MAGYAR TELEKOM GROUP Q RESULTS PRESENTATION MAY 10, 2017

Transcription

1 MAGYAR TELEKOM GROUP Q1 217 RESULTS PRESENTATION MAY 1, 217

2 Q1 217 FINANCIAL RESULTS AND 217 TARGETS* REVENUE EBITDA CAPEX Q1 217 vs. Q1 216 HUF 14.5 bn (+1.6%) Revenue growth in mobile driven by mobile data and equipment sales following sales push Slight decline in fixed line revenues with higher TV and equipment sales unable to offset the declines in voice and broadband Increasing SI/IT revenues driven by major public procurement tender wins HUF 38.3 bn (-16.5%) Q1 216 EBITDA boosted by one-off gains from the sale of Infopark (Building G) and Origo Lower gross profit driven by an increase in mobile equipment subsidies and TV service margin compression (content fee introduced in July 216) Deterioration in other OPEX driven by higher maintenance costs, repairs and remedial work expenses, and increased rental fees Higher spending on our 4G+ network HUF 15.5 bn (+39.2%) Higher number of set top boxes reflecting strong TV sales in Q1 217 Lower PSTN migration investments 217 TARGETS around HUF 56 bn around HUF 182 bn around HUF 85 bn FCF HUF.3 bn (-97.5%) Q1 216 FCF boosted by one-off gains of HUF 11.3 billion (sale of Infopark and Origo) around HUF 55 bn * Excluding Crnogorski Telekom financials and the transaction price received for the disposal of the majority ownership in Crnogorski Telekom 2

3 Q1 217 GROUP SEGMENTAL REVENUE AND EBITDA Group segmental revenues Group segmental EBITDA HUF bn % HUF bn % Q 216 Mobile Fix SI/IT & Energy Mobile Fix SI/IT 1Q 217 1Q 216 Gross profit Indirect costs Gross profit Indirect costs Measurement diff.* 1Q 217 MT-Hungary Macedonia MT-Hungary Macedonia Change Y-o-Y +1.8% -1.4% Change Y-o-Y -19.8% -2.1% Hungary: higher mobile data, TV and equipment revenues, coupled with improvement in SI/IT revenues offset the declining voice retail (both mobile and fixed) and wholesale revenues Macedonia: significant improvement in mobile revenues driven by higher mobile data usage and customer numbers was offset by lower fixed voice and wholesale revenues Hungary: EBITDA declined due to the absence of material oneoffs in other operating income realized in Q1 216, coupled with higher other operating expenses and lower gross profit Macedonia: higher other operating expenses offsetting savings in employee-related expenses and the improvement in gross profit *Including elimination and measurement difference related to a fine from the Hungarian Competition Authority 3

4 HUNGARY Revenue* EBITDA HUF bn % HUF bn % Q 216 Mobile voice Mobile nonvoice Mobile other Fixed voice Fixed BB TV Fixed other SI/IT Energy 1Q 217 1Q 216 Gross profit Sale of Infopark Sale of Origo Utility tax Employee related expenses Other op. expenses (net) 1Q 217 Increase in mobile revenues driven by mobile data growth and higher equipment sales thanks to our retention and acquisition efforts Slightly lower fixed broadband revenues as higher customer numbers were offset by a decline in price levels TV revenues increased due to a rise in the customer base and material increase in ARPU levels Significant increase in SI/IT thanks to public procurement tender wins Improvement in SI/IT margins and bad debt expenses more than offset by higher direct costs due to increased mobile equipment subsidies and the TV service margin deterioration (content fee introduced in July 216) Profit on the sale of Infopark Building G and Origo in Q1 216 results in significant year-on-year EBITDA decline Higher other OPEX due to higher network maintenance costs, repairs and remedial work expenses, and increased rental fees * Mobile voice includes mobile retail and wholesale voice; Mobile non-voice includes data, SMS and equipment; Fixed other includes equipment, data, wholesale and other 4

5 HUNGARY MOBILE Mobile SIMs 6, 5, 4, 3, 2, 1, HUF 5, % 57.7% Mar 216 5, % 58.2% Jun % 5, % 58.9% Sep 216 5,332 5,34 Prepaid 4.8% 59.2% Dec % 6.1% Mar 217 Postpaid Mobile ARPU 3,216 Blended +2.3% 3,289 Prepaid Postpaid 1,66 1,31-3.3% 1Q 216 1Q 217 4,831 4, % Mobile broadband user developments Highlights 3, 2,5 2, 1,5 1, 5 2,366 44% Mar % 2,423 2,469 47% 51% Jun 216 Sep 216 2,555 57% Dec 216 2,635 58% Mar Non-4G 4G Customer base decline driven by prepaid churn and intense competition for business customers Increase in postpaid RPC driven by retention and acquisition efforts and strong data demand MOU up by 7% due to higher postpaid ratio and growing flat tariff subscriber base Increasing mobile ARPU due to higher data sales and successful prepaid to postpaid migration 4G outdoor population coverage above 98% Smartphone penetration over 64% (vs. 58% in Q1 216) Average data usage of 4G users is 1.7 GB/month vs..5 GB/month for non-4g users 5

6 HUNGARY FIXED VOICE, BROADBAND AND TV Fixed BB customer number Pay TV customer number +2.9% 1,2 1, 1,1 1,9 1,18 1,16 1,3 <1Mbps 6% 5% 5% 4% 4% 9 1Mbps -3Mbps 8 >3Mbps 62% 57% 6 65% 64% 59% % 31% 34% 36% 4% 2 Mar 216 Jun 216 Sep 216 Dec 216 Mar % 15% 53% Mar % 15% 54% Jun % % 14% 56% Sep % 13% 57% Dec % 13% 58% Mar 217 Sat TV Cable TV IPTV Fixed voice, BB and TV ARPU HUF Fixed voice Fixed BB Pay TV 1Q 216 2,592 2,455 1Q % 3,597 3,541 3,28 3, % +7.1% Highlights Focus on increasing the ratio of higher bandwidth packages and IPTV subscribers Fixed voice churn at 2% thanks to effective bundling strategy Growing fixed broadband and TV customer base 2.9 million households across Hungary now have access to HSI* FTTx (71k HHs) ongoing countrywide roll-out ED3 (757k HHs) participating in market consolidation VDSL (1,469k HHs) revitalizing copper, excl. overlaps Fixed voice and BB ARPU continues to decline, in the face of competitive bundled (3Play) offers Higher TV ARPU due to price increase reflecting the introduction of content fee * High Speed Internet 6

7 HUNGARY MULTIPLAY Fixed line multiplay residential subs. development Fixed line multiplay residential ARPU development 1,4 1,2 1, Play HUF 1,395 34% 3% 36% Mar 216 1,391 1,382 33% 32% 3% 37% Jun % 38% Sep 216 1,364 32% 29% 39% Dec 216 1,37 31% 29% 41% Mar 217 2Play 3Play Blended 1Play 2Play 3Play 3,1 3,98 5,89 5, % 5,795 5, % -.8% 8,55 8,21-3.6% 1Q 216 1Q 217 4Play Magenta1 subscriber development Mar 216 Jun 216 Sep 216 Dec 216 Mar 217 Magenta1 subscribers Highlights Blended fixed line ARPU up by 2% thanks to continuously increasing 3Play share Lower churn among 2&3Play customers compared to 1Play subscribers More than 136, high-value 4Play Magenta1 customers, helping to maximize the telecommunication share of wallet in household spending 54% of the Magenta1 customers use at least 3Mbps fixed broadband service 5% of the Magenta1 customers subscribers to unlimited mobile voice and SMS 7

8 HUNGARY SI/IT Total Hungarian IT services market development* Market share** HUF bn % % % 6% % 239 4% 259 4% 6% 6% % 61% % 61% 22 IT Infrastructure services System Integration / IT Application services % 14% 7% 4% 2% 2% 3% 63% 2% 2% Telekom HP NISZ Microsoft IBM MVMI Oracle SAP Others SI/IT revenue and gross profit of MT Hungary HUF mn +5.4% +11.8% 2, 16,938 15,144 Revenue 15, Gross profit 1, 5, 6,4 6,364 1Q 216 1Q 217 Margin 4% 38% Highlights Q1 217 revenue rise due to major public procurement tender wins Total revenues expected to increase in 217 as a result of accelerating EU fund inflows Total SI/IT market expected to grow over the next 5 years Magyar Telekom s aim is to maintain a healthy level of gross profit by undertaking a diversified mix of both higher added value SI/IT projects and lower margin IT deals * hardware and software markets are excluded, IDC Research, 215 ** based on IDC Research 8

9 MACEDONIA Financials Mobile KPIs Revenues (HUF bn) % EBITDA (HUF bn) % Subscribers 2,5, 2,, 1,5, 1,, 5, -.9% +.7% One (T. Slovenia)* VIP (T. Austria) One.Vip 25.5% Telekom 52.1% 5.% 28.1% 46.4% 47.9% 5.%. 1Q 216 Mobile Fixed SI/IT 1Q Q 216 Gross profit Other expenses 1Q 217 1Q 215 1Q 216 1Q217 KPIs (mobile/fixed voice/fixed BB/TV) Highlights customer number QoQ change +1% -3% % +6% ARPU (HUF) 1,576 1,63 2,94 1,97 2,326 2, % 2,949 2,87-5.9% -4.8% +5.8% 1Q 216 1Q 217 Continued mobile revenue increase despite 33% mobile termination rate cut effective from December 216 Slight EBITDA decline as higher other operating expenses offset savings in employee-related expenses and the improvement in gross profit Strong integrated competitor (under the VIP brand) Robust growth in TV subscribers and reduced churn in fixed voice Almost 5% of the fixed voice customer base is already a 3Play subcriber 9

10 APPENDIX

11 MARKET POSITION IN HUNGARY Total mobile market* Fixed voice market** Subscribers 12,, 9,, 6,, 22.8% 29.9% -1.% 24.5% 27.6% 25.3% 27.7% Vodafone Telenor MT Subscribers 3,5, 3,, 2,5, 2,, 1,5, 12.9% 1.4% 16.1% 3.9% +.5% 13.3% 11.1% 17.4% 3.1% 12.7% 12.1% 18.2% 3.% Other Invitel DIGI UPC MT 3,, 47.3% 48.% 47.% 1,, 5, 56.7% 55.2% 54.% Dec 214 Dec 215 Dec 216 Mar 215 Mar 216 Mar 217 Fixed broadband market** TV market** Subscribers 3,, 2,5, 2,, 1,5, 1,, 5, 15.7% 9.5% 14.3% 21.9% 38.6% Mar % 15.% 9.6% 15.2% 21.9% 38.3% Mar % 9.2% 16.% 22.1% 37.8% Mar 217 Other Invitel DIGI UPC MT Subscribers 4,, 3,, 2,, 1,, 17.2% 4.2% 24.2% 27.% 27.4% Mar % 16.% 4.6% 24.9% 27.% 27.5% Mar % 4.9% 25.3% 27.% 28.2% Mar 217 Other Invitel DIGI UPC MT * based on internal calculations from Vodafone Group and Telenor Group Reports ** based on the total fixed voice channels/bb access/pay TV access market estimated by the National Media and Infocommunications Authority (NMIA) 11

12 MAGYAR TELEKOM CONSOLIDATED INCOME STATEMENT HUF million Q1 216 Q1 217 Change Mobile revenues 72,287 74,25 2.7% Fixed line revenues 48,346 47, % System Integration/Information Technology revenues 15,38 17, % Revenue from energy services 2,313 1, % Revenues 138,326 14,57 1.6% Direct costs (49,688) (52,942) -6.5% Employee-related expenses (19,83) (19,385) 2.1% Utility tax (7,265) (7,418) -2.1% Depreciation and amortization (25,38) (25,72) -1.6% Other operating expenses (22,147) (23,152) -4.5% Total operating expenses (124,211) (128,617) 3.5% Other operating income 6, % Operating profit 2,627 12, % Net financial results (6,67) (6,5) 8.4% Share of associates' profits (24) 39 n.a. Profit before income tax 13,996 6, % Income tax expense (3,391) (2,67) 39.% Profit for the period from continuing operations 1,65 4, % Profit from discontinued operation 86 9, % Total profit for the period 11,465 14, % 12

13 MAGYAR TELEKOM CONSOLIDATED BALANCE SHEET HUF million Dec 31, 216 Mar 31, 217 Change Current assets 193, , % Cash and cash equivalents 1,85 8, % Other current financial assets 5,14 6,8 17.7% Non current assets 981, , % Property, plant and equipment - net 483, ,62-5.1% Intangible assets 253, ,22.7% Total assets 1,175,529 1,19, % Equity 581, ,628-1.% Current liabilites 277, ,47-21.% Financial liabilities to related parties 72,589 33, % Other financial liabilities 22,6 25, % Non current liabilites 316, , % Financial liabilities to related parties 247, ,67 -.2% Other financial liabilities 5,98 48, % Total equity and liabilites 1,175,529 1,19, % 13

14 MAGYAR TELEKOM CONSOLIDATED CASH FLOW STATEMENT HUF million Q1 216 Q1 217 Change Net cash generated from operating activities 24,878 27, % Investments in tangible and intangible assets (11,1) (15,452) 39.2% Adjustments to cash purchases (14,192) (8,829) -37.8% Purchase of subsidiaries and business units (13) (1,777) n.m. Cash acquired through business combinations 475 n.m. Payments for / proceeds from other financial assets - net (4,942) (2,723) -44.9% Proceeds from disposal of subsidiaries 3,464 n.m. Proceeds from disposal of PPE and intangible assets 8, % Payments for interests in associates and joint ventures n.m. Net cash used in investing activities (18,654) (28,138) -5.8% Dividends paid to shareholders and minority interest (2,433) n.m. Net payments of loans and other borrowings (7,776) (37,594) 383.5% Repayment of other financial liabilities (1,234) (1,974) 6.% Net cash used in financing activities (11,443) (39,568) % Free cash flow from continuing operation 9, % Free cash flow from discontinued operation (185) 36,267 n.m. Total Free cashflow 9,747 36, % *Free cash flow defined as Net cash generated from operating activities plus Net cash used in investing activities, adjusted with Proceeds from / Payments for other financial assets and Repayment of other financial liabilities 14

15 For further questions please contact the IR department: Linda László Head of Investor Relations Phone: laszlo.linda@telekom.hu Rita Walfisch Investor Relations Manager Phone: walfisch.rita@telekom.hu DISCLAIMER This investor presentation 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, estimates and projections, and therefore should not have undue reliance placed upon them. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events. Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Such factors are described in, among other things, our Annual Reports for the year ended December 31, 216 available on our website at Abbreviations: 3G: third generation, 4G: fourth generation, ARPU: average revenue per user, BB: broadband, IP: internet protocol, IT: information technology, LTE: long term evolution, MOU: minutes of use, MTR: mobile termination rate, NRA: National Regulatory Authority, POD: points of delivery, R/E: real estate, RPC: revenue producing customer, SAC: subscriber acquisition cost, SRC: subscriber retention cost, SI: system integration, SIM: subscriber identity module, SMB: small and medium businesses, TWM: Total Workforce Management, VAS: value added services, WS: wholesale In addition to figures prepared in accordance with IFRS, Magyar Telekom also presents non-gaap financial performance measures, including, among others, EBITDA, EBITDA margin, and net debt. These non-gaap measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with IFRS. Non-GAAP financial performance measures are not subject to IFRS or any other generally accepted accounting principles. Other companies may define these terms in different ways. For further information relevant to the interpretation of these terms, please refer to the chapter Reconciliation of pro forma figures, which is posted on Magyar Telekom s Investor Relations webpage at