Hrvatski Telekom closed the first nine months of 2021 on a positive note with a strong commercial performance, with revenue growth once again translating into strong EBITDA AL growth. Maintaining the strong investment plan ensures continuation of positive trends and solid commercial momentum.
In 9M 2021, Hrvatski Telekom achieved growth with total consolidated net revenue, increasing by HRK 34 million or 0.6% in 9M 2021 compared to 9M 2020. The revenue increase was mainly driven by stronger mobile revenue (HRK 259 million or 10.6%), with partial offset coming from System solutions due to focus on high margin deals and different seasonality (HRK -217 million or -32.6%). Excluding Optima Telekom contribution in Q3 2020 (HRK 67 million), adjusted net revenue increased by HRK 101 million or 1.9%.
EBITDA AL was also up HRK 132 million or 6.4% in 9M 2021 as a result of an increase reported in both HT Group in Croatia (6.3%) and Crnogorski Telekom (8.3%). The EBITDA AL margin was 39.7%. Noteworthy development is that EBITDA AL continued growing for the fourth consecutive quarter supported by the positive commercial momentum. Excluding Optima Telekom contribution in Q3 2020 (HRK 28 million), adjusted EBITDA AL increased by HRK 160 million or 7.9%.
Net Profit amounted to HRK 460 million, despite contracting YoY as improved EBITDA and lower taxation were insufficient to offset the increase in depreciation on a yearly level, which stems from high investments during previous years. Investments amounted to over HRK 10 billion just over the last six years with HT again investing more than the rest of the market combined. Also, on the quarterly level, depreciation decreased, and compared to previous quarter the Net Profit increased 2.5 times or HRK 295 million.
Although the environment remains challenging, we improved our 2021 outlook (including Optima Telekom until end-June 2021), and expect a low-single digit decrease in revenue, and a mid-single digit increase in EBITDA AL compared to 2020. Our CAPEX expectations are at around HRK 1.6 billion. In terms of regional expansion, we continue monitoring and evaluating potential acquisition opportunities.
Investments into 5G and fiber remain in focus
Following the completion of the public auction procedure and the HRK 130 million investment for the new radio frequency spectrum in 700 MHz, 3.6 GHz and 26 GHz frequency bands Hrvatski Telekom ensured the highest 5G spectrum share strengthening further its leadership status. Licenses for using radio frequency spectrum have been assigned for the period of 15 years.
By providing 5G network on all 5G frequency bands HT continues setting industry standards and enabling the application of new technologies that will support economic growth and societal advancements. Healthcare, education, manufacturing, agriculture, energy, tourism, transport, development of smart cities and smart 4.0 industries are just some of the areas that will make great progress through implementation of advanced 5G network capabilities. We also delivered on our commitment to progressively enable 5G across the country, making again a strong contribution to the country’s economic and social development. During Q3 2021 600 5G locations were operational, of which already 150 sites on 3.6 GHz spectrum, ensuring a 5G coverage for 2 million people.
Additionally, HT was the first in Croatia to launch 5G roaming through agreements with Deutsche Telekom and Magyar Telekom, creating new opportunities for business and tourism and ensuring the best customer experience for customers in Croatia and abroad.
By market leading investments, Hrvatski Telekom continued to focus also on building its fiber-optic infrastructure and we expanded further the fixed network with FTTH coverage reaching more than 435,000 households, which represents a notable 34% increase compared to the same period last year. Overall, our fiber-based access network (FTTx) was with the end of third quarter available to 597,000 households (26% YOY growth).
The best network status confirmed
For the third consecutive year Hrvatski Telekom has been confirmed as the best mobile network and has received Ookla Speedtest Awards, as well as umlaut’s ‘Best in Test’ award for the fourth time. Awards confirmed that Hrvatski Telekom has both the best mobile network in Croatia, as well as the fastest and the one with the best coverage, with the 2021 result being even significantly better than in 2020. On top of this, we were recently recognized as one of the 10 fastest mobile networks in Europe.
Optima sale process
In July Hrvatski Telekom d.d. and Zagrebačka banka d.d. signed an agreement with Telemach Hrvatska d.o.o. company owned by United Group (United Group B.V., The Netherlands) on the sale and purchase of the shares of the company Optima Telekom d.d.
The subject of the transaction is sale of total of 54.31% shares of Optima Telekom out of which 36.90% are owned by Zagrebačka banka, while 17.41% are owned by HT holding d.o.o., a company in 100% ownership of Croatian Telecom.
The closing of the transaction is subject to the regulatory approvals and other agreed contractual conditions and is expected by the end of 2021. Sale and share purchase agreement determines the value for 100% shares of Optima Telekom of HRK 639 million (enterprise value) which represents 5 times 2020 EBITDA before one-time items after leases.
By signing an agreement on the sale and purchase of the shares of the company Optima Telekom d.d., it was determined that the fair value is lower than the carrying amount, which in July resulted in impairment of goodwill and assets in Group in the net amount of HRK 50 million.
Dividend and SBB program provide attractive yield for investors
Our capital allocation strategy clearly demonstrates our strong focus on shareholder returns and our intention to return value to our shareholders. During 9M 2021 HT paid dividend of HRK 8 or in the total amount of HRK 640.3 million. This amount represents a ratio of the dividend payment in relation to realized profit of 91.2%, which means that despite the challenges of the pandemic year, we further increased our high pay-out ratio.
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 600 million or 3 million 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.
Since the introduction of new Program at the end of April 2021, we have purchased 259,910 shares (HRK 49.0 million) until 30 September 2021. Total number of shares purchased in 9M 2021 (under old and new Program) is 456,353 (HRK 87.2 million).
In total, we have paid out HRK 728 million to our shareholders in 9M 2021. This represents a total yield of 4.8% (based on last price in 9M 2021), through a combination of dividends and share buybacks.
In July 2021 the Management Board withdrew 718,720 acquired Company shares without nominal value, purchased within Share Buyback Programme valid until 20 April 2021. Thereby the total number of shares has decreased from 80,766,229 shares to 80,047,509 shares without nominal value, while the remaining shares’ participation in the share capital is being increased.
Commenting on the business results for 9M 2021, Konstantinos Nempis, CEO of Hrvatski Telekom, stated:
„Hrvatski Telekom continued with the positive business developments in the 9M 2021, with strong fixed and mobile business service revenue performance, reflected in strong EBITDA AL growth.
Building on the solid commercial momentum and better operational performance we strengthened further our leadership position across all areas of the business: the biggest and fastest 5G network in the country, highest share of newly allocated 5G spectrum thanks to our HRK 130 million investment, the biggest fiber network with 435,000 covered households across Croatia enabled with gigabit speeds as a result of a record Fiber to home roll-out plan, winning again international awards and recognitions for the best network in the country, and as one of the fastest mobile networks in Europe.
Looking ahead, we remain committed to supporting our customers, economy and the society overall, continuing to deliver the best network and service quality, contributing to Croatia's future growth connecting everyone to the opportunities of digitalization."