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Investor Releases

Matáv first quarter 2002 results

Strong mobile profits lead 2002 first quarter results

BUDAPEST –May 15, 2002 - Matáv (NYSE: MTA.N and BSE: MTAV.BU), the leading Hungarian telecommunications service provider, today reported its consolidated financial results for the first quarter 2002 according to International Accounting Standards (IAS).

Highlights:

  • Total revenues grew by 9.7% (19.4% in EUR terms) to HUF 141.0 bn (EUR 578 mn) in Q1 2002 compared to Q1 2001 primarily due to the revenue growth of mobile and international businesses.
  • EBITDA reached HUF 58.9 bn (up by 9.8%) and EBITDA margin remained stable at 41.7%.
  • Fixed line segment EBITDA margin grew slightly to 40.6% driven by leased line and data transmission revenue growth and lower payments to other network operators, offset by a moderate fall in traffic revenues.
  • Mobile segment revenues increased by more than 20% mainly driven by a strong increase in the number of customers. EBITDA margin grew to 35.6% in Q1 2002 from 31.9% a year ago. Westel had over 2.7 million customers at the end of March, 2002. Westel was successful in maintaining its leading position with a 50.6% market share.
  • MakTel’s revenue grew by 35.3% but its EBITDA margin fell to 40% due to significant increases in operating expenses in the first quarter.
  • Net income reached HUF 19.9 bn (EUR 81.7 mn), an increase of 50.1% primarily driven by the higher profitability of Westel and the strengthening forint against the euro.
  • Net cash from operating activities reached HUF 41.5 bn representing 187% growth over Q1 2001
  • Net debt at period-end was HUF 428.7 bn, a decrease of HUF 14.2 bn compared to the end of 2001, resulting in a reduced net debt to total capital (net debt plus equity plus minority interest) ratio of 44.8% compared to 46.6% at year-end 2001

Elek Straub, Chairman and CEO commented: "In the fixed line segment, we started the year successfully in a competitive environment due to our thorough and complete preparations. The segment remained a strong cash generator in this quarter. The key challenge is to retain our customers and provide better and more efficient services. Westel was the main success story during this period, delivering excellent profit growth and efficiency. As a 100% Matáv owned subsidiary, it enabled us to acquire an even more noticeable share of the growth of the Hungarian telecoms market. The Group's quarterly results reflect the progress we have made in our businesses. Despite the increasing weight of competitive services in our product portfolio, EBITDA margin stayed at a strong level of 41.7%. Overall, we are on the right track to deliver the Group's targets set for the year 2002"

Fixed line: Stabilized line numbers, focus on high-end solutions, healthy EBITDA margin

In our fixed line segment revenues remained stable with an EBITDA margin of 40.6%. Subscriptions, connections and other charges increased by 6.1%. Domestic and international traffic revenues combined decreased by 7.6% as both tariffs and volumes were lower than a year ago. Our data revenues grew further by 14.7% driven by the strong volume growth in managed leased lines and Internet. Fixed line penetration did not change and the total number of lines was flat. However, at the high end of the market, the number of ISDN channels increased significantly to above 478,000, representing 34% growth in the last twelve months. By end-March 16.3% of Matáv's total fixed lines were ISDN. We grew ADSL lines as well, resulting in 11,596 lines installed by end of the quarter this year. Matáv's Internet subsidiary, Axelero maintained its leading position among the dial-up ISPs with a subscriber number of 142,385 (up by 36%). Internet usage had a proportionally greater stake in the total call volume. At parent company, average headcount decreased by 13.6% over Q1 2001 and Matáv further boosted its lines per fixed line employee ratio to 322 (showing a 8.4% growth over Q1 2001).

Mobile: Further balanced growth in the market

In a very tight competitive environment, Westel maintained its leading position in the GSM market. Mobile segment revenues increased by 20.4% to reach HUF 53.3 bn for Q1 2002 Westel outperformed its competitors in terms of net customer additions, whilst at the same time EBITDA margin in the mobile segment grew to 35.6% from 31.9% a year earlier. Operating profit grew to HUF 10.5 bn from HUF 3.3 bn, as operating expenses only slightly increased. Net income went up by 306.2% to HUF 8.2 bn, driven by strong volume growth, efficiency improvements and lower costs. Westel's subscriber base was 2.7 million at the end of Q1 2002 The Company had a GSM market share of 50.6% and added 49.6% of the total market net additions in the first quarter of 2002 Prepaid customers at end-March, 2002 represented 70.4% of the total customer base. Due to the continuous dilution in its customer base, both MOU (monthly average minutes of use per subscriber) and ARPU (average revenue per unit) declined, providing an average MOU of 121 and ARPU of HUF 6,030 in Q1 2002 Annualized churn rate was 17.6% in Q1 2002

International: Temporary slow down in profitability at MakTel

MakTel's revenues were HUF 16.1 bn (up by 35.3%) in the first three months of 2002 and EBITDA margin was 40%. The weaker than usual quarterly performance was driven by higher employee-related and maintenance expenses, higher cost of equipment sales, increased payments to other network operators and other expenses. The subscriber base has continued to grow in each business segment. Fixed line customers reached 563,305 up 7.4% from a year earlier. The mobile customer base grew to 264,291, an impressive increase of 139%. The number of Internet subscribers was 24,672 at the end of March 2002

Matáv is the principal provider of telecom services in Hungary. Matáv provides a broad range of services including telephony, data transmission, value-added services, and through its subsidiaries is Hungary's largest mobile telecom provider. Matáv also holds a majority stake in Stonebridge Communications AD controlling MakTel, the sole fixed line and the leading mobile operator in Macedonia. Key shareholders of Matáv as of March 31, 2002 include MagyarCom, owned by Deutsche Telekom AG (59.49%), while 40.51% is publicly traded.

This press-release 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 you should not place undue reliance on 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 Report on Form 20-F for the year ended December 31, 2001 filed with the U.S. Securities and Exchange Commission.