TELESTE CORPORATION'S FINANCIAL INFORMATION FOR 1998

TELESTE CORPORATION STOCK EXCHANGE RELEASE 1(10)
01.03.1999 AT 13.20

TELESTE CORPORATION'S FINANCIAL INFORMATION FOR 1998

Teleste Corporation specializes in broadband telecommunication
networks and multimedia based learning systems. Turnover in 1998
increased 13 % to FIM 393,0 million. Operating profit and profit after
financial items more than doubled to FIM 55,7 million and FIM 52,5
million respectively. Return on capital employed was 37,8 % and return
on equity was 60,3 %. Orders received increased 20 % to FIM 417,1
million. Earnings per share increased 105 % to FIM 2,27.

TURNOVER AND PROFITABILITY

The Group's turnover was FIM 393,0 million (1997: FIM 349,3 million),
which was FIM 43,7 million (13%) higher that the year before. Pro
forma figures are presented as comparative data. The principles
according which they are prepared are explained later in this release.
Approximately 90 % of the turnover was generated outside Finland.

Order intake increased by FIM 70,4 million (20%) to FIM 417,1 million.
Teleste Access Systems made the largest deal in its history in the
spring. A Belgian company Interelectra will purchase for its own
cableTV network equipment worth of FIM 70 million over four years. The
group's order backlog stood at FIM 55 million at the year end (1997:
FIM 30,2 million).

Operating profit was FIM 55,7 million (1997: FIM 26,9 million), which
was FIM 28,8 million (107 %) higher than previous year.

Teleste Access System's, that specializes in fast broadband network
technology, turnover reached FIM 245,8 million (1997: FIM 212,7
million) growing 16 %. Division's operating profit increased 65 % to
FIM 43,9 million (1997: FIM 26,7 million). Order intake was FIM 271,1
million (1997:FIM 202,0 million), or 34 % higher than last year.

Teleste Educational's, that concentrates on multimedia environments
for language learning, turnover was FIM 70,4 million (1997: FIM 69,5
million), an increase of 1 %. Operating profit was 66 % higher than
previous year, reaching FIM 6,8 million (1997: FIM 4,1 million). Order
intake decreased 5 % to FIM 66,0 million (1997: FIM 69,3 million).

Teleste Home Network's, that specializes in TV signal distribution in
the UK, turnover was FIM 81,4 million (1997: FIM 72,3 million), 12 %
higher than last year. Operating profit increased 55 % to FIM 4,8
million (1997: FIM 3,1 million). Division's order intake was FIM 83,9
million (1997: FIM 79,9 million), an increase of 5 %.

The group's profit after financial items increased 115 % to FIM 52,5
million (1997: FIM 24,4 million). Net profit was FIM 41,8 million
(1997: FIM -13,2 million). Earnings per share adjusted for
extraordinary items were FIM 2,27 (1997: FIM 1,11).

Return of capital employed stood at 37,8 % (1997: 20,2 %) and return
on equity at 60,3 % (1997: 20,0 %).

EXTRAORDINARY ITEMS

Extraordinary income comprised deferred tax asset related to previous
years. In 1997 the extraordinary expense was a group goodwill write-
off, which was created in connection of acquiring Teleste Oy shares.

R&D AND INVESTMENTS

R&D costs during the period amounted to FIM 24,9 million (1997: FIM
24,6 million) and were booked as annual expenses. The expenses include
mostly R&D personnel costs increased by 12 %, and purchases of
equipment.

Investments for the year, excluding investments in subsidiary shares,
amounted FIM 12,2 million (1997: FIM 8,6 million). Investments were
mainly focused on information technology and measuring equipment for
production. The largest single investment was a surface-mounting
machine for Teleste Home Networks. The Group renewed its operative
computer systems in all three divisions.

FINANCE

The Group's liquidity remained good during the year. Liquid funds
stood at FIM 14,5 million, at the year-end. The Group's equity ratio
was 34 % (1997: 17 %) and gearing 66 % (1997: 107 %). The interest
bearing debt at 31.12 was FIM 67,6 million. The Group had unused
credit facilities amounting FIM 30 million at year end.

The Group's hedging policy is to cover all material currency risks at
least six months ahead.

PERSONNEL

The Group employed during the year on average 563 persons (1997: 560).
At the year-end the Group employed 581 persons. New personnel were
hired mainly for the R&D and sales functions.

ADDITIONAL PURCHASE PRICE

The group paid during the year, in accordance with the agreement with
Merita Invest Oy, two lots an additional purchase price of FIM 50
million for the shares of Teleste Oy. The goodwill created from this
will be depreciated over the next ten years. Goodwill depreciation for
1998 was FIM 1,0 million.

GENERAL MEETINGS

The Annual General Meeting on April 14, 1998 decided that cumulative
losses are covered from the reserve fund. Teleste Group Oy showed a
loss of FIM 24,3 million in its closing of 1997. This loss included a
onetime write-off of FIM 23,0 million, which was related to the
acquisition of Teleste Oy.

The Extraordinary General Meeting on December 7, 1998 decided to
change the juridical form of the company to a public company. Also the
Meeting decided to change the name of the company to Teleste
Corporation (previously Teleste Group Oy).

CHANGES IN GROUP STRUCTURE

The Group structure was simplified by merging Teleste Oy to Teleste
Corporation on December 31, 1998. In the UK the name of Teleste
Cablevision Ltd was changed to Labgear Ltd and in Germany Teleste
Antenni GmbH to Teleste GmbH.

During the year Teleste Access Systems division established sales
offices in Spain, France and China. Teleste Educational division
opened a sales office in the USA in the beginning of 1999. On the
other hand the French operations of Teleste Educational were
outsourced and the activities in the subsidiary Auditek SA. will be
closed during the first part of 1999.

YEAR 2000 AND EURO

The Group established during the year a project to ensure; that the
possible computer problems generated by year 2000 would not have an
impact on Group's business activities. The target is to bring all IT
systems in the Group year 2000 compatible before summer 1999.

The Group will publish its financial information in euros starting
from the first interim closing in 1999.

OUTLOOK FOR 1999

The positive growth development for the whole Group is expected to
continue during this year and the level of profitability is expected
to remain good.

Teleste Access Systems will continue its investments to increase
turnover. The new products and new offices, which were opened in
France, Spain and China in 1998, lay a solid foundation to increased
turnover. Profitability is forecasted to remain good also in year
1999.

Teleste Educational will face in the market place continuing transfer
from traditional language laboratories to new generation multimedia
products, which, together with the economic instability in Latin
America and Asia, makes it more difficult to forecast development in
1999. The new technology is expected to create long-term possibilities
to substantially increase turnover.

Teleste Home Networks is forecasted to increase its turnover. There
are good possibilities to improve profitability during the current
year. Changes in the ownership of the largest customers might have an
effect on the development in 1999.

DISTRIBUTION OF PROFITS

Distributable funds according to consolidated balance sheet were FIM
39,9 million. The parent company's distributable funds were FIM
27.372.480,16. The Board of Directors proposed that a dividend of FIM
7.200.000 (FIM 1,80 per share) will be paid and that the rest FIM
20.172.480,16 will be retained and carried forward. The Annual General
Meeting accepted the proposal.

PRINCIPLES OF PRO FORMA STATEMENT OF INCOME

The pro forma financial statements for 1997 have been prepared as if
the Teleste Corporation group had been formed in 1 January 1997. The
figures are based on the consolidated financial statements of Teleste
Oy for the period January to August 1997 and the consolidated
financial statements of the group for the period August to December
1997. Interest expenses have been recalculated to reflect incremental
interest expenses for twelve months. The Group's taxes have been
adjusted to reflect the change in financial expenses as well as change
in deferred tax assets.

TELESTE CORPORATION

Teleste is an international technology group founded in 1954, which is
specialized in broadband telecommunication and multimedia environments
for language learning. All divisions are among the leading companies
in their businesses.

Teleste Access Systems is Europe's leading technology developer and
systems and equipment supplier for broadband cable networks. The
networks are able simultaneously to transfer video, sound and data bi-
directionally. Teleste Access Systems is also a leading provider of
signal transfer equipment for surveillance networks.

Teleste Educational is world's leading developer and supplier of
analogue and digital language learning environments.

Teleste Home Networks produces equipment for TV signal distribution
and control for home and business environments in the UK.

INCOME STATEMENT 1.1. - 31.12.1998

1998 1997 1997
27.8-31.12. Pro forma

NET SALES 393 046 132 521 349 326
Change in inventories of 1 760 3 257 3 674
finished goods
Other operating income 1 930 1 538 3 239

Material and services -154 267 -55 992 -144 257
Personnel costs -107 107 -40 011 -101 627
Depreciation and amortization -15 857 -4 649 -13 454
Other operating expenses -63 772 -29 317 -70 000

Operating profit 55 733 7 347 26 901

Financial income and expenses -3 256 88 -2 458

Profit after financial items 52 477 7 435 24 443

Extraordinary items 5 500 -30 970 -30 970

Profit before taxes 57 977 -23 535 -6 527

Income taxes -16 203 -2 522 -6 661
Minority interest 0 5 4

Net income 41 774 -26 052 -13 184

BALANCE SHEET 31.12.1998

1998 1997
Fixed assets
Intangible assets 1 310 1 013
Goodwill 51 032 3 999
Tangible assets 51 338 52 904
Investments 267 276
103 947 58 192
Current assets
Inventories 43 513 43 933
Current receivables 74 413 57 902
Cash in hand and at bank 14 517 75 729
132 443 177 564

Total assets 236 389 235 755

Shareholders' equity
Share capital 40 000 50
Share issue 0 64 919
Reserves 723 31
Retained earnings -1 865 -12 091
Net income for the period 41 774 -13 184
80 632 39 725

Obligatory provisions 20 088 15 974

Liabilities
Long-term liabilities 48 031 92 385
Current liabilities 87 638 87 671
135 669 180 056

Total Liabilities 236 389 235 755

CASH FLOW STATEMENT

31.12.98 31.12.97 31.12.97
Pro forma

CASH FLOW FROM OPERATIONS
Operating profit 55 733 7 347 26 901
Adjustment to operating profit 19 387 20 623 23 967
Change in net working capital -5 734 -44 165 -3 163
Interest income 2 048 1 218 2 304
Interest expenses -3 603 -201 -5 236
Dividend income 18 0 21
Other financial items -1 719 -924 453
Taxes paid -16 203 -2 522 -6 661
Extraordinary items 5 500 0 0

CASH FLOW FROM OPERATIONS 55 426 -18 624 38 586

INVESTMENTS
Shares in Group companies -50 800 -35 916 -182 880
Other shares 0 -276 -19
Other tangible assets -12 163 -57 626 -8 594
Sale of shares 9 0 0
Sale of other tangible assets 584 8 839
CASH FLOW FROM INVESTMENTS -62 370 -93 810 -190 654

CASH FLOW BEFORE FINANCING -6 944 -112 434 -152 068

FINANCING
Change in long-term liabilities -44 386 92 385 76 443
Change in short-term liabilities -10 358 30 000 30 000
Share issue 0 65 000 65 000
Others 476 778 91
FIANNCING TOTAL -54 268 188 163 171 534

CHANGE IN LIQUID FUNDS -61 211 75 729 19 466
Liquid funds 1.1. 75 729 0 56 263
Liquid funds 31.12. 14 517 75 729 75 729

Net sales by division 1998 1997 1997
27.8.-31.12. Pro forma
Access Systems 245 769 71 100 212 577
Educational 70 438 31 200 69 500
Home Networks 81 416 30 899 72 399
Administrative/intracorporate -4 577 -678 -5 150
Total 393 046 132 521 349 326

Net sales by market area 1998 1997 1997
27.8.-31.12. Pro forma
Finland 39 145 16 129 42 000
Scandinavia 59 675 20 315 51 000
Other EU 218 818 73 542 202 626
Other Europe 25 819 8 456 23 700
North America 9 320 3 488 6 865
Asia 14 483 5 811 13 834
Others 25 786 4 779 9 301
Total 393 046 132 521 349 326

Operating profit by division 1998 1997 1997
27.8.-31.12. Pro forma
Access Systems 43 950 6 450 26 750
Educational 6 800 5 130 4 130
Home Networks 4 754 3 700 3 100
Group/consolidation* 229 -7 933 -7 079
Total 55 733 7 347 26 901

* 1997 includes a obligatory provision for an ongoing
arbitration

Personnel by division at the year end

1998 1997 1997
27.8.-31.12. Pro forma
Access Systems 319 308 308
Educational 94 92 92
Home Networks 160 148 148
Group staff 8 7 7
Total 581 555 555

Financial income and expenses

1998 1997 1997
27.8.-31.12. Pro forma
Interest income 2 048 1 218 2 304
Interest expenses -3 603 -201 -5 236
Depreciation on investments -17 0 0
Currency differences 148 -64 1 813
Other financial items -1 851 -865 -1 360
Dividend income 18 0 21
Total -3 256 88 -2 458

Extraordinary income and expenses

1998 1997 1997
27.8.-31.12. Pro forma
One-time write-off of group 0 -30 970 -30 970
goodwill
Deferred tax asset prior 1998 5 500 0 0

Contingent liabilities and pledged assets

1998 1997
Debts covered by mortgages
Bank loans 67 462 118 390
Mortgages 17 750 17 750
Pledge subsidiary shares 0 159 880

Leasing liabilities
For next year 1 697 1 228
For later years 1 173 1 112

Other liabilities
Bank guarantees 1 216 1 591
Rental liabilities 7 300 10 100

Derivative instruments

1998 1997
Foreign exchange forward contracts 62 184 53 625
Derivative instruments are used only to hedge currency exchange risks.

Inventories

1998 1997
Raw materials and consumables 19 924 20 660
Work in progress 11 392 10 175
Finished goods 12 198 13 098
Total 43 513 43 933

Current assets

1998 1997
Accounts receivable 64 224 50 439
Deferred tax assets 2 722 0
Other receivables 2 575 2 911
Accrued receivables 4 892 4 552
Total 74 413 57 902

Long-term liabilities

1998 1997
Bond loans 31 23
Bank loans 48 000 88 390
Deferred tax liability 0 3 972
Total 48 031 92 385

Current liabilities

1998 1997
Bank loans 19 642 30 000
Advances payments received 390 1 031
Accounts payable 24 115 15 496
Other current liabilities 4 751 10 996
Accruals 38 740 30 147
Total 87 638 87 671

KEY FINANCIAL INDICATORS

1994 1995 1996 1997 1997 1998
Proforma Proforma Proforma Proforma Official

Net sales, 389,8 424,4 330,7 349,3 132,5 393,0
MFIM
Change % 4,0 % 9,0 % -22,0 % 5,6 % 12,5 %
Activities 83 % 88 % 90 % 88 % 88 % 90 %
outside
Finland

R&D 28,1 33,1 23,7 24,6 9,5 24,9
expenditure,
MFIM
% of sales 7,2 % 7,8 % 7,2 % 7,0 % 7,1 % 6,3 %

Investments, 4,2 16,2 13,1 191,5 186,5 63,0
MFIM
% of sales 1,1 % 3,8 % 4,0 % 54,8 % 140,2 % 16,0 %

Personnel, 704 650 566 560 560 563
average
Net sales per 554 653 584 624 713 698
person, 1000
FIM
Order book, 74,0 52,0 36,8 30,2 30,2 55,0
MFIM

Profitability
Operating 16,4 31,4 16,5 26,9 7,3 55,7
profit, MFIM
% of sales 4,2 % 7,4 % 5,0 % 7,7 % 5,5 % 14,2 %

Profit after 13,7 28,8 17,3 24,4 7,4 52,5
financial
items, MFIM
% of sales 3,5 % 6,8 % 5,2 % 7,0 % 5,6 % 13,4 %

Profit before 7,4 17,8 8,3 -6,5 -23,5 58,0
taxes, MFIM
% of sales 1,9 % 4,2 % 2,5 % -1,9 % -17,8 % 14,8 %

Net income, 5,8 13,1 3,2 -13,2 -26,1 41,8
MFIM
% of sales 1,5 % 3,1 % 1,0 % -3,8 % -19,7 % 10,6 %

ROE % 7,3 % 14,5 % 8,8 % 20,0 % - 60,3 %
ROCE% 9,6 % 19,3 % 13,0 % 20,2 % - 37,8 %

Equity ratio 59,4 % 55,5 % 60,7 % 16,9 % 16,9 % 34,2 %
Gearing -5,8 % -22,5 % -32,5 % 107,0 % 107,0 % 65,9 %

The proforma statement of incomes for 1994-1996 have been calculated
from Teleste group's figures by canceling group contributions and
taking into account the tax effect from this. There are no corrections
in the balance sheets.

Teleste Corporation
Timo Toivila
CEO

Further information:

CEO Timo Toivila, tel. +358 2 2605 866 or +358 400 630 484
CFO Antti Salminen, tel. +358 2 2605 725 or +358 40 535 1216

Internet: This release can be found from Teleste's home pages
www.teleste.com

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