TELESYSTEM INTERNATIONAL WIRELESS INC.
TSX : TIW
NASDAQ : TIWI

TELESYSTEM INTERNATIONAL WIRELESS INC.

July 21, 2005 15:33 ET

TIW Reports Second Quarter Results

MONTREAL, QUEBEC--(CCNMatthews - July 21, 2005) - Telesystem International Wireless Inc. (TSX:TIW)(NASDAQ:TIWI)- For the quarter ended June 30, 2005. All amounts are in US$ unless otherwise stated

Telesystem International Wireless Inc. ("TIW" or the "Company") (TSX:TIW)(NASDAQ:TIWI) today reported its results for the second quarter of 2005.

TIW is operating under a court supervised Plan of Arrangement which was approved by the Company's shareholders' on May 19, 2005 and by the Superior Court, District of Montreal, Province of Quebec on May 20, 2005. The court supervised Plan of Arrangement was adopted by the Company to allow the Company to complete the transaction with Vodafone announced on March 15, 2005, proceed with its liquidation, including the implementation of a claims process and the distribution of net cash to shareholders, cancel its common shares and proceed with its final distribution and be dissolved.

On May 31, 2005, Telesystem International Wireless Corporation N.V. ("TIWC"), a wholly-owned subsidiary of the Company, completed the first step of the Plan of Arrangement with the sale to Vodafone of all of its affiliate's interests in MobiFon S.A. ("MobiFon") and Oskar Mobil a.s. ("Oskar") for a cash consideration of approximately $3.5 billion. The unaudited consolidated financial statements for the three and six months ended June 30, 2005 therefore include the operating results of MobiFon and Oskar for two and five months respectively. Accordingly, operating results are not comparable to previous year's results. As of June 30, 2005, substantially all of the Company's assets consist of $3.6 billion (Cdn$4.47 billion) in cash and cash equivalents.

The net income for the three and six months ended June 30, 2005 includes a gain on sale of investments of $2.22 billion related to the sale to Vodafone, representing $10.19 per basic share for the second quarter and $10.26 per basic share for the first six months of 2005.

Service revenues for the quarter reached $260.5 million and $615.2 million for the six months ended on June 30, 2005. Operating income for the quarter reached $33.5 million and $117.4 million for the six months ended on June 30, 2005. Net income for the quarter was $2.22 billion or $10.20 per basic share and $10.03 per share on a fully diluted basis while it reached $2.26 billion, or $10.42 per basic share and $10.23 per share on a fully diluted basis, for the first six months of 2005.

MANAGEMENT DISCUSSION AND ANALYSIS FOR THE QUARTER ENDED JUNE 30, 2005

The management's discussion and analysis, dated July 21, 2005, should be read in conjunction with the accompanying unaudited consolidated financial statements of TIW for the three and six months ended June 30, 2005 and should also be read in conjunction with the audited consolidated financial statements and Operating and Financial Review and Prospects contained in TIW's Annual Report for the year ended December 31, 2004. The unaudited consolidated financial statements for the three and six months ended June 30, 2005 include the operating results of MobiFon and Oskar for two and five months respectively, to reflect the sale to Vodafone at the end of May 2005. Since operating results are not comparable to previous year's results and that the only significant assets of the Company are now cash and cash equivalents, the discussion and analysis is mainly focused on the corporate level activities. These consolidated interim financial statements have been prepared on a going concern basis and have not been prepared with the intent to demonstrate amounts to be distributed to shareholders under the court supervised Plan of Arrangement. Additional information relating to TIW, including the Company's annual report on Form 20-F and continuous disclosure documents, is available on SEDAR at www.sedar.com under Telesystem International Wireless Inc. The financial information presented herein has been prepared on the basis of Canadian GAAP. Please refer to Note 17 to our audited consolidated financial statements for the year ended December 31, 2004 for a summary of the differences between Canadian GAAP and United States (U.S.) GAAP.

Results of Operations

All revenues and all cost of equipment and services for the first two quarters of 2005 relate to MobiFon's and Oskar's activities in the first five months of the year.

Selling, general and administrative expenses reached $100.5 million for the quarter and $191.7 million for the first half of 2005, including unallocated expenses for corporate and other activities of $41.9 million and $47.8 million respectively. Consolidated selling, general and administrative expenses for the second quarter 2005 include a non-cash stock based compensation cost of $36.6 million of which $35.4 million is included within corporate and other activities, while the corresponding period of 2004 had stock based compensation costs amounting to $2.7 million of which $1.8 million is included within corporate and other activities. Selling, general and administrative expenses for the first six months of 2005 include a non-cash stock based compensation cost of $40.9 million of which $38.4 million is included within corporate and other activities, while the corresponding period of 2004 had stock based compensation costs amounting to $4.2 million of which $2.7 million is included within corporate and other activities. The year-over-year increase in the stock based compensation costs is mainly due to the accelerated vesting of options and restricted share units ("RSUs") triggered by the sale of all the Company's assets during the second quarter. Also included in the corporate and other activities for the quarter is a $1.5 million capital duty expense related to the repatriation of the sale proceeds from the Company's wholly-owned subsidiary TIWC.

Virtually all of the depreciation and amortization for the first half of 2005 relate to MobiFon's and Oskar's activities in the first five months of the year. As a result of the foregoing, operating income reached $33.5 million for the second quarter and $117.4 million for the first six months of 2005 which compared to $66.3 million and $116.5 million, respectively, for the corresponding periods last year.

Mostly all of the interest expenses for the first six months of 2005 relate to the subsidiaries sold at the end of May 2005. Interest income, which amounted to $8.5 million for the quarter and $10.2 million for the six months ended on June 30, 2005, includes $7.6 million earned since we completed the sale of our indirect interests in MobiFon and Oskar to Vodafone.

The sale of all our operating assets resulted in a gain on sale of investments of $2.22 billion representing the excess of the proceeds of approximately $3.5 billion over the net carrying value of our interest in ClearWave of $1.3 billion, net of the transaction cost of approximately $21.2 million.

All income tax expense for the three and six months ended on June 30, 2005 relate to MobiFon's and Oskar's pre tax income.

As a result of the foregoing, net income for the second quarter of 2005 amounted to $2.22 billion or $10.20 per basic share, including $10.19 per share related to the gain on sale of investments. On a fully diluted basis the net income amounted to $10.03 per share, including $10.02 per share related to the gain on sale of investments. For the first six months of 2005, net income reached $2.26 billion or $10.42 per basic share, including a gain on sale of investments of $10.25 per share. On a fully diluted basis the net income amounted to $10.23 per share, including $10.06 per share related to the gain on sale of investments. That compared to a net income of $13.9 million or $0.10 per share on a basic and fully diluted basis for the second quarter of 2004 and $29.6 million or $0.23 per basic share and $0.22 per share on a fully diluted basis for the first half of 2004.

Liquidity and Capital Resources

Operating activities provided cash of $103.1 million for the three month period ended June 30, 2005 compared to $101.5 million for the corresponding 2004 period. For the first six months of 2005, operating activities provided cash of $183.8 million compared to $142.8 million in the corresponding 2004 period. Most of the cash provided in the three and six months ended June 30, 2005 relate to MobiFon's and Oskar's activities in the first two and five months of the respective period.

Investing activities provided cash of $3.27 billion for the quarter ended June 30, 2005 compared to a use of cash of $73.0 million during the same period in 2004. For the first six months of 2005, investing activities provided cash of $3.20 billion compared to a use of $136.1 million for the first six months of 2004. Our investing activities in the three and six months ended June 30, 2005 consists mainly of the net proceeds from the sale of our operating assets of $3.32 billion representing the proceeds paid by Vodafone of $3.51 billion less cash and cash equivalents of ClearWave on the date of sale of $177.4 million and transaction costs paid during the quarter of $8.7 million. Shortly after the completion of the sale the Company proceeded to convert the proceeds along with its other cash and cash equivalents into Canadian dollars.

Other than the transaction with Vodafone investing activities during the three and six month periods consist primarily of the acquisition of property, plant, equipment and licenses by MobiFon and Oskar up until the end of May 2005. Investing activities for the first six months of 2005 also included the use of $6.5 million in connection with the acquisition of the 72.9% of Oskar Holdings N.V. we did not already own and $2.5 million in connection with the acquisition during the third quarter of 2004 of a 15.46% non controlling interest in MobiFon. In November 2004, we entered into an agreement in principle to acquire from non-controlling shareholders 72.9% of Oskar Holdings in exchange for the issuance of 46.0 million common shares of our treasury stock. We incurred $6.7 million of transaction expenses, of which $6.0 million was paid to, Lazard Freres & Co. LLC, bringing the aggregate value of the transaction to $521.9 million. One of our board members is managing director of an affiliate of Lazard Freres & Co. LLC. Closing occurred on January 12, 2005 and we increased our indirect equity interest in Oskar Holdings and Oskar Mobil to 100.0%. Affiliates of J.P. Morgan Partners, LLC, and AIG Emerging Europe Infrastructure Fund L.P., two of our significant shareholders, were shareholders of Oskar Holdings and received 17.4 million and 7.0 million common shares, respectively. Our existing interest in Oskar Holdings, prior to this acquisition was reflected in our consolidated financial statements on a consolidated basis. The aggregate $521.9 million purchase for the above transaction exceeded the carrying value of the net assets acquired by $432.6 million. This excess was allocated to goodwill in the amount of $475.8 million and $43.2 million to other fair value net decrements. During the corresponding 2004 period, investing activities included the net proceeds from the sale of our direct investment in Hexacom which amounted to $21.8 million offset by the use of $45.0 million of cash for the acquisition of additional interests in our subsidiaries including, during the second quarter of 2004, $3.6 million in connection with the acquisition of a 13% non controlling interest in ClearWave and $4.0 million in connection with the acquisition of a 5.9% non controlling interest in MobiFon.

Financing activities used cash of $12.0 million for the second quarter of 2005 and $47.3 million year to date compared to using cash of $12.8 million for the second quarter of 2004 and providing cash of $47.1 million for the first half of 2004. The second quarter and year to date financing activities of 2005 include proceeds from stock option exercises of $12.3 million. These proceeds were more than offset by distributions to non controlling interests of $12.0 million and $15.2 million for the three and six month periods ended June 30, 2005, respectively, as well as by repayments of long term debt of $12.3 and $44.4 million during the same periods, respectively. The repayment of long term debts include the repayment of the Company's equity subordinated debentures which were the only long term debt at the corporate level. The source of cash provided by financing activities in the first six months of 2004 included $76.1 million of proceeds from issuances of our common shares of which $8.6 million was received during the second quarter.

Cash and cash equivalents totaled $3.65 billion as of June 30, 2005. Cash equivalents consist of Government of Canada Treasury Bills and a diversified portfolio of bank deposit notes, commercial paper and other highly liquid debt instruments purchased with a maturity of three months or less. Cash and cash equivalents represents the U.S. equivalent of Cdn$4.47 billion and have an average rate of return of 2.38%.

The sale of all of the Company's assets accelerated the vesting of all options and RSUs outstanding, with the exception of the 875,570 performance RSUs which were forfeited resulting in 3,083,168 RSUs being redeemed for Common Shares and 4,816,811 options vesting of which 1,943,349 were exercised for shares during the quarter which resulted in proceeds to the Company of $12.3 million. As a result, at the end of June 2005 the Company has 220,223,796 Common Shares outstanding and 2,873,438 options outstanding of which 2,872,918 are in the money.

Update on the Plan of Arrangement

As at June 30, 2005, we had not yet paid $22.1 million (Cdn$27.1 million) of transaction and operating costs to be paid from our cash on hand prior to the final liquidation of the Company. In addition the Company has not received expected proceeds of $18.5 million (Cdn$22.7 million) from the exercise of outstanding in the money options which are expected to be exercised prior to the first distribution of the Company's cash. Pro-forma for these items, cash and cash equivalents as at June 30, 2005 would be Cdn$4.46 billion which equates to approximately Cdn$20.00 per fully diluted share and represents the target return of Cdn$19.96 plus investment income earned from the date of sale to June 30, 2005.

As part of part of its Plan of Arrangement, the Company has carried out, under the supervision of the Court, the expeditious identification and resolution of claims. The Court has appointed KPMG Inc. as monitor to identify and value claims and report to the Court and the Company on the claims received, as well as the further steps required to deal with such claims. A claims identification process has been conducted with regard to any claims outstanding as of May 20, 2005. A claims bar date has been set at July 8, 2005. Although the monitor has not yet delivered its report to the Court, the Company has reviewed all claims reported through the identification process and believes that they have been adequately provided for in the consolidated interim financial statements.

The Canadian and Quebec tax authorities have begun their audit which, when completed, will result in the issuance of final tax assessments. Since the audit was not completed as of the claims bar date, the tax authorities have filed a claim with the monitor for an undetermined amount. The Company has no control over the audit process and estimates that it could take several months for it to be completed. Accordingly, the Company and the monitor are currently in the process of determining, in cooperation with the tax authorities, the amount of a reserve for taxes that should be set aside, without prejudice to the Company's filing position, pending finalization of the tax audit. There can be no certainty that, on completion of the audit, the tax authorities will not propose adjustments which, if not successfully opposed by the Company, would result in liabilities greater than those provided for in the consolidated interim financial statements.

As soon as the adequacy of reserves has been determined and the monitor is in a position to deliver its report, the Company will file a motion with the Court for a first distribution. The Company has scheduled a hearing on such motion to the Court in August. Unless waived by the Court, the decision on the first distribution is subject to a 30-day appeal period before becoming final. The Company expects the payment date for the first distribution to be approximately 21 days from obtaining a final Court order to authorize such distribution.

Selected consolidated financial data

On June 23, 2003, we amended our share capital to implement a one for five (1:5) consolidation of our common shares. Following the consolidation, the number of issued and outstanding common shares was reduced from 467,171,850 to 93,432,101 while the number of issued and outstanding preferred shares remained unchanged at 35,000,000 but their conversion ratio was changed from 1 common share for each preferred share to 1 common share for 5 preferred shares. On March 25, 2004, the 35,000,000 issued and outstanding preferred shares were converted into 7,000,000 common shares. All share and per share amounts included in the selected consolidated data shown below have been adjusted to reflect the share consolidation.

The following represents all equity shares and granted stock options as at July 19, 2005:



Common Shares
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Common Voting Shares outstanding 221,766,709
Convertible instruments and other:
Outstanding granted employees and director's
stock options 1,330,005
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223,096,714
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The following table contains financial information that is derived from our unaudited interim financial statements for the three and six month period ended June 30, 2005.



SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA (UNAUDITED)

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Three months ended Six months ended
(in thousands of US $, June 30, June 30,
except per share data) 2005 2004 2005 2004
$ $ $ $
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STATEMENTS OF
INCOME DATA:

Revenues 273,358 301,397 647,610 579,817
Operating income 33,515 66,284 117,437 116,494
Interest expense,
net (8,464) (20,397) (31,260) (41,721)
Foreign exchange
gain (loss) (1 865) 1,317 (1,835) (661)
Net gain on sale of
investments 2,221,750 - 2,221,750 11,658
Net Income 2 223,413 13,907 2,257,825 29,590

Basic earnings
per share 10.20 0.10 10.42 0.23

Diluted earnings
per share 10.03 0.10 10.23 0.22



As at June 30, As at December 31,
2005 2004
(in thousands of US $) $ $
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BALANCE SHEET DATA:
Cash and cash equivalents,
including restricted
short-term investments
of $27.8 million as of
December 31, 2004 3 645,357 272,102
Total assets 3 651,002 2,340,709
Long-term debt, including
current portion - 1,147,060
Share capital and additional
paid-in -capital 2,494,918 1,926,511
Total shareholders' equity 3,630,667 748,481
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Summary of quarterly results

The Company's interim financial statements include the operating results of MobiFon and Oskar Mobil to the date of the sale to Vodafone which was May 31, 2005. These operating results are subject to seasonal fluctuations that materially impact quarter-to-quarter operating results. From June 1, 2005, substantially all of the Company's revenues consist of interest on short term investments which are not subject to seasonal fluctuations.




(In thousands of U.S.$, Except Q2 Q1 Q4 Q3
per share data) 2005 2005 2004 2004
$ $ $ $
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Revenues 273,358 374,252 366,816 328,929

Net income 2 223,413 34,412 4,942 20,674

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Basic and diluted earnings
per share 10.20 0.16 0.03 0.14
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(In thousands of U.S.$, Except Q2 Q1 Q4 Q3
per share data) 2004 2004 2003 2003
$ $ $ $
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Revenues 301,397 278,420 277,787 257,217

Net income (loss) 13,907 15,683 (727) 3,075

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Basic and diluted earnings
(loss) per share 0.10 0.13 (0.01) 0.03
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Forward-looking Statements

This news release contains certain forward-looking statements concerning our future operations, economic performances, financial conditions and financing plans. These statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate in the circumstances. However, whether actual results and developments will conform with our expectations and predictions is subject to a number of risks, uncertainties and assumptions. Consequently, all of the forward-looking statements made in news release are qualified by these cautionary statements, and there can be no assurance that the results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to or effects on us and our subsidiaries or their businesses or operations. We undertake no obligation and do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable law.

For all of these forward-looking statements, we claim the protection of the safe harbour for forward-looking statements contained in the U.S. Private Securities Litigation Reform Act of 1995.

About TIW

TIW operates under a court supervised Plan of Arrangement to complete the transaction with Vodafone announced on March 15, 2005, proceed with its liquidation, including the implementation of a claims process and the distribution of net cash to shareholders, cancel its common shares and proceed with its final distribution and be dissolved. TIW's shares are listed on NASDAQ ("TIWI") and on the Toronto Stock Exchange ("TIW").

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