Magyar Telekom Third Quarter 2021 Financial Results

Rékasi Tibor

Dodonova Daria Aleksandrovna

MAGYAR TELEKOM

QUARTERLY FINANCIAL REPORT

ANALYSIS OF THE FINANCIAL STATEMENTS FOR THE

THIRD QUARTER ENDED SEPTEMBER 30, 2021

Budapest - November 9, 2021 - 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 third quarter and first nine months of 2021, 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.

		TABLE OF CONTENTS
1.	HIGHLIGHTS ..............................................................................................................................................................................................................	3
2.	MANAGEMENT REPORT .........................................................................................................................................................................................	5
2.1. Consolidated IFRS Group Results......................................................................................................................................................................	5
	2.1.1 Group Profit and Loss ..............................................................................................................................................................................	5
	2.1.2	Group Cash Flows.....................................................................................................................................................................................	7
	2.1.3 Consolidated Statements of Financial Position .................................................................................................................................	8
	2.1.4	Related party transactions .....................................................................................................................................................................	9
	2.1.5	Contingencies and commitments.........................................................................................................................................................	9
	2.1.6	Significant events..................................................................................................................................................................................	10
2.2.	Segment reports................................................................................................................................................................................................	10
	2.2.1	MT-Hungary ...........................................................................................................................................................................................	11
	2.2.2	North Macedonia...................................................................................................................................................................................	12
3.	APPENDIX ...............................................................................................................................................................................................................	14
3.1.	Basis of preparation ..........................................................................................................................................................................................	14

1. Interim Consolidated Statements of Profit or Loss and Other Comprehensive Income - quarterly year-on-year comparison. 16
2. Interim Consolidated Statements of Profit or Loss and Other Comprehensive Income - first nine months year-to-date

comparison..................................................................................................................................................................................................................	17
3.4.	Revenue breakdown - quarterly year-on-year comparison .....................................................................................................................	18
3.5.	Revenue breakdown - first nine months year-to-date comparison........................................................................................................	18
3.6.	Operating expenses breakdown - quarterly year-on-year comparison.................................................................................................	19
3.7.	Operating expenses breakdown - first nine months year-to-date comparison ...................................................................................	19
3.8.	Interim Consolidated Statements of Financial Position - Assets .............................................................................................................	20
3.9.	Interim Consolidated Statements of Financial Position - Liabilities and Equity ..................................................................................	21
3.10. Interim Consolidated Statements of Cash Flows ........................................................................................................................................	22
3.11. Net debt reconciliation to changes in Statements of Cash Flows ...........................................................................................................	23
3.12. Interim Consolidated Statements of Changes in Equity............................................................................................................................	24
3.13. Exchange rate information ..............................................................................................................................................................................	25
3.14. Segment information........................................................................................................................................................................................	25
3.15. Fair value of financial instruments - financial assets.................................................................................................................................	26
3.16. Fair value of financial instruments - financial liabilities ............................................................................................................................	26
3.17. EBITDA reconciliation .......................................................................................................................................................................................	27
3.18. Capex from Interim Consolidated Statements of Cash Flows..................................................................................................................	27
3.19. Capex from Interim Consolidated Statements of Financial Position ......................................................................................................	27
4. DECLARATION .......................................................................................................................................................................................................	28

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Company name:	Magyar Telekom Plc.	Company address:	H-1097 Budapest Könyves Kálmán krt. 36.
		e-mail address:	[e-mail]
IR contacts:	Position:	Telephone:	E-mail address:
Diana Várkonyi	Head of Investor Relations	[phone]	[e-mail]
Rita Walfisch	IR manager	[phone]	[e-mail]
Gabriella Pászti	IR manager	[phone]	[e-mail]

1.	HIGHLIGHTS
Financial Highlights
		Q3 2020	Q3 2021	Change	1-9 months 2020	1-9 months 2021	Change
(HUF millions, except ratios)			(%)			(%)
Revenue	167,653	178,088	6.2%	484,173	506,528	4.6%
Operating profit	25,385	29,482	16.1%	58,893	67,143	14.0%
Profit attributable to:
Owners of the parent	18,604	17,873	(3.9%)	27,554	40,279	46.2%
Non-controlling interests	1,079	1,558	44.4%	2,798	3,728	33.2%
		19,683	19,431	(1.3%)	30,352	44,007	45.0%
Gross profit	95,241	101,676	6.8%	277,617	291,278	4.9%
EBITDA		60,737	66,373	9.3%	163,265	175,840	7.7%
EBITDA AL	54,949	60,292	9.7%	145,989	157,682	8.0%
Free cash flow				(21,369)	34,407	n.m.
Free cash flow excl. spectrum licenses				32,871	34,407	4.7%
Capex after lease	26,456	28,198	6.6%	166,571	154,489	(7.3%)
Capex after lease excl. spectrum licenses	26,456	28,198	6.6%	74,989	71,414	(4.8%)
Number of employees (closing full equivalent)				7,263	6,923	(4.7%)
					Dec 31, 2020	Sept 30, 2021	Change
							(%)
Net debt				417,433	490,177	17.4%
Net debt / EBITDA				1.85	2.06	n.a.

• Group revenue grew by 6.2% year-on-year in Q3 2021, attributable to sustained positive momentum in all service categories, with a particularly strong performance in mobile data and fixed broadband
• Gross profit improved by 6.8% year-on-year in Q3 2021, driven by higher top line contribution and the absence of a one-off telecommunication tax expense recorded in Q3 2020
• The 9.7% year-on-year growth in EBITDA AL in Q3 2021 was driven by gross profit growth
• Capex AL excluding spectrum licenses increased 6.6% year-on-year to HUF 28.2 billion in Q3 2021 and amounted to HUF 71.4 billion for the first nine months of 2021, due to differences in the timing of investments between the respective periods
• Free cash flow excl. spectrum licenses (i.e. without one-time spectrum license fees) amounted to HUF 34.4 billion in the first nine months of 2021, reflecting strong EBITDA generation, partly offset by investment-related payments and working capital developments

Operational highlights

• Average monthly mobile data consumption amongst Hungarian customers continued to rise sharply, recording an increase of over 30% year-on-year and reached 7.9 GB/month in Q3 2021
• Monetization of our gigabit-network continued with over 1 million customers now connected to the network via Gigabit- technology
• ISS Corporate Solutions ranked Magyar Telekom among the best performers of the telecom sector globally in terms of the
  Company's sustainability credentials, awarding Magyar Telekom a 'B' rating which equates to 'Prime' status
• Following its annual credit rating review, Scope Ratings GmbH affirmed Magyar Telekom at BBB+ with a stable outlook

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Tibor Rékasi, Magyar Telekom CEO commented:

"Our operating environment continued to develop favorably in the third quarter of 2021 as the effects of COVID-19 diminished further, for both Magyar Telekom and the wider market. In line with our strategy, we continued to build and modernize our Gigabit- capable network and by the end of the third quarter we reached 2.89 million access points.

Magyar Telekom grew significantly year-on-year in terms of revenue, gross profit and EBITDA. This is testament to our excellent network quality and outstanding customer satisfaction, which have enabled us to successfully monetize strong market demand for our telecommunications and data services."

Public targets

	2020 Actual	Public guidance for 2021
Revenue	HUF 673.0 billion	grow around 3%
EBITDA AL	HUF 202.6 billion	grow at least 3%
Capex AL1	HUF 106.0 billion	broadly stable
FCF1	HUF 69.5 billion	broadly stable/slight increase
1 Excluding spectrum license fees
	2020 Actual	Outlook for 2021-20243
Revenue	HUF 673.0 billion	increase potential of ~1% with further upside
EBITDA AL	HUF 202.6 billion	increase potential of ~1% with further upside
FCF1	HUF 69.5 billion	increase potential of ~1%-2%
Shareholder remuneration2	HUF 25 per share	to grow in line with FCF and net income
1 Excluding spectrum license fees

2 Total shareholder remuneration (cash + share buyback)

3 Changes in % terms represent CAGR values vs 2020 results

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2.	MANAGEMENT REPORT
2.1.	Consolidated IFRS Group Results
2.1.1 Group Profit and Loss
			Q3 2020	Q3 2021	Change	Change	1-9 months	1-9 months	Change	Change
	(HUF millions)				(%)	2020	2021		(%)
	Mobile revenue	92,578	98,573	5,995	6.5%	266,680	282,328	15,648	5.9%
	Fixed line revenue	55,114	56,342	1,228	2.2%	161,047	165,247	4,200	2.6%
	SI/IT revenue	19,961	23,173	3,212	16.1%	56,446	58,953	2,507	4.4%
	Revenue	167,653	178,088	10,435	6.2%	484,173	506,528	22,355	4.6%
	Direct costs	(72,412)	(76,412)	(4,000)	(5.5%)	(206,556)	(215,250)	(8,694)	(4.2%)
	Gross profit	95,241	101,676	6,435	6.8%	277,617	291,278	13,661	4.9%
	Indirect costs	(34,504)	(35,303)	(799)	(2.3%)	(114,352)	(115,438)	(1,086)	(0.9%)
	EBITDA	60,737	66,373	5,636	9.3%	163,265	175,840	12,575	7.7%
	Depreciation and amortization	(35,352)	(36,891)	(1,539)	(4.4%)	(104,372)	(108,697)	(4,325)	(4.1%)
	Operating profit	25,385	29,482	4,097	16.1%	58,893	67,143	8,250	14.0%
	Net financial result	(1,201)	(5,527)	(4,326)	(360.2%)	(17,616)	(11,170)	6,446	36.6%
	Share of associates' and joint ventures' results	0	0	0	n.a.	(66)	0	66	100.0%
	Profit before income tax	24,184	23,955	(229)	(0.9%)	41,211	55,973	14,762	35.8%
	Income tax	(4,501)	(4,524)	(23)	(0.5%)	(10,859)	(11,966)	(1,107)	(10.2%)
	Profit for the period	19,683	19,431	(252)	(1.3%)	30,352	44,007	13,655	45.0%
	Profit attributable to non-controlling interests	1,079	1,558	479	44.4%	2,798	3,728	930	33.2%
	Profit attributable to owners of the parent	18,604	17,873	(731)	(3.9%)	27,554	40,279	12,725	46.2%

In Q3 2021, total revenue increased by 6.2% year-on-year to HUF 178.1 billion, and 4.6% year-on-yearto HUF 506.5 billion for the first nine months of the year, primarily driven by increases in telecommunication service revenue, particularly mobile data, and some increases in System Integration and IT (SI/IT) sales in both countries of operation.

• Mobile revenue increased by 6.5% year-on-year to HUF 98.6 billion in Q3 2021, driven by further growth in mobile data, SMS and visitor revenue, which fully offset lower retail voice revenue.
• • Voice retail revenue was down by 2.3% year-on-year to HUF 30.2 billion in Q3 2021, as a result of declines in the Hungarian operation. In Hungary, this decline was attributable to lower average prices which offset the positive impact of higher usage by the expanding customer base. North Macedonian voice retail revenue was higher year-on-year, largely driven by the positive impact of the larger customer base and improved roaming results.
  • Voice wholesale revenue increased by 7.6% year-on-year to HUF 3.2 billion in Q3 2021, reflecting an increase in incoming mobile traffic in Hungary, and higher international incoming traffic in North Macedonia.
  • Data revenue rose by 17.2% year-on-year to HUF 31.4 billion during the quarter, driven by strong growth in subscriber numbers in Hungary and a combination of further increases in usage levels and higher data roaming revenue in both countries.
  • SMS revenue was up by 18.3% year-on-year to HUF 6.2 billion in Q3 2021, reflecting a strong rise in mass SMS usage in Hungary and higher revenue from the expanding postpaid subscriber base and roaming usage in North Macedonia.
  • Mobile equipment revenue remained broadly stable, amounting to HUF 23.9 billion in Q3 2021. The moderate increase in equipment sales at the Hungarian operation reflects higher average handset prices, while the slight decline in North Macedonia is due to seasonality.
  • Other mobile revenue increased by 30.6% to HUF 3.8 billion during the period, driven by improvements in visitor revenue in both countries.
• Fixed line revenue increased by 2.2% year-on-year, to HUF 56.3 billion in Q3 2021 as improvements in broadband and TV revenue offset the decline in voice revenue in both markets.

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