Unaudited interim report for the HT Group (January - December 2021)

24.2.2022

One of the HT's fastest growing years: 1.1% revenue growth, EBITDA AL up 7.9%, 4.5% net profit growth

• One of the fastest growing years, leading market position across all areas of business reflecting strong commercial momentum
• Organic EBITDA AL up 7.9%, marking fifth consecutive quarter of growth; with 4.5% net profit and 1.1% organic revenue growth
• Strengthened network leadership through record high 100,000 HH annual fiber rollout, accompanied with 30% YoY total FTTH coverage growth, and quadrupled 5G coverage

Hrvatski Telekom’s strong business performance is represented in profit, revenue and EBITDA AL growth, capitalizing on fixed, mobile and ICT businesses growth across residential and business segments, with market leading investments contributing to continuation of positive trends and solid commercial momentum.

In 2021, HT Group organic revenue* increased by 1.1% YoY, driven by strong mobile and core fixed business despite the shift in System Solutions revenue due to a focus on high margin deals.

Organic EBITDA AL* increased by 7.9% YoY, with the fifth consecutive quarter of EBITDA AL growth demonstrating continuation of strong positive commercial momentum and positive impact of transformation measures.

Net profit amounted to HRK 615 million which represents a 4.5% YoY growth, with significant growth evident on a quarterly level as well, supported also by lower depreciation. Investments amounted to over HRK 9 billion over the last five years with HT again investing more than the rest of the market combined.

Despite a volatile environment, we delivered on our financial performance targets, while investing even more than planned in 2021.

Investments into fiber and 5G remained in focus throughout 2021

Hrvatski Telekom continued to focus on building its fiber-optic infrastructure across Croatia, and we expanded further the fixed network with a record annual 100,000 households and businesses FTTH rollout with total FTTH coverage growing by a notable 30% YoY, with two thirds of the newly built fiber connections in Croatia built by HT.

5G rollout activities intensified during 2021 and resulted in Hrvatski Telekom 5G network strengthening its leadership status, being the biggest and the fastest in Croatia. We quadrupled the number of cities covered with 5G compared to 2020, almost doubling the population covered, to over 2 million. Following the conclusion of the 5G spectrum auction, HT secured the biggest share of available spectrum meeting the preconditions for remaining the leading 5G network for years to come.

We also continued to set industry standards by launching the first ever 5G roaming services in 13 countries, while at the same time becoming the first in Croatia to demonstrate 5G network on 26 GHz frequencies.

Winning network awards across fixed and mobile

For the third consecutive year Hrvatski Telekom was named the best mobile network and received Ookla Speedtest Awards, as well as umlaut’s ‘Best in Test’ award for the fourth time. These awards are testimony of Hrvatski Telekom having both the best mobile network in Croatia, as well as the fastest one with the biggest coverage. Furthermore, we were recognized as one of the 10 fastest mobile networks in Europe.

Hrvatski Telekom also received umlaut ‘Best in Test’ award for the best fixed network, with this analysis based on over 760,000 samples collected from all fixed service providers in Croatia.

This confirmation of HT being the leading network in Croatia is a combination of our investments in networks and our customer-focus, leading our customer experience to the highest levels ever in HT’s history.

Optima sale process finished

In July 2021, 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) for the sale and purchase of the shares of the company Optima Telekom d.d.

Following the signing of the Share Purchase Agreement, Telemach received all necessary regulatory approvals, and since all other conditions for the closing had been met, Hrvatski Telekom and Zagrebačka banka signed the Share Transfer Agreement on 21 January 2022, whereby they transferred their shares in Optima to Telemach.

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 2021, HT paid a total of HRK 640.3 million in dividends or HRK 8 per share. This amount represents a ratio of the dividend payment in relation to realized profit of 91.2%.

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 Programme from 29 April 2021 until 22 April 2026. The maximum volume of the new Share Buyback Programme is HRK 600 million or 3 million shares for the entire duration of the Programme, which is approximately 3.7% of the total number of shares. The Programme will create added value to all Company’s shareholders in addition to dividends.

Since the introduction of new Programme at the end of April 2021, HT purchased 326,838 shares until 31 December 2021. Total number of shares purchased in 2021, under the previous and the new Programme, is 532,281 (HRK 99.7 million).

In total, through a combination of dividends and share buybacks we in 2021 paid out HRK 742 million to our shareholders. This represents a total yield of 5.0% (based on last closing price in 2021).

In July 2021, the Management Board withdrew 718,720 acquired Company shares without nominal value, purchased within the Share Buyback Programme valid until 20 April 2021. Thereby, the total number of shares decreased from 80,766,229 to 80,047,509 without nominal value, while the remaining share participation in the share capital is being increased.

Outlook 2022

Our strategy has been proven to be successful and we intend to accelerate its implementation even further, aiming to build on the achievements and strong performance of 2021. In 2022, we are aiming for stable revenues, a mid-single digit increase in EBITDA AL, and a mid-single digit decrease in CAPEX AL compared to 2021. Our regional expansion outlook remains the same as we continue to monitor and evaluate potential M&A activities.

Commenting on the business results for 2021, Konstantinos Nempis, CEO of Hrvatski Telekom, stated: „2021 was a very successful year for Hrvatski Telekom with solid revenue growth across residential and business segments, impressive recovery in visitors’ revenues, resulting in strong EBITDA growth and improving net profit while keeping our investments at high levels.
At the beginning of 2021 we aimed for profitable growth, strengthening our network leadership across fixed and mobile, further improving the customer experience, boosting employee engagement and employer attractiveness while leading the Croatian economy and society on its digitization journey and we successfully delivered across all fronts despite the still challenging macro environment. These remarkable achievements reflect our commitment and dedication to growing our business while supporting our customers.
Looking into 2022, we are building on our solid foundations aiming to grow our company further, accelerating the digital transformation, investing in the integrated gigabit networks, further improving customer experience and employees engagement, creating even more value for our customers and shareholders while leading the digitization of the Croatian society.”

* Revenue and EBITDA AL adjusted for Optima contribution in H2 2020.