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Q1 2007 results

ATM S.A. has presented the Company’s results in the 1st quarter of 2007. In the consolidated reports of the ATM Capital Group, the income from sales was PLN 38.7 million (an increase by 48% compared to the previous year) and the net loss was over PLN 2 million. For ATM S.A. alone, the income from sales exceeded PLN 25.9 million (a decrease by 1% compared to the previous year) and the net loss was almost PLN 1.8 million.

The ATM Capital Group, Q1 2007:

  • income: PLN 38.7 million
  • net loss: PLN 2 million

ATM S.A., Q1 2007:

  • income: PLN 25.9 million
  • net loss: PLN 1.8 million

The Executive Board assesses the quarter as moderately successful, but maintains the yearly result forecast. According to the Executive Board, the reasons of the poorer results include the clearly distinguishable effect of a consistently poor first quarter, the prolonging negotiations on contracts and their delayed implementation, and the increased costs due to the company’s preparation for executing the ambitious plans for 2007. Nevertheless, the Executive Board believes, on the basis of information on the contracts being concluded, that similarly as in the previous years, this year will be closed with an increase of income and profit from core operations at the level of 20-30%. The most interesting contracts entered into in the 1st quarter of this year include:

  • in the financial sector:
    • agreement with an unrevealed financial institution on telecommunications services (PLN 2.9 million);
    • agreement with BRE S.A. on telecommunications services (PLN 1 million)
  • in the telecommunications sector:
    • agreement with an unrevealed operator (PLN 5.1 million);
    • agreement with an unrevealed operator (PLN 1.5 million);
    • agreement with Gadu-Gadu (PLN 1 million);
  • in the local government sector:
    • agreement between KLK and Sputnik Software, ATM subsidiaries, on the one side and the Aleksandrów ódzki district on the other side (PLN 548 thousand).

These contracts are strategic and developmental in their nature. Since implementation of such contracts normally leads to a significant competitive advantage obtained by the customer, their details are confidential.

The Executive Board emphasizes that many interesting, high-value contracts were signed at the beginning of the 2nd quarter or are currently being negotiated and are to be fulfilled until the end of this year. Therefore, the Board is optimistic as to the attainment of the sales plan for 2007.

The company fulfills its strategic goal of creating high-value assets

Value building through investments in telecommunications infrastructure

Classic telecommunications (data transmission and voice services) is being replaced by global digital communication services (with the increasing share of video streaming). Because of that, it is estimated that the bandwidth demand will increase by orders of magnitude (hundredfold) in the next years. In the opinion of the Executive Board, investing into assets necessary to fulfill such demand will guarantee a stable financial situation of the Company. The Company expands its carrier infrastructure and builds next fiber-optic networks in five urbanized areas: Warsaw, Silesia, ód, Wrocaw, and Lublin. Also, the network backbone bitrate is being upgraded from 1 Gbps to 10 Gbps. The metropolitan backbone in Warsaw is already partially deployed and the deployment of the Warsaw – ód – Katowice – Krakow – Warsaw loop is closing to completion.

Value building through investments in creation of intellectual property rights

Building technology platforms for network-based content distribution services is under way. In the 1st quarter of this year, two services were launched in cooperation with Cineman Sp. z o.o., an ATM subsidiary: Internet Cinema and Video on Demand (VoD). In addition to VoD services, two new modules of the Telewizja Interaktywna ATM (ATM Interactive TV) system are to be launched until the end of this year, namely IPTV and Mobile TV. The Company cooperates with the market leaders, such as Cisco Systems and Microsoft. Talks with Motorola and Nokia are under way.

The mPay S.A. subsidiary continues the process of deploying the mPay platform, a generally available mobile payment system. Tests are being conducted with all GSM network operators in Poland. The company entered also into cooperation with six banks on developing related financial products. The official commercial launch is planned in near future. Also, the company intends to expand its operations internationally by taking advantage of contacts with selected partners, established during the 3GSM World Congress in Barcelona.

Value building through expanding the ATM’s offer for the SMB sector

As announced previously, works are under way to develop an offer for small and medium-size businesses (SMB). The products for this sector will be offered under the brand name of inONE. The inONE service provisioning utility has been already deployed. The proposed product portfolio includes: hardware and software from reputable manufacturers, deployment, security assurance services, maintenance services, Internet services, collocation, and VoIP services. Partners participating in this program include such reputable companies as Dell (computer hardware), Cisco (network solutions), Microsoft (software), Symantec (security technologies), and ATM (services and competencies).

Value building through acquisitions

In the 1st quarter of 2007, the transaction of investment into Sputnik Software was finalized. ATM S.A. purchased 60% of the Sputnik stock. For ATM, this means expanding the Capital Group's product portfolio and, most of all, entering the public-sector software market (with a focus on local-government administration), where the Company’s operations have been until now limited. The market holds great opportunities because of the sector’s large needs and the availability of EU aid. The agreement is also very significant for Sputnik Software, because of the financial and technological support the company will receive from ATM. This will allow Sputnik to tender for larger, more difficult contracts.

On May 11, an investment agreement was signed with Linx Telecommunications B.V., a Dutch telecommunications company operating in Central and Eastern Europe. ATM S.A. acquired a minority block of new-issue shares. More information about it is provided in a separate press release.

ATM S.A. takes the opportunity of obtaining funds for research and development works from the European Union aid, specifically through the Ministry of Science and Higher Education under the SPO-WKP 2004-2006 program. In result of three submitted applications with a total value of PLN 6.7 million, the Company received almost PLN 3 million of subsidies. More information about it is also provided in a separate press release.

Other interesting events

Successful cooperation with Cisco Systems

Cisco Systems is the largest strategic technology partner of ATM S.A. The cooperation between the two companies evolves dynamically. In 2006, ATM revenues from sales of products and solutions based on Cisco technologies exceeded PLN 29 million, which is an increase of almost 20% compared to the previous year.

ATM develops its own products based on Cisco technologies which are just being introduced to the market. One of the examples is SMaCS (Service Management and Charging System) — an IP-network value-added service management system (supporting for example settlement of charges for using digital contents, including video on demand). There are already several examples of successful deployments of the system. Cooperation of both companies in the field of TV signal distribution and video-on-demand services is also of importance. Its goal is to use technologies acquired by Cisco together with their developers. The largest company acquired by Cisco in 2006 was Scientific Atlanta which specializes in digital TV technologies.

ATM and Cisco both declare their willingness to expand their cooperation also abroad. ATM plans to increase its sales of Cisco technology based solutions in 2007 by a half, to a level of more than PLN 40 million. During Cisco Partner Summit 2007, an annual conference of Cisco Systems’ global partners, which took place early in April this year in Las Vegas, ATM S.A. received the 2006 Solution Innovation award. ATM is the only company from the Central and Eastern European region which has been awarded for innovativeness of its solutions based on Cisco Systems’ products.

Our students win the world championship!

On March 15, 2007, a team of students from the Faculty of Mathematics, Informatics, and Mechanics of the Warsaw University (MIMUW), sponsored by ATM S.A., won the International Collegiate Programming Contest traditionally held by the Association for Computing Machinery. This year’s final was organized in Tokyo. The team members included: Marek Cygan, a fourth-year student of computer science, Marcin Pilipczuk, a fourth-year student of the simultaneous IT/mathematics courses (JSIM), and Filip Wolski, a first-year JSIM student. Their tutors were Krzysztof Diks and Jan Madey, professors from MIMUW.

The close cooperation between ATM and the Warsaw University team began over two years ago. The company offered its sponsorship when the team was preparing for the championship of Poland, and then for the European semi-finals and world finals. As the main sponsor, ATM also endowed three one-year scholarships for the programming team members.

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