Telio Holding ASA - NextGenTel Holding ASA

Transcription

Telio Holding ASA
Prospectus in connection with listing of
the company’s shares on Oslo Børs
Share Issue of 3,000,000 New Shares
Secondary Sale of up to 1,000,000 Secondary Shares
Indicative Price Range:
NOK 31 – NOK 37 per share
Book-building and Application Period:
18 May 2006 to 30 May 2006 at 16:30 hours (Norwegian time)
Joint Lead Managers:
16 May 2006
IMPORTANT INFORMATION
Please refer to ”Definitions” for definitions and glossary, which also apply to the preceding pages.
This Prospectus has been prepared according to Section 5-2 and 5-3 of the Securities Trading Act in connection
with an application for listing on Oslo Børs of the Shares of Telio Holding ASA (the “Company”) and the
Offering, as defined and described herein. The Prospectus has been approved by Oslo Børs pursuant to Section
5-7 of the Securities Trading Act.
The information contained herein is as of the date hereof and is subject to change, completion and amendment
without notice. There may have been changes in matters affecting the Company subsequent to the date of this
Prospectus. Any new factor or significant error or inaccuracy in the Prospectus capable of affecting an
assessment of the Offer Shares arising after the publication of this Prospectus and before the end of the offer
period or before the Company’s shares are listed on Oslo Børs will be published as a supplement to this
Prospectus in accordance with applicable regulations in Norway. The delivery of this Prospectus shall under no
circumstances create any implication that the information contained herein is complete or correct as of any time
subsequent to the date hereof.
Certain statements made in this Prospectus may include forward-looking statements. These statements relate to
the Company’s expectations, beliefs, intentions or strategies regarding the future. These statements may be
identified by the use of words like “anticipate”, “believe”, “estimate”, “expect”, “intend”, “may”, “plan”,
“project”, “will”, “should”, “seek”, and similar expressions. The forward-looking statements reflect the
Company’s current views and assumptions with respect to future events and are subject to risks and
uncertainties. Actual and future results and trends could differ materially from those set forth in such statements.
The Company does not intend, and does not assume any obligation, to update the forward-looking statements
included in this Prospectus as of any date subsequent to the date hereof.
All inquiries relating to this Prospectus or the matters addressed herein should be directed to the Company or the
Managers. No persons other than those described in this Prospectus have been authorized to disclose or
disseminate information about this Prospectus or about the matters addressed in this Prospectus. If given, such
information may not be relied upon as having been authorized by the Company.
This Prospectus shall be governed by Norwegian law, and any disputes relating to this Prospectus or the Offering
are subject to the sole jurisdiction of Norwegian courts, with Oslo District Court as legal venue.
ii
TABLE OF CONTENTS
Summary ........................................................................................................................................................1
Risk factors ....................................................................................................................................................9
Statements................................................................................................................................................... 13
Information about the Company ............................................................................................................... 14
Business overview...................................................................................................................................... 16
Market overview ........................................................................................................................................ 30
Property, plants and equipment ................................................................................................................. 40
Operating and financial review ................................................................................................................. 41
Material contracts....................................................................................................................................... 44
Information on holdings ............................................................................................................................ 44
Board of directors and management ......................................................................................................... 45
Remuneration and benefits ........................................................................................................................ 50
Employees .................................................................................................................................................. 51
Major shareholders..................................................................................................................................... 53
Related party transactions.......................................................................................................................... 53
Financial information................................................................................................................................. 54
Capital resources ........................................................................................................................................ 66
Research and development ........................................................................................................................ 67
Share capital ............................................................................................................................................... 68
Third party information ............................................................................................................................. 75
Statutory auditors ....................................................................................................................................... 75
Documents on display................................................................................................................................ 75
Key information ......................................................................................................................................... 76
Information concerning the securities to be offered and admitted to trading ........................................ 79
Tax issues.................................................................................................................................................... 81
Terms and conditions of the Offering....................................................................................................... 83
Selling securities holders ........................................................................................................................... 91
Admission to trading.................................................................................................................................. 92
Expense of the Offering............................................................................................................................. 92
Dilution ....................................................................................................................................................... 92
Selling Restrictions .................................................................................................................................... 93
Definitions and glossary of terms ............................................................................................................. 94
Appendix 1: Articles of Association
Appendix 2: Annual report for 2005
Appendix 3: Interim financial report for Q1 2006
Appendix 6: Application Form Retail Offering and Customer Offering
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SUMMARY
This summary includes a brief description of the Company and the Offer Shares. Investors are
advised that (a) it should be read as an introduction to the Prospectus; (b) any decision to invest in
the securities should be based on consideration of the Prospectus as a whole by the investor; (c)
where a claim in relation to the information contained in a Prospectus is brought before a court, the
plaintiff investor might have to bear the costs of translating the Prospectus before the legal
proceedings are initiated; and (d) civil liability attaches to those persons who have tabled the
summary including any translation thereof, and applied for its notification, but only if the summary
is misleading, inaccurate or inconsistence when read together with the other parts of the
Prospectus.
Information about the Company
History and development of the Company
Telio was founded in 2003 by Mr. Alan Duric, Mr. Espen Fjogstad and Mr. Aril Resen. The
underlying business idea was to create an access-independent voice over internet protocol (“VoIP”)
provider that could take advantage of the rapidly increasing broadband penetration in Norway and
subsequently to expand this business model geographically into Europe. The Company has carefully
recruited a team of VoIP experts with broad telecommunications, VoIP and technology knowledge.
On this basis the Company has designed and built a technical VoIP platform based on a combination
of open source internet protocol technology and internally developed software. The platform was
designed with emphasis on flexibility and scalability enabling rapid introduction and evolution of new
features. The first live VoIP calls were done in November 2003 and the commercial launch of the
offering in February 2004. Telio has been very successful in getting attention and attracting customers.
The Company has captured a clear position as the VoIP leader in Norway with a market share of
35.8% in January 2006 (source: The Norwegian Post and Telecommunications Authority, NPT).
Business overview
The Company’s business concept is to offer VoIP services at a fixed subscription fee with as much
free calling and innovative features as possible. VoIP, also called broadband telephony, is a
technology that enables consumers to replace the traditional phone line with a phone service using the
internet. Telio differs from traditional telecom operators by using new technology that enables the
Company to offer the voice services over a broadband line that the subscriber already pays for. In
technical terms this is called IP communication based on SIP. Since VoIP utilises the same
infrastructure which is used to deliver other types of internet services the infrastructure costs for
offering VoIP are significantly lower than the costs of offering traditional telecommunications
networks. The Company is therefore able to offer telephone communication services at lower prices
than the traditional telecom companies. Internet technology also opens up for a variety of innovative
features that can be bundled to VoIP at very low costs.
Telio currently offers two different subscription services, Telio Mini and Telio Medium, with monthly
subscription fees of NOK 159 and NOK 199, respectively. The Company does not charge any start-up
fee of tariff per minute for fixed to fixed calls. For fixed to mobile Telio currently charge NOK 0.89
per minute to all mobile operators in Norway. The Company charge its customers for traffic fees for
certain countries, but contradictory to a traditional telecom provider these fees are of less importance
to the overall revenues. The monthly subscription fee is the basis for the subscription revenue model
of the Company and Telio’s overriding objective is to maintain the current monthly subscription fee.
The price-plan is therefore considered to be favourable for heavy users of telephony as there are
virtually no calling charges, only fixed fees. Hence, Telio provides a price plan that is very easy to
communicate and to understand for the target customers.
The Company has developed its own provisioning server. The offerings are tailor-made and targeted
towards end users who appreciate simplicity with regard to technical setup. When signing up for the
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Company’s VoIP services, the subscriber receives a telephone adapter which translates the signal from
the normal telephone to data traffic. The subscriber only need to connect a normal analogue telephone
– fixed or wireless – to the adapter and the adapter to the broadband socket and the provisioning
software embedded in the adapter ensures that the adapter is immediately connected to the Company’s
servers and is provisioned with a dialling tone (plug and play installation). This feature is fundamental
for the Company’s offering because it allows for access independence and enables the customer to
move the adapter around irrespective of where in the world he or she has broadband access.
Vision and goals
From the outset, Telio’s overriding vision has been to “make telecom minute fees a thing of the past”.
The Company aims to become the leading access independent VoIP provider in Europe with special
focus on high volume users of fixed and mobile communications.
The Company has until now mainly focused on fixed line replacement in Norway. Going forward,
Telio will take advantage of fixed mobile convergence services to become a mobile operator on the
service layer, much the same as the Company is a VoIP operator on the fixed broadband service layer
today. In addition, the Company has started to expand geographically and intents to intensify this
expansion funded by the proceeds of the Share Offer. See “Strategy”, “Product dimension strategy:
Fixed Mobile Convergence” and “Geographic dimension strategy: international expansion” for further
description of the Company’s strategy.
Financial information
A summary of the consolidated financial statements for the Company for the years ended 31
December 2005, 2004 and 2003, and the condensed consolidated interim financial information for the
three months ended 31 March 2006 and 2005 are presented below.
The financial information for the years ended 31 December 2005 and 2004 has been derived from the
Company’s audited consolidated financial statements prepared and presented in accordance with
International Financial Reporting Standards (IFRS) as adopted by EU. The financial information for
the year ended 31 December 2003 has been derived from the Company’s audited financial statements
prepared and presented in accordance with Norwegian generally accepted accounting principles (N
GAAP. The financial information for the three months ended 31 March 2006 and 2005 has been
derived from the Company’s unaudited condensed consolidated interim financial information prepared
and presented in accordance with the International Accounting Standard 34 “Interim Financial
Reporting”. The historical results are not necessarily indicative of the results to be expected for any
future period.
2
(in thousands of NOK)
Total revenue
Cost of connections and traffic charges
Salaries and personnel costs
Selling and marketing costs
Other expenses
Depreciation and amortisation
Operating profit
Finance costs
Profit before income tax
Income tax expense
Profit for the year
Years ended 31 December
2005
2004
2003
IFRS
IFRS
NGAAP
First quarter
2006
2005
IFRS
IFRS
162,126
(70,242)
(27,896)
(15,215)
(33,125)
(11,791)
3,857
(456)
3,401
(224)
3,177
28,945
(14,614)
(8,857)
(1,499)
(12,409)
(2,673)
(11,107)
(511)
(11,618)
2,182
(9,436)
45
(150)
(1,144)
(27)
(1,276)
(3)
(1,279)
0
(1,279)
66,198
(29,930)
(9,003)
(7,754)
(15,232)
(6,440)
(2,161)
(816)
(2,977)
1,866
(1,111)
27,843
(11,599)
(5,732)
(1,519)
(4,601)
(1,987)
2,405
(53)
2,352
(133)
2,219
0.18
0.16
-
(0.63)
(0.63)
-
(0,26)*
(0,26)*
-
(0.06)
(0.06)
0.13
0.11
Total non-current assets
Total current assets
Total assets
66,514
87,819
154,333
27,910
19,996
47,906
671
2,497
3,168
87,588
91,859
179,447
35,670
30,021
65,691
Total equity
Total non-current liabilities
Total current liabilities
Total equity and liabilities
41,476
8,526
104,331
154,333
20,661
2,387
24,858
47,906
2,826
342
3,168
41,421
16,160
121,866
179,447
23,350
1,962
40,379
65,691
EPS (basic)
EPS (diluted)
Dividend per share
*unaudited
See the audited consolidated financial statements for 2005 in Appendix 2, the audited annual reports
for 2004 and 2003 in Appendix 4 and 5, respectively, and the unaudited interim financial report for Q1
2006 in Appendix 3 for further comments and explanatory notes.
Trends and events subsequent to the first quarter of 2006
As at 1 May 2006, Telio established its own telemarketing company (100% owned by Telio Telecom
AS) called Salgssenteret Lillehammer AS. The company is located in Lillehammer, Norway, and has
21 full time employees and 14 part time employees. The company has entered into a contract with an
owner of a telemarketing company that previously provided services to Telio to recruit all employees
of this company and to acquire certain agreement and assets related to the telemarketing activities. The
total consideration to be settled in cash under the agreement is NOK 0.85 million. See “Events
subsequent to the first quarter of 2006” for further details.
Other than the abovementioned, the Company has not experienced any other changes or trends outside
the ordinary course of business that are significant to the Company after 31 March 2006 and to the
date of this Prospectus, other than those described in this Prospectus. See “Financial Information”,
“Operating and Financial Review” and “Material Contracts”.
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Capitalisation and indebtedness
The Company believes that the capitalisation as of 31 March 2006 represents an adequate capital
structure for the Company. The Company has limited debt in the form of long-term and short-term
finance lease liabilities and is primarily founded and capitalised by shareholders equity.
The following table sets forth the Company’s capitalisation as of 31 March 2006. The information has
been derived from the Company’s unaudited condensed consolidated interim financial information for
the first quarter of 2006 in Appendix 3.
(in thousand of NOK)
31 March 2006
Current debt
Guaranteed
Secured1)
Unguaranteed / unsecured
Total current debt
14,448
14,448
Non-current debt
Guaranteed
Secured2)
Total non-current debt
16,108
16,108
Shareholder’s equity
Share capital
Other reserves
Retained earnings
Minority interests
Total shareholder’s equity
179
49,891
(8,665)
16
41,421
Total
71,977
1)
2)
Finance lease liabilities payable no later than 1 year
Finance lease liabilities payable later than 1 year and no later than 5 years
The lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the
event of default.
Research and development
Telio has a strong focus on innovation and development of new services which are complementary to
the Company’s existing services, such as mobile VoIP services. The development department
currently consist of 10 people. Besides working on development projects, the development department
is responsible for maintenance and reconditioning of the technology platform. See “Research and
Development” for further description.
The total costs spent on the development department were NOK 7.6 million, NOK 5.7 million and
NOK 0.2 million in 2005, 2004 and 2003, respectively. In the first quarter of 2006 and 2005, costs
spent on the development department were NOK 1.7 million and NOK 1.4 million, respectively. The
costs mainly consist of wages, social expenditures and other related costs.
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Board of Directors, Senior Management and Employees
Board of Directors
The members of the Board of Directors are Mr. Erik Osmundsen (Chairman), Mr. Espen Fjogstad
(executive board member), Mr. Aril Resen (executive board member), Mr. Christian Wilhelm
Rynning-Tønnesen and Mr. Richard Kosowsky.
Management
Telio’s group management consists of Mr. Arild Nilsen (CEO), Mr. Kyrre Grinde-Andersen (CFO and
investor relations), Mr. Jens Hetland (Commercial management), Mr. Alan Duric (CTO), Mr. Jimmie
Wicklund (Sales & Marketing) and Mr. Rune Strømmen (Country manager Denmark).
Employees
As of the date of this Prospectus, the Company has 87 full time equivalent employees.
Major Shareholders and Related Party Transactions
Major Shareholders
As of the date of this Prospectus the three largest shareholders in the Company are Xfile AS (a
company wholly owned by Mr. Aril Resen) with 15.1% of the Shares, Lombard Odier Darier Hentsh
& Cie (a Swiss bank acting as custodian and as a nominee for Mr. Alan Duric) with 13.8% of the
shares and Synesi AS (a company wholly owned by Mr. Espen Fjogstad) with 12.5% of the Shares.
Together, these shareholders control 41.4% of the Shares.
Related Party Transactions
The Company has entered into certain consulting agreements with Xfile AS and with Synesi AS.
Under the consulting agreements, Xfile AS and Synesi AS, respectively, shall provide general
consulting services relating to strategy and business development. The work by Xfiles AS is carried
out by Mr. Aril Resen, and the work by Synesi AS is carried out by Espen Fjogstad. Fees for the
abovementioned services totalled NOK 1.1 million, NOK 1.1 million and NOK 0.5 million in 2005,
2004 and 2003, respectively.
The above agreements have been concluded at estimated market terms. The services of the consultants
are considered an important contribution to the Company’s strategy and business development,
however none of the transactions form part of the turnover of the Company.
Advisors and auditors
DnB NOR Markets and SEB Enskilda have acted as Managers to Telio in connection with the
Offering. KPMG AS has performed a financial and tax due diligence and Bugge, Arentz-Hansen &
Rasmussen has performed a legal due diligence on Telio according to a scope agreement with the
Managers.
The Company’s auditor since incorporation has been PricewaterhouseCoopers AS.
Additional information
Share Capital
As of the date of this Prospectus, the Company’s issued share capital was NOK 1,825,250 comprising
18,252,500 Shares, each with a par value of NOK 0.1. After the Offering, the Company’s issued share
capital will be NOK 2,125,250 comprising 21,252,500 Shares, each with a par value of NOK 0.1.
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The entire share capital consists of fully paid Shares, each with a par value of NOK 0.1. Each Share
carries one vote, and otherwise gives equal rights in the Company.
The Company’s Shares are (and the New Shares will be) in registered form, and are registered in
book-entry form with the VPS under the securities identification code ISIN NO 001 0199052. The
Company’s account operator is DnB NOR Verdipapirservice.
Articles of association
The Company’s articles of association are enclosed hereto as Appendix 1. Pursuant to the articles of
association, the Company’s objects are to develop and market IP based telecommunications solutions,
engage in consultancy business and participate in other business operations. The articles of association
provide that the Board of Directors shall be composed of three to six members elected by the general
meeting.
Documents on Display
The below listed documents are referred to in this Prospectus:
•
•
•
•
Annual report 2005
Annual report 2004
Annual report 2003
First quarter report 2006
The documents will be available for inspection for the life of the Prospectus on the Company’s
homepage www.telio.no or at the Company’s and the Managers’ head offices.
Details of the Offering and Admission to Trading
The Offering and listing of Telio’s shares on Oslo Børs is an important element of the Company’s
strategy. Through the Offering the Company will broaden its shareholder base and be able to provide a
regulated marketplace for the trading of its shares. Furthermore, the proceeds from the Share Issue will
strengthen the strategic position of the Company by improving the Company’s cash position in order
to secure funding for further growth.
The following table summarises the main terms and conditions of the Offering.
Offering:
The 3,000,000 New Shares offered by the Company and up to 1,000,000
Secondary Shares offered by the Selling Shareholders, for a total of up to
4,000,000 Offer Shares. The Offering will be organized in four separate
tranches; i) the Institutional Offering, ii) the Retail Offering, iii) the
Employee Offering and iv) the Customer Offering
Indicative Price Range:
-
NOK 31 - NOK 37 per Offer Share
Book-building Period in the
Institutional Offering:
-
From and including 18 May 2006 to 16:30 hours on 30 May 2006, subject to
extension
Application Period for the
Retail Offering, the Employee Offering and the Customer
Offering
Selling Shareholders
-
From and including 18 May 2006 to 16:30 hours on 30 May 2006, subject to
extension
The Selling Shareholders are Xfile AS (wholly owned by Mr. Aril Resen,
Board member and co-founder of the Company), Mr. Alan Duric (cofounder and member of the Company’s management), Synesi AS (wholly
owned by Mr. Espen Fjogstad, co-founder and member of the Board)
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Conditions
-
The Company and the Selling Shareholders reserve the right to withdraw the
Offering at any time prior to final allocation expected to take place on or
about 31 May 2006 (subject to extension). Completion of the Offering is
further subject to i) the Board’s decision to issue New Shares after the end of
the Book-building Period, ii) approval by Oslo Børs of the Company’s
listing application and iii) the satisfaction of all conditions for listing set by
Oslo Børs
Allocation date:
-
Notifications of allocation are expected to be issued on or about 31 May
2006
Delivery of Offer Shares:
-
On or about 2 June 2006
Payment date:
-
Expected first day of listing:
-
Number of Shares outstanding
before the issuance of New
Shares:
18,252,500 Shares, each with a nominal value of NOK 0.10
Number of shares after the
Offering:
-
21,252,500 Shares, each with a nominal value of NOK 0.10
Dilution:
-
16.4% for current shareholders
Gross proceeds of the sale of
New Shares:
-
Approximately NOK 102 million (based on the mid-point of the Indicative
Price Range)
Use of Proceeds:
Expenses:
The net proceeds are anticipated to be used for financing of the following; i)
to fund Telios international strategy, ii) to fund a more aggressive growth in
Norway if necessary and iii) to fund potential acquisitions of companies in
Norway and internationally
-
The estimated offering expenses payable by the Company are NOK 9.2
million
Summary of Risk Factors
Below is a brief summary of some of the most relevant risk factors described under “Risk Factors”.
The risks described under “Risk Factors” are not the only one facing the Company. Additional risks
not presently known to the Company or risks that the Company currently deems immaterial may also
impair the Company’s business operations and adversely affect the price of the Company’s Shares.
•
Competition: The telecommunications industry is highly competitive and the Company faces
intense competition and many of the competitors are substantially larger and better capitalised
and have the advantage of a large existing customer base. The Company’s success is
dependent on its ability to attract customers away from the existing telecommunication
providers, which may prove difficult. There can be no assurance that the Company will be
able to respond to existing and new sources of competition.
•
Decreasing telecommunication prices: The Company’s prices are currently lower than the
prices of many comparable telecommunication services, such as traditional fixed line
telephony. However, the telecommunication prices in the markets in which the Company
operates have decreased substantially over the last few years and are expected to decrease
further due to strong competition. Competition and decreasing telecommunication prices may
therefore force the Company to lower its prices to remain competitive or result in a loss of
customers and market share.
•
VoIP technology acceptance: The market for VoIP services is in a relatively early stage. Some
consumers may chose not to adopt the VoIP technology which may lead to limited acceptance
and adoption of VoIP services. This may in turn limit the Company’s ability to grow.
Furthermore, VoIP services are different from analogue telephony services in some aspects
7
which may limit the acceptance and adoption of the technology; i) the Company’s VoIP
service is interrupted in the event of a power failure or loss of internet access by a consumer,
ii) loss of power or internet access may cause significant delays and even failure of emergency
assistance calls, iii) public safety answering points may not be able to see the caller’s actual
location information and iv) there is in general a higher risk of disturbances, such as echoes
and delays in transmissions.
•
The Company’s future business prospects are to a large degree dependent on its ability to meet
changing customer preferences, to anticipate and respond to technological changes and to
develop effective and competitive relationships with its customers. There can be no assurance
that the Company will be able to successfully respond to new technological developments and
challenges or identify and respond to new market opportunities and new services. The
Company’s efforts to respond to technological innovations and competition may require
significant financial investments and resources.
•
In the present Norwegian telecom market, smaller players like Telio are dependent on the
existence of network access regulation of the highly dominant player, Telenor. In the absence
of efficient regulation, there is a risk of anti-competitive measures being applied by Telenor,
such as predatory pricing or, margin squeeze, or refusal to supply telecom services to the
Company which could adversely affect Telio in the future. There is a general risk related to
the efficiency and timeliness of Norwegian surveillance authorities in ensuring compliance
with the regulations. Furthermore, in the event Telenor should not adhere to the regulatory
requirement of granting interconnection access to anybody asking for it, it may adversely
affect the Company’s business and financial condition and results of operations.
•
Due to the fact that the Company is rendering internet content services to private individuals
in Norway from a Swiss subsidiary, the Swiss subsidiary may invoice the Norwegian
customers at a rate of Swiss VAT of 0%. In this respect it should be noted, that the VAT issue
is mainly a consequence of the chosen structure and not an independent motive. The VAT
authorities have a constant focus on companies which, due to their choice of structure, are
rendering services which are VAT exempt because of inconsistencies in the Norwegian VAT
legislation as this leads to distortion of competition in disfavour of Norwegian suppliers of the
same service. Thus, there is a risk that the VAT authorities may question the reality of the
structure chosen by Telio.
•
The market price of the Shares could fluctuate significantly in response to quarterly variations
in operating results, adverse business developments, changes in financial estimates by
securities analysts and / or changes to the regulatory environment in which the Company
operates.
8
RISK FACTORS
Readers of this Prospectus should carefully consider all of the information contained herein, and
in particular the following factors, which may affect some or all of the Company’s activities and
business, and which may make an investment in the Offer Shares one of high risk. This list is not
exhaustive. The actual results of the Company could differ materially from those anticipated as
a result of many factors, including the risks described below and elsewhere in this Prospectus.
Competition
The telecommunications industry is highly competitive. The Company faces intense competition from
traditional telephone companies, wireless companies, cable companies and alternative voice
communication providers. Most of the traditional telephone companies, wireless companies and cable
companies are substantially larger and better capitalised and have the advantage of a large existing
customer base. The Company’s success is dependent on its ability to attract customers away from the
existing telecommunication providers which may be difficult. Many of the Company’s competitors
can use substantial resources to develop competing services that may be more attractive to customers.
In addition, some of the Company’s competitors offer other services, such as cable and wireless
communication, and may bundle voice over internet protocol (“VoIP”) services with other products to
create a more attractive service offering for customers than the Company’s services.
There can be no assurance that the Company will be able to respond to existing and new sources of
competition. The strong competition in the telecommunications industry and competition between
alternative voice communications providers may lead to that it will be more difficult for the Company
to attract and retain customers, result in lower prices for the Company’s services or a loss of market
share. Competition may therefore have material adverse effects on the Company’s business, financial
condition and results of operations.
Decreasing telecommunication prices
The Company’s prices are currently lower than the prices of many comparable telecommunication
services, such as traditional fixed line telephony. However, the telecommunication prices in the
markets in which the Company operates have decreased substantially over the last few years and are
expected to decrease further due to strong competition. Customers who currently use the Company’s
services due to lower prices may switch to other service providers if the Company is not able to offer
services at attractive prices. Competition and decreasing telecommunication prices may therefore force
the Company to lower its prices to remain competitive. Decreasing telecommunication prices may
result in a loss of customers and market share if the Company is unable to remain competitive and
reduce the Company’s operating results and profitability.
VoIP Technology Acceptance
The market for VoIP services is in a relatively early stage. Some consumers may chose not to adopt
the VoIP technology which may lead to limited acceptance and adoption of VoIP services. This may
in turn limit the Company’s ability to grow.
Furthermore, VoIP services are different from analogue telephony services in some aspects which may
limit the acceptance and adoption of the technology:
•
Different from analogue fixed line telephony services (but similar to ISDN), the Company’s
VoIP service is interrupted in the event of a power failure or loss of internet access by a
consumer.
9
•
Access to emergency calling services: similar to ISDN, loss of power or internet access may
cause significant delays and even failure of emergency assistance calls. In addition, public
safety answering points may not be able to see the caller’s actual location information.
•
Although VoIP will give better call quality through wide band voice, there is in general a
higher risk of disturbances, such as echoes and delays in transmissions.
Technological Development
The telecommunications industry is characterised by rapid changes in technology, new evolving
standards, emerging competition and frequent new product and service introductions. The Company’s
future business prospects are to a large degree dependent on its ability to meet changing customer
preferences, to anticipate and respond to technological changes and to develop effective and
competitive relationships with its customers. There can be no assurance that the Company will be able
to successfully respond to new technological developments and challenges or identify and respond to
new market opportunities and new services. Future technological development could have material
adverse effects on the Company’s business, financial condition and results of operations.
In addition, the Company’s efforts to respond to technological innovations and competition may
require significant financial investments and resources. Furthermore, there can be no assurance that
the Company will have the necessary financial and human resources to respond to new technological
changes and innovations and emerging competition.
Dependence on Retaining and Recruiting Knowledgeable Employees
The rapid growth of the Company has placed substantial demands on the Company’s management and
operations. The Company’s success depends in a large part upon its ability to recruit, motivate and
retain highly skilled employees with the functional and technical skills and experience necessary to
develop and deliver the Company’s services. The limited supply of such qualified employees means
that the competition for such employees is intense and there can be no assurance that the Company
will be able to recruit, motivate and retain sufficient numbers of qualified employees in the future. A
failure to do so could have a material adverse effect on the Company’s business, financial condition
and results of operations.
Interruptions and Dependence on Third Party Facilities and Equipment
Parts of the Company’s operations are dependent upon facilities and equipment owned and operated
by third parties and therefore beyond the Company’s control. These include a broadband internet
connection, alternatively other internet connections such as cable, and electrical power supply. If there
are interruptions in the internet connection or electrical power supply the Company’s customers will
not be able to make or receive calls, including emergency calls. Furthermore, the Company is also
dependent upon several data connection points operated by third parties. Failure of such connection
points may lead to customers experiencing interruptions when making or receiving calls. The
Company’s customers have experienced interruptions in the past due to failure of facilities and
equipment operated by third parties and will experience service interruptions in the future.
Interruptions may adversely affect the perceived reliability of the Company’s services and may lead to
a loss of customers and market share, difficulty in attracting new customers, failure of acceptance of
the VoIP technology and negative reputation, all of which will have material adverse effects on the
Company’s business, financial condition and results of operations.
Capital to pursue the Company’s growth strategy
The Company pursues a strategy of strong growth. The Company has invested significant amounts
with regards to product development and marketing. Additional investments may be required to pursue
further growth and to respond to technological innovations and competition. There is no guarantee that
the Company will be able to obtain additional funds on favourable terms or funds at all. Failure to
10
obtain additional financing may adversely affect the Company’s operations, financial condition,
profitability and ability to maintain growth.
Risks Related to Regulation
In the present Norwegian telecom market, smaller players like Telio are dependent on the existence of
network access regulation of the highly dominant player, Telenor. Telenor is the largest provider of
telecom services in Norway, as well as the key supplier on the wholesale level. In the absence of
efficient regulation, there is a risk of anti-competitive measures being applied by Telenor, such as
predatory pricing or margin squeeze which could adversely affect Telio in the future. There is a
general risk related to the efficiency and timeliness of Norwegian surveillance authorities in ensuring
compliance with the regulations.
Interconnection is required to complete voice and internet transmissions that originate and / or
terminate outside the Company’s network. Under Norwegian telecommunications law, providers of
public telecommunications networks and services with significant market power such as Telenor, are
required to negotiate and enter into interconnection agreements with Telio. In the event Telenor should
not adhere to the regulatory requirement of granting interconnection access to anybody asking for it, it
may adversely affect the Company’s business and financial condition and results of operations.
Tax risks
Services from Telio are delivered from two different independent companies. Telio Telecom AS
provides VAT liable telecommunication services. Telio SA, a Swiss subsidiary, provides peer to peer
internet protocol (“IP”) communication services which are regarded as internet content services. The
services are billed from the company from which they are rendered.
The Swiss subsidiary is set up to be the main provider of peer to peer IP communication services on a
European level within Telio.
Due to the fact that Telio SA as a foreign company is rendering internet content services to private
individuals in Norway, the Swiss company may invoice the Norwegian customers at a rate of Swiss
VAT of 0%. In this respect it should be noted, that the VAT issue is mainly a consequence of the
chosen structure and not an independent motive.
The VAT authorities have a constant focus on companies which, due to their choice of structure, are
rendering services which are VAT exempt because of inconsistencies in the Norwegian VAT
legislation as this leads to distortion of competition in disfavour of Norwegian suppliers of the same
service. Thus, there is a risk that the VAT authorities may question the reality of the structure chosen
by Telio.
In the second half of 2005 "Oslo Fylkesskattekontor" announced an ordinary tax /VAT audit of Telio
Sip Services SA (now Telio SA). This audit has not been executed. However, "Oslo
Fylkeskattekontor" has asked the Norwegian Post and Tele Communications Authorities to evaluate to
what extent Telio SA should be registered as a provider of ecomservices in Norway pursuant to the
provisions of "Ekomloven"; said evaluation might have possible repercussions on the VAT issue.
To some extent, the Company uses consultants that provide consulting services relating to (among
other things) strategy and business development. Tax authorities have a focus on use of consultants,
and there is always a risk that they could question whether a given consultancy arrangement should be
reclassified as an employment relation in relation to applicable employment legislation and for tax
purposes. In the event that authorities should successfully claim this, such reclassification could result
in additional liabilities and costs for the Company in relation to among other things withholding taxes
and social security payment.
11
Telio’s share prices may experience volatility
The market price of the Shares could fluctuate significantly in response to quarterly variations in
operating results, adverse business developments, changes in financial estimates by securities analysts
and / or changes to the regulatory environment in which the Company operates.
The market price of the Shares could decline due to sales of a large number of Shares in the Company
in the market or the perception that such sales could occur. Such sales could also make it more
difficult for the Company to offer equity securities in the future at a time and at a price that is deemed
appropriate.
Enforceability of civil liabilities
The Company is organised under the laws of Norway. Currently, some of its directors are residents of
Norway, and a substantial portion of its assets is located in Norway. As a result, it may not be possible
for non-Norwegian investors to effectuate service of process in their own jurisdiction on the Company
or any of such persons, or to enforce against them judgements obtained in non-Norwegian courts.
Norway is party to the Lugano Convention and a judgement obtained in another Lugano Convention
state will in general be enforceable in Norway. However, there is substantial doubt as to the
enforceability in Norway of judgements of non-Lugano Convention state courts.
Shareholders may be diluted if they are unable to participate in future offerings
Because non-Norwegian investors may be unable to participate in future offerings, their percentage
shareholding may be diluted. Unless otherwise resolved by the general meeting, shareholders in
Norwegian public companies such as the Company have pre-emptive rights proportionate to the
aggregate amount of the shares they hold with respect to new shares issued by the Company. For
reasons relating to foreign securities laws or other factors, foreign investors may not be able to
participate in a new issuance of shares or other securities and may face dilution as a result.
12
STATEMENTS
Responsibility statement by the Board of Directors
The Board of Directors of Telio confirms that, having taken all reasonable care to ensure that such is
the case, the information contained in the Prospectus is, to the best of our knowledge, in accordance
with the facts and contains no omissions likely to affect the import of the Prospectus.
Oslo, 16 May 2006
Erik Osmundsen
(Chairman)
Espen Fjogstad
Aril Resen
Christian Wilhelm Rynning-Tønnesen
Richard Kosowsky
Responsibility statement by the Selling Shareholders
The Selling Shareholders confirm that they have full ownership to the Shares being offered as
stipulated in “Terms and conditions of the Offering”, that the Secondary Shares will be offered
pursuant to the terms and conditions stated in this Prospectus, and that any Secondary Shares sold will
be sold free of any encumbrances.
Oslo, 16 May 2006
Xfile AS
Alan Duric
Synesi AS
Statement by the Managers
DnB NOR Markets and SEB Enskilda have acted as Managers to Telio in connection with the
Offering.
The Prospectus has been prepared by the Board of Directors and management of the Company, in cooperation with the Managers and their respective advisors. The Managers do not, however, make any
representation, warranty or undertaking, express or implied, and accept no responsibility or liability as
to the accuracy or the completeness of the information contained in this Prospectus or any other
information supplied in connection with the Offering. Nor can the Managers accept any legal or
financial liability in relation to any decision to accept the Offering reached on the basis of the
information in this Prospectus or any other information supplied in connection with the Offering.
KPMG AS has performed a financial and tax due diligence and Bugge, Arentz-Hansen & Rasmussen
has performed a legal due diligence on Telio according to a scope agreement with the Managers.
Oslo, 16 May 2006
DnB NOR Markets
SEB Enskilda
13
INFORMATION ABOUT THE COMPANY
Incorporation, registered office and registration number
Telio Holding ASA is a Norwegian public limited liability company organised under the laws of
Norway. The Company was incorporated 12 August 2003 as a private limited liability company (AS)
under the name Telio AS, but renamed Telio Holding AS after a legal reorganisation of the Company
in 2005. Telio Holding AS was converted to a public limited liability company (ASA) by decision of
the general meeting on 7 April 2006.
The Company’s registered office and principal place of business is at Støperigaten 2, N-0250 Oslo,
Norway. The Company’s telephone number is +47 21 49 65 65.
The Company’s business registration number with the Norwegian Register of Business Enterprise is
985 968 098.
History and Development
The following table sets forth the most important milestones in the Company’s history since
incorporation.
Year
August 2003
November 2003
January 2004
February 2004
August 2004
September 2004
October 2004
October 2004
November 2004
December 2004
December 2004
January 2005
April 2005
May 2005
August 2005
September 2005
October 2005
November 2005
Year end 2005
January 2006
February 2006
March 2006
Event
Telio was established by Mr. Alan Duric, Mr. Espen. Fjogstad and Mr. Aril Resen
First live calls carried out
First pilot customers
Commercial launch of the Company’s VoIP services
Scandinavian flat rate introduced
The Company’ received the Pulver 100 Award
Musimi in Denmark was acquired
White label with InterNLnet in Holland launched
The Company entered into a distribution agreement with Narvesen
Awarded data product of the year by PC World Norge
Second white label agreement launched
Telemarketing added as distribution channel
OEM agreement in Sweden
Dutch OEM partner launches Optibel service (www.optibel.nl)
New management in place
The Company received the Pulver 100 Award for the second time
Swedish OEM platform accepted
OEM deal in the Netherlands (XMS Media services) launched
Tellio Denmark launched
Nearly 79,000 subscribers in Norway, Denmark and the Netherlands
Telio invested in new interconnect platform
Purchase of the JustIP brand name and domain, sales agreement and TV advertising time
with TV2 were launched
White label agreement with Glocalnet in Sweden terminated when Glocalnet was
acquired by Norwegian telecom incumbent Telenor
Investments
Telio’s capital expenditures totalled NOK 48.3 million, NOK 27.4 million and NOK 0.7 million for
the years ended 31 December 2005, 2004 and 2003, respectively. During the first quarter of 2006
capital expenditures totalled NOK 23.1 million. Capital expenditures include property, plant and
equipment and intangible assets.
Capital expenditures in 2003 were mainly related to investments in hardware to set up the Company’s
VoIP technology platform. Capital expenditures in 2004 included NOK 9.5 million in intangible assets
14
(development of technology platform, and deferred direct and external customer acquisition costs) and
NOK 17.9 million in tangible fixed assets such as telephone adapters (see description below) and
hardware equipment. Capital expenditures in 2005 of NOK 48.3 million comprise investments of
NOK 24.1 million in intangible assets and NOK 24.2 million in tangible fixed assets. Capital
expenditures in the first quarter of 2006 mainly comprise an investment in interconnection equipment
(Common Channel Signalling System No. 7, SS7), adapters and deferred customer acquisition costs.
The main part of the Company’s capital expenditures is telephone adapters, which make up the
residential gateway that provides an interface between analogue calls from a telephone and the VoIP
network. Most of the capital expenditures in tangible assets (i.e. adapters and other hardware
equipment) are financed via a lease agreement with IBM Global Finance and are treated as financial
leases.
Investments in intangible assets mainly comprise investments in Telio’s VoIP technology platform.
The platform is based on open source codes and internal development. Furthermore, intangible assets
include directly attributable external costs related to customer acquisition and connection expenses. A
portion of customer acquisition costs and connection expenses are capitalised to the extent as to the
related deferred connection fees revenues, and amortised over a corresponding period of time
(currently 5 years). Other costs related to customer acquisition and connection activities are expensed
as incurred.
15
BUSINESS OVERVIEW
Introduction to VoIP
VoIP (voice over internet protocol, also referred to as ‘broadband telephony’) is a technology that
enables consumers to replace traditional phone lines with a phone service using the internet and add on
new services that traditional phone providers cannot offer. With VoIP, voice data is converted into
data packets and transmitted over the internet with an address field identifying the end user by a
Session Initiation Protocol (“SIP”) address rather than a phone number. The SIP address looks much
the same as an email address with the form [email protected] where 22149792 is a randomly chosen
telephone number. At the receiving side the data is converted back to voice data and the internet
protocol (IP) address to a phone number. The technology enables lower infrastructure costs because
VoIP utilises the same infrastructure that is used to deliver other types of internet services such as
news, home pages, search, etc., and because many different users can share the same resources. It is
easy to understand the multi modality inherent in IP, namely that the data packets can transport any
type of information whether it is voice, music, news, etc. VoIP is very much like email where the user
can attach different media to an email (music, film, etc.) Thus, internet and VoIP is a very powerful
alternative to the traditional telephone networks.
The concept of VoIP has existed for more than 10 years. However, the technology has not come of age
until the last 3-4 years due to improvements in broadband penetration and sharp increases in computer
processing power, allowing for significantly improved sound quality. VoIP services have recently
started to replace fixed line services, thus, taking away large amounts of existing traffic and revenues
from the incumbents.
As a result of lower infrastructure costs, VoIP providers are able to offer telephony services at lower
prices than the traditional telecom companies. Incumbents might therefore find it hard to defend their
current dominant market positions in markets where VoIP is introduced.
Telio background
Inspired by the rapidly emerging broadband telephony trend, a small and unique team of people
founded Telio in 2003. The team brought together extensive and complementary experience from
telecommunications, VoIP, information technology and business start-ups. The business idea was to
create an access-independent VoIP provider that could, initially, take advantage of the rapidly
increasing broadband penetration among Norwegian households, and, subsequently, develop an
international business. On this basis, Telio designed and built a technological platform based on a
combination of state-of-the-art open source IP technology and internally developed software. The
platform was built flexible and scalable, enabling rapid introduction and evolution of features.
The Company has so far focused on replacing fixed lines in the residential market. The next step will
be to move into mobile operations and to expand the business internationally. The Company believes
that VoIP will be integrated with mobile phones in the near-term and that this could represent an
important shift in the telecom industry as mobile traffic is generally higher priced than fixed line
traffic.
Based in Norway, Telio has become one of the leading European supplier of broadband telephony, and
by far the largest provider of broadband telephony to residential users in Norway.
Revenue model
Telio’s basic offering to its customers is VoIP communication services. A customer on the Telio
service is defined as an end user that has entered into a subscription agreement (either Telio Medium
or Telio Mini) with the Company. The monthly fee is the basis for the subscription revenue model of
the Company. The revenue model thus has similarities to a traditional telecom company, but differs in
some important aspects – tariffs are set to offer free calling or low-priced calling and the service
16
includes innovative and free features, communication tools and technologies. In combination with
personal customer support, Telio’s offering has the clear characteristics of a premium internet content
provider.
In Denmark, Telio owns a brand called Musimi. The Musimi business model is different to Telio in
that it is a zero fixed fee with calling charges only. It is also a platform for the technically literate
customers since any kind of CPE can be connected to the service. As a consequence, the customers are
defined as number of accounts opened. Not all opened accounts are still active accounts.
Telio’s overriding objective is to to maintain the current monthly fee level (NOK 159 for Telio Mini
and NOK 199 for Telio Medium). The Company believes the means to achieve this in a competitive
market is through continuously launching new free features bundled with the product offering, and to
reduce calling prices per minute to international destinations and / or to mobile phones in Norway.
However, reductions in calling prices will be done based on reduced calling costs to Telio. Telio
believes that the combination of a tailored price plan and attractive features will retain existing
customers and attract new ones. Although Telio is focused on offering “calling minutes for free”, the
Company does charge its customers for traffic fees to certain countries and to mobile phones. But,
unlike in the revenue model of a traditional telecom provider, Telio believes that these traffic fees over
time will be of less importance to the overall revenues of the Company.
The price plan is considered to be favorable for heavy users of telephony as there are virtually no
calling charges, only fixed fees, hence Telio provides a price plan that is very easy to communicate
and to understand for the customer. The Company’s subscriber spends more time on calls than the
average mobile, private or business user. The graph below shows the average daily in- and outgoing
minutes per telecom technology and the same data for a typical Telio subscriber.
The Company’s variable costs mainly comprise traffic fees, i.e. termination and connection costs for
calls from the IP network to fixed networks or mobile networks, and selling and marketing costs. The
fixed cost base mainly comprises salaries and personnel costs, other expenses (such as rentals) and
depreciation and amortization costs. Directly attributable external costs related to customer acquisition
and connection are capitalized and amortized over the average expected duration of a customer
relationship. The Company has concluded that such costs should be capitalized only to the extent as to
the related deferred connection fees revenues. Other costs related to customer acquisition and
connection activities are recognised as expense as incurred.
Minutes per day
35
30
25
20
15
10
5
0
M obile
PSTN / ISDN private PSTN / ISDN business
Telio subscribers
Source: Norwegian Post and Telecommunications Authority (“NPT”) and Telio
Telio has been very successful in getting attention and attracting customers. Since incorporation in
2003, the Company has built up a position as the clear VoIP leader in Norway with nearly 91,000
customers as of the end of Q1 2006. According to NPT’s statistics announced 8 May 2006, Telio had a
market share of 35.8% as of January 2006.
17
Subscriber development 2003 – Q1 2006 (in thousands)
100
90
80
70
60
50
40
30
20
10
0
2003
2004
Q2 2005
Norway
Q3 2005
Denmark
Q4 2005
Q1 2006
Netherlands
Source: Telio, approximately13,100 subscribers in Denmark are not paying fixed monthly subscription fees, only minute fees.
During 2005 Telio cancelled 3,700 inactive customers in Norway
Development in total revenues (in thousand of NOK)
180,000
162,126
160,000
140,000
120,000
100,000
80,000
66,198
60,000
40,000
20,000
0
28,945
27,843
45
2003 (NGAAP)
Source: Telio annual and quarterly reports
2004
2005
Q1 2005
Q1 2006
Key factors for Telio’s success
In the Company’s opinion, the following elements in Telio’s strategy and vision have been important
for the Company’s successful development and growth:
Excellent value proposition
• Clear focus on one specific segment - high volume telecom users
• Attractive price plans – potential for cost savings and cost predictability is easy to understand
for users
• Innovative services and most new features included for free in the Company’s VoIP offering
creating high switching barriers
• A product that is independent of broadband technology and the geographical location of
broadband connection and vendor, thereby enabling Telio to offer VoIP services to the whole
market place
• Plug and play service establishment with immediate provisioning as cables are connected
18
World leading platform
• Customer scalability
• Stable platform with telecom like uptime on service and quality
• Flexible platform, easy to launch new services quickly
• Financial scalability (no capacity related-fees to third-party vendors since the platform is built
by Telio)
World class execution
• Management with solid understanding of how to manage high growth and scalable businesses
that compete in consumer markets
• Industry leading engineers developing new technological advantages
Visionary thinking
• Telio was founded by VoIP pioneers with solid understanding of how the internet and VoIP
technology will evolve and how Telio can benefit from new developments
Creating loyal communities
• Knowledge of service initially based on word-of-mouth
• ‘Recruit a friend’ service tapping into Telio customers’ personal networks
A “consumer approach” to the Telio concept for broadband telephony
The telephone line to residential houses consists of two parts. One part has previously been used
exclusively for data traffic. This is the part for which subscribers pay the ADSL charge to get
broadband. The other part can only be used for traditional telephony and is reserved for traditional
telecommunications operators, such as Telenor in Norway. All operators that wish to offer voice
services using traditional technology must pay the national incumbent (e.g. Telenor) for “last mile”
access to the person you are calling. The operators invoice these costs to the subscriber.
Telio differs from traditional operators by using new technology that enables the Company to offer the
same voice services over the broadband line that the subscriber already pays for (in technical terms
this is called IP communication based on SIP). In its simplest form the service is experienced in just
the same way as traditional telephony, but IP communication based on SIP also allows for video
communication, calls in combination with instant messaging etc. The subscriber can retain his or hers
original telephone number for calls with the ‘normal’ telecommunications network.
The Company’s cost savings from using broadband access, i.e., infrastructure costs, are used, among
other things, to give the consumer cheaper and better services than what is possible for the traditional
telecom companies. In order for the Company’s customers to call outside of the Telio network, Telio
has an interconnect agreement with Telenor in Norway. Telio pays a small sum per minute of call
duration, but gives this for free to the customers. The same applies for a large number of international
destinations.
Telio product offering
The Company’s concept is to offer telephony at a fixed subscription fee with as much free calling and
innovative features included as possible. Telio has the largest amounts of free or partially free calling
to international fixed line destinations. 23 destinations are unlimited free, 111 further destinations are
partially free.
Telio currently offers two different subscription services, Telio Mini and Telio Medium.
Subscription offering Establishment fee**
Telio Mini*
NOK 495
Telio Medium*
NOK 495
Monthly subscription fee Specifications
One number, either new or
NOK 159
existing number
Two numbers, either new or
NOK 199
existing numbers
*Adapter included
** Establishment fees may differ during marketing campaigns
19
The Company’s plug-and-play telephone adapter which translates the signal from the normal
telephone to data traffic is shown below.
The table below sets out the tariffs independent of the monthly subscription fee.
Regions
Tariffs
Norway
Group 1
Group 2
Group 3
Group 4
Connection fee: NOK 0.00
Minute rate: NOK 0.00 (fixed line)
Minute rate: NOK 0.89 (mobile)
Sweden, Denmark, Finland, Island, UK, Ireland, Holland, Belgium, Connection fee: NOK 0.00
Luxemburg, France, Monaco, Spain, Canary Islands, Portugal, Minute rate: NOK 0.00
Germany, Switzerland, Austria, Liechtenstein, Italy, Vatican state,
USA, Canada
Argentina, Australia, Chile, Estonia, Greece, Hong Kong, Israel, Connection fee: NOK 0.00
Japan, China, Croatia, Malaysia, New Zealand, Poland, Puerto Rico, Minute rate: NOK 0.00 for up to 100
Russia, San Marino, Singapore, Slovakia, Slovenia, South Korea, minutes per month (total), after that
Taiwan, Czech , Hungary
NOK 0.49 per minute
Andorra, Bahamas, Bermuda, Brazil, Brunei, Bulgaria, Colombia, Connection fee: NOK 0.00
Costa Rica, Gibraltar, Guadeloupe, Guam, India, Jamaica, Cypress, Minute rate: NOK 0.00 for up to 50
Malawi, Pakistan, Panama, Peru, Sri Lanka, South Africa, Thailand, minutes per month (total), after that
Turkey, Venezuela, Virgin Islands (US)
NOK 0.99 per minute
Albania, Algeria, Anguilla (Leeward-Islands), Armenia, Aruba, Connection fee: NOK 0.00
Bangladesh, Barbados, Benin, Bolivia, Bosnia-Herzegovina, Minute rate: NOK 0.00 for up to 25
Botswana, Burundi, Cayman-islands,
Netherland Antilles, minutes per month (total), after that
Dominican Republic, Central African Republic, Ecuador, El NOK 1.99 per minute
Salvador, Philippines, French Guyana, Gabon, Georgia, Ghana,
Grenada, Guatemala, Indonesia, Iran, Virgin islands (UK),
Kazakhstan, Kyrgyzstan, Congo, Kuwait, Laos, Latvia, Lebanon,
Lithuania, Macau, Macedonia, Malta, Martinique, Mexico,
Moldova, Mongolia, Mozambique, Namibia, Niger, Nigeria,
Paraguay, Reunion, Romania, Rwanda, Saipan, Samoa US, Serbia &
Montenegro, Swaziland, Trinidad & Tobago, Uganda, Ukraine,
Uruguay, Uzbekistan, Zambia, Zimbabwe
Product features
Telio’s broadband telephony service includes a number of free innovative features that are not offered
by traditional telecom providers. In addition, Telio is also delivering more traditional features, such as
call forwarding, Call ID, etc.
Simple to use and install
The offerings are tailor-made and targeted towards end users who appreciate simplicity with regard to
technical setup. When subscribing for the Company’s VoIP services the customer receives a unique
SIP address. This address makes it possible for Telio to arrange the subscriber’s communications
irrespective of where in the world he or she has broadband access, i.e.built in mobility. The subscriber
will also be sent a telephone adapter which translates the signal from a normal telephone signal to data
20
traffic. The subscriber only needs to connect a normal analogue telephone, fixed or wireless, to the
adapter and the adapter to the broadband socket (plug and play) for automatic provisioning.
Installation is just as simple as connecting any kind of “normal” telephone. If the subscriber wishes to
use the computer online at the same time as the telephone is connected, the subscriber only needs to
connect the computer to a separate port on the adapter. The Company also offers home-installation
services if the customer needs assistance.
Customer Support
VoIP is inherently more scalable than PSTN as the only thing needed to increase scale is to add cheap
server capacity and because there is no legacy network to consider. Customer support is however, still
deemed important by the Company and a good and knowledgeable support function is important for
Telio’s customers. As customer support is manpower demanding, the support department will be
stepwise increased dependent on the amount of calls to the support centre. This is as much driven by
customer growth as by the installed customer base as customers normally demand more support during
the first 2-3 weeks of service.
Customer support is organised as a separate unit under the sales and marketing division. The average
waiting time for support over phone is currently approximately 2 minutes. Telio has outsourced
support on billing to Svea Finans AB, which also handles invoice collection for Telio. Other inquires
are handled by the Company’s customer support organisation. Telio’s CRM system has been
developed internally and is completely integrated with the Company’s technology platform. In this
way, Customer support has a lot of tools available that makes the handling of customers more
efficient. Customer support is organised into first line support and second line billing and second line
technical support. The solution development and research department in Telio handle third line
support. All personnel in Customer Support are trained internally by support personnel and technical
personnel to ensure quality.
Customer cancellation and churn
The Company’s VoIP offering is designed to minimise churn as it offers superior value to high volume
telecom users. Telio has defined a policy of not releasing churn figures. Actual churn defined by
subscribers with a dial tone leaving the Company to a competitor, is considered low by telecom
standards.
Telio puts a lot of efforts into reducing legal cancellation as customers buying services or products can
cancel the service within 14 days after purchase in Norway. Legal cancellation varies depending on
how the customer signs up for the Company’s VoIP services. Cancellations by customers that signed
up for services through telemarketing has so far been at a higher than acceptable level, while
cancellations from customers that signed up for services through other marketing channels are at
acceptable levels. Telio has dedicated support personnel that focus on reducing actual churn and, most
importantly, cancellations.
Initial check of customers
As the Company’s customers need a broadband connection in order to use Telio’s services, the
Company has not deemed it necessary to perform a credit check of new customers. Telio has
experienced some fraud either by customers using false names or from customers ordering services
from abroad. The Company has therefore initiated an address check on all new customers. However,
for the mobile product which will be introduced, a credit check will be implemented because the
potential downside of fraud is higher.
Billing
The billing platform has been developed in-house to suit specific needs of Telio’s service offering.
Simplicity of the system (for scaling purposes) and limited time-to-market for new features are
important requirements. The platform comprises the following parts: engine for recurring monthly
21
charging like subscription and traffic, engine for non-recurring service charging like connection fees
and rating engine for the call detail records. All services are billed from this platform. The new mobile
feature will be integrated into the Telio billing system and the customer will only see a new line item
on the bill.
Flexible access-independent platform
Telio’s business model is based on a clear technological edge and a truly network-independent
offering. The unique platform enables the Company to carry out its operations with very low levels of
investments. Traditional networks, which require that each user's telephone is connected to a central
office circuit switch, are expensive to build and maintain. In contrast, VoIP networks route calls over
the Internet using either soft-switches or software, both of which are less expensive than circuit
switches. Basically, Telio needs the IP address only. Without investing and building new
infrastructure, Telio can roll out its offering to an unlimited number of VoIP subscribers and only add
cheap server capacity as customers get online. This enables Telio to operate with lower capital
expenditures and operating costs while offering both traditional and innovative service features.
Contrary to Telio’s softswitch IP network, traditional circuit switched networks (such as PSTN / ISDN
and GSM) use dedicated circuits that allot fixed bandwidth to a call throughout its duration, whether
or not the full bandwidth is being used throughout the call to transmit voice signals. The Telio solution
use bandwidth more efficiently, allocating it instead based on usage at any given moment. VoIP
technology also presents the opportunity to offer customers attractive features that traditional
telephone networks cannot easily support, such as online call management and self-provisioning (the
ability for customers to change or add service features online).
Network operators, such as NextGenTel and Telenor, are offering VoIP to their DSL / broadband
subscribers. However, their platforms are not network independent, i.e., they can only sell their
product to their own broadband subscribers. Telio’s flexible and access-independent platform enables
the Company to provide its services to the customers on almost all networks available (ADSL, fiber,
WLAN, WiMax, etc.). By being access-independent Telio can sell VoIP services to all broadband
subscribers in Norway (approximately 1 million subscribers by the end of 2005 according to OECD).
In addition, it does not matter where in the world the customers are when making / receiving calls
(built in mobility). This means that the customers can bring their adapter to another country and plug it
into a broadband connection and start calling using their Norwegian number and the Norwegian price
plan. However, since this means exporting geographical Norwegian numbers, the Norwegian regulator
has banned marketing of this specific feature.
Telio has developed its own provisioning server. When customers have connected the cables,
provisioning software embedded in the adapter (externally developed according to Telio’s
specifications), ensures that the adapter is immediately connected to the Company’s servers and is
provisioned with a dialing tone. This feature is fundamental to the Telio offering because it allows
access independence and is a great feature for the customer as they can move the adapter around with
them. However, due to the consumer’s ability to use the adapter away from the house, Telio is not yet
able to route emergency calls properly (the emergency call service still believes the adapter is in the
house). This is because legacy emergency systems use geographical numbers to verify the location of
an emergency, and not the IP address of the phone. Regardless of this, Telio satisfies all current EU
regulations related to emergency calls, but have an exemption (like most other VoIP companies) from
the more stringent Norwegian requirements where you need to send the customer’s address as well.
Telio will however, meet all Norwegian requirements by year-end 2006 at the latest. Below is an
illustration of the Telio platform:
22
Telio VoIP platform
Pure SIP based
In internet side
Source: Telio
Telio has an end point management system that ensures adapter status management and firmware
upgrade of the adapters. The end point management system is very much used by the customer support
function to faster resolve adapter related problems. It also reduces the need to replace adapters
unnecessary. By upgrading the firmware on the adapters, Telio can provision new services on the
adapter as well as update the software for bugs. Telio has established a Network Operations Centre
that manages the platform at all times. In addition, performance parameters are available for the
technology department and management through a password operated web interface.
The Company also has a proven adaptability to international numbering plans and services on its own
platform in place in 4 countries.
In February 2006, Telio invested in a direct interconnect with Telenor in Norway. Until then,
termination of traffic in Norway had been routed through partners. The immediate effect of the
investment is to reduce termination costs in Norway and increase incoming termination revenues. See
“Material Contracts” for a description of the interconnect agreement with Telenor.
Vision, mission and goals
Vision
From the outset, Telio's overriding vision has been to “make telecom minute fees a thing of the past”.
Mission
Telio’s mission is to become the leading access-independent VoIP provider in Europe with special
focus on high volume users of fixed and mobile communications.
Goals
Telio has a two-pronged goal to accommodate its mission:
•
•
Product dimension: Telio is currently a VoIP operator. From this base, Telio will take
advantage of fixed mobile convergence services to become a mobile operator on the service
layer, much the same as Telio is a VoIP operator on the fixed broadband service layer today.
Geographical dimension: Telio has already started its geographical expansion and the
intention is to intensify this expansion
23
Strategy
The strategies Telio employ to reach the goals in the product dimension are:
•
Segment the market and offer a clear value proposition to the Company’s target segment
which is consumers with high communication volumes. Telio’s focus is on developing a
targeted product to users with high volume of communications, i.e., a 100% tailored product
to 20% of the market as opposed to a 20% tailored product to 100% of the market. The
Company believes this reduces customer acquisition costs and increases customer loyalty.
•
Continuous innovation to keep customers loyal and create new business opportunities
The strategies Telio employs to reach the goals on international expansion are:
•
Use the complex regulatory situation in Europe to Telio's advantage by creating favorable
product offerings before the regulators open the market
•
Use the community-oriented viral growth model to get a head start, such as expansion through
word of mouth and ‘recruit a friend’ services, that have been very successful in Norway. Telio
will also follow its customers’ calling patterns to look for potential international customers
Sales and marketing strategy
Telio use a number of sales and marketing channels in the process of building a strong brand and to
recruit new customers with low customer acquisition cost.
The Company’s two main sales channels are telemarketing and web advertisement. Other sales
channels used are retail, stand sale and viral marketing.
Telemarketing
Telemarketing was introduced as a sales channel during 2005 and has been an important direct sales
channel for Telio ever since. With telemarketing, Telio can communicate directly to prospects in
segments that are most likely to purchase the service. Before sales calls are made, Telio evaluates
whether customers’ have the infrastructure in place to sign up for the service (i.e., whether they have
broadband), their likely purchase intent, demographics, etc. Analysis of purchase intent and customer
segments was logged throughout 2005.
AS) named Salgssenteret Lillehammer AS. The Company expects that having telemarketing in-house
will help reduce cancellations from customers. See “Events subsequent to the first quarter of 2006” for
further description.
Web advertisement
Since the launch of Telio, internet has been the most important way of communicating with prospects
and customers. Most customers have registered through the Company’s homepage (www.telio.no).
During 2004 and 2005 the Company’s homepage was mostly used as a registration and information
channel, and only a limited numbers of customers signed up through internet advertisements. A large
number of new customers have registered through the Telio homepage after being recommended the
service from friends (‘recruit a friend’ services), PR and branding-related activities such as TV
advertisement, boards and internet search engines. Telio’s main target groups are connected to the
internet both at home and at work.
Telio believes that online registration and sales will become increasingly important throughout 2006.
24
Retail and stand sale
In order to build a brand and attract new customers Telio has sales and marketing agreements with
large store chains and various outlets throughout Norway. The two most significant retail agreements
are with Narvesen and SmartClub. In the store chains and outlets, customers can get product
information and purchase an adapter to activate VoIP subscription with Telio immediately. These
services are currently available in more than 500 outlets in Norway.
During 2005, Telio started to sell its services via sales representatives on stands. The sales volume has
increased during the first quarter of 2006 and Telio aims to be present at strategic sites in most of the
major cities in Norway before year-end. With retail and stand, sales Telio can reach segments that are
difficult to reach through other sales channels.
Viral Marketing
For Telio, community-related marketing and sales activities have been very important and successful.
In 2004, the majority of new customers heard about Telio through friends or editorial press coverage.
The community feeling has always been in focus when Telio has done product packaging and
marketing. Taking advantage of the community feeling increases loyalty, reduces churn, and reduces
customer acquisitions cost. A community-based way of selling was for the first time introduced as a
sales program in December 2005 with the “Recruit a Friend” program.
The Company’s customer can recruit one or several friends as customers. The recruiting customer gets
a ten percent reduction on the monthly subscription fee per recruited customer. When a customer has
recruited ten friends he or she does not have to pay any subscription fee at all as long as the ten
recruited friends remain Telio customers. The customer only pays for minutes not included in the
monthly subscription fee.
Customers are informed about the ‘recruit a friend’ program via the Company homepage and through
emails. The program has so far been a success and Telio will continue to develop and market the
existing program as well as launch new community-based programs.
Product dimension strategy: Fixed Mobile Convergence
Telio has developed a four phase strategy for mobile services.
Phase 1: Launch of mobile services (Q2-06)
New product launch delivering mobile subscriptions to current customers in Norway priced as a
feature (more or less at Telio’s cost). The underlying rationale is to bundle Telio’s current offering
with a high value mobile service to retain current customers and attract new VoIP customers. Billing
and support operations will be integrated.
Subscription fees are planned to be as follows:
•
•
Telio Mini: NOK 0 monthly fee for mobile subscription. Connection fee of 99 for the first
subscription and 299 for subsequent subscriptions.
Telio Medium: NOK 0 monthly fee for mobile subscriptions. Connection fee of 99 for the two
first subscriptions and 299 for subsequent subscriptions.
Calling charges are planned to be as follows:
•
•
•
Standard start up fee: NOK 0.59 per call
Minutes: The first 30 minutes free, thereafter NOK 0.89 per minute
SMS: The first 30 for free, thereafter NOK 0.45 per SMS
25
Phase 2: Launch of Mobile soft phone (est. Q4-06)
Develop a Soft Phone application for mobile phones. In this field the Company currently co-operates
with a major handset manufacturer to use Telio's Soft Phone software on mobile phones, enabling the
customers to place calls with the mobile phone over WLAN networks free of charge (a network charge
may apply). This will also apply when the customer is traveling internationally, and may consequently
have a substantial effect on the profitable international roaming market.
Phase 3: Launch of MVNO services (est. 2007)
Launch of mobile virtual network operator (MVNO) services, facilitating partial convergence at
service production level:G
• Service impact – new set of calling and messaging integration with fixed and mobileG
• Financial impact - Lower costs on mobile product and mobile termination income on calls
from mobile to IP when IP phone has an IP addressG
• Customer impact – even closer to mobility on VoIP
Phase 4: Full convergence (est. 2008-2010)
IP and mobile merge for the mass market which will give full fledged mobile / wireless VoIP
• Dual mode handset where SIP / VoIP is preferred when IP address available
• The distinction between fixed and mobile gradually disappears
• Same service level and price innovation on mobile as currently seen in fixed networks
• Alternative 4G networks start becoming visual (Wibro, WiMax, HSDPA, WLAN)
Geographic dimension strategy: international expansion
During the last 18 months Telio has had a prudent approach to international expansion. To this point
Telio has focused on selling a white label product in selected markets. This product can be described
as a wholesale broadband telephony in-a-box solution. The Company’s aim with this product has been
to establish a network and service abroad, without taking on the significant investments of marketing
and end-user relations in new markets. Rather, Telio has tried to find local partners, either with
established brands and customer bases, or partners with sizeable financial backing.
Telio has thus far signed three such partner contracts, of which two in Holland and one in Sweden.
Telio’s first partner, InterNLnet, in Holland has been operational since the summer of 2005, and the
second partner, XMS, has been operational since February 2006. Collectively Telio’s partners in
Holland have some 3,500 end-users using the Company’s VoIP service growing with 500-1,000
customers a month. The Company entered into a third partner agreement with Glocalnet in April 2005
and launch was aimed for October 2005. However, Glocalnet decided to delay the launch because of
other priorities and the company has now been acquired by Telenor. On this basis, Telio has
terminated its contract with Glocalnet.
Telio’s main sources of revenues from the two existing wholesale contracts are as follows:
•
•
Monthly service fees (recurring, categorised as software lease agreements, “ASP”)
Platform fees (non-recurring, categorised as software lease agreements, “ASP”)
In addition, the Company generates revenues and costs connected to termination services for its ASP
customers, but these services are priced at costs or with very low margins.
Telio Denmark
In 2004, Telio acquired the Danish company Musimi that had an unmanaged VoIP platform aimed at
technically literate customers. Telio has run the company separately as it does not give the same
services as is available on the proper Telio platform. The revenues and net margins from the Musimi
platform are also negligible because there is no fixed monthly fee, only traffic tariffs (minute fees).
26
Currently Musimi has some 13,000 customers that have opened an account and paid in money in order
to make calls. Some of these are not active on a regular basis.
To expand the Company’s presence in Denmark, Telio launched Tellio in Denmark in Q4 2005.
Because of an injunction from TeliaSonera the Company could not use the Telio brand name in
Denmark. The services available on the Tellio platform in Denmark are similar to the services offered
in Norway. However, the pricing plan has been adapted to local market conditions. Tellio only
delivers one year pre paid VoIP subscriptions. Tellio currently offers two different subscription
services in Denmark, Tellio Free and Tellio Plenty.
Subscription offering Establishment fee
Annual fee
Tariffs
Tellio Free
DKK 990
Unlimited free calling to fixed
phones in Denmark, Sweden,
Norway, Germany, Netherlands
DKK 1,490
As Tellio Free, but with buckets
of free calling minutes to a
number of international
destinations. Tariff per minute if
the limit is exceeded
Tellio Plenty
Free
Free
Danish speaking personnel at the support centre in Norway handle customer support. So far the
customer intake has been limited, but concrete plans to expand distribution have been developed.
Tellio is targeting the same market segment as in Norway, i.e., high volume users of telecom services.
Telio’s strategy on the European market going forward
The regulatory regimes of the telecom markets vary from country to country in Europe. To deliver
primary line replacement service, Telio will need access to cost-oriented interconnection agreements,
naked DSL, number portability and geographical numbers.
Few countries outside Norway have fully adopted the aforementioned requirements. Because of this, it
has been difficult to roll out the Norwegian primary line replacement service on a country-by-country
basis without taking undue risk for the Company.
Telio believes that in order to penetrate new markets, a new entrant needs to have a very strong and
compelling value proposition with the following traits:
•
Offering that makes it easy to understand the value of VoIP, such as through a flat-rate price
plan with few restrictions
•
Ease of use. The service must have the same look and feel as the traditional phone service the
market is used to
•
Plug and play. The service must be easy to install, easy to get started with the new service
•
Access independence so that all broadband users can use the service, i.e. no restrictions on
market reach
Phase 1 of international expansion
Because of the uncertainty with regards to regulatory regimes and changing regulation (see
“Regulatory Environment”) Telio will follow a two phase expansion strategy. The first step is a flatrate offer targeted towards the very high volume users in Europe. This will be a second line service for
the 10% top callers where they will be able to call out, but only have a virtual number to receive calls
initially. In phase one there will also be a limited set of services, and no adaptations to individual
countries will be made. With a limited up-front investment of approximately NOK 3 – 3.5 million for
27
the technology platform and software and a total cost base of approximately NOK 8 million over 12
months, Telio can launch this service for the whole of Europe, including Eastern Europe.
With immediate presence in countries with attractive demographics Telio may get a first mover
advantage to build a position and brand as the “flat rate” provider.
Telio plans to have the international service operational in Q3 / Q4 2006. The flat rate price plan will
be similar to the offering in Norway. Similarly, buckets of international destinations will most likely
be available. The service will also be completely access independent.
The aims of this first phase of international expansion is to build a critical mass of customers in as
many countries as possible, to form the foundation for a fully fledged primary line replacement service
and to build a European customer base that can be used when entering into specific countries in phase
two of the international expansion.
The services will initially be marketed as community oriented as possible. That is to use word-ofmouth, ‘recruit a friend’ services, public relations and the calling patterns of customers. Internet
advertisement will also be used as deemed efficient.
Customer service and support will be delivered from one location in Europe. As Telio grows in the
national telecommunications markets in Europe, customer support will include more local adaptation.
A “My Pages” internet homepage similar to the Norwegian service will be used for easy to use self
service. In addition, online discussion forums will be open for suggestions on how Telio can improve
its services.
Phase 2 of international expansion
Phase two of Telio’s European strategy will commence when Telio has a substantial customer base in
individual countries or when the individual markets have acceptable regulatory conditions. The
services offered will be a fully fledged access-independent primary line replacement service with
porting of numbers and subscriptions from the first phase expansion. In this way, the offering will be
strengthened even more. The aim of the second phase is to go after the second tier of high volume
users in Europe, which includes approximately 30% of the high-end users.
A number of supplementary services will need to be adapted to each market. A localised language
within customer service and support will be required and the demand for customer support may be
higher than in the first phase.
The second phase will be the most cost demanding part of the Company’s geographical expansion
strategy. Up front development work is required before entering into a new a country and most
importantly, ordinary sales channels and marketing must be employed to attract a sufficient number of
customers.
In this phase, Telio may also introduce mobile services following a similar strategy as planned for
Norway.
Telio believe the above described two phased approach is the most appropriate for Telio due to the
following factors:
•
•
•
Telio can start its geographical expansion immediately despite imperfect regulatory regimes
with respect to VoIP services, as well as take the Company through to a position where the
regulatory conditions are more ideal for VoIP services.
Telio can launch a European-wide service with limited financial investments while keeping
the upside of entering the whole broadband market.
Telio targets the high volume users. Telio’s cost advantage will make it difficult and costly to
match the Company’s offer with traditional technologies used by Carrier Pre-Selection (CPS)
28
•
•
providers or calling card companies. The competition is therefore expected to mainly come
from the incumbents and other access dependent operators.
Telio has a great window of opportunity, being one of the sole players on the European market
with a true access independent offer with security to run over multiple access technologies.
Telio has the technology and platform to launch VoIP on a large scale which to the
Company’s knowledge is currently un-matched.
The technical team, including several top names in the VoIP industry that has put Telio in a
leading position in Europe, are still with the Company and committed to strive to stay a head
of competition.
The Company’s aim with respect to geographic expansion is to bring Telio’s success in Norway into
Europe, and Telio will commit significant resources and efforts to enter into the different markets
around Europe when the Company believes the markets are ready for a full-fledge access-independent
primary line replacement on DSL.
29
MARKET OVERVIEW
VoIP Communications
VoIP is a technology that enables voice communications over the Internet through conversion of voice
signals to packet data, rather than the traditional Public Switched Telephone Network (PSTN).
Traditional phone calls across the PSTN use a dedicated circuit that transfers calls as uncut streams,
allowing no other information on the circuit regardless of available bandwidth. Conversely, IP
networks transfer data over the internet more efficiently in packets that get reassembled on the
receiving end rather than using a dedicated circuit. Compared to IP networks, PSTN networks are also
more expensive to build and maintain. VoIP networks route calls over the Internet using either
softswitches or software, both of which are less expensive than circuit switches. For a VoIP call, audio
is first converted from an analog signal to a digital signal through a codec, separated into discrete
packets, sent across an IP-based network, put back into order at the termination point, and then
converted back to an analog signal to create audio that the end user can recognize.
The IP technology fundamentally changes how the different components of a communications
network relate and interact with each other. There are significant economic benefits to consumers of
moving to the open, competitive structure of IP. The convergence of data and voice across IP will
offer features of value added services like conferencing and multimedia services. However, the current
key drivers for the growth of IP are mainly based on the low cost level. As VoIP utilise existing
network resources efficiently, the users can avoid the high tariffs associated with using the dedicated
circuits of the PSTN.
The main problem with VoIP up to now has been poor sound quality mainly due to delays or loss of
data packets on the way from one caller to another. However, increased broadband penetration, higher
bandwidth and improved technologies (e.g., packet switching and compression technology) have
improved the quality on VoIP calls significantly.
VoIP value Proposition
VoIP technology presents several advantages over the technology used in traditional wireline
telephone networks that enable VoIP providers to operate with lower capital expenditures and
operating costs while offering both traditional and innovative service features. As a result of lower
capital expenditures and operating costs, VoIP providers such as Telio can offer communication
services for lower subscription fees than traditional telecom companies. As mentioned above, the low
cost level has been the key driver for the growth of VoIP. VoIP technology also presents the
opportunity to offer customers attractive features that traditional telephone networks cannot easily
support, such as online call management and self-provisioning. VoIP has a strong value proposition
both for corporations and consumers due to lower communication costs and possibilities for additional
communication features.
Market Opportunity and Competitors
Industry analysts estimate that the global VoIP market will experience a very strong growth over the
next years. For the European market, Gartner Group estimates that there will be a growth in the
number of VoIP subscribers from 1.1 million in 2004 to 12.6 million by the end of 2009 (a CAGR of
62.2%). In the same period, Gartner Group estimates that the world wide VoIP market will grow to
74.1 million subscribers in 2009, from 9.4 million subscribers by the end of 2004.
As the availability of broadband and VoIP becomes more widespread, and as the public becomes
familiar with the advantages of VoIP over traditional voice telephony, independent industry analysts
believe that VoIP will become increasingly attractive to mainstream consumers.
30
The table below illustrates the competitive situation in which Telio is a part of. While the different
groups and companies mentioned provide residential VoIP services, each of the groups are offering its
services over different types of network. This means that there are important differences in the
characteristics and features of the VoIP communications services that they offer.
Group
Traditional
telephone-,
broadband- and
cable companies
Alternative voice
communications
providers
Other
Comment
• Use existing broadband DSL networks or existing cable
broadband networks
• Controls a large portion of the call path and are better
positioned to control call quality
• Able to offer additional bandwidth dedicated solely to the
VoIP service
• High capital expenditures and operating costs in
connection with their networks
• Can often only be used from the location where the
broadband line they provide is connected
• Connect their VoIP traffic to the public switched telephone
network so customers can make and receive calls to and
from non-VoIP users
• Alternative voice communications providers do not own or
operate a private broadband network
• Use the customer's existing broadband connection to carry
call traffic from the customer to their VoIP networks
• Do not control the "last mile" of the broadband connection,
and, have less control over call quality
• Low capital expenditure requirements and operating costs
• Offers or has announced intentions to offer VoIP services
principally on a PC-to-PC basis
• Generally carry their VoIP traffic for the most part over
the public Internet
• VoIP services are often offered for free, but can only be
used with other users of that provider's services
• Some offers a premium service that allows customers to
dial directly into a public switched telephone network
• No special adapters or gateways are required
• Customers must often use special handsets, headsets or
embedded microphones through their computers, rather
than traditional telephone handsets
Examples
• Telenor
• NextGenTel
• British Telecom
• Deutsche Telekom
• Vonage
• Telio
•
•
•
•
•
Skype (eBay)
America Online
Yahoo
Microsoft
Google
Regulatory Environment
Broadband is the fundament for the deployment of VoIP. Other fundaments include;
•
•
•
•
•
Naked DSL
Number porting
Availability of geographical numbers
Access to emergency services
Pricing
In many countries it is not possible to subscribe for a DSL connection if the end-user does not have a
PSTN subscription. In Norway, it is possible to buy a DSL connection without having a PSTN
connection. This is often referred to as naked DSL. Without the opportunity for naked DSL, a voice
over IP connection will normally not be competitive with regards to pricing.
When a PSTN subscription is not present the DSL operator has to pay a higher rental for the DSL line.
This is referred to as full access. When a PSTN subscription is present the rental for the DSL line is
referred to as shared access. The argument for the price difference is that the DSL operator has to
cover the full maintenance cost related to the copper line when there is no PSTN traffic on the line.
Many DSL operators pass the extra cost for full access to the broadband bill when a subscriber does
not have a PSTN connection.
31
Outline of the regulation of VoIP services in Norway
The Norwegian Post and Telecommunications Authority (NPT) published a policy paper 15 April
2005 on how VoIP services are regulated under Norwegian Law. The policy paper points out how the
current regulatory regime is applied to VoIP services. The NPT has stated that it is analysing whether
the rules relating to inter alia VoIP services should be amended, but it is too early to predict the
outcome of these analyses. Important conclusions in the policy paper are summarised below.
NPT concludes that VoIP offerings that are any-to-any communication enabled, such as Telio’s
offering, fall within the scope of the Electronic Communications Act in Norway. If the VoIP service is
available to the public, the services are deemed as a publicly available telephony service (PATS). As a
result, the set of obligations relating to Electronic Communications Services (ECS) and PATS under
the Electronic Communications Act will apply for Telio Telecom AS, a subsidiary of the Company
which offers ECS services in Norway. However, the NPT has stated that it may in an interim period
grant temporary exemptions from some of these obligations, but that this will only be done to a limited
extent, subject to individual applications, and under the precondition that consumer interests are
adequately protected through marketing information informing customers about potential risks or
lacking features, especially with regards to emergency calling. Temporary exemptions have been
granted to allow for competition within the telecommunication market and promotion of consumer
interests.
The NPT has stated that it generally welcomes the nomadic feature of VoIP offerings as long as
important consumer interests are protected. The NPT believes that such interest can be adequately
protected through marketing information describing the risks connected with nomadic use.
Geographic numbers are opened for use by VoIP providers and porting of such numbers from PATS to
VoIP providers shall be allowed. Use of geographic numbers is contingent upon that the service is
marketed and appears as a fixed line telephony substitute and is principally used from the end-users
permanent address. The NPT has dedicated a non-geographic number series for nomadic use (the
“85x-series”). Use of numbers from the Norwegian number series is contingent upon that the provider
can demonstrate relevant nexus with Norway. Numbers from the Norwegian national numbering plan
shall be used in Norway.
VoIP services that are used on fixed locations only will not be exempted from the obligation to
provide caller location information available to authorites handling emergency calls. VoIP providers
that offer services that are used nomadically, have an option to be granted temporary exemptions from
the emergency calls caller location requirement based on certain conditions, inter alia an obligation to
inform their customers about potential risks.
The NPT is willing to grant temporary exemptions from the obligation to offer the calling user the
possibility of preventing the presentation of the calling line identification on a per-call basis.
Moreover, the NPT is willing to grant temporary exemptions from the obligation to offer the called
subscriber the possibility of rejecting incoming calls where the presentation of the calling line
identification has been prevented by the calling party or subscriber.
Furthermore, the NPT has stated that it is willing to grant temporary exemptions from the obligation to
offer a possibility to block outgoing calls and / or re-direct calls, and similar, the obligation to provide
the possibility to prevent that calls are re-directed to the end-user from a third party.
32
Overview of European VoIP regulation
The European Regulators Group (ERG), an interface between the European Commision and the heads
of the relevant authorities within the electronic communications regulatory field, has welcomed the
introduction of VoIP services in Europe. On 11 February 2005 the ERG published a Common
Statement for VoIP regulatory approaches. In the statement, the ERG emphasised that VoIP are
expected to increase competition and offer significant benefits to users, and that the ERG therefore is
committed to creating a regulatory environment in which VoIP services can flourish whilst ensuring
that consumers are adequately protected. The Common Statement has been leading for the Norwegian
Post and Telecommunications Authority’s work described above. The ERG has adopted a flexible
approach to achieving its policy aims, which allow the EU member states to choose solutions that are
consistent with the European regulatory framework and take into account the respective national
circumstances. As a result, European VoIP regulation varies from country to country. Harmonisation
of legislation is a primary objective for the European regulatory framework and the ERG.
With respect to numbering, number portability and access to emergency services, important regulatory
conditions for VoIP offerings, ERG stated the following in the Common Statement for VoIP
regulatory approaches.
•
•
In order to foster competition by stimulating the emergence of new services as well as
promoting number portability numbering plans should be technologically neutral, and
therefore in principle be available for both traditional voice and VoIP services. Number
portability is one of the main enablers of competition and conditions concerning number
portability should be equal for similar types of voice services within the scope of national
numbering plans in order to facilitate consumer choice and promote effective competition.
Access to emergency services is extremely important for citizens, irrespective of how a voice
service may be classified for legal and regulatory purposes. When calling the emergency
number, caller location information should be provided to the extent technically feasible. In
those cases where the caller location cannot be determined by the VoIP provider, such as in
the case of nomadic use of VoIP services, the end-user should be clearly and unambiguously
informed by the VoIP provider about any restrictions in routing emergency calls and
providing caller location information and the potential consequences. Further requirements for
nomadic VoIP services related to routing and caller location information should be discussed
after technology and standards have emerged.
Regulators in Europe have argued that the local loop unbundling (LLUB) cost have to be reduced.
According to the legislation the rental cost for the DSL line shall be cost based. In December 2005 the
Norwegian regulator imposed Telenor to reduce the LLUB cost by 30% within 31 December 2007.
The reduction is positive for VoIP operators since the extra broadband cost that their subscribers pays
will be reduced.
33
The table below sets out the Company’s own judgement of the readiness of each market for access
independent first-line replacement over DSL and secondly access independent first-line replacement
over Cable / FTTH (Fiber to the Home).
Country
Austria
Belgium
Denmark
Finland
France
Germany
Greece
Ireland
Italy
Netherlands
Norway
Portugal
Spain
Sweden
Switzerland
UK
DSL
2
3
2
3
2
3
3
3
3
2
1
3
3
2
3
3
Year
2007
2008
2006
2008
2006
2008
2009
2007
2007
2007
Now
2008
2007
2006
2007
2007
Cable/FTTH
1
2
1
3
1
3
3
3
2
1
1
2
2
1
1
2
Year
Now
2006
Now
2008
Now
2008
2008
2007
2007
Now
Now
2007
2007
Now
Now
2006
1= VoIP possible, 2= Regulation expected to improve, 3=VoIP currently not possible
Source: Telio estimates
DSL as a base for access independent 1-line replacement
To reach the DSL market with an access independent 1-line replacement you need a functioning naked
DSL product on the market, as well as a pricing scheme that doesn’t squeeze end-users when
cancelling their traditional PSTN subscription. In addition to this you need availability of numbers and
number porting as well as a functioning rule set for inter-connects with the local PPT (postal,
telephone and telegraph).
Cable and FTTH as base for 1-line replacement
To reach Cable and FTTH customers with an access independent 1-line replacement offer you need
availability of numbers and number porting as well as a functioning rule set for inter-connects with the
local PPT. This means that even though the DSL market in Europe isn’t fully ready for 1-line
replacement broadband telephony, there’s still a large market to go after.
The broadband market
Broadband access technologies are the fundament for voice over IP. The rapid growth in the
broadband market over the past two years has brought the penetration level to around 36% of the
households in Western Europe. During the past year the penetration has increased by more than 10
percentage points.
Norway is among the markets with the highest broadband growth despite relatively expensive prices.
By the end of 2005 the penetration in Norway was around 45% of the households. The broadband
market is characterised by hard competition and lower prices is expected to expand the penetration
further.
34
The following figure sets forth the development in broadband penetration since 2001 in Norway, the
EU and OECD. The compounded annual growth from 2001 to 2005 was 84.3% in Norway compared
to 47.2% within the OECD.
Broadband subscribers per 100 inhabitants 2001 - 2005
25.0
22.5
20.0
17.5
15.0
12.5
10.0
7.5
5.0
2.5
0.0
2001
2002
2003
Norway
EU15
2004
2005
OECD
Source: Organisation for Economic Co-operation and Development (OECD)
With high and increasing broadband penetration the most important fundament for offering VoIP is
present. The current broadband penetration in Europe households is around 30%. The penetration
increased 10 percentage points in 2005 and with similar growth the penetration should exceed 50% in
a two years timeframe. Although DSL is the fastest growing broadband technology in Europe, cable
and FTTH still hold a strong position in selected markets. Out of Europe’s 50 million broadband users
approximately 15 million use cable or FTTH.
The voice telephony market in Norway
The fixed line market in Norway was a stable market with moderate growth for many years. However,
over the past years the fixed line operators have experienced a major decline in traffic. So far there
have been two reasons for the decline – dial up internet has migrated to broadband and voice traffic is
migrating to the mobile networks.
While the traffic has dropped considerably the number of subscriptions has remained relatively stable.
In the past quarters this has changed and the operators are currently experiencing a steady decline also
in the number of subscriptions. The reason for the decline is the migration to VoIP and that younger
people use their mobile phone instead of subscribing for a fixed line.
Going forward it is likely that these trends continue:
•
•
Voice goes from fixed to mobile, the distinction between fixed and mobile may gradually
disappear
VoIP will capture a larger share of the remaining fixed line market
36
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free usage). Telio’s strategy is to attract subscribers with high usage and the Company’s price plans
demonstrate that it is more attractive for heavy users. The table below shows the price plans offered
from some of the dominating operators.
1)
Monthly fee
Telio
Mini
Medium
159
199
Mini
0
Telenor
Basis
49
2)
Pluss
159
Cool
38
NextGenTel
Classic
68
3)
4)
Free
138
Small
29
Tele2
Large
99
Pluss
149
Fixed-fixed
Start-up fee
Rate per minute
0.0
0.0
0.0
0.0
0.89
0.49
0.59
0.15
0.0
0.0
0.58
0.14
0.58
0.0
0.0
0.0
0.58
0.10
0.58
0.0
0.0
0.0
Fixed-mobile
Start-up fee
Rate per minute
0
0.89
0
0.89
0.89
1.89
0.59
1.19-1.91
0.59
0.95-1.53
0.58
1.28
0.58
0.98
0.58
0.98
0.58
0.99-1.47
0.58
0.89-1.47
0.58
0.89-1.47
One-time establishment fees
495
495
596
596
596
390
390
390
399
399
399
1) Fixed-mobile rates include all mobile operators
2) Fixed-fixed min. rate to other Telenor VoIP subscribers is 0.0. Fixed-mobile min. rate vary depending on mobile operator
3) Fixed-fixed min. rate to other NextGenTel VoIP subscribers is 0.0 (0.58 start-up fee for Cool subscribers)
2) Fixed-fixed min. rate to other VoIP subscribers is 0.0. Fixed-mobile min. rate vary depending on mobile operator
Telenor is likely to be the dominant player in the VoIP market. It introduced its first VoIP product in
2Q 05, but it first started more extensive campaigns in 4Q 05. Telenor had a relatively good uptake on
the campaign. However, it stopped the campaign after it experienced major problems with its
platform.
At the end of March Telenor changed its fixed voice and VoIP offering significantly. It both
introduced flat rate on PSTN/ISDN for NOK 249/329 per month (NOK 0 for calls to fixed line, 20%
cheaper than the traditional service on calls to mobile and international calls). At the same time
Telenor also introduced a new flat rate VoIP products at NOK 159 per month (have to pay for calls to
mobile and international calls).
The broadband operators NextGenTel and Ventelo have experienced some uptake of VoIP. By the end
of February 06 NextGenTel had 19,450 VoIP subscribers. This means that 13% of NextGenTel’s
broadband subscribers also subscribed on the company’s VoIP offering.
Tele2, the second largest voice operator in Norway, offers VoIP that is currently competitive relative
to Telenor. Tele2 is currently using TV commercials to market its VoIP offering. Based on its strong
customer base and its strong low cost brand it is expected that Tele2 will be a key player in the VoIP
market as well.
There are several small VoIP players that managed to win some market share in the immature VoIP
market. However, many of these players lack economies of scale and sufficient funding to defend their
market shares. It is expected that several of these companies will close down or sell their operations
going forward.
Some independent VoIP operators – including Telio - have announced that they will start to offer
mobile telephony to their subscribers. The combined offering of mobile and VoIP is significantly
cheaper than the subscribers can buy separately. Telenor can not copy this strategy since the Regulator
only allows Telenor to offer a discount on a bundled service that is equal to its internal cost savings.
39
ORGANISATIONAL STRUCTURE
Telio Holding ASA is the parent company in the Telio group of companies.
The table below sets forth the Company’s significant subsidiaries (direct and indirect).
Name
Telio Telecom AS
Teliofoni AB
Telio Netherlands BV
Telio Mobil AS1)
Telio SA
Tellio APS
1)
Country of incorporation
Norway
Sweden
Netherlands
Norway
Switzerland
Denmark
Ownership interest
100%
92%
91%
100%
100%
100%
In the process of changing name to Salgssenteret Lillehammer AS
Telio Holding ASA is generally responsible for the overall management of the Telio group and sets
out the group’s goals and strategy.
PROPERTY, PLANTS AND EQUIPMENT
The Company leases 1,678 square metres of administrative office space located in the city centre of
Oslo, Norway. The facilities serve as the general corporate and operational headquarters. The lease
agreement is until 30 April 2010.
Telio’s main assets are hardware equipment relating to the Company’s technology platform (servers,
gateways, SS7 and computers), adapters used by the Company’s customers, capitalised development
costs (costs related to developing the technology platform), and capitalised customer acquisition costs.
40
OPERATING AND FINANCIAL REVIEW
First quarter of 2006
Revenues during Q1 2006 were NOK 66.2 million compared to NOK 27.8 million in Q1 2005 (an
increase of 138%). Revenues were driven by organic growth, i.e. a positive net inflow of new
customers. Set up fees paid by Glocalnet during 2005 were deferred over a period equal to the contract
period, but the balance was credited revenues as a result of the termination of the agreement with
Glocalnet AB.
In January 2006, Telio acquired certain assets from IPtech. The assets included unused commercials
on TV2, a sales agreement with TV2Nettavisen and the JustIP brand name. The previous owners of
IPtech have closed down the company’s services to its customer base subsequent to the acquisition.
Costs of connection and traffic charges were NOK 29.9 million in Q1 2006 (45% of revenues)
compared to NOK 11.6 million in Q1 2005 (42% of revenues).
Salaries and personnel costs were NOK 9.0 million in Q1 2006 (14% of revenues) compared to NOK
5.7 million (21% of revenues) in Q1 2005. Total salaries and personnel costs include NOK 0.9 million
in share based payments (NOK 0.7 million in Q1 2005). Engineering compensation amounting to
NOK 0.6 million has been capitalised as intangible assets (NOK 0.7 million in Q1 2005).
Selling and marketing costs were NOK 7.8 million in Q1 2006 (12% of revenues) compared to NOK
1.5 million in Q1 2005 (5% of revenues). Sales and marketing costs have increased compared to Q1
2005 due to the amortisation of internet marketing rights acquired from IPtech, advertising campaigns
on TV and other media, and more extensive telemarketing activities.
Other operating expenses were NOK 15.2 million in Q1 2006 (23% of revenues) compared to NOK
4.6 million (17% of revenues) in Q1 2005. Other operating expenses include costs relating to the
ongoing listing process of approximately NOK 2.7 million. Other operating expenses have primarily
increased due to increased use of temporary support staff, increased provisions for bad debt, and
invoicing costs.
Depreciation and amortisation of NOK 6.4 million includes NOK 1.5 million (23 %) in amortisation
of direct and variable customer acquisition costs Corresponding figures for 2005 were NOK 2.0
million and NOK 0.4 million (20 %), respectively.
Total operating losses in Q1 2006 were NOK 2.2 million compared to operating profits of NOK 2.4
million in Q1 2005.
Losses before income tax in Q1 2006 were NOK 3.0 million compared to profits of NOK 2.4 million
in Q1 2005. The tax expense was NOK -1.8 million in Q1 06 and the losses for the period NOK 1.1
million. Basic and diluted earnings per share were NOK –0.06 in Q1 2006 (NOK 0.13 and 0.11
respectively in Q1 2005).
Cash and cash equivalents increased by NOK 3.9 million during Q1 2006 to NOK 36.0 million at the
end of Q1 2006 (NOK 32.1 million at the end of Q4 05). Deferred income (current liability) increased
by NOK 2.4 million during the quarter mainly due to growth in the customer base. Deferred income at
the end of Q1 2006 was NOK 47.0 million of which NOK 34.4 has been collected and is nonrefundable. Total financial lease debt was NOK 30.5 million at the end of Q1 2006 (NOK 16.8 mill at
the end of Q4 2005) out of which NOK 14.4 million (8.3 million at the end of Q4 2005) was classified
as current liabilities.
Consolidated equity was NOK 41.4 million at the end of Q1 2006 (equity ratio of 23%) compared to
NOK 41.5 million at the end of 2005 (equity ratio of 27%).
41
See the Company’s unaudited interim financial report for Q1 2006 in Appendix 3 for further
comments to the Company’s financial development and explanatory notes.
Year ended 31 December 2005
Revenues during 2005 were NOK 162.1 million compared to NOK 28.9 million in 2004 (an increase
of 461%). The increase in revenues was directly related to organic growth during the year with a
significant inflow of new customers.
Cost of connection and traffic charges were NOK 70.2 million in 2005 (43% of revenues) compared
to NOK14.6 million in 2004 (51% of revenues).
Salaries and personnel costs were NOK 27.9 million in 2005 (17% of revenues) compared to NOK 8.9
million in 2004 (31% of revenues). Total salaries and personnel costs include NOK 2.8 million in
share based payments (NOK 1.5 million in 2004).
Selling and marketing costs were NOK 15.2 million (9% of revenues) compared to NOK 1.5 million
in 2004 (5% of revenues).
Other operating expenses were NOK 33.1 million (20% of revenues) compared to NOK 12.4 million
in 2004 (43% of revenues).
Depreciation and amortisation of NOK 11.8 million includes NOK 3.1 million (26%) in amortisation
of direct and variable customer acquisition costs Corresponding figures for 2004 were NOK 2.7
million and NOK 0.3 million.
Total operating profits in 2005 were NOK 3.9 million compared to operating losses of NOK 11.1
million in 2004. Operating profits have gradually improved since the establishment of the Company as
a result of the significant increase in customers.
Profits before income tax were NOK 3.4 million in 2005, compared to operating losses before income
tax of NOK 11.6 million in 2004. The 2005 tax expense was NOK 0.2 million (tax income of NOK
2.2 million in 2004) and the profit for the year was NOK 3.2 million (NOK -9.4 million in 2004).
Basic and diluted earnings per share were NOK 0.18 and NOK 0.16 in 2005.
Cash and cash equivalents increased by NOK 26.1 million during 2005 to NOK 32.1 million at the end
of 2005 (NOK 6.0 million at the end of 2004). Deferred income (current liability) increased by NOK
32.1 million during the year mainly due to growth in the customer base and ASP (application service
provider) set up fees. Deferred income at the end of 2005 was NOK 44.6 million of which NOK 32.9
has been collected and is non-refundable. Total financial lease debt was NOK 16.8 million at the end
of 2005 (NOK 3.5 mill at the end of 2004) out of which NOK 8.3 million (1.3 million at the end of
2004) was classified as current liabilities (payable within one year from the balance sheet day).
Consolidated equity was NOK 41.5 million at the end of 2005 (equity ratio of 27%) compared to NOK
20.7 million at the end of 2004 (equity ratio of 43%).
See the Company’s annual report for 2005 in Appendix 2 for further comments to the Company’s
financial development and explanatory notes.
42
Total revenues in 2004 were NOK 28.9 million reflecting sound customer intake during the year.
Operating losses in 2004 were NOK 11.1 million. Total assets by the end of 2004 were NOK 47.9
million. Fixed assets of NOK 27.9 million comprised tangible assets of NOK 16.4 million, intangible
assets of NOK 8.9 million, and deferred tax benefits of NOK 2.6 million.
Current assets of NOK 20 million in 2004 comprised NOK 14 million in trade receivables and other
receivables and NOK 6 million in cash.
The equity share at year end 2004 (total equity divided by total assets) was 43%.
See the Company’s annual reports for 2004 in Appendix 4 for further comments to the Company’s
Note that all figures for 2003 are reported in accordance to N GAAP. Telio was founded in 2003 and
had limited revenues during the year. Total revenues in 2003 were NOK 45,000. The Company mainly
focused on developing its technology platform for VoIP and establishing an organisation during 2003.
Operating losses were NOK 1.3 million. Total assets by the end of 2003 were NOK 3.2 million. Fixed
assets of NOK 1.7 million comprised tangible assets of NOK 0.7 million and NOK 1 million in an
investment in a subsidiary.
Current assets of NOK 1.5 million in 2003 comprised NOK 0.8 million in receivables and NOK 0.7
million in cash.
The equity share at year end 2003 (total equity divided by total assets) was 89%.
See the Company’s annual reports for 2003 in Appendix 5 for further comments to the Company’s
43
MATERIAL CONTRACTS
During the first quarter of 2006 Telio Telecom AS signed an interconnect agreement with Telenor
Telecom Solutions AS to cover providers registered and operating in Norway. The agreement will
enable Telio to eliminate intermediate partners, thus improving terms relating to termination revenue
and originating costs. Both parties can terminate the agreement with a notice period of six months. The
Company has not entered into any other material contract other than contracts entered into in the
ordinary course of business.
The Company has not entered into any other contract under which the Company has any obligation or
entitlement which in itself is material to the Company.
INFORMATION ON HOLDINGS
The Company does not have any ownership interests or investments which are likely to have a
significant effect on the assessment of the Company’s own assets and liabilities, financial position or
profit of losses.
44
BOARD OF DIRECTORS AND MANAGEMENT
Board of Directors
The table below sets forth the Company’s current Board.
Name
Erik Osmundsen
Espen Fjogstad
Aril Resen
Richard Kosowsky
Term expires
2007
2007
2007
2007
2007
Position
Chairman
Board member and founder of the Company
Board member and founder of the Company
Board member
Board member
Erik Osmundsen – Chairman
Mr. Osmundsen was elected to the Board in 2005 and appointed as Chairman of the Board in 2006.
Mr. Osmundsen is the Managing Partner of Creo Advisors AS, an advisory firm focusing on corporate
finance services and strategic consulting. Mr. Osmundsen has worked for Creo Advisors AS since
2001, previous working experience include the position as Investment Director at Kistefos and Senior
Engagement Manager with McKinsey & Co. Mr. Osmundsen holds an MBA from Harvard Business
School and an MSc in Business from the Norwegian School of Management. The last five years Mr.
Osmundsen has served on the board of Kelkoo S.A. (Vice Chairman of the Supervisory Board),
Optinvest AS (Chairman) and Photonyx Ltd. (board member), and currently serves on the board of
Creo Investments AS, Optinvest II AS (Chairman), Creo Advisors AS and Creo Investments II AS in
addition to being Chairman of the Board of Telio. Mr. Osmundsen is a Norwegian citizen and resides
in Oslo, Norway.
Aril Resen – Board member and co-founder
Mr. Resen is a co-founder of Telio and has been a member of the Board since the inception in 2003.
Mr. Resen is an entrepreneur and has been an angel investor in several technology companies. Mr.
Resen has previously worked as a derivatives broker at the San Francisco Stock Exchange and as a
stockbroker for ABN AMRO Alfred Berg. Mr. Resen holds an MBA from SFSU San Francisco. The
last five years Mr. Resen has served, and currently serves, on the board of 1870 Info AS, Netcon AS,
Sonorit Holding AS and Xfile AS, Epocket Solutions AS, Norma AS, Spart er tjent AS, Scan
Chemicals AS and Suiram Invest AS. In addition, Mr. Resen serves on the board of Telio Mobil AS
and Telio Telecom AS, subsidiaries of the Company. Mr. Resen is a Norwegian citizen and resides in
Oslo, Norway.
Espen Fjogstad – Board member and co-founder
Mr. Fjogstad is a co-founder of Telio. Before being elected to the Board in 2005, Mr. Fjogstad served
as Telio's CEO from 2003 to 2005. Mr. Fjogstad also co-founded Global IP Sound in 1999, serving on
the Global IP Sound board until 2001. Mr. Fjogstad has been CEO of Odin Reservoir Software and
Services and Deputy Managing Director of Smedvig Technologies (now Roxar ASA). Mr. Fjogstad
worked as a management consultant in McKinsey & Company from 1989 to 1994. Mr. Fjogstad holds
an MSc from the Norwegian University of Science and Technology and an MBA from INSEAD. The
last five years Mr. Fjogstad has served, and currently serves, on the board of Officeline ASA, Applied
Plasma Physics AS, Synesi AS (chairman), Fireg AS (chairman) and Macropartner AS. Mr. Fjogstad
is a Norwegian citizen and resides in Stavanger, Norway.
45
Christian Wilhelm Rynning-Tønnesen – Board member
Mr. Rynning-Tønnesen was elected to the Board in 2005. Mr. Rynning-Tønnesen is President and
CEO of Agder Energi power utility. Prior to assuming this position, Mr. Rynning-Tønnesen was CFO
of Norske Skog, a paper company operating worldwide. Mr. Rynning-Tønnesen has extensive
background from the energy industry and has previously worked for SINTEF, Esso Norge, McKinsey
& Co, and in Statkraft as CFO and deputy CEO. The last five years, Mr. Rynning-Tønnesen has
served on the board of the Thorvald Klaveness Group, VCOM and Presens (chairman). Mr. RynningTønnesen holds an MSc in Engineering. Mr. Rynning-Tønnesen is a Norwegian citizen and resides in
Bærum, Norway.
Richard Kosowsky – Board member
Mr. Kosowski was elected to the Board in 2006. Mr Kosowski is co-founder and Managing Partner of
Equity Management Associates, LLC, a US-based equity investment firm which invests long-term in
reasonably priced, public and private US and foreign companies with sustainable high growth. Prior to
co-founding EMA, as an early employee at QUALCOMM, Mr. Kosowski led several technology
development efforts and later returned to head wireless data initiatives and strategy. As founder of
Great Point Associates, where Mr. Kosowsky was CEO from 2001 to 2004. Mr. Kosowski has
invested and provided interim executive management to dozens of early stage technology companies
including Four11.com (acquired by Yahoo), IntelliReach and Emptoris, Inc. Mr. Kosowski also
founded FlyingPhoto.com and Momentum, Inc. Mr. Kosowski is an active mentor of early stage
companies as a member of MIT’s Venture Mentoring Service. Mr. Kosowski holds a BS and MS
degrees in Electrical Engineering from Massachusetts Institute of Technology, and an MBA with High
Distinction (Baker Scholar) from Harvard Business School. The last five years Mr. Kosowsky has
served on the board of Great Point Design, Inc. and IntelliReach, Inc. Mr. Kosowsky is a US citizen
and resides in Massachusetts, USA.
None of the board members have been associated with any bankruptcies, receiverships or liquidations
for the last five years. It is, however, noted that Mr. Resen was previously a member of the board of
directors of a small Norwegian company that went into bankruptcy in 2003. None of the board
members have been the subject of any official public incrimination and / or sanctions by statutory or
regulatory authorities (including designated professional bodies), or been disqualified by a court from
acting as a member of the administrative, management, or supervisory bodies of an issuer or from
acting in the management or conduct of the affairs of any issuer, or convicted of any fraudulent
offences, for the last five years.
To the Company’s knowledge there are currently no potential conflicts of interests between any duties
of the Company and private interest or other duties of the Company’s Board of Directors.
Management
The following chart sets out the Company’s management structure.
Arild Nilsen
CEO
Espen Fjogstad
Business development
Member of the Board
Kyrre Grinde -Andersen
CFO and investor relations
Jens Hetland
Commercial manager
Jimmie Wicklund
Sales & Marketing
Alan Duric
CTO
46
Rune Strømmen
Country manager Denmark
Arild Nilsen – Chief Executive Officer
Mr. Nilsen was elected CEO of Telio in 2005. Mr. Nilsen had served on the Board since the
Company’s inception in 2003. Prior to assuming the position as CEO, Mr. Nilsen was CEO of Glastad
Invest AS, a private equity and venture capital investment company, from 2001 to 2005. Mr. Nilsen
has held several top management positions in NetCom GSM AS, a Norwegian mobile operator,
including the positions as CTO, Market Director Corporate Business and Market Director Product. Mr.
Nilsen has also worked for McKinsey & Co. Mr. Nilsen has an MSc in electronics from the
Norwegian University of Science and Technology and an MBA from INSEAD in France. The last five
years Mr. Nilsen has served on the board of Axiti, Teknoinvest (V, VI and VII), Toumaz Technology
Ltd, Sentech AS, Fiero AS and Genomar. Mr Nilsen is a Norwegian citizen and resides in Oslo,
Norway.
Kyrre Grinde-Andersen jr. – Chief Financial Officer
Mr. Grinde-Andersen assumed the position as CFO of Telio in 2005. Before joining Telio in 2005, Mr.
Grinde-Andersen was CFO of Sense Communications Int. AS, Norway’s first mobile service provider,
from 2001 to 2005. Prior to working for Sense Communications, Mr. Grinde-Andersen held various
positions in Eastman Kodak on a Nordic and Norwegian level (including the positions as Finance
director and Sales & Marketing director) and Schlumberger Ltd. (various controlling and finance
positions) and worked within management consulting for Deloitte. Mr. Grinde-Andersen holds an
MSc degree from the Norwegian School of Economics and Business Administration and has taken an
advanced management program at INSEAD in France. The last five years Mr. Grinde-Andersen has
served, and serves, on the board of Intele Gruppen AS (chairman), Grinde AS (chairman) and Grinde
Neptune AS. In addition, Mr. Grinde-Andersen is a board member of Telio Mobil AS and Telio
Telecom AS, subsidiaries of the Company. Mr. Grinde-Andersen is a Norwegian citizen and resides in
Oslo, Norway.
Alan Duric. – Co-founder and Chief Technology Officer
Mr. Duric is co-founder and CTO of Telio. Mr. Duric is an early pioneer of VoIP and has contributed
to the development of the VoIP technology for almost a decade. Mr. Duric has been a co-author and
contributor to a number of IETF, ETSI and ITU standards. As a developer and senior systems architect
at Ericsson, Mr. Duric took part in the early deployment and development of the world’s largest VoIP
networks, such as Deltathree. Mr. Duric has worked as Senior Systems Architect at Global IP Sound
(from 2000 to 2003) where he led standardisation work and was responsible for iLBC (internet Low
Bitrate Codec), an IETF and CableLabs standard codec for VoIP. The last five years Mr. Duric has
served on the board of SIPfoundry.org, Counter Path (board of advisors), Kayote Networks Inc. (board
of advisors) and Camino Networks (co-founder and board member). Mr. Duric is a Croatian citizen
and resides in Stockholm, Sweden.
Jimmie Wiklund. – Sales & Marketing Director
Mr. Wiklund is currently Sales & Marketing Manager (“Directeur”) of Telio SA and joined the
Company in September 2004. Mr. Wiklund has held leading positions at many telecom operators in
Sweden and Norway. Prior to joining Telio, Mr. Wiklund was a business unit manager at B2 Bredband
AB (from 1999 to 2004) responsible for broadband telephony and FTTH/xDSL. Mr. Wiklund holds a
degree in Finance and Marketing. The last five years Mr. Wiklund has served on the board of Nelab
Invest AB, Comdate AB, Industrihuset AB, Nelab försäljnings AB, Scandinavian tradecenter and
Ducemedia AS in addition to certain subsidiaries of the Company. Mr. Wiklund is a Swedish citizen
and resides in Stockholm, Sweden.
Rune Strømmen – Country manager Denmark
Mr. Strømmen is Country manager for the Telio’s operations in Denmark. Mr. Strømmen joined the
Company in 2003 and has more than 10 years of management, commercial and technical working
experience from the telecom and IT industry. Prior to joining Telio, Mr. Strømmen was Director Sales
& Marketing and Product Director in Port IT (from 2000 to 2003), a telecom wholesale operator, and
held various positions in Telenor, Ericsson and Navia. Mr. Strømmen holds an MSc in electronics
47
from the Norwegian University of Science and Technology and an MBA from Herriot-Watt
University. Mr. Strømmen is currently member of the board of Tellio ApS, a subsidiary of the
Company. Mr. Strømmen is a Norwegian citizen and resides in Ski, Norway.
Jens Hetland – Commercial manager
Mr. Hetland was appointed Commercial Director of Telio in November 2005. Mr. Hetland has more
than 15 years of experience from different IT and Telecommunication management positions. In the
period up to 1992 Mr. Hetland worked for Alcatel both in Belgium and Norway. In 1992, Mr. Hetland
worked as a product manager for Ericsson, before joining NetCom in early 1993. At Netcom Mr.
Hetland participated in the company’s commercial launch and held a number of different management
positions In 2000, Mr. Hetland left NetCom and co-founded the telemedicine company Care4you
which was sold to Locus in 2003. Mr. Hetland holds an MSc in electronics from the Norwegian
University of Science and Technology. Mr. Hetland was board member of Care4You AS from 2001 to
2003 and is currently the Chairman of the board of Valida AS. Mr. Hetland is a Norwegian citizen and
resides in Oslo, Norway.
None of the members of the Company’s group management have been associated with any
bankruptcies, receiverships or liquidations for the last five years. None of the members of the group
management have been the subject of any official public incrimination and / or sanctions by statutory
or regulatory authorities (including designated professional bodies), or been disqualified by a court
from acting as a member of the administrative, management, or supervisory bodies of an issuer or
from acting in the management or conduct of the affairs of any issuer, or convicted of any fraudulent
offences, for the last five years.
of the Company and private interest or other duties of the Company’s management.
Corporate governance
The Company is dedicated to observing high standards of corporate governance, based on the
principles set forth in the Norwegian Code of Practice for Corporate Governance, as published on
December 8 2005 (the “Code of Practice”). The Company will annually produce a report as to
corporate governance, which for the first time will be included in its 2006 annual report.
As of the date of this Prospectus, the Company is in the opinion of the Board complying with the Code
of Practice, except than with regard to the following matters:
•
Section 7 of the Code of Practice – Election Committee: Per the date of this Prospectus, the
Company does not have an election committee. The Board will consider whether it will be
advantageous for the Company and its shareholders to propose to the next annual general
meeting (or if practicable a preceding extraordinary general meeting) that an election
committee is appointed and included in the Company’s Articles of Association.
•
Section 9 of the Code of Practice – Vice Chairman to the Board: Per the date of this
Prospectus, the Board has not elected a Vice Chairman to the Board. The Board will consider
whether it will be advantageous for the procedures and tasks of the Board to appoint a Vice
Chairman.
•
Section 10 of the Code of Practice – Remuneration to the Board: Although most options
previously issued to board members have expired, been exercised or terminated prior to the
date of this Prospectus, there is one board member who has a total of 40,000 options in the
Company, see “Employees” below. The Board does not intend to propose that new options are
issued to Board members. Mr. Aril Resen and Mr. Espen Fjogstad also provide consulting
services relating to strategy and business development for the Company in addition to their
appointment as members of the Board of Directors (see “Related Party Transactions”). The
48
remuneration for these additional duties is approved by the Board of Directors and the
assignments are disclosed to the Board.
Technology team
The Company’s technology platform and product offering is developed by a highly competent and
industry experienced team. The technology team is responsible for enhancing the Company’s service
and solution offering by researching and introducing new services, products and solutions to the
Company’s customers. Key members of the Company’s technology team include:
Alan Duric – Co-founder and Chief Technology Officer
See details under “Management” above.
Werner Erikssen – Vice President Engineering
Mr. Erikssen has been working with VoIP product development since 1996. Previous work experience
include working for Ericsson where he directed development and standardization efforts for three IP
multimedia communication product generations, ranging from the Ericsson H.323 Gatekeeper System,
to GSM on the NET, to IMS for 3G’s IP infrastructure.
Hisham Khartabil – Vice President Research & Solutions Development
Mr. Khartabil brings to Telio many years of experience in VoIP and SIP related technologies having
worked for Ericsson, Hotsip and finally for Nokia Mobile Phones as a SIP Senior Technology
Specialist / Requirements Manager, before joining the Company. He is the co-chair of the SIP for
Instant Messaging and Presence Leveraging Extensions (SIMPLE) working group at the Internet
Engineering Task Force (IETF) and has contributed to many IETF standards related to SIP. Mr.
Khartabil is the co-author of the book titled "The IMS: IP Multimedia Concepts and Services in the
Mobile Domain" (2004).
Thomas Vasen – Vice President Business Development
Mr. Vasen is responsible for the Company’s planned international expansion. Mr. Vasen has more
than 8 years of operational experience within VoIP. Before joining the Company, Mr. Vasen worked
for B2 Bredband AB, one of the largest broadband operators in Sweden, where he was responsible for
the setup and operations of the first line local loop replacement services to approximately 300,000 end
users.
Advisory Board
The Company has appointed an advisory board which provide advice to Telio’s management
concerning the Company’s operations and business strategy. The advisory board includes some of the
most respected VoIP and SIP experts in the world. The advisory board currently consists of the
following persons:
Jeff Pulver – President and Chief Executive Officer of Pulver.com, Inc
Mr. Pulver is a pioneer and capacity within the field of IP communications. Mr. Pulver is the author of
Internet Telephone Toolkit (1996, Wilvey), publisher of The Pulver Report and creator of the Voice
on the Net (VON) conferences. Mr. Pulver is among the founders of Vonage, WHP wireless, VON
magazine and Digisip.
Patrik Fältström – Corporate Consulting Engineer, Cisco Systems Inc.
Mr. Fältström has extensive experience within IP communication and is currently a member of the
Internet Architecture Board, the National Academy of Sciences committee on DNS and Navigation on
49
the Internet and the ICANN IDN Committee. Mr Fältström is also an advisor on IT policy to the
Swedish government.
Jonathan D.Rosenberg –Ph.D., Director of VoIP Service Provider Architecture, Cisco Systems Inc.
Mr. Rosenberg is co-author of SIP standard for Multimedia communications, inventor and co-inventor
of SIMPLE, STUN, TURN, XCAP and number of other IETF (Internet Engineering Task Force)
standards In May 2002, the Technology Review Magazine named Mr. Rosenberg as one of the 100
most innovative technologists in the world under the age of 35. In October 2005, CRN Magazine
named him one of their "Super Geeks", 10 engineers who are casting larger-than-life shadows over the
industry. Mr. Rosenberg is currently a key resource in the development of Cisco Systems SIP based
telephony development.
Cullen Jennings – Ph.D., Distinguished Engineer, Cisco Systems Inc.
Mr. Jennings is Distinguished Engineer in the Voice Technology Group at Cisco Systems Inc.
Previously Mr. Jennings was vice president of engineering for Vovida Networks. His background
includes management, consulting, and development both for technology-based companies and for
educational institutions. Mr. Cullen is a member of the IEEE and ACM and has published numerous
technical articles.
of the Company and private interest or other duties of the Company’s advisory board. As described,
some of the members of the Company’s advisory board are directors of, or may have other interests in
companies and businesses that from time to time may have conflicting interests with the Company.
Any such conflicts will be dealt with as they arise.
REMUNERATION AND BENEFITS
Board of Directors
Remuneration to the Board of Directors totalled NOK 0 in 2005. Certain members of the Board have
been awarded options in the Company. See “Employees” below for a description of the option
program.
The Company has not granted any loans, guarantees or other commitments to any member of the
Board and there are no unusual agreements regarding extraordinary bonuses to any member of the
Board. No members of the Board have any contractual entitlements to benefits upon termination of
employment.
Management
Remuneration to the Company’s management, as described under “Board of Directors and
Management” above totalled NOK 359 thousand for the year ended 2005. All members of the
Company’s management have also been awarded options in the Company. There are no bonus
agreement, profit sharing or similar except for the option plan. See “Employees” below for a
description of the option program. Currently the Company does not operate any pension schemes and
no programs have existed prior to 2005. In Norway a new mandatory pension scheme, requiring all
companies to implement a minimum defined contribution plan, will be effective as of 1 July 2006.
The company has not yet chosen a supplier for this services or what scheme to implement. The
schemes are generally funded through payments to insurance companies or trustee-administered funds,
determined by periodic actuarial calculations. No members of the Company’s management have any
contractual entitlements to benefits upon termination of employment.
50
EMPLOYEES
The number of employees has increased from 3 in 2003, 43 in 2004 and 63 by the end of 2005 (out of
which 8 were part time operators). By the end of the first quarter of 2006 the Company employed 58
full time equivalent employees. As at 1 May 2006, Telio established its own telemarketing company.
The company is located in Lillehammer, Norway, and has 28 full time equivalent employees. See
“Events subsequent to the first quarter of 2006”.
As of the date of this Prospectus, the Company has 87 full time equivalent employees. Most of the
employees are located at the Company’s main offices in Oslo, Norway. Of the full time equivalent
employees 16 work with support, 30 with technology (operations, engineering, and IT solutions), 6
with sale, 28 with telemarketing, 2 with international business and 5 with administration.
Approximately 92% of the employees are located in Norway, the remaining 8% are located in
Switzerland, Sweden, and Denmark.
In order to optimise manpower within the support function the Company use temporary staff. At year
end 2005 approximately 60% of the employees within the support function were temporary staff.
Shareholdings
The following table sets forth the number of Shares owned by the Board of Directors and Executive
Management as of the date of this Prospectus.
Number of Shares held
Board of Directors
Erik Osmundsen1)
Espen Fjogstad2)
Aril Resen3)
Richard Kosowsky4)
Shareholdings Board of Directors
0
2,495,000
2,751,000
0
0
5,246,000
Management
Arild Nilsen
Kyrre Grinde-Andersen jr.
Alan Duric5)
Jimmi Wiklund (se note below)
Jens Hetland
Rune Strømmen
Shareholdings management
0
0
2,510,000
0
0
170,000
2,680,000
Total shareholdings Board of Directors and management
7,926,000
1) Mr. Osmundsen owns 818,100 Shares indirectly through the company Creo Investments II AS where he is
41% part owner.
2) Owned through Synesi AS and personal accounts Mr. Fjogstad has granted an option to EMA Telio Limited
Partnership (“EMA”) and Kinderhook Partners (“Kinderhook”), whereby EMA and Kinderhook has a right
to acquire up to a total of 35,000 shares in Telio from Mr. Fjogstad at a price of NOK 35 per share. The
option expires on 10 June 2007.
3) Owned through Xfile AS. Mr. Resen has granted an option to EMA and Kinderhook, whereby EMA and
Kinderhook has a right to acquire up to a total of 35,000 shares in Telio from Mr. Resen at a price of NOK 35
per share. The option expires on 10 June 2007.
4) Mr. Kosowsky owns 607,319 Shares indirectly through the company EMA Telio Limited Partnership where
he is 50% part owner
5) Owned through Lombard Odier Darier Hentsh & Cie (custodian and nominee for Mr. Duric). Mr. Fjogstad
has granted an option to EMA and Kinderhook, whereby EMA and Kinderhook has a right to acquire up to
35,000 shares in Telio from Mr. Duric at a price of NOK 35 per share. The option expires on 10 June 2007.
Mr. Wiklund holds a 4 % shareholding in Teliofoni AB and a 4.5% shareholding in Telio Netherlands
BV which may be converted into shares in the Company. With regard to the shareholding in Telio
Netherlands BV, the number of shares in the Company Mr. Wiklund is entitled to receive upon
conversion shall be based on the relative value of Telio Netherlands BV compared to the Company,
calculated in accordance with an agreed formula. With regard to the shareholding in Teliofoni AB, the
51
number of shares in the Company Mr Wiklund is entitled to receive upon conversion is between
90,000 and 140,000 shares for the entire holding in Teliofoni AB, depending on when the conversion
right is exercised. However, Mr. Wiklund also has a right to require that the conversion of shares in
Teliofoni AB is calculated based on the same mechanism that has been agreed for the shares in Telio
Netherlands BV, see above.
Options
Share options are granted to directors and to selected employees. The Company does not have a
standardised option program. The exercise price of the granted options is equal to the market price of
the shares on the date of the grant. Options are commonly conditional on the employee completing one
to three year’s service (the vesting period), with some exceptions where the options are vested
immediately. Some options have an infinite period of exercitation. Others have to be exercised within
one year from the date all the options are vested, or within other individually negotiated dates. Some
options will have to be exercised within six months after resignation and one year after given notice.
The Company has no legal or constructive obligation to repurchase or settle the options in cash. The
holder of the option contract is responsible for any additional local tax related to the exercise of the
options. The following table sets forth the number of Options owned by the Board of Directors and
Executive Management as of the date of this Prospectus.
Number of options
Board of Directors
Erik Osmundsen
Espen Fjogstad
Aril Resen
Richard Kosowsky
0
0
0
40,000
0
Management
Arild Nilsen
Kyrre Grinde-Andersen jr.
Alan Duric
Jimmi Wiklund
Jens Hetland
Rune Strømmen
300,000 + 50,000
150,000
0
0
50,000
0
52
Exercise price (NOK)
23.0
13.5 + 2.5
20
19
MAJOR SHAREHOLDERS
The following table sets forth the Company’s 10 largest shareholders as of the date of the Offering.
Main shareholders
Xfile AS (controlled by Mr. Aril Resen)
Lombard Odier Darier Hentsh & Cie (custodian and nominee for Alan Duric)
Synesi AS (controlled by Mr. Espen Fjogstad)
Pershing LLC
Creo Investments II AS1)
Institusjonen Fritt Ord
EMA Telio Limited Partnership2)
Gambak
Lime Venture AS
Veen A/S T.D.
Total 10 largest shareholders
Other shareholders
Total
Shares owned before the Offering
Number
Percentage
2,751,000
15.1%
2,510,000
13.8%
2,276,667
12.5%
1,217,231
6.8%
818,100
4.5%
672,750
3.7%
607,319
3.3%
550,000
3.0%
505,334
2.8%
300,000
1.6%
12,208,401
66.9%
6,044,099
33.1%
18,252,500
100.0%
1) Mr. Osmundsen is 41% part owner of Creo Investments II AS.
2) Mr. Kosowsky is 50% part owner of EMA Telio Limited Partnership. In addition to its shareholding, EMA
Telio Limited Partnership (“EMA”) together with Kinderhook Partners (“Kinderhook”), has an option to
acquire up to a total of 105,000 shares from Mr. Aril Resen, Mr. Alan Duric and Mr. Espen Fjogstad, see
“Employees – Shareholdings” above.
All of the Shares have equal rights, including voting rights. To the Company’s knowledge, there are
no arrangements which may at a subsequent date result in a change of control of the Company.
The Company is not aware of any party who directly or indirectly owns or controls the Company.
RELATED PARTY TRANSACTIONS
The Company has entered into certain consulting agreements with Xfile AS, a company wholly owned
by Mr. Aril Resen (Member of the Board of Telio, shareholder and co-founder of the Company), and
with Synesi AS, a company wholly owned by Mr. Espen Fjogstad (member of the Board of Telio,
shareholder and co-founder of the Company). Under the consulting agreements, Xfile AS and Synesi
AS, respectively, shall provide general consulting services relating to strategy and business
development. The work by Xfile AS is carried out by Mr. Resen, and the work by Synesi AS is carried
out by Mr. Fjogstad.
The above agreements have been concluded at estimated market terms. The services of the consultants
are considered an important contribution to the Company’s strategy and business development,
however, none of the transactions form part of the turnover of the Company.
Fees for the abovementioned services totalled NOK 1.1 million, NOK 1.1 million and NOK 0.5
million in 2005, 2004 and 2003, respectively. The fees are expected to be the same in 2006.
The third founder and shareholder, Mr. Duric, is employed by the Company on an ordinary basis. The
employment agreement is on estimated standard market terms.
In 2004, Mr. Jimmi Wiklund and Mr. Thomas Vasen were granted loans of SEK 100,000 each on date
of employment. According to the contracts the loans are not interest bearing, the total balance is NOK
184,000.
53
FINANCIAL INFORMATION
Accounting principles
The principal accounting policies applied in the preparation of these consolidated financial statements
are set out below.
Basis for preparation
The consolidated financial statements of Telio Holding ASA and its subsidiaries are being prepared in
accordance with International Financial Reporting Standards (IFRS) as approved by the European
Union. The financial statement for 2005 is the Company’s first consolidated statements prepared in
accordance with IFRS.
The consolidated financial statements are presented in Norwegian currency and are rounded up to
thousands (1,000). The consolidated financial statements are being prepared under the historical cost
convention, as modified by the revaluation of land and buildings, available-for-sale financial assets,
and financial assets and financial liabilities (including derivative instruments) at fair value through
profit or loss.
The preparation of financial statements in conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgment in the process of applying
the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or
areas where assumptions and estimates are significant to the consolidated financial statements, are
disclosed in Note 4 in the Company’s annual report attached as Appendix 2.
Consolidation
Subsidiaries are all entities (including special purpose entities) over which the Company has the power
to govern the financial and operating policies generally accompanying a shareholding of more than
one half of the voting rights. See note 4 in the Company’s annual report attached as Appendix 2 for
consolidated subsidiaries. The existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether the Company controls another
entity. Subsidiaries are fully consolidated from the date on which control is transferred to the
Company. They are de-consolidated from the date that control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the
Company. The cost of an acquisition is measured as the fair value of the assets given, equity
instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly
attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values at the acquisition date,
irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair
value of the Company’s share of the identifiable net assets acquired is recorded as goodwill. If the cost
of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is
recognised directly in the income statement.
Inter-company transactions, balances and unrealised gains on transactions between group companies
are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the
asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Company.
The Company applies a policy of treating transactions with minority interests as transactions with
parties external to the Company. Disposals to minority interests result in gains and losses for the
Company that are recorded in the income statement. Purchases from minority interests result in
goodwill, being the difference between any consideration paid and the relevant share acquired of the
carrying value of net assets of the subsidiary.
54
Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that
are subject to risks and returns that are different from those of other business segments. A
geographical segment is engaged in providing products or services within particular economic
environments that are subject to risks and returns that are different from those of segments operating in
other economic environments.
The Company has operating companies located in five countries; Norway, Switzerland, Denmark,
Netherlands, and Sweden. The Norway, Switzerland, and Denmark operations offer services under the
Telio brand (including Musimi, a Telio owned brand in Denmark), while Netherlands and Sweden
offer ASP agreements.
The Company has concluded that business segments constitute the primary reporting segment,
represented by the total business, i.e. Telio brand and ASP services. The secondary reporting segment
is geographical represented by Norway and Europe.
Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the Company’s entities are measured using
the currency of the primary economic environment in which the entity operates (‘the functional
currency’). The consolidated financial statements are presented in Norwegian kroner, which is the
Company’s functional and presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange
rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies are recognised in the income
statement.
(c) Group companies
The results and financial position of all the group entities (none of which has the currency of a
hyperinflationary economy) that have a functional currency different from the presentation currency
are translated into the presentation currency as follows:
•
•
•
assets and liabilities for each balance sheet presented are translated at the closing rate at the
date of that balance sheet;
income and expenses for each income statement are translated at average exchange rates
(unless this average is not a reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case income and expenses are translated at the
dates of the transactions); and
all resulting exchange differences from operations are recognised as a separate component of
equity.
On consolidation, exchange differences arising from the translation of the net investment in foreign
operations, are taken to shareholders’ equity. Exchange differences of intercompany receivables/
payables are taken as a transaction effect in the income statement.
Property, plant and equipment
Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow
to the Company and the cost of the item can be measured reliably. All other repairs and maintenance
55
are charged to the income statement during the financial period in which they are incurred.
Depreciation on other assets is calculated using the straight-line method. To allocate their cost to their
residual values over their estimated useful lives, as follows:
•
•
Adapters: 2-4 years
Furniture and equipment: 3-5 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance
sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the
asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals
are determined by comparing proceeds with carrying amount. These are included in the income
statement. When re-valued assets are sold, the amounts included in other reserves are transferred to
retained earnings.
Capitalized customer acquisition and connection expenses
Directly attributable external costs related to customer acquisition and connection are being capitalized
and amortized over the average expected duration of a customer relationship. Such costs are
capitalized when they qualify as an asset and when the costs can be identified separately and provided
that the following criteria’s are met:
•
•
•
the entity controls future economic benefits as a result of the costs incurred;
it is probable that those future economic benefits will flow to the entity; and
the costs can be measured reliably.
The Company has concluded that such costs should be capitalized only to the extent as to the related
deferred connection fees revenues. Other costs related to customer acquisition and connection
activities are recognised as expense as incurred.
Development
Expenses that are directly associated with the production of identifiable and unique software products
controlled by the Company, and that will probably generate economic benefits exceeding costs beyond
one year, are recognised as intangible assets. Direct costs include the software development employee
costs and an appropriate portion of relevant overheads. Computer software development costs
recognised as assets are amortised over their estimated useful lives (three to five years). Other costs
associated with developing or maintaining computer software programmes are recognized as an
expense as incurred. Development costs previously recognised as an expense are not recognised as an
asset in a subsequent period. Development assets are tested for impairment annually, in accordance
with IAS 36.
Impairment of non-financial assets
Assets that are subject to amortisation are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is
recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows (cash-generating units). Non-financial assets that suffered
impairment are reviewed for possible reversal of the impairment at each reporting date.
Trade receivables
Trade receivables are recognised initially at fair value less provision for impairment. A provision for
impairment of trade receivables is established when there is objective evidence that the Company will
not be able to collect all amounts due according to the original terms of receivables. Significant
financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial
reorganisation, and default or delinquency in payments are considered as indicators that the trade
56
receivable is impaired. The amount of the provision is the difference between the asset’s carrying
amount and the present value of estimated future cash flows, discounted at the effective interest rate.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term
highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank
overdrafts are shown within borrowings in current liabilities on the balance sheet.
Share Capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of tax, from the proceeds. Where any group
company purchases the Company’s equity share capital (treasury shares), the consideration paid,
including any directly attributable incremental costs (net of income taxes) is deducted from equity
attributable to the Company’s equity holders until the shares are cancelled, reissued or disposed of.
Where such shares are subsequently sold or reissued, any consideration received, net of any directly
attributable incremental transaction costs and the related income tax effects, is included in equity
attributable to the Company’s equity holders.
Deferred income tax
Deferred income tax is provided in full, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial
statements. However, the deferred income tax, if it is not accounted for, arises from initial recognition
of an asset or liability in a transaction other than a business combination that at the time of the
transaction affects neither accounting, nor taxable profit or loss. Deferred income tax is determined
using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and
are expected to apply when the related deferred income tax asset is realised or the deferred income tax
liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will
be available against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and
associates, except where the timing of the reversal of the temporary difference is controlled by the
Company and it is probable that the temporary difference will not reverse in the foreseeable future.
Employee benefits – Pension obligations
Currently the Company does not operate any pension schemes. Furthermore, no programs have existed
prior to 2005, hence the Company has no retirement benefit obligations for the reported periods.
In Norway a new mandatory pension scheme, requiring all companies to implement a minimum
defined contribution plan, will be effective as of 1 July 2006. The Company has not yet chosen a
supplier for this services or what scheme to implement. The schemes are generally funded through
payments to insurance companies or trustee-administered funds, determined by periodic actuarial
calculations.
A defined contribution plan is a pension plan under which the Company pays fixed contributions into
a separate entity. The Company has no legal or constructive obligations to pay further contributions if
the fund does not hold sufficient assets to pay all employees the benefits relating to employee service
in the current and prior periods.
A defined benefit plan is a pension plan that is not a defined contribution plan. Typically, defined
benefit plans define an amount of pension benefit that an employee will receive on retirement, usually
dependent on one or more factors such as age, years of service and compensation. For defined
contribution plans, the Company pays contributions to publicly or privately administered pension
insurance plans on a mandatory, contractual or voluntary basis. The Company has no further payment
57
obligations once the contributions have been paid. The contributions are recognised as employee
benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a
cash refund or a reduction in the future payments is available.
Employee benefits – Share-based compensation
The Company operates an equity-settled, share-based compensation plan. The fair value of the
employee services received in exchange for the grant of the options is recognised as an expense. The
total amount to be expensed over the vesting period is determined by reference to the fair value of the
options granted. At each balance sheet date, the entity revises its estimates of the number of options
that are expected to become exercisable. It recognises the impact of the revision of original estimates,
if any, in the income statement, with a corresponding adjustment to equity. The proceeds received net
of any directly attributable transaction costs are credited to share capital (nominal value) and share
premium when the options are exercised. Social security taxes related to Share-based compensations
are being recognized as a liability and an expense at the date of grant based on the fair value of the
options issued. Adjustments to the social security tax liability are being recognized as an expense or
as a reduced expense in subsequent periods based on changes in fair value of the options issued.
Provisions
Provisions for environmental restoration, restructuring costs and legal claims are recognised when:
The Company has a present legal or constructive obligation as a result of past events; it is more likely
than not that an outflow of resources will be required to settle the obligation; and the amount has been
reliably estimated. Restructuring provisions comprise lease termination penalties and employee
termination payments. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in
settlement is determined by considering the class of obligations as a whole. A provision is recognised
even if the likelihood of an outflow with respect to any one item included in the same class of
obligations may be small. Provisions are measured at the present value of the expenditures expected to
be required to settle the obligation using a pre-tax rate that reflects current market assessments of the
time value of money and the risks specific to the obligation. The increase in the provision due to
passage of time is recognised as interest expense.
Revenue
Revenue comprises the fair value of the consideration received or receivable for the sale of services in
the ordinary course of the Company’s activities. Sales of services are recognised in the accounting
period in which the services are rendered, by reference to completion of the specific transaction
assessed on the basis of the actual service provided as a proportion of the total services to be provided.
Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminated sales
within the Telio group. Revenue primarily consists of income from connection fees, subscriptions,
traffic (originating and terminating), software licences and related revenues (“ASP”). Revenue is
recognised as follows:
i)
ii)
iii)
Connection fee: Connection fee revenues are recognized over a 5 year period, which
represent the average expected duration of a customer relationship. Revenues are being
recognized as from when the customer has entered into a subscription agreement, has paid
the connection fee and has been connected to the network. The connection fee includes
the initial connection service, adapter delivery and porting (to technically transfer the
unique telephone number from another telephone operator to the Company). The
connection fee is non refundable and the subscription agreement has no lock-in period.
Porting fee: Revenues generated from porting services (transfer of a telephone number
from Telio to another telecom operator) are being recognized when the porting service has
been delivered.
Subscriptions: Income from subscriptions is recognised on an accruals basis over the
subscription period in accordance with the substance of the subscription agreement,
starting as at the date of the activation of the subscription.
58
iv)
v)
Traffic (originating and terminating): Revenues from traffic originating from Telio
subscribers are being recognized according to actual traffic during the period times
contractual rates per traffic unit and type. Revenues from traffic terminating at Telio
subscribers from external originators are being recognized according to the same
principle.
Software lease agreements (ASP): Revenue from ASP software lease agreements is
recognized on an accrual basis over the contract period in accordance with the substance
of the lease agreement.
Other revenue
Other revenues consist of collection fees, invoice fees and interest income from customers and banks.
These revenues are recognized as incurred.
Cost of leased connection capacity consists primarily of costs related to bandwidth, hosting etc. Such
costs are recognized on an accrual basis according to the substance of the lease contracts. Cost of
traffic charges is recognized in the same period as the traffic activity has been registered, which
correspond to the related traffic revenue. In 2005 the Company’s invoicing partner received a portion
of the collection fees paid. These fees are recorded as other operating costs as of when the related
revenues are being recorded.
Leases
Leases in which a significant portion of the risks and rewards of ownership are retained
by the lessor are classified as operating leases. Payments made under operating leases (net of any
incentives received from the lessor) are charged to the income statement on a straight-line basis over
the period of the lease. IAS 17 defines a lease as being an agreement whereby the lessor conveys to the
lessee in return for a payment, or series of payments, the right to use an asset for an agreed period of
time.
The Company leases certain property, plant and equipment. Leases of property, plant and equipment
where the Company has substantially all the risks and rewards of ownership are classified as finance
leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the
leased property and the present value of the minimum lease payments. Each lease payment is allocated
between the liability and finance charges so as to achieve a constant rate on the finance balance
outstanding. The corresponding rental obligations, net of finance charges, are included in other longterm payables. The interest element of the finance cost is charged to the income statement over the
lease period so as to produce a constant periodic rate of interest on the remaining balance of the
liability for each period. The property, plant and equipment acquired under finance leases is
depreciated over the shorter of the useful life of the asset or the lease term.
Government grants
Grants from the government are recognized at their fair value where there is a reasonable assurance
that the grant will be received and the group will comply with all the attached conditions.
The Company has utilized a tax scheme that is available to all Norwegian registered enterprises. Under
the tax scheme the company qualifies for a direct reduction in tax payable upon qualifying for and
subsequently documenting certain qualifying R&D expenses (SkatteFUNN).
The government grant, representing the deduction in tax payable, are included as a reduction of
capitalized development costs and are credited to the income statement over the expected life of the
related intangible asset as from when the intangible asset is ready for its intended use.
59
Consolidated financial information
A summary of the consolidated financial statements for the Company for the years ended 31
December 2005, 2004 and 2003, and of the condensed consolidated interim financial information for
the three months ended 31 March 2006 and 2005 are presented below.
The financial information for the years ended 31 December 2005 and 2004 has been derived from the
Company’s audited consolidated financial statements prepared and presented in accordance with
International Financial Reporting Standards (IFRS) as adopted by EU. The financial information for
the year ended 31 December 2003 has been derived from the Company’s audited financial statements
prepared and presented in accordance with Norwegian generally accepted accounting principles (N
GAAP). The financial information for the three months ended 31 March 2006 and 2005 has been
derived from the Company’s unaudited condensed consolidated interim financial information prepared
and presented in accordance with the International Accounting Standard 34 “Interim Financial
Reporting”. The historical results are not necessarily indicative of the results to be expected for any
future period.
See the audited consolidated financial statements for 2005 in Appendix 2, the audited annual reports
for 2004 and 2003 in Appendix 4 and 5, respectively, and the interim financial report for Q1 2006 in
Appendix 3 for further comments and explanatory notes.
Key financial data
Total revenue
Operating profit (loss)
Profit (loss) before income tax
Profit (loss) for the period
2005
2004
2003
IFRS
IFRS
NGAAP
First quarter
2006
2005
IFRS
IFRS
162,126
3,857
3,401
3,177
28,945
(11,107)
(11,618)
(9,436)
45
(1,276)
(1,279)
(1,279)
66,198
(2,161)
(2,977)
(1,111)
27,843
2,405
2,352
2,219
0.18
0.16
(0.63)
(0.63)
(0,26)*
(0,26)*
(0.06)
(0.06)
0.13
0.11
Total non-current assets
Total assets
66,514
87,819
154,333
27,910
19,996
47,906
671
2,497
3,168
87,588
91,859
179,447
35,670
30,021
65,691
Total equity
41,476
8,526
104,331
154,333
20,661
2,387
24,858
47,906
2,826
342
3,168
41,421
16,160
121,866
179,447
23,350
1,962
40,379
65,691
EPS (basic)
EPS (diluted)
*unaudited
60
Consolidated income statement
Sales
Other revenues
Total revenue
Other expenses
Finance costs
Income tax expense (income)
Profit for the period
Attributable to:
Equity holders of the Company
Minority interest
EPS (basic)
EPS (diluted)
Dividend per share
2005
2004
2003
IFRS
IFRS
NGAAP
First quarter
2006
2005
IFRS
IFRS
152,067
10,059
162,126
(70,242)
(27,896)
(15,215)
(33,125)
(11,791)
3,857
(456)
3,401
(224)
3,177
28,120
825
28,945
(14,614)
(8,857)
(1,499)
(12,409)
(2,673)
(11,107)
(511)
(11,618)
2,182
(9,436)
45
45
(150)
(1,144)
(27)
(1,276)
(3)
(1,279)
0
(1,279)
66,121
77
66,198
(29,930)
(9,003)
(7,754)
(15,232)
(6,440)
(2,161)
(816)
(2,977)
1,866
(1,111)
26,564
1,279
27,843
(11,599)
(5,732)
(1,519)
(4,601)
(1,987)
2,405
(53)
2,352
(133)
2,219
3,156
21
(9,436)
-
(1,279)
-
(1,106)
(5)
2,219
-
0.18
0.16
-
(0.63)
(0.63)
-
(0,26)*
(0,26)*
-
(0.06)
(0.06)
-
0.13
0.11
-
*unaudited
61
Consolidated balance sheet
ASSETS
Non-current assets
Intangible assets
Deferred income tax assets
Total-non current assets
Current assets
Trade and other receivables
Total assets
EQUITY
Capital and reserves attributable to equity
Share capital
Other reserves
Accumulated losses
Total equity before minority interest
Minority interest
Total equity
LIABILITIES
Non-current liabilities
Borrowings
Deferred income tax liabilities
Current liabilities
Trade and other payables
Current income tax liabilities
Borrowings
Deferred income
Total liabilities
2005
2004
2003
IFRS
IFRS
NGAAP
First quarter
2006
2005
IFRS
IFRS
32,768
28,731
5,015
66,514
16,397
8,945
2,568
27,910
671
671
43,004
35,135
9,449
87,588
18,888
13,583
3,199
35,670
55,695
32,124
87,819
154,333
14,009
5,987
19,996
47,906
836
1,661
2,497
3,168
55,842
36,017
91,859
179,447
22,888
7,133
30,021
65,691
179
48,835
(7,559)
41,455
21
41,476
170
31,206
(10,715)
20,661
20,661
140
3,965
(1,279)
2,826
2,826
179
49,891
(8,665)
41,405
16
41,421
170
31,676
(8,496)
23,350
23,350
8,474
52
8,526
2,295
92
2,387
-
16,108
52
16,160
1,870
92
1,962
48,403
2,960
8,349
44,619
104,331
112,857
154,333
10,818
313
1,253
12,474
24,858
27,245
47,906
342
342
342
3,168
54,968
5,427
14,448
47,023
121,866
138,026
179,447
13,994
1,190
1,157
24,038
40,379
42,341
65,691
62
Consolidated statement of changes in equity
Attributable to equity holders
of the Company
Share
Other
Retained
capital
reserves
earnings
Minority
interest
Total
equity
Balance at 12 August 2003 (inception)
Profit for the year
Share issue after transaction cost
100
40
5
3,960
(1,279)
-
-
105
(1,279)
4,000
Balance at 31 December 2003 (NGAAP)
140
3,965
(1,279)
-
2,826
Implementation effect IFRS at 1 January 2004
Balance at 1 January 2004 (IFRS)
Currency translation differences
Profit for the year
Total recognised income for 2004
140
-
3,965
48
48
(1,279)
(9,436)
(9,436)
-
2,826
48
(9,436)
(9,388)
27
24,947
-
-
24,974
Balance at 31 December 2004
3
30
170
1,511
735
27,193
31,206
(10,715)
-
1,511
738
27,223
20,661
Balance at 1 January 2005
Profit for the year
170
-
31,206
82
82
(10,715)
3,156
3,156
21
21
20,661
82
3,177
3,259
7
14,505
-
-
14,512
2
0
9
179
2,762
1,220
(940)
17,547
48,835
(7,559)
21
2,762
1,222
(940)
17,556
41,476
179
-
48,835
236
-
(7,559)
(1,106)
21
(5)
41,476
236
(1,111)
-
236
(1,106)
(5)
(875)
179
647
173
820
49,891
(8,665)
16
647
173
820
41,421
170
-
31,206
(110)
-
(10,715)
2,219
-
20,661
(110)
2,219
-
(110)
2,219
-
2,109
170
480
100
580
31,676
(8,496)
-
480
100
580
23,350
Employees share option scheme:
– value of employee services
– proceeds from shares issued
Share issue after the transaction cost
Employee share option scheme:
Purchase of treasury shares
Total recognised income (loss) for the three
month period ended 31 March 2006
Balance at 31 March 2006
Total recognised income (loss) for the three
month period ended 31 March 2005
63
Consolidated statement of changes in cash flows
First quarter
2005
IFRS
2004
IFRS
2003*
NGAAP
2006
IFRS
2005
IFRS
3,177
(9,436)
(1,279)
(1,111)
2,219
224
7,814
4,338
2,762
(2,182)
2,128
545
1,511
27
-
(1,866)
4,188
2,252
647
133
1,338
649
480
– Trade and other receivables
– Trade and other payables
– Deferred revenue
Cash generated from operations
Interest paid
Net cash generated from operating activities
(41,680)
76,824
53,459
(355)
53,104
(13,173)
24,205
3,598
(118)
3,480
(836)
332
(1,756)
(1,756)
(147)
12,864
2,404
19,231
(429)
18,802
(8,865)
3,080
11,564
10,598
(50)
10,548
Cash flows from investing activities
Purchases of property, plant and equipment (PPE)
Purchases of intangible assets
Loans granted to related parties
Interest received
Net cash used in investing activities
(24,204)
(24,124)
211
(48,117)
(17,878)
(9,490)
(184)
121
(27,431)
(698)
(698)
(14,424)
(8,657)
98
(22,983)
(3,829)
(5,286)
10
(9,105)
15,735
(940)
9,604
(3,425)
20,974
25,712
2,473
(178)
28,007
4,000
4,000
173
10,404
(2,770)
7,807
100
(425)
(325)
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the
period
Translation adjustments cash and cash equivalents
25,961
4,056
1,546
3,626
1,118
5,987
176
1,651
280
115
-
32,124
267
5,987
(28)
Cash and cash equivalents at end of the period
32,124
5,987
1,661
36,017
7,133
Cash flows from operating activities
Adjustments for:
– Tax
– Depreciation
– Amortisation
– Non cash transaction related to cost of share options
Changes in working capital (ex. effects of exchange
differences on consolidation):
Cash flows from financing activities
Proceeds from issuance of ordinary shares
Proceeds from borrowings
Repayments of borrowings
Net cash used in financing activities
*unaudited
Segment information
Telio is a niche company specialising in development, marketing and sales of VoIP
telecommunication services and does not operate within any other business segments. Consequently,
all of the Company’s revenues are derived from VoIP services.
The table below sets forth the geographical breakdown of the Company’s revenues. The geographical
breakdown is based on the location of the Company’s market and customers.
Norway
Europe outside Norway
Total
2005*
2004*
142,722
27,627
9,345
493
152,067
28,120
2003
45
45
First quarter
2006
2005
62,836
25,865
3,285
699
66,121
26,564
*The revenue breakdown for 2005 and 2004 has been restated in the Company’s interim report for Q1 2006
2005 annual report.
64
Dividend policy
The Company has not declared or paid any dividends since incorporation. In view of the Company’s
planned expansion and growth of its business Telio currently intend to retain all available financial
resources and any earnings generated by the operations for use in expanding the business and the
Company do not anticipate paying any dividends in the foreseeable future. The payment of any
dividends in the future will depend on a number of factors, including the Company’s future earnings,
capital requirements, financial condition and future prospects, applicable restrictions on the payment
of dividends under Norwegian law and other factors the Board of Directors may consider relevant.
Legal and arbitration proceedings
Telio is involved in a legal dispute with Labs2 Norge ASA. The dispute relates to a split of
termination revenues generated in late 2005 and early 2005. At this point Telio routed traffic trough
Labs2.
Labs2 Norge ASA, through Aktiv Kapital ASA, has brought a claim in the amount of NOK 7,643,027
against Telio before the Conciliation Board in Oslo, Norway. Telio has rejected the claim. A hearing
was held before the Conciliation Board on 4 May 2006, but the parties did not reach an agreement. It
will then be for Labs2 Norge ASA to bring the case in before the ordinary courts if it wants to pursue
the claim. The Company has concluded that the chance of the claim being realised is not likely, and
therefore no provisions have been recognised in the Consolidated Statements for 2005, nor the
unaudited interim report for the first quarter of 2006.
Other than the above, Telio is not involved in any disputes, material litigation or arbitration
proceedings material to the Company’s financial position and profitability and is not aware that any
such proceedings are pending or threatening.
Events subsequent to the first quarter of 2006
AS) called Salgsenteret Lillehammer AS. The company is located in Lillehammer, Norway, and has
21 full time employees and 14 part time employees. The company has entered into a contract with an
owner of a telemarketing company that previously provided services to Telio to recruit all employees
of this company and to acquire certain agreement and assets related to the telemarketing activities. The
total consideration to be settled in cash under the agreement is NOK 0.85 million.
The Company has not experienced any other changes or trends outside the ordinary course of business
that are significant to the Company after 31 March 2006 and to the date of this prospectus, other than
those described in this Prospectus.
65
CAPITAL RESOURCES
Since incorporation, the Company has financed its operations by a combination of operating revenues,
private placements and debt issues. Since incorporation but prior to the Offering the Company has
raised NOK 45.5 million through issuing new Shares.
As of 31 March 2006, the Company had cash and cash equivalents of NOK 36.0 million compared to
cash and cash equivalents of NOK 32.1 as of 31 December 2005.
The Company believes that its current capital resources, together with operating results and the
proceeds from the Offer will be sufficient to fund future operations and to fulfil commitments referred
to under the section “Investments” and “Property, Plants and Equipment”. The short-term capital
resources are considered to be sufficient to cover the current short-term commitments and liabilities.
The adequacy of available funds will depend on many factors, including the further growth of the
business, scope of research and development programmes, capital expenditures, market development,
competition and potential acquisitions. Accordingly, the Company may require additional funds and
seek to raise such funds through issuing new equity or debt.
Cash flows
The net cash flow from operations was NOK 53.1 million and NOK 3.5 million in 2005 and 2004,
respectively.
The net cash flow from investing activities mainly reflects investments in operational infrastructure,
adapters, customer acquisition costs, and platform development. The net cash flow from investing
activities amounted to NOK 48.1 million and NOK 27.4 million in 2005 and 2004, respectively. The
cash flow from investing activities has been negative since incorporation due to capital expenditures
and investments to fund the Company’s growth.
The financing activities lead to a net cash inflow of NOK 21.0 million and NOK 28.0 million in 2005
and 2004, respectively. In 2005, the Company raised NOK 15.7 million through issuing new Shares
and NOK 9.6 million in new long term debt. In 2004, the Company raised NOK 25.7 through issuing
new Shares and NOK 2.5 million in new long term debt. In 2003, the Company raised NOK 4.0
million through issuing new Shares.
Net cash generated from operating activities during Q1 2006 was NOK 18.8 million (NOK 10.5
million during Q1 2005). Net cash generated from financing activities were NOK 7.8 million (NOK –
0.3 million during Q1 05). Net cash flows from operating and financial activities were partially offset
by capital expenditure and investment in intangible assets of NOK 23.0 million (NOK 9.1 million
during Q1 2005). Capital expenditures include an investment in a SS7 which enabled an interconnect
agreement with Telenor Telecom Solutions AS in January 2006 described under “Material Contracts”.
66
RESEARCH AND DEVELOPMENT
Telio has a strong focus on innovation and development of new services which are complementary to
the Company’s existing services, such as developing mobile VoIP services. See “Technology team”
for details regarding key members of the Company’s technology team. The development department
currently consist of 10 people. Besides working on development projects, the development department
is responsible for maintenance and reconditioning of the platform. In 2003 and 2004, the Company
mainly focused on developing a state of the art VoIP platform with supporting systems and completed
significant investments in hardware to set up the IT infrastructure. During 2005 the Company focused
on improving its VoIP platform further but increasingly focused on developing new services and
features complementary to the Company’s existing VoIP services. With respect to research and
development, the Company currently focus on developing innovative and complementary VoIP
services as the technological platform is more established.
The total costs spent on the development department were NOK 7.6 million, NOK 5.7 million and
NOK 0.2 million in 2005, 2004 and 2003, respectively. In the first quarter of 2006 and 2005, costs
spent on the development department were NOK 1.7 million and NOK 1.4 million, respectively. The
costs mainly consist of wages, social expenditures and other related costs. See “Investments” for a
description of investments related to hardware, IT software and other equipment.
67
SHARE CAPITAL
The following description includes certain information concerning the Company’s share capital, a
brief description of certain provisions contained in the Company’s articles of association as they are in
effect at the date of this Prospectus and a brief description of certain applicable Norwegian law,
hereunder the Companies Act. The summary does not purport to be complete and is qualified in its
entirety by the Company’s articles of association and Norwegian law. Any change in the articles of
association is subject to approval by a general meeting of shareholders.
General
Under Norwegian law, limited liability companies are divided into two categories, private and public
companies. Only the shares of public companies may be traded on a stock exchange or other regulated
marketplaces. Telio is a public limited liability company.
Issued Share Capital
18,252,500 Shares, each with a par value of NOK 0.1. After the Offer, the Company’s issued share
capital will be NOK 2,125,250 comprising 21,252,500 Shares, each with a par value of NOK 0.1.
The entire current share capital consists of fully paid Shares, each with a par value of NOK 0.1. Each
Share carries one vote, and otherwise gives equal rights in the Company.
Own Shares
At the annual general meeting held on 7 April 2006, the Board of Directors was authorised to acquire
up to 1,825,250 own shares with a total nominal value of NOK 182,525. The authorisation is valid up
to and including the next ordinary general meeting of the Company, however maximum for a period of
18 months from the date of the resolution. The price to be paid for the shares shall be between NOK
0.1 and market price + 10% of market price, maximum NOK 100. Acquisition and disposing of own
shares shall be made with settlement in cash. As of the date of this Prospectus, the authorisation has
not been utilised, and neither the Company nor any of its subsidiaries own any Shares.
Board authorisation to issue shares
At the annual general meeting held on 7 April 2006, the Board of Directors was granted the following
authorisations to increase the Company’s share capital:
•
The Board of Directors was authorized to increase the share capital by up to NOK 597,875
through issuance of up to 5,978,750 new shares, each share with a par value of NOK 0.1. The
authorization can be used for general corporate purposes, including in connection with an IPO,
acquisitions, strategic investments and other objectives in the interest of the Company
including situations as mentioned in the Norwegian Stock Exchange Act section 5-15. The
pre-emption rights of the shareholders may be derogated from. The proxy includes capital
increases by non-cash payment and a right to charge the Company with special obligations
including mergers. The authorization is valid until the next ordinary shareholders meeting,
however for a maximum of 18 months from the date of the authorization.
•
The Board of Directors was authorized to increase the share capital by NOK 300,000 through
issuance of 3,000,000 new shares, each share with a par value of NOK 0.1. The authorization
can be used for employee incentivation purposes. The pre-emption rights of the shareholders
may be derogated from. The authorization is valid until the next ordinary shareholders
meeting, however for a maximum of 18 months from the date of the authorization.
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As of the date of this Prospectus, the authorizations have not been used. However, the Board will use
the first of the authorizations mentioned above when issuing New Shares in connection with the
Offering.
Changes in Share Capital since Incorporation
Telio was incorporated on 12 August 2003 under the laws of Norway with an issued capital of NOK
100,000 comprising of 10,000,000 shares with a par value of NOK 0.01 each.
The following table sets forth the changes in the issued share capital since the Company’s
incorporation but before the Offering.
Date
Aug 2003
Sept 2003
Feb 2004
Feb 2004
Feb 2004
May 2004
Nov 2004
Nov 2004
Feb 2005
April 2005
June 2005
Nov 2005
April 2006
April 2006
Description
Incorporation
New share issue
New share issue
Exercised options
Exercised options
New share issue
Exercised options
New share issue
Exercised options
Exercised options
New share issue
Exercised options
Exercised options
Increase of par value
Change in share
capital (NOK)
100,000
40,000
5,000
1,450
1,500
20,000
500
2,000
400
1,525
6,700
500
2,950
1,642,725
Share capital after
change (NOK)
100,000
140,000
145,000
146,450
147,950
167,950
168,450
170,450
170,850
172,375
179,075
179,575
182,525
1,825,250
Number of shares
after the change
10,000,000
14,000,000
14,500,000
14,645,000
14,795,000
16,795,000
16,845,000
17,045,000
17,085,500
17,237,500
17,907,500
17,957,500
18,252,500
18,252,500
Convertible Securities, Exchangeable Securities and Securities with Warrants
In order for Telio to gain access into the Narvesen and Rema 1000 retail chains in Norway, the
Company offered Reitan (the owner of the Narvesen and Rema 1000 retail chains) a total of 1.4
million options with a strike of NOK 24 per share. The total number of options was divided into two
tranches of 700,000 options each. The first tranche expired November 2005 without being exercised.
The remaining 700,000 options will expire November 2006.
The Company has not issued any convertible securities, exchangeable securities, warrants or other
securities exchangeable into Shares other than employee stock options and the options described
above.
The number of employee share options currently outstanding is 2,796,200. See “Employees” for a
description of the employee stock options.
Objects of the Company
Telio’s objects, as set out in Article 3 of its articles of association, are to develop and market IP based
telecommunications solutions, engage in consultancy business and participate in other business
operations.
Board of Directors and Management
Pursuant to Article 5 of the articles of association, the Board of Directors shall be composed of three
to six members elected by the general meeting. Currently, the Board of Directors consists of five
members who are elected by the shareholders. Pursuant to Article 5 of the articles of association, the
Company shall have a chief executive officer. See “Board of Directors and Management” for a
description of the current members of the Board of Directors and Executive Management.
Registration of Shares
The Company’s share register is operated through the VPS. The Company’s registrar is DnB NOR
Verdipapirservice.
69
The VPS is Norway's paperless centralised securities registry. It is a computerised bookkeeping
system in which the ownership of, and all transactions relating to, Norwegian listed shares must be
recorded. All transactions relating to securities registered with the VPS are made through
computerised book entries. The VPS confirms each entry by sending a transcript to the registered
shareholder irrespective of any beneficial ownership. To effectuate such entries, the individual
shareholder must establish a share account with a Norwegian account agent. Norwegian banks, the
Bank of Norway, authorised securities brokers in Norway and Norwegian branches of credit
institutions established within the EEA are allowed to act as account agents.
Under Norwegian law shares are registered in the name of the owner of the shares. As a general rule,
there are no arrangements for nominee registration. However, shares may be registered in the VPS by
a fund manager (bank or other nominee) approved by the Norwegian Ministry of Finance, as the
nominee of foreign shareholders. An approved and registered nominee has a duty to provide
information on demand about beneficial shareholders to the company and to the Norwegian
authorities. In the case of registration by nominees, registration with the VPS must show that the
registered owner is a nominee.
Restriction on ownership of shares
The articles of association of the Company contain no provisions restricting foreign ownership of
Shares.
There are no limitations under Norwegian law on the rights of non-residents or foreign owners to hold
or vote the Shares.
Transferability
The Shares are, according to Norwegian law, freely transferable.
Disclosure requirements
Under Norwegian law, an acquisition that causes the acquirer’s proportion of shares and/or rights to
shares to reach or exceed 1/20, 1/10, 1/5, 1/3, 1/2, 2/3 or 9/10 of the share capital or an equivalent
proportion of the voting rights in a company whose shares are quoted on a Norwegian Stock
Exchange, the acquirer shall immediately notify such acquisition to the stock exchange. This applies
correspondingly to anyone who through disposal changes his proportion of shares so that the
proportion is reduced to or below the set thresholds.
Mandatory filing requirements under the Norwegian Competition Act
The Norwegian Competition Act of 5 March 2004 No. 12 (the “Competition Act”) stipulates a
mandatory filing requirement for certain mergers and transactions involving acquisition of control of
another undertaking. The Competition Act applies to concentrations as defined in art. 3 of EC Council
Regulation 4064/89 (1989 ECMR), i.e. to mergers between two or more previously independent
undertakings, and to acquisitions of direct or indirect control on a lasting basis of the whole or parts of
another undertaking. The EC Commission’s and the EC Court’s interpretation of the notion of
concentration under the said regulation is relevant when determining which mergers are comprised by
the Competition Act.
All mergers and transactions involving acquisition of control must be notified to the Norwegian
Competition Authority (the “NCA”) if the undertakings involved in the transaction have a combined
annual turnover in Norway of NOK 20 million or more. However, if only one of the undertakings
involved in the transaction has an annual turnover exceeding NOK 5 million, the transaction need not
be notified.
Notwithstanding the above, the filing requirements under the Competition Act do not apply to
concentrations that are within the turnover thresholds of the EC Merger Regulation or equivalent
thresholds in the EEA Agreement. Accordingly, the principle of one-stop-merger control applies.
70
Transactions must be notified to the NCA no later than when a final agreement between the parties is
reached or when control over another undertaking in fact is acquired. The Competition Act allows for
voluntary filing at an earlier stage. The obligation to notify the transaction is imposed on the parties to
the merger or on the acquirer(s) of an undertaking.
The mandatory filing requirement under the Competition Act imposes an obligation to submit a socalled simplified notification. If the NCA finds reason to consider the transaction more closely, the
NCA may require that the parties to the merger/the acquirer(s) submit(s) a so-called complete
notification. The NCA must make such a requirement within 15 working days after they have received
the simplified notification. If this is not done, the NCA cannot intervene against the transaction after
this deadline has expired. The parties may also voluntarily submit a complete notification without
having received instructions from the NCA.
Where the NCA has imposed an obligation to submit a complete notification, the implementation of
the transaction must be suspended. The same applies if a complete notification is submitted
voluntarily. For mergers or acquisitions of control, the stand-still obligation comes into effect as soon
as the party/parties have received the order to submit a complete notification. For voluntary filings, the
stand-still comes into effect from the time of submission of a complete notification. The suspension
period lasts for 25 working days calculated from the time the NCA has received the complete
notification. It is within this time limit that the NCA must decide whether to investigate the transaction
further.The NCA may also order a prolonged prohibition on implementation of a transaction, provided
that there is reason to believe that the concentration may create or strengthen a significant restriction
on competition and that a temporary prohibition is necessary in order to ensure that a potential
decision from the NCA can be carried out.
Mandatory offer requirement
Norwegian law requires any person, entity or group acting in concert that acquires more than 40 per
cent of the voting rights of a Norwegian company listed on a Norwegian stock exchange to make an
unconditional general offer for the purchase of the remaining shares in the company. The offer is
subject to approval by the stock exchange before submission of the offer to the shareholders. The offer
price per share must be at least as high as the highest price paid or agreed by the offeror in the sixmonth period prior to the date the 40 per cent threshold was exceeded, but equal to the market price if
the market price was higher when the 40 per cent threshold was exceeded. In the event that the
acquirer thereafter, but prior to the expiration of the bid period acquires, or agrees to acquire,
additional shares at a higher price, the acquirer is obliged to restate its bid at that higher price. A
mandatory offer must be in cash or contain a cash alternative at least equivalent to any other
consideration offered. A shareholder who fails to make the required offer must within four weeks
dispose of sufficient shares so that the obligation ceases to apply. Otherwise, Oslo Børs may cause the
shares exceeding the 40 per cent limit to be sold by public auction. A shareholder who fails to make
such bid cannot, as long as the mandatory bid requirement remains in force, vote his shares or exercise
any rights of share ownership unless a majority of the remaining shareholders approve. The
shareholder can, however, exercise the right to dividend and pre-emption rights in the event of a share
capital increase. Oslo Børs may impose a daily fine upon a shareholder who fails to make the required
offer.
A shareholder or consolidated group which owns shares representing more than 40 per cent of the
votes in a listed company, and which has not made an offer for the purchase of the remaining shares in
the company in accordance with the provisions concerning mandatory offers, is as a main rule obliged
to make a mandatory offer in the case of each subsequent acquisition. However, there are exceptions
from this rule, including for a shareholder or a consolidated group which, upon admission of the
company to listing on a stock exchange, owns more than 40 per cent of the shares in the company.
The Company has not during the current financial year or the last financial year been the subject of
any public takeover bids by third parties in respect of its equity.
It is expected that the Norwegian rules on mandatory offer requirements will be changed in the near
future in connection with the implementation of Directive 2004/25/EC on take over bids.
71
Compulsory acquisition
If a shareholder, directly or via subsidiaries, acquires Shares representing more than 90 per cent of the
total number of issued Shares as well as more than 90 per cent of the total voting rights attached to
such Shares, then such majority shareholder would have the right (and each remaining minority
shareholder of the Company would have the right to require such majority shareholder) to effect a
compulsory acquisition for cash of any Shares not already owned by such majority shareholder. Such
compulsory acquisition would imply that the majority shareholder has become the owner of the thus
acquired shares with immediate effect. Upon effecting the compulsory acquisition the majority
shareholder would have to offer the minority shareholders a specific price per share, the determination
of which price would be at the discretion of the majority shareholder. Should any minority shareholder
not accept the offered price, such minority shareholder may, within a specified deadline not to be of
less than two months' duration, object to the pricing being offered. Absent such objection to the price
being offered, the minority shareholders would be deemed to have accepted the offered price after the
expiry of the two months deadline. If an objection is made, and absent amicable settlement, each of the
majority shareholder and the objecting minority shareholder(s) can request that the price be set by the
Norwegian courts. The cost of such court procedure would, as a general rule, be for the account of the
majority shareholder, and the courts would have full discretion in respect of the valuation of the
Shares as per the effectuation of the compulsory acquisition.
Voting rights
Each share in the Company carries one vote.
As a general rule, resolutions that shareholders are entitled to make pursuant to Norwegian law or the
Company's articles of association require a simple majority of the votes cast. In the case of election of
directors to the Board of Directors, the persons who obtain the most votes cast are deemed elected to
fill the positions up for election. However, as required under Norwegian law, certain decisions,
including resolutions to waive preferential rights in connection with any share issue, to approve a
merger or de-merger, to amend the Company's articles of association or to authorise an increase or
reduction in the share capital, must receive the approval of at least two-thirds of the aggregate number
of votes cast as well as at least two-thirds of the share capital represented at a shareholders' meeting.
Norwegian law further requires that certain decisions which have the effect of substantially altering
the rights and preferences of any shares or class of shares receive the approval of the holders of such
shares or class of shares as well as the majority required for amendments to the Company's articles of
association. Decisions that (i) would reduce any shareholder's right in respect of dividend payments or
other rights to the assets of the Company or (ii) restrict the transferability of the shares require a
majority vote of at least 90 per cent of the share capital represented at the general meeting in question
as well as the majority required for amendments to the Company's articles of association. Certain types
of changes in the rights of shareholders require the consent of all shareholders affected thereby as well
as the majority required for amendments to the Company's articles of association.
In general, in order to be entitled to vote, a shareholder must be registered as the beneficial owner of
Shares in the share register kept by the VPS. Beneficial owners of Shares that are registered in the
name of a nominee are generally not entitled to vote under Norwegian law, nor are any persons who
are designated in the register as holding such Shares as nominees. Readers should note that there are
varying opinions as to the interpretation of Norwegian law in respect of the right to vote nomineeregistered shares. For example, Oslo Børs has held that in its opinion “nominee-shareholders” may
vote in general meetings if they actually prove their shareholding prior to the general meeting.
72
General meetings of shareholders
Trough the general meeting, the Company’s shareholders exercise the supreme authority in the
Company, subject to the limitations provided by Norwegian law.
All shareholders in the Company are entitled to attend and vote at general meetings, either in person or
by proxy. See “Voting rights” with regard to certain restrictions on voting right applying for nomineeregistered shares, etc.
General meetings are conveyed by the Company’s Board of Directors. A notice of a general meeting
shall be sent at the latest two weeks before the date of the meeting, and shall include a proposal for an
agenda for the meeting. A shareholder is entitled to submit proposals to be discussed at general
meetings provided such proposals are submitted in writing to the Board of Directors in such good time
that it can be entered on the agenda of the meeting.
The annual general meeting shall be called by the Board of Directors such that it can be held within
six months from the end of each financial year. The annual general meeting shall deal with and decide
on the adoption of the annual financial statement and annual report, the question of declaring dividend
and such other matters as may be set out in the calling notice.
Extraordinary general meetings can be called by the Board of Directors, and if applicable the corporate
assembly or the chairman of the corporate assembly. In addition, the Board of Directors shall call an
extraordinary general meeting whenever so demanded in writing by the auditor or shareholders
representing at least 5 % of the share capital, in order to deal with a specific subject.
Additional issuances and preferential rights
All issuances of Shares by the Company, including bonus issues, require an amendment to the Articles
of association, which requires the same vote as other amendments to the articles of association.
Furthermore, under Norwegian law, the Company's shareholders have a preferential right to subscribe
for issues of new shares by the Company. The preferential rights to subscribe in an issue may be
waived by a resolution in a general meeting by the same vote required to approve amendments to the
articles of association. For reasons relating to foreign securities laws or other factors, foreign investors
may not be able to participate in a new issuance of shares or other securities and may face dilution as a
result.
Under Norwegian law, bonus issues may be distributed, subject to shareholder approval, by transfer
from the Company's free equity or from its share premium reserve. Such bonus issues may be effected
either by issuing shares or by increasing the par value of the shares outstanding. A waiver of the
shareholders' preferential rights in respect of bonus issues requires the approval of all outstanding
shares, irrespective of class.
Dividends
Under Norwegian law, no interim dividends may be paid in respect of a financial period as to which
audited financial statements have not been approved by the annual general meeting of shareholders,
and any proposal to pay a dividend must be recommended or accepted by the directors and approved
by the shareholders at a general meeting. The shareholders may vote to reduce (but not to increase) the
dividends proposed by the directors.
Dividends in cash or in kind are payable only out of (i) the annual profit according to the adopted
income statement for the last financial year, (ii) retained profit from previous years, and (iii)
distributable reserves, after deduction of (a) any uncovered losses, (b) the book value of research and
development, (c) goodwill, (d) net deferred tax assets recorded in the balance sheet for the last
financial year, (e) the aggregate value of any treasury shares the Company has purchased or been
granted security over during the preceding financial years, (f) any credit or security given pursuant to
sections 8-7 to 8-9 of the Norwegian Public Limited Companies Act and provided always that such
73
distribution is compatible with good and prudent business practice with due regard to any losses which
may have occurred after the last balance sheet date or which may be expected to occur. The Company
cannot distribute any dividends if the equity, according to the balance sheet, amounts to less than ten
per cent of the total balance sheet without following a creditor notice procedure as required for
reducing the share capital.
Under Norwegian foreign exchange controls currently in effect, transfers of capital to and from
Norway are not subject to prior government approval except for the physical transfer of payments in
currency, which is restricted to licensed banks. Consequently, a non-Norwegian resident may receive
dividend payments without Norwegian exchange control consent if such payment is made only
through a licensed bank.
The Company’s Board will consider the amount of dividend (if any) to recommend for approval by the
Company’s shareholders, on an annual basis, based upon the earnings of the Company for the years
just ended and the financial situation of the Company at the relevant point in time.
Rights on Liquidation
Under Norwegian law, Telio may be liquidated by a resolution in a general meeting of the Company
passed by a two thirds majority of the aggregate votes cast as well as two thirds of the aggregate share
capital represented at such meeting. The Shares rank pari passu in the event of a return on capital by
Telio upon a liquidation or otherwise.
Redemption provisions
The Company’s articles of association do not contain any special redemption rights attached to the
Company’s Shares.
Subject to specific requirements set out in the Norwegian Public Limited Companies Act, the general
meeting may adopt a resolution to redeem Shares through a share capital reduction. Such resolution
requires an amendment to the articles of association, which requires the same vote as other
amendments to the articles of association. In addition, stricter majority requirements may apply
depending on the manner in which the redemption is to be carried out.
Conversion provisions
There are no conversion rights attached to the Company’s Shares.
Reports to Shareholders
The Company publishes annual and interim reports that include financial statements. From and
including the year ended 31 December 2005, the Company has changed its accounting principles from
Norwegian NGAAP to be in accordance with the International Financial Reporting Standards, IFRS,
as issued by the International Accounting Standards Board.
Notification and Publication Requirements
The Company will provide its shareholders, Oslo Børs and the market as a whole with timely and
accurate information. Notices will be published through Oslo Børs’ information system and on the
Company’s internet site.
74
THIRD PARTY INFORMATION
The information in this Prospectus that has been sourced from third parties has been accurately
reproduced and as far as the Company is aware and able to ascertain from information published by
that third party, no facts have been omitted which would render the reproduced information inaccurate
or misleading.
STATUTORY AUDITORS
The Company’s auditor since incorporation has been PricewaterhouseCoopers AS. Their address is
Karenslyst Allé 12, N-0245 Oslo, Norway. The audit partners of PricewaterhouseCoopers AS are
members of the Norwegian Institute of Public Accountants (DnR).
PricewaterhouseCoopers AS has audited the Company’s annual accounts for 2005, 2004 and 2003,
and has performed a review of the Company’s interim financial information as of and for the three
months ended 31 March 2006 in accordance with the International Standard on Review Engagements
2400.
The Auditor’s reports have been issued without qualifications.
DOCUMENTS ON DISPLAY
The following documents (or copies thereof) may be inspected at www.telio.no/ about/ ?730 or during
usual business hours at the Company’s offices at Støperigaten 2, N-0250 Oslo, Norway.
(a) The articles of association of the Company
(b) The annual reports for the years ending 31 December 2003, 31 December 2004 and 31
December 2005.
75
KEY INFORMATION
Working capital statement
The Company’s working capital is sufficient to cover present requirements for a period of at least 12
months from the date of the Prospectus.
The adequacy of available funds will depend on many factors, including the further growth of the
business, scope of research and development programmes, capital expenditures, market development,
competition and potential acquisitions. Accordingly, the Company may require additional funds and
seek to raise such funds through issuing new equity or debt.
Capitalization and indebtedness
The Company believes that the capitalisation as of 31 March 2006 represents an adequate capital
structure for the Company. The Company has limited debt in the form of long-term and short-term
finance lease liabilities and is primarily founded and capitalised by shareholders equity.
The following table sets forth the Company’s capitalisation as of 31 March 2006. The information has
been derived from the Company’s unaudited condensed consolidated interim financial information for
the first quarter of 2006 in Appendix 3.
31 March 2006
Current debt
Guaranteed
Secured1)
Total current debt
14,448
14,448
Non-current debt
Guaranteed
Secured2)
Total non-current debt
16,108
16,108
Shareholder’s equity
Share capital
Other reserves
Retained earnings
Minority interests
Total shareholder’s equity
179
49,891
(8,665)
16
41,421
Total
71,977
1)
2)
Finance lease liabilities payable no later than 1 year
Finance lease liabilities payable later than 1 year and no later than 5 years
The lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the
event of default.
76
The table below sets forth the Company’s net indebtedness as of 31 March 2006.
31 March 2006
Trading securities
Liquidity
36,017
36,017
Current financial receivables
-
Current bank debt
Current portion of non current debt
Other current financial debt (financial lease liabilities payable within 1 year)
Current financial debt
Net current financial indebtedness
14,448
14,448
(21,569)
Non current bank loans
Bonds issues
Other non current loans (financial lease liabilities payable later than 1 year and no later than 5 years)
Non current financial indebtedness
16,108
16,108
Net financial indebtedness
(5,461)
Financial lease commitments
The main part of the Company’s capital expenditures is telephone adapters which is the residential
gateway that provides an interface between analogue calls from a telephone and the VoIP network.
Most of the capital expenditures in tangible assets (i.e. adapters and other hardware equipment) are
financed via a lease agreement with IBM Global Finance and are treated as financial leases.
The table below sets out the aggregate minimum lease payments for the finance lease commitments as
of 31 March 2006.
No later than 1 year
Later than 1 year and no later than 5 years
Later than 5 years
Minimum lease payments
Future finance charges on finance leases
Finance lease liabilities
31 March 2006
14,954
17,063
32,017
(1,461)
30,556
Present value of finance lease commitments:
Later than 5 years
Present value of lease liabilities
14,448
16,108
30,556
Payments due within one year are classified as current liabilites.
IBM equipment is leased using a Fair Market Value agreement (FMV). The contract is based on that
Telio returns the equipment after the lease period. Three months prior to contract termination, Telio
has the option to by the assets at fair market value.
Non IBM equipment is leased using a Standard Pay-out agreement (SPO). Telio buys the equipment at
2% of cost at the end of the leasing period.
77
Interest of natural and legal persons involved in the Offer
Xfile AS, which is one of the Selling Shareholders, is wholly owned by Mr. Aril Resen, Member of
the Board. Mr. Alan Duric, Co-founder and Chief Technology Officer of the Company is also one of
the Selling Shareholders. Further, Synesi AS is wholly owned by Mr. Espen Fjogstad (Co-founder and
Member of the Board). As such, these persons have an (indirect) interest in the Offering.
Other than the above, the Company is not aware of any interest, including conflicting interests, which
are material to the Offering.
Use of Proceeds and Reasons for the Offer
The Offering and listing of Telio’s shares on Oslo Børs is an important element of the Company’s
strategy. Through the Offering the Company will broaden its shareholder base and be able to provide a
regulated marketplace for the trading of its shares. Furthermore, the proceeds from the Share Issue will
strengthen the strategic position of the Company by improving the Company’s cash position in order
to secure funding for further growth.
The net proceeds of the issue of the Offer Shares are expected to amount to approximately NOK 93
(based on the mid-point of the indicative price range for the Offer Shares) after deduction of estimated
offering expenses payable by the Company. The net proceeds are anticipated to be used for financing
of the following:
•
•
•
to fund Telio’s mobile and international strategy
to fund a more aggressive growth in Norway
to fund potential acquisitions of companies in Norway and internationally
78
INFORMATION CONCERNING THE SECURITIES TO BE OFFERED
AND ADMITTED TO TRADING
Type, class and ISIN number of the Offer Shares
The Company has only one class of shares. The New Shares will be (as are the Secondary Shares) of
the same class as the Company’s ordinary Shares, and the New Shares will be created under
Norwegian law.The Company’s Shares are (and the New Shares will be) in registered form, and are
registered in book-entry form with the VPS under the securities identification code ISIN NO 001
0199052. The Company’s account operator is DnB NOR Verdipapirservice, Stranden 21, NO-0021
Oslo, Norway.
Currency
The New Shares will be denominated in Norwegian Kroner, each with a nominal value of NOK 0.1.
Rights attached to the New Shares
The rights attached to the New Shares will be the same as those attaching the Company’s existing
Shares and the New Shares will rank pari passu with existing Shares in all respects from such time as
the share capital increase in connection with the issuance of the New Shares is registered with the
Norwegian Register of Business Enterprises. The New Shares will be entitled to dividend from and
including the financial year 2005.
See “Share Capital” for a further description of certain matters pertaining to the Company’s Shares,
including dividend rights, voting rights, pre-emption rights, rights to share in profits, right to share in
surplus in the event of liquidation, mandatory offer obligation, squeeze-out rules, etc.
See “Taxation” below for a description of applicable rules regarding withholding tax, etc.
Resolution to issue the New Shares
The Share Issue will comprise an issue of 3,000,000 New Shares. The determination of the Offering
Price, and thereby the determination of the proceeds received by the Company in connection with the
Offering will be made by the Board and the Selling Shareholders jointly in consultation with the
Managers following the Book-building (as described in “Indicative Price Range and Offer Price”
below). Accordingly, the Board’s final resolution to issue the New Shares will not be made until the
end of the Book-building Period.
The Board has in a Board meeting on 15 May 2006 resolved that the share capital of the Company will
be increased on terms set out below, in accordance with the authorisation to the Board to increase the
share capital of the Company granted at the general meeting on 7 April 2006. The Board resolution
does not contain the number of New Shares to be issued or the final Offer Price, and thus the Board
will have to adopt a final and formal resolution to increase the share capital following the expiry of the
Book-building Period.
The Board resolved to issue 3,000,000 shares at an indicative subscription price between NOK 31 and
NOK 37 per Share (but which may be subsequently changed by the Board) and with such tranches and
limited discounts as set out in the Prospectus. This will mean that the share capital of the Company
shall be increased by NOK 300,000 by issuance of shares, each with a nominal value of NOK 0.1. The
Shares will be issued to subscribers in the Institutional Offering, the Retail Offering, the Employee
Offering and the Customer Offering as set out in the Prospectus, but may also be subscribed for by the
Managers if deemed effective for purposes of transaction efficiency. The pre-emptive rights of the
existing shareholders to subscribe for the new shares will therefore be waived. The new shares will be
entitled to dividends declared after the date of this resolution.
79
Expected issue date
The New Shares to be issued will be issued after the expiration of the application periods in the
Offering, expected to take place on or about 31 May 2006.
Transferability
The Offer Shares (including the New Shares once issued) are according to Norwegian law and the
Company’s articles of association, freely transferable.
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TAX ISSUES
This section describes certain tax consequences in Norway for shareholders who are resident in
Norway for tax purposes (“Norwegian Shareholders”) and for shareholders who are not resident in
Norway for tax purposes (“Non-resident Shareholders”). The statements herein regarding taxation
are based on the laws in force in Norway as of the date of this Prospectus and are subject to any
changes in law occurring after such date, which changes could be made on a retrospective basis. The
following summary does not purport to be a comprehensive description of all the tax considerations
that may be relevant to a decision to purchase, own or dispose of shares. Investors are advised to
consult their own tax advisors concerning the overall tax consequences of their ownership of shares.
Norwegian shareholders
Taxation on dividends
Norwegian corporate shareholders (i.e. limited liability companies and similar entities) are not subject
to Norwegian tax on dividends received on shares in companies’ resident within the EEA. Thus, any
dividend received on the Shares is not taxable for a Norwegian Corporate Shareholder.
Dividends distributed to Norwegian individual shareholders are taxable under the Shareholder Model.
According to the Shareholder Model, individual shareholder’s income from shares (dividends and
capital gains) is taxable as ordinary income (28% flat rate) to the extent the income exceeds a basic
tax-free allowance. The tax-free allowance shall be computed for each individual shareholder on the
basis of the cost price of each of the shares multiplied by a risk-free interest. The risk-free interest will
be calculated every income year. Any unused allowance may be carried forward and set off against
future dividend distributions or against gains on the realisation of the share.
Taxation on capital gains / losses on disposal of shares
Norwegian Corporate Shareholders are not subject to tax on capital gains derived from realisation of
shares in companies’ resident within the EEA, while losses suffered from such realisations are not tax
deductible. Costs incurred in connection with the purchase and sale of such shares are not tax
deductible. Thus, any capital gains on the Shares are not taxable while losses are not deductible for a
Norwegian Corporate Shareholder.
Norwegian individual shareholders are taxable in Norway for capital gains on the realisation of shares,
and have a corresponding right to deduct losses. This applies irrespective of how long the shares have
been owned by the individual shareholder and irrespective of how many shares that are realised. Gains
are taxable as ordinary income in the year of realisation, and losses can be deducted from ordinary
income in the year of realisation. The current tax rate for ordinary income is 28%. Under current tax
rules, gain or loss is calculated per share, as the difference between the consideration received and the
tax base of the share. The tax base of each share is based on the individual shareholder’s purchase
price for the share. Unused allowance connected to a share may be deducted from a capital gain on the
same share, but may not lead to or increase a deductible loss. Further, unused allowance may not be
set off against gains from realisation of the other shares.
If an individual shareholder disposes of shares acquired at different times, the shares that were first
acquired will be deemed as first sold (the “FIFO”-principle) upon calculating taxable gain or loss.
Costs incurred in connection with the purchase and sale of shares may be deducted in the year of sale.
Net wealth tax
The value of shares is taken into account for net wealth tax purposes in Norway. The marginal tax rate
is currently 1.1%.
Listed shares are valued at 80% of the quoted value at January 1 in the assessment year.
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Non-resident shareholders
Taxation on dividends
Dividends paid from a Norwegian company to Non-resident shareholders are subject to Norwegian
withholding tax at a rate of 25% unless the recipient qualifies for a reduced rate according to an
applicable tax treaty or other specific regulations. Norway has entered into tax treaties with a number
of countries and withholding tax is normally set at 15% under these treaties. The shareholders home
country will normally give credit for the Norwegian withholding tax imposed on the dividend.
Corporate shareholders resident within the EEA are not subject to Norwegian withholding tax.
Dividends paid to individual shareholders are as the main rule subject to Norwegian withholding tax at
a rate of 25%, unless a lower rate has been agreed in an applicable tax treaty. If the individual
shareholder is resident within the EEA, the shareholder may apply to the tax authorities for a refund of
an amount corresponding to the tax-free allowance on each individual share.
In accordance with the present administrative system in Norway, a distributing company will generally
deduct withholding tax at the applicable rate when dividends are paid directly to an eligible foreign
shareholder, based on information registered with the VPS. Dividends paid to foreign shareholders in
respect of nominee registered shares are not eligible for reduced treaty withholding tax rate at the time
of payment unless the nominee, by agreeing to provide certain information regarding beneficial owner,
has obtained approval for reduced treaty withholding tax rate from the Central Office for Foreign Tax
Affairs.
Foreign shareholders should consult their own advisers regarding the availability of treaty benefits in
respect of dividend payments.
Taxation on capital gains / losses on disposal of shares
Gains from the sale or other disposal of shares by a Non-resident Shareholder will not be subject to tax
in Norway unless the Non-resident Shareholder (i) is an individual holding the shares in connection
with a business carried on or managed from Norway, or (ii) is an individual who has previously been
resident in Norway for tax purposes, and the shares are realised less than five years after the individual
ceased to be a resident in Norway for tax purposes. If the latter rule applies, the latent gain on the
shares at the time the individual ceased to be a resident in Norway for tax purposes will be taxable in
Norway, but only to the extent the gain exceeds a tax-free allowance.
Such taxation may be limited according to an applicable tax treaty.
Transfer taxes etc. VAT
No transfer taxes, stamp duty or similar taxes are currently imposed in Norway on purchase, disposal
or redemption of shares. Further, there is no VAT on transfer of shares.
Inheritance tax
Upon transfer of shares by way of inheritance or gift, the transfer may be subject to Norwegian
inheritance or gift tax. The basis for computation is the market value of the shares on the time the
transfer takes place. However, such a transfer is not subject to Norwegian tax if the donor/deceased
was neither a citizen nor resident of Norway for tax purposes at the time of the transfer.
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TERMS AND CONDITIONS OF THE OFFERING
The Offering
The Offering comprises 3,000,000 New Shares offered by the Company and up to 1,000,000
Secondary Shares offered by the Selling Shareholders, for a total of up to 4,000,000 Offer Shares. In
the event of insufficient demand in the Offering, the issue of New Shares will have priority over the
sale of Secondary Shares. The gross proceeds from the issue of New Shares will be approximately
NOK 102 million while the gross proceeds from the sale of Secondary Shares will be up to
approximately NOK 34 million (both based on the mid-range of the Indicative Price Range).
Calculated similarly, the gross proceeds from the Offering will be approximately NOK 136 million.
The Offering will be organised in four separate tranches:
•
The Institutional Offering, in which Offer Shares are being offered to institutional investors
and other professional investors in Norway and in certain other jurisdictions subject to a lower
limit per application of 40,000 Offer Shares. Allotments will be rounded down to the nearest
multiple of 200 Offer Shares.
•
The Retail Offering, in which Offer Shares are being offered to the public subject to a lower
limit per application of 200 Offer Shares, and an upper limit per application of up to but not
including 40,000 Offer Shares for each investor. Applicants will only be allotted Offer Shares
in multiples of 200 Shares, and applications will be rounded down to the nearest multiple of
200 Offer Shares. The Retail Offering will only be marketed in Norway.
•
The Employee Offering, in which Offer Shares are being offered to employees of the
Company with a discount for each employee of NOK 1,500 for 200 Offer Shares as set out in
“Application and settlement procedures in the Employee Offering” below. Each employee will
be guaranteed a minimum allotment of 200 Offer Shares. The Employee Offering will
otherwise be on terms equal to the Retail Offering. For allocations above 200 Offer Shares,
applicants in the Employee Offering are required to pay the full Offer Price.
•
The Customer Offering, in which Offer Shares are being offered to registered customers of
the Company per 29 May 2006 subject to a lower limit per application of 200 Shares and an
upper limit of up to but not including 40,000 Offer Shares per applicant. Applicants will only
be allotted Offer Shares in multiples of 200 Offer Shares, and applications will be rounded
down to the nearest multiple of 200 Shares. Each applicant in the Customer Offering will
receive a discount of 10% per Offer Share relative to the Offer Price set in the Book-building
for allocations up to 400 Offer Shares. For allocations above 400 Offer Shares, applicants in
the Customer Offering are required to pay the full Offer Price. The Customer Offering will
only be marketed in Norway and non-Norwegian customers do not qualify for participation in
the Customer Offering.
In the event that an investor applies for Offer Shares in both the Institutional Offering and the Retail
Offering or the Customer Offering, the investor’s combined application will be regarded as an
application in the Institutional Offering (implying among other things that the applicant will not be
entitled to the discount awarded to allocations in the Customer Offering).
It has been provisionally assumed that 80% of the Offering will be allocated to the Institutional
Offering and 20% to the Retail Offering, the Employee Offering and the Customer Offering. However,
the final allocation between the tranches will be decided by the Board after the end of the Bookbuilding Period on the basis of the application level in the respective tranches relative to the overall
application level for the Offering. The final allocation between the tranches will also take into account
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the conditions for listing on Oslo Børs. No particular part of the Offering has been reserved for nonNorwegian investors.
The mechanism of allocation is further described below.
Conditions for completing the Offering
The Company and the Selling Shareholders reserve the right to withdraw the Offering at any time
prior to final allocation, expected to take place on or about 31 May 2006 (subject to extension of the
application periods as described below at their sole discretion (and for any reason).
Completion of the Offering is further subject to (i) the Board’s decision to issue New Shares after the
end of the Book-building Period, (ii) approval by Oslo Børs of the Company’s listing application and
(iii) the satisfaction of all conditions for listing set by Oslo Børs (see further “Admission to trading”
below).
In the event the conditions for the Managers’ payment obligation under the Subscription and Payment
Agreement (as described in “Subscription and Payment Guarantees”) are not fulfilled (and in such
event not waived by the Managers in their sole discretion) before the share capital increase in
connection with the Share Issue is registered in the Register of Business Enterprises (expected to take
place on or about 31 March 2006), the Offering will not be completed.
The completion, withdrawal or otherwise non-completion of the Offering will be announced through
Oslo Børs’ company information system under the Company’s ticker “TELIO” and in a press release.
If the conditions for the Offering have not been met by 31 May 2006, all applicants will be released
from their application commitments (subject to extension of the application periods). The Offering
will not be closed earlier than 25 May 2006.
The Share Issue
The Share Issue will comprise an issue of 3,000,000 New Shares for a total gross consideration of
approximately NOK 102 million (based on the mid-range of the Indicative Price Range). The
determination of the Offer Price, and thereby the determination of the proceeds received by the
Company in connection with the Offering will be made by the Board and the Selling Shareholders
jointly in consultation with the Managers following the Book-building (as described in “Indicative
Price Range and Offer Price” below). Accordingly, the Board’s final resolution to issue the New
Shares will not be made until the end of the Book-building Period.
18,252,500 Shares, each with a par value of NOK 0.1. After the completion of the Share Issue, the
Company’s share capital will be increased to NOK 2,125,250 divided into 21,252,500 Shares, each
with a par value of NOK 0.1.
In connection with the issuance of the New Shares, existing Shareholders’ preferential right to
subscribe for the New Shares as set out in the Public Limited Liability Companies Act has been
derogated from.
The Secondary Sale
In addition to the offering of the New Shares by the Company, the Selling Shareholders offer to sell up
to 1,000,000 existing Shares (the “Secondary Shares”) for a total gross consideration of up to
approximately NOK 34 million (based on the mid-range of the Indicative Price Range) at the Offer
Price.
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Indicative Price Range and Offer Price
An indicative price range of NOK 31 to NOK 37 per Offer Share (the “Indicative Price Range”) has
been set by the Board after consultation with the Managers and the Selling Shareholders.
The Indicative Price Range has been determined on the basis of an overall evaluation, including the
Company’s historical and expected earnings and future market prospects as well as a comparison of
these factors with the market valuation of comparable companies and the expected demand for the
Offer Shares. The final Offer Price may be set above or below the Indicative Price Range.
The Board and the Selling Shareholders will jointly determine the Offer Price after the end of the
Book-building Period. The decision by the Board and the Selling Shareholders will be made after
consultation with the Managers, based on, among other factors, an evaluation of the level of demand
in the Book-building, the Company’s historical and expected results of operation and an assessment of
the investment market’s valuation of comparable companies.
The Offer Price will be announced through Oslo Børs’ company information system under the
Company’s ticker “TELIO” and in a press release once determined by the Board and the Selling
Shareholders, expected to take place on or around 31 May 2006.
Applications, Book-building and settlement procedures in the Institutional Offering
Book-building Period
The book-building period in the Institutional Offering (“the “Book-building Period”) will last from
and including 18 May 2006 to and including 30 May 2006, closing at 16:30 hours (Norwegian time).
However, Telio together with the Managers reserves the right to extend the Book-building Period in
their sole discretion. Any such extension of the Book-building Period will be announced before 09:00
hours (Norwegian time) on 30 May 2006. Extension will only be made one time, and for no longer
than until 16:30 hours (Norwegian time) on 6 June 2006.
In the event of extension of the Book-building Period, the allocation date, the first trading date,
payment date and the date of delivery of Offer Shares will be extended correspondingly. Furthermore,
such extension will also represent an extension of the point in time when applications made in the
Institutional Offering become irrevocable and binding upon the investor.
Application procedures in the Institutional Offering
Applications for Offer Shares in the Institutional Offering must be made during the Book-building
Period by advising one of the Application Offices of the number of Offer Shares that the investor
wishes to apply for and the price that such investor is offering to pay for the Offer Shares. Any oral
application will be binding upon the investor and subject to the same terms and conditions as a written
application. Each Application Office can, at any time and at its sole discretion, require the investor to
confirm any oral applications by instrument in writing. Applications made may be withdrawn or
amended by the investor at any time up to the end of the Book-building Period. After the end of the
Book-building Period all applications that have not been withdrawn or amended are irrevocable and
binding upon the investor. Subject to extension as described above, the book will close at 16:30 hours
(Norwegian time) on 30 May 2006, after which no further applications, amendments or withdrawals
will be accepted.
Allocation date
Notifications of allocations in the Institutional Offering are expected to be communicated by the
Managers’ directly to the individual applicants on or about 31 May 2006.
Payment, delivery and trading of allocated Offer Shares
Payment for Offer Shares allocated in the Institutional Offering shall take place against delivery of
Offer Shares, through the ordinary Norwegian settlement system (VPO) on 2 June 2006.
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For late payment, interest on the amount due will accrue at a rate equal to the prevailing interest rate
under the Norwegian Act on Interest on Overdue Payments of 17 December 1976 No. 100, per the
date of the Prospectus being 9.25 % per annum. Should payment not be made when due, the Offer
Shares allocated will not be delivered to the applicant, and the Managers reserves the right, at the risk
and cost of the applicant, to cancel the application, re-allot or otherwise dispose of the allocated Offer
Shares on such terms and in such manner as they decide in accordance with applicable regulations.
The original applicant remains liable for payment of the Offer Price, together with any interest, costs,
charges and expenses accrued, and payment may be enforced for any such amount outstanding.
The Offer Shares are expected to be tradable on Oslo Børs from and including 2 June 2006.
Applicants selling Offer Shares from 2 June 2006 and onwards must ensure that payment for such
Shares is made within the deadline set out above. Accordingly, an applicant who wishes to sell his
Offer Shares before delivery must ensure that payment is made in order for such Shares to be
delivered in time to the applicant.
Application and settlement procedures in the Retail Offering
Retail Application Period
The application period in the Retail Offering (“the Retail Application Period”) will last from and
including 18 May 2006 to and including 30 May 2006, closing at 16:30 hours (Norwegian time).
However, Telio together with the Managers reserves the right to extend the Retail Application Period
in their sole discretion. Any such extension of the Retail Application Period will be announced before
09:00 hours (Norwegian time) on 30 May 2006. Extension will only be made one time, and for no
longer than until 16:30 hours (Norwegian time) on 6 June 2006. The Application Period will only be
extended if the Book-building Period is extended and vice versa.
In the event of extension, the allocation date, the first trading date, payment date and the date of
delivery of Offer Shares will be extended correspondingly. All applications made in the Retail
Offering will be irrevocable and binding upon receipt of a duly completed Application Form by the
Application Offices, irrespective of any extension of the Retail Application Period.
Submission of Application Forms
All applications in the Retail Offering must be made on the Application Form on paper (a copy of
which is attached as Appendix 6 to this Prospectus) or through the Internet (see “Application Offices”
below). Application Forms together with this Prospectus can be obtained from the Company or from
the Application Offices.
Application Forms that are incomplete or incorrectly completed, or that are received after the expiry of
the Retail Application Period, may be disregarded without further notice to the applicant. Properly
completed Application Forms must be received by the Application Offices, or an application must be
registered through the internet, by 16:30 hours (Norwegian time) on 30 May 2006.
All applications in the Retail Offering are irrevocable once received by one of the Application Offices,
and accordingly cannot be withdrawn by the applicant after this point in time.
Applications in the Retail Offering shall be made for a specific number of Offer Shares, and not for a
specific cash amount. Each applicant in the Retail Offering will be permitted, but not required, to
indicate on the Application Form that the applicant does not wish to be allocated Offer Shares should
the Offer Price be set above the Indicative Price Range. If the applicant elects to do so, the applicant
will not be allocated any Offer Shares if the Offer Price is set above the Indicative Price Range. If the
applicant does not make this reservation on the Application Form, the application will be binding
regardless of whether the Offer Price is set within, above, or below the Indicative Price Range.
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Applicants must have a VPS account and an account with a Norwegian bank in order to be allotted
Offer Shares. If an applicant does not have a VPS account, it can be arranged through the Application
Offices, the majority of banks and investment firms.
Allocation Date
Notifications of allocation in the Retail Offering are expected to be issued by the Managers by a
notification letter sent on or about 31 May 2006. Applicants wishing to know the precise number of
Offer Shares having been allocated to them may contact the Application Offices from the morning of
31 May 2006 and onwards. Applicants in the Retail Offering who have access to investor services
through an institution that operates the applicant’s VPS account should be able to check how many
Offer Shares that have been allocated to them from and including 31 May 2006.
Payment, delivery and trading of allocated Offer Shares
In completing the Application Form, each applicant will authorize the Managers to debit the
applicant’s Norwegian bank account for the total amount due for the Offer Shares allocated. The
applicant’s account number must be stated on the Application Form. Applicants that do not have a
Norwegian bank account must contact the Application Offices. Debits will be made on or about 2 June
2006, and there must be sufficient funds in the stated bank account from and including 2 June 2006.
Should applicants have insufficient funds on their accounts or should payment be delayed for any
reason, or if it is not possible to debit the accounts, penalty interest at a rate equal to the prevailing
interest rate under the Norwegian Act on Interest on Overdue Payments of 17 December 1976 No.
100, (9.25% per annum per the date of this Prospectus) will be payable on the amount due. The
Managers reserves the right to make up to three debit attempts within 9 June 2006, if there are
insufficient funds on the account on the first debiting date. In the event that funds are not available on
the specified bank account at the appropriate date or payment cannot be claimed from the bank
account for some other reason, the Managers reserves the right, at the risk and cost of the applicant, to
cancel the application, re-allot or otherwise dispose of the allocated Offer Shares on such terms and in
such manner as it decides in accordance with applicable regulations. The original applicant remains
liable for payment of the Offering Price, together with any interest, costs, charges and expenses
accrued, and payment may be enforced for any such amount outstanding.
Delivery of Offer Shares in the Retail Offering to the applicants’ VPS accounts is expected to take
place on or about 2 June 2006, provided that payment of the total proceeds has taken place.
Applicants selling Offer Shares from 2 June 2006 and onwards must ensure that payment for such
Shares is made within the deadline set out above. Accordingly, an applicant who wishes to sell his
Offer Shares before delivery must ensure that payment is made in order for such Shares to be
delivered in time to the applicant.
Application and settlement procedures in the Employee Offering
The Company wishes to provide its employees with the opportunity to become shareholders in the
Company. Accordingly, the Board has decided to offer Offer Shares to employees in the Company.
Applications for Offer Shares in the Employee Offering must be made on a separate application form,
which will be made available to the employees together with this Prospectus at the premises of the
Company and its subsidiaries. Each employee will be guaranteed a minimum allotment of 200 Offer
Shares. Applications in the Employee Offering cannot be made through the Internet.
Each employee will be given a discount of NOK 1,500 for 200 Offer Shares. For allocations above
200 Offer Shares, applicants in the Employee Offering are required to pay the full Offer Price. For
employees who are resident in Norway for tax purposes, such discount will be regarded as a taxable
employment income pursuant to Norwegian tax law. However, a discount of up to NOK 1,500 for
each such employee will be exempt from Norwegian income taxation. For employees who are not
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resident in Norway for tax purposes, the local taxation regime in respect of the above can be different,
and such employees should obtain individual tax advice in such jurisdictions.
Other than as specified above, the terms and conditions of the Retail Offering also apply to the
Employee Offering.
Application and settlement procedures in the Customer Offering
The Company wishes to provide its registered customers as of 29 May 2006 (“Qualifying Customers”)
with the opportunity to become shareholders in the Company. Accordingly, the Board has decided to
offer Offer Shares to Qualifying Customers at a discount of 10% per Offer Share relative to the Offer
Price set in the Book-building for allocations up to 400 Offer Shares. For allocations above 400 Offer
Shares, applicants in the Customer Offering are required to pay the full Offer Price.
Applications for Offer Shares in the Customer Offering must be made on the same Application Form
used in the Retail Offering on paper (a copy of which is attached as Appendix 6 to this Prospectus).
Application Forms together with this Prospectus can be obtained from the Company or from the
Application Offices. Applications in the Customer Offering cannot apply for Offer Shares through the
Internet. Non-Norwegian customers do not qualify for applications in the Customer Offering.
Applicants in the Customer Offering must fill in their costumer number with Telio in the relevant box
in the Application Form whereby they confirm that they are Qualifying Customers. If an applicant
who is a Qualifying Customer does not fill in its correct customer number in the relevant box, the
applicant’s application will be treated as an application in the Retail Offering.
Other than as specified above, the terms and conditions of the Retail Offering also apply to the
Customer Offering.
Application Offices
Application Offices for applications in the Institutional Offering, the Retail Offering and the Customer
Offering are the Managers:
DnB NOR Markets ASA
Stranden 21
NO-0021 OSLO
Norway
SEB Enskilda ASA
Filipstad Brygge 1
PO Box 1363 Vika
NO-0113 OSLO
Norway
Telephone: +47 22 94 88 80
Fax:
+47 22 48 29 80
Telephone: +47 21 00 85 00
Fax:
+47 21 00 89 62
Applicants in the Retail Offering who are Norwegian residents can also apply for Offer Shares through
the Internet at the addresses www.dnbnor.no/markets and www.enskilda.no where they will be able to
download this Prospectus including the Application Form (a copy of which is attached as Appendix 6
to this Prospectus) once they have confirmed that they reside in Norway and have valid VPS accounts.
Applications made over the Internet must be duly registered during the Application Period.
All applications in the Retail Offering, the Employee Offering and the Customer Offering are
irrevocable once received by one of the Application Offices or, with respect to the Retail Offering,
registered on the Internet.
Mechanism of Allocation
The Company’s current shareholders will not have any pre-emptive rights in the Offering. The Selling
Shareholders will not apply for Offer Shares.
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It has been provisionally assumed that 80% of the Offering will be allocated to the Institutional
Offering and 20% to the Retail Offering, the Employee Offering and the Customer Offering. However,
the final allocation between the tranches will be decided by the Board after the end of the Bookbuilding Period on the basis of the application level in the respective tranches relative to the overall
application level for the Offering. The final allocation between the tranches will also take into account
the conditions for listing on Oslo Børs. No particular part of the Offering has been reserved for nonNorwegian investors.
In the Institutional Offering, the Board will determine the allocation of Offer Shares after consultation
with the Managers. In addition to satisfaction of the requirements set by Oslo Børs in relation to
number of shareholders holding at least one round lot, an important aspect of the allocation principles
is the desire to create an appropriate long-term shareholder structure for the Company. The allocation
principles will, in accordance with normal practice for institutional placements, include factors such as
pre-marketing and management road-show participation and feedback, timeliness of the order, price
level, relative order size, sector knowledge, investment history, perceived investor quality and
investment horizon. The Company and the Managers further reserve the right, at their sole discretion,
to take into account the credit-worthiness of any applicant. The Company and the Managers may also
set a maximum allocation to any applicant, and may round, scale down or zero-allot any application.
No Offer Shares have been reserved for any specific national market.
In the Retail Offering and the Customer Offering, allotment of Offer Shares will be made in multiples
of 200 Shares, and applications will be rounded down to the nearest multiple of 200 Offer Shares. No
allocation will be made for a number of Offer Shares less than 200 Offer Shares. In the event of oversubscription, the Company will endeavor to ensure that all applicants in said tranche receive a certain
number of Offer Shares to be decided by the Board based on the number and size of applications
received. Smaller applications might therefore be granted a higher relative allotment compared to
larger applications. Allotment of additional Offer Shares will be based on objective criteria based on a
pro-rata allocation so that larger applications will receive a larger share of the additional shares and
vice versa for smaller applications.
In the Employee Offering, each employee will be guaranteed a minimum allotment of 200 Offer
Shares. Other than this, the same allocation principles will be applied in the Employee Offering as in
the Retail Offering and the Customer Offering.
Subscription and Payment Guarantees
In order to ensure prompt registration of the share capital increase and issuance of the New Shares,
Telio will prior to or in connection with the determination of the Offer Price and allocation in the
Offering enter into a subscription and payment agreement with the Managers, whereby the Managers
will undertake to subscribe and make full payment for the New Shares, in its own name, but for the
benefit of the applicants in the Offering. Such subscription by the Managers will take place
immediately after the allocation has been approved by the Board, expected to occur on or about 30
May 2006. Payment by the Managers will take place on the first business day after the subscription
has taken place, expected to be on or about 31 May 2006, and the share capital increase will be
registered in the Register of Business Enterprises immediately thereafter.
The Offer Shares will be transferred to the individual applicants’ VPS accounts in accordance with the
payment terms set out in “Applications, Book-building and settlement procedures in the Institutional
Offering”, “Application and settlement procedures in the Retail Offering”, “Application and
settlement procedures in the Employee Offering” and “Application and settlement procedures in the
Customer Offering”, provided however, that no settlement will be effectuated if the conditions for
listing of the Shares are not satisfied, see “Conditions for completing the Offering”. The settlement
will take place between the Managers and the individual applicants, and as a consequence applicants
shall deal with the Managers with regard to issues related to settlement.
The Managers subscription and payment obligation under the Subscription and Payment Agreement
will be conditional upon no “force majeure” event having occurred before the share capital increase in
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connection with the issuance of the New Shares is registered in the Register of Business Enterprises
(expected to take place on or around 31 March 2006). The following events shall constitute a “force
majeure” event: (i) a banking moratorium declared in or suspension or material limitation in trading in
securities on a principal stock exchange in Oslo, London or New York, (ii) a material adverse change
in the Company’s business, financial condition or results of operations, (iii) the outbreak or escalation
of hostilities or war or the declaration of a national emergency in Norway, the United States or the
United Kingdom, or (iv) the occurrence of any material adverse change in Norwegian or international
financial, political or economic conditions.
In the event the conditions set out above for the Managers’ subscription and payment obligation under
the Subscription and Payment Agreement are not fulfilled (and in such event not waived by the
Managers in their sole discretion), the Offering will not be completed. Should this occur, the Company
will issue a notification, see “Publication of Technical Information in Respect of the Offering” below.
Publication of Technical Information in Respect of the Offering
The Company will utilize Oslo Børs’ company information system to publish technical information in
respect of the Offering prior to listing of the Shares. Such information will also be available on the
Company’s web-site www.telio.no. This applies to information on any changes in the Retail
Application Period, the Book-building Period, the Indicative Price Range, the final determination of
the Offer Price, the size of the Offering, etc.
Mandatory anti-money laundering procedures
The Offering is subject to the Norwegian Money Laundering Act No. 41 of 20 June 2003 and the
Norwegian Money Laundering Regulations No. 1487 of 10 December 2003 (collectively the “AntiMoney Laundering Legislation”). All applicants who are not registered as existing customers with the
Managers must verify their identity to the Managers in accordance with requirements of the AntiMoney Laundering Legislation, unless an exemption is available. Applicants that have designated an
existing Norwegian bank account and an existing VPS-account on the Application Form are exempted,
provided the aggregate subscription price is less than NOK 100,000, unless verification of identity is
requested by the Managers. The verification of identification must be completed prior to the end of the
application period. Investors that have not completed the required verification of identification will not
be allocated Offer Shares. Further, in participating in the Offering, each applicant must have a VPS
account. The VPS account number must be stated on the Application Form. VPS accounts can be
established with authorized VPS registrars which can be Norwegian banks, authorized securities
brokers in Norway and Norwegian branches of credit institutions established within the EEA.
However, non-Norwegian investors use nominee VPS accounts registered in the name of a nominee.
The nominee must be authorized by the Norwegian Ministry of Finance. Establishment of VPS
account requires verification of identification before the VPS registrar in accordance with the AntiMoney Laundering Legislation.
Jurisdiction
The Offering and this Prospectus are subject to Norwegian law, unless otherwise stated herein. Any
dispute arising in respect of the Offering or this Prospectus is subject to the exclusive jurisdiction of
Oslo District Court.
90
SELLING SECURITIES HOLDERS
The Managers have entered into an agreement with the Selling Shareholders, whereby the Selling
Shareholders have undertaken to offer up to 1,000,000 Secondary Shares free of encumbrances in
connection with the Offer.
Applications for Offer Shares will first be allocated to the Share Issue. Hence, the Secondary Sale will
not take place unless the Share Issue is completed. The Company will not receive any proceeds from
the Secondary Sale.
The following table sets forth the Selling Shareholders and the number of existing Shares offered by
each of the Selling Shareholders.
Selling Shareholder
Xfile AS1)
Allan Duric2)
Synesi AS3)
Business address
Oslo, Norway
Stockholm, Sweden
Stavanger, Norway
Shares owned
prior to sale
2,751,000
2,510,000
2,276,667
Shares to
be sold
334,000
333,000
333,000
Shares owned
after sale
2,417,000
2,177,000
1,943,667
1)
Wholly owned by Mr. Aril Resen, Board member and co-founder of the Company
Mr. Alan Duric, co-founder and member of the Company’s management. Mr. Alan Duric holds his Shares
through Lombard Odier Darier Hentsh & Cie (acting as custodian and nominee for Mr. Alan Duric)
3)
Wholly owned by Mr. Espen Fjogstad, co-founder and member of the Company’s Board
2)
Lock-up agreements
The Managers have entered into a lock-up agreement with the following shareholders offering to sell
existing Shares: Xfile AS, Mr. Allan Duric and Synesi AS (Mr. Fjogstad also own Shares through
personal accounts which are subject to lock-up agreements as described below). Under the lock-up
agreement, said parties have agreed not to offer, sell, contract to sell, mortgage, charge, deposit,
assign, issue options or warrants in respect of, grant any option to purchase or otherwise dispose of,
directly or indirectly, any Shares (or any other securities convertible into or exchangeable for Shares
or which carry rights to subscribe or purchase Shares), or enter into any transaction (including a
derivative transaction) having an effect on the market in the Shares similar to that of a sale or publicly
to announce any intention to do any of such things or deposit any Shares. The Lock-up undertaking
does not apply if the Managers, in their sole discretion, give their written consent prior to such a sale
or transaction.
The lock-up period shall remain in force for 12 months after the first day of listing of the Shares on
Oslo Børs. It is agreed, however, that the Shareholders shall have the right to sell 25% of their Shares
owned after the Secondary Sale after 3 months, another 25% after 6 months, another 25% after 9
months and the remaining Shares after 12 month.
91
ADMISSION TO TRADING
Telio has applied for a listing of the Company’s Shares on Oslo Børs. The board of Oslo Børs is
expected to consider the application in a board meeting scheduled for 29 May 2006. Telio is confident
that Oslo Børs will approve the Company’s listing application with acceptable conditions, however no
assurance for this can be given. In the event the listing application is not approved on conditions
acceptable to Telio, the Offering will not be completed. Provided Oslo Børs approves Telio’s listing
application, provided the Company fulfils any conditions set by Oslo Børs, and provided the other
conditions for completion of the Offering set out herein are fulfilled (or waived), it is expected that the
first quotation and trading day will be on or about 2 June 2006.
The number of Shares forming one round lot will depend on the Offer Price, but is expected to consist
of 200 Shares. The Company’s ticker code will be ”TELIO”.
It is expected that it will be possible to trade the alloted Offer Shares through Oslo Børs from and
including 2 June 2006. However, delivery of Offer Shares to each of the investors that have been
allotted Offer Shares is conditional upon settlement being executed according to the terms set out
above.
Prior to the Offering, the Company’s shares have been traded in the over-the-counter market
maintained by the Norwegian Securities Sealers Association (“Fondsmeglerforbundet”). The
Company will terminate its agreement for trading on this market. Except for this, the Shares are to the
Company’s knowledge not admitted to trading on any regulated or equivalent market.
EXPENSE OF THE OFFERING
The total net proceeds of the Offering will be NOK 125 million based on the mid range of the price
interval. The estimated total expenses of the Offer payable by the Company are expected to amount to
NOK 9.2 million.
DILUTION
The percentage of immediate dilution resulting from the Share Issue for the Company's existing
shareholders is 16.4%.
92
SELLING RESTRICTIONS
No action has been or will be taken in any jurisdiction other than Norway by the Managers, the Selling
Shareholders or the Company that would permit a public offering of the Offer Shares, or the
possession or distribution of any documents relating thereto, in any jurisdiction where specific action
for that purpose is required. Accordingly, this Prospectus may not be used for the purpose of, and does
not constitute, an offer to sell or issue, or a solicitation of an offer to buy or subscribe for, any
securities in any jurisdictions in any circumstances in which such offer or solicitation is not lawful or
authorized. Persons into whose possession this Prospectus may come are required by the Company,
the Selling Shareholders and the Managers to inform themselves about and to observe such
restrictions.
The Offer Shares are not being offered and may not be offered or sold, directly or indirectly, in
Canada, Japan or to the United States or to or for the account of any resident of Canada, Japan or any
U.S. persons.
In relation to the United Kingdom, this Prospectus and its contents are confidential and its distribution
(which term shall include any form of communication) is restricted pursuant to Section 21
(Restrictions on Financial Promotion) of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005. In relation to the United Kingdom, this Prospectus is only directed at, and
may only be distributed to, persons who fall within the meaning of Article 19 (Investment
Professionals) and 49 (High Net Worth Companies, Unincorporated Associations, etc.) of the
Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 or who are persons to
whom the Prospectus may otherwise lawfully be distributed.
Each prospective purchaser and subscriber to the Offer Shares must comply with all applicable laws
and regulations in force in any jurisdiction in which it purchases, subscribes, offers or sells the Offer
Shares or possesses or distributes this Prospectus and must obtain any consent, approval or permission
required by it for acquiring Offer Shares.
Each purchaser of Offer Shares will be deemed to have acknowledged, by its application for Offer
Shares, that the Company, the Selling Shareholders and the Managers and their respective affiliates
and other persons will rely on the accuracy of the acknowledgements, representations and agreements
set forth herein.
93
DEFINITIONS AND GLOSSARY OF TERMS
The following definitions and glossary apply in this Prospectus unless otherwise dictated by the
context, including the foregoing pages of this Prospectus.
Application Form
-
The application form to be used by investors when ordering Shares in the
Retail Offering and the Customer Offering, a copy of which is included as
Appendix 6 hereto
Application Offices
-
SEB Enskilda ASA and DnB NOR Bank ASA
Board of Directors or Board
-
Board of Directors of the Company
Book-building
-
The book-building process arranged by the Manager to assist the Company
and the Selling Shareholder in establishing, among other things, the Offering
Price, as further described in “Terms and Conditions of the Offering”
Book-building Period
-
The period from and including 18 May 2006 to and including 30 May 2006,
closing at 16:30 hours (Norwegian time), subject to discretionary extension,
in which Offer Shares may be applied for in the Institutional Offering
Company
-
Telio Holding ASA or Telio Holding ASA with subsidiaries as required by
context
Customer Offering
-
The tranche of the Offering in which Offer Shares are being offered by the
Company and the Selling Shareholder to customers of the Company, as
further described in “Terms and Conditions of the Offering”
DnB NOR Markets
-
DnB NOR Markets ASA, a part of DnB NOR Bank ASA, with registered
address at Filipstad Brygge 1, PO Box 1363 Vika, NO-0113 OSLO , Norway
Employee Offering
-
The tranche of the Offering in which Offer Shares are being offered to
employees of the Company, as further described in “Terms and Conditions
of the Offering”
Enskilda
-
SEB Enskilda ASA, with registered address at Stranden 21, NO-0021
OSLO, Norway
EPS
-
Earnings per share
IFRS
-
International Financial Reporting Standards
Indicative Price Range
-
Indicative price range for the Offer Shares as stipulated in “Terms and
Conditions of the Offering”
Institutional Offering
-
The tranche of the Offering in which Offer Shares are being offered by the
Company and the Selling Shareholder to institutional investors and other
professional investors, as further described in “Terms and Conditions of the
Offering”
Managers
-
Enskilda and DnB NOR Markets
New Shares
-
The 3,000,000 new Shares to be issued by the Company pursuant to the
Offering
NOK
-
The currency of the Kingdom of Norway (Norwegian krone)
Norwegian GAAP or NGAAP -
Generally accepted accounting principles in Norway (in Norwegian: God
Norsk Regnskapsskikk)
Offer Price
-
The price per Offer Share established following the Book-building
Offer Shares
-
the New Shares and the Secondary Shares
Offering
-
The Institutional Offering, the Retail Offering, the Customer Offering and
the Employee Offering
Oslo Børs
-
Oslo Børs ASA (the Oslo Stock Exchange)
94
Prospectus
-
Public Limited Companies Act -
This prospectus prepared in connection with the Offering and the application
for listing of the Company’s Shares on Oslo Børs, including all appendices
The Norwegian Public Limited Companies Act of 13 June 1997 No. 45
Retail Application Period
-
The period from and including 18 May 2006 to and including 30 May 2006,
closing at 16:30 hours (Norwegian time), subject to discretionary extension,
in which Offer Shares may be applied for in the Retail Offering
Retail Offering
-
The tranche of the Offering in which Offer Shares are being offered to the
public in Norway, subject to a lower limit per application of 40,000 Shares
for each investor, as further described in “Terms and Conditions of the
Offering”
Secondary Shares
-
The up to 1,000,000 existing Shares offered by the Selling Shareholder
pursuant to the Offering.
Securities Trading Act
-
The Securities Trading Act of 19 June 1997 No. 79 (as amended)
Selling Shareholder
-
The shareholder of the Company offering to sell the Secondary Shares
pursuant to the Offering, as further described “Selling Shareholders”
Share Issue
-
The issuance of the New Shares by the Company
Shares
-
All shares issued by the Company
Stock Exchange Regulations
-
The Stock Exchange Regulations of 17 January 1994 No. 30 (as amended)
TELIO
-
The Company’s ticker code
Telio
-
The Company
VPS
-
The Norwegian Central Securities Depository
VPS account
-
An account held with VPS to register ownership of securities
Terms and expressions used in the telecom industry and technical terms used in the description of the
Company are set out below.
VoIP
-
Voice over internet protocol
PSTN
-
Public Switched Telephone Network
ISDN
-
Integrated services digital network
LLUB
-
Local loop unbundling
IP
Internet protocol
95
APPENDIX 1: ARTICLES OF ASSOCIATION
This is an office translation of the Articles of Association of Telio Holding ASA. The official
language of this document is Norwegian. In the event of any discrepancy between the Norwegian
and English text, the Norwegian shall take precedence.
ARTICLES OF ASSOCIATION
OF
TELIO HOLDING ASA
(adopted at the annual general meeting 7 April 2006)
§1
Company
The name of the company is Telio Holding ASA. The company is a public limited liability
company
§2
Registered office
The registered office is in Oslo
§3
Object of the company
The company’s object is to develop and market IP based telecommunications solutions,
engage in consultancy business and participate in other business operations.
§4
Share capital
The company’s share capital is NOK 1,825,250 divided into 18,252,500 shares, each with a
par value of NOK 0.1.
§5
Management
The board of directors of the company shall consist of 3 to 6 members elected by the General
Meeting.
The chairman of the board of directors and the chief executive officer may sign for
and on behalf of the Company.
The board of directors may grant power of attorney
The company shall have a chief executive officer
§6
The General Meeting
The General Meeting shall:
1) approve the annual accounts and the annual reports, including the distribution of dividends
2) deal with any other business as required by and in accordance with the law or the Articles
of Association
§7
Registration of Shares
The company’s share register shall be operated through the Norwegian Central Securities
Depository (VPS)
§8
Company Act
In all other respects, the provisions of the Public Limited Companies Act apply
96
Consolidated Financial Statements
31 December 2005
Telio Holding AS
1
5
6
Consolidated cash flow statement
7
7
9
9
9
10
10
Summary of significant accounting policies:
Basis of preparation
Consolidation
Segment reporting
Foreign currency translation
Capitalised customer acquisition and
2
2.1
2.2
2.3
2.4
2.5
2.6
11
11
11
11
12
12
12
13
13
13
14
Trade receivables
Share capital
Deferred income tax
Employee benefits
Provisions
Revenue
Other revenue
Leases
Government grants
2.12
2.13
2.14
2.15
2.16
2.17
2.18
2.19
2.9
2.11
11
Impairment of non-financial assets
2.8
2.10
11
Development
2.7
connection expenses
7
General information
1
statements:
Notes to the consolidated financial
3
4
Contents
Telio Holding AS
97
27
26
25
24
23
22
21
20
19
18
17
16
15
14
13
12
11
10
9
8
7
6
5
4
3
18
33
33
31
31
30
30
29
29
29
28
28
28
27
26
25
25
22
21
21
21
20
19
Events after the balance sheet date
2
15
16
Transition to IFRS
Related-party transactions
Commitments
Contingencies
Earnings per share
Net financial income and expense
Interest expense
Other expenses
Employee benefit expense
Other revenue
Contingent liabilities
Deferred revenue
Tax
Borrowings
outstanding
Equity, shareholders and options
Development expenditure
Intangible assets
Fixed assets
Segment information
judgements
Critical accounting estimates and
Financial risk factors
APPENDIX 2: ANNUAL REPORT FOR 2005
98
Retained earnings
Minority interest
313
1,253
Christian Rynning-Tønnesen
Espen Fjogstad
Oslo 29. March 2006
Erik Osmundsen
(Chairman of the board)
Aril Resen
The notes on pages 7 to 40 are an integral part of these consolidated financial statements.
Arild Nilsen (CEO)
Terje Hamre
154,333
47,906
24,858
27,245
12,474
44,619
8,349
10,818
2,387
92
2,295
20,661
20,661
(10,715)
112,857
15
Deferred income
2,960
48,403
8,526
52
8,474
41,476
21
41,455
(7,559)
170
31,206
104,331
13
Borrowings
179
48,835
Total liabilities
14
12,16
Current liabilities
13
14
Borrowings
LIABILITIES
Total equity
11
11
Other reserves
11
11
Share capital
Capital and reserves attributable to equity holders of the Company
EQUITY
47,906
19,996
154,333
87,819
3
22
22
14
20,21
6,7
19
18
17
5
Note
0.16
0.18
21
3,156
3,177
(224)
3,401
(456)
3,857
(11,791)
(33,125)
(15,215)
(27,896)
(70,242)
162,126
10,059
152,067
2005
(0.63)
(0.63)
-
(9,436)
(9,436)
2,182
(11,618)
(511)
(11,107)
(2,673)
(12,409)
(1,499)
(8,857)
(14,614)
28,945
825
28,120
2004
Year ended 31 December
– diluted
– basic
Company during the year (expressed in NOK per share)
Earnings per share for profit attributable to the equity holders of the
Minority interest
Attributable to :
Profit for the year
Income tax expense
Finance costs
Operating profit
Total assets
5,987
14,009
32,124
55,695
10
Other expenses
9,16
27,910
66,514
2,568
5,015
8,945
16,397
28,731
Current assets
14
Intangible assets
6
7
32,768
Sales
Total revenue
2004
Non-current assets
2005
Other revenues
Note
As at 31 December
Telio Holding AS
ASSETS
Telio Holding AS
4
99
11
48,835
17,547
9
179
(940)
1,220
2,762
14,505
0
2
-
7
11
11
11
82
-
-
-
82
Profit for the year
-
31,206
11
170
27,193
30
31,206
735
3
1,511
170
11
-
24,947
11
Employees share option scheme:
27
48
-
-
11
3,965
140
48
reserves
capital
-
Other
(7,559)
-
-
-
-
-
3,156
3,156
-
(10,715)
(10,715)
-
-
-
-
(9,436)
(9,436)
-
(1,279)
earnings
Retained
21
-
-
-
-
-
21
21
-
-
-
-
-
-
-
-
-
-
-
interest
Company
Share
Minority
Attributable to equity holders of the
-
11
Note
Profit for the year
Telio Holding AS
5
41,476
17,556
(940)
1,222
2,762
14,512
3,259
3,177
82
20,661
20,661
27,223
738
1,511
24,974
(9,388)
(9,436)
48
2,826
equity
Total
Non cash transaction related to cost of share options
–
9
13
32,124
Cash, cash equivalents and bank overdrafts at end of the year
176
Translation adjustments cash, cash equivalents and bank overdraft
5,987
25,961
Net (decrease)/increase in cash, cash equivalents and bank overdrafts
Cash, cash equivalents and bank overdrafts at beginning of the year
20,974
(3,425)
9,604
(940)
15,735
(48,117)
211
-
(24,124)
(24,204)
53,104
(355)
53,459
76,824
(41,680)
2,762
4,338
7,814
224
3,177
2005
5,987
280
1,651
4,056
28,007
(178)
2,473
25,712
(27,431)
121
(184)
(9,490)
(17,878)
3,480
(118)
3,598
24,205
(13,173)
1,511
545
2,128
(2,182)
(9,436)
2004
Year ended 31 December
10
13
11
11
25
Interest received
7
6
20
12,13,1
11
7
6
14
Note
Interest paid
–
–
differences on consolidation):
Changes in working capital (excluding the effects of exchange
Amortisation
Depreciation
Tax
–
–
–
Adjustments for:
Telio Holding AS
6
100
SIC 12 (Amendment), Consolidation - Special Purpose Entities (effective from 1 January 2005); and
IAS 39 (Amendment), Transition and Initial Recognition of Financial Assets and Financial Liabilities (effective from 1
•
•
•
any pension schemes.
7
disclosure requirements. These amendments are not relevant to the Group’s operations, as the Group does not operate
multi-employer plans where insufficient information is available to apply defined benefit accounting. It also adds new
an alternative recognition approach for actuarial gains and losses. It may impose additional recognition requirements for
IAS 19 (Amendment), Employee Benefits (effective from 1 January 2006). This amendment introduces the option of
as follows:
Group’s accounting periods beginning on or after 1 January 2006 or later periods but which the Group has not early adopted,
Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the
Standards, interpretations and amendments to published standards that are not yet effective
concluded that they are not relevant to the Group.
Management assessed the relevance of these amendments and interpretations with respect to the Group’s operations and
January 2005).
IFRIC 2, Members’ Shares in Co-operative Entities and Similar Instruments (effective from 1 January 2005);
•
or after 1 September 2004:
The following amendments and interpretations to standards are mandatory for the Group’s accounting periods beginning on
Interpretations and amendments to published standards effective in 2005
consolidated financial statements, are disclosed in Note 4.
involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the
also requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It
land and buildings, available-for-sale financial assets, and financial assets and financial liabilities (including derivative
instruments) at fair value through profit or loss.
consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of
The consolidated financial statement is presented in Norwegian currency and is rounded up to thousands (1,000). The
Standards Board. This is the company’s first IFRS consolidated account, and IFRS 1 has been implemented. In the note 27 it
appears that the transition from IFRS has impacted the balance sheet, income statement and cash flow.
Standards (IFRS), which has been determined by European Union and corresponds with the interpretation of International
The consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting
2.1 Basis of preparation
These policies have been consistently applied to all the years presented, unless otherwise stated.
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.
2. Summary of significant accounting policies
note 2.2 below. These consolidated financial statements have been approved for issue by the Board of Directors on 29 March
2006.
The consolidated financial statements for 2005, closing December 31, includes the company and its subsidiaries as stated in
•
•
•
•
•
•
•
•
consolidated profit or loss. This amendment is not relevant to the Group’s operations, as the Group has not entered into
This amendment
IFRIC 4 requires
management considers IFRIC 6 currently not relevant to the Group’s operations.
8
scheme is financed on a voluntary basis, which means that Telio can dispose the adapters free of charge. Per date the
responsible for the disposal. In Norway there is a voluntary scheme for disposal of electrical/ electronic equipment. This
(effective from 1 December 2005). Telio is obliged to receive the adapters when the customer returns them, and thereby
IFRIC 6, Liabilities arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment
(effective from 1 January 2006). IFRIC 5 is currently not relevant to the Group’s operations.
IFRIC 5, Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds
on the Group’s operations and concluded that it is currently not relevant.
(the asset); and (b) the arrangement conveys a right to use the asset. Management has assessed the impact of IFRIC 4
requires an assessment of whether: (a) fulfilment of the arrangement is dependent on the use of a specific asset or assets
the determination of whether an arrangement contains a lease to be based on the substance of the arrangement. It
IFRIC 4, Determining whether an Arrangement contains a Lease (effective from 1 January 2006).
statements.
to IAS 1 and concluded that neither IFRS 7, nor the amendment to IFRS 1, is currently relevant for the Group’s financial
the level of an entity’s capital and how it manages capital. The Group assessed the impact of IFRS 7 and the amendment
Presentation. It is applicable to all entities that report under IFRS. The amendment to IAS 1 introduces disclosures about
Banks and Similar Financial Institutions, and disclosure requirements in IAS 32, Financial Instruments: Disclosure and
and market risk, including sensitivity analysis to market risk. It replaces IAS 30, Disclosures in the Financial Statements of
exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk
information about financial instruments. It requires the disclosure of qualitative and quantitative information about
Statements - Capital Disclosures (effective from 1 January 2007). IFRS 7 introduces new disclosures to improve the
IFRS 7, Financial Instruments: Disclosures, and a complementary Amendment to IAS 1, Presentation of Financial
the Group’s operations.
IFRS 6, Exploration for and Evaluation of Mineral Resources (effective from 1 January 2006). IFRS 6 is not relevant to
mineral resources.
amendments are not relevant to the Group’s operations, as the Group does not carry out exploration for and evaluation of
(Amendment), Exploration for and Evaluation of Mineral Resources (effective from 1 January 2006). These
IFRS 1 (Amendment), First-time Adoption of International Financial Reporting Standards and IFRS 6
amendments are not currently relevant to the Group.
Management has considered this amendment to IAS 39 and IFRS 4 (Amendment) and has concluded that the
related fees received and deferred, and (b) the expenditure required to settle the commitment at the balance sheet date.
initially recognised at their fair value, and subsequently measured at the higher of (a) the unamortised balance of the
requires issued financial guarantees, other than those previously asserted by the entity to be insurance contracts, to be
IAS 39 and IFRS 4 (Amendment), Financial Guarantee Contracts (effective from 1 January 2006).
any such financial instruments.
as part of this category. The Group believes that this amendment is not applicable as the Group does has not entered into
financial instruments classified at fair value through profit or loss and restricts the ability to designate financial instruments
IAS 39 (Amendment), The Fair Value Option (effective from 1 January 2006). This amendment changes the definition of
December 2005 and 2004.
any intragroup transactions that would qualify as a hedged item in the consolidated financial statements as of 31
than the functional currency of the entity entering into that transaction; and (b) the foreign currency risk will affect
The Company is a limited liability company incorporated and domiciled in Norway. The address of its registered office is
Støperigaten 2, N-0250 Oslo.
hedged item in the consolidated financial statements, provided that: (a) the transaction is denominated in a currency other
sell the VoIP service under their own name (“ASP”). In 2005 over 90% of the Groups revenues came from sales of VoIP
services under the Telio brand.
2006). The amendment allows the foreign currency risk of a highly probable forecast intragroup transaction to qualify as a
IAS 39 (Amendment), Cash Flow Hedge Accounting of Forecast Intragroup Transactions (effective from 1 January
consumers under the Telio brand. Further, the Group offers the use of the self developed technology platform to partners who
•
Notes to the Consolidated Financial Statements (continued)
Telio Holding AS
Telio Holding AS (‘the Company’) and its subsidiaries (together ‘the Group’) provides VoIP (Voice over IP) services to end
1. General information
Notes to the Consolidated Financial Statements
Telio Holding AS
101
from the settlement of such transactions and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies are recognised in the income
statement.
(c) Group companies
The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that
have a functional currency different from the presentation currency are translated into the presentation currency as follows:
effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an
acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at
Oslo
Copenhagen
Oslo
Stockholm
Fribourg
Amsterdam
Telio Telecom AS
Telio APS
Telio Mobil AS
Teliofoni AB
Telio SA
Telio Netherland BV
91%
100%
92%
100%
100%
100%
Shareholding and voting rights
9
the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated
financial statements are presented in Norwegian kroner, which is the Company’s functional and presentation currency.
Items included in the financial statements of each of the Group’s entities are measured using
(a) Functional and presentation currency
2.4 Foreign currency translation
business, i.e. Telio brand and ASP services. The secondary reporting segment is geographical represented by Norway and
Europe
The Group has concluded that business segments constitute the primary reporting segment, represented by the total
The Norway, Switzerland, and Denmark operations offer services under the Telio brand (including Musimi, a Telio owned
brand in Denmark), while Netherlands and Sweden offer ASP agreements.
The Group has operating companies located in five countries; Norway, Switzerland, Denmark, Netherlands, and Sweden.
services within particular economic environments that are subject to risks and returns that are different from those of
segments operating in other economic environments.
returns that are different from those of other business segments. A geographical segment is engaged in providing products or
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and
2.3 Segment reporting
of the carrying value of net assets of the subsidiary.
from minority interests result in goodwill, being the difference between any consideration paid and the relevant share acquired
Disposals to minority interests result in gains and losses for the Group that are recorded in the income statement. Purchases
The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group.
(b) Transactions and minority interests
The business address
Subsidiaries
Consolidated subsidiaries:
Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of
subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated.
of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net
assets of the subsidiary acquired, the difference is recognised directly in the income statement.
irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share
contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date,
the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and
Adapters
Furniture and equipment
2-4 years
3-5 years
2.7 Development
10
The company has concluded that such costs should be capitalized only to the extent as to the related deferred connection
fees revenues. Other costs related to customer acquisition and connection activities are recognised as expense as incurred.
(c) the costs can be measured reliably.
(b) it is probable that those future economic benefits will flow to the entity; and
(a) the entity controls future economic benefits as a result of the costs incurred;
the average expected duration of a customer relationship (see section 2.15 below). Such costs are capitalized when they
qualify as an asset and when the costs can be identified separately and provided that the following criteria’s are met:
Directly attributable external costs related to customer acquisition and connection are being capitalized and amortized over
2.6 Capitalized customer acquisition and connection expenses
These are included in the income statement. When re-valued assets are sold, the amounts included in other reserves are
transferred to retained earnings.
Gains and losses on disposals are determined by comparing proceeds with carrying amount.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount (Note 2.8).
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
–
–
Depreciation on other assets is calculated using the straight-line method
to allocate their cost to their residual values over their estimated useful lives, as follows:
reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are
incurred.
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition of the items.
2.5 Property, plant and equipment
shareholders’ equity. Exchange differences of intercompany receivables/ payables are taken as a transaction effect in the
income statement.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations, are taken to
expenses are translated at the dates of the transactions); and
(iii) all resulting exchange differences from operations are recognised as a separate component of equity.
reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and
(ii) income and expenses for each income statement are translated at average exchange rates (unless this average is not a
(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting
and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and
controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They
are de-consolidated from the date that control ceases.
Foreign currency transactions are translated into the functional currency using the exchange
Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial
(b) Transactions and balances
Telio Holding AS
(a) Subsidiaries
2.2 Consolidation
Telio Holding AS
102
be effective as of July 1, 2006. The company has not yet chosen a supplier for this services or what scheme to implement.
The schemes are generally funded through payments to insurance companies or trustee-administered funds, determined by
periodic actuarial calculations.
associated with developing or maintaining computer software programmes are recognized as an expense as incurred.
Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.
2.13 Employee benefits
11
the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference
will not reverse in the foreseeable future.
(a) Connection fee
12
Revenue primarily consists of income from connection fees, subscriptions, traffic (originating and terminating), software
licences and related revenues (“ASP”). Revenue is recognised as follows:
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where
Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminated sales within the Group.
which the temporary differences can be utilised.
reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the
total services to be provided.
the Group’s activities. Sales of services are recognised in the accounting period in which the services are rendered, by
Revenue comprises the fair value of the consideration received or receivable for the sale of services in the ordinary course of
2.15 Revenue
tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The
increase in the provision due to passage of time is recognised as interest expense.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-
considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to
any one item included in the same class of obligations may be small.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by
to settle the obligation; and the amount has been reliably estimated. Restructuring provisions comprise lease termination
penalties and employee termination payments. Provisions are not recognised for future operating losses.
legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required
Provisions for environmental restoration, restructuring costs and legal claims are recognised when: The Group has a present
2.14 Provisions
grant based on the fair value of the options issued. Adjustments to the social security tax liability are being recognized as an
expense or as a reduced expense in subsequent periods based on changes in fair value of the options issued.
Social security taxes related to Share-based compensations are being recognized as a liability and an expense at the date of
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and
share premium when the options are exercised.
date, the entity revises its estimates of the number of options that are expected to become exercisable. It recognises the
impact of the revision of original estimates, if any, in the income statement, with a corresponding adjustment to equity.
expensed over the vesting period is determined by reference to the fair value of the options granted. At each balance sheet
employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be
The Group operates an equity-settled, share-based compensation plan. The fair value of the
(b) Share-based compensation
paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are
recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been
For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on
amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as
age, years of service and compensation.
A defined benefit plan is a pension plan that is not a defined contribution plan. Typically, defined benefit plans define an
Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all
employees the benefits relating to employee service in the current and prior periods.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against
the related deferred income tax asset is realised or the deferred income tax liability is settled.
tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when
that at the time of the transaction affects neither accounting, nor taxable profit or loss. Deferred income tax is determined using
is not accounted for, arises from initial recognition of an asset or liability in a transaction other than a business combination
assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax, if it
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of
2.12 Deferred income tax
consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is
included in equity attributable to the Company’s equity holders.
holders until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any
any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company’s equity
Where any Group company purchases the Company’s equity share capital (treasury shares), the consideration paid, including
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from
the proceeds.
Ordinary shares are classified as equity.
2.11 Share capital
with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current
liabilities on the balance sheet.
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments
2.10 Cash and cash equivalents
present value of estimated future cash flows, discounted at the effective interest rate.
trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the
enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered as indicators that the
according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will
receivables is established when there is objective evidence that the Group will not be able to collect all amounts due
Trade receivables are recognised initially at fair value less provision for impairment. A provision for impairment of trade
2.9 Trade receivables
identifiable cash flows (cash-generating units). Non-financial assets that suffered impairment are reviewed for possible reversal
of the impairment at each reporting date.
value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and
the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying
Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that
2.8 Impairment of non-financial assets
Development assets are tested for impairment annually, in accordance with IAS 36.
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The
In Norway a new mandatory pension scheme, requiring all companies to implement a minimum defined contribution plan, will
development costs recognised as assets are amortised over their estimated useful lives (three to five years). Other costs
include the software development employee costs and an appropriate portion of relevant overheads. Computer software
Group companies currently do not operate any pension schemes. Furthermore, no programs have existed prior to 2005,
hence the company has no retirement benefit obligations for the reported periods.
(a) Pension obligations
Telio Holding AS
that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs
Expenses that are directly associated with the production of identifiable and unique software products controlled by the Group, and
Telio Holding AS
103
2.19 Government grants
13
periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired
under finance leases is depreciated over the shorter of the useful life of the asset or the lease term.
The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant
balance outstanding. The corresponding rental obligations, net of finance charges, are included in other long-term payables.
Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance
substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s
commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments.
The Group leases certain property, plant and equipment. Leases of property, plant and equipment where the Group has
payments, the right to use an asset for an agreed period of time.
IAS 17 defines a lease as being an agreement whereby the lessor conveys to the lessee in return for a payment, or series of
by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from
the lessor) are charged to the income statement on a straight-line basis over the period of the lease.
Leases in which a significant portion of the risks and rewards of ownership are retained
2.18 Leases
In 2005 our invoicing partner received a portion of the collection fees paid. These fees are recorded as other operating costs
as of when the related revenues are being recorded.
Cost of traffic charges is recognized in the same period as the traffic activity has been registered, which correspond to the
related traffic revenue.
Cost of leased connection capacity consists primarily of costs related to bandwidth, hosting etc. Such costs are recognized on
an accrual basis according to the substance of the lease contracts.
2.17 Cost of connections and traffic charges
Other revenues consist of collection fees, invoice fees and interest income from customers and banks. These revenues are
recognized as incurred.
2.16 Other revenue
with the substance of the lease agreement.
Revenue from “ASP” software lease agreements is recognized on an accrual basis over the contract period in accordance
(d) Software lease agreements (“ASP”)
Revenues from traffic terminating at Telio subscribers from external originators are being recognized according to the same
principle.
Revenues from traffic originating from Telio subscribers are being recognized according to actual traffic during the period
times contractual rates per traffic unit and type.
(c) Traffic (originating and terminating)
Income from subscriptions is recognised on an accruals basis over the subscription period in accordance with the substance
of the subscription agreement, starting as at the date of the activation of the subscription.
(b) Subscriptions
Revenues generated from porting services (transfer of a telephone number from Telio to another telecom operator) are being
recognized when the porting service has been delivered.
adapter delivery and porting (to technically transfer the unique telephone number from another telephone operator to the
Company).The connection fee is non refundable and the subscription agreement has no lock-in period.
the connection fee and has been connected to the network. The connection fee includes the initial connection service,
relationship. Revenues are being recognized as from when the customer has entered into a subscription agreement, has paid
Connection fee revenues are recognized over a 5 year period, which represent the average expected duration of a customer
Telio Holding AS
14
costs and are credited to the income statement over the expected life of the related intangible asset as from when the
intangible asset is ready for its intended use.
The government grant, representing the deduction in tax payable, are included as a reduction of capitalized development
company qualify for a direct reduction in tax payable upon qualifying for and subsequently documenting certain qualifying
R&D expenses (SkatteFUNN).
The company has utilized a tax scheme that is available to all Norwegian registered enterprises. Under the tax scheme the
Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be
received and the group will comply with all the attached conditions.
Telio Holding AS
104
15
Prudent liquidity risk management implies maintaining sufficient cash to maintain and develop operations according to budget. Cash
positions are monitored regularly, and an agreement has been made by a financing company concerning sales of receivables.
(c) Liquidity risk
monitor high usage with potential fraud and disconnection of customers not settling their balances. Further, the company monitors aging
balances.
is in the process of evaluating implementation of credit check in certain distribution channels. The company has prudent procedures to
balances. In 2005 no credit check is being made as most customers have been credit checked by the broadband supplier. The company
The company has no significant concentrations of credit risk as the customer base consists of many customers with relatively small
(b) Credit risk
Norwegian Kroner.
The Group operates internationally, but has limited foreign exchange risk in 2005 as the major part of revenues and costs (> 90%) are in
Foreign exchange risk
(a) Market risk
management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the
Group’s financial performance. Risk management is carried out by the CFO.
The Group’s activities are exposed to certain financial risks: market risk, credit risk, and liquidity risk. The Group’s overall risk
3. Financial risk factors
Telio Holding AS
include the software development employee costs and an appropriate portion of relevant overheads. Computer software
that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs
16
Expenses that are directly associated with the production of identifiable and unique software products controlled by the Group, and
Development costs are either capitalized or expensed as incurred based on an assessment of the nature of the expenses.
(d) Development costs, amortization and depreciation
calculated. Once a month, the leasing rent for all contracts is paid and booked as interest cost over the income statement,
and a reduction of the leasing liability.
rate implicit in the lease contract. The contracts also identify the monthly payment, from which the implicit interest rates are
is capitalized as assets and leasing liabilities. The discount factor used to calculate the MLP's present value is the interest
fair value of the leased property and the present value of the MLP. The leasing contracts identify the total contract price that
The lease liability is booked at the inception of the lease. Recognition of the leased asset and lease liability is the lesser of the
present value of the minimum lease payments (MLP) at the beginning of the lease amounts to substantially all of the fair
value of the asset.
The Group leases adapters and IT-equipment. The lease term covers the major part of the asset’s economic life and the
classification of leases in our accounts as either financial leases or operating leases is sensitive to changes in these
underlying estimates and assumptions.
assets are based on current fair values amortised in accordance with our standard depreciation policy for such assets. The
value on alternative cost of acquiring the assets as quoted by the lessor. Our estimates of expected future values of the
values of assets and lessor’s rates of return as reflected by the implicit rate of return. We generally base our estimates of fair
Classification of leases involves the use of estimates or assumptions about fair values of leased assets, expected future
Leases are classified as either financial leases or operating leases based on an assessment of the terms of the lease.
(c) Lease arrangements
that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such
determination is made.
estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts
is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on
worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination
The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the
(b) Income taxes
asset and when the costs can be identified separately. Based on the customer contracts, management has concluded that
such costs should be capitalized only to the extent as to the related deferred connection fee revenue.
the average expected duration of a customer relationship (see above). Such costs are capitalized when they qualify as an
Directly attributable external costs related to customer acquisition and connection are being capitalized and amortized over
uncertainty. The effect of changes with respect to the expected duration of a customer relationship is amortized over the
remaining average expected duration of the customer relationships.
managements assumptions concerning the future. This estimate is evaluated on a quarterly basis and represents a significant
customer relationship. The average duration of a customer relationship is based on available statistical data and
Connection revenues are being recognized over a 5 year period, which represent the average expected duration of a
(a) Revenue recognition and cost deferral
seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
4.1 Critical accounting estimates and assumptions
Estimates and judgements are continually evaluated, and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
4. Critical accounting estimates and judgements
Telio Holding AS
105
Management has defined each subsidiary as an individual cash generating unit (CGU). The impairment test is conducted in
accordance with generally accepted methods and IAS 36.
Non-financial assets are tested annually for any impairment in accordance with the accounting policy stated in note 2.8.
(f) Impairment testing of non-financial assets
17
customer sub ledger. The provisions are reviewed periodically. Any provisions for non consumer related receivables are based
on an individual analysis.
are not paid within the due date. The company makes provisions for bad debt based on monthly aging balances from the
characteristics a minimal amount of losses are realised. The company has standard collection routines for all receivables that
Typically, customer receivables include a large amount of balances with relatively small amounts. Due to this balance
(e) Provision for bad debt
software systems are tested for impairment annually, in accordance with IAS 36, or more frequently if indications of impairment
have surfaced.
of any changes to the depreciation plans are amortized over the remaining useful life of the assets. Capitalized internally developed
Management reviews the estimated useful lives of capitalized assets and applied depreciation method at least annually. The effect
The Group’s management determines the estimated useful lives and related depreciation charges for capitalized assets.
associated with developing or maintaining computer software programmes are recognized as an expense as incurred.
development costs recognised as assets are amortised over their estimated useful lives (three to five years). Other costs
Telio Holding AS
152,067
100%
51%
49%
28,120
5,959
22,161
2004
48,328
1,568
46,760
2005
154,333
35,261
119,072
2005
77%
100%
3%
97%
100%
23%
27,368
481
26,887
2004
47,906
4,678
43,228
2004
77,429
67,345
1,878
152,067
Traffic
ASP
Total
5,415
2005
Subscriptions
Connection fees
Analysis of sales by category
where the assets are located.
4%
100%
1%
44%
51%
21%
79%
100%
2%
98%
100%
10%
90%
100%
18
Capital expenditure includes both property, plant and equipment and intangible assets. Geographical allocation is based on
Total
Norway
Capital expenditure
Total assets are allocated based on where the assets are located.
Total
Norway
Total assets
Sales are allocated based on the country in which the customer is has the contract with Telio ("sales by destination").
Total
74,789
77,278
2005
Norway
Sales
based on the location of its markets and customers. Transactions within the two segments are eliminated.
both by the geographical location of its operations and also by the location of its markets. Telio’s definition of geographical segments is
The Group operations are defined into two different segments; Norway and Europe. The risks and returns of an entity are influenced
Secondary reporting format - geographical segments
development, marketing and sales of Voice over IP telecommunication and operates only in one business segment.
as products and services represent the predominant source and nature of risks and returns. Telio is a niche company specializing in
IAS 14 requires segmental reporting on both a primary and secondary basis. Business segments is primary reporting format for Telio,
Primary reporting format - business segments
5. Segment information
Telio Holding AS
106
-
Net book amount
(5,030)
22,478
Depreciation charge
Closing net book amount
6,956
21,775
(2004: TNOK 5,551). Rights to the leased assets revert to the lessor in the event of default.
19
(545)
28,731
(4,883)
33,614
28,731
(4,338)
24,124
8,945
8,945
(545)
9,490
8,945
granted is TNOK 800 (2004: TNOK 800).
capitalised development costs and implies indirectly a reduction of the yearly amortisation cost. Total SkatteFUNN
The carrying amount of leased adapters is TNOK 10,208 (2004: TNOK 0) and for furniture and IT-equipment TNOK 8,397
-
-
9,490
Amortisation of IT-systems development cost is included in ‘depreciation and amortisation’ in the income statement.
Net book amount
(3,384)
25,159
21,775
(3,086)
20,898
3,963
3,963
(298)
4,261
3,963
(298)
4,261
-
-
The carrying value of SkatteFUNN is TNOK 1,227 (2004: TNOK 760). SkatteFUNN is booked as a reduction of the
32,768
(9,969)
(1,499)
8,455
6,956
(1,252)
3,226
4,982
4,982
(247)
5,229
4,982
(247)
5,229
-
-
-
-
-
Total
in the income statement as other costs. Rights to the leased assets revert to the lessor in the event of default.
10,290
(3,549)
Accumulated amortisation
Cost
At 31 December 2005
Amortisation charge
Additions
Opening net book amount
Net book amount
Cost
At 31 December 2004
Amortisation charge
Additions
-
-
-
Net book amount
-
-
-
-
-
-
Customer
acquisition
cost
IT-systems
development
cost
Cost
At 1 January 2004
All development costs arose from internal development.
22,478
42,737
32,768
(7,814)
24,204
(19)
16,397
16,397
(2,155)
18,552
16,397
(2,128)
17,878
(24)
671
671
(27)
698
Total
Operational lease rentals amounting to TNOK 203 (2004: TNOK 52) relating to operational lease of IT-equipment are included
(6,420)
Accumulated depreciation
13,839
10,290
(2,784)
6,482
(19)
6,611
6,611
(765)
7,376
6,611
(738)
6,702
(24)
671
671
(27)
698
Furniture and
IT-Equipment
7. Intangible assets
Telio Holding AS
Depreciation expense of TNOK 362 (2004: TNOK 0) has been reallocated to the balance sheet as activated development costs.
28,898
Cost
At 31 December 2005
17,722
-
9,786
Additions
Exchange differences
9,786
(1,390)
Net book amount
11,176
9,786
Cost
At 31 December 2004
(1,390)
Depreciation charge
11,176
Exchange differences
Additions
-
-
Adapters
Cost
At 1 January 2004
6. Fixed Assets
Telio Holding AS
20
107
55,695
Total trade and other receivables
2004
14,009
2.321
184
2,982
8,522
(494)
9,016
Total cash at bank and in hand
Restricted withholding tax account
Cash at bank and in hand
10. Cash and cash equivalents
32,124
947
31,177
2005
Since the receivables are short-term, the fair value corresponds with the accounted value.
Loans to related parties are non interest bearing.
5,987
646
5,341
2004
December 2005. The Group has not used any of the provision for impaired receivables during the year
ended 31 December 2005 (2004: 494).
The Group has not recognised loss for the impairment of its trade receivables during the year ended 31
11,346
184
Other receivables
Loan to related parties (note 25)
4,178
39,987
Trade receivables – net
Prepayments
(3,250)
Provision for impairment of receivables
2005
43,237
Trade receivables
9. Trade and other receivables
2005
7,589
Total development costs
social expenditures and other related costs.
platform. The following amounts are the total costs regarding the development department, consisting of wages,
develop the platform, the development department is responsible for maintenance and reconditioning of the
The group has a development department consisting of 10 people in 2005. Besides working on projects to
8. Development expenditure
Telio Holding AS
21
Value of employee
issued
Proceeds from shares
service
-
-
Value of employee
issued
Proceeds from shares
service
17,924,000
-
179
-
-
-
-
-
(33,500)
2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Tresury
shares
45,345
-
-
-
-
1,220
-
-
(925)
15,403
29,647
-
-
735
-
(1,000)
25,947
3,965
Share
premium
Other
lated
Accumu-
3,360
-
-
-
(940)
-
2,762
27
-
-
1,511
-
-
-
130
-
-
82
-
-
-
-
-
-
48
-
48
-
-
-
-
1,511
-
-
translation
differences
-
-
payed in
capital
(7,559)
3,156
-
-
-
-
-
-
-
-
(10,715)
(9,436)
-
-
-
-
-
(1,279)
Retained
earnings
21
21
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Minority
interest
41,476
3,1777
-
82
(940)
1,222
2,762
27
(925)
15,410
(20,661)
(9,436)
48
738
1,511
(1,000)
25,974
2,826
Total
shares at a later date. All shares issued by the Company were fully paid.
22
the charter above. The face value is NOK 335, and the amount is presented in thousands NOK. The Company has the right to reissue these
net of income tax, was TNOK 940, and has been deducted from shareholders’ equity. The shares are held as ‘treasury shares’, and are shown in
The Company acquired 33,500 of its own shares through purchases over the counter in Norway (OTC). The total amount paid to acquire the shares,
The total authorised number of ordinary shares is 17 957 500 shares (2004: 17 045 000 shares) with a par value of NOK 0.01 per share (2004:
NOK 0,01 per share). All issued shares are fully paid. All shares have equal voting rights.
At 31 December 2005
Profit for the year
Translation differences
Treasury shares
purchased
–
–
scheme:
-
-
7
242,500
-
Fund issue
Employee share option
-
670,000
170
-
17,045,000
3
-
-
-
27
140
Ordinary
shares
295,000
Cost of issuance 22. June
Issue of shares 22. June
At 31 December 2004
Loss for the year
Translation differences
-
-
-
-
Cost issuance
Employee share option
scheme:
2,750,000
14,000,000
Number of
Shares
Issue of shares
At 1 January 2004
11. Equity, shareholders and options outstanding
Telio Holding AS
108
Pershing LLC
Exercise
20.00
23.00
19.00
2.50
6.00
10.00
13.00
13.50
23.00
24.00
28.00
2009
2009
2009
2010
Infinite
Infinite
Infinite
Infinite
Infinite
Infinite
Infinite
Infinite
the options are vested immediately. Some options have an infinite period of exercitation. Others have to be exercised within one
year from the date all the options are vested, or within other individually negotiated dates. Some options will have to be exercised
within six months after resignation and one year after given notice. For further details see the options expiry dates given below.
23
Total
27.00
13.50
23.00
2007
2008
2.50
10.00
2007
2008
24.00
2006
commonly conditional on the employee completing one to three year’s service (the vesting period), with some exceptions where
10.00
2006
The exercise price of the granted options is equal to the market price of the shares on the date of the grant. Options are
6.00
2006
10.00
2.50
2006
2008
24.00
price in NOK
per share
2005
Expiry year.
1
2,868
5
6
7
19
13
282
315
125
50
35
150
300
2
40
250
75
50
700
270
125
50
2005
Shares
Share options outstanding at the end of the year have the following expiry date and exercise prices:
0
345
375
240
0
0
0
300
0
0
0
75
100
50
700
270
150
3,305
2004
700
3,305
-
(295)
(135)
3,215
520
Options
(thousands)
being issued at NOK 5.04 each (2004: NOK 2.50 each). The related weighted average price at the time of exercise was
NOK 15.06 (2004: NOK 3.54) per share.
Share options are granted to directors and to selected employees. The company does not have a standardized option program.
The Group has no legal or constructive obligation to repurchase or settle the options in cash. The holder of the option contract is
responsible for any additional local tax related to the exercise of the options.
14.86
-
2.50
2.50
15.21
2.50
price in NOK
per share
exercise
thousand) were exercisable. Options exercised in 2005 resulted in 243 thousand shares (2004: 295 thousand shares)
6.00
100.0 %
22.9 %
2004
Average
Out of the 2,868 thousand outstanding options (2004: 3,305 thousand options), 1,821 thousand options (2004: 555
(700)
2,868
(243)
(104)
13.77
5.04
Exercised
24.00
10.00
Forfeited
610
At 31 December
15.56
Granted
3,305
Lapsed
14.86
price in NOK
per share
At 1 January
Options
(thousands)
2008
17,957,500
4,114,966
0,8,%
0.9 %
1.0 %
1.0 %
1.0 %
1.2 %
1.2 %
1.3 %
1.4 %
1.7 %
1.8 %
2.8 %
2.8 %
3.1 %
3.4 %
3,4,%
6.5 %
12.7 %
14.0 %
15.3 %
Percentage
exercise
Average
2005
Movements in the number of share options outstanding and their related weighted average exercise prices
are as follows:
Telio Holding AS
Share options
*Included in Others are 33,500 Treasury shares in Telio Holding AS
Totalt number of shares
Others*
162,500
Erik Osmundsen (se note 25)
142,500
210,000
175,100
Pluton AS
Sandnes Investering ASA
218,333
Espen Fjogstad (Note 25)
Violina AS
227,500
Ro Invest AS
171,000
250,000
Pulver
172,500
300,000
Veen A/S
Sirius AS
327,500
Saamand AS
Cat Invest I
510,000
505,334
Lime Venture AS
Gambak
Creo Investments II AS (Note 25)
607,100
550,000
Institusjonen Fritt Ord
607 319
1,168,181
Synesi AS (Note 25)
EMA Telio Limited Partnership
2 510 000
2,276,667
Lombard Odier Darier Hentsg & Cie (Note 25)
2,751,000
Number of shares
Common shares
Xfile AS (Note 25)
Shareholder name
List of all major stockholders in Telio Holding as of Dec. 31.2005
Telio Holding AS
24
109
48,403
8,249
13,675
3,536
22,943
2005
10,818
1,008
2,229
1,204
6,377
2004
3,548
1,253
1,253
2,295
2,295
2004
Future finance charges on finance leases
Minimum lease payments
Later than 5 years
16,823
(805)
17,628
-
8,544
9,084
2005
Finance lease liabilities – minimum lease payments:
of default.
3,548
(64)
3,612
-
2,352
1,260
2004
Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event
16,823
Total current
Total borrowings
8,349
8,349
Current
8,474
8,474
Total non-current
2005
Non-current
13. Borrowing
Social security tax on employee share options is included in the accrued expenses. Further details are disclosed in
note 16.
Total trade and other payables
Other payables
Accrued expenses
Social security and other taxes
Trade payables
12. Trade and other payables
date. Holders of less than 30,000 options exercise these on average nine months after vesting date.
made for exercise is that holders of more than 30,000 options on average exercise these within three months after vesting
deviation of expected share price returns is based on a historical average of three comparable companies. Assumptions
2.39%). The risk-free rate applied has the same duration as the granted options. The volatility measured at the standard
dividend yield of 0% (2004: 0%) option life from a set of assumptions and average risk-free interest rate of 2.69% (2004:
9.11) at the grant date, exercise price shown above, standard deviation of expected share price returns of 26% (2004: 28%),
(2004: TNOK 3,905). The significant inputs into the model were a weighted average share price of NOK 15.46 (2004: NOK
25
16,823
1,253
3,548
2005
(224)
2004
2,182
2,476
(296)
2005
Effective tax rate
Income tax expense
7%
(224)
208
(448)
Not recognised increase or decrease in deferred tax assets
Other
(246)
Non-taxable income or costs
(953)
1,215
Effect of different taxation rates in Norway and abroad
3,402
Tax assessed at the tax rate in Norway (28% in 2005 and 28% in 2004)
Pre tax profit
19%
2,182
(63)
(467)
(409)
(132)
3,253
(11,618)
2004
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the
nominal tax rates applicable to profits in jurisdictions where the Company has operations as follows:
2,483
Income tax expense
(2,707)
Changes in deferred tax
Total tax payable for the year
14. Tax
at 2% of cost at the end of the leasing period.
Non IBM equipment is leased using a Standard Pay-out agreement (SPO). Telio buys the equipment
has the option to by the assets at fair market value.
-
2,295
Telio returns the equipment after the lease period. Three months prior to contract termination, Telio
IBM equipment is leased using a Fair Market Value agreement (FMV). The contract assumes that
Payments due within one year are classified as current.
Present value of lease liabilities
-
Later than 5 years
8,474
8,349
The present value of finance lease liabilities is as follows:
The fair value of options granted during the period determined using the Black-Scholes valuation model was TNOK 2,962
Telio Holding AS
Telio Holding AS
26
110
5,015
(52)
Recognised deferred tax assets
Recognised deferred tax liability
(92)
2,568
2,476
3,445
619
2,826
5,921
40
2,443
2,483
(7,999)
9
(8,008)
10,482
56
9,456
(92)
2,568
2,476
(3,445)
(619)
(2,826)
5,921
159
2,798
Deferred revenues ASP revenues
44,619
11,740
Deferred revenues subscriptions
Total deferred revenues
30,081
2005
Deferred revenues connection fee
15. Deferred revenues
December 2005 have not been recognised due to lack of convincing evidence of future taxable
income.
Deferred tax asset regarding tax loss carry forward in Sweden amounting to TNOK 910 as at 31
12,474
753
-
11,721
2004
The group has tax loss carry forward of TNOK 4,017 as at 31 December 2005 and TNOK 563 as at 31
December 2004. The total loss carried forward has no expiry date.
4,963
11,440
606
10,834
16,403
Net deferred tax assets
Deferred tax liabilities - gross
Other
Property, plan and equipment
Deferred tax liabilities
Deferred tax assets - gross
159
215
27
1,033
17. Other revenues
(3,744)
(1,297)
3,555
(41)
54
(27,896)
* included are payroll tax.
** See note 7 regarding intangible assets and note 8 regarding development costs
Average number of employees
Total personnel expenses
Other personnel costs
Capitalized personnel costs**
Pension costs – defined contribution plans
(5,100)
Social security costs
Share options granted to directors and employees*
(21,269)
2005
10,059
Wages and salaries
18. Employee benefit expense
Total other revenues
211
264
Interest income customers
Interest income bank and other
9,584
Collection and billing fees
2005
37
(8,857)
(336)
2,285
-
(2,544)
(1,011)
(7,251)
2004
825
120
-
705
2004
Gross contingent liabilities are part of the accounts payable and current liabilities, while the amounts
covered by the group’s employees are stated as trade receivables and other receivables.
obligation to pay social security tax when the options are exercised. The numbers given above states
the group’s net liabilities regarding social security tax for the options.
-
1,033
-
2004
Contingent liabilities relates to social security tax for the granted options. Some employees have the
(263)
3,372
Total provision at 31. January
5,762
15,218
970
5,762
Payment during the year
Tax loss carried forward
Current liabilities
2,602
-
Charged as an expense during the year
-
970
2005
Accounts Receivables
2004
2005
2005
1,033
2004
16. Contingent liabilities
Contingent liabilities at 1. January
statement
Consolidated income
Telio Holding AS
Deferred tax assets
Deferred tax and deferred tax assets:
Telio Holding AS
28
111
(2,706)
2
(383)
(736)
Other financial expense
Interest expense
(736)
(456)
Net finance income/ (expense)
280
2005
Net interest cost (Note 20)
Foreign exchange (losses)/gains – net
The exchange differences (charged)/credited to the income statement are included as follows:
21. Net financial income and expense
(271)
Interest expense on financial lease
(84)
Other financial income
Interest expense
2005
20. Interest expense
(33,125)
(975)
Total other expenses
Other
(735)
(2,660)
Loss on bad debt (change in provision)
(511)
(172)
(339)
2004
(172)
(54)
(64)
(54)
-
2004
(12,409)
(533)
(829)
(5,898)
(2,679)
(1,050)
(1,211)
Facilities
(3,494)
(2,645)
(2,700)
2004
Collection and billing costs
(2,688)
Office consumables, equipment and communication
(10,628)
(4,103)
2005
Travel and cars
Professional fees (legal, audit and other)
Temporary staff
19. Other expenses
Telio Holding AS
29
2005
0.18
17,272
3,156
2004
(0.63)
15,029
(9,436)
2005
2004
MNOK 5. Management has concluded that the chance of the claim being realised is not likely, and
therefore no provisions have been recognised as of December 31, 2005.
7.57, including interests. Management has concluded that the maximum exposure is approximately
Lab2/Port IT has through Aktiv Kapital AS forwarded a legal claim against Telio Group totalling MNOK
contract. This is done by offsetting the discrepancy of what Telio claims to be the correct figure and the
figure Lab 2 claims to be correct against subsequent invoices from Lab2/Port IT.
financial statement of 2005, the Group has recognised an income based on Telios interpretation of the
revenues generated in late 2004/early 2005, when the traffic was routed through Lab2/ Port IT. In the
Telio is involved in at legal dispute with Lab2/ Port IT. The dispute relates to a split of termination
23. Contingencies
(0.12)
(0.63)
0.16
(0.51)
Diluted earnings per share (NOK per share)
0.16
3,305
18,334
20,140
15,029
(9,436)
2,868
17,272
3,156
Adjustment due to negative result
Diluted earnings per share (NOK per share)
Weighted average number of ordinary shares for diluted earnings per
share (thousands)
Adjustments for – share options (thousands)
Weighted average number of ordinary shares in issue (thousands)
Profit attributable to equity holders of the Company
attached to outstanding share options. The number of shares calculated as above is compared with the
number of shares that would have been issued assuming the exercise of the share options.
market share price of the Company’s shares) based on the monetary value of the subscription rights
number of shares that could have been acquired at fair value (determined as the average annual
interest expense less the tax effect. For the share options, a calculation is done to determine the
is assumed to have been converted into ordinary shares and the net profit is adjusted to eliminate the
category of dilutive potential ordinary shares: convertible debt and share options. The convertible debt
outstanding to assume conversion of all dilutive potential ordinary shares. The Company has one
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares
Diluted
Basic earnings per share (NOK per share)
Weighted average number of ordinary shares in issue (thousands)
Profit attributable to equity holders of the Company
purchased by the Company and held as treasury shares (Note 11).
by the weighted average number of ordinary shares in issue during the year, excluding ordinary shares
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company
Basic
22. Earnings per share
Telio Holding AS
30
112
8,670
11,271
4,249
-
3,317
932
2004
Xfiles AS
–
CTO
Commercial leader
Sales director
Manager
Alan Duric****
Jens Hetland
Jimmie Wiklund
Rune Strømmen
50,000
85,000
50,000
-
150,000
300,000
2.5
10
19
-
20
13.5
There is no remuneration other than remuneration granted though option plans.
Compensation to board of directors
Total key management compensation
Other long-term benefits
Salaries and other short-term employee benefits
-
359
3
356
2005
-
-
-
-
2004
board of Directors extraordinary remunerations in the event of termination or change of employment or
office. There are no bonus agreement, profit sharing or similar except for the option plan.
party agreement with Synesi AS. There are no obligations to pay the general manager or chairman of the
184
-
-
184
2005
184
-
184
-
2004
granted loans TSEK 100 each on date of employment. According to contract the loans are not interest
In 2004 Jimmy Wicklund (CEO Telio SA) and Thomas Vasen (International development) were
End of the year
Loan repayments received
Loans advanced during year
Beginning of the year
Loans to directors and key management of the Company (and their
families):
v) Loans to related parties
475
185
193
law auditing includes accounts assistance. The amount mentioned is exclusive VAT.
468
Other services
The service provided above includes services from the auditor’s coadjutant law firm. Required by the
265
Tax
68
29
2004
In 2004, and until August 15 2005, the CEO role was handled by Mr. Espen Fjogstad through a related
142
Authorisation services
1,412
537
2005
Statutory audit
iv) Audit services provided
****Owned through Lombard Odier Darier Hentsch & Cie.
*** Indirectly owned through Creo Investments, where Erik Osmundsen has economic interests.
** 2,276,667 shares indirectly owned through Synesi AS a 100% owned company and 218,333 owned
directly.
120,000
-
-
2,510,000
-
-
2.5
-
23
-
-
-
Strike price
ii) Key management compensation
31
CFO
Kyrre Grinde-Andersen
50,000
-
40,000
-
-
-
Number
of
options
Total audit services provided
1,140
645
1,050
495
450
2004
600
2005
CEO
Arild Nilsen
-
685,100
-
2,495,000
-
2,751,000
* Indirectly owned through Xfiles AS, a 100% owned company.
Board member
CEO
Arild Nilsen
Board member
Erik Osmundsen ***
Board member
Board member
Terje Hamre
Espen Fjogstad**
Chairman
Aril Resen*
Number of
shares
Services are negotiated with related parties on a commercial basis.
Total purchase of services
Synesi AS
–
Purchases of services:
i) Purchases of services
The following transactions were carried out with related parties:
shareholders of the company. Mr. Resen is chairman of the board and Mr. Fjogstad is board member.
In 2004 the company entered into consulting agreements with Synesi AS and Xfiles AS.
Espen Fjogstad and Aril Resen are though the companies Synesi AS and Xfiles AS among the largest
25. Related-party transactions
The Group entered a five year leasing contract in May 2005 and the contract is due at the end of April 2010. Yearly minimum
lease payment is TNOK 2,601. The rent can be adjusted annually according to SSB CPI.
Total operating lease commitments
-
2,601
Later than 5 years
2005
The Group rent office facilities at headquarter in Oslo.
Position
iii) Shares in the company owned by the general manager and members of the board.
24. Commitments
Name
Operating lease commitments – where a Group Company is the lessee
Telio Holding AS
Telio Holding AS
32
113
2004 net operating expenses remains at the same level as under NGAAP
2004 operating result reduced by TNOK 13,934 to TNOK (11,107)
2004 result reduced from TNOK 1,880 to TNOK (9,436)
Total assets as of 31 December 2005 increased by TNOK 3,659 to TNOK 47,906
Consolidated equity as of 31 December 2004 reduced from TNOK 30,466 to TNOK 20,661.
•
•
•
•
•
IAS 18 Revenue, regarding recognition of revenues from ASP contracts and connection fees
IAS 38 Intangible assets, regarding capitalisation of customer acquisition cost
•
employees
IFRS 2 Share-based Payments, regarding expenses related to recognition of fair value of options granted to
•
•
IFRS were:
The standards giving rise to most significant changes to the financial information of the Group on transition from NGAAP
2004 revenues reduced by TNOK 13,857 to TNOK 28,945 due to deferral of revenues
•
Highlights
The reconciliations give comparable information of the consolidated statement of 1 of January 2004 and of 31
December 2004.
The identified differences are calculated and presented in the tables below.
Accounting Act and generally accepted accounting principles in Norway (NGAAP). Telio has analyzed the differences
between NGAAP and IFRS for those areas that affect the consolidated financial statements.
(IFRS). The consolidated group financial statements for 2004 have been prepared in accordance with the Norwegian
From 1 January 2005, the consolidated accounts of Telio will comply with International Financial Reporting Standards
Introduction
27. Transition to IFRS
In March 2006 the contract with Glocalnet AB was terminated as a result of Glocalnet being acquired by Telenor.
In January 2006, Telio Holding AS acquired assets equal to NOK 3,5 million from Just IP. The assets related
primarily to a media agreement with TV2 and a commercial agreement with TV2 Nettavisen.
Telio Telecom AS and Telenor Telecom Solutions AS. Transaction costs relating to the guarantee are based on
commercial term and the agreement includes a covenance of 35% equity share.
In January 2006 Handelsbanken as issued a guarantee of 12 MNOK relating to the interconnect agreement between
claimed by Svea. As a part of the agreement a factoring pledge has been initiated for the receivables of the two
companies.
Svea pays face value incl. vat for all invoices. For any later credits approved by the company a regress will be
Telecom AS and Telio SA have agreed to sell all invoices related to subscriptions and traffic at the date of invoicing.
In January 2006 the company entered into an agreement with Svea Finans concerning sales of receivables. Telio
26. Events after the balance sheet date
A guarantee has been issued to ensure positive equity in the subsidiary Glocalnet AB.
33
bearing.
Income statement
Statement of changes in equity/statement of recognized income and expense
Cash flow statement
Notes including a summary of significant accounting policies.
•
•
•
•
ASP Agreements
reduced by TNOK 10,118.
Deferred tax asset is increased by NOK 2,809 and trade receivable is reduced by TNOK 1,207 and equity is
Financial position as of 31 December 2004 is adjusted as follows: Deferred revenue is increase by TNOK 11,721.
Balance sheet impact
of the tax expense of TNOK 2,809.
by TNOK 296 due to a reclassification of loss on connection fees receivable. The adjustment implies a reduction
Compared with N GAAP, 2004 revenues are reduced by TNOK 13,223 under IFRS. Other expenses are reduced
Impact on the income statement
recognition is conditional upon subscription agreement, payment of connection fee and connection to the network.
average expected duration of a customer relationship, which is estimated to be a 5 year period. The revenue
interpretation of IAS 18 Revenue, implies that connection fees are recognized as revenue linearly over the
Telio has recognised connection fees as revenue upon billing of customer under NGAAP. The Company’s
Principal difference
B) Revenues recognition - connection fees
current liability, equity as of 31 December 2004 is reduced by TNOK 542 and deferred tax asset is increased by
TNOK 211
Due to the adoption of the new accounting principle, deferred revenue amounting to TNOK 753 is recognized as a
As a consequence, 2004 revenues are reduced by TNOK 753 million compared by NGAAP. The adjustment
implies a negative tax expense of TNOK 211.
N GAAP. Under IFRS, such revenues are deferred over a period equal to the contract length, including optional
prolongation (IAS 18).
Non-refundable set-up fees under ASP contracts were recognised as revenue upon customer acceptance under
A)
A summary of the principal differences between NGAAP and IFRS as applicable to Telio and impact on 2004 financial
statements are as follows :
Explanation of IFRS adjustments to the income statement and the balance sheet
presentation of the entity’s performance should be chosen. Telio has chosen to present expenses by their nature.
Expenses can be presented either by the nature of expenses or by their function. The format that will give the fairest
Balance sheet
•
minimum requirements for content. A set of financial statements comprises:
IAS 1 sets out overall requirements for the presentation of financial statements, guidelines for their structure and
at historical cost.
to restate items of property, plant and equipment to fair value at the transition date. Such items have been maintained
resetting cumulative translation differences to zero at the transition date. Telio has chosen not to adopt the exemption
was incorporated in 2003 and has a simple financial structure, no such exemptions have been adopted, except for
the first time to take certain exemptions from the full requirements of IFRS in the transition period. However, since Telio
IFRS 1 First Time Adoption of International Financial Reporting Standards, permits those companies adopting IFRS for
Basis of preparation
vi) Guaranties for related parties
Telio Holding AS
Telio Holding AS
34
114
Share based payment
First year instalment of borrowings (leasing debt) is reclassified from non-current to current liability
(TNOK 1,253 million).
difference is reclassified from retained earnings to other pay in capital (TNOK 48). The total amount
reclassified from retained earnings to other pay in capital is TNOK 1,327.
2003 loss is reclassified from other reserves to retained earnings (TNOK 1,279). The translation
•
•
Costs regarding outsourcing of the billing and collection process is reclassified from traffic cost to other
operating expenses (TNOK 829)
•
The following reclassifications have been made due to the IFRS transition:
•
Interest income is reclassified from finance cots to other revenues (TNOK 120)
E) Reclassification
TNOK 128. Correspondingly, net equity is reduced by TNOK 707.
TNOK 1,161. Social security tax to be paid by employees result in an increase of trade and other receivable by
earnings (TNOK 1,511). The provision for social security tax implies an increase in trade and other payables of
The recognition of share-based payments implies a reclassification between equity reserves equity and retained
35
3,168
342
Total liabilities
342
LIABILITIES
2,826
is social security tax. The tax expense is reduced by TNOK 326.
Total equity
-
140
2,686
Retained earnings
Other reserves
3,168
Share capital
Capital and reserves attributable to equity holders of
EQUITY
Total assets
651
1,681
836
671
671
-
-
-
(12,544)
(1,279)
1,279
-
-
-
-
-
-
-
IFRS (E)
Transition to
As of 1 January 2004
NGAAP
Current assets
Non-current assets
ASSETS
Impact of conversion to IFRS
Personnel expenses are increased by TNOK 2,544 million, of which TNOK 1,511 is option cost and TNOK 1,033
tax on options and takes into account the effect employees’ payment of social security tax.
employees are assessed based on a Black-Scholes calculation. Equivalent, Telio has provided for social security
Vested options to employees are expensed according to IFRS 2. The market values of options granted to
D)
2,170, a reduction of deferred tax asset of TNOK 778, and deferred tax liability is reduced by TNOK 170 and an
increase in equity of TNOK 1,562.
The new principle for accounting of customer acquisition cost implies an increase of intangible assets of TNOK
complying with the criteria set out above. Amortization of capitalised customer acquisition cost amounts to TNOK
298 for 2004. The adjustment implies an increase in tax expense of TNOK 608.
2004 other operating expenses are reduced by TNOK 2,470 due to capitalisation of customer acquisition costs
duration of the customer relationship, ref. B) above.
connection fees in the balance sheet. Capitalised customer acquisition cost is amortized over the estimated
decided to capitalize customer acquisition cost only to the extent that such expenses are covered by deferred
related to customer acquisition and connection when the criteria in section 2.6 are fulfilled under IFRS. Telio has
acquisitions were expensed as incurred under NGAAP, Telio is capitalizing directly attributable external costs
While telephone numbers ported from other operator were capitalised and remaining costs related to customer
IFRS consolidated opening balance sheet 1. January 2004
Intangible assets
C)
Telio Holding AS
Telio Holding AS
3,168
342
342
2,826
(1,279)
3,965
140
3,168
1,681
651
836
671
671
IFRS
36
115
1,928
13,781
44,247
211
753
753
753
-
9,971
Total liabilities
Deferred income
-
-
-
313
-
-
3,810
9,658
-
-
(542)
-
1,602
11,721
11,721
11,721
-
-
-
-
-
-
(10.118)
-
(10.118)
(10.118)
(542)
(542)
262
3,548
30,466
-
30,466
Borrowings
Current liabilities
Borrowings
LIABILITIES
Total equity
Minority interest
Total equity
Retained earnings
-
1,392
(170)
-
-
-
-
-
(170)
(170)
-
1,562
-
1,562
1,562
-
-
454
1,161
1,161
-
-
-
1,161
-
-
-
(707)
-
(707)
(2,218)
1,511
-
-
-
1,253
-
1,253
-
-
(1,253)
-
(1,253)
-
-
-
(1,327)
1,327
37
47,906
27,245
24,858
12,474
1,253
313
10,818
2,387
92
2,295
20,661
-
20,661
(10,715)
31,206
170
47,906
(556)
-
-
1,880
-
-
454
Profit for the year
170
28,368
1,392
Income tax expense
Other reserves
1,602
Share capital
211
2,436
44,247
Total assets
EQUITY
19,996
(2,375)
(13,672)
(391)
-
Other expenses
2,827
128
5,987
14,009
Operating profit
-
-
-
Finance costs
(1,207)
128
-
-
-
21,075
-
(1,207)
-
-
5,987
(15,443)
Cost of services – traffic cost
42,801
Total revenues
(2,171)
27,910
705
42,096
NGAAP
Other revenues
Sales
15,088
-
2,568
8,945
16,397
IFRS
326
-
-
-
E
(6,313)
1,392
326
-
D
2,809
211
23,172
(778)
2,170
-
C
Personnel expenses
2,809
-
-
B
211
-
-
A
-
6,775
16,397
NGAAP
Transition to IFRS
Consolidated income statement 2004
(542)
211
(753)
-
(753)
-
(10,118)
2,809
(12,927)
-
(12,927)
-
296
-
-
-
(13,223)
-
(13,223)
B
1,562
(608)
2,170
-
2,170
(298)
1,796
672
-
-
-
-
-
C
-
-
-
-
D
(2,218)
326
(2,544)
-
(2,544)
-
-
-
(2,544)
Transition ti IFRS
-
-
-
(753)
-
(753)
A
Telio Holding AS
Current assets
Deferred income tax
Intangible assets
Non-current assets
ASSETS
Consolidated balance sheet 31. December 2004
Telio Holding AS
-
-
-
(120)
120
-
(829)
-
-
829
120
120
-
E
38
(9,436)
2,182
(11,618)
(511)
(11,107)
(2,673)
(12,409)
(1,499)
(8,857)
(14,614)
28,945
825
28,120
IFRS
116
Non cash transaction related to cost of
–
–
(241)
at end of the year
Cash, cash equivalents and bank overdrafts
and bank overdraft
Translation adjustments cash, cash equivalents
beginning of the year
Cash, cash equivalents and bank overdrafts at
equivalents and bank overdrafts
Net (decrease)/increase in cash, cash
5,987
280
1,651
4,056
29,260
(178)
3,726
25,712
(24,963)
121
(184)
Interest received
(7,022)
Purchases of property, plant and equipment
(17,878)
(118)
Interest paid
(123)
Deferred revenue
–
9,318
(14,252)
-
2,375
556
1,880
NGAAP
–
–
of exchange differences on consolidation):
Changes in working capital (excluding the effects
share options Amortisation
Tax
–
Adjustments for:
Consolidated cash flow statement 2004
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,721
-
1,207
-
-
-
-
-
-
-
-
(2,468)
-
-
(2,468)
-
2,468
-
2,468
-
-
-
-
298
-
608
-
1,562
C
(2,809)
(10,118)
B
-
753
-
-
-
(211)
(542)
A
D
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,161
(128)
1,511
-
(326)
(2,218)
Transition to IFRS
Telio Holding AS
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
E
39
5,987
280
1,651
4,056
29,260
(178)
3,726
25,712
(27,431)
121
(184)
(9,490)
(17,878)
2,227
(118)
2,346
11,721
11,232
(13,173)
1,511
2,673
(2,182)
(9,436)
IFRS
IFRS
E) Reclassification
D) Share based payment
C) Intangible assets
B) Revenues from connection fees
A) ASP deals
NGAAP
170
-
-
-
-
-
170
share
Ordinary
31,206
1,327
1,511
-
-
-
28,368
reserves
Other
Consolidated equity statement 31. December 2004
(10,715)
(1,327)
(2,218)
1,562
(10,118)
(542)
1,928
earnings
Retained
Telio Holding AS
20,661
-
(707)
1,562
(10,118)
(542)
30,466
Equity
40
117
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In our opinion,
N the financial statements of the parent company have been prepared in accordance with the law
and regulations and give a true and fair view of the financial position of the company as of
December 31, 2005, and the results of its operations and its cash flows for the year then ended, in
accordance with accounting standards, principles and practices generally accepted in Norway
N the financial statements of the group have been prepared in accordance with the law and
regulations and give a true and fair view of the financial position of the group as of December 31,
2005, and the results of its operations and its cash flows and the changes in equity for the year
then ended, in accordance with IFRSs as adopted by the EU
We conducted our audit in accordance with laws, regulations and auditing standards and practices
generally accepted in Norway, including standards on auditing adopted by The Norwegian Institute of
Public Accountants. These auditing standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. To
the extent required by law and auditing standards an audit also comprises a review of the
management of the Company's financial affairs and its accounting and internal control systems. We
believe that our audit provides a reasonable basis for our opinion.
We have audited the annual financial statements of Telio Holding AS as of December 31, 2005,
showing a loss of NOK 689 000 for the parent company and a profit of NOK 3 177 000 for the group.
We have also audited the information in the directors' report concerning the financial statements, the
going concern assumption, and the proposal for the coverage of the loss of the parent company. The
annual financial statements comprise the financial statements of the parent company and the group.
The financial statements of the parent company comprise the balance sheet, the statements of income
and cash flows and the accompanying notes. The financial statements of the group comprise the
balance sheet, the statement of income and cash flows, the statement of changes in equity and the
accompanying notes. The regulations of the Norwegian accounting act and accounting standards,
principles and practices generally accepted in Norway have been applied in the preparation of the
financial statements of the parent company. IFRSs as adopted by the EU have been applied in the
preparation of the financial statements of the group. These financial statements are the responsibility
of the Company’s Board of Directors and Managing Director. Our responsibility is to express an
opinion on these financial statements and on other information according to the requirements of the
Norwegian Act on Auditing and Auditors.
Auditor’s report for 2005
To the Annual Shareholders' Meeting of Telio Holding AS
PricewaterhouseCoopers AS
N-0245 Oslo
Telephone +47 02316
Telefax +47 23 16 10 00
Note: This translation from Norwegian has been prepared for information purposes only.
Torbjørn Larsen
State Authorised Public Accountant (Norway)
(2)
the company's management has fulfilled its duty to produce a proper and clearly set out
registration and documentation of accounting information in accordance with the law and good
bookkeeping practice in Norway
the information in the directors' report concerning the financial statements, the going concern
assumption, and the proposal for the coverage of the loss of the parent company are consistent
with the financial statements and comply with the law and regulations.
Oslo, March 29, 2006
PricewaterhouseCoopers AS
N
N
First quarter 2006
Telio Holding ASA – First quarter 2006
Unaudited condensed consolidated interim financial
information
30,021
118
Erik Osmundsen
(Chairman of the board)
Espen Fjogstad
Telio Holding ASA – First quarter 2006
Aril Resen
Arild Nilsen (CEO)
Richard Kosowsky
179,447
Oslo 4. May 2006
42,341
138,026
65,691
40,379
121,866
Total liabilities
24,038
47,023
Deferred income
1,157
1,190
14,448
5,427
13,994
1,962
16,160
54,968
92
1,870
52
16,108
-
23,350
23,350
16
Borrowings
Current liabilities
Borrowings
LIABILITIES
170
31,676
(8,496)
41,421
41,405
Total equity
Minority interest
179
49,891
(8,665)
Other reserves
Accumulated deficit
Share capital
Capital and reserves attributable to equity holders of the Company
EQUITY
65,691
91,859
179,447
36,017
Total assets
7,133
55,842
22,888
35,670
3,199
13,583
18,888
31.03.2005
Current assets
87,588
9,449
35,135
43,004
Intangible assets
31.03.2006
Non-current assets
ASSETS
154,333
112,857
104,331
44,619
8,349
2,960
48,403
8,526
52
8,474
41,476
21
41,455
48,835
(7,559)
179
154,333
87,819
32,124
55,695
66,514
5,015
28,731
32,768
31.12.2005
APPENDIX 3: FIRST QUARTER REPORT FOR 2006
119
(7,754)
(0.06)
(0.06)
– diluted
(5)
(1,106)
– basic
Earnings per share for profit attributable to the equity holders of
the Company during the period (expressed in NOK per share)
Minority interest
Attributable to :
(1,111)
1,866
Income tax (expense) income
Profit (loss)
(2,977)
(816)
(2,161)
Finance costs
(6,440)
(15,232)
Other expenses
(9,003)
(29,930)
77
66,198
Total revenue
66,121
2006
2005
0.11
0.13
-
2,219
2,219
(133)
2,352
(53)
2,405
(1,987)
(4,601)
(1,519)
(5,732)
(11,599)
27,843
1,279
26,564
1st quarter
Other revenues
Sales
0.16
0.18
21
3,156
3,177
(224)
3,401
(456)
3,857
(11,791)
(33,125)
(15,215)
(27,896)
(70,242)
162,126
10,059
152,067
2005
Year
-
Total recognised income (loss) for the
three month period ended March 31, 2006
31,206
170
-
Total recognised income (loss) for the
three month period ended March 31, 2005
580
31,676
170
100
-
480
(110)
-
(110)
Other
reserves
Share capital
(8,665)
-
-
-
(1,106)
(1,106)
-
(7,559)
(7,559)
-
-
-
-
-
3,156
3,156
-
Retained
earnings/
accumulated
deficit
(10,715)
(8,496)
-
-
-
2,219
2,219
-
Retained
earnings /
accumulated
deficit
(10,715)
Company
49,891
820
179
173
-
647
236
-
236
48,835
48,835
-
179
179
17,547
9
(940)
-
1,220
2
2,762
14,505
7
82
-
-
-
Profit for the year
82
31,206
Other
reserves
-
170
Share capital
Company
-
-
Minority
interest
-
-
-
-
-
-
-
-
16
-
-
-
(5)
(5)
-
21
21
-
-
-
-
-
21
21
Minority
interest
23,350
580
100
480
2,109
2,219
(110)
20,661
Total
equity
41,421
820
173
647
(875)
(1,111)
236
41,476
41,476
17,556
(940)
1,222
2,762
14,512
3,259
3,177
82
20,661
Total
equity
120
(147)
267
36,017
Cash and cash equivalents at end of the period
Cash and cash equivalents at beginning of the period
Translation adjustments cash and cash equivalents
3,626
32,124
Net (decrease)/increase in cash and cash equivalents
(2,770)
7,807
10,404
Net cash flow from financing activities
-
173
(22,983)
98
(8,657)
(14,424)
18,802
(429)
19,231
2,404
12,864
Net cash flow from investing activities
Interest received
Interest paid
– Deferred revenue
– Trade and other payables
– Trade and other receivables
Changes in working capital (excluding the effects of exchange differences
on consolidation):
647
2,252
– Amortisation
– Non cash transaction related to cost of share options
4,188
(1,866)
(1,111)
2006
480
649
1,338
133
2,219
2005
7,133
(28)
5,987
1,118
(325)
(425)
-
-
100
(9,105)
10
(5,286)
(3,829)
10,548
10,598
(50)
11,564
3,080
(8,865)
1st quarter
– Depreciation
– Tax
Adjustments for:
The preparation of these Interim Financial Statements requires management to make estimates and assumptions
that effect the reported revenues, costs, assets, liabilities, and disclosure of contingent liabilities at the date of the
Interim Financial Statements. If in the future such estimates and assumptions, which are based on management’s
best judgement at the date of the Interim Financial Statements, deviate from the actual circumstances, the
original estimates and assumptions will be modified as appropriate in the period in which the circumstances
change.
Management has assessed that there are no new IFRS accounting standards, amendments and interpretations to
standards that are relevant to Telio in the period.
The financial statements are prepared in consistency with the accounting policies used in the annual financial
statements for the year ending December 31, 2005.
The unaudited condensed consolidated interim financial information has been prepared in accordance with IAS
34, “Interim Financial Reporting” (IFRS). These Interim Financial Statements should be read in conjunction
with the Consolidated Financial Statements for the year ended December 31, 2005 as they provide an update of
previously reported information. They were approved by the Board of Directors on May 4, 2006.
1. Statement of compliance
121
66,121
3,285
62,836
1st quarter 2006
100%
5%
95%
26,564
699
25,865
1st quarter 2005
100%
3%
97%
152,067
9,345
142,722
Year 2005*
100%
30,892
179,447
Total
100%
17%
83%
6%
94%
65,691 100%
4,048
61,643
31.03.2005
154,333
18,785
135,548
31.12.2005*
100%
12%
88%
23,081
100
22,981
1st quarter 2006
100%
0%
100%
4%
96%
9,115 100%
320
8,795
1st quarter 2005
48,328
1,568
46,760
Year 2005
100%
3%
97%
30,813
29,827
3,298
66,121
Traffic
ASP
Total
2,183
1st quarter 2006
Subscriptions
Connection fees
Analysis of sales by category
3%
100%
5%
45%
47%
3%
1%
48%
48%
26,564 100%
121
12,749
12,777
917
1st quarter 2005
4%
1%
44%
51%
152,067 100%
1,878
67,345
77,429
5,415
Year 2005
Capital expenditure includes both property, plant and equipment and intangible assets. Geographical allocation is based on where the assets are
located.
Total
Norway
Capital expenditure
* Restated compared to Annual Report for 2005, note 5. Adjusted total assets as of December 31, 2004 per Norway and Europe outside Norway
are TNOK 44,189 (92%) and TNOK 3,717 (8%) respectively.
148,555
31.03.2006
Norway
Total assets
6%
94%
Restated compared to Annual Report for 2005, note 5. Adjusted revenues for 2004 per Norway and Europe outside Norway are TNOK 27,627
(98%) and TNOK 493 (2%) respectively.
Total
Norway
Sales
The Group operations are defined into two different segments; Norway and Europe. The risks and returns of an entity are influenced both by
the geographical location of its operations and also by the location of its markets. Telio’s definition of geographical segments is based on the
location of its markets and customers. Transactions within the two segments are eliminated.
Secondary reporting format - geographical segments
Primary reporting format - business segments
IAS 14 requires segmental reporting on both a primary and secondary basis. Business segments are primary reporting format for Telio, as
products and services represent the predominant source and nature of risks and returns. Telio is a niche company specializing in
development, marketing and sales of Voice over IP telecommunication and operates only in one business segment.
2. Segment information
Total deferred revenues
Deferred revenues ASP revenues
Deferred revenues subscriptions
Deferred revenues connection fee
47,023
240
12,655
34,128
1st quarter 2006
24,038
650
4,840
18,548
1st quarter 2005
44,619
2,798
11,740
30,081
Year 2005
Software lease agreements (ASP)
Revenue from software lease agreements (ASP) is recognized on an accrual basis over the contract period in
accordance with the substance of the lease agreement.
Subscriptions
Income from subscriptions is recognised on an accruals basis over the subscription period in accordance with the
substance of the subscription agreement, starting as at the date of the activation of the subscription.
Connection fee
Connection fee revenues are recognized over a 5 year period, which represent the average expected duration of a
customer relationship. Revenues are being recognized as from when the customer has entered into a
subscription agreement, has paid the connection fee and has been connected to the network. The connection fee
includes the initial connection service, adapter delivery and porting (to technically transfer the unique
telephone number from another telephone operator to the Company).The connection fee is non refundable and
the subscription agreement has no lock-in period. Revenues generated from porting services (transfer of a
telephone number from Telio to another telecom operator) are being recognized when the porting service has
been delivered.
Deferred revenues include revenues generated from connection fees, subscriptions and software lease
agreements (ASP). These are recognised as follows (as stated in section 2.15 in the annual report for 2005):
3. Deferred revenues
122
E) Reclassification
The following reclassifications have been made due to the IFRS transition:
Interest income is reclassified from finance cots to other revenues (TNOK 10)
Costs regarding outsourcing of the billing and collection process is reclassified from traffic cost to other operating
expenses (TNOK 375)
Loss from FY 2003 is reclassified from other reserves to retained earnings (TNOK 1,279). Accumulated translation
difference is reclassified from retained earnings to other reserves (TNOK -62).
First year installment of borrowings (leasing debt) is reclassified from non-current to current liability (TNOK 1,529
million).
Vested options to employees are expensed according to IFRS 2. The market values of options granted to employees are
assessed based on a Black-Scholes calculation. Equivalent, Telio has provided for social security tax on options and
takes into account the effect employees’ payment of social security tax.
While telephone numbers ported from other operator were capitalized and remaining costs related to customer
acquisitions were expensed as incurred under NGAAP, Telio is capitalizing directly attributable external costs related to
customer acquisition and connection when defined criteria are fulfilled under IFRS. Telio has decided to capitalize
customer acquisition cost only to the extent that such expenses are covered by deferred connection fees in the balance
sheet. Capitalized customer acquisition cost is amortized over the estimated duration of the customer relationship, ref. B)
above.
B) Revenues recognition - connection fees
Telio has recognized connection fees as revenue upon billing of customer under NGAAP. The Company’s interpretation
of IAS 18 Revenue, implies that connection fees are recognized as revenue linearly over the average expected duration
of a customer relationship, which is estimated to be a 5 year period.
A) ASP agreements
Non-refundable set-up fees under ASP contracts were recognized as revenue upon customer acceptance under N GAAP.
Under IFRS, such revenues are deferred over a period equal to the contract length, including optional prolongation.
Explanation of IFRS adjustments to the financial statements for 1st quarter 2005
Telio’s consolidated accounts for 2005 complies with International Financial Reporting Standards (IFRS) as adopted by
the EU. Previously presented consolidated quarterly financial statements for 2005 in accordance with the Norwegian
Accounting Act and generally accepted accounting principles in Norway (NGAAP) have been restated to comply with
IFRS. Identified differences between NGAAP and IFRS applicable to 1st quarter 2005 are disclosed in the tables below.
The bases for the adjustments are presented in further detail in note 27 to the consolidated financial statements for 2005.
Introduction
4. Transition to IFRS
31,159
170
57,364
182
650
650
21,680
650
-
-
-
17,987
-
1,190
-
-
3,693
16,797
-
-
(468)
-
(468)
(468)
-
-
294
3,399
35,684
-
35,673
7,046
28,468
Total liabilities
Borrowings
Deferred income
Current liabilities
Borrowings
LIABILITIES
Total equity
Minority interest
Total equity
Retained earnings/accumulated deficit
Other reserves
Share capital
EQUITY
182
-
7,133
57,364
-
24,026
-
3,485
18,548
18,548
18,548
-
-
-
-
-
-
4,095
(202)
-
-
-
-
-
(202)
(202)
-
4,297
-
(15,063)
4,297
4,297
-
-
4,095
-
-
-
4,095
(2,171)
6,266
(15,063)
(15,063)
-
-
3,485
(1,236)
-
(1,236)
4,721
182
26,205
-
4,721
Total assets
-
C
Transition to IFRS
B
182
-
-
A
-
7,317
18,888
NGAAP
Current assets
Deferred income tax
Intangible assets
Non-current assets
ASSETS
Consolidated balance sheet 31 March 2005
565
1,665
1,665
-
-
-
1,665
-
-
-
(1,100)
-
(1,100)
(3,091)
1,991
-
565
98
-
98
467
467
-
D
-
-
-
4,840
1,157
-
(4,468)
(1,529)
-
(1,529)
-
-
-
(1,217)
1,217
-
-
-
-
-
-
-
-
-
E
65,691
42,341
40,379
24,038
1,157
1,190
13,994
1,962
92
1,870
23,350
-
23,350
(8,496)
31,676
170
65,691
30,021
7,133
22,888
35,670
3,199
13,583
18,888
IFRS
123
Cash, cash equivalents and bank overdrafts at end
of the year
Translation adjustments cash, cash equivalents and
bank overdraft
Cash, cash equivalents and bank overdrafts at
beginning of the year
Net (decrease)/increase in cash, cash equivalents and
bank overdrafts
Changes in working capital (excluding the effects of
exchange differences on consolidation):
– Non cash transaction related to cost of share
options
– Tax, depreciation and amortisation
7,133
(28)
5,987
1,118
(325)
(4,648)
6,091
(1,695)
-
2,560
5,226
NGAAP
Consolidated cash flow 1st quarter 2005
(935)
5,226
Profit for the year
6,161
(43)
6,204
(1,625)
(5,466)
(5,089)
(4,718)
(11,974)
35,076
-
35,076
NGAAP
Income tax expense
Finance costs
Operating profit
Other expenses
Personnel expenses
Cost of services – traffic cost
Total revenues
Other revenues
Sales
-
29
74
A
74
(29)
103
-
103
-
-
-
-
-
103
-
103
A
-
-
-
-
-
-
-
(103)
Consolidated income statement 1st quarter 2005
2,736
(1,222)
3,958
-
3,958
(362)
750
3,570
-
-
-
-
-
C
-
-
-
-
-
-
-
6,856
-
(1,912)
(4,944)
B
-
-
-
-
-
(4,457)
4,457
137
-
1,584
2,736
C
-
-
-
-
D
-
-
-
-
-
-
-
534
480
(141)
(873)
D
(873)
141
(1,014)
-
(1,014)
-
-
-
(1,014)
Transition to IFRS
(4,944)
1,912
(6,856)
-
(6,856)
-
490
-
-
-
(7,346)
-
(7,346)
B
Transition to IFRS
-
-
-
-
-
-
-
-
-
-
-
E
-
-
-
(10)
10
-
(375)
-
-
375
10
1,279
(1,269)
E
7,133
(28)
5,987
1,118
(325)
(9,105)
10,548
5,729
480
2,120
2,219
IFRS
2,219
(133)
2,352
(53)
2,405
(1,987)
(4,601)
(1,519)
(5,732)
(11,599)
27,843
1,279
26,564
IFRS
-
E) Reclassification
170
-
IFRS
-
170
-
Ordinary share
B) Revenues from connection fees
A) ASP deals
NGAAP
Consolidated equity statement 31 March 2005
31,676
1,269
1,991
-
-
28,468
-
Other reserves
(8,496)
(1,269)
(3,091)
4,297
(15,063)
7,046
(468)
Retained
earnings /
accumulated
deficit
23,350
-
(1,100)
4,297
(15,063)
35,684
(468)
Equity
124
125
126
127
128
129
130
131
132
133
134
135
136
APPENDIX 6: APPLICATION FORM RETAIL AND CUSTOMER OFFERING
Telio Holding ASA – Application form retail and customer offering
For full information on retail offering and the customer offering, see the attached English language prospectus (”the Prospectus”). Applications for shares in the retail offering and customer
offering may be made from and including 18 May 2006 to and including 30 May 2006 at 16.30 Norwegian time. A correctly completed application form must be received by post or fax by one
of the Application Offices for the Retail Offering and Customer Offering (see “Terms and Conditions of the Offering” in the Prospectus) by 16:30 Norwegian time on 30 May 2006:
DnB NOR Markets ASA
Enskilda Securities ASA
Stranden 21, NO-0021 Oslo
Filipstad Brygge 1, Postboks 1363 Vika, 0113 Oslo
Telefon + 47 22 94 88 80, Fax + 47 22 48 29 80
Telefon: + 47 21 00 85 00, Telefaks: + 47 21 00 89 62
It is not sufficient for the form to be postmarked within the deadline. Applications may also be made to the internet addresses www.enskilda.no and www.dnbnor.no/markets/emisjoner, with
the same deadline. Applicants in the Customer Offering cannot apply for shares through the internet. Applicants for shares bear the risk of any postal delays, unavailable fax lines or technical
computer problems relating to the above-mentioned internet address. The Managers are free to accept or reject late received, incomplete or incorrectly completed forms. The number of
shares allotted to an applicant may be reduced in accordance with the allotment criteria described in the Prospectus. The application period may be extended. Notice of any such extension
will be given through the Oslo Stock Exchange information system. Any such extension will form part of the application period. Extension of the application period may mean that allotment,
settlement and trading in the shares in the public offer are postponed by the same number of business days as the application period is extended. Applications that are received are
irrevocable for the applicant, and remain binding even if the application period is extended. Acceptance of applications is conditional on the company being listed on the Oslo Stock Exchange
and the offer being completed (see “Terms and Conditions of the Offering” in the Prospectus).
PRICE
The price per share has not yet been determined, (see “Terms and Conditions of the Offering” in the Prospectus). The price per share in the Retail Offering is expected to be in the range from
NOK 31 to and including NOK 37 per share, but the price may also be higher or lower. The price range has been set by the Board of Telio Holding ASA in consultation with the Managers. The
application can be made conditional on the price per share not being set higher than the highest price in the price range. In such a case this must be expressly stated in a separate field
below. If the order is conditional on such a highest price and the final price is higher than the price range, the applicant will not be allotted shares. If such a condition is not specified the
application will be treated as binding irrespective of the final price. The final price per share will be determined after the expiry of the application period on 30 May 2006 following a binding
bidding process among institutional investors with applications from and including 40,000 shares (”bookbuilding”). The final price is to be based on demand at different price levels and will
take as a starting point the price range described above. Each applicant in the Customer Offering will receive a discount of 10 per cent per share relative to the price per share set in the
Retail Offering for allocations up to 400 Offer Shares. For allocations above 400 Offer Shares, applicants in the Customer Offering are required to pay the same price per share as in the Retail
Offering. The Customer Offering will only be marketed in Norway and non-Norwegian customers do not qualify for applications in the Customer Offering. Applicants in the Customer Offering
must be registered as a customer with Telio Holding ASA as of 29 May 2006 to qualify as an applicant in the Customer Offering. Applicants in the Customer Offering must fill in their costumer
number with Telio Holding ASA in the relevant box in the Application Form whereby they confirm that they are qualifying customers. If an applicant who is a qualifying customer does not fill
in its correct customer number in a separate box below, the applicant’s application will be treated as an application in the Retail Offering (see “Application and settlement procedures in the
Customer Offering” in the Prospectus). Applications in the Customer Offering can be made conditional on the price per share not being set higher than the highest price in the price range. In
such a case this must be expressly stated in a separate field below. If the order is conditional on such a highest price and the final price is higher than the price range, the applicant will not
be allotted shares.
MINIMUM APPLICATION
Applications in the retail and customer offering are to be made in shares, not in amounts. The minimum application is 200 shares, while the maximum application is up to but not including
40,000 shares. Applications for less than 200 shares will be rejected without notice. Applications will further be rounded down to the nearest whole 200. If an application is made for 40,000
shares or more in the retail and customer offering this will be treated as an application for 39,800 shares. If one wishes to apply for 40,000 shares or more this must be done in the
institutional offering.
ALLOTMENT AND PAYMENT FOR SHARES ALLOTTED
Final allotment of shares will be made by the Board of Telio Holding ASA in consultation with the Managers in accordance with the allotment criteria described in “Terms and Conditions of the
Offering” in the Prospectus. When applying for shares each applicant must give DnB NOR Markets ASA, on behalf of the Managers, a one-time authorisation to debit a specified Norwegian
bank account for payment for the shares allotted. Notice of allotment is expected to be sent by post on 31 May 2006. Those who need to know their precise allotment before receiving the
notice of allotment may contact one of the Managers from the morning of 31 May 2006. For those with access to investor services through their VPS account manager it will be possible to
check the number of shares that have been allotted from and including 31 May 2006. Debiting is expected to take place on or about 2 June 2006. There must be cover for the whole amount
on the specified bank account on 2 June 2006. The shares are expected to be transferred to the individual applicant’s VPS account on or about 2 June 2006 if there are sufficient fund on the
account. If there are insufficient funds on the account, or the account cannot be debited on the due date, the Managers reserve the right to make a further 3 attempts to debit the account
before 9 June 2006. Interest will be payable on late payments at the rate of 9.25% p.a. If payment is not made for shares allotted, the Managers reserve the right to sell the shares allotted
for the applicant’s account and risk in accordance with applicable regulations.
DELIVERY OF SHARES - LIABILITY
Applicants may be allotted and delivered new and/or existing shares. The Managers have agreed with Telio Holding ASA on further terms that they will subscribe the new shares and sell
them on to applicants, see further regarding this in “Subscription and Payment Guarantees” of the Prospectus. Registration of the capital increase in the Registry of Business Enterprises is
planned for on or about 31 May 2006. This means that shares allotted will be capable of being traded from the opening of the Exchange on 2 June 2006. Delivery of the shares to the
applicant is however conditional on payment taking place in accordance with the description above. Those wishing to dispose of their shares before delivery has taken place, will themselves
bear the risk that settlement does not take place as described above, and thus that the shares are not delivered in time. The on-sale to the applicants of the new shares is conditional on the
new shares being delivered to the Managers by Telio Holding ASA. The applicant may not assert rights/claims against the Managers (as sellers of shares) to a further extent than the rights
/claims the Managers (as subscribers of shares) at any time may assert against Telio Holding ASA. The Managers disclaim any liability for any loss that the applicants might incur as a result
of the Managers’ acts, including the Managers’ subscription and/or payment for the shares.
For applicants who are not already customers of one or both of the Managers, an identity check will be required in accordance with the Money Laundering regulations.
DETAILS OF THE APPLICATION
Applicant’s VPS-account number *)
I/we apply irevocably for the following number of shares
(minimum 200 shares – maximum 39 800 shares)
Condition as to price per share (should only be completed if the application is conditional on the final price per share not
exceeding the price range) My application is conditional on the final price per share not exceeding the price range (insert cross):
Application in the Customer Offering (should only be completed if the applicant is a qualifying customer of Telio Holding
Telio customer number:
ASA see “Application and settlement procedures in the Customer Offering” in the Prospectus) I/We herby confirm that we
was customers of Telio Holding ASA as of 29 May 2006 (insert customer number)
Authorisation to debit an account (must be completed):
Account to be debited __________________________________________________________________________________________________(bank account – 11 digits)
I/We hereby apply for the shares specified above and hereby give DnB NOR Markets ASA a one-time authorization to debit my / our Norwegian bank account for the consideration
for the shares allotted in accordance with the terms set out above and in the Prospectus. The application and the authorisation are irrevocable.
Place and date of application
Binding signature
Must be dated in the application period.
If signed pursuant to an authorization, documentation in the form of a company certificate or
power of attorney should be attached. Guardians must sign for those lacking legal capacity.
INFORMATION ON THE APPLICANT (must be completed)
Applicant’s name/firm or similar
Street address or similar (for private: Home address)
Post number and post district
Personal number (11 digits)/organisation number
Daytime telephone number
Nationality
Telephone/telefax/e-mail
137
Telio Holding ASA
Støperigaten 2
P.O. Box 1203 Vika
0110 Oslo
Tlf: +47 21 68 64 64
Fax: +47 21 67 35 01
DnB NOR Markets
Aker Brygge
Stranden 21
0021 Oslo
SEB Enskilda ASA
Filipstad Brygge 1
P.O. Box 1363 Vika
0113 Oslo
Tel: +47 22 94 88 80
Fax: +47 22 48 29 80 / +47 22 83 20 00
Tlf: +47 21 00 85 00
Fax: +47 21 00 89 06
Print: Sekkelsten & sønn as

Telio Holding ASA - NextGenTel Holding ASA

Transcription

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