Europe

Customer development

Total

In the Europe operating segment, almost all key performance indicators for customer development posted improvement compared with the end of 2023. Our convergent product portfolio generated growth of 2.4 % 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 increased by 1.6 %. The number of mobile customers increased by 3.0 %. Our build-out of the 5G network is making good progress.

Mobile communications

We had a total of 49.3 million mobile customers at the end of the first half of 2024 – an increase of 3.0 % compared with the end of 2023. The number of contract customers increased by 1.3 %. The contract customer base grew in almost all of our national companies, but especially in Poland, Greece, Croatia, and Romania. Overall, contract customers accounted for 56.0 % 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 further headway with 5G. As of June 30, 2024, our national companies covered 72.1 % of the population on average with 5G, a further increase against the prior year.

The prepaid customer base grew by 5.2 % compared with the end of 2023. Since January 1, 2024, customers of a wholesale service provider have been reported as prepaid customers in Austria. Without this effect, the number of prepaid customers remained stable compared with the end of the prior year. We convinced a portion of our prepaid customers to switch to higher-value contract rate plans. Furthermore, inactive SIM cards are deactivated from the customer base at regular intervals, as was the case in Romania and Poland.

Fixed network

The broadband business increased by 1.6 % compared with the end of 2023 to a total of 7.1 million customers. This growth is mainly driven by the national companies in Poland, Hungary, 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 first half of 2024, 9.5 million households, which is around 420 thousand additional households, had access to our high-performance fiber-optic network offering gigabit speeds. The number of fixed-network lines subscribed to remained stable at 8.0 million lines as of June 30, 2024.

The TV and entertainment business had 4.3 million customers in total at the end of the first half of 2024, posting growth of 1.2 % compared with the end of the prior year. The TV market is already saturated in many of the countries in our segment, where TV services are offered not only by telecommunications companies, but also by OTT players.

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 June 30, 2024, we had 7.9 million FMC customers; this corresponds to growth of 2.4 % compared with the end of the prior year. Almost all of our national companies, but in particular in Poland, Greece, Hungary, and the Czech Republic, contributed to this growth. The customer base in Slovakia was smaller due to optimizations to the FMC product portfolio there. At the end of the first half of 2024, FMC customers accounted for 63.7 % 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. Our service app is used by 70.0 % of our consumers.

Development of operations

Revenue, service revenue

Our Europe operating segment generated revenue of EUR 6.0 billion in the first half of 2024, a year-on-year increase of 6.1 %. In organic terms, revenue increased by 6.2 %. Service revenues grew by 6.9 % year-on-year, or by 6.5 % in organic terms.

The organic growth in service revenues was due on the one hand to the strong performance of the mobile business on the back of a larger contract customer base, and higher prices in several countries. Contract customer additions also had positive effects on terminal equipment revenues. On the other hand, the year-on-year increase in fixed-network service revenues additionally contributed to this growth. 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. In addition to higher revenues from wholesale, the IT business also made a positive revenue contribution. 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 service revenue in organic terms, with our national companies in Greece, Hungary, Poland, and Slovakia recording the strongest development in absolute terms by country.

Revenue from Consumers increased in organic terms by 5.7 % year-on-year. In mobile communications, both service revenues and mobile terminal equipment sales were up. 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. The higher number of FMC customers additionally had a positive impact on revenue.

Revenue from Business Customers grew on an organic basis by 6.8 % against the prior-year period, with Greece, Hungary, Austria, and Croatia making the largest contribution. All product areas – mobile communications, fixed network, and systems solutions – recorded growth. The mobile contract customer base grew by 2.4 %, with almost all of our national companies, but in particular Poland, Austria, Romania, and Greece contributing to this growth. In the fixed-network business, the number of broadband customers rose by 5.6 %. Fixed-network revenues grew by 3.8 % overall, with the strongest growth recorded in the segment of smaller business customers. This offset the decline in voice telephony revenues in the corporate customer segment in Greece. IT revenue grew strongly compared with the prior-year period by 19.9 %, due to an increase in systems solutions business and data communication, especially in connection with EU-funded projects in Greece’s public sector. 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

The sound operational development in the mobile, fixed-network, and IT businesses more than offset the inflation-induced cost increases. This led to strong year-on-year growth of 8.4 % in adjusted EBITDA AL to EUR 2.2 billion in the first half of 2024. In organic terms, adjusted EBITDA AL grew by 8.5 %, with a positive net margin sufficient to more than offset higher indirect costs that resulted primarily from the inflation-induced increase in salaries.

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, Slovakia, the Czech Republic, and Austria. These increases were partially offset by declines in Romania.

At EUR 2.1 billion, EBITDA AL increased by 8.6 % against the first half of the prior year. The net expense arising from special factors was more or less on a par with the prior-year level.

Development of operations in selected countries

Greece. Revenues in Greece amounted to EUR 1.7 billion in the first half of 2024, a significant year-on-year increase of 8.9 %. This development is largely due to higher service revenues, mainly from IT and wholesale, but also from the mobile, broadband, and TV businesses. However, mobile revenues were affected by termination rate cuts imposed by the regulatory authority. Traditional voice telephony revenues continued to decline in line with expectations. By contrast, terminal equipment revenues from contract customer additions contributed to the growth in revenue. Our convergence products performed well, with further customer additions and corresponding revenue.

Adjusted EBITDA AL stood at EUR 650 million, up 1.5 % year-on-year, driven by a higher net margin. Higher indirect costs, e.g., for energy, reduced the positive effect.

Hungary. Revenue in Hungary totaled EUR 1.1 billion in the first six months of 2024, which corresponds to substantial growth of 12.8 % despite unfavorable exchange rate effects. In organic terms, revenue was up against the prior-year period by 15.7 %. This development was mainly driven by higher mobile and fixed-network service revenues on the back of further growth in the customer base. IT revenues also posted significant growth. Thanks to our increased investments in the build-out of fiber-optic lines, our offers have won over large numbers of customers. This growth in the customer base additionally drove an increase in terminal equipment sales. Our convergence products also continued to perform well, with further customer additions and corresponding revenue.

Adjusted EBITDA AL stood at EUR 388 million, 41.3 % above the prior-year level. In organic terms, adjusted EBITDA AL grew by 45.6 %. This marked increase was due to a significantly higher net margin from the positive development in operating business, as well as to the repeal of the special tax levied on owners of telecommunications cables (utility tax).

Poland. Revenue in Poland increased by 9.1 % compared with the prior-year period to EUR 797 million in the first half of 2024. Excluding positive exchange rate effects, revenue increased moderately by 1.8 %. Mobile service revenues recorded the strongest growth. However, mobile revenues were affected by termination rate cuts imposed by the regulatory authority. Broadband revenues from the fixed-network business also posted significant increases. Both trends are the result of growth in the respective customer bases. The number of FMC customers increased substantially again, with a corresponding positive impact on revenues. This was partially offset by lower revenues from the IT business. Other revenues were influenced by declining terminal equipment revenues and a positive one-time effect in the prior year.

Adjusted EBITDA AL stood at EUR 217 million, 10.9 % above the prior-year level. In organic terms, adjusted EBITDA AL grew by 3.7 %, driven by a higher net margin.

Czech Republic. Revenue in the Czech Republic stood at EUR 609 million in the first half of 2024, a decrease of 6.2 % against the prior-year period. Excluding negative exchange rate effects, the decrease was 1.0 %. IT and other revenues declined as a result of the termination of a business relationship. Service revenues were up 2.7 %, mainly due to increases in the broadband, TV, and mobile businesses, driven by growth in the respective customer bases. However, mobile revenues were affected by termination rate cuts imposed by the regulatory authority. The number of FMC customers also grew in the reporting period.

Adjusted EBITDA AL increased by 0.3 % year-on-year to EUR 246 million. In organic terms, earnings grew by 6.0 % on the back of a higher net margin driven by higher mobile and fixed-network service revenues.

Austria. Revenue generated in Austria grew by 3.3 % to reach EUR 724 million in the first six months of 2024. In organic terms, the increase was 3.0 %. This development was driven by higher service revenues from mobile and broadband businesses on account of increases in the respective customer bases. However, mobile revenues were affected by termination rate cuts imposed by the regulatory authority. The number of FMC customers also grew in the reporting period, contributing to the increase in service revenues. Revenue from IT business increased slightly.

Adjusted EBITDA AL increased significantly by 5.6 % year-on-year to EUR 278 million. In organic terms, earnings grew by 5.2 %, driven mainly by a revenue-related increase in the net margin, which was partially offset by higher indirect costs.

Profit/loss from operations (EBIT)

In our Europe operating segment, EBIT grew by 17.6 % in the first half of 2024 to EUR 1.1 billion, mainly due to the 8.5 % increase in EBITDA. This was partially offset by the 1.7 % increase in depreciation, amortization and impairment losses, especially in Poland.

Cash capex (before spectrum investment), cash capex

In the first six months of 2024, our Europe operating segment reported cash capex (before spectrum investment) of EUR 940 million, up 5.8 % year-on-year, largely due to the timing of the allocation of capital expenditure. Cash capex decreased by 6.8 % due to lower payments for spectrum compared with the prior-year period. We continue to invest in the provision of broadband, fiber-optic technology, and 5G as part of our integrated network strategy.