Investor News

Budapest, August 8, 2018 18:00

Magyar Telekom (Reuters: MTEL.BU and Bloomberg: MTELEKOM HB), the leading Hungarian telecommunications service provider, today reported its consolidated financial results for the second quarter and first half of 2018, in accordance with International Financial Reporting Standards (IFRS).

Financial highlights:

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Strategic highlights:

• Continued increase in Group revenue thanks to sustained improvement in service revenue coupled with equipment and SI/IT sales growth
  • Hungarian postpaid, broadband and TV customer expansion continues
  • SI/IT revenue growth driven by high volume of public sector infrastructure projects
  • Macedonian revenue improvement across all segments amplified by favourable exchange rate movements
• EBITDA growth driven by higher revenues coupled with savings in other operating expenses
• Free Cash Flow increase as higher EBITDA, lower capex payments and declining acquisition costs offset higher payments to handset suppliers
• Net debt ratio rose to 35.3% reflecting dividend payment in May 2018

Tibor Rékasi, CEO commented:

“I am delighted to report a strong performance across all our business lines in the second quarter of 2018. Growth rates achieved in System Integration and IT revenues and equipment sales, played a particularly important role in delivering a 9.2% year-on-year increase in Group revenues.
In Hungary, we witnessed continued growth in demand for mobile data, increased uptake of smart devices. Our flexible postpaid offering facilitated successful pre- to postpaid migration, further supporting our mobile data revenue growth and delivering a 7.8% year-on-year increase in ARPU.
In line with our strategy, we maintained a strong focus on growing our high-speed internet network with steady progress towards our coverage target of 300,000 additional households in 2018. The benefits of these efforts are reflected in the positive trajectory of our high-speed internet and TV revenues for the quarter.  In addition to positive market dynamics, the strong growth in equipment sales reflects our successful efforts to meet customer needs by introducing the possibility of purchasing mobile devices for fixed services and vice versa.
With FMC as a focal point of our strategy, during the second quarter, we took action to further enhance the attractiveness of our Magenta 1 offer by doubling the mobile data allowance for these customers. We remain the only operator in Hungary that can meet a household’s entire telecommunications needs and will continue to leverage this competitive advantage going forward.
In System Integration and IT, the highest revenue growth in recent years at 36.2% year-on-year was primarily achieved by delivering a high volume of hardware and software contracts with a lower profit margin. Whilst this achievement had limited impact on profitability it allowed us to reinforce our relationship with a wide range of customers and secure longer term contracts.
Group performance during the quarter was further supported by the continued turnaround in Macedonia.  Both revenues and EBITDA improved thanks to solid performance across all business lines.
Based on higher than anticipated revenue growth in the second quarter, we expect our full year revenue to be higher than our original guidance at around HUF 630 billion. All other elements of the original guidance remain unchanged as the increase in revenue is largely due to revenue streams such as equipment sale and SI/IT performance that are lower margin serving to secure our customer base and set us up for the future rather than result in an immediate return.”

This investor news contains forward-looking statements. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. These statements are based on current plans, estimates and projections, and therefore should not have undue reliance placed upon them. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.

Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Such factors are described in, among other things, our annual financial statements for the year ended December 31, 2017, available on our website at https://www.telekom.hu which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and adopted by the European Union.

In addition to figures prepared in accordance with IFRS, Magyar Telekom also presents non-GAAP financial performance measures, including, among others, EBITDA, EBITDA margin and net debt. These non-GAAP measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with IFRS. Non-GAAP financial performance measures are not subject to IFRS or any other generally accepted accounting principles. Other companies may define these terms in different ways. For further information relevant to the interpretation of these terms, please refer to the chapter “Reconciliation of pro forma figures”, which is posted on Magyar Telekom’s Investor Relations webpage at www.telekom.hu/investor_relations.

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