Unaudited interim report for the HT Group (January - December 2023)

23.2.2024

The largest investments in HT history, revenue up by 5.7% YoY and EBITDA AL by 5.3% YoY

• Strong commercial results with revenue growing by 5.7%, offsetting 4.8% operating costs increase, adjusted EBITDA AL up by 5.3%
• The largest investments in HT history, reaching EUR 361.4m (+50.7% YoY). Won the largest mobile spectrum share and expanded the largest FTTH network in Croatia by more than 20%
• Net Profit reached EUR 132.0 million

As a result of strong commercial momentum and positive business developments Hrvatski Telekom has in FY 2023 recorded 5.7% YoY revenue growth, fueled by good performance across consumer and business segments.

Despite inflationary and competitive pressures, HT managed to contain the increase of operating expenses to 4.8% YoY, supported by continued operating model transformation and cost efficiency initiatives. This, alongside the strong commercial momentum has contributed to 5.3% YoY adjusted EBITDA AL growth.

Net Profit reached EUR 132.0 million, primarily driven by non-recurring items, alongside solid EBITDA performance.

Market leading investments further increased in 2023, up by 50.7% YoY and reaching EUR 361.4 million including spectrum, confirming our dedication to provide the platform for the country’s digitalization and future business growth.

Despite challenging environment and economic uncertainty, HT has successfully delivered upon our most recent outlook, exceeding initial guidance for 2023.

Strengthened network leadership

With market leading investments and development of infrastructure across Croatia, HT has additionally strengthened its mobile and fixed network leadership.

In legacy bands the spectrum auction, HT has secured the largest mobile spectrum share in the market, received OOKLA certification as the best and fastest mobile network in the country for the 5th year in a row and was also recognized by HAKOM as the best mobile network in Croatia. By building fiber infrastructure not only in cities but also in sub-urban and rural areas across Croatia, HT has expanded already it’s by far the largest fiber-to-the-home (FTTH) network in Croatia by more than 20% YoY, a significant step towards fulfilling the goal of covering more than 1 million households with gigabit fiber speeds.

Deregulation of high-speed network services in competitive areas

In July 2023 HAKOM adopted the final decisions on market analysis of wholesale fixed network access, deregulating HT’s fiber in 72 administrative units in urban areas of Croatia, which are by HAKOM deemed as competitive.

Deregulation of high-speed networks in competitive areas will enable equal market conditions for all market participants.

Continued operating model optimization

HT has accelerated transformation of it’s operating model, raising efficiency levels, while at the same time delivering the best customer experience in the market. In January 2024, HT has completed integration of Iskon Internet into HT d.d and has transferred construction and maintenance unit of HT network from Ericsson Nikola Tesla Servisi to newly founded subsidiary - HT Servisi d.o.o. In addition, HT has stared preparations for shutting down 3G technology. This will further accelerate the transition to more energy-efficient 4G and 5G technologies, allowing us to provide customers with faster, more advanced and secure services, while strengthening contribution to society’s sustainable digital transformation.

Driving the ESG agenda

Sustainability is an integral part of HT strategy, and as a socially responsible company, throughout 2023, HT has continued to integrate and systematically implement all three pillars of the ESG into it’s operations, focusing on climate change, resource efficiency and digital inclusion. In Croatia, HT has decreased energy consumption by 3% YoY and CO₂ emissions by 4% YoY, concluded the first ever virtual PPA agreement in the country, marking an important milestone in company’s energy strategy. Furthermore, HT has launched a comprehensive environmental protection platform “Call you have to take” and had a record-high year in terms of collected old electronic devices. Efforts in this field were once again recognized with HT winning the national sustainability award for the third year in a row.

New Collective Agreement signed

In December, a new Collective Agreement was signed, set to take effect in January 2024, and is valid for three years. Hereby HT once again affirmed itself as the most desirable employer in the telecom industry, and one of the best in Croatia altogether.

Announcement on the appointment of new CEO

In December 2023, Kostas Nebis, Chief Executive Officer of HT has resigned effective 1 July 2024 and will continue his career within Deutsche Telekom Group, taking over the role of Chairman and CEO of OTE Group in Greece.

Nataša Rapaić, present Member of the Management Board and Chief Operating Officer Residential (COOR), has been appointed CEO of HT, effective 1 July 2024.

The highest remuneration program since 2019

HT’s capital allocation strategy continues to demonstrate the Company’s strong focus on shareholder returns and intention to return value to shareholders. During 2023, HT has returned EUR 107.8 million to the shareholders through dividends and share buybacks, representing the highest capital allocation since 2019.

HT paid dividend in the amount of EUR 1.10 per share which represents a ratio of the dividend payment in relation to the realized Company profit of 93.9%, and a 3.6% growth compared to the previous year.

Within the framework of ongoing Share Buyback Programme and through a successful Accelerated Book Building auction process that took place in September, HT purchased additional 808,252 Company shares on the Zagreb Stock Exchange. HT paid an equivalent value of EUR 21.2 million for the acquisition of the Company’s shares in the reporting period.

The dividend for 2023 will be announced on 20 March 2024, alongside publication of audited financial statements for FY 2023.

Outlook for 2024

Despite the persisting external challenges, our primary objective is to continue with our growth trajectory. We are aiming for a low single-digit revenue increase, considering slowdown of mobile non-service revenue after peak in 2023 and reduced contribution of lower margin transit traffic revenue. Additionally, we anticipate a mid-single-digit growth in both EBITDA AL and CAPEX AL compared to 2023. Our stance on regional expansion remains unchanged, as we diligently assess potential M&A opportunities.

Commenting on the business results for  year 2023, Konstantinos Nempis, CEO of Hrvatski Telekom, stated:

“2023 was a successful year for Hrvatski Telekom marked with a very strong financial performance, revenue and EBITDA growth across consumer and business segments on the back on mobile, fixed and System Solutions profitable growth.
As a result of the largest investments in the company’s history, we further strengthened our network leadership, securing the largest legacy spectrum share, again winning awards for the best mobile network. We have additionally expanded the largest FTTH network, bringing gigabit fiber and 5G speeds to individuals and businesses across Croatia, creating in the process a crucial digital platform for the country’s economic growth and social progress.
Looking into 2024, we will continue building on our solid foundations aiming to grow our company further, accelerating the digital transformation, investing in the essential ICT infrastructure, further improving customer experience and employees engagement, creating even more value for our customers and shareholders while leading the digitization of the Croatian society.”