Interim report, January – March 2005

Record level of orders received

- Orders received increased by 22 per cent and amounted to SEK 144.6 (118.4) million, 60 per cent higher than the average quarterly level (SEK 90.3 million) during 2004. - The order backlog at the end of the period amounted to SEK 223.9 (211.7) million, of which on-going ASP and support contracts accounted for SEK 107.3 (106.4) million. - Net sales amounted to SEK 105.0 (93.9) million, an increase of 12 per cent. - Operating income amounted to SEK 5.6 (7.4) million. - Income after tax amounted to SEK 4.6 (7.7) million. - Earnings per share amounted to SEK 0.24 (0.44). - Large, strategic orders from leading carriers in Southeast Asia. President’s comments During the first quarter of 2005 orders received increased by 22 per cent compared to the corresponding period last year and amounted to SEK 144.6 million. This is 60 per cent higher than the average level of orders received per quarter in 2004, which was SEK 90.3 million. Orders received during this first quarter, a period which is usually a weak, represent the highest level ever for the company. The amount of net sales, SEK 105.0 million, has been exceeded only in the first quarter of 2001, when the company reported a significant amount of extraordinary income. We estimate that the level of orders received in the second quarter of 2005 will continue to be strong. Teligent’s growth and long-term profitability are driven by sales of new systems, which generate continuous support income and upgrading of capacity and function. Sales and delivery of new systems, not least to new customers in new regions, are however more demanding and have a lower level of initial profitability. Teligent has achieved positive operating income for the first quarter of 2005, which means that we have now shown positive income in three of the five quarters since 1 January 2004. This achievement has been made despite continued considerable expenses both in product development and in expanding our global marketing channels. Operations Company management has continued to maintain a high level of focus on the expansion of global sales and distribution channels. Base organisations for deliveries have now been established in Europe, USA, Africa, the Middle East, Asia, and, to a certain extent, in Russia. During the quarter, a large and strategic order was received from one of Southeast Asia’s fastest growing carriers. The order includes basic installation of the Teligent P90/E service platform with a major licensing agreement for utilisation of Teligent’s patented technology in the various types of networks of the carriers. The company’s product portfolio is based on the Teligent P90/E platform. The further development of the platform and applications on the platform continued within a number of strategic areas. The most important transactions, from a commercial point of view, in the last 12 months have taken place within the following areas: - Messaging systems/voicemail - Payment solutions, including Service Delivery Platforms and Content/Charging Gateways. - The Teligent P90/E base platform with development tools as a central “service network architecture” in the carriers’ networks. - Mobile IN and VPN solutions Teligent’s very strong level of orders received involving complex and relatively large systems deliveries to the larger telecommunications carriers yields an increased level of tied-up capital. First quarter 2005 Orders received Orders received in the period amounted to SEK 144.6 million (118.4), equivalent to an increase of 22 per cent compared with the same period last year, and an increase of 77 per cent over the previous quarter. Currency exchange rates had a negative effect of 6 per cent on orders received compared with the first quarter 2004. With an unchanged exchange rate, orders received increased 28 per cent. As of the end of the period, order backlog amounted to SEK 223.9 million (211.7), of which continuing support and ASP contracts accounted for SEK 107.3 million (106.4). Only those ASP and support contracts that are to be delivered within the next 12 months are reported in the order backlog. Net sales Net sales for the period amounted to SEK 105.0 million (93.9), equivalent to an increase of 12 per cent. Of net sales, a total of SEK 27.0 million (25.7) referred to income for ASP and support contracts. Gross margin and income The gross margin amounted to 60 per cent (49). Increased volumes in combination with a larger number of standardised products and software have led to an improved gross margin. Operating income for the period amounted to SEK 5.6 million (7.4) and income after financial items amounted to SEK 4.9 million (7.7). Earnings per share amounted to SEK 0.24 (0.44) Tax The Group reported a loss carry forward of SEK 372.7 million at the start of the year, of which SEK 353.7 million was reported by the Parent Company. Of this fiscal deficit, SEK 35.4 million has been settled against deferred income tax liabilities referring to temporary differences in the Group. The remaining value of deferred tax assets has not been capitalised. Financial position, cash flow and investments As of 31 March 2005, consolidated equity amounted to SEK 223.0 million (208.2) and the equity/assets ratio was 58 per cent (64). Liquid funds, excluding unutilised credit facilities, amounted to SEK 13.6 million (19.3) as of 31 March 2005. In addition, the company had unutilised credit facilities amounting to approximately SEK 22.9 million. Cash flow before investments amounted to SEK -9.0 million (-7.6). Investments during the period amounted to SEK 17.4 million (9.8), of which intangible assets accounted for SEK 15.1 million (8.2) and tangible assets for SEK 2.3 million (1.6). Personal The number of employees in the Group increased by 13 during the period to 312 (279), of which 199 (172) in Sweden. Accounting principles From financial year 1 January 2005 the company will prepare its consolidated financial statements in accordance with IFRS and any other requirements arising from the regulations of the Swedish Annual Accounts Act. This interim report is the first report that the company presents according to IFRS and is prepared in accordance with IAS 34 Interim Financial Reporting and the IFRS standards and the IFRIC interpretations which came into effect as of 31 March 2005. The IFRS standards and IFRIC interpretations that will be applicable as of 31 December 2005, including those that will be applied on an optional basis, are not known with certainty at the time of preparing this interim report . Until 2004 the company applied the recommendations and statements of the Swedish Financial Accounting Standards Council. The transition to IFRS is reported in accordance with IFRS 1 First-time Adoption of International Financial Reporting Standards, for which the transition date is 1 January 2004. IFRS 1 prescribes that the comparative year 2004 is also to be reported according to IFRS. Financial information referring to previous financial years other than 2004 has not been recalculated. Teligent has prepared an opening IFRS balance sheet as of 1 January 2004 for the Group in order to facilitate comparison between the 2004 and the 2005 outcomes. In conjunction with this, the reported quarterly figures for 2004 will be recalculated in order that comparison can be made with 2005 financials. The changes in the accounting principles caused by this transition and the transitional effects on the consolidated income statement and balance sheet are presented at the end of this report, including the alternative exceptions from full retroactive application as stipulated in IFRS 1, as selected to be implemented by the company. Forecast for 2005 The company refrains from presenting a forecast for the 2005. Other Information Annual General Meeting The Annual General Meeting of shareholders was held on 7 April 2005. The Annual General Meeting resolved to authorise the Board of Directors to decide upon a new share issue of a maximum of 2 million new shares. The Annual General Meeting also decided upon the principles regarding the Election Committee for the forthcoming year. The following individuals were re-elected to the new Board of Directors: Lars-Erik Nilsson (Chairman), Anders Björkman, Olle Isberg, Bengt Jörgensen, Mikael Karlsson and Pekka Peltola. Forthcoming reports Interim report for Jan - Jun 2005, 15 Jul 2005 Interim report for Jan - Sept 2005, 21 Oct 2005 Nynäshamn, 29 April 2005 Ulf Lindstén President and CEO