Hungary’s largest telecommunications service provider Magyar Telekom reported its consolidated financial results for the fourth quarter and full year of 2020, in accordance with International Financial Reporting Standards (IFRS) as endorsed by the EU.
Total revenues increased by 3.6% year-on-year to HUF 188.9 billion in Q4 2020 thanks to increases in telecommunication service revenues in both countries coupled with higher equipment sales, and a positive foreign exchange impact stemming from the strengthening of the North Macedonian denar (MKD) compared to the Hungarian forint (HUF). For the full year 2020, revenues were up 1.0% at HUF 673.0 billion as the mentioned positive impacts were mitigated by lower Hungarian SI/IT revenues.
Direct costs increased by 3.0% year-on-year to HUF 90.9 billion in Q4 2020 mostly driven by higher equipment costs. For 2020, direct costs were up by 1.7% year-on-year at HUF 297.5 billion reflecting increases in telecom tax and other direct costs partly mitigated by lower SI/IT expenses.
Gross profit improved by 4.1% year-on-year to HUF 97.9 billion in Q4 2020 thanks to higher contribution from telecommunication services partly counterbalanced by lower roaming results in both countries of operation. Gross profit was up moderately to HUF 375.6 billion in 2020 , as the positive telecommunication service trends were mitigated by lower Hungarian SI/IT contribution.
Indirect costs improved by 3.0% year-on-year, to HUF 35.3 billion in Q4 2020, and by 2.6% year-on-year to HUF 149.7 billion in 2020, thanks to broad-based cost saving measures implemented at the Hungarian operation.
EBITDA rose by 8.6% year-on-year to HUF 62.6 billion in Q4 2020, and by 2.4% to HUF 225.9 billion in full year 2020, as the result of higher gross profit coupled with lower indirect costs. EBITDA AL improved by 9.9% year-on-year to HUF 56.6 billion in Q4 2020, and by 2.5% annually to HUF 202.6 billion in full year 2020.
Depreciation and amortization (‘D&A’) expenses decreased by 2.6% year-on-year, to HUF 36.7 billion in Q4 2020, reflecting the extension of the useful life of some assets as well as the absence of useful life shortening of some IT software, impacting the base period. D&A expenses rose by 2.7% year-on-year to HUF 141.1 billion in 2020, attributable to the frequency licenses acquired in March 2020 in Hungary, while in North Macedonia the increase reflected higher amortization expenses in relation to content rights, software and licenses.
Profit for the period rose by 22.9% year-on-year to HUF 16.0 billion in Q4 2020, reflecting higher EBITDA coupled with lower D&A expenses. In full year 2020, profit rose by 4.1% year-on-year to HUF 46.3 billion, as the annual EBITDA improvement could offset the higher D&A expenses.
Profit attributable to non-controlling interests rose by HUF 1.0 billion year-on-year to HUF 1.2 billion in Q4 2020, as higher EBITDA was coupled with better financial results, resulting in an increased profit at the North Macedonian operation.
Free cash flow excluding spectrum licenses reached HUF 69.5 billion in 2020, representing a HUF 4.5 billion improvement versus the previous year. Despite increased investment into the business, favorable working capital developments, rising profitability and lower financial charges payable led to enhanced annual free cash flow. Free cash flow after spectrum licenses reached HUF 15.3 billion for the full year, including the payment of 5G spectrum license fees in Q2 2020.
Magyar Telekom CEO Tibor Rékasi is quoted in the company statement by saying that “I am particularly proud that in the face of the COVID-19 pandemic, all our employees rose to the challenge to deliver a performance ahead of our 2020 expectations. In the fourth quarter, the business achieved robust results with a significant HUF 5 billion improvement in total EBITDA AL to HUF 56.6 billion. This strong final-quarter performance contributed to the successful delivery of our most important annual financial KPIs, including revenue, EBITDA AL and free cash flow.
2020 will also go down in history as a year of significant investments into our fixed and mobile networks. The fiber network roll-out gathered pace last year with overall development exceeding previous years’ levels. Looking ahead to 2021, I am confident that we will continue on our growth path despite ongoing volatility in our operating environment.”
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