Slide 1: Magyar Telekom Full Year 2008 Results
Presentation Magyar Telekom Full Year 2008 Results Transformation reinforces strong market and financial position 1
Slide 2: Abbreviations and investigation disclosure
Abbreviations: 3G: third generation, ARPU: average revenue per user, BB: broadband, CBC: call-by-call, CPS: carrier pre-selection, HQ: headquarters, HSDPA: high-speed downlink packet access, IC: interconnection, IP: internet protocol, IT: information technology, LTO: local telecommunication operator
Slide 3: Agenda
Agenda Overview Magyar Telekom’s strategic priorities Changes in organization, brand structure Improving service quality and portfolio Focus on efficiency Challenges and strengths Dividend policy Impacts of the financial crisis on Magyar Telekom Regulatory snapshot Public targets for 2008 and 2009 2
Slide 4: Magyar Telekom Group at a glance
Overview Magyar Telekom Group at a glance Market leader in all core businesses Stock information Integrated operations in Hungary, Macedonia EUR 2.0bn market capitalization and Montenegro operating in 39 local primary areas out of the total 54 Stock exchange listing in Hungary listed on NYSE and
Slide 5: Magyar Telekom's strategic priorities
Magyar Telekom’s strategic priorities Focus on efficiency, service excellence and expansion execute value-accretive acquisitions in the region SUSTAINABLE GROWTH and in Hungary expand into new business areas (e.g. content Long-term focus CAPTURE IN T services) ERN develop and launch new access
Slide 6: Further expansion in the SEE region and in Hungary
Magyar Telekom’s strategic priorities Further expansion in the SEE region and in Hungary South-Eastern Europe Hungary Seeking additional value-creating acquisitions Leading position in the SI/IT market both in Hungary and South-Eastern Europe through acquisitions; further consolidation 2001 – Make
Slide 7: Leaner organization, simpler brand structure
Changes in organization, brand structure Leaner organization, simpler brand structure New organizational structure Clear brand structure New organization since January 1, 2008 Customer segment-focused organization “T” as our corporate brand identifies the Magyar Telekom Group Consumer Business ABC
Slide 8: Improving service quality and portfolio
Improving service quality and portfolio Reinforcing technological leadership New generation access strategy Satellite TV service 5-year plan aiming to cover 1.2 million T-Home Sat TV households by 2013 (~30% of Hungarian nationwide DVB-S service (Digital Video Broadcasting- households) offering ba
Slide 9: Focus on efficiency: Headcount rationalization
Focus on efficiency Headcount rationalization Efficiency improvement Headcount-reduction headcount reductions enabled through integrated operations and leaner corporate structure Headcount reduction for 2008 15% decrease (~1,800 employees) by end of 2008 compared to the end of June 2007 level of
Slide 10: Challenges and strengths
Challenges and strengths Changing business needs, need for efficiency improvement Change in revenue mix Strong focus on profitability Revenue breakdown Growing EBITDA margin and returns HUF million ongoing headcount reduction and cost cutting 700 000 671 196 676 661 673 056 CAGR reflected in margi
Slide 11: Dividend policy: Targeted balance sheet structure
Dividend policy Targeted balance sheet structure Net debt ratio and dividend payment Usage of free cash flow as % of the generated free cash Dividend policy driven by capital structure 140% keep net debt within the range of 30-40% 120% maintaining a flexible balance sheet in case value- 100% 17%
Slide 12: Impacts of the financial crisis on Magyar Telekom
Impacts of the financial crisis on Magyar Telekom 2008 2009 2010 and beyond Persistently weaker currency, higher interest rates Economic recession increase in purchasing costs reduction of telecommunication spending Risks higher financing costs both in residential and business segments FX im
Slide 13: Regulatory snapshot
Regulatory snapshot Regulation follows the EU regulatory recommendations in all three countries Hungary: fully in line with the EU Regulatory Framework Macedonia: liberalization of the fixed line market is in progress, regulated mobile termination rates Montenegro: new telecommunication law wa
Slide 14: Public targets for 2008 and 2009
Public targets for 2008 and 2009 2008 public targets and results 2009 public targets Revenue Flat over 2007 -0.5% 9 1% decline compared to 2008 due to recession disposable income will significantly fall competitive landscape strict regulation Underlying* EBITDA Flat over 2007 +1.9% 9 1-2% decl
Slide 15: 2008 summary: Segments
2008 summary Revenues EBITDA EBITDA margin Group HUF 673.1bn -0.5% HUF 268.4bn +10.0% 39.9% Underlying** HUF 282.3bn +1.9% 41.9% T-Home HUF 290.5bn -5.6% HUF 117.7bn +5.5% 40.5% underlying HUF 122.8bn -3.9% 42.9% T-Mobile HUF 349.4bn +0.7% HUF 148.4bn -0.6% 42.5% Segments* underlying HUF 149.2bn -1.
Slide 16: T-Home: Hungarian operations
T-Home: Hungarian operations Focus on efficiency and customer retention Voice revenues under threat from Revenue breakdown HUF million -5.2% competition 250 000 increasing threat from cable operators offering 3Play 200 000 strong mobile substitution as mobility premium 150 000 diminishes annua
Slide 17: T-Home: Hungarian operations
T-Home: Hungarian operations Broadband market developments Cable services General deceleration of BB market growth Second player on the cable market MTel’s ADSL retail market share is 52%, cable BB T-Kábel market share ~19% based on cableTV 16% customers (~423,000) most competition comes from
Slide 18: T-Mobile: Hungarian operations
T-Mobile: Hungarian operations Competitive environment Regulation Subscribers, market shares and penetration* 79% 86% 92% 99% 110% 122% Penetration Mobile termination fee cut Subscribers further 16% cut in Jan-2010 and Dec-2010 for 10 000 000 all operators 44% decreasing asymmetry among operator
Slide 19: T-Mobile: Hungarian operations
T-Mobile: Hungarian operations Solid financial and operational performance Continuing tariff decline Usage and ARPU trends MOU increased by 2% yoy to 152 in 2008 ARPU (HUF) MOU ARPU down by 10% to HUF 4, 087 (~EUR 16) 6 000 160 growing importance of VAS (17% of ARPU) 5 500 150 5 000 140 post
Slide 20: T-Home: international operations
T-Home: international operations Macedonia Montenegro Limited top line growth opportunities Booming broadband market fixed line penetration was 20.9% (down 1.5ppt) fixed line penetration at 28.0% (down 2.6ppt) number of lines ~458,000 (down 7.0%) number of lines ~187,000 (down by 1.7%) str
Slide 21: T-Mobile: international operations
T-Mobile: international operations Macedonia Montenegro Subscribers 81% 93% 100% 106% 111% Penetration Subscribers 169% 180% 198% 212% 186% Penetration 2 500 000 1 200 000 25% 27% 12% 1 000 000 23% 26% 2 000 000 10% 12% 25% 8% 9% 29% 800 000 30% 29% 1 500 000 30% 30% 41% 600 000 42% 43% 38% 41% 1 00
Slide 22: T-Systems
T-Systems Growing importance of SI/IT services Declining traditional revenues Leading position in the Hungarian SI/IT Pressure on voice and data revenues market intense competition from alternative service full scale IT service portfolio offered through providers and strong mobile substitution a