I M P O R T A N T D A T E S I N 2 0 0 0Annual meeting of shareholders in Tampere, FinlandMay 16 (for more information see http://www.tpo.fi).

Interim reportsJanuary 1 – March 31 May 10January 1 – June 30 August 16January 1 – September 30 November 15

TO W A R D S C O N V E R G E N C E

“The current decade will be vitally important for contentdevelopment. A telecom operator needs Internet content inorder to win and retain interface users. A content producerneeds to attract customers via its network connections.

The information industry will inevitably form more networks,join together, seek mergers and partnerships. TPO’s strengthas a regional telecom operator lies in its strong existingcustomer access and its efficient management of customerrelationships.”

C O N T E N T S

Tampere Telephone Plc in brief 2

Organization 10

Managing director´s statement 12

The annual report of

the board of directors 14

Financial statements 18

Contacts 20

TPO produces and markets quality telecommunicationssolutions and services that promote interaction andcooperation between people, improve business prospectsfor enterprise and increase security in the surroundingsociety.

TPO´s relations with customers and stakeholders targetprofitability and durability to ensure competitiveness andrising value.

1882 – 1920 Limited company1920 – 1997 Co-operative company

November 18, 1997 Public limited companyMarch 17, 1998 Helsinki Exchanges, main list

C O M P A N Y H I S T O R Y

B U S I N E S S I D E A

T P O I N B R I E F

2

V A L U E S

Customer-orientationForward visionProfitabilityPersonnel motivationResponsible awareness

Tampere Telephone Plc is Finland´s second largest privatetelephone company and the leading telecommunicationsoperator in the Tampere region. TPO provides both atraditional telephone network and a cable tv network.

Nationwide, TPO forms a business cluster with HelsinkiTelephone Corporation (Elisa Communications) andKSP Group, which are its partners in e.g. product developmentprojects.

TPO is a technologically competitive, developing tele-communications company with a key position in Finland´snational network infrastructure. The company is also a strongplayer in multimedia and in exploiting the businessopportunities presented by the evolution of the Internet.The company´s strong balance sheet, its size and its centrallocation provide significant potential for expansion. TPO´soperations are in a sector that is growing rapidly and whereprofitability is expected to remain good.

T P O – L O C A L A N D G L O B A L

Tampere is the home city of Tampere Telephone.Tampere is the second largest regional centre in Finland

and the largest inland city in Scandinavia. Tampere with itsimmediate surroundings has a dynamic population of about440 000. The city itself has a population of 200 000.

Tampere was founded in 1779 on the bank of theTammerkoski rapids and it evolved into the most highlyindustrialized locality in Finland, during the 19th century.Tampere continues having modern and competitive industry,

but there is also a rapidly growing number of high technologyorganizations.

Information technology in the Tampere region has involvedunprejudiced co-operation between universities, researchcentres and enterprises, and TPO has played a notable role init. The co-operation and synergy between these actors turnscience and knowhow into new business. Thus, the Tampereregion offers competitive opportunities for investments.

T A M P E R E R E G I O N

3

HEINOLAVALKEA-

KOSKI

FORSSA LAHTI

PÄLKÄNE

TOIJALA

HÄMEENLINNA

RUOVESI

VAMMALA

VIRRAT

IKAA-LINEN

ORI-VESI

NOKIA

PADASJOKI

PARKANO MÄNTTÄ

LÄNGEL-MÄKI

TAMPERE

K E Y F I G U R E S

4

Tampere Telephone´s business operations cover the mostimportant telecommunications products and services directedat companies, corporations and residental customers. Theyinclude telephone and data communications, cable TV, Internet,multimedia, and a number of other telecommunicationsservices, and incorporate nationwide networks, local areanetworks, as well as intranet and extranet networks.

As a major player among the 46 local telephone companiesin Finland TPO makes an essential part of the national andinternational network infrastructure. TPO runs KaukoverkkoYsi´s main operating centre (national long-distance calls) andoperates the exchanges of Oy Radiolinja Ab (mobile tele-phony) and Finnet International Ltd (international calls). It alsomanages one of Finland´s five Finnet Centres, i.e. customernetwork operating centres.

F I E L D O F O P E R AT I O N

EUR 1999 1998 1997 1996 1995

Turnover (EUR 1000) 99 698 92 653 81 498 70 505 63 190

Operating profit (EUR 1000) 22 372 17 734 11 459 6 125 3 052

Return on investment (ROI) % 14.8% 13.2% 9.2% 5.4% 3.7%

Investments (EUR 1000) 39 592 35 639 22 128 23 943 19 593

Balance sheet final figure (EUR 1000) 227 997 190 537 182 607 178 216 169 831

Equity ratio % 71.2% 70.1% 66.7% 68.5% 69.1%

Earnings per share (EUR) 0.43 0.33 0.22 0.11 0.06

Dividend per share (EUR) 0.20 *) 0.12 0.04

FIM 1999 1998 1997 1996 1995

Turnover (FIM 1000) 592 776 550 890 484 565 419 202 375 712

Operating profit (FIM 1000) 133 017 105 439 68 130 36 415 18 144

Return on investment (ROI) % 14.8% 13.2% 9.2% 5.4% 3.7%

Investments (FIM 1000) 235 401 211 900 131 567 142 360 116 497

Balance sheet final figure (FIM 1000) 1 355 607 1 132 883 1 085 729 1 059 624 1 009 7711

Equity ratio % 71.2% 70.1% 66.7% 68.5% 69.1%

Earnings per share (FIM) 2,57 1,97 1,31 0,66 0,37

Dividend per share (FIM) 1,20*) 0,70 0,25

1999 1998 1997 1996 1995

Average personnel 833 813 789 785 785

Fixed telephone connections 172 821 173 442 171901 169 219 168 159

Cable TV connections 69 123 66 733 64 708 62 597 60 442

*) Board’s proposal

*) Board’s proposal

Through co-operation with it´spartners, TPO seeks synergy evenin new business areas, improvedcompetitive positions in the marketand increased value for thecompanies.

G R O U P S T R U C T U R E

Sales and Marketing cover nearly every form oftelecommunications that a private household or acompany should need. For private customers theseinclude basic telephone services with supplementaryoptions, Internet services, ISDN and ADSL connectionsfor broader data transmission needs. For companiesTPO offers telecommunications packages consisting ofcall services, data transmission, security services, Internetservices and a wide range of other services.

Telecommunication services and cable network servicesbuild, operate and maintain TPO´s telecommunicationnetworks. These units also have an important role in theconstruction, operation and management of thenationwide networks of Kaukoverkko Ysi Oy and FinnetInternational Ltd and the mobile phone network ofOy Radiolinja Ab.

B U S I N E S S U N I T S

MINORITY HOLDINGS

ASSOCIATED UNDERTAKINGS

SUBSIDIARIES

5

Computec Oy

Oy MediaTampere Ltd

Oy Omnitele Ab

Fonetic Oy

City TV OyPirkanmaa

KSP Group

Skycom Oy

FinnetInternational Ltd

KaukoverkkoYsi Oy

Oy Radiolinja Ab

Votek Oy

Tampereen Tieto-verkko Oy (TTV)

TAMPERETELEPHONE

PLC

PARENTCOMPANY

Cable TV operator

Value added servicesfor telecom operators

Digi-TV

Service Provider

Regional telecomcompany

Regional television

Mobile operator

Multimedia

Long-distance operator

Building control and datatransmission systems

International operator

R & D Consulting

As a network operator TPO´s development projectsrelate to increasing the efficiency and speed of thetelephone network, expanding it and harnessing itfor Internet use. In TPO´s operating area, networkswitching technology has been completely digitalsince 1997. Internet traffic already accounts for 30percent of current traffic on the telephone networkand is increasing.

As well as traditional personal and systemsconnections, TPO´s telephone network offers ISDN,which is already fairly familiar, and Internet and tele-work services based on ADSL. To a large extentADSL is a completely new technology but it utilizesthe fixed connections of the traditional telephonenetwork and offers customers broadband access thatis many tens of times faster than earlier alternatives.

The InternetTPO is participating on a broad front in exploitingthe business opportunities created by the Internet.It is developing Internet-based services in its capacityboth as a network operator (network development,expansion, broadband connections) and as a serviceoperator (network and Internet connections,interface, content supply with partners). TPO´s aimis to offer its customers quality connections andrelated services. The home and business Internetconnections developed by TPO have achievedmarket leadership in the Tampere region, with amarket share of about 30 %.

A mult i -network futureIn the future TPO services will be accessible from acomputer, via a television, or from a fixed or mobiletelephone. The user will be able to obtain fixedconnections services, wireless connection and theInternet and its applications, all from the samesupplier. This will be done by using multiple networkssuch as the telephone network, the broadbandnetwork and the third-generation mobilecommunications network, all built by TPO or itspartners.

F U T U R E O U T L O O K VO T E K O Y D E V E L O P S V A

6

Votek Oy at the Pori Telecommunication CompetenceCenter is a pioneer and market leader in Finland,specializing in automated Internet and telephone services,i.e. Unified Messaging services for tele operators, customerservice organizations and media companies. Tampere Tele-phone became the company´s major shareholder inDecember 1999.

The consolidated turnover of Votek and its fully-ownedsubsidiary Fonetic Oy, which markets electronic market-place services, will reach FIM 14 million this year, half ofthis from exports. Votek, which has rapidly expanded itsstaff, employed about 30 designers at the beginning of2000, but is expected to raise the figure to nearly 50during the year.

TPO ensuresgrowthVotek started to cooperate with Tampere Telephone aboutten years ago. Home answering and message services andautomatic wake-up and reminder services are examplesof products developed by Votek which have, through TPOand other Finnet companies, become important additionalservices for every phone user and corporate customer.

“TPO is the best possible partner for us because ithas emphasized value-added network services and is apioneer in this area. TPO has sector-specific knowhowand an important interface with customers. On the otherhand, at Votek we have our own service development and

Votek Oy´s first product, an automatic classified ads recep-

tion system for newspapers, came onto the market in the

early 1990s. Since then, systems for electronic newspapers

and electronic commerce have been delivered to all the

large newspapers in Finland and some in Estonia, and pilot

systems have also been sold to Sweden and the UK.

Votek started to cooperate with TPO and other Finnet

companies in the development of value-added services in

the early 1990s. This area includes home answering and

various message services, automatic wake-up and reminder

services, and the new MultiCall reachability service, in

which the subscriber needs only one telephone number.

When this number is called, the Votek system redirects the

call to ring simultaneously at one or several fixed network

or mobile network numbers. If none of the numbers

Combined services takingover the sector

A L U E - A D D E D N E T W O R K S E R V I C E S

production environment for the new-generation services.Our strength lies in developing sector-specific services,”says Niku Oravainen, the founder of Votek Oy. He pointsout that Votek has now reached a phase of developmentat which sufficient growth is impossible with the oldownership base relative to the company´s marketpotential. TPO will now ensure the necessary growthpotential on both the domestic and foreign markets.

Towards EuropeThe European market for automatic phone services isexpected to rise to EUR 10 billion by 2002. According toNiku Oravainen, European tele operators are seeking newpartners suitable for outsourcing their services. Votek´sstrength lies in its strong sector-specific knowhow, whichwill be useful in Europe. Its strategy is networking, and thecompany has already signed a partnership agreement onEuropean marketing with Hewlett Packard.

answers, the call can be redirected to an answering service

that receives the message and forwards a short message

to a mobile phone. The service thus replaces phone call

transfers and a number of separate answering services.

Votek´s subsidiary Fonetic Oy produces e-commerce

services. Fonetic has also developed a phone answering

service for health centres and medical centres which is

already used by some 20 health centres in Finland. New

services are also being developed for the health care sector.

The sector will next witness the arrival of combined

services which enable users to utilize the services of the

telephone network and the Internet together. The service

will function from several interfaces – a terminal, mobile

phone or fixed connection – but the user will need only

one service contract.

7

8

large owners – the parent company TPO and Alma Media– form a strong cluster with both the necessary technologyand the professional skills for producing new kinds ofservice.

Production ofprogrammes wideningDigital TV will considerably increase TTV´s productiveoperations. The outlook for local programme productionlooks good, as TTV is already engaged in fairly large-scale TV operations. It produces news for MTV3, andprogrammes ranging from sports to TV plays for differentchannels. TTV´s company Take One is a professionalproducer of TV commercials, company videos, computergraphics and other audio-visual materials. At its premises

L o c a l n e w s a n d n e w s e r v i c e s

Tampereen Tietoverkko Oy (TTV) is preparing to begindigital TV transmissions via cable TV in 2000. The followingyear will witness a start to transmissions by CityTV Pirkan-maa, which was granted a licence for local digital TVtransmissions by the Government in 1999. TTV owns 40per cent of the company.

“In the first phase, digital TV will offer consumers morelocal programming. However, digitality also enables thedevelopment of totally new interactive services that exploitthe full potential of the Internet and TV. Such servicesinclude a range of ordering, trading and informationservices,” says Matti Tulin, Managing Director of Tampe-reen Tietoverkko Oy.

According to Tulin, digital TV now calls for solid invest-ment and construction for the future. TTV and both of its

TA M P E R E E N T I E T O V E R K K O T O B E G I N D I G I T

T H E G R O W I N G T E L E C O M M U N I C A T I O N S S E

“Telecom companies – like technology companies ingeneral – are attracting a lot of interest among investorsat the moment. Telecom operators are regarded as growthcompanies, implying that this interest will continue,” saysVisa Manninen, an analyst at the Helsinki office of theinvestment bank D. Carnegie Ab.

Since the deregulation of the market, there have beenrapid changes in the telecommunications sector. We arenow at a phase where operators are seeking new growthareas, technologies and products through corporateacquisitions.

“Seeking advantages through economies of scale bringsoperators together. Mergers are designed to save costsand free resources for product development, and sizeis thus a clear advantage. They sustain investor interest,of course, but there are other reasons as well.”

“Investors value technological development and followclosely how operators are doing in growing developmentareas such as data and Internet services.”

According to Manninen, the importance of datatransmission and various Internet services will increase inboth fixed line and mobile telephony. New services can beprovided efficiently in telephone networks because phoneshave the important advantage of working in both directions.

“It will also be interesting to see who will end up owningthe Internet marketplaces, the shopping centres of thefuture. An operator providing such a portal can charge thecompanies represented there for the service,” Manninenpoints out.

Global and specialist companies side by sideAccording to Manninen, global operators will also graduallystart appearing on the market through mergers, side byside with small specialized companies whose strengthsinclude close connections with customers and thus goodopportunities to market new services.

“Regular invoicing is important for marketing purposes,”Manninen points out.

“Tampere Telephone has focused strongly on developingits Internet services. It also runs a cable TV network, whichenables expansion of other electronic services. Net-working with various service providers brings a competitiveadvantage. The company´s strengths also include closecustomer relationships with the companies and households

Telecom companies areinteresting investment targetswhich attract both large fundsand small investors, says VisaManninen of D. Carnegie Abin Finland. Carnegie is aninvestment bank independentof all other banks andfinancial groupings andhas offices in Helsinki,Stockholm, Copenhagen,Oslo, Luxembourg, Londonand New York.

C

on Hallituskatu, in the centre of Tampere, TTV has botha professional production team and well-equippedproduction facilities with TV studios.

70,000 householdswill soon have cableTPO has been involved in the development of cable TVoperations since the founding of Tampereen Tietoverkkoin 1973. Construction of the network began in 1983, andTPO became the majority shareholder in TTV at the endof the decade.

The last few years have been a time of rapid growth.The number of cable TV connections in households willexceed 70,000 in early 2000, and TTV´s network is nowthe second largest independent cable network in Finland.

TTV has been testing use of the cablenetwork for Internet services in Tampere.Decisions will be made in the spring of 2000on how large-scale the provision of Internetservices via cable TV will be. In any case,Internet services are expanding rapidly.According to Matti Tulin, TPO and TTV willalso be able to produce other attractiveservices for consumers in the future.

A L T V T R A N S M I S S I O N S

Managing DirectorMatti Tulin.

T O R A T T R A C T S I N V E S T O R S

in its operating area.”According to Manninen, it is important for investors to

know the companies they invest in. In this respect, beinglocal is an advantage.

Telecommunication technologypioneers attract interest“It´ll be interesting to see what kind of cooperation clustersform in Finland. The roles of Helsinki Telephone Corpora-tion, Tampere Telephone Plc and local telephone companiesare changing constantly. Mobile phone networks arecurrently going through a phase of restructuring,” saysManninen and points to the fact that, in intra-Group phonecompanies, the owners want to measure the value of theirholdings in new market situations. Changes in ownershipstructure will raise the number of mergers in the future,too.

There are several large telecommunications companiesamong the 20 most valuable companies in Europe. Amongothers sources these attract money from investment funds,which are indeed interested in technology shares in general.

According to Manninen, there is a rule in the investmentmarket: large investors invest in large companies, smallones in smaller companies. One key factor is liquidity, inorder to be able to buy and sell shares quickly. There arefewer investors if the volume of trading is not large enough.

“The pioneering Finnish tele-technology companies seemto be attracting growing investor interest, and Finnish

companies are apparently more attractive than smallcompanies elsewhere.”

According to Manninen, small investors in Finland havediscovered technology shares, a fact witnessed by thepopularity of new share issues. Even the trend in interestrates is increasingly channelling private individuals´ moneyinto the share market.

According to Manninen, technology company risks derivemainly from the possibility that growth and profitabilitywill not in fact be found in all the new areas. “Overall, therisk profile of technology companies is higher, and theyare more sensitive to interest rate fluctuations, becauserate hikes hit hardest those companies with the highestexpected future profits,” he explains.

Internet an important source of information“Nowadays, the Internet is the most important informationchannel for investors. It provides both general informationon the market, and all the announcements and otherrelevant material from listed companies. The web pages ofHelsinki Exchanges and listed companies get informationto investors quickly and easily.”

Analyst Visa Manninen advises investors to familiarizethemselves with the material published by the Ministry ofTransport and Communications, which is also available viathe Internet. International research organizations alsoproduce interesting reports, some of which are availableover the Internet for free.

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TA M P E R E T E L E P H O N E P L C

Owners annualgeneral meeting

Sales andMarketing

ORGANIZATION1.1.2000

Board ofrepresentatives

Board

CEOErkki Ripatti

DirectorJukka Yrjölä

TelecommunicationsServicesDirector

Heikki Untola

Cable NetworkServicesDirector

Jouko Ala-Rantala

Finance andAdministrationDirector, Vice CEOHannu-Pekka Ihatsu

BusinessDevelopment

DirectorVeli-Matti Viitanen

Erkki Ripatti

Jukka YrjöläHannu-Pekka Ihatsu

Heikki Untola

Mikkola KaijaAssistantInformation for investorshttp://www.tpo.fi

11

M A I N S H A R E H O L D E R S

20 MAJOR SHAREHOLDERS ON DECEMBER 31, 1999

%

Helsinki Telephone plc 33.22

Merita Bank plc (nominee) 2.26

Pohjola Group Insurance Corp. 1.06

City of Tampere 1.01

Life Assurance Company Henki-Sampo 0.66

Merita Plc Pension Foundation 0.50

Fennia Mutual Pension Insurance Company 0.41

TPO Pension Foundation 0.41

Insurance Corp. Aurum 0.37

Industrial Insurance Ltd 0.37

Church’s Central Fund 0.28

Suomi Mutual Life Assurance Company 0.27

Pension Insurance Company Ilmarinen 0.26

Investment Fund Aktia Capital 0.26

Skandinaviska Enskilda Banken 0.25

Veljesten Viestintä Ltd 0.24

Veikko Laine Ltd 0.23

Evangelical-Lutheran parish of Tampere 0.20

Helsinki Central Depository (nominee) 0.19

Finland’s actors’ association’s pension trust 0.19

Shares registered under a nominee accountand foreign ownership, total 2.90 %

Number of owners 59.963

Jouko Ala-Rantala Veli-Matti Viitanen

M A N A G I N G D I R E C T O R ’ S S TAT E M E N T

General economic growth continuedin Finland in 1999. Private consumptionremained stable, thanks to rising realincomes. Finnish companies expect towitness even better economic trendsin 2000. Export are picking up andhome market demand is increasing.An important basis for these encouragingprospects is the moderate wage settle-ments made, which will maintain compet-itiveness and corporate profitability.

The rapid expansion of telecommunica-tions and tele-technology has continuedworldwide. There have been mergersbetween huge enterprises, but also somebreak-ups. Amid increasing convergence,partners for the new millennium arebeing sought among various operators.So far, during the first phase of theinformation society, the main focus hasbeen on information technology. Duringthe next decade, the emphasis will be oncontent development. Terminals andsystems will naturally continue todevelop, but service packages will takeshape on an individual basis, to meet userneeds. A technology orientation will giveway to a market orientation.

New EU Directives on telecomoperations will probably be drawn up in2000–2002, meaning that new legislationwill take effect in 2003. The changestaking place in the EU´s policy ontelecommunications will affect theoperations of telecom companies longbefore that, however.

The Finnish authorities, too, havestarted to study matters such as thepricing of leased lines, the subscriberconnections and national and inter-national roaming. The Office of FreeCompetition, for instance, is particularlyactive in monitoring the operations oftelecom companies with substantialmarket prominence.

One mark of convergence was theestablishment in Finland at the beginningof 2000 of the Finnish Federation forCommunications and Teleinformatics,which all the listed telecom operatorsjoined. The division of labour in therepresentation of interests betweenFinnet and the new association is stillunder discussion.

12

Labour market matters form no partof its operations as yet.

In terms of their business operations,the Finnet Companies are dividing intotwo or more clusters. This developmentis most obvious in the mobile business,where the 3G/2G grouping has nowbeen granted a nationwide operatingpermit for GSM operations thatcompetes with Oy Radiolinja Ab.

Results via cooperationCooperation between Helsinki Tele-phone Corporation (HTC) and itsstrategic partners will doubtless yieldgood results within the year. In ownershipterms, the HTC/TPO/KSP group becamemore tightly knit during the year whenTampere Telephone increased its holdingin Keski-Suomen Puhelin Oyj to 32.9 percent, and Helsinki Telephone Corporationits holding in TPO to 33.22 per cent.

On the other hand, in spring TPO sold

its holding in Oy Datatie Ab and someof its Oy Radiolinja Ab shares, sincewhich its holding in the latter has been4.4 per cent of the A shares.

At the end of the year TPO bought amajority holding (65.3%) in the Poritechnology company Votek Oy, whichthus became a TPO subsidiary. Votek Oyproduces the added value servicesneeded by teleoperators. Votek´s fullyowned subsidiary Fonetic Oy is a servicecompany and service tester. Votek nowplans to expand beyond its home marketand to go international with suitablepartners.

Thanks to careful preparations, TPOsuffered no Y2K problems.

For TPO, the service level and businesstargets set for 1999 were achieveddespite new official regulations andever tighter competition. Consolidated

to generate short-term ‘quick profits’ forinvestors, but rather to gradually increaseshare value through solid performance.New IT and technology shares seem tohave bewitched investors, despite thedistinctly weak profit record of thecompanies concerned. Because of thefuture gains so confidently expected,market values and P/E figures for thesecompanies are incomprehensibly high.I believe that the undervalued TPO shareprice will eventually reach its proper levelrelative to profits and the company´sfuture potential.

In the autumn, the Financial Supervisionauthority initiated police enquiriesbecause of information received by TPOon April 30 concerning a public purchasebid for over 50 per cent of the TPOshares. Despite our efforts, we wereunable to find anything out about theFBS Investment Group which put inthe offer. At the end of May, however,we were informed that the Group waswithdrawing its bid for financial reasons.

operating profit was 22.4 per cent ofturnover and earnings per share FIM 2.57(+30.5%). Nearly FIM 110 million of theinvestments made went into shares intelecommunications and technologycompanies. The market value of sharesincluded in TPO´s investments or valueof unlisted shares as based on the lastknown trades totals over FIM 500 millionmore than their book value.

TPO´s operating principle is to produceand market high-quality telecommunica-tions solutions and services. As a net-work and service operator, it handles itscustomer relations profitably and on along-term basis in order to safeguard itscompetitiveness and ensures that thecompany´s market value rises. Despitegood profit performance in accordancewith its targets, the price of the TPOshare did not rise during the year to thesame degree as other companies in thesame field. The company has never aimed

TPO has its own Internet service forhouseholds and companies which can beaccessed by modem, ISDN or the fastnew fixed ADSL link. On the other hand,we are also an Oy Radiolinja Ab share-holder and strategic partner which canexploit the synergy benefits of both afixed and a mobile network. Newbusiness expansion opportunities willbe devised with our new subsidiary,Votek Oy, among others.

Through our subsidiary TampereenTietoverkko Oy, we have our sights setboth on the digital TV future and on fastbroadband Internet services via cable TVnetworks. This will supplement the Inter-net service offered via the normal tele-phone system. Finland plans to introducedigital TV transmissions this year.To access digital TV content, consumersneed a new user interface with TV, multi-media and Internet features. A nationalresearch project is currently engaged indeveloping a simple, efficient interface,interactive services and the technicalservice platform needed for them.

Content forinformation highwaysThe current decade will be vitallyimportant for content development.A telecom operator needs Internetcontent in order to win and retain inter-face users. A content producer needsto attract customers via its networkconnections. The customer wants servicepackages that include different types ofconnection (fixed/mobile/digital TV),combined with a wide range of content.The information industry will inevitablyform more networks, seek mergers andpartnerships, find additional resourcesand new business through corporateacquisitions, join together to formportals, etc. etc. TPO´s strength as aregional telecom operator lies in its strongexisting customer access and its efficientmanagement of customer relationships.

In the Tampere region, the strategy is todevelop an innovative milieu specificallyfor information and communicationstechnology. Close cooperation betweenresearch centres, universities and colleges,and commercial companies will guaranteethat innovations are converted into solidbusiness.

Tampere also has strong local contentknow-how; witness, for instance, thecooperation within the Oy MediaTampere Ltd multimedia company. TPO isworking with various operators to acquireboth national and regional content forinformation highways. During spring 2000,for instance, a regional Internet portal isto be launched.

There is still rather little eBusiness inFinland, though relative to population weare a world leader in terms of Internetuse. Services have actually been over-shadowed by technology here. However,many suspicions and misconceptions havebeen successfully banished recently, andthere is growing interest in such newservices. eBusiness comprises both thesale of goods and services over the Inter-net and information transfer betweencompanies and organizations. Mastery ofcustomer information and client relation-ships is then an increasingly crucialcompetitive element. The strategic powerof eBusiness lies in its customer database.The legal framework of eBusiness hasalready been laid down in draft EUDirectives.

eBusiness will be a component in TPO´sestablished operations and Internetservices, generating added value for ourcustomers and a rise in share value forour shareholders. We have several Inter-net product packages that give us a goodstarting point for trading on the net:household and corporate Internet, Info-Circle, Lippupiste, and others. TPO´selectronic marketplaces will be openingfrom spring this year for both homes andcompanies.

I should like to express my warm thanksto our shareholders, customers andpartners for our collaboration in 1999.I trust that our confidential relationshipswill continue and take on many interestingchallenges in the new millennium ofinformation and experiences.

Thanks and appreciation for last year´sgood results are also due to the wholeTPO team. I believe they still have plentyof innovative energy left for the years tocome.

Erkki Ripatti

13

R E P O R T B Y T H E B O A R D O F D I R E C T

In June, the Ministry of Transport andCommunications granted new licencesfor digital TV. A regional licence wasgranted to City-TV Oy in Pirkanmaa,a company in which a subsidiary ofTampere Telephone Plc, TampereenTietoverkko, has a 40 per cent holding.

New regulations on the interconnec-tion of telecommunications networkstook effect on May 1, 1999. A Ministry ofTransport and Communications decisionchanged the pricing structure for trafficbetween networks.

Growth in the telecommunicationsmarket continued strong. Internet traffic,especially, is expanding faster thantraffic on average. The growth in mobilephone connections slowed down on theprevious year. Penetration was about65 per cent at the end of the year. Themarket shares of Tampere Telephone Plchave remained about the same.

Group structure andchanges in ownershipTampere Telephone Plc increased itsholding in Keski-Suomen Puhelin Oyjby purchasing 361,500 shares in thecompany on March 18, 1999, thus gaininga holding of 32.9 per cent and 27.5 per

Developments inthe operating environmentThe information technology sectorhas been going through rapid changeboth internationally and nationally. Fastdevelopment is expected to continue,and this has greatly boosted the marketvalue of companies in the sector. Freecompetition and response to futurechallenges has created new internationaland national corporations, and will go ondoing so.

The restructuring of the telephonesector continued all year. In line witha joint agreement, Tampere TelephonePlc sold 180 of its Radiolinja Oy seriesA shares to Helsinki Telephone Corpo-ration, increasing the latter´s holding inRadiolinja to about 67 per cent. Thecompany also sold 45 of its Oy DatatieAb shares to Helsinki Telephone Corpo-ration, whose holding in Datatie thusrose to over 60 per cent. Tampere Tele-phone Plc increased its holding in Keski-Suomen Puhelin Oyj to 32.9 per cent.

In March, the Ministry of Transportand Communications granted newlicences for third-generation mobilephone networks. Tampere TelephonePlc´s application for a regional UMTSlicence was unsuccessful. In mobilecommunication networks, TPO willcontinue to cooperate with Radiolinja.

95 96 97 98 99

600

500

400

300

200

100

0

16

14

12

InvestmentsReturn on Investment(ROI)%

240

210

180

Turnover

FIM million

FIM million

14

95 96 97 98 9995 96 97 98 99

10

8

6

4

2

0

150

120

90

60

30

0

O R S

Group consists of the parent companyTampere Telephone Plc, the subsidiariesTampereen Tietoverkko Oyj, with a 64per cent holding, and Votek Oy, with 65.3per cent, and the associated undertakingsKeski-Suomen Puhelin Oyj, with a 32.9per cent holding, and Skycom Oy (TV-Tampere), with 20 per cent.

Net salesConsolidated net sales totalled FIM 592.8million (FIM 550.9 million in 1998), anincrease of 7.6 per cent. Net sales by theparent company, Tampere Telephone Plc,totalled FIM 570.9 million and otheroperating income FIM 0.9 million. Thegrowth in network rentals (21.4%),annual fees (14.2%) and other salesincome (16.5%) was greater than theaverage growth in net sales as a whole.Traffic income remained at the previousyear´s level. Internet business growth was

67 per cent, and such traffic accountedfor about a third of telephone time. Thenumber of telephone connections was172,821 (173,442) and the number ofcable TV connections 69,123 (66,733)at the end of the year.

ReturnConsolidated operating profit amountedto FIM 133.0 million (FIM 105.4 million),up 26.2 per cent. Consolidated profitbefore extraordinary items and taxeswas FIM 143.9 million (FIM 111.0 million).A sales profit of FIM 68.5 million fromthe sale of Oy Radiolinja Ab and OyDatatie Ab shares was entered underextraordinary income. Profit for thefinancial period was FIM 152.1 million(FIM 68.2 million).

Investmentsand financingConsolidated investment in fixed assetstotalled FIM 235.4 million, compared withFIM 211.9 million the year before. Parentcompany investments totalled FIM 225.1million (FIM 220.2 million). Investment inthe transmission network amounted toFIM 67.1 million, in machinery and equip-ment to FIM 37.5 million and in real estateto FIM 6.0 million. Other investmenttotalled FIM 114.5 million. All investmentswere financed out of income. The Group´sfinancial status and liquidity remainedgood, and the equity ratio was 71.2 percent (70.1%) on December 31, 1999.

cent of the voting rights. Tampere Tele-phone Plc also subscribed 19.5 per centof the shares in the recently founded OyTampere Media Ltd. In December 1999,Tampere Telephone Plc purchased 65.3per cent of the technology companyVotek Oy shares. Tampere Telephone

95 96 97 98 99

140130120110100

908070605040302010

0

Profit after depreciation

Dividend per Share

FIM

Earnings per Share(EPS)

FIM3

2,5

2

1,5

FIM million

1,4

1,2

1

0,8

0,6

15

1

0,5

097 98 9995 96 97 98 99

0,4

0,2

0

Boards´proposal

REPORT BY THE BOARD OF DIRECTORS...

as Chairman of the Board in 1999. Othermembers of the Board of Directors wereTimo Sasi (Vice Chairman), Riitta Jakara,Esko Jouppi, Matti Länsiö, Matti Matt-heiszen and Pirjo Rauhala. On November23, 1999 the Board of Representativesre-elected Timo Sasi, who was in turnto resign, as a member of the Board andreplaced Esko Jouppi, who was also inturn to resign, with Reijo Hautala.

The Board of Representativesconvened twice during 1999. The Boardconvened 12 times.

Implementationof the Y2K projectTampere Telephone Plc´s Y2K projectwas carried out as planned without anyproblems. Transfer technology, customerequipment and systems, and informationmanagement systems functionedsmoothly.

DevelopmentTampere Telephone Plc´s developmentprojects as a network operator wererelated to increasing the efficiency andspeed of the telephone network,expanding the network and harnessingthe network for Internet use. As anexample, Tampere Telephone Plc atthe beginning of October launched anInternet connection based on ADSLtechnology.

Tampere Telephone Plc utilizes thebusiness opportunities offered by theInternet as both a network operator anda service operator. In producing Inter-net content, Tampere Telephone Plccooperates with several producers.

One of the most promising trendsrelated to the Internet contentcomprises network games, wherethe company has gained a large amountof users. The service has just beenlaunched, and will be developed furtheron a national basis.

One of the aims of developmentwork is to make Tampere Telephoneplc services available in the future viacomputer, TV, fixed connection telephoneor mobile phone. The user will then getthe services of a fixed connection, wire-less connections and the Internet andapplications all from the same serviceprovider. This can be done by utilizingseveral networks, such as the telephonenetwork, the broadband network andthe third-generation mobile phone net-work. Tampere Telephone is also involvedin four development programmescoordinated by Oy Omnitele Ab.

The parent company invested FIM 13.7million in research and development.

PersonnelThe average personnel figure duringthe financial period was 833 (813).Permanent full-time employeesnumbered 729 on December 31, 1999.

Future prospectsGrowth in the telecommunicationsmarket is expected to continue buoyantin 2000. Expansion is fastest in the Inter-net, mobile phone and value addedservices business sectors. Further rapidgrowth in Internet business presupposesan increase in e-commerce. TampereTelephone Plc is engaged in developingand launching such operations. Nationaland international development and the

Shares and ownershipA total of 12,232,129 Tampere Telephoneshares changed hands on Helsinki Ex-changes, representing 30.6 per cent ofthe average number. The total value oftransactions was FIM 554.7 million.The lowest price paid was FIM 36.03 pershare and the highest FIM 57.08, and theclosing price was FIM 44.89. The averageprice was FIM 45.37. The number ofshares was 40,222,490 on December 31,1999.

According to the book-entry register,the number of owners was 59,963 atyear-end. The largest shareholder isHelsinki Telephone Plc, with a 33.2 percent holding. Tampereen Tietoverkkoowns 4,250 Tampere Puhelin Plc shares.

AdministrationThe statutory annual meeting of share-holders was held on May 18, 1999. Atthe annual meeting of shareholders, thefollowing 25 people were elected asmembers of the Board of Representa-tives as of January 1, 2000: Aaltonen Outi,Antila Timo, Graeffe Gunnar, HautalaReijo, Ilomäki Aimo, Isokangas Erkki, JarvaTapani, Juntunen Raimo, Kantalainen Kari,Karinen Anne, Lahtinen Timo, LehtonenArja, Lilja Markku, Manninen Matti, Nord-man Kurt, Paalanen Antero, Pernu Teuvo,Petäkoski-Hult Tuula, Rahikkala Markku,Salisma Seppo, Salminen Seppo, SoljaErkki, Vainioranta Jouko, Valto Hannu andVuorensola Markku. SVH Pricewater-house Coopers Oy was elected as thecompany auditor, with Hannu Pellinenand Henrik Sormunen, Authorized PublicAccountants, as responsible auditors. JyriLeivo, Approved Accountant, was electedas deputy auditor. Paavo Luokkala acted

16

marketing of added value services arehandled in cooperation with the subsidi-ary Votek Oy. A regional Internet portalis being developed jointly with otherOy Media Tampere Ltd shareholders.The role of Tampere Telephone Plc isto act as a telecommunications and ISPoperator.

Net sales are expected to grow some6 per cent without any corporateacquisitions, and operating profit toremain on the 1999 level.

Proposal ofthe BoardThe distributable shareholders´ equity ofthe parent company is FIM 251.9 million.The distributable shareholders´ equityof the Group is FIM 254.8 million. TheBoard proposes to the meeting of share-holders that a dividend of FIM 1.20 pershare be distributed.

As of March 1, 2000, Tampere Tele-phone Plc will comply with the ‘Guide-lines for Insiders’ issued by HelsinkiExchanges.

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C O N S O L I D AT E D B A L A N C E S H E E T

C O N S O L I D AT E D I N C O M E S TAT E M E N T1999 1998 1999 1998

FIM 1000 FIM 1000 EUR 1000 EUR 1000

Turnover 592 776 550 890 99 698 92 653

Equity earnings in associated companies 7 477 – 977 1 258 – 164Other operating income 1 361 1 773 229 298

Materials and services 136 913 137 414 23 027 23 111Personnel expenses 166 272 149 600 27 956 25 161Depreciation 121 848 117 373 20 493 19 741Other operating expenses 43 564 41 860 7 327 7 040

Operating profit 133 017 105 439 22 372 17 734

Financial income and expenses 10 895 5 565 1 832 936

Profit before extraordinary items 143 912 111 004 24 204 18 670

Extraordinary items 68 523 – 12 539 11 525 – 2 109

Profit before taxes 212 435 98 465 35 729 16 561

Income taxes – 59 209 – 29 583 – 9 958 – 4 976

Minority interests – 1 152 – 685 – 194 – 115

Profit for the year 152 074 68 197 25 577 11 470

December 31, 1999 December 31, 1998 December 31, 1999 December 31, 1998FIM 1000 FIM 1000 EUR 1000 EUR 1000

ASSETS

Fixed assetsIntangible assets 15 949 12 786 2 682 2 150Goodwill on consolidation 19 953 112 3 356 19Tangible assets 713 186 718 182 119 949 120 790Shares and holdings

Shares in associated companies 134 930 80 978 22 694 13 620Other holdings 65 664 200 594 24 071 105 049 11 044 33 737 4 048 17 668

Fixed assets total 949 682 836 129 159 725 140 627

Current assetsInventories 24 485 25 049 4 118 4 213Short-term receivables 143 239 129 310 24 091 21 748Marketable securities 33 031 53 979 5 555 9 079Cash and cash equivalents 205 170 88 416 34 507 14 871

Current assets total 405 925 296 754 68 272 49 910

1 355 607 1 132 883 227 997 190 537

LIABILITIES

Shareholders’ equityShare capital 402 225 392 625 67 649 66 035Share premium fund 43 627 6 187 7 338 1 041Reserve fund 84 970 84 970 14 291 14 291Profit from preceding years 272 081 232 037 45 761 39 026Profit for the year 152 074 68 197 25 577 11 470

954 977 784 016 160 616 131 862

Subordinated loan 1 000 168

Minority interest 8 600 7 147 1 446 1 202

LiabilitiesDeferred tax liability 69 185 71 787 11 636 12 074Long-term liabilities 150 964 148 800 25 390 25 026Short-term liabilities 170 881 121 133 28 740 20 373

391 030 341 720 65 767 57 473

1 355 607 1 132 883 227 997 190 537

19

C O N S O L I D AT E D F U N D S S TAT E M E N T1999 1998 1999 1998

FIM 1000 FIM 1000 EUR 1000 EUR 1000

Sources of funds

Income financingNet operating income 133 017 105 439 22 372 17 734Depreciation 121 848 117 373 20 493 19 741Financing income and expenses 10 895 5 565 1 832 936Extraordinary income and expenses 68 523 – 12 539 11 525 – 2 109Income taxes – 59 209 – 29 583 – 9 958 – 4 976

275 074 186 255 46 264 31 326Capital financing

Change in shareholders’ equity 47 040 7 819 7 912 1 315Change in minority interests 301 51Change in subordinated loan 1 000 168Change in long-term liabilities 2 509 422

50 850 7 819 8 552 1 315

Total 325 924 194 074 54 816 32 641

Usage of fund

Payment of dividends 28 153 9 774 4 735 1 644Investments in fixed assets 235 401 211 900 39 592 35 639Decrease in long-term liabilities 14 385 2 419

Total 263 554 236 059 44 327 39 702

Change in networking capital Increase + / Decrease – 62 370 – 41 985 10 490 – 7 061

Specification of change innetworking capital

Inventories and liquid assets 109 171 – 47 366 18 361 – 7 966Short-term liabilities – 49 403 7 949 – 8 309 1 337Deferred tax liabilities 2 602 – 2 568 438 – 432

62 370 – 41 985 10 490 – 7 061

Tampere Telephone PlcNäsilinnankatu 41, P.O.Box 138

FIN-33101 Tampere, Finland

Telephone +358 3 224 4111Telefax +358 3 224 4389

E-mail tpo@tpo.fiInternet http://www.tpo.fi