Smarter Utility

 

[November 09, 2004]

TIW Reports Strong Third Quarter Results

MONTREAL --(Business Wire)-- Nov. 9, 2004 -- Telesystem International Wireless Inc. (Nasdaq:TIWI) (TSX:TIW):

For the Quarter and the Nine-Month Period Ended September 30, 2004

All Amounts are in US$ Unless Otherwise Stated

-- Service Revenues of $314.2 million, up 28.8% from Q3-2003

-- Operating Income of $77.6 million, up 55.4% from Q3-2003

-- Net Income of $20.7 million compared to $3.1 million in Q3-2003

Telesystem International Wireless Inc. ("TIW" or the "Company") (TSX:TIW) (Nasdaq:TIWI) today reported its results for the third quarter of 2004.

Service revenues for the quarter reached $314.2 million compared to $244.0 million for the third quarter of 2003. Consolidated operating income before depreciation and amortization (OIBDA)(1) increased 32.3% to $133.9 million compared to $101.2 million for the third quarter of 2003. Operating income for the quarter reached $77.6 million compared to $49.9 million for the third quarter of 2003. The growth in OIBDA and operating income reflects strong subscriber growth in Romania and significant subscriber growth and margin expansion in the Czech Republic. Net income for the quarter was $20.7 million or $0.14 per share on a basic and fully diluted basis compared to a net income of $3.1 million or $0.03 per share on a basic and fully diluted basis for the third quarter 2003.


"We are pleased with our third quarter results", said Bruno Ducharme, Chairman and Chief Executive Officer. "We are also very satisfied with the success of our recent 575 million euros debt financing in the Czech Republic, which reflects a high level of confidence from the capital market and improves our operating and financial flexibility" added Mr. Ducharme. "In Romania, we continued to register strong subscriber growth with net additions 29.6% greater than for the same period in 2003, resulting in strong service revenues growth. In the Czech Republic we continue to grow our postpaid subscriber base and improve our margin" said Alexander Tolstoy, President and Chief Operating Officer.

(1) We use the term operating income before depreciation and amortization ("OIBDA") and average revenue per user ("ARPU") which may not be comparable to similarly titled measures reported by other companies. We believe that OIBDA, referred to by some other telecommunication operators as EBITDA, provides useful information to investors because it is an indicator of the strength and performance for our ongoing business operations, including our ability to fund discretionary spending such as capital expenditures and other investments and our ability to incur and service debt. While depreciation and amortization are considered operating costs under generally accepted accounting principles, these expenses primarily represent the non-cash current period allocation of costs associated with long-lived assets acquired or constructed in prior periods. Our OIBDA calculation is commonly used as one of the bases for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the wireless telecommunications industry. We believe that ARPU provides useful information concerning the appeal of our rate plans and service offerings and our performance in attracting and retaining high value customers. ARPU excludes equipment revenues, revenues from other wireless networks' customers roaming on our network and miscellaneous revenues. OIBDA and ARPU should not be considered in isolation or as alternative measures of performance under generally accepted accounting principles ("GAAP"). For the reconciliation of OIBDA to net income and for the reconciliation between service revenues and ARPU refer to the non GAAP measures and operating data section of this release.

MANAGEMENT DISCUSSION AND ANALYSIS

FOR THE QUARTER AND THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2004

Management's discussion and analysis, dated November 9, 2004, should be read in conjunction with the accompanying unaudited consolidated financial statements of TIW for the three month and nine months ended September 30, 2004 and should also be read in conjunction with the audited consolidated financial statement and Operating and Financial Review and Prospects contained in TIW's 2003 Annual Report for the year ended December 31, 2003. Additional information relating to TIW, including the company's annual report on Form 20-F and continuous disclosure documents, is available on SEDAR at www.sedar.com under Telesystem International Wireless Inc. The financial information presented herein has been prepared on the basis of Canadian GAAP. Please refer to Note 17 to our audited consolidated financial statements for the year ended December 31, 2003 for a summary of the differences between Canadian GAAP and United States (U.S.) GAAP.

Results of Operations

We recorded net subscriber additions for the third quarter of 349,076 compared to 343,538 in the same period last year. As of September 30, 2004 the total number of subscribers reached 6,117,029, up 33.5% compared to 4,582,295 at the end of the third quarter of 2003. Consolidated service revenues increased 27.9% to $328.9 million compared to $257.2 million for the third quarter of 2003.

Cost of service revenues increased to $92.2 million for the three months ended September 30, 2004 from $72.8 million for the three months ended September 30, 2003 but slightly declined, as a percentage of service revenues, to 29.3% compared to 29.8% for the prior year comparative period.

Equipment revenues rose to $14.7 million for the three months ended September 30, 2004 compared to $13.2 million for the same period in 2003 as a result of subscriber growth. Cost of equipment correspondingly rose to $25.8 million from $22.5 million for the three months ended September 30, 2004 and September 30, 2003 respectively. Included in the cost of equipment are costs of handsets and accessories sold, including subsidized handsets, as well as the costs of SIM cards, the majority of which are provided to new subscribers as part of the cost of acquiring such new subscribers.

Selling, general and administrative expenses were $77.0 million, 24.5% of service revenue, in the third quarter of 2004 as compared to $60.8 million, 24.9% of service revenue, in 2003. The increase in selling, general and administrative expense is largely attributable to additional costs incurred for acquiring and servicing a significantly higher number of subscribers. Also included in the expenses for the third quarter of 2004 is a non-cash stock based compensation expense of $3.5 million.

We recorded OIBDA of $133.9 million compared to OIBDA of $101.2 million for the same period last year. OIBDA as a percentage of service revenue for the three month period reached 42.6% compared to 41.5% in the same period of 2003. This improvement reflects the revenue impact of solid subscriber growth, our focus on postpaid growth in the Czech Republic and realized economies of scale as a result of fixed costs being spread over the larger subscriber base.

Depreciation and amortization increased to $56.3 million for the three months ended September 30, 2004, from $51.3 million, due primarily to a higher tangible asset base. The revenue growth and lower depreciation costs as a percentage of service revenue resulted in an operating income of $77.6 million compared to $49.9 million for the same period last year, an increase of 55.5%.

Interest expense net of interest income for the three months ended September 30, 2004 was $20.3 million compared to $24.2 million for the same quarter of 2003, primarily due to a reduction in spreads on Oskar's credit facility as we met certain financial ratios, to repayment of long-term debt and also due to an increase in financial income from $0.5 million in the third quarter of 2003 to $1.2 million in the third quarter of this year. The foreign exchange gain of $1.3 million for the three months ended September 30, 2004 which included gains in both Oskar Mobil and MobiFon, arose primarily from the revaluation of working capital items denominated in currencies other than these companies' functional currencies, while the foreign exchange loss of $0.9 million for the three months ended September 30, 2003 also included losses associated with the revaluation of the unhedged portion of our Euro-denominated senior credit facility at Oskar Mobil into Czech Koruna which depreciated relative to the Euro during that quarter.

Income tax expense for the quarter was $17.5 million as compared to $13.2 million for the same quarter in 2003. Income tax expense consists primarily of Romanian income taxes. The Romanian government has announced a reduction in the corporate income tax rate from 25% to 19% effective January 1, 2005.

As a result of the foregoing, net income for the third quarter of 2004 amounted to $20.7 million or $0.14 per share on a basic and fully diluted basis compared to a net income of $3.1 million or $0.03 per share on a basic and fully diluted basis for the third quarter of 2003.

For the nine months ended September 30, 2004, consolidated service revenues increased 31.9% to $864.9 million compared to $655.5 million for the same period last year. Cost of service revenues increased to $257.8 million for the nine months ended September 30, 2004 from $194.5 million for the nine months ended September 30, 2003 but was stable, as a percentage of service revenues, at 29.8%. Selling, general and administrative expenses were $217.3 million for the nine months ended September 30, 2004 compared to $160.6 million for the same period in 2003. The increase in selling, general and administrative expense is largely attributable to additional costs incurred for acquiring and servicing a significantly higher number of subscribers and stock based compensation charges of $7.7 million. As a result of the aforementioned, OIBDA for the nine month period ended September 30, 2004 was $362.3 million compared to $280.1 million for the same period in 2003. Operating income increased 50.7% to $194.1 million from $128.8 million for the same period last year. Net income for the nine month period ended September 30, 2004 was $50.3 million or $0.38 per share basic and $0.37 per share fully diluted compared to a net income of $12.6 million or $0.13 per share basic and fully diluted for the corresponding prior year period. The 2004 net income includes a gain of $11.7 million on the disposal of our shares in Hexacom our Indian affiliate in the first quarter, while the 2003 net income included a gain of $19.4 million on the sale of a minority interest in MobiFon. The 2003 result also includes a loss from discontinued operations of $8.8 million related to our discontinued Brazilian cellular operations which were disposed of on March 26, 2003.

MobiFon S.A. - Romania

MobiFon S.A. ("MobiFon" or its trade mark, "Connex"), added 279,797 net subscribers for the third quarter for a total of 4,369,745, compared to net additions of 215,954 in the third quarter of 2003 and total subscribers of 2,962,081 at the end of the same 2003 period, an increase of 47.5% in total number of subscribers. As of September 30, 2004, we estimate that MobiFon had a 48.3% share of the cellular market in Romania. As of September 30, 2004, postpaid subscribers accounted for 33.5% of MobiFon's total subscriber base as compared to 37.2% at the end of the third quarter of 2003 and 34.6% at the end of last quarter.

The Romanian mobile market continued to show significant growth. During the past 12 months, we estimate cellular telephony market penetration in Romania increased to 42% from 29% at the end of the third quarter of 2003.

Service revenues reached $183.3 million compared to $144.1 million for the third quarter of 2003. This record $39.2 million increase in service revenues translated into a 27.2% year over year growth rate. This growth was largely attributable to a 48.2% increase in average number of subscribers partly offset by a decline in average revenue per user.

The monthly average revenue per user ("ARPU")1 for the third quarter was $13.06 compared to $15.44 for the same period of last year, with the decrease being primarily the result of the addition of more than 1.4 million subscribers during the last 12 months with a lower usage profile compared to the existing average subscriber base.

Cost of services as a percent of service revenue increased to 21.2% from 19.7% in the third quarter of 2003. This increase is primarily a result of higher interconnection costs associated with a higher proportion of traffic terminating on other operators' networks and higher regulatory spectrum fees which are primarily related to the newly introduced Universal Service Fee, $1.1 million of which was booked during the third quarter of 2004. Selling, general and administrative expenses decreased from 22.6% of service revenues for the three months ended September 30, 2003 to 21.8% for the current three month period primarily due to lower bad debt expense. Bad debt as a percentage of total service revenue decreased from 1.7% in the third quarter of 2003 to 0.8% in the third quarter of 2004.

OIBDA increased 27.1% to $97.1 million compared to $76.4 million for the same period last year. OIBDA as a percentage of service revenue was stable versus the same period last year at 53.0%. Operating income for the quarter rose 41.0% to $67.7 million compared to $48.0 million for the third quarter of 2003.

For the first nine months of 2004, service revenues increased 28.4% to $493.4 million compared to $384.4 million for the same period last year, consistent with the 42.1% increase in average number of subscribers partially offset by the lower ARPU. The monthly ARPU for the first nine months of 2004 was $12.94 compared to $14.44 for the same period of last year, with the decrease being the result of the addition of more than 1.4 million subscribers, including more than 1.0 million prepaid subscribers, during the last 12 months. OIBDA for the first nine months of 2004 increased 21.8% to $260.1 million compared to $213.6 million for the 2003 period. OIBDA as a percentage of service revenue decreased to 52.7% for the first nine months of 2004 compared to 55.6% in the corresponding period of 2003, consistent with greater costs incurred in acquiring significantly more new subscribers and retaining high value subscribers during the period. Operating income rose 33.3% to $172.8 million compared to $129.7 million for the first nine months of 2003.

Oskar Mobil a.s. (formerly know as Cesky Mobil a.s.)- Czech Republic

Oskar Mobil a.s. ("Oskar Mobil" or its trade mark "Oskar") added 69,279 subscribers in the third quarter to reach 1,747,284, an increase of 21.5% in total number of subscribers compared to 1,438,142 subscribers at the end of the third quarter of 2003. In the Czech Republic, our focus on postpaid growth continued to be successful with postpaid subscribers representing 75% of net additions during the quarter. As a result, our prepaid/postpaid mix as of September 30, 2004 was 54.0/46.0 compared to 58.9/41.1 at of September 30, 2003 and 57.5/42.5 at the end of December 31, 2003. We estimate we held a 17.1% share of the national cellular market as of September 30, 2004, compared to a 15.7% share at the same time last year. During the past 12 months, we estimate cellular penetration in the Czech Republic increased to 100% from 90% at the end of the third quarter of 2003. According to our estimate, we captured approximately 45% of the total market net subscriber additions during the quarter.

Service revenues increased 31.0% to $130.9 million compared to $99.9 million for the third quarter of 2003 due to a 23.4% increase in average subscribers and a 6.1% increase in ARPU. ARPU for the third quarter decreased from Czech Koruna 660 ($23.05) in the third quarter of 2003 to Czech Koruna 633 ($24.46) for the same period this year however the average exchange rate between the U.S. Dollar and the Czech Koruna during the third quarter of 2004 was 10.7% higher than for the same period in 2003. The 4.2% decrease in the local currency ARPU is primarily driven by the reduction in interconnection rates. Although the interconnect rate decrease reduces the ARPU, it also reduces interconnection costs.

Cost of services as a percent of service revenue decreased to 40.8% from 44.3% in the third quarter of 2003. This decrease results primarily from lower average interconnection rates amongst mobile operators and from greater on-net and incoming traffic as a percentage of total traffic. Selling, general and administrative expenses decreased to 24.9% of service revenues compared to 27.0% for the same period last year mainly as a result of lower selling and marketing expenses.

We recorded OIBDA in the Czech Republic of $41.3 million compared to OIBDA of $26.0 million for the same period last year. OIBDA as a percentage of service revenue for the quarter reached 31.6% compared to 26.0% in the third quarter of 2003. This improvement reflects the revenue impact of solid subscriber growth, our focus on postpaid growth and the aforementioned economies of scale realized as fixed costs are spread over the larger subscriber base. We achieved an operating income of $14.5 million in the Czech Republic for the third quarter of 2004, compared to an operating income of $3.1 million for the third quarter of 2003.

For the first nine months, service revenues increased 37.0% to $371.5 million compared to $271.2 million for the same period in 2003 consistent with the 26.1% increase in average number of subscribers and the 8.5% increase in ARPU as expressed in U.S. Dollars. ARPU for the first nine months of 2004 reached Czech Koruna 633 ($24.13) compared to Czech Koruna 635 ($22.24) in 2003. In April 2004, the regulatory body announced a new mobile voice terminating interconnection rate of Czech Koruna 3.19 per minute compared to Czech Koruna 3.66 which had a negative impact on the ARPU and a positive impact on interconnection costs for the first nine months of 2004. OIBDA reached $115.2 million compared to OIBDA of $71.7 million for the first nine months of last year consistent with the revenue impact of solid subscriber growth, our focus on postpaid growth and the economies of scale realized as fixed costs are spread over a larger subscriber base. Operating income reached $34.3 million compared to $4.4 million for the same period in 2003.

In November 2004, Oskar Mobil implemented a loyalty points program directed to its business customers. Business customers meeting certain conditions are awarded points, based on their total bill, which can be redeemed for handsets.

Corporate and Other

Unallocated expenses for corporate and other activities were $4.6 million for the third quarter of 2004 compared to $1.2 million for the same period last year and $13.0 million for the nine months ended September 30, 2004 compared to $5.3 million for the same period in 2003. During 2003, we adopted the fair value based method of accounting for stock-based compensation on a prospective basis and, accordingly, the fair value method has been applied to all grants on or after January 1, 2003. As a result, consolidated selling, general and administrative expenses for the third quarter and nine months ended September, 2004 include stock based compensation cost of $3.5 million and $7.7 million respectively of which $2.4 million and $5.0 million is included within corporate and other activities, while the corresponding period of 2003 had no compensation costs as no grants were awarded in that period. On May 4, 2004, TIW's shareholders approved a Restricted Share Unit ("RSU") plan under which 1,052,158 RSU's were outstanding as of September 30, 2004 and were included in the determination of this quarter's stock based compensation. Furthermore, 2003 results included our share of net income from our Indian operation, which was disposed of at the end of 2003, of $1.0 million and $2.6 million for the three and nine months ended September 30, 2003.

Liquidity and Capital Resources

Operating activities provided cash of $109.7 million and $252.7 million for the three month and nine month periods ended September 30, 2004, respectively, compared to $52.2 million and $172 million for the corresponding 2003 periods. On a year-to-date basis, the primary factor contributing to the higher operating cash flow was the $82.2 million increase in OIBDA.

Investing activities used cash of $94.7 million for the quarter ended September 30, 2004 compared to a use of cash of $32.5 million during the same period in 2003. Our investing activities include the acquisition of property, plant and equipment of $57.1 million and $32.5 million for the three-month periods ended September 30, 2004 and September 30, 2003, respectively. For the nine months ending September 2004, investing activities used cash of $230.8 million compared to $90.4 million for the same period of 2003. Acquisitions of property, plant and equipment during the nine months ending September 30 of this year were $173.4 million compared to $133.3 million for the corresponding period last year. Investing activities for the nine months ended September 30, 2004 also include the net proceeds from the sale of our direct investment in Hexacom during the first quarter which amounted to $21.8 million. These proceeds were offset by the use of $85.9 million of cash for the acquisition of additional interests in our subsidiaries including $40.9 million during the third quarter of 2004 of which $36.6 million was in connection with the cash portion of the acquisition of a 15.46% non controlling interest in MobiFon. During the 2003 period, the Company received net proceeds of $41.5 million from the sale of a minority interest in MobiFon.

Financing activities used cash of $37.4 million for the third quarter of 2004 and provided cash of $9.8 million year to date compared to cash used of $134.6 million and $73.7 million for the third quarter and nine months ended September 30, 2003. The source of cash provided by financing activities in the nine months ended September 30, 2004 was $76.1 million of proceeds from issuances of our common shares. These proceeds were partially offset by $31.5 million of scheduled repayments of MobiFon's and Oskar Mobil's senior credit facilities, $13.7 million of which occurred during the third quarter, the early redemption of $2.3 million of MobiFon Holding's senior notes during the quarter, as well as by $32.1 million distributed to minority shareholders of MobiFon, $20.9 million of which was distributed during the third quarter. During the nine months ended September 30, 2003, use of cash for financing activities included $223.9 million in repayment of long-term debt of which $151.5 million was repaid in the third quarter, $59.5 million distributed to minority shareholders of which $28.3 million occurred in the third quarter, $47.4 million representing a full payment in the first quarter of 2003 of TIW's senior bank facility, $28.1 million in additions to restricted cash, and $12.9 million of deferred financing costs of which $6.2 million occurred in the third quarter. These uses were partially offset by $279.0 million in proceeds from issuance of long term debt of which $32.1 million was received in the third quarter and $18.9 million, received during the third quarter, from the issuance of subsidiaries' shares to non-controlling interests.

Cash, cash equivalents and restricted short-term investments totaled $257.3 million as of September 30, 2004, including $102.7 million at the corporate level, which included $28.1 million in restricted short term investments.

As of September 30, 2004, total consolidated indebtedness was $1.1 billion, of which $224.5 million was at the corporate level, $277.5 million at MobiFon and $572.4 million at Oskar Mobil. As of September 30, 2004 corporate net debt defined as debt at the corporate level minus cash and short-term investment at the corporate level was $121.8 million compared to $178.2 million at September 30, 2003 and $150.9 million at December 31, 2003.

In December 2003, we accepted a binding offer to sell our 27.5% direct equity interest in Hexacom for proceeds of $22.5 million. We provided our co-shareholders in Hexacom with the required notices to trigger certain rights of first refusal provided for in the Hexacom Shareholders' Agreement. During the first quarter of 2004, our co-shareholders exercised their right of first refusal and paid the $22.5 million purchase price as stipulated in the December 12, 2003 binding offer. As a result, we realized a gain on disposal of its investment in Hexacom of $11.7 million in the three months period ended March 31, 2004.

On March 25, 2004, the shareholders of MobiFon approved dividends amounting to Lei 4.6 trillion ($138 million). The dividends do not become payable to shareholders until conditions for shareholder distributions are met under the MobiFon's senior credit agreements. In April and July 2004, an aggregate of $32.1 million of dividends were distributed to non-controlling interests. As at September 30, 2004, the amount payable to non-controlling interests based on the conditions of such loan agreements, was $10.3 million and is included with total current liabilities.

On March 25, 2004, we sold 7 million common shares at $9.50 per share from treasury for gross proceeds of $66.5 million and net proceeds of $62.7 million. On March 31, 2004, the underwriters of the offering exercised the over-allotment option that they had been awarded to purchase an additional 1,050,000 million common shares at a price of $9.50 per share from treasury. The over-allotment option closed on April 5, 2004 resulting in net proceeds of $9.5 million.

On March 17, 2004, we acquired 5.9% of MobiFon and 2.9% of Oskar Holdings N.V., formerly known as TIW Czech N.V., from EEIF Melville B.V., Emerging Markets Partnership c.v. and EEIF Czech N.V., in exchange for the issuance of 14,621,714 of our common shares. Pursuant to the term of the sale, the selling shareholders of MobiFon had the right to receive 5.9% of the dividends paid in 2004 relating to MobiFon 2003 earnings up to an aggregate maximum of $5.2 million of which $5.1 million had been paid as of September 30, 2004.

In March 2004, we acquired 10,942,625 shares of our subsidiary ClearWave from two institutional investors for an aggregate consideration of $139.9 million, consisting of 11,268,538 of our common shares and $ 35.7 million in cash. On May 25, 2004, we launched an offer to all remaining minority shareholders of ClearWave to purchase the 186,560 shares they owned, representing a 0.2% interest in ClearWave's equity, for Cdn$16.64 ($12.48) in cash per share. The offer was extended to July 15, 2004 and 176,851 of the ClearWave shares were tendered under the offer for aggregate consideration of $2.2 million. The shares acquired through these transactions represent a 13.0% equity interest and a 4.6% voting interest in ClearWave and as a result our direct and indirect equity and voting interest in ClearWave increased to 99.99% and 100.0%, respectively, resulting in a 63.5% ultimate equity interest in MobiFon and a 27.1% ultimate equity interest in Oskar Mobil.

On September 15, 2004 we acquired 15.46% of MobiFon from certain private equity investors for a combination of cash and of our common shares. We acquired 25,185,168 shares of MobiFon in exchange for 28,358,499 of our shares, representing an exchange ratio of 1.126, and an additional 4,203,310 shares of MobiFon for $36.6 million in cash. We increased our indirect ownership in MobiFon from 63.5% to 79.0%. Pursuant to the terms of the sale, the selling shareholders had the right to receive up to Lei 260.2 billion ($7.9 million) of the dividends declared in March 2004 but unpaid as of September 15, 2004 and this amount is included with current accrued liabilities as of September 30, 2004. The terms of the agreement restrict the ability of the Selling Shareholders and certain permitted distributees of the Selling Shareholders to resell or otherwise dispose of their TIW shares for a period of 12 months following closing of the transaction, other than for certain permitted transfers among affiliated entities. Other than pursuant to their right to piggy-back on certain registered offerings, no more than 16.6% of the total TIW shares received by the Selling Shareholders can be disposed of three months after completion, an additional 16.7% six months after completion, a further 16.7% nine months after completion and the remaining 50% on the first anniversary of completion.

The acquisitions of shares of MobiFon, Oskar Holdings and ClearWave were accounted for using the purchase method. Accordingly, the aggregate consideration of $602.2 million was allocated to the fair value of the assets acquired and liabilities assumed based on management's best estimate of such fair values determined using generally accepted valuation methodologies. The aggregate purchase price for the above transactions as well as the acquisition of 1.2% of ClearWave which occurred in the fourth quarter of 2003 and for which approximately $9.2 million of goodwill was recorded, exceeded the carrying value of net assets acquired by $540.0 million which was preliminarily allocated to goodwill in the amount of $545.9 million and $5.9 million to other fair value net decrements.

In August 2004, in accordance with the covenants governing MobiFon Holdings' 12.5% Senior Notes, we made an offer to acquire up to $15.6 million in principal of the notes at a purchase price equal to the principal amount of the notes plus accrued and unpaid interest. Pursuant to this offer, we retired $2.3 million of principal amount of Senior Notes plus accrued interest.

On October 13, 2004 our subsidiary, Oskar Mobil issued in a private placement 325 million euros ($398.7 million) Senior Notes ("the Notes") due 2011. The Notes bear interest at 7.5%, payable semi-annually in arrears beginning in April 2005. Net proceeds from the offering of the Notes were approximately 314.3 million euros ($385.6 million), after deducting underwriting discounts and other related expenses. The Notes are callable at our option after October 2008 at decreasing redemption prices starting at 103.75% of the principal amount of the Notes. Concurrently with the issuance of the Notes, Oskar Mobil proceeded with an initial draw of CZK3,964 million and 24 million euros (in aggregate approximately $184.0 million with repayments of $24.5 million, $49.1 million and $110.4 million scheduled in 2007, 2008 and thereafter, respectively) from a new senior credit facility. The new senior credit facility consists of a CZK5,033.6 million and 40.0 million euros (approximately $245.3 million in aggregate) five year amortizing tranche A maturing in 2009, and amortizing from March 2007, and a CZK1,573 million (approximately $61.3 million) six year tranche B repayable in full at maturity. The indebtedness under the new senior credit facility ranks pari passu with the Notes as to security. The new senior credit facility is available for drawing, on a revolving basis, over the next 24 months.

The net proceeds from the issuance of the Notes, together with the net proceeds from our initial drawdown under the new senior credit facility, were approximately $562.5 million (458.5 million euros), after deducting underwriting discounts and other related expenses. The Company used the net proceeds along with cash on hand, to repay in full and cancel the existing Oskar Mobil senior credit facility, in the amounts of CZK 5,402.8 million and 171.7 million euro (in aggregate $567.1 million) and to terminate certain currency and interest rate hedging agreements. As a result of the retirement of the current bank facility and the unwinding of the related hedging agreements, the Company anticipates recognizing a loss on early extinguishment of debt and related hedges of approximately $26 million during the fourth quarter consisting of the unrealized portion of such hedging contracts and the unamortized deferred financing costs which as of September 30, 2004 was $8.3 million. In connection with the unwinding of existing hedges an amount of 29.0 million euros ($35.6 million), consisting of the fair value of the unwounded hedges, was paid to counterparts. As a result of this refinancing, our consolidated annual principal repayments of long-term debt for 2005, 2006, 2007, 2008 and thereafter consist of $45.0M, $60.9M, $99.5M, $139.1M and $731.8M, respectively.

In November 2004, we entered into an agreement in principle to acquire from non-controlling shareholders 72.9% of Oskar Holdings in exchange for the issuance of 46.0 million common shares of our treasury stock. Upon closing of the acquisition, we will increase our indirect ownership in Oskar Holdings and Oskar Mobil to 100% and 99.87%, respectively. Two of our significant shareholders are shareholders of Oskar Holdings and will receive 17.4 million and 7.0 million common shares, respectively. The closing of the transaction remains subject to certain conditions, including among others, the execution of final documentation and regulatory approvals. Closing is expected to take place in the first quarter of 2005 and the transaction will be accounted for using the purchase method.

We expect to have future capital requirements, particularly in relation to the expansion and the addition of capacity to our cellular networks and for the servicing of our debt. We intend to finance such future capital requirements mainly from cash and cash equivalents on hand, short-term investments and cash flows from operating activities.

The Romanian Ministry for Communications and Information Technology (MCTI) previously announced a tender process for the so called 3G or UMTS mobile licenses. Four 15 year licenses were on offer for $35 million each. The tender process closed on October, 29, 2004 and the Ministry announced that they had received two bids, one from Orange SA and one from MobiFon. License award is expected to be announced on November 12. Should we be awarded a UMTS license, the license fee will be payable as for $10.5 million within 120 days of the award and the balance by installments over a five year period. License conditions will include minimum coverage requirements.

Selected consolidated financial data

On June 23, 2003, we amended our share capital to implement a one for five (1:5) consolidation of our common shares. Following the consolidation, the number of issued and outstanding common shares was reduced from 467,171,850 to 93,432,101 while the number of issued and outstanding preferred shares remained unchanged at 35,000,000 but their conversion ratio was changed from 1 common share for each preferred share to 1 common share for 5 preferred shares. On March 25, 2004, the 35,000,000 issued and outstanding preferred shares were converted into 7,000,000 common shares. All share and per share amounts included in the selected consolidated data shown below have been adjusted to reflect the share consolidation.

"The following represents all equity shares, granted stock options and restricted share units outstanding and the number of common shares which the Company's equity subordinated debentures are convertible into as at November 4, 2004:" -0- *T Common Shares --------------------------------------------------------------------- Common Voting Shares outstanding 168,284,679 Convertible instruments and other: Outstanding granted employees and director's stock options 5,248,872 Outstanding granted employees and director's restricted share units 1,052,158 Convertible equity subordinated debentures 59,162 --------------------------------------------------------------------- 174,644,871 --------------------------------------------------------------------- --------------------------------------------------------------------- The following table contains financial information that is derived from our unaudited interim financial statements for the three and nine month periods ended September 30, 2004. Three months ended Nine months ended September 30, September 30, (in thousands of US $, except per share data) 2004 2003 2004 2003 $ $ $ $ --------------------------------------------------------------------- --------------------------------------------------------------------- STATEMENTS OF INCOME (LOSS) AND CASH FLOWS DATA: Revenues 328,929 257,217 908,746 689,298 Operating income 77,573 49,928 194,067 128,762 Interest expense, net (20,339) (24,183) (62,060) (68,849) Foreign exchange gain (loss) 1,278 (948) 617 4,000 Net gain on disposal of assets - 28 11,658 19,367 Income from continuing operations 20,674 3,075 50,264 21,423 Loss from discontinued operations - - - (8,811) Net Income 20,674 3,075 50,264 12,612 Basic earnings (loss) per share From continuing operations 0.14 0.03 0.38 0.22 From discontinued operations - - - (0.09) Net earnings 0.14 0.03 0.38 0.13 Diluted earnings (loss) per share From continuing operations 0.14 0.03 0.37 0.22 From discontinued operations - - - (0.09) Net earnings 0.14 0.03 0.37 0.13 Acquisitions of property plant and equipment 57,112 32,464 173,373 133,266 As at September 30, As at December 31, 2004 2003 (in thousands of US $) $ $ --------------------------------------------------------------------- --------------------------------------------------------------------- BALANCE SHEET DATA: Cash and cash equivalents, including restricted short-term investments of $28,1 million as of September 30, 2004 and December 31, 2003 257,317 224,822 Total assets 2,233,576 1,667,531 Long-term debt, including current portion 1,074,352 1,121,411 Total capital 1,919,589 1,327,574 Total shareholders' equity 734,559 91,773 --------------------------------------------------------------------- Summary of quarterly results Our operating results are subject to seasonal fluctuations that materially impact quarter-to-quarter operating results. Accordingly, one quarter's operating results are not necessarily indicative of what a subsequent quarter's operating results will be. In particular, this seasonality generally results in usage in the first quarter tending to be lower than in the rest of the year. Also in the first quarter, new customer acquisitions tend to be low which can result in reduced costs. Seasonal fluctuations also typically occur in the third quarter of each year because of higher usage in Romania and more roaming, as a result of the summer holidays, result in higher network revenue and operating profit. Furthermore, the fourth quarter typically has the largest number of subscriber additions and associated subscriber acquisition and activation related expenses, including marketing and promotional expenditures, which result in lower operating profits. (In thousands of U.S.$, Except Q3 Q2 Q1 Q4 per share data) 2004 2004 2004 2003 $ $ $ $ --------------------------------------------------------------------- --------------------------------------------------------------------- Revenues 328,929 301,397 278,420 277,787 Income (loss) from continuing operations 20,674 13,907 15,683 (727) Net income (loss) 20,674 13,907 15,683 (727) Basic earnings (loss) per share --------------------------------------------------------------------- From continuing operations 0.14 0.10 0.13 (0.01) From discontinued operations - - - - --------------------------------------------------------------------- Net earnings (loss) 0.14 0.10 0.13 (0.01) --------------------------------------------------------------------- Diluted earnings (loss) per share - --------------------------------------------------------------------- From continuing operations 0.14 0.10 0.13 (0.01) From discontinued operations - - - - --------------------------------------------------------------------- Net earnings (loss) 0.14 0.10 0.13 (0.01) --------------------------------------------------------------------- --------------------------------------------------------------------- (In thousands of U.S.$, Except Q3 Q2 Q1 Q4 per share data) 2003 2003 2003 2002 $ $ $ $ --------------------------------------------------------------------- --------------------------------------------------------------------- Revenues 257,217 232,163 199,918 196,461 Income (loss) from continuing operations 3,075 6,500 11,848 (8,405) Net income (loss) 3,075 6,500 3,037 (35,637) Basic earnings (loss) per share --------------------------------------------------------------------- From continuing operations 0.03 0.07 0.12 (0.08) From discontinued operations - - (0.09) (0.27) --------------------------------------------------------------------- Net earnings (loss) 0.03 0.07 0.03 (0.35) --------------------------------------------------------------------- Diluted earnings (loss) per share --------------------------------------------------------------------- From continuing operations 0.03 0.07 0.12 (0.08) From discontinued operations - - (0.09) (0.27) --------------------------------------------------------------------- Net earnings (loss) 0.03 0.07 0.03 (0.35) --------------------------------------------------------------------- --------------------------------------------------------------------- *T

Non GAAP measures and operating data

We believe that OIBDA, referred to by some other telecommunication operators as EBITDA, provides useful information to investors because it is an indicator of the strength and performance for our ongoing business operations, including our ability to fund discretionary spending such as capital expenditures and other investments and our ability to incur and service debt. While depreciation and amortization are considered operating costs under generally accepted accounting principles, these expenses primarily represent the non-cash current period allocation of costs associated with long-lived assets acquired or constructed in prior periods. Our OIBDA calculation is commonly used as one of the bases for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the wireless telecommunications industry. OIBDA has limitations as an analytical tool, and you should not consider it in isolation from, or as a substitute for, analysis of our results of operations, including our cash flows, as reported under GAAP. Some of the limitations of OIBDA as a measure are:

-- It does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

-- It does not reflect changes in, or cash requirements for, our working capital needs;

-- It does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;

-- Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and OIBDA does not reflect any cash requirements for such replacements;

-- It does not reflect foreign exchange gains or losses; and

-- Other companies in our industry may calculate this measure differently than we do, limiting its usefulness as a comparative measure.

We believe that average revenue per user ("ARPU") provides useful information concerning the appeal of our rate plans and service offerings and our performance in attracting and retaining high value customers. ARPU excludes equipment revenues, revenues from other wireless networks' customers roaming on our network and miscellaneous revenues. OIBDA and ARPU should not be considered in isolation or as alternative measures of performance under GAAP. Average number of subscribers for the period is calculated as the average of each month's average number of subscribers.

Proportionate financial figures and other operational data represent the combination of our ultimate proportionate ownership at the end of each period presented in each of its investees and are not intended to represent any measure of performance in accordance with generally accepted accounting principles. Equity interest figures represent our direct and indirect ownership interests in our operations. For a reconciliation of proportionate operating income to operating income, refer to the supplementary financial information filed with our interim financial statements.

The following tables provide a reconciliation between OIBDA and net income: -0- *T Three months ended Nine months ended OPERATING DATA FROM September 30, September 30, CONTINUING OPERATIONS (In thousands of U.S.$) 2004 2003 2004 2003 --------------------------------------------------------------------- --------------------------------------------------------------------- Net Income 20,674 3,075 50,264 12,612 Loss from discontinued operations - - - 8,811 Income taxes 17,488 13,180 44,614 38,675 Non - controlling interests 20,350 8,570 49,404 23,182 Net gain on disposal of assets - (28) (11,658) (19,367) Foreign exchange (gain) loss (1,278) 948 (617) (4,000) Interest expense, net 20,339 24,183 62,060 68,849 Depreciation and amortization 56,285 51,284 168,222 151,318 --------------------------------------------------------------------- OIBDA 133,858 101,212 362,289 280,080 --------------------------------------------------------------------- --------------------------------------------------------------------- The following tables provide a reconciliation between service revenues and ARPU for both MobiFon and Oskar Mobil: MobiFon Three months ended Nine months ended September 30, September 30, 2004 2003 2004 2003 --------------------------------------------------------------------- --------------------------------------------------------------------- Service revenues for the periods (in $ thousands) 183,319 144,127 493,354 384,374 Average number of subscribers for the period (in millions) 4.23 2.85 3.88 2.73 Average monthly service revenue per subscriber for the period (in $) 14.45 16.83 14.12 15.63 Less: impact of excluding in roaming and miscellaneous revenue (1.39) (1.39) (1.18) (1.19) --------------------------------------------------------------------- --------------------------------------------------------------------- ARPU 13.06 15.44 12.94 14.44 --------------------------------------------------------------------- Oskar Mobil Three months ended Nine months ended September 30, September 30, 2004 2003 2004 2003 --------------------------------------------------------------------- --------------------------------------------------------------------- Service revenues for the periods (in $ thousands) 130,900 99,920 371,539 271,167 Average number of subscribers for the period (in millions) 1.71 1.39 1.65 1.31 Average monthly service revenue per subscriber for the period (in $) 25.48 24.00 25.08 23.08 Less: impact of excluding in roaming and miscellaneous revenue (1.02) (0.95) (0.95) (0.84) --------------------------------------------------------------------- --------------------------------------------------------------------- ARPU 24.46 23.05 24.13 22.24 --------------------------------------------------------------------- Other selected operational data: Start-up Licensed Date of POPs Total Technology Operations (millions) Subscriber(1) --------------------------------------------------------------------- --------------------------------------------------------------------- Romania GSM 1997 21.7 4,369,745 Czech Republic GSM 2000 10.2 1,747,284 --------------------------------------------------------------------- --------------------------------------------------------------------- Total 31.9 6,117,029 --------------------------------------------------------------------- --------------------------------------------------------------------- Equity Equity POPs Equity Interest (millions) Subscribers --------------------------------------------------------------------- --------------------------------------------------------------------- Romania 79.0% 17.1 3,451,719 Czech Republic 27.1% 2.8 472,846 --------------------------------------------------------------------- --------------------------------------------------------------------- Total 19.9 3,924,565 --------------------------------------------------------------------- --------------------------------------------------------------------- (1) Subscriber figures include 2,904,257 and 943,016 prepaid subscribers in Romania and Czech Republic, respectively *T

Forward-looking Statements

This news release contains certain forward-looking statements concerning our future operations, economic performances, financial conditions and financing plans. These statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate in the circumstances. However, whether actual results and developments will conform with our expectations and predictions is subject to a number of risks, uncertainties and assumptions. Consequently, all of the forward-looking statements made in news release are qualified by these cautionary statements, and there can be no assurance that the results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to or effects on us and our subsidiaries or their businesses or operations. We undertake no obligation and do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable law.

For all of these forward-looking statements, we claim the protection of the safe harbour for forward-looking statements contained in the U.S. Private Securities Litigation Reform Act of 1995.

Conference Call

The conference call with analysts on the third quarter 2004 results will be made available via an audio web cast from TIW's Internet site. The web cast is scheduled to begin at 10:00 a.m. EST on Tuesday, November 9, 2004 (at www.tiw.ca). A replay of the conference call can also be heard between 12:00 p.m. on Tuesday, November 9 and 11:59 p.m. on December 7. To access the replay facility, dial (416) 695-5800 and you will be instructed to enter the access code: 3109326.

About TIW

TIW is a leading provider of wireless voice, data and short messaging services in Central and Eastern Europe with more than 6.1 million subscribers. TIW operates in Romania through MobiFon S.A. under the brand name Connex and in the Czech Republic through Oskar Mobil a.s. under the brand name Oskar. TIW's shares are listed on NASDAQ ("TIWI") and on the Toronto Stock Exchange ("TIW").

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