Published: 2007-02-08 07:30:01 CET
Elisa Oyj - Quarterly report
ELISA'S FINANCIAL STATEMENTS FOR 2006
ELISA CORPORATION STOCK EXCHANGE RELEASE 08.02.07 AT 8.30 am

ELISA'S FINANCIAL STATEMENTS FOR 2006

Year 2006

Revenue increased by 14% to EUR 1,518 million in 2006

Excluding non-recurring items, both EBITDA improved to EUR
445 million (346) and pre-tax profit to EUR 222 million (112)

Profit before taxes amounted to EUR 212 million (212)

Earnings per share was EUR 0.97 (1.22)


October-December 2006

Revenue increased by 17 per cent to EUR 401 million (343)

Excluding non-recurring items, both EBITDA improved to EUR
119 million (89) and pre-tax profit to EUR 70 million (27)

Profit before taxes amounted to EUR 69 million (33)

Revenue per subscription (ARPU) in the mobile network
improved slightly from the previous quarter’s EUR 30.5 to 
EUR 30.8. Churn increased from 11.7 to 14.0 per cent

The number of mobile subscriptions continued to increase
during the fourth quarter, due in part to the new 3G service
bundles

The number of broadband subscriptions increased by
approximately 17,000 on the previous quarter.

The financial position remained stable: the equity ratio at
the end of December stood at 63 per cent (62) and net debt at 
EUR 377 million (293)

Key indicators were as follows:

Income statement      10-12/2006 10-12/2005   1-12/2006   1-12/2005
EUR million                         
Revenue                      401        343       1,518       1,337
EBITDA                    118 1)      95 2)      434 3)      446 4)
EBIT                          70         38         225         233
Profit before taxes           69         33         212         212
Earnings per share, EUR     0.31       0.18        0.97        1.22
Capital expenditures          70         71         207         204

EBITDA excluding non-recurring items: 1) EUR 119 million, 2) EUR
89 million, 3) EUR 445 million, 4) EUR 346 million

Figures describing the financial position and cash flow:

Financial position              31 Dec 2006 31 Dec 2005
Net debt                                377         293
Equity ratio, %                        63.1        61.7
                                                       
Cash flow statement               1-12/2006   1-12/2005
Cash flow after investments             118         308

The Board of Directors will propose to the General Meeting that a
dividend of EUR 0.50 per share plus an extra dividend of EUR 1.00
per share, which totals EUR 1.50 per share, be distributed for
2006. This corresponds to 152 per cent of the profit for the
financial period. The Board of Directors also decided to apply to
the General Meeting for authorisation to buy back 8 million
treasury shares, which accounts for 5 per cent of total shares.
The Group has specified the following medium-term capital
structure objectives: net debt to EBITDA of 1.5-2 and gearing of
50-100 percent. The purpose of these proposals is to improve the
efficiency of capital structure significantly. The parent
company’s distributable proceeds at year-end amounted to EUR 574
million.

CEO Veli-Matti Mattila:

“The year 2006 was outstanding.

Elisa’s success last year within both the broadband market and
mobile communications was excellent. In Finland, we strengthened
our leading position in the broadband market as the number of
subscriptions increased by approximately one fifth. Success in
mobile communications also furthered Elisa’s success in the 3G
service bundles market.

During the last quarter, the number of broadband subscriptions
grew by approximately 17,000. We expanded our broadband offering
by introducing, among other things, the Viihdekaista entertainment
service that offers Canal Digital TV and movie services as well as
video rentals.

The popularity of the 3G service bundles contributed significantly
to the development of the wireless information society. Once
service bundles were permitted in the beginning of April, the
handset base started to renew rapidly. According to our estimate,
Finns had approximately 350,000 3G service bundles by the end of
the year. New handsets also brought about an increase in the use
of new services.

Elisa’s revenues grew 14% during the year and the result improved
clearly. Thanks to all Elisa employees for their contribution to
this successful result, for which a total bonus of EUR 6 million
will be transferred to the personnel fund.

The significant difference between interconnection fees applied by
different operators distorts competition on the mobile
communication markets. The Finnish Communications Regulatory
Authority’s (FICORA) view of harmonising unequal interconnection
fees is correct, and it is good that the authority has taken
measures to this effect. There is a trend towards equal fees also
within the EU.

By order of the Finnish Communications Regulatory Authority, the
frequencies assigned to operators have been equally distributed as
of the beginning of the year. This decision also supports
harmonised interconnection fees. It would be just in terms of
competition and fair to customers to migrate directly to equal
fees and record this as a principle in legislation. “

ELISA CORPORATION

Vesa Sahivirta
Director, IR and Financial Communication

Further information:

Mr Veli-Matti Mattila, President and CEO, tel. +358 10 262 2635
Mr Jari Kinnunen, CFO, tel. +358 10 262 9510
Mr Vesa Sahivirta, Director, IR and Financial Communication, 
tel. +358 10 262 3036

Distribution:

Helsinki Stock Exchange
Principal Media


Financial report 1 January to 31 December 2006

The financial report has been prepared in accordance with the IFRS
recognition and measurement principles.

Market situation

The base of mobile communications terminals has evolved favourably
in Finland with 3G handsets comprising a significant proportion of
new terminals. Permitted since the beginning of April, the new 3G
service bundles clearly intensified the service competition. The
bundles, which offer new services, were highly popular. The number
of Elisa mobile network subscriptions showed a positive
development, and usage of subscriptions increased.

The fixed network business continued its earlier trend: the number
of broadband subscriptions continued to grow, while the number and
usage of traditional subscriptions decreased.

Development of revenue, earnings and financial position

EUR million                             2006       2005       2004
Revenue                                1,518      1,337      1,356
EBITDA*                                  434        446        455
EBITDA, %*                              28.6       33.4       33.6
EBIT*                                    225        233        242
EBIT, %*                                14.8       17.4       17.8
Return on equity, %                     12.1       15.9       19.2
Equity ratio, %                         63.1       61.7       49.3

* Figures excluding non-recurring items:
EBITDA 2006 EUR 445 million, 2005 EUR 346 million and 2004 EUR
441 million
EBITDA, % 2006 29.3%, 2005 25.9% and 2004 32.5%
EBIT, 2006 EUR 236 million, 2005 EUR 133 million, 2004 228 million
EBIT, % 2006 15.5%, 2005 9.9% and 2004 16.8%

Revenue development by segments:

                                  Financial statements
EUR million                        1-12/2006  1-12/2005
Mobile communications                    930        740
Fixed network                            665        671
Other businesses                           0         38
Inter-segment sales                      -77       -112
Total                                  1,518      1,337

Earnings development by segment:

                        Financial statements    Excluding non-
                                                recurring items
EUR million             1-12/2006  1-12/2005 1-12/2006* 1-12/2005**
Mobile communications                                             
 EBITDA                       259        220        263         190
 EBITDA, %                     28         30         28          26
 EBIT                         162        130        166         100
Fixed network                                                     
 EBITDA                       181        160        187         156
 EBITDA, %                     27         24         28          23
 EBIT                          71         45         77          41
Other business and                                                
corporate functions                                               
 EBITDA                        -6         66         -6           0
 EBIT                          -7         58         -7          -8
Total                                                             
 EBITDA                       434        446        445         346
 EBITDA, %                     29         33         33          26
 EBIT                         225        233        236         133

* Provision for reorganising operations, EUR -10 million
* Capital gain on the divestment of Yomi Software, EUR 4 million;
compensations for damage in interconnection traffic, EUR 28
million; capital gain on real estate, EUR 15 million; capital gain
on the disposal of Comptel shares and the related impact on
earnings, EUR 40 million; IFRS adjustment relating to the transfer
of pension liabilities, EUR 13 million; provision for reorganising
operations, EUR -6 million; and capital gain on the sale of
Estera, EUR 6 million.

The Group’s revenue increased by 14 per cent. The growth was
positively affected by increased 3G mobile terminal sales,
increased use of mobile communications services, growth of the
broadband business, as well as Elisa’s acquisition of Saunalahti
and the increase in traffic arising from Saunalahti subscriptions
(Saunalahti was consolidated with Elisa's financial statements as
of 1 November 2005).

The Group’s EBITDA was EUR 434 million (446). EBITDA excluding non-
recurring items was EUR 445 million (346), representing an
increase of 29 per cent on the previous year. The improvement in
EBITDA was affected by synergy benefits from the Saunalahti merger
and business efficiency measures.

The Group’s financial income and expenses totalled EUR -14 million
(-22). The financial income also included the share of the
associated companies’ results, EUR 0.1 million (1.2). The
financial items in the income statement for the fourth quarter of
the year include a financial gain of EUR 2.6 million from the sale
of bad debt receivables.

Income taxes in the income statement amounted to EUR -50 million 
(-34).

The Group’s January-December result after taxes was EUR 161
million (178). The group’s earnings per share (EPS) amounted to
EUR 0.97 (1.22). At the end of 2006, the Group’s equity per share
was EUR 8.07 (8.06 at the end of 2005).

Changes in corporate structure

On 28 March 2006, Elisa deposited a security, as referred to in
Chapter 14, Section 21 of the Companies Act, with regard to
Saunalahti Group Oyj’s shares that are to be redeemed. This
increased Elisa’s holding in Saunalahti to 100 per cent and ended
the public quotation of Saunalahti shares.

In accordance with the terms of Elisa’s Saunalahti deal as
determined by the Finnish Competition Authority, Saunalahti sold
the Saunaverkko network required for the implementation of
broadband services and its customer contracts in the Tampere,
Jyväskylä and Riihimäki regions. Saunalahti also sold the
Saunaverkko network without customer contracts in the Helsinki
region.

In June, Elisa offered to buy all the shares in Lounet Oy, paying
EUR 1,310 per share certificate for 1,000 shares in Lounet Oy. In
addition, the General Meeting of Lounet Oy held on 19 June 2006
decided to pay a dividend of EUR 0.09 per share for 2005. The
total value of the bid was approximately EUR 14 million, of which
EUR 9.2 million was realised. The offer began on 21 June 2006 and
ended on 31 December 2006. Elisa’s shareholding in Lounet Oy was
80.2 per cent at that time.

Tikka Communications Oy and Jyväsviestintä Oy merged with Elisa as
of 1 July 2006.

In September, Elisa sold the entire stock of Elisa
Mobiilsideteenused As to its Estonian subsidiary Elisa
Andmesideteenused As. Elisa Mobiilsideteenused As merged into
Elisa Andmesideteenused As at the end of 2006.

Elisa sold the television business of the local channel TV
Jyväskylä that operated in Elisa’s cable TV network in the
Jyväskylä region to TV Jyväskylä Ky through an agreement signed on
8 September 2006.

Mobile communication business

                        31.12.2006  31.12.2005
Total number of                             
subscriptions 
(Finland and Estonia)    2,488,900   2,228,100
- Elisa’s network                           
operator in Finland      2,194,400   1,962,100
- Subscriptions in         294,500     266,000
Estonia

                      10-12/2006  10-12/2005  1-12/2006  1-12/2005
Revenue/subscription**
(ARPU),e                    30.8        30.4       30.2       32.5
Churn**, %                  14.0        22.6       13.8       28.4
Usage, million minutes*    1,330       1,070      4,888      3,509
Usage,                        
min/subscription/month**     213        180         203        172
SMS, million msg*            336        275       1,193        827
SMS,                          
msg/subscription/month**      54         40          50         38
Value-added                    
services/revenue, %           17         17          17         16

* Elisa's network operator in Finland (the 2005 figures partly
include Saunalahti subscriptions)
** Elisa's service operator in Finland (the 2005 figures excluding
Saunalahti)

Elisa’s network operators in Finland increased the number of its
subscriptions by some 230,000 subscriptions during the year. The
increase was markedly due to lively demand for 3G subscriptions
and an increase in prepaid subscriptions. The number of
subscriptions at the end of 2006 was approximately 2,200,000. The
fourth-quarter increase was approximately 30,000 subscriptions.

The call minutes per subscription of Elisa’s own service operators
rose by approximately 18 per cent and the number of SMS messages
increased by approximately 32 per cent on the previous year. The
call minutes per subscription only include outgoing traffic.

The call minutes of the network operator rose by 39 per cent and
SMS messages by 44 per cent. The increased volume of traffic was
due to additional traffic brought by Saunalahti, among other
things.

Revenue per subscription (ARPU) decreased by approximately 7 per
cent on the previous year. This was due to a fall in average
prices per minute and a reduction in interconnection fees in June
2006. The increased usage per subscription failed to completely
compensate for the decrease due to price erosion and
interconnection fees.

In March, Elisa introduced a new pricing model for the use of
wireless services, which is based on a monthly fee system similar
to broadband subscriptions.

Elisa was the first operator in the Nordic region to open its
HSDPA network, tripling the speeds of connections in the mobile
phone network. The speed of the network is 1 Mbit/s. Elisa also
launched its HSDPA network in Tallinn and Pärnu, Estonia in July.

Elisa's 3G network covers approximately 65 cities in Finland, 
the total coverage being approximately 40 per cent of the 
population.

As of 20 September, 2006, Elisa launched the most comprehensive
mobile TV service in Finland for its 2G and 3G customers. The
service provides access to eight different TV channels.

Elisa revised the international roaming pricing of its mobile
calls and SMS messages as of 1 January 2007, harmonising the
pricing of calls and SMS messages its customers make or receive
abroad. In the new pricing model, calls made or received abroad
are divided into different zones, each with two price categories.
One price category is for calls on the preferred operator’s
network, and another for calls on the networks of other operators.

The Finnish Regulatory Authority has issued new decisions of
significant market power affecting interconnection fees. Elisa's
obligations remain unchanged in this regard. In accordance with
the new decision, Saunalahti changed its mobile interconnection
fee as of 1 June 2006, to 8.4 cents per minute (previously 11
cents per minute), which corresponds to Elisa’s mobile
interconnection fee. The change is based on Saunalahti’s
operations being part of Elisa’s business operations. Furthermore,
FICORA is currently investigating the regulatory compliance of
declining traffic pricing.

In May, Elisa agreed on new mobile interconnection fees with
TeliaSonera Finland. As of 1 January 2007, the mobile
interconnection fee charged by Elisa will be 7.25 cents per minute
(previously 8.4 cents per minute). However, not all the
negotiations between the operators have been concluded.

In December 2006, the Finnish Communications Regulatory Authority
published its view on the development of interconnection fees
between mobile operators. FICORA’s view extends to 2009 and
comprises annual minimums and maximums for interconnection fees.
FICORA demands reductions in the price level and narrowing of
price differences. Its intention is also to support commercial
negotiations between businesses in order to reduce declining
traffic prices. FICORA will decide on the maximum allowed price
for declining traffic if the parties are unable to reach an
agreement on interconnection fees.

The success of Elisa’s subsidiary in Estonia continued. Revenue
increased to EUR 102.9 million (88.1), EBITDA to EUR 32.6 million
(27.9) and EBIT to EUR 22.5 million (18.5). The number of
subscriptions stood at 294,500 (266,000) at the end of 2006.

Fixed network business

Number of subscriptions         31 Dec 2006 31 Dec 2005  Change, %
Broadband subscriptions             496,300     420,500         18
ISDN channels                        76,200     128,700        -41
Cable TV subscriptions              226,000     214,100          6
Analogue and other                  
subscriptions                       521,100     578,000        -10
Subscriptions, total              1,319,600   1,341,800         -2

The demand for Elisa's broadband subscriptions continued briskly
throughout 2006. The number of subscriptions showed an increase of
18 per cent on the previous year. The fourth-quarter increase in
broadband was approximately 17,000 subscriptions. Elisa continued
as the Finnish broadband market leader.

The number of traditional subscriptions continued to decrease as
voice calls shifted to the mobile communication network and data
transfers to broadband subscriptions.

Elisa continued its investments targeted at increasing the speeds
of the fixed broadband network and enabling the company to offer
new services.

Elisa launched a broadband bundle that includes a broadband
subscription and a laptop computer.

Elisa decided to phase out its public phones by 30 September 2007.

Cisco Systems granted Elisa two awards during the year: in May,
Elisa received the IP Communications Specialization certificate
for its role as an expert partner in IP-based communications
solutions, and in December a certificate for its expertise in
wireless solutions. Elisa was also the first Finnish company to
receive Cisco’s Advanced Technology Partner (ATP) certificate,
which Cisco grants to selected partners for their excellent
performance in the sale, design, installation or maintenance of IP-
based communications solutions, or for their prominent role in
innovative projects.

Personnel

Elisa employed 4,086 people on average in 2006 (2005 average 4,989
people and 2004 average 5,590 people). Wages and salaries in 2006
totalled EUR 173 million (2005 EUR 194 million, 2004 EUR 212
million).  At the end of 2006, the number of personnel was 3,592
(4,681).

Personnel by segments:
                               31 Dec 2006 31 Dec 2005 31 Dec 2004
Mobile communications                1,329       1,629       1,477
Fixed network                        2,224       3,001       3,015
Other business operations                -           -         814
Corporate functions                     38          51          70
Total                                3,592       4,681       5,376

Reorganisation of operations within Elisa continued in 2006.
Elisa transferred 134 people from its telemarketing operations to
Manpower Business Solutions Oy, and 119 people transferred from
Elisa’s order processing and invoicing to Barona Oy.

The number of personnel in Elisa’s Business Customers unit
decreased by 182, partly through voluntary resignation and partly
as a consequence of statutory labour negotiations.

The sales of business operations associated with customer
installations, maintenance and financial management entered into
force on 1 September 2006. As a consequence of the transactions,
337 people transferred from Elisa to Relacom Finland Oy, and 32
people transferred to Pretax BSP OY.

On 1 January 2007, Elisa outsourced field operations associated
with customer installations and maintenance in Central Finland,
Northern Savo and Northern Karelia to Daxtum Oy, transferring 47
employees.

A total bonus of EUR 6 million will be transferred to the
personnel fund.

In March, Elisa’s Board of Directors decided on a new share-based
incentive system for key personnel. The potential reward from the
system is based on the overall returns on Elisa shares from 2006
to 2008 and will be paid in 2008 and 2010 partly in company shares
and partly in cash.

Investments

EUR million                       1-12/2006  1-12/2005   1-12/2004
Capital expenditures, of which          207        204         182
- mobile communication business          78         86          68
- GSM leasing liability buy-backs         2          4          20
- fixed network business                127        112          88
- others                                             2           6
Shares                                   10        415          61
 - of which obtained through an                           
exchange of shares                                 361          47 
Total                                   218        619         243

The Group’s depreciations were EUR 209 million (213).

Financial position

Elisa's financial position and liquidity remained stable. Cash
flow after investments amounted to EUR 118 million (308).

In October, Standard & Poor’s Ratings Services confirmed the
credit rating of Elisa’s long-term debt at the current level of
BBB. The outlook for the credit rating changed from negative to
stable. Elisa’s short-term rating increased from A-3 to A-2.

Financial key indicators:
EUR million                     31 Dec 2006 31 Dec 2005
Net debt                                377         293
Gearing, %                             28.7        21.7
Equity ratio, %                        63.1        61.7
                                                       
                                  1-12/2006   1-12/2005
Cash flow after investments             118         308

Valid financing arrangements:
EUR million                       Maximum  In use on 31 
                                   amount      Dec 2006 
Committed credit line                 170             0
Commercial paper programme 1)         150             0
EMTN programme 2)                   1 000           316

1) The programme is not committed
2) European Medium Term Note programme, not committed.

Long-term credit ratings:

Credit rating agency                  Rating    Outlook
Moody’s Investor Services               Baa2     Stable
Standard & Poor’s                        BBB     Stable

Shares

At the end of the year, Elisa’s total number of shares was
166,066,016 (166,066,016), all within one share series. The market
capitalisation at the end of the year stood at EUR 3,360 million
(2,596). The market capitalisation grew by 29% during the year.

In 2006, a total of 247 million (248) Elisa shares were traded on
the Helsinki Stock Exchange for an aggregate of EUR 4,218 million
(3,464). The exchange was 153 per cent (172) of the number of
shares on the market. Shareholdings in the nominee register grew
from 42 per cent to 47 per cent.

All 379,800 shares not transferred to the book entry system that
were held in a joint book-entry account were sold on behalf of
their owners on the Helsinki Stock Exchange in accordance with the
Companies Act.

Elisa did not have any valid warrants at the end of 2006.

Treasury shares

Between 27 October and 4 December 2006, Elisa acquired 4,000,000
treasury shares through the Helsinki Stock Exchange at an average
price of EUR 19.85. The aggregate acquisition price is
approximately EUR 79.4 million. Following the acquisitions, the
company holds 4,000,000 Elisa shares. Furthermore, the subsidiary
Lounet Oy holds 125,000 Elisa shares (180,000 at the end of 2005).

At the end of the year the total number of Elisa shares owned by
Group companies was 4,125,000 (180,000 at the end of 2005). The
nominal value of the shares totalled approximately EUR 79.4
million, and their proportion of the share capital and voting
rights was 2.48 per cent.

Research and development

The Group invested EUR 6 million in research and development in
2006 (EUR 8 million in 2005 and EUR 17 million in 2004),
corresponding to 0.4 per cent of revenue (0.6 per cent in 2005 and
1.3 per cent in 2004). Due to structural changes, the figures are
not comparable with previous years.

Focal points for research included the development of a service-
oriented electronic market, digitalisation of customer operating
environments and new operating patterns, mobile TV and community
communications services, as well as ubiquitous computing (ubicom).
Research was intensely networked with national and international
industry players. Development operations were focused on new IP-
based mobile communication and broadband network solutions, as
well as new services aimed at businesses and consumers.

Elisa’s General Meeting of Shareholders

Elisa’s Annual General Meeting decided on 27 March 2006 to pay a
dividend of EUR 0.70 per share for 2005. The number of the members
of the Board of Directors was confirmed at five (5), and the
following members were re-elected for the ensuing term, ending at
the close of the next Annual General Meeting: Mika Ihamuotila,
Pekka Ketonen, Lasse Kurkilahti, Matti Manner and Ossi Virolainen.

KPMG Oy Ab, authorised public accountants, with APA Pekka Pajamo
as the responsible auditor, was appointed the company’s auditor.

The Board of Directors’ authorisations

The Annual General Meeting approved the Board of Directors’
proposal authorising the Board of Directors to decide on
increasing the company’s share capital. The authorisation is valid
for one year. A maximum aggregate of 33.2 million of the company’s
shares can be issued, and the company’s share capital can be
increased by a maximum of EUR 16,600,000 in total.

The Annual General Meeting approved the Board of Directors’
proposal concerning the authorisation to acquire and assign
treasury shares. The authorisation applies to a maximum of
16,000,000 treasury shares.

Significant legal issues

The court ruling dismissing the action for annulment of the
decision to increase the share capital made at the former Oy
Radiolinja Ab’s General Meeting of Shareholders in spring 2000 has
become final. The redemption price concerning 325 Radiolinja
shares is still pending. The demands for increasing the redemption
price are mainly based on the above mentioned action for annulment
that was resolved in favour of Elisa. A court of arbitration set
the redemption price for Radiolinja’s shares at EUR 7,904.83 in
2001.

On 8 May 2006, a court of arbitration set the redemption price for
Tikka Communications Oy’s shares at EUR 1,940 per share. The total
redemption price was approximately EUR 700,000.

On 16 May 2006, a court of arbitration set the redemption price
for Saunalahti Group Oyj’s shares at EUR 2.56 per share, which
corresponds to a total redemption price of approximately 
EUR 9.8 million.

With regard to suspected securities market offences concerning
Jippii Group in 2001, Elisa’s subsidiary Saunalahti Group Oyj
(formerly Jippii Group) has been issued a demand for a fine of 
EUR 800,000 and a forfeiture of approximately EUR 215,000.

The Finnish Competition Authority is conducting an investigation
into Elisa concerning the pricing of broadband subscriptions in
2003–2006.

Substantial risks associated with Elisa’s operations

Risk management is part of Elisa’s internal auditing system. It
aims at ensuring that risks affecting the company’s business are
identified, influenced and monitored. The company classifies risks
into strategic, operational, insurable and financial risks.

Strategic and operational risks

The telecommunications industry is under intense competition in
Elisa’s main market areas, which may have an impact on Elisa’s
business. The telecommunications industry is subject to heavy
regulation. Elisa and its business are monitored and regulated by
several public authorities. This regulation also affects the price
level of some products and services offered by Elisa.

The rapid developments in telecommunications technology may have a
significant impact on Elisa’s business.

Elisa’s main market is Finland, where the number of mobile phones
per inhabitant is high, so the overall market for mobile
subscriptions in Finland cannot grow significantly. Furthermore,
the volume of phone traffic in Elisa’s fixed network has decreased
in the past few years. These factors may limit the opportunities
for growth.

Accident risks

The Group’s core operations are covered by insurance against
damage and interruptions caused by accidents. Accident risks also
include litigations and claims.

Financial risks

There were no changes in Elisa’s risk management policy in 2006.
Financial risks are described in more detail in the company’s
financial statements.

In order to manage interest rate risk, the Group’s borrowing and
investments are diversified in fixed- and variable-rate
instruments. Derivative instruments were not used in 2006.

Most of Elisa Group’s cash flows are denominated in euros, which
means that the exchange rate risk (economic risk and transaction
risk) is minor.

The objective of liquidity risk management is to ensure the
Group’s financing in all circumstances. The amount of the Group’s
liquid assets, committed credit limits and investments totalled
EUR 192 million at the end of 2006 (EUR 383 million).

Liquid assets are invested within confirmed limits to investment
targets with a good credit rating. The business units are liable
for credit risk associated with accounts receivable. Credit risk
concentrations in accounts receivable are minor as the customer
base is wide.

Environmental issues

Elisa carries out high-quality and environmentally friendly
telecommunications services. The aims of the company’s confirmed
environmental policy are as follows: to promote sustainable
development on local, national and international levels as part of
competitive business practice, to commit to protecting the
environment affected by Elisa's operations, to take environmental,
quality and safety considerations into account in its decision-
making and management systems, and to comply with national and
international environmental regulations.

Elisa evaluated suppliers and subcontractors also according to
environmental criteria, and improved awareness of environmental
issues among the personnel by openly and regularly providing
information on their effects.

The principal projects in 2006 included: initiating the design of
a standardised environmental management system, further
development of the environmental load data reporting system,
improving waste management and developing the production waste
processes.

Elisa collaborates with organisations such as Vodafone, The
European Telecommunications Network Operators’ Association (ETNO)
and Lassila&Tikanoja plc on environmental issues.

Events after the financial period

Elisa initiated the doubling of its 3G network speed. The new
maximum speed of 2 megabits will initially serve business users in
particular who need fast connections to enable mobile work.

Elisa and Barona Solutions Oy signed a letter of intent concerning
the outsourcing of Elisa’s operations related to order management
and invoicing of corporate customers to Barona as of 1 February
2007. In connection with the transfer, a total of 187 employees
transferred from Elisa to Barona.

Elisa launched the Elisa Assistant service. The software is
intended for Elisa’s broadband customers and will activate in case
of any problems. Elisa Assistant will help in determining the
settings for Internet services or finding Web page addresses.

The mobile call pricing model for Elisa’s private customer
subscriptions is changing. From 1 March 2007 an opening fee of EUR
0.049/call will be charged for mobile calls made in Finland. The
minute rates for subscriptions remain unchanged.

Outlook for 2007

Competition in the Finnish telecommunications market remains
challenging, while the focus is increasingly on services. The use
of mobile communications and broadband products continues to rise.
Elisa’s aim is to further reinforce its position as the leading
service supplier.

Elisa’s revenue is expected to increase on the previous year.
EBITDA and EBIT excluding non-recurring items are expected to
improve on the previous year. This will be affected by factors
such as growth in the 3G market and the improved market situation
and efficiency measures. However, EBITDA and EBIT for
the first six months are estimated to be slightly weaker compared
with the previous six months in part due to changes caused by
interconnection fees in the mobile communications business.

Capital expenditures during the year are estimated to total 11 to
13 per cent of the revenue, and cash flow will remain clearly
positive.

Dividend proposal

The Board of Directors has decided on Elisa’s profit distribution
policy, according to which 40 to 60 per cent of the profit will be
distributed for the financial period. Distribution of profit
includes dividend payment and purchase of treasury shares. The
Board of Directors proposes that a dividend of EUR 0.50 per share
plus an extra dividend of EUR 1.00 per share, totalling EUR 1.50
per share, be distributed for 2006. The dividend payment
corresponds to 152 per cent of the profit for the financial
period.

BOARD OF DIRECTORS


Information in this release is 
based on the company's audited 
Financial Statements.
The Auditor's report has been 
given on 7 February 2007.

CONSOLIDATED INCOME STATEMENT
EUR million
                                         10-12   10-12    1-12     1-12
                                          2006    2005    2006     2005

Revenue                                  400,7   343,0  1518,4   1337,3
Other operating income                     2,0    12,4     8,7    113,9
Materials and services                  -182,4  -146,7  -689,3   -565,9
Employee benefit expenses                -53,7   -58,8  -213,9   -220,5
Other operating expenses                 -48,4   -55,4  -189,4   -218,7
EBITDA                                   118,2    94,5   434,5    446,1
Depreciation                             -47,8   -56,8  -209,1   -213,2
EBIT                                      70,4    37,7   225,4    232,9
Share of associated companies' profit      0,1     0,0     0,1      1,2
Financial income and expenses             -1,4    -5,1   -13,7    -22,2
Profit before tax                         69,1    32,6   211,8    211,9
Income taxes                             -18,1    -4,6   -50,4    -34,1
Profit for the period                     51,0    28,0   161,4    177,8

Attributable to:
  Equity holders of the parent            50,7    27,2   160,3    176,2
  Minority interest                        0,3     0,8     1,1      1,6
Profit for the period                     51,0    28,0   161,4    177,8

Earnings per share (EUR)
Basic                                     0,31    0,18    0,97     1,22
Diluted                                   0,31    0,18    0,97     1,22

Average number of outstanding shares 
(1000 shares)
Basic                                   163885  153822  165417   144807
Diluted                                 163885  153822  165417   144807


REVENUE BY BUSINESS SEGMENTS
EUR million
                                          10-12   10-12    1-12    1-12
                                           2006    2005    2006    2005

Mobile                                    252,8   197,3   929,9   739,9
Fixed Network                             162,3   173,0   665,0   670,9
Other Companies                                     1,5     0,1    38,2
Unallocated
Intra-segment sales elimination           -14,4   -28,8   -76,6  -111,7
Corporation total                         400,7   343,0  1518,4  1337,3

EBITDA BY BUSINESS SEGMENTS
EUR million                               10-12   10-12    1-12    1-12
                                           2006    2005    2006    2005

Mobile                                     76,4    51,8   259,0   220,1
Fixed Network                              43,4    36,8   181,1   159,6
Other Companies                                     5,2            55,8
Unallocated                                -1,6     0,7    -5,6    10,5
Corporation total                         118,2    94,5   434,5   446,1

EBIT BY BUSINESS SEGMENTS
EUR million                               10-12   10-12    1-12    1-12
                                           2006    2005    2006    2005

Mobile                                     53,8    27,1   161,7   129,9
Fixed Network                              18,8     3,4    70,6    44,8
Other Companies                                     5,2            47,3
Unallocated                                -2,2     2,0    -6,9    10,9
Corporation total                          70,4    37,7   225,4   232,9


CONSOLIDATED BALANCE SHEET
EUR million
                                                         31.12.  31.12.
                                                           2006    2005    
Non-current assets
Property, plant and equipment                             645,5   660,6
Goodwill                                                  772,3   770,6
Other intangible assets                                   190,4   178,7
Investments in associated companies                         0,4     0,4
Available-for-sale investments                             48,4    44,2
Other receivables                                           4,8    10,6
Deferred tax receivable                                    33,7    42,5
                                                         1695,5  1707,6
Current assets
Inventories                                                38,4    20,3
Trade and other receivables                               334,8   261,8
Cash and cash equivalents                                  22,2   212,7
                                                          395,4   494,8

Total assets                                             2090,9  2202,4


Equity attributable to equity holders of the parent      1307,6  1337,3
Minority interest                                           4,7    12,4
Total equity                                             1312,3  1349,7

Non-current liabilities
Deferred tax liabilities                                   36,3    40,6
Provisions                                                  8,2     9,4
Interest-bearing debt                                     321,1   393,7
Other non-current liabilities                              16,1    12,7
                                                          381,7   456,4
Current liabilities
Trade and other payables                                  316,2   280,5
Provisions                                                  2,7     3,4
Interest-bearing debt                                      78,0   112,4
                                                          396,9   396,3

Total equity and liabilities                             2090,9  2202,4


STATEMENT OF CHANGES IN EQUITY
EUR million                                            
                Share   Share Treasury   Other Retained Minority  Total
              capital   issue   shares  reser- earnings interest equity
                      premium              ves
Total equity      
at 1.1.2005      71,0   530,4     -3,1    34,5    250,8     31,0  914,5
Available for 
sale investments                          34,7                     34,7
Other changes                                       3,7             3,7
Items recognised 
directly in equity                        34,7      3,7            38,4
Profit for 
the period                                        176,2      1,6  177,8
Total recognised 
income and                                   
expense for 
the period                                34,7    179,9      1,6  216,2
Sales of 
subsidiaries                                               -15,8  -15,8
Investment in 
subsidiaries                      -0,2                      -0,2   -0,4
Dividends                                        -123,2     -4,2 -127,4
Issue of share 
capital          12,0                    349,7                    361,7
Purchase of 
treasury shares                    0,8                              0,8
Total equity at 
31.12.2005       83,0   530,4     -2,5   418,9    307,5     12,4 1349,7


Total equity at 
1.1.2006         83,0   530,4     -2,5   418,9    307,5     12,4 1349,7
Available for 
sale investments                           3,4                      3,4
Other changes                             -0,2     -0,5            -0,7
Items recognised 
directly in 
equity                                     3,2     -0,5             2,7
Profit for 
the period                                        160,3     1,1   161,4
Total recognised 
income and                           
expense for 
the period                                 3,2    159,8     1,1   164,1
Investment in 
subsidiaries                      -0,2                     -5,8    -6,0
Dividends                                        -116,2    -3,0  -119,2
Investment in 
treasury shares                  -79,4                            -79,4
Sales of 
treasury shares                    0,8             0,1             0,9
Share based 
compensation                                        2,2             2,2
Total equity 
at 31.12.2006    83,0   530,4    -81,3   422,1    353,4     4,7  1312,3


CONSOLIDATED CASH FLOW STATEMENT
EUR million

                                                           1-12    1-12
                                                           2006    2005
Cash flow from operating activities

Profit before tax                                         211,8   211,9
Depreciation                                              209,1   213,2
Other adjustments to profit before tax                      8,3   -66,3
Change in working capital                                 -76,8   -23,7
Cash flow from operating activities                       352,4   335,1

Received dividends and interests and interest paid        -17,5   -20,5
Taxes paid                                                 -0,3    -5,1
Net cash flow from operating activities                   334,6   309,5

Cash flow from investments

Capital expenditure                                      -205,7  -194,9
Investments in shares and other investments               -25,4    -4,1
Proceeds from asset disposal                               14,9   197,5
Net cash used in investment                              -216,2    -1,5

Cash flow after investments                               118,4   308,0

Cash flow from financing

Change in interest-bearing receivables                              0,8
Investment in treasury shares                             -79,4
Proceeds from treasury shares                               1,0     0,8
Repayment of long-term debt                              -122,4  -102,4
Change in short-term debt                                  25,0   -18,6
Repayment of financing leases                              -9,5   -16,7
Dividends paid                                           -123,6  -122,0
Net cash used in financing                               -308,9  -258,1

Change in cash and cash equivalents                      -190,5    49,9
Cash and cash equivalents at beginning of period          212,7   162,8
Cash and cash equivalents at end of period                 22,2   212,7


LIABILITIES
EUR million
                                                         31.12.  31.12.
                                                           2006    2005
Mortgages, pledges and guarantees

Mortgages
  For own and group companies                                      18,7
Pledges given
  Pledges given as surety                                   0,7     0,9
Guarantees given
  For others                                                0,5     3,1
Mortgages, pledges and guarantees total                     1,2    22,6

Leasing contracts and other commitments

Leasing commitments                                        12,9    14,3
Repurchase commitments                                      0,4     0,7
Real estate leases                                         67,8    63,3
Lease liabilities total                                    81,1    78,3

Other commitments

Lease-leaseback agreement (QTE facility)
  Termination risk                                         18,6    23,5
  Total value of the arrangement                          154,1   171,5
Other commitments                                           0,0     0,6


KEY FIGURES
EUR million
                                          10-12   10-12    1-12    1-12
                                           2006    2005    2006    2005

Shareholders' equity/share, EUR                            8,07    8,06
Net debt                                                  376,9   293,5
Gearing                                                  28,7 %  21,7 %
Equity ratio                                             63,1 %  61,7 %
Return of investment (ROI)                               13,2 %  14,7 %
Gross investments in fixed assets,         69,8    71,3   207,4   204,4
of which finance lease investments          0,7     0,3     1,7     9,5
Gross investments as % of revenue        17,4 %  20,8 %  13,7 %  15,3 %
Investments in shares,                      2,1   374,7    10,3   414,8
of which paid in equity issue                     361,2           361,2
Average number of personnel                                4086    4989


Formulae for financial indicators

Gearing  %  


               Interest-bearing debt - cash and cash equivalents
         ---------------------------------------------------------x 100
                                   Total equity


Equity ratio % 

                                       Total equity
               --------------------------------------------------x 100
                        Balance sheet total - advances received


Return on investment % (ROI)


            
    Profit before taxes+interest costs and other financial expences
    ---------------------------------------------------------------x100
    Balance sheet total-non-interest bearing liabilities (average)


Net debt  
                     Interest-bearing debt - cash and cash equivalents


Shareholders' equity/share


                  Equity attributable to equity holders of the parent
                ------------------------------------------------------
                        Number of shares outstanding at end of period

Earnings/share 


        Profit for the period attributable to equity holders of parent
      -----------------------------------------------------------------
                        Average number of outstanding shares