MT Treasury 20club v2

Slide 1: 

Risk management in financing Presented by Thilo Kusch, CFO May 2010

Slide 2: 

Overview – Magyar Telekom Group at a glance EUR 2.5bn market capitalization Stock exchange listings listed on NYSE and Budapest Stock Exchange traded in London Majority owned by Deutsche Telekom (59.2%) Integrated operations in Hungary, Macedonia and Montenegro leading telecommunications service provider in all three countries leading SI/IT service provider in Hungary Albania Ukraine Moldova Romania Bulgaria Hungary Croatia Serbia Montenegro Macedonia Pop/Alternative Ukraine Moldova Romania Bulgaria Hungary Croatia Montenegro Macedonia Ukraine Moldova Romania Bulgaria Hungary Croatia BiH Serbia Greece Montenegro Macedonia Integrated Pop/Alternative Integrated Pop/Alternative Kosovo International presence Slovenia Albania 3Screen Company ICT leadership Service innovation Regional presence Strategy One Company

Slide 3: 

Investors’ Expectation Free cash flow to drive investors’ interest Different forms of free operating cash flow usage - capital expenditure, dividend payment, share buyback , M&A Usage of free cash flow inspected thoroughly by the investor community Therefore, investors’ return expectations among primary considerations Usage of free operating cash flow % of the generated free operating cash

Slide 4: 

- Investments (Capex) +/- Operating Working Capital = operating Cash-flow - Direct and operating expenses Revenues ~Stable 2010 future Revenues Dividend expectations, Aquisitions Building our future Efficiency improvement Room to invest Revenues Less Efficiency Less room to invest Finance strategy - Enhancing financial flexibilityIncrease operational efficiency -> Create room to invest into our future 4

Operating Free Cash Flow Q1 2010Ebitda drop almost compensated by Capex and oWC savings : 

Operating Free Cash Flow Q1 2010Ebitda drop almost compensated by Capex and oWC savings Ebitda 66,6 59,2 -oWC -Capex =oFcF -7,4 bn -1,7 bn 33,0 34,7 -15,5 -19,9 -10,7 -12,0 2009 Actual 2010 Actual

Slide 6: 

Refinancing risk Overview of MT financials In supporting MT’s business goals MT Finance faces market risks HUF 400bn debt portfolio HUF 650bn annual revenue HUF 250bn EBITDA HUF 80bn free cash-flow HUF 70-80bn peak in annual financing need (dividend payment) Interest rate risk Liquidity risk FX risk

Volatile interest rates – smoothened financing cost : 

Average interest rate of the debt portfolio has been smoothened over time not reflecting the prompt fluctuations in inter-bank interest rates: controlled average maturity balanced fix-floater ratio No debtor can be independent from the market environment in the long run Volatile interest rates – smoothened financing cost The best goal achievable is to smoothen the strong market fluctuations over time

Cautious level of Sound liquidity indebtedness position retained : 

Cautious level of Sound liquidity indebtedness position retained In line with Magyar Telekom’s dividend policy we keep the net debt ratio within the range of 30-40% The conservative approach made possible to manage the financing and refinancing needs even among market turbulences Financing willingness of banks drop dramatically, but widespread connections with substantial Hungarian banks allowed us to raise necessary financing funds Maturity structure has contributed to retain a strong liquidity position despite lack of liquidity on financial market

FX hedge strategy : 

FX hedge strategy Cash-flow, P&L and balance sheet cannot be hedged at the same time; focus on cash-flow risk management Significant part of our capex is EUR denominated Smaller part of the opex is also exposed to HUF depreciation Exposure is mitigated by dividend incomes from Macedonia and Montenegro and by some operating revenues Temporary fluctuations in P&L (e.g. translational effects) but no impact on CF

Slide 10: 

Refinancing risk Lessons learned Responses needed from MT Balanced debt portfolio Maturity structure Fix-floater ratio Diversified financing sources FX denomination Stronger focus on cash generation Sufficient financing buffers to be held Enhanced counterparty risk valuation in investing transactions Extended horizon of risk management Interest rate risk Liquidity risk FX risk