Slide 1: Magyar Telekom Group Investor Presentation
MAGYAR TELEKOM GROUP INVESTOR PRESENTATION
Slide 2: Strategy, Outlook and Guidance
STRATEGY, OUTLOOK AND GUIDANCE
Slide 3: Overview – Magyar Telekom Group at a Glance
OVERVIEW – MAGYAR TELEKOM GROUP AT A GLANCE INTERNATIONAL PRESENCE BUNDLING STRATEGY Czech Republic Slovakia Austria Moldova Beyond Hungary Hungary Core Slovenia Croatia Croatia Romania Romania Core DIVERSIFIED BiH Serbia SERVICE Serbia Kosovo Bulgaria Montenegro Bulgaria PROVIDER Macedonia Macedoni
Slide 4: Hungarian Economic Environment
HUNGARIAN ECONOMIC ENVIRONMENT GROWTH STRUCTURE CONTINUED DELEVERAGING KEEPS Contribution to GDP growth (%) DOMESTIC DEMAND LOW 8 Consumer spending and investments slowly 6 turn the trend but growth remains fragile 4 EU transfers act as vital source of 2 investments 0 MT financials strongly co
Slide 5: Market Positions on the Hungarian Telecommunication Market
MARKET POSITIONS ON THE HUNGARIAN TELECOMMUNICATION MARKET TOTAL MOBILE MARKET SHARES (TOTAL SIM BASED) MOBILE BROADBAND MARKET SHARES (TOTAL SIM BASED) Subscribers Subscribers 12,000,000 5,000,000 22.8% 22.5% 22.7% 4,000,000 9,000,000 24.7% 25.0% 31.3% 30.9% 30.5% 3,000,000 Vodafone 25.9% 6,000,000
Slide 6: Wide Range of Telecom Services, System Integration and IT Infrastructure at T-Systems Hungary
WIDE RANGE OF TELECOM SERVICES, SYSTEM INTEGRATION AND IT INFRASTRUCTURE COMPETENCES AT T-SYSTEMS HUNGARY CONNECTIVITY 40% of total revenue 64 % of total margin* Fixed voice Fixed data Fixed internet Mobile voice Mobile internet Mobile data SYSTEM INTEGRATION 17% of total revenue 10% of total margin
Slide 7: Market Leader in IT Services
MARKET LEADER IN IT SERVICES SYSTEM INTEGRATION IT INFRASTRUCTURE SI & IT Package Custom System IT App. OS & Infra. OS & Infra. proj. Public Hosting application app. dev. integration consulting operation operation service Cloud 33% 30% 20% 18% 18% 18% 15% 15% 10% 9% 8% 5% 6% Fornax Revenue based mar
Slide 8: 2013 Group Results – Revenues and EBITDA
2013 GROUP RESULTS – REVENUES AND EBITDA GROUP REVENUES GROUP EBITDA HUF bn +5.0% HUF bn -7.9% 194.8 -12.1 640 5.1 637.5 195 21.7 630 192 620 189 9.8 610 607.1 -12.4 186 14.3 600 -9.0 -2.6 183 -2.9 3.8 -3.7 1.7 179.5 590 180 3.0 580 177 -1.6 570 174 10 0 0 2012 Mobile Fixed Fixed M. non- Equip. SI/I
Slide 9: 2013 Group Results – Capex and FCF
2013 GROUP RESULTS – CAPEX AND FCF GROUP CAPEX GROUP FCF* HUF bn HUF +42.8bn HUF bn HUF -59.1bn 7.2 -1.4 146.1 59.7 -19.9 150 17.5 60 38.0 3.1 45 -15.4 103.3 -10.9 100 -10.7 30 -30.1 15 50 -0.3 0.6 0 6.6 0 -15 2012 License Mac. License Mac. Annual STB Other 2013 2012 Pro-M EBITDA Spectrum Other cash
Slide 10: Group Revenue Developments
GROUP REVENUE DEVELOPMENTS SIGNIFICANT REVENUE POTENTIAL FROM NON-CORE ACTIVITIES HUF bn 800 CAGR: ca. +2% 600 Beyond core Mobile broadband growth ca. 18% only partially compensates Near core for decline in voice ca. 26% revenue 400 Further growth in near- core revenues expected Core Plans to
Slide 11: Disciplined Cost Management
DISCIPLINED COST MANAGEMENT EBITDA AND COST DEVELOPMENTS (RELATIVE TO REVENUES) 100% Direct costs expected to rise in 32% parallel with increase in 80% 37% 37% 40% revenues and change in product mix 60% Indirect costs to decline by 31% CAGR ca. 2% by 2017 vs. 29% 30% 26% 40% 2012 5% 5% 6% 5% C
Slide 12: Efficiency Investments Free Up Capex for New Technologies and Services
EFFICIENCY INVESTMENTS FREE UP CAPEX FOR NEW TECHNOLOGIES AND SERVICES CAPEX DEVELOPMENTS* HUF bn 15% 13% 14% 12% 100 Fixed access: focus on increasing HSI coverage 80 Mobile access: 4G population coverage to reach 80% by 2015 60 Efficiency investments: – Replacement of legacy network – PSTN m
Slide 13: Dividend Policy
DIVIDEND POLICY DIVIDEND PAYMENT AND NET DEBT RATIO DEVELOPMENTS Net debt ratio* Dividend per share (HUF) Maintain net debt ratio (net debt/total 50% 80 capital) target of 30% - 40% 43.8% 42.5% 70 Net debt ratio stood at 42.5% at the end of June 2014 40% 60 32.7% 34.1% 34.3% TARGET HUF 58.7bn
Slide 14: Financial Outlook
FINANCIAL OUTLOOK 2013 RESULTS 2014 TARGETS 2017 TARGETS increasing at a CAGR of REVENUE HUF 637.5bn (+5.0%) up to 3% decline ca. 2% compared to 2012 surpassing 2013 level of EBITDA HUF 179.5bn (-7.9%) up to 3% decline HUF 179.5bn CAPEX* HUF 87.5bn around HUF 87bn around HUF 80bn **excluding spectru
Slide 15: Q2 2014 Results
Q2 2014 RESULTS
Slide 16: Q2 2014 Financial Highlights
Q2 2014 FINANCIAL HIGHLIGHTS Increase in TV, fixed and broadband revenues REVENUE Higher mobile broadband revenues -3.3%; HUF 151.8bn Lower fixed and mobile voice revenues Lower revenues from SI/IT and energy services Expansion in the gross margins of energy and SI/IT services REPORTED EBITDA Reduct
Slide 17: H1 2014 Results and Public Targets for 2014
H12014 RESULTS AND PUBLIC TARGETS FOR 2014 H1 2014 RESULTS 2014 TARGETS REVENUE -3.1% up to 3% decline Lower energy revenues due to cuts in regulated retail energy prices and the mild winter Decline in equipment sales and SI/IT revenues REPORTED +1.5% up to 3% decline* EBITDA Strong improvemen
Slide 18: Q2 2014 Group Results – Revenues and EBITDA
Q2 2014 GROUP RESULTS – REVENUES AND EBITDA GROUP REVENUES GROUP EBITDA HUF bn HUF bn -3.3% 158 51 156.9 -2.4 -0.3% 156 0.2 -1.1 -1.8 0.8 -0.6 0.5 154 -1.9 0.9 0.2 151.8 152 -0.4 1.5 -1.2 150 50 49.8 148 49.6 2 0 0 Q2 Mobile Fixed Equip. SI/IT Energy M. non- TV Other Q2 Q2 2013 Energy Other gross Em
Slide 19: Q2 2014 Segment Results – Revenues and EBITDA
Q2 2014 SEGMENT RESULTS – REVENUES AND EBITDA SEGMENTS’ REVENUE DEVELOPMENTS SEGMENTS’ EBITDA DEVELOPMENT HUF bn HUF bn -0.3% 1.2 -0.2 160 51 -1.5 -3.3% 158 156.9 -3.2 156 50 49.8 -2.0 0.4 49.6 154 0.1 -1.8 2.0 151.8 152 49 -0.2 150 0 35 Q2 2013 T-HU T-Systems Maced. Monten. Elim. Q2 2014 Q2 2013 T-
Slide 20: Hungary – Fixed Voice Market
HUNGARY – FIXED VOICE MARKET TELEKOM HUNGARY FIXED VOICE SUBSCRIBERS Significant reduction in fixed voice churn due to the Subscribers 2,000,000 retention effect of: -1% – Hoppá package 1,500,000 1,438,474 1,421,063 – 2Play/3Play offers – Retail energy bundling 1,000,000 VoCa Decline in 1Play cu
Slide 21: Hungary – Energy Retail
HUNGARY – ENERGY RETAIL GAS AND ELECTRICITY POINTS OF DELIVERY (POD) RETAIL ENERGY BUSINESS PODs (thousand) 200 Soft launch in 2010, nationwide since April 2012 Gas Electricity Residential customers receive a 3-8% discount to 150 regulated universal service prices on their energy 68.7 67.6 67.6
Slide 22: Telekom Hungary – Broadband and TV Market
TELEKOM HUNGARY -- BROADBAND AND TV MARKET FIXED BROADBAND SUBSCRIBER BREAKDOWN Subscribers +6% 1,000,000 943,876 890,661 6% 5% Growth in broadband market driven by cable 750,000 29% 31% and fiber Significant ARPU pressure from multiplay 500,000 Fiber Cable BB migration and local pricing 57% 56%
Slide 23: Telekom Hungary – Mobile Market
TELEKOM HUNGARY – MOBILE MARKET TELEKOM SMARTPHONE PENETRATION % of total handsets Smartphone sales reached 90% of postpaid handsets 50 % 45.6 % 41.1 % Broadband subscription attach rate at ca. 90% 40 % 31.3 % Full 4G coverage in Budapest and 51% 30 % population-based coverage countrywide 20 %
Slide 24: Macedonia and Montenegro
MACEDONIA AND MONTENEGRO MACEDONIAN MOBILE VOICE MARKET One (T. Slovenia) MONTENEGRIN MOBILE VOICE MARKET Telenor VIP (T. Austria) Subscribers m:tel (T. Serbia) Subscribers T-Mobile +4% T-Mobile -8% 0% -1% 1,500,000 2,500,000 -6% -14% 24% 22% 1,200,000 0% 0% 2,000,000 24% 24% 26% 40% 20% 26% 900,000
Slide 25: Financials
FINANCIALS
Slide 26: Magyar Telekom – Consolidated Income Statement
MAGYAR TELEKOM – CONSOLIDATED INCOME STATEMENT HUF million Q2 2013 Q2 2014 Change Mobile revenues 78,939 77,372 -2.0% Fixed line revenues 53,522 51,533 -3.7% System Integration/Information Technology revenues 15,191 14,785 -2.7% Revenue from Energy Services 9,255 8,096 -12.5% Revenues 156,907 151,78
Slide 27: Magyar Telekom – Consolidated Balance Sheet
MAGYAR TELEKOM - CONSOLIDATED BALANCE SHEET HUF million Jun 30, 2013 Jun 30, 2014 Change Current assets 195,657 182,923 -6.5% Cash and cash equivalents 15,118 13,967 -7.6% Other current financial assets 31,009 14,420 -53.5% Non current assets 842,406 886,558 5.2% Property, plant and equipment - net
Slide 28: Magyar Telekom – Consolidated Cash Flow Statement
MAGYAR TELEKOM - CONSOLIDATED CASH FLOW STATEMENT HUF million Jun 30, 2013 Jun 30, 2014 Change Net cash generated from operating activities 41,468 56,216 35.6% Investments in tangible and intangible assets (40,620) (33,330) -17.9% Adjustments to cash purchases 2,758 (9,390) -440.5% Purchase of subsi
Slide 29: For further questions please contact the IR department
For further questions please contact the IR department: Investor Relations Phone: +36 1 458-0424 Fax : +36 1 458-0443 e-mail: investor.relations@telekom.hu Abbreviations: 3G: third generation, 4G: fourth generation, ARPU: average revenue per user, BB: broadband, CUG: closed user group, HQ: headquart