Investor News

Budapest, November 6, 2019 17:00

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 2019, in accordance with International Financial Reporting Standards (IFRS).

Financial highlights:

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Strategic highlights:

• Group revenues increased marginally owing to positive telecommunication service revenue trends across both mobile and fixed segments which outweighed lower SI/IT revenues
  
  • A renewal of the mobile and fixed service portfolio supported further growth in Hungarian data revenues
  • The success of the Magenta offer in North Macedonia helped to maintain favourable revenue trends
  • SI/IT revenues in Hungary continued to contract reflecting a lower volume of public sector contracts
• Gross profit increased due to higher revenues coupled with a one-off improvement in bad debt expense
• EBITDA, excluding the impact of IFRS 16, increased as a result of improved gross profit performance coupled with savings in indirect costs
• Free cash flow declined year-on-year, despite improved profitability across the Group. This is largely due to the payment of the 2100 MHz frequency license extension fee and less favourable changes in working capital
• Net debt increased to HUF 390.3 billion at the end of Q3 2019, reflecting the recognition of lease liabilities in accordance with IFRS 16 and the payment of dividends in May 2019

Tibor Rékasi, CEO commented:

 

“I am pleased to announce that in the first nine months of 2019, our core business continued on a positive trajectory, supported by our sustained competitive advantage and our ability to remain both agile and forward looking in an evolving market.  

In Hungary, we re-shaped our mobile and fixed portfolios according to our ‘more-for-more’ strategy to ensure we remain well positioned to satisfy customer needs and market expectations. This is reflected in the year-on-year revenue increases reported by our fixed and mobile segments of 3.3% and 3.1%, respectively.  

On Group level, in the first 9 months of 2019, total revenue remained broadly stable year-on-year at HUF 484.3 billion, as the positive growth in fixed and mobile revenues was offset by a decline in the performance of the System Integration and IT segment. In the same period, EBITDA (excluding the impact of IFRS16 adoption) grew by 1.9%. 

In the Hungarian mobile segment, continued strong demand for data in the third quarter offset the decline in voice and equipment revenues. The temporary slowdown in handset revenues we witnessed in the second quarter has slowed and we expect to see a return to growth in the fourth quarter, a traditionally strong period for the business.  

In the fixed segment, the ongoing rollout of our fiber network, which replaces crucial parts of our legacy network with fiber optic, played a key role in facilitating further development of our product offering. With our new fiber rollout coupled with technical upgrades to our cable network, we are now able to offer gigabit connectivity to more than 1.7 million access points in Hungary. This has driven further growth of our customer base and broadband ARPU.  

In line with our strategy, we remained diligently focused on growing our FMC customer base. In Q3 2019, our first FMC competitor entered the market following the approval of the merger of Vodafone and UPC. To maintain our competitive advantage, we have enhanced our Magenta1 offering which delivers highly attractive services and related equipment. In addition to enabling customers with a prepaid mobile tariff to take advantage of the Magenta 1 offer, we have also reviewed the offer to ensure its advantages are more clearly presented to customers. With the introduction of one bill first to our new Magenta1 customers they can truly see the advantages of being converged customers. Our FMC offer with its highly attractive services and related equipment, remains popular with our customers and supports the sustained growth in our FMC customer base.  

In North Macedonia we are continuing the revenue and EBITDA turnaround, managing to grow both figures in this quarter. Despite intensifying competition in the market, we have successfully grown our core business supported by increased customer demand for data and equipment, specially smartphones in the periods. 

Looking ahead, despite evolving market dynamics with the introduction of new players to the market, we remain confident in our ability to deliver our strategy and our full year guidance remains unchanged.”

 

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, 2018, 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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