Letter from the President of the Management Board

predsednik uprave

The Telekom Slovenije Group generated net sales revenue of EUR 729.5 million in 2015, EBITDA of EUR 200.8 million and a net profit of EUR 68.1 million in 2015. Given that ONE, a subsidiary of Telekom Slovenije, was merged with VIP in 2015 in Macedonia to form a new company and the fact that the memorandum of association includes conditions for Telekom Slovenije’s withdrawal from the newly established company within three years, the aforementioned forward agreement and the exclusion of ONE are reflected in the net financial result in the total amount of EUR 30.4 million. A comparison of the results achieved by the Telekom Slovenije Group in 2015 with those achieved in 2014 must take into account the fact the operations of the Macedonian company ONE are only included in the Telekom Slovenije Group’s results until 31 July 2015. The Group’s stake in Gibtelecom, which was sold at the end of 2014, is also not included in results for 2015. In this context, the Telekom Slovenije Group earmarked EUR 113 million for investments and paid its shareholders dividends of EUR 65 million in 2015.

As previously mentioned, we completed activities to merge ONE and VIP in 2015 as part of the Group’s efforts to consolidate operations. Telekom Slovenije holds a 45% participating interest in the newly established company ONE.VIP, with the Telekom Austria Group holding the remaining 55%. Last year we became the 100% owner of Debitel, which will be merged with Telekom Slovenije this year. In this way, we will further strengthen our position as the leading Slovenian operator.

The Telekom Slovenije Group’s competitive advantage is and will continue to be in the future the superior quality of its comprehensive communication services and solutions. We will also venture into new areas that will bring us even closers to our users.

The telecommunications markets of South-Eastern Europe are reaching maturity, while we expect consolidation to continue in the future, both within individual countries and between countries. The Telekom Slovenije Group monitors processes closely, and will continue its consolidation efforts while strengthening its market position. Ipko, which in 2014 was the first operator in Kosovo to introduce 3G and LTE/4G technologies, is the leading provider of broadband connections and the second largest provider of mobile telephony services. At the end of 2015 the company share of the mobile telephony market stood at almost 35 %, and the number of broadband connections have increased by 12%. Blicnet increased its number of mobile telephony users by 43% and its number of broadband connections by 2%.

The Telekom Slovenije Group is in step with the most cutting-edge trends, provides its users superior services and advanced technological solutions, and adapts its range of products and services to meet all of their communication needs. We continuously strive to be a complete and trustworthy partner. Last year we used our in-house knowledge and internal development activities to become one of the first operators in the world to offer the use of TV, internet and fixed telephony services by users via the LTE/4G network, which covered more than 95% of the Slovenian population at the end of the year. We are thus also strengthening our position on the IT solutions market, and using those solutions to compensate for declining revenues from basic telecommunications activities. We generated revenues of more than EUR 26 million in 2015 from the aforementioned services, which is double the revenues generated in 2014. Continued growth is also planned in this segment in the coming years.

We are strengthening our position on the IT solutions market in Slovenia and increasing the number of users on the markets of South-Eastern Europe.

We also dedicated a great deal of attention in 2015 to the optimisation of operations. To that end, we improved information support for the procurement process, shortened reporting deadlines and improved the risk assessment process. We reduced maintenance costs associated with systems under management and the scope of paper operations, as well as electricity consumption by 0.6%.

The Telekom Slovenije Group’s sustainable operations derive from our values and remain a part of our strategic policies for the period 2016 to 2020. We identify new opportunities in relations with stakeholders, and contribute through numerous activities to the development of society and the environment in which we operate. Through further modernisation and upgrades to the mobile network and the expansion of the fibre optic access network, we will improve both accessibility to and the quality of state-of-the-art communication services. In that respect, we constantly strive to keep the environmental impacts of our operations to a minimum. A total of 223 additional comprehensive measurements of environmental impacts were carried out in Slovenia in 2015 due to the expansion of the LTE/4G mobile network. Those measurements showed that electromagnetic radiation was below the permitted values in all locations. We also passed independent external assessments for the previously obtained ISO 50001 energy management system and the ISO 14001 environmental management system certificates, and transitioned to the latest version of the ISO 27001 information security management system standard. Together with our business partners, we give back to society by supporting projects in the areas of sport, culture, education, the environment and humanitarian activities.

The Telekom Slovenije Group is planning a net profit of EUR 34 million, EBITDA of EUR 198 million and investments of up to EUR 156 million in 2016.

We will strengthen our market share in Slovenia by expanding the fibre optic access network, through a range of convergent packages and by expanding the range of services outside the basic telecommunications activity. We will implement our strategy for the next five years in three phases, each of which will mean a step forward in Telekom Slovenije’s operations. During the first phase, we will focus on innovation and the development of our core activity. We will concentrate on increasing value for users and selectively expand to new areas. The focus of the second phase will be on digitalisation, and the simplification and automation of operations, while the aim of the third phase is to generate value from the activities carried out in the first two phases.

The Telekom Slovenije Group is planning a net profit of EUR 34 million, EBITDA of EUR 198 million and investments of up to EUR 156 million in 2016. We will focus on technological development and the development of new services, and continue to optimise all levels of operations.

Telecommunications trends are focused on the standardisation of the user experience. We are therefore developing an “all-IP” network that will provide users the same user experience, regardless of the technology functioning in the background. In addition to communication services, we will offer users other services in the future that they require at home and at work. In this way, we will increase our usefulness to users, as well as our share of expenditure by families and companies. Through digitalisation, the simplification of operations and the automation of processes, we focus fully on our users, and in the coming years transform the Group into a lean and agile operator, capable of responding even faster to the changing technology market.

The regional fibre optic network, which is fully owned by Telekom Slovenije, represents a key strategic advantage of the Telekom Slovenije Group and the greatest potential for future growth in revenues from international wholesale services.

The Telekom Slovenije Group will remain a part of ongoing consolidation processes in the telecommunications sector, and will continue with personnel restructuring activities and the optimisation of its operations. At the same time, we will constantly strive to improve corporate governance practices in our operations.

Thank you for your trust.

signature

Rudolf Skobe, MSc
President of the Management Board