STOCKHOLM, Sweden, Aug. 13, 2002 (PRIMEZONE) -- Song Networks' revenues in the second quarter totaled SEK 559 million (US $61 million). This represents a 5% decrease over last quarter and an 11% increase compared to the same period of the previous year. Gross margin improved by 65 basis points, from 40.1% in the first quarter of 2002 to 40.7% or by 1,000 basis points from the same period the previous year. Adjusted sales, general and administration costs (SG&A) 1) improved to 47% of revenues or to SEK 261 million (US $28 million) during the second quarter from 48% or from SEK 284 million (US $31 million) the previous quarter. Adjusted SG&A was 62% of revenues or SEK 314 million (US $34 million) during the second quarter in 2001.
The Company has taken the decision to further reduce SG&A gradually, to reach a level of SEK 230 million (US $25 million) by the first quarter of 2003. Adjusted EBITDA 2) was -6% or SEK -33 million (US $-4 million) compared to -8% or SEK -47 million (US $5 million) in the first quarter of 2002 and -32% or SEK -159 million (US $17 million) in the second quarter of 2001. The Company added 1,368 directly connected sites 3) during the quarter totalling 12,989 in all. At the end of the quarter, the number of corporate customers was 21,721, of which 6,644 were directly connected. Direct revenues 4) increased to 56% of total revenues in the second quarter of 2002 compared to 53% in the first quarter of 2002 or 44% the second quarter 2001. Revenues from data and internet services 5) increased to 42% from 38% of total revenues previous quarter. Due to the adoption of new accounting rules an impairment charge of SEK 1,147 million (US $125 million) has been recorded for goodwill. In addition an impairment charge of SEK 416 million (US $45 million) was recorded pertaining to construction in progress, for a total impairment charge of SEK 1,563 million (US $170 million). The business combination agreement that Song Networks entered into with Telenor Business Solutions Holding AS on July 9 was terminated on August 13. The termination of the business combination agreement with Telenor resulted from the lack of support of an ad hoc committee of bondholders of Song Networks regarding the restructuring terms resulting from the agreement, as well as the committee's positive view regarding Song Networks restructuring potential. Song Networks and the committee are considering a number of potential restructuring alternatives and Song Networks will make further announcements regarding its restructuring as appropriate.
Song Networks expects to complete a restructuring, conclude an Extraordinary General Meeting and close these transactions by the end of October 2002. On August 1, 2002, Song Networks announced that its wholly owned subsidiary Song Networks N.V. would not make the interest coupon payment scheduled on August 1, 2002 on the EUR 175 million 12?% Senior Notes due 2008. During the restructuring process, and assuming Song Networks does not make payment on any of its bonds, the Company believes that its existing operating cash resources will suffice until the end of 2002.
Song Networks Holding AB ("Song Networks" or the "Company"), formerly Tele1 Europe Holding AB (Stockholmsborsen:SONW) (Nasdaq:SONW), the leading pan-Nordic competitive provider of broadband communications services, today reported second quarter financial and operating results. Commenting on the results, Tomas Franzen, Chief Executive Officer, said: "The operations are continuing to develop in the right direction. A continued focus on high margin services, data and direct revenues, in combination with measures taken to reduce our costs, will secure an adjusted EBITDA break-even in the end of the fourth quarter, 2002".
Financial Highlights:
-- Second quarter revenues totalled SEK 559 million (US $61
million). This represents a 5% decrease over last quarter but
an 11% increase of revenues from the same period during
previous year.
-- Direct revenues totalled SEK 314 million (US $34 million) in the
second quarter, up from SEK 311 million (US $34 million) in the
first quarter of 2002 and represented 56% of total revenues
in the second quarter, compared to 53% in the previous quarter.
-- Revenues from data and internet services totalled SEK 232 million
(US $25 million) or 42% of total revenues in the second quarter,
compared to 38% in the previous quarter.
-- Gross margin improved to 40.7% in the second quarter compared to
40.1% previous quarter.
-- Adjusted sales, general and administration costs (SG&A) improved to
47% or SEK 261 million (USD 28 million) in the second quarter
of 2002, from 48% or SEK 284 million (USD 31 million) in the
previous quarter.
-- Adjusted EBITDA margin improved to -6% or SEK -33 million (US $-4 million) in the second quarter. Adjusted EBITDA margin in the
first quarter was -8% or SEK -47 million (US $-5 million).
-- EBITDA was SEK 92 million (USD 10 million) which was due to an
unrealized foreign exchange gain of SEK 146 million (US $16 million).
EBITDA was SEK 72 million (USD 8 million) in the first quarter
of 2002.
As of June 30, 2002, the Company had approximately SEK 394 million (US $43 million) in cash and cash equivalents (including other securities, restricted cash and used credit facility), as compared to SEK 917 million (US $100 million) as of March 31, 2002. Song Networks has access to a credit facility of a maximum of SEK 300 million (US $33 million), of which SEK 70 million (USD 8 million) has been used as per June 30, 2002. The total amount that can be borrowed pursuant to this credit facility, which is secured by Song Networks' receivable, is limited to 65% of our receivables not older than 60 days. As of August 8, 2002, the Company had SEK 304 million (USD 33 million) in cash and cash equivalents (including other securities, restricted cash and used credit facility of SEK 105 million (USD 11 million)). In addition the Company has sold net operating losses (NOLs) from Song Networks AB amounting to SEK 2,180 million (USD 237 million) for SEK 150 million (USD 16 million) for which payment is expected in the end of September 2002.
Due to the adoption of new accounting rules an impairment charge ofSEK 1,147 million (USD 125 million) has been recorded for goodwill. Inaddition an impairment charge of SEK 416 million (USD 45 million) wasrecorded pertaining to construction in progress, for a total impairmentcharge of SEK 1,563 million (USD 170 million).
The Company has during the second quarter of 2002 repurchased an additional 8.8% of its outstanding bonds for SEK 67 million (US $7million). The Company has during the first and second quarter of 2002repurchased a total of 17% of its outstanding bonds for a total of SEK139 million (US $15 million). In the second quarter the cash effect ofthe repurchase was SEK -83 million (US $-9 million) plus accruedinterest of SEK -20 million (US $-2 million).
The Company expects to be adjusted EBITDA break-even in the end ofthe fourth quarter 2002 and expects full year 2002 revenues of SEK 2.3-2.4 billion (US $250-260 million).
Operational Highlights:
The Company added 238 fiber sites during the quarter resulting in atotal of 1,582 fiber sites connected to its fiber network throughoutSweden, Norway, Finland and Denmark.
Directly connected customers increased by 306 to 6,644 during thesecond quarter of 2002.
Directly connected sites increased by 1,368 to 12,989 during thesecond quarter, while the total number of sites connected through DSLincreased by 670 to 5,722.
The Company increased the number of active IP/VPN sites to approximately 2,900 versus 2,300 in the previous quarter.
In April 2002, Song Networks signed an agreement with BiliaPersonbilar Region Vast AB to supply a full range of telephony services.The two-year agreement has an initial estimated value of SEK 5 million(US $0.5 million).
In May 2002, the consultancy company, Asplan Viak, chose SongNetworks as supplier of a uniform communications network for its 15branch offices in Norway. Song Networks will supply Asplan Viak with anIP/VPN solution. The agreement has a term of 2 years and an estimatedvalue of SEK 3.9 million (US $0.4 million).
On May 29, 2002, Song Networks announced that Song Networks AS,Song Networks' Norwegian subsidiary, had signed a 5-year contract forthe operation of Visma Provider's ASP platform. The parties have alsosigned a framework agreement for the supply of infrastructure andcommunication services for a period of 3 years. With the growth thatVisma Provider is anticipating, the value of the contract comes toaround SEK 49 million (US $5 million).
On June 3, 2002, Song Networks announced that Song Networks AB, theSwedish subsidiary, had signed a 2 year-contract for the supply of datacommunication to the Swedish Customs Office. The solution comprises 81IP/VPN ports divided between 73 offices. The contract is worthapproximately SEK 13 million (US $1.4 million).
On June 6, 2002, Song Networks announced that Song Networks AB, theSwedish subsidiary, had signed an agreement with Scandic Hotelsregarding supply of data communications. The value of the agreement isapproximately SEK 30 million (US $3 million) over 3.5 years. Theagreement is Song Networks' largest agreement involving datacommunications in Sweden.
On June 19, 2002, Song Networks announced that, together with itssubsidiary Song Networks AB as subcontractor Tele Danmark InterNordiahas received an order from Sweco AB for delivery of a group-widetelephony solution for both fixed and mobile telephony. It is a 5-yearcontract, and the deal is worth SEK 20 million (US $2 million) each forTele Danmark InterNordia and Song Networks.
On June 26, 2002, Song Networks announced that Song Networks A/S inDenmark and the Danish listed company Jysk (formerly known as JyskSengetoejslager A/S) had signed a deal for 3 years. Adding to 178locations throughout Denmark and Sweden connected earlier this year,Jysk has ordered 51 locations in Norway and 30 in Finland to beconnected by a data communications network provided by Song Networks.
In April Customer care of Song Networks in Finland was chosen HelpDesk of the Year 2002 by the Nordic Help Desk Institute.
On June 25, 2002, Song Networks announced organisational changes inSweden and in Norway for an additional focus on synergies and to gainfurther efficiency within the Group.
On June 20, 2002, Song Networks announced a change of Boardcomposition. Lars Windfeldt stepped down as Chairman and resigned fromthe Board of Song Networks Holding AB and was replaced by Lars Gronberg.
The Annual General Meeting of Song Networks Holding AB was held onApril 17.
Subsequent Events:
On July 9, 2002, Song Networks announced that Telenor BusinessSolutions Holding AS and Song Networks Holding AB had entered into abusiness combination agreement as part of an overall financialrestructuring of the Song Networks Group, whereby Song Networks wouldissue new shares and a convertible bond to Telenor Business SolutionsHolding AS in exchange for the contribution of the Telenor BusinessSolutions AB business together with a cash balance of SEK 550 million(US $60 million).
On August 1, 2002, Song Networks announced that its wholly ownedsubsidiary Song Networks N.V. would not make the interest coupon paymentscheduled on August 1, 2002 on the EUR 175 million 12?% Senior Notes due2008.
On August 12, 2002, the Board of Song Networks Holding AB decidedto delist the Company's ADRs from Nasdaq.
On August 12, 2002, the Company sold Net operating losses from SongNetworks AB amounting to SEK 2,180 million (US $237 million) for SEK 150million (US $16 million).
On August 13, 2002, Song Networks terminated the business combination agreement that was signed on July 9. "Adjusted" SG&A is defined as SG&A before provisions for social security fees and compensation expense related to employee stock options and non-recurring restructuring charges. The non-recurring restructuring charges amounted to SEK 10 million (US $1 million) for Q2 2002. The Company did not have any non-recurring restructuring charges during Q1 2001 or Q1 2002. Non-recurring restructuring charges totalled SEK 19 million (US $2 million) for Q2 2001, which amount was included in SG&A.
In addition non-recurring restructuring charges of SEK 108 million (US$11.7 million) in Q3 2001 and SEK 56 million (US $6 million) in Q4 2001were recorded as items affecting comparability and were thus excludedfrom SG&A.
With new SEC guidance effective as of previous quarter, we also give thefollowing information: SG&A was SEK 261 million (US $28 million) or 47%of total revenues for the second quarter of 2002, as compared to SEK 330million (US $36 million) or 66% of total revenues for the second quarterof 2001. SG&A totalled SEK 259 (US $28 million) for Q1 2001, SEK 350million (US $38 million) in Q3 2001, SEK 350 million (US $38 million)for Q4 2001, SEK 283 million (US $31 million) for Q1 2002.
Song Networks defines EBITDA as earnings (loss) before interest, income taxes, depreciation and amortization. "Adjusted" EBITDA is defined as EBITDA before provisions for social security fees and compensation expense related to employee stock options, non-recurring restructuring charges, foreign exchange gains and losses, and all other reported as Other income/ expense. EBITDA was SEK 92 million (US $10 million), or 17% of total revenues for the second quarter of 2002, as compared to SEK -191 million (US $-21 million) or -38% for the second quarter of 2001. With new SEC guidance effective as of previous quarter, we also give the following information: EBITDA totalled SEK -77 million (US $-8 million) for Q1 2001, SEK -253 million (US $-27 million) in Q3 2001, SEK -137 million (US $-15 million) for Q4 2001 and SEK 72 million (US $8 million) for Q1 2002. A "site" is defined as a customer connection/ office. Direct revenues include on-net revenues, hosting revenues and revenues from leasing capacity to corporate customers. Revenues from data and internet services include hosting revenues and revenues from leasing capacity to corporate customers.
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