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Budapest, November 9, 2005
Magyar Telekom (Reuters: NYSE: MTA.N, BSE: MTEL.BU and Bloomberg: NYSE: MTA US, BSE: MTELEKOM HB), the leading Hungarian telecommunications service provider, today reported its consolidated financial results for the first nine months of 2005, in accordance with International Financial Reporting Standards (IFRS). From the second quarter of 2005, the consolidated income statement includes the results of Telekom Montenegro Group (“TCG”), while the company’s balance sheet has been consolidated in Magyar Telekom's accounts as of March 31, 2005.
Highlights:
Elek Straub, Chairman and CEO commented: “The improvement in our third quarter results of 2005 was supported by the contribution of Telekom Crne Gore, whose impressive EBITDA margin of over 45% clearly demonstrates the success of the acquisition. At the Hungarian fixed line business, a reduction in revenues, mainly attributable to a fall in traffic, did not deter the overall positive margin development due to a proportionately higher reduction in total operating expenses. In addition, the continuous increase in the line per employee ratio demonstrates the positive trend in productivity, in line with our strategic target. At T-Mobile Hungary, we were able to improve the profitability in the third quarter and maintain clear market leadership over the second largest competitor despite a small loss of market share. At our international fixed operations, third quarter results improvement reflect the consolidation impact of TCG this year and the severance provision created at MakTel last year. Overall, we have seen impressive profit contribution from our international mobile operations. Finally, in line with our medium-term strategy, the Board has made a proposal for the merger of Magyar Telekom and T-Mobile Hungary with the aim of capitalising on synergies between the two businesses.”
Hungarian fixed line operations: ADSL program and headcount efficiency in line with targets
Revenues
before elimination of turnover from other operations declined by 6.5%
to HUF 213.4 bn with an EBITDA margin of 36.6% in the first nine months
of 2005. Domestic and international traffic revenues combined declined
by 24.9%, mainly due to traffic loss to fixed line competitors and
mobile substitution, which resulted in lower volumes. The lower mobile
termination rates and discounts provided in our packages contributed to
the revenue decline. However, leased line and data revenues continued
to grow, recording a 21.0% rise as the number of installed ADSL lines
increased. The increased mobile substitution and number portability,
both in the business and residential segments accelerated the decline
in the total number of fixed lines (down 3.8% at end-September compared
to the same period in 2004). The strong focus on improving efficiency
is reflected in the lines per employee ratio, which reached 461 at
parent company level. Customised tariff packages at the parent company
represented 64% of the total number of lines, with over 1.7 million
lines at the end of the third quarter of 2005. Magyar Telekom’s
Internet subsidiary, T-Online Hungary, reported HUF 19.6 bn in revenues
in the first nine months of 2005 against HUF 14.1 bn in the same period
of 2004.
International fixed line operations: despite a decline in
revenue at MakTel, profitability was maintained; consolidation impact
of Telekom Montenegro
Revenues before elimination of
turnover from other operations grew by 19.2% to HUF 40.8 bn in the
first nine months of 2005. EBITDA increased to HUF 15.5 bn with an
EBITDA margin of 37.9%. MakTel’s fixed line business revenues fell as
mobile substitution caused a reduction in the revenue-generating
customer base. The results were also affected by lower usage and an
unfavourable foreign exchange movement. However, due to strict cost
controls across the whole company, all expense lines improved,
resulting in a strong EBITDA margin of 46.1%. Telekom Montenegro’s
fixed line operations brought HUF 9.4 bn in revenues since
consolidation, whilst EBITDA was HUF 1.5 bn, including a severance
expense of HUF 1.2 bn.
Hungarian mobile operations: clear market leadership maintained, strong financials
Revenues
before elimination of turnover from other operations grew by 3.2% in
the first nine months of 2005 as a result of higher enhanced service
revenues and slightly higher traffic revenues. EBITDA was HUF 81.5 bn
with an EBITDA margin of 40.4%. In the third quarter, T-Mobile
Hungary’s impressive profitability was driven by the focus on
value-added services, usage growth and cost cutting initiatives as well
as the HUF 1.1 bn reversal of the accrual created for payments into the
Universal Telecommunication Support Fund following a favourable Court
decision in September 2005. At the same time, receivables from the Fund
shown in the Hungarian fixed line operations were written off in an
amount of HUF 0.8 bn, which had an adverse impact on the Hungarian
fixed line operations in the third quarter. Operating profit increased
strongly, by 39.3% to HUF 56.1 bn, as the vast majority of the
write-off relating to the Westel brand name was accounted for in the
first quarter of 2004. Average acquisition cost per customer fell
sharply, by 34.5%, reflecting lower subsidies in both prepaid and
postpaid segments. When calculating subscriber acquisition cost, we
include the connection margin (SIM card cost less the connection fee)
and the sales-related equipment subsidy and agent fee. Though the
introduction of new packages encouraged an increase in usage as well as
growth in value added services, the discounts offered, combined with
the impact of regulatory changes and the extensive use of the closed
user group offers, resulted in a broadly stable ARPU (monthly average
revenue per user). MOU (monthly average minutes of use per subscriber)
grew to 124 in the first nine months of 2005 reflecting the improved
price elasticity.
International mobile operations: impressive profit contributions from both Mobimak and Monet
Revenues
before elimination of turnover from other operations grew strongly by
25.0% to HUF 31.3 bn in the first nine months of 2005. EBITDA was HUF
16.4 bn with an EBITDA margin of 52.4%. MakTel’s mobile business
reported slight revenue growth in a growing market characterised by
strong tariff competition. In addition, the currency movements had a
negative impact (-2.2%) on the results. EBITDA grew to HUF 13.5 bn and
Mobimak produced an impressive EBITDA margin of 53.6%. The results of
the international mobile operations also contained those of Monet, the
mobile subsidiary of Telekom Montenegro, which posted revenues of HUF
6.2 bn and EBITDA of HUF 2.9 bn during the Q2-Q3 period (EBITDA margin:
47.4%). The mobile penetration, driven by the tourist season, stood at
99% at the end-Q3 2005 in Montenegro.
About Magyar Telekom
Magyar Telekom is the
principal provider of telecom services in Hungary. Magyar Telekom
provides a broad range of services including telephony, data
transmission, value-added services, and through its subsidiary T-Mobile
Hungary is Hungary's largest mobile telecom provider. Magyar Telekom
also holds a 100% stake in Stonebridge Communications AD, which
controls MakTel, the sole fixed line operator and its subsidiary
Mobimak, the leading mobile operator in Macedonia. Magyar Telekom has a
majority stake in Telekom Montenegro (TCG). TCG Group provides fixed,
mobile and Internet services in Montenegro. Key shareholders of Magyar
Telekom as of September 30, 2005 include MagyarCom Holding GmbH
(59.21%), owned by Deutsche Telekom AG. The remainder, 40.79% is
publicly traded.
This
investor 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.
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,
2004 filed with the U.S. Securities and Exchange Commission.
For detailed information on Magyar Telekom’s first nine months of 2005 results please visit our website or the website of the Budapest Stock Exchange (www.bse.hu).