Budapest, March 11, 2015 17:30

Magyar Telekom and MET signed an agreement today to establish an equally shared joint venture that will provide natural gas and electricity services primarily for business customers.

The new joint venture will enter the market of business energy services with favourable terms and competitive offers. The change in the business energy service operation will have no impact on the residential energy service currently offered by Magyar Telekom.

The genesis of this agreement is the strategic partnership between Magyar Telekom and MOL, which has a significant ownership share in MET, signed in July 2013 and covering cooperation in the areas of sales, retail, energy retail and information technology.

The primary aim of the joint venture is to develop and improve the energy operations serving the business customers of both Magyar Telekom and MET in a competitive energy market environment. The parties see significant opportunities for synergies, driven primarily by greater economies of scale, the potential for risk sharing and the extensive industry experience and skills. Each party brings its own unique but complementary sets of strengths that will contribute to the success of this joint venture – in the case of Magyar Telekom, the experience it has gained in customer servicing and innovation through its energy market presence, matched by MET’s comprehensive experience in the wider energy industry. Through their new joint venture, the parties will create the conditions of their long-term presence and growth in the energy market. They can also improve their operational efficiency and performance, enabling additional customer benefits.

The joint venture will be set up on a 50:50 ownership basis with balanced rights in the management structure. Therefore, once the joint venture has commenced effective operations, business energy services will no longer be accounted for by the parties on a fully consolidated basis, but rather the 50% share of dividends payable by the joint venture will appear in the consolidated financial results of both owners. As a direct consequence, total revenues for Magyar Telekom are now anticipated to be proportionally lower than previously guided, down by around HUF 35-40 billion in 2017.

Due to the establishment of this joint venture, natural gas and electricity services currently provided by Magyar Telekom to business customers will be ceased in mid-term and transferred to this new joint venture. During the establishment of the joint venture, Telekom’s business customers will be served seamlessly and customer relations maintained continuously.

Completion of the transaction, which requires approval by the relevant authorities, is anticipated in the second half of 2015.