Hrvatski Telekom d d : Unaudited interim report for the HT Group (January - December 2022)

• Solid business results despite challenging environment, revenue up by 2.2% YoY and EBITDA AL by 0.8% YoY
• Strengthened network leadership, by rolling out ~100K FTTH HH; recognized for the best fixed, mobile and 5G network
• Market leading investments continued

In 2022, Organic revenue increased by 2.2%, driven by continued growth momentum in core fixed and mobile services, both in Croatia and Montenegro. Due to strong performance in the first half of 2022 organic EBITDA AL increased by 0.8% in 2022. Organic Net Profit grew in 2022 by 10.5%, primarily driven by normalization of depreciation expenses, which had peaked during the first half of 2021.

Despite challenging economic environment, Organic investments remined at the same level as the previous year, totaling HRK 1.7 billion (EUR 231m), representing by far the leading investments on the market and HT's strong contribution to country's digitalization.

With regards to the outlook, despite a volatile environment, we managed to exceed our revenues and organic EBITDA AL guidance. Our CAPEX AL exceeded our initial plan for 2022, as solid business results allowed us to accelerate investments.

Strengthened network leadership

Throughout 2022, HT has put a strong focus on building the fiber-optic infrastructure and implementing the next generation fixed access network (NGA). As a result of these efforts, HT has achieved 21% YoY growth rate of its FTTH network, by far the largest in the country, providing fiber connectivity for over a half million households.

At the same time, HT remains focused on investments in the development of 5G network which currently covers around 100 cities throughout Croatia and more than 2 million people.

Hrvatski Telekom won both industry benchmarks for the highest quality network in Croatia. HT received "Best in Test" umlaut awards for the best mobile and fixed broadband networks in Croatia. Additionally, the quality of the HT mobile network was further confirmed by winning the Ookla Speedtest Award for the fastest 5G network as well as the awards for best mobile network in Croatia, for the fourth year in a row. These awards reflect HT's continuous investments in the development and quality of its networks, both mobile and fixed broadband, and the best customer satisfaction in the market.

Customer satisfaction and Employee engagement reach historical highs

As a result of continuous network, product and service improvements our customers enjoy the best ever experience which is reflected in the highest ever satisfaction in both B2C and B2B. Focusing on our employees and making the biggest ever investment in our employees, while at the same time introducing a comprehensive career path for all employees, resulted with employee engagement reaching historic highs and HT strengthening its status of the most desirable telco employer, and in general one of the best employers in the market.

Driving the ESG agenda

Living up to its ESG commitments, resulted in Hrvatski Telekom in 2022 being recognized as one of Europe's climate leaders, a winner of the Croatian Sustainability Index award for the second year in a row, and the first ever Croatian company to make it to the 2022 World's most ethical companies list. This confirms our dedication to our company's sustainable future, but also our contributions to the society and economy with the digital infrastructure being the key lever for a more sustainable future.

Changes to the Management Board

In December 2022, Siniša Đuranović was appointed new Management Board Member and Chief Corporate Affairs Officer (CCO), after last holding the leadership role of Senior Vice President and General Counsel.

​​Attractive capital return program for shareholders

Our capital allocation strategy clearly demonstrates Hrvatski Telekom's strong focus on shareholder returns and our intention to return value to our shareholders.

On 25 April 2022, the General Assembly confirmed the joint proposal by the Management Board and the Supervisory Board for the distribution of net profit for 2021. The amount of HRK 638 million represents a ratio of the dividend payment in relation to the realized profit of the Company of 95.8%.

In 2022 we executed the highest ever Share Buyback in our corporate history, purchasing additional 979,444 Company shares on the Zagreb Stock Exchange, within the ongoing Share Buyback Programme. Hrvatski Telekom paid an equivalent value of HRK 180.4 million for the acquisition of the Company's shares in the reporting period, which represents growth of 81% YoY. In July 2022, the Management Board withdrew 1,271,667 acquired Company shares without nominal value, purchased within Share Buyback Programme. Thereby, the total number of shares has decreased from 80,047,509 shares to 78,775,842 shares without nominal value, without the share capital of the Company being decreased while the remaining share participation in the share capital is being increased.

Outlook for 2023

Stepping into 2023, we expect challenges we faced in 2022 to remain present. The inflationary pressures will continue putting pressure on our costs and the consumers disposable income, the energy market remains volatile, while Croatian GDP growth is projected to slow down. To keep on winning in the market and growing the company further, we will continue with the implementation of our strategy, based on our key strategic pillars, while pushing faster with our operating model transformation. Therefore, in 2023, we are aiming for a low-single digit increase in revenues and EBITDA AL, and a mid-single digit decrease in CAPEX AL compared to 2022. Our regional expansion outlook remains the same as we continue to monitor and evaluate potential M&A activities.

Commenting on the business results for FY 2022, Konstantinos Nempis, CEO of Hrvatski Telekom, stated: "In a very demanding year and despite the growing challenges in the macroeconomic environment, with inflationary pressures and unprecedented energy prices, we managed to deliver solid business results, allowing us to keep our investments on the same level as in previous year.
In 2022 we further strengthened our network leadership, once again recognized as the best mobile and fixed network in the country. Our commitment to investments, expanding our fiber infrastructure further covering 100,000 new households and strengthening our 5G network leadership ensured our customers enjoy the best customer experience. Thanks to our strong focus on customers as well as on employees, customer satisfaction and employee engagement reached new historical highs in 2022.
The macroeconomic challenges of 2022 will remain present in 2023. However, we remain committed to our plans, investments and supporting the country's goals, with the digital infrastructure and services we are providing being the key growth levers."