Press Releases

Budapest, May 12, 2000

MATÁV (NYSE: MTA.N and BSE: MTAV.BU), the leading Hungarian telecommunications service provider, today reported continued progress in its first quarter 2000 financial results.

Highlights:

• Revenues grew by 19.2% (17.1% in EUR terms) to 105.1 billion forints compared to 88.2 billion forints in the first quarter of 1999. Top-line growth was driven primarily by a 42.6% increase in revenues from subscriptions, reflecting a major rebalancing of Matáv's tariffs, and a 32.1% rise in mobile telecommunications revenues powered by a strong increase in the number of mobile subscribers.
• Net income increased by 17.8% (15.8% in EUR terms) to 20.1 billion forints, versus 17.1 billion forints in the same period of last year.
• Basic earnings per share also grew by 17.8% to 19.4 forints per share.
• Margins decreased slightly during first quarter 2000, as MATÁV continued aggressive sales and marketing efforts to build usage and broaden the subscriber base in the mobile segment, and to drive sales of ISDN lines, particularly in the expanding residential ISDN segment. The decrease is also partly attributable to the new interconnection fees that took effect from February 1.

Elek Straub, MATÁV Chairman and CEO, commented: ?MATÁV has delivered another sound quarter of growth. We continue to see a steady progress in our growth businesses, mobile penetration increases unabated and our ISDN promotion was also well received by the general public. Our bottom-line growth rate for the quarter has slowed from last year's tremendous performance. This reflects in part the impact of our new interconnect regime. We entered a transition period when we should establish stable grounds for our operations in the liberalized telecom market and -at the same time- set the basis for transforming MATÁV into an IP-focused communications company ready to meet the challenges of the future."

• Mobile revenues increased 32.1 % to 23.0 billion forints compared to the first quarter of 1999. This increase was mainly driven by the accelerated growth in the number of GSM subscribers to over 1 million at the end of the quarter. Westel maintained its number one position in the Hungarian mobile segment, with a 56% share of the GSM market. As the market's quality leader, Westel introduced a number of services such as WAP and online customer care, many of them firsts for Hungary. Aside from pursuing technological leadership, Westel continues to broaden its customer footprint with call packages tailored to various market segments, including a 10% reduction in average monthly fees.
• In our fixed-line business, MATÁV made significant progress in rebalancing. Our new tariffs, effective February 1, 2000 reflect a 50% increase in monthly subscription fees and a reduction in per-second usage charges. The positive effects of the reduction in usage fees on volumes are however delayed by the fact that the new tariffs were introduced only in the second month of the quarter. This shift towards cost-based pricing will put us in a prepared position when the market is fully liberalized.
• Fixed-line penetration in our service areas was 38.7% at the end of first quarter 2000. The number of ISDN lines jumped to nearly 143,700, nearly a 90% increase over first quarter 1999, and a 26% increase over the 1999 year-end total. We are on track to achieve our major goal for 2000 of making ISDN a mass market product that will also serve as a platform for the introduction of ADSL in the second half of 2000. The strong growth in the number of ISDN channels during the quarter was partially offset by a slight decrease in business and residential analogue lines, reflecting the shift towards digital lines, the substantial increase in monthly fees at a time of falling mobile prices, as well as a curtailing of promotions on the installation of analogue lines.
• MATÁVNet, Matáv's internet service provider which holds a 46% share of the Hungarian dial-up market, once again experienced a very successful quarter. The number of dial-up subscribers rose to 61,293, a 76.8% increase over the first three months of 1999. This performance was backed by aggressive marketing efforts and the popularity of our flexible internet offering.
• Employee-related expenses increased by 5.4% year-on-year to 13.9 billion forints. The moderate growth results from wage increases effective April 1, 1999 and from increases in the proportion of more highly qualified employees partially offset by headcount reductions and decreases in welfare costs. Efficiency improvements continued with an 8.6% year-on-year headcount reduction to 15,100 and an increase in the number of lines per fixed employee to 246 from 204 at the end of March, 1999.

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 March 31, 2000 include the Ministry for Transport, Communications and Water Management (holder of the Golden Share), MagyarCom, a consortium of SBC/Ameritech International, Inc. and Deutsche Telekom AG (59.53%), while 40.47% is publicly traded.

For detailed information on Matáv's first quarter results, visit our website at
http://www.matav.hu/english/world/investors/index.html