Magyar Telekom Reports 12.5% Annual Growth in Q1

Group revenue grew by 12.5% year-on-year in Q1 2023, thanks to continued strong demand for mobile data coupled with further increases in broadband revenues and higher system integration and IT revenues, the telecom service provider reported on the website of the Budapest Stock Exchange.

Gross profit improved in line with revenue trends, growing by 13.1% year-on-year in Q1 2023.

Indirect costs were up by 44.7% year-on-year, i.e. by HUF 17.3 billion, reflecting the effect of the supplementary
telecommunication tax, four times higher electricity costs, the average 7% increase in the Hungarian wage expense and the inflationary pressure on other costs.

EBITDA AL declined by 8.9% year-on-year to HUF 50.8 billion in Q1 2023, as increases in other costs offset the
improvement in gross profit.

Net income was 43.0% lower year-on-year, at HUF 10.5 billion in Q1 2023, primarily driven by lower EBITDA and deteriorating net financial result; adjusted net income was 22.0% lower year-on-year, at HUF 12.1 billion in Q1 2023.

Capex after leases, excluding spectrum licenses, increased moderately year-on-year to HUF 23.5 billion in Q1 2023, primarily driven by higher spending related to fiber provisioning and installation in Hungary.

Free cash flow, excluding spectrum license fees, was lower year-on-year at HUF 10.7 billion cash outflow in Q1 2023, reflecting higher interest and lease outpayments and the absence of one-off cash inflow from the subsidiary sale recorded in Q1 2022.

Magyar Telekom CEO Tibor Rékasi commented in the report that "despite facing a highly uncertain economic and business landscape, and an evolving competitive environment within the Hungarian telecommunication industry, we remain focused on delivering superior customer satisfaction by offering gigabit networks and meeting increasing demand for data. The success of these efforts is reflected in the continued expansion of our subscriber base which led to a year-on-year increase of 13.1% in our gross profit for the first quarter of 2023. However, our profitability has been impacted by the current macro environment, as evidenced by an 8.9% decrease in EBITDA AL due to significant cost pressures. In Hungary, our indirect costs, excluding the supplementary telecommunications tax, increased by 28%, primarily due to the sharp increase in our energy prices, in particular the four times higher electricity cost year-on-year. Given the increasing subcontractor costs, unfavorable yield environment and weaker forint, we continue to take proactive steps to address changes in our external environment and leverage our strong position in the market to drive positive momentum in our operating performance.”