Magyar Telekom results for the third quarter of 2017

Magyar Telekom results for the third quarter of 2017

Budapest, November 8, 2017 18:00

Magyar Telekom (Reuters: MTEL.BU and Bloomberg: MTELEKOM HB), the leading Hungarian telecommunications service provider, today reported its consolidated financial results for the third quarter and first nine months of 2017, in accordance with International Financial Reporting Standards (IFRS).

Highlights:

Total revenues increased by 8.8% year-on-year to HUF 155.4 billion in Q3 2017 (Q3 2016: HUF 142.9 billion). This is largely due to strong growth in SI/IT revenues, higher equipment sales and continued increase in mobile data usage. These factors are also behind 9M 2017 revenue of HUF 449.4 billion, a 6.5% rise compared to the same period in 2016. Mobile revenues grew by 8.5% year-on-year to HUF 85.5 billion in Q3 2017. This increase is attributable to increased mobile data and handset sales revenues in both Hungary and Macedonia, coupled with provision reversal related to the ceased loyalty program in Hungary, which offset a decline in voice revenues. As a results of these trends, 9M 2017 mobile revenues increased by 6.5% year-on-year. Fixed line revenues increased by 3.3% year-on-year to HUF 48.9 billion in Q3 2017 due to positive trends in broadband, TV, data and equipment revenues coupled with some slowdown in the decline of voice retail revenues. 9M 2017 fixed line revenues were broadly flat year-on-year as higher TV, equipment and data revenues were offset by a decline in voice and broadband retail and wholesale revenues. SI/IT revenues increased by 28.4% year-on-year to HUF 19.6 billion in Q3 2017, and by 37.4% to HUF 61.1 billion in the first nine months of 2017. The increase was primarily driven by the acceleration of EU fund inflows into Hungary, boosting levels of high volume software and hardware delivery projects. Energy service revenues decreased by 7.7% year-on-year to HUF 1.3 billion in Q3 2017 due to the smaller electricity customer base and expiry of remaining gas universal contracts. 9M 2017 energy service revenues declined by 18.8% year-on-year to HUF 4.3 billion, due to the same factors. As announced on July 31, 2017, the Company has decided to exit from the residential segment of the electricity market with effect from November 1, 2017.

Direct costs increased by 13.6% year-on-year to HUF 58.1 billion, mostly due to a significant increase in SI/IT and equipment sales costs, in line with the related revenue rises. 9M 2017 direct costs increased by 16.1% year-on-year to HUF 173.7 billion, as a result of the same factors. Interconnect costs decreased by 4.2% year-on-year to HUF 4.9 billion in Q3 2017 reflecting the cut in Macedonian mobile termination rates. SI/IT service related costs rose to HUF 13.1 billion in Q3 2017, in line with related revenue increases. Telecom tax increased by 6.1% year-on-year to HUF 6.3 billion in Q3 2017, driven by higher mobile voice traffic in both residential and business segments resulting from the growing popularity of flat rate packages. Other direct costs grew by HUF 2.8 billion year-on-year to HUF 31.1 billion in Q3 2017, due to an increase in cost of equipment sales (in line with a higher volume of smartphone and TV set sales) and higher roaming related costs, partly offset by lower mobile handset subsidies.

Gross profit increased by 6.1% year-on-year in Q3 2017 to HUF 97.3 billion and by 1.2% year-on-year in 9M 2017 to HUF 275.7 billion, reflecting the changing revenue mix.

Indirect costs improved by 1.4% year-on-year to HUF 40.1 billion in the third quarter of 2017, thanks to an increase in other operating income. 9M 2017 indirect costs were 4.3% higher year-on-year, at HUF 132.3 billion, due to the absence of positive one-off items (the sale of Origo and Infopark Building G) that occurred in Q1 2016. Employee related expenses were HUF 18.6 billion in Q3 2017 compared to HUF 18.4 billion in Q3 2016. The 1.2% increase reflects higher employee numbers, partly offset by savings measures. In the first nine months of 2017, employee related expenses were broadly stable year-on-year, as cost optimization measures offset the negative impact of the higher employee numbers. Other operating expenses increased by 3.4% year-on-year, amounting to HUF 23.6 billion in Q3 2017, due to increased marketing expenses related to sponsorship of the FINA World Championships in July 2017. Other operating income increased to HUF 2.2 billion in Q3 2017 from HUF 0.6 billion in Q3 2016 thanks to real estate sales - as part of the real estate optimization program - and higher brand fee income from the E2 energy joint venture. In the first nine months of 2017, other operating income declined by HUF 4.1 billion compared to 9M 2016, owing to HUF 5.1 billion of one-off profits realized on the Infopark and the Origo sales in Q1 2016.

EBITDA was 12.1% higher year-on-year at HUF 57.2 billion in Q3 2017 due to increased gross profit and higher other operating income. 9M 2017 EBITDA declined by 1.6% as the improvement in gross profit was offset by lower other operating income reflecting the absence of one-off gains related to sale of Origo and Infopark (Building G) realised in Q1 2016.

Depreciation and amortization expenses declined by 4.5% year-on-year in Q3 2017 driven by useful life extensions of some assets as well as the scrapping of radio technical equipment. 9M 2017 depreciation and amortization expenses were broadly stable year-on-year as the above-mentioned factors were offset by software activation related to the new billing and CRM system in Hungary.

Profit for the period from continuing operations improved to HUF 19.3 billion in Q3 2017 from HUF 13.6 billion in Q3 2016, reflecting an increase in operating profit combined with lower financial expenses. For the first nine months of 2017, profit for the period from continuing operations increased by 3.5% com

LINK:	https://www.telekom.hu/about_us/press_room/press_releases/2017/novembe...
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