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Hrvatski Telekom: HT Q2; Takeaways from 9M Conference Call with Management

    Tea Pevec
    Tea Pevec

    Head of Research

    InterCapital
    25 July 2019
    Published by
    We have already sent a quick note following HT’s results this morning. Results show salesimprovement of 0.4% yoy supported by growth in customized ICT solutions and higher handsetrevenue and post-paid revenue in Mobile business. Net profit increased 1.2% yoy due to decreasein exceptional items, positive effect of net financial result and lower depreciation.New CEO, Konstantinos Nempis, and CFO represented HT at a conference call earlier today. Thepresentation and additional documents are available HERE. You can hear a replay of the call(including Q&A session) HERE. Financials results comments incorporated with our conclusions on themost interesting topics are following:1. Evo TV – From acquisition of Evo TV HT had one-off EBITDA gain of around 60m HRK (in Q1alone) while other EBITDA effect is marginal. Number of TV customers have increased by 18%due to acquisition of Evo TV. On the revenue side Evo TV acquisition to date has resulted inaround 20m HRK uplift. HT began selling the product through its network and it is evidencinggood results.2. Montenegro Telekom – The company is operating in a tough competitive and regulatoryenvironment in Montenegro, which has improved compared to previous years. MontenegroTelekom has recorded a decline in revenue (-3.4% to HRK 292m) due to negative developmentin fixed voice and mobile prepaid segment which was partly offset by rise in system solutionsrevenue. Negative development was also evidenced on operating profitability level (-5.7% toHRK 101m). It was mostly due to the absence of one-off positive effects in H1 2018 (sale of realestates and accounting standards change) and lower revenues from fixed voice. Decrease inEBITDA was slowed down compared to Q1 when it has decreased 9.1%. If we exclude the oneoffpositive in 2018, operating profitability is stable, and this development is expected to continuein the following period.3. Optima Telekom – Contribution to revenue of Optima Telekom was HRK 2m lower comparedto H1 2018. But when we look at EBIT by segment Optima Telekom contribution has increasedby HRK 13m to HRK 99m in H1 2019. From Management no further details were given concerningsale of Optima Telekom and there will be no change in reporting on Optima before saleThe outlook remained unchanged on all metrics compared to what was given prior. EBITDA afterlease guidance measure of 38% was realized on the level of H1 2019 so it is expected that this levelof expenses will be sustained in the following periods. The results are in line with previousmanagement estimate and until we make a new DCF model we will keep our target priceUNDER REVIEW.