Interim report quarter 1 2007

First quarter 2007:
- Consultancy margins at 8%; Temporarily weakened by loss making Obigo related consulting
- Obigo to maintenance mode; Losses stop in Q3 2007
- auSystems divestment proceeds with considerations of MSEK 825

2007 2006
Key figures, Jan–Mar Jan–Mar Change
SEK million
Net sales 318 362 -12%
Operating
earnings (EBIT)* -534 -5 n.a
Earnings for the
period from
continuing
operations* -628 -14 n.a
Earnings for the
period from
discontinuing
operations 374 23 1,526%
Earnings for the
period* -254 9 -3,000%
Earnings per
share, SEK* -4,06 0,14 -3,000%
Cash flow from
current
operations -53 -85 n.a
Cash flow after
investment
operations -43 -122 n.a
Of which:
Net sales
Consulting 275 303 -9%
Net Sales
Products/Obigo 44 59 -25%
EBIT Consulting 23 34 -32%
EBIT Products/
Obigo* -543 -44 n.a

Note: During the first quarter it was decided to divest the auSystems
division. According to IFRS, auSystems is reported as discontinued
operations, implying that all current financial and other key numbers
for the reporting period as well as comparison figures are reported
separated from the continuing business. Net operating earnings from
auSystems and the estimated market value from a sale of auSystems are
reported as a single amount on the face of the income statement.
*Including write-down of goodwill amounting to SEK 357 million,
capitalized development of SEK 100 million and provisions for
restructuring of SEK 30 million in 2007.

· The consulting business reported operating earnings (EBIT) of SEK 23
million (34) and an 8% operating margin (11%). Europe and Russia
continued to report strong performances, whereas Asia and North America
reported negative earnings – mainly caused by changes in Products.
Teleca has initiated actions to turn the loss making units profitable.
The Q1 2007 net sales do not include any intercompany revenue.

· Products reported EBIT of SEK -56 million excluding one time charges.
The significant increase in product losses is a consequence of Teleca’s
decision to bring Obigo business to maintenance mode and stop losses as
of Q3 2007. Teleca has stopped capitalizing development costs during the
first quarter.

· Excluding one time charges operating earnings for the quarter were
SEK -47 million. One time charges related to Products were SEK -487
million consisting of write down of goodwill of SEK -357 million, write
down of capitalized R&D of SEK -100 million and provisions for
restructuring of SEK -30 million.

· Teleca shareholders have approved the auSystems divestment in a cash
deal worth SEK 825 million. The sale will result in estimated capital
gain of 354 MSEK and write down of deferred tax assets of SEK 95
million. Further the sale may result in future additional purchase price
of maximum SEK 22 million for tax benefits transferred. End of March
2007 the pro forma net cash including proceeds from divestments of
auSystems was SEK 571 million.

· Teleca’s Board plans to distribute between SEK 570 and 630 million,
of the proceeds from the auSystems transaction to shareholders through a
share redemption program. An extraordinary shareholders meeting will be
called for in May 2007 to decide on the distribution.

Market outlook

Teleca expects the total value of software to increase across the mobile
device industry in 2007.

The mobile device industry is characterized by intense competition among
leading OEMs and their technology suppliers. The margin pressures
following the hefty competition will likely lead industry players to
consider their software and outsourcing strategies. Teleca expects this
development to create significant new opportunities for software and
services companies.


Outlook for 2007:
Teleca expects consulting revenues to grow slightly over the year from
the level seen in Q1 2007.

Teleca’s result for Q2 will be significantly negatively impacted by
Obigo changes & margin pressures in Obigo related services businesses.
In total Teleca will show a loss for the 2nd quarter.

The company targets margins at the 10% level in 2H 2007 and increasing
into 2008. Seasonal effects will impact Q3 negatively and Q4 positively.
The profit in 2H 2007 is not expected to fully cover the losses (excl.
one-time charges) in 1H 2007.

The product revenue is expected to slightly decline over the year from a
level of up to SEK 30 million in Q2.

CEO Comments
René Svendsen-Tune, President & CEO of Teleca says:
‘We are making very good progress in shaping the new Teleca. I am very
pleased to see, how well our strategy of creating very tight links with
the global leaders of the mobile device industry works, and it will pay
off in the quarters to come. With 52% of our staff in low cost
countries, mainly in Russia, we have a very competitive cost structure.
Combined with our leading skills it makes us a very attractive partner.
We want to see our stable and strong performance in our European and
Russian services operations repeated in all markets. The decision of
taking the Obigo business to maintenance mode has short term negative
impact on our operations, but going forward we will add new ways of
bringing value to our customers. Our increased focus on Open Source
Software excites us and we trust that over time this will allow us to
work even closer with the large players in the industry eco-systems and
hence open new attractive businesses for us’.

For more information please contact:
· René Svendsen-Tune, President and CEO, Teleca AB, mobile +45-40540068
· Christian Luiga, CFO, Teleca AB, +46-857911604, mobile +46-703751604