Telekom Romania announced the financial results for Q2 2020, and the results are mixed, both good and not so good, but it is to be expected in the context of the Coronavirus pandemic.
"The Telekom Romania Group announces the key performance indicators for the second quarter of 2020, ended on June 30, 2020, as reported today by the OTE Group, which shows almost stable revenues and a continuation of the growth of EBITDA year-on-year.
In Q2 2020, consolidated revenues were affected by the global Covid-19 pandemic – similarly to other EU operators – as travel restrictions reduced roaming and visiting revenues, while temporary store closures negatively impacted sales of terminals. This impact was almost entirely covered by an increase in revenues from the company's ICT and wholesale segments, which led to consolidated revenues of 228,9 million euros, with a slight decrease of 1% compared to the same period from 2019.
Despite these adverse effects, IFRS16 adjusted EBITDA increased by 25,7% y/y to €36,2 million, mainly due to the company's ongoing cost transformation and further cost reduction measures in the context of COVID-19 . Year-on-year growth in EBITDA for the third consecutive quarter provides further evidence of the company's continued and sustainable recovery, even in the face of additional economic challenges brought about by the Covid-19 crisis.
Total revenues from mobile services decreased by 9,2% compared to Q2 2019, up to 93,8 million euros. This decrease was driven by a reduction in mobile termination rates imposed by the regulator and partly by a decrease in roaming and international traffic during the travel restrictions caused by the COVID-19 pandemic in Q2. Furthermore, during the lockdown period, as part of the measures imposed by the state of emergency, a third of retail stores, especially those in large shopping centers, were closed. This affected cell phone sales and generally slowed purchases of any kind. By the end of the second quarter of this year, all stores were able to reopen. Despite these aspects, the subscriber base of mobile services (postpaid) increased by 6,1% compared to the same period of the previous year, up to 1,6 million subscribers.
The customer base for the strategically important fixed-mobile convergent (FMC) service segment continued to grow in Q2 2020 by 9,4% year-on-year, now reaching 881.000 subscribers, reasserting its market leadership position of Telekom Romania on this segment.
Total revenues from fixed services amounted to 121,1 million euros in the second quarter of 2020, an annual increase of 7,2%, driven in particular by the strong increase in the ICT segment of the company, with an advance of 25,1 % and wholesale business, which grew by 21%, more than compensating for a 6,6% contraction in fixed segment retail revenues. The voice service showed signs of stabilization, with revenues remaining stable compared to the previous two quarters at €14,3 million, helped by growth in FMC customers.
The shift of the TV customer base to future-oriented technologies – such as IPTV – continued, causing the subscriber base to decline to 1,26 million in Q2 2020, particularly on DTH services. Although the impact was partially mitigated by an increase in ARPU over the same time frame, the contraction of the TV subscriber base led to a decrease in television service revenues. At the same time, the company's new offering, the Smart TV Stick, which allows customers to turn their TV into a Smart TV without additional installation and independent of the provider, has continued to grow, reaching a base of 17.400 subscribers since launch at the end of the first quarter of this year. The decline in television service revenue was partially offset by an 8,4% increase in fixed internet revenue compared to Q2 of the prior year, through a focus on higher value customers.
All this time, Telekom has kept Romania connected with special offers for all customer segments, to help Romanians continue to work, learn and play safely, from the comfort of their homes. Similarly, the company continued to help the most affected segments of society and supported modern educational models, by implementing Wi-Fi in over 700 schools throughout the country, while providing access to digital education for Romanian schools through Adservio platform.
In Q2 2020, the implementation of the "Cash for Growth" program continued to produce effects, through significant decreases, especially on indirect costs, which were 10% lower compared to the same period in 2019. This improvement was achieved by continuing cost reduction in all areas of activity as part of the company's cost transformation program. This transformation has been accelerated by additional measures taken to mitigate the negative effects caused by the Covid-19 crisis on the various cost centers.
During the Covid-19 crisis, the company did not implement staff reduction measures such as layoffs or technical unemployment.
“In Q2, we maintained stable revenue and continued EBITDA growth despite challenging circumstances. This quarter, we showed that through our strategy of tight spending control and cost transformation, we are able to overcome and mitigate the unexpected effects of the Covid-19 pandemic on our top line. I am happy to have achieved EBITDA growth for the third consecutive quarter and this gives me confidence that we have chosen the right approach to achieve a stable and sustainable recovery of our financial performance", said Nicolas MAHLER, Chief Financial Officer, Telekom Romania .
"We managed to quickly adapt to the situation generated by the pandemic, being all synchronized towards the same goals. Thus we were able to implement the necessary changes in record time. Now and in the coming period we will have to continue to adapt our way of working in the new context – of course, always with the customer as our priority. One thing is clear, the digitization path we have already started at the company level is more relevant than ever and we will continue in this direction to facilitate our work. All under the motto < >. Personally, I am very satisfied that our response to this crisis is also appreciated by our customers, who, according to a recent study, put a lot of trust in Telekom, especially during the general lockdown caused by the Covid-19 crisis," said Miroslav MAJOROS, CEO of Telekom Romania.
Nicolas MAHLER continued: “With a strong performance in the IT&C and wholesale segments, we managed to keep consolidated revenues stable for the quarter. This is also the result of an increased demand for digitization solutions from our corporate customers, which we have been able to respond to both through our standard product portfolio, but also through customized solutions. At the same time, our new products for the consumer segments – Smart WiFi and Smart TV Stick – continue to be very well received by customers, showing that we offer the right solutions for this delicate time, where connectivity and digital communication are more important than ever. It's great to receive our customers' appreciation for these offerings, especially the Voted Product of the Year® award we received for our Smart WiFi solution. We are very proud to be the company that keeps Romania connected."
"Of course, we have been successful in our mission to keep Romania connected during this difficult time, thanks to the non-stop and dedicated work of our frontline employees, such as technicians. They have gone out on the ground and worked tirelessly to resolve all customer requests on site and ensure our networks can continue to operate at the high level of quality we have come to expect. I would like to take this opportunity to especially thank these colleagues, who continued to do their work with great passion in the field, while a large number of Romanians were able to switch to working from home! We will continue to take all necessary safety and security measures to keep our colleagues safe while they are serving the customer.”
"While we are focused on the safety of our employees, we have not lost sight of the health of our customers. Especially during the Covid-19 pandemic, it is very important to adjust the way of interaction, such as payments or invoicing on digital channels. This not only brings more security, but is also a much faster option for our customers. We're doing our best to make this process as easy as possible and we're happy to be responsive, with digital invoice usage up over 70% at the end of Q2 this year compared to the same period last year.”
“The previous quarter demonstrated once again the importance of a rigorous focus on cash management and cost transformation as the main drivers of our ongoing financial recovery and the basis for funding the necessary investments going forward. This becomes even more vital in the face of the impact generated in the economy by the Covid-19 pandemic. We will continue the strategy of strict spending discipline, optimizing costs throughout the organization and further digitizing processes for the rest of 2020," concluded Nicolas MAHLER."
