Investor Releases

December 08, 2000

MATÁV (NYSE: MTA.N and BSE: MTAV.BU), the leading Hungarian telecommunications service provider, based on the decision of the Board of Directors, today reported the details of the restructuring program announced on November 14 for the company's fixed-line voice telephone service operations.

As the first step of implementing the newly announced corporate strategy MATÁV is undertaking significant measures. The key elements of the program include a restructuring of the fixed voice, mobile, internet and system integration service operations targeting headcount reductions of 16% in the fixed line business (MATÁV Rt.) in the course of 2001; accelerated depreciation of certain analogue and other assets; and a continuing shift of capital expenditure towards higher growth areas. MATÁV plans to take further actions next year related to its strategies to refocus its operation towards high growth areas, including geographic expansion. According to the decision of the Board of Directors MATÁV will submit a binding bid for the 51% of Maktel, the Macedonian telecommunications company.

MATÁV chairman and CEO Elek Straub commented: "The restructuring builds on our longstanding track record of productivity gains and focus on creating a highly successful and profitable telecommunications leader. What we take now is a proactive step to refocus our operations and capitalize on fast changing technologies and consumer behaviour. To meet investors' expectations, MATÁV is increasingly allocating its human and financial capital to newer business areas where the most shareholder value can be created, such as mobile, data and internet. In order to increase the transparency of these areas we will provide more detailed information on them beginning with the first quarter of 2001 MATÁV has already established strong leadership positions in these fully competitive markets, to take advantage of the considerable growth opportunities in the evolving infocommunication industry in Hungary."

Headcount reductions will be accompanied by process improvement and operational restructuring that will eliminate approximately 150 organisational units. The more significant headcount reductions will occur in the headquarters, back-up and technical support areas. Network monitoring units will be strengthened, while the maintenance units will be consolidated.

These changes will be implemented in stages over the next several months and MATÁV expects the process to be completed by the end of 2001 In the first round, MATÁV will streamline the call centre, customer care and information services functions. Four technical directorates will be folded into two new units, the network management and the technical services directorates.

For the current restructuring program, MATÁV will take a one time charge which it estimates will be approximately HUF 13-15 billion, including restructuring costs, severance payments, asset write-offs, which will impact the company's 2000 financials. The exact amount of the charge is subject to several factors, including negotiations with the trade union.

MATÁV is the principal provider of telecom services in Hungary and holds the national concession for national and international long distance telephony. MATÁV provides a broad range of services including telephony, data transmission, value-added services, and through its subsidiaries is Hungary's largest mobile telecom provider. Key shareholders as of September 30, 2000 include the Hungarian State (holder of the Golden Share), MagyarCom, owned by Deutsche Telekom AG (59.49%), while 40.51% is publicly traded.