Investor News

Budapest, November 7, 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 third quarter and first nine months of 2018, in accordance with International Financial Reporting Standards (IFRS).

Financial highlights:

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Strategic highlights:

• Further increase in Group revenue as growth in equipment and SI/IT sales continued to be coupled with an improvement in service revenues
  • Integrated fixed-mobile packages give further support to postpaid, broadband and TV customer expansion in both countries
  • Strong demand for equipment sales in Hungary further support favourable service revenue trends
  • SI/IT revenue growth primarily driven by a high volume of public sector infrastructure projects in Hungary
• Decline in Gross profit reflecting revenue mix changes as well as the absence of one-off items supporting Q3 2017 performance
• Temporary decline in EBITDA as gross profit decreases and indirect costs slightly increase
• Increase in Free cash flow as higher first nine months EBITDA, lower capex payments and declining acquisition costs offset higher receivable balances related to instalment sales and a temporary increase in payments to handset suppliers

Tibor Rékasi, CEO commented:

“I am delighted that we have maintained our strong performance from the first half of the year in the third quarter of 2018. Once again, we delivered growth across all business lines, with System Integration and IT and Equipment sales revenues contributing strongly to the 5.4% revenue growth achieved in the quarter.

In Hungary, the demand for mobile data continued to grow, in line with the increasing number of smart devices in the market. The latter was reinforced by our strategy for equipment sales, which included a new subsidy structure favoring smart handsets in the product mix. Our new mobile packages drive pre- to postpaid migration among our customers and further support our mobile data revenue growth. These factors were also shown in our mobile ARPU, where we achieved 8% growth year-on-year.

As per our ongoing strategy, we maintained a strong focus on our fixed network. We are working to achieve our goal of extending our fiber coverage to an additional 300,000 households in 2018. This effort is part of our overall long-term plan to offer gigabit internet connectivity across the whole country. The benefits of these efforts materialize in the ongoing growth of our broadband retail and TV revenue lines. In addition, equipment revenues continued to grow year-on-year, reflecting our successful efforts to meet customer needs, by allowing customers to purchase mobile devices with their fixed contracts and vice versa.

Next to offering an outstanding fixed network to our customers, the other pillar of our growth strategy is our FMC offering. Currently we are still the only truly integrated player in the Hungarian market with an integrated fixed-mobile offering to our customers. During the third quarter we updated our Magenta1 proposition to present a clearer structure and more convincing offer to customers. While in the second quarter we doubled the mobile data allowance, in the third quarter we unified our offering, giving our Magenta1 customers the ability to achieve a 30% discount on all related services. Thanks to the changes introduced in our Magenta1 offering in 2018, over one-fifth of our households are now Magenta1 subscribers. In addition to our consumer focus, we relaunched Magenta1 Business in the third quarter, offering business customers similar advantages, including possible IT related services.

In the System Integration and IT segment we had a strong quarter, reaching 19.8% revenue growth year-on-year. The growth was again attributable to a high volume of software and hardware projects with a lower profit margin. These projects, with a lower than average margin, serve to establish relationships with several different institutions – ones we can later convert to higher margin service 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, a positive trend in service revenues, as well as favorable exchange rate movements. “

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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