EuroTel Bratislava Reports Strong Revenue Growth for the Third
Quarter 2003 - Mobile service revenues increased 27% to Sk2.6
billion in the third quarter 2003 BRATISLAVA, Slovakia, Nov. 13
/PRNewswire-FirstCall/ -- EuroTel Bratislava a.s. ("EuroTel," the
"Company," or "we"), a leading telecommunications company in the
Slovak Republic, today announced record earnings before interest,
taxes, depreciation and amortization (EBITDA) of Sk1,183 million
(Euro 28.7(1) million) for the quarter ended September 30, 2003.
This number represented a 26.1% improvement over EBITDA of Sk938
million (Euro 22.3(1) million) during the third quarter 2002. The
Company's EBITDA margin (EBITDA divided by total revenues) was
40.6% in the third quarter of 2003, as compared to 39.8% in the
same period of 2002. EuroTel reported EBITDA of Sk3,343 million
(Euro 81.2(1) million) for the nine months 2003, a 43.1%
improvement over EBITDA of Sk2,336 million (Euro 55.6(1) million)
for the same period of 2002. The Company's EBITDA margin was 41.5%
in the first nine months 2003, as compared to 35.2% in the first
nine months 2002. The Company also announced that it ended the
third quarter of 2003 with 1,457,017 customers, a 22% increase over
customer count of 1,198,577 on September 30, 2002. Net customer
additions amounted to 86,024 in the third quarter of 2003, a 158%
increase over the 33,314 net customer additions in the same period
of last year. EuroTel's CEO Robert Chvatal said: "In 2003 we were
able to accelerate the growth of our customer base and the third
quarter was the strongest in 2003 with respect to net customer
additions. Although competition in the Slovak mobile market focused
on low end pricing plans in recent months, we have improved our
average revenue per user by over 5% on an annual basis. Our
customer base structure has been developing favorably as we are
successfully switching prepaid customers to our postpaid pricing
plans. The 22% growth in overall number of our customers in 12
months is a promising result as we move towards the Christmas
season, when we traditionally experience the highest volume of new
customer additions." "EuroTel has also done a lot to improve its
GSM coverage in certain key parts of Slovakia in the recent 18
months, which allows us to be much more competitive on the coverage
aspect than was previously the case. We are also very optimistic
about the future of the mobile market and we anticipate mobile
penetration to be very close to 70% as we move into 2004," added
Robert Chvatal. Ivan Bosnak, EuroTel's Chief Financial Officer,
noted: "We can state with confidence that we beat our expectations
in the three quarters of 2003, which is a good sign on the eve of
the Christmas season. Margins continue to improve and we generated
positive free cash flow in 2003, despite the fact that our capital
expenditure was at record levels. This is in line with our budget
and these investments are expected to continue to drive our mobile
service revenues up as evidenced by healthy 27% increase in third
quarter 2003." Operating Performance EuroTel's 26.6% increase in
mobile service revenues for the third quarter of 2003 over the same
period of 2002 was primarily driven by growth in the number of both
postpaid and prepaid customers, as well as by an increase in
blended ARPU.(2) Postpaid ARPU decreased from Sk1,712 in the third
quarter of 2002 to Sk1,613 in the same period of 2003. However,
prepaid ARPU increased from Sk226 to Sk260 during the same period.
The blended ARPU increased from Sk580 to Sk614 as our marketing
initiatives were successful in stimulating increased usage in both
voice and SMS traffic per average user. As of September 30, 2003,
the Company had 1,457,017 mobile customers, comprised of 396,474
GSM postpaid customers, 1,058,296 GSM prepaid customers and 2,247
NMT customers. This represents an increase of 21.6% from the
1,198,577 total mobile customers the Company had at September 30,
2002. As of today, we have more than 1.5 million mobile customers
on our network. Total revenues, including revenues related to
mobile equipment and other sales, as well as revenues from managed
data network services, increased by 23.7% to Sk2,917 million in the
third quarter of 2003. Our cost of sales and services for the third
quarter of 2003 increased by 29.1% to Sk1,211 million; primarily as
a result of the 67.4% growth in mobile equipment costs and other
cost of sales driven by our focus on acquiring new postpaid
customers. Third quarter 2003 gross profit increased by 20.0% to
Sk1,706 million. Gross profit margin for the period decreased to
58.5%, down from 60.2% in the third quarter of 2002. This decrease
in gross profit margin was mainly due to higher cost of sales for
mobile handsets as a result of higher subsidies we granted to
attract new customers, multiplied by the higher number of mobile
handsets sold in this period. Prepaid acquisition costs per added
customer declined to Sk239 from Sk282 in the third quarter of 2003.
Postpaid acquisition cost per added customer increased in third
quarter of 2003 to Sk4,004 from Sk3,016 over the same period. For
the nine months ended September 30, 2003, revenues increased by
21.4% to Sk8.1 billion and cost of sales increased by 11.0% to
Sk3.2 billion. Gross profit increased by 29.2% to Sk4.9 billion in
the same period. Gross margin increased to 60.8%, up from 57.1% in
the nine months of 2002, as a result of higher revenue growth and
lower international interconnection costs. The Company reported an
operating profit of Sk709 million for the third quarter of 2003,
compared with an operating profit of Sk511 million for the same
period of the previous year. The increase in operating profit was
primarily due to accelerating growth in revenue as well as
efficiencies achieved in the area of operating expenses. The
Company incurred net finance costs of Sk106 million compared to the
net finance income of Sk27 million in the third quarter of 2002.
This increase in net finance costs was primarily due to lower
foreign exchange gains arising mainly on our Euro-denominated
long-term notes in third quarter 2003, as compared to the same
period of 2002. The lower foreign exchange gains in the third
quarter of 2003 over the third quarter 2002 are the result of the
lower appreciation of the Slovak Crown against the Euro, which is
the currency in which all our borrowings are denominated. On
October 23, 2002, November 27, 2002, February 5, 2003 and February
7, 2003 respectively, EuroTel entered into four Euro/Sk
cross-currency interest rate swaps to hedge its exposure to the
Euro/Sk exchange rate risk in connection with the March 30, 2003,
September 30, 2003 and March 30, 2004 interest payments to the
holders of its Euro-denominated Senior Guaranteed Notes due 2007.
The interest expense on borrowings in the first nine months of 2003
increased due to the higher hedged exchange rates used, which were
the result of these cross-currency interest rate swaps aimed at
hedging 100% of our exposure to Euro/Sk exchange rate risk in
connection with the aforementioned interest payments. EuroTel
recorded net income of Sk438 million in the third quarter of 2003
as compared to net income of Sk406 million in the third quarter of
2002. For the nine months ended September 30, 2003, EuroTel
experienced a net profit of Sk1,104 million, as compared to a net
profit of Sk533 million for the nine months of 2002. Financial
Condition Debt. Gross debt as of September 30, 2003 totaled Sk6.6
billion (Euro 1601 million) and consisted solely of our
Euro-denominated Senior Guaranteed Notes due 2007. On March 23,
2000, the Company's financing subsidiary, Slovak Wireless Finance
Company B.V., issued seven-year Senior Guaranteed Notes at a coupon
rate of 11.25% for total gross proceeds of Euro 175 million. Euro
90.5 million of the proceeds were used to pay down then-existing
bank debt. The remaining net proceeds were, and currently continue
to be, used to fund network expansions, customer acquisitions,
costs relating to our UMTS license and general corporate purposes.
In April 2001, the Company finalized an increase in ordinary share
capital by capitalizing all outstanding shareholder loans and
accrued interest then outstanding in an aggregate value of Sk3,059
million. During the second half of 2001, EuroTel repurchased Euro
15 million of the Senior Guaranteed Notes in a series of
open-market transactions for a total net consideration of Sk687
million. As a result, EuroTel's gross debt decreased to Euro 160
million as of October 31, 2001. Capital Expenditures. EuroTel
invested Sk960 million in property, plant and equipment in the
third quarter of 2003, up from Sk814 million in the same period of
the previous year. This increase primarily reflects the cost of
expansion of our mobile service coverage in select locations as
well as the capacity added to better serve our growing customer
base. Liquidity. During the third quarter of 2003, the Company
funded its operations, capital expenditures and handset purchases
with internally generated cash flow as well as a portion of the
proceeds from its March 2000 bond offering. Cash on hand at the end
of the quarter was Sk1,371 million. Short term investments remained
at Sk1,622 million. In the third quarter of 2003, the Company
generated negative free cash flow (net cash from operating
activities and from the disposal of property and equipment less
capital expenditure) of Sk328 million as compared to negative free
cash flow of Sk826 million in the same period of the previous year.
This was mainly due to semi-annual interest payment of Sk389
million and Sk377 million at the end of September 2003 and 2002,
respectively. In addition, in August 2002, EuroTel paid the first
installment of Sk500 million for the UMTS license it was granted
pursuant to a tender in July 2002. During the first nine months of
2003, the Company generated positive free cash flow of Sk487
million as compared to the negative free cash flow of Sk785 million
(including the Sk500 million paid for UMTS license) in the same
period of the previous year. The improvement is mainly attributable
to the accelerating growth in revenue and to positive developments
in working capital management. Other Developments Mobile
Multibanking. On August 1, 2003, EuroTel launched a new service
called "Mobile Multibanking", in cooperation with selected Slovak
banks. The service allows our customers to view their account
information and perform transfers from their bank accounts using
their mobile phones. Until end of the year 2003, the majority of
Slovak banks are expected to join EuroTel in providing this service
to their customers. I-SMS. On September 17, 2003 EuroTel commenced
a new service called "I- SMS". Customers who activate this service
agree to receive promotional SMS. Each promotional SMS received
earns the customer a Sk1 credit on his or her mobile account.
Operating Highlights Third Quarter 2003 2002 % Change Total Mobile
Customers 1,457,017 1,198,577 21.6% Net Mobile Customer Additions
86,024 33,314 158.2% Average Monthly Churn 1.73% 1.87% (7.5)%
Average Monthly billable Minutes of Use (MoU) per Customer 83 79
5.1% Monthly ARPU Sk614 Sk580 5.9% Ending Number of Employees*
1,216 1,131 7.5% Slovak Crowns (in millions) Third Quarter 2003
2002 % Change Revenues 2,917 2,359 23.7% Gross Margin 1,706 1,421
20.1% EBITDA 1,183 938 26.1% Operating Profit 709 511 38.7% Net
Income 438 406 7.9% * Includes both full-time and temporary
employees, expressed as number of full-time equivalent employees,
based on a 40 hour work week. Web page at: http://www.eurotel.sk/
EuroTel (http://www.eurotel.sk/) is a leading telecommunications
company in the Slovak Republic, offering both mobile
telecommunications services and managed data network services. As
of September 30, 2003, the Company's GSM and NMT mobile networks
covered approximately 98% of the Slovak Republic's 5.4 million
population. EuroTel is owned 51% by Slovak Telecom
(http://www.telecom.sk/), a subsidiary of Deutsche Telekom AG
(Frankfurt, amtlicher Handel: DTE / NYSE: DT;
http://www.telekom.de/), and 49% by Atlantic West B.V., a joint
venture between subsidiaries of Verizon Communications (NYSE: VZ;
http://www.verizon.com/) and AT&T Wireless Services, Inc.
(NYSE: AWE; http://www.attws.com/). This press release contains
statements about expected future events and financial results that
are forward-looking and subject to risks and uncertainties. For
these statements, we claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. Listed below are some important
factors which could affect future results and could cause those
results to differ materially from those expressed in the
forward-looking statements: material adverse changes in the
business environment in Slovakia, such as the devaluation of the
Slovak Crown, inflation levels above those in the U.S. and economic
downturns; the effect of changes in the regulatory environment in
Slovakia; our ability to develop new technologies and recruit and
retain qualified personnel; our ability to obtain the financing
necessary to pursue business opportunities; and our ability to
adapt to rapid technological changes and significant competition.
Readers are cautioned not to place undue reliance on the
aforementioned forward-looking statements, which speak only as of
the date hereof and EuroTel undertakes no obligation to publicly
release any revisions to these forward-looking statements to
reflect events or circumstances after the date hereof or to reflect
the occurrence of unanticipated events. For the purposes of
Regulation G, the information submitted to the SEC on this Form 6-K
shall be deemed as issued by the Company contemporaneously outside
and inside the United States and not specifically targeted at
persons located in the United States. Attached are Selected
Unaudited Consolidated Financial Information and Condensed
Unaudited Consolidated Balance Sheets of EuroTel for the three and
nine months ended September 30, 2003 and 2002, prepared in
accordance with International Financial Reporting Standards,
including International Accounting Standards and interpretations
issued by the International Accounting Standards Board. (1) Unless
otherwise noted, all monetary figures are in Slovak Crowns(Sk). At
September 30, 2003, Euro 1 = Sk41.173. At September 30, 2002, Euro
1 = Sk42.011. (Source: National Bank of Slovakia) Euro amounts are
presented as convenience translations only. (2) Blended ARPU
represents weighted average of the ARPU of our prepaid and postpaid
customers EUROTEL SELECTED UNAUDITED CONSOLIDATED FINANCIAL
INFORMATION COMPARISON OF THIRD QUARTER 2003 WITH THIRD QUARTER
2002 (in thousands of Slovak Crowns) Statement of Operations Data
3Q03 3Q02 % Change Revenues Mobile service revenues 2,604,921
2,056,822 26.6% Mobile equipment and other sales 181,322 183,770
(1.3)% Managed data network service revenues 130,543 118,278 10.4%
Total revenues 2,916,786 2,358,870 23.7% Cost of sales and services
Mobile service cost of sales 683,356 612,491 11.6% Mobile equipment
and other cost of sales 486,151 290,463 67.4% Managed data network
service cost of sales 41,730 35,162 18.7% Total cost of sales
1,211,237 938,116 29.1% Gross profit 1,705,549 58.5% 1,420,754
60.2% 20.0% Operating expenses Advertising, marketing and sales
expense 111,280 109,744 1.4% Depreciation and amortization 474,153
426,873 11.1% Other operating expenses 411,067 372,616 10.3%
Operating profit 709,049 511,521 38.6% Finance costs / (income)
106,168 (27,354) 488.1% Taxes 164,458 132,674 24.0% Net income
438,423 406,201 7.9% EBITDA* 1,183,202 938,394 26.1% EBITDA
margin** 40.6% 39.8% 2.0% SG&A as a % of revenue 17.9% 20.4%
(12.3)% * EBITDA - earnings (operating profit) before interest
(finance costs), taxes, depreciation and amortization, ** EBITDA
margin - EBITDA divided by total revenues EUROTEL SELECTED
UNAUDITED CONSOLIDATED FINANCIAL INFORMATION COMPARISON OF THIRD
QUARTER 2003 WITH SECOND QUARTER 2003 (in thousands of Slovak
Crowns) Statement of Operations Data 3Q03 2Q03 % Change Revenues
Mobile service revenues 2,604,921 2,399,681 8.6% Mobile equipment
and other sales 181,322 141,413 28.2% Managed data network service
revenues 130,543 122,825 6.3% Total revenues 2,916,786 2,663,919
9.5% Cost of sales and services Mobile service cost of sales
683,356 620,545 10.1% Mobile equipment and other cost of sales
486,151 367,185 32.4% Managed data network service cost of sales
41,730 39,670 5.2% Total cost of sales 1,211,237 1,027,400 17.9%
Gross profit 1,705,549 58.5% 1,636,519 61.4% 4.2% Operating
expenses Advertising, marketing and sales expense 111,280 125,674
(11.5)% Depreciation and amortization 474,153 460,541 3.0% Other
operating expenses 411,067 424,470 (3.2)% Operating profit 709,049
625,834 13.3% Finance costs 106,168 199,277 (46.7)% Taxes 164,458
118,919 38.3% Net income 438,423 307,638 42.5% EBITDA* 1,183,202
1,086,375 8.9% EBITDA margin** 40.6% 40.8% (0.5)% SG&A as a %
of revenue 17.9% 20.7% (13.5)% * EBITDA - earnings (operating
profit) before interest (finance costs), taxes, depreciation and
amortization, ** EBITDA margin - EBITDA divided by total revenues
EUROTEL SELECTED UNAUDITED CONSOLIDATED FINANCIAL INFORMATION
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2003 WITH NINE MONTHS
ENDED SEPTEMBER 30, 2002 (in thousands of Slovak Crowns) Statement
of Operations Data Sept 30, 2003 Sept 30, 2002 % Change Revenues
Mobile service revenues 7,207,167 5,741,346 25.5% Mobile equipment
and other sales 472,549 544,111 (13.2)% Managed data network
service revenues 375,513 350,461 7.1% Total revenues 8,055,229
6,635,918 21.4% Cost of sales and services Mobile service cost of
sales 1,868,902 1,651,430 13.2% Mobile equipment and other cost of
sales 1,168,754 1,086,587 7.6% Managed data network service cost of
sales 120,654 108,223 11.5% Total cost of sales 3,158,310 2,846,240
11.0% Gross profit 4,896,919 60.8% 3,789,678 57.1% 29.2% Operating
expenses Advertising, marketing and sales expense 371,636 315,119
17.9% Depreciation and amortization 1,375,175 1,222,394 12.5% Other
operating expenses 1,182,164 1,138,408 3.8% Operating profit
1,967,944 1,113,757 76.7% Finance costs 458,271 395,631 15.8% Taxes
406,055 184,930 119.6% Net income 1,103,618 533,196 107.0% EBITDA*
3,343,119 2,336,151 43.1% EBITDA margin** 41.5% 35.2% 17.9%
SG&A as a % of revenue 19.3% 21.9% (11.9)% * EBITDA - earnings
(operating profit) before interest (finance costs), taxes,
depreciation and amortization, ** EBITDA margin - EBITDA divided by
total revenues EUROTEL CONDENSED UNAUDITED CONSOLIDATED BALANCE
SHEET COMPARISON OF THIRD QUARTER 2003 WITH THIRD QUARTER 2002 (in
thousands of Slovak Crowns) Assets 3Q03 3Q02 % Change Non-current
assets Property and equipment 7,590,650 6,149,848 23.4% Licenses
1,951,595 622,952 213.3% UMTS license prepayment -- 500,000 --
Deferred expenses and other long term assets 111,236 91,055 22.2%
9,653,481 7,363,855 31.1% Current assets Inventories 178,358
331,009 (46.1)% Receivables, prepayments and deferred expenses
1,520,460 1,272,411 19.5% Current investments 1,622,145 2,346,183
(30.9)% Cash and cash equivalents 1,370,713 1,446,566 (5.2)%
4,691,676 5,396,169 (13.1)% Total assets 14,345,157 12,760,024
12.4% Liabilities and equity Shareholders' equity Share capital
3,734,735 3,734,735 -- Retained earnings and other reserves
1,532,962 384,908 298.3% 5,267,697 4,119,643 27.9% Non-current
liabilities Long term notes 6,395,215 6,487,013 (1.4)% Deferred
revenues and other liabilities 106,992 85,247 25.5% Deferred tax
liability 424,180 224,259 89.1% 6,926,387 6,796,519 1.9% Current
liabilities Trade, other payables and deferred revenues 1,795,100
1,798,203 (0.2)% Accrued interest - long term notes 4,117 2,101
96.0% Income tax payable 224,212 1,300 17,147.1% Provisions 127,644
42,258 202.1% 2,151,073 1,843,862 16.7% Total liabilities and
equity 14,345,157 12,760,024 12.4% EUROTEL CONDENSED UNAUDITED
CONSOLIDATED BALANCE SHEET COMPARISON OF THIRD QUARTER 2003 WITH
SECOND QUARTER 2003 (in thousands of Slovak Crowns) Assets 3Q03
2Q03 % Change Non-current assets Property and equipment 7,590,650
7,146,233 6.2% Licenses 1,951,595 458,555 325.6% UMTS license
prepayment -- 1,510,506 -- Deferred expenses and other long term
assets 111,236 113,899 (2.3)% 9,653,481 9,229,193 4.6% Current
assets Inventories 178,358 130,137 37.1% Receivables, prepayments
and deferred expenses 1,520,460 1,291,671 17.7% Current investments
1,622,145 1,849,976 (12.3)% Cash and cash equivalents 1,370,713
1,494,767 (8.3)% 4,691,676 4,766,551 (1.6)% Total assets 14,345,157
13,995,744 2.5% Liabilities and equity Shareholders' equity Share
capital 3,734,735 3,734,735 -- Retained earnings and other reserves
1,532,962 1,095,961 39.9% 5,267,697 4,830,696 9.0% Non-current
liabilities Long term notes 6,395,215 6,474,270 (1.2)% Deferred
revenues and other liabilities 106,992 109,900 (2.6)% Deferred tax
liability 424,180 346,384 22.5% 6,926,387 6,930,554 (0.1)% Current
liabilities Trade, other payables and deferred revenues 1,795,100
1,845,933 (2.8)% Accrued interest - long term notes 4,117 191,989
(97.9)% Income tax payable 224,212 140,409 59.7% Provisions 127,644
56,163 127.3% 2,151,073 2,234,494 (3.7)% Total liabilities and
equity 14,345,157 13,995,744 2.5% DATASOURCE: EuroTel Bratislava
a.s. CONTACT: Ivan Bosnak, Chief Financial Officer,
+421-2-4955-5114, or , or Marilena LaRosa, Investor Relations,
+1-212-983-1702 ext. 208, or , both of EuroTel Bratislava a.s. Web
site: http://www.eurotel.sk/
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