Budapest, August 9, 2007
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 six months of 2007, in accordance with International Financial Reporting Standards (IFRS).
Highlights:
Christopher Mattheisen, Chairman and CEO commented:
“I
am pleased to report close to 4% top-line growth and 1.6% EBITDA growth
in the second quarter of this year compared to the same period of last
year. Despite the difficult macroeconomic environment we are on track
to achieve our targets for this year. In the T-Com segment we face
higher churn levels and further tariff erosion in Hungary, although
these were mainly offset by expanding broadband revenues and good
performance of the Montenegrin operations. In the mobile business, the
stable Hungarian operations, while impacted by the reduced mobile
termination rates, were supported by growing contributions from the
international subsidiaries and TETRA services. The consolidation of
SI/IT companies ensured revenue growth in the T-Systems segment and
stabilised EBITDA levels.
As communicated earlier, we are
continuously working to improve the operational cost structure and
headcount productivity within the Group as well as leveraging new,
integrated revenue opportunities. As part of these efforts, we have
already initiated some integration steps. According to the decision of
the Extraordinary General Meeting held in June, Emitel and the access
business of T-Online will be merged into the parent company. Within the
T-Systems segment we started to simplify the organisational structure
by reducing the number of subsidiaries. Restructuring and headcount
reductions at the network division have also started; the majority of
the severance-related expenses accounted in the second quarter in the
T-Com segment relates to this. Furthermore, we are going to announce
our detailed and broader restructuring plans in the autumn.”
T-Com
Revenues before elimination fell by 1.6% to
HUF 77.1 bn in Q2 2007 over the same period in 2006 and EBITDA margin
decreased to 38.1%.
T-Mobile
Revenues before elimination grew by 4.5% to HUF 85.0 bn; EBITDA margin was 44.1%.
T-Systems
Revenues before elimination increased by
14.4% as the consolidation effect of the new subsidiaries offset the
declining traditional voice revenues. KFKI Group and T-Systems Hungary
contributed HUF 5.8 bn revenues and HUF 0.9 bn EBITDA in Q2 2007.
Excluding the new subsidiaries, revenues decreased by 20.7%, driven by
the continuous pressure on voice tariffs and increasing mobile
substitution. The segment’s EBITDA decreased by 3.1% and EBITDA margin
was 20.7% in Q2 2007.
Headquarters and Shared services
Revenues before
elimination were down by 9.0% driven by lower marketing and real estate
services, partly compensated by higher security service revenues.
EBITDA decreased by 3.7% to HUF -5.1 bn.
As previously disclosed, in the course of conducting their audit of our 2005 financial statements, PricewaterhouseCoopers Könyvvizsgáló és Gazdasági Tanácsadó Kft. identified two contracts the nature and business purposes of which were not readily apparent. In February 2006, our Audit Committee initiated an independent investigation into this matter. In the course of the investigation, two further contracts entered into by Magyar Telekom Plc. were potentially raising concerns. To date, the independent investigators have been unable to find sufficient evidence to show that any of the four contracts under investigation resulted in the provision of services to us or to our subsidiaries under those contracts of a value commensurate with the payments we made under those contracts. The independent investigators have been unable to determine definitively the purpose of the contracts, and it is possible that the purpose may have been improper. The independent investigators further identified several contracts at our Macedonian subsidiary that could warrant further review. In February 2007, our Board of Directors determined that those contracts should be reviewed and expanded the scope of the independent investigation to cover these additional contracts and related transactions. We have approved and are currently implementing certain remedial measures designed to enhance our internal controls to ensure compliance with Hungarian and U.S. legal requirements and NYSE listing requirements. As previously reported, the investigation delayed the finalization of our 2005 financial statements, and as a result we and some of our subsidiaries have failed and may fail to meet certain deadlines prescribed by U.S., Hungarian and other applicable laws and regulations for preparing and filing audited annual results and holding annual general meetings. We have to date been fined HUF 13 million as a consequence of these delays. We have notified the Hungarian Financial Supervisory Authority, the U.S. Securities and Exchange Commission and the U.S. Department of Justice of the investigation, are in regular contact with these authorities regarding the investigation and are responding to inquiries raised by and the investigations being conducted by these authorities. The U.S. Department of Justice has recently expanded the scope of its investigation to include the actions taken by the Company in response to the findings of and issues raised by the Company’s internal investigation and a related subpoena and further informal document requests have been issued.
About Magyar Telekom
Magyar Telekom is the
principal provider of telecom services in Hungary. Magyar Telekom
provides a broad range of services including traditional fixed line and
mobile telephony, data transmission, value-added, IT and system
integration services. Magyar Telekom owns the majority of the shares of
MakTel, the sole fixed line operator and its subsidiary T-Mobile
Macedonia, the leading mobile operator in Macedonia. Magyar Telekom has
a majority stake in Crnogorski Telekom. This Group provides fixed,
mobile and Internet services in Montenegro. Key shareholders of Magyar
Telekom as of June 30, 2007 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, 2006 filed with the U.S.
Securities and Exchange Commission.