Equant Reports 2002 Results

AMSTERDAM -- Equant (New York Stock Exchange: ENT, Euronext Paris: EQU) today announced its results for the full year 2002. Commenting on Equant's results, Didier Delepine, president and chief executive officer, said: "These results confirm that Equant will emerge as a stronger and even more competitive company when the economy fully recovers. With the successful integration of Equant and Global One within the FT Group we have now the size that, together with the simplicity of our processes and our constant efforts to reduce our cost base, should deliver efficiencies and value. Against the backdrop of a difficult economic climate we have improved our EBITDA by some $200 million and we plan to further lower our cost base to help us produce a substantial increase in EBITDA for 2003. Our continuing focus on the cash position should ensure that we remain cash flow positive in 2003 and free from outside financial needs for the period. "We should see a flow through of benefits from our successful integration. 2001 saw the first benefits of the reductions in sales positions and costs with 2002 showing a full year improvement. Network rationalization was the prime task for 2002 with the full year benefits flowing through in 2003. In 2003 we will complete the systems and process integration-dependent back office restructuring, largely affecting our G&A costs." Revenues The Company's total revenues were $2,973 million for 2002, a decrease of 3.0 percent compared with the pro forma year 2001, with growth in Network Services Direct offset by declines in the other revenue lines. Table 1: Revenue Details ($ millions)

Gross Profit and Gross Margin The Company's gross profit was $899 million in 2002, an increase of $97 million, or 12.1 percent, from the $802 million in pro forma 2001, despite the $92 million decline in revenue. The gross margin was 30.2 percent in the full year compared with 26.2 percent in pro forma 2001. The improvement in gross margin is largely a result of the Company's focus on cost reduction, the network integration and the reduction in duplicate transmission capacity. The cost of services and products sold declined by 8.4 percent. The cost reductions reflect the continued focus on operational efficiencies and the effects of network restructuring and integration activities. The Company's access and data termination costs for the fourth quarter of 2002 were approximately 8 percent below those of the first quarter 2002. Similarly, transmission costs have declined by approximately 8 percent. During 2002, 82 network sites were closed leading to annualized cost reductions of $18 million. Operating Expenses The Company continued the consolidation of its sales forces, reducing quota-bearing salespersons by 15 percent while improving direct order-based productivity by 41 percent. There was also a reduction in back office costs. Selling expenses as a percent of revenue declined to 11.2 percent in the full year compared with 13.1 percent in pro forma 2001. The Company will continue to optimize sales costs during 2003. G&A expenses in 2002 were $374 million, an 8.5 percent decrease from pro forma 2001. The reduced G&A expenses result from the Company's continuing restructuring and integration program, which has reduced headcount, as previously announced, and cut duplicated expenses for premises, equipment and information technology. Over 60 administrative and office sites have now been closed representing annualized rental savings alone in excess of $8 million. G&A costs as a percent of revenue decreased to 12.6 percent in the full year, compared with 13.3 percent in pro forma 2001. The Company expects to make further significant reductions in G&A expenses during 2003, as the necessary integration of back office processes and systems should enable further efficiencies. EBITDA Earnings before interest, taxes, depreciation and amortization, share plan costs and non-recurring charges (EBITDA) were $192 million in full year 2002 compared with an EBITDA loss of $9 million in pro forma 2001. As a result of the improved gross profit and the reduction in expenses, the EBITDA margin for the full year was 6.5 percent compared with a negative 0.3 percent in pro forma 2001. Depreciation and Amortization (excluding goodwill) Depreciation and amortization expense increased 2.4 percent to $464 million for the full year compared with $453 million in pro forma 2001. The 2001 charge included accelerated depreciation of $68 million for assets acquired with Global One. The depreciation charge is substantially above the current rate of capital expenditure, reflecting the high levels of capital expenditure in prior periods. The Company expects the depreciation charge to rise slightly in 2003 reflecting the high level of capital expenditure in recent years, but then decline as the Company's asset base matures and integration and operating benefits reduce capital expenditure expectations going forward. Operating Loss before Share Plan and non-recurring charges The adjusted operating loss of $272 million in the full year 2002 reflects a substantial improvement from the loss of $462 million in the comparable period of pro forma 2001 driven by the growth in gross profit and reductions in Selling costs and General and Administrative expenses. Equant