Matav Announces 2001 First Half Results.Business Editors BUDAPEST Budapest (b  `dəpĕst'), city (1990 pop. 2,016,100), capital of Hungary, N central Hungary, on both banks of the Danube. , Hungary--(BUSINESS WIRE)--Aug. 14, 2001Matav (NYSE NYSE See: New York Stock Exchange : MTA (1) (Message Transfer Agent or Mail Transfer Agent) The store and forward part of a messaging system. See messaging system. (2) See M Technology Association. 1. (messaging) MTA - Message Transfer Agent. .N and BSE See Bombay Stock Exchange. BSE See Boston Stock Exchange (BSE). : MTAV.BU), the leading Hungarian telecommunications service provider A Telecommunications Service Provider or TSP is a type of Communications Service Provider that has traditionally provided telephone and similar services. This category includes ILECs, CLECs, and mobile wireless companies. , today reported its financial results for the first half of 2001. Highlights: Revenues grew by 23.1% (21.3% in euro and 13.6% in dollar terms) to 263.3 billion forints (EUR EUR In currencies, this is the abbreviation for the Euro. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 1,006.7 million or US$ 904.9 million) compared to 213.8 billion forints in the first half of 2000. -- Mobile segment revenues amounted to 92.5 billion forints in the first half of 2001 compared to 73.8 billion forints in the same period of last year, an increase of 25.4%. The main contributor to revenue growth in the mobile business was increased traffic due to the 71% increase in net subscribers. -- MakTel added 27.1 billion forints to Matav's revenues. The key components of revenues were domestic traffic revenues, mobile and international traffic revenues. -- Fixed line segment revenues grew by 4.2% to 164.9 billion forints, as higher subscription fees and ISDN, leased lines and data revenue growth offset lower traffic revenues. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become increased by 11.2% (9.5% in euro terms), amounting to 111.5 billion forints (EUR 426.3 million or US$ 383.2 million) versus 100.3 billion forints a year ago. The EBITDA margin was 42.3% for the first six months of 2001. Net interest and other charges recorded 181 million forints in the first half of the year versus 11.3 billion forints in the same period of last year. This was a joint effect of foreign exchange gains on the euro denominated debt portfolio mainly of Matav Rt. and Westel resulting from the strengthening of the forint fo·rint n. See Table at currency. [Hungarian, from Italian fiorino, florin; see florin.] Noun 1. against the euro in the second quarter, and the losses on mainly MakTel's dollar denominated loans as dollar strengthened against the euro. Net income increased by 1.3% (0.2% decrease in euro terms) to 42.1 billion forints (EUR 161.0 million or US$ 144.8 million), compared to 41.6 billion forints in the first six months of 2000. The net income margin was 16.0% for the first half of 2001. Elek ELEK Electronic Straub Straub is a Germanic surname that literally means “one with bushy or bristly hair” and “destroy or rob.” [1] It may also refer to people who come from Straube in Germany. , Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. commented: "This set of results reflects the progress we have made in our businesses in the first half of the year and underscores Matav's success in implementing its strategy for growth by focusing its resources on mobile, data, Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the and international acquisitions. Westel has improved its financial performance by continuing mobile subscriber subscriber, n the person, usually the employee, who represents the family unit in relation to the prepayment plan. Other family members are dependents. Also called certificate holders or enrollees. growth and increasing traffic. MakTel, our first international acquisition, is increasing revenues in line with our expectations. In the fixed line segment growth was driven by data services, increased Internet usage and fixed to mobile traffic revenues. We have also been successful in increasing our ISDN ISDN in full Integrated Services Digital Network Digital telecommunications network that operates over standard copper telephone wires or other media. sales doubling connections in the last twelve months. In addition, we have completed a major restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). of our fixed line business announced at the end of last year to counteract the slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. and rising competition in this segment. As a result, by the end of June June: see month. headcount head count or head·count n. 1. The act of counting people in a particular group. 2. The number of people counted in this way. Noun 1. reduced to 9,790 at Matav Rt. a 13.8% decline compared to a year ago." Mobile: Continuing strong growth Mobile segment revenues experienced strong growth to 92.5 billion forints, an increase of 25.4% over the first half of 2000. Enhanced services Enhanced service is service offered over commercial carrier transmission facilities used in interstate communications, that employs computer processing applications that act on the format, content, code, protocol, or similar aspects of the subscriber's transmitted information; show the highest increase with over 100% growth year over year. Gross GSM (Global System for Mobile Communications) A digital cellular phone technology based on TDMA that is the predominant system in Europe, but also used worldwide. Developed in the 1980s, GSM was first deployed in seven European countries in 1992. additions totaled 569,000, and net subscriber growth was 71% year-on-year. The proportion of prepaid pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. customers grew to 61% of the
total subscriber base compared to 39% a year ago.EBITDA was 34.2 billion forints in the first half of the year versus 26.5 billion forints in the same period of last year. The EBITDA margin improved to 37.0% compared to 36.0% a year ago. The increase in EBITDA and a HUF HUF In currencies, this is the abbreviation for the Hungarian Forint. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 2.4 billion foreign exchange gain contributed to an improvement in Westel's first half net income to HUF 11.6 billion, a 54.9% increase compared to the same period of last year. Westel retained its leading position in the Hungarian GSM market with a market share of 52.7% at the end of June, capturing 50.5% of total GSM net additions in the first six months of the year. Hungary's mobile penetration rate reached 39.1% at the end of June. Monthly average minutes-of-use per subscriber reached 150 minutes in the first half of the year, a drop of 19.8% compared to last year. Westel's average revenue per unit was 7,006 forints in the first half of the year, a decline of 26.7% compared to the same period of last year. Churn rate (1) The percentage of customers who cancel their online, cellphone or other subscription service during a certain time period. (2) The percentage of employees who leave the company during a certain time period. See churning. was 14.4%. Fixed Line: Higher subscription fees and ISDN and data revenue growth make up for lower traffic revenues Fixed line segment revenues grew by 4.2% year on year to 164.9 billion forints thanks mainly to the higher volume of ISDN subscribers and higher monthly subscription charges and wider use of value added Value Added The enhancement a company gives its product or service before offering the product to customers. Notes: This can either increase the products price or value. services. The penetration rate in Matav's service areas has stabilized sta·bi·lize v. sta·bi·lized, sta·bi·liz·ing, sta·bi·liz·es v.tr. 1. To make stable or steadfast. 2. at 39%, underscoring the saturation saturation, of an organic compound saturation, of an organic compound, condition occurring when its molecules contain no double or triple bonds and thus cannot undergo addition reactions. of the fixed line service segment. The nearly 30% increase in monthly subscription fees this February February: see month. has resulted in decreased demand for Matav's basic package at the lower end of the residential market. Matav has successfully retained customers in this segment with its low-user calling plan, which had 315,000 subscribers at the end of the second quarter. At the high end of the market, the number of ISDN channels continued to increase significantly, resulting in growth of over 100% year on year. By the end of June 13% of Matav's total fixed lines were ISDN channels. Domestic traffic measured in minutes increased by 8.7% year over year, mainly due to increases in Internet usage and fixed-to-mobile traffic. The growth in local traffic was partially offset by lower per-minute charges introduced in February and the shift towards lower-cost Internet and off-peak off-peak adj. Not in the period of most frequent or heaviest use: lower rates for telephone calls made during off-peak hours; travelers who take advantage of off-peak fares. rates calls. The dynamic development of the mobile market has resulted in the growth of fixed-to-mobile traffic, though growth has somewhat abated Abated, an ancient technical term applied in masonry and metal work to those portions which are sunk beneath the surface, as in inscriptions where the ground is sunk round the letters so as to leave the letters or ornament in relief. From 1911 Encyclopædia Britannica as more and more traffic stays within the mobile networks. Despite significant reductions in long distance and international tariffs This is a list of tariffs and trade legislation:
Data revenue growth of 30% was driven by the growth of ISDN data, managed leased lines A private communications channel leased from a common carrier. Most digital lines require four wires (two pairs) for full-duplex transmission. (communications, networking) leased line , Internet and cable TV revenues. Managed leased lines grew by 34%, driven by the growth in demand for broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). connectivity. The number of Internet customers has increased by 56% to 110,384 compared to 70,904 a year ago. Number of cable TV connections increased by over 50% year over year. EBITDA margins in the fixed line segment decreased to 38.5% from 46.6% a year ago. The main drivers of operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. growth were the 12.5% wage increase at Matav Rt. in April, the higher outpayments due to higher traffic between Matav Rt. and the mobile service providers and higher outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. and subcontractor One who takes a portion of a contract from the principal contractor or from another subcontractor. When an individual or a company is involved in a large-scale project, a contractor is often hired to see that the work is done. fees for customer support which relates to the expanded product offering the company. As a result of reducing headcount by 1,437 in the first half of the year, lines per employee efficiency ratio increased to 300 by the end of the reporting period. International segment contributed 10.3% to group revenues The most dynamically growing revenue lines were MakTel's increased mobile and international call revenues in the second quarter. MakTel had 532,780 fixed line subscriber, 153,364 mobile customers and 15,178 Internet subscriber at the end of June. EBITDA margin in the first half of the year was 50.9% at our international segment. MakTel's contribution to group EBITDA was negatively effected by the strengthening of the forint against the euro and thus the Macedonian denar The denar (plural: denari, Macedonian: денар and денари, denar and denari, ISO 4217 code: MKD) is the currency of the Republic of Macedonia. It is subdivided into 100 deni. . Matav is the principal provider of telecom services in Hungary Hungary, Hung. Magyarország, officially Republic of Hungary, republic (2005 est. pop. 10,007,000), 35,919 sq mi (93,030 sq km), central Europe. and holds the national concession CONCESSION. A grant. This word is frequently used in this sense when applied to grants made by the French and Spanish governments in Louisiana. for national and international long distance telephony Meaning "sound over distance," it refers to electronically transmitting the human voice. In the beginning, telephony dealt only with analog signals in the circuit-switched networks of the telephone companies. . Matav provides a broad range of services including telephony, data transmission, value-added services A value-added service (VAS) is a telecommunications industry term for non-core services or, in short, all services beyond standard voice calls and fax transmissions. , and through its subsidiaries is Hungary's largest mobile telecom provider. Matav also holds a majority stake in Stonebridge Stonebridge or StoneBridge may refer to:
Macedonia (măs'ədō`nēə), Macedonian Makedonija, officially Republic of Macedonia, republic (2005 est. pop. 2,045,000), 9,930 sq mi (25,720 sq km), SE Europe. Key shareholders of Matav as of June 30, 2001 include the Hungarian State (holder of the Golden Share), MagyarCom, owned by Deutsche Telekom Deutsche Telekom AG (ISIN: DE0005557508, FWB: DTE, NYSE: DT, LSE: DEU, TYO: 9496 ) (abbreviated DTAG) is a telecommunications company headquartered in Bonn, Germany. It is the largest telecommunications company in Germany and in the EU. AG (59.49%), while 40.51% is publicly traded. For detailed information on Matav's 1H 2001 results visit our website: (http://www.matav.hu/english/world/investors) or the website of the Budapest Stock Exchange Budapest Stock Exchange Established in 1864, the major securities market of Hungary. (www.bse.hu Listed Securities/ Issuer's news).
MATAV Dec 31, Jun 30, Jun 30, Jun 30, 2000
Consolidated 2000 2000 2001 - Jun 30, 2001
(Audited) (Unaudited) (Unaudited) % change
Balance Sheets - IAS
(HUF million)
ASSETS
Current assets
Cash and cash
equivalents 13,296 4,333 9,385 116.6%
Financial
investments 6,045 2,506 1,082 (56.8%)
Receivables 71,951 71,948 85,005 18.1%
Inventories 10,587 10,883 11,302 3.9%
Total current assets 101,879 89,670 106,774 19.1%
Property, plant
and equipment 561,702 541,331 643,056 18.8%
Intangible assets 51,964 33,962 92,324 171.8%
Associates and other
long term
investments 14,062 14,171 14,610 3.1%
Total fixed assets 627,728 589,464 749,990 27.2%
Other non current
assets 15,902 6,461 20,160 212.0%
Total assets 745,509 685,595 876,924 27.9%
LIABILITIES AND
SHAREHOLDERS' EQUITY
Loans and other
borrowings 78,725 25,073 77,371 208.6%
Trade and other
payables 96,068 84,610 87,094 2.9%
Deferred revenue 3,690 4,188 3,492 (16.6%)
Provisions for
liabilities and
charges 11,624 3,038 6,499 113.9%
Total current
liabilities 190,107 116,909 174,456 49.2%
Loans and other
borrowings 110,641 165,067 187,558 13.6%
Deferred revenue 9,949 11,772 8,300 (29.5%)
Provisions for
liabilities and
charges 30 1,799 0 (100.0%)
Deferred tax liability 0 0 2,796
Other non current
liabilities 7,067 0 7,252 n.a.
Total non current
liabilities 127,687 178,638 205,906 15.3%
Minority interests 40,731 30,239 81,259 168.7%
Shareholders' equity
Common stock 103,736 103,728 103,736 0.0%
Additional paid
in capital 22,955 22,834 22,955 0.5%
Treasury stock (127) 0 (160) n.a.
Retained earnings 260,420 233,247 288,772 23.8%
Total shareholders'
equity 386,984 359,809 415,303 15.4%
Total liabilities
and shareholders'
equity 745,509 685,595 876,924 27.9%
MATAV 6 months ended June 30,
Consolidated 2000 2001 %
Income Statements - IAS (Unaudited) (Unaudited) change
(HUF million)
Revenues
Subscriptions, connections
and other charges 39,962 47,451 18.7%
Domestic traffic revenue 65,238 61,827 (5.2%)
Other usage 9,153 8,717 (4.8%)
Domestic telecommunications
services 114,353 117,995 3.2%
International traffic revenues 20,449 17,537 (14.2%)
Mobile telecommunications
services 49,759 64,475 29.6%
Revenues from international
activities 0 27,116 n.a.
Leased lines and data
transmission 12,329 16,029 30.0%
Other services 16,928 20,163 19.1%
Total revenues 213,818 263,315 23.1%
Employee related expenses (27,058) (35,812) 32.4%
Depreciation and
amortization (36,483) (48,108) 31.9%
Payments to other network
operators (26,018) (34,279) 31.8%
Cost of telecommunications
equipment sales (15,922) (20,720) 30.1%
Other operating expenses (44,501) (60,998) 37.1%
Total operating expenses (149,982) (199,917) 33.3%
Operating profit 63,836 63,398 (0.7%)
Net interest and other
charges (11,306) (181) (98.4%)
Share of associates' results
before income tax 1,000 1,328 32.8%
Profit before income tax 53,530 64,545 20.6%
Income tax expense (4,651) (7,165) 54.1%
Profit after income tax 48,879 57,380 17.4%
Minority interest (7,296) (15,259) 109.1%
Net income 41,583 42,121 1.3%
MATAV 6 months ended June 30,
Consolidated 2001
Cash Flow Statement - IAS (Unaudited)
(HUF million)
Cash flow from operating activities
Cash generated from operations 104,845
Interest paid (9,250)
Commissions and bank charges (1,194)
Net income tax paid (5,077)
Net cash from operating activities 89,324
Cash flow from investing activities
Capital expenditure on tangible and
intangible assets (74,896)
Purchase of investments (84,298)
Cash acquired 5,488
Interest received 1,071
Dividends received 779
Movement in other financial assets 5,662
Proceeds from disposal of fixed assets 5,887
Net cash flow utilized in investing activities (140,307)
Cash flow from financing activities
Dividends paid to shareholders and
minority interest (18,771)
Net change in the loan portfolio 66,017
Net cash used for treasury stock transactions (33)
Other 267
Net cash flow utilized in financing activities 47,480
Translation differences on cash and cash equivalents (408)
Change in cash and cash equivalents (3,911)
Cash and cash equivalents at beginning of year 13,296
Cash and cash equivalents at end of year 9,385
Change in cash and cash equivalents (3,911)
Summary of key operating statistics
30-Jun-00 30-Jun-01 Jun 00 - Jun 01
% change
EBITDA margin 46.9% 42.3% (9.8%)
Operating margin 29.9% 24.1% (19.4%)
Net income margin 19.4% 16.0% (17.5%)
ROA 12.5% 10.4% (16.8%)
Net debt to total capital 32.0% 33.9% 5.9%
Number of closing lines
Residential 2,335,103 2,208,508 (5.4%)
Business 361,492 303,546 (16.0%)
Payphone 36,481 37,157 1.9%
ISDN channels 181,416 385,734 112.6%
Total lines 2,914,492 2,934,945 0.7%
Digitalization of
exchanges with ISDN 81.2% 85.2% 4.9%
Penetration 38.8% 39.1% 0.8%
Fixed line employees
(closing full
equivalent) 11,352 9,790 (13.8%)
Total no of employees
(closing full
equivalent) 14,469 16,669 15.2%
Lines per fixed line
employees 257 300 16.7%
Traffic in minutes
(thousands)
Domestic 4,740,903 5,154,102 8.7%
International outgoing 90,878 84,185 (7.4%)
Westel 0660 RPCs
(Revenue Producing
Customers) 87,482 60,054 (31.4%)
Westel RPCs (Revenue
Producing Customers) 1,190,747 2,035,913 71.0%
Total cellular RPCs 1,278,229 2,095,967 64.0%
Westel's MOU 187 150 (19.8%)
Westel's ARPU (Average
Traffic Rev./RPC/Month) 9,562 7,006 (26.7%)
Westel's overall churn 12.4% 14.4% 16.1%
Managed leased lines
(FLEX-Com connections) 7,649 10,270 34.3%
Internet subscribers 70,904 110,384 55.7%
Cable television
customers 186,462 285,596 53.2%
Analysis of the Financial Statements for the six months ended June 30, 2001 Acquisition of Macedonian Telecom (MakTel) In December December: see month. 2000, Matav ("the Company"), on behalf of a consortium, reached an agreement with the government of Macedonia to purchase 51 percent of Macedonian Telecom ("MakTel") upon its privatization privatization: see nationalization. privatization Transfer of government services or assets to the private sector. State-owned assets may be sold to private owners, or statutory restrictions on competition between privately and publicly owned . The closing of the transaction took place on January January: see month. 15, 2001 whereby the Company paid EUR 343.3 million on behalf of the consortium in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with the acquisition agreement. The 51 percent ownership acquired by Matav was contributed on January 16, 2001 to a newly established Macedonian acquisition vehicle, Stonebridge Communications AD. In accordance with a subscription and shareholders' deed deed, in law, written document that is signed and delivered by which one person conveys land or other realty (see property) to another. A deed may assure the extent of the conveying party's ownership or, if the party is uncertain of the precise extent, he issues a between Matav, SEEF Seef (Arabic: السيف) is a district near Manama in the island kingdom of Bahrain. Seef is a result of active reclamation work which has dramatically changed the Bahrain coastline. Holdings Ltd. and CosmoTelco Added Value Added value in financial analysis of shares is to be distinguished from value added. Used as a measure of shareholder value, calculated using the formula:
MakTel became a consolidated subsidiary of Matav from January 15, 2001. Analysis of group income statements Sales Revenues from domestic telecommunications services In telecommunication, the term telecommunications service has the following meanings: 1. Any service provided by a telecommunication provider. 2. for the first six months of 2001 reflect significant rebalancing Rebalancing The process of realigning the weightings of one's portfolio of assets. Notes: For example, if your portfolio's proportion of stock has grown too large for your intended assets weightings and risk tolerance, you might rebalance by selling some stock and putting of tariffs that took place effective February 1, 2001. The new tariffs indicate significant progress to set prices to the underlying costs. Subscription fees increased nearly 30%, while domestic and international usage tariffs decreased, which are reflected in the mixed growth figures below. Revenues from subscriptions, connections and other charges for the six months ended June 30, 2001 amounted to HUF 47,451 million, compared to HUF 39,962 million for the same period in 2000 (an 18.7% increase). Growth resulted mainly from subscription fee increases. The average number of lines increased 1.7% to 2,953,888 in the first six months of 2001 from 2,903,543 in the first six months of 2000. Increase in subscription revenues was partially offset by the decline in revenues from connection fees. The decreased connection fee revenues resulted from the lower number of analog line A wire (cable) that carries an analog signal. See analog. gross additions as well as lower connection fees due to marketing campaigns. Other charges increased as a result of wider usage of digifon services, voice-mail and phone-directory as well as subscriptions to tariff tariff, tax on imported and, more rarely, exported goods. It is also called a customs duty. Tariffs may be distinguished from other taxes in that their predominant purpose is not financial but economic—not to increase a nation's revenue but to protect domestic packages, such as Mindenkinek. Domestic traffic revenue for the first six months of 2001 amounted to HUF 61,827 million, compared to HUF 65,238 million for the same period in 2000. The 8.7% growth in domestic usage was offset by tariff rebalancing. In addition to lowering both local and long distance tariffs in nominal Trifling, token, or slight; not real or substantial; in name only. Nominal capital, for example, refers to extremely small or negligible funds, the use of which in a particular business is incidental. NOMINAL. Relating to a name. terms, Matav offers tariff discounts, such as the night discount and the Mindenkinek package. Revenues from other usage for the first six months of 2001 amounted to HUF 8,717 million, compared to HUF 9,153 million for the same period in 2000 (a 4.8% decrease). This decrease is attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to lower fees paid to Matav by other domestic operators. This decrease was partially offset by the increased number of minutes, especially by the significantly higher traffic between the mobile service providers and Matav. International traffic revenues amounted to HUF 17,537 million for the six months ended June 30, 2001, compared to HUF 20,449 million for the same period in 2000 (a 14.2% decrease). Both outgoing and incoming Incoming is a 3-D shooter developed by Rage Software and published by Interplay. The PC version was released in late 1998, and the Dreamcast version, a launch title for the console, was released in 1998 in Japan and in 1999 in the rest of the world. international revenue show a decrease. Decrease in outgoing international traffic revenue is due to a 15% reduction in international traffic rates effective from February 1, 2001 as well as volume decreases. International incoming traffic revenue decreased as well, resulting from lower volume of incoming minutes and lower international settlement rates partly offset by higher SDR/HUF exchange rates. Revenues from mobile telecommunications services amounted to HUF 64,475 million for the first six months of 2001, compared to HUF 49,759 million for the six months ended June 30, 2000 (a 29.6% increase). The growth resulted from the increased number of subscribers, partly offset by lower tariffs. The average number of Westel customers increased by 80.2%, while the average number of Westel 0660 customers decreased by 26.8%. Within the Westel customers, the prepaid group shows a significant, 169.3% increase. Prepaid customers accounted for approximately 80.8% of gross additions in the first half of 2001 and represent 60.7% of total Westel customers at June 30, 2001. Westel's ARPU (Average Revenue Per User) A calculation often used to determine the overall value of an application. It is also used to rate particular customers, especially in the wireless space, by comparing someone's account to the overall average. (average revenue per user) decreased by 26.7%, from HUF 9,562 in the first half of 2000 to HUF 7,006 in the first half of 2001 due to the dilution Dilution A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. Notes: Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. of customer base as the ARPU of the newly acquired prepaid customers is relatively low. Within mobile telecommunications services enhanced services show the highest increase, with over 100% growth year over year. Enhanced services now represent 6% of revenues from mobile telecommunications services. This revenue includes primarily SMS (1) (Storage Management System) Software used to routinely back up and archive files. See HSM. (2) (Systems Management Server) Systems management software from Microsoft that runs on Windows NT Server. (short message service). Increases in mobile traffic were partly offset by decreased usage per subscriber and decreasing tariffs. Westel's usage measured in MOU (Minutes Of Usage) A metric used to compute billing and/or statistics for telephone calls or other network use. (minutes of use) decreased from 187 minutes per customer per month in the first half of 2000 to 150 minutes per customer per month for the same period in 2001. The decreasing MOU is due to the increasing proportion of the prepaid segment, which has much lower minutes of usage than regular subscribers. Per minute tariff charges decreased by 8%, due to increasing competition in the mobile telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. market as well as change in call patterns, whereby the proportion of lower tariff calls (such as within network and off-peak period) is increasing in the call distribution. Revenues from international activities show revenues of MakTel, our newly acquired subsidiary. Revenues from international activities amounted to HUF 27,116 million for the six months ended June 30, 2001. Revenues from leased lines and data transmission amounted to HUF 16,029 million for the first half of 2001, compared to HUF 12,329 million for the same period in 2000 (a 30.0% increase). This strong growth was due to the increase in the number of managed leased lines, ISDN, Internet and cable TV subscribers. The number of managed leased lines increased to 10,270 at June 30, 2001 compared to 7,649 at June 30, 2000. The number of ISDN channels more than doubled over the period, from 181,416 at June 30, 2000 to 385,734 at June 30, 2001. Residential customers now account for 20% of the ISDN connections compared to 6% a year ago. The number of Internet connections grew by 56%, while the number of cable television customers increased by 53% year over year. Revenues from other services amounted to HUF 20,163 million for the first six months of 2001, compared to HUF 16,928 million for the same period in 2000 (a 19.1% increase). Other services include equipment sales, construction, maintenance, audiotex A voice response application that allows users to enter and retrieve information over the telephone. See IVR. , telex telex: see telegraph. telex International telegraphic message-transfer service consisting of a network of teleprinters. Subscribers to a telex service can exchange textual communications and data directly with one another. , telegraph telegraph, term originally applied to any device or system for distant communication by means of visible or audible signals, now commonly restricted to electrically operated devices. Attempts at long-distance communication date back thousands of years (see signaling). and miscellaneous revenues. The increase in this category is mainly due to equipment sales of Westel. In addition to the significant increase in prepaid gross additions, the equipment sales ratio (the proportion of customers purchasing a phone set) also increased. The average sales price of the mobile phonesets sold by Westel show a 22.3% decrease as of June 30, 2001, compared to June 30, 2000. Expenses Employee-related expenses for the six months ended June 30, 2001 amounted to HUF 35,812 million, compared to HUF 27,058 million for the same period in 2000 (an increase of 32.4%). The growth results from wage increases effective April 1, 2001, as well as the 15.2% increase in group headcount figures to 16,669 by June 30, 2001 compared to June 30, 2000. While headcount reductions at Matav continued, growth resulted mainly due to the acquisition of MakTel. MakTel had 3,683 employees at June 30, 2001, therefore without the inclusion of MakTel, the group headcount figure would have decreased 10% by June 30, 2001 compared to June 30, 2000. MakTel accounted for HUF 2,780 million of the increase in employee-related expenses in the first half of 2001 compared to the first half of 2000. In addition, headcount also increased at Westel in line with the increased operation of our GSM subsidiary. Efficiency improvements continued, and resulted in an increased number of lines per fixed line employee, 300 at the end of June 2001, compared to 257 a year earlier. Depreciation and amortization for the six months ended June 30, 2001 amounted to HUF 48,108 million, compared to HUF 36,483 million for the same period in 2000 (an increase of 31.9%). The growth is a result of increased investment in fixed assets fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → . MakTel accounted for HUF 3,766 million of the increase in depreciation expenses in the first half of 2001 compared to the first half of 2000. In addition, depreciation and amortization also includes the amortization expense of the goodwill that arose on the acquisition of MakTel. Payments to other network operators for the six months ended June 30, 2001 amounted to HUF 34,279 million, compared to HUF 26,018 million for the same period in 2000 (an increase of 31.8%). The increase was due to the increased penetration of mobile customers. MakTel's international outpayments accounted for HUF 2,329 million from the increase in payments to other network operators in the first half of 2001 compared to the first half of 2000. The cost of telecommunications equipment sales for the first half of 2001 was HUF 20,720 million, compared to HUF 15,922 million for the same period in 2000 (an increase of 30.1%). This is mainly due to the increased number of gross additions at Westel during the first six months of 2001 compared to the first six months of 2000 as well as the increase in the equipment sales ratio, i.e. the proportion of customers purchasing a phoneset. This increase was partly offset by the lower average cost of mobile handsets. MakTel accounted for HUF 909 million from the increase in cost of telecommunications equipment sales in the first half of 2001 compared to the first half of 2000. Other operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. for the first six months of 2001 amounted to HUF 60,998 million, compared to HUF 44,501 million for the same period in 2000 (an increase of 37.1%). Other operating expenses include materials, maintenance, marketing, service fees, outsourcing expenses, energy and consultancy. MakTel accounted for HUF 6,436 million of the increase in other operating expenses in the first half of 2001 compared to the first half of 2000. Operating Profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. Operating profit amounted to HUF 63,398 million for the six months ended June 30, 2001, compared to HUF 63,836 million for the same period in 2000. Total revenues for the first six months of 2001 increased 23.1% to HUF 263,315 million, compared to HUF 213,818 million for the first half of 2000. Total operating expenses increased 33.3% to HUF 199,917 million in the first half of 2001 from HUF 149,982 million for the same period in 2000. Operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: for the six months ended June 30, 2001 was 24.1%, while operating margin for the same period in 2000 was 29.9%. Net Interest and Other Charges Net interest and other charges were HUF 181 million for the first half of 2001, compared to HUF 11,306 million for the same period in 2000. Net interest and other charges show a decrease due to the 12 billion HUF foreign exchange gain (excluding foreign exchange gain on derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. ). This foreign exchange gain resulted mainly from the strengthening of the HUF due to the widening of the intervention A procedure used in a lawsuit by which the court allows a third person who was not originally a party to the suit to become a party, by joining with either the plaintiff or the defendant. band by the National Bank of Hungary. This foreign exchange gain more than offset the 2.4 billion HUF increase in interest expense on foreign exchange denominated loans resulting from the higher average loan balance. Total loans and other borrowings increased from HUF 190,140 million at June 30, 2000, to HUF 264,929 million at June 30, 2001, mainly because of the loan taken from Deutsche Telekom AG to finance the MakTel acquisition. Net interest and other charges include MakTel's HUF 1,843 million of net interest and other charges in the first half of 2001. Share of associates' results Share of associates' results amounted to HUF 1,328 million for the six months ended June 30, 2001, compared to HUF 1,000 million for the same period in 2000, reflecting improved operating results of investments. Profit before taxation Profit before income tax amounted to HUF 64,545 million for the six months ended June 30, 2001 versus HUF 53,530 million for the same period in 2000. Income tax Income tax expense increased from HUF 4,651 million for the six months ended June 30, 2000 to HUF 7,165 million for the same period of 2001, mainly due to higher deferred tax charge. Minority Interest Minority interest for the first six months of 2001 was HUF 15,259 million, compared to HUF 7,296 million for the same period in 2000 (an increase of 109.1%). This increase is due to the growth of Westel's profits as well as the inclusion of MakTel. MakTel accounted for HUF 4,068 million increase in minority interest in the first half of 2001 compared to the first half of 2000. Net Income Net income for the first half of 2001 was HUF 42,121 million, compared to HUF 41,583 million for the same period in 2000 (an increase of 1.3%). Analysis of segmented income statements The sum of the financial results of the three segments presented below does not equal the group financial results because of intersegment eliminations. Fixed line segment Fixed line segment includes Matav Rt. and its consolidated subsidiaries, other than MakTel, Stonebridge, Westel and Westel 0660.
6 months ended 6 months ended Change in
June 30, 2000 June 30, 2001 percentage
Revenues 158,279 164,920 4.2%
EBITDA 73,779 63,486 (14.0%)
Operating profit 45,175 30,510 (32.5%)
Profit after income tax 34,122 28,490 (16.5%)
Minority interest (28) 30 (207.1%)
Net income 34,094 28,520 (16.3%)
Revenues from the fixed line segment increased 4.2% year over year. The main contributors to this revenue growth were revenues from leased line and data transmission services, which increased by 29.9% in the first half of 2001 compared to the first half of 2000. Leased line and data transmission revenue growth was driven by strong volume increases in managed lease lines, ISDN channels, Internet and cable television customers. Matav's domestic fixed voice business experienced only moderate, 3.0% growth, which was driven by subscription fee increases, partly offset by decreases in local and long distance tariffs. International revenues declined by 14.0%, due to lower outgoing and incoming traffic as well as decreased international tariffs. Operating profit of the fixed line segment decreased by 32.5% because operating expenses grew at a faster rate than revenues. The main drivers of the operating expense growth were the wage increase at Matav Rt. from April 1, 2001, the increased outpayments due to higher traffic between Matav Rt. and the mobile service providers, and higher outsourcing, subcontracting expenses as well as higher local taxes. Net income decreased by 16.3%, at a lower rate than operating profit because of the favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. movement in net interest and other charges. This favorable movement in net interest and other charges is mainly due to the 9 billion HUF foreign exchange gain (excluding foreign exchange gain on derivatives) resulting from the strengthening of the HUF. This favorable increase in foreign exchange gain was partly offset by the 1.6 billion HUF increase in foreign exchange interest expense, mainly due to the loan taken to finance MakTel. Mobile segment Mobile segment includes Westel and Westel 0660.
6 months ended 6 months ended Change in
June 30, 2000 June 30, 2001 percentage
Revenues 73,761 92,487 25.4%
EBITDA 26,540 34,213 28.9%
Operating profit 18,661 23,716 27.1%
Profit after income tax 14,757 22,825 54.7%
Minority interest (7,268) (11,221) 54.4%
Net income 7,489 11,604 54.9%
Revenues in the mobile segment increased by 25.4% in the first six months of 2001 compared to the same period in 2000 due to strong increases in the number of mobile customers. Westel's customer base surged A cloud which rolls out from the bottom of the column produced by a subsurface burst of a nuclear weapon. For underwater bursts the surge is, in effect, a cloud of liquid droplets which has the property of flowing almost as if it were a homogeneous fluid. 71.0% to 2,035,913 subscribers, including 1,236,623 prepaid customers by June 30, 2001. Average monthly usage per Westel subscriber decreased by 19.8%, from 187 minutes in the first half of 2000 to 150 minutes in the first half of 2001. Mobile penetration reached 39.1% in Hungary and Westel accounts for 53% market share in the very competitive GSM market. Operating profit shows a 27.1% increase. While revenues grew 25.4%, operating expenses increased at a lower rate, 24.8% year over year. The majority of the increase in operating expenses relates to customer acquisitions, such as cost of phonesets, SIM cards SIM card abbr (= subscriber identity module card) → carte f SIM SIM card n (Tel) (= Subscriber Identity Module card) → SIM-Karte f , marketing expenses, etc. Employee related expenses also increased at Westel due to increased headcount as well as wage increases. To accomodate the traffic of the increased subscriber base, the mobile network is continuously expanding, resulting in higher depreciation expense. Depreciation and amortization also increased because of the inclusion of the 1800 DCS (1) See also DSC. (2) Digital Cross-connect System) A network switching and grooming device used by telecom carriers. See digital cross-connect. license in concession rights in the last half of 2000. Because of the 33.2% increase in depreciation expense, the growth in operating profit is below the growth of EBITDA. Net income in the mobile segment increased by 54.9%, at a much faster rate than operating profit, due to a 147.3% decrease in net interest and other charges. This decrease in net interest and other charges was mainly due to the 2.4 billion HUF foreign exchange gain resulting from the strengthening of the HUF. International segment International segment includes the operations of MakTel, Stonebridge, Telemacedonia, the goodwill amortization arising from the consolidation of MakTel as well as the minority interest held by other stakeholders Stakeholders All parties that have an interest, financial or otherwise, in a firm-stockholders, creditors, bondholders, employees, customers, management, the community, and the government. in MakTel.
6 months ended
June 30, 2001
Revenues 27,143
EBITDA 13,807
Operating profit 9,172
Profit after income tax 6,065
Minority interest (4,068)
Net income 1,997
MakTel has been a consolidated company of Matav beginning January 15, 2001. MakTel had 532,780 fixed line subscribers, 153,364 mobile subscribers and 15,178 Internet subscribers at June 30, 2001. About 43% of MakTel's revenue is derived from domestic telecommunications services, about 25% from international traffic and about 26% from mobile telecommunications services. The revenues from leased lines, data transmission and other services account for only 6% of total revenues. The international segment has a strong, 50.9% EBITDA margin and 33.8% operating margin for the six months ended June 30, 2001. Minority interest of HUF 4,068 million represents the percentage of income accruing to the minority owners in MakTel and in Stonebridge. Minority interest is not calculated on the amortization relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the goodwill acquired by Matav Rt. Analysis of group balance sheets Total assets and total shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. and liabilities at June 30, 2000 were HUF 685,595 million. Total assets and total shareholders' equity and liabilities amounted to HUF 876,924 million as of June 30, 2001. The increase is mainly attributable to the acquisition of MakTel. Intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. Intangible assets increased 171.8% from June 30, 2000 to HUF 92,324 million at June 30, 2001. This increase was due to goodwill on acquisition of subsidiaries, including MakTel, and the acquisition of the 1800 concession rights at Westel. Loans and other borrowings The current portion of loans and other borrowings increased 208.6% from June 30, 2000 to HUF 77,371 at June 30, 2001. The increase in current loans and other borrowings reflects reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. of some of the Rt.'s and Westel's long term borrowings to short term borrowings as they fall due the next 12 months. Non-current loans and other borrowing increased 13.6% from June 30, 2000 to HUF 187,558 million at June 30, 2001. This increase mainly reflects the loan received from Deutsche Telekom AG to finance the acquisition of MakTel. In addition, short term loans and long term loans increased due to the inclusion of MakTel's loans in the consolidated balance sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. . Minority interest Minority interest increased 168.7% from June 30, 2000 to HUF 81,259 million at June 30, 2001. This increase was due to the acquisition of MakTel and the results of Westel, partly offset by the dividend declared to the minority shareholder of Westel. Retained earnings Retained Earnings The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. Retained earnings increased 23.7% from June 30, 2000 to HUF 288,612 million at June 30, 2001. This increase was due to net income. |
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