Submission to the General Meeting of Magyar Telekom Plc.

Transcription

1 Submission to the General Meeting of Magyar Telekom Plc. Report of the Board of Directors on the management of Magyar Telekom Plc., on the business operation, on the business policy and on the financial situation of the Company and Magyar Telekom Group in Budapest, April 12, 213

2 REPORT OF THE BOARD OF DIRECTORS ON THE MANAGEMENT OF MAGYAR TELEKOM PLC., ON THE BUSINESS OPERATION, ON THE BUSINESS POLICY AND ON THE FINANCIAL SITUATION OF THE COMPANY AND MAGYAR TELEKOM GROUP IN CHRISTOPHER MATTHEISEN CHAIRMAN -CEO ANNUAL GENERAL MEETING APRIL12, 213 MANAGEMENT COMMITTEE AND REPORTING STRUCTURE Christopher Mattheisen Chairman and Chief Executive Officer Attila Keszég Chief Commercial Officer Residential Péter Lakatos Chief Commercial Officer SMB Róbert Budafoki Chief Commercial Officer Enterprise Walter Goldenits Chief Technology and IT Officer Róbert Pataki Chief Business Development Officer Éva Somorjai Chief Human Resources Officer Thilo Kusch Chief Financial Officer Balázs Máthé Chief Legal and Corporate Affairs Officers Reporting structure Telekom Hungary T-Systems Hungary Macedonia Montenegro residential, SoHo, SMB customers public sector and enterprise clients 2

3 AWARDS WON IN Excellence in customer service award in the personal service category Best employer in Hungary Best sustainability report in Hungary Best Organizational Development project in Hungary - Service attitude program 3 MARKET POSITIONS ON THE HUNGARIAN TELECOMMUNICATION MARKET Mobile voice market shares (based on total SIMs) 15,, Mobile broadband market shares (based on total SIMs) 3,5, 12,, 22.4% 23.% 9,, 34.3% 32.% 6,, 3,, 43.4% 45.% 21 Fixed broadband market shares* 22.8% 31.3% 45.9% Vodafone Telenor T-Mobile 3,, 2,5, 2,, 1,5, 25.6% 1,, 26.6% 5, 47.8% 21 TV market shares* 23.8% 27.5% 48.7% 25.9% 28.3% 45.8% 2,5, 4,, 2,, 1,5, 1,, 5, 3.8% 12.2% 2.7% 36.3% May ** 27.6% 3,, 3.1% 24.7% 28.9% 26.4% 13.6% Other 12.6% DIGI 2,, 23.2% 22.2% 23.% 2.7% 21.9% UPC 24.9% 25.9% 26.7% MT 1,, 36.6% 36.9% 24.% 24.7% 25.4% December December 21 *based on the total fixed BB /TV market estimated by the National Media and Infocommunications Authority **data is not available for earlier periods 4

4 HUNGARY FIXED VOICE MARKET AND RETAIL ENERGY Multi-Play developments 2,, 21 1,5, -18% 1,, +6% +24% 5, 1 Play 2 Play 3 Play Gas and electricity points of delivery (POD) PODs 16, Gas Electricity 147, ,17 12, 87,819 8, 61,516 Market trends significant reduction in fixed voice churn due to the retention benefit of: Hoppá package 2Play/3Play offers retail energy bundling decline in 1Play customer base to 48% success of the retail energy business demonstrated by a significant increase in the number of energy delivery points 45% of energy customers subscribe to a 3Play package 4, 11,8 15,226 24,628 35,262 March June September December March June September December 5 HUNGARY -- FIXED BROADBAND AND TV MARKET T-Home fixed broadband subscriber breakdown 1,, 8, 6, 4, 2, 851,38 3.7% 25.% 58.7% 12.6% December TV subscriber breakdown 1,, 8, 6, 797, % +3% 874, % 28.1% 56.8% 1.3% December Fiber Cable ADSL Wholesale Market trends broadband market growth driven by cable and fiber development, while ADSL growth has slowed internet service portfolio restructured to support fixed broadband market share TV ARPU supported by increasing ratio of interactive IPTV customers significant migration from cable to IPTV +5% te act e custo e s 834, % 4, 2, 28.4% 36.3% December 37.5% 27.6% December Satelite TV IPTV Cable TV 6

5 HUNGARY MOBILE VOICE AND DATA MARKET T-Mobile smartphone penetration % of total handsets 35 % 3 % 31.3 % 25 % 2 % 18.4 % Market trends 15 % 9.6 % 1 % 5 % % 21 Mobile termination rate cuts HUF/min 35 3 improving customer mix: y-o-y increase in postpaid ratio to 47% from 46% smartphone sales reached 7% in broadband d subscription attach rate at ca. 8% full LTE coverage in Budapest and 65 additional towns in Hungary MTR cuts: 2% cut from Jan, further 25% cut from Jan 213 to 2.4 eurocents HUF/min February December 213 T-Mobile Telenor Vodafone 7 HUNGARIAN ECONOMIC ENVIRONMENT Growth structure Contribution to GDP growth (%) Q1 21 Q2.5% Economic challenges Economic downturn coupled with a high rate of inflation i GDP performance dependent on export dynamics continued decline in household spending due to the weakening HUF, high unemployment and inflation has put pressure Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY on consumption 213* MT financials strongly correlated with trends Consumption Net exports Investment in domestic demand Inflation * Central Bank of Hungary December forecast GDP y-o-y growth Additional taxes levied on Magyar Telekom HUF bn New telecom tax Special tax Utility tax ca Forecast New tax burdens introduced to reduce budget deficit special, revenue-based sector tax levied on a temporary basis between 21- new, traffic-based permanent telecom tax introduced from July permanent tax on utility and telecom networks levied from 213 8

6 GROUP RESULTS REVENUES AND EBITDA Group revenues Group EBITDA HUF bn HUF bn Underlying performance Mobile voice Fixed voice TV SI/IT Energy Other 14 Special influence* Direct margin Fixed M. non- Mobile data voice equip. Employee- Mac. Pro-M sale Net other related R/E sale Opex Revenue development EBITDA development Group revenues up 1.6% y-o-y y strong contribution from energy service revenues increase in contribution from mobile internet revenues and smartphone sales fixed and mobile voice revenue decline reflect depressed household consumption and MTR cuts decrease in fixed data revenues primarily due to public sector insourcing i Underlying EBITDA down 4.4% y-o-y y further erosion of traditional voice and data revenues lower direct margin contribution of new, growing businesses efficiency e cy enhancing measures es have mitigated margin dilution introduction of new telecommunications tax from July negative impact of HUF 16.2bn provision related to the SEC/DOJ settlement on results *investigation- and severance-related expenses, as well as special and new telecom taxes 9 FREE CASH FLOW AND DIVIDENDS Free cash flow* generation Dividend payment HUF bn Special and telecom tax Net debt ratio** DPS (HUF) 5% % 32.7% 34.1% 34.3% % Target 3% % % 1 % Minorities FCF to shareholders Net debt ratio Dividend payment Free cash flow generation FCF declined in due to a number of exceptional costs: - spectrum acquisition (HUF 1.9 bn) - DOJ/SEC settlement t (HUF 22.1 bn) - new telecom tax introduced in July (HUF 9 bn) partially mitigated by proceeds from Pro-M sale (HUF 2 bn) *defined as Operating CF + Investing CF adjusted for proceeds from/payments for other financial assets Dividend policy in order to maintain an efficient capital structure, we have a net debt ratio target of 3-4% increase in ratio attributed to exceptional costs in the Board of Directors proposes HUF 5 dividend per share on earnings for approval at the AGM **defined as net debt / total capital 1

7 MAGYAR TELEKOM STRATEGIC BUSINESS PRIORITIES 213 We aim to become the most highly regarded SERVICE company, thereby maintaining our leadership in all segments and achieving turnaround in our financials both top- and bottom-line. Short-term corporate targets are derived from long-term priorities INNOVATE the core 1. Build online Company through E-TRANSFORMATION both externally and internally 2. Differentiate through outstanding CUSTOMER EXPEREINCE in all channels 3. Secure leadership in BROADBAND QUALITY countrywide (fixed and mobile) 4. Improve OPERATIONAL EXCELLENCE through online and agility 5. Develop PEOPLE as our most important assets GROW the core 6. Leverage B2B competences in IT services regionally and increase non-telco revenues EXTEND the core 7. Boost INNOVATION and capture new revenue streams in Digital Home and Retail+ 11 PUBLIC TARGETS FOR targets results Revenue Flat to -3% pressure on real disposable income to lead to a further decline in household consumption spending power in the business sector is expected to remain limited shortfall of Pro-M revenues +1.6% 4 7% decline 44%* Reported EBITDA -4.4%* changing revenue mix with increasing proportion of sales made *4.4% decline y-o-y refers to up by lower margin services change in underlying EBITDA margin dilution partially mitigated by efficiency enhancing measures CAPEX** **excluding spectrum license fees 5% decline network modernization, LTE roll-out internal efficiency programs 92.4bn 12

8 DIVIDEND PAYMENT DETAILS The proposed gross dividend is HUF 5 per ordinary share with a nominal value of HUF 1 April 22, 213 detailed announcement will be published on the order of dividend disbursement on the homepage of the Company and the Budapest Stock Exchange May 6, 213 last day of trading with Magyar Telekom shares entitled to dividend May 7, 213 ex-dividend date May 9, 213 record date for dividend entitlement May 16, 213 first day of dividend disbursement 13 THANK YOU FOR YOUR ATTENTION! FOR FURTHER QUESTIONS PLEASE CONTACT THE INVESTOR RELATIONS DEPARTMENT: PHONE: FAX: INVESTOR.RELATIONS@TELEKOM.HU