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Investor Releases

Matáv first quarter 2001 results

May 15, 2001

Matáv (NYSE: MTA.N and BSE: MTAV.BU), the leading Hungarian telecommunications service provider, today reported its financial results for the first quarter of 2001


Revenues grew by 22.3% (17.8% in euro terms) to 128.5 billion forints (483.8 million euros) compared to 105.1 billion forints in the first quarter of 2000 Besides the start of the full consolidation of MakTel from the second half of January, the main contributors to this growth were Matáv?s mobile, leased line and data businesses, and an increase in subscription revenues: -

The mobile business continued to powerfully drive Matáv?s revenue growth. Revenues in the first quarter of 30.2 billion forints compare to 23.0 billion forints in the same period of last year, which is an increase of 31.6%. -

Revenues from leased lines and data transmission services delivered the fastest growth rate again, with an increase of 33.2% from 6.0 billion forints to 8.0 billion forints on a yearly basis. -

Subscriptions, connections and other charges grew by 23.4% year-on-year to 23.4 billion forints, mainly as a result of the higher monthly subscription fees effective since February 1, 2001 and also supported by the migration towards ISDN lines with higher monthly fee. -

In its first quarter of consolidation, MakTel added 11.9 billion forints to Matáv?s revenues. Without MakTel, revenue growth would have been 10.9%. Matáv started to fully consolidate MakTel as of January 15.

EBITDA increased by 8.6% (4.7% in euro terms), amounting to 53.6 billion forints (201.6 million euros) versus 49.3 billion forints a year ago. The EBITDA margin was 41.7% for the first three months of 2001

Net income decreased by 24.9% (27.6% in euro terms) in the first three months to 15.1 billion forints (56.8 million euro), compared to 20.1 billion forints (78.5 million euro) in the first three months of 2000 The net income margin was 11.7% for the first three months of 2001

Elek Straub, Chairman and CEO commented: ?This was the first quarter that we welcomed MakTel into the Matáv group, a promising international investment contributing to our overall growth. For the remainder part of our buisness, mobile and data continued to be the key growth drivers of revenues. Despite increasing weight of competitive services in our product portfolio and most importantly the continued strong growth of the mobile market in the first quarter, EBITDA margin remained on a healthy level of over 40%.?

The mobile segment delivered outstanding growth again

Westels produced before intersegment elimination a 24.9% revenue growth from 35.4 billion forints in the first quarter of 2000 to 44.2 billion forints this year, due to a strong increase in the subscriber base. EBITDA grew by 18.6% to 14.1 billion forints and the 25% net income growth means an increase from 3.0 billion forints to 3.8 billion forints related to the same period of last year. Operating margin decreased as a result of increased customer acquisition costs due to 45% more gross additions in the first quarter of 2001 compared to the first quarter of 2000 and increased depreciation due to network development.

Dynamic growth of the mobile market continued in the first quarter of the year with mobile penetration reaching nearly 35% in Hungary. Westel retained its leading position and accounted for 54% market share on the GSM market. Westel?s customer base surged 80.2% to 1.8 million of which 57% is prepaid.

As subscriber base grew significantly average usage per customer declined. Westel?s ARPU (average revenue per user) dropped year-on-year by 28% to HUF 7,000 per month and MOU (average minutes of use per subscriber) fell by 19% to 148 per month in the first quarter of 2001 Churn rate remained at a relatively low 15% level.

Data business is leading the growth rate of the fixed line segment

Revenues from leased lines and data transmission increased by 33.2% year-on-year. Despite fierce competition, Matáv?s data line was able to exploit favorable trends in demand for data transmission solutions in Hungary. Matáv?s key product remained managed leased lines, reaching a significant volume of 9,530 pieces. This is an increase of 28% related to the end of the first quarter 2000 In the internet business Matáv?s internet subsidiary, Axelero remained the leading dial-up ISP with a subscriber number of nearly 104,000. This means that Matáv could increase its customer base by 70% year-over-year. Cable TV subscriber base was 72% higher than a year ago and totalled to 280,000 at the end of March, 2001

Solid revenues generated by the traditional fixed business

Revenues from domestic telecommunication services increased by 4.6% year-on-year. Subscriptions, connections and other charges showed a substantial increase of 23.4% mainly due to Matáv?s continued rebalancing efforts which meant Matáv could increase its basic monthly subscription fee by 27% effective from the first of February.

Both domestic and international traffic revenues declined due to reduction of call charges; local calls became cheaper by 6.4%, domestic long distance by 14.1% and international by 15.0% from February. Also, Internet usage had proportionally greater stakes in the total call volume, where prices are lower, and there was a slowdown of growth in fixed to mobile calls.

Competitive business lines growing strongly, EBITDA margin remains healthy

The increased revenue contribution of competitive business lines is reflected in the profit margins due to stronger marketing and higher customer acquisition costs. EBITDA margin was negatively affected also by the increased pay-out for other network operators - mainly due to the development of the mobile market -, and increased average wages. As a result, EBITDA margin decreased but stayed on a healthy 41.7% level. Other main drivers of operating expenses were increased depreciation due to increased capital expenditure in the previous years, needed for network buildout, increased amortisation due to MakTel acquisition in January.

Matáv is the principal provider of telecom services in Hungary and holds the national concession for national and international long distance telephony. Matáv provides a broad range of services including telephony, data transmission, value-added services, and through its subsidiaries is Hungary's largest mobile telecom provider. Matáv also holds a majority stake in Stonebridge Communications AD controlling MakTel, the sole fixed line and mobile operator in Macedonia Key shareholders of Matáv as of December March 31, 2001 include the Hungarian State (holder of the Golden Share), MagyarCom, owned by Deutsche Telekom AG (59.49%), while 40.51% is publicly traded.