Published: 2006-10-20 07:30:01 CEST
Elisa Oyj - Company Announcement
ELISA'S INTERIM REPORT FOR JULY-SEPTEMBER 2006
ELISA CORPORATION STOCK EXCHANGE RELEASE 20 OCTOBER 2006 AT 8.30am

ELISA'S INTERIM REPORT FOR JULY-SEPTEMBER 2006

The profit before tax improved from EUR 28 million to EUR 69
million and the EBITDA from EUR 85 million to EUR 123 million

Revenue increased by 19 per cent and was EUR 387 million
(326).

Revenue per subscription (ARPU) decreased slightly from EUR
31.3 in the second quarter to EUR 30.5 due to a reduction in
Saunalahti's interconnection fee

Churn in mobile communications decreased further to stand at
11.7 per cent, compared with 12.9 per cent in the second quarter.

The introduction of new 3G service bundles and prepaid
subscriptions contributed to an increase in the number of mobile
subscriptions.

The number of broadband subscriptions increased by
approximately 7,000 on the previous quarter.

The financial position remained stable: at the end of
September, the equity ratio was 65 per cent (62 per cent at the
end of 2005) and net debt at EUR 336 million (293 at the end of
2005)

In July-September, Elisa's key indicators were as follows:

Income statement              7-9/2006   7-9/2005    1-12/2005
EUR million
Revenue                            387        326        1 337
EBITDA                             123         85         446*
EBIT                                73         33         233*
Profit before taxes                 69         28         212*
Earnings per share, EUR           0.32       0.15        1.22*
Capital expenditures                40         45          204

* Excluding non-recurring items: EBITDA EUR 346 million, EBIT EUR
133 million, profit before taxes EUR 112 million and earnings per
share EUR 0.61

Figures describing the financial position and cash flow:

Financial position           30.9.2006  30.9.2005   31.12.2005
Net debt                           336        363          293
Equity ratio, %                   65.5       55.3         61.7
                                                              
Cash flow statement           7-9/2006   7-9/2005    1-12/2005
Cash flow after investments         36          1          308

CEO Veli-Matti Mattila:

”Uniform interconnection fees

Interconnection fees between operators have been widely
discussed. Different rates have a highly distorting effect on
competition and thus the fees should be adjusted to a uniform
level. Unless operators can soon come to a mutual agreement, the
regulatory authorities are positioned to promote a speedy solution
to the problem. The Ministry of Transport and Communications has
already forcibly expressed its opinions in this respect.

In this matter we should look at what is happening elsewhere in
Europe. The trend is towards uniform rates, which also corresponds
with the intent of the European Commission. For example, Sweden
has announced its aim to harmonise the interconnecting fees
already next year.

There are currently some 220,000 3G data terminals in Finland,
which means growth has been very strong. We estimate this number
to exceed 300,000 by the end of the year. One of the main
objectives was to update the country’s mobile phone base to
correspond to the requirements of the information society. Service
bundles have been an undeniable success.

Elisa's third-quarter performance was very successful. We retained
our leading position on the slackening broadband market and the
number of our mobile network subscriptions increased markedly.
Mobile subscription usage also increased favourably. I am
particularly pleased with the growing usage of new services, which
testifies to the popularity of our service bundles.”

ELISA CORPORATION

Vesa Sahivirta
Director, IR and Financial Communications

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


Interim report for January-September 2006

This interim report has been prepared in accordance with the IFRS
recognition and measurement principles. The information presented
in this interim report is unaudited. This report concerns the July-
September period. The figures in the tables for the Stock Exchange
Release concern the January-September period.

Market situation

The new 3G service bundles, which have been permitted since 1
April, have clearly strengthened the service competition. These
bundles offer new services and have been highly popular. The
number of mobile network subscriptions developed positively, 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.

Revenue

EUR million                   7-9/2006    7-9/2005   Change, %
Mobile communications              246         183          34
Fixed network                      156         166          -6
Other businesses                     0           5            
Inter-segment sales                -16         -28         -43
Total                              387         326          19

Elisa's revenue for July-September was up 19 per cent on last
year. The growth was positively affected by Elisa's acquisition of
Saunalahti's business and an increase in the sale of mobile
handsets.

Performance

EUR million                      7-9/2006   7-9/2005  Change,%
Mobile communications                                         
 EBITDA                                72         46        57
 EBITDA, %                             29         25          
 EBIT                                  49         24       104
Fixed network                                                 
 EBITDA                                52         40        30
 EBITDA, %                             33         24          
 EBIT                                  26         12       117
Other business and                                            
corporate functions                                           
 EBITDA                                -1         -1          
 EBIT                                  -1         -3
Group, total                                                  
 EBITDA                               123         85        45
 EBITDA, %                             32         26          
 EBIT                                  73         33       121

Elisa's EBITDA grew 45 per cent on the corresponding period in
2005. This increase was attributable to improved profitability,
the synergy benefits created by the acquisition of Saunalahti and
the increased usage of service bundles and new services.

The Group’s financial income and expenses totalled EUR -4
million (-5). Reduced financial expenses were mainly due to a
decrease in average net debt in the period under review.

Income taxes in the period under review amounted to EUR -16
million (-6).

The Group's July-September profit after taxes amounted to EUR 53
million (22). The Group’s earnings per share (EPS) amounted to EUR
0.32 (0.15). At the end of September, the Group's equity per share
was EUR 8.01 (8.06 at the end of 2005).

Changes in corporate structure

Elisa sold the television business of TV Jyväskylä, a local
channel operating in Elisa's cable television network in the
Jyväskylä region, to TV Jyväskylä Ky with an agreement signed on 
8 September 2006.

Mobile communication business

Number of subscriptions          30.9.2006 30.9.2005 31.12.2005
                                        
Total number of subscriptions                               
(Finland and Estonia)            2,452,487 1,738,624  2,228,101
Total number of subscriptions    
in Finland *                     2,163,887 1,480,794  1,962,101         
Subscriptions in Estonia           288,600   257,830    266,000

* Elisa's network operator 
in Finland

Operating figures in Finland    7-9/2006 7-9/2005      2005

Revenue/subscription**(ARPU),€      30.5     31.2      32.5
Churn**, %                          11.7     27.2      28.4
Usage, million minutes*            1,265      934     3,509
Usage, min/subscription/month**      207      177       172
SMS, million msg*                    303      219       827
SMS, msg/subscription/month**         50       38        38
Value-added services/revenue,%        17       17        16

* Elisa's network operator in Finland (2005 figures include some
Saunalahti subscriptions)
** Elisa's service operator in Finland (2005 figures exclude
Saunalahti)

Elisa’s network operator increased the number of its subscriptions
by some 683,100 subscriptions during the year. The increase was
markedly due to Saunalahti shifting its subscriptions to Elisa’s
network. The third-quarter increase was approximately 103,500
subscriptions. The increase was affected by the positive demand
for 3G service bundles and prepaid subscriptions.

The call minutes per subscription of Elisa's own service operator
rose by approximately 17 per cent and the number of SMS messages
increased by approximately 32 per cent on the corresponding period
in 2005. The call minutes of the network operator rose by 35 per
cent and SMS messages by 38 per cent. The increase was affected by
e.g. the additional traffic generated by Saunalahti.

Revenue per subscription (ARPU) decreased by approximately 2 per
cent on the comparison period. This was due to a fall in consumer
prices and interconnection fees in June 2006. The increased usage
per subscription failed to completely compensate for the decrease
due to price erosion. Compared with the previous quarter, revenue
per subscription was down by some 3 per cent, decreasing from EUR
31.3 to EUR 30.5, which was partially due to the reduction of
Saunalahti's interconnection fees.

On 20 September 2006, Elisa began offering its 2G and 3G customers
the most comprehensive mobile TV service in Finland, providing
users with access to eight different TV channels.

From September to November, Elisa will expand its 3G network to
seven new locations. Elisa will also improve network functionality
by establishing new base stations at current 3G locations across
the whole country.

Elisa’s Estonian subsidiary continued to grow. Revenue was EUR
27.8 million (23.9), EBITDA EUR 9.6 million (7.5) and EBIT 6.9
million (5.2). The number of subscriptions increased by
approximately 12 per cent to 288,600 subscriptions at the end of
September (257,830). In July, Elisa launched its HSDPA network 
in Tallinn and Pärnu. The maximum speed of the network is 1 Mbit/s.

Fixed network business

Number of subscriptions   30.9.2006  30.9.2005 31.12.2005
                                 
Broadband subscriptions     479,586    345,896    420,465
ISDN channels               110,226    135,716    128,665
Cable TV subscriptions      223,192    208,592    214,054
Analogue and other                                    
subscriptions               528,776    592,663    578,002
Subscriptions, total      1,341,770  1,282,869  1,341,186
                              
The number of broadband subscriptions rose by 7,054 in the July-
September period, showing an increase of 39 per cent on the
previous year.

The number of traditional subscriptions continued to decrease
steadily 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 introduced a broadband service bundle, which includes 
a broadband subscription and a laptop PC.

Personnel

During July-September, the average number of personnel at Elisa
was 3,956 (an average of 4,989 in 2005).

                        30.9.2006  30.9.2005 31.12.2005

Mobile communications       1,355      1,449      1,629
Fixed network               2,267      3,102      3,001
Other business operations       -        166          -
Corporate functions            39         55         51
Total                       3,661      4,772      4,681

Elisa's business transfer agreements made in the first half of
2006 concerning the partial transfer of Elisa's field operations
in the area of customer installations and maintenance to Relacom
Finland Oy took effect as of 1 September 2006.

The business transfer agreement concerning the outsourcing of
external accounting processes related to Elisa's financial
administration to Pretax BSP Oy took effect as of 1 September
2006.

In connection with the outsourcing agreements, 337 employees
transferred from Elisa to Relacom and 32 employees to Pretax as
established employees.

Investments

EUR million                    7-9/2006  7-9/2005  1-12/2005
                                               
Capital expenditures, of which       40        45        204
- mobile communication business      14        18         86
- GSM leasing liability buy-backs     0         0          4     
- fixed network business             27        27        112
- others                              0         0          2
Shares                                7         5        415
- of which achieved through an                                                  
  exchange of shares                                     361
Total                                  47        51      619

Financial position

Elisa's financial position and liquidity remained stable during
the third quarter. The Group's July-September cash flow after
investments amounted to EUR 36 million (1).

Financial key indicators

EUR million                30.9.2006  30.9.2005 31.12.2005
Net debt                         336        363        293
Gearing, %                      25.2       35.3       21.7
Equity ratio, %                 65.5       55.3       61.7
                                                         
                            7-9/2006   7-9/2005  1-12/2005
Cash flow after investments       36          1        308

Valid financing arrangements

EUR million                      Maximum         In use on
                                  amount         30.9.2006
Committed credit line                170                 0
Commercial paper programme 1)        150                 0
EMTN programme2)                   1,000               336

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         Negative

Share

At the end of September the company's total number of shares was
166,066,016 and its market capitalisation on 30 September 2006
stood at EUR 2,887 million.

In July-September, a total of 47.4 million shares were traded on
the Helsinki Stock Exchange for an aggregate of EUR 762.3 million.
The exchange was 28.6 per cent of the number of shares on the
market.

Treasury shares

The Annual General Meeting held on 27 March 2006 authorised the
Board of Directors to acquire and assign treasury shares. The
authorisation has not been used. At the end of September, the
companies consolidated in the Elisa Group's financial statements
held 125,000 Elisa Corporation shares. The nominal value of the
shares totalled EUR 62,500, and their proportion of the share
capital and voting rights was 0.1 per cent.

Significant legal issues

Since the publication of Elisa's Annual Report 2005 and the 2006
interim reports, the following legal developments concerning Elisa
have taken place:

A total of 379,800 shares held in Elisa's joint book-entry account
were sold on the Helsinki Stock Exchange between 27 July and 1
August 2006. These shares represent approximately 0.23 per cent of
Elisa's shares and votes. The sale was based on the decision made
by Elisa's Annual General Meeting on 14 March 2005 to sell the non-
transferred shares held in the joint book-entry account on behalf
of their owners in accordance with Chapter 31, section 3a of the
Finnish Companies Act.

The proceeds received from the sale have been deposited with the
State Provincial Office of Southern Finland. The owners of shares
held in the joint account or other assignees are entitled to
receive a share of the proceeds corresponding to the number of
shares owned.

Events after the reporting period

Elisa's tender offer to the shareholders of Lounet Oy continues
until 17 November 2006. As a result of the offer, Elisa's
ownership in Lounet is now almost 80 per cent.

Outlook for 2006

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

The Group's revenue is expected to increase clearly on the
previous year. The growth will be partially attributable to an
increase in handset sales. Elisa expects to see a clear
improvement in EBITDA and EBIT excluding non-recurring items in
2006. This will be due to e.g. the synergy benefits created by the
Saunalahti deal and Elisa's rationalisation procedures.
Profitability in the fourth quarter will remain good, although a
slight fall in EBITDA and EBIT from third-quarter levels is
expected due to increasing market activities and seasonal
variation in personnel expenses.

Capital expenditures during the year are estimated to total 13 to
15 per cent of the revenue, and cash flow will remain clearly
positive. Certain non-recurring items due to IT and production
system reforms, which will support the "One Elisa" operational
model, are scheduled for 2006.

BOARD OF DIRECTORS


Figures are not audited.

CONSOLIDATED INCOME STATEMENT
EUR million 
                                   7-9     7-9     1-9     1-9     1-12
                                  2006    2005    2006    2005     2005

Revenue                          386,9   325,5  1117,7   994,3   1337,3
Other operating income             2,8     3,2     6,7   101,5    113,9
Operating expenses              -266,7  -244,0  -808,1  -744,2  -1005,1
EBITDA                           123,0    84,7   316,3   351,6    446,1
Depreciation and amortisation    -49,8   -51,9  -161,3  -156,4   -213,2
EBIT                              73,2    32,8   155,0   195,2    232,9
Share of associated companies' 
profit                             0,0     0,0     0,0     1,2      1,2
Financial income and expenses     -3,9    -5,0   -12,3   -17,1    -22,2
Profit before tax                 69,3    27,8   142,7   179,3    211,9
Income taxes                     -16,3    -5,7   -32,3   -29,5    -34,1
Profit for the period             53,0    22,1   110,4   149,8    177,8

Attributable to:
  Equity holders of the parent    52,6    21,6   109,6   149,0    176,2
  Minority interest                0,4     0,5     0,8     0,8      1,6
Profit for the period             53,0    22,1   110,4   149,8    177,8

Earnings per share (EUR)
Basic                             0,32    0,15    0,66    1,05     1,22
Diluted                           0,32    0,15    0,66    1,05     1,22

Average number of outstanding 
shares (1000 shares)
Basic                           165941  141757  165933  141769   144807
Diluted                         165941  141757  165933  141769   144807

REVENUE BY BUSINESS SEGMENTS
EUR million 
                                    7-9     7-9     1-9     1-9    1-12
                                   2006    2005    2006    2005    2005

Mobile                            245,7   183,3   677,1   542,6   739,9
Fixed Network                     156,4   166,0   502,6   497,9   670,9
Other Companies                             5,4     0,1    36,7    38,2
Unallocated
Intra-segment sales elimination   -15,2   -29,2   -62,3   -82,9  -111,7
Corporation total                 386,9   325,5  1117,5   994,3  1337,3

EBITDA BY BUSINESS SEGMENTS
EUR million 
                                    7-9     7-9     1-9     1-9    1-12
                                   2006    2005    2006    2005    2005

Mobile                             72,3    45,6   182,6   168,3   220,1
Fixed Network                      52,0    40,2   137,7   122,8   159,6
Other Companies                             0,8            50,6    55,8
Unallocated                        -1,3    -1,9    -4,0     9,9    10,5
Corporation total                 123,0    84,7   316,3   351,6   446,1

EBIT BY BUSINESS SEGMENTS
EUR million
                                    7-9     7-9     1-9     1-9    1-12
                                   2006    2005    2006    2005    2005

Mobile                             48,7    24,0   107,9   102,8   129,9
Fixed Network                      25,5    11,6    51,8    41,4    44,8
Other Companies                             0,5            42,1    47,3
Unallocated                        -1,0    -3,3    -4,7     8,9    10,9
Corporation total                  73,2    32,8   155,0   195,2   232,9

CONSOLIDATED BALANCE SHEET
EUR million 
                                                 30.9.    30.9.  31.12.
                                                  2006     2005    2005
Non-current assets
Property, plant and equipment                    629,6    693,6   660,6
Goodwill                                         772,2    471,1   770,6
Other intangible assets                          183,7     81,0   178,7
Investments in associated companies                0,3      0,4     0,4
Available-for-sale investments                    32,1     46,5    44,2
Other receivables                                 14,4     10,8    10,6
Deferred tax receivable                           37,2     35,0    42,5
                                                1669,5   1338,4  1707,6
Current assets
Inventories                                       24,4     17,6    20,3
Trade and other receivables                      319,5    359,1   261,8
Cash and cash equivalents                         38,8    156,3   212,7
                                                 382,7    533,0   494,8

Total assets                                    2052,2   1871,4  2202,4


Equity attributable to equity 
holders of the parent                           1328,8   1016,2  1337,3
Minority interest                                  6,6     12,5    12,4
Total equity                                    1335,4   1028,7  1349,7

Non-current liabilities
Deferred tax liabilities                          36,9     31,4    40,6
Provisions                                         8,7      6,1     9,4
Interest-bearing debt                            323,9    403,3   393,7
Other non-current liabilities                     12,2     13,1    12,7
                                                 381,7    453,9   456,4
Current liabilities
Trade and other payables                         279,7    268,5   280,5
Provisions                                         4,5      4,6     3,4
Interest-bearing debt                             50,9    115,7   112,4
                                                 335,1    388,8   396,3

Total equity and liabilities                    2052,2   1871,4  2202,4

STATEMENT OF CHANGES IN EQUITY
EUR million 
                     Share
             Share   issue   Treasury Other    Retained Minority Total
             capital premium shares   reserves earnings interest equity
Total equity 
at 31.12.2004   71,0   530,4     -3,1     34,5    250,8     31,0  914,5
Available for 
sale investments                          37,0                     37,0
Other changes                                       3,2    -15,7  -12,5
Items recognised 
directly in 
equity                                    37,0      3,2    -15,7   24,5
Profit for 
the period                                        149,0      0,8  149,8
Total recognised 
income and                                
expense for the 
period                                    37,0    152,2    -14,9  174,3 
Dividends                                         -56,8     -3,6  -60,4
Purchase of 
treasury shares                   0,2                               0,2
Total equity 
at 30.9.2005    71,0   530,4     -2,9     71,5    346,2     12,5 1028,7


Total equity 
at 31.12.2005   83,0   530,4     -2,5    418,9    307,5     12,4 1349,7
Available for 
sale investments                          -2,6                     -2,6
Other changes                    -0,1     -0,2     -1,0     -4,5   -5,8
Items recognised 
directly in 
equity                           -0,1     -2,8     -1,0     -4,5   -8,4
Profit for 
the period                                        109,6      0,8  110,4
Total recognised 
income and                         
expense for the 
period                           -0,1     -2,8    108,6     -3,7  102,0
Dividends                                        -116,1     -2,1 -118,2
Sales of 
treasury shares                   0,8               0,1             0,9
Share based 
compensation                               1,0                      1,0
Total equity 
at 30.9.2006    83,0   530,4     -1,8    417,1    300,1      6,6 1335,4

CONSOLIDATED CASH FLOW STATEMENT
EUR million 
                                                   1-9      1-9    1-12
                                                  2006     2005    2005
Cash flow from operating activities
Profit before tax                                142,7    179,3   211,9
Depreciation and amortisation                    161,3    156,4   213,2
Other adjustments to profit before tax            10,1    -66,5   -66,3
Change in working capital                        -69,5    -37,4   -23,7
Cash flow from operating activities              244,6    231,8   335,1

Received dividends and interests and interest 
paid                                             -18,5    -22,7   -20,5
Taxes paid                                        -0,9     -4,2    -5,1
Net cash flow from operating activities          225,2    204,9   309,5

Cash flow from investments
Capital expenditure                             -136,7   -124,0  -194,9
Investments in shares and other investments      -24,6    -17,2    -4,1
Proceeds from asset disposal                      13,7     99,7   197,5
Net cash used in investment                     -147,6    -41,5    -1,5

Cash flow after investments                       77,6    163,4   308,0

Cash flow from financing
Proceeds from treasury shares                      0,9              0,8
Change in interest-bearing receivables                      0,7     0,8
Repayment of long-term debt                     -122,4    -87,5  -102,4
Change in short-term debt                                 -10,4   -18,6
Repayment of financing leases                     -7,5    -12,4   -16,7
Dividends paid                                  -122,5    -60,3  -122,0
Net cash used in financing                      -251,5   -169,9  -258,1

Change in cash and cash equivalents             -173,9     -6,5    49,9
Cash and cash equivalents at beginning of 
period                                           212,7    162,8   162,8
Cash and cash equivalents at end of period        38,8    156,3   212,7

LIABILITIES
EUR million
                                                 30.9.    30.9.  31.12.
                                                  2006     2005    2005
Mortgages, pledges and guarantees
Mortgages
  For own and group companies                      0,0      1,9    18,7
Pledges given
  Pledges given as surety                          0,7      1,0     0,9
Guarantees given
  For others                                       0,5      2,6     3,1
Mortgages, pledges and guarantees total            1,2      5,5    22,6

Leasing contracts and other commitments
Leasing commitments                               12,0     14,3    14,3
Repurchase commitments                             0,5      0,8     0,7
Real estate leases                                57,2     57,7    63,3
Lease liabilities total                           69,7     72,8    78,3

Other commitments
Lease-leaseback agreement (QTE facility)
 Termination risk                                 19,4     23,1    23,5
 Total value of the arrangement                  160,3    168,7   171,5
Other commitments                                  0,0      0,1     0,6

KEY FIGURES
EUR million
                                    7-9     7-9     1-9     1-9    1-12
                                   2006    2005    2006    2005    2005

Shareholders' equity/share, EUR                    8,01    7,17    8,06
Net debt                                          336,0   362,7   293,5
Gearing                                          25,2 %  35,3 %  21,7 %
Equity ratio                                     65,5 %  55,3 %  61,7 %
Gross investments in fixed assets  39,7    45,2   137,6   133,1   204,4
of which finance lease investments  0,1     0,4     1,0     9,2     9,5
Gross investments as % of 
revenue                          10,3 %  13,9 %  12,3 %  13,4 %  15,3 %
Investments in shares,              6,9     5,4     8,2    40,1   414,8
of which paid in equity issue                                     361,2
Average number of personnel                        4239    5109    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


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