Telekom Romania: performance indicators for the financial year of 2020

Telekom Romania group announces key performance indicators for the financial year of 2020, ended December 31, 2020.The company achieved continued growth in EBITDA After Lease, which increased by 6.6% YoY to €150.7 mln., the second consecutive year of EBITDA growth.

At the same time, adjusted Free Cash Flow sharply increased and returned to positive cash generation in 2020. This improvement came despite slightly lower revenues in 2020, which were influenced by the effect of pandemic on the Romanian economy, such as, for example, a lower number of international visitors, as well as a regulated reduction of mobile termination rates in 2020. As a result, total revenues reached €950.9 mln. a slight decrease of 3.0% compared to the previous year.

“Telekom Romania’s good results showed the extraordinary capacity of the company to transform its operations and provide products and services to support its customers during the pandemic, and highlighted the importance of telecommunications within the overall economy. My gratitude goes to the entire team, for keeping the company on a sustainable path, while adapting to the new context. In 2021, we will continue our digitalization journey, with the aim to fully meet our customers’ needs through our standard or tailor-made products and services. We will continue to deliver on our strategy, drive innovation and take bold decisions, to the benefit of our customers”, stated Vladan Pekovic, CEO Telekom Romania.

Total revenues from Fixed Business remained stable at €480.1 mln. in 2020, driven especially by a YoY growth in Wholesale revenues of 11.5% to €152.2 mln., mitigating a reduction in Fixed Retail Revenues, as well as slightly lower ICT revenues, driven by a different season specificity of contracts.

The traditional voice business showed further signs of stabilization, with the YoY decline in revenues slowing down in 2020, despite the Covid-19 negative impact.

The QoQ reduction in TV subscribers further slowed down during 2020, with the total customer base remaining stable in Q4 at 1.24 mln., despite the effect of the ongoing decline of older technologies, such as DTH services. Subscribers to Telekom’s innovative Smart TV Stick further increased to 70k. The product allows customers to effortlessly turn their old television set into a smart TV, without the need for technical installations.

Simultaneously, broadband revenues grew by 6.7% YoY up to €70.3 mln. in 2020, especially due to the continued focus on customer value. The company’s innovate Smart Wi-Fi product, which allows for the simple and fast installation of internet at home, without the need for any technical installation, continued to gain momentum, with the number of subscribers growing by over 300% YoY.

The number of mobile postpaid subscribers grew by 6.3% YoY to 1.65 mln. in 2020, with three consecutive quarters of subscriber growth. At the same time, mobile service revenues were adversely affected by a reduction in termination rates for mobile networks as well as lower traffic from roaming and international visitors, due to the Covid-19 pandemic and the associated slowdown in travel during 2020. As a result, total mobile revenues declined by 6.5% compared to the previous year, amounting to €400.2 mln.

On the Fixed-Mobile-Convergence (FMC) segment, Telekom Romania continued its ongoing growth, with a jump in the subscriber base of 10% YoY to 931k customers in 2020, achieving the third consecutive year of double-digit subscriber growth for this segment.

A key underlying factor of the company’s continued bottom line improvements was the successful ongoing cost transformation program, which was initiated in the second half of 2018.

Through structural improvements across all cost categories, Telekom Romania decreased Indirect Costs by 8.6% in 2020, compared to the previous year, while implementing and completing important transformation steps, such as the ones in IT operations and TV production. Additionally, to mitigate any impacts from the Covid-19 pandemic, Telekom Romania initiated various further cost saving measures in 2020.

One-off effects significantly influenced the company’s performance in Q4 2020. Total Revenue amounted to €240.8mln, while EBITDA after Lease reached €30.4 mln.in Q4 2020.

“Despite a very difficult economic situation caused by the global pandemic, we are happy to report that we continued our growth on EBITDA and Free Cash Flow. The good financial results for 2020 not only show that our strategy is working, but also that the transformation of the company, which we started 2 years ago, has helped us to become resilient in the face of external disruption,” said Nicolas Mahler, Chief Financial Officer, Telekom Romania.

“While we experienced some Covid-19 related impact on our revenues, we nonetheless achieved to grow our profitability over the past year, through a rigorous focus on three important strategic pillars: customer orientation, digitization and cost transformation.”

Nicolas Mahler continued: “Customer orientation lies at the heart of our business, being a key element of our culture. This is reflected in the passion, reliability and engagement of our front line employees, who continued to provide our clients with the consistently high quality of service they need and deserve – even despite the extraordinary situation during the pandemic in 2020. For this, I want to express my heartfelt gratitude. In 2020, we also continued to provide our customers with new and innovative products to fulfill all their telecommunication needs and the reaction on the market shows that this is appreciated.

Our Smart Wi-Fi and Smart TV Stick products, which we launched over the previous year, are gaining subscribers at a very fast pace. At the same time, we are seeing significant subscriber growth in the key strategic customer segments of mobile contract and converged services, which build the foundation for further growth in the future.”

“For our business customers, we continue to leverage our unique position in the market to deliver custom-made ICT solutions. Especially in the current environment, many businesses are looking to digitize and we have shown that we are the right partner to help them on this journey. At the same time, we continue to work with local authorities across the country to implement smart projects, which improve the quality of life for all Romanians. For example, we have started to install fast charging stations for electric cars in several cities in Romania, the first telecommunication company in the country to initiate such a project.”

“In 2020 we also continued to drive our own digitization initiatives, both internally and towards our customers. Through our ongoing Robotic Process Automation (RPA) activities, we further increase the automation rate of our internal processes. In 2020, we again doubled the number of active robots within the company, the third year in a row that we managed to achieve this growth rate. Externally, we are aiming to make it as simple as possible for our customers to handle all their relevant interactions with us from the comfort of their homes, making it faster, easier and most importantly – safer. Through this, we have increased the customers that receive their invoice digitally by more than 60% and those using digital payment channels by approximately 30% compared to 2019.”

“Finally, the key pillar of our turnaround strategy has been our continued focus on structural cost transformation. Through the Cash for Growth program, which we have implemented in the second half of 2018, we have fundamentally improved our cost base, achieving significant reductions; especially on our Indirect cost categories. Through sustained discipline and rigorous implementation, coupled with key transformations, such as the externalization of our IT activities, we lifted our underlying financial structure to a stable and resilient foundation. Our cost transformation will continue to play a vital role also in the future, to ensure we consolidate our financial turnaround.”

Nicolas Mahler concluded: “We have consistently proven that our strategy is delivering the needed results, even in difficult external circumstances. Through our focused efforts, we managed to turnaround our financial performance, consistently delivering growth on the important key performance indicators of EBITDA and FCF. Nonetheless, our transformation journey is ongoing. We will continue to reliably execute on our initiatives and to ensure the healthy financial base needed for future investments that are the hallmark of our industry. We are on a good track and are starting into 2021 from a strong position to further improve on both our fixed and our mobile business areas.”

In 2020, OTE S.A. announced it has entered into an agreement to sell its 54% stake in Telekom Romania Communications S.A. to Orange Romania. The transaction is subject to regulatory approvals and other conditions and is expected to be completed within the second half of 2021. Until then, nothing changes for the customers. The company will continue to provide the same services, as today.