The year 2004 in which Ericsson Nikola Tesla celebrated its 55th anniversary was another successful year for the company. It featured a series of good results; it was excellent when speaking of booked orders and sales and with solid net income before taxes. The business results of the company Ericsson Nikola Tesla in 2004 were presented by Gordana Kovačević, President of Ericsson Nikola Tesla, Maria Radtke, Finance Director, Alen Ludaš, Marketing and Sales Director for VIPnet and Si.mobil, Tihomir Šicel, Marketing and Sales Director for T-HT, Josip Jakovac, Marketing and Sales Director for CIS countries, Jagoda Carić, Marketing and Sales Director for Bosnia and Herzegovina and Montenegro, Hrvoje Benčić, Director of Marketing, Customer Solutions and Sales Support and Siniša Krajnović, Deputy Director of Research and Development Center. Gordana Kovačević, President of Ericsson Nikola Tesla spoke about the highlights in 2004 and outlook for 2005.

 

Compared with 2003 the performance of Ericsson Nikola Tesla in 2004 was characterized by the following results:

• 45% rise in booked orders, including the first UMTS contract, concluded with VIPnet
• 11% higher sales
• 20% higher net income
• return from sales amounts to 16%, the set objective was 10%
• positive cash flow from operations for the sixth successive year
• price of ETK share rose during 2004 by 236%
• maintained internal stability, which was confirmed by Dialog, the annual employees satisfaction survey that has been carried out for the sixth consecutive year.

This overall satisfying result is based mainly on activities, i.e. on the improvement program carried out by the company over a long period and on strong efforts in 2004 to increase sales and the cost efficiency of the company.

 

Ericsson Nikola Tesla, positioned as Ericsson's regional and global competence center, grew stronger during the year, mainly due to the expertise of employees and their creativity in complex and urgent assignments, also to the company's way of working and management.

 

• Owing to new higher responsibilities on corporate level in several dozens countries of Central and Eastern Europe, Middle East, Central Asia and Africa, in total sales structure of Ericsson Nikola Tesla export is represented with 75% (15% to Sweden and 60% to other countries), whereas the sales in domestic market account for 25% of total sales.
• Intensive business cooperation with Croatian operators of fixed and mobile telephony, T-HT and VIPnet, resulted in the rise of sales in domestic market by 22% compared with the year before.
• The largest individual markets of Ericsson Nikola Tesla u 2004 were: Croatia, the Federation of Bosnia and Herzegovina, Russia, Sweden, Belarus, Montenegro, Moldova and Kazakhstan

"Forty years of work in Ericssonu, and especially the past six years in Ericsson Nikola Tesla, enabled me to fill my career with valuable jobs that imply a great deal of responsibility. The position of the president of Ericsson Nikola Tesla filled me with pride because I had the opportunity to collaborate with true professionals, dedicated and competent experts in every job we did together. Over that period I worked closely with Gordana Kovačević and I am convinced that with her as the company leader Ericsson Nikola Tesla has a great chance of further growth. I would like to thank all Ericsson Nikola Tesla employees for making my past six professional years really exceptional and I wish them and their new president a lot of success in their future projects."

Prioritized activities of the company in the past period were focused on employees, customers, better efficiency and innovativeness aimed at the achievement of good financial results and increased value for shareholders of Ericsson Nikola Tesla.

 

All key business indicators are better than planned.

• Orders booked amounted to 1605 MHRK, compared with 1108 MHRK in 2003.
• Net sales in 2004 amounted to 1552 MHRK, compared with net sales of 1404 MHRK in 2003.
• Income before taxes was better than planned, it was 250 MHRK compared with 202 MHRK in 2003.
• Total operating expenses, selling and administrative costs increased in 2004 compared with those in 2003 mainly due to higher provisions for receivables from customers in foreign market.
• Cash flow from operations was positive (+141 MHRK) for the sixth consecutive year

Main investments in the next period will be channeled to: financing of our customers to increase the business volume and to achieve a better standing in the market, to new technology to secure that ETK stays at the forefront of the implementation of new technology for our customers, further into research and development activities and e-business. The list of prioritized investments also includes further reconstruction and refurbishing of buildings to prepare office areas for new associates to be employed in 2005.

 

 

In Croatia successful cooperation between Ericsson Nikola Tesla and its strategic partner T-HT, the fixed telephony operator has existed for many years now. The partnership with VIPnet, a mobile telephony operator has lasted since the foundation of VIPnet in 1999. In both cases it is the matter of strategic partnership in the introduction of new technologies. In 2004 the achieved net sales with VIPnet were 30% better than planned. In addition to national coverage, the EDGE technology being the last phase in data communication development in GSM system and a part of the 3G mobile technology was introduced in VIPnet's network as well. A significant business accomplishment is the agreement on long-term cooperation between ETK and VIPnet in building an UMTS network. Crucial in the good cooperation with strategic partners T-HT and VIPnet are strong and competent local support, experienced project management team and ETK specialists with knowledge acquired in international projects. In 2005 good results in business with T-HT and VIPnet are expected as well. Prioritized activities will be further building of UMTS network and further modernization of fixed network, in addition to this new multimedia services will be developed.

 

When speaking of export markets, ETK achieved record sales in the market of the Community of Independent States, CIS (former USSR) and contracted business is worth 100 million US dollars. This was accomplished in the markets of Russia, Belarus, Ukraine, Moldavia, Kazakhstan, Uzbekistan, Kyrgyzstan and Georgia. To Russia, our major single market, ETK exported the equipment and solutions to the value of approx. 50 million USD. Belarus is with contracted business of 36 million USD in mobile telephony a very promising market. Significant contracts were signed in Kazakhstan and Moldova. Vital success factors in these markets are on one hand large experience and knowledge of specific network features and commitment of ETK specialists, on the other a boom in telecommunications in most CIS countries. Further strengthening of partnership with customers there, offered top quality cutting-edge equipment and solutions, favorable prices and customer crediting policy create opportunities for further business in these countries. The company looks with optimism towards the business year 2005 with the prospect of continued positive market trend.

 

Export to the markets of Bosnia and Herzegovina and Montenegro in 2004 increased. Orders booked went up 42%, net sales up 12% compared with the preceding year. The most significant business partners there are BH Telecom, Telekom Srpska, HT Mostar, Eronet, Monet and Telekom Crne Gore. The most important tasks in the markets of these countries are related to the introduction of the latest standards in the fixed network of the operators BH Telekom and Telekom Srpska, the extension of mobile network and implementation of GPRS system in the BH Telekom network, also the implementation of additional GSM services. Being a strategic partner of operators in the markets of Bosnia and Herzegovina and Montenegro, ETK expects further upward trends in 2005 – extension of mobile network, implementation of EDGE technology and similar.

This Center for customer solutions, services, logistics and e-systems was successful throughout the year and consequently it obtained broader responsibilities for tasks within the Ericsson Group. The performance of this unit is founded on expertise, creativity, innovativeness and motivation of its specialists. It is a strong expert center within the Ericsson Group for end-to-end solutions with local, regional and global responsibilities. These responsibilities concern total customer solutions and sales support in Ericsson's (market) region Europa, Middle East and Africa (EMEA/CEMA). This unit employs round 500 specialists, most of them university graduates and is a leading center in its field of work and also a strong team for consulting, integration and management services in the market unit Central Europe (MUCE). The unit includes the Global Service Delivery Center – GSDC that delivers software and system integration. GSDC is recognized within the Ericsson community and obtained broader responsibilities. ETK Mobility World center, the only of the kind within the market unit Central Europe, established cooperation with new partners and thus broadened its expert network; the result is a number of new mobile applications developed. Significant initiatives and projects to drive business growth in 2004 were: modernization of T-HT network, 3G projects for VIPnet and other customers in the market units Central, Southern and Eastern Europe, network development strategy in the neighboring countries (Bosnia and Herzegovina, Montenegro), projects related to the building of new generation networks (IP based networks) for the CIS countries, e-projects for Croatia (e-health for primary health care, etc.). In 2005 the Operations Center will have in focus the marketing activities in domestic and foreign markets, projects for new mobile and fixed operators in Croatia, e-projects for the market units Central and Eastern Europe and Central Asia, increased responsibilities within the Ericsson group for service delivery, higher employment and new programs such as innovations and M&S competences.

The Center collaborates with universities in Croatia and has secured many long-term assignments within the task allocation scheme of the corporate Research and Development community, thus providing for permanent growth. The Center retained its strong position in the AXE signaling, and achieved growth in new development – the CPP products. Owing to the results and good reputation founded on top quality, reliability, competence and cost efficiency the Research and Development Center entered new responsibilities on corporate level, especially in new technologies (IP). The resulting increased business volume imposed new employment, so that 80 new associates with university degree joined the company and the employment trend continues.

The business results of Ericsson Nikola Tesla have their origin in the large intellectual capital. Thus we create values for customers and consequently for ETK shareholders. The company cherishes the winning spirit, performance-driven culture with focus on accomplishment of planned objectives, creation of prerequisites for customer success, teamwork that creates added value and creative approach, especially in urgent situations. In 2004 the number of employees rose from 1020 to 1094 people. Therefore the formerly decreasing trend in employment ceased. Increased staff requirements are obvious especially in the fields connected with new key responsibilities assigned to the company by Ericsson and in the activities related to total customer solutions and services as well as research and development. In 2004 the labor turnover was 3,4%, the lowest since 1990 and 84% of employees were university graduates. More than 470 employees having their first employment contract with ETK are under the age of 34. The ratio between male and female workforce in the company is 70% to 30%. The human resources policy of the company is aimed at an overall rise of company potential and on competence development of employees. Presently more than 150 employees are engaged in postgraduate studies. Ericsson Nikola Tesla was recognized as one of the most desired employers in Croatia because the company provides to its employees good working conditions, encourages career development and provides competitive salaries compared with other Croatian companies.

Carl-Henric Svanberg, the president and CEO of Ericsson visited Ericsson Nikola Tesla and Croatia in June 2004. This official occasion was a further proof that ETK had been recognized as a significant constituent part of Ericsson Group. Ericsson's CEO attended meetings with company managers and talked to employees. Mr. Svanberg also met Mr. Stjepan Mesić, the President of the Republic of Croatia and Mr. Ivo Sanader, the Prime Minister. In November 2004 Ericsson Nikola Tesla celebrated its 55th anniversary. Some 600 guests, customer representatives and business partners from home and abroad attended the celebration. Present were also the representatives of the Croatian Sabor, and government, also of municipal government of the City of Zagreb, and chambers of commerce.

To achieve outstanding business results Ericsson Nikola Tesla has for years paid attention to total quality management in all its business processes. This was recognized on local, regional and global level so that over the last couple of years both the company and its top executives obtained round hundred awards and recognitions. In addition to the certificate Recognized for Excellence for the quality of business processes and the Golden Marten for business performance we mention only the most important ones. For the tenth consecutive year the company has been among 400 major enterprises in Croatia, according to FINA and Commercial Messenger. ETK was third in the category of revenues from export / fastest growth of revenues from export, and it was fifth in the category of fastest growth of net income (compared with 1994). The company holds as the first in the Ericsson Group the Certificate for Occupational Health and Safety at Work Management System based on the standard ISO 18001. In 2004 Ericsson Nikola Tesla obtained the Golden Plaque given by the Croatian Chamber of Commerce, the Golden Share in the award category of highest price increase, further the title «The Discovery of the Year» for outstanding performance and recognizability in the markets of Eastern Europe according to East Capital and the recognition The best company in Croatia, whereas Åke Enell was declared the Manager of the Year 2004 according to the analysts' house Finance Central Europe, FCE with headquarters in London. Ericsson Nikola Tesla is among the best Croatian employers according to (Croatian) Business Daily. ETK obtained Ericsson's European Equality Award 2000. The company also obtained the Recognition for the promotion of female role in industry of communication-information technology (ICT) and Gordana Kovačević, then vice-president of the company, was declared the Manager of the Year in that particular field; the contest was organized by Meritor Media. Gordana Kovačević was also declared the Manager of the Year by CROMA, the Croatian Association of Managers and Entrepreneurs.

Company culture implies continuity in the implementation of operational and business principles. This means that team work, flexibility and adjustment to new market trends and corporate policies and creation of prerequisites for customers' business growth will continue to be key elements in the business strategy of Ericsson Nikola Tesla. The year 2005 should be the year of new opportunities for business growth. Domestic market, export markets and internal Ericsson market provide plenty of new opportunities and Ericsson Nikola Tesla will do its best to turn them to own advantage.

 

Objectives for 2005 include the following:

• to establish/strengthen business partnership with new/old customers in domestic/foreign markets, both in fixed and mobile telecommunications
• to take on new responsibilities and to strengthen the image of a responsible/reliable partner in the Ericsson Group
• business growth in domestic market including the acquisition of references in e-health as the first step towards export of solutions in e-systems
• to strengthen the position in system integration and communication services delivery
• export on 2004 level or slightly lower
• tto acquire the status of preferred supplier in information-communication (ICT) industry both in Croatia and in export markets

To accomplish the planned objectives for 2005 Ericsson Nikola Tesla will continue its adjustment to new market conditions. The company will also seek simpler and more effective ways of conducting operations in order to improve its cost efficiency. Additional intellectual capital shall be acquired through competence development, sharing of knowledge and the employment of new associates. Based on good business results the Supervisory Board of the company agreed with and approved of the recommendation by the Managing Director and forwarded to the General Assembly for consideration and decision-making a proposal for a payment of dividend to the amount of 18 HRK per share and on the redemption of share capital of the company to the amount of 100 HRK per share.

 

Communication Ericsson Nikola Tesla