Eltel’s third quarter and full-year 2016 result significantly impacted by previously communicated challenges in certain projects

During 2016, Eltel has successively communicated increased market related as
well as operational challenges especially in certain projects within power
transmission and rail and road. These challenges have continued during the third
quarter, most significantly in certain of Eltel’s electrification projects in
Africa. As a consequence, Eltel’s third quarter 2016 EBITA is expected to be
approximately EUR 8 million. These challenges are expected to continue also in
the fourth quarter and management estimates the Group’s full-year 2016 EBITA to
be in the range of EUR 27-32 million.
Håkan Kirstein, Eltel’s new CEO as of September 19, 2016 comments: “The
challenges we currently have are mainly related to Eltel’s project business,
which accounts for approximately one third of total Group volumes. This business
has historically shown a profitable and well-managed track record over many
years. However, we take these recent deviations in certain projects very
seriously. Eltel’s management is currently carrying out a thorough review,
including planning of permanent corrective actions, to restore the situation in
this part of our business. The conclusions and an action plan will be in place
by mid-November. However, Eltel has already made a review of the larger projects
and has as a consequence of that made a conservative assessment of the risks in
those projects, which is reflected in the guidance provided above. At the same
time, it is important to note that the vast majority of Eltel’s operations are
performing well. We have a sizeable committed order backlog that is well
supported by both smart meter installations and fibre rollouts. In a longer term
perspective, Eltel’s position within the Infranet projects business is
considered to remain strong.”

In Eltel’s second quarter 2016 results, published in August, a provision of EUR
10 million was reported following the quality related performance issues in one
of two parallel rail projects in Norway. The second quarter interim report also
highlighted continued challenges in certain African power transmission projects,
effects from the lower order intake in the power transmission business over the
last twelve months as well as continued negative impact from the Norwegian rail
projects.

During the third quarter, these challenges have continued, most significantly in
the African electrification projects as a result of various factors such as
delays and limited access to site, consequential cost increases due to work
acceleration and other operational project issues. The biggest negative impact
on EBITA derives from power transmission with the majority being related to
these African projects. Profitability dilution impact from the other Norwegian
rail projects has been somewhat larger compared to previous internal
expectations. In addition, implementation costs for the shared services
transition and a bankruptcy of a Swedish subcontractor has had a negative impact
on third quarter performance.

Consequently, Eltel’s management expects Group EBITA for the third quarter 2016
to be approximately EUR 8 million when reported on 9 November.

The above mentioned challenges are expected to also impact net sales and
profitability in the fourth quarter 2016. Eltel estimates that EBITA for the
full year 2016 will be in the range of EUR 27-32 million, indicating an EBITA
for the fourth quarter in the range of EUR 10-15 million. In the estimate for
the fourth quarter, management has also considered the increased impact of
delayed customer investments in the Polish and German power markets and in the
German communication sector as communicated in connection with the second
quarter 2016 interim report.

Regarding 2017 management is now taking a more cautious stand concerning Eltel’s
project business within power transmission in Africa and rail and road in
Norway. Within the Power segment, it is estimated that net sales from power
transmission will decrease in 2017 compared to the level in 2016. This is due to
market related delays in customer investments, corrective actions in Eltel’s
project management and effects of weak order intake during the last twelve
months in power transmission.

Eltel will publish its third quarter 2016 interim report on Wednesday 9 November
2016 at 8.00 CET.

Today Eltel’s CEO Håkan Kirstein and CFO Gert Sköld will host an audiocast in
English starting at 08.30 CET. The event will be audiocasted live on
https://wonderland.videosync.fi/eltel-press-conference.

For those who would like to participate on the telephone conference in
connection with the audiocast, the telephone numbers are:

  · FI: +358 9 8171 0494
  · SE: +46 8 5664 2690
  · UK: +44 203 008 9804

Please, call in well in advance to register. There will also be an opportunity
to ask questions via audiocast or telephone conference.

For further information:
Ingela Ulfves
VP - IR and Group Communications
Tel: +358 40 311 3009, ingela.ulfves@eltelnetworks.com

This information is information that Eltel AB is obliged to make public pursuant
to the EU Market Abuse Regulation. The information was submitted for
publication, through the agency of the contact person set out above, on 14
October 2016 at 07.30 CET.

About Eltel
Eltel is a leading European provider of technical services for critical
infrastructure networks – Infranets – in the segments of Power, Communication
and Transport & Security, with operations throughout the Nordic and Baltic
regions, Poland, Germany, the United Kingdom and Africa. Eltel provides a broad
and integrated range of services, spanning from maintenance and upgrade services
to project deliveries. Eltel has a diverse contract portfolio and a loyal and
growing customer base of large network owners. In 2015 Eltel net sales amounted
to EUR 1,255 million. The current number of employees is approximately 9,600.
Since February 2015, Eltel AB is listed on Nasdaq Stockholm.