VILNIUS, Lithuania--(Business Wire)--
CONFIRMATION OF RESPONSIBLE PERSONS
Following the Article No. 22 of the Law on Securities of the Republic of
Lithuania and Rules on Preparation and Submission of Periodic and Additional
Information of the Lithuanian Securities Commission, we, Arunas Siksta, General
Manager of TEO LT, AB, and Jan-Erik Elserius, Chief Financial Officer and Deputy
General Manager of TEO LT, AB, hereby confirm that, to the best of our
knowledge, the attached not audited TEO LT, AB Interim Consolidated Financial
Statements of for the twelve months of 2007, prepared in accordance with
International Financial Reporting Standards as adopted by the European Union,
give a true and fair view of the assets, liabilities, financial position and
profit of TEO LT, AB and the Group of undertakings.
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General Manager Arunas Siksta
Chief Financial Officer and
Deputy General Manager Jan-Erik Elserius
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TEO LT, AB
INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE TWELVE MONTHS OF 2007
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 twelve months of 2007 are preliminary and
not audited. TEO Group financial statements for the year ended 31 December 2006
have been audited by the external auditors.
CONSOLIDATED BALANCE SHEET OF TEO GROUP (LTL thousand)
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ASSETS 2007-12-31 2006-12-31
------------------------------------------------------------ ---------------- ----------------
Non-current assets
------------------------------------------------------------ ---------------- ----------------
Property, plant and equipment 666,886 644,164
------------------------------------------------------------ ---------------- ----------------
Intangible assets 29,643 33,538
------------------------------------------------------------ ---------------- ----------------
Non-current receivables 3,165 4,951
------------------------------------------------------------ ---------------- ----------------
699,694 682,653
------------------------------------------------------------ ---------------- ----------------
Current assets
------------------------------------------------------------ ---------------- ----------------
Inventories 4,943 8,154
------------------------------------------------------------ ---------------- ----------------
Receivables, prepayments and accrued revenue 112,768 248,719
------------------------------------------------------------ ---------------- ----------------
Current income tax receivable 5,749 723
------------------------------------------------------------ ---------------- ----------------
Held-to-maturity investments 116,726 40,419
------------------------------------------------------------ ---------------- ----------------
Trading investments 34,561 34,287
------------------------------------------------------------ ---------------- ----------------
Cash and cash equivalents 229,350 232,581
------------------------------------------------------------ ---------------- ----------------
Assets held for sale 1,851 1,515
------------------------------------------------------------ ---------------- ----------------
505,948 566,398
------------------------------------------------------------ ---------------- ----------------
TOTAL ASSETS 1,205,642 1,249,051
------------------------------------------------------------ ---------------- ----------------
EQUITY 2007-12-31 2006-12-31
------------------------------------------------------------ ---------------- ----------------
Shareholders' equity
------------------------------------------------------------ ---------------- ----------------
Share capital 814,913 814,913
------------------------------------------------------------ ---------------- ----------------
Treasury shares (120,000) (120,000)
------------------------------------------------------------ ---------------- ----------------
Legal reserve 81,499 81,499
------------------------------------------------------------ ---------------- ----------------
Translation differences -- (1)
------------------------------------------------------------ ---------------- ----------------
Retained earnings 294,167 333,301
------------------------------------------------------------ ---------------- ----------------
1,070,579 1,109,712
------------------------------------------------------------ ---------------- ----------------
Minority interest -- --
------------------------------------------------------------ ---------------- ----------------
Total equity 1,070,579 1,109,712
------------------------------------------------------------ ---------------- ----------------
LIABILITIES
------------------------------------------------------------ ---------------- ----------------
Non-current liabilities
------------------------------------------------------------ ---------------- ----------------
Borrowings 6,809 7,764
------------------------------------------------------------ ---------------- ----------------
Deferred tax liabilities 9,530 17,481
------------------------------------------------------------ ---------------- ----------------
Grants 2,768 4,727
------------------------------------------------------------ ---------------- ----------------
Deferred revenue 1,900 2,634
------------------------------------------------------------ ---------------- ----------------
21,007 32,606
------------------------------------------------------------ ---------------- ----------------
Current liabilities
------------------------------------------------------------ ---------------- ----------------
Trade, other payables and accrued liabilities 112,047 94,690
------------------------------------------------------------ ---------------- ----------------
Current income tax liabilities 104 11,140
------------------------------------------------------------ ---------------- ----------------
Borrowings 805 818
------------------------------------------------------------ ---------------- ----------------
Provisions 1,100 --
------------------------------------------------------------ ---------------- ----------------
Liabilities related to assets held for sale -- 85
------------------------------------------------------------ ---------------- ----------------
114,056 106,733
------------------------------------------------------------ ---------------- ----------------
Total liabilities 135,063 139,339
------------------------------------------------------------ ---------------- ----------------
TOTAL EQUITY AND LIABILITIES 1,205,642 1,249,051
------------------------------------------------------------ ---------------- ----------------
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CONSOLIDATED INCOME STATEMENT OF TEO GROUP (LTL thousand)
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October October January - January -
-December -December December 2007 December 2006
2007 2006
-------------------------------------- -------------- -------------- -------------- --------------
Revenue 211,120 188,212 793,450 734,811
-------------------------------------- -------------- -------------- -------------- --------------
Other income 1,559 1,637 4,057 4,367
-------------------------------------- -------------- -------------- -------------- --------------
Employee related expenses (46,464) (36,747) (160,564) (127,208)
-------------------------------------- -------------- -------------- -------------- --------------
Interconnection expenses (31,216) (27,378) (119,460) (105,329)
-------------------------------------- -------------- -------------- -------------- --------------
Other operating expenses (48,755) (46,178) (171,637) (158,951)
-------------------------------------- -------------- -------------- -------------- --------------
Depreciation, amortisation and
impairment charge (41,219) (42,830) (166,696) (193,500)
-------------------------------------- -------------- -------------- -------------- --------------
Other gain (loss), net 538 (157) 6,318 4,271
-------------------------------------- -------------- -------------- -------------- --------------
Operating profit 45,563 36,559 185,468 158,461
-------------------------------------- -------------- -------------- -------------- --------------
Finance income 2,862 1,772 11,463 5,038
-------------------------------------- -------------- -------------- -------------- --------------
Finance costs (170) (202) (784) (1,448)
-------------------------------------- -------------- -------------- -------------- --------------
Finance income (costs), net 2,692 1,570 10,679 3,590
-------------------------------------- -------------- -------------- -------------- --------------
Share of result of associates -- -- -- 41
-------------------------------------- -------------- -------------- -------------- --------------
Profit before income tax 48,255 38,129 196,147 162,092
-------------------------------------- -------------- -------------- -------------- --------------
Income tax (7,952) (6,381) (33,317) (30,291)
-------------------------------------- -------------- -------------- -------------- --------------
Profit for the period from continuing
operations 40,303 31,748 162,830 131,801
-------------------------------------- -------------- -------------- -------------- --------------
-------------------------------------- -------------- -------------- -------------- --------------
Discontinued operations:
-------------------------------------- -------------- -------------- -------------- --------------
Profit (loss) for the period from
discontinued operations -- (504) -- (1,252)
-------------------------------------- -------------- -------------- -------------- --------------
Profit for the period 40,303 31,244 162,830 130,549
-------------------------------------- -------------- -------------- -------------- --------------
Attributable to:
-------------------------------------- -------------- -------------- -------------- --------------
Equity holders of the Company 40,303 31,244 162,830 130,421
-------------------------------------- -------------- -------------- -------------- --------------
Minority interest -- -- -- 128
-------------------------------------- -------------- -------------- -------------- --------------
40,303 31,244 162,830 130,549
-------------------------------------- -------------- -------------- -------------- --------------
Earnings per share for profit
attributable to the equity holders of
the Company (in litas) 0.052 0.040 0.210 0.168
-------------------------------------- -------------- -------------- -------------- --------------
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CONSOLIDATED CASH FLOW STATEMENT OF TEO GROUP (LTL thousand)
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January - January -
December 2007 December 2006
------------------------------------------------------------- ---------------- ----------------
Operating activities
------------------------------------------------------------- ---------------- ----------------
Profit for the period from continuing operations 162,830 131,801
------------------------------------------------------------- ---------------- ----------------
Adjustments for:
------------------------------------------------------------- ---------------- ----------------
Income tax 33,317 30,291
------------------------------------------------------------- ---------------- ----------------
Depreciation, amortisation and impairment charge 166,696 193,500
------------------------------------------------------------- ---------------- ----------------
Share of result of associates -- (41)
------------------------------------------------------------- ---------------- ----------------
Elimination of gain and losses (5,383) (4,271)
------------------------------------------------------------- ---------------- ----------------
Interest income (15,441) (8,777)
------------------------------------------------------------- ---------------- ----------------
Interest expenses 328 583
------------------------------------------------------------- ---------------- ----------------
Other non-cash transactions 113 59
------------------------------------------------------------- ---------------- ----------------
------------------------------------------------------------- ---------------- ----------------
Changes in working capital (excluding the effects of
acquisition and disposal of subsidiaries):
------------------------------------------------------------- ---------------- ----------------
Inventories 3,211 (4,418)
------------------------------------------------------------- ---------------- ----------------
Trade and other accounts receivable (11,811) (10,843)
------------------------------------------------------------- ---------------- ----------------
Trade and other accounts payable and deferred revenue 7,621 3,085
------------------------------------------------------------- ---------------- ----------------
Cash generated from operations 341,481 330,969
------------------------------------------------------------- ---------------- ----------------
Interest paid (352) (576)
------------------------------------------------------------- ---------------- ----------------
Interest received 12,725 5,845
------------------------------------------------------------- ---------------- ----------------
Income tax paid (57,330) (41,393)
------------------------------------------------------------- ---------------- ----------------
Net cash from operating activities 296,524 294,845
------------------------------------------------------------- ---------------- ----------------
January - January -
Investing activities December 2007 December 2006
------------------------------------------------------------- ---------------- ----------------
Purchase of property, plant and equipment (PPE) and
intangible assets (184,865) (97,925)
------------------------------------------------------------- ---------------- ----------------
Proceeds from disposal of PPE, intangible assets, assets held
for sale 11,974 81,489
------------------------------------------------------------- ---------------- ----------------
Acquisition/disposal of held-to-maturity investments, net (73,040) 82,116
------------------------------------------------------------- ---------------- ----------------
Acquisition of subsidiaries -- (5,062)
------------------------------------------------------------- ---------------- ----------------
Disposal of subsidiaries 1,714 12,420
------------------------------------------------------------- ---------------- ----------------
Dividends received -- 47
------------------------------------------------------------- ---------------- ----------------
Loans granted (2,597) (150,000)
------------------------------------------------------------- ---------------- ----------------
Loans repaid 150,000 --
------------------------------------------------------------- ---------------- ----------------
Net cash from investing activities (96,814) (76,915)
------------------------------------------------------------- ---------------- ----------------
Financing activities
------------------------------------------------------------- ---------------- ----------------
Repayment of borrowings (968) (10,659)
------------------------------------------------------------- ---------------- ----------------
Dividends paid to the shareholders of the Company (201,973) (124,291)
------------------------------------------------------------- ---------------- ----------------
Net cash from financing activities (202,941) (134,950)
------------------------------------------------------------- ---------------- ----------------
Increase (decrease) in cash and cash equivalents (3,231) 82,980
------------------------------------------------------------- ---------------- ----------------
Movement in cash and cash equivalents
------------------------------------------------------------- ---------------- ----------------
At start of the period 232,581 149,601
------------------------------------------------------------- ---------------- ----------------
Increase (decrease) during the period (3,231) 82,980
------------------------------------------------------------- ---------------- ----------------
At end of the period 229,350 232,581
------------------------------------------------------------- ---------------- ----------------
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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 2006 814,913 (120,000) 81,499 (21) 327,171 2,329 1,105,891
---------------- ----------- ----------- ----------- ------------ ----------- ---------- ------------
Dividends paid
for the year
2005 -- -- -- -- (124,291) -- (124,291)
---------------- ----------- ----------- ----------- ------------ ----------- ---------- ------------
Net profit -- -- -- -- 130,421 128 130,549
---------------- ----------- ----------- ----------- ------------ ----------- ---------- ------------
Currency
translation
differences -- -- -- 20 -- -- 20
---------------- ----------- ----------- ----------- ------------ ----------- ---------- ------------
Acquisition of
minority
interest -- -- -- -- -- (2,457) (2,457)
---------------- ----------- ----------- ----------- ------------ ----------- ---------- ------------
Balance at
31 December 2006 814,913 (120,000) 81,499 (1) 333,301 -- 1,109,712
---------------- ----------- ----------- ----------- ------------ ----------- ---------- ------------
---------------- ----------- ----------- ----------- ------------ ----------- ---------- ------------
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 -- -- -- -- 162,830 -- 162,830
---------------- ----------- ----------- ----------- ------------ ----------- ---------- ------------
Currency
translation
differences -- -- -- 1 9 -- 10
---------------- ----------- ----------- ----------- ------------ ----------- ---------- ------------
Balance at
31 December 2007 814,913 (120,000) 81,499 -- 294,167 -- 1,070,579
---------------- ----------- ----------- ----------- ------------ ----------- ---------- ------------
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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.
The Company's GDRs are traded on the London Stock Exchange (LSE) (trading code:
TEOL).
As on 31 December 2007, 55,390,530 ordinary shares of the Company (6.80% of the
total share capital) were represented by 5,539,053 GDRs.
As on 31 December 2007, the total number of TEO LT, AB shareholders was 14,117.
The number of shareholders on the day of the last Annual General Meeting of
Shareholders, which was held on 26 April 2007, was 12,827.
Shareholders of TEO LT, AB as on 31 December 2007:
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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 -- --
--------------------------- ---------------- ---------------- ---------------- ----------------
East Capital Asset
Management AB, Box 1364,
SE-111 93 Stockholm,
Sweden, code 556564-5370 42,007,382 (c) 4.00 4.20 --
--------------------------- ---------------- ---------------- ---------------- ----------------
State of Lithuania (d) 12 805 485 (d) 1.57 1.65 --
--------------------------- ---------------- ---------------- ---------------- ----------------
Other shareholders 242 503 337 29.76 31.21 --
--------------------------- ---------------- ---------------- ---------------- ----------------
Total: 814 912 760 100.00 100.00 --
--------------------------- ---------------- ---------------- ---------------- ----------------
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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) 18,601,390 ordinary registered shares and 1,398,965 Global Depository Receipts.
(d) The State Property Fund (12,442,855 shares) and the State Tax Authorities (362,630 shares).
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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 31 December 2007, 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 Directory inquiry J. Galvydzio str.
service 118, Call 7/Zygio str. 97,
Center services LT-08222 Vilnius,
www.lintel.lt 100 100
------------------ ------------------ ------------------ ------------------ ------------------
UAB Baltic Data IT infrastructure Zirmunu str. 141,
Center services LT-09128 Vilnius,
www.bdc.lt 100 100
------------------ ------------------ ------------------ ------------------ ------------------
UAB Kompetencijos Training and Palangos str. 4,
Ugdymo Centras consultancy LT-01117 Vilnius,
www.kuc.lt 100 100
------------------ ------------------ ------------------ ------------------ ------------------
UAB Voicecom NMT-450 network Savanoriu ave. 28,
LT-03501 Vilnius 100 100
------------------ ------------------ ------------------ ------------------ ------------------
VsI TEO Sportas Women's basketball Savanoriu ave. 28,
team LT-03116 Vilnius,
www.teobasket.lt --(a) 100
------------------ ------------------ ------------------ ------------------ ------------------
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NOTE: (a) TEO is the sole founder and owner of a non-profit organisation VsI TEO
Sportas.
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.
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.
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. Lintel also provides Directory
Inquiry Service 118, telemarketing and customer care services. Till September
2007 UAB Lintel held 4.67 per cent of treasury stocks of the Company.
UAB Baltic Data Center is one of the most rapidly growing providers of IT
services for enterprise customers in Lithuania. Services provided by UAB Baltic
Data Center comprise a complex enterprise systems maintenance package that
implies Server, Data Base and data streams as well as IT Service Desk services.
UAB Baltic Data Center also has its subsidiary in Latvia - Baltic Data Center
SIA, which is a dormant company.
UAB Voicecom has the permission to use the national network of mobile analogue
cellular radio communication of the NMT-450 standard. Permission was valid until
31 October 2007 but in 2007 it was prolonged until 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.
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 acquisition 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 per cent
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 - January -
Financial figures December 2007 December 2006 Change (%)
------------------------------------------- ----------------- ----------------- -----------------
Revenue (LTL thousand) 793,450 734,811 8.0
------------------------------------------- ----------------- ----------------- -----------------
EBITDA (LTL thousand) 352,164 351,961 0.1
------------------------------------------- ----------------- ----------------- -----------------
EBITDA margin (%) 44.4 47.9
------------------------------------------- ----------------- ----------------- -----------------
Operating profit (LTL thousand) 185,468 158,461 17.0
------------------------------------------- ----------------- ----------------- -----------------
Operating profit margin (%) 23.4 21.6
------------------------------------------- ----------------- ----------------- -----------------
Profit before income tax (LTL thousand) 196,147 162,092 21.0
------------------------------------------- ----------------- ----------------- -----------------
Profit for the period (LTL thousand) 162,830 130,549 24.7
------------------------------------------- ----------------- ----------------- -----------------
Profit for the period margin (%) 20.5 17.8
------------------------------------------- ----------------- ----------------- -----------------
Earnings per share (LTL) 0.210 0.168 25.0
------------------------------------------- ----------------- ----------------- -----------------
Number of shares excluding treasury stocks
(thousand) 776,818 776,818 --
------------------------------------------- ----------------- ----------------- -----------------
Cash flow from operating activities (LTL
thousand) 341,481 330,969 3.2
------------------------------------------- ----------------- ----------------- -----------------
Cash used for capital investments (LTL
thousand) 184,865 97,925 88.8
------------------------------------------- ----------------- ----------------- -----------------
Financial ratios 2007-12-31 2006-12-31
------------------------------------------- ----------------- ----------------- -----------------
Return on capital employed (a) (%) 18.4 14.4
------------------------------------------- ----------------- ----------------- -----------------
Return on average assets (a) (%) 15.7 12.6
------------------------------------------- ----------------- ----------------- -----------------
Return on shareholders' equity (a) (%) 15.3 11.8
------------------------------------------- ----------------- ----------------- -----------------
Gearing ratio (%) -34.8 -26.9
------------------------------------------- ----------------- ----------------- -----------------
Debt to equity ratio (%) 0.7 0.8
------------------------------------------- ----------------- ----------------- -----------------
Current ratio (%) 443.6 530.7
------------------------------------------- ----------------- ----------------- -----------------
Rate of turnover of assets (a) (%) 67.0 58.6
------------------------------------------- ----------------- ----------------- -----------------
Equity to assets ratio (%) 88.8 88.8
------------------------------------------- ----------------- ----------------- -----------------
*T
NOTE: calculated for 12 months period on roll-up bases.
The total consolidated TEO Group's revenue for the twelve months of 2007 was LTL
793 million, an increase by 8 per cent over the total revenue of LTL 735 million
for the twelve months of 2006. Total revenue excluding Comliet construction
activities that contributed LTL 1.7 million during the year 2006 grew by 8.2 per
cent over the year. The total revenue for October - December of 2007 was LTL 211
million, an increase by 12.2 per cent over the total revenue of LTL 188 million
for October - December of 2006.
In 2007 revenue of TEO Group increased due to rapid development of new business
areas such as IT and TV services, continuous growth of revenue from Internet and
data communication services driven by continuous growth of the number of
customers, increase in revenue from non-telecommunications activities generated
by subsidiaries, and after a number of years not only stabilised but also
growing revenue from voice telephony services.
During the twelve months of 2007 share of revenue from traditional voice
telephony services from total amount of revenue continued to shrink and amounted
to 66.6 per cent of total revenue, while share of Internet and data
communications revenue continued to grow and amounted to 27 per cent. Revenue
from IT services amounted to 1.8 per cent, television services - 1.1 per cent
and other services - 3.6 per cent of total revenue for January - December of
2007.
Breakdown of TEO Group revenue (LTL thousand)
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October - October - January- January-
December December December December
2007 2006 Change (%) 2007 2006 Change (%)
--------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Voice telephony services 133,892 131,926 1.5 528,326 524,571 0.7
--------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Internet and data
communication services 59,357 48,147 23.3 214,027 181,348 18.0
--------------------------- ----------- ----------- ----------- ----------- ----------- -----------
IT services 5,162 1,677 207.8 14,050 9,892 42.0
--------------------------- ----------- ----------- ----------- ----------- ----------- -----------
TV services 4,179 708 490.3 8,368 708 1,081.9
--------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Other revenues 8,530 5,754 48.2 28,679 16,641 72.3
--------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Construction activities
(Comliet) -- -- -- -- 1,651
--------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Total 211,120 188,212 12.2 793,450 734,811 8.0
--------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Total excluding revenue
from construction
activities 211,120 188,212 12.2 793,450 733,160 8.2
--------------------------- ----------- ----------- ----------- ----------- ----------- -----------
*T
Increase in revenue from voice telephony in 2007 compared with the revenue in
2006, was due to increase in revenue from subscription fees by 2.3 per cent,
value added services - by 17.4 per cent and network interconnection services -
by 12.1 per cent. And that increase fully off-set decline in revenue from
traffic charges and wholesales services by 8.9 and 27.7 per cent, respectively.
During 2007, the total number of main telephone lines in service increased by
almost 4 thousand lines: 57.6 thousand new telephone lines were installed, while
53.6 thousand lines were disconnected. During October - December of 2007 the
number of main lines increased by 1.5 thousand.
During the year the number of lines used by residential customers increased by
2.7 thousand from 605.7 thousand (31 December 2006) to 608.4 thousand (31
December 2007). The number of lines used by business customers also increased in
2007 by 2.4 thousand from 175.6 thousand to 178 thousand. While the number of
payphones went down from 3,575 to 2,440.
In spite of the increased number of telephone lines, total calls traffic in
2007, compared to 2006, declined by 3.7 per cent. Traffic of local calls
decreased by 4.6 per cent, long distance domestic calls - by 1.2 per cent,
international calls - by 2.9 per cent and fixed-to-mobile - by 3.4 per cent.
Traffic generated by business customers decreased the most - by 9.7 per cent,
while traffic generated by residential customers declined insignificantly - by
0.8 per cent.
The main indicators of TEO Group activities
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2007-12-31 2006-12-31 Change (%)
------------------------------------------- ----------------- ----------------- -----------------
Number of fixed telephone lines in service 788,946 784,958 0.5
------------------------------------------- ----------------- ----------------- -----------------
Digitalisation rate (%) 93.9 94.0 0.1
------------------------------------------- ----------------- ----------------- -----------------
Number of broadband Internet connections
(DSL, LAN, FTTH, WiFi) 258,552 180,774 43.0
------------------------------------------- ----------------- ----------------- -----------------
Number of wireless Internet (WiFi) hot-
spots 3,182 804 295.7
------------------------------------------- ----------------- ----------------- -----------------
Number of IP TV customers 17,453 4,902 256.0
------------------------------------------- ----------------- ----------------- -----------------
Number of VoIP customers 1,813 1,135 59.7
------------------------------------------- ----------------- ----------------- -----------------
Number of IT services to small and medium
size business customers 604 -- --
------------------------------------------- ----------------- ----------------- -----------------
Number of personnel at the end of period 3,177 3,098 2.6
------------------------------------------- ----------------- ----------------- -----------------
*T
In 2007 TEO maintained its leading position on the voice telephony market.
According to the Report of the Communications Regulatory Authority (CRA), TEO
market share of the fixed-line telephony market in terms of customers during the
third quarter of 2007 amounted to 93.3 per cent and in terms of revenue - to
95.3 per cent. TEO networks' interconnection market share in terms of revenue
amounted to 19.3 per cent.
In 2007 continuously increased the number of broadband Internet services users.
In 2007 TEO offered a novelty - Internet access via new-generation fiber-optic
network, the fibers of which are installed up to the user's computer (FTTH).
Fiber optic connection ensures higher speed as well as symmetrical upload and
download.
To the residential customers that have access either to a fiber (FTTH) or a
local (LAN) network the Company offered new Internet payment plans ("Basic
Plus", "Optimal Plus" and "Premium Plus") that provide 10 Mbps Internet speed
within Lithuania and from 512 Kbps up to 6 Mbps abroad.
From March 2007 the Company introduced charges for usage of wireless broadband
Internet access (based on WiFi technology) at TEO hot-spots. Currently for
residential TEO Internet service users the monthly fee is LTL 9.99, for TEO
business customers, depending on the number of users, the monthly fee ranges
from LTL 9.99 up to LTL 25 and for non-TEO customers the monthly fee is LTL 50
or LTL 5 per hour.
From July 2007, users of the wireless Internet service have the possibility to
use the wireless Internet at more than 10 thousand wireless Internet hot-spots
of 56 operators in 27 countries. And from November 2007 the connection speed at
TEO hot-spots in Lithuania was increased up to 10 Mbps.
During January - December 2007, the number of broadband Internet access users
increased by 77.8 thousand. Out of total 258.6 thousand broadband connections,
229.1 thousand are DSL connections sold to retail customers, 19.6 thousand are
wireless connections via the WiFi network, 5.8 thousand - via local area
networks (LAN), 1.7 thousand - via the new-generation fiber-optic network and
2.4 thousand DSL connections are the connections sold to wholesales customers.
In 2007 the number of dial-up Internet access users continued to go down. During
the year the number of dial-up service customers decreased by half from 10.5
thousand to 5.1 thousand.
Compared with the year 2006, revenue from Internet broadband access services for
the year 2007 went up by 24.3 per cent while revenue from dial-up Internet
service decreased by 58.4 per cent. Revenue from data communication and network
capacity sale services increased by 19.5 and 17.3 per cent, respectively.
In 2007, the Company sustained its share on the Internet service market.
According to the Report of the CRA, the Company's market share of the total
Internet providers' market in terms of revenue during the third quarter of 2007
amounted to 43.2 per cent, while its share of the broadband Internet access
market was 48.1 per cent. On 30 September 2007 broadband Internet penetration
per 100 residents of Lithuania was 13.7 per cent. In terms of revenue TEO had
55.6 per cent of the leased lines market and 51.5 per cent of the data
communications market.
In 2007, TEO Group expands its portfolio of IT services for business customers:
in March TEO offered a new computer rent and sale service, in May - an online
backup service. At the year end there were more than 600 IT services users.
As evaluation of the Group's abilities could be regarded a contract signed by
UAB Baltic Data Center, a subsidiary of TEO, with the world's leading IT
solution company Hewlett-Packard (HP), and DnB NORD finance group for
implementation and maintenance of a new IT infrastructure, which will
interconnect the group's banks operating in six countries. The value of this
long-term project is LTL 38 million.
Developing interactive digital television according to the concept "More Than
Television", in May 2007 TEO offered new services of a virtual cinema theatre
and game on TV to the users of its Internet television (IPTV) service. In
November, the virtual cinema theatre service was substituted by a Video-on
Demand service. During the year, the number of customers using the IPTV service
that was launched in October 2006 increased by 3.5 times.
In April 2007, TEO signed an agreement for transmission of TV programs through
the Company's digital terrestrial TV (DVB-T) network and in October made a deal
for acquisition of UAB Nacionaline Skaitmenine Televizija, a company having two
licences for re-broadcasting of TV programs through the DVB-T network. All
shares of UAB Nacionaline Skaitmenine Televizija were acquired in January 2008.
TEO plans to start offering digital terrestrial television services in the first
quarter of 2008.
By the end of 2007 in the five biggest cities of Lithuania TEO had already
installed the network of DVB-T transmitters that make digital TV channels
available to 75-80 per cent residents of Lithuania.
In 2007 revenue from IPTV services amounted to LTL 6.7 million and from
transmission of TV programs through DVB-T network - LTL 1.7 million.
In 2007 the Company implemented a special project by order of the Ministry of
Internal Affairs of the Republic of Lithuanian that increased consolidated
revenue from other services by additional LTL 12 million. Revenue from other
services consists 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 (interest income from bonds acquired and loans granted) for the
twelve months of 2007decreased by 7.1 per cent over the other income a year ago
as TeliaSonera repaid its LTL 150 million loan in February 2007. Over the year
other gain (loss) from sale of property, investments and etc. increased by 47.9
per cent.
Total operating expenses of the Group during January - December 2007 were by
15.4 per cent higher than total operating expenses a year ago. Due to changes in
the number of employees and increase of salaries, employee-related expenses
increased the most - by 26.2 per cent. Networks' interconnection expenses
increased by 13.4 per cent and other operating expenses - by 8 per cent. In the
group of other operating expenses, the biggest increase was in expenses for
purchase of telecommunication equipment and services related to implementation
of the project ordered by the Ministry of Internal Affairs. Network maintenance
expenses, expenses for energy, premises and transport and IT costs increased as
well. Only expenses for marketing in 2007 were lower than in 2006.
Increase in operating expenses is in line with the Company's plans and is
related to entering into new and more complex service areas such as IT and
digital TV, growth of Internet and interconnect services that require bigger
number and more qualified employees.
During October - December 2007, the total number of employees (headcount) in TEO
Group went down by 208 to 3,177. Therefore during January - December the total
number of employees increased by just 79: in the parent company, TEO, the number
of employees increased by 11, in Lintel - by 48, in Baltic Data Center - by 44,
in Kompetencijos Ugdymo Centras - by 4, while, due to the discontinued
operations of the fitness center, the number of TEO Sportas employees decreased
by 28.
EBITDA for the twelve months of 2007, compared with the twelve months of 2006,
remained on the same level (an increase by 0.1 per cent) and amounted to LTL 352
million. Due to 8 per cent increase in revenue EBITDA margin was lower and
amounted to 44.4 per cent (47.9 per cent in 2006).
Depreciation and amortisation charges continuously went down over the year by
13.9 per cent and in 2007 amounted to 21 per cent of total revenue (26.3 per
cent a year ago). Consequently, operating profit was 17 per cent higher than a
year ago and operating profit margin was 23.4 per cent (21.6 per cent a year
ago).
Due to repayment of the loan in 2006 and received higher interest income on cash
and cash equivalents net financial income during 2007 was almost 3 times higher
than a year ago.
Profit before income tax for the twelve months of 2007 was up by 21 per cent and
amounted to LTL 196 million (LTL 162 million a year ago). Profit for the period
(including minority interest and profit from discontinued operations) amounted
to LTL 163 million, an increase by 24.7 per cent over LTL 131 million a year
ago. Over the year, the profit margin went up from 17.8 per cent to 20.5 per
cent.
Discontinued operations imply result of UAB MicroLink Lietuva and UAB Baltijos
Kompiuteriu Akademija activities during January - February of 2006 and OOO
Comliet-Kaliningrad activities from February 2006 till February 2007.
During January - December 2007, the total assets of TEO Group decreased by 3.5
per cent. Due to higher investments, non-current assets increased by 2.5 per
cent and amounted to 58 per cent of the total assets. Current assets decreased
by 10.7 per cent mainly due to the year 2006 dividend payout and amounted to 42
per cent of the total assets. But, in spite of LTL 202 million or 0.26 litas per
share dividend payment, cash, trading investment and held-to-maturity
investments alone represented 31.6 per cent of the total assets.
In February 2007, TeliaSonera AB repaid the loan of LTL 150 million to TEO and
at the end of 2007 TEO extended a LTL 2.6 million loan to UAB Nacionaline
Skaitmenine Televizija that was acquired in January 2008.
Due to dividend payment, shareholders' equity at the end of 2007 was by 3.5 per
cent lower that at the beginning of 2007, but still amounted to 88.8 per cent of
the total assets.
At the end of 2007 retained earnings of TEO Group amounted to LTL 294 million
(LTL 333 million in 2006), but it should be noted that, according to the
provisions of the Law of the Republic of Lithuania on Companies, dividends
should be paid from retained earnings of the Parent company of the Group. As of
31 December 2007 retained earnings of TEO LT, AB amounted to LTL 197 million
(LTL 211 million in 2006).
Borrowings of TEO Group
-0-
*T
Book value as of 31
Borrower Lender Currency December 2007
(LTL thousand)
------------------------------ ------------------------------ ------------- ---------------------
AB Invaldos Nekilnojamo Turto
TEO LT, AB Fondas (premises leasing) LTL 7,614
------------------------------ ------------------------------ ------------- ---------------------
Total 7,614
--------------------------------------------------------------------------- ---------------------
*T
In 2007, financial liabilities related to leasing agreement of TEO Group were
paid for and at the end of the year only financial liabilities related to
financial leasing of premises comprised borrowings (financial liabilities) of
the Group. As on 31 December 2007, net debt was negative and amounted to LTL 373
million. The net debt to equity ratio was negative and stood at 34.8 per cent.
Net cash flow from operating activities during 2007 was by 0.6 per cent higher
than net cash from operating activities a year ago. Cash spend on capital
investments, including LTL 13.2 million paid in 2007 for investment done in
2006, increased by 88.8 per cent. In 2008, LTL 39 million will be paid for
investments done in 2007. Part of the LTL 150 million loan repaid by TeliaSonera
was used for investments into held-to-maturity investments. During January -
December 2007 by 25.9 per cent more cash was used in investment activities than
in 2006.
In 2007, net cash flow from operating and investing activities in total amounted
to LTL 200 million, but due to the payment of dividends of LTL 202 million and
the repayment of borrowings, cash and cash equivalents during 2007 decreased by
LTL 3 million.
Total capital expenditure during 2007 amounted to LTL 195 million (it was
planned to spend LTL 199 million).
During 2007 the Company invested LTL 136 million into the network development:
completed upgrading of its backbone network, commenced a rapid development of
wireless Internet and new-generation fiber optic access networks. In October,
the upgrading of a new backbone network that ensures higher Internet speed, is
more reliable and creates possibilities for usage of most modern
telecommunication and IT technologies, was completed. In 2007, the capacity of
direct connections to the international Internet network was increased by 2.6
time and now amounts to 11.6 Gbps.
Investments into information technologies, including investments related to the
IT infrastructure project of DnB NORD Group, amounted to LTL 36 million.
Investments into the upgrading of customer care centers and the construction of
a new TEO building in Vilnius amounted to LTL 16 million. Due to unforeseen
legal problems, investments into construction of the new headquarters amounted
to LTL 8.6 million instead of the planned amount of LTL 33 million. Other
investments amounted to LTL 6.8 million.
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.
TEO LT, AB
Copyright Business Wire 2008
