TELESYSTEM INTERNATIONAL WIRELESS INC.
TSX VENTURE : TIW

TELESYSTEM INTERNATIONAL WIRELESS INC.

October 19, 2005 13:49 ET

TIW Reports Third Quarter Results: Plan to Cancel and Delist Common Shares

MONTREAL, CANADA--(CCNMatthews - Oct. 19, 2005) - Telesystem International Wireless Inc. (TSX VENTURE:TIW) All amounts are in US$ unless otherwise stated.

Telesystem International Wireless Inc. ("TIW" or the "Company") (TSX VENTURE:TIW) today reported its results for the third quarter of 2005 and also announced its intention to have its common shares cancelled and delisted from the TSX Ventures Exchange ("TIW") before the end of November.

TIW is operating under a court supervised Plan of Arrangement which was approved by the Company's shareholders' and by the Superior Court, District of Montreal, Province of Quebec. 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 therefore only include the operating results of MobiFon and Oskar for the first five months of 2005. Accordingly, operating results are not comparable to previous year's results.

As of September 30, 2005, substantially all of the Company's assets consist of $259.6 million (Cdn$301.9 million) in cash, cash equivalents and short term investments. Net income for the quarter, which mainly consists of the excess of interest income over the corporate operating costs, was $18.0 million or $0.08 per share on a basic and fully diluted basis.

Pursuant to its Plan of Arrangement, TIW intends to file a motion to seek an order from the Superior Court, District of Montreal, Province of Quebec to allow the transfer to the Court-appointed Monitor, KPMG Inc., of all the powers of the shareholders and directors.

Although the Company will only be able to confirm the date at which its shares will be cancelled and delisted from the TSX Venture Exchange once the Court has issued its order, TIW is targeting such cancellation and the delisting of its shares to take effect before the end of November and before initiating any further cash distribution to its shareholders. Future distributions, if any, will be made to shareholders of record as at the close of business on the date of cancellation of the shares. Upon cancellation of the shares the right of such former shareholders to receive future distribution from the Company, if any, will not be assignable or otherwise transferable.

Regarding the potential tax consequence in relations with the cancellation of the shares and any future distributions, the Company refers its shareholders to the Information Circular dated April 18, 2005. The Information Circular is available by accessing TIW's web site at www.tiw.ca, SEDAR at www.sedar.com or EDGAR at www.sec.gov.

Following the delisting of its shares TIW also intends to make filings with applicable securities authorities in Canada and the United States to cease to be a reporting company.

MANAGEMENT DISCUSSION AND ANALYSIS

FOR THE QUARTER ENDED SEPTEMBER 30, 2005

The management's discussion and analysis, dated October 19, 2005, should be read in conjunction with the accompanying unaudited consolidated financial statements of TIW for the three and nine months ended September 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 nine months ended September 30, 2005 include the operating results of MobiFon and Oskar for five months, to reflect the sale to Vodafone at the end of May 2005. Since operating results are not comparable to previous year's results and the only significant assets of the Company are now cash, cash equivalents and short term investments, 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 nine months of 2005 relate to MobiFon's and Oskar's activities in the first five months of the year.


Selling, general and administrative expenses reached $2.4 million for the quarter and $194.1 million for the first nine months of 2005, including unallocated expenses for corporate and other activities of $2.4 million and $50.3 million respectively. Selling, general and administrative expenses include a non-cash stock based compensation cost of $40.9 million and nil for the nine and three month periods ended on September 30, 2005, of which $38.4 million is included within corporate and other activities. The corresponding periods of 2004 had stock based compensation costs amounting to $7.7 million and $3.5 million, respectively, of which $5.0 million and $2.4 million was included within corporate and other activities. The year-over-year increase in the stock based compensation costs for the first nine months of 2005 is mainly due to the accelerated vesting of options and restricted share units ("RSUs") triggered by the sale of all the Company's operating assets during the second quarter. Also included in the corporate and other activities for the nine month period ended September 30, 2005 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 nine months 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 loss reached $2.5 million for the third quarter compared to an operating income of $77.6 million for the same quarter last year. For the first nine months of 2005, operating income was $114.9 million which compared to $194.1 million for the corresponding period last year.

Mostly all of the interest expenses for the first nine months of 2005 relate to the subsidiaries sold at the end of May 2005. Interest income amounted to $22.0 million for the quarter and $32.2 million for the nine months ended on September 30, 2005, of which $27.8 million have been earned since we completed the sale of our indirect interests in MobiFon and Oskar to Vodafone. As a result of the sale of the Company's operating assets and subsequent conversion of the majority of the proceeds into Canadian dollars, the Company's reassessed its functional currency based on the collective economic factors of the environment in which the Company now operates and has determined it to be the Canadian dollar as of June 1, 2005. This change from a U.S. dollar functional currency is accounted for on a prospective basis. However, the Company continues to present its consolidated financial statements in U.S dollars. Foreign exchange loss of $1.5 million for the third quarter of 2005 on US dollars denominated cash balances is a result of the strengthening of the Canadian dollar versus the U.S. dollar during the quarter.

The sale of all our operating assets in May 2005 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 nine months ended on September 30, 2005 relate to MobiFon's and Oskar's pre tax income.

As a result of the foregoing, net income for the third quarter of 2005 amounted to $18.0 million or $0.08 per share on a basic and fully diluted basis. For the first nine months of 2005, net income reached $2.28 billion or $10.41 per basic share, including a gain on sale of investments of $10.16 per share. On a fully diluted basis the net income amounted to $10.31 per share, including $10.06 per share related to the gain on sale of investments. That compared to a net income of $20.7 million or $0.14 per share on a basic and fully diluted basis for the third quarter of 2004 and $50.3 million or $0.38 per basic share and $0.37 per share on a fully diluted basis for the first nine months of 2004.

Liquidity and Capital Resources

Operating activities provided cash of $18.2 million for the three month period ended September 30, 2005 compared to $109.7 million for the corresponding 2004 period. For the first nine months of 2005, operating activities provided cash of $202.0 million compared to $252.6 million in the corresponding 2004 period. Most of the cash provided in the nine months ended September 30, 2005 relate to MobiFon's and Oskar's activities in the first five months of the period.

Investing activities used cash of $230.4 million for the quarter ended September 30, 2005 compared to $94.7 million during the same period in 2004. These activities for the third quarter primarily consist of investments totalling C$255 million ($219.3 million) in short term instruments, which were pledged as security for potential assessments by taxation authorities. For the first nine months of 2005, investing activities provided cash of $2.97 billion compared to a use of $230.9 million for the first nine months of 2004. Our investing activities in the nine months ended September 30, 2005 consist mainly of the net proceeds from the sale of our operating assets of $3.31 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 period of $11.2 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 nine 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 nine 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 at the time of the transaction, 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 $85.9 million of cash for the acquisition of additional interests in our subsidiaries including $40.9 million during the third quarter of 2004, of which $36.6 million was in connection with the cash portion of the acquisition of a 15.46% non controlling interest in MobiFon.

Financing activities used cash of $3.56 billion for the third quarter of 2005 and $3.61 billion year to date compared to using cash of $37.4 million for the third quarter of 2004 and providing cash of $9.8 million for the first nine months of 2004. The third quarter financing activities mainly consist of the distribution of $3.58 billion (Cdn$4.19 billion) to our shareholders on September 27, 2005, pursuant to the Plan of Arrangement of the Company and as authorized by the Court, through a reduction of the stated capital of the common shares of Cdn$17.01 per fully diluted common share and a dividend of Cdn$1.79 per fully diluted common share to shareholders of record on September 8 and 21, 2005, respectively. The third quarter and year to date financing activities of 2005 include proceeds from stock option exercises of $18.5 million and 30.8 million, respectively. The proceeds for the nine month period ended September 30, 2005 were more than offset by distributions to non controlling interests of $15.2 million as well as by repayments of long term debt of $44.4 million. 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 nine months ended September 30, 2004 was $76.1 million of proceeds from issuances of our common shares. These proceeds were partially offset by $32.0 million of scheduled repayments of MobiFon's and Oskar Mobil's senior credit facilities, $14.2 million of which occurred during the third quarter, the early redemption of $2.3 million of MobiFon Holding's senior notes during the quarter, as well as by $32.1 million distributed to minority shareholders of MobiFon, $20.9 million of which was distributed during the third quarter.

Cash, cash equivalents and short term investments totaled $259.6 million as of September 30, 2005 which represents the U.S. equivalent of Cdn$301.9 million. Cash equivalents and short term investments consist of bank deposit notes and commercial paper.

The Company continues to hold certain reserves in cash, cash equivalents and restricted short term investments to meet future estimated costs and potential liabilities. The timing and size of future distributions by the Company depend on its ability to free up these reserves as it settles or otherwise makes final determination of its liabilities. The most significant of these is a reserve totalling Cdn$255 million or approximately Cdn$1.14 per share for potential tax liability. The taxation authorities have not, however, yet assessed the specific amount of their claims and assessments may not be delivered for several months. The Company believes that there are no material amounts owing to taxation authorities. However, there can be no certainty as to whether or not the tax authorities will propose adjustments that may reduce potential future distributions.

Accordingly, there can be no certainty that the Company will be able to make further distributions or that cumulative distributions will equal to the Target Return of Cdn$19.9614 per share plus Investment Income (as defined in the Information Circular). Taking into account the Investment Income of approximately Cdn$0.15 earned as of September 30, 2005 and the First Distribution of Cdn$18.80 paid on September 27, 2005, the amount of future distributions should not be expected to exceed approximately Cdn$1.31 per share. TIW does not expect to realize a material amount of additional Investment Income in periods subsequent to September 30, 2005.

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 October 14, 2005:



Common Shares
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Common Voting Shares outstanding 223,096,714
Convertible instruments and other:
Outstanding granted employees and director's stock options 0
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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
nine month periods ended September 30, 2005.


SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA (UNAUDITED)

---------------------------------------------------------------------

Three months ended Nine months ended
(in thousands of US $, September 30, September 30,
except per share data) 2005 2004 2005 2004
$ $ $ $
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STATEMENT OF INCOME DATA:

Revenues - 328,929 647,610 908,746
Operating income (loss) (2,531) 77,573 114,906 194,067
Interest income
(expense), net 21,944 (20,339) (9,316) (62,060)
Foreign exchange
gain (loss) (1,453) 1,278 (3,288) 617
Net gain on sale
of investments - - 2,221,750 11,658
Net Income 17,960 20,674 2,275,785 50,264

Basic earnings per share 0.08 0.14 10.41 0.38

Diluted earnings per share 0.08 0.14 10.31 0.37


As at September 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 $219.2 million
as of September 30, 2005 and
$27.8 million as of December
31, 2004 259,601 272,102
Total assets 264,486 2,340,709
Long-term debt, including
current portion - 1,147,060
Share capital and additional
paid-in -capital - 1,926,511
Total shareholders' equity 255,777 748,481
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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 Q3 Q2 Q1 Q4
per share data) 2005 2005 2005 2004
$ $ $ $
------------------------------------------------------------------
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Revenues - 273,358 374,252 366,816

Net income 17,960 2,223,413 34,412 4,942

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Basic and diluted
earnings per share 0.08 10.20 0.16 0.03
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(In thousands of U.S.$, Except Q3 Q2 Q1 Q4
per share data) 2004 2004 2004 2003
$ $ $ $
------------------------------------------------------------------
------------------------------------------------------------------

Revenues 328,929 301,397 278,420 277,787

Net income (loss) 20,674 13,907 15,683 (727)

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Basic and diluted earnings
(loss) per share 0.14 0.10 0.13 (0.01)
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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 the TSX Ventures Exchange ("TIW").

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