Magyar Telekom results for the third quarter of 2022 Budapest, November 8, 2022 17:30
Magyar Telekom today reported its consolidated financial results for the third quarter and first nine months of 2022, in accordance with International Financial Reporting Standards (IFRS) as endorsed by the EU.
Total revenue increased by 9.0% year-on-year to HUF 190.9 billion in Q3 2022 and by 9.4% year-on-year to HUF 547.5 billion in the first nine months of 2022. This improvement was primarily driven by the strong growth in mobile data and higher equipment sales whilst the weakening of the Hungarian forint against the North Macedonian denar amplified the North Macedonian subsidiary's contribution.
Mobile revenue rose by 12.3% year-on-year to HUF 110.7 billion in Q3 2022 , driven by growth in mobile data revenue and higher equipment sales which offset lower voice revenue at both countries of operation.
Fixed line revenue increased by 7.3% year-on-year, to HUF 60.3 billion in Q3 2022, thanks primarily to increases in fixed broadband and TV revenues driven by the customer base expansion at both countries of operation.
System Integration (SI) and IT ( SI/IT') revenues were down by 2.2%, at HUF 20.0 billion in Q3 2022, from HUF 20.4 billion in Q3 2021 as a result of the absence of revenues formerly generated by the Hungarian healthcare business unit including Pan-Inform LLC and lower project volumes in North Macedonia. In underlying terms, SI/IT revenues at the Hungarian operation showed positive development thanks to higher project volumes.
Direct costs increased in line with revenues, by 9.8% year-on-year to HUF 80.6 billion in Q3 2022, mainly driven by the increase in equipment costs and partly offset by lower bad debt expense.
Interconnect costsdecreased by 7.3% year-on-year to HUF 6.0 billion in Q3 2022, reflecting lower payments at the Hungarian operation to domestic mobile operators.
SI/IT service-related costs decreased moderately year-on-year to HUF 13.8 billion in Q3 2022, in line with lower revenues.
Bad debt expenses were lower by HUF 0.5 billion year-on-year, amounting to HUF 1.4 billion in Q3 2022 thanks to favorable aging and positive contribution from factoring results at the Hungarian operation.
Telecom taxincreased moderately year-on-year to HUF 6.6 billion in Q3 2022, reflecting higher mobile voice traffic, partly offset by lower fixed voice volumes.
Other direct costswere up 18.3% year-on-year to HUF 52.8 billion in Q3 2022, driven by higher equipment costs in line with the increase in sales volumes and an increase in roaming outpayments reflective of the easing of travelling restrictions compared to a year earlier.
Gross profit improved by 8.5% year-on-year to HUF 110.3 billion in Q3 2022, thanks to a higher contribution from telecommunication services, particularly data, at both countries of operation.
Indirect costs rose by HUF 9.8 billion year-on-year, to HUF 45.1 billion in Q3 2022, due mainly to the newly introduced supplementary telecommunication tax coupled with higher other expenses.
Employee-related expenses increased by 3.6% year-on-year, amounting to HUF 20.8 billion in Q3 2022, driven by 2022 wage increase and one-off compensation to employees which are partly offset by lower severance expenses and the reduction in headcount.
Supplementary telecommunication tax, imposed by the Government of Hungary with its decree issued on June 4, is levied on the actual business year's annual net sales of electronic telecommunication services as defined by the law on local taxes and is payable for the full years 2022 and 2023. As a consequence, a HUF 6.5 billion expense was booked in Q3 2022, in relation to the third quarter 2022 supplementary tax charge.
Other operating expenses (excluding the supplementary telecommunication tax) rose by 16.6% year-on-year to HUF 18.9 billion in Q3 2022, reflecting the negative impact of cost pressure stemming from high general inflation, particularly present in the North Macedonian operation. The cost increase was mainly attributable to higher energy costs, with respect to both fuel and electricity, with the latter putting particularly strong pressure on results of the North Macedonia operation.
Other operating income was broadly stable year-on-year, amounting to HUF 1.1 billion in Q3 2022.
EBITDA declined by 1.8% year-on-year to HUF 65.2 billion in Q3 2022 as the improvement in gross profit was offset by higher indirect costs, including the supplementary telecommunication tax. EBITDA AL was down by 2.8% year-on-year to HUF 58.6 billion in Q3 2022 , due to aforementioned drivers coupled with higher IFRS 16 lease liability related depreciation and interest expenses, in line with the increasing volume of the related lease liabilities.
Depreciation and amortization ( D&A') expenses declined by 8.1% year-on-year to HUF 33.9 billion in Q3 2022, driven by lower depreciation expenses at the Hungarian operation attributable to full copper network retirement in some areas of Hungary, lower software related depreciation expenses thanks to the optimization of the IT infrastructure and the proportionally lower amortization of the spectrum licenses that expired in April 2022 and were since reacquired. These declines were partly offset by an increase accounted for in North Macedonia reflecting the weakening of the forint, whereas D&A in local currency declined.
Profit for the period decreased by 4.9% year-on-year to HUF 18.5 billion in Q3 2022 , as lower EBITDA and increasing financial expenses offset the positive impact stemming from the lower D&A.
Net financial result deteriorated from a loss of HUF 5.5 billion in Q3 2021 to a loss of HUF 8.1 billion in Q3 2022. Interest expense increased driven by higher interest related to lease liabilities and higher average interest costs whilst the unfavorable
