SOURCE: Invitel ZRt.

March 08, 2007 00:05 ET

Magyar Telecom B.V., Parent Company of Invitel ZRt., Reports Financial Results for the Year Ended 31 December 2006

BUDAORS, HUNGARY -- (MARKET WIRE) -- March 8, 2007 --Magyar Telecom B.V., parent company of Invitel ZRt. ("Invitel"), today reported its financial results for the year ended 31 December 2006.

Financial and Operational Highlights

--  Total revenue in HUF terms increased 9% to HUF 49.1 billion for the
    year ended 31 December 2006 compared to the same period of last year. In
    Euro, total revenue for the period was EUR 185.6 million compared to EUR
    181.3 million in 2005.
--  Gross margin was HUF 34.0 billion for the year ended 31 December 2006,
    up 3% compared to the previous year. Gross margin percentage remained
    strong at 69%. In Euro, gross margin for the year decreased by 3% to EUR
    128.5 million.
--  Recurring EBITDA was HUF 20.3 billion for the year ended 31 December
    2006 compared to HUF 20.5 billion in the same period of 2005. In Euro,
    recurring EBITDA for the year ended 31 December 2006 decreased to EUR 76.7
    million from EUR 82.4 million in 2005.
--  The average exchange rate for the year ended 31 December 2006 was
    264.66 HUF/EUR while the average exchange rate for the year ended 31
    December 2005 was 248.32 HUF/EUR.
--  The total number of broadband Internet customers including Euroweb was
    over 100 000 as of 31 December 2006.
--  Mass Market out of concession voice customer contracts increased from
    82 379 as of 31 December 2005 to 161 423 as of 31 December 2006.
--  Gross margin of total business segment was HUF 9.0 billion for the
    period ended 31 December 2006, up 9% compared to the previous year.
--  Business voice customer growth is accelerating. The number of voice
    contracts grew to a total of 2 898, representing a year on year increase of
    102%.
--  Free cash flow before debt service, excluding the purchase of Euroweb,
    was EUR 49.2 million for the period ended 31 December 2006.
--  Cash and cash equivalents after the acquisition of Euroweb totaled EUR
    13.6 million at 31 December 2006.
--  The capex to revenue ratio for the year ended 31 December 2006 was
    13%, driven by growth in new customer acquisitions.
    
Mass Market Voice revenues for the year ended 31 December 2006 amounted to HUF 20.5 billion (EUR 77.4 million) compared to HUF 22.1 billion (EUR 89.1 million) for the year ended 31 December 2005. This decrease is attributable to competition in our historical concession areas and mobile substitution, partially offset by the increase in out of concession revenue arising from continuously increasing the number of customers.

Mass Market Internet revenues were HUF 6.4 billion (EUR 24.4 million) for the year ended 31 December 2006 compared to HUF 5.0 billion (EUR 20.0 million) for the year ended 31 December 2005, an increase of 30% year on year. This performance was due to the increase in the number of DSL contracts, in line with the continued expansion of the Hungarian broadband Internet market.

Business revenues for the year ended 31 December 2006 increased by 30% to HUF 14.5 billion (EUR 54.6 million) compared to HUF 11.1 billion (EUR 44.8 million) for the year ended 31 December 2005. This increase is due to the decrease in churn to mobile service providers, increase in our out of concession business voice contracts as well as the inclusion of the results of Euroweb.

Wholesale revenues for the year ended 31 December 2006 increased to HUF 7.7 billion (EUR 29.2 million) from HUF 6.8 billion (EUR 27.4 million) for the year ended 31 December 2005.

On 9 January 2007, HTCC announced that it had signed an agreement to acquire 100% of the shares in Matel Holdings NV (and thereby indirectly 99.98% of the shares of Invitel) for a total consideration of EUR 470 million or 6.1x Invitel EBITDA for LTM 30 September 2006. Martin Lea will assume the role of Chief Executive Officer of the enlarged company and Robert Bowker that of Chief Financial Officer. The transaction is subject to the approval of the Competition Office which is expected to be received in the first half of 2007.

Martin Lea, CEO of Invitel, commented, "Overall, we are pleased with the results for 2006 which are very positive, in all respects. We feel that the increase both in revenues and gross margin compared to last year reflects well on the performance of the whole Invitel team, particularly in light of quite challenging trading conditions. We continue to see signs of stability in our traditional in concession voice business, whilst at the same time have demonstrated our ability to strongly grow our Internet business, as well as our out of concession corporate and residential business and the higher margin elements of our wholesale business. We have also benefited from the inclusion of Euroweb, which has now been fully integrated with the Invitel business in Hungary.

"Also, we are very pleased to have signed the agreement with HTCC," added Mr. Lea. "We believe that the combination of the two companies will create a stronger number two player in the Hungarian fixed line telecommunications market and that the combined businesses will create new and bigger opportunities, through broader geographic coverage as well as a more diversified service portfolio."

Robert Bowker, CFO of Invitel, stated, "Our total gross margin for the year ended 31 December 2006 was HUF 34.0 billion showing a 3% increase compared to the prior year. We were able to keep our operating costs under control, which contributed to us achieving a recurring EBITDA margin of 41%. This contributed to us maintaining our net third party debt to recurring EBITDA ratio at the level of 3.1x. Despite strong growth in new customer acquisition our capex to revenue ratio remained at around 13%."

Mr. Bowker also noted that the Company's balance sheet is strong with EUR 13.6 million in cash and cash equivalents at 31 December 2006.

"The results for 2006 were in line with our expectations," concluded Ian McKenzie, Executive Chairman of the Board. "We are pleased to see the trends both in our in concession and out of concession areas. We also believe that the agreement concluded with HTCC at the beginning of 2007 was a significant step forward for the company that will add further competitive strengths to the new combined entity and will enable it to increase market share both in and out of concession areas in the corporate, wholesale and Internet businesses."

A summary of Magyar Telecom B.V.'s financial results for the year ended 31 December 2006, which includes further information regarding our financial performance and also includes qualification of some of the terms used in this press release, is available on the Invitel website (www.invitel.hu/investors) and should be read in conjunction with this press release.

Conference Call Information

On 8 March 2007 (at 14:00 UK time, 15:00 CET, 9:00 AM EST), Invitel will host a conference call to discuss financial results for the year 2006. You can participate in the conference call by dialling +44-145-256-0299 (UK), +1-706-679-0560 (International) or +1-877-270-4109 (US) and referencing "Matel" or "Invitel". You can access a web cast of the call on the Invitel web site at www.invitel.hu/investors. In addition, a replay will be available two hours after the call has ended and through 15 March 2007. To access the replay of the call, in the UK please dial +44-145-255-0000 and enter conference ID number 9443593; in the US please dial +1-800-642-1687 or internationally dial +1-706-645-9291 and enter conference ID number 8897906. An archived replay of the conference web cast will also be available on the Invitel web site, www.invitel.hu/investors.

About Invitel (previously Vivendi Telecom Hungary)

Founded in 1994, Invitel offers telephony, Internet, and data services to residential and business customers in Hungary. Invitel is the incumbent operator in 9 out of 54 primary service areas, where it has stable cash generative core telephony business. In the rest of Hungary, which represents a significant growth opportunity following the liberalisation of the telecom market, Invitel is an alternative telecom operator with a national backbone, metropolitan networks and point-to-multi-point access system.

This press release contains forward-looking statements. These statements reflect the current belief of Invitel's management as well as assumptions made by, and information available to, Invitel. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual future results and developments could differ materially from those set forth in these statements due to various factors. These factors include, among others, changes in the general economic and competitive situation, particularly in Invitel's businesses and markets. In addition, future results and developments could be affected by the performance of financial markets, fluctuations in exchange rates and changes in national and supranational law, particularly with regard to tax regulations. The company assumes no obligation to update forward-looking statements.

Contact Information

  • Contacts:

    Invitel Rt.
    Robert Bowker, CA(SA), CFA
    Chief Financial Officer
    Tel: +36 1 801 1374
    Email: bowkerr@invitel.co.hu

    The Global Consulting Group
    Kathy Price
    Investor Relations
    22 Cortland Street, 14th Floor
    New York, NY 10007
    Tel: +1-646-284-9430
    Email: kprice@hfgcg.com

    Invitel Rt.
    Péter Beterédy, ACCA
    Treasury Manager
    Tel: +36 1 801 1343
    Email: bezeredyp@invitel.co.hu

    Invitel Rt.
    Andrea Rába, ACCA
    Financial Reporting Manager
    Tel: +36 1 801 1651
    Email: rabaa@invitel.co.hu