First six months of 2014 characterised by Company transformation
T-Hrvatski Telekom (Reuters: THTC.L, HT.ZA; Bloomberg: THTC LI, HTRA CZ), Croatia’s leading telecommunications provider, announces its unaudited results for the six months ended 30 June 2014.
T-HT is Croatia’s largest telecommunications provider and the market leader across all areas of operation. At the end of the first half of 2014, Hrvatski Telekom had 1.1 million fixed line customers, 2.3 million mobile subscribers and 620,508 broadband retail access lines, providing TV services to 393,525 customers.
In the first six months of the year, the overall telecommunications industry in Croatia was strongly impacted by the continuing economic crisis, regulatory changes and further market deterioration.
Operating within a challenging environment, HT slowed the trend of revenue decline, and reported H1 2014 of HRK 3.3 billion. This represents a fall of 5.2% compared to the almost 6.0% fall seen in the same period of the previous year. Revenue declined primarily in the voice segment, and this was partially offset by higher non-voice revenue, substantial growth in ICT revenue and increased terminal equipment revenue.
Despite increased company transformation related costs, the Group maintained operating expenses at the same level and EBITDA amounted to HRK 1.2 billion. EBITDA before exceptional items was HRK 1.3 billion, a 10.0% decrease primarily due to the revenue decrease and change of revenue structure. Net income totalled HRK 401 million, down 29.5%.
Company transformation leading to a more agile, more efficient organization
To build the foundations for the future growth and expansion of the Group’s operations, against the backdrop of the protracted economic crisis and continued deterioration of the Croatian telecommunications market, the first six months of the year were characterized by the transformation of the Company.
A number of activities were undertaken in order to increase levels of efficiency and customer focus, including the implementation of a new organizational structure and the introduction a new Chief Customer Experience Officer position within the Management Board of HT.
To create a more agile, more efficient organization, the number of managerial positions was cut substantially, so that currently HT has 31% fewer managerial positions as compared to the same period of the previous year.
A new Collective Agreement was signed with the unions, providing a high level of rights to HT employees, but also reflecting the present economic situation and conditions under which the Group operates.
In order to increase infrastructure quality and efficiency, along with cost optimization with regard to construction and maintenance, a non-binding Letter of Intent was signed with Ericsson to outsource the services of construction and maintenance of HT’s infrastructure.
In June, HT took over the management of Optima Telekom (OT), as part of the pre-bankruptcy settlement process, to improve OT's market positioning and stabilize its financial performance. This move is aimed at protecting the interests of OT’s customers, as well as bringing stability to the telecom market overall.
In the first half of the year, the Croatian telecommunication market was marked by a considerable increase in the annual radiofrequency fee, which impacts HT's operations significantly. The increase in the annual radiofrequency cost is so significant that all present plans for investments and new networks, services and technology development will have to amended to in a way that will result in substantial reductions. In order to decrease the negative impact of such a significant increase in costs and to preserve business sustainability, employment and investments, Croatian Telecom increased its mobile service prices by introducing a network access fee in July.
HT continues to invest
As one of the leading drivers of economic growth in Croatia, HT continues to invest. In the first half of the year, capital expenditures amounted to HRK 492 million. Investments were primarily directed towards network development, broadband access enhancement and IP transformation aimed at strengthening the technological base of HT.
In the first half of the year, Croatian Telecom opened a new data center, representing an investment of HRK 62.5 million. This demanding project was achieved through cooperation between Croatian Telecom and Group Končar. The data center is one of the most advanced in this part of the European Union and is a showcase for Croatian expertise.
Davor Tomašković, President of the Management Board of HT: Company transformation is the basis for future growth and expansion of operations
Commenting on the results for the first six months of 2014, Davor Tomašković, President of the Management Board and CEO of Hrvatski Telekom, said: "Across the second quarter of 2014, the focus of our activities has been on the transformation of the Company in order to make the organization more flexible, more advanced and fully focused on its customers.
We have undertaken a number of initiatives to achieve a more agile and more efficient organization and thereby build the foundations for the future growth of operations in the domestic market, and for the expansion of our operations across the regional market.
Most of these activities have now been successfully completed and, despite the continued deterioration of our operating environment and the imposition of a new tax, we are maintaining the outlook for 2014 that we announced at the beginning of the year."