RapoRt anual

annual REpoRt 2005Bd. Libert`]ii nr.14, Sector 5

Bucure[ti 050706, RomåniaTel: +40 31 500 3001, +40 21 307 3001,

Fax: +40 21 311 4132www.radiocom.ro

14, Libert`]ii Bvd., Bucharest,sector 5, 050706, Romania

Phone: +40 31 500 3001, +40 21 307 3001, Fax: +40 21 311 4132www.radiocom.ro

Cuprins / Contents

�

1. MESAJUL PRE{EDINTELUI / CEO MESSAGE

2. PREZENTARE RADIOCOM / ABOUT RADIOCOM

2.1. Viziune – Misiune - Clien]i / Vision – Mission - Clients

2.2. Profil companie / Company Profile

2.3. Echipa RADIOCOM / RADIOCOM Team

2.3.1. Structura organizatoric ̀/ Company Organization

2.3.2. Resurse umane / Human Resources

3. RADIOCOM ÎN ANUL 2005 / RADIOCOM IN THE YEAR 2005

3.1. Dezvoltare comercial` / Commercial Development

3.1.1. Broadcasting / Broadcasting

3.1.2. Telecomunica]ii / Telecommunications

3.2. Dezvoltare infrastructur` / Infrastructure development

3.3. Investi]ii / Investments

3.4. Retrospectiva anului \n evenimente / Highlights of 2005

4. PROIECTELE RADIOCOM PENTRU ANUL 2006 / FUTURE PROJECTS 2006

5. DATE FINANCIARE / FINANCIAL STATEMENTS

pg. 5

pg. 7

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pg. 9

pg. 11

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pg. 13

pg. 15

pg. 15

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pg. 17

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pg. 27

pg. 29

pg. 33

pg. 44

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�. CEO MESSAGEMotto:„Our unique resources and abilities make us to believe that we can be a communications integrator and a player respected by our clients and competitors."

�

To the National Company of Radiocommunications this year has been under the sign of big challenges. Having a new management team, our company imposed to it extremely ambitious targets and now, at the end of the year, we are satisfied that most of them have been accomplished. Having a history of almost seven decades and a big tradition in

the field, we have been aware even from the beginning about the responsibility we had: to continue and keep alive this tradition, the company’s modernization in keeping with the requests of 21st century and entering into directly competition with the biggest operators on the communications market. We launched the new brand RADIOCOM, registered mark of the National Company of Radiocommunications, together with a project for imposing it both on business background and public awareness. Starting from the reality that RADIOCOM holds a national infrastructure in its patrimony, formed by redundant communications networks, even from the beginning we tried to exploit this advantage and the results didn’t delay. To the two main domains of activity – broadcasting and telecommunications – we added a various services portfolio, mainly addressed to business segment: Internet, VPN, leased lines, national and international telephony, integrated services of communications: data & Internet & telephony, videoconferencing, satellite communications services. The broadcasting services, that bring the biggest revenues to RADIOCOM, registered an outstanding growth of 61 % in comparison with last year. The accumulations got from our services allowed us to make investments of € 37.2 millions, the most part of these being directed both to broadcasting sector (€ 31.16 millions) and telecommunications sector (€ 4.41 millions) as well as other destinations such as infrastructure, designing etc. (€ 1.59 millions). Without making a hierarchy of our achievements this year, I still do consider that the biggest achievement is launching the service T-DAB (Terrestrial Digital Audio Broadcasting) for private radio channels, that provides high quality sound, data transmission in connection with broadcasted programs (information about broadcasted songs, programs, traffic information, emergency calls) as well as a quality receiving in running vehicles but also very good receiving in case of signal interference from cities and mountain zones and also receiving of images and text. Everything we done and we achieved over this year has been possible only due to the contribution of all the employees of the company. The RADIOCOM team, which is formed by more than 2,200 specialists, undoubted represented the decisive factor in developing and asserting it on the communications market. I am convinced that only together we can succeed in making RADIOCOM the main national broadcasting services provider for radio and television public and private channels, imposing us on the regional communications market also. In the year to come we will confront with another provocation, maybe the biggest one: RADIOCOM’s privatisation. I am convinced we will succeed to rally all our resources and transform the state RADIOCOM Company into a private, modern, dynamic and profitable one.

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�. ABOUT RADIOCOM

�.�. Vision – Mission - Clients

Vision:

We wish to become the main national provider both of broadcasting services for public and private radio &TV programs and networks and electronic communications services. With a remarkable presence on the regional market and an outstanding position on the local market of electronic communications, we aim to transform us from a state company into a modern and profitable private company.

Mission:

• Providing of high quality broadcasting and communications services

• Transforming into a modern, efficient and profitable company

• Stimulating the performance and providing an attractive work ambiance for the employees

Clients:

• RADIOCOM Clients are not an interruption of our work – they are the purpose of it. We are not doing them a favour by serving them – they are doing us a favour by giving us an opportunity to do so.

• RADIOCOM Clients are the most important persons ever in this company – in person or by mail.

• RADIOCOM Clients are persons who bring us their wants. It is our job to handle them profitably to them and to ourselves.

• RADIOCOM Clients are not someone to argue or match wits with. Nobody ever won an argument with a customer.

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�. ABOUT RADIOCOM

�.�. Company Profile

RADIOCOM, registered mark of the National Company of Radiocommunications is one of the main providers of networks and electronic communications services in Romania and at the same time leader on broadcasting market. Today, RADIOCOM is undoubted a 100 % Romanian ascending brand, whose history began in 1936 together with putting into operation the radio broadcasting transmitter in Bod. Therefore for over fifty years RADIOCOM is a continuous and active presence on the telecommunications market in Romania, in 1956 being achieved the first television public transmission and in 1957 has been put into operation the first transmitter for broadcasting of public television program. RADIOCOM’s infrastructure supports the radio communications sector in Romania through its broadcasting and telecom services offered to the interested companies. RADIOCOM holds and operates a RR SDH network, an ATM / MPLS backbone achieved with Cisco equipment, a PMP (point-multi point) 3.5 GHz and 26 GHz and a voice network, all these networks being redundant and compatible with each other. RADIOCOM holds as well the biggest satellite communications Earth Station in the South – East of Europe. Considering its two domains of activity, broadcasting and telecommunications, RADIOCOM continuously developed it, proving maturity and innovation. The various services portfolio provided by RADIOCOM is mainly addressed to business segment: Internet, VPN, leased lines, national and international telephony, communications integrated services: data & Internet & telephony, videoconferencing, satellite - based communications. Together with launching of the services: prepaid cards and post paid cards for national and international calls, RADIOCOM extended the addressing of its services towards the end users segment also. The guarantee of RADIOCOM services quality has been consolidated by obtaining the certification for Integrated Quality, Environmental, Occupational Health and Safety Management System according to ISO 9001:2000, ISO 14001 and OHSAS 18001 standards. This certification represents both our management and personnel engagement for providing the best quality services by using the most modern communications technologies. The first priority of RADIOCOM is satisfying its clients starting from the following premises:

• customer understanding

• receptivity for the client needs

• quality / price ratio

• promptness of our actions

• loyalty to our partners

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�. ABOUT RADIOCOM

�.�. RADIOCOM Team

�.�.�. Company Organization

RADIOCOM is hierarchically structured as follows:

• central administration that includes also:

ÿ Training Centre Radiocommunications - Tancabesti

ÿ Satellite Communications Centre - Cheia – the most important gate for coming in and coming out of data transmissions, voice, radio and video communications in Romania.

• 4 divisions, without legal personality:

ÿ Bucharest Division performs its activity in Bucharest and in 17 district capital towns of the country namely: Ilfov, Giurgiu, Arge[, Teleorman, Tulcea, Vâlcea, Prahova, Olt, Gala]i, Constan]a, Bra[ov, Buz`u, Covasna, Dâmbovi]a, C`l`ra[i, Br`ila and Ialomi]a.

ÿ Cluj Division performs its activity in Cluj and in 10 districts of Transylvania country’s area: Alba, Bihor, Bistri]a-N`s`ud, Cluj, Harghita, Maramure[, Mure[, Sibiu, Satu-Mare and S`laj.

ÿ Ia[i Division performs its activity in Iasi and in 8 districts of Moldavia country’s area: Ia[i, Bac`u, Neam], Suceava, Boto[ani, Vaslui, Vrancea and Gala]i.

ÿ Timi[oara Division performs its activity in the following districts: Timi[, Arad, Hunedoara, Gorj, Dolj, Mehedin]i and Cara[ - Severin.

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�.�.�. Human Resources

RADIOCOM is a medium size company with over 2,200 employees. Regarding its two domains of activity - broadcasting and telecommunications - over 50 % of the employees are working in broadcasting, 25 % are specialized in telecommunications activities and the rest is working in services connected with both main domains of activity. In order to meet the currently training needs in information technology and communications, in 1998, May 18th, RADIOCOM inaugurated its own Training Centre, by a PHARE project. The study methods, subject courses and teaching methods are based on PHARE consultancy at European level. This is the only Training Centre in Romania where are held courses in radio communications domain and there are certified the occupational titles in the field. The courses are focused to grow the knowledge level of the own personnel but also meet interested students halfway from outside the company. Starting with the year 2000 the Training Centre is certified according to the regulations of the Ministry of Education and Research. At the end of the training programs the students get graduation certificates issued by the National Council for Adult Vocational Training (NCAVT). In these certificates acknowledged on the labour market are mentioned the occupational titles in the field got by every student. The graduation certificates issued by the Ministry of Labour, Social Solidarity and Family and by the Ministry of Education and Research) certify the training level and practical abilities gained by the students at the end of the courses. These certificates are the only legal documents according to the Dictionary of Occupational Titles.

The Training Centre is authorized as:

• Training Centre

• CISCO Local Academy

• Evaluation and Certification Centre, attested by NCAVT

• Adult Professional Training Centre, attested by NCAVT

�. ABOUT RADIOCOM

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�. RADIOCOM IN THE YEAR �00�

�.�. Commercial Development

�.�.�. Broadcasting

One of the ways you feel yourself connected to the whole world is the access to the public radio

and television programmes.

RADIOCOM is the company that makes possible to get into our homes the information, news,

entertainment shows and films.

RADIOCOM offers the following broadcasting services:

• TV Broadcasting: broadcasting of the national public programs of the Romanian Television

Company through the biggest television transmitters and transposers network

• Radio Broadcasting: broadcasting of the national public programs of the Romanian Radio

Broadcasting Company countrywide and abroad through the biggest radio broadcasting transmitters

network

• Ocassional TV transmissions

• T-DAB (Terrestrial – Digital Audio Broadcasting): digital broadcasting of the radio programs; this

service is provided to the Romanian Radio Broadcasting Company (Romania Actualitati, Romania

Muzical, Antena Bucurestilor), Pro FM, and Radio Romantic through a pilot project in Bucharest

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�. RADIOCOM IN THE YEAR �00�

�.�.�. Telecommunications The quality of its infrastructure and services permitted RADIOCOM to gain the confidence of many important clients in various fields, thus our company imposed it as an important player on the communications market in Romania, the name RADIOCOM becoming more and more known and respected.

The telecom segment includes the following services portfolio:

• Leased lines

• Internet - BiNet®

• VPN

• Integrated services of communications: telephony & VPN & Internet

• Telephony : - Prepaid cards, euro 3, 5, 10 and 15, for national and international calls both from Romania to abroad and from abroad to Romania - post paid cards

• Satellite communications provided through the Satellite Communications Centre from Cheia: - Data transmissions and telephony – provided through DAMA and IDR / IBS technologies - Digital radio broadcasting – provided through TV Digital Platform

• Videoconferencing

• Renting of spaces and antennas supports At present RADIOCOM portfolio includes almost all the telecommunications operators in Romania who use our infrastructure as well as companies from important sectors of our economy such as: banks, financial institutions, multinational companies etc.

The revenues share obtained by RADIOCOM from selling the above-mentioned services is as follows:

¢ Renting tehnical¢ Leased lines revenues¢ Internet revenues¢ Telephony revenues¢ Other revenues

6%

33%

38%

12%

11%

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�. RADIOCOM IN THE YEAR �00�

Turnover evolution

Revenues analysis

The electronic communications market in Romania that includes both fix and mobile traditional operators and new players who offer integrated services of telephony, satellite and cable television as well as Internet access, exceeded € 3 billions in 2005 and the estimations for 2006 and the next years forecast a growing rate of over 20%.

The evolution of RADIOCOM revenues in �00� is presented in the diagram below:

¢ Broadcasting revenues¢ Telecommunications revenues¢ Occasional transmissions revenues

4%

75%

21%

Total revenues

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�. RADIOCOM IN THE YEAR �00�

�.�. Infrastructure Development

�.�.�. Broadcasting

Analogue TV Broadcasting: broadcasting of the public programs of the Romanian Television Company through the biggest television transmitters and transposers networks in Romania. In 2005 has been initiated an ample project of modernization and development of these networks. This project will be finalized in 2006. As part of this project has been acquired last generation equipment. “TVR 1” network – will have 39 high power and 530 low power transmitters that cover about 99% of the population of the country. “TVR 2” network – will have 48 high power and 35 low power transmitters that cover about 90.07% of the population of the country. “TVR Regional” network – will have 5 high power transmitters that broadcast in the following cities: Timisoara, Craiova, Cluj, Tg. Mures and Iasi. Analogue Radio Broadcasting: broadcasting of the public programs of the Romanian Radio Broadcasting Company, countrywide and abroad, through the biggest radio broadcasting transmitters: 47 AM transmitters in long, medium and short waves and 113 FM-CCIR transmitters. Excepting short waves transmitters all the other equipment are modern, under full solid-state technology. Most of the transmitters have been installed during 2003-2004 and broadcasted the public radio programs at international quality standards. The radio transmitters belonging to RADIOCOM are distributed according to the broadcasted programs as follows:

• For broadcasting the program ’’Romania Actualitati’’ it is used a network of 23 AM transmitters and a network of 59 FM transmitters, together covering about 99.9% of the Romanian population.

• For broadcasting the program ’’Romania Cultural’’ it is used a network of 41 FM transmitters that covers about 97% of the Romanian population.

• For broadcasting the regional, territorial and local programs are used the following transmitters networks:

• AM (Timisoara Studio, Antena Satelor),

• FM (Romania Muzical, Radio Bucharest, Resita Studio),

• Mixt: AM and FM (Constanta Studio, Iasi Studio, Craiova Studio, Targu Mures Studio, Cluj Studio).

• For broadcasting the radio programs abroad it is used a network of 5 short waves transmitters installed in the Broadcasting Stations from Tiganesti (2), Galbeni (2) and Saftica (1).

Digital Radio Broadcasting (T-DAB): broadcasting of the public programs of the Romanian Radio Broadcasting Company (Romania Actualitati, Romania Muzical and Radio Bucharest) as well as the programs of private programs (Pro FM and Radio Romantic).

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�.�.�. Telecommunications

In telecommunications the company investments allowed the development of a modern, last-generation and strong infrastructure formed by high capacity RR SDH network, a PMP national access network (26 GHz and 3.5 GHz) by using ATM/MPLS, completed by the Satellite Communications Centre from Cheia.

�. RADIOCOM IN THE YEAR �00�

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�. RADIOCOM IN THE YEAR �00�

• RR SDH Network, developed with Bosch – Marconi equipment, has a total length of over 2,500

Km, it is completed by a high capacity national RR analogue network with a length of 16.000 Km

and links the big cities of Romania. On the digital RR network SDH can be distributed waves E1, E3

and STM1 between the existing insertion points. The performances of the SDH / PDH network are

according to the European and international standards (ETSI and ITU).

• PMP access network based on ATM / MPLS technology (3.5 GHz and 26 GHz) – has been developed

on a PDH backbone that had a total length of over 2,900 km. Over that has been implemented a network

that used ATM technology. The PMP access network covers all the district capital cities in Romania,

putting together both the high transmission capacity on backbone and the last-mile access.

• ATM/MPLS national network – it is developed at national level and has a total length of over

4,600 Km. Implemented with CISCO equipment, this network has been authorized by the equipment

provider through Cisco Powered Network (CPN) program. This way RADIOCOM gained the right to

advertise this sign in order to prove the highest quality of its network.

• Voice network (VocalTec equipment) – it is an IP telephony network based on the last generation

VocalTec equipment on an invoicing system ensured by MIND company. At international level the

telephony network is interconnected with well-know operators (Deutsche Telekom, Matav) and at

national level with Romtelecom and the mobile telephony operators in Romania.

In �00� have been achieved some projects that contributed to the development of the RADIOCOM

telecommunications infrastructure such as:

• installation of new access points in the network in the following districts: Reghin (PMP 3.5

GHz), Medias (PMP 3.5 GHz), Mangalia (PMP 3.5 GHz), Tecuci (PMP 3.5 GHz), Navodari (3.5 GHz), Lugoj

(PMP 3.5 GHz), Carei (5.7 GHz), Caracal (3.5 Ghz), Oltenita, Curtea de Arges and Fagaras (in the last

three districts have been installed only mini links n x E1),

• two new providers of local loop equipment in 3.5 Ghz, Alvarion and Airspan, contributed to the

network implementation

• expanding the PMP 3.5 Ghz network in the following cities: Tg. Mures, Alba Iulia, Calarasi,

Alexandria, Braila, Galati, Suceava, Piatra Neamt, Pitesti, Craiova

• field trial with WiMAX and other communications equipment (Milimetrix, RAD, Motorola)

• finalizing the interconnections with Orange Romania and Telemobil

• changing the SS7 signalisation between RADIOCOM and Romtelecom (from 7 signalising

nodes SS7 existing in 2004 to 2 nodes, in Bucharest and Brasov)

• upgrading the MIND invoicing system as well and migration from the invoicing platform based

on Intel servers with Windows 2000 Server operation system into the invoicing platform based on

Sun Fire servers with Solaris operation system, in redundant configuration for faults tolerance.

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�. RADIOCOM IN THE YEAR �00�

• implementation of bares codes for invoicing system

• has been achieved the interconnection with GTS Telecom for providing a backup route for international traffic

• installing the VocalTec Essentra EX platform for pentru H323 and SIP interconnections with other foreign operators

• installing the VoIP Cisco platform formed by a Cisco 7200 gatekeeper, 2 Call Manager and more ATA186 and 188 equipment as well as IP Phones for providing an alternative solution to Vocal Tec

The telecommunications networks are completed by the

• Earth Station from Cheia

RADIOCOM owns � Earth Stations placed at the Satellite Communications Centre:

- Two INTELSAT Earth Stations – standard A (32 m diameter, C Band 6/4 GHz) that operate for the Atlantic Ocean zone (on the satellite IS 905 @ 335.5° E) and Indian Ocean zone (on the satellite IS 904 @ 60° E)

- One INTELSAT Earth Station – standard C (13 m diameter, Ku Band 14/11 GHz) that operates for the Atlantic Ocean zone (on the satellite INTELSAT IS 903 @ 325.5° E) and offers services to the national and private companies for developing their VSAT networks.

- One EUTELSAT Earth Station – standard M (2,4 m diameter, Ku Band 14/11 GHz) that operates for the satellite EUTELSAT W2 @ 16° E for radio broadcasting.

The Centre is connected to the national radio relays network and to the National Telecommunications Centre through two routes of microwave links of 3x155 Mbps: Cheia – Ploiesti – Bucharest and Cheia – Brasov – Bucharest.

�.�. Investments

The investments of the year 2005 have been of RON 222,619,977. 77. They are structured on the main services of the company as follows:

• Broadcasting (modernization of the radio broadcasting and television transmitters and transposers networks) RON 198,697,680.47

• Telecommunications (modernization of the radio relays network, access networks, data transmissions) RON 15,622,315.81

• Other investments RON 8,299,981.49

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�. RADIOCOM IN THE YEAR �00�

�.�. Highlights of �00�

April, �0th – ��th:

We participated at the international exhibition of communications and information technology – CERF (Computers and Electronics Romanian Fair) 2005, which is the most important IT & C event in Romania and represents the link between the Romanian economy and the most advanced technologies in the world.

April, 21st – we launched the new corporate identity - RADIOCOM, as part of an ample process of re branding that transformed the company into a more competitive one, with a new and modern image and ready for the competition with the other players on the communications market.

July, �th:

On the occasion of Radiocommunications Day, we celebrated 65 years since we firstly broadcasted the radio and television programs through our own transmitters and transposers network. On this occasion also has been launched in Romania the T-DAB (Terrestrial – Digital Audio broadcasting) for private radio programs by a pilot project developed in Bucharest. At the same time has been launched an anniversary envelope that celebrated more than 65 years of continuously presence of RADIOCOM on radio and television broadcasting in Romania.

September, ��th:

We started to test the new WiMAX technology, compatible with IEEE 802.16-2004 standard, in order to introduce the first RADIOCOM broadband services on the Romanian market beginning with the first semester of 2006. The WiMAX implementation allows broadband Internet access to those clients who don’t have DSL connexion or by cable (CATV). This way the clients benefit of integrated services of voice (local, national and international telephony), data (Internet) and video (streaming video).

December, �th:

We became universal service supplier for nine more locations of the country namely: Papauti (Covasna District), Brezoia (Dimbovita District), Jolotca (Harghita District), Odesti (Maramures District), Ursa (Olt District), Fagetu (Salaj District), Calinesti (Suceava District), Ficatar (Timis District) and Grindu (Tulcea District).

The continuation of opening the telecentres at the villages ranges in the ample project of RADIOCOM, started at the end of 2005, regarding its participation to the development of the poorer regions of the country. Through these telecentres the population from this places have access to the national and international telephony services.

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�. RADIOCOM IN THE YEAR �00�

December, ��th:

We launched « Ring+ subscription zero » service addressed to natural persons by putting to their disposal a new tariffs list for « Ring+ subscription » service. This new service offers advantageous tariffs for international and national calls without payment of the monthly subscription.

December, �00�:

We launched the calling service from abroad to Romania and other international destinations. This service is addressed to the users of Ring+ prepaid cards.

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�. FUTURE PROJECTS �00�

Residential market:a) Trends• access to services triple-play type: Internet, voice, IPTV or Video on Demand• users mobility through the protocols SIP and ENUM• media streaming

b) Development directionsIntroducing of new technologies necessary to develop the access network and the new voice services for residential usersThe RADIOCOM’s offer contents: - bundles with included minutes -support for user mobility (SIP account accessible from any device SIP-enabled) - prepaid access - call-divert, call-hold, call-filtering, call-waiting, voice-mail, conferencing, caller-ID

Market of Business Services:

a) Trends• Audio IP and videoconferencing• Centrex IP• Call Centres• Unified messaging

b) Development directions• Completion the present access solutions through E1-ISDN with BRI-ISDN access or through private voice trunk (H323 or SIP)

• Development a soft switch NGN platform

The soft switch solution is an intelligent function for telephony network control by providing services

for end users, signalling functions and important services for the operators as well as charging

service.

Advantages: - equipment are centralized distributed and commanded - low cost - easy modernization and introducing of new services and applications

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�. FUTURE PROJECTS �00�

• Implementation of new services: Hosted-PBX, IP Unified Messaging and Presence, videoconferencing, audio conferencing, Call Centres

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Terrestrial Digital Television (DVB-T)

In Romania digital television is experimentally tested. Using the terrestrial digital technology

brings to ceasing conventional analogue broadcasting by replacing old services along 15 to maximum

25 years. During this period of time digital and analogue broadcastings will simultaneously coexist

Until 2012 is planning the harmonization of digital television national systems and equitably

allocation of spectral resources as it is established in the digital radio- broadcasting plan from

Geneva, on the occasion of the Regional Conference for Radiocommunications. In this project it is

planned to develop 8 digital TV national networks in Romania, which will gradually replace the 3

already existing networks and the 300 licensed local stations.

DVB-T system offers more TV programs into one 8 MHz channel, more types of programs such

as PAL, PAL Plus or High Definition TV; programs reception can be made on portable devices type

laptop or PDA; can be made data transmissions associated or not associated to the broadcasted

programs; it is possible the interactivity (TV on demand).

RADIOCOM will offers DVB-T service through two pilot-project: first in Bucharest (Bucharest -

Herastrau Station, on channel 54) that broadcasts the channels of the Romanian Television Company

(TVR 1 and TVR 2) as well as private channels Antena 1, PROTV and Realitatea TV and the second DVB-

T transmitter will be put into operation in Sibiu until the end of the year 2006.

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Considering RADIOCOM owns a 3.5GHz license (bandwidth agreed by the WiMAX equipment

producers) and has the best skilled technical personnel specialized in radio networks operation it

decided to implement three pilot projects in Timis, Cluj, and Suceava districts for offering broadband

services through WiMAX technology.

The specialists consider that WiMAX is the technological support for „the best connected” type

service, that guarantees services quality and special operability both NLOS (non line of sight) and

LOS (line of sight).

The market segment taken into consideration by RADIOCOM is residential and SOHO, following

that the development of broadband services to be made for business and residential metropolitan

segment.

The advantages of WiMAX technology are the low prices accessible to the end user and network

programming with instant applications: gas, water, energy, heating networks can be put together

as for the invoicing system and customer service.

Government applications in: education, culture, investments, labour, security but also anti- terrorism

fight.

Can be introduced new services through platforms type: IPTV, video telephony, pay TV, video on

demand, time shift TV, music clubs, gaming.

Monitoring / security and offering broadband services for railway traffic

Monitoring of WiFi zones

At present, in Romania are more than 7,000 locations not connected to modern communications

services that means is a great opportunity to the communications services providers.

�G Services

RADIOCOM is very interested in obtaining a 3G license considering this is an access solution to the

last generation services such as video call, reception and transmission of big sizes e-mails, high

speed Internet access as well as transfer of video mobile contents (television, music, video clips,

entertainment). The data transmission speed it is between 384 kbps and 2 Mbps.

The granting of the licenses for radio electrics frequencies in order to provide networks and

3G mobile communications services is stipulated by Government Decision 1113/2002, modified

by G.D.1165/2004 and G.D.425/2006 as well as by the Decision of the President of the General

Inspectorate for Information Technology and Communications no.563/2006.

WiMAX

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INDEPENDENT AUDITORS RAPPORT TO GENERAL SHAREHOLDERS MEETING S.N. RADIOCOMUNICATII S.A.

1. We have audited the accounting balance of SN RADIOCOMUNICATII SA (further on “the

Company”) concluded on the 31st of December 2005, as well profit and loss account, the situation

of changing of own capital, situation of treasury flow, as well as explicative notes for the financial

exercise concluded for this date, yearly financial situations which are drafted in keeping with

Accounting law no. 82/1991, Ordain of Public Finances Minister no. 94/2001 and other ulterior

regulations which change and complete them. Our responsibility consists of expressing an opinion

regarding these financial situations based on our audit.

2. Except for the things introduced within the following paragraph, our audit was accomplished

in keeping with the International Audit Standards, adopted entirely by the Auditor Chamber from

Romania. These standards require that our audit should be planned and performed as to obtain a

reasonable assurance that the data within yearly accounts do not present significant irregularities.

The audit consists in examination, based on testing the justificative documents, of amounts and

notes to be found within financial situations of the Company. Nevertheless, the audit presupposes

verification of accounting principles used and of significant estimations of the management,

evaluation of the general presentation modality for the financial situations. We think that our audit

offers a reasonable base in order for us to express our opinion.

3. We have not participated on the physical inventory of the stocks owned by the Company on

the 31st of December 2005, this date coming before we were appointed as auditors. Nevertheless,

this was the reason why we could not make a conclusion on the assets value, respectively if they are

useful and if their value expresses the replacement cost.

4. At first, the company evaluates the assts in costs, and then they are reevaluated in keeping

with the decisions of the government regarding the reevaluation. The latest reevaluation of corporate

assets has been done by the Company on the 31st of December 2003, in keeping with GD 1553/2003.

Due to the fact that except for DG 1553/2003, the Company reevaluated the corporate assets in

keeping with previous regulations, we were not able to take the conclusion if they are presented

at the right value established on the 31st of December 2005, in accordance to IAS 16 – “Corporate

assets”.

The rapport of independent auditors on the financial situations elaborated by the Company in

keeping with the Public Finances Minister Order no 94/200 I, referring to:

Total Assets: 880,232,790 RON, Turn over 244,572,948 RON, Net Profit: 1,937,005 RON

raport anual A4_2oo6_46pag inter39 39 12/14/06 2:40:40 PM

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Nevertheless, for the previous periods, the Company had an accelerated depreciation for its assets

in keeping with fiscal stipulation in force. Due to the fact that this practice was not in accordance

to IAS 16 – “Corporate assets”, management of the Company changed fro the 2005 exercise, the

accounting policy regarding the depreciation of this equipment, adopting the linear method.

Consequently, the depreciation registered after the 1st of January 2005, was corrected on its own

capitals, and the one registered during the year was corrected on the exercise expense. Regardless

of the fact that the depreciation method adopted starting with the 1st of January 2005 is in keeping

with IAS 16, we could not establish exactly if the right value and the depreciation accumulated reflect

the assets use range.

5. Regardless of the fact that, starting by January 2004, Romanian economy started to be considered

as hyper-inflationist, financial situations of the Company at the 31st of December 2005 should have

been drafted applying IAS 29 “Financial rapporting on Hyper-inflationist economies” due to the fact

that the initial balance should have been previously presented in keeping with this standard, the

reason why, in accordance to paragraph 8.3 from OMFP 94, the auditor has the obligation to issue a

reserve regarding the application of International Standards for Financial Rapporting.

6. In our opinion, except for the reserves introduced in paragraphs starting from 3 to 5, financial

situations adequately presents, under the whole significant aspects, the financial position of

RADIOCOMUNICATII SA and its operations results, treasury flows and evolution of its own capital,

elaborated in accordance to Accounting Law no. 82/1991, Public Finances Minister Ordain no. 94/2001

and other ulterior regulations which modify and complete them at 31st of December 2005.

8. Financial situations annexed are not meant to introduce exactly the financial position and

results of Company operations in keeping with IFRS. This is the reason why the annexed financial

situations which are elaborated to be used by persons that do not know the impact if these standards

are not applied. Taking this into account, the rapport is exclusively drafted in order to hand in the

financial situations afferent for financial exercise concluded on the 31st of December 2005 with

Romanian authorities.

ELITE CONSULTING SA

by: Constantin Miu

independent financial auditor

Bucharest, 30th of May 2006

The rapport of independent auditors on the financial situations elaborated by the Company in

keeping with the Public Finances Minister Order no 94/200 I, referring to:

Total Assets: 880,232,790 RON, Turn over 244,572,948 RON, Net Profit: 1,937,005 RON

raport anual A4_2oo6_46pag inter41 41 12/14/06 2:40:40 PM

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�. DATE FINANCIARE / FINANCIAL STATEMENTS

A. ACTIVE IMOBILIZATE/Investments

I. IMOBILIZ~RI NECORPORALE/Intangible Assets

II. IMOBILIZ~RI CORPORALE/Tangible Assets

1. Terenuri [i construc]ii/Land and Buildings

2. Instala]ii tehnice [i ma[ini/Machinery, Equipment, Vehicles

3. Alte imobiliz`ri/Other Tangible Assets

III. IMOBILIZ~RI FINANCIARE/Financial Investments

4. Titluri de]inute ca imobiliz`ri/Shareholdings, Securities, Loans Granted

5. Alte crean]e/Other Financial Receivables

B. ACTIVE CIRCULANTE/Current Assets

I. STOCURI/Inventory

II. CREAN}E/Receivables

1. Crean]e comerciale/Trade Accounts Receivables

2. Alte crean]e/Other receivables

III. CASA {I CONTURI LA B~NCI/Cash and Cash equivalents

C. CHELTUIELI ÎN AVANS/Prepayments

D. DATORII CE TREBUIE PL~TITE ÎNTR-O PERIOAD~ DE UN AN/Current Liabilities

E. TOTAL ACTIVE MINUS DATORII CURENTE/Assets minus Current Liabilities

F. DATORII CE TREBUIE PL~TITE ÎNTR-O PERIOAD~ MAI MARE DE UN AN/Long Term Liabilities

G. PROVIZIOANE PENTRU RISCURI {I CHELTUIELI/Provisions for risk and expenses

H. VENITURI ÎN AVANS/Advance Income

I. CAPITAL {I REZERVE/Capital and Stocks

- capital subscris v`rsat/Paid -up subscribed capital

II. REZERVE DIN REEVALUARE/Revaluation reserves

III. REZERVE/reserves

IV. REZULTATUL REPORTAT/Over Result

V. REZULTATUL EXERCI}IULUI/Practices Result

Repartizarea profitului/Sharing Profit

TOTAL CAPITALURI PROPRII/Company equity

Bilan] la data de �� decembrie �00�

raport anual A4_2oo6_46pag inter42 42 12/14/06 2:40:41 PM

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���,���,���

��0,000

���,0��,���

191,939,901

102,907,896

157,169,776

��,���,0�0

25,269,122

7,925,928

�0,��0,0��

�,���,���

��,���,���

12,695,248

1,999,617

��,�0�,���

699,439

��,���,��0

���,0��,���

���,���,��0

�,0��

�,���,���

���,���,���

146,308,899

���,�0�,���

��,���,�0�

�,���,���

�,���,��0

3,677,940

���,���,���

��0,���,0��

�,���,���

�0�,���,���

202,679,876

290,631,670

115,347,445

�0,���,���

14,109,651

6,132,503

��,���,���

�,���,���

��,�0�,0��

18,213,952

23,889,145

�,��0,���

648,393

��,���,0��

���,�0�,��0

���,���,���

�,���,000

�,0��,��0

���,���,���

147,038,789

���,0��,00�

��,���,���

�,���,���

��,�0�,���

25,404,781

���,���,���

���,���,���

�,���,���

���,���,�0�

193,681,453

386,495,565

189,090,885

�0�,��0

213,828

93,142

�0�,���,���

��,0��,���

��,���,���

17,793,280

31,328,892

��,���,���

1,047,883

��,���,���

���,0��,�00

���,���,��0

��,���

�,00�,�0�

���,���,���

146,562,796

�0�,���,���

��,���,���

��,���,���

�,���,00�

1,937,005

���,���,���

LEI��.��.�00�

LEI��.��.�00�

LEI��.��.�00�

raport anual A4_2oo6_46pag inter43 43 12/14/06 2:40:41 PM

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Contul de Profit [i Pierdere la data de �� DECEMBRIE �00�

VENITURI TOTALE/Revenues

Cifra de afaceri net`/Turnover

Alte venituri/Other revenues

CHELTUIELI TOTALE/Expenses

Cheltuieli materiale/Material expenses

Cheltuieli cu personalul/Personnel Costs

Salarii/Personnel Salaries

Cheltuieli cu asigur`rile [i protec]ia social`/Social Security and Protection Expenses

Amortizarea/Depreciation

Alte cheltuieli/Other Expenses

VENITURI DIN EXPLOATARE/Operating Revenues

CHELTUIELI DE EXPLOATARE/Operating Expenses

REZULTATUL DIN EXPLOATARE/Operating Profit

VENITURI FINANCIARE/Financial Revenues

CHELTUIELI FINANCIARE/Financial Expenses

REZULTATUL FINANCIAR/Financial Profit

REZULTATUL EXTRAORDINAR/Extraordinary Profit

REZULTATUL BRUT/Profit before Tax

IMPOZITUL PE PROFIT/Tax

REZULTATUL NET AL EXERCI}IULUI FINANCIAR/Net Income

Denumirea indicatorului

raport anual A4_2oo6_46pag inter44 44 12/14/06 2:40:41 PM

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���,���,�0�

167,677,659

21,785,250

���,���,���

27,714,730

61,735,551

45,453,901

16,281,650

34,304,986

60,158,958

���,���,���

���,���,��0

��,�0�,�0�

�,���,���

��,���,���

-�,���,���

0

�,���,���

1,870,745

�,���,��0

���,���,��0

212,374,131

62,858,299

���,���,���

29,636,375

70,878,368

53,029,927

17,848,441

63,797,141

88,209,368

���,���,���

���,���,���

-�,���,���

��,���,���

��,�0�,0��

��,�0�,���

0

��,���,���

-2,693,603

��,�0�,���

���,0��,���

244,572,947

30,476,510

���,���,���

27,124,566

82,503,030

61,998,743

20,504,287

57,022,360

108,207,768

���,���,���

���,���,0��

��,���,���

��,���,���

��,�0�,���

-��,0��,���

-�,���

���,���

-1,745,272

�,���,00�

LEI��.��.�00�

LEI��.��.�00�

LEI��.��.�00�

Contul de Profit [i Pierdere la data de �� DECEMBRIE �00�

raport anual A4_2oo6_46pag inter45 45 12/14/06 2:40:41 PM

RAPORT ANUAL

ANNUAL REPORT 2006

Bd. Libert`]ii nr.14, Sector 5Bucure[ti 050706, Romånia

Tel: +40 31 500 3001, +40 21 307 3001, Fax: +40 21 311 4132www.radiocom.ro

14, Libert`]ii Bvd., Bucharest,sector 5, 050706, Romania

Phone: +40 31 500 3001, +40 21 307 3001, Fax: +40 21 311 4132www.radiocom.ro