REG-TEO LT, AB Half-yearly Report

VILNIUS, Lithuania--(Business Wire)--

TEO LT, AB

INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS OF 2008

PREPARED IN ACCORDANCE WITH THE RULES ON PREPARATION AND SUBMISSION OF PERIODIC
AND ADDITIONAL INFORMATION OF THE LITHUANIAN SECURITIES COMMISSION

TEO LT, AB (hereinafter - TEO or "the Company") Group is the largest Lithuanian
broadband Internet access and voice telephony services operator, providing
integrated telecommunication, IT and TV services to residents and business. TEO
Group is a part of TeliaSonera Group, the Nordic and Baltic telecommunications
leader.

The Communication Regulatory Authority (CRA) of Lithuania has designated TEO
together with its related legal entities as an operator with significant market
power (SMP) on 14 markets. TEO and UAB Omnitel as members of TeliaSonera Group
are regarded as related entities in Lithuania, therefore TEO is considered as
SMP on the market of voice call termination at public mobile network of UAB
Omnitel.

The consolidated financial statements of TEO Group have been prepared according
to International Financial Reporting Standards as adopted by the European Union.

TEO Group financial statements for the six months of 2008 are not audited. TEO
Group financial statements for the year ended 31 December 2007 are audited by
the auditors.

CONSOLIDATED BALANCE SHEET OF TEO GROUP (LTL thousand)

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ASSETS 2008-06-30 2007-12-31
------------------------------------------------------------ ---------------- ----------------
Non-current assets
------------------------------------------------------------ ---------------- ----------------
Property, plant and equipment 632,823 657,962
------------------------------------------------------------ ---------------- ----------------
Intangible assets 42,234 29,643
------------------------------------------------------------ ---------------- ----------------
Trade and other receivables 2,502 3,166
------------------------------------------------------------ ---------------- ----------------
677,559 690,771
------------------------------------------------------------ ---------------- ----------------
Current assets
------------------------------------------------------------ ---------------- ----------------
Inventories 3,795 4,943
------------------------------------------------------------ ---------------- ----------------
Trade and other receivables 121,563 121,691
------------------------------------------------------------ ---------------- ----------------
Current profit tax receivable 2,847 5,749
------------------------------------------------------------ ---------------- ----------------
Held-to-maturity investments 90,592 116,726
------------------------------------------------------------ ---------------- ----------------
Trading investments - 34,561
------------------------------------------------------------ ---------------- ----------------
Cash and cash equivalents 165,446 229,350
------------------------------------------------------------ ---------------- ----------------
Assets held for sale 1,743 1,851
------------------------------------------------------------ ---------------- ----------------
385,986 514,871
------------------------------------------------------------ ---------------- ----------------
TOTAL ASSETS 1,063,545 1,205,642
------------------------------------------------------------ ---------------- ----------------
*T

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EQUITY 2008-06-30 2007-12-31
------------------------------------------------------------ ---------------- ----------------
Shareholders' equity
------------------------------------------------------------ ---------------- ----------------
Share capital 814,913 814,913
------------------------------------------------------------ ---------------- ----------------
Treasury shares (120,000) (120,000)
------------------------------------------------------------ ---------------- ----------------
Legal reserve 81,499 81,499
------------------------------------------------------------ ---------------- ----------------
Retained earnings 189,284 294,167
------------------------------------------------------------ ---------------- ----------------
965,696 1,070,579
------------------------------------------------------------ ---------------- ----------------
Minority interest - -
------------------------------------------------------------ ---------------- ----------------
Total equity 965,696 1,070,579
------------------------------------------------------------ ---------------- ----------------
LIABILITIES
------------------------------------------------------------ ---------------- ----------------
Non-current liabilities
------------------------------------------------------------ ---------------- ----------------
Borrowings 6,395 6,809
------------------------------------------------------------ ---------------- ----------------
Deferred tax liabilities 6,315 9,530
------------------------------------------------------------ ---------------- ----------------
Grants 1,814 2,768
------------------------------------------------------------ ---------------- ----------------
Deferred revenue 1,710 1,900
------------------------------------------------------------ ---------------- ----------------
16,234 21,007
------------------------------------------------------------ ---------------- ----------------
Current liabilities
------------------------------------------------------------ ---------------- ----------------
Trade, other payables and accrued liabilities 79,605 112,047
------------------------------------------------------------ ---------------- ----------------
Current income tax liabilities 945 104
------------------------------------------------------------ ---------------- ----------------
Borrowings 820 805
------------------------------------------------------------ ---------------- ----------------
Provisions 245 1,100
------------------------------------------------------------ ---------------- ----------------
81,615 114,056
------------------------------------------------------------ ---------------- ----------------
Total liabilities 97,849 135,063
------------------------------------------------------------ ---------------- ----------------
TOTAL EQUITY AND LIABILITIES 1,063,545 1,205,642
------------------------------------------------------------ ---------------- ----------------
*T

CONSOLIDATED INCOME STATEMENT OF TEO GROUP (LTL thousand)

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April - June April - June January - June January - June
2008 2007 2008 2007
-------------------------------------- -------------- -------------- -------------- --------------
Revenue 203,307 192,981 410,110 378,786
-------------------------------------- -------------- -------------- -------------- --------------
Other income 1,386 710 3,494 1,840
-------------------------------------- -------------- -------------- -------------- --------------
Employee related expenses (43,391) (40,036) (84,301) (76,301)
-------------------------------------- -------------- -------------- -------------- --------------
Network interconnection expenses (30,192) (31,023) (60,768) (56,919)
-------------------------------------- -------------- -------------- -------------- --------------
Other operating expenses (41,000) (39,616) (85,227) (78,606)
-------------------------------------- -------------- -------------- -------------- --------------
Depreciation, amortisation and
impairment charge (42,613) (42,037) (86,019) (84,476)
-------------------------------------- -------------- -------------- -------------- --------------
Other gain (loss), net 277 3,001 1,503 3,402
-------------------------------------- -------------- -------------- -------------- --------------
Operating profit 47,774 43,980 98,792 87,726
-------------------------------------- -------------- -------------- -------------- --------------
Finance income 3,367 3,203 6,074 5,851
-------------------------------------- -------------- -------------- -------------- --------------
Finance costs (140) (150) (549) (294)
-------------------------------------- -------------- -------------- -------------- --------------
Finance income (costs), net 3,227 3,053 5,525 5,557
-------------------------------------- -------------- -------------- -------------- --------------
Profit before income tax 51,001 47,033 104,317 93,283
-------------------------------------- -------------- -------------- -------------- --------------
Income tax (6,913) (7,883) (14,996) (16,255)
-------------------------------------- -------------- -------------- -------------- --------------
Profit for the period from continuing
operations 44,088 39,150 89,321 77,028
-------------------------------------- -------------- -------------- -------------- --------------

-------------------------------------- -------------- -------------- -------------- --------------
Discontinued operations:
-------------------------------------- -------------- -------------- -------------- --------------
Profit (loss) for the period from
discontinued operations - (2) - -
-------------------------------------- -------------- -------------- -------------- --------------
Profit for the period 44,088 39,148 89,321 77,028
-------------------------------------- -------------- -------------- -------------- --------------
Attributable to:
-------------------------------------- -------------- -------------- -------------- --------------
Equity holders of the Company 44,088 39,148 89,321 77,028
-------------------------------------- -------------- -------------- -------------- --------------
Minority interest - - - -
-------------------------------------- -------------- -------------- -------------- --------------
44,088 39,148 89,321 77,028
-------------------------------------- -------------- -------------- -------------- --------------
Earnings per share for profit
attributable to the equity holders of
the Company (in litas) 0.057 0.050 0.155 0.099
-------------------------------------- -------------- -------------- -------------- --------------
*T

CONSOLIDATED CASH FLOW STATEMENT OF TEO GROUP (LTL thousand)

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January - June January - June
2008 2007
------------------------------------------------------------- ---------------- ----------------
Operating activities
------------------------------------------------------------- ---------------- ----------------
Profit for the period from continuing operations 89,321 77,028
------------------------------------------------------------- ---------------- ----------------
Income tax 14,996 16,255
------------------------------------------------------------- ---------------- ----------------
Depreciation, amortisation and impairment charge 86,019 84,476
------------------------------------------------------------- ---------------- ----------------
Elimination of gain and losses (1,503) (3,402)
------------------------------------------------------------- ---------------- ----------------
Interest income (7,599) (7,182)
------------------------------------------------------------- ---------------- ----------------
Interest expenses 148 169
------------------------------------------------------------- ---------------- ----------------
Other non-cash transactions 146 913
------------------------------------------------------------- ---------------- ----------------

------------------------------------------------------------- ---------------- ----------------
Changes in working capital (excluding the effects of
acquisition and disposal of subsidiaries):
------------------------------------------------------------- ---------------- ----------------
Inventories 1,229 (765)
------------------------------------------------------------- ---------------- ----------------
Trade and other accounts receivable (2,524) (12,588)
------------------------------------------------------------- ---------------- ----------------
Trade and other accounts payable and deferred revenue (1,322) 1,047
------------------------------------------------------------- ---------------- ----------------
Cash generated from operations 178,911 155,951
------------------------------------------------------------- ---------------- ----------------

------------------------------------------------------------- ---------------- ----------------
Interest paid (148) (181)
------------------------------------------------------------- ---------------- ----------------
Interest received 4,104 6,684
------------------------------------------------------------- ---------------- ----------------
Tax paid (14,469) (23,995)
------------------------------------------------------------- ---------------- ----------------

------------------------------------------------------------- ---------------- ----------------
Net cash from operating activities 168,398 138,459
------------------------------------------------------------- ---------------- ----------------
January - June January - June
Investing activities 2008 2007
------------------------------------------------------------- ---------------- ----------------
Purchase of property, plant and equipment (PPE) and
intangible assets (88,395) (80,627)
------------------------------------------------------------- ---------------- ----------------
Proceeds from disposal of PPE, intangible assets, assets held
for sale 1,019 3,060
------------------------------------------------------------- ---------------- ----------------
Acquisition/disposal of held-to-maturity investments, net 29,619 (18,757)
------------------------------------------------------------- ---------------- ----------------
Acquisition/disposal of trading investments, net 35,411 -
------------------------------------------------------------- ---------------- ----------------
Acquisition of subsidiaries (16,078) -
------------------------------------------------------------- ---------------- ----------------
Disposal of subsidiaries 725 989
------------------------------------------------------------- ---------------- ----------------
Loan granted/repaid - 150,000
------------------------------------------------------------- ---------------- ----------------
Net cash from investing activities (37,699) 54,665
------------------------------------------------------------- ---------------- ----------------
Financing activities
------------------------------------------------------------- ---------------- ----------------
Repayment of borrowings (399) (406)
------------------------------------------------------------- ---------------- ----------------
Dividends paid to the shareholders (194,204) (201,973)
------------------------------------------------------------- ---------------- ----------------
Net cash from financing activities (194,603) (202,379)
------------------------------------------------------------- ---------------- ----------------
Increase (decrease) in cash and cash equivalents (63,904) (9,255)
------------------------------------------------------------- ---------------- ----------------
Movement in cash and cash equivalents
------------------------------------------------------------- ---------------- ----------------
At start of the period 229,350 232,581
------------------------------------------------------------- ---------------- ----------------
Increase (decrease) during the period (63,904) (9,255)
------------------------------------------------------------- ---------------- ----------------
At end of the period 165,446 223,326
------------------------------------------------------------- ---------------- ----------------
*T

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY OF TEO GROUP (LTL thousand)

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Attributable to equity holders of the Company
------------------------------------------------------------ Minority Total equity
Share Treasury Legal Translation Retained interest
Capital Shares reserves differences earnings
---------------- ----------- ----------- ----------- ------------ ----------- ---------- ------------
Balance at
1 January 2007 814,913 (120,000) 81,499 (1) 333,301 - 1,109,712
---------------- ----------- ----------- ----------- ------------ ----------- ---------- ------------
Dividends paid
for the year
2006 - - - - (201,973) - (201,973)
---------------- ----------- ----------- ----------- ------------ ----------- ---------- ------------
Net profit - - - - 77,028 - 77,028
---------------- ----------- ----------- ----------- ------------ ----------- ---------- ------------
Currency
translation
differences - - - 9 -- - 9
---------------- ----------- ----------- ----------- ------------ ----------- ---------- ------------
Balance at
30 June 2007 814,913 (120,000) 81,499 8 208,356 - 984,776
---------------- ----------- ----------- ----------- ------------ ----------- ---------- ------------

---------------- ----------- ----------- ----------- ------------ ----------- ---------- ------------
Balance at
1 January 2008 814,913 (120,000) 81,499 - 294,167 - 1,070,579
---------------- ----------- ----------- ----------- ------------ ----------- ---------- ------------
Dividends paid
for the year
2007 - - - - (194,204) - (194,204)
---------------- ----------- ----------- ----------- ------------ ----------- ---------- ------------
Net profit - - - - 89,321 - 89,321
---------------- ----------- ----------- ----------- ------------ ----------- ---------- ------------
Balance at
30 June 2008 814,913 (120,000) 81,499 - 189,284 - 965,696
---------------- ----------- ----------- ----------- ------------ ----------- ---------- ------------
*T

EXPLANATORY LETTER

TEO Group is the largest Lithuanian broadband Internet access and voice
telephony services operator, providing integrated telecommunication, IT and TV
services to residents and business.

The authorized share capital of TEO LT, AB is 814,912,760 litas. It consists of
814,912,760 ordinary registered shares with a nominal value of one litas each.

38,095,242 shares are treasury stocks that have no rights to exercise any
property and non-property rights provided by the Law of the Republic of
Lithuania on Companies. Therefore, the number of TEO LT, AB shares that provide
voting rights during the General Meeting of Shareholders is 776,817,518.

Shares of TEO LT, AB are listed on the Baltic Main List of the Vilnius Stock
Exchange (VSE) (trading code: TEO1L).

TEO LT, AB runs a Global Depository Receipt (GDR) programme. According to the
programme, one GDR represents 10 ordinary registered shares of the Company.
Shares are held by the depository bank, Deutsche Bank Trust Company Americas, 60
Street, New York, NY 10005, U.S.A.

As on 15 July 2008, 31,641,670 ordinary shares of the Company (3.88% of the
total share capital) were represented by 3,164,167 GDRs.

The Company's GDRs are traded on the London Stock Exchange (LSE) (trading code:
TEOL).

The number of shareholders on the day of the last General Meeting of
Shareholders, which was held on 15 July 2008, was 14,964.

Shareholders of TEO LT, AB as on 15 July 2008:

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Name of the shareholder Number of Share of the Share of votes Share of votes
(name of the enterprise, ordinary share capital given by the held together
type and registered office registered (%) shares owned by with persons
address, code in the shares owned by the right of acting in
Register of Enterprises) the shareholder ownership (%) concert (%)
--------------------------- ---------------- ---------------- ---------------- ----------------
Amber Teleholding A/S (a),
c/o ,,TeliaSonera Danmark
A/S",
Holmbladsgade 139, DK-2300
Copenhagen S, Denmark,
code 20758694 488,947,656 60.00 62.94 -
--------------------------- ---------------- ---------------- ---------------- ----------------
TEO LT, AB, Savanoriu pr.
28, LT-03501 Vilnius,
Lithuania, code 121215434
(Treasury stocks) 38,095,242 (b) 4.67 - -
--------------------------- ---------------- ---------------- ---------------- ----------------
State of Lithuania (d) 11,728,985 (c) 1.44 1.51 -
--------------------------- ---------------- ---------------- ---------------- ----------------
Other shareholders 276,140,877 33.89 35.55 -
--------------------------- ---------------- ---------------- ---------------- ----------------
Total: 814 912 760 100.00 100.00 -
--------------------------- ---------------- ---------------- ---------------- ----------------
*T

NOTE: (a) Amber Teleholding A/S is a fully owned subsidiary of Swedish
TeliaSonera AB.

(b) 12,698,412 ordinary registered shares and 2,539,683 Global Depository
Receipts.

(c) The State Property Fund (11,366,355 shares) and the State Tax Authorities
(362,630 shares).

TEO together with its related legal entities is designated as an operator with
significant market power (SMP) in Lithuania on the following markets of:

- access to the public telephone network at a fixed location for residential
customers;

- access to the public telephone network at a fixed location for non-residential
customers;

- publicly available local and/or national telephone services provided at a
fixed location for residential customers;

- publicly available international telephone services provided at a fixed
location for residential customers;

- publicly available local and/or national telephone services provided at a
fixed location for non-residential customers;

- publicly available international telephone services provided at a fixed
location for non-residential customers;

- minimum set of leased lines;

- calls origination on public telephone network provided at a fixed location;

- calls termination on public telephone network provided at a fixed location;

- national transit in fixed public telephone network;

- international transit in fixed public telephone network;

- wholesale broadband access;

- wholesale unbundled access (including shared access) to metallic loops and
sub-loops for the purpose of providing broadband and voice services;

- wholesale terminating segments and trunk segments of leased lines.

As TeliaSonera AB through Amber Mobile Teleholding AB owns a 100 per cent stake
in the largest mobile operator in Lithuania UAB Omnitel, TEO is regarded as an
entity related to UAB Omnitel, therefore TEO is considered as SMP on the market
of voice call termination on the mobile network of Omnitel.

As on 30 June 2008, TEO Group consisted of the parent company, TEO LT, AB,
(Savanoriu ave. 28, LT-03501 Vilnius, www.teo.lt) and its daughter companies:

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Name of the Activities of the Legal address TEO part in the Part of TEO votes
company company share capital of (%)
the company (%)
------------------ ------------------ ------------------ ------------------ ------------------
UAB Lintel Information, J. Galvydzio str.
telemarketing and 7/Zygio str. 97,
remote customer LT-08222 Vilnius,
care services www.lintel.lt 100.00 100.00
------------------ ------------------ ------------------ ------------------ ------------------
UAB Baltic Data Data center and Zirmunu str. 141,
Center information LT-09128 Vilnius,
system management www.bdc.lt
services 100.00 100.00
------------------ ------------------ ------------------ ------------------ ------------------
UAB Nacionaline Re-broadcasting of Savanoriu pr. 125,
Skaitmenine TV channels LT-44146 Kaunas
Televizija through DVB-T
networks 100.00 100.00
------------------ ------------------ ------------------ ------------------ ------------------
UAB Kompetencijos Training and Palangos str. 4,
Ugdymo Centras consultancy LT-01117 Vilnius,
www.kuc.lt 100.00 100.00
------------------ ------------------ ------------------ ------------------ ------------------
UAB Voicecom NMT-450 network Savanoriu ave. 28,
LT-03501 Vilnius 100.00 100.00
------------------ ------------------ ------------------ ------------------ ------------------
VsI TEO Sportas Women's basketball Savanoriu ave. 28,
team LT-03116 Vilnius,
www.teobasket.lt --(a) 100.00
------------------ ------------------ ------------------ ------------------ ------------------
*T

NOTE: (a) TEO is the sole founder and owner of a non-profit organisation VsI TEO
Sportas.

TEO LT, AB, the parent company of the Group, offers to residential and business
customers in Lithuania voice telephony, Internet, digital television, IT, data
communication and telecommunications networks interconnection services. TEO also
operates an Internet portal www.zebra.lt.

UAB Lintel is the largest, in terms of business volumes, and the most modern, in
terms of technologies and management, Call Center service provider in Lithuania.
It handles around 16 million contacts per year. For residential customers Lintel
provides Directory Inquiry Service 118 and consultations to computer users by
phone 1518 as well as telemarketing and remote customer care services to
business customers.

UAB Baltic Data Center is a leading provider of data center and information
system management services in the Baltic States. Baltic Data Center provides
professional data centre, computer workstation and business management system
support and development services. UAB Baltic Data Center also has its subsidiary
in Latvia - Baltic Data Center SIA, which is a dormant company.

On 3 January 2008, TEO acquired 100 per cent stake in UAB Nacionaline
Skaitmenine Televizija, which has two licenses for re-broadcasting of television
channels through digital terrestrial television (DVB-T) networks. In March 2008,
TEO Group started provision of digital terrestrial television services
Skaitmenine GALA (Digital GALA).

UAB Voicecom has the permission to use the national network of mobile analogue
cellular radio communication of the NMT-450 standard. Permission is valid till
31 October 2008.

UAB Kompetencijos Ugdymo Centras provides training and consultancy services,
organises certified trainings. Kompetencijos Ugdymo Centras is one of the
largest employees' development institutions in Lithuania.

VsI TEO Sportas supports TEO women basketball team, a multiple champion of
Lithuania and the Baltic States. In 2007 TEO Sportas handed over operations of
fitness center ZEBRA SPORT at P. Luksio str. 34 in Vilnius to UAB Griunvaldas.

On 15 February 2007, TEO LT, AB sold its 100 per cent stake in OOO
Comliet-Kaliningrad (ul. Pugachiova 14а, RUS-236000 Kaliningrad, Kaliningrad
Region, Russian Federation). The company was acquired from the then subsidiary
UAB Comliet (held 95 per cent stake in OOO Comliet-Kaliningrad) and UAB Comliet
Sprendimai (5 per cent stake) on 31 January 2006.

TEO Group accounting

Subsidiaries are all entities over which the Group has the power to govern the
financial and operating policies generally accompanying a shareholding of more
than one half of the voting rights. The existence and effect of potential voting
rights that are currently exercisable or convertible are considered when
assessing whether the Group controls another entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They
are de-consolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of
subsidiaries by the Group. The cost of an acquisition is measured as the fair
value of the assets given, equity instruments issued and liabilities incurred or
assumed at the date of exchange, plus costs directly attributable to the
acquisition. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured initially at their
fair values at the acquisition date, irrespective of the extent of any minority
interest. The excess of the cost of acquisition over the fair value of the
Group's share of the identifiable net assets acquired is recorded as goodwill.
If the cost of acquisition is less than the fair value of the net assets of the
subsidiary acquired, the difference is recognised directly in the income
statement

Inter-company transactions, balances and unrealised gains on transactions
between group companies are eliminated. Unrealised losses are also eliminated
but considered an impairment indicator of the asset transferred. Accounting
policies of subsidiaries have been changed where necessary to ensure consistency
with the policies adopted by the Group.

The Group applies a policy of treating transactions with minority interests as
transactions with parties external to the Group. Disposals to minority interests
result in gains and losses for the Group that are recorded in the income
statement. Purchases from minority interests result in goodwill, being the
difference between any consideration paid and the relevant share acquired of the
carrying value of net assets of the subsidiary.

Associates are all entities over which the Group has significant influence but
not control, generally accompanying a shareholding of between 20% and 50% of the
voting rights. Investments in associates are accounted for using the equity
method of accounting and are initially recognised at cost. The Group's
investment in associates includes goodwill identified on acquisition, net of any
accumulated impairment loss.

The Group's share of its associates' post-acquisition profits or losses is
recognised in the income statement, and its share of post-acquisition movements
in reserves is recognised in reserves. The cumulative post-acquisition movements
are adjusted against the carrying amount of the investment. When the Group's
share of losses in an associate equals or exceeds its interest in the associate,
including any other unsecured receivables, the Group does not recognise further
losses, unless it has incurred obligations or made payments on behalf of the
associate.

Unrealised gains on transactions between the Group and its associates are
eliminated to the extent of the Group's interest in the associates. Unrealised
losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Accounting policies of associates have been
changed where necessary to ensure consistency with the policies adopted by the
Group.

Key figures of TEO Group

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January - June January - June
Financial figures 2008 2007 Change (%)
------------------------------------------- ----------------- ----------------- -----------------
Revenue (LTL thousand) 410,110 378,786 8.3
------------------------------------------- ----------------- ----------------- -----------------
EBITDA (LTL thousand) 184,811 172,202 7.3
------------------------------------------- ----------------- ----------------- -----------------
EBITDA margin (%) 45,1 45,5
------------------------------------------- ----------------- ----------------- -----------------
Operating profit (LTL thousand) 98,792 87,726 12.6
------------------------------------------- ----------------- ----------------- -----------------
Operating profit margin (%) 24,1 23,2
------------------------------------------- ----------------- ----------------- -----------------
Profit before income tax (LTL thousand) 104,317 93,283 11.8
------------------------------------------- ----------------- ----------------- -----------------
Profit for the period (LTL thousand) 89,321 77,028 16.0
------------------------------------------- ----------------- ----------------- -----------------
Profit for the period margin (%) 21,8 20,3
------------------------------------------- ----------------- ----------------- -----------------
Earnings per share (LTL) 0,115 0,099 16.0
------------------------------------------- ----------------- ----------------- -----------------
Number of shares excluding treasury stocks
(thousand) 776,818 776,818 -
------------------------------------------- ----------------- ----------------- -----------------
Financial ratios 2008-06-30 2007-06-30
------------------------------------------- ----------------- ----------------- -----------------
Return on capital employed (a) (%) 19.7 16.3
------------------------------------------- ----------------- ----------------- -----------------
Return on average assets (a) (%) 16.8 14.0
------------------------------------------- ----------------- ----------------- -----------------
Return on shareholders' equity (a) (%) 16.8 13.4
------------------------------------------- ----------------- ----------------- -----------------
Gearing ratio (%) -25.8 -31.4
------------------------------------------- ----------------- ----------------- -----------------
Debt to equity ratio (%) 0.7 0.8
------------------------------------------- ----------------- ----------------- -----------------
Current ratio (%) 472.9 518.0
------------------------------------------- ----------------- ----------------- -----------------
Rate of turnover of assets (a) (%) 70.6 63.1
------------------------------------------- ----------------- ----------------- -----------------
Equity to assets ratio (%) 90.8 89.8
------------------------------------------- ----------------- ----------------- -----------------
*T

NOTE: calculated for 12 months period on roll-up bases.

Revenue

The total consolidated TEO Group's revenue for the first six months of 2008 was
LTL 410 million, an increase by 8.3 per cent over the total revenue of LTL 379
million for the first six months of 2007. The total revenue for April - June
2008 was LTL 203 million, an increase by 5.4 per cent over the total revenue of
LTL 193 million for April - June of 2007.

During the first six months of 2008 share of revenue from traditional voice
telephony services from total amount of revenue continued to shrink and amounted
to 63.2 per cent of total revenue, while share of Internet and data
communications revenue continued to grow and amounted to 29.8 per cent. Revenue
from IT services amounted to 2.8 per cent, television services - 1.7 per cent
and other services - 2.5 per cent of total revenue for January - June 2008.

Breakdown of TEO Group revenue (LTL thousand

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April-June April-June January- January-
2008 2007 Change (%) June 2008 June 2007 Change (%)
--------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Voice telephony services 128,215 132,634 (3.3) 259,330 262,249 (1.1)
--------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Internet and data
communication services 61,746 51,447 20.0 122,416 100,044 22.4
--------------------------- ----------- ----------- ----------- ----------- ----------- -----------
IT services 4,957 2,189 126.5 11,387 4,944 130.3
--------------------------- ----------- ----------- ----------- ----------- ----------- -----------
TV services 3,836 1,401 173.8 6,910 2,474 179.3
--------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Other revenues 4,553 5,310 (14.3) 10,067 9,075 10.9
--------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Total 203,307 192,981 5.4 410,110 378,786 8.3
--------------------------- ----------- ----------- ----------- ----------- ----------- -----------
*T

Compared with the revenue for the first six months of 2007, revenue from
subscription fees for the first six months of 2008 increased by 3.2 per cent and
value added services - by 5.8 per cent although that did not off-set a decline
in revenue from traffic charges and network interconnection services - by 8.7
per cent and 7.1 per cent, respectively. Revenue from wholesales services went
down by 8.5 per cent, too.

During January - June 2008, the total number of main telephone lines in service
decreased by 12.9 thousand lines because from February 2008 the Company
terminated provision of temporary disconnected telephone line with incoming
calls service. On the other hand number of active lines increased by 40
thousand. In total, during the first six months of 2008 there were installed
24.5 thousand new telephone lines while 37.4 thousand lines were disconnected.

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2008-06-30 2007-06-30 Change (%)
------------------------------------------- ----------------- ----------------- -----------------
Number of fixed lines in service 776,052 787,726 (1.5)
------------------------------------------- ----------------- ----------------- -----------------
Digitalisation rate (%) 93.9 94.0 (0.1)
------------------------------------------- ----------------- ----------------- -----------------
Number of broadband Internet connections
(DSL, FTTB, FTTH, WiFi) 277,676 212,648 30.6
------------------------------------------- ----------------- ----------------- -----------------
Number of wireless Internet (WiFi) hot-
spots 3,761 1,750 114.9
------------------------------------------- ----------------- ----------------- -----------------
Number of IP TV customers 27,963 11,382 145.7
------------------------------------------- ----------------- ----------------- -----------------
Number of DVB-T customers 6,554 - -
------------------------------------------- ----------------- ----------------- -----------------
Number of IT services customers 799 276 189.5
------------------------------------------- ----------------- ----------------- -----------------
Number of personnel (head-counts) at the
end of period 3,261 3,274 (0.4)
------------------------------------------- ----------------- ----------------- -----------------
Number of full time employees at the end of
the period 2,887 3,035 (4.8)
------------------------------------------- ----------------- ----------------- -----------------
*T

Total calls traffic for the first six months of 2008, compared to the same
period of 2007, declined by just 1.9 per cent as traffic generated by
residential customers increased by 2.7 per cent while traffic generated by
business customers continued to go down due to competition with other operators.

An increase in residential customers' traffic due to marketing campaigns and
public holidays as well as in March improved Universalusis (Universal) payment
plan for residential customers caused increase in total long distance domestic
calls' traffic by 6.9 per cent. Total traffic of local calls decreased by 3.4
per cent, international calls - by 0.6 per cent and fixed-to-mobile traffic - by
6.9 per cent.

From March users of Universalusis (Universal) payment plan for the monthly fee
of 50 litas could make unlimited calls within TEO network all over Lithuania at
any time of the day. For retired persons and persons belonging to certain groups
of socially disadvantaged people, the monthly fee for the payment plan is 35
litas. Previously, subscribers to this payment plan were given 4 hours of free
calls during the peak time and 30 hours during off-peak time within TEO network.

According to the Report of the Communications Regulatory Authority (CRA) for the
first quarter of 2008, TEO market share of the fixed-line telephony market in
terms of customers amounted to 94.6 per cent and in terms of revenue - to 95.4
per cent. In terms of revenue TEO had 19.5 per cent of the networks'
interconnection market.

During January-June of 2008, the number of broadband Internet access users
increased by 19.1 thousand. Out of total 277.7 thousand broadband connections,
242 thousand are copper DSL connections sold to retail customers, 20.2 thousand
are wireless connections via the WiFi network, 13.2 thousand are fiber optic
connections (7.5 thousand Fiber to the building (FTTB) and 5.7 thousand Fiber to
the home (FTTH)) and 2.3 thousand DSL connections are the connections sold to
wholesales customers.

Compared with the first six months of 2007, revenue from Internet broadband
access services for the first six months of 2008 went up by 23.7 per cent while
revenue from dial-up Internet service went down by 47.1 per cent as the number
of dial-up Internet service users over the year decreased by half from 6.9
thousand to 3.7 thousand. Revenue from data communication and network capacity
sale services increased by 22.5 and 30.2 per cent, respectively.

According to the Report of the CRA, the Company's market share of the total
Internet providers' market in terms of revenue during the first quarter of 2008
amounted to 41.6 per cent, while its share of the broadband Internet access
market was 47.7 per cent. On 31 March 2008 broadband Internet penetration per
100 residents of Lithuania was 15.8 (a year ago - 12.1 per cent). In terms of
revenue TEO had 54.7 per cent of the leased lines market and 51.8 per cent of
the data communications market.

In March 2008, TEO Group started provision of digital terrestrial television
service Skaitmenine GALA (Digital GALA), which will enable using the
highest-quality television services almost in the whole of Lithuania. The new
service's users have the possibility to watch 37 popular TV channels broadcasted
through digital terrestrial (DVB-T) television transmitters.

The monthly fee for Digital GALA is 29 litas, but TEO customers who order
service till 8 August 2008, first 12 months will use it for free.

At the end of June 2008 there were 6,554 subscribers of digital terrestrial
television service Digital GALA. During January-June 2008, the number of IPTV
service Interaktyvioji GALA (Interactive GALA), previously called just GALA,
increased by 10.5 thousand and at the end of June amounted to 28 thousand.

From July TEO offered to users of Interactive GALA service a new additional TV
channels' package for children that contains three TV channels for children
created by Disney Corporation.

During the second quarter of 2008 UAB Baltic Data Center signed a 3 year
contract with company Vilniaus Duona for the maintenance and support of servers
and other IT infrastructure.

During the first three months of 2008 the Company implemented a few special
telecommunications projects by order of governmental institutions and increased
its revenue from other services by LTL 1.3 million. Revenue from special
projects during the first six months of 2007 amounted to LTL 2 million.

Revenue from other services consists also of the following non-telecommunication
services: lease of premises, Contact Center services of UAB Lintel, consultancy
and training services of UAB Kompetencijos Ugdymo Centras, fitness center
services operated by TEO Sportas till June 2007.

Other income, that consist of interest income from bonds acquired, for
January-June of 2008 increased by more than 3 times over the other income a year
ago. Other gain (loss) from sale of property, investments and etc. decreased by
2.3 times.

Operating expenses

Total operating expenses of the Group in the first six months of 2008 were by
8.7 per cent higher than total operating expenses a year ago. All major groups
of expenses increased: employee related expenses increased by 10.5 per cent,
networks' interconnection expenses - by 6.8 per cent, other operating expenses -
by 8.4 per cent. In the group of other operating expenses, the biggest increase
was in expenses related to IT and network expenses as well as energy, premises
and transportation expenses.

During January-June 2008 the total number of employees (headcount) in TEO Group
went up from 3,177 (31 December 2007) to 3,261 (30 June 2008) while number of
full-time employees went down from 2,907 to 2,887, as part-time employees are
recalculated into full-time employees and number does not include employees on
maternity/paternity leave.

Earnings

EBITDA for the first six months of 2008 went up by 7.3 per cent to LTL 185
million over LTL 172 million in the first six months of 2007. EBITDA margin
stood at 45.1 per cent (45.5 per cent in 2007).

Due to higher investments in 2007-2008, depreciation and amortisation charges
over the year increased by 1.8 per cent and during January-June of 2008 amounted
to 21 per cent of total revenue (22.3 a year ago). Nevertheless, operating
profit was 12.6 per cent higher than a year ago and operating profit margin was
24.1 per cent (23.2 per cent a year ago).

Net financial income in January-June of 2008 was by 0.6 per cent lower than a
year ago due to lower market rates.

Profit before income tax in the first six months of 2008 was up by 11.8 per cent
and amounted to LTL 104 million (LTL 93 million a year ago). Profit for the
period amounted to LTL 89 million, an increase by 16 per cent over LTL 77
million a year ago. Over the year, the profit margin went up from 20.3 per cent
to 21.8 per cent.

Balance sheet

During January-June 2008 the total assets of TEO Group decreased by 11.8 per
cent mainly due to dividend for the year 2007 payment.

Due to depreciation non-current tangible assets decreased by 3.8 per cent, while
non-current intangible assets increased by 42.5 per cent due to acquisition of
TV channels re-broadcasting licences (acquisition of UAB Nacionaline Skaitmenine
Televizija). Total non-current assets amounted to 63.7 per cent of the total
assets.

In May, following the resolution of the Annual General Meeting of Shareholders
of 29 April 2008, dividend of total LTL 194 million or LTL 0.25 per share were
paid to the shareholders of TEO. Therefore, current assets decreased by 25 per
cent and amounted to 36.3 per cent of the total assets, whereof cash and trading
investments alone represented 24 per cent of the total assets.

Due to dividend payment, shareholders' equity decreased by 9.8 per cent but
still amounted to 90.8 per cent of the total assets.

At the end of June 2008, the total amount of borrowings included only financial
liabilities related to financial leasing of premises and amounted to LTL 7.2
million. Net debt was negative and amounted to LTL 249 million. The net debt to
equity ratio was negative and amounted to 25.8 per cent.

Cash flow

Net cash flow from operating activities during the first six months of 2008 was
by 21.6 per cent higher than net cash from operating activities a year ago.

During January-June of 2008 an amount of LTL 55.8 million was allocated for
capital investments. Majority of cash was invested into the network - LTL 43.8
million (or 78.5 per cent of all investments), LTL 7.4 million (13.3 per cent)
into upgrading of buildings, LTL 3.9 million (7 per cent) into IT and LTL 0.7
million (1.3 per cent) went to other investments. The remaining portion of cash
spent during January-March of 2008 for capital investments was payments for
investments made in 2007.

In June 2008, the Company's capital investments program was revised. Capital
investments for the year 2008, excluding construction of the Company's
head-quarters, should amount up to LTL 182 million and will be oriented towards
improvement of the network, quality of services and development of digital
terrestrial TV services.

During the first half of 2008 the network of digital terrestrial television
(DVB-T) transmitters which was operational in the biggest cities of Lithuania
was expanded into Birzai, Druskininkai, Mazeikiai, Rokiskis, Taurage, Telsiai,
Ukmerge and Utena. From now on Digital GALA service is available to 95 percent
of the residents of Lithuania.

In May 2008, the Company installed a new optical connection with foreign
operators and increased its international Internet speed up to 20 gigabits per
second (Gbps). TEO became the first company in Lithuania having interconnected
its networks with a foreign operator via 10 Gbps optical connection. In the end
of this year, TEO is planning to install another optical connection and increase
international Internet speed up to 28 Gbps.

In 2007, TEO started a project of customer care centers' renovation. By the end
June 2008 premises for serving residential and business customers were renovated
in Kaunas, Klaipeda, Alytus, Marijampole, Utena and Mazeikiai. In July was
completed renovation of customer care centers in Siauliai and Panevezys. During
2008 the customer care center in Taurage will be renovated as well.

In February 2007, TEO sold its 100 per cent stake in its dormant subsidiary OOO
Comliet-Kaliningrad which was acquired in January 2006 from the then subsidiary
UAB Comliet (95 per cent) and UAB Comliet Sprendimai (5 per cent).

On 3 January 2008, TEO LT, AB completed transaction on acquisition of 100 per
cent stake in UAB Nacionaline Skaitmenine Televizija. UAB Nacionaline
Skaitmenine Televizija has two licenses for re-broadcasting of television
channels through digital terrestrial television (DVB-T) networks.

Due to capital investments, acquisition of UAB Nacionaline Skaitmenine
Televizija (LTL 16 million) and payment of dividends for the year 2007 (LTL 194
million), cash and cash equivalents during the first six months of 2008
decreased by LTL 64 million.

Other material information

Instead of Gert Tiivas, a member of the Board, who resigned from the Board as of
28 April 2008, a new member - Justas Pipinis - was elected for the current term
of the Board during an Extraordinary General Meeting of Shareholders on 15 July
2008.

Extraordinary General Meeting of Shareholders also approved the preparation of
the draft reorganisation conditions for the merge by acquisition of UAB
Nacionaline Skaitmenine Televizija into TEO LT, AB. Currently Nacionaline
Skaitmenine Televizija is changing its legal status from closed joint-stock
company (UAB) to joint-stock company (AB).

In 2007, due to unforeseen legal problems, i.e. due to temporary suspension by
the court of the detailed plan approved by the Municipality of Vilnius City of a
land plot at Lvovo str. 21A, the construction of TEO building was not started in
planned time and due to such delay, the damage likely to be incurred by TEO
(i.e. due to an increase in construction prices, additional costs for lease of
the current premises, and etc.). In order to claim compensation for this damage,
TEO started a civil action against the person, who initiated the suspension of
the detailed plan, and the court applied temporary measures to ensure an
injunction - arrested the property of the above mentioned person.

Following the order of the Communications Regulatory Authority of the Republic
of Lithuania of 31 January 2008 on prices for calls initiation, calls
termination, national and international transit services on the public telephone
network of TEO LT, AB at a fixed location the Company publicly announced a new
standard proposal for networks interconnection along with a new networks
interconnection services structure and by 40 per cent decreased networks
interconnection tariffs.

TEO LT, AB

Copyright Business Wire 2008