New York and Stockholm - Tele2 AB, ("Tele2"), (Nasdaq Stock Market: TLTOA and TLTOB and Stockholmsbörsen: TEL2A and TEL2B), the leading alternative pan-European telecommunications company, today announced a number of non-recurring items that will affect the results for the fourth quarter, to be published on 9 February 2004. None of the items have a cash effect. In combination, the after-tax effect of these items will be a positive MSEK 910.
1. Deferred tax receivables and related goodwill writedown: net effect MSEK 1,410
According to Tele2's accounting principles, a deferred tax receivable in the case of loss carry-forwards is reported only to the extent that it is estimated that they can be utilized against profits in the near future. This means that losses in start-up operations cannot be offset against taxes on profits in more mature operations. For Tele2 this has led to higher tax expenses than if the taxes had been based on the company's combined profits. Due to the continued positive results trend in Continental Europe, losses that have not been taken account of when calculating taxes now result in a positive tax effect of MSEK 1,730. The part of loss carry-forwards that existed when Tele2 acquired SEC and that could have reduced goodwill by some MSEK 320, is accounted for as a writedown according to the Swedish Financial Accounting Standards Council's recommendation RR9-Income taxes.
2. Adjustment of revenue recognition at Comviq: MSEK -365, corresponding to MSEK -263 after tax
Revenue from mobile telephony is shown as calls are made, which means that sold but not yet used prepaid cards should not be included in revenues. To estimate this, revenues in Sweden have been recognized according to a model that has been used unchanged since the start of Tele2's prepaid telephony in 1997, in the absence of a system to measure the value of sold but not used prepaid cards. In the latter part of 2003, Comviq brought such a system into use, and it was established that sold but not used prepaid cards have been underestimated by around MSEK 365 in total for the period 1997 through 30 September 2003, of which MSEK 95 is estimated to have occurred in 2003.
3. One-time writedown of fixed assets: MSEK -300, corresponding to MSEK -237 after tax
Fixed assets at a total value of around MSEK 300 will be expensed in the fourth quarter, in part as a writedown of MSEK 225 and in part as a financial cost of MSEK 75. The largest element, MSEK 175, relates to the writedown of an Atlantic undersea cable that Tele2 invested in during the latter part of the 90's, and is a result of Tele2's assessment of continued overcapacity. The bulk of the remaining part, some MSEK 75, is related to the writedown of shares in the investment TravelLink AB.
Tele2 AB, formed in 1993, is the leading profitable alternative pan-European telecommunications company offering fixed and mobile telephony, data network and Internet services under the brands Tele2, Tango and Comviq to 20.4 million people in 23 countries. Tele2 operates Datametrix, which specializes in systems integration, 3C Communications, providing integrated credit card processing, web payment solutions and public payphones; Transac, providing billing and transaction processing service; C³, offering co-branded pre-paid calling cards and Optimal Telecom, the price-guaranteed residential router device. The Group offers cable television services and, together with MTG, owns the Internet portal Everyday.com. The Company is listed on the Stockholmsbörsen, under TEL2A and TEL2B, and on the Nasdaq Stock Market under TLTOA and TLTOB.
Lars-Johan Jarnheimer Telephone: + 46 8 562 640 00
President and CEO, Tele2 AB
Håkan Zadler Telephone: + 46 8 562 640 00
CFO, Tele2 AB
Dwayne Taylor Telephone: + 44 20 7321 5038