This document provides a financial analysis of Český Telecom, a.s. for the years 2000-2006. It includes an income survey showing revenue, costs, profits, and other financial metrics. It also includes a balance survey showing assets, liabilities, equity and other balance sheet items. The analysis is based on Český Telecom's audited financial statements and other sources. Estimates are provided for some future years and acquisition scenarios.

1. FINANCIAL ANALYSIS
ČESKÝ TELECOM, a.s.
Czech Republic
Jan Zika
IDENTIFICATION
Name: Český Telecom, a.s.
Prof. Number:
Country: Czech Republic
NACE-code:
Sector: Telecommunications
Specification:
Currency: CZK
Amounts: million
Date: 5/30/2003
Identification 1

2. Jan Zika - Financial Analysis, Český Telecom, a.s.
Comments
The source of all historical data is Český Telecom, a.s. (CTc). Figures used for calculations
has been obtained from CTc’s audited annual financial statements prepared according to
International Accounting Standards. The rest of the data used for comparisons (See also
Methodology Description section in Ratio Comparison Sheet) has been obtained from
Reuters multexInvestor Service.
On several places in this analysis estimates or aggregate figures are used due to lack of
relevant and ‘effectively accessible’ data. For the same reason, some of the breakdowns in
the specific survey sheets had to be replaced by aggregations. Despite all this, the aim of
the author was to maintain sufficient level information validity within the limits of very
restricted means.
Comments 2

3. Income Survey
ČESKÝ TELECOM, a.s.
Czech Republic
Fiscal year (ending in) 2000 2001 2002 2003E 2004E 2005E 2006E 2005E* 2006E*
Number of months 12 12 12 12 12 12 12 12 12
Last month DEC DEC DEC DEC DEC DEC DEC DEC DEC
Currency CZK CZK CZK CZK CZK CZK CZK CZK CZK
Amount million million million million million million million million million
TOTAL REVENUES 57,224 100.0 55,900 100.0 52,856 100.0 50,320 100.0 50,364 100.0 51,623 100.0 54,616 100.0 66,128 100.0 68,532 100.0
Net sales (turnover) 43,648 76.3 40,300 72.1 37,044 70.1 34,220 68.0 33,922 67.4 34,312 66.5 35,204 64.5 34,312 51.9 35,204 51.4
Current gain on disposal 405 0.7 448 0.8 514 1.0 502 1.0 513 1.0 521 1.0 531 1.0 521 0.8 531 0.8
Other operational cash income 13,171 23.0 15,152 27.1 15,298 28.9 15,598 31.0 15,929 31.6 16,790 32.5 18,881 34.6 31,295 47.3 32,797 47.9
Other operational non-cash income 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
- OPERATING COSTS 45,153 78.9 45,785 81.9 45,768 86.6 44,428 88.3 43,445 86.3 42,803 82.9 43,389 79.4 51,891 78.5 52,437 76.5
Cash costs of goods sold 30,528 53.3 28,745 51.4 26,706 50.5 25,617 50.9 26,498 52.6 27,216 52.7 28,650 52.5 34,344 51.9 35,530 51.8
Goods, commodities and services 9,626 16.8 8,352 14.9 6,604 12.5 5,735 11.4 5,832 11.6 5,870 11.4 6,258 11.5 7,450 11.3 7,751 11.3
Personnel costs 7,722 13.5 7,554 13.5 7,563 14.3 7,018 13.9 7,251 14.4 7,463 14.5 7,712 14.1 9,290 14.0 9,568 14.0
Selling, general & admininstr. Costs 3,753 6.6 2,569 4.6 1,913 3.6 1,917 3.8 2,098 4.2 2,159 4.2 2,263 4.1 2,721 4.1 2,815 4.1
Operating rents 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
Other operational cash costs 9,427 16.5 10,270 18.4 10,626 20.1 10,947 21.8 11,317 22.5 11,724 22.7 12,417 22.7 14,883 22.5 15,396 22.5
Depreciation/amortizations 14,625 25.6 17,040 30.5 19,062 36.1 18,811 37.4 16,947 33.6 15,587 30.2 14,739 27.0 17,547 26.5 16,907 24.7
Other operational non-cash costs 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
= EBIT (NET OPERATING RESULT) 12,071 21.1 10,115 18.1 7,088 13.4 5,892 11.7 6,919 13.7 8,820 17.1 11,227 20.6 14,237 21.5 16,095 23.5
+ Financial cash income (267) (0.5) 834 1.5 498 0.9 536 1.1 535 1.1 431 0.8 494 0.9 525 0.8 491 0.7
+ Equity in distributed profits 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
+ Equity in non-distributed profit 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
+ Other Financial non-cash income 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
- Interest expenses 2,690 4.7 2,178 3.9 1,476 2.8 1,361 2.7 985 2.0 581 1.1 519 1.0 3,873 5.9 3,635 5.3
- Other financial cash costs 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
- Financial non-cash costs 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
= CURRENT PROFIT BEFORE TAX 9,114 15.9 8,771 15.7 6,110 11.6 5,067 10.1 6,469 12.8 8,670 16.8 11,202 20.5 10,889 16.5 12,951 18.9
- Current taxes 992 1.7 1,369 2.4
- Deferred taxes 1,766 3.1 1,330 2.4
= CURRENT NET PROFIT/LOSS 6,356 11.1 6,072 10.9 4,225 8.0 3,684 7.3 4,743 9.4 6,203 12.0 8,047 14.7 7,796 11.8 9,266 13.5
Extraordinary cash items 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
Extraordinary gain on disposal 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
Extraordinary non-cash items 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
= TOTAL NET PROFIT/LOSS 6,356 11.1 6,072 10.9 4,225 8.0 3,684 7.3 4,743 9.4 6,203 12.0 8,047 14.7 7,796 11.8 9,266 13.5
- Dividends 2,416 38.0 0 0.0 1,836 43.5 1,771 48.1 2,319 48.9 2,995 48.3 3,897 48.4 2,383 30.6 2,609 28.2
- Profit attributable to minority interests 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
3,685 5.41,383 2.7 1,726 3.4 3,155 5.8 3,093 4.71,885 3.6 2,467 4.8
Results 2003E-2006E are based on the assumptions of the STATUS QUO scenario of CTc holding a 51% share in
Eurotel. Columns 2005E* and 2006E* describe the BUY scenario of the acquisition of Eurotel. Although it is likely that
CTc will acquire the residual share of Eurotel, it is hard to predict when exactly this is going to happen. Even after
setting a particular year (2005 is estimated in this analysis), the influence of acquisition on financial results will depend
on the number of month left to the end of that fiscal year. Especially for 2005, the results could be "somewhere
between" 2005E and 2005E*
Income Survey 3

4. Balance Survey
ČESKÝ TELECOM, a.s.
Czech Republic
Fiscal year (ending in) 2000 2001 2002 2003E 2004E 2005E 2006E 2005E* 2006E*
Number of months 12 12 12 12 12 12 12 12 12
Last month DEC DEC DEC DEC DEC DEC DEC DEC DEC
Currency CZK CZK CZK CZK CZK CZK CZK CZK CZK
Amount million million million million million million million million million
FIXED ASSETS 141,525 88.2 140,822 88.5 131,210 83.9 124,611 87.2 118,841 87.4 112,654 86.1 108,700 85.5 138,042 88.8 133,923 88.3
Net tangible fixed assets 122,388 76.3 120,765 75.9 115,471 73.9 111,283 77.9 107,084 78.7 102,132 78.0 100,054 78.7 125,148 80.5 123,271 81.3
Investments & Advances 9,801 6.1 6,888 4.3 4,398 2.8 3,113 2.2 3,012 2.2 2,801 2.1 2,782 2.2 3,433 2.2 3,427 2.3
Other fixed assets 9,336 5.8 13,169 8.3 11,341 7.3 10,215 7.2 8,745 6.4 7,721 5.9 5,864 4.6 9,461 6.1 7,225 4.8
CURRENT ASSETS 18,852 11.8 18,275 11.5 25,141 16.1 18,245 12.8 17,142 12.6 18,245 13.9 18,431 14.5 17,357 11.2 17,708 11.7
Inventories, orders on hand 1,804 1.1 1,925 1.2 1,409 0.9 1,680 1.2 1,521 1.1 1,428 1.1 1,735 1.4 1,750 1.1 2,138 1.4
Trade receivables 6,552 4.1 7,265 4.6
Other receivables 2,334 1.5 927 0.6
Prep. expenses & Accr. Inc. 594 0.4 665 0.4
Marketable securities 5,834 3.6 2,147 1.3
Cash & Deposits 1,734 1.1 5,346 3.4
TOTAL ASSETS 160,377 100.0 159,097 100.0 156,351 100.0 142,856 100.0 135,983 100.0 130,899 100.0 127,131 100.0 155,399 100.0 151,631 100.0
T.N.W. 103,807 64.7 107,062 67.3 111,317 71.2 107,672 75.4 106,005 78.0 104,783 80.0 102,108 80.3 104,783 67.4 102,108 67.3
Common stock 32,209 20.1 32,209 20.2 32,209 20.6 32,209 22.5 32,209 23.7 32,209 24.6 32,209 25.3 32,209 20.7 32,209 21.2
Preferred stock 30,816 19.2 30,816 19.4 30,816 19.7 30,816 21.6 30,816 22.7 30,816 23.5 30,816 24.2 30,816 19.8 30,816 20.3
Revaluation reserves 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
Retained earnings 40,782 25.4 43,998 27.7 48,247 30.9 44,600 31.2 42,927 31.6 41,705 31.9 39,028 30.7 41,705 26.8 39,028 25.7
Other reserves (-tr. stock) 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
Minority interests 0 0.0 39 0.0 45 0.0 47 0.0 53 0.0 53 0.0 55 0.0 53 0.0 55 0.0
- Goodwill (correction) 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
- Intangibles (correction) 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
LONG TERM LIABILITIES 39,675 24.7 30,386 19.1 21,146 13.5 18,014 12.6 15,218 11.2 12,216 9.3 11,375 8.9 36,621 23.6 35,374 23.3
Provisions 10,046 6.3 11,184 7.0 11,632 7.4 11,602 8.1 11,064 8.1 10,981 8.4 11,135 8.8 10,981 7.1 11,289 7.4
Subordinated long term debt 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
Senior long term debt 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
Long term financial lease obligations 29,629 18.5 19,202 12.1 9,514 6.1 6,412 4.5 4,154 3.1 1,235 0.9 240 0.2 25,640 16.5 24,085 15.9
Other long term liabilities 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
Progress payments/billings l.t. 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
CURRENT LIABILITIES 16,895 10.5 21,649 13.6 23,888 15.3 17,170 12.0 14,760 10.9 13,995 10.7 14,303 11.3 13,995 9.0 14,149 9.3
Long term debt maturing 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
Short term debt (banks..) 3,481 2.2 7,801 4.9 12,513 8.0 5,738 4.0 1,220 0.9 521 0.4 190 0.1 521 0.3 190 0.1
Trade payables 13,260 8.3 13,848 8.7 11,375 7.3 11,278 7.9 13,540 10.0 13,474 10.3 13,959 11.0 13,474 8.7 13,959 9.2
Progress payments/billings s. t. 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
Accrued taxes/Staff charges/soc sec 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
Other debt & loans 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
Current provisions 154 0.1 0 0.0 0 0.0 154 0.1 0 0.0 0 0.0 154 0.1 0 0.0 0 0.0
Other accruals & Prep. Inc. 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
TOTAL LIABILITIES 160,377 100.0 159,097 100.0 156,351 100.0 142,856 100.0 135,983 100.0 130,994 100.1 127,786 100.5 155,399 100.0 151,631 100.0
NET CURRENT ASSETS 1,957 1.2 (3,374) (2.1) 1,253 0.8 1,075 0.8 2,382 1.8 4,250 3.2 4,128 3.2 3,362 2.2 3,559 2.3
OFF BALANCE SHEET LIABILITIES
- operating leases 0 0.0 0 0.0 0 0.0
- capex commitments 0 0.0 0 0.0 0 0.0
- guarantees 0 0.0 0 0.0 0 0.0
- other 0 0.0 0 0.0 0 0.0
10,324 6.6
5,283 3.4
8,589 6.8
8,107 6.4
8,425 6.4
8,392 6.4
8,543
7,078
6.2
5.4
6.3
5.2
8,431 5.4
15,301 9.8
10,582 7.0
4,988 3.3
8,821
7,744
Balance Survey 4

5. Cashflow Survey
ČESKÝ TELECOM, a.s.
Czech Republic
Fiscal year (ending in) 2000 2001 2002 2003E 2004E 2005E 2006E 2005E* 2006E*
Number of months 12 12 12 12 12 12 12 12 12
Last month DEC DEC DEC DEC DEC DEC DEC DEC DEC
Currency CZK CZK CZK CZK CZK CZK CZK CZK CZK
Amount million million million million million million million million million
A. Cash Flow from operating activities 24,057 107.7 25,084 104.5 22,185 93.5 21,927 96.7 24,739 112.2 22,648 100.6 23,847 100.1 24,134 91.5 27,324 99.4
+ Total net profit/loss 6,356 28.4 6,072 25.3 4,225 17.8 3,684 16.2 4,743 21.5 6,203 27.6 8,047 33.8 7,796 29.6 9,266 33.7
+ Depreciations/Amortizations 14,625 65.5 17,040 71.0 19,062 80.4 18,811 82.9 16,947 76.9 15,587 69.3 14,739 61.8 17,547 66.5 16,907 61.5
+ Deferred taxes & other non-cash costs 1,766 7.9 1,330 5.5 943 4.0 692 3.0 863 3.9 1,234 5.5 1,578 6.6 1,547 5.9 1,843 6.7
- Equity in non-distributed profit 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
- Gain on disposal (current + extraordinary) 405 1.8 448 1.9 514 2.2 502 2.2 513 2.3 521 2.3 531 2.2 521 2.0 531 1.9
- Non-cash income 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
= "Total cash flow" 22,342 100.0 23,994 100.0 23,716 100.0 22,685 100.0 22,040 100.0 22,503 100.0 23,833 100.0 26,369 100.0 27,485 100.0
- Extraordinary items 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
= "Current cash flow" 22,342 100.0 23,994 100.0 23,716 100.0 22,685 100.0 22,040 100.0 22,503 100.0 23,833 100.0 26,369 100.0 27,485 100.0
Change in net working capital 1,715 7.7 1,090 4.5 (1,531) (6.5) (758) (3.3) 2,699 12.2 145 0.6 14 0.1 (2,235) (8.5) (161) (0.6)
B. Cash Flow from investing activities (23,702) (11,383) (13,644) (11,750) (11,750) (12,150) (12,500) (13,608) (15,000)
Purchase of tangible/intangible fixed assets (23,235) (11,383)
- Disposals (market value) 467 0
C. Cash Flow from financing activities (4,356) (6,107) (4,976) (9,877) (6,776) (3,618) (1,326) 25,731 (1,886)
Net increase in long-term financial debt (5,457) (10,427) (9,688) (3,102) (2,258) (2,919) (995) 25,400 (1,555)
Net increase in short-term financial debt 1,101 4,320 4,712 (6,775) (4,518) (699) (331) 331 (331)
Net increase in equity (issues) 0 0 0 0 0 0 0 0 0
Sources (A + C) 19,701 18,977 17,209 12,050 17,963 19,030 22,521 49,865 25,438
Application (B) (23,702) (11,383) (13,644) (11,750) (11,750) (12,150) (12,500) (13,608) (15,000)
(13,644) (12,150) (15,000)(11,750) (11,750) (12,500) (13,608)
Cashflow Survey 5

6. Ratios
ČESKÝ TELECOM, a.s.
Czech Republic
Jan Zika - Financial Analysis, Český Telecom, a.s.
Fiscal year (ending in) 2000 2001 2002 2003E 2004E 2005E 2006E 2005E* 2006E*
Number of months 12 12 12 12 12 12 12 12 12
Last month DEC DEC DEC DEC DEC DEC DEC DEC DEC
Profitability
Sales increase (%) 1.6 -7.7 -8.1 -7.6 -0.9 1.1 2.6 -2.5 2.6
Gross margin (%) 83.2 85.1 87.5 88.6 88.4 88.6 88.5 88.7 88.7
Current net profit / Total revenues (%) 11.1 10.9 8.0 7.3 9.4 12.0 14.7 11.8 13.5
Current cash flow / Total revenues (%) 39.0 42.9 44.9 45.1 43.8 43.6 43.6 39.9 40.1
Current ROE (% Net / TNW weighted) 6.3 5.8 3.9 3.4 4.4 5.9 7.8 7.5 9.0
ROE (% Net profit / Equity) 6.1 5.7 3.8 3.4 4.5 5.9 7.9 7.4 9.1
ROA (% Net profit / Total Assets) 4.0 3.8 2.7 2.6 3.5 4.7 6.3 5.0 6.1
ROA (% EBIT / Total Assets) 7.5 6.4 4.5 4.1 5.1 6.7 8.8 9.2 10.6
[Current ROA (%) according to the template] 7.5 6.9 4.8 4.3 5.3 6.9 9.1 10.4 10.8
Pay-out ratio (%) 38.0 0.0 43.5 48.1 48.9 48.3 48.4 30.6 28.2
Liquidity
Current ratio 1.1 0.8 1.1 1.1 1.2 1.3 1.3 1.2 1.3
Quick ratio 1.0 0.8 1.0 1.0 1.1 1.2 1.2 1.1 1.1
Inventory rotation (times a year) 24.2 20.9 26.3 20.4 22.3 24.0 20.3 19.6 16.5
Trade credit granted (days) 54.8 65.8 66.5 75.3 73.5 71.7 71.2 87.9 87.8
Trade credit received (days) 502.8 605.2 628.7 717.8 847.4 837.8 814.2 660.1 657.3
Financial Structure
Solvency ratio (%) 64.7 67.3 71.2 75.4 78.0 80.0 80.3 67.4 67.3
Solvency ratio (before correction for goodwill &
intangibles) (%) 64.7 67.3 71.2 75.4 78.0 80.0 80.3 67.4 67.3
Solvency ratio (including operating leases) (%) 64.7 67.3 71.2 75.4 78.0 80.0 80.3 67.4 67.3
LT Financial debt / TNW (%) 28.5 17.9 8.5 6.0 3.9 1.2 0.2 24.5 23.6
Total financial debt / TNW (%) 31.9 25.2 19.8 11.3 5.1 1.7 0.4 25.0 23.8
Ratios 6

7. Jan Zika - Financial Analysis, Český Telecom, a.s.
Ratio projection 2003-2006
2 alternative scenarios: BUY
STATUS QUO
Profitability
CTc will not sell its 51% share in Eurotel, at the same time it will not buy the residual
share of 49%
CTc will acquire the residual share of 49% in Eurotel
-10
-8
-6
-4
-2
0
2
4
2000 2001 2002 2003E 2004E 2005E 2006E
Sales Increase (%) BUY
STATUS QUO
80
81
82
83
84
85
86
87
88
89
90
2000 2001 2002 2003E 2004E 2005E 2006E
Gross margin (%) BUY
STATUS QUO
0
2
4
6
8
10
12
14
16
2000 2001 2002 2003E 2004E 2005E 2006E
Net profit / Total revenues (%) BUY
STATUS QUO
36
37
38
39
40
41
42
43
44
45
46
2000 2001 2002 2003E 2004E 2005E 2006E
Current cash flow / Total revenues (%) BUY
STATUS QUO
0
1
2
3
4
5
6
7
8
9
10
2000 2001 2002 2003E 2004E 2005E 2006E
Current ROE (% Net / TNW weighted) BUY
STATUS QUO
0
1
2
3
4
5
6
7
2000 2001 2002 2003E 2004E 2005E 2006E
ROA (% Net profit / Total Assets) BUY
STATUS QUO
0
2
4
6
8
10
12
2000 2001 2002 2003E 2004E 2005E 2006E
ROA (% EBIT / Total Assets) BUY
STATUS QUO
0
10
20
30
40
50
60
2000 2001 2002 2003E 2004E 2005E 2006E
Pay-out ratio (%) BUY
STATUS QUO
Ratio Projection 7

8. Liquidity
Financial Structure
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
2000 2001 2002 2003E 2004E 2005E 2006E
Current ratio BUY
STATUS QUO
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
2000 2001 2002 2003E 2004E 2005E 2006E
Quick ratio BUY
STATUS QUO
0
5
10
15
20
25
30
2000 2001 2002 2003E 2004E 2005E 2006E
Inventory rotation (times a year) BUY
STATUS QUO
0
10
20
30
40
50
60
70
80
90
100
2000 2001 2002 2003E 2004E 2005E 2006E
Trade credit granted (days) BUY
STATUS QUO
0
100
200
300
400
500
600
700
800
900
2000 2001 2002 2003E 2004E 2005E 2006E
Trade credit received (days) BUY
STATUS QUO
40
45
50
55
60
65
70
75
80
85
2000 2001 2002 2003E 2004E 2005E 2006E
Solvency ratio (%) BUY
STATUS QUO
0
5
10
15
20
25
30
2000 2001 2002 2003E 2004E 2005E 2006E
LT Financial debt / TNW (%) BUY
STATUS QUO
0
5
10
15
20
25
30
35
2000 2001 2002 2003E 2004E 2005E 2006E
Total financial debt / TNW (%) BUY
STATUS QUO
Ratio Projection 8

9. Jan Zika - Financial Analysis, Český Telecom, a.s.
CTc current price, PSE PX50 Index and Price (Valuation) Ratios; 2000-2003
Source: www.akcie.cz, Prague Stock Exchange, CTc, author's calculations
Interval
(days) Date CTc Price PX50
No. of
Current
Year
Quarters
Net Profit
(TTM,
million) EPS (TTM) P/E (TTM)
BV per
Share P/BV
Sales
(TTM,
million)
Sales per
Share
(TTM)
P/Sales
(TTM)
FCF per
Share
(Annual) P/FCF
28 5/30/2003 347.50 555.90 1 3775 11.72 29.65 249.79 1.39 52756 163.79 2.12 36.36 9.56
28 5/2/2003 331.00 527.50 1 3775 11.72 28.24 249.79 1.33 52756 163.79 2.02 36.36 9.10
28 4/4/2003 301.30 497.20 1 3775 11.72 25.71 249.79 1.21 52756 163.79 1.84 36.36 8.29
28 3/7/2003 264.00 463.80 0 4276 13.28 19.89 249.79 1.06 52856 164.10 1.61 36.36 7.26
28 2/7/2003 281.80 476.60 0 4276 13.28 21.23 249.79 1.13 52856 164.10 1.72 36.36 7.75
28 1/10/2003 251.30 465.10 0 4276 13.28 18.93 249.79 1.01 52856 164.10 1.53 36.36 6.91
28 12/13/2002 273.10 465.20 3 6045 18.77 14.55 249.79 1.09 53493 166.08 1.64 36.36 7.51
28 11/15/2002 242.30 449.90 3 6045 18.77 12.91 249.79 0.97 53493 166.08 1.46 36.36 6.66
28 10/18/2002 239.10 430.10 3 6045 18.77 12.74 249.79 0.96 53493 166.08 1.44 36.36 6.58
28 9/20/2002 255.10 448.30 2 5772 17.92 14.24 249.79 1.02 53838 167.15 1.53 36.36 7.02
28 8/23/2002 275.50 459.20 2 5772 17.92 15.37 249.79 1.10 53838 167.15 1.65 36.36 7.58
28 7/26/2002 253.80 420.40 2 5772 17.92 14.16 249.79 1.02 53838 167.15 1.52 36.36 6.98
28 6/28/2002 243.00 412.60 1 6077 18.87 12.88 249.79 0.97 54497 169.20 1.44 36.36 6.68
28 5/31/2002 310.50 451.40 1 6077 18.87 16.46 249.79 1.24 54497 169.20 1.84 36.36 8.54
28 5/3/2002 335.50 461.60 1 6077 18.87 17.78 249.79 1.34 54497 169.20 1.98 36.36 9.23
28 4/5/2002 315.80 433.90 1 6077 18.87 16.74 249.79 1.26 54497 169.20 1.87 36.36 8.69
28 3/8/2002 342.50 439.90 0 6072 18.85 18.17 249.79 1.37 55900 173.55 1.97 36.36 9.42
28 2/8/2002 316.30 406.40 0 6072 18.85 16.78 249.79 1.27 55900 173.55 1.82 36.36 8.70
28 1/11/2002 370.80 411.60 0 6072 18.85 19.67 249.79 1.48 55900 173.55 2.14 36.36 10.20
28 12/14/2001 323.10 390.10 3 5537 17.19 18.79 236.60 1.37 56093 174.15 1.86 9.69 33.35
28 11/16/2001 335.50 401.40 3 5537 17.19 19.52 236.60 1.42 56093 174.15 1.93 9.69 34.63
28 10/19/2001 263.60 361.90 3 5537 17.19 15.33 236.60 1.11 56093 174.15 1.51 9.69 27.21
28 9/21/2001 195.75 325.20 2 6109 18.97 10.32 236.60 0.83 56808 176.37 1.11 9.69 20.21
28 8/24/2001 267.40 373.50 2 6109 18.97 14.10 236.60 1.13 56808 176.37 1.52 9.69 27.60
28 7/27/2001 327.50 383.10 2 6109 18.97 17.27 236.60 1.38 56808 176.37 1.86 9.69 33.81
28 6/29/2001 365.00 417.70 1 6234 19.35 18.86 236.60 1.54 57133 177.38 2.06 9.69 37.68
28 6/1/2001 358.30 434.70 1 6234 19.35 18.51 236.60 1.51 57133 177.38 2.02 9.69 36.99
28 5/4/2001 335.10 405.80 1 6234 19.35 17.31 236.60 1.42 57133 177.38 1.89 9.69 34.59
28 4/6/2001 354.10 418.50 1 6234 19.35 18.30 236.60 1.50 57133 177.38 2.00 9.69 36.56
28 3/9/2001 426.70 458.70 0 6356 19.73 21.62 236.60 1.80 57224 177.66 2.40 9.69 44.05
28 2/9/2001 481.00 485.60 0 6356 19.73 24.37 236.60 2.03 57224 177.66 2.71 9.69 49.66
28 1/12/2001 533.20 491.40 0 6356 19.73 27.02 236.60 2.25 57224 177.66 3.00 9.69 55.04
29 12/15/2000 477.20 465.00 3 6310 19.59 24.36 226.62 2.11 55894 173.53 2.75 17.30 27.58
27 11/16/2000 481.70 467.40 3 6310 19.59 24.59 226.62 2.13 55894 173.53 2.78 17.30 27.84
28 10/20/2000 529.30 507.10 3 6310 19.59 27.02 226.62 2.34 55894 173.53 3.05 17.30 30.60
28 9/22/2000 555.00 513.50 2 6264 19.45 28.54 226.62 2.45 54563 169.40 3.28 17.30 32.08
28 8/25/2000 604.90 542.00 2 6264 19.45 31.11 226.62 2.67 54563 169.40 3.57 17.30 34.97
28 7/28/2000 698.60 572.60 2 6264 19.45 35.92 226.62 3.08 54563 169.40 4.12 17.30 40.38
28 6/30/2000 625.30 524.80 1 6264 19.45 32.15 226.62 2.76 54563 169.40 3.69 17.30 36.15
28 6/2/2000 757.20 588.20 1 6217 19.30 39.23 226.62 3.34 53233 165.27 4.58 17.30 43.77
28 5/5/2000 741.60 599.00 1 6217 19.30 38.42 226.62 3.27 53233 165.27 4.49 17.30 42.87
28 4/7/2000 843.20 642.20 1 6217 19.30 43.68 226.62 3.72 53233 165.27 5.10 17.30 48.74
28 3/10/2000 869.20 666.60 0 6171 19.16 45.37 226.62 3.84 51902 161.14 5.39 17.30 50.24
28 2/11/2000 769.80 626.90 0 6171 19.16 40.18 226.62 3.40 51902 161.14 4.78 17.30 44.50
n/a 1/14/2000 595.10 516.50 0 6171 19.16 31.06 226.62 2.63 51902 161.14 3.69 17.30 34.40
n/a 4/11/2003 306.70 505.70 1 3775 11.72 26.17 249.79 1.23 52756 163.79 1.87 36.36 8.44
n/a 12/30/2002 244.70 460.70 3 6045 18.77 13.04 249.79 0.98 53493 166.08 1.47 36.36 6.73
Stock Market and Price Ratios 9

10. Quarterly data for TTM calculation
Source: CTc; aproximations for 1999 and 2000 are used, they are derived by dividing the annual figures by 4
Year Quarter Net Profit Revenues
2003 1 971 12712.0
2002 4 355 13476.0
2002 3 1290 13246.0
2002 2 1159 13322.0
2002 1 1472 12812.0
2001 4 2124 14113.0
2001 3 1017 13591.0
2001 2 1464 13981.0
2001 1 1467 14215.0
2000 4 1589 14306.0
2000 3 1589 14306.0
2000 2 1589 14306.0
2000 1 1589 14306.0
1999 4 1543 12975.5
1999 3 1543 12975.5
1999 2 1543 12975.5
1999 1 1543 12975.5
Beginning of the year
2003 1/1/2003
2002 1/1/2002
2001 1/1/2001
2000 1/1/2000
Number of days per year365
Free Cash Flow - figures from CTc's Offical Statements are used
2002 2001 2000
CF from
Operations 21368 22549 22499
Capex 9657 17016 16927
Dividends
paid 0 2413 0
FCF 11711 3120 5572
Stock Market and Price Ratios 10

11. Price Ratios - Methodology
Interval
The period of time between the two consequent dates, in which the then current price information was recorded. The author is
using 28 days for two reasons: 1) 28-day period is just a little shorter than 30-day period which is considered one month in
many standards. Therefore the developments can be more less observed as monthly data; 2) 28 days and not 30 days was
used because of the character of the data stream. 28-day period allowed omitting the weekends when the Prague Stock
Market is closed. Of course, the author might have used the Friday’s data for weekends, but the 28-day approach seemed to
be more accurate. Only once in the whole sample, the 28-day period couldn’t be pursued for the reason of State holiday on
the date the information was supposed to be recorded. This happened on November 17, 2000. Data of November 16, 2000
were used in stead as the last valid information available.
Number of Current-Year Quarters
Number of Current-Year Quarters is used in TTM (Trailing twelve months) calculations. When divided by 4, it indicates the
relative weight of the correspondent (current) fiscal year accounting data in the TTM aggregation. In other words, any TTM
accounting figure (Net Profit, Revenue) is a sum of the latest 4 completed quarters.
Trailing twelve month approach (TTM)
Please note, that ex-post TTM is used for P/E and P/Sales. This explains the differences between the calculations in here
(“Stock Market and Price Ratios” sheet and related links) and calculations that could be made using historical data elsewhere
in this analysis. The difference does not show an inconsistence of the data but different approach to them. TTM here actually
simulates the historical development of ratios as it would be observed in real time by someone watching the quarterly
accounting data. Of course, the assumption that the revised quarterly accounting data is available immediately after the
particular period (quarter) ends is not realistic. On the other hand, one may assume that this data is in fact a mean, and
therefore the best estimate, of expected results.
Net Profit (TTM)
The quarterly data for 1999 and 2000 were not available to the author. Therefore they are approximated as equal portions of
annual figures.
EPS (TTM)
Please see TTM description above. Particularly, EPS here differs from both historical annual EPS and annualized (projected)
EPS presented in the official CTc’s statements. The total number of shares used is the number for the current year with the
exception of 2003, for which 2002 data is used. For the whole period 1999-2002 the number of shares is constant and it is
very likely it will be constant in the following years too. (See accounting statements projection)
P/E (TTM)
Please see TTM description above.
BV per share
The BV and Number of Common Shares data for this indicator is obtained from annual account statements, not from the
quarterly statements. The reason is the stable development of these variables and the fact that annual accounting statements
were used as a primary source of data for this analysis. Quarterly data elsewhere in this analysis were only used to capture
the real-time developments of more volatile variables. For every date
P/BV
Please see BV per share description above.
Sales per Share (TTM)
TTM Sales equals TTM Revenues as shown on this sheet. See also TTM description above. The total number of shares used
is the number for the current year with the exception of 2003, for which 2002 data is used. For the whole period 1999-2002
the number of shares is constant and it is very likely it will be constant in the following years too. (See accounting statements
projection)
P/Sales (TTM)
Please see Sales per share (TTM).
FCF per Share (Annual)
Free Cash Flow here is calculated as CF from Operations minus Capital Expenditures minus Dividends paid. The official CTc
annual CF statement is used as a source of data. CF Survey from this analysis was not used because of the lack of relevant
data and higher compatibility with IAS. The total number of shares used is the number for the current year with the exception
of 2003, for which 2002 data is used. For the whole period 1999-2002 the number of shares is constant and it is very likely it
will be constant in the following years too. (See accounting statements projection)
P/FCF
Please see FCF per Share (Annual) above.
Stock Market and Price Ratios 11

12. Jan Zika - Financial Analysis, Český Telecom, a.s.
Český telecom S&P 500
World
Communicatio
ns Industry Sector
Telstra
Corporation
(ADR) (NYSE)
Vodafone
Group plc
(ADR) (NYSE)
Verizon
Communication
s (NYSE)
SBC
Communication
s Inc. (NYSE)
Nippon
Telegraph &
Telephone
Corp. (ADR)
(NYSE)
Telecom Italia
S.p.A. (ADR)
(NYSE)
Deutsche
Telekom AG
(ADR) (NYSE)
Telefonica S.A.
(ADR) (NYSE)
BellSouth
Corporation
(NYSE)
France Telecom
(ADR) (NYSE)
BT Group plc
(ADR) (NYSE)
Swisscom AG
(ADR) (NYSE)
Koninklijke
KPN N.V. (ADR)
(NYSE)
Nextel
Communication
s (NASD)
AT&T Corp.
(NYSE)
Telekom
Austria AG
(ADR) (NYSE)
Tele2 AB (ADR)
(NASD)
MATAV
Hungarian
Telecom, (ADR)
(NYSE)
Valuation Ratios Český T. S&P 500 Industry Sector TLS VOD VZ SBC NTT TI DT TEF BLS FTE BTY SCM KPN NXTL T TKA TLTOB MTA
P/E Ratio (TTM) 26.17 22.98 15.86 23.18 84.8 NM 21.67 9.8 NM NM NM NM 15.83 NM NM 35.88 NM 8.29 11.7 362.32 176.29 9.93
P/BV (MRQ, end of the year for 1.23 4.34 2.5 3.35 17.59 0.66 3.02 2.19 1.16 4.26 1.31 2.69 2.4 NM 38.15 3.88 3.28 4.55 0.96 1.88 1.36 1.72
P/Sales (TTM) 1.87 3 1.49 2.4 11.12 15.85 1.46 1.7 0.62 1.57 0.86 1.55 1.91 0.5 0.79 1.99 1.14 1.33 0.31 1.51 1.25 1.5
P/FCF (TTM, annual for CTc) 8.44 27.43 17.65 25.61 31.45 108.86 16.65 15.14 624.29 NM 10.95 NA 14.28 NA 25.04 15.77 3.63 56.38 31.3 4.03 NA 10.07
Český T. S&P 500 Industry Sector TLS VOD VZ SBC NTT TI DT TEF BLS FTE BTY SCM KPN NXTL T TKA TLTOB MTA
Beta (S&P 500 is 1) n/a 1 1.09 0.99 0.68 0.95 0.8 0.79 1.06 0.78 1.4 1.18 0.8 1.73 1.23 0.66 1.73 2.15 0.9 0.75 1.52 1.35
Dividends Český T. S&P 500 Industry Sector TLS VOD VZ SBC NTT TI Company TEF BLS FTE BTY SCM KPN NXTL T TKA TLTOB MTA
Dividend Yield 1.86 2.21 4.25 2.61 5.36 1.28 4.29 4.93 1.01 1.89 NA NA 3.68 3.62 2.53 NA NA NA 4.95 NA NA NA
Chart Description Český T. S&P 500 INDUSTRY SECTOR Telstra Vodafone Verizon SBC Nippon T.T. T. Italia Deutsche T. Telefonica BellSouth France T. BT Group Swisscom KPN Nextel AT&T T. Austria Tele2 MATAV
Comparison of Price (Valuation) Ratios: CTc and selected companies in the
communications services industry listed in order of descending market
Methodology description
Below are the definition of the ratios presented in this sheet. For the detailed description of methods used to
calculate the CTc Ratios, please see “Stock Market and Price Ratios” sheet. According to the author the most
significant difference (the usage of MRQ vs. “End of the year” for P/BV and TTM vs. “Annual” for P/FCF) is still
negligible. Stock prices of April 11, 2002 were used.
P/E Ratio (TTM)
Calculated by dividing the Price by the sum of the Diluted Earnings Per Share from continuing operations before
Extraordinary Items and Accounting Changes over the last four quarters.
P/BV (MRQ, end of the year for CTc)
Price divided by the latest quarterly Book Value per Share. For CTc, Book Value per Share is the one in fiscal 2002
consolidated statements. BV per Share is defined as the Common Shareholder's Equity divided by the
Shares Outstanding at the end of the most recent fiscal quarter or at the end of fiscal 2002 for CTc.
P/Sales (TTM)
Price divided by the Sales (Revenue) per Share for the trailing twelve months.
P/CFC (TTM, annual for CTc)
Price divided by the trailing twelve month Free Cash Flow Per Share. Free Cash Flow is calculated from the
Statement of Cash Flows as Cash From Operations minus Capital Expenditures and Dividends Paid.
Price Ratios - Comparison 12

13. Jan Zika - Financial Analysis, Český Telecom, a.s.
The period used for the data actualization is 28 days. Please note that the methods used here to calculate the ratios may differ
from methods used elsewhere in this analysis. As a result, the values differ too. Please see the methodology description in "Stock
Market and Price Ratios" sheet.
Below are the charts displaying the data and calculations from "Stock Market and Price Ratios" sheet.
Price Ratios - Charts
0
5
10
15
20
25
30
35
40
45
50
1/14/2000 5/14/2000 9/14/2000 1/14/2001 5/14/2001 9/14/2001 1/14/2002 5/14/2002 9/14/2002 1/14/2003 5/14/2003
P/E Ratio (TTM)
0
100
200
300
400
500
600
700
800
900
1000
1/14/2000 5/14/2000 9/14/2000 1/14/2001 5/14/2001 9/14/2001 1/14/2002 5/14/2002 9/14/2002 1/14/2003 5/14/2003
CTc Stock Price and PX50 Index PX50 CTc Price
Price Ratios - Charts 13

14. 0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
1/14/2000 5/14/2000 9/14/2000 1/14/2001 5/14/2001 9/14/2001 1/14/2002 5/14/2002 9/14/2002 1/14/2003 5/14/2003
P/BV Ratio
0
1
2
3
4
5
6
1/14/2000 5/14/2000 9/14/2000 1/14/2001 5/14/2001 9/14/2001 1/14/2002 5/14/2002 9/14/2002 1/14/2003 5/14/2003
P/Sales Ratio (TTM)
0
10
20
30
40
50
60
1/14/2000 5/14/2000 9/14/2000 1/14/2001 5/14/2001 9/14/2001 1/14/2002 5/14/2002 9/14/2002 1/14/2003 5/14/2003
P/FCF Ratio
Price Ratios - Charts 14

15. Price Ratios - Comparison (Charts)
Beware of zero values. Some ratios are incorectly displayed as zero, eventhough in fact the data is
not available. Please see "Price Ratios - Comparison"
26.17
22.98
15.86
23.18
84.8
0
21.67
9.8
0
0
0
0
15.83
0
0
35.88
0
8.29
11.7
362.32
176.29
9.93
Český T.
S&P 500
INDUSTRY
SECTOR
Telstra
Vodafone
Verizon
SBC
Nippon T.T.
T. Italia
Deutsche T.
Telefonica
BellSouth
France T.
BT Group
Swisscom
KPN
Nextel
AT&T
T. Austria
Tele2
MATAV
P/E Ratio (TTM)
1.23
4.34
2.5
3.35
17.59
0.66
3.02
2.19
1.16
4.26
1.31
2.69
2.4
0
38.15
3.88
3.28
4.55
0.96
1.88
1.36
1.72
Český T.
S&P 500
INDUSTRY
SECTOR
Telstra
Vodafone
Verizon
SBC
Nippon T.T.
T. Italia
Deutsche T.
Telefonica
BellSouth
France T.
BT Group
Swisscom
KPN
Nextel
AT&T
T. Austria
Tele2
MATAV
P/BV (MRQ, end of the year for CTc)
1.87
3
1.49
2.4
11.12
15.85
1.46
1.7
0.62
1.57
0.86
1.55
1.91
0.5
0.79
1.99
1.14
1.33
0.31
1.51
1.25
1.5
Český T.
S&P 500
INDUSTRY
SECTOR
Telstra
Vodafone
Verizon
SBC
Nippon T.T.
T. Italia
Deutsche T.
Telefonica
BellSouth
France T.
BT Group
Swisscom
KPN
Nextel
AT&T
T. Austria
Tele2
MATAV
P/Sales (TTM)
8.44
27.43
17.65
25.61
31.45
108.86
16.65
15.14
624.29
0
10.95
0
14.28
0
25.04
15.77
3.63
56.38
31.3
4.03
0
10.07
Český T.
S&P 500
INDUSTRY
SECTOR
Telstra
Vodafone
Verizon
SBC
Nippon T.T.
T. Italia
Deutsche T.
Telefonica
BellSouth
France T.
BT Group
Swisscom
KPN
Nextel
AT&T
T. Austria
Tele2
MATAV
P/FCF (TTM, annual for CTc)
Price Ratios - Charts 15

16. Jan Zika - Financial Analysis, Český Telecom, a.s.
Český telecom S&P 500
Communication
s Industry Sector
Corporation
(ADR) (NYSE)
Group plc
(ADR) (NYSE)
Communicatio
ns (NYSE)
Communicatio
ns Inc. (NYSE)
Telegraph &
Telephone
S.p.A. (ADR)
(NYSE)
Telekom AG
(ADR) (NYSE)
Telefonica S.A.
(ADR) (NYSE)
Corporation
(NYSE)
Telecom (ADR)
(NYSE)
BT Group plc
(ADR) (NYSE)
Swisscom AG
(ADR) (NYSE)
KPN N.V. (ADR)
(NYSE)
Communicatio
ns (NASD)
AT&T Corp.
(NYSE)
Austria AG
(ADR) (NYSE)
Tele2 AB (ADR)
(NASD)
Hungarian
Telecom, (ADR)
Valuation Ratios CTc S&P 500 Industry Sector TLS VOD VZ SBC NTT TI DT TEF BLS FTE BTY SCM KPN NXTL T TKA TLTOB MTA
Payout Ratio 43.45 27.52 51.68 16.94 306.12 NM 92.49 48.11 NM NM NM 0 54.6 0 NM 100.89 0 0 53.15 0 0 12.95
Growth Rates CTc S&P 500 Industry Sector TLS VOD VZ SBC NTT TI DT TEF BLS FTE BTY SCM KPN NXTL T TKA TLTOB MTA
Sales Increase (%) -8.08 4.06 0.4 11.19 -2.67 70.72 0.65 -6.03 -3.35 NA 12.38 -4.76 -7 8.38 -12.06 2.48 1.63 13.42 -28.02 17.24 24.7 11.47
Financial Strength CTc S&P 500 Industry Sector TLS VOD VZ SBC NTT TI DT TEF BLS FTE BTY SCM KPN NXTL T TKA TLTOB MTA
Current Ratio 1.05 1.68 1.04 1.43 0.96 0.71 0.77 0.96 1.08 1.74 1.3 0.64 0.82 0.31 1.09 1.31 0.86 1.69 1.32 0.34 1.03 0.35
Total Debt to Equity 0.40 0.94 1.35 0.89 0.92 0 1.66 0.66 1.31 1.77 1.84 1.6 0.98 NM 43.59 0.51 2.81 4.41 1.83 1.78 0.36 0.79
Profitability Ratios CTc S&P 500 Industry Sector TLS VOD VZ SBC NTT TI DT TEF BLS FTE BTY SCM KPN NXTL T TKA TLTOB MTA
Gross Margin (%) 87.51 47.44 44.25 41.37 63.99 -18.9 37.96 37.08 100 94.11 73.29 100 46.85 60.2 100 65.86 100 71.15 49.37 93.7 4.93 93.14
Net Profit Margin (%) 7.99 11.85 7.6 7.78 12.48 -34.91 6.78 17.32 2.1 0.03 -50.91 -15.82 12.07 -44.05 -8.22 7.12 -61.36 15.89 3.3 -3.94 0.71 15.12
Management Effectiveness CTc S&P 500 Industry Sector TLS VOD VZ SBC NTT TI DT TEF BLS FTE BTY SCM KPN NXTL T TKA TLTOB MTA
Return On Assets (%) 2.70 6.37 2.76 5.92 7.14 -6.21 2.71 7.89 1.12 0.02 -17.21 -5.7 5.35 -17.43 -5.54 5.18 -23.42 6.37 1.13 -1.49 0.47 8.06
Return On Investment (%) 3.19 3.65 7.98 9.04 -6.76 3.37 9.97 1.37 0.02 -7.5 -18.47 6.67 -27.01 -8.15 6.99 -30.51 7.52 1.35 -1.99 0.58 9.8 10.29
Return On Equity (%) 3.80 18.4 9.13 13.18 18.79 -8.17 14.63 23.18 -9.01 -3.88 -42.99 -20.14 14.94 -581.6 -362.87 9.56 -129.2 2477.61 2.95 0.5 0.78 16.86
Efficiency CTc S&P 500 Industry Sector TLS VOD VZ SBC NTT TI DT TEF BLS FTE BTY SCM KPN NXTL T TKA TLTOB MTA
Net Income/Employee (USD) 11408 7315 38378 72888 40218 NM 19974 42605 9009 99 NM NM 35169 NM NM 36340 NM 91184 17592 NM 11926 23129
Receivable Turnover 6.27 9.3 5.68 16.24 5.47 4.71 4.95 4.91 5.77 3.66 7.65 3.5 5.05 5.9 3.53 NM NM 7.62 5.59 6.52 4.33 6.48
Inventory Turnover 26.29 11.01 29 16.24 29.7 95.42 24.12 NA 0 2.88 8.12 0 35.85 22.76 0 NA NA 9.99 NA 2.62 89.04 3.18
Asset Turnover 0.34 0.95 0.43 1.18 0.57 0.18 0.4 0.46 0.53 0.53 0.34 0.36 0.44 0.4 0.67 0.73 0.38 0.4 0.34 0.38 0.66 0.53
USD/CZK Exchange rate 27
Chart Description Český T. S&P 500 INDUSTRY SECTOR Telstra Vodafone Verizon SBC Nippon T.T. T. Italia Deutsche T. Telefonica BellSouth France T. BT Group Swisscom KPN Nextel AT&T T. Austria Tele2 MATAV
Comparison of CTc with selected companies in the communications services industry listed in
order of descending market capitalization
Methodology Description
Figures derived for CTc are intended for orientation comparison purposes only. The methods used for calculations
of ratios of CTc and the rest of the companies (as described below) differ due to lack of relevant data about CTc.
On the other hand, obtaining the financial statements of the other companies, synchronizing and analyzing them
would not be effective considering the purpose of this analysis.
Ratios for CTc are calculated according standard IAS approach as annual ratios for fiscal 2002. Ratios for the rest
of the companies are calculated as described below. In general the difference is that for CTc the last reported fiscal
2002 is used for calculation whereas for the rest of the companies TTM (rarely MRQ) methodology is applied.
Another difference would be in calculating average aggregations, where most recent annual figures (or two
consequent years average) would be used for CTc and five most recent quarters average would be used for the
rest of the companies. Despite the delays of couple month and differences in calculating averages, the ratios are
roughly comparable assuming there is stable short-term development to a certain extent.
Payout Ratio
Percentage of the Primary/Basic Earnings Per Share Excluding Extraordinary Items paid to common stockholders
in the form of cash dividends during the trailing twelve months.
Sales Increase
Percent change in annual sales (trailing twelve months) as compared to the same period one year ago.
Current Ratio
Total Current Assets for the most recent quarter divided by Total Current Liabilities for the same period.
Total Debt To Total Equity
This ratio is Total Debt for the most recent fiscal quarter by Total Shareholder Equity for the same period. Total
Debt is the sum of Short Term Debt, the Current Portion of Long Term Debt and Capitalized Lease Obligations,
Long Term Debt and Capitalized Lease Obligations.
Gross Margin
Trailing 12 months Total Revenue minus the trailing 12 months Cost of Goods Sold divided by the trailing 12
months Total Revenue and multiplied by 100.
Net Profit Margin
Income After Taxes for the trailing twelve months divided by Total Revenue for the same period and is expressed
as a percentage.
Return on Assets
Income After Taxes for the trailing twelve months divided by the Average Total Assets, expressed as a percentage.
Average Total Assets is calculated by adding the Total Assets for the 5 most recent quarters and dividing by 5.
Return on Investment
Trailing twelve month Income after taxes divided by the average total long-term debt, other long-term liabilities and
shareholders equity, and expressed as a percentage.
Return on Equity
Income Available to Common Stockholders for the trailing twelve months divided by the Common Equity and is
expressed as a percentage. Average Common Equity is calculated by adding the Common Equity for the 5 most
recent quarters and dividing Average by 5.
Net Income/Employee
Income After Taxes for the trailing twelve months divided by the number of employees at the end of the last
reported fiscal year. The number of employees is defined as the number of full-time equivalent employees reported
on the Company's 10-K report.
Receivable Turnover
Total Revenue for the trailing twelve months divided by Average Accounts Receivables. Average Receivables is
calculated by adding the Accounts Receivables for the 5 most recent quarters and dividing by 5.
Inventory Turnover
Cost of Goods Sold for the trailing twelve months divided by Average Inventory. Average Inventory is calculated by
adding the inventory for the 5 most recent quarters and dividing by 5.
Asset Turnover
Total Revenues for the trailing twelvemonths divided by the Average Total Assets. The Average Total Assets is
defined as the Total Assets for the 5 most recent quarters divided by 5.
Ratio Comparison 16

17. Jan Zika - Financial Analysis, Český Telecom, a.s.
Ratio evaluation
Payout Ratio
Since different businesses have different cash needs and different levels of normal earnings volatility, it's probably
best to evaluate Payout Ratios by comparing a company to the average for its Industry. Unfortunately even this
measure would not be very precise due to specific conditions in CTc and its position on the market. The zero
value for CTc came out as a result of retained earnings. In fact, in the last four years dividends were paid out only
once in 2001. General Meeting of CTc can still decide to pay out the dividends for 2002.
Sales Increase
The main reasons for decrease in sales in 2002 were decrease in call revenues and decrease in revenues from
other operators.
Current Ratio
Increase in current ratio was partly influenced by write-offs of 0,36 billion in the fourth quarter 2002. Theoretically,
it is usually suggested that the value should be higher, but on the other hand the CTc’s figure is almost equal to
industry average.
Total Debt To Total Equity
In this aspect CTc has a great advantage to the other national operators. Its debt-to-equity ratio is one of the
lowest in the industry which contrast with serious problems some big operators (including France Telecom for
which the data is not available in this comparison) have been facing recently. It also fully meets the standard
general suggested benchmark. On the other hand low debt lowers efficiency and implies high cost of capital.
Gross Margin
CTc’s gross margin is roughly twice as big as both industry average and S&P 500 average.
Net Profit Margin
Modest Net Profit Margin, though roughly equal to industry and S&P 500 average can be considered as a
success bearing in mind the huge negative results of France Telecom, Deutsche Telecom, KPN and others as
shown in the chart.
Return on Assets
Although CTc’s ROA is fully comparable with industry average and unlike ROA of some other, especially
European, operators it is positive, its low and decreasing value has a negative influence on the overall outlook
and represents a weakness.
Return on Investment
CTc’s return on investment is rather low compared to some other companies in the industry. Partial explanation
can be provided by the fact that CTc has been recently obliged to various investment activities related to the
modernization of the network and opening its infrastructure to alternative operators.
Return on Equity
Very low and decreasing ROE has been a serious problem of CTc for the last few years and has to be considered
as a weakness.
Net Income/Employee
Low Net Income per Employee compared to the industrial average can be explained by excessive number of
employees remaining from the past. However the management is aware of this problem and actively promotes
the reorganization and reduction of total number of employees.
Receivable Turnover
The Receivables Turnover is slightly above the industrial average. It doesn’t signal any problem.
Inventory Turnover
Inventory Turnover of CTc meets the industry average.
Asset Turnover
Asset Turnover of CTc is not significantly lower in comparison with the industry average. On the other hand the so
called favorable rate would be necessarily higher.
Ratio Evaluation 17

18. Jan Zika - Financial Analysis, Český Telecom, a.s.
Beware of zero values. Some ratios are incorectly displayed as zero, eventhough in fact the data is not available. Please
see "Ratios Comparison"
43.45
27.52
51.68
16.94
306.12
0
92.49
48.11
0
0
0
0
54.6
0
0
100.89
0
0
53.15
0
0
12.95
Český T.
S&P 500
INDUSTRY
SECTOR
Telstra
Vodafone
Verizon
SBC
Nippon T.T.
T. Italia
Deutsche T.
Telefonica
BellSouth
France T.
BT Group
Swisscom
KPN
Nextel
AT&T
T. Austria
Tele2
MATAV
Payout Ratio
Český T.
S&P 500
INDUSTRY
SECTOR
Telstra
Vodafone
Verizon
SBC
Nippon T.T.
T. Italia
Deutsche T.
Telefonica
BellSouth
France T.
BT Group
Swisscom
KPN
Nextel
AT&T
T. Austria
Tele2
MATAV
-40 -20 0 20 40 60 80
Sales Increase (%)
1.05
1.68
1.04
1.43
0.96
0.71
0.77
0.96
1.08
1.74
1.3
0.64
0.82
0.31
1.09
1.31
0.86
1.69
1.32
0.34
1.03
0.35
Český T.
S&P 500
INDUSTRY
SECTOR
Telstra
Vodafone
Verizon
SBC
Nippon T.T.
T. Italia
Deutsche T.
Telefonica
BellSouth
France T.
BT Group
Swisscom
KPN
Nextel
AT&T
T. Austria
Tele2
MATAV
Current Ratio
0.40
0.94
1.35
0.89
0.92
0
1.66
0.66
1.31
1.77
1.84
1.6
0.98
0
43.59
0.51
2.81
4.41
1.83
1.78
0.36
0.79
Český T.
S&P 500
INDUSTRY
SECTOR
Telstra
Vodafone
Verizon
SBC
Nippon T.T.
T. Italia
Deutsche T.
Telefonica
BellSouth
France T.
BT Group
Swisscom
KPN
Nextel
AT&T
T. Austria
Tele2
MATAV
Total Debt to Equity
Ratio Comparison - Charts 18

19. Český T.
S&P 500
INDUSTRY
SECTOR
Telstra
Vodafone
Verizon
SBC
Nippon
T.T.
T. Italia
Deutsche
T.
Telefonica
BellSouth
France T.
BT Group
Swisscom
KPN
Nextel
AT&T
T. Austria
Tele2
MATAV
-20 0 20 40 60 80 100
Gross Margin (%)
Český T.
S&P 500
INDUSTRY
SECTOR
Telstra
Vodafone
Verizon
SBC
Nippon T.T.
T. Italia
Deutsche T.
Telefonica
BellSouth
France T.
BT Group
Swisscom
KPN
Nextel
AT&T
T. Austria
Tele2
MATAV
-70 -60 -50 -40 -30 -20 -10 0 10 20
Net Profit Margin (%)
Český T.
S&P 500
INDUSTRY
SECTOR
Telstra
Vodafone
Verizon
SBC
Nippon T.T.
T. Italia
Deutsche T.
Telefonica
BellSouth
France T.
BT Group
Swisscom
KPN
Nextel
AT&T
T. Austria
Tele2
MATAV
-25 -20 -15 -10 -5 0 5 10
Return On Assets (%)
Český T.
S&P 500
INDUSTRY
SECTOR
Telstra
Vodafone
Verizon
SBC
Nippon T.T.
T. Italia
Deutsche T.
Telefonica
BellSouth
France T.
BT Group
Swisscom
KPN
Nextel
AT&T
T. Austria
Tele2
MATAV
-35 -30 -25 -20 -15 -10 -5 0 5 10
Return On Investment (%)
Ratio Comparison - Charts 19

20. Český T. 3.80
S&P 500 18.4
INDUSTRY 9.13
SECTOR 13.18
Telstra 18.79
Vodafone -8.17
Verizon 14.63
SBC 23.18
Nippon T.T. -9.01
T. Italia -3.88
Deutsche T. -42.99
Telefonica -20.14
BellSouth 14.94
France T. -581.6
BT Group -362.87
Swisscom 9.56
KPN -129.2
Nextel 2477.61
AT&T 2.95
T. Austria 0.5
Tele2 0.78
MATAV 16.86
-25 -20 -15 -10 -5 0 5 10 15 20 25
Return On Equity (%)
11408
7315
38378
72888
40218
0
19974
42605
9009
99
0
0
35169
0
0
36340
0
91184
17592
0
11926
23129
Český T.
S&P 500
INDUSTRY
SECTOR
Telstra
Vodafone
Verizon
SBC
Nippon T.T.
T. Italia
Deutsche T.
Telefonica
BellSouth
France T.
BT Group
Swisscom
KPN
Nextel
AT&T
T. Austria
Tele2
MATAV
Net Income/Employee (USD)
6.27
9.3
5.68
16.24
5.47
4.71
4.95
4.91
5.77
3.66
7.65
3.5
5.05
5.9
3.53
0
0
7.62
5.59
6.52
4.33
6.48
Český T.
S&P 500
INDUSTRY
SECTOR
Telstra
Vodafone
Verizon
SBC
Nippon T.T.
T. Italia
Deutsche T.
Telefonica
BellSouth
France T.
BT Group
Swisscom
KPN
Nextel
AT&T
T. Austria
Tele2
MATAV
Receivable Turnover
Ratio Comparison - Charts 20

21. 26.29
11.01
29
16.24
29.7
95.42
24.12
0
0
2.88
8.12
0
35.85
22.76
0
0
0
9.99
0
2.62
89.04
3.18
Český T.
S&P 500
INDUSTRY
SECTOR
Telstra
Vodafone
Verizon
SBC
Nippon T.T.
T. Italia
Deutsche T.
Telefonica
BellSouth
France T.
BT Group
Swisscom
KPN
Nextel
AT&T
T. Austria
Tele2
MATAV
Inventory Turnover
0.34
0.95
0.43
1.18
0.57
0.18
0.4
0.46
0.53
0.53
0.34
0.36
0.44
0.4
0.67
0.73
0.38
0.4
0.34
0.38
0.66
0.53
Český T.
S&P 500
INDUSTRY
SECTOR
Telstra
Vodafone
Verizon
SBC
Nippon T.T.
T. Italia
Deutsche T.
Telefonica
BellSouth
France T.
BT Group
Swisscom
KPN
Nextel
AT&T
T. Austria
Tele2
MATAV
Asset Turnover
Ratio Comparison - Charts 21

22. Jan Zika - Financial Analysis, Český Telecom, a.s.
DuPont Diagram Companmy: ROE
ROA
Profit margin Asset turnover
Net profit after tax Total revenues Equity multiplicator
Profit before tax Taxes Total assets Equity
Total revenues Total costs Tax rate %
EBIT
Sales of goods Costs of sales Total revenues Total assets
514 1913
Production Other Production Services
37044 15298 11502 5728
Sale of assets Depreciation Staff costs Fixed assets Current assets
19062 7563
Residual value Other costs Tangible assets Inventories Receivables and prepayments
Intangible assets Fin. Investment Fin. assets Other assets
Earnings from fin. oper.
Fin. Revenues Interests Other fin. costs Other assets
1208 -230
Extra. earnings
Extra. revenues Extra. costs
4027
0
8431
11341 371 15301
131210 25141
115471 1409
-978
111272
52856 46746 31
7088
52856 156351
4225 52856 1.4
6110 1885 156351
Český telecom, a.s.
2002 3.8%
2.7%
8.0% 0.34
DuPont 22

23. Jan Zika - Financial Analysis, Český Telecom, a.s.
00/99 01/00 02/01 03/02 04/03 05/04 06/05
Revenues 51,902 57,224 55,900 52,856 50,320 50,364 51,623 54,616 66,128 68,532 10% (2%) (5%) (5%) 0% 2% 6%
Operating Costs 26,170 30,528 28,745 26,706 25,617 26,485 27,216 28,650 34,344 35,530 17% (6%) (7%) (4%) 3% 3% 5%
EBITDA 25,732 26,696 27,155 26,150 24,703 23,879 24,407 25,966 31,784 33,002 4% 2% (4%) (6%) (3%) 2% 6%
Depreciation 13,409 14,625 17,040 19,062 18,811 16,947 15,587 14,739 17,547 16,907 9% 17% 12% (1%) (10%) (8%) (5%)
EBIT 12,323 12,071 10,115 7,088 5,892 6,932 8,820 11,227 14,237 16,095 (2%) (16%) (30%) (17%) 18% 27% 27%
Contributed services from TelSource (cost) 544 634 (9) 0 0 0 0 0 0 0 17% (101%) (100%) n/a n/a n/a n/a
Interest expense 3,154 2,690 2,178 1,476 1,361 985 581 519 3,873 3,635 (15%) (19%) (32%) (8%) (28%) (41%) (11%)
Interest income (413) (342) (467) (268) (297) (411) (314) (389) (328) (275) (17%) 37% (43%) 11% 38% (24%) 24%
Currency (gains)/losses 596 (25) (358) (230) (239) (124) (117) (105) (197) (216) (104%) 1332% (36%) 4% (48%) (6%) (10%)
Profit Before Tax 8,442 9,114 8,771 6,110 5,067 6,482 8,670 11,202 10,889 12,951 8% (4%) (30%) (17%) 28% 34% 29%
Income Tax 2,271 2,758 2,699 1,885 1,383 1,726 2,467 3,155 3,093 3,685 21% (2%) (30%) (27%) 25% 43% 28%
Net Profit after tax 6,171 6,356 6,072 4,225 3,684 4,756 6,203 8,047 7,796 9,266 3% (4%) (30%) (13%) 29% 30% 30%
EPS (Earnings Per Share) 19.2 19.7 18.9 13.1 11.4 14.8 19.3 25.0 24.2 28.8 3% (4%) (30%) (13%) 29% 30% 30%
00/99 01/00 02/01 03/02 04/03 05/04 06/05
Call revenues 1) 26,393 24,126 21,150 13,663 10,083 9,467 9,439 9,643 9,439 9,643 (9%) (12%) (35%) (26%) (6%) (0%) 2%
Business 63% 61% 55% 52% 50% 49% 49% 47% 49% 47% (3%) (10%) (5%) (4%) (2%) 0% (4%)
Residential 32% 34% 41% 44% 46% 47% 47% 49% 47% 49% 6% 21% 7% 5% 2% 0% 4%
Payphones 5% 5% 4% 4% 4% 4% 4% 4% 4% 4% 0% (20%) 0% 0% 0% 0% 0%
Revenues from other network operators 5,347 5,712 3,910 2,593 2,351 2,317 2,358 2,447 2,358 2,447 7% (32%) (34%) (9%) (1%) 2% 4%
Revenues from international operators 2,973 2,946 2,041 1,492 1,134 1,180 1,353 1,426 1,353 1,426 (1%) (31%) (27%) (24%) 4% 15% 5%
Revenues from domestic operators 2,374 2,766 1,869 1,101 1,217 1,137 1,005 1,021 1,005 1,021 17% (32%) (41%) 11% (7%) (12%) 2%
Subscription charges 5,190 6,897 7,263 10,576 10,395 10,057 10,261 10,584 10,261 10,584 33% 5% 46% (2%) (3%) 2% 3%
Connection / relocation charges 718 414 260 217 131 145 117 98 117 98 (42%) (37%) (17%) (40%) 11% (19%) (16%)
Eurotel and consolidation adjustments 7,891 12,104 14,019 13,861 13,982 14,131 14,612 15,398 29,117 29,314 53% 16% (1%) 1% 1% 3% 5%
Equipment sales and sales of materials 371 405 448 514 502 513 521 531 521 531 9% 11% 15% (2%) 2% 2% 2%
Leased lines 1,869 2,023 2,383 2,680 3,246 3,423 3,421 3,421 3,421 3,421 8% 18% 12% 21% 5% (0%) 0%
Data transmission and other telephony 2) 3,453 4,476 5,334 7,315 8,014 8,513 8,716 9,011 8,716 9,011 30% 19% 37% 10% 6% 2% 3%
Other revenues 670 1,067 1,133 1,437 1,616 1,798 2,178 3,483 2,178 3,483 59% 6% 27% 12% 11% 21% 60%
Total 51,902 57,224 55,900 52,856 50,320 50,364 51,623 54,616 66,128 68,532 10% (2%) (5%) (5%) 0% 2% 6%
1) Excluding call revenues from ISDN
2) ISDN, Internet, Data network services, Telex, Data transmission and other telephony
All financials in CZK million, unless specified otherwise.
Financial results 1999-2002 are audited. Results 2003-2006 are own estimations of the author. Results 2003E-2006E are
based on the assumptions of the STATUS QUO scenario of CTc holding a 51% share in Eurotel. Columns 2005E* and
2006E* describe the BUY scenario of the acquisition of Eurotel. Although it is likely that CTc will acquire the residual share of
Eurotel, it is hard to predict when exactly this is going to happen. Even after setting a particular year (2005 is estimated in this
analysis), the influence of acquisition on financial results will depend on the number of month left to the end of that fiscal year.
Especially for 2005, the results could be "somewhere between" 2005E and 2005E*
All results are consolidated and presented under International Accounting Standards (IAS).
Source: ČESKÝ TELECOM, a.s., author
2002
2002
2003E 2004E
YOY Change
2005E 2006E
2003E 2004E 2005E 2005E* 2006E*
INCOME STATEMENT 1999 2000 2001
REVENUES - Breakdown 1999 2000 2001 2006E
YOY Change
2005E* 2006E*
IS 23

24. 00/99 01/00 02/01
Telephone lines in operation, e.o.p. (x 1000) 3,839 3,854 3,842 3,661 0% (0%) (5%)
Business (incl. service lines and payphones) 1,159 1,190 1,210 1,148 3% 2% (5%)
Residential 2,680 2,664 2,632 2,513 (1%) (1%) (5%)
- ISDN channels (x 1000) 57 122 261 389 114% 114% 49%
Net number of new lines installed (x 1000) in the period 105 15 (12) (181) (86%) (180%) 1405%
Payphones in operation, e.o.p. (x 1000) 30 30 28 26 0% (7%) (6%)
Penetration as % of households 72% 72% 71% 59% (0%) (1%) (17%)
Penetration as % of population 37% 37% 37% 36% 0% (0%) (3%)
Digitalisation (number of teleph. lines connected to digital
exchange)
77% 86% 95% 100% 12% 11% 5%
00/99 01/00 02/01
Total Eurotel customers, e.o.p. (x 1000) 1,070 2,171 3,238 3,891 103% 49% 20%
00/99 01/00 02/01
Total number of customers, e.o.p. (x 1000) 45 185 481 702 312% 159% 46%
00/99 01/00 02/01 03/02 04/03 05/04 06/05
Staff costs 7,567 7,722 7,554 7,563 7,018 7,251 7,463 7,712 9,290 9,568 2% (2%) 0% (7%) 3% 3% 3%
Material consumed 1,154 1,474 949 876 899 927 953 984 1,140 1,227 28% (36%) (8%) 3% 3% 3% 3%
Payments to other network operators 6,912 8,152 7,403 5,728 4,836 4,905 4,917 5,274 6,310 6,524 18% (9%) (23%) (16%) 1% 0% 7%
Payments to international operators 3,365 3,092 2,480 1,798 1,082 1,191 1,196 1,527 1,398 1,894 (8%) (20%) (28%) (40%) 10% 0% 28%
Payments to domestic operators 3,547 5,060 4,923 3,930 3,754 3,714 3,721 3,747 4,912 4,630 43% (3%) (20%) (4%) (1%) 0% 1%
Equipment and material cost of sales 2,003 3,753 2,569 1,913 1,917 2,098 2,159 2,263 2,721 2,815 87% (32%) (26%) 0% 9% 3% 5%
Energy, repairs & mainten. and other oper.costs 8,534 9,427 10,270 10,626 10,947 11,317 11,724 12,417 14,883 15,396 10% 9% 3% 3% 3% 4% 6%
Total operating costs 26,170 30,528 28,745 26,706 25,617 26,485 27,216 28,650 34,344 35,530 17% (6%) (7%) (4%) 3% 3% 5%
00/99 01/00 02/01
ČESKÝ TELECOM employees, e.o.p. 20,115 17,322 15,194 13,717 (14%) (12%) (10%)
Lines per fixed line employee, e.o.p. 191 222 253 267 17% 14% 6%
Eurotel employees (all staff), e.o.p. 1,627 2,121 2,420 2,447 30% 14% 1%
Number of ordinary shares in issue1)
322,089,900 322,089,900 322,089,900 322,089,900 322,089,900 322,089,900 322,089,900 322,089,900 322,089,900 322,089,900
Dividend per share - 7.50 - 5.70 5.50 7.20 9.30 12.10 7.40 8.10
1)
Due to comparability,one registred ordinary share with the nominal value of CZK 1,000 was included as 10 shares with a nominal
value of CZK 100.
2002
2002
2002
YOY Change
FIXED LINE NETWORK 1999 2000 2001
MOBILE NETWORK 1999 2000 2001
INTERNET IOL 1999 2000 2001
OPERATING COSTS 1999 2000 2001
YOY Change
STAFF 1999 2000 2001 2002
2002 2003E 2004E 2005E
YOY Change
2005E* 2006E*2006E
2006E*2002 2003E 2004E 2005E
YOY Change
YOY Change
DIVIDENDS 1999 2000 2001 2006E 2005E*
IS 24

25. Jan Zika - Financial Analysis, Český Telecom, a.s.
Source: ČESKÝ TELECOM, a.s., author
00/99 01/00 02/01 03/02 04/03 05/04 06/05
Fixed Assets 134,614 141,525 140,822 131,210 124,611 118,841 112,654 108,700 138,042 133,923 5% (0%) (7%) (5%) (5%) (5%) (4%)
tangible fixed assets 121,457 122,388 120,765 115,471 111,283 107,084 102,132 100,054 125,148 123,271 1% (1%) (4%) (4%) (4%) (5%) (2%)
construction in progress 8,318 6,617 5,865 4,027 2,958 2,852 2,647 2,630 3,244 3,240 (20%) (11%) (31%) (27%) (4%) (7%) (1%)
intangible fixed assets 4,718 9,336 13,169 11,341 10,215 8,745 7,721 5,864 9,461 7,225 98% 41% (14%) (10%) (14%) (12%) (24%)
available-for-sale investment 121 3,184 1,023 371 155 160 154 152 189 187 2531% (68%) (64%) (58%) 3% (4%) (1%)
Current Assets 20,872 18,852 18,275 25,141 18,245 17,142 18,245 18,431 17,357 17,708 (10%) (3%) 38% (27%) (6%) 6% 1%
inventories 2,226 1,804 1,925 1,409 1,680 1,521 1,428 1,735 1,750 2,138 (19%) 7% (27%) 19% (9%) (6%) 21%
receivables and prepayments 9,294 9,480 8,857 8,431 8,821 8,543 8,425 8,589 10,324 10,582 2% (7%) (5%) 5% (3%) (1%) 2%
cash and cash equivalents 1)
9,352 7,568 7,493 15,301 7,744 7,078 8,392 8,107 5,283 4,988 (19%) (1%) 104% (49%) (9%) 19% (3%)
Total Assets 155,486 160,377 159,097 156,351 142,856 135,983 130,899 127,131 155,399 151,631 3% (1%) (2%) (9%) (5%) (4%) (3%)
Equity 97,478 103,807 107,023 111,272 107,625 105,952 104,730 102,053 104,730 102,053 6% 3% 4% (3%) (2%) (1%) (3%)
share capital 32,209 32,209 32,209 32,209 32,209 32,209 32,209 32,209 32,209 32,209 0% 0% 0% 0% 0% 0% 0%
reserves 65,269 71,598 74,814 79,063 75,416 73,743 72,521 69,844 72,521 69,844 10% 4% 6% (5%) (2%) (2%) (4%)
Minority interest 0 0 39 45 47 53 53 55 53 55 n/m n/m 15% 4% 13% 0% 4%
Liabilities 58,008 56,570 52,035 45,034 35,184 29,978 26,211 25,678 50,616 49,523 (2%) (8%) (13%) (22%) (15%) (13%) (2%)
loans and overdrafts 37,466 33,110 27,003 22,027 12,150 5,374 1,756 430 26,161 24,275 (12%) (18%) (18%) (45%) (56%) (67%) (76%)
- of which: short term 2,380 3,481 7,801 12,513 5,738 1,220 521 190 521 190 46% 124% 60% (54%) (79%) (57%) (64%)
long term 35,086 29,629 19,202 9,514 6,412 4,154 1,235 240 25,640 24,085 (16%) (35%) (50%) (33%) (35%) (70%) (81%)
creditors 11,781 13,260 13,848 11,375 11,278 13,540 13,474 13,959 13,474 13,959 13% 4% (18%) (1%) 20% (0%) 4%
provisions 8,761 10,200 11,184 11,632 11,756 11,064 10,981 11,289 10,981 11,289 16% 10% 4% 1% (6%) (1%) 3%
Total Equity and Liabilities 155,486 160,377 159,097 156,351 142,856 135,983 130,994 127,786 155,399 151,631 3% (1%) (2%) (9%) (5%) (4%) (2%)
1)
incl. Available-for-sale investment
00/99 01/00 02/01
Net cash from operating activities 22,182 22,499 22,549 21,368 22,750 22,250 22,150 22,100 28,795 28,730 1% 0% (5%)
Net cash used in investing activities (13,875) (23,702) (11,383) (13,644) (11,750) (11,750) (12,150) (12,500) (13,608) (15,000) 71% (52%) 20%
purchase of property, plant and equipment (15,118) (12,438) (12,732) (9,059) (18%) 2% (29%)
purchase of intangible assets (3,439) (4,950) (5,219) (2,032) 44% 5% (61%)
marketable securities 1)
4,241 (6,775) 5,633 (3,987) (260%) (183%) (171%)
other 441 461 935 1,434 5% 103% 53%
Net cash outflow before financing 8,307 (1,203) 11,166 7,724 11,000 10,500 10,000 9,600 15,187 13,730 (114%) (1028%) (31%)
Net cash from financing activities (1,695) (4,367) (7,571) (4,586) (7,500) (4,500) (4,500) (4,500) (5,580) (5,580) 158% 73% (39%)
Effect of exchange rate changes 375 132 (109) 5 (65%) (183%) (105%)
Net cash increase / (decrease) 6,987 (5,438) 3,486 3,143 (178%) (164%) (10%)
1)
Sum of Cash purchase of and Proceeds from marketable securities.
2005E* 2006E*2003E 2004E 2005E 2006E
2002
2002
YOY Change
2003E 2004E 2005E 2006E 2005E* 2006E*
YOY Change
BALANCE SHEET 1999 2000 2001
CASH FLOW STATEMENT 1999 2000 2001
BS and CF 25

26. Jan Zika - Financial Analysis, Český Telecom, a.s.
FCFF and DDM (using data from projected statements for BUY scenario)
Year 2003E 2004E 2005E* 2006E*
EBIT x (1-t) 4,284 5,086 10,193 11,515 (CZK millions)
+ Depreciation 18,811 16,947 17,547 16,907 (CZK millions)
= CF from Operations 23,095 22,033 27,740 28,422 (CZK millions)
- Change in Net Working Capital 178- 1,307 980 197 (CZK millions)
- Capital expenditures 10,000 10,000 16,000 16,000 (CZK millions)
= FCFF 13,273 10,726 10,760 12,225 (CZK millions)
Year 2003E 2004E 2005E* 2006E*
Dividend per share (CZK) 5.50 7.20 9.30 12.10
WACC
Current EBIT 7,088 (CZK millions)
Current tax rate 30.85%
Current Return on Capital 9.84%
Cash & Marketable Securities 15,301 (CZK millions)
Market Value of Equity 111,926 (CZK millions)
Market Value of Debt 24,687 (CZK millions)
Beta of the stock 1.8
Riskfree rate 3.88%
Risk Premium 6.00%
Enter the cost of debt 4.88%
Cost of Equity 14.42% For Expected Mkt Rate of Return Use:
Cost of Debt 3.37% Daily Mkt Avg 2000-200328-day Mkt Avg 2000-2003Other
Debt Ratio 18.07% Yes No No
Cost of Capital (WACC) 12.42% Mkt Avg Return (daily)Mkt Avg Return (28 days)
k (CAPM) 16.42% 11.02% 5.19% 7.00%
FCFF Growth Rate beyond 2006 1% 2% 3% 4% 5%
Dividend Growth Rate beyond 2007-2010 4% 5% 6% 10% 14%
Dividend Growth Rate beyond 2010 2% 2% 2% 2% 2%
EV (FCFF, CZK millions) 103,194 110,422 119,184 130,026 143,790
EV-LT Liabilities (FCFF, CZK million) 76,887 84,115 92,877 103,719 117,483
EVPS (FCFF, CZK) 320.39 342.83 370.03 403.69 446.43
P (FCFF, CZK) 238.71 261.15 288.36 322.02 364.75
P (DDM, CZK) 66.86 83.05 89.48 135.28 332.22
CTc Stock Price at PSE - Dec 30, 2002 244.70
Estimated Dividend Growth Rate 2007-2010 4.39%
200
250
300
350
400
450
1% 2% 3% 4% 5%
CZK
Growth Rate beyond 2006
FCFF Valuation P (FCFF, CZK)
-
50
100
150
200
250
300
350
400
450
500
4% 6% 8% 10% 12% 14%
CZK
Dividend Growth Rate 2007-2010
DDM Valuation P (DDM, CZK)
FCFF and DDM 26

27. Jan Zika - Financial Analysis, Český Telecom, a.s.
Regression
Current riskfree rate 3.88% Risk premium for stocks 6.00% Current stock price 347.50
Number of periods of data 45 Riskfree rate during period 3.88% Current Annual DPS 5.70
Time period Index Price(Stock) DPS(Stock) Split Factor Index Level Return(Stock)Return(Mkt) (R(jt)-Rj)^2 (R(mt)-R(m))^2 (R(jt)-R(j))*(R(mt)-R(m)) 1+Return(Stock)1+Return(Mkt)
1 1 347.50 1 555.90 4.98% 5.38% 0.002834411 0.002485478 0.002654216 104.98% 105.38%
2 1 331.00 1 527.50 9.86% 6.09% 0.010396472 0.003244097 0.005807509 109.86% 106.09%
3 1 301.30 1 497.20 14.13% 7.20% 0.020931759 0.004628013 0.00984238 114.13% 107.20%
4 1 264.00 1 463.80 -6.32% -2.69% 0.003573065 0.00095118 0.001843537 93.68% 97.31%
5 1 281.80 1 476.60 12.14% 2.47% 0.015564839 0.000430213 0.0025877 112.14% 102.47%
6 1 251.30 1 465.10 -7.98% -0.02% 0.005842156 1.76338E-05 0.000320966 92.02% 99.98%
7 1 273.10 1 465.20 12.71% 3.40% 0.017031656 0.000901396 0.003918197 112.71% 103.40%
8 1 242.30 1 449.90 1.34% 4.60% 0.000281359 0.001768329 0.000705362 101.34% 104.60%
9 1 239.10 1 430.10 -6.27% -4.06% 0.00352008 0.001987565 0.002645068 93.73% 95.94%
10 1 255.10 1 448.30 -7.40% -2.37% 0.004992404 0.000768467 0.001958698 92.60% 97.63%
11 1 275.50 1 459.20 8.55% 9.23% 0.007901545 0.007798436 0.007849821 108.55% 109.23%
12 1 253.80 1 420.40 4.44% 1.89% 0.002288157 0.000222613 0.000713704 104.44% 101.89%
13 1 243.00 1 412.60 -21.74% -8.60% 0.045796455 0.008089043 0.019247064 78.26% 91.40%
14 1 310.50 1 451.40 -7.45% -2.21% 0.005058823 0.000680237 0.001855047 92.55% 97.79%
15 1 335.50 1 461.60 6.24% 6.38% 0.00432589 0.003582656 0.003936772 106.24% 106.38%
16 1 315.80 1 433.90 -7.80% -1.36% 0.005560083 0.000310597 0.001314133 92.20% 98.64%
17 1 342.50 1 439.90 8.28% 8.24% 0.007434405 0.006153901 0.006763918 108.28% 108.24%
18 1 316.30 1 406.40 -14.70% -1.26% 0.020617876 0.000276155 0.002386155 85.30% 98.74%
19 1 370.80 1 411.60 14.76% 5.51% 0.022807812 0.002614254 0.007721749 114.76% 105.51%
20 1 323.10 1 390.10 -3.70% -2.82% 0.001126913 0.001032708 0.001078782 96.30% 97.18%
21 1 335.50 1 401.40 27.28% 10.91% 0.076259928 0.01105902 0.029040662 127.28% 110.91%
22 1 263.60 1 361.90 34.66% 11.29% 0.122504076 0.011852531 0.0381049 134.66% 111.29%
23 1 195.75 1 325.20 -26.80% -12.93% 0.069992202 0.017769308 0.035266315 73.20% 87.07%
24 1 267.40 1 373.50 -18.35% -2.51% 0.03244365 0.000843498 0.005231266 81.65% 97.49%
25 1 327.50 1 383.10 -10.27% -8.28% 0.00987032 0.007537516 0.00862541 89.73% 91.72%
26 1 365.00 1 417.70 1.87% -3.91% 0.000487953 0.001856897 -0.000951881 101.87% 96.09%
27 1 358.30 1 434.70 6.92% 7.12% 0.005274145 0.004520283 0.004882686 106.92% 107.12%
28 1 335.10 1 405.80 -5.37% -3.03% 0.002526763 0.001178602 0.001725702 94.63% 96.97%
29 1 354.10 1 418.50 -17.01% -8.76% 0.027806468 0.008394825 0.01527843 82.99% 91.24%
30 1 426.70 1 458.70 -11.29% -5.54% 0.011990156 0.003525947 0.00650205 88.71% 94.46%
31 1 481.00 1 485.60 -9.79% -1.18% 0.008931995 0.000249239 0.001492047 90.21% 98.82%
32 1 533.20 1 491.40 11.74% 5.68% 0.014578499 0.002786773 0.006373929 111.74% 105.68%
33 1 477.20 1 465.00 -0.93% -0.51% 3.54224E-05 8.31577E-05 5.42738E-05 99.07% 99.49%
34 1 481.70 1 467.40 -8.99% -7.83% 0.007489146 0.006768781 0.007119859 91.01% 92.17%
35 1 529.30 1 507.10 -4.63% -1.25% 0.001841789 0.00027053 0.000705874 95.37% 98.75%
36 1 555.00 1 513.50 -8.25% -5.26% 0.006257242 0.003199862 0.00447463 91.75% 94.74%
37 1 604.90 1 542.00 -13.41% -5.34% 0.01709168 0.003297601 0.007507433 86.59% 94.66%
38 1 698.60 1 572.60 11.72% 9.11% 0.014547731 0.007586065 0.010505238 111.72% 109.11%
39 1 625.30 1 524.80 -17.42% -10.78% 0.029174061 0.012492704 0.019090912 82.58% 89.22%
40 1 757.20 1 588.20 2.10% -1.80% 0.000596622 0.000484632 -0.000537719 102.10% 98.20%
41 1 741.60 1 599.00 -12.05% -6.73% 0.01371314 0.005076999 0.008343956 87.95% 93.27%
42 1 843.20 1 642.20 -2.99% -3.66% 0.000703434 0.001647382 0.001076487 97.01% 96.34%
43 1 869.20 1 666.60 12.91% 6.33% 0.017560143 0.003521614 0.007863844 112.91% 106.33%
44 1 769.80 1 626.90 29.36% 21.37% 0.088181885 0.044000127 0.062289759 129.36% 121.37%
45 1 595.10 1 516.50
Regression Statistics and Risk Parametres Stock Avg (28 days)Mkt Avg (28 days)
Risk and Performace Measures -0.34% 0.40%
Intercept (Alpha) -1.04% Stock Avg (365 days)Mkt Avg (365 days)
Slope (Beta) 1.756298872 -4.42% 5.19%
Rf(1- Beta) -0.24%
Intercept-Rf(1-Beta) -0.80%
Stock Compound
Variance Statistics 2002 2001 2000
Variance of the stock 0.018319642 -15.48% -32.29% -19.81%
Variance of the market 0.004835974
Systematic variance 0.014916975 Mkt Compound
Unsystematic variance 0.003402667 2002 2001 2000
R squared 81.43% 19.25% -16.11% -9.97%
Using Beta
In estimating expected returns:
Riskfree Rate 3.88%
Historical return premium 6.00%
Expected return 14.42%
In forecasting prices:
Current price 347.50
Annualized DPS 5.70
Predicted prices:
- One year from now 391.90
- Two years from now 441.98
- Three years from now 498.45
- Four years from now 562.14
- Five years from now 633.97
Regression 27

28. Jan Zika - Financial Analysis, Český Telecom, a.s.
Inputs for synthetic rating estimation
Type of firm = 1 (1 for large manufacturing firm, 2 for smaller or riskier firm, 3 for financial service firm)
Current Earnings before interest and taxes (EBIT) = 7,088 (CZK million)
Current interest expenses = 1,476 (CZK million)
Current long term government bond rate = 3.88%
Output
Interest coverage ratio = 4.80
Estimated Bond Rating = A
Estimated Default Spread = 1.00%
Estimated Cost of Debt = 4.88%
For large manufacturing firms For financial service firms
If interest coverage ratio is If long term interest coverage ratio is
> ≤ to Rating is Spread is greater than ≤ to Rating is Spread isOperating Income Decline
-100000 0.199999 D 10.00% -100000 0.049999 D 10.00% -50.00%
0.2 0.649999 C 7.50% 0.05 0.099999 C 7.50% -40.00%
0.65 0.799999 CC 6.00% 0.1 0.199999 CC 6.00% -40.00%
0.8 1.249999 CCC 5.00% 0.2 0.299999 CCC 5.00% -40.00%
1.25 1.499999 B- 4.25% 0.3 0.399999 B- 4.25% -25.00%
1.5 1.749999 B 3.25% 0.4 0.499999 B 3.25% -20.00%
1.75 1.999999 B+ 2.50% 0.5 0.599999 B+ 2.50% -20.00%
2 2.499999 BB 2.00% 0.6 0.799999 BB 2.00% -20.00%
2.5 2.999999 BBB 1.50% 0.8 0.999999 BBB 1.50% -20.00%
3 4.249999 A- 1.25% 1 1.49999 A- 1.25% -17.50%
4.25 5.499999 A 1.00% 1.5 1.99999 A 1.00% -15.00%
5.5 6.499999 A+ 0.80% 2 2.49999 A+ 0.80% -10.00%
6.5 8.499999 AA 0.50% 2.5 2.99999 AA 0.50% -5.00%
8.50 100000 AAA 0.20% 3 100000 AAA 0.20% 0.00%
For smaller and riskier firms
If interest coverage ratio is
greater than ≤ to Rating is Spread is
-100000 0.499999 D 10.00%
0.5 0.799999 C 7.50%
0.8 1.249999 CC 6.00%
1.25 1.499999 CCC 5.00%
1.5 1.999999 B- 4.25%
2 2.499999 B 3.25%
2.5 2.999999 B+ 2.50%
3 3.499999 BB 2.00%
3.5 4.499999 BBB 1.50%
4.5 5.999999 A- 1.25%
6 7.499999 A 1.00%
7.5 9.499999 A+ 0.80%
9.5 12.499999 AA 0.50%
12.5 100000 AAA 0.20%
Rating 28

29. Jan Zika - Financial Analysis, Český Telecom, a.s.
PSE Historical 2000-2003
Date CTc Price PX50 Return CTc Return PX50 1+Return CTc 1+Return PX50 CTc Avg Return Mkt Avg Return
5/30/2003 347.5 555.9 -0.20% 0.04% 99.80% 100.04% 27.24% 11.02%
5/29/2003 348.2 555.7 0.14% 0.63% 100.14% 100.63% (Annual) (Annual)
5/28/2003 347.7 552.2 0.84% 0.20% 100.84% 100.20%
5/27/2003 344.8 551.1 -0.78% -0.31% 99.22% 99.69%
5/26/2003 347.5 552.8 0.00% 0.07% 100.00% 100.07%
5/23/2003 347.5 552.4 -0.23% -0.05% 99.77% 99.95%
5/22/2003 348.3 552.7 -0.06% 0.25% 99.94% 100.25%
5/21/2003 348.5 551.3 1.31% 0.44% 101.31% 100.44%
5/20/2003 344 548.9 -0.15% -0.09% 99.85% 99.91%
5/19/2003 344.5 549.4 1.17% 1.05% 101.17% 101.05%
5/16/2003 340.5 543.7 -1.10% -0.44% 98.90% 99.56%
5/15/2003 344.3 546.1 0.38% -0.04% 100.38% 99.96%
5/14/2003 343 546.3 0.35% 1.13% 100.35% 101.13%
5/13/2003 341.8 540.2 0.50% 0.60% 100.50% 100.60%
5/12/2003 340.1 537.0 -0.41% 0.17% 99.59% 100.17%
5/9/2003 341.5 536.1 -0.38% -0.65% 99.62% 99.35%
5/7/2003 342.8 539.6 0.38% -0.55% 100.38% 99.45%
5/6/2003 341.5 542.6 2.71% 1.40% 102.71% 101.40%
5/5/2003 332.5 535.1 0.45% 1.44% 100.45% 101.44%
5/2/2003 331 527.5 1.69% 1.31% 101.69% 101.31%
4/30/2003 325.5 520.7 0.62% -0.34% 100.62% 99.66%
4/29/2003 323.5 522.5 -0.31% 0.23% 99.69% 100.23%
4/28/2003 324.5 521.3 1.63% 1.26% 101.63% 101.26%
4/25/2003 319.3 514.8 -0.84% -0.27% 99.16% 99.73%
4/24/2003 322 516.2 -0.56% -0.06% 99.44% 99.94%
4/23/2003 323.8 516.5 3.85% 2.34% 103.85% 102.34%
4/22/2003 311.8 504.7 0.16% -0.16% 100.16% 99.84%
4/18/2003 311.3 505.5 0.00% 0.40% 100.00% 100.40%
4/17/2003 311.3 503.5 1.04% 0.84% 101.04% 100.84%
4/16/2003 308.1 499.3 -1.38% -1.17% 98.62% 98.83%
4/15/2003 312.4 505.2 0.61% -0.20% 100.61% 99.80%
4/14/2003 310.5 506.2 1.24% 0.10% 101.24% 100.10%
4/11/2003 306.7 505.7 1.39% 0.22% 101.39% 100.22%
4/10/2003 302.5 504.6 -0.49% -0.26% 99.51% 99.74%
4/9/2003 304 505.9 1.16% -0.35% 101.16% 99.65%
4/8/2003 300.5 507.7 0.00% 0.36% 100.00% 100.36%
4/7/2003 300.5 505.9 -0.27% 1.75% 99.73% 101.75%
4/4/2003 301.3 497.2 3.54% 1.16% 103.54% 101.16%
4/3/2003 291 491.5 -4.96% -1.82% 95.04% 98.18%
4/2/2003 306.2 500.6 -0.52% 0.42% 99.48% 100.42%
4/1/2003 307.8 498.5 1.25% 1.16% 101.25% 101.16%
3/31/2003 304 492.8 1.91% 0.61% 101.91% 100.61%
3/28/2003 298.3 489.8 -0.23% 0.27% 99.77% 100.27%
3/27/2003 299 488.5 -1.45% -0.35% 98.55% 99.65%
3/26/2003 303.4 490.2 0.97% 0.51% 100.97% 100.51%
3/25/2003 300.5 487.7 -1.89% 0.35% 98.11% 100.35%
3/24/2003 306.3 486.0 1.26% 0.16% 101.26% 100.16%
3/21/2003 302.5 485.2 2.09% 1.10% 102.09% 101.10%
3/20/2003 296.3 479.9 0.51% 0.59% 100.51% 100.59%
3/19/2003 294.8 477.1 2.79% -0.13% 102.79% 99.87%
3/18/2003 286.8 477.7 0.46% -0.10% 100.46% 99.90%
3/17/2003 285.5 478.2 -1.48% -0.04% 98.52% 99.96%
3/14/2003 289.8 478.4 0.66% 1.16% 100.66% 101.16%
3/13/2003 287.9 472.9 3.41% 1.98% 103.41% 101.98%
3/12/2003 278.4 463.7 3.00% 0.89% 103.00% 100.89%
3/11/2003 270.3 459.6 -0.73% -0.78% 99.27% 99.22%
3/10/2003 272.3 463.2 3.14% -0.13% 103.14% 99.87%
3/7/2003 264 463.8 1.23% 0.11% 101.23% 100.11%
3/6/2003 260.8 463.3 0.00% -0.15% 100.00% 99.85%
3/5/2003 260.8 464.0 -0.84% -0.51% 99.16% 99.49%
3/4/2003 263 466.4 -2.41% -1.12% 97.59% 98.88%
3/3/2003 269.5 471.7 0.37% -0.17% 100.37% 99.83%
2/28/2003 268.5 472.5 -2.19% -0.44% 97.81% 99.56%
2/27/2003 274.5 474.6 -4.19% -0.90% 95.81% 99.10%
2/26/2003 286.5 478.9 -0.28% 0.44% 99.72% 100.44%
2/25/2003 287.3 476.8 -1.44% -0.75% 98.56% 99.25%
2/24/2003 291.5 480.4 -0.78% -0.62% 99.22% 99.38%
2/21/2003 293.8 483.4 0.89% 0.23% 100.89% 100.23%
2/20/2003 291.2 482.3 0.76% 0.50% 100.76% 100.50%
2/19/2003 289 479.9 -0.10% 0.02% 99.90% 100.02%
2/18/2003 289.3 479.8 -0.86% 0.13% 99.14% 100.13%
2/17/2003 291.8 479.2 -0.75% 0.50% 99.25% 100.50%
2/14/2003 294 476.8 0.20% -0.29% 100.20% 99.71%
2/13/2003 293.4 478.2 2.05% 0.48% 102.05% 100.48%
2/12/2003 287.5 475.9 -1.37% -0.42% 98.63% 99.58%
2/11/2003 291.5 477.9 0.93% 0.34% 100.93% 100.34%
2/10/2003 288.8 476.3 2.48% -0.06% 102.48% 99.94%
2/7/2003 281.8 476.6 2.06% 1.06% 102.06% 101.06%
PSE Historical 29

30. Jan Zika - Financial Analysis, Český Telecom, a.s.
Operating Lease Converter
Inputs (All Currency amounts in millions of CZK)
Operating lease expense in current year = 1,022
Operating Lease Commitments
Year Commitment Year 1 is next year, here it is 2003.
1 593
2 324
3 324
4 324
5 324
6 and beyond 1,046
Pre-tax Cost of Debt = 4.88% (from the ratings estimator, see Rating sheet)
From the current financial statements, enter the following
Reported Operating Income (EBIT) = 7,088 EBIT reported in the current income statement, CZK millions
Reported Debt = 22,254 Interest-bearing debt approximated from Interest-bearing debt/Equity ratio reported by CTc, CZK millions
Output
Number of years embedded in yr 6 estimate = 2 The average lease expense over the first five years is used
to estimate the number of years of expenses in yr 6
Converting Operating Leases into debt
Year Commitment Present Value
1 593 565
2 324 295
3 324 281
4 324 268
5 324 256
6 and beyond 523 768 Commitment beyond year 6 converted into an annuity for ten years
Debt Value of leases = 2,432
Restated Financials
Depreciation on Operating Lease Asset = 347 Straight line depreciation
Adjustment to Operating Earnings = 119 PV of operating leases * Pre-tax cost of debt
Adjustment to Total Debt outstanding = 2,432
Operating Lease Convertor 30

31. 1999 2000 2001
Revenue
Communications traffic revenues 30,207 30,218 27,464
Connection charges 1,664 2,028 1,249
Subscription charges 7,701 9,515 9,838
Revenue from other network operators 5,416 6,590 5,954
Telex, data transmission and other telephony 3,453 4,476 6,831
Equipment sales and sales of materials 808 1,244 970
Leased circuits 1,847 1,982 2,332
Other revenues 806 1,171 1,262
Total revenues 51,902 57,224 55,900
1999 2000 2001
Operating costs
Wages and salaries 5,327 5,418 5,395
Social security contributions 1,948 1,906 1,785
Staff welfare costs 292 397 374
Total staff costs 7,567 7,721 7,554
Depreciation of tangible fixed assets 12,810 13,804 14,723
Amortization of intangible fixed assets 599 821 2,317
Payments to other network operators 6,912 8,152 7,403
Equipment and material cost of sales 2,003 3,753 2,430
Repairs and maintenance 477 571 713
Advertising and promotion 1,105 1,634 1,527
Operating lease payments 615 640 719
Consultancy n/a 915 1,034
Other operating expenses 7,491 7,142 7,365
Total operating expenses 39,579 45,153 45,785
1999 2000 2001
Finantial costs
Contributed services from TelSource 544 634 (9)
Interest expense 3,154 2,690 2,178
Interest income (- means positive income) (413) (342) (467)
Currency gains/losses (- means gain) 596 (25) (358)
Total finantial costs 3,881 2,957 1,344
1999 2000 2001
Receivables and prepayments
Domestic trade receivables 5,788 6,260 6,930
Foreign currency trade receivables 232 292 335
Other debtors 1,699 1,653 385
Prepayments 513 594 665
Derivative instruments 0 0 1
Income tax receivable 369 211 0
VAT receivable 693 470 541
Total Receivables and prepayments 9,294 9,480 8,857
1999 2000 2001
Cash flow - Investing activities
Purchase of property, plant and equipment (15,118) (12,438) (12,732)
Purchase of intangible fixed assets (3,439) (4,950) (5,219)
Purchase of marketable securities 0 (11,998) (428)
Disposal of tangible fixed assets 28 119 467
Proceeds from marketable securities 4,241 5,223 6,061
Interest received 413 342 468
Net cash used in investing activities (13,875) (23,702) (11,383)
FS Breakdown 31