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2Q2008 results

The second quarter of 2008 brought an increase in sales revenue compared to 2Q2007, both for ATM S.A. (19% increase) and the entire capital group (11% increase). The 1H2008 sales revenue increase over 1H2007 amounted to 22% and 12% respectively.

An increase in revenue and efficient cost control enabled significant increase in profits of the company and its capital group. ATM S.A. reached net profits of PLN 3,766 thousand in the first half-year, compared to PLN 216 thousand in the first half of the previous year. ATM capital group companies attained shareholder net profits of PLN 2,310 thousand, compared to PLN 21 thousand of loss last year.

Trends are also favorable when comparing 2Q2008 with 1Q2008: consolidated revenue has increased by 18%, and the 2Q net profit of PLN 2.3 million is optimistic, when compared to PLN 0.7 million of loss in 1Q.

ATM’s management board rates these results as excellent, and confirms that the development of the ATM capital group continues in accordance to annual assumptions and plans. The results of 1H2008 is a positive forecast of attainable annual results, taking into account traditional seasonal variations in IT sales with a noticeable increase in revenue and profits by the end of each year.

The company systematically experiences a large increase in profits from telecommunications services and value-added services (41% increase when compared to the same period of the previous year), especially those pertaining to co-location services. Proper, dynamic development of this ATM S.A. business is of key importance to the development and financial stability of the entire company. This is due to the fact, that a major part of ATM S.A. agreements are long-term contracts, which ensure foreseeable, major revenue streams in the years to come. In 2Q2008, ATM acquired a few new major customers, including AIG Bank Polska, Inotel telecom operator (connected to the inter-operator AC-X node), Capgemini (an international consulting company), and the Goldenline.pl community portal. The extended scope of cooperation with the Interoute international telecom operator is also worth mentioning. The contract is not only key in financial terms, but also confirms the company’s top telecom service quality and competitiveness.

Also in 2Q2008, reaching out to the development requirements of the telecom service market, the company modernized southern and northern rings of its national ATMAN transmission network. 10 Gbps MPLS technology has been implemented based on Cisco solutions. ATM S.A. is also continuously developing its metropolitan networks and invests in international lines (for example, a new line to Frankfurt has recently become operational). Close co-operation with Linx Telecommunications (and their proprietary international telecommunications network), member of the ATM capital group, strengthens ATM S.A.’s position as an operator offering international traffic communications services.

Internet broadcasts of the Euro 2008 matches were a key marketing event for ATM S.A. The company was one of three technology partners selected for this Polsat venture (represented during this project by Redefine), and was the only one to deliver noticeable increase in Internet user access to the online match coverage. More than 80 thousand users registered at the Euro 2008 website managed by ATM S.A. The users gained access to both live broadcasts and video-on-demand. Euro 2008 was an opportunity for multiple independent operators to join the ATMAN network, which helped to increase the scope of high quality transmissions requiring top bandwidth. The solution used for this purpose (ATM InteractiveTV) shall be presented in September at the IBC2008 TV broadcaster tradeshow in Amsterdam.

In terms of ICT system integration, the company tightens its cooperation with Cisco Systems. ATM is one of three key Cisco business partners in Poland, and has been working with Cisco for several years, also on a scientific level – in the area of new ICT technology research and development. By limiting the number of suppliers and partners, and focusing on key competences, ATM accomplishes increasingly better results addressing their offer to businesses from the financial and telecom sectors. This results in such contracts, as the development deal with one of the key national telecom operators for infrastructure delivery of an approximate net value of $2.7 million. The net value of the next contract stage is estimated at $1.5 million. The deal pertains primarily to Cisco Systems network solutions, which will be used to increase the operator’s Internet service quality and network management capabilities.

More optimistic news come from ATM capital group companies. Almost all of them, except for the mPay group, systematically have positive results. It should, however, be taken into consideration that most of them (except for the mature KLK Sp. z o.o.) are young enterprises focusing on development. Their profits are not yet impressive (in the range of a couple of thousand PLN at the end of 1H2008), but continuing well-considered development and maintaining profitability at the same time holds a good promise for the future. On the other hand, mPay S.A. and mPay International Sp. z o.o. – companies developing a mobile payment system – so far keep bringing financial losses. However, the project is developing, but not as quickly as one might expect of such an excellent solution. The company has suspended its activities related to gaining funds from stock issue and introducing stock to the New Connect market. This is due to preliminary discussions with a strategic investor interested in this company.

Recently, we have had one company from the ATM capital group that has been particularly active – Sputnik Software. It has signed a deal for software and training delivery for 14 P≥ock region districts. It has also signed a deal with the IT Department of State Forests NFH to deliver cryptographic cards and readers, along with suitable software and certificates for State Forests NFH organizational units. On the other hand, Cineman has launched cooperation with Netia (a telecom operator), providing its customers with video-on-demand content. It enables a selected movie to be purchased without leaving home, and then watched on a computer screen.

Activities and products offered by the ATM capital group are recognized by market experts and opinion formers. Recently ATM InteractiveTV, a product of ATM S.A. for Internet TV, has been awarded by the “¶wiat Telekomunikacji” magazine with a Golden Antenna 2008 in the category of “Terrestrial solution for business”. Another Golden Antenna went to ATM S.A.’s subsidiary – mPay S.A. (in the “Top promising business of the year” category). The mPay system already encompasses more than 1500 points of sale and a couple of thousand Internet stores. It is also worth mentioning that the mPay system enables users to settle parking fees in Warsaw. The Proton application developed by Sputnik Software, ATM S.A.’s subsidiary, has been recognized as “Application of Year 2008” in a prestigious competition organized by Microsoft. Notably, user feedback as well as jury opinions were taken into account when awarding the title. (Proton is an electronic document workflow system for institutions. The application has already been deployed at more than 200 government and local government administration institutions.)

ATM also continues its activities related to the ATM Center of Innovation project. Discussions with £ódľ Special Economic Zone S.A. (£SSE) have been successfully completed. ATM’s investment offer has been judged best in the history of £SSE. As a result, on July 11, 2008 (i.e. after the end of the reporting period), the Minister of Economy issued a formal permission for ATM to start operations within the zone. Preparations are currently underway to deliver the first stage of this investment.

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