Ericsson Nikola Tesla d.d.
Business results of joint stock company Ericsson Nikola Tesla in first nine months 2008
Date: 28th October 2008
Orders booked 1,468 MHRK
Sales revenues 1,308.4 MHRK
Gross margin 17.8%
Operating profit 122.7 MHRK
Profit before tax 133.4 MHRK
Net profit 106.7 MHRK
Earnings per share 81 HRK
Return on sales before tax 10.2%
Cash flow from operating activities 298.4 MHRK
„Ericsson Nikola Tesla's key performance indicators for the first nine months meet our
expectations. We have an increase in sales revenues and operating profit. Despite increasingly more
difficult market situation we maintain a sound margin level and generate strong cash flow from
In view of the situation and developments in the ICT industry I can say that our and Ericsson's
results are in tune with world trends, yet with a more positive effect we can be proud of. Still,
despite the strong growth in wireline and wireless broadband (access), despite global HSPA
networks gathering momentum, despite exponentially growing mobile subscriptions worldwide and
a growing demand for ICT and e-business solutions, there is a rising concern among businesses
over global recession and its consequences. It is therefore uncertain how operators will act in the
future and whether or to what extent the consumers would spend less on telecom service segment.
We cannot influence global developments but what we can do is to continuously improve our
operational excellence, to use all business opportunities and to find out new areas of growth. Key to
our local and regional business success are Ericsson technology brand and its business reputation
combined with the strength and competitive advantage of Ericsson Nikola Tesla.
In my experience our focus on strategic priority areas, innovative solutions and internal synergy
proved to be crucial for stable operations and long-term growth“, says Gordana Kovačević,
president of Ericsson Nikola Tesla.
In the first nine months of the year Ericsson Nikola Tesla performed as follows:
Sales revenues are up 3% compared to the same period last year, owing to a considerable sales
growth in regional markets, good performance in domestic market and knowledge sales to
Ericsson. Orders booked are up 1%.
In domestic market the sales revenues are up 7.6%, amounting to 416.6 MHRK.
In the regional markets (Bosnia and Herzegovina, Montenegro and Kosovo) sales revenues are
up 32.2%, totaling 334.6 MHRK, nearly half of it achieved in Bosnia and Herzegovina.
In the Commonwealth of Independent States sales revenues amount to 249.1 MHRK which is
down 25.2%. The results achieved in the Russian market are better than last year; in Belarus and
Kazakhstan there was a time shift in several scheduled activities, affecting considerably total results
in the reported period.
In Ericsson market sales revenues are up 4.2%, totaling 308 MHRK owing to research and
development activities and sales of services.
The structure of external sales (i.e. without Ericsson market) in our three business segments is as
follows: network infrastructure accounts for 63%, services for 29% and multimedia solutions
(including enterprise systems) for 8%. The system integration accounts for 39% in total services
Financial indicators – operational profitability
Operating profit is up 36% primarily due to increased gross margin (from 16.3% to 17.8%), totaling
122.7 MHRK. The increase in operating profit is partially influenced by lower impairment
allowances on long-term doubtful receivables and by the internal rationalization and cost
Operating expenses (SG&A) total 98.6 MHRK, up 7.9% compared to the same period last year, on
account of additional marketing and selling activities, especially in Kosovo. We also work hard to
intensify our present cooperation and to acquire new customers.
Profit from financial activities totals 10.7 MHRK which is considerably less year-over-year. It
results from a decreased value of financial instruments and from smaller release of impairment
allowances for receivables.
Profit before tax is on last year's level (+0.8%), totaling 133.4 MHRK.
The liquidity is very good; the cash flow from operating activities is positive, totaling 298.4
Important activities and contracts in major markets
In 3Q 2008 the cooperation between Ericsson Nikola Tesla and telecom operators in Croatia
continued. The company and Vipnet cooperate in capacity expansion of 2nd and 3rd generation
radio access network and in packet network upgrading. The company's cooperation with T-HT
covers optical transmission systems and broadband access segments.
The cooperation between mobile operator Tele2 and Ericsson Nikola Tesla continued; as the
exclusive supplier the company provides GSM and UMTS network upgrading (service) and
delivers transmission equipment.
With BH Telecom, the largest mobile operator in Bosnia and Herzegovina, the company contracted
a service network expansion. This includes systems and services capacity extension, implementing
an operation and supervision system, improving operation parameters, also a possible introduction
and implementation of new, primarily multimedia services.
With telecom operator HT Mostar the company signed a contract for GSM mobile network
expansion and GSM mobile access network upgrading. Another deal is relating to health
information system: in August 2008 the company concluded a contract for ICT solution and
equipment delivery with the Clinical Hospital Mostar.
In 3Q 2008 the cooperation between Ericsson Nikola Tesla and its partners in the Community of
Independent States (CIS) continued despite the rising competition among global ICT providers in
this market. The contracted assignments include wireline networks modernization and upgrading
for the Russian telecom operators Svyazinvest and MegaFon and for the Moldovan operator
Interdnyestrcom. Also the call supervision system support services were contracted for the
operators Tozzi S.R.L Moscow and North West Telecom in Sankt Petersburg, further IP-oriented
enterprise solutions for customers in Kazakhstan. The longstanding cooperation in mobile segment
with FE VELCOM, the first GSM operator in Belarus is continued with GSM network expansion
and customer support service.
Regarding the knowledge sales to Ericsson, the company maintained and broadened its
responsibilities in research and development. Main developmental activities are relating to the
cutting-edge network nodes and traffic routers generations for wireless and wireline users. The
major area of work is IP systems. Research is focused on several company projects covering a wide
range of activities from new ICT areas up to standardization and prototype realization.
In the reported period the Global Service Delivery Center, GSDC, Croatia obtained in wireline
segment new responsibilities relating to Solution Architecture, put into operation Ericsson’s new
Telephony Softswitch 4.0 solution that operates on transit level and obtained a Remote Delivery
Support assignment for GSM and UMTS radio, core and transport networks optimization for the
fastest growing mobile operator in the Middle East and North Africa.
Besides important corporate projects and latest-generation technology solutions in global Ericsson
market, our Customer Solution Center also has a record of excellent performance.
Ericsson Nikola Tesla, as an integral part of the Ericsson Group, supports the modern ways of
communicating. The company’s activities include marketing and sales, research and development,
design of the total communications solution, services in the multi-service and mobile networks area
including the mobile Internet and complex system integration in all business areas. The company
provides innovative ICT solutions that constantly improve people’s life and create new value.
Company Communication of Ericsson Nikola Tesla
For additional information, please contact:
Snježana Bahtijari Orhideja Gjenero
Company Communication Director Investor Relations Manager
Ericsson Nikola Tesla d.d. Ericsson Nikola Tesla d.d.
Krapinska 45 Krapinska 45
HR-10 0002 Zagreb HR-10 002 Zagreb
Phone: + 385 1 365 4556 Phone: +385 1 365 4431
Mobile: +385 91 365 4556 Mobile: +385 91 365 4431
Fax: +385 1 365 3156 Fax: +385 1 365 3156
E-mail: email@example.com E-mail: firstname.lastname@example.org
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