What are Magyar Telekom’s strategic priorities and why are they the company’s main concern?
Our strategy is composed of five key elements. In response to intensifying competition, our goal is to position Magyar Telekom as the only ‘3Screen’ company among residential customers with the ability to offer services across three infrastructure platforms. We currently offer voice, internet and TV services on our fibre/copper, cable and mobile networks. With our business customers we put strong emphasis on our integrated IT–telecommunications products. Our goal is to further strengthen our ICT leadership by extending both our product range and client base. Concerning our regional presence, we are strongly committed to our current operations as well as looking for future acquisition opportunities. At our subsidiaries in Macedonia and Montenegro, our primary focus is on growth areas such as fixed line broadband expansion, customer acquisition and retention in the mobile markets.

We believe it is important to focus on service innovation to offer our subscribers enhanced customer experience. Finally, let me mention our ‘one company’ corporate approach. Despite the number of subsidiaries we operate and the wide range of services we provide, we always look at the group as a whole. This is how we want to be seen by our partners and how our internal operations are structured in terms of IT and management approach.

What major industry-related strengths does Magyar Telekom possess, compared to its competitors?
At Magyar Telekom we are proud of our market leadership in all three core Hungarian markets we operate in. These positions, coupled with the strategy supporting their achievement, are the primary foundations of our strong competitive position.

In the Hungarian mobile market we have maintained our clear market leadership in both voice and broadband markets thanks to our high-quality 3G network and attractive customer propositions.

In the Hungarian fixed line market we aim to position Magyar Telekom as the fully integrated service provider. In addition to being the primary fixed voice telephony provider, we also have the highest market share in the broadband internet market. Furthermore, as TV service is the most attractive customer proposition in the fixed line product portfolio, at the end of 2008 we launched a nationwide satellite TV service to complement our existing cable and IPTV offerings. As a result, we were able to almost double our share of the TV market within one year. Exploiting this unique position as the only provider of internet, TV and telephone services nationwide, we aim to position ourselves as the leading triple play company in Hungary.

Finally, we became the leading IT and system integration service provider in 2008 by capitalising on acquisition opportunities and our in-house capabilities. Our full-scale service offering allows us to provide bundled IT−telecommunications products creating additional synergies for the group and further strengthening our leading position in the market.

What opportunities does Magyar Telekom offer its customers and shareholders?
We are the only provider in Hungary offering “double triple-play” services, i.e. television, internet and telephone on both fixed and mobile networks. Besides, we also provide full range of ICT services to our corporate clients. We put great emphasis on customer satisfaction and providing superior customer service. Through our call centre, website or T-Pont shops, customers can obtain information about our products and services, have their enquiries answered or request modifications to their service. In addition, we regularly conduct customer satisfaction surveys, which are an important indicator of corporate performance in different customer segments.

At the same time, we put strong emphasis on shareholder remuneration, a key consideration among our investors. We plan to maintain our focus on free cash flow generation going forward to be able to offer investors attractive dividend yields. 

We also plan to further strengthen our position in the key areas of corporate social responsibility, including sustainability, environmental protection, closing the digital gap, sponsorship of culture and arts, and charitable donations.

What are Magyar Telekom’s corporate governance principles and to what extent are those principles implemented?
The professional sphere and investors require public companies listed on the stock exchange to state clearly what governance model they use and how this is applied in practice. Being a company listed both on the Budapest Stock Exchange and the New York Stock Exchange it is highly important for us to meet this requirement and the relevant statutory and stock exchange requirements. Magyar Telekom is governed by four separate bodies: the General Meetings of Shareholders, the Board of Directors, the Supervisory Board and the Audit Committee. Their roles are defined by law and by the company’s memorandum and articles of association.

The General Meeting is the highest decision-making body of Magyar Telekom, comprised of all of the shareholders. The Board of Directors is responsible for managing the company. Among other measures, it approves the Company’s strategy and business plan, organisational restructuring actions of major impact, as well as the conclusion of major transactions, decides on the employment and remuneration of the CEO and other Chief Officers. The Board of Directors is also required to ensure appropriate risk management within the corporation and to establish an adequate internal control system. Our Board of Directors, however, is not a management body; day-to-day operations are conducted by the CEO and other Chief Officers.

The Supervisory Board oversees the activities of the management for the General Meeting. It acts as an independent body, elects a chairman, and passes its resolutions by simple majority.

Certain tasks are assigned to the Audit Committee which oversees the work of the company’s independent auditor and the Group Compliance Director, who evaluates the operation of the financial reporting system and the efficiency of the internal audit function. Magyar Telekom has also established two other committees. The Disclosure Committee ensures that our disclosures are made in a timely manner and in line with the requirements of the laws, while the Remuneration Committee performs compensation functions and certain functions of a nomination committee.

It is Magyar Telekom’s policy that all disclosures made to our security holders or the investment community should be accurate and complete, and fairly present our financial condition and results of operations in all material respects. The controls and procedures currently used are designed to ensure that information required by regulatory bodies as well as all other written information that we disclose to the investment community is recorded, processed, summarised, and reported accurately and on a timely basis, as well as that the information is collected and transferred to the management to ensure that timely decisions are made on the disclosure.

As the telecommunications industry undergoes a major change globally, the Hungarian Telecom sector is beginning to get more competitive.
– How does Magyar Telekom intend to compete?
– How is Magyar Telekom adapting to these changes?
Our strategy is aimed at addressing competitive challenges and while our leading market positions make us well placed to fight the competition, we have implemented a number of changes in the past few years to further strengthen our long-term competitiveness.

Reflecting the significant structural changes underway in the telecommunications industry, Magyar Telekom realigned its operational structure in 2008, supporting an even greater focus on customer needs. Consequently, we now have leaner and more efficient business units serving our residential and corporate clients. Following the implementation of the new operational structure, we also rebranded our fixed line services to T-Home, bringing all of our residential fixed line services under one brand name. With these steps Magyar Telekom’s objective was to better meet future customer needs, making our company more attractive to our clients and investors.

With telecommunications being a technology-driven industry we are continuously improving our network quality and introducing new state-of-the-art technologies. Our 3G mobile network was named the best quality network among 268 mobile operators worldwide in a survey published by ARCChart in 2009. In the fixed line segment we have commenced a five-year new generation network rollout programme aimed at covering one third of households with ultramodern fiber-to-the-home or upgraded hybrid-fiber-coax networks by the end of 2013. These networks offer bandwidths of up to 100Mbit/s, allowing customers to enjoy multiple bandwidth-demanding services.

What impact has the credit crisis had on the company overall?
Thanks to our balanced financing structure, the credit crisis did not jeopardise either our short term liquidity or the long term financing needs of the company. The low liquidity and elevated interbank rates and credit spreads had only a limited negative impact on our financing conditions, thanks to the quality of our debt portfolio remaining unchanged.

In your opinion, what could the future hold for Magyar Telekom?  
We are committed to further strengthening our operations both in Hungary and the region by providing our customers with state-of-the-art services through the best available telecommunication network at home or on the move. Our goal is to deliver real broadband access with attractive services and content through TV, computer and mobile screens. As such, we are strongly committed to new generation network rollouts and upgrades. In addition, we consider customer care and product innovation among our highest priorities. Our strategic goal is to leverage our existing competences whilst investing for the future to safeguard our market positions and enhance customer experience.

Christopher Mattheisen is Chairman and CEO of Magyar Telekom