Hrvatski Telekom (Reuters: HT.ZA, Bloomberg: HT CZ), the leading telecommunications provider in Croatia announces its unaudited consolidated results for the six months ended with 30 June 2020.
The COVID-19 situation, and by it initiated lockdown impacted the business developments, with Hrvatski Telekom inevitably also experiencing the effects. As a direct result, total consolidated net revenue decreased by HRK 201 million or 5.4% in H1 2020 compared to H1 2019. The revenue decrease was caused by lower realization in fixed revenue (HRK 105 million or 6.3%), mobile revenue (HRK 100 million or 6.1%) and miscellaneous revenue (HRK 7 million or 93.0%), partially offset by higher system solutions (HRK 12 million or 3.2%).
EBITDA AL decreased by HRK 110 million or 7.8% in H1 2020, due to decrease by both HT Group in Croatia (HRK 106 million or 8.1%) and Crnogorski Telekom (HRK 4 million or 3.9%). Excluding the one-off EvoTV transaction in Q1 2019, EBITDA AL was 3.7% lower. The EBITDA AL margin was 37.0%.
Net profit after non-controlling interests decreased by HRK 125 million or 28.5%. Total CAPEX amounted to HRK 804 million, up 10.3% against the same period last year.
Due to high levels of uncertainty and volatility in March and April Hrvatski Telekom put its 2020 outlook under review. Although the environment is still uncertain, the revised 2020 outlook is now issued. Revenue, which we had previously anticipated to be stable to slightly lower than in 2019, we now expect to be mid-to-high single digit lower. EBITDA AL margins, which we previously expected to be around 38%, we now expect at around 39%. In February we set CAPEX expectations at around HRK 1.7 billion, and we still expect to deliver on that target. In terms of regional expansion, we reiterate that we continue to monitor and evaluate potential acquisition opportunities.
Challenging quarter from financial perspective due to COVID-19 and seasonal effects
Following the turnaround demonstrated in end of 2019, Hrvatski Telekom at the beginning of the 2020 continued with the positive trends, evidenced from the growth in postpaid, broadband and TV, and system solutions as well as from investments in network and service quality, still, the business developments were outweighed by decrease in revenues related to COVID-19, with it connected lockdown, and the seasonal effects.
Nevertheless, Hrvatski Telekom’s commitment to supporting its customers, businesses and society remained strong at all times. As a result, businesses were able to remain operational, people were able to work from home, school programs were able to be conducted online. The COVID-19 situation made it clear just how vital the ICT industry and investments in digital infrastructure and solutions are to the whole Croatia. The investments Hrvatski Telekom, as the biggest private investor in digitalization, made over the last years, with the biggest of the last 10 years coming in 2019, enabled the stability of the fixed and mobile networks and ensured consumers, businesses and public sector, under increased traffic remained connected in times when it was crucial.
The leading network status confirmed by improving customer experience and two awards for the best mobile network
Despite the challenging outlook, Hrvatski Telekom remains committed to its investment plans into network quality, 5G development and fiber roll-out, which are critical for Croatia's economic recovery and rapid transition to a digital society.
Hrvatski Telekom has received two Ookla awards for the second consecutive year - for “The Fastest Mobile Network” and “The Best Mobile Coverage” in Croatia. Ookla is the world leader in internet quality access testing and analysis and Ookla awards and they are globally the most valued and referenced indicators of mobile network quality. Hrvatski Telekom’s achievement is even more relevant as the awards also reflect the performance and the highest network quality during the COVID-19 which brought a drastic increase in telecommunications traffic.
Following its modernization Hrvatski Telekom’s mobile network is ready for 5G technology which will be the basis of economic growth. Hrvatski Telekom is the leader in the segment of 5G technology development and intensive work is being done to test the functionality and performance of 5G technology and prepare for commercial operations once the required radio frequency spectrum is allocated. The tests include the application of Dynamic Spectrum Sharing (DSS) technology which is crucial for the fast implementation of 5G technology. In the background of making the benefits of 5G a reality are partnerships and cooperation agreements, such as the one with Ericsson Nikola Tesla (ENT) based on which ENT became the exclusive supplier of the radio mobile network until 2024. This was the first 5G contract between two companies in Croatia, with which Hrvatski Telekom and ENT are continuing a long-term cooperation with the aim of enabling technological, economic and social progress.
In 2020, a strong focus has been placed on the implementation of the next generation fixed access network (NGA), targeting an increase in the fiber-optic network footprint. By the end of the first half of 2020, an additional 19,608 households were covered by FTTH technology in the access network, covering in total 299,000 households with FTTH. Fiber-optic networks represent the future of the fixed network and they are the primary prerequisite for the country’s digitalization.
The highest ever employee satisfaction and a new and improved Collective Agreement
Hrvatski Telekom has made great progress in building a digital company in which employees have impact and grow, and as a result we have seen growth in their engagement and satisfaction. The results from the employee satisfaction survey conducted in May 2020 confirmed that Hrvatski Telekom is moving in the right direction, with satisfaction reaching 82%, which represents the best ever result in the HT’s history.
The Management Board of Hrvatski Telekom and the Croatian Telecommunications Trade Union and the Republic Trade Union of Workers signed a new Collective Agreement which entered into force on 1 July 2020, and is valid for the next two years, until 30 June 2022. The new Collective Agreement not only retained a high level of employee's material and social rights, but also includes additional improvements confirming Hrvatski Telekom's responsible employer status.
Reduced fee for radiofrequency spectrum and postponement of the assignment for frequency bands
30 June 2020 amendments of the Ordinance on payment of fees for the right to use of addresses, numbers and radio frequency spectrum came into force. Following these amendments, the annual fee for the use of unpaired radiofrequency spectrum for the public mobile network decreased by 50%.
A public consultation on the future assignment of the 700 MHz, 800 MHz, 900 MHz, 3,6 GHz and 26 GHz frequency bands was held in the period between 24 June and 15 July 2020. The assignment of the 700 MHz, 3.6 GHz and 26 GHz frequency bands was planned by HAKOM at the end of 2020. Taking into account the COVID-19 epidemic and the impact of the measures adopted to fight the epidemic on social and economic activities, HAKOM decided to move the deadline for this to the first half of 2021.
Strong focus on shareholder returns
During H1 2020 the Company acquired at the Zagreb Stock Exchange a further 355,198 Company shares. For the acquisition of Company shares in H1 2020, the Company paid out an equivalent value of HRK 60.1 million. In March, the Management Board adopted amendments to the provision of the Share Buyback Program, removing some limitations regarding everyday trading (volume and price) to be able to more efficiently execute the program.
In July, General Assembly confirmed our proposal for the distribution of net profit for 2019. The amount of HRK 8.00 represents a ratio of the dividend payment in relation to the realized profit o the Company of 90.2%.
Commenting on the business results for H1 2020, Kostas Nebis, CEO of Hrvatski Telekom, stated: “The first six months of 2020 were strongly impacted by COVID-19 and by it initiated lockdown, with effects seen across business, economy and society. There is not a single industry that has not been affected by such developments, including the Telecoms sector. However, the services and connectivity we provide to the Croatian society and economy are now more important than ever before, and I am proud that we have, especially during the past six months demonstrated our market, technology and network leadership, as well as our strong commitment to supporting the country when it mattered the most, and we will continue to do so.
With Croatia needing to step up its digitalization I see our role in helping businesses and public sector transform and make a digital leap with a combination of telco and standardized and customized ICT solutions, in providing even more value to our customers by accelerating the simplification on all touchpoints, and in keeping the pace of our network investment plan which is a key lever for the society's digitization and return to economic growth. Very few industries and even fewer companies can play this role that is essential for the future of Croatia.
This is why, even under the challenging outlook for the remainder of 2020, Hrvatski Telekom as thelargest private investor in the digitalization of Croatia, will continueconnecting the Croatian society with the opportunities of digitization, and I am confident we will deliver on our vision of sustainable and profitable growth.”