AB LIETUVOS TELEKOMAS

Content (Part 1)

AB Lietuvos Telekomas1. Development of events in 1990-20022. Vision, mission and values of AB Lietuvos Telekomas

2.1. Vision of Lietuvos Telekomas2.2. Mission of Lietuvos Telekomas2.3. Values of Lietuvos Telekomas

3. Company overview3.1. Major shareholders of AB Lietuvos Telekomas 3.2. Structure of AB Lietuvos Telekomas3.3. Structure of Lietuvos Telekomas Group3.4. Management structure of AB Lietuvos Telekomas3.5. Our business3.6. Our strategy3.7. Lietuvos Telekomas is one of the best employers in Lithuania3.8. Our Internet business (Part 1)3.9. Our Internet business (Part 2)3.10. Regulatory matters in Lithuania3.11. Period of exclusive rights3.12. Tariff re-balancing

Content (Part 2)

3.13. Key indicators of AB Lietuvos Telekomas Group3.14. Revenues (IAS) 3.15. Growth rates of main indicators3.16. Profit before tax 3.17. Lietuvos Telekomas employees (full time in core business) 3.18. Penetration/ Number of applicants on the waiting list (thou)3.19. Digitalisation3.20. Analogue/ Digital lines3.21. Digitalisation of business subscribers in Lithuania3.22. Digitalisation of main lines in 5 largest cities3.23. Digitalisation of business subscribers in 5 largest cities3.24. Modern network of Lietuvos Telekomas (9 months 2002)3.25. Capacity of digital exchanges (9 months 2002)3.26. Transmission and Access Network (9 months 2002)3.27. Coverage of data communication network

1. Development of events in 1990-2002

11 March 1990 – restoration of an independent state of Lithuania

6 February 1992 – establishment of state enterprise Lietuvos Telekomas

16 June 1997 – registration of joint stock company AB Lietuvos Telekomas

9 June 1998 – new Telecommunications Law

7 July 1998 – privatization of Lietuvos Telekomas; Telia and Sonera acquired 60% of shares for 510 million USD

23 August 1999 – employees of Lietuvos Telekomas acquired almost 5% of Company’s shares

29 March 2000 – the State Property Fund announced the initial public offering of AB Lietuvos Telekomas’ shares

12 June 2000 – AB Lietuvos Telekomas’ shares are traded on the National Stock Exchange of Lithuania and GDRs on the London Stock Exchange

1. Development of events in 1990-2002

9 March 2001 – Lietuvos Telekomas issued its debut EuroLitasNote of LTL 150 million with the maturity of three years

1 May 2001 – UAB Voicecom, a daughter company of Lietuvos Telekomas, started provision of international calls over IP

6 May 2002 - UAB Comliet, the biggest subsidiary of AB Lietuvos Telekomas, signed an agreement on the purchase of 75 per cent of the Latvian company Datu Tikli SIA shares

16 May 2002 - TietoEnator Oyj and AB Lietuvos Telekomas have signed agreements on the sale of part of Lietuvos Telekomas’ stake in its IT service providing subsidiaries to TietoEnator

4 July 2002 – UAB Comliet, a subsidiary of AB Lietuvos Telekomas, signed an agreement on the purchase of 55 per cent of Estonian company AC Telegrupp shares

5 July 2002 – the new Law on Telecommunications (will enter into force on 1 January 2003)

2. Vision, mission and values

Lietuvos Telekomas is the leading telecommunications provider in the region

2.1. Vision of Lietuvos Telekomas

2. Vision, mission and values

Lietuvos Telekomas provides business and residential customers in Lithuania with communications solution that meet their needs.

Lietuvos Telekomas is a customer oriented company which is driving changes and creating the future, thus paving the way for society’s development and it’s citizens’ well being.

Lietuvos Telekomas will create short term and long term profitability that will continuously increase the value of the company.

2.2. Mission of Lietuvos Telekomas

2. Vision, mission and values

Customer orientationCourteous, Attentive and Caring

Improved performanceSelf-development, Commercial success and Excellence

Business orientationAll services, investments, activities should contribute to profit of the company

LeadershipResponsibility and Trust, Pro-active and Creative

ProfessionalPro-active, Keeping promises and Innovative

2.3. Values of Lietuvos Telekomas

3. Company overview

On 12 June 2000, AB Lietuvos Telekomas launched Global Depository Receipt (GDR) program. According to the program one GDR represents 10 ordinary registered shares of AB Lietuvos Telekomas; shares are held by depository –Deutsche Bank Trust Company Americas.

Note:* UAB Lintkom, a daughter company of AB Lietuvos Telekomas, holds shares of AB Lietuvos Telekomas.

3.1. Major shareholders of AB Lietuvos Telekomas

10.03%

4.67%

25.30%

60.00%

Amber Teleholding A/ S

State of Lithuania

Treasury stocks*

Other shareholders

3. Company overview3.2. Structure of AB Lietuvos Telekomas

UAB Voicecom

UAB Lietuvos Telekomo

VersloSprendimai

VšĮ Lietuvos Telekomo

Sporto Klubas

UAB Baltijos Telekomunikacijų

Konsultacinis Centras

UAB Comliet

UAB Lintkom

UAB Lintel

UAB Verslo Portalas

UAB VersloŽinios

NexcomTelecommunications

LLC

100%

100%

100%

60%

100%

30%

70%

UAB Baltijos Informacinių

Duomenų Valdymo Centras

26%

60%

100%

75%

RBS Skals AS

25 %

40%

TietoEnator Oyj

74%

40%

3. Company overview3.3. Structure of Lietuvos Telekomas Group

55%Telegrupp AS

45 %

Merko Ehitus Ltd. AS

Datu Tikli SIA

3. Company overview3.4. Management structure of AB Lietuvos Telekomas

Secretariat

Human Resources Department

Services Development Department

Executive Vice-President

President General Manager

Project Division

Customer Service Department

Public Relations Department

Procurement Department

Finance Department

  

Legal DivisionCorporate Security Division

Strategic Development

Division

Wholesales Department

Process Division

Network Department

Wire telephony local domestic long distance international fixed to mobile value-added services

Internet Takas ISP & Portals E-commerce/Multimedia

Wholesale to operators transit service outgoing & incoming

international call routing mobile to fixed

Call centre Lintel Call Centre services Telemarketing

Networks & data PBX/Centrex ISDN Leased lines (broadband

and digital) ADSL

Telephony based on Modern Technologies

UAB Voicecom - outgoing & incoming international calls

group

Technical support UAB Comliet – planning

/design/construction, maintenance, installation, fault repair

3. Company overview3.5. Our business

IT infrastructure & professional services

data center service system hosting and support Help desk service application development other services

continued digitalisation city fibre optic rings high capacity backbone

LT’s strategy is to develop from a traditional provider of basic voice telephony services into a provider of a wide range of technologically advanced communications products and services

process re-engineering upgrade of IT systems continued cost cutting Call Centres

Increase of line penetration and usage new products and higher value-added services continued tariff rebalancing

multiple portals development e-commerce development on the new VAS platform network modernisation for multimedia services wide ADSL services penetration

Modernisation of network infrastructure

Increase in market orientation, productivity and operational efficiency

Revenue growth

Exploitation of Internet and multimedia opportunities

3. Company overview3.6. Our strategy

A set of Human Resources management tools developed during the year 2000 is successfully functioning.

Purposeful staff development as one of the highest priorities is carried out through targeted training programmes and developed by working in teams.

1st Graduate Trainee Programme for Lithuanian graduates with University background was successfully implemented during the year 1999 – 2001 and the second one started 1 October 2001.

3. Company overview3.7. Lietuvos Telekomas is one of the best employers in Lithuania

2 SBAs: access and portals

Products and Services:

ADSL to business and residential customers (from 2 April 2002 launched plan A4 with highest internet connection speed over ADSL – 1Mbps/ 512 kbps)

New VAS (value-added services) platform

Intranet solutions (Tako biuras 1&2 – dial-up VPN’s)

DSL VPN service (from 1 March 2002)

Internet networks service (24-hours flatrate over ISDN line) – for customers that would like to have ADSL, but there is no technical possibilities (from 1 May 2002)

Takas iD – ADSL based metered service for residential customers (from 20 September 2002)

3. Company overview3.8. Our Internet business (Part 1)

Number of unauthorized Internet dial-up customers and amount of unauthorized Internet dial-up traffic (thou. min.)

3. Company overview3.9. Our Internet business (Part 2)

214,192 226,035

31,20050,97353,158 49,828

35,681

171,607

121,745139,638

0

50,000

100,000

150,000

200,000

250,000

1999 2000 2001 9 months2001

9 months2002

Customers Traffic thou. min.

Lietuvos Telekomas up to December 31, 2002 will have the right to be the sole operator of public fixed telephone network and sole provider of the public fixed telephone network services.

Head of the Communication Regulatory Authority (CRA) was appointed on 26 February 2001 and members of the Council of the Communication Regulatory Authority were appointed on 30 May 2001. From this date CRA officially started its activities.

The Company must interconnect with all other licensed operators. Lietuvos Telekomas has signed the Interconnection Agreements with all three Lithuanian mobile operators.

On 6 June 2001, the Government approved the National Numbering Plan. Implementation of the Plan started in September 2001 and the main implementation activities were finished in September 2002.

The new Law on Telecommunications was approved on 5 July 2002 and will enter into force on 1 January 2003. Preparation of the secondary legislation is in the process.

3. Company overview3.10. Regulatory matters in Lithuania

Re-balancing of tariffs, both structure and levels

Creating a modern cost allocation system

Expanding of the network in non-profitable rural areas

Rightsizing of Company’s employees and implementation of modern organization and process-thinking environment to become more efficient

3. Company overview3.11. Period of exclusive rights

Re-balancing of tariffs is concluded

well before 1 January 2003.

Tariffs are divided in two baskets in

accordance to the price-cap formula

basket Y is key to re-balancing

basket X unlikely to be fully utilised

Price-cap baskets

Basket YBasket X

Local callsLocal callsMonthly subscription

feeMonthly subscription fee Installation feeILDDLD (incl. Fixed to mobile)

CPI+15% maximumCPI+10% maximum

Less than 8% used last year

(2001 07- 2002 07)

Source: Company licence

3. Company overview3.12. Tariff re-balancing

App. 16% used last year

(2001 07- 2002 07)

Telephone main lines connected (thou)* 1.188 1.152 1.168 994.8

Penetration (%)* 34.0** 33.1 33.5 28.7

Revenues (MLTL) 1.038,6 1.058,5 794.8 729.2

Profit before tax (MLTL) 333.0 138.7 140.5 77.9

Net profit (MLTL) 240.4 181.7 97.2 59.2

EBITDA (MLTL) 523.6 564.4 442.4 389.5

Investments (MLTL) 517.0 368.4 264.1 173.5

EPS (Earning per share (LTL)) 0.30 0.23 0.125 0.076

Digitalisation (%)* 46.5 64.97 59.5 81.5

Full time employees (end of the period) 6,293 5,646 5,781 4,558

2000 2001

* Only parent company’s indicators

** Calculated on the basis of the population of 3.493 thousand

2001 2002 9 months

3. Company overview3.13. Key indicators of Lietuvos Telekomas Group

3. Company overview3.14. Revenues (IAS)

1,0591,039980

794.8729.2

0

200

400

600

800

1000

1200

1999 2000 2001 9 months2001

9 months2002

MLTL+8%

-8.3%

9 months results for the year 2002

-39.1%

-3.6%-8.3%

-12.0%

-39.0%

TotalRevenue

Operatingexpenses

EBITDA EBIT Net profit

3. Company overview3.15. Growth rates of main indicators (compared to the result of the 9 months of 2001)

* Profit before tax including the gain from sales of UAB Bite GSM and UAB Mokejimu Korteliu Sistemos shares

MLTL

3. Company overview3.16. Profit before tax

142

77.9

333*

139 140.5

0

50

100

150

200

250

300

350

1999 2000 2001 9 months2001

9 months2002

* LT + LTVS (relative number working in the fixed telephony area)

** LT + LTVS + Comliet (relative number working in the fixed telephony area)

*** LT + LTVS + Comliet + Voicecom ((relative number working in the fixed telephony area)

3. Company overview3.17. Lietuvos Telekomas employees (full time in core business)

3.906* * *5.493* *6.956* 6.042* * 5.303* *

166196,6

217,2213

255

1999 2000 2001 9 months2001

9 months2002

Employees

Lines per employee

* Calculated on the bases of the population of 3,493.4 thousand

3. Company overview3.18. Penetration/ Number of applicants on the waiting list (thou)

31.2 33.134.0* 33.5

28.7

5,314,89,1

41,6

74,9

0

15

30

1999 2000 2001 9 monyhs2001

9 months2002

0

20

40

60

80

100

120

Penetration of telephone lines per 100 residents (includingpay-phones)Applications (thousands)

33.7%

46.5%

65.0%

81.5%

59.5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1999 2000 2001 9 months2001

9 months2002

3. Company overview3.19. Digitalisation

183379

764242

635683

403487

473699

811267

694625748186

551974

388341

0

100000

200000

300000

400000

500000

600000

700000

800000

900000

1999 2000 2001 9 months2001

9 months2002

analog lines digital lines

3. Company overview3.20. Analogue/ Digital lines

55.3%

75.1%83.6%

88.8%82.5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1999 2000 2001 9 months2001

9 months2002

3. Company overview3.21. Digitalisation of business subscribers in Lithuania

38.9%

53.4%

79.1%70.9%

100%

0%

20%

40%

60%

80%

100%

120%

1999 2000 2001 9 months2001

9 months2002

3. Company overview3.22. Digitalisation of main lines in 5 largest cities

9 months 2002

100% 0%

Analog lines Digital lines

9 months 2001

92.9%

7.1%

Analog lines Digital lines

3. Company overview3.23. Digitalisation of business subscribers in 5 largest cities

International and Long-distance transmission network channels

Analogue0.3%

Digital 99.7%

3. Company overview3.24. Modern network of Lietuvos Telekomas (9 months 2002)

3. Company overview3.25. Capacity of digital exchanges (9 months 2002)

EWSD (Siemens)

61%

MTX4%

AXE-10 (Ericsson)

35%

3. Company overview3.26. Transmission and Access Network (9 months 2002)

Skuodas

PlungėTelšiai

Radviliškis

Šiauliai

N.Akmenė Joniškis

Latvija

Švedija

Rusija

Mažeikiai

Pakruojis Pasvalys

Biržai

Rokiškis

Kupiškis

Anykščiai

Ukmergė

Širvintos

MolėtaiŠvenčionys

Ignalina

Utena

Zarasai

Kretinga

Šventoji

Palanga

GargždaiKlaipėda

Šilalė

Šilutė

Tauragė

Pagėgiai

Kelmė

Raseiniai

Kaunas

Kaišiadorys

Šalčininkai

Baltarusija

Elektrėnai

Prienai

Varėna

Alytus

Marijampolė

Lazdijai

Lenkija

Šakiai

Vilkaviškis

Jurbarkas

TM-3(43,479km.)

TM-5

OKL-2(198,730km.)

OKL-5(530,850km.)

OKL-1(96,839km.)

OKL-9(120,484km.)

OKL-7

(378,197km.)

TM-4(35,917km.)

TM-1

(108

,855

km.)

OKL-4(302,748km.)

OKL-4

OK

L-7

OK

L-4

OKL-8

(187,535km)

OKL-6

OKL-3

(289,274km.)Kėdainiai

Jonava

Neveronys

LentvarisGrigiškės

Vievis

TM-2

(281

,040

km)

Vilnius

OKL-6(1

76,125k

m.)

Druskininkai

Pabradė

Visaginas

50,71

9km

56,842km.

58,125km

21,849km

36,782km44,897km

56,006km

49,891km 69,093km 67,288km

49,97km31,061km

48,41

4km

41,4

65km

22,223km

64,884km63,8

14km

57,242km

23,429km

25,071km

44,279km 33,085km 46,234kmKuršėnai

26,6

32km

41,866km

53,217km

59,3

25km

61,9

22km

9,15

8km

73,9

62km

34,8

93km

51,199km

96,09

5km

28,2

1km

51,82km

36,6

25km

39,546km

47,689km

49,443km

30,56

8km66,998km

59,816km50,210km

1,063km16

,261

km

42,416km55,453km

58,791km 32,123km

44,926km

27,341km

46,692km

23,948kmExisting F.O.Network

Planned lines

14,6

19km

TrakaiElektrėnai

Panevėžys

40,9

33km

45,641km

52,0

19km 3056,457 km

Rietavas

35,273kmOKL-10

BalbieriškisOKL-11

47,2km 17,8km

TM-6

Kybartai

TM-7

19,732km

10,7

09km

Rusija

OKL-10(212,296km)

OKL-10

91,989km

85,634km

39,736km

57,369km

Obeliai

Latvija

9,841

kmTM-8

3. Company overview3.27. Coverage of data communication network

NIDAŠILUTĖ

KRETINGA

SKUODAS

PLUNGĖTELŠIAI

JONIŠKIS

PASVALYS

BIRŽAI

ROKIŠKIS

ZARASAI

KUPIŠKIS

PAKRUOJIS

UTENA

IGNALINARASEINIAI

JURBARKAS

KAUNAS

TRAKAI

DRUSKININKAI

RADVILIŠKIS

ŠALČININKAI

ŠIRVINTOS

MOLĖTAI

ANYKŠČIAI

ŠVENČIONYS

ŠAKIAI

PALANGA

KLAIPĖDAKELMĖ

MAŽEIKIAI N.AKMENĖ

ŠIAULIAI

PANEVĖŽYS

VILNIUS

VARĖNA

TAURAGĖ

MEDININKAI

VISAGINASGARGŽDAI

ŠILALĖ

UKMERGĖ

JONAVA

KAIŠIADORYS

ELEKTRĖNAI

BIRŠTONAS

LAZDIJAI

PRIENAIVILKAVIŠKIS

MARIJAMPOLĖALYTUS

DLL services & FR, IP access

KĖDAINIAI

Kuršėnai