Matáv nine months 1999 results - Matáv nine months 1999 results - Investor Relations - Magyar Telekom

Matáv nine months 1999 results

Matáv nine months 1999 results

BUDAPEST, November 12, 1999 -- MATÁV (NYSE: MTA.N and BSE: MTAV.BU), the leading Hungarian telecommunications service provider, today reported continued improvements in financial results for the first nine months of 1999

    • Revenues grew 20.3% (9.7% in USD and 12.7% in EUR terms) year-on-year to 280.3 billion forints, compared to 232.9 billion forints in the first nine months of 1998 Fully competitive business lines produced the highest revenue growth, led by mobile telecommunications services with a 31.9% year-on-year increase and leased lines and data transmission services with a 34.4% increase.
    • EBITDA increased 20.2% year-on-year to 133.8 billion forints compared to 111.3 billion forints a year ago. The EBITDA margin was 47.7% in the first three quarters of 1999 versus 47.8% for the same period in 1998
    • Net income increased 29.2% (17.8% in USD and 20.9% in EUR terms), to 55.8 billion forints versus 43.2 billion forints in the same period last year, despite the fact that a five-year tax holiday ended in 1998 and MATÁV and Westel 900 began to pay corporate tax at a rate of 7.2%. Net income margin increased to 19.9%, compared to 18.5% in the first three quarters of 1998
    • Basic earnings per share grew by 29.2% year-on-year to 53.8 forints.

Chairman and CEO Elek Straub, commenting on Matáv's results for the first nine months, said "Our fixed-line voice telephony services continued to see strong growth rates, and we are strengthening our position in the dynamically expanding mobile and data businesses where we operate in fully liberalized markets. GSM subscribers growth was outstanding, and perhaps more importantly we were able to achieve these increases and thereby strenghten our position ahead of the commercial entry of the third GSM provider into the market - while still delivering strong financial performance in the period. Additionally, the recent option agreement with Deutsche Telekom to acquire the remaining 49% interest in Westels, will allow us to invest shareholders' funds back into our mobile position, further securing our long-term prospects for growth and value creation." The main drivers for top line growth were subscription charges, domestic traffic revenues, mobile revenues and revenues from leased lines and data transmission.

    • The number of fixed lines increased 9.4% year-on-year to over 2   823,000 including ISDN channels. The number of ISDN channels has increased by 67.5% year-on-year to nearly 101   000, showing strong demand for data communications tools. As a result, penetration reached 37.6% at the end of September 1999 compared to 34.2% a year ago. We currently have over 88   000 orders for new lines.
    • Domestic usage growth measured in minutes has outperformed the growth in the number of lines, posting an 11.6% increase year-on-year. The main drivers were residential and ISDN traffic growth.
    • Matáv's 51% owned GSM provider Westel 900 has increased its customer base by 48.2% year-on-year to 737   000. As a result, consolidated mobile service revenues rose by 31.9% year-on-year to 59.6 billion forints. Prepaid customers accounted for 28% of net additions at Westel 900 in the last twelve months, and reached 16% of total GSM subscribers by the end of the period.
    • Growth in data communications remained strong. Revenues from leased lines and data communications surged by 34.4% relative to the first nine months of 1998 to 17.3 billion forints, driven mainly by internet and other data traffic and value-added services. Data and leased line revenues represent 6.2% of Matáv's total revenues.
    • We reduced our headcount by 9.2% year-on-year to approximately 15   600. Staff efficiency has increased 20.9% to 226 lines per employee from 187 a year ago.

MATÁV is the principal provider of telecom services in Hungary and holds the national concession for national and international long distance telephony. 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. Key shareholders as of September 30, 1999 include the Ministry for Transport, Communications and Water Management (holder of the Golden Share), MagyarCom, a consortium of Ameritech International, Inc. and Deutsche Telekom AG (59.53%), while 40.47% is publicly traded.

MATÁV Consolidated Financial Summari - IAS (HUF million) 9 months ended September 30, 1998 (unaudited) 9 months ended September 30, 1999 (unaudited) % change
Revenues
Subscriptions,connections and other charges 40   861   47   204   15,5%  
Domestic traffic revenue 79   873   98   639   23,5%  
Other usage 14   718   13   887   (5,6%)  
Domestic telecommunications services 135   452   159   730   17,9%  
International traffic revenues 28   831   32   215   11,7%  
Mobile telecommunications services 45   196   59   616   31,9%  
Leasedlines and data transmission 12   835   17   252   34,4%  
Other services 10   629   11   527   8,4%  
Total revenues 232   943   280   340   20,3%  
Employee related expenses (35   405)   (42   701)   20,6%  
Depreciation and amortization (36   778)   (46   028)   25,2%  
Paymentsto other network operators (26   518)   (31   793)   19,9%  
Costof telecommunications equipment sales (12   117)   (16   321)   34,7%  
Other operating expenses (47   554)   (55   716)   17,2%  
Total operating expenses (158   372)   (192   559)   21,6%  
Operating profit 74   571   87   781   17,7%  
Netinterest and other charges (25   031)   (17   236)   (31,1%)  
Share of associates'results before income tax (118)   764   n.m.  
Profit before income tax 49   422   71   309   44,3%  
Income tax payable 947   (5   285)   n.m.  
Profit after income tax 50   369   66   024   31,1%  
Minority interest (7   162)   (10   214)   42,6%  
Net income 43   207   55   810   29,2%  
  1998 1998 1999 % change
Dec 31, September 30,
(audited) (unaudited) (unaudited)
ASSETS
Current assets
Cash and cash equivalents 3   613   5   443   6   062   11,4%  
Financial investments 1   274   1   155   11   645   908,2%  
Receivables 51   662   49   529   64   655   30,5%  
Inventories 8   117   7   659   8   395   9,6%  
Total current assets 64   666   63   786   90   757   42,3%  
Total fixed assets 479   474   447   928   518   741   15,8%  
Other non current assets 5   400   4   738   5   712   20,6%  
Total assets 549   540   516   452   615   210   19,1%  
LIABILITIES AND SHAREHOLDERS' EQUITY
Loans and other borrowings 19   311   22   154   19   408   (12,4%)  
Trade and other payables 74   956   61   374   79   325   29,2%  
Deferred revenue 5   638   5   680   4   921   (13,4%)  
Provisionsfor liabilities and charges 4   322   3   666   5   038   37,4%  
Total current liabilities 104   227   92   874   108   692   17,0%  
Loans and other borrowings 153   160   149   223   162   144   8,7%  
Deferred revenue 18   260   19   689   14   776   (25,0%)  
Provisionsfor liabilities and charges 4   513   3   734   3   520   (5,7%)  
Total non current liabilities 175   933   172   646   180   440   4,5%  
Minority interests 12   135   8   817   21   321   141,8%  
Shareholders' equity
Common stock 103   728   103   728   103   728   0,0%  
Paid in capital 22   834   22   834   22   834   0,0%  
Retained earnings 130   683   115   553   178   195   54,2%  
Summary of key operating statistics
    30.szept.98 30.szept.99 Sep 99 - Sep 98
EBITDA margin 47,8%   47,7%   (0,2%)  
Operating margin 32,0%   31,3%   (2,2%)  
Net income margin 18,5%   19,9%   7,6%  
ROA 11,6%   12,8%   10,3%  
Netdebt to total capital 39,6%   33,4%   (15,7%)  
Number of closing lines
Residential 2   126   506   2   310   301   8,6%  
Business 356   820   376   025   5,4%  
Payphone 36   601   36   030   (1,6%)  
ISDN channels 60   140   100   764   67,5%  
Total lines 2   580   067   2   823   120   9,4%  
Digitalizationof exchanges with ISDN 75,3%   78,9%   4,8%  
Penetration 34,2%   37,6%   9,9%  
Westel 450 RPCs (Revenue Producing Customers) k 92   349   99   108   7,3%  
Westel 900RPCs (Revenue Producing Customers) 497   387   736   933   48,2%  
Total cellular RPCs 589   736   836   041   41,8%  
Fixed lineemployees (closing full equivalent) 13   809   12   484   (9,6%)  
Total no ofemployees (closing full equivalent) 17   237   15   643   (9,2%)  
Linesper fixed line employees 187   226   20,9%  
Traffic in minutes (thousands)
Domestic 5   647   260   6   304   409   11,6%  
International outgoing 140   764   145   193   3,1%  

Analysis of the Financial Statements for the nine months ended September 30, 1999

INCOME STATEMENT

Sales
Revenues from subscriptions, connections and other charges for the nine months ended September 30, 1999 amounted to HUF 47   204 million, compared to HUF 40   861 million for the same period in 1998 (a 15.5% increase). Growth resulted from an increase in the number of subscribers and tariff increases. The average number of lines increased 9.8% to 2   735,524 in 1999 from 2   491,351 for the first nine months in 1998

Domestic traffic revenue for the first nine months in 1999 totalled HUF 98   639 million, compared to HUF 79   873 million for the same period in 1998 (a 23.5% increase). Revenue growth was driven by increases in the number of subscribers and tariffs.

Revenues from other usage for the first nine months in 1999 amounted to HUF 13   887 million, compared to HUF 14   718 million for the same period in 1998 (a 5.6% decrease). This decrease is attributable to lower fees paid to MATÁV by other domestic operators.

International traffic revenues amounted to HUF 32   215 million for the nine months ended September 30, 1999, compared to HUF 28   831 million for the same period in 1998 (a 11.7% increase).

Revenues from mobile telecommunications services totalled HUF 59   616 million for the first nine months in 1999, compared to HUF 45   196 million for the nine months ended September 30, 1998 (a 31.9% increase). The growth resulted from the increased number of subscribers.

Revenue from leased lines and data transmission amounted to HUF 17   252 million for the first nine months in 1999, compared to HUF 12   835 million for the same period in 1998 (a 34.4% increase). This strong growth was due to the increase in the number of managed leased lines, ISDN, internet and audiotex.

Revenues from other services amounted to HUF 11   527 million for the first nine months in 1999, compared to HUF 10   629 million for the same period in 1998 (an 8.4% increase). Other services include equipment sales, construction, maintenance and miscellaneous revenues.

Expenses
Employee-related expenses for the nine months ended September 30, 1999 totalled HUF 42   701 million compared to HUF 35   405 million for the same period in 1998 (an increase of 20.6%). This growth results from wage increases effective April 1, 1999 and as MATÁV increases the proportion of more highly qualified employees in its workforce.

Depreciation and amortization for the nine months ended September 30, 1999 amounted to HUF 46   028 million compared to HUF 36   778 million for that period in 1998 (an increase of 25.2%). The growth is a result of increased investment in fixed assets and reduction of useful lives of certain asset categories.

Payments to other network operators for the nine months ended September 30, 1999 totalled HUF 31   793 million compared to HUF 26   518 million for the same period in 1998 (an increase of 19.9%). The increase was due to the increased penetration of mobiles and fixed lines and an increase in the average fees that MATÁV pays to other operators.

The cost of telecommunications equipment sales for the first nine months in 1999 was HUF 16   321 million compared to HUF 12   117 million for the same period in 1998 (an increase of 34.7%). This is due to the increased number of mobile handsets sold.

Other operating expenses for the first nine months in 1999 amounted to HUF 55   716 million compared to HUF 47   554 million for the same period in 1998 (an increase of 17.2%). Other operating expenses include materials, maintenance, marketing, service fees, local taxes, energy, and consultancy.

Operating
Profit Operating profit totalled HUF 87   781 million for the nine months ended September 30, 1999, compared to HUF 74   571 million for the same period in 1998 Total revenues increased 20.3% to HUF 280   340 million for the first nine months in 1999 compared to HUF 232   943 million for the first nine months in 1998 Total operating expense increased 21.6% to HUF 192   559 million for the first nine months in 1999 from HUF 158   372 million for the same period in 1998 Operating margin for the nine months ended September 30, 1999 was 31.3%, while operating margin for the same period in 1998 was 32.0%.

Net Interest and Other Charges
Net interest and other charges were HUF 17   236 million for the first nine months in 1999 compared to HUF 25   031 million for the same period in 1998 Net interest and other charges show a decrease due to the continuing strengthening of the Hungarian Forint. Total loans and other borrowings increased from HUF 171   377 million on September 30, 1998, to HUF 181   552 million on September 30, 1999

Share of associates' results
Share of associates' results amounted to HUF 764 million for the nine months ended September 30, 1999 compared to a loss of HUF 118 million for the same period in 1998, reflecting improved results of EMITEL and M-RTL.

Profit before taxation
Profit before tax amounted to HUF 71   309 million for the nine months ended September 30, 1999 versus HUF 49   422 million for the same period in 1998

Income tax
Income tax increased for the first nine months in 1999 due to the fact that MATÁV Rt. and Westel 900 started to pay corporate tax in 1999

Minority Interest
Minority interest for the first nine months in 1999 was HUF 10   214 million compared to HUF 7   162 million for the same period in 1998 (an increase of 42.6%). This increase is due to significantly higher profitability of Westel 900 and Westel 450.

Net Income
Net income for the first nine months in 1999 was HUF 55   810 million compared to HUF 43   207 for the same period in 1998 (an increase of 29.2%).

BALANCE SHEET
Total assets and total shareholders' equity and liabilities for September 30, 1998 were restated to HUF 516   452 million which reflects the adoption of IAS 19 "Employee Benefits" (revised 1997) as of January 1, 1998 Total assets and total shareholders' equity and liabilities amounted to HUF 615   210 million as of September 30, 1999 The increase is attributable to operating results.

Receivables
Receivables for September 30, 1999 of HUF 64   655 million increased 30.5% over September 30, 1998 This increase was due to the increase in the subscriber base and tariffs.

Trade and other payables
Trade and other payables increased from HUF 61   374 million in September 30, 1998 to HUF 79   325 million in September 30, 1999 The increase was due to the increase in domestic and foreign creditors resulting from the growth of the companies' operation as well as to the increase of tax payables as MATÁV Rt. and Westel 900 started to pay corporate tax in 1999

Retained earnings
Retained earnings increased 54.2% from September 30, 1998 to HUF 178   195 million at September 30, 1999 MATÁV paid a dividend of HUF 8   298 million. Retained earnings for September 30, 1998 were restated as a result of an adjustment for IAS 19 "Employee benefits" of HUF 2   506 million.

Number of employees
The number of full time and equivalent employees decreased from 17   237 on September 30, 1998 to 15   643 on September 30, 1999

Shareholder Structure
The issued share capital of MATÁV is HUF 103   728,170   000 consisting of 1   037,281   600 series "A" ordinary shares, nominal value HUF 100 per share, and one registered series "B" voting preference share, nominal value HUF 10   000. The holder of the series "B" share is entitled to certain preferential voting and other rights. Matáv's registered shareholders are summarised in the table below:

Shareholder Number of Shares Percentage of share capital
MagyarCom 617   478   081   59,53  
Publicly traded 419   803   519   40,47  
  1   037   281   600   100,00  
Holder of series "B" share 1      
  1   037   281   601      

Shareholders with over 5% ownership:

MagyarCom - Holding company of Deutsche Telekom and Ameritech *
Morgan Guaranty Trust - Depository for the Matáv's ADRs

* On October 8, 1999 SBC completed its acquisition of Ameritech.

Shares held by MATÁV in Treasury:

Treasury shares September 30, 1998 September 30, 1999
Number 124   200   0  
Book value (HUF million) 19   0  
Nominal Value (HUF million) 12   0  

On November 16, 1998 MATÁV fulfilled its legal requirements and sold its 124   200 Treasury shares at an average price of 1   214 HUF/share.

Other developments

On August 31, 1999 MATÁV announced that it sold 25% of its ownership and 75% of its voting rights in MATÁVKábelTV Kft. to Hungaria Insurance Co. Ltd.

On October 21, 1999 MATÁV announced that it entered into an agreement with Deutsche Telekom providing an option to acquire the 49% ownership in Westel 450 and Westel 900. MATÁV can exercise the option for a fixed price of USD 885 million in up to three tranches representing a percentage of not less than 15% each at any time during the period commencing on July 1, 2000 and ending September 30, 2001