Elisa and Saunalahti ? Finns together

Dear reader,
Implementation of the strategy has progressed determinedly and as planned. We are working on all phases of the strategy simultaneously. The integration of One Elisa as such was necessary in the interest of succeeding in the market competition. A strong market position, for one, provides a solid foundation as we?re aiming for new services and new markets.

Development of profitability and operations continues

In 2005 we continued our consistent reform of Elisa, aiming at a simpler and more streamlined operating method and, above all, a sharper competitive edge.

We have made a tremendous renewal effort. The functions are now concentrated within one group and under one umbrella brand. From the customer perspective, Elisa is more accessible: all the services are available at one stop.

The integration of One Elisa has changed the working methods of all Elisa employees and often required going the extra mile. I would like to give special thanks to all Elisa employees for their commitment to the changes made and their dedication to our common effort for the best of the joint Elisa.

The integration of One Elisa is not finished. The customers demand convenience and speed, and the market continues to demand more efficient operations. You need to be quick and flexible to survive.

In 2005 we placed special emphasis on customer service. For example, the average queuing time for the private customer service improved clearly from the close to seven minutes at the beginning of the year down to some 40 seconds at the end of the year.

We reinforced our market position in 2005

2005 was also a successful year in the market for Elisa.

We became the market leader in broadband subscriptions. In mobile subscriptions, the transfer of Saunalahti?s customers to Elisa?s network significantly boosted our position.

Elisa?s acquisition of Saunalahti was in line with our strategy and was certainly the most important event in the Finnish telecommunications market in 2005. The long anticipated consolidation in the market became reality when these two Finnish operators found each other.

Together, Elisa and Saunalahti make an extremely strong player on the Finnish markets. We are the market leader in broadbands by a fair margin, and in mobile subscriptions our joint market share is approximately 37 per cent.

Elisa?s reliability and Saunalahti?s unbiased approach form a competitive package. For the customer, this means better and more versatile services.

Mobile phones replace sleeping bags

Competition on the Finnish telecommunications market has been fierce. Mobile call prices have been more than halved in a short time. At its highest, the annual churn has exceeded 60 per cent.

Consumers have mainly based their decision to switch operators on price. There are signs that the fiercest price competition is coming to an end and that overall quality and new services are gaining more importance as competitive factors.

Thus, while competition remains fierce, it will expand from prices to services. This is partially attributable to the partial lifting of the ban on bundling. As of 1 April 2006 it will be possible to sell 3G phones and subscriptions together. This is something that has been forbidden thus far.

Elisa was among the first to demand this restriction be removed. In our opinion, the ban on bundling could have been lifted from all subscriptions and handsets. Nevertheless, this is a good start. I believe that experience will lead to the ban being lifted entirely in the future.

We introduce services that make everyday life significantly easier

The operator business still mainly consists of voice and SMS services and monthly fees for broadband subscriptions. New services and markets allow us to expand our business.

Susanna Huovinen, the Minister of Transport and Communications, made the following statement concerning information society services in daily life at the Communications Forum held in January 2006:

?For the users of communication services, the benefits must naturally exceed the cost. It is the commercial task of businesses to develop services and attract interest among customers.?

Elisa takes this challenge seriously and much has already been achieved in this area.

There are already a number of new services, and they have quite a few uses in people?s day-to-day lives. A viable example can be found in my own daily life. For the past year I have managed my affairs more productively with the help of realtime e-mail and a calendar that I can access with my mobile phone. The Push Email service is an excellent day-to-day tool.

In Lahti people can book dental appointments through SMS messages. This innovation has been awarded the Government?s Information Society Award. In Helsinki, SMS tram tickets have also sold by the million.

Finnair also offers SMS check-in on flights.

Thanks to the mobile certificate, customers can manage their affairs securely and safely via their mobile phones.

Thus there are already some new services available for our daily lives. Naturally, operators can also look in the mirror when regretting the, as yet, small number of new services. Resources have been spent on the price competition. Convenience of services has also left room for improvement.

At Elisa we find that developing new services for the benefit of our customers? everyday lives opens rich opportunities.

Elisa wants to stay at the leading edge of development, creating and providing new useful services for the customers and companies. The integration of the information society in people?s day-to-day lives will not progress without an active input from the operators.

Onwards with enthusiasm

Elisa?s employees achieved excellent results in 2005. Elisa had a highly successful year on many fronts. We want to provide pleasant surprises for our customers and ourselves in 2006 as well. While our challenges will not grow less, our opportunities will increase. The exciting new opportunities infuse us with tremendous amounts of energy.

I would like to thank our customers, partners and shareholders for a successful year 2005.

I would also like to thank all Elisa employees for doing a wonderful job.

Thanks to you all, we are able to build an ever more competitive Elisa. We offer our customers useful everyday services and opportunities for enhancing the efficiency of their operations, and challenging tasks for the Elisa team.

Mr Veli-Matti Mattila
President and CEO