Elisa Communications TMT Conference Barcelona September 17 - 19, 2002 www. elisa. com
Key Topics n Elisa Today n Review of Core Business in H 1/2002 n Focus on CAPEX and Cash Flow n Financial Position on Solid Base n Performance of Core Business Areas n Elisa’s View on Future Market Growth September, 2002 Corporate Finance/Investor Relations 2
Elisa’s Strategic Agenda n Leading telecommunications service provider of Finnish customers n n n Reached market leadership in fixed line business starting Q 3 2001 by purchasing Soon Communications Mobile operator in North-western Europe n n n Towards domestic market leadership in 2005 Strong player in Finland Estonia Towards Pan-European and global dimension with Vodafone’s product and brand partnerships Growth of customer base from Germany n Leading consolidator of city carriers, significant effect on revenue growth of Elisa starting from 2002 and EBITDA growth starting from 2003 September, 2002 Corporate Finance/Investor Relations 3
Core Business of Elisa n Elisa provides (1) comprehensive telecommunications solutions to enduser customers, and (2) network services to carriers in chosen markets. n n The main geographic market is the domestic market Finland, where Elisa targets market leadership in all customer segments as the current market share is high due to long-term presence In new markets Germany and Estonia, Elisa has a focused strategy as new entrant: mobile operator in Estonia, multi-local access network provider in Germany. September, 2002 Corporate Finance/Investor Relations 4
Elisa on Track to Domestic Market Leadership 90 70 80 70 60 60 50 50 40 40 a 30 Elis 30 20 20 10 10 0 0 1986 1990 Fixed, % Sonera, % September, 2002 1994 Mobile, % Elisa, % 1998 Market share of Elisa and Sonera, % Product share of the market, % 80 2002 Data, % Corporate Finance/Investor Relations 5
Group Business Proceeded as Expected in the First Half of 2002 Moderate growth with improved profitability in Mobile Business n n Amount of subscribers increased due to the intensive sales efforts of the service operator itself although Telia switched their subs away from the Radiolinja network MMS services will be launched in Q 3/2002 Strong growth in Fixed Network Business due to new group companies n Profitability stayed at the same level n Strong growth in ADSL subscriptions Profitability development of Germany-based Business was on track n The amount of new business customers exceeded targets n Business performance was in line with the guidance n Shutdown of the mobile retail business was completed according to plan September, 2002 Corporate Finance/Investor Relations 6
Focus on CAPEX and Cash Flow CAPEX has been restrained to moderate level n Fixed networks integration reduces CAPEX needs n The new technology will facilitate lower total construction and maintenance cost n Building of UMTS network is underway and will stretch over several years n Improving profitability of Germany-based business lowers the need for financing n Annualised CAPEX for 2002 will be restrained to EUR 250 m (excl. network buy-backs) Operative cash flow* has turned positive n n n Previous full year target has already been met by the strict CAPEX program Improvement of the group EBITDA and the current CAPEX program will guarantee a positive cash flow also for the second half of the year Cash flow for the year 2003 is expected to be positive Clean EBITDA ± change in working capital – operative CAPEX (excl. network buy-backs) – financial items – taxes September, 2002 Corporate Finance/Investor Relations 7
CAPEX by Quarters, EUR million Investments in fixed assets include Radiolinja’s buy-backs of leasing liabilities September, 2002 Corporate Finance/Investor Relations 8
Financial Position is on Solid Base Increase in net debt has ceased n n Cost cutting program and lower CAPEX due to new market situation Net debt increased due to consolidation of Tropolys and change in booking of debt related to redemption of Soon and Radiolinja shares Net debt cutting program is underway n Means include disposal of non core businesses (Direktia, Instalia, Soon directory) n Net debt / EBITDA ratio less or equal to 2 remains as target Financing is secured n Elisa has access to debt capital market n Debt covenants are not in danger to be breached n EUR 170 m committed bank facility is available n No step up language in bank loans and bonds September, 2002 Corporate Finance/Investor Relations 9
Mobile Business Revenue, EUR million EBITDA / revenue, % EBIT / revenue, % Future profitability drivers n Network buy-backs will improve margins n Vodafone cooperation brings more high ARPU business customers n Vodafone cooperation allows optimisation of R&D costs n New services (GPRS, MMS) will bring gradual growth n Strict cost control supports better profitability September, 2002 Corporate Finance/Investor Relations 10
Leasing Liability of Radiolinja n n n n Between 1990 – 1999 Radiolinja leased exclusively, with long-term agreements, a significant part of the mobile network from local telephone companies in Finland The UMTS delivery agreements executed by Radiolinja will reduce the economical life time of the network leased from telcos significantly. It will become shorter that the term of the lease agreements. The new technology will facilitate to lower total construction and maintenance cost of the 2 G and 3 G networks Radiolinja endeavours to rearrange the lease agreements by the beginning of the year 2004 at the latest The related one-time write-down will be booked in accordance with the current practice (2/3 of the repurchase value will be written down) Remaining leasing liability of Radiolinja exceeds the amount of about EUR 77 m and the book value of the corresponding network depreciated according to plan NPV of the leasing liability was EUR 117 m in the end of June September, 2002 Corporate Finance/Investor Relations 11
Fixed Network Business Revenue, EUR million EBITDA / revenue, % EBIT / revenue, % Future profitability drivers n Executed cost cutting programs will take full effect in the latter half of the year n Sale of low margin businesses improve margins (for example Instalia) n Network integration and optimising decreases CAPEX needs n New higher prices from July 1, 2002 will bring EUR 10 m more revenue annually n New domestic competition environment will enhance the position of Elisa as a domestic solution provider September, 2002 Corporate Finance/Investor Relations 12
Germany-based Business Revenue, EUR million EBITDA / revenue, % EBIT / revenue, % Future profitability drivers n Shutdown of the mobile retail business was completed according to plan n Revenue is estimated to grow faster than the sector in Germany n Margins are improving, EBITDA will turn positive by the end of 2002 and EBIT by the end of 2003 n In 2003 EBITDA is expected to be positive on annual basis n Financial need of Germany-based business will decrease significantly September, 2002 Corporate Finance/Investor Relations 13
Growth Trends of the Finnish Market Settling back to long-term growth trend The market doubled in five years 6 p. a % 4 . Market Trend a. . 5 3 % p. a 7 % p. Growth boosted by Consumer Mobile Services 20 Total market size EUR billion 7 3 GNP Trend a. p. 3% 2 1 0 1980 September, 2002 1990 2000 2010 Corporate Finance/Investor Relations 14
Elisa Communications TMT Conference Barcelona September 17 - 19, 2002 www. elisa. com
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