February 24, 2016
Magyar Telekom (Reuters: MTEL.BU and Bloomberg: MTELEKOM HB), the
leading Hungarian telecommunications service provider, today reported its
consolidated financial results for the fourth quarter and full year of 2015, in
accordance with International Financial Reporting Standards (IFRS).
in Q4 2015 rose by 10.7% quarter on quarter from HUF
billion to HUF
driven by outstanding SI/IT performance, as well as the solid growth in the
fixed line business.
Mobile revenues decreased by 4.1% compared to the same
period of last year, mainly due to the fall in wholesale revenues following the
sharp decrease in Mobile Termination Rates (MTRs) in Hungary, as well as a
decline in SMS and equipment sales. At the same time, mobile data revenues
increased significantly over this period due to growth in the subscriber base.
improved by 8.1% as a result of higher broadband retail, equipment and
wholesale revenues, boosted also by the GTS Hungary acquisition.
Integration (SI) and IT revenues
almost doubled compared to the fourth quarter of 2014 mostly
driven by major Hungarian IT projects at the end of the year. Despite the exit
from the residential gas business as of 31 July, 2015
increased by 5.5% quarter on quarter underpinned by strong performance in the
business sub-segment both in gas and electricity services. With regards
2015 full year results,
total revenues grew by 4.8%
compared to 2014 which is higher
than previously guided. The marginal decline in mobile revenues was offset by
higher fixed line and energy service revenues, as well as very strong SI/IT
sales underpinned by EU funded projects. Revenues increased at both T-Hungary
and T-Systems by 3.4% and 13.1% respectively; while in Macedonia and Montenegro,
revenues declined by 3.9% and 5.6% respectively year on year due to ongoing
competitive and regulatory pressures.
Total direct costs increased by 20.5% to HUF
billion in Q4 2015, driven by significantly
higher SI/IT service related costs in line with the robust increase in
revenues. Interconnection costs fell by 27.7% following the cut in MTRs in
Hungary, while bad debt expenses also slightly improved. Looking at the
direct costs for full year
2015, we experienced a 10.2% increase
compared to 2014 due to higher SI/IT and energy
related costs associated with extended sales in both business lines, partly
offset by a fall in interconnection costs and an improvement in bad debts relating
equipment sales in Hungary. On a
quarterly comparative basis,
the gross margin increased by 3.8%,and by 1.7% for the full year.
EBITDA in Q4 2015 increased by 4.5% quarter on quarter to HUF
, despite the higher
employee-related expenses deriving from the rise in severance costs booked in
relation to the two-year headcount reduction program in 2014/2015, as well as
effect of the GTS acquisition on the headcount.
Year on year EBITDA
improved by 3.4%
, far exceeding our original guidance of roughly stable EBITDA
compared to 2014; this was driven principally by higher gross profit
contributions, not only from the energy and SI/IT businesses, but also from
core fixed line and mobile.
Details of special taxes
sector specific special taxes
decreased by 8.3% from HUF 6.7 billion to HUF 6.1 billion
quarter on quarter and went down by 1.8% on annual basis.
and amortization (D&A) expenses went up by 18.9% to HUF
billion in Q4
by higher amortization
of telecom licenses linked to the new frequency rights acquired in October,
2014. Software activation related to the new billing
and new SAP system also caused additional expenses. D&A for the full year increased by 13.0%
in 2015 compared to 2014.
financial results improved by 29.5% to HUF
billion in Q4 2015, primarily due to the higher gains
generated through foreign exchange translations and hedges caused by a
weakening Hungarian forint, as well as lower interest rates quarter on quarter.
Year on year, net financial results remained roughly stable.
tax expense decreased significantly, by 50.2% to HUF
billion quarter on
difference is mainly due to the one-time release of a deferred tax asset of
HUF 2.5 billion in Q4 2014 relating to our Macedonian subsidiaries, driven by
the impairment in Stonebridge’s investment (Stonebridge
is our holding company in Macedonia) in Makedonski Telekom, following the poor
share price performance of Makedonski Telekom in 2014, and a capital reduction in Stonebridge. Looking at
as a whole, income tax expenses decreased by 31.5%
, for much the same
factors that caused the decline for the fourth quarter; meanwhile, the
underlying effective tax rate for 2015 remained in-line with previous years, at
the average rate of ca. 30%.
attributable to the owners of the parent company (net income) more than doubled
billion to HUF
billion in the fourth quarter of 2015, primarily driven by this
significant drop in income tax expenses and to a lesser degree, lower profits
attributable to non-controlling interests on account of a fall in profits at both
Makedonski Telekom and Crnogorski Telekom. However,
the full year, despite lower income taxes, profit attributable to the owners of
the parent company decreased by 3.1% reflecting the 8.8% fall in operating
and a higher
share of profits attributable to non-controlling interests.
in tangible and intangible assets (CAPEX) decreased by 40.4% to HUF
billion for the full year
, although it should be recalled that HUF 97.6 billion was spent
in Q4 2014 for the Hungarian frequency licenses. Excluding this investment in
frequency licenses in 2014 and the additional Capex spent on fixed line network
development in Hungary amounting to approx. HUF 20.5 billion in 2015, Capex
increased only by approx. HUF 2.5 billion compared to the previous year. In
2015, Telekom Hungary accounted for HUF 88.4 billion of the total CAPEX, while
HUF 5.4 billion was allocated to T-Systems Hungary. The Macedonian and
Montenegrin operations accounted for HUF 10.6 billion and HUF 5.2 billion of
the CAPEX respectively.
Free cash flow (FCF
defined as operating cash flow and investing cash flow adjusted for proceeds
from / payments for other financial assets and repayment of other financial
increased from an outflow of HUF
billion in full year 2014 to an inflow of HUF
billion in 2015. Operating
cash flow improved by HUF 10.8 billion mostly due to higher EBITDA and lower tax payments in 2015 deriving from the tax law amendments in
Macedonia in 2014, but also reflecting a higher severance provision in 2015 versus
2014. Total investing cash flow (excluding Proceeds from other financial assets
– net) in 2015 amounted to HUF 110.7 billion, down by HUF 30.1billion compared
to 2014, due to the positive effect of the HUF 58.5 billion frequency
acquisition in 2014 that more than compensated for the GTS acquisition (paid
for in cash), and the capital intensive HSI roll-out project.
Net debt decreased by 7.4% from HUF
at the end of the fourth quarter of 2014 to
billion by the end of December 2015, while the
(net debt to total capital)
improved from 45.7% to 42.9% driven by a reduction in
both short- and long-term borrowings. Magyar Telekom’s dividend policy seeks to
maintain its net debt within the 30%-40% range and the net debt ratio is on a
downward trajectory. Thus, we expect that the net debt ratio will approach the
targeted range between 30-40% in the upcoming years.
Christopher Mattheisen, CEO commented:
fills me with great pride to report the highest Group revenue since 2008 at 656 billion forint for full year 2015 and a significantly improved EBITDA at 187 billion forint. Following the turn-around in our revenue, margins and most
latterly EBITDA, we have also managed to return to positive Free Cash Flow
generation in 2015. This will serve as the cornerstone for the resumption of
dividend payments relating to last year’s earnings, with a dividend payment of
15 forint per share proposed to our Annual General Meeting in April 2016.
providing integrated fixed and mobile services, we continued next generation IP
network development across all segments which will strengthen our technology
leadership positions further. We launched our MagentaOne Quad-Play offer in
both Hungary and Macedonia to maximize the telecommunication share of the
household spending wallet, with Montenegro following in January of this year.
Meanwhile, our focus on costs has allowed us to become a leaner and more
efficient company. Following the conclusion of our headcount reduction program
in Hungary, our focus will be on product and process simplification and
digitalization, including moving more of our customer servicing online.
Hungary, we have reached over 97% 4G population coverage with almost a million
customers on our 4G network. Moreover, we have rolled out High Speed Internet
access to almost half a million households. Consequently, it was the growth in
mobile and fixed line broadband, as well as in TV that drove the outstanding
revenues in Hungary, along with a significant increase in System integration/IT
and energy sales. I am also delighted to announce that after five years of
decline, T-Systems has also managed to turn around its EBITDA and return to
to 2016, we remain focused on the continued execution of our turnaround
strategy which involves growing our profitability in line with our targets. The
ongoing shift in our revenue mix, achieved by migrating customers to bundled
packages across Magyar Telekom’s operations, is expected to mitigate the
decline in voice revenue. Following our exit from the residential gas business
and a move away from full consolidation of the B2B energy business, we expect
revenues of 580 to 590 billion forint in 2016, and have upgraded our 2017
revenue guidance to a range of between 585 and 595 billion forint.
our reported EBITDA is expected to range between 187 and 191 billion forint in
2016, whilst our updated EBITDA guidance for 2017 is between 189 and 193 billion forint. The growing contribution from System integration and IT
activities across our geographies will play a key role in achieving our target
of growing Group EBITDA from one year to the next. In terms of Capex, despite
continued network development, we expect an annual decline of approximately 10%
in both 2016 and 2017.”
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.
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, 2014, available
on our website at
http://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
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