In spite of economic slowdown the number of television services users continued to grow: during January-June 2009 the number

In spite of economic slowdown, the number of television services users continued to grow: during January-June 2009 the number of digital terrestrial television (DVB-T) service users increased by 11.5 thousand or 43.9 per cent and the number of IP TV service users increased by 7.6 thousand or 18.7 per cent. In terms of revenue TEO had 62.9 per cent of leased lines and 65.5 per cent of data communications markets. On 31 March 2009 the penetration of broadband Internet using fixed connection per 100 residents of Lithuania was 18.1 per cent. According to the CRA Report, the Company`s market share of the total Internet providers market in terms of revenue during the first quarter of 2009 increased and amounted to 42.4 per cent while share on broadband Internet access using fixed connection market reached 50.1 per cent.

As a result, the number of DSL connections during the year eased by 2 per cent.At the end of June 2009, out of total 303.8 thousand broadband connections, 237.1 thousand were copper DSL connections sold to retail customers, 42 thousand were fiber optic connections, 22.8 thousand were wireless connections via the WiFi network and 1.9 thousand DSL connections are the ones sold to wholesale customers.Compared with the first six months of 2008, revenue from Internet services for the first six months of 2009 went up by 14.9 per cent and revenue from data communication services increased by 14 per cent. Over the last twelve months, the number of broadband Internet access users increased by 25.8 thousand. As the Company entered into the phase of substitution of the Internet over the copper lines using DSL technology with up-to-date Internet over the optic line using FTTH (Fiber to the home) and FTTB (Fiber to the building) technologies, the number of FTTH connections during the year increased by almost 5.5 times to 31.2 thousand and the number of FTTB connections increased by 39 per cent to 10.5 thousand. In terms of revenue TEO increased its share in networks` interconnection market up to 18.1 per cent. As a result, over the year revenue from traffic charges went down by 15.9 per cent.In May, for residential customers TEO introduced new flat fee payment plans that provide more or unlimited number of free-of-charge minutes within TEO network and favourable tariffs for international calls and calls to mobile operators` networks.Revenue from networks` interconnection services decreased by 13.9 per cent mainly due to reduced national interconnection tariffs.According to the Report of the Communications Regulatory Authority (CRA) for the first quarter of 2009, TEO retains its market share of the fixed-line telephony market in terms of customers (93.2 per cent) and in terms of revenue (95 per cent).

Lower number of voice telephony service users resulted in a decline of revenue from subscription fees in January-June 2009 by 2.5 per cent compared with the same period a year ago.In spite of the decreased number of telephone lines, the traffic volume generated by residential customers increased by 3.9 per cent, but the traffic volume of business customers decreased by 16.4 per cent during the first six months of 2009. As a result, the total number of main telephone lines in service decreased by 25.2 thousand, of which 13.8 thousand are residential and 11.4 thousand - business customers` lines. The main decrease was in the business customers` segment and this is a reflection of the current economic slowdown.During January-June 2009, 16.3 thousand of new telephone lines were installed while 41.5 thousand were disconnected. Revenue from television services amounted to 3.1 per cent, IT services - 2.6 per cent and other services - 3.1 per cent of total revenue for January-June 2009. Revenue from voice telephony services decreased due to lower traffic volume, decreased number of telephone lines in service and in August 2008 reduced national interconnection tariffs. A decline in revenue from voice telephony services is compensated by continuous growth in revenue from Internet and data communication as well as television services.Share of revenue from traditional voice telephony services from total amount of revenue continued to shrink and for the first six months of 2009 amounted to 56.9 per cent of total revenue, while share of Internet and data communications revenue continued to grow and amounted to 34.3 per cent. Revenue from other services in January-June 2008 includes revenue of LTL 1.3 million from a one-time special telecommunication project.

Revenues for the second quarter and first half of 2008 are increased by LTL 1,144 thousand and LTL 1,929 thousand, respectively, of fines for termination of agreements which at the end of 2008 were moved from financial income to revenue from other services. The total revenue for April-June 2009 was LTL 203.6 million, a decline by 0.4 per cent over the total revenue of LTL 204.5 million for April-June of 2008. Switchover to the new-generation network technology was taking pace and helped the Company to retain its customers TEO was further increasing the quality of its services. The Company`s revenue stayed the same for six months of 2009 compared to the same period in 2008 (excluding one-time projects). The Company implemented the cost control measures which allowed to maintain their bottom line. 28, LT-03501 Vilnius, LithuaniaTelephone number+370 5 262 15 11Fax number+370 5 212 66 65Internet address activities Integrated telecommunication, IT and television services to residential and business customers in LithuaniaMANAGEMENT REPORT Management`s comment on financial results for the first six months of 2009: "TEO LT, AB continues to produce good results despite extended uncertainty in the economy.