Eesti Telekom boasts record net profit

Eesti Telekom, one of the Baltics' blue chip corporations, posted a record profit last year thanks to rapid growth in both mobile and fixed-data communication sectors.

According to preliminary financial results, Eesti Telekom managed a 1 billion kroon (64.1 million euro) net profit in 2002, a 33 percent increase over 2001's result. On a per share basis net profit increased from 0.36 to 0.48 euro.

Eesti Telekom Group, controlled by TeliaSonera Group (49 percent ownership) and uniting EMT (mobile services) and Eesti Telefon (fixed line and Internet), the largest companies in their respective spheres, also posted an 8 percent annual increase of consolidated revenues to 296 million euros in 2002.

Jaan Mannik, Eesti Telekom CEO, was laconic about the group's financial results.

"Year 2002 was a good year," he said. "Mobile communication was the main growth area, but at the same time fixed-line communication revenues also grew fast," he explained.

Kristel Kivinurm, analyst with Trigon Markets, a major Central and East European investment bank, said Eesti Telekom's operating and net profits were approximately 10 percent higher than expected due to the low level of investments and a decline in depreciation charges.

"The group's revenues were in line with our estimates, while adjusted fixed line revenues were a little lower," said Kivinurm.

While personnel costs were slightly lower compared with 2001, Eesti Telekom Group's operating expenses were up by 6 percent and totaled 159 million euros due to higher costs for materials and services.

Eesti Telekom's fixed-line and Internet communications provider and former monopoly, Eesti Telefon, lost nearly 36,000 customers of its total 460,000 in 2002, which is in line with overall market trends that began shortly after liberalization of the fixed-line communication market in 2001.

EMT, the largest mobile communication provider in Estonia, gained 44,000 new clients last year as many traditional fixed-line users switched over to cheaper cellular services.

In an online news conference, Peep Aaviksoo, CEO of EMT, said the company won over new clients thanks to proper service packages.

"We were glad to see clients who had tried cheaper services from other operators returning to us. Our [average revenue per user] in December was 423 kroons," said Aaviksoo.

Regarding 2003, Eesti Telekom forecasts that the repeatedly postponed issuance of 3G network licenses may finally become a reality.

However, the current debate in Parliament over increasing the initial license price from 25 million kroons to 70 million kroons, as well and the government's plan to issue four 3G licenses, may lead to another delay, according to Eesti Telekom.

"I think 70 million kroons is a price too high for a market the size of Estonia. We cannot talk about cooperation with other operators because we do not know how many of them will dare to enter the 3G market," Aaviksoo said.

In 2003 Trigon Markets expects adjusted group revenues and operating profit of Eesti Telekom to increase by 6 percent, while net profits are projected to decline by 12 percent due to an increase in the effective tax rate.