Eltel’s second quarter 2016 results to be impacted by a EUR 10 million provision in one rail project in Norway

During delivery inspections of a rail project in Norway unsatisfactory technical
quality in work execution have been identified and a significant amount of
additional work to finalise the project is consequently required. Eltel is
recording a provision of EUR 10 million in its second quarter results to cover
these additional costs.
During 2016, Eltel has communicated that there are challenges within the
Transport & Security segment in the execution of two rail projects in Norway.
Overall bad project execution originally derives from too fast ramp up of two
parallel rail projects. These were started as Eltel entered the rail business in
Norway in 2013-2014.

In the second quarter, during delivery inspections in one of these projects,
unsatisfactory technical quality and an increased volume of additional work to
complete the delivery were identified. The main root cause for the
unsatisfactory technical quality and increased work to complete is poorly
performed installation work in combination with weak project and subcontractor
management. This has resulted in the need for significant additional corrective
works in the execution of the project.

During July and early August, detailed assessment of the additional cost to
correct identified deficiencies and to complete remaining work has led to an
updated assessment confirming that the cost to rectify these remaining issues
significantly exceeds the previous assessment. These additional costs require a
provision of EUR 10 million.

This provision of EUR 10 million will negatively affect Eltel’s operative EBITA
in the second quarter.

Axel Hjärne, CEO comments: “Never in my twelve years at Eltel have I experienced
anything close to this and it is totally unacceptable. Eltel is a company which
delivers quality to its customers and which applies structured ways of
performing our business. We are currently doing everything possible to correct
the situation, at the same time securing that nothing similar would happen
again. We are taking instant corrective and preventive actions. Eltel has
initiated several managerial changes to the project during the past months and
the project management is being further strengthened by internal support. An
additional review of subcontractor quality performance by third party will be
conducted immediately. We expect the final project to be delivered to the
customer during 2016.”

Eltel will publish its second quarter 2016 interim report on Friday 19 April
2016 at 8.00 CET.

This information is information that Eltel AB is obliged to make public pursuant
to the EU Market Abuse Regulation. The information was submitted for
publication, through the agency of the contact person set out above, at 07.30
CET on August 16, 2016.

Today Eltel’s CEO Axel Hjärne and CFO Gert Sköld will host an audiocast in
English starting at 08.30 CET. The event will be audiocasted live on
https://wonderland.videosync.fi/2016-08-16-eltel. For those who would like to
participate on the telephone conference in connection with the audiocast, the
telephone numbers are:

  · Sweden: +46 8 566 42692
  · Finland: +358 9 817 10491
  · United Kingdom: +44 20 300 89808

Please, call well in advance to register.

There will also be an opportunity to ask questions via audiocast or telephone
conference.

For further information:
Ingela Ulfves
VP - IR and Group Communications
Tel: +358 40 311 3009, ingela.ulfves@eltelnetworks.com

About Eltel
Eltel is a leading European provider of technical services for critical
infrastructure networks – Infranets – in the segments of Power, Communication
and Transport & Security, with operations throughout the Nordic and Baltic
regions, Poland, Germany, the United Kingdom and Africa. Eltel provides a broad
and integrated range of services, spanning from maintenance and upgrade services
to project deliveries. Eltel has a diverse contract portfolio and a loyal and
growing customer base of large network owners. In 2015 Eltel net sales amounted
to EUR 1,255 million. The current number of employees is approximately 9,600.
Since February 2015, Eltel AB is listed on Nasdaq Stockholm.