Press Releases

Budapest, September 30, 2013 17:40

Magyar Telekom’s senior management team, at its Investor Day held today for investors and analysts as first of a planned series, gave a detailed view on the Company’s strategic and financial targets. Chief Executive Officer Christopher Mattheisen and the Chief Officers have reconfirmed in their presentations that Magyar Telekom is maintaining its successful efforts in addressing the challenges arising from its market and operating environment.

During the Investor Day, Magyar Telekom’s Chief Executive OfficerChristopher Mattheisen and the Company’s Chief Officersbesides giving an update on corporate strategyannounced the Company’s near and mid-term financial targets and outlook. The senior executives have reconfirmed in their presentations that Magyar Telekom is maintaining its successful efforts in addressing the challenges arising from its market and operating environment. The Company remains committed, even while bearing additional burdens extraordinary in international comparison too, to contribute through its investments and developments to consumer welfare and increasing business competitiveness as well as to sustainable economic growth.

Following on from 2012 when the decline in revenues was reversed, a significant achievement in itself, Magyar Telekom forecasts revenues to grow by 2017 by around a 2% compound annual growth rate (CAGR). Although Group EBITDA is still expected to decline in 2014, by 2017 the 2013 EBITDA level will be surpassed. A moderate reduction in capital expenditures (CAPEX) is also expected going forward. Mirroring the turnaround in EBITDA, Magyar Telekom expects its free cash flow to start to improve from 2015 onwards, with the 2012 level expected to be exceeded in 2017. It is then that Magyar Telekom will be judged to have achieved a complete financial performance turnaround.

These results will be achieved by continuing on the transformation journey that Magyar Telekom has already embarked on through the integration of activities such as Systems Integration and IT, insurance, energy and the broadening of its device portfolio. Through this expansion to include near core and beyond core services to augment its traditional core activities, Magyar Telekom has been able to provide a unique customer experience that has helped to optimise value for both the Company and its subscribers, as illustrated by the current turnaround in revenues and increasing market shares. Through following this strategy, Magyar Telekom will be able to transform into a diversified service provider in the period out to 2017.

Over the past number of years, Telekom has been active in expanding into new business areas and aims to continue on this path going forward: by 2017, 18% of revenues are expected to come from beyond core activities. This expansion will encompass activities such as insurance, e-commerce or Digital Home offers. The Company also intends to pursue its strategy regarding its energy service and expects that under the current regulatory and market conditions the energy service will have an overall positive contribution to the Group’s financial performance.

Regarding network investments, focus will be paid to increasing high speed internet coverage in those regions where the Company sees demand for these services. In the mobile market, Telekom intends to increase its population based coverage of the most advanced 4G/LTE technology to 80% by 2015 in order to meet the demand for speed called for by the significant growth in data. The Company expects that projects geared towards enhancing efficiency levels will have eased off significantly by 2017, thereby freeing up more capital to be invested into new technologies and services.

In the Hungarian residential segment, with the bundling of core, near core and beyond core products and services, the Company has successfully reduced the churn in its traditional fixed voice business whilst keeping its mobile subscriber base stable in a shrinking market. At the same time, thanks to the attractive positioning of its bundles, both the average service and the average revenue per household have been steadily increasing over the past 3 years. Magyar Telekom strongly believes that it can create value by providing an enhanced customer experience that will lead to greater loyalty and higher levels of spending amongst its customers. Via its bundling strategy, it aims to increase the ratio of those households that subscribe to at least two telecommunication services from its 2012 level of 57% to 74% by 2017.

The Company’ primary goals in the SoHo/SMB segment are to preserve its leading telecommunications provider role, increase its market share in the IT market thanks to its integrated offers and IT competencies, and achieve a turnaround in the revenues generated from this segment in 2015.

T-Systems Hungary, Magyar Telekom’s segment that serves corporate customers and the public sector, has grown to become the largest SI/IT provider in Hungary. By deepening its customer relationships through becoming an integrated transformation partner, and possibly through international expansion, T-Systems expects its declining adjusted trend to reverse in 2015.

Magyar Telekom intends to maintain its current dividend policy, targeting a net debt to total capital ratio between 30%-40%.

For detailed information on Magyar Telekom's near and mid-termoutlook as well as strategic and financial targets please visit our website ( https://www.telekom.hu/investor_relations) or the website of the Budapest Stock Exchange ( http://www.bse.hu).