Magyar Telecom B.V. Announces the Financial Results for the Period Ended June 30, 2012 and Investor Call

LONDON--(BUSINESS WIRE)--Magyar Telecom B.V. (“Matel B.V.”) announced today its financial results for the quarter and six months ended June 30, 2012.

RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2012

The results for the six months ended June 30, 2012 reflect the consolidated financial results of Magyar Telecom B.V. and its subsidiaries (collectively, the “Company”) in accordance with International Financial Reporting Standards (“IFRS”).

The reporting currency is euro (“EUR”), however the functional currency of continued operations is the Hungarian forint (“HUF”), being the currency of the primary economic environment in which the Company operates.

When comparing the financial results for the six months ended June 30, 2012 to the financial results for the six months ended June 30, 2011, the reported results in euro have been affected by the difference between the average HUF/EUR exchange rates. The Hungarian forint depreciated against the euro by 10% with an average HUF/EUR exchange rate of 295.64 during the six months ended June 30, 2012 compared to the average HUF/EUR exchange rate of 269.38 during the six months ended June 30, 2011. This change in exchange rates had an impact on Hungarian forint denominated earnings when converted into euro.

The Company’s revenue was EUR 84.8 million for the six months ended June 30, 2012 which represents a 15% decrease compared to the six months ended June 30, 2011. Segment gross margin decreased by 14% from EUR 81.8 million for the six months ended June 30, 2011 to EUR 70.0 million for the six months ended June 30, 2012. General operating expense decreased by 6% from EUR 41.6 million for the six months ended June 30, 2011 to EUR 39.1 million for the six months ended June 30, 2012. Income from operations decreased to EUR 3.8 million for the six months ended June 30, 2012 from EUR 8.6 million for the six months ended June 30, 2011, mainly as a result of the decrease in segment gross margin. Net result for the six months ended June 30, 2012 was a net loss of EUR 23.4 million compared to a net income of EUR 18.9 million for the six months ended June 30, 2011, which includes the gain of EUR 28.5 million accounted for in relation to the acquisition of Fibernet.

Residential Voice – Residential Voice segment gross margin was EUR 17.0 million for the six months ended June 30, 2012, representing a decrease of 27% compared to the six months ended June 30, 2011. The decrease was mainly due to the decrease in our Residential Voice revenue as a result of the decrease in the number of customers and traffic and the 10% depreciation of the HUF against the EUR during the six months ended June 30, 2012 compared to the prior year.

Residential Internet – Residential Internet segment gross margin was EUR 12.9 million for the six months ended June 30, 2012, representing a decrease of 10% compared to the six months ended June 30, 2011. The decrease was mainly due to the 10% depreciation of the HUF against the EUR during the six months ended June 30, 2012 compared to the prior year. In functional currency terms, Residential Internet segment gross margin was flat year over year.

Cable - Cable segment gross margin was EUR 6.2 million for the six months ended June 30, 2012 compared to EUR 4.9 million for the six months ended June 30, 2011. The Cable segment was introduced as of March 1, 2011 and relates to the revenue generated by the ex-Fibernet business.

Corporate – Corporate segment gross margin was EUR 22.9 million for the six months ended June 30, 2012, representing a decrease of 12% compared to the six months ended June 30, 2011. The decrease was mainly due to the decrease in Corporate Voice revenue as a result of loss of lines and price erosion due to competition and the 10% depreciation of the HUF against the EUR during the six months ended June 30, 2012 compared to the prior year.

Wholesale – Wholesale segment gross margin was EUR 11.0 million for the six months ended June 30, 2012, representing a decrease of 15% compared to the six months ended June 30, 2011, which is mainly due to the 10% devaluation of the HUF against the EUR compared to the prior year, and the decrease in small bandwidth wholesale leased line revenue.

Segment gross margin is a non-IFRS financial measure, which is used by management to evaluate the performance of the business segments. The following table represents the reconciliation of segment gross margin to income from operations as per the Consolidated Statement of Comprehensive Income / (Loss) of the Company:

	Six months ended June 30,
(euro in millions)	2012		2011
Residential Voice	17.0		23.4
Residential Internet	12.9		14.4
Cable	6.2		4.9
Corporate	22.9		26.1
Wholesale	11.0		13.0
Segment Gross Margin	70.0		81.8
Network operating expenses	(10.0	)	(10.6	)
Direct personnel expenses	(5.4	)	(6.2	)
Selling, general and administrative expenses	(23.7	)	(24.8	)
Depreciation and amortization	(26.4	)	(28.6	)
Cost of restructuring	(0.7	)	(3.0	)
Income from operations	3.8		8.6

Net cash provided by operations, which includes interest paid but excludes capital expenditure and debt repayments, was EUR 11.9 million for the six months ended June 30, 2012.

COMMENTS FROM DAVID McGOWAN

Commenting on the financial results, David McGowan, Chief Executive Officer of Invitel said, “The general economic conditions in Hungary continue to be challenging; with an increasing pace of company liquidations and the introduction of new telecom sector taxes applying pressure. The Company has made several initiatives to improve its competitive position; in the Residential segment the developments are focused on transforming our service portfolio with the focus on TV-led offerings and an increased emphasis on value for customers. Our Corporate segment enjoys a growing customer base due partly to an increased focus on high quality ICT and cloud services.”

CONFERENCE CALL

On August 10, 2012 (at 14:00 UK time, 15:00 CET, 9:00 AM ET), Matel B.V. will host a conference call to discuss financial results for the period ended June 30, 2012.

You can participate in the conference call by dialing 800-4626-6666 (UK toll free), [phone] (International) or [phone] (U.S. toll free) and referencing “Matel B.V.”.

A webcast of the call and the presentation materials will be available on Invitel’s website at http://english.invitel.hu/ under “Press/Investor Relations”. The webcast will be available for replay until November 10, 2012. In addition, a replay of the call will be available until August 24, 2012 at 11:59 PM ET. To access the replay of the call, please dial [phone] (U.S. toll free) or internationally dial [phone] and enter account (286) followed by the replay access code (397548).

ABOUT MAGYAR TELECOM B.V.

Magyar Telecom B.V., through its subsidiary, Invitel, is one of Hungary’s leading telecommunications and info-communications service providers. It provides 16 thousand satisfied business clients with a broad portfolio of media, telecommunication, and info-communication services; on the other hand Invitel has 750 thousand residential and SOHO subscriptions on the digital TV, internet and voice services market. The number of its wholesale partners exceeds 250. In its customer service offices, called “Telepoints”, Invitel is directly available to residential customers at 27 different sites throughout Hungary, while the work of business partners is supported by skilled account managers through continuous personal communication. To ensure excellent service quality and maximum customer satisfaction, Invitel employs a staff of 1,200 employees. The Company is headquartered in Budaörs.

Forward-Looking Statements

The information above includes forward-looking statements about Magyar Telecom B.V. and its subsidiaries (“Matel B.V.”). These and all forward-looking statements are only predictions of current plans that are constantly under review by Matel B.V. Such statements are qualified by important factors that may cause actual results to differ from those contemplated, including those risk factors detailed in Matel B.V.’s Annual Reports, which may not be exhaustive. For a discussion of such risk factors, see Matel B.V.’s Annual Reports. Matel B.V. operates in a continually changing business environment and new risk factors emerge from time to time. Matel B.V. cannot predict such new risk factors, nor can it assess the impact, if any, of such new risk factors on its business or events described in any forward-looking statements. Matel B.V. has no obligation to publicly update or revise any forward-looking statements to reflect the occurrence of future events or circumstances. In addition, because Matel B.V. is no longer subject to certain reporting obligations with the SEC, and no longer intends to file or furnish any updates with the SEC.

Magyar Telecom B.V.
Financial Highlights
(in millions of euro)
Statements of Operations
	Six months ended June 30, 2012		Six months ended June 30, 2011
Residential Voice	18.8		26.6
Residential Internet	15.8		17.6
Cable	8.3		6.3
Corporate	28.2		33.2
Wholesale	13.7		15.7
Total Revenue	84.8		99.4
Segment Cost of Sales	14.8		17.6
Income (Loss) from Operations	3.8		8.6
Interest Expense	20.6		19.4
Foreign Exchange Gains (Losses), net	(1.6	)	(1.2	)
Gains (Losses) on Derivative Financial Instruments	(0.2	)	(0.4	)
Net income (loss) for the Period	(23.4	)	18.9

Magyar Telecom B.V.
Financial Highlights
(in millions of euro)
Balance Sheet
	June 30,		December 31,
	2012		2011
Current Assets	56.0		67.9
Property, Plant and Equipment, net	274.8		257.2
Total Assets	365.2		357.5
Total Current Liabilities	42.8		44.4
Long Term Debt	315.8		313.5
Total Shareholders’ Equity	(7.4	)	(14.4	)
Total Liabilities and Shareholders’ Equity	365.2		357.5