TELESTE CORPORATION INTERIM REPORT 1 JANUARY TO 30 SEPTEMBER 2006

TELESTE CORPORATION STOCK EXCHANGE RELEASE 24.10.2006 AT 14.00

TELESTE CORPORATION INTERIM REPORT 1 JANUARY TO 30 SEPTEMBER 2006

(Data unaudited. This interim report has been compiled in
compliance with IFRS IAS 34.)

- Net sales grew by 25.8% amounting to EUR 73.4 (58.3) million
- Operating profit grew by 37.7% equalling EUR 7.6 (5.5) million
- Undiluted result per share increased by 46% standing at EUR 0.32
(0.22)
- Orders received improved by 20.5% standing at EUR 73.3 (60.9)
million
- Orders received by Broadband Cable Networks increased by 21.7%
amounting to EUR 63.0 (51.8) million
- Orders received by Video Networks increased by 13.3% standing at
EUR 10.3 (9.1) million

Growth in Net Sales and Profitability

Year-on-year net sales grew by 25.8% amounting to EUR 73.4
(January to September 2005: 58.3) million. Compared to the same
time period in the previous year operating profit grew by 37.7%
standing at EUR 7.6 (5.5) million making 10.4% (9.5%) of net
sales. Undiluted result per share equalled EUR 0.32 (EUR 0.22).
Year over year, orders received improved by 20.5% standing at EUR
73.3 (60.9) million. Order backlog totalled EUR 22.7 (23.3)
million. Some EUR 6.9 million of deliveries in the backlog are
scheduled for 2007 or later. Contingency planning required for
deliveries under framework agreements involved, among others,
increased inventories, but therefore, delays in deliveries could
essentially be avoided towards the end of the review period.

Net sales in Q3 amounted to EUR 27.9 (20.4) million while
operating profit equalled EUR 3.5 (2.7) million making 12.5%
(13.4%) of net sales. Orders received in Q3 stood at EUR 24.9
(23.9) million.

Business Units

Broadband Cable Networks
Year-on-year net sales increased by 28.5% amounting to EUR 61.7
(48.0) million. Operating profit stood at EUR 7.2 (4.9) million.
This enhancement in the operating profit can be attributed to
increased net sales. Orders received improved by 21.7% from the
previous year standing at EUR 63.0 (51.8) million. Order backlog
totalled EUR 20.8 (18.4) million.

The Q3 net sales for the business was EUR 23.6 (16.6) million.
Operating profit stood at EUR 3.3 (2.3) million making 13.9%
(13.6%) of the net sales. Orders received in Q3 stood at EUR 20.4
(20.2) million.

Video Networks
Year-on-year net sales increased by 13% amounting to EUR 11.6
(10.3) million. Operating profit stood at EUR 0.4 (0.6) million.
Orders received by the business increased by 13.3% compared to the
same period in the previous year standing at EUR 10.3 (9.1)
million. Order backlog totalled EUR 1.9 (4.9) million. Drop in the
order backlog compared to the same time period in the previous
year is mainly due to revenue recognition from the project
involving the CCTV management system for the French National
Railway Authority (SNCF).

The Q3 net sales for the business was EUR 4.2 (3.8) million.
Operating profit stood at EUR 0.2 (0.5) million making 4.6%
(12.4%) of the net sales. Decreased profitability over the
corresponding period in 2005 is attributable to investments made
in network management resources and R&D. Orders received in Q3
stood at EUR 4.4 (3.7) million.

Personnel

At the end of September, the Group employed 607 (543) people, 177
of them stationed outside Finland. The number of staff does not
include hired labour amounting to 50 (19) persons at the end of
the review period.

R&D and Investments

At the end of September, the number of Teleste's R&D personnel was
128 (129). The R&D expenditure for the review period totalled EUR
5.9 (6.0) million making 8.1% (10.3%) of net sales. Activated R&D
expenses stood at EUR 0.9 (1.1) million. Depreciation on activated
R&D expenses for the period under review amounted to EUR 0.7 (0.4)
million. Investments for the Group totalled EUR 5.3 (2.5) million.
Priority areas included acquisitions, product development and
measuring instruments for production. To shorten the turnaround
time in R&D the company has placed an order for a new SMT
component placement line scheduled for commissioning in the first
half of 2007. In the period under review, the real estate in
Norway was sold with inconsequential capital gain.

Finance

Operating cash flow for the period under review stood at EUR -1.3
(2.3) million. In the relevant period the amount of working
capital tied was EUR 9.3 million consisting of short-term
receivables of EUR 8.5 million and inventories of EUR 6.2 million.
Increased inventories were designed to ensure availability of
components with longer-than-average delivery time. Non-interest
bearing liabilities grew by EUR 5.4 million. At the end of the
review period, liquid funds stood at EUR 9.6 (12.3) million. At
the end of September, interest-bearing debt for the Group stood at
EUR 14.9 million. Made investments and the increased working
capital were partially financed using interest-bearing debt. At
the end of September, in addition to liquid funds the company's
unused stand-by credits amounted to EUR 17 million. Teleste's
gearing ratio was 14.6% (-9%) while the equity ratio was 48.3%
(53.5%). Teleste hedges main exchange rate risks of forecasted
currency flows for six months ahead.

Shares and Shareholders

In the past year the trading price of shares fluctuated between
EUR 6.46 (5.85) and EUR 12.75 (8.35). The closing price at the end
of September was EUR 8.95 (8.15). According to the Finnish Central
Security Depository, the number of shareholders at the end of the
period was 5875 (6259) while foreign ownership accounted for 19.3%
(13.4%). The value of shares traded on the Helsinki Exchanges was
EUR 98.0 (57.5) million while the number thereof equalled 10.1
(8.4) million. In January 2006, Ilmarinen Mutual Pension Insurance
Company reported its ownership having increased up to 5.42%. In
August 2006, Schroder Investment Management Limited flagged their
holding to have reached 5.01%.

Decisions by the Annual General Meeting

The Annual General Meeting on 4 April 2006 confirmed the financial
statements for 2005 and discharged the Board and the CEO from
liability for the financial period. The AGM confirmed the dividend
of EUR 0.16 per share as proposed by the Board of Directors. The
dividend was paid out on 18 April 2006.

Composition of Teleste's Board remained unchanged. Mr. Tapio
Hintikka was re-elected as Chairman whilst Mr. Tero Laaksonen, Mr.
Pertti Raatikainen, Mr. Timo Toivila and Mr. Pekka Vennamo
continued as members on the Board of Directors.

Authorised Public Accountants KPMG Oy Ab continue as the auditor
for the financial period 2006.

The AGM authorised the Board to acquire the maximum of 1,215,000
of the company's own shares and to convey 1,700,000 company's own
shares. The AGM authorised the company to increase the share
capital by directed issue of no more than EUR 1,360,000 being
equal to 3.4 million shares. These authorisations expire on 4
April 2007. The authorisations granted by the AGM have been used
by conveying 30,000 own shares in the acquisition of the capital
stock of Suomen Turvakamera Oy; other authorisations have not been
used. Based on authorisations granted in 2001 and 2002, the
company is in possession of 455,000 of its own shares.

Outlook

In our estimation the current favourable development of the
Broadband Cable Networks business will continue in the last
quarter of 2006. We estimate accrual for orders placed for the
Ethernet to the Home (EttH) to start in the last quarter of the
year. We will sustain our focus on innovative network solutions
designed to support the cable operators' business and continue the
efforts in strengthening our command of fibre technology (FttH)
while developing and providing value added services suited to the
requirements of the cable operators.

Video Networks will sustain its efforts in chosen markets to
commoditise solutions tailored to meet requirements set by
specific industries. Additionally, the priority areas include
large-scale CCTV solutions related to traffic and urban area
surveillance.

Teleste's net sales and post-tax profit for 2006 will increase
from the previous year.

We estimate the market for 2007 to continue favourably in both our
businesses. However, changes in the ownership arrangements of some
cable operators may cause temporary delays in scheduled
deliveries. Order accrual for Video Networks is greatly dependent
on timing of decisions taken by public authorities in different
countries.

Teleste’s final accounts for the financial year 2006 will be
released on 30 January 2007.

24.10.2006

TELESTE CORPORATION Jukka Rinnevaara
Board of Directors President and CEO

Consolidated Statement of Income 1-9 1-9 Change % 1-12
(tEUR) /2006 /2005 /2005

Turnover 73 350 58 322 25.8 % 82 588
Change in inventories of 6 268 -399 n/a 761
finished goods
Other operating income 1 618 1 514 6.8 % 1 530
Materials and services -40 459 -25 250 60.2 % -36 443
Personnel expenses -19 720 -17 433 13.1 % -24 124
Other operating expenses -11 696 -9 795 19.4 % -13 791
Depreciation -1 769 -1 445 22.4 % -1 940
Operating profit 7 593 5 514 37.7 % 8 582

Financial income and expenses -306 -100 205.6 % -261
Profit after financial items 7 288 5 414 34.6 % 8 321

Profit before taxes 7 288 5 414 34.6 % 8 321

Taxes -1 864 -1 592 17.1 % -2 363
Minority share 0 -103 n/a 0
Net profit 5 424 3 719 45.8 % 5 956

Attributable to:
Equity holders of the parent 5 424 3 719 45.8 % 5 956
Minority interest 0 103 n/a 0
5 424 3 822 41.9 % 5 956

Earnings per share for profit of the year attributable to
the equity holders of the parent (expressed in EUR per share)
Basic 0.32 0.22 46.0 % 0.35
Diluted 0.30 0.21 45.7 % 0.33

Consolidated Statement of 7-9 7-9 Change %
Income (tEUR) /2006 /2005

Turnover 27 870 20 427 36.4 %
Change in inventories of -3 910 36 n/a
finished goods
Other operating income 376 610 -38.3 %
Materials and services -17 524 -9 929 76.5 %
Personnel expenses -6 461 -5 106 26.5 %
Other operating expenses -4 069 -2 745 48.2 %
Depreciation -610 -556 9.8 %
Operating profit 3 491 2 738 27.5 %

Financial income and expenses -156 11 n/a
Profit after financial items 3 335 2 749 21.3 %

Profit before taxes 3 335 2 749 21.3 %

Taxes -908 -809 12.2 %
Minority share 0 0 n/a
Net profit 2 427 1 940 25.1 %

BALANCE SHEET (tEUR) 30.9. 30.9. Change % 31.12.
2006 2005 2005
Non-current assets
Property, plant, equipment 5 691 5 872 -3.1 % 5 860
Goodwill 12 327 8 526 44.6 % 9 205
Intangible assets 3 272 2 049 59.7 % 2 589
Investments 1 116 1 116 0.0 % 1 116
22 406 17 563 27.6 % 18 770
Current assets
Inventories 15 807 8 772 80.2 % 9 623
Other current assets 26 380 17 640 49.5 % 17 878
Short-term investments 788 7 000 n/a 2 000
Liquid funds 8 832 5 294 66.8 % 6 524
51 807 38 706 33.8 % 36 025

Total assets 74 213 56 269 31.9 % 54 795

Shareholder's equity and liabilities
Share capital 6 954 6 935 0.3 % 6 935
Other equity 28 855 23 010 25.4 % 25 371
35 809 29 945 19.6 % 32 306
Minority share 0 71 n/a 0
35 809 30 016 19.3 % 32 306

Non-current liabilities
Provisions 515 609 -15.4 % 515
Non interest bearing 0 0 n/a 433
liabilities
Interest bearing liabilities 1 599 8 012 -80.0 % 706
2 114 8 621 -75.5 % 1 654
Short-term liabilities
Trade payables and other s-t 21 960 14 425 52.2 % 16 123
liabilities
Provisions 1 071 1 630 -34.3 % 1 502
S-t interest bearing 13 259 1 577 740.8 % 3 210
liabilities
36 290 17 632 105.8 % 20 835

Total shareholder's equity and 74 213 56 269 31.9 % 54 795
liabilities

Cash-flow (tEUR) 1-9 1-9 Change 1-12
/2006 /2005 % /2005

Cash-flow from operation -1 320 2 338 n/a 5 537
Cash in 67 783 54 341 24.7 % 84 118
Cash out -69 103 -52 003 32.9 % -78 581
Cash-flow from investments -4 758 -3 604 32.0 % -4 612
Cash in 321 0 n/a 0
Cash out -5 079 -3 604 40.9 % -4 612
Cash-flow from finance 7 224 -3 581 n/a -9 545
Cash in 10 094 0 n/a 3 000
Cash out -319 -1 564 -79.6 % -10 523
Emission 146 0 n/a 0
Paid dividend -2 697 -2 017 33.7 % -2 022
Other items -50 33 n/a 36
Effect of currency rates -50 33 n/a 36
Change in liquid funds 1 096 -4 814 n/a -8 584

Key figures 1-9 1-9 Change 1-12
/2006 /2005 % /2005
Earnings per share, EUR 0.32 0.22 46.0 % 0.35
Earnings per share fully 0.30 0.21 45.7 % 0.33
diluted, EUR
Shareholders' equity per 2.12 1.78 19.0 % 1.92
share, EUR

Return on equity 21.2 % 17.6 % 20.3 % 19.8 %
Return on capital employed 23.1 % 19.3 % 20.0 % 23.7 %
Equity ratio 48.3 % 53.5 % -9.9 % 59.1 %
Gearing 14.6 % -9.0 % n/a -14.3 %

Investments, tEUR 5 340 2 450 118.0 % 4 073
Order backlog, tEUR 22 662 23 294 -2.7 % 22 700
Personnel, average 604 537 12.5 % 546

Number of shares (thousands) 17 355 17 340 0.1 % 17 340
including own shares
Highest share price, EUR 12.75 8.35 52.7 % 8.35
Lowest share price, EUR 6.46 5.85 10.4 % 5.85
Average share price, EUR 9.79 6.81 43.8 % 6.97

Turnover, in million shares 10.1 8.4 19.8 % 10.8
Turnover, in MEUR 98.0 57.5 70.5 % 75.3

Treasury shares
Number Nominal % of % of
of value share votes
hares EUR capital

Parent company owns own 455 000 182 000 2.62 % 2.62 %
shares 30.9.2006

Contingent liabilities and pledged assets (tEUR)
For own debt
Guarantees 794 0 n/a 320
Mortgages on company assets 475 10 000 -95.3 % 0
Mortgages on properties 0 7 000 n/a 0
Leasing and rent liabilities 2 866 1 845 55,3 % 1 779
4 135 18 845 -78.1 % 2 099

Derivative instruments (tEUR)
Value of underlying forward 11 471 8 383 36.8 % 16 503
contracts
Market value of forward 11 430 8 584 33.2 % 16 597
contracts

Taxes are computed on the basis of the tax on the profit for the
period.

Primary segments information 1-9 1-9 Change 1-12
(tEUR) /2006 /2005 % /2005

Broadband Cable Networks
Order intake 63 044 51 803 21.7 % 72 850
Net sales 61 707 48 023 28.5 % 67 179
EBIT 7 206 4 875 47.8 % 7 374
EBIT% 11.7 % 10.2 % 15.0 % 11.0 %
Video Networks
Order intake 10 268 9 060 13.3 % 12 500
Net sales 11 643 10 299 13.0 % 15 409
EBIT 387 639 -39.4 % 1 208
EBIT% 3.3 % 6.2 % -46.4 % 7.8 %
Total
Order intake 73 312 60 863 20.5 % 85 350
Net sales 73 350 58 322 25.8 % 82 588
EBIT 7 593 5 514 37.7 % 8 582
EBIT% 10.4 % 9.5 % 9.5 % 10.4 %

Information per 7-9 4-6 1-3 10-12 7-9 10/2005-
quarter (tEUR) /06 /06 /06 /05 /05 9/2006

Broadband Cable Networks
Order intake 20 441 18 435 24 168 21 047 20 202 84 091
Net sales 23 627 19 121 18 959 19 157 16 583 80 864
EBIT 3 294 1 909 2 003 2 499 2 260 9 705
EBIT % 13.9 % 10.0 % 10.6 % 13.0 % 13.6 % 12.0 %

Video Networks
Order intake 4 428 3 045 2 795 3 490 3 716 13 758
Net sales 4 243 3 548 3 852 5 110 3 844 16 753
EBIT 197 40 150 569 478 956
EBIT % 4.6 % 1.1 % 3.9 % 11.1 % 12.4 % 5.7 %

Total
Order intake 24 869 21 480 26 963 24 537 23 918 97 849
Net sales 27 870 22 669 22 811 24 267 20 427 97 617
EBIT 3 491 1 949 2 153 3 068 2 738 10 661
EBIT % 12.5 % 8.6 % 9.4 % 12.6 % 13.4 % 10.9 %

Attributable to equity Share Share Transla Retai Total
holders of the parent capital premium tion ned
(tEUR) differen earnings
ces
Shareholder's equity 6 935 1 276 70 24 025 32 306
1.1.2006
Translation differences -50 -50
Profit of the period 5 424 5 424
Equity-settled share- 19 126 -2 016 -1 871
based payments
Shareholder's equity 6 954 1 402 20 27 433 35 809
30.9.2006

Distribution of Ownership Shares %
Companies 1 763 218 10.14%
Financial institutions 4 766 651 27.42%
Public institutions 2 926 283 16.83%
Nonprofit organisations 954 045 5.49%
Private individuals 3 613 122 20.78%
Foreign and nominee-registered 3 361 533 19.33%
Total 17 386 852 100.00%

Shareholders Shares %
1. Sampo Life Insurance Company Ltd 1 624 200 9.34%
2. Ilmarinen Mutual Pension 1 569 083 9.02%
Insurance Company
3. Kaleva Mutual Insurance Company 785 900 4.52%
4. FIM Fenno Mutual Fund 529 900 3.05%
5. Aktia Capital Mutual Fund 521 450 3.00%
6. Teleste Corporation 455 000 2.62%
7. Varma Mutual Pension Insurance 407 150 2.34%
Company
8. State Pension Fund 400 000 2.30%
9. Mutual Insurance Company Eläke-Fennia 350 000 2.01%
10. Nordea Nordic Small Cap Mutual Fund 305 350 1.76%

ADDITIONAL INFORMATION:
CEO Jukka Rinnevaara, tel +358 2 2605 866 or +358 400 747 488

DISTRIBUTION:
Helsinki Exchanges
Media
www.teleste.com