Press Releases

Budapest, August 12, 2004 00:00

2004 interim results: stable financial and operational results despite regulatory and competitive pressure.

Highlights:

• Revenues grew slightly by 0.4% to HUF 297.9 bn (EUR 1,163.4 m) in 1H 2004 compared to 1H 2003 as a result of higher mobile and data transmission revenues, offset by a decline in revenues from domestic and international traffic, and lower other usage.
  
• EBITDA declined by 2.3% to HUF 126.1 bn, with EBITDA margin reaching 42.3%.
  
• Gross additions to tangible and intangible assets amounted to HUF 35.4 bn. Of this, the portion relating to the fixed line segment reached HUF 14.6 bn, with mobile at HUF 17.3 bn and MakTel reporting HUF 3.5 bn.
  
• Fixed line segment: revenues declined by 6.4%; EBITDA margin was 36.3%.
  
• Mobile segment: revenues grew by 4.4%, EBITDA margin was 41.6% in 1H 2004. T-Mobile Hungary kept its leading position with a market share of 47.7% at the end of June 2004.
  
• International segment: revenues grew by 4% with EBITDA margin reaching a strong 51.7%. EBITDA fell slightly to HUF 17.4 bn from HUF 18 bn in the same period last year.
  
• Group operating profit reduced to HUF 57.6 bn mainly driven by a 10.8% growth in depreciation and amortization. Net income declined to HUF 30.3 bn (EUR 118.3 m).
  
• Net cash from operating activities increased to HUF 101.3 bn due to the combined impact of a decline in EBITDA and a fall in working capital requirements. Net cash utilized in investing activities reduced to HUF 38.7 bn. This was due to higher gross additions to tangible and intangible assets (primarily at the fixed line segment) together with a lower purchase of subsidiaries and increased proceeds from real estate sales. Net cash used in financing activities was HUF 49.1 bn, mainly explained by the higher dividend paid at the parent company and increased borrowing as a result of this.
  
• Net debt has been reduced by HUF 41.5 bn since the end of June 2003 resulting in a net debt ratio (net debt to net debt plus equity plus minority interest) of 34.6% compared to 36.6% at the end of June 2003.

Elek Straub, Chairman and CEO commented:
"For the first half of the year we have witnessed a balanced financial and operational performance for the Group. As expected, the fixed line segment reported a decline in revenues and EBITDA due to the strengthening regulatory and competitive pressure. The Regulator published its final resolution on Matáv's new reference interconnection offer in June. This resulted in a further reduction compared to January, with interconnection traffic fees now close to the relevant EU benchmarks. A new player appeared in the Hungarian fixed line market in the second quarter, increasing the competition for customers in this segment. In the broadband business, the ADSL rollout program has continued in line with our aims. The line per employee ratio at the parent company exceeded 353 (compared to 341 at end-June last year). In the mobile segment, the rebranding of Westel into T-Mobile Hungary was very successful, with rapid growth in awareness of the new brand. I am pleased to say that the perception of T-Mobile Hungary is very positive. We have also seen a smooth start to mobile number portability. The segment reported healthy financials driven by a balanced focus on maximising the value of the customer base and optimizing acquisition and retention costs. At MakTel, the pressure on revenues did not prohibit the achievement of a strong EBITDA margin in the first half of this year. Finally, let me mention that at the end of the second quarter, we paid the vast majority of the dividend relating to 2003 earnings, resulting in an increase in net debt ratio to close to 35%, fully in line with the dividend policy announced in March of last year."

Fixed line: Successful line retention; further growth in customised packages, competitive and regulatory pressure

Fixed line revenues fell by 6.4% to HUF 153.9 bn with EBITDA margin at 36.3%. Domestic and international traffic revenues combined fell by 13.2% mainly due to lower volumes and price discounts. At the same time, leased line and data revenues continued to grow, rising by 23.2%, driven by a volume increase in ADSL and increased internet subscribers. The total number of lines was down by only 0.5% compared to 1H 2003 and flat compared to 1Q 2004; evidence of Matáv's success in halting line number erosion. By the end of June 2004, 18.6% of Matáv's total fixed lines were ISDN channels. Customised tariff packages represented around 55% of the total number of lines with 1.6 million lines at the end of the second quarter 2004. The successful ADSL program resulted in 142,430 ADSL lines being installed by the end of 1H 2004. Matáv's internet subsidiary, Axelero, retained its leading position among ISPs in the dial-up market with a market share of around 44% and a total of 233,989 internet subscribers at the end of June 2004 (up by 35.2% year-on-year).


Mobile: Successful rebranding, improving customer base, healthy financials despite strong competition

Mobile revenues rose by 4.4% mainly driven by higher traffic, enhanced service revenues and equipment sales. EBITDA increased to HUF 52.8 bn, while the EBITDA margin reached 41.6%. Operating profit reduced by 5.7% as the vast majority of the write-off relating to the Westel rebranding was accounted for in the first quarter of 2004. T-Mobile Hungary maintained its leading position in a highly competitive market with 47.7% market share, while GSM penetration was 81.2% at end-June. T-Mobile Hungary's customer base exceeded 3.9 million at the end of 1H 2004. In the same period, the proportion of postpaid customers increased to 26.9% of the total customer base, compared with 25.5% at end of 1H 2003. Average acquisition cost per customer fell by 20.7% to HUF 10,284 in 1H 2004 from HUF 12,974 a year earlier. When calculating subscriber acquisition cost, we include the connection margin (connection fee less the SIM card cost) and the sales related equipment subsidy and agent fee. MOU (monthly average minutes of use per subscriber) increased to 111 in 1H 2004 from 110 a year earlier. Blended ARPU (monthly average revenue per user) declined to HUF 4,923; within this postpaid ARPU reached HUF 12,103 and prepaid ARPU was HUF 2,349. Due to new packages, the usage slightly grew but the discounts that some of these provide as well as the regulatory impacts resulted in downward pressure on ARPU. The enhanced services revenue (mainly SMS) grew to HUF 595 (12.1% of total ARPU), from HUF 550 (10.6% of total ARPU) in the same period last year. The churn rate of postpaid customers was successfully kept at the low level of 11.1% in 1H 2004. The churn rates at both prepaid and postpaid segments showed a decline compared to 1H 2003.


International: EBITDA margin maintained at an impressive level despite limited top line growth

International revenues rose by 4% to HUF 33.7 bn in 1H 2004 driven mainly by favourable foreign exchange rate movement. Mobile telecommunications services revenues grew, as did domestic traffic revenues. However, these were partially offset by a fall in international traffic revenues. EBITDA reached HUF 17.4 bn with a strong EBITDA margin of 51.7%. The closing number of employees fell by 4.1% to 3,543 at the end of the second quarter this year over the same period last year. Fixed line penetration in Macedonia was around 29%, and mobile penetration grew further to 38% over 21% in 1H 2003. The number of fixed line customers grew to 623,741, up by 1.9% from the previous year's figure. Within this, analog subscribers remained broadly unchanged at 584,429. ISDN channels, at the same time, showed a growth of 46.1% to 39,312. The mobile customer base rose by 51.1% to 623,285, broadly the same as the fixed line customer base. MakTel's mobile market share stood at 80% at end-June 2004. The number of internet subscribers at the end of the second quarter of 2004 increased to 56,426 (up by 34.4% year-on-year).