From the business perspective, Q1 2021 was a challenging quarter due to COVID-19 implications on the economic activity. Nevertheless, Hrvatski Telekom ended the quarter on a positive note with a strong commercial momentum.
In Q1 2021, Hrvatski Telekom achieved solid growth with total consolidated net revenue, increasing by HRK 56 million or 3.2% in Q1 2021 compared to Q1 2020. The revenue increase was mainly driven by stronger mobile revenue (HRK 46 million or 6.0%) and fixed revenue returning to growth (HRK 12 million or 1.5%), with partial offset coming from timing of System solutions deals (HRK 3 million or -1.6%).
EBITDA AL was also up HRK 25 million or 4.0% in Q1 2021 as a result of an increase reported in both HT Group in Croatia (4.3%) and Crnogorski Telekom (0.2%). The EBITDA AL margin was 36.0%. Noteworthy development is that EBITDA AL continued growing for the second consecutive quarter supported by the positive commercial momentum and transformation measures.
Net Profit contracted as improved EBITDA and lower taxation were insufficient to offset the increase in depreciation, which stems from high investments during previous years, with investments amounting to over HRK 9 billion just over the last five years. Our investments are not only supporting the economy to get back to growth but are also essential for the Company’s future success.
Continued investments in network infrastructure
Despite the challenging environment Hrvatski Telekom continued to expand coverage of 5G network during Q1 2021. Additional 17 cities were covered with 5G network with a total coverage of 1.5m inhabitants, across 34 cities in Croatia.
In Q1 2021, Hrvatski Telekom continued to focus on building its fiber-optic infrastructure and implementing the next generation fixed access network (NGA), while targeting an increase in the fiber-optic network footprint which represents the future of the fixed network and is the primary prerequisite for the country’s digitalization. In Q1 2021, Hrvatski Telekom’s FTTH coverage reached more than 370,000 households, 29% more than a year ago. Overall, our fiber-based access network (FTTx) is now available to 531,000 households (19.3% YOY growth).
Future spectrum assignments
Croatian Regulatory Authority for Network Industries (HAKOM) announced that the public auction of the spectrum in 700 MHz, 3,6 GHz and 26 GHz frequency bands will be held in the period between May and July 2021. A public consultation on the Information memorandum on the public auction framework was launched on 2 April 2021.
Spectrum award in 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, and 2600 MHz frequency bands has been announced for 2022. Currently valid licences in these frequency bands expire in Q4 2024.
Strong focus on shareholder returns
On 23 April 2021, the General Assembly confirmed the joint proposal of the Management Board and the Supervisory Board for the distribution of net profit for 2020. The amount of HRK 641.9 million represents a ratio of the dividend payment in relation to the realized profit of the Company of 91.2%.
During Q1 2021, Hrvatski Telekom purchased additional 189,924 Company shares on the Zagreb Stock Exchange, in line with its ongoing Share Buyback Program. Hrvatski Telekom paid-out an equivalent value of HRK 35.3 million for the acquisition of the Company’s shares in the reporting quarter.
The General Assembly of Hrvatski Telekom d.d. authorized the Management Board to buy back the Company's own shares for the period of 5 years, commencing a new Share Buyback Program from 29 April 2021 until 22 April 2026. The maximum volume of the new Share Buyback Program is HRK 600m or 3m shares for the entire duration of the Program, which is approximately 3.7% of the total number of shares. The Program will create added value to all shareholders of the Company in addition to dividends.
In the latest Annual Report on Corporate Governance by the Croatian Financial Services Supervisory Agency (HANFA), Hrvatski Telekom has been named the best company listed in the Zagreb Stock Exchange (ZSE) Official market category, which once again demonstrates how Hrvatski Telekom, along with continuously delivering stable performance, implements the highest standards of corporate governance. Building on it, Hrvatski Telekom has even raised the bar additionally entering the ZSE’s Prime Market.
Although the environment remains uncertain, we confirm our 2021 outlook (including Optima Telekom until end-June 2021). We expect a mid-single digit decrease in revenue, and a low-single digit increase in EBITDA AL compared to 2020. Our CAPEX expectations are at around HRK 1.6 billion, down from the 2020 total of HRK 1.82 billion. In terms of regional expansion, we continue monitoring and evaluating potential acquisition opportunities.
Commenting on the business results for Q1 2021, Konstantinos Nempis, CEO of Hrvatski Telekom, stated: „Doing business in Q1 2021 remained under the impact of the COVID-19 pandemic extension. Still, despite the challenging macroeconomic environment, Hrvatski Telekom maintained its strategic focus, continuing with the investments in the infrastructure and the country’s digitalization.
By investing in the infrastructure, we expanded further our fiber network, we doubled the number of cities covered with 5G compared to 2020, while at the same time an even stronger customer-centric approach resulted with great customer satisfaction.
This translated into solid business performance, represented in top line revenue and EBITDA AL growth, which provide a strong foundation for sustainable and profitable growth going forward."