Strategy

As a result of our strategy, Magyar Telekom has maintained a leading position in its Hungarian fixedline, mobile, Internet and data businesses in 2010. 

The telecommunications industry is undergoing a major change globally. Worldwide trends are driving towards an integrated telecommunications, information, media and entertainment market. The economic crisis has also led to restructuring between market segments. 

We expect that the traditional telecommunications market will no longer deliver sizeable revenue growth in Hungary. The fixed voice market as a major revenue and profit source is declining; mobile is no longer able to compensate this decline. However, we expect that new core segments, especially mobile broadband, broadcasting and IT services will deliver sizable revenue growth in the coming years. The fixed market is characterized by 3Play bundles, with TV services becoming a driver and core element of service offerings, while the mobile market is driven by fierce competition in broadband. An increasing technology platform-based competition can be observed in the domestic market, and our competitors are extensively deploying next-generation countrywide fixed and mobile networks. The battle for customer contact has pushed prices down. This slower development in the telecommunications market is likely to lead to consolidation between market players to increase economies of scale and enable growth. 

Our Corporate Strategy was designed in order to address these global and local market challenges and better exploit our position as an integrated telecommunications operator with a full range of services. Our Corporate Strategy - FIX, TRANSFORM, INNOVATE - enables us to exploit and develop our extended customer base, significantly improve efficiency and capture growth opportunities. The strategic objective in the short/mid-term is to fix critical factors within the core business (simplified and focused lean operation, lower cost structure, end-to-end responsibilities) and to further strengthen our positions in core connectivity segments (voice, mobile broadband, TV) that will enable us to shift resources and priorities towards focused innovation and expansion. 

Our new growth areas support conscious revenue restructuring, i.e., our growth in our new core segments, such as broadband, broadcasting, IT and content services, is expected to gradually compensate for lower revenues from traditional telecommunications, while non-core areas, such as energy, e-health, finance, and insurance services, support customer retention and the maintenance of high-margin revenues. 

In order to continue our transformation to become a cost-efficient integrated services company in an extended market of telecommunications and related industries, we have set our strategic priorities as follows:

1. Slow down voice churn

• To retain customers of the highest margin segments
• To secure the largest profit pool for future investments

2. Reach competitive cost structure

• To reach competitive cost base
• Improve Return on Capital Employed (‘‘ROCE’’), Operating Expenses to Sales and Capital Expenditures to EBITDA ratios

3. Secure market leader position in broadband

• To secure broadband access leadership as basis for all future services
• To stabilize revenue market share and increase share of high-margin revenues

4. Achieve market leader position on the TV market

• To increase TV customer volumes as means to retain high-margin voice and broadbandcustomers
• To increase number of services per customer (3/4Play)

5. Stabilize revenues

• To transform our revenues into a sustainable mix
• To reverse declining revenue trends, thus easing pressure on cost side
• To further monetize infrastructure with high-margin revenues