Magyar Telekom Távközlesi Nyilvánosan Müködö Reszvenytársaság : First Quarter 2023 Financial Results (2024)

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Rékasi Tibor

MAGYAR TELEKOM

QUARTERLY FINANCIAL REPORT

ANALYSIS OF THE FINANCIAL STATEMENTS FOR THE

FIRST QUARTER ENDED MARCH 31, 2023

Budapest - May 10, 2023 - Magyar Telekom (Reuters: MTEL.BU and Bloomberg: MTELEKOM HB, hereinafter: Company), the leading Hungarian telecommunications service provider, today reported its consolidated financial results for the first quarter of 2023, in accordance with International Financial Reporting Standards (IFRS) as endorsed by the EU (hereinafter: quarterly financial report). The quarterly financial report contains unaudited figures for each reporting period.

3.2. Interim Consolidated Statement of Profit or Loss and Other Comprehensive Income - quarterly year-on-year

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• Group revenue grew by 12.5% year-on-year in Q1 2023, thanks to continued strong demand for mobile data coupled with further increases in broadband revenues and higher system integration and IT revenues
• Gross profit improved in line with revenue trends, growing by 13.1% year-on-year in Q1 2023
• Indirect costs were up by 44.7% year-on-year, i.e. by HUF 17.3 billion, reflecting the effect of the supplementary telecommunication tax, four times higher electricity costs, the average 7% increase in the Hungarian wage expense and the inflationary pressure on other costs
• EBITDA AL declined by 8.9% year-on-year to HUF 50.8 billion in Q1 2023, as increases in other costs offset the improvement in gross profit
• Net income was 43.0% lower year-on-year, at HUF 10.5 billion in Q1 2023, primarily driven by lower EBITDA and deteriorating net financial result; adjusted net income was 22.0% lower year-on-year, at HUF 12.1 billion in Q1 2023
• Capex after leases excluding spectrum licenses increased moderately year-on-year to HUF 23.5 billion in Q1 2023, primarily driven by higher spending related to fiber provisioning and installation in Hungary
• Free cash flow, excluding spectrum license fees, was lower year-on-year at HUF 10.7 billion cash outflow in Q1 2023, reflecting higher interest and lease outpayments and the absence of one-off cash inflow from the subsidiary sale recorded in Q1 2022

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Tibor Rékasi, Magyar Telekom CEO, commented:

"Despite facing a highly uncertain economic and business landscape, and an evolving competitive environment within the Hungarian telecommunication industry, we remain focused on delivering superior customer satisfaction by offering gigabit networks and meeting increasing demand for data. The success of these efforts is reflected in the continued expansion of our subscriber base which led to a year-on-year increase of 13.1% in our gross profit for the first quarter of 2023. However, our profitability has been impacted by the current macro environment, as evidenced by an 8.9% decrease in EBITDA AL due to significant cost pressures. In Hungary, our indirect costs, excluding the supplementary telecommunications tax, increased by 28%, primarily due to the sharp increase in our energy prices, in particular the four times higher electricity cost year-on-year. Given the increasing subcontractor costs, unfavorable yield environment and weaker forint, we continue to take proactive steps to address changes in our external environment and leverage our strong position in the market to drive positive momentum in our operating performance."

Public targets

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Total revenue increased by 12.5% year-on-year to HUF 195.9 billion in Q1 2023. This improvement was primarily driven by strong growth in mobile data, higher system integration and IT revenue and further increase in fixed broadband revenue whilst the introduction of inflation-basedfee adjustment to the Hungarian subscription fees also contributed to the increase.

• Mobile revenue rose by 10.6% year-on-year to HUF 112.3 billion in Q1 2023, driven by the continued growth in mobile data revenue and the moderate increase in voice-retailrevenue.
• • Voice retail revenue increased by 4.2% year-on-year to HUF 29.5 billion in Q1 2023 reflecting the positive impact of further customer base expansion in both countries and the Hungarian fee adjustment which offset reductions stemming from lower usage levels.
  • Voice wholesale revenue decreased by 5.7% year-on-year to HUF 2.9 billion in Q1 2023, primarily driven by lower related revenues at the Hungarian operation due to lower incoming traffic volumes.
  • Data revenue rose by 23.1% year-on-year to HUF 41.4 billion in Q1 2023, driven by continued growth in subscriber numbers and usage levels in both Hungary and North Macedonia.
  • SMS revenue was stable year-on-year, amounting to HUF 6.2 billion in Q1 2023, as somewhat lower revenues from mass messaging in Hungary was offset by increases driven by the higher customer base and increased subscription fees.
  • Mobile equipment revenue increased by 3.4% year-on-year to HUF 28.0 billion in Q1 2023. Although revenue from customer sales transactions increased further, driven by higher average handset prices at both countries of operation, it was offset by strong rise in the installment sales related present value discount as well as by lower revenue from third party export sales at the Hungarian operation.
  • Other mobile revenue rose by HUF 1.0 billion to HUF 4.3 billion in Q1 2023, reflecting the increased interest revenue component in relation to the equipment installment sales related present value discount driven by the sharp increase in the Hungarian base rate year-on-year.

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