Europe

Customer development

Total

In the Europe operating segment, almost all key performance indicators for customer development improved compared with the end of 2022, exceeding our expectations in some cases. Our convergent product portfolio, in particular, generated growth compared with year-end 2022 of 10.0 % in FMC customers thanks to ongoing demand. As a consequence, we are working flat out to build out our fixed-network infrastructure with state-of-the-art optical fiber. The number of broadband customers has increased by 4.6 %. The number of mobile customers increased by 1.1 % compared with the end of 2022. Our build-out of the 5G network is making good progress.

Mobile communications

At the end of the year, we had a total of 47.9 million mobile customers in the Europe operating segment, an increase of 1.1 % compared with the end of 2022. The number of contract customers increased by 2.8 %. The contract customer base grew at all of our national companies, but especially in Greece, Poland, the Czech Republic, Croatia, and Austria. Overall, contract customers accounted for 56.9 % of the total customer base. Our customers benefited from greater coverage with fast mobile broadband – a result of our integrated network strategy. The footprint countries of our operating segment are also making excellent headway with 5G. As of December 31, 2023, our national companies covered 67.2 % of the population on average with 5G, a significant increase against the prior year.

The prepaid customer base declined slightly by 1.1 % compared with the end of 2022. In addition, as part of our regular business activities we offer our prepaid customers high-value contract plans with the resulting number of contract conversions contributing positively to contract customer business.

Fixed network

The broadband business increased by 4.6 % compared with the end of 2022 to a total of 7.0 million customers. This growth is mainly driven by the national companies in Poland, Hungary, Greece, and the Czech Republic. By continuing to invest in optical fiber, we are systematically building out our fixed-network infrastructure. As of the end of the reporting year, around 9.1 million households, which is around 1 million additional households, had access to our high-performance fiber-optic network offering gigabit speeds. We have already won some 35 % of the households in these areas as active customers for one of our fiber-optic broadband products. The total number of fixed-network lines subscribed to increased again by 1.5 %, reaching 8.0 million as of December 31, 2023.

The TV and entertainment business had a total of 4.3 million customers as of the end of the fourth quarter of 2023, up by 3.7 % compared with the end of the prior year. This was attributable among other things to the acquisition of exclusive rights to broadcast sports events in the prior year. With both telecommunications providers and OTT players offering TV services, the TV market is already saturated in many countries of our segment. In order to remain competitive here, we are constantly developing our offerings and integrate these OTT services in our platforms. This includes both local (e.g., Voyo in Slovakia and in the Czech Republic) and international (Disney+ in Austria) offerings.

FMC – fixed-mobile convergence and digitalization

Our portfolio of convergent products, MagentaOne, was highly popular with consumers across all of our national companies. As of the end of 2023, we had 7.7 million FMC customers; this corresponds to growth of 10.0 % compared with the end of the prior year. Our national companies in particular in Poland, Greece, Hungary, and the Czech Republic contributed to this growth. As of December 31, 2023, FMC customers accounted for 62.8 % of the broadband customer base. We have also seen rising customer numbers from the marketing of our MagentaOne Business product to business customers.

We continue to expand our digital interaction with customers, which means we can meet customer needs in a more personalized and efficient way, and position products and innovative services on the market more quickly. Around 71 % of our consumers use our service app.

Development of operations

Revenue, service revenue

Our Europe operating segment generated revenue of EUR 11.8 billion in the 2023 financial year, a year-on-year increase of 5.7 %. In organic terms, revenue increased by 4.8 %. Service revenues grew by 4.8 % year-on-year, or by 4.0 % in organic terms.

Organic revenue growth was largely driven by the strong performance of the mobile business, especially the increase in mobile service revenues with higher margins: alongside the larger contract customer base, higher prices in several countries and increases in roaming and visitor revenues further contributed to this trend. Contract customer additions also had positive effects on terminal equipment revenues. Fixed-network service revenues increased against the prior year. Our intense focus on the continued build-out of high-speed network infrastructure drove growth in broadband and TV revenues, which more than offset the expected declines in voice telephony revenues and wholesale revenues. The systems solutions business made a positive contribution to revenue overall. Regulatory interventions such as the reduction in termination rates had a negative impact on our organic development of revenue in the reporting period.

All countries apart from Romania contributed to the growth in revenue in organic terms, with our national companies in Hungary, Austria, Poland, Croatia, Slovakia, and Greece recording the best absolute development by country.

Revenue from Consumers increased in organic terms by 5.8 % year-on-year, due to the mobile business, where both service revenues and sales of mobile terminal equipment increased. In the fixed network, revenue from broadband and TV business increased thanks to our continuous fiber-optic build-out and our TV and entertainment offerings. This more than offset the decline in revenue from voice telephony. In addition, the higher number of FMC customers had a positive impact on revenue.

Revenue from Business Customers grew by 6.0 % against the prior year, with Hungary, Poland, and Greece making the most important contributions. All product areas – mobile communications, fixed-network, and systems solutions – recorded growth. The number of mobile contract customers increased by 2.1 %, with almost all national companies, in particular Poland, Austria, and Greece, contributing to growth, which offset the census-driven decline in Hungary. In the fixed-network business, the number of broadband customers rose by 5.1 %. Growth was reported across all customer segments, with the highest growth recorded in the segment of smaller business customers, which was able to increase revenue by 8.7 % against the prior year. IT revenue grew strongly compared with the prior year, increasing by 6.7 %, due to an increase in systems solutions business and data communication, especially in Hungary, Greece, Slovakia, and Poland. Digital Infrastructure developed positively as a result of the expansion of capacities and strong growth in the cloud and security solutions business.

Adjusted EBITDA AL, EBITDA AL

Our Europe operating segment generated adjusted EBITDA AL of EUR 4.1 billion in the reporting year, up 3.8 % year-on-year. In organic terms, adjusted EBITDA AL grew by 2.8 %, again posting a positive earnings performance, with a positive net margin more than sufficient to offset the rise in indirect costs. This rise in costs is mainly driven by inflation-induced cost increases (especially higher energy and personnel costs). In Hungary, the supplementary telecommunications tax continues to have an adverse impact on our EBITDA AL.

Looking at the development by country, the increase in adjusted organic EBITDA AL was attributable to positive absolute trends, in particular at our national companies in Hungary, Croatia, Austria, and Greece. These increases were offset by declines in the Czech Republic and Romania, primarily due to one-time effects.

At EUR 4.0 billion, EBITDA AL increased by 2.2 % against the prior year. The net expense arising from special factors was higher than in the prior-year.

Development of operations in selected countries

Greece. In the reporting year, revenue in Greece increased by 1.1 % year-on-year to EUR 3.2 billion. This trend is due to higher mobile revenues. Alongside higher service revenues, the addition of new contract customers drove an increase in terminal equipment revenues. However, mobile revenues were affected by termination rate cuts imposed by the regulatory authority. Revenue declined slightly in the fixed-network business, where traditional voice telephony revenues are tapering off. Wholesale revenues also decreased as a result of lower volumes. Our convergence products, however, performed well, with further customer additions and corresponding revenue. Systems solutions business recorded a further substantial rise in revenue.

Adjusted EBITDA AL stood at EUR 1.3 billion, up 1.1 % year-on-year, driven by lower indirect costs.

Hungary. Revenue in Hungary totaled EUR 2.0 billion in the 2023 financial year, which corresponds to substantial growth of 18.4 %. Excluding positive exchange rate effects, revenue increased by 15.6 % against the prior year in organic terms. The biggest driver of this increase was mobile business, mainly on account of significantly higher service revenues. Fixed-network revenue also increased markedly against the prior year. We recorded higher service revenues, in particular in the broadband and TV business, both driven again by larger customer bases. Thanks to our increased investments in the build-out of fiber-optic lines, our offers have won over large numbers of customers. Our convergence products also continued to perform well, with further customer additions and corresponding revenue. Systems solutions business also recorded a significant increase in revenue.

Adjusted EBITDA AL stood at EUR 600 million, 21.7 % above the prior-year level. In organic terms, the increase was 19.3 %. The increase in indirect costs, especially for energy, personnel, and the supplementary telecommunications tax, was more than offset by the higher net margin.

Poland. Revenue in Poland increased by 7.7 % compared with the prior year to EUR 1.5 billion. Excluding positive exchange rate effects, revenue increased by 4.2 % in organic terms. Mobile business was the main driver of this uptrend in revenue, with growth in the contract customer base also having a positive effect on terminal equipment business. However, mobile revenues were affected by termination rate cuts imposed by the regulatory authority. The number of FTTH customers in the fixed-network business also increased significantly, creating the basis for further broadband growth. This is reflected in higher broadband service revenues, and is also thanks to our successful partnership agreements on network infrastructure. The number of FMC customers increased again substantially in 2023. This had a corresponding positive impact on revenues. We recorded substantial revenue growth in the systems solutions business.

Adjusted EBITDA AL stood at EUR 393 million, 4.0 % above the prior-year level. In organic terms, adjusted EBITDA AL grew slightly by 1.3 %. The revenue-driven increase in the net margin was slightly higher than the increase in indirect costs, in particular as a result of higher energy costs.

Czech Republic. Revenue in the Czech Republic stood at EUR 1.3 billion in the reporting year, an increase of 4.4 % against the prior year. Excluding positive exchange rate effects, organic growth was 2.0 %. This is largely attributable to our mobile business, which recorded higher service revenues and increased revenues from terminal equipment sales, the latter driven in part by renewed growth in the number of contract customers. However, mobile revenues were affected by termination rate cuts imposed by the regulatory authority. The fixed-network business also contributed to revenue growth. Thanks to our investments in the build-out of fiber-optic lines, our offers have won over large numbers of customers. Our convergence products recorded further customer additions and corresponding revenue growth.

Adjusted EBITDA AL decreased by 6.6 % year-on-year to EUR 470 million. In organic terms, earnings fell by 8.7 %, due to a decrease in the net margin and as a result of higher indirect costs. In addition to higher energy and personnel costs, a one-time effect from the termination of a business relationship in the business customer segment also had an impact.

Austria. Revenue in Austria totaled EUR 1.5 billion in the 2023 financial year. This increase of 4.8 % was mainly attributable to growth in mobile revenues, despite the adverse effects from the termination rate cuts. Alongside higher service revenues, terminal equipment revenues also increased, driven in part by growth in the contract customer base. Broadband revenues in the fixed-network business recorded growth. Revenue from systems solutions business increased slightly.

Adjusted EBITDA AL increased by 4.5 % year-on-year to EUR 529 million. In organic terms, earnings grew by 3.2 %, driven mainly by a revenue-related increase in the net margin.

Profit/loss from operations (EBIT)

In our Europe operating segment, EBIT increased by 14.4 % in the reporting year to EUR 2.0 billion, mainly due to the 4.7 % increase in EBITDA. Depreciation, amortization and impairment losses were down 1.9 % against the prior-year level, mainly due to an impairment loss recognized in the prior year on non-current assets in the Romanian mobile business.

Cash capex (before spectrum investment), cash capex

In the 2023 financial year, our Europe operating segment reported a year-on-year increase of 0.6 % in cash capex (before spectrum investment) to EUR 1.8 billion, and thus remained stable at the prior-year level. Cash capex increased by 9.5 % against the prior-year period as a result of the acquisition of spectrum licenses in Croatia and Poland. We continue to invest in the provision of broadband, fiber-optic technology, and 5G as part of our integrated network strategy.