Magyar Telecom B.V. Investor Presentation for the period ended - PowerPoint PPT Presentation

1 Magyar Telecom B.V. Investor Presentation for the period ended September 30, 2012 November 21, 2012

Safe Harbor Statement 2 This presentation of Magyar Telecom B.V. (”the Company”) contains “forward-looking statements”. These and all forward-looking statements are only predictions or statements of current plans that are constantly under review by the Company. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. These forward-looking statements are all based on currently available operating, financial, and competitive information and are subject to various risks and uncertainties. Actual results could differ materially from those expressed in the forward-looking statements for a variety of reasons, including but not limited to: fluctuation in foreign exchange rates and interest rates; changes in Hungarian and Central and Eastern European economic conditions and consumer and business spending; the amount that the Company invests in new business opportunities and the timing of those investments; the mix of services sold; competition; management of growth and expansion; future integration of acquired businesses; the performance of IT Systems; technological changes; the Company's indebtedness; and government regulation. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the Company's financial reports, which are available on the Company’s website, www.invitel.hu. Accordingly, investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made. The Company does not undertake to update such statements to reflect the impact of circumstances or events that arise after the date the statements are made. Investors should, however, consult any further disclosures the Company may make in its reports.

Overview 3 Weak macroeconomic environment persists. Voice business continues to decline across both the Residential and Corporate business segments as customers continue to economize, resulting in both line- churn and cost-effective usage in both segments. Growth in Corporate customer base is largely offsetting the negative impact of overall price erosion in this segment and provides a platform for continued ICT services growth. In the Residential segment, rapidly growing fiber sales and a stabilized cable business are not fully compensating for market-driven declines in our traditional copper-based product lines. Operational efficiency programs are in place to reduce cost and redirect resources to customer-facing functions. New tax burdens will increase the adverse impact of government policy on earnings.

Macroeconomic Background 4 EUR/HUF Historical Movement In the second quarter of 2012 GDP decreased by 1.2%(Yr/Yr). The National Bank forecasts 2012 Yr/Yr GDP 320 310 decrease to be at 1.4%. 300 290 The Hungarian forint has strengthened from 315 HUF/EUR 280 at the beginning of the year to a current range of 280-290. 270 260 Annual inflation was 6.6% in September 2012. Inflation is 250 forecasted to stay at 5.5-6.0% level in 2012 and to decrease 240 01-11 03-11 05-11 07-11 09-11 11-11 01-12 03-12 05-12 07-12 09-12 to 3.5-5.0% levels in 2013. In 2012 the National Bank decreased its policy rate from 7.0% to 6.25% in three steps: 25bp in August 2012, 25bp in Real GDP September 2012 and 25bp in October 2012. 104 Unemployment slightly decreased during the period and 101.6 102 101.0 100.0 currently stands at 10.4% compared to 10.9% in June 2012, 100 11.7% in March 2012 and 10.7% in December 2011. 98.1 98 96.4 Company liquidations have gathered pace in the first half of 96 95.2 2012; the number of liquidations for the period ended August 94 2012 are 35% higher than in the same period of last year. 92 2006A 2007A 2008A 2009A 2010A 2011A

Government Policy Impact I. – Utility Tax 5 New tax enacted by Parliament on November 20, 2012, effective January 2013 • Conceptually announced on October 17th as part of a deficit reduction package Per meter tax on utility networks • Payable by energy and water utilities, fixed line telcos and cable operators • Buried pipes/cables as well as lines on utility poles are subject to tax • ”Last mile” exemption – sections of network connecting a single property are not subject to the tax • Liability falls on the owner of the pipes/cables • Multiple cables/bundles within a single footprint are taxed once per owner HUF 125 per meter tax rate • Tax rate is tiered with the HUF 125/m top rate applicable to network >300km • Other rate reductions may be allowed – still assessing Invitel network subject to tax is in the range of 20,000-32,000 kilometers Tax has indefinite term & is payable in two installments – March and September each year Tax is payable to the central government

Government Policy Impact II. 6 Per-Minute Telco Tax (Existing – in force as of July 2012) • HUF 2 per minute/SMS/MMS, subject to a per subscriber cap • Tax caps for 2012 (2013-): HUF 400 (700) per month for residential subscribers and HUF 1,400 (2,500) per month for business subscribers • Exemption: 10 minutes per month are tax free for residential customers Postal Check Fee Recharge Ban (New – in force as of November 2012) • New amendment to the Electronic Communications Act, passed by Parliament on November 6, 2012 • Telcos are no longer allowed to charge fees for issuing invoices or for payment of invoices; however, selective discounts for a given payment method are allowed. • This forces us to stop our practise of charging customers a fee for bills paid via post offices using the so-called yellow check, the most popular retail payment method. • Invitel has for years charged customers a fee for bills paid through the Post Office in order to recoup the ~HUF 130 per transaction fee the Post Office charges us for processing and aggregating those payments. Transaction Tax (New – in force as of January 2013) • Transaction tax of 20bp, subject to a cap, payable by financial institutions • Indirect impact on Invitel’s customer bill and supplier invoice transactions • Impacts us to the extent that financial partners are able pass on the costs

Government Policy Impact III. – Looking Ahead 7 Policy 2013 Impact Crisis Tax None. Limited to three years 2010-2012 Per-Minute Telco Tax Full 12 month impact Postal Check Fee Recharge Depends on effectiveness of offsetting measures Ban Transaction Tax Probable indirect impact via higher financial partner charges Utility Tax Range as indicated subject to detailed assessment

Financial Highlights for the nine month period ended September 30, 2012 8 The functional currency of Magyar Telecom B.V. and its subsidiaries (”the Company”) is the Hungarian forint. The Hungarian forint depreciated against the EUR by 7% during the period ended September 30, 2012 compared to the average Hungarian forint/Euro exchange rate in the period ended September 30, 2011. Revenue in EUR decreased by 14% for the period ended September 30, 2012 compared to the same period of the prior year. In HUF terms, revenue decreased by 8% for the period ended September 30, 2012 compared to the same period of the prior year. Segment gross margin in EUR decreased by 14% for the period ended September 30, 2012 compared to the same period of the prior year. In HUF terms, segment gross margin decreased by 7% for the period ended September 30, 2012 compared to the same period of the prior year. Segment gross margin percentage was 83% and 82% for the period ended September 30, 2012 and 2011, respectively.

Financial Highlights for the nine month period ended September 30, 2012 9 Adjusted operating expenses* in EUR increased by 3% for the period ended September 30, 2012 compared to the same period of the prior year. In HUF terms, adjusted operating expenses increased by 11% for the period ended September 30, 2012 compared to the prior year. The increase is mainly due to higher personnel expenses and the new telecom tax introduced from July 2012. Adjusted EBITDA** in EUR decreased by 25% to EUR 53.8 million for the period ended September 30, 2012 compared to the same period of the prior year. Adjusted EBITDA** in HUF decreased by 20% to HUF 15.7 billion for the period ended September 30, 2012 compared to the same period of the prior year. Adjusted EBITDA** margin was 42% and 49% for the period ended September 30, 2012 and 2011, respectively. The Company is implementing a significant headcount reduction and other overhead control measures in the fourth quarter. Non-recurring items for the period ended September 30, 2012 include HUF 410 million (approximately EUR 1 407 thousand) for severance and other expenses related to the restructuring.