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Budapest, February 24, 2009 00:00
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 2008, in accordance with International Financial Reporting Standards (IFRS).
Highlights:
Christopher Mattheisen, Chairman and CEO commented:
“
The year of 2008 marked an important milestone in the process of becoming
an integrated company with a leaner organization, simplified brand structure
and powerful and competitive product offerings from T-Home, T-Mobile and
T-Systems. To improve our competitiveness we made a further important step in
the fourth quarter and launched our satellite TV service. We can report very
positive customer reactions to our satellite TV launch, in the short time since
introduction the order volume is well above expectations. We believe that
through gaining TV market share position we can protect and even grow our voice
and broadband market shares, in line with our strategic goal to strengthen
Magyar Telekom’s 3Play position.
As well as seeing through the transformation of the Group last year, we
have also met the financial targets delivering broadly stable revenues and even
a slight increase in underlying EBITDA (EBITDA excluding investigation- and
headcount-reduction related expenses) in 2008 compared to 2007. Underlying
EBITDA margin was close to 42% in 2008. In terms of CAPEX, excluding the non-cash
items and the 3G license in
Macedonia
, we have reported
a CAPEX to Sales ratio of around 15% in line with the announced targets.
Looking ahead, the general economic outlook and its potential impact on
our business is still uncertain and difficult to predict. Despite the very
challenging environment and uncertain outlook that we face, not just in
Hungary but in our foreign markets as well, we are targeting for 2009 a revenue decline
of 1% and an EBITDA decline of 1 to 2% compared to the 2008 results
1
(excluding
both special influences and the one-off item related to the
fixed-to-mobile provision reversal). In terms of CAPEX, as announced earlier,
we aim to maintain the absolute 2008 level this year
1, despite the
weakening Hungarian currency. This flat level also includes the investments in
the fibre roll-out program announced earlier. We are continuously monitoring
the economic environment and its impact on our business and will communicate if
and when our assessment of our outlook changes.”
1
The comparable figures for 2008 are: HUF 664.5 bn revenues, HUF
273.7 bn EBITDA and HUF 103.6 bn
CAPEX.
Group:
T-Home
Revenues before intersegment elimination fell by 6.7% to HUF 71.8 bn in Q4 2008 compared to the same period last year, while EBITDA margin was 33.9%.
T-Mobile
Revenues before intersegment elimination increased by 1.8% to HUF 90.7 bn in the fourth quarter of 2008 compared to the same period in 2007; EBITDA margin was 35.7%.
T-Systems
Revenues before intersegment elimination increased by 7.2% to HUF 23.8 bn. System integration/IT revenues were up by 14.2% in the fourth quarter of 2008 mainly driven by intra-Group orders, while fixed line revenues declined slightly mainly due to mobile substitution. Thanks to the integration efforts and efficiency improvements, EBITDA increased to HUF 4.3 bn and EBITDA margin was 18.2% in Q4 2008.Underlying EBITDA margin (excluding the severance payment and accruals of HUF 1.1 bn in Q4 2008) even reached 23.0%, however this also includes the reversal of part of the impairment accounted in the last quarter of 2007.
Group Headquarters and
Shared services
Revenues before intersegment elimination were down by 7.5% to HUF 5.8 bn. EBITDA increased to HUF -6.5 bn due to lower investigation-related expenses (HUF 1.5 bn in Q4 2008 compared to HUF 2.0 bn in Q4 2007) and lower headcount reduction related severance payments and accruals (HUF 1.1 bn in Q4 2008 compared to HUF 5.6 bn in Q4 2007).
As
previously disclosed, in the course of conducting their audit of Magyar
Telekom’s 2005 financial statements, PricewaterhouseCoopers Könyvvizsgáló és
Gazdasági Tanácsadó Kft. (“PWC”) identified two contracts the nature and
business purposes of which were not readily apparent to them. In February 2006,
the Company’s Audit Committee retained White & Case (the “independent
investigators”), as its independent legal counsel, to conduct an internal
investigation into whether the Company had made payments under those, or other
contracts, potentially prohibited by U.S. laws or regulations, including the
Foreign Corrupt Practices Act (“FCPA”), or internal Company policy. The
Company’s Audit Committee also informed the U.S. Department of Justice (“DOJ”)
and the U.S. Securities and Exchange Commission (“SEC”), and the Hungarian
Supervisory Financial Authority of the internal investigation.
Based
on the documentation and other evidence obtained by it, White & Case
preliminarily concluded that there was reason to believe four consulting
contracts entered into in 2005 were entered into to serve improper objectives,
and further found that certain employees had destroyed evidence that was
relevant to the investigation. White & Case also 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 internal investigation to cover these
additional contracts and any related or similarly questionable contracts or
payments. In May 2008, the independent investigators provided us with a
“Status Report on the Macedonian Phase of the Independent Investigation.” In
the Status Report, White & Case stated, among other things, that “there is
affirmative evidence of illegitimacy in the formation and/or performance”
of six contracts for advisory, marketing, acquisition due-diligence and/or
lobbying services in Macedonia, entered into between 2004 and 2006 between us
and/or various of our affiliates on the one hand, and a Cyprus-based consulting
company and/or its affiliates on the other hand, under which we and/or our
affiliates paid a total of over EUR 6.7 million. The internal investigation is
continuing into these and other contracts identified by the independent investigators.
In
2007 the Supreme State Prosecutor of the Republic of Montenegro informed the
Board of Directors of Crnogorski Telekom, our Montenegrin subsidiary, of her
conclusion that the contracts subject to the internal investigation in
Montenegro included no elements of any type of criminal act for which
prosecution would be initiated in Montenegro.
Hungarian
authorities also commenced their own investigations into the Company’s
activities in Montenegro. The Hungarian National Bureau of Investigation
has informed us that it closed its investigation as of May 20, 2008 without
identifying any criminal activity.
United
States authorities commenced their own investigations concerning the
transactions which are the subject of our internal investigation, to determine
whether there have been violations of U.S. law. The Ministry of Interior
of the Republic of Macedonia has also issued requests to our Macedonian
subsidiaries, requesting information and documents concerning certain of our
subsidiaries’ procurement and dividend payment activities in that country
(together with U.S. investigations, the “Government investigations”). During
2007, the U.S. authorities expanded the scope of their investigations to
include an inquiry into our actions taken in connection with the internal
investigation and our public disclosures regarding the internal
investigation.
We
cannot predict when the internal investigation or the ongoing Government
investigations will be concluded, what the final outcome of those investigations
may be, or the impact, if any, they may have on our financial statements or
results of operations. Government authorities could seek criminal or civil
sanctions, including monetary penalties, against us or our affiliates, as well
as additional changes to our business practices and compliance programs.
Magyar Telekom incurred HUF
5.4 bn expenses relating to the investigation in 2008, which are included in
other operating expenses in the Group Headquarters and Shared services (“GHS”)
segment.
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 Makedonski Telekom, the leading fixed line operator and its subsidiary T-Mobile Macedonia, the leading mobile operator in Macedonia. Magyar Telekom has a majority stake in Crnogorski
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,
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number of important factors could cause actual results to differ materially
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described in, among other things, our Annual Report on Form 20-F for the year
ended December 31, 2007
filed with the U.S. Securities and Exchange Commission.