Hrvatski Telekom (Reuters: HT.ZA; Bloomberg: HTRA CZ), Croatia’s leading telecommunications provider, announces its unaudited consolidated results for the three months ended 31 March 2019.
“IFRS 16”, accounting standard is applied from 1 January 2019 and has a material effect on the Company’s financial statements, particularly on total assets, the results of operations, cash generated from operations, and the presentation of the financial position. *
Strong financial performance
In Q1 2019, EBITDA before exceptional items AL (after leases) increased by HRK 22 million, or 3.4%, to HRK 673 million in comparison with Q1 2018. EBITDA AL margin is at the level of 37.9%. Strong increase in EBITDA in Q1 is partially influenced by one-time effects such as Evo TV transaction and other.
In Q1 2019, net profit after NCI (non-controlling interest) amounts to HRK 190 million, which is an increase of 14.1% in comparison with the same period a year ago.
Total consolidated revenue generated in the first three months of 2019 amounts to HRK 1,775 million, which is 1.3% below the realization of the same period last year.
Growth of Magenta 1 customers, acquisition of Evo TV
The core proposition of Hrvatski Telekom remains the convergent offer under the name Magenta 1 combining the best from fixed and mobile service world. The unique concept of Magenta 1 on the Croatian market has more than 230 thousand customers and the number of customers grew by 10.2% from previous quarter.
As of 1 March, following the approval by the National Regulatory Agency (HAKOM), Hrvatski Telekom acquired Evo TV business from Hrvatska Pošta. With Evo TV, Hrvatski Telekom pay TV customer base grew from Q1 2018 by 17.8%, reaching 488 thousand pay TV customers.
Continued investment in infrastructure, P3 best network award and first 5G pilot in Croatia
In Q1 2019, capital expenditure realization amounts to HRK 386 million and is below Q1 2018 as a result of seasonal effects. Outlook on capital expenditures for 2019 remains the same as announced, i.e. around 2018 level.
In Q1 2019, Hrvatski Telekom continued with investments into fiber infrastructure, modernizing fixed access network to a new generation (NGA), achieving coverage for 59% households with a speed beyond 30 Mbps and 22% households with a speed beyond 100 Mbps.
Also, Hrvatski Telekom continued with an investment program of the modernization of mobile radio and transport networks. Upon successful completion of network modernization in the region of Istria and in Zagreb and Zagreb County in 2018, in Q1 2019, network modernization has continued on the coastal part of Croatia from Dubrovnik to Rijeka region. At the end of March 2019, a total of 45% locations were swapped with modernized 5G ready mobile radio equipment and infrastructure.
Furthermore, Hrvatski Telekom has continued to improve coverage and speed of its mobile network, reaching indoor 4G population coverage of 83.1% and outdoor population coverage of 98.7%.
Hrvatski Telekom participated in tender procedure organized by the National Regulatory Agency (HAKOM) for spectrum at 2,600 MHz. Hrvatski Telekom successfully acquired 2 x 20 MHz.
Hrvatski Telekom has won the award for the best mobile network in Croatia (P3 award) for the 2nd year in a row. Furthermore, in March 2019, Hrvatski Telekom was the first operator in Croatia and among the first in Europe to pilot and demonstrate a 5G network. The demonstration was realized in the city of Samobor in a real production environment by using commercial radio and core 5G equipment and functionality. Apart from Samobor, 5G technology will be piloted in other specific areas in Croatia.
Strong growth of customers using Moj Telekom app and announcement of new digital services
The key lever for digitalization of customer experience is Hrvatski Telekom’s app called Moj Telekom that gives users a detailed overview of all fixed and mobile telco services, consumption, enables payment of bills, and manages tariffs and options. The usage of Moj Telekom app is strongly increasing and in Q1 there were more than 113 thousand users.
In the first quarter of 2019, Hrvatski Telekom and Zagrebačka banka partnered up for new digital banking service - Telekom Banking. This is the first cooperation of this type between a telecommunications operator and a bank on the Croatian market. The service, currently in the pilot phase, and commercial launch is expected in next few months.
Commenting on the business results of the first quarter of 2019, Konstantinos Nempis, new President of the Management Board of Hrvatski Telekom, said: “The strong business results in the first quarter of 2019 show a continuation of successful business operations of Hrvatski Telekom. Such position of the Company, its investment capacity, access to state-of-the-art technologies and, most of all, its competent and talented people, will enable Hrvatski Telekom to leap forward in the era of digital world, creating a positive difference for the Croatian society. In the next period, strategic focus will be on simplification and digitization of customer experience and Company’s operations to be faster and more agile, and on strong investments in high speed fixed and mobile networks, enabling our customers and Croatian citizens to connect to the opportunities of digitization, all leading to a sustainable growth of Hrvatski Telekom.”
* The new regulations affect the Company as a lessee especially in relation to leases of cell sites (land, space in cell towers or rooftop surface areas), network infrastructure, and buildings used for administrative or technical purposes. Therefore, “AL” or “After Leases” steering KPIs have been introduced to ensure comparability. In relation to 2018, only the income statement and the respective KPIs have been adjusted for IFRS 16 effects.