchases of new operations. Financial Results for the three months ended December 31, 1998 Operating revenues for the three months ended December 31, 1998 increased by 42% to MSEK 1,664 compared to MSEK 1,175 for the three months ended December 31, 1997. Operating profit before depreciation and amortization was MSEK 222 in the fourth quarter of 1998 compared to MSEK 233 in the comparable period of 1997. Results for the fourth quarter of 1998 have been impacted by a price reduction initiated on fixed telephony services, the launch of Optimal Telecom and start up and build out costs associated with the operations in Denmark and Norway. Results were positively effected by a strong fourth quarter for the Mobile Telephony operation with operating profit before depreciation and amortization increasing by 81% from MSEK 152 in the fourth quarter of 1997 to MSEK 275 in the fourth quarter of 1998. The performance of the shares in The Employee Share Option Program for the three months ended December 31, 1998, resulted in a charge of MSEK 30. Operating profit after depreciation and amortization in the fourth quarter of 1998 was MSEK 27, compared to MSEK 74 in the three months ended December 31, 1997. Net interest and other financial expenses for the fourth quarter of 1998 were MSEK 73 compared to MSEK 96 for the fourth quarter of 1997. This reflects the achievement of lower average interest rates on debt outstanding during the period and a MSEK 45 one off interest charge in 1997 associated with loan agreements preceding the refinancing of the Group. The loss after financial items in the fourth quarter of 1998 was MSEK 57 compared to a loss of MSEK 43 in the fourth quarter of 1997. COMPANY NAME CHANGE Effective from October 15, 1998 NetCom Systems AB changed its name to NetCom AB ACQUISITIONS In the third quarter of 1998, NetCom announced the acquisition of a 48% interest in AS Ritabell in Estonia ("Ritabell") from Millicom International Cellular SA ("MIC") for a consideration of $50 million. Ritabell is a cellular operation in Estonia and the acquisition became effective on October 1, 1998 and Ritabell was therefore reflected in NetCom's consolidated financial results for the fourth quarter of 1998. In January 1999, a purchase agreement was signed with Levicom International Holdings BV, which wholly owns the companies, AS Levicom Cellular ("CellCo") and OÜ Levicom Broadband ("BroadCo"). At completion, NetCom acquired 90% of the share capital of CellCo, which holds the 52% interest in the share capital of Ritabell, and 100% of a DCS 1800 license in Lithuania. In addition, NetCom acquired 19% of the capital of BroadCo, which encompasses Internet activities in Estonia, and a number of cable television operations in Estonia and Lithuania. NetCom's percentage interest in Ritabell will increase from 48% to 94.8%, with the additional 46.8% interest in Ritabell being held through NetCom's interest in CellCo. The aggregate consideration of $58.6 million is payable in tranches on an annual basis, with the first payment of $28.6 million due on completion and therefore reflected in the first quarter of 1999 financial results. The operation in Estonia covers a population under license of approximately 1.5 million people and the DCS 1800 license in Lithuania covers a population under license of approximately 3.7 million. At December 31, 1998, Ritabell reported 43,000 gross cellular subscribers, inclusive of 24,000 prepaid customers. Ritabell reported revenue for the twelve months ended December 31, 1998 of MSEK 101 and operating profit before depreciation and amortization totaled MSEK 8. NetCom's proportional interest in Ritabell at December 31, 1998 was 48% and Ritabell is reflected as an associated company in the fourth quarter of 1998 financial statements. YEAR 2000 Within NetCom, there are several systems dependent operations. The Board and management are currently giving high priority to the issue of the Year 2000 and the potential effect that this may have on the Company, its products, services and employees. An Activity Plan has been produced and resources dedicated to the planning, upgrading and testing of systems. The management are committed to a regular review of the process and will give regular quarterly updates to its shareholders. OPERATIONAL REVIEW The Operational Review reflects NetCom AB as of December 31, 1998 Tele2 AB in Sweden Tele2 AB encompasses 3 operational divisions: Mobile Telephony, Fixed Telephony and Internet and Cable Television which are marketed under the brand names of Comviq, Tele2 and Kabelvision. Mobile Telephony In the twelve months ended December 31 1998, Tele2 AB's mobile telephony operations continued to make strong progress. At the year-end, Comviq and Tele2Mobil reported 1,279,000 subscribers, inclusive of prepaid card subscribers, representing an increase of 58% on the 810,000 subscribers reported in the same period of 1997. The annual churn rate excluding prepaid subscribers has remained stable at approximately 20%. During 1998, the number of activated prepaid card customers increased by a substantial 170% from 228,000 to 615,000. The total numbers of cards sold to retailers but not yet activated increased by 56% from 70,000 at the end of 1997 to 109,000 at the end of 1998. There was a new promotional campaign for prepaid services, which bundled an Ericsson operator locked phone with NetCom's prepaid card. A substantial 85,000 subscriptions were sold by December 31, 1998, of which 65,000 were activated. During the period, Tele2Mobil was re-launched. Tele2Mobil offers mobile telephony services designed specifically for business customers. The main advantages of the service are the low call tariffs that exist for calling between the customer's office and mobile phone and between individual company registered mobile phones, in addition to the 24 hour customer service facility. Strong subscriber growth continues to be fueled by the introduction of new marketing initiatives. In September 1998, under the Comviq brand a new local mobile telephony service was launched in 3 additional cities in Sweden with the benefit to customers of a low subscription fee and call rates that are competitively priced in comparison with an ordinary fixed line telephone subscription. The average minutes of use per customer, excluding prepaid, for 1998 increased to 109 minutes, a 16% improvement on the 94 minutes of average usage reported in 1997. The monthly revenue per customer, excluding prepaid card subscribers, for the twelve months ended December 31, 1998 was SEK 368 compared to SEK 316 for the same period of 1997, an increase of over 16%. In the fourth quarter of 1998, monthly revenues per subscriber, excluding prepaid card subscribers increased by 19% to SEK 374 compared to SEK 314 in the fourth quarter of 1997. Tele2 continues to invest in its cellular infrastructure to meet the growing demand for cellular services across its markets both in the prepaid and post paid sectors. Fixed Telephony and Internet In the period December 31, 1997 to December 31, 1998, Tele2 in Sweden increased the number of its fixed telephony customers by 121% from 313,000 to 691,000. At December 31, 1998, approximately 200,000 subscriptions were registered through NetCom's collaboration with the Swedish Cancer Society and its telephone lottery, Ringo, which utilizes Tele2's network. Tele2 reported 421,000 dial up Internet customers at December 31, 1998, corresponding to a 60% increase on the 263,000 customers reported in the comparative period of 1997. In the fourth quarter Tele2 added 71,000 new subscribers, an increase of 20% on the third quarter of 1998. Call2Web, the IP based telephony service, has increased the functionality of its customer offering and recently launched an innovative service. The new service called "Double Line", allows customers to make and receive telephone calls on a single line while surfing the Net. In December 1998, Tele2 also began offering lower Internet surfing rates to existing Internet customers who also become telephony customers. In September 1998, Tele2 announced an agreement with Disney Online to license Disney Online content and the children's service Disney Blast for distribution on the Internet in Sweden, Denmark and Norway. The agreement with Disney has significantly increased the value-added content of Tele2's customer offering on the Internet and will be a significant stand-alone service. A new interconnect agreement with Telia will lead to higher margins for Tele2's fixed telephony operations from December 1, 1998. Cable Television The number of subscribers declined in 1998. Sales and programming services are now provided by Viasat as part of the collaboration announced earlier in the year. This has resulted in a repositioning of the brand and a new program offer launch which has lead to a stronger performance of the operation in the later part of 1998. During 1998, Tele2 became one of the first company to offer Internet access via the Cable television network. The technology enables speeds of up to 512 kbps, which is approximately 10 times faster than the fastest modems currently available on the market. NätTeknik/Datametrix NätTeknik/Datametrix extends NetCom's expertise into the areas of systems integration and support both for the Group's telecommunications and data net services and for third parties in Scandinavia. In August 1998, NätTeknik/Datametrix announced an agreement with Lucent Technologies ("Lucent") to sell Lucent's communications servers in call centers in Sweden. Lucent is the world leader in the field of call center solutions and is one of the largest manufacturers of telecommunications equipment. In collaboration with Lucent, NetCom aims to challenge competitors in the field of call center solutions in Scandinavia. Tele2 A/S, Denmark During 1998, Tele2 A/S, Denmark's the second largest company in the provision of fixed telephony services, continued to grow substantially. Using the "1001" prefix, Tele2 A/S reported 274,000 fixed telephony customers as of December 31, 1998, an increase of 138% on the comparative period of 1997. Tele2 A/S has both private and corporate customers. Tele2 A/S markets its dial up Internet service to private individuals as "get2net" and reported 129,000 customers, an increase of 579% for the twelve months ended December 1998 compared to 19,000 subscribers reported in the same period of 1997. The Company also provides Internet services to both the private and corporate market under the brand name of UNI2, which increased its customer base by 150% to 20,000 customers for the twelve months ended December 31, 1998 from 8,000 customers in 1997. Tele2 Norge AS, Norway The market for public telecommunications in Norway was deregulated in January, 1998, at which time Tele2 Norge launched service using the "1502" prefix and brand. As of December 31, 1998, Tele2 Norge reported 131,000 fixed telephony subscribers, an increase of 75% on the 75,000 subscribers reported at June 30, 1998. Tele2 Norge had a total of 63,000 activated Internet subscribers, as at December 31 1998, compared to 6,000 activated subscribers reported in 1997. NetCom ASA NetCom's Norwegian affiliate, NetCom ASA, has made significant progress in the twelve months ended December 31, 1998. The number of subscribers increased in the twelve months ended December 31, 1998 by 119,000 for a total of 536,000, an increase of 29% on the 417,000 subscribers reported in the comparative period of 1997. There has also been an increase in the average minutes of usage per subscriber from NOK 133 in the twelve months ended December 1997 to NOK 144 in the same period of 1998. Operating revenues increased by 19% to MNOK 2,032 in the twelve months ended December 31, 1998 compared to MNOK 1,714 for the comparative period of 1997. Operating profit before depreciation and amortization in the twelve- month period increased by 149% to MNOK 528, compared to MNOK 212 in the comparative period of 1997. This improvement occurred as a result of strong subscriber growth during the period and a reduced churn rate. The operating profit after depreciation and amortization over the same period amounted to MNOK 247, compared to a loss of MNOK 24 in the comparable period in 1997. FINANCIAL SUMMARY Depreciation and Amortization The group's depreciation and amortization charge for the twelve months ended December 31, 1998 was MSEK 705 compared to MSEK 609 for the comparable period in 1997. This reflects increased investment in and the expansion of the Company's asset base during the period. In the twelve months ended December 31, 1998, Tele2 AB's charge for depreciation and amortization was MSEK 552 (MSEK 510). Mobile Telephony accounted for MSEK 273 (MSEK 243), Fixed Telephony and Internet MSEK 217 (MSEK 183) and Cable Television MSEK 62 (MSEK 84). Depreciation and amortization for the Group's operations in Norway and Denmark totaled MSEK 17 (MSEK 7) and MSEK 41 (MSEK 17) respectively. The figures shown in brackets correspond to the comparable periods in 1997. Share Structure The weighted average number of A and B shares outstanding at December 31, 1998 was 103,598,394 and the weighted average number of shares in issue, after full conversion was 103,850,246. Parent Company At the parent company level, the loss after financial items for the twelve months ended December 31, 1998 was MSEK 29 compared to a loss of MSEK 39 in the corresponding period of 1997. In 1997, the Company had large costs connected with the issue of new shares and the listing of the equity on the Nasdaq stock market. Included within the reported loss figure is a provision of MSEK 67 relating to the Company's obligations to senior executives under the Employee Share Option Program. Investments in property, plant and equipment in the twelve months ended December 31, 1998 totaled MSEK (4) compared to MSEK 22 in the corresponding period of 1997. In the second quarter of 1998, convertible debentures representing 755,555 B shares were converted, thereby increasing shareholders equity by MSEK 37. ACCOUNTING PRINCIPLES NetCom has reported its quarterly financial statements in accordance with the accounting principles and methods used in the Annual Report and Accounts for the 1997 financial year. For the purposes of comparison, the figures for 1997 have been restated to reflect the new organizational structure of the Group adopted in the first quarter of 1998. This results in the cable television operations of Tele2 AB being accounted for separately from other cable operations which as separate legal entities are accounted for within Other Operations. Operating revenues for the 1997 financial year for these independent companies totaled MSEK 14, and an operating loss of MSEK 1. For the purpose of comparison there has also been a reduction in operating revenues for the 1997 financial year for the Mobile Telephony and Fixed Telephony operations within Tele2 AB to reflect internal sales between Comviq and Tele2. COMPANY DISCLOSURE Annual Report The Company's 1998 Annual Report and Accounts will be distributed to shareholders on April 16, 1999 and will also be available form NetCom's offices at Box 62, 164 94 Kista, Borgarfjordsgatan 16. First Quarter of 1999 Results NetCom's first quarter of 1999 financial and operating results for the period ended March 31, 1999 will be released on May 18, 1998. AGM The AGM will be held at 1p.m on Thursday May 20, 1999 at Gamla Stans Bryggeri, Tullhus 2 on Skeppsbrokajen, Stockholm. The Board and President of NetCom AB will propose to the Annual General Meeting (AGM) that no dividend is paid to shareholders for the financial year ended December 31, 1998. Stockholm, February 25, 1998 The Board of Directors of NetCom AB NetCom AB, formed in 1993 is a leading telecommunications company in Scandinavia. It is engaged in the GSM cellular business operating using the brand names of Comviq and Tele2Mobil in Sweden, NetCom ASA in Norway and through affiliate Ritabell in Estonia. In the areas of public telecommunications, data communication services and Internet, NetCom operates Tele2 in Sweden, Tele2 A/S in Denmark and Tele2 Norge AS in Norway. NetCom also operates NätTeknik and Datametrix, specializing in systems integration and Kabelvision, a Swedish cable TV services company. NetCom is listed both on the Stockholm Stock Exchange under the symbols NCOMA and NCOMB and on the Nasdaq Stock Market under the NECSY. CONTACTS Anders Björkman Telephone: + 46 8 562 640 00 President and CEO, NetCom AB, Sweden Jörgen Latte Telephone: + 46 8 562 640 00 CFO, NetCom AB, Sweden Samantha Drover Telephone: + 44 171 408 0020 Director of Investor Relations Press Inquiries: Janerik Larsson Telephone: +46 70 762 00 85 Internet: www.netcom.se APPENDICES Consolidated Income Statement Consolidated Balance Sheet Consolidated Statement of Changes in Financial Position Parent Company's Statement of Changes in Financial Position Changes in Shareholders Equity Review of the Group Quarterly Historic Financial Review Five Year Summary CONSOLIDATED INCOME STATEMENT (MSEK) 1998 1997 Full Full Year Year Operating revenue 5,969 4,036 Operating expenses (5,564) (3,815) Option to Management (67) (35) Other revenues 190 217 Other expenses (10) (11) Operating Profit 518 392 Share of gain/loss of associated (10) (81) companies Non-recurring items* - (38) Net interest and other financial (276) (310) expenses** Gain/loss after financial items 232 (37) Taxes (165) 86 Gain for year 67 49 Earnings per share after tax and after full conversion Tele2 Norway (1.24) (0.46) kr kr Tele2 Denmark (1.69) (0.79) kr kr Associated companies (0.14) (0.85) kr kr Tele2 Sweden and other operations 3.71 kr 2.67 kr Total 0.64 kr 0.57 kr * The 1997 figure relates to a deferral to the first quarter of 1997 of NetCom ASA's fourth quarter of 1996 financial results. ** The full year figure for 1997 includes the expensing of one off interest costs in 1997 totaling MSEK 45 associated with loan agreements preceding the re-financing of the Group CONSOLIDATED BALANCE SHEET (MSEK) 1998 1997 December December 31 31 ASSETS Fixed assets Intangible assets 1 671 1 707 Property, plant and 5 604 4 583 equipment Financial investments* 796 624 8 071 6 914 Current assets Materials and supplies 31 9 Current receivables 1 648 1 182 Cash 433 579 2 112 1 770 Total assets 10 183 8 684 EQUITY AND LIABILITIES Shareholders' Equity Restricted equity 4 231 4 332 Non-restricted equity (968) (1 176) 3 263 3 156 Minority interest 2 2 Provisions 102 35 Long-term liabilities Interest-bearing 4 801 4 146 liabilities Convertible loan debenture - 37 Interest-free liabilities 1 - 4 802 4 183 Short-term liabilities Interest-bearing 239 4 liabilities Interest-free liabilities 1 775 1 304 2 014 1 308 Total equity and 10 183 8 684 liabilities * The figures include deferred tax for the periods December 31, 1998 and December 31, 1997 of MSEK 397 and MSEK 580 respectively. CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION (MSEK) 1998 1997 Full Year Full Year Cash flow from operations 955 650 Changes in working capital 35 (239) Cash flows provided by operating 990 411 activities Investing activities (1 841) (1 084) Financing activities 703 1 032 Net change in cash (148) 359 Cash at beginning of year 579 220 Exchange difference in cash 2 - Cash at end of year 433 579 PARENT COMPANY'S STATEMENT OF CHANGES IN FINANCIAL POSITION (MSEK) 1998 1997 Full Year Full Year Cash flow from operations (89) (88) Changes in working capital 46 33 Net cash flow from operating (43) (55) activities Investing activities (196) (350) Financing activities 351 404 Net change in cash 112 (1) Cash at beginning of year 36 37 Cash at end of year 148 36 CHANGES IN SHAREHOLDERS EQUITY Restricted Equity Non-restricted Equity Share Other Share in Other Capital Restr. Equity & Retained Equity Associat Losses ed Co's. Equity, Jan. 1, 1998 516 3 816 (304) (872) Distribution to Legal 55 (55) Reserve Conversion of debentures 3 34 Transfers: - Shares in associated (9) 9 co.'s - Deferred Tax (161) (5) 166 - Other (27) 27 Translation differences (5) 8 Profit for the year 67 Equity, Dec. 31 1998 519 3 712 (318) (650) Total Restricted & 4 231 (968) Retained Losses REVIEW OF THE GROUP (MSEK) 1998 1997 Full Full Year Year Operating revenue by business area Tele2 AB: -Mobile telephony 2,958 2,058 -Fixed telephony included Internet 2,223 1,584 -Cable Television 137 227 5,318 3,869 Tele2 Norway 169 35 Tele2 Denmark 546 192 Other operations 197 64 Parent company 6 3 Adjustments for sales internal (267) (127) Total 5,969 4,036 Operating profit by business area Tele2 AB: -Mobile telephony 1,004 444 -Fixed telephony included Internet 46 211 -Cable Television (60) (4) 990 651 Tele2 Norway (110) (43) Tele2 Denmark (156) (76) Other operations (37) (2) Parent company (90) (60) Group adjustments, depreciation (79) (78) Total 518 392 Gain/loss after financial items by business area Tele2 651 337 Tele2 Norway (128) (48) Tele2 Denmark (176) (82) Other operations 3 (8) Parent company (29) (39) Shares of gain/loss in associated (10) (81) companies Non-recurring items, associated - (38) companies* Group adjustments, depreciation (79) (78) Total 232 (37) REVIEW OF THE GROUP (MSEK), continued 1998 1997 Full Full Year Year Investments by business area Tele2 AB: -Mobile telephony 612 486 -Fixed telephony included Internet 572 439 -Cable Television 17 (33) -Purchase of companies (net) 95 - 1,296 892 Tele2 Norway 69 50 Tele2 Denmark 130 102 Other operations 60 36 Parent company, tangible assets (4) 22 Parent company, purchase of 319 (15) companies (net) Long-term receivables, change (29) (3) 1,841 1,084 Finance lease 118 33 Total investments including finance 1,959 1,117 lease * The 1997 figure relates to a deferral to the first quarter of 1997 of NetCom ASA's fourth quarter of 1996 financial results. QUARTERLY HISTORIC FINANCIAL REVIEW 1998 1998 1998 1998 1997 1997 Q4 Q3 Q2 Q1 Q4 Q3 Operating revenue by business area Tele2 AB: -Mobile telephony 809 796 749 604 587 554 -Fixed telephony 592 526 530 575 466 381 included Internet -Cable Television 30 26 36 45 70 49 984 1,431 1,348 1,315 1,224 1,123 Tele2 Norway 70 39 33 27 15 8 Tele2 Denmark 172 141 124 109 65 58 Other operations 91 53 35 18 28 16 Parent company 2 2 1 1 1 2 Adjustments for sales (63) (60) (42) (57) (24) internal (102) Total 1,664 1,520 1,448 1,337 1,175 1,044 Operating profit by business area Tele2 AB: -Mobile telephony 205 322 263 214 90 169 -Fixed telephony (11) (18) 13 62 83 58 included Internet -Cable Television (16) (22) (18) (4) (12) (7) 178 282 258 272 161 220 Tele2 Norway (7) (20) (41) (42) (15) (11) Tele2 Denmark (56) (26) (47) (27) (30) (25) Other operations (29) (2) (1) (5) (4) (1) Parent company (39) 18 (37) (32) (19) (15) Group adjustments, (20) (21) (17) (21) (19) (19) depreciation Total 27 231 115 145 74 149 Gain/loss after financial items by business area Tele2 103 198 159 191 52 149 Tele2 Norway (15) (24) (45) (44) (17) (12) Tele2 Denmark (63) (32) (51) (30) (32) (27) Other operations (26) 9 26 (6) (7) - Parent company (25) 34 (19) (19) 1 (10) Shares of gain/loss in (11) 3 5 (7) (21) - associated companies Group adjustments, (20) (21) (17) (21) (19) (19) depreciation Total (57) 167 58 64 (43) 81 Investments by business area Tele2 AB: -Mobile telephony 186 122 172 132 149 72 -Fixed telephony 165 191 123 93 137 91 included Internet -Cable Television 12 1 4 - (15) 4 -Purchase of companies - 84 - 11 - - (net) 363 398 299 236 271 167 Tele2 Norway 20 - 25 24 39 3 Tele2 Denmark 52 25 24 29 27 9 Other operations 21 14 12 13 25 5 Parent company, (2) - (1) (1) 14 - tangible assets Parent company, 319 - - - (15) (4) purchase of companies (net) Long-term receivables, (29) - - - (3) - change 744 437 359 301 358 180 Finance lease 3 19 2 94 33 - Total investments 747 456 361 395 391 180 including finance lease FIVE YEAR SUMMARY 1998 1997 1996 1995* 1994* Income Statement and Balance Sheet (MSEK) Operating revenue 5 4 2 1 882 969 036 872 953 Operating profit before 1 1 651 depreciation 223 000 (431) (241) Operating profit after 518 392 254 depreciation (728) (480) Loss/gain after financial 232 (37) 29 (1 items 456) (951) Shareholders' equity 3 3 2 19 263 156 276 (910) Shareholders' equity, 3 3 2 19 after full conversion 263 193 923 (910) Total assets 10 8 7 4 4 183 684 527 831 278 Cash flow provided by 990 411 610 operating activities (759) (491) Liquidity 821 1 819 189 11 499 Net borrowing 4 3 3 4 3 600 579 894 555 322 Net borrowing, after full 4 3 3 4 3 conversion 600 542 247 555 322 Investments including 1 1 1 1 1 financial lease** 959 117 016 006 081 Key ratio (%) Solidity 32% 36% 30% negat 1% ive Solidity, after full 32% 37% 39% negat 1% conversion ive Return on shareholders' 2.1% 3.2% negat negat negat equity ive ive ive Return on shareholders' 2.1% 3.2% negat negat negat equity, after full ive ive ive conversion Return on capital employed 6.7% 4.8% 1.3% negat negat ive ive Average interest rate 6.6% 7.1% 8.9% 11.5% 13.4% Average interest rate, 6.6% 7.1% 8.6% after full conversion 11.5% 13.5% Value per share (SEK) Gain/loss 0.64 0.50 2.80 negat negat ive ive Gain/loss, after full 0.64 0.57 2.78 negat negat conversion ive ive -of which Tele2 Norway (1.24 (0.46 (0.12 ) ) ) -of which Tele2 Denmark (1.69 (0.79 (0.16 ) ) ) -of which associated 2.52 companies (0.14 (0.85 ) ) -of which Tele2 Sweden 3.71 2.67 0.54 and other operations Shareholders' equity negat 31.50 32.18 25.78 ive 970.1 0 Shareholders' equity, negat after full conversion 31.42 30.86 28.70 ive 970.1 0 Market value at closing - - day 330.0 170.5 110.5 0 0 0 P/E-ratio - - 513.1 344.4 39.40 9 3 P/E-ratio, after full - - conversion 514.4 298.1 39.81 3 2 * NetCom, formerly a wholly owned subsidiary of Industriförvalnings AB Kinnevik, was listed in 1996. ** Financial leases are included from January 1, 1997. *** The P/E-ratios are calculated on an annualized basis. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/02/25/19990225BIT00050/bit0001.doc Full Report http://www.bit.se/bitonline/1999/02/25/19990225BIT00050/bit0002.pdf Full Report